LOAN AGREEMENT
THIS
AGREEMENT (as
the
same may be amended, restated or otherwise modified, the “Agreement”) is made
this 8th day of March, 2007, between MOD-PAC
CORP.,
a New
York corporation with offices at 0000 Xxxxxxx Xxxxxx, Xxxxxxx, Xxx Xxxx
00000 (“Borrower”) and KEYBANK
NATIONAL ASSOCIATION,
a
national banking association, with offices at 00 Xxxxxxxx Xxxxx, Xxxxxxx,
Xxx Xxxx 00000, and its successors and assigns (“Lender”).
In
consideration of the covenants and agreements contained herein, the Borrower
and
the Lender hereby mutually agree as follows:
1. DEFINITIONS
1.1. General.
Any
accounting term used but not specifically defined herein shall be construed
in
accordance with GAAP (as defined below). The definition of each agreement,
document, and instrument set forth in Section 1.2 hereof shall be deemed to
mean
and include such agreement, document, or instrument as amended, restated, or
modified from time to time.
1.2. Defined
Terms.
As
used
in this Agreement:
“Account”,
“Account Debtor”. “Chattel Paper”, “Consumer Goods”, “Deposit Account”,
“Document”, “Equipment”, “Farm Products”, “General Intangible”, “Goods”,
“Instrument” and “Proceeds”, have the meanings as set forth in the New York
Uniform Commercial Code, Sections 9-102(a) (2), (3) (11), (23), (29), (30),
(33), (34), (42), (44), (47), (48) and (64) inclusive, as amended from time
to
time.
“Affiliate”
of any specified entity means any other entity directly or indirectly
controlling or controlled by or under direct or indirect common control with
such specified entity and “control”, when used with respect to any specified
entity, means the power to direct the management and policies of such entity,
directly or indirectly, whether through the ownership of voting securities,
by
contract or otherwise; and the terms “controlling” and “controlled” have
meanings correlative to the foregoing.
“Acquisition”
means (whether in one transaction or a series of transactions) (i) any
acquisition on a going concern basis (whether by purchase, lease or otherwise)
of any assets (including, without limitation, Equipment), facility and/or
business or business unit operated by any Person that is not a Subsidiary of
Borrower, and (ii) acquisitions of a majority of the outstanding equity or
other
similar interests in any such Person (whether by merger, stock purchase or
otherwise).
“Borrowing
Base” means (a) 80% of Eligible Accounts plus (b) 40% of Eligible Inventory, but
not to exceed One Million Five Hundred Thousand Dollars ($1,500,000.00),
plus (c) 100% of Eligible Equipment, but not to exceed Two Million Dollars
($2,000,000.00).
“Borrowing
Base Certificate” means a certificate substantially in the form of attached
Exhibit B.
“Business
Day” means a day of the year on which banks are not required or authorized to
close in Cleveland, Ohio.
“Capital
Expenditures” means net fixed assets at the end of the period less net fixed
assets at the beginning of the period plus depreciation expense for the period,
excluding any fixed assets acquired through a Permitted
Acquisition.
“Cash
Flow” means, with respect to any fiscal year, net income after taxes and/or
dividends and other distributions (not including share repurchases permitted
by
this Agreement) , exclusive of extraordinary gains and losses, plus
depreciation, amortization, non-cash goodwill impairment write-down, and
non-cash option expense up to a maximum of $500,000.00, in each case for such
fiscal year, minus current maturities of long term Indebtedness (but in no
event
the Revolving Credit) as of the last day of such fiscal year and Capital
Expenditures, except to the extent financed by third-party debt, for such fiscal
year.
“Closing
Costs” means costs and expenses incurred by Lender in connection with the
closing of the transactions contemplated by this Agreement, including, without
limitation, Lender’s attorneys’ fees and expenses, audit and appraisal
expenses.
“Code”
shall mean the Internal Revenue Code of 1986, as amended, together with the
rules and regulations promulgated thereunder.
“Collateral”
means the collateral in which Borrower has given the Lender a security interest
pursuant to the Security Agreement dated of even date herewith, and any other
instrument given to Lender to secure the Indebtedness and/or this
Agreement.
“Contract
Right” means (a) any contract right, and (b) any right to payment under a
contract not yet earned by performance and not evidenced by an Instrument or
Chattel Paper.
“Controlled
Group” shall mean Borrower and each Person required to be aggregated with
Borrower under Code Sections 414(b), (c), (m) or (o).
“Deposit
Account” means (a) any deposit account, and (b) any demand, time, savings,
passbook, or a similar account maintained with a bank, savings and loan
association, credit union, or similar organization, other than an account
evidenced by a certificate of deposit.
“EBITDA”
means, with respect to any fiscal year, the net income of Borrower plus the
aggregate amounts deducted in determining such net income in respect of interest
expenses, taxes, depreciation, amortization, non-cash goodwill impairment
write-down and non-cash option expense up to a maximum of $500,000.00, but
not,
however, giving effect to extraordinary losses or gains in calculating net
income; in each case for such fiscal year.
“Eligible
Accounts” mean all bona fide Accounts (up to 90 days from date of invoice) of
Borrower, except the following:
(a)
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Accounts
subject to any pending claim for credit, allowance, or adjustment
or any
set off or counterclaim other than discounts granted in the ordinary
course of business for prompt
payment;
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(c)
|
Borrower
has received notice of the financial impairment of the Account Debtor
that
may reasonably be expected to impact the Account Debtor’s ability to pay
such Account;
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(d)
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Accounts
subject to an assignment, pledge, claim, mortgage, Lien, or security
interest of any type except that granted to or in favor of
Lender;
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(e)
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the
Goods which are the subject of the Account have been rejected, returned,
or acceptance has been revoked or
refused;
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(f)
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Accounts
of the United States of America or any division or department thereof
except if there has been compliance with the Assignment of Claims
Act;
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(g)
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Accounts
due from any Subsidiary, shareholder or employee of Borrower;
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(h)
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Accounts
owed by Account Debtors that are not located in, and organized under
the
laws of, the United States or Canada, or a state or province thereof;
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(i)
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Accounts
Lender deems unacceptable subject to standards of commercial
reasonableness.
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“Eligible
Equipment” means all Equipment except
Equipment which is:
(a) |
located
outside the United States;
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(b) |
damaged,
defective or obsolete;
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(c) |
subject
to a purchase money or other Lien except in favor of Lender;
or
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(d) |
determined
by Lender, subject to standards of commercial reasonableness, to
be
unsatisfactory in any
respect.
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-2-
“Eligible
Inventory” means all Inventory except
Inventory which is:
(a)
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work
in process;
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(b)
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located
outside the United States;
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(c)
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in
the possession of a bailee or a third party, unless such bailee or
third
party has signed a waiver letter in form reasonably acceptable to
Lender;
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(d)
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damaged,
defective, or obsolete;
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(e)
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held
by Borrower or a third party on consignment;
or
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(f)
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determined
by Lender, subject to standards of commercial reasonableness, that
the
Inventory is unsatisfactory in any
respect.
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“Environmental
Law” means any federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to, or imposing liability
upon
a Person in connection with the use, release or disposal of any hazardous,
toxic
or dangerous substance, waste or material.
“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as amended
from
time to time, and the regulations promulgated pursuant thereto.
“ERISA
Event” shall mean (a) with respect to an ERISA Plan, the imposition of an excise
tax or any other liability on Borrower or the imposition of a Lien on the assets
of Borrower; (b) the engagement by a Controlled Group member in a
non-exempt “prohibited transaction” (as defined under ERISA Section 406 or Code
Section 4975) or a breach of a fiduciary duty under ERISA that could result
in
liability to Borrower; (c) the application by a Controlled Group member for
a waiver from the minimum funding requirements of Code Section 412 or ERISA
Section 302 or the occurrence of an event or condition that requires a
Controlled Group member to provide security under Code Section 401(a)(29) or
ERISA Section 307; (d) the occurrence of a Reportable Event with respect to
any
Pension Plan as to which notice is required to be provided to the PBGC; (e)
the
withdrawal by a Controlled Group member from a Multiemployer Plan in a
“complete withdrawal” or a “partial withdrawal” (as such terms are defined in
ERISA Sections 4203 and 4205, respectively); (f) the involvement of, or
occurrence or existence of any event or condition that makes likely the
involvement of, a Multiemployer Plan in any reorganization under ERISA Section
4241; (g) the failure of an ERISA Plan (and any related trust) that is
intended to be qualified under Code Sections 401 and 501 to be so qualified
or
any “cash or deferred arrangement” under any such ERISA Plan to meet the
requirements of Code Section 401(k); (h) the taking by the PBGC of any steps
to
terminate a Pension Plan or appoint a trustee to administer a Pension Plan,
or
the taking by a Controlled Group member of any steps to terminate a Pension
Plan; (i) the failure by a Controlled Group member or an ERISA Plan to
satisfy any requirements of law applicable to an ERISA Plan; (j) the
commencement, existence or threatening of the incurrence by a Controlled Group
member of a claim, action, suit, audit or investigation with respect to an
ERISA
Plan, other than a routine claim for benefits; or (k) the incurrence by a
Controlled Group member of any liability for post-retirement benefits under
any
Welfare Plan, other than as required by ERISA Section 601, et. seq.
or Code
Section 4980B.
“ERISA
Affiliate” means each Person (whether or not incorporated) which together with
Borrower would be treated as a single employer under ERISA.
“ERISA
Plan” shall mean an “employee benefit plan” (within the meaning of ERISA Section
3(3)) that a Controlled Group member at any time sponsors, maintains, or with
respect to which a Controlled Group member, makes, or is obligated to make
contributions, or has otherwise incurred liability.
