EXHIBIT 10
LOAN AGREEMENT
This LOAN AGREEMENT is made this 30th day of June 2005,
between DIVERSIFIED SECURITY SOLUTIONS, INC., a corporation organized and
existing pursuant to the laws of the State of Delaware, ("Borrower") having an
address at 000 Xxxxxxx Xxxxxx, Xxxxxx Xxxxx, Xxx Xxxxxx 00000 and XXXXXX UNITED
BANK, A New Jersey corporation, and its successors and assigns, ("Lender") with
an office at 0000 XxxXxxxxx Xxxxxxxxx, Xxxxxx, Xxx Xxxxxx 00000.
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender extend a FOUR
MILLION and 00/100 (4,000,000.00) DOLLAR two (2) year credit facility (the
"Revolving Loan"), the proceeds of which will be used solely to repay the
existing indebtedness of Xxxxx Bros. Electronics, Inc. to the Bank, and for
working capital and acquisition financing;
WHEREAS, Borrower has also requested Lender to extend a ONE
MILLION and 00/100 (1,000,000.00) DOLLAR term loan (the "Term Loan"), the
proceeds of which shall be used to refinance existing indebtedness to Lender;
and
WHEREAS, Lender is willing to extend the credit facilities on
the terms and subject to the conditions set forth in this Agreement.
AGREEMENT
1. DEFINITIONS. As used herein, the following terms shall have the
following meanings (terms defined in the singular to have the same meaning when
used in the plural and vice versa):
1.1. "Account Debtor" shall mean any Person who is or may become
obligated under or on account of any Receivable.
1.2. "Advance" shall mean any loan or advance made by Lender in
connection with the Term Loan or the Revolving Loan.
1.3. "Affiliate" shall mean any Person: (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, Borrower; (ii) which beneficially owns or holds
five (5) percent or more of any class of the voting stock or other equity
interest in Borrower; or (iii) five (5) percent or more of the voting stock or
other equity interest of which is beneficially owned or held by Borrower. For
purposes hereof, "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting stock or other equity interests,
by contract or otherwise. For purposes thereof, a Subsidiary constitutes an
"Affiliate".
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1.4. "Authenticate" shall mean to sign or to execute or otherwise
adopt a symbol, or encrypt or similarly process a record, in whole or in part,
with the present interest of the authenticating person to identify the person
and adopt or accept a Record.
1.5. "Bank Accounts" shall have the meaning set forth in Section
5.20 of this Agreement.
1.6. "Banking Day" shall mean any day on which commercial banks
are not authorized or required to close in the State of New Jersey.
1.7. "Borrower" shall mean Diversified Security Solutions, Inc.
1.8. "Capital Expenditure" shall mean, as determined in accordance
with GAAP, the dollar amount of gross expenditures (including obligations under
capital leases) made or incurred for fixed assets, real property, plant and
equipment, and all renewals, improvements and replacements thereto (but not
repairs thereof) during any period.
1.9. "Code" shall mean the Internal Revenue Code of the United
States.
1.10. "Contract Year" shall mean, during the term of the Loans,
each consecutive twelve (12) month period commencing on the date hereof and, in
each case, ending on the date which is one day prior to the applicable
anniversary date hereof.
1.11. "Current Ratio" shall mean the ratio of Borrower's current
assets to Borrower's current liabilities exclusive of the Revolving Loan.
1.12. "Debt Service Coverage Ratio" shall mean the ratio of
Borrower's net income after taxes plus depreciation and amortization expenses to
the principal payments due on Borrower's long-term debt for the previous four
fiscal quarters.
1.13. "Default" shall mean an event or condition the occurrence of
which would, with the lapse of time or the giving of notice, or both, become an
Event of Default, whether or not Lender has declared an Event of Default to have
occurred.
1.14. "EBITDA" shall mean Borrower's total income before interest
expense, taxes, depreciation and amortization, all calculated in accordance with
GAAP.
1.15. "Effective Tangible Net Worth" shall mean Borrower's total
assets minus Senior Liabilities. For purposes of this computation, the aggregate
amount of (1) any intangible assets of Borrower including without limitation,
goodwill, franchises, licenses, patents, trademarks, trade names, copyrights,
service marks and brand names, plus (2) amounts owing, if any, from
shareholders, officers or Affiliate entities shall be subtracted from total
assets.
1.16. "Environment" shall mean any water or water vapor, any land
surface or subsurface, air, fish, wildlife, biota and all other natural
resources.
1.17. "Environmental Laws" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
Environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of "hazardous
substances" and the rules, regulations, policies, guidelines, interpretations,
decisions,
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orders and directives of federal, state and local governmental agencies and
authorities with respect thereto.
1.18. "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
1.19. "Events of Default" shall have the meaning set forth in
Article 11 of this Agreement.
1.20. "Fiscal Year" shall mean with respect to any Person, a year
of 365 or 366 days, as the case may be, ending on the last day of any calendar
year.
1.21. "GAAP" shall mean generally accepted accounting principles
consistently applied and maintained throughout the period indicated and
consistent with the prior financial practice of Borrower, except for changes
mandated by the Financial Accounting Standards Board or any similar accounting
authority of comparable standing. Whenever any accounting term is used herein
which is not otherwise defined, it shall be interpreted in accordance with GAAP.
1.22. "Governmental Rules" shall have the meaning given to such
term in Section 5.21 of this Agreement.
1.23. "Guarantor" shall mean all Guarantors (whether one or more)
and, if more than one, each Guarantor individually, named on Schedule 1.23
attached hereto, as well as any Person who shall become a Guarantor pursuant to
Section 9.1 of this Agreement.
1.24. "Guaranty" shall mean the guaranty dated the date hereof and
executed and delivered by Guarantor to Lender in connection with this Agreement,
as well as a guaranty executed and delivered to Lender pursuant to Section 9.1
of this Agreement.
1.25. "Indebtedness" shall mean and include all obligations for
borrowed money of any kind or nature, including funded debt and unfunded
liabilities, contingent obligations under guaranties or letters of credit, but
excluding performance bonds, and all obligations for the acquisition or use of
any fixed asset, including capitalized leases, or improvements which are payable
over a period longer than one year, regardless of the term thereof or the Person
or Persons to whom the same is payable and the Obligations.
1.26. "Lender" shall mean Xxxxxx United Bank.
1.27. "Loan Documents" shall mean this Agreement, the Guaranty and
all other documents and instruments to be delivered by Borrower or any other
Person under this Agreement or in connection with the Loans or any other
Indebtedness or Obligations of Borrower to Lender, as the same may be amended,
modified or supplemented from time to time.
1.28. "Loans" shall mean the loans and advances made by Lender
under this Agreement, including all Advances.
1.29. "Material Adverse Effect" shall mean any material adverse
effect, as determined by Lender in the exercise of its reasonable business
judgment, on (a) the business, assets, operations, prospects or condition,
financial or otherwise, of Borrower or Guarantor; (b) Borrower's ability to pay
or perform the Obligations in accordance with their terms; (c) the validity or
enforceability of this Agreement or any of the Loan Documents; or (d) the
practical realization of the benefits, rights and remedies inuring to Lender
under this Agreement or under the Loan Documents.
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1.30. "Maximum Facility" shall mean Five Million and 00/100
(5,000,000.00) Dollars.
1.31. "Notice of Borrowing" shall mean a borrowing request in a
Record substantially in the form of Exhibit C attached hereto.
1.32. "Obligations" shall mean and include all loans (including
the Loans), advances, debts, liabilities, obligations, covenants and duties
owing by Borrower to Lender or any Affiliate of Lender of any kind or nature,
present or future, whether or not evidenced by any note, guaranty or other
instrument, whether arising under this Agreement, the other Loan Documents or
under any other agreement or by operation of law, whether or not for the payment
of money, whether arising by reason of an extension of credit, opening,
guaranteeing or confirming of a letter of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect, (including
those acquired by purchase or assignment), absolute or contingent, due or to
become due, now due or hereafter arising and howsoever acquired including,
without limitation, all interest, charges, expenses, commitment, facility,
collateral management or other fees, attorneys' fees and expenses, consulting
fees and expenses and any other sum chargeable to Borrower under this Agreement,
the other Loan Documents or any other agreement with Lender.
