LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement"), is entered into as of February 12,
1997, between NUMEREX CORP. ("NumereX") AND ITS U.S. SUBSIDIARIES listed on the
signature pages hereto (NumereX and such Subsidiaries each individually a
"Borrower" and collectively, the "Borrowers"; NumereX and all of its
Subsidiaries, both U.S. and foreign, are sometimes collectively referred to as
"NumereX and its Subsidiaries"), and PNC BANK, NATIONAL ASSOCIATION (the
"Bank").
The Borrowers and the Bank, with the intent to be legally bound, agree as
follows:
I. Loan and Security
1.1 Loan. The following loans, lines of credit and credit facilities (if
one or more, collectively, the "Loan"), made for the purpose indicated below
shall be subject to and governed by this Agreement:
Amount and Type Purpose
--------------- -------
$10,000,000 Convertible Line of Credit General working capital and
acquisitions
The Loan is or will be evidenced by a promissory note or notes of the Borrowers
(if one or more, collectively, the "Note") acceptable to the Bank, which shall
set forth the interest rate, repayment and other provisions, the terms of which
are incorporated into this Agreement by reference.
1.2 Security. The security for repayment of the Loan shall consist of
equity interests of NumereX's direct and indirect foreign subsidiaries pledged
under stock pledge or similar agreements heretofore, contemporaneously or
hereafter executed and delivered to the Bank (the "Security Documents"), which
shall secure repayment of the Loan, the Note and all other loans, advances,
debts, liabilities, obligations, covenants and duties owing by the Borrowers to
the Bank of any kind or nature, present or future, whether or not evidenced by
any note, guaranty or other instrument, whether arising under any agreement,
instrument or document, whether or not for the payment of money, whether arising
by reason of an extension of credit, opening of a letter of credit, loan or
guarantee or in any other manner, whether arising out of overdrafts on deposit
or other accounts or electronic funds transfers (whether through automatic
clearing houses or otherwise) or out of the Bank's non-receipt of or inability
to collect funds or otherwise not being made whole in connection with depository
transfer check or other similar arrangements, whether direct or indirect
(including those acquired by assignment or participation), absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising, and any amendments, extensions, renewals or increases and all costs and
expenses of the Bank incurred in the documentation, negotiation, modification,
enforcement, collection or
otherwise in connection with any of the foregoing, including but not limited to
reasonable attorneys' fees and expenses (hereinafter referred to collectively as
the "Obligations"). Unless expressly provided to the contrary in documentation
for any other loan or loans, it is the express intent of the Bank and the
Borrowers that all Obligations including those included in the Loan be
cross-collateralized and cross-defaulted, such that collateral securing any of
the Obligations shall secure repayment of all Obligations and a default under
any Obligation shall be a default under all Obligations.
This Agreement, the Note, the Security Documents and all other related documents
are collectively referred to as the "Loan Documents".
II. Representations and Warranties. Each Borrower hereby makes the
following representations and warranties, which shall be continuing in nature
and remain in full force and effect until the Obligations are paid in full, and
which shall be true and correct except as otherwise set forth on the Schedules
attached hereto and incorporated herein by reference:
A. Existence, Power and Authority. NumereX and each of its Subsidiaries
are duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and have the power and
authority to own and operate their assets and to conduct their business as now
or proposed to be carried on, and each is duly qualified, licensed and in good
standing to do business in all jurisdictions where its ownership of property or
the nature of its business requires such qualification or licensing. NumereX and
each of its Subsidiaries are duly authorized to execute and deliver the Loan
Documents, all necessary action to authorize the execution and delivery of the
Loan Documents has been properly taken, and each Borrower is and will continue
to be duly authorized to borrow under this Agreement. NumereX and each of its
Subsidiaries are duly authorized to perform all of the other terms and
provisions of the Loan Documents.
B. Financial Statements. The Borrowers have delivered or caused to be
delivered the most recent balance sheet, income statement and statement of cash
flows for NumereX and its Subsidiaries (the "Historical Financial Statements").
The Historical Financial Statements are true, complete and accurate in all
material respects and fairly present the financial condition, assets and
liabilities, whether accrued, absolute, contingent or otherwise and the results
of the operations of NumereX and its Subsidiaries for the period specified
therein. The Historical Financial Statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") consistently applied from
period to period subject in the case of interim statements to normal year-end
adjustments and to any comments and notes acceptable to the Bank in its sole
discretion.
C. No Material Adverse Change. Since the date of the most recent
Financial Statements, NumereX and its Subsidiaries on a consolidated basis have
not
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suffered any damage, destruction or loss, and no event or condition has occurred
or exists, which has resulted or could result in a material adverse change in
their business, assets, operations, financial condition or results of operation.
