LOAN AGREEMENT (EQUIPMENT)
Among
GE CAPITAL PUBLIC FINANCE, INC.,
as Lender,
ARKANSAS DEVELOPMENT FINANCE AUTHORITY,
as Issuer,
and
QUAIL PIPING PRODUCTS, INC.,
as Borrower
Dated as of November 1, 1997
This instrument constitutes a security agreement
under the Arkansas Uniform Commercial Code.
LOAN AGREEMENT (EQUIPMENT)
Lender: GE Capital Public Finance, Inc.
Suite 470
0000 Xxxxxxxxxx Xxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Issuer: Arkansas Development Finance Authority
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Borrower: Quail Piping Products, Inc. Asahi/America, Inc.
0000 Xxxxx Xxxxxxxxxx Xxxxxx 00 Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000 Xxxxxx, Xxxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
THIS LOAN AGREEMENT (Equipment) dated as of November 1, 1997 (this
"Agreement") among GE Capital Public Finance, Inc., a Delaware corporation, as
lender (with its successors and assigns, "Lender"), Arkansas Development Finance
Authority, a body politic and corporate and public instrumentality duly
organized and validly existing under the laws of the State of Arkansas (the
"State"), as issuer ("Issuer"), and Quail Piping Products, Inc., a Massachusetts
corporation, as borrower ("Borrower").
WHEREAS, Issuer is authorized and empowered under the laws of the State,
including Xxx 0000 of 1985, as amended (the "Act"), to enter into loan
agreements, contracts and other instruments and documents necessary or
convenient to obtain loans for the purpose of facilitating the financing of
certain projects as described in the Act; and
WHEREAS, in furtherance of the purposes of the Act, Issuer proposes to
finance all or a portion of the acquisition and installation of the Equipment
(as hereinafter defined) by Borrower pursuant to this Agreement by obtaining a
loan from Lender and lending the proceeds thereof to Borrower; and
WHEREAS, Borrower proposes to borrow the proceeds of the loan made by
Lender to Issuer upon the terms and conditions set forth herein to finance the
acquisition and installation of the Equipment; and
WHEREAS, Borrower shall make Loan Payments (as hereinafter defined)
directly to Lender as assignee of Issuer; and
WHEREAS, this Agreement shall not be deemed to constitute a debt or
liability or moral obligation of the State or any political subdivision thereof,
or a pledge of the faith and credit or taxing power of the State or any
political subdivision thereof, but shall be a special obligation payable solely
from the Loan Payments payable hereunder by Borrower to Lender as assignee of
Issuer;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, and in consideration of the premises contained in this
Agreement, Lender, Issuer and Borrower agree as follows:
ARTICLE I
DEFINITIONS AND EXHIBITS
Section 1.01. Definitions. The following terms used herein will have the
meanings indicated below unless the context clearly requires otherwise:
"Acquisition Costs" means the contract price paid or to be paid to Vendors
or reimbursed to Borrower for any portion of the Equipment, including
administrative, engineering, legal, financial, costs of issuance hereof and
other costs incurred by Lender, Issuer, Borrower, Escrow Agent and Vendors in
connection with the acquisition, installation and financing by Lender of such
Equipment, which Acquisition Costs are set forth in Exhibit A hereto.
"Agreement" means this Agreement, including all exhibits hereto, as any of
the same may be supplemented or amended from time to time in accordance with the
terms hereof.
"Borrower" means Quail Piping Products, Inc., a Massachusetts corporation.
"Business Day" means a day other than a Saturday or Sunday on which banks
are generally open for business in New York, New York.
"Certificate of Acceptance" means a Certificate of Acceptance, in
substantially the form set forth as Exhibit B hereto, whereby Borrower
acknowledges receipt in good condition of particular items of Equipment
identified therein and confirms the date of delivery thereof and certain other
matters.
"Code" means the Internal Revenue Code of 1986, as amended, and United
States Treasury regulations promulgated thereunder.
"Default" means an event that, with giving of notice or passage of time or
both, would constitute an Event of Default as provided in Article XI hereof.
"Environmental Laws" has the meaning ascribed thereto in paragraph (h) of
Article V hereof.
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"Equipment" means the property identified in Exhibit A hereto, as amended
from time to time pursuant to Section 12.07 hereof, to be used in connection
with Borrower's operations (including, to the extent permitted pursuant to the
Code without jeopardizing the tax-exempt status of the Interest, certain items
originally financed through internal advances of Borrower in anticipation of
obtaining permanent financing through Issuer), together with all replacement
parts, additions, repairs, accessions and accessories incorporated therein
and/or affixed to such property.
"Escrow Agent" means National City Bank of Minneapolis, as escrow agent
under the Escrow Agreement, and its successors and assigns permitted under the
Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement dated as of November 1, 1997
among Lender, Issuer, Borrower and Escrow Agent relating to this Agreement.
"Escrow Fund" means the fund established and held by Escrow Agent pursuant
to the Escrow Agreement.
"Event of Taxability" means the Interest is or becomes includable in
Lender's gross income as the result of (i) any act or failure to act by Issuer
or Borrower or use of the proceeds of the Loan, (ii) a change in use of the
Equipment, (iii) any misrepresentation or inaccuracy in any of the
representations, warranties or covenants contained in this Agreement or the Tax
Regulatory Agreement by Issuer or Borrower, (iv) the enactment of any federal
legislation after the date of this Agreement or (v) the promulgation of any
income tax regulation or ruling by the Internal Revenue Service after the date
of this Agreement.
"Gross-Up Rate" means, with respect to any Interest payment (including
payments made prior to the Event of Taxability), the rate necessary to calculate
an additional payment in an amount sufficient such that the sum of the Interest
payment plus the additional payments would, after reduced by the federal tax
(including interest and penalties) actually imposed thereon, equal the amount of
the Interest payment.
"Guarantor" means Asahi/America, Inc., a Massachusetts corporation.
"Guaranty" means the Guaranty and Negative Pledge Agreement of even date
herewith from Guarantor for the benefit of Lender.
"Interest" means the portion of any payment from Issuer to Lender
designated as and comprising interest as shown in Exhibit A hereto.
"Issuer" means Arkansas Development Finance Authority, acting as issuer
under this Agreement.
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"Lender" means (i) GE Capital Public Finance, Inc., acting as lender under
this Agreement, (ii) any surviving, resulting or transferee corporation of GE
Capital Public Finance, Inc. and (iii) except where the context requires
otherwise, any assignee(s) of Lender.
"Loan" means the loan from Issuer to Borrower pursuant to this Agreement.
"Loan Payments" means the loan payments payable by Borrower pursuant to the
provisions of this Agreement as specifically set forth in Exhibit A hereto. As
provided in Article II hereof, Loan Payments shall be payable by Borrower
directly to Lender, as assignee of Issuer, in the amounts and at the times as
set forth in Exhibit A hereto.
"Loan Proceeds" means the total amount of money to be paid pursuant to
Section 2.02 hereof to Escrow Agent for deposit and application in accordance
with the Escrow Agreement.
"Prepayment Amount" means the amount which Borrower may or must from time
to time pay or cause to be paid to Lender as assignee of Issuer in order to
prepay the Loan, as provided in Article Section 2.07 hereof, such amounts being
set forth in Exhibit A hereto, together with accrued interest and all other
amounts due hereunder.
"Principal" means the portion of any Loan Payment designated as principal
in Exhibit A hereto.
"Purchase Agreements" means Borrower's purchase agreements with Vendors of
the Equipment.
"Real Estate Loan Agreement" means the Loan Agreement (Real Estate) of even
date herewith among Lender, Issuer and Borrower.
"State" means the State of Arkansas.
"Tax Regulatory Agreement" means the Tax Regulatory Agreement of even date
herewith among Borrower, Issuer and Lender, as such Tax Regulatory Agreement may
be amended from time to time in accordance with its terms.
"UCC" means the Uniform Commercial Code as adopted and in effect in the
State.
"Vendor" means the manufacturer or vendor of an item of Equipment, as well
as the agents or dealers of the manufacturer, from whom Borrower has purchased
or is purchasing items of Equipment.
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Section 1.02. Exhibits. The following exhibits are attached hereto and made
a part hereof:
Exhibit A: Form of Schedule of Equipment and Loan Payments, describing the
Equipment and setting forth the Loan Payments and Prepayment Amounts. Issuer
hereby authorizes Lender to insert in Exhibit A the serial or other identifying
numbers relating to the Equipment when available.
Exhibit B: Form of Certificate of Acceptance.
Exhibit C: Form of opinion of counsel to Borrower.
Exhibit D: Form of opinion of counsel to Issuer.
Exhibit E: Form of opinion of special tax counsel.
Section 1.03. Rules of Construction. (a) The singular form of any word used
herein, including the terms defined in Section 1.01 hereof, shall include the
plural, and vice versa. The use herein of a word of any gender shall include
correlative words of all genders.
(b) Unless otherwise specified, references to Articles, Sections and other
subdivisions of this Agreement are to the designated Articles, Sections and
other subdivision of this Agreement as originally executed. The words "hereof,"
"herein," "hereunder" and words of similar import refer to this Agreement as a
whole.
(c) The headings or titles of the several articles and sections shall be
solely for convenience of reference and shall not affect the meaning,
construction or effect of the provisions hereof.
ARTICLE II
FINANCING OF EQUIPMENT AND TERMS OF LOAN
Section 2.01. Acquisition of Equipment. Borrower either has ordered or
shall order the Equipment pursuant to one or more Purchase Agreements from one
or more Vendors. Borrower shall remain liable to the Vendor or Vendors in
respect of its duties and obligations in accordance with each Purchase Agreement
and shall bear the risk of loss with respect to any loss or claim relating to
any item of Equipment covered by any Purchase Agreement, and neither Lender nor
Issuer shall assume any such liability or risk of loss.
Section 2.02. Loan. Lender hereby agrees, subject to the terms and
conditions of this Agreement, to make a loan to Issuer in the amount of
$3,600,000; Issuer hereby agrees, subject to the terms and conditions of this
Agreement, to borrow such amount from Lender and to lend such amount to
Borrower; and Borrower hereby agrees to borrow such amount from Issuer.
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Upon fulfillment of the conditions set forth in Article III hereof, Lender shall
deposit the Loan Proceeds in the Escrow Fund to be held, invested and disbursed
as provided in the Escrow Agreement. Issuer's obligation to repay the loan from
Lender, and Borrower's obligation to repay the Loan, shall commence, and
interest shall begin to accrue, on the date that Loan Proceeds are disbursed to
Borrower on behalf of Issuer or deposited in the Escrow Fund.
Section 2.02. Interest. The principal amount of the loan from Lender to
Issuer and the Loan hereunder outstanding from time to time shall bear interest
(computed on the basis of actual days elapsed in a 360-day year) at the rate of
five and eighty-nine hundredths percent (5.89%). Interest accruing on the
principal balance of such loans outstanding from time to time shall be payable
as provided in Exhibit A and upon earlier demand in accordance with the terms
hereof or prepayment in accordance with Section 2.07 hereof. Upon the occurrence
of an Event of Taxability, Borrower shall, with respect to future interest
payments, begin making Loan Payments calculated at the Gross-Up Rate unless
Borrower has prepaid the Loan pursuant to Section 2.07(c) hereof. In addition,
Borrower shall make within thirty days after written demand of Lender a payment
to Lender sufficient to supplement prior Loan Payments to the Gross-Up Rate.