1.33. "Person" shall mean an individual, partnership, limited
liability company, limited liability partnership, corporation, joint venture,
joint stock company, land trust, business trust or unincorporated organization
or a government or agency or political subdivision thereof.
1.34. "Plan" shall mean an employee benefit plan or other plan now
or hereafter maintained for employees of Borrower or any subsidiary of Borrower
and covered by Title IV of ERISA.
1.35. "Prime Rate" means the floating commercial loan rate of
Xxxxxx United Bank announced by it from time to time as its Prime Rate.
1.36. "Property" shall mean any interest in any kind of property
or asset, whether real, personal or mixed, or tangible or intangible.
1.37. "Receivables" shall mean and include all present and future
accounts including, without limitation, healthcare receivables, credit card
receivables, software and license fees, contract rights, promissory notes,
chattel paper, electronic chattel paper, instruments and documents, all tax
refunds and rights to receive tax refunds, bonds, certificates, rights to
payment for the sale, lease or license or equipment and policies of insurance
and insurance proceeds, investment securities, notes and instruments, deposit
accounts, book accounts, credits and reserves and all forms of obligations
whatsoever owing, together with all instruments, all documents of title
representing any of the foregoing, and all rights in any merchandise or goods
which any of the same may represent, all files and records with respect to any
collateral or security given by Borrower to Lender, together with all right,
title, security and guaranties with respect to each Receivable, including any
right of stoppage in transit, whether now owned or hereafter created or acquired
by Borrower or in which Borrower now has or hereafter acquires any interest.
1.38. "Reconciliation Report" shall mean a report in form
satisfactory to Lender, reconciling Borrower's quarter-end Receivable agings,
payable agings and inventory listings to Borrower's quarterly financial
statements.
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1.39. "Record" shall mean information that is inscribed on a
tangible medium or which is stored in an electronic or other medium and is
retrievable in perceivable form. If Lender so specifies with respect to a
particular type of Record, that type of Record shall be signed or otherwise
authenticated by Borrower.
1.40. "Reportable Event" shall have the meaning assigned to that
term in Title IV of ERISA.
1.41. "Revolving Loan" shall mean the Advances to be made by
Lender to Borrower pursuant to Section 2.1 of this Agreement, and all interest
thereon and all fees, costs and expenses payable by Borrower in connection
therewith.
1.42. "Revolving Loan Interest Rate" shall mean the Prime Rate.
1.43. "Revolving Note" shall mean, the promissory note
substantially in the form annexed hereto as Exhibit A to be given by Borrower to
Lender to evidence the Revolving Loan.
1.44. "Senior Liabilities" shall mean the total liabilities
including capitalized leases and all reserves for deferred taxes and other
deferred sums appearing on the liabilities side of a balance sheet of Borrower
in accordance with GAAP but excluding debt fully subordinated to Lender on terms
and conditions acceptable to Lender.
1.45. "Solvent" shall mean when used with respect to any Person,
such Person (i) owns property the fair value of which is greater than the amount
required to pay all of such Person's Indebtedness (including contingent debts),
(ii) owns property the present fair salable value of which is greater than the
amount that will be required to pay the probable liabilities of such Person on
its then existing Indebtedness as such become absolute and matured, (iii) is
able to pay all of its Indebtedness as such Indebtedness matures, and (iv) has
capital sufficient to carry on its then existing business.
1.46. "Subsidiary" shall mean any corporation in which more than
fifty (50) percent of the issued and outstanding Voting Stock is owned, directly
or indirectly, by Borrower.
1.47. "Term Loan" shall mean the Advance made to Borrower by
Lender pursuant to Section 2.2 of this Agreement, and all interest thereon and
all fees, costs, and expenses payable by Borrower in connection therewith.
1.48. "Term Loan Interest Rate" shall mean a fixed rate of
interest equal to 6.75%.
1.49. "Term Note" shall mean the promissory note substantially in
the form annexed hereto as Exhibit B to be given by Borrower to Lender to
evidence the Term Loan.
1.50. "Termination Date of Revolving Loan" shall mean the earlier
of May 1, 2007 or the date of which Lender terminates this Agreement pursuant to
Section 11.1 of this Agreement.
1.51. "Termination Date of Term Loan" shall mean the earlier of
June 30, 2010, or the date on which Lender terminates this Agreement pursuant to
Section 11.1 of this Agreement.
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1.52. "UCC" means the Uniform Commercial Code as in effect from
time to time.
1.53. "Voting Stock" means securities of any class or classes of a
corporation, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
individuals performing similar functions).
2. LOANS.
2.1. Advances under the Revolving Loan. Subject to the terms and
conditions of this Agreement and relying upon the representations and warranties
set forth in this Agreement, for so long as no Default or Event of Default
exists, Lender shall lend to Borrower on its request a sum equal to the
aggregate of $4,000,000.00 and subject to the other limitations set forth in
this Section 2.1 and limitations set forth in this Agreement, Borrower may
borrow, repay and re-borrow Advances until May 1, 2007 (the "Maturity Date").
Each Advance requested under the Revolving Loan (a "Revolving Loan Advance")
shall be requested in an Authenticated Record sent via facsimile transmission by
a Notice of Borrowing under the Revolving Loan executed by an authorized officer
of Borrower, not later than 2:00 p.m. Eastern Time on any Banking Day on which a
Revolving Loan Advance is requested. Provided that Borrower shall have satisfied
all conditions precedent set forth in this Agreement, including the
reaffirmation of the representations and warranties and covenants as provided in
Article 5 of this Agreement, Lender shall make the Revolving Loan Advance to
Borrower in the amount requested in the Record by Borrower in immediately
available funds for credit to any account of Borrower (other than a payroll
account) with Lender as Borrower may specify. Lender shall not be responsible
for any failure of any amount so transferred to be credited to any such account
unless such failure is due to Lender's gross negligence or willful misconduct.
2.2. Advance under the Term Loan. Subject to the terms and
conditions of this Agreement and relying upon the representations and warranties
set forth in this Agreement, so long as no Default or Event of Default exists,
Lender agrees to lend Borrower a principal sum of $1,000,000.00 for the sole
purpose of refinancing existing indebtedness to Lender.
2.3. Overline. Borrower acknowledges that Lender has advised
Borrower that Lender does not intend to permit Borrower to incur Obligations
under this Agreement at any time in an outstanding principal amount exceeding
the Maximum Facility or the maximum amount of the Revolving Loan; however, it is
agreed that should the Obligations of Borrower to Lender incurred under the
Loans or otherwise exceed either then, such excess Obligations shall (a)
constitute Obligations under this Agreement, (b) be entitled to the benefit of
all security and protection under this Agreement and the other Loan Documents,
and (c) be payable immediately without notice or demand by Lender.
2.4. Payment on the Revolving Loan. Commencing on August 1, 2005
and continuing on the same day of each and every month thereafter until the
Termination Date of the Revolving Loan, Borrower shall pay all accrued but
unpaid interest only, at the Revolving Loan Interest Rate, provided no Default
or Event of Default has occurred. Notwithstanding anything herein to the
contrary, the entire outstanding principal balance of the Revolving Loan, plus
all accrued and unpaid interest thereon and all fees and other amounts payable
under this Agreement and the Loan Documents, shall be due and payable in full,
on the Termination Date of Revolving Loan.
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2.5. Payment on the Term Loan. Commencing on July 30, 2005 and
continuing on the same day of each and every month thereafter, Borrower shall
repay the Term Loan in sixty (60) equal consecutive monthly installment payments
of principal and interest of $19,729.65 until the Termination Date of the Term
Loan on which date the entire unpaid principal balance of the Term Loan together
with all accrued but unpaid interest shall be immediately due and payable. Any
prepayment of principal or interest, or prepayment of principal, howsoever
designated by Borrower, shall be applied first to accrued interest and the
balance, if any, to the principal balance outstanding.
2.6. Evidence of Borrower's Obligations. Borrower's obligation to
pay the principal of, and interest on, the Advances made to Borrower shall be
evidenced by the Term Note and the Revolving Note, respectively, executed by
Borrower and delivered to Lender.
