REVOLVING LINE OF CREDIT LOAN AGREEMENT AND SECURITY AGREEMENT
Exhibit 10.48
REVOLVING LINE OF CREDIT LOAN AGREEMENT
AND SECURITY AGREEMENT
THIS REVOLVING LINE OF CREDIT LOAN AGREEMENT AND SECURITY AGREEMENT (“Agreement”) is made as of November 15, 2002, by and among EFJ, Inc., a Delaware corporation, and X. X. Xxxxxxx Company, a Minnesota corporation, both having an address at c/o EFJ, Inc., 0000 00xx Xxxxxx, XX, Xxxxx Xxxxx, Xxxxxxxxxx, X.X. 00000-0000, and Bank of America, N.A., a national banking association, having an address at 0000 Xxxxxxx Xxxxxxx, 0xx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000.
RECITALS
1. The Borrower has applied to the Lender for a revolving line of credit loan facility in the maximum principal amount of Ten Million and 00/100 Dollars ($10,000,000.00) to be used by the Borrower for working capital and to finance the performance of government contracts, the payments under which are subject to being assigned as security for the Revolving Loan (as hereafter defined).
2. The Lender is willing to make the Revolving Loan on the terms and conditions hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises, the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower and the Lender hereby agree as follows:
ARTICLE 1. DEFINITIONS.
1.1 Defined Terms. Certain capitalized terms not otherwise defined herein are used in this Agreement with the following meanings, unless the context otherwise requires:
1. “Account” means a right to payment of a monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provide or to be provided, (iv) for use or hire of a vessel under a charter or other contract, (vii) arising out of the use of a credit or charge card or information contained on or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or sponsored by a state, governmental unit of a state, or person licensed or authorized to operate the game by a state or governmental unit of a state.
2. “Advance” means an advance of funds under the Revolving Loan.
3. “Affiliate” means, with respect to any specified Person, any other Person which, directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such specified Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of a Person, whether through ownership of common stock, by contract, agreement, understanding or otherwise.
4. “Agreement” means this Revolving Line of Credit Loan Agreement and Security Agreement as the same may be amended, modified or supplemented from time to time.
5. “Allowed Amount of Advances” means the aggregate amount of all Advances of principal under the Revolving Loan permitted to be outstanding at any particular time under the Paragraph below titled “Allowed Amount of Advances.”
6. “Assignment” means a direct assignment of Payments under Government Contracts, pursuant to and in compliance with the Assignment of Claims Act.
7. “Assignment of Claims Act” means Xxxxx 00, Xxxxxx Xxxxxx Code § 3727, and Xxxxx 00, Xxxxxx Xxxxxx Code § 15, as revised or amended, and any rules or regulations issued pursuant thereto,
and also shall be deemed to include any other laws, rules or regulations governing the assignment of payments under Government Contracts or claims against a Government.
8. “Billed” means that the Borrower has submitted an invoice to a Customer requesting payment for goods or services provided by the Borrower.
9. “Borrower” means EFJ, Inc., and X. X. Xxxxxxx Company and to each such Person or to all of them, as the context may require, and the representations and obligations hereunder of the Persons comprised by the term “Borrower” shall be joint and several. For purposes of testing compliance with the financial covenants hereinafter, the negative covenants hereinafter, the unused fee provided hereinafter, and pricing under the Revolving Note that is based on the Borrower’s financial performance, financial information concerning the Borrower shall mean financial information for EFJ, Inc., and X. X. Xxxxxxx Company stated on a consolidated basis. In addition, the financial reporting to be provided by the Borrower shall be provided for EFJ, Inc. and X. X. Xxxxxxx Company on a consolidated and consolidating basis unless otherwise requested by Lender.
10. “Borrowing Base” means:
1. Ninety percent (90%) of the Borrower’s Eligible Government Accounts, plus
2. Eighty Five percent (85%) of the Borrower’s Eligible Commercial Accounts, plus
3. Thirty Five percent (35%) of the Borrower’s Eligible Inventory, provided, however, that in the event that the amount of the Borrower’s Eligible Inventory which would be included in the Borrowing Base should exceed Forty Percent (40%) of the total Borrowing Base, then the amount of the Borrower’s Eligible Inventory which shall be included in the Borrowing Base shall be reduced to an amount which equals Forty Percent (40%) of the Borrowing Base.
After calculating the portion of the Borrowing Base comprised of Eligible Government Accounts, Eligible Commercial Accounts and Eligible Inventory, Lender shall deduct from such portion of the Borrowing Base such reserves as Lender may establish from time to time in its reasonable credit judgment, including without limitation, reserves for dilution, rent at leased locations subject to statutory or contractual landlord’s liens, inventory shrinkage, customs charges, warehousemen’s or bailees’ charges, liabilities to growers of agricultural products which are entitled to lien rights under the Perishable Agricultural Commodities Act or any applicable state law, and the amount of estimated maximum exposure, as determined by Lender from time to time, under any interest rate contracts which Borrower enters into with Lender (including interest rate swaps, caps, floors, options thereon, combinations thereof, or similar contracts).
In addition, Lender may require modifications to the percentage rates of advance set forth above, based on the results of any field examination or audit of Borrower, as determined in Lender’s sole and absolute discretion. In the absence of manifest error, Lender’s determination of the amount of the Borrowing Base shall be conclusive.
11. “Borrowing Base Certificate” means a certificate substantially in the form of Schedule 1.1(A) attached hereto and made a part hereof (or such subsequent form as the Lender shall require).
12. “Borrowing Date” means the date on which an Advance is made.
13. “Business Day” means any day that is not a Saturday, Sunday or banking holiday in the State of Maryland.
14. “Capital Lease” means any lease which has been or should be capitalized on the books of the lessee in accordance with GAAP.
15. “Cash Collateral Account” means an account to be established by Lender in Borrower’s name, with the Lender, for the purpose of receiving Payments, which shall constitute part of the Collateral unless and until disbursed to the Borrower or applied for the Borrower’s account in accordance with this Agreement.
16. “Closing Date” means November 15, 2002.
17. “Code” means the Internal Revenue Code of the United States, as amended.
18. “Collateral” means all of the personal property of the Borrower, wherever located, and whether now owned or hereafter acquired, including without limitation, all of the following kinds of property now owned or hereafter acquired by the Borrower:
1. Accounts;
2. Chattel Paper;
3. Deposit Accounts;
4. Documents;
5. Equipment;
6. Fixtures;
7. General Intangibles (including payment intangibles and software);
8. Instruments;
9. Inventory;
10. Investment Property;
11. Intellectual Property;
12. Money;
13. Supporting Obligations (including Letter-of-Credit Rights);
14. all books and records and computer hardware, software and systems;
15. all policies of insurance and the proceeds thereof;
16. all additions and accessions to and replacements of the collateral described above; and
17. all products and proceeds of all of the collateral described above.
19. “Commercial Accounts” means all Accounts due from Customers other than the Government.
20. “Compliance Certificate” means a certificate substantially in the form of Schedule 1.1(B) attached hereto and made a part hereof
21. “Contra Account” means an Account due from an account debtor to which the Borrower owes money.
22. “Customer” means any governmental entity (federal, state, county, municipal or otherwise) or business entity (corporation, association, partnership, limited liability company or partnership, sole proprietorship or otherwise) or individual to which the Borrower provides goods or services for compensation; however, certain individual agencies of the United States Government and certain branches of certain major corporations, as determined by the Lender in its sole discretion, shall be treated as Customers in their own right, separate and distinct from other such agencies or branches and from the United States Government or the corporation of which they are a part.
23. “Debt” means:
1. indebtedness or liability for borrowed money, or for the deferred purchase price of property or services;
2. obligations as a lessee under a Capital Lease;
3. obligations to reimburse the issuer of letters of credit or acceptances;
4. all guaranties, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person or otherwise to assure a creditor against loss; and
5. obligations secured by any lien or Encumbrance on property owned by the Borrower.
24. “EBITDA” means the Borrower’s net income, less income or plus loss from discontinued operations and extraordinary items, plus income taxes, plus interest expense, plus depreciation, depletion and amortization, plus non-cash compensation expense resulting from options granted prior to this Agreement.
25. “Eligible,” when used to describe an Account, means that the Account conforms to the following criteria:
1. the Account has been Billed;
2. in the case of a Commercial Account or Government Account, less than ninety-one (91) days have passed from the original billing date;
3. at the Lender’s option, in the case of a Government Account, the Borrower has made an Assignment of all Payments due or to become due under the Government Contract giving rise to the Account;
4. the Account arose from a bona fide sale of goods or services to a Customer; the goods or services have been delivered or provided to the Customer; the Borrower possesses receipts from the Customer acknowledging delivery of the goods or performance of the services; and Customer has not returned or rejected the goods or services;
5. the Account is based upon an enforceable written order or contract for goods or services;
6. the Borrower’s title to the Account is absolute and is not subject to any prior assignment, claim, escrow agreement or amendment; lien or security interest, and the Borrower otherwise has the full and unqualified right and power to assign and grant a security interest in the Account to the Lender;
7. the amount shown on the books of the Borrower and on any invoice, certificate, schedule or statement delivered to the Lender regarding the amount due on the Account is due and owing to the Borrower;
8. the Account is not subject to any claim of reduction, counterclaim, set-off, recoupment or other defense in law or equity, or any claim for credits, allowances or adjustments by the Customer because of returned, inferior or damaged goods, unsatisfactory services or for any other reason, or any claim by a Customer against a warranty provided by Borrower for an Account arising from the sale of goods or services to a Customer; provided, that (a) if only a portion of an Account is subject to a claim by a Customer against a warranty provided by Borrower for goods or services sold to a Customer, the portion of such Account not subject to such claim will be Eligible as the Customer does not contest making payment of the remainder of the Account and as long as it otherwise would qualify as being Eligible under this Agreement, and (b) if only a portion of goods sold by Borrower to a Customer are returned by the Customer to the Borrower, the portion of such Account which did not arise from the sale of the returned
goods will be Eligible as long as the Customer does not contest making payment of the remainder of the Account and such Account would otherwise qualify as being Eligible under this Agreement;
9. the Customer has not notified the Borrower of any dispute concerning any of the goods or services giving rise to the Account, nor made claim that the goods or services fail to conform to the requirements of the Customer’s order or contract, nor notified the Borrower to cure any default under the Customer’s order or contract;
10. the Account does not arise out of a Customer’s contract or order that by its terms forbids or makes void or unenforceable the Borrower’s assignment of the Account to the Lender;
11. the Borrower has not received any note, trade acceptance draft or other instrument tendered in payment of the Account;
12. the Borrower has not received any notice of the death of the Customer or any partner in a Customer that is a partnership (where the death of such partner would result in dissolution or termination of such Customer); nor has Borrower received any notice of dissolution, termination of existence, insolvency, business failure, appointment of a receiver for any part of the property of, assignment for the benefit of creditors by, or the filing of a petition in bankruptcy or the commencement of any proceeding under any bankruptcy or insolvency laws by or against the Customer;
13. the Customer is not incorporated in any jurisdiction outside the United States and is not conducting its business primarily outside the United States; provided, that an Account from such a Customer shall not be excluded from the definition of Eligible by virtue of this paragraph if (1) the contract between the Customer and Borrower from which the Account shall be created has been approved by Lender, in advance, in writing and the Account would otherwise qualify as being Eligible, or (2) Borrower shall be the beneficiary under and have recourse to a letter of credit issued by a financial institution acceptable to Lender in respect of such an Account and Lender shall have delivered to Borrower written approval of such letter of credit and related Account, such written approval to be provided in Lender’s sole and absolute discretion;
14. Borrower is not indebted in any manner to the Customer; however, the amount of the Account which will not qualify as being Eligible shall be only the amount equal to the amount of the indebtedness owing by Borrower to Customer, so long as the amount of the Account in excess of the amount of the indebtedness owing by Borrower to Customer would otherwise qualify as being Eligible under this Agreement);
15. no bond has been issued or is contemplated with respect to the goods or services furnished by the Borrower or with respect to the project or contract for which those goods or services were furnished, unless otherwise agreed to in advance, in writing by Lender, as determined by Lender in its sole and absolute discretion; and
16. the Account is not an Ineligible Account; and
when used to describe Inventory, shall mean the cost of the Borrower’s Inventory, less such part of the Inventory that the Lender determines to be ineligible, and less a reserve for obsolescence to be determined by the Lender. Ineligible Inventory shall include, but shall not be limited to, work-in-process, inventory on consignment and any other Inventory that the Lender believes should not be considered eligible, either because of doubtful value or because the Lender believes there would be practical difficulties in realizing on the Inventory.
In the event of any dispute, under the foregoing criteria, as to whether an Account or Inventory is, or has ceased to be, an Eligible Account or Eligible Inventory, the Lender’s decision shall control.
26. “Encumbrance” means any mortgage, pledge, deed of trust, assignment, security interest, hypothecation, lien or charge of any kind (including any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction).
27. “Ending Date” means September 30, 2004.
28. “Environmental Laws” mean all laws relating to Hazardous Wastes, Toxic Substances or materials that might be emitted, released or discharged into the environment or other laws or regulations protecting the environment.
29. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the rules and regulations thereunder, all as the same may be in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections.
30. “ERISA Affiliate” means an entity, whether or not incorporated, which is under common control with the Borrower or any of its subsidiaries within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes the Borrower or any of its subsidiaries and which is treated as a single employer under Sections 414(b), (c), (m), or (o) of the Code.
31. “Event of Default” means any one of the events specified as an “Event of Default” under this Agreement.
32. “Fixed Charge Coverage Ratio” means the sum of EBITDA and cash rent expense, less taxes paid in cash and less capital expenditures; divided by sum of: (i) scheduled principal payments on the Borrower’s long term debt, (ii) cash interest expense, and (iii) cash rent expense.
33. “Funded Debt” means the sum of (i) all outstanding liabilities of the Borrower for borrowed money and all other interest bearing liabilities, including without limitation, current and long term debt, plus (ii) all LOC Obligations or other contingent obligations.
34. “GAAP” means generally accepted accounting principles in the United States of America.
35. “Governance Documents” means the Borrower’s Articles or Certificate of Incorporation and Bylaws or other documents or agreements affecting the Borrower’s corporate governance.
36. “Government” means the government of the United States of America or the departments or agencies of the United States, but does not include the government of any state or the District of Columbia or any departments or agencies of any state or of the District of Columbia.
37. “Government Accounts” means all Accounts arising out of any Government Contract.
38. “Government Contracts” means all contracts with a Government, including all renewals, extensions, modifications, change orders and amendments thereof and thereto.
39. “Hazardous Wastes” mean all waste materials subject to regulation under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., or applicable state law and any other applicable federal, state or local laws and their regulations now in force or hereafter enacted relating to hazardous wastes.
