CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of May __, 2000 by and between
SERVATRON, INC., a Washington corporation ("Borrower"), and ITRON, INC., a
Washington corporation ("Lender").
RECITALS
Borrower has requested the credit facilities described herein from
Lender, and Lender has agreed to provide said credit facilities to Borrower on
the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises
of the parties contained herein, Lender and Borrower hereby agree as follows:
ARTICLE I. DEFINITIONS
1.1 DEFINED TERMS
All terms defined above shall have the meanings set forth above. Any
accounting term used in this Agreement that is not specifically defined herein
shall have the meaning customarily given to it under GAAP, and all other terms
contained in this Agreement that are not defined herein shall, unless the
context indicates otherwise, have the meanings provided in the Code to the
extent such terms are defined therein. The following terms shall have the
meanings set forth below (with all such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Agreement" means this Credit Agreement as amended, modified or
supplemented from time to time.
"Applicable Rate" means, at any date, the lesser of (a) a per annum
rate equal to the sum of the Prime Rate plus 100 basis points, plus; during the
continuation of an Event of Default, an additional 300 basis points, or (b) the
Highest Lawful Rate.
"Bankruptcy Code" means the Bankruptcy Reform Act, Title 11 of the
United States Code, as amended or recodified from time to time, including
(unless the context otherwise requires) any rules or regulations promulgated
thereunder.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks are authorized or required to be closed in Spokane,
Washington.
"Closing Date" means the date of this Agreement.
"Code" means the Uniform Commercial Code of the State of Washington, as
amended from time to time.
"Collateral" means (a) all of Borrower's right, title, and interest in
and to all accounts, goods, general intangibles, money, instruments, chattel
paper, deposit accounts, documents and investment property; (b) all products,
proceeds, rents and profits of the foregoing; and (c) all of the foregoing,
whether now owned or existing or hereafter acquired or arising or in which
Borrower now has or hereafter acquires any rights.
"Contaminant" means any pollutant, hazardous substance, toxic
substance, hazardous waste or other substance regulated or forming the basis of
liability under any Environmental Law.
"Default" means (i) an Event of Default, (ii) an event or condition
that with the giving of notice or the passage of time, or both, would constitute
an Event of Default, or (iii) the filing against Borrower of a petition
commencing an involuntary case under the Bankruptcy Code.
"Disclosure Schedule" means Schedule I attached hereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended or recodified from time to time, including (unless the context otherwise
requires) any rules or regulations promulgated thereunder.
"Environmental Law" means all applicable federal, state and local laws,
statutes, ordinances and regulations, and any applicable judicial or
administrative interpretation, order, consent decree or judgment, relating to
the regulation and protection of the environment. Environmental Laws include but
are not limited to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. ss. 9601 et seq.); the Hazardous
Material Transportation Act, as amended (49 U.S.C. ss. 180 et seq.); the Federal
Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. ss. 136 et
seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. ss.
6901 et seq.); the Toxic Substance Control Act, as amended (42 U.S.C. ss. 7401
et seq.); the Clean Air Act, as amended (42 U.S.C. ss. 740 et seq.); the Federal
Water Pollution Control Act, as amended (33 U.S.C. ss. 1251 et seq.); and the
Safe Drinking Water Act, as amended (42 U.S.C. ss. 300f et seq.), and their
state and local counterparts or equivalents and any applicable transfer of
ownership notification or approval statutes.
"Environmental Liabilities and Costs" means, as to any Person, all
liabilities, obligations, responsibilities, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim or
demand by any other Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, including, without
limitation, any thereof arising under any Environmental Law, Permit, order or
agreement with any Governmental Authority or other Person, and which relate to
any violation or alleged violation of an Environmental Law or a Permit, or a
Release or threatened Release.
"Event of Default" has the meaning set forth in Section 8.1 hereof.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time, consistently applied.
"Governmental Authority" means any domestic or foreign national, state
or local government, any political subdivision thereof, any department, agency,
authority or bureau of any of the foregoing, or any other entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including the Federal Deposit Insurance Corporation,
the Federal Reserve Board, the Comptroller of the Currency, any central bank or
any comparable authority.
"Governmental Rule" means any applicable law, rule, regulation,
ordinance, order, code interpretation, judgment, decree, directive, guidelines,
policy or similar form of decision of any Governmental Authority.
"Highest Lawful Rate" means, at the particular time in question, the
maximum rate of interest which,under applicable law, Lender is then permitted
to charge Borrower on the applicable Loan, and if the maximum rate changes at
any time, the Highest Lawful Rate shall increase or decrease, as the case may
be, as of the effective time of each such change, without notice to Borrower.
"Indebtedness" of any Person means, without duplication, (a) all
liabilities of such Person as determined in accordance with GAAP, (b) all
obligations of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (c) all lease obligations of such Person, (d) all contingent
obligations of such Person, (e) all obligations of such Person to purchase,
redeem, retire, defease or otherwise acquire for value any Stock or Stock
Equivalents of such Person with a mandatory repurchase or redemption date of
less than ten years from the date of issuance thereof, (f) all obligations
secured by (or for which the holder of such obligations has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property owned by
such Person, even though such Person has not assumed or become liable for the
payment of such obligations, and (g) all liabilities of such Person in
connection with the failure to make when due any contribution or payment
pursuant to or under any Plan. For purposes of determining the amount of
Indebtedness in a circumstance when the creditor has recourse only to specified
assets, the amount shall be the lesser of (i) the amount of such obligation or
(ii) the fair market value of such assets.
"Indemnitees" has the meaning set forth in Section 9.3 hereof.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
security interest, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever, including, without limitation, any
conditional sale or other title retention agreement or the interest of a lessor
under any capital lease.
"Loan" means an advance made by Lender to Borrower pursuant to
Section 2.1.
"Loan Documents" means this Agreement, the Note and each other
agreement, note, notice, document, contract or instrument to which Borrower now
or hereafter is a party and that is required by Lender in connection with the
Obligations.
"Material Adverse Effect" means a material adverse effect on (a) the
condition (financial or otherwise), business, performance, operations or
properties of Borrower, (b) the ability of Borrower to perform its obligations
under the Loan Documents, or (c) the rights and remedies of Lender under the
Loan Documents.
"Maturity Date" means the earlier of January 18, 2004 or the due date
determined pursuant to Section 8.2.
"Note" means a promissory note executed by Borrower in favor of Lender
evidencing Loans, substantially in the form attached as Exhibit A hereto.
"Obligations" means all of Borrower's obligations under the Loan
Documents, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Title IV of ERISA.
"Permit" means any permit, approval, authorization, license, variance
or permission required from a Governmental Authority under an applicable
Governmental Rule.