2.7. Prepayment. Borrower shall be permitted to prepay, in full or
in part, at any time, without premium or penalty, the principal balance of the
Revolving Loan or the Term Loan or both. Each such prepayment shall be not less
than five thousand (5,000.00) dollars. Any partial prepayments made by Borrower
on the Term Loan will be applied against the remaining unpaid principal payments
due on the Term Loan in the inverse order of the maturity of such payments.
3. LENDER'S COMPENSATION.
3.1. Interest on Advances. Borrower shall pay interest, in
arrears, on the first day of each month commencing August 1, 2005, on the
average daily unpaid principal amount of the Revolving Loan at the Revolving
Loan Interest Rate until the Termination Date of the Revolving Loan. Borrower
shall pay principal and interest, in arrears, on the first day of each month
commencing July 30, 2005 at the Term Loan Interest Rate until the Termination
Date of the Term Loan. Notwithstanding the foregoing, on and after the
occurrence of a Default or an Event of Default, Borrower shall pay interest on
the Revolving Loan and the Term Loan at a rate which is three (3) percent per
annum above the Revolving Loan Interest Rate or the Term Loan Interest Rate, as
the case may be; provided, however, in no event shall any interest to be paid
under this Agreement or under any Loan Document exceed the maximum rate
permitted by law.
3.2. Computation of Interest and Fees. All interest and fees under
this Agreement shall be computed on the basis of a year consisting of three
hundred sixty (360) days for the number of days actually elapsed.
3.3. Payments. All payments of principal and interest with respect
to the Obligations shall be charged by Lender to Borrower's operating account
maintained with Lender, which operating account shall be maintained throughout
the term of the Revolving Loan and the Term Loan. In the event that Borrower's
operating account contains insufficient collected funds, Lender may at its
discretion deem any such payment as an Advance or require Borrower to pay to
Lender in U.S. currency the amount of such payment. All such payments shall be
without any defense, offset or counterclaim of any kind. Any such payment made
to Lender shall be paid to Lender at Xxxxxx United Bank, Attn: Loan Operations,
0000 XxxXxxxxx Xxxxxxxxx, Xxxxxx, Xxx Xxxxxx or at such other address as Lender
shall specify, by 2:00 p.m. New York, New York time on the date when due.
Whenever any payment to be made shall otherwise be due on a day that is not a
Banking Day, such payment shall be made on the next succeeding Banking Day and
such extension of time shall be included in computing interest in
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connection with any such payment. Lender may make an Advance to reimburse itself
for any payments on the Obligations (including fees and expenses payable by
Borrower), which are not paid when due, without notice or demand to Borrower.
Any delay or failure by Lender in submitting any invoice for such interest or
fee or in the making of an Advance under the Revolving Loan or the Term Loan
shall not discharge or relieve Borrower of its obligation to make such interest
or fee payment.
3.4. Late Charge. In the event that any payment on the Revolving
Loan or the Term Loan shall become overdue for a period of ten (10) days or
more, a late charge of five (.05) cents for each dollar so overdue may be
charged by Lender for the purpose of defraying the expense incident to handling
such delinquent payment.
4. APPLICATION OF PROCEEDS. The proceeds of the Advances under the Term
Loan shall be used solely by Borrower to refinance existing indebtedness to
Lender. The proceeds of Advances under the Revolving Loan shall be used solely
by Borrower for working capital and acquisition financing.
5. INDUCING REPRESENTATIONS. In order to induce Lender to make the
Loans, Borrower makes the following representations and warranties to Lender:
5.1. Organization and Qualifications. Borrower is and always has
been a corporation duly organized and existing under the laws of the State of
Delaware. Borrower's tax identification number is 00-0000000 and its
organizational identification number is N/A. Borrower and each Guarantor is
qualified to do business in every jurisdiction where the nature of its business
requires it to be so qualified. Each Guarantor is and always has been an entity
duly organized and existing under the laws of the state set forth on Schedule
5.1. Each Guarantor's tax identification number and organizational
identification number is set forth on Schedule 5.1.
5.2. Name and Address. During the preceding five (5) years,
neither Borrower nor any Guarantor has been known by nor has used any other name
whether corporate, fictitious or otherwise, except as set forth on Schedule 5.2
attached hereto. Borrower's office is at the address set forth above.
5.3. Structure. Borrower has no Subsidiaries or Affiliates, except
as set forth on Schedule 5.3 attached hereto.
5.4. Legally Enforceable Agreement. The execution, delivery and
performance of this Agreement, each and all of the other Loan Documents and each
and all other instruments and documents to be delivered by Borrower or its
Affiliates under this Agreement and the creation of all liens, and security
interests provided for herein are within Borrower's corporate power, have been
duly authorized by all necessary or proper corporate action including the
consent of shareholders where required, are not in contravention of any
agreement or indenture to which Borrower is a party or by which it is bound, or
of the Certificate of Incorporation or By-Laws of Borrower, and are not in
contravention of any provision of law and the same do not require the consent or
approval of any governmental body, agency, authority or any other Person which
has not been obtained and a copy thereof furnished to Lender.
5.5. Solvent Financial Condition. Borrower and each Guarantor is
Solvent.
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5.6. Financial Statements. The financial statements of Borrower
and Guarantor for the fiscal year ended December 31, 2004, copies of which have
been delivered to Lender, fairly present Borrower's and Guarantor's financial
condition and results of operations as relevant and as of such date and there
have been no material adverse changes since such date. Borrower and Guarantor
have no contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments, or unrealized or unanticipated losses from any
unfavorable commitments which were not disclosed in such financial statements or
the notes thereto.
5.7. Joint Ventures. Neither Borrower nor any Guarantor is engaged
in any joint venture or partnership with any other Person.
5.8. Real Estate. Attached hereto as Schedule 5.8 is a list
showing all real property owned or leased by Borrower or any Guarantor, and if
leased, the correct name and address of the landlord and the date and term of
the applicable lease.
5.9. Patents, Trademarks, Copyrights and Licenses. Borrower owns
or possesses all the patents, trademarks, service marks, trade names, copyrights
and licenses necessary for the present and planned future conduct of its
business without any conflict with the rights of others.
5.10. Existing Business Relationship. There exists no actual or
threatened termination, cancellation or limitation of, or any adverse
modification or change in, the business relationship of Borrower or any
Guarantor with any supplier, customer or group of customers whose purchases
individually or in the aggregate could effect the operations or the financial
condition of Borrower or any Guarantor.
5.11. Investment Company Act: Federal Reserve Board Regulations.
Borrower is not an "investment company", or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended (15 U.S.C.
'SS' 80(a)(1), et seq.). The making of the Loans under this Agreement by Lender,
the application of the proceeds and repayment thereof by Borrower and the
performance of the transactions contemplated by this Agreement will not violate
any provision of such Act, or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder. Borrower does not own any margin
security as that term is defined in Regulation U of the Board of Governors of
the Federal Reserve System and the proceeds of the Loans made pursuant to this
Agreement will be used only for the purposes contemplated under this Agreement.
None of the proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
margin security or for any other purpose which might constitute any of the Loans
under this Agreement a "purpose credit" within the meaning of said Regulation U
or Regulations T or X of the Federal Reserve Board. Borrower will not take, or
permit any agent acting on its behalf to take, any action which might cause this
Agreement or any document or instrument delivered pursuant hereto to violate any
regulation of the Federal Reserve Board.
5.12. Tax Returns. Borrower and each Guarantor has filed all tax
returns (Federal, state or local) required to be filed and paid all taxes shown
thereon to be due including interest and penalties or has provided adequate
reserves therefor. No assessments have been made against Borrower or any
Guarantor by any taxing authority nor has any penalty or
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deficiency been made by any such authority. To the best of Borrower's knowledge,
no Federal income tax return of Borrower or any Guarantor is presently being
examined by the Internal Revenue Service nor are the results of any prior
examination by the Internal Revenue Service or any State or local tax authority
being contested by Borrower or any Guarantor.
