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EXHIBIT 10.2
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August 9, 1996
Xx. Xxxxxxx X. Xxxxx and
Xx. Xxxxxxxxxxx Xxxxxx
Xxxxxx Research Associates, Inc.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000-0000
Dear Xx. Xxxxx and Xx. Xxxxxx:
This letter shall set out the terms and conditions under which Star Bank, N.A.
(hereafter referred to as the "Bank") agrees to lend Xxxxxx Research Associates,
Inc. (hereafter called the "Company") Two Million Dollars ($2,000,000) under
this Revolving Credit Loan Agreement (the "Agreement"). The purpose of this
loan is for working capital.
THE REVOLVING CREDIT
Subject to there being no event of default (or circumstance which would, with
the passage of time become an event of default) the Bank agrees to make
revolving credit loans to the Company (as described below) from the date of this
Agreement through the earlier of: a) a demand for payment in accordance with the
terms of a revolving promissory note (the "Revolving Note") which will evidence
the Company's obligation; or b) July 31, 1997 (the "Maturity Date").
Under the Revolving Note, the Company may borrow, repay, and reborrow up to
$2,000,000. Interest on the outstanding principal balance of the Revolving Loan
Portion shall accrue from the date of disbursement of each draw thereunder in
accordance with the following provisions:
(a) Interest on advances hereunder shall be computed on the basis of a year
of 360 days, for the actual number of days outstanding, and charged
based on a rate per annum, selected at the option of the Company as
provided herein, equal to:
i. the Prime Rate of the Bank, adjusted automatically and
immediately, without notice, as of the date of each change in
the Prime Rate; or
ii. the LIBOR Rate for the applicable Interest Period (30, 60 or
90 days) PLUS two ---- hundred fifty basis points (2.50%).
(b) The following definitions shall be used in connection with this Loan
Agreement.
i. "Prime Rate" shall mean the rate per annum established or
announced by the Bank from time to time as its Prime Rate
determined solely by the Bank pursuant to market factors and
its own operating needs and is not necessarily the Bank's most
favored or favorable rate.
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ii. "LIBOR Rate" shall mean an annual rate, determined solely by
the Bank, as the rate offered to the Bank by prime banks
(rounded off upwards if necessary, to the nearest 1/1000 of
one percent) for deposits with the Bank of immediately
available United States dollars for the applicable Interest
Period of such LIBOR Rate Loan in the London Interbank Market
at or about 11:00 a.m., London time, (or such earlier time as
may be arranged and agreed upon the Company and the Bank) on
the day three Business Days preceding the first day of the
Interest Period of such LIBOR Rate Loan and adjusted for
Reserve Percentages and any other regulatory and/or
governmental costs incurred by the Bank from Eurocurrency
liabilities. The amount of the adjustment for Reserve
Percentages and the regulatory and/or governmental costs shall
be based upon the assumption that the Bank funded 100% of the
loan in the London interbank market.
iii. "Interest Period" shall mean, with respect to any LIBOR Rate
Loan, the period commencing on the date such loan is made,
continued or converted or on the last day of the immediately
preceding Interest Period applicable to such LIBOR Rate Loan,
as the case may be, and ending on the same day in the first,
second, third calendar month thereafter, as the Company may
elect in advance in accordance with the requirements of this
Loan Agreement; provided, however, that whenever the last day
of any Interest Period would otherwise occur on a day other
than a Business Day, the last day of such Interest Period
shall occur on the next succeeding Business Day, and further
provided that if such extension of time would cause the last
day of the Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall
occur on the next preceding Business Day. If any Interest
Period ends on a day during a month in which there is no
numerically corresponding day to the first day of the Interest
Period, then the Interest Period shall end on the last
Business Day of such calendar month. Interest shall accrue
from and including the first day of an Interest Period to, but
excluding, the last day of such Interest Period.
iv. "Business Day" shall mean for any Prime Rate Loan any day
other than Saturday, Sunday or Holiday on which banks in the
State of Ohio are authorized by law to close and for any LIBOR
Rate Loan any day on which the Bank is open for the regular
conduct of business and a day on which dealings in U.S. dollar
denominated deposits are carried out in the London interbank
market.
v. "LIBOR Rate Loan" shall mean a loan made under the Agreement,
as amended, that bears interest with reference to such LIBOR
Rate.
vi. "Prime Rate Loan" shall mean a loan made under the Agreement,
as amended, that bears interest with reference to the Prime
Rate.
