Credit Agreement
CREDIT AGREEMENT is made as of the 20th day of December, 1996, by and
among (i) CompuDyne Corporation, a Nevada corporation ("CompuDyne"), (ii)
MicroAssembly Systems, Inc., a Connecticut corporation ("MicroAssembly"),
(iii) Quanta Systems Corporation, a Connecticut corporation ("Quanta"),
(iv) Quanta SecurSystems, Inc., a Maryland corporation ("SecurSystems"
and, collectively with CompuDyne, Quanta and MicroAssembly, the
Borrowers ), and (v) Asian American Bank & Trust Company, a
Massachusetts trust company with a head office at 00 Xxxxxxxx Xxxxxx,
Xxxxxx, Xxxxxxxxxxxxx (the Bank ).
1. DEFINITIONS AND RULES OF INTERPRETATION.
1.01 Definitions. The following terms shall have the meanings set forth
in this REF 1 or elsewhere in the provisions of this Credit Agreement
referred to below:
Accounts Receivable.
--------------------
All rights of the Borrowers to payment for goods sold, leased or
otherwise marketed in the ordinary course of business and all rights of
the Borrowers to payment for services rendered in the ordinary course of
business and all sums of money or other proceeds due thereon pursuant to
transactions with account debtors, except for that portion of the sum of
money or other proceeds due thereon that relates to sales, use or
property taxes in conjunction with such transactions, recorded on books
of account in accordance with generally accepted accounting principles.
Affiliate.
---------
Any Person that would be considered to be an affiliate of a Borrower
under Rule 144(a) of the Rules and Regulations of the Securities and
Exchange Commission, as in effect on the date hereof, if such Borrower
were issuing securities.
Assignment of Monies.
--------------------
An Assignment of Monies Due or to Become Due, to be executed and
delivered by the Borrowers in accordance with REF. 8.12, substantially in
the form of Exhibit A attached hereto.
Balance Sheet Date. [September 30, 1996].
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Bank. As defined in the preamble hereto.
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Bank s Head Office.
------------------
The Bank s head office located at 00 Xxxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, or at such other location as the Bank may designate
from time to time.
Bank s Special Counsel.
----------------------
Lyne, Xxxxxxxxx & Xxxxxx LLP or such other counsel as may be approved by
the Bank.
Borrower(s). As defined in the preamble hereto.
-----------
Borrowing Base.
--------------
At the relevant time of reference thereto, an amount determined by the
Bank by reference to the most recent Borrowing Base Report that is equal
to 75% of Eligible Accounts Receivable for which invoices have been
issued and are payable.
Borrowing Base Report.
---------------------
A Borrowing Base Report signed by the chief financial officer of the
Borrowers and in substantially the form of Exhibit B hereto.
Business Day.
------------
Any day other than a Saturday, a Sunday, or any other day on which
banking institutions in Boston, Massachusetts, are not required or
permitted to be open for the transaction of banking business.
Capital Assets.
--------------
Fixed assets, both tangible (such as land, buildings, fixtures, machinery
and equipment) and intangible (such as patents, copyrights, trademarks,
franchises and good will); provided, that Capital Assets shall not
include any item customarily charged directly to expense or depreciated
over a useful life of 12 months or less in accordance with generally
accepted accounting principles.
Capital Expenditures.
--------------------
Amounts paid or indebtedness incurred by the Borrowers in connection with
the purchase or lease by the Borrowers of Capital Assets that would be
required to be capitalized and shown on the consolidated balance sheet of
CompuDyne and its Subsidiaries in accordance with generally accepted
accounting principles.
Capitalized Leases.
------------------
Leases under which any Borrower is the lessee or obligor, the discounted
future rental payment obligations under which are required to be
capitalized on the balance sheet of the lessee or obligor in accordance
with generally accepted accounting principles.
CERCLA. See REF 7.18.
------
Closing Date.
------------
The first date on which the conditions set forth in REF 11 have been
satisfied.
Code.
-----
The Internal Revenue Code of 1986.
Collateral.
-----------
All of the property, rights and interests of the Borrowers that are or
are intended to be subject to the security interests created by the
Security Documents.
Concentration Account. See REF 8.13.
Consolidated or consolidated.
----------------------------
With reference to any term defined herein, shall mean that term as
applied to the accounts of CompuDyne and its Subsidiaries, consolidated
in accordance with generally accepted accounting principles.
Consolidated Cash Flow.
----------------------
With respect to any fiscal period, an amount equal to the sum of
Consolidated Net Income for such fiscal period plus depreciation and all
other noncash charges made in calculating Consolidated Net Income, all as
determined on a consolidated basis in accordance with generally accepted
accounting principles.
Consolidated Financial Obligations.
----------------------------------
With respect to any fiscal period, an amount equal to the sum of all
payments on Indebtedness that become due and payable or that are to
become due and payable during such fiscal period pursuant to any
agreement or instrument to which CompuDyne or any of its Subsidiaries is
a party relating to the borrowing of money or the obtaining of credit or
in respect of Capitalized Leases. Demand obligations shall be deemed to
be due and payable during any fiscal period during which such obligations
are outstanding.
Consolidated Net Income (or Deficit).
-----------------------------------
The consolidated net income (or deficit) of CompuDyne and its
Subsidiaries, after deduction of all expenses, taxes, and other proper
charges, determined in accordance with generally accepted accounting
principles, after eliminating therefrom all extraordinary nonrecurring
items of income.
Credit Agreement.
----------------
This Credit Agreement, including the Schedules and Exhibits hereto.
Current Assets.
--------------
All assets of CompuDyne and its Subsidiaries on a consolidated basis
that, in accordance with generally accepted accounting principles, are
properly classified as current assets, provided that (a) notes and
accounts receivable shall be included only if good and collectible as
determined by the Borrowers in accordance with established practice
consistently applied and, with respect to such notes, only if payable on
demand or within one year from the date as of which Current Assets are to
be determined and if not directly or indirectly renewable or extendible
at the option of the debtors, by their terms, or by the terms of any
instrument or agreement relating thereto, beyond such year, and, with
respect to such accounts receivable, only if payable and outstanding not
more than 90 days after the date of the shipment of goods or other
transaction out of which any such account receivable arose; and such
notes and accounts receivable shall be taken at their face value less
reserves determined to be sufficient in accordance with generally
accepted accounting principles; and (b) inventory shall be included only
if and to the extent that the same shall consist of saleable finished
goods ready and available for shipment to purchasers thereof.
Current Liabilities.
-------------------
All consolidated liabilities of CompuDyne and its Subsidiaries maturing
on demand or within one year from the date as of which Current
Liabilities are to be determined, and such other liabilities as may
properly be classified as current liabilities in accordance with
generally accepted accounting principles.
Default. See REF 13.
---------
Distribution.
------------
The declaration or payment of any dividend on or in respect of any shares
of any class of capital stock of any Borrower, other than dividends
payable solely in shares of common stock of such Borrower; the purchase,
redemption, or other retirement of any shares of any class of capital
stock of such Borrower; the return of capital by such Borrower to its
shareholders as such; or any other distribution on or in respect of any
shares of any class of capital stock of such Borrower.
Dollars or $.
------------
Dollars in lawful currency of the United States of America.
Drawdown Date.
-------------
The date on which any Loan is made or is to be made.
Eligible Accounts Receivable.
----------------------------
The aggregate of the unpaid portions of Accounts Receivable (net of any
credits, rebates, offsets, holdbacks or other adjustments or commissions
payable to third parties that are adjustments to such Accounts
Receivable) (a) that the Borrowers reasonably and in good faith determine
to be collectible; (b) that are with account debtors that (i) are not
Affiliates of any Borrower, (ii) purchased the goods or services giving
rise to the relevant Account Receivable in an arm s length transaction,
(iii) are not insolvent or involved in any case or proceeding, whether
voluntary or involuntary, under any bankruptcy, reorganization,
arrangement, insolvency, adjustment of debt, dissolution, liquidation or
similar law of any jurisdiction and (iv) are, in the Bank s reasonable
judgment, creditworthy; (c) that are in payment of obligations that have
been fully performed and are not subject to dispute or any other similar
claims that would reduce the cash amount payable therefor; (d) that are
not subject to any pledge, restriction, security interest or other lien
or encumbrance other than those created by the Loan Documents; (e) in
which the Bank has a valid and perfected first-priority security
interest; (f) that are not outstanding for more than 60 days past the
earlier to occur of (i) the date of the respective invoices therefor and
(ii) the date of shipment thereof in the case of goods or the end of the
calendar month following the provision thereof in the case of services;
(g) that are not due from any single account debtor if more than 15% of
the aggregate amount of all Accounts Receivable owing from such account
debtor would otherwise not be Eligible Accounts Receivable; (h) that are
payable in Dollars; (i) that are not payable from an office outside of
the United States; and (j) in the case of any Account Receivable arising
under any U.S. Government Contract, with respect to which the Borrowers
shall have executed and delivered a duly-completed Assignment of Monies.
Environmental Laws. See REF 7.18.
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ERISA.
------
The Employee Retirement Income Security Act of 1974.
Event of Default. See REF 13.
----------------
generally accepted accounting principles.
----------------------------------------
(a) When used in REF 10, whether directly or indirectly through reference
to a capitalized term used therein, means (i) principles that are
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, in effect for the fiscal
year ended on the Balance Sheet Date, and (ii) to the extent consistent
with such principles, the accounting practice of the Borrowers reflected
in its financial statements for the year ended on the Balance Sheet Date,
and (b) when used in general, other than as provided above, means
principles that are (i) consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors,
as in effect from time to time, and (ii) consistently applied with past
financial statements of the Borrowers adopting the same principles,
provided, that in each case referred to in this definition of generally
accepted accounting principles , a certified public accountant would,
insofar as the use of such accounting principles is pertinent, be in a
position to deliver an unqualified opinion (other than a qualification
regarding changes in generally accepted accounting principles) as to
financial statements in which such principles have been properly applied.
Guaranteed Pension Plan.
-----------------------
Any pension plan maintained by any Borrower, or to which any Borrower
contributes, that is required to pay plan termination insurance premiums
to the Pension Benefit Guaranty Corporation.
Hazardous Substances. See REF 7.18.
--------------------
Indebtedness.
------------
All obligations, contingent and otherwise, that in accordance with
generally accepted accounting principles should be classified upon the
obligor s balance sheet as liabilities, or to which reference should be
made by footnotes thereto, including in any event and whether or not so
classified: (a) all debt and similar monetary obligations, whether direct
or indirect; (b) all liabilities secured by any mortgage, pledge,
security interest, lien, charge or other encumbrance existing on property
owned or acquired subject thereto, whether or not the liability secured
thereby shall have been assumed; and (c) all guaranties, endorsements and
other contingent obligations, whether direct or indirect, in respect of
indebtedness of others, including any obligation to supply funds to or in
any manner to invest in, directly or indirectly, the debtor, to purchase
indebtedness, or to assure the owner of indebtedness against loss,
through an agreement to purchase goods, supplies, or services for the
purpose of enabling the debtor to make payment of the indebtedness held
by such owner or otherwise, and the obligations to reimburse the issuer
in respect of any letters of credit.
Investments.
-----------
All expenditures made and all liabilities incurred (contingently or
otherwise) for the acquisition of stock or Indebtedness of, or for loans,
advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person.
Letter of Credit. See REF 4.01(a).
-----------------
Letter of Credit Application. See REF 4.01(a).
----------------------------
Line Cap. $850,000.
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Line Termination Date. June 30, 1997.
---------------------
Loan Documents.
--------------
This Credit Agreement, the Note, the Letter of Credit Applications, the
Letters of Credit, the Subordination Agreement and the Security
Documents.
Loan Request. See REF. 2.04.
Loans.
-----
Revolving credit loans made or to be made by the Bank to the Borrowers
pursuant to REF 2.
Maximum Drawing Amount.
----------------------
The maximum aggregate amount from time to time that the beneficiaries may
draw under outstanding Letters of Credit, as such aggregate amount may be
reduced from time to time pursuant to the terms of the Letters of Credit.
Note. See REF 2.02.
-----
Obligations.
-----------
All indebtedness, obligations and liabilities of any Borrower to the
Bank, individually or collectively, existing on the date of this Credit
Agreement or arising thereafter, direct or indirect, joint or several,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
secured or unsecured, arising by contract, operation of law or otherwise,
including those arising or incurred under this Credit Agreement or any of
the other Loan Documents or in respect of any of the Loans made or the
Note or other instruments at any time evidencing any thereof.
outstanding.
