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Exhibit 10.12
LOAN PARTICIPATION AGREEMENT
THIS AGREEMENT, made this 28th day of May, 1997, by and between AMERICAN
COMMERCIAL FINANCE CORPORATION, having a place of business at 000 Xxxxx Xxxx
Xxxxxx, Xxxx Xxxxxxxx, Xxxxxxxxxxx 00000 ("ACFC"), and CONNECTICUT DEVELOPMENT
AUTHORITY, having its principal place of business at 000 Xxxxx Xxxxxx, Xxxxx
Xxxx, Xxxxxxxxxxx 00000 ("PARTICIPANT").
PREAMBLE
ACFC has entered into a Commercial Revolving Loan, Demand Loan and
Security Agreement dated November 1, 1996, as amended in December, 1996 (as
further amended or supplemented from time to time, the "LOAN AGREEMENT") with
INDUSTRIAL TECHNOLOGIES, INC., a Delaware corporation and INTEC EUROPE, LTD., a
Delaware corporation (collectively, the "BORROWER"). ACFC desires to sell, and
the Participant desires to purchase, a 100% interest in a term loan in the
original principal amount of $500,000 to be extended concurrently with the
execution of this Agreement by ACFC to Borrower pursuant to the Loan Agreement
(the "TERM LOAN"), on the terms and conditions set forth herein. Capitalized
terms used herein but not defined herein shall have the meanings ascribed to
them in the Loan Agreement.
WITNESSETH:
NOW, THEREFORE, ACFC and the Participant have agreed as follows:
1. Sale of Interest. Subject to the terms of this Agreement, ACFC hereby
sells, assigns and conveys to the Participant, and the Participant hereby
purchases from ACFC, a 100% interest in the Term Loan. The Participant's 100%
ownership interest in the Term Loan is hereinafter referred to as its
"Participation Share." The Participant shall have no interest in the revolving
loans or demand loan extended by ACFC to the Borrower pursuant to the Loan
Agreement in the maximum aggregate principal amounts of up to $1,500,000 and
$500,000 (the "REVOLVING LOAN" and "DEMAND LOAN", respectively) or in any
Commitment Fee, Minimum Interest Amount, or other fee charged pursuant to the
Loan Agreement, all of which amounts shall be retained by Lender for its own
account (except as otherwise provided in Section 3(a) hereof with respect to the
Termination Fee).
2. Funding. The Participant shall pay to ACFC the sum of $500,000 within
three (3) business days of the date hereof.
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3. Share and Priority of Payments.
(a) Prior to ACFC's demand for payment of any or all of the
Obligations, so long as no Defaulting Event has occurred, the
Participant shall (after the Participant has paid to ACFC the amount set
forth in Section 2 hereof in collected funds) be entitled to receive the
amount of all payments of principal, interest and late charges from
amounts actually received by ACFC from the Borrower and clearly
identified by the Borrower as being in respect of the Term Loan,
provided that ACFC shall have the right to retain from such payments any
amounts reasonably due and payable by the Participant to ACFC hereunder.
Prior to ACFC's demand for payment of any or all of the Obligations, so
long as no Defaulting Event has occurred, the Participant shall also be
entitled to receive its Participant's Termination Fee Share.
"Participant's Termination Fee Share" means a percentage of the amount
of the Termination Fee provided for in Section 13.1(b) of the Loan
Agreement (the "TERMINATION FEE") that is received by ACFC from the
Borrower and clearly identified by the Borrower as being in respect of
the Termination Fee, such percentage being that which the then
outstanding principal amount of the Term Loan bears to the aggregate
amount of the then Obligations of Borrower (the "TOTAL OBLIGATIONS").
(b) Any amounts received by ACFC from the Borrower prior to
ACFC's demand for payment of any or all of the Obligations and prior to
the occurrence of a Defaulting Event which are not clearly identified by
Borrower as being in respect of the Term Loan or in respect of any other
Obligations shall be retained by ACFC and applied to the Obligations
(other than the Term Loan) until such Obligations are fully and finally
paid in cash. The Participant acknowledges and agrees that while ACFC
may from time to time debit the Revolving Loan Account for principal and
interest charges on the Term Loan, any such debits shall be at ACFC's
sole discretion and shall not establish a pattern or custom binding upon
ACFC. Notwithstanding the foregoing, amounts paid by the Borrower will
not be applied to the Relocation Penalty, as defined in the promissory
note evidencing the Term Loan, until all of the Obligations (other than
the Term Loan) have been fully and finally paid in cash.
(c) After ACFC's demand for payment of any or all of the
Obligations or the occurrence of a Defaulting Event, the Participant
shall not be entitled to any payments in respect of the Participation
Share (including without limitation the Relocation Penalty as defined in
the promissory note evidencing the Term Loan) until all of the
Obligations (other than the Term Loan) are fully and finally paid in
cash.
