Exhibit 10.6
REVOLVING CREDIT AGREEMENT
between
FIRST UNION NATIONAL BANK
and
ENVIRONMENTAL TECTONICS CORPORATION
Dated as of March 27, 1997
REVOLVING CREDIT AGREEMENT BETWEEN FIRST UNION NATIONAL BANK
and ENVIRONMENTAL TECTONICS CORPORATION
TABLE OF CONTENTS
Article Page
ARTICLE I - DEFINITIONS...................................... 1
ARTICLE II - CREDIT ACCOMMODATIONS........................... 9
2.1 The Line of Credit...................................... 9
2.2 Interest................................................ 11
2.3 Conversion and Continuation of Loans.................... 13
2.4 Special Provisions Applicable to Adjusted LIBO
Rate Loans.............................................. 14
2.5 Requirements of Law..................................... 16
2.6 Determinations.......................................... 16
2.7 Payments and Computations............................... 17
2.8 Borrowing............................................... 17
2.9 Prepayment and Repayment................................ 17
ARTICLE III - SECURITY....................................... 18
3.1 Security Documents...................................... 18
3.2 Additional Documents.................................... 18
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE BORROWER.. 18
4.1 Good Standing of the Borrower; Authorization............ 18
4.2 Compliance with Laws and Other Agreements............... 18
4.3 No Conflict; Governmental Approvals..................... 18
4.4 Financial and Other Information Regarding Borrower...... 19
4.5 Taxes................................................... 19
4.6 Encumbrances and Guaranties............................. 19
4.7 Material Adverse Changes................................ 20
4.8 Margin Securities....................................... 20
4.9 ERISA................................................... 20
4.10 Pending Litigation...................................... 20
4.11 Valid, Binding and Enforceable.......................... 20
4.12 Priority of Mortgage.................................... 21
4.13 Priority of Security Interests.......................... 21
4.14 Environmental Matters................................... 21
4.15 No Untrue Statements.................................... 21
ARTICLE V - CONDITIONS PRECEDENT TO THE BANK'S OBLIGATIONS... 22
5.1 Documents and Items to be Delivered by the Borrower at
Closing................................................. 22
5.2 Bank's Audit............................................ 24
5.3 Additional Financing.................................... 24
5.4 Conditions Precedent to Making Line of Credit Loans..... 24
5.5 Conditions Subsequent................................... 24
ARTICLE VI - AFFIRMATIVE COVENANTS OF THE BORROWER........... 25
6.1 Use of Proceeds......................................... 25
6.2 Financial Statements.................................... 25
6.3 Ordinary Course of Business; Records.................... 26
6.4 Information for the Bank................................ 26
6.5 Insurance............................................... 27
6.6 Maintenance............................................. 28
6.7 Taxes................................................... 28
6.8 Leases.................................................. 28
6.9 Corporate Existence; Certain Rights; Laws............... 28
6.10 Notice of Litigation or Other Proceedings............... 28
6.11 Indebtedness............................................ 28
6.12 Notice of Events of Default............................. 28
6.13 ERISA................................................... 29
6.14 Deposit Accounts........................................ 29
6.15 Management.............................................. 29
6.16 Financial Covenants..................................... 29
6.17 Compliance with Environmental Laws...................... 29
6.18 Foreign Accounts........................................ 29
6.19 Further Actions......................................... 30
ARTICLE VII - NEGATIVE COVENANTS............................. 30
7.1 Fundamental Corporate Changes........................... 30
7.2 Indebtedness............................................ 30
7.3 Encumbrances............................................ 30
7.4 Guaranties.............................................. 31
7.5 Sales and Lease-Backs................................... 31
7.6 Loans, Investments...................................... 31
7.7 Change in Business...................................... 32
7.8 Sale or Discount of Receivables......................... 32
7.9 Prepayment of Indebtedness.............................. 32
7.10 ERISA................................................... 32
7.11 Restricted Payments..................................... 32
7.12 Compliance with Federal Reserve Board Regulations....... 32
7.13 Change in Ownership..................................... 33
ARTICLE VIII - EVENTS OF DEFAULT............................. 33
8.1 Borrower's Failure to Pay............................... 33
8.2 Breach of Covenants or Conditions....................... 33
8.3 Defaults in Other Agreements............................ 33
8.4 Agreements Invalid...................................... 33
8.5 False Warranties; Breach of Representations............. 34
8.6 Judgments............................................... 34
8.7 Bankruptcy or Insolvency of the Borrower................ 34
ARTICLE IX - REMEDIES........................................ 35
9.1 Further Advances; Acceleration; Setoff.................. 35
9.2 Further Remedies; Confession of Judgment................ 35
ARTICLE X - MISCELLANEOUS.................................... 37
10.1 Remedies Cumulative; No Waiver.......................... 37
10.2 Notices................................................. 37
10.3 Costs, Expenses and Attorneys' Fees..................... 38
10.4 Survival of Covenants................................... 39
10.5 Counterparts; Effectiveness............................. 39
10.6 Headings................................................ 39
10.7 Payment Due On A Day Other Than A Business Day.......... 39
10.8 Arbitration............................................. 39
10.9 Preservation and Limitation of Remedies................. 40
10.10 Governing Law......................................... 41
10.11 Integration........................................... 41
10.12 Amendment and Waiver.................................. 41
10.13 Successors and Assigns................................ 41
10.14 Severability of Provisions............................ 41
10.15 Consent to Jurisdiction and Service of Process........ 41
10.16 Indemnification....................................... 42
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT ("Agreement"), dated as of
March 27, 1997, is between FIRST UNION NATIONAL BANK, a national
banking association (the "Bank"), and ENVIRONMENTAL TECTONICS
CORPORATION, a Pennsylvania corporation (the "Borrower").
BACKGROUND
The Bank and the Borrower desire to set forth the terms and
conditions under which the Bank will make available to the
Borrower certain credit facilities to be used for the purposes
specified in this Agreement. Accordingly, the Bank and the
Borrower, each intending to be legally bound hereby, agree as
follows:
ARTICLE I - DEFINITIONS
Terms used herein without definition that are defined in the
Uniform Commercial Code shall have the meanings ascribed to them
therein, unless the context requires otherwise. The following
terms shall have the following meanings in this Agreement:
"Account" shall have the meaning given to that term in the
Uniform Commercial Code and, in addition, shall include any right
to payment for goods sold or leased or services rendered which is
evidenced by an instrument or chattel paper.
"Adjusted Base Rate" shall mean the rate of interest equal
to the Base Rate less the Rate Reduction, if any.
"Adjusted Base Rate Loan" shall mean any Line of Credit Loan
accruing interest at the Adjusted Base Rate.
"Adjusted LIBO Rate" shall mean the interest rate equal to
the sum of LIBOR plus two and one-half percent (2.50%) less the
Rate Reduction, if any.
"Adjusted LIBO Rate Loan" shall mean any Line of Credit Loan
accruing interest at the Adjusted LIBO Rate.
"Affiliate" shall mean any Subsidiary of the Borrower and
any Person or entity that, now or hereafter, directly or
indirectly through one or more intermediaries, controls, is
controlled by or is under common ownership or control with the
Borrower. For purposes of this definition, the terms "control,"
"controls" and "controlled" shall refer to the power to determine
the management or policies of a Person, whether resulting from an
official position or capacity with such Person, direct or
indirect beneficial ownership of at least twenty percent (20%) of
the voting securities or other equity interests of such Person,
or otherwise.
"Agreement" shall mean this agreement, together with all
exhibits, amendments, modifications and supplements hereto as may
be in effect from time to time.
"Applicable Law" shall mean all applicable provisions of
(i) constitutions, statutes, rules, regulations and orders of
governmental authorities of any kind having jurisdiction over the
Bank or the Borrowers, (ii) authorizations, consents, approvals,
and licenses of such governmental authorities, (iii) Judgments,
and (iv) common law and equity.
"Applicable Rates" shall have the meaning given such term in
Section 2.2 hereof.
"Assignment of Claims" shall mean that assignment by the
Borrower to the Bank, dated the date of this Agreement, in form
and substance satisfactory to the Bank, of claims of the Borrower
upon the United States, as required pursuant to Article III of
this Agreement, together with all amendments, modifications,
exhibits and schedules thereto as may be in effect from time to
time.
"Bank" shall have the meaning specified in the initial
paragraph of this Agreement, together with its successors and
assigns.
"Base Rate" shall mean the floating annual rate of interest
that is designated from time to time by the Bank as the "Base
Rate" and is used by the Bank as a reference base with respect to
interest rates charged to borrowers. The determination and
statement of the Base Rate shall not in any way preclude the Bank
from making loans to other borrowers at rates which are higher or
lower than the Base Rate.
"Borrower" shall have the meaning specified in the initial
paragraph of this Agreement, together with its successors and
assigns.
"Business Day" shall mean any day upon which the Bank is
open for business at 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxxx,
Xxxxxxxxxxxx.
"Capital Lease" shall mean any lease of property which, in
accordance with GAAP, should be capitalized on the lessee's
balance sheet.
"Capital Lease Obligation" shall mean the amount of the
liability which, according to GAAP, should be capitalized or
disclosed with respect to a Capital Lease.
"Chase Letters of Credit" shall have the meaning given to
such term in Section 7.2 hereof.
"Closing" shall mean the execution and delivery to the Bank
of all of the documents and instruments required by the terms of
this Agreement and the closing of the transactions contemplated
by this Agreement.
"Closing Date" shall mean the date on which the Closing
takes place.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Collateral" shall have the meaning set forth in the
Security Agreement.
"Copyright Assignment" shall mean the collateral assignment
by the Borrower to the Bank, dated the same date as this
Agreement, in form and substance satisfactory to the Bank, of
certain copyrights held by the Borrower, as required pursuant to
Article III of this Agreement, together with all amendments,
modifications, exhibits and schedules thereto as may be in effect
from time to time.
"Default Rate" shall mean the Base Rate plus two percent
(2%).
"Encumbrance" shall mean, as to any Person, any mortgage,
lien, pledge, adverse claim, charge, security interest or other
encumbrance in or on, or any interest or title of any vendor,
lessor, lender to, or other secured party of the Person under any
conditional sale or other title retention agreement or Capital
Lease with respect to, any property or asset of the Person.
"Environmental Laws" shall mean the Federal Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
Sections 9601, et. seq., the Federal Resource Conservation and Recovery
Act, 42 U.S.C. Sections 6901 et. seq., the Hazardous Materials
Transportation Act, 49 U.S.C. Sections 1801, et. seq., all other
federal, state and local environmental or health laws applicable
to the Borrower or its business, operations or assets now or
hereafter enacted, and all rules, regulations, orders and
publications adopted or promulgated pursuant thereto from time to
time.
"ERISA" shall mean the federal Employee Retirement Income
Security Act of 1974, as amended.
"Eurodollar Business Day" shall mean any day on which
relevant London international financial markets are open for
dealings in deposits of U.S. Dollars and which is also other than
a Saturday, Sunday or other day on which commercial banks are
authorized or permitted to close in Philadelphia, Pennsylvania.
"Event of Default" shall have the meaning set forth in
Article VIII of this Agreement.
"Federal Reserve Board" shall mean the Board of Governors of
the United States Federal Reserve System.
"Financial Statements" shall have the meaning set forth in
Section 4.4(a) of this Agreement.
"GAAP" shall mean generally accepted accounting principles,
as in effect at the time of application to the provisions hereof,
and consistently applied.
"Guarantors" shall mean Environmental Tectonics Corporation
(Europe) Limited and ETC International Corporation.
"Guarantor Security Agreements" shall mean that certain
Security Agreement, dated as of the same date of this Agreement,
by ETC International Corporation and that certain Debenture dated
as of the same date of this Agreement, by Environmental Tectonics
Corporation (Europe) Limited, each in form and substance
satisfactory to the Bank, as required by Article III of this
Agreement, together with all amendments, modifications, exhibits
and schedules thereto as may be in effect from time to time.
"Guaranty" shall mean any guaranty or agreement to be a
surety or other material contingent liability (other than any
endorsement for collection or deposit in the ordinary course of
business), direct or indirect, with respect to any obligation of
another Person.
"Guaranty Agreements" shall mean those certain Guaranties,
dated the same date of this Agreement, in form and substance
satisfactory to the Bank, by the Guarantors, as required by
Article III of this Agreement, together with all amendments,
modifications, exhibits and schedules thereto as may be in effect
from time to time.
"Hazardous Materials" shall mean all materials of any kind
which are flammable, explosive, toxic, radioactive or otherwise
hazardous to animal or plant life or the environment, including,
without limitation, "hazardous wastes," "hazardous substances"
and "contaminants," as such terms are defined by Environmental
Laws.