-----------
With respect to the Loans, the aggregate unpaid principal thereof as of
any date of determination.
Perfection Certificates.
-----------------------
The Perfection Certificates as defined in the Security Agreement.
Permitted Liens.
---------------
Liens, security interests and other encumbrances permitted by REF 9.02.
Person.
------
Any individual, corporation, partnership, trust, unincorporated
association, business or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Pledge Agreement.
----------------
The Pledge Agreement, dated or to be dated on or prior to the Closing
Date, between CompuDyne and the Bank, substantially in the form of
Exhibit H attached hereto.
Prime Rate.
----------
The highest rate of interest published from time to time in the Wall
Street Journal as the "prime rate" in its "Money Rates" section.
Record.
------
The grid attached to the Note, or the continuation of such grid, or any
other similar record maintained by the Bank with respect to any Loan
referred to in the Note.
Reimbursement Obligation.
------------------------
The Borrowers obligation to reimburse the Bank on account of any drawing
under any Letter of Credit as provided in REF 4.02.
Security Agreement.
------------------
The Security Agreement, dated or to be dated on or prior to the Closing
Date, between the Borrowers and the Bank, substantially in the form of
Exhibit C attached hereto.
Security Documents.
------------------
The Assignments of Monies, the Pledge Agreement and the Security
Agreement.
Subordinated Debt.
-----------------
Unsecured Indebtedness of any Borrower that is expressly subordinated and
made junior to the payment and performance in full of the Obligations,
and evidenced as such by the Subordination Agreement or by another
written instrument containing subordination provisions in form and
substance approved by the Bank in writing.
Subordination Agreement.
-----------------------
The Subordination Agreement, dated or to be dated on or prior to the
Closing Date, between the Bank, the Borrowers and Xxxx Xxxxxxxxx,
substantially in the form of Exhibit G attached hereto.
Subsidiary.
----------
Any corporation, association, trust, or other business entity of which
the designated parent shall at any time own, directly or indirectly,
through a Subsidiary or Subsidiaries, at least a majority (by number of
votes) of the outstanding Voting Stock.
Surety Agreement.
----------------
Any agreement between any insurance, surety, bonding or similar entity (a
"surety") and any Borrower, pursuant to which, among other things, such
Borrower agrees to indemnify and reimburse the surety for any and all
costs and expenses incurred by such surety in connection with its
performance of any bonding or similar arrangement on behalf of such
Borrower.
UCC.
----
The Uniform Commercial Code as adopted and in effect in the Commonwealth
of Massachusetts.
Uniform Customs.
---------------
With respect to any Letter of Credit, the Uniform Customs and Practice
for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500, or any successor version thereto adopted by
the Bank in the ordinary course of its business as a letter of credit
issuer and in effect at the time of issuance of such Letter of Credit.
Unpaid Reimbursement Obligation.
-------------------------------
Any Reimbursement Obligation for which the Borrowers do not reimburse the
Bank on the date specified in, and in accordance with, REF 4.02.
U.S. Government Contract.
------------------------
Any contract between any Borrower and the United States government or any
of its departments, agencies, bureaus or instrumentalities.
Voting Stock.
------------
Stock or similar interests, of any class or classes (however designated),
the holders of which are at the time entitled, as such holders, to vote
for the election of a majority of the directors (or persons performing
similar functions) of the corporation, association, trust or other
business entity involved, whether or not the right so to vote exists by
reason of the happening of a contingency.
1.02 Rules of Interpretation.
-----------------------------
a. A reference to any document or agreement shall include such document
or agreement as amended, modified or supplemented from time to time in
accordance with its terms and the terms of this Credit Agreement.
b. The singular includes the plural and the plural includes the singular.
c. A reference to any law includes any amendment or modification to such
law.
d. A reference to any Person includes its permitted successors and
permitted assigns.
e. Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
f. The words "include", "includes" and "including" are not limiting.
g. All terms not specifically defined herein or by generally accepted
accounting principles, which terms are defined in the UCC have the
meanings assigned to them therein.
h. Reference to a particular "REF" refers to that section of this Credit
Agreement unless otherwise indicated.
i. The words "herein", "hereof", "hereunder" and words of like import
shall refer to this Credit Agreement as a whole and not to any particular
section or subdivision of this Credit Agreement.
2. THE REVOLVING CREDIT FACILITY.
--------------------------------
2.01 Commitment to Lend.
---------------------------
Subject to the terms and conditions set forth in this Credit Agreement,
the Bank agrees to lend to the Borrowers, and the Borrowers may borrow,
repay, and reborrow from time to time between the Closing Date and the
Line Termination Date upon notice by the Borrowers to the Bank given in
accordance with REF 2.04, such sums as are requested by the Borrowers up
to a maximum aggregate amount outstanding (after giving effect to all
amounts requested) at any one time equal to the lesser of (a) the Line
Cap less the sum of the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations and (b) the Borrowing Base less the sum of the
Maximum Drawing Amount and all Unpaid Reimbursement Obligations. Each
request for a Loan hereunder shall constitute a representation and
warranty by the Borrowers that the conditions set forth in REFS 11 and
12, in the case of the initial Loan to be made on the Closing Date, and
REF 12, in the case of all other Loans, have been satisfied on the date
of such request.
2.02 The Note.
-----------------
The Loans shall be evidenced by a promissory note of the Borrowers in
substantially the form of Exhibit D hereto (the "Note"), dated as of the
Closing Date and completed with appropriate insertions. The Note shall
be payable to the order of the Bank in a principal amount equal to the
Line Cap or, if less, the outstanding amount of all Loans, plus interest
accrued thereon, as set forth below. The Borrowers irrevocably authorize
the Bank to make or cause to be made, at or about the time of the
Drawdown Date of any Loan or at the time of receipt of any payment of
principal on the Note, an appropriate notation on the Record reflecting
the making of such Loan or (as the case may be) the receipt of such
payment. The outstanding amount of the Loans set forth on the Record
shall be prima facie evidence of the principal amount thereof owing and
unpaid to the Bank, but the failure to record, or any error in so
recording, any such amount on the Record shall not limit or otherwise
affect the obligations of the Borrowers hereunder or under the Note to
make payments of principal of or interest on the Note when due.
2.03 Interest on Loans.
--------------------------
a. Except as otherwise provided in REF 5.03, each Loan shall bear
interest for the period commencing with the Drawdown Date thereof and
ending on the date of repayment thereof at the rate of 2% per annum above
the Prime Rate. Any change in the interest rate resulting from a change
in the Prime Rate is to be effective at the beginning of the day of such
change.
b. The Borrowers jointly and severally promise to pay interest on each
Loan in arrears on the 15th day of each calendar month, commencing on
January 15, 1997.
2.04 Requests for Loans.
---------------------------
The Borrowers shall give to the Bank written notice (which written notice
may be delivered by telecopy) in the form of Exhibit E hereto (or
telephonic notice confirmed in a writing in the form of Exhibit E hereto)
of each Loan requested hereunder (a "Loan Request") not later than (a)
10:00 a.m. (Boston time) on the proposed Drawdown Date thereof. Each
Loan Request shall be irrevocable and binding on the Borrowers and shall
obligate the Borrowers to accept the Loan requested from the Bank on the
proposed Drawdown Date. Each Loan Request shall be in a minimum
aggregate amount of $10,000 or an integral multiple thereof.
2.05 Change in Borrowing Base.
----------------------------------
The Borrowing Base shall be determined weekly (or at such other interval
as may be specified pursuant to REF 8.03(e)) by the Bank by reference to
the Borrowing Base Report.
2.06 Unused Availability Fee.
---------------------------------
The Borrowers jointly and severally agree to pay to the Bank an unused
availability fee calculated at the rate of 1/2% per annum on the average
daily amount during each calendar month or portion thereof from the
Closing Date to the Line Termination Date by which the Line Cap exceeds
the outstanding amount of Loans during such calendar month. The unused
availability fee shall be payable monthly in arrears on the first day of
each calendar month for the immediately preceding calendar month
commencing on February 1, 1996, with a final payment on the Line
Termination Date or any earlier date on which the Loans shall become due
and payable in full.
2.07 Origination Fee.
------------------------
The Borrowers shall pay to the Bank, on or prior to the Closing Date, an
origination fee in the amount of $1,000.
3. REPAYMENT OF THE LOANS.
-------------------------
3.01 Line Termination.
---------------------
The Borrowers jointly and severally promise to pay on the Line
Termination Date, and there shall become absolutely due and payable on
the Line Termination Date, all of the Loans outstanding on such date,
together with any and all accrued and unpaid interest thereon.
3.02 Mandatory Repayments of Loans.
----------------------------------
If at any time while the Loans are outstanding, the outstanding amount of
the Loans, the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations exceeds the lesser of (a) the Line Cap and (b) the Borrowing
Base, then the Borrowers shall immediately pay the amount of such excess
to the Bank for application first, to any Unpaid Reimbursement
Obligations; second, to the Loans; and third, to provide the Bank with
cash collateral for Reimbursement Obligations as contemplated by REF
4.02(b) and (c).
3.03 Automatic Repayment of Loans.
---------------------------------
At such times as the Bank may determine, the Bank, by charging the
Concentration Account, shall apply the unrestricted collateral balances
in the Concentration Account (subject to final payment in cash of all
items theretofore credited to the Concentration Account) to the
outstanding Loans. The Bank shall provide the Borrowers with prompt
notice of each such charge and application. To the extent that, after
such application, there are no Loans outstanding, the Bank shall, at the
Borrowers request, transfer the unrestricted collected balances in the
Concentration Account to the Borrowers operating accounts with the Bank.
3.04 Optional Repayments of Loans.
---------------------------------
The Borrowers shall have the right, at their election, to repay the
outstanding amount of the Loans, as a whole or in part, at any time
without penalty or premium. Each such partial prepayment of the Loans
shall be in an integral multiple of $10,000 and shall be accompanied by
the payment of accrued interest on the principal prepaid to the date of
prepayment.
4. LETTERS OF CREDIT.
--------------------
4.01 Letter of Credit Commitments.
---------------------------------
a. Subject to the terms and conditions hereof and the execution and
delivery by the Borrowers of a letter of credit application on the Bank s
customary form (a "Letter of Credit Application"), the Bank, in reliance
upon the representations and warranties of the Borrowers contained
herein, agrees to issue, extend and renew for the account of the
Borrowers one or more standby or documentary letters of credit
(individually, a "Letter of Credit"), in such form as may be requested
from time to time by the Borrowers and agreed to by the Bank; provided,
however, that, after giving effect to such request, (i) the sum of the
aggregate Maximum Drawing Amount and all Unpaid Reimbursement Obligations
shall not exceed $100,000 at any one time and (ii) the sum of (A) the
Maximum Drawing Amount on all Letters of Credit, (B) all Unpaid
Reimbursement Obligations, and (C) the amount of all Loans outstanding
shall not exceed the lesser of (1) the Line Cap and (2) the Borrowing
Base.
b. Each Letter of Credit Application shall be completed to the
satisfaction of the Bank. In the event that any provision of any Letter
of Credit Application shall be inconsistent with any provision of this
Credit Agreement, then the provisions of this Credit Agreement shall, to
the extent of any such inconsistency, govern.
c. Each Letter of Credit issued, extended or renewed hereunder shall,
among other things, (i) provide for the payment of sight drafts for honor
thereunder when presented in accordance with the terms thereof and when
accompanied by the documents described therein, and (ii) have an expiry
date no later than the date that is 14 days (or, if the beneficiary is
located outside of the United States of America, 45 days) prior to the
Line Termination Date. Each Letter of Credit so issued, extended or
renewed shall be subject to the Uniform Customs.
4.02 Reimbursement Obligation of the Borrowers.
----------------------------------------------
In order to induce the Bank to issue, extend and renew each Letter of
Credit, the Borrowers hereby agree, jointly and severally, to reimburse
or pay to the Bank, with respect to each Letter of Credit issued,
extended or renewed by the Bank hereunder,
except as otherwise expressly provided in REF 4.02(b) and (c), on each
date that any draft presented under such Letter of Credit is honored by
the Bank, or the Bank otherwise makes a payment with respect thereto, (i)
the amount paid by the Bank under or with respect to such Letter of
Credit, and (ii) the amount of any taxes, fees, charges or other costs
and expenses whatsoever incurred by the Bank in connection with any
payment made by the Bank under, or with respect to, such Letter of
Credit,
b. upon the reduction (but not termination) of the Line Cap to an amount
less than the Maximum Drawing Amount, an amount equal to such difference,
which amount shall be held by the Bank as cash collateral for all
Reimbursement Obligations, and
c. upon the termination of the Line Cap, or the acceleration of the
Reimbursement Obligations with respect to all Letters of Credit in
accordance with REF 13, an amount equal to the then Maximum Drawing
Amount on all Letters of Credit, which amount shall be held by the Bank
as cash collateral for all Reimbursement Obligations.
