CREDIT AGREEMENT
NBD BANK, N.A., a national banking association (the "Bank") whose address is
Xxx Xxxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxx, 00000, has approved the credit
facilities listed below (collectively the "Credit Facilities," and
individually as designated below) to TEKSYN, INC. (the "Borrower"), whose
address is 0000 XXXXXX XXXX, XXXXXXXXXXXX, XXXXXXX 00000, subject to the terms
and conditions set forth in this agreement.
1. CREDIT FACILITIES.
1.1 FACILITY A. The bank has approved a credit facility to the Borrower
in the principal sum not to exceed $250,000.00 in the aggregate at any one
time outstanding ("Facility A"). Credit under Facility A shall be in the
form of disbursements evidenced by credits to the Borrower's account and
shall be repayable as set forth in a Revolving Business Credit Note
executed concurrently. The proceeds of Facility A shall be used for
working capital purposes. Facility A shall expire on JULY 1, 1996 unless
earlier withdrawn.
1.2 FACILITY B (LINE CONVERTING TO A TERM LOAN). The Bank has approved
a credit facility to the Borrower in the principal sum not to exceed
$112,500.00 in the aggregate at any one time outstanding ("Facility
B"). Facility B shall be in the form of advances evidenced by the
Borrower's Business Credit Note. The proceeds of Facility B shall be
used to finance Borrower's acquisition of equipment. Interest on each
loan shall accrue at a rate to be agreed upon by the Bank and the
Borrower at the time the loan is made. Notwithstanding the aggregate
amount of Facility B stated above, the original principal amount of
each advance shall not exceed the 75.0% of the cost of the equipment
purchased with Facility B proceeds. Availability of advances under
Facility B shall expire on JULY 1, 1996 unless earlier withdrawn,
whereupon the outstanding balance of Facility B shall convert to an
amortizing three (3) year term loan.
The notes described above, together with any renewals, replacements, or
modifications thereof are referred to hereinafter as the "Notes").
2. CONDITIONS PRECEDENT. Before any extension of credit under this
agreement, whether by disbursement of a loan, or otherwise, the
following conditions shall have been satisfied:
A. REPRESENTATIONS. The representation contained in Section 9 shall
be true on and as of the date of the extension of credit;
B. NO EVENT OF DEFAULT. No event of default shall have occurred
and be continuing or would result from the extension of credit;
C. With respect to Facility A, the Bank shall be in receipt of a
borrowing base certificate indicating a Borrowing Base (as hereinafter
defined) sufficient to support all advances under Facility A, including
the requested advance.
D. With respect to Facility B, the Bank shall have received a copy
of the invoice for the equipment being financed with the proceeds of
Facility B. The Bank shall have received such other approvals,
opinions and documents as it may reasonably request.
3. BORROWING BASE/REQUESTS TO BORROW.
3.1 BORROWING BASE. Notwithstanding any other provision of this
agreement, the aggregate principal amount outstanding at any
one time under Facility A shall not exceed the lesser of the
"Borrowing Base" or $250,000.00. "Borrowing Base" means 80%
of the borrower's trade accounts receivable in which the Bank
has a perfected, first priority security interest, excluding
accounts more than 90 days past due from the date of invoice,
accounts subject to offset or defense, government, bonded,
affiliate and foreign accounts, accounts from trade
debtors of which more than 25% is more than 90 days past due.
3.2 REQUESTS TO BORROW. The Borrower may authorize certain of its
officers and/or other agents to request advances by telephone
or other means of communication. Any such authorization shall
be on the Bank's form.
4. FEE. Upon execution of this agreement, the Borrower shall pay the
Bank a fee in the aggregate amount of Three Thousand and 00/100
Dollars ($3,000.00), all of which the Borrower acknowledges have
been earned by the Bank.
5. SECURITY.
5.1 Payment of the borrowing under the Credit Facilities shall be
secured by a first security interest and/or real estate
mortgage, as the case may be, covering the following property
and all its additions, substitutions, increments, proceeds and
products, whether now owned or later acquired (the
"Collateral").
