CREDIT AND SECURITY AGREEMENT
Exhibit
10.1
XXXXX FARGO BUSINESS CREDIT
THIS
CREDIT AND SECURITY AGREEMENT
(the
“Agreement”) is dated September 29, 2008, and is entered into between
MERRIMAC
INDUSTRIES, INC.,
a
Delaware corporation (“Company”), and Xxxxx
Fargo Bank, National Association
(as more
fully defined in Exhibit A, “Xxxxx Fargo”), acting through its Xxxxx Fargo
Business Credit operating division.
RECITALS
Company
has asked Xxxxx Fargo to provide it with a $5,000,000.00 revolving line of
credit (the “Line of Credit”) for working capital purposes. Company has also
requested a $500,000.00 equipment Term Loan (“Term Loan I”) and a $2,500,000.00
real estate Term Loan (“Term Loan II”) to facilitate refinancing of existing
debt and permanent real estate financing (collectively, the “Term Loan”). Xxxxx
Fargo is agreeable to meeting Company’s request, provided that Company agrees to
the terms and conditions of this Agreement.
For
purposes of this Agreement, capitalized terms not otherwise defined in the
Agreement shall have the meaning given them in Exhibit A.
1. AMOUNT
AND TERMS OF THE LINE OF CREDIT AND TERM LOAN
1.1 Line
of Credit; Limitations on Borrowings; Termination Date; Use of
Proceeds.
(a) Line
of Credit and Limitations on Borrowing.
Xxxxx
Fargo shall make Advances to Company under the Line of Credit that shall not
at
any time exceed in the aggregate the lesser of (i) $5,000,000.00 (the “Maximum
Line Amount”), or (ii) the Borrowing Base limitations described in Section 1.2.
Within these limits, Company may periodically borrow, prepay in whole or in
part, and reborrow. Xxxxx Fargo has no obligation to make an Advance during
a
Default Period or at any time Xxxxx Fargo reasonably believes that an Advance
would result in an Event of Default.
(b) Maturity
and Termination Dates.
Company
may request Line of Credit Advances from the date that the conditions set forth
in Section 3 are satisfied until the earlier of: (i) three (3) years from the
date hereof (the “Maturity Date”), (ii) the date Company terminates the Line of
Credit, or (iii) the date Xxxxx Fargo terminates the Line of Credit following
an
Event of Default. (The earliest of these dates is the “Termination
Date.”)
(c) Use
of
Line of Credit Proceeds.
Company
shall use the proceeds of each Line of Credit Advance for ordinary working
capital purposes and capital expenditures.
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(d) Revolving
Note.
Company’s obligation to repay Line of Credit Advances, regardless of how
initiated under Section 1.3, shall be evidenced by a revolving promissory note
(as renewed, amended or replaced from time to time, the “Revolving
Note”).
1.2 Borrowing
Base; Mandatory Prepayment.
(a) Borrowing
Base.
The
borrowing base (the “Borrowing Base”) is an amount equal to:
(i) 85%
or
such lesser percentage of Eligible Accounts as Xxxxx Fargo in its sole
discretion may deem appropriate ; provided that this rate may be reduced at
any
time by Xxxxx Fargo’s in its sole discretion by one (1) percent for each
percentage point by which Dilution on the date of determination is in excess
of
five percent (5.0%), plus
(ii) 30%
or
such lesser percentage of Eligible Inventory as Xxxxx Fargo in its sole
discretion may deem appropriate, or $400,000.00 whichever is less,
less
(iii) the
Borrowing Base Reserve, less
(iv) Indebtedness,
other than the Term Loan, that Company owes Xxxxx Fargo that has not been
advanced on the Revolving Note, less
(v) Indebtedness
that is not otherwise described in Section 1, including Indebtedness that Xxxxx
Fargo in its sole discretion finds on the date of determination to be equal
to
Xxxxx Fargo’s net credit exposure with respect to any swap, derivative, foreign
exchange, hedge, deposit, treasury management or similar transaction or
arrangement extended to Company by Xxxxx Fargo and any Indebtedness owed by
Company to Xxxxx Fargo Merchant Services, L.L.C..
(b) Mandatory
Prepayment; Overadvances.
If
unreimbursed Line of Credit Advances evidenced by the Revolving Note exceed
the
Borrowing Base or the Maximum Line Amount at any time, then Company shall
immediately prepay the Revolving Note in an amount sufficient to eliminate
the
excess, unless in each case, Xxxxx Fargo has delivered to Company an
Authenticated Record consenting to the Overadvance prior to its occurrence,
in
which event the Overadvance shall be temporarily permitted on such terms and
conditions as Xxxxx Fargo in its sole discretion may deem appropriate, including
the payment of additional fees or interest, or both.
1.3 Procedures
for Line of Credit Advances.
(a) Advances
to Operating Account.
Line of
Credit Advances shall be credited to Company’s demand deposit account maintained
with Xxxxx Fargo (the “Operating Account”), unless the parties agree in a Record
Authenticated by both of them to disburse to another account.
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(i) Advances
upon Company’s Request. Line of Credit Advances may be funded upon Company’s
request. No request will be deemed received until Xxxxx Fargo acknowledges
receipt, and Company, if requested by Xxxxx Fargo, confirms the request in
an
Authenticated Record in the form of Notice of Borrowing attached hereto as
Exhibit 1.3. Company shall repay all Advances, even if the Person requesting
the
Advance on behalf of Company lacked authorization.
(A) Floating
Rate Advances.
If
Company wants a Floating Rate Advance, it shall make the request no later than
11:59 a.m. Central Time on the Business Day on which it wants the Floating
Rate
Advance to be funded, which request shall specify the principal Advance amount
being requested.
(B) LIBOR
Advances.
If
Company wants a LIBOR Advance, it shall make the request no later than 11:59
a.m. Central Time three (3) Business Days prior to the Business Day on which
it
wants the LIBOR Advance to be funded, which request shall specify both the
principal Advance amount and Interest Period being requested. No more than
three
(3) separate LIBOR Advance Interest Periods may be outstanding at any one time.
Each LIBOR Advance shall be in multiples of $500,000.00 and in the minimum
amount of at least $1,000,000.00. LIBOR Advances are not available for Advances
made through the Loan Manager Service, and shall not be available during Default
Periods.
(ii) Advances
through Loan Manager.
If
Xxxxx Fargo has separately agreed that Company may use the Xxxxx Fargo Loan
Manager service (“Loan Manager”), Line of Credit (but not Term Loan) Advances
will be initiated by Xxxxx Fargo and credited to the Operating Account as
Floating Rate Advances as of the end of each Business Day in an amount
sufficient to maintain an agreed upon ledger balance in the Operating Account,
subject only to Line of Credit availability as provided in Section 1.1(a).
If
Xxxxx Fargo terminates Company’s access to Loan Manager, Company may continue to
request Line of Credit Advances as provided in Section 1.3(a)(i). Xxxxx Fargo
shall have no obligation to make an Advance through Loan Manager during a
Default Period, or in an amount in excess of Line of Credit availability, and
may terminate Loan Manager at any time in its sole discretion.
(b) Protective
Advances; Advances to Pay Indebtedness Due.
Xxxxx
Fargo may initiate a Floating Rate Advance on the Line of Credit in its sole
discretion for any reason at any time, without Company’s compliance with any of
the conditions of this Agreement, and (i) disburse the proceeds directly to
third Persons in order to protect Xxxxx Fargo’s interest in Collateral or to
perform any of Company’s obligations under this Agreement, or (ii) apply the
proceeds to the amount of any Indebtedness then due and payable to Xxxxx Fargo
unless the basis for such disbursement is an issue being contested by Company
in
good faith and on terms acceptable to Xxxxx Fargo.
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1.3A. LIBOR
Advances.
(a) Funding
Line of Credit Advances as LIBOR Advances for Fixed Interest
Periods.
Company
may fund a Line of Credit Advance as a LIBOR Advance for one, three, six or
twelve month periods (each period an “Interest Period”, as more fully defined in
Exhibit A).
(b) Procedure
for Converting Floating Rate Advances to LIBOR Advances.
Company
may request that all or any part of an outstanding Floating Rate Advance be
converted to a LIBOR Advance, provided that no Default Period is in effect,
and
that Xxxxx Fargo receives the request no later than 11:59 a.m. Central Time
three (3) Business Days prior to the Business Day on which Company wishes the
conversion to become effective. Each request shall (i) specify the principal
amount of the Floating Rate Advance to be converted, (ii) the Business Day
of
conversion, and (iii) the Interest Period desired. The request shall be
confirmed in an Authenticated Record if requested by Xxxxx Fargo. Each
conversion to a LIBOR Advance shall be in multiples of $500,000.00 and in the
minimum amount of at least $1,000,000.00.
(c) Expiring
LIBOR Advance Interest Periods.
Unless
Company requests a new LIBOR Advance, or prepays an outstanding LIBOR Advance
at
the expiration of an Interest Period, Xxxxx Fargo shall convert each LIBOR
Advance to a Floating Rate Advance on the last day of the expiring Interest
Period. If no Default Period is in effect, Company may request that all or
part
of any expiring LIBOR Advance be renewed as a LIBOR Advance, provided that
Xxxxx
Fargo receives the request no later than 11:59 a.m. Central Time three (3)
Business Days prior to the Business Day that constitutes the first day of the
new Interest Period. Each request shall specify the principal amount of the
expiring LIBOR Advance to be continued and Interest Period desired, and shall
be
confirmed in an Authenticated Record if requested by Xxxxx Fargo. Each renewal
of a LIBOR Advance shall be in multiples of $500,000.00 and in the minimum
amount of at least $1,000,000.00.
(d) Quotation
of LIBOR Advance Interest Rates.
Xxxxx
Fargo shall, with respect to any request for a new or renewal LIBOR Advance,
or
the conversion of a Floating Rate Advance to a LIBOR Advance, provide Company
with a LIBOR quote for each Interest Period identified by Company on the
Business Day on which the request was made, if the request is received by Xxxxx
Fargo no later than 11:59 a.m. Central Time of the Business Day on which Company
has requested that the LIBOR Advance be made effective. If Company does not
immediately accept a LIBOR quote, the quoted rate shall expire and any
subsequent request for a LIBOR quote shall be subject to redetermination by
Xxxxx Fargo.
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(e) Taxes
and Regulatory Costs.
Company
shall also pay Xxxxx Fargo with respect to any LIBOR Advance all (i)
withholdings, interest equalization taxes, stamp taxes or other taxes (except
income and franchise taxes) imposed by any domestic or foreign governmental
authority that are related to LIBOR, and (ii) future, supplemental, emergency
or
other changes in the LIBOR Reserve Percentage, the assessment rates imposed
by
the Federal Deposit Insurance Corporation, or similar costs imposed by any
domestic or foreign governmental authority or resulting from compliance by
Xxxxx
Fargo with any request or directive (whether or not having the force of law)
from any central bank or other governmental authority that are related to LIBOR
but not otherwise included in the calculation of LIBOR. In determining which
of
these amounts are attributable to an existing LIBOR Advance, any reasonable
allocation made by Xxxxx Fargo among its operations shall be deemed conclusive
and binding.
(f) Limitation
of LIBOR Advances.
Not
more than seventy-five percent (75%) of the total outstanding Advances under
the
Line of Credit and Term Loan II shall be LIBOR Advances.
1.4 Collection
of Accounts and Application to Revolving Note.
(a) The
Collection Account.
Company
has granted a security interest to Xxxxx Fargo in the Collateral, including
all
Accounts. Except as otherwise agreed by both parties in an Authenticated Record,
all Proceeds of Accounts and other Collateral, upon receipt or collection,
shall
be deposited each Business Day into the Collection Account. Funds so deposited
(“Account Funds”) are the property of Xxxxx Fargo, and may only be withdrawn
from the Collection Account by Xxxxx Fargo.
(b) Payment
of Accounts by Company’s Account Debtors.
Company
shall instruct all account debtors to make payments either directly to the
Lockbox for deposit by Xxxxx Fargo directly to the Collection Account, or
instruct them to deliver such payments to Xxxxx Fargo by wire transfer, ACH,
or
other means as Xxxxx Fargo may direct for deposit to the Collection Account
or
for direct application to the Line of Credit. If Company receives a payment
or
the Proceeds of Collateral directly, Company will promptly deposit the payment
or Proceeds into the Collection Account. Until deposited, it will hold all
such
payments and Proceeds in trust for Xxxxx Fargo without commingling with other
funds or property. All deposits held in the Collection Account shall constitute
Proceeds of Collateral and shall not constitute the payment of
Indebtedness.
(c) Application
of Payments to Revolving Note.
Xxxxx
Fargo will withdraw Account Funds deposited to the Collection Account and pay
down borrowings on the Line of Credit by applying them to the Revolving Note
on
the first Business Day following the Business Day of deposit to the Collection
Account, or, if payments are received by Xxxxx Fargo that are not first
deposited to the Collection Account pursuant to any treasury management service
provided to Company by Xxxxx Fargo, such payments shall be applied to the
Revolving Note as provided in the Master Agreement for Treasury Management
Services and the relevant service description.
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1.5 Term
Loan.
(a) Term
Loan.
Xxxxx
Fargo shall extend Term Loan I to Company through a single Advance in the amount
of $500,000.00. Xxxxx Fargo shall extend Term Loan II to Company through a
single Advance in an amount not in excess of the lesser of (i) $2,500,000.00,
or
(ii) 60 percent (60%) of the fair market value of real property located at
00
Xxxxxxxxx Xxxxx, Xxxx Xxxxxxxx, Xxx Xxxxxx. The Term Loan must be advanced
no
later than the date hereof.
(b) Term
Note.
Company’s obligation to repay the Term Loan and each Term Loan Advance shall be
evidenced by an installment promissory note (as renewed, amended, or replaced
from time to time, the “Term Note”).
(c) Term
Loan Advances and Disbursements.
Xxxxx
Fargo shall deposit the proceeds of each Term Loan Advance to Company’s
Operating Account, or disburse the proceeds in such other manner as the parties
may agree in an Authenticated Record. Upon request, Company shall confirm its
request for an Advance in an Authenticated Record, and agrees that it shall
repay the Term Loan even if the Person requesting any Term Loan Advance on
behalf of Company lacked authorization. The Term Loan II Advance may be funded
as a LIBOR Advance through the same process as that set forth in Section 1.3
and
Section 1.3A.
(d) Payments
and Adjustments to Payments.
The
unpaid principal amount of Term Loan I shall be paid in equal monthly
installments based upon a four (4) year amortization; the unpaid principal
amount of Term Loan II shall be paid in equal monthly installments amortizing
on
a straight line basis based upon a 180 month period, both beginning on the
first
day of the month following the date hereof, and on the first calendar day of
each succeeding month until the earlier of the applicable amortization or the
Termination Date, when the unpaid principal and interest evidenced by the Term
Note shall be fully due and payable. Installment payments may be adjusted by
Xxxxx Fargo from time to time to an amount that would fully amortize the Term
Note in substantially equal payments of principal through Termination Date
(the
“Assumed Maturity Date”). Payments shall be collected by Xxxxx Fargo through a
debit to the Term Note and a simultaneous Line of Credit Advance in the same
amount, or by such other method as the parties may agree. Proceeds from the
liquidation of Collateral acquired with Term Loan proceeds will be applied
to
the Term Note.
(e) Prepayments
and Mandatory Prepayments.
Company
may prepay the Term Loan at any time. If Xxxxx Fargo obtains an appraisal of
the
Equipment at any time as permitted under this Agreement, and the appraisal
shows
the aggregate unpaid principal amount of Term Loan I exceeds the lesser of
(i)
25% of the Net Orderly Liquidation Value of the Equipment or (ii) $2,000,000.00,
then Company shall immediately prepay the unpaid principal of the Term Note
in
the amount of such excess.
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(f) Collection
of Prepayments and Related Fees.
All
Term Loan prepayments, including mandatory prepayments and prepayments due
on
the Termination Date, must be accompanied by any prepayment and LIBOR Advance
breakage fees payable under this Agreement, which will be applied to the most
remote principal installments then due and payable. Any prepayments of principal
and any related fees shall be collected by Xxxxx Fargo through a debit to the
Term Note and a simultaneous Line of Credit Advance in the same amount, or
by
such other method as the parties may agree.
1.6 Interest
and Interest Related Matters.
(a) Interest
Rates Applicable to Line of Credit and Term Loan.
Except
as otherwise provided in this Agreement, the unpaid principal amount of each
Line of Credit Advance evidenced by the Revolving Note, and each Term Loan
Advance evidenced by the Term Note, shall accrue interest at an annual interest
rate calculated as follows:
Floating
Rate
Line
of
Credit Advances = Prime Rate plus one percent (1.0%),
Term
Loan
I Advances = Prime Rate plus one percent (1.0%)
Term
Loan
II Advances = Prime Rate plus one and one-half percent (1-1/2%)
which
interest rate shall change whenever the Prime Rate changes (the “Floating
Rate”); or
LIBOR
Advance Rate for One, Three, Six or Twelve Month Interest Periods
Line
of
Credit Advances = LIBOR plus three and one/quarter percent (3-1/4%)
Term
Loan
II Advances = LIBOR plus three and one-half percent (3-1/2%);
Multiple
Advances under the Line of Credit, or, if applicable, the Term Loan, may
simultaneously accrue interest at both the Floating Rate and at the LIBOR
Advance Rate, subject to the limitations of Section 1.3(a)(i).
(b) Intentionally
Omitted.
(c) Default
Interest Rate. Commencing on the day an Event of Default occurs, through and
including the date identified by Xxxxx Fargo in a Record as the date that the
Event of Default has been cured or waived (each such period a “Default Period”),
or during a time period specified in Section 1.9, or at any time following
the
Termination Date, in Xxxxx Fargo’s sole discretion and without waiving any of
its other rights or remedies, the principal amount of the Revolving Note and
the
Term Note shall bear interest at a rate that is three percent (3.0%) above
the
contractual rate set forth in Section 1.6(a) (the “Default Rate”), or any lesser
rate that Xxxxx Fargo may deem appropriate, starting on the first day of the
month in which the Default Period begins through the last day of that Default
Period, or any shorter time period to which Xxxxx Fargo may agree in an
Authenticated Record.
