Credit Agreement
This
agreement dated as of March 1, 2007 between JPMorgan Chase Bank, N.A. (together
with its successors and assigns, the "Bank"), whose address is 0000 Xxxx Xxxxxx,
Xxxxxx, XX 00000, and Advanced Materials, Inc. (whether one or more, and if
more
than one, individually and collectively, the "Borrower"), whose address is
0000
Xxx
Xxxxxxx, Xxxxx 000, Xxxxxx Xxxxx 00000.
| 1. |
Credit
Facilities.
|
| 1.1 |
Scope.
This agreement governs Facility A, and, unless otherwise agreed to
in
writing by the Bank and the Borrower or prohibited by applicable
law,
governs the Credit Facilities as defined below. Advances under the
Credit
Facilities shall be subject to the procedures established from time
to
time by the Bank. Any procedures agreed to by the Bank with respect
to
obtaining advances including automatic loan sweeps shall not vary
the
terms or conditions of this agreement or the Related Documents regarding
the Credit Facilities.
|
| 1.2 |
Facility
A (Line of Credit).
The Bank has approved a credit facility to the Borrower in the principal
sum not to exceed $2,000,000.00 in the aggregate at any one time
outstanding ("Facility A"). Credit under Facility A shall be repayable
as
set forth in a Line of Credit Note executed concurrently with this
agreement, and any renewals, modifications, extensions, rearrangements,
restatements thereof and replacements or substitutions
therefor.
|
| 1.3 |
Borrowing
Base.
The aggregate principal amount of advances outstanding at any one
time
under Facility A (the "Aggregate Outstanding Amount") shall not exceed
the
Borrowing Base or the maximum principal amount then available under
the
Line of Credit Note (and any and all renewals, modifications, extensions,
rearrangements, restatements thereof and replacements or substitutions
therefor) evidencing Facility A, whichever is less (the "Maximum
Available
Amount"). If at any time the Aggregate Outstanding Amount exceeds
the
Maximum Available Amount, the Borrower shall immediately pay the
Bank an
amount equal to such excess. "Borrowing Base" means the aggregate
of:
|
A. 80%
of
the book value of all Eligible Accounts; plus
B. 50%
of
the lower of cost (determined using the first-in, first-out method of inventory
accounting) or wholesale market value, as determined by the Bank in its sole
discretion, of all Eligible Inventory; the amount provided for in this
subsection B (inventory component) being limited in all events to no more than
100% of the amount provided for in subsection A above (accounts
component).
| 2. |
Definitions.
As
used in this agreement, the following terms have the following respective
meanings:
|
| 2.1 |
"Credit
Facilities" means all extensions of credit from the Bank to the Borrower,
whether now existing or hereafter arising, including but not limited
to
those described in Section 1 if any, and those extended contemporaneously
with this agreement.
|
| 2.2 |
"Liabilities"
means all debts, obligations, indebtedness and liabilities of every
kind
and character of the Borrower whether individual, joint and several,
contingent or otherwise, now or hereafter existing in favor of the
Bank,
including, without limitation, all liabilities, interest, costs and
fees,
arising under or from any note, open account, overdraft, credit card,
lease, Rate Management Transaction, letter of credit application,
endorsement, surety agreement, guaranty, acceptance, foreign exchange
contract or depository service contract, whether payable to the Bank
or to
a third party and subsequently acquired by the Bank, any monetary
obligations (including interest) incurred or accrued during the pendency
of any bankruptcy, insolvency, receivership or other similar proceedings,
regardless of whether allowed or allowable in such proceeding, and
all
renewals, extensions, modifications, consolidations, rearrangements,
restatements, replacements or substitutions of any of the foregoing.
The
term "Rate Management Transaction" in this agreement means any transaction
(including an agreement with respect thereto) that is a rate swap,
basis
swap, forward rate transaction, commodity swap, commodity option,
equity
or equity index swap, equity or equity index option, bond option,
interest
rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, forward transaction, currency swap
transaction, cross-currency rate swap transaction, currency option,
derivative transaction or any other similar transaction (including
any
option with respect to any of these transactions) or any combination
thereof, whether linked to one or more interest rates, foreign currencies,
commodity prices, equity prices or other financial
measures.
|
| 2.3 |
"Notes"
means
all promissory notes, instruments and/or contracts evidencing the
terms
and conditions of any of the Credit Facilities.
|
| 2.4 |
"Account"
means a trade account, account receivable, other receivable, or other
right to payment for goods sold or leased or services rendered owing
to
the Borrower (or to a third party grantor acceptable to the
Bank).
|
| 2.5 |
"Account
Debtor" means the person or entity obligated upon an
Account.
|
| 2.6 |
"Affiliate"
means any person, corporation or other entity directly or indirectly
controlling, controlled by or under common control with the Borrower
and
any director or officer of the Borrower or any Subsidiary of the
Borrower.
|
| 2.7 |
"Eligible
Accounts" means, at any time, all of the Borrower's Accounts in
which the Bank has a first priority perfected continuing security
interest
and which are earned and invoiced within thirty
(30) days of being earned and which contain selling terms and conditions
acceptable to the Bank, are payable on ordinary trade terms, and
are not
evidenced by a promissory note, other instrument or chattel paper.