40. “Ineligible Accounts” shall include the following Accounts:
1. Accounts that do not conform with the criteria set forth for Eligible Accounts;
2. An Account owing by any account debtor for which the Lender has deemed fifty percent (50%) or more of the account debtor’s other Accounts to be non-Eligible; however, for purposes of this category of Ineligible Accounts, each Government Contract shall be treated as an individual Customer;
3. Government Accounts arising under Government Contracts which contain an express prohibition against assignment of the Borrower’s rights to Payment;
4. The last payment due on a Government Account, unless such Government Account arises from a Government Contract which is a “fixed price contract” (as defined in the Federal Acquisition Regulations) which does not include any provision for progress payments, incentive arrangements or price redetermination;
5. Contra Accounts; provided, that the portion of the Accounts owing by a single Customer to Borrower which exceeds the amounts owing by the Borrower to such Customer shall not constitute an Ineligible Account as long as such portion of the Accounts would not otherwise be Ineligible Accounts as defined under this Agreement;
6. Accounts receivable from Affiliates or subsidiaries of the Borrower;
7. Unbilled Accounts, including, but not limited to, progress payments, retainages, milestones and final payments; or
8. Any Account deemed by the Lender, in the exercise of its sole and absolute discretion, to be an Ineligible Account because of uncertainty as to the creditworthiness of the Customer or because the Lender otherwise considers the collateral value thereof to the Lender to be impaired or its ability to realize such value to be insecure.
41. “Intellectual Property” shall mean all patents, licenses, trade names, trademarks, copyrights, inventions, service marks, trademark registrations, service xxxx registrations and copyright registrations, whether domestic or foreign and applications for any of the foregoing, and all proprietary technology, know-how, trade secrets or other intellectual property rights owned or used by the Borrower or any subsidiary in the operation of their respective businesses.
42. “Item” means any “item” as defined in Section 4-104 of the Uniform Commercial Code, to include, without exclusion or limitation, checks, drafts, money orders or other media by which Payment may be made.
43. “Lender” means Bank of America, N.A. and its successors and assigns.
44. “Letter of Credit” means a letter of credit issued by the Lender for the account of the Borrower under this Agreement.
45. “Letter of Credit Agreement” means the Lender’s standard form of application and reimbursement agreement in effect from time to time that the Lender requires as a condition for each letter of credit that the Lender issues to one of its customers.
46. “Letter of Credit Sublimit” means Four Million and 00/100 Dollars ($4,000,000.00).
47. “Loan” means the Revolving Loan.
48. “Loan Documents” mean this Agreement, the Revolving Note, or any other document executed by the Borrower or any other Person evidencing, securing, guaranteeing or relating to the Revolving Loan, as such documents or instruments may be amended, modified or extended from time to time.
49. “LOC Obligations” means, at any time, the sum of (i) the maximum amount which is, or at any time thereafter may become, available to be drawn under Letters of Credit then outstanding, assuming compliance with all requirements for drawings referred to in such Letters of Credit; plus (ii) the aggregate amount of all drawings under Letters of Credit honored by the Lender but not reimbursed.
50. “Margin” means the percentage interest rate shown on the Performance Pricing Grid to be added to the LIBOR Rate (as defined in the Revolving Note) or the Prime Rate (as defined in the Revolving Note) to determine the rate of interest payable at any time under the Revolving Note. The Margin regarding the LIBOR Rate shall be as stated in the “LIBOR +” row of the Performance Pricing Grid, and the Margin regarding the Prime Rate shall be as stated in the “Prime Rate +” row of the Performance Pricing Grid.
51. “Maximum Revolving Commitment Amount” means Ten Million and 00/100 Dollars ($10,000,000.00), or such lesser amount that Borrower may request as hereinafter provided.
52. “Multiemployer Plan” means a Plan which is a multiemployer plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.
53. “Multiple Employer Plan” means a Plan which the Borrower or any of its subsidiaries or any ERISA Affiliate and at least one employer other than the Borrower or any of its subsidiaries or any ERISA Affiliate are contributing sponsors.
54. “Operating Account” means a demand deposit account to be established by the Borrower with the Lender for the Borrower’s use in connection with its business operations and with the Revolving Loan.
55. “Payment” or “Payments” means any check, draft, cash or any other remittance or credit in payment or on account of any or all of the Accounts.
56. “PBGC” means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA and any successor thereto.
57. “Performance Pricing Grid” means the following table (which is also contained in the Revolving Note):
|
|
|
Xxxxx 0 |
|
Xxxxx 0 |
|
Xxxxx 0 |
|
|
Xxxx/ XXXXXX |
|
Ratio > 2.50x |
|
2.00x < Ratio < 2.50x |
|
Ratio < 2.00x |
|
|
Commitment Fee |
|
.375 |
% |
.375 |
% |
.375 |
% |
|
LIBOR + |
|
2.75 |
% |
2.25 |
% |
2.00 |
% |
|
Prime Rate + |
|
2.00 |
% |
1.75 |
% |
1.50 |
% |
58. “Person” means any individual, partnership, association, trust, corporation, limited liability company or partnership, or other entity.
59. “Plan” means any employee benefit plan (as defined in Section 3(3) of ERISA) which is covered by ERISA and with respect to which the Borrower or any of its subsidiaries or any ERISA Affiliate is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an “employer” within the meaning of Section 3(5) of ERISA.
60. “Reportable Event” means a “reportable event” as defined in Section 4043 of ERISA with respect to which the notice requirements to the PBGC have not been waived.
61. “Revolving Loan” means the Revolving Loan facility made available by the Lender to the Borrower pursuant to this Agreement in the maximum principal amount of Ten Million and 00/100 Dollars ($10,000,000.00), evidenced by the Revolving Note.
62. “Revolving Note” means the Borrower’s promissory note, of even date, in the amount of Ten Million and 00/100 Dollars ($10,000,000.00), payable to the order of the Lender, and evidencing the Borrower’s obligation to repay the Revolving Loan.
63. “Single Employer Plan” means any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan.
64. “Tangible Net Worth” means the value of the Borrower’s total assets (including leaseholds and leasehold improvements and reserves against assets but excluding goodwill, patents, trademarks,
trade names, developed software, organization expense, unamortized debt discount and expense, capitalized or deferred research and development costs, deferred marketing expenses, and other like intangibles, and monies due from affiliates, officers, directors, employees, shareholders, members or managers of the Borrower) less total liabilities, including but not limited to accrued and deferred income taxes, but excluding the non-current portion of Subordinated Liabilities. For purposes of this definition, “Subordinated Liabilities” means the liabilities subordinated to the Borrower’s obligations to the Lender in a manner acceptable to the Lender as determined in the Lender’s sole discretion.
65. “Termination Event” means (i) with respect to any Plan, the occurrence of a Reportable Event or the substantial cessation of operations (within the meaning of Section 4062(e) of ERISA); (ii) the withdrawal of the Borrower or any of its subsidiaries or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan; (iii) the distribution of a notice of intent to terminate or the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to terminate or the actual termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (vi) the complete or partial withdrawal of the Borrower or any of its subsidiaries or any ERISA Affiliate from a Multiemployer Plan.
66. “Toxic Substances” mean any materials which have been shown to have significant adverse effects on human health or which are subject to regulation under the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq., applicable state law, or any other applicable federal, state or local laws now in force or hereafter enacted relating to toxic substances. “Toxic Substances” includes, but is not limited to, asbestos, polychlorinated biphenyls (PCBs), petroleum products, and lead-based paints.
67. “UCC” means the Uniform Commercial Code in effect in the state(s) as set forth in Section 1.4 of this Agreement.
1.2 Accounting Terms. Accounting terms used in this Agreement but not defined in this Agreement shall have the meanings given to them in accordance with GAAP in effect on the date of this Agreement. Except as otherwise provided in this Agreement, all financial computations made pursuant to this Agreement and all financial reports provided to the Lender shall be made in accordance with GAAP, consistently applied. Except as otherwise provided in this Agreement, whenever this Agreement refers to a balance sheet, financial statement or the information contained in a balance sheet or other financial statement, the Agreement shall be construed to refer to most recent consolidated balance sheet or other financial statement that Borrower has provided to the Lender.
1.3 Use of Defined Terms. All terms defined in this Agreement shall have the same defined meanings when used in any certificate, report or other document made or delivered in connection with this Agreement, unless otherwise set forth therein.
1.4 UCC Terms. Terms that incorporate definitions provided in the Uniform Commercial Code shall have such meanings as are mandated by the Uniform Commercial Code of the state or states applicable for the determination of such meanings. Terms not otherwise defined herein and not incorporating a definition under the Uniform Commercial Code of any particular state, but which are defined in the Uniform Commercial Code as adopted by the State of Maryland, shall have the meanings ascribed to them under the Uniform Commercial Code as adopted by the State of Maryland.
ARTICLE 2. LOAN.
2.1 Revolving Line of Credit. The Lender agrees to extend the Revolving Loan to Borrower, subject to the terms and conditions of this Agreement. Until the Ending Date, Borrower may borrow, repay and reborrow Advances in accordance with this Agreement.
1. Allowed Amount of Advances. The aggregate principal amount of Advances outstanding at any time shall not exceed the lesser of:
1. the difference between (i) the Maximum Revolving Commitment Amount and (ii) the LOC Obligations; or
2. the difference between (i) the Borrowing Base and (ii) the LOC Obligations.
2. Mandatory Prepayments. If the principal outstanding under the Revolving Loan, at any time exceeds the Allowed Amount of Advances, then Borrower shall make a payment of principal under the Revolving Loan in an amount sufficient that the principal outstanding under the Revolving Loan will no longer exceed the Allowed Amount of Advances, said payment to be made within three (3) Business Days from the date the principal outstanding under the Revolving Loan exceeds the Allowed Amount of Advances. If the amount of the Borrower’s Funded Debt at any time exceeds the maximum amount that will enable Borrower to comply with any of the affirmative covenants provided hereinafter (including, without limiting the generality of the foregoing, any covenant limiting the Borrower’s ratio of Funded Debt to EBITDA), then Borrower shall make a payment of principal under the Revolving Loan in an amount sufficient to enable Borrower to comply with all applicable financial covenants provided hereinafter, said payment to be made within three (3) Business Days from the date that Borrower’s Funded Debt exceeds the maximum amount that will enable Borrower to comply with said affirmative covenants.
3. Procedure for Advances. Unless the Borrower has previously entered into a separate auto borrow or similar cash management service with the Lender, the Borrower may request Advances by telephone through its employees or agents, as hereinafter provided. Each Advance request must be received by the Lender not later than 1:00 p.m. (Eastern time) on the date the Advance is to be made and must specify the amount of the Advance. The Lender shall deposit the Advance into the Borrower’s Operating Account if the Borrower is entitled to the Advance, subject to the terms and conditions of this Agreement. If the Borrower has entered into a separate auto borrow or similar cash management service with Lender, then the provisions of such service shall control with respect to the procedures for making Advances to the Borrower. The Lender shall have the right to terminate such auto borrow or similar cash management service at any time, as determined in the Lender’s sole and absolute discretion.
4. Letter of Credit Subfacility. At the Lender’s discretion, the Lender shall issue Letters of Credit for the account of the Borrower from time to time upon request from the Closing Date until the Ending Date, subject to the following terms and conditions:
1. the aggregate amount of LOC Obligations shall at no time exceed the Letter of Credit Sublimit;
2. any request for a Letter of Credit to be issued must be delivered and received by Lender not later than five (5) Business Days prior to the date that the Borrower wishes to have the Letter of Credit issued;
3. no Letter of Credit shall have an original expiry date more than one year from the date of issuance or beyond the Ending Date unless otherwise agreed to by the Lender in writing or unless the Borrower’s obligation to reimburse the Lender for drawings under the Letter of Credit has been fully secured by a cash deposit with the Lender;
4. the Borrower shall execute and deliver to the Lender a Letter of Credit Agreement with respect to each Letter of Credit to be issued by the Lender, using the Lender’s standard reimbursement agreement form at the time the Letter of Credit is issued. The form and substance of each Letter of Credit, and any reimbursement agreement required by the Lender in relation to a Letter of Credit, must be satisfactory to the Lender, in its sole judgment. At the Lender’s option, Letters of Credit shall be subject to The Uniform Customs and Practice for
Documentary Credits, as published as of the date of issue by the International Chamber of Commerce (Publication No. 500 or the most recent publication, the “UCP”);
5. issuance of the Letter of Credit shall not cause the aggregate outstanding principal amount of all Advances to exceed the Allowed Amount of Advances, determined taking into account the increase in the amount of the LOC Obligations caused by the issuance of the Letter of Credit;
6. the Lender shall not be required to issue any Letter of Credit if any circumstance exists that would entitle the Lender not to honor a request for an Advance under the Revolving Loan;
7. upon notice from the Lender of any drawing under any Letter of Credit, the Borrower shall, as to be determined in the Lender’s sole and absolute discretion, either (a) deliver cash to the Lender, in an amount satisfactory to secure all LOC Obligations and all amounts payable by the Borrower to the Lender under any Letter of Credit Agreement pertaining to such LOC Obligations, or (b) reimburse Lender, within three (3) Business Days from the date Lender provides notice to Borrower, for the amount of the drawing, plus interest from the date of the drawing at the highest rate of interest then in effect under the Revolving Note. The Borrower’s obligation to reimburse the Lender for any drawing under a Letter of Credit shall be absolute and unconditional, irrespective of any rights of set-off, counterclaim or defense to payment the Borrower may claim or have against the Lender, the beneficiary of the Letter of Credit or any other Person;
8. unless the Borrower makes reimbursement from another source on the day of the drawing under any Letter of Credit, the Borrower shall be deemed to have requested an Advance under the Revolving Loan in the amount of the drawing, and (i) the Lender, at its option, may make such an Advance (irrespective of whether the Borrower would then be entitled to an Advance under the terms of this Agreement) and apply the proceeds of the Advance to satisfy the Borrower’s obligation to reimburse the Lender for the amount drawn on the Letter of Credit; and (ii) any such Advance shall be repayable, with interest, in accordance with the terms and conditions of the Revolving Note; and
9. the provisions of the Letter of Credit Agreement pertaining to each Letter of Credit are deemed incorporated into this Agreement by this reference and shall be binding upon the Lender and the Borrower as if fully set forth herein. If a conflict exists between the terms of the Letter of Credit Agreement and any other Loan Document, the terms of the Letter of Credit Agreement shall control with respect to the Letter of Credit issued pursuant to that Letter of Credit Agreement but not as to other matters governed by this Agreement or such Loan Document.
2.2 Repayment of Revolving Loan; Auto-Debit. The Borrower promises to repay the Revolving Loan, with interest, at the time and in the manner and in accordance with the terms provided in the Revolving Note. The Borrower has elected to authorize Lender to effect payment of sums due under the Revolving Note and this Agreement by means of debiting the Borrower’s account with the Lender, account number 192-283-2821. This authorization shall not affect the obligation of the Borrower to pay such sums when due, without notice, if there are insufficient funds in such account to make payment in full on the due date thereof, or if the Lender fails to debit the account.
