EXHIBIT 10.23
LOAN AND SECURITY AGREEMENT
[as Amended]
THIS LOAN AND SECURITY AGREEMENT is entered into as of August 23, 2002, by
and between IPG Photonics Corporation, a Delaware corporation ("Borrower"), and
IP Fibre Devices (UK) Ltd., a United Kingdom limited liability company
("Lender").
RECITALS
Borrower has requested that Lender extend or continue credit to Borrower as
described below, and Lender has agreed to provide such credit to Borrower on the
terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Lender and Borrower hereby agree as follows:
ARTICLE I
CREDIT TERMS
SECTION 1.1. LINE OF CREDIT.
(a) Subject to the terms and conditions of this Agreement, Lender hereby
agrees to make advances to Borrower ("Loans") from time to time up to but
excluding March 31, 2006 (the "Commitment Period"), not to exceed at any time
the aggregate principal amount of Four Million Six Hundred Dollars
($4,600,000.00) ("Line of Credit"), the proceeds of which shall be used for
working capital and general corporate purposes. The Lender shall remain
committed to provide Loans to Borrower under this Agreement during the
Commitment Period subject to the conditions set forth below.
(b) "Borrower may from time to time during the Commitment Period borrow,
partially or wholly repay its outstanding Loans, and reborrow, subject to all of
the limitations, terms and conditions contained herein; provided, however, that
the total outstanding Loans under the Line of Credit shall not at any time
exceed the maximum principal amount available under as set forth in Section
1.1(a). After the Commitment Period, the outstanding principal amount of the
Loans together with accrued and unpaid interest shall amortize in twenty-four
equal monthly installments, due no later than the first calendar day of each
month starting December 31, 2006; provided, however, that the entire outstanding
principal amount of Loans together with accrued interest shall become
immediately due and payable earlier upon the consummation of an initial public
offering of securities of the Borrower or a Change in Control (as defined in
Section 6.1 below)."
(c) The Loans made by the Lender shall be evidenced by one or more accounts
or records maintained by the Lender in the ordinary course of business. The
accounts or records maintained by the Lender shall govern absent demonstrable
error of the amount of the Loans made by the Lender to the Borrower and the
interest and payments thereon. Any failure so to record or any error in doing so
shall not, however, limit or otherwise affect the obligation of the Borrower
hereunder to pay any amount owing with respect to the Loans.
(d) All payments to be made by Borrower shall be made without set-off,
recoupment or counterclaim. Except as otherwise expressly provided herein, all
payments by the Borrower shall be made to Lender at the Lender's office or agent
for payment, and shall be made in dollars and in immediately available funds, no
later than 2:00 p.m. (New York City time) on the date specified herein. Any
payment received by Lender later than 2:00 p.m. (New York City time) shall be
deemed to have been received on the following Business Day and any applicable
interest or fee shall continue to accrue.
(e) Whenever any payment is due on a day other than a business day, such
payment shall be made on the following business day, and such extension of time
shall in such case be included in the computation of interest or fees, as the
case may be.
SECTION 1.2. INTEREST/FEES.
(a) Interest. The outstanding principal balance of the Loans shall bear
interest at the rate of interest at a rate per annum equal to LIBOR in effect
from time to time plus 2%. Each determination of an interest rate by Lender
shall be conclusive and binding on the Borrower in the absence of manifest
error. Prior to the end of the Commitment Period, interest only on each Loan
shall be paid in arrears at the end of each three-month period. Interest shall
also be paid on the date of any prepayment of Loans for the portion of the Loans
so prepaid and upon payment (including prepayment) in full thereof and, during
the existence of any Event of Default (as defined below), interest shall be paid
on demand of Lender. After the Commitment Period, interest together with
principal shall be paid on a monthly basis, on a date to be agreed between
Borrower and Lender.
(b) LIBOR. The term "LIBOR" means the rate of interest per annum determined
by Lender as the rate of interest at which dollar deposits in the approximate
amount of the amount of the Loan to be made and for a period of three months as
quoted on the Telerate Page 3750 as of 11:00 a.m. (London time) on the day two
business days before the commencement of such loan advancement. If Telerate Page
3750 is not available, such rate of interest shall be that quoted by an
appropriate reference bank selected by Lender and having a maturity comparable
to such interest period as would be offered to major banks in the London
interbank market at their request at approximately 11:00 a.m. (London time) two
business days prior to the disbursement of the Loan proceeds.
(c) Default Interest. Notwithstanding subsection (a) of this Section, while
any Event of Default exists or after acceleration, Borrower shall pay interest
(after as well as before entry of judgment thereon to the extent permitted by
law) on the principal amount of all outstanding Loans, at a rate per annum which
is determined by adding 2% per annum to the applicable interest then in effect
for such Loans.
