Exhibit 10.50
LOAN AGREEMENT
AGREEMENT made as of the 26th day of June, 2002 by and between
SOVEREIGN BANK, with an office at 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx
(hereinafter referred to as the "LENDER"), and BTU INTERNATIONAL, INC., a
Delaware corporation with its chief executive office, principal place of
business and mailing address at 00 Xxxxxxx Xxxx, Xxxxx Xxxxxxxxx, Xxxxxxxxxxxxx
00000 (hereinafter referred to as the "BORROWER").
SECTION 1. DEFINITIONS. As used herein:
1.1. ACCOUNTING TERMS All accounting terms not specifically defined
herein shall be construed in accordance with GAAP and all financial data
submitted pursuant to this Loan Agreement shall be prepared in accordance with
GAAP.
1.2. AFFILIATES - means any Person: (1) which directly or indirectly
Controls, or is Controlled by, or is under common Control with, the Borrower or
any subsidiary of the Borrower; (2) which directly or indirectly beneficially
owns or holds any class of voting stock of the Borrower or any subsidiary; or
(3) the voting stock of which is directly or indirectly beneficially owned or
held by the Borrower or any subsidiary.
1.3. BANKING DAY - means with respect to any date that is specified in
this Agreement, to be subject to adjustment in accordance with the applicable
Business Day Convention, (i) a day on which commercial lenders settle payments
in the Commonwealth of Massachusetts or London, England if the payment
obligation is calculated by reference to any LIBOR rate, (ii) in any other case,
any day on which Lender is open for business.
1.4. BORROWING DATE - means any day upon which a LIBOR Rate Loan is
made.
1.5. BORROWING REQUEST - means a request in the form of Exhibit 1.4 by
the Borrower to the Lender to loan or advance funds in the form of either a
Prime Rate Loan or a LIBOR Rate Loan.
1.6. BUSINESS DAY CONVENTION - means the convention for adjusting any
relevant date if it would otherwise fall on a day that is not a Banking Day.
Reference to a payment date, when used in conjunction with the term "Business
Day Convention", shall mean that an adjustment will be made if the date would
otherwise fall on a day that is not a Banking Day so that the date will be the
first following day that is a Banking Day.
1.7. CONTROL - means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise.
1.8. EFFECTIVE DATE - means the date of execution of this Loan
Agreement.
1.9. ELIGIBLE INVENTORY - means the amount of Inventory, net of
reserves, (valued at the lesser of cost to the Borrower or market value)
appearing on the Borrower's books of account (maintained in accordance with
GAAP) which continually meets the following requirements:
(a) It is raw materials, work in process or finished goods and is
saleable in the ordinary course of business;
(b) It is owned by the Borrower and is not subject to any lien or
security interest whatsoever
other than liens permitted by Section 6.1.
The value of Eligible Inventory shall be its book value determined in
accordance with GAAP, net of reserves. In no event shall Eligible Inventory
include damaged, obsolete, outdated and otherwise unsaleable Inventory.
1.10. ELIGIBLE RECEIVABLES - The term "ELIGIBLE RECEIVABLE", as used
herein, means the amount of the Borrower's accounts receivable appearing on the
Borrower's books of account (maintained in accordance with GAAP) (hereinafter an
"ACCOUNT") owing to Borrower, whether domestic or foreign, which is a bona fide
existing obligation owed to the Borrower and which met the following
specifications at the time it came into existence and continues to meet the same
until it is collected in full:
(a) The Account is not more than ninety (90) days past invoice date;
(b) The Account arose from (i) the performance of services or (ii) an
outright sale of goods by Borrower, such goods have been shipped to the account
debtor, and Borrower has possession of, or has delivered to Lender, receipts
evidencing such shipment or (iii) a contract with a customer calling for
progress billing and the Borrower has satisfied the contract's terms and
conditions for such billing;
(c) The Account is not subject to any prior assignment, claim, lien, or
security interest, and Borrower will not make any further assignment thereof or
create any further security interest therein, nor permit Borrower's rights
therein to be reached by attachment, levy, garnishment or other judicial
process;
(d) The Account is net of set-offs, credits, allowances or adjustments
by the account debtor, and the account debtor has not disputed its liability
thereon and has not returned any of the goods from the sale of which the Account
arose;
(e) The Account arose in the ordinary course of Borrower's business and
did not arise from the performance of services or a sale of goods to a supplier
or employee of the Borrower;
(f) No notice of bankruptcy or insolvency of the account debtor has
been received by or is known to the Borrower;
(g) The Account is not owed by an entity which is a parent,
brother/sister, subsidiary or other Affiliate of Borrower;
(h) The Account is not evidenced by a promissory note, unless such note
has been delivered to the Lender;
(i) The Account did not arise out of any sale made on a xxxx and hold,
dating or delayed shipment basis; or
(j) The Account is not owed by United States governmental agencies or
by any state government agencies which, in order to perfect a lien, would
require execution by such agency of any assignment or other documentation.;
PROVIDED THAT if, at any time Twenty-five (25%) percent or more of the
aggregate amount of the Accounts due from any account debtor (or such higher
percentage as the Lender has agreed may be applicable to specified account
debtors) are more than ninety (90) days past the invoice date, none of the
Accounts (then existing or hereafter or thereafter arising) due from such
account debtor shall be deemed to be Eligible Receivables until such time as
less than Twenty-five (25%) percent (or such higher
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percentage as may be applicable to said account debtor, if the Lender has so
agreed) of the Accounts due from such account debtor are (as a result of actual
payments received thereon) more than ninety (90) days past the invoice date.
Accounts payable by Borrower to an account debtor shall be netted against
Accounts due from such account debtor and the difference (if positive) shall
constitute Eligible Receivables from such account debtor for purposes of
determining the Borrowing Base. Characterization of any Account due from an
account debtor as a Eligible Receivable shall not in any way obligate Lender to
accept any Account subsequently arising from such account debtor to be, or to
continue to deem such Account to be, a Eligible Receivable. It is Borrower's
responsibility to determine the credit-worthiness of account debtors and all
risks concerning the same and collection of Accounts are with Borrower; and all
Accounts whether or not Eligible Receivables constitute collateral.
The Lender, in its sole discretion, may, on a case by case basis, by
written notice, waive one or more of the specifications enumerated above
required of a Eligible Receivable, provided however, a waiver of a specification
or requirement in one instance shall not be deemed a waiver of any other
specification nor a waiver of said specification or requirement on any other
occasion.
PROVIDED FURTHER, in the event that the Borrower grants the Lender a
security interest in the Borrower's assets, then, in such instance, all
Accounts, whether or not the Accounts are deemed Eligible Receivables, and all
Inventory, whether or not Eligible Inventory, shall constitute a portion of the
Lender's collateral.
1.11. GAAP - means the generally accepted accounting principles
observed in the preparation of the Borrower's audited financial statements for
its fiscal year ended December 31, 2001, consistently applied.
1.12. HEDGING OBLIGATIONS - means, with respect to the Borrower, all
liabilities of the Borrower to the Lender under interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements, or any other
agreements or arrangements designed to protect the Borrower against fluctuations
in interest rates or currency exchange rates.
1.13. INTERBANK MARKET - means, with respect to any LIBOR Rate Loan,
any recognized interbank Eurodollar market chosen in good faith by Lender.
1.14. INTEREST MATURITY DATE - means the date on which an Interest
Period expires.
1.15. INTEREST PAYMENT DATE - means relative to any LIBOR Rate Loan,
having an Interest Period of three (3) months or less, the last Banking Day of
such Interest Period, and as to any LIBOR Rate Loan having an Interest Period
longer than three (3) months, each Banking Day which is three (3) months, or a
whole multiple thereof, after the first day of such Interest Period and the last
day of such Interest Period.
1.16. INTEREST PERIOD - means relative to any LIBOR Rate Loans
(i) initially, the period beginning on (and including) the date on
which such LIBOR Rate Loan is made or continued as, or
converted into, a LIBOR Rate Loan pursuant to Section 2.4(b)
and ending on (but excluding) the day which numerically
corresponds to such date 30, 60, 90, or, if available, 180
days, in each case as the Borrower may select in a written
notice to the Lender at least two business days prior to the
date on which such LIBOR Rate Loan is to take effect; and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period
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applicable to such LIBOR Rate Loan and ending 30, 60, 90, or,
if available, 180 days thereafter, as selected by the
Borrower by irrevocable notice to the Lender not less than
two Banking Days prior to the last day of the then current
Interest Period with respect thereto;
provided, however, that
(a) the Borrower shall not be permitted to select Interest Periods to
be in effect at any one time which have expiration dates occurring on more than
six (6) different dates;
(b) Interest Periods commencing on the same date for LIBOR Rate Loans
comprising part of the same advance under this Agreement shall be of the same
duration;
(c) Interest Periods for LIBOR Rate Loans in connection with which
Borrower has entered into a Hedging Obligation with the Lender shall be of the
same duration as the relevant periods set under such Hedging Obligation;
(d) if such Interest Period would otherwise end on a day which is not a
Banking Day, such Interest Period shall end on the next following Banking Day
unless such day falls in the next calendar month, in which case such Interest
Period shall end on the first preceding Banking Day; and
(e) no Interest Period may end later than the Termination Date.
1.17. INVENTORY - means all "Inventory" as that term is defined in the
Uniform Commercial Code as of the date hereof, including, without limitation,
any and all goods, merchandise or other personal property, wheresoever located
and whether or not in transit, now owned or hereafter acquired by the Borrower,
which is or may at any time be held for sale or lease, or furnished or to be
furnished under any contract of service or held as raw materials, work in
process, finished goods, supplies or materials used or consumed in the
Borrower's business, and all such property the sale or other disposition of
which has given rise to Accounts, Chattel Paper, Documents, or Instruments and
which has been returned to or repossessed or stopped in transit by the Borrower.
1.18. LETTERS OF CREDIT. Those Letters of Credit issued by Lender
under Section 2.8 hereof.
1.19. LEVERAGE RATIO- has the meaning provided in Schedule A.
1.20. LIBOR INTEREST RATE - means, relative to any LIBOR Rate Loan to
be made, continued or maintained as, or converted into, a LIBOR Rate Loan for
any Interest Period, a rate per annum (rounded to the nearest 1/16%) determined
pursuant to the following formula:
LIBOR Interest Rate = LIBOR Rate
----------
(1.0 - LIBOR Reserve Percentage)
1.21. LIBOR RATE - means relative to any Interest Period for LIBOR Rate
Loans, (a) the offered rate for deposits of U.S. Dollars in an amount
approximately equal to the amount of the requested LIBOR Rate Loan for a term
coextensive with the designated Interest Period available in the London
inter-bank market which appears on the Telerate Page 3750 as of 11:00 a.m.
London time on the day which is two London Banking Days prior to the beginning
of such Interest Period or (b) if no such rate appears on the Telerate Page 3750
(or any successor service) the rate of interest determined by the Lender in its
sole discretion to approximate the rate offered in the London interbank market
for a period equal to such LIBOR Interest Period.
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1.22. LIBOR RATE LOAN(S) - means any loan or advance the rate of
interest applicable to which is based upon the LIBOR Rate.
1.23. LIBOR RESERVE PERCENTAGE - means, relative to any day of any
Interest Period for LIBOR Rate Loans, the maximum aggregate (without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements (including all basic, emergency, supplemental, marginal and other
reserves and taking into account any transitional adjustments or other scheduled
changes in reserve requirements) under any regulations of the Board of Governors
of the Federal Reserve System (the "Board") or other governmental authority
having jurisdiction with respect thereto as issued from time to time and then
applicable to assets or liabilities consisting of "Eurocurrency Liabilities", as
currently defined in Regulation D of the Board, having a term approximately
equal or comparable to such Interest Period.
1.24. LOAN AGREEMENT - means this Loan Agreement, as the same may
hereafter be supplemented, modified or amended.
1.25. LOAN DOCUMENTS - means any and all agreements, instruments,
documents, security agreements, mortgages, financing statements, and supplements
thereto and relating to the Loan, or entered into between the Borrower in favor
of, or with, the Lender, at any time, for any purpose, including, without
limitation, the Loan Agreement, any Term Notes, as defined in the Loan
Agreement, hereafter executed by the Borrower, and the Security Agreement, if
any, executed by the Borrower.
1.26. LONDON BANKING DAY - means a day on which dealings in US dollar
deposits are transacted in the London interbank market.
1.27. MARGIN - shall mean Two and 25/100 (2.25%) percent (i.e., 225
basis points), unless the financial statements for the most recent fiscal
quarter and the corresponding covenant compliance certificate submitted by the
Borrower report a Leverage Ratio which is less than .60 to 1.0 but equal to or
greater than .40 to 1.0 (a "TIER TWO LEVERAGE RATIO"), in which event the Margin
shall be One and 75/100 (1.75%) percent (i.e., 175 basis points), or (ii) the
financial statements for the most recent fiscal quarter and corresponding
covenant compliance certificate submitted by the Borrower report a Leverage
Ratio of the Borrower which is less than .40 to 1.0 (a "TIER ONE LEVERAGE
RATIO"), in which event the Margin shall be One and 25/100 (1.25%) percent
(i.e., 125 basis points). Such adjustments shall be effective on the first
business day of the month next following the Lender's receipt of the financial
statement and covenant compliance certificate evidencing attainment of a Tier
One or Tier Two Leverage Ratio, as the case may be, provided, however,
adjustments will not take effect with regard to pre-existing LIBOR Rate Loans,
but such adjusted Margin shall be effective with regard to LIBOR Rate Loans
advanced on or after the date of the adjustment or conversions of Prime Rate
Loans to LIBOR Rate Loans on or after the date of such adjustment.
1.28. NOTE - means the Revolving Note, as defined in Section 2.3 below
and the term "NOTES" means the Revolving Note and any and all Term Notes, as
defined in Section 2.6.
1.29. OBLIGATIONS - means all loans, advances, debts, liabilities,
obligations, covenants and duties owing by the Borrower to the Lender of every
kind and description (whether or not evidenced by any note or other instrument
and whether or not for the payment of money), direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, whether or
not such obligations are related to the transaction described in this Loan
Agreement, by class, or kind, or whether or not contemplated by the parties at
the time of the granting of this security interest, including without
limitation, all interest, fees, charges, expenses and attorneys' fees chargeable
to the Borrower or incurred by the Lender in connection with the Borrower's
account whether provided for herein or in any Supplemental
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Agreement, including all Hedging Obligations.
1.30. PERSON - means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority, or other entity of whatever nature.
1.31. PRIME RATE - means the variable per annum rate of interest so
designated from time to time by the Lender as its prime rate. The Prime Rate is
a reference rate and does not necessarily represent the lowest or best rate
being charged to any customer. The rate of interest hereunder shall change
simultaneously and automatically, without further notice, upon the Lender's
determination and designation from time to time of the Prime Rate. The Lender's
determination and designation from time to time of the Prime Rate shall not in
any way preclude the Lender from making loans to other borrowers at rates that
are higher or lower than or different from the referenced rate.
1.32. PRIME RATE LOANS - means when used in the singular any Loan on
which the Interest rate is calculated by reference to the Prime Rate, and, when
used in the plural, shall mean all such Loans.
1.33. RESERVE RATE - means the rate (expressed as a decimal) at which
Lender would be required to maintain reserves under REGULATION D of the Board of
Governors of the Federal Reserve System against Eurodollar Liabilities if such
Liabilities were outstanding. The LIBOR Interest Rate shall be adjusted
automatically as of the effective date of any change in the Reserve Rate.
1.34. SUPPLEMENTAL AGREEMENTS - means any and all agreements,
instruments, documents, security agreements, mortgages, financing statements,
and supplements thereto granting or intending to grant to the Lender any lien,
security interest, pledge, assignment or indemnification to secure the
Obligations, or entered into between the Borrower or Guarantor in favor of, or
with, and the Lender, at any time, for any purpose.
1.35. TERMINATION DATE - means May 31, 2006, as it may be extended, in
the Lender's sole discretion, as set forth in Section 2.7 hereof.
1.36. VARIABLE RATE - has the meaning provided in Section 2.4(a).
1.37. ADDITIONAL DEFINITIONS Unless otherwise specifically defined
herein, all terms used in this Loan Agreement and in all documents referred to
herein and which have been defined in Articles 1, 2 or 9 of the Massachusetts
Uniform Commercial Code, shall be interpreted and construed in light of the
sections, the definitions, the "official comment", and the definitional and
substantive cross-references of the Uniform Commercial Code.
SECTION 2. TERMS OF BORROWING.
2.1. REVOLVING LOAN. The Lender hereby agrees that it will loan to the
Borrower and the Borrower may borrow from the Lender, from time to time on
notice to the Lender as provided below (the "REVOLVING LOAN") such amounts as
the Borrower may request from time to time, provided that the aggregate amount
borrowed hereunder shall not exceed the lesser of:
(a) the Borrowing Base, as defined below; or
(b) FOURTEEN MILLION ($14,000,000.00) DOLLARS.
For purposes of this Agreement, except as otherwise expressly set forth
herein, the term
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"BORROWING Base" shall be deemed to mean a sum equal to:
(1) One Hundred (100%) Percent of all cash balances from all
cash accounts of the Borrower, not to exceed, in any event,
One Million ($1,000,000.00) Dollars; PLUS
(2) Eighty (80%) Percent of the Eligible Receivables; PLUS
(3) Thirty-Five (35%) Percent of the Borrower's Eligible
Inventory, with Inventory
advances not to exceed, in any event, Four Million
($4,000,000.00) Dollars; PLUS
(4) Eighty (80%) Percent of the higher of the (i) net book value
or (ii) appraised value of Borrower's Fixed Assets, as
defined in Section 2.2 below;
LESS
(5) The aggregate face amount(s) of any Letter of Credit
outstanding hereunder plus the outstanding amount, if any,
of all amounts previously drawn under any Letter(s) of
Credit which have not been reimbursed to Lender by Borrower.