"Permitted Liens" means
(a) Liens arising by operation of law for taxes, assessments or
governmental charges not yet due;
(b) statutory Liens of mechanics, materialmen, shippers, warehousemen,
carriers, and other similar persons for services or materials arising in the
ordinary course of business for which payment is not yet due;
(c) nonconsensual Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security;
(d) Liens for taxes or statutory Liens of mechanics, materialmen,
shippers, warehousemen, carriers and other similar persons for services or
materials that are due but are being contested in good faith and by appropriate
and lawful proceedings promptly initiated and diligently conducted and for which
reserves satisfactory to Lender have been established;
(e) Liens listed on the Disclosure Schedule;
(f) Liens granted in the Loan Documents;
(g) purchase money Liens upon or in any property of Borrower and used
by Borrower in the ordinary course of business and Liens to secure capital
leases and any related payment and performance obligations if, in each case, the
incurrence of such Indebtedness is permitted by Section 7.2; provided, however,
that: (i) any such Lien is created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund, the cost
(including, without limitation, the cost of construction and the reasonable fees
and expenses relating to such Indebtedness) of the property subject thereto,
(ii) the principal amount of the Indebtedness secured by such Lien does not
exceed such cost, and (iii) such Lien does not extend to or cover any other
property other than such item of property, any improvements on such item, and
the proceeds from the disposition of such items;
(h) zoning restrictions, easements, rights of way, survey exceptions,
encroachments, covenants, licenses, reservations, leasehold interests,
restrictions on the use of real property or minor irregularities incident
thereto which do not in the aggregate materially detract from the value or use
of the property or assets of Borrower or impair, in any material manner, the use
of such property for the purposes for which such property is held by Borrower;
(i) the interests of lessors or lessees of property leased
pursuant to leases permitted hereunder;
(j) Liens of a depository institution arising solely by virtue of any
statutory or common law provision relating to banker's liens, rights of setoff,
or similar rights and remedies as to deposit accounts or other funds maintained
with such institution, provided that (i) such deposit account is not a dedicated
cash collateral account and is not subject to restrictions against access by
Borrower in excess of those set forth by regulations promulgated by any
Government Authority, and (ii) such deposit account is not intended by Borrower
to provide collateral to the depository institution;
(k) judgment Liens to the extent the existence of such Liens is not an
Event of Default under Section 8.1(g); (l) Liens granted to secure obligations
to the Senior Lender provided that the principal amount secured thereby does not
exceed $_________; (m) any Lien securing Indebtedness ("New Indebtedness") that
constitutes a refinancing of any Indebtedness (in whole or in part) secured, at
the time of refinancing, by a Permitted Lien ("Old Indebtedness"), provided that
(i) any such Lien is limited to all or part of the property that secured the Old
Indebtedness and (ii) the New Indebtedness is not greater than the Old
Indebtedness; and (n) Liens (other than Liens on the Collateral) on the property
of Borrower or any Subsidiary securing (i) the non-delinquent performance of
bids, trade contracts (other than for borrowed money), operating leases, and
statutory obligations, (ii) contingent obligations on surety and appeal bonds,
and (iii) other non-delinquent obligations of a like nature; in each case
incurred in the ordinary course of business, provided all such Liens in the
aggregate would not (even if enforced) cause a Material Adverse Effect.
"Person" means an individual, partnership, corporation (including,
without limitation, a business trust), joint stock company, limited liability
company, trust, unincorporated association, joint venture or other entity, or a
Governmental Authority.
"Plan" means an employee benefit plan, as defined in Section 3(3) of
ERISA, which Borrower maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed by any of them.
"Prime Rate" means, for any day, an interest rate per annum equal to
the rate of interest most recently announced by Bank of America, N.A. Bank at
its principal office as its prime rate, with any change in the prime rate to be
effective as of the day such change is publicly announced by Bank of America,
N.A.
"Release" means, as to any Person, any unpermitted spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration of a Contaminant into the environment.
"Remedial Action" means all actions required to clean up, remove,
prevent or minimize a Release or threat of Release or to perform pre-remedial
studies and investigations and post-remedial monitoring and care.
"Senior Lender" means Sterling Savings Bank and its successors and
assigns.
"Stock" means shares of capital stock, beneficial or partnership
interests, participations or other equivalents (regardless of how designated) of
or in a corporation or other entity, whether voting or nonvoting, and includes,
without limitation, common stock and preferred stock.
"Stock Equivalents" means all securities convertible into or
exchangeable for Stock and all warrants, options or other rights to purchase or
subscribe for any Stock, whether or not presently convertible, exchangeable or
exercisable.
1.2 HEADINGS
Headings in this Agreement and each of the other Loan Documents are for
convenience of reference only and are not part of the substance hereof or
thereof.
1.3 ADDITIONAL DEFINITION PROVISIONS
Whenever the terms "herein," "hereof," "hereto," "hereunder,"
"therein," "thereof," "thereto," "thereunder," and similar terms contained in
this Agreement or any Loan Document refer to this Agreement or other Loan
Document, such terms refer to the whole of this Agreement or other Loan Document
and not to any particular article, section, paragraph or provision.
ARTICLE II. THE CREDIT
2.1 REVOLVING LOANS
(a) On the terms and subject to the conditions contained in this
Agreement, Lender agrees to make loans (each a "Loan") to Borrower from time to
time until the Maturity Date in an aggregate amount not to exceed $500,000 at
any time outstanding. Borrower may from time to time borrow, partially or wholly
repay its outstanding borrowings (subject to the limitations of Section 2.1(c)
below), and reborrow, subject to all the limitations, terms and conditions
contained herein. Borrower shall repay the outstanding principal balance of the
Loans, together with all accrued and unpaid interest and related fees on the
Maturity Date. The Loans shall be evidenced by a Note payable to the order of
Lender.
(b) Borrower shall request each advance of a Loan by giving Lender
irrevocable written notice at least one Business Day in advance of the proposed
date of borrowing, which specifies (i) the principal amount of the requested
advance (which amount must be a minimum of $50,000 with increments above $50,000
being in integral multiples of $50,000) and (ii) the proposed date of borrowing,
which shall be a Business Day. Borrower may not make more than one borrowing
request in any week.
(c) From time to time on any Business Day, Borrower may make a
voluntary prepayment, in whole or in part, of the outstanding principal amount
of the Loans; provided, however, that (i) each voluntary partial prepayment must
be in a minimum amount of $_______ with increments above $_______ being in
integral multiples of
$-------.
2.2 INTEREST
The outstanding principal balance of the Loans shall bear interest at
the Applicable Rate. All fees, expenses and other amounts not paid when due
shall bear interest (from the date due until paid) at the Applicable Rate.
Interest shall be computed on the basis of a 360-day year, actual days elapsed,
and shall be payable monthly, in arrears, on the first day of each month and on
the Maturity Date.
2.3 OTHER PAYMENT TERMS
(a) Manner. Borrower shall make all payments due to Lender under the
Loan Documents by payment to Lender in lawful money of the United States and in
same day or immediately available funds not later than 11:00 a.m. (Spokane time)
on the date due.
(b) Date. Whenever any payment due hereunder shall fall due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall be included in the computation of
interest or fees, as the case may be.
(c) Application of Payments. All payments under the Loan Documents
(including prepayments) shall be applied first to unpaid fees, costs and
expenses then due and payable under the Loan Documents, second to accrued
interest then due and payable under the Loan Documents and finally to reduce the
principal amount of the outstanding Loans.
(d) Payment Provisions. Borrower shall make all payments due hereunder
free and clear of, and without deduction or withholding for or on account of,
any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees,
deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment of,
any of the Obligations Lender is required to surrender or return such payment or
proceeds to any person or entity for any reason, then the Obligations intended
to be satisfied by such payment or proceeds shall be reinstated and continue and
this Agreement shall continue in full force and effect as if such payment or
proceeds had not been received by Lender. Borrower hereby indemnifies and holds
Lender harmless for the amount of any payments or proceeds surrendered or
returned. This Section 2.3(d) shall remain effective notwithstanding any
contrary action which may be taken by Lender in reliance upon such payment or
proceeds and shall survive the payment in full and performance of all of
Borrower's other Obligations.
ARTICLE III. SECURITY
3.1 GRANT OF SECURITY INTEREST
Borrower hereby grants to Lender a security interest in all of the
Collateral as security for the full and prompt payment in cash and performance
of the Obligations.
3.2 PERFECTION; DUTY OF CARE
(a) Until all the Obligations have been fully satisfied and paid in
cash, Borrower shall perform all steps reasonably requested by Lender to
perfect, maintain and protect Lender's security interest in the Collateral,
including, without limitation, (i) executing and filing financing and
continuation statements in form and substance satisfactory to Lender, and (ii)
delivering all Collateral in which Lender's security interest may be perfected
by possession together with such indorsements as Lender may request. Borrower
hereby authorizes Lender to execute and file one or more UCC financing
statements signed only by Lender evidencing the security interest granted
hereby.
(b) Borrower shall pay all taxes, assessments and governmental charges
levied or assessed or imposed upon or with respect to the Collateral; provided,
however, Borrower shall not be required to pay any tax if the validity and/or
amount thereof is being contested in good faith and by appropriate and lawful
proceedings promptly initiated and diligently conducted of which Borrower has
given prior notice to Lender and for which appropriate reserves have been
established and so long as levy and execution have been and continue to be
stayed. If Borrower fails to pay or so contest and reserve for such taxes,
assessments and governmental charges, Lender may (but shall not be required to)
pay the same and add the amount of such payment to the principal of the Loans.