“Event
of
Default” means any one or more of the occurrences described in Section 6
hereof.
“GAAP”
means generally accepted accounting principles as in effect from time to time,
which shall include the official interpretations thereof by the Financial
Accounting Standards Board, consistently applied, except any changes in
generally accepted accounting principles shall not be taken into consideration
for the purposes of covenant calculations under Sections 5.22 and 5.23 until
such time as the Lender and Borrower have amended such covenants in light of
such changes in generally accepted accounting principles such that the
performance standards reflected by such covenants as so amended are
substantially equivalent to those in effect on the date hereof applying
generally accepted accounting principles as in effect on the date hereof.
-3-
“Guarantor”
means each Person that now or hereafter guarantees any portion of the Borrower’s
Indebtedness payable to the Lender, and such Person’s heirs, administrators,
successors and assigns.
“Guaranty”
means any guaranty agreement executed by a Guarantor and delivered to
Lender.
“Indebtedness”
shall mean, for any Person (excluding in all cases trade payables payable and
accrued liabilities in the ordinary course of business by such Person), (a)
all
obligations to repay borrowed money, direct or indirect, incurred, assumed,
or
guaranteed, (b) all obligations for the deferred purchase price of capital
assets, (c) all obligations under conditional sales or other title retention
agreements, (d) all obligations (contingent or otherwise) under any letter
of
credit, banker’s acceptance, currency swap agreement, or Interest Rate
Agreement, (e) all synthetic leases, (f) all lease obligations that have been
or
should be capitalized on the books of such Person in accordance with GAAP,
(g)
all obligations of such Person with respect to asset securitization financing
programs to the extent that there is recourse against such Person or such Person
is liable (contingent or otherwise) under any such program, (h) all obligations
to advance funds to, or to purchase assets, property or services from, any
other
Person in order to maintain the financial condition of such Person, and (i)
any
other transaction (including forward sale or purchase agreements) having the
commercial effect of a borrowing of money entered into by such Person to finance
its operations or capital requirements.
“Interest
Rate Agreement” means any agreement for a derivative or hedging product,
including, without limitation, interest rate or equity swaps, futures, options,
caps, floors, collars, or forwards now or hereafter executed by and between
Borrower and Lender or any Lender Affiliate.
“Inventory”
is as defined in the UCC and means, without limitation, goods, merchandise
and
other personal property furnished under any contract of service or intended
for
sale or lease, including, without limitation, and all raw materials, work in
process, finished goods and materials and supplies, of any kind, nature or
description, that are used or consumed by Borrower’s business, or are or might
be used in connection with the manufacture, packing, shipping, advertising,
selling or finishing such goods, merchandise and other personal property, and
all returned or repossessed goods now or hereafter in the possession of or
under
the control of Borrower, wherever located.
“L/C
Sublimit” means the aggregate undrawn face value of all Letters of Credit
permitted in Paragraph 2.4.
“Lender
Affiliate” means any one or more bank or non-bank subsidiaries (other than the
Lender) of KeyCorp and its successors.
“Letter
of Credit” means any outstanding letter of credit issued by Lender on behalf of
Borrower.
“Lien”
means any mortgage, security interest, lien, charge, encumbrance on, pledge
or
deposit of, or conditional sale or other title retention agreement with respect
to any property or asset.
“Loan”
or
“Loans” means the credit to the Borrower extended by the Lender in accordance
with Section 2 hereof.
“Loan
Documents” means the collective reference to this Agreement and all other
instruments, agreements and documents entered into from time to time, evidencing
or securing the Loan or any obligation of payment thereof or performance of
Borrower’s or Guarantor’s obligations in connection with the transaction
contemplated hereunder, each as amended.
“Margin
Stock” shall have the meaning given to it under Regulation U of the Board of
Governors of the Federal Reserve System, as amended from time to
time.
“Material
Adverse Effect” means any condition or event that Lender reasonably determines
has had or is reasonably likely to have a material adverse effect on (a) the
business, operations, property or condition (financial or otherwise) or
prospects of Borrower, (b) the business, operations, property, condition
(financial or otherwise) or prospects of Borrower and its Subsidiaries, if
any,
taken as a whole, or (c) the validity or enforceability of this Agreement or
any
of the other Loan Documents or the rights and remedies of Lender hereunder
or
thereunder.
-4-
“Multiemployer
Plan” shall mean a Pension Plan that is subject to the requirements of Subtitle
E of Title IV of ERISA.
“Note”
or
“Notes” means, as the case may be, the promissory note(s) signed and delivered
by the Borrower to evidence its Indebtedness to the Lender pursuant to Section
2
hereof .
“Obligation”
or “Obligations” means, collectively, (a) all Indebtedness and other obligations
incurred by Borrower to Lender pursuant to this Agreement and includes the
principal of and interest on all Notes; (b) each extension, renewal or
refinancing thereof in whole or in part; (c) the commitment and other fees,
and
any prepayment fees payable under this Agreement or any other Loan Document;
(d)
every other liability, now or hereafter owing to any Lender Affiliate by
Borrower under any Interest Rate Agreement entered into by Borrower with such
Lender Affiliate; and (e) every other liability to Lender, whether owing by
only
Borrower or by Borrower with one or more others in a several, joint or joint
and
several capacity, whether owing absolutely or contingently, whether created
by
note, overdraft, guaranty of payment, Interest Rate Agreement or other contract
or by quasi-contract, tort, statute or other operation of law, whether incurred
directly to Lender or acquired by Lender by purchase, pledge or otherwise and
whether participated to or from Lender in whole or in part; and (e) all Related
Expenses.
“Obligor”
shall mean (a) a Person whose credit or any of whose property is pledged to
the
payment of the Obligations and includes, without limitation, any Guarantor,
and
(b) any signatory to a Loan Document.
“Organization”
means a corporation, government or government subdivision or agency, business
trust, estate, trust, partnership, association, two or more Persons having
a
joint or common interest, and any other legal or commercial entity.
“PBGC”
shall mean the Pension Benefit Guaranty Corporation, or its
successor.
“Pension
Plan” shall mean an ERISA Plan that is a “pension plan” within the meaning of
ERISA Section 3(2).
“Permitted
Acquisitions” means any Acquisition as to which all of the following conditions
are satisfied:
(a)
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such
Acquisition involves a line or lines of business that will not
substantially change the general nature of the business in which
Borrower
is engaged on the date of this Agreement.
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(b)
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no
Event of Default or Potential Default shall exist prior to or immediately
after giving effect to such
Acquisition;
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(c)
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after
giving effect to such Acquisition, the purchase price for Borrower’s total
Acquisitions will not exceed Two Million Five Hundred Thousand Dollars
($2,500,000.00). For this purpose, “purchase price” means the amount of
cash paid in such Acquisition (excluding amounts to be paid under
any
earn-out or similar provisions based on performance), plus the amount
of
any liabilities assumed other than trade payables and accrued liabilities
incurred in the ordinary course of
business.
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“Permitted
Encumbrances” means, as of any particular time, (a) liens for ad valorem taxes
and special assessments not then delinquent, (b) this Agreement, and any
security interest or other lien created thereby, (c) any Permitted Encumbrances
defined in any of the Loan Documents, including, without limitation, as defined
in any Security Instrument, (d) any liens permitted by Section 5.15 hereof,
and
(e) such minor defects, irregularities, encumbrances and clouds on title as
normally exist with respect to property similar in character to the Collateral
and as do not materially interfere with or impair the use or value of the
property affected thereby.
“Person”
means an individual or an Organization.
“Plan”
means any ERISA Plan (other than a Multiemployer Plan) in which the Borrower
or
any Subsidiary is, or has been at any time during the preceding two (2) years,
an “employer” or a “substantial employer” as such terms are defined in
ERISA.
-5-
“Potential
Default” means any condition, action, or failure to act which, with the passage
of time, service of notice, or both, will constitute an Event of Default under
this Agreement.
“Proceeds”
means (a) any proceeds, and (b) whatever is received upon the sale, exchange,
collection, or other disposition of Collateral or Proceeds, whether cash or
non-cash. Cash Proceeds includes, without limitation, moneys, checks, and
Deposit Accounts. Proceeds includes, without limitation, any Account arising
when the right to payment is earned under a Contract Right, any insurance
payable by reason of loss or damage to the Collateral, and any return or
unearned premium upon any cancellation of insurance. Except as expressly
authorized in the Agreement or the Security Instruments, Lender's right to
Proceeds specifically set forth herein or indicated in any financing statement
shall never constitute an express or implied authorization on the part of Lender
to Borrower’s sale, exchange, collection, or other disposition of any or all of
the Collateral.
“Prohibited
Transaction” means a “prohibited transaction” within the meaning of ERISA
Section 406 or Code Section 4975, other than any transaction subject to a
statutory or administrative exemption.
“Quarters”
or “Quarterly” means calendar quarters, being each of the three (3) calendar
month periods ending 3/31, 6/30, 9/30 and 12/31 of each calendar
year.
“Related
Expenses” means any and all costs, liabilities, and expenses (including, without
limitation, losses, damages, penalties, claims, actions, reasonable attorney’s
fees, legal expenses, judgments, suits and disbursements) reasonably incurred
by, or imposed upon, or asserted against, Lender in any attempt by
Lender:
(a) to
obtain, preserve, perfect, or enforce any security interest evidenced by (i)
this Agreement, or (ii) any other pledge agreement, mortgage, deed of trust,
hypothecation agreement, guaranty, security agreement, assignment, or security
instrument executed or given by Borrower to or in favor of Lender;
(b) to
obtain
payment, performance, and observance of any and all of the
Obligations;
(c) to
maintain, insure, audit, inspect, collect, preserve, repossess, and dispose
of
any of the Collateral, including, without limitation, costs and expenses for
appraisals, assessments, and audits of Borrower or the Collateral;
or
(d) incidental
or related to (a) through (c) above, including, without limitation, interest
thereupon from the date due and payable by Borrower at the rate payable as
set
forth in the Note, but in no event greater than the highest rate permitted
by
law;
provided,
however, under no circumstance shall Related Expenses include any Closing
Cost.
