Exhibit 10.1
WORKING CAPITAL REVOLVING LOAN FACILITY
AND SECURITY AGREEMENT
THIS WORKING CAPITAL REVOLVING LOAN FACILITY AND SECURITY AGREEMENT
(this "Agreement") dated as of November __, 2002, is made by and among RZB
Finance, LLC, a Delaware limited liability company with an address at 1133
Avenue of the Americas, 00/xx/ Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Lender");
Isomet Corporation, a New Jersey corporation with its principal place of
business at 0000 Xxxx Xxxxx Xxxx, Xxxxxxxxxxx, Xxxxxxxx 00000 ("Isomet Corp.");
Isomet UK, a wholly owned subsidiary of Isomet Corp., with an address at 00 Xxxx
Xxxxx Xxxxx, Xxxxxxxxxx Industrial Park, Xxxxxxx Xxxxx XX00 0XX, Xxxxxx Xxxxxxx
("Isomet UK"); and Isomet Foreign Sales Corporation, a wholly owned subsidiary
of Isomet Corp., with an address at x/x Xxxxx & Xxxxx, X.X. Xxx 000, Xxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx ("IFSC"). Isomet Corp., Isomet UK and IFSC are collectively
and individually from time to time herein referred to as the "Borrower."
WHEREAS, Borrower has requested that the Lender establish a Loan
Facility ("Loan Facility") for the purpose of providing the Borrower with
pre-export working capital to finance the manufacture or purchase and subsequent
sale of the Items and for such other purposes as are expressly set forth herein;
and
WHEREAS, Borrower has executed a borrower agreement (the "Borrower
Agreement") which has been acknowledged by the Lender and which is attached
hereto as Exhibit "A" and the terms of which are incorporated by reference
herein; and
WHEREAS, the Export-Import Bank of the United States ("Ex-Im Bank")
will guarantee the payment of one hundred percent (100%) of the principal
amounts disbursed and outstanding under such Loan Facility and all interest
accrued thereon, subject to the terms and conditions of a Master Guarantee
Agreement dated September 20, 2002 (the "Master Guarantee Agreement") by and
between Ex-Im Bank and the Lender and a Loan Authorization Agreement by and
between Ex-Im Bank and the Lender ("Loan Authorization Agreement") which is
attached hereto as Exhibit "B" and incorporated by reference herein; and
WHEREAS, Lender is prepared to establish the Loan Facility pursuant to
the terms and subject to the conditions herein set forth.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereby agree as follows.
1. DEFINITIONS.
1.1 Construction. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned to them in the Borrower
Agreement or in the Loan Authorization Agreement. For the purposes of
interpreting this Agreement, if any of the capitalized terms defined in this
Agreement conflict with the same terms as they are defined in
either the Borrower Agreement or the Loan Authorization Agreement, the
definitions of the capitalized terms in this Agreement shall prevail.
1.2 Incorporation of Recitals. The recitals to this Agreement are
incorporated into and shall constitute a part of this Agreement.
1.3 Definitions. As used in this Agreement, including the recitals
hereto, the following terms shall have the following meanings:
"Account Debtor" shall have the meaning as defined in Article 9 of the
UCC.
"Accounts Receivable" shall have the meaning as defined in Section 1.01
of the Borrower Agreement.
"Availability Date" shall have the meaning as defined in Section 11.1
of this Agreement.
"Borrowing Base" shall have the same meaning as "Export-Related
Borrowing Base" as that term is defined in Section 1.01 of the Borrower
Agreement.
"Controlled Account" shall have the meaning set forth in Section 2.7 of
this Agreement.
"Credit Accommodations" shall have the meaning as defined in Section
1.01 of the Borrower Agreement.
"Disbursement" shall mean an advance of a working capital loan from
Lender to Borrower under the Loan Facility.
"Disbursement Rates" shall mean the advance rates specified in Section
5(C) of the Loan Authorization Agreement for each category of Collateral.
"Eligible Export-Related Accounts Receivable" shall mean, to the extent
not excluded under the Borrower Agreement, those export-related trade accounts
from the sale of Items due and payable to the Borrower in the United States and
any notes, drafts, letters of credit or insurance proceeds supporting payment
thereof, provided, however, the Lender may include in the Borrowing Base,
Accounts Receivable due and collectible in the United Kingdom by Isomet UK or
denominated in British pounds if all of the special conditions set forth in
Article 9 of this Agreement have been met by Borrower.
"Eligible Costs" shall mean those working capital costs associated with
an Export Order or an Indirect Export which are not excluded under the Borrower
Agreement.
"Event of Default" shall have the meaning as set forth in Section 12.1
of this Agreement.
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"Export Order" shall mean a written export order or contract for the
purchase by a buyer from the Borrower of any of the Items.
"General Intangibles" shall mean all intellectual property and other
"general intangibles" (as such term is defined in the UCC) necessary or
desirable to or for the disposition of Inventory.
"Inventory" shall mean "inventory" (as such term is defined in the
UCC), now or hereafter owned or acquired by Borrower, wherever located,
including all inventory, merchandise, goods and other personal property which
are held by or on behalf of Borrower for sale or lease or are furnished or are
to be furnished under a contract of service or which constitute raw materials,
work in process or materials used or consumed or to be used or consumed in
Borrower's business or in the processing, production, packaging, promotion,
delivery or shipping of the same, including other supplies.
"Indirect Exports" shall mean those sales of the Items, not excluded
under the Borrower Agreement, from the Borrower to a buyer who intends to export
the Items.