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vii. "Notification Date" shall mean for any LIBOR Rate Loan the
date which is three (3) Business Days prior to the first day
of Interest Period such LIBOR Rate Loan.
viii. "Reserve Percentages" shall mean the total maximum reserve
percentages for determining the reserves to be maintained by
member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in Federal Reserve System for
Eurocurrency Liabilities, as defined in Federal Reserve Board
Regulations D, rounded upward to the nearest 1/1000 of one
percent. The percentage will include, but not be limited to
marginal, emergency, supplemental, special and other reserve
percentages.
(c) Loans hereunder shall be made pursuant to Company's written request
thereof given to Bank as provided in accordance to the provisions of
the Agreement, stating the date of the requested loan, the amount of
the requested loan;: whether it will be a Prime Rate Loan or LIBOR Rate
Loan, the applicable Interest Period, if any, and the total amount to
be borrowed. Each request for a LIBOR Rate Loan shall be for a minimum
amount of Two Hundred Fifty U.S. dollars ($250,000.00). Any written
request with respect to a LIBOR Rate Loan shall be received by the Bank
on or before the applicable Notification Date. No written request for
any loan shall become effective until actually received by the Bank.
The Company will only be entitled to a combined total of three (3)
LIBOR Rate Loans at any one time.
(d) Any LIBOR Rate Loan elected by the Company under this Agreement, shall
remain in effect until the expiration of the applicable Interest
Period. The Company may select a new Interest Period for such LIBOR
Rate Loan by delivery of written notice to the Bank on or before the
Notification Date.
(e) Interest on the Revolving Credit Note is payable monthly on the last
day of each month following the execution of such Revolving Credit
Note, until the Maturity Date, at which time the principal balance,
together with interest and unpaid fees, shall become due and payable;
provided, however, that any LIBOR Rate Loan shall, at the option of the
Bank be due and payable in full at the end of the Interest Period then
in effect for such LIBOR Rate Loan. In case of any change in law or
governmental rules, regulations, guidelines or orders (or any
interpretation thereof) or the introduction of new laws, regulations or
guidelines which require the Bank to reserve for unfunded revolving
credit commitments, the Bank may charge the borrower an additional fee
which will compensate the Bank for such requirements.
(f) Loans may be prepaid at any time, in whole or in part, without premium
or penalty, except that, upon any such prepayment of any such LIBOR
Rate Loan, as referred to in this section, the Company shall pay to the
Bank immediately upon demand a prepayment fee, computed
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solely by the Bank, as the amount necessary to compensate the Bank for
reasonable losses, expenses and liabilities the Bank may sustain as a
result of such prepayment. In calculating the amount of such a
prepayment fee, the Bank is hereby authorized by the Company to make
such assumptions regarding the source of funding, redeployment of funds
and other related matters as the Bank may deem appropriate. If the
Company fails to pay any prepayment fee when due, the amount of such
prepayment fee shall thereafter bear interest until paid at a rate per
annum three percent (3%) above the Bank's Prime Rate in effect from
time to time (computed on the basis of a 360-day year, actual days
elapsed). Each change in the rate of interest on any such past due
prepayment fee shall become effective on the date each Prime Rate
change is announced within the Bank. Any prepayment of principal shall
be accompanied by a payment of interest accrued to date thereon; and
said prepayment shall be applied to the principal installments in the
inverse order of their maturities.
REPRESENTATIONS & WARRANTIES
To induce the Bank to enter into this Agreement and to agree to make the loans
described herein, the Company represents and warrants that:
(A) CORPORATE EXISTENCE. It is a corporation duly existing under the laws
of the State of Ohio, is qualified to do business in all states where
failure to be so qualified would have a material adverse effect on the
Company, and has all requisite power and authority to own its property
and carry on its business as now being conducted.
(B) BORROWING AUTHORIZATION. The execution by the Company and the delivery
and performance of this Agreement, the Note(s), and other documents
connected to the loans described herein have been authorized by
necessary corporate action and will not violate: 1) any provision of
law; 2) the Articles of Incorporation or By-laws of the Company; or 3)
any agreement binding on the Company.
(C) FINANCIAL STATEMENTS. Its audited financial statements dated December
31, 1995 (a copy of which have been previously furnished to the Bank)
have been prepared in conformity with generally accepted accounting
principles consistently applied, and fairly present the financial
condition of the Company and its operation as of the date of the
statements, and since such date there has been no material adverse
change in its financial condition.