2.3 Use of Revolving Loan Proceeds. The proceeds of the Revolving Loan shall be used for working capital and to finance the performance of Government Contracts, and for no other purpose.
2.4 Revolving Loan Fees. The Borrower promises to pay the Lender the following fees in consideration of entering into this Agreement. These fees are in addition to interest payable under the Revolving Note:
1. an up front fee of Twenty Five Thousand and 00/100 Dollars ($25,000.00), payable on the Closing Date.
2. an unused fee on any difference between the Maximum Revolving Commitment Amount and the amount of credit the Borrower actually uses, determined by the average of the daily amount of credit outstanding during each month (including the amount of any LOC Obligations). The fee will be calculated at .375% per year. The fee is calculated and payable monthly, in arrears, commencing on the first day of the first month after the date of this Agreement until the expiration of the availability of Advances under this Agreement.
3. all fees and costs for each field examination performed by the Lender or its agents, for up to two (2) field examinations per year. However, the Lender shall have the right to perform such additional field examinations at any time, in its sole discretion. Each additional field examination will be at Lender’s own expense if no Event of Default has occurred and remains uncured at the time of the additional field examination, but shall be at the Borrower’s expense if an Event of Default has occurred and remains uncured at the time of the additional field examination.
4. a letter of credit fee for each day that any Letter of Credit is outstanding. The letter of credit fee shall be calculated and payable monthly, in arrears, commencing on the first day of the first calendar month after the date of this Agreement. The letter of credit fee shall be determined for each day by multiplying the aggregate amount of LOC Obligations on that day for undrawn Letters of Credit by a per-diem rate equal to the applicable annual percentage rate shown on the Performance Pricing Grid, divided by 360.
ARTICLE 3. CONDITIONS PRECEDENT TO LOAN.
3.1 Conditions Precedent to Initial Advance. The Lender shall be under no obligation to make the first Advance under this Agreement until, in the Lender’s sole judgment, all of the following conditions are satisfied:
1. Representations and Warranties; Compliance. All representations and warranties made by the Borrower in or in connection with this Agreement or any of the other Loan Documents or otherwise made in writing in connection with this Agreement shall be true and correct on the Closing Date, and the Borrower shall have performed all of the promises or undertakings under this Agreement and satisfied all of the conditions of this Agreement that the Borrower was required to perform or to satisfy as of the Closing Date.
2. Documents Concerning the Borrower. The Borrower shall deliver to the Lender copies of all documents requested by the Lender, including a complete, correct and current copy of the Borrower’s Articles of Incorporation, certified by the Secretary of State of the Borrower’s state of incorporation; a complete, correct and current copy of its Bylaws, certified by the Borrower’s corporate secretary; a complete, correct and current copy of all resolutions of the Borrower’s Board of Directors authorizing the execution, delivery and performance of this Agreement and of the other Loan Documents, certified by the Borrower’s corporate secretary; and appropriate certificates of incumbency for those officers of the Borrower executing this Agreement or any of the other Loan Documents, certified by the Borrower’s corporate secretary and president. In addition, the following documents and materials shall have been delivered to the Lender, and must be satisfactory to the Lender in form and substance:
1. all supporting documentation with regard to the Borrower or the Revolving Loan as the Lender may require;
2. such additional information, instruments, opinions, documents, certificates and reports relating to the Borrower or the Collateral as the Lender may deem necessary; and
3. such lien releases or termination statements as the Lender may deem necessary to remove any Encumbrances on the Collateral.
3. Executed Note and Loan Documents. Borrower shall deliver to the Lender, fully executed: this Agreement, the Revolving Note, Assignments of Payments Under Government Contracts, UCC-1 Financing Statements and such other documents, instruments and certificates as the Lender may
reasonably require, in form and substance satisfactory to the Lender. All taxes, fees and charges with respect to the preparation, filing and recording of the Loan Documents shall have been paid by Borrower.
4. Landlord and Mortgagee Waivers. The Lender shall have received such landlord and mortgagee waivers as it shall request with respect to any of the Borrower’s landlords or mortgagees which could claim an interest in any Collateral as a remedy for a default under any lease, mortgage or deed of trust.
5. Financing Statements and Control Agreements. All Financing Statements and/or Control Agreements deemed necessary by the Lender to perfect its security interest in the Collateral or any other collateral securing the Loan.
6. Legal Opinion. The Borrower shall deliver to the Lender a written opinion or opinions of legal counsel for Borrower dated the Closing Date and addressed to the Lender, which opinions must be in form and content satisfactory to the Lender. Without limiting the generality of the foregoing, the opinion or opinions must address the Borrower’s organization, existence, power, good standing and authority and as to the validity, binding effect and enforceability of the Loan Documents, including the existence, validity, enforceability, attachment, perfection, and binding effect of any security interest, lien or assignment being granted by Borrower or any guarantor or other Person providing Collateral to Lender with respect to the Collateral. The forms of opinion letter attached to this Agreement as Schedule 3.1, upon timely execution and delivery by counsel, meets the requirements of this section.
7. Operating Account. The Borrower shall establish the Operating Account with the Lender.
8. Compliance with Covenants. The Borrower shall establish to the Lender’s satisfaction that the Advance will not cause the Borrower to cease to comply with the Borrower’s financial covenants as set forth hereinafter.
9. Borrowing Base Certificate. The Borrower shall deliver to the Lender a Borrowing Base Certificate dated the Closing Date with supporting schedules attached thereto, including without limitation, current Accounts Receivable and Accounts Payable reports.
3.2 Future Advances. The obligation of the Lender to make any Advance under the Revolving Loan subsequent to the Closing Date is further conditional on:
1. Conditions of First Advance Remain Satisfied. The Lender shall have determined, in its sole judgment, that the conditions precedent to the first Advance are satisfied as of the Borrowing Date for the subsequent Advance; the Loan Documents shall remain in full force and effect; and neither the Borrower nor any Person providing Collateral or a guaranty shall have purported to terminate any of the Loan Documents or notified the Lender of an intention not to perform under any applicable Loan Document.
2. Borrowing Base Certificate. The Lender shall have received a Borrowing Base Certificate, executed by a duly authorized officer of the Borrower with supporting updated schedules attached thereto.
3. Representations and Warranties. All representations and warranties contained herein shall be true and correct at the date of such disbursement.
4. No Material Adverse Change. The Lender shall have determined, in its sole discretion, that no material adverse change has occurred in the financial condition of the Borrower since the Closing Date, as determined from the most recent financial statements furnished to the Lender.
5. No Default. No Event of Default has occurred and remains uncured, and no event has occurred or circumstance exists which, with the passage of time or the giving of notice or both, would constitute an Event of Default.
3.3 Lender’s Right To Rely On Communications. The Borrower authorizes the Lender to accept, rely upon, act upon and comply with, any verbal or written instructions, requests, confirmations and orders of any employee or agent of the Borrower. The Borrower acknowledges that the transmission between the Borrower and the Lender of any such instructions, requests, confirmations and orders involves the possibility of errors, omissions, mistakes and discrepancies and agrees to adopt such internal measures and operational procedures as the Borrower deems necessary to protect its interests. The Borrower hereby assumes all risk of loss arising out of: (i) the Lender’s acceptance, reliance on, compliance with or observation of any such instructions, requests, confirmations or orders that the Lender, in good faith, believes are genuine; and (ii) any such errors, omissions, mistakes and discrepancies, except those caused by the Lender’s gross negligence or willful misconduct. The Borrower agrees to indemnify the Lender and to hold the Lender harmless for and from all claims, demands, suits, actions, judgments, decrees, losses or damages, including attorneys fees and expenses, that the Lender may incur as a result of the foregoing events or occurrences for which the Borrower has assumed the risk of loss.
ARTICLE 4. SECURITY.
4.1 Grant of Security Interest. As security for (i) the payment of the Loan, and any other extensions of credit, loans, letters of credit or other financial accommodations now or hereafter made by the Lender for the benefit of the Borrower, and (ii) the performance of the Borrower’s obligations under or in connection with any interest rate swap agreement as defined in 11 U.S.C. §101 by and between the Borrower and the Lender or any Affiliate of the Lender (whether absolute or contingent and whether now or hereafter becoming due or owing), and (iii) any other liability or obligation of the Borrower to the Lender whether now or hereafter existing, of every kind and description, whether or not evidenced by notes or other instruments, and whether or not such liability or obligations are direct or indirect, fixed or contingent, liquidated or unliquidated, the Borrower hereby assigns, grants and conveys to the Lender a security interest in the Collateral. Proceeds of the Collateral shall be allocated pari passu among the Loans and any outstanding interest rate swap agreements. The Borrower further agrees that the Lender shall have in respect of the Collateral all of the rights and remedies of a secured party under the Uniform Commercial Code, other applicable law and this Agreement. The Borrower covenants and agrees to execute and deliver, and hereby authorizes the Lender to prepare and file with the financing records of such jurisdictions as the Lender deems appropriate, such financing statements and other instruments and filings or perform any and all acts as are necessary in the opinion of the Lender to perfect, maintain and protect the security interest hereby granted. Except as otherwise set forth in this Agreement, the Lender does not authorize and the Borrower agrees that it shall not take any of the following actions without the prior written consent of the Lender: (a) sell, lease, license, transfer, exchange or otherwise dispose of any of the Collateral except in the ordinary course of business; or (b) mortgage, pledge, lien, assign, grant a security interest or otherwise encumber any of the Collateral.
4.2 Covenants Regarding Inventory and Equipment. With regard to Collateral that constitutes Inventory or Equipment, the Borrower further covenants as follows:
1. The Borrower shall not permit any of the Equipment or other Collateral to become a fixture to any real estate unless subordination agreements satisfactory to the Lender are obtained by any owner or mortgagee of such real estate.
2. The Lender’s security interest shall extend and attach to Inventory which is presently in existence and is owned by the Borrower or in which the Borrower purchases or acquires an interest at any time and from time to time in the future, whether such Inventory is in transit or in the Borrower’s constructive, actual or exclusive occupancy or possession or not, and wherever the same may be located, including, without limitation, all Inventory which may be located at the premises of the Borrower or upon the premises of any carriers, forwarding agents, truckers, warehousemen, vendors, selling agents, finishers, convertors or other third parties who may have possession of the Inventory.
3. Upon sale, exchange, lease or disposition of the Inventory or Equipment, the security interest of the Lender shall without break in continuity and without further formality or act continue in and attach to all cash and non-cash proceeds of such sale, exchange, lease or disposition, including
Inventory returned or rejected by customers or repossessed by either the Borrower or the Lender. As to any such sale, exchange, lease or disposition, the Lender shall have all of the rights of an unpaid seller, including stoppage in transit, replevin, detinue and reclamation.
4.3 Certain Rights of the Lender. The Lender shall have the right, but not the obligation, (i) to pay any taxes or levies on the Collateral or any costs to repair or to preserve the Collateral; and (ii) to cure any defaults by the Borrower on contracts by the Borrower intended to give rise to Accounts. Such payments and the costs of curing such defaults shall constitute Advances under the Revolving Note and shall be secured pursuant to this Agreement, irrespective of whether the Borrower would then be entitled to such Advances under this Agreement.
4.4 Financing Statements; Possession of Collateral by Lender; Control. At the request of the Lender, the Borrower will execute financing statements, continuation statements and other documents with respect to the Collateral pursuant to the Uniform Commercial Code or otherwise, in form satisfactory to the Lender, and the Borrower will pay the cost of filing the same in all public offices wherever the Lender deems filing to be necessary or desirable. The Borrower agrees that a carbon, photographic, photostatic or other reproduction of this Agreement or of a financing statement is sufficient as a financing statement, provided however, that it shall not limit the obligations of the Borrower as previously set forth herein. The Borrower grants the Lender the right, and irrevocably authorizes the Lender, at the Lender’s option, to file any or all such financing statements, continuation statements and other documents pursuant to the Uniform Commercial Code and otherwise, without the Borrower’s signature, and irrevocably appoints the Lender as the Borrower’s attorney-in-fact to execute any such statements and documents in the Borrower’s name and to perform all other acts which the Lender deems appropriate to perfect and to continue the security interests conferred by this Agreement.
In addition, upon request of the Lender, Borrower shall deliver to the Lender within two (2) Business Days following the request of the Lender, or authorize and direct any and all Persons in possession of Collateral, to deliver to Lender within two (2) Business Days following the request of the Lender all Collateral for which the Lender requires possession to perfect its security interest in such Collateral, properly endorsed or acknowledged. Furthermore, the Borrower shall take all such actions as may be requested by the Lender to allow the Lender to exercise control over any Collateral for the purpose of allowing the Lender to perfect its security interest in Collateral, which Collateral may include Deposit Accounts, Investment Property, Letter-of-Credit Rights and electronic Chattel Paper. At the Lender’s request, the Borrower shall execute and deliver to the Lender, and have any other Persons in possession or control of Collateral, execute and deliver to the Lender, control or other agreements, in form and substance satisfactory to the Lender.
4.5 Records of Collateral; Information. The Borrower at all times will maintain accurate books and records covering the Collateral. The Borrower will promptly xxxx all books and records with an entry showing the absolute assignment of and granting of a security interest in all Collateral to the Lender, and hereby grants the Lender the right to audit the books and records of the Borrower relating to Collateral at any time and from time to time. The Borrower shall (i) promptly furnish the Lender with any information with respect to Collateral requested by the Lender; (ii) allow the Lender or its representatives to inspect the Collateral, at any time and wherever located and in whomever’s possession the Collateral may be, and to inspect and copy, or furnish the Lender or its representatives with copies of all records relating to the Collateral; (iii) furnish the Lender or its representatives such information as the Lender may reasonably request to identify the Collateral, at the time and in the form requested by the Lender; and (iv) deliver upon request to the Lender shipping and delivery receipts evidencing the shipment of goods and invoices evidencing the receipt of the Collateral and payment for the Collateral.
4.6 No Release. No injury to the Collateral, loss or destruction of the Collateral, failure to perfect or to continue the perfection of the Lender’s security interest in the Collateral, or release of the Lender’s security interest in the Collateral, or any part of it, shall relieve the Borrower of any obligation under this Agreement or under any of the other Loan Documents. The Borrower expressly waives all defenses based on suretyship or impairment of collateral, and shall not be released or discharged of any obligation under
the Loan Documents, in whole or in part, by the Lender’s failure to protect or preserve the Collateral. No Person, in deciding to enter into this Loan Agreement, has relied on the execution of this Loan Agreement or the granting of a security interest in Collateral by any other Person. Each Person comprised by the term Borrower waives notice of any change in financial condition of any Person liable for the Loans or any part thereof, and agrees that maturity of the Loans or any part thereof may be accelerated, extended or renewed one or more times by the Lender in its discretion, without notice to the Person and without affecting the Lender’s security interest in the Collateral. The Lender shall not be required to bring any action against any other Person or to resort to any other security or to any balance of any Deposit Account as a condition of enforcing its rights against any of the Collateral.