"Indebtedness" shall mean any obligation for borrowed money,
including, without limitation:
(a) any obligation owed for all or any part of the
purchase price of property or other assets or for the cost of
property or other assets constructed or of improvements thereto,
other than accounts payable included in current liabilities and
incurred in respect of property purchased in the ordinary course
of business;
(b) any Capital Lease Obligation; and
(c) any reimbursement obligations and other
obligations under any letter of credit, currency swap agreement,
interest rate swap, cap, collar or floor agreement or other
interest rate management devise, or any forward sale or purchase
agreement for foreign currencies.
"Interest Period" shall mean, with respect to any Adjusted
LIBO Rate Loan, a period of 30, 60 or 90 days' duration as the
Borrower may elect; provided, however, that (a) interest shall
accrue from and including the first day of each Interest Period
to, but excluding, the day on which such Interest Period expires;
(b) any Interest Period which would otherwise end on a day which
is not a Eurodollar Business Day shall be extended to the next
succeeding Eurodollar Business Day, unless such Eurodollar
Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Eurodollar
Business Day; and (c) with respect to any Interest Period which
begins on the last Eurodollar Business Day of a calendar month
(or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) the
Interest Period shall end on the last Eurodollar Business Day of
a calendar month.
"Judgment" shall have the meaning set forth in Section 8.6
of this Agreement.
"Landlord's Waivers" shall mean landlord's waivers, in form
and substance satisfactory to the Bank, by Orlando TechCenter,
Ltd. as landlords of real property leased to the Borrower, as
required pursuant to Article III of this Agreement, together with
all amendments, modifications, exhibits and schedules thereto as
may be in effect from time to time.
"Letters of Credit" shall have the meaning set forth in
Section 2.1(b)(1) of this Agreement.
"Letter of Credit Fee Reduction" shall mean a reduction in
the letter of credit fee otherwise charged by the Bank to the
Borrower pursuant to Section 2.1(b)(2) of this Agreement. The
Letter of Credit Fee Reduction shall equal one-quarter of one
percent (0.25%) if the Borrower's Leverage Ratio is greater than
0.75 and less than 1.00. The Letter of Credit Fee Reduction
shall equal sixty-five one hundredths of one percent (0.65%) if
the Borrower's Leverage Ratio is less than or equal to 0.75.
"LIBOR" shall mean the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined by the Bank
pursuant to the following formula:
London InterBank Offered Rate
LIBOR = 1 - Reserve Percentage
For purposes of this Agreement, the term "London InterBank
Offered Rate" shall mean, for any Interest Period, as applied to
any Adjusted LIBO Rate Loan, the rate per annum reported on
Telerate page 3750 as of 11:00 a.m. London time (or as soon
thereafter as practicable) two Eurodollar Business Days prior to
the first day of such Interest Period or, if not so reported,
then as determined by the Bank from another recognized source of
interbank quotation.
"Line of Credit" shall mean the line of credit from the Bank
to the Borrower established pursuant to Section 2.1 of this
Agreement.
"Line of Credit Loans" shall mean the loans made by the Bank
to the Borrower pursuant to the Line of Credit.
"Line of Credit Note" shall have the meaning set forth in
Section 2.1 of this Agreement, together with all replacements,
amendments and renewals thereof.
"Loan Documents" shall mean this Agreement, the Security
Agreement, the Mortgage, the Note, the Patent Assignment, the
Trademark Assignment, the Copyright Assignment, the Guaranty
Agreements, the Guarantor Security Agreements, the Assignment of
Claims and all agreements, amendments, certificates, financing
statements, schedules, reports, notices, and exhibits now or
hereafter executed or delivered in connection with any of the
foregoing, as may be in effect from time to time.
"Loans" shall mean the Line of Credit Loans.
"Mortgage" shall mean a mortgage, dated the same day as this
Agreement, in form and substance satisfactory to the Bank, by
which the Borrower shall grant to the Bank a mortgage lien on
real property located at County Line Industrial Park,
Southampton, Pennsylvania, as required pursuant to Article III of
this Agreement, together with all amendments, modifications,
exhibits and schedules thereto as may be in effect from time to
time.
"Note" shall mean the Line of Credit Note, and all
replacements, amendments, extensions and renewals thereof.
"Obligations" shall mean the obligations of the Borrower:
(a) to pay the principal, interest, commitment fees
and any other liabilities of the Borrower to the Bank under this
Agreement and the other Loan Documents in accordance with the
terms thereof;
(b) to satisfy all of the other direct or indirect
liabilities of the Borrower to the Bank, whether hereunder or
otherwise, whether now existing or hereafter incurred, whether or
not evidenced by any note or other instrument, matured or
unmatured, direct, absolute or contingent, joint or several,
including any extensions, modifications, renewals thereof and
substitutions therefor;
(c) to repay the Bank all amounts advanced by the Bank
hereunder or otherwise on behalf of the Borrower, including, but
without limitation, advances for principal or interest payments
to prior secured parties, mortgagors or lienors, or for taxes,
levies, insurance, rent, wages, repairs to or maintenance or
storage of any Collateral; and
(d) to reimburse the Bank, on demand, for all of the
Bank's expenses and costs, including the reasonable fees and
expenses of its counsel, in connection with the negotiation,
preparation, administration, amendment, modification, or
enforcement of this Agreement and the documents required
hereunder, including all amounts payable under Section 10.3
hereof.
"Patent Assignment" shall mean the collateral assignment by
the Borrower to the Bank, dated the same date as this Agreement,
in form and substance satisfactory to the Bank, of certain
patents held by the Borrower, as required pursuant to Article III
of this Agreement, together with all amendments, modifications,
exhibits and schedules thereto as may be in effect from time to
time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust,
unincorporated organization, joint venture, court or governmental
or political subdivision or agency thereof.
"Rate Reduction" shall mean a reduction in the Applicable
Base Rate or Applicable LIBO Rate, as applicable, charged by the
Bank to the Borrower pursuant to Section 2.2 of this Agreement.
The Rate Reduction shall equal one-quarter of one percent (0.25%)
if the Borrower's Leverage Ratio is greater than 0.75 and less
than 1.00. The Rate Reduction shall equal one half of one
percent (0.50%) if the Borrower's Leverage Ratio is less than or
equal to 0.75. The determination of whether the Borrower is
entitled to a Rate Reduction shall be made in connection with the
Borrower's delivery of the certificate required to be delivered
by the Borrower to the Bank pursuant to Section 6.2(b) of this
Agreement. Rate Reductions will become effective on the first
day of the subsequent fiscal quarter. Prior to the Borrower's
delivery of the first such Certificate, no Rate Reduction will be
available.
"Regulatory Change" means (a) the enactment or effectuation
after the date of this Agreement of any new, or change in any
existing, Applicable Law, (b) the adoption after such date of any
new, or the adoption or other effectuation after such date of any
change in any existing, interpretation, directive or request
(whether or not having the force of law), or (c) any change after
such date in the administration or enforcement of any Applicable
Law to which the Bank is subject. As used in this definition,
the "effectuation" of a change shall include, without limitation,
that consisting of or resulting from a determination of a court
or regulatory authority.
"Reserve Percentage" shall mean, for any Adjusted LIBO Rate
Loan for any Interest Period therefor, the maximum percentage
reserve requirement (rounded to the next highest 1/100 of 1% and
expressed as a decimal) in effect for any day during the Interest
Period under the Federal Reserve Board's Regulation D for
Eurocurrency Liabilities as defined therein.
"Revolving Facility Commitment" shall have the meaning set
forth in Section 2.1 of this Agreement.
"Security Agreement" shall mean the agreement between the
Borrower as debtor and the Bank as secured party, dated the same
date as this Agreement, in form and substance satisfactory to the
Bank, by which the Borrower shall grant security interests in
certain of its assets to the Bank, as required pursuant to
Article III hereof, together with all amendments, modifications,
exhibits, and schedules thereto as may be in effect from time to
time.
"Subordinated Debt" shall mean debt incurred by the Borrower
pursuant to: (i) that certain Debenture Purchase Agreement dated
March 27, 1997 by Sirrom Capital Corporation and Borrower;
(ii) that certain Stock Purchase Warrant dated March 27, 1997 by
Sirrom Capital Corporation and Borrower; and (iii) that certain
Preferred Stock Purchase Agreement by Sirrom Capital Corporation
and Borrower.
"Subordination Agreements" shall mean: (i) that certain
subordination agreement by and among the Bank, the Borrower and
Sirrom Capital Corporation, dated the same date of this
Agreement, in form and substance satisfactory to the Bank;
(ii) that certain Dividend Subordination Agreement by and between
the Bank, the Borrower and Sirrom Capital Corporation, dated the
same date of this Agreement, in form and substance satisfactory
to the Bank; and (iii) that certain subordination agreement by
and among the Bank, the Borrower, Xxxxxxx X. Xxxxxxxx, Xxxx X.
Xxxxxxxx and Xxxx X. Xxxxxxxx Profit Sharing Plan, dated the same
date of this Agreement, in form and substance satisfactory to the
Bank as required pursuant to Article III of this Agreement,
together with all amendments, modifications, exhibits and
schedules thereto as may be in effect from time to time.
"Subsidiary" shall mean, as to any designated corporation,
any corporation, the outstanding shares of which having
sufficient voting power (not depending on the happening of a
contingency) to elect at least a majority of the members of its
board of directors, are at the time owned by the designated
corporation.
"Tax" means any federal, state or foreign tax, assessment or
other governmental levy or duty or other charge (including any
withholding tax) upon a person or entity or upon its assets,
revenues, income or profits, other than income and franchise
taxes imposed upon the Bank by the jurisdictions (or any
political subdivision thereof) in which the Bank or any office of
the Bank is located.
"Termination Date" shall initially mean May 31, 1999. The
Bank may, in its sole discretion, extend the Termination Date for
one or more additional one year periods by providing written
notice to the Borrower on or before the Termination Date.
"Trademark Assignment" shall mean the collateral assignment
by the Borrower to the Bank, dated the same date as this
Agreement, in form and substance satisfactory to the Bank, of
certain trademarks and other intangible property held by the
Borrower, as required pursuant to Article III of this Agreement,
together with all amendments, modifications, exhibits and
schedules thereto as may be in effect from time to time.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code of Pennsylvania as codified at 13 Pa. C.S.A. Section 101 et seq.,
as in effect on the date of this Agreement.
ARTICLE II - CREDIT ACCOMMODATIONS
2.1 The Line of Credit. The Bank shall make available to
the Borrower, commencing on the Closing Date, a Revolving Credit
Facility in the maximum principal amount of $10,000,000.00 (the
"Revolving Facility Commitment"), upon the terms and conditions
set forth herein. After May 31, 1998, the Revolving Facility
Commitment shall be reduced to $9,000,000.
(a) Generally. At any time and from time to time
during the period commencing on the Closing Date and ending on
the Termination Date, upon the request of the Borrower, the Bank
shall provide to the Borrower a loan or loans which shall be used
by the Borrower for working capital and/or repayment of
indebtedness existing at the time of the Closing (the "Line of
Credit"). Subject to Section 2.2(b)(2), any loan request by the
Borrower shall be in a minimum amount of $100,000.00. To the
extent a loan request exceeds $100,000.00, such excess shall be
in multiples of $100,000.00. The Borrower may use the Line of
Credit during the period referred to in the preceding sentence by
borrowing, repaying and reborrowing in accordance with the terms
of this Agreement. On and before May 31, 1998, the aggregate
outstanding principal under the Line of Credit at any time shall
not exceed $9,000.000.00. After May 31, 1998, the aggregate
outstanding principal under the Line of Credit at any time shall
not exceed $8,000,000. If, at any time, the aggregate
outstanding principal under the Line of Credit exceeds: (i) on or
before May 31, 1998, $9,000,000.00 or (ii) after May 31, 1998,
$8,000,000.00, then, without any requirement of demand or notice
from the Bank, the Borrower shall immediately pay to the Bank the
amount of such excess. Upon the Termination Date, unless the
same has been extended by written agreement between the Bank and
the Borrower (which the Bank shall provide, if at all, no later
than forty-five (45) days prior to the Termination Date), the
Bank's commitment to make Line of Credit Loans shall terminate,
all Line of Credit Loans shall immediately mature and all
Obligations under the Revolving Credit Facility shall be
immediately due and payable in full.
(b) Letters of Credit.
(1) Generally. In addition to making loans to
the Borrower under the Line of Credit as provided in
Section 2.1(a) hereof, the Bank shall, upon the request of the
Borrower and subject to the terms of this Agreement, also issue
one or more standby letters of credit ("Letters of Credit") for
the account of the Borrower to benefit customers of the Borrower
that have advanced funds to the Borrower or have executed
maintenance contracts with the Borrower. The cumulative face
amount of all outstanding Letters of Credit, together with the
Chase Letters of Credit, shall at no time exceed $2,000,000.00.