(D) ACTIONS PENDING. There is no litigation pending or threatened against
or affecting the Company before any court or agency, or any contingent
liabilities that are not provided for in the financial statements
referred to in subsection (C) FINANCIAL STATEMENTS above.
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(E) LIENS. None of the assets of the Company are subject to any mortgage,
pledge, security interest, lien, or other encumbrance except for those
noted in the financial statements referred to in subsection (C)
FINANCIAL STATEMENTS.
(F) ENVIRONMENTAL MATTERS. All operations and property of the Company are
in full compliance with all federal, state, and local statutes, rules,
and regulations relating to air and water pollutants and hazardous
waste disposal. There is no judicial or administrative proceeding
pending or threatened against or affecting the Company with respect to
such environmental matters.
(G) COMPLIANCE. The Company is in compliance in all material respects with
all statutes, rules, and regulations applicable to it. No default (or
event which with notice or lapse of time, or both, would constitute a
default) exists under any agreement or instrument for borrowed money to
which Company is a party or pursuant to which any property of Company
is encumbered.
(H) LIABILITIES. All taxes, assessments, and other liabilities which are
due have been paid in full and in a timely manner, except for those
taxes and assessments which the Company is contesting in good faith and
with respect to which the Company has taken proper steps to perfect its
appeal and which have not resulted in liens on the Company's property
which materially diminishes the value of the property.
COLLATERAL
All obligations of the Company to the Bank under this Agreement and the
Note(s) shall be secured by the following (collectively called the
"Collateral"):
(A) A security interest in the Company's accounts receivable, inventory,
machinery, equipment, furniture, fixtures, furnishings, and general
intangibles, now owned or hereafter acquired, their proceeds (cash or
non-cash) and any insurance proceeds related thereto, all to be
evidenced by the Bank's standard Security Agreement.
The Collateral and all documentation with respect thereto shall be in a form
satisfactory to the Bank, and the Company agrees to execute any and all
documents necessary to assure the protection, perfection, and/or enforcement of
the Bank's security interest in the Collateral.
COVENANTS
In consideration of the Bank's promise to make the loans described herein, the
Company agrees that, from the date of this Agreement until the Note(s) are paid
in full, it shall:
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(A) FINANCIAL STATEMENT. Furnish the Bank: 1) a copy of the Company's
audited financial statements, prepared in conformity with generally
accepted accounting principles applied on a basis consistent with the
preceding years by independent certified public accountants acceptable
to the Bank within 90 days of the Company's fiscal year end; and 2) a
copy of its unaudited financial statements, similarly prepared, in a
form satisfactory to the Bank within 45 days of the end of each of its
fiscal months.
(B) PERIODIC REPORTS. Provide the Bank within 10 days of the end of each of
the Company's fiscal months: 1) an aging of accounts receivable in a
form satisfactory to the Bank; 2) an analysis of long-term projects %
of completion; 3) a schedule of project advances; 4) a xxxxxxxx
schedule; and 5) other reports and information as the Bank may
reasonably request.
(C) INSURANCE. Maintain insurance on all real and personal property with
carriers acceptable to the Bank in an amount and against hazards and
liabilities as is common with other companies in similar situations.
The policies shall show the Bank as "name insured" and "loss payee."
The Company shall provide the Bank with certificates of insurance or
other satisfactory evidence upon request.
(D) TAXES. Pay all taxes, assessments, and other liabilities when due,
except for those which are contested in good faith.
(E) NOTICE. Give the Bank prompt notice of any: (i) default of this or any
other Agreement or contract under which the Company is liable; (ii)
environmental or labor dispute; (iii) lawsuit filed naming the Company
as a defendant; (iv) reportable event under ERISA; or (v) material
change in the Company's business prospects or financial condition.
(F) CANCELLATION OF CONTRACT. Give the Bank notice within three days of any
canceled clinical trials contract.
(G) CORPORATE EXISTENCE AND STATUS. Maintain its corporate existence and
remain in good standing under the laws of each jurisdiction where the
Company is duly qualified to conduct its business.
(H) MAINTENANCE OF PROPERTY. Maintain Company property in good condition
and repair, and not commit or permit any action that may impair the
value of the property or the Bank's Collateral.
