EXHIBIT 10(qq)
TERM LOAN AND SECURITY AGREEMENT
THIS TERM LOAN AND SECURITY AGREEMENT(this "AGREEMENT"), is entered
into as of March 26, 2002, between MERRIMAC INDUSTRIES, INC., a Delaware
corporation, with an address at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the
"BORROWER"), and FLEET NATIONAL BANK (f/k/a/ Summit Bank) (the "BANK"), with an
address at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
WHEREAS, the Borrower desires to borrow, and the Bank desires to lend
money pursuant to the terms hereof.
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein, and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, the Borrower and the Bank, intending to be
legally bound, hereby agree as follows:
1. DEFINITIONS.
All capitalized terms used and not otherwise defined in the body of
this Agreement shall have the meanings assigned to them in the Schedule 1. All
terms of an accounting character not specifically defined herein shall have
meanings given to such terms by GAAP.
2. LOAN TERMS; AMOUNTS; INTEREST RATES; ETC.
2.1 TERM LOAN. The Bank agrees, subject to the terms and conditions
hereinafter set forth, to make a term loan to the Borrower in the
aggregate principal amount of Three Million Five Hundred Thousand
Dollars ($3,500,000) (the "LOAN" or "TERM LOAN") on the date hereof
(the "CLOSING DATE"). The Borrower may not reborrow any principal
amounts repaid or prepaid on the Term Loan. The Term Loan shall be
evidenced by a Term Loan Note in the form provided to the Borrower by
the Bank (together with any attachments thereto and amendments or
modifications thereto in effect from time to time, hereinafter referred
to as the "NOTE"). The Term Loan shall be for a term commencing on the
Closing Date and terminating on March 26, 2022 (the "MATURITY DATE").
2.2 MATURITY; MANDATORY PREPAYMENT.
(a) MATURITY. The Loan will mature on the Maturity Date, at
which time all amounts outstanding under the Loan and unpaid
interest thereon will
automatically be due and payable.
(b) MANDATORY PREPAYMENT. Notwithstanding anything to the
contrary contained herein, on each "MANDATORY PREPAYMENT DATE"
(as defined in this Section 2.2(b)), the Borrower shall
automatically and without notice be obligated to prepay all
outstanding principal, interest and other amounts due under
the Loan as of such date, unless the Bank agrees, in writing,
to waive such prepayment. In the event that Bank agrees, in
its sole discretion, to waive any prepayment, the Borrower
shall continue to make payments according to the terms of this
Loan Agreement. Any waiver granted to the Borrower under this
Section 2.2(b) shall not be deemed a waiver of any of the
Bank's other rights under any of the Loan Documents, including
without limitation, the right to receive (i) continued
payments due under the Loan in accordance with the terms of
this Loan Agreement, and (ii) all amounts outstanding under
the Loan and unpaid interest thereon due as of the Maturity
Date. For the purpose of this Loan Agreement, the following
dates shall each be a Prepayment Date:
MANDATORY PREPAYMENT DATES
--------------------------
March 26, 2007
March 26, 2012
March 16, 2017
2.3 INTEREST RATES; COMPUTATION, LATE FEES AND PAYMENT TERMS.
(a) INTEREST. Principal amounts outstanding under the Loan
shall bear interest at a rate per annum equal to the sum of
the Prime Rate minus one-half percent, but in no event will
the interest rate be greater than the maximum interest rate
permitted by law. Interest shall be payable in arrears and
accrue from the Closing Date until the date that all amounts
due under the Note are paid in-full. Interest on the
outstanding balance of the Loan shall be payable in monthly
payments in accordance with the Note.
(b) PRINCIPAL. The principal amount of the Loan shall be
payable in monthly installments in accordance with the Note.
All unpaid principal and accrued, unpaid interest is due and
payable in full by the Borrower to the Bank on the Maturity
Date.
(b) COMPUTING INTEREST. Interest will be calculated on the
basis of a year of 360 days for the actual number of days
elapsed in each interest period and will be payable in
arrears.
(c) LATE FEES. If the entire amount of any required principal
and/or interest is not paid in full within ten (10) days after
the same is due, the Borrower shall pay to Bank a late fee
equal to five percent (5%) of the required payment.
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(d) PAYMENT OF FEES AND EXPENSES. Borrower shall pay on demand
all expenses of Bank in connection with the preparation,
administration, default, collection, waiver or amendment of
loan terms, or in connection with Bank's exercise,
preservation or enforcement of any of its rights, remedies or
options hereunder, including, without limitation, reasonable
fees of outside legal counsel or the allocated costs of
in-house legal counsel, accounting, consulting, brokerage or
other similar professional fees or expenses, and any fees or
expenses associated with travel or other costs relating to any
appraisals or examinations conducted in connection the loan or
any other collateral therefore, and the amount of all such
expenses shall, until paid, bear interest at the rate
applicable to principal hereunder (including any default rate)
and be an obligation secured by any collateral.
(e) DEFAULT RATE OF INTEREST. Upon an Event of Default
described in Section 7.1 (whether or not Bank has accelerated
payment of the Note), the unpaid principal of all advances
shall, at the option of Bank, bear interest at a rate which is
four (4) percentage points per annum greater than that which
would otherwise be applicable.
(f) APPLICATION OF PAYMENTS. All payments shall be applied
first to the payment of all fees, expenses and other amounts
due to the Bank (excluding principal and interest), then to
accrued interest, and the balance on account of outstanding
principal; provided, however, that after default, payments
will be applied to the obligations of Borrower to Bank as Bank
determines in its sole discretion.
(g) PREPAYMENT. The amount due under the Loan may be prepaid
in whole or in part at any time without penalty.
(h) MISC. All payments of principal, interest and other
amounts payable hereunder, shall be made to Borrower at such
place as Borrower may, from time to time determine, not later
than 1:00 P.M. (New Jersey time) on the due date therefor in
lawful money of the United States of America in federal funds
or other funds immediately available to Bank, without
counterclaim or setoff and free and clear of, and without any
deduction or withholding for, any taxes or other payments.
2.4 CLOSING FEE AND COUNSEL FEE. The Borrower will pay a one-time
closing fee of Twenty Five Thousand Dollars ($25,000.00) (the
"CLOSING FEE"). The Closing Fee will include any fees paid by
the Borrower prior to the Closing Date and will not be
refundable for any reason. In addition, Borrower shall pay to
Bank's counsel all reasonable costs and fees (the "COUNSEL
FEE") incurred in connection with the preparation, execution
and delivery of the Loan Documents and other documents related
thereto.
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2.5 BANKING ACCOUNT. The Borrower agrees to maintain an account
(hereinafter referred to as the "Account") at the Bank
continuously until the Liabilities due hereunder are paid in
full. The Bank shall and is hereby authorized by the Borrower
to enter and deposit into the Account the entire proceeds of
the Loan.
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3. MORTGAGE AND SECURITY INTEREST.
3.1 MORTGAGE. In addition to a security interest in the Collateral (as
defined in Section 3.2), Borrower's payment and performance
obligations under this Agreement and the other Loan Documents shall be
secured by a first mortgage lien on property commonly known as ▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, as more particularly set
forth in that First Mortgage and Security Agreement of even date
herewith.
3.2. GRANT OF SECURITY INTEREST. As security for the full and punctual
payment and performance of all Obligations of the Borrower to the Bank,
the Borrower hereby grants to the Bank a continuing security interest
in all of the assets and personal property of the Borrower, including
without limitation, the following property (the "Collateral"): all
personal property of the Borrower, including the following, all whether
now owned or hereafter acquired or arising and wherever located: (i)
accounts (including, without limitation, accounts receivable); (ii)
securities entitlements, securities accounts, commodity accounts,
commodity contracts and investment property; (iii) deposit accounts;
(iv) instruments (including promissory notes); (v) documents (including
warehouse receipts); (vi) chattel paper (including electronic chattel
paper and tangible chattel paper); (vii) inventory, including raw
materials, work in process, or materials used or consumed in Borrower's
business, items held for sale or lease or furnished or to be furnished
under contracts of service, sale or lease, goods that are returned,
reclaimed or repossessed; (viii) goods of every nature, including
stock-in-trade and goods on consignment; (ix) equipment, including
machinery, vehicles and furniture; (x) fixtures; (xi) commercial tort
claims, if any; (xii) letter of credit rights; (xiii) general
intangibles, of every kind and description, including payment
intangibles, software, computer information, source codes, object
codes, records and data, all existing and future customer lists, choses
in action, claims (including claims for indemnification or breach of
warranty), books, records, patents and patent applications, copyrights,
trademarks, tradenames, tradestyles, trademark applications, goodwill,
blueprints, drawings, designs and plans, trade secrets, contracts,
licenses, license agreements, formulae, tax and any other types of
refunds, returned and unearned insurance premiums, rights and claims
under insurance policies; (xiv) all supporting obligations of all of
the foregoing property; (xv) all property of the Borrower now or
hereafter in the Bank's possession or in transit to or from, or under
the custody or control of, the Bank or any affiliate thereof; (xvi) all
cash and cash equivalents thereof; and (xvii) all cash and noncash
proceeds (including insurance proceeds) of all of the foregoing
property, all products thereof and all additions and accessions
thereto, substitutions therefor and replacements thereof.
Notwithstanding the foregoing, the Collateral pledged under this
Agreement shall not include any (i) property in the possession of or
maintained by the Costa Rica Facilities, (ii) contract rights in the
"Transaction Agreements" (as such term is defined in that certain
Subscription Agreement dated as of February 28, 2002, by and between
Borrower, and Dupont Chemical and Energy Operations, Inc., and E.I. Du
Pont de Nemours (collectively the "Dupont Companies")), or (iii) any
intellectual property arising out of the Transaction Agreements between
Borrower and the Dupont Companies on or after the
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date of this Agreement which is not related to the intellectual
property identified on Schedule 4.11, or (iv) any contract rights
arising out of the Transaction Agreements between Borrower and the
Dupont Companies on or after the date of this Agreement.