"Items" shall mean acousto-optic laser control devices, electronic
drivers and birefringent material.
"Loan Facility" shall mean the revolving loan facility established by
the Lender for the Borrower under this Agreement.
"Loan Documents" shall have the meaning as defined in Section 1.01 of
the Borrower Agreement.
"Maturity Date" shall have the meaning as defined in Section 2.3
herein.
"Maximum Amount" shall have the meaning as defined in Section 2.1
herein.
"Note" shall have the meaning as defined in Section 2.3 herein.
"Obligations" shall have the meaning as defined in Section 4.1 herein.
"Permitted Liens" shall mean those liens of Bank of America Leasing &
Capital, LLC and Lombard North Central PLC Capital Leases that are authorized by
Ex-Im Bank under Section 6(c) of the Loan Authorization Agreement.
"Prime Rate" shall mean the "Prime Rate" as published in the "Money
Rates" section of the Wall Street Journal.
"Secured Accounts Receivable" shall have the meaning as defined in
Section 4.1(b) herein.
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"Secured Collateral" shall have the meaning as defined in Section 4.1
herein.
"UCC" shall mean the Uniform Commercial Code as the same may be in
effect from time to time in the jurisdiction in which the Borrower or the
Collateral is located.
2. BASIC TERMS AND CONDITIONS OF LOAN FACILITY
2.1 Loan Facility. On the terms and subject to the conditions of this
Agreement, Lender agrees to lend to Borrower and Borrower agrees to borrow from
Lender through the Loan Facility funds in an amount not to exceed at any time
the "Maximum Amount." The Maximum Amount shall mean the principal dollar amount
outstanding under the Loan Facility at any one time equal to the lesser of (a)
One Million Five Hundred Thousand Dollars ($1,500,000.00), or (b) the Borrowing
Base. The Borrower shall use the Credit Accommodations under the Loan Facility
solely for the purpose set forth in Section 6.1 of this Agreement and for the
purpose of enabling the Borrower to finance the costs of manufacturing,
producing, purchasing or selling the Items as permitted by the Borrower
Agreement and the Loan Authorization Agreement.
2.2 Disbursements. Disbursements under the Loan Facility shall be
made in accordance with the provisions of Article 7 of this Agreement and in
accordance with the Borrower Agreement and the Loan Authorization Agreement
(including the applicable Disbursement Rates set forth therein and the special
conditions attached as Schedule B thereto).
2.3 The Note. The obligation of the Borrower to repay Disbursements
made under the Loan Facility shall be evidenced by the Borrower's promissory
note of even date herewith (the "Note") payable to the order of the Lender and
in the form attached hereto as Exhibit "C". The Note shall be in the principal
amount of One Million Five Hundred Thousand Dollars ($1,500,000.00) and shall
bear interest as set forth in Section 2.4 herein. Unless the Loan Facility is
renewed or extended by Lender with the consent of Ex-Im Bank, Borrower shall pay
in full all amounts outstanding under the Loan Facility and all accrued and
unpaid interest thereon no later than the first business day following the Final
Disbursement Date (the "Maturity Date").
2.4 Interest. Each Disbursement under the Loan Facility shall bear
interest from the date of the respective Disbursement to the date of payment to
Lender at a per annum rate equal to the sum of (a) two percent (2.00%), and (b)
the Prime Rate. Interest shall be calculated daily on the basis of the actual
number of days elapsed (including the first day but excluding the last day) over
a year of 360 days.
2.5 Overdue Interest. Any principal not paid when due shall bear
interest from the date when due until payment is made, payable on demand, at a
per annum rate equal to the sum of (a) three percent (3.00%), and (b) the Prime
Rate.
2.6 Prepayment; New Disbursements. The Borrower shall have the right
on not less than five business Days written notice to the Lender to prepay the
Loan Facility in whole at any
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time, without premium or penalty but with accrued interest on the principal
being prepaid to the date of prepayment. The Borrower shall have the right to
repay the Loan Facility in part at any time, without premium or penalty but with
accrued interest on the principal being prepaid to the date of prepayment. The
Borrower shall further have the right to obtain new Disbursements up to the
Availability Date so long as the conditions in Article 7 are met and the
aggregate unpaid Disbursements at no time exceed the Maximum Amount.
2.7 Controlled Account. Prior to the first Disbursement under the
Loan Facility, Lender will establish a Controlled Account with a bank acceptable
to Lender (the "Controlled Account"). The Controlled Account will operate as a
"lock box" account and all payments from Borrower's customers shall be wired or
mailed directly to the selected bank and deposited into the Controlled Account.
The Borrower agrees to notify its customers that all amounts owing to Borrower
have been assigned to Lender and direct its customers to remit payments to the
Controlled Account. The Lender may, in its discretion, apply amounts in the
Controlled Account to any amounts outstanding under the Loan Facility.
3. FEES AND EXPENSES
3.1 Fees and Expenses. The Borrower shall pay to the Lender the fees
and expenses specified below:
(a) An arrangement fee of Twenty Five Thousand Dollars
($25,000.00) payable prior to the first Disbursement under the Loan Facility.
(b) A facility fee with an Annual Facility Fee Percentage of
one and one-half percent (1.5%) per annum and calculated as set forth in
Schedule A to the Loan Authorization Agreement payable prior to the first
Disbursement under the Loan Facility.
(c) A fee of Three Hundred Fifty Dollars ($350) for each
Disbursement made to the Borrower under this Agreement.