(I) TANGIBLE CAPITAL BASE. Not permit its tangible capital base to be less
than $400,000 plus 50% of net income less any S-Corporation tax
distributions beginning with the quarter ending June 30, 1996 and for
each fiscal quarter thereafter plus 90% of net proceeds from the public
offering of Company stock. The remaining 10% shall be used for
distributions of
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previously taxed S-Corporation earnings. "Tangible Capital Base" shall
mean, as of any date, the sum of the Company's total equity plus debts
subordinated to the Bank minus any intangible assets. All financial
terms in this Agreement shall have the meanings given them under
generally accepted accounting principles.
(J) INDEBTEDNESS. Not incur or permit to exist any indebtedness, except:
(i) the borrowings evidenced by this Agreement; (ii) favorable
short-term unsecured trade credit granted in the ordinary course of
business.
(K) LIENS. Not create or permit to exist any mortgage, pledge, security
interest, or other encumbrance with respect to any assets now owned or
hereafter acquired, except for (i) liens created in favor of the Bank
hereunder; or (ii) purchase money interests created in connection with
the acquisition of property acquired after the date of this Agreement
which attaches specifically to the property acquired.
(L) GUARANTIES. Not guaranty any obligation or indemnify any other person
or enterprise except for the personal liability from the Company's own
officers', directors', or employees' own actions on behalf of the
Company.
(M) MERGER AND SALE OF ASSETS. Not be a party to any merger, consolidation,
or reorganization (including the purchase of all or substantially all
of the equity or assets of any other enterprise). Not, except in the
ordinary course of its business, sell, transfer, or lease any part of
its property.
(N) RESTRICTED PAYMENTS. Total compensation to Xxxxxxx X. Xxxxx and
Xxxxxxxxxxx Xxxxxx shall not exceed $250,000 combined annually.
(O) DEPOSITORY ACCOUNTS. The Company agrees to maintain all primary
depository accounts with the Bank.
(P) INVESTMENTS. Not invest in, loan, or make advances to any other
enterprises, except for (i) obligations of the United States Treasury
and agencies thereof, (ii) commercial paper maturing within one-year
and rate "A-1/P-1," or (iii) Certificates of Deposit of the Bank.
(Q) WAIVER. Any variance from these covenants shall be permitted only with
the prior written consent and/or waiver of the Bank. Any such waiver
shall not preclude the exercise of any power or right under this
Agreement by the Bank.
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CLOSING CONDITIONS
The obligation of the Bank to make the loans described by this Agreement is
subject to the satisfaction of each of the following conditions:
(A) RESOLUTIONS. The Company shall have delivered to the Bank a copy of the
resolutions of the Company's Board of Directors authorizing the loans
described herein and the execution and delivery of this Agreement, the
Note(s), and other documents the Bank deems necessary for these loans,
certified by an appropriate officer of the Company.
(B) OTHER DOCUMENTS: INSPECTION The Company shall have delivered to the
Bank such other documents as the Bank may request prior to the date of
the initial loan. The Bank or its designated representative shall have
the continuing right to inspect and review all the Company's records,
documents, and assets, whether or not directly related to the Company's
obligations hereunder.
(C) DEFAULT. Before and after giving effect to the loan(s) described
herein, no event of default (as defined below) or event which would
with the passage of time mature into an event of default shall have
occurred and/or be continuing.
(D) WARRANTIES. Before and after giving effect to the loan(s) described
herein, the representations and warranties noted above shall be true
and correct on the date of this Agreement.
(E) FEES AND EXPENSES The Company agrees to pay the Bank any out-of-pocket
expenses incurred by the Bank (including reasonable attorneys' fees,
legal expenses, filing fees, etc.) in entering into and closing this
Agreement.
