EXHIBIT 10.1
AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT (this
"Agreement") is made this 5th day of May, 2006, by and among ARGAN, INC.
(formerly Puroflow Incorporated), a corporation organized under the laws of the
State of Delaware ("Argan"), SOUTHERN MARYLAND CABLE, INC., a corporation
organized under the laws of the State of Delaware ("SMC") and VITARICH
LABORATORIES, INC. (formerly AGAX/VLI Acquisition Corporation), a corporation
organized under the laws of the State of Delaware ("Vitarich"), jointly and
severally (each of Argan, SMC and Vitarich, a "Borrower" and collectively, the
"Borrowers"); and BANK OF AMERICA, N.A., a national banking association, its
successors and assigns (the "Lender").
RECITALS
A. The Lender, Argan and SMC have entered into that certain
Financing and Security Agreement dated as of August 19, 2003 (as thereafter
amended from time to time, the "Original Financing Agreement"). Pursuant to the
Original Financing Agreement, the Lender agreed to make certain loans described
therein, and other financial accommodations to Argan and SMC.
B. The Borrowers have requested that the Lender extend the Revolving
Credit Expiration Date and make a new term loan to the Borrowers.
C. The Borrowers and the Lender have agreed, pursuant to this
Agreement, to amend and restate the Original Financing Agreement in its
entirety. The Lender is willing to make the credit facilities available jointly
and severally to the Borrowers upon the terms and subject to the conditions set
forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereby agree to amend and restate the Original Financing Agreement in
its entirety as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms.
As used in this Agreement, the terms defined in the Preamble and Recitals
hereto shall have the respective meanings specified therein, and the following
terms shall have the following meanings:
"2006 Term Loan" has the meaning described in Section 2.2.2 (2006 Term
Loan Commitment).
"2006 Term Loan Commitment" has the meaning described in Section 2.2.2
(2006 Term Loan Commitment).
"2006 Term Loan Committed Amount" has the meaning described in Section
2.2.2 (2006 Term Loan Commitment).
"2006 Term Loan Facility" means either of the facilities established by
the Lender pursuant to Section 2.2.2 (Term Loan Facilities).
"2006 Term Loan Fee" has the meaning described in Section 2.2.4 (The 2006
Term Loan Fee).
"2006 Term Note" has the meaning described in Section 2.2.2 (b) (The 2006
Term Note).
"Account" individually and "Accounts" collectively mean all presently
existing or hereafter acquired or created accounts, accounts receivable,
health-care insurance receivables, contract rights, notes, drafts, instruments,
acceptances, chattel paper, leases and writings evidencing a monetary obligation
or a security interest in, or a lease of, goods, all rights to payment of a
monetary obligation or other consideration under present or future contracts
(including, without limitation, all rights (whether or not earned by
performance) to receive payments under presently existing or hereafter acquired
or created letters of credit), or by virtue of property that has been sold,
leased, licensed, assigned or otherwise disposed of, services rendered or to be
rendered, loans and advances made or other considerations given, by or set forth
in or arising out of any present or future chattel paper, note, draft, lease,
acceptance, writing, bond, insurance policy, instrument, document or general
intangible, and all extensions and renewals of any thereof, all rights under or
arising out of present or future contracts, agreements or general interest in
goods which gave rise to any or all of the foregoing, including all commercial
tort claims, other claims or causes of action now existing or hereafter arising
in connection with or under any agreement or document or by operation of law or
otherwise, all collateral security of any kind (including, without limitation,
real property mortgages and deeds of trust) Supporting Obligations,
letter-of-credit rights and letters of credit given by any Person with respect
to any of the foregoing, all books and records in whatever media (paper,
electronic or otherwise) recorded or stored, with respect to any or all of the
foregoing and all equipment and general intangibles necessary or beneficial to
retain, access and/or process the information contained in those books and
records, and all Proceeds of the foregoing.
"Account Debtor" means any Person who is obligated on a Receivable and
"Account Debtors" mean all Persons who are obligated on the Receivables.
"ACH Transactions" means any cash management or related services including
the automatic clearing house transfer of funds by the Lender for the account of
any of the Borrowers pursuant to agreement or overdrafts.
"Additional Borrower" means each Person that has executed and delivered an
Additional Borrower Joinder Supplement that has been accepted and approved by
the Lender.
"Additional Borrower Joinder Supplement" means an Additional Borrower
Joinder Supplement in substantially the form attached hereto as EXHIBIT A, with
the blanks appropriately completed and executed and delivered by the Additional
Borrower and accepted by Argan on behalf of the Borrowers.
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"Adjustment Date" has the meaning described in Section 8.5 (Assignments by
Lender).
"Affiliate" means, with respect to any designated Person, any other
Person, (a) directly or indirectly controlling, directly or indirectly
controlled by, or under direct or indirect common control with the Person
designated, (b) directly or indirectly owning or holding ten percent (10%) or
more of any equity interest in such designated Person, or (c) ten percent (10%)
or more of whose stock or other equity interest is directly or indirectly owned
or held by such designated Person. For purposes of this definition, the term
"control" (including with correlative meanings, the terms "controlling",
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through ownership of voting securities or
other equity interests or by contract or otherwise.
"Agreement" means this Amended and Restated Financing and Security
Agreement, as amended, restated, supplemented or otherwise modified in writing
in accordance with the provisions of Section 8.2 (Amendments; Waivers).
"Assignee" means any Person to which the Lender assigns all or any portion
of its interests under this Agreement, any Commitment, and any Loan, in
accordance with the provisions of Section 8.5 (Assignments by Lender), together
with any and all successors and assigns of such Person; "Assignees" means the
collective reference to all Assignees.
"Bankruptcy Code" means Title 11 of the United States Code, as amended
from time to time, and any successor Laws.
"Borrower" means each Person defined as a "Borrower" in the preamble of
this Agreement and each Additional Borrower; "Borrowers" means the collective
reference to all Persons defined as "Borrowers" in the preamble to this
Agreement and all Additional Borrowers.
"Borrowing Base" has the meaning described in Section 2.1.8 (Borrowing
Base).
"Borrowing Base Deficiency" has the meaning described in Section 2.1.8
(Borrowing Base).
"Borrowing Base Report" has the meaning described in Section 2.1.9
(Borrowing Base Report).
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in the State are authorized or required to close.
"Capital Adequacy Regulation" means any guideline, request or directive of
any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
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"Capital Expenditure" means an expenditure (whether payable in cash or
other property or accrued as a liability) for Fixed or Capital Assets,
including, without limitation, the entering into of a Capital Lease.
"Capital Lease" means with respect to any Person any lease of real or
personal property, for which the related Lease Obligations have been or should
be, in accordance with GAAP consistently applied, capitalized on the balance
sheet of that Person.
"Cash Equivalents" means (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit with
maturities of one (1) year or less from the date of acquisition of, or money
market accounts maintained with, the Lender, any Affiliate of the Lender, or any
other domestic commercial bank having capital and surplus in excess of One
Hundred Million Dollars ($100,000,000) or such other domestic financial
institutions or domestic brokerage houses to the extent disclosed to, and
approved by, the Lender and (c) commercial paper of a domestic issuer rated at
least either A-1 by Standard & Poor's Corporation (or its successor) or P-1 by
Xxxxx'x Investors Service, Inc. (or its successor) with maturities of six (6)
months or less from the date of acquisition.
"Chattel Paper" means a record or records (including, without limitation,
electronic chattel paper) that evidence both a monetary obligation and a
security interest in specific goods, a security interest in specific goods and
software used in the goods, or a lease of specific goods; all Supporting
Obligations with respect thereto; any returned, rejected or repossessed goods
and software covered by any such record or records and all proceeds (in any form
including, without limitation, accounts, contract rights, documents, chattel
paper, instruments and general intangibles) of such returned, rejected or
repossessed goods; and all Proceeds of the foregoing.
"Closing Date" means the date set forth in the preamble hereof.
"Collateral" means all property of each and every Borrower subject from
time to time to the Liens of this Agreement, any of the Security Documents
and/or any of the other Financing Documents, together with any and all Proceeds
thereof.
"Collateral Account" has the meaning described in Section 2.1.11 (The
Collateral Account).
"Collateral Disclosure List" has the meaning described in Section 3.3
(Collateral Disclosure List).
"Collection" means each check, draft, cash, money, instrument, item, and
other remittance in payment or on account of payment of the Accounts or
otherwise with respect to any Collateral, including, without limitation, cash
proceeds of any returned, rejected or repossessed goods, the sale or lease of
which gave rise to an Account, and other proceeds of Collateral; and
"Collections" means the collective reference to all of the foregoing.
"Commitment" means the Revolving Credit Commitment, the Term Loan
Commitment or the 2006 Term Loan Commitment, as the case may be, and
"Commitments" means the collective reference to the Revolving Credit Commitment,
the Term Loan Commitment, the 2006 Term Loan Commitment and the commitment for
any loan, letter of credit, interest rate protection, foreign exchange risk,
cash management, and other Credit Facility now or hereafter provided to any of
the Borrowers by the Lender whether under this Agreement or otherwise.
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"Committed Amount" means the Revolving Credit Committed Amount, the Term
Loan Committed Amount or the 2006 Term Loan Committed Amount, as the case may
be, and "Committed Amounts" means collectively the Revolving Credit Committed
Amount, the Term Loan Committed Amount and the 2006 Term Loan Committed Amount.
"Compliance Certificate" means a periodic Compliance Certificate described
in Section 6.1.1 (Financial Statements).
"Commonly Controlled Entity" means an entity, whether or not incorporated,
which is under common control with any Borrower within the meaning of Section
414(b) or (c) of the Internal Revenue Code.
"Copyrights" means and includes, in each case whether now existing or
hereafter arising, all of each Borrower's rights, title and interest in and to
(a) all copyrights, rights and interests in copyrights, works protectable by
copyright, copyright registrations, copyright applications, and all renewals of
any of the foregoing, including without limitation, those set forth in Schedule
1.1 attached hereto, (b) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing, including, without
limitation, damages or payments for past, current or future infringements of any
of the foregoing, (c) the right to xxx for past, present and future
infringements of any of the foregoing, and (d) all rights corresponding to any
of the foregoing throughout the world.
"Credit Facility" means the Revolving Credit Facility, or either of the
Term Loan Facilities as the case may be, and "Credit Facilities" means
collectively the Revolving Credit Facility and the Term Loan Facilities and any
and all other credit facilities now or hereafter extended under or secured by
this Agreement.
"Default" means an event which, with the giving of notice or lapse of
time, or both, could or would constitute an Event of Default under the
provisions of this Agreement.
"Documents" means all documents of title or receipts, whether now existing
or hereafter acquired or created, and all Proceeds of the foregoing.
"EBITDA" means as to the Borrowers and their Subsidiaries on a
consolidated basis for any period of determination thereof, the sum of (a) the
net profit (or loss) determined in accordance with GAAP consistently applied,
plus (b) interest expense for such period, plus (c) income tax provisions for
such period, plus (d) depreciation and amortization of assets for such period,
plus (e) for the quarter ending July 31, 2005, the non-cash derivative expense
associated with the issuance of common stock, in the amount of (i) $1,610,000
for Xxxxx Xxxxxx and (ii) $342,000 for Main Street Resources and plus (f)
non-cash impairment of goodwill arising from the acquisition of Vitarich.
"Eligible Inventory" means the collective reference to all Inventory of
each Borrower held for sale in the ordinary course of business, valued at the
lowest of the net purchase cost or realizable value with respect to raw
materials and the lowest of the net manufacturing cost or realizable value with
respect to finished goods inventory, excluding, however, any Inventory which
consists of:
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(i) any Inventory located outside of the United States;
(ii) any Inventory in which the Lender has not properly and
unavoidably perfected the Liens of the Lender under this Agreement;
(iii) any Inventory not in the actual possession of a
Borrower, except to the extent provided in subsection (v) below;
(iv) any Inventory in the possession of a bailee,
warehouseman, consignee or similar third party, except to the extent that such
bailee, warehouseman, consignee or similar third party has entered into an
agreement with the Lender in which such bailee, warehouseman, consignee or
similar third party consents and agrees to the Lender's Lien on such Inventory
and to such other terms and conditions as may be required by the Lender;
(v) any Inventory located on premises leased or rented to a
Borrower or otherwise not owned by a Borrower, unless the Lender has received a
waiver and consent from the lessor, landlord and/or owner, in form and substance
satisfactory to the Lender and from any mortgagee of such lessor, landlord or
owner to the extent required by the Lender;
(vi) any Inventory the sale or other disposition of which has
given rise to a Receivable;
(vii) any Inventory which fails to meet all standards and
requirements imposed by any Governmental Authority over such Inventory or its
production, storage, use or sale;
(viii) work-in-process, supplies, displays, packaging and
promotional materials;
(ix) any Inventory as to which the Lender determines in the
exercise of its sole and absolute discretion at any time and in good faith is
not in good condition or is defective, unmerchantable, post-seasonal, slow
moving or obsolete; and
(x) any Inventory which the Lender in the good faith exercise
of its sole and absolute discretion has deemed to be ineligible because the
Lender, in good faith, otherwise considers the collateral value to the Lender to
be impaired or its ability to realize such value to be insecure.
In the event of any dispute under the foregoing criteria as to whether
Inventory is, or has ceased to be, Eligible Inventory, the decision of the
Lender in the good faith exercise of its sole and absolute discretion shall
control.
"Eligible Receivable" and "Eligible Receivables" mean, at any time of
determination thereof, the unpaid portion of each account (net of any returns,
discounts, claims, credits, charges, accrued rebates or other allowances,
offsets, deductions, counterclaims, disputes or other defenses and reduced by
the aggregate amount of all reserves, limits and deductions provided for in this
definition and elsewhere in this Agreement) receivable in United States Dollars
by a Borrower, provided each account conforms and continues to conform to the
following criteria to the satisfaction of the Lender:
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(a) the account arose in the ordinary course of a Borrower's
business from a bona fide outright sale of Inventory by such Borrower or from
services performed by such Borrower;
(b) the account is a valid, legally enforceable obligation of the
Account Debtor and requires no further act on the part of any Person under any
circumstances to make the account payable by the Account Debtor;
(c) the account is based upon an enforceable order or contract,
written or oral, for Inventory shipped or for services performed, and the same
were shipped or performed in accordance with such order or contract;
(d) if the account arises from the sale of Inventory, the Inventory
the sale of which gave rise to the account has been shipped or delivered to the
Account Debtor on an absolute sale basis and not on a xxxx and hold sale basis,
a consignment sale basis, a guaranteed sale basis, a sale or return basis, or on
the basis of any other similar understanding;
(e) if the account arises from the performance of services, such
services have been fully rendered and do not relate to any warranty claim or
obligation;
(f) the account is evidenced by an invoice or other documentation in
form acceptable to the Lender, dated no later than the date of shipment or
performance and containing only terms normally offered by the respective
Borrower;
(g) the amount shown on the books of a Borrower and on any invoice,
certificate, schedule or statement delivered to the Lender is owing to such
Borrower and no partial payment has been received unless reflected with that
delivery;
(h) the account is not outstanding more than ninety (90) days from
the date of the invoice therefore;
(i) the account is not owing by any Account Debtor for which the
Lender has deemed fifty percent (50%) or more of such Account Debtor's other
accounts (or any portion thereof) due to a Borrower, individually, or all of the
Borrowers collectively, to be non-Eligible Receivables, excluding, however,
those accounts for which the Lender has excluded under this subsection (i)
solely as a result of such accounts exceeding the concentration limits set forth
in subsection (j) below;
(j) to the extent such account is owing by an Account Debtor or a
group of affiliated Account Debtors then existing accounts to all of the
Borrowers collectively exceed in aggregate face amount twenty five percent (25%)
of the total Eligible Receivables of all Borrowers Receivables, the accounts in
excess of twenty five percent (25%) shall not be Eligible Receivables;
(k) the Account Debtor has not returned, rejected or refused to
retain, or otherwise notified a Borrower of any dispute concerning, or claimed
nonconformity of, any of the Inventory or services from the sale or furnishing
of which the account arose;
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(l) the account is not subject to any present or contingent (and no
facts exist which are the basis for any future) offset, claim, deduction or
counterclaim, dispute or defense in law or equity on the part of such Account
Debtor, or any claim for credits, allowances, or adjustments by the Account
Debtor because of returned, inferior, or damaged Inventory or unsatisfactory
services, or for any other reason including, without limitation, those arising
on account of a breach of any express or implied representation or warranty;
(m) the Account Debtor is not a Subsidiary or Affiliate of any
Borrower or an employee, officer, director or shareholder (other than Xxxxx
Xxxxxx), of any Borrower or any Subsidiary or Affiliate of any Borrower;
(n) the Account Debtor is not incorporated or primarily conducting
business or otherwise located in any jurisdiction outside of the United States
of America, unless the Account Debtor's obligations with respect to such account
are secured by a letter of credit, guaranty or banker's acceptance having terms
and from such issuers and confirmation banks as are acceptable to the Lender in
its sole and absolute discretion (which letter of credit, guaranty or banker's
acceptance is subject to the perfected Lien of the Lender);
(o) as to which none of the following events has occurred with
respect to the Account Debtor on such Account: death or judicial declaration of
incompetency of an Account Debtor who is an individual; the filing by or against
the Account Debtor of a request or petition for liquidation, reorganization,
arrangement, adjustment of debts, adjudication as a bankrupt, winding-up, or
other relief under the bankruptcy, insolvency, or similar laws of the United
States, any state or territory thereof, or any foreign jurisdiction, now or
hereafter in effect; the making of any general assignment by the Account Debtor
for the benefit of creditors; the appointment of a receiver or trustee for the
Account Debtor or for any of the assets of the Account Debtor, including,
without limitation, the appointment of or taking possession by a "custodian," as
defined in the Federal Bankruptcy Code; the institution by or against the
Account Debtor of any other type of insolvency proceeding (under the bankruptcy
laws of the United States or otherwise) or of any formal or informal proceeding
for the dissolution or liquidation of, settlement of claims against, or winding
up of affairs of, the Account Debtor; the sale, assignment, or transfer of all
or any material part of the assets of the Account Debtor; the nonpayment
generally by the Account Debtor of its debts as they become due; or the
cessation of the business of the Account Debtor as a going concern;
(p) the Account Debtor is not a Governmental Authority, unless all
rights of each Borrower with respect to such account have been assigned to the
Lender on terms acceptable to the Lender pursuant to the Assignment of Claims
Act of 1940, as amended or any comparable state statute;
(q) no Borrower is indebted in any manner to the Account Debtor (as
creditor, lessor, supplier or otherwise), with the exception of customary
credits, adjustments and/or discounts given to an Account Debtor by a Borrower
in the ordinary course of its business;
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(r) the account does not arise from services under or related to any
warranty obligation of a Borrower or out of service charges, finance charges or
other fees for the time value of money;
(s) the account is not evidenced by chattel paper or an instrument
of any kind;
(t) the title of the respective Borrower to the account is absolute
and is not subject to any prior assignment, claim, Lien, or security interest,
except Permitted Liens;
(u) no bond or other undertaking by a guarantor or surety has been
or is required to be obtained, supporting the performance of any Borrower or any
other obligor in respect of any of such Borrower's agreements with the Account
Debtor or supporting the account and any of the Account Debtor's obligations in
respect of the account;
(v) each Borrower has the full and unqualified right and power to
assign and grant a security interest in, and Lien on, the account to the Lender
as security and collateral for the payment of the Obligations;
(w) the account is subject to a Lien in favor of the Lender, which
Lien is perfected as to the account by the filing of financing statements and
which Lien upon such filing constitutes a first priority security interest and
Lien;
(x) the Inventory giving rise to the account was not, at the time of
the sale thereof, subject to any Lien, except those in favor of the Lender;
(y) the part of the account which represents a retainage shall be
excluded from Eligible Accounts, and to the extent any part of an account
represents a progress billing the Lender reserves the right to among other
things, exclude such account or to lower the advance rate of Eligible Accounts,
or limit the amount of loans which can be made against progress xxxxxxxx, based
on the results of a field exam; and
(z) the Lender in the good faith exercise of its sole and absolute
discretion has not deemed the account ineligible because of uncertainty as to
the creditworthiness of the Account Debtor or because the Lender otherwise
considers the collateral value of such account to the Lender to be impaired or
its ability to realize such value to be insecure.
In the event of any dispute, under the foregoing criteria, as to whether
an account is, or has ceased to be, an Eligible Receivable, the decision of the
Lender in the good faith exercise of its sole and absolute discretion shall
control.
"Equipment" means all equipment, machinery, computers, chattels, tools,
parts, machine tools, furniture, furnishings, fixtures and supplies of every
nature, presently existing or hereafter acquired or created and wherever
located, whether or not the same shall be deemed to be affixed to real property
and all of such types of property leased by any of the Borrowers and all of the
Borrowers' rights and interests with respect thereto under such leases
(including, without limitation, options to purchase), together with all
accessions, additions, fittings, accessories, special tools, and improvements
thereto and substitutions therefore and all parts and equipment which may be
attached to or which are necessary or beneficial for the operation, use and/or
disposition of such personal property, all licenses, warranties, franchises and
General Intangibles related thereto or necessary or beneficial for the
operation, use and/or disposition of the same, together with all Accounts,
Chattel Paper, Instruments and other consideration received by any Borrower on
account of the sale, lease or other disposition of all or any part of the
foregoing, and together with all rights under or arising out of present or
future Documents and contracts relating to the foregoing and all Proceeds of the
foregoing.
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"Enforcement Costs" means all expenses, charges, costs and fees whatsoever
(including, without limitation, reasonable outside and allocated in-house
counsel attorney's fees and expenses) of any nature whatsoever paid or incurred
by or on behalf of the Lender in connection with (a) the enforcement of any or
all of the Obligations, this Agreement and/or any of the other Financing
Documents and (b) the creation, perfection, collection, maintenance,
preservation, defense, protection, realization upon, disposition, sale or
enforcement of all or any part of the Collateral, this Agreement or any of the
other Financing Documents, including, without limitation, those costs and
expenses more specifically enumerated in Section 3.6 (Costs) and/or Section 8.10
(Enforcement Costs), and further including, without limitation, amounts paid to
lessors, processors, bailees, warehousemen, sureties, judgment creditors and
others in possession of or with a Lien against or claimed against the
Collateral.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" has the meaning described in ARTICLE VII (Default and
Rights and Remedies).
