[GRAPHIC OMITTED] Credit Authorization Agreement
NBD Bank (the "Bank"), whose address is 000 Xxxxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx 00000-0000, has approved the credit facilities listed below
(collectively, the "Credit Facilities," and individually, as designated
below) to Ideal Instruments, Inc., a Michigan Corporation (the "Borrower"),
whose address is 0000 Xxxx Xxxxx Xxxxxx, Xxxxxxxx Xxxx, Xxxxxxxx 00000,
subject to the terms and conditions set forth in this agreement.
1 Credit Facilities.
1 Uncommitted Credit Authorizations. The Bank has approved the
uncommitted credit authorizations listed below (collectively,
the "Credit Authorizations," and individually, as designated
below) subject to the terms and conditions of this agreement
and the Bank's continuing satisfaction with the Borrower's
financial status. Disbursements under the Credit
Authorizations are solely at the Bank's discretion. Any
disbursement on one or more occasions shall not commit the
Bank to make any subsequent disbursement.
A. Facility A. The Bank has approved an uncommitted Credit
Authorization to the Borrower in the principal sum not
to exceed $_________ in the aggregate at any one time
outstanding ("Facility A"). Credit under Facility A
shall be in the form of disbursements evidenced by
credits to the Borrower's account and shall be repayable
as set forth in a Master Xxxxxx Note executed
concurrently (referred to in this agreement both
singularly and together with any other promissory notes
referenced in this Section 1 as the "Notes"). The
proceeds of Facility A shall be used for the following
purpose: ___________. Facility A shall expire on ________
unless earlier withdrawn.
[X] B. Facility B (Including Letters of Credit). The Bank has
approved an uncommitted Credit Authorization to the
Borrower in the principal sum not to exceed
$1,000,000.00 in the aggregate at any one time
outstanding ("Facility B"). Facility B shall include the
issuance of commercial letters of credit not exceeding
$150,000.00 in the aggregate at any one time
outstanding, expiring not later than March 31, 1999 (the
"Letters of Credit"). Each Letter of Credit shall be in
form acceptable to the Bank and shall bear a fee of ____%
per year of the face amount of each standby Letter of
Credit plus an issuance fee of $150,000.00 upon issuance
of each Letter of Credit. Credit under Facility B shall
be in the form of disbursements evidenced by credits to
the Borrower's account and shall be repayable as set
forth in a Master Demand Note executed concurrently
(referred to in this agreement both singularly and
together with any other promissory notes referenced in
this Section 1 as the "Notes") or by issuance of a
Letter of Credit upon completion of an application
acceptable to the Bank. The proceeds of Facility B shall
be used for the following purpose: working capital.
Facility B shall expire on September 30, 1998 unless
earlier withdrawn.
C. Facility C (Purchase Money Term Loans). The Bank has
approved an uncommitted credit authorization to the
Borrower in the principal sum not to exceed $_____ in the
aggregate at any one time outstanding ("Facility C").
Facility C shall be in the form of loans evidenced by
the Borrower's notes on the Bank's form (referred to in
this agreement both singularly and together with any
other promissory notes referenced in this Section 1 as
the "Notes"), the proceeds of which shall be used to
purchase the following equipment _______. Interest on each
loan shall accrue at a rate to be agreed upon by the
Bank and the Borrower at the time the loan is made. The
maturity of each note shall not exceed ____ months from
the note date. Notwithstanding the aggregate amount of
Facility C stated above, the original principal amount
of each loan shall not exceed the lesser of ____% of the
cost of the equipment purchased with loan proceeds or
$_____. Facility C shall expire ____ on unless earlier
withdrawn.
1.2 Term Loans. The Bank agrees to extend credit to the Borrower
in the form of term loan(s) (whether one or more, the "Term
Loans") in the principal sum(s) of ______, respectively,
bearing interest and payable as set forth in the Term Note(s)
executed concurrently (referred to in this agreement both
singularly and together with any other promissory notes
referenced in this Section 1 as the "Notes"). The proceeds of
the Term Loans shall be used for the following purpose:
______.
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2.0 Conditions Precedent.
2.1 Conditions Precedent to Initial Extension of Credit. Before
the first extension of credit under 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 if applicable, the letter
of credit applications, the security agreement,
financing statements, mortgage, guaranties,
subordination agreements and any other loan documents
which the Bank may reasonably require to give effect to
the transactions described by this agreement;
B. Evidence of Due Organization and Good Standing. Evidence
satisfactory to the Bank of the due organization and
good standing of the Borrower and every other business
entity that is a party to this agreement or any other
loan document required by this agreement; and
C. Evidence of Authority to Enter into Loan Documents.
Evidence satisfactory to the Bank that (i) each party to
this agreement or any other loan document required by
this agreement is authorized to enter into the
transactions described by this agreement and the other
loan documents, and (ii) the person signing on behalf of
each party is authorized to do so.