(c) In order to protect or perfect the security interest granted under
the Loan Documents, Lender may discharge any Lien that is not a Permitted Lien
or bond the same, pay for any insurance that Borrower has failed to maintain as
required by this Agreement and, upon an Event of Default, maintain guards, pay
any service bureau, or obtain any record and add the same to the principal of
the Loans.
(d) Lender shall have no duty of care with respect to the Collateral,
except to exercise reasonable care with respect to the Collateral in its
custody, but shall be deemed to have exercised reasonable care if such property
is accorded treatment either (i) substantially equal to that which it accords
its own property or (ii) as Borrower requests in writing, provided that no
failure to comply with any such request nor any omission to do any such act
requested by Borrower shall be deemed a failure to exercise reasonable care.
Lender's failure to take steps to preserve rights against any parties or
property shall not be deemed to be a failure to exercise reasonable care with
respect to the Collateral in its custody.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Lender,
subject to the exceptions set forth on the Disclosure Schedule, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the performance and payment in
full, in cash, of all Obligations:
4.1 LEGAL STATUS; SUBSIDIARIES
Borrower is a corporation, duly organized and validly existing under
the laws of Washington, and is qualified or licensed to do business (and is in
good standing as a foreign corporation, if applicable) in all jurisdictions in
which such qualification or licensing is required or in which the failure to so
qualify or to be so licensed could have a Material Adverse Effect. Borrower is
not known by, and has not, during the preceding five years, been known as or
used, any other corporate or fictitious name and has not acquired any of its
assets in a bulk transfer (other than in the asset purchase involving Lender).
Borrower has no subsidiaries and does not own or hold, directly or indirectly,
any capital stock or equity security of, or any equity interest in, any Person.
4.2 AUTHORIZATION AND VALIDITY
The Loan Documents have been duly authorized and the performance by
Borrower of its obligations under the Loan Documents constitute a proper
corporate purpose under all applicable law. The Loan Documents, upon their
execution and delivery in accordance with the provisions hereof, will constitute
legal, valid and binding agreements and obligations of Borrower, enforceable
against it in accordance with their respective terms.
4.3 NO VIOLATION
The execution, delivery and performance by Borrower of each of the Loan
Documents do not violate or contravene any provision of its articles or
certificate of incorporation or by-laws and do not violate any Governmental Rule
or result in a breach of or constitute a default under any contract, obligation,
indenture or other instrument to which it is a party or by which it may be
bound, which violation, breach or default would have a Material Adverse Effect.
4.4 LITIGATION
There are no pending or, to Borrower's knowledge, threatened, actions,
claims, investigations, suits or proceedings, by or before any governmental
authority, arbitrator, court or administrative agency that could have a Material
Adverse Effect.
4.5 CORRECTNESS OF FINANCIAL STATEMENT
The financial statements of Borrower dated as of _________ heretofore
delivered by Borrower to Lender, (a) present fairly its financial condition and
results of operations; (b) disclose all liabilities of Borrower that are
required to be reflected or reserved against under GAAP, whether liquidated or
unliquidated, fixed or contingent; and (c) have been prepared in accordance with
GAAP. Except as disclosed to Lender pursuant to Section 6.3, since the date of
such financial statements, there has been no change or changes which have
resulted in a Material Adverse Effect.
4.6 TAXES
Borrower has filed, or caused to be filed, all federal, state, local
and foreign tax returns required to be filed by it, and has paid, or caused to
be paid, all taxes as are shown on such returns, or on any assessment received
by it, to the extent that such taxes have become due, except as otherwise
contested in good faith and except for those taxes the nonpayment of which would
not , in the aggregate, have a Material Adverse Effect. Borrower has set aside
proper amounts on its books, determined in accordance with GAAP, for the payment
of all taxes for the years that have not been audited by the respective tax
authorities and for taxes being contested by it.
4.7 ERISA
Borrower is in compliance in all material respects with the applicable
provisions of ERISA. Borrower has not violated any provision of any Plan
maintained or contributed to by it in a manner that could reasonably be expected
to result in a Material Adverse Effect. No "reportable event" (as defined in
Title IV of ERISA) has occurred and is continuing with respect to any Plan
initiated by it.
4.8 OTHER OBLIGATIONS
Borrower is not in default with respect to any Indebtedness or any of
its material contractual obligations.
4.9 ENVIRONMENTAL MATTERS
Borrower is in compliance in all material respects with all
Environmental Laws applicable to it, other than such noncompliance as in the
aggregate will not have a Material Adverse Effect. Borrower has not received
notice that it is the subject of any federal or state investigation evaluating
whether any Remedial Action is needed. There have been no Releases by Borrower
that could reasonably be expected to result in a Material Adverse Effect.
4.10 LIENS
Borrower has good, indefeasible, and merchantable title to and
ownership of the Collateral, free and clear of all Liens, except Permitted
Liens. There are no Liens of any nature whatsoever on any of Borrower's
properties other than Permitted Liens.
4.11 NO BURDENSOME RESTRICTIONS; NO DEFAULTS
Borrower is not a party to any contractual obligation the compliance
with which would have a Material Adverse Effect. No facts or circumstances exist
which would constitute a breach of any obligation, representation or warranty of
Borrower hereunder if this Agreement were in effect immediately prior to
Borrower's execution hereof.
4.12 INSURANCE
All current policies of insurance of any kind or nature owned by or
issued to Borrower, including, without limitation, policies of fire, theft,
product liability, public liability, property damage, other casualty, employee
fidelity, workers' compensation and employee health and welfare insurance, are
in full force and effect and are of a nature and provide such coverage as is
sufficient and as is customarily carried by companies of its size and character.
Borrower has no reason to believe that it will be unable to comply with Section
6.5.
4.13 LABOR MATTERS
Other than any of the following which in the aggregate have no
reasonable likelihood of having a Material Adverse Effect: (i) there are no
strikes, work stoppages, slowdowns or lockouts pending or to Borrower's
knowledge threatened against or involving it; (ii) there are no arbitrations or
grievances pending or to its knowledge threatened against or involving it; (iii)
there is no organizing activity involving it pending or to its knowledge
threatened by any labor union or group of employees; (iv) there are no
representation proceedings pending against it or to its knowledge threatened
with the National Labor Relations Board; (v) no labor organization or group of
its employees has made a pending demand on it for recognition; (vi) there are no
unfair labor practice charges, grievances or complaints pending or in process or
to its knowledge threatened by or on behalf of any employee or group of its
employees; (vii) there are no complaints or charges against it pending or to its
knowledge threatened to be filed with any federal, state or local court,
governmental agency or arbitrator based on, arising out of, in connection with,
or otherwise relating to its employment of any individual; and (viii) it is in
material compliance with all Governmental Rules, and all orders of any
Governmental Authority or arbitrator, relating to the employment of labor
including all such laws relating to wages, hours, collective bargaining,
discrimination, civil rights, and the payment of withholding and/or social
security and similar taxes. As of the date hereof Borrower is not a party to,
and has no obligations under, any collective bargaining agreement.
4.14 FORCE MAJEURE
Neither Borrower's business nor its properties are currently suffering
from the effects of any fire, explosion, accident, strike, lockout or other
labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the
public enemy or other casualty (whether or not covered by insurance), other than
those the consequences of which in the aggregate could not reasonably be
expected to have a Material Adverse Effect.
4.15 INTELLECTUAL PROPERTY
Borrower owns or licenses or otherwise has the right to use all
material licenses, Permits, patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, copyright applications,
franchises, authorizations and other intellectual property rights that are
necessary for the operation of its businesses, without infringement upon or
conflict with the rights of any other Person with respect thereto, including,
without limitation, all trade names. No slogan or other advertising device,
product, process, method, substance, part or other material now employed, or now
contemplated to be employed, by Borrower infringes upon or conflicts with any
rights owned by any other Person, which infringement or conflict is reasonably
likely to have a Material Adverse Effect, and no claim or litigation regarding
any of the foregoing is pending or, to its knowledge, threatened, the existence
of which is reasonably likely to have a Material Adverse Effect. No patent,
invention, device, application, principle or any statute, law, rule, regulation,
standard or code is pending or, to its knowledge, proposed, other than those the
consequences of which in the aggregate have no reasonable likelihood of having a
Material Adverse Effect.
