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Exhibit 10.6
COMMERCIAL REVOLVING LOAN, DEMAND LOAN AND SECURITY AGREEMENT
This Commercial Revolving Loan, Demand Loan and Security Agreement dated
November 1, 1996 among INDUSTRIAL TECHNOLOGIES, INC. a Delaware corporation with
its chief executive office and principal place of business at Xxx Xxxxxxx Xxxxx,
Xxxxxxxx, Xxxxxxxxxxx 00000 ("ITI"), INTEC EUROPE, LTD., a Delaware corporation
with its chief executive office and principal place of business at One Trefoil,
Xxxxxxxx, Xxxxxxxxxxx 00000 ("INTEC", and together with ITI, collectively
referred to as the "Borrowers"), and AMERICAN COMMERCIAL FINANCE CORPORATION, a
Delaware corporation with an office at 000 Xxxxx Xxxx Xxxxxx, Xxxx Xxxxxxxx,
Xxxxxxxxxxx 00000 ("Lender").
PREAMBLE
WHEREAS, Borrowers have requested Lender to extend to Borrowers (a) a
revolving loan in the maximum aggregate principal amount of up to $1,500,000
(the "Revolving Loan") and (b) a demand loan in the original principal amount of
$500,000 (the "Demand Loan", and together with the Revolving Loan, the "Loans");
and
WHEREAS, Lender has agreed to extend the Loans to Borrowers on the
conditions set forth below.
NOW, THEREFORE, for the mutual considerations contained in this
Agreement, Borrowers and Lender agree as follows:
ARTICLE I. Definitions
Section 1.1. Accounting Terms; Etc. Unless otherwise defined, all
accounting terms shall be construed, and all computations or classifications of
assets and liabilities and of income and expenses shall be made or determined in
accordance with generally accepted accounting principles consistently applied.
As used herein, or in the Financing Agreements or in any certificate, document
or report delivered pursuant to this Agreement or any other Financing Agreement,
the following terms shall have the following meanings:
(a) "Account" and "Accounts" shall have the meanings
assigned in Section 8.1(a) hereof.
(b) "Account Debtor" and "Account Debtors" shall mean
the person or entity or persons or entities obligated to Borrowers upon the
Accounts.
(c) "Agreement" shall mean this Commercial Revolving
Loan, Demand Loan and Security Agreement as the same may from time to time be
amended, supplemented or otherwise modified.
(d) "Arrangement" and "Arrangements" shall have the
meaning assigned in Section 5.1(n) hereof.
(e) "Borrower" shall mean ITI or Intec and
"Borrowers" shall mean ITI and Intec.
(f) "Business Day" shall mean any day other than a
day on which commercial banks in Hartford, Connecticut are required or permitted
by law to close.
(g) "Collateral" shall mean the property of Borrowers
described in Section 8.1 hereof.
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(h) "Commitment Letter" shall mean that certain
commitment letter issued by Lender to Borrower and dated October 8, 1996.
(i) "Company" and "Companies" shall mean Borrowers
and any entities affiliated with Borrowers in connection with any Plan.
(j) "Corporate Guarantor" shall mean Intec Corp., a
Delaware corporation.
(k) "Corporate Guarantor Security Agreement" shall
have the meaning assigned in Section 6.1(f) hereof.
(l) "Corporate Guaranty" shall have the meaning
assigned in Section 6.1(e) hereof.
(m) "Defaulting Event" shall mean the occurrence of
an Event of Default or the occurrence of any condition or event which but for
the giving of notice or passage of time or both would constitute an Event of
Default.
(n) "Demand Loan" shall have the meaning assigned in
Section 3.1 hereof.
(o) "Demand Loan Borrowing Base" shall mean an amount
equal to the lesser of: (i) thirty percent (30%) of the cost of ITI's Eligible
Inventory located at the Premises determined from time to time by the Lender
based upon cost information provided to Lender by Borrower, or (ii) the Maximum
Inventory Amount.
(p) "Demand Promissory Note" shall have the meaning
assigned in Section 3.1 hereof.
(q) "Dollar" and the sign "$" shall mean lawful money
of the United States of America.
(r) "Eligible Accounts" shall mean those Accounts of
Borrowers which arise from the sale of inventory or rendition of services in the
ordinary course of Borrowers' business, are subject to Lender's perfected, first
lien security interest and no other lien or security interest, and are evidenced
by an invoice or other documentary evidence satisfactory to Lender. Further, no
Account shall be an Eligible Account if:
(i) it arises out of a sale made by Borrowers to any
affiliate, division, subsidiary or parent of Borrowers or to any person
or entity controlled by or under common control with an affiliate,
division, subsidiary or parent of Borrowers;
(ii) it is due or unpaid more than ninety (90) days after its
original invoice date;
(iii) the account debtor is also Borrowers' creditor or
supplier, has disputed liability or made any claim with respect to any
other account due from such account debtor to Borrowers, or the account
is otherwise subject to any defense, counterclaim or offset of or by
the account debtor;
(iv) the account debtor is located outside the United States
and Canada (unless such account is supported by a letter of credit or
credit insurance acceptable in form, scope and substance satisfactory
to Lender in Lender's sole discretion);
(v) the account debtor is located in New Jersey or Minnesota,
unless Borrowers have (x) filed a Notice of Business Activity Report in
the appropriate office or agency for such state in the then current
year, or (y) received a Certificate of Authority to do business and is
in good standing in such state;
(vi) the sale giving rise to the account is on a
xxxx-and-hold, guaranteed sale, sale-and-return, sale on approval,
consignment or other repurchase or return basis, or is evidenced by a
note or chattel paper;
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(vii) Borrowers have made an agreement with the account debtor
for any deduction from the invoice representing said account, except
for discounts or allowances made in the ordinary course of Borrowers'
business for prompt payment, which discounts or allowances are
reflected in the calculation of the face value of each respective
invoice related thereto;
(viii) twenty-five percent (25%) or more of the aggregate
invoices for an account debtor are due or unpaid for more than ninety
(90) days after their original invoice date;
(ix) it arises out of a sale made by the Borrowers to an
account debtor that is the United States Government or any agency or
subdivision thereof (collectively the "Government"), unless Borrowers
have complied in all respects with the Federal Assignment of Claims Act
of 1940, or has otherwise satisfied Lender as to the assignability and
collectability of said accounts; or
(x) the Lender in its sole discretion deems the Account to be
unacceptable for any reason.
If there is any dispute as to whether any Account is an Eligible
Account, the determination of Lender shall at all times control.
(s) "Eligible Foreign Accounts" shall mean an Account
that is otherwise an Eligible Account and further (i) is an account arising from
a sale by Intec in the ordinary course of its business, (ii) is an account in
which Lender has a first lien security interest perfected under Belgian law,
(iii) the account debtor has been notified to remit payment directly to Lender
pursuant to a notice in form and content satisfactory to Lender, and (iv) is an
account supported by a letter of credit or credit insurance in form, scope and
substance satisfactory to Lender in Lender's sole discretion.
(t) "Eligible Inventory" shall mean ITI's inventory
of raw material, finished goods and work-in-process to the extent Lender, in its
sole discretion, determines that such inventory is eligible for advance. In
addition and without limiting Lender's discretion, Eligible Inventory shall be
net of reserves and returns, valued at cost, and subject to Lender's perfected
first security interest and to no other lien or security interest. Further and
without limiting Lender's discretion, no inventory shall be eligible if it is:
(i) deemed by Lender as slow moving or obsolete;
(ii) not otherwise in good condition and salable through
normal trade channels; or
(iii) not salable in the ordinary course of Borrower's
business.
(u) "Environmental Laws" shall mean any and all
applicable foreign, federal, state and local statutes, laws, regulations, rules,
ordinances, orders, guidances, policies or common law (whether now existing or
hereafter enacted or promulgated) pertaining to the environment, of any and all
federal, state or local governments and governmental and quasi-governmental
agencies, bureaus, subdivisions, commissions or departments which may now or
hereafter have jurisdiction over Borrower and all applicable judicial and
administrative and regulatory decrees, judgments and orders, including common
law rulings and determinations, relating to injury to, or the protection of,
real or personal property or human health or the environment, including, without
limitation, all requirements pertaining to reporting, licensing, permitting,
investigation, remediation and removal of emissions, discharges, releases or
threatened releases of Hazardous Materials, chemical substances, pollutants or
contaminants whether solid, liquid or gaseous in nature, into the environment or
relating to the manufacture, processing, distribution, use, treatment, storage,
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disposal, transport or handling of such Hazardous Materials, chemical
substances, pollutants or contaminants.
Without limiting the generality of the foregoing, the term
"Environmental Laws" shall encompass each of the following statutes, and
regulations promulgated thereunder, and amendments and successors to such
statutes and regulations, as may be enacted and promulgated from time to time:
Federal Occupational Safety and Health Act ("OSHA"); the Clean Air Act ("CAA");
the Toxic Substances Control Act ("TSCA"); the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("XXXX"); the Clean Water Act
("CWA"); the Resource Conservation and Recovery Act, as amended by the Hazardous
and Solid Waste Amendments of 1984 ("RCRA"); the Hazardous Materials
Transportation Act; and all applicable Environmental Laws of each state and
municipality in which Borrower conducts business or locates assets and all rules
and regulations thereunder and amendments thereto, and all similar state and
local laws, rules and regulations.
(v) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974 and all rules and regulations promulgated pursuant thereto,
as the same may from time to time be supplemented or amended.
(w) "Event of Default" and "Events of Default" shall
have the meanings assigned in Section 9.1 hereof.
(x) "Fidelity Guarantors" shall have the meaning
assigned in Section 6.1(d) hereof.
(y) "Fidelity Guaranties" shall have the meaning
assigned in Section 6.1(d) hereof.
(z) "Financing Agreement" or "Financing Agreements"
shall mean this Agreement, the Notes, the Fidelity Guaranties, the Corporate
Guaranty, the Corporate Security Agreement, and any and all other instruments,
agreements and documents executed in connection herewith or therewith or related
hereto or thereto, together with any amendments, supplements or modifications
hereto or thereto.
(aa) "Fixed Assets" shall mean equipment and other
assets of Borrowers which, by generally accepted accounting principles, must be
treated as fixed assets in financial statements of Borrowers.
(bb) "Further Loans" shall have the meaning assigned
in Section 6.2 hereof.
(cc) "Hazardous Material" shall mean any chemical,
compound, material, mixture or substance: (i) the presence of which requires or
may hereafter require notification, investigation, monitoring or remediation
under any Environmental Law; (ii) which is or becomes defined as a "hazardous
waste", "hazardous material" or "hazardous substance" or "toxic substance" or
"pollutant" or "contaminant" under any present or future applicable federal,
state or local law or under the rules and regulations adopted or promulgated
pursuant thereto, including, without limitation, the Environmental Laws; (iii)
which is toxic, explosive, corrosive, reactive, ignitable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of any foreign country, the United States, any state
of the United States, or any political subdivision thereof to the extent any of
the foregoing has or had jurisdiction over Borrowers; (iv) which contains
without limitation, gasoline, diesel fuel or other petroleum products, asbestos
or polychlorinated biphenyls ("PCBs"); or (v) any other chemical, material or
substance, exposure to, or disposal of, which is now or hereafter
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prohibited, limited or regulated by any federal, state or local governmental
body, instrumentality or agency.
(dd) "Indemnifiable Liability" shall have the meaning
assigned in Section 14.1(a) hereof.
(ee) "Indemnitee" and "Indemnitees" shall have the
meanings assigned in Section 14.1(a) hereof.
(ff) "Intec" shall have the meaning assigned in the
first paragraph hereof.
(gg) "ITI" shall have the meaning assigned in the
first paragraph hereof.
(hh) "Lender" shall have the meaning assigned in the
first paragraph hereof.
(ii) "Life Insurance Assignment" shall have the
meaning assigned in Section 6.1(k) hereof.
(jj) "Loan" means a Revolving Loan or the Demand Loan
and "Loans" means the Revolving Loans and the Demand Loan.