"Facilities" means the collective reference to the loan, letter of credit,
interest rate protection, foreign exchange risk, cash management, and other
credit facilities now or hereafter provided to any one or more of the Borrowers
by the Lender.
"Fees" means the collective reference to each fee payable to the Lender
under the terms of this Agreement or under the terms of any of the other
Financing Documents.
"Financing Documents" means at any time collectively this Agreement, the
Notes, the Security Documents and any other instrument, agreement or document
previously, simultaneously or hereafter executed and delivered by any Borrower,
and/or any other Person, singly or jointly with another Person or Persons,
evidencing, securing, guarantying or in connection with this Agreement, any
Note, any of the Security Documents, any of the Facilities, and/or any of the
Obligations.
"Fixed or Capital Assets" of a Person at any date means all assets which
would, in accordance with GAAP consistently applied, be classified on the
balance sheet of such Person as property, plant or equipment at such date.
"Fixed Charges" means as to the Borrowers and their Subsidiaries for any
period of determination, the sum of all scheduled interest expense excluding the
non-cash interest expense associated with the amortization of issuance costs for
Subordinated Indebtedness in favor of Xxxxx Xxxxxx, all principal payments and
all Capital Lease payments of the Borrowers and their Subsidiaries made during
the twelve (12) months preceding the date such covenant is being tested, all in
accordance with GAAP.
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"Fixed Charge Coverage Ratio" means, as to the Borrowers and their
Subsidiaries for any period of determination thereof, the ratio of (a) EBITDA,
minus dividends and distributions to (b) Fixed Charges.
"Funded Debt" means all Indebtedness of Borrowers in favor the Lender,
including, without limitation, the outstanding principal balance of the
Revolving Loan, the Term Loan and the 2006 Term Loan, the face amount of any
outstanding letters of credit and all Indebtedness under Capital Leases.
"GAAP" means generally accepted accounting principles in the United States
of America in effect from time to time.
"General Intangibles" means all general intangibles of every nature,
whether presently existing or hereafter acquired or created, and without
implying any limitation of the foregoing, further means all books and records,
commercial tort claims, other claims (including without limitation all claims
for income tax and other refunds), payment intangibles, Supporting Obligations,
choses in action, claims, causes of action in tort or equity, contract rights,
judgments, customer lists, software, Patents, Trademarks, licensing agreements,
rights in intellectual property, goodwill (including goodwill of any Borrower's
business symbolized by and associated with any and all Trademarks, trademark
licenses, Copyrights and/or service marks), royalty payments, licenses,
letter-of-credit rights, letters of credit, contractual rights, the right to
receive refunds of unearned insurance premiums, rights as lessee under any lease
of real or personal property, literary rights, Copyrights, service names,
service marks, logos, trade secrets, amounts received as an award in or
settlement of a suit in damages, deposit accounts, interests in joint ventures,
general or limited partnerships, or limited liability companies or partnerships,
rights in applications for any of the foregoing, books and records in whatever
media (paper, electronic or otherwise) recorded or stored, with respect to any
or all of the foregoing, all Supporting Obligations with respect to any of the
foregoing, and all Equipment and General Intangibles necessary or beneficial to
retain, access and/or process the information contained in those books and
records, and all Proceeds of the foregoing.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any department, agency or instrumentality thereof.
"Hazardous Materials" means (a) any "hazardous waste" as defined by the
Resource Conservation and Recovery Act of 1976, as amended from time to time,
and regulations promulgated thereunder; (b) any "hazardous substance" as defined
by the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended from time to time, and regulations promulgated thereunder; (c)
any substance the presence of which on any property now or hereafter owned,
acquired or operated by any of the Borrowers is prohibited by any Law similar to
those set forth in this definition; and (d) any other substance which by Law
requires special handling in its collection, storage, treatment or disposal.
"Hazardous Materials Contamination" means the contamination (whether
presently existing or occurring after the date of this Agreement) by Hazardous
Materials of any property owned, operated or controlled by any of the Borrowers
or for which any of the Borrowers has responsibility, including, without
limitation, improvements, facilities, soil, ground water, air or other elements
on, or of, any property now or hereafter owned, acquired or operated by any of
the Borrowers, and any other contamination by Hazardous Materials for which any
of the Borrowers is, or is claimed to be, responsible.
11
"Indebtedness" of a Person means at any date the total liabilities of such
Person at such time determined in accordance with GAAP consistently applied.
"Indebtedness for Borrowed Money" of a Person means at any time the sum at
such time of (a) Indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, (b) any obligations of such
Person in respect of letters of credit, banker's or other acceptances or similar
obligations issued or created for the account of such Person, (c) Lease
Obligations of such Person with respect to Capital Leases, (d) all liabilities
secured by any Lien on any property owned by such Person, to the extent attached
to such Person's interest in such property, even though such Person has not
assumed or become personally liable for the payment thereof, (e) obligations of
third parties which are being guarantied or indemnified against by such Person
or which are secured by the property of such Person; (f) any obligation of such
Person under an employee stock ownership plan or other similar employee benefit
plan; (g) any obligation of such Person or a Commonly Controlled Entity to a
Multi-employer Plan; and (h) any obligations, liabilities or indebtedness,
contingent or otherwise, under or in connection with, any Swap Contract; but
excluding trade and other accounts payable in the ordinary course of business in
accordance with customary trade terms and which are not overdue (as determined
in accordance with customary trade practices) or which are being disputed in
good faith by such Person and for which adequate reserves are being provided on
the books of such Person in accordance with GAAP.
"Indemnified Parties" has the meaning set forth in Section 8.19
(Indemnification).
"Instrument" means a negotiable instrument or any other writing which
evidences a right to payment of a monetary obligation and is not itself a
security agreement or lease and is of a type that in the ordinary course of
business is transferred by delivery with any necessary endorsement or
assignment, and all Supporting Obligations with respect to any of the foregoing
and all Proceeds with respect to any of the foregoing.
"Interest Rate Protection Agreement" means any interest rate or currency
swap agreements, cap, floor, and collar agreements, currency spot and forward
contracts and other similar agreements and arrangements.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the Income Tax Regulations issued and proposed to
be issued thereunder.
"Inventory" means all goods of each Borrower and all right, title and
interest of each Borrower in and to all of its now owned and hereafter acquired
goods and other personal property furnished under any contract of service or
intended for sale or lease, including, without limitation, all raw materials,
work-in-process, finished goods and materials and supplies of any kind, nature
or description which are used or consumed in any Borrower's business or are or
might be used in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such goods and other personal property and
all licenses, warranties, franchises, General Intangibles, personal property and
all documents of title or documents relating to the same, together with all
Accounts, Chattel Paper, Instruments and other consideration received by any
Borrower on account of the sale, lease or other disposition of all or any part
of the foregoing, and together with all rights under or arising out of present
or future Documents and contracts relating to the foregoing and all Proceeds of
the foregoing.
12
"Investment Property" means a security, whether certificated or
uncertificated, security entitlement, securities account, commodity contract or
commodity account and all Proceeds of, and Supporting Obligations with respect
to, the foregoing.
"Item of Payment" means each check, draft, cash, money, instrument, item,
and other remittance in payment or on account of payment of the Receivables or
otherwise with respect to any Collateral, including, without limitation, cash
proceeds of any returned, rejected or repossessed goods, the sale or lease of
which gave rise to a Receivable, and other proceeds of Collateral; and "Items of
Payment" means the collective reference to all of the foregoing.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any Governmental Authority.
"Lease Obligations" of a Person means for any period the rental
commitments of such Person for such period under leases for real and/or personal
property (net of rent from subleases thereof, but including taxes, insurance,
maintenance and similar expenses which such Person, as the lessee, is obligated
to pay under the terms of said leases, except to the extent that such taxes,
insurance, maintenance and similar expenses are payable by sublessees),
including rental commitments under Capital Leases.
"Letter-of-credit right" means a right to payment or performance under a
letter of credit, whether or not the beneficiary has demanded or is at the time
entitled to demand payment or performance.
"Liabilities" means at any date all liabilities that in accordance with
GAAP consistently applied should be classified as liabilities on a consolidated
balance sheet of the Borrowers and their respective Subsidiaries.
"LIBOR Rate" shall mean a daily fluctuating rate equal to the one (1)
month rate of interest (rounded upwards, if necessary to the nearest 1/100 of
1%) appearing on Telerate Page 3750 (or any successor page) as the one (1) month
London interbank offered rate for deposits in U.S. Dollars at approximately
11:00 A.M. (London, time), on the second preceding business day, as adjusted
from time to time in the Lender's sole discretion for then-applicable reserve
requirements, deposits insurance assessment rates and other regulatory costs. If
for any reason such rate is not available, the term "LIBOR Rate" shall mean the
fluctuating rate of interest equal to the one (1) month rate of interest
(rounded upwards, if necessary to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the one (1) month London interbank offered rate for deposits
in U.S. Dollars at approximately 11:00 a.m. (London Time) on the second
preceding business day, as adjusted from time to time for then-applicable
reserve requirements, deposit insurance assessment rates and other regulatory
costs; provided, however, if more than one rate is specified on Reuters Screen
LIBO page, the applicable rate shall be the arithmetic mean of all such rates.
"Lien" means any mortgage, deed of trust, deed to secure debt, grant,
pledge, security interest, assignment, encumbrance, judgment, lien, financing
statement, hypothecation, provision in any instrument or other document for
confession of judgment, cognovit or other similar right or other remedy, claim,
charge, control over or interest of any kind in real or personal property
securing any indebtedness, duties, obligations, and liabilities owed to, or
claimed to be owed to, a Person, all whether perfected or unperfected, avoidable
or unavoidable, based on the common law, statute or contract or otherwise,
including, without limitation, any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or agreement to
give any financing statement under the Uniform Commercial Code of any
jurisdiction, excluding the precautionary filing of any financing statement by
any lessor in a true lease transaction, by any xxxxxx in a true bailment
transaction or by any consignor in a true consignment transaction under the
Uniform Commercial Code of any jurisdiction or the agreement to give any
financing statement by any lessee in a true lease transaction, by any bailee in
a true bailment transaction or by any consignee in a true consignment
transaction.
13
"Loan" means each of the Revolving Loan, the Term Loan or the 2006 Term
Loan, as the case may be, and "Loans" means the collective reference to the
Revolving Loan, the Term Loan and the 2006 Term Loan.
"Loan Notice" has the meaning described in Section 2.1.2 (Procedure for
Making Advances).
"Lockbox" has the meaning described in Section 2.1.11 (The Collateral
Account).
"Maximum Rate" has the meaning described in Section 2.3.4 (Maximum
Interest Rate).
"Multi-employer Plan" means a Plan that is a Multi-employer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Worth" means the Borrowers' consolidated shareholders' equity,
defined in accordance with GAAP.
"Note" means the Revolving Credit Note, the Term Note or the 2006 Term
Note, as the case may be, and "Notes" means collectively the Revolving Credit
Note, the Term Note and the 2006 Term Note, and any other promissory note which
may from time to time evidence all or any portion of the Obligations.
"Obligations" means all present and future indebtedness, duties,
obligations, and liabilities, whether now existing or contemplated or hereafter
arising, of any one or more of the Borrowers to the Lender under, arising
pursuant to, in connection with and/or on account of the provisions of this
Agreement, each Note, each Security Document, and/or any of the other Financing
Documents, the Loans, any Swap Contract and/or any of the Facilities including,
without limitation, the principal of, and interest on, each Note, late charges,
the Fees, Enforcement Costs, and prepayment fees (if any), letter of credit
reimbursement obligations, letter of credit fees or fees charged with respect to
any guaranty of any letter of credit; also means all other present and future
indebtedness, duties, obligations, and liabilities, whether now existing or
contemplated or hereafter arising, of any one or more of the Borrowers to the
Lender or its Affiliates of any nature whatsoever, regardless of whether such
indebtedness, duties, obligations, and liabilities be direct, indirect, primary,
secondary, joint, several, joint and several, fixed or contingent; and also
means any and all renewals, extensions, substitutions, amendments, restatements
and rearrangements of any such indebtedness, duties, obligations, and
liabilities.
14
"Patents" means and includes, in each case whether now existing or
hereafter arising, all of each Borrower's rights, title and interest in and to
(a) any and all patents and patent applications, including without limitation,
those set forth in Schedule 1.1 attached hereto, (b) any and all inventions and
improvements described and claimed in such patents and patent applications, (c)
reissues, divisions, continuations, renewals, extensions and
continuations-in-part of any patents and patent applications, (d) income,
royalties, damages, claims and payments now or hereafter due and/or payable
under and with respect to any patents or patent applications, including, without
limitation, damages and payments for past and future infringements, (e) rights
to xxx for past, present and future infringements of patents, and (f) all rights
corresponding to any of the foregoing throughout the world.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Liens" means: (a) Liens for Taxes which are not delinquent or
which the Lender has determined in the exercise of its sole and absolute
discretion (i) are being diligently contested in good faith and by appropriate
proceedings, and such contest operates to suspend collection of the contested
Taxes and enforcement of a Lien, (ii) the respective Borrower has the financial
ability to pay, with all penalties and interest, at all times without materially
and adversely affecting such Borrower, and (iii) are not, and will not be with
appropriate filing, the giving of notice and/or the passage of time, entitled to
priority over any Lien of the Lender; (b) deposits or pledges to secure
obligations under workers' compensation, social security or similar laws, or
under unemployment insurance in the ordinary course of business; (c) Liens
securing the Obligations; (d) judgment Liens to the extent the entry of such
judgment does not constitute a Default or an Event of Default under the terms of
this Agreement or result in the sale or levy of, or execution on, any of the
Collateral; (e) purchase money security interests in machinery and equipment
securing Indebtedness not in excess of $50,000 in the aggregate per each
calendar year; and (f) such other Liens, if any, as are set forth on Schedule
4.1.20 attached hereto and made a part hereof.
"Permitted Uses" means (a) with respect to the Term Loan, to refinance
certain existing Indebtedness of the Borrowers, (b) with respect to the 2006
Term Loan, to reduce a portion of the Subordinated Debt, and (c) with respect to
the Revolving Loan, the payment of expenses incurred in the ordinary course of
any Borrower's business.
"Person" means and includes an individual, a corporation, a partnership, a
joint venture, a limited liability company or partnership, a trust, an
unincorporated association, a Governmental Authority, or any other organization
or entity.
"Plan" means any pension plan that is covered by Title IV of ERISA and in
respect of which any Borrower or a Commonly Controlled Entity is an "employer"
as defined in Section 3 of ERISA.
"Post-Default Rate" means with respect to all Obligations, the LIBOR Rate
in effect from time to time, plus four percent (4.0%) per annum.
"Prepayment" means a Revolving Loan Optional Prepayment or a Term Loan
Optional Prepayment, as the case may be, and "Prepayments" mean collectively
all, Revolving Loan Optional Prepayments and Term Loan Optional Prepayments.
15
"Proceeds" has the meaning described in the Uniform Commercial Code as in
effect from time to time.
"Receivable" means one of each Borrower's now owned and hereafter owned,
acquired or created Accounts, Chattel Paper, General Intangibles and
Instruments; and "Receivables" means all of each Borrower's now or hereafter
owned, acquired or created Accounts, Chattel Paper, General Intangibles and
Instruments, and all Proceeds thereof.
"Registered Organization" means an organization organized solely under the
law of a single state or the United States and as to which the state or the
United States must maintain a public record showing the organization to have
been organized.
"Reportable Event" means any of the events set forth in Section 4043(c) of
ERISA or the regulations thereunder.
"Responsible Officer" means for Argan, Xxxxxx Xxxxxxxxxx, President, Art
Xxxxxx, Senior Vice President and CFO, for SMC, and Art Xxxxxx, Secretary, Vice
President and Treasurer and for Vitarich, Xxxxxx Xxxxxxxxxx, Chairman of the
Board, Art Xxxxxx, Vice President or Secretary.
"Revolving Credit Commitment" means the agreement of the Lender relating
to the making of the Revolving Loan and advances thereunder subject to and in
accordance with the provisions of this Agreement.
"Revolving Credit Commitment Period" means the period of time from the
Closing Date to the Business Day preceding the Revolving Credit Termination
Date.
"Revolving Credit Committed Amount" has the meaning described in Section
2.1.1 (Revolving Credit Facility).
"Revolving Credit Expiration Date" means May 31, 2007.
"Revolving Credit Facility" means the facility established by the Lender
pursuant to Section 2.1 (Revolving Credit Facility).
"Revolving Credit Note" has the meaning described in Section 2.1.3
(Revolving Credit Note).
"Revolving Credit Termination Date" means the earlier of (a) the Revolving
Credit Expiration Date, or (b) the date on which the Revolving Credit Commitment
is terminated pursuant to Section 7.2 (Remedies) or otherwise.
"Revolving Credit Unused Line Fee" and "Revolving Credit Unused Line Fees"
have the meanings described in Section 2.1.7 (Revolving Credit Unused Line Fee).
"Revolving Loan" has the meaning described in Section 2.1.1 (Revolving
Credit Facility).
"Revolving Loan Account" has the meaning described in Section 2.1.6
(Revolving Loan Account).
16
"Revolving Loan Fee" has the meaning described in Section 2.1.12
(Revolving Loan Fee).
"Revolving Loan Optional Prepayment" and "Revolving Loan Optional
Prepayments" have the meanings described in Section 2.1.4 (Optional Prepayment
of Revolving Loan).
"Revolving Loan Mandatory Prepayment" and "Revolving Loan Mandatory
Prepayments" have the meanings described in Section 2.1.10 (Mandatory
Prepayments of Revolving Loan).
"Security Documents" means collectively any assignment, pledge agreement,
security agreement, mortgage, deed of trust, deed to secure debt, financing
statement and any similar instrument, document or agreement under or pursuant to
which a Lien is now or hereafter granted to, or for the benefit of, the Lender
on any real or personal property of any Person to secure all or any portion of
the Obligations, all as the same may from time to time be amended, restated,
supplemented or otherwise modified.
"Solvent" means when used with respect to any Person that at the time of
determination:
(a) the assets of such Person, at a fair valuation, are in excess of
the total amount of its debts (including, without limitation, contingent
liabilities); and
(b) the present fair saleable value of its assets is greater than
its probable liability on its existing debts as such debts become absolute and
matured; and
(c) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments) as they
mature; and
(d) it has capital sufficient to carry on its business as conducted
and as proposed to be conducted.
For purposes of determining whether a Person is Solvent, the amount of any
contingent liability shall be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"State" means the State of Maryland.
"Subordinated Debt" means all Junior Debt as defined in the Debt
Subordination Agreement by and among Xxxxx X. Xxxxxx, Argan and the Lender dated
as of [__________ __, 200_, as amended from time to time.
"Subordinated Indebtedness" means all Indebtedness incurred at any time by
any one or more of the Borrowers, which is in amounts, subject to repayment
terms, and subordinated to the Obligations, as set forth in one or more written
agreements, all in form and substance satisfactory to the Lender in its sole and
absolute discretion.
17
"Subsidiary" means any corporation the majority of the voting shares of
which at the time are owned directly by any Borrower and/or by one or more
Subsidiaries of any Borrower.
"Supporting Obligation" means a Letter-of-credit right, secondary
obligation or obligation of a secondary obligor or that supports the payment or
performance of an account, chattel paper, a document, a general intangible, an
instrument or investment property.
"Swap Contract" means any document, instrument or agreement between
Borrower and Lender or any affiliate of Lender, now existing or entered into in
the future, relating to an interest rate swap transaction, forward rate
transaction, interest rate cap, floor or collar transaction, any similar
transaction, any option to enter into any of the foregoing, and any combination
of the foregoing, which agreement may be oral or in writing, including, without
limitation, any master agreement relating to or governing any or all of the
foregoing and any related schedule or confirmation, each as amended from time to
time.
"Taxes" means all taxes and assessments whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character
(including all penalties or interest thereon), which at any time may be
assessed, levied, confirmed or imposed by any Governmental Authority on any of
the Borrowers or any of its or their properties or assets or any part thereof or
in respect of any of its or their franchises, businesses, income or profits.
"Term Loan" has the meaning described in Section 2.2.1 (Term Loan
Commitment).
"Term Loan Commitment" has the meaning described in Section 2.2.1 (Term
Loan Commitment).
"Term Loan Committed Amount" has the meaning described in Section 2.2.1
(Term Loan Commitment).
"Term Loan Facilities" means the facilities for the Term Loan and the 2006
Term Loan established by the Lender pursuant to Section 2.2 (Term Loan
Facilities).
"Term Loan Optional Prepayment" and "Term Loan Optional Prepayments" have
the meanings described in Section 2.2.3 (Optional Prepayments of Term Loans).
"Term Loan Reserve" means (i) for the first eighteen (18) months following
the Closing Date, Seven Hundred Fifty Thousand Dollars ($750,000), and (ii) if
there is an outstanding principal balance with respect to the 2006 Term Loan in
the nineteenth (19th) month or thereafter, an amount equal to (a) Seven Hundred
Fifty Thousand Dollars ($750,000), minus (b) the sum of all payments of
principal made by the Borrowers to the Lender on account of the 2006 Term Loan.
"Term Note" has the meaning described in Section 2.2.1(b) (The Term Note).
"Trademarks" means and includes in each case whether now existing or
hereafter arising, all of each Borrower's rights, title and interest in and to
(a) any and all trademarks (including service marks), trade names and trade
styles, and applications for registration thereof and the goodwill of the
business symbolized by any of the foregoing, including without limitation, those
set forth in Schedule 1.1 attached hereto, (b) any and all licenses of
trademarks, service marks, trade names and/or trade styles, whether as licensor
or licensee, (c) any renewals of any and all trademarks, service marks, trade
names, trade styles and/or licenses of any of the foregoing, (d) income,
royalties, damages and payments now or hereafter due and/or payable with respect
thereto, including, without limitation, damages, claims, and payments for past,
present and future infringements thereof, (e) rights to xxx for past, present
and future infringements of any of the foregoing, including the right to settle
suits involving claims and demands for royalties owing, and (f) all rights
corresponding to any of the foregoing throughout the world.