4.16 SOLVENCY
Borrower has received consideration that is the reasonably equivalent
value of the obligations and liabilities that it has incurred to Lender.
Borrower is not insolvent as defined in any applicable state or federal statute,
nor will it be rendered insolvent by the execution and delivery of this
Agreement or the other Loan Documents. Borrower does not intend to, nor does it
believe that it will, incur debts beyond its ability to pay them as they mature.
Borrower has capital sufficient to carry on its business and transactions and
all business and transactions in which it is about to engage.
4.17 TRUTH, ACCURACY OF INFORMATION
All financial and other information furnished to Lender in connection
with this Agreement is accurate in all material respects and does not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the information furnished, in light of the
circumstances under which furnished, not misleading. The representations and
warranties in Sections 4.10 and 4.15 are based solely upon the representations
and warranties made by Lender to Borrower in connection with the sale of the
Collateral by Lender to Borrower.
4.18 CHIEF EXECUTIVE OFFICE AND OTHER LOCATIONS
Borrower's chief executive office and principal place of business is
East 00000 Xxxxxxxx Xxxxxx, Xxxxxxx, XX 00000. Borrower's books and records are
located at its chief executive office, and the only other offices and/or
locations where it keeps the Collateral (except for Inventory which is in
transit) or conducts any of its business are set forth in Section 4.18 of the
Disclosure Schedule.
4.19 COMPLIANCE WITH LAW
Borrower is in compliance with all Governmental Rules and law, except
where the failure to do so would not have a Material Adverse Effect.
ARTICLE V. CONDITIONS
5.1 CONDITIONS OF INITIAL EXTENSION OF CREDIT
The obligation of Lender to extend any credit contemplated by this
Agreement is subject to the fulfillment to Lender's satisfaction of all of the
following conditions:
(a) Documentation. Lender shall have received, in form and substance
satisfactory to it, each of the following duly executed:
(i) this Agreement, and the Note;
(ii) a corporate borrowing resolution from Borrower;
(iii) a good standing certificate and certified copy of
Borrower's articles of incorporation;
(iv) a copy of Borrower's by-laws certified by its
secretary as correct and complete;
(v) a certificate of incumbency from Borrower;
(vi) an opinion of Xxxxxx & Xxxx, P.C., counsel to Borrower,
as to such matters as Lender shall reasonably require; and
(vii) such other documents as Lender may require.
(b) Financial Condition. No event or circumstance exists that
can reasonably be expected to have a Material Adverse Effect.
(c) Insurance. Borrower shall have delivered to Lender evidence of the
insurance coverage, including loss payable endorsements, required pursuant to
Section 6.5.
5.2 CONDITIONS OF EACH EXTENSION OF CREDIT
The obligation of Lender to make any Loan (including any Loan being
made by Lender on the Closing Date) shall be subject to the further conditions
precedent that:
(a) the following statements shall be true on the date of such Loan,
both before and after giving effect thereto and to the application of the
proceeds therefrom, and the acceptance by Borrower of the proceeds of such Loan
shall constitute a representation and warranty by Borrower that on the date of
such Loan or such issuance such statements are true:
(i) the representations and warranties of Borrower contained
in the Loan Documents are correct in all material respects on and as of
such date as though made on and as of such date or, as to those
representations and warranties limited by their terms to a specified
date, were correct in all material respects on and as of such date; and
(ii) no Default is continuing or would result from the
Loan being made;
(b) Lender shall have received such additional documents,
information and materials as Lender may reasonably request; and
(c) no event or circumstance exists that can reasonably be expected to
have a Material Adverse Effect.
ARTICLE VI. AFFIRMATIVE COVENANTS
Borrower covenants that so long as Lender remains committed to extend
credit to Borrower pursuant to the terms hereof and until performance and
payment in full, in cash, of all Obligations, Borrower shall:
6.1 PUNCTUAL PAYMENTS
Punctually pay all principal, interest, fees and other liabilities due
under any of the Loan Documents at the times and place and in the manner
specified therein.
6.2 ACCOUNTING RECORDS
Keep accurate books and records of its financial affairs sufficient to
permit the preparation of financial statements therefrom in accordance with
GAAP.
6.3 FINANCIAL STATEMENTS AND REPORTS
Provide to Lender all of the following, in form and detail reasonably
satisfactory to Lender and with sufficient copies for distribution to Lender:
(i) as soon as available but not later than 90 days after and
as of the end of each fiscal year, reviewed financial statements of
Borrower, prepared in accordance with GAAP and prepared by an
independent certified public accountant acceptable to Lender, together
with such accountant's report with respect thereto;
(ii) as soon as available but not later than 30 days after and
as of the end of each month, financial statements of Borrower prepared
in accordance with GAAP (subject to normal year-end adjustments and, if
Borrower so elects, without footnotes) together with a comparison of
Borrower's financial condition for such month and year-to-date with the
corresponding month and year-to-date in the immediately preceding
fiscal year;
(iii) contemporaneously with the delivery of each financial
statement required hereby, a certificate of Borrower's chief executive
officer substantially in the form of Exhibit B attached hereto (A)
certifying that such financial statements fairly present in all
material respects Borrower's balance sheet as of the end of such
month/year and income and cash flow for such month/year and
year-to-date (subject to normal year-end adjustments), and (B) stating
that no Default existed at any time during the period covered by such
statement, except for those events or conditions, if any, described in
such certificate in reasonable detail together with a statement of any
action taken or proposed to be taken with respect thereto;
(iv) not later than March 30 of each year, or sooner if
available, Borrower shall furnish to Lender detailed projections for
Borrower's current fiscal year setting forth projected income, cash
flow and borrowing availability under this Agreement for each quarter
and the projected balance sheet as of the end of each quarter, together
with a certificate of Borrower's chief executive officer setting forth
the assumptions on which such projections are based and certifying
that, in the judgment of such officer, such assumptions are reasonable
based on careful consideration and on the information known to Borrower
at the time such projections were prepared;
(v) not later than 20 days after and as of the end of each
month: (i) a report of the aging (based on due date) of Borrower's
accounts payable as of the end of the preceding month in the following
categories: current; 1-30 days past due; 31-60 days past due, 61-90
days past due and over 90 days past due; and (ii) a report of the aging
(based on due date) of Borrower's accounts as of the end of the
preceding month in the following categories: current; 1-30 days past
due; 31-60 days past due, 61-90 days past due and over 90 days past
due; and
(vi) from time to time such other information as Lender may
reasonably request.
6.4 COMPLIANCE
Preserve and maintain all licenses, Permits, governmental approvals,
rights, privileges, franchises, intellectual property and general intangibles
necessary for the conduct of its business and comply in all material respects,
with all Governmental Rules, contractual obligations, commitments, instruments,
licenses, Permits and franchises, other than such failure to preserve or
maintain or noncompliance the consequences of which in the aggregate are not
reasonably likely to have a Material Adverse Effect.
6.5 INSURANCE
(a) Maintain with responsible insurance companies reasonably acceptable
to Lender insurance with respect to its properties and business (including
business interruption and extra expense endorsements) against such casualties
and contingencies and of such types, with such deductibles and in such amounts
as is customary in the case of similar businesses. Such insurance shall contain
a lender's loss payable endorsement acceptable to Lender and shall name Lender
as an additional named insured. The policies or a certificate thereof signed by
the insurer shall be delivered to Lender within five Business Days after the
issuance or renewal of the policies to Borrower. Each such policy shall provide
that such policy may not be amended (except to increase coverage) or canceled
without thirty days prior written notice to Lender. At least fifteen days before
the expiration of a policy, Borrower shall deliver to Lender a binder (or other
evidence reasonably acceptable to Lender) indicating that such policy has been
renewed or that a substitute for such policy will be issued effective upon the
expiration of such policy. If Borrower fails to do so, Lender may (but shall not
be required to) procure such insurance and add the cost thereof to the Loans.