Each such payment shall be made to the Bank at the Bank s Head Office in
immediately available funds. Interest on any and all amounts remaining
unpaid by the Borrower under this REF 4.02 at any time from the date such
amounts become due and payable (whether as stated in this REF 4.02, by
acceleration or otherwise) until payment in full (whether before or after
judgment) shall be payable to the Bank on demand at the rate specified in
REF 5.03 for overdue principal on the Loans.
4.03 Letter of Credit Payments.
------------------------------
If any draft shall be presented or other demand for payment shall be made
under any Letter of Credit, the Bank shall notify the Borrowers of the
date and amount of the draft presented or demand for payment and of the
date and time when it expects to pay such draft or honor such demand for
payment. The responsibility of the Bank to the Borrowers shall be only
to determine that the documents (including each draft) delivered under
each Letter of Credit in connection with such presentment shall be in
conformity in all material respects with such Letter of Credit.
4.04 Obligations Absolute.
-------------------------
The Borrowers obligations under this REF 4 shall be absolute and
unconditional under any and all circumstances and irrespective of the
occurrence of any Default or Event of Default or any condition precedent
whatsoever or any setoff, counterclaim or defense to payment that the
Borrowers may have or have had against the Bank or any beneficiary of a
Letter of Credit. The Borrowers further agree with the Bank that the
Bank shall not be responsible for, and the Borrowers Reimbursement
Obligations under REF 4.02 shall not be affected by, among other things,
the validity or genuineness of documents or of any endorsements thereon,
even if such documents should in fact prove to be in any or all respects
invalid, fraudulent or forged, or any dispute between or among the
Borrowers, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be
transferred or any claims or defenses whatsoever of the Borrowers against
the beneficiary of any Letter of Credit or any such transferee. The Bank
shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. The Borrowers
agree that any action taken or omitted by the Bank under or in connection
with each Letter of Credit and the related drafts and documents, if done
in good faith, shall be binding upon the Borrowers and shall not result
in any liability on the part of the Bank to the Borrowers.
4.05 Reliance by Issuer.
-----------------------
To the extent not inconsistent with REF 4.04, the Bank shall be entitled
to rely, and shall be fully protected in relying upon, any Letter of
Credit, draft, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Bank.
4.06 Letter of Credit Fee.
-------------------------
The Borrowers shall, on the date of issuance or any extension or renewal
of any Letter of Credit and at such other time or times as such charges
are customarily made by the Bank, pay a fee (in each case, a "Letter of
Credit Fee") to the Bank in respect of each Letter of Credit at the rate
set forth in the Bank s standard rate sheet as in effect at the time or
such issuance, extension or renewal.
5. CERTAIN GENERAL PROVISIONS.
5.01 Funds for Payments.
-----------------------
a. All payments of principal, interest, Reimbursement Obligations and any
other amounts due hereunder or under any of the other Loan Documents
shall be made to the Bank at the Bank s Head Office or at such other
location that the Bank may from time to time designate, in each case in
immediately available funds. The Borrowers shall enter into such
arrangements as are necessary to permit the Bank to deduct such payments
automatically from the Borrowers deposit accounts with the Bank.
b. All payments by the Borrowers hereunder and under any of the other
Loan Documents shall be made without setoff or counterclaim and free and
clear of and without deduction for any taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, compulsory loans, restrictions
or conditions of any nature now or hereafter imposed or levied by any
jurisdiction or any political subdivision thereof or taxing or other
authority therein unless the Borrowers are compelled by law to make such
deduction or withholding. If any such obligation is imposed upon the
Borrowers with respect to any amount payable by it hereunder or under any
of the other Loan Documents, the Borrowers will pay to the Bank, on the
date on which such amount is due and payable hereunder or under such
other Loan Document, such additional amount in Dollars as shall be
necessary to enable the Bank to receive the same net amount that the Bank
would have received on such due date had no such obligation been imposed
upon the Borrowers. The Borrowers will deliver promptly to the Bank
certificates or other valid vouchers for all taxes or other charges
deducted from or paid with respect to payments made by the Borrowers
hereunder or under such other Loan Document.
5.02 Computations.
-----------------
All computations of interest on the Loans shall be based on a 360-day
year and paid for the actual number of days elapsed. Whenever a payment
hereunder or under any of the other Loan Documents becomes due on a day
that is not a Business Day, the due date for such payment shall be the
immediately preceding Business Day. The outstanding amount of the Loans
as reflected on the Record from time to time shall be considered correct
and binding on the Borrowers unless within five Business Days after
receipt of any notice by the Bank of such outstanding amount, the Bank
shall notify the Borrowers to the contrary.
5.03 Late Fee; Interest after Default.
-------------------------------------
If any payment hereunder or under any of the other Loan Documents shall
not be paid within 15 days of the due date thereof, there shall
immediately become due and payable a late payment fee in the amount of 5%
of the amount so overdue. During the continuance of any Default or Event
of Default, the Loans shall bear interest at a rate equal to 2% above the
rate that would otherwise be applicable pursuant to REF 2.03.
6. COLLATERAL SECURITY.
----------------------
a. The Obligations shall be secured by a perfected first-priority
security interest (subject only to Permitted Liens entitled to priority
under applicable law) in all of the assets of the Borrowers, whether now
owned or hereafter acquired, pursuant to the terms of the Security
Agreement.
b. On or prior to the Closing Date, the Borrowers shall execute and
deliver a duly completed Assignment of Monies with respect to each U.S.
Government Contract, except for any such contract containing specific
provisions that prohibit contract award disclosure.
7. REPRESENTATIONS AND WARRANTIES.
---------------------------------
The Borrowers represent and warrant to the Bank as follows:
7.01 Corporate Authority.
------------------------
a. Incorporation; Good Standing. CompuDyne (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Nevada, (ii) has all requisite corporate power to own its
property and conduct its business as now conducted and as currently
contemplated, and (iii) is in good standing as a foreign corporation and
is duly authorized to do business in the State of Connecticut and in each
other jurisdiction where such qualification is necessary, except where a
failure to be so qualified would not have a materially adverse effect on
the business, assets or financial condition of CompuDyne. Quanta (i) is
a corporation duly organized, validly existing and in good standing under
the laws of the State of Connecticut, (ii) has all requisite corporate
power to own its property and conduct its business as now conducted and
as currently contemplated, and (iii) is in good standing as a foreign
corporation and is duly authorized to do business in the State of
Maryland and in each other jurisdiction where such qualification is
necessary, except where a failure to be so qualified would not have a
materially adverse effect on the business, assets or financial condition
of Quanta. MicroAssembly (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Connecticut,
(ii) has all requisite corporate power to own its property and conduct
its business as now conducted and as currently contemplated, and (iii) is
in good standing as a foreign corporation and is duly authorized to do
business in each jurisdiction where such qualification is necessary,
except where a failure to be so qualified would not have a materially
adverse effect on the business, assets or financial condition of
MicroAssembly. SecurSystems (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland,
(ii) has all requisite corporate power to own its property and conduct
its business as now conducted and as currently contemplated, and (iii) is
in good standing as a foreign corporation and is duly authorized to do
business in each jurisdiction where such qualification is necessary,
except where a failure to be so qualified would not have a materially
adverse effect on the business, assets or financial condition of
SecurSystems.
b. Authorization. The execution, delivery and performance of this Credit
Agreement and the other Loan Documents to which any Borrower is or is to
become a party and the transactions contemplated hereby and thereby (i)
are within the corporate authority of such Borrower, (ii) have been duly
authorized by all necessary corporate proceedings, (iii) do not conflict
with or result in any breach or contravention of any provision of law,
statute, rule or regulation to which such Borrower is subject or any
judgment, order, writ, injunction, license or permit applicable to such
Borrower and (iv) do not conflict with any provision of the corporate
charter or bylaws of, or any agreement or other instrument binding upon,
such Borrower.
c. Enforceability. The execution and delivery of this Credit Agreement
and the other Loan Documents to which any Borrower is or is to become a
party will result in valid and legally binding obligations of such
Borrower enforceable against it in accordance with the respective terms
and provisions hereof and thereof, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating
to or affecting generally the enforcement of creditors rights and except
to the extent that availability of the remedy of specific performance or
injunctive relief is subject to the discretion of the court before which
any proceeding therefor may be brought.
7.02 Governmental Approvals.
---------------------------
The execution, delivery and performance by the Borrowers of this Credit
Agreement and the other Loan Documents to which any Borrower is or is to
become a party and the transactions contemplated hereby and thereby do
not require the approval or consent of, or filing with, any governmental
agency or authority other than those already obtained.
7.03 Title to Properties; Leases.
--------------------------------
Except as indicated on Schedule 7.03 hereto, the Borrowers own all of the
assets reflected in the balance sheet of the Borrowers as at the Balance
Sheet Date or acquired since that date (except property and assets sold
or otherwise disposed of in the ordinary course of business since that
date), subject to no rights of others, including any mortgages, leases,
conditional sales agreements, title retention agreements, liens or other
encumbrances except Permitted Liens.
7.04 Financial Statements.
-------------------------
There has been furnished to the Bank a balance sheet of the Borrowers as
at the Balance Sheet Date, and a statement of income of the Borrowers for
the fiscal period then ended. Such balance sheet and statement of income
have been prepared in accordance with generally accepted accounting
principles and fairly present the financial condition of the Borrowers as
at the close of business on the date thereof and the results of
operations for the fiscal period then ended. There are no contingent
liabilities of the Borrowers as of such date involving material amounts,
known to the officers of the Borrowers, that were not disclosed in such
balance sheet and the notes related thereto.
7.05 No Material Changes, Etc.
-----------------------------
Since the Balance Sheet Date there has occurred no materially adverse
change in the financial condition or business of any Borrower as shown on
or reflected in the balance sheet of the Borrowers as at the Balance
Sheet Date, or the statement of income for the fiscal year then ended,
other than changes in the ordinary course of business that have not had
any materially adverse effect either individually or in the aggregate on
the business or financial condition of any Borrower. Since the Balance
Sheet Date, no Borrower has made any Distribution.
7.06 Franchises, Patents, Copyrights, Etc.
-----------------------------------------
Each Borrower possesses all franchises, patents, copyrights, trademarks,
trade names, licenses and permits, and rights in respect of the
foregoing, adequate for the conduct of its business substantially as now
conducted without known conflict with any rights of others.
7.07 Litigation.
---------------
Except as set forth in Schedule REF 7.07 hereto, there are no actions,
suits, proceedings or investigations of any kind pending or threatened
against any Borrower before any court, tribunal or administrative agency
or board that, if adversely determined, might, either in any case or in
the aggregate, materially adversely affect the properties, assets,
financial condition or business of any Borrower or materially impair the
right of such Borrower, considered as a whole, to carry on business
substantially as now conducted by, or result in any substantial liability
not adequately covered by insurance, or for which adequate reserves are
not maintained on the balance sheet of the Borrowers, or that question
the validity of this Credit Agreement or any of the other Loan Documents,
or any action taken or to be taken pursuant hereto or thereto.
7.08 No Materially Adverse Contracts, Etc.
-----------------------------------------
No Borrower is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has
or is expected in the future to have a materially adverse effect on the
business, assets or financial condition of such Borrower. No Borrower is
a party to any contract or agreement that has or is expected, in the
judgment of such Borrower s officers, to have any materially adverse
effect on the business of such Borrower.
7.09 Compliance With Other Instruments, Laws, Etc.
-------------------------------------------------
No Borrower is in violation of any provision of its charter documents,
bylaws, or any agreement or instrument to which it may be subject or by
which it or any of its properties may be bound or any decree, order,
judgment, statute, license, rule or regulation, in any of the foregoing
cases in a manner that could result in the imposition of substantial
penalties or materially and adversely affect the financial condition,
properties or business of such Borrower.
7.10 Tax Status.
---------------
Each Borrower has (a) made or filed all federal and state income and all
other tax returns, reports and declarations required by any jurisdiction
to which it is subject, (b) paid all taxes and other governmental
assessments and charges shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and
by appropriate proceedings and (c) set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent
to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Borrowers
know of no basis for any such claim.