(d) All reasonable out of pocket costs and expenses, including
legal fees, costs and expenses, incurred by the Lender in connection with (i)
the preparation, review and amendment of all documentation relating to the
establishment of the Loan Facility; (ii) collection efforts and filing and
effecting payment on claims made against Ex-Im Bank under the Working Capital
Guarantee, (iii) the establishment, preservation and enforcement of Lender's
security interest in and liens on the Secured Collateral and (iv) the
enforcement of this Agreement against the Borrower. Such costs and expenses may
be deducted from the Controlled Account if not otherwise paid by Borrower.
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4. SECURITY AGREEMENT
4.1 Grant of Security Interest; Secured Collateral. As security for the
payment of all of the obligations evidenced by this Agreement, the Note and any
other Loan Documents and for Borrower's performance of, and compliance with, all
terms, covenants, conditions, stipulations and agreements contained in this
Agreement, the Note and any other Loan Documents, whether direct or contingent
(collectively the "Obligations"), Borrower hereby grants to Lender and agrees
that Lender shall have a perfected, first priority, continuing security interest
in all of the following property and assets, wherever situated (the "Secured
Collateral"):
(a) All Inventory of the Borrower in all of its forms and of every
nature, kind and description, wherever located and whether now owned or
hereafter acquired;
(b) All "Secured Accounts Receivable" which shall mean all of the
following that arise from the sale of the Items: all accounts, Accounts
Receivable, other receivables, book debts and other forms of obligations and all
present and future rights of the Borrower to payment for goods or products sold
or leased or for services rendered or from any other transaction whether earned
by performance and whether evidenced by an instrument, chattel paper or a
general obligation; all amounts owing to the Borrower arising out of or under
its instruments, documents, contract rights, chattel paper and general
intangibles and all other debts, obligations, and amounts of whatever nature and
in whatever form owing to the Borrower; all rights in, to and under all purchase
orders or receipts for goods or services; all rights to payment of interest or
finance charges, insurance proceeds, costs of collection and enforcement,
reasonable attorney's fees and other amounts with respect to any and all of the
foregoing; all rights of an unpaid seller (including rescission, replevin,
reclamation and stoppage of delivery in transit or for service) for unpaid
goods; rights in any goods or products represented by any and all of the
foregoing, including returned, rejected, rerouted or repossessed goods;
sureties' obligations, security, guarantees or collateral for any and all of the
foregoing including rights at law and in equity with respect thereto; and all
proceeds (cash and non-cash) and all products of any and all of the foregoing.
(c) All General Intangibles (including, without limitation, payment
intangibles, all books and records, things in action, contractual rights, tax
returns, goodwill, trademarks, copyrights and patents), both now owned or
hereafter acquired by the Borrower.
(d) All proceeds (cash and non cash) and products of any of the
foregoing.
The security interest granted hereunder shall extend and attach to all Secured
Collateral which is presently in existence or may hereafter arise and which is
owned by the Borrower or in which the Borrower has any interest whether held by
the Borrower or others for its account. In no event shall prior recourse to any
Secured Collateral or other security granted to the Lender be a prerequisite to
the Lender's right to demand payment of any obligation owed to the Lender under
this Agreement. Further, it is understood that the Lender shall not have any
obligation or liability whatsoever to perform in any respect any of the
Borrower's respective contracts or obligations
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relating to the Secured Accounts Receivable. The Secured Collateral shall remain
personal property at all times. Borrower shall not affix any of the Collateral
to any real property in any manner which would change its nature from that of
personal property to real property or to a fixture.
4.2 Lender's First Priority Security Interest. Lender shall receive prior
to the first Disbursement an official report from each state or jurisdiction in
which the Borrower or Secured Collateral is located and each other state in
which the Lender desires to file Financing Statements indicating that Lender's
security interest in the Secured Collateral is prior to all other security
interests or other interests reflected in the report except for (i) the
Permitted Liens, (ii) liens of Bank of America to be released pursuant to
Section 6.2 hereof, and (iii) liens of Lloyds Bank on assets of Isomet UK to be
released prior to the receivables of Isomet UK being included in any calculation
of the Borrowing Base.
4.3 No Obligation to Xxxxxxxx Liens. To the extent that the obligations of
the Borrower under this Agreement are now or hereafter secured by any assets or
property other than by the Secured Collateral, then the Lender shall have the
right, in its sole discretion exercised in good faith, to determine which
rights, liens or remedies the Lender shall at any time pursue, foreclose upon,
relinquish, subordinate, modify or to take any other action with respect to,
without in any way modifying or effecting any of such rights, liens or remedies
or any of the Lender's rights hereunder.
4.4 Set-Off. Any deposits, reserves or sums of any kind credited by or due
from the Lender to the Borrower and any other funds, property or assets of the
Borrower in the possession of the Lender may be held by the Lender as security
for the obligations of the Borrower under this Agreement and set-off by the
Lender at any time in whole or in partial satisfaction of the obligations of the
Borrower to the Lender under this Agreement.