The net
amount of any Eligible Account against which the Borrower may borrow
shall
exclude all returns, discounts, credits, and offsets of any nature.
Unless
otherwise agreed to by the Bank in writing, Eligible Accounts do
not
include Accounts: (1) which are not owned by the Borrower free and
clear
of all security interests, liens, encumbrances, constructive trust,
statutory priorities not in favor of the Bank, and claims of third
parties, except the Bank; (2) with respect to which the Account Debtor
is
an Affiliate, an employee or agent of the Borrower; (3) with respect
to
which the Account Debtor is an Affiliate or otherwise affiliated
with or
related to the Borrower; (4) with respect to which goods are placed
on
consignment, guaranteed sale, xxxx-and-hold, sale-and-return, sale
on
approval, cash-on-delivery or other terms by reason of which the
payment
by the Account Debtor may be conditional; (5) with respect to which
the
Account Debtor is not a resident of the United States, except to
the
extent such Accounts are otherwise Eligible Accounts and are supported
by
insurance, bonds or other assurances satisfactory to the Bank; (6)
subject
to the U.S. Office of Foreign Asset Control Special Designated Nationals
and Blocked Person's List, or with respect to which the Account Debtor
is
otherwise a person or entity with whom the Borrower or the Bank is
prohibited from doing business by any applicable law, regulation,
executive order or other legal directive; (7) which are not payable
in
U.S. Dollars; (8) with respect to which the Borrower is or may become
liable to the Account Debtor for goods sold or services rendered
by the
Account Debtor to the Borrower; (9) which are subject to dispute,
counterclaim, deduction, withholding, defense, or setoff; (10) with
respect to which the goods have not been shipped or delivered, or
the
services have not been rendered, to the Account Debtor, or which
otherwise
constitute pre-billed Accounts; (11) which constitute retainage,
or are
bonded Accounts; (12) with respect to which the Bank, in its sole
discretion, deems the creditworthiness, financial or business condition
of
the Account Debtor to be unsatisfactory; (13) of any Account Debtor
who
has filed or has had filed against it a petition in bankruptcy or
an
application for relief under any provision of any state or federal
bankruptcy, insolvency, or debtor-in-relief acts, or who has had
appointed
a trustee, custodian, or receiver for the assets of such Account
Debtor,
or who has made an assignment for the benefit of creditors or has
become
insolvent or fails generally to pay its debts (including its payrolls)
as
such debts become due; (14) with respect to which the Account Debtor
is
the United States government or any department or agency of the United
States; and any other Accounts deemed ineligible by the Bank in its
sole
discretion; (15) which have not been paid in full within 90 days
from the
invoice date, and all Accounts of Biolucent,
Inc. not
been paid in full within 45
days from invoice date;
(16) all of the Accounts of any Account Debtor which has more than
20% of
its total amount outstanding on all Accounts owing more than 90 days
from
invoice date, or in the case of Biolucent,
Inc. owing more than 45 days from invoice date; (17)
Accounts due from any one Account Debtor to the extent exceeding
15% of
all Eligible Accounts, or in the case of Biolucent,
Inc., exceeding
20% of all Eligible Accounts, or in the case of Xxxxxx Corporation,
exceeding 30% of all Eligible
Accounts.
|
| 2.8 |
"Eligible
Inventory" means, at any time, all of the Borrower's Inventory in
which
the Bank has a first priority perfected continuing security interest
except Inventory which is: (1) not owned by the Borrower free and
clear of
all security interests, liens, encumbrances, and claims of third
parties,
except the Bank; (2) slow moving, obsolete, unsalable, damaged, defective,
perishable, or unfit for further processing; (3) work in process;
(4)
subject to consignment or otherwise in the possession of a third
party,
unless otherwise agreed to by the Bank in writing; (5) in transit
or
located outside of the United States; (6) identified to be purchased
under
a contract under which the Borrower has received, or is entitled
to
receive, an advance payment; (7) determined by the Bank in its sole
discretion to be ineligible due to licensing, intellectual property,
or
legal or regulatory issues which exist making it difficult to resell
such
Inventory; (8) comprised of samples, returns, rejected items, re-work
items, non-standard items, odd-lots, or repossessed goods; (9) produced
in
violation of applicable law including the Fair Labor Standards Act
and the
regulations and order of the Department of Labor; or (10) otherwise
deemed
ineligible by the Bank in its sole discretion; and (11) Work in process
inventory; obsolete/slow moving inventory; consigned or unowned inventory
and damaged/returned inventory; provided, however, that transportation
and
storage charges shall be excluded from amounts otherwise included
in
Eligible Inventory.
|
| 2.9 |
"Inventory"
means all of the Borrower's raw materials, work in process, finished
goods, merchandise, parts and supplies, of every kind and description,
and
goods held for sale or lease or furnished under contracts of service
in
which the Borrower now has or hereafter acquires any right, whether
held
by the Borrower or others, and all documents of title, warehouse
receipts,
bills of lading, and all other documents of every type covering all
or any
part of the foregoing. Inventory includes inventory temporarily out
of the
Borrower's custody or possession and all returns on
Accounts.