5.13. Litigation. Except as disclosed in Schedule 5.13, no action
or proceeding is now pending or, to the knowledge of Borrower, is threatened
against Borrower or any Guarantor, at law, in equity or otherwise, before any
court, board, commission, agency or instrumentality of the Federal or state
government or of any municipal government or any agency or subdivision thereof,
or before any arbitrator or panel of arbitrators, and Borrower or any Guarantor
has not accepted liability for any such action or proceeding. There is no
proceeding pending against Borrower or any Guarantor before any governmental
agency (Federal, state or local) and, to the best of Borrower's knowledge, no
investigation has been commenced before any such governmental agency the effect
of which, if adversely decided, would or could, have a Material Adverse Effect.
5.14. Title/Liens. There are no existing liens on any Property of
Borrower or any Guarantor, except for liens described on Schedule 5.14.
5.15. Existing Indebtedness. Neither Borrower nor any Guarantor
have any existing Indebtedness except the Indebtedness described on Schedule
5.15.
5.16. ERISA Matters. The present value of all accrued vested
benefits under any Plan (calculated on the basis of the actuarial evaluation for
the Plan) did not exceed as of the date of the most recent actuarial evaluation
for such Plan the fair market value of the assets of such Plan allocable to such
benefits. Borrower is not aware of any information since the date of such
evaluation which would affect the information contained therein. Such Plan has
not incurred an accumulating funding deficiency, as that term is defined in
Section 302 of ERISA or Section 412 of the Code (whether or not waived), no
liability to the Pension Benefit Guaranty Corporation (other than required
premiums which have become due and payable, all of which have been paid) has
been incurred with respect to the Plan and there has not been any Reportable
Event which presents a risk of termination of the Plan by the Pension Benefit
Guaranty Corporation. Borrower has not engaged in any transaction which would
subject Borrower to tax, penalty or liability for prohibited transactions
imposed by ERISA or the Code.
5.17. O.S.H.A. To Borrower's knowledge, Borrower and each
Guarantor have duly complied with, and its facilities, business, leaseholds,
equipment and other property are in compliance in all respects with, the
provisions of the federal Occupational Safety and Health Act and all rules and
regulations thereunder and all similar state and local Governmental Rules. There
are no outstanding citations, notices or orders of non-compliance issued to
Borrower or any Guarantor or relating to its facilities, business, leaseholds,
equipment or other property under any such Governmental Rules.
5.18. Environmental Matters. Except as disclosed in Schedule 5.18,
to Borrower's knowledge,
(a) No property owned or used by Borrower or any Guarantor is or
has been used for the generation, manufacture, refining, transportation,
treatment, storage, handling or disposal of any "hazardous substances" or
"hazardous wastes". The following are all of The North American Industry
Classification System (NAICS) codes applicable to the properties and
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operations of Borrower and its Affiliate: 541512/561621; (b) Borrower and each
Guarantor is in compliance with all applicable Environmental Laws; (c) there has
been no contamination or release of hazardous substances at, upon, under or
within any Property owned or leased by Borrower or any Guarantor, and there has
been no contamination (as defined in any applicable Environmental Law) or
release of hazardous substances (as defined in any applicable Environmental Law)
on any other Property that has migrated or threatens to migrate to any Property
owned or leased by Borrower or any Guarantor; (d) there are not now and never
have been above-ground or underground storage tanks at any Property owned or
leased by Borrower or any Guarantor; (e) there are no transformers, capacitors
or other items of Equipment containing polychlorinated biphenyls at levels in
excess of 49 parts per million, violative of any applicable Environmental Law,
at any Property owned or leased by Borrower or any Guarantor; (f) no hazardous
substances are present at any Property owned or leased by Borrower or any
Guarantor, nor will any hazardous substances be present upon any such Property
or in the operation thereof by Borrower or any Guarantor; (g) all permits and
authorizations required under Environmental Laws for all operations of Borrower
and each Guarantor have been duly issued and are in full force and effect,
including but not limited to those for air emissions, water discharges and
treatment, storage tanks and the generation, treatment, storage and disposal of
hazardous substances; (h) there are no past, pending or threatened environmental
claims against Borrower or any Guarantor or any Property owned or leased by
Borrower or any Guarantor; and there is no condition or occurrence on any
Property owned or leased by Borrower or any Guarantor that could be anticipated
(1) to form the basis of an environmental claim against Borrower or any
Guarantor or its properties or (2) to cause any Property owned or leased by
Borrower or any Guarantor to be subject to any restrictions on its ownership,
occupancy or transferability under any Environmental Law; (i) no portion of any
Property owned or leased by Borrower or any Guarantor contains
asbestos-containing material that is or threatens to become friable; (j) the
representations and warranties set forth in this Section 5.18 shall survive
repayment of the Obligations and the termination of this Agreement and the other
Loan Documents.
5.19. Labor Disputes. There are no pending or, to Borrower's
knowledge, threatened labor disputes which could have a Material Adverse Effect.
5.20. Location of Banking and Securities Accounts. Annexed hereto
as Schedule 5.20 hereto sets forth a complete and accurate list of all deposit,
checking and other Bank Accounts, all securities and other accounts maintained
with any broker dealer and all other similar accounts maintained by Borrower and
each Guarantor (collectively, "Bank Accounts"), together with a description
thereof.
5.21. Compliance With Laws. Borrower and each Guarantor is in
compliance with all Federal, state and local governmental rules, ordinances and
regulations ("Governmental Rules") applicable to its ownership or use of
properties or the conduct of its business.
5.22. No Other Violations. Borrower is not in violation of any
term of its Certificate of Incorporation or By-laws and no event or condition
has occurred or is continuing which constitutes or results in (or would
constitute or result in, with the giving of notice, lapse of time or other
condition) (a) a breach of, or a default under, any agreement, undertaking or
instrument to which Borrower is a party or by which it or any of its Property
may be affected, or (b) the imposition of any lien on any Property of Borrower.
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5.23. Survival of Representations and Warranties. Borrower
covenants, warrants and represents to Lender that all representations and
warranties of Borrower contained in this Agreement or in any other Loan Document
shall be true at the time of Borrower's execution of this Agreement and the
other Loan Documents, and Lender's right to bring an action for breach of any
such representation or warranty or to exercise any remedy under this Agreement
based upon the breach of such representation or warranty shall survive the
execution, delivery and acceptance hereof by Lender and the closing of the
transactions described herein or related hereto until the Obligations are
finally and irrevocably paid in full.
6. FINANCIAL STATEMENTS AND INFORMATION; CERTAIN NOTICES TO LENDER. So
long as Borrower shall have any Obligations to Lender under this Agreement,
Borrower shall deliver to Lender, or shall cause to be delivered to Lender:
6.1. Annual Financial Statements. Within one hundred twenty (120)
days after the close of each Fiscal Year of Borrower, a copy of its audited
annual financial statements prepared in accordance with GAAP by independent
certified public accountants acceptable to Lender, consisting of a balance
sheet, statements of operations and retained earnings and accompanying footnotes
and supporting schedules, statements of cash flow (on consolidated basis only),
all on a consolidated and consolidating basis, approved by Lender, which
approval will not be unreasonably withheld. Xxxxxxxxxx & Company LLC, Borrower's
accountants, are currently acceptable to Lender. For purposes of this Section
6.1 and Section 6.2, the term "Borrower" shall include Borrower's Subsidiaries
and Affiliates. Notwithstanding the foregoing, if Lender is able to obtain a
copy of Borrower's Form 10-KSB, either from the internet or directly from
Borrower, within the time frame set forth in this Section 6.1, Borrower will not
be required to submit the annual financial statements for such Fiscal Year as
required by this Section 6.1.
6.2. Quarterly Financial Statements. As soon as available, but in
any event within forty-five (45) days of the end of the first three (3) quarters
of Borrower's Fiscal Year, financial statements consisting of a balance sheet,
profit and loss statement, statement of income and retained earnings and cash
flow as of the close of such quarter together with supporting schedules and a
compliance certificate in the form attached as Exhibit D hereto. The quarterly
financial statements shall be certified to be true and correct by the Chief
Financial Officer of Borrower. Such financial statements must be in form and
content acceptable to Lender and shall be prepared in accordance with prior
practices applied on a consistent basis and shall be prepared on a consolidated
and consolidating basis. Notwithstanding the foregoing, if Lender is able to
obtain a copy of Borrower's Form 10-QSB, either from the internet or directly
from Borrower within the time frame set forth in this Section 6.2, Borrower will
not be required to submit the quarterly financial statements for such quarter
period as required by this Section 6.2.