(b) Maintain in full force and effect such liability and other
insurance with respect to its activities as may be reasonably required by
Lender. Such liability insurance shall name Lender as an additional insured with
respect to the activities of Borrower and shall be provided by insurer(s)
acceptable to Lender.
6.6 FACILITIES
Keep all properties useful or necessary to its business in good repair
and condition, and from time to time make necessary repairs, renewals and
replacements thereto so that such property shall be fully and efficiently
preserved and maintained.
6.7 TAXES AND OTHER LIABILITIES
Pay and discharge when due any and all indebtedness, obligations,
assessments and taxes, both real or personal, including without limitation
Federal and state income taxes and state and local property taxes and
assessments, except such as Borrower may in good faith contest or as to which a
bona fide dispute may arise, and for which Borrower has made provision for
adequate reserves in accordance with GAAP.
6.8 LITIGATION
Promptly give notice in writing to Lender of any litigation pending or
threatened against it with a claim in excess of $50,000.
6.9 NOTICE TO LENDER
(a) Promptly (but in no event more than two Business Days after the
occurrence of each such event or matter) give written notice to Lender in
reasonable detail of: (i) the occurrence of any Default; (ii) any termination or
cancellation of any insurance policy which Borrower is required to maintain,
unless such policy is replaced without any break in coverage with an equivalent
or better policy; (iii) any uninsured or partially uninsured loss or losses
through liability or property damage, or through fire, theft or any other cause
affecting the property of Borrower in excess of an aggregate of $50,000 during
any twelve month period; (iv) any change in the organizational structure of
Borrower; or (v) the occurrence of any event that could reasonably be expected
to have a Material Adverse Effect.
(b) As soon as possible and in any event within ten days after Borrower
knows or has reason to know that any "reportable event" (as defined in Title IV
of ERISA) that triggers an obligation to file a notice with the PBGC with
respect to any Plan has occurred, deliver to Lender a statement of the President
or chief financial officer of Borrower setting forth details as to such
reportable event and the action which Borrower proposes to take with respect
thereto, together with a copy of the notice of such reportable event to the
PBGC.
(c) Promptly, upon receipt (but in no event more than two Business Days
after receipt) of a notice by Borrower, any affiliate of Borrower or any
administrator of any Plan that the PBGC has instituted proceedings to terminate
a Plan or to appoint a trustee to administer a Plan, provide to Lender a copy of
such notice.
6.10 CONDUCT OF BUSINESS
Except as otherwise permitted by this Agreement, (a) conduct its
business in the ordinary course and (b) use its reasonable efforts in the
ordinary course and consistent with past practice to (i) preserve its business
and the goodwill and business of the customers, advertisers, suppliers and
others with whom it has business relations, (ii) keep available the services and
goodwill of its present employees, and (iii) preserve all rights, Permits,
licenses, approvals, privileges, registered patents, trademarks, trade names,
copyrights and service marks and other intellectual property with respect to its
business.
6.11 PRESERVATION OF CORPORATE EXISTENCE, ETC.
Preserve and maintain its corporate existence, rights (charter and
statutory) and material franchises, licenses, permits, intellectual property and
general intangibles, unless the failure to so preserve and maintain is not
reasonably likely to have a Material Adverse Effect.
6.12 ACCESS
At any reasonable time and from time to time upon at least two Business
Days prior notice from Lender (unless a Default shall have occurred and be
continuing, in which case no prior notice is necessary), permit Lender and/or
any agents or representatives thereof, to (i) examine and make copies of and
abstracts from Borrower's records and books of account, (ii) visit Borrower's
properties, (iii) discuss Borrower's affairs, finances and accounts with any of
its officers or directors who may then be reasonably available, (iv) communicate
directly with Borrower's independent certified public accountants, (v) arrange
for verification of Borrower's accounts under reasonable procedures directly
with the obligors thereon or by other methods, and (vi) examine and inspect its
assets. Borrower shall authorize its independent certified public accountants to
disclose to Lender any and all financial statements and other information of any
kind, including, without limitation, copies of any management letter, work
papers or the substance of any oral information that such accountants may have
with respect to Borrower's business, financial condition, results of operations
or other affairs. Borrower shall execute and deliver at the request of Lender
such instruments as may be necessary for Lender to obtain such information
concerning the business of Borrower as Lender may require from accountants,
service bureaus or others having custody of or maintaining records or assets of
Borrower, provided that the foregoing shall not (and is not intended to) require
Borrower to take any action that would constitute a waiver of Borrower's
attorney/client privilege with any of Borrower's attorneys..
6.13 PERFORMANCE AND COMPLIANCE WITH OTHER COVENANTS
Perform and observe all the terms, covenants and conditions required to
be performed and observed by it under its contractual obligations (including,
without limitation, to pay all rent and other charges payable under any lease
and all debts and other obligations as the same become due), and do all things
necessary to preserve and to keep unimpaired its rights under such contractual
obligations, other than such failures the consequences of which in the aggregate
are not reasonably likely to have a Material Adverse Effect.
6.14 FISCAL YEAR; ACCOUNTING PRACTICES
Notify Lender at least 45 days in advance of any action Borrower
intends to take to change (i) its fiscal year or (ii) its method of accounting,
or any accounting practice used by it, or the application of GAAP in a manner
inconsistent with the financial statements previously delivered by it to Lender.
6.15 ENVIRONMENTAL
(a) Promptly give notice to Lender upon obtaining knowledge of (i) any
claim, injury, proceeding, investigation or other action, including a request
for information or a notice of potential environmental liability, by or from any
Governmental Authority or any third-party claimant that could result in Borrower
incurring Environmental Liabilities and Costs or (ii) the discovery of any
Release at, on, under or from any real property, facility or equipment owned or
leased by Borrower in excess of reportable or allowable standards or levels
under any applicable Environmental Law, or in any manner or amount that could
reasonably be expected to result in Borrower incurring Environmental Liabilities
and Costs.
(b) Upon discovery of the presence on any property owned or leased by
Borrower of any Contaminant that reasonably could be expected to result in
Environmental Liabilities and Costs, take all Remedial Action required by
applicable Environmental Law.
6.16 LIENS
Keep the Collateral free and clear of all Liens, except Permitted
Liens.
6.17 FURTHER ASSURANCES
At Lender's request at any time and from time to time, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Loan Documents,
at Borrower's expense.
ARTICLE VII. NEGATIVE COVENANTS
Borrower covenants that so long as Lender remains committed to extend
credit to Borrower pursuant to the terms hereof and until performance and
payment in full, in cash, of all Obligations, Borrower will not:
7.1 LIENS
Create or suffer to exist any Lien upon or with respect to any of its
properties, whether now owned or hereafter acquired, or assign any right to
receive income, except Permitted Liens.
7.2 INDEBTEDNESS
Create or suffer to exist any Indebtedness except:
(a) the Obligations;
(b) current liabilities in respect of taxes, assessments and
governmental charges or levies incurred, or liabilities for labor, materials,
inventory, services, supplies and rentals incurred, or for goods or services
purchased, in the ordinary course of business consistent with industry practice
in respect of arm's length transactions and the past practice of Borrower;
(c) Indebtedness of Borrower referenced on Section 7.2 of the
Disclosure Schedule and all renewals, extensions, refinancing or refunding of
such Indebtedness in a principal amount which does not exceed the principal
amount outstanding immediately before such refinancing, together with all
prepayment fees, penalties and expenses in respect of the Indebtedness being
renewed, extended, refinanced or refunded, provided each such renewal,
extension, refinancing or refunding is on terms and conditions no less favorable
to the creditors than the Indebtedness being renewed, extended, refinanced or
refunded;
(d) purchase money Indebtedness (including capital leases) to finance
the purchase of fixed assets (including equipment); provided that (i) the total
of all such Indebtedness shall not exceed an aggregate principal amount of
$___________ at any one time outstanding (in addition to any such Indebtedness
referred to in Section 7.2(c)); (ii) such Indebtedness when incurred shall not
exceed the purchase price of the assets financed; and (iii) no such Indebtedness
shall be refinanced for a principal amount in excess of the principal balance
outstanding thereon at the time of such refinancing;
(e) Indebtedness subordinated in writing to the Obligations on terms
acceptable to Lender in favor of the prior payment in full in cash of the
Obligations;
(f) Indebtedness to the Senior Lender provided that the principal
amount thereof does not exceed $1,500,000 outstanding at any time; (g)
Indebtedness secured by Permitted Liens; and (h) In addition to all other
Indebtedness permitted by this Agreement, aggregate Indebtedness not to exceed
at any one time outstanding $______.