Section 2.04. Payments. Issuer shall pay the principal of, premium, if any
in accordance with Section 2.07 hereof, and interest on the loan from Lender to
Issuer, but only out of the amounts paid by Borrower pursuant to this Agreement.
Borrower shall pay to Lender, as assignee of Issuer, Loan Payments, in the
amounts and on the dates set forth in Exhibit A hereto. As security for its
obligation to pay the principal of, premium, if any in accordance with Section
2.07 hereof, and interest on the loan from Lender, Issuer assigns to Lender all
of Issuer's right to receive Loan Payments from Borrower hereunder, all of
Issuer's rights hereunder and all of Issuer's right, title and interest in and
to the Equipment, and Issuer irrevocably constitutes and appoints Lender and any
present or future officer or agent of Lender as its lawful attorney, with full
power of substitution and resubstitution, and in the name of Issuer or
otherwise, to collect the Loan Payments and any other payments due hereunder and
to xxx in any court for such Loan Payments or other payments, to exercise all
rights hereunder with respect to the Equipment, and to withdraw or settle any
claims, suits or proceedings pertaining to or arising out of this Agreement upon
any terms. Such Loan Payments and other payments shall be made by Borrower
directly to Lender, as Issuer's assignee, and shall be credited against Issuer's
payment obligations hereunder. No provision, covenant or agreement contained in
this Agreement or any obligation herein imposed on Issuer, or the breach
thereof, shall constitute or give rise to or impose upon Issuer a pecuniary
liability, a charge upon its general credit or taxing powers or a pledge of its
general revenues. In making the agreements, provisions and covenants set forth
in this Agreement, Issuer has not obligated itself except with respect to the
Equipment and the application of the Loan Payments to be paid by Borrower
hereunder. All amounts required to be paid by Borrower hereunder shall be paid
in lawful money of the United States of America in immediately available funds.
No recourse shall be had by Lender or Borrower for any claim based on this
Agreement or the Tax Regulatory Agreement against any director, officer,
employee or agent of Issuer alleging personal liability on the part of such
person, unless such claim is based on the willful dishonesty of or intentional
violation of law by such person.
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Section 2.05. Payment on Non-Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day which is not a Business Day, such
payment may be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of interest hereunder.
Section 2.06. Loan Payments To Be Unconditional. The obligations of
Borrower to make the Loan Payments required under this Article II and to make
other payments hereunder and to perform and observe the covenants and agreements
contained herein shall be absolute and unconditional in all events, without
abatement, diminution, deduction, setoff or defense for any reason, including
(without limitation) any failure of the Equipment to be delivered or installed,
any defects, malfunctions, breakdowns or infirmities in the Equipment or any
accident, condemnation, destruction or unforeseen circumstances. Notwithstanding
any dispute between Borrower and any of Issuer, Lender, any Vendor or any other
person, Borrower shall make all Loan Payments when due and shall not withhold
any Loan Payments pending final resolution of such dispute, nor shall Borrower
assert any right of set-off or counterclaim against its obligation to make such
payments required under this Agreement.
Section 2.07. Prepayments. (a) Borrower may, in its discretion, prepay the
Loan in whole at any time after the third anniversary of the date hereof by
paying the applicable Prepayment Amount; provided, however, that the applicable
premium for the privilege of prepayment used to calculate the Prepayment Amount
under this clause (a) may be reduced by 100 basis points as provided in Section
7.09 hereof but in no event to a percentage less than zero.
(b) Borrower shall prepay the Loan in whole or in part at any time pursuant
to Article IX hereof by paying the applicable Prepayment Amount, subject to
adjustment as provided in Article IX hereof.
(c) Borrower shall prepay the Loan in full immediately upon demand of
Lender after the occurrence and during the continuance of an Event of Default by
paying the applicable Prepayment Amount.
(d) Borrower may prepay the Loan in full at any time within 90 days after
the occurrence of an Event of Taxability by paying the applicable Prepayment
Amount plus an amount necessary to supplement the prior Loan Payments to the
Gross-Up Rate; provided, however, that if the Event of Taxability is the result
of an act or failure to act by Issuer, a determination that a representation or
warranty of Issuer was untrue in any material respect when made or a failure of
Issuer to comply with Article IV(n) hereof, the Prepayment Amount shall not
include any premium.
(e) The amounts due hereunder shall be repaid in part without premium with
funds remaining in the Escrow Fund upon termination of the Escrow Agreement as
provided in Sections 2.03 or 2.04 of the Escrow Agreement.
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Upon any prepayment in part of the Loan, the prepayment shall be applied
first to interest accrued thereon and next to the Principal portion of the Loan
Payments in the inverse order of maturity.
ARTICLE III
CONDITIONS PRECEDENT
Lender's agreement to make the loan to Issuer hereunder and to disburse the
Loan Proceeds shall be subject to the condition precedent that Lender shall have
received all of the following, each in form and substance satisfactory to
Lender:
(a) This Agreement, properly executed on behalf of Issuer and
Borrower, and each of the Exhibits hereto properly completed.
(b) The Tax Regulatory Agreement, properly executed on behalf of
Issuer and Borrower.
(c) The Escrow Agreement, properly executed on behalf of Issuer,
Lender and Escrow Agent.
(d) The Guaranty, properly executed on behalf of Guarantor.
(e) A certificate of the Clerk or an Assistant Clerk of Borrower,
certifying as to (i) the resolutions of the board of directors of Borrower,
authorizing the execution, delivery and performance of this Agreement, the
Escrow Agreement and the Tax Regulatory Agreement and any related
documents, (ii) the bylaws of Borrower, and (iii) the signatures of the
officers or agents of Borrower authorized to execute and deliver this
Agreement, the Escrow Agreement and the Tax Regulatory Agreement and other
instruments, agreements and certificates on behalf of Borrower.
(f) Currently certified copies of the Articles of Organization of
Borrower.
(g) A Certificate of Good Standing issued as to Borrower by the
Secretary of State of the state of Borrower's incorporation not more than
10 days prior to the date hereof.
(h) A certificate of the Clerk or an Assistant Clerk of Guarantor,
certifying as to (i) the resolutions of the board of directors of
Guarantor, authorizing the execution, delivery and performance of the
Guaranty and any related documents, (ii) the bylaws of Guarantor, and (iii)
the signatures of the officers or agents of Guarantor authorized to execute
and deliver the Guaranty and other instruments, agreements and certificates
on behalf of Guarantor.
(i) Currently certified copies of the Articles of Organization of
Guarantor.
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(j) A Certificate of Good Standing issued as to Guarantor by the
Secretary of State of the state of Guarantor's incorporation not more than
10 days prior to the date hereof.
(k) Certificates of the insurance required hereunder, containing a
lender's loss payable clause or endorsement in favor of Lender.
(l) A completed and executed Form 8038 or evidence of filing thereof
with the Secretary of Treasury.
(m) A resolution or evidence of other official action taken by or on
behalf of Issuer to authorize the transactions contemplated hereby.
(n) Evidence that the financing of the Equipment has been approved by
the "applicable elected representative" of Issuer after a public hearing
held upon reasonable notice.
(o) As applicable, financing statements executed by Borrower, as
debtor, and naming Issuer, as secured party, and Lender, as assignee,
and/or the original certificate of title or manufacturer's certificate of
origin and title application if any of the Equipment is subject to
certificate of title laws.
(p) Financing statements executed by Issuer, as debtor, and naming
Lender, as secured party.
(q) Current searches of appropriate filing offices showing that (i) no
state or federal tax liens have been filed and remain in effect against
Borrower, (ii) no financing statements have been filed and remain in effect
against Borrower relating to the Equipment except those financing
statements filed by Lender, (iii) Lender has duly filed all financing
statements necessary to perfect the security interest created pursuant to
this Agreement and (iv) Lender has duly filed all financing statements
necessary to perfect the transfer of Issuer's interest in this Agreement
and the Loan Payments.
(r) An opinion of counsel to Borrower and Guarantor, addressed to
Lender and Issuer, in the form attached hereto as Exhibit C.
(s) Evidence that each of the conditions contained in Article III of
the Real Estate Loan Agreement have been satisfied.
(t) An opinion of counsel to Issuer, addressed to Lender and Borrower,
in the form attached hereto as Exhibit D.
(u) An opinion of special tax counsel, addressed to Lender, in the
form attached hereto as Exhibit E.
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(v) Payment of Issuer's fees, commissions and expenses incurred in
connection with this Agreement and the transactions contemplated hereby.
(w) Any other documents or items reasonably required by Lender.
Lender's agreement to make the loan to Issuer hereunder, to disburse the
Loan Proceeds and to consider approval of any disbursement from the Escrow Fund
shall be subject to the further conditions precedent that on the date thereof:
(x) Lender shall have received each of the items required for a
disbursement pursuant to the Escrow Agreement;
(y) Lender shall have received in form and substance reasonably
satisfactory to Lender Vendor invoice(s) and/or xxxx(s) of sale relating to
the Equipment (unless a letter of credit with respect to such disbursement
has been provided pursuant to Section 2.02 of the Escrow Agreement) and, if
such invoices have been paid by Issuer or Borrower, evidence of payment
thereof and, if applicable, evidence of official intent to reimburse such
payment as required by the Code;
(z) the representations and warranties contained in Articles IV and V
hereof are correct in all material respects on and as of the date of such
disbursement as though made on and as of such date, except to the extent
that such representations and warranties relate solely to an earlier date;
and
(aa) no event has occurred and is continuing, or would result from
such loan to Issuer or the Loan which constitutes a Default, an Event of
Default or an Event of Taxability.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ISSUER
Issuer represents, warrants and covenants for the benefit of Lender and
Borrower, as follows:
(a) Issuer is a body politic and corporate and a public
instrumentality duly created and validly existing under the Constitution
and laws of the State.
(b) Issuer will exercise its best efforts to preserve and keep in full
force and effect its existence as a body corporate and politic.
(c) Issuer is authorized under the Constitution and laws of the State
to enter into this Agreement, the Escrow Agreement, the Tax Regulatory
Agreement and the transactions contemplated hereby and to perform all of
its obligations hereunder.
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(d) Issuer has duly authorized the execution and delivery of this
Agreement, the Escrow Agreement and the Tax Regulatory Agreement under the
terms and provisions of the resolution of its governing body or by other
appropriate official approval, and further represents, covenants and
warrants that all requirements have been met and procedures have occurred
in order to ensure the enforceability of this Agreement, the Escrow
Agreement and the Tax Regulatory Agreement against Issuer. Issuer has taken
all necessary action and has complied with all provisions of the Act,
including (without limitation) the making of the findings required by the
Act, required to make this Agreement, the Escrow Agreement and the Tax
Regulatory Agreement the valid and binding obligation of Issuer.
(e) The officer of Issuer executing this Agreement and any related
documents has been duly authorized to execute and deliver this Agreement,
the Escrow Agreement and the Tax Regulatory Agreement and such related
documents under the terms and provisions of a resolution of Issuer's
governing body, or by other appropriate official action.
(f) This Agreement, the Escrow Agreement and the Tax Regulatory
Agreement are legal, valid and binding obligations of Issuer, enforceable
in accordance with their respective terms, except to the extent limited by
bankruptcy, reorganization or other laws of general application relating to
or affecting the enforcement of creditors' rights.
(g) Issuer has assigned to Lender all of Issuer's rights in the
Equipment and this Agreement (except any indemnification payable to Issuer
pursuant to Section 7.06 hereof and notice to Issuer pursuant to Section
12.03 hereof) including the assignment of all rights in the security
interest granted to Issuer by Borrower.