18
"Uniform Commercial Code" means, unless otherwise provided in this
Agreement, the Uniform Commercial Code as adopted by and in effect from time to
time in the State or in any other jurisdiction, as applicable.
"Wholly Owned Subsidiary" means any domestic United States corporation,
all the shares of stock of all classes of which (other than directors'
qualifying shares) at the time are owned directly or indirectly by a Borrower
and/or by one or more Wholly Owned Subsidiaries of a Borrower.
Section 1.2 Accounting Terms and Other Definitional Provisions.
Unless otherwise defined herein, as used in this Agreement and in any
certificate, report or other document made or delivered pursuant hereto,
accounting terms not otherwise defined herein, and accounting terms only partly
defined herein, to the extent not defined, shall have the respective meanings
given to them under GAAP, as consistently applied to the applicable Person. All
terms used herein which are defined by the Uniform Commercial Code shall have
the same meanings as assigned to them by the Uniform Commercial Code unless and
to the extent varied by this Agreement. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and article, section, subsection, schedule and exhibit references are
references to articles, sections or subsections of, or schedules or exhibits to,
as the case may be, this Agreement unless otherwise specified. As used herein,
the singular number shall include the plural, the plural the singular and the
use of the masculine, feminine or neuter gender shall include all genders, as
the context may require. Reference to any one or more of the Financing Documents
shall mean the same as the foregoing may from time to time be amended, restated,
substituted, extended, renewed, supplemented or otherwise modified. Reference in
this Agreement and the other Financing Documents to the "Borrower", the
"Borrowers", "each Borrower" or otherwise with respect to any one or more of the
Borrowers shall mean each and every Borrower and any one or more of the
Borrowers, jointly and severally, unless a specific Borrower is expressly
identified.
ARTICLE II
THE CREDIT FACILITIES
Section 2.1 The Revolving Credit Facility.
2.1.1 Revolving Credit Facility.
Subject to and upon the provisions of this Agreement, the Lender
establishes a revolving credit facility in favor of the Borrowers. The aggregate
of all advances under the Revolving Credit Facility is sometimes referred to in
this Agreement as the "Revolving Loan".
19
The principal amount of Four Million Two Hundred Fifty Thousand
Dollars ($4,250,000) is the "Revolving Credit Committed Amount".
During the Revolving Credit Commitment Period, any or all of the
Borrowers may request advances under the Revolving Credit Facility in accordance
with the provisions of this Agreement; provided that after giving effect to any
Borrower's request the aggregate outstanding principal balance of the Revolving
Loan would not exceed (a) the lesser of the Revolving Credit Committed Amount or
(b) the then most current Borrowing Base, minus the Term Loan Reserve.
Unless sooner paid, the unpaid Revolving Loan, together with
interest accrued and unpaid thereon, and all other Obligations shall be due and
payable in full on the Revolving Credit Expiration Date.
2.1.2 Procedure for Making Advances Under the Revolving Loan; Lender
Protection Loans.
The Borrowers may borrow under the Revolving Credit Facility on any
Business Day. Advances under the Revolving Loan shall be deposited to a demand
deposit account of a Borrower with the Lender (or an Affiliate of the Lender) or
shall be otherwise applied as directed by the Borrowers, which direction the
Lender may require to be in writing. No later than 11:00 a.m. (Eastern Time) on
the date of the requested borrowing, the Borrowers shall give the Lender oral or
written notice (a "Loan Notice") of the amount and (if requested by the Lender)
the purpose of the requested borrowing. Any oral Loan Notice shall be confirmed
in writing by the Borrowers within three (3) Business Days after the making of
the requested advance under the Revolving Loan. Each Loan Notice shall be
irrevocable.
In addition, each of the Borrowers hereby irrevocably authorizes the
Lender at any time and from time to time, without further request from or notice
to the Borrowers, to make advances under the Revolving Loan, and to establish,
without duplication reserves against the Borrowing Base, which the Lender, in
its sole and absolute discretion, deems necessary or appropriate to protect the
interests of the Lender, including, without limitation, advances and reserves
under the Revolving Loan made to cover debit balances in the Revolving Loan
Account, principal of, and/or interest on, any Loan, the Obligations, and/or
Enforcement Costs, prior to, on, or after the termination of other advances
under this Agreement, regardless of whether the outstanding principal amount of
the Revolving Loan that the Lender may advance or reserve hereunder exceeds the
Revolving Credit Committed Amount. Notwithstanding the foregoing, prior to the
occurrence of any Default, the Lender will provide notice of any advances made
under the Revolving Loan pursuant to this provision.
2.1.3 Revolving Credit Note.
The obligation of the Borrowers to pay the Revolving Loan, with
interest, shall be evidenced by a promissory note (as from time to time
extended, amended, restated, supplemented or otherwise modified, the "Revolving
Credit Note") substantially in the form of EXHIBIT B-1 attached hereto and made
a part hereof, with appropriate insertions. The Borrowers shall execute and
deliver to the Lender on the date hereof the Revolving Credit Note in
substitution for and not satisfaction of, the issued and outstanding Revolving
Credit Note, and the Revolving Credit Note shall be the "Revolving Credit Note"
for all purposes of the Financing Documents. The Note being substituted pursuant
to this Agreement shall be marked "Replaced" and returned to the Borrowers after
the execution of this Agreement. The Revolving Credit Note shall be dated as of
the Closing Date, shall be payable to the order of the Lender at the times
provided in the Revolving Credit Note, and shall be in the principal amount of
the Revolving Credit Committed Amount. The Revolving Credit Note shall not
operate as a novation of any of the Obligations or nullify, discharge, or
release any such Obligations under the Original Financing Agreement or the
continuing contractual relationship of the parties hereto in accordance with the
provisions of this Agreement.
20
Each of the Borrowers acknowledges and agrees that, if the
outstanding principal balance of the Revolving Loan outstanding from time to
time exceeds the face amount of the lesser of (a) the Revolving Credit Committed
Amount or (b) the then most current Borrowing Base, minus the Term Loan Reserve,
the excess shall bear interest at the Post-Default Rate for the Revolving Loan
and shall be payable, with accrued interest, ON DEMAND.
2.1.4 Optional Prepayments of Revolving Loan.
The Borrowers shall have the option at any time and from time to
time to prepay (each a "Revolving Loan Optional Prepayment" and collectively the
"Revolving Loan Optional Prepayments") the Revolving Loan, in whole or in part
without premium or penalty.
2.1.5 Treasury Management.
The Borrowers will provide the Lender with a list of all depository
and investment accounts now or hereafter maintained with other financial
institutions and upon request of the Lender, will obtain blocked account
agreements in form and substance satisfactory to the Lender from such
institutions; provided, however, that the provisions of this Section 2.1.5 shall
not apply to deposit accounts used for payroll, payroll taxes and other employee
wage and benefit payments to or for the benefit of Borrowers' employees.
2.1.6 Revolving Loan Account.
The Lender will establish and maintain a loan account on its books
(the "Revolving Loan Account") to which the Lender will (a) debit (i) the
principal amount of each advance of the Revolving Loan made by the Lender
hereunder as of the date made, (ii) the amount of any interest accrued on the
Revolving Loan as and when due, and (iii) any other amounts due and payable by
the Borrowers to the Lender from time to time under the provisions of this
Agreement in connection with the Revolving Loan, including, without limitation,
Enforcement Costs, Fees, late charges, and service, collection and audit fees,
as and when due and payable, and (b) credit all payments made by the Borrowers
to the Lender on account of the Revolving Loan as of the date made. The Lender
may debit the Revolving Loan Account for the amount of any Item of Payment that
is returned to the Lender unpaid. All credit entries to the Revolving Loan
Account are conditional and shall be readjusted as of the date made if final and
indefeasible payment is not received by the Lender in cash or solvent credits.
Any and all periodic or other statements or reconciliations, and the information
contained in those statements or reconciliations, of the Revolving Loan Account
shall be final, binding and conclusive upon the Borrowers in all respects,
absent manifest error, unless the Lender receives specific written objection
thereto from the Borrowers within thirty (30) Business Days after such statement
or reconciliation shall have been sent by the Lender.
21
2.1.7 Revolving Credit Unused Line Fee.
The Borrowers shall pay to the Lender a revolving credit facility
fee (collectively, the "Revolving Credit Unused Line Fees" and individually, a
"Revolving Credit Unused Line Fee") in an amount equal to three eighths of one
percent (.375%) per annum of the average daily unused and undisbursed portion of
the Revolving Credit Committed Amount in effect from time to time accruing
during each month. The accrued and unpaid portion of the Revolving Credit Unused
Line Fee shall be paid by the Borrowers to the Lender monthly in arrears on the
last day of each month, commencing on the first such date following the date
hereof, and on the Revolving Credit Termination Date.
2.1.8 Borrowing Base.
As used in this Agreement, the term "Borrowing Base" means at any
time, an amount equal to the aggregate of (a) eighty percent (80%) of the amount
of Eligible Receivables, plus (b) fifty percent (50%) of the amount of Eligible
Inventory.
The Borrowing Base shall be computed based on the Borrowing Base
Report most recently delivered to and accepted by the Lender in its sole and
absolute discretion. In the event the Borrowers fail to furnish a Borrowing Base
Report required by Section 2.1.9 (Borrowing Base Report), or in the event the
Lender believes that a Borrowing Base Report is no longer accurate, the Lender
may, in its sole and absolute discretion exercised from time to time and without
limiting its other rights and remedies under this Agreement, suspend the making
of or limit advances under the Revolving Loan. The Borrowing Base shall be
subject to reduction by the amount of any Receivable or any Inventory which was
included in the Borrowing Base but which the Lender determines fails to meet the
respective criteria applicable from time to time for Eligible Receivables or
Eligible Inventory.
If at any time the total of the aggregate principal amount of the
Revolving Loan exceeds the Borrowing Base, a borrowing base deficiency
("Borrowing Base Deficiency") shall exist. Each time a Borrowing Base Deficiency
exists, the Borrowers at the sole and absolute discretion of the Lender
exercised from time to time shall pay the Borrowing Base Deficiency ON DEMAND to
the Lender.
Without implying any limitation on the Lender's discretion with
respect to the Borrowing Base, the criteria for Eligible Receivables and for
Eligible Inventory contained in the respective definitions of Eligible
Receivables and of Eligible Inventory are in part based upon the business
operations of the Borrowers existing on or about the Closing Date and upon
information and records furnished to the Lender by the Borrowers. If at any time
or from time to time hereafter, the business operations of the Borrowers change
or such information and records furnished to the Lender is incorrect or
misleading, the Lender in its discretion, may at any time and from time to time
during the duration of this Agreement change such criteria or add new criteria.
The Lender may communicate such changed or additional criteria to the Borrowers
from time to time either orally or in writing.
2.1.9 Borrowing Base Report
The Borrowers will furnish to the Lender no less frequently than
monthly and at such other times as may be requested by the Lender a report of
the Borrowing Base (each a "Borrowing Base Report"; collectively, the "Borrowing
Base Reports") in the form required from time to time by the Lender,
appropriately completed and duly signed. The Borrowing Base Report shall contain
the amount and payments on the Receivables, the value of Inventory, and the
calculations of the Borrowing Base, all in such detail, and accompanied by such
supporting and other information, as the Lender may from time to time request.
Upon the Lender's request and upon the creation of any Receivables, or at such
other intervals as the Lender may require, the Borrowers will provide the Lender
with (a) copies of Account Debtor invoices; (b) evidence of shipment or
delivery; and (c) such further schedules, documents and/or information regarding
the Receivables and the Inventory as the Lender may reasonably require. The
items to be provided under this subsection shall be in form satisfactory to the
Lender, and certified as true and correct by a Responsible Officer (or by any
other officers or employees of the Borrower whom a Responsible Officer from time
to time authorizes in writing to do so), and delivered to the Lender from time
to time solely for the Lender's convenience in maintaining records of the
Collateral. Any Borrower's failure to deliver any of such items to the Lender
shall not affect, terminate, modify, or otherwise limit the Liens of the Lender
on the Collateral.
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2.1.10 Mandatory Prepayments of Revolving Loan.
The Borrowers shall make the mandatory prepayments (each a
"Revolving Loan Mandatory Prepayment" and collectively, the "Revolving Loan
Mandatory Prepayments") of the Revolving Loan at any time and from time to time
in such amounts requested by the Lender pursuant to Section 2.1.8 (Borrowing
Base) in order to cover any Borrowing Base Deficiency.
2.1.11 The Collateral Account.
If the Lender requests, the Borrowers will deposit, or cause to be
deposited, all Items of Payment to a bank account designated by the Lender and
from which the Lender alone has power of access and withdrawal (the "Collateral
Account"). When a Collateral Account is in existence, each deposit shall be made
not later than the next Business Day after the date of receipt of the Items of
Payment. The Items of Payment shall be deposited in precisely the form received,
except for the endorsements of the Borrowers where necessary to permit the
collection of any such Items of Payment, which endorsement the Borrowers hereby
agree to make. In the event the Borrowers fail to do so, the Borrowers hereby
authorize the Lender to make the endorsement in the name of any or all of the
Borrowers. During any period when a Collateral Account is in place, prior to
such a deposit, the Borrowers will not commingle any Items of Payment with any
of the Borrowers' other funds or property, but will hold them separate and apart
in trust and for the account of the Lender.
In addition, if so directed by the Lender, the Borrowers shall
direct the mailing of all Items of Payment from their Account Debtors to one or
more post-office boxes designated by the Lender, or to such other additional or
replacement post-office boxes pursuant to the request of the Lender from time to
time (collectively, the "Lockbox"). The Lender shall have unrestricted and
exclusive access to the Lockbox.
After a Collateral Account is established, the Borrowers hereby
authorize the Lender to inspect all Items of Payment, endorse all Items of
Payment in the name of any or all of the Borrowers, and deposit such Items of
Payment in the Collateral Account. The Lender reserves the right, exercised in
its sole and absolute discretion from time to time, to provide to the Collateral
Account credit prior to final collection of an Item of Payment and to disallow
credit for any Item of Payment which is unsatisfactory to the Lender. In the
event Items of Payment are returned to the Lender for any reason whatsoever, the
Lender may, in the exercise of its discretion from time to time, forward such
Items of Payment a second time. Any returned Items of Payment shall be charged
back to the Collateral Account, the Revolving Loan Account, or other account, as
appropriate.
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The Lender will apply the whole or any part of the collected funds
credited to the Collateral Account against the Revolving Loan (or with respect
to Items of Payment that are not proceeds of Accounts or Inventory or after an
Event of Default, against any of the Obligations) or credit such collected funds
to a depository account of any or all of the Borrowers with the Lender (or an
Affiliate of the Lender), the order and method of such application to be in the
sole discretion of the Lender. On the first day of each month, the Borrowers
shall pay the Lender an amount equal to the additional interest which would have
accrued on the Revolving Loan during the preceding month if collections in the
Collateral Account during the month had been received two (2) Business Days
subsequent to their actual receipt; any resulting increase in the amount of
interest payable by the Borrowers shall be part of the Obligations.
2.1.12 Revolving Loan Fee.
The Borrowers shall pay to the Lender a non-refundable loan fee of
Ten Thousand Dollars ($10,000) on or before the Closing Date (the "Revolving
Loan Fee"). The Revolving Loan Fee is earned when paid.
Section 2.2 The Term Loan Facilities.
2.2.1 The 2003 Term Loan Facility.
(a) Term Loan Commitment.
The Lender has made a loan (the "Term Loan") to the Borrowers in the
principal amount of One Million Two Hundred Thousand Dollars ($1,200,000) (the
"Term Loan Committed Amount"). The obligation of the Lender to make the Term
Loan is herein called its "Term Loan Commitment". The Term Loan has a principal
outstanding balance as of May 1, 2006 of One Hundred Thousand Dollars and Eleven
Cents ($100,000.11).
(b) The Term Note.
The obligation of the Borrowers to pay the Term Loan with interest
is evidenced by a promissory note dated August 19, 2003 (as from time to time
extended, amended, restated, supplemented or otherwise modified, the "Term
Note") made a part hereof. The Term Note shall remain in full force and effect
without setoff, and the Borrowers shall continue to pay the Term Note in
accordance with the terms hereof and thereof.
2.2.2 The 2006 Term Loan Facility.
(a) 2006 Term Loan Commitment.
Subject to and upon the provisions of this Agreement, including,
without limitation, the provisions of Section 5.3 of this Agreement, the Lender
agrees to make a loan (the "2006 Term Loan") to the Borrowers if requested in
writing by the Borrowers within one hundred twenty (120) days of the Closing
Date (the "2006 Term Loan Availability End Date") in the principal amount of One
Million Five Hundred Thousand Dollars ($1,500,000) (the "2006 Term Loan
Committed Amount"). The obligation of the Lender to make the 2006 Term Loan is
herein called its "2006 Term Loan Commitment".
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(b) The 2006 Term Note.
The obligation of the Borrowers to pay the 2006 Term Loan with
interest shall be evidenced by a promissory note (as from time to time extended,
amended, restated, supplemented or otherwise modified, the "2006 Term Note")
substantially in the form of EXHIBIT B-3 attached hereto and made a part hereof
with appropriate insertions.
2.2.3 Optional Prepayments of Term Loans.
The Borrowers may, at their option, at any time and from time to
time, prepay (each a "Term Loan Optional Prepayment" and collectively the "Term
Loan Optional Prepayments") the Term Loan or the 2006 Term Loan, in whole or in
part, upon five (5) Business Days prior written notice, specifying the date and
amount of prepayment. The amount to be so prepaid, together with interest
accrued thereon to date of prepayment if the amount is intended as a prepayment
of the Term Loan or the 2006 Term Loan in whole, shall be paid by the Borrowers
to the Lender on the date specified for such prepayment. Partial Term Loan
Optional Prepayments shall be in an amount not less than the amount of the next
principal installment under the Term Note or the 2006 Term Loan, as applicable,
and shall be applied first to all accrued and unpaid interest on the principal
of the Term Note or the 2006 Term Note, as applicable, then to the balloon
payment due at maturity, if any, and then to principal against the principal
installments in the inverse order of their maturity.
2.2.4 The 2006 Term Loan Fee.
The Borrowers shall pay to the Lender a non-refundable fee of
Eighteen Thousand Seven Hundred and Fifty Dollars ($18,750) on or before the
Closing Date (the "2006 Term Loan Fee"). The Term Loan Fee is earned when paid.
The Borrowers understand and agree that in the event the Borrowers fail to fully
satisfy the conditions set forth in Section 5.3 for making the 2006 Term Loan,
on or prior to the 2006 Term Loan Availability End Date, the Lender shall not
return the 2006 Term Loan Fee.
Section 2.3 General Financing Provisions.
2.3.1 Borrowers' Representatives.
The Borrowers hereby represent and warrant to the Lender that each
of them will derive benefits, directly and indirectly, from each Loan, both in
their separate capacity and as a member of the integrated group to which each of
the Borrowers belong and because the successful operation of the integrated
group is dependent upon the continued successful performance of the functions of
the integrated group as a whole, because (a) the terms of the consolidated
financing provided under this Agreement are more favorable than would otherwise
be obtainable by the Borrowers individually, (b) this financing has enabled a
certain purchase agreement transaction and (c) Borrowers' additional
administrative and other costs and reduced flexibility associated with
individual financing arrangements which would otherwise be required if
obtainable would substantially reduce the value to the Borrowers of the
financing. The Borrowers in the discretion of their respective managements are
to agree among themselves as to the allocation of proceeds of the Loan,
provided, however, that the Borrowers shall be deemed to have represented and
warranted to the Lender at the time of allocation that each benefit and use of
proceeds is a Permitted Use.
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For administrative convenience, each Borrower hereby irrevocably
appoints Argan as the Borrower's attorney-in-fact, with power of substitution
(with the prior written consent of the Lender in the exercise of its sole and
absolute discretion), in the name of Argan or in the name of any Borrower or
otherwise to take any and all actions with respect to the this Agreement, the
other Financing Documents, the Obligations and/or the Collateral (including,
without limitation, the Proceeds thereof) as Argan may so elect from time to
time, including, without limitation, actions to (i) request advances under the
Loan and direct the Lender to disburse or credit the proceeds of any Loan
directly to an account of Argan any one or more of the Borrowers or otherwise,
which direction shall evidence the making of such Loan and shall constitute the
acknowledgment by each of the Borrowers of the receipt of the proceeds of such
Loan, (ii) enter into, execute, deliver, amend, modify, restate, substitute,
extend and/or renew this Agreement, any Additional Borrower Joinder Supplement,
any other Financing Documents, security agreements, mortgages, deposit account
agreements, instruments, certificates, waivers, letter of credit applications,
releases, documents and agreements from time to time, and (iii) endorse any
check or other item of payment in the name of the Borrower or in the name of
Argan. The foregoing appointment is coupled with an interest, cannot be revoked
without the prior written consent of the Lender, and may be exercised from time
to time through Argan's duly authorized officer, officers or other Person or
Persons designated by Argan to act from time to time on behalf of Argan.
Each of the Borrowers hereby irrevocably authorizes the Lender to
make Loans to any one or more of the Borrowers pursuant to the provisions of
this Agreement upon the written, oral or telephone request of any one or more of
the Persons who is from time to time a Responsible Officer of a Borrower under
the provisions of the most recent certificate of corporate resolutions and/or
incumbency of the Borrowers on file with the Lender and also upon the written,
oral or telephone request of any one of the Persons who is from time to time a
Responsible Officer of Argan under the provisions of the most recent certificate
of corporate resolutions and/or incumbency for Argan on file with the Lender.
The Lender assumes no responsibility or liability for any errors,
mistakes, and/or discrepancies in the oral, telephonic, written or other
transmissions of any instructions, orders, requests and confirmations between
the Lender and the Borrowers in connection with the Credit Facilities, any Loan
or any other transaction in connection with the provisions of this Agreement.