(kk) "Maximum Inventory Amount" shall mean (i)
$500,000 from the date hereof through March 31, 1997, and thereafter, (ii) the
amounts set forth on Schedule A attached hereto for the corresponding time
periods set forth therein.
(ll) "Minimum Balance" shall have the meaning
assigned in Section 4.1(a) hereof.
(mm) "Minimum Interest Amount" shall have the meaning
assigned in Section 13.1(c) hereof.
(nn) "Notes" shall mean the Revolving Promissory Note
and the Demand Promissory Note.
(oo) "Notice of Borrowing" shall have the meaning
assigned in Section 2.3 hereof.
(pp) "Obligation" and "Obligations" shall mean and
include all loans, advances, interest, indebtedness, liabilities, obligations,
fees, charges, expenses, guaranties, covenants and duties at any time owing by
Borrowers to Lender of every kind and description, whether or not evidenced by
any note or other instrument, whether or not for the payment of money, whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, including, but not limited to, the Loans, the Termination
Fee, all other indebtedness, liabilities and obligations of Borrowers arising
under this Agreement and the other Financing Agreements or otherwise, and all
costs, expenses, fees, charges incurred by Lender hereunder or otherwise with
respect to Borrowers, including without limitation, fees and expenses of
attorneys, paralegals and other professionals incurred in connection with any of
the foregoing, or in any way connected with, involving or relating to the
preservation, enforcement, protection or defense of, or realization under this
Agreement, any of the other Financing Agreements, any related agreement,
document or instrument, the Collateral and the rights and remedies hereunder or
thereunder, including without limitation, all costs, expenses and fees incurred
in inspecting or surveying mortgaged real estate, if any, or conducting
Environmental studies or tests, and all costs, expenses and fees incurred in
connection with any "workout" or default resolution negotiations involving legal
counsel or other professionals and further in connection with any modification,
renegotiation or restructuring of the indebtedness evidenced by this Agreement
and/or any of the other Financing Agreements and/or Obligations.
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(qq) "Plan" shall mean any employee benefit plan or
other plan maintained by Borrowers or any entity affiliated with Borrowers for
employees covered by Title I of ERISA.
(rr) "Premises" shall mean the real property located
at Xxx Xxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000.
(ss) "Prime Rate" shall mean the Prime Rate as
published from time to time in the "Money Rates" section of The Wall Street
Journal or any successor publication, or in the event that such rate is no
longer published in The Wall Street Journal, a comparable index or reference
selected by Lender. The Prime Rate need not and may not necessarily be the
lowest or most favorable rate.
(tt) "Receivables" shall have the meaning assigned in
Section 8.1(a) hereof.
(uu) "Release" shall mean any release, emission,
disposal, leaching or migration into the environment (including, without
limitation, the abandonment or disposal of any barrels, containers, or other
closed receptacles containing any Hazardous Materials) or into or out of any
property owned, occupied or used by Borrowers.
(vv) "Renewal Term" shall have the meaning assigned
in Section 13.1 (a) hereof.
(ww) "Revolving Loan" and "Revolving Loans" shall
have the meanings assigned in Section 2.1 hereof.
(xx) "Revolving Loan Account" shall have the meaning
assigned in Section 2.3 hereof.
(yy) "Revolving Loan Borrowing Base" shall mean an
amount equal to the lesser of: (i) ONE MILLION FIVE HUNDRED THOUSAND DOLLARS
($1,500,000), or (ii) an amount equal to the aggregate of (1) eighty percent
(80%) of Eligible Accounts which arise out of sales by ITI, plus (2) the lesser
of (A) eighty percent (80%) of Eligible Foreign Accounts, or (B) TWO HUNDRED
FIFTY THOUSAND DOLLARS ($250,000); provided, however, that Borrowers'
eligibility under the Revolving Loan Borrowing Base shall be reduced dollar for
dollar by the outstanding principal amount of the Demand Loan. For example, if
the outstanding principal amount of the Demand Loan is $500,000, the Borrowers
shall be eligible to borrow $1,000,000 pursuant to subsection (i) of the
preceding sentence.
(zz) "Revolving Promissory Note" shall have the
meaning assigned in Section 2.3 hereof.
(aaa) "Subordinating Creditor" shall mean Xxxx Xxxxx
New York, LP.
(bbb) "Subordination Agreement" shall have the
meaning set forth in Section 6.1(g) hereof.
(ccc) "Subsidiary" and "Subsidiaries" shall mean any
corporation or corporations of which the outstanding shares of any stock having
ordinary voting power is at the time owned by Borrowers and/or by one or more
Subsidiaries.
(ddd) "Term" shall have the meaning assigned in
Section 13.1(a) hereof.
(eee) "Termination Fee" shall have the meaning
assigned in Section 13.1(c) hereof.
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ARTICLE II. Revolving Loans
Section 2.1. Amount. Subject to the terms and conditions contained in
this Agreement, and so long as no Defaulting Event has occurred, Lender agrees,
in its sole discretion, to make loans (collectively, the "Revolving Loans" and,
individually, a "Revolving Loan") to Borrowers from time to time until
terminated as provided below in principal amounts not exceeding in the aggregate
at any one time outstanding the Revolving Loan Borrowing Base, it being agreed
and understood that at no time shall the maximum aggregate principal amount of
the Revolving Loans made by Lender exceed the Revolving Loan Borrowing Base.
Without limiting Lender's discretion, notwithstanding the actual net face value
of any Eligible Account of Borrowers, for purposes of computing the Revolving
Loan Borrowing Base, the value of any Eligible Account with a net face value in
excess of $50,000 shall be reduced to $50,000 prior to the application of such
Revolving Loan Borrowing Base unless, upon Borrowers' request, Lender approves a
higher limit. Lender may, in its sole discretion, raise or lower any such limits
without in any way creating a course of conduct which requires Lender to
maintain such raised or lowered limit or to raise or lower such limit again in
the future.
Section 2.2. Payment on Demand. ALL OBLIGATIONS OF BORROWERS ARISING
UNDER THE REVOLVING LOANS SHALL BE PAID BY BORROWERS IN FULL UPON DEMAND BY
LENDER, NOTWITHSTANDING LENDER'S RIGHTS UPON THE OCCURRENCE OF AN EVENT OF
DEFAULT AND WHETHER OR NOT SUCH EVENT OF DEFAULT HAS OCCURRED.
Section 2.3. Procedure For Advances, Notice of Borrowing, Revolving
Promissory Note, Etc. Within the limits of the Revolving Loan Borrowing Base and
the Term, so long as Borrowers are in compliance with all of the terms and
conditions of this Agreement and no Defaulting Event has occurred, Borrowers may
request borrowings, repay and request reborrowings of Revolving Loans. Whenever
Borrowers desire an advance, Borrowers shall notify Lender (which notice shall
be irrevocable) by telex, telecopy or telephone of the proposed borrowing. Such
notice (each, a "Notice of Borrowing") shall specify the date of the proposed
borrowing and the amount to be borrowed. Each Notice of Borrowing must be
received by Lender no later than 11:00 a.m., Hartford, Connecticut time on the
day such borrowing is requested. In addition to this Agreement, the Revolving
Loans shall be evidenced by a revolving promissory note payable to Lender in the
form of Exhibit A attached hereto (the "Revolving Promissory Note"). Insofar as
Borrowers may request and Lender shall make Revolving Loans hereunder, Lender
shall enter such advances as debits on a revolving loan account maintained by
Borrowers with Lender (the "Revolving Loan Account"). In order to facilitate the
requesting and making of advances hereunder, Intec hereby appoints ITI as its
agent authorized to request, receive and distribute to Intec advances under the
Revolving Loan and to communicate with the Lender with respect to the Revolving
Loan, and ITI hereby accepts such appointment. Lender may also record to the
Revolving Loan Account, in accordance with customary accounting practices and
procedures, all fees, accrued and unpaid interest, late fees, usual and
customary charges for the maintenance and administration of checking and any
other accounts maintained by Borrowers with Lender and other fees and charges
which are properly chargeable to Borrowers under this Agreement; all payments,
subject to collection, made by Borrowers on account of indebtedness evidenced by
the Revolving Loan Account; all proceeds of Collateral which are finally paid to
Lender in its own office in cash or collected items; and other appropriate
debits and credits, including, without limitation, payments of interest due
hereunder.
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Section 2.4. Monthly Statements. On a monthly basis, Lender shall
render a statement for the Revolving Loan Account, which statement shall be
considered correct and accepted by Borrowers and conclusively binding upon
Borrowers unless Borrowers notifies Lender to the contrary within ten (10) days
of the receipt of said statement by Borrowers. Lender shall have the right to
debit the Revolving Loan Account for all interest charges on the Loan as and
when the same shall be due and payable, if not otherwise paid by Borrowers.
Section 2.5. Lender Discretion. Nothing herein shall be construed to
(a) require Lender to make Revolving Loans, and/or (b) prohibit Lender from
lending in excess of the Revolving Loan Borrowing Base, it being agreed that all
such loans and advances shall be at Lender's sole discretion and shall not
establish a pattern or custom binding upon Lender.
ARTICLE III. Demand Loan
Section 3.1. Amount. Subject to the terms and conditions contained in
this Agreement, Lender agrees to make a loan to Borrowers in the original
principal amount of $500,000 (the "Demand Loan"). In addition to this Agreement,
the Demand Loan shall be evidenced by a Demand Promissory Note payable to Lender
in the form of Exhibit B attached hereto (the "Demand Promissory Note").
Section 3.2. Payment on Demand. ALL OBLIGATIONS OF BORROWERS ARISING
UNDER THE DEMAND LOAN SHALL BE PAID BY BORROWERS IN FULL UPON DEMAND BY LENDER,
NOTWITHSTANDING LENDER'S RIGHTS UPON THE OCCURRENCE OF AN EVENT OF DEFAULT AND
WHETHER OR NOT SUCH EVENT OF DEFAULT HAS OCCURRED AND, IF DEMAND IS NOT SOONER
MADE, AS SET FORTH IN THE DEMAND NOTE.
Section 3.3. Monthly Statements. On a monthly basis, Lender shall
render a statement for the Demand Loan, which statement shall be considered and
accepted by Borrowers and conclusively binding upon Borrowers unless Borrowers
notifies Lender to the contrary within ten (10) days of the receipt of said
statement by Borrowers, Lender shall have the right to debit any account of
Borrowers for all principal, interest and other charges on the Demand Loan as
and when the same shall be due and payable, if not otherwise paid by Borrowers.
ARTICLE IV. Interest, Fees and other Charges
Section 4.1. Interest.
(a) INTEREST RATES. So long as no Defaulting Event
has occurred, the Loans shall bear interest (from the date made through and
including the date of payment in full), at a floating rate per annum equal to
four percentage points (4.0%) above the Prime Rate, on the greater of (i) the
actual aggregate monthly balance outstanding under the Loans, or (ii) a minimum
assumed aggregate monthly loan balance of $900,000 (the "Minimum Balance").
(b) PAYMENT OF INTEREST. So long as any of the
Obligations remain outstanding, interest on the Loans shall be due and payable
without notice or demand monthly in arrears beginning on November 1, 1996 and
continuing on the first business day of each and every month thereafter.
(c) DEFAULT INTEREST RATE. Notwithstanding the
foregoing, interest on the Loans, at all times after the occurrence of an Event
of Default, and interest on
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all payments of interest that are not paid when due, shall accrue at a rate per
annum equal to four percentage points (4.0%) above the applicable interest rates
otherwise in effect under this Agreement.
(d) CALCULATION OF INTEREST. Interest on the Loans
shall be calculated on the basis of a 360-day year and the actual number of days
elapsed.
(e) LATE PAYMENT. If any amount due hereunder or
under the Notes are not paid within ten (10) days after the date it is due and
payable, without in any way affecting Lender's right to make demand hereunder or
to declare an Event of Default to have occurred, Lender may in its sole
discretion assess a late charge equal to five percent (5.0%) of such late
payment against Borrowers, which late charge shall be immediately due and
payable and may be paid by a charge to Borrowers' loan account as contemplated
in Section 2.3 above.