D. Binding Obligations. Each Borrower has full power and authority to
enter into the transactions provided for in this Agreement and has been duly
authorized to do so by appropriate action of its Board of Directors as may be
required by law, charter, other organizational documents or agreements; and the
Loan Documents, when executed and delivered by NumereX or any of its
Subsidiaries which are parties to the Loan Documents, will constitute the legal,
valid and binding obligations of such obligor, enforceable in accordance with
their terms.
E. No Defaults or Violations. There does not exist any Event of Default
under this Agreement or any default or violation by NumereX or any of its
Subsidiaries of or under any of the terms, conditions or obligations of: (i) its
articles or certificate of incorporation, regulations or bylaws or its other
organizational documents as applicable; (ii) any indenture, mortgage, deed of
trust, franchise, permit, contract, agreement, or other instrument to which it
is a party or by which it is bound; or (iii) any law, regulation, ruling, order,
injunction, decree, condition or other requirement applicable to or imposed upon
it by any law, the action by any court or any governmental authority or agency;
and the consummation of this Agreement and the transactions set forth herein
will not result in any such default or violation.
F. Title to Assets. NumereX and its Subsidiaries have good and
marketable title to the assets reflected on the most recent Financial
Statements, free and clear of all liens and encumbrances, except for (i) current
taxes and assessments not yet due and payable, (ii) liens and encumbrances, if
any, reflected or noted in the Historical Financial Statements, (iii) assets
disposed of by NumereX or its Subsidiaries in the ordinary course of business
since the date of the most recent Financial Statements, and (iv) those liens or
encumbrances specified on Schedule 2.6.
G. Litigation. There are no actions, suits, proceedings or governmental
investigations pending or, to the knowledge of the Borrowers, threatened against
NumereX or any of its Subsidiaries, which could result in a material adverse
change in its business, assets, operations, financial condition or results of
operations and there is no basis known to the Borrowers for any action, suit,
proceedings or investigation which could result in such a material adverse
change. All pending or threatened litigation against NumereX or any of its
Subsidiaries is listed on Schedule 2.7.
H. Tax Returns. NumereX and each of its Subsidiaries have filed all
returns and reports that are required to be filed by any of them in connection
with any federal, state or local tax, duty or charge levied, assessed or imposed
upon any of them or
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any of their properties or withheld by any of them, including unemployment,
social security and similar taxes and all of such taxes, have been either paid
or adequate reserve or other provision has been made.
I. Employee Benefit Plans. Each employee benefit plan as to which
NumereX or any of its Subsidiaries may have any liability complies in all
material respects with all applicable provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA"), including minimum funding requirements,
and (i) no Prohibited Transaction (as defined under ERISA) has occurred with
respect to any such plan, (ii) no Reportable Event (as defined under Section
4043 of ERISA) has occurred with respect to any such plan which would cause the
Pension Benefit Guaranty Corporation to institute proceedings under Section 4042
of ERISA, (iii) the Borrower has not withdrawn from any such plan or initiated
steps to do so, and (iv) no steps have been taken to terminate any such plan.
J. Environmental Matters. NumereX and its Subsidiaries are in
compliance, in all material respects, with all Environmental Laws, including,
without limitation, all Environmental Laws in jurisdictions in which NumereX or
any Subsidiary owns or operates, or has owned or operated, a facility or site,
stores Collateral, arranges or has arranged for disposal or treatment of
hazardous substances, solid waste or other waste, accepts or has accepted for
transport any hazardous substances, solid waste or other wastes or holds or has
held any interest in real property or otherwise. Except as otherwise disclosed
on Schedule 2.7, no litigation or proceeding arising under, relating to or in
connection with any Environmental Law is pending or, to the best of the
Borrowers' knowledge, threatened against any real property which NumereX or any
of its Subsidiaries holds or has held an interest or any past or present
operation of NumereX or any such Subsidiary. No release, threatened release or
disposal of hazardous waste, solid waste or other wastes is occurring, or to the
best of the Borrowers' knowledge has occurred, on, under or to any real property
in which NumereX or any of its Subsidiaries holds any interest or performs any
of its operations, in violation of any Environmental Law. As used in this
Section, "litigation or proceeding" means any demand, claim notice, suit, suit
in equity, action, administrative action, investigation or inquiry whether
brought by a governmental authority or other person, and "Environmental Laws"
means all provisions of laws, statutes, ordinances, rules, regulations, permits,
licenses, judgments, writs, injunctions, decrees, orders, awards and standards
promulgated by any governmental authority concerning health, safety and
protection of, or regulation of the discharge of substances into, the
environment.
