EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
by and between
APPLIED INNOVATION INC.
"BORROWER"
and
HUNTINGTON NATIONAL BANK
"LENDER"
Dated: August 7, 2002
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT dated as of August 7, 2002,
("AGREEMENT") is by and between APPLIED INNOVATION INC., a Delaware corporation
("BORROWER") and THE HUNTINGTON NATIONAL BANK, a national banking association
("LENDER") and its successors and assigns.
In consideration of the premises and the respective representations,
warranties, covenants, agreements and conditions hereinafter set forth, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in the Loan Documents, the following
terms shall have the meanings set forth below. Additional defined terms may
appear elsewhere in the Loan Documents.
"ADVANCE" means an advance of funds with respect to the Loan.
"AFFILIATE" means, as to any Person, any other Person (i) that directly
or indirectly controls, is controlled by, or is under direct or indirect common
control with, such Person, (ii) that directly or indirectly owns ten percent
(10%) or more of the voting power of such Person, (iii) ten percent (10%) or
more of the voting power of which is directly or indirectly owned by such
Person, or (iv) that has the power directly or indirectly to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"AVAILABILITY" means on any Business Day commencing on the Closing Date
and ending on the Maturity Date and so long as no Default or Event of Default
has occurred and is continuing, the amount available to Borrower from Lender
equal to the lesser of (i)(a) the then current Borrowing Base or (b) TEN MILLION
AND NO/100 DOLLARS ($10,000,000.00) less (ii) the then current outstanding
Principal Sum of the Note.
"BANKRUPTCY CODE" means Title 11 of the United States Code, as amended
from time to time.
"BORROWING BASE" means the sum of (i) seventy five percent (75%) of
Borrower's Eligible Accounts Receivable; plus (ii) forty percent (40%) of
Borrower's Eligible Inventory; plus (iii) seventy five percent (75%) of the
appraised value of the Property, not to exceed FIVE MILLION AND NO/100 DOLLARS
($5,000,000.00).
"BORROWING BASE CERTIFICATE" means a certificate of Borrower,
substantially in the form of EXHIBIT H.
"BUSINESS DAY" means each day other than Saturdays, Sundays, and other
days upon which banking institutions in the city of Columbus, Ohio are either
authorized or requested to remain closed to the general public. If the due date
of any payment due under the Note shall be a
1
day that is not a Banking Day, the due date shall be extended to the next
succeeding Banking Day; provided, however, that if such next succeeding Banking
Day occurs in the following calendar month, then the due date shall be the
immediately preceding Banking Day.
"CLOSING DATE" means the date of the execution of this Agreement.
"COLLATERAL" means all of Borrower's personal property, wherever
located, and now owned or hereafter acquired, including: Accounts; Chattel
Paper; Goods, Inventory; Equipment; Instruments; Investment Property; Documents;
Deposit accounts; Letter-of-Credit Rights; General Intangibles; and to the
extent not listed above as original collateral, Proceeds and Products of the
foregoing. All capitalized terms used in this definition and not otherwise
defined herein shall have the meaning assigned to them in the UCC. "Collateral"
also means all the real Property and fixtures attached thereto subject to the
Mortgage identified on EXHIBIT E, and includes any and all assets and property
as defined as "Collateral" in any other document or agreement between Lender and
Borrower. To the extent that the terms of any lease, license or similar
agreement between the Borrower and any person or entity prohibits transfer or
assignment by the Borrower of an interest in the property subject to such lease,
license or agreement, "Collateral" does not include the Borrower's interest in
such property.
"COMPLIANCE CERTIFICATE" means, with respect to each fiscal year and
each quarter, a certificate, substantially in the form of EXHIBIT F, signed by a
Responsible Officer (i) stating that no Default has occurred and is continuing,
or stating that a Default has occurred and is continuing, describing such
Default in reasonable detail, and describing what steps are being taken to
remedy the Default, (ii) stating that, to the best of his or her knowledge,
Borrower is in compliance with each of the covenants set forth in this
Agreement, or stating that Borrower is not in compliance, describing such
noncompliance in reasonable detail, and describing what steps are being taken to
remedy such noncompliance, and (iii) setting forth in reasonable detail a
computation of each of the financial covenants contained in this Agreement as of
the end of the applicable fiscal year or quarter. The Compliance Certificate
shall be presented in a form reasonably satisfactory to Lender.
"DEFAULT" means any event that is not an Event of Default as of a
specified date, but that with the lapse of time, notice, or both, would
constitute an Event of Default.
"EARLY TERMINATION FEE" means, that Borrower shall pay to Lender an
amount equal to two percent (2%) of the committed amount related to the Loan if
Borrower shall terminate this Agreement or any Loan at any time within the first
six (6) months from the date of this Agreement. If Borrower shall terminate this
Agreement or any loan at any time after the first six (6) months from the date
of this Agreement but prior to the Maturity Date, Borrower shall pay to Lender
an amount equal to one percent (1%) of the committed amount related to the Loan.
If Borrower is requested by Lender to pay off the Loan early or otherwise
required by Lender to terminate its relationship with Lender, the Early
Termination Fee provision shall not apply.
"EBITDA" means, for any period, Net Income for such period, plus
without duplication and to the extent reflected as a charge in the Statement of
Net Income for such period, (a) the sum of the following expenses of Borrower
for such period, in each case to the extent included in determining Net Income:
(i) depreciation and amortization expense; (ii) Interest Expense; (iii)
2
total Federal, state and local income tax expense; (iv) extraordinary losses;
(v) net losses on disposition of properties outside the ordinary course of
business; and (vi) all other extraordinary, unusual or non-recurring non-cash
charges, minus (b) the sum of the following items for Borrower for such period,
in each case to the extent included in determining Net Income: (i)
extraordinary, unusual or non-recurring gains; and (ii) net gains on disposition
of properties outside the ordinary course of business.
"ELIGIBLE ACCOUNTS RECEIVABLE" means that portion of Borrower's
accounts receivable on which Lender has a first and exclusive perfected security
interest, and that Lender determines in its reasonable discretion from time to
time, based on credit policies, market conditions, Borrower's business and other
matters, is eligible. For purposes of determining the Borrowing Base, Eligible
Accounts Receivable shall not include (a) accounts receivable which are ninety
(90) days past due or one hundred twenty (120) days past the invoice date, (b)
intercompany accounts, (c) foreign accounts receivable, not encompassed by
letters of credit in favor of Borrower, except for accounts receivable from
Telkom South Africa, for which fifty percent (50%) of accounts receivable less
than ninety (90) days past the due date, and not exceeding FIVE HUNDRED THOUSAND
AND NO/100 DOLLARS ($500,000.00) in the aggregate, shall be included in Eligible
Accounts Receivable, (d) any accounts receivable from any single account debtor
if fifty percent (50%) or more of such account debtor's receivables are more
than ninety (90) days past due or one hundred twenty (120) days past the invoice
date, (e) to the extent that any accounts receivable from any single account
debtor exceeds fifty percent (50%) of all Borrower's accounts receivable.
"ELIGIBLE INVENTORY" means that portion of the Borrower's Inventory, on
which the Lender has a first and exclusive perfected security interest, and that
the Lender determines in its reasonable discretion from time to time, based on
credit policies, market conditions, the Borrower's business and other matters,
is eligible for use in calculating the Borrowing Base. For purposes of
determining the Borrowing Base, Eligible Inventory shall not include (a)
Inventory which has been returned to Borrower after sale or lease thereof or
which Lender, in the exercise of its good faith judgment, determines to be
defective, unmerchantable, or obsolete for any reason, (b) work in progress, (c)
slow moving, obsolete or discontinued Inventory, (d) supply items, packaging, or
the freight portion of raw materials, (e) Inventory in control of a third person
for processing, storage, or otherwise unless the Borrower shall have obtained
and delivered to Lender, a bailee's waiver or secured party of bailee's waiver,
in form satisfactory to Lender, the original documents or other instruments
evidencing such Inventory, or such other agreements or other documents Lender
shall require in its sole and absolute discretion, (f) consigned Inventory, (g)
Inventory in transit unless Borrower shall have delivered to Lender a xxxx of
lading for such Inventory, (h) Inventory located outside of the United States of
America, or (i) Inventory in which any third party has a security interest or
lien. All Inventory shall be valued at the lesser of cost (on a FIFO basis) or
market.
"EVENT OF DEFAULT" means any of the events specified in SECTION 7,
provided that any requirement of notice, the lapse of time, or both, or any
other condition has been satisfied.
"GAAP" means those Generally Accepted Accounting Principles in the
United States which are recognized as such by the Financial Accounting Standards
Board of the American Institute of Certified Public Accountants or, if
applicable, the Securities and Exchange
3
Commission (or any generally recognized successor), consistently applied, as
such principles exist from time to time.
"INDEBTEDNESS" means with respect to any Person, as of any date of
determination, monetary obligations of such Person (other than trade payables
owing in the ordinary course of business), including (without duplication): (i)
all liability of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all liabilities of such Person evidenced by
a note, bond, debenture, or similar instrument; (iii) all obligations of such
Person under any conditional sale, lease or other title retention or security
agreement with respect to property acquired; (iv) all obligations in respect of
letters of credit, bankers' acceptances, surety or other bonds or similar
obligations issued or created for the account of such Person; (v) all direct or
indirect guaranty obligations of such Person; (vi) all liabilities or
obligations secured by any Lien on any property owned by such Person, whether or
not the Person has assumed or otherwise become liable for the payment thereof;
(vii) any liability of such Person or a "commonly controlled entity" to a
"multiemployer plan", both as defined in the Employee Retirement Act of 1974, as
amended from time to time; and (viii) any amendment, renewal, extension,
revision, or refunding of such liability or obligation.