2.2 Conditions Precedent to Each Extension of Credit. Before any
extension of credit under this agreement, whether by
disbursement of a loan, issuance of a letter of credit, or
otherwise, the following conditions shall have been
satisfied:
A. Representations. The Representations contained in this
agreement shall be true on and as of the date of the
extension of credit;
B. No Event of Acceleration. No event of acceleration shall
have occurred and be continuing or would result from the
extension of credit;
C. Continued Satisfaction. The Bank shall have remained
satisfied with the Borrower's managerial and financial
status;
D. Additional Approvals, Opinions, and Documents. The Bank
shall have received such other approvals, opinions and
documents as it may reasonably request.
3.0 Borrowing Base/Annual Pay Down.
1 Borrowing Base. Notwithstanding any other provision of this
agreement, the aggregate principal amount outstanding at any
one time under Facility B shall not exceed the lesser of the
Borrowing Base or $1,000,000.00. Borrowing Base means:
A. 80% of the Borrower's domestic trade accounts receivable
in which the Bank has a perfected, first priority
security interest, excluding accounts more than 90 days
past due from the date of invoice, accounts subject to
offset or defense, government, bonded, affiliate, and
accounts otherwise unacceptable to the Bank, plus 50% of
foreign trade accounts receivable backed by commercial
letters of credit acceptable to Bank, plus
B. Inventory of the Borrower in which the Bank has a
perfected first priority security interest, valued at
the lower of cost or market but not exceeding
$700,000.00 in the aggregate, as follows:
(1) 50% of raw material inventory; and (2) 50% of
work-in-process inventory; and (3) 50% of finished goods
inventory, plus
4.0 Fees and Expenses.
4.1 Fees. Upon execution of this agreement, or as set forth
below, the Borrower shall pay the Bank the following fees,
all of which the Borrower acknowledges have been earned by
the Bank: ___________.
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4.2 Out-of-Pocket Expenses. The Borrower shall reimburse the Bank
for its out-of-pocket expenses and reasonable attorney's fees
(including the fees of in-house counsel) allocated to the
Credit Facilities.
5.0 Security.
5.1 Payment of the borrowings under the Credit Facilities shall
be secured by a first security interest and/or real estate
mortgage, as the case may be, covering the following property
and all its additions, substitutions, increments, proceeds
and products, whether now owned or later acquired
("Collateral"):
[X] A. Accounts Receivable. All of the Borrower's accounts,
chattel paper, general intangibles, instruments, and
documents (as those terms are defined in the Michigan
Uniform Commercial Code), rights to refunds of taxes
paid at any time to any governmental entity, and any
letters of credit and drafts under them given in support
of the foregoing, wherever located. The Borrower shall
deliver to the Bank executed security agreements and
financing statements in form and substance satisfactory
to the Bank.
[X] B. Inventory. All of the Borrower's inventory, wherever
located. The Borrower shall deliver to the Bank executed
security agreements and financing statements in form and
substance satisfactory to the Bank.
[X] C. Equipment. All of the Borrower's equipment, wherever
located. The Borrower shall deliver to the Bank executed
security agreements and financing statements in form and
substance satisfactory to the Bank.
5.2 No forbearance or extension of time granted any subsequent
owner of the Collateral shall release the Borrower from
liability.
5.3 Additional Collateral/Setoff. To further secure payment of
the borrowings under the Credit Facilities and all of the
Borrower's other liabilities to the Bank, the Borrower grants
to the Bank a continuing security interest in: (i) all
securities and other property of the Borrower in the custody,
possession or control of the Bank (other than property held
by the Bank solely in a fiduciary capacity) and (ii) all
balances of deposit accounts of the Borrower with the Bank.
The Bank shall have the right at any time to apply its own
debt or liability to the Borrower, or to any other party
liable for payment of the borrowings under the Credit
Facilities, in whole or partial payment of such borrowings or
other present or future liabilities, without any requirement
of mutual maturity.
5.4 Cross Lien. Any of the Borrower's other property in which the
Bank has a security interest to secure payment of any other
debt, whether absolute, contingent, direct or indirect,
including the Borrower's guaranties of the debts of others,
shall also secure payment of and be part of the Collateral
for the Credit Facilities.