3.3. SPECIFIC REPRESENTATIONS, WARRANTIES AND COVENANTS WITH RESPECT TO
COLLATERAL. Collateral, Borrower hereby represents and warrants to and
covenants with the Bank, as follows:
i. Change in Name or Locations. The Borrower hereby agrees
that if the location of the Collateral changes from the locations
listed on Schedule 3.3(a) hereto and made part hereof, or if the
Borrower changes its name, its type of organization, its state of
organization (if Borrower is a registered organization), its principal
residence (if Borrower is an individual), its chief executive office
(if Borrower is a general partnership or non-registered organization)
or establishes a name in which it may do business that is not listed as
a tradename on Schedule 3.3(b) hereto, the Borrower will immediately
notify the Bank in writing of the additions or changes.
ii. Representations and Warranties. Except as disclosed in or
permitted under the Loan Agreement, the Borrower represents, warrants
and covenants to the Bank that: (a) all information, including its
exact name (as it appears on its organizational documents, as amended,
filed with the state of its incorporation or formation), type of
organization, jurisdiction of organization and chief executive office
set forth in this Agreement are true and correct on the date hereof;
(b) the Borrower has good, marketable and indefeasible title to the
Collateral, has not made any prior sale, pledge, encumbrance,
assignment or other disposition of any of the Collateral, and the
Collateral is free from all encumbrances and rights of setoff of any
kind except the lien in favor of the Bank created by this Agreement;
(c) except as herein provided, the Borrower will not hereafter without
the Bank's prior written consent sell, pledge, encumber, assign or
otherwise dispose of any of the Collateral or permit any right of
setoff, lien or security interest to exist thereon except to the Bank;
(d) the Borrower will defend the Collateral against all claims and
demands of all persons at any time claiming the same or any interest
therein; (e) each account and general intangible, if included in the
definition of Collateral, is genuine and enforceable in accordance with
its terms and the Borrower will defend the same against all claims,
demands, setoffs and counterclaims at any time asserted; and (f) at the
time any account or general intangible becomes subject to this
Agreement, such account or general intangible will be a good and valid
account representing a bona fide sale of goods or services by the
Borrower and such goods will have been shipped to the respective
account debtors or the services will have been performed for the
respective account debtors, and no such account or general intangible
will be subject to any claim for credit, allowance or adjustment by any
account debtor or any setoff, defense or counterclaim.
iii. Borrower's Covenants. The Borrower covenants that it
shall:
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(a) from time to time and at all reasonable times allow the
Bank, by or through any of its officers, agents, attorneys, or
accountants, to examine or inspect the Collateral, and obtain
valuations and audits of the Collateral, at the Borrower's expense,
wherever located. The Borrower shall do, obtain, make, execute and
deliver all such additional and further acts, things, deeds, assurances
and instruments as the Bank may require to vest in and assure to the
Bank its rights hereunder and in or to the Collateral, and the proceeds
thereof, including waivers from landlords, warehousemen and mortgagees.
Upon an Event of Default, the Borrower agrees that the Bank has the
right to notify (on invoices or otherwise) account debtors and other
obligors or payors on any Collateral of its assignment to the Bank, and
that all payments thereon should be made directly to the Bank, and that
the Bank has full power and authority to collect, compromise, endorse,
sell or otherwise deal with the Collateral in its own name or that of
the Borrower.;
(b) keep the Collateral in good order and repair at all times
and immediately notify the Bank of any event causing a material loss or
decline in value of the Collateral, whether or not covered by
insurance, and the amount of such loss or depreciation;
(c) only use or permit the Collateral to be used in accordance
with all applicable federal, state, county and municipal laws and
regulations; and
(d) have and maintain insurance at all times with respect to
all Collateral against risks of fire (including so-called extended
coverage), theft, sprinkler leakage, and other risks (including risk of
flood if any Collateral is maintained at a location in a flood hazard
zone) as the Bank may require, in such form, in such amount, for such
period and written by such companies as may be satisfactory to the Bank
in its sole discretion. Each such casualty insurance policy shall
contain a standard Lender's Loss Payable Clause issued in favor of the
Bank under which all losses thereunder shall be paid to the Bank as the
Bank's interest may appear. Such policies shall expressly provide that
the requisite insurance cannot be altered or canceled without at least
thirty (30) days prior written notice to the Bank and shall insure the
Bank notwithstanding the act or neglect of the Borrower. Upon the
Bank's demand, the Borrower shall furnish the Bank with duplicate
original policies of insurance or such other evidence of insurance as
the Bank may require. In the event of failure to provide insurance as
herein provided, the Bank may, at its option, obtain such insurance and
the Borrower shall pay to the Bank, on demand, the cost thereof.
Proceeds of insurance may be applied by the Bank to reduce the
Obligations or to repair or replace Collateral, all in the Bank's sole
discretion.
iv. Negative Pledge; No Transfer. The Borrower will not sell
or offer to sell or otherwise transfer or grant or allow the imposition
of a lien or security interest upon the Collateral except (a) to the
Bank, (b) as permitted in the Loan Agreement, or (c) for sales of
inventory and collections of accounts in the Borrower's ordinary course
of business. The Borrower will not allow any third party to gain
control of all or any part of the Collateral, and will not use any
portion thereof in any manner inconsistent with this Agreement or with
the terms and conditions of any policy of insurance thereon.
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v. For all accounts, Borrower shall:
(a) On the Bank's demand, make notations on its books and
records showing the Bank's security interest and make available to the
Bank shipping and delivery receipts evidencing the shipment of the
goods that gave rise to an account, completion certificates or other
proof of the satisfactory performance of services that gave rise to an
account, a copy of the invoice for each account and copies of any
written contract or order from which an account arose. The Borrower
shall promptly notify the Bank if an account becomes evidenced or
secured by an instrument or chattel paper and upon the Bank's request,
will promptly deliver any such instrument or chattel paper to the Bank,
including, without limitation, any letter of credit delivered to the
Borrower to support a shipment of inventory by the Borrower.
(b) Promptly advise the Bank whenever an account debtor
refuses to retain or returns any goods from the sale of which an
account arose and will comply with any instructions that the Bank may
give regarding the sale or other disposition of such returns. From time
to time with such frequency as the Bank may request, the Borrower will
report to the Bank all credits given to account debtors on all
accounts.
(c) Immediately notify the Bank if any account arises out of
contracts with the United States or any department, agency or
instrumentality thereof, and will execute any instruments and take any
steps required by the Bank so that all monies due and to become due
under such contract shall be assigned to the Bank and notice of the
assignment given to and acknowledged by the appropriate government
agency or authority under the Federal Assignment of Claims Act of 1940,
as amended, or other applicable law.
(d) At any time after the occurrence of an Event of Default,
and without notice to the Borrower, the Bank may direct any persons who
are indebted to the Borrower on any Collateral consisting of accounts
or general intangibles to make payment directly to the Bank of the
amounts due. At any time after the occurrence of an Event of Default,
at the request of the Bank, the Borrower will direct any persons who
are indebted to the Borrower on any Collateral consisting of accounts
or general intangibles to make payment directly to the Bank. The Bank
is authorized to collect, compromise, endorse and sell any such
Collateral in its own name or in the Borrower's name and to give
receipts to such account debtors for any such payments and the account
debtors will be protected in making such payments to the Bank. Upon the
Bank's written request, the Borrower will establish with the Bank and
maintain a lockbox account ("LOCKBOX") with the Bank and a depository
account(s) ("CASH COLLATERAL ACCOUNT") with the Bank subject to the
provisions of this subparagraph and such other related agreements as
the Bank may require, and the Borrower shall notify its account debtors
to remit payments directly to the Lockbox. Thereafter, funds collected
in the Lockbox shall be transferred to the Cash Collateral Account, and
funds in the Cash Collateral Account shall be applied by the Bank,
daily, to reduce the outstanding Obligations.
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vi. Further Assurances. By its signature hereon, the Borrower
hereby irrevocably authorizes the Bank to execute (on behalf of the
Borrower) and file against the Borrower one or more financing,
continuation or amendment statements pursuant to the UCC in form
satisfactory to the Bank, and the Borrower will pay the cost of
preparing and filing the same in all jurisdictions in which such filing
is deemed by the Bank to be necessary or desirable in order to perfect,
preserve and protect its security interests. If required by the Bank,
the Borrower will execute all documentation necessary for the Bank to
obtain and maintain perfection of its security interests in the
Collateral. If any Collateral consists of letter of credit rights,
electronic chattel paper, deposit accounts or supporting obligations
not maintained with the Bank or one of its affiliates, or any
securities entitlement, securities account, commodities account,
commodities contract or other investment property, then at the Bank's
request the Borrower will execute, and will cause the depository
institution or securities intermediary upon whose books and records the
ownership interest of the Borrower in such Collateral appears, to
execute such Pledge Agreements, Notification and Control Agreements or
other agreements as the Bank deems necessary in order to perfect,
prioritize and protect its security interest in such Collateral, in
each case in a form satisfactory to the Bank.
vii. Remedies. Upon the occurrence of any such Event of
Default and at any time thereafter, the Bank may declare all
Obligations secured hereby immediately due and payable, without further
notice, presentment, demand, declaration, protest or other requirement
of any kind, all of which are expressly waived by the Borrower. At any
time after the occurrence of any Event of Default, and irrespective of
whether the Obligations have been declared due and payable pursuant to
the immediately preceding sentence, the Bank shall have, in addition to
any remedies provided herein or in the other Loan Documents or by any
applicable law or in equity, all the remedies of a secured party under
the UCC. The Bank's remedies include, but are not limited to, the right
to (a) peaceably by its own means or with judicial assistance enter the
Borrower's premises and take possession of the Collateral without prior
notice to the Borrower or the opportunity for a hearing, (b) render the
Collateral unusable, (c) dispose of the Collateral on the Borrower's
premises, (d) require the Borrower to assemble the Collateral and make
it available to the Bank at a place designated by the Bank, (e) notify
the United States Postal Service to send the Borrower's mail to the
Bank, (f) endorse the name of the Borrower upon any and all checks,
drafts, money orders and other instruments for the payment of monies
which are payable to the Borrower and constitute proceeds of the
Collateral, (g) sign financing statements in the name of the Borrower,
or file financing statements with the Borrower's signature in any
relevant state to perfect or maintain the Bank's security interest in
any of the Collateral, (h) subrogate to all of the Borrower's
interests, rights and remedies in respect to the Collateral, (i) take
possession of an sell in a commercially reasonable manner in accordance
with applicable law or dispose of any or all of the Collateral at
public or private sale without notice or advertisement (if permitted by
law) and bid and become purchaser at such sale, and if notice of such
sale or of other action by Bank is required by applicable law, Borrower
agrees that ten (10) days notice to
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Borrower shall be sufficient, which Bank and Borrower herewith agree to
be commercially reasonable, and (j) apply the proceeds of any
disposition of the Collateral available for satisfaction of the
Obligations in the order, amounts, and manner which Bank may determine
in its sole discretion. Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold
on a recognized market, the Bank will give the Borrower reasonable
notice of the time and place of any public sale thereof or of the time
after which any private sale or any other intended disposition thereof
is to be made. The requirements of commercially reasonable notice shall
be met if such notice is sent to the Borrower at least ten (10) days
before the time of the intended sale or disposition. Expenses of
retaking, holding, preparing for disposition, disposing or the like
shall include the Bank's reasonable attorneys' fees and legal expenses,
incurred or expended by the Bank to enforce any payment due it under
this Agreement either as against the Borrower, or in the prosecution or
defense of any action, or concerning any matter growing out of or
connection with the subject matter of this Agreement and the Collateral
pledged hereunder. The Borrower waives all relief from all appraisement
or exemption laws now in force or hereafter enacted.
viii. Power of Attorney. The Borrower does hereby make,
constitute and appoint any officer or agent of the Bank as the
Borrower's true and lawful attorney-in-fact, with power to (a) endorse
the name of the Borrower or any of the Borrower's officers or agents
upon any notes, checks, drafts, money orders, or other instruments of
payment or Collateral that may come into the Bank's possession in full
or part payment of any Obligations; (b) ▇▇▇ for, compromise, settle and
release all claims and disputes with respect to, the Collateral; and
(c) sign, for the Borrower, such documentation required by the UCC, or
supplemental intellectual property security agreements; granting to the
Borrower's said attorney full power to do any and all things necessary
to be done in and about the premises as fully and effectually as the
Borrower might or could do. The Borrower hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof. This
power of attorney is coupled with an interest, and is irrevocable.