A. ACCOUNTS RECEIVABLE. All of the Borrower's accounts, chattel
paper, general intangibles, instruments, and documents (as
those terms are defined in the Indiana Uniform Commercial
Code), rights to refunds of taxes paid at any time to any
governmental entity, and any letters of credit and drafts
under them given in support of the foregoing, wherever
located. The Borrower shall deliver to the Bank executed
security agreements and financing statements in form and
substance satisfactory to the Bank.
B. INVENTORY. All of the Borrower's inventory, wherever
located.
C. EQUIPMENT. All of the borrower's equipment, wherever
located. The Borrower shall deliver to the Bank executed
security agreements and financing statements in form and
substance satisfactory to the Bank.
5.2 No forbearance nor extension of time granted any subsequent
owner of the Collateral shall release the Borrower from
liability.
5.3 ADDITIONAL COLLATERAL/SETOFF. To further secure payment of the
borrowing under the Credit Facilities and all of the Borrower's
other liabilities to the Bank, the Borrower grants to the Bank
a continuing security interest in: (i) all securities and other
property of the Borrower in the custody, possession or control
of the Bank (other than property held by the Bank solely in a
fiduciary capacity) and (ii) all balances of deposit accounts
of the Borrower with the Bank. The Bank shall have the right
at any time after default to apply its own debt or liability
to the Borrower, or to any other party liable for payment of
the borrowings under the Credit Facilities, in whole or
partial payment of such borrowings or other present or
future liabilities, without any requirement of mutual maturity.
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5.4 CROSS-LIEN. Any of the Borrower's other property in which the
Bank has a security interest to secure payment of any other
debt, whether absolute, contingent, direct or indirect,
including the Borrower's guaranties of the debts of others,
shall also secure payment of and be part of the Collateral for
Credit Facilities.
6. SUBORDINATION. The Credit Facilities shall be supported by the
subordination of debt in the amount of $401,151.25 owing to
the Indiana Business and Modernization Technology Corporation,
in manner and by agreement satisfactory to the Bank.
7. AFFIRMATIVE COVENANTS. So long as any debt remains outstanding from
the Borrower to the Bank, the Borrower will:
7.1 INSURANCE. Maintain insurance with financially sound and
reputable insurers covering its properties and business
against those casualties and contingencies and in the types and
amounts as shall be in accordance with sound business and
industry practices.
7.2 EXISTENCE. Maintain its existence and business operations as
presently in effect in accordance with all applicable laws and
regulations, pay its debts and obligations when due under
normal terms, and pay on or before their due date, all taxes,
assessments, fees and other governmental monetary
obligations, except as they may be contested in good faith if
they have been properly reflected on its books and, at the
Bank's request, adequate funds or security has been pledged to
insure payment.
7.3 FINANCIAL RECORDS. Maintain proper books and records of
account, in accordance with generally accepted accounting
principles where applicable, and consistent with financial
statements previously submitted to the Bank.
7.4 COLLATERAL AUDITS. Permit the Bank or its agents to perform an
annual audit of the Collateral. The Borrower shall compensate
the Bank for such audits in accordance with the Bank's
schedule of fees as may be amended from time to time. The Bank
shall retain the right to inspect the Collateral and business
records related to it at such times and at such intervals as
the bank may reasonably require.
7.5 MANAGEMENT. Maintain Xxxxx X. Xxxxxxx as President of the
Borrower.
7.6 FINANCIAL REPORTS. Furnish to the Bank whatever information,
books, and records the Bank may reasonably request, including
at a minimum: If the Borrower has subsidiaries, all financial
statements required will be provided on a consolidated and on
a separate basis.
A. Within 60 days after each QUARTERLY period, an internally
prepared set of financial statements including a
compliance certificate and a balance sheet as of the end
of that period and a statement of profit, loss and surplus,
from the beginning of that fiscal year to the end of that
period.