7.3 RESTRICTED PAYMENTS, REDEMPTIONS
(a) Declare or make any dividend payment or other distribution of
assets, properties, cash, rights, obligations or securities on account or in
respect of any of its Stock or Stock Equivalents except dividends paid by
Borrower solely in Stock or Stock Equivalents of Borrower;
(b) purchase, redeem or otherwise acquire for value any of
Borrower's Stock or Stock Equivalents; or
(c) prepay or redeem any Indebtedness that is subordinated to the
Obligations or make any payment in respect of such Indebtedness at any time that
a Default is continuing or would be caused by such payment.
7.4 MERGERS, STOCK ISSUANCES, SALE OF ASSETS, ETC.
(a) Merge or consolidate with any Person or acquire all or
substantially all of the Stock or Stock Equivalents of any Person, except for
(i) any such merger, consolidation, or acquisition in which the Stock or Stock
Equivalents are acquired in exchange for, or out of the cash proceeds of the
substantially concurrent sale of, new common or preferred equity of Borrower;
(b) Acquire all or substantially all of (i) the assets of any Person or
(ii) the assets constituting the business of a division, branch or other unit
operation of any Person, except for any such acquisition in which the assets are
acquired in exchange for, or out of the cash proceeds of the substantially
concurrent sale of, new common or preferred equity of Borrower; or
(c) Sell, convey, transfer, lease or otherwise dispose of any of its
assets or any interest therein to any Person, or permit or suffer any other
Person to acquire any interest in any of the assets of Borrower, except (i)
Permitted Liens, (ii) the sale or disposition of inventory in the ordinary
course of business and/or assets which have become obsolete or are replaced in
the ordinary course of business, (iii) equipment to the extent that such
equipment is exchanged for credit against the purchase price of similar
replacement equipment, or the proceeds of such sale are reasonably promptly
applied to the purchase price of such replacement equipment, and (iv) any other
assets or interest, provided that (A) at the time of any such sale, conveyance,
transfer or disposition, no Default shall exist or shall result from such
transaction, (B) at least 80% of the aggregate sales price from such sale,
conveyance, transfer or disposition shall be paid in cash, and (C) the aggregate
value of all assets so sold by Borrower shall not exceed in any fiscal year
$_____.
7.5 INVESTMENTS IN OTHER PERSONS
Directly or indirectly, make or maintain any loan or advance to any
other Person or own, purchase or otherwise acquire any Stock, Stock Equivalents,
other equity interest, obligations or other securities of, or otherwise invest
in, any other Person (any such transaction being an "Investment"), except:
(a) Investments in accounts, contract rights and chattel paper, notes
receivable and similar items arising in the ordinary course of business;
(b) incidental advances to employees of Borrower in the ordinary
course of business;
(c) Investments in direct obligations to the United States of America
or any agency thereof, banker's acceptances and certificates of deposit issued
by any commercial bank in the United States of America;
(d) Investments acquired in exchange for, or out of the cash proceeds
of the substantially concurrent sale of, new common or preferred equity of
Borrower; and
(e) In addition to the Investments permitted under this Agreement, any
other Investments to the extent that they do not exceed at any one time
outstanding $________.
7.6 CHANGE IN NATURE OF BUSINESS
Directly or indirectly engage in any business activity other than
contract manufacturing and new activities that are reasonably incidental to or
can reasonably be expected to facilitate such manufacturing.
7.7 GUARANTIES
Guarantee or become liable in any way as surety, endorser (other than
as endorser of negotiable instruments for deposit or collection in the ordinary
course of business), accommodation endorser or otherwise for, nor pledge or
hypothecate any assets of Borrower as security for, any liabilities or
obligations of any other Person except any of the foregoing required by this
Agreement.
7.8 PLANS
(a) Adopt or become obligated to contribute to any Plan subject to
Title IV or any multiemployer Plan or any other Plan subject to Section 412 of
the Internal Revenue Code (except for any such Plan listed on the Disclosure
Schedule on the Closing Date), (b) establish or become obligated with respect to
any new welfare benefit Plan, or modify any existing welfare benefit Plan, which
is reasonably likely to result in an increase of the present value of future
liabilities for post-retirement life insurance and medical benefits, or (c)
establish or become obligated to contribute to any new unfunded pension Plan, or
modify any existing unfunded pension Plan, which is reasonably likely to result
in an increase in the present value of future unfunded liabilities under all
such plans.
7.9 CANCELLATION OF INDEBTEDNESS OWED TO IT
Cancel any claim or Indebtedness owed to it except for legitimate
business purposes in the reasonable judgment of Borrower and in the ordinary
course of business.
7.10 ENVIRONMENTAL
Dispose, or permit any other Person to dispose, of any Contaminant by
placing it in or on the ground or waters of any property owned or leased by
Borrower, except in material compliance with Environmental Law or the terms of
any Permit, unless such action(s), in the aggregate, have no reasonable
likelihood of having a Material Adverse Effect.
7.11 TRANSACTIONS WITH AFFILIATES
Enter into any transaction directly or indirectly with or for any
affiliate except in the ordinary course of business on a basis no less favorable
to such affiliate than would be obtained in a comparable arm's length
transaction with a Person not an affiliate involving assets that are not
material to the business and operations of Borrower.
7.12 NEW LOCATION; NAME CHANGE
Open any new location or change its name unless (i) Borrower gives
Lender (a) 30 days prior written notice of the intended name change, (b) 30 days
prior written notice of the intended opening of such new location, and (ii)
Borrower executes and delivers to Lender such agreements, documents and
instruments as Lender deems reasonably necessary or desirable to protect its
interests in the Collateral, including, without limitation, UCC-1 financing
statements.