(d) Anything herein to the contrary notwithstanding, the obligations of
Borrower to Lender hereunder shall be subject to the limitation that payments of
interest shall not be required, for any period for which interest is computed
hereunder, to the extent (but only to the extent) that contracting for or
receiving such payment by Lender would be contrary to the provisions of any law
applicable to Lender limiting the highest rate of interest that may be lawfully
contracted for, charged or received by Lender,
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and in such event the Borrower shall pay Lender interest at the highest rate
permitted by applicable law.
(e) Computation and Payment. Interest shall be computed on the basis of a
360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in Section 1.1(d).
SECTION 1.3 SECURITY
1.3.1 GRANT OF SECURITY INTEREST. The Borrower, to secure the Obligations
(as defined below), hereby assigns, pledges and grants to the Lender a
continuing first priority security interest in the collateral consisting of all
of the Borrower's right, title and interest in and to the property and interests
in property, whether now owned or existing or hereafter acquired or arising and
regardless of where located and all products, proceeds, substitutions,
additions, accessions and replacements thereof (all of the same being herein
referred to as the "Collateral"):
(a) all inventory, finished goods, raw materials, work in process,
equipment, chattel, licenses and other goods listed on Schedule 1 hereto
(collectively, "Inventory");
(b) all rights now or hereafter accruing to the Borrower under
contracts, agreements or other instruments to hold, use and enforce all
rights thereunder related to the Inventory;
(c) all books and records relating to any of the Inventory (including,
without limitation, data, printouts, and other computer materials and
records of the Borrower pertaining to any of the foregoing); and
(d) all accessions and additions to, substitutions for and all
replacements, products and proceeds of the foregoing, including, without
limitation, proceeds of insurance policies insuring the Inventory; it being
agreed that Borrower may substitute new Collateral with the consent of the
Lender by amending and both signing Schedule 1.
1.3.2 SECURITY FOR OBLIGATIONS. This Section 1.3 secures the full and
prompt payment and performance of (i) all obligations of the Borrower to pay, as
and when due and payable (by scheduled maturity or otherwise), all amounts from
time to time owing by it in respect of this Agreement, whether for principal,
interest (including, without limitation, all interest that accrues after the
commencement of any case, proceeding or other action relating to bankruptcy,
insolvency or reorganization of the Borrower), fees or otherwise (collectively,
the "Obligations").
1.3.3 DEBTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (i) the Borrower shall remain fully liable under any contracts
and agreements included in the Collateral to perform all of its duties and
obligations thereunder, (ii) the exercise by the Lender of any of the rights
hereunder shall not release the Borrower from any of its duties or obligations
under any such Collateral, and (iii) the Lender is not obligated or liable under
any such Collateral by reason of this Agreement, nor is the Lender obligated to
perform any obligations or duties of the Borrower thereunder or to take any
action hereunder.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Lender,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to
Lender subject to this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the State of Delaware, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement and each promissory
note, contract, instrument and other document required hereby or at any time
hereafter delivered to Lender in connection herewith (collectively, the "Loan
Documents") have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of Borrower's
knowledge threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which could have a material adverse effect on the financial condition or
operation of Borrower other than those disclosed by Borrower to Lender in
writing prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENTS. The audited consolidated
financial statements of Borrower dated December 31, 2001 and the unaudited
consolidated financial statements dated March 31, 2002, true copies of which
have been delivered by Borrower to Lender prior to the date hereof, (a) are
complete and correct and presents fairly the financial condition of Borrower,
(b) disclose all liabilities of Borrower that are required to be reflected or
reserved against under generally accepted accounting principles, whether
liquidated or unliquidated, fixed or contingent, and (c) have been prepared in
accordance with generally accepted accounting principles consistently applied,
except for the absence of financial footnotes and subject to year-end
adjustments on the unaudited March 31, 2002 financial statements. Since the date
of the unaudited financial statement there has been no material adverse change
in the financial condition of Borrower, nor has Borrower mortgaged, pledged,
granted a security interest in or otherwise encumbered any of its assets or
properties except in favor of Lender or as otherwise permitted by Lender in
writing.
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SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending
material assessments or adjustments of its income tax payable with respect to
any year.
SECTION 2.7. NO SUBORDINATION. Except as otherwise permitted pursuant to
Section 5.2, there is no agreement, indenture, contract or instrument to which
Borrower is a party or by which Borrower may be bound that requires the
subordination in right of payment of any of Borrower's obligations subject to
this Agreement to any other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.
SECTION 2.9. ERISA. Borrower is in compliance in all material respects with
all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation; except as set
forth on Schedule 2.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Lender in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.