EVENTS OF DEFAULT
Upon the occurrence of any of the following events, the Bank may declare the
Note(s) due and immediately payable, without further notice or demand and the
Bank shall have all rights to realize on the collateral. To the extent the
maximum Amount Available is not being utilized by the Company, the Bank may upon
such declaration of default terminate any unused balance:
(A) Non-payment of principal or interest prescribed herein when due or when
notice of such non-payment is sent to the Company by the Bank, or any
default, demand, or acceleration under any Note or related instrument
concerning the Collateral; or
(B) Non-payment of principal or interest on any other borrowed money
obligation when due or the holder of such obligation declares the
obligation due prior to its stated maturity unless the obligation is
disputed in good faith; or
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(C) Any representation or warranty of the Company in this or any other loan
document is false; or
(D) The Company violates any covenant or condition of this or any other
loan documentation; or
(E) The Company is unable to pay its business debts as they become due or
the Company's consolidated financial statement indicates an insolvency
or deficit net worth; or
(F) The Company applies for the appointment of a trustee or receiver of any
part of the assets of the Company or commences any proceedings relating
to Borrower under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, or other liquidation law
of any jurisdiction; or
(G) Any such application, if filed, or any such proceedings are commenced
against the Company, and the Company indicates its approval, consent,
or acquiescence; or an order is entered appointing such trustee or
receiver, or adjudicating the Company bankrupt or insolvent, or
approving the petition in any such proceedings, and such order remains
in effect for thirty (30) days; or
(H) A material part of the Company's operations shall cease for a period of
thirty (30) days, other than temporary or seasonal cessations which are
simultaneously experienced by other companies in the Company's line of
business (which, if continued, would not have a material adverse effect
on the Company's operations or financial conditions); or,
(I) If, in the reasonable opinion of the Bank, there has been-a material
adverse change in the financial affairs or operating condition of the
Company or in the value of the Collateral which, in the reasonable
judgment of Bank, materially imperils the Company's ability to repay or
secure its obligations to the Bank under this Agreement.
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LAW/JURISDICTION
This Agreement, the loans, and the Note(s) shall be deemed made in Ohio, and all
the rights and obligations of the parties hereunder shall in all respects be
governed by and construed in accordance with the laws of the State of Ohio,
including all matters of construction, validity, and performance. Without
limitation on the ability of the Bank to exercise all its rights as to the
Collateral security for any loan or note, or to initiate and prosecute actions
for repayment in any applicable jurisdiction, Bank and Company agree that any
action or proceeding commenced by or on behalf of the parties relating to this
Agreement, the loans, or the Note(s) shall be commenced and maintained
exclusively in courts of applicable jurisdiction located in Xxxxxxxx County,
Ohio.
STAR BANK, N.A.
/s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Assistant Vice President
Accepted this 9th day of August, 1996
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Xxxxxx Research Associates, Inc.
By /s/ Xxxxxxx X. Xxxxxx
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November 27, 1996
Xx. Xxxxxxx X. Xxxxxx
Chief Financial Officer
Xxxxxx Research Associates, Inc.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxx 00000-0000
RE: Line of Credit Agreement dated August 9, 1996 by and between Star Bank,
N.A. (the "Bank") and Xxxxxx Research Associates, Inc. (the "Company")
(said agreement shall hereinafter be referred to as the "Agreement").
Dear Xx. Xxxxxx:
Pursuant to the Loan Agreement referenced above, the Bank hereby waives the
following covenant.
(J) INDEBTEDNESS. Not incur or permit to exist any indebtedness, except:
(i) the borrowings evidenced by this Agreement, (ii) favorable
short-term unsecured trade credit granted in the ordinary course of
business.
This waiver pertains specifically to a $2 million lease line transaction for the
acquisition of office equipment, office furniture, computer equipment and
computer software. The covenant remains in effect for all other transactions. Do
not hesitate to contact me should you have any questions.
Sincerely,
/s/Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Assistant Vice President
MAS:d
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February 13, 1997
Xx. Xxxxxxx X. Xxxxx and
Xx. Xxxxxxxxxxx Xxxxxx
Xxxxxx Research Associates, Inc.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000-0000
Re: The Revolving Credit Loan Agreement dated August 9, 1997 and
as subsequently amended from time to time, (hereinafter referred
to as the "Agreement") by and between Star Bank, N.A. (the
"Bank") and Xxxxxx Research Associates, Inc. (the "Company")
Dear Xx. Xxxxx and Xx. Xxxxxx:
This letter, when duly and validly accepted by the Company, shall amend the
Agreement such that:
1) INCREASE RESTRICTED PAYMENTS. Total compensation to Xxxxxxx X. Xxxxx and
Xxxxxxxxxx Xxxxxx shall not exceed $275,000 combined annually.
All representations and warranties of the Company as originally set forth in
the Agreement are true and correct as of the date hereof. All other terms,
conditions, and covenants of the Agreement shall remain in full force and
effect.
If all the above terms represent our understanding, please indicate your
agreement by signing below.
Sincerely,
Star Bank, N.A.
By: /s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
Vice President
Accepted this 27 day of November 1997.
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XXXXXX RESEARCH ASSOCIATES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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