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(d) Interest
Accrual on Payments Applied to Revolving Note.
Payments received by Xxxxx Fargo shall be applied to the Revolving Note as
provided in Section 1.4(c), but the principal amount paid down shall continue
to
accrue interest through the end of the first Business Day following the Business
Day that the payment was applied.
(e) Usury.
No
interest rate shall be effective which would result in a rate greater than
the
highest rate permitted by law. Payments in the nature of interest and other
charges made under any Loan Documents or any other document or agreement
described in or related to this Agreement that are later determined to be in
excess of the limits imposed by applicable usury law will be deemed to be a
payment of principal, and the Indebtedness shall be reduced by that amount
so
that such payments will not be deemed usurious.
1.7 Fees.
(a) Origination
Fee.
Company
shall pay Xxxxx Fargo a one time origination fee of $60,000.00 which shall
be
fully earned and payable upon the execution of this Agreement.
(b) Unused
Line Fee.
Company
shall pay Xxxxx Fargo an annual unused line fee of three-eighths of one percent
(3/8%) of the daily average of the Maximum Line Amount reduced by outstanding
Advances (the “Unused Amount”), from the date of this Agreement to and including
the Termination Date, which unused line fee shall be payable monthly in arrears
on the first day of each month and on the Termination Date.
(c) Intentionally
Omitted.
(d) Collateral
Exam Fees.
Company
shall pay Xxxxx Fargo fees in connection with any Collateral exams (typically
conducted quarterly), audits or inspections conducted by or on behalf of Xxxxx
Fargo (both prior and subsequent to the date hereof) at the current rates
established from time to time by Xxxxx Fargo as its collateral exam fees (which
fees are currently $1,000.00 per eight-hour day per collateral examiner),
together with all actual out-of-pocket costs and expenses incurred in conducting
any collateral examination or inspection A minimum of two (2) Collateral exams
will be conducted by Xxxxx Fargo each year.
(e) Collateral
Monitoring Fees.
Company
shall pay Xxxxx Fargo a fee at the rates established from time to time by Xxxxx
Fargo as its Collateral monitoring fees (which fees are currently $500.00 per
month), due and payable monthly in arrears on the first day of the month and
on
the Termination Date.
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(f) Line
of Credit Termination and/or Reduction Fees.
If (i)
Xxxxx Fargo terminates the Line of Credit during a Default Period, or if (ii)
Company terminates the Line of Credit on a date prior to the Maturity Date,
or
if (iii) Company and Xxxxx Fargo agree to reduce the Maximum Line Amount, then
Company shall pay Xxxxx Fargo as liquidated damages a termination or reduction
fee in an amount equal to a percentage of the Maximum Line Amount (or the
reduction of the Maximum Line Amount, as the case may be) calculated as follows:
(A) two percent (2.0%) if the termination occurs on or before the first
anniversary of the first Line of Credit Advance; (B) one percent (1.0%) if
the
termination or reduction occurs after the first anniversary of the first Line
of
Credit Advance, but on or before the second anniversary of the first Line of
Credit Advance; and (C) one percent (1.0%) if the termination or reduction
occurs after the second anniversary of the first Line of Credit
Advance.
(g) Overadvance
Fees.
Company
shall pay a $500.00 Overadvance fee for each day that an Overadvance exists
which was not agreed to by Xxxxx Fargo in an Authenticated Record prior to
its
occurrence; provided that Xxxxx Fargo’s acceptance of the payment of such fees
shall not constitute either consent to the Overadvance or waiver of the
resulting Event of Default. Company shall pay additional Overadvance fees and
interest in such amounts and on such terms as Xxxxx Fargo in its sole discretion
may consider appropriate for any Overadvance to which Xxxxx Fargo has
specifically consented in an Authenticated Record prior to its
occurrence.
(h) Treasury
Management Fees.
Company
will pay service fees to Xxxxx Fargo for treasury management services provided
pursuant to the Master Agreement for Treasury Management Services or any other
agreement entered into by the parties, in the amount prescribed in Xxxxx Fargo’s
current service fee schedule.
(i) Intentionally
Omitted.
(j) Intentionally
Omitted.
(k) Other
Fees and Charges.
Xxxxx
Fargo may impose additional fees and charges during a Default Period for (i)
waiving an Event of Default, or for (ii) the administration of Collateral by
Xxxxx Fargo. All such fees and charges shall be imposed at Xxxxx Fargo’s sole
discretion following oral notice to Company on either an hourly, periodic,
or
flat fee basis, and in lieu of or in addition to imposing interest at the
Default Rate, and Company’s request for an Advance following such notice shall
constitute Company’s agreement to pay such fees and charges.
(l) Termination
and Prepayment Fees Following Transfer Between Xxxxx Fargo Operating
Divisions.
If the
Loan Documents, following Company’s request and the consent of Xxxxx Fargo
Business Credit (which consent may be withheld by Xxxxx Fargo Business Credit
in
its sole discretion), are transferred to an operating division of Xxxxx Fargo
other than Xxxxx Fargo Business Credit, the transfer will not be deemed a
termination or prepayment resulting in the payment of termination and/or
prepayment fees, provided that Company agrees, at the time of transfer, to
the
payment of comparable fees in an amount not less than that set forth in this
Agreement, in the event that any facilities extended under this Agreement are
terminated early or prepaid after the transfer. In no event, however, may
Company seek to transfer the Loan Documents to another operating division prior
to the date which is eighteen (18) months following the date
hereof.
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(m) LIBOR
Advance Breakage Fees.
Company
may prepay any Revolving Note or Term Note LIBOR Advance at any time in any
amount, whether voluntarily or by acceleration, provided, however, that if
the
LIBOR Advance is prepaid, Company shall pay Xxxxx Fargo upon demand a LIBOR
Advance breakage fee equal to the sum of the discounted monthly differences
for
each month from the month of prepayment through the month in which such Interest
Period matures, calculated as follows for each such month:
(i) Determine
the amount of interest which would have accrued each month on the amount prepaid
at the interest rate applicable to such amount had it remained outstanding
until
the last day of the applicable Interest Period.
(ii) Subtract
from the amount determined in (i) above the amount of interest which would
have
accrued for the same month on the amount prepaid for the remaining term of
such
Interest Period at LIBOR in effect on the date of prepayment for new loans
made
for such term in a principal amount equal to the amount prepaid.
(iii) If
the
result obtained in (ii) for any month is greater than zero, discount that
difference by LIBOR used in (ii) above.
Company
acknowledges that prepayment of the Revolving Note or the Term Note may result
in Xxxxx Fargo incurring additional costs, expenses or liabilities, and that
it
is difficult to ascertain the full extent of such costs, expenses or
liabilities. Company agrees to pay the above-described LIBOR Advance breakage
fees and agrees that this amount represents a reasonable estimate of the LIBOR
Advance breakage costs, expenses and/or liabilities of Xxxxx Fargo.
(n) Term
Loan Prepayment Fees.
Company
may prepay the principal amount of the Term Note at any time in any amount,
whether voluntarily or by acceleration, subject to the payment of a prepayment
fee in an amount equal to (i) two percent (2.0%) of the amount prepaid, if
prepayment occurs on or before the first anniversary of the first Term Loan
Advance; (ii) one percent (1.0%) of the amount prepaid, if prepayment occurs
after the first anniversary of the first Term Loan Advance but on or before
the
second anniversary of the first Term Loan Advance; and (iii) one percent (1.0%)
of the amount prepaid, if prepayment occurs after the second anniversary of
the
first Term Loan Advance.
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1.8 Interest
Accrual; Principal and Interest Payments; Computation.
(a) Interest
Payments and Interest Accrual.
Accrued
and unpaid interest under the Revolving Note and the Term Note on Floating
Rate
Advances shall be due and payable on the first day of each month (each an
“Interest Payment Date”) and on the Termination Date, and shall be paid in the
manner provided in Section 1.4(c) and Section 1.5(d). Interest shall accrue
from
the most recent date to which interest has been paid or, if no interest has
been
paid, from the date of Advance to the Interest Payment Date. Interest accruing
on any LIBOR Advance shall be due and payable on the last day of the applicable
Interest Period and on the Termination Date; provided, however, for Interest
Periods in excess of one month, interest shall nevertheless be due and payable
monthly on the last day of each month, and on the last day of the Interest
Period.
(b) Payment
of Revolving Note and Term Note Principal.
The
principal amount of the Revolving Note and the Term Note shall be paid from
time
to time as provided in this Agreement, and shall be fully due and payable on
the
Termination Date.
(c) Payments
Due on Non Business Days.
If an
Interest Payment Date or the Termination Date falls on a day which is not a
Business Day, payment shall be made on the next Business Day, and interest
shall
continue to accrue during that time period.
(d) Computation
of Interest and Fees.
Interest accruing on the unpaid principal amount of the Revolving Note and
fees
payable under this Agreement shall be computed on the basis of the actual number
of days elapsed in a year of 360 days.
(e) Liability
Records.
Xxxxx
Fargo shall maintain accounting and bookkeeping records of all Advances and
payments with respect to the Indebtedness in such form and content as Xxxxx
Fargo in its sole discretion deems appropriate. Xxxxx Fargo’s calculation of the
amount of the Indebtedness shall be presumed correct unless proven otherwise
by
Company. Upon request, Company will admit and certify to Xxxxx Fargo in a Record
the exact unpaid principal amount of Indebtedness that Company then believes
to
be due and payable to Xxxxx Fargo. Any billing statement or accounting provided
by Xxxxx Fargo shall be conclusive and binding unless Company notifies Xxxxx
Fargo in a detailed Record of its intention to dispute the billing statement
or
accounting within 30 days of receipt.
1.9 Termination,
Reduction or Non-Renewal of Line of Credit by Company;
Notice.
(a) Termination
by Company after Advance Notice.
Company
may terminate or reduce the Line of Credit at any time prior to the Maturity
Date, if it (i) delivers an Authenticated Record notifying Xxxxx Fargo of its
intentions at least 60 days prior to the proposed Termination Date, (ii) pays
Xxxxx Fargo the termination fee set forth in Section 1.7(f), and (iii) pays
the
Indebtedness in full or down to the reduced Maximum Line
Amount.
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11
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(b) Termination
by Company without Advance Notice.
If
Company fails to deliver Xxxxx Fargo timely notice of its intention to terminate
the Line of Credit or reduce the Maximum Line Amount as provided in Section
1.9(a), Company may nevertheless terminate the Line of Credit or reduce the
Maximum Line Amount and pay the Indebtedness in full or down to the reduced
Maximum Line Amount if it (i) pays the termination fee set forth in Section
1.7(f), and (ii) pays the Default Rate on the Revolving Note commencing on
the
60th day prior to the proposed Termination Date and continuing through the
date
that Xxxxx Fargo receives delivery of an Authenticated Record giving it actual
notice of Company’s intention to terminate.
(c) Non-Renewal
by Company; Notice.
If
Company does not wish Xxxxx Fargo to consider renewal of the Line of Credit
on
the next Maturity Date, Company shall deliver an Authenticated Record to Xxxxx
Fargo at least 60 days prior to the Maturity Date notifying Xxxxx Fargo of
its
intention not to renew. If Company fails to deliver to Xxxxx Fargo such timely
notice, then the Revolving Note shall accrue interest at the Default Rate
commencing on the 60th day prior to the Maturity Date and continuing through
the
date that Xxxxx Fargo receives delivery of an Authenticated Record giving it
actual notice of Company’s intention not to renew.
2. SECURITY
INTEREST AND OCCUPANCY OF COMPANY’S PREMISES
2.1 Grant
of Security Interest.
Company
hereby pledges, assigns and grants to Xxxxx Fargo, for the benefit of Xxxxx
Fargo and as agent for Xxxxx Fargo Merchant Services, L.L.C., a Lien and
security interest (collectively referred to as the “Security Interest”) in the
Collateral, as security for the payment and performance of all Indebtedness.
Following request by Xxxxx Fargo, Company shall xxxxx Xxxxx Fargo , for the
benefit of Xxxxx Fargo and as agent for Xxxxx Fargo Merchant Services, L.L.C.,
a
Lien and security interest in all commercial tort claims that it may have
against any Person.
2.2 Notifying
Account Debtors and Other Obligors; Collection of
Collateral.
Xxxxx
Fargo may at any time (whether or not a Default Period then exists) deliver
a
Record giving an account debtor or other Person obligated to pay an Account,
a
General Intangible, or other amount due, notice that the Account, General
Intangible, or other amount due has been assigned to Xxxxx Fargo for security
and must be paid directly to Xxxxx Fargo. Company shall join in giving such
notice and shall Authenticate any Record giving such notice upon Xxxxx Fargo’s
request. After Company or Xxxxx Fargo gives such notice, Xxxxx Fargo may, but
need not, in Xxxxx Fargo’s or in Company’s name, demand, xxx for, collect or
receive any money or property at any time payable or receivable on account
of,
or securing, such Account, General Intangible, or other amount due, or grant
any
extension to, make any compromise or settlement with or otherwise agree to
waive, modify, amend or change the obligations (including collateral
obligations) of any account debtor or other obligor. Xxxxx Fargo may, in Xxxxx
Fargo’s name or in Company’s name, as Company’s agent and attorney-in-fact,
notify the United States Postal Service to change the address for delivery
of
Company’s mail to any address designated by Xxxxx Fargo, otherwise intercept
Company’s mail, and receive, open and dispose of Company’s mail, applying all
Collateral as permitted under this Agreement and holding all other mail for
Company’s account or forwarding such mail to Company’s last known
address.
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12
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2.3 Assignment
of Insurance.
As
additional security for the Indebtedness, Company hereby assigns to Xxxxx Fargo
and to Xxxxx Fargo Merchant Services, L.L.C., all rights of Company under every
policy of insurance covering the Collateral and all business records and other
documents relating to it, and all monies (including proceeds and refunds) that
may be payable under any policy, and Company hereby directs the issuer of each
policy to pay all such monies directly to Xxxxx Fargo. At any time, whether
or
not a Default Period then exists, Xxxxx Fargo may (but need not), in Xxxxx
Fargo’s or Company’s name, execute and deliver proofs of claim, receive payment
of proceeds and endorse checks and other instruments representing payment of
the
policy of insurance, and adjust, litigate, compromise or release claims against
the issuer of any policy. Any monies received under any insurance policy
assigned to Xxxxx Fargo, other than liability insurance policies, or received
as
payment of any award or compensation for condemnation or taking by eminent
domain, shall be paid to Xxxxx Fargo and, as determined by Xxxxx Fargo in its
sole discretion, either be applied to prepayment of the Indebtedness or
disbursed to Company under staged payment terms reasonably satisfactory to
Xxxxx
Fargo for application to the cost of repairs, replacements, or restorations
which shall be effected with reasonable promptness and shall be of a value
at
least equal to the value of the items or property destroyed.
2.4 Company’s
Premises
(a) Xxxxx
Fargo’s Right to Occupy Company’s Premises.
Company
hereby grants to Xxxxx Fargo the right, at any time during a Default Period
and
without notice or consent, to take exclusive possession of all locations where
Company conducts its business or has any rights of possession, including the
locations described on Exhibit B (the “Premises”), until the earlier of (i)
payment in full and discharge of all Indebtedness and termination of the Line
of
Credit, or (ii) final sale or disposition of all items constituting Collateral
and delivery of those items to purchasers.
(b) Xxxxx
Fargo’s Use of Company’s Premises.
Xxxxx
Fargo may use the Premises to store, process, manufacture, sell, use, and
liquidate or otherwise dispose of items that are Collateral, and for any other
incidental purposes deemed appropriate by Xxxxx Fargo in good
faith.
(c) Company’s
Obligation to Reimburse Xxxxx Fargo.
Xxxxx
Fargo shall not be obligated to pay rent or other compensation for the
possession or use of any Premises, but if Xxxxx Fargo elects to pay rent or
other compensation to the owner of any Premises in order to have access to
the
Premises, then Company shall promptly reimburse Xxxxx Fargo all such amounts,
as
well as all taxes, fees, charges and other expenses at any time payable by
Xxxxx
Fargo with respect to the Premises by reason of the execution, delivery,
recordation, performance or enforcement of any terms of this
Agreement.
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13
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2.5 License.
Without
limiting the generality of any other Security Document, Company hereby grants
to
Xxxxx Fargo a non-exclusive, worldwide and royalty-free license to use or
otherwise exploit all Intellectual Property Rights of Company for the purpose
of: (a) completing the manufacture of any in-process materials during any
Default Period so that such materials become saleable Inventory, all in
accordance with the same quality standards previously adopted by Company for
its
own manufacturing and subject to Company’s reasonable exercise of quality
control; and (b) selling, leasing or otherwise disposing of any or all
Collateral during any Default Period.
2.6 Financing
Statements.
Company
authorizes Xxxxx Fargo to file financing statements describing Collateral to
perfect Xxxxx Fargo’s Security Interest in the Collateral, and Xxxxx Fargo may
describe the Collateral as “all personal property” or “all assets” or describe
specific items of Collateral including commercial tort claims as Xxxxx Fargo
may
consider necessary or useful to perfect the Security Interest. All financing
statements filed before the date of this Agreement to perfect the Security
Interest were authorized by Company and are hereby re-authorized. Following
the
termination of the Line of Credit and payment of all Indebtedness, Xxxxx Fargo
shall, at Company’s expense and within the time periods required under
applicable law, release or terminate any filings or other agreements that
perfect the Security Interest.
2.7 Setoff.
Xxxxx
Fargo may at any time, in its sole discretion and without demand or notice
to
anyone, setoff any liability owed to Company by Xxxxx Fargo against any then
due
Indebtedness.
2.8 Collateral
Related Matters.