(h) Issuer will not pledge, mortgage or assign this Agreement or its
duties and obligations hereunder to any person, firm or corporation, except
as provided under the terms hereof.
(i) None of the execution and delivery of this Agreement, the Escrow
Agreement or the Tax Regulatory Agreement, the consummation of the
transactions contemplated hereby or the fulfillment of or compliance with
the terms and conditions of this Agreement, the Escrow Agreement or the Tax
Regulatory Agreement violates any law, rule, regulation or order, conflicts
with or results in a breach of any of the terms, conditions or provisions
of any restriction or any agreement or instrument to which Issuer is now a
party or by which it is bound or constitutes a default under any of the
foregoing or results in the creation or imposition of any prohibited lien,
charge or encumbrance of any nature whatsoever upon any of the property or
assets of Issuer under the terms of any instrument or agreement.
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(j) There is no action, suit, proceeding, claim, inquiry or
investigation, at law or in equity, before or by any court, regulatory
agency, public board or body pending or, to the best of Issuer's knowledge,
threatened against or affecting Issuer, challenging Issuer's authority to
enter into this Agreement, the Escrow Agreement or the Tax Regulatory
Agreement or any other action wherein an unfavorable ruling or finding
would adversely affect the enforceability of this Agreement, the Escrow
Agreement or the Tax Regulatory Agreement or any other transaction of
Issuer which is similar hereto, or the exclusion of the Interest from gross
income for federal tax purposes under the Code, or would materially and
adversely affect any of the transactions contemplated by this Agreement.
(k) Issuer will submit or cause to be submitted to the Secretary of
the Treasury a Form 8038 (or other information reporting statement) at the
time and in the form required by the Code.
(l) The financing of the Equipment has been approved by the
"applicable elected representative" (as defined in Section 147(f) of the
Code) of Issuer after a public hearing held upon reasonable notice.
(m) Issuer will comply fully at all times with the Tax Regulatory
Agreement, and Issuer will not take any action, or omit to take any action,
which, if taken or omitted, respectively, would violate the Tax Regulatory
Agreement.
(n) Issuer will take no action that would cause the Interest to become
includable in gross income for federal income tax purposes under the Code
(including, without limitation, intentional acts under Treas. Reg. ss.
1.148-2(c) or consenting to a deliberate action within the meaning of
Treas. Reg. ss. 1.141-2(d)), and Issuer will take and will cause its
officers, employees and agents to take all affirmative actions legally
within its power necessary to ensure that the Interest does not become
includable in gross income of the recipient for federal income tax purposes
under the Code (including, without limitation, the calculation and payment
of any rebate required to preserve such exclusion).
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER
Borrower represents, warrants and covenants for the benefit of Lender and
Issuer, as follows:
(a) Borrower is a corporation duly organized, validly existing and in
good standing under the laws of The Commonwealth of Massachusetts, has
power to enter into this Agreement and by proper corporate action has duly
authorized the execution and delivery of this Agreement, the Escrow
Agreement and the Tax Regulatory Agreement. Borrower is in good standing
and is duly licensed or qualified to transact business in the
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State and in all jurisdictions where the character of the property owned or
leased or the nature of the business transacted by it makes such licensing
or qualification necessary.
(b) Borrower has been fully authorized to execute and deliver this
Agreement, the Escrow Agreement and the Tax Regulatory Agreement under the
terms and provisions of the resolution of its board of directors, or by
other appropriate official approval, and further represents, covenants and
warrants that all requirements have been met, and procedures have occurred
in order to ensure the enforceability of this Agreement, the Escrow
Agreement and the Tax Regulatory Agreement and this Agreement, the Escrow
Agreement and the Tax Regulatory Agreement have been duly authorized,
executed and delivered.
(c) The officer of Borrower executing this Agreement, the Escrow
Agreement and the Tax Regulatory Agreement and any related documents has
been duly authorized to execute and deliver this Agreement, the Escrow
Agreement and the Tax Regulatory Agreement and such related documents under
the terms and provisions of a resolution of Borrower's board of directors.
(d) This Agreement, the Escrow Agreement and the Tax Regulatory
Agreement constitute valid and legally binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms,
except to the extent limited by bankruptcy, reorganization or other laws of
general application relating to effecting the enforcement of creditors'
rights.
(e) The execution and delivery of this Agreement, the Escrow Agreement
and the Tax Regulatory Agreement, the consummation of the transactions
contemplated hereby and the fulfillment of the terms and conditions hereof
do not and will not violate any law, rule, regulation or order, conflict
with or result in a breach of any of the terms or conditions of the
articles of organization or bylaws of Borrower or of any corporate
restriction or of any agreement or instrument to which Borrower is now a
party and do not and will not constitute a default under any of the
foregoing or result in the creation or imposition of any liens, charges or
encumbrances of any nature upon any of the property or assets of Borrower
contrary to the terms of any instrument or agreement.
(f) To the best of Borrower's knowledge, the authorization, execution,
delivery and performance of this Agreement by Borrower do not require
submission to, approval of, or other action by any governmental authority
or agency, which action with respect to this Agreement has not been taken
and which is final and nonappealable.
(g) There is no action, suit, proceeding, claim, inquiry or
investigation, at law or in equity, before or by any court, regulatory
agency, public board or body pending or, to the best of Borrower's
knowledge, threatened against or affecting Borrower, challenging Borrower's
authority to enter into this Agreement, the Escrow Agreement or the Tax
Regulatory Agreement or any other action wherein an unfavorable ruling or
finding would adversely affect the enforceability of this Agreement, the
Escrow
13
Agreement or the Tax Regulatory Agreement or any other transaction of
Borrower which is similar hereto, or the exclusion of the Interest from
gross income for federal tax purposes under the Code, or would materially
and adversely affect any of the transactions contemplated by this
Agreement.
(h) The property at which the Equipment is located is properly zoned
for its current and anticipated use and the use of the Equipment will not
violate any applicable zoning, land use, environmental or similar law or
restriction the violation of which would have a material adverse effect on
Borrower. Borrower has all licenses and permits to use the Equipment.
Borrower has obtained all permits, licenses and other authorizations which
are required under federal, state and local laws relating to emissions,
discharges, releases of pollutants, contaminants, hazardous or toxic
materials, or wastes into ambient air, surface water, ground water or land,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants or hazardous or toxic materials or wastes ("Environmental
Laws") at the Borrower's facilities or in connection with the operation of
its facilities. Except as previously disclosed to Lender in writing,
Borrower and all activities of the Borrower at its facilities comply with
all Environmental Laws and with all terms and conditions of any required
permits, licenses and authorizations applicable to Borrower with respect
thereto the failure with which to comply would have a material adverse
effect on Borrower. Except as previously disclosed to Lender in writing,
Borrower is also in compliance with all limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules
and timetables contained in Environmental Laws or contained in any plan,
order, decree, judgment or notice of which Borrower is aware the failure
with which to comply would have a material adverse effect on Borrower.
Except as previously disclosed to Lender in writing, Borrower is not aware
of, nor has Borrower received notice of, any events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
interfere with or prevent continued compliance with, or which may give rise
to any liability under, any Environmental Laws.
(i) The Equipment is of the type authorized and permitted to be
financed pursuant to the Act.
(j) Borrower owns or will own the Equipment and intends to operate the
Equipment, or cause the Equipment to be operated, as a "project," within
the meaning of the Act, until the date on which all of the Loan Payments
have been fully paid or the applicable Prepayment Amount has been fully
paid.
(k) Borrower will not take any action, or permit any action within its
control to be taken on its behalf, that would cause the Interest to become
includable in gross income of the recipient for federal income tax purposes
under the Code (including, without limitation, intentional acts under
Treas. Reg. ss. 1.148-2(c) or deliberate action within the meaning of
Treas. Reg. ss. 1.141-2(d)), and Borrower will take and will cause its
officers, employees and agents to take all affirmative actions legally
within its power necessary to ensure that the Interest does not become
includable in gross income of the
14
recipient for federal income tax purposes under the Code (including,
without limitation, the calculation and payment of any rebate required to
preserve such exclusion).
(l) Borrower has heretofore furnished to Lender the audited financial
statement of Guarantor for Guarantor's fiscal years ended December 31,
1994, December 31, 1995 and December 31, 1996 and the unaudited financial
statement of Guarantor for the six months ended June 30, 1997, and those
statements fairly present the financial condition of Guarantor on the dates
thereof and the results of its operations and cash flows for the periods
then ended and were prepared in accordance with generally accepted
accounting principles. Since the date of the most recent financial
statements, there has been no material adverse change in the business,
properties or condition (financial or otherwise) of Guarantor.
(m) Borrower and Guarantor have paid or caused to be paid to the
proper authorities when due all federal, state and local taxes required to
be withheld by them. Borrower and Guarantor have filed all federal, state
and local tax returns which are required to be filed, and Borrower and
Guarantor have paid or caused to be paid to the respective taxing
authorities all taxes as shown on said returns or on any assessment
received by them to the extent such taxes have become due.
(n) Borrower has or will have good and absolute title to all Equipment
and all proceeds thereof, free and clear of all mortgages, security
interests, liens and encumbrances except for the security interest created
pursuant to this Agreement.
(o) All financial and other information provided to Lender by or on
behalf of Borrower or Guarantor in connection with Borrower's request for
the Loan contemplated hereby is true and correct in all material respects
and, as to projections, valuations or pro forma financial statements,
present a good faith opinion as to such projections, valuations and pro
forma condition and results.
(p) None of the Equipment is or will become a fixture on real estate.
None of the Equipment constitutes a replacement of, substitution for or
accessory to any property of Borrower subject to a lien of any kind.
Borrower owns the real property where the Equipment will be located subject
to no liens or encumbrances of any kind except for easements and similar
encumbrances that do not cover the Equipment or have a material adverse
effect on the use of such real property.
(q) Upon delivery and installation of the Equipment, Borrower will
provide to Issuer and Lender a completed and executed copy of the
Certificate of Acceptance attached hereto as Exhibit B.
(r) Borrower will aid and assist Issuer in connection with preparing
and submitting to the Secretary of the Treasury a Form 8038 (or other
applicable information reporting statement) at the time and in the form
required by the Code.
15
(s) Borrower will comply fully at all times with the Tax Regulatory
Agreement, and Borrower will not take any action, or omit to take any
action, which, if taken or omitted, respectively, would violate the Tax
Regulatory Agreement.
(t) Expenses for work done by officers or employees of Borrower in
connection with the Equipment will be included as an Acquisition Cost, if
at all, only to the extent (i) such persons were specifically employed for
such particular purpose, (ii) the expenses do not exceed the actual cost
thereof and (iii) such expenses are treated or capable of being treated
(whether or not so treated) on the books of Borrower as a capital
expenditure in conformity with generally accepted accounting principles
applied on a consistent basis.
(u) Any costs incurred with respect to that part of the Equipment paid
from the Loan Proceeds shall be treated or capable of being treated on the
books of Borrower as capital expenditures in conformity with generally
accepted accounting principles applied on a consistent basis.
(v) No part of the Loan Proceeds will be used to finance inventory or
rolling stock or will be used for working capital or to finance any other
cost not constituting an Acquisition Cost.
(w) No person other than Borrower is in occupancy or possession of any
portion of the real property where the Equipment is located.
(x) The Equipment is property of the character subject to the
allowance for depreciation under Section 167 of the Code.
ARTICLE VI
TITLE TO EQUIPMENT; SECURITY INTEREST
Section 6.01. Title to Equipment. Borrower will at all times protect and
defend, at its own cost and expense, its title from and against all claims,
liens and legal processes of creditors of Borrower, and keep all Equipment free
and clear of all such claims, liens and processes.