Without implying any limitation on the joint and several nature of the
Obligations, the Lender agrees that, notwithstanding any other provision of this
Agreement, the Borrowers may create reasonable inter-company indebtedness
between or among the Borrowers with respect to the allocation of the benefits
and proceeds of the advances and Credit Facilities under this Agreement. The
Borrowers agree among themselves, and the Lender consents to that agreement,
that each Borrower shall have rights of contribution from all of the other
Borrowers to the extent such Borrower incurs Obligations in excess of the
proceeds of the Loans received by, or allocated to purposes for the direct
benefit of, such Borrower. All such indebtedness and rights shall be, and are
hereby agreed by the Borrowers to be, subordinate in priority and payment to the
indefeasible repayment in full in cash of the Obligations, and, unless the
Lender agrees in writing otherwise, shall not be exercised or repaid in whole or
in part until all of the Obligations have been indefeasibly paid in full in
cash. The Borrowers agree that all of such inter-company indebtedness and rights
of contribution are part of the Collateral and secure the Obligations. Each
Borrower hereby waives all rights of counterclaim, recoupment and offset between
or among themselves arising on account of that indebtedness and otherwise. Each
Borrower shall not evidence the inter-company indebtedness or rights of
contribution by note or other instrument, and shall not secure such indebtedness
or rights of contribution with any Lien or security. Notwithstanding anything
contained in this Agreement to the contrary, the amount covered by each Borrower
under the Obligations (including, without limitation, Section 2.3.8 (Guaranty))
shall be limited to an aggregate amount (after giving effect to any collections
from, rights to receive contribution from or payments made by or on behalf of
any other Borrower in respect of the Obligations) which, together with other
amounts owing by such Borrowers to the Lender under the Obligations, is equal to
the largest amount that would not be subject to avoidance under the Bankruptcy
Code or any applicable provisions of any applicable, comparable state or other
Laws.
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2.3.2 Use of Proceeds of the Loans.
The proceeds of each advance under the Loans shall be used by the
Borrowers for Permitted Uses, and for no other purposes except as may otherwise
be agreed by the Lender in writing. The Borrowers shall use the proceeds of the
Loans promptly.
2.3.3 Computation of Interest and Fees.
All applicable Fees and interest shall be calculated on the basis of
a year of 360 days for the actual number of days elapsed. Any change in the
interest rate on any of the Obligations resulting from a change in the LIBOR
Rate shall become effective as of the opening of business on the day on which
such change in the LIBOR Rate is announced.
2.3.4 Maximum Interest Rate.
In no event shall any interest rate provided for hereunder exceed
the maximum rate permissible for corporate borrowers under applicable law for
loans of the type provided for hereunder (the "Maximum Rate"). If, in any month,
any interest rate, absent such limitation, would have exceeded the Maximum Rate,
then the interest rate for that month shall be the Maximum Rate, and, if in
future months, that interest rate would otherwise be less than the Maximum Rate,
then that interest rate shall remain at the Maximum Rate until such time as the
amount of interest paid hereunder equals the amount of interest which would have
been paid if the same had not been limited by the Maximum Rate. In the event
that, upon payment in full of the Obligations, the total amount of interest paid
or accrued under the terms of this Agreement is less than the total amount of
interest which would, but for this Section, have been paid or accrued if the
interest rates otherwise set forth in this Agreement had at all times been in
effect, then the Borrowers shall, to the extent permitted by applicable law, pay
the Lender, an amount equal to the excess of (a) the lesser of (i) the amount of
interest which would have been charged if the Maximum Rate had, at all times,
been in effect or (ii) the amount of interest which would have accrued had the
interest rates otherwise set forth in this Agreement, at all times, been in
effect over (b) the amount of interest actually paid or accrued under this
Agreement. In the event that a court determines that the Lender has received
interest and other charges hereunder in excess of the Maximum Rate, such excess
shall be deemed received on account of, and shall automatically be applied to
reduce, the Obligations other than interest, in the inverse order of maturity,
and if there are no Obligations outstanding, the Lender shall refund to the
Borrowers such excess.
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2.3.5 Payments.
All payments of the Obligations, including, without limitation,
principal, interest, Prepayments, and Fees, shall be paid by the Borrowers
without setoff, recoupment or counterclaim to the Lender in immediately
available funds not later than 12:00 p.m. (Eastern Time) on the due date of such
payment. All payments received by the Lender after such time shall be deemed to
have been received by the Lender for purposes of computing interest and Fees and
otherwise as of the next Business Day. Payments shall not be considered received
by the Lender until such payments are paid to the Lender in immediately
available funds to the Lender's principal office in Rockville, Maryland or at
such other location as the Lender may at any time and from time to time notify
the Borrowers. Alternatively, at its sole discretion, the Lender may charge any
deposit account of the Borrowers at the Lender or any Affiliate of the Lender
with all or any part of any amount due to the Lender under this Agreement or any
of the other Financing Documents to the extent that the Borrowers shall have not
otherwise tendered payment to the Lender.
2.3.6 Liens; Setoff.
The Borrowers hereby grant to the Lender as additional collateral
and security for all of the Obligations, a continuing Lien on any and all
monies, Investment Property, and other property of the Borrowers and the
proceeds thereof, now or hereafter held or received by or in transit to, the
Lender, and/or any Affiliate of the Lender, from or for the account of, the
Borrowers, and also upon any and all deposit accounts (general or special) and
credits of the Borrowers, if any, with the Lender or any Affiliate of the
Lender, at any time existing, excluding any deposit accounts held by the
Borrowers in their capacity as trustee for Persons who are not Borrowers or
Affiliates of the Borrowers. Without implying any limitation on any other rights
the Lender may have under the Financing Documents or applicable Laws, during the
continuance of an Event of Default, the Lender is hereby authorized by the
Borrowers at any time and from time to time, without notice to the Borrowers, to
set off, appropriate and apply any or all items hereinabove referred to against
all Obligations then outstanding (whether or not then due), all in such order
and manner as shall be determined by the Lender in its sole and absolute
discretion.
2.3.7 Requirements of Law.
In the event that the Lender shall have determined in good faith
that (a) the adoption of any Capital Adequacy Regulation, or (b) any change in
any Capital Adequacy Regulation or in the interpretation or application thereof
or (c) compliance by the Lender or any corporation controlling the Lender with
any request or directive regarding capital adequacy (whether or not having the
force of law) from any central bank or Governmental Authority, does or shall
have the effect of reducing the rate of return on the capital of the Lender or
any corporation controlling the Lender, as a consequence of the obligations of
the Lender hereunder to a level below that which the Lender or any corporation
controlling the Lender would have achieved but for such adoption, change or
compliance (taking into consideration the policies of the Lender and the
corporation controlling the Lender, with respect to capital adequacy) by an
amount deemed by the Lender, in its reasonable discretion, to be material, then
from time to time, after submission by the Lender to the Borrowers of a written
request therefore and a statement of the basis for such determination, the
Borrowers shall pay to the Lender such additional amount or amounts in order to
compensate the Lender or its controlling corporation for any such reduction.
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2.3.8 Guaranty.
(a) Each Borrower hereby unconditionally and irrevocably,
guarantees to the Lender:
(i) the due and punctual payment in full (and not merely
the collectibility) by the other Borrowers of the Obligations,
including unpaid and accrued interest thereon, in each case
when due and payable, all according to the terms of this
Agreement, the Notes and the other Financing Documents;
(ii) the due and punctual payment in full (and not
merely the collectibility) by the other Borrowers of all other
sums and charges which may at any time be due and payable in
accordance with this Agreement, the Notes or any of the other
Financing Documents;
(iii) the due and punctual performance by the other
Borrowers of all of the other terms, covenants and conditions
contained in the Financing Documents; and
(iv) all the other Obligations of the other Borrowers.
(b) The obligations and liabilities of each Borrower as a
guarantor under this Section 2.3.8 shall be absolute and unconditional and joint
and several, irrespective of the genuineness, validity, priority, regularity or
enforceability of this Agreement, any of the Notes or any of the Financing
Documents or any other circumstance which might otherwise constitute a legal or
equitable discharge of a surety or guarantor. Each Borrower in its capacity as a
guarantor expressly agrees that the Lender may, in its sole and absolute
discretion, without notice to or further assent of such Borrower and without in
any way releasing, affecting or in any way impairing the joint and several
obligations and liabilities of such Borrower as a guarantor hereunder:
(i) waive compliance with, or any defaults under, or
grant any other indulgences under or with respect to any of
the Financing Documents;
(ii) modify, amend, change or terminate any provisions
of any of the Financing Documents;
(iii) grant extensions or renewals of or with respect to
the Credit Facilities, the Notes or any of the other Financing
Documents;
(iv) effect any release, subordination, compromise or
settlement in connection with this Agreement, any of the Notes
or any of the other Financing Documents;
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(v) agree to the substitution, exchange, release or
other disposition of the Collateral or any part thereof, or
any other collateral for the Loan or to the subordination of
any lien or security interest therein;
(vi) make advances for the purpose of performing any
term, provision or covenant contained in this Agreement, any
of the Notes or any of the other Financing Documents with
respect to which the Borrowers shall then be in default;
(vii) make future advances pursuant to this Agreement or
any of the other Financing Documents;
(viii) assign, pledge, hypothecate or otherwise transfer
the Commitments, the Obligations, the Notes, any of the other
Financing Documents or any interest therein, all as and to the
extent permitted by the provisions of this Agreement;
(ix) deal in all respects with the other Borrowers as if
this Section 2.3.8 were not in effect;
(x) effect any release, compromise or settlement with
any of the other Borrowers, whether in their capacity as a
Borrower or as a guarantor under this Section 2.3.8, or any
other guarantor; and
(xi) provide debtor-in-possession financing or allow use
of cash collateral in proceedings under the Bankruptcy Code,
it being expressly agreed by all Borrowers that any such
financing and/or use would be part of the Obligations.
(c) The obligations and liabilities of each Borrower, as
guarantor under this Section 2.3.8, shall be primary, direct and immediate,
shall not be subject to any counterclaim, recoupment, set off, reduction or
defense based upon any claim that a Borrower may have against any one or more of
the other Borrowers, the Lender, and/or any other guarantor and shall not be
conditional or contingent upon pursuit or enforcement by the Lender of any
remedies it may have against the Borrowers with respect to this Agreement, the
Notes or any of the other Financing Documents, whether pursuant to the terms
thereof or by operation of law. Without limiting the generality of the
foregoing, the Lender shall not be required to make any demand upon any of the
Borrowers, or to sell the Collateral or otherwise pursue, enforce or exhaust its
remedies against the Borrowers or the Collateral either before, concurrently
with or after pursuing or enforcing its rights and remedies hereunder. Any one
or more successive or concurrent actions or proceedings may be brought against
each Borrower under this Section 2.3.8, either in the same action, if any,
brought against any one or more of the Borrowers or in separate actions or
proceedings, as often as the Lender may deem expedient or advisable. Without
limiting the foregoing, it is specifically understood that any modification,
limitation or discharge of any of the liabilities or obligations of any one or
more of the Borrowers, any other guarantor or any obligor under any of the
Financing Documents, arising out of, or by virtue of, any bankruptcy,
arrangement, reorganization or similar proceeding for relief of debtors under
federal or state law initiated by or against any one or more of the Borrowers,
in their respective capacities as borrowers and guarantors under this Section
2.3.8, or under any of the Financing Documents shall not modify, limit, lessen,
reduce, impair, discharge, or otherwise affect the liability of each Borrower
under this Section 2.3.8 in any manner whatsoever, and this Section 2.3.8 shall
remain and continue in full force and effect. It is the intent and purpose of
this Section 2.3.8 that each Borrower shall and does hereby waive all rights and
benefits which might accrue to any other guarantor by reason of any such
proceeding, and the Borrowers agree that they shall be liable for the full
amount of the obligations and liabilities under this Section 2.3.8, regardless
of, and irrespective to, any modification, limitation or discharge of the
liability of any one or more of the Borrowers, any other guarantor or any
obligor under any of the Financing Documents, that may result from any such
proceedings.
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(d) Each Borrower, as guarantor under this Section 2.3.8,
hereby unconditionally, jointly and severally, irrevocably and expressly waives:
(i) presentment and demand for payment of the
Obligations and protest of non-payment;
(ii) notice of acceptance of this Section 2.3.8 and of
presentment, demand and protest thereof;
(iii) notice of any default hereunder or under the Notes
or any of the other Financing Documents and notice of all
indulgences;
(iv) notice of any increase in the amount of any portion
of or all of the indebtedness guaranteed by this Section
2.3.8;
(v) demand for observance, performance or enforcement of
any of the terms or provisions of this Section 2.3.8, the
Notes or any of the other Financing Documents;
(vi) all errors and omissions in connection with the
Lender's administration of all indebtedness guaranteed by this
Section 2.3.8, except errors and omissions resulting from the
Lender's gross negligence or willful misconduct;
(vii) any right or claim of right to cause a marshalling
of the assets of any one or more of the other Borrowers;
(viii) any act or omission of the Lender which changes
the scope of the risk as guarantor hereunder; and
(ix) all other notices and demands otherwise required by
law which the Borrower may lawfully waive.
Within ten (10) days following any request of the Lender so to do,
each Borrower will furnish the Lender and such other persons as the Lender may
direct with a written certificate, duly acknowledged stating in detail whether
or not any credits, offsets or defenses exist with respect to this Section
2.3.8.
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2.3.9 ACH Transactions and Swap Contracts.
The Borrowers may request and the Lender or its Affiliates may, in
their sole and absolute discretion, provide ACH Transactions and Swap Contracts.
In the event the Borrowers request Lender or its Affiliates to procure ACH
Transactions or Swap Contracts, then the Borrowers agree to indemnify and hold
the Lender or its Affiliates harmless from any and all obligations now or
hereafter owing to the Lender or its Affiliates. The Borrowers agree to pay the
Lender or its Affiliates all amounts owing to the Lender or its Affiliates
pursuant to ACH Transactions and Swap Contracts. In the event the Borrowers
shall not have paid to the Lender or its Affiliates such amounts, the Lender may
cover such amounts by an advance under the Revolving Loan, which advance shall
be deemed to have been requested by the Borrowers. The Borrowers acknowledge and
agree that the obtaining of ACH Transactions and Swap Contracts from the Lender
or its Affiliates (a) is in the sole and absolute discretion of the Lender or
its Affiliates and (b) is subject to all rules and regulations of the Lender or
its Affiliates.
ARTICLE III
THE COLLATERAL
Section 3.1 Debt and Obligations Secured.
All property and Liens assigned, pledged or otherwise granted under
or in connection with this Agreement (including, without limitation, those under
Section 3.2 (Grant of Liens)) or any of the Financing Documents shall secure (a)
the payment of all of the Obligations, and (b) the performance, compliance with
and observance by the Borrowers of the provisions of this Agreement and all of
the other Financing Documents or otherwise under the Obligations.
Section 3.2 Grant of Liens.
Each of the Borrowers hereby assigns, pledges and grants to the
Lender, and agrees that the Lender shall have a perfected and continuing
security interest in, and Lien on, all of the Borrowers' Accounts, Inventory,
Chattel Paper, Documents, Instruments, Equipment, Investment Property and
General Intangibles and all of the Borrowers' deposit accounts with any
financial institution with which any of the Borrowers maintains deposits,
whether now owned or existing or hereafter acquired or arising, all returned,
rejected or repossessed goods, the sale or lease of which shall have given or
shall give rise to an Account or Chattel Paper, all insurance policies relating
to the foregoing, all books and records in whatever media (paper, electronic or
otherwise) recorded or stored, with respect to the foregoing and all Equipment
and General Intangibles necessary or beneficial to retain, access and/or process
the information contained in those books and records, and all Proceeds and
products of the foregoing. Each of the Borrowers further agrees that the Lender
shall have in respect thereof all of the rights and remedies of a secured party
under the Uniform Commercial Code as well as those provided in this Agreement,
under each of the other Financing Documents and under applicable Laws.
Section 3.3 Collateral Disclosure List.
On or prior to the Closing Date, each of the Borrowers shall deliver
to the Lender a list (the "Collateral Disclosure List") which shall contain such
information with respect to such Borrower's business and real and personal
property as the Lender may require and shall be certified by a Responsible
Officer of such Borrower, all in the form provided to the Borrowers by the
Lender. Promptly after demand by the Lender, the Borrowers, as appropriate,
shall furnish to the Lender an update of the information contained in the
Collateral Disclosure List at any time and from time to time as may be requested
by the Lender.
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Section 3.4 Personal Property.
The Borrowers acknowledge and agree that it is the intention of the
parties to this Agreement that the Lender shall have a first priority, perfected
Lien, in form and substance satisfactory to the Lender and its counsel, on all
of the Borrowers' assets of any kind and nature whatsoever, whether now owned or
hereafter acquired, subject only to the Permitted Liens, if any. In furtherance
of the foregoing:
3.4.1 Investment Property, Chattel Paper, Promissory Notes, etc.
(a) On the Closing Date and without implying any limitation on
the scope of Section 3.2 (Grant of Liens), each of the Borrowers shall deliver
to the Lender the originals of all of its letters of credit, Investment
Property, Chattel Paper, Documents and Instruments and, if the Lender so
requires, shall execute and deliver separate pledge, assignment and security
agreements in form and content acceptable to the Lender, which pledge,
assignment and security agreements shall assign, pledge and xxxxx x Xxxx to the
Lender on all such Borrower's letters of credit, Investment Property, Chattel
Paper, Documents, and Instruments.
(b) In the event that any of the Borrowers shall acquire after
the Closing Date any letters of credit, Investment Property, Chattel Paper,
Documents, or Instruments, each such Borrower shall promptly so notify the
Lender and deliver the originals of all of the foregoing to the Lender promptly
and in any event within ten (10) days of each acquisition.
(c) All letters of credit, Investment Property, Chattel Paper,
Documents and Instruments shall be delivered to the Lender endorsed and/or
assigned as required by any pledge, assignment and security agreement and/or as
the Lender may require and, if applicable, shall be accompanied by blank
irrevocable and unconditional stock or bond powers and/or notices as the Lender
may require.
Section 3.5 Record Searches.
As of the Closing Date and thereafter at the time any Financing
Document is executed and delivered by the Borrowers pursuant to this Section,
the Lender shall have received, in form and substance satisfactory to the
Lender, such Lien or record searches with respect to all of the Borrowers and/or
any other Person, as appropriate, and the property covered by such Financing
Document showing that the Lien of such Financing Document will be a perfected
first priority Lien on the property covered by such Financing Document subject
only to Permitted Liens or to such other matters as the Lender may approve.
Section 3.6 Costs.
The Borrowers agree to pay, as part of the Enforcement Costs and to
the fullest extent permitted by applicable Laws, on demand all costs, fees and
expenses incurred by the Lender in connection with the taking, perfection,
preservation, protection and/or release of a Lien on the Collateral, including,
without limitation:
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(a) customary fees and expenses incurred in preparing
Financing Documents from time to time (including, without limitation, reasonable
attorneys' fees incurred in connection with preparing the Financing Documents,
including, any amendments and supplements thereto);
(b) all filing and/or recording taxes or fees;
(c) all costs of Lien and record searches;
(d) reasonable attorneys' fees in connection with all legal
opinions required; and
(e) all related costs, fees and expenses.
Section 3.7 Release.
Upon the indefeasible repayment in full in cash of the Obligations
and performance of all Obligations of the Borrowers and all obligations and
liabilities of each other Person, other than the Lender, under this Agreement
and all other Financing Documents, and the termination and/or expiration of all
of the Commitments, upon the Borrowers' request and at the Borrowers' sole cost
and expense, the Lender shall release and/or terminate any Financing Document
but only if and provided that there is no commitment or obligation (whether or
not conditional) of the Lender to re-advance amounts which would be secured
thereby.
Section 3.8 Inconsistent Provisions.
In the event that the provisions of any Financing Document directly
conflict with any provision of this Agreement, the provisions of this Agreement
govern.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties.
The Borrowers, for themselves and for each other, represent and
warrant to the Lender, as follows:
4.1.1 Subsidiaries.
The Borrowers have the Subsidiaries listed on the Collateral
Disclosure List and no others. Each of the Subsidiaries is a Wholly Owned
Subsidiary except as shown on the Collateral Disclosure List, which correctly
indicates the nature and amount of each Borrower's ownership interests therein.
4.1.2 Existence.
Each Borrower (a) is a Registered Organization under the laws of the
jurisdiction stated in the Preamble of this Agreement, (b) has the power to own
its property and to carry on its business as now being conducted, and (c) is
duly qualified to do business and is in good standing in each jurisdiction in
which the character of the properties owned by it therein or in which the
transaction of its business makes such qualification necessary. Each Borrower is
organized under the laws of only one (1) jurisdiction.
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4.1.3 Power and Authority.
Each Borrower has full power and authority to execute and deliver
this Agreement and the other Financing Documents to which it is a party, to make
the borrowings under this Agreement and to incur and perform the Obligations
whether under this Agreement, the other Financing Documents or otherwise, all of
which have been duly authorized by all proper and necessary action. No consent
or approval of owners or any creditors of any Borrower, and no consent,
approval, filing or registration with or notice to any Governmental Authority on
the part of any Borrower, is required as a condition to the execution, delivery,
validity or enforceability of this Agreement, or any of the other Financing
Documents, or the performance by any Borrower of the Obligations.
4.1.4 Binding Agreements.
This Agreement and the other Financing Documents executed and
delivered by the Borrowers have been properly executed and delivered and
constitute the valid and legally binding obligations of the Borrowers and are
fully enforceable against each of the Borrowers in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting the rights and remedies of
creditors and secured parties, and general principles of equity regardless of
whether applied in a proceeding in equity or at law.
4.1.5 No Conflicts.
Neither the execution, delivery and performance of the terms of this
Agreement or of any of the other Financing Documents executed and delivered by
any Borrower nor the consummation of the transactions contemplated by this
Agreement will conflict with, violate or be prevented by (a) any Borrower's
organizational or governing documents, (b) any existing mortgage, indenture,
contract or agreement binding on any Borrower or affecting its property, or (c)
any Laws.
4.1.6 No Defaults, Violations.
(a) No Default or Event of Default has occurred and is
continuing.