K. Intellectual Property. NumereX and each Subsidiary owns or is
licensed to use all patents, patent rights, trademarks, trade names, service
marks, copyrights, intellectual property, technology, know-how and processes
used in their businesses as currently conducted that are material to the
condition (financial or otherwise), business or operations of NumereX or its
Subsidiaries.
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L. Regulatory Matters. No part of the proceeds of the Loan will be used
for "purchasing" or "carrying" any "margin stock" within the respective meanings
of each of the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time in effect or for any purpose
which violates the provisions of the Regulations of such Board of Governors.
M. Solvency. As of the date hereof and after giving effect to the
transactions contemplated by the Loan Documents, (i) the aggregate value of the
assets of NumereX and its Subsidiaries will exceed their liabilities (including
contingent, subordinated, unmatured and unliquidated liabilities), (ii) NumereX
and its Subsidiaries will have sufficient cash flow to enable them to pay their
debts as they mature, and (iii) NumereX and its Subsidiaries will not have
unreasonably small capital for the businesses in which they are engaged.
N. Disclosure. None of the Loan Documents contains or will contain any
untrue statement of material fact or omits or will omit to state a material fact
necessary in order to make the statements contained in this Agreement or the
Loan Documents not misleading. There is no fact known to any Borrower which
materially adversely affects or, so far as the Borrowers can now reasonably
foresee, might materially adversely affect the business, assets, operations,
financial condition or results of operation of NumereX or any Subsidiary and
which has not otherwise been fully set forth in this Agreement, the Schedules
hereto or in the Loan Documents.
O. Subsidiaries. A complete listing of the Borrowers' Subsidiaries,
including information about their jurisdictions of formation and their equity
ownership is set forth on Schedule 2.15. As used in this Agreement, a
"Subsidiary" of any Borrower at any time shall mean (i) any corporation, Company
or trust of which 50% or more (by number of shares or number of votes) of the
outstanding capital stock or shares of beneficial interest normally entitled to
vote for the election of one or more directors or trustees is at such time owned
directly or indirectly by such Borrower or one or more of such Borrower's
Subsidiaries, or any partnership of which such Borrower is a general partner or
of which 50% or more of the partnership interests is at the time directly or
indirectly owned by such Borrower or one or more of such Borrower's
Subsidiaries, or (ii) any corporation, company, trust, partnership or other
entity which is controlled or capable of being controlled by such Borrower or
one or more of such Borrower's Subsidiaries.
III. Affirmative Covenants. Each Borrower agrees that from the date of
execution of this Agreement until all Obligations have been fully paid and any
commitments of the Bank to the Borrowers have been terminated, such Borrower
will, and will cause each of its Subsidiaries to:
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A. Books and Records. Maintain books and records in accordance with GAAP
and give representatives of the Bank access thereto at all reasonable times,
including permission to examine, copy and make abstracts from any of such books
and records and such other information as the Bank may from time to time
reasonably request, and NumereX and its Subsidiaries will make available to the
Bank for examination copies of any reports, statements or returns which NumereX
or any Subsidiary may make to or file with any governmental department, bureau
or agency, federal or state.
B. Interim Financial Statements; Certificate of No Default. Furnish the
Bank within 45 days after the end of each fiscal quarter the Financial
Statements of NumereX and its Subsidiaries for such period, in reasonable
detail, certified by an authorized officer of NumereX and prepared in accordance
with GAAP applied from period to period subject to normal year end adjustments,
including footnotes and explanations. NumereX shall also deliver a certificate,
in the form of Exhibit A attached hereto, as to compliance with applicable
financial covenants for the period then ended and whether any Event of Default
exists, and, if so, the nature thereof and the corrective measures the Borrower
proposes to take. "Financial Statements" means NumereX consolidated and
consolidating balance sheets, income statements and statements of cash flows of
NumereX and its Subsidiaries for the year, month or quarter together with
year-to-date figures and comparative figures for the corresponding periods of
the prior year.
C. Annual Financial Statements. Furnish annual Financial Statements for
NumereX and its Subsidiaries to the Bank within 120 days after the end of each
fiscal year. The annual consolidated Financial Statements will be audited by an
independent certified public accountant selected by the NumereX and satisfactory
to the Bank; the annual consolidating Financial Statements shall be certified by
an authorized officer of NumereX. The annual audited Financial Statements shall
contain the unqualified opinion of the independent certified public accountant
whose examination shall have been made in accordance with GAAP consistently
applied from period to period.
D. Payment of Taxes and Other Charges. Pay and discharge when due all
indebtedness and all taxes, assessments, charges, levies and other liabilities
imposed upon NumereX and its Subsidiaries, their income, profits, property or
business, except those which currently are being contested in good faith by
appropriate proceedings and for which NumereX and its Subsidiaries shall have
set aside adequate reserves or made other adequate provision with respect
thereto acceptable to the Bank in its sole discretion.