"INTELLECTUAL PROPERTY" means all business and trade names, trademarks,
logos, service marks, brand names, patents, patent applications, copyrights,
know how, trade secrets, processes, techniques, discoveries, inventions,
developments, research, formulas, designs, confidential information, customer
lists, software, technical information, data, plans and drawings, and other
proprietary rights with respect to intellectual property required for or
incidental to a Person's business or operations.
"INTEREST EXPENSE" means, for any period, total cash interest expense
of Borrower with respect to all Indebtedness of Borrower, determined in
accordance with GAAP.
"LIBO RATE" means the rate obtained by dividing: (a) the actual or
estimated per annum rate, or the arithmetic mean of the per annum rates of
interest for deposits in United States Dollars for one (1) day periods, as
offered and determined by Lender in its sole discretion based upon reference to
information appearing in Telerate, a service of Telerate Systems Incorporated,
in the section captioned "British Lenders Assoc. Interest Settlement Rates", or
any comparable index selected by Lender on each date the LIBO Rate is
determined; by (b) an amount equal to one minus the stated maximum rate
(expressed as a decimal), if any, of all reserve requirements (including,
without limitation, any marginal, emergency, supplemental, special or other
reserves) that is specified on each date the LIBO Rate is determined by the
Board of Governors of the Federal Reserve System (or any successor agency
thereto) for determining the maximum reserve requirement with respect to
eurocurrency funding (currently referred to as "Eurocurrency liabilities" in
Regulation D of such Board) maintained by a member bank of the Federal Reserve
System, or any other regulations of any governmental authority having
jurisdiction with respect thereto, all as conclusively determined by Lender.
"LIEN" means any mortgage, assessment, security interest, easement,
claims, trusts, charge, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or otherwise, including judgment and mechanics'
liens), or preference, priority or other security agreement or similar
preferential arrangement of any kind or nature whatsoever (including any
4
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the UCC or comparable law of any jurisdiction
in respect of any of the foregoing).
"LIQUIDITY RATIO" means a ratio determined as of the last day of each
calendar month, equal to the ratio of (i) unencumbered cash and Marketable
Securities divided by (ii) TEN MILLION AND NO/100 DOLLARS ($10,000,000.00).
"LOAN" means the aggregate Advances extended to Borrower by Lender
pursuant to this Agreement in an aggregate Principal Sum of up to TEN MILLION
AND NO/100 DOLLARS ($10,000,000.00), secured by the Collateral and further
evidenced by the Note commencing on the Closing Date and terminating on the
applicable Maturity Date.
"LOAN DOCUMENTS" means the documents listed in SECTION 3.1 of this
Agreement and all other documents, filings and certificates executed and
delivered in connection with the transactions contemplated by this Agreement.
"MARKETABLE SECURITIES" means those unencumbered securities which would
be permissible for investment by Borrower in accordance with Borrower's
investment policy, as amended on October 21, 1999, a copy of which has been
previously delivered to and agreed upon by Lender, or a successor to such
investment policy to which Lender has AGREED.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business conditions, operations, performance or prospects of the Borrower, taken
as a whole; or (b) the ability of the Borrower to perform its obligations under
the Loan Documents.
"MATURITY DATE" means three hundred and sixty four ("364") days from
the Closing Date (August 6, 2003).
"MORTGAGE" means that certain mortgage on the Property.
"NET INCOME" means for any period, the net income or loss of Borrower
for such period determined in accordance with GAAP.
"NOTE" means the cognovit revolving promissory note, in the form of
EXHIBIT B, dated as of the date hereof, due on the Maturity Date in the
Principal Sum of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00), evidencing the
Advances made by Lender to Borrower pursuant to the Loan Documents, as amended,
modified or restated from time to time.
"OBLIGATIONS" means, collectively: (i) Borrower's obligations to Lender
under this Agreement; (ii) all of Borrower's other present and future
obligations to Lender arising out of or in connection with this Agreement; (iii)
Borrower's obligations to repay (a) any amounts that Lender may advance or spend
for the maintenance or preservation of the Collateral and (b) any other
expenditures that Lender may make under the provisions of this Agreement or for
the benefit of Borrower; (iv) all amounts owed under any modifications, renewals
or extensions of any of the foregoing obligations; and (iv) any of the foregoing
that arises after the filing of a petition by or against Borrower under the
Bankruptcy Code, even if such obligations do not accrue because of the automatic
stay under Bankruptcy Code Section 362 or otherwise.
5
"ORIGINATION FEE" waived.
"PERMITTED INDEBTEDNESS" has the meaning set forth in Section 6.1(a).
"PERMITTED LIENS" means (1) Liens incurred pursuant to the Loan
Documents; (2) nonconsensual Liens securing taxes, assessments or governmental
charges or levies or the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons; (3) Liens incurred in the
ordinary course of business (A) in connection with workers' compensation,
unemployment insurance, social security and other like laws, or (B) to secure
the performance of bids, tenders, sales contracts, leases, statutory
obligations, surety, appeal and performance bonds and other similar obligations
not incurred in connection with the borrowing of money, the obtaining of
advances or the payment of the deferred purchase price of property; (4)
attachment, judgment and other similar Liens arising in connection with court
proceedings, provided the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being actively contested
in good faith and by appropriate proceedings; (5) purchase money Liens made in
connection with the purchase price of property, the purchase of which does not
violate this Agreement or any other Loan Document, provided that such Lien
attaches only to the property acquired; (6) Liens incurred in the ordinary
course of business (including, without limitation, easements, rights of way,
restrictions and other similar encumbrances) which do not secure Indebtedness
and which do not in the aggregate materially detract from the value of
Borrower's property or assets or materially impair the use thereof in the
ordinary course of its business provided, however, that Borrower makes
appropriate reserves on its books and records in respect of such Liens set forth
in this CLAUSE (6) in accordance with GAAP and that such Liens individually or
in the aggregate do not have a material adverse effect on the Borrower or its
operations; (7) Liens in existence on the date hereof listed on EXHIBIT A, (8)
any interest or title of a lessor under any lease entered into by Borrower in
the ordinary course of business; and (9) Liens in connection with Indebtedness
permitted pursuant to Section 6.1(a)(vi).
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, governmental authority or any other form of entity.
"PRIME RATE" means the prime or base rate established by Lender from
time to time as its prime rate, based on its consideration of economic, money
market, business and competitive factors, and is not necessarily Lender's most
favorable rate. Any changes in the interest rate of the Loan due to a change in
the Prime Rate will take effect on the date of the Lender's change in its prime
or base rate.
"PRINCIPAL SUM" means the principal amount of the Note at any time
outstanding.
"PROPERTY" means that certain real property as described on EXHIBIT E.
"REQUEST FOR ADVANCE" means a Request for Advance substantially in the
form of EXHIBIT G.
6
"RESPONSIBLE OFFICER" means Xxxxxxx X. Xxxxxx and any Person then
holding the position of Chief Financial Officer or Controller of the Borrower.
"RESPONSIBLE OFFICER CERTIFICATE" means, with respect to the annual
financial statements, monthly financial statements, monthly accounts receivables
detail, a certificate signed by the Responsible Officer stating in effect that
such financial statements, when delivered, (i) were complete and correct in all
material respects; (ii) were prepared in accordance with GAAP; and (iii) fairly
present in all material respects the results of operations for the applicable
accounting period and consolidated financial condition as of the end of such
accounting period. The Responsible Officer Certificate shall be presented in a
form reasonably satisfactory to Lender.
"TANGIBLE NET WORTH" of any Person shall mean, as of any date, the
total shareholders' equity (including capital stock, additional paid-in capital
and retained earnings after deducting treasury stock) which would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP,
less all amounts appearing on the balance sheet of such Person related to (i)
goodwill; (ii) patents, trademarks, tradenames, copyrights and franchises, (iii)
loans and advances to employees, and (iv) all other similar assets that would be
classified as intangible assets under GAAP.
"UCC" means the Uniform Commercial Code as in effect in an applicable
state, and as amended from time to time. Any term used in the UCC as enacted in
the State of Ohio or the State where the Collateral is located and not defined
in the Loan Documents has the meaning, as amended from time to time, given to
the term in the UCC.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings assigned herein when used in
the Note or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in the Loan Documents and any certificate or
other document made or delivered pursuant hereto, accounting terms
relating to Borrower not defined in SUBSECTION 1.1 and accounting terms
partly defined in SUBSECTION 1.1 to the extent not defined, shall have
the respective meanings given to them under GAAP.
SECTION 2. LOAN
Upon the terms and subject to the conditions set forth in this
Agreement, Lender shall lend to Borrower the aggregate principal amount of up to
TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) due and owing on the Maturity
Date evidenced by the Note.
2.1 Subject to Availability, the Loan shall be disbursed by Lender to
Borrower in one or more Advances. Each Advance may be prepaid in whole or in
part and reborrowed, all in accordance with the terms and conditions hereof.
Each Advance shall be subject to each of the following conditions:
7
(a) a request for Advance is submitted by Borrower to Lender in a
form reasonably acceptable to Lender;
(b) each of the representations and warranties contained in SECTION
4 are true and correct in all material respects as of the date of each
Advance (unless any of the same expressly relate to an earlier date,
including, without limitation, the representation set forth in
SUBSECTION 4.9);
(c) the Borrower certifies in a writing reasonably acceptable to
Lender that it is in compliance with each of the covenants set forth in
this Agreement;
(d) no Event of Default or Default shall exist; and
(e) Advances under the Loan shall be requested prior to the
Maturity Date.