4.7 Assignment of Payments Under Certain Government Contracts and Government Accounts. On the Closing Date, and thereafter upon the creation of any Government Contract or Government Account, the Borrower shall, at the Lender’s option, execute and deliver to the Lender specific Assignments of Payments due or to become due with respect to any Government Account designated by the Lender. The Borrower shall execute and deliver any and all documents and take any and all steps necessary to provide the Lender with an Assignment. The separate Assignment to the Lender of a right to payment under specific Government Contracts, as contemplated under this Section, shall not be deemed to limit the Lender’s security interest to Payments under those particular Government Contracts and the related Government Accounts, but rather the Lender’s security interest, as stated above, shall extend to Payments under any and all Government Contracts and the related Government Accounts and proceeds thereof, now or hereafter owned or acquired by the Borrower.
4.8 Additional Remedy for Failure to Assign Payments. The Borrower acknowledges that the Lender will be irreparably harmed if the Borrower fails to assign Payments due or to become due under any Government Contract when required by this Agreement, and that the Lender shall have no adequate remedy at law. Therefore, the Borrower agrees that the Lender shall be entitled to the following remedies, in addition to all other remedies allowed by law or under this Agreement,
1. an injunction compelling the Borrower’s compliance with the provisions of this Agreement requiring the Borrower to assign Payments due or to become due under any Government Contract;
2. the appointment of a receiver, within instructions that the receiver shall comply, in the Borrower’s name and on its behalf, with the provisions of this Agreement requiring the Borrower to assign Payments due or to become due under any Government Contract; and
3. such other or further equitable relief as may be necessary or desirable to secure to the Lender the benefits of the rights of an assignee under the Assignment of Claims Act.
4.9 Indemnification; Risk of Loss. In any suit, proceeding or action brought by or against the Lender relating to the Collateral, the Borrower will defend, indemnify and keep the Lender harmless from and against all expense, loss or damage (including reasonable attorneys’ fees) suffered by reason of any defense, set-off, counterclaim, recoupment or reduction of liability whatsoever of account debtor or other obligor of the Borrower. The foregoing obligation of the Borrower to indemnify the Lender shall survive the payment of the Loans and the termination of this Agreement, but shall not extend to any suit, proceeding or action arising out of the Lender’s gross negligence or willful misconduct.
In addition, the risk of any loss or damage associated with the Collateral, including without limitation, any Collateral in the possession of Lender shall be borne by the Borrower; provided, that the Lender shall be responsible for any loss resulting from the Lender’s gross negligence or willful misconduct. In the event that the Lender is in possession of Collateral, (a) the Borrower shall be liable to the Lender and shall pay to the Lender, upon demand, all reasonable expenses, including the cost of insurance and payment of taxes or other charges, incurred in the custody, preservation, use or operation of the Collateral, and all such expenses shall be secured by the Collateral; and (b) the Lender may use and operate the Collateral, as determined in its sole and absolute discretion, (i) to preserve the Collateral or its value, (ii) as permitted by an order of a court having competent jurisdiction, or (iii) as otherwise set forth herein or as previously or hereafter agreed to by the Borrower. Notwithstanding anything in this Agreement to the contrary, the
Lender shall have no duty and be under no obligation to collect any income accruing on the Collateral or to preserve any rights relating to the Collateral.
ARTICLE 5. BORROWER’S REPRESENTATIONS AND WARRANTIES.
To induce the Lender to enter into this Agreement and to extend the Revolving Loan to the Borrower, the Borrower makes the following representations and warranties to the Lender. These representations and warranties are continuing, and each request for an Advance shall be deemed to be an affirmation of these representations and warranties as of the date of the most recent Borrowing Base Certificate submitted prior to the request.
5.1 Corporate Authority; Subsidiaries. Each Person encompassed by the definition of the Borrower (i) is a corporation duly organized, validly existing, and in good standing under the laws of its state of incorporation as shown on Schedules 5.1-1 through 5.1-2 attached hereto and made a part hereof, and the exact legal name of the Borrower is as set forth above in the definition of the Borrower; (ii) is qualified to do business as a foreign corporation and is in good standing in all jurisdictions where its activities or ownership of property require such qualification except where the failure to be so qualified would not in the aggregate have a material adverse impact on the condition of the Borrower (financial or other wise), and (iii) has the full and unrestricted power and authority, corporate and otherwise, to own, operate and lease its properties, to carry on its business as currently conducted, to execute and deliver and perform the Loan Documents, to incur the obligations provided for herein and therein, and to perform the transactions contemplated hereby and thereby (including without limitation, the creation of the lien and security interest in favor of the Lender in the Collateral, the Assignments and any other Collateral required by this Agreement), all of which have been duly and validly authorized by all proper and necessary action (all of which actions are in full force and effect). The Borrower has no subsidiaries other than those set forth in Schedules 5.1-1 through 5.1-2 attached hereto and made a part hereof. Each of the Persons comprised by the term Borrower maintains its chief executive office at the location stated in Schedules 5.1-1 through 5.1-2 attached hereto and made a part hereof.
5.2 Approvals. The Borrower has provided the Lender with a true and accurate certificate of a Resolution of the Borrower’s Board of Directors authorizing the loan transactions contemplated by this Agreement. No further approval, consent or other action by the stockholders of the Borrower, by any governmental authority or by any other Person is or will be necessary to permit the valid execution, delivery or performance by the Borrower of this Agreement or any of the other Loan Documents.
5.3 Binding Effect, No Violations. Each of the Loan Documents, upon its execution and delivery, will constitute a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, moratorium, fraudulent transfer or conveyance or similar laws affecting creditors’ rights generally and limits imposed by equitable principles. The execution, delivery and performance of the Loan Documents will not (i) violate, conflict with or constitute a default (with due notice, lapse of time or both) under any law, regulation, order or any other requirement of any court, tribunal, arbitrator or governmental authority, any terms of the Articles or Certificate of Incorporation or Bylaws of the Borrower, or any contract, agreement or other arrangement binding upon or affecting the Borrower or any of its properties, or (ii) result in the creation, imposition or acceleration of any indebtedness or any Encumbrance of any nature upon, or with respect to, the Borrower or any of its properties, except such Encumbrances in favor of the Lender.
5.4 Litigation. Except as set forth in Schedule 5.4 attached hereto and made a part hereof, there is no claim, litigation, proceeding or investigation pending, or to the Borrower’s information, knowledge or belief, threatened or reasonably anticipated against or affecting the Borrower, its properties or business, this Agreement, any of the other Loan Documents, or any of the transactions contemplated hereby or thereby, before or by any court, tribunal, arbitrator or governmental authority, and there is no possibility of any judgment, liability or award which reasonably may be expected to occur and result in any material adverse change in the business, operations, prospects, properties or assets or condition, financial or otherwise, of the Borrower. The Borrower is not in default with respect to any judgment, order, writ,
injunction, decree, rule, award or regulation of any court, governmental instrumentality or agency, commission, board, bureau, arbitrator or arbitration panel, which default would have a material adverse impact on the condition of Borrower (financial or otherwise).
5.5 Title to and Condition of Assets. The Borrower has good, valid and marketable title to all of its properties and assets (whether real or personal) and has the power to transfer its rights and interests in the Collateral, and there exist no Encumbrances on any of the Borrower’s properties or assets, including without limitation, the Collateral. All personal property of the Borrower is in good operating condition and repair, and is suitable and adequate for the uses for which it is being used, except where the failure to be in such condition or to be so suitable and adequate would not have a material adverse effect on Borrower. Upon the execution and delivery of this Agreement, and upon (a) the filing of financing statements, (b) the Lender’s taking possession of the Collateral, (c) the Lender’s receipt of a satisfactory acknowledgment from a Person in possession of any Collateral that such Collateral is in the possession of such Person and is being held for the benefit of the Lender, or (d) the Lender obtaining satisfactory control over any of the Collateral consisting of Investment Property, Deposit Accounts, Letter-of-Credit Rights or electronic Chattel Paper or such other Collateral for which control is required to perfect a security interest (as control is defined in the UCC), as the case may be, the Lender will have a good, valid and perfected first priority lien and security interest in the Collateral, subject to no Encumbrance in favor of any other Person, other than the Encumbrances otherwise set forth in Schedule 7.2 attached hereto and incorporated herein by reference.
5.6 Loan Application. The statements made and the documents delivered by the Borrower to the Lender in connection with its application for the Revolving Loan and in connection with this Agreement and the other Loan Documents are true, correct and complete, in all material respects, omit no material facts, are not misleading, and present fairly the condition (financial or otherwise) of the Borrower. The Borrower certifies further that the information set forth in the Borrower Information Statements attached hereto as Schedules 5.1-1 through 5.1-2 is true, accurate and complete as of the date of this Agreement.
5.7 No Change. No change in the business, operations, properties or condition (financial or otherwise) of the Borrower, or any other event, has occurred since the date of the most recent financial statements submitted to the Lender by the Borrower, which change could or would reasonably be expected to adversely affect the ability of Borrower to perform or comply with all terms, conditions and agreements to be performed or complied with by the Borrower under this Agreement or under any of the other Loan Documents, or to perform the transactions contemplated by this Agreement or the other Loan Documents.
5.8 Taxes. Borrower has timely filed all tax returns and reports required by any governmental authority to be filed by Borrower, and such returns and reports are true and correct. The Borrower has paid all taxes, assessments and other government charges imposed upon it or its income, profits or properties, or upon any part thereof, other than (a) those presently payable without penalty or interest, or (b) such taxes that have been contested in good faith and by proper proceedings where the Borrower has set aside on its books adequate reserves therefore (as set forth in Schedule 5.8 attached hereto and incorporated herein by reference), and in the case where such tax assessment, claim or levy might become an Encumbrance, the Borrower has made arrangements acceptable to Lender with respect thereto. The Borrower has timely filed all claims for refunds to which the Borrower is entitled. The amounts reserved as a liability for income and other taxes payable in the most recent financial statements of the Borrower provided to the Lender are sufficient for the payment of all unpaid federal, state, county and local income, excise, property and other taxes, whether or not disputed, of the Borrower accrued for or applicable to the period and on the dates of such financial statements and all years and periods prior thereto, and for which the Borrower may be liable in its own right or as a transferee of the assets of, or as successor to, any other Person.
5.9 No Default. No Event of Default, and no event which with notice, lapse of time or other condition would constitute an Event of Default, has occurred and is continuing.
5.10 Compliance with Laws, Governance Documents and Agreements. The Borrower has complied and is in full compliance with all applicable laws, ordinances, rules, regulations, orders and other requirements of any governmental authority or arbitrator, and with all terms and conditions of its Governance Documents, and with each agreement binding upon or affecting the Borrower or any of its properties. The Borrower is not in default with respect to any Debt. Without limiting the generality of the foregoing, the Borrower represents to the Lender that: (1) the Borrower has previously disclosed to the Lender all of the Borrower’s activities that involve the use, manufacturing, storage, disposal, emission, discharge, generation or transportation of Hazardous Wastes, Toxic Substances or other materials regulated by Environmental Laws; (2) the Borrower has complied and is in full compliance with all Environmental Laws; (3) the Borrower maintains in full force and effect all permits required by Environmental Laws; and (4) there exists no pending or threatened litigation, order, ruling, notice or investigation regarding the Borrower’s use, manufacturing, storage, disposal, emission, discharge generation or transportation of Hazardous Wastes or Toxic Substances or regarding any violation or alleged violation of any Environmental Laws, except as set forth in Schedule 5.10 attached hereto and incorporated herein by reference.
5.11 Licenses and Contracts. All franchises, licenses, trademarks, trade names, copyrights, patents, permits, certificates, consents, approvals, authorizations, agreements and contracts necessary to operate Borrower’s business as it currently is being operated and to own or lease Borrower’s property have been obtained, are in effect, have been complied with in all material respects by Borrower, are free from challenge, and to the extent permitted under applicable law, are fully assignable to the Lender for the purpose of securing the Revolving Loan. Borrower has no knowledge and has not received any notice to the effect that any product it manufactures or sells, or any service it renders, or any process, method, know-how, trade secret, part or material it employs in the manufacture of any product it makes or sells or any service it renders, or the marketing or use by it or another of any such product or service, may infringe any trademark, trade name, copyright, patent, trade secret or legally protected right of any other Person.
5.12 Intellectual Property. The Borrower owns all right, title and interest in and to all Intellectual Property used in and material to the operation of its business or, for such Intellectual Property that is not owned, possesses adequate licenses or other legally enforceable rights to use the same. The Borrower has no reason to believe that any valid basis exists upon which a claim adversely affecting any such Intellectual Property may be asserted against the Borrower or any subsidiary. To the best knowledge of the Borrower, no Person is infringing upon the Intellectual Property used by the Borrower or any subsidiary material to the operation of their respective businesses. The Borrower has taken commercially reasonable steps to protect the secrecy, confidentiality and value of its and all subsidiaries’ rights in and to such Intellectual Property and to prevent others from using such Intellectual Property without consent.
5.13 Disclosure. No representation or warranty of Borrower contained in this Agreement or any of the Loan Documents and no written statement of fact furnished or to be furnished by the Borrower to the Lender pursuant to this Agreement or any of the Loan Documents, when viewed together, contains or will contain any untrue statement of a fact material to the financial condition of the Borrower, or omits or will omit to state any material fact necessary in order to make the statements contained herein or therein, or furnished herewith or therewith, not misleading.
5.14 Trade Name; Merger. Except as set forth in Schedules 5.1-1 through 5.1-2 , during the ten (10) years immediately preceding the date of this Agreement: (1) neither the Borrower nor any predecessor of the Borrower has used any corporate or fictitious name other than its current corporate name; (2) the Borrower has not changed its name, or been the surviving entity in a merger or acquired any business; and (3) the Borrower has not utilized and does not utilize any trade name or trade names in the conduct of its business.
5.15 Payment of Employees and Subcontractors. The Borrower is not in default with regard to the payment of any employee or subcontractor.
5.16 ERISA Borrower is in compliance with the Borrower’s obligations under ERISA. Without limiting the generality of the foregoing:
1. During the five-year period prior to the date on which this representation is made or deemed made: (i) no Termination Event has occurred, and, to the best of the Borrower’s knowledge, no event or condition has occurred or exists as a result of which any Termination Event could reasonably be expected to occur, with respect to any Plan; (ii) no “accumulated funding deficiency,” as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, has occurred with respect to any Plan; (iii) each Plan has been maintained, operated and funded in compliance with its own terms and in material compliance with the provisions of ERISA, the Code, and any other applicable federal or state laws; and (iv) no lien in favor of the PBGC or a Plan has arisen or is reasonably likely to arise on account of any Plan.
2. The actuarial present value of all “benefit liabilities” under each Single Employer Plan (determined within the meaning of Section 401(a)(2) of the Code, utilizing the actuarial assumptions used to fund such Plans), whether or not vested, did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the current value of the assets of such Plan allocable to such accrued liabilities.