“Related
Person” means any Person who (i) now or hereafter owns an equity interest in
Borrower or Guarantor or (ii) has warrants, debentures, or similar rights to
own
any equity interest in Borrower or Guarantor, whether or not the same has vested
or been delivered or (iii) is owned, in whole or in part, by Borrower or
Guarantor.
“Reportable
Event” shall mean a reportable event as that term is defined in Title IV of
ERISA, except actions of general applicability by the Secretary of Labor under
Section 110 of ERISA
“Revolving
Credit” means the Revolving Credit Facility described in Section 2.2 hereof,
which Revolving Credit shall be payable in accordance with the terms of such
Revolving Credit Facility and this Agreement.
“SEC”
means the United States Securities and Exchange Commission.
“Security
Instrument(s)” means the written document(s) listed in Exhibit A attached
hereto, signed and delivered from time to time to the Lender in connection
with
Indebtedness owed by Borrower to the Lender.
“Subsidiary”
means any Person of which more than fifty percent (50%) of the following is,
at
the time, owned or controlled, directly or indirectly, by Borrower or one or
more other Subsidiaries: (i) the voting stock or units entitling the holders
thereof to elect a majority of the board of directors, managers, or trustees
thereof, or (ii) the interest in the capital or profits of such
Person.
-6-
“Termination
Date” means March 8, 2010, or such earlier date that Lender has terminated the
Revolving Credit under Section 7.1 hereof, or Borrower has terminated the
Revolving Credit under Section 2.5 hereof.
“Total
Funded Debt” means the sum without duplication for Borrower and/or any of its
subsidiaries of (1) all indebtedness for borrowed money, whether maturing in
less than or more than one year, plus (2) all bonds, notes, debentures or
similar debt instruments plus (3) all capitalized lease obligations plus (4)
the
present value of all basic rental obligations under any synthetic
lease.
“Welfare
Plan” means an ERISA Plan that is a “welfare plan” within the meaning of ERISA
Section 3(1).
The
foregoing definitions shall be applicable to the singulars and plurals of the
foregoing defined terms.
2.1. Intentionally
Omitted.
2.2. Revolving
Credit Facility.
The
Lender hereby agrees, subject to the terms and conditions of this Agreement
and
the Promissory Note of Borrower to the Lender of even date herewith, to extend
the Revolving Credit to Borrower, at any time on or before the Termination
Date,
as follows: Lender will, upon request from Borrower, make loan advances to
or
for the account of Borrower up to but not exceeding an aggregate unpaid
principal amount outstanding at any one time equal to the lesser of
(i) Eight Million Dollars ($8,000,000.00) or (ii) the Borrowing Base.
2.3. Fees.
The
Borrower shall pay the Lender the following fees:
(a)
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A
commitment fee on the actual daily Unused Portion (as defined below)
on
and from the date hereof to and including the Termination Date, at
the
rate of thirty basis points (0.30%) per annum (using a day rate based
upon
a year of 360 days and charged for the actual number of days elapsed),
payable on the last day of each month commencing March 31, 2007, and
upon termination or reduction of the Revolving Credit. The “Unused
Portion” means, on any day, the maximum amount of the Revolving Credit (as
the same may be reduced pursuant to Section 2.5 below) on such day,
less
the aggregate principal amount of the Loans and Letters of Credit
outstanding on such day.
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(b)
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A
facility fee equal to $48,000.00, payable on or prior to the date
of
execution of this Agreement.
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(c)
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Borrower
agrees to pay Lender a letter of credit fee of 1.5% per annum of
the
amount of any issued and outstanding standby Letters of Credit, payable
for each day the letter of credit is outstanding at a rate of
1/360th
of
the applicable per annum rate, quarterly in advance. Borrower agrees
to
pay Lender a letter of credit fee for any trade letter of credit
consistent with Lender’s standard fees for trade letters of
credit.
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2.4. Letter
of Credit.
So long
as no event of default has occurred and/or no demand for payment of the Note
has
been made, and subject to the other conditions of the Loan Documents, Borrower
may request Lender to issue Letters of Credit under the Revolving Credit for
the
account of Borrower, provided that (a) the aggregate undrawn face value of
all
such Letters of Credit at any time outstanding does not exceed $1,500,000.00
(“L/C Sublimit”), and (b) the L/C Sublimit when combined with the amount of
advances outstanding under the Note, does not exceed the amount of the
Note.
-7-
(a)
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The
following types of Letters of Credit can be issued hereunder:
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financial
standby and trade Letters of Credit up to an aggregate of $1,500,000,
(b)
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Whenever
a Letter of Credit is drawn, unless the amount drawn is immediately
reimbursed by Borrower, the amount of the draw shall be an advance
under
the Note.
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(c)
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For
each Letter of Credit required by Borrower and issued by Lender,
Borrower
agrees to execute and deliver to Lender an appropriate application
and
agreement in a form as required by Lender, and to pay such other
service
charges as are generally charged by Lender under its fee schedule
in
effect from time to time.
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(d)
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Each
Letter of Credit issued hereunder shall be secured by any and all
Collateral and any Guaranty agreement given to secure the
Note.
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2.5
Reduction
of Line Limit.
Borrower
may, on written notice (each a “Reduction Notice”) to Lender, state its desire
to reduce the maximum amount of the Revolving Credit available hereunder to
any
amount which is not less than the aggregate of the then outstanding principal
amount of Loans and the undrawn face amount of Letters of Credit. Three (3)
Business Days after receipt of such Reduction Notice, the obligation of Lender
to make loans and issue Letters of Credit hereunder shall be limited to the
amount set forth in such Reduction Notice. Any reductions of the maximum amount
of the Revolving Credit shall be permanent and shall not be reinstated at any
future date and any partial reduction shall be in the amount of not less than
$1,000,000 and shall be in increments of $500,000 above such
amount.
3. WARRANTIES
Borrower
represents and warrants to the Lender (which representations and warranties
will
survive the delivery of the Note and the making of the Loans) that:
3.1. Existence and Legal Authority.
Borrower
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of New York and has all requisite power and authority to
own
its property and to carry on its business as now being conducted, to enter
into
the Loan Documents to which it is a party and the other agreements referred
to
herein and transactions contemplated thereby, and to carry out the provisions
and conditions of such Loan Documents to which it is a party. Borrower is duly
qualified to do business and is in good standing in every jurisdiction where
the
failure to so qualify would have a Material Adverse Effect.
3.2. Due Execution and Delivery.
Borrower
has full power, authority and legal right to incur the obligations provided
for
in, and to execute and deliver and to perform and observe the terms and
provisions of, the Loan Documents to which it is a party, and each of them
has
been duly executed and delivered by Borrower and has been authorized by all
required action, and Borrower has obtained all requisite consents to the
transactions contemplated thereby under any instrument to which it is a party,
and the Loan Documents constitute the legal, valid and binding obligations
of
Borrower enforceable against Borrower in accordance with their respective terms,
except as the enforceability thereof may be limited by applicable bankruptcy,
insolvency or other similar laws affecting creditors' rights
generally.
3.3. No Breach of Other Instruments.
Neither
the execution and delivery of the Loan Documents, nor the compliance by Borrower
with the terms and conditions of the Loan Documents, nor the consummation of
the
transactions contemplated thereby, will conflict with or result in a breach
of
the Articles of Incorporation or By-Laws, as applicable, or other governing
documents of Borrower, or any of the terms, conditions or provisions of any
agreement or instrument or any charter or other corporate restriction or law,
regulation, rule or order of any governmental body or agency to which Borrower
is now a party or is subject, or imposition of a lien, charge or encumbrance
of
any nature whatsoever upon any of the property or assets of Borrower pursuant
to
the terms of any such agreement or instrument.
-8-
3.4. Government Authorization.
No
consent, approval, authorization or order of any court or governmental agency
or
body is required for the consummation by Borrower of the transactions
contemplated by the Loan Documents.
3.5. Ownership
of Property.
Except
for Permitted Encumbrances or as otherwise permitted in the Security Instruments
or this Agreement, Borrower has and will have good and marketable fee title
to,
or valid leasehold interests in, its real properties in accordance with the
laws
of the jurisdiction where located, and good and marketable title to
substantially all its other property and assets, subject, however, in the case
of real property, to title defects and restrictions which do not materially
interfere with the operations conducted thereon by Borrower. Except for
Permitted Encumbrances, the real property and all other property and assets
of
the Borrower is free from any liens or encumbrance securing Indebtedness and
from any other liens, encumbrances, charges or security interests of any kind.
Each lease, if any, to which Borrower is a party is in full force and effect,
and no material default on the part of Borrower or, to its knowledge, any other
party thereto exists.
3.6. Absence of Defaults, etc.
The
Borrower is not (i) in material default under any indenture or contract or
agreement to which it is a party or by which it is bound, (ii) in violation
of
its articles of incorporation or by -laws, as applicable, or any other governing
document, (iii) in default with respect to any order, writ, injunction or decree
of any court, or (iv) in default under any order or license of any federal
or
state governmental department, which in the case of any such default described
in clauses (i) through and including (iv) has had or could be reasonably
expected to have Material Adverse Effect . There exists no condition, event
or
act which constitutes, or after notice or lapse of time or both would
constitute, an Event of Default.
3.7. Indebtedness of Borrower.
Borrower
does not have outstanding on the date hereof, any Indebtedness for borrowed
money, except for such Indebtedness identified in the financial statements
referred to in Section 3.8 hereof.