ARTICLE VIII. EVENTS OF DEFAULT
8.1 EVENTS OF DEFAULT
The occurrence of any of the following shall constitute an "Event of
Default" under this Agreement:
(a) Borrower shall fail to pay when due any amount payable under
any of the Loan Documents;
(b) any financial statement or certificate furnished to Lender in
connection with, or any representation or warranty made by Borrower under, any
of the Loan Documents shall prove to be false or misleading in any material
respect when furnished or made;
(c) any default by Borrower in the performance of or compliance with
any obligation, agreement or other provision contained in Sections 6.5, 6.11,
7.2, 7.3, 7.4, 7.5, 7.7, and 7.12;
(e) any default by Borrower in the performance of or compliance with
any obligation, agreement or other provision contained in any Loan Document
(other than those referred to in subsections (a) through (c) above) for ten
Business Days after written notice thereof has been given to Borrower by Lender;
(f) any breach by Borrower in the payment or performance of any
obligation under the terms of any contract or instrument (other than any of the
Loan Documents) evidencing Indebtedness in excess of $100,000 if such breach has
not been cured to the satisfaction of the affected creditor or waived by such
creditor within any applicable cure period provided under the contract or
instrument;
(g) any judgment(s), order(s) or writ(s) in excess of an aggregate of
$100,000 is/are rendered or entered against Borrower, except any judgment for
which Borrower is fully insured (subject to standard deductibles) or except if
the enforcement of such judgment, order or writ has been stayed or the liability
thereon bonded in a manner and on terms reasonably satisfactory to Lender; or
the service of notice(s) of levy and/or of writ(s) of attachment or execution,
or other like process, against any of the assets of Borrower with respect to
obligations in excess of an aggregate of $100,000;
(h) Borrower shall become insolvent, or shall suffer or consent to or
apply for the appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally be unable to or fail to pay
its debts as they become due, or shall make a general assignment for the benefit
of creditors; Borrower shall file a voluntary petition in bankruptcy, or seek to
effect a plan or other arrangement with creditors or any other relief under the
Bankruptcy Code, or under any state or other Federal law granting relief to
debtors, whether now or hereafter in effect; or any involuntary petition or
proceeding pursuant to the Bankruptcy Code or any other applicable state or
other Federal law relating to bankruptcy, reorganization or other relief for
debtors is filed or commenced against Borrower and is not dismissed, stayed or
vacated within sixty days thereafter; Borrower shall file an answer admitting
the jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower shall be adjudicated a bankrupt, or an order for relief
shall be entered by any court of competent jurisdiction under the Bankruptcy
Code or any other applicable state or Federal law relating to bankruptcy,
reorganization or other relief for debtors;
(i) tax lien(s) (other than a Permitted Lien) greater than $50,000 in
the aggregate shall have been filed against Borrower or any of its property by
any federal, state, or municipal authority;
(j) if any of the following events occur: (a) any Plan incurs any
"accumulated funding deficiency" (as defined in ERISA) whether waived or not,
(b) Borrower or any affiliate engages in any "prohibited transaction" (as
defined in ERISA), (c) any Plan is terminated, (d) a trustee is appointed by an
appropriate United States district court to administer any Plan, or (e) the PBGC
institutes proceedings to terminate any Plan or to appoint a trustee to
administer any Plan;
(k) the dissolution or liquidation of Borrower, or Borrower or its
directors or stockholders shall take action seeking to effect the dissolution or
liquidation of Borrower; or
(l) there shall exist or occur any event or condition that Lender in
good faith believes impairs, or is substantially likely to impair, the prospect
of payment or performance by Borrower of any of the Obligations.
8.2 REMEDIES
(a) During the continuance of any Event of Default (other than an Event
of Default referred to in Section 8.1(h) hereof), Lender may by written notice
to Borrower, (i) terminate the obligations of Lender to extend any further
credit under any of the Loan Documents, and (ii) declare all indebtedness of
Borrower under the Loan Documents to be immediately due and payable without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by Borrower, and/or take such enforcement action as is
permitted under this Section 8.2. Upon the occurrence or existence of any Event
of Default described in Section 8.1(h) hereof, immediately and without notice,
(A) the obligations, if any, of Lender to extend any further credit under any of
the Loan Documents shall automatically cease and terminate, and (B) all
indebtedness of Borrower under the Loan Documents shall automatically become
immediately due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived by Borrower.
Borrower acknowledges that portions of the Collateral may be difficult to
preserve and dispose of and may be subject to complex maintenance and
management; accordingly, Lender shall have the widest possible latitude in the
exercise of its rights and remedies hereunder as to such portions of Collateral.
(b) During the continuance of an Event of Default, Lender, in addition
to any other rights and remedies contained in the Loan Documents, shall have all
of the rights and remedies of a secured party under the Code and all other
applicable law, all of which rights and remedies shall be cumulative and
nonexclusive to the extent permitted by law. Lender may cause the Collateral to
remain on Borrower's premises, at Borrower's expense, pending sale or other
disposition thereof. Lender shall have the right to conduct such sales on
Borrower's premises or elsewhere, at Borrower's expense, on such occasion(s) as
Lender may see fit, and Borrower, at Lender's request, will, at Borrower's
expense, assemble the Collateral and make it available to Lender at such
place(s) as Lender may reasonably designate from time to time. Any sale, lease
or other disposition by Lender of the Collateral, or any part thereof, may be
for cash or other value. Borrower shall execute and deliver, or cause to be
executed and delivered, such instruments, documents, assignments, deeds,
waivers, certificates and affidavits and take such further action as Lender
shall reasonably require in connection with such sale, and Borrower hereby
constitutes Lender as its attorney-in-fact to execute any such instrument,
document, assignment, deed, waiver, certificate or affidavit on behalf of
Borrower and in its name. At any sale of the Collateral, the Collateral to be
sold may be sold in one lot as an entirety or in separate lots as Lender may
determine. Lender shall not be obligated to make any sale of any Collateral if
it determines not to do so, regardless of the fact that notice of sale was
given. Lender may, without notice or publication, adjourn any public or private
sale or cause the sale to be adjourned from time to time by announcement at the
time and place fixed for sale, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. In case any sale of
Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by Lender until the sale price is paid, but Lender shall not incur
any liability if any purchaser fails to pay for any Collateral so sold and, in
case of any such failure, such Collateral may be sold again. At any public sale,
Lender (i) may bid for or purchase, free (to the extent permitted by law) from
any rights of redemption, stay or appraisal on the part of Borrower with respect
to the Collateral, the Collateral offered for sale, (ii) make payment on account
thereof by using any claim then due and payable to Lender from Borrower as a
credit against the purchase price, and (iii) upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to Borrower therefor.
(c) Lender is hereby granted a license and right to use, without charge
upon the occurrence and during the continuance of an Event of Default and until
the Obligations are fully and finally paid in cash, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks, advertising material or any property of a similar nature in
completing the production, advertising for sale and sale of any Collateral.
(d) Any notice required to be given by Lender with respect to any of
the Collateral which notice is given pursuant to Section 9.1 and deemed received
pursuant to Section 9.1 at least five Business Days before a sale, lease,
disposition or other intended action by Lender with respect to any of the
Collateral shall constitute fair and reasonable notice to Borrower of any such
action. A public sale in the following fashion shall be conclusively presumed to
be reasonable: (i) the sale is held in a county where any part of the Collateral
is located or in which Borrower has a place of business; (ii) the sale is
conducted by auction, but it need not be by a professional auctioneer; (iii) any
Collateral is sold as is and without any preparation for sale; and (iv) Borrower
is given notice of such public sale pursuant to the preceding sentence.
(e) Upon the occurrence and during the continuance of an Event of
Default, Lender shall have, with respect to Borrower's accounts, all rights and
powers to: (i) direct any and all account debtors to make all payments in
respect of such accounts directly to Lender or otherwise demand payment of any
or all of such accounts; (ii) enforce payment of any or all of such accounts by
legal proceedings or otherwise; (iii) exercise Borrower's rights and remedies
with respect to any actions or proceedings brought to collect such accounts;
(iv) sell or assign any such account upon such terms, for such amount and at
such time or times as Lender deems advisable; (v) settle, adjust, compromise,
extend or renew any such account; (vi) discharge or release any such accounts;
and (vii) prepare, file and sign Borrower's name on any proof of claim in
bankruptcy or any similar document against an account debtor, and to otherwise
exercise the rights granted herein.
(f) Lender shall have no obligation (i) to preserve any rights to the
Collateral against any Person, (ii) to make any demand upon or pursue or exhaust
any rights or remedies against Borrower or others with respect to payment of the
Obligations, (iii) to pursue or exhaust any rights or remedies with respect to
any of the Collateral or any other security for the Obligations, or (iv) to
marshal any assets in favor of Borrower or any other Person against or in
payment of any or all of the Obligations.
(g) Borrower shall pay to Lender on demand and as part of the
Obligations, all costs and expenses, including court costs and costs of sale,
incurred by Lender in exercising any of its rights or remedies hereunder, and
all costs and expenses incurred in connection with any review of any part of the
Collateral.
