Exhibit 10.17
PARTICIPATION AGREEMENT
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This Participation Agreement (the "Agreement") is made and executed this
13th day of April, 2001 by and between PNC BANK, NATIONAL ASSOCIATION ("Lender")
with an office at 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, Attn:
Xxxxx Xxxxxx, Assistant Vice President, and FARO TECHNOLOGIES, INC., with an
office at 000 Xxxxxxxxxx Xxxx, Xxxx Xxxx, XX 00000, Attn: Xx. Xxxxx Xxxx,
President and CEO ("Participant").
BACKGROUND
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A. Pursuant to the terms and conditions of a certain Loan
Agreement ("Loan Agreement") dated January 28, 1998 and related agreements,
instruments and documents, all as amended from time to time (collectively called
the "Credit Documents"), Lender has made loans, advances, and extensions of
credit ("Line of Credit") to Spatialmetrix Corporation ("Borrower") up to a
current maximum principal outstanding amount of $2,300,000 at any one time.
B. Participant acknowledges receipt of copies of the Credit
Documents. All capitalized terms used herein without definition shall have the
respective meanings ascribed thereto in the Credit Documents.
C. Contemporaneously herewith, Lender is increasing the
maximum principal amount of the Line of Credit to Three Million Eight Hundred
Thousand ($3,800,000) Dollars. Participant has agreed to purchase and accept and
Lender is willing to sell and transfer to Participant a participating interest
in the Line of Credit subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, with the foregoing Background deemed
incorporated herein and made a part hereof, for good and valuable consideration
the receipt of which is hereby acknowledged, and intending to be legally bound,
the parties hereby covenant and agree as follows:
1. Pursuant and subject to the terms hereof, Lender hereby
sells, extends and transfers to Participant and Participant hereby purchases and
accepts from Lender an undivided participating interest in the Line of Credit
("Participation Share") in an amount equal to the lesser of: (i) thirty-nine and
forty-seven one hundredths percent (39.47%) ("Participation Percentage") of the
principal amount of the Line of Credit outstanding on the books of Lender, or
(ii) $1,500,000. Participant's Participation Share shall be sold on a "last out"
basis, meaning the Participant's Participation Share shall only be paid after
Lender's share of the Line of Credit is paid and satisfied in full.
2. INTENTIONALLY DELETED.
3. Lender shall pay over to Participant from and promptly
after payment to Lender of, the interest actually received by Lender from
Borrower, a sum equal to interest calculated on Participant's actual outstanding
daily Participation Share of the Line of Credit for the period covered by the
interest payment at one quarter percent (.25%) less than the rate(s) per annum
set forth in the Credit Documents. Participant shall not share in any prepayment
premiums or fees set forth in the Loan Agreement. If Lender should, for any
reason, receive less than the full amount of interest or other compensation due
under the Credit Documents, Participant's share of such interest or compensation
set forth herein shall xxxxx ratably.
4. Except as set forth in Section 3 hereof, all amounts paid
to and credited by Lender to the outstanding balance of the Line of Credit
including, without limitation, principal, interest and expenses and including
the proceeds or collections resulting from the realization from or disposition
of any Collateral Security for the Line of Credit shall be applied first (to be
applied to principal, interest and expenses in such order as Lender may elect)
for the benefit of Lender and then second, to Participant. The term "Collateral
Security" as used herein includes Lender's lien on or security interest in all
of Borrower's Collateral (as defined in the Credit Documents) and the amounts
payable under and the proceeds of all other agreements under which any party
other than Borrower becomes liable in any capacity in connection with the Line
of Credit; balances in any bank account (including proceeds of any setoff), or
loss reserve account or other reserve account of Borrower which Lender or
Participant appropriates and applies to or toward the satisfaction of any
liability of Borrower to Lender; and all other property, real or personal,
tangible or intangible, of Borrower or any third party which secures payment of
the Line of Credit. Lender shall hold title to and possession of all Collateral
Security and Credit Documents in its name. Upon payment in full of Lender's
share of the Line of Credit, Participant shall be the full and sole owner of the
Line of Credit, the Credit Documents and all rights and obligations thereunder
in its sole name.