(b) None of the Borrowers nor any of their respective
Subsidiaries is in default under or with respect to any obligation under any
existing mortgage, indenture, contract or agreement binding on it or affecting
its property in any respect which could be materially adverse to the business,
operations, property or financial condition of any Borrower, or which could
materially adversely affect the ability of any Borrower to perform its
obligations under this Agreement or the other Financing Documents, to which any
Borrower is a party.
4.1.7 Compliance with Laws.
None of the Borrowers nor any of their respective Subsidiaries is in
violation of any applicable Laws (including, without limitation, any Laws
relating to employment practices, to environmental, occupational and health
standards and controls) or order, writ, injunction, decree or demand of any
court, arbitrator, or any Governmental Authority affecting any Borrower or any
of its properties, the violation of which, considered in the aggregate, could
materially adversely affect the business, operations or properties of any
Borrower and/or any Subsidiaries.
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4.1.8 Margin Stock.
None of the proceeds of the Loans will be used, directly or
indirectly, by any Borrower or any Subsidiary for the purpose of purchasing or
carrying, or for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry, any "margin stock" within the meaning
of Regulation U (12 CFR Part 221), of the Board of Governors of the Federal
Reserve System or for any other purpose which might make the transactions
contemplated in this Agreement a "purpose credit" within the meaning of
Regulation U, or cause this Agreement to violate any other regulation of the
Board of Governors of the Federal Reserve System or the Securities Exchange Act
of 1934 or the Small Business Investment Act of 1958, as amended, or any rules
or regulations promulgated under any of such statutes.
4.1.9 Investment Company Act; Margin Stock.
None of the Borrowers nor any of their respective Subsidiaries is an
investment company within the meaning of the Investment Company Act of 1940, as
amended, nor is it, directly or indirectly, controlled by or acting on behalf of
any Person which is an investment company within the meaning of said Act. None
of the Borrowers nor any of their respective Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying "margin stock" within the
meaning of Regulation U (12 CFR Part 221), of the Board of Governors of the
Federal Reserve System.
4.1.10 Litigation.
Except as otherwise disclosed on Schedule 4.1.10 attached hereto and
made a part hereof, there are no proceedings, actions or investigations pending
or, so far as any Borrower knows, threatened before or by any court, arbitrator
or any Governmental Authority which, in any one case or in the aggregate, if
determined adversely to the interests of any Borrower or any Subsidiary, would
have a material adverse effect on the business, properties, condition (financial
or otherwise) or operations, present or prospective, of any Borrower.
4.1.11 Financial Condition.
The consolidated financial statements of Argan dated January 31,
2006 are complete and correct and fairly present the financial position of each
of the Borrowers and their Subsidiaries and the results of their operations and
transactions in their surplus accounts as of the date and for the period
referred to and have been prepared in accordance with GAAP applied on a
consistent basis throughout the period involved. There are no liabilities,
direct or indirect, fixed or contingent, of any Borrower or any Subsidiary as of
the date of such financial statements that are not reflected therein or in the
notes thereto. There has been no adverse change in the financial condition or
operations of any Borrower or any Subsidiary since the date of such financial
statements and to the Borrowers' knowledge no such adverse change is pending or
threatened. None of the Borrowers nor any Subsidiary has guaranteed the
obligations of, or made any investment in or advances to, any Person, except as
disclosed in such financial statements.
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4.1.12 Full Disclosure.
The financial statements referred to in Section 4.1.11 (Financial
Condition), the Financing Documents (including, without limitation, this
Agreement), and the statements, reports or certificates furnished by any
Borrower in connection with the Financing Documents (a) do not contain any
untrue statement of a material fact and (b) when taken in their entirety, do not
omit any material fact necessary to make the statements contained therein not
misleading. There is no fact known to any Borrower which such Borrower has not
disclosed to the Lender in writing prior to the date of this Agreement with
respect to the transactions contemplated by the Financing Documents that
materially and adversely affects or in the future could, in the reasonable
opinion of that Borrower materially adversely affect the condition, financial or
otherwise, results of operations, business, or assets of any Borrower or any
Subsidiary.
4.1.13 Indebtedness for Borrowed Money.
Except for the Obligations and except as set forth in Schedule
4.1.13 attached hereto and made a part hereof, the Borrowers have no
Indebtedness for Borrowed Money. The Lender has received photocopies of all
promissory notes evidencing any Indebtedness for Borrowed Money set forth in
Error! Reference source not found., together with any and all subordination
agreements, other agreements, documents, or instruments securing, evidencing,
guarantying or otherwise executed and delivered in connection therewith.
4.1.14 Taxes.
Each of the Borrowers and its Subsidiaries has filed all returns,
reports and forms for Taxes that, to the knowledge of the Borrowers, are
required to be filed, and has paid all Taxes as shown on such returns or on any
assessment received by it, to the extent that such Taxes have become due, unless
and to the extent only that such Taxes, assessments and governmental charges are
currently contested in good faith and by appropriate proceedings by a Borrower,
such Taxes are not the subject of any Liens other than Permitted Liens, and
adequate reserves therefore have been established as required under GAAP. All
tax liabilities of the Borrowers were as of the date of audited financial
statements referred to in Section 4.1.11 (Financial Condition), and are now,
adequately provided for on the books of the Borrowers and their Subsidiaries, as
appropriate. No tax liability has been asserted by the Internal Revenue Service
or any state or local authority against any Borrower for Taxes in excess of
those already paid.
4.1.15 ERISA.
With respect to any Plan that is maintained or contributed to by any
Borrower and/or by any Commonly Controlled Entity or as to which any Borrower
retains material liability: (a) no "accumulated funding deficiency" as defined
in Code ss.412 or ERISA ss.302 has occurred, whether or not that accumulated
funding deficiency has been waived; (b) no Reportable Event has occurred other
than events for which reporting has been waived; (c) no termination of any plan
subject to Title IV of ERISA has occurred; (d) neither the Borrower nor any
Commonly Controlled Entity has incurred a "complete withdrawal" within the
meaning of ERISA ss.4203 from any Multi-employer Plan; (e) neither the Borrower
nor any Commonly Controlled Entity has incurred a "partial withdrawal" within
the meaning of ERISA ss.4205 with respect to any Multi-employer Plan; (f) no
Multi-employer Plan to which the Borrower or any Commonly Controlled Entity has
an obligation to contribute is in "reorganization" within the meaning of ERISA
ss.4241 nor has notice been received by the Borrower or any Commonly Controlled
Entity that such a Multi-employer Plan will be placed in "reorganization".
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4.1.16 Title to Properties.
The Borrowers have good and marketable title to all of their
respective properties, including, without limitation, the Collateral and the
properties and assets reflected in the balance sheets described in Section
4.1.11 (Financial Condition). The Borrowers have legal, enforceable and
uncontested rights to use freely such property and assets. All of such
properties, including, without limitation, the Collateral that were purchased,
were purchased for fair consideration and reasonably equivalent value in the
ordinary course of business of both the seller and the Borrowers and not, by way
of example only, as part of a bulk sale.
4.1.17 Patents, Trademarks, Etc.
Each of the Borrowers and its Subsidiaries owns, possesses, or has
the right to use all necessary Patents, licenses, Trademarks, Copyrights,
permits and franchises to own its properties and to conduct its business as now
conducted, without known conflict with the rights of any other Person. Any and
all obligations to pay royalties or other charges with respect to such
properties and assets are properly reflected on the financial statements
described in Section 4.1.11 (Financial Condition).
4.1.18 Employee Relations.
Except as disclosed on Schedule 4.1.18 attached hereto and made a
part hereof, (a) no Borrower nor any Subsidiary thereof nor any of the
Borrower's or Subsidiary's employees is subject to any collective bargaining
agreement, (b) no petition for certification or union election is pending with
respect to the employees of any Borrower or any Subsidiary and no union or
collective bargaining unit has sought such certification or recognition with
respect to the employees of a Borrower, (c) there are no strikes, slowdowns,
work stoppages or controversies pending or, to the best knowledge of the
Borrowers after due inquiry, threatened between any Borrower and its employees,
and (d) no Borrower nor any Subsidiaries is subject to an employment contract,
severance agreement, commission contract, consulting agreement or bonus
agreement. Hours worked and payments made to the employees of any one or more of
the Borrowers have not been in violation of the Fair Labor Standards Act or any
other applicable law dealing with such matters. All payments due from any one or
more of the Borrowers or for which any claim may be made against a Borrower, on
account of wages and employee and retiree health and welfare insurance and other
benefits have been paid or accrued as a liability on its books. The consummation
of the transactions contemplated by the Financing Agreement or any of the other
Financing Documents will not give rise to a right of termination or right of
re-negotiation on the part of any union under any collective bargaining
agreement to which any Borrower is a party or by which it is bound.
4.1.19 Presence of Hazardous Materials or Hazardous Materials
Contamination.
To the best of each Borrower's knowledge, (a) no Hazardous Materials are
located on any real property owned, controlled or operated by any of the
Borrowers or for which any Borrower is, or is claimed to be, responsible, except
for reasonable quantities of necessary supplies for use by a Borrower in the
ordinary course of its current line of business and stored, used and disposed in
accordance with applicable Laws; and (b) no property owned, controlled or
operated by any Borrower or for which any Borrower has, or is claimed to have,
responsibility has ever been used as a manufacturing, storage, or dump site for
Hazardous Materials nor is affected by Hazardous Materials Contamination at any
other property.
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4.1.20 Perfection and Priority of Collateral.
The Lender has, or upon execution and recording of this Agreement
and the Security Documents will have, and will continue to have as security for
the Obligations, a valid and perfected Lien on and security interest in all
Collateral, free of all other Liens, claims and rights of third parties
whatsoever except Permitted Liens, including, without limitation, those
described on Schedule 4.1.20 attached hereto and made a part hereof.
4.1.21 Collateral Disclosure List.
The information contained in the Collateral Disclosure List of each
Borrower is complete and correct. Each Collateral Disclosure List completely and
accurately identifies (a) the type of entity, the state of organization and the
chief executive office of the applicable Borrower (b) each other place of
business of such Borrower, (c) the location of all books and records pertaining
to the Collateral, and (d) each location, other than the foregoing, where any of
the Collateral is located.
4.1.22 Business Names and Addresses.
In the five (5) years preceding the date hereof, no Borrower has
changed its name, identity or corporate structure, has conducted business under
any name other than its current name, and has conducted its business in any
jurisdiction other than those disclosed on the Collateral Disclosure List.
4.1.23 Equipment.
All Equipment is personalty and is not and will not be affixed to
real estate in such manner as to become a fixture or part of such real estate.
No equipment is held by any Borrower on a sale on approval basis.
4.1.24 Inventory.
The Inventory of the Borrowers is (a) of good and merchantable
quality, free from defects, (b) not stored with a bailee, warehouseman, carrier,
or similar party, (c) not on consignment, sale on approval, or sale or return,
and (d) located at the places of business set forth on the Collateral Disclosure
List. No goods offered for sale by any Borrower are consigned to or held on sale
or return terms by that Borrower.
4.1.25 Accounts.
With respect to all Accounts and to the best of the Borrowers'
knowledge (a) they are genuine, and in all respects what they purport to be, and
are not evidenced by a judgment, an Instrument, or Chattel Paper (unless such
judgment has been assigned and such Instrument or Chattel Paper has been
endorsed and delivered to the Lender); (b) they represent bona fide transactions
completed in accordance with the terms and provisions contained in the invoices,
purchase orders and other contracts relating thereto, and the underlying
transaction therefore is in accordance with all applicable Laws; (c) the amounts
shown on the respective Borrower's books and records, with respect thereto are
actually and absolutely owing to that Borrower and are not contingent or subject
to reduction for any reason other than regular discounts, credits or adjustments
allowed by that Borrower in the ordinary course of its business; (d) all Account
Debtors thereon have the capacity to contract; and (e) the goods sold, leased or
transferred or the services furnished giving rise thereto are not subject to any
Liens except the security interest granted to the Lender by this Agreement and
Permitted Liens.
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4.1.26 Solvency
Each of the Borrowers is Solvent prior to and after giving effect to
the Purchase Transaction and the making of the Loans.
4.1.27 Compliance with Eligibility Standards.
Each Account and all Inventory included in the calculation of the
Borrowing Base does and will at all times meet and comply with all of the
standards for Eligible Receivables and Eligible Inventory. With respect to those
Accounts which the Lender has deemed Eligible Receivables (a) there are no
facts, events or occurrences which in any way impair the validity,
collectibility or enforceability thereof or tend to reduce the amount payable
thereunder; and (b) there are no proceedings or actions known to any Borrower
that are threatened or pending against any Account Debtor which might result in
any material adverse change in the Borrowing Base.
Section 4.2 Survival; Updates of Representations and Warranties.
All representations and warranties contained in or made under or in
connection with this Agreement and the other Financing Documents shall survive
the Closing Date, the making of any advance under the Loans and extension of
credit made hereunder, and the incurring of any other Obligations and shall be
deemed to have been made at the time of each request for, and again at the time
of the making of, each advance under the Loans, except that the representations
and warranties which relate to the financial statements which are referred to in
Section 4.1.11 (Financial Condition), shall also be deemed to cover financial
statements furnished from time to time to the Lender pursuant to Section 6.1.1
(Financial Statements).
ARTICLE V
CONDITIONS PRECEDENT
Section 5.1 Conditions to the Initial Advance.
The making of the initial advance under the Loans is subject to the
fulfillment on or before the Closing Date of the following conditions precedent
in a manner satisfactory in form and substance to the Lender and its counsel:
5.1.1 Organizational Documents - Borrowers.
The Lender shall have received for each Borrower:
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(a) a certificate of good standing certified by the Secretary
of State, or other appropriate Governmental Authority, of the state of formation
of the Borrower;
(b) a certified copy from the appropriate Governmental
Authority under which the Borrower is organized, of the Borrower's
organizational documents and all recorded amendments thereto;
(c) a certificate of qualification to do business certified by
the Secretary of State or other Governmental Authority of each jurisdiction in
which the Borrower conducts business;
(d) a certificate dated as of the Closing Date by the
Secretary or an Assistant Secretary of the Borrower covering:
(i) true and complete copies of the Borrower's
organizational and governing documents and all amendments
thereto;
(ii) true and complete copies of the resolutions of its
Board of Directors authorizing (A) the borrowings hereunder,
and (B) the granting of the Liens contemplated by this
Agreement and the Financing Documents to which the Borrower is
a party;
(iii) the incumbency, authority and signatures of the
officers of the Borrower authorized to sign this Agreement and
the other Financing Documents to which the Borrower is a
party; and
(iv) the identity of the Borrower's current directors,
common stock holders and other equity holders who, to the
knowledge of any Borrower, own more than twenty percent (20%)
of the outstanding common stock, as well as their respective
percentage ownership interests.
5.1.2 Opinion of Borrowers' Counsel.
The Lender shall have received the favorable opinion of counsel for
the Borrowers addressed to the Lender.
5.1.3 Consents, Licenses, Approvals, Etc.
The Lender shall have received copies of all consents, licenses and
approvals, required in connection with the execution, delivery, performance,
validity and enforceability of the Financing Documents, and such consents,
licenses and approvals shall be in full force and effect.
5.1.4 Notes.
The Lender shall have received the Term Note, the 2006 Term Note and
the Revolving Credit Note, each conforming to the requirements hereof and
executed by a Responsible Officer of each Borrower and attested by a duly
authorized representative of each Borrower.
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5.1.5 Financing Documents and Collateral.
Each Borrower shall have executed and delivered the Financing
Documents to be executed by it, and shall have delivered original Chattel Paper,
Instruments, Investment Property, and related Collateral and all opinions, title
insurance, and other documents contemplated by ARTICLE III (The Collateral).
5.1.6 Other Documents, Etc.
The Lender shall have received such other certificates, opinions,
documents and instruments confirmatory of or otherwise relating to the
transactions contemplated hereby as may have been reasonably requested by the
Lender.
5.1.7 Payment of Fees.
The Lender shall have received payment of any Fees due on or before
the Closing Date including, without limitation, the 2006 Term Loan Fee.
5.1.8 Collateral Disclosure List.
Each Borrower shall have delivered the Collateral Disclosure List
required under the provisions of Section 3.3 (Collateral Disclosure List) duly
executed by a Responsible Officer of each Borrower.
5.1.9 Recordings and Filings.
Each Borrower shall have: (a) executed and delivered all Financing
Documents required to be filed, registered or recorded in order to create, in
favor of the Lender, a perfected Lien in the Collateral (subject only to the
Permitted Liens) in form and in sufficient number for filing, registration, and
recording in each office in each jurisdiction in which such filings,
registrations and recordations are required, and (b) delivered such evidence as
the Lender deems satisfactory that all necessary filing fees and all recording
and other similar fees, and all Taxes and other expenses related to such
filings, registrations and recordings will be or have been paid in full.
5.1.10 Insurance Certificate.
The Lender shall have received an insurance certificate in
accordance with the provisions of Section 6.1.8 (Insurance).
5.1.11 Subordination Agreement
The Lender shall have received a debt subordination agreement
satisfactory in form and substance to the Lender and its counsel, executed by
the Borrowers and Xxxxx X. Xxxxxx, or his successor or assign, if any, with
respect to the Subordinated Debt.
5.1.12 Subordination Note
The Lender shall have received evidence that the maturity of the
Subordinated Debt has been extended to no earlier than August 1, 2007.
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Section 5.2 Conditions to all Extensions of Credit.
The making of all advances under the Loans is subject to the
fulfillment of the following conditions precedent in a manner satisfactory in
form and substance to the Lender and its counsel:
5.2.1 Compliance.
Each Borrower shall have complied and shall then be in compliance
with all terms, covenants, conditions and provisions of this Agreement and the
other Financing Documents that are binding upon it.
5.2.2 Default.
There shall exist no Event of Default or Default hereunder.
5.2.3 Representations and Warranties.
The representations and warranties of each of the Borrowers
contained among the provisions of this Agreement shall be true and with the same
effect as though such representations and warranties had been made at the time
of the making of, and of the request for, each advance under the Loans, except
that the representations and warranties which relate to financial statements
which are referred to in Section 4.1.11 (Financial Condition), shall also be
deemed to cover financial statements furnished from time to time to the Lender
pursuant to Section 6.1.1 (Financial Statements).
5.2.4 Adverse Change.
No adverse change shall have occurred in the condition (financial or
otherwise), operations or business of any Borrower that would, in the good faith
judgment of the Lender, materially impair the ability of that Borrower to pay or
perform any of the Obligations.
5.2.5 Legal Matters.
All legal documents incident to each advance under the Loans shall
be reasonably satisfactory to counsel for the Lender.
Section 5.3 Conditions to 2006 Term Loan.
In addition to the satisfaction of the conditions set forth in
Sections 5.1 and 5.2, the making of the 2006 Term Loan is subject to the
fulfillment of the following conditions precedent in a manner satisfactory in
form and substance to the Lender and its counsel:
5.3.1 2006 Term Note.
The Lender shall have received the 2006 Term Note conforming to the
requirements hereof and executed by a Responsible Officer of each Borrower and
attested by a duly authorized representative of each Borrower.
5.3.2 Default.
There shall exist no Event of Default or Default hereunder.
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5.3.3 Interest Rate Protection Agreement.
The Lender shall have received an executed Interest Rate Protection
Agreement in accordance with Section 6.2.19.
5.3.4 Compliance.
The Lender shall have received pro-forma financial statements in
form and detail satisfactory to the Lender for the most recent month then ended,
that demonstrate that, after making the 2006 Term Loan and after reducing the
Subordinated Debt with the proceeds thereof, Borrowers will be in compliance
with all the financial covenants set forth in Section 6.1.14 based on a trailing
twelve (12) month test.
5.3.5 Other Documents, Etc.
The Lender shall have received such other certificates, opinions,
documents and instruments confirmatory of or otherwise relating to the 2006 Term
Loan as may have been reasonably requested by the Lender.
5.3.6 Legal Matters.
All legal documents incident to the 2006 Term Loan shall be
reasonably satisfactory to counsel for the Lender.
ARTICLE VI
COVENANTS OF THE BORROWERS
Section 6.1 Affirmative Covenants.
So long as any of the Obligations (or any the Commitments therefore) shall
be outstanding hereunder, the Borrowers agree jointly and severally with the
Lender as follows:
6.1.1 Financial Statements.
The Borrowers shall furnish to the Lender:
(a) Annual Statements and Certificates. The Borrowers shall
furnish to the Lender as soon as available, but in no event more than ninety
(90) days after the close of the Borrowers' fiscal years, (i) a copy of the
annual financial statement in reasonable detail satisfactory to the Lender
relating to the Borrowers and their Subsidiaries, prepared in accordance with
GAAP and examined and certified by independent certified public accountants
satisfactory to the Lender, which financial statement shall include a
consolidated and consolidating balance sheet of the Borrowers and their
Subsidiaries as of the end of such fiscal year and consolidated and
consolidating statements of income, cash flows and changes in shareholders
equity of the Borrowers and their Subsidiaries for such fiscal year, (ii) a
Compliance Certificate, in substantially the form attached to this Agreement as
EXHIBIT C, as may be amended by the Lender from time to time, containing a
detailed computation of each financial covenant in this Agreement which is
applicable for the period reported, a certification that no change has occurred
to the information contained in the Collateral Disclosure List (except as set
forth in a schedule attached to the certification), each prepared by a
Responsible Officer of the Borrowers in a format acceptable to the Lender and
(iii) a management letter in the form prepared by the Borrowers' independent
certified public accountants. It is understood and agreed that the Borrowers
shall furnish to the Lender within fifteen (15) days of the Closing Date the
statements required by this Section for the fiscal year end January 31, 2006.