4.5 Financing Statements. The Borrower hereby authorizes the Lender from
time to time to file one or more financing statements or continuations or
amendments thereto or any other document necessary or desirable to obtain a
perfected, first priority continuing security interest in any jurisdiction in
which Borrower or the Secured Collateral are located pursuant to the UCC or any
other law to which Borrower or the Secured Collateral are subject, (the
"Financing Statements"), without the Borrower's signature appearing thereon, as
appropriate under any applicable law that the Lender deems desirable to
evidence, perfect or protect its security interest in, and other liens on, the
Secured Collateral in such form(s) as are satisfactory to the Lender. The
Borrower shall pay the cost of filing all Financing Statements and other notices
in all public offices where filing is deemed by the Lender to be necessary or
desirable to perfect, protect or enforce the security interest and liens granted
to the Lender hereunder. A photographic copy or other reproduction of this
Agreement or of a Financing Statement is sufficient as an attachment to any
Financing Statement. The Lender is hereby authorized to give notice to any
person as may be necessary or desirable under applicable laws to evidence,
protect, perfect or enforce the Lender's security interest in the Secured
Collateral.
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4.6 Limitations on Lender's Duties Relating to Secured Collateral. The
Borrower shall bear the risk of loss of the Secured Collateral. Neither the
Lender, nor any of its directors, officers, employees or agents shall be liable
for any failure to demand, collect or realize all or any part of the Secured
Collateral or for any delay in doing so. Neither the Lender, nor any of its
directors, officers, employees or agents shall be under any obligation to sell
or otherwise dispose of any Secured Collateral upon the request of the Borrower
or otherwise. Lender shall have no duty to collect any income accruing on the
Secured Collateral or to preserve any rights relating to the Secured Collateral.
4.7 Additional Security. The Borrower shall at all times ensure that the
Borrowing Base exceeds the amount disbursed and outstanding under the Loan
Facility. If informed by the Lender or if the Borrower otherwise has actual
knowledge that the Borrowing Base is at any time less than the amount disbursed
and outstanding under the Loan Facility, the Borrower shall within five (5)
Business Days, either (a) furnish additional security to the Lender, in form and
amount satisfactory to Lender and Ex-Im Bank, or (b) pay to the Lender an amount
equal to the difference between the amount disbursed and outstanding and the
Borrowing Base.
5. CONDITIONS PRECEDENT TO FIRST DISBURSEMENT
The obligation of the Lender to permit the first Disbursement under the
Loan Facility is subject to the following conditions:
5.1 Execution and Delivery of Loan Documents. Each of the Loan Documents
shall have been duly authorized, executed and delivered to Lender by the
respective parties thereto and shall constitute the legal, valid and binding
obligations of the respective parties thereto and shall be enforceable in
accordance with its terms.
5.2 Fees and Expenses. Lender shall have been paid the fees set forth in
Section 3.1 and such costs and expenses which may have been incurred by Lender
as provided in Section 3.1(d).
5.3 Landlord Waiver. The Borrower shall have delivered to the Lender, in
form and substance satisfactory to the Lender, a certificate which has been
executed by the Borrower's landlord waiving any and all rights in the Secured
Collateral. By its terms, the waiver certificate shall authorize the Lender, its
successors and assigns, to enter onto the premises in order to inspect the
Secured Collateral and related books and records, or enforce its security
interest thereon.
5.4 Assignment of Key-Man Life Insurance Policy. The Borrower shall have
delivered to the Lender, in form and substance satisfactory to the Lender, an
assignment of a key-man life insurance policy opened in the name of Xxxxx
Xxxxxx, in the amount of One Million Five Hundred Thousand Dollars
($1,500,000.00). The Borrower shall notify the Lender and Ex-
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Im Bank in writing immediately in the event a claim is filed under such key-man
life insurance policy.
5.5 Controlled Account. The Controlled Account shall have been
established.
5.6 Compliance with Section 7.1. Borrower shall have delivered the
documents and complied with the conditions set forth in Section 7.1.
5.7 Liens. Lender shall have received the official reports confirming the
priority of Lender's security interest in the Secured Collateral as provided in
Section 4.2 of this Agreement.
5.8 Other Documents. Borrower shall have delivered to Lender such other
documents as Lender may reasonably require Borrower to execute or deliver, in
form and substance satisfactory to Lender.
6. SPECIAL PERMITTED USE OF FIRST DISBURSEMENT
6.1 Special Permitted Use of First Disbursement. All or a portion of the
first Disbursement under the Loan Facility, in an amount not to exceed Seven
Hundred Thousand Dollars ($700,000), may be used by Borrower to refinance the
Borrower's existing line of credit with Bank of America.
6.2 Special Condition. The use of the Disbursement permitted under Section
6.1 of this Agreement is expressly conditioned on Borrower, prior to the first
Disbursement under the Loan Facility, delivering to Lender a written agreement
of Bank of America, in form and substance acceptable to Lender, to release all
security interests it holds in the Secured Collateral concomitantly with the
delivery by Borrower of the proceeds from the first Disbursement described in
Section 6.1 of this Agreement.
7. DISBURSEMENTS
7.1 Conditions Precedent to Each Disbursement. The obligation of the
Lender to permit any Disbursement, including the first Disbursement, shall be
subject to the delivery to the Lender of the documents indicated below and to
the fulfillment, as of the date of such Disbursement, in a manner satisfactory
to the Lender, of the conditions set forth below:
(a) A Request for Disbursement substantially in the form attached
hereto as Exhibit "D", and made a part hereof.
(b) A Borrowing Base Certificate, substantially in the form attached
hereto as Exhibit "E", and made a part hereof current within the past thirty
(30) calendar days of the date of the requested Disbursement.
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(c) A copy of the Export Orders referenced in the Request for
Disbursement or, if permitted by Lender, a written summary of the Export Orders.