E. Maintenance of Existence, Operation and Assets. Do all things
necessary to maintain, renew and keep in full force and effect its
organizational existence and all rights, permits and franchises necessary to
enable it to continue its business; continue in operation in substantially the
same manner as at present; keep its properties in
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good operating condition and repair; and make all necessary and proper repairs,
renewals, replacements, additions and improvements thereto.
F. Insurance. Maintain with financially sound and reputable insurers,
insurance with respect to its property and business against such casualties and
contingencies, of such types and in such amounts as is customary for established
companies engaged in the same or similar business and similarly situated.
G. Compliance with Laws. Comply, in all material respects, with all laws
applicable to it and to the operation of its business (including any statute,
rule or regulation relating to employment practices and pension benefits or to
environmental, occupational and health standards and controls).
H. Bank Accounts. Establish and maintain at the Bank each Borrower's
primary depository and disbursement accounts.
I. Financial Covenants. Comply with all of the financial and other
covenants, if any, set forth on the Addendum.
J. Additional Reports. Provide prompt written notice to the Bank of the
occurrence of any of the following (together with a description of the action
which the Borrower proposes to take with respect thereto): (i) any Event of
Default or potential Event of Default, (ii) any litigation filed by or against
NumereX or any of its Subsidiaries, (iii) any Reportable Event or Prohibited
Transaction with respect to any Employee Benefit Plan(s) (as defined in ERISA)
or (iv) any event which might result in a material adverse change in the
business, assets, operations, financial condition or results of operation of
NumereX or any of its Subsidiaries.
K. Annual Projections, etc.. Furnish annual projections and additional
financial information, as the Bank may request.
IV. Negative Covenants. Each Borrower covenants and agrees that from the
date of execution of this Agreement until all Obligations have been fully paid
and any commitments of the Bank to the Borrowers have been terminated, such
Borrower will not, and will not permit any of its Subsidiaries to, without the
Bank's prior written consent:
A. Indebtedness. Incur any indebtedness for borrowed money other than:
(i) the Loan and any subsequent indebtedness to the Bank; (ii) existing
indebtedness disclosed on the Historical Financial Statements referred to in
Section 3.2; and (iii) indebtedness not to exceed $500,000 in the aggregate
outstanding for NumereX and its Subsidiaries at any time.
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B. Liens and Encumbrances. Create, assume or permit to exist any
mortgage, pledge, encumbrance or other security interest or lien upon any assets
(including equity interests in any Subsidiary of NumereX) now owned or hereafter
acquired or enter into any arrangement for the acquisition of property subject
to any conditional sales agreement except (i) liens and encumbrances described
in Section 2.6 (ii) liens and encumbrances securing indebtedness permitted under
Section 4.1(iii) and (iii) liens and encumbrances in favor of Bank.
C. Guarantees. Guarantee, endorse or become contingently liable for the
obligations of any person, firm or corporation, except (a) as provided in
Section 4.1, and (b) in connection with the endorsement and deposit of checks in
the ordinary course of business for collection.
D. Loans, Advances, Investments. Purchase or hold beneficially any
stock, other securities or evidences of indebtedness of any loans or advances
to, or make any investment or acquire any interest whatsoever in, any other
person, firm or corporation, except loans, advances and investments that are (i)
disclosed on the Historical Financial Statements of NumereX and its
Subsidiaries, (ii) acceptable to the Bank in its sole discretion, (iii)
permitted under Section 4.8, (iv) from any Subsidiary of any Borrower to a
Borrower, and (v) from NumereX to its Canadian Subsidiary in the total amount of
not more than $250,000.
E. Merger or Transfer of Assets. Merge or consolidate with or into any
person, firm or corporation or lease, sell, transfer or otherwise dispose of
all, or substantially all, of its property, assets and business whether now
owned or hereafter acquired; provided, however, that NumereX may sell Digital
Audio Limited (UK).
F. Change in Business. Make or permit any material change in the nature
of its business as carried on as of the date hereof.
G. Dividends. Declare or pay any dividends on or make any distribution
with respect to any class of its equity or ownership interest, or purchase,
redeem, retire or otherwise acquire any of its equity, if such action would
cause an Event of Default; nor shall any Subsidiary of any Borrower pay any
dividend or any distribution to anyone other than a Borrower.
H. Acquisitions. Acquire any person, firm or corporation unless (i) the
acquisition fits within such Borrower's current strategic business direction in
its present lines of business, (ii) no Event of Default exists at the time of
the acquisition or would result from the acquisition, and (iii) the
consideration paid for the acquisition when added to the consideration paid for
all other acquisitions after the date of this Agreement for which written
approval is not required is valued at less than $1,500,000.