All amounts drawn under Letters of Credit shall be deemed to be
evidenced by the Line of Credit Note, and the amount available to
be borrowed under the Revolving Credit Facility shall be reduced
by the aggregate amounts drawn and available to be drawn at any
time under all outstanding Letters of Credit. In no event shall
the aggregate amount available to be drawn on all outstanding
Letters of Credit plus the Chase Letters of Credit plus the
outstanding principal balance of Line of Credit Loans exceed the
Revolving Facility Commitment. In such an event, the Borrower
shall immediately pay to the Bank the amount of such excess. The
duration of any Letters of Credit shall not extend beyond the
Termination Date without the prior written consent of the Bank.
Upon an Event of Default under this Agreement, the Bank may, at
its option, cause to be advanced Adjusted Base Rate Loans from
the Revolving Credit Facility in an amount up to the face amount
of the Letters of Credit. The proceeds of any advance made
pursuant to this paragraph shall be deposited with the Bank in a
deposit account maintained at the Bank which shall constitute a
portion of the Collateral. In the event that any outstanding
Letters of Credit are thereafter returned to the Bank without any
drafts or demands for payment having been made thereon, then from
any sums then on deposit in the foregoing account an amount shall
be applied to the then outstanding principal balance of the
Revolving Credit Facility which is equal to the face amount of
each such returned Letter of Credit.
(2) Issuance of Letters of Credit. Subject to
the provisions of Section 2.1(b)(1), the Bank shall issue Letters
of Credit for the account of the Borrower, provided that the
Borrower (i) provides a written request for each such Letter of
Credit specifying the terms thereof, including, without
limitation, the amount and the name and address of the
beneficiary of such Letter of Credit; (ii) executes and delivers
to the Bank an application for each such Letter of Credit
pursuant to the form provided for such purpose by the Bank; and
(iii) executes and delivers to the Bank such other documents and
instruments which the Bank, in its sole and absolute discretion,
deems reasonable and necessary. The Borrower shall pay to the
Bank on the date of issuance of each Letter of Credit hereunder a
fee equal to the face amount of the Letter of Credit multiplied
by 1.5% less the Letter of Credit Fee Reduction, if any. The
foregoing fees may be deducted by the Bank from the Borrower's
accounts maintained at the Bank as such fees are incurred. The
determination of whether the Borrower is entitled to a Letter of
Credit Fee Reduction shall be made in connection with the
Borrower's delivery of the certificate required to be delivered
by the Borrower to the Bank pursuant to Section 6.2 of this
Agreement. Letter of Credit Fee Reductions for future Letters of
Credit will become effective upon the first Business Day of the
fiscal quarter following the Bank's receipt of the above-
described certificate.
(c) Interest. Interest shall accrue on all loans
outstanding under the Line of Credit at the rate or rates set
forth in Section 2.2 hereof.
(d) Line of Credit Note. The obligations of the
Borrower to repay the aggregate outstanding principal under the
Revolving Credit Facility and to pay accrued interest on Line of
Credit Loans shall be evidenced by a promissory note, in form and
substance satisfactory to the Bank, to be executed and delivered
to the Bank concurrently with the execution and delivery of this
Agreement (the "Line of Credit Note").
(e) Commitment Fees. In addition to any and all other
fees required to be paid by the Borrower in accordance with the
terms of this Agreement, the Borrower shall pay to the Bank on
the first Business Day of each of Borrower's fiscal quarters a
commitment fee equal to 0.05% of the average unused balance of
the Revolving Facility Commitment during the preceding fiscal
quarter.
2.2 Interest. Interest shall accrue on the outstanding
principal amounts of the Line of Credit Loans in accordance with
the following provisions:
(a) Applicable Rates. At the Borrower's election, the
Line of Credit Loans shall bear interest at any one of the
following rates (the "Applicable Rates"):
(1) the Adjusted Base Rate, such rate to change
simultaneously and automatically upon the Bank's designation of
any change in the Base Rate; or
(2) the Adjusted LIBO Rate.
(b) Determination of Interest Periods and Applicable
Rates. Interest Periods and the Applicable Rates shall be chosen
with respect to Line of Credit Loans as follows:
(1) The Borrower may ask the Bank for indications
of LIBOR for specified Line of Credit Loans and Interest Periods,
as applicable, at any time. If the Borrower anticipates that it
may elect the Adjusted LIBO Rate to be applicable to a Line of
Credit Loan, the Borrower shall request an indication of LIBOR
prior to 11:00 a.m. (Philadelphia time) at least three Eurodollar
Business Days prior to the commencement of the applicable
Interest Period, and if the Borrower desires to elect the
Adjusted LIBO Rate for such Interest Period, the Borrower must
accept such indication of LIBOR by notice to the Bank in writing
or by telephone (confirmed promptly in writing) prior to
11:00 a.m. (Philadelphia time) on the date of acceptance, which
shall be at least two Eurodollar Business Days prior to the
commencement of the Interest Period selected by the Borrower. If
the Borrower does not provide the applicable notice of election
of the Adjusted LIBO Rate, then the Borrower shall be deemed to
have requested that the Adjusted Base Rate apply to any Line of
Credit Loan which is subject to any expiring Interest Period and
to any new Line of Credit Loan, as the case may be, until the
Borrower shall have given appropriate notice of a requested
change in or determination of the rate of interest in accordance
with this Section 2.2. No acceptance of an indication of rate
hereunder shall bind the Bank unless timely made.
(2) The Borrower shall not request and the Bank
shall not be required to provide, an indication of LIBOR with
respect to a specified Interest Period for any Line of Credit
Loan of less than $500,000.
(3) All determinations and quotations of rate by
the Bank hereunder shall be conclusive and binding upon the
Borrower, in the absence of manifest error.
(4) If no Interest Period is elected with respect
to any Adjusted LIBO Rate Loan, the request for such Line of
Credit Loan shall be deemed to be a request for a thirty day
Interest Period in respect of any such Adjusted LIBO Rate Loan.
(5) Upon the occurrence of any Event of Default
and a resulting acceleration of Obligations pursuant to
Section 9.1(b) hereof, all Interest Periods shall automatically
terminate and all Adjusted LIBO Rate Loans shall be automatically
converted to Loans bearing interest at the Default Rate and shall
be subject to the payment of all amounts then due with respect to
such termination under Section 2.4 hereof.
(c) Payment of Interest. Notwithstanding anything to
the contrary in this Agreement, the Borrower shall pay interest
accruing at the Adjusted LIBO Rate monthly in arrears on the
first Business Day of each consecutive calendar month during an
Interest Period commencing on the first such date next succeeding
the date on which such Interest Period commenced, and on the
expiration date of such Interest Period. The Borrower shall pay
interest on all Line of Credit Loans other than Adjusted LIBO
Rate Loans monthly in arrears on the first day of each
consecutive calendar month commencing with the month immediately
following the date on which the first advance under the Line of
Credit is made. All accrued but unpaid interest under the Note
shall be payable, without demand, on the maturity thereof
(whether by its stated terms, or upon prepayment, acceleration or
otherwise).
(d) Default Rate. Notwithstanding anything to the
contrary contained in this Section 2.2, upon the occurrence of an
Event of Default under this Agreement, all Line of Credit Loans
shall bear interest at the Default Rate.
2.3 Conversion and Continuation of Loans. The Borrower may
convert any Line of Credit Loan to an Adjusted LIBO Rate Loan or
continue any Adjusted LIBO Rate Loan subject to an expiring
Interest Period for an additional Interest Period upon the same
advance notice required pursuant to Section 2.2 hereof, subject,
however, to the all of the terms of this Agreement, including,
without limitation, the following:
(a) Rate Availability. An Adjusted LIBO Rate shall be
available, notwithstanding Section 2.4(a) hereof.
(b) Limitation on Interest Period. No Interest Period
may be elected with respect to any Line of Credit Loan (i) which
would expire after the Termination Date in the case of an
Adjusted LIBO Rate Loan, or (ii) for a period other than those
referred to in the definition of "Interest Period" set forth in
Article I hereof.
(c) Payment of Interest; No Default. All interest
accrued under an expiring Interest Period shall be paid by the
Borrower on the last day of such Interest Period, and no
continuation or conversion of a Line of Credit Loan subject to an
expiring Interest Period shall be made for so long as an Event of
Default shall be continuing.
(d) Timing. No continuation or conversion of an
Adjusted LIBO Rate Loan may be effected on other than the last
day of the Interest Period then in effect with respect to such
Adjusted LIBO Rate Loan, and a Line of Credit Loan which is not
an Adjusted LIBO Rate Loan may be converted into an Adjusted LIBO
Rate Loan only on a Eurodollar Business Day.
(e) Failure to Give Notice. In the event that the
Borrower shall not give notice to continue any Adjusted LIBO Rate
Loan into a subsequent Interest Period in accordance with
Section 2.2 hereof, the Borrower shall be deemed to have
requested that such Adjusted LIBO Rate Loan (unless repaid) be
converted to one accruing interest at the Adjusted Base Rate, at
the expiration of the then current Interest Period.
2.4 Special Provisions Applicable to Adjusted LIBO Rate
Loans. The following special provisions shall apply to Adjusted
LIBO Rate Loans:
(a) Mandatory Suspension and Conversion of Adjusted
LIBO Rate Loans. The Bank's obligations to make, maintain or
convert into Adjusted LIBO Rate Loans of any type shall be
suspended, all outstanding Adjusted LIBO Rate Loans shall be
converted on the last day of their applicable Interest Periods
(or, if earlier, in the case of clause (2) below, on the last day
the Bank may lawfully continue to maintain Adjusted LIBO Rate
Loans or, in the case of clause (3) below, the day determined by
such Bank to be the last Business Day before the effective date
of the applicable restriction) into, and all pending requests for
the making of or conversion into Adjusted LIBO Rate Loans shall
be deemed requests for, Line of Credit Loans at the Adjusted Base
Rate if:
(1) on or prior to the determination of the
interest rate for an Adjusted LIBO Rate Loan for any Interest
Period, the Bank determines that for any reason appropriate
quotations are not available to it (including, quotations in the
interbank market selected by it for deposits with it) for
purposes of determining the Adjusted LIBO Rate or in the good
faith reasonable judgment of the Bank, that such rate would not
accurately reflect the cost to the Bank of making, maintaining or
converting into an Adjusted LIBO Rate Loan of such type for such
Interest Period;
(2) at any time the Bank determines, in the
exercise of its good faith reasonable judgment, that any
Regulatory Change makes it unlawful or impracticable for such
Bank to make or maintain any Adjusted LIBO Rate Loan, or to
comply with its obligations hereunder in respect thereof; or
(3) the Bank determines, in the exercise of its
good faith reasonable judgment, that by reason of any Regulatory
Change it is restricted, directly or indirectly, in the amount
that it may hold of (x) a category of liabilities that include
deposits by reference to which, or on the basis of which, the
interest rate applicable to Adjusted LIBO Rate Loans is directly
or indirectly determined, or (y) the category of assets that
includes Adjusted LIBO Rate Loans.
The Bank shall promptly give notice to the Borrower of
any circumstance that would make the provisions of this
Section 2.4(a) applicable, but the failure to give any such
notice shall not affect such Bank's rights hereunder.
(b) Regulatory Changes. If any Regulatory Change:
(1) shall subject the Bank to any Tax determined
by the Bank to be applicable to any Adjusted LIBO Rate Loan, to
the Bank's obligation to make or maintain any such Adjusted LIBO
Rate Loan, to this Agreement or the Note, or shall, in the
determination of the Bank, change the basis of taxation of
payments to the Bank of the principal of or interest on any
Adjusted LIBO Rate Loan or of any other amounts payable under
this Agreement in respect of any Adjusted LIBO Rate Loan or its
obligation to make or maintain any Adjusted LIBO Rate Loan; or
(2) shall impose, increase, modify or deem
applicable any Tax, reserve, insurance charge, special deposit,
assessment or other requirement or condition (other than reserves
and assessments taken into account in the calculation of the
Adjusted LIBO Rate) against assets of, deposits with or to the
account of, credit extended by, or the obligations of the Bank
under this Agreement, or shall impose on the Bank or on any
relevant interbank market for U.S. Dollars, any condition; and
the result of the foregoing, in the determination of the Bank, is
to (x) reduce the amount of any sum received or receivable by the
Bank with respect to any Adjusted LIBO Rate Loan or the return to
be earned by the Bank on any such Loan, (y) impose a cost on the
Bank that is attributable to the making or maintaining of, or its
commitment to make, any such Adjusted LIBO Rate Loan, or
(z) require the Bank to make any payment on, or calculated by
reference to, the gross amount of any amount received by it
hereunder or under any such Loan, then, within 15 days after
request by the Bank, the Borrower shall pay to the Bank such
additional amount or amounts as the Bank determines will
compensate the Bank for such reduction, increased cost or
payment. The Bank will promptly notify the Borrower of any
Regulatory Change of which it has knowledge that will entitle the
Bank to compensation pursuant to this Section 2.4(b), but the
failure to give such notice shall not affect the Bank's right to
such compensation. The Bank agrees to take any reasonable action
which the Bank determines, in its discretion, may be available
without cost or expense to the Bank in order to eliminate or
mitigate the effect of such Regulatory Change.