In the event of an acquisition of a business by the Borrower, (i) for
purposes of calculating the Borrowing Base applicable to the Loan the proceeds
of which are being used by the Borrower to make the acquisition of such
business, the Borrowing Base shall include the Eligible Receivables, the
Eligible Inventory and the Fixed Assets of the business being acquired, and (ii)
until such time as a satisfactory field examination of the acquired business has
occurred (which Lender agrees to arrange promptly and without unreasonable
delay), the Borrowing Base shall be reduced to the Seventy-five (75%) percent of
the amount which would otherwise be available under this Section 2.1. and after
the conclusion of a field exam, satisfactory to the Bank in its reasonable
judgment (which the Lender agrees to arrange promptly without unreasonable
delay), the Borrowing Base shall return to the calculation set forth above.
The loans made pursuant to this Section (including all Loans converted
to Term Loans as described in Section 2.6) shall be known as the "LOAN" or
"LOANS", as the context requires or permits. The making of Loans, advances, and
credits by Lender to the Borrower in excess of the above described Borrowing
Base formula is for the benefit of the Borrower and does not affect the
obligations of Borrower hereunder; all such Loans constitute Obligations and
must be repaid by Borrower in accordance with the terms of this Agreement.
2.2. BORROWING BASE REPORT, ETC. For purposes of computing the
Borrowing Base, within fifteen (15) days after the end of each month, the
Borrower shall furnish to the Lender information adequate to identify Accounts
and Inventory at times and in form and substance as may be required by the
Lender, including, without limitation, a Borrowing Base Certificate in the form
attached hereto as Exhibit 2.2, a deposit account report (showing cash balances
in all locations), an Accounts agings (also known as a receivables aging), an
Inventory summary and a Fixed Asset listing (such as a depreciation schedule),
each certified by the President, Treasurer or Chief Financial Officer as being
true, accurate and complete, together with such certificates as the Lender may
reasonably require from the Borrower representing that no Event of Default has
occurred and is continuing and that the Borrower knows of no event which, but
for the passage of time or the giving of notice, would create an Event of
Default. Together with each schedule, the Borrower shall, upon request of the
Lender, furnish copies of customers' invoices or the
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equivalent, and original shipping or delivery receipts for all merchandise sold,
and the Borrower warrants the genuineness thereof.
For purposes of Section 2.1, the term "FIXED ASSETS" shall mean the
Borrower's equipment, furniture and fixtures, but such term shall exclude
leasehold improvements, goodwill, software and other intangible assets. In
measuring the value of the Fixed Assets, the Lender shall use Eighty (80%)
percent of the net book value of said Fixed Assets (determined in accordance
with GAAP), unless the Borrower elects to have its Fixed Assets appraised by an
appraiser reasonably satisfactory to the Lender, at the Borrower's sole expense,
in which event, Eighty (80%) percent of the appraised value of the Fixed Assets
may be substituted as the Fixed Asset component of the Borrowing Base. Such
appraisal shall be updated at the expense of the Borrower upon request by the
Lender, but not more than once annually.
2.3. REVOLVING NOTE/REPAYMENT OF THE REVOLVING LOAN. All advances under
the Revolving Credit shall be evidenced by a Revolving Credit Note from Borrower
to the order of Lender dated of even date herewith (the "REVOLVING NOTE"), such
Revolving Note to be in the form of Exhibit 2.3 hereto. Each advance under the
Revolving Note shall be recorded in an account on the Lender's books in which
shall also be recorded accrued interest on advances, payments on such advances,
and other appropriate debits and credits as herein provided, and such account
shall constitute prima facie evidence of the information contained therein. In
the event the Revolving Credit at any time exceeds the Borrowing Base, the
Borrower will immediately, upon notification thereof from the Lender, repay to
the Lender the amount by which the Revolving Credit exceeds the Borrowing Base.
2.4. INTEREST ON THE REVOLVING CREDIT. All Loans shall bear interest
as described below and shall be evidenced by the Revolving Note and shall be
payable as described therein.
(a) PRIME RATE LOANS. By delivering a Borrowing Request (or providing
telephonic notice confirmed in a writing in the form of a Borrowing Request) to
the Lender on or before 10:00 a.m., New York time, on a Banking Day, the
Borrower may, from time to time, irrevocably request that a Prime Rate Loan be
made in a minimum amount of Fifty Thousand Dollars ($50,000.00) and incremental
multiples of Twenty-five Thousand Dollars ($25,000.00), to the extent available.
Interest, net of those advances (if any) which bear interest calculated by
reference to the LIBOR Rate, prior to default or maturity, will be charged to
Borrower at a fluctuating rate which is the daily equivalent to a variable rate
(the "Variable Rate") equal to the Prime Rate, unless (i) the financial
statement of the Borrower for the most recent fiscal quarter and the
corresponding covenant compliance certificate submitted by the Borrower report a
Leverage Ratio, which is less than .60 to 1.0 but equal to or greater than .40
to 1.0 (a "Tier Two Leverage Ratio"), in which event the rate of interest
payable hereunder shall be adjusted to a rate equal to the aggregate of the
Prime Rate minus one-quarter (0.25%) percent, or (ii) the financial statements
for the most recent fiscal quarter and corresponding covenant compliance
certificate submitted by the Borrower report a Leverage Ratio of the Borrower
which is less than .40 to 1.0 (a "Tier One Leverage Ratio"), in which event the
rate of interest payable hereunder shall be adjusted to a rate equal to the
aggregate of the Prime Rate minus one-half (0.50%) percent. Such adjustments
shall take effect on the first business day of the month next following the
Lender's receipt of the financial statement and covenant compliance certificate
evidencing attainment of a Tier One or Tier Two Leverage Ratio, as the case may
be. On the other hand, in the event that the financial statements for the most
recent fiscal quarter and the corresponding covenant compliance certificate
evidence that the Leverage Ratio of the Borrower has increased and the Borrower
has been paying interest based on a Tier One or Tier Two Leverage Ratio which is
no longer being achieved, then, effective on the first business day of the month
next following the Lender's receipt of the financial statement and covenant
compliance certificate evidencing the changed Leverage Ratio, the Lender shall
adjust the interest rate to the rate set forth above for the Leverage Ratio
which is evidenced and reported.
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Interest shall be calculated upon the outstanding balance owing to the
Lender at the close of each day and interest on Prime Rate Loans shall be
payable on the first day of each month in arrears. The rate of interest payable
by Borrower shall be changed effective as of that date in which a change in the
Prime Rate becomes effective. Interest shall be computed on the basis of the
actual number of days elapsed over a year of three hundred sixty-five (365)
days. Interest shall be payable in lawful money of the United States of America
to Lender, or otherwise as the Lender shall direct, without set-off, deduction
or counterclaim monthly, in arrears, on the first day of each month, commencing
on the first day of the month next succeeding the date hereof.
(b) LIBOR RATE LOANS.
(i) By delivering a Borrowing Request (or providing telephonic notice
confirmed in a writing in the form of a Borrowing Request) to the Lender on or
before 10:00 a.m., New York time, on a Banking Day, the Borrower may, from time
to time, irrevocably request, on not less than two (2) nor more than five (5)
Banking Days' notice, that a LIBOR Rate Loan be made in a minimum amount of Two
Hundred-Fifty Thousand ($250,000.00) Dollars and incremental multiples of
Twenty-five Thousand ($25,000.00) Dollars, with the Interest Period designated,
to the extent available. On the terms and subject to the conditions of this
agreement, each LIBOR Rate Loan shall be made available to the Borrower no later
than 11:00 a.m. New York time on the first day of the applicable Interest Period
by deposit to the account of the Borrower as shall have been specified in its
borrowing request.
(ii) After receipt from the Borrower of any notice which requests a
conversion to a LIBOR Rate Loan, the Lender shall determine if it is able to
make such LIBOR Rate Loan (or if it is unable to do so for reasons described in
this Paragraph only) and will notify the Borrower upon confirmation of its
ability to do so.
(iii) No election of a LIBOR Rate Loan shall become effective:
(a) if, prior to the commencement of any such Interest Period,
the Lender reasonably determines that (i) Eurodollar deposits in an
amount comparable to the amount of the LIBOR Rate Loan that has been
elected and which have a term corresponding to the proposed Interest
Period are not readily available in the inter bank Eurodollar market,
or (ii) by reason of circumstances affecting the inter-bank Eurodollar
market, adequate and reasonable methods do not exist for ascertaining
the interest rate applicable to such deposits for the proposed Interest
Period; or
(b) if the Lender shall have advised the Borrower by telephone
or otherwise at or prior to noon (Boston time) on the second Banking
Day prior to the commencement of such proposed Interest Period (and
shall have subsequently confirmed in writing) that, after reasonable
efforts to determine the availability of such Eurodollar deposits, the
Lender reasonably anticipates that Eurodollar deposits in an amount
equal to the amount of the LIBOR Rate Loan elected and which have a
term corresponding to the Interest Period in question will not be
offered in the Eurodollar market to the Lender at a rate of interest
that does not exceed the anticipated LIBOR Rate.
In such event, then the Lender shall so notify the Borrower on or
before 4:00 p.m. on the Banking Day prior to the conversion date specified in
the notice from the Borrower, and in such event, the Lender shall not be
obligated to make such LIBOR Rate Loan and the Borrower's request shall be
deemed to have been withdrawn by the Borrower.
(iv) Except as otherwise provided in the immediately preceding
subparagraph (ii), any notice
9
from the Borrower which requests a LIBOR Rate Loan shall be irrevocable and
binding upon the Borrower. The Borrower shall indemnify the Lender against any
and all losses and expenses incurred by the Lender by reason of such failure
including, without limiting the generality of the foregoing, all losses and
expenses incurred by reason of the liquidation, disposition or re-employment of
deposits or other funds acquired by the Lender to fund such LIBOR Rate Loan.
(v) The Borrower shall pay interest on the aggregate unpaid principal
balance of each LIBOR Rate Loan from the Borrowing Date for such LIBOR Rate Loan
through and including the Interest Maturity Date chosen by the Borrower with
respect to such LIBOR Rate Loan at a per annum fixed rate equal to the aggregate
of (i) the LIBOR Interest Rate plus (ii) the Margin, and shall pay all interest
accrued but unpaid under this Section (iv) on the sooner to occur of: (i) the
first day of each month; or (ii) such Interest Maturity Date.
(vi) If a LIBOR Rate Loan is not repaid in full on its Interest
Maturity Date, then such LIBOR Rate Loan shall bear interest at the rate which
is calculated by reference to the Prime Rate as described in Section 2.4(a)
above from and after such Interest Maturity Date.
(vii) Each LIBOR Rate Loan shall be repaid in full on its Interest
Maturity Date.
(viii) Any LIBOR Rate Loan may be repaid with the proceeds of another
Loan.
(ix) Intentionally Omitted.
(x) By delivering a continuation/conversion notice to the Lender on
or before 10:00 a.m., New York time, on a Banking Day, the Borrower may from
time to time irrevocably elect, on not less than two nor more than five Banking
Days' notice, that all, or any portion in an aggregate minimum amount of Two
Hundred Fifty Thousand ($250,000.00) Dollars and integral multiples of
Twenty-Five Thousand ($25,000.00) Dollars, of any LIBOR Rate Loan be converted
on the last day of an Interest Period into a LIBOR Rate Loan with a different
Interest Period, or continued on the last day of an Interest Period as a LIBOR
Rate Loan with a similar Interest Period, provided, however, that no portion of
the outstanding principal amount of any LIBOR Rate Loans may be converted to, or
continued as, LIBOR Rate Loans when any default or Event of Default has occurred
and is continuing, and no portion of the outstanding principal amount of any
LIBOR Rate Loans may be converted to, LIBOR Rate Loans of a different duration
if such LIBOR Rate Loans relate to any Hedging Obligations. In the absence of
delivery of a continuation/conversion notice with respect to any LIBOR Rate Loan
at least two Banking Days before the last day of the then current Interest
Period with respect thereto, such LIBOR Rate Loan shall, on such last day,
automatically convert to a loan that accrues interest by reference to the Prime
Rate, as set forth in Section 2.4(a) above..
(xi) LIBOR Rate Loans shall mature and become payable in full on the
last day of the Interest Period relating to such LIBOR Rate Loan. Upon maturity,
a LIBOR Rate Loan may be continued for an additional Interest Period or may be
converted to a Prime Rate Loan.
(xii) LIBOR Rate Loans in connection with which the Borrower has
entered into Hedging Obligations with the Lender may be prepaid, subject to the
prepayment fees provided in the contract(s) governing such Hedging Obligations;
other LIBOR Rate Loans maybe prepaid upon the terms and conditions set forth
herein. The Borrower shall give the Lender, no later than 10:00 a.m., New York
City time, at least four (4) Banking Days notice of any proposed prepayment of
any LIBOR Rate Loans, specifying the proposed date of payment of such LIBOR Rate
Loans, and the principal amount to be paid. Each partial prepayment of the
principal amount of LIBOR Rate Loans shall be in an integral multiple of
Twenty-five Thousand ($25,000.00) Dollars and accompanied by the payment of all
charges outstanding
10
on such LIBOR Rate Loans and of all accrued interest on the principal repaid to
the date of payment. Borrower acknowledges that prepayment or acceleration of a
LIBOR Rate Loan during an Interest Period shall result in the Lender incurring
additional costs, expenses and/or liabilities and that it is extremely difficult
and impractical to ascertain the extent of such costs, expenses and/or
liabilities. Therefore, all full or partial prepayments of LIBOR Rate Loans
shall be accompanied by, and the Borrower hereby promises to pay, on each date a
LIBOR Rate Loan is prepaid or the date all sums payable hereunder become due and
payable, by acceleration or otherwise, in addition to all other sums then owing,
an amount ("LIBOR RATE LOAN PREPAYMENT FEE") determined by the Lender pursuant
to the following formula:
(1) the then current rate for United States Treasury securities
(bills on a discounted basis shall be converted to a bond
equivalent) with a maturity date closest to the end of the
Interest Period as to which prepayment is made, subtracted from
(2) the LIBOR Interest Rate plus the Margin applicable to the LIBOR
Rate Loan being prepaid. If the result of this calculation is
zero or a negative number, then there shall be no LIBOR Rate Loan
Prepayment Fee. If the result of this calculation is a positive
number, then the resulting percentage shall be multiplied by:
(3) the amount of the LIBOR Rate Loan being prepaid.
The resulting amount shall be divided by:
(4) 360
and multiplied by:
(5) the number of days remaining in the Interest Period as to which
the prepayment is being made.
Said amount shall be reduced to present value calculated by using the
referenced United States Treasury securities rate and the number of days
remaining on the Interest Period for the LIBOR Rate Loan being prepaid.
The resulting amount of these calculations shall be the LIBOR Rate Loan
Prepayment Fee.
(xiii) Notwithstanding any other provision of this Agreement, (1) if
the introduction of or any change in any law or regulation (or change in the
interpretation thereof) applicable to the Lender or any foreign branch, agent or
correspondent thereof shall make it unlawful, or (2) if any central bank or
other governmental authority having jurisdiction over the Lender or any such
branch, agent or correspondent, shall assert that it is unlawful, for the Lender
to perform its obligations hereunder or for any such branch, agent or
correspondent to act on behalf of the Lender to make LIBOR Rate Loans to the
Borrower or to continue to fund or maintain LIBOR Rate Loans to the Borrower
hereunder, or (3) if the Lender determines after making all reasonable efforts,
that deposits of the relevant amount and for the relevant LIBOR Rate Loan to the
Borrower are not available to the Lender in the Interbank Market, then, on
notice thereof by the Lender to the Borrower, the obligation of the Lender to
the Borrower to make future LIBOR Rate Loans shall terminate. If, as a result of
any of the foregoing described events, the Lender is prohibited from maintaining
LIBOR Rate Loans, the Lender shall, upon the happening of such event, notify the
Borrower and the Borrower shall, in the case of each LIBOR Rate Loan, on the
Interest Maturity Date of such LIBOR Rate Loan (or, in any event, if the Lender
so requests, on such earlier date as may be required by the relevant law,
regulation or interpretation), either prepay such LIBOR Rate Loan
11
or convert such LIBOR Rate Loan into a Prime Rate Loan, provided, however, in
the event any such prepayment or conversion is required no prepayment fees shall
be required to be paid by the Borrower.
(xiv) If, due to payments made by the Borrower pursuant to this
Agreement or due to the acceleration of the Obligations or due to any other
reason, except by reason of a payment made pursuant to subsection () above or
because the Borrowing Base has been exceeded, the Lender receives payments of
principal of any LIBOR Rate Loan prior to the Interest Maturity Date for such
LIBOR Rate Loan, the Borrower shall, upon demand by the Lender, pay to the
Lender any amounts required to compensate the Lender for any additional losses,
costs or expenses which it may reasonably incur as a result of such payment,
including, without limitation, any loss, costs or expenses incurred by reason of
the liquidation or re-employment of deposits or other funds acquired by the
Lender to fund or maintain such LIBOR Rate Loan.
(xv) Calculation of the LIBOR Interest Rate, as well as all other
fees and charges payable with respect to each LIBOR Rate Loan shall be made and
paid as though Lender had actually funded the relevant LIBOR Rate Loan through
the purchase of a Eurodollar deposit at LIBOR in an amount equal to the amount
of the LIBOR Rate Loan and having a maturity comparable to the relevant Interest
Period and through the transfer of such Eurodollar deposit from an offshore
agent or office of Lender to a domestic office of Lender in the United States of
America, provided, however, that Lender may fund each LIBOR Rate Loan in any
manner it sees fit and the foregoing assumptions shall be nevertheless used for
the calculation of the LIBOR Interest Rate and such other fees and charges.