This
Agreement does not contemplate a sale of Accounts or chattel paper, and, as
provided by law, Company is entitled to any surplus and shall remain liable
for
any deficiency. Xxxxx Fargo’s duty of care with respect to Collateral in its
possession (as imposed by law) will be deemed fulfilled if it exercises
reasonable care in physically keeping such Collateral, or in the case of
Collateral in the custody or possession of a bailee or other third Person,
exercises reasonable care in the selection of the bailee or third Person, and
Xxxxx Fargo need not otherwise preserve, protect, insure or care for such
Collateral. Xxxxx Fargo shall not be obligated to preserve rights Company may
have against prior parties, to liquidate the Collateral at all or in any
particular manner or order or apply the Proceeds of the Collateral in any
particular order of application. Xxxxx Fargo has no obligation to clean-up
or
prepare Collateral for sale. Company waives any right it may have to require
Xxxxx Fargo to pursue any third Person for any of the Indebtedness.
2.9 Notices
Regarding Disposition of Collateral.
If
notice to Company of any intended disposition of Collateral or any other
intended action is required by applicable law in a particular situation, such
notice will be deemed commercially reasonable if given in the manner specified
in Section 7.4 at least ten calendar days before the date of intended
disposition or other action.
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3. CONDITIONS
PRECEDENT
3.1 Conditions
Precedent to Initial Advance.
Xxxxx
Fargo’s obligation to make the initial Advance shall be subject to the condition
that Xxxxx Fargo shall have received this Agreement and each of the Loan
Documents, and any document, agreement, or other item described in or related
to
this Agreement, and all fees and information described in Exhibit C, executed
and in form and content satisfactory to Xxxxx Fargo.
3.2 Additional
Conditions Precedent to All Advances.
Xxxxx
Fargo’s obligation to make any Advance (including the initial Advance) shall be
subject to the further additional conditions: (a) that the representations
and
warranties described in Exhibit D are correct on the date of the Advance, except
to the extent that such representations and warranties relate solely to an
earlier date; and (b) that no event has occurred and is continuing, or would
result from the requested Advance that would result in an Event of
Default.
4. REPRESENTATIONS
AND WARRANTIES
To
induce
Xxxxx Fargo to enter into this Agreement, Company makes the representations
and
warranties described in Exhibit D. Any request for an Advance will be deemed
a
representation by Company that all representations and warranties described
in
Exhibit D are true, correct and complete as of the time of the request, unless
they relate exclusively to an earlier date. Company shall promptly deliver
a
Record notifying Xxxxx Fargo of any change in circumstance that would affect
the
accuracy of any representation or warranty, unless the representation and
warranty specifically relates to an earlier date.
5. COVENANTS
So
long
as the Indebtedness remains unpaid, or the Line of Credit has not been
terminated, Company shall comply with each of the following covenants, unless
Xxxxx Fargo shall consent otherwise in an Authenticated Record delivered to
Company.
5.1 Reporting
Requirements.
Company
shall deliver to Xxxxx Fargo the following information, compiled where
applicable using GAAP consistently applied, in form and content reasonably
acceptable to Xxxxx Fargo:
(a) Annual
Financial Statements.
As soon
as available and in any event within 120 days after Company’s fiscal year end,
Company’s audited financial statements with the unqualified opinion of an
independent certified public accountant reasonably acceptable to Xxxxx Fargo,
which shall include Company’s balance sheet, income statement, and statement of
retained earnings and cash flows prepared, if requested by Xxxxx Fargo, on
a
consolidated and consolidating basis to include Company’s Affiliates. The annual
financial statements shall be accompanied by a certificate (the “Compliance
Certificate”) in the form of Exhibit E that is signed by Company’s chief
financial officer.
Each
Compliance Certificate that accompanies an annual financial statement shall
also
be accompanied by copies of all management letters prepared by Company’s
accountants.
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15
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(b) Quarterly
Financial Statements.
As soon
as available and in any event within 45 days after the end of each quarter
except the final (or within sixty [60] days after the end of each quarter if
otherwise in accordance with applicable regulatory guidelines of the Securities
& Exchange Commission), a Company prepared balance sheet, income statement,
and statement of retained earnings prepared for that quarter and for the
year-to-date period then ended, prepared, if requested by Xxxxx Fargo, on a
consolidated and consolidating basis to include Company’s Affiliates, and
stating in comparative form the figures for the corresponding date and periods
in the prior fiscal year, subject to quarterly adjustments. The financial
statements shall be accompanied by a Compliance Certificate in the form of
Exhibit E that is signed by Company’s chief financial officer. Xxxxx Fargo
acknowledges the period closing dates utilized by Company as set forth on
Schedule 5.1(b) attached hereto.
(c) Collateral
Reports.
No
later than 15 days after each month end (or more frequently if Xxxxx Fargo
shall
request it), detailed agings of Company’s accounts receivable and accounts
payable and a calculation of Company’s Accounts, Eligible Accounts, Inventory
and Eligible Inventory as of the end of that month or shorter time period
requested by Xxxxx Fargo. Not later than 5 days after each two-week period
(or
more frequently if Xxxxx Fargo shall request it) a detailed Inventory report,
Inventory Certificate report and Eligible Inventory Report.
(d) Projections.
No
later than 30 days prior to each fiscal year end, Company’s projected balance
sheet and income statement and statement of cash flows and statement of retained
earnings and cash flows for each quarter of the next fiscal year, certified
as
being the most accurate projections available by Company’s chief financial
officer and accompanied by a statement of assumptions and supporting schedules
and information.
(e) Supplemental
Reports.
Weekly,
or more frequently if Xxxxx Fargo requests, Company’s standard form of “daily
collateral report”, together with receivables schedules, collection reports, and
copies of invoices in excess of $30,000.00, shipment documents and delivery
receipts for goods sold to account debtors in excess of $30,000.00.
(f) Litigation.
No
later than five days after discovery, a Record notifying Xxxxx Fargo of any
litigation or other proceeding before any court or governmental agency which
seeks a monetary recovery against Company in excess of $100,000.00.
(g) Intellectual
Property.
(i) No
later than 30 days before it acquires material Intellectual Property Rights,
a
Record notifying Xxxxx Fargo of Company’s intention to acquire such rights; (ii)
except for transfers permitted under Section 5.18, no later than 30 days before
it disposes of material Intellectual Property Rights, a Record notifying Xxxxx
Fargo of Company’s intention to dispose of such rights, along with copies of all
proposed documents and agreements concerning the disposal of such rights as
requested by Xxxxx Fargo; (iii) promptly upon discovery, a Record notifying
Xxxxx Fargo of (A) any Infringement of Company’s Intellectual Property Rights by
any Person, (B) claims that Company is Infringing another Person’s Intellectual
Property Rights and (C) any threatened cancellation, termination or material
limitation of Company’s Intellectual Property Rights; and (iv) promptly upon
receipt, copies of all registrations and filings with respect to Company’s
Intellectual Property Rights.
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16
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(h) Defaults.
No
later than three days after learning of the probable occurrence of any Event
of
Default, a Record notifying Xxxxx Fargo of the Event of Default and the steps
being taken by Company to cure the Event of Default.
(i) Disputes.
Promptly upon discovery, a Record notifying Xxxxx Fargo of (i) any disputes
or
claims by Company’s customers exceeding $5,000.00 individually or $10,000.00 in
the aggregate during any fiscal year; (ii) credit memos not previously reported
in Section 5.1(e); and (iii) any goods returned to or recovered by Company
outside of the ordinary course of business or in the ordinary course of business
but with a value in an amount in excess of $100,000.00.
(j) Changes
in Officers and Directors.
Promptly following occurrence, a Record notifying Xxxxx Fargo of any change
in
the persons constituting Company’s Officers and Directors.
(k) Collateral.
Promptly upon discovery, a Record notifying Xxxxx Fargo of any loss of or
material damage to any Collateral or of any substantial adverse change in any
Collateral or the prospect of its payment.
(l) Commercial
Tort Claims.
Promptly upon discovery, a Record notifying Xxxxx Fargo of any commercial tort
claims brought by Company against any Person, including the name and address
of
each defendant, a summary of the facts, an estimate of Company’s damages, copies
of any complaint or demand letter submitted by Company, and such other
information as Xxxxx Fargo may request.
(m) Reports
to Owners.
Promptly upon distribution, copies of all financial statements, reports and
proxy statements which Company shall have sent to its Owners.
(n) Tax
Returns of Company.
No
later than ten days after they are required to be filed (giving account to
properly filed extensions), copies of Company’s signed and dated state and
federal income tax returns and all related schedules, and copies of any
extension requests.
(o) Intentionally
Omitted.
(p) Violations
of Law.
No
later than three days after discovery of any violation, a Record notifying
Xxxxx
Fargo of Company’s violation of any law, rule or regulation, the non-compliance
with which is reasonably likely to have a Material Adverse Effect on
Company.
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17
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(q) Pension
Plans.
(i)
Promptly upon discovery, and in any event within 30 days after Company knows
or
has reason to know that any Reportable Event with respect to any Pension Plan
has occurred, a Record authenticated by Company’s chief financial officer
notifying Xxxxx Fargo of the Reportable Event in detail and the actions which
Company proposes to take to correct the deficiency, together with a copy of
any
related notice sent to the Pension Benefit Guaranty Corporation; (ii) promptly
upon discovery, and in any event within 10 days after Company fails to make
a
required quarterly Pension Plan contribution under Section 412(m) of the IRC,
a
Record authenticated by the Company’s chief financial officer notifying Xxxxx
Fargo of the failure in detail and the actions that Company will take to cure
the failure, together with a copy of any related notice sent to the Pension
Benefit Guaranty Corporation; and (iii) promptly upon discovery, and in any
event within 10 days after Company knows or has reason to know that it may
be
liable or may be reasonably expected to have liability for any withdrawal,
partial withdrawal, reorganization or other event under any Multiemployer Plan
under Sections 4201 or 4243 of ERISA, a Record authenticated by Company’s chief
financial officer notifying Xxxxx Fargo of the details of the event and the
actions that Company proposes to take in response.
(r) Other
Reports.
From
time to time, with reasonable promptness, all receivables schedules, inventory
reports, collection reports, deposit records, equipment schedules, invoices
to
account debtors, shipment documents and delivery receipts for goods sold, and
such other materials, reports, records or information as Xxxxx Fargo may
reasonably request.
(s) Environmental.
At any
time, in the sole discretion of Xxxxx Fargo, not more than one Phase II
environmental report on the Premises, including such Premises subject to the
Mortgage at the expense of Company.
5.2 Financial
Covenants.
Company
agrees to comply with the financial covenants described below, which shall
be
calculated using GAAP consistently applied, except as they may be otherwise
modified by the following capitalized definitions:
(a) Maximum
due from Costa Rica Affiliate.
Company
shall not permit during each period described below the amount due from its
Costa Rica Affiliate, Multi-Mix® Microtechnology S.R.L. to exceed the amount
below determined as of the end of each quarter:
| Period |
Maximum
Due
|
|||
|
Through
January 3, 2009
|
$
|
4,250,000.00
|
||
|
Through
April 4, 2009
|
$
|
4,500,000.00
|
||
|
Through
July 4, 2009
|
$
|
4,750,000.00
|
||
|
Through
October 3, 2009, and each fiscal quarter thereafter
|
$
|
5,000,000.00
|
||
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18
-
(b) Minimum
Net Income.
Company
shall achieve for each period described below, Net Income (net of any impairment
adjustments, write-downs and non-cash items) of not less or more than the amount
set forth for each such period (numbers appearing between “< >“ are
negative):
|
Period
|
Minimum
Net Income
|
|
|
Through
January 3, 2009
|
Net
Loss of not more than <$265,000.00>
|
|
|
Through
April 4, 2009, and each fiscal quarter thereafter
|
Not
less than 75% of Company’s projection of Net Income or not more than 100%
of Company’s projection of Net Loss measured
cumulatively
|
(c) Intentionally
Omitted
(d) Intentionally
Omitted
(e) Minimum
Debt Service Coverage Ratio.
Company
shall maintain as of each fiscal quarter end, a Debt Service Coverage Ratio
of
not less than 1.10 to 1.0 commencing September 27, 2008 and for each fiscal
quarter end thereafter.
(f) Intentionally
Omitted.
(g) Capital
Expenditures.
Company
shall not incur or contract to incur Capital Expenditures of more than (i)
$1,000,000.00 in the aggregate during Company’s fiscal year ending December 31,
2008, and (ii) $600,000.00 for each subsequent year end.
(h) Intentionally
Omitted.
(i) Intentionally
Omitted.
(j) Intentionally
Omitted.
(k) Minimum
Availability.
At all
times after the date hereof, after taking account of all outstanding Advances,
availability under Line of Credit shall be not less than
$500,000.00.
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19
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(l)
Capital
Expenditures under Borrowing Base.
Company
may use not more than $500,00.00 of its availability under the Borrowing Base
for Capital Expenditures during fiscal year ending January 3, 2009
only.
5.3 Other
Liens and Permitted Liens.
(a) Other
Liens; Permitted Liens.
Company
shall not create, incur or suffer to exist any Lien upon any of its assets,
now
owned or later acquired, as security for any indebtedness, with the exception
of
the following (each a “Permitted Lien”; collectively, “Permitted Liens”): (i) In
the case of real property, covenants, restrictions, rights, easements and minor
irregularities in title which do not materially interfere with Company’s
business or operations as presently conducted; (ii) Liens in existence on the
date of this Agreement that are described in Exhibit F and secure indebtedness
for borrowed money permitted under Section 5.4; (iii) The Security Interest
and
Liens created by the Security Documents; (iv) Purchase money Liens relating
to
the acquisition of Equipment not exceeding the lesser of cost or fair market
value, not exceeding $100,000.00 in the aggregate during any fiscal year and
so
long as no Default Period is then in existence and none would exist immediately
after such acquisition; (v) such security as Company may post in the ordinary
course of business to obtain performance bonds upon prior notice to Xxxxx Fargo
and subject to the prior consent of Xxxxx Fargo (which consent shall not be
unreasonably withheld) provided that such security will not otherwise cause
a
Default Period; (vi) statutory liens of landlords, carriers, warehousers,
bailees, mechanics, materialmen and other like liens imposed by law in the
ordinary course of business for amounts not yet due or being contested in good
faith, and with respect to which adequate reserves or appropriate provisions
are
being maintained by the Company in accordance with GAAP; and (vii) liens for
taxes which are not yet due and payable or which are being contested in good
faith by the Company on terms acceptable to Xxxxx Fargo.
(b) Financing
Statements.
Company
shall not authorize the filing of any financing statement by any Person as
Secured Party with respect to any of Company’s assets, other than Xxxxx Fargo.
Company shall not amend any financing statement filed by Xxxxx Fargo as Secured
Party except as permitted by law.
5.4 Indebtedness.
Company
shall not incur, create, assume or permit to exist any indebtedness or liability
on account of deposits or letters of credit issued on Company’s behalf, or
advances or any indebtedness for borrowed money of any kind, whether or not
evidenced by an instrument, except: (a) Indebtedness described in this
Agreement; (b) indebtedness of Company described in Exhibit F; and (c)
indebtedness secured by Permitted Liens.
5.5 Guaranties.
Company
shall not assume, guarantee, endorse or otherwise become directly or
contingently liable for the obligations of any Person, except: (a) the
endorsement of negotiable instruments by Company for deposit or collection
or
similar transactions in the ordinary course of business; and (b) guaranties,
endorsements and other direct or contingent liabilities in connection with
the
obligations of other Persons in existence on the date of this Agreement and
described in Exhibit F.
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20
-
5.6 Investments
and Subsidiaries.
Company
shall not make or permit to exist any loans or advances to, or make any
investment or acquire any interest whatsoever in, any Person or Affiliate,
including any partnership or joint venture, nor purchase or hold beneficially
any stock or other securities or evidence of indebtedness of any Person or
Affiliate, except:
(a) Investments
in direct obligations of the United States of America or any of its political
subdivisions whose obligations constitute the full faith and credit obligations
of the United States of America and have a maturity of one year or less,
commercial paper issued by U.S. corporations rated “A 1” or “A 2” by Standard
& Poor’s Ratings Services or “P 1” or “P 2” by Xxxxx’x Investors Service or
certificates of deposit or bankers’ acceptances having a maturity of one year or
less issued by members of the Federal Reserve System having deposits in excess
of $100,000,000 (which certificates of deposit or bankers’ acceptances are fully
insured by the Federal Deposit Insurance Corporation);
(b) Travel
advances or loans to Company’s Officers and employees not exceeding at any one
time an aggregate of $20,000.00;
(c) Prepaid
rent not exceeding one month or security deposits; and
(d) Current
investments in those Subsidiaries in existence on the date of this Agreement
which are identified on Exhibit D and advances consistent with Section 5.2(a)
hereof.
5.7 Dividends
and Distributions.
Company
shall not declare or pay any dividends (other than dividends payable solely
in
stock of Company) on any class of its stock, or make any payment on account
of
the purchase, redemption or retirement of any shares of its stock, or other
securities or evidence of its indebtedness or make any distribution regarding
its stock, either directly or indirectly if there then exists or as a result
thereof there occurs a Default Period.
5.8 Salaries.
Company
shall not pay excessive or unreasonable salaries, bonuses, commissions,
consultant fees or other compensation. Company shall not increase the salary,
bonus, commissions, consultant fees or other compensation of any Director,
Officer or consultant, or any member of their families, by more than 10% in
any
one year, either individually or for all such Persons in the aggregate, or
pay
such an increase from any source other than profits earned in the year of
payment if there then exists or as a result of such increase in payment there
occurs a Default Period.
5.9 Intentionally
Omitted.
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21
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5.10 Books
and Records; Collateral Examination; Inspection and
Appraisals.
(a) Books
and Records; Inspection.