(f) LAWFUL INTEREST. It being the intent of the
parties that the rate of interest and all other charges to Borrowers be lawful,
if for any reason the payment of a portion of interest, fees or charges as
required by this Agreement would exceed the limit established by applicable law
which a commercial lender such as Lender may charge to a commercial Borrowers
such as Borrowers, then the obligation to pay interest or charges shall
automatically be reduced to such limit and, if any amounts in excess of such
limits shall have been paid, then such amounts shall be applied to the unpaid
principal amount of the Obligations or refunded to Borrowers so that under no
circumstances shall interest or charges required hereunder exceed the maximum
rate allowed by law, as aforesaid.
Section 4.2. Closing Fees. On or before the date hereof, Borrowers
shall pay or have paid to Lender all fees, expenses and other costs incurred by
Lender in connection with the closing of the extension of the Loans (including,
without limitation, all attorney's and other professional's fees and expenses).
Section 4.3. Commitment Fee. Borrowers shall also pay to Lender a
nonrefundable commitment fee equal to one percent (1%) of the maximum principal
amount of the Loans on the date hereof and on each anniversary date of this
Agreement. It is understood that the determination of the maximum principal
amount of the Loans shall be made without regard to the component of the
Revolving Loan Borrowing Base based upon Eligible Accounts. For example, for
purposes of this provision, on the date hereof the maximum principal amount of
the Loans is $1,500,000 and the commitment fee payable on the date hereof is
$15,000.
ARTICLE V. Representations and Warranties
Section 5.1. Representations and Warranties. EACH OF THE BORROWERS
REPRESENTS AND WARRANTS TO LENDER THAT:
(a) GOOD STANDING AND QUALIFICATION. It is duly
organized, validly existing and in good standing under the laws of the State of
Delaware. It has all requisite corporate power and authority to own and operate
its properties and to carry on its business as presently conducted and is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction wherein the character of the properties owned or leased by it
therein or in which the transaction of its business therein makes such
qualification necessary.
(b) CORPORATE AUTHORITY. It has full power and
authority to enter into this Agreement and the other Financing Agreements to
which it is a party, to make the borrowings contemplated herein, to execute and
deliver the Notes and the other Financing Agreements to which it is a party, and
to incur the obligations provided for herein and therein,
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all of which have been duly authorized by all necessary and proper corporate
action. No other consent or approval or the taking of any other action in
respect of shareholders or of any public authority is required as a condition to
the validity or enforceability of this Agreement, the Notes, the other Financing
Agreements or any other instrument, document or agreement delivered in
connection herewith or therewith.
(c) BINDING AGREEMENTS. This Agreement constitutes,
and the Notes and the other Financing Agreements executed and/or delivered in
connection herewith or therewith, when issued and delivered pursuant hereto for
value received shall constitute, valid and legally binding obligations of
Borrowers, enforceable in accordance with their respective terms, except as
enforcement may be limited by principles of equity, bankruptcy, insolvency, or
other laws affecting the enforcement of creditors' rights generally.
(d) LITIGATION. There are no actions, suits or
proceedings pending against Borrowers before any court or administrative agency,
nor are there any actions, suits or proceedings threatened, which, individually
or in the aggregate, would materially and adversely affect the financial
condition, assets or operations of Borrowers, nor are there any such actions,
suits or proceedings which question the validity of this Agreement, the Notes,
any of the other Financing Agreements, or any action to be taken in connection
with the transactions contemplated hereby or thereby.
(e) NO CONFLICTING LAW OR AGREEMENTS. The execution,
delivery and performance by Borrowers of this Agreement, the Notes and each
other Financing Agreement, as the case may be, does not (i) violate any
provision of its Articles of Incorporation or By-laws or any order, decree or
judgment, or any provision of any statute, rule or regulation to which the
Borrowers may be subject; (ii) violate or conflict with, result in a breach of
or constitute (with notice or lapse of time, or both) a default under any
shareholder agreement, stock preference agreement, mortgage, indenture or other
contract or undertaking to which it is a party, or by which any of its
properties may be bound; and (iii) result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any property or assets
of Borrowers except for the liens granted hereunder to Lender.
(f) TAXES. With respect to all of its taxable periods
it has filed all tax returns which are required to be filed and all federal,
state, municipal, franchise and other taxes shown on such filed returns have
been paid or are being diligently contested by appropriate proceedings and have
been reserved against, as required by generally accepted accounting principles,
consistently applied.
(g) FINANCIAL STATEMENTS. It has heretofore delivered
to Lender: (i) its audited annual balance sheet as of September 30, 1995, and
the related statements of income, retained earnings and cash flows for the
fiscal year or period then ended. Each of such statements is complete and
correct in all material respects and fairly presents its consolidated financial
condition as of the dates and for the periods referred to therein and has been
prepared in accordance with generally accepted accounting principles
consistently applied by it throughout the periods involved. There are no
liabilities, direct or indirect, fixed or contingent, of Borrowers as of the
dates of said balance sheets which are not reflected in such statements or in
the notes thereto.
(h) ADVERSE DEVELOPMENTS. Except as disclosed in
Borrowers' most recent Form 10K filed with the Securities and Exchange
Commission and subsequently filed Form 10Qs and except that Borrowers anticipate
a loss for quarter ended August 30, 1996, since September 30, 1995 there has
been no material adverse change in its financial condition, business,
operations, affairs or prospects of Borrowers or in any of their properties or
assets.
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(i) EXISTENCE OF ASSETS AND TITLE THERETO. It has
good and marketable title to all of its properties and assets, including the
properties and assets reflected in the financial statements delivered in
connection herewith. None of such properties or assets are subject to any
mortgage, pledge, lien, lease, encumbrance or charge except those permitted
under the terms of this Agreement.
(j) REGULATIONS G, T, U AND X. The proceeds of the
borrowings hereunder are not being used and will not be used, directly or
indirectly, for the purposes of purchasing or carrying any margin stock in
contravention, or which would cause any Lender to be in violation, of
Regulations G, T, U or X promulgated by the Board of Governors of the Federal
Reserve System.
(k) COMPLIANCE. It is not in default with respect to
any order, writ, injunction or decree of any court or of any federal, state,
municipal or other governmental department, commission, board, bureau, agency,
authority or official, nor is it in violation of any law, statute, rule or
regulation to which it or any of its properties are subject and it has not
received notice of any such default from any party and is not in default in the
payment or performance of any of its obligations to any third parties or in the
performance of any mortgage, indenture, lease, contract or other agreement to
which it is a party or by which any of its assets or properties may be bound.
(l) LEASES It enjoys quiet and undisturbed possession
under all leases under which it is operating, and all of such leases are valid
and subsisting and not in default.
(m) PENSION PLANS.
(i) No fact, including but not limited to any "reportable
event", as that term is defined in Section 4043 of ERISA, exists in
connection with any Plan of any of the Companies under Sections 414(b),
(c), (m), (n) and (o) of the Internal Revenue Code of 1986, as amended
(the "Code") which might constitute grounds for termination of any such
Plan by the Pension Benefit Guaranty Corporation (the "PBGC"), or for
the appointment by the appropriate United States District Court of a
trustee to administer any such Plan. A list of all of the Companies'
respective Plans are attached hereto on Schedule 5.1(m) attached
hereto;
(ii) No "prohibited transaction" within the meaning of Section
406 of ERISA or Section 4975 of the Code exists or will exist upon the
execution and delivery of this Agreement and the other Financing
Agreements, or the performance by the parties hereto or thereto of
their respective duties and obligations hereunder and thereunder;
(iii) Each of the Companies agrees to do all acts, including,
but not limited to, making all contributions necessary to maintain
compliance with ERISA or the Code, and agrees not to terminate any such
Plan in a manner or do or fail to do any act which could result in the
imposition of a lien on any of its properties pursuant to Section 4068
of ERISA;
(iv) None of the Companies sponsors or maintains, and has
never contributed to, and has not incurred any withdrawal liability
under a "multi-employer plan" as defined in Section 3 of ERISA and none
of the Companies has any written or verbal commitment of any kind to
establish, maintain or contribute to any "multi-employer plan" under
the Multi-employer Pension Plan Amendment Act of 1980;
(v) None of the Companies has any unfunded liability in
contravention of ERISA and the Code;
(vi) Each and every Plan complies currently, and has complied
in the past, both as to form and operation, with its terms and with
provisions of the Code and
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ERISA, and all applicable regulations thereunder and all rules issued
by the Internal Revenue Service, U.S. Department of Labor and the PBGC
and as such, is and remains a "qualified" plan under the Code;
(vii) No actions, suits or claims are pending (other than
routine claims for benefits) against any Plan, or the assets of any
such Plan;
(viii) The Companies have performed all obligations required
to be performed by it under any Plan and the Companies are not in
default, or in violation of any Plan, and have no knowledge of any such
default or violation by any other party to any and all Plans;
(ix) No liability has been incurred by any of the Companies to
the PBGC or to participants or beneficiaries on account of any
termination of a Plan subject to Title IV of ERISA, no notice of intent
to terminate a Plan has been filed by (or on behalf of) any of the
Companies pursuant to Section 4041 of ERISA and no proceeding has been
commenced by the PBGC pursuant to Section 4042 of ERISA;
(x) The reporting and disclosure provisions of the Securities
Act of 1933 and Securities Exchange Act of 1934 have been complied with
for all such Plans.
(n) DEFERRED COMPENSATION ARRANGEMENTS. Except as set
forth in Schedule 5.1(n) attached hereto, none of the Companies has entered into
employment contracts or deferred compensation plans, incentive compensation
plans, executive compensation plans, arrangements or commitments (each,
individually, an "Arrangement"). With respect to each such Arrangement:
(i) Such Arrangement complies currently, and has complied in
the past, both as to form and operation with its terms and the
provisions of the Code and ERISA and all applicable laws, rules and
regulations;
(ii) The disclosure and reporting provisions of the Securities
Act of 1933 and the Securities Exchange Act of 1934 have been
satisfied;
(iii) Such Arrangement is legally valid and binding and is in
full force and effect;
(iv) The Companies have made all contributions required to be
made under any such Arrangement and no contributions are currently due
and owing;
(v) There are no actions, suits or claims pending (other than
routine claims for benefits) or, to the best of the Companies'
knowledge which could be reasonably expected to be asserted against any
such Arrangement; and
(vi) The Companies have performed all obligations required to
be performed by it under any such Arrangement and the Companies are not
in default or in violation of, and the Companies have no knowledge of a
default or violation by any other party to any such Arrangement.
(o) CHIEF EXECUTIVE OFFICE. Its chief executive
office and principal place of business, and the office where its books and
records concerning Collateral are kept, is as set forth in the first paragraph
of this Agreement.
(p) PLACES OF BUSINESS AND LOCATION OF COLLATERAL. It
has no other places of business and locates no Collateral, specifically
including books and records, at any location other than as set forth in the
first paragraph of this Agreement and as set forth on Schedule 5.1(p) attached
hereto. It shall maintain a full and complete set of its books and records in
its offices at the chief executive office described in the immediately preceding
paragraph.
(q) CONTINGENT LIABILITIES. It is not a party to any
suretyship, guaranty or other similar type agreement, nor has it offered its
endorsement to any individual,
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concern, corporation or other entity or acted or failed to act in any manner
which would in any way create a contingent liability that does not appear in the
financial statements referred to hereinbefore.
(r) CONTRACTS. No contract, governmental or
otherwise, to which it is a party, is subject to renegotiation, nor is it in
default in any material respect of any contract.
(s) UNIONS AND PENSIONS. It is not a party to any
collective bargaining or union agreement.
(t) LICENSES. It has all licenses, permits and other
permissions required by any government, agency or subdivision thereof, or from
any licensing entity to which Borrowers may be subject, necessary for the
conduct of its business, all of which it represents to be in good standing and
in full force and effect.