(xvi) Suspension of Libor Rate Option. If the Lender shall have
determined that
(1) US dollar deposits in the relevant amount and for the relevant
Interest Period are not available to the Lender in the London
interbank market;
(2) by reason of circumstances affecting the Lender in the London
interbank, adequate means do not exist for ascertaining the LIBOR
Rate applicable hereunder to LIBOR Rate Loans of any duration, or
(3) LIBOR no longer adequately reflects the Lender's cost of funding
loans.
Then, upon notice from the Lender to the Borrower, the obligations of
the Lender under this Section 2.4(b) to make or continue any loans as, or to
convert any Loans into, LIBOR Rate Loans of such duration shall forthwith be
suspended until the Lender shall notify the Borrower that the circumstances
causing such suspension no longer exist.(xvii)In addition to the LIBOR Rate Loan
Prepayment Fee, the Borrower agrees to reimburse the Lender (without
duplication) for any increase in the cost to the Lender, or reduction in the
amount of any sum receivable by the Lender, in respect, or as a result of:
(1) any conversion or repayment or prepayment of the principal
amount of any LIBOR Rate Loans on a date other than the
scheduled last day of the Interest Period applicable thereto;
(2) any loans not being made as LIBOR Rate Loans in accordance with
the borrowing request thereof;
(3) any LIBOR Rate Loans not being continued as, or converted into,
LIBOR Rate Loans in accordance with the continuation/conversion
notice thereof, or
(4) any costs associated with marking to market any Hedging
Obligations that (in the reasonable determination of the Lender)
are required to be terminated as a result of any conversion,
repayment or prepayment of the principal amount of any LIBOR
Rate Loan on
12
a date other than the scheduled last day of the Interest Period
applicable thereto;
The Lender shall promptly notify the Borrower in writing of the occurrence of
any such event, such notice to state, in reasonable detail, the reasons
therefore and the additional amount required fully to compensate the Lender for
such increased cost or reduced amount. Such additional amounts shall be payable
by the Borrower to the Lender within five days of its receipt of such notice,
and such notice shall, in the absence of manifest error, be conclusive and
binding on the Borrower. The Borrower understands, agrees and acknowledges the
following: (i) the Lender does not have any obligation to purchase, sell and/or
match funds in connection with the use of LIBOR Rate as a basis for calculating
the rate of interest on a LIBOR Rate Loan, (ii) the LIBOR Rate may be used
merely as a reference in determining such rate, and (iii) the Borrower has
accepted the LIBOR Rate as a reasonable and fair basis for calculating such
rate, the LIBOR Rate Prepayment Fee, and other funding losses incurred by the
Lender. Borrower further agrees to pay the LIBOR Rate Prepayment Fee and other
funding losses, if any, whether or not the Lender elects to purchase, sell
and/or match funds.
(xviii) If on or after the date hereof the adoption of any applicable law, rule
or regulation or guideline (whether or not having the force of law), or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency:
(1) shall subject the Lender to any tax, duty or other charge with
respect to its LIBOR Rate Loans or its obligation to make LIBOR Rate
Loans, or shall change the basis of taxation of payments to the Lender
of the principal of or interest on its LIBOR Rate Loans or any other
amounts due under this agreement in respect of its LIBOR Rate Loans or
its obligation to make LIBOR Rate Loans (except for the introduction
of, or change in the rate of, tax on the overall net income of the
Lender or franchise taxes, imposed by the jurisdiction (or any
political subdivision or taxing authority thereof) under the laws of
which the Lender is organized or in which the Lender's principal
executive office is located); or
(2) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System of the United States) against assets of, deposits with or for
the account of, or credit extended by, the Lender or shall impose on
the Lender or on the London interbank market any other condition
affecting its LIBOR Rate Loans or its obligation to make LIBOR Rate
Loans; and the result of any of the foregoing is to increase the cost
to the Lender of making or maintaining any LIBOR Rate Loan, or to
reduce the amount of any sum received or receivable by the Lender under
this Agreement with respect thereto, by an amount deemed by the Lender
to be material, then, within 15 days after demand by the Lender, the
Borrower shall pay to the Lender such additional amount or amounts as
will compensate the Lender for such increased cost or reduction.
(xix) If any change in, or the introduction, adoption, effectiveness,
interpretation, reinterpretation or phase-in of, any law or regulation,
directive, guideline, decision or request (whether or not having the force of
law) of any court, central bank, regulator or other governmental authority
affects or would affect the amount of capital required or expected to be
maintained by the Lender, or person controlling the Lender, and the Lender
determines (in its sole and absolute discretion) that the rate of return on its
or such controlling person's capital as a consequence of its commitments or the
loans made by the Lender is reduced to a level below that which the Lender or
such controlling person could have achieved but for the occurrence of any such
circumstance, then, in any such case upon notice from time to time by the Lender
to the Borrower, the Borrower shall immediately pay directly to the Lender
additional amounts sufficient
13
to compensate the Lender or such controlling person for such reduction in rate
of return. A statement of the Lender as to any such additional amount or amounts
(including calculations thereof in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding on the Borrower. In determining such
amount, the Lender may use any method of averaging and attribution that it (in
its sole and absolute discretion) shall deem applicable.
(xx) All payments by the Borrower of principal of, and interest on, the LIBOR
Rate Loans and all other amounts payable hereunder shall be made free and clear
of and without deduction for any present or future income, excise, stamp or
franchise taxes and other taxes, fees, duties, withholdings or other charges of
any nature whatsoever imposed by any taxing authority, but excluding franchise
taxes and taxes imposed on or measured by the Lender's net income or receipts
(such non-excluded items being called "TAXES"). In the event that any
withholding or deduction from any payment to be made by the Borrower hereunder
is required in respect of any Taxes pursuant to any applicable law, rule or
regulation, then the Borrower will
(1) pay directly to the relevant authority the full amount required
to be so withheld or deducted;
(2) promptly forward to the Lender an official receipt or other
documentation satisfactory to the Lender evidencing such payment
to such authority; and
(3) pay to the Lender such additional amount or amounts as is
necessary to ensure that the net amount actually received by the
Lender will equal the full amount the Lender would have received
had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Lender with respect to
any payment received by the Lender hereunder, the Lender may pay such Taxes and
the Borrower will promptly pay such additional amount (including any penalties,
interest or expenses) as is necessary in order that the net amount received by
the Lender after the payment of such Taxes (including any Taxes on such
additional amount) shall equal the amount the Lender would have received had not
such Taxes been asserted.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Lender the required receipts or other
required documentary evidence, the Borrower shall indemnify the Lender for any
incremental Taxes, interest or penalties that may become payable by the Lender
as a result of any such failure.
2.5. [INTENTIONALLY OMITTED]
2.6. CONVERSION OF OUTSTANDING AMOUNTS TO TERM LOANS.
(a) Conversion of Outstanding Amounts. Provided that no Event of
Default shall have occurred and be continuing, the Borrower may convert any
principal amount outstanding under the Revolving Credit to a term loan (each a
"Term Loan" and collectively the "Term Loans"), provided conversion of
outstanding advances must be in minimum amounts of $500,000.00 and in
incremental multiples of $25,000.00. Such Term Loans shall have a term
designated by the Borrower, provided such term expires not later than the then
Termination Date hereunder, with the principal repaid in equal quarterly
installments of principal, with the interest payable monthly in arrears at the
LIBOR Based Rate or the Variable Rate as elected by the Borrower. If the
Borrower desires to convert an advance, it shall give the Lender three (3)
business days written notice, specifying the date of such conversion, the amount
to be converted and the interest rate selected and, if a LIBOR Based Rate is
selected, the duration of the Interest Period therefore. Each Term Loan shall be
evidenced by a promissory note (each a "Term Note"
14
and collectively the "Term Notes") in a form substantially similar to Exhibit
2.6. All principal amounts outstanding under the Term Notes shall reduce dollar
for dollar the amounts available under the Revolving Credit. Prior to the
Termination Date, amounts converted to Term Notes and repaid in accordance with
said notes may be re-borrowed.
2.7. TERMINATION. All outstanding balances under the Revolving Credit
shall be payable on the Termination Date. The term (and Termination Date) shall
be reviewed annually in May for consideration of one (1) year extensions. The
first such review shall occur in June, 2003 for consideration to extend the term
(and Termination Date) to June 30, 2007.
Notwithstanding the foregoing, should either the Lender or the Borrower
become insolvent or go out of business, the other party shall have the right to
terminate this Agreement at any time without notice. Upon the effective date of
termination, all Obligations, whether or not incurred under this Loan Agreement
or any Supplemental Agreement or otherwise, shall become immediately due and
payable without notice or demand. Notwithstanding termination, until all
Obligations have been fully satisfied, except for those specific covenants and
conditions dealing with the making of advances, all terms and conditions of all
agreements between the Borrower and the Lender shall remain in full force and
effect, including, without limitation, the terms of any and all security
agreements, mortgages, assignments, pledge agreements and other security
instruments and all financing statements now or hereafter executed.
2.8. LETTERS OF CREDIT Subject to all of the terms and conditions of
this Loan Agreement and so long as no event of default has occurred and is
continuing, the Lender shall, from time to time, at the request of the Borrower,
issue Letters of Credit (including standby Letters of Credit) on behalf of
Borrower under such further terms and conditions as offered by the Lender to its
customers at the time of issuance. The total aggregate liability on all Letters
of Credit outstanding shall not exceed the lesser of (i) the Borrowing Base in
effect at such time or (ii) Fourteen Million ($14,000,000.00) Dollars AFTER
DEDUCTING THEREFROM the then outstanding balance of (i) the sum of all advances
outstanding under the Revolving Loan (including the Term Loans), and (ii) the
aggregate amount available to be drawn under all Letters of Credit then
outstanding, plus the outstanding amount, if any, of all amounts previously
drawn under Letters of Credit which have not been reimbursed to Lender by
Borrower. Requests for Letters of Credit shall be made by Borrower by delivering
to Lender a completed and executed Application and Reimbursement Agreement for
Letter of Credit in a form satisfactory to Lender in all respects (the
"REIMBURSEMENT AGREEMENT"). The Letters of Credit shall be an Obligation of
Borrower to the Lender and shall be secured by any collateral securing the other
Obligations. Borrower shall pay to the Lender a fee for each Letter of Credit
equal to five-eights of one (.625%) percent per annum of the face amount of each
such Letter of Credit plus such other fees as are from time to time customarily
charged by Lender in connection with letters of credit such as standard issuance
and application fees, and amendment fees, and/or as set forth in the applicable
Reimbursement Agreement (the "LETTER OF CREDIT FEE"). The Letter of Credit Fee
shall be payable in advance prior to the date of issuance of each Letter of
Credit. The Lender's agreement to issue Letters of Credit pursuant to this
Section 2.8 shall terminate on the Termination Date. Each Letter of Credit shall
have a maximum term of one (1) year, subject to extension by Lender in its sole
and absolute discretion, except that the Lender will not issue any Letters of
Credit with an expiry date later than the Termination Date.
2.9. PREPAYMENT. Advances under the Revolving Note may be prepaid in
whole or in part without penalty or premium. Advances under the LIBOR option may
be prepaid prior to the LIBOR Interest Maturity Date, but will be subject to
prepayment fees, to be calculated based on the amount prepaid, the remaining
term of the advance and the prevailing interest rate at the time of prepayment,
as set forth in Section 2.4 hereof.
15
2.10. AUTOMATIC PAYMENT; METHOD OF PAYMENT. The Borrower hereby
authorizes the Lender to automatically deduct from Borrower's accounts any
amount due under this Loan Agreement ("AUTOMATIC PAYMENTS"). If the funds in
said account are insufficient to advance funds to cover any payment, Lender
shall not be obligated to advance funds to cover the payment. At any time and
for any reason, Borrower or Lender may voluntarily terminate such Automatic
Payments, in which event Lender agrees to invoice the Borrower for the amount of
interest due and owing on the next interest payment date not less than five (5)
Banking Days before such interest is due. Whenever any payment to be made under
this Loan Agreement shall be stated to be due on a day other than a Banking Day,
such charge shall be subject to the Business Day Convention and any such
extension of time shall in such case be included in the computation of the
payment of accrued interest.
2.11. LATE CHARGE FEE. If a regularly scheduled payment is twenty (20)
days or more late, Borrower will be charged 5.0% of the unpaid portion of the
regularly scheduled payment or $25.00, whichever is greater, but in no event
more than One Thousand ($1000.00) Dollars. If Lender demands payment of this
Loan, and Borrower does not pay the Loan within twenty (20) days after Lender's
demand, Borrower will be charged either 5.0% of the unpaid principal plus
accrued unpaid interest or $25.00, whichever is greater, but in no event more
than One Thousand ($1000.00) Dollars. The Bank may, in its sole discretion,
elect to waive the late charge fee in any instance, provided, however, its
waiver in any one or more instances, shall not be construed as a waiver of its
right to impose such late charge fee on any other occasion regardless of whether
any prior notice of any kind is given.
2.12. CONDITIONS PRECEDENT TO ADVANCES. The obligation of the Lender to
make initial advances to the Borrower is subject to the conditions precedent
that the events or documents required take place or be executed and delivered to
the Lender in form and substance satisfactory to the Lender and its counsel. The
obligation of the Lender to make any subsequent advances is subject to the
conditions precedent that: (a) no Event of Default has occurred and is
continuing; (b) no event which with the passage of time or the giving of notice,
or both, would constitute an Event of Default has occurred and is continuing;
(c) the Lender has, upon request, received a certificate signed by a duly
authorized officer of the Borrower stating that all representations and
warranties contained in this Loan Agreement are correct as though made on and as
of the date of such certificate; (d) the Lender has received such other
approvals, opinions, or documents as the Lender may reasonably request; and (e)
there has been no material adverse change in the financial condition or business
assets of the Borrower since the date of the latest financial statement
delivered to the Lender.
2.13. FACILITY FEES. A one time commitment fee of Twenty-One Thousand
($21,000.00) Dollars shall be due from the Borrower on the date hereof.
Additionally, the Borrower shall pay a fee (the "REVOLVING CREDIT FEE")
to the Lender, in arrears, on a quarterly basis, equal to one eighth of one
percent (0.125%) per annum of the average daily unused portion of the Revolving
Credit, said Revolving Credit Fee to be paid within ten (10) days of written
notice from the Lender, commencing with the quarter ending on June 30, 2002, and
quarterly thereafter. Said average daily unused portion shall refer to that
amount which is equal to the difference between the maximum Revolving Credit
amount set forth in Section 2.1 and the average daily outstanding balance of the
Revolving Credit made pursuant to this Section for each fiscal quarter. The
Revolving Credit Fee may, at the option of the Lender, be charged to the account
of Borrower when due.
2.14. SWAP AGREEMENTS. Borrower may enter into a SWAP agreement or
other similar agreement or arrangement with Lender or its affiliates with
respect to amounts bearing interest at the LIBOR Based Rate or Variable Rate
(any such agreement or arrangement shall be in form and substance
16
reasonably satisfactory to Lender) in order to hedge or minimize risk with
respect to the fluctuation of interest rates. The SWAP Agreement shall be for
such term as the Borrower elects, provided such a term is then available, but in
no event beyond the then Termination Date under this Agreement. If the SWAP
Agreement shall expire prior to the Interest Maturity Date or the SWAP agreement
covers less than the total outstanding principal balance, then the Variable Rate
shall be effective from the date thereof and/or for any principal of the loan
evidenced by the Revolving Note or a Term Note and uncovered by the SWAP
agreement.
SECTION 3. SECURITY INTEREST
3.1. SPRINGING SECURITY INTEREST. Upon the occurrence of any the
following events:
(a) In the event that the cash balances of the Borrower, based on the
monthly cash balance report provided to the Lender, are less than Two Million
and 00/100 ($2,000,000.00) Dollars; or
(b) The occurrence of an Event of Default while there exist any
outstanding Loans and such Event of Default has not been cured by the Borrower,
or waived by the Lender, within thirty (30) days; or
(c) The Borrower requests a Loan, or the conversion of an existing
Loan, while an Event of Default is continuing, regardless of whether or not the
Borrower has had any opportunity to cure such Event of Default, or whether it
has been continuing for thirty (30) days or any other a particular period; or
(d) The Borrower has Loans outstanding in an aggregate amount equal
to or exceeding Five Million ($5,000,000.00) Dollars (excluding any issued
Letters of Credit) for a period of more than three (3) consecutive business
days; then, in such event, the Borrower shall forthwith, and, in any event
within two (2) business days of notice from the Lender, execute and deliver to
the Lender a security agreement (the "SECURITY AGREEMENT") in the form attached
hereto as Exhibit 3.1, granting to the Lender a first lien and security interest
in all assets of the Borrower wherever located, excepting only real estate, (and
subject to the filing of appropriate financing statements). Additionally, the
Borrower hereby irrevocably constitutes and appoints the Lender as the
Borrower's true and lawful attorney, with full power of substitution, at the
sole cost and expense of the Borrower but for the sole benefit of the Lender, to
be exercised only such event, to execute the Security Agreement in the name of
the Borrower. All powers conferred upon the Lender by this Agreement, being
coupled with an interest, shall be irrevocable so long as any Obligation of the
Borrower to the Lender shall remain unpaid.
3.2. PERFECTION OF SECURITY INTEREST. The Lender is hereby authorized
to file UCC financing statements to perfect the security interest and first lien
in the assets of the Borrower (other than real property, including fixtures)
granted pursuant to the Security Agreement upon the occurrence of any of the
following events:
(a) The occurrence of an Event of Default while there exist any
outstanding Loans and such Event of Default has not been cured by the Borrower,
or waived by the Lender, within thirty (30) days;
(b) The Borrower requests a Loan, or the conversion of an existing
Loan, while an Event of Default is continuing, regardless of whether or not the
Borrower has had any opportunity to cure such Event of Default, or whether it
has been continuing for thirty (30) days or any other a particular period; or
(c) The Borrower has Loans outstanding in an aggregate amount equal to
or exceeding Five Million ($5,000,000.00) Dollars (excluding any issued Letters
of Credit) for a period of more than three (3) consecutive business days.