Section 6.02. Security Interest in Equipment. This Agreement is intended to
constitute a security agreement within the meaning of the UCC. As security for
Borrower's payment to Lender, as assignee of Issuer, of Loan Payments and all
other amounts payable to Lender hereunder or under the Real Estate Loan
Agreement, or any other obligation (whether direct or indirect and whether now
existing or hereafter arising), Borrower hereby grants to Issuer, and Issuer
hereby assigns to Lender, a security interest constituting a first lien on the
Equipment, all repairs, replacements, substitutions and modifications thereto or
thereof and all proceeds of the foregoing. Issuer and Borrower agree to execute
such additional documents, including financing statements, assignments,
affidavits, notices and similar instruments, in form satisfactory to Lender, and
take such other actions that Lender deems necessary or appropriate to establish
and
16
maintain the security interest created by this Section, and Issuer and Borrower
hereby designate and appoint Lender as their agent, and grant to Lender a power
of attorney (which is coupled with an interest), to execute on behalf of Issuer
and Borrower, as the case may be, such additional documents and to take such
other actions. If requested by Lender, Borrower shall obtain a landlord and/or
mortgagee's consent and waiver with respect to the property where the Equipment
is located. If requested by Lender, Borrower shall conspicuously xxxx the
Equipment with appropriate lettering, labels or tags, and maintain such
markings, so as clearly to disclose Lender's security interest in the Equipment.
Section 6.03. Change in Name or Corporate Structure of Borrower; Change in
Location of Borrower's Principal Place of Business. Borrower's chief executive
office is located at the address set forth above, and all of Borrower's records
relating to its business and the Equipment are kept at such location or at 00
Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx. Borrower hereby agrees to provide written
notice to Lender and Issuer of any change or proposed change in its name,
corporate structure, place of business or chief executive office or change or
proposed change in the location of the Equipment. Such notice shall be provided
at least 30 days in advance of the date that such change or proposed change is
planned to take effect. Borrower does business, and has done business, only
under its own name.
Section 6.04. Liens and Encumbrances to Title. Borrower shall not, directly
or indirectly, create, incur, assume or suffer to exist any mortgage, pledge,
lien, charge, encumbrance or claim on or with respect to the Equipment
(together, "Liens") other than the respective rights of Lender and Issuer as
herein provided. Borrower shall promptly, at its own expense, take such action
as may be necessary duly to discharge or remove any such Lien. Borrower shall
reimburse Lender for any expenses incurred by Lender to discharge or remove any
Lien.
Section 6.05. Personal Property. The parties hereby agree that the
Equipment is, and during the period this Agreement is in force will remain,
personal property and, when subjected to use by Borrower hereunder, will not be
or become fixtures; provided, however, that if contrary to the parties' intent
the Equipment is or may be deemed to be a fixture, Borrower shall cause filings
to be made with the applicable government officials or filing offices to create
and preserve for Lender as assignee of Issuer a perfected first priority
security interest in the Equipment.
Section 6.06. Assignment of Insurance. As additional security for the
payment and performance of Borrower's obligations hereunder, Borrower hereby
assigns to Lender, as assignee of Issuer, any and all moneys (including, without
limitation, proceeds of insurance and refunds of unearned premiums) due or to
become due under, and all other rights of Borrower with respect to, any and all
policies of insurance now or at any time hereafter covering the Equipment or any
evidence thereof or any business records or valuable papers pertaining thereto,
and Borrower hereby directs the issuer of any such policy to pay all such moneys
directly to Lender. Borrower hereby assigns to Lender, as assignee of Issuer,
any and all moneys due or to become due with respect to any condemnation
proceeding affecting the Equipment. At any time, whether before or after the
occurrence of any Event of Default, Lender may (but need not), in Lender's name
or in Borrower's name, execute and deliver proof of claim, receive all such
17
moneys, endorse checks and other instruments representing payment of such
moneys, and adjust, litigate, compromise or release any claim against the issuer
of any such policy or party in any condemnation proceeding. All such proceeds
received by Lender shall be applied as provided in Article IX hereof.
Section 6.07. Occupancy. (a) Borrower hereby irrevocably grants to Lender
the right to occupy the property where the Equipment is located (the "Premises")
at any time after the acceleration of all amounts due hereunder after occurrence
and during the continuance of an Event of Default.
(b) Lender may occupy the Premises only to hold, sell, store, liquidate,
realize upon or otherwise dispose of the Equipment and for other purposes that
Lender may in good xxxxx xxxx to be related or incidental purposes.
(c) The right of Lender to occupy the Premises shall cease and terminate
upon the earlier of (1) payment in full and discharge of all obligations of
Borrower and Issuer hereunder, and (2) final sale or disposition of all of the
Equipment and delivery of all such Equipment to purchasers; provided, however,
that in no event shall such right extend beyond a commercially reasonable time.
(d) Lender shall not be obligated to pay or account for any rent or other
compensation for the occupancy of the Premises. Borrower will pay, or reimburse
Lender for, all taxes, fees, duties, levies, charges and expenses at any time
incurred by or imposed upon Lender by reason of the execution, delivery,
existence, recordation, performance or enforcement of this Section.
Section 6.08. Agreement as Financing Statement. To the extent permitted by
applicable law, a carbon, photographic or other reproduction of this Agreement
or of any financing statements signed by Borrower is sufficient as a financing
statement in any state to perfect the security interests granted in this
Agreement.
ARTICLE VII
AFFIRMATIVE COVENANTS OF BORROWER
So long as the Loan shall remain unpaid, Borrower will comply with the
following requirements:
Section 7.01. Reporting Requirements. Borrower will deliver, or cause to be
delivered, to Lender each of the following, which shall be in form and detail
acceptable to Lender:
(a) as soon as available, and in any event within 120 days after the
end of each fiscal year of Guarantor, audited consolidated financial
statements of Guarantor and Borrower with the unqualified opinion of
independent certified public accountants selected by Borrower and
acceptable to Lender, which annual financial statements shall include the
consolidated balance sheet of Guarantor and Borrower as at the end of such
18
fiscal year and the related consolidated statements of income, retained
earnings and cash flows of Guarantor and Borrower for the fiscal year then
ended, all in reasonable detail and prepared in accordance with generally
accepted accounting principles applied on a basis consistent with the
accounting practices applied in the financial statements referred to in
Article V hereof, together with a certificate of the chief financial
officer of Guarantor stating that such financial statements have been
prepared in accordance with generally accepted accounting principles
applied on a basis consistent with the accounting practices reflected in
the annual financial statements referred to in Article V hereof and whether
or not such officer has knowledge of the occurrence of any Default or Event
of Default hereunder and, if so, stating in reasonable detail the facts
with respect thereto;
(b) as soon as available and in any event within 90 days after the end
of each fiscal quarter of Guarantor and Borrower, an unaudited/internal
consolidated balance sheet and consolidated statements of income and
retained earnings of Guarantor and Borrower as at the end of and for such
month and for the year to date period then ended, in reasonable detail and
stating in comparative form the figures for the corresponding date and
periods in the previous year, all prepared in accordance with generally
accepted accounting principles applied on a basis consistent with the
accounting practices reflected in the financial statements referred to in
Article V hereof and certified by the chief financial officer of Guarantor,
subject to year-end audit adjustments; and accompanied by a certificate of
that officer stating (i) that such financial statements have been prepared
in accordance with generally accepted accounting principles applied on a
basis consistent with the accounting practices reflected in the financial
statements referred to in Article V hereof, (ii) whether or not such
officer has knowledge of the occurrence of any Default or Event of Default
hereunder not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto, and (iii) all relevant
facts in reasonable detail to evidence, and the computations as to, whether
or not Guarantor and Borrower are in compliance with the financial
covenants contained in Section 7.10 hereof;
(c) immediately after the commencement thereof, notice in writing of
all litigation and of all proceedings before any governmental or regulatory
agency affecting Borrower or Guarantor of the type described in Article
V(g) hereof or which seek a monetary recovery against Borrower in excess of
$100,000 or Guarantor in excess of $500,000;
(d) as promptly as practicable (but in any event not later than five
Business Days) after an officer of Borrower obtains actual knowledge of the
occurrence of any event that constitutes a Default or an Event of Default
hereunder, notice of such occurrence, together with a detailed statement by
a responsible officer of Borrower of the steps being taken by Borrower to
cure the effect of such Default or Event of Default;
(e) promptly upon knowledge thereof, notice of any material loss or
destruction of or damage to any Equipment or of any material adverse change
in any Equipment;
19
(f) promptly upon their distribution, copies of all financial
statements, reports and proxy statements that Borrower or Guarantor shall
have sent to its stockholders;
(g) promptly after the amending thereof, copies of any and all
amendments to its certificate of incorporation, articles of organization or
bylaws;
(h) promptly upon actual knowledge thereof, notice of the violation by
Borrower of any law, rule or regulation;
(i) promptly upon actual knowledge thereof, notice of any material
adverse change in the financial or operating condition of Borrower;
(j) at the time when audited financial statements are delivered
pursuant to the requirements of Section 7.01(a) hereof, projections of
Borrower's and Guarantor's business and financial results for the next
succeeding fiscal year, together with a balance sheet, income statement and
supporting facts and assumptions used to formulate such projections; and
(k) promptly after the amending thereof, financial covenants required
by Borrower's and/or Guarantor's working capital lender.
Section 7.02. Books and Records; Inspection and Examination. Borrower will
keep accurate books of record and account for itself pertaining to the Equipment
and pertaining to Borrower's business and financial condition in which true and
complete entries will be made in accordance with generally accepted accounting
principles consistently applied and, upon reasonable request of Lender and three
Business Days' prior written notice, will permit any officer, employee, attorney
or accountant for Lender to audit, review, make extracts from, or copy any and
all corporate and financial books, records and properties of Borrower at all
times during ordinary business hours, and to discuss the affairs of Borrower
with any of its directors, officers, employees or agents. Borrower will permit
Lender, or its employees, accountants, attorneys or agents, to examine and copy
any or all of its records and to examine and inspect the Equipment at any time
during Borrower's business hours. Unless an Event of Default has occurred and is
continuing, the inspections and examinations referred to in this Section shall
be conducted not more than once per calendar year and shall be at the expense of
Lender.
Section 7.03. Compliance With Laws; Environmental Indemnity. Borrower will
(a) comply with the requirements of applicable laws and regulations the
noncompliance with which would materially and adversely affect its business or
its financial condition, (b) comply with all applicable Environmental Laws and
regulations and obtain any permits, licenses or similar approvals required by
any such laws or regulations the noncompliance with which would materially and
adversely affect its business or its financial condition and (c) use and keep
the Equipment, and will require that others use and keep the Equipment, only for
lawful purposes, without violation of any federal, state or local law, statute
or ordinance the violation of which would materially and adversely affect its
business or its financial condition. Borrower shall
20
secure all permits and licenses, if any, necessary for the installation and
operation of the Equipment. Borrower shall comply in all respects (including,
without limitation, with respect to the use, maintenance and operation of each
item of the Equipment) with all laws of the jurisdictions in which its
operations involving any component of Equipment may extend and of any
legislative, executive, administrative or judicial body exercising any power or
jurisdiction over the items of the Equipment or its interest or rights under
this Agreement. Borrower will indemnify, defend and hold Lender harmless from
and against any claims, loss or damage to which Lender may be subjected as a
result of any past, present or future existence, use, handling, storage,
transportation or disposal of any hazardous waste or substance or toxic
substance by Borrower or on property owned, leased or controlled by Borrower and
on which the Equipment will be located. This indemnification shall survive the
termination of this Agreement and payment of the indebtedness hereunder.