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I. Subsidiaries. Create or acquire any Subsidiary unless (i) such
Subsidiary joins this Agreement as a Borrower; or (ii) if the Subsidiary is a
foreign entity and NumereX so chooses, 65% of the equity of such foreign
Subsidiary is pledged to the Bank as collateral security for the Obligations.
J. Negative Pledges. Agree with any party to limit its ability to
provide collateral security to Bank.
V. Events of Default. The occurrence of any of the following will be deemed
to be an "Event of Default":
A. Covenant Default. The Borrowers shall default in the performance of
any of the covenants or agreements contained in this Agreement.
B. Breach of Warranty. Any Financial Statement, representation, warranty
or certificate made or furnished by the Borrowers to the Bank in connection with
this Agreement shall be false, incorrect or incomplete when made.
C. Other Default. The occurrence of an Event of Default as defined in
the Note or other Loan Documents.
D. Change in Control of NumereX. The occurrence of a change of control
in the beneficial ownership of NumereX. For purposes of this Section 5.4, a
"change of control" shall occur if any person or group of persons (within the
meaning of Sections 13(a) or 14(a) of the Securities Exchange Act of 1934, as
amended) other than Gwynedd Resources, Ltd. shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the Securities
Exchange Commission under said Act) of 20% or more of the voting capital stock
of NumereX.
Upon the occurrence of an Event of Default, the Bank will have all rights and
remedies specified in the Note and the Loan Documents and all rights and
remedies (which are cumulative and not exclusive) available under applicable law
or in equity.
VI. Conditions. The Bank's obligation to make any advance under the Loan
is subject to the conditions that as of the date of the advance:
A. No Event of Default. No Event of Default or event which with the
passage of time, provision of notice or both would constitute an Event of
Default shall have occurred and be continuing.
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B. Authorization Documents. The Bank shall have been furnished certified
copies of resolutions of each Borrower's board of directors authorizing the
transactions contemplated hereby or other proof of authorization satisfactory to
the Bank.
C. Receipt of Loan Documents. The Bank shall have received the Loan
Documents and such other instruments and documents which the Bank may reasonably
request in connection with the transactions provided for in this Agreement,
which may include an opinion of counsel for any party executing any of the Loan
Documents in form and substance satisfactory to the Bank.
VII. Expenses. The Borrowers agree to pay the Bank, upon the closing of
this Agreement, and otherwise on demand, all costs and expenses incurred by the
Bank in connection with the (i) preparation, negotiation and delivery of this
Agreement and the other Loan Documents, and any modifications thereto, and (ii)
collecting the loan or instituting, maintaining, preserving, enforcing and
foreclosing the security interest in any of the collateral securing the Loan,
whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions or proceedings arising out of or relating to this
Agreement, including reasonable fees and expenses of counsel (which may include
costs of in-house counsel) and foreign counsel, expenses for auditors,
appraisers and environmental consultants, lien searches, recording and filing
fees and taxes.
VIII. Increased Costs. On written demand, together with the written
evidence of the justification therefor, the Borrowers agree to pay the Bank, all
direct costs incurred and any losses suffered or payments made by the Bank as a
consequence of making the Loan by reason of any change in law or regulation or
its interpretation imposing any reserve, deposit, allocation of capital or
similar requirement (including without limitation, Regulation D of the Board of
Governors of the Federal Reserve System) on the Bank, its holding company or any
of their respective assets.
IX. Miscellaneous.
A. Notices. All notices, demands, requests, consents, approvals and
other communications required or permitted hereunder must be in writing and will
be effective upon receipt if delivered personally to such party, or if sent by
facsimile transmission with confirmation of delivery, or by nationally
recognized overnight courier service, to the address set forth below or to such
other address as any party may give to the other in writing for such purpose:
To the Bank: PNC Bank, N.A.
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
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Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
To any Borrower: NumereX Corp.
Rose Tree Corporate Center II, Suite 5500
0000 X. Xxxxxxxxxx Xxxx
Xxxxx, XX 00000
Attention: Xxxxxxx X. XxXxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
B. Preservation of Rights. No delay or omission on the part of the Bank
to exercise any right or power arising hereunder will impair any such right or
power or be considered a waiver of any such right or power or any acquiescence
therein, nor will the action or inaction of the Bank impair any right or power
arising hereunder. The Bank's rights and remedies hereunder are cumulative and
not exclusive of any other rights or remedies which the Bank may have under
other agreements, at law or in equity.
C. Illegality. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
D. Changes in Writing. No modification, amendment or waiver of any
provision of this Agreement nor consent to any departure by the Borrowers
therefrom, will in any event be effective unless the same is in writing and
signed by the Bank, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on the Borrowers in any case will entitle the Borrowers to any other or
further notice or demand in the same, similar or other circumstance.
E. Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
F. Counterparts. This Agreement may be signed in any number of
counterpart copies and by the parties hereto on separate counterparts, but all
such copies shall constitute one and the same instrument.
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G. Successors and Assigns. This Agreement will be binding upon and inure
to the benefit of the Borrowers and the Bank and their respective heirs,
executors, administrators, successors and assigns; provided, however, that the
Borrowers may not assign this Agreement in whole or in part without the prior
written consent of the Bank and the Bank at any time may assign this Agreement
in whole or in part.
H. Interpretation. In this Agreement, unless the Bank and the Borrowers
otherwise agree in writing, the singular includes the plural and the plural the
singular; words importing any gender include the other genders; references to
statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; the word "or"
shall be deemed to include "and/or", the words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections) or exhibits are
to those of this Agreement unless otherwise indicated; and references to
agreements and other contractual instruments shall be deemed to include all
subsequent amendments and other modifications to such instruments, but only to
the extent such amendments and other modifications are not prohibited by the
terms of this Agreement. Section headings in this Agreement are included for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose. Unless otherwise specified in this Agreement, all
accounting terms shall be interpreted and all accounting determinations shall be
made in accordance with GAAP. If this Agreement is executed by more than one
party as Borrower, the obligations of such persons or entities will be joint and
several.
I. Indemnity. The Borrowers agree to indemnify each of the Bank, its
directors, officers and employees and each legal entity, if any, who controls
the Bank (the "Indemnified Parties") and to hold each Indemnified Party harmless
from and against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, all fees of counsel with whom any Indemnified
Party may consult and all expenses of litigation or preparation therefor) which
any Indemnified Party may incur or which may be asserted against any Indemnified
Party in connection with or arising out of the matters referred to in this
Agreement or in the other Loan Documents by any person, entity or governmental
authority (including any person or entity claiming derivatively on behalf of the
Borrowers), whether (a) arising from or incurred in connection with any breach
of a representation, warranty or covenant by any Borrower, or (b) arising out of
or resulting from any suit, action, claim, proceeding or governmental
investigation, pending or threatened, whether based on statute, regulation or
order, or tort, or contract or otherwise, before any court or governmental
authority, which arises out of or relates to this Agreement, any other Loan
Document, or the use of the proceeds of the Loan; provided, however, that the
foregoing indemnity agreement shall not apply to claims, damages, losses,
liabilities and expenses solely attributable to an Indemnified Party's gross
negligence or willful misconduct. The indemnity agreement contained in this
Section shall survive the termination of this Agreement, payment
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of any Loan and assignment of any rights hereunder. The Borrowers may
participate at its expense in the defense of any such action or claim.
J. Assignments and Participations. At any time, without any notice to
the Borrowers, the Bank may sell, assign, transfer, negotiate, grant
participations in, or otherwise dispose of all or any part of the Bank's
interest in the Loan. The Borrowers hereby authorize the Bank to provide,
without any notice to the Borrowers, any information concerning the Borrowers,
including information pertaining to the Borrowers' financial condition, business
operations or general creditworthiness, to any person or entity which may
succeed to or participate in all or any part of the Bank's interest in the Loan.
K. Governing Law and Jurisdiction. This Agreement has been delivered to
and accepted by the Bank and will be deemed to be made in the State where the
Bank's office indicated above is located. THIS AGREEMENT WILL BE INTERPRETED AND
THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH
THE LAWS OF THE STATE WHERE THE BANK'S OFFICE INDICATED ABOVE IS LOCATED,
EXCLUDING ITS CONFLICT OF LAWS RULES. The Borrowers hereby irrevocably consent
to the exclusive jurisdiction of any state or federal court for the county or
judicial district where the Bank's office indicated above is located, and
consents that all service of process be sent by nationally recognized overnight
courier service directed to the Borrowers at the Borrowers' registered addresses
or Borrowers' commercial registered office provider and service so made will be
deemed to be completed on the business day after deposit with such courier;
provided that nothing contained in this Agreement will prevent the Bank from
bringing any action, enforcing any award or judgment or exercising any rights
against any Borrower individually, against any security or against any property
of the Borrowers within any other county, state or other foreign or domestic
jurisdiction. The Bank and the Borrowers agree that the venue provided above is
the most convenient forum for both the Bank and the Borrowers. The Borrowers
waive any objection to venue and any objection based on a more convenient forum
in any action instituted under this Agreement.
L. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND THE BANK IRREVOCABLY
WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS
EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN
ANY OF SUCH DOCUMENTS. EACH BORROWER AND THE BANK ACKNOWLEDGE THAT THE FOREGOING
WAIVER IS KNOWING AND VOLUNTARY.