Company
shall keep complete and accurate books and records with respect to the
Collateral and Company’s business and financial condition and any other matters
that Xxxxx Fargo may request, in accordance with GAAP. Company shall permit
any
employee, attorney, accountant or other agent of Xxxxx Fargo to audit, review,
make extracts from and copy any of its books and records at any time during
ordinary business hours, and to discuss Company’s affairs with any of its
Directors, Officers, employees or agents.
(b) Authorization
to Company’s Agents to Make Disclosures to Xxxxx Fargo.
Company
authorizes all accountants and other Persons acting as its agent to disclose
and
deliver to Xxxxx Fargo’s employees, accountants, attorneys and other Persons
acting as its agent, at Company’s expense, all financial information, books and
records, work papers, management reports and other information in their
possession regarding Company.
(c) Collateral
Exams and Inspections.
Company
shall permit Xxxxx Fargo’s employees, accountants, attorneys or other Persons
acting as its agent, to examine and inspect any Collateral or any other property
of Company at any time during ordinary business hours.
(d) Collateral
Appraisals.
Xxxxx
Fargo may also obtain, from time to time, but no more than 4 times each calendar
year, at Company’s expense, an appraisal of Company’s Collateral, by an
appraiser acceptable to Xxxxx Fargo in its sole discretion.
5.11 Account
Verification; Payment of Permitted Liens.
(a) Account
Verification.
Xxxxx
Fargo or its agents may (i) contact account debtors and other obligors at any
time to verify Company’s Accounts; and (ii) require Company to send requests for
verification of Accounts or send notices of assignment of Accounts to account
debtors and other obligors.
(b) Covenant
to Pay Permitted Liens.
Company
shall pay when due each account payable due to any Person holding a Permitted
Lien (as a result of such payable) on any Collateral unless contested by Company
in good faith.
5.12 Compliance
with Laws.
(a) General
Compliance with Applicable Law; Use of Collateral.
Company
shall (i) comply and cause each Subsidiary to comply, with the requirements
of
applicable laws and regulations, the non compliance with which would have a
Material Adverse Effect on its business or its financial condition and (ii)
use
and keep the Collateral, and require that others use and keep the Collateral,
only for lawful purposes, without violation of any federal, state or local
law,
statute or ordinance.
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(b) Compliance
with Federal Regulatory Laws.
Company
shall (i) prohibit, and cause each Subsidiary to prohibit, any Person that
is an
Owner or Officer from being listed on the Specially Designated Nationals and
Blocked Person List or other similar lists maintained by the Office of Foreign
Assets Control (“OFAC”), the Department of the Treasury or included in any
Executive Orders, (ii) not permit the proceeds of the Line of Credit or any
other financial accommodation extended by Xxxxx Fargo to be used in any way
that
violates any foreign asset control regulations of OFAC or other applicable
law,
(iii) comply, and cause each Subsidiary to comply, with all applicable Bank
Secrecy Act laws and regulations, as amended from time to time, and (iv)
otherwise comply with the USA Patriot Act and Xxxxx Fargo’s related policies and
procedures.
(c) Compliance
with Environmental Laws.
Company
shall (i) comply, and cause each Subsidiary to comply, with the requirements
of
applicable Environmental Laws and obtain and comply in all material respects
with all permits, licenses and similar approvals required by them, and (ii)
not
generate, use, transport, treat, store or dispose of any Hazardous Substances
in
such a manner as to create any material liability or obligation under the common
law of any jurisdiction or any Environmental Law.
5.13 Payment
of Taxes and Other Claims.
Company
shall pay or discharge, when due, and cause each Subsidiary to pay or discharge,
when due, (a) all taxes, assessments and governmental charges levied or imposed
upon it or upon its income or profits, upon any properties belonging to it
(including the Collateral) or upon or against the creation, perfection or
continuance of the Security Interest, prior to the date on which penalties
attach, (b) all federal, state and local taxes required to be withheld by it,
and (c) all lawful claims for labor, materials and supplies which, if unpaid,
might by law become a Lien upon any properties of Company, although Company
shall not be required to pay any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which proper reserves have been
made.
5.14 Maintenance
of Collateral and Properties.
(a) Company
shall keep and maintain the Collateral and all of its other properties necessary
or useful in its business in good condition, repair and working order (normal
wear and tear excepted) and will from time to time replace or repair any worn,
defective or broken parts, although Company may discontinue the operation and
maintenance of any properties if Company believes that such discontinuance
is
desirable to the conduct of its business and not disadvantageous in any material
respect to Xxxxx Fargo. Company shall take all commercially reasonable steps
necessary to protect and maintain its Intellectual Property Rights.
(b) Company
shall defend the Collateral against all Liens, claims and demands of all third
Persons claiming any interest in the Collateral. Company shall keep all
Collateral free and clear of all Liens except Permitted Liens. Company shall
take all commercially reasonable steps necessary to prosecute any Person
Infringing its Intellectual Property Rights and to defend itself against any
Person accusing it of Infringing any Person’s Intellectual Property
Rights.
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5.15 Insurance.
Company
shall at all times maintain insurance with insurers acceptable to Xxxxx Fargo,
in such amounts, on such terms (including any deductibles) and against such
risks as Xxxxx Fargo may require, in such amounts and against such risks as
is
usually carried by companies engaged in similar business and owning similar
properties in the same geographical areas in which Company operates. Company
shall also, at all times and without limitation maintain business interruption
insurance (including force majeure coverage) and keep all tangible Collateral
insured against risks of fire (including so-called extended coverage), theft,
collision (for Collateral consisting of motor vehicles) and such other risks
and
in such amounts as Xxxxx Fargo may reasonably request, with any loss payable
to
Xxxxx Fargo to the extent of its interest, and all such policies of insurance
shall contain a lender’s loss payable endorsement for the benefit of Xxxxx
Fargo. All policies of liability insurance shall name Xxxxx Fargo as an
additional insured. Notwithstanding the foregoing, Company may select any
insurance carrier with AM Best’s rating of A- VII+ or better and maintain such
insurance policies with insurance coverages comparable to such policies and
coverages existing as of the date hereof.
5.16 Preservation
of Existence.
Company
shall preserve and maintain its existence and all of its rights, privileges
and
franchises necessary or desirable in the normal conduct of its business and
shall conduct its business in an orderly, efficient and regular manner, the
failure of which would cause a Material Adverse Effect.
5.17 Delivery
of Instruments, etc.
Upon
request by Xxxxx Fargo, Company shall promptly deliver to Xxxxx Fargo in pledge
all instruments, documents and chattel paper constituting Collateral, endorsed
or assigned by Company.
5.18 Sale
or Transfer of Assets; Suspension of Business Operations.
Company
shall not sell, lease, assign, transfer or otherwise dispose of (a) the stock
of
any Subsidiary, (b) all or a substantial part of its assets, or (c) any
Collateral or any interest in Collateral (whether in one transaction or in
a
series of transactions) to any other Person other than the sale of Inventory
in
the ordinary course of business and shall not liquidate, dissolve or suspend
business operations. Company shall not transfer any part of its ownership
interest in any Intellectual Property Rights and shall not permit its rights
as
licensee of Licensed Intellectual Property to lapse, except that Company may
transfer such rights or permit them to lapse if it has reasonably determined
that such Intellectual Property Rights are no longer useful in its business.
If
Company transfers any Intellectual Property Rights for value, Company shall
pay
the Proceeds to Xxxxx Fargo for application to the Indebtedness. Company shall
not license any other Person to use any of Company’s Intellectual Property
Rights, except that Company may grant licenses in the ordinary course of its
business in connection with sales of Inventory or the provision of services
to
its customers.
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5.19 Consolidation
and Merger; Asset Acquisitions.
Company
shall not consolidate with or merge into any other entity, or permit any other
entity to merge into it, or acquire (in a transaction analogous in purpose
or
effect to a consolidation or merger) all or substantially all of the assets
of
any other entity.
5.20 Sale
and Leaseback.
Company
shall not enter into any arrangement, directly or indirectly, with any other
Person pursuant to which Company shall sell or transfer any real or personal
property, whether owned now or acquired in the future, and then rent or lease
all or part of such property or any other property which Company intends to
use
for substantially the same purpose or purposes as the property being sold or
transferred.
5.21 Restrictions
on Nature of Business.
Company
will not engage in any line of business materially different from that presently
engaged in by Company, and will not purchase, lease or otherwise acquire assets
not related to its business.
5.22 Accounting.
Company
will not adopt any material change in accounting principles except as required
by GAAP, consistently applied. Company will not change its fiscal
year.
5.23 Discounts,
etc.
After
notice from Xxxxx Fargo, Company will not grant any discount, credit or
allowance to any customer of Company or accept any return of goods sold. Company
will not at any time modify, amend, subordinate, cancel or terminate any
Account.
5.24 Pension
Plans.
Except
as disclosed to Xxxxx Fargo in a Record prior to the date of this Agreement,
neither Company nor any ERISA Affiliate will (a) adopt, create, assume or become
party to any Pension Plan, (b) become obligated to contribute to any
Multiemployer Plan, (c) incur any obligation to provide post-retirement medical
or insurance benefits with respect to employees or former employees (other
than
benefits required by law) or (d) amend any Plan in a manner that would
materially increase its funding obligations.
5.25 Place
of Business; Name.
Company
will not transfer its chief executive office or principal place of business,
or
move, relocate, close or sell any business Premises. Company will not permit
any
tangible Collateral or any records relating to the Collateral to be located
in
any state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest. Company will not change its
name or jurisdiction of organization.
5.26 Constituent
Documents.
Company
will not amend its Constituent Documents if such amendment will have a Material
Adverse Effect; Company will provide Xxxxx Fargo with prior notice of Company’s
intent to so amend.
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5.27 Performance
by Xxxxx Fargo.
If
Company fails to perform or observe any of its obligations under this Agreement
at any time, Xxxxx Fargo may, but need not, perform or observe them on behalf
of
Company and may, but need not, take any other actions which Xxxxx Fargo may
reasonably deem necessary to cure or correct this failure; and Company shall
pay
Xxxxx Fargo upon demand the amount of all costs and expenses (including
reasonable attorneys’ fees and legal expense) incurred by Xxxxx Fargo in
performing these obligations, together with interest on these amounts at the
Default Rate.
5.28 Xxxxx
Fargo Appointed as Company’s Attorney in Fact.
To
facilitate Xxxxx Fargo’s performance or observance of Company’s obligations
under this Agreement, Company hereby irrevocably appoints Xxxxx Fargo and Xxxxx
Fargo’s agents, as Company’s attorney in fact (which appointment is coupled with
an interest) with the right (but not the duty) to create, prepare, complete,
execute, deliver, endorse or file on behalf of Company any instruments,
documents, assignments, security agreements, financing statements, applications
for insurance and any other agreements or any Record required to be obtained,
executed, delivered or endorsed by Company in accordance with the terms of this
Agreement.
6. EVENTS
OF DEFAULT AND REMEDIES
6.1 Events
of Default.
An
“Event of Default” means any of the following:
(a) Company
fails to pay the amount of any Indebtedness on the date that it becomes due
and
payable;
(b) Company
fails to observe or perform any covenant or agreement of Company set forth
in
this Agreement, or in any of the Loan Documents, or in any other document or
agreement described in or related to this Agreement or to any
Indebtedness;
(c) An
Overadvance arises as the result of any reduction in the Borrowing Base, or
arises in any manner or on terms not otherwise approved of in advance by Xxxxx
Fargo in a Record that it has Authenticated;
(d) An
event
of default or termination event (however defined) occurs under any swap,
derivative, foreign exchange, hedge or any similar transaction or arrangement
entered into between Company and Xxxxx Fargo;
(e) A
Change
of Control shall occur;
(f) Company
becomes insolvent or admits in a Record an inability to pay debts as they
mature, or Company makes an assignment for the benefit of creditors; or Company
applies for or consents to the appointment of any receiver, trustee, or similar
officer for the benefit of Company, or for any of their properties; or any
receiver, trustee or similar officer is appointed without the application or
consent of Company; or any judgment, writ, warrant of attachment or execution
or
similar process is issued or levied against a substantial part of the property
of Company;
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(g) Company
files a petition under any chapter of the United States Bankruptcy Code or
under
the laws of any other jurisdiction naming Company as debtor; or any such
petition is instituted against Company; or Company institutes (by petition,
application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, debt arrangement, dissolution, liquidation or similar proceeding
under the laws of any jurisdiction; or any such proceeding is instituted (by
petition, application or otherwise) against Company not dismissed within sixty
(60) days following institution.
(h) Intentionally
Omitted.
(i) Any
representation or warranty made by Company in this Agreement, or by Company
(or
any of its Officers) in any agreement, certificate, instrument or financial
statement or other statement delivered to Xxxxx Fargo in connection with this
Agreement is untrue or misleading in any material respect when delivered to
Xxxxx Fargo;
(j) A
final,
non-appealable arbitration award, judgment, or decree or order for the payment
of money in an amount in excess of $100,000.00 which is not insured or subject
to indemnity, is entered against Company which is not immediately stayed or
appealed;
(k) Company
is in default with respect to any bond, debenture, note or other evidence of
material indebtedness issued by Company that is held by any third Person other
than Xxxxx Fargo, or under any instrument under which any such evidence of
indebtedness has been issued or by which it is governed, or under any material
lease or other contract, and the applicable grace period, if any, has expired,
regardless of whether such default has been waived by the holder of such
indebtedness;
(l) Company
liquidates, dissolves, terminates or suspends its business operations or
otherwise fails to operate its business in the ordinary course, or merges with
another Person; or sells or attempts to sell all or substantially all of its
assets;
(m) Company
fails to pay any indebtedness or obligation owed to Xxxxx Fargo which is
unrelated to the Line of Credit or this Agreement as it becomes due and
payable;
(n) Intentionally
Omitted;
(o) Intentionally
Omitted;
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(p) Any
event
or circumstance occurs that Xxxxx Fargo in good faith believes may impair the
prospect of payment of all or part of the Indebtedness, or Company’s ability to
perform any of its material obligations under any of the Loan Documents, or
any
other document or agreement described in or related to this Agreement, or there
occurs any material adverse change in the business or financial condition of
Company.
(q) Any
Director or Officer of Company is indicted for a felony offence under state
or
federal law, or Company hires an Officer or appoints a Director who has been
convicted of any such felony offense, or a Person becomes an Owner of at least
20% of the issued and outstanding common stock of Company who has been convicted
of any such felony offense.
(r) Any
Reportable Event, which Xxxxx Fargo in good faith believes to constitute
sufficient grounds for termination of any Pension Plan or for the appointment
of
a trustee to administer any Pension Plan, has occurred and is continuing 30
days
after Company gives Xxxxx Fargo a Record notifying it of the Reportable Event;
or a trustee is appointed by an appropriate court to administer any Pension
Plan; or the Pension Benefit Guaranty Corporation institutes proceedings to
terminate or appoint a trustee to administer any Pension Plan; or Company or
any
ERISA Affiliate files for a distress termination of any Pension Plan under
Title
IV of ERISA; or Company or any ERISA Affiliate fails to make any quarterly
Pension Plan contribution required under Section 412(m) of the IRC, which Xxxxx
Fargo in good faith believes may, either by itself or in combination with other
failures, result in the imposition of a Lien on Company’s assets in favor of the
Pension Plan; or any withdrawal, partial withdrawal, reorganization or other
event occurs with respect to a Multiemployer Plan which could reasonably be
expected to result in a material liability by Company to the Multiemployer
Plan
under Title IV of ERISA.
6.2 Rights
and Remedies.
During
any Default Period, Xxxxx Fargo may in its discretion exercise any or all of
the
following rights and remedies:
(a) Xxxxx
Fargo may terminate the Line of Credit and decline to make Advances including
any unfunded Term Loan Advances, if any, and terminate any services extended
to
Company under the Master Agreement for Treasury Management
Services;
(b) Xxxxx
Fargo may declare the Indebtedness to be immediately due and payable and
accelerate payment of the Revolving Note and the Term Note, and all Indebtedness
shall immediately become due and payable, without presentment, notice of
dishonor, protest or further notice of any kind, all of which Company hereby
expressly waives;
(c) Xxxxx
Fargo may, without notice to Company, apply any money owing by Xxxxx Fargo
to
Company to payment of the Indebtedness;
(d) Xxxxx
Fargo may exercise and enforce any rights and remedies available upon default
to
a secured party under the UCC, including the right to take possession of
Collateral, proceeding with or without judicial process (without a prior hearing
or notice of hearing, which Company hereby expressly waives) and sell, lease
or
otherwise dispose of Collateral for cash or on credit (with or without giving
warranties as to condition, fitness, merchantability or title to Collateral,
and
in the event of a credit sale, Indebtedness shall be reduced only to the extent
that payments are actually received), and Company will upon Xxxxx Fargo’s demand
assemble the Collateral and make it available to Xxxxx Fargo at any place
designated by Xxxxx Fargo which is reasonably convenient to both
parties;
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(e) Xxxxx
Fargo may exercise and enforce its rights and remedies under any of the Loan
Documents and any other document or agreement described in or related to this
Agreement;
(f) Intentionally
Omitted;
(g) Xxxxx
Fargo may for any reason apply for the appointment of a receiver of the
Collateral, to which appointment Company hereby consents; and
(h) Xxxxx
Fargo may exercise any other rights and remedies available to it by law or
agreement.
6.3 Immediate
Default and Acceleration.
Following the occurrence of an Event of Default described in Section 6.1(f)
or
(g), the Line of Credit shall immediately terminate and all of Company’s
Indebtedness shall immediately become due and payable without presentment,
demand, protest or notice of any kind.
7. MISCELLANEOUS
7.1 No
Waiver; Cumulative Remedies.
No delay
or any single or partial exercise by Xxxxx Fargo of any right, power or remedy
under the Loan Documents, or under any other document or agreement described
in
or related to this Agreement, shall constitute a waiver of any other right,
power or remedy under the Loan Documents or granted by Company to Xxxxx Fargo
under other agreements or documents that are unrelated to the Loan Documents.