(c) Funding Losses. The Borrower shall pay to the
Bank, upon request, such amount or amounts as the Bank determines
are necessary to compensate it for any loss, cost or expense
incurred by it as a result of (i) any payment, prepayment or
conversion of an Adjusted LIBO Rate Loan on a date other than the
last day of an Interest Period for such Adjusted LIBO Rate Loan
or (ii) an Adjusted LIBO Rate Loan for any reason not being made
or converted, or any payment of principal thereof or interest
thereon not being made, on the date therefor determined in
accordance with the applicable provisions of this Agreement.
Such amount shall equal the excess of (x) the interest that would
have been received from the Borrower under this Agreement on any
amounts to be redeployed during an Interest Period or its
remaining portion over (y) the interest component of the return
that the Bank determines it could have obtained had it placed
such amount on deposit in the interbank market selected by it for
a period equal to such Interest Period or its remaining portion.
2.5 Requirements of Law. In the event that after the date
hereof, any change in any law, regulation or treaty or in the
interpretation or application thereof or compliance by the Bank
with any request or directive (whether or not having the force of
law) from any central bank or other governmental authority,
agency or instrumentality:
(a) subjects or shall subject the Bank to any tax of
any kind whatsoever with respect to this Agreement, the loans
made hereunder or the issuance or maintenance of the Letters of
Credit hereunder, or changes the basis of taxation of payments to
the Bank of principal, commitment fees, interest or any other
amount payable hereunder (except for changes in the rate of tax
on the overall net income of the Bank);
(b) imposes, modifies or holds or shall impose, modify
or hold applicable any reserve, special deposit, compulsory loan
or similar requirement against assets held by, or deposits or
other liabilities in or for the account of, advances or loans by,
or other credit extended by, or any other acquisition of funds
by, any office of the Bank, which reserve, special deposit,
compulsory loan or similar requirement is not otherwise included
in determination of the interest rate hereunder;
(c) imposes or shall impose on the Bank any other
condition;
and the result of any of the foregoing is to, directly or
indirectly, increase the cost to the Bank of making, renewing or
maintaining advances or extensions of credit or issuing or
maintaining Letters of Credit or to reduce any amount receivable
thereunder then, in any such case, the Borrower shall promptly
pay the Bank, upon its demand, any additional amounts necessary
to compensate the Bank for such additional cost or reduced amount
receivable. If the Bank becomes entitled to claim any additional
amounts pursuant to this subsection, it shall promptly notify the
Borrower of the event by reason of which it has become so
entitled. The good faith determination as to any additional
amounts payable pursuant to the foregoing sentence by the Bank
shall be conclusive in the absence of manifest error.
2.6 Determinations. In making the determinations
contemplated by Section 2.4 and 2.5 hereof the Bank may make such
estimates, assumptions, allocations and the like that it, in good
faith, determines to be appropriate. All such determinations
shall be final, binding and conclusive upon the Borrower, except
to the extent of any manifest error in computation or
transmission. The Bank shall furnish to the Borrower, upon
request, a certificate outlining in reasonable detail the
computation of any amounts claimed by it under Section 2.4 or 2.5
and the assumptions underlying such computations, provided that
the failure to deliver a certificate shall not affect the Bank's
right to such amounts.
2.7 Payments and Computations. All amounts payable by the
Borrower to the Bank under this Agreement or the Note shall be
paid directly to the Bank in immediately available funds at the
address of the Bank set forth in Section 10.2 hereof or at such
other address of which the Bank shall give notice to the Borrower
pursuant to Section 10.2 hereof. The Bank is authorized to
charge any account of the Borrower at the Bank for any payment
due by the Borrower under this Agreement or the Note.
Computation of interest hereunder with respect to Adjusted LIBO
Rate Loans hereunder shall be made by the Bank on the basis of a
year of 360 days for the actual number of days elapsed.
Computation of interest hereunder with respect to Adjusted Base
Rate Loans hereunder shall be made by the Bank on the basis of a
year of 365/366 days (as applicable) for the actual number of
days elapsed. All payments under the Note shall be applied by the
Bank to the Obligations in its sole and absolute discretion.
2.8 Borrowing. The Borrower shall notify the Bank of each
proposed borrowing under the Line of Credit not later than
2:30 p.m., Philadelphia, Pennsylvania time on the day of the
proposed borrowing, except as otherwise provided in Section 2.2
with respect to Adjusted LIBO Rate Loans.
2.9 Prepayment and Repayment. Subject to Section 2.4 of
this Agreement, the Borrower may make payments and prepayments of
the Loans in whole or in part at any time and from time to time
without penalty or premium upon notification to the Bank not
later than 2:30 p.m. Philadelphia, Pennsylvania time on the date
of the proposed payment or prepayment.
The Bank may, and the Borrower authorizes the Bank to
debit the Borrower's accounts at the Bank for the amount of any
payment as and when such payment becomes due hereunder. If there
are insufficient funds in such debited account at the time such
account is debited, and the debiting creates an overdraft, the
Bank may charge the Borrower an administrative fee in an amount
established from time to time by the Bank. Such authorization
for the Bank to debit the Borrower's accounts at the Bank shall
not affect the Borrower's obligation to pay when due all amounts
payable hereunder, whether or not there are sufficient funds in
accounts of the Borrower. The foregoing rights of the Bank to
debit the Borrower's accounts shall be in addition to, and not in
limitation of, any rights of set-off which the Bank may have
hereunder or under any other Loan Document.
ARTICLE III - SECURITY
3.1 Security Documents. As security for the prompt
payment, performance, satisfaction and discharge when due of all
the Obligations, the Borrower shall execute and deliver or shall
cause to be executed and delivered to the Bank, concurrently with
the execution of this Agreement, the Security Agreement, the
Mortgage, the Patent Assignment, the Trademark Assignment, the
Copyright Assignment, the Assignment of Claims, the Guaranty
Agreement and the Guarantor Security Agreement.
3.2 Additional Documents. The Borrower shall execute and
deliver and/or cause to be executed and delivered, concurrently
with the execution of this Agreement, the Subordination
Agreements and the Landlord's Waivers.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE BORROWER
In order to induce the Bank to execute and deliver this
Agreement and to make the Loans available to the Borrower, the
Borrower represents and warrants to the Bank that, as of the date
hereof:
4.1 Good Standing of the Borrower; Authorization. The
Borrower is duly incorporated, organized and existing and in good
standing in the Commonwealth of Pennsylvania and is duly
qualified as a foreign corporation and authorized to do business
in all other jurisdictions wherein the nature of its business or
property makes such qualification necessary, except where the
failure to so qualify would not have a material adverse effect on
the financial condition or results of operations of the Borrower.
The Borrower has the corporate power to own its properties and to
carry on its business as now conducted. The execution, delivery
and performance of this Agreement and the other Loan Documents
have been duly authorized by all necessary corporate proceedings
on the part of the Borrower.
4.2 Compliance with Laws and Other Agreements. The
Borrower is in compliance with all laws, rules, regulations,
judgments, decrees, orders, agreements and requirements which
affect in any material way the Borrower, its assets or the
operation of its business and has not received, and has no
knowledge of, any order or notice of any governmental
investigation or of any violation or claim of violation of any
law, regulation, judgment, decree, order, agreement, or other
governmental requirement.
4.3 No Conflict; Governmental Approvals. The execution,
delivery, and performance of this Agreement and each of the other
Loan Documents will not (i) conflict with, violate, constitute a
default under, or result in a breach of any provision of any
applicable law, rule, regulation, judgment, decree, order,
instrument or other agreement, or (ii) conflict with or result in
a breach of any provision of the certificate of incorporation or
by-laws of the Borrower. No authorization, permit, consent or
approval of or other action by, and no filing, registration or
declaration with, any governmental authority or regulatory body
is required to be obtained or made by the Borrower for the due
execution, delivery and performance of this Agreement or any of
the Loan Documents, except such as have been duly obtained or
made prior to the Closing Date and are in full force and effect
as of the Closing Date (copies of which have been delivered to
the Bank on or before the Closing Date).
4.4 Financial and Other Information Regarding Borrower.
(a) The Borrower has delivered to the Bank true,
correct and complete copies of audited financial statements as of
February 23, 1996 and internally prepared financial statements of
the Borrower as of November 29, 1996. Those financial statements
("Financial Statements") present fairly the financial position of
the Borrower as of February 23, 1996 and November 29, 1996 and
the results of the operations of the Borrower for the periods
then ended in conformity with GAAP.
(b) The Borrower has no Indebtedness other than as
shown in the most recent Financial Statements.
(c) The Borrower has no "investment" (as such term is
defined under GAAP), whether by stock purchase, capital
contribution, loan, advance, purchase of property or otherwise,
in any Person, other than as shown in the most recent Financial
Statements.
4.5 Taxes. The Borrower is not delinquent in payment of
any income, property or other tax, except for any delinquency in
the payment of a tax which is contested in good faith by the
Borrower and for which appropriate reserves have been established
in accordance with GAAP.
4.6 Encumbrances and Guaranties.
(a) All properties and assets of the Borrower are
owned by the Borrower free and clear of all Encumbrances except
(i) those for taxes or other government charges either not yet
delinquent or the nonpayment of which is permitted by Section 4.5
of this Agreement; (ii) those not arising in connection with
Indebtedness that do not materially impair the use or value of
the properties or assets of the Borrower in the conduct of its
businesses; (iii) Encumbrances whose release and termination is
evidenced by the Borrower's delivery to the Bank of appropriate
documents on the Closing Date; (iv) the Loan Documents and
Encumbrances otherwise permitted under the Security Agreement and
the Mortgage; and (v) Encumbrances disclosed in the most recent
Financial Statements.
(b) The Borrower is not obligated under any Guaranty.
4.7 Material Adverse Changes. Since November 29, 1996,
there has not been any material adverse change in the business,
operations, properties or financial position of the Borrower.
The Borrower does not know of any fact (other than matters of a
general economic or political nature) which materially adversely
affects, or, so far as the Borrower can now reasonably foresee,
will materially adversely affect, the business, operations,
properties or financial position of the Borrower or the
performance by the Borrower of its obligations under this
Agreement and the other Loan Documents.
4.8 Margin Securities. The assets of the Borrower do not
include any "margin securities" within the meaning of
Regulations G or U of the Board of Governors of the Federal
Reserve System (12 C.F.R. 207, 221), and the Borrower does not
have any present intention of acquiring any margin security.
4.9 ERISA. The provisions of each employee benefit plan as
defined in Section 3(3) of ERISA ("Plan") maintained by the
Borrower complies with all applicable requirements of ERISA and
of the Code, and with all applicable rulings and regulations
issued under the provisions of ERISA and the Code setting forth
those requirements. Except as listed on Schedule 4.9 hereof, no
reportable event, as defined in Section 4043 of ERISA, has
occurred with respect to any Plan; no Plan to which Section 4021
of ERISA applies has been terminated; no Plan has incurred any
liability to PBGC as provided in Section 4062, 4063 and 4064 of
ERISA; no Plan has been involved in any prohibited transaction
within the meaning of Section 406 of ERISA or Section 4975 of the
Code; and there are no unfunded liabilities with respect to any
Plan which are not disclosed in the Financial Statements.
4.10 Pending Litigation. There are no actions, suits,
proceedings or investigations pending, or, to the knowledge of
the Borrower, threatened against or affecting the Borrower,
before any court, arbitrator or administrative or governmental
body which, in the aggregate, might adversely affect any action
taken or to be taken by the Borrower under this Agreement and the
other Loan Documents or which, in the aggregate, might materially
adversely affect the business, operations, properties or
financial position of the Borrower, or the ability of the
Borrower to perform its obligations under this Agreement and the
other Loan Documents.
4.11 Valid, Binding and Enforceable. This Agreement and the
other Loan Documents have been duly and validly executed and
delivered by the parties thereto (other than the Bank) and
constitute the valid and legally binding obligations of such
parties enforceable in accordance with their respective terms,
except as enforcement of this Agreement and the other Loan
Documents may be limited by bankruptcy, insolvency or other laws
of general application relating to or affecting the enforcement
of creditors' rights and except as enforcement is subject to
general equitable principles.
4.12 Priority of Mortgage. The Mortgage, when recorded in
the office of the Recorder of Deeds of Bucks County,
Pennsylvania, will create a valid mortgage lien on the real
property described therein, subject only to such Encumbrances as
may be expressly permitted by the Mortgage and the Security
Agreement.
4.13 Priority of Security Interests. The Security
Agreement, upon the filing of financing statements in the
appropriate governmental offices, will create valid first
perfected security interests in the personal property of the
Borrower described therein as collateral for all the Obligations
subject to no prior Encumbrances.
4.14 Environmental Matters.
(a) The Borrower has performed all of its obligations
under, has obtained all necessary approvals, permits,
authorizations and other consents required by, and is not in
material violation of, any Environmental Laws.