|
| 2.10 |
"Intangible
Assets" means the aggregate amount of: (1) all
assets classified as intangible assets under generally accepted accounting
principles, including, without limitation, goodwill, trademarks,
patents,
copyrights, organization expenses, franchises, licenses, trade names,
brand names, mailing lists, catalogs, excess of cost over book value
of
assets acquired, and bond discount and underwriting expenses;
and (2) loans or advances to, investments in, or receivables from
(i)
Affiliates, officers, directors, employees or shareholders of the
Borrower
or (ii) any person or entity if such loan, advance, investment or
receivable is outside the Borrower's normal course of
business.
|
| 2.11 |
"Subsidiary"
means, as to a particular person, any entity of which fifty (50%)
or more
of the indicia of equity rights is at the time of determination directly
or indirectly owned by the person or by one or more persons controlled
by,
controlling or under common control with the
person.
|
| 2.12 |
"Tangible
Net Worth" means total assets less the sum of Intangible Assets and
total
liabilities.
|
| 2.13 |
"Related
Documents" means the Notes, all loan agreements, credit agreements,
reimbursement agreements, security agreements, mortgages, deeds of
trust,
pledge agreements, assignments, guaranties, and any other instrument
or
document executed in connection with this agreement or in connection
with
any of the Liabilities.
|
| 3. |
Conditions
Precedent to Extensions of
Credit.
|
| 3.1 |
Conditions
Precedent to Initial Extension of Credit under each of the Credit
Facilities.
Before the first extension of credit governed by this agreement,
whether
by disbursement of a loan, issuance of a letter of credit, or otherwise,
the Borrower shall deliver to the Bank, in form and substance satisfactory
to the Bank:
|
A. Loan
Documents.
The
Notes, and as applicable, the letter of credit applications, reimbursement
agreements, the security agreements, the pledge agreements, financing
statements, mortgages or deeds of trust, the guaranties, the subordination
agreements, and any other documents which the Bank may reasonably require to
give effect to the transactions described in this agreement or the other Related
Documents;
B. Evidence
of Due Organization and Good Standing.
Evidence, satisfactory to the Bank, of the due organization, valid existence
and
good standing of the Borrower and every other business entity that is a party
to
this agreement or any other Related Document; and
C. Evidence
of Authority to Enter into Loan Documents.
Evidence
that (i) each party to this agreement and any other document required by this
agreement is authorized to enter into the transactions described in this
agreement and the other Related Documents, and (ii) the person signing on behalf
of each party is authorized to do so.
| 3.2 |
Conditions
Precedent to Each Extension of Credit.
Before any extension of credit governed by this agreement, whether
by
disbursement of a loan, issuance of a letter of credit or otherwise,
the
following conditions must be
satisfied:
|
A. Representations.
The
representations of the Borrower are true on and as of the date of the request
for and funding of the extension of credit;
B. No
Event of Default.
No
default has occurred in any provision of this agreement, the Notes or any other
Related Documents and is continuing or would result from the extension of
credit, and no event has occurred which would constitute the occurrence of
any
default but for the lapse of time until the end of any grace or cure
period;
C. Additional
Approvals, Opinions, and Documents.
The Bank
has received any other approvals, opinions and documents as it may reasonably
request; and
D. No
Prohibition or Onerous Conditions.
The
making of the extension of credit is not prohibited by or subjects the Bank
to
any penalty or onerous condition under any law, ordinance, decree, requirement,
order, judgment, rule, regulation (or interpretation of any of the foregoing),
foreign governmental authority, the United States of America, any state thereof
and any political subdivision of any of the foregoing and any agency,
department, commission, board, bureau, court or other tribunal having
jurisdiction over the Bank or the Borrower, or any Subsidiary of the Borrower
or
their respective properties.
| 4. |
Affirmative
Covenants. The
Borrower agrees to do, and cause each of its Subsidiaries to do,
each of
the following:
|
| 4.1 |
Insurance.
Maintain insurance with financially sound and reputable insurers,
with
such insurance and insurers to be acceptable to the Bank, covering
its
properties and business against those casualties and contingencies
and in
the types and amounts as are in accordance with sound business and
industry practices.
|
| 4.2 |
Existence.
Maintain its existence and business operations as presently in effect
in
accordance with all applicable laws and regulations, pay its debts
and
obligations when due under normal terms, and pay on or before their
due
date, all taxes, assessments, fees and other governmental monetary
obligations, except as they may be contested in good faith if they
have
been properly reflected on its books and, at the Bank's request,
adequate
funds or security has been pledged to insure
payment.
|
| 4.3 |
Financial
Records.
Maintain proper books and records of account, in accordance with
generally
accepted accounting principles, and consistent with financial statements
previously submitted to the Bank.
|
| 4.4 |
Inspection.
Permit the Bank to inspect and copy the Borrower’s business records at
such times and at such intervals as the Bank may reasonably require,
and
to discuss the Borrower’s business, operations, and financial condition
with the Borrower's officers and accountants.
|
| 4.5 |
Financial
Reports.