17
The Borrower hereby irrevocably constitutes and appoints the Lender as
the Borrower's true and lawful attorney, with full power of substitution, at the
sole cost and expense of the Borrower but for the sole benefit of the Lender, to
be exercised only upon the occurrence of any of the aforesaid events to sign
and/or file or record on behalf of the Borrower any financing or other statement
in order to perfect or protect the Lender's security interest. All powers
conferred upon the Lender by this Agreement, being coupled with an interest,
shall be irrevocable so long as any Obligation of the Borrower to the Lender
shall remain unpaid.
Once filed, the UCC financing statements shall remain on record for not
less than six (6) months. Said filings shall thereafter be terminated, upon
satisfaction of the following conditions:
(a) The Borrower's two most recent quarterly financial statements and
covenant compliance certificates demonstrate compliance with the financial
covenants set forth in this Agreement; and
(b) The aggregate balance of all outstanding Loans is less than Five
Million ($5,000,000.00) Dollars and it is not projected that the Borrower will
require Loans, which, with the then outstanding aggregate balance of all Loans,
would cause the total of all Loans to exceed Five Million ($5,000,000.00)
Dollars; and
(c) No Event of Default has occurred and is continuing, and no event
has occurred, which with the passage of time, or the giving of notice, or both,
would constitute an Event of Default.
SECTION 4. REPRESENTATIONS, WARRANTIES AND GENERAL COVENANTS
The Borrower hereby represents and warrants to the Lender (which
representations and warranties will survive the delivery of the Note(s) and this
Agreement and the making of any advances and shall be deemed to be continuing
until the foregoing Note(s) are fully paid and this Agreement is terminated)
that, except as set forth on Schedule A:
4.1. ORGANIZATION AND QUALIFICATION. The Borrower (i) is and will
continue to be duly organized and validly existing and in good standing under
the laws of its state of organization; (ii) has filed in all locations required
under the laws of each jurisdiction in which it does business; (iii) is
qualified and in good standing to do business in all other jurisdictions in
which the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary; (iv) has the power to
execute and deliver this Agreement, the Note(s), and all other documents,
instruments and agreements related hereto and to borrow hereunder. Borrower has
all requisite permits, authorizations, franchise agreements and licenses,
without unusual restrictions or limitations, to own, operate and lease its
properties and to conduct the business in which it is presently engaged, all of
which are in full force and effect.
4.2. NO LEGAL BAR. The execution and delivery of this Loan Agreement
and compliance by the Borrower with any of the terms and provisions hereof or of
any of the other agreements or instruments referred to herein will not, on the
Effective Date, violate any provision of any existing law or regulation or any
writ or decree of any court or governmental instrumentality, or any agreement or
instrument to which the Borrower is a party or which is binding upon it or its
assets, and will not result in the creation or imposition of any lien, security
interest, charge or encumbrance of any nature whatsoever upon or in any of its
assets, except as contemplated by this Loan Agreement; and no consent of any
other party, and no consent, license approval or authorization of or
registration or declaration with any governmental bureau or agency, is required
in connection with the execution, delivery, performance, validity and
enforceability of this Loan Agreement.
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4.3. TITLE, LIENS AND ENCUMBRANCES. The Borrower has good and
marketable title to all of its real property and valid title to all of its
personal property, and none of its personal property is subject to any pledge,
lease, trust, bailment, lien, security interest, encumbrance, charge or title
retention or other security agreement or arrangement of any character whatsoever
other than as permitted in the Supplemental Agreements.
4.4. NO MATERIAL LITIGATION. The Borrower represents that no material
litigation or administrative proceeding of or before any governmental body is
presently pending or, to the knowledge of the Borrower, threatened against the
Borrower or any of its property.
4.5. NO DEFAULT. The Borrower is not, on the date hereof, in default
with respect to the payment or performance of any of its obligations or in the
performance of any covenants or conditions to be performed by it pursuant to the
terms and provisions of any indenture, agreement or instrument to which it is a
party or by which it may be bound and the Borrower has received no notice of
default thereunder.
4.6. COMPLIANCE WITH LAWS. The Borrower has complied with and will
continue to comply with all applicable statutes and regulations of the United
States of America, and all states, counties, municipalities and agencies of any
thereof with respect to (a) any restrictions, specifications or other
requirements pertaining to products which the Borrower manufactures and sells,
or to the services it performs; (b) the conduct of its business operations; (c)
the use, maintenance and operation of the real and personal properties owned or
leased by it in the operation of its business; and (d) if a legal entity, the
issued and outstanding equity interests of the Borrower and the disclosure of
material facts and information to its equity interest holders.
The Borrower shall indemnify the Lender and hold the Lender harmless
from and against all loss, liability, damage and expense, including reasonable
attorney's fees, suffered or incurred, by the Lender, (i) under or on account of
any applicable local, state or federal laws or regulations, including the
assertion of any liens thereunder (the "ENVIRONMENTAL LAWS"); (ii) with respect
to any discharge, spillage, uncontrolled loss, seepage or filtration of oil or
petroleum or chemical, liquids or solid, liquid or gaseous products or hazardous
waste which, if contained or removed or mitigated by any applicable local, state
or federal agency or entity, would give rights to a lien (a "SPILL") affecting
any real or personal property owned or leased by the Borrower, including any
loss of value of any such property as a result of such Spill; or (iii) with
respect to any other matter affecting the real or personal property owned or
leased by the Borrower and governed by the provisions of the Environmental Laws.
4.7. NO SECONDARY LIABILITIES. There are no outstanding contracts or
agreements of guaranty or suretyship made by the Borrower, or to which it is a
party, or to which any of its assets are subject.
4.8. TAXES. The Borrower has filed or caused to be filed or obtained
extensions for the filing of, and will continue to file and cause to be filed,
all federal, state and local tax returns required by law to be filed, and has
paid and will continue to pay all taxes shown to be due and payable on said
returns or on any assessment made against it, except if being contested in good
faith and adequate provision has been made therefore on its books of account. No
claims are being asserted with respect to such taxes which are not reflected in
the financial statements which have been furnished by the Borrower to the
Lender.
4.9. FINANCIAL CONDITION. The Borrower has submitted to the Lender
various financial statements and information, and represents that all of said
financial information is true and correct to the best of the knowledge and
belief of the Borrower; that such financial information fairly presents the
financial condition and results of the operations of the Borrower as of the date
thereof and for the period indicated therein; that such financial statements
have been prepared in accordance with generally
19
accepted accounting principles and practices consistently maintained throughout
the period involved; and that, as of the date of said financial information
submitted, there were no material unrealized or anticipated losses from any
unfavorable commitments of the Borrower; and that there has been no material
adverse change in the business or assets or in the condition, financial or
otherwise, of the Borrower from that set forth in said financial statements
other than normal seasonal changes which occur in the normal course and
operation of the Borrower's business.
4.10. REPRESENTATION ACCURACY. No representation or warranty by the
Borrower contained in any certificate or other document furnished or to be
furnished by the Borrower pursuant hereto or in connection with the transactions
contemplated hereunder, contains, or at the time of deliver will contain, any
untrue statement of material fact or omits or will omit to state a material fact
necessary to make it not misleading.
4.11. AGREEMENTS RE EQUITY INTERESTS. The Borrower does not have any
agreements pertaining to the purchase or sale of its equity interests other than
stock options and stock purchase rights granted to employees and non-employee
directors, from time to time, pursuant to stock option plans described in the
Borrowers SEC Form 10-K for its fiscal year ended December 31, 2001.
4.12. COLLECTIVE BARGAINING AGREEMENTS. The Borrower is not a party to
any collective bargaining agreements.
4.13. PENSION PLANS. To the extent that any present or future pension
plan of the Borrower is subject to state or federal statutes or regulations, the
Borrower represents and warrants that it shall at all times be in compliance in
all material respects with said statutes and regulations and will furnish the
Lender with copies of such reports as it may be required to furnish under said
statutes or regulations. Additionally, all pension plans and other plans where
the Borrower has any liability are fully funded.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the
Obligations shall remain outstanding, or the Lender has any commitment
hereunder, the Borrower will perform and observe each and all of the covenants
and agreements herein set forth.
5.1. PAYMENTS UNDER THIS LOAN AGREEMENT, ETC. The Borrower will make
punctual payment of all monies and will faithfully and fully keep and perform
all of the terms, conditions, covenants and agreements contained on the
Borrower's part to be paid, kept or performed hereunder, and will be bound in
all respects as debtor under this Loan Agreement; and will make punctual payment
of all monies and will faithfully and fully keep and perform all of the terms,
conditions, covenants and agreements on its part to be paid, kept or performed
under the terms of any lease or mortgage of the premises where Borrower
operates, and will promptly notify the Lender in the event of any default on the
part of the Borrower or receipt by the Borrower of any notice of alleged default
under any such lease or mortgage. The Borrower will pay and discharge at or
before their maturity all taxes, assessments, rents, claims, debts and charges.
5.2. INFORMATION, ACCESS TO BOOKS AND INSPECTION, FIELD EXAMS. The
Borrower will furnish to the Lender such information regarding the business
affairs and financial condition of the Borrower as the Lender may reasonably
request, and give any representative of the Lender access during normal business
hours to, and permit him to examine and copy, and make extracts from, any and
all books, records and documents in the possession of the Borrower relating to
its Financial affairs and the Collateral under the Security Agreement and its
compliance with the Security Agreement and this Agreement to inspect any of the
properties of the Borrower.
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Additionally, one time per year, at such time as is selected by the
Lender, the Lender may cause to be conducted a field examination by auditors
selected by the Lender and the Borrower shall pay all reasonable field exam or
audit costs and expenses associated therewith, including, without limitation,
all reasonable travel and other expenses incurred in connection with any such
audit or exam. After an Event of Default has occurred and while such Event of
Default is continuing, there shall be no such limitation to the frequency of
such exams or audits conducted at the Borrower's expense.
5.3. EXISTENCE, PROPERTIES AND INSURANCE. The Borrower will do or cause
to be done all things necessary to preserve and keep in full force and effect
the legal existence of Borrower and its rights and franchises, and comply with
all laws applicable thereto; at all times maintain, preserve and protect all
franchises, patents, and trade names and preserve all the remainder of its
property used or useful in the conduct of its business and keep the same in good
condition and repair (normal wear and tear and obsolescence excepted), and from
time to time make, or cause to be made, all needful and proper repairs,
renewals, replacements, betterments and improvements thereto, and will pay or
cause to be paid, except when the same may be contested in good faith, all rent
due on premises where any property is held or may be held, so that the business
carried on in connection therewith may be continuously conducted. The Borrower
will have and maintain insurance at all times with respect to its properties
against risks of fire (including so-called extended coverage), theft and such
risks as are customary for companies conducting business in the industries in
which the Borrower conducts its business, containing such terms, in such form,
and for such periods, and written by such companies as are reasonably
satisfactory to the Lender. The Borrower will furnish the Lender with
certificates or other evidence satisfactory to the Lender of compliance with the
foregoing insurance provisions. The Borrower will also at all times maintain
necessary workmen's compensation insurance and such other insurance as may be
required by law or as may be reasonably required by the Lender.
5.4. NOTICES OF DEFAULT AND GOVERNMENTAL ORDERS. The Borrower will
promptly give notice in writing to the Lender of the occurrence of any event
which constitutes or which with notice or lapse of time, or both, would
constitute an Event of Default; of any court or governmental orders, notices,
claims, investigations, litigation and proceedings affecting the Borrower, and
of any dispute which may exist between the Borrower, and any governmental
regulatory body or any other party, which, if decided adversely against the
Borrower, would have a material adverse effect on the Borrower's financial and
operating conditions and would prevent the Borrower to operate its business as
presently operated.
5.5. FINANCIAL STATEMENTS. The Borrower agrees to furnish to the
Lender the financial information set forth on Schedule B attached hereto.
5.6. SOLVENCY. The Borrower hereby represents to the Lender that it
is solvent and is generally paying its debts as such debts become due.
5.7. F.I.C.A. AND WITHHOLDING TAXES. Upon request of the Lender, the
Borrower will furnish the Lender with proof satisfactory to the Lender of the
payment or deposit of F.I.C.A. and withholding taxes required of the Borrower by
applicable law. Should the Borrower fail to make any such payment or deposit or
furnish such proof within a reasonable time, the Lender may, in the Lender's
sole and absolute discretion, and without notice to the Borrower: (a) make
payment of the same or any part thereof; or (b) set up such reserves in the
Borrower's account as the Lender may deem necessary to satisfy the liability
therefore. Each amount so deposited or paid by the Lender shall constitute an
advance and shall be secured by all the collateral, if any, held by the Lender.
Nothing herein contained shall obligate the Lender to make such deposit or
payment or set up such reserve, nor shall the making of one or more such
deposits or payments or the setting up of any such reserve constitute: (i) an
agreement on the Lender's part to take any further or similar action; or (ii) a
waiver of any default by the Borrower under the terms hereof or of any other
agreements between the Borrower and the Lender. Upon the
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expiration or termination of this Loan Agreement or transactions hereunder, the
Lender shall retain any security interest in all the collateral, if any, held by
the Lender until the Borrower shall have paid or discharged all such F.I.C.A.
and tax obligations accrued to the date of such expiration or termination, or
shall have supplied to the Lender evidence satisfactory to the Lender that due
provisions have been made therefore.
5.8. BANK ACCOUNTS. The Borrower shall establish within thirty (30)
days from the date of this Agreement and thereafter maintain all primary bank
and operating accounts, (including checking accounts) with the Lender.
5.9. FINANCIAL COVENANTS. The Borrower shall comply with the financial
covenants set forth on Schedule B.
SECTION 6. NEGATIVE COVENANTS
So long as any Obligations of the Borrower to the Lender remain
outstanding and unpaid, or the Lender has any commitment hereunder, the Borrower
covenants and agrees as follows:
6.1. LIMITATION ON LIENS. Without first obtaining the Lender's prior
written consent, create, incur, assume, or suffer to exist, or permit to create,
incur, assume, or suffer to exist, any lien upon or with respect to any of its
assets which constitute personal property and do not constitute any interest in
real property ("PERSONAL PROPERTY"), properties, now owned or hereafter
acquired, except:
(1) liens in favor of the Bank and liens on Exhibit 6.1(1);
(2) liens for taxes or assessments or other government charges
or levies if not yet due and payable or, if due and payable,
if they are being contested in good faith by appropriate
proceedings and for which appropriate reserves are
maintained.
(3) purchase money security interests in equipment financed by
vendors and capital leases for equipment, provided that the
aggregate of all purchase money financings and equipment
leases entered into in any year shall not exceed $500,000,
nor total more than $2,500,000.00 in the aggregate;
(4) deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance,
old age pensions or other social security; liens in respect
of judgments or awards to the extent such judgments or
awards are otherwise permitted hereunder; and
(5) liens (other than judgments and awards) created by or
resulting from any litigation or legal proceeding, provided
the execution or other enforcement thereof is effectively
stayed and the claims secured thereby are being actively
contested in good faith by appropriate proceedings
satisfactory to the Lender
6.2. LIMITATION ON ADVANCES. The Borrower shall not make or suffer to
exist any advances or loans to, any Person or Persons (other than (i) advances
to employees for travel expenses, drawing accounts and similar expenditures and
(ii) deposits made to suppliers in accordance with the Borrower's customary
business practices) in excess of One Hundred Thousand ($100,000.00) Dollars in
the aggregate.
6.3. LIMITATION ON OTHER BORROWING. The Borrower shall not incur,
create, assume or
22
permit to exist any indebtedness or liability outside of the ordinary course of
the Borrower's business on account of deposits or advances or any indebtedness
or liability for borrowed money, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations for borrowed money,
except as referred to in or permitted by this Loan Agreement, except for (i)
existing indebtedness described on Exhibit 6.3 hereto and (ii) to the extent
permitted in Section 6.1 (3).
6.4. LIMITATION ON DIVIDENDS AND DISTRIBUTIONS. The Borrower shall not
declare or pay any dividend or distribution (whether in cash, property or
otherwise) unless Borrower is current on all debt payments of any kind
(including, without limitation, debt payments owing to Lender) which would cause
the Borrower to be default of any of its financial covenants hereunder.
6.5. LIMITATION ON ISSUANCE OR ACQUISITION OF EQUITY INTEREST. The
Borrower shall not redeem, retire, purchase or otherwise acquire for value any
equity interests of the Borrower, nor commit to the same, if such action would
cause the Borrower to be default of any of its financial covenants hereunder.
6.6. LIMITATION ON FUNDAMENTAL CHANGES. The Borrower shall not (a)
convey, sell, lease or otherwise dispose of all or substantially all of its
property, assets or business or (b) merge or consolidate with or into any other
firm or corporation unless the Borrower is the surviving entity and the
Borrower's Chairman and a majority of the Borrower's Board of Directors remain
in place following the merger or consolidation, or (c) or change its name.
6.7. LIMITATION ON DISPOSITION OF PERSONAL PROPERTY. The Borrower shall
not, other than the disposition of finished goods in the ordinary course of
business and the disposition of obsolete inventory or equipment no longer used
or useful, sell, exchange or otherwise dispose of any of its Personal Property,
or any part thereof or any interest therein, which in the aggregate exceed Two
Hundred Fifty Thousand ($250,000.00) Dollars in any one year without the express
written authorization of the Lender.