(d) For any eligible Disbursement related to an Indirect Export, the
Borrower shall deliver to Lender an executed copy of both the purchase contract
between the Borrower and the buyer and a written certification from the Borrower
and the buyer that the Items sold pursuant to such purchase contract will be
exported to a country which Ex-Im Bank is not legally prohibited from doing
business.
(e) Borrower shall have complied and shall be in compliance with all
terms, covenants and conditions of this Agreement, the Borrower Agreement and
the Note which are binding upon it.
(f) There shall exist no Event of Default and no event which, with the
giving of notice or the passage of time, or both, would constitute an Event of
Default.
(g) The representations and warranties contained in Article 8 shall be
true and correct with the same effect as though such representations and
warranties had been made at the time of the making of the Disbursement.
(h) Lender shall have received payment of the fees specified in
Section 3.1 and all other fees and expenses due and payable under Article 3.
7.2 Limitations on Disbursements. Lender shall not be obligated to make
any Disbursements to the Borrower:
(a) after the Availability Date;
(b) following the occurrence of an Event of Default or of any event
which but for the giving of notice would constitute an Event of Default;
(c) during any period in which the outstanding principal balance of
the Loan Facility exceeds the Borrowing Base;
(d) except for the first Disbursement described in Section 6.1, that
is not supported by an Export Order or, if an Indirect Export, supported by the
contracts and certifications specified in Section 7.1(d) above;
(e) if the Lender has knowledge that the Disbursement will be used in
a manner prohibited by Section 2.01 of the Borrower Agreement;
(f) if the Lender has knowledge that no outstanding Export Orders
exist;
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(g) if the Lender has knowledge that Borrower has included in the
Borrowing Base any of the exclusions set forth in Section 2.04 of the Borrower
Agreement; or
(h) if the Borrower has violated any terms and conditions of this
Agreement, the Borrower Agreement, or the Loan Authorization Agreement.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 Representations and Warranties of the Borrower. The Borrower
represents and warrants to the Lender that:
(a) Existence and Authority. The Borrower is duly organized and
validly existing under the laws of its jurisdiction of incorporation with full
power, authority and legal right to own its property and carry on its business
as now conducted and has taken all actions necessary or advisable to authorize
it to execute, deliver, perform and observe the terms and conditions of this
Agreement and all other documents submitted under this Agreement.
(b) Restrictions. The execution, delivery and performance or
observance by the Borrower of the terms of and consummation by the Borrower of
the transactions contemplated by this Agreement does not and will not conflict
with or result in a breach or violation of: (i) the articles of incorporation,
charter, operating agreement, stockholders' agreement, by-laws or similar
documents of the Borrower; or (ii) any order, writ, injunction, judgment or
decree of any court or other tribunal. Further, the execution, delivery and
performance or observance by the Borrower of the terms of and consummation by
the Borrower of the transactions contemplated by this Agreement does not and
will not conflict with or result in a breach of any agreement or instrument to
which the Borrower is a party or by which it or any of its revenues, properties
or assets may be subject, or result in the creation or imposition of any lien
upon any of the revenues, properties or assets of the Borrower pursuant to any
such agreement or instrument.
(c) Binding Effect. This Agreement, and all other documents submitted
under this Agreement which have been executed on or before the date hereof have
been duly executed and delivered by the Borrower. This Agreement and each of the
documents which may hereafter be executed and delivered under this Agreement
will constitute a direct, general and unconditional obligation of the Borrower
which is legal, valid and binding upon the Borrower and enforceable against the
Borrower in accordance with its respective terms, except as such enforceability
may be limited by applicable insolvency, reorganization, liquidation,
moratorium, readjustment of debt, or other similar laws affecting the
enforcement of creditors' rights generally and by the application of general
principles of equity regardless of whether such enforceability is considered in
a proceeding at law or in equity. The Borrower's obligations to the Lender under
this Agreement will rank in all respects superior in priority of payment and in
right of security to all other debts of the Borrower except for the indebtedness
secured by the Permitted Liens, and (ii) the indebtedness secured by liens of
Lloyds Bank on assets of Isomet UK to be released prior to the receivables of
Isomet UK being included in any calculation of the Borrowing Base.
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(d) Borrower's Financial Statements. The Borrower's financial
statements shall present fairly the financial condition of the Borrower at the
date of such statements and the results of the operations of the Borrower for
such quarter. The Borrower's financial statements have been and shall be
prepared in accordance with generally accepted accounting principles in the
United States of America. Except as fully reflected in the Borrower's financial
statements, there are no liabilities or obligations with respect to the Borrower
of any nature for the period to which the Borrower's financial statements relate
that either individually or in the aggregate would be material to the Borrower.
Since the date of the Borrower's financial statements, there has been no
material adverse change in the financial condition, business, prospects or
operations of the Borrower.
(e) No Taxes. There is no tax imposed on or in connection with: (i)
the execution, delivery or performance of this Agreement or of any of the
documents submitted under this Agreement; (ii) the enforcement of any of the
documents submitted under this Agreement, or (iii) on any payment to be made to
the Lender under any of the documents submitted under this Agreement.
(f) Payment of Taxes. All taxes, assessments and governmental charges
and liens imposed on the Borrower and its properties, operations and income
(collectively the "Taxes") have been paid and discharged prior to the date when
any interest or penalty would accrue for nonpayment thereof.
(g) Perfected Lien on Inventory, General Intangibles and Accounts
Receivable. This Agreement creates a valid security interest in the Inventory,
General Intangibles and the Secured Accounts Receivable, and upon the due filing
of UCC-1 financing statements, all filings and other actions necessary or
desirable to perfect and protect such security interest will have been duly
taken.