4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
The Borrower makes the following representations and warranties to the
Bank which shall be true and correct as of the date of this Agreement and will
continue to remain true and correct so long as any amount remains due under the
Note
4.1 ORGANIZATION, POWER AND AUTHORITY. The Borrower is a
corporation duly organized, validly existing and in good
standing or subsisting under the laws of the jurisdiction of
its organization, and is duly qualified as a foreign
corporation, and is in good standing, in each jurisdiction in
which such qualification is required by law, other than in
those jurisdictions as to which failure to be so qualified or
in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The
Borrower has the
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corporate power and authority to own or hold under lease
the properties it purports to own or hold under lease, to
transact the business it transacts or proposes to transact, to
execute and deliver the Loan Documents to which it is a party
and to perform the provisions thereof.
4.2 AUTHORIZATION; ETC. The Loan Documents to which it is a party
have been duly authorized by all necessary corporate action on
the part of the Borrower and each of the Loan Documents
constitute a legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with
its terms except as such enforceability may be limited by (a)
applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforceability of
creditor's rights generally, and (b) general principles of
equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The
individuals who represent themselves to the Bank as holding
one or more of the following executive officer positions with
the Borrower at the time of making a certification hereunder
are, and at such times shall be, authorized to execute and
deliver on behalf of the Borrower the certifications
contemplated under this Agreement to be delivered in the
future (each an "AUTHORIZED OFFICER").
4.3 FINANCIAL STATEMENTS; PROJECTIONS.
(a) The Borrower has delivered or caused to be delivered to
the Bank copies of the consolidating and consolidated
financial statements of the Borrower. All of said financial
statements (including in each case the related schedules and
notes) fairly present in all material respects the
consolidated financial condition of the Borrower as of the
respective dates specified on such consolidated financial
statements, and the consolidated results of operations and
cash flows for the respective periods so specified, and have
been prepared in accordance with GAAP consistently applied
throughout the periods involved, except as set forth in the
notes thereto (subject, in the case of any interim financial
statements, to the omission of notes thereto and normal
year-end adjustments).
(b) The Borrower has delivered to the Bank projections of its
anticipated financial performance for the period beginning on
January 1, 2001 and continuing through December 31, 2002 (the
"FINANCIAL PROJECTIONS"). The Financial Projections were
prepared in good faith by the Borrower based on assumptions
its management believed to be reasonable at the date of their
preparation and, in the opinion of management of the Borrower,
the underlying assumptions provide a reasonable basis for such
Financial Projections.
4.4 NO MATERIAL ADVERSE CHANGE. Since the most recent balance
sheet of the Borrower delivered to the Bank, the Borrower has
not suffered any damage, destruction or loss to any Material
part of its assets (tangible or intangible), and no event or
circumstance has occurred or exists, which individually or in
the
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aggregate has resulted or could reasonably be expected to
result in a Material Adverse Effect.
4.5 NO DEFAULTS, VIOLATIONS OR CONFLICTS; ETC. The execution,
delivery and performance by the Borrower of the Loan Documents
to which it is a party will not (a) contravene, result in any
breach of, or constitute a default under, or result in the
creation of any Lien (as hereinafter defined) in respect of
any of its property or under, corporate charter, by-laws, or
similar constituent documents, or any indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, or
any other agreement or instrument to which it is bound or by
which it or any of its properties may be bound or affected,
(b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or
ruling of any court, arbitrator or Governmental Authority
applicable to it, or (c) violate any provision of any statute
or other rule or regulation of any Governmental Authority
applicable to it, which default or violation, individually or
in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
The term "LIEN" shall mean any mortgage (other than the
Mortgage made in favor of Bank of even date herewith), pledge,
security interest, bailment, encumbrance, claim, lien, right
of set-off or charge of any kind, including any agreement to
give any of the foregoing, any conditional sale or other title
retention agreement and any lease in the nature thereof, and
the filing of or agreement to give any financing statement
under the Uniform Commercial Code.
The term "PERMITTED LIENS" means Liens (a) for current taxes
and assessments not yet due and payable; (b), if any,
reflected on or in the notes to the most recent balance sheet
of the Borrower delivered to the Bank on or prior to the
Closing Date; (c) securing the payment of taxes or charges of
Governmental Authorities not yet delinquent or being contested
in good faith by appropriate proceeding, for which adequate
reserves are maintained in accordance with GAAP; (d) in the
nature of non-exclusive licenses and sublicenses of the
Intellectual Property granted to Persons in the ordinary
course of business; (e) arising from judgments, decrees or
attachments to the extent and only so long as such judgment,
decree or attachment has not caused or resulted in an Event of
Default; (f) in favor of lessors of tangible personal property
arising under operating leases, provided that such Liens are
limited to the leased property, any improvements made thereto
and the proceeds thereof; (g) in favor of or approved in
writing by the Bank, or (h) set forth on Schedule 4.5.
4.6 TITLE TO PROPERTY; LEASES. Except as disclosed on Schedule
4.5, the Borrower has good and sufficient title to, or a valid
leasehold interest in, all of its Material properties,
including all such properties reflected in the most recent
balance sheet of the Borrower delivered to the Bank or
purported to have been acquired by the Borrower after the date
of said balance sheet (except as sold or otherwise
12
disposed of in the ordinary course of business), in each case
free and clear of all Liens, except for Permitted Liens.
4.7 LITIGATION. Except as set forth on Schedule 4.10, there are no
actions, suits, proceedings or governmental investigations
pending or, to the Borrower's knowledge, threatened against
the Borrower in any court or before any arbitrator of any kind
or before any Governmental Authority, which, individually or
in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
4.8 TAX RETURNS. The Borrower has filed all returns and reports
that are required to be filed by it in connection with any
federal, state or local tax, duty or charge levied, assessed
or imposed upon them or their properties, assets, income or
franchises or withheld by them, including unemployment, social
security and similar taxes and all of such taxes, have been
either paid or adequate reserves or other provision for the
payment thereof have been made in accordance with GAAP, except
for any non-filing of returns or reports or any non-payment of
taxes or assessments that could not individually or in the
aggregate reasonably be expected to have a Material Adverse
Effect.
4.9 EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which
the Borrower may have any liability complies in all material
respects with all applicable provisions of ERISA, including
minimum funding requirements, and (a) no "Prohibited
Transaction" (as defined under ERISA) has occurred with
respect to any such plan, (b) no "Reportable Event" (as
defined under Section 4043 of ERISA) has occurred with respect
to any such plan which would cause the Pension Benefit
Guaranty Corporation to institute proceedings under Section
4042 of ERISA, (c) the Borrower has not withdrawn from any
such plan or initiated steps to do so, and (d) no steps have
been taken to terminate any such plan. In the event that
Borrower shall institute a "defined benefit Plan" (as defined
under ERISA), the Borrower shall furnish to the Bank: (i) as
soon possible and in any event within thirty (30) days after
Borrower or a duly appointed administrator of a defined
benefit Plan knows or has reason to know that any "Reportable
Event" (as defined under ERISA) has occurred with respect to
any defined benefit Plan, a statement of the chief financial
officer of the Borrower setting forth details as to such
Reportable Event and the action which the Borrower proposes to
take with respect thereto, together with a copy of the notice
of such reportable event given to the PBCG; (ii) promptly
after the filing thereof with the United States Department of
Labor, the Internal Revenue Service or the PBCG, copies of
each annual and other report or notice with respect to each
defined benefit Plan; and (iii) promptly after receipt
thereof, a copy of any notice Borrower or any other Control
Persons may receive from the United States Department of
Labor, the Internal Revenue Service or the PBCG with respect
to any defined benefit Plan.
13
4.10 ENVIRONMENTAL MATTERS. Except as disclosed on Schedule 4.10,
the Borrower is (or, in respect of prior owned or operated
real property, was) in compliance, in all material respects,
with all Environmental Laws, including, without limitation,
all Environmental Laws in jurisdictions in which the Borrower
owns or operates, or had owned or operated, a facility or
site, stores or has stored Collateral, arranges or has
arranged for disposal or treatment of hazardous substances,
solid waste or other waste, accepts or has accepted for
transport any hazardous substances, solid waste or other
wastes. No litigation or proceeding arising under, relating to
or in connection with any Environmental Law is pending or, to
the Borrower's knowledge, threatened against the Borrower, any
real property which the Borrower holds or has held an interest
in, or any past or present operation of the Borrower that
could reasonably be expected to result in a Material Adverse
Effect. To the Borrower's knowledge, no release, threatened
release or disposal of hazardous waste, solid waste or other
wastes is occurring, or to the Borrower's knowledge has
occurred, on, under or to any real property in which the
Borrower holds any interest or performs any of its operations,
in violation of any Environmental Law that could reasonably be
expected to result in a Material Adverse Effect. As used in
this Section, "litigation or proceeding" means any demand,
claim notice, suit, suit in equity, action, administrative
action, investigation or inquiry whether brought by a
Governmental Authority or other person; "ENVIRONMENTAL LAWS"
means all provisions of laws, statutes, ordinances, rules,
regulations, permits, licenses, judgments, writs, injunctions,
decrees, orders, awards and standards promulgated by any
Governmental Authority concerning health, safety and
protection of, or regulation of the discharge of substances
into, the environment; and the terms "real property,"
"facility" and "site," when referring to real property, a
facility or site leased and not owned by the Borrower, shall
refer only to the portion of such real property, facility or
site actually or previously leased by the Borrower.