3.8. Financial
Condition.
The
Borrower has furnished to the Lender financial statements which, in the opinion
of Borrower, fairly and accurately reflect the financial operations of Borrower
for the period covered thereby, and there has been no material adverse change
in
the Borrower’s financial prospects since the date of such financial statements
which would require revision of the same.
3.9. No Adverse Change.
Subsequent
to the date of the financial statements referred to in Section 3.8 hereof,
Borrower has not incurred or agreed to incur any material liabilities or
obligations, direct or contingent, and there has not been any material increase
in the anticipated aggregate amount of debt of Borrower, or any other event
or
condition that has had or could reasonably be expected to have a Material
Adverse Effect.
3.10. Taxes.
Except
as
set forth on Schedule 3.10 attached , Borrower has filed all tax returns which
are to be filed and has paid, or has made adequate provision for the payment
of,
all taxes which have or may become due pursuant to said returns or to
assessments received by them (except nothing herein shall require Borrower
to
pay any tax or assessment that Borrower is diligently contesting in good faith,
and with respect to which Borrower has established adequate reserves on its
books. The provisions for taxes reflected in the financial statements referred
to in Section 3.8 are believed adequate to cover any and all accrued and unpaid
taxes for which Borrower is liable for the period ended on the date of such
balance sheet and all prior periods. Borrower knows of no deficiency assessment
or proposed deficiency assessment of taxes for which Borrower may be liable,
except as may be otherwise disclosed in writing to the Lender prior to the
date
hereof.
3.11. Litigation.
Except
as
set forth on Schedule 3.11 attached, prior to the date hereof, there are no
actions, suits or proceedings pending, or to the actual knowledge of Borrower,
threatened against or affecting Borrower or its respective property in any
court, or before or by any federal, state or municipal or other governmental
department, commission, board, bureau, agency or other instrumentality, domestic
or foreign, except for actions, suits or proceedings of a character normally
incident to the kind of business conducted by Borrower, none of which, either
individually or in the aggregate has had or reasonably could be expected to
result in a Material Adverse Effect.
-9-
3.12. Environmental Matters.
Borrower
is in compliance with all Environmental Laws and all applicable federal, state
and local health and safety laws, regulations, ordinances or rules, the failure
to comply with has had or could be reasonably expected to have a Material
Adverse Effect..
3.13. Subsidiaries
and Affiliates.
Except
as
set forth on Schedule 3.13, Borrower does not have any Subsidiaries or any
Affiliates. If Borrower has any additional Subsidiary or Affiliate at any time
subsequent to the date of execution hereof, the term “Borrower” as used in
Sections 5 and 6 shall include in its meaning Borrower and its Subsidiaries,
for
such period or periods that Borrower has any Subsidiaries, unless the context
clearly requires otherwise. For any period during which Borrower has any
Subsidiaries, all financial statements, accounts and reports submitted by the
Borrower and all calculations hereunder based on same shall be consolidated
and/or on a consolidating basis or combined and/or on a combining basis with
such Subsidiaries, as the context required.
3.14. ERISA.
No
Reportable Event or Prohibited Transaction which could reasonably be expected
to
create a liability in excess of Five Hundred Thousand Dollars ($500,000.00)
or
result in a Material Adverse Effect has occurred and is continuing with respect
to any Plan of Borrower, and Borrower has not incurred an “accumulated funding
deficiency” (as that term is defined by ERISA) since the effective date of
ERISA.
3.15. Solvency.
The
Borrower is not insolvent as defined in any applicable state or federal
fraudulent transfer, fraudulent conveyance or bankruptcy or similar creditors’
rights statute, nor will Borrower be rendered insolvent by the execution and
delivery of this Agreement or any of the Loan Documents to Lender. The Borrower
is not engaged or about to engage in any business or transaction for which
the
assets retained by it shall constitute an unreasonably small capital, taking
into consideration the obligations to Lender incurred hereunder. Borrower does
not intend to, nor does it believe that it will, incur debts beyond its ability
to pay them as they mature.
3.16. No
Burdensome Restrictions.
Borrower
is not a party to any instrument or agreement or subject to any charter or
other
corporate restriction which would reasonably be expected to result in a Material
Adverse Effect.
3.17. Federal
Reserve Regulations; Use of Loan Proceeds.
Borrower is not engaged principally, or as one of its important activities,
in
the business of extending credit for the purpose of purchasing or carrying
any
Margin Stock. No part of the proceeds of the Loans will be used, directly or
indirectly, for a purpose which violates any law, rule or regulation of any
governmental body, including without limitation the provisions of Regulations
G,
U, or X of the Board of Governors of the Federal Reserve System, as amended.
No
part of the proceeds of the Loans will be used, directly or indirectly, to
purchase or carry any Margin Stock or to extend credit to others for the purpose
of purchasing or carrying any Margin Stock.
3.18. OFAC/USA
PATRIOT Act Restrictions.
Neither
Borrower nor any Guarantor is (or will be) a person with whom Lender is
restricted from doing business under regulations of the Office of Foreign Asset
Control (“OFAC”) of the Department of the Treasury of the United States of
America (“Treasury”) or under any list of known or suspected terrorists or
terrorist organizations issued by any federal government agency and designated
as such by Treasury in consultation with the federal functional regulators,
or
under any statute, executive order, or other governmental action, and neither
Borrower nor any Guarantor is engaging, or shall engage, in any dealings or
transactions or shall otherwise be associated with such persons. In addition,
Borrower hereby agrees to provide to the Lender with any additional information
that the Lender deems necessary from to time in order to ensure compliance
with
all applicable laws concerning money laundering and similar
activities.
4.1. Loan
Funding.
The
obligation of the Lender to close the transactions contemplated by this
Agreement shall be subject to satisfaction of the following conditions, unless
waived in writing by the Lender: (a) all legal matters and Loan Documents
incident to the transactions contemplated hereby shall be reasonably
satisfactory, in form and substance, to Lender's counsel; (b) the Lender shall
have received (i) certificates by an authorized officer or representative of
Borrower upon which the Lender may conclusively rely until superseded by similar
certificates delivered to the Lender, certifying that (1) all requisite action
taken in connection with the transactions contemplated hereby has been duly
authorized and (2) the names, signatures, and authority of Borrower’s authorized
signers executing the Loan Documents, and (ii) such other documents as the
Lender may reasonably require to be executed by, or delivered on behalf of,
Borrower to carry out the purposes of this Agreement; (c) the Lender shall
have
received the Note with all blanks appropriately completed, executed by an
authorized signer for Borrower; (d) the Borrower shall have paid to the Lender
the fee(s) then due and payable under this Agreement and the other Loan
Documents; (e) no Material Adverse Effect shall have occurred; (f) the Lender
shall have received the written opinion(s) of legal counsel for the Borrower
selected by the Borrower and satisfactory to the Lender, dated the date of
this
Agreement and covering the Loan Documents and such other matter(s) as the Lender
may reasonably require; (g) the Lender shall have received written instructions
by the Borrower with respect to disbursement of the proceeds of the Loan; and
(h) the Lender shall have received all Security Instruments duly executed by
all
parties thereto.
-10-
4.2. Security.
No Loan
shall be made hereunder unless and until Borrower shall have supplied to Lender
as security for repayment of any and all Loans made hereunder the Security
Instruments listed on Exhibit A hereto, in form and substance reasonably
acceptable to Lender.
4.3. Each
Loan.
The
obligation of the Lender to make any Loan shall be subject to initial compliance
with Sections 4.1 and 4.2 herein and also subject to satisfaction of the
following conditions that at the date of making such Loan, and after giving
effect thereto: (a) no Event of Default shall have occurred and continue to
exist, (b) each representation and warranty set forth in Section 3 above is
true
and correct as if then made, and (c) for Loans under the Revolving Credit
Facility, a true, accurate and complete Borrowing Base Certificate has been
provided.
5. COVENANTS
As
long
as credit is available hereunder or until all principal of and interest on
the
Note have been paid, the Borrower covenants and agrees that it will comply
with
the following provisions:
5.1. Accounting;
Financial Statements and Other Information.