7.11 No Event of Default.
------------------------
No Default or Event of Default has occurred and is continuing.
7.12 Holding Company and Investment Company Acts.
------------------------------------------------
No Borrower is a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company", as such
terms are defined in the Public Utility Holding Company Act of 1935; nor
is any Borrower an "investment company", or an "affiliated company" or a
"principal underwriter" of an "investment company", as such terms are
defined in the Investment Company Act of 1940.
7.13 Absence of Financing Statements, Etc.
-----------------------------------------
Except with respect to Permitted Liens, there is no financing statement,
security agreement, chattel mortgage, real estate mortgage or other
document filed or recorded with any filing records, registry or other
public office, that purports to cover, affect or give notice of any
present or possible future lien on, or security interest in, any assets
or property of any Borrower or any rights relating thereto.
7.14 Perfection of Security Interest.
------------------------------------
All filings, assignments, pledges and deposits of documents or
instruments have been made and all other actions have been taken that are
necessary or advisable, under applicable law, to establish and perfect
the Bank s security interest in the Collateral. The Collateral and the
Bank s rights with respect to the Collateral are not subject to any
setoff, claims, withholdings or other defenses. The Borrowers are the
owners of the Collateral free from any lien, security interest,
encumbrance and any other claim or demand, except for Permitted Liens.
7.15 Certain Transactions.
-------------------------
None of the officers, directors, or employees of any Borrower is
currently a party to any transaction with any Borrower (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services
to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of any Borrower, any corporation,
partnership, trust or other entity in which any officer, director, or any
such employee has a substantial interest or is an officer, director,
trustee or partner.
7.16 ERISA Compliance.
---------------------
Each Borrower has complied in all material respects with ERISA, including
the provisions thereof respecting funding requirements for, and the
termination of, plans and respecting prohibited transactions thereunder,
and the funding of any Guaranteed Pension Plan complies with the minimum
funding standards of Section 412 of the Internal Revenue Code. Except as
set forth on Schedule 7.16 hereto, the current value of all accrued
benefits under each of such plans did not, as of the latest valuation
date, exceed the then current value of the assets of such plans allocable
to such accrued benefits based upon the actuarial methods and assumptions
used for such plans.
7.17 Regulations U and X.
------------------------
The proceeds of the Loans shall be used for working capital and general
corporate purposes. No portion of any Loan is to be used for the purpose
of purchasing or carrying any "margin security" or "margin stock" as such
terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224.
7.18 Environmental Compliance.
-----------------------------
a. No Borrower is in violation of any judgment, decree, order, law,
license, rule or regulation pertaining to environmental matters,
including those arising under the Resource Conservation and Recovery Act,
the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 ("CERCLA"), the Superfund Amendments and Reauthorization Act of
1986, the Federal Water Pollution Control Act, the Federal Clean Air Act,
the Toxic Substances Control Act or any state or local statute,
regulation, ordinance, order or decree relating to health, safety or the
environment (collectively, "Environmental Laws"), which violation would
have a materially adverse effect on the business, assets or financial
condition of any Borrower, except as disclosed on Schedule 7.18 hereto.
b. No Borrower has received notice that it has been identified by the
United States Environmental Protection Agency as a potentially
responsible party under CERCLA with respect to a site listed on the
National Priorities List, 40 C.F.R. Part 000 Xxxxxxxx X (1986), nor has
any Borrower received any notification that any hazardous waste, as
defined by 42 U.S.C. REF 6903(5), any hazardous substances, as defined by
42 U.S.C. REF 9601(14), any "pollutant or contaminant", as defined by 42
U.S.C. REF 9601(33), or any toxic substance, hazardous materials, oil or
other chemicals or substances regulated by any Environmental Laws
(collectively, Hazardous Substances ) that it has disposed of has been
found at any site at which a federal or state agency has conducted or is
conducting a remedial investigation or other action pursuant to any
Environmental Law except as disclosed on Schedule 7.18 hereto.
7.19 Subsidiaries.
-----------------
Attached hereto as Schedule 7.19 is a complete and accurate list of all
Subsidiaries of any of the Borrowers.
7.20 Government Contracts.
-------------------------
Attached hereto as Schedule 7.20 is a true, correct and complete list of
all U.S. Government Contracts.
8. AFFIRMATIVE COVENANTS OF THE BORROWERS. The Borrowers covenant and
agree that, so long as any Loan, Unpaid Reimbursement Obligation, Letter
of Credit or Note is outstanding or the Bank has any obligation to make
any Loans or to issue, extend or renew Letters of Credit:
8.01 Maintenance of Office.
--------------------------
Each of CompuDyne and MicroAssembly will maintain its chief executive
office in Willimantic, Connecticut, or at such other place in the United
States of America as such Borrower shall designate upon written notice to
the Bank, where notices, presentations and demands to or upon such
Borrower in respect of the Loan Documents to which such Borrower is a
party may be given or made. Quanta will maintain its chief executive
office in Gaithersburg, Maryland, or at such other place in the United
States of America as Quanta shall designate upon written notice to the
Bank, where notices, presentations and demands to or upon Quanta in
respect of the Loan Documents to which Quanta is a party may be given or
made. SecurSystems will maintain its chief executive office in Hanover,
Maryland, or at such other place in the United States of America as
SecurSystems shall designate upon written notice to the Bank, where
notices, presentations and demands to or upon SecurSystems in respect of
the Loan Documents to which SecurSystems is a party may be given or made.
8.02 Records and Accounts. Each Borrower will (a) keep true and accurate
records and books of account in which full, true and correct entries will
be made in accordance with generally accepted accounting principles and
(b) maintain adequate accounts and reserves for all taxes (including
income taxes), depreciation, depletion, obsolescence and amortization of
its properties, contingencies and other reserves.
8.03 Financial Statements, Certificates and Information. The Borrowers
will deliver to the Bank:
a. as soon as practicable, but in any event not later than 90 days after
the end of each fiscal year of CompuDyne, the consolidated and
consolidating balance sheets of CompuDyne and its Subsidiaries as at the
end of such year, and the related consolidated and consolidating
statements of income and statements of cash flow for such year, each
setting forth in comparative form the figures for the previous fiscal
year and all such statements to be in reasonable detail, prepared in
accordance with generally accepted accounting principles, and certified
without qualification by Deloitte & Touche or by other independent
certified public accountants satisfactory to the Bank, together with a
written statement from such accountants to the effect that they have read
a copy of this Credit Agreement, and that, in making the examination
necessary to such certification, they have obtained no knowledge of any
Default or Event of Default or, if such accountants shall have obtained
knowledge of any then existing Default or Event of Default, they shall
disclose in such statement any such Default or Event of Default; provided
that such accountants shall not be liable to the Bank for failure to
obtain knowledge of any Default or Event of Default;
b. as soon as practicable, but in any event not later than 45 days after
the end of each of the fiscal quarters of CompuDyne, copies of the
unaudited consolidated and consolidating balance sheets of CompuDyne and
its Subsidiaries as at the end of such quarter, and the related
consolidated and consolidating statements of income and statements of
cash flow for the portion of CompuDyne s fiscal year then elapsed, all in
reasonable detail and prepared in accordance with generally accepted
accounting principles, together with a certification by the principal
financial or accounting officer of CompuDyne that the information
contained in such financial statements fairly presents the financial
position of CompuDyne on the date thereof (subject to year-end
adjustments);
c. simultaneously with the delivery of the financial statements referred
to in subsections (a) and (b) above, CompuDyne s 10-K or 10-Q report, as
the case may be, together with a statement certified by the principal
financial or accounting officer of CompuDyne in substantially the form of
Exhibit F hereto and setting forth in reasonable detail computations
evidencing compliance with the covenants contained in REF 10 and (if
applicable) reconciliations to reflect changes in generally accepted
accounting principles since the Balance Sheet Date;
d. contemporaneously with the mailing thereof, copies of all material of
a financial nature sent to the stockholders of any Borrower;
e. on Tuesday of each week or at such earlier time as the Bank may
reasonably request, a Borrowing Base Report setting forth the Borrowing
Base as at the end of the immediately preceding week or other date so
requested by the Bank, signed by the Chief Financial Officer of each of
the Borrowers;
f. within 15 days after the end of each calendar month, an Accounts
Receivable and accounts payable aging report;
g. contemporaneously with the filing thereof, true, correct and complete
copies of each Borrower s federal and state income tax returns
h. from time to time such other financial data and information (including
accountants management letters) as the Bank may reasonably request.
8.04 Notices.
------------
a. Defaults. The Borrowers will promptly notify the Bank in writing of
the occurrence of any Default or Event of Default. If any Person shall
give any notice or take any other action in respect of a claimed default
(whether or not constituting an Event of Default) under this Credit
Agreement or any other note, evidence of indebtedness, indenture or other
obligation to which or with respect to which any Borrower is a party or
obligor, whether as principal, guarantor, surety or otherwise, the
Borrowers shall forthwith give written notice thereof to the Bank
describing the notice or action and the nature of the claimed default.
b. Environmental Events. The Borrowers will promptly give notice to the
Bank (i) of any violation of any Environmental Law that any Borrower
reports in writing or is reportable by such Person in writing (or for
which any written report supplemental to any oral report is made) to any
federal, state or local environmental agency and (ii) upon becoming aware
thereof, of any inquiry, proceeding, investigation, or other action,
including a notice from any agency of potential environmental liability,
or any federal, state or local environmental agency or board, that has
the potential materially to affect the assets, liabilities, financial
condition or operations of any Borrower, or the Bank s security interests
pursuant to the Security Documents.
c. Notification of Claims against Collateral. The Borrowers will,
immediately upon becoming aware thereof, notify the Bank in writing of
any setoff, claims, withholdings or other defenses to which any of the
Collateral, or the Bank s rights with respect to the Collateral, are
subject.
d. Notice of Litigation and Judgments. The Borrowers will give notice to
the Bank in writing within 15 days of becoming aware of any litigation or
proceedings threatened in writing or any pending litigation and
proceedings affecting any Borrower or to which any Borrower is or becomes
a party involving an uninsured claim against such Borrower that could
reasonably be expected to have a materially adverse effect on such
Borrower and stating the nature and status of such litigation or
proceedings. The Borrowers will give notice to the Bank in writing, in
form and detail satisfactory to the Bank, within ten days of any judgment
not covered by insurance, final or otherwise, against any Borrower in an
amount in excess of $10,000.
8.05 Corporate Existence; Maintenance of Properties. Each Borrower will
do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence, rights and franchises. Each
Borrower will (a) cause all of its properties used or useful in the
conduct of its business to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment, (b)
cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in such Borrower s judgment
may be necessary so that the business carried on in connection therewith
may be properly and advantageously conducted at all times, and (c)
continue to engage primarily in the businesses now conducted by it and in
related businesses; provided that nothing in this REF 8.05 shall prevent
any Borrower from discontinuing the operation and maintenance of any of
its properties if such discontinuance is, in the judgment of such
Borrower, desirable in the conduct of its business and that do not in the
aggregate materially adversely affect the business of such Borrower.
8.06 Insurance. Each Borrower will maintain with financially sound and
reputable insurers insurance with respect to its properties and business
against such casualties and contingencies as shall be in accordance with
the general practices of businesses engaged in similar activities in
similar geographic areas and in amounts, containing such terms, in such
forms and for such periods as may be reasonable and prudent and in
accordance with the terms of the Security Agreement.
8.07 Taxes. Each Borrower will duly pay and discharge, or cause to be
paid and discharged, before the same shall become overdue, all taxes,
assessments and other governmental charges imposed upon it and its real
properties, sales and activities, or any part thereof, or upon the income
or profits therefrom, as well as all claims for labor, materials, or
supplies that if unpaid might by law become a lien or charge upon any of
its property; provided that any such tax, assessment, charge, levy or
claim need not be paid if the validity or amount thereof shall currently
be contested in good faith by appropriate proceedings and if such
Borrower shall have set aside on its books adequate reserves with respect
thereto; and provided further that the Borrowers will pay all such taxes,
assessments, charges, levies or claims forthwith upon the commencement of
proceedings to foreclose any lien that may have attached as security
therefor.