3. Neither the Borrower nor any of its subsidiaries nor any ERISA Affiliate has incurred, or, to the best of the Borrower’s knowledge, are reasonably expected to incur any withdrawal liability under ERISA to any Multiemployer Plan or Multiple Employer Plan. Neither the Borrower, any of its subsidiaries nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in reorganization (within the meaning of Section 4241 of ERISA), is insolvent (within the meaning of Section 4245 of ERISA), or has been terminated (within the meaning of Title IV of ERISA), and no Multiemployer Plan is, to the best knowledge of the Borrower, reasonably expected to be in reorganization, insolvent or terminated.
4. No prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has occurred with respect to a Plan which has subjected or may subject the Borrower or any of its subsidiaries or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which the Borrower or any of its subsidiaries or any ERISA Affiliate has agreed or is required to indemnify any Person against any such liability.
5.17 Government Contracts. The Borrower is not currently in default as to the terms of any Government Contract, and no Government Contract has been canceled or terminated by the Government in the past ten years. No Government Contract for which Payments have been assigned to the Lender as Collateral is dependent on appropriations, except as set forth in Schedule 5.17 attached hereto and made a part hereof.
5.18 No Debarment. The Borrower is not subject to any pending or threatened debarment proceedings.
5.19 Assignment of Payments. The Borrower has the right to assign to the Lender all Payments due or to become due under each of Borrower’s Government Contracts (except Payments under the Borrower’s Government Contracts which are not assignable, as disclosed in Schedule 5.19 attached hereto and made a part hereof for Government Contracts entered into prior to the execution of this Agreement, or as promptly disclosed by the Borrower to the Lender for Government Contracts entered into after the execution of this Agreement), and there exists no uncanceled prior Assignment of Payments under any of the Borrower’s Government Contracts.
5.20 Assignment of Claims Act. The Borrower is now in compliance and hereby covenants and agrees that the Borrower will in the future comply with any and all of the requirements of the Assignment of Claims Act, where such statutes are applicable to any Government Contract, and shall take all such other action as may be necessary to facilitate the direct assignment to the Lender of the Payments due or
to become due under any Government Contract and the creation and perfection of the Lender’s security interest in such Payments.
ARTICLE 6. BORROWER’S AFFIRMATIVE COVENANTS.
Until all obligations of the Borrower under this Agreement and the other Loan Documents are paid in full and performed, the Borrower covenants and agrees that it shall:
6.1 Payment of Revolving Loan. Punctually make the payments on the Revolving Loan at the times and places and in the manner specified in the Revolving Note.
6.2 Corporate Existence. Preserve, maintain and keep in full force and effect its corporate existence and good standing in the jurisdiction of its incorporation.
6.3 Corporate Rights and Franchises; Qualification; Orderly Conduct of Business. Preserve, maintain and keep in full force and effect all franchises, licenses, permits, certificates, consents, approvals, authorizations, agreements and contracts material to the operation of the Borrower’s business as it currently is being conducted, whether now existing or hereafter granted to or obtained by the Borrower; qualify and remain qualified as a foreign corporation in each jurisdiction in which such qualification is necessary or desirable in view of its activities and ownership of property; continue to engage in a business of the same general type as now conducted by it; and conduct such business in a manner consistent with the conduct of its business prior to the date of this Agreement.
6.4 Taxes, Charges and Obligations. Pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or upon its income, profits, properties or any part thereof, prior to the date on which penalties attach thereto, as well as all claims which, if unpaid, might become an Encumbrance upon any properties of the Borrower, and pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all of the indebtedness and other obligations of whatever nature of the Borrower; however, the Borrower shall not be required to pay any such tax, assessment, charge, levy, claim, indebtedness or obligation so long as (i) the validity thereof is being contested by the Borrower in good faith and by proper proceedings, (ii) the Borrower sets aside on its books adequate reserves therefor, and (iii) in the case where any such tax, assessment, charge, claim or levy might become an Encumbrance upon any item of the Collateral or any part thereof, the Borrower makes arrangements acceptable to the Lender to secure the payment thereof.
6.5 Maintenance of Property. Preserve and keep all property used or useful in its business, including without limitation, the Collateral, in good repair, working order and condition, and from time to time make all necessary or desirable repairs, renewals and replacements thereof.
6.6 Insurance. Maintain and keep in full force and effect, with financially sound and reputable insurance companies acceptable to the Lender, insurance in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which Borrower operates (but in any event, casualty insurance covering the Borrower’s tangible personal property and real estate for their full replacement value and comprehensive public liability insurance coverage with limits of not less than Three Million and 00/100 Dollars ($3,000,000.00) for any one occurrence and Five Million and 00/100 Dollars ($5,000,000.00) for the aggregate of all occurrences during a policy period of no more than one (1) year), all such insurance policies to be in form and substance satisfactory to the Lender. If requested by the Lender, Borrower shall also procure, maintain and keep in full force and effect business interruption insurance in an amount, in form and issued by companies acceptable to the Lender in all respects. All liability insurance policies shall name the Lender as an additional insured, and all casualty insurance or business interruption insurance policies shall name the Lender as the loss payee. All insurance policies shall prohibit cancellation (including cancellation for nonpayment of premium) or reduction of coverage except with thirty (30) days’ prior written notice to and consent of the Lender. At least thirty (30) days prior to the expiration date of each and every insurance policy required by this Agreement, Borrower shall obtain and deliver to the Lender a renewal or substitution policy in form and substance satisfactory to the Lender.
6.7 Contract Obligations. Perform in accordance with the terms of every contract, agreement, obligation or other arrangement to which the Borrower is a party or by which it or any of its property is bound which is material to the operation of the Borrower’s business as determined by Lender in its sole and absolute discretion, including, without limiting the generality of the foregoing, Government Contracts, except to the extent that the contract or agreement is inconsistent with this Agreement. In the event that any default or performance deficiency occurs, the Borrower shall notify the Lender promptly in writing. The Borrower shall provide the Lender promptly with copies of any cure notices or stop work notices it may receive from the Government on any Government Contract and detail the proposed corrective action. The Borrower shall provide the Lender promptly with copies of any cure notices or stop work notices it may receive from the Government on any Government Contract and detail the proposed corrective action.
6.8 Compliance with Laws. Comply with all applicable laws, regulations, orders and other requirements of any court, tribunal, arbitrator or governmental authority, non-compliance with which could have a material adverse effect on the business, operations, property or condition (financial or otherwise) of the Borrower. The Borrower will take all necessary actions to remain in full compliance with such laws, regulations, orders and any other requirements, the Governance Documents and all other agreements. Should the Borrower be deemed by any governmental authority or deem itself to be in violation of any relevant law, ordinance, rule, regulation, orders or other requirement, Governance Document or agreement, the Borrower shall notify the Lender promptly of such violation and take all necessary remedial actions. Without limiting the generality of the foregoing, the Borrower shall: (1) comply strictly and in all respects with all Environmental Laws affecting the Borrower or its property; (2) promptly forward to the Lender copies of all orders, notices, permits, applications or other communications and reports finding or alleging that the Borrower or its property does not comply with any of the Environmental Laws; (3) promptly provide a proposed response action, or plan with respect to any failure to comply with Environmental Laws; and (4) defend the Lender, indemnify the Lender, and hold the Lender harmless from and against any claims, demands, suits, actions, judgements, decrees, losses or damages, including attorneys’ fees, arising out of the failure of the Borrower of any of its properties to comply with any of the Environmental Laws. To the extent that Federal or state laws, rules, regulations or orders establish requirements which relate to the disposition of property, compliance by the Lender with such laws, rules or regulations in any disposition or sale of the Collateral shall not be deemed to adversely effect the commercially reasonableness of any such sale or disposition, or otherwise render the sale or disposition commercially unreasonable.
6.9 Books and Records. Keep and maintain at its chief executive offices adequate and proper records and books of account, in which complete entries are made in accordance with GAAP, consistently applied, and in accordance with all laws, regulations, orders and other requirements of any court, tribunal, arbitrator or governmental authority, reflecting all financial and other transactions of the Borrower normally and customarily included in records and books of account of companies engaged in the same or similar businesses and activities as the Borrower. As of the date of this Agreement, the chief executive offices of EFJ, Inc. are located in Lincoln, Nebraska and the chief executive offices of X. X. Xxxxxxx Company are located in Waseca, Minnesota.
6.10 Access to the Borrower’s Properties, Books and Records. Permit the Lender and any agents or representatives thereof to visit and inspect the Borrower’s properties to examine and make abstracts from and/or copies of any of the Borrower’s books and records at any and all reasonable times and as often as the Lender or such agents or representatives may desire, and to discuss the business, operations, properties and condition (financial and otherwise) of Borrower with any of the officers, directors, agents or representatives (including without limitation, the independent certified public accountants) of the Borrower. In addition to having the right to perform field audits of the Borrower’s books and records, the Lender shall have the right, but not the obligation, to contact the contracting officer under any Government Contract directly to determine the Borrower’s contract performance status on the Government Contract.
6.11 Financial and Other Statements. Furnish to the Lender the following statements, which must be satisfactory to the Lender in form and substance, at the times and in the manner specified below:
1. Annual Financial Statements. As soon as available, but in no event more than ninety (90) days after the close of each of the Borrower’s fiscal years, audited financial statements for that year, stating the Borrower’s financial condition. The financial statements shall be prepared by an independent certified public accountant acceptable to the Lender, in accordance with GAAP, consistently applied. The financial statements must be acceptable to the Lender in form and substance, and shall contain such detail as the Lender may require. The financial statements shall include a consolidated and consolidating balance sheet as of the end of such fiscal year, a profit and loss statement, a cash flow statement (said statements to include a statement of financial condition of the Borrower and changes in shareholders’ equity). If the Borrower comprises a parent corporation and its subsidiaries, the financial statements shall state the financial condition of the parent corporation and those subsidiaries on a consolidated basis.
2. Annual Opinion of Accountant. As soon as available but in no event more than ninety (90) days after the close of each of the Borrower’s fiscal years, an opinion of the independent certified public accountant who prepared the Borrower’s annual financial statements. The opinion shall be acceptable to the Lender in form and substance and shall contain no qualification that is unacceptable to the Lender. The opinion shall state also whether the accountant’s examination of the Borrower’s financial condition has revealed the occurrence of an Event of Default or an event that would constitute an Event of Default with the giving of notice or the lapse of time or both, and, if such an Event of Default or event has occurred, shall describe such Event of Default or event in detail satisfactory to the Lender.
3. Management Letters. Promptly upon receipt thereof, copies of any reports submitted to the Borrower by independent certified public accountants in connection with examination of the financial statements of the Borrower made by such accountants;
4. Quarterly Statements and Certificates. As soon as available but in no event more than forty-five (45) days after the close of each of the Borrower’s fiscal quarters, the Borrower will provide management prepared balance sheets and profit and loss statements, with supporting schedules, setting forth the financial condition of the Borrower as of the end of the most recent fiscal quarter and for the year to date;
5. Annual Projections. Not less than thirty (30) days prior to the commencement of each of the Borrower’s fiscal years, the Borrower shall also furnish to the Lender projections (budgets) for each of the upcoming four fiscal quarters, which projections shall include a balance sheet, profit and loss statement and statement of cash flows.
6. Monthly Reports. The Borrower shall deliver to the Lender:
1. as soon as available, but not later than twenty (20) days after the end of each month, a fully completed Borrowing Base Certificate stating the Borrowing Base as of the last day of the immediately preceding month; and at the Lender’s request, the Borrower shall furnish to the Lender such schedules, certificates, lists, records, reports, information and documents to enable the Lender to verify the Borrowing Base; and
2. as soon as available, but not later than twenty (20) days after the end of each month, and at such other times as Lender may reasonably require, an accounts receivable aging schedule in intervals of not more than thirty (30) days.
7. Government Contract Audits. Provide written notice to the Lender that Borrower has received the results of any and all audits by the Defense Contract Audit Agency, or any other government agency, conducted before the award of a contract, before the final payment on a contract, or at any other time, said notice to be delivered to Lender within thirty (30) days of the Borrower’s
receipt of such audit results. Upon request by the Lender, the Borrower shall deliver all written results of such audits to the Lender with ten (10) days of a request by the Lender.
8. Additional Reports and Information. With reasonable promptness, such additional information, reports or statements as the Lender may from time to time request and all material filings with public governmental or other agencies or companies.
9. Compliance Certificate. Within forty five (45) days after the end of each of the Borrower’s fiscal quarters, and at such other times as the Lender may reasonably request, Borrower shall deliver a Compliance Certificate signed by an authorized financial officer of the Borrower (1) setting forth the information and computations (in sufficient detail) to establish that the Borrower is in compliance with all financial covenants at the end of the period covered by the financial statements then being furnished and (2) stating whether any Event of Default has occurred as of the date of the financial statements or the date of the Compliance Certificate, or any event which, upon notice or lapse of time or both, would constitute an Event of Default, and if such an Event of Default exists, specifying the nature thereof and the action that the Borrower is taking and proposes to take with respect thereto. At the Lender’s request, the Borrower shall furnish to the Lender such schedules, certificates, lists, records, reports, information and documents to enable the Lender to verify the Compliance Certificate.
6.12 Accounts. Within twenty (20) days from the end of each month, and at such other times as Lender may reasonably require, the Borrower shall deliver to the Lender schedules of all outstanding Accounts. Such schedules shall be in form and detail satisfactory to the Lender, shall show the age of such Accounts in intervals not greater than thirty (30) days, and shall contain such other information and be accompanied by such supporting documents as the Lender may from time to time prescribe. The Borrower also shall deliver to the Lender copies of the Borrower’s invoices, evidences of shipment or delivery and such other schedules and information as the Lender may reasonably require. The items to be provided under this Section are to be prepared and delivered to the Lender from time to time solely for its convenience in maintaining records of the Collateral, and the Borrower’s failure to give any of such items to the Lender shall not affect, terminate, modify or otherwise limit the Lender’s security interest granted in the Accounts. Without limiting the generality of the foregoing, the Borrower shall promptly notify the Lender when the Borrower obtains any new Government Contract or Government Account for which Payments are to be specifically assigned to the Lender pursuant to this Agreement, and the Borrower shall furnish to the Lender, upon request, a copy of each Government Contract of the Borrower and a copy of each amendment thereto or modification thereof which changes the price of such contract or the amount funded to pay for such contract, except to the extent that furnishing such copies may be prohibited by government security regulations. The Borrower shall use its best efforts and shall take any and all steps necessary to collect its Accounts, including without limitation, the filing and pursuit of legal action in furtherance of said collection efforts.