Borrower shall maintain a standard system of accounting, established and
administered in accordance with GAAP consistently followed throughout the
periods involved, and will set aside on its books for each fiscal quarter and
fiscal year, the proper amounts or accruals for depreciation, obsolescence,
amortization, bad debts, current and deferred taxes, prepaid expenses, and
for
other purposes as shall be required by GAAP. Borrower will deliver or cause
to
be delivered to the Lender:
(a) As
soon
as practicable after the end of each quarter in each fiscal year, except the
last, and in any event within 45 days thereafter, financial statements,
including income statement, balance sheet, statement of condition of the
Borrower as of the end of such quarter, and statements of cash flow, changes
in
financial position, and common shareholder’s equity for such quarter;
(b) As
soon
as practicable after the end of each fiscal year, and in any event within
120 days thereafter, financial statements, including income statement,
balance sheet, statement of condition of the Borrower as of the end of such
year, and statement of cash flow and changes in financial position of the
Borrower for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and prepared
by
an independent certified public accountant, accompanied by a report and
unqualified opinion of an independent certified public accountant of recognized
standing,
selected
by Borrower and satisfactory to the Lender, and prepared in accordance with
generally accepted auditing standards;
(c) Together
with each set of financial statements required under subparagraphs (a) and
(b) a
certificate in the form of Exhibit C, substantially in the form attached hereto,
of the principal financial officer or other appropriate officer of Borrower
(in
his capacity as such officer on behalf of Borrower and not individually) stating
(i) that the representations and warranties contained in this Agreement are
true
and correct in all material respects as of the date of the certificate, and
whether or not there exists any Event of Default or Potential Default,
specifying the nature and period of existence thereof and what action, if any,
the Borrower is taking or proposes to take with respect thereto, and (ii) if
such financials statements are quarterly financial statements, that such
financial statements are complete and accurate in all material respects, subject
to changes resulting from year-end adjustments;
(d) Promptly
and in any event within five (5) Business Days after the occurrence of a
Reportable Event with respect to a Plan, a copy of any materials required to
be
filed with the PBGC with respect to such Reportable Event or those that would
have been required to be filed if the thirty (30) day notice requirement to
PBGC
were not waived;
-11-
(e) Promptly
upon receipt, and in no event more 10 days after receipt, of a notice by
Borrower or any ERISA Affiliate or any administrator of any Plan or
Multiemployer Plan that the PBGC has instituted proceedings to terminate such
Plan or to appoint a trustee to administer such Plan, a copy of such notice;
(f) Promptly
upon receipt thereof, copies of all written reports submitted to the Borrower
by
independent accountants in connection with any annual or interim compilation
and/or review the books of Borrower;
(g) At
the
time of each Loan request and within twenty (20) days of each month-end during
which any amount of the revolving Credit is outstanding, a Borrowing Base
Certificate in form attached hereto as Exhibit B, together with a detailed
accounts receivable and inventory report in form satisfactory to
Lender;
(h) Promptly
after transmission thereof or other filings with the SEC, copies of all annual,
quarterly or current reports that Borrower is required to file with the SEC
on
Form 10-K, 10-Q or 8-K (or any successor form); and
(i) Promptly
after transmission thereof to its stockholders, copies of all annual, quarterly
and other reports and all proxy statements that Borrower furnishes to its
stockholders.
5.2. Additional
Financial Reports.
Borrower shall, upon request of Lender, deliver to the Lender its annual
federal, state and local tax returns and such other financial information as
Lender may reasonably request.
5.3. Insurance;
Maintenance of Properties.
Borrower shall: (a) maintain with financially sound and reputable insurers,
insurance with coverage and limits as may be required by law and of such
character and amounts as are usually maintained by companies engaged in like
business, including without limitation products liability insurance; (b) furnish
to Lender upon the execution of this Agreement and, at the beginning of each
fiscal year, insurance certificates and, if requested by Lender, copies of
insurance policies; and (c) obtain other or additional insurance promptly,
upon
the reasonable request of Lender, to the extent that such insurance may be
available and is customary for the type of business in which Borrower is
engaged. Lender shall be named a loss payee under such policies to the extent
of
its interest. The policies shall provide that no cancellation shall occur
without thirty (30) days prior written notice to Lender. Borrower shall provide
to Lender updated insurance certificates at least fifteen (15) days prior to
the
date of expiration. Borrower will at least annually and upon any change, or
more
often upon the occurrence of an Event of Default, upon request of Lender,
furnish to the Lender a schedule of all insurance carried by Borrower, setting
forth in detail the amount and type of such insurance. Except as otherwise
permitted in this Agreement, Borrower will maintain, in good repair, working
order, and condition, all properties used in the business of the Borrower,
subject to ordinary wear and tear.
5.4. Existence;
Business.
Borrower shall cause to be done all things necessary to preserve and keep in
full force and effect its existence and rights, to conduct its business in
a
prudent manner, to maintain in full force and effect, and renew from time to
time, its franchises, permits, licenses, patents, and trademarks that are
necessary to operate its business. Borrower will comply in all material respects
with all valid laws and regulations now in effect or hereafter promulgated
by
any properly constituted governmental authority having jurisdiction; provided,
however, that Borrower shall not be required to comply with any law or
regulation which it is contesting in good faith by appropriate proceedings
as
long as either the effect of such law or regulation is stayed pending the
resolution of such proceedings or the effect of not complying with such law
or
regulation would not reasonably be expected to result in a Material Adverse
Effect.
5.5. Payment
of Taxes.
Borrower shall pay all taxes, assessments, and other governmental charges levied
upon any of its properties or assets or in respect of its franchises, business,
income, or profits before the same become delinquent, except that no such taxes,
assessments, or other charges need be paid if contested in good faith and by
appropriate proceedings promptly initiated and diligently conducted and if
proper amounts, determined in accordance with GAAP, have been set aside for
the
payment of all such taxes, charges, and assessments.
-12-
5.6. Adverse
Changes.
Borrower shall promptly notify the Lender in writing of (a) the occurrence
of
any event which, if it had existed on the date of this Agreement, would have
required qualification of the representations and warranties set forth in
Section 3 hereof and (b) any Material Adverse Effect.
5.7. Notice
of Default.
Borrower shall promptly notify (but in no event more than five (5) days after
the occurrence thereof) the Lender of any Event of Default or Potential Default
hereunder and any demands made upon the Borrower by any Person for the
acceleration and immediate payment of any Indebtedness owed to such Person,
if
the amount of such Indebtedness exceeds $500,000.00
5.8. Inspection.
Borrower shall make available for inspection by duly authorized representatives
of the Lender, or its designated agent, Borrower’s books, records, and
properties when reasonably requested to do so, and will furnish the Lender
such
information regarding its business affairs and financial condition within a
reasonable time after written request therefor.
(a) Shall
comply in all respects with all Environmental Laws where a failure to comply
could have a Material Adverse Effect;
(b) Shall
deliver promptly to Lender (i) copies of any significant documents received
from
the United States Environmental Protection Agency or any state, county, foreign,
provincial or municipal environmental or health agency, and (ii) copies of
any
significant documents submitted by Borrower or any of its Subsidiaries to the
United States Environmental Protection Agency or any state, county, foreign,
provincial or municipal environmental or health agency concerning its
operations; and
(c) Shall
promptly undertake and diligently pursue to completion all action recommended
by
any environmental audit report(s) issued and all action(s) necessary to correct
any environmental problem or defect identified in any environmental audit
report(s), unless Borrower contests in good faith any such determination and
establishes within a reasonable time frame support for Borrower’s position based
on a report of a qualified professional reasonably acceptable to
Lender.
Borrower
shall indemnify the Lender and hold it harmless against any loss, costs,
damages, or expense, including, but not limited to, reasonable attorney’s fees,
that Lender may incur, directly or indirectly, as a result of or in connection
with the assertion against Lender of any claim relating to the presence or
removal of any environmental contamination on any premises utilized by Borrower
(except if resulting from the gross negligence or willful misconduct of
Lender).
5.10. Health
and Safety.
Borrower shall be in compliance with all requirements of applicable federal,
state, foreign, provincial and local environmental, health and safety laws,
regulations, ordinances or rules which would, in the aggregate, if not complied
with, result in a Material Adverse Effect.
5.11. Extraordinary
Services.
In
the
event extraordinary services are required by Lender for inspections, appraisals,
or for securing estimates of costs which, in the Lender’s reasonable judgment
are not regular or routine, Lender may deduct the reasonable expense of such
extraordinary services from any moneys due to Borrower hereunder or from any
account maintained by Borrower with Lender or any Lender Affiliate.
-13-
5.12. Commercial
Operating Account.
So long
as credit is available hereunder or until all principal of and interest on
the
Note has been paid in full, the Borrower shall maintain with Lender and/or
a
Lender Affiliate, as its primary financial institution, corporate deposit,
cash
management and loan accounts, where applicable, except Borrower shall be allowed
a commercially reasonable amount of time following the date of this Agreement
to
transfer its existing accounts to Lender. At the option of Lender, all Loan
payments and fees will automatically be debited from the Borrower’s primary
operating account and all disbursements of Loan proceeds shall be made by the
Lender’s or Lender Affiliate’s crediting of such disbursements directly into the
appropriate Borrower’s account.
5.13. Additional
Assurance.
Borrower shall upon request of Lender promptly take such action and promptly
make, execute, and deliver all such additional and further items, deeds,
assurances, and instruments as Lender may reasonably require, so as to
completely vest in and ensure to Lender its rights hereunder and in or to the
Collateral.
5.14. Sale,
Purchase of Assets.
Borrower shall not, directly or indirectly, (a) purchase, lease, or otherwise
acquire any assets except in the ordinary course of business (which shall not
be
deemed to include the purchase or acquisition of ten percent (10%) or more
of
the capital stock or assets of operating businesses unless expressly consented
to by Lender in writing prior to such purchase or acquisition) except for
Permitted Acquisitions, purchases of its shares pursuant to any share buy back
program for an amount in the aggregate with all other Share purchases does
not
exceed $2,500,000 during the term of this Agreement, or as otherwise expressly
permitted under this Agreement; or (b) sell, lease, transfer, or otherwise
dispose of any assets except for (i) assets sold, leased, transferred or subject
to other disposition for full and adequate consideration in the reasonable
judgment of Borrower which Borrower has determined to be worn out or obsolete
or
not useful in the ordinary course of its business, and (ii) assets sold, leased,
transferred or subject to other disposition in the ordinary course of business
provided that Borrower receives full and adequate consideration in the
reasonable judgment of Borrower in exchange for such assets sold, leased,
transferred or otherwise subject to disposition.
5.15. Mortgages,
Security Interests, and Liens.