(b) The Borrower has not received any notice,
citation, summons, directive, order or other communication,
written or oral, from, and the Borrower has no knowledge of the
filing or giving of any such notice, citation, summons,
directive, order or other communication by, any governmental or
quasi-governmental authority or agency or any other Person
concerning the presence, generation, treatment, storage,
transportation, transfer, disposal, release or other handling of
any Hazardous Materials within, on, from, related to, or
affecting any real property owned or occupied by the Borrower.
(c) To the best of the Borrower's knowledge, after
reasonable inquiry, no real property owned or occupied by the
Borrower has ever been used, either by the Borrower or any of its
predecessors in interest, to generate, treat, store, transport,
transfer, dispose of, release or otherwise handle any Hazardous
Material in violation of any applicable Environmental Laws.
(d) To the best of the Borrower's knowledge, after due
inspection, there are no Hazardous Materials within, on or under
any real property owned or occupied by the Borrower in violation
of any applicable Environmental Laws.
4.15 No Untrue Statements. Neither this Agreement, the Loan
Documents nor any other document, certificate or statement
furnished or to be furnished by the Borrower or by any other
party to the Bank in connection herewith contains, or at the time
of delivery will contain, any untrue statement of a material fact
or omits or will omit to state a material fact necessary in order
to make the statements contained herein and therein not
misleading.
ARTICLE V - CONDITIONS PRECEDENT TO THE BANK'S OBLIGATIONS
The Bank's obligations hereunder are conditioned upon the
satisfaction of the following conditions precedent:
5.1 Documents and Items to be Delivered by the Borrower at
Closing. The Borrower shall deliver or cause to be delivered to
the Bank at the Closing the following:
(a) This Agreement duly executed by the Borrower;
(b) The Note duly executed by the Borrower;
(c) The Security Agreement duly executed by the
Borrower, together with such Uniform Commercial Code financing
statements and other documents as the Bank may reasonably require
to be executed by the Borrower;
(d) The Mortgage duly executed by the Borrower and
acknowledged, in form suitable for recording;
(e) The Patent Assignment duly executed by the
Borrower and acknowledged in form suitable for recording;
(f) The Trademark Assignment duly executed by the
Borrower and acknowledged, in form suitable for recording;
(g) The Copyright Assignment;
(h) The Assignment of Claims duly executed by the
Borrower;
(i) The Guaranty Agreements duly executed by the
Guarantors;
(j) The Guarantor Security Agreements duly executed by
the Guarantors;
(k) Evidence of the Borrower's having complied with
those covenants regarding insurance as are contained in this
Agreement and the other Loan Documents;
(l) A certificate of the Secretary or an Assistant
Secretary of the Borrower dated the Closing Date including
(i) resolutions duly adopted by the Borrower authorizing the
transactions under the Loan Documents; (ii) a copy of the by-laws
of the Borrower; (iii) evidence of the incumbency and signature
of the officers executing on its behalf any of the Loan Documents
and any other document to be delivered pursuant to any such
documents, together with evidence of the incumbency of such
Secretary or Assistant Secretary; (iv) a copy, certified by the
Pennsylvania Secretary of State, as of the most recent date
practicable, of the Borrower's Articles and Certificate of
Incorporation, together with the certification of the Secretary
or Assistant Secretary of the Borrower as of the Closing Date
that such Articles and Certificate of Incorporation have not been
amended since the date of the aforesaid certification by the
Secretary of State; and (v) certificates of authority or good
standing for the Borrower from its jurisdiction of incorporation
and any other jurisdiction where the Borrower is qualified to do
business;
(m) A copy of each and every authorization, permit,
consent, and approval of and other action by, and notice to and
filing with, every governmental authority and regulatory body
which is required to be obtained or made by the Borrower for the
due execution, delivery and performance of this Agreement and the
other Loan Documents;
(n) Policies of title insurance issued by a title
company satisfactory to the Bank insuring the Mortgage, as a
valid mortgage lien, subject only to exceptions approved by the
Bank;
(o) The opinion of Xxxxxxx & Xxx, dated as of Closing
Date, in form and substance satisfactory to the Bank and its
counsel;
(p) To the extent not paid by the Borrower to the Bank
prior to the Closing, a facility fee of $75,000.00;
(q) Appraisals of: (i) Borrower's real estate located
at County Line Industrial Park, Southampton, PA and
(ii) Borrower's machinery and equipment, which appraisals shall
be prepared at the Borrower's expense, shall be satisfactory in
form and substance to the Bank and shall indicate that the total
fair market value of the above-described real property, together
with Borrower's appraised machinery and equipment, is not less
than $2,500,000.00;
(r) An environmental risk assessment database report,
which report shall be prepared at Borrower's expense, with
respect to the Borrower's real estate located at County Line
Industrial Park, Southampton, Pennsylvania and the surrounding
area, which report shall be satisfactory to the Bank in its sole
and absolute discretion;
(s) Management prepared Financial Statements for the
year ended February 28, 1997 evidencing results satisfactory to
the Bank, in the Bank's sole and absolute discretion;
(t) Evidence that all Accounts owing by Account
debtors located in countries which the Bank has rated "Country
Risk Rate 3" or worse are supported by a letter of credit
acceptable to the Bank in its sole and absolute discretion;
(u) A twelve-month budget of cash flows sufficient for
the Bank to match actual cash flows to projected cash flows for
individual existing and anticipated contracts;
(v) A list of all Accounts supported by a letter of
credit, including a summary of limitations or conditions with
respect to such letter of credit.
5.2 Bank's Audit. The Bank or the Bank's designee's
completion of an audit of Borrower's Accounts, inventory, costs
in excess of xxxxxxxx, accounts payable and xxxxxxxx in excess of
costs which audit shall be acceptable to the Bank, in both its
scope and its conclusions, in the Bank's sole and absolute
discretion. The cost of such audit shall be borne by the
Borrower.
5.3 Additional Financing. The Borrower's obtaining:
(a) $4,000,000 of unsecured, subordinated debt upon
terms and conditions satisfactory to the Bank in its sole and
absolute discretion; and
(b) $2,500,000 of non-cumulative, convertible,
preferred stock upon terms and conditions satisfactory to the
Bank in its sole and absolute discretion.
5.4 Conditions Precedent to Making Line of Credit Loans.
The Bank shall not be obligated to make any Line of Credit Loans
hereunder or make Letters of Credit available hereunder unless:
(a) As of the date of the proposed advance, no Event
of Default has occurred and is continuing and no event has
occurred and is continuing which, with the giving of notice or
lapse of time, or both, would constitute an Event of Default;
(b) The representations and warranties contained in
Article IV are true and correct on the date of the proposed
advance, except that the representations and warranties in
Section 4.4 shall refer to the financial statements most recently
supplied to the Bank pursuant to Section 6.2 of this Agreement;
(c) No material adverse change has occurred in the
financial condition of the Borrower since the date hereof; and
(d) The Borrower has delivered to the Bank, upon the
Bank's request, a certificate executed by the chief executive
officer of the Borrower confirming the statements made in
paragraphs (a), (b), and (c) above.
5.5 Conditions Subsequent. The Borrower shall deliver or
cause to be delivered, on or before April 14, 1997, the
opinion(s) of Xxxxxxx & Xxx, in form and substance satisfactory
to the Bank and its counsel with respect to each of the
Guarantors. The failure of the Borrower to deliver such
opinion(s) to Bank on or before April 4, 1997 shall constitute an
Event of Default under Article VIII of this Agreement.
ARTICLE VI - AFFIRMATIVE COVENANTS OF THE BORROWER
The Borrower hereby covenants and agrees that from the date
hereof and until satisfaction in full of the Obligations, unless
the Bank shall otherwise consent in writing, the Borrower shall
do the following:
6.1 Use of Proceeds. Use the proceeds of the borrowings
hereunder only for the purposes specified in Section 2.1 of this
Agreement.
6.2 Financial Statements. Furnish to the Bank:
(a) Within ninety days after the end of each fiscal
year, financial statements of the Borrower, including a balance
sheet, statement of income, reconciliation of net worth,
statement of cash flows and such other financial statements of
the Borrower in such detail as the Bank may reasonably request.
Such financial statements shall present fairly the financial
condition of the Borrower as of the close of such year and the
results of its operations and its cash flows during such year, in
accordance with GAAP, and shall be audited and accompanied by the
opinion of an independent public accountant acceptable to the
Bank. Such opinion shall not be acceptable to the Bank if
qualified due to any limitations in scope imposed by the
Borrower. Any other qualification by the accountant shall render
the acceptability of the financial statements subject to the
Bank's approval. Such financial statements shall be accompanied
by a certificate signed by the chief financial officer of the
Borrower in which such chief financial officer calculates all
financial covenants and warrants that no Events of Default
specified in Article VIII hereof nor any events which with the
giving of notice or lapse of time, or both, would constitute an
Event of Default exist.
(b) Within forty-five days after the end of each
fiscal quarter, a balance sheet, statement of income, statement
of cash flows and such other financial statements in such detail
as the Bank may reasonably request, which shall present fairly
the financial position of the Borrower as of the end of such
quarter and the results of its operations and a statement of cash
flows during such quarter, in accordance with GAAP, certified by
the chief financial officer of the Borrower. Such financial
statements shall be accompanied by a certificate signed by the
chief financial officer of the Borrower in which such chief
financial officer calculates all financial covenants and warrants
that no Events of Default specified in Article VIII hereof nor
any events which with the giving of notice or lapse of time, or
both, would constitute an Event of Default exist.
(c) Within forty-five days after the end of each
fiscal year, a cash flow budget for the new fiscal year setting
forth budgeted monthly and cumulative cash inflows and outflows
for the year, in adequate detail and with explanatory supporting
notes and schedules itemizing cash flows on a contract-by-
contract basis as requested by the Bank.
(d) Within forty-five days after the end of each
fiscal quarter, a revised cash flow budget reconciling budgeted
and actual cash flows and explaining in sufficient detail the
causes of any variances between budgeted cash flows and actual
cash flows.
(e) When requested by Bank or, if not requested by the
Bank, within forty-five days after the end of each fiscal
quarter, a detailed aging of Accounts by customer within
department (domestic non-government, U.S. government and
international) with summary totals by age within and across
departments. Such aging shall also include the original date of
each invoice with respect to an Account, shall indicate which
Accounts are supported by a letter of credit and shall include a
summary of limitations or conditions with respect to such letters
of credit.
(f) When requested by the Bank or, if not requested by
the Bank, within forty-five days after the end of each fiscal
quarter, a schedule of contracts-in-progress, which schedule
shall include for each contract the name of the contract party,
the original and revised contract values, the original and
revised cost estimates and profit percentage estimates, the
percent complete, the projected costs to complete and the
xxxxxxxx in excess of costs or the costs in excess of xxxxxxxx
with summary totals for all categories.
(g) When filed, a copy of any and all reports filed by
the Borrower with the U.S. Securities and Exchange Commission,
including, but not limited to, Forms 10Q and 10K.
6.3 Ordinary Course of Business; Records. Conduct its
business only in the ordinary course and keep accurate and
complete books and records of its assets, liabilities and
operations consistent with sound business practices and in
accordance with GAAP.
6.4 Information for the Bank. Make available during normal
business hours for inspection by the Bank or its designated
representatives any of its books and records when reasonably
requested by the Bank to do so, and furnish the Bank any
information reasonably requested regarding its operations,
business affairs and financial condition within a reasonable time
after the Bank gives notice of its request therefor. In
particular, and without limiting the foregoing, the Borrower
shall permit, during normal business hours, representatives of
the Bank's Audit Department to make such periodic inspections of
the Borrower's books, records and assets as such representatives
deem necessary and proper.
6.5 Insurance. Carry at all times with financially sound
and reputable insurers: (a) all workers' compensation or similar
insurance as may be required under the laws of any jurisdiction;
(b) public liability insurance against claims for personal
injury, death or property damage suffered upon, in or about any
premises occupied by it or occurring as a result of the
ownership, maintenance or operation by it of any automobile,
truck or other vehicle or as a result of the use of products
manufactured, constructed or sold by it, or services rendered by
it; (c) business interruption insurance covering risk of loss as
a result of the cessation for all or any part of one year of any
substantial part of the business conducted by it; (d) hazard
insurance against such other hazards as are usually insured
against by business entities of established reputation engaged in
like businesses and similarly situated, including, without
limitation, fire (flood, if applicable) and extended coverage;
and (e) such other insurance as the Bank may from time to time
reasonably require, and pay all premiums on the policies for all
such insurance when and as they become due and take all other
actions necessary to maintain such policies in full force and
effect at all times. The insurance specified in Subsections (b),
(c) and (d) shall be maintained in such amounts (and with co-
insurance and deductibles) as such insurance is usually carried
by business entities of established reputation engaged in the
same or similar business and similarly situated. The Borrower
shall from time to time, upon request by the Bank, promptly
furnish or cause to be furnished to the Bank evidence, in form
and substance satisfactory to the Bank, of the maintenance of all
insurance required to be maintained hereby, including, without
limitation, such originals or copies as the Bank may request of
policies, certificates of insurance, riders and endorsements
relating to such insurance and proof of premium payments. The
Borrower shall cause each hazard insurance policy to provide, and
the insurer issuing each such policy to certify to the Bank, that
(a) if such insurance be proposed to be canceled or materially
changed for any reason whatsoever, such insurer will promptly
notify the Bank and such cancellation or change shall not be
effective for 30 days after receipt by the Bank of such notice,
unless the effect of such change is to extend or increase
coverage under the policy; (b) the Bank shall be named as lender
loss payee with respect to personal property and mortgagee with
respect to real property; and (c) the Bank will have the right,
at its election, to remedy any default in the payment of premiums
within 30 days of notice from the insurer of such default. The
foregoing covenants regarding insurance are in addition to, and
not intended to supersede, those covenants regarding insurance
set forth in the Security Agreement. In the event and to the
extent of any conflict between the provisions of this Agreement
and the provisions of the Security Agreement regarding the
insuring of Collateral, the provisions of the Security Agreement
with respect thereto shall govern.