Section 7.04. Payment of Taxes and Other Claims. Borrower will pay or
discharge, when due, (a) all taxes, assessments and governmental charges levied
or imposed upon it or upon its income or profits, upon any properties belonging
to it (including, without limitation, the Equipment) or upon or against the
creation, perfection or continuance of the security interest created pursuant to
this Agreement, prior to the date on which penalties attach thereto, (b) all
federal, state and local taxes required to be withheld by it, and (c) all lawful
claims for labor, materials and supplies which, if unpaid, might by law become a
lien or charge upon any properties of Borrower; provided, that Borrower shall
not be required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings. Borrower will pay, as the same respectively come due, all taxes and
governmental charges of any kind whatsoever that may at any time be lawfully
assessed or levied against or with respect to the Equipment, as well as all gas,
water, steam, electricity, heat, power, telephone, utility and other charges
incurred in the operation, maintenance, use, occupancy and upkeep of the
Equipment.
Section 7.05. Maintenance of Equipment. (a) Borrower shall, at its own
expense, maintain, preserve and keep the Equipment in good repair, working order
and condition, and shall from time to time make all repairs and replacements
necessary to keep the Equipment in such condition, and in compliance with state
and federal laws, ordinary wear and tear excepted. Borrower shall maintain the
Equipment in a condition suitable for certification by the manufacturer thereof
(if certification is available) and in conformance with all manufacturer's
recommended maintenance requirements, but Borrower shall not be required
pursuant to this Section to obtain any such certification. In the event that any
material parts or accessories forming part of any item or items of Equipment
become worn out, lost, destroyed, damaged beyond repair or otherwise rendered
unfit for use, Borrower, at its own expense and expeditiously, will replace or
cause the replacement of such parts or accessories by replacement parts or
accessories free and clear of all liens and encumbrances and with a value and
utility at least equal to that of the parts or accessories being replaced
(assuming that such replaced parts and accessories were otherwise in good
working order and repair). All such replacement parts and accessories shall be
deemed to be incorporated immediately into and to constitute an integral portion
of the Equipment and, as such, shall be subject to the terms of this Agreement.
Neither
21
Lender nor Issuer shall have any responsibility in any of these matters, or for
the making of improvements or additions to the Equipment.
(b) Borrower will defend the Equipment against all claims or demands of all
persons (other than Lender) claiming the Equipment or any interest therein.
(c) Borrower will keep the Equipment free and clear of all security
interests, liens and encumbrances except the security interest created pursuant
to this Agreement.
Section 7.06. Insurance. (a) Borrower shall, at its own expense, procure
and maintain continuously in effect: (i) public liability insurance for personal
injuries, death or damage to or loss of property arising out of or in any way
relating to the Equipment sufficient to protect Lender from liability in all
events, with a coverage limit of not less than $1,000,000 per occurrence, and
(ii) insurance against such hazards as Lender may require, including, but not
limited to, all-risk casualty and property insurance, in an amount equal to the
greater of the full replacement cost of the Equipment with new equipment having
substantially similar specifications or the applicable Prepayment Amount.
(b) If required by State law, Borrower shall carry workers' compensation
insurance covering all employees on, in, near or about the Equipment, and upon
request, shall furnish to Lender certificates evidencing such coverage.
(c) All insurance policies required by this Article shall be taken out and
maintained with insurance companies acceptable to Lender; and shall contain a
provision that the insurer shall not cancel or revise coverage thereunder
without giving written notice to the insured parties at least thirty (30) days
before the cancellation or revision becomes effective. No insurance shall be
subject to any co-insurance clause. Each insurance policy required by this
Article shall name Lender as an additional insured party and loss payee without
regard to any breach of warranty or other act or omission of Borrower and shall
include a lender's loss payable endorsement for the benefit of Lender. Prior to
the delivery of Equipment, Borrower shall deposit with Lender evidence
satisfactory to Lender of such insurance and, prior to the expiration thereof,
shall provide Lender evidence of all renewals or replacements thereof.
(d) As among Lender, Borrower and Issuer, Borrower assumes all risks and
liabilities from any cause whatsoever, whether or not covered by insurance, for
loss or damage to any Equipment and for injury to or death of any person or
damage to any property, whether such injury or death be with respect to agents
or employees of Borrower or of third parties, and whether such property damage
be to Borrower's property or the property of others. Whether or not covered by
insurance, Borrower hereby assumes responsibility for and agrees to reimburse
Lender and Issuer for and will indemnify, defend and hold Lender and Issuer
harmless from and against all liabilities, obligations, losses, damages,
penalties, claims, actions, costs and expenses (including reasonable attorneys'
fees) of whatsoever kind and nature, imposed on, incurred by or asserted against
Lender or Issuer that in any way relate to or arise out of this Agreement, the
transactions contemplated hereby and the Equipment, including but not limited
to, (i) the selection, manufacture, purchase, acceptance or rejection of
Equipment or the ownership of the
22
Equipment, (ii) the delivery, lease, possession, maintenance, use, condition,
return or operation of the Equipment, (iii) the condition of the Equipment sold
or otherwise disposed of after possession by Borrower, (iv) any patent or
copyright infringement, (v) the conduct of Borrower, its officers, employees and
agents, (vi) a breach of Borrower of any of its covenants or obligations
hereunder and (vii) any claim, loss, cost or expense involving alleged damage to
the environment relating to the Equipment, including, but not limited to
investigation, removal, cleanup and remedial costs. All amounts payable by
Borrower pursuant to the immediately preceding sentence shall be paid
immediately upon demand of Issuer or Lender, as the case may be. This provision
shall survive the termination of this Agreement.
Section 7.07. Preservation of Corporate Existence. Borrower will preserve
and maintain its corporate existence and all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business; and
shall conduct its business in an orderly, efficient and regular manner.
Section 7.08. Performance by Lender. If Borrower at any time fails to
perform or observe any of the covenants or agreements contained in this
Agreement, and if such failure shall continue for a period of ten calendar days
after Lender gives Borrower written notice thereof (or in the case of the
agreements contained in Sections 7.05 and 7.06 hereof, immediately upon the
occurrence of such failure, without notice or lapse of time), Lender may, but
need not, perform or observe such covenant on behalf and in the name, place and
stead of Borrower (or, at Lender's option, in Lender's name) and may, but need
not, take any and all other actions which Lender may reasonably deem necessary
to cure or correct such failure (including, without limitation, the payment of
taxes, the satisfaction of security interests, liens or encumbrances, the
performance of obligations owed to account debtors or other obligors, the
procurement and maintenance of insurance, the execution of assignments, security
agreements and financing statements, and the endorsement of instruments); and
Borrower shall thereupon pay to Lender on demand the amount of all moneys
reasonably expended and all costs and expenses (including reasonable attorneys'
fees and legal expenses) reasonably incurred by Lender in connection with or as
a result of the performance or observance of such agreements or the taking of
such action by Lender, together with interest thereon from the date expended or
incurred at the lesser of 12% per annum or the highest rate permitted by law. To
facilitate the performance or observance by Lender of such covenants of
Borrower, Borrower hereby irrevocably appoints effective upon the occurrence and
continuance of an Event of Default Lender, or the delegate of Lender, acting
alone, as the attorney in fact of Borrower with the right (but not the duty)
from time to time to create, prepare, complete, execute, deliver, endorse or
file in the name and on behalf of Borrower any and all instruments, documents,
assignments, security agreements, financing statements, applications for
insurance and other agreements and writings required to be obtained, executed,
delivered or endorsed by Borrower under this Agreement.
Section 7.09. Management of Guarantor. Borrower hereby agrees, upon written
request of Lender after Xxxxxx X. Xxxxx is at any time not the chief executive
officer of Guarantor or not otherwise actively involved in the management of
Guarantor (a "Management Change"), to provide to Lender a letter of credit in
form and substance and issued by a bank acceptable to Lender in Lender's sole
discretion in an amount equal to 50% of the outstanding amount of the
23
Loan; provided, however, that Lender will not request any such letter of credit
until 90 days after a Management Change occurs; and, provided, further, the
premium used to calculate the Prepayment Amount pursuant to Section 2.07(a)
hereof shall be reduced by 100 basis points but in no event to a percentage less
than zero.
Section 7.10. Financial Covenants. (a) Guarantor, on a consolidated basis,
will maintain at all times its ratio of Debt (as defined below) to Tangible Net
Worth (as defined below) at not more than 1.70 to 1.00. "Debt" shall mean (i)
all items of indebtedness or liability which in accordance with generally
accepted accounting principles or federal tax law would be included in
determining total liabilities as shown on the liabilities side of a balance
sheet or otherwise classified as debt, and (ii) guaranties and endorsements
(other than for purposes of collection in the ordinary course of business) by
Guarantor and other contingent obligations of Guarantor in respect of, or to
purchase or otherwise acquire, indebtedness of others (other than for members of
the consolidated group). "Tangible Net Worth" means the excess of:
(A) the tangible assets of Guarantor, which, in accordance with
generally accepted accounting principles, are tangible assets, after
deducting adequate reserves in each case where, in accordance with
generally accepted accounting principles, a reserve is proper over
(B) all Debt of Guarantor;
provided, however, that (i) inventory shall be taken into account on the basis
of the cost (determined on a first-in, first-out basis) or current market value,
whichever is lower, (ii) in no event shall there be included as such tangible
assets patents, trademarks, trade names, copyrights, licenses, good will,
advances or loans to, or receivables from, directors, officers, employees or
affiliates, intangible assets, amounts relating to covenants not to compete,
pensions assets, deferred charges or treasury stock or any securities or Debt of
Guarantor or any other securities unless the same are readily marketable in the
United States of America or entitled to be used as a credit against federal
income tax liabilities, (iii) securities included as such tangible assets shall
be taken into account at their current market price or cost, whichever is lower,
and (iv) any write-up in the book value of any assets shall not be taken into
account.
(b) Guarantor, on a consolidated basis, will maintain at its fiscal year
end its Debt Service Coverage Ratio (as defined below) at not less than 1.20 to
1.00. "Debt Service Coverage Ratio" means the ratio of (i) Guarantor's Cash Flow
Available for Debt Service (as defined below) to (ii) Guarantor's Debt Service
(as defined below). "Cash Flow Available for Debt Service" of Guarantor means
Guarantor's income before taxes and interest, plus depreciation, amortization
and other non-cash charges less the aggregate of (x) capital expenditures not
financed with long-term debt and (y) any taxes paid, all based upon the prior
twelve (12) month period. "Debt Service" of Guarantor means the aggregate of (i)
interest expense of Guarantor for the prior twelve (12) months, and (ii) the
current portion of the long-term Debt of Guarantor for the prior twelve (12)
month period.
24
(c) Guarantor will maintain at all times its Tangible Net Worth at not less
than $12,000,000.
(d) Guarantor will maintain at all times its net working capital (as
determined in accordance with generally accepted accounting principles) at not
less than $3,500,000.
(e) If the financial covenants required by Borrower's and/or Guarantor's
working capital lender are at any time changed, Lender may in its discretion
require Borrower and Guarantor to comply with such changed financial covenants
for the benefit of Lender, and Borrower hereby agrees to amend this Section to
reflect such changed financial covenants.