Borrower
shall not, directly or indirectly, create, incur, assume, or permit to exist
any
Lien with respect to any property or assets of Borrower, whether now owned
or
hereafter acquired other than:
(a) Liens
for
taxes, assessments, or governmental charges or levies the payment of which
is
not at the time required by Section 5.5 hereof;
(b) Liens
imposed by law, such as Liens of landlords, carriers, warehousemen, mechanics,
and materialmen arising in the ordinary course of business for sums not yet
due
or being contested by appropriate proceedings promptly initiated and diligently
conducted, provided other appropriate provision, if any, as shall be required
by
GAAP shall have been made therefor;
(c) Liens
incurred or deposits made in the ordinary course of business in connection
with
workers' compensation, unemployment insurance, and other types of social
security, or to secure the performance of tenders, statutory obligations, and
surety and appeal bonds, or to secure the performance and return of money bonds
and other similar obligations, excluding obligations for the payment of borrowed
money;
(d) Any
judgment Lien, provided that the judgment it secures shall, within thirty (30)
days after the entry thereof, have been discharged or execution therefor stayed
pending appeal, or shall have been discharged within thirty (30) days after
the
expiration of any such stay;
(e) Liens
that secure the Indebtedness of Borrower for the purchase price or improvement
of any real or personal property and that only encumber the property purchased
or improved, provided such Indebtedness is permitted under Section 5.16 hereof;
(f) Liens
that secure the repayment of Indebtedness of Borrower to the Lender or any
Lender Affiliate; or
(g) Liens
set
forth in Schedule 5.15, or evidenced by or permitted under the terms of Security
Instruments only, and any other Permitted Encumbrances.
-14-
5.16. Indebtedness
.
Borrower shall not (a) create, incur or assume additional indebtedness for
borrowed money (not outstanding on the date hereof), including capital leases,
in excess of the aggregate amount of $1,500,000 outstanding at any one time
for
Borrower and its Subsidiaries, except indebtedness to (i) to Lender contemplated
by this Agreement or (ii) to any
Subsidiary that is a Guarantor that has granted to Lender a security interest
in
all of its personal property pursuant to a security agreement substantially
equivalent to the security agreement executed and delivered by Borrower to
Lender or owing by
such
Subsidiary to Borrower, or (b) sell with recourse any of Borrower’s accounts,
except to Lender.
5.17. Assumptions;
Guaranties.
Borrower shall not assume, guarantee, endorse, or otherwise become directly
or
contingently liable for (including, without limitation, liable by way of
agreement, contingent or otherwise, to purchase, to provide funds for payment,
to supply funds to, or otherwise invest in any debtor or otherwise to assure
the
creditor against loss) any obligation or Indebtedness of any other Person,
except (i) guaranties by endorsement of negotiable instruments for deposit,
collection, or similar transactions in the ordinary course of business, (ii)
Indebtedness of Borrower to the Lender or any Lender Affiliate; (iii) a guaranty
of any Indebtedness of Borrower or a Subsidiary of Borrower that is permitted
under Section 5.16; and (iv) Borrower’s guaranty of the obligations of 0000-0000
Xxxxxxx Xxxxxx LLC to NewBuff Associates LLC pursuant to a Net Lease, dated
November 10, 2003, as may be amended from time to time.
5.18. Mergers;
Consolidation; Sale of Borrower.
Borrower
shall not merge or consolidate with any Person, dissolve, wind up its affairs,
or sell, assign, lease, or otherwise dispose of (whether in one transaction
or
in a series of transactions), all or substantially all of its assets (whether
now owned or hereafter acquired) to any Person, except (a) a merger of a
Subsidiary into Borrower, (b) a merger of a Person into Borrower in connection
with a Permitted Acquisition or (c) or a merger with another Person that is
or
becomes a Borrower hereunder as of the date of such transaction and such further
assurances with respect to any such transaction satisfactory to the Lender
are
delivered on or before the effective date of such transaction.
5.19. Investments;
Loans. Borrower
shall not, directly or indirectly, (a) purchase or otherwise acquire or own
any
stock or other securities of any other Person (other than as permitted under
this Agreement) or (b) make or permit to be outstanding any loan or advance
(other than trade advances in the ordinary course of business or as otherwise
permitted under this Agreement) or enter into any arrangement to provide funds
or credit, to any other Person, except that (i) it may purchase or otherwise
acquire and own marketable U.S. Treasury and Agency obligations, and
certificates of deposit and bankers acceptances issued or created by any
domestic commercial bank, and the stock of any Subsidiaries identified in
Section 3.13, (ii) it may engage in Permitted Acquisitions, (iii) it may
makes loans and advances to any Subsidiary that is a Guarantor that has granted
to Lender a security interest in all of its personal property pursuant to a
security agreement substantially equivalent to the security agreement executed
and delivered by Borrower to Lender; and (iv) it may make loans and advances
in
the aggregate not exceeding $500,000.
5.20. Payment
of Subordinated Debt.
Borrower
shall not make any payment upon any outstanding indebtedness which is
subordinated to the Lender in violation of the terms of any applicable
subordination agreement or terms of subordination applicable
thereto
5.21. Related
Expenses.
Borrower
hereby authorizes Lender or Lender’s designated agent (but without obligation by
Lender to do so) to incur Related Expenses (whether prior to, upon, or
subsequent to any Event of Default), and Borrower shall promptly repay,
reimburse, and indemnify Lender for any and all Related Expenses. Lender may,
at
its option, debit Related Expenses directly to the Loan Accounts or any Account
of Borrower maintained with Lender or any Lender Affiliate; provided that Lender
shall provide to Borrower supporting documentation for any Related Expenses
so
debited; and provided further that Lender is not so authorized to incur Related
Expenses to perform any matter that Borrower has an obligation to perform unless
Lender has provided notice to Borrower of Borrower’s failure to so perform and
Borrower has not promptly corrected such failure. Borrower acknowledges that
Lender’s routine inspection fees relating to the Borrowing Base are Related
Expenses reimbursable by Borrower.
5.22. Cash
Flow Requirements.
Borrower shall maintain Cash Flow of not less than the amount set forth, tested
at the end of any fiscal year set forth below for the preceding 12-month
period:
-15-
Fiscal
Year End
|
Operating
Cash Flow
|
December
31, 2007
|
$
750,000.00
|
December
31, 2008
|
$1,500,000.00
|
December
31, 2009
|
$2,250,000.00
|
5.23. Total
Funded Debt to EBITDA Ratio.
Borrower shall maintain a ratio of Total Funded Debt to EBITDA of not greater
than the amount set forth, tested as of the end of any fiscal year, set forth
below for the period of the previous four fiscal quarters:
Fiscal
Year End
|
Ratio
|
December
31, 2007
|
4.25
to 1.0
|
December
31, 2008
|
3.5
to 1.0
|
December
31, 2009
|
3.0
to 1.0
|
The
occurrence of any one or more of the following events shall constitute an Event
of Default under this Agreement:
6.1. Payments.
If
(a) the interest on any Note or any commitment or other fee shall not be
paid in full punctually when due and payable, or (b) the principal of any
Note shall not be paid in full punctually when due and payable.
6.2. Covenants.
If
Borrower or any Obligor fails to perform or observe any covenant or agreement
(other than as referred to in Section 6.1 hereof) contained in this Agreement
or
in any other of the Loan Documents, and such failure remains unremedied for
thirty (30) days after the Lender gives notice thereof to such Borrower or
Obligor.
6.3. Representations
and Warranties.
If any
representation, warranty or statement made in or pursuant to this Agreement
or
any Loan Document or any other material information furnished by Borrower or
any
Obligor to Lender or any other holder of any Note, shall be false or erroneous
in any material respect.
6.4. Validity
Of Loan Documents.
If (a)
any material provision, in the reasonable judgment of Lender, of any Loan
Document shall at any time for any reason cease to be valid, binding and
enforceable against Borrower or any Obligor; (b) the validity, binding effect
or
enforceability of any Loan Document against Borrower or any Obligor shall be
contested by Borrower or any Obligor; (c) Borrower or any Obligor shall deny
that it has any or further liability or obligation thereunder; or (d) any Loan
Document shall be terminated, invalidated or set aside, or be declared
ineffective or inoperative or in any way cease to give or provide to Lender
the
benefits purported to be created thereby.
6.5. Loan
Document Default.
If
any
event of default shall occur under any other Loan Document, or if under any
Loan
Document any payment is required to be made by Borrower or any Obligor on demand
of Lender, and such demand is made and has not been timely satisfied.
6.6. Cross
Default.
If
Borrower shall default in the payment of principal or interest due and owing
upon any other obligation for borrowed money of more than $500,000, beyond
any
period of grace provided with respect thereto or in the performance or
observance of any other agreement, term or condition contained in any agreement
under which such obligation is created, if the effect of such default is to
allow the acceleration of the maturity of such Indebtedness or to permit the
holder thereof to cause such Indebtedness to become due prior to its stated
maturity.
6.7. ERISA
Default.
The
occurrence of one or more ERISA Events that (a) could be reasonably expected
to
have a Material Adverse Effect, or (b) results in a Lien on any of the assets
of
Borrower.
-16-
6.8. Money
Judgment.
A
final
judgment or order for the payment of money in an amount in excess of $500,000
shall be rendered against Borrower or any Obligor by a court of competent
jurisdiction, that remains unpaid or unstayed and undischarged for a period
(during which execution shall not be effectively stayed) of thirty (30) days
after the date on which the right to appeal has expired.
6.10. Intentionally
Omitted.
6.11. Solvency.
If
Borrower or any Obligor shall (a) die or discontinue business,
(b) generally not pay its debts as such debts become due, (c) make a
general assignment for the benefit of creditors, (d) apply for or consent
to the appointment of a receiver, a custodian, a trustee, an interim trustee
or
liquidator of all or a substantial part of its assets, (e) be adjudicated a
debtor or have entered against it an order for relief under Title 11 of the
United States Code, as the same may be amended from time to time, (f) file
a voluntary petition in bankruptcy or file a petition or an answer seeking
reorganization or an arrangement with creditors or seeking to take advantage
of
any other law (whether federal or state) relating to relief of debtors, or
admit
(by answer, by default or otherwise) the material allegations of a petition
filed against it in any bankruptcy, reorganization, insolvency or other
proceeding (whether federal or state) relating to relief of debtors,
(g) suffer or permit to continue unstayed and in effect for 60 consecutive
days any judgment, decree or order entered by a court of competent jurisdiction,
that approves a petition seeking its reorganization or appoints a receiver,
custodian, trustee, interim trustee or liquidator of all or a substantial part
of its assets, or (h) take any action in order thereby to effect any of the
foregoing, or omit to take, any action in order to prevent any of the
foregoing.