B. Within 120 days after, and as of the end of, each of its
fiscal years, a detailed SET OF FINANCIAL STATEMENTS
including a balance sheet and statement of profit, loss
and surplus, AUDITED by an independent certified public
accountant of recognized standing.
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C. Within 30 days after and as of the end of each calendar
month, the following, each certified as correct by one of
its authorized agents:
(1) a list of accounts receivable, aged from date of
invoice;
(2) a borrowing base certificate in the form of Exhibit A.
8. NEGATIVE COVENANTS.
8.1 DEFINITIONS. As used in this agreement, the following terms
shall have the following respective meanings:
A. "Affiliate" shall mean shareholders, partners, owners, and
subsidiaries, and entities owned or controlled by such
parties.
B. "Cash Flow Coverage Ratio" shall mean, for any fiscal
period of the Borrower's operations the ratio of (i) the
Borrower's net income, plus depreciation and other non
cash expenditures, plus interest expense, less any
dividends and less any capital expenditures not funded by
permissible long term debt in such fiscal period, to (ii)
the sum of all interest payments and the principal
payments on long term debt made or accrued in such period,
including payments made under capitalized leases, during
such period.
C. "Subordinated Debt" shall mean debt subordinated to the
Bank in manner and by agreement satisfactory to the Bank.
D. "Tangible Net Worth" shall mean total assets less the sum
of intangible assets, due from Affiliates, and total
liabilities. Intangible assets include goodwill, patents,
copyrights, mailing lists, catalogs, trademarks, bond
discount and underwriting expenses, organization expenses,
and all other intangibles.
8.2 Unless otherwise noted, the financial requirements set forth
in this Section 11 shall be computed in accordance with
generally accepted accounting principles applied on a
basis consistent with financial statements previously
submitted by the Borrower to the Bank.
8.3 Without the written consent of the Bank, so long as any debt
remains outstanding under the Credit Facilities, the Borrower
will not:
A. TANGIBLE NET WORTH. Permit its Tangible Net Worth plus
Subordinated Debt to be less than $400,000.00 from and
after June 1, 1995.
B. TOTAL RATIO. Permit the ratio of its total liabilities less
Subordinated Debt to its Tangible Net Worth plus
Subordinated Debt to exceed 6.0 to 1.00 after June 30,
1995 and to 3.0 to 1.00 from and after December 31, 1995.
C. CASH FLOW COVERAGE RATIO. Permit the Cash Flow Coverage
Ratio to be less than 1.5 to 1.0 for any fiscal year of
the Borrower.
D. DEBT. Incur, or permit to remain outstanding, debt for
borrowed money or installment obligations, except debt
reflected in the latest financial statement of the Borrower
furnished to the Bank prior to execution of this agreement
and which is not to be paid with proceeds of borrowings
under the Credit Facilities, and debt to the Bank. For
purposes of this covenant, capitalized leases and the
sale of any accounts receivable shall be deemed the
incurring of debt for borrowed money.
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E. GUARANTIES. Guarantee or otherwise become or remain
secondarily liable on the undertaking of another, except
for endorsement of drafts for deposit and collection in
the ordinary course of business.
F. LIENS. Create or permit to exist any lien on any of its
property, real or personal, except: existing liens known
to he the Bank; liens to the Bank; liens incurred in the
ordinary course of business securing current nondelinquent
liabilities for taxes, worker's compensation, unemployment
insurance, social security and pension liabilities; and
liens for taxes being contested in good faith.
G. ADVANCES AND INVESTMENTS. Purchase or acquire any
securities of, or make any loans or advances to, or
investments in, any person, firm or corporation, except
obligations of the United States Government, open market
commercial paper rated one of the top two ratings by a
rating agency of recognized standing, or certificates of
deposit in insured financial institutions.
9. REPRESENTATION. Borrower represents that it is a corporation duly
organized, existing and in good standing under the laws of its state
of incorporation, and that the execution and delivery of this
agreement and the Notes, and the performance of the obligations they
impose, are within its corporate powers, have been duly authorized
by all necessary action of its board of directors and do not
contravene the terms of its articles of incorporation or by-laws.