[X] 6.0 Guaranties. Payment of the Borrower's liabilities under the
Credit Facilities shall be guaranteed by Neogen Corporation, by
execution of the Bank's form of guaranty agreement. The liability
of the guarantors, if more than one, shall be joint and several.
[X] 7.0 Subordination. The Credit Facilities shall be supported by the
subordination of debt owing from the Borrower to Neogen
Corporation, including without limitation debt owing in the amount
of $1,000,000.00, in manner and by agreement satisfactory to the
Bank.
8.0 Affirmative Covenants. So long as any debt remains outstanding
under the Credit Facilities, the Borrower, and each of its
subsidiaries, if any, shall:
8.1 Insurance. Maintain insurance with financially sound and
reputable insurers covering its properties and business
against those casualties and contingencies and in the types
and amounts as shall be in accordance with sound business and
industry practices.
8.2 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
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8.3 Financial Records. Maintain proper books and records of
account, in accordance with generally accepted accounting
principles where applicable, and consistent with financial
statements previously submitted to the Bank. The Bank retains
the right to inspect the Collateral and business records
related to it at such times and at such intervals as the Bank
may reasonably require.
8.4 Notice. Give prompt notice to the Bank of the occurrence of
(i) any Event of Acceleration, and (ii) any other
development, financial or otherwise, which would affect the
Borrower's business, properties or affairs in a materially
adverse manner.
8.5 Collateral Audits. Permit the Bank or its agents to perform
audits of the Collateral. The Borrower shall compensate the
Bank for such audits in accordance with the Bank's schedule
of fees as amended from time to time.
8.6 Management. Maintain _____ as ____.
8.7 Financial Reports. Furnish to the Bank whatever information,
books, and records the Bank may reasonably request, including
at a minimum: If the Borrower has subsidiaries, all financial
statements required will be provided on a consolidated and on
a separate basis.
[X] A. Within 20 days after each quarterly period, a balance
sheet as of the end of that period and statements of
income, cash flows, and retained earnings from the
beginning of that fiscal year to the end of that period,
certified as correct by one of its authorized agents.
[X] B. Within 120 days after, and as of the end of, each of
its fiscal years, a detailed financial statement
including a balance sheet and statements of income,
retained earnings, and cash flows.
[X] C. Within 20 days after and as of the end of each calendar
quarter, the following lists, each certified as correct
by one of its authorized agents: [X] (1) a list of
accounts receivable, aged from date of invoice; [ ] (2)
a list of accounts payable, aged from date of receipt;
[X] (3) a list of inventory, valued at the lower of cost
or market.
D. Within ___ days after and as of the end of each calendar
year, the signed personal financial statement of ____.
E Within five (5) days after filing, a signed copy of the
annual tax return, with exhibits, of _____.
F Within 120 days after, and as of the end of, each of its
fiscal years, a detailed audit of Neogen Corporation
certified by an independent certified public accountant
of recognized standing.
9.0 Negative Covenants.
9.1 Definitions. As used in this agreement, the following terms
shall have the following respective meanings:
A. "Subordinated Debt" means debt subordinated to the Bank
in manner and by agreement satisfactory to the Bank.
B. "Tangible Net Worth" means total assets less intangible
assets, total liabilities, and all sums owing from
stockholders, members, or partners, as the case may be,
and from officers, managers, and directors. Intangible
assets include goodwill, patents, copyrights, mailing
lists, catalogs, trademarks, bond discount and
underwriting expenses, organization expenses, and all
other intangibles.
9.2 Unless otherwise noted, the financial requirements set forth
in this section shall 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.
9.3 Without the written consent of the Bank, so long as any debt
remains outstanding under the Credit Facilities, the Borrower
shall not: (where appropriate, covenants apply on a
consolidated basis)
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A. Dividends. Acquire or retire any of its shares of
capital stock, or declare or pay dividends or make any
other distributions upon any of its shares of capital
stock or percentage ownership interests, except
dividends payable in its capital stock and dividends
payable to "Subchapter S" corporation shareholders and
distributions payable to LLC members in amounts
sufficient to pay the shareholders' or members' income
tax obligations related 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 any
such shares or securities.
C. Debt. Incur, or permit to remain outstanding, debt for
borrowed money or installment obligations, except debt
reflected in the latest financial statement of the
Borrower furnished to the Bank prior to execution of
this agreement and not to be paid with proceeds of
borrowings under the Credit Facilities. For purposes of
this covenant, the sale of any accounts receivable shall
be deemed the incurring of debt for borrowed money.
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
nondelinquent liabilities for taxes, worker's
compensation, unemployment insurance, social security
and pension liabilities; and liens for taxes being
contested in good faith.