(u) COLLATERAL. It is and shall continue to be the
sole owner of the Collateral free and clear of all liens, encumbrances, security
interests and claims except the liens granted to Lender or permitted hereunder
and the security interests and liens listed on Schedule 5.1(u) attached hereto;
Borrowers are fully authorized to sell, transfer, pledge and/or grant a security
interest in each and every item of the Collateral to Lender; all documents and
agreements related to the Collateral shall be true and correct and in all
respects what they purport to be; all signatures and endorsements that appear
thereon shall be genuine and all signatories and endorsers shall have full
capacity to contract; none of the transactions underlying or giving rise to the
Collateral shall violate any applicable state or federal laws or regulations;
all documents relating to the Collateral shall be legally sufficient under such
laws or regulations and shall be legally enforceable in accordance with their
terms; and Borrowers agree to defend the Collateral against the claims of all
persons other than Lender.
(v) TRADENAMES. Except as set forth in Schedule
5.1(v) attached hereto, it does not have any tradenames.
(w) FINANCIAL INFORMATION. All financial information
including, but not limited to, information relating to the Receivables and
Inventory, submitted by it to Lender, whether previously or in the future, is
and will be true and correct in all material respects, and is and will be
complete insofar as may be necessary to render it a true and accurate depiction
of the subject matter to which it relates.
(x) PARENT, AFFILIATE OR SUBSIDIARY CORPORATIONS.
Except as set forth in Schedule 5.1(x) attached hereto, Borrowers have no parent
corporation and has no affiliates or Subsidiaries.
(y) ENVIRONMENTAL MATTERS.
(i) It has obtained all permits, licenses and other
authorizations which are required under all Environmental Laws. Except
for the alleged spill on a portion of Borrowers' Trumbull facility
previously disclosed to Lender, it is in compliance with the terms and
conditions of all such permits, licenses and authorizations, and is
also in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Environmental Law
or in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved
thereunder.
(ii) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is
pending or threatened by any governmental or other entity with respect
to any alleged failure by Borrowers to have any permit, license or
authorization required in connection with the conduct of its business
or with respect
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to any Environmental Laws, including without limitation, Environmental
Laws relating to the generation, treatment, storage, recycling,
transportation, disposal or release of any Hazardous Materials.
(iii) No oral or written notification of a release of any
Hazardous Material has been filed by or against Borrowers and no
property now or previously owned, leased or used by it, including
without limitation, the Premises, is listed or proposed for listing on
the Comprehensive Environmental Response, Compensation and Inventory of
Sites or National Priorities List under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or on any
similar state or federal list of sites requiring investigation or
cleanup.
(iv) There are no liens or encumbrances arising under or
pursuant to any Environmental Laws on any of the property or properties
owned, leased or used by it, including without limitation, any of the
properties owned or leased by it, and no governmental actions have been
taken or are in process which could subject any of such properties to
such liens or encumbrances or, as a result of which Borrowers would be
required to place any notice or restriction relating to the presence of
Hazardous Materials at any property owned by it in any deed to such
property.
(v) Neither it nor, to the best knowledge of Borrowers, any
previous owner, tenant, occupant or user of any property owned, leased
or used by Borrowers, has (i) engaged in or permitted any operations or
activities upon or any use or occupancy of such property, or any
portion thereof, for the purpose of or in any way involving the
release, discharge, refining, dumping or disposal (whether legal or
illegal, accidental or intentional) of any Hazardous Materials on,
under, or in or about such property; or (ii) transported or had
transported any Hazardous Materials to such property except to the
extent such Hazardous Materials are raw products commonly used in
day-to-day manufacturing operations of such property and, in such case,
in compliance with, all Environmental Laws; (iii) engaged in or
permitted any operations or activities which would allow the facility
to be considered a treatment, storage or disposal facility as that term
is defined in 40 CFR 264 and 265; (iv) engaged in or permitted any
operations or activities which would cause any of Borrowers' properties
to become subject to The Connecticut Transfer Act, Section 22a-134 et
seq. C.G.S.; or (v) constructed, stored or otherwise located Hazardous
Materials on, under, in or about any such property except to the extent
commonly used in day-to-day operations of any such property and, in
such case, in compliance with all Environmental Laws. Further, to the
best knowledge of Borrowers, no Hazardous Materials have migrated from
other properties upon, about or beneath any such property.
The representations contained in this subparagraph (y) are qualified in
their entirety by the matters disclosed on Schedule 5.1(y) attached
hereto.
(z) Use of Proceeds. It will use the proceeds of the
Loans solely (i) to satisfy in full loans outstanding to Boston Financial &
Equity and X.X. XxXxxxxxxx on the date hereof, and (ii) for working capital
purposes.
ARTICLE VI. Conditions of Lending
Section 6.1. Conditions of the Initial Loans. Subject to the terms
hereof, the obligation of Lender to make the first Revolving Loan and the Demand
Loan under this Agreement is subject to the fulfillment of the following
conditions precedent at the time of the execution of this Agreement:
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(a) NOTES. Lender shall have received a duly executed
Revolving Promissory Note and Demand Promissory Note drawn to its order.
(b) EVIDENCE OF CORPORATE ACTION. Lender shall have
received certified copies of all corporate action (in form and substance
satisfactory to Lender) taken by Borrowers to authorize the execution, delivery
and performance of this Agreement, the Notes, and the other Financing Agreements
to which it is a party, and the borrowings to be made hereunder and thereunder,
together with true copies of Borrowers' Articles of Incorporation and By-laws
and such other papers as Lender or its counsel may require.
(c) OPINION OF COUNSEL. Lender shall have received a
favorable written opinion of counsel for Borrowers, the Fidelity Guarantors and
the Corporate Guarantor, accompanied by such supporting documents as Lender or
its counsel may require.
(d) FIDELITY GUARANTIES. Lender shall have received a
duly executed Fidelity Guaranty (individually, a "Fidelity Guaranty" and
collectively, the "Fidelity Guaranties") from each of Xxxxxx X. Xxxxxxx and
Xxxxxx Xxxxxx (collectively, the "Fidelity Guarantors"). The Fidelity Guaranties
shall be in form, scope and substance satisfactory to Lender and its counsel.
(e) CORPORATE GUARANTY. Lender shall have received a
duly executed Guaranty Agreement (the "Corporate Guaranty") from Intec Corp.
(the "Corporate Guarantor"). The Corporate Guaranty shall be in form, scope and
substance satisfactory to Lender and its counsel.
(f) CORPORATE GUARANTOR SECURITY AGREEMENT. Lender
shall have received a security agreement (the "Corporate Guarantor Security
Agreement") from the Corporate Guarantor in form, scope and substance
satisfactory to Lender and its counsel.
(g) SUBORDINATION AGREEMENT. Lender shall have
received a subordination agreement from the Subordinating Creditor in form,
scope and substance satisfactory to Lender and its counsel (the "Subordination
Agreement").
(h) LESSOR'S AGREEMENT. Borrowers shall cause to be
delivered to Lender a lessor's agreement with respect to the Premises (the
"Lessor's Agreement") in form, scope and substance satisfactory to Lender and
its counsel.
(i) UCC-1 FINANCING STATEMENTS. Lender shall have
received from Borrowers and from the Corporate Guarantor duly executed UCC-1
financing statements and such other documents as Lender deems necessary or
proper to perfect the security interest in the Collateral, all of which shall be
in form, scope and substance satisfactory to Lender and its counsel.
(j) NOTICE OF ASSIGNMENTS AND POST OFFICE BOX CHANGE
OF ADDRESS CARDS. Lender shall have received from ITI a notice of assignment and
from each of Borrowers a post office change of address card which shall be in
form, scope and substance satisfactory to Lender and its counsel.
(k) LIFE INSURANCE ASSIGNMENT. Lender shall have
received a duly executed life insurance assignment as collateral (the "Life
Insurance Assignment") on the life of the Xxxxxx X. Xxxxxxx, which shall be in
an amount equal to at least $500,000. The Life Insurance Assignment shall be in
form, scope and substance satisfactory to Lender and its counsel.
(l) WARRANT. Lender shall have received a duly
executed Warrant to purchase 100,000 shares of ITI's Common Stock, in form,
scope and substance satisfactory to Lender and its counsel.
(m) FURTHER DOCUMENTS. Lender shall have received
such further documents, instruments and agreements as Lender may request,
including without limitation,
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evidence that the insurance policies and certificates evidencing adequate
insurance and coverage on each of Borrowers' assets are currently in full force
and effect, continue to name Lender as loss payee or additional insured, as the
case may be, and that the premiums are current.
Section 6.2. Conditions of Loans Based Upon Eligible Foreign Accounts.
In addition to the conditions in Section 6.1 above, Lender shall make no
Revolving Loans based upon Eligible Foreign Accounts unless the following
conditions exist or have been satisfied by Borrowers at the time any Loan based
upon Eligible Foreign Accounts is requested:
(a) SECURITY DOCUMENTS. Lender shall have received such
documents, instruments and agreements as Lender may request to perfect its first
priority lien security interest in the assets of Intec, in form, scope and
substance satisfactory to Lender and its Belgian counsel.
(b) NOTIFICATION OF ACCOUNT DEBTORS. Lender shall have
received evidence that Intec's account debtors have been notified of Lender's
first priority lien security interest and to remit payment directly to Lender,
in form, scope and substance satisfactory to Lender and its Belgian counsel.
Section 6.3. Conditions of Additional Revolving Loans. In addition to
the conditions in Section 6.1 above, Lender shall make no further Revolving
Loans (collectively, the "Further Loans") unless the following conditions shall
exist or have been satisfied by Borrowers at the time any Further Loan is
requested:
(a) ABSENCE OF TERMINATION OR DEFAULT. Lender shall not have
terminated the Revolving Loan facility or the Demand Loan hereunder, nor shall a
Defaulting Event exist or have occurred.
(b) COMPLIANCE CERTIFICATES. On the date of each Revolving
Loan hereunder and after giving effect thereto, Borrowers shall have delivered
to Lender, upon Lender's request, a certificate executed by its chief financial
officer which states, among other things, that: (i) Borrowers have complied, and
is then in compliance, with all the terms, covenants and conditions of this
Agreement and the other Financing Agreements to which it is a party; (ii) there
exists no Event of Default or Defaulting Event; and (iii) the representations
and warranties contained herein and in the other Financing Agreements are true
and correct with the same effect as though such representations and warranties
had been made at the time of each Further Loan.
(c) REVOLVING LOAN BORROWING BASE AND DEMAND LOAN BORROWING
BASE. The indebtedness of Borrowers by virtue of the making of any Revolving
Loan shall not exceed the Revolving Loan Borrowing Base. Borrowers shall not
request any Revolving Loan if the effect of such Revolving Loan shall be to
cause the balance of all Revolving Loans to exceed the Revolving Loan Borrowing
Base. The indebtedness of Borrowers by virtue of the making of the Demand Loan
shall not exceed the Demand Loan Borrowing Base.
(d) FURTHER DOCUMENTS. Lender shall have received such further
documents, instruments and agreements as Lender may reasonably request.