No
notice to or demand on Company in any circumstance shall entitle Company to
any
additional notice or demand in any other circumstances. The remedies provided
in
the Loan Documents or in any other document or agreement described in or related
to this Agreement are cumulative and not exclusive of any remedies provided
by
law. Xxxxx Fargo may comply with applicable law in connection with a disposition
of Collateral, and such compliance will not be considered to adversely affect
the commercial reasonableness of any sale of the Collateral.
7.2 Amendments;
Consents and Waivers; Authentication.
No
amendment or modification of any Loan Documents, or any other document or
agreement described in or related to this Agreement, or consent to or waiver
of
any Event of Default, or consent to or waiver of the application of any covenant
or representation set forth in any of the Loan Documents, or any other document
or agreement described in or related to this Agreement, or any release of Xxxxx
Fargo’s Security Interest in any Collateral, shall be effective unless it has
been agreed to by Xxxxx Fargo and memorialized in a Record that: (a)
specifically states that it is intended to amend or modify specific Loan
Documents, or any other document or agreement described in or related to this
Agreement, or waive any Event of Default or the application of any covenant
or
representation of any terms of specific Loan Documents, or any other document
or
agreement described in or related to this Agreement, or is intended to release
Xxxxx Fargo’s Security Interest in specific Collateral; and (b) is Authenticated
by the signature of an authorized employee of both parties, or by an authorized
employee of Xxxxx Fargo with respect to a consent or waiver. The terms of an
amendment, consent or waiver memorialized in any Record shall be effective
only
to the extent, and in the specific instance, and for the limited purpose to
which Xxxxx Fargo has agreed.
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7.3 Execution
in Counterparts; Delivery of Counterparts.
This
Agreement and all other Loan Documents, or any other document or agreement
described in or related to this Agreement, and any amendment or modification
to
them may be Authenticated by the parties in any number of counterparts, each
of
which, once authenticated and delivered in accordance with the terms of this
Section 7.3, will be deemed an original, and all such counterparts, taken
together, shall constitute one and the same instrument. Delivery by fax or
by
encrypted e-mail or e-mail file attachment of any counterpart to any Loan
Document Authenticated by an authorized signature will be deemed the equivalent
of the delivery of the original Authenticated instrument. Company shall send
the
original Authenticated counterpart to Xxxxx Fargo by first class U.S. mail
or by
overnight courier, but Company’s failure to deliver a Record in this form shall
not affect the validity, enforceability, and binding effect of this Agreement
or
the other Loan Documents, or any other document or agreement described in or
related to this Agreement.
7.4 Notices,
Requests, and Communications; Confidentiality.
Except
as otherwise expressly provided in this Agreement:
(a) Delivery
of Notices, Requests and Communications.
Any
notice, request, demand, or other communication by either party that is required
under the Loan Documents, or any other document or agreement described in or
related to this Agreement, to be in the form of a Record (but excluding any
Record containing information Company must report to Xxxxx Fargo under Section
5.1) may be delivered (i) in person, (ii) by first class U.S. mail, (iii) by
overnight courier of national reputation, or (iv) by fax, or the Record may
be
sent as an Electronic Record and delivered (v) by an encrypted e-mail, or (vi)
through Xxxxx Fargo’s Commercial Electronic Office® (“CEO®”) portal or other
secure electronic channel to which the parties have agreed.
(b) Addresses
for Delivery.
Delivery of any Record under this Section 7.4 shall be made to the appropriate
address set forth on the last page of this Agreement (which either party may
modify by a Record sent to the other party), or through Xxxxx Fargo’s CEO portal
or other secure electronic channel to which the parties have
agreed.
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(c) Date
of Receipt.
Each
Record sent pursuant to the terms of this Section 7.4 will be deemed to have
been received on (i) the date of delivery if delivered in person, (ii) the
date
deposited in the mail if sent by mail, (iii) the date delivered to the courier
if sent by overnight courier, (iv) the date of transmission if sent by fax,
or
(v) the date of transmission, if sent as an Electronic Record by electronic
mail
or through Xxxxx Fargo’s CEO portal or similar secure electronic channel to
which the parties have agreed; except that any request for an Advance or any
other notice, request, demand or other communication from Company required
under
Section 1, and any request for an accounting under Section 9-210 of the UCC,
will not be deemed to have been received until actual receipt by Xxxxx Fargo
on
a Business Day by an authorized employee of Xxxxx Fargo.
(d) Confidentiality
of Unencrypted E-mail.
Company
acknowledges that if it sends an Electronic Record to Xxxxx Fargo without
encryption by e-mail or as an e-mail file attachment, there is a risk that
the
Electronic Record may be received by unauthorized Persons, and that by so doing
it will be deemed to have accepted this risk and the consequences of any such
unauthorized disclosure.
7.5 Company
Information Reporting; Confidentiality.
Except
as otherwise expressly provided in this Agreement:
(a) Delivery
of Company Information Records.
Any
information that Company is required to deliver under Section 5.1 in the form
of
a Record may be delivered to Xxxxx Fargo (i) in person, or by (ii) first class
U.S. mail, (iii) overnight courier of national reputation, or (iv) fax, or
the
Record may be sent as an Electronic Record (v) by encrypted e-mail, or (vi)
through the file upload service of Xxxxx Fargo’s CEO portal or other secure
electronic channel to which the parties have agreed.
(b) Addresses
for Delivery.
Delivery of any Record to Xxxxx Fargo under this Section 7.5 shall be made
to
the appropriate address set forth on the last page of this Agreement (which
Xxxxx Fargo may modify by a Record sent to Company), or through Xxxxx Fargo’s
CEO portal or other secure electronic channel to which the parties have
agreed.
(c) Date
of Receipt.
Each
Record sent pursuant to this Section will be deemed to have been received on
(i)
the date of delivery to an authorized employee of Xxxxx Fargo, if delivered
in
person, or by U.S. mail, overnight courier, fax, or e-mail; or (ii) the date
of
transmission, if sent as an Electronic Record through Xxxxx Fargo’s CEO portal
or similar secure electronic channel to which the parties have
agreed.
(d) Authentication
of Company Information Records.
Company
shall Authenticate any Record delivered (i) in person, or by U.S. mail,
overnight courier, or fax, by the signature of the Officer or employee of
Company who prepared the Record; (ii) as an Electronic Record sent via encrypted
e-mail, by the signature of the Officer or employee of Company who prepared
the
Record by any file format signature that is acceptable to Xxxxx Fargo, or by
a
separate certification signed and sent by fax; or (iii) as an Electronic Record
via the file upload service of Xxxxx Fargo’s CEO portal or similar secure
electronic channel to which the parties have agreed, through such credentialing
process as Xxxxx Fargo and Company may agree to under the CEO
agreement.
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(e) Certification
of Company Information Records.
Any
Record (including any Electronic Record) Authenticated and delivered to Xxxxx
Fargo under this Section 7.5 will be deemed to have been certified as materially
true, correct, and complete by Company and each Officer or employee of Company
who prepared and Authenticated the Record on behalf of Company, and may be
legally relied upon by Xxxxx Fargo without regard to method of delivery or
transmission.
(f) Confidentiality
of Company Information Records Sent by Unencrypted E-mail.
Company
acknowledges that if it sends an Electronic Record to Xxxxx Fargo without
encryption by e-mail or as an e-mail file attachment, there is a risk that
the
Electronic Record may be received by unauthorized Persons, and that by so doing
it will be deemed to have accepted this risk and the consequences of any such
unauthorized disclosure. Company acknowledges that it may deliver Electronic
Records containing Company information to Xxxxx Fargo by e-mail pursuant to
any
encryption tool acceptable to Xxxxx Fargo and Company, or through Xxxxx Fargo’s
CEO portal file upload service without risk of unauthorized
disclosure.
7.6 Further
Documents.
Company
will from time to time execute, deliver, endorse and authorize the filing of
any
instruments, documents, conveyances, assignments, security agreements, financing
statements, control agreements and other agreements that Xxxxx Fargo may
reasonably request in order to secure, protect, perfect or enforce the Security
Interest or Xxxxx Fargo’s rights under the Loan Documents, or any other document
or agreement described in or related to this Agreement (but any failure to
request or assure that Company executes, delivers, endorses or authorizes the
filing of any such item shall not affect or impair the validity, sufficiency
or
enforceability of the Loan Documents, or any other document or agreement
described in or related to this Agreement, and the Security Interest, regardless
of whether any such item was or was not executed, delivered or endorsed in
a
similar context or on a prior occasion).
7.7 Costs
and Expenses.
Company
shall pay on demand all costs and expenses, including reasonable attorneys’
fees, incurred by Xxxxx Fargo in connection with the Indebtedness, this
Agreement, the Loan Documents, or any other document or agreement described
in
or related to this Agreement, and the transactions contemplated by this
Agreement, including all such costs, expenses and fees incurred in connection
with the negotiation, preparation, execution, amendment, administration,
performance, collection and enforcement of the Indebtedness and all such
documents and agreements and the creation, perfection, protection, satisfaction,
foreclosure or enforcement of the Security Interest.
7.8 Indemnity.
In
addition to its obligation to pay Xxxxx Fargo’s expenses under the terms of this
Agreement, Company shall indemnify, defend and hold harmless Xxxxx Fargo, its
parent Xxxxx Fargo & Company, and any of its affiliates and successors, and
all of their present and future Officers, Directors, employees, attorneys and
agents (the “Indemnitees”) from and against any of the following (collectively,
“Indemnified Liabilities”):
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(a) Any
and
all transfer taxes, documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery of the Loan
Documents, or any other document or agreement described in or related to this
Agreement, or the making of the Advances;
(b) Any
claims, loss or damage to which any Indemnitee may be subjected if any
representation or warranty contained in Exhibit D proves to be incorrect in
any
respect or as a result of any violation of the covenants contained in Section
5.12; and
(c) Any
and
all other liabilities, losses, damages, penalties, judgments, suits, claims,
costs and expenses of any kind or nature whatsoever (including the reasonable
fees and disbursements of counsel) in connection with this Agreement and any
other investigative, administrative or judicial proceedings, whether or not
such
Indemnitee shall be designated a party to such proceedings, which may be imposed
on, incurred by or asserted against any such Indemnitee, in any manner related
to or arising out of or in connection with the making of the Advances and the
Loan Documents, or any other document or agreement described in or related
to
this Agreement, or the use or intended use of the proceeds of the Advances,
with
the exception of any Indemnified Liability caused by the gross negligence or
willful misconduct of an Indemnitee.
If
any
investigative, judicial or administrative proceeding described in this Section
is brought against any Indemnitee, Company, or counsel designated by Company
and
satisfactory to the Indemnitee, will resist and defend the action, suit or
proceeding at Company’s sole cost and expense, and at all times Company shall
advise Indemnitee of the status of its defense - the disposition thereof to
be
subject to the approval of Indemnitee. Each Indemnitee will use its best efforts
to cooperate in the defense of any such action, suit or proceeding. If this
agreement to indemnify is held to be unenforceable because it violates any
law
or public policy, Company shall nevertheless make the maximum contribution
to
the payment and satisfaction of each of the Indemnified Liabilities to the
extent permissible under applicable law. Company’s obligations under this
Section shall survive the termination of this Agreement and the discharge of
Company’s other obligations under this Agreement.
7.9 Retention
of Company’s Records.
Xxxxx
Fargo shall have no obligation to maintain Electronic Records or retain any
documents, schedules, invoices, agings, or other Records delivered to Xxxxx
Fargo by Company in connection with the Loan Documents, or any other document
or
agreement described in or related to this Agreement for more than 30 days after
receipt by Xxxxx Fargo. If there is a special need to retain specific Records,
Company must notify Xxxxx Fargo of its need to retain or return such Records
with particularity, which notice must be delivered to Xxxxx Fargo in accordance
with the terms of this Agreement at the time of the initial delivery of the
Record to Xxxxx Fargo.
-
33
-
7.10 Binding
Effect; Assignment; Complete Agreement.
The Loan
Documents, or any other document or agreement described in or related to this
Agreement, shall be binding upon and inure to the benefit of Company and Xxxxx
Fargo and their respective successors and assigns, except that Company shall
not
have the right to assign its rights under this Agreement or any interest in
this
Agreement without Xxxxx Fargo’s prior consent, which must be confirmed in a
Record Authenticated by Xxxxx Fargo. To the extent permitted by law, Company
waives and will not assert against any assignee any claims, defenses or set-offs
which Company could assert against Xxxxx Fargo. This Agreement shall also bind
all Persons who become a party to this Agreement as a borrower. This Agreement,
together with the Loan Documents, or any other document or agreement described
in or related to this Agreement, comprises the complete and integrated agreement
of the parties on the subject matter of this Agreement and supersedes all prior
agreements, whether oral or evidenced in a Record. To the extent that any
provision of this Agreement contradicts other provisions of the Loan Documents
other than this Agreement, or any other document or agreement described in
or
related to this Agreement, this Agreement shall control.
7.11 Sharing
of Information.
Xxxxx
Fargo may share any information that it may have regarding Company and its
Affiliates with its accountants, lawyers, and other advisors, and Xxxxx Fargo
and each direct and indirect subsidiary of Xxxxx Fargo & Company may also
share any information that they have with each other, and Company waives any
right of confidentiality it may have with respect to the sharing of all such
information.
7.12 Severability
of Provisions.
Any
provision of this Agreement which is prohibited or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining terms of this Agreement.
7.13 Headings.
Section
and subsection headings in this Agreement are included for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.
7.14 Governing
Law; Jurisdiction, Venue; Waiver of Jury Trial.
The Loan
Documents (other than real estate related documents, if any) shall be governed
by and construed in accordance with the substantive laws (other than conflict
laws) of the State of New York. The parties to this Agreement (a) consent to
the
personal jurisdiction of the state and federal courts located in the State
of
New York in connection with any controversy related to this Agreement; (b)
waive
any argument that venue in any such forum is not convenient; (c) agree that
any
litigation initiated by Xxxxx Fargo or Company in connection with this Agreement
or the other Loan Documents may be venued in either the state or federal courts
located in the City of New York, County of New York and State of New York;
and
(d) agree that a final judgment in any such suit, action or proceeding shall
be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or
in any other manner provided by law.
[REMAINDER
OF PAGE LEFT INTENTIONALLY BLANK]
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34
-
COMPANY
AND XXXXX FARGO
WAIVE
ANY RIGHT TO TRIAL BY JURY IN ANY ACTION AT LAW OR IN EQUITY OR IN ANY OTHER
PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT.
|
MERRIMAC
INDUSTRIES, INC.
|
XXXXX
FARGO BANK,
|
|||
|
NATIONAL
ASSOCIATION
|
||||
|
By:
|
/s/
Xxxxxx X. Xxxxxx
|
By:
|
/s/
Xxxxxx Xxxxxx
|
|
|
Xxxxxx
X. Xxxxxx
|
Xxxxxx
Xxxxxx
|
|||
|
Its
Chief Financial Officer
|
Its
Vice President
|
|||
COMPANY
AND XXXXX FARGO
HAVE
EXECUTED THIS AGREEMENT THROUGH THEIR AUTHORIZED OFFICERS AS OF THE DATE SET
FORTH ABOVE.
|
XXXXX
FARGO BANK,
|
MERRIMAC
INDUSTRIES, INC.
|
|||
|
NATIONAL
ASSOCIATION
|
||||
|
By:
|
/s/
Xxxxxx Xxxxxx
|
By:
|
/s/
Xxxxxx X. Xxxxxx
|
|
|
Xxxxxx
Xxxxxx
|
Xxxxxx
X. Xxxxxx
|
|||
|
Its
Vice President
|
Its
Chief Financial Officer
|
|||
|
Xxxxx
Fargo Bank, National Association
|
Merrimac
Industries, Inc.
|
|
|
XXX-
X0000-000
|
00
Xxxxxxxxx Xxxxx
|
|
|
000
Xxxx 00xx Xxxxxx, 00xx
Xxxxx
|
Xxxx
Xxxxxxxx, Xxx Xxxxxx 00000
|
|
|
Xxx
Xxxx, Xxx Xxxx 00000
|
||
|
Fax:
(000) 000-0000
|
Fax:
(000) 000-0000
|
|
|
Attention:
Xxxxxx Xxxxxx,
|
Attention:
Xxxxxx X. Xxxxxx
|
|
|
Vice
President
|
Chief
Financial Officer
|
|
|
e-mail:xxxxxx.xxxxxx@xxxxxxxxxx.xxx
|
Email:
xxx@xxxxxxxxxxx.xxx
|
-
35
-
Exhibit
A to Credit and Security Agreement
DEFINITIONS
“Account
Funds” is defined in Section 1.4(a).
“Accounts”
shall have the meaning given it under the UCC.
“Advance”
and “Advances” means an advance or advances under the Line of Credit or the Term
Loan.
“Affiliate”
or “Affiliates” means Multi-Mix® Microtechnology S.R.L. and any other Person
controlled by, controlling or under common control with Company, including
any
Subsidiary of Company. For purposes of this definition, “control,” when used
with respect to any specified Person, means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise.
“Agreement”
means this Credit and Security Agreement.
“Assumed
Maturity Date” is defined in Section 1.5(d).
“Authenticated”
means (a) to have signed; or (b) to have executed or to have otherwise adopted
a
symbol, or have encrypted or similarly processed a Record in whole or in part,
with the present intent of the authenticating Person to identify the Person
and
adopt or accept a Record.
“Borrowing
Base” is defined in Section 1.2(a).
“Borrowing
Base Reserve” means, as of any date of determination, an amount or a percent of
a specified category or item that Xxxxx Fargo establishes in its sole discretion
from time to time to reduce availability under the Borrowing Base (a) to reflect
events, conditions, contingencies or risks which affect the assets, business
or
prospects of Company, or the Collateral or its value, or the enforceability,
perfection or priority of Xxxxx Fargo’s Security Interest in the Collateral, as
the term “Collateral” is defined in this Agreement, or (b) to reflect Xxxxx
Fargo’s judgment that any collateral report or financial information relating to
Company and furnished to Xxxxx Fargo may be incomplete, inaccurate or misleading
in any material respect.