6.3. Quarterly Reports. As soon as available, but in any event
within forty-five (45) days of the end of the first three (3) quarters of
Borrower's Fiscal Year, reports for Borrower and each Guarantor consisting of
(a) an aging of the accounts receivable, (b) an inventory report, (c) an
accounts payable aging, and (d) a Reconciliation Report, each as of the close of
such quarter together with such supporting schedules and a compliance
certificate in the form attached as Exhibit D hereto. The reports shall be
certified to be true and correct by the Chief Financial Officer of Borrower.
Such reports must be inform and content acceptable to Lender and shall be
prepared in accordance with prior practices applied on a consistent basis.
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For purposes of this Section 6.3, the term "Borrower" shall include Borrower's
Subsidiaries and Affiliates.
6.4. Tax Returns. Within one hundred twenty (120) days of the end
of each Fiscal Year or within ten (10) days after same is filed with the
Internal Revenue Service, whichever is earlier, a completely signed copy of the
Federal income tax return of Borrower and each Guarantor for each Fiscal Year,
which tax return shall be reviewed or prepared by an independent certified
public accountant approved by Lender which approval will not be unreasonably
withheld.
6.5. SEC Filings. If requested by Lender, within ten (10) days of
such request, a copy of Borrower's most recent Form 10-K or Form 10-KSB and Form
10-Q or Form 10-QSB, as the case may be, as filed with the Securities and
Exchange Commission as of the last day of its Fiscal Year and as of the last day
of and for the most recent quarter and for the portion of the Fiscal Year then
elapsed as the case may be, each such form to be certified by Borrower's Chief
Financial Officer to be true and accurate and as having been prepared in
accordance with GAAP.
6.6. Notice of Acquisitions. Immediately after the acquisition of
all or any substantial part of the stock, properties or assets of any Person by
Borrower or any Guarantor, whether by merger, consolidation, purchase of stock
or otherwise, Borrower will provide Lender with telephonic notice followed by
notice in a Record specifying and describing the nature of such acquisition.
Borrower shall promptly provide Lender with any information requested by Lender
in connection with any such transaction and copies of any and all documents in
connection with such transaction.
6.7. Customer Lists. If requested by Lender, a list of all of
Borrower's customers and vendors, including the addresses, and telephone and
facsimile numbers of such customers and vendors which lists shall be delivered
within thirty (30) days of such request by Lender.
6.8. Insurance. Annually, within thirty (30) days of the renewal
date of such insurance policy, evidence of insurance in form and content
satisfactory to Lender and otherwise in compliance with Section 8.6 of this
Agreement.
6.9. Notice of Event of Default and Adverse Business Developments.
Immediately after becoming aware of the existence of a Default or an Event of
Default or after becoming aware of any developments or other information which
is likely to materially adversely affect Borrower's or any Guarantor's
properties, business, prospects, profits or condition (financial or otherwise)
or Borrower's or any Guarantor's ability to perform their obligation under this
Agreement or any other Loan Documents, including, without limitation, the
following:
(a) any dispute that may arise between Borrower or any Guarantor
and any governmental regulatory body or law enforcement authority, including any
action relating to any tax liability of Borrower or any Guarantor;
(b) any labor controversy resulting in or threatening to result in
a strike or work stoppage against Borrower or any Guarantor;
(c) any proposal by any public authority to acquire the assets or
business of Borrower or any Guarantor;
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(d) except for Borrower's proposed and pending request for
shareholders approval to change its name to Xxxxx Bros. Electronics, Inc., any
other proposed or actual change of Borrower's or any Guarantor's name, identity,
state of organization or corporate structure; or
(e) any other matter which has resulted or may result in a
Material Adverse Effect.
In each case, Borrower will provide Lender with telephonic notice
followed by notice in a Record specifying and describing the nature of such
Default, Event of Default or development or information, and such anticipated
effect.
6.10. Other Information. Such other information respecting the
financial condition of Borrower, any Guarantor or any Property of Borrower in
which Lender may have a lien as Lender may, from time to time, request. Borrower
authorizes Lender to communicate directly with Borrower's independent certified
public accountants and authorizes those accountants to disclose to Lender any
and all financial statements and other information of any kind that they may
have with respect to Borrower and its business and financial and other affairs.
Lender shall treat information so obtained and any non-public or proprietary
information obtained pursuant to this Agreement as confidential. On or before
the date of this Agreement, Borrower shall deliver to Lender a letter addressed
to such accountants instructing them to comply with the provisions of this
Section 6.9, which letter shall be acknowledged by such accountants.
7. ACCOUNTING. Lender may account monthly to Borrower. Each and every
account shall be deemed final, binding and conclusive upon Borrower in all
respects, as to all matters reflected therein, unless Borrower, within thirty
(30) days after the date the account was rendered, delivers to Lender notice in
a Record of any objections which Borrower may have to any such account and in
that event only those items expressly objected to in such notice shall be deemed
to be disputed by Borrower. If Borrower disputes the correctness of any
statement, Borrower's notice shall specify in detail the particulars of its
basis for contending that such statement is incorrect.
8. AFFIRMATIVE COVENANTS. Borrower represents and warrants that, so
long as it shall have any Obligation to Lender under this Agreement, Borrower
will:
8.1. Business and Existence. Preserve and maintain Borrower's and
each Guarantor's separate existence and rights, privileges and franchises.
8.2. Trade Names. Transact business in Borrower's own name and
invoice all of Borrower's receivables in Borrower's own name.
8.3. Transactions with Affiliates. Whenever Borrower engages in
transactions with any of Borrower's Affiliates, other than in the normal course
of Borrower's business as currently conducted, conduct the same on an
arms-length basis or other basis more favorable to Borrower, provided Borrower
has notified Lender in writing prior to engaging in any such transaction and
executes any and all documentation required by Lender in connection therewith.
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8.4. Taxes. Pay and discharge all taxes, assessments, government
charges and levies imposed upon Borrower, Borrower's income or Borrower's
profits or upon any Property belonging to Borrower prior to the date on which
penalties attach thereto, except where the same may be contested in good faith
by appropriate proceedings being diligently conducted.
8.5. Compliance with Laws. Comply with all Governmental Rules
applicable to Borrower including, without limitation, all laws and regulations
regarding the collection, payment and deposit of employees' income, unemployment
and Social Security taxes.
8.6. Maintain Properties: Insurance. Safeguard and protect all
Property used in the conduct of Borrower's and any Guarantor's business and keep
all of Borrower's and any Guarantor's Property insured with insurance companies
licensed to do business in the states where the Property is located against loss
or damage by fire or other risk under extended coverage endorsement and against
theft, burglary, and pilferage together with such other hazards as Lender may
from time to time request, in amounts reasonably satisfactory to Lender.
Borrower shall certificates of insurance to Lender and providing that the
insurance shall not be canceled, amended or terminated except upon thirty (30)
days' prior written notice to Lender. Borrower shall promptly notify Lender of
any event or occurrence causing a loss or decline in the value of Property
insured or the existence of an event justifying a material claim under any
insurance and the estimated amount thereof.
8.7. Business Records. Keep adequate records and books of account
with respect to Borrower's business activities in which proper entries are made
in accordance with sound bookkeeping practices reflecting all financial
transactions of Borrower.
8.8. Litigation. Give Lender prompt notice of any suit at law or
in equity against Borrower or any Guarantor involving a claim for money or
Property valued in excess of Five Hundred Thousand and 00/100 (500,000.00)
Dollars except where the same is fully covered by insurance and the insurer has
accepted liability for any such claim in writing.
8.9. Damage or Destruction of Property. Maintain or cause to be
maintained all its and each Guarantor's Properties in good condition and repair
at all times, preserve the Properties from loss, damage, or destruction of any
nature whatsoever and provide Lender with prompt notice in a Record of any
destruction or substantial damage to any Properties.
8.10. Name Change. Except as provided under Subsection 6.9(d)
hereof, provide Lender with not fewer than thirty (30) days notice in an
Authenticated Record prior to any proposed change of name of Borrower or any
Guarantor or the creation of any Subsidiary.