6.6 Maintenance. Maintain its equipment, real property and
other properties in good condition and repair (normal wear and
tear excepted) and pay and discharge the cost of repairs thereto
or maintenance thereof.
6.7 Taxes. Pay all taxes, assessments, charges and levies
imposed upon it or on any of its property, or which it is
required to withhold and pay over, and provide evidence of
payment thereto to the Bank if the Bank so requests, except where
contested in good faith by lawful and appropriate proceedings and
where adequate reserves therefor have been set aside on its
books; provided, however, that the Borrower shall pay all such
taxes, assessments, charges and levies forthwith whenever
foreclosure on any lien which attaches or security therefor
appears imminent.
6.8 Leases. Pay all rent or other sums required by every
lease to which the Borrower is a party as the same becomes due
and payable, perform all its obligations as tenant or lessee
thereunder except where contested in good faith by lawful and
appropriate proceedings and where adequate reserves therefor have
been set aside; and keep all such leases at all times in full
force and effect during the terms thereof.
6.9 Corporate Existence; Certain Rights; Laws. Do all
things necessary to preserve and keep in full force and effect in
each jurisdiction in which it conducts business the business
existence, licenses, permits, rights, copyrights, patents,
trademarks, trade names and franchises of the Borrower and comply
with all present and future laws, ordinances, rules, regulations
judgments, orders and decrees which affect in any material way
the Borrower, its assets or the operation of its business.
6.10 Notice of Litigation or Other Proceedings. Give
immediate notice to the Bank of (i) the existence of any dispute,
(ii) the institution of any litigation, administrative proceeding
or governmental investigation involving the Borrower or (iii) the
entry of any judgment, decree or order against or involving the
Borrower, any of which might materially and adversely affect the
operation, financial condition, property or business of the
Borrower or affect the enforceability of this Agreement or any of
the other Loan Documents.
6.11 Indebtedness. Pay or cause to be paid when due (or
within applicable grace periods) all Indebtedness of the
Borrower.
6.12 Notice of Events of Default. Give immediate notice to
the Bank if the Borrower becomes aware of the occurrence of any
Event of Default, or of any fact, condition or event which with
the giving of notice or lapse of time, or both, would be an Event
of Default, or of the failure of the Borrower to observe or
perform any of the conditions or covenants to be observed or
performed by it under this Agreement or any of the other loan
Documents.
6.13 ERISA. Maintain each Plan in compliance with all
applicable requirements of ERISA and of the Code and with all
applicable rulings and regulations issued under the provisions of
ERISA and of the Code. As promptly as practicable (but in any
event not later than ten days) after the Borrower receives from
the PBGC a notice of intent to terminate any Plan or to appoint a
trustee to administer any Plan, after the Borrower has notified
the PBGC that any reportable event, as defined in Section 4043 of
ERISA, with respect to any Plan has occurred, or after the
Borrower has provided a notice of intent to terminate to each
affected party, as defined for purposes of Section 4041(a)(2) of
ERISA, with respect to any Plan, a certificate of the chief
executive officer of the Borrower shall be furnished to the Bank
setting forth the details with respect to the events resulting in
such reportable event, as the case may be, and the action which
the Borrower proposes to take with respect thereto, together with
a copy of the notice of intent to terminate or to appoint a
trustee from the PBGC, of the notice of such reportable event or
of the Borrower's notice of intent to terminate, as the case may
be.
6.14 Deposit Accounts. Use the Bank as its depository
institution unless otherwise agreed in writing by the Bank; and
notify the Bank, in writing and on a continuing basis, of all
deposit accounts and certificates of deposit (including the
numbers thereof) maintained with or purchased from other banks
and other financial institutions.
6.15 Management. Furnish to Bank within five (5) days of
any election or appointment of officers or directors, written
notice of any change in the persons who from time to time become
officers and directors of Borrower and cause Xxxxxxx X. Xxxxxxxx,
Chairman and President and Xxxxx Xxxxxx, Chief Financial Officer,
to continue in their current positions with the Borrower.
6.16 Financial Covenants. Observe the financial covenants
set forth on Schedule 6.16 attached hereto and made a part
hereof.
6.17 Compliance with Environmental Laws. Comply fully with
all Environmental Laws and not use any property which it owns or
occupies to generate, treat, store, transport, transfer, dispose
of, release or otherwise handle any Hazardous Material, except in
compliance with all Environmental Laws.
6.18 Foreign Accounts. The Bank shall obtain letters of
credit acceptable to the Bank, in the Bank's sole and absolute
discretion, to support Accounts owed by Account debtors located
in countries which the Bank has rated or later rates as having a
Country Risk Rate of "3" or worse.
6.19 Further Actions. Cooperate and join with the Bank, at
its own expense, in taking all such further actions as the Bank,
in its sole judgment, shall deem necessary to effectuate the
provisions of the Loan Documents and to perfect or continue the
perfected status of all Encumbrances granted to the Bank pursuant
to the Loan Documents, including, without limitation, the
execution, delivery and filing of financing statements,
amendments thereto and continuation statements, the delivery of
chattel paper, documents or instruments to the Bank, and the
notation of Encumbrances in favor of the Bank on certificates of
title.
ARTICLE VII - NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that from the
Closing Date until satisfaction in full of the Obligations, it
will not do any one or more of the following without first
obtaining the written consent of the Bank:
7.1 Fundamental Corporate Changes.
(a) change its name, enter into or effect any merger,
consolidation, share exchange, division, conversion,
reclassification, recapitalization, reorganization or other
transaction of like effect, or dissolve;
(b) sell, transfer, lease or otherwise dispose of all
or (except in the ordinary course of business) any material part
of its assets or any significant product line or process; or
(c) have any Subsidiary.
7.2 Indebtedness. Incur, create, assume or have any
Indebtedness except:
(a) the Loans;
(b) the Letters of Credit;
(c) the Chase Letters of Credit listed on Schedule 7.2
hereof (which letters of credit, upon their expiration, shall not
be renewed);
(d) the Subordinated Debt; and
(e) not more than $100,000 of other Indebtedness.
7.3 Encumbrances. Create or allow any Encumbrances to be
on or otherwise affect any of its property or assets except:
(a) encumbrances in favor of the Bank;
(b) encumbrances for taxes, assessments and other
governmental charges incurred in the ordinary course of business
which are not yet due and payable;
(c) pledges or deposits made in the ordinary course of
business to secure payment of workmen's compensation or to
participate in any fund in connection with workmen's
compensation, unemployment insurance or other social security
obligations;
(d) good faith pledges or deposits made in the
ordinary course of business to secure performance of tenders,
contracts (other than for the repayment of Indebtedness) or
leases or to secure statutory obligations or surety, appeal,
indemnity, performance or other similar bonds required in the
ordinary course of business;
(e) liens of mechanics, materialmen, warehousemen,
carriers or other similar liens, securing obligations incurred in
the ordinary course of business that are not yet due and payable;
(f) encumbrances securing Indebtedness permitted under
Section 7.2(c) and (e), provided that (i) no other covenants of
this Agreement are thereby violated and (ii) no assets other than
the assets so acquired secure such Indebtedness;
(g) encumbrances, if any, otherwise expressly
permitted by the Security Agreement or the Mortgage; and
(h) Encumbrances disclosed in the Financial
Statements.
7.4 Guaranties. Directly or indirectly make any Guaranty.
7.5 Sales and Lease-Backs. Sell, transfer or otherwise
dispose of any property, real or personal, now owned or hereafter
acquired, with the intention of directly or indirectly taking
back a lease on such property.
7.6 Loans, Investments. Purchase, invest in, or make any
loan in the nature of an investment in the stocks, bonds, notes
or other securities or evidence of Indebtedness of any person,
except for (i) short-term obligations of the Treasury of the
United States of America; (ii) certificates of deposit issued by
banks with shareholders' equity of at least $100,000,000;
(iii) repurchase agreements not exceeding 29 days in duration
issued by banks with shareholders' equity of at least
$100,000,000; or (iv) notes and other instruments generally known
as "commercial paper" which arise out of current transactions,
which have maturities at the time of issuance thereof not
exceeding nine months and which have, at the time of such
purchase, investment or other acquisition, the highest credit
rating of Standard & Poor's Corporation or Xxxxx'x Investors
Service, Inc, or make any loan or advance to or for the benefit
of any person, except for ordinary course advances to employees
for business travel and other expenses.
7.7 Change in Business. Discontinue any substantial part,
or change the nature of, the business of the Borrower, or enter
into any new business unrelated to the present business conducted
by the Borrower.
7.8 Sale or Discount of Receivables. Sell any notes
receivable or accounts receivable, with or without recourse.
7.9 Prepayment of Indebtedness. Make any voluntary
prepayments of Indebtedness other than the Loans.
7.10 ERISA.
(a) Terminate any Plan maintained by the Borrower to
which Section 4021 of ERISA applies;
(b) Allow the value of the benefits guaranteed under
Title IV of ERISA to exceed the value of assets allocable to such
benefits;
(c) Incur a withdrawal liability within the meaning of
Section 4201 of ERISA.
7.11 Restricted Payments.
(a) Declare or pay any dividend, or make any
distributions of cash or property, to holders of any shares of
its capital stock, or, directly or indirectly, redeem or
otherwise acquire any such shares or any option, warrant or right
to acquire any such shares; provided, however, that absent an
Event of Default hereunder or an event which with the giving of
notice or lapse of time, or both, would constitute an Event of
Default hereunder, Borrower may pay dividends not to exceed
$68,750 per fiscal quarter in accordance with the terms of that
certain Preferred Stock Purchase Agreement.
(b) Permit payment, whether in cash or otherwise, of
any amount on account of the Subordinated Debt, except payment of
interest (absent an Event of Default hereunder or an event which
with the giving of notice or lapse of time, or both, would
constitute an Event of Default hereunder) in accordance with the
terms of the agreements between the Borrower and the holders of
the Subordinated Debt.
7.12 Compliance with Federal Reserve Board Regulations.
(i) Use any of the proceeds of the Loans, directly or indirectly,
for the purposes of purchasing or carrying any "margin security"
within the meaning of Regulations G or U of the Board of
Governors of the Federal Reserve System (12 X.X.X. 000, 000),
(xx) use any of the proceeds of the Loans, directly or
indirectly, for the purpose of purchasing, carrying or trading in
any securities under such circumstances as to involve the
Borrower in a violation of Regulation X of such Board
(12 C.F.R. 224), or (iii) take or permit to be taken any other
action which would result in the Loans or the consummation of any
of the other transactions contemplated hereby being violative of
such regulations or any other regulation of such Board.
7.13 Change in Ownership. Allow Xxxxxxx Xxxxxxxx and Xxxx
Xxxxxxxx, together, to own, directly or indirectly, less than
thirty percent (30%) of the outstanding shares of voting common
stock of the Borrower.
ARTICLE VIII - EVENTS OF DEFAULT
An event of default ("Event of Default") under this
Agreement shall be deemed to exist if any one or more of the
following events occurs and is continuing, whatever the reason
therefor:
8.1 Borrower's Failure to Pay. The Borrower fails to pay
any amount of principal, interest, fees or other sums as and when
due under this Agreement or any of the other Loan Documents, or
any other Obligations, whether upon stated maturity,
acceleration, or otherwise.
8.2 Breach of Covenants or Conditions. The Borrower
(i) fails to perform or observe any term, covenant, agreement or
condition set forth in Section 6.16 or Article VII of this
Agreement, or (ii) fails to perform or observe any other term,
covenant, agreement or condition set forth in this Agreement or
any of the other Loan Documents or is in violation of or non-
compliance with any provision of this Agreement (other than those
set forth in Section 6.16 and Article VII) or any of the Loan
Documents, and, with respect only to clause (ii) above, has not
remedied and fully cured such non-performance, non-observance,
violation of or non-compliance within fifteen (15) days after the
Bank has given written notice thereof to the Borrower; provided,
however, that during such fifteen (15) day period the Bank's
obligations to make further Loans to the Borrower shall be
suspended.