“Business
Day” means a day on which the Federal Reserve Bank of New York is open for
business and, if such day relates to a LIBOR Advance, a day on which dealings
are carried on in the London interbank eurodollar market.
“Capital
Expenditures” means for a period, any expenditure of money during such period
for the lease, purchase or other acquisition of any capital asset, or for the
lease of any other asset whether payable currently or in the
future.
-
36
-
“CEO”
is
defined in Section 7.4(a).
“Change
of Control” means the occurrence of any of the following events:
|
(a)
|
Any
Person or “group” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934) who does not have an ownership interest
in Company on the date of the initial Advance, is or becomes the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that any such Person, entity
or
group will be deemed to have “beneficial ownership” of all securities that
such Person, entity or group has the right to acquire, whether such
right
is exercisable immediately or only after the passage of time), directly
or
indirectly, of more than 25 percent (25%) of the voting power of
all
classes of ownership of Company; or
|
|
(b)
|
During
any consecutive two-year period, individuals who at the beginning
of such
period constituted the board of Directors of Company (together with
any
new Directors whose election to such board of Directors, or whose
nomination for election by the Owners of Company, was approved by
a vote
of a majority of the Directors then still in office who were either
Directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to
constitute a majority of the board of Directors of Company then in
office.
|
“Collateral”
means all of Company’s Accounts, chattel paper and electronic chattel paper,
deposit accounts, documents, Equipment, General Intangibles, goods, instruments,
Inventory, Investment Property, letter-of-credit rights, letters of credit,
all
sums on deposit in any Collection Account, and any items in any Lockbox;
together with (a) all substitutions and replacements for and products of such
property; (b) in the case of all goods, all accessions; (c) all accessories,
attachments, parts, Equipment and repairs now or subsequently attached or
affixed to or used in connection with any goods; (d) all warehouse receipts,
bills of lading and other documents of title that cover such goods now or in
the
future; (e) all collateral subject to the Lien of any of the Security Documents;
(f) any money, or other assets of Company that come into the possession,
custody, or control of Xxxxx Fargo now or in the future; (g) Proceeds of any
of
the above Collateral; (h) books and records of Company, including all mail
or
e-mail addressed to Company; and (i) all of the above Collateral, whether now
owned or existing or acquired now or in the future or in which Company has
rights now or in the future.
“Collection
Account” means “Collection Account” as defined in the Master Agreement for
Treasury Management Services and related Lockbox and Collection Account Service
Description or Collection Account Service Description, whichever is
applicable.
“Compliance
Certificate” is defined in Section 5.1(a) and is in the form of Exhibit
E.
-
37
-
“Constituent
Documents” means with respect to any Person, as applicable, that Person’s
certificate of incorporation, articles of incorporation, by-laws, certificate
of
formation, articles of organization, limited liability company agreement,
management agreement, operating agreement, shareholder agreement, partnership
agreement or similar document or agreement governing such Person’s existence,
organization or management or concerning disposition of ownership interests
of
such Person or voting rights among such Person’s owners.
“Current
Maturities of Long Term Debt” means, during a period beginning and ending on
designated dates, the amount of Company’s long-term debt and capitalized leases
which become due during that period.
“Debt”
means of a Person as of a given date, all items of indebtedness or liability
which in accordance with GAAP would be included in determining total liabilities
as shown on the liabilities side of a balance sheet for such Person and shall
also include the aggregate payments required to be made by such Person at any
time under any lease that is considered a capitalized lease under
GAAP.
“Debt
Service Coverage Ratio” means (a) the sum of (i) Funds from Operations and (ii)
Interest Expense minus (iii) unfinanced Capital Expenditures divided by (b)
the
sum of (i) Current Maturities of Long Term Debt and (ii) Interest
Expense.
“Default
Period” is defined in Section 1.6(c).
“Default
Rate” is defined in Section 1.6(c).
“Dilution”
means, as of any date of determination, a percentage, based upon the prior
six
(6) months, which is the result of dividing (a) actual bad debt write-downs,
discounts, advertising allowances, credits, and any other items with respect
to
the Accounts determined to be dilutive by Xxxxx Fargo in its sole discretion
during this period, by (b) Company’s net sales during such period (excluding
extraordinary items) plus the amount of clause (a).
“Director”
means a director if Company is a corporation, or a governor or manager if
Company is a limited liability company.
“Earnings
Before Taxes” means pretax earnings from operations, excluding extraordinary
gains, but including extraordinary losses.
“Electronic
Record” means a Record that is created, generated, sent, communicated, received,
or stored by electronic means, but does not include any Record that is sent,
communicated, or received by fax.
“Eligible
Accounts” means all unpaid Accounts of Company arising from the sale or lease of
goods or the performance of services, net of any credits and excluding all
deposits or other prepayments, but further excluding any Accounts having any
of
the following characteristics:
|
(a)
|
That
portion of Accounts unpaid 90 days or more after the invoice date
or, if
Xxxxx Fargo in its sole discretion has determined that a particular
dated
Account may be eligible, that portion of such Account which is unpaid
more
than 30 days past the stated due date or more than 60 days past the
invoice date;
|
-
38
-
|
(b)
|
That
portion of Accounts related to goods or services with respect to
which
Company has received notice of a claim or dispute, which are subject
to a
claim of offset or a contra account, or which reflect a reasonable
reserve
for warranty claims or returns;
|
|
(c)
|
That
portion of Accounts not yet earned by the final delivery of goods
or that
portion of Accounts not yet earned by the final rendition of services
by
Company to the account debtor, including with respect to both goods
and
services, progress xxxxxxxx, and that portion of Accounts for which
an
invoice has not been sent to the applicable account
debtor;
|
|
(d)
|
Accounts
constituting (i) Proceeds of copyrightable material unless such
copyrightable material shall have been registered with the United
States
Copyright Office, or (ii) Proceeds of patentable inventions unless
such
patentable inventions have been registered with the United States
Patent
and Trademark Office;
|
|
(e)
|
Accounts
owed by any unit of government, whether foreign or domestic (except
that
there shall be included in Eligible Accounts that portion of Accounts
owed
by such units of government for which Company has provided evidence
satisfactory to Xxxxx Fargo that (i) Xxxxx Fargo’s Security Interest
constitutes a perfected first priority Lien in such Accounts, and
(ii)
such Accounts may be enforced by Xxxxx Fargo directly against such
unit of
government under all applicable
laws);
|
|
(f)
|
Accounts
denominated in any currency other than United States
Dollars;
|
|
(g)
|
Accounts
owed by an account debtor located outside the United States or Canada
which are not (i) backed by a bank letter of credit naming Xxxxx
Fargo as
beneficiary or assigned to Xxxxx Fargo, in Xxxxx Fargo’s possession or
control, and with respect to which a control agreement concerning
the
letter-of-credit rights is in effect, and acceptable to Xxxxx Fargo
in all
respects, in its sole discretion, or (ii) covered by a foreign receivables
insurance policy acceptable to Xxxxx Fargo in its sole
discretion;
|
|
(h)
|
Accounts
owed by an account debtor who is insolvent or is the subject of bankruptcy
proceedings or who has gone out of
business;
|
|
(i)
|
Accounts
owed by an Owner, Subsidiary, Affiliate, Officer or employee of
Company;
|
|
(j)
|
Accounts
not subject to the Security Interest or which are subject to any
Lien in
favor of any Person other than Xxxxx
Fargo;
|
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39
-
|
(k)
|
That
portion of Accounts that has been restructured, extended, amended
or
modified;
|
|
(l)
|
That
portion of Accounts that constitutes advertising, finance charges,
service
charges or sales or excise taxes;
|
|
(m)
|
Accounts
owed by an account debtor, regardless of whether otherwise eligible,
to
the extent that the aggregate balance of such Accounts exceeds 25%
of the
aggregate amount of all Accounts; except that with respect to SS/Loral,
to
the extent that the aggregate balance of its Accounts exceeds 15%
of the
aggregate amount of all Accounts;
|
|
(n)
|
Accounts
owed by an account debtor, regardless of whether otherwise eligible,
if
33% or more of the total amount of Accounts due from such debtor
is
ineligible under clauses (a), (b), or (k) above;
and
|
|
(o)
|
Accounts,
or portions of Accounts, otherwise deemed ineligible by Xxxxx Fargo
in its
sole discretion.
|
“Eligible
Inventory” means all raw material and parts Inventory of Company, valued at the
lower of cost or market in accordance with GAAP; but excluding Inventory having
any of the following characteristics:
|
(a)
|
Inventory
that is: in-transit; located at any Premises of Borrower outside
of United
States; located at any warehouse, job site or other premises not
approved
by Xxxxx Fargo in an Authenticated Record delivered to Company; not
subject to a perfected first priority Lien in Xxxxx Fargo’s favor; subject
to any Lien or encumbrance that is subordinate to Xxxxx Fargo’s first
priority Lien; covered by any negotiable or non-negotiable warehouse
receipt, xxxx of lading or other document of title; on consignment
from
any consignor; or on consignment to any consignee or subject to any
bailment unless the consignee or bailee has executed an agreement
with
Xxxxx Fargo;
|
|
(b)
|
Supplies,
packaging, maintenance parts, fabricated parts, or sample Inventory,
or
customer supplied parts or
Inventory;
|
|
(c)
|
Work-in-process
Inventory;
|
|
(d)
|
Inventory
that is damaged, defective, obsolete, slow moving or not currently
saleable in the normal course of Company’s operations, or the amount of
such Inventory that has been reduced by
shrinkage;
|
|
(e)
|
Inventory
that Company has returned, has attempted to return, is in the process
of
returning or intends to return to the vendor of the
Inventory;
|
|
(f)
|
Inventory
that is perishable or live;
|
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40
-
|
(g)
|
Inventory
manufactured by Company pursuant to a license unless the applicable
licensor has agreed in a Record that has been Authenticated by licensor
to
permit Xxxxx Fargo to exercise its rights and remedies against such
Inventory;
|
|
(h)
|
Inventory
that is subject to a Lien in favor of any Person other than Xxxxx
Fargo;
|
|
(i)
|
Inventory
stored at locations holding less than 10% of the aggregate value
of
Company’s Inventory; and
|
|
(j)
|
Inventory
otherwise deemed ineligible by Xxxxx Fargo in its sole
discretion.
|
“Environmental
Law” means any federal, state, local or other governmental statute, regulation,
law or ordinance dealing with the protection of human health and the
environment.
“Equipment”
shall have the meaning given it under the Uniform Commercial Code in effect
in
the state whose laws govern this Agreement.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from
time
to time.
“ERISA
Affiliate” means any trade or business (whether or not incorporated) that is a
member of a group which includes Company and which is treated as a single
employer under Section 414 of the IRC.
“Event
of
Default” is defined in Section 6.1.
“Floating
Rate” means an annual interest rate equal to (a) the Prime Rate plus one percent
(1.0%) for a Line of Credit Advance, and (b) the Prime Rate plus one percent
(1.0%) for a Term Loan I Advance, and (c) the Prime Rate plus one-half percent
(1/2%) for a Term Loan II Advance.
“Floating
Rate Advance” means an Advance bearing interest at the Floating
Rate.
“Funds
from Operations” means for a given period, the sum of (a) Net Income, (b)
depreciation and amortization, (c) any increase (or decrease) in deferred income
taxes, (d) any increase (or decrease) in life reserves, and (e) other non-cash
items, each as determined for such period in accordance with GAAP.
“GAAP”
means generally accepted accounting principles, applied on a basis consistent
with the accounting practices applied in the financial statements described
on
Exhibit D.
“General
Intangibles” shall have the meaning given it under the UCC.
“Hazardous
Substances” means pollutants, contaminants, hazardous substances, hazardous
wastes, petroleum and fractions thereof, and all other chemicals, wastes,
substances and materials listed in, regulated by or identified in any
Environmental Law.
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41
-
“Indebtedness”
is used in its most comprehensive sense and means any debts, obligations and
liabilities of Company to Xxxxx Fargo, whether incurred in the past, present
or
future, whether voluntary or involuntary, and however arising, and whether
due
or not due, absolute or contingent, liquidated or unliquidated, determined
or
undetermined, and including without limitation all obligations arising under
any
swap, derivative, foreign exchange, hedge, deposit, treasury management or
similar transaction or arrangement however described or defined that Company
may
enter into at any time with Xxxxx Fargo or with Xxxxx Fargo Merchant Services,
L.L.C., whether or not Company may be liable individually or jointly with
others, or whether recovery upon such Indebtedness may subsequently become
unenforceable.
“Indemnified
Liabilities” is defined in Section 7.8.
“Indemnitees”
is defined in Section 7.8.
“Infringement”
or “Infringing” when used with respect to Intellectual Property Rights means any
infringement or other violation of Intellectual Property Rights.
“Intellectual
Property Rights” means all actual or prospective rights arising in connection
with any intellectual property or other proprietary rights, including all rights
arising in connection with copyrights, patents, service marks, trade dress,
trade secrets, trademarks, trade names or mask works.
“Interest
Expense” means for a fiscal year-to-date period, Company’s total gross interest
expense during such period (excluding interest income), and shall in any event
include (a) interest expensed (whether or not paid) on all Debt, (b) the
amortization of debt discounts, (c) the amortization of all fees payable in
connection with the incurrence of Debt to the extent included in interest
expense, and (d) the portion of any capitalized lease obligation allocable
to
interest expense.
“Interest
Payment Date” is defined in Section 1.8(a).
“Interest
Period” means the period that commences on (and includes) the Business Day on
which either a LIBOR Advance is made or continued or on which a Floating Rate
Advance is converted to a LIBOR Advance, and ending on (but excluding) the
Business Day numerically corresponding to that date that falls the number of
months afterward as selected by Company pursuant to Section 1.3A, during which
period the outstanding principal amount of the LIBOR Advance shall bear interest
at the LIBOR Advance Rate; provided, however, that:
|
(a)
|
If
an Interest Period would otherwise end on a day which is not a Business
Day, then it shall end on the next Business Day, unless that day
is the
first Business Day of a month, in which case the Interest Period
shall end
on the last Business Day of the preceding
month;
|
|
(b)
|
No
Interest Period applicable to an Advance may end later than the Maturity
Date; and
|
-
42
-
|
(c)
|
In
no event shall Company select Interest Periods with respect to LIBOR
Advances which would result in the payment of a LIBOR Advance breakage
fee
in order to make a required principal
payment.
|
“Inventory”
shall have the meaning given it under the UCC.
“Investment
Property” shall have the meaning given it under the UCC.
“LIBOR”
means the rate per annum (rounded upward, if necessary, to the nearest whole
1/8th of one percent (1%)) determined pursuant to the following
formula:
|
Base
LIBOR
|
||
|
100%
- LIBOR Reserve Percentage
|
|
(a)
|
“Base
LIBOR” means the rate per annum for United States dollar deposits quoted
by Xxxxx Fargo as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Xxxxx Fargo for the purpose
of
calculating effective rates of interest for loans making reference
to it,
on the first day of an Interest Period for delivery of funds on that
date
for a period of time approximately equal to the number of days in
that
Interest Period and in an amount approximately equal to the principal
amount to which that Interest Period applies. Company understands
and
agrees that Xxxxx Fargo may base its quotation of the Inter-Bank
Market
Offered Rate upon such offers or other market indicators of the Inter-Bank
Market as Xxxxx Fargo in its discretion deems appropriate including
the
rate offered for U.S. dollar deposits on the London Inter-Bank
Market.
|
|
(b)
|
“LIBOR
Reserve Percentage” means the reserve percentage prescribed by the Board
of Governors of the Federal Reserve System (or any successor) for
“Eurocurrency Liabilities” (as defined in Regulation D of the Federal
Reserve Board, as amended), adjusted by Xxxxx Fargo for expected
changes
in such reserve percentage during the applicable Interest
Period.
|
“LIBOR
Advance” means an Advance bearing interest at the LIBOR Advance
Rate.
“LIBOR
Advance Rate” means an annual interest rate equal to (a) LIBOR plus three and
one-quarter percent (3-1/4%) for a Line of Credit Advance, and (b) LIBOR plus
three and one-half percent (3-1/2%) for a Term Loan II Advance
“Lien”
means any security interest, mortgage, deed of trust, pledge, lien, charge,
encumbrance, title retention agreement or analogous instrument or device,
including the interest of each lessor under any capitalized lease and the
interest of any bondsman under any payment or performance bond, in, of or on
any
assets or properties of a Person, whether now owned or subsequently acquired
and
whether arising by agreement or operation of law.
“Line
of
Credit” is defined in the Recitals.
-
43
-
“Loan
Documents” means this Agreement, the Revolving Note, the Term Note, the Master
Agreement for Treasury Management Services and the Security Documents, together
with every other agreement, note, document, contract or instrument to which
Company now or in the future may be a party and which may be required by Xxxxx
Fargo in connection with, or as a condition to, the execution of this Agreement.
Any documents or other agreements entered into between Company and Xxxxx Fargo
that relate to any swap, derivative, foreign exchange, hedge, or similar product
or transaction, or which are entered into with an operating division of Xxxxx
Fargo other than Xxxxx Fargo Business Credit, shall not be included in this
definition.
“Loan
Manager” means the treasury management service defined in the Master Agreement
for Treasury Management Services and related Loan Manager Service
Description.
“Lockbox”
means “Lockbox” as defined in the Master Agreement for Treasury Management
Services and related Lockbox and Collection Account Service
Description.
“Master
Agreement for Treasury Management Services” means the Master Agreement for
Treasury Management Services, the related Acceptance of Services, and the
Service Description governing each treasury management service used by
Company.