8.11. Access to Books and Records. Provide Lender with such
reports and upon reasonable notice with such access to Borrower's and each
Guarantor's books and records and permit Lender to copy and inspect such
reports, books and records all as Lender deems necessary or desirable to enable
Lender to monitor the credit facilities extended hereby. Lender may examine and
inspect the inventory, equipment or other Property and may examine, inspect and
copy all books and records with respect thereto at any time during Borrower's
and such Guarantor's normal business hours except that prior to an Event of
Default, Lender shall give Borrower or such Guarantor prior reasonable notice of
such proposed inspection. Borrower shall maintain full, accurate and complete
records respecting inventory, including a perpetual inventory, at all times.
8.12. Solvent. Continue to be Solvent.
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8.13. Compliance With Environmental Laws. Comply with all
applicable Environmental Laws.
8.14. Compliance with ERISA and other Employment Laws. Comply with
all applicable provisions of ERISA and the Internal Revenue Code of 1986, as
amended, and any other applicable laws, rules or regulations relating to the
compensation of employees and funding of employee pension plans.
8.15. Bank Accounts. Maintain its primary operating account in a
branch office of Lender and cause each Guarantor to maintain its primary
operating account in a branch office of Lender.
9. NEGATIVE COVENANTS. So long as Borrower shall have any Obligation to
Lender under this Agreement and unless Lender has first consented thereto in an
Authenticated Record, Borrower shall not:
9.1. Mergers; Consolidations; Acquisitions. Enter into or permit
any Guarantor to enter into any merger, consolidation, reorganization or
recapitalization with any other Person except in the ordinary course of
Borrower's or such Guarantor's business as currently conducted and further
provided such Person shall agree to become a Guarantor hereunder and shall
execute and deliver to Lender a guaranty agreement in evidence thereof in form
and substance acceptable to Lender; take any steps in contemplation of
dissolution or liquidation; conduct any part of its business through any
Subsidiary, unincorporated association or other Person except for a Guarantor;
or acquire all or substantially all of the Voting Stock of any Person, whether
by merger, consolidation, purchase of stock or otherwise or acquire all or any
substantial part of the Properties of any Person unless such Person shall agree
to become a Guarantor hereunder and shall execute and deliver to Lender a
guaranty agreement in evidence thereof in form and substance acceptable to
Lender.
9.2. Sale or Disposition. Sell or dispose of all or a material
portion of its or any Guarantor's Property in one or more transactions or grant
any Person an option to acquire any such Property, provided, however, that the
foregoing shall not prohibit sales of inventory in the ordinary course of
Borrower's business as currently conducted.
9.3. Defaults. Permit any landlord, mortgagee, trustee under deed
of trust or lienholder to declare a default under any lease, mortgage, deed of
trust or lien on real estate owned or leased by Borrower or any Guarantor, which
default remains uncured after any stated cure period or for a period in excess
of thirty (30) days from its occurrence, whichever is less, unless such default
is being contested by Borrower or such Guarantor in good faith by appropriate
proceedings being diligently conducted.
9.4. Limitations on Liens. Without the prior written consent of
Lender, suffer any lien, encumbrance, mortgage or security interest on any of
its Property, except (i) liens in favor of Lender; (ii) such liens as appear on
Schedule 5.14 attached hereto; (iii) liens for taxes contested in good faith;
and (iv) purchase money liens solely on the assets acquired with such purchase
money financing.
9.5. Borrower's Name and Offices. Transfer Borrower's or cause a
transfer of Guarantor's chief executive office or except as noted in Subsection
6.9(d), change its
16
organizational name or office where it maintains its records (including computer
printouts and programs), except with Lender's prior consent in an Authenticated
Record.
9.6. Fiscal Year. Change its Fiscal Year.
9.7. Change of Control. Allow, without the prior consent of Lender
in an Authenticated Record, a change in the ownership structure of any
Guarantor.
9.8. Guaranties; Contingent Liabilities. Assume, guarantee,
endorse, contingently agree to purchase or otherwise become liable upon the
obligation of any Person or permit any Guarantor to engage in any such
transaction except in the ordinary course of Borrower's or such Guarantor's
business as currently conducted.
9.9. Removal of Bank Accounts. Remove, transfer or cause to be
removed or transferred any of the Bank Accounts of Borrower or any Guarantor
maintained with Lender at any branch of Lender.
9.10. Transfer of Notes or Accounts. Sell, assign, transfer,
discount except in the ordinary course of Borrower's or any Guarantor's business
as currently conducted or otherwise dispose of any Receivables or any promissory
note or other instrument payable to it with or without recourse.
9.11. Change of Business. Cause or permit a change in the nature
of its business as conducted on the date of this Agreement.
9.12. Change of Accounting Practices. Change its present
accounting principles or practices in any respect, except, upon notice to Lender
in a Record, as may be required by changes in GAAP.
9.13. Inconsistent Agreement. Enter into or permit any Guarantor
to enter into any agreement containing any provision which would be violated by
the performance of Borrower's or any Guarantor's Obligations or other
obligations under this Agreement or any other Loan Document.
9.14. Loan or Advances. Make any loans or advances in excess of
$25,000.00 to one or more Persons in the aggregate other than in the ordinary
course for business travel and expense advances.
9.15. Investments. Purchase any stock, securities, or evidence of
indebtedness of any Person except (i) investments in direct obligations of the
United States Government and certificates of deposit of United States commercial
banks or (ii) as otherwise permitted by this Agreement.
9.16. Debt to Effective Tangible Net Worth Ratio. Have a ratio of
Total Liabilities to Effective Tangible Net Worth of more than 1.00 to 1.00,
measured quarterly commencing with the quarter ending June 30, 2005.
9.17. Debt Service Coverage Ratio. Have a Debt Service Coverage
Ratio of less than 1.25 to 1.00, measured annually commencing with the Fiscal
Year ended December 31, 2005.
9.18. Effective Tangible Net Worth. Have an Effective Tangible Net
Worth of less than $8,000,000.00, measured quarterly, provided, however, that
commencing January 1,
17
2006, the minimum required Effective Tangible Net Worth shall increase by not
less than 50% of Borrower's net income for the immediately preceding Fiscal
Year.
9.19. Current Ratio. Have a Current Ratio of less than 2.0 to 1.0
measured quarterly commencing with the quarter ending June 30, 2005.
10. CONDITIONS TO ADVANCES. Lender's obligation to make any Advance
under the Revolving Loan is subject to the condition that, as of the date of the
Advance, no Default or Event of Default shall have occurred and be continuing
and that the matters set forth in Article 5 of this Agreement and the
representations and covenants set forth in the other Loan Documents continue to
be true and complete. Borrower's acceptance of each Advance under this Agreement
shall constitute a confirmation, as of the date of the Advance, of the matters
set forth in Article 5 of this Agreement, of the representations and covenants
set forth in the other Loan Documents, and that no Default or Event of Default
then exists. If requested by Lender, Borrower shall further confirm such matters
by delivery of a Record dated the day of the Advance and signed by an authorized
officer of Borrower.