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(b) Quarterly Statements and Certificates. The Borrowers shall
furnish to the Lender as soon as available, but in no event more than forty five
(45) days after the close of the Borrowers' fiscal quarters, consolidated and
consolidating balance sheets of the Borrowers and their Subsidiaries as of the
close of such period, consolidated and consolidating income, cash flows and
changes in shareholders equity statements for such period and a Compliance
Certificate, in substantially the form attached to this Agreement as EXHIBIT C,
containing a detailed computation of each financial covenant in this Agreement
which is applicable for the period reported, a certification that no change has
occurred to the information contained in the Collateral Disclosure List (except
as set forth on a schedule attached to the certification), each prepared by a
Responsible Officer of or on behalf of each Borrower in a format acceptable to
the Lender, all as prepared and certified by a Responsible Officer of the
Borrowers and accompanied by a certificate of that officer stating whether any
event has occurred which constitutes a Default or an Event of Default hereunder,
and, if so, stating the facts with respect thereto.
(c) Annual Budget and Projections. The Borrowers shall furnish
to the Lender as soon as available, but in no event later than thirty (30) days
before the end of each fiscal year a consolidated and consolidating budget and
pro forma financial statements on a quarterly basis for the following fiscal
year.
(d) Additional Reports and Information. The Borrowers shall
furnish to the Lender promptly, such additional information, reports or
statements as the Lender may from time to time reasonably request.
(e) Monthly Reports. The Borrowers shall furnish to the Lender
within twenty (20) days after the end of each fiscal month, a Borrowing Base
Report and a report containing the following information:
(i) a detailed aging schedule of all Receivables by
Account Debtor, in such detail, and accompanied by such
supporting information, as the Lender may from time to time
reasonably request;
(ii) a detailed aging of all accounts payable by
supplier, in such detail, and accompanied by such supporting
information, as the Lender may from time to time reasonably
request;
(iii) a listing of all Inventory by component, category
and location, in such detail, and accompanied by such
supporting information as the Lender may from time to time
reasonably request; and
(iv) such other information as the Lender may reasonably
request.
6.1.2 Reports to SEC and to Stockholders.
The Borrowers will furnish to the Lender, promptly upon the filing
or making thereof, at least one (l) copy of all financial statements, reports,
notices and proxy statements sent by any Borrower to its stockholders, and of
all regular and other reports filed by any Borrower with any securities exchange
or with the Securities and Exchange Commission.
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6.1.3 Recordkeeping, Rights of Inspection, Field Examination, Etc.
(a) Each of the Borrowers shall, and shall cause each of its
Subsidiaries to, maintain (i) a standard system of accounting in accordance with
GAAP, and (ii) proper books of record and account in which full, true and
correct entries are made of all dealings and transactions in relation to its
properties, business and activities.
(b) Each of the Borrowers shall, and shall cause each of its
Subsidiaries to, permit authorized representatives of the Lender to visit and
inspect the properties of the Borrowers and their Subsidiaries, to review,
audit, check and inspect the Collateral at any time with or without notice, to
review, audit, check and inspect the Borrowers' other books of record at any
time with or without notice and to make abstracts and photocopies thereof, and
to discuss the affairs, finances and accounts of the Borrowers and their
Subsidiaries, with the officers, directors, employees and other representatives
of the Borrowers and their Subsidiaries and their respective accountants, all at
such times during normal business hours and other reasonable times and as often
as the Lender may reasonably request.
(c) Each of the Borrowers hereby irrevocably authorizes and
directs all accountants and auditors employed by any of the Borrowers and/or any
of their Subsidiaries at any time prior to the repayment in full of the
Obligations to exhibit and deliver to the Lender copies of any and all of the
financial statements, trial balances, management letters, or other accounting
records of any nature of any or all of the Borrowers and/or any or all of their
respective Subsidiaries in the accountant's or auditor's possession, and to
disclose to the Lender any information they may have concerning the financial
status and business operations of any or all of the Borrowers and/or any or all
of their respective Subsidiaries. Further, each of the Borrowers hereby
authorizes all Governmental Authorities to furnish to the Lender copies of
reports or examinations relating to any and all of the Borrowers and/or any or
all Subsidiaries, whether made by the Borrowers or otherwise. The Lender agrees
that prior to the occurrence of a Default to give the Borrowers five (5) days
prior notice before requesting any such information from any such accountants,
auditors or Governmental Authorities.
(d) Any and all costs and expenses incurred by, or on behalf
of, the Lender in connection with the conduct of any of the foregoing,
including, without limitation, travel, lodging, meals, and other expenses for
inspections of the Collateral and the Borrowers' operations for each auditor
employed by the Lender for inspections of the Collateral and the Borrowers'
operations, shall be part of the Enforcement Costs and shall be payable to the
Lender upon demand. Prior to the occurrence of an Event of Default, the
Borrowers shall not be responsible for the cost of more than two (2) field
examinations in any twelve (12) month period. The Borrowers acknowledge and
agree that such expenses may include, but shall not be limited to, any and all
reasonable out-of-pocket costs and expenses of the Lender's employees and agents
in, and when, traveling to any of the Borrowers' facilities.
6.1.4 Existence.
Each of the Borrowers shall (a) maintain, and cause each of its
Subsidiaries to maintain, its existence in good standing in the jurisdiction in
which it is organized and in each other jurisdiction where it is required to
register or qualify to do business if the failure to do so in such other
jurisdiction might have a material adverse effect on the ability of the Borrower
to perform the Obligations, on the conduct of the Borrower's operations, on the
Borrower's financial condition, or on the value of, or the ability of the Lender
to realize upon, the Collateral and (b) remain a Registered Organization under
the laws of the jurisdiction stated in the Preamble of this Agreement.
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6.1.5 Compliance with Laws.
Each of the Borrowers shall comply, and cause each of its
Subsidiaries to comply, with all applicable Laws and observe the valid
requirements of Governmental Authorities, the noncompliance with or the
non-observance of which might have a material adverse effect on the ability of
the Borrowers to perform the Obligations, on the conduct of the Borrowers'
operations, on the Borrowers' consolidated financial condition, or on the value
of, or the ability of the Lender to realize upon, the Collateral.
6.1.6 Preservation of Properties.
Each of the Borrowers will, and will cause each of its Subsidiaries
to, at all times (a) maintain, preserve, protect and keep its properties,
whether owned or leased, in good operating condition, working order and repair
(ordinary wear and tear excepted), and from time to time will make all proper
repairs, maintenance, replacements, additions and improvements thereto needed to
maintain such properties in good operating condition, working order and repair,
and (b) do or cause to be done all things necessary to preserve and to keep in
full force and effect its material franchises, leases of real and personal
property, trade names, Patents, Trademarks, Copyrights and permits which are
necessary for the orderly continuance of its business.
6.1.7 Line of Business.
Each of the Borrowers will continue to engage substantially in the
businesses of the marketing and manufacture of filtration related products and
providing infrastructure services to the government and the telecommunications
and utility industries.
6.1.8 Insurance.
Each of the Borrowers will, and will cause each of its Subsidiaries
to, at all times maintain with "A" or better rated insurance companies such
insurance as is required by applicable Laws and such other insurance, in such
amounts, of such types and against such risks, hazards, liabilities, casualties
and contingencies as are usually insured against in the same geographic areas by
business entities engaged in the same or similar business. Without limiting the
generality of the foregoing, each of the Borrowers will, and will cause each of
its Subsidiaries to, keep adequately insured all of its property against loss or
damage resulting from fire or other risks insured against by extended coverage
and maintain public liability insurance against claims for personal injury,
death or property damage occurring upon, in or about any properties occupied or
controlled by it, or arising in any manner out of the businesses carried on by
it, all in such amounts not less than the Lender shall reasonably determine from
time to time. Each of the Borrowers shall deliver to the Lender on the Closing
Date (and thereafter on each date there is a material change in the insurance
coverage) an insurance certificate containing a detailed list of the insurance
then in effect and stating the names of the insurance companies, the types, the
amounts and rates of the insurance, dates of the expiration thereof and the
properties and risks covered thereby. Within thirty (30) days after notice in
writing from the Lender, the Borrowers will obtain such additional insurance as
the Lender may reasonably request.
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6.1.9 Taxes.
Except to the extent that the validity or amount thereof is being
contested in good faith and by appropriate proceedings, each of the Borrowers
will, and will cause each of its Subsidiaries, to pay and discharge all Taxes
prior to the date when any interest or penalty would accrue for the nonpayment
thereof. Each of the Borrowers shall furnish to the Lender at such times as the
Lender may require proof satisfactory to the Lender of the making of payments or
deposits required by applicable Laws including, without limitation, payments or
deposits with respect to amounts withheld by any of the Borrowers from wages and
salaries of employees and amounts contributed by any of the Borrowers on account
of federal and other income or wage taxes and amounts due under the Federal
Insurance Contributions Act, as amended.
6.1.10 ERISA.
Each Borrower will, and will cause each of its Commonly Controlled
Entities to, comply with the funding requirements of ERISA with respect to Plans
for its respective employees. No Borrower will permit with respect to any Plan
(a) any prohibited transaction or transactions under ERISA or the Internal
Revenue Code, which results, or may result, in any material liability of any
Borrower, or (b) any Reportable Event if, upon termination of the plan or plans
with respect to which one or more such Reportable Events shall have occurred,
there is or would be any material liability of the Borrower to the PBGC. Upon
the Lender's request, each Borrower will deliver to the Lender a copy of the
most recent actuarial report, financial statements and annual report completed
with respect to any Plan.
6.1.11 Notification of Events of Default and Adverse Developments.
Each of the Borrowers shall promptly notify the Lender upon
obtaining knowledge of the occurrence of:
(a) any Event of Default;
(b) any Default;
(c) any litigation instituted or threatened against any of the
Borrowers or any of their Subsidiaries and of the entry of any judgment or Lien
(other than any Permitted Liens) against any of the assets or properties of any
of the Borrowers or any Subsidiary where the claims against any Borrower or any
Subsidiary exceed One Hundred Thousand Dollars ($100,000) and are not covered by
insurance;
(d) any event, development or circumstance whereby the
financial statements furnished hereunder fail in any material respect to present
fairly, in accordance with GAAP, the financial condition and operational results
of any of the Borrowers or any of their respective Subsidiaries;
(e) any judicial, administrative or arbitral proceeding
pending against any of the Borrowers or any of their respective Subsidiaries and
any judicial or administrative proceeding known by any of the Borrowers to be
threatened against any Borrower or any Subsidiary that, if adversely decided,
could materially adversely affect the financial condition or operations (present
or prospective) of any Borrower or any Subsidiary;
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(f) the receipt by any of the Borrowers or any Subsidiary of
any notice, claim or demand from any Governmental Authority which alleges that
any of the Borrowers or any Subsidiary is in violation of any of the terms of,
or has failed to comply with any applicable Laws regulating its operation and
business, including, but not limited to, the Occupational Safety and Health Act
and the Environmental Protection Act; and
(g) any other development in the business or affairs of any of
the Borrowers or any of their respective Subsidiaries that may be materially
adverse;
in each case describing in detail satisfactory to the Lender the nature thereof
and the action the Borrowers propose to take with respect thereto.
6.1.12 Hazardous Materials; Contamination.
Each of the Borrowers agrees to:
(a) give notice to the Lender immediately upon acquiring
knowledge of the presence of any Hazardous Materials or any Hazardous Materials
Contamination on any property owned, operated or controlled by any Borrower or
for which any Borrower is, or is claimed to be, responsible (provided that such
notice shall not be required for Hazardous Materials placed or stored on such
property in accordance with applicable Laws in the ordinary course (including,
without limitation, quantity) of a Borrower's line of business expressly
described in this Agreement), with a full description thereof;
(b) promptly comply with any Laws requiring the removal,
treatment or disposal of Hazardous Materials or Hazardous Materials
Contamination and provide the Lender with satisfactory evidence of such
compliance;
(c) provide the Lender, within thirty (30) days after a demand
by the Lender, with a bond, letter of credit or similar financial assurance
evidencing to the Lender's satisfaction that the necessary funds are available
to pay the cost of removing, treating, and disposing of such Hazardous Materials
or Hazardous Materials Contamination and discharging any Lien which may be
established as a result thereof on any property owned, operated or controlled by
any Borrower or for which any Borrower is, or is claimed to be, responsible; and
(d) as part of the Obligations, defend, indemnify and hold
harmless the Lender and its agents, employees, trustees, successors and assigns
from any and all claims which may now or in the future (whether before or after
the termination of this Agreement) be asserted as a result of the presence of
any Hazardous Materials or any Hazardous Materials Contamination on any property
owned, operated or controlled by any Borrower or for which any Borrower is, or
is claimed to be, responsible. Each Borrower acknowledges and agrees that this
indemnification shall survive the termination of this Agreement and the
Commitments and the payment and performance of all of the other Obligations.
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6.1.13 Disclosure of Significant Transactions.
Each of the Borrowers shall deliver to the Lender a written notice
describing in detail each transaction by it involving the purchase, sale, lease,
or other acquisition or loss or casualty to or disposition of an interest in
Fixed or Capital Assets which exceeds One Hundred Fifty Thousand Dollars
($150,000), said notices to be delivered to the Lender within thirty (30) days
of the occurrence of each such transaction.
6.1.14 Financial Covenants.
(a) Funded Debt to EBITDA. The Borrowers, on a consolidated
basis, will not permit the ratio of Funded Debt to EBITDA, tested as of the last
day of each of the Borrowers' fiscal quarters commencing July 31, 2006 for the
four (4) quarter period then ending, to be greater than 2.50 to 1.00.
(b) Fixed Charge Coverage Ratio. The Borrowers will maintain,
on a consolidated basis and tested as of the last day of each of the Borrowers'
fiscal quarters commencing July 31, 2006, and thereafter for the four (4)
quarter period then ending, a Fixed Charge Coverage Ratio of not less than 1.25
to 1.00.
(c) Minimum EBITDA. The Borrowers will maintain, on a
consolidated basis and tested as of the last day of each of the Borrowers'
fiscal quarters commencing July 31, 2006, minimum EBITDA equal to or exceeding
the following levels on a rolling four (4) quarter basis:
For the quarter ending:
July 31, 2006 $1,200,000
October 31, 2006 $1,300,000
January 31, 2007, and each quarter thereafter $1,800,000
(d) Waivers. Pursuant to Section 6.1.14 of the Original
Financing Agreement, the Lender and the Borrowers have agreed to certain
financial covenants. In consideration of the execution of this Agreement, the
Lender has agreed to waive Borrower's compliance with the Funded Debt to EBITDA
and Fixed Charge Coverage Ratio financial covenants for the period ending
January 31, 2006.
6.1.15 Collection of Receivables.
Until the occurrence of a Default, the Borrowers and their
Subsidiaries shall at their own expense have the privilege for the account of,
and in trust for, the Lender of collecting their Receivables and receiving in
respect thereto all Items of Payment and shall otherwise completely service all
of the Receivables including (a) the billing, posting and maintaining of
complete records applicable thereto, (b) the taking of such action with respect
to the Receivables as the Lender may request or in the absence of such request,
as each of the Borrowers and each of the Subsidiaries may deem advisable; and
(c) the granting, in the ordinary course of business, to any Account Debtor, any
rebate, refund or adjustment to which the Account Debtor may be lawfully
entitled, and may accept, in connection therewith, the return of goods, the sale
or lease of which shall have given rise to a Receivable and may take such other
actions relating to the settling of any Account Debtor's claim as may be
commercially reasonable. The Lender may, at its option, at any time or from time
to time after and during the continuance of an Event of Default hereunder,
revoke the collection privilege given in this Agreement to any one or more of
the Borrowers and each of the Subsidiaries by either giving notice of its
assignment of, and Lien on the Collateral to the Account Debtors or giving
notice of such revocation to the Borrowers. The Lender shall not have any duty
to, and the Borrowers hereby release the Lender from all claims of loss or
damage caused by the delay or failure to collect or enforce any of the
Receivables or to preserve any rights against any other party with an interest
in the Collateral. The Lender shall be entitled at any time and from time to
time after written notice to the Borrowers to confirm and verify Receivables.
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6.1.16 Assignments of Receivables.
Each Borrower will promptly, upon request, execute and deliver to
the Lender written assignments, in form and content acceptable to the Lender, of
specific Receivables or groups of Receivables; provided, however, the Lien
and/or security interest granted to the Lender under this Agreement shall not be
limited in any way to or by the inclusion or exclusion of Receivables within
such assignments. Receivables so assigned shall secure payment of the
Obligations and are not sold to the Lender whether or not any assignment
thereof, which is separate from this Agreement, is in form absolute. The
Borrowers agree that neither any assignment to the Lender nor any other
provision contained in this Agreement or any of the other Financing Documents
shall impose on the Lender any obligation or liability of any of the Borrowers
with respect to that which is assigned and the Borrowers hereby agree jointly
and severally to indemnify the Lender and hold the Lender harmless from any and
all claims, actions, suits, losses, damages, costs, expenses, fees, obligations
and liabilities which may be incurred by or imposed upon the Lender by virtue of
the assignment of and Lien on any Borrower's rights, title and interest in, to,
and under the Collateral.
6.1.17 Government Accounts.
The Borrowers will immediately notify the Lender if any of the
Receivables in excess of One Hundred Thousand Dollars ($100,000) and having a
remaining term in excess of six (6) months arise out of contracts with the
United States or with any other Governmental Authority, and, as appropriate,
execute any documents and take any steps required by the Lender in order that
all moneys due and to become due under such contracts shall be assigned to the
Lender and notice thereof given to the Governmental Authority under the Federal
Assignment of Claims Act or any other applicable Laws.
6.1.18 Inventory.
With respect to the Inventory, the Borrowers and their Subsidiaries
will: (a) keep correct and accurate records itemizing and describing the kind,
type, quality and quantity of Inventory, the Borrowers' and Subsidiaries' cost
therefore and the selling price thereof, all of which records shall be available
to the officers, employees or agents of the Lender upon demand for inspection
and copying thereof; (b) not store any Inventory with a bailee, warehouseman or
similar Person without the Lender's prior written consent, which consent may be
conditioned on, among other things, delivery by the bailee, warehouseman or
similar Person to the Lender of warehouse receipts, in form acceptable to the
Lender, in the name of the Lender evidencing the storage of Inventory and the
interests of the Lender therein; and (c) permit the Lender and its agents or
representatives to inspect and examine the Inventory and to check and test the
same as to quality, quantity, value and condition upon prior notice at any time
or times hereafter during the Borrowers' and Subsidiaries' usual business hours
or at other reasonable times. The Borrowers and their Subsidiaries shall be
permitted to sell their Inventory in the ordinary course of business until the
occurrence of an Event of Default.
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6.1.19 Maintenance of the Collateral.
The Borrowers will maintain the Collateral in good working order,
saving and excepting ordinary wear and tear, and will not permit anything to be
done to the Collateral that may materially impair the value thereof. The Lender
shall not have any duty to, and the Borrowers hereby release the Lender from all
claims of loss or damage caused by the delay or failure to collect or enforce
any of the Receivables or to, preserve any rights against any other party with
an interest in the Collateral.
6.1.20 Equipment.
The Borrowers shall (a) maintain all Equipment as personalty, (b)
not affix any Equipment to any real estate in such manner as to become a fixture
or part of such real estate, and (c) shall hold no Equipment on a sale on
approval basis. The Borrowers hereby declare their intent that, notwithstanding
the means of attachment, no goods of the Borrowers hereafter attached to any
realty shall be deemed a fixture, which declaration shall be irrevocable,
without the Lender's consent, until all of the Obligations have been paid in
full and all of the Commitments have been terminated or have expired.
6.1.21 Defense of Title and Further Assurances.
At their expense, the Borrowers will defend the title to the
Collateral (and any part thereof), and will immediately execute, acknowledge and
deliver any renewal, affidavit, deed, assignment, security agreement,
certificate or other document which the Lender may require in order to perfect,
preserve, maintain, continue, protect and/or extend the Lien granted to the
Lender under this Agreement or under any of the other Financing Documents and
the first priority of that Lien, subject only to the Permitted Liens. The
Borrowers hereby authorize the filing of any financing statement or continuation
statement required under the Uniform Commercial Code. The Borrowers will from
time to time do whatever the Lender may require by way of obtaining, executing,
delivering, and/or filing landlords' or mortgagees' waivers, notices of
assignment and other notices and amendments and renewals thereof and the
Borrowers will take any and all steps and observe such formalities as the Lender
may require, in order to create and maintain a valid Lien upon, pledge of, or
paramount security interest in, the Collateral, subject to the Permitted Liens.
The Borrowers shall pay to the Lender on demand all taxes, costs and expenses
incurred by the Lender in connection with the preparation, execution, recording
and filing of any such document or instrument. To the extent that the proceeds
of any of the Accounts or Receivables of the Borrowers are expected to become
subject to the control of, or in the possession of, a party other than the
Borrowers, the Borrowers shall cause all such parties to execute and deliver on
the Closing Date security documents or other documents as requested by the
Lender and as may be necessary to evidence and/or perfect the security interest
of the Lender in those proceeds. Each Borrower hereby irrevocably appoints the
Lender as the Borrower's attorney-in-fact, with power of substitution, in the
name of the Lender or in the name of the Borrower or otherwise, for the use and
benefit of the Lender, but at the cost and expense of the Borrowers and without
notice to the Borrowers, to execute and deliver any and all of the instruments
and other documents and take any action which the Lender may require pursuant
the foregoing provisions of this Section 6.1.21.
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6.1.22 Business Names; Locations.
Each of the Borrowers will notify and cause each of their
Subsidiaries to notify the Lender not less than thirty (30) days prior to (a)
any change in the name under which the Borrower or the applicable Subsidiary
conducts its business, (b) any change of the location of the chief executive
office of the applicable Borrower or the applicable Subsidiary, and (c) the
opening of any new place of business or the closing of any existing place of
business, and (d) any change in the location of the places where the Collateral,
or any part thereof, or the books and records, or any part thereof, are kept.
6.1.23 Use of Premises and Equipment.
The Borrowers agree that until the Obligations are fully paid and
all of the Commitments have been terminated or have expired, the Lender (a)
after and during the continuance of an Event of Default, may use any of the
Borrowers' owned or leased lifts, hoists, trucks and other facilities or
equipment for handling or removing the Collateral; and (b) shall have, and is
hereby granted, a right of ingress and egress to the places where the Collateral
is located, and may proceed over and through any of the Borrowers' owned or
leased property.