Borrower represents that the execution and delivery of this
agreement and the Notes, and the performance of the obligations they
impose, do not violate any law, do not conflict with any agreement
by which it is bound, do not require the consent or approval of any
governmental authority or third party, and that this agreement and
the Notes are valid and binding agreements, enforceable in
accordance with their terms. Borrower also represents that the Notes
evidence business loans exempt from the Federal Truth In Lending Act
(15 USC 1601, et seq), the Federal Reserve Board's Regulation Z (12
CFR 226, et seq), and the Indiana Uniform Consumer Credit Code (IC
24-4.5-1-101, et seq). Borrower further represents that all balance
sheets, profit and loss statements, and other financial statements,
if any, furnished to the Bank are accurate and fairly reflect the
financial condition of the organizations and persons to which they
apply on their effective dates, including contingent liabilities of
every type, which financial condition has not changed materially
and adversely since those dates.
10. ACCELERATION.
10.1 EVENTS OF DEFAULT/ACCELERATION. If any of the following events
occurs:
A. The Borrower fails to pay within five business days of due
date any amount payable under the Credit Facilities or
under any agreement or instrument evidencing debt to any
creditor;
B. The Borrower (a) fails to observe or perform any other
term of this agreement or the Notes; (b) makes any
materially incorrect or misleading representation,
warranty, or certificate to the Bank; (c) makes any
materially incorrect or misleading representation in any
financial statement or other information delivered to the
Bank; or (d) defaults under the terms of any agreement or
instrument relating to any debt for borrowed money
(other than borrowings under the Credit Facilities) such
that the creditor declares the debt due before its
maturity;
C. There is a default under the terms of any loan agreement,
mortgage, security agreement or any other document
executed as part of the Credit Facilities, or any guaranty
of the borrowings under the Credit Facilities is revoked or
becomes
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unenforceable in whole or in part, or any Guarantor fails to
promptly perform under such a guaranty;
D. A "reportable event" (as defined in the Employee Retirement
Income Security Act of 1974 as amended) occurs that would
permit the Pension Benefit Guaranty Corporation to
terminate any employee benefit plan of the Borrower or any
affiliate of the Borrower;
E. The Borrower becomes insolvent or unable to pay its debts as
they become due;
F. The Borrower (a) makes an assignment for the benefit of
creditors; (b) consents to the appointment of a custodian,
receiver or trustee for it or a substantial part of its
assets; or (c) commences any proceeding under any
bankruptcy, reorganization, liquidation or similar laws
of any jurisdiction;
G. A custodian, receiver or trustee is appointed for the
Borrower for a substantial part of its assets without its
consent and is not removed within 60 days after such
appointment;
H. Proceedings are commenced against the Borrower under any
bankruptcy, reorganization, liquidation, or similar laws
of any jurisdiction, and such proceedings remain undismissed
for 60 days after commencement; or the Borrower consents
to the commencement of such proceedings;
I. Any judgment is entered against the Borrower and not released
in favor of Borrower within sixty (60) business days, or
any attachment, levy or garnishment is issued against any
property of the Borrower;
J. The Borrower, without the Bank's written consent, (a) is
dissolved, (b) merges or consolidates with any third party,
(c) leases, sells or otherwise conveys a material part of
its assets or business outside the ordinary course of
business, (d) leases, purchases, or otherwise acquires a
material part of the assets of any other corporation or
business entity, except in the ordinary course of business,
or (e) agrees to do any of the foregoing, (notwithstanding
the foregoing, any subsidiary may merge or consolidate
with any other subsidiary, or with the Borrower, so long
as the Borrower is the survivor);
K. There is a substantial change in the management or ownership,
or the existing or prospective financial condition of the
Borrower which the Bank in good faith determines to be
materially adverse; or
L. The Bank in good faith shall deem itself insecure;
then the Credit Facilities shall terminate and all borrowings under them
shall become due immediately, without notice, at the Bank's option.