6.8. LIMITATION ON CONTINGENT LIABILITIES. The Borrower shall not
become liable as guarantor, surety, endorser or otherwise for, or agree to
purchase, repurchase or assume, any obligation of any Person, except for
endorsement of checks and commercial paper for deposit, collection, or discount
in the ordinary course of business, which contingent liabilities in the
aggregate exceed at any one time the sum of Five Hundred Thousand ($500,000.00)
Dollars.
6.9. NEGATIVE PLEDGE. Except as otherwise agreed to in writing, the
Borrower agrees that it shall not enter into any negative pledge with any third
party prohibiting the Borrower from pledging, encumbering or otherwise granting
to the Bank a lien or security interest in Personal Property of the Borrower,
without obtaining the prior written consent from the Bank The Borrower
represents and warrants to the Bank that it has not entered into any negative
pledge agreements with any third party other than with respect to Personal
Property as permitted herein.
SECTION 7. DEFAULT
7.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events or conditions shall constitute an "EVENT OF DEFAULT" under this
Loan Agreement:
(a) Failure to make any payment in respect of (a) interest or
Revolving Credit Fee as the same shall become due and such failure shall
continue for a period of three (3) Banking Days or (b) the principal of any of
the Obligations as the same shall become due.
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(b) Any warranty or representation or other statement made or
furnished to the Lender by or on behalf of the Borrower herein or in any
document or instrument furnished in connection herewith proves to have been
false or misleading in any material respect when made or furnished.
(c) Breach of or failure in the due observance or performance of any
covenant, condition or agreement on the part of the Borrower to be observed or
performed pursuant to this Loan Agreement (other than those to be observed or
performed pursuant to Section 5.9 and Section 6 and other than those
specifically listed in this Section 7.1) and the failure to cure (if curable)
any such breach or failure within thirty (30) days after receipt of written
notice thereof from the Lender to the Borrower, except in the case of the
Borrower's requirement to execute and deliver the Security Agreement, as defined
in Section 3.1, in which case, the Borrower shall have three (3) business days
to cure.
(d) Breach of or failure in the due observance or performance of any
covenant, condition or agreement on the part of the Borrower to be observed or
performed pursuant to Section 5.9 or Section 6.
(e) Breach of or failure in the due observance or performance of any
covenant, condition or agreement on the part of the Borrower to be observed or
performed pursuant to any Supplemental Agreements or breach by Borrower of any
other agreement with Lender and such breach or failure shall not be corrected or
cured within thirty (30) days after written notice from the Lender to the
Borrower.
(f) A judgment or judgments for the payment of money shall be rendered
against the Borrower, and any such judgment shall remain unsatisfied and in
effect for any period of thirty (30) consecutive days without a stay or
execution or any attachment on trustee process or the like is served on the
Lender in connection with collection activity against the Borrower in excess of
$100,000.00;
(g) The Borrower shall (1) apply for or consent to the appointment
of a receiver, trustee or liquidator of all or a substantial part of any of its
assets; (2) be unable, or admit in writing its inability, to pay its debts as
they mature; (3) file any petition, case arrangement, reorganization, or the
like under any insolvency or bankruptcy law, or the adjudication of it as a
bankrupt, or the making of an assignment for the benefit of creditors or the
consenting to any form or arrangement for the satisfaction, settlement or delay
of debt or the appointment of a receiver for all or any part of its properties;
or (4) any action shall be taken by the Borrower for the purpose of effecting
any of the foregoing.
(h) An order, judgment or decree shall be entered, or a case shall be
commenced, against the Borrower, without its application, approval or consent by
any court of competent jurisdiction, approving a petition or permitting the
commencement of a case seeking reorganization or liquidation of the Borrower or
appointing a receiver, trustee or liquidator of the Borrower, or of all or a
substantial part of the assets of the Borrower, and Borrower, by any act,
indicate its approval thereof, consent thereto, or acquiescence therein, or such
order, judgment, decree or case shall continue unstayed and in effect for any
period of sixty (60) consecutive days.
(i) If the Borrower shall dissolve or liquidate, or be dissolved or
liquidated, or cease to legally exist, or merge or consolidate, or be merged or
consolidated with or into any other corporation.
(j) Failure by the Borrower to pay any other indebtedness or
obligation, or if any such other indebtedness or obligation shall be
accelerated, or if there exists any event of default under any instrument,
document or agreement governing, evidencing or securing such other indebtedness
or obligation.
(k) Substantial loss, theft, damage, destruction or diminution in
market value of any material assets of the Borrower not covered by insurance in
any material respect.
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Upon and after an Event of Default, the availability of advances hereunder
shall, at the option of the Lender, be deemed to be automatically terminated
and, at its option, the whole of said indebtedness, both principal and interest,
and including any other sums which may become due under this Loan Agreement,
shall, at the option of the Lender, immediately become due and payable without
presentment, demand, protest, notice of protest, or other notice of dishonor of
any kind, all of which are hereby expressly waived by the Borrower.
7.2. ACCELERATION. Upon the occurrence and during the continuance of an
Event of Default, the entire unpaid balance owed under this Loan Agreement, or
any note or other documents evidencing the same, plus any other Obligations,
shall, at the option of the Lender, immediately upon written notice to the
Borrower become due and payable without presentment, demand, protest, notice of
protest, or other notice of dishonor of any kind, all of which are hereby
expressly waived by the Borrower.
7.3. DEFAULT RATE. To the extent allowed by applicable law, after the
occurrence of any Event of Default, after maturity or after judgment has been
rendered on this Loan Agreement, Borrower's right to select pricing options
shall cease (if applicable) and all outstanding principal and unpaid interest
shall bear, until paid, interest at a rate per annum equal to two (2%)
percentage points greater than that which would otherwise be applicable (the
"DEFAULT RATE").
SECTION 8. MISCELLANEOUS PROVISIONS
8.1. SETOFF. Borrower hereby grants to Lender a lien, security interest
and a right of setoff as security for all of the Obligations, upon and against
all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Lender or any entity under the
control of Lender, or in transit to any of them. At any time, without demand or
notice, after an Event of Default, Lender may set off the same or any part
thereof and apply the same to any liability or obligation of Borrower even
though unmatured and regardless of the adequacy of any other collateral securing
the Obligations. ANY AND ALL RIGHTS TO REQUIRE LENDER TO EXERCISE ITS RIGHTS OR
REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS,
PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS
OR OTHER PROPERTY OF THE BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND
IRREVOCABLY WAIVED. Lender shall not be required to marshal any present or
future security for, or guarantees of, the Obligations or to resort to any such
security or guarantee in any particular order and the Borrower waives to the
fullest extent that it lawfully can, (a) any right it might have to require the
Lender to pursue any particular remedy before proceeding against the Lender and
(b) any right to the benefit of, or to direct the application of the proceeds of
any collateral until the Obligations are paid in full.
8.2. WAIVERS GENERALLY. The Borrower agrees that no delay or failure on
the part of the holder in exercising any power, privilege, remedy, option or
right hereunder shall operate as a waiver thereof or of any other power,
privilege, remedy or right; nor shall any single or partial exercise of any
power, privilege, remedy, option or right hereunder preclude any other or future
exercise thereof or the exercise of any other power, privilege, remedy, option
or right. The rights and remedies expressed herein are cumulative, and may be
enforced successively, alternately, or concurrently and are not exclusive of any
rights or remedies which holder may or would otherwise have under the provisions
of all applicable laws, and under the provisions of all agreements between the
Borrower and the Lender.
8.3. MAXIMUM INTEREST. Borrower shall not be obligated to pay and
Lender shall not collect interest at a rate higher than the maximum permitted by
law or the maximum that will not subject Lender to any civil or criminal
penalties. If, because of the acceleration of maturity the payment of interest
in advance or any other reason, Borrower is required, under the provisions of
any Loan Document or
25
otherwise, to pay interest at a rate in excess of such maximum rate, the rate of
interest under such provisions shall immediately and automatically be reduced to
such maximum rate and any payment made in excess of such maximum rate, together
with interest.
8.4. WAIVER OF RIGHT TO PREJUDGMENT REMEDY NOTICE AND HEARING. Borrower
hereby waives such rights as it may have to notice and/or hearing under any
applicable federal or state laws pertaining to the exercise by Lender of such
rights as the Lender may have regarding the right to seek prejudgment remedies
and/or deprive Borrower of or affect the use of or possession or enjoyment of
Borrower's property prior to the rendition of a final judgment against the
Borrower. The Borrower further waives any right it may have to require Lender to
provide a bond or other security as a precondition to or in connection with any
prejudgment remedy sought by Lender, and waives any objection to the issuance of
such prejudgment remedy based on any offsets, claims, defenses or counterclaims
to any action brought by the Lender.
8.5. WAIVER OF RIGHT TO TRIAL BY JURY AND CONSENT TO JURISDICTION.
BORROWER AND LENDER MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER DOCUMENTS
CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR LENDER TO MAKE THE LOAN
AND ACCEPT THIS AGREEMENT.
Borrower hereby agrees that the following courts:
State Court - Any state or local court of the Commonwealth of
Massachusetts; and
Federal Court - United States District Court for the District of
Massachusetts;
or at the option of Lender, any court in which Lender shall initiate legal or
equitable proceedings and which has subject matter jurisdiction over the matter
in controversy, shall have exclusive jurisdiction to hear and determine any
claims or disputes between Borrower and Lender pertaining directly or indirectly
to this Agreement or to any matter arising in connection with this Agreement.
Borrower expressly submits and consents in advance to such jurisdiction in any
action or proceeding commenced in such courts, hereby waiving personal service
of the summons and complaint, or other process or papers issued therein, and
agreeing that service of such summons and complaint, or other process or papers,
may be made by registered or certified mail addressed to Borrower at the address
set forth herein. Should Borrower fail to appear or answer any summons,
complaint, process or papers so served within thirty (30) days after the mailing
thereof, it shall be deemed in default and an order and/or judgment may be
entered against it as demanded or prayed for in such summons, complaint, process
or papers. The exclusive choice of forum set forth herein shall not be deemed to
preclude the enforcement of any judgment obtained in such forum or the taking of
any action under this Agreement to enforce the same in any appropriate
jurisdiction nor the ability or right of the Lender to seek prejudgment relief
wherever the Borrower has assets, including accounts receivable or contract
rights.
8.6. SURVIVAL OF AGREEMENTS. All agreements, representations and
warranties made herein, in any agreement and in any statements, notices,
invoices, certificates, schedules, documents or other instruments delivered to
the Lender in connection with this Loan Agreement or any other agreement shall
survive the making of the loans and advances hereunder.
8.7. RIGHTS OF ASSIGNEE. All, but not less than all, rights of the
Lender in, to and under this
26
Loan Agreement shall pass to and may be exercised by any assignee thereof. The
Borrower agrees that, in the event of an assignment of this Loan Agreement and
notice of such assignment to the Borrower, the liability of the Borrower to a
holder for value of this Loan Agreement shall be immediate and absolute and not
affected by any actions of the Lender; and that the Borrower will not set up any
claim against the Lender as a defense, counterclaim or setoff to any action for
the unpaid balance owed under this Loan Agreement or for possession, brought by
said holder.
8.8. BINDING EFFECT. All rights and obligations of the Lender hereunder
shall inure to the benefit of and be binding upon its successors and assigns,
and all the obligations of the Borrower contained in this Loan Agreement shall
bind the successors and assigns of the Borrower. If the Borrower consists of one
or more parties, all of the obligations, covenants, representations and
warranties of the Borrower contained in this Loan Agreement shall be the joint
and several obligations of the parties constituting the "Borrower".
8.9. ENTIRE AGREEMENT. This Loan Agreement and the documents referred
to herein constitute the entire agreement of the parties and may not be amended
orally.
8.10. GOVERNING LAW. This Loan Agreement shall be governed and
construed in accordance with the laws of the Commonwealth of Massachusetts,
including its conflict of laws principles.
8.11. PAYMENTS. Acceptance of any check, draft or money order tendered
in payment of any of the Obligations is conditioned upon and subject to receipt
of final payment in cash.
8.12. SCHEDULES. All schedules referred to herein and annexed hereto
are hereby incorporated into this Loan Agreement and made a part hereof.
8.13 EXPENSES AND COUNSEL FEES. The Borrower agrees to pay all
reasonable counsel fees and expenses, including recording and filing fees,
incurred by the Lender in connection with the financing of any kind and
character hereafter incurred by the Lender, whether in connection with efforts
to collect the Obligations, or in the enforcement or defense of any of the
provisions of this Loan Agreement; or negotiations regarding and consultation
concerning this Loan Agreement or any Supplemental Agreement, or preparation
therefore, or the financing extended thereunder; or the defense of any
proceedings involving any claims made or threatened against or arising out of
this Loan Agreement or any Supplemental Agreement, or the financing extended
thereunder, or which the Lender may hereafter incur in protecting, enforcing,
increasing or releasing any security held by the Lender or any Obligation or any
provision of this Loan Agreement or any Supplemental Agreement, or obligation to
pay such counsel fees and expenses of the Lender shall exist whether or not
proceedings are instituted or legal appearances made in any court on behalf of
the Lender. Borrower further promises to pay to the Lender, as incurred, all
other reasonable costs abd expenses incurred (i) in the protection,
modification, collection, defense or enforcement of all or part of this Loan
Agreement or any Supplemental Agreement, or (ii) in the foreclosure or
enforcement of any mortgage or security interest which may now or hereafter
secure the Obligations, or (iii) with respect to any action taken to protect,
defend, modify or sustain the lien of any such mortgage or security agreement,
or (iv) with respect to any litigation or controversy arising from or connected
with this Loan Agreement or any Supplemental Agreement or the Obligations or any
mortgage or security agreement or collateral which may now or hereafter secure
the Obligations or (v) with respect to any act to protect defend, modify,
enforce or release any of its rights or remedies with regard to, or otherwise
effect collection of, any collateral which may now or in the future secure the
Obligations.The Borrower specifically authorizes the Lender to pay all such fees
and expenses and charge the same to the Borrower's loan account. Furthermore, if
the Borrower shall request the Lender's consent or joinder in any instrument
pertaining to this Loan Agreement, the Borrower agrees to promptly reimburse the
Lender for the reasonable legal fees incurred by Lender in processing such
request, whether or not the Lender
27
complies therewith; and if the Borrower shall fail to promptly reimburse the
Lender, the same shall be deemed to be a default in the Borrower's monetary
obligations under this Loan Agreement.
8.14 LENDER ADVANCES. The Lender may, in its sole and absolute
discretion, with at least three (3) business days notice (except in the event of
any emergency, in which no notice shall be required, such as lack of insurance
coverage for the Borrower's business assets), pay any amount which the Borrower
has failed to pay or perform any act which the Borrower has failed to perform
under this Loan Agreement. In such event the costs, disbursements, expenses and
reasonable counsel fees thereof, together with interest thereon from the date
the expense is paid or incurred, at the highest interest rate allowed under this
Loan Agreement shall be (i) added to the Obligations, (ii) payable on demand to
the Lender and (iii) secured by any collateral held by the Lender. Nothing
herein contained shall obligate the Lender to make such payments nor shall the
making of one or more such payments constitute (i) an agreement on the Lender's
part to take any further or similar action; or (ii) a waiver of any Event of
Default under this Loan Agreement.
8.15 DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections of this Loan Agreement are inserted for convenience only and shall not
be deemed to affect the meaning or construction of any of the provisions hereof.
8.16 NOTICES. All notices, requests, demands, claims and other
communications required or permitted to be delivered, given or otherwise
provided under this Agreement must be in writing and must be delivered, given or
otherwise provided:
(a) by facsimile (in which case, it will be effective upon
receipt of confirmation of good transmission), with a
copy via overnight delivery by a nationally recognized
courier service; or
(b) by overnight delivery by a nationally recognized
courier service (in which case, it will be effective on
the Business Day after being deposited with such
courier service);
in each case, to the address (or facsimile number) listed below:
If to the Borrower:
------------------
BTU International, Inc.
00 Xxxxxxx Xxxx
Xxxxx Xxxxxxxxx, Xxxxxxxxxxxxx 00000,
Attention: President
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxxx X. Xxxxxx, Esquire
Ropes & Xxxx
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
28
If to the Lender:
----------------
Sovereign Bank
00 Xxxxxxxx Xxxxxx
Mail Stop: MA1-PLS-0201
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxx, Esquire
Xxxxxx & Xxxxx LLP
0 Xxxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
8.17 SEVERABILITY. If any provision of this Loan Agreement or
application thereof to any person or circumstance shall to any extent be
invalid, the remainder of this Loan Agreement or the application of such
provision to persons, entities or circumstances other than those as to which it
is held invalid, shall not be affected thereby and each provision of this Loan
Agreement shall be valid and enforceable to the fullest extent permitted by law.
8.18 THIRD PARTY PURCHASER. So long as no Event of Default has occurred
and is continuing (and otherwise without consent), Lender shall have the right
at any time or from time to time, with the consent of the Borrower, to sell,
assign, endorse, or transfer all of its rights and obligations hereunder to one
bank (each an "ASSIGNEE"), and Borrower agrees that it shall execute, or cause
to be executed such documents including without limitation, amendments to this
Agreement and to any other documents, instruments and agreements executed in
connection herewith as Lender shall deem necessary to effect the foregoing. In
addition, at the request of Lender and any such Assignee, Borrower shall issue
one or more new promissory notes, as applicable, to any such Assignee and, if
Lender has retained any of its rights and obligations hereunder following such
assignment, to Lender, which new promissory notes shall be issued in replacement
of, but not in discharge of, the liability evidenced by the note held by Lender
prior to such assignment and shall reflect the amount of the respective
commitments and loans held by such Assignee and Lender after giving effect to
such assignment. Upon the execution and delivery of appropriate assignment
documentation, amendments and any other documentation required by Lender in
connection with such assignment, and the payment by Assignee of the purchase
price agreed to by Lender and such Assignee, such Assignee shall be a party to
this Agreement and shall have all of the rights and obligations of Lender
hereunder (and under any and all other guaranties, documents, instruments and
agreements executed in connection herewith) to the extent that such rights and
obligations have been assigned by Lender pursuant to the assignment
documentation between Lender and Assignee, and Lender shall be released from its
obligation hereunder and thereunder to a corresponding extent.