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ARTICLE VII. Covenants
A. Affirmative Covenants.
Each of the Borrowers covenants and agrees that from the date hereof
until payment and performance in full of all Obligations, and until the
termination of this Agreement, unless Lender otherwise consents in writing,
Borrowers shall:
Section 7.1. Financial Statements. Deliver or caused to be
delivered to Lender: (a) within thirty (30) days after the close of each fiscal
month of Borrowers, consolidated and consolidating internally prepared financial
statements of Borrowers including balance sheets as of the close of each month,
and statements of income and retained earnings for such month, and for that
portion of the fiscal year-to-date then ended, which shall be prepared on a
basis consistent with that of the preceding period or containing disclosure of
the effect on financial condition or results of operations of any change in such
preparation, and which shall be certified by the chief financial officer of
Borrowers as being accurate and fairly presenting the financial condition of
Borrowers; (b) within ninety (90) days after the close of each fiscal year of
Borrowers, consolidated audited financial statements including a balance sheet
as of the close of such fiscal year and statements of income, stockholders'
capital and cash flow for the year then ended, prepared in conformity with
generally accepted accounting principles, applied on a basis consistent with
that of the preceding year or containing disclosure of the effect on financial
condition or results of operations of any change in the application of
accounting principles during the year, and accompanied by a report thereon of a
recognized certified public accounting firm selected by Borrowers and reasonably
satisfactory to Lender, which opinion shall state that such financial statements
fairly present the financial condition and results of operations of Borrowers in
accordance with generally accepted accounting principles, and also accompanied
by a written statement from such accountants stating that they have reviewed
such financial statements and have found no evidence of an Event of Default
having occurred or of an event which with passage of time and/or giving of
notice would constitute an Event of Default having occurred; (c) within ten (10)
days of the close of each month, monthly aging of accounts receivable and
accounts payable and inventory status reports in form, scope and substance
satisfactory to Lender; (d) daily sales and collection information in the form
supplied by Lender to Borrowers (converted into U.S. Dollars); (e)
contemporaneously with the delivery to shareholders or governmental agencies,
copies of all reports and information delivered to shareholders or filed with
governmental agencies; (f) within one hundred twenty (120) days after the close
of each fiscal year of the Fidelity Guarantors state and federal income tax
returns; (g) promptly upon Lender's written request, such other information
about the financial condition and operations of Borrowers or the Fidelity
Guarantors, as Lender may, from time to time, reasonably request; and (h)
promptly upon becoming aware of any Event of Default, or the occurrence or
existence of a Defaulting Event, notice thereof in writing.
Section 7.2. Insurance and Endorsements. (a) Keep its
properties and cause the Premises to be insured against fire and other hazards
(pursuant to so-called "All Risk" coverage) in amounts and with companies
satisfactory to Lender to the same extent and covering such risks as is
customary in the same or a similar business; maintain public liability coverage,
including without limitation, products liability coverage, against claims for
personal injuries or death; and maintain all worker's compensation, employment
or similar insurance as may be required by applicable law; and (b) all insurance
shall contain such terms, be in such form, and be for such periods reasonably
satisfactory to Lender, and be written by carriers duly
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licensed by the appropriate governmental authority of each state where any
Collateral is located. Without limiting the generality of the foregoing, such
insurance must provide that it may not be canceled without thirty (30) days'
prior written notice to Lender. Borrowers shall cause Lender to be endorsed as a
loss payee with a long form Lender's Loss Payable Clause, in form and substance
acceptable to Lender on all such insurance. In the event of failure to provide
and maintain insurance as herein provided, Lender may, at its option, provide
such insurance and charge the amount thereof to the Revolving Loan Account.
Borrowers shall furnish to Lender certificates or other satisfactory evidence of
compliance with the foregoing insurance provisions. Borrowers hereby irrevocably
appoint Lender as its attorney-in-fact, coupled with an interest, to make proofs
of loss and claims for insurance, and to receive payments of the insurance
proceeds and execute and endorse all documents, checks and drafts in connection
with payment of such insurance. Any insurance proceeds received by Lender shall
be applied to the Obligations in such order and manner as Lender shall determine
in its sole discretion.
Section 7.3. Tax and Other Liens. Comply with all statutes and
government regulations and pay all taxes, assessments, governmental charges or
levies, or claims for labor, supplies, rent and other obligations made against
it or its property which, if unpaid, might become a lien or charge against
Borrowers or its properties, except liabilities being contested in good faith
and against which adequate reserves have been established in accordance with
generally accepted accounting principles.
Section 7.4. Place of Business; Location of Collateral.
Maintain its chief place of business and chief executive offices at the address
set forth in the introductory sentence hereof and its other places of business
and locations of Collateral as set forth in Schedule 5.1(p) hereto unless
Borrowers shall have given Lender thirty (30) days' prior written notice of any
change thereof.
Section 7.5. Inspections. Allow Lender, at its expense prior
to an Event of Default or demand for payment of the Obligations and at the
expense of Borrowers at any time after an Event of Default or demand for payment
of the Obligations by or through any of its officers, attorneys, and/or
accountants designated by it, for the purpose of ascertaining whether or not
each and every provision hereof and of any related agreement, instrument and
document is being performed, to enter the offices and plants of Borrowers to
examine or inspect any of the properties, books and records or extracts
therefrom, to make copies of such books and records or extracts therefrom and to
make complete environmental studies and/or investigations, and to discuss the
affairs, finances and accounts thereof with Borrowers all at such reasonable
times, upon reasonable notice and as often as Lender or any representative of
Lender may reasonably request.
Section 7.6. Litigation. Promptly advise Lender of the
commencement or threat of litigation, including arbitration proceedings and any
proceedings before any governmental agency (but excluding product liability
claims which are either fully covered by insurance or adequately covered by
insurance and which are not likely to have a material adverse effect on the
business, assets or condition (financial or otherwise) of Borrowers), which is
instituted against Borrowers or, upon receipt of any information pertaining
thereto, the Fidelity Guarantors and is reasonably likely to have a materially
adverse effect upon the condition, financial, operating or otherwise, of
Borrowers or the Fidelity Guarantors.
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Section 7.7. Maintenance of Existence. Maintain its corporate
existence and comply with all valid and applicable statutes, rules and
regulations, and maintain its properties in good repair, working order and
operating condition. Borrowers shall immediately notify Lender of any event
causing material loss in the value of its assets.
Section 7.8. Inventory. Allow Lender to examine and inspect
the Inventory at reasonable times and intervals and upon reasonable notice.
Borrowers shall immediately notify Lender of any event causing material loss or
depreciation in value of Inventory and the amount of such loss or depreciation.
Section 7.9. ERISA. Immediately notify Lender of any event
which causes it not to be in compliance with ERISA in all material respects.
Section 7.10. Notice of Certain Events. Give prompt written
notice to Lender of:
(a) any material dispute that may arise between
Borrowers and any governmental regulatory body or law enforcement agency;
(b) any labor controversy resulting or likely to
result in a strike or work stoppage against Borrowers;
(c) any proposal by any public authority to acquire
the assets or business of Borrowers;
(d) the location of any Collateral other than at
Borrowers' places of business disclosed in this Agreement (other than Collateral
in transit in the ordinary course of Borrowers' business);
(e) any proposed or actual change of the name,
identity or corporate structure of Borrowers;
(f) any circumstance or event by virtue of which or
in connection with which Borrowers may have incurred or may incur any liability,
expense or responsibility under any Environmental Law including, without
limitation: (i) any Release of any Hazardous Material required to be reported to
any federal, state or local governmental authority, instrumentality or agency
under any applicable Environmental Law; (ii) any and all written communications
with respect to claims or suits under any applicable Environmental Law or any
Release of Hazardous Material required to be reported to any federal, state or
local governmental authority, instrumentality or agency; (iii) any remedial
action taken by Borrowers or any other person in response to (A) any Hazardous
Material on, under or about the properties or assets of Borrowers, the existence
of which may give rise to a claim or suit resulting in a material change of
Borrowers' business operations or financial condition, or (B) any claim or suit
resulting in a material change of Borrowers' business operations or financial
condition; (iv) Borrowers' discovery of any occurrence or condition on any real
property adjoining or in the vicinity of Borrowers' business premises which may
cause such premises to be in violation of any Environmental Law or to be subject
to any restrictions on the ownership, occupation, transferability or use thereof
under any Environmental Law; and (v) any request for information from any
federal, state or local governmental authority, instrumentality or agency that
indicates such entity is investigating Borrowers' potential responsibility for a
Release of Hazardous Material;
(g) any other matter which has resulted or is
reasonably likely to result in a material adverse change in the financial
condition or operations of Borrowers;
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(h) any information received by Borrowers with
respect to any Receivable that may materially affect the value thereof or the
rights and remedies of Lender with respect thereto; and
(i) any action, suit or claim pending or which could
be reasonably expected to be asserted against Borrowers.
Section 7.11. Defaults. Upon the occurrence of an Event of
Default or of a Defaulting Event, give prompt written notice of such occurrence
to Lender signed by the president or chief financial officer of Borrowers
describing such occurrence and the action, if any, being taken to cure the Event
of Default or Defaulting Event.
Section 7.12. Duties. Borrowers have complied and will
continue to comply with any and all federal, state and local laws affecting its
business, including, but not limited to, payment of all federal and state taxes
with respect to sales to Account Debtors by Borrowers and disclosures in
connection therewith. Borrowers jointly and severally agree to indemnify Lender
against and hold Lender harmless from, all claims, actions and losses, including
reasonable attorney's fees and costs incurred by Lender arising from any
contention, whether well founded or otherwise, that there has been a failure to
comply with such laws.
Section 7.13. Collateral Duties. Do whatever Lender may
reasonably request from time to time by way of obtaining, executing, delivering
and filing financing statements, assignments, landlord's or mortgagee's waivers,
warehouse agreements and other notices and amendments and renewals of any of the
foregoing, and Borrowers will take any and all steps and observe such
formalities as Lender may request, in order to create and maintain a valid and
enforceable first lien upon, pledge of, and first priority security interest in,
any and all of the Collateral. Lender hereby is authorized to file financing
statements without the signature of Borrowers and to execute and file such
financing statements on behalf of Borrowers as specified by the Uniform
Commercial Code to perfect or maintain its security interest in all of the
Collateral. All reasonable charges, expenses and fees Lender may incur in filing
any of the foregoing, together with reasonable costs and expenses of any lien
search required by Lender, and any taxes relating thereto, shall be charged to
the Revolving Loan Account and added to the Obligations.
Section 7.14. Audit and Appraisals by Lender; Fees. Permit
Lender to audit the books and records of Borrowers and to conduct or cause to be
conducted appraisals of Borrowers' assets at such times, upon reasonable notice,
and in such manner and detail as Lender deems reasonable. Without limiting the
generality of the foregoing, Lender shall be allowed to verify the Receivables
and Inventory of Borrowers and to confirm with Account Debtors the validity and
amount of Receivables. At any time after Lender has made a demand for payment of
any Obligations or the occurrence of an Event of Default, Borrowers shall
promptly pay to Lender reasonable audit fees and any out-of-pocket expenses
incurred in connection with any audit performed by Lender, or by any third party
retained by Lender in its sole discretion if Lender, in its sole discretion,
deems it necessary to hire outside auditors. In addition, Borrowers shall
promptly pay or reimburse Lender for the costs of any such appraisals conducted
by or for Lender after an Event of Default or demand for payment of the
Obligations. Lender may charge any such audit fees and out-of-pocket expenses to
the Revolving Loan Account.
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Section 7.15. Bank Accounts. Maintain all of its bank
accounts, including without limitation, its operating and depository accounts,
with respect to ITI at Chase Manhattan Bank of Connecticut, People's Bank,
Silicon Valley Bank, and with respect to Intec at Banque Generale.
B. Negative Covenants.
Each of the Borrowers covenants and agrees that from the date hereof
until payment and performance in full of all Obligations, and until the
termination of this Agreement, unless Lender otherwise consents in writing,
neither of the Borrowers shall:
Section 7.16. Encumbrances. Incur or permit to exist any lien,
mortgage, charge or other encumbrance against any of its properties or assets,
whether now owned or hereafter acquired, except: (a) liens required or expressly
permitted by this Agreement; (b) pledges or deposits in connection with or to
secure worker's compensation, unemployment or liability insurance; (c) those
listed on Schedule 5.1(u) attached hereto; (d) tax liens which are being
contested in good faith with the prior written consent of Lender and against
which, if requested by Lender as a condition to its consent, the Borrowers shall
set up a cash reserve or post a surety bond in an amount equal to the total
amount of the lien being contested; and (e) purchase money lien securing
financing for machinery and equipment purchased in the ordinary course of
business as permitted pursuant to Section 7.17 below.
Section 7.17. Limitation on Indebtedness. Except as set forth in the
Subordination Agreement and except (with Lender's prior written consent which
shall not be unreasonably withheld) for purchase money financing for machinery
and equipment purchased in the ordinary course of business or for the leasing of
machinery and equipment in the ordinary course of business, create, incur or
guarantee any indebtedness or obligation for borrowed money (including without
limitation, any reimbursement obligations for any letter of credit issued by any
financial institution) from, or issue or sell any of its obligations to, any
lender.