7.1. Rights
of Lender.
If any
Event of Default shall occur, Lender may, at its election, and without demand
or
notice of any kind, do any one or more of the following:
(a)
Declare
all of the Borrower’s Obligations to Lender to be immediately due and payable,
whereupon all unpaid principal, interest and fees in respect of such
Obligations, together with all of Lender’s costs, expenses and attorneys’ fees
related thereto, under the terms of the Loan Documents or otherwise, shall
be
immediately due and payable;
(b) Terminate
any commitment to make any additional advances under any Loan;
(c) Exercise
any and all rights and remedies available to Lender under any applicable
law;
(d) Exercise
any and all rights and remedies granted to Lender under the terms of this
Agreement or any of the other Loan Documents; and/or
(e) Set
off
the unpaid balance of the Obligations against any debt owing to Borrower by
the
Lender or by any Lender Affiliate, including, without limitation, any obligation
under a repurchase agreement or any funds held at any time by the Lender or
any
Lender Affiliate, whether collected or in the process of collection, or in
any
time or demand deposit account maintained by Borrower at, or evidenced by any
certificate of deposit issued by, the Lender or any Lender Affiliate. Borrower
agrees, to the fullest extent it may effectively do so under applicable law,
that any holder of a participation in the Note may exercise rights of set-off
or
counterclaim and other rights with respect to such participation as fully as
if
such holder of a participation were a direct creditor of Borrower pursuant
to
this Agreement in the amount of such participation.
(f) With
respect to Borrower’s Instruments, Documents and Chattel Paper, request in
writing that Borrower immediately deliver or cause to be delivered to Lender
or
any Lender Affiliate, all of Borrower’s Instruments, Chattel Paper, and
Documents, appropriately endorsed either, at Lender’s option, (i) to
Lender’s order, without limitation or qualification. Lender, or Lender’s
designated agent, is hereby constituted and appointed Borrower’s
attorney-in-fact with authority and power to so endorse any and all Instruments,
Documents, and Chattel Paper upon Borrower’s failure to do so. Such authority
and power, being coupled with an interest, shall be (i) irrevocable until
all Obligations are paid, performed and observed in full, (ii) exercisable
by Lender at any time after the occurrence and during the continuance of an
Event of Default and without any request upon Borrower by Lender to so endorse,
and (iii) exercisable in Lender’s name or Borrower’s name.
-17-
7.2. No
Waiver.
The
remedies in this Section 7 are in addition to, not in limitation of, any other
right, power, privilege, or remedy, either in law, in equity, or otherwise,
to
which the Lender may be entitled. No failure or delay on the part of the Lender
in exercising any right, power, or remedy will operate as a waiver thereof,
nor
will any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right hereunder. The remedies
in
this Agreement are in addition to, not in limitation of, any other right, power,
privilege, or remedy, either in law, in equity, or otherwise, to which the
Lender may be entitled. All Lender’s rights and remedies, whether evidenced by
this Agreement or by any other agreement, instrument or document shall be
cumulative and may be exercised singularly or concurrently.
8.1. Remedies;
Waiver; Amendments.
No
waiver of any provision of this Agreement or the Note, or consent to departure
therefrom, is effective unless in writing and signed by the Lender. No such
consent or waiver extends beyond the particular case and purpose involved.
No
amendment to this Agreement is effective unless in writing and signed by the
Borrower and the Lender. If at any time or times, by assignment or otherwise,
Lender transfers any of the Obligations to another person, such transfer shall
carry with it Lender’s powers and rights under this Agreement with respect to
the Obligation or Collateral so transferred and the transferee shall have said
powers and rights, whether or not they are specifically referred to in the
transfer.
8.2. Expenses,
Costs and Taxes.
The
Borrower shall pay on demand all of the following costs and expenses of Lender:
(a) reasonable out of pocket expenses, including but not limited to attorneys’
fees and expenses, of Lender in connection with the administration of the Loan
Documents, the collection and disbursement of all funds hereunder and the other
instruments and documents to be delivered hereunder, (b) extraordinary expenses
of Lender in connection with the administration of this Agreement, the Note
and
the other instruments and documents to be delivered hereunder following the
occurrence and during the continuance of an Event of Default, (c) the reasonable
fees and out-of-pocket expenses of special counsel for Lender, with respect
to
the foregoing, and of local counsel, if any, who may be retained by said special
counsel with respect thereto, (d) all fees due hereunder or in any other Loan
Documents, and (e) all costs and expenses, including reasonable attorneys’ fees,
in connection with the determination of Lender’s lien priority in any collateral
securing the Note, or the restructuring or enforcement of the Note or any other
Loan Document. In addition, Borrower shall pay any and all stamp and other
taxes
and fees payable or determined to be payable in connection with the execution
and delivery of any Loan Document, and the other instruments and documents
to be
delivered hereunder, and agrees to hold Lender harmless from and against any
and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes or fees. Borrower authorizes Lender to debit such
expenses, costs and taxes directly to Borrower’s Loan accounts or any account
Borrower maintains with Lender or Lender Affiliate. Notwithstanding anything
herein to the contrary, Borrower shall have no liability for Closing Costs
incurred by Lender.
8.3. Indemnification.
The
Borrower shall indemnify and hold the Lender harmless against any and all
liabilities, losses, damages, costs, and expenses of any kind (including,
without limitation, the reasonable fees and disbursements of counsel in
connection with any investigative, administrative or judicial proceeding,
whether or not the Lender shall be designated a party thereto) which may be
incurred by the Lender relating to or arising out of this Agreement or any
actual or proposed use of proceeds of any Loan hereunder; provided, that the
Lender shall have no right to be indemnified hereunder for its own gross
negligence or willful misconduct as determined by a court of competent
jurisdiction. A certificate as to any such loss or expense shall be promptly
submitted by the Lender to the Borrower and shall, in the absence of manifest
error, be conclusive and binding as to the amount thereof.
8.4. Construction.
The
provisions of this Agreement and the respective rights and duties of Borrower
and Lender hereunder shall be governed by and construed in accordance with
New
York law and any applicable federal laws. Borrower hereby irrevocably submits
to
the non-exclusive jurisdiction of any New York state or federal court sitting
in
Erie County, over any action or proceeding arising out of or relating to this
Agreement, or any document related to the Obligations, and Borrower hereby
irrevocably agrees that all claims in respect of such action or proceeding
may
be heard and determined in such New York state or federal court. The Borrower
hereby waives any objection that it 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. The several captions to different Sections of this Agreement are inserted
for convenience only and shall be ignored in interpreting the provisions hereof.
Time is of the essence in the performance of the obligations under this
Agreement. All grace periods in this Agreement and all other Loan Documents
shall run concurrently.
-18-
8.5. Extension
of Time.
If any
payment comes due on a day that is not a Business Day, Borrower may make the
payment on the first Business Day following the payment date and pay the
additional interest accrued to the date of payment.
8.6. Notices.
All
notices, requests, demands or other communications provided for hereunder shall
be in writing and, if to Borrower, mailed or delivered to it, addressed to
it at
the address specified on the signature pages of this Agreement, or if to Lender,
mailed or delivered to it, addressed to the address of Lender specified on
the
signature pages of this Agreement. All notices, statements, requests, demands
and other communications provided for hereunder shall be deemed to be given
or
made when delivered or three (3) Business Days after being deposited in the
mails with postage prepaid by registered or certified mail, addressed as
aforesaid, or sent by facsimile with telephonic confirmation of receipt, except
that notices from Borrower to Lender pursuant to any of the provisions hereof
shall not be effective until received by Lender.
8.7. Capital
Adequacy.
If
Lender shall have determined, after the closing of the Loans, that the adoption
of any applicable law, rule, regulation or guideline regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by Lender
(or
its lending office) with any request or directive regarding capital adequacy
(whether or not having the force of law) issued after the date hereof of any
such authority, central bank or comparable agency, has or would have the effect
of reducing the rate of return on Lender’s capital (or the capital of its
holding company) as a consequence of its obligations hereunder to a level below
that which Lender (or its holding company) could have achieved but for such
adoption, change or compliance (taking into consideration Lender’s policies or
the policies of its holding company with respect to capital adequacy) by an
amount deemed by Lender to be material, then from time to time, within fifteen
(15) days after demand by Lender, Borrower shall pay to Lender such additional
amount or amounts as will compensate Lender (or its holding company) for such
reduction. Lender shall designate a different lending office if such designation
will avoid the need for, or reduce the amount of, such compensation and will
not, in the judgment of Lender, be otherwise disadvantageous to Lender. A
certificate of Lender claiming compensation under this Section and setting
forth
the additional amount or amounts to be paid to it hereunder shall be conclusive
in the absence of manifest error. In determining such amount, Lender may use
any
reasonable averaging and attribution methods. Failure on the part of Lender
to
demand compensation for any reduction in return on capital with respect to
any
period shall not constitute a waiver of Lender’s rights to demand compensation
for any reduction in return on capital in such period or in any other period.
The protection of this Section shall be available to Lender regardless of any
possible contention of the invalidity or inapplicability of the law, regulation
or other condition that shall have been imposed but if so held invalid or
inapplicable an adjustment shall be made with respect any period subsequent
thereto, if Borrower has paid or would otherwise be paying such additional
compensation for such period.