2.2 MATURITY AND PAY OFF. All outstanding Advances, together with all
accrued but unpaid interest in relation to the Note, shall be due and payable in
full on the Maturity Date.
2.3 INTEREST.
(a) Interest shall accrue on the Principal Sum until paid in full
(whether before or after judgment) at a fluctuating rate of interest
equal to, at the option and designation of the Borrower, as set forth
below, either (i) the Prime Rate less one percent (1%) per annum, or
(ii) the Libo Rate plus 1.65% per annum. The Borrower shall designate
in its request for Advance whether the Advance is to bear interest with
reference to the Libo Rate or the Prime Rate. The Borrower with respect
to any outstanding Advance may change its designation of the interest
by giving Lender no less than three (3) days advance written notice.
All accrued but unpaid interest shall be paid monthly in arrears
commencing September 1, 2002.
(b) During any period when any Event of Default shall have occurred
and be continuing, or upon maturity of the Note (by acceleration or
otherwise) the aggregate unpaid principal amount shall bear interest
from the date of such Event of Default or Maturity Date, as the case
may be, at a rate per annum equal to the Prime Rate plus five percent
(5.0%) until paid in full (both before and after judgement).
(c) Notwithstanding any provision of the Note to the contrary: (i)
in no event shall the interest rate on the Note be a rate per annum in
excess of the maximum interest rate permissible under applicable law
and (ii) to the extent that interest (or other amounts paid with
respect to the Note that are deemed to be interest under applicable
law) results in interest payments in excess of those permitted under
applicable law, such excess payments shall be applied, first, to the
payment of the Principal Sum, second, to any other amounts due from
Borrower to Lender under this Agreement, and, third, if no other
Obligations are owing to Lender under this Agreement, then refunded to
Borrower.
(d) Interest shall be calculated based upon: (i) the actual number
of days elapsed over each month, including any additional days elapsed
because the scheduled payment date fell on a day other than a Business
Day; and (ii) a calendar year of 360 days.
8
2.4 LATE PAYMENTS. If payment of principal, interest, or unpaid fees is
not made prior to 2:00 p.m., Columbus, Ohio time on the fifth day after such
payment is due and until such amount is paid in full, Lender may, in its sole
discretion, by notice to Borrower, assess a fee equal to five percent (5%) of
the past due payment amount.
2.5 PAYMENTS. (a) Unless otherwise agreed by Lender, all payments due
to Lender in connection with the Loan Documents shall be deducted by Lender from
readily available funds from Borrower's account with Lender as of 2:00 p.m.
Columbus, Ohio time on the date each payment is due.
(b) In the event sufficient funds are not readily available
pursuant to SUBSECTION 2.5(a) to satisfy Borrower's payment
obligations, Lender shall provide Borrower notice of such deficiency
and Borrower shall make payment of such deficiency by wire transfer of
immediately available funds to the account of Lender. Any such wire
transfer received by Lender after 2:00 p.m. Columbus, Ohio time shall
be deemed to have been received by Lender prior to 2:00 p.m. on the
next Business Day.
2.6 EARLY TERMINATION FEE. Borrower shall pay Lender the Early
Termination Fee if Borrower terminates the Loan prior to the Maturity Date.
SECTION 3. CONDITIONS TO CLOSING
The obligation of Lender to make an Advance on and after the Closing
Date is subject to the fulfillment, in a manner reasonably satisfactory to
Lender, of each of the following conditions precedent:
3.1 EXECUTION AND DELIVERY OF DOCUMENTS. Each of the following
documents and certificates, each dated and effective as of the Closing Date,
shall have been duly executed and delivered by the parties thereto on the
Closing Date:
(a) this Agreement;
(b) the Note;
(c) the Mortgage;
(d) a Compliance Certificate;
(e) a Borrowing Base Certificate, inventory report, aged accounts
receivables report and accounts payable report, in a form reasonably
acceptable to Lender;
(f) May 31, 2002 year to date interim financial statements, in a
form acceptable to Lender, and accompanied by a Responsible Officer
Certificate; and
(g) Copy of hazard insurance policy in a form reasonably
satisfactory to Lender and naming Lender as loss payee, and mortgagee
on any title insurance policy.
9
3.2 CERTIFICATES, OPINIONS AND OTHER DOCUMENTS. The following
certificates, opinions and other documents shall have been delivered by or on
behalf of Borrower, each in a form reasonably satisfactory to Lender, prior to
the Closing Date:
(a) copies of the Board of Directors' resolutions of Borrower
authorizing the execution, delivery and performance of Borrower's
obligations under the Loan Documents and any other documents to be
delivered by Borrower pursuant hereto and thereto;
(b) certified copies of Borrower's charter documents,
including any and all amendments thereto, as in effect on the Closing
Date, together with good standing certificates in each jurisdiction
where Borrower is qualified to do business unless the failure to be in
good standing would not have a Material Adverse Effect; and
(c) such other opinions, certificates, affidavits, documents
and filings as Lender may reasonably request.
3.3 DISBURSEMENTS AND DELIVERIES. The following disbursements shall
have been made by Borrower on the Closing Date:
(a) Payment of all reasonable closing costs, including but not
limited to, Lender's legal counsel's reasonable legal fees in an amount
not to exceed TEN THOUSAND AND NO/100 DOLLARS ($10,000.00), plus
out-of-pocket expenses. Borrower may apply good faith deposit,
delivered in connection with the execution of the Commitment Letter,
dated June 10, 2002, in payment of such expenses.
3.4 OTHER. Each of the following shall be true:
(a) each of Borrower's representations and warranties set
forth in the Loan Documents shall be accurate in all material respects
as of the Closing Date; and
(b) no material adverse change shall have occurred in the
financial condition of Borrower or its properties or operations since
March 31, 2002, other than certain matters as to which Borrower has
advised Lender prior to the Closing Date.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BORROWER
The representations and warranties of Borrower set forth below shall
survive the Closing Date, and any investigation made by Lender shall not
diminish the right of Lender to rely upon such representations and warranties.
Set forth on the EXHIBIT A, attached hereto are the exceptions to the
representations and warranties, which exceptions qualify this SECTION 4 in its
entirety. Borrower represents and warrants to Lender as follows.
4.1 INCORPORATION AND GOOD STANDING. Borrower is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Borrower is duly qualified to do business and is in good standing
under the laws of each state or other jurisdiction in which either the character
of its properties or the nature of its activities makes such qualification
necessary, except where a failure to qualify or be in good standing would not
have a
10
Material Adverse Effect. Borrower has furnished to Lender true and complete
copies of its charter documents and any other agreements affecting its
governance, all as in effect on the date of this Agreement.
4.2 COMPANY POWER. Borrower has full power and authority to (a) own,
lease and operate its properties and assets, (b) carry on its business as
presently conducted, (c) execute and deliver the Loan Documents and any other
instruments or documents provided for herein or therein, and (d) carry out and
perform its obligations under the terms of the Loan Documents.
4.3 ASSUMED BUSINESS NAMES. The Borrower does not do business under any
assumed business names.
4.4 SUBSIDIARIES AND JOINT VENTURES. As of the Closing Date, Borrower
has no subsidiaries and does not otherwise own or control, directly or
indirectly, or have any other equity investment in or other interest in, any
other Person. Borrower is not a member, partner or participant in any
partnership, joint venture, association or similar arrangement.
4.5 AUTHORIZATION; ENFORCEABILITY. Borrower's execution, delivery, and
performance of the Loan Documents have been duly authorized by all necessary
action by Borrower; do not require the consent or approval of any other Person,
regulatory authority or governmental body; and do not conflict with, result in a
violation of, or constitute a default under (a) any provision of its articles of
incorporation, or bylaws or code of regulations, or any agreement or other
instrument binding upon Borrower or (b) any law, governmental regulation, court
decree, or order applicable to Borrower. The Loan Documents to which it is a
party, when executed and delivered by Borrower, will constitute valid and
legally binding obligations of Borrower, enforceable against Borrower in
accordance with their respective terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally, and to general principles of equity.
4.6 TITLE TO AND CONDITION OF PROPERTIES AND ASSETS. Borrower owns, has
a valid leasehold interest in, or has legal right to use, as well as transfer,
all of the assets, properties and tangible personal property necessary for the
conduct of its business, free and clear of any Liens, but for the Liens
contemplated by this Agreement and Permitted Liens. The personal property owned
and leased by Borrower is in good operating condition and repair, ordinary wear
and tear excepted. Any real estate owned and leased by Borrower is in good
condition and it is not obligated to perform any material repairs to such real
estate. All Collateral consisting of goods is located solely in the states
listed on attached EXHIBIT D ("COLLATERAL STATES").
4.7 BOOKS AND RECORDS. The books of account, asset ledgers, inventory
ledgers, minute books and stock record books of Borrower, all of which have been
made available to Lender, are complete and correct in all material respects, and
have been maintained on a consistent basis in accordance with sound business
practices.
4.8 FINANCIAL STATEMENTS. The financial statements of Borrower as of
March 31, 2002, copies of which have been previously made available to Lender,
(a) are correct and complete in all material respects, (b) are consistent with,
and have been prepared from, the books and records of Borrower, (c) have been
prepared in accordance with GAAP except for such deviations as are
11
referred to in the notes thereto, and in the case of internally generated
financial statements, such financial statements do not contain footnotes, and
(d) fairly present in all material respects the financial position and results
of operations, changes in stockholders' equity and cash flows of Borrower as of
each date and for the respective periods covered by the financial statements.
Borrower is the sole owner of all of the assets reflected on such financial
statements.