F. Advances and Investments. Purchase or acquire any
securities of, or make any loans or advances to, or
investments in, any person, firm or corporation, except
obligations of the United States Government, open market
commercial paper rated one of the top two ratings by a
rating agency of recognized standing, or certificates of
deposit in insured financial institutions.
G. 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 shall
furnish to the Bank a completed Federal Reserve Board
Form U-1.
H. Working Capital. Permit the difference between its
current assets [less all sums owing from stockholders,
member or partners, as the case may be, and officers,
managers and directors] and current liabilities [plus
all sums (other than Subordinated Debt) owing to
stockholders, members or partners, as the case may be,
and officers, managers and directors] to be less than
$_____.
I. Tangible Net Worth [Plus Subordinated Debt]. Permit its
Tangible Net Worth [plus Subordinated Debt] to be less
than $875,000.00.
J. Current Ratio. Permit the ratio of its current assets to
its current liabilities to be less than ____ to 1.00.
K. Leverage Ratio. Permit the ratio of its total liabilities
to its Tangible Net Worth [plus Subordinated Debt] to
exceed _____ to 1.00.
L. Fixed Assets. Expend for, contract for, lease, rent, or
otherwise acquire fixed assets, if the expense to the
Borrower and all subsidiaries, if any, shall exceed $_____
in the aggregate in any one fiscal year.
M. Leases. Contract for or assume in any manner lease
obligations if the aggregate of all payments shall
exceed $ in any one fiscal year.
N. Compensation. Pay, or award compensation of any kind, in
any one fiscal year, to exceeding ___________
10.0 Representations by Xxxxxxxx. Each 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 the Borrower 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 in accordance with their terms;
and (c) all balance sheets, profit and loss statements, and other
financial statements furnished to the Bank are accurate and fairly
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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. Each Borrower,
if other than a natural person, further represents that: (a) it is
duly organized, existing and in good standing under the laws of
the jurisdiction under which it was organized; 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 bylaws, or any
partnership, operating or other agreement governing its affairs.
11.0 Acceleration.
11.1 Events of Acceleration. If any of the following events
occurs, the Credit Facilities shall terminate and all
borrowings under them shall be due immediately, without
notice, at the Bank's option, whether or not the Bank has
made demand.
A. The Borrower or any guarantor of any of the Credit
Facilities or the Notes ("Guarantor") fails to pay
when due any amount payable under the Credit
Facilities or under any agreement or instrument
evidencing debt to any creditor;
B. The Borrower or any Guarantor (a) fails to observe or
perform any other term of this agreement or the
Notes; (b) makes any materially incorrect or
misleading representation, warranty, or certificate
to the Bank; (c) makes any materially incorrect or
misleading representation in any financial statement
or other information delivered to the Bank; or (d)
defaults under the terms of any agreement or
instrument relating to any debt for borrowed money
(other than borrowings under the Credit Facilities)
such that the creditor declares the debt due before
its maturity;
C. There is a default under the terms of any loan
agreement, mortgage, security agreement or any other
document executed as part of the Credit Facilities,
or any guaranty of the borrowings under the Credit
Facilities becomes unenforceable in whole or in part,
or any Guarantor fails to promptly perform under its
guaranty;
D. A "reportable event" (as defined in the Employee
Retirement Income Security Act of 1974 as amended)
occurs that would permit the Pension Benefit Guaranty
Corporation to terminate any employee benefit plan of
the Borrower or any affiliate of the Borrower;
E. The Borrower or any Guarantor becomes insolvent or
unable to pay its debts as they become due;
F. The Borrower or any Guarantor (a) makes an assignment
for the benefit of creditors; (b) consents to the
appointment of a custodian, receiver or trustee for
it or for a substantial part of its assets; or (c)
commences any proceeding under any bankruptcy,
reorganization, liquidation or similar laws of any
jurisdiction;
G. A custodian, receiver or trustee is appointed for the
Borrower or any Guarantor or for a substantial part
of its assets without its consent and is not removed
within 60 days after such appointment;
H. Proceedings are commenced against the Borrower or any
Guarantor under any bankruptcy, reorganization,
liquidation, or similar laws of any jurisdiction, and
such proceedings remain undismissed for 60 days after
commencement; or the Borrower or Guarantor consents
to the commencement of such proceedings;
I. Any judgment is entered against the Borrower or any
Guarantor, or any attachment, levy or garnishment
is issued against any property of the Borrower or any
Guarantor;
J. The Borrower or any Guarantor dies;
K. The Borrower or any Guarantor, without the Bank's
written consent, (a) is dissolved, (b) merges or
consolidates with any third party, (c) leases, sells
or otherwise conveys a material part of its assets or
business outside the ordinary course of business, (d)
leases, purchases, or otherwise acquires a material
part of the assets of any other corporation or
business entity, except in the ordinary course of
business, or (e) agrees to do any of the foregoing,
(notwithstanding the foregoing, any subsidiary may
merge or consolidate with any other subsidiary, or
with the Borrower, so long as the Borrower is the
survivor);
L. The loan-to-value ratio of any pledged securities at
any time exceeds ___%, and such excess continues for
five (5) days after notice from the Bank to the
Borrower;
M. There is a substantial change in the existing or
prospective financial condition of the Borrower or
any Guarantor which the Bank in good faith determines
to be materially adverse; or
N The Bank in good faith shall deem itself insecure.