8.3 LENDER AS BORROWER'S ATTORNEY
Borrower hereby appoints Lender or any other Person whom Lender may
designate, as Borrower's attorney, with power during the continuation of an
Event of Default: to indorse Borrower's name on any checks, notes, acceptances,
money orders, drafts or other forms of payment or security that may come into
Lender's possession; to sign Borrower's name on any invoice or xxxx of lading
relating to any account, on drafts against customers, on schedules and
assignments of accounts, on notices of assignment, financing statements and
other public records, and on notices to customers; to notify the post office
authorities to change the address for delivery of Borrower's mail to an address
designated by Lender; to receive, open and process all mail addressed to
Borrower; to ask for, demand, xxx for, collect, receive, receipt and give
aquittance for any and all moneys due or to become due with respect to any
Collateral; to settle, compromise, prosecute or defend any action, claim or
proceeding with respect to Collateral; to sell, assign, pledge, transfer and
make any agreement with respect to or otherwise deal with the Collateral; and to
do all things necessary to perfect Lender's security interest in the Collateral,
to preserve and protect the Collateral and to otherwise carry out this
Agreement; provided, however, that nothing contained in this Section 8.3 will be
construed as requiring or obligating Lender to take any action. Provided Lender
acts in a reasonable manner, Borrower ratifies and approves all acts of such
attorney, and neither Lender nor the attorney will be liable for any acts or
omissions nor for any error of judgment or mistake of fact or law. This power
being coupled with an interest is irrevocable until the Obligations have been
fully satisfied and indefeasibly paid in cash or the financing arrangements
between Lender and Borrower are terminated, whichever shall later occur.
ARTICLE IX. MISCELLANEOUS
9.1 NOTICES
Any notice required or permitted to be given hereunder will be
in writing, will 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 will be deemed to have been validly
given (i) five days following deposit in the United States mail, with proper
first-class postage prepaid, (ii) the next Business Day after notice was
delivered to a regularly scheduled overnight delivery carrier, or (iii) upon
receipt of notice given by fax, mailgram, telegram, telex or personal delivery:
To Borrower: Servatron, Inc.
East 00000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxxxx
Fax No.:
To Lender: Itron, Inc.
0000 X. Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxxx
Fax No.: _____________
9.2 COSTS, EXPENSES, ATTORNEYS' FEES
Borrower shall pay immediately upon demand the full amount of all
payments, advances, charges, costs and expenses, including reasonable attorneys'
fees (whether incurred at the trial or appellate level, in an arbitration
proceeding, in bankruptcy, (including, without limitation, any adversary
proceeding, contested matter or motion) or otherwise), incurred by Lender in
connection with (a) the negotiation and preparation of the Loan Documents, (b)
the enforcement, preservation or protection (or attempted enforcement,
preservation or protection) of Lender's rights, including, without limitation,
periodic collateral examinations, and/or the collection of any amounts which
become due under any of the Loan Documents, and (c) the prosecution or defense
of any action in any way related to any of the Loan Documents, including without
limitation, any action for declaratory relief, and including any of the
foregoing incurred in connection with any bankruptcy proceeding relating to
Borrower.
9.3 INDEMNIFICATION
To the fullest extent permitted by law, Borrower hereby agrees to
protect, indemnify, defend and hold harmless each of Lender and its officers,
directors, shareholders, employees, agents, attorneys and affiliates
(collectively, "Indemnitees") from and against any liabilities, losses, damages
or expenses of any kind or nature and from any suits, claims or demands
(including in respect of or for reasonable attorneys' fees (whether incurred at
the trial or appellate level, in an arbitration proceeding, in bankruptcy
(including, without limitation, any adversary proceeding, contested matter or
motion) or otherwise) and other expenses, including the allocated costs and
expenses of internal counsel) arising on account of or in connection with any
matter or thing or action or failure to act by Indemnitees, or any of them,
arising out of or relating to this Agreement, any other Loan Document, including
without limitation any use by Borrower of any Loan proceeds, except to the
extent such liability arises from the willful misconduct or gross negligence of
the Indemnitees. Upon receiving knowledge of any suit, claim or demand asserted
by a third party that Lender believes is covered by this indemnity, such
Indemnitee shall give Borrower notice of the matter and an opportunity to defend
it, at Borrower's sole cost and expense, with legal counsel satisfactory to
Lender. Lender may also require Borrower to defend the matter. Any failure or
delay of Lender to notify Borrower of any such suit, claim or demand shall not
relieve Borrower of its obligations under this Section 9.3, but shall reduce
such obligations to the extent of any increase in those obligations caused
solely by an unreasonable failure or delay in providing such notice. This
Section 9.3 shall survive the payment in full and performance of all of
Borrower's other Obligations.
9.4 SUCCESSORS AND ASSIGNS
(a) The Loan Documents shall be binding upon and inure to the benefit
of the successors and assigns of the parties; provided, however, that Borrower
may not assign or transfer its interest hereunder. Lender reserves the right to
sell, assign, transfer, negotiate or grant participations in all or any part of,
or any interest in, Lender's rights and benefits under each of the Loan
Documents.
(b) Without limitation, Lender may disclose the Loan Documents, and any
financial or other information relating to Borrower, to its affiliates, auditors
and legal counsel, to any potential participant or assignee and to any
Governmental Authority to the extent that such disclosure is required by law and
as required in order to comply with a subpoena or order issued by a court of
competent jurisdiction or by a legislative or regulatory body.
9.5 SETOFF
In addition to any of Lender's others rights and remedies, Lender shall
have the right without prior notice to Borrower, any such notice being expressly
waived by Borrower to the extent permitted by applicable law, during the
continuance of an Event of Default to setoff and apply against any indebtedness,
whether matured or unmatured, of Borrower to Lender any amount owing from Lender
or any affiliate thereof to Borrower at any time during the continuation of an
Event of Default. This right of setoff may be exercised by Lender against
Borrower or against any trustee in bankruptcy, debtor in possession, assignee
for the benefit of creditors, receiver or execution, judgment or attachment
creditor of Borrower or against anyone else claiming through or against Borrower
or such trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of setoff shall not have been exercised
by Lender prior to the occurrence of an Event of Default. Lender agrees promptly
to notify Borrower after any such setoff and application made by Lender,
provided that the failure to give such notice shall not affect the validity of
such setoff and application.
9.6 NO WAIVER; CUMULATIVE REMEDIES
No failure on the part of Lender to exercise, and no delay in
exercising, any right, power, privilege or remedy under any Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power, privilege or remedy preclude any other or further exercise
thereof or the exercise of any other right, power, privilege or remedy. The
rights and remedies under the Loan Documents are cumulative and not exclusive of
any rights, powers, privileges and remedies that may otherwise be available to
Lender.
9.7 ENTIRE AGREEMENT; AMENDMENT
The Loan Documents constitute the entire agreement between Borrower and
Lender with respect to the Loans and supersede all prior negotiations,
communications, discussions, correspondence and agreements concerning the
subject matter hereof. The Loan Documents may be amended or modified only by a
written document executed by the parties hereto.
9.8 NO THIRD PARTY BENEFICIARIES
This Agreement is made and entered into for the sole protection and
benefit of the parties hereto and their respective permitted successors and
assigns, and no other person or entity shall be a third party beneficiary of, or
have any direct or indirect cause of action or claim in connection with, this
Agreement or any other of the Loan Documents to which it is not a party.
9.9 TIME
Time is of the essence of each and every provision of this Agreement
and each other of the Loan Documents.
9.10 SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision or any remaining provisions of this Agreement.
9.11 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Washington.
9.12 WAIVER OF JURY TRIAL
EACH OF BORROWER AND LENDER, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION IN ANY WAY ARISING OUT OF
OR RELATING TO THIS AGREEMENT, ANY OTHER OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS OR EVENTS REFERENCED HEREIN OR THEREIN OR CONTEMPLATED HEREBY OR
THEREBY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND/OR ANY OTHER OF THE LOAN DOCUMENTS. A COPY
OF THIS SECTION MAY BE FILED WITH ANY COURT AS WRITTEN EVIDENCE OF THE WAIVER OF
THE RIGHT TO TRIAL BY JURY AND THE CONSENT TO TRIAL BY COURT.
9.13 COUNTERPARTS
This Agreement may be executed in any number of identical counterparts,
any set of which signed by all the parties hereto shall be deemed to constitute
a complete, executed original for all purposes.
9.14 WASHINGTON STATUTORY NOTICE
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR
FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
SERVATRON, INC. ITRON, INC.
By: /s/ Xxxxx Xxxxxxxxx By: /s/ Xxxxx X. Xxxxxxxxx
Title: President Title: CFO