8.3 Affirmative Covenants of the Borrower. The Borrower covenants and
agrees that until all amounts owing under this Agreement have been paid in full,
the Borrower will, unless the Lender shall have consented in writing:
(a) Notice of Defaults. Notify Lender promptly but in no event later
than seventy-two (72) hours after it has knowledge of an Event of Default.
(b) Notice of Adverse Changes. Promptly notify the Lender of any
material circumstance of which it has knowledge which (i) may result in the
occurrence of an Event of Default; or (ii) may result in the Borrower's being
unable to perform its obligations under this Agreement.
(c) Notice of Material Litigation. Promptly notify Lender if any
material litigation is filed against the Borrower.
(d) Financial Statements. (i) Beginning with the financial period
ending September 30, 2002 and continuing until all amounts owing under this
Agreement have been paid
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in full, the Borrower shall furnish to the Lender within forty-five (45) days
after the end of each quarter, a copy of its financial statements in form and
substance satisfactory to Lender, including its balance sheet, statement of
income, and statement of cash flow for that quarter all of which have been
prepared by an independent accounting firm acceptable to the Lender; and (ii)
such additional financial reports and other data and information regarding its
financial condition, business and operations as the Lender may reasonably
request.
(e) Inventory Reports. Submit to the Lender in writing within twenty
(20) days after each month-end, a schedule detailing all of the Borrower's
Inventory for the preceding month.
(f) Accounts Receivable Aging Report. Submit to the Lender on a
monthly basis, within twenty (20) days after each month-end, in writing an
Accounts Receivable and Accounts Payable aging report detailing the terms of the
amount due from and owing to each Account Debtor.
(g) Inspections. Permit representatives of the Lender and Ex-Im Bank,
upon reasonable prior notice, to make reasonable inspections as provided in
Section 2.09 of the Borrower's Agreement of the Borrower's books and records in
connection with this Agreement and cause the Borrower's officers and employees
to give full cooperation and assistance in connection therewith.
(h) Use of Disbursements. Use the Disbursements only for the purposes
allowed under Section 2.01 of the Borrower Agreement or as otherwise expressly
provided in this Agreement.
(i) Notices of Changes, Transfer, Dissolution and Litigation. Notify
the Lender in writing within five (5) Business Days if (a) the Borrower changes
its name or identity in any manner, (b) the Borrower changes the location of its
principal place of business, (c) the nature of any of the Secured Collateral is
changed or any of the Secured Collateral is transferred to another location, (d)
any of the books or records related to the Secured Collateral are transferred to
another location, (e) a proceeding in bankruptcy or an action for debtor's
relief is filed by, against or on behalf of the Borrower, (f) the Borrower fails
to obtain the dismissal or termination within thirty (30) calendar days of the
commencement of any proceeding or action referred to in (e) above, (g) the
Borrower begins any procedure for its dissolution or liquidation, or a procedure
therefore has been commenced against it, or (h) any material litigation is filed
against the Borrower.
(j) Terms of Sale. Ensure that all export sales financed with the
Loan Facility shall be paid in U.S. Dollars on one of the following terms (i)
open account uninsured, or (ii) cash payment received prior to shipment.
(k) Insurance Premium. Timely pay all premiums on the insurance
policy described in Section 5.4 of this Agreement.
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(l) Other Acts. From time to time, do and perform any and all acts
and execute and furnish any and all documents as may be necessary or as
reasonably requested by the Lender in order to effect the purposes of this
Agreement and to protect the interests of the Lender under this Agreement.
8.5 Negative Covenants Of The Borrower. The Borrower covenants and agrees
that until all amounts owing to the Lender under this Agreement have been paid
in full, it will not without the prior written consent of the Lender:
(a) Liens on Items. Create, assume, permit or suffer to exist any
liens on any of its assets or property except the following:
(i) liens for taxes, assessments, or governmental charges or
levies if the same shall at the time not be delinquent or thereafter can be paid
without penalty or are being contested in good faith and by appropriate
proceedings;
(ii) liens imposed by law such as carriers', warehousemen's, and
mechanics' liens and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than thirty (30) days past
due or which are being contested in good faith by appropriate proceedings and
for which adequate reserves shall have been set aside on its books; or
(iii) the Permitted Liens.
(b) Loans to Stockholders. From and after August 31, 2002 make or
permit any loans, advances to, or guarantee any loans or advances to any
stockholder of the Borrower or entity affiliated with the Borrower.
(c) Indebtedness. The Borrower shall not create, incur, assume or
suffer to exist any Indebtedness other than (i) Indebtedness Outstanding as of
August 31, 2002, including any renewals, refinancings or extensions of such
Indebtedness (provided, however, except as may have existed on August 31, 2002,
no liens or other assets may secure such Indebtedness); and (ii) unsecured
current liability (not the result of borrowing) incurred in the ordinary and
regular course of business for current purposes and not overdue.
(d) Dividend Restrictions. Declare or pay, or set apart any funds for
the payment of, any dividends (other than dividends payable in stock of the
Borrower) on any shares of stock of any class of the Borrower, or make any
payment to purchase, redeem, retire or acquire any shares of stock of any class
of the Borrower or any option, warrant or other right to acquire such stock.
(e) Change in Business. Make any material change in its
organizational structure or the scope or nature of its business or operations.