8.8. Survival
of Agreements; Relationship.
All
agreements, representations, and warranties made in this Agreement will survive
the making of the extension of credit hereunder, and will bind and inure to
the
benefit of the Borrower and the Lender, and their respective successors and
assigns; provided, that no subsequent holder of the Note shall by reason of
acquiring that Note or Notes become obligated to make any Loan hereunder and
no
successor to or assignee of the Borrower may borrow hereunder without the
Lender’s written assent. The Lender may transfer and assign this Agreement, and
the Loans hereunder, and deliver the Collateral to the assignee, who shall
thereupon have all of the rights of the Lender, provided, however, prior to
the
occurrence of an Event of Default, or event which, with the giving of notice
or
passage of time or both, would constitute an Event of Default, such assignment
may be made only with the consent of Borrower, which consent shall not be
unreasonably withheld. Borrower may not assign this Agreement or the right
to
receive any disbursements hereunder or any interest herein. The rights and
powers given in this Agreement to the Lender are in addition to those otherwise
created or existing in the same Collateral by virtue of other agreements or
writings. The relationship between the Borrower and the Lender with respect
to
this Agreement, the Note and any other Loan Document is and shall be solely
that
of debtor and creditor, respectively, and the Lender has no fiduciary obligation
toward the Borrower with respect to any such document or the transactions
contemplated thereby.
-19-
8.9. Severability.
If any
provision of this Agreement or the Note, or any action taken hereunder, or
any
application thereof, is for any reason held to be illegal or invalid, such
illegality or invalidity shall not affect any other provision of this Agreement
or the Note, each of which shall be construed and enforced without reference
to
such illegal or invalid portion and shall be deemed to be effective or taken
in
the manner and to the full extent permitted by law.
8.10. Entire
Agreement.
This
Agreement, the Note, the Security Instruments and any other Loan Document
executed in connection herewith integrate all the terms and conditions mentioned
herein or incidental hereto and supersede all oral representations and
negotiations and supersede, amend and restate prior writings with respect to
the
subject matter hereof. In this Agreement unless the context otherwise requires,
words in the singular number include the plural, and in the plural number
include the singular.
8.11. Participation/Syndication.
Borrower
acknowledges that the Lender reserves the right to syndicate and/or participate
its interest in the Loans and Borrower agrees to, at Lender’s reasonable
request, execute such additional promissory notes and other instruments as
may
be appropriate to evidence its obligation under the Loans to such syndicate
Lenders as may commit, in the future, to fund a portion of the Loans according
to the terms of this Agreement; provided, however, prior to the occurrence
of an
Event of Default, or event which, with the giving of notice or passage of time
or both, would constitute an Event of Default, Borrower shall have the right
to
approve any bank or other lender that is brought into the syndicate or as a
participant, which approval shall not be unreasonably withheld.
8.12. JURY
TRIAL WAIVER.
BORROWER AND LENDER EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING
ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN LENDER
AND
BORROWER ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR
ANY
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
Address: | Borrower: | |
0000 Xxxxxxx Xxxxxx | XXX-XXX XXXX. | |
Xxxxxxx, Xxx Xxxx 00000 | |
|
By: | /s/ Xxxxx X. Xxxx | |
Xxxxx X. Xxxx |
||
Vice President - Finance and Chief Financial Officer |
Address: | Lender: | |
00 Xxxxxxxx Xxxxx | XXXXXXX NATIONAL ASSOCIATION | |
Buffalo, New York | |
|
By: | /s/ Xxxx X. Xxxxxxxxx | |
Xxxx X. Xxxxxxxxx |
||
Vice President |
-20-
Exhibit
A
Security
Instruments
Security
Agreement between Borrower and Lender dated of even date herewith.
Exhibit
B
BORROWING
BASE CERTIFICATE
The
undersigned hereby certifies to KEYBANK
NATIONAL ASSOCIATION
(“Lender”), in accordance with the terms of the Loan Agreement between
MOD-PAC
CORP.
(“Borrower”) and Lender dated March 8, 2007, as may be amended from time to time
(AAgreement@),
that:
A. RECEIVABLES
(i)
Total Receivables
|
$
|
|
|||||
Less:
|
|||||||
Ineligible
Receivables:
|
|||||||
Specific
Receivables > 90 days
|
|||||||
from
invoice date
|
|||||||
Credit
Balances
|
|
||||||
Contra
Account
|
|
||||||
Accounts
Subject to Liens
|
|
||||||
Subsidiary,
Shareholder
|
|||||||
or
Employee
|
|
||||||
Foreign
Receivables except
|
|||||||
from
a Canadian Account
|
|||||||
Debtor
|
|
||||||
Government
Receivables (without
|
|||||||
Assignment
of Claims Act
|
|||||||
Compliance)
|
|
||||||
Other
Ineligibles
|
|
||||||
Total
for Ineligibles:
|
<$ |
>
|
|||||
Total
Eligible Receivables
|
|
||||||
x
80% Advance Rate
|
x
|
.80
|
|||||
RECEIVABLES
BORROWING BASE
|
$
|
|
B.
INVENTORY
(i)
Total Inventory
|
$
|
|
||||
Less:
|
||||||
Ineligible
Inventory
|
<$ |
>
|
||||
Total
Eligible Inventory
|
$
|
|
||||
x
40% Advance Rate
|
x
|
.40 | ||||
INVENTORY
BORROWING BASE
|
$
|
|
=
B
|
|||
INVENTORY
CAP
|
$
|
1,500,000
|
=
C
|
|||
LESSER
OF B OR C
|
$
|
|
=
D
|
|||
C.
EQUIPMENT
|
||||||
EQUIPMENT
BORROWING BASE
|
$
|
2,000,000
|
=
E
|
|||
D.
BORROWING CAPACITY
|
||||||
(i)Maximum
Loan = A+D+E above =
|
$
|
|
||||
(not
in excess of $8,000,000)
|
||||||
Less:
Face Amount of Outstanding
|
||||||
Letters
of Credit
|
<$ |
>
|
||||
Sub-Total
|
$
|
|
||||
Less:
Current Balance
|
<$ |
>
|
||||
Total
Availability
|
$
|
|
The
undersigned certifies that to the best of the knowledge of the undersigned,
the
value of the undersigned’s Eligible Equipment has not fallen below
$2,000,000.
To
the
best knowledge of the undersigned, the undersigned is in compliance with all
of
the terms and provisions on its part to be observed or performed under the
Agreement, and no event or circumstance which upon notice, lapse of time or
both
has occurred or is continuing would cause the undersigned to be out of
compliance with the Agreement.
Dated: ______________________, ______ | MOD-PAC CORP. |
By_________________________________ | |
Name:______________________________ | |
Title:_______________________________ | |
Exhibit
C
COMPLIANCE
CERTIFICATE
MOD-PAC
CORP.
(“Borrower”) hereby certifies to KEYBANK
NATIONAL ASSOCIATION
(“Lender”) pursuant to the Loan Agreement between Borrower and Lender dated as
of March 8, 2007, as may be amended from time to time (“Agreement”)
that:
A. General:
1. Capitalized
terms not defined herein shall have the meanings set forth in the
Agreement.
2. There
does not exist an Event of Default or an event which would with notice or the
lapse of time, or both, constitutes an Event of Default .
3. The
representations and warranties contained in the Agreement are true, correct
and
complete in all material respects with the same effect as though such
representations and warranties had been made on the date hereof.
B. Financial
Statements:
1. Any
quarterly financial statements delivered with this Certificate are complete
and
accurate in all material respects, subject to changes resulting from year-end
adjustments.
1. As
of the
date hereof or, for any fiscal year as may be designated below, the
computations, ratios and calculations as set forth below in accordance with
Sections 5.22 and 5.23 of the Agreement, are true and correct in all material
respects:
(a)
|
Cash
Flow
|
|
as
of __________________, _____:
|
$__________
|
|
(b)
|
Total
Funded Debt to EBITDA Ratio
|
|
as
of __________________, _____:
|
___
to 1.0
|
MOD-PAC CORP. | |
By_________________________________ | |
Name:______________________________ | |
Title:_______________________________ | |
Schedule
3.10
Federal
income tax audit in process of tax years 2003, 2004, and 2005
Section
3.11
None.
Schedule
3.13
1803
-0000 Xxxxxxx Xxxxxx LLC, a New York Limited Liability Company
Schedule
5.15
1.
|
HSBC
Business Credit (USA) Inc. :
Operating lease covering Heidelberg
press;
|
2.
|
Kodak
Polychrome Graphics, LLC:
The following equipment is owned by Kodak, and the Borrower is permitted
to use it in consideration of purchasing Kodak products --one thermal
line, which includes 1 each of pre-bake oven, developer unit, post-bake
oven, gum unit, plate stacker and 3 conveyor sections; and two sword
lines, each includes 1 each of developer & gum unit, plate stacker and
transfer conveyor;
|
3.
|
Hewlett-Packard
Financial Services Company:
Operating lease covering digital printing press;
and
|
4.
|
Xpedx:
Consignment of materials for use by Borrower -- consisting of aluminum
plates and chemicals that are processed on the above Kodak-owned
equipment. In addition, a similar consignment for use of paper products
is
under negotiation.
|
5.
|
HSBC
Bank USA
-
Liens on equipment in favor of HSBC Bank USA securing obligations
owing to
HSBC Bank USA with respect to two letters of credit being replaced
by
Letters of Credit being issued by the Lender following signing of
this
Loan Agreement. These liens will be terminated once the HSBC letters
of
credit are returned to HSBC Bank
USA.
|
Certain
of the above items may not constitute “Liens” that are required to be disclosed,
but have been added to this disclosure schedule for informational
purposes.