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11.2 Remedies. If the borrowings under the Credit Facilities are
not paid at maturity, whether by demand, acceleration or
otherwise, the Bank shall have all of the rights and
remedies provided by any law or agreement. Any requirement
of reasonable notice shall be met if the Bank sends the
notice to the Borrower at least seven (7) days prior to the
date of sale, disposition or other event giving rise to the
required notice. The Bank is authorized to cause all or any
part of the Collateral to be transferred to or registered
in its name or in the name of any other person, firm or
corporation, with or without designation of the capacity of
such nominee. The Borrower shall be liable for any
deficiency remaining after disposition of any Collateral.
The Borrower is liable to the Bank for all reasonable costs
and expenses of every kind incurred in the making or
collection of the Credit Facilities, including, without
limitation, reasonable attorney's fees and court costs
(whether attributable to the Bank's in-house or outside
counsel). These costs and expenses shall include, without
limitation, any costs or expenses incurred by the Bank in
any bankruptcy, reorganization, insolvency or other similar
proceeding.
12.0 Miscellaneous.
12.1 Notice from one party to another relating to this agreement
shall be deemed effective if made in writing (including
telecommunications) and delivered to the recipient's
address, telex number or fax number set forth under its
name below by any of the following means: (a) hand
delivery, (b) registered or certified mail, postage
prepaid, with return receipt requested, (c) first class or
express mail, postage prepaid, (d) Federal Express, or like
overnight courier service or (e) fax, telex or other wire
transmission with request for assurance of receipt in a
manner typical with respect to communication of that type.
Notice made in accordance with this section shall be deemed
delivered upon receipt if delivered by hand or wire
transmission, 3 business days after mailing if mailed by
first class, registered or certified mail, or one business
day after mailing or deposit with an overnight courier
service if delivered by express mail or overnight courier.
12.2 No delay on the part of the Bank in the exercise of any
right or remedy shall operate as a waiver. No single or
partial exercise by the Bank of any right or remedy shall
preclude 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 shall be effective unless in writing
and signed by the Bank, nor shall a waiver on one occasion
be construed as a bar to or waiver of that right on any
future occasion.
12.3 This agreement, the Notes, and any related loan documents
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 shall be 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
such validity, illegality or unenforceability in one
jurisdiction shall not affect the validity, legality or
enforceability of the obligations of the Borrower under
this agreement or the Notes in any other jurisdiction.
12.4 The Borrower, if more than one, shall be jointly and
severally liable.
12.5 This agreement is delivered in the State of Michigan and
governed by Michigan law. This agreement is binding on the
Borrower and its successors, and shall inure to the benefit
of the Bank, its successors and assigns.
12.6 Section headings are for convenience of reference only and
shall not affect the interpretation of this agreement.
13.0 Waiver of Jury Trial. The Bank and the Borrower knowingly and
voluntarily waive any right either of them have to a trial by jury
in any proceeding (whether sounding in contract or tort) which is
in any way connected with this or any related agreement, or the
relationship established under them. This provision may only be
modified in a written instrument executed by the Bank and the
Borrower.
Executed by the parties on: January 13, 1998.
Borrower:
NBD Bank Ideal Instruments, Inc.
By:_________________________________ By:______________________________
Xxxxxx X. Xxxxxxx, Vice President Xxxxx X. Xxxxxxx, President/CEO
By:______________________________
Xxx X. Xxxxxxxx, Treasurer
Address for Notices: Address for Notices:
000 Xxxxx Xxxxxxx Xxxxxx 000 Xxxxxx Xxxxx
Xxxxxxx, XX 00000 Xxxxxxx, XX 00000-1509
Fax/Telex No. (000) 000-0000 Fax/Telex No. (000) 000-0000
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