Section 7.18. Contingent Liabilities. Assume, guarantee, endorse or
otherwise become liable upon the obligations of any person, firm or corporation,
or enter into any purchase or option agreement or other arrangement having
substantially the same effect as such a guarantee, except by the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business.
Section 7.19. Consolidation or Merger. Merge into or consolidate with
or into any corporation.
Section 7.20. Loans, Advances, Investments. Make or permit to exist any
loans or advances to, or purchase any stock, other securities or evidences of
indebtedness of, or make or permit to exist any investment (including without
limitation the acquisition of stock of a corporation), or acquire any assets or
any other interest whatsoever, in any other person.
Section 7.21. Acquisition of Stock of Borrowers; Dividends. Purchase,
acquire, redeem or retire, or make any commitment to purchase, acquire, redeem
or retire any of the capital stock of Borrowers, whether now or hereafter
outstanding, or declare or pay any dividend, or make any distribution to any of
its stockholders, except for reasonable and actual
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travel expenses not to exceed $10,000 per year, per person, or $100,000 per year
in the aggregate.
Section 7.22. Sale and Lease of Assets. Sell or lease any of the assets
of the Borrowers, except for sales of inventory in the ordinary course of
business consistent with past practices and on an arms-length basis.
Section 7.23. Name Changes. Change its name or style other than as set
forth in this Agreement.
Section 7.24. Prohibited Transfers. Transfer, in any manner, either
directly or indirectly, any cash, property, or other asset to any parent or any
of its affiliates or Subsidiaries, other than sales made in the ordinary course
of business and for fair consideration on terms no less favorable than if such
sale had been an arms-length transaction between Borrowers or such Subsidiary
and an unaffiliated entity.
Section 7.25. No Management/Ownership Change. Suffer any change in the
management of Borrowers.
Section 7.26. Leasebacks. Lease any real estate or other capital asset
from any lessor who shall have acquired such property from Borrowers.
Section 7.27. Loans to Officers, Directors and/or Shareholders. Make
any loan or advance or make any transfer, in any manner, of any cash, property
or other asset to or on behalf of any of its officers, directors or
shareholders.
Section 7.28. Payment of Subordinated Debt. Make payment of any sums to
the Subordinating Creditor in violation of the Subordination Agreement.
ARTICLE VIII. Collateral
Section 8.1. Grant. To secure the prompt payment and performance of
each and all of the Obligations, each of the Borrowers pledges, assigns,
transfers and grants to Lender a continuing, first lien security interest in the
following property of Borrowers, now owned or hereafter acquired or arising (the
"Collateral"):
(a) All accounts and accounts receivable related to or arising
from the sale or lease of inventory or rendition of services by Borrowers (the
"Accounts") and all other accounts, bank accounts, contracts, contract rights,
notes, documents, chattel paper, instruments, acceptances, drafts or other forms
of obligations and receivables (collectively with the Accounts, the
"Receivables"), whether or not the same are listed on any schedules, assignments
or reports furnished to Lender from time to time, and whether such Receivables
are now existing or are created or arise at any time hereafter, together with
all goods, inventory and merchandise returned by or reclaimed by or repossessed
from customers wherever such goods, inventory and merchandise are located, and
all proceeds thereto including without limitation, proceeds of insurance thereon
and all guaranties, securities, and liens which Borrowers may hold for the
payment of any such Receivables, including without limitation, all rights of
stoppage in transit, replevin and reclamation and all other rights and remedies
of an unpaid vendor or lienor, and any liens held by Borrowers as a mechanic,
contractor, subcontractor, processor, materialman, machinist, manufacturer,
artisan, or otherwise;
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(b) All documents, instruments, documents of title, general
intangibles, policies and certificates of insurance, guaranties, securities,
chattel paper, deposits, tax returns, proceeds of insurance, proceeds of an
eminent domain or condemnation award, cash, liens or other property, which are
now or may hereinafter be in the possession of Borrowers or as to which
Borrowers may now or hereafter control possession by documents of title or
otherwise, including, but not limited to, all property allocable to unshipped
orders relating to Receivables and Inventory;
(c) All books, records, customer lists, supplier lists,
ledgers, evidences of shipping, invoices, purchase orders, sales orders and all
other evidences of Borrowers' business records, including all cabinets, drawers,
etc. that may hold the same; computer records, lists, software, programs,
wherever located, all whether now existing or hereafter arising or acquired;
(d) All of Borrowers' inventory, whether now owned or
hereafter acquired, including without limitation (collectively, the
"Inventory"): (i) all goods manufactured or acquired for sale or lease, and any
piece goods, raw materials, work in process and finished merchandise, findings
or component materials, and all supplies, goods, incidentals, office supplies,
packaging materials, and any and all items including machinery and equipment
used or consumed in the operation of the business of Borrowers or which
contribute to the finished product or to the sale, promotion and shipment
thereof, in which Borrowers may now or at any time hereafter may have an
interest, whether or not such inventory is listed in this Agreement on any
reports furnished to Lender from time to time; (ii) all inventory whether or not
the same is in transit or in the constructive, actual or exclusive occupancy or
possession of Borrowers or is held by Borrowers or by others for the Accounts,
including without limitation, all goods covered by purchase orders and contracts
with suppliers and all goods billed and held by suppliers; (iii) all inventory
which may be located on the premises of Borrowers or of any carrier, forwarding
agents, truckers, warehousemen, vendors, selling agents or third parties; (iv)
all general intangibles relating to or arising out of inventory; (v) all
proceeds and products of the foregoing resulting from the sale, lease or other
disposition of inventory, including cash, accounts receivable, other non-cash
proceeds and trade-ins; and (vi) with respect to after-acquired inventory, the
security interest shall be deemed to be a purchase money security interest;
(e) All general intangibles, including without limitation, tax
refunds, proceeds of insurance, eminent domain awards, condemnation proceeds,
and patents, copyrights, tradenames, trademarks, applications therefor, and
licenses to any patent, copyright, trademark, or tradename that Borrowers now
own, has the right to use or may hereafter own or acquire the right to use;
(f) All equipment, machinery, appliances, and furniture and
fixtures, now existing or hereafter arising, wherever located, and all
contracts, contract rights and chattel paper arising out of any lease of any of
the foregoing;
(g) All other collateral in which Borrowers may hereafter
grant to Lender a security interest; and
(h) All renewals, substitutions, replacements, additions,
accessions, proceeds, and products of any and all of the foregoing, including
without limitation, all proceeds of credit, fire and other insurance and also
including, without limitation, rents and profits resulting from the temporary
use of the Collateral.
ARTICLE IX. Events of Default
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Section 9.1. Events of Default. Without affecting the demand
nature of the Loans which shall at all times be due and payable on demand, any
and all Obligations, including without limitation, the Obligations arising
pursuant to or in connection with the Loans shall, at the option of Lender and
notwithstanding any time or credit allowed by any note or agreement, become
immediately due and payable without notice if any one or more of the following
events (collectively, "Events of Default" and individually, an "Event of
Default") shall occur:
(a) Borrowers' failure to pay principal, interest or
any other sum due hereunder or under the Notes;
(b) Borrowers' failure to pay or perform when due any
other covenant, duty, indebtedness, liability or obligation arising under this
Agreement, the Notes or any of the other Financing Agreements, or any other
Obligation, or such failure by either Fidelity Guarantor or the Corporate
Guarantor,
(c) the making by Borrowers, either Fidelity
Guarantor or the Corporate Guarantor of any misrepresentation of a material fact
to Lender;
(d) loss, theft, or destruction of any Collateral in
excess of Fifty Thousand Dollars ($50,000) in value which is not covered by
insurance with Lender's loss payee endorsement as required herein;
(e) the filing, making or issuance of any lien, levy,
seizure, attachment, garnishment, injunction, execution, tax
lien or judgment upon or against Borrowers or any of the
Collateral, or any other property or assets of Borrowers which
lien, levy, seizure, attachment, garnishment, injunction,
execution, tax lien or judgment is not released within
thirty-five (35) days from its initial issuance or creation;
(f) any of the following of, by, or involving
Borrowers, either Fidelity Guarantor or the Corporate Guarantor: insolvency
(failure to pay debts generally as they mature or where the fair value of assets
is not in excess of liabilities); business failure; appointment of a receiver or
custodian; assignment for the benefit of creditors; calling of a meeting of
creditors; appointment of a committee of creditors, or liquidating banks, or
offering of a composition extension to creditors; or the commencement of any
proceedings under any bankruptcy or insolvency law;
(g) Borrowers' failure to keep the Collateral insured
against loss by fire or otherwise for the full insurable value thereof with
companies and for coverages (including Lender's Long Form Loss Payable
Endorsement) acceptable to Lender and making the loss, if any, payable to
Lender;
(h) the loss, revocation or failure to renew any
license and/or permit now held or hereafter acquired by Borrowers which
adversely affects the ability of Borrowers to continue their operations as
presently conducted;
(i) the occurrence of a default or event of default
(howsoever defined) under any other agreement between Lender, either Fidelity
Guarantor or the Corporate Guarantor; or
(j) the declaration of a default that permits
acceleration of maturity under any obligation of Borrowers to any other
creditor; or
(k) the occurrence of any event or circumstance with
respect to the Borrowers such that Lender shall believe in good faith that the
prospect of payment of all or any part of Obligations or the performance by the
Borrowers under this Agreement, or any other agreement between the Lender and
the Borrowers, is impaired or there shall occur any material adverse change in
the business or financial condition of the Borrowers.
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Upon the occurrence of any Event of Default, at the option of Lender:
(x) any and all Obligations, including without limitation the Obligations
arising from or in connection with the Loans, shall become immediately due and
payable, and (y) Borrowers' eligibility to request any Further Loans shall
automatically and immediately terminate, without presentment, demand, protest,
notice of protest or other notice or requirements of any kind, all of which
Borrowers expressly waive. Notwithstanding the foregoing sentence, if any Event
of Default under clause (f) occurs, the acceleration of the Obligations and
termination of Borrowers' eligibility to request Further Loans shall be
automatic.
At any time after an Event of Default, Lender may proceed to enforce
the rights of Lender whether by suit in equity or by action at law, whether for
specific performance of any covenant or agreement contained in this Agreement,
the Notes or the other Financing Agreements, or in aid of the exercise of any
power granted in either this Agreement or the Notes or any other Financing
Agreement, or it may proceed to obtain judgment or any other relief whatsoever
appropriate to the enforcement of such rights, or proceed to enforce any legal
or equitable right which Lender may have by reason of the occurrence of any
Event of Default hereunder.
ARTICLE X. Collection of Receivables
Section 10.1. Deposits. ITI agrees that it shall promptly
notify its account debtors to make payment of all Receivables directly to a
lockbox established in Lender's name at such financial institution as Lender
shall elect, and that ITI shall execute a lockbox agreement in form, scope and
substance satisfactory to Lender. All Receivables of Intec shall be directed for
payment directly to such account of Lender as designated by Lender from time to
time. All collections and other proceeds of Receivables which Borrowers receive
shall be received in trust for Lender and Borrowers shall: keep all such
collections separate and apart from all of its other funds and property;
identify such collections and proceeds as the property of Lender; and
immediately deposit such collections in the identical form received in such
accounts of Lender as designated by Lender from time to time.
Section 10.2. Schedule. All collections of Receivables shall
be set forth on a schedule in form and substance satisfactory to Lender.
Collections of Receivables shall be credited to the Obligations of Borrowers on
the day of their actual receipt by Lender; provided, however, that all credits
shall be conditional credits subject to collection and that returned items, at
Lender's option, may be charged to Borrowers; and further provided that for
purposes of the computation of interest, items shall not be deemed to be
collected until three (3) days after their actual receipt by Lender.