6.1.24 Protection of Collateral.
The Borrowers agree that the Lender may at any time following an
Event of Default take such steps as the Lender deems reasonably necessary to
protect the interest of the Lender in, and to preserve the Collateral,
including, the hiring of such security guards or the placing of other security
protection measures as the Lender deems appropriate, may employ and maintain at
any of the Borrowers' premises a custodian who shall have full authority to do
all acts necessary to protect the interests of the Lender in the Collateral and
may lease warehouse facilities to which the Lender may move all or any part of
the Collateral to the extent commercially reasonable. The Borrowers agree to
cooperate fully with the Lender's efforts to preserve the Collateral and will
take such actions to preserve the Collateral as the Lender may reasonably
direct. All of the Lender's expenses of preserving the Collateral, including any
reasonable expenses relating to the compensation and bonding of a custodian,
shall be part of the Enforcement Costs.
6.1.25 Appraisals.
Whenever a Default or an Event of Default exists, the Borrowers
shall, at their expense, provide the Lender with appraisals or updates thereof
of any or all of the Collateral from an appraiser and in form in all respects
satisfactory to the Lender.
Section 6.2 Negative Covenants.
So long as any of the Obligations or the Commitments shall be
outstanding hereunder, the Borrowers agree with the Lender as follows:
6.2.1 Capital Structure, Merger, Acquisition or Sale of Assets.
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None of the Borrowers will alter or amend its capital structure,
authorize any additional class of equity, issue any stock or equity of any
class, enter into any merger or consolidation or amalgamation, windup or
dissolve itself (or suffer any liquidation or dissolution) or acquire all or
substantially all the assets of any Person, or sell, lease or otherwise dispose
of any of its assets (except Inventory disposed of in the ordinary course of
business prior to an Event of Default). Any consent of the Lender to the
disposition of any assets may be conditioned on a specified use of the proceeds
of disposition. Notwithstanding anything set forth in this Section to the
contrary, the Lender agrees that it will not unreasonably withhold its consent
to one or more of the Borrowers creating one or more wholly owned operating
Subsidiaries (collectively, the "Operating Subsidiary") and transferring
substantially all of its assets to the Operating Subsidiary, provided, that at
the time of such transfer and after giving effect thereto, each of the following
conditions is met: (a) no Default or Event of Default has occurred and is
continuing or would occur as a result of such event; (b) the Lender shall have
received and reviewed the pro forma projections of the Borrowers (in form and
detail satisfactory to the Lender in its reasonable discretion) taking into
effect the Operating Subsidiary, which pro forma projections demonstrate the
Borrowers' continued compliance with all of the material terms of this Agreement
throughout the term hereof; (c) the Lender shall have received a written summary
of the revised capital structure of the Borrowers and the Operating Subsidiary;
(d) Argan shall own one hundred percent (100%) of the outstanding stock of the
Operating Subsidiary; (e) the Lender shall have received copies of all
organizational documents for the Operating Subsidiary, including without
limitation an incumbency certificate and resolution; (f) the Borrowers shall at
the Borrowers' expense cause the Operating Subsidiary to be added as a
co-obligor on this Agreement and the Financing Documents pursuant to an
Additional Borrower Joinder Supplement and deliver such additional Financing
Documents, instruments, and opinions as the Lender may reasonably require to
cause all of the assets of the Operating Subsidiary to be subject to a first
Lien security interest in favor of the Lender.
6.2.2 Subsidiaries.
None of the Borrowers will create or acquire any Subsidiaries other
than the Subsidiaries identified on the Collateral Disclosure List, without the
prior written consent of the Lender.
6.2.3 Issuance of Stock.
None of the Borrowers will issue, or grant any option or right to
purchase, any of its capital stock.
6.2.4 Purchase or Redemption of Securities, Dividend Restrictions.
None of the Borrowers will purchase, redeem or otherwise acquire any
shares of its capital stock or warrants now or hereafter outstanding, declare or
pay any dividends thereon (other than stock dividends), apply any of its
property or assets to the purchase, redemption or other retirement of, set apart
any sum for the payment of any dividends on, or for the purchase, redemption, or
other retirement of, make any distribution by reduction of capital or otherwise
in respect of, any shares of any class of capital stock of any Borrower, or any
warrants, permit any Subsidiary to purchase or acquire any shares of any class
of capital stock of, or warrants issued by, any Borrower, make any distribution
to stockholders or set aside any funds for any such purpose, and not prepay,
purchase or redeem any Indebtedness for Borrowed Money other than the
Obligations.
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6.2.5 Indebtedness.
None of the Borrowers will create, incur, assume or suffer to exist
any Indebtedness for Borrowed Money or permit any Subsidiary to do so, except:
(a) the Obligations;
(b) current accounts payable arising in the ordinary course;
(c) Indebtedness secured by Permitted Liens;
(d) Subordinated Indebtedness;
(e) Indebtedness resulting from endorsement of negotiable
instruments for collection in the ordinary course of business;
(f) Indebtedness of the Borrowers existing on the date hereof
and reflected on the financial statements furnished pursuant to Section 4.1.11
(Financial Condition); and
(g) Any extensions, renewals or replacements of Indebtedness
described in clauses (c) and (e) above, which do not increase the amount of such
Indebtedness.
6.2.6 Investments, Loans and Other Transactions.
Except as otherwise provided in this Agreement, none of the
Borrowers will, or will permit any of its Subsidiaries to, (a) make, assume,
acquire or continue to hold any investment in any real property (unless used in
connection with its business and treated as a Fixed or Capital Asset of any
Borrower or any Subsidiary) or any Person, whether by stock purchase, capital
contribution, acquisition of indebtedness of such Person or otherwise
(including, without limitation, investments in any joint venture or
partnership), (b) guaranty or otherwise become contingently liable for the
Indebtedness or obligations of any Person, or (c) make any loans or advances, or
otherwise extend credit to any Person, except:
(i) any loan or advance to an officer or employee of any
Borrower or any Subsidiary, provided that the aggregate amount
of all such loans advances by all of the Borrowers and their
Subsidiaries (taken as a whole) outstanding at any time shall
not exceed Twenty Five Thousand Dollars ($25,000);
(ii) the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business;
(iii) any investment in Cash Equivalents, which are
pledged to the Lender as collateral and security for the
Obligations; and
(iv) trade credit extended to customers in the ordinary
course of business.
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6.2.7 Stock of Subsidiaries.
None of the Borrowers will sell or otherwise dispose of any shares
of capital stock of any Subsidiary (except in connection with a merger or
consolidation of a Wholly Owned Subsidiary into any of the Borrowers or another
Wholly Owned Subsidiary of any of the Borrowers or with the dissolution of any
Subsidiary) or permit any Subsidiary to issue any additional shares of its
capital stock except pro rata to its stockholders.
6.2.8 Subordinated Indebtedness.
None of the Borrowers will, nor will permit any Subsidiary to make:
(a) any payment of principal of, or interest on, any of the
Subordinated Indebtedness, if a Default or an Event of Default then exists
hereunder or would result from such payment;
(b) any payment of the principal or interest due on the
Subordinated Indebtedness as a result of acceleration thereunder or a mandatory
prepayment thereunder;
(c) any amendment or modification of or supplement to the
documents evidencing or securing the Subordinated Indebtedness; or
(d) payment of principal or interest on the Subordinated
Indebtedness other than when due (without giving effect to any acceleration of
maturity or mandatory prepayment).
6.2.9 Liens; Confessed Judgment.
Each Borrower agrees that it (a) will not create, incur, assume or
suffer to exist any Lien upon any of its properties or assets, whether now owned
or hereafter acquired, or permit any Subsidiary so to do, except for Liens
securing the Obligations and Permitted Liens, (b) will not agree to, assume or
suffer to exist any provision in any instrument or other document for confession
of judgment, cognovit or other similar right or remedy, (c) will not enter into
any contracts for the consignment of goods, will not execute or suffer the
filing of any financing statements or the posting of any signs giving notice of
consignments, and will not, as a material part of its business, engage in the
sale of goods belonging to others, and (d) will not allow or suffer to exist the
failure of any Lien described in the Security Documents to attach to, and/or
remain at all times perfected on, any of the property described in the Security
Documents.
6.2.10 Transactions with Affiliates.
None of the Borrowers nor any of their Subsidiaries will enter into
or participate in any transaction with any Affiliate other than transactions in
the ordinary course of business on fair and reasonable terms no less favorable
to the Borrowers than would be obtained in a comparable arm's length transaction
with a Person not an Affiliate, with the officers, directors, employees and
other representatives of any Borrower and/or any Subsidiary.
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6.2.11 Other Businesses.
None of the Borrowers nor any of their Subsidiaries will engage
directly or indirectly in any business other than its current line of business
described elsewhere in this Agreement.
6.2.12 ERISA Compliance.
None of the Borrowers nor any Commonly Controlled Entity shall: (a)
engage in or permit any "prohibited transaction" (as defined in ERISA); (b)
cause any "accumulated funding deficiency" as defined in ERISA and/or the
Internal Revenue Code; (c) terminate any pension plan in a manner which could
result in the imposition of a lien on the property of any Borrower pursuant to
ERISA; (d) terminate or consent to the termination of any Multi-employer Plan;
or (e) incur a complete or partial withdrawal with respect to any Multi-employer
Plan.
6.2.13 Prohibition on Hazardous Materials.
None of the Borrowers shall place, manufacture or store or permit to
be placed, manufactured or stored any Hazardous Materials on any property owned,
operated or controlled by any Borrower or for which any Borrower is responsible
other than Hazardous Materials placed or stored on such property in accordance
with applicable Laws in the ordinary course of a Borrower's business expressly
described in this Agreement.
6.2.14 Method of Accounting; Fiscal Year.
Each Borrower agrees that:
(a) it shall not change the method of accounting employed in
the preparation of any financial statements furnished to the Lender under the
provisions of Section 6.1.1 (Financial Statements), unless required to conform
to GAAP and on the condition that the Borrowers' accountants shall furnish such
information as the Lender may request to reconcile the changes with the
Borrowers' prior financial statements
(b) it will not change its fiscal year from a year ending on
January 31.
6.2.15 Compensation.
None of the Borrowers nor any Subsidiary will pay any bonuses, fees,
compensation, commissions, salaries, drawing accounts, or other payments (cash
and non-cash), whether direct or indirect, to any stockholders, Subsidiary, or
any Affiliate, other than reasonable compensation (including bonuses) for actual
services rendered by stockholders in their capacity as officers or employees of
the Borrower or Subsidiary.
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6.2.16 Transfer of Collateral.
None of the Borrowers nor any of their Subsidiaries will transfer,
or permit the transfer, of the Collateral or the books and records related to
any of the Collateral to a location not disclosed on the Collateral Disclosure
List, except for "mobile goods" and vehicles being operated in the ordinary
course of business.
6.2.17 Sale and Leaseback.
None of the Borrowers nor any of their Subsidiaries will directly or
indirectly enter into any arrangement to sell or transfer all or any substantial
part of its fixed assets and thereupon or within one (1) year thereafter rent or
lease the assets so sold or transferred.
6.2.18 Disposition of Collateral.
None of the Borrowers will sell, discount, allow credits or
allowances, transfer, assign, extend the time for payment on, convey, lease,
assign, transfer or otherwise dispose of the Collateral, except, prior to an
Event of Default, dispositions expressly permitted elsewhere in this Agreement,
the sale of Inventory in the ordinary course of business, and the sale of
unnecessary or obsolete Equipment.
6.2.19 Interest Rate Protection Agreements.
On or prior to the date upon which the Lender makes the 2006 Term
Loan, the Borrowers will obtain and at all times thereafter maintain in full
force and effect one or more Interest Rate Protection Agreements with the Lender
(and/or with a bank or other financial institution having capital, surplus and
undivided profits of at least Five Hundred Million Dollars ($500,000,000), which
effectively enables Borrowers (in a manner satisfactory to the Lender), as of
any date, to protect themselves against fluctuations of interest rates as to a
notional principal amount at least equal to Seventy-Five Percent (75%) of the
aggregate amount of the 2006 Term Loan. The Borrowers will not enter into or
permit to exist or acquire any Interest Rate Protection Agreement except in the
ordinary course of business to mitigate fluctuations of interest rates in
respect of outstanding Indebtedness.
ARTICLE VII
DEFAULT AND RIGHTS AND REMEDIES
Section 7.1 Events of Default.
The occurrence of any one or more of the following events shall
constitute an "Event of Default" under the provisions of this Agreement:
7.1.1 Failure to Pay.
The failure of the Borrowers to pay any of the Obligations within
five (5) days of when due and payable in accordance with the provisions of this
Agreement, the Notes and/or any of the other Financing Documents.
7.1.2 Breach of Representations and Warranties.
Any representation or warranty made in this Agreement or in any
report, statement, schedule, certificate, opinion (including any opinion of
counsel for the Borrowers), financial statement or other document furnished in
connection with this Agreement, any of the other Financing Documents, or the
Obligations, shall prove to have been false or misleading when made (or, if
applicable, when reaffirmed) in any material respect.
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7.1.3 Failure to Comply with Covenants.
Default shall be made by the Borrower in the due observance and
performance of any covenant, condition or agreement contained in Sections 6.1.1
or 6.1.14 hereof or in Section 6.2 hereof.
7.1.4 Other Defaults.
Default shall be made by the Borrower in the due observance or
performance of any other term, covenant or agreement herein contained (other
than as set forth in Section 7.1.3 above), which default shall remain unremedied
for thirty (30) days after written notice thereof to the Borrower by the Lender.
7.1.5 Default Under Other Financing Documents or Obligations.
A default shall occur under any of the other Financing Documents or
under any other Obligations, and such default is not cured within any applicable
grace period provided therein.
7.1.6 Receiver; Bankruptcy.
Any Borrower or any Subsidiary shall (a) apply for or consent to the
appointment of a receiver, trustee or liquidator of itself or any of its
property, (b) admit in writing its inability to pay its debts as they mature,
(c) make a general assignment for the benefit of creditors, (d) be adjudicated a
bankrupt or insolvent, (e) file a voluntary petition in bankruptcy or a petition
or an answer seeking or consenting to reorganization or an arrangement with
creditors or to take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation law or statute, or an answer
admitting the material allegations of a petition filed against it in any
proceeding under any such law, or take corporate action for the purposes of
effecting any of the foregoing, (f) by any act indicate its consent to, approval
of or acquiescence in any such proceeding or the appointment of any receiver of
or trustee for any of its property, or suffer any such receivership, trusteeship
or proceeding to continue undischarged for a period of sixty (60) days, or (g)
by any act indicate its consent to, approval of or acquiescence in any order,
judgment or decree by any court of competent jurisdiction or any Governmental
Authority enjoining or otherwise prohibiting the operation of a material portion
of any Borrower's or any Subsidiary's business or the use or disposition of a
material portion of any Borrower's or any Subsidiary's assets.
7.1.7 Involuntary Bankruptcy, etc.
(a) An order for relief shall be entered in any involuntary
case brought against any Borrower or any Subsidiary under the Bankruptcy Code,
or (b) any such case shall be commenced against any Borrower or any Subsidiary
and shall not be dismissed within sixty (60) days after the filing of the
petition, or (c) an order, judgment or decree under any other Law is entered by
any court of competent jurisdiction or by any other Governmental Authority on
the application of a Governmental Authority or of a Person other than any
Borrower or any Subsidiary (i) adjudicating any Borrower, or any Subsidiary
bankrupt or insolvent, or (ii) appointing a receiver, trustee or liquidator of
any Borrower or of any Subsidiary, or of a material portion of any Borrower's or
any Subsidiary's assets, or (iii) enjoining, prohibiting or otherwise limiting
the operation of a material portion of any Borrower's or any Subsidiary's
business or the use or disposition of a material portion of any Borrower's or
any Subsidiary's assets, and such order, judgment or decree continues unstayed
and in effect for a period of thirty (30) days from the date entered.
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7.1.8 Judgment.
Unless adequately insured in the opinion of the Lender, the entry of
a final judgment for the payment of money involving more than One Hundred
Thousand Dollars ($100,000) against any Borrower or any Subsidiary, and the
failure by such Borrower or such Subsidiary to discharge the same, or cause it
to be discharged, within thirty (30) days from the date of the order, decree or
process under which or pursuant to which such judgment was entered, or to secure
a stay of execution pending appeal of such judgment.
7.1.9 Execution; Attachment.
Any execution or attachment shall be levied against the Collateral,
or any part thereof, and such execution or attachment shall not be set aside,
discharged or stayed within thirty (30) days after the same shall have been
levied.
7.1.10 Default Under Other Borrowings.
Default shall be made with respect to any Indebtedness for Borrowed
Money of any of the Borrowers (other than the Loans) if the default is a failure
to pay at maturity or if the effect of such default is to accelerate the
maturity of such Indebtedness for Borrowed Money or to permit the holder or
obligee thereof or other party thereto to cause such Indebtedness for Borrowed
Money to become due prior to its stated maturity.
7.1.11 Challenge to Agreements.
Any Borrower shall challenge the validity and binding effect of any
provision of any of the Financing Documents or shall state its intention to make
such a challenge of any of the Financing Documents or any of the Financing
Documents shall for any reason (except to the extent permitted by its express
terms) cease to be effective or to create a valid and perfected first priority
Lien (except for Permitted Liens) on, or security interest in, any of the
Collateral purported to be covered thereby.
7.1.12 Material Adverse Change.
The Lender, in its sole discretion, determines in good faith that a
material adverse change has occurred in the financial condition of any of the
Borrowers.
7.1.13 Impairment of Position.
The Lender, in its sole discretion, determines in good faith that an
event has occurred which impairs in any material respect the prospect of payment
of any of the Obligations and/or the value of the Collateral.
7.1.14 Liquidation, Termination, Dissolution, Change in Responsible
Officers.
Any Borrower shall liquidate, dissolve or terminate its existence or
shall suspend or terminate a substantial portion of its business operations or
if 2 of the 3 current Responsible Officers at any time cease to be actively
involved in the daily management of any Borrower without the prior written
consent of the Lender.
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7.1.15 Swap Default.
An event occurs which gives the Lender the right or option to
terminate any Swap Contract which is secured by the Collateral.
Section 7.2 Remedies.
Upon the occurrence of any Event of Default, the Lender may, in the
exercise of its sole and absolute discretion from time to time, at any time
thereafter exercise any one or more of the following rights, powers or remedies:
7.2.1 Acceleration.
The Lender may declare any or all of the Obligations to be
immediately due and payable, notwithstanding anything contained in this
Agreement or in any of the other Financing Documents to the contrary, without
presentment, demand, protest, notice of protest or of dishonor, or other notice
of any kind, all of which the Borrowers hereby waive.
7.2.2 Further Advances.
The Lender may from time to time without notice to the Borrowers
suspend, terminate or limit any further advances, loans or other extensions of
credit under the Commitments, under this Agreement and/or under any of the other
Financing Documents. Further, upon the occurrence of an Event of Default or
Default specified in Section 7.1.6 (Receiver; Bankruptcy) or Section 7.1.7
(Involuntary Bankruptcy, etc.), the Revolving Credit Commitment and any
agreement in any of the Financing Documents to provide additional credit shall
immediately and automatically terminate and the unpaid principal amount of the
Notes (with accrued interest thereon) and all other Obligations then
outstanding, shall immediately become due and payable without further action of
any kind and without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived by the Borrowers.
7.2.3 Uniform Commercial Code.
The Lender shall have all of the rights and remedies of a secured
party under the applicable Uniform Commercial Code and other applicable Laws.
Upon demand by the Lender, the Borrowers shall assemble the Collateral and make
it available to the Lender, at a place designated by the Lender. The Lender or
its agents may without notice from time to time enter upon any Borrower's
premises to take possession of the Collateral, to remove it, to render it
unusable, to process it or otherwise prepare it for sale, or to sell or
otherwise dispose of it.
Any written notice of the sale, disposition or other intended action
by the Lender with respect to the Collateral which is sent by regular mail,
postage prepaid, to the Borrowers at the address set forth in Section 8.1
(Notices), or such other address of the Borrowers which may from time to time be
shown on the Lender's records, at least ten (10) days prior to such sale,
disposition or other action, shall constitute commercially reasonable notice to
the Borrowers. The Lender may alternatively or additionally give such notice in
any other commercially reasonable manner. Nothing in this Agreement shall
require the Lender to give any notice not required by applicable Laws.
If any consent, approval, or authorization of any state, municipal
or other Governmental Authority or of any other Person or of any Person having
any interest therein, should be necessary to effectuate any sale or other
disposition of the Collateral, the Borrowers agree to execute all such
applications and other instruments, and to take all other action, as may be
required in connection with securing any such consent, approval or
authorization.
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The Borrowers recognize that the Lender may be unable to effect a
public sale of all or a part of the Collateral consisting of Investment Property
by reason of certain prohibitions contained in the Securities Act of 1933, as
amended, and other applicable Federal and state Laws. The Lender may, therefore,
in its discretion, take such steps as it may deem appropriate to comply with
such Laws and may, for example, at any sale of the Collateral consisting of
securities restrict the prospective bidders or purchasers as to their number,
nature of business and investment intention, including, without limitation, a
requirement that the Persons making such purchases represent and agree to the
satisfaction of the Lender that they are purchasing such securities for their
account, for investment, and not with a view to the distribution or resale of
any thereof. The Borrowers covenant and agree to do or cause to be done promptly
all such acts and things as the Lender may request from time to time and as may
be necessary to offer and/or sell the securities or any part thereof in a manner
which is valid and binding and in conformance with all applicable Laws. Upon any
such sale or disposition, the Lender shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral consisting of securities so
sold.