8.19 PARTICIPATION. Lender shall have the unrestricted right at any
time and from time to time, and without the consent of or notice to Borrower, to
grant to one or more institutions or other persons (each a "Participant")
participating interests in Lender's obligations to lend hereunder and/or any or
all of the loans held by Lender hereunder. In the event of any such grant by
Lender of a participating interest to a Participant, whether or not upon notice
to Borrower, Lender shall remain responsible for the
29
performance of its obligations hereunder and Borrower shall continue to deal
solely and directly with Lender in connection with Lender's rights and
obligations hereunder. Lender shall furnish any information concerning Borrower
in its possession from time to time to any prospective assignees and
Participants, provided that Lender shall require any such prospective assignee
or Participant to maintain the confidentiality of such information.
8.20 REPLACEMENT DOCUMENTS. Upon receipt of an affidavit of an officer
of Lender as to the loss, theft, destruction or mutilation of the Note or any
other security document(s) which is not of public record and, in the case of any
such loss, theft, destruction or mutilation, upon surrender and cancellation of
such Note or other document(s) and a reasonably indemnity, the Borrower will
issue, in lieu thereof, a replacement Note or other document(s) in the same
principal amount thereof and otherwise of like
8.21 FEDERAL RESERVE. Lender may at any time pledge, endorse, assign,
or transfer all or any portion of its rights under the Loan Documents including
any portion of the Note to any of the twelve (12) Federal Reserve Banks
organized under Section 4 of the Federal Reserve Act. 12.U.S.C. Section 341. No
such pledge or enforcement thereof shall release Lender from its obligations
under any of the Loan Documents.
IN WITNESS WHEREOF, the parties have caused this Loan Agreement to be
duly executed and delivered by the proper and duly authorized officers as of the
date and year first above written.
SOVEREIGN BANK
By:__________________________________
Xxxxxxx X. Xxxxx, Vice President
Duly Authorized
BTU INTERNATIONAL, INC.
______________________________ By: __________________________________
Witness Xxxxxx X. Xxxxx
Vice President, Corporate Controller
Duly Authorized
30
LIST OF SCHEDULES AND EXHIBITS
SCHEDULE A FINANCIAL COVENANTS AND DISCLOSURES
SCHEDULE B FINANCIAL STATEMENTS AND REPORTING REQUIREMENTS
EXHIBIT A OTHER BUSINESS LOCATIONS OF BORROWER
EXHIBIT B COVENANT COMPLIANCE CERTIFICATE
EXHIBIT 1.4 BORROWING REQUEST FORM
EXHIBIT 2.2 FORM OF BORROWING BASE CERTIFICATE
EXHIBIT 2.3 FORM OF REVOLVING NOTE
EXHIBIT 2.6 FORM OF TERM NOTE
EXHIBIT 3.1 FORM OF SECURITY AGREEMENT
EXHIBIT 6.1(1) PERMITTED LIENS
EXHIBIT 6.3 EXISTING INDEBTEDNESS
31
SCHEDULE A
FINANCIAL COVENANTS AND DISCLOSURES
The Borrower hereby covenants and agrees that it shall not:
LEVERAGE RATIO. Borrower will not permit the ratio of (a) the total
liabilities that would be shown on the balance sheet of the Borrower as of any
date, to (b) the Borrower's Tangible Net Worth as of such date (the "LEVERAGE
RATIO") to be greater than .75 to 1.0.
MINIMUM TANGIBLE NET WORTH. Permit Borrower's Tangible Net Worth to be
less than the aggregate of (i) Twenty Million ($20,000,000.00) Dollars and (ii)
Fifty (50%) percent of the aggregate after tax income of the Borrower for each
fiscal year commencing with the fiscal year ending December 31, 2002. Losses in
subsequent fiscal years will not serve to decrease the aforesaid minimum level
in effect as of each fiscal year end.
Notwithstanding the foregoing, in the event of the acquisition by the
Borrower of another business, whether by merger or by the purchase of stock or
assets, which acquisition has been approved by the Board of Directors of the
Borrower, then, unless otherwise agreed in writing with the Lender, and provided
the Lender has been provided with the information set forth in Schedule B, item
9, the Leverage Ratio shall be modified so as to permit a Leverage Ratio
thereafter of not more than 2.0 to 1.0. Additionally, in such event, the
Tangible Net Worth requirement shall be reduced to Fifteen Million
($15,000,000.00) Dollars for the year of the acquisition, with said Fifteen
Million ($15,000,000.00) Dollars thereafter increasing annually by Fifty (50%)
percent of the aggregate after tax income of the Borrower for each fiscal year
after the year during which the acquisition was consummated.
In the event of an acquisition of a business, until such time as a
field examination has occurred, the Borrowing Base shall be reduced to the
Seventy-five (75%) percent of the amount which would otherwise be available
under Section 2.1 and after the conclusion of a field exam, satisfactory to the
Bank in its reasonable judgment, the Borrowing Base shall return to the amount
determined pursuant to Section 2.1.
Unless the Lender otherwise consents in writing:
(a) Accounting Terms. Unless otherwise defined or specified in this
Section, all accounting terms shall be construed and all accounting
determinations shall be made in accordance with GAAP.
(b) Calculation of Financial Covenants. The calculation of the
financial covenants set forth above shall be measured quarterly against the
financial statements required to be delivered to the Lender pursuant to
Schedule B.
For purposes of this Schedule:
"INTANGIBLE ASSETS" - means assets that in accordance with GAAP are
properly classifiable as intangible assets, including, but not limited to,
goodwill, franchises, licenses, patents, trademarks, trade names and copyrights.
"TANGIBLE NET WORTH" - means Total Assets minus the sum of (i)
Intangible Assets and (ii) Total Liabilities.
"TOTAL ASSETS" - means total assets determined in accordance with GAAP.
32
SCHEDULE B
FINANCIAL STATEMENTS AND REPORTING
The Borrower will furnish to the Lender:
QUARTERLY FINANCIAL STATEMENTS. As soon as available, and, in any event, within
Forty-five (45) days after the end of each calendar quarter, financial
statements prepared by Borrower's Chief Financial Officer, Treasurer or
Certified Public Accountants, in 10-Q form, prepared in accordance with GAAP
consistently applied and certified by the President, Treasurer or Chief
Financial Officer of the Borrower as being true, accurate and complete;
ANNUAL FINANCIAL STATEMENTS OF BORROWER. Within four (4) months after the end of
each fiscal year, an annual financial statement, including, without limitation,
a balance sheet of the Borrower as of the end of such fiscal year and a
statement of income and retained earnings of the Borrower for such fiscal year,
and a statement of change in financial position of the Borrower for such fiscal
year, all in reasonable detail and stating in comparative form the respective
figures for the corresponding date and period in the prior fiscal year prepared
in accordance with GAAP consistently applied, of audit quality as prepared by
independent certified public accountants selected by the Borrower and approved
by the Lender, which approval shall not be unreasonably withheld, and certified
by the President, Treasurer of the Borrower or Chief Financial Officer of the
Borrower as being true, accurate and complete, together with all management
reports prepared by said accountants, and a copy of the Borrower's 10-K Report.
NOTICE OF LITIGATION. Promptly after the commencement thereof, notice of all
actions, suits, and proceedings before any court or governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign,
affecting the Borrower or any Subsidiary or Affiliate, which, if determined
adversely to the Borrower or any Subsidiary or Affiliate, could have a material
adverse effect on the financial condition, properties, or operations of the
Borrower or any Subsidiary or Affiliate. Any suit seeking in excess of One
Hundred Thousand ($100,000.00) Dollars shall be deemed material for notice
purposes;
NOTICE OF DEFAULTS AND EVENTS OF DEFAULT. As soon as possible and in any event
within ten (10) days after the occurrence of each Default or Event of Default, a
written notice setting forth the details of such Default or Event of Default and
the action which is proposed to be taken by the Borrower with respect thereto;
TAX RETURNS, FINANCIALS AND GENERAL INFORMATION. Such other information
respecting the condition or operations, financial or otherwise of Borrower and
any successor in title thereto, and any Subsidiary or Affiliate, as the Lender
may, from time to time, reasonably request;
ACCOUNTS AGINGS, BORROWING BASE CERTIFICATE AND INVENTORY AND FIXED ASSET
SUMMARY. Initially, on or before the initial borrowing request or any request
for the issuance of a Letter of Credit, and thereafter, so long as any
borrowings or Letters of Credit remain outstanding, within fifteen (15) days
after the end of each month, (a) an Accounts aging in such form as the Lender
reasonably requests; (b) inventory and Fixed Asset summary report in a form
satisfactory to the Lender; (c) a Borrowing Base Certificate, in the form of
Exhibit 2.2 or such other form as the Lender requires; and (d) a deposit balance
report for the Borrower's cash and cash equivalent balances, in form summary to
the Lender.
33
QUARTERLY COMPLIANCE CERTIFICATES. Within forty-five (45) days after the end of
each quarter, a Compliance Certificate in the form of Exhibit B or in such other
form as the Lender requires and certified by the President, Treasurer of the
Borrower or Chief Financial Officer of the Borrower; and
PROJECTIONS. As available, and, in any event, within fifteen (15) days of when
approved by the Board of Directors or any executive committee, Borrower's annual
budget and projected performance.
ACQUISITION INFORMATION. In the event of the acquisition by the Borrower of
another business, whether by merger or by the purchase of stock or assets or
otherwise, which acquisition has been approved by the Board of Directors of the
Borrower, within ten (10) days of such acquisition, all information furnished to
the Board of Directors and, within ten (10) days of request by Lender, such
other information as the Lender may reasonably request, including, without
limitation, forecasts, business plans and product descriptions.
34
EXHIBIT A
OTHER BUSINESS LOCATIONS
35
EXHIBIT B
COMPLIANCE CERTIFICATE TO FINANCIAL COVENANTS
WITH ACCOMPANYING FINANCIAL STATEMENTS
OF BTU INTERNATIONAL, INC.
AS OF FISCAL QUARTER ENDED: ________________________
PURSUANT TO A LOAN AGREEMENT DATED JUNE 26, 2002
(A) MINIMUM TANGIBLE NET WORTH. The Borrower shall maintain a minimum Tangible
Net Worth equal to the sum of (i) $20,000,000.00 and (ii) Fifty (50%) percent of
the aggregate after tax income of the Borrower for each fiscal year commencing
with the fiscal year ending December 31, 2002, evaluated quarterly beginning as
of the quarter ending September 30, 2002 (subject to an adjusted minimum in the
event of an acquisition of another business). Tangible Net Worth is defined as
"Total Assets minus the sum of (i) Intangible Assets and (ii) Total
Liabilities".
A. Total assets
-------------------------
B. Intangible assets
-------------------------
C. A minus B
-------------------------
D. Total Liabilities
-------------------------
E. C minus E = Tangible Net Worth
=========================
In compliance Violation
-------------- --------------
(B) LEVERAGE RATIO. Borrower shall maintain a "Total Liabilities /Tangible Net
Worth ratio of not greater than .75: 1.0, which ratio shall be evaluated
quarterly beginning September 30, 2002 (subject to an adjusted minimum in the
event of an acquisition of another business).
A. Total assets
-------------------------
B. Intangible assets
-------------------------
C. A minus B
-------------------------
D. Total liabilities
-------------------------
E. Tangible net worth (C minus D)
-------------------------
F. Ratio of C to E
=========================
In compliance In violation
--------------- ---------------
I hereby certify to the accuracy of the above information after review of the
financial statements and books of BTU International, Inc.
BTU INTERNATIONAL, INC.
By:
------------------------------------
(Signature)
Title:
----------------------------------
Date:
----------------------------------
36
EXHIBIT 1.4
FORM OF BORROWING REQUEST
37
EXHIBIT 2.2
BORROWING BASE CERTIFICATE
BTU INTERNATIONAL, INC.
Pursuant to a Loan and Credit Agreement between the undersigned as
Borrower, and Sovereign Bank as the Bank, dated June 26, 2002 as may be
modified, amended or extended from time to time, the undersigned hereby requests
loan availability as outlined below. The following is a true and accurate
calculation of borrowing availability under the Agreement as of _______________:
Cash Deposits
1. Cash deposits Per Attached, limited to $1,000,000:
---------
2. Gross Accounts Receivable Per Attached Aging For Period End:
---------
3. Less: Accounts Receivable aged more than 90 days:
---------
4. Less: Contra Accounts Receivable:
---------
5. Less: Accounts Receivable with greater than 50% aged more than 90 days:
---------
6. Eligible Accounts Receivable (Line 2 minus Lines 3, 4 and 5):
---------
7. Accounts Receivable Advance Rate: 80%
8. Net Availability from Receivables (Line 6 x Line 7):
---------
Inventory
9. Total Inventory per Attached for Period End:
---------
10. Less ineligible inventory as Defined:
---------
11. Eligible Inventory (Line 9 minus Line 10):
---------
12. Inventory Advance Rate: 35%
13. Net Availability from Inventory (Line 11 x Line 12):
---------
(Inventory availability not to exceed $4,000,000)
Fixed Assets
14. Fixed Assets as Defined, per attached:
---------
15. Fixed Assets advance rate: 80%
16. Net Availability from Fixed Assets (Line 14 x Line 15)
---------
17. Total Availability
18. Total Gross Availability (Line 8 plus Line 14):
---------
19. End of Period Loan Balance:
---------
20. Outstanding Letters of Credit:
---------
21. Total Borrowings (Line 19 plus Line 20):
---------
22. Borrowing Base Excess / Shortfall Line 18 minus Line 21):
---------
38
The Borrower hereby certifies that all representations and warranties contained
in the Agreement are true and accurate in all material respects on the date of
this Certificate and on the effective date of the subject loan request herein as
though such representations and warranties had been made on those dates.
BTU INTERNATIONAL, INC.
By: __________________________ Date: ____________________
39
EXHIBIT 2.3
FORM OF REVOLVING NOTE
REVOLVING CREDIT NOTE
$14,000,000.00 BOSTON, MASSACHUSETTS
JUNE , 2002
FOR VALUE RECEIVED, BTU INTERNATIONAL, INC., a Delaware corporation with a
principal place of business at 00 Xxxxxxx Xxxx, Xxxxx Xxxxxxxxx, Xxxxxxxxxxxxx
00000 (the "BORROWER") promises to pay to the order of SOVEREIGN BANK, (the
"LENDER") at its offices at 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, or at
such other place as the holder of this note may from time to time designate in
writing on the Termination Date (defined below), the principal sum of FOURTEEN
MILLION AND 00/100 DOLLARS ($14,000,000.00), or the aggregate unpaid principal
amount of all advances made by the Lender to the Borrower as part of the
Revolving Loan pursuant to the Loan Agreement dated June 26, 2002, as from time
to time in effect, between the Lender and the Borrower (the "LOAN AGREEMENT").
The Borrower promises to pay interest on each advance at the rate set forth in
the Loan Agreement and to pay all taxes levied or assessed upon said principal
sum against any holder of this Note and all costs, including reasonable
attorney's fees incurred in the collection, defense, preservation, enforcement
or protection of this Note, in the foreclosure of any mortgage or security
interest now or hereafter securing the same or in any proceedings to otherwise
enforce or protect this Note or any security therefor. All advances shall be due
and payable as set forth herein, but if not sooner paid, this Note and all
amounts due hereunder shall be due and payable on MAY 31, 2006 (as it may be
extended by the Lender, in its sole the discretion, the "TERMINATION Date").
Pursuant to the Loan Agreement, the Borrower may convert advances made hereunder
to term loans evidenced by term note. To the extent any such advances are
converted to term loans, then as advances are converted, then the amounts so
converted shall be evidenced by Term Notes and all outstanding principal
balances of all Term Loans will reduce the amounts available hereunder dollar
for dollar. Amounts converted to Term Loans and repaid may not be re-borrowed
hereunder.
All loans made by the Lender as part of the Revolving Loan pursuant to
the Loan Agreement and all repayments of the principal thereof shall be recorded
by the Lender and, prior to any transfer hereof, appropriate notations to
evidence the foregoing information with respect to each such loan then
outstanding shall be endorsed by the Lender on a schedule to be attached hereto
and to become a part hereof; provided, however, that the failure of the Lender
to make or attach any such recordation or endorsement shall not affect the
obligations of the Borrower under this Note, such Loan Agreement or any other
document related thereto.
This Note evidences borrowings under, and is entitled to the benefits
of, and is subject to the provisions of, the Loan Agreement. The principal of
this Note is prepayable in the amounts and under the circumstances set forth in
the Loan Agreement, and may be prepaid in whole or from time to time in part,
all as set forth in the Loan Agreement. Terms defined in the Loan Agreement are
used herein with the meanings so defined.
In case an Event of Default shall occur and be continuing, the entire
principal of this Note may become or be declared due and payable in the manner
and with the effect provided in the Loan Agreement.
40
The Borrower hereby waives presentment, demand, notice, protest and all
other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note. The Borrower hereby assents to
any extension or postponement of the time of payment or any other indulgence, to
the addition or release of any party or person primarily or secondarily liable,
and to the addition, release and/or substitution of all or any portion of any
collateral now or hereafter securing this Note.
This Note shall be governed by and construed in accordance with the laws
of The Commonwealth of Massachusetts.
BTU INTERNATIONAL, INC.