4.9 MATERIAL ADVERSE CHANGE; MATERIAL EVENTS. Other than the Loan,
Borrower has no Indebtedness, or other material liability, claim, loss,
deficiency or obligation of any nature whether absolute or contingent,
liquidated or unliquidated and whether due or to become due. Since the date of
the most recent financial statements provided to Lender there has not been any
material adverse change in Borrower's business, operations, properties, assets
or condition and no event has occurred or circumstance exists that may result in
such a material adverse change other than certain matters as to which Borrower
advised Lender prior to the Closing Date. Borrower has no material contingent
obligations except as disclosed in such financial statements. Borrower has no
knowledge of any circumstance, condition, event or arrangement that may
hereafter give rise to any such liability other than in the ordinary course of
business.
4.10 TAXES. Borrower has timely filed or caused to be filed all tax
returns required under applicable law and such returns are true, correct and
complete in all material respects.
4.11 INTELLECTUAL PROPERTY. Borrower owns or is licensed to use,
without restriction or adverse claim, all Intellectual Property free and clear
of any Liens other than the Liens granted to Lender pursuant to this Agreement
and Permitted Liens, and has the right to use its Intellectual Property without
payment to any Person. There are no interference, opposition or cancellation
proceedings or infringement suits pending or, to the knowledge of Borrower,
threatened with respect to any of the Intellectual Property. To Borrower's
knowledge, no Person is interfering with, infringing upon, misappropriating or
otherwise in conflict with any of its Intellectual Property. Borrower has not
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any Intellectual Property rights of any Person, and it has not received any
claim alleging such action.
4.12 LEGAL PROCEEDINGS. Borrower is not (i) subject to any outstanding
injunction, judgment, order, decree or ruling, whether or not subject to appeal,
or (ii) a party or, to its knowledge, threatened to be made a party, to any
action, suit, proceeding, hearing, audit or investigation, of or before any
court, quasi-judicial agency, administrative agency or arbitrator.
4.13 INSURANCE. Borrower maintains and has maintained such insurance as
is required by any and all applicable laws and such other insurance, in amounts
and insuring against hazards and other liabilities, as is customarily maintained
by companies similarly situated.
4.14 COMPLIANCE WITH LAWS. Borrower has complied and is currently in
compliance with all applicable laws where the failure to so comply may have a
Material Adverse Effect. No notice has been received by Borrower alleging
non-compliance which remains uncured as of the date hereof, except for such
non-compliance that would not have a Material Adverse Effect.
4.15 LICENSES AND PERMITS. Borrower has obtained all governmental
licenses, permits and other governmental authorizations required in order for
it to own its assets and conduct its
12
business as presently conducted. All of such licenses, permits and
authorizations are in full force and effect. No material violation or remedial
obligation exists in respect of any such license or permit. No proceeding is
pending, or to the knowledge of Borrower, threatened to revoke or limit any such
license, permit or authorization.
4.16 HAZARDOUS MATERIALS. No property of Borrower to the best of
Borrower's knowledge ever has been, or ever will be so long as this Agreement
remains in effect, used for the generation, manufacture, storage, treatment,
disposal, release or threatened release of any hazardous waste or substance, as
those terms are defined in the "CERCLA," "XXXX," applicable state or Federal
laws, or regulations adopted pursuant to any of the foregoing. The
representations and warranties contained herein are based on Borrower's due
diligence in investigating the properties for hazardous waste and hazardous
substances. Borrower hereby (a) releases and waives any future claims against
Lender for indemnity or contribution in the event Borrower becomes liable for
cleanup or other costs under any such laws, and (b) agrees to indemnify and hold
harmless Lender against any and all claims and losses resulting from a breach of
this provision of this Agreement. This obligation to indemnify shall survive the
satisfaction of this Agreement.
4.17 LABOR RELATIONS. Borrower is not a party to or bound by any
collective bargaining or other labor agreement, and there are no organizational
efforts affecting its employees. There are no unremedied violations of any
federal, state or local labor or employment laws or regulations, including
wages, hours, collective bargaining, taxes and the like, and Borrower has no
knowledge of the existence of any grounds for any such claims.
4.18 NO INSOLVENCY. After giving effect to all Indebtedness (including
the Loan) of Borrower, (a) Borrower will be able to pay its obligations as they
become due and payable; (b) the present fair saleable value of the assets of
Borrower exceeds the amount that will be required to pay its probable liability
on its obligations as they become absolute and matured; (c) the aggregate value
of the property of Borrower at a fair valuation exceeds its Indebtedness; and
(d) Borrower will have sufficient capital to engage in its businesses.
4.19 FULL DISCLOSURE. The financial statements and other documents
provided to Lender and the representations and warranties of Borrower contained
in the Loan Documents, do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading. Borrower has not knowingly provided or made available to
Lender any information that is misleading or inaccurate in any material respect
or knowingly withheld from or failed to disclose to Lender any data, documents
or other information that, insofar as Borrower can now foresee, could materially
adversely affect its assets, properties or business or financial condition or
its ability to perform its obligations under the Loan Documents.
4.20 USE OF PROCEEDS. Borrower shall use the proceeds of the Loan for
the purposes of supporting short term working capital requirements and other
corporate purposes not prohibited by this Agreement including, without
limitation, investments in accordance with its investment policy as amended
dated October 21, 1999, its stock redemption program and acquisitions.
13
4.21 STATE OF INCORPORATION, PRINCIPAL PLACE OF BUSINESS, TAXPAYER
IDENTIFICATION NUMBER. The Borrower's State of incorporation and Federal
Taxpayer Identification Number as shown on EXHIBIT C are true, accurate and
correct.
4.22 MERGERS. At no time has the Borrower merged into or been
consolidated with any other entity.
SECTION 5. AFFIRMATIVE COVENANTS
Borrower hereby agrees that so long as Lender is under any obligation
to make an Advance to Borrower hereunder or the Note remains outstanding and
unpaid or any other amount is owing to Lender under any Loan Document, Borrower
shall:
5.1 FINANCIAL AND COMPANY REPORTS. Deliver or shall cause to be
delivered to Lender the following reports within the applicable time periods
specified in this SECTION 5.1:
(a) For the fiscal year ending December 31, 2002, and for each
fiscal year thereafter, the annual financial statements, which shall be
delivered within one hundred twenty (120) days after the end of each
such fiscal year and shall have been audited by an independent
certified public accountant satisfactory to Lender and shall be
accompanied by (i) a Responsible Officer Certificate and (ii) a
Compliance Certificate;
(b) Year to date internally prepared monthly financial
statements shall be delivered within thirty (30) days after the end of
each calendar month. Such monthly financial statements shall include
(i) balance sheets, (ii) income statements, (iii) statements of cash
flows, (iv) an accounts receivable report, (v) aged accounts payable
report, and (vi) a Borrowing Base Certificate, all in the form
acceptable to Lender. The monthly financial statements shall be
accompanied by a (A) Responsible Officer Certificate and (B) Compliance
Certificate.
Promptly upon written request therefor, Borrower shall furnish (or
cause to be furnished) to Lender additional financial or other information as
Lender may reasonably request.
5.2 PREPARATION OF FINANCIAL STATEMENTS IN ACCORDANCE WITH GAAP.
Prepare all quarterly and annual financial statements in compliance with the
regulations of any regulatory body having jurisdiction over Borrower or its
business and in accordance with GAAP in a manner consistent with the accounting
practices, policies and procedures applied in connection with the preparation of
the financial statement initially delivered to Lender, except for any changes
required by GAAP or adopted with Lender's written consent (which shall not
unreasonably be withheld). Where the character or amount of any asset or
liability or item of income or expense, or any consolidation or other accounting
computation is required to be made for any purpose, it shall be done in
accordance with GAAP.
5.3 NOTICE OF CERTAIN EVENTS. Give prompt notice to Lender of the
occurrence of any of the following events:
14
(a) any Default or Event of Default accompanied by a
certificate specifying the nature of such Default or Event of Default
and period of existence thereof;
(b) any (i) default or event of default under any material
contractual obligation in excess of ONE HUNDRED THOUSAND AND NO/100
DOLLARS ($100,000.00) of Borrower or (ii) litigation where the dollar
amount at issue not covered by insurance is reasonably expected by
Borrower to be at least ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($100,000.00), or the commencement of any investigation or proceeding
which may exist at any time between Borrower and any third party
including, but not limited to, any governmental authority;
(c) any matter which has resulted or is likely to result in a
material adverse change in Borrower's financial condition or
operations; or
(d) the loss or destruction of any asset of Borrower not
covered by insurance, where such loss or destruction is reasonably
expected by Borrower to be at least TWENTY FIVE THOUSAND AND NO/100
DOLLARS ($25,000.00) or have a Material Adverse Effect.
Each notice pursuant to this SUBSECTION 5.4 shall be accompanied by a statement
of a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action Borrower proposes to take with respect thereto.
5.4 BOOKS, RECORDS, AUDITS AND INSPECTIONS. Maintain accurate and
complete books and records. Lender shall have the right, in its sole discretion,
to conduct audits of the Borrower, using Lender or non-Lender personnel, and the
Borrower will provide access to all of its books and records and such other
information which Lender deems necessary to evaluate the status of the Loan or
the Collateral. The Borrower will pay to Lender in connection with such audits,
all reasonable fees and out-of-pocket expenses of the auditors. Such audit fees
and expenses shall be payable by the Borrower upon demand.
5.5 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Preserve, renew
and keep in full force and effect the legal existence of Borrower and not, in
one transaction or a series of related transactions, merge into or consolidate
with any other entity or sell all or substantially all of its assets; take all
reasonable action to maintain all rights, privileges and franchises necessary in
the normal conduct of Borrower's businesses, activities or operations; comply
with all contractual obligations and applicable laws, except, in each case, to
the extent that failure to do so would not, in the aggregate, have a Material
Adverse Effect.