ARTICLE VIII
NEGATIVE COVENANTS OF BORROWER
So long as the Loan shall remain unpaid, Borrower agrees that:
Section 8.01. Lien. Borrower will not create, incur or suffer to exist any
mortgage, deed of trust, pledge, lien, security interest, assignment or transfer
for security upon or of any of the Equipment (except for the security interest
created pursuant to this Agreement) or any of its inventory, accounts
receivables or cash. Guarantor may create, incur or suffer to exist mortgages,
deeds of trust, pledges, liens, security interests and assignments or transfers
for security upon all or any part of its assets.
Section 8.02. Sale of Assets. Borrower will not, and will not permit
Guarantor to, sell, lease, assign, transfer or otherwise dispose of all or
substantially all of its assets or of any of the Equipment or any interest
therein (whether in one transaction or in a series of transactions); provided,
however, that Borrower or Guarantor may enter into such transaction if Borrower
or Guarantor, as the case may be, is the surviving entity, Lender receives a tax
opinion in form and substance satisfactory to Lender and no Default or Event of
Default has occurred or would result from such transaction.
Section 8.03. Consolidation and Merger. Borrower will not, and will not
permit Guarantor to, consolidate with or merge into any person, or permit any
other person to merge into it, or acquire (in a transaction analogous in purpose
or effect to a consolidation or merger) all or substantially all of the assets
of any other person); provided, however, that Borrower or Guarantor may enter
into such transaction if Borrower or Guarantor, as the case may be, is the
surviving entity, Lender receives a tax opinion in form and substance
satisfactory to Lender and no Default or Event of Default has occurred or would
result from such transaction; and provided, further, that Guarantor may in all
events sell not more than 50% of the outstanding common stock of Borrower.
Section 8.04. Accounting. Borrower will not, and will not permit Guarantor
to, adopt, permit or consent to any material change in accounting principles
other than as required by
25
generally accepted accounting principles. Borrower will not, and will not permit
Guarantor to, adopt, permit or consent to any change in its fiscal year.
Section 8.05. Other Defaults. Borrower will not permit any breach, default
or event of default to occur under any note, loan agreement, indenture, lease,
mortgage, contract for deed, security agreement or other contractual obligation
binding upon Borrower beyond any applicable grace or cure period or any
judgment, decree, order or determination applicable to Borrower which is not
stayed or being diligently contested in good faith.
Section 8.06. Place of Business. Borrower will not permit any of the
Equipment to be located in any state or area in which, in the event of such
location, a financing statement covering such Equipment would be required to be,
but has not in fact been, filed in order to perfect the security interest
created pursuant to this Agreement.
Section 8.07. Modifications and Substitutions. (a) Borrower will not make
any material alterations, modifications or additions to the Equipment which
cannot be removed without materially damaging the functional capabilities or
economic value of the Equipment. Upon delivery of the Equipment to Lender
pursuant to Section 11.03 hereof and at the request of Lender, Borrower, at its
sole cost and expense, will remove all alterations, modifications and additions
and repair the Equipment as necessary to return the Equipment to the condition
in which it was furnished, ordinary wear and tear and permitted modifications
excepted.
(b) Notwithstanding the provisions of subparagraph (a) of this section,
Borrower may, with the prior written consent of Lender, substitute for parts,
elements, portions or all of the Equipment, other parts, elements, portions,
equipment or facilities; provided, however, that any substitutions that are not
material or are made pursuant to Borrower's obligations to make repairs
referenced under any provision of this Agreement shall not require such prior
written consent. Borrower shall provide such documents or assurances as Lender
may reasonably request to maintain or confirm the security interest assigned to
Lender in the Equipment as so modified or substituted.
Section 8.08. Use of the Equipment. Borrower will not install, use, operate
or maintain the Equipment improperly, carelessly, in violation of any applicable
law or in a manner contrary to that contemplated by this Agreement.
ARTICLE IX
DAMAGE AND DESTRUCTION; USE OF NET PROCEEDS
Borrower shall provide a complete written report to Lender immediately upon
any material loss, theft, damage or destruction of any Equipment and of any
accident involving any Equipment. If all or any part of the Equipment is lost,
stolen, destroyed or damaged beyond repair ("Damaged Equipment"), Borrower shall
as soon as practicable after such event either: (a) replace the same at
Borrower's sole cost and expense with equipment having substantially similar
specifications and of equal or greater value to the Damaged Equipment
immediately prior
26
to the time of the loss occurrence, such replacement equipment to be subject to
Lender's approval, whereupon such replacement equipment shall be substituted in
this Agreement and the other related documents by appropriate endorsement or
amendment; or (b) pay the applicable Prepayment Amount of the Damaged Equipment;
provided, however, that if the damage or destruction is the result of any act of
God, arson, natural disaster, riot or war, the applicable Prepayment Amount
shall be calculated by reducing the applicable premium by one-half. Borrower
shall notify Lender of which course of action it will take within forty-five
(45) calendar days after the loss occurrence. If, within sixty (60) calendar
days of the loss occurrence, (a) Borrower fails to notify Lender; (b) Borrower
and Lender fail to execute an amendment to this Agreement to delete the Damaged
Equipment and add the replacement equipment or (c) Borrower fails to pay the
applicable Prepayment Amount, then Lender may, at its sole discretion, declare
the applicable Prepayment Amount to be immediately due and payable, and Borrower
is required to pay the same. The Net Proceeds of insurance with respect to the
Damaged Equipment promptly shall be made available by Lender to be applied to
discharge Borrower's obligation under this Article, and any Net Proceeds in
excess of the amounts necessary to satisfy Borrower's obligations under this
Article shall be paid to Borrower. The payment of the Prepayment Amount and the
termination of Lender's interest in the Damaged Equipment is subject to the
terms of Section 2.07 hereof. For purposes of this Article, the term "Net
Proceeds" shall mean the amount remaining from the gross proceeds of any
insurance claim or condemnation award after deducting all expenses (including
reasonable attorneys' fees) incurred in the collection of such claim or award.
ARTICLE X
ASSIGNMENT, SUBLEASING AND SELLING
Section 10.01. Assignment by Lender. This Agreement, and the obligations of
Borrower to make payments hereunder, may be assigned and reassigned in whole or
in part to one or more assignees or subassignees by Lender at any time
subsequent to its execution, without the necessity of obtaining the consent of
Issuer or Borrower; provided, however, that no such assignment or reassignment
shall be effective unless and until (a) Issuer and Borrower shall have received
notice of the assignment or reassignment disclosing the name and address of the
assignee or subassignee and (b) in the event that such assignment or
reassignment is made to a bank or trust company as trustee for holders of
certificates representing interests in this Agreement, such bank or trust
company agrees to maintain, or cause to be maintained, a book-entry system by
which a record of the names and addresses of such holders as of any particular
time is kept and agrees, upon request of Issuer or Borrower, to furnish such
information to Issuer or Borrower; provided, further, that there shall not be
more than one person acting as lender or servicer hereunder at any one time; and
provided, finally, that no such assignment shall amend the terms hereof or
require Borrower to pay any fees or expenses in connection with such assignment.
Upon receipt of notice of assignment, Borrower will reflect in a book-entry the
assignee designated in such notice of assignment, and shall agree to make all
payments to the assignee designated in the notice of assignment, notwithstanding
any claim, defense, setoff or counterclaim whatsoever (whether arising from a
breach of this Agreement or otherwise) that Issuer and Borrower may from time to
time have against Lender or the assignee.
27
Issuer and Borrower agree to execute all documents, including notices of
assignment and chattel mortgages or financing statements, which may be
reasonably requested by Lender or its assignee to protect their interest in the
Equipment and in this Agreement.
Section 10.02. No Sale or Assignment by Borrower. This Agreement and the
interest of Borrower in the Equipment may not be sold, assumed, assigned or
encumbered by Borrower.
ARTICLE XI
EVENTS OF DEFAULT AND REMEDIES
Section 11.01. Events of Default. The following constitute "Events of
Default" under this Agreement:
(a) failure by Borrower to pay to Lender, as assignee of Issuer, when
due any Loan Payment or to pay any other payment required to be paid
hereunder and the continuation of such failure for a period of ten days;
(b) failure by Borrower to maintain insurance on the Equipment in
accordance with Section 7.06 hereof;
(c) failure by Borrower or Issuer to observe and perform any other
covenant, condition or agreement contained herein, in the Escrow Agreement,
in the Tax Regulatory Agreement or in any other document or agreement
executed in connection herewith on its part to be observed or performed for
a period of 30 days after written notice is given to Borrower or Issuer, as
the case may be, specifying such failure and requesting that it be
remedied; provided, however, that, if the failure stated in such notice
cannot be corrected within such 30-day period, Lender will not unreasonably
withhold its consent to an extension of such time if corrective action is
instituted by Borrower or Issuer, as the case may be, within the applicable
period and diligently pursued until the default is corrected;
(d) initiation by Issuer of a proceeding under any federal or state
bankruptcy or insolvency law seeking relief under such laws concerning the
indebtedness of Issuer;
(e) Borrower or Guarantor shall be or become insolvent, or admit in
writing its inability to pay its or his debts as they mature, or make an
assignment for the benefit of creditors; or Borrower or Guarantor shall
apply for or consent to the appointment of any receiver, trustee or similar
officer for it or for all or any substantial part of its property; or such
receiver, trustee or similar officer shall be appointed without the
application or consent of Borrower or Guarantor, as the case may be; or
Borrower or Guarantor shall institute (by petition, application, answer,
consent or otherwise) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or similar
proceeding relating to it under the laws of any jurisdiction; or any such
proceeding shall be instituted (by petition, application or otherwise)
against
28
Borrower or Guarantor; or any judgment, writ, warrant of attachment or
execution or similar process shall be issued or levied against a
substantial part of the property of Borrower or Guarantor;
(f) determination by Lender that any representation or warranty made
by Borrower, Issuer or Guarantor herein, in the Tax Regulatory Agreement,
in the Guaranty or in any other document executed in connection herewith
was untrue in any material respect when made;
(g) failure of Lender to have a valid and perfected security interest
in the Equipment, subject to no other security interest, assignment, lien
or encumbrance;
(h) the occurrence of a default or an event of default under any
instrument, agreement or other document evidencing or relating to any
indebtedness or other monetary obligation of Borrower or Guarantor beyond
any applicable grace or cure period in an amount greater than $100,000 with
respect to Borrower or in an amount greater than $500,000 with respect to
Guarantor;
(i) Guarantor shall repudiate, purport to revoke or fail to perform
Guarantor's obligations under the Guaranty;
(j) Guarantor shall at any time own less than 50% of the outstanding
common stock of Borrower (Borrower hereby acknowledges that Lender has made
its decision to enter into the transactions contemplated hereby based in
part upon the management expertise of Guarantor and its ownership of the
stock of Borrower);
(k) an Event of Default shall occur and continue under the Real Estate
Loan Agreement; or
(l) the breach by Borrower of any of its obligations under the Escrow
Agreement.