8.08 Inspection of Properties and Books. Each Borrower, at its own
expense, shall permit the Bank, through its designated representatives,
to visit and inspect any of the properties of such Borrower, to examine
the books of account of such Borrower (and to make copies thereof and
extracts therefrom), and to discuss the affairs, finances and accounts of
such Borrower with, and to be advised as to the same by, its officers,
all at such reasonable times and intervals as the Bank may reasonably
request.
8.09 Compliance with Laws, Contracts, Licenses and Permits. Each
Borrower will comply with (a) all applicable laws and regulations
wherever its business is conducted, including all Environmental Laws, (b)
the provisions of its charter documents and bylaws, (c) all agreements
and instruments by which it or any of its properties may be bound and (d)
all applicable decrees, orders and judgments. If any authorization,
consent, approval, permit or license from any officer, agency or
instrumentality of any government shall become necessary or required in
order that any Borrower may fulfill any of its obligations hereunder or
any of the other Loan Documents to which such Borrower is a party, such
Borrower will immediately take or cause to be taken all reasonable steps
within the power of such Borrower to obtain such authorization, consent,
approval, permit or license and furnish the Bank with evidence thereof.
8.10 Pension Plans. Each Borrower shall:
a. fund each pension plan as required by Section 412 of the Code;
b. furnish to the Bank a copy of any actuarial statement related to any
pension plan required to be submitted under REF 103(d) of ERISA, no later
than the date on which such statement is submitted to the Department of
Labor or the Internal Revenue Service;
c. furnish to the Bank forthwith a copy of (i) any notice of a pension
plan termination sent to the Pension Benefit Guaranty Corporation under
REF 4041(a) of ERISA and (ii) any notice, report or demand sent or
received by a pension plan under REFS 4041, 4042, 4043, 4063, 4065, 4066
or 4068 of ERISA; and
d. furnish to the Bank a copy of any request for waiver from the funding
standards or extension of the amortization periods required by Section
412 of the Code no later than the date on which the request is submitted
to the Department of Labor or the Internal Revenue Service, as the case
may be.
8.11 Use of Proceeds. The Borrowers will use the proceeds of the Loans
solely for working capital purposes.
8.12 Assignment of U.S. Government Contracts. The Borrowers shall
execute and deliver to the Bank a duly completed Assignment of Monies
with respect to each U.S. Government Contract. With respect to U.S.
Government Contracts entered into subsequent to the Closing Date, such
Assignment of Monies shall be furnished contemporaneously with the
execution thereof. Notwithstanding the foregoing, the Borrowers shall
not be required to deliver an Assignment of Monies with respect to any
U.S. Government Contract containing specific provisions that prohibit
contract award disclosure. The Bank shall not deliver any Assignment of
Monies to the relevant governmental agency except during the continuance
of an Event of Default.
8.13 Depository Accounts. Each Borrower shall maintain its primary
depository accounts with the Bank. In addition, the Borrowers shall open
an account or accounts (the "Concentration Account") with the Bank for
deposits of proceeds of Accounts Receivable. The Borrowers shall make
such arrangements as are satisfactory to the Bank to provide that the
proceeds of all Accounts Receivable are deposited directly into the
Concentration Account. Such deposits shall be made by ACH or direct wire
transfer to the Concentration Account whenever reasonably practicable.
The Borrowers shall have no right to withdraw any funds from the
Concentration Account except as provided in REF 3.03.
8.14 Further Assurances. Each Borrower will cooperate with the Bank and
execute such further instruments and documents as the Bank shall
reasonably request to carry out to its satisfaction the transactions
contemplated by this Credit Agreement and the other Loan Documents.
9 CERTAIN NEGATIVE COVENANTS OF THE BORROWERS.
---------------------------------------------
The Borrowers covenant and agree that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or the
Bank has any obligation to make any Loans or to issue, extend or renew
Letters of Credit:
9.01 Restrictions on Indebtedness. No Borrower will create, incur,
assume, guarantee or be or remain liable, contingently or otherwise, with
respect to any Indebtedness other than:
a. Indebtedness to the Bank arising under any of the Loan Documents;
b. current liabilities of such Borrower incurred in the ordinary course
of business and not incurred through (i) the borrowing of money or (ii)
the obtaining of credit except for credit on an open account basis
customarily extended and in fact extended in connection with normal
purchases of goods and services;
c. Indebtedness in respect of taxes, assessments, governmental charges or
levies and claims for labor, materials and supplies to the extent that
payment therefor shall not at the time be required to be made in
accordance with the provisions of REF 8.07;
d. Indebtedness in respect of judgments or awards that have been in force
for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which such Borrower
shall at the time in good faith be prosecuting an appeal or proceedings
for review and in respect of which a stay of execution shall have been
obtained and be in effect pending such appeal or review;
e. endorsements for collection, deposit or negotiation and warranties of
products or services, in each case incurred in the ordinary course of
business;
f. loans from shareholders of CompuDyne, to the extent the same are
subordinated to the Obligations pursuant to the Subordination Agreement,
and other Subordinated Debt;
g. Indebtedness incurred in connection with the acquisition after the
date hereof of any real or personal property by such Borrower, provided
that the aggregate principal amount of such Indebtedness of the Borrowers
shall not exceed the aggregate amount of $100,000 at any one time;
h. Indebtedness existing on the date hereof and listed and described on
Schedule 9.01 hereto; and
i. contingent Indebtedness incurred by any Borrower in connection with
the execution of any one or more Surety Agreements.
9.02 Restrictions on Liens. No Borrower will (a) create or incur or
suffer to be created or incurred or to exist any lien, encumbrance,
mortgage, pledge, charge, restriction or other security interest of any
kind upon any of its property or assets of any character, whether now
owned or hereafter acquired, or upon the income or profits therefrom; (b)
transfer any of such property or assets or the income or profits
therefrom for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to
payment of its general creditors; (c) acquire, or agree or have an option
to acquire, any property or assets upon conditional sale or other title
retention or purchase money security agreement, device or arrangement;
(d) suffer to exist for a period of more than 30 days after the same
shall have been incurred any Indebtedness or claim or demand against it
that if unpaid might by law or upon bankruptcy or insolvency, or
otherwise, be given any priority whatsoever over its general creditors;
or (e) sell, assign, pledge or otherwise transfer any accounts, contract
rights, general intangibles, chattel paper or instruments, with or
without recourse; provided that any Borrower may create or incur or
suffer to be created or incurred or to exist:
i. liens to secure taxes, assessments and other government charges or
claims for labor, material or supplies in respect of obligations not
overdue;
ii. deposits or pledges made in connection with, or to secure payment of,
workmen s compensation, unemployment insurance, old age pensions or other
social security obligations;
iii. liens in respect of judgments or awards, the Indebtedness with
respect to which is permitted by REF 9.01(d);
iv. liens of carriers, warehousemen, mechanics and materialmen, and
other like liens, in existence less than 120 days from the date of
creation thereof in respect of obligations not overdue;
v. encumbrances consisting of easements, rights of way, zoning
restrictions, restrictions on the use of real property and defects and
irregularities in the title thereto, landlord s or lessor s liens under
leases to which such Borrower is a party, and other minor liens or
encumbrances none of which in the opinion of such Borrower interferes
materially with the use of the property affected in the ordinary conduct
of the business of such Borrower, which defects do not individually or in
the aggregate have a materially adverse effect on the business of such
Borrower;
vi. liens existing on the date hereof and listed on Schedule 9.02
hereto;
vii. purchase money security interests in or purchase money mortgages on
real or personal property acquired after the date hereof to secure
purchase money Indebtedness of the type and amount permitted by REF
9.01(g), incurred in connection with the acquisition of such property,
which security interests or mortgages cover only the real or personal
property so acquired;
viii. liens in favor of the Bank under the Loan Documents;
ix. liens securing Subordinated Debt; and
x. unperfected security interests in favor of one or more sureties and
created in connection with the execution of Surety Agreements by any one
or more Borrowers.
9.03 Restrictions on Investments. No Borrower will make or permit to
exist or to remain outstanding any Investment except Investments in:
a. marketable direct or guaranteed obligations of the United States of
America that mature within one year from the date of purchase by such
Borrower;
b. demand deposits, certificates of deposit, bankers acceptances and time
deposits of the Bank or, to the extent the same are fully insured by the
Federal Deposit Insurance Corporation, of other United States banks;
c. securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any state thereof that at the time of purchase have been rated
and the ratings for which are not less than "P 1" if rated by Xxxxx s
Investors Services, Inc., and not less than "A 1" if rated by Standard
and Poor s; and
d. common stock issued by a corporation organized and existing under the
laws of the United States of America or any state thereof, provided, no
such common stock shall constitute margin stock as such term is used in
Regulation U of the Board of Governors of the Federal Reserve System, 12
C.F.R. Part 221, and provided further that the aggregate outstanding
dollar amount of all such common stock shall not exceed $50,000 at any
time.
9.04 Distributions. CompuDyne will not make any Distributions; provided,
however, that so long as no Default or Event of Default shall have
occurred and be continuing, or shall occur as a result thereof, CompuDyne
may pay dividends on the preferred stock described on Schedule 9.04
hereto at a rate not in excess of the rate set forth on Schedule 9.04.
9.05 Merger and Consolidation. No Borrower will become a party to any
merger or consolidation, or agree to or effect any asset acquisition,
stock acquisition or disposition of assets (other than the acquisition
and disposition of assets in the ordinary course of business consistent
with past practices).
9.06 Sale and Leaseback. No Borrower will enter into any arrangement,
directly or indirectly, whereby such Borrower shall sell or transfer any
property owned by it in order then or thereafter to lease such property
or lease other property that such Borrower intends to use for
substantially the same purpose as the property being sold or transferred.
9.07 Subordinated Debt. No Borrower will amend, supplement or otherwise
modify the terms of any of the Subordinated Debt or prepay, redeem or
repurchase any of the Subordinated Debt.
10 FINANCIAL COVENANTS OF THE BORROWERS.
----------------------------------------
The Borrowers covenant and agree that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or the
Bank has any obligation to make any Loans or to issue, extend or renew
Letters of Credit:
10.01 Debt Service. The Borrowers will not permit the ratio of
Consolidated Cash Flow for any fiscal quarter of CompuDyne ending on or
after December 31, 1996, to Consolidated Financial Obligations as
determined for such fiscal quarter, to be less than 1.1:1.0.
10.02 Current Ratio. The Borrowers will not permit the ratio of Current
Assets to Current Liabilities to be less than 1.0:1.0 at any time.
11 CLOSING CONDITIONS.
---------------------
The obligation of the Bank to make the initial Loan and to issue any
initial Letters of Credit shall be subject to the satisfaction of the
following conditions precedent on or prior to December ___, 1996:
11.01 Loan Documents. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto, shall be in
full force and effect and shall be in form and substance satisfactory to
the Bank. The Bank shall have received a fully executed copy of each
such document.
11.02 Certified Copies of Charter Documents. The Bank shall have
received from each Borrower a copy, certified by a duly authorized
officer of such Borrower to be true and complete on the Closing Date, of
each of (a) its charter or other incorporation documents as in effect on
such date of certification, and (b) its by-laws as in effect on such
date.
11.03 Corporate Action. All corporate action necessary for the valid
execution, delivery and performance by each Borrower of this Credit
Agreement and the other Loan Documents to which such Borrower is or is to
become a party shall have been duly and effectively taken, and evidence
thereof satisfactory to the Bank shall have been provided to the Bank.
11.04 Incumbency Certificate. The Bank shall have received from each
Borrower an incumbency certificate, dated as of the Closing Date, signed
by a duly authorized officer of such Borrower, and giving the name and
bearing a specimen signature of each individual who shall be authorized:
(a) to sign, in the name and on behalf of such Borrower, each of the Loan
Documents to which such Borrower is or is to become a party; (b) to make
Loan Requests; and (c) to give notices and to take other action on its
behalf under the Loan Documents.
11.05 Validity of Liens. The Security Agreement shall be effective to
create in favor of the Bank a legal, valid and enforceable first (except
for Permitted Liens entitled to priority under applicable law) security
interest in and lien upon the Collateral. All filings, recordings,
deliveries of instruments and other actions necessary or desirable in the
opinion of the Bank to protect and preserve such security interests shall
have been duly effected. The Bank shall have received evidence thereof
in form and substance satisfactory to the Bank.
11.06 Perfection Certificates and UCC Search Results. The Bank shall
have received from each Borrower a completed and fully executed
Perfection Certificate and the results of Uniform Commercial Code
searches with respect to the Collateral, indicating no liens other than
Permitted Liens and otherwise in form and substance satisfactory to the
Bank.