5.6 ACCOUNTS. For value received in consideration of the pricing of the
Loan, Borrower shall deposit substantially all of Borrower's operating funds
with The Huntington National Bank and shall maintain its primary operating
accounts with The Huntington National Bank. Borrower shall maintain certain of
its cash management services accounts and certain of its investment accounts
with The Huntington National Bank.
5.7 INSURANCE.
15
(a) Keep its business and properties insured against all risks
usually insured against in the same general area by Persons engaged in
the same or a similar business, including those risks currently insured
by Borrower;
(b) Maintain public liability insurance against claims for personal
injury, death or property damage suffered by others upon or in or about
any premises occupied by it or occurring as a result of its ownership,
maintenance operation of any automobiles, aircraft or other vehicles,
or facilities;
(c) Maintain all such workers' compensation or similar insurance as
may be required under the laws of any jurisdiction in which it may be
engaged in business; and
(d) Furnish to Lender, upon request, a certificate of its insurance
coverage, in form and detail satisfactory to Lender, and copies of the
applicable policies (if so requested); and (ii) require each policy of
insurance to contain a provision whereby it cannot be canceled,
amended, or modified or permitted to lapse except after thirty (30)
days prior written notice to Lender.
5.8 COMPLIANCE WITH LAWS. Comply at all times with all applicable laws,
including zoning laws, rules regulations, orders and directions of any
governmental authority having jurisdiction over it or its business or property,
except for such noncompliance as would not, individually or in the aggregate,
have a Material Adverse Effect.
5.9 PAYMENT OF OBLIGATIONS. Pay and discharge, as the same shall become
due and payable, all its material obligations and liabilities including, without
limitation, all tax liabilities, assessments and governmental charges or levies
upon it or its properties or assets, unless the same are being contested in good
faith by appropriate proceedings and adequate reserves are being maintained in
accordance with GAAP.
5.10 MAINTENANCE OF PROPERTIES. Maintain all of its properties in good
condition and repair in accordance with the requirements of its business.
SECTION 6. NEGATIVE COVENANTS.
Borrower hereby agrees that so long as Lender is under any obligation
to advance funds to Borrower hereunder or the Note remains outstanding and
unpaid or any other amount is owing to Lender under any Loan Document, Borrower
shall not, absent Lender's prior written consent, directly or indirectly:
6.1 FINANCIAL COVENANTS.
(a) Create, incur, assume, extend the maturity of or otherwise
modify in any material respect, or otherwise become directly or
indirectly liable with respect to, any Indebtedness other than (i) the
Indebtedness contemplated by this Agreement; (ii) Indebtedness in
connection with Permitted Liens; (iii) Indebtedness consisting of
interest rate protection agreements, foreign currency exchange
agreements, commodity price protection agreements or other interest or
currency exchange rate or commodity price hedging agreements with
Lender; (iv) purchase money Indebtedness incurred after the
16
date of this Agreement in connection with the purchase of assets in the
ordinary course of business; (v) Indebtedness the payment of which is
subordinate to indebtedness to Lender pursuant to a subordination
agreement in the form reasonably acceptable to Lender; (vi)
Indebtedness incurred as a result of borrowing against brokerage
accounts not on deposit with Lender in an amount not to exceed FIVE
MILLION AND NO/100 DOLLARS ($5,000,000.00), without the prior written
consent of the Lender, which such consent shall not be unreasonably
withheld, and (vii) Indebtedness in addition to the foregoing in an
amount not to exceed FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($500,000.00), without the prior written consent of the Lender, which
such consent shall not be unreasonably withheld (the foregoing 6.1
(a)(i) through (vii), the "PERMITTED INDEBTEDNESS")
(b) Enter into or permit to exist any transaction (including,
without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate of
Borrower on terms that are less favorable to Borrower than those which
might be obtained at the time from Persons who are not such an
Affiliate, unless the Affiliate is a domestic subsidiary of the
Borrower and has guaranteed the Indebtedness of the Borrower to Lender
in a form reasonably satisfactory to Lender under the Loan Documents
and any other security documents reasonably required by Lender.
(c) Sell, transfer or otherwise dispose of any of its assets
included in the current Borrowing Base calculation, except (i)
inventory and obsolete equipment or other obsolete or worn out property
disposed of in the ordinary course of business not to exceed ONE
HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00), and (ii) other
assets disposed of for fair market value in the ordinary course of
business.
(d) Create any subsidiary, unless such subsidiary (i) is
either domiciled in the United States or is domiciled outside the
United States with assets the value of which, in the reasonable opinion
of Lender, do not exceed ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($100,000.00), excluding assets owned prior to becoming a subsidiary of
the Borrower; and (ii) such subsidiary has executed and delivered to
Lender a guaranty of the Indebtedness of Borrower under the Loan
Documents and all other documentation required by Lender in order to
protect and secure such guaranty.
(e) Redeem, repurchase or retire any of the capital stock,
except as in accordance with the stock buyback program in existence as
of the date of this Agreement.
(f) Pay or obligate itself to pay, directly or indirectly, any
management fee or similar compensation to any Person.
(g) Fail to maintain at all times a Tangible Net Worth of at
least THIRTY SIX MILLION FIVE HUNDRED AND NO/DOLLARS ($36,500,000.00)
initially measured on the Closing Date and then quarterly thereafter.
(h) Fail to maintain at all times a Liquidity Ratio of 1:1
initially measured on the Closing Date and then upon each draw request
thereafter.
17
(i) Change its fiscal year or accounting methods unless except
in accordance with GAAP.
(j) Directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any of the assets of Borrower
whether now owned or hereafter acquired or any proceeds, income or
profits therefrom, other than Permitted Liens.
(k) Make or suffer to exist investments in or loans to any
other Person, except: (i) loans made in compliance with SUBSECTION 6.1
(1) OR (m); (ii) investments received by or issued to Borrower on
account or in settlement of any claim of Borrower against any other
Person in any bankruptcy or similar insolvency proceeding involving
such Person, (iii) investments in cash equivalents or made in
compliance with its investment policy as amended dated October 21,
1999, or such other investment policy as Lender has approved, which
approval shall not be unreasonably withheld; (iv) extensions of trade
credit in the ordinary course of business, (v) loans and advances to
employees of Borrower in the ordinary course of business not to exceed
ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) in the aggregate,
and (vi) a loan to Xxxxxx Xxxxxxx in the amount of THREE HUNDRED EIGHTY
TWO THOUSAND SEVEN HUNDRED EIGHTY THREE AND 23/100 DOLLARS
($382,783.23).
(l) Subject to SUBSECTION 6.1(k) and except for Permitted
Indebtedness, endorsements of instruments or items of payment for
collection in the ordinary course of business, guaranty, endorse, or
otherwise in any way become or be responsible for any obligations of
any other Person, whether directly or indirectly by agreement to
purchase the Indebtedness of any other Person or through the purchase
of goods, supplies or services on behalf of such Person, or maintenance
of working capital or other balance sheet covenants or conditions, or
by way of stock purchase, capital contribution, advance or loan for the
purpose of paying or discharging any Indebtedness or obligation of such
other Person or otherwise.
(m) Enter into any arrangement whereby Borrower shall sell or
transfer any property owned by Borrower to any Person and, following
such sale or transfer, Borrower shall lease, as lessee, the same
property, unless (i) the sale or transfer relates to property first
acquired by Borrower after the Closing Date, and (ii) prior to and
immediately after giving effect to such sale, no Event of Default shall
have occurred and be continuing; and
(n) Enter into or assume any agreement (other than the Loan
Documents) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired.
6.2 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any transaction of
merger, consolidation, or amalgamation, unless the Borrower is the surviving
company as the result of the transaction or the entity resulting from such
transaction assumes all Indebtedness of the Borrower under the Loan Documents
and such entity is acceptable to Lender; liquidate, wind up
18
or dissolve itself (or suffer any liquidation or dissolution); or convey, sell,
lease, assign, transfer or otherwise dispose of, all or substantially all of its
property, business or assets.