7.2.4 Specific Rights With Regard to Collateral.
In addition to all other rights and remedies provided hereunder or
as shall exist at law or in equity from time to time, the Lender may (but shall
be under no obligation to), at any time after the occurrence of an Event of
Default, without notice to any of the Borrowers, and each Borrower hereby
irrevocably appoints the Lender as its attorney-in-fact, with power of
substitution, in the name of the Lender and/or in the name of any or all of the
Borrowers or otherwise, for the use and benefit of the Lender, but at the cost
and expense of the Borrowers and without notice to the Borrowers:
(a) request any Account Debtor obligated on any of the
Accounts to make payments thereon directly to the Lender, with the Lender taking
control of the Proceeds thereof;
(b) compromise, extend or renew any of the Collateral or deal
with the same as it may deem advisable;
(c) make exchanges, substitutions or surrenders of all or any
part of the Collateral;
(d) copy, transcribe, or remove from any place of business of
any Borrower or any Subsidiary all books, records, ledger sheets,
correspondence, invoices and documents, relating to or evidencing any of the
Collateral or without cost or expense to the Lender, make such use of any
Borrower's or any Subsidiary's place(s) of business as may be reasonably
necessary to administer, control and collect the Collateral;
(e) repair, alter or supply goods if necessary to fulfill in
whole or in part the purchase order of any Account Debtor;
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(f) demand, collect, receipt for and give renewals,
extensions, discharges and releases of any of the Collateral;
(g) institute and prosecute legal and equitable proceedings to
enforce collection of, or realize upon, any of the Collateral;
(h) settle, renew, extend, compromise, compound, exchange or
adjust claims in respect of any of the Collateral or any legal proceedings
brought in respect thereof;
(i) endorse or sign the name of any Borrower upon any Items of
Payment, certificates of title, Instruments, Investment Property, stock powers,
documents, documents of title, financing statements, assignments, notices or
other writing relating to or part of the Collateral and on any proof of claim in
bankruptcy against an Account Debtor;
(j) notify the Post Office authorities to change the address
for the delivery of mail to the Borrowers to such address or Post Office Box as
the Lender may designate and receive and open all mail addressed to any of the
Borrowers; and
(k) take any other action necessary or beneficial to realize
upon or dispose of the Collateral or to carry out the terms of this Agreement.
7.2.5 Application of Proceeds.
Any proceeds of sale or other disposition of the Collateral will be
applied by the Lender to the payment first of any and all Enforcement Costs, and
any balance of such proceeds will be applied to the Obligations in such order
and manner as the Lender shall determine. If the sale or other disposition of
the Collateral fails to fully satisfy the Obligations, the Borrowers shall
remain liable to the Lender for any deficiency.
7.2.6 Performance by Lender.
The Lender without notice to or demand upon the Borrowers and
without waiving or releasing any of the Obligations or any Default or Event of
Default, may (but shall be under no obligation to) at any time after any Default
or Event of Default make such payment or perform such act for the account and at
the expense of the Borrowers, and may enter upon the premises of the Borrowers
for that purpose and take all such action thereon as the Lender may consider
necessary or appropriate for such purpose and each of the Borrowers hereby
irrevocably appoints the Lender as its attorney-in-fact to do so, with power of
substitution, in the name of the Lender, in the name of any or all of the
Borrowers or otherwise, for the use and benefit of the Lender, but at the cost
and expense of the Borrowers and without notice to the Borrowers. All sums so
paid or advanced by the Lender together with interest thereon from the date of
payment, advance or incurring until paid in full at the Post-Default Rate and
all costs and expenses, shall be deemed part of the Enforcement Costs, shall be
paid by the Borrowers to the Lender on demand, and shall constitute and become a
part of the Obligations.
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7.2.7 Other Remedies.
The Lender may from time to time proceed to protect or enforce its
rights by an action or actions at law or in equity or by any other appropriate
proceeding, whether for the specific performance of any of the covenants
contained in this Agreement or in any of the other Financing Documents, or for
an injunction against the violation of any of the terms of this Agreement or any
of the other Financing Documents, or in aid of the exercise or execution of any
right, remedy or power granted in this Agreement, the Financing Documents,
and/or applicable Laws. The Lender is authorized to offset and apply to all or
any part of the Obligations all moneys, credits and other property of any nature
whatsoever of any or all of the Borrowers now or at any time hereafter in the
possession of, in transit to or from, under the control or custody of, or on
deposit with, the Lender or any Affiliate of the Lender.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices.
All notices, requests and demands to or upon the parties to this Agreement
shall be in writing and shall be deemed to have been given or made when
delivered by hand on a Business Day, or two (2) days after the date when
deposited in the mail, postage prepaid by registered or certified mail, return
receipt requested, or when sent by overnight courier, on the Business Day next
following the day on which the notice is delivered to such overnight courier,
addressed as follows:
Borrowers: Argan Inc.
Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Chief Financial Officer
with a copy to: Xxxxxxxx & Xxxx LLP
000 Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Lender: Bank of America, N.A.
0000 Xxxxxxx Xxxxxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, SVP
with a copy to: Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxxxxxxxxx Xxxxx, Xxxxx 000
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
By written notice, each party to this Agreement may change the address to
which notice is given to that party, provided that such changed notice shall
include a street address to which notices may be delivered by overnight courier
in the ordinary course on any Business Day.
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Section 8.2 Amendments; Waivers.
This Agreement and the other Financing Documents may not be amended,
modified, or changed in any respect except by an agreement in writing signed by
the Lender and the Borrowers. No waiver of any provision of this Agreement or of
any of the other Financing Documents, nor consent to any departure by the
Borrowers therefrom, shall in any event be effective unless the same shall be in
writing signed by the Lender. No course of dealing between the Borrowers and the
Lender and no act or failure to act from time to time on the part of the Lender
shall constitute a waiver, amendment or modification of any provision of this
Agreement or any of the other Financing Documents or any right or remedy under
this Agreement, under any of the other Financing Documents or under applicable
Laws.
Without implying any limitation on the foregoing:
(a) Any waiver or consent shall be effective only in the
specific instance, for the terms and purpose for which given, subject to such
conditions as the Lender may specify in any such instrument.
(b) No waiver of any Default or Event of Default shall extend
to any subsequent or other Default or Event of Default, or impair any right
consequent thereto.
(c) No notice to or demand on the Borrowers in any case shall
entitle the Borrowers to any other or further notice or demand in the same,
similar or other circumstance.
(d) No failure or delay by the Lender to insist upon the
strict performance of any term, condition, covenant or agreement of this
Agreement or of any of the other Financing Documents, or to exercise any right,
power or remedy consequent upon a breach thereof, shall constitute a waiver,
amendment or modification of any such term, condition, covenant or agreement or
of any such breach or preclude the Lender from exercising any such right, power
or remedy at any time or times.
(e) By accepting payment after the due date of any amount
payable under this Agreement or under any of the other Financing Documents, the
Lender shall not be deemed to waive the right either to require prompt payment
when due of all other amounts payable under this Agreement or under any of the
other Financing Documents, or to declare a default for failure to effect such
prompt payment of any such other amount.
Section 8.3 Cumulative Remedies.
The rights, powers and remedies provided in this Agreement and in the
other Financing Documents are cumulative, may be exercised concurrently or
separately, may be exercised from time to time and in such order as the Lender
shall determine, subject to the provisions of this Agreement, and are in
addition to, and not exclusive of, rights, powers and remedies provided by
existing or future applicable Laws. In order to entitle the Lender to exercise
any remedy reserved to it in this Agreement, it shall not be necessary to give
any notice, other than such notice as may be expressly required in this
Agreement. Without limiting the generality of the foregoing and subject to the
terms of this Agreement, the Lender may:
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(a) proceed against any one or more of the Borrowers with or
without proceeding against any other Person (who may be liable (by endorsement,
guaranty, indemnity or otherwise) for all or any part of the Obligations;
(b) proceed against any one or more of the Borrowers with or
without proceeding under any of the other Financing Documents or against any
Collateral or other collateral and security for all or any part of the
Obligations;
(c) without reducing or impairing the obligation of the
Borrowers and without notice, release or compromise with any guarantor or other
Person liable for all or any part of the Obligations under the Financing
Documents or otherwise;
(d) without reducing or impairing the obligations of the
Borrowers and without notice thereof:
(i) fail to perfect the Lien in any or all Collateral or
to release any or all the Collateral or to accept substitute
Collateral;
(ii) approve the making of advances under the Revolving
Loan under this Agreement;
(iii) waive any provision of this Agreement or the other
Financing Documents;
(iv) exercise or fail to exercise rights of set-off or
other rights; or
(v) accept partial payments or extend from time to time
the maturity of all or any part of the Obligations.
Section 8.4 Severability.
In case one or more provisions, or part thereof, contained in this
Agreement or in the other Financing Documents shall be invalid, illegal or
unenforceable in any respect under any Law, then without need for any further
agreement, notice or action:
(a) the validity, legality and enforceability of the remaining
provisions shall remain effective and binding on the parties thereto and shall
not be affected or impaired thereby;
(b) the obligation to be fulfilled shall be reduced to the
limit of such validity;
(c) if such provision or part thereof pertains to repayment of
the Obligations, then, at the sole and absolute discretion of the Lender, all of
the Obligations of the Borrowers to the Lender shall become immediately due and
payable; and
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(d) if the affected provision or part thereof does not pertain
to repayment of the Obligations, but operates or would prospectively operate to
invalidate this Agreement in whole or in part, then such provision or part
thereof only shall be void, and the remainder of this Agreement shall remain
operative and in full force and effect.
Section 8.5 Assignments by Lender.
The Lender may, without notice to or consent of the Borrowers, assign to
any Person (each an "Assignee" and collectively, the "Assignees") all or a
portion of the Lender's Commitments. The Lender and its Assignee shall notify
the Borrowers in writing of the date on which the assignment is to be effective
(the "Adjustment Date"). On or before the Adjustment Date, the Lender, the
Borrowers and the Assignee shall execute and deliver a written assignment
agreement in a form acceptable to the Lender, which shall constitute an
amendment to this Agreement to the extent necessary to reflect such assignment.
Upon the request of the Lender following an assignment made in accordance with
this Section 8.5, the Borrowers shall issue new Notes to the Lender and its
Assignee reflecting such assignment, in exchange for the existing Notes held by
the Lender, provided the Lender shall have used good faith efforts to obtain a
confidentiality agreement from any such Assignee.
In addition, notwithstanding the foregoing, the Lender may at any time
pledge all or any portion of the Lender's rights under this Agreement, any of
the Commitments or any of the Obligations to a Federal Reserve Bank.
Section 8.6 Participations by Lender.
The Lender may at any time sell to one or more financial institutions
participating interests in any of the Lender's Obligations or Commitments;
provided, however, that (a) no such participation shall relieve the Lender from
its obligations under this Agreement or under any of the other Financing
Documents to which it is a party, (b) the Lender shall remain solely responsible
for the performance of its obligations under this Agreement and under all of the
other Financing Documents to which it is a party, and (c) the Borrowers shall
continue to deal solely and directly with the Lender in connection with the
Lender's rights and obligations under this Agreement and the other Financing
Documents.
Section 8.7 Disclosure of Information by Lender.
In connection with any sale, transfer, assignment or participation by the
Lender in accordance with Section 8.5 (Assignments by Lender) or Section 8.6
(Participations by Lender), the Lender shall have the right to disclose to any
actual or potential purchaser, assignee, transferee or participant all financial
records, information, reports, financial statements and documents obtained in
connection with this Agreement and/or any of the other Financing Documents or
otherwise.
Section 8.8 Successors and Assigns.
This Agreement and all other Financing Documents shall be binding upon and
inure to the benefit of the Borrowers and the Lender and their respective
successors and assigns, except that the Borrowers shall not have the right to
assign their rights hereunder or any interest herein without the prior written
consent of the Lender.
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Section 8.9 Continuing Agreements.
All covenants, agreements, representations and warranties made by the
Borrowers in this Agreement, in any of the other Financing Documents, and in any
certificate delivered pursuant hereto or thereto shall survive the making by the
Lender of the Loans and the execution and delivery of the Notes, shall be
binding upon the Borrowers regardless of how long before or after the date
hereof any of the Obligations were or are incurred, and shall continue in full
force and effect so long as any of the Obligations are outstanding and unpaid.
From time to time upon the Lender's request, and as a condition of the release
of any one or more of the Security Documents, the Borrowers and other Persons
obligated with respect to the Obligations shall provide the Lender with such
acknowledgments and agreements as the Lender may require to the effect that
there exists no defenses, rights of setoff or recoupment, claims, counterclaims,
actions or causes of action of any kind or nature whatsoever against the Lender
and/or any of its agents and others, or to the extent there are, the same are
waived and released.
Section 8.10 Enforcement Costs.
The Borrowers agree to pay to the Lender on demand all Enforcement Costs,
together with interest thereon from the date incurred or advanced until paid in
full at a per annum rate of interest equal at all times to the Post-Default
Rate. Enforcement Costs shall be immediately due and payable at the time
advanced or incurred, whichever is earlier. Without implying any limitation on
the foregoing, the Borrowers agree, as part of the Enforcement Costs, to pay
upon demand any and all stamp and other Taxes and fees payable or determined to
be payable in connection with the execution and delivery of this Agreement and
the other Financing Documents and to save the Lender harmless from and against
any and all liabilities with respect to or resulting from any delay in paying or
omission to pay any Taxes or fees referred to in this Section. The provisions of
this Section shall survive the execution and delivery of this Agreement, the
repayment of the other Obligations and shall survive the termination of this
Agreement.
Section 8.11 Applicable Law; Jurisdiction.
8.11.1 Applicable Law.
Borrowers acknowledge and agree that the Financing Documents,
including, this Agreement, shall be governed by the Laws of the State, as if
each of the Financing Documents and this Agreement had each been executed,
delivered, administered and performed solely within the State even though for
the convenience and at the request of the Borrowers, one or more of the
Financing Documents may be executed elsewhere. The Lender acknowledges, however,
that remedies under certain of the Financing Documents that relate to property
outside the State may be subject to the laws of the state in which the property
is located.
8.11.2 Submission to Jurisdiction.
The Borrowers irrevocably submit to the jurisdiction of any state or
federal court sitting in the State over any suit, action or proceeding arising
out of or relating to this Agreement or any of the other Financing Documents.
Each of the Borrowers irrevocably waives, to the fullest extent permitted by
law, any objection that it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding brought in any such court and any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. Final judgment in any such suit, action or
proceeding brought in any such court shall be conclusive and binding upon the
Borrowers and may be enforced in any court in which the Borrowers are subject to
jurisdiction, by a suit upon such judgment, provided that service of process is
effected upon the Borrowers in one of the manners specified in this Section or
as otherwise permitted by applicable Laws.
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8.11.3 Appointment of Agent for Service of Process.
The Borrowers hereby irrevocably designate and appoint CT
Corporation System, Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000, as the Borrowers' authorized agent to receive on the Borrowers'
behalf service of any and all process that may be served in any suit, action or
proceeding of the nature referred to in this Section in any state or federal
court sitting in the State. If such agent shall cease so to act, the Borrowers
shall irrevocably designate and appoint without delay another such agent in the
State satisfactory to the Lender and shall promptly deliver to the Lender
evidence in writing of such other agent's acceptance of such appointment and its
agreement that such appointment shall be irrevocable.
8.11.4 Service of Process.
Each of the Borrowers hereby consents to process being served in any
suit, action or proceeding of the nature referred to in this Section by (a) the
mailing of a copy thereof by registered or certified mail, postage prepaid,
return receipt requested, to the Borrower at the Borrower's address designated
in or pursuant to Section 8.1 (Notices), and (b) serving a copy thereof upon the
agent, if any, designated and appointed by the Borrower as the Borrower's agent
for service of process by or pursuant to this Section. The Borrowers irrevocably
agree that such service (y) shall be deemed in every respect effective service
of process upon the Borrowers in any such suit, action or proceeding, and (z)
shall, to the fullest extent permitted by law, be taken and held to be valid
personal service upon the Borrowers. Nothing in this Section shall affect the
right of the Lender to serve process in any manner otherwise permitted by law or
limit the right of the Lender otherwise to bring proceedings against the
Borrowers in the courts of any jurisdiction or jurisdictions.
Section 8.12 Duplicate Originals and Counterparts.
This Agreement may be executed in any number of duplicate originals or
counterparts, each of such duplicate originals or counterparts shall be deemed
to be an original and all taken together shall constitute but one and the same
instrument.
Section 8.13 Headings.
The headings in this Agreement are included herein for convenience only,
shall not constitute a part of this Agreement for any other purpose, and shall
not be deemed to affect the meaning or construction of any of the provisions
hereof.
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Section 8.14 No Agency.
Nothing herein contained shall be construed to constitute the Borrowers as
the agent of the Lender for any purpose whatsoever or to permit the Borrowers to
pledge any of the credit of the Lender. The Lender shall not be responsible or
liable for any shortage, discrepancy, damage, loss or destruction of any part of
the Collateral wherever the same may be located and regardless of the cause
thereof. The Lender shall not, by anything herein or in any of the Financing
Documents or otherwise, assume any of the Borrowers' obligations under any
contract or agreement assigned to the Lender, and the Lender shall not be
responsible in any way for the performance by the Borrowers of any of the terms
and conditions thereof, except for losses which are the direct result of the
Lender's gross negligence or willful misconduct.
Section 8.15 Date of Payment.
Should the principal of or interest on the Notes become due and payable on
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and in the case of principal, interest shall be payable
thereon at the rate per annum specified in the Notes during such extension.
Section 8.16 Entire Agreement.
This Agreement is intended by the Lender and the Borrowers to be a
complete, exclusive and final expression of the agreements contained herein.
Neither the Lender nor the Borrowers shall hereafter have any rights under any
prior agreements pertaining to the matters addressed by this Agreement but shall
look solely to this Agreement for definition and determination of all of their
respective rights, liabilities and responsibilities under this Agreement.
Section 8.17 Waiver of Trial by Jury.
THE BORROWERS AND THE LENDER HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER AND THE LENDER MAY BE
PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY
OF THE FINANCING DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER CONSTITUTES A
WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR
PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS
AGREEMENT.
This waiver is knowingly, willingly and voluntarily made by the Borrowers
and the Lender, and the Borrowers and the Lender hereby represent that no
representations of fact or opinion have been made by any individual to induce
this waiver of trial by jury or to in any way modify or nullify its effect. The
Borrowers and the Lender further represent that they have been represented in
the signing of this Agreement and in the making of this waiver by independent
legal counsel, selected of their own free will, and that they have had the
opportunity to discuss this waiver with counsel.
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Section 8.18 Liability of the Lender.
The Borrowers hereby agree that the Lender shall not be chargeable for any
negligence, mistake, act or omission of any accountant, examiner, agency or
attorney employed by the Lender in making examinations, investigations or
collections, or otherwise in perfecting, maintaining, protecting or realizing
upon any lien or security interest or any other interest in the Collateral or
other security for the Obligations.
By inspecting the Collateral or any other properties of the Borrowers or
by accepting or approving anything required to be observed, performed or
fulfilled by the Borrowers or to be given to the Lender pursuant to this
Agreement or any of the other Financing Documents, the Lender shall not be
deemed to have warranted or represented the condition, sufficiency, legality,
effectiveness or legal effect of the same, and such acceptance or approval shall
not constitute any warranty or representation with respect thereto by the
Lender.
Section 8.19 Indemnification.
The Borrowers agree to indemnify and hold harmless, Lender, the Lender's
parent and Affiliates and the Lender's parent's and Affiliates' officers,
directors, shareholders, employees and agents (each an "Indemnified Party," and
collectively, the "Indemnified Parties"), from and against any and all claims,
liabilities, losses, damages, costs and expenses (whether or not such
Indemnified Party is a party to any litigation), including without limitation,
reasonable attorney's fees and costs and costs of investigation, document
production, attendance at depositions or other discovery, incurred by any
Indemnified Party with respect to, arising out of or as a consequence of (a)
this Agreement or any of the other Financing Documents, including without
limitation, any failure of the Borrowers to pay when due (at maturity, by
acceleration or otherwise) any principal, interest, fee or any other amount due
under this Agreement or the other Financing Documents, or any other Event of
Default; (b) the use by the Borrowers of any proceeds advanced hereunder; (c)
the transactions contemplated hereunder; or (d) any claim, demand, action or
cause of action being asserted against (i) the Borrowers or any of their
Affiliates by any other Person, or (ii) any Indemnified Party by the Borrowers
in connection with the transactions contemplated hereunder. Notwithstanding
anything herein or elsewhere to the contrary, the Borrowers shall not be
obligated to indemnify or hold harmless any Indemnified Party from any
liability, loss or damage resulting from the gross negligence, willful
misconduct or unlawful actions of such Indemnified Party. Any amount payable to
the Lender under this Section will bear interest at the Post- Default Rate from
the due date until paid.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, each of the parties hereto have executed and delivered
this Agreement under their respective seals as of the day and year first written
above.
Borrowers:
WITNESS/ATTEST: ARGAN, INC.
/s/Xxxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxxxx (Seal)
---------------- ----------------------
Name: Xxxxxx Xxxxxxxxxx
Title: Chairman and CEO
WITNESS/ATTEST: SOUTHERN MARYLAND CABLE, INC.
/s/ Xxxxxx Xxxxxxxxxx By: /s/Xxxxxx Xxxxxx (Seal)
--------------------- ------------------
Name: Xxxxxx Xxxxxx
Title: CFO
WITNESS/ATTEST: VITARICH LABORATORIES, INC.
/s/ Xxxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxxxx (Seal)
---------------- ----------------------
Name: Xxxxxx Xxxxxxxxxx
Title: Chairman and CEO
Lender:
WITNESS: BANK OF AMERICA, N.A.
------------------------ By: /s/ Xxxxxxx X. Xxxxxxxxx (Seal)
-------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Senior Vice President
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LIST OF EXHIBITS
A. Additional Borrower Joinder Supplement
B-1. Revolving Credit Note
B-2. Term Note
B-3. 2006 Term Note
C. Form of Compliance Certificate
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LIST OF SCHEDULES
Schedule 1.1 Copyrights, Patents and Trademarks
Schedule 4.1.10 Litigation
Schedule 4.1.13 Indebtedness for Borrowed Money
Schedule 4.1.18 Employee Relations
Schedule 4.1.20 Perfection and Priority of Collateral
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AMENDED AND RESTATED
FINANCING AND SECURITY AGREEMENT
Dated
May 5, 2006
By and Among
ARGAN INC.
And
SOUTHERN MARYLAND CABLE, INC.
And
VITARICH LABORATORIES, INC.
And
BANK OF AMERICA, N.A.