4.11 INTELLECTUAL PROPERTY. The Borrower owns or has a valid and
enforceable right to use all patents and patent rights owned
or used by it free and clear of all Liens except Permitted
Liens. To its knowledge, the Borrower owns or has a valid and
enforceable right to use all trademarks, trade names, service
marks, copyrights, and other Intellectual Property (as
hereinafter defined), technology, know-how and processes
necessary for the conduct of the Borrower's business as
currently conducted, in each case, that are Material, free and
clear of all Liens except Permitted Liens. Except as disclosed
in Schedule 4.11, the Borrower does not own any registered
patents, registered trademarks or registered copyrights nor
does the Borrower have any applications to register patents,
trademarks or copyrights that are pending.
The term "INTELLECTUAL PROPERTY" means and includes all of the
Borrower's right, title and interest in all patents, patent
applications, copyrights, copyright applications, trademarks,
trademark applications, trade names, tradestyles, service
14
marks, goodwill, computer information, computer software,
source codes, object codes and trade secrets.
4.12 USE OF PROCEEDS; MARGIN REGULATIONS. The Borrower will use the
proceeds of the Loan only for lawful purposes in accordance
with the term of this Agreement. No part of the proceeds of
the Loan will be used directly or indirectly for the purpose
of "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve
System as now and from time to time in effect, or for any
purpose which violates the provisions of the Regulations of
such Board of Governors.
4.13 SOLVENCY. As of the date hereof, and after giving effect to
the transactions contemplated by the Loan Documents, the
Borrower will have sufficient cash flow to enable it to pay
its debts as they mature and will not have an unreasonably
small amount of capital relative to the Borrower's business
and operations.
4.14 COMPLIANCE WITH LAWS. Except as set forth on Schedule 4.10,
the Borrower has complied in all material respects with all
Laws applicable to it, and to the operation of its business
(including any statute, rule or regulation relating to
employment practices and pension benefits or to environmental,
occupational and health standards and controls), except where
failure to comply could not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse
Effect.
4.15 DISCLOSURE. None of the Loan Documents contain any untrue
statement of material fact or omits to state a material fact
necessary in order to make the statements contained in this
Agreement or the Loan Documents, taken as a whole, not
misleading. There is no fact known to the Borrower which,
individually or in the aggregate with other facts known to the
Borrower, could reasonably be expected to have a Material
Adverse Effect, and which has not otherwise been fully set
forth in this Agreement, the Addendum, the Schedules hereto or
in the Loan Documents. Each of the certificates delivered or
to be delivered by the Borrower or any of its officers
pursuant to the terms of the Loan Documents will be true,
accurate and complete in all material respects as of the date
made.
4.16 BUSINESS. The Borrower is principally engaged in the research,
development, manufacture, distribution and sale of electronic
and other signal processing equipment and conducts no other
substantial businesses or activities.
4.17 PRINCIPAL PLACE OF BUSINESS. As of the date hereof, the
principal place of business of the Borrower is located at ▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇.
15
5. AFFIRMATIVE COVENANTS.
The Borrower will comply with the covenants and agreements set forth in
this Section 5 from the date of execution of this Agreement until all
Obligations have been fully paid and any commitments of the Bank to the Borrower
have been terminated.
5.1 BOOKS AND RECORDS. The Borrower will maintain accurate and
complete books and records. The Borrower will give
representatives of the Bank access, upon request and during
normal business hours in accordance with the provisions of
this Section 5.1, to its books and records of account,
including permission to examine, copy and make abstracts from
any of such books and records and such other information as
the Bank may from time to time reasonably request, and the
Borrower will make available to the Bank, for examination
during normal business hours and in accordance with the
provisions of this Section 5.1, copies of any reports,
statements or returns which it may make or file with any
governmental department, bureau or agency, federal or state.
Audits shall be at the expense of the Borrower. So long as
neither an Event of Default exists nor the Bank reasonably
believes that there has been a Material adverse change in the
business or financial condition of the Borrower, the Bank will
(i) give reasonable written notice at least one (1) Business
Day prior to conducting any examination under this Section
5.1, (ii) not require the Borrower to pay for more than one
(1) audit per annum, and (iii) not contact the Borrower's
customers unless required to do so by applicable law, rules,
or regulations or its own internal policies. Except as
permitted under Section 12.11 hereof in connection with an
assignment or grant of a participation interest in the Loan or
as hereafter provided, the Bank will treat as confidential all
non-public information contained in such books and records;
provided, however, that (a) the Bank will be permitted to
disclose any such confidential information or any other
information pertaining to the Borrower that is in the
possession or control of the Bank or as may be required or
requested by its applicable Governmental Authorities, and (b),
if the Bank is required to disclose confidential information
pursuant to a court order, subpoena or similar process, prior
to disclosure the Bank will (i) promptly provide the Borrower
with a copy of the court order or subpoena, (ii) cooperate
with the Borrower at the Borrower's expense in obtaining a
protective or similar order, and (iii) in any event, disclose
only such confidential information as the Bank, with the
advice of its counsel, shall deem necessary to comply with
such court order or subpoena.
5.2 FINANCIAL REPORTS. The Borrower shall deliver to the Bank the
following financial and other reports of the Borrower:
(a) Within ninety (90) days of the Borrower's fiscal year end
(for each year under this Agreement), a Report on Form 10-K
with all accompanying financial reports and statements;
(b) Within one hundred twenty (120) days of the Borrower's
fiscal year end (for each year under this Agreement), copies
of the Borrower Annual Report to stockholders;
16
(c) Within sixty (60) days of the end of each fiscal quarter,
quarterly reports on Form 10-Q, current reports on Form 8-K,
proxy statements and any other reports filed with or filings
made with the Securities and Exchange Commission. With respect
to financial statements included in the reports on Form 10-Q,
the chief financial officer of the Borrower shall certify same
complete and correct, which certificate shall include a
statement (i) of his examination (which shall include a review
of the relevant provisions of this Agreement), (ii) that the
Company is in compliance with all financial covenants
contained in this Agreement, and (iii) indicating whether his
examination has disclosed the existence of any condition or
event which constitutes an Event of Default, and, if so,
specifying the nature and period of existence thereof;
(d) Within sixty (60) days of the end of the Borrower's fiscal
year end (for each year under this Agreement), an accounts
recivable aging report in a form reasonably satisfactory to
Bank;
(e) Within sixty (60) days of the end of each fiscal quarter,
quarterly backlog reports (which shall include shipping dates)
for each of the Borrower and Filtran; and
(f) Within ten (10) days after the Bank's request therefor,
such additional information regarding the financial condition
and affairs of the Borrower as the Bank shall reasonably
require.
5.3 FINANCIAL PROJECTIONS. The Borrower will deliver to the Bank
projections, forecasts, financial pro formas and such other
information reasonably requested by the Bank from time to time
that is in the nature of information presented to the
Borrower's Board of Directors or is in the nature of
information disclosed to any of the Borrower's existing
stockholders or prospective investors, which at a minimum
shall include monthly financial projections for the fiscal
year ending December 31, 2001, and quarterly financial
projections for each year thereafter until all Obligations
have been fully paid and any commitments of the Bank to the
Borrower have been terminated.
5.4 PAYMENT OF TAXES AND OTHER CHARGES. The Borrower will pay and
discharge all Obligations, when due, all indebtedness and all
taxes, assessments, charges, levies and other liabilities
imposed upon them, their income, profits, property or
business, except those which currently are being contested in
good faith by appropriate proceedings and for which the
Borrower will have set aside adequate reserves in accordance
with GAAP or made other adequate provision with respect
thereto acceptable to the Bank in its reasonable discretion;
provided, however, that the Borrower need not pay any such tax
or assessment or claims if the nonpayment of all such taxes
and assessments and claims in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
17
5.5 MAINTENANCE OF EXISTENCE, OPERATION AND ASSETS. The Borrower
will do all things reasonably necessary to maintain, renew and
keep in full force and effect its organizational existence and
all rights, permits and franchises necessary to enable it to
continue its business; continue in operation in substantially
the same manner as at present; maintain, preserve and keep all
its properties, equipment and assets reasonably necessary for
its business in good repair, working order and condition,
reasonable wear and tear excepted, and make, or cause to be
made, all necessary or appropriate repairs, renewals,
replacements, substitutions, additions, betterments and
improvements thereto so that the efficiency of all such
properties and assets shall at all times be properly preserved
and maintained.
5.6 PRESERVATION OF PROPERTY; INSURANCE. The Borrower shall keep
and maintain all of its properties in good order and repair;
and will maintain with financially sound and reputable
insurers, as reasonably determined in good faith by the
Borrower, insurance with respect to its property and business
against such casualties and contingencies, of such types and
in such amounts as is customary for established companies
engaged in the same or similar business and similarly
situated, and will deliver to the Bank at least once each year
evidence of insurance in form satisfactory to the Bank.
5.7 COMPLIANCE WITH LAWS. The Borrower will comply in all material
respects with all Laws applicable to it and to the operation
of its business (including any statute, rule or regulation
relating to employment practices and pension benefits or to
environmental, occupational and health standards and
controls), except where failure to comply could not reasonably
be expected to have, either individually or in the aggregate,
a Material Adverse Effect.
5.8 ADDITIONAL REPORTS. The Borrower will deliver written notice
to the Bank promptly after receiving notice or knowledge of
the occurrence of any of the following, together with a
description of the action that the Borrower is taking or
proposes to take with respect thereto: (a) an Event of Default
or an event or circumstance that with the passage of time,
delivery of notice or both would constitute an Event of
Default, (b) any Reportable Event or Prohibited Transaction
with respect to any Employee Benefit Plan(s) (as defined in
ERISA); (c) any event that could reasonably be expected to
have a Material Adverse Effect; or (d) an Equity Event (as
hereinafter defined).
The term "EQUITY EVENT" means the closing and completion of a
private placement of common or preferred stock of the Borrower
or equity securities convertible into preferred or common
stock of the Borrower, as the case may be, to professional or
institutional investors or other investors who may lawfully
purchase such securities, including, but not limited to, then
existing owners of the Borrower's equity securities, resulting
in any net proceeds to the Borrower upon commercially
reasonable terms prevailing in the marketplace at the time and
negotiated at arm's length.
18
5.9 BOARD REPORTS; OBSERVER RIGHTS. The Borrower will deliver to
the Bank copies of all regular periodic reports provided by
management of the Borrower to its Board of Directors. The Bank
shall be entitled to attend meetings of the Board of Directors
of the Borrower for the purpose of observing such proceedings,
unless such attendance would be inappropriate as determined by
the Chairman of the Board of Directors of the Borrower.
5.10 BANK ACCOUNTS. The Borrower will maintain all of its bank
accounts for corporate and related business at the Bank.