Section 11.02. Remedies on Default. Whenever any Event of Default shall
have occurred and be continuing, Lender, as assignee of Issuer, shall have the
right, at its sole option without any further demand or notice, to take any one
or any combination of the following remedial steps to the extent that the same
are available to secured parties under Article 9 of the UCC in effect in the
State from time to time and which are otherwise accorded to Lender, as assignee
of Issuer, by applicable law:
(a) by notice to Issuer and Borrower, declare the entire unpaid
principal amount of the Loan then outstanding, all interest accrued and
unpaid thereon and all amounts payable under this Agreement to be forthwith
due and payable, whereupon the Loan, all such accrued interest and all such
amounts shall become and be forthwith due and payable, without presentment,
notice of dishonor, protest or further notice of any kind, all of which are
hereby expressly waived by Borrower;
29
(b) take possession of the Equipment wherever situated, without any
court order or other process of law and without liability for entering the
premises, and lease, sublease or make other disposition of the Equipment
for use over a term in a commercially reasonable manner, all for the
account of Lender, provided that Borrower shall remain directly liable for
the deficiency, if any, between the rent or other amounts paid by a lessee
or sublessee of the Equipment pursuant to such lease or sublease during the
same period of time, after deducting all reasonable costs and expenses,
including reasonable attorneys' fees and expenses, incurred with respect to
the recovery, repair and storage of the Equipment during such period of
time;
(c) take possession of the Equipment wherever situated, without any
court order or other process of law and without liability for entering the
premises, and sell the Equipment in a commercially reasonable manner. All
proceeds from such sale shall be applied in the following manner:
FIRST, to pay all proper and reasonable costs and expenses
associated with the recovery, repair, storage and sale of the
Equipment, including reasonable attorneys' fees and expenses;
SECOND, to pay (i) Lender the amount of all unpaid Loan Payments
or other obligations (whether direct or indirect owed by Borrower to
Lender), if any, which are then due and owing, together with interest
and late charges thereon, (ii) Lender the then applicable Prepayment
Amount (taking into account the payment of past-due Loan Payments as
aforesaid), plus a pro rata allocation of interest, at the rate
utilized to calculate the Loan Payments, from the next preceding due
date of a Loan Payment until the date of payment by the buyer, and
(iii) any other amounts due hereunder, including indemnity payments,
taxes, charges, reimbursement of any advances and other amounts
payable to Lender or Issuer hereunder; and
THIRD, to pay the remainder of the sale proceeds, purchase moneys
or other amounts paid by a buyer of the Equipment to Borrower;
(d) proceed by appropriate court action to enforce specific
performance by Issuer or Borrower of the applicable covenants of this
Agreement or to recover for the breach thereof, including the payment of
all amounts due from Borrower. Borrower shall pay or repay to Lender or
Issuer all costs of such action or court action, including, without
limitation, reasonable attorneys' fees;
(e) with or without notice to Borrower or Issuer submit one or more
drafts under any letter of credit provided pursuant to Section 7.09 hereof
or pursuant to the Escrow Agreement for any amounts due hereunder; and
30
(f) take whatever action at law or in equity may appear necessary or
desirable to enforce its rights with respect to the Equipment. Borrower
shall pay or repay to Lender or Issuer all costs of such action or court
action, including, without limitation, reasonable attorneys' fees.
Notwithstanding any other remedy exercised hereunder, Borrower shall remain
obligated to pay to Lender any unpaid portion of the Prepayment Amount.
Section 11.03. Delivery of Equipment. Upon an Event of Default, Borrower
shall within ten calendar days after notice from Lender, at its own cost and
expense: (a) perform any testing and repairs required to place the Equipment in
the condition required by Article VII; (b) if deinstallation, disassembly or
crating is required, cause the Equipment to be deinstalled, disassembled and
crated by an authorized manufacturer's representative or such other service
person as is satisfactory to Lender; and (c) deliver the Equipment to a location
specified by Lender, freight and insurance prepaid by Borrower. If Borrower
refuses to deliver the Equipment in the manner designated, Lender may enter upon
Borrower's premises where the Equipment is kept and take possession of the
Equipment and charge to Borrower the commercially reasonable costs of such
taking. Borrower hereby expressly waives any damages occasioned by such taking
that are the result of Lender's or Lender's agent's gross negligence or willful
misconduct.
Section 11.04. No Remedy Exclusive. No remedy herein conferred upon or
reserved to Lender or Issuer is intended to be exclusive and every such remedy
shall be cumulative and shall be in addition to every other remedy given under
this Agreement or now or hereafter existing at law or in equity. No delay or
omission to exercise any right or power accruing upon any Event of Default shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right or power may be exercised from time to time and as often as may
be deemed expedient. In order to entitle Lender or Issuer to exercise any remedy
reserved to it in this Article, it shall not be necessary to give any notice
other than such notice as may be required by this Article. All remedies herein
conferred upon or reserved to Lender or Issuer shall survive the termination of
this Agreement.
Section 11.05. Late Charge. Any Loan Payment not paid by Borrower on the
due date thereof shall, to the extent permissible by law, bear a late charge
equal to the lesser of three cents ($.03) per dollar of the delinquent amount or
the lawful maximum, and Borrower shall be obligated to pay the same immediately
upon receipt of Lender's written invoice therefor, but such late charge shall
not apply to any amounts accelerated hereunder or to any other Prepayment
Amounts.
ARTICLE XII
MISCELLANEOUS
Section 12.01. Costs and Expenses of Lender. Borrower shall pay to Lender,
in addition to the Loan Payments payable by Borrower hereunder, such amounts in
each year as
31
shall be required by Lender in payment of any reasonable costs and expenses
incurred by Lender in connection with the enforcement of this Agreement after
the occurrence of an Event of Default, including (without limitation) payment of
all reasonable fees, costs and expenses and all administrative costs of Lender
in connection with the Equipment, expenses (including, without limitation,
attorneys' fees and disbursements), fees of auditors or attorneys, insurance
premiums not otherwise paid hereunder and all other direct and necessary
administrative costs of Lender or charges required to be paid by it in order to
comply with the terms of, or to enforce its rights under, this Agreement. Such
costs and expenses shall be billed to Borrower by Lender from time to time,
together with a statement certifying that the amount so billed has been paid by
Lender for one or more of the items above described, or that such amount is then
payable by Lender for such items. Amounts so billed shall be due and payable by
Borrower within 30 days after receipt of the xxxx by Borrower.
Section 12.02. Disclaimer of Warranties. LENDER AND ISSUER MAKE NO WARRANTY
OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN,
CONDITION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR FITNESS FOR
USE OF THE EQUIPMENT, OR ANY OTHER WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, WITH RESPECT THERETO. In no event shall Lender or Issuer be liable for
any loss or damage in connection with or arising out of this Agreement, the
Equipment or the existence, furnishing, functioning or Borrower's use of any
item or products or services provided for in this Agreement.
Section 12.03. Notices. All notices, certificates, requests, demands and
other communications provided for hereunder or under the Escrow Agreement or the
Tax Regulatory Agreement shall be in writing and shall be (a) personally
delivered, (b) sent by first class United States mail, (c) sent by overnight
courier of national reputation, or (d) transmitted by telecopy, in each case
addressed to the party to whom notice is being given at its address as set forth
above and, if telecopied, transmitted to that party at its telecopier number set
forth above or, as to each party, at such other address or telecopier number as
may hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) three Business Days after
deposited in the mail if delivered by mail, (c) the date sent if sent by
overnight courier, or (d) the date of transmission if delivered by telecopy. If
notice to Borrower of any intended disposition of the Equipment or any other
intended action is required by law in a particular instance, such notice shall
be deemed commercially reasonable if given (in the manner specified in this
Section) at least ten (10) Business Days prior to the date of intended
disposition or other action. A courtesy copy of all notices to Borrower shall
also be given to the following person; provided, however, that the failure to
provide such courtesy copy shall not affect the rights or obligations of Lender,
Issuer or Borrower:
Xxxxxx Xxxxxxx, Esq.
Xxxxxx & Hannah LLP
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
32
Section 12.04. Further Assurance and Corrective Instruments. Issuer and
Borrower hereby agree that they will, from time to time, execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such further
acts, instruments, conveyances, transfers and assurances, as Lender reasonably
deems necessary or advisable for the implementation, correction, confirmation or
perfection of this Agreement, the Escrow Agreement or the Tax Regulatory
Agreement and any rights of Lender hereunder or thereunder.
Section 12.05. Binding Effect; Time of the Essence. This Agreement shall
inure to the benefit of and shall be binding upon Lender, Issuer, Borrower and
their respective successors and assigns. Time is of the essence.
Section 12.06. Severability. In the event any provision of this Agreement
shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provision
hereof.
Section 12.07. Amendments. To the extent permitted by law, the terms of
this Agreement shall not be waived, altered, modified, supplemented or amended
in any manner whatsoever except by written instrument signed by the parties
hereto, and then such waiver, consent, modification or change shall be effective
only in the specific instance and for the specific purpose given.
Borrower and Lender agree to amend Exhibit A to this Agreement to more
specifically identify the Equipment being financed hereunder at such time as
such identification is possible. Such amendment shall be effected by written
instrument signed by Borrower and Lender. Issuer's consent to the amendment
referred to in this paragraph shall not be required. Such amendment may take the
form of a Payment Request Form in the form attached to the Escrow Agreement as
Exhibit A executed by Borrower and Lender.
Issuer's consent to an amendment of the financial covenants contained in
Section 7.10 hereof shall not be required.
Section 12.08. Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute one and the same instrument, and any of the parties hereto may
execute this Agreement by signing any such counterpart, provided that only the
original marked "Original: 1 of 6" on the execution page thereof shall
constitute chattel paper under the UCC.
Section 12.09. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State.
Section 12.10. Captions. The captions or headings in this Agreement are for
convenience only and in no way define, limit or describe the scope or intent of
any provisions or sections of this Agreement.
33
Section 12.11. Entire Agreement. This Agreement, the Tax Regulatory
Agreement, the Escrow Agreement and the exhibits hereto and thereto constitute
the entire agreement among Lender, Issuer, Borrower and Escrow Agent. There are
no understandings, agreements, representations or warranties, express or
implied, not specified herein or in such documents regarding this Agreement or
the Equipment financed hereby.
Section 12.12. Usury. It is the intention of the parties hereto to comply
with any applicable usury laws; accordingly, it is agreed that, notwithstanding
any provisions to the contrary in this Agreement, in no event shall this
Agreement require the payment or permit the collection of interest or any amount
in the nature of interest or fees in excess of the maximum permitted by
applicable law.
Section 12.13. Waiver of Jury Trial. LENDER, ISSUER AND BORROWER HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, ANY OF THE
RELATED DOCUMENTS, ANY DEALINGS AMONG LENDER, ISSUER OR BORROWER RELATING TO THE
SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY RELATED
TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED AMONG LENDER,
ISSUER AND BORROWER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING
OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY RELATED
TRANSACTIONS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
[REMAINDER OF PAGE INTENTIONALLY BLANK; EXECUTION PAGE FOLLOWS.]
34
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
their respective corporate names by their duly authorized officers, all as of
the date first written above.
Lender: GE CAPITAL PUBLIC FINANCE, INC.
By_________________________________
Title______________________________
Issuer: ARKANSAS DEVELOPMENT FINANCE
AUTHORITY
By_________________________________
Title______________________________
Borrower: QUAIL PIPING PRODUCTS, INC.
By: /s/ Xxxxxx X. Xxxxx
---------------------------
Title: Chairman
---------------------------
ORIGINAL: __ OF 6
[EXECUTION PAGE OF LOAN AGREEMENT (EQUIPMENT)]
Exhibit A to Loan Agreement (Equipment)
SCHEDULE OF EQUIPMENT AND LOAN PAYMENTS
Description of Equipment
The following Equipment is the subject of the Loan Agreement (Equipment)
dated as of November 1, 1997 among GE Capital Public Finance, Inc. ("Lender"),
Arkansas Development Finance Authority ("Issuer"), and Quail Piping Products,
Inc. ("Borrower"):
Description Manufacturer
Quantity of Equipment or Vendor Serial Number
The Equipment is located at the following address:
0000 Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Prior to the relocation of the Equipment or portion thereof, Borrower will
provide 30 days' prior written notice to Lender.