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ARTICLE XI. Returned Merchandise
Section 11.1. Procedures. Until Lender exercises its rights to
xxx to collect the Receivables as provided for in this Agreement, Borrowers may
continue their present policies for returned merchandise and adjustments, but
shall promptly notify Lender of any credits, adjustments or disputes arising
concerning the goods or services represented by Receivables. In any event,
Borrowers will immediately pay Lender from their own funds (and not from the
proceeds of Receivables), for application to the Revolving Loans, an amount
equal to any credit or adjustment made to any Eligible Accounts; provided,
however, that so long as Borrowers are not in default hereunder, such payment
need not be made if Borrowers shall have, after making such credit or
adjustment, sufficient Receivables to maintain the aggregate outstanding balance
of the Revolving Loans under the Revolving Loan Borrowing Base.
ARTICLE XII. Rights and Remedies of Lender
Section 12.1. Remedies of Lender. Upon Lender's demand for
payment of the Loans or upon the occurrence of any Event of Default, Lender
shall have in any jurisdiction where enforcement of this Agreement, the Notes or
any other Financing Agreement is sought, in addition to all other rights and
remedies which Lender may have under law and equity, the following rights and
remedies, all of which may be exercised with or without further notice to
Borrowers and without a prior judicial or administrative hearing, which notice
and hearing are expressly waived: to occupy any of Borrowers' premises for up to
six (6) months rent free for the purposes of liquidating Collateral, including
without limitation, conducting an auction thereon; to enforce or foreclose the
liens and security interests created under this Agreement or under any other
agreement relating to Collateral by any available judicial procedure or without
judicial process; to enter any premises where any Collateral may be located for
the purpose of taking possession or removing the same; to sell, assign, lease,
or otherwise dispose of Collateral or any part thereof, either at public or
private sale, in lots or in bulk, for cash, on credit or otherwise, with or
without representations or warranties, and upon such terms as shall be
acceptable to Lender, all at Lender's sole option and as Lender in its sole
discretion may deem advisable; to bid or become purchaser at any such sale if
public; and, at the option of Lender, to apply or be credited with the amount of
all or any part of the Obligations owing to Lender against the purchase price
bid by Lender at any such sale.
Section 12.2. Specific Powers. Lender may at any time, before
(with respect to clauses (v), (vii) and (x) of this Section 12.2) or after the
occurrence of a demand for payment of the Loans or an Event of Default, at
Lender's sole discretion: (i) give notice of assignment to any Account Debtor
(it being understood and agreed that Lender may at any time, before or after
demand for payment of the Revolving Loan or the occurrence of an Event of
Default verify receivables directly with Account Debtors); (ii) collect
Receivables directly and charge, or cause to be charged, the collection costs
and expenses to the Revolving Loan Account; (iii) collect receivables submitted
by Borrowers to Lender for collection and charge, or cause to be charged, the
collection costs and expenses to the Revolving Loan Account; (iv) settle or
adjust disputes and claims directly with Account Debtors for amounts and upon
terms which Lender considers advisable, and credit, or cause to be credited, the
Revolving Loan Account with the net amounts received in payment of Receivables;
(v) exercise all other rights granted in this Agreement and the other Financing
Agreements; (vi) receive, open and dispose of all mail addressed to Borrowers
and notify the Post Office authorities to change the address for delivery of
Borrowers' mail to an address designated by Lender; (vii) endorse the name of
Borrowers on any checks or other evidence of payment that may come into
possession
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of Lender and on any invoice, freight or express xxxx, xxxx of lading or other
document; (viii) in the name of Borrowers or otherwise, demand, xxx for, collect
and give acquittance for any and all monies due or to become due on Receivables;
(ix) compromise, prosecute or defend any action, claim or proceeding concerning
Receivables; and (x) do any and all things necessary and proper to carry out the
purposes contemplated in this Agreement, the other Financing Agreements and any
other agreement between the parties. Neither Lender nor any person acting as its
representative hereunder shall be liable for any acts or omissions or for any
error of judgment or mistake of fact or law, except for gross negligence or
willful misconduct. Borrowers agree that the powers granted hereunder, being
coupled with an interest, shall be irrevocable so long as any Obligation remains
unsatisfied. Notwithstanding the foregoing, it is understood that Lender is
under no duty to take any of the foregoing actions and that after having made
demand upon the Account Debtors for payment, Lender shall have no further duty
as to the collection or protection of Receivables or any income therefrom and no
further duty to preserve any rights pertaining thereto, other than the safe
custody thereof in the event Lender takes possession thereof.
Section 12.3. Duties After Demand or Default. Borrowers will,
at Lender's request, assemble all Collateral and make it available to Lender at
places which Lender may reasonably select, whether at the premises of Borrowers
or elsewhere and will make available to Lender all premises and facilities of
Borrowers for the purpose of Lender taking possession of Collateral or of
removing or putting the Collateral in salable form. In the event that Lender
elects to exercise its right to take possession and control of any Collateral,
and any goods called for in any sales order, contract, invoice or other
instrument or agreement evidencing or purporting to give rise to any Receivable
shall not have been delivered or shall be claimed to be defective by any
customer, Lender shall have the right in its sole discretion to use and deliver
to such customer any goods of Borrowers to fulfill such order, contract or the
like so as to make good any such Receivable. If any Collateral shall require
repairing, maintenance, preparation, or the like, or is in process or other
unfinished state, Lender shall have the right, but shall not be obligated, to
effectuate such repair, maintenance, preparation, processing or completion of
manufacturing for the purpose of putting the same in such salable form as Lender
shall deem appropriate, provided that Lender shall nonetheless have the right to
sell or dispose of such Collateral without such processing. The net cash
proceeds resulting from the collection, liquidation, sale, lease or other
disposition of Collateral shall be applied first to the expenses (including all
attorneys' and professionals' fees) of retaking, holding, storing, processing
and preparing for sale, selling, collecting, liquidating and the like such
collateral and then to the satisfaction of all Obligations (application as to
particular Obligations or against principal or interest to be at Lender's sole
discretion), and then, upon full and final payment of the Obligations, and
unless otherwise prohibited by court order or law, to Borrowers, it being agreed
that if any such payment made to Lender is recovered from or repaid by Lender in
whole or in part in any bankruptcy, insolvency or similar proceeding instituted
by or against Borrowers, this Agreement automatically shall be reinstated
without any further action by Borrowers and Lender. Borrowers shall be liable to
Lender and shall pay to Lender on demand any deficiency which may remain after
such sale, disposition, collection or liquidation of Collateral.
Section 12.4. Cumulative Remedies. The enumeration of Lender's
rights and remedies set forth in this Article XII is not intended to be
exhaustive and the exercise by Lender of any right or remedy hereunder shall not
preclude the exercise of any other rights or
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remedies, all of which shall be cumulative and shall be in addition to any other
right or remedy given hereunder or under any other agreement between the parties
or which may now or hereafter exist in law or at equity or by suit or otherwise.
No delay or failure to take action on the part of Lender in exercising any
right, power or privilege shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or privilege preclude other
or further exercise thereof or the exercise of any other right, power or
privilege or shall be construed to be a waiver of any Event of Default. No
course of dealing between Borrowers and Lender or its employees shall be
effective to change, modify or discharge any provision of this Agreement or to
constitute a waiver of any Event of Default.
ARTICLE XIII. Term
Section 13.1. Term and Termination.
(a) REVOLVING LOAN. Unless sooner terminated by Lender as a
result of the occurrence of a demand, an Event of Default, or a Defaulting
Event, Borrowers' eligibility to request Revolving Loans shall commence on the
date hereof and shall continue for a period through and including October 31,
1999 (the "Term"). Borrowers' eligibility to request Revolving Loans may be
extended after the Term (and after any Renewal Term, as defined below). Any such
extension (and any further extension) shall be made only with the express
written consent of both Borrowers and Lender (each being a "Renewal Term"). At
the end of the Term (or at the end of a Renewal Term, if applicable), Borrowers
shall pay the entire balance of the Revolving Loans the Demand Loan and all
other outstanding Obligations. Further, upon termination of the Revolving Loan
facility, all of the rights, interests and remedies of Lender and Obligations of
Borrowers shall survive and Borrowers shall have no right to receive, and Lender
shall have no obligation to make, any further Revolving Loans. Upon full, final
and indefeasible payment of the Obligations to Lender, all rights and remedies
of Borrowers and Lender hereunder shall cease, so long as any payment so made to
Lender and applied to the Obligations is not thereafter recovered from or repaid
by Lender in whole or in part in any bankruptcy, insolvency or similar
proceeding instituted by or against Borrowers, whereupon this Agreement shall be
automatically reinstated without any further action by Borrowers and Lender and
shall continue to be fully applicable to such Obligations to the same extent as
though the payment so recovered or repaid had never been originally made on such
Obligations.
(b) DEMAND LOAN. Unless sooner terminated by Lender as a
result of the occurrence of a demand, an Event of Default or a Defaulting Event,
the Demand Loan shall be repaid as set forth in the Demand Promissory Note. The
Borrowers may not prepay the Demand Note.
(c) TERMINATION FEE AND MINIMUM INTEREST. In the event that
(a) this Agreement is terminated by Borrowers as of any date other than the end
of the Term or the end of a Renewal Term, or (b) this Agreement is terminated as
a result of the occurrence of an Event of Default or a Defaulting Event,
Borrowers shall pay to Lender on the effective date of such termination, in
addition to the Minimum Interest Amount, if applicable, and in addition to any
other payments Borrowers are required to make hereunder, a termination charge
equal to: five percent (5.0%) of the maximum principal amount of the Loans, if
terminated during the first year of the Loans, three percent (3.0%) of the
maximum principal amount of the Loans, if terminated during the second year of
the Loans and one percent (1.0%) of the maximum principal amount of the Loans,
if terminated during the third year of the Loans (the "Termination Fee");
provided, however, that there shall be no Termination Fee if, during the
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second year of the Loans, the Loans are paid in full directly or indirectly from
the proceeds of a loan from a commercial bank. It is understood that the
determination of the maximum principal amount of the Loans shall be made without
regard to the component of the Revolving Loan Borrowing Base based upon Eligible
Accounts. For example, for purposes of this provision, on the date hereof the
maximum principal amount of the Loans is $1,500,000 and the Termination Fee
would be $75,000 if the Loans were terminated during the first year. In the
event that (x) Borrowers attempt to breach this Agreement by terminating this
Agreement prior to the expiration of the Term, or (y) Borrowers give to Lender
less than sixty (60) days notice that Borrowers intend to decline to extend the
term of this Agreement at the end of the Term or any Renewal Term, or (z) this
Agreement is terminated as a result of the occurrence of an Event of Default or
a Defaulting Event, Borrowers shall pay to Lender the Minimum Interest Amount on
the effective date of such termination, in addition to the Termination Fee and
any other payments Borrowers are required to make hereunder. All other amounts
due from Borrowers to Lender prior to or in connection with any termination of
this Agreement, which have not been previously paid, shall be paid by Borrowers
on or before the effective date of the termination. As used herein, the "Minimum
Interest Amount" means interest upon the Minimum Balance at the interest rate in
effect on the date that express written notice of such termination is given to
Lender (or, if no such notice is given, the rate in effect on the effective date
of termination), for the period commencing on the date of such written notice of
termination (or, if no such notice is given, commencing on the effective date of
termination) and ending at the end of the Term (or at the end of a period of
sixty (60) days thereafter, if such termination notice is given by Borrowers
during or at the end of a Renewal Term on less than sixty (60) days notice or if
no termination notice is given).
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ARTICLE XIV. Miscellaneous
Section 14.1. Indemnification.