5.11 USE OF PROCEEDS. The Borrower will use the proceeds of the
Loan only for lawful purposes in accordance with the uses
permitted hereunder and such use shall not contravene any
applicable Law.
5.12 OPINION OF BORROWER'S COUNSEL. The Borrower will cause its
counsel to deliver to the Bank on or prior to the Closing Date
an opinion in form and substance reasonably satisfactory to
the Bank and its counsel.
5.13 LITIGATION. The Borrower shall promptly notify the Bank of any
litigation, actions, proceedings, claims or investigations
pending or threatened against the Borrower or any of its
Subsidiaries, wherein claimant seeks to recover in excess of
$100,000.00 and of the entry of any judgment in excess of
$100,000.00 against the Borrower or the entry of any Liens
securing any obligation or obligations in excess of
$100,000.00 (individually or in the aggregate), other than
Permitted Liens, against any of its assets.
5.14 RELIANCE UPON COSTA RICA FACILITIES. If required in order to
avoid an Event of Default under Section 7.1(a), Borrower
agrees to apply any monies or proceeds from the Costa Rica
Facilities toward the payment of its Obligations due
hereunder.
6. NEGATIVE COVENANTS.
The Borrower will comply with the covenants and agreements set forth in
this Section 6 from the date of execution of this Agreement until all
Obligations have been fully paid and any commitments of the Bank to the Borrower
have been terminated.
6.1 INDEBTEDNESS. The Borrower shall not create, incur or assume
any liability for borrowed money in excess of an aggregate of
Two Hundred Thousand Dollars ($200,000.00); provided, however,
that, subject to applicable financial covenants of the
Borrower in this Agreement, Borrower may incur liabilities up
to Five Hundred Thousand Dollars ($500,000.00) in the
aggregate per annum for the purchase of new machinery and
equipment through direct financing, lease financing or other
means, except liabilities heretofore or hereinafter incurred
in favor of the Bank.
19
6.2 OBLIGATIONS. The Borrower shall not assume, guarantee, endorse
or otherwise become liable, in connection with the obligations
of any person, firm or corporation except:
(i) Liabilities resulting from product warranties made in
the ordinary course of business;
(ii) Liabilities resulting from its endorsement of items
or instruments for deposit or collection in the
ordinary course of business; and
(iii) Assumptions, guarantees, endorsements or other
liabilities for obligations which in the aggregate do
not exceed Two Hundred Thousand Dollars ($200,000.00)
at any time outstanding, except for a guaranty of the
lease obligations relating to the Costa Rica
Facilities, which obligations shall not exceed
$500,000.00, as more particulalry set forth on
Schedule 6.2.
6.3 SALE/LEASE OF PROPERTY. The Borrower shall not sell, lease,
abandon, or otherwise dispose of any part of its properties or
assets, except (i) sales of finished goods made to a person,
firm or corporation in the ordinary course of business in
commercially reasonable and bona fide arm's length
transactions for fair consideration, (ii) dispositions of raw
materials and finished goods inventory deemed to be obsolete
and in respect of which a charge to income has been reflected
in the Borrower's financial statements, or (iii) the factoring
of certain foreign receivables in the ordinary course of the
Borrower's business, unless (1) the Bank is provided at least
ten (10) days written notice of such sale, lease or
disposition, and (2) the entire amount of proceeds of such
sale, lease or disposition is paid to the Bank to reduce the
principal amount outstanding under the Loan.
6.4 OTHER SALE/LEASE OF PROPERTY. The Borrower shall not purchase,
lease, or otherwise acquire the properties, assets or real
estate, or any interest therein, of any person, firm or
corporation, except purchases, leases or other acquisitions of
inventory and equipment made in the ordinary course of
business in bona fide arm's length transactions.
6.5 BUSINESS COMBINATION. The Borrower shall not consolidate with,
merge into, or participate in any joint venture with, any
person, firm or corporation, or permit any person, firm or
corporation to consolidate with, merge into or participate in
any joint venture with the Borrower without the consent of
Bank.
6.6 SUBSIDIARY. The Borrower shall not create or acquire, or
permit the creation or acquisition of, any Subsidiary without
the consent of the Bank, which shall not unreasonably be
withheld or delayed.
20
6.7 SECURITIES. The Borrower shall not purchase or acquire the
obligations, securities or stock of, or make loans, advances
or capital contributions to, any person, firm or corporation,
except:
(i) Marketable direct obligations of the United States of
America;
(ii) Commercial paper issued by corporations conducting
substantially all of their business in the United
States of America, maturing within 180 days from the
date of the original issue thereof, and rated "prime"
by the National Credit Office;
(iii) Bonds of any state, county, or municipality of the
United States of America, (w) which mature within two
years from the date of acquisition thereof, and (x)
which are not in default as to principal or interest,
and (y) which are rated Aa, or better, by ▇▇▇▇▇'▇
Investors Service, and (z) the interest of which is
exempt from federal income tax;
(iv) Customer's notes, chattel paper, or the like received
as non-cash proceeds of the sale of any inventory in
the ordinary course of business;
(v) Certificates of Deposit and Repurchase Agreements;
(vi) Repurchase of its common stock, not to exceed in the
aggregate the sum of $1,000,000 during the term of
this Agreement; or
(vii) Investments described on Schedule 6.7 hereto, which
investments shall not exceed in the aggregate at any
one time the sum of $2,000,000.
6.8 LOANS TO INSIDERS. The Borrower shall not make any new loans
or advances (individually or in the aggregate exceeding at any
one time the sum of $100,000.00) to any of its officers,
directors or shareholders, or to any other person, firm or
entity.
6.9 CAPITAL STOCK. The Borrower shall not alter its existing
capital stock structure by elections of new classes of stock
or otherwise.
6.10 RECEIVABLES. The Borrower shall not sell, assign, transfer,
discount or otherwise dispose of any account receivable or any
note receivable with or without recourse, except for
collection without recourse in the ordinary course of
business.
6.11 MERGER OR TRANSFER OF ASSETS. The Borrower shall not: (a)
merge or consolidate with or into any Person, or (b) lease,
sell, transfer or otherwise dispose of its property, assets
and business, whether now owned or hereafter acquired, except
in the ordinary course consistent with past practice or as
contemplated in the financial projections delivered to the
Bank prior to the Closing Date.
21
6.12 CHANGE IN BUSINESS, MANAGEMENT OR EQUITY OWNERSHIP; CHANGE OF
CONTROL.
(a) The Borrower shall not engage in any business other than
the business specified in Section 4.16, without the prior
written consent of the Bank.
(b) The Borrower shall not make, suffer or permit any material
change (i) in the composition of its current executive
management if, as a result of such change, the person then
serving as Chief Executive Officer of the Borrower would cease
serving in such capacity, unless such change has been approved
by one of the individuals, or a majority of the individuals,
if more than two, who are then serving on the Borrower's Board
of Directors as the designees or representatives of
institutional or professional investors that hold shares of
the capital stock of the Borrower; or (ii) in the ownership of
its capital stock or other similar equity interests, whether
through the change of ownership of presently outstanding
shares or interests or by means of newly issued shares or
interests, except pursuant to (A) Section 6.7, (B) an
underwritten public offering of the Borrower's common stock
that is registered under the Securities Act of 1933, as
amended, or (C) an Equity Event that does not result in a
Change of Control.
(c) The Borrower will not permit or suffer to occur a Change
of Control and will not execute any agreement or letter of
intent with respect to any proposed transaction or event or
series of transactions or events which, when fully performed
by the parties thereto, would result in a Change of Control.
6.13 DIVIDENDS. The Borrower shall not declare or pay any cash
dividends on or make any cash distribution with respect to any
class of its equity or ownership or membership interests which
would result in a breach of the financial covenants set forth
in Section 6.15, or purchase, redeem, retire or otherwise
acquire any of its equity or ownership or membership interests
other than in connection with employee repurchase agreements
entered into by the Borrower pursuant to (i) an Equity Event
or (ii) the grant of stock options, stock grants or options or
grants to acquire ownership or membership interests issued to
employees under an existing plan approved by the Borrower's
Board of Directors (a copy of which has been made available to
the Bank).
6.14 INTELLECTUAL PROPERTY. The Borrower shall not enter into any
agreement or undertaking pursuant to which the Borrower
assigns for security or grants or agrees to assign for
security or grant to any Person a lien or security interest in
or otherwise encumber any of the Borrower's present and future
right, title and interest in and to (a) any Intellectual
Property, (b) the registration of any Intellectual Property,
(c) the right to ▇▇▇ for past, present and future
infringements of any Intellectual Property, (d) the proceeds
of any Intellectual Property, including, without limitation,
license royalties and proceeds of infringement suits, or (e)
the goodwill associated with any Intellectual Property;
provided, however, nothing herein shall restrict or prohibit
the Borrower from granting licenses of any
22
Intellectual Property in the ordinary course of business that
are not for the purpose of granting security. The Borrower
will not enter into any agreement, covenant or undertaking
with any Person the terms of which would restrict or prohibit
the Borrower from, or would be violated upon, granting or
assigning for security to the Bank a lien or security interest
in or otherwise encumbering in favor of the Bank or assigning
outright to the Bank any Intellectual Property or other rights
and benefits described in the preceding sentence. The Borrower
will not abandon any Material Intellectual Property
registration without the written consent of the Bank. The
Borrower will maintain the Intellectual Property in full force
and effect until all of the Obligations are satisfied in full
except for Intellectual Property rights that expire
automatically upon completion of their terms or as otherwise
provided in the immediately preceding sentence. Upon request
of the Bank after the occurrence and during the continuance of
an Event of Default, the Borrower will deliver to the Bank a
description of all such Intellectual Property existing at such
time.
6.15 FINANCIAL COVENANTS. Without the prior written consents of the
Bank, the Borrower shall not cause, suffer or permit: (1) the
Leverage Ratio to exceed 1.1:1.0 at the end of any
quarter-annual period during the Borrower's fiscal year; (2)
the Tangible Net Worth of the Borrower to be less than
$14,500,000.00 at the end of any quarter-annual period during
the Borrower's fiscal year, except that this threshold shall
be increased on a cumulative basis each quarter in an amount
equal to fifty percent (50%) of the net income from the
preceding quarter (with no change to the then current
threshold if the net income for the preceding quarter is
negative); or (3) fail to maintain at the end of each
quarter-annual period during the Borrower's fiscal year a
minimum Fixed Charge Coverage Ratio for the preceding four
fiscal quarters of at least 1.25:1.00. Each of the foregoing
financial covenants will be tested for compliance at the end
of each calendar month or quarter, as applicable, and the
Borrower will report its compliance or non-compliance
therewith to the Bank in accordance with the provisions of
Section 5.2 of this Agreement.