5. Lender shall, at all times, have the sole and exclusive
right to service, administer and monitor the Line of Credit, the Collateral
Security and Credit Documents, including without limitation the rights to: (i)
exercise all rights, privileges and options under the Credit Documents,
including the credit judgment with respect to the making of advances and the
determinations to the basis on which and the extent to which advances may be
made, (ii) amend the Credit Documents, (iii) modify or terminate the Line of
Credit or accelerate the Line of Credit, (iv) release, substitute or exchange
any of the Collateral Security, (v) waive nonperformance by Borrower or other
Events of Default, or enforce or refrain from enforcing its rights or remedies
under the Credit Documents, and (vi) compromise claims by or against Borrower or
with respect to any Collateral Security. Participant shall have no right or vote
in connection with Lender's rights set forth above. Notwithstanding the
foregoing, Lender and Participant agree as follows: (a) Lender shall permit
Borrower to draw upon the Line of Credit after the date hereof for up to a
maximum of $1,500,000 for the purposes set forth in Exhibit "A" hereto and made
a part hereof; (b) Lender shall not make any further increases in the maximum
principal amount of the Line of Credit beyond $3,800,000 without the
Participant's prior written consent; (c) Lender shall not release, substitute or
exchange any of the Collateral Security without the Participant's prior written
consent; and (d) Lender shall not extend the time for repayment of the principal
balance of the Line of Credit beyond August 31, 2001 without the Participant's
prior written consent.
6. Lender shall have the right to deduct from payments on the
Line of Credit, or collections from or proceeds of Collateral Security, such
funds as may be necessary to pay or reimburse Lender for costs and expenses
incurred by it and not reimbursed by Borrower. All out-of-pocket costs and
out-of-pocket expenses incurred by Lender and not reimbursed by Borrower after
the date hereof in connection with the amendment, administration and enforcement
of the Line
of Credit and Lender's rights in the Collateral Security (including, without
limitation, reasonable counsel fees and expenditures to preserve and protect the
Collateral Security under, and preserve and defend Lender's rights and interest
under, the Credit Documents) shall be shared by Participant pro rata with Lender
based on Participant's Participation Percentage, however, Participant shall only
be required to reimburse Lender for such out-of-pocket costs and expenses to the
extent Participant has received monies from Lender for application against its
Participation Share. Lender shall not be responsible to Participant for any of
Participant's costs and expenses arising from the interpretation of, amendment
to or enforcement of this Agreement, and neither Participant nor Lender shall be
entitled to share, on a pro rata basis with the other, any costs and expenses
arising from any actions or proceedings brought by Lender or Participant against
the other party.
7. Participant has entered into this Agreement solely upon its
own independent investigation and credit analysis and is not relying upon any
information supplied by or any representations made by Lender. Participant shall
continue to make its own analysis and evaluation of Borrower. Lender makes no
representation or warranty and assumes no responsibility with respect to (a) the
financial condition of Borrower, any guarantor or other obligor, or any account
debtor of Borrower; (b) the accuracy, sufficiency or currency of any information
concerning the financial condition, prospects or results of operations of
Borrower; (c) the sufficiency, authenticity, legal effect, validity or
enforceability of the Credit Documents; or (d) the value, condition, location or
quality to the Collateral Security. Lender assumes no responsibility or
liability with respect to the collectibility of the Line of Credit or the
performance by Borrower of any obligation under the Credit Documents.
8. During the term of this Agreement, Lender will furnish
Participant with copies of all financial statements and field examination
reports of Borrower and such other financial statements and reports as
Participant may reasonably request. Lender shall promptly provide Participant
with a copy of all correspondence from Lender to Borrower, including without
limitation, demands for payment, notices of default, notices of acceleration,
summons and complaints, and all notices relating to the sale of the Collateral
Security. Lender will promptly notify Participant when it receives notice of or
has actual knowledge of any Event of Default under the Credit Documents.
9. (a) Lender shall exercise the same care in accordance with
commercially reasonable practices in administering, servicing and monitoring the
Loan as it exercises with respect to similar transactions involving no
participation. Lender shall exercise its right and options hereunder in a manner
deemed by Lender to be in the best interests of Lender and Participant. Without
limiting the foregoing, Lender may rely on the advice of counsel concerning
legal matters and upon any written statements which it believes to be genuine or
to have been presented by a proper person or entity and shall not be required to
make any inquiry concerning the performance by Borrower of any of its
obligations and liabilities under the Credit Documents or under any other
document or agreement. Lender shall be entitled to rely on any notice, consent,
certificate, affidavit, letter, telegram, teletype message, statement, order or
other document believed by it to be genuine and correct and to have been signed
and sent by the proper person or persons and, in respect of legal matters, upon
an opinion of counsel selected by Lender.
(b) Notwithstanding paragraph 9(a) above, Lender
shall not in any event have any liability whatsoever to Participant except for
Lender's gross negligence, willful misconduct or bad faith.
10. (a) In the event that: (a) Lender is required to refund or
repay to Borrower or any other party all or any portion of any principal,
interest or other payment which was paid to Lender after the date of this
Agreement, and (b) Lender remitted all or a portion of such principal, interest
or other payment to Participant pursuant to this Agreement, then Participant
shall remit to Lender, on demand of Lender, such refunded or repaid amounts
actually received by Participant.