(a) In consideration of Lender's execution and delivery of
this Agreement and Lender's making of the Loans hereunder and in addition to all
other obligations of Borrowers under this Agreement, Borrowers jointly and
severally hereby agree to defend, protect, indemnify and hold harmless Lender,
its successors, assigns, officers, directors, employees and agents (including
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (individually, an "Indemnitee" and collectively,
the "Indemnitees") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages and
expenses in connection therewith (irrespective of whether any such Indemnitees
is a party to any action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements as and when incurred
(collectively, the "Indemnifiable Liabilities") incurred by the Indemnitees or
any of them as a result of, or arising out of, or relating to (i) the execution,
delivery, performance or enforcement of this Agreement and the other Financing
Agreements and any instrument, document or agreement executed pursuant hereto to
any of the Indemnitees; (ii) Lender's status as lender to, or creditor of,
Borrowers; or (iii) the operation of Borrowers' business from and after the date
hereof, including without limitation those arising under any Environmental Laws,
except for Indemnifiable Liabilities arising solely as a result of the
Indemnities' gross negligence or willful misconduct. To the extent that the
foregoing undertaking by Borrowers may be unenforceable for any reason,
Borrowers shall make the maximum contribution to the payment and satisfaction of
each of the Indemnifiable Liabilities which is permissible under applicable law.
(b) Borrowers jointly and severally hereby covenant and agree
at all times to indemnify, hold harmless and defend the Indemnitees, whether as
secured party in possession or as successor in interest to Borrowers as owner of
any personal property assets located on the real property of Borrowers, by
virtue of any action taken by Lender pursuant to the Financing Agreement, the
Uniform Commercial Code (as in effect in any applicable jurisdiction) or
otherwise from and against any and all liabilities, losses, damages, costs,
expenses, penalties, fines, causes of action, suits, claims, demands or
judgments, including without limitation, attorneys' fees and expenses, suffered
or incurred in connection with: (i) the Environmental Law, including, without
limitation, liens or claims of any federal, state or municipal government or
quasi-governmental agency or any third person, whether arising under any
Environmental Law or any other federal, state or municipal law or regulation;
(ii) any spill or contamination affecting the Premises or any other property
owned, leased, controlled or used by Borrowers, including without limitation,
any Hazardous Substance or other waste-like or toxic substances located on,
under, emanating from or relating to the Premises or such property from and on
and after the date hereof or any portion of any thereof or any property
contiguous to the Premises or such property from and after the date hereof, and
including without limitation, any loss of value of the Premises or such property
as a result of any such spill or contamination; and (iii) the direct or indirect
installation, use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal or presence of any Hazardous Substance,
on, under or about the Premises or any other property owned, leased, controlled
or used by Borrowers or any portion of any thereof, from and including all
consequential damages, the costs of any required or necessary repair, cleanup or
detoxification, and the costs of the preparation and implementation of any
closure, remedial or other required plans; provided, however, that Borrower
shall have no obligation to indemnify the Indemnities
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under this Subsection 14.1(b) for claims or losses resulting solely from the
Indemnities own action while on the Premises. Further, the mere fact that such
Indemnitee has been declared an "owner" or "operator" (as such term is defined
in any Environmental Law) resulting from such Indemnitee having taking
possession of any of the Collateral (without any negligence on the part of such
Indemnitee) shall not exonerate Borrowers from any claim by any Indemnitee
seeking such indemnification.
Section 14.2. Payment Set-Aside. To the extent that Borrowers
make a payment or payments to Lender (whether hereunder, under the Notes, or
under the other Financing Agreements) or Lender enforces its security interests
or rights or exercises its right of setoff, and such payment or payments or the
proceeds of such enforcement or setoff or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to Borrowers, a trustee, receiver or any other person under any law (including
without limitation, any bankruptcy law, state or federal law, common law or
equitable cause of action) in each case in connection with any bankruptcy or
similar proceeding involving Borrowers, then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.
Section 14.3. Set-off. Each of the Borrowers hereby grants to
Lender a lien and right of setoff for all its liabilities to Lender upon and
against all its deposits, credits, collateral and property now or hereafter in
the possession or control of Lender or in transit to Lender. Lender may, upon
the occurrence of any Event of Default or Defaulting Event or both, apply or
exercise the right of set off against any or all of the foregoing, or any part
thereof against any liability of Borrowers to Lender, regardless whether such
liability is matured or unmatured.
Section 14.4. Covenants to Survive; Binding Agreement. All
covenants, agreements, warranties and representations made herein, in the Notes,
in the other Financing Agreements, and in all certificates or other documents of
Borrowers shall survive the advances of money made by Lender to Borrowers
hereunder and the delivery of the Notes and the other Financing Agreements, and
all such covenants, agreements, warranties and representations shall be binding
upon and inure to the benefit of Lender and its successors and assigns, whether
or not so expressed.
Section 14.5. Cross-Collateralization. All Collateral which
Lender may at any time acquire from Borrowers or from any other source in
connection with Obligations arising under this Agreement and the other Financing
Agreements shall constitute collateral for each and every Obligation, without
apportionment or designation as to particular Obligations and all Obligations,
however and whenever incurred, shall be secured by all Collateral however and
whenever acquired, and Lender shall have the right, in its sole discretion, to
determine the order in which Lender's rights in or remedies against any
Collateral are to be exercised and which type of Collateral or which portions of
Collateral are to be proceeded against and the order of application of proceeds
of Collateral as against particular Obligations.
Section 14.6. Cross-Default. Each of the Borrowers
acknowledges and agrees that an Event of Default and/or Defaulting Event under
any one of the Financing Agreements shall constitute an Event of Default or
Defaulting Event under each of the other Financing Agreements.
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Section 14.7. Amendments and Waivers. Neither this Agreement,
the Notes, the other Financing Agreements, nor any term, covenant or condition
hereof or thereof may be changed, waived, discharged, modified or terminated
except by a writing executed by the parties hereto or thereto. No failure on the
part of Lender to exercise, and no delay in exercising, any right, remedy or
power hereunder or under the Note or the other Financing Agreements shall
preclude any other or future exercise thereof, or the exercise of any other
right, remedy or power.
Section 14.8. Notices. All notices, requests, consents,
demands and other communications hereunder shall be in writing and shall be
mailed by first class mail to the respective parties to this Agreement to the
address set forth in the introductory sentence hereof.
Section 14.9. Transfer of Lender's Interest. Each of the
Borrowers hereby agrees that Lender, in its sole discretion, may freely sell,
assign or otherwise transfer participations, portions, co-lender interests or
other interests in all or any portion of the indebtedness, liabilities or
obligations arising in connection with or in any way related to the financing
transactions of which this Agreement is a part provided that such transferee is
a recognized financial institution. In the event of any such transfer, the
transferee may, in Lender's sole discretion, have and enforce all the rights,
remedies and privileges of Lender. Each of the Borrowers consents to the release
by Lender to any potential transferee of any and all information (including
without limitation, financial information) pertaining to Borrowers as Lender, in
its sole discretion, may deem appropriate. If such transferee so participates
with Lender in making loans or advances hereunder or under any other agreement
between such Lender and Borrowers, each of the Borrowers hereby grants to such
transferee and such transferee shall have and is hereby given a continuing lien
and security interest in any money, securities or other property of Borrowers in
the custody or possession of such transferee, including the right of setoff
under circumstances consistent with this Agreement, to the extent of such
transferee's participation in the Obligations of Borrowers to Lender.
Section 14.10. Waivers.
(a) EACH OF THE BORROWERS ACKNOWLEDGES THAT THE LOANS
EVIDENCED HEREBY ARE COMMERCIAL TRANSACTIONS AND WAIVES ITS RIGHT TO NOTICE AND
HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE
ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH
LENDER MAY DESIRE TO USE, AND FURTHER WAIVES ITS RIGHTS TO REQUEST THAT LENDER
POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT BORROWERS AGAINST DAMAGES THAT
MAY BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY LENDER. EACH OF
THE BORROWERS FURTHER WAIVES DILIGENCE, DEMAND, PRESENTMENT FOR PAYMENT, NOTICE
OF NONPAYMENT, PROTEST AND NOTICE OF ANY RENEWALS OR EXTENSIONS.
(b) EACH OF THE BORROWERS HEREBY WAIVES TRIAL BY JURY IN ANY
COURT IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH
OR IN ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS AGREEMENT IS A
PART AND/OR THE ENFORCEMENT OF ANY OF LENDER'S RIGHTS, INCLUDING WITHOUT
LIMITATION, TORT CLAIMS. BORROWERS ACKNOWLEDGES THAT IT MAKES
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THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER CONSIDERATION
OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS. EACH OF THE BORROWERS
FURTHER ACKNOWLEDGES THAT LENDER HAS NOT REPRESENTED TO BORROWERS THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
(c) EACH OF THE BORROWERS ACKNOWLEDGES THAT IT MAKES
THE FOREGOING WAIVERS IN CLAUSE (a) AND CLAUSE (b) ABOVE, KNOWINGLY,
VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF
SUCH WAIVERS WITH ITS ATTORNEYS.
Section 14.11. Section Headings; Severability; Entire
Agreement. Section and subsection headings have been inserted herein for
convenience only and shall not be construed as part of this Agreement. Every
provision of this Agreement, the Notes and the other Financing Agreements is
intended to be severable; if any term or provision of this Agreement, the Notes,
the other Financing Agreements, or any other document delivered in connection
herewith shall be invalid, illegal or unenforceable for any reason whatsoever,
the validity, legality and enforceability of the remaining provisions hereof or
thereof shall not in any way be affected or impaired thereby. All Exhibits and
Schedules to this Agreement shall be annexed hereto and shall be deemed to be
part of this Agreement. This Agreement, the other Financing Agreements, and the
Exhibits and Schedules attached hereto and thereto embody the entire agreement
and understanding between Borrowers and Lender and supersede all prior
agreements and understandings relating to the subject matter hereof unless
otherwise specifically reaffirmed or restated herein.
Section 14.12. Governing Law, Notice and Service of Process,
Pleadings and Other Papers. This Agreement and the other Financing Agreements,
and all transactions, assignments and transfers hereunder and thereunder, and
all the rights of the parties, shall be governed as to validity, construction,
enforcement and in all other respects by the laws of the State of Connecticut
(but not its conflicts of law provisions). Each of the Borrowers hereby
designates and appoints, without power of revocation, the Secretary of the State
of Connecticut as Borrowers' agent upon whom may be served all process,
pleadings, notices or other papers which may be served upon it as a result of
any of its Obligations under this Agreement or other Financing Agreements. Each
of the Borrowers agrees that the Superior Court for the Judicial District of
Hartford/New Britain or the United States District Court for the District of
Connecticut shall have jurisdiction to hear and determine any claims or disputes
pertaining to the financing transactions of which this Agreement is a part
and/or to any matter arising or in any way related to this Agreement or any
other agreement between Lender and Borrowers, and each of the Borrowers
expressly submits and consents in advance to such jurisdiction in any action or
proceeding.
Section 14.13. Joint and Several Obligation. Each Borrower
acknowledges that (a) the Obligations are the joint and several obligation of
each Borrower, (b) the Borrowers are affiliate corporations, and (c) for reasons
of simplicity and administrative ease, the Borrowers desire that the Loans be
extended to them as co-borrowers. The security interests, liens and other rights
and interests in and relative to any of the real or personal property of the
Borrowers now or hereafter granted to Lender by the Borrowers or in any
instrument or agreement, shall serve as security for any and all of the
Obligations, including but not limited
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to, the obligations arising under the Loans and, for the repayment thereof,
Lender may resort to any security held by it in such order and manner as it may
elect. References in this Agreement to the Borrower in the singular shall
include the plural and all obligations herein contained are and shall be joint
and several.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized officers as of the date first above written.
Witnessed:
INDUSTRIAL TECHNOLOGIES, INC.
/s/ Xxxxxx Xxxxxx By: /s/ X.X Xxxxxxx
-------------------------- ----------------------------
/s/ Xxxxx Xxxxxxx Its President/CEO
-------------------------
INTEC EUROPE, LTD.
/s/ Xxxxxx Xxxxxx By: /s/ X.X Xxxxxxx
-------------------------- ----------------------------
/s/ Xxxxx Xxxxxxx Its President/CEO
-------------------------
AMERICAN COMMERCIAL FINANCE
CORPORATION
/s/ Xxxxx Xxxxxxxx By: /s/ Xxxxxxx X. Mount
-------------------------- ----------------------------
/s/ Xxxxx Xxxxxx Its President
--------------------------
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