8.3 Defaults in Other Agreements. The Borrower fails to
perform or observe any term, covenant, agreement or condition
contained in, or there shall occur any default under or as
defined in, any other agreement applicable to the Borrower or by
which the Borrower is bound involving a material liability of the
Borrower which shall not be remedied within the period of time
(if any) within which such other agreement permits such default
to be remedied, unless such default is waived by the other party
thereto or excused as a matter of law.
8.4 Agreements Invalid. The validity, binding nature of,
or enforceability of any material term or provision of any of the
Loan Documents is disputed by, on behalf of, or in the right or
name of the Borrower or any material term or provision of any
such Loan Document is found or declared to be invalid, avoidable,
or non-enforceable by any court of competent jurisdiction.
8.5 False Warranties; Breach of Representations. Any
warranty or representation made by the Borrower in this Agreement
or any other Loan Document or in any certificate or other writing
delivered under or pursuant to this Agreement or any other Loan
Document, or in connection with any provision of this Agreement
or related to the transactions contemplated hereby shall prove to
have been false or incorrect or breached in any material respect
on the date as of which made.
8.6 Judgments. A final judgment or judgments is entered,
or an order or orders of any judicial authority or governmental
entity is issued against the Borrower (other than judgments
disclosed on Schedule A to the Security Agreement), which is
uninsured (such judgment(s) and order(s) hereinafter collectively
referred to as "Judgment") (i) in the United States, the United
Kingdom, Canada, or any other jurisdiction in which the common
law applies for payment of money, which Judgment, in the
aggregate, exceeds One Hundred Thousand Dollars ($100,000.00)
outstanding at any one time; or (ii) in any other jurisdiction,
for payment of money, which judgment, in the aggregate, exceeds
Five Hundred Thousand Dollars ($500,000) outstanding at any one
time or (iii) for injunctive or declaratory relief which would
have a material adverse effect on the ability of the Borrower to
conduct its business, and such Judgment is not discharged or
execution thereon or enforcement thereof stayed pending appeal,
within thirty days after entry or issuance thereof, or, in the
event of such a stay, such Judgment is not discharged within
thirty days after such stay expires.
8.7 Bankruptcy or Insolvency of the Borrower.
(a) The Borrower or any Guarantor becomes insolvent,
or generally fails to pay, or is generally unable to pay, or
admits in writing its inability to pay, its debts as they become
due or applies for, consents to, or acquiesces in, the
appointment of a trustee, receiver or other custodian for the
Borrower or a substantial part of its property, or makes a
general assignment for the benefit of creditors.
(b) The Borrower or any Guarantor commences any
bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any state or federal bankruptcy or insolvency
law, or any dissolution or liquidation proceeding.
(c) Any bankruptcy, reorganization, debt arrangement,
or other case or proceeding under any state or federal bankruptcy
or insolvency law, or any dissolution or liquidation proceeding,
is involuntarily commenced against or in respect of the Borrower
or any Guarantor or an order for relief is entered in any such
proceeding, which is not dismissed within sixty days.
004 A trustee, receiver, or other custodian is
appointed for the Borrower or any Guarantor or a substantial part
of the Borrower's or any Guarantor's property.
ARTICLE IX - REMEDIES
9.1 Further Advances; Acceleration; Setoff.
(a) Upon the occurrence of any one or more Events of
Default, the Bank may, in its sole discretion, refuse to make any
further advances or Loans to the Borrower.
(b) Automatically upon the occurrence of any Event of
Default described in Section 8.7 of this Agreement, and in the
sole discretion of the Bank upon the occurrence of any other
Event of Default, the unpaid principal balance of all Loans, all
interest and fees accrued and unpaid thereon, and all other
amounts and Obligations payable by the Borrower under this
Agreement and the other Loan Documents shall immediately become
due and payable in full, all without protest, presentment,
demand, or further notice of any kind to the Borrower, all of
which are expressly waived by the Borrower.
(c) If any of the Obligations shall be due and payable
or any one or more Events of Default shall have occurred, the
Bank shall have the right, in addition to all other rights and
remedies available to it, without notice to the Borrower, to
apply toward and set-off against and apply to the then unpaid
balance of the Note and the other Obligations any items or funds
held by the Bank, any and all deposits (whether general or
special, time or demand, matured or unmatured, fixed or
contingent, liquidated or unliquidated) now or hereafter
maintained by the Borrower for its own account with the Bank, and
any other indebtedness at any time held or owing by the Bank to
or for the credit or the account of the Borrower. For such
purpose the Bank shall have, and the Borrower hereby grants to
the Bank, a first lien on all such deposits. The Bank is hereby
authorized to charge any such account or indebtedness for any
amounts due to the Bank. Such right of set-off shall exist
whether or not the Bank shall have made any demand under this
Agreement, the Note or any other Loan Document and whether or not
the Note and the other Obligations are matured or unmatured. The
Borrower hereby confirms the Bank's lien on such accounts and
right of set-off, and nothing in this Agreement shall be deemed
any waiver or prohibition of such lien and right of set-off.
9.2 Further Remedies; Confession of Judgment.
(a) Upon the occurrence of any one or more Events of
Default, the Bank may proceed to protect and enforce its rights
under this Agreement and the other Loan Documents by exercising
such remedies as are available to the Bank in respect thereof
under applicable law, either by suit in equity or by action at
law, or both, whether for specific performance of any provision
contained in this Agreement or any of the other Loan Documents or
in aid of the exercise of any power granted in this Agreement or
any of the other Loan Documents.
(b) THE FOLLOWING PARAGRAPH SETS FORTH A POWER OF
AUTHORITY FOR ANY ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWER.
IN GRANTING THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST
BORROWER, THE BORROWER, FOLLOWING CONSULTATION WITH (OR DECISION
NOT TO CONSULT) SEPARATE COUNSEL FOR BORROWER AND WITH KNOWLEDGE
OF THE LEGAL EFFECT HEREOF, HEREBY KNOWINGLY, INTENTIONALLY,
VOLUNTARILY, INTELLIGENTLY AND UNCONDITIONALLY WAIVES ANY AND ALL
RIGHTS THE BORROWER HAS OR MAY HAVE TO PRIOR NOTICE AND AN
OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND
LAWS OF THE UNITED STATES OF AMERICA, COMMONWEALTH OF
PENNSYLVANIA, OR ELSEWHERE INCLUDING, WITHOUT LIMITATION, A
HEARING PRIOR TO GARNISHMENT AND ATTACHMENT OF THE BORROWER'S
BANK ACCOUNT AND OTHER ASSETS. BORROWER ACKNOWLEDGES AND
UNDERSTANDS THAT BY ENTERING INTO THIS AGREEMENT CONTAINING A
CONFESSION OF JUDGMENT CLAUSE THAT BORROWER IS VOLUNTARILY,
INTELLIGENTLY AND KNOWINGLY GIVING UP ANY AND ALL RIGHTS,
INCLUDING CONSTITUTIONAL RIGHTS, THAT BORROWER HAS OR MAY HAVE TO
NOTICE AND A HEARING BEFORE JUDGMENT CAN BE ENTERED AGAINST
BORROWER AND BEFORE THE BORROWER'S ASSETS, INCLUDING, WITHOUT
LIMITATION, ITS BANK ACCOUNTS, MAY BE GARNISHED, LEVIED, EXECUTED
UPON AND/OR ATTACHED. BORROWER UNDERSTANDS THAT ANY SUCH
GARNISHMENT, LEVY, EXECUTION AND/OR ATTACHMENT SHALL RENDER THE
PROPERTY GARNISHED, LEVIED, EXECUTED UPON OR ATTACHED IMMEDIATELY
UNAVAILABLE TO BORROWER. IT IS SPECIFICALLY ACKNOWLEDGED BY
BORROWER THAT THE BANK HAS RELIED ON THIS WARRANT OF ATTORNEY AND
THE RIGHTS WAIVED BY BORROWER HEREIN IN ENTERING INTO THIS
AGREEMENT AND AS AN INDUCEMENT TO EXTEND CREDIT TO THE BORROWER.
Upon the occurrence of an Event of Default hereunder or
under any other Loan Document, Borrower hereby jointly and
severally authorizes and empowers any attorney of any court of
record or the prothonotary or clerk of any county in the
Commonwealth of Pennsylvania, or in any jurisdiction where
permitted by law or the clerk of any United States District
Court, to appear for Borrower in any and all actions which may be
bought hereunder and enter and confess judgment against the
Borrower or any of them in favor of the Bank for such sums as are
due or may become due hereunder or under any other Loan
Documents, together with costs of suit and actual collection
costs including, without limitation, reasonable attorneys' fees
equal to 1% of the Obligations then due and owing but in no event
less than $5,000.00, with or without declaration, without prior
notice, without stay of execution and with release of all
procedural errors and the right to issue executions forthwith.
To the extent permitted by law, Borrower waives the right of
inquisition on any real estate levied on, voluntarily condemns
the same, authorizes the prothonotary or clerk to enter upon the
writ of execution this voluntary condemnation and agrees that
such real estate may be sold on a writ of execution; and also
waives any relief from any appraisement, stay or exemption law of
any state now in force or hereafter enacted. Borrower further
waives the right to any notice and hearing prior to the
execution, levy, attachment or other type of enforcement of any
judgment obtained hereunder, including, without limitation, the
right to be notified and heard prior to the garnishment, levy,
execution upon and attachment of Borrower's bank accounts and
other property. If a copy of this Agreement verified by
affidavit of any officer of the Bank shall have been filed in
such action, it shall not be necessary to file the original
thereof as a warrant of attorney, any practice or usage to the
contrary notwithstanding. The authority herein granted to
confess judgment shall not be exhausted by any single exercise
thereof, but shall continue and may be exercised from time to
time as often as the Bank shall find it necessary and desirable
and at all times until full payment of all amounts due hereunder
and under any other Loan Documents. The Bank may confess one or
more judgments in the same or different jurisdictions for all or
any part of the Obligations arising hereunder or under any other
Loan Documents to which Borrower is a party, without regard to
whether judgment has theretofore been confessed on more than one
occasion for the same Obligations. In the event that any
judgment confessed against the Borrower is stricken or opened
upon application by or on behalf of Borrower or any obligor for
any reason, the Bank is hereby authorized and empowered to again
appear for and confess judgment against Borrower for any part or
all of the Obligations owing under this Agreement and/or for any
other liabilities, as herein provided.
ARTICLE X - MISCELLANEOUS
10.1 Remedies Cumulative; No Waiver. The rights, powers and
remedies of the Bank provided in this Agreement and the other
Loan Documents are cumulative and not exclusive of any right,
power or remedy provided by law or equity, and no failure or
delay on the part of the Bank in the exercise of any right,
power, or remedy shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power, or remedy
preclude other or further exercise thereof, or the exercise of
any other right, power or remedy.
10.2 Notices. Every notice and communication under this
Agreement or any of the other Loan Documents shall be in writing
and shall be given by either (i) hand-delivery, (ii) first class
mail (postage prepaid), (iii) reliable overnight commercial
courier (charges prepaid), or (iv) telecopy or other means of
electronic transmission, if confirmed promptly by any of the
methods specified in clauses (i), (ii) and (iii) of this
sentence, to the following addresses:
If to the Borrower:
Environmental Tectonics Corporation
Xxxxxx Xxxx Xxxxxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxxxx, President
Telecopy No: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxxxx, Esquire
Xxxxxxx & Xxx, P.C.
One Glenhardie Corporate Center
Suite 202
0000 Xxxxxxxx Xxxx
X.X. Xxx 000
Xxxxx, Xxxxxxxxxxxx 00000-0000
Telecopy No.: (000) 000-0000
If to the Bank:
First Union National Bank
Portfolio Management
Witherspoon Building, PA 0000
Xxxxx & Xxxxxx Xxxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxx Xxxxxxx
Telecopy No.:(000) 000-0000 or 985-3149
With a copy to:
Duane, Morris & Heckscher
Xxx Xxxxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esquire
Telecopy No.: (000) 000-0000
Notice given by telecopy or other means of electronic
transmission shall be deemed to have been given and received when
sent. Notice by overnight courier shall be deemed to have been
given and received on the date scheduled for delivery. Notice by
mail shall be deemed to have been given and received three (3)
calendar days after the date first deposited in the United States
Mail. Notice by hand delivery shall be deemed to have been given
and received upon delivery.
A party may change its address by giving written notice to
the other party as specified herein.