6.13 Collateral. Maintain all tangible Collateral in good condition; insure insurable Collateral for its full replacement cost under an insurance policy acceptable to the Lender that names Lender as loss payee; execute, deliver and file, or cause the execution, delivery and filing of, any and all documents (including without limitation, financing statements, continuation statements or other writings or records), necessary or desirable for the Lender to create, perfect, preserve, validate or otherwise protect a first priority lien and security interest in the Collateral; maintain, or cause to be maintained, at all times, the Lender’s first priority lien and security interest in the Collateral; within three (3) Business Days of learning thereof, report to the Lender any reclamation, return or repossession of any goods forming a part of the Collateral, any claim or dispute asserted by any account debtor or other obligor owing an obligation to the Borrower, and any other matters affecting the value or enforceability or collectibility of any of the Collateral; defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Lender, and pay all costs and expenses (including attorneys’ fees and expenses) incurred in connection with such defense; at the Borrower’s sole cost and expense (including attorneys’ fees and expenses), settle any and all claims, demands and disputes, and indemnify and protect the Lender
against any liability, loss or expenses arising from any such claims, demands or disputes or out of any such reclamation, return or repossession of goods forming a part of the Collateral; however, if the Lender shall so elect, the Lender shall have the right at all times to settle, compromise, adjust or litigate all claims and disputes directly with the Customer or other obligor owing an obligation to the Borrower upon such terms and conditions as the Lender deems advisable, and all costs and expenses thereof (including attorneys’ fees and expenses) shall be incurred for the account of the Borrower and shall constitute a part of the obligations owed to the Lender and secured pursuant to this Agreement. The Borrower’s Equipment, goods and other tangible personal property set forth in Schedule 6.13 attached hereto and made a part hereof shall be kept and maintained at the locations set forth in said Schedule 6.13; the Borrower shall not relocate or move the Equipment, goods or other tangible personal property without the Lender’s prior written consent, which shall not be unreasonably withheld. If Lender consents to the relocation of certain Equipment, goods or other tangible personal property, the Borrower shall execute, and hereby irrevocably authorizes the execution by the Lender of, all documents, records or financing statements, and the Borrower shall take such action as the Lender may request to assure that the Lender’s first priority security interest in the Equipment, goods and tangible personal property continues to be perfected under the Uniform Commercial Code or other applicable laws.
6.14 Financial Covenants. Maintain:
1. Tangible Net Worth. A minimum Tangible Net Worth, at all times from the closing of the Loan, equal to or exceeding Nineteen Million Eight Hundred Seventy Five Thousand and 00/100 Dollars ($19,875,000.00) plus Seventy Five Percent (75%) of the Borrower’s positive net income for the immediately preceding fiscal year.
2. Funded Debt to EBITDA. A maximum ratio of Funded Debt to EBITDA as follows:
1. 3.0 to 1.0 for the fiscal quarters ending on or before September 30, 2003; and
2. 2.50 to 1.0 for all fiscal quarters thereafter.
3. Fixed Charge Coverage Ratio. A minimum Fixed Charge Coverage Ratio of 1.75 to 1.0, tested on a quarterly basis.
4. Positive EBITDA. A minimum EBITDA for Borrower of $0.00 for the immediately preceding two fiscal quarters of Borrower, to be measured at the end of each fiscal quarter on a rolling two quarter basis.
Compliance with financial covenants b and c above will be measured at the end of each fiscal quarter on a rolling four quarter basis. Unless otherwise expressly provided in this Agreement, if the Borrower comprises a parent corporation and its subsidiaries, the covenants herein relating to the financial condition of the Borrower refer to the financial condition of the parent corporation and those subsidiaries stated on a consolidated basis.
6.15 Notice of Litigation, Default and Loss. Give notice to the Lender upon the occurrence of any Event of Default or event which with notice or lapse of time or otherwise would constitute an Event of Default, and of any loss or damage to any of the Collateral, said notice to be given within One (1) Business Day of the date of such occurrence, event, loss or damage. Borrower also shall give notice to the Lender of any action, suit or proceeding at law or in equity or by or before any governmental instrumentality or agency (domestic or foreign), commission, board, bureau, arbitrator or arbitration panel which, if adversely determined, could materially impair or affect the right of Borrower to carry on its business substantially as now conducted or could materially affect its respective business, operations, prospects, properties, assets (including the Collateral) or condition, financial or otherwise, said notice to be given within Two (2) Business Days of the date Borrower receives information regarding or becomes aware of such action, suit or proceeding. Within One (1) Business Day of Borrower becoming aware that the holder of any Debt or Encumbrance has given notice or taken any action with respect to a claimed breach, default or event of default, a written notice shall be given by the Borrower to the Lender specifying the notice given or action
taken by such holder and the nature of the claimed breach, default or event of default by the Borrower thereunder, and the action being taken or proposed to be taken with respect thereto.
6.16 Proxy Statements, Etc. Promptly after the sending or filing thereof, send copies of all proxy statements, financial statements and reports which the Borrower sends to its stockholders, and copies of all regular, periodic and special reports, and all registration statements which the Borrower files with the Securities and Exchange Commission or any governmental authority which may be substituted therefor, or with any national securities exchange.
6.17 ERISA. Give prompt notice to the Lender of any of the following: (i) of any event or condition, including, but not limited to, any Reportable Event, that constitutes, or might reasonably lead to, a Termination Event; (ii) with respect to any Multiemployer Plan, the receipt of notice as prescribed in ERISA or otherwise of any withdrawal liability assessed against the Borrower, any of its subsidiaries or any of its ERISA Affiliates, or of a determination that any Multiemployer Plan is in reorganization or insolvent (both within the meaning of Title IV of ERISA); (iii) the failure to make full payment on or before the due date (including extensions) thereof of all amounts which the Borrower or any of its subsidiaries or ERISA Affiliate is required to contribute to each Plan pursuant to its terms and as required to meet the minimum funding standard set forth in ERISA and the Code with respect thereto; or (iv) any change in the funding status of any Plan that could have a material adverse effect on the Borrower’s financial condition; together, with a description of any such event or condition or a copy of any such notice and a statement by the principal financial officer of the Borrower briefly setting forth the details regarding such event, condition, or notice, and the action, if any, which has been or is being taken or is proposed to be taken by the Borrower with respect thereto. Promptly upon request, the Borrower shall furnish to the Lender such additional information concerning any Plan as may be reasonably requested, including, but not limited to, copies of each annual report/return (Form 5500 series), as well as all schedules and attachments thereto required to file with the Department of Labor or the Internal Revenue Service pursuant to ERISA and the Code, respectively, for each “plan year” (within the meaning of Section 3(39) of ERISA). Such notice shall be given in any event within five (5) Business Days after the occurrence of any event that Borrower is required to report to the Lender under this clause.
6.18 Place of Business; Location of Records. Each of the Persons comprised by the term Borrower shall maintain its chief executive office, and the office where its records are kept, at it’s the respective addresses stated in Schedules 5.1-1 through 5.1-2. The Borrower shall provide the Lender with fourteen (14) days’ advance written notice of any change in the location of its chief executive office or the office at which its records are kept.
6.19 Payments to the Borrower. If the Borrower has assigned Payments under any Government Contract to the Lender, remit to the Lender promptly any Payments erroneously sent directly to the Borrower by the Government, and until so remitted, hold those Payments in trust for the Lender.
6.20 Depository Accounts. Maintain primary operating and depository accounts with the Lender, including, without limitation, the Operating Account.
ARTICLE 7. BORROWER’S NEGATIVE COVENANTS.
Until all obligations of the Borrower under this Agreement and the other Loan Documents are paid in full and performed, the Borrower covenants and agrees that it shall not, unless the Lender otherwise consents in advance in writing:
7.1 Debt. Create, incur, assume or suffer to exist any Debt, except (a) trade debt incurred in the ordinary course of Borrower’s business; (b) Debt between the entities comprising the term Borrower; (c) Debt not otherwise permitted by this Section 7.1 in an amount not to exceed, in the aggregate, the sum of Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00), at any one time.
7.2 Encumbrances. Create, incur, assume or suffer to exist any Encumbrance upon any of its properties or assets (including without limitation, the Collateral), whether now owned or hereafter acquired, except (a) Encumbrances in favor of the Lender; (b) Encumbrances for taxes, assessments or
other governmental charges which are not past due or the validity of which are being contested by Borrower in good faith by appropriate proceedings and with respect to which the Borrower has set aside on its books adequate reserves therefor and for which the Borrower has made arrangements acceptable to Lender to secure payment thereof, as determined in Lender’s sole and absolute discretion; (c) Encumbrances disclosed in Schedule 7.2 attached hereto and incorporated herein by reference; (d) deposits or pledges required in the ordinary course of Borrower’s business to secure obligations under worker’s compensation or social security laws, or with respect to unemployment insurance; (e) mechanic’s, workers’ or materialmen’s Encumbrances arising in the Borrower’s ordinary course of business with respect to obligations that are not overdue more than thirty (30) days from their respective due dates or that are being contested in good faith and for which Borrower has set aside on its books adequate reserves therefor and for which the Borrower has made arrangements acceptable to Lender to secure payment thereof, as determined in Lender’s sole and absolute discretion; and (f) Encumbrances placed upon fixed assets hereafter acquired to secure a portion of the purchase price thereof; provided that (1) Borrower’s purchase of such fixed assets shall be in Borrower’s ordinary course of business, (2) such Encumbrances shall not extend to or encumber any property of the Borrower other than the property being so purchased and (3) the aggregate amount of the Debt secured by such Encumbrances incurred as a result of such purchases shall not at any time exceed the amount provided for in Section 7.1(c) of this Agreement. Notwithstanding anything in this Section 7.2 to the contrary, the total amount of Encumbrances under Section 7.2(c) plus the total amount of Encumbrances under Section 7.2 (f) shall not, at any time, exceed Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00).
7.3 Fundamental Changes. Amend its Articles or Certificate of Incorporation by any amendment which would adversely affect the Borrower’s ability to perform or comply with any of the terms, conditions or agreements to be performed or complied with by the Borrower hereunder or to perform any of the transactions contemplated hereby; change its state of incorporation; change its fiscal year or corporate name; change its Chief Executive Officer or Chief Financial Officer; convert its organizational form into another entity form or establish any new entity to perform the business or similar business of the Borrower; reorganize, consolidate or merge with any other entity, whether in a single transaction or a series of transactions.
7.4 Acquisitions. Purchase, lease or otherwise acquire the assets, business, goodwill or securities of any other Person, including, without limitation, shares of stock in corporations, partnership interests in general or limited partnerships or membership interests in limited liability companies, or acquire any other business, other than (a) transfers between any of the Persons comprised by the term Borrower, and (b) transfers disclosed on Schedule 7.4 attached hereto and made a part hereof, which transfers were agreed to prior to the date of this Agreement.
7.5 Transfer of Assets. Sell, lease, assign, pledge or otherwise dispose of any of its properties, stock or assets (including without limitation, the Collateral), whether now owned or hereafter acquired, except in the ordinary course of business and for fair market value.
7.6 Investments. Purchase or hold any stock, or evidence of indebtedness of any other Person or entity except investments in direct obligations of the United States Government and certificates of deposit of United States commercial banks insured by the Federal Deposit Insurance Corporation, other than the Borrower’s investments in the following:
1. Government securities due within one year after the date of the making of the investment;
2. Readily marketable direct obligations of any State of the United States of America given on the date of such investment a credit rating of at least Aa by Xxxxx’x Investors Service, Inc. or AA by Standard & Poor’s Corporation, in each case due within one year from the making of the investment;
3. Certificates of deposit issued by, bank deposits in, eurodollar deposits through, and bankers’ acceptances of any bank having on the date of such investment a commercial paper credit rating of at least P1 by Xxxxx’x Investors Service, Inc. and A1 by Standard & Poor’s Corporation, in each case due within one year after the date of the making of the investment; and
4. Readily marketable commercial paper of corporations doing business in and incorporated under the Laws of the United States of America or any State thereof having on the date of such investment a commercial paper credit rating of at least P1 by Xxxxx’x Investors Service, Inc. and A1 by Standard & Poor’s Corporation, in each case due within Two Hundred Seventy (270) days after the date of the making of the investment.
7.7 Loans. Make loans or advances to any Person or Persons that exceed in the aggregate the sum of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) outstanding at any time, except (1) reasonable advances for business expenses of the Borrower’s employees that would be reimbursable under the Borrower’s existing expense reimbursement policy; and (2) loans and advances between any of the Persons comprised by the term Borrower.
7.8 Guaranty. Guaranty or provide surety or pledge or hypothecate assets for the obligation of any other Person or Persons.
7.9 Repurchase of Securities. Purchase, redeem or otherwise acquire any of its own capital stock or purchase, acquire, redeem, retire or make any payment on account of the principal of any indebtedness of the Borrower, except at the stated maturity of such indebtedness, and except payments of indebtedness incurred under this Agreement.
7.10 Use of Proceeds. Use, or allow the use of, the proceeds of the Revolving Loan for any purpose which would cause this Agreement to violate any Regulations of the Board of Governors of the Federal Reserve System; or for any purpose other than the purposes or purposes specified hereinabove.
7.11 Other Agreements. Enter into any agreement or undertaking containing any provision which would be violated or breached by the Borrower’s performance of its obligations under the Loan Documents.
7.12 Sale and Leaseback. Enter into any arrangement whereby the Borrower sells or transfers all or any substantial part of its fixed assets then owned by it and thereupon, or within one (1) year thereafter, rents or leases the assets so sold or transferred from the purchaser or transferor (or their respective successors in interest).
7.13 Capital Expenditures. Make capital expenditures in excess of One Million Three Hundred Thousand and 00/100 Dollars ($1,300,000.00) in any fiscal year.
7.14 Dividends. Declare or pay dividends on account of any class of stock in the Borrower, or make any distribution of assets to the Borrower’s stockholders, whether in cash, assets or obligations of the Borrower.
7.15 Transactions with Affiliates. Except as specifically permitted by the terms of this Agreement, enter into any transaction, including without limitation, the purchase, sale or exchange of property or the rendering of any service, with any Affiliate, except in the ordinary course of and pursuant to the reasonable requirements of the Borrower’s business and upon fair and reasonable terms no less favorable to the Borrower than would be applicable in a comparable arm’s-length transaction with a Person not an Affiliate.
ARTICLE 8. COLLECTION, DEPOSIT AND ASSIGNMENT OF PAYMENTS.