10.2 REMEDIES. If the borrowings under the Credit Facilities are not
paid at maturity, whether by acceleration or otherwise, the
Bank shall have all of the rights and remedies provided by any
law or agreement. Any requirement of reasonable notice shall
be met if the Bank sends the notice to the Borrower at
least seven (7) days prior to the date of sale, disposition
or other event giving rise to the required notice. The Bank
is authorized to cause all or any part of the Collateral to be
transferred to or registered in its name or in the name of any
other person, firm or corporation, with or without designation
of the capacity of such nominee. The Borrower shall be
liable for any deficiency remaining after disposition of any
Collateral. The Borrower is liable to the Bank for all
reasonable costs and expenses of every kind incurred in the
making or collection of the Credit Facilities, including, without
limitation, reasonable attorneys' fees and court costs.
These costs and expenses shall include, without limitation, any
costs or expenses incurred by the Bank in any bankruptcy,
reorganization, insolvency or other similar proceeding.
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11. MISCELLANEOUS.
11.1 Notice from one party to another relating to this agreement shall
be deemed effective if made in writing (including telecommunications)
and delivered to the recipient's address, telex number or facsimile
number set forth under its name below by any of the following means:
(a) hand delivery, (b) registered or certified mail, postage prepaid,
with return receipt requested, (c) first class or express mail,
postage prepaid, (d) Federal Express, Purolator Courier or like
overnight courier service or (e) facsimile, telex or other wire
transmission with request for assurance of receipt in a manner
typical with respect to communication of that type. Notice made in
accordance with this section shall be deemed delivered upon
receipt if delivered by hand or wire transmission, 3 business
days after mailing if mailed by first class, registered or certified
mail, or one business day after mailing or deposit with an overnight
courier service if delivered by express mail or overnight courier.
11.2 No delay on the part of the Bank in the exercise of any right or
remedy shall operate as a waiver. No single or partial exercise by
the Bank of any right or remedy shall preclude any other future
exercise of it or the exercise of any other right or remedy. No
waiver or indulgence by the Bank of any default shall be effective
unless in writing and signed by the Bank, nor shall a waiver on one
occasion be construed as a bar to or waiver of that right on any
future occasion.
11.3 This agreement, the Notes, and any related loan documents embody
the entire agreement and understanding between the Borrower and the
Bank and supersede all prior agreements and understandings relating
to their subject matter. If any one or more of the obligations of
the Borrower under this agreement or the Notes shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining obligations of the Borrower
shall not in any way be affected or impaired, and such validity,
illegality or unenforceability in one jurisdiction shall not
affect the validity, legality or enforceability of the obligations
of the Borrower under this agreement or the Notes in any other
jurisdiction.
11.4 This agreement is delivered in the State of Indiana and governed
by Indiana law. This agreement is binding on the Borrower and its
successors, and shall inure to the benefit of the Bank, its
successors and assigns.
11.5 Section headings are for convenience of reference only and shall
not affect the interpretation of this agreement.
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12. WAIVER OF JURY TRIAL BY BANK AND BORROWER. The Bank and the Borrower,
after consulting or having had the opportunity to consult with counsel,
knowingly, voluntarily and intentionally waive any right either of them may
have to a trial by jury in any litigation based upon or arising out of this
agreement or any related instrument or agreement or any of the
transactions contemplated by this agreement or any course of conduct,
dealing, statements (whether oral or written), or actions of either of
them. Neither the Bank nor the Borrower shall seek to consolidate, by
counterclaim or otherwise, any action in which a jury trial has been
waived with any other action in which a jury trial cannot be or has not
been waived. These provisions shall not be deemed to have been modified
in any respect or relinquished by either the Bank or the Borrower except
by a written instrument executed by both of them.
Executed by the parties on the 9th day of June, 1995.
TEKSYN, INC.
By: /s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx President & CEO
------------------------------------
Printed Name Title
Address: 0000 Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
NBD BANK, N.A.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Xxxxxxx X. Xxxxxx AVP
------------------------------------
Printed Name Title
Address: Xxx Xxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
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