9.13. Appointment of Agent. The Borrowers shall appoint an agent such as CT
Corporation, acceptable to Bank, as its agent for the service of process on any
action or proceeding undertaken or prosecuted in connection with this Agreement
or any of the other
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Loan Documents. This appointment shall not affect the Bank's right to
serve legal process in any other manner permitted by law.
9.14. Joint and Several Liability. The Obligations of each Borrower under
this Agreement, the Note and other Loan Documents are joint and several.
9.15 Confidential Information. The Bank acknowledges that the reports,
documents and other information supplied or to be supplied by the Borrowers to
the Bank pursuant to this Agreement, including without limitation, the reports,
documents and other information to be supplied pursuant to Section 3.2, are
confidential (all such reports, documents and other information are hereinafter
referred to as "Confidential Information"). Notwithstanding the foregoing,
Confidential Information shall not include any reports, documents and other
information which are, or become, generally available to the public other than
as a result of a breach of this Section 9.15 by the Bank or its respective
directors, officers, employees, representatives, agents, affiliates or
professional advisors. Without the prior written consent of the Borrowers, the
Bank shall not disclose any Confidential Information to any person or entity
other than (a) its respective directors, officers, employees, representatives,
agents, affiliates and professional advisors and then only on a "need to know"
basis (the "Permitted Persons") or (b) to, or in any filing with, any state of
federal regulatory agency to which the Bank is required to report by its charter
or by statute or regulation. The Bank shall cause all Permitted Persons to
comply with all the terms and covenants of this Section 9.15. The Bank shall
inform all Permitted Persons of the confidential nature of the Confidential
Information and shall, if requested by the Borrowers, obtain the written
agreement of all Permitted Persons to be bound by and comply with the provisions
of this Section 9.15 on the same terms and conditions as if specifically named a
party. Without limiting the generality of the foregoing, the Bank agrees that it
shall not trade in, or make recommendations concerning trades in, the common
stock or other securities of the Borrowers. The Bank acknowledges that any
breach of this Section 9.15 may cause irreparable injury to a Borrower for which
money damages could not adequately compensate. If there is such a breach, such
Borrower shall be entitled, in addition to any other rights and remedies they
may have at law or in equity, to have an injunction issued by any competent
court enjoining and restraining the breaching parties from continuing such
breach. The existence of any claim or cause of action which any of the breaching
parties may have against the Borrowers shall not constitute a defense or bar to
the enforcement of this Section 9.15. Notwithstanding the foregoing, if the Bank
is required to disclose any Confidential Information in a judicial,
administrative or governmental proceeding, the Bank will notify the Borrowers as
promptly as practicable so that the Borrowers may either seek an appropriate
protective order or relief or waive the provisions of this Section 9.15. If, in
the absence of any such protective order, relief or waiver, the Bank is
required, in the written opinion of its legal counsel, to disclose Confidential
Information to any court, governmental agency or tribunal or else stand liable
for contempt or other penalty, the Bank may disclose such Confidential
Information without liability hereunder.
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Each Borrower acknowledges that it has read and understood all the provisions of
this Agreement, including the waiver of jury trial, and has been advised by
counsel as necessary or appropriate.
WITNESS the due execution hereof as a document under seal, as of the date
first written above.
[CORPORATE SEAL] NUMEREX CORP.
Attest: /s/Xxxxxx Xxxxxxx By: /s/Xxxxxxx X. XxXxx
------------------------- ------------------------------
Print Name: Xxxxxx Xxxxxxx Print Name:
-------------------- ----------------------
Title: Senior Accountant Title:
--------------------------- ----------------------------
[CORPORATE SEAL] DCX SYSTEMS, INC.
Attest: /s/Xxxxxx Xxxxxxx By: /s/Xxxxxxx X. XxXxx
------------------------- ------------------------------
Print Name: Xxxxxx Xxxxxxx Print Name:
-------------------- ----------------------
Title: Senior Accountant Title:
--------------------------- ----------------------------
[CORPORATE SEAL] DIGILOG INC.
Attest: /s/Xxxxxx Xxxxxxx By: /s/Xxxxxxx X. XxXxx
------------------------- ------------------------------
Print Name: Xxxxxx Xxxxxxx Print Name: Xxxxxxx X. XxXxx
-------------------- ----------------------
Title: Title:
--------------------------- ----------------------------
-15-
[CORPORATE SEAL] NUMEREX INVESTMENT CORP.