By:_____________________________
Xxxxxx X. Xxxxx
Vice President, Corporate Controller
and Chief Accounting Officer
------------------------------
Witness
41
EXHIBIT 2.6
FORM OF TERM NOTE
TERM PROMISSORY NOTE
$[__,000.00] BOSTON, MASSACHUSETTS
___, 200_
FOR VALUE RECEIVED, on _________________ 200_ (the "MATURITY DATE"), BTU
INTERNATIONAL, INC., a Delaware corporation with a principal place of business
at 00 Xxxxxxx Xxxx, Xxxxx Xxxxxxxxx, Xxxxxxxxxxxxx 00000 (hereinafter called
"BORROWER") promises to pay to the order of SOVEREIGN BANK, (hereinafter called
"LENDER") at its offices at 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, or at
such other place as the holder of this note may from time to time designate in
writing, the principal sum of [ MINIMUM OF $500,000.00 ] AND 00/100 DOLLARS ($
,000.00)], in lawful money of the United States. The Borrower also promises to
pay interest monthly in arrears on the outstanding principal balance at the rate
or rates provided in the Credit Agreement monthly in arrears with each
installment of principal and to pay all taxes levied or assessed upon said
principal sum against any holder of this Note and all costs, including
reasonable attorney's fees incurred in the collection, defense, preservation,
enforcement or protection of this Note, in the foreclosure of any mortgage or
security interest now or hereafter securing the same or in any proceedings to
otherwise enforce or protect this Note or any security therefore. Payments of
principal shall be made in <____________ (____)> successive quarterly
installments as follows:
<__________ (______)> equal successive quarterly installments in
the amount of <______________ DOLLARS ($_____________)> commencing
<______________> and continuing on the <_______> day of each successive quarter
thereafter, with the final and <____________ (______)> installment being due and
payable on the Maturity Date, said installment being an amount equal to the
balance of all unpaid principal and accrued interest.
This Note evidences borrowings under, and is entitled to the benefits
of, and is subject to the provisions of, the Credit Agreement dated as of June
26, 2002, as from time to time in effect (the "CREDIT AGREEMENT"), between the
Borrower and the Lender. The principal of this Note is prepayable in the amounts
and under the circumstances set forth in the Credit Agreement, and may be
prepaid in whole or from time to time in part, all as set forth in the Credit
Agreement. Terms defined in the Credit Agreement are used herein with the
meanings so defined.
In case an Event of Default shall occur and be continuing, the entire
principal of this Note may become or be declared due and payable in the manner
and with the effect provided in the Credit Agreement.
This Note shall be governed by and construed in accordance with the
laws of The Commonwealth of Massachusetts.
42
The parties hereto, including the Borrower and endorsers, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Note, except as specifically otherwise provided in the Credit Agreement, and
assent to extensions of time of payment, forbearance or other indulgence without
notice.
BTU INTERNATIONAL, INC.
By:
------------------------------ -------------------------------
Witness Name:
Title:
43
EXHIBIT 3.1
FORM OF SECURITY AGREEMENT
(SECTION 3.1)
SECURITY AGREEMENT
(ALL ASSETS OTHER THAN REAL ESTATE)
THIS SECURITY AGREEMENT is entered into at Boston, Massachusetts, as of
this ____ day of , 200____ by and between BTU INTERNATIONAL, INC., a Delaware
corporation with its chief executive office, principal place of business and
mailing address at 00 Xxxxxxx Xxxx, Xxxxx Xxxxxxxxx, Xxxxxxxxxxxxx 00000
(hereinafter called the "BORROWER") and SOVEREIGN BANK (hereinafter called the
"BANK").
The tangible Collateral, including the Inventory and Equipment, which
is the subject matter of this Agreement is and will be kept at: 00 Xxxxxxx Xxxx,
Xxxxx Xxxxxxxxx, Xxxxxxxxxxxxx 00000 and the other locations described on
Exhibit A. The Borrower warrants that the Borrower has no places of business
except as set forth in the preceding sentence, except for additional locations
identified on Exhibit A. All records concerning Borrower's accounts, contract
rights and other property are at 00 Xxxxxxx Xxxx, Xxxxx Xxxxxxxxx, Xxxxxxxxxxxxx
00000.
1. In consideration of the Bank's extending credit and other financial
accommodations to the Borrower, the Borrower hereby grants to the Bank a
security interest in (including, without limitation, a lien on and pledge of)
all of the Borrower's Collateral (as hereinafter defined).
The security interest granted by this Agreement is given to and shall
be held by the Bank as security for the payment and performance of all
Obligations (as hereinafter defined). After the occurrence and during the
continuation of an Event of Default, if the Bank shall have declared the
Obligations to be immediately due and payable pursuant to Section 7.2 of the
Loan Agreement, the Bank shall have the unrestricted right from time to time to
apply the proceeds of any of the Collateral to any of the Obligations, as the
Bank in its sole discretion may determine.
During the continuance of this Agreement, the Borrower will, at such
intervals as the Bank may request, notify the Bank, upon a form satisfactory to
the Bank, of all Collateral which has come into existence since the date hereof
or the date of the last such notification, including, without limitation, the
delivery of schedules of the Collateral.
2. The following definitions shall apply:
(a) "COLLATERAL" shall mean all the Borrower's present and
future right, title and interest in and to any and all of the following
property, whether such property be now existing or hereafter created,
acquired or arising or now or hereafter received by or belonging or
owing to the Borrower:
(i) All Inventory;
(ii) All accounts, (as these terms are defined in the Uniform
Commercial Code, as hereafter defined), including, without limiting the
generality of the foregoing, "Health-Care-Insurance Receivables",
accounts receivable, and all contract rights, and chattel paper,
including
44
without limiting the generality of the foregoing, "Electronic Chattel
Paper", regardless of whether or not any of the foregoing constitute
proceeds of other Collateral;
(iii) All general intangibles, regardless of whether or not
they constitute proceeds of other Collateral, including, without
limitation, all the Borrower's rights (which the Bank may exercise or
not as it in its sole discretion may determine) to acquire or obtain
goods and/or services with respect to the manufacture, processing,
storage, sale, shipment, delivery or installation of any of the
Borrower's Inventory or other Collateral;
(iv) All products and accessions to any of the Collateral;
(v) All tax refunds of every kind and nature to which the
Borrower is now or hereafter may become entitled no matter however
arising, including, without limitation, loss carry back refunds;
(vi) All obligations, debts and liabilities owing to the
Borrower of every kind and nature, from any person, firm or corporation
or any other legal entity, whether now existing or hereafter arising,
now or hereafter received by or belonging or owing to Borrower, for
goods sold by it or for services rendered by it, or however otherwise
same may have been established or created, all guarantees and
securities therefore, all right, title and interest of Borrower in the
merchandise or services which gave rise thereto, including the rights
of reclamation and stoppage in transit, all rights to replevy goods,
and all rights of an unpaid seller of merchandise or services, and all
choses in action;
(vii) All goodwill, trade secrets, records, files, computer
programs, and software and data, customer lists, ledger sheets, trade
names, trade secrets, copyrights, trademarks and patents;
(viii) All documents and instruments (whether negotiable or
nonnegotiable, and regardless of their being attached to chattel
paper), including, without limitation, all notes, bills, drafts and
acceptances and all security entitlements, financial assets and other
investment property, as these terms are defined in the Uniform
Commercial Code;
(ix) All Equipment, including without limitation, machinery,
furniture, trade fixtures and all other goods used in the conduct of
the Borrower's business, and including, without limitation, all motor
vehicles now or hereafter owned or acquired by the Borrower;
(x) All books and records (including, without limiting the
generality of the foregoing all electronically recorded data), whether
now owned or existing or hereafter acquired, created or arising,
including, without in any way limiting the generality of the foregoing,
those relating to its accounts;
(xi) All deposit accounts and other bank accounts of any kind
maintained by the Borrower with any bank, trust company, investment
firm or fund, or any similar institution or organization;
(xii) All commercial tort claims, letters of credit and letter
of credit rights, as these terms are defined in the Uniform Commercial
Code; and
(xiii) All proceeds of Collateral of every kind and nature and
in whatever form, including, without limitation, both cash and noncash
proceeds resulting or arising from the rendering of services by the
Borrower or the sale or other disposition by the Borrower of the
45
Inventory or other Collateral and all insurance proceeds payable under
insurance policies relating to any items of Collateral and rents and
profits resulting from the temporary use of Collateral;
Provided, however, that "Collateral" shall not include any of the Borrower's
interests in real property, including fixtures.
(b) "CONTRACT RIGHTS" or "CONTRACT RIGHTS" means the rights of
the Borrower to payment under contracts not yet earned by performance
and not evidenced by instruments or chattel paper.
(c) "INTELLECTUAL PROPERTY" shall mean
(i) all copyrights owned by the Borrower that are
registered with the United States Copyright Office (or any
office maintaining registration of copyrights in any foreign
jurisdiction) and all applications for such registration; and
(ii) all trademarks, tradenames, service marks,
service names and patents owned by the Borrower that are
registered with the United States Patent and Trademark Office
(or any office maintaining registration of such items in any
state of the United States of America or any foreign
jurisdiction) and all applications for such registration.
(d) "INVENTORY" shall include, without limitation, any and all
goods, wares, merchandise and other tangible personal property,
including raw materials, work in process, supplies and components, and
finished goods, whether held by the Borrower for sale or other
disposition, and also including any returned or repossessed Inventory
detained from or rejected for entry into the United States by the
appropriate governmental authorities, all products of and accessions to
Inventory and including documents of title, whether negotiable or
nonnegotiable, representing any of the foregoing.
(e) "DEBTOR(S)" shall mean the Borrower's customers who are
indebted to the Borrower, sometimes also referred to as "ACCOUNT
DEBTORS".
(f) "LOAN DOCUMENTS" shall mean any and all agreements,
instruments, documents, security agreements, mortgages, financing
statements, and supplements thereto and relating to the Loan Agreement
dated as of June 26 2002 between the Bank and the Borrower, as the same
may be amended, supplemented or restated from time to time, (the "LOAN
AGREEMENT"), or entered into between the Borrower in favor of, or with,
the Bank, at any time, for any purpose, including, without limitation,
the Loan Agreement, any Term Notes, as defined in the Loan Agreement,
hereafter executed by the Borrower, and the Security Agreement, if any,
executed by the Borrower.
(g) "OBLIGATION(S)" shall include, without limitation, all
loans, advances, indebtedness, notes, liabilities and amounts,
liquidated or unliquidated, owing by the Borrower and/or its parent or
subsidiaries, including without limitation under the Loan Agreement to
the Bank at any time, each of every kind, nature and description,
whether arising under this Agreement or otherwise, and whether secured
or unsecured, direct or indirect (that is, whether the same are due
directly by the Borrower to the Bank; or are due indirectly by the
Borrower to the Bank as endorser or guarantor; or as obligor of
obligations due to third persons which have been endorsed or assigned
to the Bank; or otherwise), absolute or contingent, due or to become
due, now existing or hereafter contracted, and all obligations arising
under the Loan Documents, and any and all overdrafts of Borrower. Said
term shall also include all interest and other charges
46
chargeable to the Borrower and/or any guarantor or due from the
Borrower to the Bank from time to time and all costs and expenses
referred to in Paragraph 7 of this Agreement.
(h) "PERSON" or "PARTY" shall include individuals, firms,
corporations and all other entities.
(i) "EVENT OF DEFAULT" shall mean the occurrence of any one or
more of the Events of Default specified in the Loan Agreement or in the
event this agreement shall at any time after its execution and delivery
and for any reason cease (a) to create a valid and perfected first
priority security interests in and to the property purported to be
subject hereto or (b) to be in full force and effect or shall be
declared null and void, or the validity or enforceability thereof shall
be contested by the Borrower or any subsidiary or guarantor of the
Borrower;
(j) "EQUIPMENT" shall mean and include all the Borrower's
machinery, equipment, furniture, trade fixtures, (other than items that
constitute "fixtures" under applicable real property law), motor
vehicles, and intending to include all tangible personal property
utilized in the conduct of the Borrower's business (but excluding
therefrom Inventory, as that term is defined in the Code), and all
replacements or substitutions therefor and all accessions thereto.
All words and terms used in this Agreement other than those
specifically defined in Paragraph 2, and except as specifically otherwise
provided elsewhere in this Agreement, shall be deemed to have the meanings
accorded to them in the Massachusetts Uniform Commercial Code as amended from
time to time (herein the "CODE").
3. After the occurrence and during the continuation of an Event of
Default and after notice by the Bank to the Borrower, all proceeds of and
collections of the Collateral shall be held in trust by the Borrower for the
Bank and shall not be commingled with the Borrower's other funds or deposited in
any bank account of the Borrower; and the Borrower agrees to deliver to the Bank
on the dates of receipt thereof by the Borrower, duly endorsed to the Bank or to
the bearer, or assigned to the Bank, as may be appropriate, all proceeds of the
Collateral in the identical form received by the Borrower.
4. After the occurrence and during the continuation of an Event of
Default the Borrower may grant such allowances or other adjustments to Debtor(s)
as the Borrower may reasonably deem to accord with sound business practice,
including, without limiting the generality of the foregoing, accepting the
return of all or any part of the Inventory (subject to the provisions set forth
in this Agreement with reference to returned Inventory), unless the Bank shall
specifically direct otherwise in writing.
5. Intentionally omitted.
6. Intentionally omitted.
7. The Borrower shall pay to the Bank any and all costs and expenses
(including, without limitation, reasonable attorney's fees, court costs,
litigation and other expenses) incurred or paid by the Bank in establishing,
maintaining, protecting or enforcing any of the Bank's rights or the
Obligations, including, without limitation, any and all such costs and expenses
incurred or paid by the Bank in defending the Bank's security interest in, title
or right to the Collateral or in collecting or attempting to collect or
enforcing or attempting to enforce payment of the Collateral.
8. From and after notice to the Borrower pursuant to Paragraph 3, at
the expiration of such period of time after receipt by the Bank as the Bank
determines is reasonably sufficient to allow for clearance or payment of any
items, the cash proceeds of the Collateral shall be credited to the Obligations,
47
it being specifically understood and agreed, however, that an account
receivable, contract right, general intangible, negotiable or nonnegotiable
instrument (other than a check), or other non-cash proceeds shall not be so
credited until actual payment thereof. All such credits shall, however, be
conditional upon final payment to the Bank of the items giving rise to them and
if any item is not so paid, the amount of any credit given for it shall be
charged as a debit in said Borrower's loan account, if any, or against any
deposit account of the Borrower with the Bank, whether or not the item is
returned.
9. The Borrower shall hold its books and records relating to the
Collateral in a manner reasonably satisfactory to the Bank; and shall deliver to
the Bank from time to time promptly at its request, all invoices, original
documents of title, contracts, chattel paper, instruments and any other writings
relating thereto, and other evidence of performance of contracts, or evidence of
shipment or delivery of the merchandise or of the rendering of services; and the
Borrower will deliver to the Bank promptly at the Bank's request from time to
time additional copies of any or all such papers of writings, and such other
information with respect to any of the Collateral and such schedules of
Inventory, schedules of accounts and such other writings as the Bank may in its
sole discretion deem to be necessary or effectual to evidence any loan hereunder
or the Bank's security interest in the Collateral.
10. The Borrower shall promptly make, stamp or record such entries or
legends on the Borrower's books and records or on any of the Collateral as the
Bank shall request from time to time to indicate and disclose that the Bank has
a security interest in such Collateral.
11. The Bank, or its representatives, at any time and from time to time
on reasonable notice and at reasonable times, shall have the right, and the
Borrower will permit them:
(a) to examine, check, make copies of or extracts from any
of the Borrower's books, records and files (including, without
limitation, orders, and original correspondence);
(b) to inspect and examine the Borrower's Inventory or other
Collateral; and
(c) to verify the Collateral or any portion or portions
thereof or the Borrower's compliance with the provisions of this
Agreement.
12. The Borrower will execute and deliver to the Bank any writings and
do all things necessary, effectual or requested by the Bank to carry into effect
the provisions and intent of this Agreement, or to vest more fully in or assure
to the Bank (including, without limitation, all steps to create and perfect) the
security interest in the Collateral granted to the Bank by this Agreement or to
comply with applicable statute or law and to facilitate the collection of the
Collateral, including the furnishing at the Borrower's own cost and expense, at
such intervals as the Bank may establish from time to time, of reports,
financial data and analyses satisfactory to the Bank.
13. The Borrower covenants with and warrants to the Bank:
(a) That all Equipment and Inventory in which the Bank is now
or hereafter given a security interest pursuant to this Agreement will
at all times be kept and maintained in good order and condition at the
sole cost and expense of the Borrower.
(b) That the Borrower will maintain in force one or more
policies of insurance on all Equipment, Inventory and all other
tangible Collateral against risks of fire (with customary extended
coverage), sprinkler leakage, theft, loss or damage and other risks
customarily insured against by companies engaged in businesses similar
to that of the Borrower in such amounts, containing such terms, in such
form, for such periods, covering such hazards and written by such
48
companies as may be reasonably satisfactory to the Bank, such insurance
to be payable to the Bank as its interest may appear in the event of
loss after the occurrence and during the continuation of an Event of
Default, no loss shall be adjusted thereunder without the Bank's
approval; and all such policies shall provide that they may not be
canceled without first giving at least ten (10) days' written notice of
cancellation to the Bank. In the event that the Borrower fails to
provide evidence of the maintenance of such insurance satisfactory to
the Bank, the Bank may, at its option, secure such insurance and charge
the cost thereof to the Borrower and as a debit charge in the
Borrower's loan account, if any, or any other accounts of the Borrower
with the Bank. At the option of the Bank, after the occurrence and
during the continuation of an Event of Default, all insurance proceeds
received from any loss or damage to any of the Collateral shall be
applied either to the replacement or repair thereof or as a payment on
account of the Obligations.