11.07 Certificates of Insurance. The Bank shall have received a
certificate of insurance from an independent insurance broker as of dated
the Closing Date, identifying insurers, types of insurance, insurance
limits, and policy terms, and otherwise describing all liability
insurance, as well as the insurance obtained in accordance with the
provisions of the Security Agreement.
11.08 Borrowing Base Report. The Bank shall have received from the
Borrowers the initial Borrowing Base Report dated as of the Closing Date.
11.09 Accounts Receivable Aging Report. The Bank shall have received
from the Borrowers the most recent Accounts Receivable aging report of
the Borrowers dated as of a date no more than 15 days prior to the
Closing Date and the Borrowers shall have notified the Bank in writing on
the Closing Date of any material deviation from the Accounts Receivable
values reflected in such Accounts Receivable aging report and shall have
provided the Bank with such supplementary documentation as the Bank may
reasonably request.
11.10 Opinions of Counsel. The Bank shall have received a favorable
legal opinion addressed to the Bank, dated as of the Closing Date, in
form and substance satisfactory to the Bank, from Xxxxx Xxxxxx & Xxxxxx,
counsel to the Borrowers, and from ________________, local Nevada counsel
to CompuDyne.
11.11 Origination Fee. The Borrowers shall have paid to the Bank the fee
described in REF 2.07
12 CONDITIONS TO ALL BORROWINGS.
-------------------------------
The obligations of the Bank to make any Loan and to issue, extend or
renew any Letter of Credit, including the initial Loan and any initial
Letters of Credit, in each case whether on or after the Closing Date,
shall also be subject to the satisfaction of the following conditions
precedent:
12.01 Representations True; No Event of Default. Each of the
representations and warranties of any of the Borrowers contained in this
Credit Agreement, the other Loan Documents or in any document or
instrument delivered pursuant to or in connection with this Credit
Agreement shall be true as of the date as of which they were made and
shall also be true at and as of the time of the making of such Loan or
the issuance, extension or renewal of such Letter of Credit, with the
same effect as if made at and as of that time (except to the extent of
changes resulting from transactions contemplated or permitted by this
Credit Agreement and the other Loan Documents and changes occurring in
the ordinary course of business that singly or in the aggregate are not
materially adverse, and to the extent that such representations and
warranties relate expressly to an earlier date) and no Default or Event
of Default shall have occurred and be continuing.
12.02 No Legal Impediment. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable
opinion of the Bank would make it illegal for it to make such Loan.
12.03 Governmental Regulations. The Bank shall have received such
statements in substance and form reasonably satisfactory to the Bank as
it shall require for the purpose of compliance with any applicable
regulations of the Massachusetts Commissioner of Banks, the Federal
Deposit Insurance Corporation or the Board of Governors of the Federal
Reserve System.
12.04 Proceedings and Documents. All proceedings in connection with the
transactions contemplated by this Credit Agreement, the other Loan
Documents and all other documents incident thereto shall be satisfactory
in substance and in form to the Bank and to the Bank s Special Counsel,
and the Bank and such counsel shall have received all information and
such counterpart originals or certified or other copies of such documents
as the Bank may reasonably request.
12.05 Borrowing Base. The Bank shall have received the most recent
Borrowing Base Report required to be delivered to the Bank in accordance
with REF 8.03(e) and, if requested by the Bank, a Borrowing Base Report
dated within five days of the Drawdown Date of such Loan or the date of
the issuance, extension or renewal of such Letter of Credit.
13 EVENTS OF DEFAULT; ACCELERATION; ETC.
---------------------------------------
13.01 Events of Default and Acceleration. If any of the following events
("Events of Default" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice or lapse of time,
"Defaults") shall occur:
a. the Borrowers shall fail to pay any principal of the Loans or any
Reimbursement Obligation when the same shall become due and payable,
whether at the stated date of maturity or any accelerated date of
maturity or at any other date fixed for payment;
b. the Borrowers shall fail to pay any interest on the Loans or other
sums due hereunder or under any of the other Loan Documents within 15
days of the date when the same shall become due and payable, whether at
the stated date of maturity or any accelerated date of maturity or at any
other date fixed for payment;
c. any Borrower shall fail to comply with any of its covenants contained
in REFS. 8.08, 9 or 10;
d. any Borrower shall fail to perform any term, covenant or agreement
contained herein or in any of the other Loan Documents (other than those
specified elsewhere in this REF 13.01) for 30 days after written notice
of such failure has been given to the Borrowers by the Bank;
e. any representation or warranty of any Borrower in this Credit
Agreement or any of the other Loan Documents or in any other document or
instrument delivered pursuant to or in connection with this Credit
Agreement shall prove to have been false in any material respect upon the
date when made or deemed to have been made or repeated;
f. any Borrower shall fail to pay at maturity, or within any applicable
period of grace, any obligation for borrowed money or credit received or
in respect of any Capitalized Leases, or fail to observe or perform any
material term, covenant or agreement contained in any agreement by which
it is bound, evidencing or securing borrowed money or credit received or
in respect of any Capitalized Leases for such period of time as would
permit (assuming the giving of appropriate notice if required) the holder
or holders thereof or of any obligations issued thereunder to accelerate
the maturity thereof;
g. any Borrower shall make an assignment for the benefit of creditors, or
admit in writing its inability to pay or generally fail to pay its debts
as they mature or become due, or shall petition or apply for the
appointment of a trustee or other custodian, liquidator or receiver of
such Borrower or of any substantial part of the assets of such Borrower
or shall commence any case or other proceeding relating to such Borrower
under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or shall take any action to
authorize or in furtherance of any of the foregoing, or if any such
petition or application shall be filed or any such case or other
proceeding shall be commenced against any Borrower and such Borrower
shall indicate its approval thereof, consent thereto or acquiescence
therein;
h. a decree or order is entered appointing any such trustee, custodian,
liquidator or receiver or adjudicating any Borrower bankrupt or
insolvent, or approving a petition in any such case or other proceeding,
or a decree or order for relief is entered in respect of any Borrower in
an involuntary case under federal bankruptcy laws as now or hereafter
constituted;
i. there shall remain in force, undischarged, unsatisfied and unstayed,
for more than 30 days, whether or not consecutive, any final judgment
against any Borrower that, with other outstanding final judgments,
undischarged, against the Borrowers exceeds in the aggregate $25,000;
j. any Subordinated Debt shall be prepaid, redeemed or repurchased in
whole or in part;
k. if any of the Loan Documents shall be canceled, terminated, revoked or
rescinded otherwise than in accordance with the terms thereof or with the
express prior written agreement, consent or approval of the Bank, or any
action at law, suit in equity or other legal proceeding to cancel, revoke
or rescind any of the Loan Documents shall be commenced by or on behalf
of any Borrower or any of its stockholders, or any court or any other
governmental or regulatory authority or agency of competent jurisdiction
shall make a determination that, or issue a judgment, order, decree or
ruling to the effect that, any one or more of the Loan Documents is
illegal, invalid or unenforceable in accordance with the terms thereof;
or
l. any Borrower shall be indicted for a federal crime, a punishment for
which could include the forfeiture of any assets of such Borrower
included in the Borrowing Base or any assets of such Borrower not
included in the Borrowing Base but having a fair market value in excess
of $10,000;
then, and in any such event, so long as the same may be continuing, the
Bank may, by notice in writing to the Borrowers, declare all amounts
owing with respect to this Credit Agreement, the Note and the other Loan
Documents to be, and they shall thereupon forthwith become, immediately
due and payable without presentment, demand, protest or other notice of
any kind, all of which are hereby expressly waived by the Borrowers;
provided that in the event of any Event of Default specified in REFS.
13.01(g), REF 13.01(h) or REF 13.01(j), all such amounts shall become
immediately due and payable automatically and without any requirement of
notice from the Bank.
13.02 Termination of Line Cap. If any one or more of the Events of
Default specified in REFS. 13.01(g), 13.01(h) or 13.01(j) shall occur,
any unused portion of the credit hereunder shall forthwith terminate and
the Bank shall be relieved of all further obligations to make Loans to
the Borrowers or to issue, extend or renew Letters of Credit. If any
other Event of Default shall have occurred and be continuing the Bank
may, by notice to the Borrowers, terminate the unused portion of the
credit hereunder, and upon such notice being given such unused portion of
the credit hereunder shall terminate immediately and the Bank shall be
relieved of all further obligations to make Loans or to issue, extend or
renew Letters of Credit. No termination of the credit hereunder shall
relieve the Borrowers of any of the Obligations.
13.03 Remedies. In case any one or more of the Events of Default shall
have occurred and be continuing, and whether or not the Bank shall have
accelerated the maturity of the Loans pursuant to REF 13.01, the Bank may
proceed to protect and enforce its rights by suit in equity, action at
law or other appropriate proceeding, whether for the specific performance
of any covenant or agreement contained in this Credit Agreement and the
other Loan Documents or any instrument pursuant to which the Obligations
to the Bank are evidenced, including as permitted by applicable law the
obtaining of the ex parte appointment of a receiver, and, if any amount
owing to the Bank hereunder or under any of the other Loan Documents
shall have become due, by declaration or otherwise, proceed to enforce
the payment thereof or any other legal or equitable right of the Bank.
No remedy herein conferred upon the Bank or the holder of the Note is
intended to be exclusive of any other remedy and each and every remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute
or any other provision of law.
13.04 Distribution of Collateral Proceeds. In the event that, following
the occurrence or during the continuance of any Default or Event of
Default, the Bank receives any monies in connection with the enforcement
of any of the Security Documents, or otherwise with respect to the
realization upon any of the Collateral, such monies shall be distributed
for application as follows:
a. First, to the Obligations in such order or preference as the Bank may
determine;
b. Second, upon payment and satisfaction in full or other provisions for
payment in full satisfactory to the Bank of all of the Obligations, to
the payment of any obligations required to be paid pursuant to REF 9-
504(l)(c) of the UCC; and
c. Third, the excess, if any, shall be returned to the Borrowers or to
such other Persons as are entitled thereto.
14 SETOFF.
----------
Regardless of the adequacy of any collateral, any securities, deposits or
other sums credited by or due from the Bank to any Borrower are and shall
be subject to a security interest hereby granted by such Borrower in
favor of the Bank to secure payment of Obligations and any and all other
liabilities, direct, or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, of such Borrower to the
Bank. Upon the occurrence of any Event of Default, and at any time or
times thereafter, without any demand or notice, except to the extent that
notice may be required by applicable law, the Bank may sell or dispose of
any or all such securities, deposits or other sums, and may exercise any
and all rights accorded the Bank pursuant to the UCC. The Bank may at
any time following the occurrence and during the continuance of any Event
of Default apply or set off such deposits or other sums against the
payment of the Obligations or any other liabilities, direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
arising, of such Borrower to the Bank, or may apply an administrative
hold or "freeze" to such sums or deposits and hold the same as collateral
security for such liabilities. No single or partial exercise by the Bank
of any right, power or remedy hereunder or under any of the other Loan
Documents shall preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. Each right, power and
remedy specifically granted to the Bank herein or in any of the other
Loan Documents or otherwise available to it, shall be cumulative, and
shall be in addition to every other right, power and remedy specifically
given herein or in any of the other Loan Documents or now or hereafter
existing at law, in equity or otherwise. Each such right, power and
remedy, whether specifically granted herein or otherwise existing, may be
exercised at any time and from time to time and as often and in such
order as may be deemed expedient by the Bank in its sole and absolute
discretion.
15. EXPENSES.
-------------
The Borrowers agree, jointly and severally, to pay (a) the reasonable
costs of producing and reproducing this Credit Agreement, the other Loan
Documents and the other agreements and instruments mentioned herein, (b)
any taxes (including any interest and penalties in respect thereof)
payable by the Bank (other than taxes based upon the Bank s net income)
on or with respect to the transactions contemplated by this Credit
Agreement (the Borrowers hereby jointly and severally agreeing to
indemnify the Bank with respect thereto), (c) the reasonable fees,
expenses and disbursements of the Bank s Special Counsel or any local
counsel to the Bank incurred in connection with the preparation,
administration or interpretation of the Loan Documents and other
instruments mentioned herein, each closing hereunder, and amendments,
modifications, approvals, consents or waivers hereto or hereunder, (d)
the fees, expenses and disbursements of the Bank incurred by the Bank in
connection with the preparation, administration or interpretation of the
Loan Documents and other instruments mentioned herein, (e) all reasonable
out-of-pocket expenses (including reasonable attorneys fees and costs,
which attorneys may be employees of the Bank) incurred by the Bank in
connection with (i) the enforcement of or preservation of rights under
any of the Loan Documents against any Borrower or the administration
thereof after the occurrence of a Default or Event of Default and (ii)
any litigation, proceeding or dispute, whether arising hereunder or
otherwise, in any way related to the Bank s relationship with any
Borrower and (f) all reasonable fees, expenses and disbursements of the
Bank incurred in connection with title and UCC searches, UCC filings or
mortgage recordings. The covenants of this REF 15 shall survive payment
or satisfaction of payment of amounts owing with respect to the Note.