(f) Merger, Consolidation, Dissolution and Sale. Merge or consolidate
with any other entity; dissolve or terminate its legal existence; sell, lease,
transfer or otherwise dispose of,
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other than in the ordinary course of Borrower's business, any substantial part
of its properties or any of its properties essential to the conduct of its
business or operations as now or hereafter conducted or enter into any agreement
to do any of the foregoing.
9. SPECIAL CONDITIONS PERTAINING TO CERTAIN ACCOUNTS RECEIVABLE
9.1 Receivables Due and Collectible Outside the U.S. Notwithstanding
Section 2.04 of the Borrower Agreement, the Lender may include in the Borrowing
Base, Eligible Export-Related Accounts Receivable due and collectible in the
United Kingdom to Isomet UK, provided that:
(a) The Accounts Receivable shall derive exclusively from Eligible
Exports originating from the United States;
(b) One hundred percent (100%) of all proceeds from such Accounts
Receivable are remitted by Isomet UK to the United States on a minimum of a
weekly basis;
(c) No more than fifty percent (50%) of the Export-Related Borrowing
Base may consist of Accounts Receivable due and collectible in the United
Kingdom;
(d) Borrower shall submit a report to Lender, in form and substance
satisfactory to Lender, on a minimum of a monthly basis evidencing Borrower's
compliance with Section 9.1(c) of this Agreement;
(e) Lender obtains a valid and enforceable first priority security
interest (or its equivalent) in the Accounts Receivable in the jurisdiction
where the Accounts Receivable are located;
(f) Lender obtains a pledge of stock from Isomet Corp., in form and
substance satisfactory to Lender, all of the issued and outstanding stock of
Isomet UK and IFSC stock sufficient to allow Lender to gain control of Isomet UK
and IFSC and all of its assets if there is an Event of Default; and
(g) Lender obtains a legal opinion, in form and substance
satisfactory to Lender, from counsel to Isomet UK licensed to practice in the
jurisdiction of incorporation of Isomet UK with regard to the enforceability of
the first priority security interest (or its equivalent) in Accounts Receivables
of Isomet UK referenced in Section 9.1(e).
9.2 Accounts Receivable Payable in Non-U.S. Currency. Notwithstanding
Section 2.01 of the Borrower Agreement, the Borrower may denominate Eligible
Export-Related Accounts Receivable in British pounds, provided that any such
Accounts Receivable are hedged against foreign currency exchange risks.
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10. GOVERNING LAW AND JURISDICTION
10.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, United States of America.
10.2 Choice Of Forum. As a specifically bargained inducement for the Lender
to enter into this Agreement and to extend credit to Borrower, the Borrower
agrees that any action, suit or proceeding in respect of or arising out of this
Agreement, its validity or performance, may be initiated and prosecuted in New
York at the discretion of the Lender. The Borrower consents to and submits to
the exercise of jurisdiction over their person by any state or federal court
located in New York having jurisdiction over the subject matter, waive personal
service of any and all process upon them and consent that all such service of
process be made by U.S. registered mail directed to the Borrower and the Lender
at their respective addresses as set forth in Section 13.1 hereof; and service
so made shall be deemed to be completed five business days after such process
shall have been deposited in the U.S. mail, registered mail, postage prepaid.
The Borrower waives any objection based on forum non conveniens, and any
objection to venue of any action instituted hereunder.
10.3 JURY TRIAL. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR THE LENDER TO
ENTER INTO THIS LOAN AGREEMENT AND TO EXTEND CREDIT TO THE BORROWER, THE
BORROWER AND LENDER WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT
OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS LOAN AGREEMENT AND THE
CONDUCT OF THE RELATIONSHIP BETWEEN LENDER AND BORROWER.
11. AVAILABILITY DATE
11.1 Availability Date. The Lender shall not be obligated to make any
Disbursements under this Agreement to the Borrower subsequent to September 30,
2003 (the "Availability Date"), unless Lender and Ex-Im Bank otherwise consent
in writing.
12. EVENTS OF DEFAULT
12.1 Events of Default. Upon the occurrence of any of the following events
or conditions (each an "Event of Default"):
(a) any failure by the Borrower to pay when due any amount owing under
thisAgreement or any Note; or
(b) any representation or warranty made or deemed made by the Borrower in
this Agreement, or in connection herewith or any statement made in any
certificate, report or financial statement furnished by the Borrower to the
Lender, or any statement made in the legal opinions of the Borrower concerning
facts relating to the Borrower or, as the case may be, relating to the
16
transactions contemplated hereby has proven to have been false or misleading in
any material respect when made; or
(c) any failure by the Borrower to perform or comply with any of the
covenants, agreements or provisions set forth in this Agreement; or
(d) any failure by the Borrower to pay when due including any period of
grace provided to the Borrower with respect thereto, any amounts (which in the
reasonable judgment of the Lender if the Borrower is required to pay such amount
would affect materially and adversely the ability of the Borrower to pay the
amounts due under this Agreement) that are payable under any other agreement or
instrument providing for the payment by the Borrower of borrowed money or for
the deferred purchase price of property or services received or any such amount
has prior to the stated maturity thereof become due, or any events specified in
any such agreement or instrument shall occur the effect of which is to cause or
with the giving of notice or lapse of time or both to permit any person to cause
such amounts to become due or to be repaid in full prior to their stated
maturity; or
(e) the Borrower shall be unable to pay their debts as they fall due or
shall admit in writing their inability to pay their debts as they fall due or
shall become insolvent; or
(f) proceedings in bankruptcy or an action for debtor's relief is filed
by, against, or on behalf the Borrower and, with respect to any such proceedings
or action instituted by a person or entity other than the Borrower, such
proceedings or action are not terminated or dismissed within thirty (30)
calendar days of filing; or
(g) the Borrower begins any procedure for liquidation or dissolution or
any such procedure is commenced against any of them; or
(h) any judgment against the Borrower shall have been entered on a
claim not covered by insurance in an amount which in the reasonable judgment of
the Lender if the Borrower is required to pay such amount would affect
materially and adversely the ability of the Borrower to pay the amounts due
under this Agreement and such judgment has remained unpaid, unvacated, unbonded
or unstayed by appeal or otherwise for a period of thirty (30) days from the
date of its entry; or
(i) the disbursed amount outstanding under the Loan Facility exceeds
the Borrowing Base and the Borrower fails within five (5) days after being
informed thereof by the Lender either to (a) furnish additional security to the
Lender or (b) pay to the Lender an amount equal to the difference between the
Disbursed Amount outstanding and the Borrowing Base; or
(j) any other default occurs under any of the Loan Documents;
then and in any such event, and at any time thereafter, if such event is
continuing, the Lender by written notice to the Borrower may terminate all
obligations on Lender's part to make any further
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Disbursement and/or may declare immediately due and payable all or any portion
of the principal amount of the Loan Facility then outstanding, including accrued
interest thereon to the date of payment, and all other amounts owing under this
Agreement. Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
The aforementioned right to accelerate is in addition to and not a substitute
for any other rights and remedies available to the Lender under this Agreement
and under applicable laws.