11. EVENTS OF DEFAULT.
11.1. Defaults. Upon the happening of any of the following events
(individually, an "Event of Default," collectively, "Events of Default"):
(a) if Borrower or Guarantor shall fail to make any payment when
due on any Obligation under this Agreement or any other Loan Document; or
(b) if Borrower or Guarantor shall fail to comply with any term,
condition, covenant, warranty or representation contained in Articles 6, 8 or 9
of this Agreement; or
(c) if Borrower or Guarantor shall fail to comply with any term,
condition, covenant or warranty of or in this Agreement other than in Articles
6, 8 or 9 of this Agreement, and such failure continues for a period in excess
of fifteen (15) days after notice thereof is given by Lender to Borrower; or
(d) if Borrower or Guarantor shall fail to comply with any term,
condition, covenant, warranty or representation contained in any of the other
Loan Documents or any other agreement between Lender and Borrower which failure
has continued beyond any applicable grace and/or notice period; or
(e) if Borrower or Guarantor shall cease to be Solvent, admit
inability to pay debts, make an assignment for the benefit of its creditors,
call a meeting of its creditors to obtain any general financial accommodation,
suspend business or if any case under any provision of the Bankruptcy Code
including provisions for reorganizations, shall be commenced by or against
Borrower or Guarantor or if a receiver, trustee or equivalent officer shall be
appointed for all or any of the Properties of Borrower or Guarantor unless any
such involuntary proceeding is dismissed within thirty (30) days of filing; or
(f) if any statement or representation contained in any financial
statement, report, or certificate delivered by Borrower or Guarantor to Lender
shall be or prove to be materially false or misleading, in any respect, when
made; or
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(g) if any federal or state tax lien is filed of record against
Borrower or Guarantor , and is not bonded or discharged within thirty (30) days
of filing; or
(h) if a judgment for more than Five Hundred Thousand and 00/100
(500,000.00) Dollars shall be entered against Borrower or any Guarantor in any
action or proceeding and shall not be stayed, vacated, bonded, paid or
discharged within thirty (30) days of entry, except a judgment where the claim
is fully covered by insurance, except to the extent of any policy deductible not
exceeding Twenty Thousand and 00/100 (20,000.00) Dollars, and the insurance
company has accepted liability therefore in writing; or
(i) if any obligation of Borrower or Guarantor in respect of any
Indebtedness in excess of any aggregate amount of $25,000.00 (other than
Indebtedness to Lender) shall be declared to be or shall become due and payable
prior to its stated maturity or such obligation shall not be paid as and when
the same becomes due and payable; or there shall occur any event or condition
which constitutes an event of default under any mortgage, indenture, instrument,
agreement or evidence of Indebtedness relating to any obligation of Borrower or
Guarantor in respect of any such Indebtedness in the aggregate amount of
Twenty-Five Thousand and 00/100 (25,000.00) Dollars or more, the effect of which
is to permit the holder or the holders of such mortgage, indenture, instrument,
agreement or evidence of Indebtedness, or a trustee, agent or other
representative on behalf of such holder or holders, to cause the Indebtedness
evidenced thereby to become due prior to its stated maturity; or
(j) if Borrower or Guarantor shall fail to observe or perform any
material term and/or condition of any material agreement with any Person; or
(k) upon the happening of any Reportable Event which Lender in its
reasonable discretion determines might constitute grounds for the termination of
any Plan, or if a trustee shall be appointed by an appropriate United States
District Court or other court or administrative tribunal to administer any Plan,
or if the Pension Benefit Guaranty Corporation shall institute proceedings to
terminate any Plan or to appoint a trustee to administer any Plan; or
(l) upon the occurrence and continuance of any Material Adverse
Effect, which in the reasonable opinion of Lender, impairs Lender's security,
materially increases Lender's risks; or materially impairs Borrower's ability to
perform under this Agreement or under any other Loan Documents.
Then, and in any such event, Lender may terminate this Agreement
without prior notice or demand to Borrower or any Guarantor or may demand
payment in full of all Obligations (whether otherwise then payable on demand or
not) without terminating this Agreement and shall, in any event, be under no
further responsibility to extend any credit or afford any financial
accommodation to Borrower, whether under this Agreement or otherwise.
11.2. Obligations Immediately Due. Upon the Termination Date of
the Term Loan, for any reason, all of Borrower's Obligations to Lender under the
Term Note shall immediately become due and payable without further notice or
demand. Upon the Termination Date of the Revolving Loan for any reason, all of
Borrower's Obligations to Lender under the Revolving Loan shall immediately
become due and payable without further notice or demand.
12. REMEDIES OF LENDER. Upon the occurrence of any Event of Default or
upon any termination of this Agreement, then Lender shall have, in addition to
all of its other
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rights under this Agreement, all of the rights and remedies provided in the
Guaranty and any other Loan Document.
12.1 Rights on Default. Upon the occurrence of any Default or an
Event of Default, and after giving effect to any applicable grace period, in
addition to and without limiting any rights Lender may have under any agreement,
document or instrument evidencing or representing any obligation of Borrower to
Lender or executed in connection with any such obligation, Lender is hereby
authorized to declare any or all of the Obligations to be immediately due and
payable, and the rights and remedies of Lender shall be as set forth herein, in
the UCC and as otherwise available under applicable law.
12.2 Lender's Right of Set-Off. Lender may, at any time upon the
occurrence of a Default or an Event of Default hereunder and without any further
notice to Borrower or any Guarantor (such notice being expressly waived),
set-off or apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by, or any other Indebtedness at any time
owing by Lender or any subsidiary or affiliate of Lender or any participant in
Lender's loans, to Borrower or any Guarantor to or for the credit or the account
of Borrower against any Obligation irrespective of whether any demand has been
made hereunder or whether such Obligation is mature.
13. GENERAL PROVISIONS.
13.1. Rights Cumulative. Lender's rights and remedies under this
Agreement shall be cumulative and non-exclusive of any other rights or remedies
which Lender may have under any other agreement or instrument, by operation of
law or otherwise.
13.2. Successors and Assigns. This Agreement is entered into for
the benefit of the parties hereto and their successors and assigns. It shall be
binding upon and shall inure to the benefit of the parties, their successors and
assigns. Lender shall have the right, without the necessity of any further
consent or authorization by Borrower, to sell, assign or grant participation in
all, or a portion of, Lender's interest in the Loans, to other financial
institutions of the Lender's choice and on such terms as are acceptable to
Lender in its sole discretion.
13.3. Notice. Wherever this Agreement provides for notice to any
party (except as expressly provided to the contrary), it shall be given by
messenger, facsimile, certified U.S. mail with return receipt requested, or
nationally recognized overnight courier with receipt requested, effective when
either received or receipt rejected by the party to whom addressed, and shall be
addressed as follows, or to such other address as the party affected may
hereafter designate:
If to Lender: XXXXXX UNITED BANK
0000 XxxXxxxxx Xxxxxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxxx, SVP
With a copy to: Xxxx & Xxxxxx LLC
20
1600 Route 000 Xxxxx
XX Xxx 00
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Esq.
If to Borrower: DIVERSIFIED SECURITY SOLUTION, INC.
000 Xxxxxxx Xxxxxx
Xxxxxx Xxxxx, XX 00000
Attention: Xxxxx Reach, Secretary
13.4. Strict Performance. The failure, at any time or times
hereafter, to require strict performance by Borrower or Guarantor of any
provision of this Agreement shall not waive, affect or diminish any right of
Lender thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Lender of any Default or Event of Default by Borrower or
Guarantor under this Agreement or any other Loan Document shall not suspend,
waive or affect any other Default or Event of Default by Borrower or Guarantor
under this Agreement or any other Loan Document, whether the same is prior or
subsequent thereto and whether of the same or a different type.
13.5. Waiver. Borrower waives presentment, protest, notice of
dishonor and notice of protest upon any instrument on which it may be liable to
Lender as maker, endorser, guarantor or otherwise.
13.6. Construction of Agreement. The parties hereto agree that the
terms and language of this Agreement were the result of negotiations between the
parties, and, as a result, there shall be no presumption that any ambiguities in
this Agreement shall be resolved against either party. Any controversy over the
construction of this Agreement shall be decided mutually without regard to
events of authorship or negotiation.
13.7. Expenses. If, at any time or times prior or subsequent to
the date hereof, regardless of whether or not a Default or an Event of Default
then exists or any of the transactions contemplated under this Agreement are
concluded, Lender employs counsel for advice or other representation, or incurs
legal expenses, or consulting fees and expenses, or other costs or out-of-pocket
expenses in connection with: (A) the negotiation and preparation of this
Agreement or any other Loan Document, or any amendment of or modification of
this Agreement or any other Loan Document; (B) the administration of this
Agreement or any of the other Loan Documents and the transactions contemplated
hereby and thereby; (C) periodic audits and appraisals performed by Lender; (D)
any litigation, contest, dispute, suit, proceeding or action (whether instituted
by Lender, Borrower or any other Person) in any way relating to this Agreement
or any other Loan Document or Borrower's affairs; (E) the perfection of any
lien; or (F) any attempt to enforce any rights or remedies of Lender against
Borrower or any other Person which may be obligated to Lender by virtue of this
Agreement or any other Loan Document; then, in any such event, the actual
attorneys' fees and expenses arising from such services and all expenses, costs,
charges and other fees of such counsel of Lender or relating to any of the
events or actions described in this Section 13.7 shall be payable by Borrower to
Lender, and shall be
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additional Obligations under this Agreement. Additionally, if any taxes
(excluding taxes imposed upon or measured by the net income of Lender, but
including any intangibles tax, stamp tax or recording tax) shall be payable on
account of the execution or delivery of this Agreement, or the execution,
delivery, issuance or recording of any other Loan Document, or the creation of
any of the Obligations under this Agreement, by reason of any existing or
hereafter enacted federal or state statute, Borrower will pay (or will promptly
reimburse Lender for the payment of) all such taxes including, but not limited
to, any interest and penalties thereon, and will indemnify, defend and hold
Lender harmless from and against any liability in connection therewith. Borrower
shall also reimburse Lender for all other expenses incurred by Lender in
connection with the transactions contemplated under this Agreement or the other
Loan Documents, including, without limitation, fees in connection with any bank
account, wire charges, automatic clearing house fees and other similar costs and
expenses.