16 INDEMNIFICATION.
------------------
The Borrowers agree, jointly and severally, to indemnify and hold
harmless the Bank from and against any and all claims, actions and suits,
whether groundless or otherwise, and from and against any and all
liabilities, losses, damages and expenses of every nature and character
arising out of this Credit Agreement or any of the other Loan Documents
or the transactions contemplated hereby including, without limitation,
(a) any actual or proposed use by the Borrowers of the proceeds of any of
the Loans, (b) any actual or alleged infringement of any patent,
copyright, trademark, service xxxx or similar right of any Borrower, (c)
any Borrower s entering into or performing this Credit Agreement or any
of the other Loan Documents or (d) with respect to the Borrowers and
their respective properties and assets, the violation of any
Environmental Law, the presence, disposal, escape, seepage, leakage,
spillage, discharge, emission, release or threatened release of any
Hazardous Substances or any action, suit, proceeding or investigation
brought or threatened with respect to any Hazardous Substances
(including, but not limited to, claims with respect to wrongful death,
personal injury or damage to property), in each case including, without
limitation, the reasonable fees and disbursements of counsel and
allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding. In litigation, or the
preparation therefor, the Bank shall be entitled to select its own
counsel and, in addition to the foregoing indemnity, the Borrowers agree
to pay promptly the reasonable fees and expenses of such counsel. If and
to the extent that the obligations of any Borrower under this REF 16 are
unenforceable for any reason, the Borrowers hereby agree to make the
maximum contribution to the payment in satisfaction of such obligations
that is permissible under applicable law.
17 SURVIVAL OF COVENANTS, ETC. All covenants, agreements,
representations and warranties made herein, in the Note, in any of the
other Loan Documents or in any documents or other papers delivered by or
on behalf of any Borrower pursuant hereto shall be deemed to have been
relied upon by the Bank, notwithstanding any investigation heretofore or
hereafter made by it, and shall survive the making by the Bank of any of
the Loans as herein contemplated, and shall continue in full force and
effect so long as any amount due under this Credit Agreement or the Note
or any of the other Loan Documents remains outstanding or the Bank has
any obligation to make any Loans. All statements contained in any
certificate or other paper delivered to the Bank at any time by or on
behalf of any Borrower pursuant hereto or in connection with the
transactions contemplated hereby shall constitute representations and
warranties by such Borrower hereunder.
18 ASSIGNMENT AND PARTICIPATION.
---------------------------------
18.01 Participations. The Bank may sell participations to one or more
banks or other entities in all or a portion of the Bank s rights and
obligations under this Credit Agreement and the other Loan Documents.
18.02 Disclosure. The Borrowers agree that the Bank may disclose
information obtained by the Bank pursuant to this Credit Agreement to
participants and potential participants hereunder; provided that such
participants or potential participants shall agree (a) to treat in
confidence such information, (b) not to disclose such information to a
third party and (c) not to make use of such information for purposes of
transactions unrelated to such contemplated participation.
18.03 Successors and Assigns. This Agreement and all rights and
obligations hereunder shall be binding upon the Borrowers and their
respective successors and assigns, and shall inure to the benefit of the
Bank and its successors and assigns.
18.04 Assignment by Borrowers. No Borrower shall assign or transfer any
of its rights or obligations under any of the Loan Documents without the
prior written consent of the Bank.
19 CONCERNING JOINT AND SEVERAL LIABILITY.
19.01 Mutual Benefit, Etc. Each of the Borrowers is accepting joint and
several liability hereunder in consideration of the financial
accommodations to be provided by the Bank under this Credit Agreement,
for the mutual benefit, directly and indirectly, of each of the Borrowers
and in consideration of the undertakings of each other Borrower to accept
joint and several liability for the Obligations.
19.02 Acceptance of Joint and Several Liability. Each of the Borrowers,
jointly and severally, hereby irrevocably and unconditionally accepts,
not merely as a surety but also as a co-debtor, joint and several
liability with the other Borrowers, with respect to the payment and
performance of all of the Obligations (including, without limitation, any
Obligations arising under this REF 19), it being the intention of the
parties hereto that all the Obligations shall be the joint and several
Obligations of each of the Borrowers without preferences or distinction
among them.
19.03 Failure to Pay or Perform. If and to the extent that any of the
Borrowers shall fail to make any payment with respect to any of the
Obligations as and when due or to perform any of the Obligations in
accordance with the terms thereof, then in each such event the other
Borrowers will make such payment with respect to, or perform, such
Obligations.
19.04 Full Recourse Obligations. The Obligations of each of the
Borrowers under the provisions of this REF 19 constitute full recourse
Obligations of each of the Borrowers enforceable against each such Person
to the full extent of its properties and assets, irrespective of the
validity, regularity or enforceability of this Agreement or any other
circumstance whatsoever.
19.05 Certain Waivers. Except as otherwise expressly provided in this
Agreement, each of the Borrowers hereby waives notice of acceptance of
its joint and several liability, notice of the Loans, notice of the
occurrence of any Default or Event of Default, or of any demand for any
payment under this Agreement, notice of any action at any time taken or
omitted by the Bank under or in respect of any of the Obligations, any
requirement of diligence or to mitigate damages and, generally, to the
extent permitted by applicable law, all demands, notices and other
formalities of every kind in connection with this Agreement. Each of the
Borrowers hereby assents to, and waives notice of, any extension or
postponement of the time for the payment of any of the Obligations, the
acceptance of any partial payment thereon, any waiver, consent or other
action or acquiescence by the Bank at any time or times in respect of any
default by any of the Borrowers in the performance or satisfaction of any
term, covenant, condition or provision of this Agreement, any and all
other indulgences whatsoever by the Bank in respect of any of the
Obligations, and the taking, addition, substitution or release, in whole
or in part, at any time or times, of any security for any of the
Obligations or the addition, substitution or release, in whole or in
part, of any of the Borrowers. Without limiting the generality of the
foregoing, each of the Borrowers assents to any other action or delay in
acting or failure to act on the part of the Bank with respect to the
failure by any of the Borrowers to comply with any of its respective
Obligations, including, without limitation, any failure strictly or
diligently to assert any right or to pursue any remedy or to comply fully
with applicable laws or regulations thereunder, that might, but for the
provisions of this REF 19, afford grounds for terminating, discharging or
relieving any of the Borrowers, in whole or in part, from any of its
Obligations under this REF 19, it being the intention of each of the
Borrowers that, so long as any of the Obligations hereunder remain
unsatisfied, the Obligations of such Borrowers under this REF 19 shall
not be discharged except by performance and then only to the extent of
such performance. The Obligations of each of the Borrowers under this
REF 19 shall not be diminished or rendered unenforceable by any winding
up, reorganization, arrangement, liquidation, reconstruction or similar
proceeding with respect to any of the Borrowers or of the Bank. The
joint and several liability of the Borrowers hereunder shall continue in
full force and effect notwithstanding any absorption, merger,
amalgamation or any other change whatsoever in the name, membership,
constitution or place of formation of any of the Borrowers or the Bank.
19.06 Successors and Assigns; Provisions Remain in Effect; Etc. The
provisions of this REF 19 are made for the benefit of the Bank and its
successors and assigns, and may be enforced by it from time to time
against any or all of the Borrowers as often as occasion therefor may
arise and without requirement on the part of the Bank first to xxxxxxxx
any of its claims or to exercise any of its rights against any other
Borrower or to exhaust any remedies available to it against any other
Borrower or to resort to any other source or means of obtaining payment
of any of the Obligations hereunder or to elect any other remedy. The
provisions of this REF 19 shall remain in effect until all of the
Obligations shall have been paid in full or otherwise fully satisfied.
If at any time any payment, or any part thereof, made in respect of any
of the Obligations, is rescinded or must otherwise be restored or
returned by the Bank upon the insolvency, bankruptcy or reorganization of
any of the Borrowers, or otherwise, the provisions of this REF 19 will
forthwith be reinstated in effect, as though such payment had not been
made.
19.07 Subrogation Waiver. Except to the extent provided in REF 19.08,
until the payment and performance in full of all Obligations and any and
all other obligations of each Borrower to the Bank, whether existing on
the date hereof or arising at any time hereafter, each Borrower hereby
agrees that it shall not exercise any rights against any other Borrower
hereunder, by way of contribution, subrogation or otherwise, and will not
prove any claim in competition with the Bank, its affiliates or such
other creditor in respect of any payment hereunder in bankruptcy or
insolvency proceedings of any nature; such Borrower will not claim any
setoff or counterclaim against any other Borrower in respect of any
liability of such Borrower to such other Borrower; and such Borrower
waives any benefit of and any right to participate in any collateral that
may be held by the Bank or any such affiliate. Each Borrower hereby
acknowledges that the waiver contained in the preceding sentence (the
Subrogation Waiver ) is given as an inducement to the Bank to consummate
the transactions contemplated hereby and any other agreement referred to
herein and, in consideration of the willingness of the Bank to consummate
such transactions, such Borrower agrees that it shall not in any way
amend or modify the Subrogation Waiver without the prior written consent
of the Bank. If any payment shall be made to a Borrower on account of
its rights under this REF 19 at any time when the Obligations shall not
have been paid in full, each and every amount so paid will forthwith be
paid over to the Bank to be credited and applied to the Obligations.
19.08 Indemnities. Each of the Borrowers agrees to indemnify each other
Borrower for any losses, costs or expenses that any such other Borrower
may sustain or incur as a result of paying or repaying any of the
obligations of such indemnifying Borrower hereunder or under the Note or
any of the other Loan Documents. All obligations of the Borrowers in
respect of the indemnities set forth in this paragraph (h) shall be fully
subordinated in right of payment to the final payment in full of all of
the Obligations. Each Borrower agrees not to enforce any such
indemnification claim unless and until all of the Obligations have been
fully and finally paid and satisfied in full; provided, however, that
such Borrower shall be entitled, if it so elects, to take from time to
time such procedural actions, such as providing notices of claims and
filing proofs of claim, as such Borrower may reasonably determine to
preserve any such indemnification claim.
19.09 Transfer of Indemnification Rights. Each of the Borrowers is free
to sell, assign or transfer its indemnification rights under REF 19.08 in
connection with any sale, transfer or other disposition of all or
substantially all of the assets of such Borrower to the extent that such
sale, assignment, transfer or other disposition is otherwise expressly
permitted hereunder.
20 NOTICES, ETC.
-----------------
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to
this Credit Agreement or the Note shall be in writing and shall be
delivered in hand, mailed by United States first class mail, postage
prepaid, sent by overnight courier (e.g., Federal Express or similar
courier), or sent by telegraph, telecopy, facsimile or telex and
confirmed by delivery via hand, courier or postal service, addressed as
follows:
a. if to any Borrower, at c/o CompuDyne Corporation, 000 Xxxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxxxxx, Attention: Xxxxxx X. Xxxxxxx, or at such other
address for notice as such Borrower shall last have furnished in writing
to the Person giving the notice; and
b. if to the Bank, at 00 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000,
Attention: Xxxxxxx X. Xxxxxx, Vice President/Lending, or at such other
address for notice as the Bank shall last have furnished in writing to
the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand, overnight courier
or facsimile to a responsible officer of the party to which it is
directed, at the time of the receipt thereof by such officer or the
sending of such facsimile and (ii) if sent by first-class mail, postage
prepaid, on the third Business Day following the mailing thereof.
21 GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE; ETC.
----------------------------------------------------------
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF
THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SUCH COMMONWEALTH
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). EACH
BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS
OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN
AND CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE
OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE
ADDRESS SPECIFIED IN REF 20. EACH BORROWER HEREBY WAIVES ANY OBJECTION
THAT SUCH BORROWER MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH
SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT
COURT.
22 HEADINGS. The captions in this Credit Agreement are for convenience
of reference only and shall not define or limit the provisions hereof.