10.3 Costs, Expenses and Attorneys' Fees. Whether or not
the transactions contemplated by this Agreement and the other
Loan Documents are fully consummated, the Borrower shall promptly
pay (or reimburse, as the Bank may elect) all costs and expenses
which the Bank has incurred or may hereafter incur in connection
with the negotiation, preparation, reproduction, interpretation
and enforcement of this Agreement and the other Loan Documents,
the collection of all amounts due hereunder and thereunder, and
any amendment, modification, consent or waiver which may be
hereafter requested by the Borrower or otherwise required. Such
costs and expenses shall include, without limitation, the fees
and disbursements of counsel to the Bank, the costs of appraisal
fees, searches of public records, costs of filing and recording
documents with public offices, and similar costs and expenses
incurred by the Bank. Upon the occurrence of an Event of
Default, such costs shall also include the fees of any
accountants, consultants or other professionals retained by the
Bank. The Borrower's reimbursement obligations under this
Section shall survive any termination of this Agreement.
10.4 Survival of Covenants. This Agreement and all
covenants, agreements, representations and warranties made herein
and in any certificates delivered pursuant hereto shall survive
the making of the Loans and the execution and delivery of the
Note and, subject to the provisions of 10.15 hereof, shall
continue in full force and effect until all of the Obligations
have been fully paid, performed, satisfied and discharged.
10.5 Counterparts; Effectiveness. This Agreement may be
executed in any number of counterparts and by the different
parties on separate counterparts. Each such counterpart shall be
deemed to be an original, but all such counterparts shall
together constitute one and the same Agreement. This Agreement
shall be deemed to have been executed and delivered when the Bank
has received counterparts hereof executed by all parties listed
on the signature page(s) hereto.
10.6 Headings. The headings of sections have been included
herein for convenience only and shall not be considered in
interpreting this Agreement.
10.7 Payment Due On A Day Other Than A Business Day. If any
payment due or action to be taken under this Agreement or any
Loan Document falls due or is required to be taken on a day which
is not a Business Day, such payment or action shall be made or
taken on the next succeeding Business Day and such extended time
shall be included in the computation of interest.
10.8 Arbitration. Upon demand of any party hereto, whether
made before or after institution of any judicial proceeding, any
dispute, claim or controversy arising out of, connected with or
relating to this Agreement and other Loan Documents ("Disputes")
between or among parties to this Agreement shall be resolved by
binding arbitration as provided herein. Institution of a
judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include,
without limitation, tort claims, counterclaims, disputes as to
whether a matter is subject to arbitration, claims brought as
class actions, claims arising from Loan Documents executed in the
future, or claims arising out of or connected with the
transaction reflected by this Agreement.
Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration
Rules") of the American Arbitration Association (the "AAA") and
Title 9 of the U.S. Code. All arbitration hearings shall be
conducted in Philadelphia, Pennsylvania. The expedited
procedures set forth in Rule 51 et seq. of the Arbitration Rules
shall be applicable to claims of less than $1,000,000.00. All
applicable statutes of limitation shall apply to any Dispute. A
judgment upon the award may be entered in any court having
jurisdiction. The panel from which all arbitrators are selected
shall be comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction, state or federal, of
the state where the hearing will be conducted or if such person
is not available to serve, the single arbitrator may be a
licensed attorney. Notwithstanding the foregoing, this
arbitration provision does not apply to disputes under or related
to swap agreements.
10.9 Preservation and Limitation of Remedies.
Notwithstanding the preceding binding arbitration provisions,
Bank and Borrower agree to preserve, without diminution, certain
remedies that any party hereto may employ or exercise freely,
independently or in connection with an arbitration proceeding or
after an arbitration action is brought. Bank and Borrower shall
have the right to proceed in any court of proper jurisdiction or
by self-help to exercise or prosecute the following remedies, as
applicable: (i) all rights to foreclose against any real or
personal property or other security by exercising a power of sale
granted under Loan Documents or under applicable law or by
judicial foreclosure and sale, including a proceeding to confirm
the sale; (ii) all rights of self-help including peaceful
occupation of real property and collection of rents, set-off, and
peaceful possession of personal property; (iii) obtaining
provisional or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment, appointment of receiver
and filing an involuntary bankruptcy proceeding; and (iv) when
applicable, a judgment by confession of judgment. Preservation
of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a
Dispute.
Borrower and Bank agree that they shall not have a remedy of
punitive or exemplary damages against the other in any Dispute
and hereby waive any right or claim to punitive or exemplary
damages they have now or which may arise in the future in
connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
10.10 Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws of the
Commonwealth of Pennsylvania.
10.11 Integration. This Agreement and the other Loan
Documents constitute the sole agreement of the parties with
respect to the subject matter hereof and thereof and supersede
all oral negotiations and prior writings with respect to the
subject matter hereof and thereof.
10.12 Amendment and Waiver. No amendment of this
Agreement, and no waiver of any one or more of the provisions
hereof shall be effective unless set forth in writing and signed
by the parties hereto.
10.13 Successors and Assigns.
(a) Generally. This Agreement (i) shall be binding
upon the Borrower and the Bank and their respective successors
and assigns, and (ii) shall inure to the benefit of the Borrower
and the Bank and their respective successors and assigns,
provided, however, that the Borrower may not assign its rights
hereunder or any interest herein without the prior written
consent of the Bank, and any such assignment or attempted
assignment by the Borrower shall be void and of no effect with
respect to the Bank.
(b) Participations. The Bank may from time to time
sell or otherwise grant participations in the Loans and the Note,
provided that the Bank remains sole agent with respect to the
Loans and the Note, and the holder of any such participation, if
the participation agreement so provides, (i) shall, with respect
to its participation, be entitled to all of the rights of the
Bank and (ii) may exercise any and all rights of setoff or
banker's lien with respect thereto, in each case as fully as
though the Borrower were directly indebted to the holder of such
participation in the amount of such participation. The Bank may
disclose to prospective participants such information regarding
the Borrower's affairs as the Bank possesses. The Bank shall
give notice to the Borrower of the grant of such participations;
however, the failure to give such notice shall not affect any of
the Bank's rights hereunder.
10.14 Severability of Provisions. Any provision in this
Agreement that is held to be inoperative, unenforceable,
voidable, or invalid in any jurisdiction shall, as to that
jurisdiction, be ineffective, unenforceable, void or invalid
without affecting the remaining provisions, and to this end the
provisions of this Agreement are declared to be severable.
10.15 Consent to Jurisdiction and Service of Process. The
Borrower irrevocably appoints each and every officer of the
Borrower as its attorneys upon whom may be served, by regular or
certified mail at the address set forth in Section 10.2 hereof,
any notice, process or pleading in any action or proceeding
against it arising out of or in connection with this Agreement or
any of the other Loan Documents; and the Borrower hereby
(i) consents that any action or proceeding against it be
commenced and maintained in any court within the Commonwealth of
Pennsylvania or in the United States District Court for the
Eastern District of Pennsylvania by service of process on any
such officer; (ii) agrees that the courts of the Commonwealth of
Pennsylvania and the United States District Court for the Eastern
District of Pennsylvania shall have jurisdiction with respect to
the subject matter hereof and the person of the Borrower and the
Collateral, and (iii) waives any objection that such Borrower may
now or hereafter have as to the venue of any such suit, action or
proceeding brought in such a court or that such court is an
inconvenient forum. Notwithstanding the foregoing, the Bank, in
its absolute discretion may also initiate proceedings in the
courts of any other jurisdiction in which the Borrower may be
found or in which any of its properties or the Collateral may be
located.
10.16 Indemnification.
(a) If, after receipt of any payment of all or any
part of the Obligations, the Bank is compelled to surrender such
payment to any Person or entity for any reason (including,
without limitation, a determination that such payment is void or
voidable as a preference or fraudulent conveyance, an
impermissible setoff, or a diversion of trust funds), then this
Agreement and the other Loan Documents shall continue in full
force and effect, and the Borrower shall be liable for, and shall
indemnify, defend and hold harmless the Bank with respect to the
full amount so surrendered.
(b) The Borrower shall indemnify, defend and hold
harmless the Bank with respect to any and all claims, expenses,
demands, losses, costs, fines or liabilities of any kind,
including reasonable attorneys' fees and costs, arising from or
in any way related to (i) acts or conduct of the Borrower under,
pursuant to or related to this Agreement and the other Loan
Documents, (ii) Borrower's breach or violation of any
representation, warranty, covenant or undertaking contained in
this Agreement or the other Loan Documents, and (iii) Borrower's
failure to comply with any or all laws, statutes, ordinances,
governmental rules, regulations or standards, whether federal,
state, or local, or court or administrative orders or decrees,
including without limitation those resulting from any Hazardous
Materials or dangerous environmental condition within, on, from,
related to or affecting any real property owned or occupied by
the Borrower, unless resulting from the acts or conduct of the
Bank constituting gross negligence or willful misconduct.
(c) The provisions of this section shall survive the
termination of this Agreement and the other Loan Documents and
shall be and remain effective notwithstanding the payment of the
Obligations, the cancellation of the Note, the release of any
Encumbrance securing the Obligations or any other action which
the Bank may have taken in reliance upon its receipt of such
payment. Any cancellation of the Note, release of any
Encumbrance or other such action shall be deemed to have been
conditioned upon any payment of the Obligations having become
final and irrevocable.
IN WITNESS WHEREOF, the undersigned have caused this
Agreement to be executed by their duly authorized officers on the
date first above written.
ENVIRONMENTAL TECTONICS CORPORATION
By:/s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: Chief Financial Officer
FIRST UNION NATIONAL BANK
By:/s/ Xxxxxx Xxxxxxxxxxx
Name: Xxxxxx Xxxxxxxxxxx
Title: Senior Vice President
Schedule 6.16
FINANCIAL COVENANTS
This Schedule is a part of the Revolving Credit Agreement
dated March 27, 1997 between First Union National Bank and
Environmental Tectonics Corporation.
A. Current Ratio -- The Borrower shall have at the end of
each fiscal quarter a Current Ratio of not less than 1.50
to 1.00.
B. Leverage Ratio -- The Borrower shall have at the end of
each fiscal quarter a Leverage Ratio of not more than:
(i) 1.25 to 1.00 for the fiscal quarters ending
May 31, 1997, August 31, 1997 and November 30, 1997; and
(ii) 1.00 to 1.00 for the quarter ending February 27,
1998 and subsequent quarters.
C. Funds Flow Coverage Ratio -- The Borrower shall have at
the end of each fiscal quarter a Funds Flow Coverage Ratio of not
less than 1.10 to 1.00.
"Current Assets" shall mean, at any time, all assets which,
in accordance with GAAP, should be classified as current assets
of the Borrower.
"Current Liabilities" shall mean, at any time, all
liabilities which, in accordance with GAAP, should be classified
as current liabilities of the Borrower, plus, if the Line of
Credit Loans do not constitute current liabilities in accordance
with GAAP, the Line of Credit Loans, plus the face amount of all
issued Letters of Credit.
"Current Ratio" shall mean, at any time, the ratio of
Current Assets to Current Liabilities.
"Funds Flow Coverage Ratio" shall mean the sum of (i) Net
Income, interest expense, depreciation and amortization less
(ii) preferred dividends, unfunded capital expenditures, software
development costs and non-cash income (to the extent included in
Net Income) divided by the sum of interest expense, current
maturities of long term debt (excluding any and all Line of
Credit Loans) and capital leases (calculated in accordance with
GAAP) plus twenty percent of the average of the maximum
borrowings outstanding under the Revolving Facility Commitment
during each of the two most recent quarters. Prior to
February 27, 1998, the Funds Flow Coverage Ratio shall be
calculated by annualizing all components of the Funds Flow
Coverage Ratio. Thereafter, the Funds Flow Coverage Ratio shall
be calculated on a twelve-month rolling basis.
"Leverage Ratio" shall mean the ratio of Senior Liabilities
to Tangible Capital Funds.
"Liabilities" shall mean, at any time, all liabilities
which, in accordance with GAAP, shall be classified as
liabilities of the Borrower.
"Net Income" shall mean, for any period, the net income of
the Borrower, determined in accordance with GAAP, excluding:
(a) the proceeds of any insurance policy;
(b) any gain or loss arising from:
(1) the sale or other disposition of any assets
(other than Current Assets);
(2) any write-up of assets; or
(3) the acquisition of outstanding securities
representing Indebtedness of the Borrower;
(c) any amount representing any interest in the
undistributed earnings of any Person;
(d) any earnings, prior to the date of acquisition, of
any Person acquired in any manner;
(e) any earnings of a successor to or transferee of
the assets of the Borrower prior to becoming such successor or
transferee;
(f) any deferred credit (or amortization of a deferred
credit) arising from the acquisition of any Person; and
(g) any other item constituting an extraordinary gain
or loss under GAAP.
"Senior Liabilities" shall mean, at any time, all
Liabilities less the Subordinated Debt.
"Tangible Assets" shall mean all tangible assets of the
Borrower and shall exclude, without limitation, all goodwill,
franchises, licenses, patents, trademarks, trade names,
copyrights, service marks, and brand names, but shall not exclude
software development costs.
"Tangible Capital Funds" shall mean Tangible Assets less
Senior Liabilities.