Furnish to the Bank whatever information, books and records the Bank
may
from time to time reasonably request, including at a minimum:
|
A. A
borrowing base certificate, in form and detail satisfactory to the Bank, with
(1) a list of accounts receivable, aged from date of invoice, (2) a list of
inventory, valued at the lower of cost (determined using the first-in, first-out
method of inventory accounting) or wholesale market value, and (3) and such
other supporting documentation as the Bank may request, at the following times:
(A) within 30 days after and as of the end of each calendar month in which
there
was an outstanding advance of principal under Facility A on the last day of
such
calendar month, and (B) if no borrowing base certificate has been provided
or is
otherwise due as of the end of the immediately preceding calendar month, with
any request of an advance under the Credit Facilities.
B. For
Advanced Materials Group, Inc., a Nevada corporation: via either the XXXXX
System or its Home Page, within ninety (90) days after the filing of its Annual
Report on Form 10-K for the fiscal year then ended with the Securities and
Exchange Commission, but no event later than ninety (90) days after the end
of
such fiscal year, the financial statements for such fiscal year as contained
in
such Annual Report on Form 10-K and, as soon as it shall become available,
the
annual report to shareholders of the Borrower for the fiscal year then
ended.
C. For
Advanced Materials Group, Inc., a Nevada corporation: via either the XXXXX
System or its Home Page, within forty-five (45) days after the filing of its
Quarterly Report on Form 10-Q for the fiscal quarter then ended with the
Securities and Exchange Commission, but no event later than forty-five (45)
days
after the end of such fiscal quarter, copies of the financial statements for
such fiscal quarter as contained in such Quarterly Report on Form 10-Q, and,
as
soon as it shall become available, a quarterly report to shareholders of the
Borrower for the fiscal quarter then ended.
D. For
Advanced Materials Group, Inc., a Nevada corporation: via either the XXXXX
System or its Home Page, promptly after the same become publicly available,
copies of all periodic and other reports, proxy statements and other materials
filed by the Borrower or any Subsidiary with the Securities and Exchange
Commission or any governmental authority succeeding to any or all of the
functions of said Commission.
If
for
any reason the XXXXX System and/or its Home Page are not available to the
Borrower as is required for making available the financial statements or reports
referred to above, the Borrower shall then furnish a copy of such financial
statements or reports to the Bank.
For
the
purposes of this section, "XXXXX System" means the Electronic Data Gathering
Analysis and Retrieval System owned and operated by the United States Securities
and Exchange Commission or any replacement system, and "Home Page" means the
Borrower's corporate home page on the World Wide Web accessible through the
Internet via the universal resource locator (URL) identified as "xxx.xxx0.xxx"
or such
other universal resource locator that the Borrower shall designate in writing
to
the Bank as its corporate home page on the World Wide Web.
| 4.6 |
Notices
of Claims, Litigation, Defaults, etc.
Promptly inform the Bank in writing of (1) all existing and all threatened
litigation, claims, investigations, administrative proceedings and
similar
actions affecting the Borrower which could materially affect its
business, assets, affairs, prospects or
financial condition of the Borrower or its Subsidiaries; (2) the
occurrence of any event which gives rise to the Bank's option to
terminate
the Credit Facilities; (3) the institution of steps by the Borrower
to
withdraw from, or the institution of any steps to terminate, any
employee
benefit plan as to which the Borrower may have liability; (4) any
reportable event or any prohibited transaction in connection with
any
employee benefit plan; (5) any additions to or changes in the locations
of
the Borrower's or any of the Borrower's or Subsidiary's businesses;
and
(6) any alleged breach of any provision of this agreement or of any
other
agreement related to the Credit Facilities by the
Bank.
|
| 4.7 |
Additional
Information.
Furnish such additional information and statements, as the Bank may
request, from time to time.
|
| 4.8 |
Insurance
Reports.
Furnish to the Bank, upon request of the Bank, reports on each existing
insurance policy showing such information as the Bank may reasonably
request.
|
| 4.9 |
Other
Agreements.
Comply with all terms and conditions of all other agreements, whether
now
or hereafter existing, between the Borrower and any other
party.
|
| 4.10 |
Title
to Assets and Property.
Maintain good and marketable title to all of the Borrower's assets
and
properties.
|
| 4.11 |
Additional
Assurances.
Promptly make, execute and deliver any and all agreements, documents,
instruments and other records that the Bank may request to evidence
any of
the Credit Facilities, cure any defect in the execution and delivery
of
any of the Related Documents, perfect any lien, comply with legal
requirements applicable to the Bank or the Credit Facilities or more
fully
to describe particular aspects of the agreements set forth or intended
to
be set forth in any of the Related
Documents.
|
| 4.12 |
Employee
Benefit Plans.
Maintain each employee benefit plan as to which the Borrower may
have any
liability, in compliance with all applicable requirements of law
and
regulations.
|
| 4.13 |
Banking
Relationship.
Establish and maintain its primary banking depository and disbursement
relationship with the Bank.
|
| 4.14 |
Compliance
Certificates.