23 COUNTERPARTS. This Credit Agreement and any amendment hereof may be
executed in several counterparts and by each party on a separate
counterpart, each of which when so executed and delivered shall be an
original, and all of which together shall constitute one instrument. In
proving this Credit Agreement it shall not be necessary to produce or
account for more than one such counterpart signed by the party against
whom enforcement is sought.
24 ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents
executed in connection herewith or therewith express the entire
understanding of the parties with respect to the transactions
contemplated hereby. Neither this Credit Agreement nor any term hereof
may be changed, waived, discharged or terminated, except as provided in
REF 26.
25 WAIVER OF JURY TRIAL, CERTAIN DAMAGES, ETC. EACH OF THE BORROWERS
AND THE BANK HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY
ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS CREDIT
AGREEMENT, THE NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR
OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH BORROWER HEREBY WAIVES
ANY RIGHT SUCH BORROWER MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION
REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. Each Borrower (a) certifies that no representative,
agent or attorney of the Bank has represented, expressly or otherwise,
that the Bank would not, in the event of litigation, seek to enforce the
foregoing waivers and (b) acknowledges that the Bank has been induced to
enter into this Credit Agreement by, among other things, the waivers and
certifications contained in this REF 25.
26 CONSENTS, AMENDMENTS, WAIVERS, ETC. Any consent or approval required
or permitted by this Credit Agreement to be given by the Bank may be
given, and any term of this Credit Agreement, the other Loan Documents or
any other instrument related hereto or mentioned herein may be amended,
and the performance or observance by any Borrower of any terms of this
Credit Agreement, the other Loan Documents or such other instrument or
the continuance of any Default or Event of Default may be waived (either
generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of the Borrowers
and the written consent of the Bank. No waiver shall extend to or affect
any obligation not expressly waived or impair any right consequent
thereon. No course of dealing or delay or omission on the part of the
Bank in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial thereto. No notice to or demand upon the
Borrowers shall entitle any Borrower to other or further notice or demand
in similar or other circumstances.
27 SEVERABILITY. The provisions of this Credit Agreement are severable
and if any one clause or provision hereof shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect only such clause or
provision, or part thereof, in such jurisdiction, and shall not in any
manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Credit Agreement in any jurisdiction.
28 TRANSITIONAL ARRANGEMENTS.
----------------------------
28.01 Original Credit Agreement Superseded. This Credit Agreement shall
supersede the Credit Agreement, dated February 9, 1996 (the Original
Credit Agreement ), among CompuDyne, Quanta, MicroAssembly and the Bank
in its entirety, except as provided in this REF 28. On the Closing Date,
the rights and obligations of the parties under the Original Credit
Agreement and the Note as defined therein shall be subsumed within and
be governed by this Credit Agreement and the Note.
28.02 Fees under Superseded Agreement. All unused availability and other
fees and expenses owing or accruing under or in respect of the Original
Credit Agreement shall be calculated as of the Closing Date (prorated in
the case of any fractional periods), and shall be paid in accordance with
the method, and on the dates, specified in the Original Credit Agreement,
as if the Original Credit Agreement were still in effect.
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
COMPUDYNE CORPORATION QUANTA SYSTEMS CORPORATION
By:/s/ Xxxxxx Xxxxxxx By:/s/ Xxxxxx Xxxxxxx
Title: Chairman, Pres. & CEO Title: Chairman
MICROASSEMBLY SYSTEMS, INC. QUANTA SECURSYSTEMS, INC.
By: /s/ Xxxxxx Xxxxxxx By:/s/ Xxxxxx Xxxxxxx
Title: President Title: Chairman
ASIAN AMERICAN BANK & TRUST
COMPANY
By:
Title:
------------------------------------------------------------------------
Schedule 7.03
Exceptions to Title
None
-------------------------------------------------------------------------
Schedule 7.07
Litigation
-------------------------------------------------------------------------
Schedule 7.16
ERISA Compliance
CompuDyne Corporaton currently has a pension plan which is not fully
funded. The liability for such shortfall is disclosed in CompuDyne's
financial statements.
-------------------------------------------------------------------
Schedule 7.18
Environmental Matters
1. See Schedule 7.7 to the Agreement
-------------------------------------------------------------------------
Schedule 7.19
Subsidiaries
Percentage
of voting
securities
Incorporated owned by
under the immediate
Name laws of Parent parent
------- -------- --------------- ------
CompuDyne Corp. of Maryland Maryland CompuDyne Corp. 100%
Quanta Systems Corporation Connecticut CompuDyne Corp. 100%
CompuDyne, Inc. Delaware CompuDyne Corp. 100%
MicroAssembly Systems, Inc. Connecticut CompuDyne Corp. 100%
Quanta SecurSystems, Inc. Maryland CompuDyne Corp. 100%
Schedule 7.20
Government Contracts
-------------------------------------------------------------------------
Schedule 9.01
Existing Indebtedness
-------------------------------------------------------------------------
Schedule 9.02
Existing Liens
-------------------------------------------------------------------------
Schedule 9.04
Preferred Stock
Table of Contents
1. 1. DEFINITIONS AND RULES OF INTERPRETATION.....................1
1.01. Definitions...............................................1
1.02. Rules of Interpretation...................................7
2. THE REVOLVING CREDIT FACILITY....................................8
2.01. Commitment to Lend........................................8
2.02. The Note......................................................8
2.03. Interest on Loans.............................................8
2.04. Requests for Loans............................................8
2.05. Change in Borrowing Base......................................9
2.06. Unused Availability Fee......................................9
2.07. Origination Fee...............................................9
3. REPAYMENT OF THE LOANS...........................................9
3.01. Line Termination..............................................9
3.02. Mandatory Repayments of Loans.................................9
3.03. Automatic Repayment of Loans..................................9
3.04. Optional Repayments of Loans..................................9
4. LETTERS OF CREDIT...............................................10
4.01. Letter of Credit Commitments.................................10
4.02. Reimbursement Obligation of the Borrowers....................10
4.03. Letter of Credit Payments....................................11
4.04. Obligations Absolute.........................................11
4.05. Reliance by Issuer...........................................11
4.06. Letter of Credit Fee.........................................12
5. CERTAIN GENERAL PROVISIONS......................................12
5.01. Funds for Payments...........................................12
5.02. Computations.................................................12
5.03. Late Fee; Interest after Default.............................12
6. COLLATERAL SECURITY.............................................13
7. REPRESENTATIONS AND WARRANTIES..................................13
7.01. Corporate Authority..........................................13
(a) Incorporation; Good Standing...................................13
(b) Authorization..................................................14
(c) Enforceability.................................................14
7.02. Governmental Approvals.......................................14
7.03. Title to Properties; Leases..................................14
7.04. Financial Statements.........................................14
7.05. No Material Changes, Etc.....................................14
7.06. Franchises, Patents, Copyrights, Etc.........................15
7.07. Litigation...................................................15
7.08. No Materially Adverse Contracts, Etc.........................15
7.09. Compliance With Other Instruments, Laws, Etc.................15
7.10. Tax Status...................................................15
7.11. No Event of Default..........................................15
7.12. Holding Company and Investment Company Acts..................15
7.13. Absence of Financing Statements, Etc.........................16
7.14. Perfection of Security Interest..............................16
7.15. Certain Transactions.........................................16
7.16. ERISA Compliance.............................................16
7.17. Regulations U and X..........................................16
7.18. Environmental Compliance.....................................16
7.19. Subsidiaries.................................................17
7.20. Government Contracts.........................................17
8. AFFIRMATIVE COVENANTS OF THE BORROWERS..........................17
8.01. Maintenance of Office........................................17
8.02. Records and Accounts.........................................17
8.03. Financial Statements, Certificates and Information...........18
8.04. Notices......................................................19
(a) Defaults.......................................................19
(b) Environmental Events...........................................19
(c) Notification of Claims against Collateral......................19
(d) Notice of Litigation and Judgments.............................19
8.05. Corporate Existence; Maintenance of Properties...............19
8.06. Insurance....................................................20
8.07. Taxes........................................................20
8.08. Inspection of Properties and Books...........................20
8.09. Compliance with Laws, Contracts, Licenses and Permits........20
8.10. Pension Plans................................................21
8.11. Use of Proceeds..............................................21
8.12. Assignment of U.S. Government Contracts......................21
8.13. Depository Accounts..........................................21
8.14. Further Assurances...........................................21
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS.....................21
9.01. Restrictions on Indebtedness.................................22
9.02. Restrictions on Liens........................................22
9.03. Restrictions on Investments..................................24
9.04. Distributions................................................24
9.05. Merger and Consolidation.....................................24
9.06. Sale and Leaseback...........................................24
9.07. Subordinated Debt............................................24
10. FINANCIAL COVENANTS OF THE BORROWERS...........................24
10.01. Debt Service................................................25
10.02. Current Ratio...............................................25
11. CLOSING CONDITIONS.............................................25
11.01. Loan Documents..............................................25
11.02. Certified Copies of Charter Documents.......................25
11.03. Corporate Action............................................25
11.04. Incumbency Certificate......................................25
11.05. Validity of Liens...........................................25
11.06. Perfection Certificates and UCC Search Results..............25
11.07. Certificates of Insurance...................................26
11.08. Borrowing Base Report.......................................26
11.09. Accounts Receivable Aging Report............................26
11.10. Opinions of Counsel.........................................26
11.11. Origination Fee.............................................26
12. CONDITIONS TO ALL BORROWINGS...................................26
12.01. Representations True; No Event of Default...................26
12.02. No Legal Impediment.........................................26
12.03. Governmental Regulations....................................26
12.04. Proceedings and Documents...................................27
12.05. Borrowing Base..............................................27
13. EVENTS OF DEFAULT; ACCELERATION; ETC...........................27
13.01. Events of Default and Acceleration..........................27
13.02. Termination of Line Cap.....................................29
13.03. Remedies....................................................29
13.04. Distribution of Collateral Proceeds.........................29
14. SETOFF...............................................29
15. EXPENSES.......................................................30
16. INDEMNIFICATION................................................30
17. SURVIVAL OF COVENANTS, ETC......................................31
18. ASSIGNMENT AND PARTICIPATION...................................31
18.01. Participations..............................................31
18.02. Disclosure..................................................31
18.03. Successors and Assigns......................................31
18.04. Assignment by Borrowers.....................................31
19. CONCERNING JOINT AND SEVERAL LIABILITY.........................32
19.01. Mutual Benefit, Etc.........................................32
19.02. Acceptance of Joint and Several Liability...................32
19.03. Failure to Pay or Perform...................................32
19.04. Full Recourse Obligations...................................32
19.05. Certain Waivers.............................................32
19.06. Successors and Assigns; Provisions Remain in Effect; Etc....33
19.07. Subrogation Waiver..........................................33
19.08. Indemnities.................................................33
19.09. Transfer of Indemnification Rights..........................34
20. NOTICES, ETC...................................................34
21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE; ETC........34
22. HEADINGS.......................................................35
23. COUNTERPARTS...................................................35
24. ENTIRE AGREEMENT, ETC..........................................35
25. WAIVER OF JURY TRIAL, CERTAIN DAMAGES, ETC.....................35
26. CONSENTS, AMENDMENTS, WAIVERS, ETC.............................35
27. SEVERABILITY...................................................36
28. TRANSITIONAL ARRANGEMENTS......................................36
28.01. Original Credit Agreement Superseded........................36
28.02. Fees under Superseded Agreement.............................36
------------------------------------------------------------------------
List of Schedules and Exhibits
Schedule 7.03 --- Exceptions to Title
Schedule 7.07 --- Litigation
Schedule 7.16 --- ERISA Compliance
Schedule 7.18 --- Environmental Matters
Schedule 7.19 --- Subsidiaries
Schedule 7.20 --- Government Contracts
Schedule 9.01 --- Existing Indebtedness
Schedule 9.02 --- Existing Liens
Schedule 9.04 --- Preferred Stock
Exhibit A --- Assignment of Monies
Exhibit B --- Form of Borrowing Base Report
Exhibit C --- Security Agreement
Exhibit D --- Note
Exhibit E --- Form of Loan Request
Exhibit F --- Form of Compliance Report
Exhibit G --- Form of Subordination Agreement
Exhibit H --- Pledge Agreement
-----------------------------------------------------------------------
Credit Agreement
Dated as of December ___, 1996
Among
CompuDyne Corporation
Quanta Systems Corporation
MicroAssembly Systems, Inc.
Quanta SecurSystems, Inc.
And
Asian American Bank & Trust Company