“Material
Adverse Effect” means any of the following:
|
(a)
|
A
material adverse effect on the business, operations, results of
operations, prospects, assets, liabilities or financial condition
of
Company;
|
|
(b)
|
A
material adverse effect on the ability of Company to perform its
obligations under the Loan Documents, or any other document or agreement
related to this Agreement; or
|
|
(c)
|
A
material adverse effect on the ability of Xxxxx Fargo to enforce
the
Indebtedness or to realize the intended benefits of the Security
Documents, including a material adverse effect on the validity or
enforceability of any Loan Document or of any rights against any
Guarantor, or on the status, existence, perfection, priority (subject
to
Permitted Liens) or enforceability of any Lien securing payment or
performance of the Indebtedness.
|
“Maturity
Date” is defined in Section 1.1(b).
“Maximum
Line Amount” is defined in Section 1.1(a).
“Mortgage”
means a first priority and exclusive real estate mortgage in favor of Xxxxx
Fargo on otherwise marketable and insurable premises located at 00 Xxxxxxxxx
Xxxxx, Xxxx Xxxxxxxx, Xxx Xxxxxx which is subject to a title insurance policy
acceptable to Xxxxx Fargo and secures that part of the Indebtedness determined
by Xxxxx Fargo.
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44
-
“Multiemployer
Plan” means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to
which Company or any ERISA Affiliate contributes or is obligated to
contribute.
“Net
Cash
Proceeds” means the cash proceeds of any asset sale (including cash proceeds
received as deferred payments pursuant to a note, installment receivable or
otherwise, but only upon actual receipt) net of (a) attorney, accountant, and
investment banking fees, (b) brokerage commissions, (c) amounts required to
be
applied to prior Liens the repayment of debt secured by a Lien not prohibited
by
this Agreement on the asset being sold, and (c) taxes paid or reasonably
estimated to be payable as a result of such asset sale.
“Net
Income” means fiscal year-to-date after-tax net income from continuing
operations, as determined in accordance with GAAP, but excluding (a) any
extraordinary gains as determined in accordance with GAAP, (b) any change in
the
valuation of goodwill made in accordance with FASB Accounting Standard 142,
and
(c) any non-cash effects of accounting for stock based compensation in
accordance with FASB pronouncement SFAS 123(r).
“Net
Loss” means fiscal year-to-date after-tax net loss from continuing operations as
determined in accordance with GAAP.
“Net
Orderly Liquidation Value” means a professional opinion of the probable Net Cash
Proceeds that could be realized at a properly advertised and professionally
conducted liquidation sale, conducted under orderly sale conditions for an
extended period of time (usually six to nine months), under the economic trends
existing at the time of the appraisal.
“OFAC”
is
defined in Section 5.12(b).
“Officer”
means with respect to Company, an officer if Company is a corporation, a manager
if Company is a limited liability company, or a partner if Company is a
partnership.
“Operating
Account” is defined in Section 1.3(a), and maintained in accordance with the
terms of Xxxxx Fargo’s Commercial Account Agreement in effect for demand deposit
accounts.
“Overadvance”
means the amount, if any, by which the unpaid principal amount of the Revolving
Note is in excess of the then-existing Borrowing Base.
“Owned
Intellectual Property” is defined in Exhibit D.
“Owner”
means with respect to Company, each Person having legal or beneficial title
to
an ownership interest in Company or a right to acquire such an
interest.
“Patent
and Trademark Security Agreement” means each Patent and Trademark Security
Agreement entered into between Company and Xxxxx Fargo.
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45
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“Pension
Plan” means a pension plan (as defined in Section 3(2) of ERISA) maintained for
employees of Company or any ERISA Affiliate and covered by Title IV of
ERISA.
“Permitted
Lien” and “Permitted Liens” are defined in Section 5.3(a).
“Person”
means any individual, corporation, partnership, joint venture, limited liability
company, association, joint stock company, trust, unincorporated organization
or
government or any agency or political subdivision of a governmental
entity.
“Plan”
means an employee benefit plan (as defined in Section 3(3) of ERISA) maintained
for employees of Company or any ERISA Affiliate.
“Premises”
is defined in Section 2.4(a).
“Prime
Rate” means at any time the rate of interest most recently announced by Xxxxx
Fargo at its principal office as its Prime Rate, with the understanding that
the
Prime Rate is one of Xxxxx Fargo’s base rates, and serves as the basis upon
which effective rates of interest are calculated for those loans making
reference to it, and is evidenced by its recording in such internal publication
or publications as Xxxxx Fargo may designate. Each change in the rate of
interest shall become effective on the date each Prime Rate change is announced
by Xxxxx Fargo. In
no
event, however, shall the annual rate of interest represented by the Prime
Rate
be less than five (5%) percent.
“Proceeds”
shall have the meaning given it under the UCC.
“Record”
means information that is inscribed on a tangible medium or that is stored
in an
electronic or other medium and is retrievable in perceivable form, and includes
all information that is required to be reported by Company to Xxxxx Fargo
pursuant to Section 5.1.
“Reportable
Event” means a reportable event (as defined in Section 4043 of ERISA), other
than an event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the Pension Benefit Guaranty
Corporation.
“Revolving
Note” is defined in Section 1.1(d).
“Security
Documents” means this Agreement, the Patent and Trademark Security Agreement(s),
the Mortgage, Deposit Account Control Agreement executed by Capital One, N.A.,
and any other document delivered to Xxxxx Fargo from time to time to secure
the
Indebtedness.
“Security
Interest” is defined in Section 2.1.
“Subsidiary”
means any Person of which more than 50% of the outstanding ownership interests
having general voting power under ordinary circumstances to elect a majority
of
the board of directors or the equivalent of such Person, irrespective of whether
or not at the time ownership interests of any other class or classes shall
have
or might have voting power by reason of the happening of any contingency, is
at
the time directly or indirectly owned by Company, by Company and one or more
other Subsidiaries, or by one or more other Subsidiaries.
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46
-
“Termination
Date” is defined in Section 1.1(b).
“Term
Loan” is defined in the Recitals.
“Term
Note” is defined in Section 1.5(b).
“UCC”
means the Uniform Commercial Code in effect in the state designated in this
Agreement as the state whose laws shall govern this Agreement, or in any other
state whose laws are held to govern this Agreement or any portion of this
Agreement.
“Unused
Amount” is defined in Section 1.7(b).
“Xxxxx
Fargo” means Xxxxx Fargo Bank, National Association in its broadest and most
comprehensive sense as a legal entity, and is not limited in its meaning to
the
Xxxxx Fargo Business Credit operating division, or to any other operating
division of Xxxxx Fargo.
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47
-
Exhibit
B to Credit and Security Agreement
Premises
The
Premises referred to in the Credit and Security Agreement have an address of
00
Xxxxxxxxx Xxxxx, Xxxx Xxxxxxxx, Xxx Xxxxxx, and are legally described as
follows:
D
E S C R
I P T I O N
ALL
that
certain lot, parcel or tract of land, situate and lying in the Township of
West
Xxxxxxxx, County of Essex, State of New Jersey, and being more particularly
described as follows:
BEGINNING
in the southerly line of Fairfield Place 2,455.67 feet measured along the same
westerly from the west side of Fairfield Avenue and running;
thence.
|
(1)
|
Along
the westerly line of Lot 2P-3 South 53 degrees 47 minutes 40 seconds
West
512.67 feet to the line of lands of Mountain Ridge Country Club,
thence
|
|
(2)
|
Along
the lands of Mountain Ridge Country Club North 44 degrees 02 minutes
West
399.84 feet; thence
|
|
(3)
|
Through
lands of Xxxxxxx Xxx Costa North 53 degrees 47 minutes 40 seconds
East
511.49 feet to the southerly side of proposed extension of Fairfield
Place; thence
|
|
(4)
|
Running
along the southerly side of Fairfield Place and the proposed extension
of
Fairfield Place South 44 degrees 12 minutes East 400 feet to the
point and
place of BEGINNING.
|
Being
also know and designated as Lot 2Q on a certain map entitled “Map of Property of
A. Xxx Xxxxx - Fairfield Place Section 4” and filed in the Essex County
Register’s Office on March 22, 1966 as Filed Map No. 2886.
The
above description is drawn in accordance with a survey made by X.X. Xxxxxxx
Associates, Inc., dated September 25, 2003.
XXX
0
XX XXXXX
0000
XX THE
TAX MAP.
(Said
Lot
and Block reported for informational purposes only)
In
the
event of any conflict between the address and the legal description, the legal
description shall control.
Exhibit
C to Credit and Security Agreement
CONDITIONS
PRECEDENT
Xxxxx
Fargo’s obligation to make an initial Advance shall be subject to the condition
that Xxxxx Fargo shall have received the following, executed and in form and
content satisfactory to Xxxxx Fargo. The following descriptions are limited
descriptions for reference purposes only and should not be construed as limiting
in any way the subject matter that Xxxxx Fargo requires each document to
address.
A. Loan
Documents to be Executed by Company:
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(1)
|
The
Revolving Note and the Term Note.
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|
(2)
|
|
(3)
|
The
Master Agreement for Treasury Management Services, the Acceptance
of
Services, and the related Service Description for each deposit or
treasury
management related product or service that Company will subscribe
to,
including without limitation the Loan Manager Service Description
and the
Lockbox and Collection Account Service Description, Collection Account
Service Description.
|
|
(4)
|
The
Patent and Trademark Security
Agreement.
|
|
(5)
|
The
Mortgage.
|
|
(6)
|
The
Daily Collateral Report.
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B. Loan
Documents to be Executed by Third Parties:
|
(1)
|
Waiver
of Setoff Rights from each account debtor to Company pursuant to
which the
account debtor waives its rights to exercise its rights to setoff
against
such Account any amounts owed by Company to the account
debtor.
|
|
(2)
|
Certificates
of Insurance required under this Agreement, with all hazard insurance
containing a lender’s loss payable endorsement in Xxxxx Fargo’s favor and
with all liability insurance naming Xxxxx Fargo as additional
insured.
|
|
C.
|
Documents
Related to the Premises
|
|
(1)
|
Any
mortgages or deeds of trust pursuant to which Company or the landlord
to
Company has encumbered the
Premises.
|
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49 -
|
D.
|
Federal
Tax, State Tax, Judgment, UCC and Intellectual Property Lien
Searches
|
|
(1)
|
Current
searches of Company in appropriate filing offices showing that (i)
no
Liens have been filed and remain in effect against Company and Collateral
except Permitted Liens or Liens held by Persons who have agreed in
an
Authenticated Record that upon receipt of proceeds of the initial
Advances, they will satisfy, release or terminate such Liens in a
manner
satisfactory to Xxxxx Fargo, and (ii) Xxxxx Fargo has filed all UCC
financing statements necessary to perfect the Security Interest,
to the
extent the Security Interest is capable of being perfected by
filing.
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(2)
|
Current
searches of Third Persons in appropriate filing offices with respect
to
any of the Collateral that is in the possession of a Person other
than
Company that is held for resale, showing that (i) UCC financing statements
sufficient to protect Company’s and Xxxxx Fargo’s interests in such
Collateral have been filed, and (ii) no other secured party has filed
a
financing statement against such Person and covering property similar
to
Company’s, other than Company, or if there exists any such secured party,
evidence that each such party has received notice from Company and
Xxxxx
Fargo sufficient to protect Company’s and Xxxxx Fargo’s interests in
Company’s goods from any claim by such secured
party.
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E.
|
Constituent
Documents:
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(1)
|
The
Certificate of Authority of Company, which shall include as part
of the
Certificate or as exhibits to the Certificate, (i) the Resolution
of
Company’s Directors and, if required, Owners, authorizing the execution,
delivery and performance of those Loan Documents and other documents
or
agreements described in or related to this Agreement to which Company
is a
party, (ii) an Incumbency Certificate containing the signatures of
Company’s Officers or agents authorized to execute and deliver those
instruments, agreements and certificates referenced in (i) above,
as well
as Advance requests, on Company’s behalf, (iii) Company’s Constituent
Documents, (iv) a current Certificate of Good Standing or Certificate
of
Status issued by the secretary of state or other appropriate authority
for
Company’s state of organization, certifying that Company is in good
standing and in compliance with all applicable organizational requirements
of the state of organization, and (v) a Secretary’s Certificate of
Company’s secretary or assistant secretary certifying that the Certificate
of Authority of Company is true, correct and
complete.
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|
(2)
|
Evidence
that Company is licensed or qualified to transact
business
in
all jurisdictions where the character of the property owned or leased
or
the nature of the business transacted by it makes such licensing
or
qualification necessary.
|
|
(3)
|
An
Officer’s
Certificate
of
an appropriate Officer of Company confirming, in his or her personal
capacity, the representations and warranties set forth in this
Agreement.
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(4)
|
A
Customer
Identification Information Form and
such other forms and verification as Xxxxx Fargo may need to comply
with
the U.S.A. Patriot Act.
|
|
F.
|
Real
Estate Related Documents:
|
With
respect to the real estate that is encumbered by the mortgage or deed of trust
given by Company or any third Person to Xxxxx Fargo:
|
(1)
|
An
appraisal ordered by Xxxxx Fargo or its agent of said real property
and
all improvements thereon, conforming to Uniform Standards of Professional
Appraisal Practice.
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(2)
|
An
American Land Title Association policy of title insurance, with such
endorsements as Xxxxx Fargo may require, issued by an insurer in
such
amounts as Xxxxx Fargo may require, insuring Xxxxx Fargo’s first priority
lien on said real estate, subject only to such exceptions as Xxxxx
Fargo
in its discretion may approve, together with such evidence relating
to the
payment of liens or potential liens as Xxxxx Fargo may
require.
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(3)
|
An
American Land Title Association survey certified to Xxxxx Fargo and
to the
title company.
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(4)
|
A
current environmental site assessment indicating that the real property
is
subject to no “recognized environmental conditions”, as that term is
defined by the American Society for Testing and Materials, in its
standards for environmental due diligence, and is not in need of
remedial
action to avoid subjecting its owner to any present or future liability
or
contingent liability with respect to the release of toxic or hazardous
wastes or substances.
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(5)
|
A
flood hazard determination form, confirming whether or not the parcel
is
in a flood hazard area and whether or not flood insurance must be
obtained, and, if the real estate is located in a flood hazard area,
a
policy of flood insurance.
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(6)
|
Copies
of management services and maintenance contracts, fire, health and
safety
reports, certificates of occupancy, leases and rent
rolls.
|
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G.
|
Miscellaneous
Matters or Documents:
|
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(1)
|
Payment
of fees and reimbursable costs and expenses due under this Agreement
through the date of initial Advance, including all legal expenses
incurred
through the date of the closing of this
Agreement.
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(2)
|
Evidence
that after making the initial Advance and satisfying all obligations
owed
to Company’s prior lender of even date herewith, and all trade payables
older than 90 days from invoice date, book overdrafts and closing
costs,
the availability under the Line of Credit is not less than
$1,000,000.00.
|
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(3)
|
Any
documents or other agreements entered into by Company and Xxxxx Fargo
that
relate to any swap, derivative, foreign exchange, hedge, deposit,
treasury
management or similar product or transaction extended to Company
by Xxxxx
Fargo not already provided pursuant to the requirements of (A)-(F)
above.
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(4)
|
Receipt
and acceptance by Xxxxx Fargo of real estate appraisal completed
by Quest
Realty Advisors.
|
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(5)
|
Receipt
and acceptance by Xxxxx Fargo of real estate structural integrity
study to
be completed and delivered to Xxxxx Fargo not later than August 30,
2008.
|
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(6)
|
Receipt
and acceptance by Xxxxx Fargo of legal status report from Canada
law firm
acceptable to Xxxxx Fargo as to status, claims, defenses and issues
relating to litigation involving FMI-Canada and litigation involving
Company landlord.
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(7)
|
Receipt
and acceptance by Xxxxx Fargo of Collateral examinations, Net Orderly
Liquidation Value appraisal on Company’s Equipment and fair market value
appraisal of Premises subject to
Mortgage.
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(8)
|
Receipt
and acceptance by Xxxxx Fargo of background check on senior management
of
Company.
|
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(9)
|
Such
other documents as Xxxxx Fargo in its sole discretion may
require.
|
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(10)
|
Execution
of this Agreement must occur not later than September 30,
2008.
|
Exhibit
D to Credit and Security Agreement
REPRESENTATIONS
AND WARRANTIES
Company
represents and warrants to Xxxxx Fargo as follows:
|
(a)
|
Existence
and Power; Name; Chief Executive Office; Inventory and Equipment
Locations; Federal Employer Identification Number and Organizational
Identification Number.
Company is a corporation organized, validly existing and in good
standing
under the laws of the State of Delaware and is licensed or qualified
to
transact business in all jurisdictions where the character of the
property
owned or leased or the nature of the business transacted by it makes
such
licensing or qualification necessary. Company has all requisite power
and
authority to conduct its business, to own its properties and to execute
and deliver, and to perform all of its obligations under, those Loan
Documents and any other documents or agreements that it has entered
into
with Xxxxx Fargo related to this Agreement. The Company has done
business
solely under the names set forth below in addition to its correct
legal
name. Company’s chief executive office and principal place of business is
located at the address set forth below, and all of Company’s records
relating to its business or the Collateral are kept at that location.
All
Inventory and Equipment is located at that location or at one of
the other
locations set forth below. Company’s name, Federal Employer Identification
Number and Organization Identification Number are correctly set forth
at
the end of the Agreement next to Company’s
signature.
|
[Omitted]
(b) Capitalization.
The
Capitalization Chart below constitutes a correct and complete ownership
structure of all Subsidiaries of Company.
[Omitted]
(c) Authorization
of Borrowing; No Conflict as to Law or Agreements.