6.16 FILTRAN RESTRICTIONS. Borrower shall not assign,
transfer, loan or otherwise distribute any funds, monies or
property of any kind to Filtran, unless such monies and/or
property are transferred, lent, distributed or assigned (i) in
the ordinary course of business, and (ii) as part of the
vendor/trade relationship between Borrower and Filtran.
Notwithstanding the foregoing, in no event shall any of the
proceeds of the Loan be transferred, assigned, lent or
otherwise distributed to Filtran.
23
7. EVENTS OF DEFAULT; REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following will
be deemed to be an "EVENT OF DEFAULT":
(a) Payment Default. The Borrower's failure to pay, when due,
on demand or at maturity (whether stated or by acceleration),
as the case may be, any payment of principal, interest or
other charges due and owing to the Bank under this Loan
Agreement or the Note, which breach remains uncured for a
period of ten (10) days from the date such payment is due.
(b) Covenant Default. The Borrower shall either (i) default in
the performance of, or violate any of, the covenants or
agreements contained in Sections 5. or 6., or (ii) default in
the performance of, or violate any of the other covenants or
agreements contained in this Agreement (other than the
Obligation to pay principal and interest on the Note, which
shall be governed by Section 7.1(a), or those contained in
Sections 5. or 6.) and, if the same are capable of being
cured, such default or violation shall continue uncured for a
period of thirty (30) consecutive calendar days after written
notice thereof is given to the Borrower by the Bank.
(c) Breach of Warranty. Any Financial Statement,
representation, warranty or certificate made or furnished by
the Borrower to the Bank in connection with this Agreement
shall be false, incorrect or incomplete in any Material
respect when made.
(d) Bankruptcy or Insolvency. A proceeding shall have been
instituted in a court having jurisdiction over the Borrower
seeking a decree or order for relief in respect of Borrower in
an involuntary case under the Bankruptcy Code or any other
applicable bankruptcy, insolvency reorganization or other
similar law and such involuntary case shall remain undismissed
or unstayed and in effect for a period of thirty (30)
consecutive calendar days, or the Borrower shall commence a
voluntary case under any such law or consent to the
appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator, conservator (or other similar
official).
(e) Other Default. The occurrence of an Event of Default as
defined in the Note or any of the other Loan Documents,
subject to any applicable cure periods therein.
(f) Default on Guarantees. A default with respect to any
indebtedness of any Affiliate for which Borrower has
guaranteed the payment of such indebtedness, if the effect of
such default is to cause or permit the acceleration of such
debt.
24
(g) Entry of Judgment. The entry of a final judgment for money
damages exceeding One Hundred Thousand Dollars ($100,000.00)
against the Borrower and the failure of the Borrower to
discharge the judgment within ten (10) consecutive calendar
days after the entry of such judgment.
(h) Material Adverse Effect. The occurrence of any event or
circumstance or any combinations of events or circumstances
that alone or taken together results in a Material Adverse
Effect.
(i) Adverse Change in Business/Financial Condition. If, in the
good faith opinion of the Bank, there is any Material adverse
change in the Borrower's business or financial condition or if
the Bank otherwise reasonably deems itself insecure.
7.2 REMEDIES. Upon the occurrence of an Event of Default described
in Section 7.1, the principal and accrued interest, all other
amounts due and owing on the Loan (if not then due and
payable), and all other Obligations owing to Bank shall become
due and payable immediately, without presentment, demand,
notice, protest, declaration or any other requirement of any
kind, all of which the Borrower expressly waives. Upon the
occurrence of an Event of Default, and irrespective of whether
the Loan has been declared due and payable pursuant to the
immediately preceding sentence, the Bank will have all rights
and remedies specified in this Agreement, in the Note and
other Loan Documents, and all rights and remedies (which are
cumulative and not exclusive) available under applicable law
or in equity. Upon the occurrence of an Event of Default, the
Bank may notify any Persons who are account debtors of the
Borrower to submit all payments in respect of the Borrower's
accounts receivable directly to the Bank and shall provide
written notice to the Borrower that it has done so. Upon the
occurrence of an Event of Default, the Bank's duty to make any
further loans pursuant to this Agreement or otherwise shall
immediately cease.
7.3 RIGHTS OF SET-OFF. The Borrower and any Guarantor hereby grant
to Bank a continuing lien, security interest and right of
setoff as security for all liabilities and obligations to
Bank, whether now existing or hereafter arising, upon and
against all deposits, credits, collateral and property, now or
hereafter in the possession, custody, safekeeping or control
of Bank or any entity under the control of Fleet National Bank
and its successors and assigns or in transit to any of them.
At any time, without demand or notice, (any such notice being
expressly waived by Borrower) Bank may set off the same or any
part thereof and apply the same to any liability or obligation
of Borrower and any Guarantor even though unmatured and
regardless of the adequacy of any other collateral securing
the Loan. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS
RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH
RESPECT TO SUCH
25
DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER ARE HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
8. CONDITIONS.
The closing of the Loan (the "CLOSING") shall take place at such place
and on such date as the Borrower and the Bank shall mutually agree (the "CLOSING
DATE"). The Bank's obligation to make any advance or fund any draw under any
Loan is subject to the following conditions as of the date of the advance:
8.1 NO EVENT OF DEFAULT. No Event of Default or fact, event or
circumstance which with the passage of time, provision of
notice or both would constitute an Event of Default shall have
occurred and be continuing.
8.2 AUTHORIZATION DOCUMENTS. The Bank will have been furnished
certified copies of resolutions of the board of directors
authorizing the execution of this Agreement, the Note, and
other Loan Documents, or other proof of authorization
satisfactory to the Bank.
8.3 RECEIPT OF LOAN DOCUMENTS. The Bank will have received the
Loan Documents, and such other instruments and documents that
the Bank may reasonably request in connection with the
transactions provided for in this Agreement.
8.4 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Borrower to the Bank will be true and
correct in all material respects as of the Closing Date and in
all material respects thereafter, except for those
representations and warranties that speak as of a specific
date, including, but not limited to, the representations and
warranties pertaining to financial statements of the Borrower
dated prior to such date, which representations and warranties
shall be true and correct as of such date.
8.5 NO LITIGATION. No litigation and no proceeding nor
investigation by or before any court, public body, agency or
authority is impending or threatened, of which either party is
aware, which may have a Material Adverse Effect.
8.6 PAYMENT OF FEES. The Borrower will have paid to the Bank the
Counsel Fee.
8.7 ORGANIZATIONAL DOCUMENTS. The Bank will have received the
following documents:
(a) Duly executed and delivered by the Borrower, in a form
reasonably satisfactory to the Bank, each of the following:
(i) Term Loan and Security Agreement;
(ii) Term Loan Note;
(iii) First Mortgage and Security Agreement;
26
(iv) Absolute Assignment of Leases and Rents;
(v) Environmental Indemnity Agreement; and
(vi) Environmental Affidavit.
(b) A ceritified copy of the resolutions of the Board of
Directors of the Borrower in a form satisfactory to the Bank,
authorizing the execution, delivery and performance of the
Loan Documents, the transactions contemplated by such
documents and all such other and further actions in connection
with this Agreement as designated officers of the Borrower may
deem necessary and proper;
(c) Certificates by the Secretary of the Borrower as to the
incumbency and signatures of the officers of the Borrower
designated to sign the Loan Documents;
(d) Copy, certified by the Secretary of the Borrower, of its
Certificate of Incorporation and Bylaws; and
(e) Certificate from the Secretary of the State of Delaware as
to the good standing of the Borrower.
8.8 LIENS. Proof, satisfactory to the Bank in form and substance,
of the satisfaction, termination and discharge of any Liens,
other than Permitted Liens.
8.9 SECURED CREDITOR INSURANCE. A secured creditor insurance
policy, with coverage acceptable to the Bank and naming the
Bank as the insured, shall be in full force and effect with
the entire premium being paid in advance and in-full by the
Borrower.
9. EXPENSES.
The Borrower will pay to the Bank, not sooner than five (5) calendar
days after the Closing Date, and thereafter on demand, all reasonable and
necessary documented costs and expenses, including reasonable fees and expenses
of counsel, expenses for auditors, appraisers and environmental consultants,
lien searches, recording and filing fees and taxes, incurred by the Bank in
connection with (a) the preparation, negotiation and delivery of this Agreement
and the other Loan Documents, (b) any amendments, amendments and restatements or
other modifications to this Agreement or the other Loan Documents incurred
subsequent to the Closing Date, and (c) the Loan or instituting, maintaining,
preserving, enforcing and foreclosing the security interest in any of the
collateral securing the Loan, whether through judicial proceedings or otherwise.
27
10. USURY.
All agreements between Borrower and the Bank are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to the Bank for the use or the
forbearance of the indebtedness evidenced hereby exceed the maximum permissible
under applicable law. As used herein, the term "applicable law" shall mean the
law in effect as of the date hereof provided, however, that in the event there
is a change in the law which results in a higher permissible rate of interest,
then this Loan Agreement shall be governed by such new law as of its effective
date. In this regard, it is expressly agreed that it is the intent of Borrower
and Bank in the execution, delivery and acceptance of this Loan Agreement to
contract in strict compliance with the laws of the State of New Jersey from time
to time in effect. If under or from any circumstances whatsoever, fulfillment of
any provision hereof or of any of the Loan Documents at the time of performance
of such provision shall be due, shall involve transcending the limit of such
validity prescribed by applicable law, then the obligation to be fulfilled shall
automatically be reduced to the limits of such validity, and if under or from
circumstances whatsoever Bank should ever receive as interest an amount which
would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal balance evidenced
hereby and not to the payment of interest. This provision shall control every
other provision of all agreements between Borrower and the Bank.
11. INCREASED COSTS.
Within thirty (30) calendar days following written demand, together
with the written evidence of the justification therefore (including in
reasonable detail, the calculation thereof), the Borrower will pay to the Bank,
all direct increased costs incurred, and any losses suffered or increased
payments made by the Bank as a consequence of making the Loan, by reason of any
change in law or regulation or the interpretation of any law or regulation
imposing any reserve, deposit, allocation of capital or similar requirement
(including without limitation, Regulation D of the board of Governors of the
Federal Reserve System) on the Bank, its holding company or any of their
respective assets.