6.3 ORGANIZATIONAL AND BUSINESS ACTIVITIES. Materially amend its
charter documents, materially change its structure, effect any reorganization or
recapitalization or engage in any material business substantially different from
and unrelated to its present business, without the prior written consent of
Lender.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES
7.1 EVENT OF DEFAULT. There shall exist an "Event of Default" if any of
the following occurs:
(a) Borrower shall fail to pay any outstanding amount of
interest and/or principal amount of the Note within five (5) five
Business Days of the date when due in accordance with the terms thereof
or hereof;
(b) any representation or warranty made, or deemed made
pursuant to the terms of the Loan Documents or which is contained in
any certificate, document or financial or other statement furnished at
any time under or in connection with this Agreement, or the Note shall
prove to have been incorrect in any material respect on or as of the
date made or deemed made;
(c) Borrower shall default in the observance or performance of
any other agreement contained in the Loan Documents, and such Default
shall not have been remedied within ten (10) days after the earlier of
(i) the day on which Borrower first obtains knowledge of such Default,
or (ii) the day on which written notice thereof is given by Lender to
Borrower;
(d) Borrower shall default under any loan, extension of
credit, security agreement, purchase or sale agreement, interest rate
protection agreement, foreign currency exchange agreement, commodity
price protection agreement or other interest or currency exchange rate
or commodity price hedging arrangement or any other agreement, in favor
of Lender;
(e) Borrower shall default under any loan, extension of
credit, security agreement, or any other agreement related to
collateral or security, in favor of any lender, in each case
compromising Indebtedness in the principal sum of TWO HUNDRED FIFTY
THOUSAND AND NO/100 DOLLARS ($250,000.00);
(f) Borrower shall default under any purchase or sales
agreement compromising Indebtedness in the principal sum of ONE MILLION
AND NO/100 DOLLARS ($1,000,000.00);
(g) The dissolution or termination of Borrower's existence as
a going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower;
19
(h) Commencement of foreclosure or forfeiture proceedings,
whether by judicial proceedings, self-help, repossession or any other
method, by any creditor of Borrower, including a garnishment,
attachment or levy on or of any of Borrower's deposit accounts with
Lender, unless such proceedings are being contested in good faith by
Borrower and the proceedings, if adversely determined, could not
reasonably be expected to have a Material Adverse Effect;
(i) Lender shall be determined not to have a valid Lien on the
Collateral, the aggregate value of which is equal to or exceeding ONE
HUNDRED THOUSAND AND NO/100 ($100,000.00) other than by virtue of acts
or omissions of Lender, or one or more of the Loan Documents shall have
been determined not to be valid;
(j) one or more judgments or decrees shall be entered against
Borrower involving in the aggregate a liability of ONE HUNDRED THOUSAND
AND NO/100 DOLLARS ($100,000.00) or more which shall not be fully
covered by insurance and all such judgments or decrees shall not have
been paid by Borrower within ten (10) days of entry thereof, or have
been vacated, discharged, stayed or bonded pending appeal within thirty
(30) days from the entry thereof; or
(k) Lender, in good faith, deems itself insecure.
7.2 REMEDIES. Upon the occurrence of an Event of Default, Lender shall
have (i) all rights and remedies granted to it under the Note, this Agreement,
including but not limited to those rights and remedies provided for in
SUBSECTIONS 8.4 AND 8.5, and the other Loan Documents, and (ii) all rights of a
creditor under applicable law (including the UCC). All such rights and remedies
and the exercise thereof shall be cumulative. No exercise of any such rights and
remedies shall be deemed to be exclusive or constitute an election of remedies.
7.3 ACCELERATION. If any Event of Default shall occur, except where
otherwise provided in the Loan Documents, all commitments and obligations of
Lender under this Agreement will, upon written notice from Lender to Borrower,
terminate (including any obligation to make Advances or disbursements), and all
Indebtedness under this Agreement will, upon written notice from Lender to
Borrower, become due and payable, PROVIDED that, notwithstanding the foregoing,
upon the occurrence of an Event of Default pursuant to Section 7.1(e) above, all
the Indebtedness under this Agreement will automatically become immediately due
and payable without notice to Borrower of any kind.
SECTION 8. SECURITY AGREEMENT
8.1 GRANT OF SECURITY INTEREST. Borrower grants a security interest in
the Collateral to Lender to secure the payment or performance of the
Obligations.
8.2 PERFECTION OF SECURITY INTEREST.
(a) Filing a financing statement. Borrower authorizes Lender
to file one or more financing statement (each, a "FINANCING STATEMENT") in
accordance with the UCC describing the Collateral in which a security interest
may be perfected by filing a Financing Statement.
20
(b) Possession. Borrower shall have possession of the
Collateral, except where expressly otherwise provided in this Agreement. Where
Collateral is in the possession of a third party, Borrower will join with Lender
in notifying the third party of Lender's security interest and attempting to
obtain an acknowledgment from such third party that it is holding the Collateral
for the benefit of Lender.
8.3 POST-CLOSING COVENANTS AND RIGHTS CONCERNING THE COLLATERAL.
(a) Inspection. The parties to this Agreement may inspect any
Collateral in the other party's possession, at any time upon reasonable notice.
(b) Personal Property. The Collateral constituting goods other
than fixtures shall remain personal property at all times. Borrower shall not
affix any goods other than fixtures to any real property in any manner which
would change its nature from that of personal property to real property or to a
fixture, unless prior to such time Lender has filed a financing statement for
the purpose of perfecting a security interest a security interest in such
fixture.
(c) Lender's Collection Rights. After the occurrence of, and
during the continuance of, an Event of Default, Lender shall have the right, at
any time, to enforce Borrower's rights against the Borrower's account debtors
and obligors.
(d) Limitations on Obligations Concerning Maintenance of
Collateral.
(i) Borrower has the risk of loss of the Collateral
other than Collateral in the possession of, or under
the control of, Lender.
(ii) Lender shall have no duty to collect any income
accruing on the Collateral or to preserve any rights
relating to the Collateral.
8.4 REMEDIES UPON DEFAULT. In addition to those rights and remedies
provided for in SECTION 7.2, Lender shall have the right to pursue any of the
following remedies separately, successively or simultaneously: (i) file suit and
obtain judgment and, in conjunction with any action, Lender may seek any
ancillary remedies provided by law, including levy of attachment and
garnishment; (ii) without taking possession, sell, lease or otherwise dispose of
the Collateral at public or private sale in accordance with the UCC; and (iii)
take possession of any Collateral if not already in its possession without
demand and without legal process. Upon Lender's demand, Borrower will assemble
and make the Collateral available to Lender at a place to be designated by
Lender that is reasonably convenient to both parties. Borrower grants to Lender
the right, for this purpose, to enter into or on any premises where Collateral
may be located.
8.5 FORECLOSURE PROVISIONS.
(a) No Waiver. No delay or omission by Lender to exercise any
right or remedy accruing upon any Event of Default shall: (i) impair
any right or remedy; (ii) waive any default or operate as an
acquiescence to the Event of Default; or (iii) affect any subsequent
Event of Default of the same or of a different nature.
21
(b) Notices. Lender shall give Borrower such notice of any
private or public sale as may be required by the UCC.
(c) Condition of Collateral. Lender has no obligation to
clean-up or otherwise prepare the Collateral for sale, provided that
sale of Collateral is in a commercially reasonable manner.
(d) No Obligation to Pursue Others. Lender has no obligation
to attempt to satisfy the Obligations by collecting them from any other
person liable for them and Lender may release, modify or waive any
collateral provided by any other Person to secure any of the
Obligations, all without affecting Lender's rights against Borrower.
Borrower waives any right it may have to require Lender to pursue any
third person for any of the Obligations.
(e) Compliance with Other Laws. Lender may comply with any
applicable state or federal law requirements in connection with a
disposition of the Collateral and compliance will not be considered to
adversely affect the commercial reasonableness of any sale of the
Collateral.
(f) Warranties. Lender may sell the Collateral without giving
any warranties as to the Collateral. Lender may specifically disclaim
any warranties of title or the like. This procedure will not be
considered to adversely affect the commercial reasonableness of any
sale of the Collateral.
(g) Sales of Credit. If Lender sells any of the Collateral
upon credit, Borrower will be credited only with payments actually made
by the purchaser thereof, received by Lender and applied to the
indebtedness of such purchaser. In the event such purchaser fails to
pay for the Collateral, Lender may resell the Collateral and Borrower
shall be credited with the proceeds of the sale.
(h) Purchases by Lender. In the event Lender purchases any of
the Collateral being sold, Lender may pay for the Collateral by
crediting some or all of the Obligations of the Borrower.
(i) No Marshaling. Lender has no obligation to marshal any
assets in favor of Borrower, or against or in payment of: (i) the Note;
(ii) any of the other Obligations; or (iii) any other obligation owed
to Lender by Borrower or any other person.
SECTION 9. MISCELLANEOUS.
9.1 AMENDMENT, MODIFICATION OR RESTATEMENT. The parties may, by mutual
agreement, amend, modify or restate any provision or the entirety of any Loan
Document, provided that each such amendment, modification or restatement shall
be in writing and shall be executed and delivered by each party.
(a) Unless otherwise specified in such amendment, modification or
restatement:
22
(b) the amended or modified provisions shall be effective as of the
date of such amendment;
(c) such amendment shall not be deemed to constitute a waiver of any
Default that has occurred and is continuing as of the effective date thereof;
(d) Borrower shall be deemed to have reconfirmed each of the
representations and warranties set forth herein as of the effective date of such
amendment (except to the extent such representations and warranties relate to an
earlier date);
(e) all terms defined herein shall have the same definition in such
amendment;
(f) such amendment shall be deemed to be a Loan Document unless
otherwise specifically provided and the provisions of this Section shall be
applicable to such amendment; and
(g) this Agreement and each Loan Document shall be deemed to remain in
full force and effect, as so amended, modified or restated.
Unless otherwise specified, all Loan Documents concerning the
Collateral shall remain in full force and effect. Lender may, in its sole
discretion, condition its agreement to any amendment, modification or
restatement upon the payment of money, the granting of additional security, the
providing of additional guarantees or other acts or concessions by Borrower or
any other Person.
9.2 WAIVER OF COMPLIANCE. The parties may, by mutual agreement, waive
compliance with any provision of any Loan Document or any Default or Event of
Default; provided that each such waiver shall be in writing and be shall
executed and delivered by each party. Each such waiver shall be effective only
in the specific instance and for the specific purpose for which it is given.
Lender may, in its sole discretion, refuse to grant any such waiver or condition
any such waiver upon the payment of money, the granting of additional security,
the providing of additional guarantees or other acts or concessions by Borrower
or any other Person.
9.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of the Loan Documents.