Provide the Bank, within forty-five (45) days after the end of each
fiscal
quarter, with a certificate executed by the Borrower's chief financial
officer, or other officer or a person acceptable to the Bank, certifying
that, as of the date of the certificate, no default exists under
any
provision of this agreement.
|
| 5.1 |
Unless
otherwise noted, the financial requirements set forth in this section
will
be computed in accordance with generally accepted accounting principles
applied on a basis consistent with financial statements previously
submitted by the Borrower to the
Bank.
|
| 5.2 |
Without
the written consent of the Bank, the Borrower will
not:
|
A. Dividends.
Acquire
or retire any of its shares of capital stock, or, other than dividends in its
capital stock, declare or pay dividends or make any other distributions upon
any
of its shares of capital stock; provided, however, that following any fiscal
year with respect to which the Borrower maintained status as an "S" corporation
under the Internal Revenue Code, if there is no existing default under this
agreement or any agreement related to the Liabilities and to do so will not
cause a default under any of such agreements, the Borrower may pay dividends
to
its shareholders sufficient in amount to pay their income tax obligation
attributable to the Borrower's taxable income.
B. Sale
of Shares.
Issue,
sell or otherwise dispose of any shares of its capital stock or other
securities, or rights, warrants or options to purchase or acquire those shares
or securities.
C. Debt.
Incur,
contract for, assume, or permit to remain outstanding, indebtedness for borrowed
money, installment obligations, or obligations under capital leases or operating
leases, other than (1) unsecured trade debt incurred in the ordinary course
of
business, (2) indebtedness owing to the Bank, (3) indebtedness reflected in
the
latest financial statement of the Borrower furnished to the Bank prior to
execution of this agreement and that is not to be paid with proceeds of
borrowings under the Credit Facilities, (4) indebtedness outstanding as of
the
date hereof that has been disclosed to the Bank in writing and that is not
to be
paid with proceeds of borrowings under the Credit Facilities, and (5) other
indebtedness not to exceed an aggregate principal amount of $150,000.00
outstanding at any one time, for capital expenditures for Borrower’s regular
business operations.
D. Guaranties.
Guarantee or otherwise become or remain secondarily liable on the undertaking
of
another, except for endorsement of drafts for deposit and collection in the
ordinary course of business.
E. Liens.
Create
or permit to exist any lien on any of its property, real or personal, except:
existing liens known to the Bank; liens to the Bank; liens incurred in the
ordinary course of business securing current non-delinquent liabilities for
taxes, worker’s compensation, unemployment insurance, social security and
pension liabilities.
F. Use
of Proceeds.
Use, or
permit any proceeds of the Credit Facilities to be used, directly or indirectly,
for the purpose of "purchasing or carrying any margin stock" within the meaning
of Federal Reserve Board Regulation U. At the Bank's request, the Borrower
will
furnish a completed Federal Reserve Board Form U-1.
G. Continuity
of Operations.
(1)
Engage in any business activities substantially different from those in which
the Borrower is presently engaged; (2) cease operations, liquidate, merge,
transfer, acquire or consolidate with any other entity, change its name,
dissolve, or sell any assets out of the ordinary course of business; or (3)
enter into any arrangement with any person providing for the leasing by the
Borrower or any Subsidiary of real or personal property which has been sold
or
transferred by the Borrower or Subsidiary to such person.
H. Limitation
on Negative Pledge Clauses.
Enter
into any agreement with any person other than the Bank which prohibits or limits
the ability of the Borrower or any of its subsidiaries to create or permit
to
exist any lien on any of its property, assets or revenues, whether now owned
or
hereafter acquired.
I. Conflicting
Agreements.
Enter
into any agreement containing any provision which would be violated or breached
by the performance of the Borrower's obligations under this agreement or any
of
the other Related Documents.
J. Transfer
of Ownership.
Permit
any pledge of any ownership interest in the Borrower, or any sale or other
transfer of any ownership interest in the Borrower.
K. Loans,
Advances to and Investments in Others and Receivables from
Others.
Make any
loans or advances to, investments in, or incur any receivables from any person,
except (A) loans, advances, investments or receivables, made or incurred in
the
ordinary course of business, to, in or from any person that is not (i) an
Affiliate, (ii) an employee of the Borrower, or (iii) an equity holder of the
Borrower, and (B) loans, advances, investments and receivables existing as
of
the date of this agreement that have been disclosed to the Bank in writing
and
that are not to be paid with proceeds of borrowings under the Credit
Facilities.
L. Tangible
Net Worth.
Permit
as of any fiscal quarter end, its Tangible Net Worth to be less than
$1,500,000.00.
M. Government
Regulation.
(1) Be
or become subject at any time to any law, regulation, or list of any government
agency (including, without limitation, the U.S. Office of Foreign Asset Control
list) that prohibits or limits Bank from making any advance or extension of
credit to Borrower or from otherwise conducting business with Borrower, or
(2)
fail to provide documentary and other evidence of Borrower's identity as may
be
requested by Bank at any time to enable Bank to verify Borrower's identity
or to
comply with any applicable law or regulation, including, without limitation,
Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.
N. Subsidiaries.
Form,
create or acquire any Subsidiary without prior consent of the Bank.
| 6.1 |
Representations
and Warranties by the Borrower.