8.1 Cash Collateral Account. Upon request of Lender, Borrower shall cause all Payments to be deposited into the Cash Collateral Account. In furtherance of this covenant, Borrower shall instruct all Customers to make all Payments either by electronic funds transfer directly to the Cash Collateral Account or by check to a post office box or other collection facility under the Lender’s control for deposit into the Cash Collateral Account. If any Payments are made directly to the Borrower or otherwise come into the Borrower’s possession, the Borrower shall not commingle any such Payment with the Borrower’s other funds or property, but shall hold the Payment separate and apart in trust for the Lender and shall promptly deliver the Payment to the Lender (appropriately endorsed, if the Payment is in the form of a check) for deposit into the Cash Collateral Account. Interest (if any) earned on sums on deposit in the Cash
Collateral Account shall be added to the Cash Collateral Account. The Borrower hereby appoints the Lender and any officer, employee or agent of the Lender as the Lender may from time to time designate as attorneys-in-fact for the Borrower to endorse and sign the name of the Borrower on all checks, drafts, money orders or other Items delivered to the Lender for deposit into the Cash Collateral Account. The Cash Collateral Account shall constitute part of the Collateral, and funds on deposit in the Cash Collateral Account shall be applied towards the amounts due and owing under the Revolving Note, this Agreement and/or the other Loan Documents as determined by the Lender in its sole and absolute discretion, and provided no Event of Default has occurred and remains uncured, the remaining funds shall be deposited into the Borrower’s Operating Account. If an Event of Default has occurred and remains uncured, Payments received by Lender shall be applied as the Lender may determine in its sole discretion. Borrower retains sole responsibility for assuring that Borrower’s Operating Account contains sufficient funds to pay any Items that may be presented for payment from the Operating Account.
However, if an Event of Default has occurred and remains uncured, Payments received by the Lender shall be applied as the Lender may determine in its sole discretion. The Borrower retains sole responsibility for assuring that the Borrower’s Operating Account contains sufficient funds to pay any Items that may be presented for payment from the Operating Account.
8.2 Overdrafts. At the Lender’s sole option in each instance, the Lender may do one of the following:
1. The Lender may make Advances under the Revolving Note to prevent or to cover an overdraft on account of the Borrower with the Lender. Each such Advance will accrue interest from the date of the Advance or the date on which the account is overdrawn, whichever occurs first, at the interest rate described in the Revolving Note. The Lender may make such Advances even if the Advances may cause the balance owing under the Revolving Note to exceed the Maximum Revolving Commitment Amount.
2. The Lender may reduce the amount of credit otherwise available under the Revolving Note by the amount of any overdraft on any account of the Borrower with the Lender.
This section shall not be deemed to authorize Borrower to create overdrafts on any of Borrower’s accounts with Lender.
ARTICLE 9. EVENTS OF DEFAULT AND REMEDIES.
9.1 Events of Default. The occurrence of any one or more of the following events shall constitute an Event of Default under this Agreement:
1. The Borrower shall fail to pay, when due, any sum payable under the Revolving Note; or
2. any representation or warranty made by or on behalf of the Borrower herein or in any of the other Loan Documents which, in the Lender’s judgment, shall prove to have been materially inaccurate or breached in any respect on or as of any date as of which made; or
3. a decree or order for relief of the Borrower shall be entered by a court of competent jurisdiction in any involuntary case involving the Borrower under any bankruptcy, insolvency or similar law now or hereafter in effect, or a receiver, liquidator or other similar agent for the Borrower or for any substantial part of the Borrower’s assets or property shall be appointed, or the winding up or liquidation of the Borrower’s affairs shall be ordered, or any action by any creditor (other than the Lender) of the Borrower preparatory to or for the purpose of commencing any such involuntary case, appointment, winding up or liquidation shall be taken, and such proceeding shall not have been dismissed within thirty (30) days after the date it commenced; or
4. The Borrower shall commence a voluntary case under any bankruptcy, insolvency or similar law now or hereafter in effect, or the Borrower shall consent to the entry of an order for relief in an involuntary case under any such law or to the appointment of or taking possession by a receiver, liquidator or other similar agent for the Borrower or for any substantial part of the Borrower’s assets
or property, or the Borrower shall make any general assignment for the benefit of creditors, or the Borrower shall take any action preparatory to or otherwise in furtherance of any of the foregoing, or the Borrower shall fail generally to pay its debts as such debts come due; or
5. Any indebtedness or obligation of the Borrower to any third party in excess of One Hundred Thousand and 00/100 Dollars ($100,000.00) shall have been declared due prior to its scheduled date of maturity as a result of the occurrence of a default or event of default thereunder; or
6. one or more judgments or decrees in an amount of more than One Hundred Thousand and 00/100 Dollars ($100,000.00) shall be entered against the Borrower (not paid or fully covered by insurance) and all such judgments or decrees have not been vacated, discharged, stayed or bonded pending appeal within fifteen (15) days from the entry thereof, or any attachment or garnishment shall be issued against the Borrower or the Borrower’s property, and any such attachment shall not have been vacated, discharged, stayed or bonded pending trial in a manner satisfactory to Lender; or
7. any material change in the business, operations, property, assets or condition (financial or otherwise) of the Borrower shall occur which adversely affects the ability of the Borrower to meet and carry out its obligations under this Agreement or any of the other Loan Documents or to perform the transactions contemplated herein or thereby, the materiality of such change to be determined by the Lender in its sole discretion; or
8. any investigative proceeding, audit or other action shall be initiated by or on behalf of any Customer, which is based upon a claim or contest with respect to any Government Contract or Government Account that, if adversely determined to the Borrower, would have a material adverse effect on the Borrower’s financial condition, as determined by the Lender in its sole discretion; or
9. the issuance to the Borrower of any cure notice, show-cause notice, or notice of whole or partial termination, for default or alleged default, under any contract which is either a Government Contract or is a subcontract (at any tier) which is related to a contract between a third party and the Government; provided that the events described in this subparagraph shall not constitute an Event of Default if the default or alleged default is curable and the Borrower cures the grounds for such issuance within thirty (30) days of issuance of such notice, or if such grounds are not curable within such thirty (30) day period the Borrower provides evidence satisfactory to the Lender that the Borrower has commenced to cure within such period, and the Borrower diligently proceeds with such cure and provides evidence that such cure shall be completed within a time period acceptable to Lender, as determined by Lender in its sole and absolute discretion; or
10. with respect to the Borrower, the occurrence of any debarment or suspension from contracting or subcontracting with the Government; or
11. any material default by the Borrower occurs under the terms of any Government Contract or any breach in the Borrower’s performance obligations occurs under any Government Contract; or
12. any Government Contract is terminated for default; or
13. any loss, theft, damage or destruction of any material portion of the Collateral for which there is either no insurance coverage or for which, in the opinion of the Lender, there is insufficient insurance coverage; or
14. the majority voting control in the Borrower is directly or indirectly sold, assigned, transferred, encumbered or otherwise conveyed without the prior written consent of the Lender; said majority voting control meaning, in the aggregate, a twenty percent (20%) or greater interest in the Borrower is sold, assigned, transferred, encumbered or otherwise conveyed to a single Person, or any relative or Affiliate of such Person, or any combination thereof; or
15. any of the following events or conditions shall occur: (1) any “accumulated funding deficiency,” as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, shall exist with respect to any Plan, or any lien shall arise on the assets of the Borrower or
any of its subsidiaries or any ERISA Affiliate in favor of the PBGC or a Plan; (2) a Termination Event shall occur with respect to a Single Employer Plan, which, in the Lender’s opinion, is likely to result in the termination of such Plan for purposes of Title IV of ERISA; (3) a Termination Event shall occur with respect to a Multiemployer Plan or Multiple Employer Plan, which in the Lender’s opinion, is likely to result in (i) the termination of such Plan for purposes of Title IV of ERISA, or (ii) the Borrower or any of its subsidiaries or any ERISA Affiliate incurring any liability in connection with a withdrawal from, reorganization of (within the meaning of Section 4241 of ERISA), or insolvency or (within the meaning of Section 4245 of ERISA) such Plan; or (4) any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall occur which may subject the Borrower or any of its subsidiaries or any ERISA Affiliate to any liability under Section 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which the Borrower or any of its subsidiaries or any ERISA Affiliate has agreed or is required to indemnify any Person against any such liability; or
16. The Borrower or any other Person standing as a guarantor for the Loan or providing security for the Loan shall fail to observe or perform any other term, covenant or agreement contained in this Agreement or in any other Loan Document or in any other agreement (including, without limitation, any Swap Agreement) with the Lender or any of the Lender’s Affiliates to be observed or performed on its part and such default shall continue unremedied for a period of ten (10) Business Days after written notice of the existence of such default is given by the Lender. The cure period described in this paragraph is inapplicable to the Events of Default listed in the paragraphs above.
If one of the foregoing events or circumstances occurs to which a cure period applies, the Lender will not exercise its rights and remedies under this Agreement to collect the Loans except as the Lender reasonably deems necessary to protect its interests in the Collateral, but Lender shall not be required to make any new Advances or other financial accommodations unless and until the default is timely cured under this Agreement. Notwithstanding anything in this Agreement to the contrary, any right to cure a default is applicable only to defaults for which a cure period has been provided. The Borrower shall have no right to cure any default for which no cure period has been provided..
9.2 Rights and Remedies of the Lender. Upon the occurrence of any Event of Default, the Lender may, at its option, exercise any one or more of the following rights and remedies:
1. Declare this Agreement and the Lender’s obligation to make or extend any Advances on the Revolving Loan to be terminated, and declare the entire unpaid principal amounts of the Revolving Loan, all interest accrued and unpaid thereon, and all other amounts payable under this Agreement and the other Loan Documents to be accelerated, and to be immediately due and payable (except that upon the occurrence of an Event of Default arising out of voluntary or involuntary bankruptcy proceedings in which the Borrower is the debtor, such acceleration shall occur automatically and immediately without any declaration or other action on the part of the Lender) whereupon the Revolving Loan, all such accrued interest, and all such amounts shall become and be immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any of the other Loan Documents to the contrary notwithstanding;
2. Take possession or control of, store, lease, operate, manage, sell or otherwise dispose of all or any part of the Collateral in accordance with the remedies provided to secured parties under the Uniform Commercial Code, this Agreement, the Loan Documents or other applicable law. In taking possession of the Collateral, the Lender may enter the Borrower’s premises and otherwise proceed without legal process, and the Borrower shall on the Lender’s demand, promptly assemble and make the Collateral available to the Lender at a place designated by the Lender. The Lender shall be entitled to immediate possession of all books and records evidencing or pertaining to any of the Collateral. In the event of any sale or other disposition of the Collateral, the Lender may disclaim any
warranty relating to title, possession, quiet enjoyment or any other warranty of the like, including without limitation, any warranty of merchantability or fitness for a particular purpose.;
3. Notify any or all Customers to make any Payments due to the Borrower from such Customers directly to the Lender, and render performance to or for the benefit of the Lender of any obligations of such Customer(s) to the Borrower. To facilitate direct collection, the Borrower hereby appoints the Lender, acting through any officer or employee of the Lender, as the Lender may from time to time designate, as attorney-in-fact for the Borrower to (i) receive, open and dispose of all mail addressed to the Borrower and take therefrom any Payments on or proceeds of Accounts; (ii) take over the Borrower’s post office boxes or make such other arrangements, in which Borrower shall cooperate, to receive the Borrower’s mail, including notifying the post office authorities to change the address for delivery of mail addressed to the Borrower to such address as the Lender shall designate; provided that Lender shall promptly remit to the Borrower any mail so received which does not relate to the Collateral; (iii) endorse the name of the Borrower in favor of the Lender upon any and all checks, drafts, money orders, notes, acceptances or other evidences of payment or Collateral that may come into the Lender’s possession; (iv) sign and endorse the name of the Borrower on any invoice or xxxx of lading relating to any of the Accounts, on verifications of Accounts sent to any Customer, to drafts against any Customer, to assignments of Accounts, and to notices to any Customer; and (v) do all acts and things necessary to carry out this Agreement and the transactions contemplated hereby, including signing the name of the Borrower on any instruments required by law in connection with the transactions contemplated hereby and on financing statements as permitted under the Uniform Commercial Code of any appropriate state. The Borrower hereby ratifies and approves all acts of such attorneys-in-fact, and neither the Lender nor any other such attorney-in-fact shall be liable for any acts of commission or omission, or for any error of judgment or mistake of fact or law of any such attorney-in-fact, except for acts of gross negligence or wilful misconduct of the Lender. This power, being coupled with an interest and given to secure an obligation, is irrevocable so long as the Revolving Loan remains unsatisfied, or any Loan Document remains effective, as solely determined by the Lender. The Lender shall have no obligation or duty to pursue any Person other than the Borrower for the amounts owing under or in connection with the Revolving Loan, this Agreement or the other Loan Documents, including without limitation any guarantors or Persons pledging property to secure the Loans. To the extent such rights may now or hereafter exist, the Borrower waives the right to require Lender to pursue any Persons other than the Borrower to pay the amounts owing under the Revolving Note, Loan Agreement or other Loan Documents;
4. In the Lender’s own name, or in the name of the Borrower, demand, collect, receive, xxx for and give receipts and releases for, any and all amounts due on Accounts, but the Lender shall not, under any circumstances, be liable for any error or omission or delay of any kind occurring in the settlement, collection or payment of any Accounts or any instrument received in payment thereof or for any damage resulting therefrom;
5. Endorse as the agent of the Borrower any Chattel Paper, Documents or Instruments forming all or any part of the Collateral;
6. Make formal application for the transfer of all of the Borrower’s permits, licenses, approvals, agreements and the like relating to the Collateral or to the Borrower’s business to the Lender or to any assignee of the Lender or to any purchaser of any of the Collateral;
7. Obtain appointment of a receiver for all or any of the Collateral, the Borrower hereby consenting to the appointment of such a receiver and agreeing not to oppose any such appointment. Any receiver so appointed shall have such powers as may be conferred by the appointing authority including any or all of the powers, rights and remedies which the Lender is authorized to exercise by the Loan Documents, and shall have the right to incur such obligations and to issue such certificates therefor as the appointing authority shall authorize;
8. Take any other action consistent with applicable law which the Lender deems necessary or desirable to protect and realize upon its security interest in the Collateral;
9. File any legal action or lawsuit and obtain a judgement for any and all amounts owing under the Revolving Note, this Agreement or the other Loan Documents, and in conjunction with any such action, the Lender may pursue any ancillary remedies provided by law, including without limitation, attachment, garnishment, execution and levy;
10. The Borrower acknowledges that any failure to comply with its obligation regarding the Collateral, including (without limiting the generality of the foregoing) granting of Assignments and collection of the Accounts, shall cause irreparable harm to the Lender for which the Lender has no adequate remedy at law, and agrees that the Lender shall be entitled to specific performance, an injunction or other equitable relief to enforce the Borrower’s obligations under this Agreement; and
11. In addition to the foregoing, and not in substitution therefor, exercise any one or more of the rights and remedies exercisable by the Lender under other provisions of this Agreement, under any of the other Loan Documents, or provided by applicable law (including, without limiting the generality of the foregoing, the Uniform Commercial Code), including without limitation, generally enforcing any or all of the Borrower’s rights and remedies against any Customers; provided that the Lender shall be under no obligation to do so.