(c) That at the date hereof the Borrower is (and as to
Collateral that the Borrower may acquire after the date hereof, will
be) the lawful owner of the Collateral, and that the Collateral, and
each item thereof, is, will be, and shall continue to be free of all
restrictions, liens, encumbrances, or other right, title or interest
(other than the security interest therein granted to the Bank hereby,
or permitted by the Loan Agreement) that the Borrower has and will have
full power and authority to grant to the Bank a security interest in,
and will not transfer, assign, sell (except sales or other dispositions
in the ordinary course of business in respect to Inventory as expressly
permitted in Paragraph 3 of this Agreement), pledge, encumber, subject
to lien or grant any security interest in any of the Collateral (or any
of the Borrower's right, title or interest therein) to any person other
than the Bank or as permitted by the Loan Agreement; and that the
Borrower will warrant and defend the Bank's right to and interest in
the Collateral against all claims and demands of all persons
whatsoever.
(d) That no contract right, account, general intangible or
chattel paper is or will be represented by any note or other instrument
(negotiable or otherwise), and that no contract right, account or
general intangible is, or will be represented by any conditional or
installment sales obligation or other chattel paper, except such
instruments or chattel paper as have been or forthwith upon receipt by
the Borrower following the occurrence and during the continuation of an
Event of Default and the giving of notice by the Bank as provided in
Section 7.2 of the Loan Agreement will be delivered to the Bank (duly
endorsed or assigned, as may be appropriate), such delivery, in the
case of chattel paper, to include all executed copies except those in
the possession of the installment buyer (provided, that if the Bank
elects to leave chattel paper in the possession of the Borrower, such
procedure shall be subject to the Borrower's compliance with the
provisions of Paragraph 10 hereof and to the Bank's right to require
delivery and endorsement or assignment of such chattel paper by the
Borrower to the Bank whenever the Bank shall so request); and following
the occurrence and during the continuation of an Event of Default and
the giving of notice by the Bank as provided in Section 7.2 of the Loan
Agreement any security for or guaranty of any of the Collateral shall
be delivered to the Bank immediately upon receipt thereof by the
Borrower, with such assignments and endorsements thereof as the bank
may request.
(e) (i) That, except as the Bank may otherwise approve in
writing, and except for sale, processing, use, consumption or other
disposition in the ordinary course of business, the Borrower will keep
all Inventory at one or more of the locations specified in the preamble
to this Agreement.
(ii) That the Borrower shall, during the term of this
Agreement, keep the Bank currently and accurately informed in
writing of each location where the Borrower's records relating
to its accounts and contract rights, respectively, are kept,
and shall not
49
remove such records, or any of them, to another state without
giving the Bank at least thirty (30) days' prior written
notice thereof.
(iii) That the Borrower's chief executive office is
correctly stated in the preamble to this Agreement, that the
Borrower shall, during the term of this Agreement, keep the
Bank currently and accurately informed in writing of each of
its other places of business, and that the Borrower shall not
change the location of such chief office or open any new, or
close, move or change any existing or new place of business
without giving the Bank at least thirty (30) days' prior
written notice thereof.
(f) That the Bank shall not be deemed to have assumed any
liability or responsibility to the Borrower or any third person for the
correctness, validity or genuineness of any instruments or documents
that may be released or endorsed to the Borrower by the Bank (which
shall automatically be deemed to be without recourse to the Bank in any
event), or for the existence, character, quantity, quality, condition,
value or delivery of any goods purporting to be represented by any such
documents; and that the Bank, by accepting such security interest in
the Collateral, or by releasing any Collateral to the Borrower, shall
not be deemed to have assumed any obligation or liability to any
supplier or Debtor or to any other third party, and the Borrower agrees
to indemnify and defend the Bank and hold it harmless in respect to any
claim or proceeding arising out of any matter referred to in this
Paragraph 13(f).
(g) Intentionally omitted.
(h) That the Borrower will immediately notify the Bank of any
loss or damage to, or material diminution in or any occurrence which
would materially and adversely affect the value of, the Inventory or
other Collateral. In the event that the Bank, in its sole discretion,
shall determine that there has been any such material loss, damage or
material diminution in the value of any of the assets included in the
Borrowing Base, then any such assets which have been lost, damaged or
otherwise diminished in value shall be excluded from the calculation of
the Borrowing Base, without regard as to whether there is insurance
coverage therefore. If the outstanding Loans exceed the Borrowing Base
calculated after the exclusion of assets as a result of such casualty,
then, at the Bank's election, exercised in its sole discretion, within
thirty (30) days of notice, the Borrower shall pay, to the Bank such
amount so that the Borrower is in compliance with the Borrowing Base,
or, alternatively, provide substitute collateral which is satisfactory
to the Bank in its sole discretion.
(i) That the Bank may from time to time in the Bank's
discretion hold and treat any deposits or other sums at any time
credited by or due from the Bank to the Borrower and any securities or
other property of the Borrower in the possession of the Bank, whether
for safekeeping or otherwise, as collateral security for and apply or
set the same off against any Obligations after the occurrence and
during the continuance of an Event of Default.
(j) That if any of the Collateral includes a charge for, or if
any loan by the Bank to the Borrower shall be subject to any tax
payable to any governmental taxing authority, the Borrower shall pay
such tax independently when due. The Bank may retain the full proceeds
of the Collateral and the Borrower will indemnify and save the Bank
harmless from any loss, cost, liability or expense (including, without
limitation, reasonable attorney's fees), in connection therewith other
than such as shall be caused by the Bank's willful misconduct, gross
negligence or acts taken in bad faith.
(k) That at any time or times after the occurrence and during
the continuation of an
50
Event of Default, the Bank may notify any Debtor or Debtors of its
security interest in the Collateral and collect all amounts due
thereon; and the Borrower agrees, at the request of the Bank, to
notify all or any of the Debtors in writing of the Bank's security
interest in the Collateral in whatever manner the Bank requests, and
if the Bank so requests, to permit the Bank to mail such notices at
the Borrower's expense.
(l) That the Bank may, at its option, from time to time,
discharge any taxes, liens or encumbrances on any of the Collateral not
permitted by the Loan Agreement, or take any other action that the Bank
may deem proper to maintain or preserve its security interest in the
Collateral, and the Borrower will pay to the Bank on demand or the Bank
in its sole discretion may charge to the Borrower all amounts so paid
or incurred by it or as a debit charge against the Borrower's loan
account, if any, or any other deposit account of the Borrower with the
Bank.
(m) If any of Borrower's accounts arise out of contracts with
the United States or any department, agency, or instrumentality
thereof, Borrower will immediately notify Bank thereof in writing and
execute any instruments and take any steps required by Bank in order
that all monies due and to become due under such contracts-shall be
assigned to Bank and notice thereof given to the Government under the
Federal Assignment of Claims Act.
(n) That all representations now or hereafter made by the
Borrower to the Bank, whether in this Agreement or in any supporting or
supplemental reports, statements or documentation, including, without
limitation, statements relating to the Collateral and financial
statements, are, and will be, at and as of the date when made true and
correct in all material respects.
(o) Except for the Bank's gross negligence or willful
misconduct or acts taken in bad faith, Borrower will indemnify and save
Bank harmless from all loss, costs, damage, liability or expenses
(including, without limitation, court costs and reasonable attorneys,
fees) that Bank may sustain or incur by reason of defending or
protecting this security interest or the priority thereof or enforcing
the Obligations, or in the prosecution or defense of any action or
proceeding concerning any matter growing out of or in connection with
this Agreement and/or any other documents now or hereafter executed in
connection with this Agreement and/or the Obligations and/or the
Collateral. This indemnity shall survive the repayment of the
Obligations and the termination of Bank's agreement to make loans
available to Borrower and the termination of this Agreement.
(p) The Borrower shall duly authorize, execute and deliver to
the Bank separate memoranda of security interests provided by the Bank
with respect to the Intellectual Property for filing in the offices
described. Upon the registration of any additional Intellectual
Property (or the filing of applications therefor) in the offices
described above, the Borrower shall notify the Bank and duly authorize,
execute and deliver to the Bank separate memoranda of security
interests covering such additional Intellectual Property for filing in
such offices.
14. The Borrower hereby irrevocably constitutes and appoints the Bank
as the Borrower's true and lawful attorney, with full power of substitution, at
the sole cost and expense of the Borrower but for the sole benefit of the Bank,
to be exercised only after the occurrence and during the continuation an Event
of Default and the giving of the notice as provided by Section 7.2 of the Loan
Agreement, to convert the Collateral into cash, including without limitation,
the sale (either public or private) of all or any portion or portions of the
Inventory and other Collateral; to enforce collection of the Collateral, either
in its own name or in the name of the Borrower, including, without limitation,
executing releases, compromising or settling with any Debtors and prosecuting,
defending, compromising or releasing any
51
action relating to the Collateral; to notify Post Office authorities to change
the address for delivery of mail addressed to the Borrower to such address as
the Bank shall designate; to receive, open and dispose of all mail addressed to
the Borrower received at such address and to take therefrom any remittances or
proceeds of Collateral in which the Bank has a security interest; to endorse the
name of the Borrower in favor of the Bank upon any and all checks, drafts, money
orders, notes, acceptances or other instruments of the same or different nature
received at such address; to sign and endorse the name of the Borrower on and to
receive as secured party any of the Collateral, any invoices, schedules of
Collateral, freight or express receipts, or bills of lading, storage receipts,
warehouse receipts, or other documents of title of the same or different nature
relating to the Collateral; to sign the name of the Borrower or any notice to
the Debtors or on verification of the Collateral; and to sign and file or record
on behalf of the Borrower any financing or other statement in order to perfect
or protect the Bank's security interest. The Bank shall not be obliged to do any
of the acts or exercise any of the powers hereinabove authorized, but if the
Bank elects to do any such act or exercise any such power, it shall not be
accountable for more than it actually receives as a result of such exercise of
power, and it shall not be responsible to the Borrower except for willful
misconduct, gross negligence, or acts taken in bad faith. All powers conferred
upon the Bank by this Agreement, being coupled with an interest, shall be
irrevocable so long as any Obligation of the Borrower to the Bank shall remain
unpaid.
Whenever the Bank deems it desirable that any legal action be
instituted with respect to any Collateral or that any other action be taken in
an attempt to effectuate collection of any Collateral, the Bank may reassign the
item in question to the Borrower (and if the Bank shall execute any such
reassignment, it shall automatically be deemed to be without recourse to the
Bank in any event) and require the Borrower to proceed with such legal or other
action at the Borrower's sole liability, cost and expense, in which event all
amounts collected by the Borrower on such item shall nevertheless be subject to
the provisions of the last sentence of Paragraph 3 of this Agreement.
15. The Bank is hereby authorized, at its election, at any time or
times after an Event of Default has occurred and during the continuation
thereof, if the Bank has given the notice as provided by Section 7.2 of the Loan
Agreement, and without any further demand or notice except to such extent as
notice may be required by applicable law, to sell or otherwise dispose of all or
any of the Collateral at public or private sale, and the Bank may also exercise
any and all other rights and remedies of a secured party under the Code or which
are otherwise accorded to it by applicable law, all as the Bank may determine.
If notice of a sale or other action by the Bank is required by applicable law,
the Borrower agrees that ten (10) days' written notice to the Borrower, or the
shortest period of written notice permitted by such law, whichever is larger,
shall be sufficient; and that to the extent permitted by such law, the Bank, its
officers, attorneys and agents may bid and become purchasers at any such sale,
if public, and may purchase at any private sale any of the Collateral that is of
a type customarily sold on a recognized market or which is the subject of widely
distributed standard price quotations, and any sale (public or private) shall be
free from any right of redemption, which the Borrower hereby waives and
releases. No purchaser at any sale (public or private) shall be responsible for
the application of the purchase money other than the Bank. Any balance of the
net proceeds of sale remaining after paying all direct Obligations of the
Borrower to the Bank, and all costs and expenses of manufacturer, processing,
completion or installation of the Inventory; collection, storage, custody, sale
and delivery of the Inventory, the Equipment, and/or the Collateral, including,
without limitation, reasonable attorneys' fees, and after retaining as
collateral security or applying as the Bank may elect (in whole or in part at
any time and from time to time) amounts equal to the aggregate of all other
Obligations shall be returned to the Borrower or to such other party as may be
legally entitled thereto; and if there is a deficiency, the Borrower shall be
responsible for the same, with interest as provided in the Loan Agreement. Upon
demand by the Bank, the Borrower shall assemble the Collateral and make it
available to the Bank at a place designated by the Bank which is reasonably
convenient to the Bank and the Borrower.
52
16. The Borrower waives notice of nonpayment, demand, presentment,
protest or notice of protest of the Collateral, and all other notices, consents
to any renewals or extensions of time of payment thereof, and generally waives
any and all suretyship defenses and defenses in the nature thereof. No delay or
omission of the Bank in exercising or enforcing any of its rights, powers,
privileges, remedies, immunities or discretions (all of which are hereinafter
collectively referred to as the "BANK'S RIGHTS AND REMEDIES") hereunder shall
constitute a waiver thereof; and no waiver by the Bank of any default of the
Borrower hereunder shall operate as a waiver of any other default hereunder. No
term or provision hereof shall be waived, altered or modified except with the
prior written consent of the Bank, which consent makes explicit reference to
this Agreement. Except as provided in the preceding sentence, no other agreement
or transaction, of whatsoever nature, entered into between the Bank and the
Borrower at any time (whether before, during or after the effective date or term
of this Agreement), shall be construed in any particular as a waiver,
modification or limitation of any of the Bank's rights and remedies under this
Agreement (nor shall anything in this Agreement be construed as a waiver,
modification or limitation of any of the Bank's rights and remedies under any
such other agreement or transaction) but all of the Bank's rights and remedies
not only under the provisions of this Agreement but also under any such other
agreement or transaction shall be cumulative and not alternative or exclusive,
and may be exercised by the Bank at such time or times and in such order of
preference as the Bank in its sole discretion may determine.
17. If any provision of this Agreement or portion of such provision or
the application thereof to any person or circumstance shall to any extent be
held invalid or unenforceable, the remainder of this Agreement (or the remainder
of such provision) and the application thereof to other persons or circumstances
shall not be affected thereby.
18. This Agreement shall be binding upon and inure to the benefit of
the respective successors and assigns of the parties hereto, and shall remain in
full force and effect (and the Bank shall be entitled to rely thereon,
notwithstanding payment of all Obligations of the Borrower to the Bank at any
time or times) until terminated as to future transactions by written notice from
either party to the other party of the termination hereof; provided that any
such termination shall not release or affect any Collateral in which the bank
already has a security interest or any Obligations incurred or rights accrued
hereunder prior to the effective date of such notice (as hereinafter defined) of
such termination. Notwithstanding any such termination, the Bank shall have a
security interest in all Collateral to secure the payment and performance of
Obligations arising after such termination as a result of commitments or
undertakings made or entered into by the Bank prior to such termination. Upon
the later to occur of the effective date of any such termination and the date on
which all Obligations are paid in full, the Bank shall terminate its security
interests in the Collateral and the Bank shall deliver to Borrower termination
statements with respect thereto. The Bank may transfer and assign this Agreement
and deliver the Collateral to the assignee, who shall thereupon have all of the
rights and obligations of the Bank; and the Bank shall then be relieved and
discharged of any responsibility or liability with respect to this Agreement and
the Collateral.
19. This Agreement is intended to take effect as a sealed instrument
and has been executed or completed and is to be performed in Massachusetts, and
it and all transactions thereunder or pursuant thereto shall be governed as to
interpretation, validity, effect, rights, duties and remedies of the parties
thereunder and in all other respects by the domestic laws of The Commonwealth of
Massachusetts.
20. Notwithstanding the existence of any other security interests in
the Collateral described in this Agreement held by the Bank or by any other
party, or the existence of any other mortgage or security interest in any other
property or collateral of the Borrower or of any co-obligor, guarantor or
endorser held by the Bank or any other party, the Bank shall have the right to
determine the order in which any or all of said collateral and property,
including the Collateral, shall be subjected to the remedies provided
53
herein and in any other security agreement or mortgage granted by the Borrower
or any other party and the right to determine the order in which any or all
portions of the Obligations secured hereby are satisfied from the proceeds
realized upon the exercise of the remedies provided herein or therein. The
Borrower and any party who consents to this interest in the said Collateral and
other property and who has actual or constructive notice hereof hereby waives
and shall be deemed to have waived any and all rights to require the marshalling
of assets in connection with the exercise of any of the remedies permitted by
applicable law or provided herein.
21. All notices, requests, demands, claims and other communications
required or permitted to be delivered, given or otherwise provided under this
Agreement must be in writing and must be delivered, given or otherwise provided:
(a) by facsimile (in which case, it will be effective upon receipt
of confirmation of good transmission) ), with a copy via overnight
delivery by a nationally recognized courier service;or
(b) by overnight delivery by a nationally recognized courier service
(in which case, it will be effective on the Business Day after being
deposited with such courier service);
in each case, to the address (or facsimile number) listed below:
If to the Borrower:
------------------
BTU International, Inc.
00 Xxxxxxx Xxxx
Xxxxx Xxxxxxxxx, Xxxxxxxxxxxxx 00000,
Attention: President
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxxx X. Xxxxxx, Esquire
Ropes & Xxxx
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
If to the Bank:
--------------
Sovereign Bank
00 Xxxxxxxx Xxxxxx
Mail Stop: MA1-PLS-0201
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
54
Xxxxxxx X. Xxxxx, Esquire
Xxxxxx & Xxxxx LLP
0 Xxxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
SOVEREIGN BANK
By:
-----------------------
Xxxxxxx X. Xxxxx, Vice President
BTU INTERNATIONAL, INC.
-----------------------
By:
Name:
Title:
55
EXHIBIT 6.1(1)
PERMITTED LIENS
56
EXHIBIT 6.3
EXISTING INDEBTEDNESS
57