Attest: /s/Xxxxxx Xxxxxxx By: /s/Xxxxxxx X. XxXxx
------------------------- ------------------------------
Print Name: Print Name:
-------------------- ----------------------
Title: Title:
--------------------------- ----------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/Xxxxxxx Xxxxxxx
------------------------------
Print Name: Xxxxxxx Xxxxxxx
---------------------
Title: Assistant Vice President
-------------------------
-16-
ADDENDUM
FINANCIAL COVENANTS
Debt Service Coverage Ratio. Beginning with the fiscal quarter ending January
31, 1997, the Borrowers will not permit the ratio of Operating Cash Flow to Debt
Service, calculated on a rolling basis as of the end of each fiscal quarter for
the previous four quarters, to be less than 1.10 to 1.00; provided, however,
that for the fiscal quarters ending January 31, April 30, and July 31, 1997, the
Debt Service Coverage Ratio will be measured cumulatively at quarter end for
such quarters only and not any prior quarters ending in fiscal year 1996.
Fixed Charge Coverage Ratio. The Borrowers will cause NumereX and its
Subsidiaries to maintain a Fixed Charge Coverage Ratio of at least 1.00 to 1 as
of the end of each fiscal quarter, beginning with the fiscal quarter ending
January 31, 1997.
Leverage Ratio. The Borrowers will not permit (i) the ratio of their
consolidated liabilities to their consolidated Tangible Net Worth to exceed 1.20
to 1.00 at any time or (ii) the ratio of consolidated liabilities to Tangible
Net Worth for NumereX and its Subsidiaries to exceed 1.00 to 2.00 at any time.
Tangible Net Worth. The Borrowers (i) will maintain at all times consolidated
Tangible Net Worth of at least $18,000,000 and (ii) will cause NumereX and its
Subsidiaries to maintain at all times consolidated Tangible Net Worth of at
least $32,500,000.
Operating Income. The Borrowers will not have an operating loss for any fiscal
quarter or year, except that the Borrowers may have operating losses during
fiscal 1997 so long as the cumulative amount of such losses does not exceed
$250,000 for the fiscal year ending October 31, 1997. The quarterly calculation
of operating income shall not take into account expenses of foreign Subsidiaries
of NumereX which are eliminated in the annual consolidated Financial Statements.
As used above:
"Debt Service" means the sum of scheduled principal payments of long term debt
plus interest expense, measured for Borrowers on a consolidated basis at the end
of each quarter.
"EBITDA" means consolidated net income plus non-recurring, non-cash
extraordinary items, income tax expense, interest expense, depreciation and
amortization, measured at the end of each fiscal quarter for the previous four
quarters.
"Fixed Charges" means the consolidated sum of principal payments of long term
debt, interest expense, capital expenditures, income tax expense and dividends,
measured at the end of each fiscal quarter for the previous four quarters.
"Fixed Charge Coverage Ratio" means the ratio of EBITDA to Fixed Charges.
"Operating Cash Flow" means net income plus interest expense, depreciation and
amortization measured for Borrowers on a consolidated basis at the end of each
fiscal quarter.
"Tangible Net Worth" means total consolidated stockholders' equity (which shall
not include expenses of foreign Subsidiaries of NumereX which are eliminated in
the annual consolidated Financial Statements) less total consolidated net
intangible assets.
All accounting terms not otherwise defined shall be defined, and all
calculations and other determinations shall be made, in accordance with GAAP
consistently applied from period to period.
ADDITIONAL TERMS AND CONDITIONS
Pledge of Stock in Canadian Subsidiary. The equity interests in DCX Systems
Company, NumereX's existing Canadian Subsidiary, cannot be transferred because
of a provision in its charter which cannot be amended. Within ten days after the
date of this Agreement, however, NumereX will either (i) cause DCX Systems
Company to discontinue operations and form a new Canadian Subsidiary whose
shares can be transferred or (ii) amalgamate DCX Systems Company with another
Canadian Subsidiary so that the shares in the resulting company can be
transferred. In either event, within the same ten day period, NumereX will also
deliver to Bank Security Documents by which NumereX pledges 65% of the equity
interests in its ultimate Canadian Subsidiary, accompanied by a legal opinion
from Canadian counsel in form and substance satisfactory to Bank.
Release of Certain Liens. Within 30 days of the date of this Agreement,
NumereX shall provide the Bank with satisfactory evidence that Lloyds Bank has
released its charge against the property of Digital Audio Limited. In addition,
as a condition precedent to the initial advance of the Loan, NumereX shall
provide the Bank with satisfactory evidence that (a) Digital Audio Limited has
terminated its line of credit with Lloyds Bank and taken appropriate steps to
assure the release of Lloyd's charge within 30 days of the date of this
Agreement and (b) Xxxxxx Xxxxxxx "and others" have released the charge they hold
on the property of Versus Technology Limited.