9.3 Application of Proceeds. Any proceeds from the collection or sale or other disposition of the Collateral shall be applied in the following order of priority:
First, to the payment of all expenses of retaking, holding, preparing for disposition, processing, collecting, storing, leasing, operating, managing, selling or disposing of the Collateral, and to the payment of all sums which the Lender may be required or may elect to pay, if any, for taxes, assessments, insurance and other charges upon such Collateral or any part thereof, and of all other payments which the Lender may be required or authorized to make under any provision of this Agreement or of any other Loan Document (including in each such case legal costs and attorneys’ fees and expenses);
Second, to the payment of all obligations on the Revolving Loan under this Agreement, and under the other Loan Documents, and to the payment of any other obligations due to the Lender, in such order as the Lender may determine in its sole discretion; and
Third, to the payment of any surplus then remaining to the Borrower, unless otherwise provided by law or directed by a court of competent jurisdiction; provided that the Borrower shall be liable for any deficiency if the proceeds of the Collateral are insufficient to satisfy all obligations due to the Lender.
9.4 Collection/Enforcement Costs. The Borrower shall pay all costs and expenses incurred by the Lender in connection with the enforcement or defense of its rights under this Agreement and the other Loan Documents, including without limitation, legal costs and attorneys’ fees (whether or not suit is instituted), paralegal and expert witness fees and costs, and arbitration fees and costs, and in connection with the collection of any sums from the Borrower.
ARTICLE 10. MISCELLANEOUS PROVISIONS.
10.1 Additional Actions and Documents. The Borrower shall take or cause to be taken such further actions, shall execute, deliver and file or cause to be executed, delivered and filed such further documents and instruments, and shall obtain such consents as may be necessary or as the Lender may reasonably request in order fully to effectuate the purposes, terms and conditions of this Agreement and the other Loan Documents, whether before, at or after the closing of transactions contemplated hereby and thereby or the occurrence of an Event of Default hereunder, including without limitation, executing such documents and taking such further actions as requested by the Lender to evidence or perfect the security interest(s) granted in accordance with this Agreement, to maintain a first priority security interest in the Collateral for the benefit of the Lender, or to effectuate the rights of the Lender hereunder.
10.2 Expenses. The Borrower shall, whether or not the transactions contemplated hereby are consummated, (i) reimburse the Lender and save the Lender harmless against liability for the payment of all out-of-pocket expenses arising in connection with: (a) the preparation, execution, delivery or filing of this Agreement or any of the Loan Documents; or (b) the administration, defense or enforcement of this Agreement or any of the Loan Documents; or (c) the preservation or exercise of any rights (including the right to collect and dispose of the Collateral) under this Agreement or any of the other Loan Documents; and (ii) pay and hold the Lender and each subsequent holder of the Note harmless from and against, any and all present and future stamp taxes or similar document taxes or recording taxes and any and all charges with respect to or resulting from any delay in paying, or failure to pay, such taxes. Without limiting the generality of the foregoing, the expenses covered by this paragraph include the Lender’s legal fees, the costs of audits or examinations conducted by the Lender’s employees and any arbitration fees or court costs.
10.3 Notices. Except as may otherwise be provide herein, all notices, demands, requests or other communications provided for herein or in the other Loan Documents shall be in writing and shall be deemed to be effective one (1) day after dispatch if sent by Federal Express or any other commercially recognized overnight delivery service or two (2) days after dispatch if sent by registered or certified mail, return receipt requested and addressed as follows:
If to the Borrower:
EFJ, Inc.
0000 00xx Xxxxxx, XX, Xxxxx Xxxxx
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxxxxx Xxxxxx, Senior Vice President and Chief Financial Officer
With copies to:
Xxxxxx Xxxxxx, Esquire
General Counsel to EFJ, Inc.
0000 Xxxxx Xxxx 0xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
and
Xxxxxx Xxxxxxx, Esquire
Manatt, Xxxxxx & Xxxxxxxx, LLP
00000 X. Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
If to the Lender:
Bank of America, N.A.
0000 Xxxxxxx Xxxxxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Senior
Vice President
With copy to:
Xxxxxx X. Xxxxxx, Esquire
Bean, Xxxxxx & Xxxxxx, P.C.
0000 X. 00xx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
If the Borrower comprises more than one Person, notice to the Borrower at the address specified above in this section for EFJ, Inc. shall constitute notice to all such Persons, and each Person signing below as the Borrower hereby irrevocably appoints EFJ, Inc. as that Person’s agent to receive notices from the Lender under this Agreement or the other Loan Documents.
Each party may designate by notice in writing a new address to which any notice, demand, request or communication thereafter may be so given, served or sent. Each notice, demand, request or communication which is mailed, delivered or transmitted in the manner described above shall be deemed sufficiently given, served, sent or received for all purposes at such time as it is delivered: (i) to the United States Postal Service, in the case of a notice given by certified mail; (ii) to Federal Express or any other commercially recognized overnight delivery service, in accordance with the terms and procedures for such delivery
Any notices required under the Uniform Commercial Code with respect to the sale or other disposition of the Collateral shall be deemed reasonable if mailed by the Lender to the Persons entitled thereto at their last known address at least ten (10) days prior to disposition of the Collateral.
10.4 Severability. If fulfillment of any provision of the Loan Documents or performance of any transaction related thereto, at the time such fulfillment or performance shall be due, shall involve transcending the limit of validity prescribed by law, then the obligation to be fulfilled or performed shall be reduced to the limit of such validity; and if any clause or provision contained in any Loan Document operates or would operate prospectively to invalidate any Loan Document, in whole or in part, then such clause or provision only shall be held ineffective, as though not herein or therein contained, and the remainder of the Loan Documents shall remain operative and in full force and effect.
10.5 Survival. It is the express intention and agreement of the parties hereto that all covenants, agreements, statements, representations, warranties and indemnities made by the Borrower in the Loan Documents shall survive the execution and delivery of the Loan Documents and the making of all Advances and extensions of credit thereunder.
10.6 Waivers. No waiver by the Lender of, or consent by the Lender to, a variation from the requirements of any provision of the Loan Documents shall be effective unless made in a written instrument duly executed on behalf of the Lender by its duly authorized officer, and any such waiver shall be limited solely to those rights or conditions expressly waived.
10.7 Rights Cumulative. The rights and remedies of the Lender described in any of the Loan Documents are cumulative and not exclusive of any other rights or remedies which the Lender or the then holder of the Revolving Note otherwise would have at law or in equity or otherwise. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other notice or demand in similar or other circumstances.
10.8 Entire Agreement; Modification; Benefit. This Agreement, the Schedules hereto, and the other Loan Dozuments constitute the entire agreement of the parties hereto with respect to the matters contemplated herein, supersede all prior oral and written agreements with respect to the matters contemplated herein, and may not be modified, deleted or amended except by written instrument executed by the parties. All terms of this Agreement and of the other Loan Documents shall be binding upon, and shall inure to the benefit of and be enforceable by, the parties hereto and their respective successors and assigns; however, the Borrower may not assign or transfer any of its rights or obligations hereunder without the prior written consent of the Lender. In the event of any conflict between the terms of this Agreement and the terms of the other Loan Documents, the terms of this Agreement shall control.
10.9 Setoff. In addition to any rights or remedies of the Lender provided by law, upon the occurrence of any Event of Default hereunder, or any event or circumstance which, with the giving of notice or the passage of time or both, would constitute an Event of Default hereunder, the Lender is irrevocably authorized, at any time or times without prior notice to the Borrower, to set off, appropriate and apply any and all deposits, credits, indebtedness or claims at any time held or owing by the Lender to or for the credit or the account of the Borrower, in such amounts as the Lender may elect, against and on account of the obligations and liabilities of the Borrower to the Lender hereunder or under any of the other Loan Documents, whether or not the Lender has made any demand for payment, and although such obligations and liabilities may be contingent or unmatured.
10.10 Construction. This Agreement and the other Loan Documents, the rights and obligations of the parties hereto, and any claims or disputes relating thereto shall be governed by and construed in accordance with the laws of the State of Maryland (excluding the choice of law rules thereof) except to the extent that the UCC provides for either (a) the application of the laws of the state in which the Borrower maintains its chief executive office, (b) the application of the laws of the state in which the collateral is located, (c) the application of the laws of the state in which the Debtor is located or (d) otherwise mandates the application of the laws of another state or jurisdiction. Each party hereto hereby acknowledges that all parties hereto participated equally in the negotiation and drafting of this Agreement and that, accordingly, no court construing this Agreement shall construe it more stringently against one party than against the other.
10.11 Pronouns. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the Person may require.
10.12 Headings. Article, section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof.
10.13 Payments. If any payment or performance of any of the obligations under this Agreement or any of the other Loan Documents becomes due on a day other than a Business Day, the due date shall be extended to the next succeeding Business Day, and interest thereon (if applicable) shall be payable at the then applicable rate during such extension.
10.14 Execution. To facilitate execution, this Agreement and any of the other Loan Documents may be executed in as many counterparts as may be required; and it shall not be necessary that the signature of, or on behalf of, each party, or the signatures of all Persons required to bind any party, appear on each counterpart; but it shall be sufficient that the signature of, or on behalf of, each party, or the signatures of the Persons required to bind any party, appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. It shall not be necessary in making proof of this Agreement or any other Loan Document to produce or account for any particular number of counterparts; but rather any number of counterparts shall be sufficient so long as those counterparts contain the respective signatures of, or on behalf of, all of the parties hereto.
10.15 Consent to Jurisdiction. Subject to any provision of this Agreement requiring that disputes be submitted to arbitration, the Borrower irrevocably consents to the jurisdiction of any state or federal court sitting in the State of Maryland over any suit, action, or proceeding arising out of or relating to this Agreement or the other Loan Documents. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection that the Borrower may now or hereafter have to the laying of venue of any such suit, action, or proceeding brought in any such court, or any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action, or proceeding brought in any such court shall be conclusive and binding upon the Borrower.
10.16 Service of Process. The Borrower consents to process being served in any suit, action or proceeding by mailing a copy thereof by registered or certified mail postage prepaid, return receipt requested, to the Borrower’s address specified in or designated in this Agreement. The Borrower agrees that such service (i) shall be deemed in every respect effective service of process upon the Borrower in any such suit, action or proceeding and (ii) shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon and personal delivery to the Borrower. Nothing in this Section shall affect the right of the Lender to serve process in any manner permitted by law, or limit any right that the Lender may have to bring proceedings against the Borrower in the courts of any jurisdiction or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
10.17 Assignment; Sale of Loan Documents; Disclosure of Information. The Borrower hereby consents to and agrees that the Lender may disclose to any Person any and all information connected with or related to the Revolving Loan or other Loan Documents for the purpose of selling or assigning any rights of the Lender in the Loan Documents. The information which may be disclosed by the Lender
includes but is not limited to all Loan Documents, credit files and correspondence files and all other writings and oral communications which Lender wishes to disclose, in its sole and absolute discretion. The Borrower also hereby consents to and agrees that the Lender may sell or assign any rights of the Lender in any or all of the Loan Documents pursuant to such terms and conditions as may be acceptable to the Lender in its sole and absolute discretion, to any interested Person, and nothing in this Agreement or the other Loan Documents shall prevent, delay or otherwise impede or affect the right of the Lender to immediately sell or assign any rights of the Lender in the Loan Documents on such terms as it deems acceptable. The Borrower shall not be entitled to assign its interest in this Agreement without the prior written consent of the Lender, and any such attempt of the Borrower to assign its interest without the prior written consent of the Lender shall be null and void.
10.18 WAIVER OF JURY TRIAL. BY AGREEING TO BINDING ARBITRATION, BORROWER AND LENDER IRREVOCABLY AND VOLUNTARILY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF A CLAIM. FURTHERMORE, WITHOUT INTENDING IN ANY WAY TO LIMIT THIS AGREEMENT TO ARBITRATE, TO THE EXTENT ANY CLAIM IS NOT ARBITRATED, THE PARTIES IRREVOCABLY AND VOLUNTARILY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF SUCH CLAIM. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.
10.19 ARBITRATION.
This paragraph concerns the resolution of any controversies or claims between the Borrower and the Lender, whether arising in contract, tort or by statute, including but not limited to controversies or claims that arise out of or relate to: (i) this Agreement (including any renewals, extensions or modifications); or (ii) any document related to this Agreement; (collectively a “Claim”).
At the request of the Borrower or the Lender, any Claim shall be resolved by binding arbitration in accordance with the Federal Arbitration Act (Title 9, U.S. Code) (the “Act”). The Act will apply even though this Agreement provides that it is governed by the law of a specified state.
Arbitration proceedings will be determined in accordance with the Act, the applicable rules and procedures for the arbitration of disputes of JAMS or any successor thereof (“JAMS”), and the terms of this paragraph. In the event of any inconsistency, the terms of this paragraph shall control.
The arbitration shall be administered by JAMS and conducted in any U.S. state where real or tangible personal property collateral for this credit is located or if there is no such collateral, in Maryland. All Claims shall be determined by one arbitrator; however, if Claims exceed Five Million and 00/100 Dollars ($5,000,000.00), upon the request of any party, the Claims shall be decided by three arbitrators. All arbitration hearings shall commence within ninety (90) days of the demand for arbitration and close within ninety (90) days of commencement and the award of the arbitrator(s) shall be issued within thirty (30) days of the close of the hearing. However, the arbitrator(s), upon a showing of good cause, may extend the commencement of the hearing for up to an additional sixty (60) days. The arbitrator(s) shall provide a concise written statement of reasons for the award. The arbitration award may be submitted to any court having jurisdiction to be confirmed and enforced.
The arbitrator(s) will have the authority to decide whether any Claim is barred by the statute of limitations and, if so, to dismiss the arbitration on that basis. For purposes of the application of the statute of limitations, the service on JAMS under applicable JAMS rules of a notice of Claim is the equivalent of the filing of a lawsuit. Any dispute concerning this arbitration provision or whether a claim is arbitrable shall be determined by the arbitrator(s). The arbitrator(s) shall have the power to award legal fees pursuant to the terms of this Agreement.
This paragraph does not limit the right of the Borrower or the Lender to: (i) exercise self-help remedies, such as but not limited to, setoff; (ii) initiate judicial or nonjudicial foreclosure against any real or personal property collateral; (iii) exercise any judicial or power of sale rights, or (iv) act in a court of law
to obtain an interim remedy, such as but no limited to, injunctive relief, writ of possession or appointment of a receiver, or additional or supplementary remedies.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or have caused this Agreement to be duly executed on their behalf, as of the day and year first hereinabove set forth.
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EFJ, INC., a Delaware corporation |
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By: |
/s/ Xxxxxxx X. Xxxxxxx |
(SEAL) |
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Xxxxxxx X. Xxxxxxx |
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Chief Executive Officer and President |
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X. X. XXXXXXX COMPANY, a Minnesota corporation |
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By: |
/s/ Xxxxxxx X. Xxxxxxx |
(SEAL) |
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Xxxxxxx X. Xxxxxxx |
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Chief Executive Officer and President |
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BANK OF AMERICA, N.A. |
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By: |
/s/ Xxxxxxx X. Xxxxxxx |
(SEAL) |
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Xxxxxxx X. Xxxxxxx |
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Senior Vice President |
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