13. MISCELLANEOUS
13.1 Notices. Any notice or notification required, permitted or
contemplated hereunder shall be in writing, shall be addressed to the party to
be notified at the address set forth below or at such other address as each
party may designate for itself from time to time by notice hereunder, and shall
be deemed to have been validly served, given or delivered (a) five days
following deposit in the United States mails, registered mail, with proper
postage prepaid, or (b) the next business day after such notice was delivered to
a regularly scheduled overnight delivery carrier with delivery fees either
prepaid or an arrangement, satisfactory with such carrier, made for the payment
of such fees, or (c) upon receipt of notice given by facsimile transmission,
telex, or personal delivery:
To Lender: RZB Finance LLC
1133 Avenue of the Americas
00/xx/ Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xx. Xxxxxxx Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
To Borrower: Isomet Corporation and Subsidiaries
0000 Xxxx Xxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
Attn: Xx. Xxxxx Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to: Isomet UK
00 Xxxx Xxxxx Xxxxx
Xxxxxxxxxx Xxxxxxxxxx Xxxx
Xxxxxxx Xxxxx, XX00 0XX
Tel: 000-00-00000-00000
With a copy to: Isomet Foreign Sales Corporation
x/x Xxxxx & Xxxxx
X.X. Xxx 000, Xxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx
Tel: (000) 000-0000
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13.2 Priority Allocation Of Funds. The Lender is hereby authorized to
apply any amounts received or due to the Lender in the order of priority
determined by Lender in its discretion.
13.3 Disclaimer. The Lender shall not be responsible in any way for the
performance of the Export Order or orders associated with Indirect Exports, and
no claim with respect thereto will affect the obligations of the Borrower under
this Agreement or any of the Loan Documents.
13.4 Disposition of Indebtedness. The Lender may sell, assign,
transfer, pledge, negotiate, grant participation in, or otherwise dispose of all
or any part of its interest in all or any part of the Borrower's indebtedness
under this Agreement and the Note to any party (collectively, a "Disposition of
Indebtedness"), and any such party shall enjoy all the rights and privileges of
the Lender under this Agreement and the Note. The Borrower shall, at the request
of the Lender, execute and deliver to the Lender or to any party that the Lender
may designate, any such further instruments as may be necessary or desirable to
give full force and effect to a Disposition of Indebtedness. Notwithstanding
anything to the contrary, the Borrower may not assign or otherwise transfer any
of its obligations under this Agreement without the prior written consent of the
Lender.
13.5 Benefit Of Agreement. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.
13.6 No Waiver; Remedies Cumulative. No failure or delay on the part of
the Lender in exercising any right, power or privilege under this Agreement and
no course of dealing between the Borrower and the Lender shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other right, power or privilege thereunder. The
remedies expressly provided herein are cumulative and not exclusive of any
rights or remedies which the Lender would otherwise have. No notice to or demand
on the Borrower in any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of the Lender to any other or further action in any circumstances without
notice or demand.
13.7 Entire Agreement. This Agreement, the Loan Authorization Agreement
and the Borrower Agreement and all attachments hereto and thereto contain the
entire agreement between the parties relating to the Loan Facility.
13.8 Amendment Or Waiver. This Agreement may not be changed or amended
without the written consent of the parties hereto and no provision hereof may be
waived without the written consent of the party to be bound thereby.
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13.9 Counterparts. This Agreement may be signed in separate
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
13.10 Severability. To the extent permitted by applicable law, the
legality or unenforceability of any provision of this Agreement shall not in any
way effect or impair the legality or enforceability of the remaining provisions
of this Agreement.
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
duly executed and delivered, as of the date first written above.
RZB FINANCE LLC
____________________________________
By: ________________________________
(Print Name and Title)
ISOMET CORPORATION
____________________________________
By: Xxxxx Xxxxxxx
Executive Vice President
ISOMET UK
By:_________________________________
Its:________________________________
ISOMET FOREIGN SALES CORPORATION
By:_________________________________
Its:________________________________
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