(d) After ACFC's demand for payment of all or any of the
Obligations or the occurrence of a Defaulting Event, or upon any payment
or
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distribution of assets of Borrower or any Guarantors of any kind or
character (including without limitation, cash, property or securities)
resulting from (i) any dissolution, winding up, total or partial
liquidation, reorganization, sale, receivership, assignment for the
benefit of creditors, readjustment of indebtedness, composition or
extension of Borrower or any Guarantors (whether in bankruptcy or
similar proceeding), or (ii) any other disposition of all or any part of
Borrower, the Collateral, the Guarantors or of any asset of the
Guarantors, then, the Obligations (other than the Term Loan) shall first
be paid in full, or payment thereof provided for, before any payment is
made on account of the Participation Share.
(e) In the event that the Obligations (other than the Term Loan)
are fully and finally paid, ACFC shall assign to the Participant the
Term Loan and ACFC's lien and security interests in the Collateral,
without recourse and without any representations or warranties. Upon
such assignment, ACFC shall deliver to the Participant such of the
original Financing Agreements with respect to the Term Loan as ACFC may
have which the Participant reasonably deems necessary to enable the
Participant to receive Term Loan payments and collect the Term Loan, and
the participation interest of Participant under this Agreement shall
terminate.
4. Term Loan Collections and Remittances. All payments of principal,
interest and late charges received by ACFC from Borrower prior to ACFC's demand
for payment of all or any part of the Obligations or the occurrence of a
Defaulting Event which are clearly identified by Borrower as being in respect of
the Term Loan, as well as Participant's Termination Fee Share, shall be paid by
ACFC to the Participant within two (2) business days of ACFC's receipt of such
payment from the Borrower. Such payments by ACFC to the Participant will be made
by wire transfer, if requested by the Participant. In the event any Term Loan
payment or any part thereof is dishonored upon presentment for payment or is
rescinded or must be returned by ACFC for any reason after ACFC has remitted
payment to the Participant, the Participant agrees to reimburse ACFC for such
remittance immediately upon written demand by ACFC.
5. Servicing of Term Loan.
(a) ACFC shall endeavor to exercise the same care in
administering the Term Loan as it exercises with respect to similar
matters in which no participations are allotted by it, and it shall have
no further responsibility to the Participant. Without limiting the
generality of the foregoing, after the occurrence of a Defaulting Event,
ACFC shall have the right to proceed with such course of action as it
determines in its sole discretion, including commencing or refraining
from commencing collection proceedings or other legal action to enforce
the Obligations. In the event ACFC elects to commence legal proceedings
to enforce the Obligations, ACFC shall have the
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right to select legal counsel of its own choice. ACFC shall not be
liable, in the absence of bad faith, for any error of judgment or any
action taken by it, and in no event shall ACFC be liable for punitive or
consequential damages. Without limiting the foregoing, ACFC may rely
upon the advice of counsel concerning legal matters and upon any written
document believed to be genuine and to have been signed and sent by the
proper person or persons. ACFC shall give prompt written notice to the
Participant of any demand or default of the Obligations that is declared
by ACFC. Notwithstanding the foregoing provisions of this Section 5, in
the event that the Borrower fails to pay any amount under the Term Loan
(including, without limitation, the Relocation Penalty) as and when due,
ACFC shall, upon the written request of the Participant, demand payment
of the Obligations and commence such collection proceedings or other
legal action to enforce the Obligations as ACFC would undertake with
respect to similar matters in which no participations are allotted by
it, and it shall have no further responsibility to the Participant.
(b) ACFC may, in its sole discretion and without the consent of
the Participant, give or withhold waivers, consents and approvals, and
amend the Loan Agreement and the other Financing Agreements (as defined
in the Loan Agreement). ACFC agrees, however, that it will not amend any
provision of the Financing Agreements to change the principal amount of
the Term Loan, to reduce the interest, Relocation Penalty or late
charges on the Term Loan, to change the principal repayment schedule of
the Term Loan, or to release any Collateral without the written consent
of the Participant. ACFC shall, promptly after ACFC's receipt or giving
thereof, provide the Participant with copies of any amendments,
consents, or waivers with respect to the Financing Agreements.
(c) The Participant agrees that it will on demand reimburse
ACFC, to the extent of Participant's Expenses Participation Percentage
thereof, for any and all actual out-of-pocket costs, expenses and
disbursements which may be incurred or made by ACFC in connection with
any action which may be taken by ACFC to collect the amounts owing to
ACFC in connection with the Obligations, if ACFC is not reimbursed for
such amounts at such time by or on behalf of the Borrower. The
Participant shall not be obligated to reimburse ACFC for any of the
so-called "overhead", incidental and/or routine costs of administering
the Term Loan which do not entail out-of-pocket expenditures or
disbursements by ACFC. As used herein, "Expenses Participation
Percentage" means the proportion that the Participation Share then bears
to the total amount of the Obligations.
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6. Representations and Warranties.