To
induce the Bank to enter into this agreement and to extend credit
or other
financial accommodations under the Credit Facilities,
the Borrower represents and warrants as of the date of this agreement
and
as of the date of each request for credit under the Credit Facilities
that each of the following statements is and shall remain true and
correct
throughout the term of this agreement and until all Credit Facilities
and
all amounts owing under the Notes and other Related Documents are
paid in
full. The Borrower represents that: (a) the execution and delivery
of this
agreement and the Notes, and the performance of the obligations they
impose, do not violate any law, conflict with any agreement by which
it is
bound, or require the consent or approval of any governmental authority
or
other third party, (b) this agreement and the Notes are valid and
binding
agreements, enforceable according to their terms, (c) all balance
sheets,
profit and loss statements, and other financial statements and other
information furnished to the Bank in connection with the Liabilities
are
accurate and fairly reflect the financial condition of the organizations
and persons to which they apply on their effective dates, including
contingent liabilities of every type, which financial condition has
not
changed materially and adversely since those dates, (d) no litigation,
claim, investigation, administrative proceeding or similar action
(including those for unpaid taxes) against the Borrower is pending
or
threatened, and no other event has occurred which may in any one
case or
in the aggregate materially adversely affect the Borrower's financial
condition and properties, other than litigation, claims, or other
events,
if any, that have been disclosed to and acknowledged by the Bank
in
writing, (e) all of the Borrower's tax returns and reports that are
or
were required to be filed, have been filed, and all taxes, assessments
and
other governmental charges have been paid in full, except those presently
being contested by the Borrower in good faith and for which adequate
reserves have been provided, (f) the Borrower is not an "investment
company" or a company "controlled" by an "investment company", within
the
meaning of the Investment Company Act of 1940, as amended, (g) the
Borrower is not a "holding company", or a "subsidiary company" of
a
"holding company" or an "affiliate" of a "holding company" or of
a
"subsidiary company" of a "holding company" within the meaning of
the
Public Utility Holding Company Act of 1935, as amended, (h) there
are no
defenses or counterclaims, offsets or adverse claims, demands or
actions
of any kind, personal or otherwise, that the Borrower could assert
with
respect to this agreement or the Credit Facilities, (i) the Borrower
owns,
or is licensed to use, all trademarks, trade names, copyrights,
technology, know-how and processes necessary for the conduct of its
business as currently conducted, and (j) no part of the proceeds
of the
Credit Facilities will be used for "purchasing" or "carrying" any
"margin
stock" within the respective meanings of each of the quoted terms
under
Regulation U of the Board of Governors of the Federal Reserve System
of
the United States (the "Board") as now and from time to time hereafter
in
effect or for any purpose which violates the provisions of any regulations
of the Board. The Borrower, other than a natural person, further
represents that: (a) it is duly organized and validly existing under
the
laws of the state where it is organized and is in good standing in
its
state of organization and each state where it is doing business,
and (b)
the execution and delivery of this agreement and the Notes and the
performance of the obligations they impose (i) are within its powers,
(ii)
have been duly authorized by all necessary action of its governing
body,
and (iii) do not contravene the terms of its articles of incorporation
or
organization, its by-laws, or any partnership, operating or other
agreement governing its affairs.
|
| 6.2 |
Representations
and Warranties Regarding Assets.
To
induce the Bank to enter into this agreement and to extend credit
or other
financial accommodations under the Credit Facilities,
the Borrower represents and warrants as of the date of this agreement
and
as of the date of each request for credit under the Credit Facilities
that each of the following statements is and shall remain true and
correct
throughout the term of this agreement and until all Credit Facilities
and
all amounts owing under the Notes and other Related Documents are
paid in
full. With respect to any asset of the Borrower utilized in the
calculation of the Borrowing Base set forth in this agreement, the
Borrower represents and warrants to the Bank: (1) each asset represented
by the Borrower to be eligible for Borrowing Base purposes of this
agreement conforms to the eligibility definitions set forth in this
agreement (2) all asset values delivered to the Bank will be true
and
correct, subject to immaterial variance; and be determined on a consistent
accounting basis; (3) except as agreed to the contrary by the Bank
in
writing, each asset is now and at all times hereafter will be in
the
Borrower's physical possession and shall not be held by others on
consignment, sale or approval, or sale or return; (4) except as reflected
in schedules delivered to the Bank, each asset is now and at all
times
hereafter will be of good and merchantable quality, free from defects;
(5)
each asset is not now and will not at any time hereafter be stored
with a
bailee, warehouseman, or similar party without the Bank's prior written
consent, and in such event, the Borrower will concurrently at the
time of
bailment cause any such bailee, warehouseman, or similar party to
issue
and deliver to the Bank, warehouseman receipts in the Bank's name
evidencing the storage of the assets; and (6) the Bank, its assigns,
or
agents shall have the right at any time and at the Borrower's expense
to
inspect, examine and audit the Borrower's records, and if Accounts
are
included in the calculation of Borrowing Base, confirm with Account
Debtors the accuracy of such Accounts, and inspect and examine the
assets
and to check and test the same as to quality, quantity, value, and
condition.
|
| 7. |
Default/Remedies.
If
any of the Credit Facilities are not paid at maturity, whether by
acceleration or otherwise, or if a default by anyone occurs under
the
terms of this agreement, the Notes or any other Related Documents,
then
the Bank shall have all of the rights and remedies provided by any
law,
equity
or
agreement.
|
| 8.1 |
Notice.