13.8. Waiver of Right to Jury Trial.
A. Borrower and Lender recognize that in matters related to the
Loans and this Agreement, and as it may be subsequently modified and/or amended,
any such party may be entitled to a trial in which matters of fact are
determined by a jury (as opposed to a trial in which such matters are determined
by a federal or state judge). By execution of this Agreement, Lender and
Borrower will give up their respective right to a trial by jury. Borrower and
Lender each hereby expressly acknowledge that this waiver is entered into to
avoid delays, minimize trial expenses, and streamline the legal proceedings in
order to accomplish a quick resolution of claims arising under or in connection
with the Note and this Agreement.
B. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT NOT PROHIBITED BY
LAW, BORROWER AND LENDER EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT THAT BORROWER OR LENDER MAY HAVE TO A TRIAL BY JURY IN RESPECT
TO ANY LITIGATION, DIRECTLY OR INDIRECTLY, AT ANY TIME ARISING OUT OF, UNDER, OR
IN CONNECTION WITH THE LOANS, THIS AGREEMENT, OR ANY TRANSACTION CONTEMPLATED
THEREBY OR HEREBY, BEFORE OR AFTER MATURITY.
C. CERTIFICATIONS. BORROWER HEREBY CERTIFIES THAT NEITHER ANY
REPRESENTATIVE NOR AGENT OF LENDER NOR LENDER'S COUNSEL HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT LENDER WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. BORROWER ACKNOWLEDGES THAT
LENDER HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATION HEREIN.
13.9. Indemnification by Borrower/Waiver of Claims. Borrower
hereby covenants and agrees to indemnify, defend (with counsel selected by
Lender) and hold harmless Lender and its officers, partners, employees,
consultants and agents from and against any and all claims, damages,
liabilities, costs and expenses (including, without limitation, the actual fees
and expenses of counsel) which may be incurred by or asserted against Lender or
any such other Person in connection with:
(a) any investigation, action or proceeding arising out of or in
any way relating to this Agreement, any of the Loans, any of the other Loan
Documents, any other
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agreement relating to any of the Obligations, or any act or omission relating to
any of the foregoing; or
(b) the correctness, validity or genuineness of any instrument or
document that may be released or endorsed to Borrower by Lender (which shall
automatically be deemed to be without recourse to Lender in any event), or the
existence, character, quantity, quality, condition, value or delivery of any
goods purporting to be represented by any such documents; or
(c) any broker's commission, finder's fee or similar charge or fee
in connection with the Loans and the transactions contemplated in this
Agreement.
13.10. Savings Clause for Indemnification. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in Section 13.9 above
may be unenforceable because it is violative of any law or public policy,
Borrower shall contribute the maximum portion which it is permitted to pay and
satisfy under applicable law to the payment and satisfaction of all matters
referred to under Section 13.9.
13.11. Waiver. To the extent permitted by applicable law, no claim
may be made by Borrower or any other Person against Lender or any of its
Affiliates, partners, officers, employees, agents, attorneys or consultants for
any special, indirect, consequential or punitive damages in respect of any claim
for breach of contract, tort or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement or the other Loan
Documents or any act, omission or event occurring in connection therewith; and
Borrower hereby waives, releases and agrees not to xxx upon any claim for any
such damages, whether or not accrued and whether or not known or suspected to
exist in its favor. Neither Lender nor any of its Affiliates, partners,
officers, employees, agents, attorneys or consultants shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement or the transactions contemplated hereby, except for its or their
own gross negligence or willful misconduct.
13.12. Entire Agreement; Amendments; Lender's Consent. This
Agreement (including the Exhibits and Schedules thereto) and the other Loan
Documents supersede, with respect to their subject matter, all prior and
contemporaneous agreements, understandings, inducements or conditions between
the respective parties, whether express or implied, oral or written. No
amendment or waiver of any provision of this Agreement or any other Loan
Document, nor consent to any departure by Borrower therefrom, shall in any event
be effective unless the same shall be in a Record Authenticated by Lender and
Borrower, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
13.13. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute but one and the
same agreement.
13.14. Severability of Provisions. Any provision of this Agreement
or any of the other Loan Documents that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or the other Loan Documents or affecting the
validity or enforceability of such provision in any other jurisdiction.
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13.15. Headings. The headings preceding the text of this Agreement
are inserted solely for convenience of reference and shall not constitute a part
of this Agreement or affect its meaning, construction or effect.
13.16. Exhibits and Schedules. All of the Exhibits and Schedules
to this Agreement are hereby incorporated by reference herein and made a part
hereof.
14. GOVERNING LAW; CONSENT TO JURISDICTION.
(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW JERSEY, AND
MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW JERSEY, AND THE
PROCEEDS OF THE TERM NOTE AND THE REVOLVING NOTE DELIVERED PURSUANT THERETO WERE
DISBURSED FROM THE STATE OF NEW JERSEY, WHICH STATE THE PARTIES AGREE HAS A
SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION
EMBODIED HEREIN, AND IN ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW JERSEY APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY
APPLICABLE LAW OF THE UNITED STATES OF AMERICA. TO THE FULLEST EXTENT PERMITTED
BY LAW, LENDER AND BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVE ANY
CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT,
THE REVOLVING NOTE AND THE TERM NOTE, AND THIS AGREEMENT, THE REVOLVING NOTE AND
THE TERM NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW JERSEY.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR
BORROWER OR OTHER PARTY TO THIS TRANSACTION ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE REVOLVING NOTE AND THE TERM NOTE SHALL BE INSTITUTED IN THE SOLE
OPTION OF LENDER IN ANY FEDERAL OR STATE COURT LOCATED IN NEW JERSEY, AND LENDER
AND BORROWER WAIVE ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND LENDER AND BORROWER
HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT,
ACTION OR PROCEEDING. BORROWER SHALL DESIGNATE FROM TIME TO TIME AN AUTHORIZED
AGENT HAVING AN OFFICE IN THE STATE OF NEW JERSEY TO ACCEPT AND ACKNOWLEDGE ON
ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT,
ACTION OR PROCEEDING AND AGREES THAT SERVICE OF PROCESS UPON SUCH AGENT AT SUCH
ADDRESS AND WRITTEN NOTICE OF SUCH SERVICE ON SUCH BORROWER MAILED OR DELIVERED
TO SUCH BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT
EFFECTIVE SERVICE OF PROCESS UPON SUCH BORROWER IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN THE STATE OF NEW JERSEY. BORROWER (I) SHALL GIVE PROMPT NOTICE TO
LENDER OF ANY CHANGE OF ADDRESS OF ITS AUTHORIZED
24
AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A
SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW JERSEY (WHICH OFFICE SHALL BE
DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY
DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN
NEW JERSEY OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR. BORROWER REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS CONSENT TO JURISDICTION PROVISION WITH ITS
LEGAL COUNSEL, AND HAS MADE THIS WAIVER KNOWINGLY AND VOLUNTARILY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized on the day and year first
above written.
ATTEST: DIVERSIFIED SECURITY SOLUTIONS, INC.
_____________________________ by__________________________________
Xxxxx Reach, Secretary Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer and
Treasurer
WITNESS: XXXXXX UNITED BANK
_____________________________ by__________________________________
Xxxxxxx X. Xxxx, Esq. Name: Xxxxx X. Xxxxxxxxxx
Title: Senior Vice President
25