9.4 INDEMNIFICATION BY BORROWER. Borrower shall indemnify and hold
Lender and its Affiliates officers, directors, shareholders and agents, harmless
from and against any loss, liability, claim, damage, injury, obligation,
penalty, cost, suit, action, interest, demand, expense (including costs of
investigation, defense, reasonable attorneys' fees, amounts paid in settlement,
and judgments) related to, caused by, resulting or arising directly or
indirectly from or in connection with any inaccuracy in or breach of any
representation or warranty made by Borrower, or any failure of Borrower to
perform or observe fully any covenant, agreement or provision contained herein,
in the Loan Documents or in any other certificate, instrument or documents
delivered by Borrower in connection herewith or therewith. The foregoing
indemnification provisions are in addition to any statutory, equitable or common
law remedy available to Lender.
23
9.5 CONSENT OR APPROVAL OF LENDER. Whenever this Agreement or any Loan
Document provides that an action may be taken with the "consent" or "approval"
of Lender, such consent or approval must be in writing signed by Lender. Each
such consent or approval shall be effective only in the specific instance and
for the specific purpose for which it is given.
Unless the Loan Document specifically provides that Lender shall not
"unreasonably withhold" such consent or approval, Lender may, in its reasonable
discretion, refuse to grant any such consent or approval, or condition any such
consent or approval upon the payment of money, the granting of additional
security, the providing of additional guarantees or other acts or concessions by
Borrower or any other Person.
Where any Loan Document provides that Lender shall not "unreasonably
withhold" any consent or approval, any of the following shall by way of example
and not limitation, constitute an appropriate reason to withhold such consent or
approval:
(a) imposing additional unreimbursed cost, expense or
liability upon Lender or its Affiliates, unless Borrower has reimbursed
such cost, expense or liability;
(b) releasing any Person liable for any Obligation under any
Loan Document;
(c) limiting in any material respect the practical ability of
Lender to enforce any of its rights or remedies under any Loan
Document;
(d) causing or potentially causing Lender or its Affiliates to
violate or breach any agreement by which they are bound, the terms of
their charter documents or any applicable law;
(e) releasing any security for any of the Obligations under
any Loan Document, unless the value of such security has been deducted
from the Availability;
(f) subordinating or further subordinating of any of the
rights of Lender under any Loan Document to the rights of any other
Person.
9.6 FORBEARANCE. Lender may, in the exercise of its sole discretion,
with or without notice to Borrower, forbear from declaring an Event of Default
under any Loan Document, or exercising or enforcing any right or remedy
hereunder or thereunder.
Unless Lender otherwise agrees in writing, no such forbearance shall be
deemed to toll the passage of any time period, waive Lender's right to declare
such Event of Default or exercise or enforce any such right or remedy at any
time, suspend the accrual of interest or waive any assessment that would
otherwise accrue or become due, constitute a basis for laches or estoppel, or
preclude the exercise or enforcement of any other right or remedy or declaration
of any other Event of Default under any Loan Document. Lender may, in the
exercise of its sole discretion, condition any forbearance upon the payment of
money, the granting of additional security, the providing of additional
guarantees or other acts or concessions by Borrower or any other Person.
24
9.7 NO IMPLIED RIGHTS OR WAIVERS. No notice to or demand on Borrower in
any case shall entitle Borrower to any other or further notice or demand in the
same, similar and other circumstances, except as otherwise required by this
Agreement or any other Loan Document. Neither any failure nor any delay on the
part of Lender in exercising any right, power or privilege under any Loan
Document shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or further exercise of the same or the
exercise of any other right, power or privilege.
9.8 PAYMENT OF FEES AND EXPENSES. Borrower agrees (i) to pay or
reimburse Lender for all of its out-of-pocket expenses incurred in connection
with the development, preparation and execution of, and the amendment,
supplement or modification to the Loan Documents and any other document prepared
in connection herewith, and the consummation of the transactions contemplated
hereby and thereby, including without limitation, the reasonable fees (which
shall not exceed $10,000) and disbursements of counsel to Lender, (ii) to pay or
reimburse Lender for all of its costs and expenses (including reasonable legal
fees and expenses) incurred in connection with the investigation and
determination of an Event of Default, the enforcement of the Loan Documents, the
collection of amounts due under the Loan Documents, and (iii) to pay or
reimburse Lender for all costs and expenses, including but not limited to, all
recording and filing fees in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of
any Loan Document.
9.9 REPRODUCTION OF DOCUMENTS. Any of the Loan Documents and all other
documents relating hereto and thereto, including, without limitation, (a)
consents, waivers and modifications which may hereafter be executed, (b)
documents received by Lender at the time of any borrowing or otherwise, and (c)
financial statements, certificates and information previously or hereafter
furnished to Lender, may be produced by Lender by an photographic, photostatic,
microfilm, micro-card, miniature photographic, computerized, digitized, scanned
or other process. Borrower and Lender agree and stipulate that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by Lender in the regular
course of business) and that any enlargement, facsimile or further reproduction
of such reproduction shall likewise be admissible in evidence.
9.10 ENTIRE AGREEMENT. The Loan Documents constitute the entire
agreement relating to the subject matter hereof among the parties and supersede
all prior or contemporaneous agreements between the parties. The parties have
not relied upon any representations, inducements, promises, undertakings or
agreements other than those expressly set forth in the Loan Documents.
9.11 SEVERABILITY. If any provision of the Loan Documents is held to be
invalid, void or unenforceable for any reason, the remaining provisions shall
nevertheless continue in full force and effect, provided that nothing in this
subsection shall be construed to limit or waive the breach of any representation
with respect to enforceability of this Agreement.
25
9.12 THIRD PARTY BENEFICIARIES. The obligations of each party under the
Loan Documents shall inure solely to the benefit of the other parties, and no
other Person shall have any legal or equitable right, remedy or claim under or
with respect to any Loan Document.
9.13 LEGAL REPRESENTATION. Each of the parties has been represented by
independent legal counsel in connection with the negotiation, drafting and
execution of the Loan Documents, and each party expressly waives to the fullest
extent permitted by applicable law any claim that any Loan Document constitutes
a contract of adhesion; the protection of any applicable law protecting
individuals or consumers in credit transactions; any usury or similar law
limiting interest or other fees or compensation in a credit transaction; any
claim that any Loan Document constitutes a partnership, joint venture, trust or
similar arrangement; any claim that any Loan Document imposes any fiduciary or
agency duty upon Lender or any of its agents; and any implied representation,
warranty or covenant.
9.14 RULES OF CONSTRUCTION. Unless otherwise specified, the following
rules shall be applied in construing the provisions of the Loan Documents.
(a) Terms that imply gender shall apply to all genders;
(b) Headings are included solely for purposes of reference and
shall be ignored in construing the provisions of any Loan Documents;
(c) The Exhibits and Schedules attached to any Loan Document are
incorporated herein and in each Loan Document by reference;
(d) "Herein", "hereto", "hereof" and words of similar import refer
to this Agreement or any Loan Document (as applicable);
(e) The word "and" connotes "each and every", and the word "or"
connotes "any one or more";
(f) The word "including" is deemed to be followed by the words
"without limitation";
(g) Unless otherwise specified in the applicable Loan Documents,
any reference to any law or regulation refers to that law or regulation
as amended from time to time and to the corresponding provision of any
successor law or regulation;
(h) Any reference to any agreement or other document refers to
that agreement or other document as amended, modified or restated from
time to time;
(i) The recitals are the mutual representations of the parties and
are a part of the document in which they appear;
(j) Unless otherwise specified in the applicable Loan Documents,
any reference to any Person shall be construed as a reference to that
Person's successors, assigns, heirs or estate or personal
representative; and
26
(k) No consideration or evidentiary weight shall be given to any
prior draft or xxxx-up of any document; the identity of the party (or
its counsel) drafting or proposing any provision of a document; any
summary or description of any proposed term or provision set forth in
any term sheet, commitment letter or written presentation produced
prior to the date hereof; or perceived or alleged differences among the
parties with respect to bargaining advantage, sophistication in
financial affairs or access to information.
9.15 NOTICE.
(a) Any notice or other communication required or permitted to be
given or made under any Loan Document (i) shall be in writing, (ii) may
be delivered by hand delivery, First Class U.S. Mail (regular,
certified, registered or expedited delivery), FedEx, UPS Overnight,
Airborne or other nationally recognized delivery service, or fax, and
(iii) shall be delivered or transmitted to the appropriate address as
set forth below.
(b) Each notice or other communication shall be delivered or
addressed to a party at its address set forth below unless such address
is changed in accordance with the immediately following sentence. A
party's address for notice may be changed from time to time by notice
given to each of the other parties.
BORROWER:
APPLIED INNOVATION INC.
0000 Xxxxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Fax No. (000) 000-0000
With a copy to:
--------------
Xxxxxx Xxxxxx Xxxxxx & Xxxxxx LLP
00 X. Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx
Fax No. (000) 000-0000
LENDER:
THE HUNTINGTON NATIONAL BANK
00 Xxxxx Xxxx Xxxxxx, XX 0000
Xxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxxxx
Fax No. (000) 000-0000
27
With a copy to:
--------------
Xxxxxxx & Xxxxx, Co., L.P.A.
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax No. (000) 000-0000
Absent fraud or manifest error, a receipt signed by the
addressee or its authorized representative, a certified or registered
mail receipt, a signed delivery service confirmation or a fax shall
constitute proof of delivery. Any notice actually received by the
addressee shall constitute delivery notwithstanding the failure to
comply with any provisions of this subsection.
A notice delivered by regular First Class U.S. Mail shall be
deemed to have been delivered on the third Business Day after its
post-xxxx. Any other notice shall be deemed to have been received on
the date and time of the signed receipt or confirmation of delivery or
transmission thereof, unless that receipt or confirmation date and time
is not a Business Day or is after 5:00 p.m. local time on a Business
Day, in which case such notice shall be deemed to have been received on
the next succeeding Business Day.