Any notices and demands under or related to this document shall be
in
writing and delivered to the intended party at its address stated
herein,
and if to the Bank, at its main office if no other address of the
Bank is
specified herein, by one of the following means: (a) by hand, (b)
by a
nationally recognized overnight courier service, or (c) by certified
mail,
postage prepaid, with return receipt requested. Notice shall be deemed
given: (a) upon receipt if delivered by hand, (b) on the Delivery
Day
after the day of deposit with a nationally recognized courier service,
or
(c) on the third Delivery Day after the notice is deposited in the
mail.
"Delivery Day" means a day other than a Saturday, a Sunday or any
other
day on which national banking associations are authorized to be closed.
Any party may change its address for purposes of the receipt of notices
and demands by giving notice of such change in the manner provided
in this
provision.
|
| 8.2 |
No
Waiver.
No
delay on the part of the Bank in the exercise of any right or remedy
waives that right or remedy. No single or partial exercise by the
Bank of
any right or remedy precludes any other future exercise of it or
the
exercise of any other right or remedy. No waiver or indulgence by
the Bank
of any default is effective unless it is in writing and signed by
the
Bank, nor shall a waiver on one occasion bar or waive that right
on any
future occasion.
|
| 8.3 |
Integration.
This agreement, the Notes, and the
other Related Documents
to
the Credit Facilities embody the entire agreement and understanding
between the Borrower and the Bank and supersede all prior agreements
and
understandings relating to their subject matter. If any one or more
of the
obligations of the Borrower under this agreement or the Notes is
invalid,
illegal or unenforceable in any jurisdiction, the validity, legality
and
enforceability of the remaining obligations of the Borrower shall
not in
any way be affected or impaired, and the invalidity, illegality or
unenforceability in one jurisdiction shall not affect the validity,
legality or enforceability of the obligations of the Borrower under
this agreement, the Notes and the other Related Documents
in
any other jurisdiction.
|
| 8.4 |
Joint
and Several Liability.
Each party executing this agreement as the Borrower is individually,
jointly and severally liable under this agreement.
|
| 8.5 |
Governing
Law and Venue.
This agreement shall be governed by and construed in accordance with
the
laws of the State of Texas (without giving effect to its laws of
conflicts). The Borrower agrees that any legal action or proceeding
with
respect to any of its obligations under this agreement may be brought
by
the Bank in any state or federal court located in the State of Texas,
as
the Bank in its sole discretion may elect. By the execution and delivery
of this agreement, the Borrower submits to and accepts, for itself
and in
respect of its property, generally and unconditionally, the non-exclusive
jurisdiction of those courts. The Borrower waives any claim that
the State
of Texas is not a convenient forum or the proper venue for any such
suit,
action or proceeding.
|
| 8.6 |
Captions.
Section headings are for convenience of reference only and do not
affect
the interpretation of this
agreement.
|
| 8.7 |
Survival
of Representations and Warranties.
The Borrower understands and agrees that in extending the Credit
Facilities, the Bank is relying on all representations, warranties,
and
covenants made by the Borrower in this agreement or in any certificate
or
other instrument delivered by the Borrower to the Bank under this
agreement. The Borrower further agrees that regardless of any
investigation made by the Bank, all such representations, warranties
and
covenants will survive the making of the Credit Facilities and delivery
to
the Bank of this agreement, shall be continuing in nature, and shall
remain in full force and effect until such time as the Borrower's
indebtedness to the Bank shall be paid in
full.
|
| 8.8 |
Non-Liability
of the Bank.
The relationship between the Borrower and the Bank created by this
agreement is strictly a debtor and creditor relationship and not
fiduciary
in nature, nor is the relationship to be construed as creating any
partnership or joint venture between the Bank and the Borrower. The
Borrower is exercising the Borrower's own judgement with respect
to the
Borrower's business. All information supplied to the Bank is for
the
Bank's protection only and no other party is entitled to rely on
such
information. There is no duty for Bank to review, inspect, supervise
or
inform the Borrower of any matter with respect to the Borrower's
business.
The Bank and the Borrower intend that the Bank may reasonably rely
on all
information supplied by the Borrower to the Bank, together with all
representations and warranties given by the Borrower to the Bank,
without
investigation or confirmation by the Bank and that any investigation
or
failure to investigate will not diminish the Bank's right to so rely.
|
| 8.9 |
Indemnification
of the Bank.
The Borrower agrees to indemnify, defend and hold the Bank, its parent
companies, subsidiaries, affiliates, their respective successors
and
assigns and each of their respective shareholders, directors, officers,
employees and agents (collectively, the "Indemnified Persons") harmless
from any and against any and all loss, liability, obligation, damage,
penalty, judgment, claim, deficiency, expense, interest, penalties,
attorneys' fees (including the fees and expenses of attorneys engaged
by
the Indemnified Person at the Indemnified Person's reasonable discretion)
and amounts paid in settlement ("Claims") to which any Indemnified
Person
may become subject arising
out of or relating to this agreement or the Collateral,
including
any Claims resulting from any Indemnified Person’s own
negligence,
except to the limited extent that the Claims are proximately caused
by the
Indemnified Person's
gross negligence or willful misconduct.