12. MISCELLANEOUS.
12.1 NOTICES. All notices, demands, requests, consents, approvals
and other communications required or permitted hereunder must
be in writing and will be effective upon receipt if delivered
personally to such party, or by nationally recognized
overnight courier service, to the address set forth below or
to such other address as any party may give to the other in
writing for such purpose:
To the Bank: To the Borrower:
Fleet National Bank Merrimac Industries, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
28
12.2 PRESERVATION OF RIGHTS. No delay or omission on the part of
the Bank to exercise any right or power arising hereunder will
impair any such right or power, or be considered a waiver of
any such right or power or any acquiescence therein, nor will
the action or inaction of the Bank impair any right or power
arising hereunder. The Bank's rights and remedies hereunder
are cumulative and not exclusive of any other rights or
remedies which the Bank may have under other agreements, at
law or in equity.
12.3 ILLEGALITY. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.
12.4 CHANGES IN WRITING. No modification, amendment or waiver of
any provision of this Agreement nor consent to any departure
by the Borrower therefrom, will in any event be effective
unless the same is in writing and signed by the Bank and, in
the case of amendments and modifications, by the Borrower, and
then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No
notice to or demand on the Borrower in any case will entitle
the Borrower to any other or further notice or demand in the
same, similar or other circumstance.
12.5 ENTIRE AGREEMENT. This Agreement (including the documents and
instruments referred to herein) constitutes the entire
agreement and supersedes all other prior agreements and
understandings, both written and oral, between the parties
with respect to the subject matter hereof.
12.6 SIGNATURES; COUNTERPARTS. This Agreement may be signed in any
number of counterpart copies and by the parties hereto on
separate counterparts and delivered by telecopier, but all
such copies shall constitute one and the same instrument.
12.7 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon
and inure to the benefit of the Borrower and the Bank and
their respective successors and assigns; provided, however,
that the Borrower may not assign this Agreement in whole or in
part without the prior written consent of the Bank, and the
Bank, at any time, may assign this Agreement in whole or in
part in accordance with Section 12.11 hereof.
12.8 INTERPRETATION. In this Agreement, unless the Bank and the
Borrower otherwise agree in writing, the singular includes the
plural and the plural the singular; words importing any gender
include the other genders; references to statutes are to be
construed as including all statutory provisions consolidating,
amending or replacing the statute referred to; the word "or"
shall be deemed to include "and/or," the words "including,"
"includes" and "include" shall be deemed to be
29
followed by the words "without limitation"; references to
articles, sections (or subdivisions of sections), schedules or
exhibits are to those of this Agreement unless otherwise
indicated; and references to agreements and other contractual
instruments shall be deemed to include all subsequent
amendments and other modifications to such instruments, but
only to the extent such amendments and other modifications are
not prohibited by or are entered into in accordance with the
terms of this Agreement. Section headings in this Agreement
are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Unless otherwise specified in this Agreement, all accounting
terms shall be interpreted, and all accounting determinations
shall be made, in accordance with GAAP. If this Agreement is
executed by more than one party as Borrower, the obligations
of such persons or entities will be joint and several.
12.9 INDEMNITY. The Borrower agrees to indemnify each of the Bank,
its directors, officers and employees and each legal entity,
if any, which controls the Bank (the "INDEMNIFIED PARTIES")
and to hold each Indemnified Party harmless from and against
any and all claims, damages, losses, liabilities and expenses
(including, without limitation, all reasonable fees of counsel
and all reasonable expenses of litigation or preparation
therefor) which any Indemnified Party may incur or which may
be asserted against any Indemnified Party in connection with
or arising out of the matters referred to in this Agreement or
in the other Loan Documents by any person, entity or
Governmental Authority (including any person or entity
claiming derivatively on behalf of the Borrower), whether (a)
arising from or incurred in connection with any breach of a
representation, warranty or covenant by the Borrower, or (b)
arising out of or resulting from any suit, action, claim,
proceeding or governmental investigation, pending or
threatened, whether based on statute, regulation or order, or
tort, or contract or otherwise, before any court or
Governmental Authority, which arises out of or relates to this
Agreement, any other Loan Document, or the use of the proceeds
of the Loan; provided, that the foregoing indemnity agreement
shall not apply to, and the Borrower shall not be liable for,
claims, damages, losses, liabilities and expenses to the
extent such claims, damages, losses, liabilities and/or
expenses are proximately caused by an Indemnified Party's
gross negligence, reckless disregard or willful misconduct.
The indemnity agreement contained in this Section shall
survive the termination of this Agreement, payment of any Loan
and assignment of any rights hereunder. The Borrower may
participate at its expense in the defense of any such action
or claim.
12.10 TERMINATION; REINSTATEMENT. Except as otherwise provided in
Section 9 and Section 12.9 and the other indemnification
obligations and waivers under the Loan Documents, this
Agreement will terminate upon satisfaction of the following
events: (a) payment to the Bank in full (unconditionally and
indefeasibly) of all monetary obligations due hereunder and
under the Loan Documents, and (b) the termination of the
Bank's commitment to lend under the Loan; provided, however,
that this Agreement and the other Loan Documents
30
will, to the maximum extent allowed by applicable law, be
reinstated and the Obligations correspondingly increased (as
though such payment(s) had not been made) if at any time any
amount received by the Bank in respect of any Obligations is
rescinded or must otherwise be restored, refunded or returned
by the Bank to the Borrower or any other person or entity (i)
upon, or as a result of, the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Borrower or
(ii) upon, or as a result of, the appointment of any receiver,
intervenor, conservator, trustee or similar official for the
Borrower or for any substantial part of the assets of the
Borrower.
12.11 ASSIGNMENTS AND PARTICIPATION. At any time, without any notice
to the Borrower, the Bank may sell, assign, transfer,
negotiate, grant participation in, or otherwise dispose of all
or any part of the Bank's interest in the Loan. The Borrower
hereby authorizes the Bank to provide, without any notice to
the Borrower, any information concerning the Borrower,
including information pertaining to the Borrower's financial
condition, business operations or general creditworthiness, to
any person or entity not a competitor of Borrower which may
succeed to or participate in all or any part of the Bank's
interest in the Loan, provided, that such person or entity
agrees to maintain the confidentiality of such information in
accordance with customary banking practices.
12.12 PLEDGE TO FEDERAL RESERVE. Bank may at any time pledge or
assign all or any portion of its rights under the loan
documents (including any portion of the Note) to any of the
twelve (12) Federal Reserve Banks originated under Section 4
of the Federal Reserve Act, 12 U.S.C. Section 341. No such
pledge or assignment or enforcement thereof shall release Bank
from its obligations under any of the Loan Documents.
12.13 REPLACEMENT OF NOTE. Upon receipt of an affidavit of an officer
of Bank as to the theft, destruction or mutilation of the Note
or any other security document which is not of public record,
and, in the case of any such loss, theft, destruction or
mutilation, upon cancellation of such Note or other security
document, Borrower will issue, in lieu thereof, a replacement
note or other security document in the same principal amount
thereof and otherwise like tenor.
12.14 COLLATERAL PLEDGE. Bank may transfer Collateral into its name
or that of its nominee and may receive the income and any
distributions thereon and hold the same as Collateral for the
obligations due under this Agreement or the other Loan
Documents , or apply the same to any obligations due under
this Agreement or the Loan Documents, whether or not a default
or Event of Default has occurred.
12.15 GOVERNING LAW.
THIS AGREEMENT HAS BEEN DELIVERED TO AND ACCEPTED BY THE BANK
AND WILL BE DEEMED TO BE MADE IN ▇▇▇ ▇▇▇▇▇ ▇▇
▇▇
▇▇▇ ▇▇▇▇▇▇. THIS AGREEMENT WILL BE INTERPRETED AND THE RIGHTS
AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW JERSEY, EXCLUDING ITS
CONFLICT OF LAWS RULES.
12.16 CHOICE OF FORUM.
THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT SEATED IN MONMOUTH
COUNTY OR THE DISTRICT OF NEW JERSEY, AND CONSENTS THAT ALL
SERVICE OF PROCESS BE SENT PREPAID BY NATIONALLY RECOGNIZED
OVERNIGHT COURIER SERVICE DIRECTED TO THE BORROWER AT THE
BORROWER'S ADDRESS SET FORTH HEREIN AND SERVICE SO MADE WILL
BE DEEMED TO BE COMPLETED ON THE BUSINESS DAY AFTER DEPOSIT
WITH SUCH COURIER; PROVIDED THAT NOTHING CONTAINED IN THIS
AGREEMENT WILL PREVENT THE BANK FROM BRINGING ANY ACTION,
ENFORCING ANY AWARD OR JUDGMENT OR EXERCISING ANY RIGHTS
AGAINST THE BORROWER INDIVIDUALLY, AGAINST ANY SECURITY OR
AGAINST ANY PROPERTY OF THE BORROWER WITHIN ANY OTHER COUNTY,
STATE OR OTHER FOREIGN OR DOMESTIC JURISDICTION. THE BANK AND
THE BORROWER AGREE THAT THE VENUE PROVIDED ABOVE IS THE MOST
CONVENIENT FORUM FOR BOTH THE BANK AND THE BORROWER. THE
BORROWER WAIVES ANY OBJECTION TO VENUE AND ANY OBJECTION BASED
ON A MORE CONVENIENT FORUM IN ANY ACTION INSTITUTED UNDER THIS
AGREEMENT.
12.17 WAIVER OF JURY TRIAL.
THE BORROWER AND THE BANK (BY ACCEPTANCE OF THIS LOAN
AGREEMENT) MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS LOAN AGREEMENT OR ANY OTHER LOAN DOCUMENTS
CONTEMPLATED TO BE EXECUTED IN CONNECTION THEREWITH OR ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING, WITHOUT
LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS OR ACTIONS OF BANK RELATING TO THE ADMINISTRATION
OF THE LOAN OR ENFORCEMENT OF THE LOAN DOCUMENTS, AND AGREE
THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION
WITH ANY OTHER ACTION IN
32
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS
PROHIBITED BY LAW, BORROWER HEREBY WAIVES ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER IN ANY LITIGATION, ANY SPECIAL
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. BORROWER
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF BANK
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT BANK WOULD NOT
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR BANK
TO ACCEPT THIS LOAN AGREEMENT AND MAKE THE LOAN.
The Borrower acknowledges that it has read and understood all the
provisions of this agreement, including the waiver of jury trial, and has been
advised by counsel as necessary or appropriate.
33
WITNESS the due execution of this Term Loan Agreement as of the date
first written above.
ATTEST: MERRIMAC INDUSTRIES, INC.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------- ------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Secretary Name: ▇▇▇▇▇ ▇.▇▇▇▇▇▇
Title: President and CEO
FLEET NATIONAL BANK
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Senior Vice President
▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ )
) SS.:
COUNTY OF ESSEX )
I, ________________________________________, an Attorney at Law of New
Jersey DO HEREBY CERTIFY that ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, who is personally known to me to
be the same person whose name is subscribed to in the foregoing instrument
appeared before me this day in person and acknowledged that he signed, sealed
and delivered the said instrument as the free and voluntary act of MERRIMAC
INDUSTRIES, INC., for the uses and purposes therein set forth, and that he was
duly authorized to execute same on behalf of said Company.