9.16 ASSIGNMENT.
(a) The Loan Documents shall be binding upon and inure to the
benefit of Borrower and Lender, all future holders of the Note and
their respective successors and permitted assigns, PROVIDED, HOWEVER,
that Borrower shall not, and shall not attempt or purport, to assign or
transfer to any Person or permit any other Person to assume or
undertake any of its rights, duties or obligations under any Loan
Document without the prior written consent of Lender, which consent may
be granted in its sole discretion.
(b) Lender may, in the sole exercise of its discretion, (A)
assign (with or without recourse) all of its rights, duties and
obligations under the Loan Documents; (B) sell or transfer all or any
part of the Loan; or (C) sell a participation in the Loan. Lender shall
not be required to notify Borrower of any of the foregoing assignments,
participations or distributions; provided, however, that until Borrower
receives such notice, Borrower shall be entitled to treat Lender as the
sole holder of the Loan. In the event that Lender assigns or transfers
the Loan or its rights, duties and obligations under the Loan
Documents, such assignment or transfer shall be deemed a waiver by
Lender of compliance by Borrower with Section 5.6 of this Agreement,
and Borrower shall have no obligation to maintain operating funds or
other accounts either with Lender or its assignee of transferee.
9.17 FURTHER ASSURANCES. Each party agrees to execute and deliver such
further documents and instruments and to do such further acts and things as may
be necessary or desirable to carry out the intent and purposes of the Loan
Documents.
9.18 CLOSING OF THE TRANSACTION. It is anticipated that the
transactions contemplated by this Agreement may be closed and consummated by the
transmission of documents, signature
28
pages of documents and funds by mail, delivery service, fax or other electronic
transmission. Each party agrees that the faxed delivery of a counterpart
signature page to the other parties or their representatives shall constitute
such party's execution and delivery thereof. The parties agree that the
attachment of original or faxed signature pages of any document by legal counsel
acting in such capacity and in accordance with instructions, shall constitute
the execution and delivery of such documents.
The closing shall be deemed to have occurred and the Loan Documents
shall be deemed to have been simultaneously executed and delivered by all
parties in Dublin, Ohio on the Closing Date.
9.19 COUNTERPARTS. Any Loan Document may be executed in one or more
counterparts, each of which shall be deemed an original, and all of such
counterparts together shall constitute one and the same agreement.
9.20 SETOFF. In addition to any rights and remedies by law, Lender
shall have the right, without prior notice to Borrower, any such notice being
expressly waived by Borrower to the extent permitted by applicable law, upon any
amount becoming due and owing by Borrower hereunder or under the Note (whether
by maturity, by acceleration or otherwise) to set-off and appropriate and apply
against any and all amounts in which Borrower has an interest, any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time in the
possession or control of Lender or due from Lender to Borrower under any
agreement without regard to whether Lender has received the same in pledge, for
safekeeping, as agent for collection or transmission or otherwise or whether
Lender has conditionally released the same; and provided that any amounts so
set-off and appropriated shall be applied first to the payment of the Loan and
any other amounts owing to Lender under the Loan Documents and then to all other
amounts owing from Borrower to Lender under any other agreement.
9.21 GOVERNING LAW. The Loan Documents were negotiated in the State of
Ohio and accepted by Lender in the State of Ohio, and the Loan shall be
disbursed from the State of Ohio. The parties agree that the State of Ohio has a
substantial relationship to the transactions evidenced hereby and further agree
that the Loan Documents shall be governed by and construed in accordance with
the laws of the State of Ohio without regard to conflict of laws principles.
9.22 WAIVER OF JURY TRIAL AND SET-OFF BY BORROWER. The parties, each
after consulting or having had the opportunity to consult with legal counsel,
knowingly, voluntarily and intentionally agree that in any litigation in any
court with respect to, in connection with, or arising out of any Loan Document,
or the validity, protection, interpretation, collection or enforcement thereof,
or any other claim or dispute howsoever arising between Lender and Borrower, (i)
Borrower hereby waives the right to interpose any set-off, recoupment,
counterclaim or crossclaim in connection with any such litigation, irrespective
of the nature thereof, unless such set-off recoupment, counterclaim or
crossclaim could not, by reason of any applicable federal or state procedural
law, be interposed, pleaded or alleged in any other action, and (ii) both
Borrower and Lender hereby each expressly waive any right they may have to a
trial by jury of any claim, demand, action or cause of action (A) arising under
any Loan Document or any other instrument, document or agreement executed or
delivered in connection
29
herewith, or (B) in any way connected with or related or incidental to the
dealings of Lender and Borrower with respect to any Loan Document or any other
instrument, document or agreement executed or delivered in connection herewith,
or the transactions related hereto, in each case whether sounding in contract or
tort or otherwise; and Borrower and Lender hereby agree and consent that any
such claim, demand, action or cause of action shall be decided by court trial
without a jury and either Borrower or Lender may file an original counterpart or
a copy of this Section with any court as written evidence of the consent of
Borrower or Lender to the waiver of its rights to trial by jury.
9.23 CONSENT TO JURISDICTION, VENUE AND SERVICE OF PROCESS.
(a) The parties, each after having consulted or having had the
opportunity to consult with legal counsel, knowingly, voluntarily,
intentionally, and irrevocably: (i) consents to the exclusive
jurisdiction of the Common Pleas Court of Franklin County, Ohio and the
United States District Court for the Southern District of Ohio, Eastern
Division with respect to any litigation; (ii) waives any objections to
the venue of any litigation in either such court, any defense of
inconvenient forum to the maintenance of any such litigation in any
such court and any bond (other than any appeals or supersedeas bond),
surety or other security that might be required of any other party with
respect to the maintenance of any such litigation in any such court
(except, in the case of Lender, as and to the extent necessary to
secure in rem jurisdiction over the property of Borrower or any
guarantor or surety of the Note, or to enforce any lien or security
interest or enforce any judgment); (iii) agrees not to commence any
litigation except in either of such courts and agrees not to contest
the removal of any litigation commenced in any other court to either of
such courts; (iv) agrees not to seek to remove, by consolidation or
otherwise, any litigation commenced in either of such courts to any
other court; (v) waives personal service of process in connection with
any litigation and consents to service of process by registered or
certified mail, postage prepaid, addressed as provided in this
Agreement; and (vi) agrees not to contest the discretionary
jurisdiction of either such court with respect to any declaratory
judgment or other action in equity.
(b) The provisions set forth in SUBSECTION 9.23(a) shall not be
deemed to have been modified in any respect or relinquished by either
Lender or Borrower except by written instrument executed by each of
them. Nothing in this Section shall be deemed to affect the right of
any party to serve legal process in any manner permitted by law. Each
party agrees that a final judgment in any litigation so brought shall
be deemed to conclusive and may be enforced by suit on such judgment or
in any other manner provided by applicable law.
The parties expressly acknowledge that the provisions of this
Section have been mutually agreed upon for the purpose of minimizing
expense, delay and conflict in resolving disputes arising under or in
connection with the transactions between and relationships among the
parties contemplated by the Loan Documents, and, therefore, agree that:
(i) in the event that any party commences litigation in any court other
than one of the courts specified in this SUBSECTION 9.23 and such
litigation is dismissed, stayed or removed to one of the courts
specified in this SUBSECTION 9.23 by virtue of the enforcement of the
provisions of this SUBSECTION 9.23, such party shall reimburse all of
the other parties to such litigation for all legal fees and other
expenses incurred by such parties in defending such litigation and
securing such stay, dismissal or removal (including all cost incurred
in connection with
30
compliance with discovery in such litigation); and (ii) in the event
that any party commences litigation in any court other than one of the
courts specified in this SUBSECTION 9.23, all discovery and responsive
pleading in such litigation shall be stayed pending the determination
of any motion by any other party to cause such litigation to be
dismissed, stayed or removed to one of the courts specified in this
SUBSECTION 9.23 by virtue of the enforcement of the provisions of this
SUBSECTION 9.23.
9.24 CONFESSION OF JUDGMENT. Borrower hereby authorizes any attorney at
law to appear for Borrower, in an action on the Note or any Loan Document, at
any time after the same become due, as herein provided, in any court of record
in or of the State of Ohio, or elsewhere, to waive the issuing and service of
process against Borrower and to confess judgment in favor of the holder of the
Note or the party entitled to the benefits of the Agreement against Borrower for
the amount that may be due, with interest at the rate herein mentioned and costs
of suit, and to waive and release all errors in said proceedings and judgment,
and all petitions in error, and right of appeal from the judgment rendered.
9.25 CONFIDENTIALITY. Lender will maintain as confidential, and will
not disclose to any Person, any information provided by Borrower in connection
with the Loan Documents or acquired by Lender in connection with the Loan,
including, without limitation, any information obtained in any audit described
in SECTION 5.4 or inspection of Collateral described in SECTION 8.3, except (a)
as necessary in connection with the Loan Documents; (b) as required by law; (c)
as required in connection with regulatory authorities having jurisdiction over
Lender; (d) as necessary in connection with Lender's independent auditors; (e)
to potential assignees of, or participants in, the Lender's rights and interests
pursuant to the Loan Documents, in each instance who have agreed to comply with
this SECTION 9.25; or (f) such information that is, or has become, public
knowledge.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
31
The parties have caused this Agreement to be executed and delivered
effective as of the date first written above.
LENDER:
THE HUNTINGTON NATIONAL BANK
By: /s/ Xxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxxx
Its: Vice President
================================================================================
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
================================================================================
BORROWER:
APPLIED INNOVATION INC.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
------------------------------------
Its: Vice President, Treasurer and
------------------------------------
Chief Financial Officer
------------------------------------
32