(b) Participant hereby indemnifies Lender, ratably
according to its Participation Percentage, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever arising after
the date hereof, which may be imposed on, incurred by or asserted against the
Bank in any way relating to or arising out of Lender's execution of, or
compliance with this Agreement or actions taken or omitted by Lender at the
direction of or with the consent of Participant in connection with the terms
hereof, provided that Participant shall not be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the willful misconduct or gross
negligence of Lender. Participant's obligations under this Section shall survive
the termination of the Credit Documents and this Agreement.
11. (a) Participant acknowledges and agrees that this Agreement
merely sets forth the terms and conditions under which it is acquiring an
interest in certain loans and extensions of credit made and to be made by Lender
in a commercial loan transaction entered into between Lender and Borrower, and
that this Agreement is therefore not intended to represent and shall not be
deemed to constitute a security. This Agreement and the participation of
Participant in the Line of Credit are not intended to and shall not be deemed to
create or constitute any joint venture or partnership between Participant and
Lender.
(b) No amounts paid by Participant hereunder shall be
considered as a loan by Participant to Lender. It is expressly agreed that the
participation herein described is a full-risk, non-recourse participation and
that Participant shall look only to payments received and collected by Lender
from Borrower or from Collateral Security or from any guarantor or other obligor
for repayment of the participation.
12. (a) Participant shall not sell, subparticipate, assign,
transfer or pledge all or any portion of its Participation Share in the Line of
Credit, or its rights or obligations hereunder, without the prior written
consent of Lender.
(b) Subject to the provisions of Section 13 hereof,
nothing herein contained shall prohibit or restrict Lender from granting other
participations in the Line of Credit to any other party as Lender may, in its
sole discretion, elect. Lender shall provide Participant with prior written
notice of the grant of other participations in the Line of Credit.
13. (a) At any time after the date of this Agreement,
Participant may, but is not obligated to, on ten (10) days' prior written notice
to Lender, terminate this Agreement and tender to Lender, on the effective date
of such termination, an amount of cash or Federal Funds or other funds
immediately available in Philadelphia, Pennsylvania equal to 100% of Lender's
Share in the outstanding balance of the Line of Credit, plus accrued interest as
of the date of such tender. If such tender is duly made, Participant shall
thereupon be deemed to have acquired Lender's entire Share for which such tender
was made and this Agreement shall be terminated, except for obligations existing
under paragraph 10(b) hereof on the date of tender.
(b) If Lender has granted a participation in this
Line of Credit to any person other than the Participant (an "Other Participant")
, at any time after the date of this Agreement, Participant may, but is not
obligated to, on ten (10) days' prior written notice to the Other Participant,
terminate this Agreement and tender to the Other Participant, on the effective
date of termination, an amount of cash or Federal Funds or other funds
immediately available in Philadelphia, Pennsylvania, equal to 100% of such Other
Participant's Share in the outstanding balance of the Line of Credit, plus
accrued interest as of the date of such tender. If such tender is duly made,
Participant shall thereupon be deemed to have acquired such Other Participant's
entire Share for which such tender was made and the Participation Agreement
entered into between the Other Participant and Lender shall be terminated. Each
participation agreement entered into by the Lender in which a participation in
the Line of Credit is granted to any Other Participant shall incorporate the
provisions of this Section 13.
(c) From and after receipt of written notice from the
Participant of its intention to exercise its option under Section 13(a) hereof,
the Lender shall not take any of the actions described in Section 5(i) through
(vi) without the prior written consent of Participant.
14. During the term of this Agreement, Participant shall not
with respect to Borrower, without the prior written consent of Lender, offer,
solicit, negotiate, or otherwise contact Borrower in any manner regarding the
Line of Credit, the Credit Documents, this Agreement or any of the terms of any
of the above, provided however, that Participant is permitted to contact the
Borrower with respect to refinancing of the Line of Credit.
15. This Agreement may be executed in counterpart copies,
each of which shall be deemed a duplicate original hereof.
16. No modification or waiver of any provision of this Agreement
shall be binding or enforceable unless in writing and signed by the party
against whom enforcement is sought. No rights are intended to be created
hereunder for the benefit of Borrower or any other third party beneficiary.
Notices required or given hereunder shall be sent to the addresses set forth
above either by telecopy, hand delivery against receipt or by a
nationally-recognized overnight courier service on an overnight or next business
day basis and sent to the addresses described on the first page of this
Agreement. Notices shall be effective either immediately upon hand delivery or
one business day after pick-up by express courier.
17. This Agreement shall inure to the benefit of Lender and
Participant and their respective successors and assigns. This Agreement shall be
governed by the laws of the Commonwealth of Pennsylvania.
18. THE PARTICIPANT HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE
RELATING TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE
PARTICIPANT ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed the day and year first above written.
PNC BANK, NATIONAL ASSOCIATION
By:___________________________
Title:________________________
FARO TECHNOLOGIES, INC.
By:___________________________
Title:________________________