The indemnification provided for in this paragraph shall survive
the
termination of this agreement and shall not be affected by the presence,
absence or amount of or the payment or nonpayment of any claim under,
any
insurance.
|
| 8.10 |
Counterparts.
This agreement may be executed in multiple counterparts, each of
which,
when so executed, shall be deemed an original, but all such counterparts,
taken together, shall constitute one and the same
agreement.
|
| 8.11 |
Sole
Discretion of the Bank.
Whenever the Bank's consent or approval is required under this agreement,
the decision as to whether or not to consent or approve shall be
in the
sole and exclusive discretion of the Bank and the Bank's decision
shall be
final and conclusive.
|
| 8.12 |
Advice
of Counsel.
The Borrower acknowledges that it has been advised by counsel, or
had the
opportunity to be advised by counsel, in the negotiation, execution
and
delivery of this agreement and any Related
Documents.
|
| 8.13 |
Recovery
of Additional Costs. If
the imposition of or any change in any law, rule, regulation, or
guideline, or the interpretation or application of any thereof by
any
court or administrative or governmental authority (including any
request
or policy not having the force of law) shall impose, modify, or make
applicable any taxes (except federal, state, or local income or franchise
taxes imposed on the Bank), reserve requirements, capital adequacy
requirements, or other obligations which would (A) increase the cost
to
the Bank for extending or maintaining the Credit Facilities, (B)
reduce
the amounts payable to the Bank under the Credit Facilities, or (C)
reduce
the rate of return on the Bank's capital as a consequence of the
Bank's
obligations with respect to the Credit Facilities, then the Borrower
agrees to pay the Bank such additional amounts as will compensate
the Bank
therefor, within five (5) days after the Bank's written demand for
such
payment. The Bank's demand shall be accompanied by an explanation
of such
imposition or charge and a calculation in reasonable detail of the
additional amounts payable by the Borrower, which explanation and
calculations shall be conclusive in the absence of manifest
error.
|
| 8.14 |
Conflicting
Terms.
If
this agreement is inconsistent with any provision in any other Related
Documents, the Bank shall determine, in the Bank's sole and absolute
discretion, which of the provisions shall control any such
inconsistency.
|
| 8.15 |
Expenses.
The Borrower agrees to pay or reimburse the Bank for all its out-of-pocket
costs and expenses and reasonable attorneys' fees incurred in connection
with the development, preparation and execution of, and in connection
with
the enforcement or preservation of any rights under, this agreement,
any
amendment, supplement, or modification thereto, and any other documents
prepared in connection herewith or therewith. These costs and expenses
include without limitation any costs or expenses incurred by the
Bank in
any bankruptcy, reorganization, insolvency or other similar proceeding.
|
| 9. |
USA
PATRIOT ACT NOTIFICATION.
The following notification is provided to Borrower pursuant to Section
326
of the USA Patriot Act of 2001, 31 U.S.C. Section
5318:
|
IMPORTANT
INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government
fight the funding of terrorism and money laundering activities, Federal law
requires all financial institutions to obtain, verify, and record information
that identifies each person or entity that opens an account, including any
deposit account, treasury management account, loan, other extension of credit,
or other financial services product. What this means for Borrower: When Borrower
opens an account, if Borrower is an individual Bank will ask for Borrower's
name, taxpayer identification number, residential address, date of birth, and
other information that will allow Bank to identify Borrower, and if Borrower
is
not an individual Bank will ask for Borrower's name, taxpayer identification
number, business address, and other information that will allow Bank to identify
Borrower. Bank may also ask, if Borrower is an individual to see Borrower's
driver’s license or other identifying documents, and if Borrower is not an
individual to see Borrower's legal organizational documents or other identifying
documents.
| 10. |
WAIVER
OF SPECIAL DAMAGES.
THE BORROWER WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
ANY
RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER FROM THE BANK
IN ANY
LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES.
|
| 11. |
JURY
WAIVER.
THE BORROWER AND THE BANK HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY
AND
UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING
ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) BETWEEN
THE
BORROWER AND THE BANK ARISING OUT OF OR IN ANY WAY RELATED TO THIS
DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO
PROVIDE
THE FINANCING DESCRIBED HEREIN.
|
THIS
AGREEMENT AND THE OTHER WRITTEN RELATED DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
|
Address(es)
for Notices: Borrower:
|
||||||||
|
0000
Xxx Xxxxxxx, Xxxxx 000
Xxxxxx
Xxxxx 00000
|
Advanced
Materials, Inc.
|
|||||||
|
By:
|
/s/ Xxxxxxx X Xxxxxxxxx | |||||||
| Xxxxxxx X Xxxxxxxxx President and CFO | ||||||||
|
Printed
Name
|
Title
|
|||||||
|
Date
Signed:
|
February 26, 2007 | |||||||
|
Address
for Notices:
|
Bank:
|
|||||
|
0000
Xxxx Xxxxxx
Xxxxxx,
XX 00000
|
JPMorgan
Chase Bank, N.A.
|
|||||
|
By:
|
/s/Xxxxx X Xxxxxxxxxx | |||||
| Xxxxx X Xxxxxxxxxx |
SVP
|
|||||
|
Printed
Name
|
Title
|
|||||
|
Date
Signed:
|
March 1, 2007 | |||||