The
execution, delivery and performance by Company of the Loan Documents and any
other documents or agreements described in or related to this Agreement, and
all
borrowing under the Line of Credit have been authorized and do not (i) require
the consent or approval of Company’s Owners; (ii) require the authorization,
consent or approval by, or registration, declaration or filing with, or notice
to, any governmental agency or instrumentality, whether domestic or foreign,
or
any other Person, except to the extent obtained, accomplished or given prior
to
the date of this Agreement; (iii) violate any provision of any law, rule or
regulation (including Regulation X of the Board of Governors of the Federal
Reserve System) or of any order, writ, injunction or decree presently in effect
having applicability to Company or of Company’s Constituent Documents; (iv)
result in a breach of or constitute a default or event of default under any
indenture or loan or credit agreement or any other material agreement, lease
or
instrument to which Company is a party or by which it or its properties may
be
bound or affected; or (v) result in, or require, the creation or imposition
of
any Lien (other than the Security Interest) upon or with respect to any of
the
properties now owned or subsequently acquired by Company.
(d) Legal
Agreements.
This
Agreement, the other Loan Documents, and any other document or agreement
described in or related to this Agreement, will constitute the legal, valid
and
binding obligations of Company, enforceable against Company in accordance with
their respective terms.
(e) Subsidiaries.
Except
as disclosed below, Company has no Subsidiaries.
[Omitted]
(f) Financial
Condition; No Adverse Change.
Company
has furnished to Xxxxx Fargo its audited financial statements for its fiscal
year ended December 29, 2007 and unaudited financial statements for the
fiscal-year-to-date period ended June 28, 2008 and those statements fairly
present Company’s financial condition as of those dates and the results of
Company’s operations and cash flows for the periods then ended and were prepared
in accordance with GAAP. Since the date of the most recent financial statements,
there has been no Material Adverse Effect in Company’s business, properties or
condition (financial or otherwise).
(g) Litigation.
There
are no actions, suits or proceedings pending or, to Company’s knowledge,
threatened against or affecting Company or any of its Affiliates or the
properties of Company or any of its Affiliates before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic
or
foreign, which, if determined adversely to Company or any of its Affiliates,
would result in a final judgment or judgments against Company or any of its
Affiliates in an amount in excess of $100,000.00,
apart
from those matters specifically disclosed below.
[Omitted]
(h) Intellectual
Property Rights.
(i) Owned
Intellectual Property.
Set
forth below is a complete list of all patents, applications for patents,
trademarks, applications to register trademarks, service marks, applications
to
register service marks, mask works, trade dress and copyrights for which Company
is the owner of record (the “Owned Intellectual Property”). Except as set forth
below, (A) Company owns the Owned Intellectual Property free and clear of all
restrictions (including covenants not to xxx any Person), court orders,
injunctions, decrees, writs or Liens, whether by agreement memorialized in
a
Record Authenticated by Company or otherwise, (B) no Person other than Company
owns or has been granted any right in the Owned Intellectual Property, (C)
all
Owned Intellectual Property is valid, subsisting and enforceable, and (D)
Company has taken all commercially reasonable action necessary to maintain
and
protect the Owned Intellectual Property
that is
registered in the United States.
(ii) Agreements
with Employees and Contractors.
Company
has entered into a legally enforceable agreement with each Person that is an
employee or subcontractor obligating that Person to assign to Company, without
additional compensation, any Intellectual Property Rights created, discovered
or
invented by that Person in the course of that Person’s employment or engagement
with Company (except to the extent prohibited by law), and further obligating
that Person to cooperate with Company, without additional compensation, to
secure and enforce the Intellectual Property Rights on behalf of Company, unless
the job description of the Person is such that it is not reasonably foreseeable
that the employee or subcontractor will create, discover, or invent Intellectual
Property Rights.
(iii) Intellectual
Property Rights Licensed from Others.
Set
forth below is a complete list of all agreements under which Company has
licensed Intellectual Property Rights from another Person (“Licensed
Intellectual Property”) other than readily available, non-negotiated licenses of
computer software and other intellectual property used solely for performing
accounting, word processing and similar administrative tasks (“Off-the-shelf
Software”) and a summary of any ongoing payments Company is obligated to make
with respect thereto. Except as set forth below or in any other Record, copies
of which have been given to Xxxxx Fargo, Company’s licenses to use the Licensed
Intellectual Property are free and clear of all restrictions, Liens, court
orders, injunctions, decrees, or writs, whether by agreed to in a Record
Authenticated by Company or otherwise. Except as disclosed below, Company is
not
contractually obligated to make royalty payments of a material nature, or pay
fees to any owner of, licensor of, or other claimant to, any Intellectual
Property Rights.
(iv) Other
Intellectual Property Needed for Business.
Except
for Off-the-shelf Software and as disclosed below, the Owned Intellectual
Property and the Licensed Intellectual Property constitute all Intellectual
Property Rights used or necessary to conduct Company’s business as it is
presently conducted or as Company reasonably foresees conducting
it.
(v) Infringement.
Except
as disclosed below, Company has no knowledge of, and has not received notice
either orally or in a Record alleging, any Infringement of another Person’s
Intellectual Property Rights (including any claim set forth in a Record that
Company must license or refrain from using the Intellectual Property Rights
of
any Person) nor, to Company’s knowledge, is there any threatened claim or any
reasonable basis for any such claim.
[Omitted]
(i) Taxes.
Company
and its Affiliates have paid or caused to be paid to the proper authorities
when
due all federal, state and local taxes required to be withheld by each of them.
Company and its Affiliates have filed all federal, state and local tax returns
which to the knowledge of the Officers of Company or any Affiliate, as the
case
may be, are required to be filed, and Company and its Affiliates have paid
or
caused to be paid to the respective taxing authorities all taxes as shown on
these returns or on any assessment received by any of them to the extent such
taxes have become due.
(j) Titles
and Liens.
Company
has good and absolute title to all Collateral free and clear of all Liens other
than Permitted Liens. No financing statement naming Company as debtor is on
file
in any office except to perfect only Permitted Liens.
(k) No
Defaults.
Company
is in compliance with all provisions of all agreements, instruments, decrees
and
orders to which it is a party or by which it or its property is bound or
affected, the breach or default of which could reasonably be expected to have
a
Material Adverse Effect on Company’s financial condition, properties or
operations .
(l) Submissions
to Xxxxx Fargo.
All
financial and other information provided to Xxxxx Fargo by or on behalf of
Company in connection with Company’s request for the credit facilities
contemplated hereby is (i) true, correct,
accurate
and
complete in all material respects, and
(ii)
as to
projections, valuations or proforma financial statements, present such
projections, valuations and proforma condition and results in a good faith
manner.
(m) Financing
Statements.
Company
has previously authorized the filing of financing statements sufficient when
filed to perfect the Security Interest and other Liens created by the Security
Documents. When such financing statements are filed, Xxxxx Fargo will have
a
valid and perfected security interest in all Collateral capable of being
perfected by the filing of financing statements. None of the Collateral is
or
will become a fixture on real estate, unless a sufficient fixture filing has
been filed with respect to such Collateral.
(n) Rights
to Payment.
Each
right to payment and each instrument, document, chattel paper and other
agreement constituting or evidencing Collateral is (or, in the case of all
future Collateral, will be when arising or issued) the valid, genuine and
legally enforceable obligation, subject to no defense, setoff or counterclaim
of
the account debtor or other obligor named in that instrument.
(o) Employee
Benefit Plans.
(i) Maintenance
and Contributions to Plans.
Except
as disclosed below, neither Company nor any ERISA Affiliate (A) maintains or
has
maintained any Pension Plan, (B) contributes or has contributed to any
Multiemployer Plan, or (C) provides or has provided post-retirement medical
or
insurance benefits to employees or former employees (other than benefits
required under Section 601 of ERISA, Section 4980B of the IRC, or applicable
state law).
(ii) Knowledge
of Plan Noncompliance with Applicable Law.
Except
as disclosed below, neither Company nor any ERISA Affiliate has (A) knowledge
that Company or the ERISA Affiliate is not in full compliance with the
requirements of ERISA, the IRC, or applicable state law with respect to any
Plan, (B) knowledge that a Reportable Event occurred or continues to exist
in
connection with any Pension Plan, or (C) sponsored a Plan that it intends to
maintain as qualified under the IRC that is not so qualified, and no fact or
circumstance exists which may have an adverse effect on such Plan’s tax
qualified status.
(iii) Funding
Deficiencies and Other Liabilities.
Neither
Company nor any ERISA Affiliate has liability for any (A) accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the IRC)
under
any Plan, whether or not waived, (B) withdrawal, partial withdrawal,
reorganization or other event under any Multiemployer Plan under Section 4201
or
4243 of ERISA, or (C) event or circumstance which could result in financial
obligation to the Pension Benefit Guaranty Corporation, the Internal Revenue
Service, the Department of Labor or any participant in connection with any
Plan
(other than routine claims for benefits under the Plan).
[Omitted]
(p) Environmental
Matters.
(i) Hazardous
Substances on Premises.
Except
as disclosed below, there are not present in, on or under the Premises any
Hazardous Substances in such form or quantity as to create any material
liability or obligation for either Company or Xxxxx Fargo under the common
law
of any jurisdiction or under any Environmental Law, and no Hazardous Substances
have ever been stored, buried, spilled, leaked, discharged, emitted or released
in, on or under the Premises in such a way as to create a material
liability.
(ii) Disposal
of Hazardous Substances.
Except
as disclosed below, to the knowledge of Company, Company has not disposed of
Hazardous Substances in such a manner as to create any material liability under
any Environmental Law.
(iii) Claims
and Proceedings with Respect to Environmental Law Compliance.
Except
as disclosed below, there have not existed in the past nor are there to the
knowledge of Company any threatened or impending requests, claims, notices,
investigations, demands, administrative proceedings, hearings or litigation
relating in any way to the Premises or Company, alleging material liability
under, violation of, or noncompliance with any Environmental Law or any license,
permit or other authorization issued pursuant thereto.
(iv) Compliance
with Environmental Law; Permits and Authorizations.
Except
as disclosed below, Company (A) conducts its business at all times in all
material respects in compliance with applicable Environmental Law, (B) possesses
valid licenses, permits and other authorizations required under applicable
Environmental Law for the lawful and efficient operation of its business, none
of which are scheduled to expire, or withdrawal, or material limitation within
the next 12 months, and (C) has not been denied insurance on grounds related
to
potential environmental liability.
(v) Status
of Premises.
Except
as disclosed below, the Premises are not and never have been listed on the
National Priorities List, the Comprehensive Environmental Response, Compensation
and Liability Information System or any similar federal, state or local list,
schedule, log, inventory or database.
(vi) Environmental
Audits, Reports, Permits and Licenses.
Company
has delivered to Xxxxx Fargo all environmental assessments, audits, reports,
permits, licenses and other documents prepared during the past two years
describing or relating in any way to the Premises or Company’s
businesses.
[Omitted]
Exhibit
E to Credit and Security Agreement
COMPLIANCE
CERTIFICATE
|
To:
|
Xxxxx
Fargo Bank, National Association
|
|
Date:
|
_______________________,
20 ___
|
|
Subject:
|
Financial
Statements
|
In
accordance with our Credit and Security Agreement dated ________________,
2008 (as
amended from time to time, the “Credit Agreement”), attached are the financial
statements of Merrimac
Industries, Inc. (the
“Company”) dated ______________, 20___ (the “Reporting Date”) and the
year-to-date period then ended (the “Current Financials”). All terms used in
this certificate have the meanings given in the Credit Agreement.
A. Preparation
and Accuracy of Financial Statements.
I
certify that the Current Financials have been prepared in accordance with GAAP,
subject to year-end audit adjustments, and fairly present Company’s financial
condition as of the Reporting Date.
B. Name
of Company; Merger and Consolidation.
I
certify that:
(Check
one)
| o |
Company
has not, since the date of the Credit Agreement, changed its name
or
jurisdiction of organization, nor has it consolidated or merged with
another Person.
|
| o |
Company
has, since the date of the Credit Agreement, either changed its name
or
jurisdiction of organization, or both, or has consolidated or merged
with
another Person, which change, consolidation or merger: o was
consented to in
advance by Xxxxx Fargo in an Authenticated Record, and/or o is
more fully described in the statement of facts attached to this
Certificate.
|
C. Events
of Default.
I
certify that:
(Check
one)
| o |
I
have no knowledge of the occurrence of an Event of Default under
the
Credit Agreement, except as previously reported to Xxxxx Fargo in
a
Record.
|
| o |
I
have knowledge of an Event of Default under the Credit Agreement
not
previously reported to Xxxxx Fargo in a Record, as more fully described
in
the statement of facts attached to this Certificate, and further,
I
acknowledge that Xxxxx Fargo may under the terms of the Credit Agreement
impose the Default Rate at any time during the resulting Default
Period.
|
D. Litigation
Matters.
I
certify that:
(Check
one)
| o |
I
have no knowledge of any material adverse change to the litigation
exposure of Company or any of its Affiliates or of any
Guarantor.
|
| o |
I
have knowledge of material adverse changes to the litigation exposure
of
Company or any of its Affiliates or of any Guarantor not previously
disclosed in Exhibit D, as more fully described in the statement
of facts
attached to this Certificate.
|
E. Financial
Covenants. I
further
certify that:
(Check
and complete each of the following)
1. Maximum
due from Costa Rica Affiliate.
Pursuant to Section 5.2(a) of the Credit Agreement, as of the Reporting Date,
the amount due from Multi-Mix® Microtechnology S.R.L. was $________________,
which o satisfies odoes
not
satisfy the requirement that such amount be not less than [_$_____________
on the Reporting Date._][_ the applicable amount set forth in the table below
(numbers appearing between “< >“ are negative) on the Reporting
Date:
|
Period
|
Maximum Due
|
|||
|
|
||||
|
Through
January 3, 2009
|
$
|
4,250,000.00
|
||
|
Through
April 4, 2009
|
$
|
4,500,000.00
|
||
|
Through
July 4, 2009
|
$
|
4,750,000.00
|
||
|
Through
October 3, 2009, and each fiscal quarter thereafter
|
$
|
5,000,000.00
|
||
2. Minimum
Net Income.
Pursuant to Section 5.2(b) of the Credit Agreement, as of the Reporting Date,
Company’s Net Income was [_$__________],
which
o satisfies
o does
not satisfy the requirement that Net Income be not less than [$_______
_] on the Reporting Date._][_ the amount set forth in the table below (numbers
appearing between “< >” are negative) on the Reporting
Date:
|
Period
|
Minimum
Net Income
|
|
|
Through
January 3, 2009
|
Net
loss of not more than <$265,000.00>
|
|
|
Through
April 4, 2009, and each fiscal quarter thereafter
|
Not
less than 75% of Company’s projection of Net Income or not more than 100%
of Company’s projection of Net Loss measured
cumulatively
|
3. Minimum
Debt Service Coverage Ratio.
Pursuant to Section 5.2(e) of the Credit Agreement, as of the Reporting Date,
Company’s Debt Service Coverage Ratio was [______]
to
1.00,
which o satisfies
o does
not satisfy the requirement that such ratio be not less than 1.10 to
1.0 on
the
Reporting Date.
4.
Capital
Expenditures.
Pursuant to Section 5.2(g) of the Credit Agreement, for the year-to-date period
ending on the Reporting Date, Company has expended or contracted to expend
during the [_fiscal_]
year
ended [_______________,
200___,_] for
Capital Expenditures, [_$________________]
in
the
aggregate and [_$______________],
for
each subsequent year end which osatisfies
o does
not satisfy the requirement that such expenditures not exceed [_$___________]
for
Capital Expenditures in the aggregate and [_$___________
_] for
each
subsequent year end.
5. Salaries.
Company
has not paid excessive or unreasonable salaries, bonuses, commissions,
consultant fees or other compensation, or increased the salary, bonus,
commissions, consultant fees or other compensation of any Director, Officer
or
consultant, or any member of their families, by more than ten percent (10%)
as
of the Reporting Date over the amount paid in Company’s previous fiscal year,
either individually or for all such persons in the aggregate, and has not paid
any increase from any source other than profits earned in the year of payment,
if there then exists or as a result of such increase in payment there shall
exist a Default Period or cause to exist a Default Period, and as a consequence
Company o is
o is
not in compliance with Section 5.8 of the Credit Agreement.
Attached
are statements of all relevant facts and computations in reasonable detail
sufficient to evidence Company’s compliance with the financial covenants
referred to above, which computations were made in accordance with
GAAP.
|
MERRIMAC
INDUSTRIES, INC.
|
|
By:
|
|
Its
Chief Financial Officer
|
Exhibit
F to Credit and Security Agreement
[Omitted]
SCHEDULE
5.1(b)
MERRIMAC
INDUSTRIES, INC.
[Omitted]
EXHIBIT
1.3
NOTICE
OF BORROWING
_______________,
2008
|
TO:
|
Xxxxx
Fargo Bank, N.A.
|
|
000
Xxxx 00xx Xxxxxx, 00xx Xxxxx
|
|
|
Xxx
Xxxx, XX 00000
|
|
|
Telecopier:
(000) 000-0000
|
|
|
Attention:
Portfolio Manager for xxxxxxxxxxxxxxxls,
Inc.
|
We
refer
to that certain Credit and Security Agreement dated as of _______________,
2008
(as amended or modified to date, the “Credit Agreement”) by and between MERRIMAC
INDUSTRIES, INC. (the “Company”) and XXXXX FARGO BANK, NATIONAL ASSOCIATION
acting through its Xxxxx Fargo Business Credit operating division (“Xxxxx
Fargo”). Capitalized terms used herein but not otherwise defined shall have the
same meanings assigned to them in the Credit Agreement.
Pursuant
to Section 1.3 of the Credit Agreement, we hereby request or confirm our request
for an Advance on the date and in the amount(s) specified below.
|
Amount
of Advance
|
Date
of Borrowing
|
|
|
$
|
Company
hereby elects the Floating Rate/LIBOR option.
Please
wire the proceeds of such advance directly to Xxxxx Fargo Bank, NA as
follows:
Xxxxx
Fargo Bank, NA
ABA
No.
000000000
Account
Number ________________
Name
of
account – _________________, Inc.
|
By:
|
|
|
Chief
Financial Officer
|
|
SCHEDULE
OF INTELLECTUAL PROPERTY
[Omitted]
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