(a) The Participant represents to ACFC that (i) it is entering into this
Participation Agreement and purchasing the Participation Share for its own
account; (ii) it has no present intention to, and agrees that it will not, sell,
assign, transfer or otherwise divide its interest in this Agreement or the
Participation Share; (iii) its entering into this Agreement and its purchasing
the Participation Share are in accordance with all laws, regulations and
statutes affecting or otherwise applicable to it; and (iv) it has previously
entered into similar participation agreements and made investments of the type
and kind and nature of this Agreement, is aware of and able to bear the economic
risks involved in its entering into this Agreement and purchasing the
Participation Share and does not foresee the occurrence of any event which would
alter said ability.
(b) The Participant acknowledges that (i) ACFC has furnished to the
Participant a copy of the Loan Agreement, the promissory note evidencing the
Term Loan and such other documents executed and/or delivered by the Borrower to
ACFC in connection therewith as Participant has requested, (ii) ACFC makes no
representation or warranty, and assumes no responsibility, with respect to the
due execution, sufficiency, legality, validity, enforceability or collectibility
of the Term Loan, the Financing Agreements or the Collateral (including, without
limitation, the enforceability of the Relocation Penalty), or the truth or
correctness of any representations, statements, or certifications made by the
Borrower or the Guarantors in connection with any of the foregoing, (iii) the
Participant's decision to purchase the Participation Share is based upon its own
independent analysis and evaluation of the Borrower and the Guarantors and their
respective financial positions, and (iv) the Participant has not relied on any
investigation or analysis conducted by ACFC or on any advice or communication by
ACFC. ACFC assumes no responsibility for the financial conditions of the
Borrower or the Guarantors or the performance of the Borrower's or the
Guarantors' obligations. ACFC agrees to furnish to the Participant copies of
such documents as ACFC shall receive in connection with the Term Loan as the
Participant may request. ACFC assumes no responsibility with respect to the
truth, correctness, authenticity, legality, validity or enforceability thereof.
(c) ACFC represents to the Participant that (i) ACFC is the sole legal
and beneficial owner of the Participation Share being issued to the Participant
hereunder; (ii) there exists no encumbrance on the Participation Share; and
(iii) SACFC has full power and authority to make the Term Loan and to issue to
the Participant the Participation Share.
7. Rights of Further Sale and Assignment. The Participant shall not sell
any interests in the Term Loan without ACFC's prior written consent. Except for
sales to affiliates of ACFC or as directed by regulatory authorities, ACFC will
not sell any interests in the Revolving Loan without Participant's prior written
consent.
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8. Term Loan is Not a Security. ACFC and the Participant acknowledge and
agree that this Agreement merely sets forth the terms and conditions under which
the Participant is acquiring an interest in the Term Loan. This Agreement is not
intended to represent and shall not be deemed to constitute a security pursuant
to the Securities Act of 1933, the Securities and Exchange Act of 1934, the
Investment Company Act of 1940 or other applicable federal or state law. This
Agreement and the participation of the Participant in the Term Loan is not
intended, and shall not be deemed, to create or constitute a loan by the
Participant to ACFC.
9. No Partnership or Joint Venture. ACFC and the Participant acknowledge
and agree that the relationship between them shall be solely that of contracting
parties with an agency relationship. Nothing contained in this Agreement shall
be deemed or construed to create a partnership, tenancy-in-common, joint tenancy
or joint venture by or between ACFC and the Participant. This Agreement shall
not confer upon either ACFC or the Participant any interest in, or subject
either to any liability for, the assets or liabilities of the other, except as
expressly stated herein.
10. Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Connecticut (but not its
conflict of laws provisions).
11. Notices. Any notice to be given under this Agreement shall be in
writing and mailed by certified mail, return receipt requested, or sent by
recognized overnight or same day delivery service, addressed as follows:
If to ACFC: American Commercial Finance Corporation
000 Xxxxx Xxxx Xxxxxx
Xxxx Xxxxxxxx, XX 00000
Attention: Xxxxxxx X. Mount
President
If to the Participant: Connecticut Development Authority
000 Xxxxx Xxxxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Vice President
or to such other address as either party may designate by notice given in
accordance with the terms of this paragraph.
12. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto, and cannot be modified in any respect except by an
agreement in writing.
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13. Headings. The headings contained in this Agreement are for the
convenience of reference only and are not to effect the construction of or be
taken into consideration in interpreting this Agreement.
14. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the successors and permitted assigns of the parties
hereto.
IN WITNESS WHEREOF, each party has caused this instrument to be signed
in its corporate name by its duly authorized officer, on the day and year first
above written.
AMERICAN COMMERCIAL FINANCE CORPORATION
By: /s/ Xxxxxxx X. Mount
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Xxxxxxx X. Mount
Its President
CONNECTICUT DEVELOPMENT AUTHORITY
By: /s/ Xxxxx X. Xxxx
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Xxxxx X. Xxxx
Its Loan Closing Administrator