Given under my hand and notarial seal, this _____ day of March, 2002.
--------------------------------
Name:
Attorney at Law of New Jersey
35
DEFINITIONS
"AFFILIATE" shall mean, with respect to any Person, (a) any other Person who
(either alone or with a group of Persons, and either directly or indirectly
through one or more intermediaries) is in control of, is controlled by or is
under common control with such Person, (b) any director, officer, partner,
employee or agent of such Person, and (c) any member of the immediate family of
such Person or any natural Person described in the preceding clauses (a) and
(b). A Person or group of Persons shall be deemed to be in control of another
Person when such Person or group of Persons possesses, directly or indirectly,
the power to direct or cause the direction of the management or policies of such
other Person, whether through the ownership of voting securities, by contract or
otherwise.
"BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C.
-101, et seq.), as amended and in effect from time to time and the regulations
issued from time to time thereunder.
"BUSINESS DAY" means any day other than a Saturday, Sunday, Federal holiday or
any other day on which commercial banks are authorized or required to be closed
for business in New Jersey.
"CASH EQUIVALENTS" means (a) securities issued or fully guaranteed or insured by
the United States government or any agency thereof maturing not more than six
(6) months from the date of acquisition; (b) certificates of deposit, time
deposits, repurchase agreements, reverse repurchase agreements, or bankers'
acceptances, having in each case a tenor of not more than six (6) months, issued
by the Bank, any affiliate of the Bank or any U.S. commercial bank or any branch
or agency of any non-U.S. bank licensed to conduct business in the United States
having combined capital and surplus of not less than $250,000,000; (c)
commercial paper of any issuer rated at least a-1 by Standard & Poor's Rating
Group, a division of ▇▇▇▇▇▇-▇▇▇▇ Companies, or P-1 by ▇▇▇▇▇'▇ Investors Service
Inc. and in either case having a tenor of not more than three (3) months.
"CHANGE OF CONTROL" means (a) failure of the Control Persons or Affiliates
thereof to hold in the aggregate at least fifty percent (50%) of the capital
stock of the Borrower, assuming that all convertible securities of the Borrower
then outstanding and all convertible securities issuable upon exercise of any
warrants, options or other rights outstanding at such time were converted at
such time and that all warrants, options or similar rights to acquire shares of
the capital stock of the Borrower were exercised at such time, or (b) the
acquisition after the date of the Loan Agreement by any Person who is not a
Control Person of the power to elect, appoint, or cause the election or
appointment of at least a majority of the members of the board of directors of
the Borrower, through beneficial ownership of the capital stock of the Borrower
or otherwise.
"CONTROL PERSONS" means the Person or Persons who as of the date of the Loan
Agreement hold more than fifty (50%) of the capital stock of the Borrower,
assuming that all convertible
36
securities of the Borrower then outstanding and all convertible securities
issuable upon exercise of any warrants, options or other rights outstanding at
such time were converted at such time and that all warrants, options or similar
rights to acquire shares of the capital stock of the Borrower were exercised at
such time.
"COST RICA FACILITIES" means Industrias Merrimac Incorporada, S.R.L. and
Multi-Mix(R) Microtechnology, S.R.L.
"CURRENT ASSETS" means all current assets of the Borrower determined in
accordance with GAAP and as shown on the balance sheet of the Borrower delivered
to the Bank pursuant to Sections 5.2 and 5.3 of the Loan Agreement.
"CURRENT LIABILITIES" means all current liabilities of the Borrower minus
deferred revenues of the Borrower, in each case, determined in accordance with
GAAP and as shown on the balance sheet of the Borrower delivered to the Bank
pursuant to Sections 5.2 and 5.3 of the Loan Agreement.
"DEMAND DEPOSIT ACCOUNT" means the demand deposit account established and
maintained by Borrower with Bank pursuant to Section 2.4(b).
"EBITDA" means net income of the Borrower for the four quarter period ending on
any fiscal quarter end date plus, for said four quarter period, without
duplication and only to the extent reflected as charges in the statements of
such net income for such period, the amounts accrued by the Borrower for (i)
interest on bank loans and all other indebtedness ("Interest"), plus (ii)
accrued taxes, plus (iii) depreciation and amortization of assets.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"FILTRAN" means Filtran Microcircuits Inc. the Borrower's Subsidiary located in
Canada.
"FIXED CHARGE COVERAGE RATIO" means EBITDA plus principal repayments on loans
due from Filtran and other Subsidiaries of the Borrower less cash taxes,
dividends and CAPEX (minus external funding) divided by interest expense and
prinicipal payments on long term debt (excluding any amounts due under the
Revoliving Term Loan between Borrower and Bank as set forth in the Second
Amended Revolving Credit and Security Agreement).
"GAAP" means generally accepted accounting principles set forth from time to
time in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the accounting
profession), which are applicable in the circumstances as of the date of
determination.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any
37
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock of capital ownership or otherwise, by any of
the foregoing. any government or political subdivision or any agency, authority,
bureau, central bank, commission, department or instrumentality of any
government or political subdivision, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.
"LAW" shall mean any law (including common law), constitution, statute, treaty,
regulation, rule, ordinance, order, injunction, writ, decree or award of any
Governmental Authority.
"LEVERAGE RATIO" means the ratio of total liabilities to Tangible Net Worth.
"LOAN AGREEMENT" means the Agreement between the Borrower and the Bank to which
this Schedule 1 has been affixed and incorporated, as the same may be amended,
amended and restated or otherwise modified from time to time in accordance with
its terms.
"LOAN DOCUMENTS" shall mean this Agreement (including the Addendum, the Riders
and the Schedules hereto), the Note, the First Mortgage and Security Agreement,
Environmental Indemnity Agreement, Assignment of Leases and Rents, and all other
documents and instruments executed and delivered in connection herewith or
related hereto are collectively referred to as the "Loan Documents".
"MATERIAL" means material in relation to the business, operations, affairs,
financial condition, assets, properties, or prospects of the Borrower and its
subsidiaries, if any, taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the business,
operations, affairs, financial condition, assets, properties or prospects of the
Borrower taken as a whole, or (b) the ability of the Borrower to perform any of
its obligations under the Loan Documents or the Warrant Agreement (as defined
hereinafter), or (c) the enforceability of the Loan Agreement, the Note or any
of the other Loan Documents.
"OBLIGATION" shall mean and includes the Loan, the Note and all other loans,
advances, debts, liabilities, obligations, covenants and duties owing by the
Borrower to the Bank or to any other direct or indirect subsidiary of Fleet
National Bank, of any kind or nature, present or future (including any interest
accruing thereon after maturity, or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether direct or
indirect (including those acquired by assignment or participation), absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising, whether or not (i) evidenced by any note, guaranty or other instrument,
(ii) arising under any agreement, instrument or document, (iii) for the payment
of money, (iv) arising by reason of an extension of credit, opening of a letter
of credit, loan, equipment lease or guarantee, (v) under any interest or
currency swap, future, option or other interest rate protection or similar
agreement, (vi) under or by reason of any foreign currency transaction, forward,
option or other similar transaction providing for the purchase of one currency
in exchange for the sale of another
38
currency, or in any other manner, or (vii) arising out of overdrafts on deposit
or other accounts or out of electronic funds transfers (whether by wire transfer
or through automated clearing houses or otherwise) or out of the return unpaid
of, or other failure of the Bank to receive final payment for, any check, item,
instrument, payment order or other deposit or credit to a deposit or other
account, or out of the Bank's non-receipt of or inability to collect funds or
otherwise not being made whole in connection with depository or other similar
arrangements; and any amendments, extensions, renewals and increases of or to
any of the foregoing, and all costs and expenses of the Bank incurred in the
documentation, negotiation, modification, enforcement, collection and otherwise
in connection with any of the foregoing, including reasonable attorneys' fees
and expenses.
"PERSON" shall mean an individual, sole proprietorship, corporation, partnership
(general or limited), trust, business trust, limited liability company,
unincorporated organization or association, joint venture, joint-stock company,
Governmental Authority, or any other entity of whatever nature.
"PBCG" means the Pension Benefit Guaranty Corporation, its successor or any
other entity that shall perform the functions previously performed by PBCG.
"PRIME RATE" means the rate of interest per annum generally announced by the
Bank from time at its main office as a means of pricing certain of its loans to
its customers, from which other borrowing rates may be determined or, if the
Bank ceases to announce its prime rate or its prime rate otherwise becomes
unavailable for any reason, the prime rate published in the Wall Street Journal.
The Prime Rate is not tied to any external rate or index and does not
necessarily reflect the lowest rate of interest actually charged to any
particular class or category of customers of the Bank. If and when the Prime
Rate changes, the rate of interest on the Loans bearing interest at the Prime
Rate will change automatically without notice to the Borrower, effective on the
date of any such change.
"SUBSIDIARY" of a Person means any corporation, association, limited liability
company, partnership, joint venture, joint stock company or other business
entity of which more than fifty percent (50%) of the voting stock or other
equity interests (in the case of Persons other than corporations) is owned or
controlled directly or indirectly by the Person, or one or more Subsidiaries of
the Person, or a combination thereof.
"TANGIBLE NET WORTH" means Borrower's net worth minus the following: goodwill,
amounts due from officers, amounts due from Affiliates (including, without
limitation, Filtran and the Costa Rica Facilities) of the Borrower, and
investments in Affiliates (including, without limitation, Filtran and the Costa
Rica Facilities) of the Borrower.
"UCC" means the Uniform Commercial Code, as adopted and enacted and as in effect
from time to time in the State whose law governs pursuant to the Section of this
Agreement entitled "Governing Law and Jurisdiction." Terms used herein which are
defined in the UCC and not otherwise defined herein shall have the respective
meanings ascribed to such terms in the UCC. To the extent the definition of any
category or type of collateral is modified by any amendment,
39
modification or revision to the UCC, such modified definition will apply
automatically as of the date of such amendment, modification or revision.
"WHOLLY-OWNED SUBSIDIARY" of a Person means any Subsidiary in which 100% of the
capital stock or equity interests (in the case of a Subsidiary that is not a
corporation) of each class having ordinary voting power, and 100% of the capital
stock or equity interests (in the case of a Subsidiary that is not a
corporation) of every other class, in each case, at the time as of which any
determination is made, is owned, beneficially and of record, by such Person, or
by one or more Wholly-Owned Subsidiaries of such Person, or a combination
thereof.
40