Schedule of Loan Payments
Interest Rate: 5.89%
PAYMENT PAYMENT TOTAL PRINCIPAL INTEREST PREPAYMENT
NO. DATE PAYMENT COMPONENT COMPONENT AMOUNT
_____________________
After payment of Loan Payment due opposite Prepayment Amount.
Exhibit B to Loan Agreement (Equipment)
FORM OF CERTIFICATE OF ACCEPTANCE
I, the undersigned, hereby certify that I am the duly qualified and acting
_______________ of Quail Piping Products, Inc. ("Borrower") and, with respect to
the Loan Agreement (Equipment) dated as of November 1, 1997 (the "Agreement") by
and among Borrower, GE Capital Public Finance, Inc. ("Lender") and Arkansas
Development Finance Authority ("Issuer"), that:
1. The equipment described in Exhibit A to the Agreement (the
"Equipment") has been delivered and installed in accordance with Borrower's
specifications and has been accepted by Borrower.
2. Borrower has obtained from a reputable insurance company qualified
to do business in the State (as defined in the Agreement) insurance with
respect to all risks required to be covered thereby pursuant to Section
7.06 of the Agreement.
3. Attached to this Certificate of Acceptance are Vendor invoice(s)
and/or xxxx(s) of sale relating to the Equipment and, if such invoices have
been paid by Issuer or Borrower, evidence of payment thereof and, if
applicable, evidence of official intent to reimburse such payment as
required by the Code (as defined in the Agreement).
4. All of the representations and warranties of Borrower contained in
the Agreement are true and correct as of the date hereof and no Default or
Event of Default has occurred thereunder.
Dated: _________ __, 19__.
QUAIL PIPING PRODUCTS, INC.,
Borrower
By_____________________________
Title__________________________
Date___________________________
Exhibit C to Loan Agreement (Equipment)
FORM OF OPINION OF COUNSEL TO BORROWER
_________ __, 19__
Arkansas Development Finance Authority
Xxxxx 000
000 Xxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Quail Piping Products, Inc.
0000 Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
GE Capital Public Finance, Inc.
Suite 470
0000 Xxxxxxxxxx Xxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Re: Loan Agreement (Equipment) dated as of November 1, 1997 by and among
GE Capital Public Finance, Inc. ("Lender"), Arkansas Development
Finance Authority ("Issuer") and Quail Piping Products, Inc.
("Borrower")
Ladies and Gentlemen:
We have acted as counsel to Borrower with respect to the Loan Agreement
(Equipment) described above (the "Loan Agreement"), the Escrow Agreement of even
date therewith (the "Escrow Agreement") among Lender, Issuer, Borrower and
National City Bank of Minneapolis, as escrow agent, the Tax Regulatory Agreement
of even date therewith (the "Tax Regulatory Agreement"; the Loan Agreement, the
Escrow Agreement and the Tax Regulatory Agreement may be referred to herein
collectively as the "Agreements") and various related matters and we have acted
as counsel to Asahi/America, Inc. in connection with the Guaranty and Negative
Pledge Agreement dated as of November 1, 1997 (the "Guaranty") for the benefit
of Lender and various related matters and, in this capacity, have reviewed a
duplicate original or certified copy of each of the Agreements and the Guaranty.
Based upon the examination of these and such other documents as we deem
relevant, it is our opinion that:
1. Borrower has been duly organized and is validly existing as a
corporation in good standing under the laws of The Commonwealth of
Massachusetts with full power and authority to own its properties and
conduct its business.
2. Borrower has full power and authority to execute and deliver the
Agreements and to carry out the terms thereof. The Agreements have been
duly and validly authorized, executed and delivered, are in full force and
effect and are the legal, valid and binding contracts of Borrower
enforceable in accordance with their respective terms (including against
claims of usury), except to the extent limited by state and federal laws
affecting remedies and by bankruptcy, reorganization, or other laws of
general application relating to or affecting the enforcement of creditors'
rights.
3. The consummation of the transactions contemplated by the Agreements
and the carrying out of the terms thereof will not result in violation of
any provisions of the articles of organization or bylaws of Borrower or
result in the violation of any provision of, or in a default under, any
indenture, mortgage, deed of trust, indebtedness, agreement, judgment,
decree, order, statute, rule or regulation to which Borrower is a party or
by which it or its property is bound.
4. There are no legal or governmental actions, suits, proceedings,
inquiries or investigations pending, threatened or contemplated, or any
basis therefor, to which Borrower is or may become a party or of which any
property of Borrower is or may become subject, other than ordinary routine
litigation incident to the kind of business conducted by Borrower which, if
determined adversely to Borrower, would not, individually or in the
aggregate, have a material adverse effect on the financial position or
results of operations of Borrower.
5. There are no legal or governmental proceedings pending, threatened
or contemplated, or any basis therefor, wherein an unfavorable decision,
ruling or finding would adversely affect the validity of or security for
the Agreements or the transactions contemplated thereby.
6. Guarantor has been duly organized and is validly existing as a
corporation in good standing under the laws of The Commonwealth of
Massachusetts with full power and authority to own its properties and
conduct its business.
7. Guarantor has full power and authority to execute and deliver the
Guaranty and to carry out the terms thereof. The Guaranty has been duly and
validly authorized, executed and delivered, are in full force and effect
and is the legal, valid and binding contract of Guarantor enforceable in
accordance with its terms, except to the extent limited by state and
federal laws affecting remedies and by bankruptcy, reorganization, or other
laws of general application relating to or affecting the enforcement of
creditors' rights.
8. The consummation of the transactions contemplated by the Guaranty
and the carrying out of the terms thereof will not result in violation of
any provisions of the articles of organization or bylaws of Guarantor or
result in the violation of any provision
C-2
of, or in a default under, any indenture, mortgage, deed of trust,
indebtedness, agreement, judgment, decree, order, statute, rule or
regulation to which Guarantor is a party or by which it or its property is
bound.
9. There are no legal or governmental actions, suits, proceedings,
inquiries or investigations pending, threatened or contemplated, or any
basis therefor, to which Guarantor is or may become a party or of which any
property of Guarantor is or may become subject, other than ordinary routine
litigation incident to the kind of business conducted by Guarantor which,
if determined adversely to Guarantor, would not, individually or in the
aggregate, have a material adverse effect on the financial position or
results of operations of Guarantor.
10. There are no legal or governmental proceedings pending, threatened
or contemplated, or any basis therefor, wherein an unfavorable decision,
ruling or finding would adversely affect the validity of for the Guaranty
or the transactions contemplated thereby.
11. The Equipment (defined in the Loan Agreement) constitutes personal
property and when used by Borrower will not become fixtures under
applicable law.
12. The provisions of the Loan Agreement are effective to create a
security interest in favor of Lender, as assignee of Issuer, in all of
Borrower's right, title and interest in and to the Equipment and all
proceeds thereof. Such security interest has been properly perfected and is
subject to no liens or encumbrances.
Very truly yours,
C-3
Exhibit D to Loan Agreement (Equipment)
FORM OF OPINION OF COUNSEL TO ISSUER
_________ __, 19__
Arkansas Development Finance Authority
Xxxxx 000
000 Xxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Quail Piping Products, Inc.
0000 Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
GE Capital Public Finance, Inc.
Suite 470
0000 Xxxxxxxxxx Xxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Re: Loan Agreement (Equipment) dated as of November 1, 1997 by and among
GE Capital Public Finance, Inc. ("Lender"), Arkansas Development
Finance Authority ("Issuer")and Quail Piping Products, Inc.
("Borrower")
Ladies and Gentlemen:
We have acted as counsel to Issuer with respect to the Loan Agreement
(Equipment) described above (the "Loan Agreement"), the Escrow Agreement of even
date therewith (the "Escrow Agreement") among Lender, Issuer, Borrower and
National City Bank of Minneapolis, as escrow agent, the Tax Regulatory Agreement
of even date therewith (the "Tax Regulatory Agreement"; the Loan Agreement, the
Escrow Agreement and the Tax Regulatory Agreement may be referred to herein
collectively as the "Agreements") and various related matters and, in this
capacity, have reviewed a duplicate original or certified copy of the
Agreements. Based upon the examination of these and such other documents as we
deem relevant, it is our opinion that:
1. Issuer is a political subdivision of the State of Arkansas (the
"State") under the Internal Revenue Code of 1986, as amended, duly
organized, existing and operating under the Constitution and laws of the
State.
2. Issuer is authorized and has power under applicable law to enter
into the Agreements and to carry out its obligations thereunder and the
transactions contemplated thereby.
3. The Agreements have been duly authorized, approved, executed and
delivered by and on behalf of Issuer and are the legal, valid and binding
contracts of Issuer enforceable in accordance with their terms, except to
the extent limited by state and federal laws affecting remedies and by
bankruptcy, reorganization or other laws of general application relating to
or affecting the enforcement of creditors' rights.
4. The authorization, approval and execution of the Agreements and all
other proceedings of Issuer relating to the transactions contemplated
thereby have been performed in accordance with all open meeting, public
bidding and other laws, rules and regulations of the State.
5. There is no litigation, action, suit or proceeding pending or
before any court, administrative agency, arbitrator or governmental body
that challenges the organization or existence of Issuer; the authority of
Issuer or its officers or its employees to enter into the Agreements; the
proper authorization, approval and/or execution of the Agreements and the
other documents contemplated thereby; or the ability of Issuer otherwise to
perform its obligations under the Agreements and the transactions
contemplated thereby.
Very truly yours,
D-2
Exhibit E to Loan Agreement (Equipment)
FORM OF OPINION OF SPECIAL TAX COUNSEL
__________ __, 19__
GE Capital Public Finance, Inc.
Suite 470
0000 Xxxxxxxxxx Xxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Re: Loan Agreement (Equipment) dated as of November 1, 1997 by and among
GE Capital Public Finance, Inc. ("Lender"), Arkansas Development
Finance Authority ("Issuer") and Quail Piping Products, Inc.
("Borrower")
Ladies and Gentlemen:
We have acted as special counsel to GE Capital Public Finance, Inc. in
connection with the Loan Agreement (Equipment) described above (the "Loan
Agreement"), the Escrow Agreement of even date therewith (the "Escrow
Agreement") among Lender, Issuer, Borrower and National City Bank of
Minneapolis, as escrow agent, and the Tax Regulatory Agreement of even date
therewith (the "Tax Regulatory Agreement"; the Loan Agreement, the Escrow
Agreement and the Tax Regulatory Agreement may be referred to herein
collectively as the "Agreements"). In such capacity, we have examined a
certified copy of a resolution adopted by the Issuer (the "Resolution")
authorizing the execution and delivery of the Agreements.
Based upon an examination of the aforementioned documents and such other
documents and opinions as we have deemed relevant and necessary as a basis for
the opinions set forth herein, and in reliance thereon, it is our opinion as
special tax counsel that, assuming compliance with certain covenants contained
in the Agreements, under the statutes, regulations, rulings and judicial
decisions existing on the date of the original delivery of the Loan Agreement,
the portion of the payments that is paid by Issuer to Lender and which is
designated as and comprising interest, as provided in the Loan Agreement, is not
includable in gross income for purposes of federal income taxation; however such
interest portion is a specific preference item for purposes of the alternative
minimum tax provisions imposed on individuals and corporations set forth in the
Internal Revenue Code of 1986, as amended.
Very truly yours,