SECTION 2.12. REPRESENTATIONS AND WARRANTIES: GENERAL. The Borrower hereby
represents and warrants that (i) the principal place of business and chief
executive office of the Borrower are located at the address of the Borrower
identified in Section 7.2 hereof, (ii) the Borrower has good, indefeasible and
merchantable title to the Collateral, and it owns the Collateral free and clear
of any lien, security interest, charge or encumbrance except for: (a) the
security interests in favor of the Lender
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created by this Agreement; or (b) other liens expressly permitted by Section 5.7
("Permitted Liens"); (iii) except such as may have been filed in favor of the
Lender, no effective financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any recording office;
and (iv) this Agreement, together with actions heretofore taken or concurrently
undertaken, creates a valid and first perfected priority lien (subject to
Permitted Liens) in the Collateral, securing the payment of the Obligations, and
all filings and other actions necessary to create, evidence, perfect and
preserve such security interest (save for the timely filing of continuation
statements or other statements required by applicable law) have been, or are
being concurrently undertaken with the execution hereof, duly taken.
ARTICLE III
CONDITIONS
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of
Lender to extend any credit contemplated by this Agreement is subject to the
fulfillment to Lender's satisfaction of all of the following conditions:
(a) Approval of Lender Counsel. All legal matters incidental to the
extension of credit by Lender shall be satisfactory to Lender's counsel.
(b) Documentation. Lender shall have received, in form and substance
satisfactory to Lender, each of the following, duly executed:
(i) This Agreement;
(ii) Corporate Resolution: Borrowing;
(iii) UCC Financing Statement; and
(iv) Such other documents as Lender may require under any other
Section of this Agreement.
(c) Financial Condition. There shall have been no material adverse change,
as determined by Lender, in the financial condition or business of Borrower, nor
any material decline, as determined by Lender, in the market value of a
substantial or material portion of the assets of Borrower.
(d) Insurance. Borrower shall have delivered to Lender evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Lender, and where
required by Lender, with loss payable endorsements in favor of Lender.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Lender to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Lender's satisfaction of each of the following
conditions:
(a) Compliance. The representations and warranties contained herein and in
each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Lender
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
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(b) Documentation. Lender shall have received all additional documents that
may be required in connection with such extension of credit.
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Lender remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Lender under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower shall, unless Lender otherwise consents in
writing:
SECTION 4.1. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Lender, at any reasonable time, to inspect,
audit and examine such books and records, to make copies of the same, and to
inspect the properties of Borrower.
SECTION 4.2. FINANCIAL STATEMENTS. Provide to Lender all of the following,
in form and detail satisfactory to Lender:
(a) not later than 120 days after and as of the end of each fiscal year, an
audited consolidated financial statement of Borrower, prepared by a certified
public accountant acceptable to Lender, to include a balance sheet, income
statement, statement of cash flows and footnotes;
(b) not later than 45 days after and as of the end of each quarter, a
consolidated financial statement of Borrower, prepared by Borrower, to include a
balance sheet and income statement;
(c) not later than 30 days after and as of the end of each calendar month,
a consolidated financial statement of Borrower, prepared by Borrower, to include
a balance sheet and income statement; and
(d) from time to time such other information as Lender may reasonably
request.
SECTION 4.3. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.
SECTION 4.4. INSURANCE. Maintain and keep in force insurance of the types
and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Lender, and
deliver to Lender from time to time at Lender's request schedules setting forth
all insurance then in effect.
SECTION 4.5. FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time
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make necessary repairs, renewals and replacements thereto so that such
properties shall be fully and efficiently preserved and maintained.
SECTION 4.6. TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Lender's satisfaction, for eventual payment thereof in
the event Borrower is obligated to make such payment.
SECTION 4.7. LITIGATION. Promptly give notice in writing to Lender of any
litigation pending or threatened against Borrower in excess of $500,000.00.
SECTION 4.8. NOTICE TO LENDER. Promptly (but in no event more than five (5)
days after the occurrence of each such event or matter) give written notice to
Lender in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property.
SECTION 4.9. COLLATERAL.
(a) The Borrower hereby covenants and agrees with the Lender that (i) the
Borrower shall preserve and maintain the lien created by this Agreement and will
protect and defend its title to the Collateral so that the lien so granted shall
be and remain a continuing first priority security interest (subject to
Permitted Liens) in the Collateral, (ii) the Borrower will not create, assume or
suffer to exist any other lien in the Collateral except Permitted Liens, (iii)
the Borrower shall maintain books and records pertaining to the Collateral in
such detail, form and scope as the Lender may reasonably require, and (iv) the
Borrower shall pay all taxes, assessments and other charges lawfully levied or
assessed upon its properties or upon any of the Collateral when due. If, in the
Lender's sole opinion any lien (other than Permitted Liens) may create an
obligation having priority over the lien granted hereby, the Lender may pay such
lien and the amount of such payment shall be charged to the Borrower and be
secured by the lien granted hereby.
(b) The Borrower shall comply with the following covenants regarding the
Collateral, (i) to the extent that the Borrower shall retain possession of the
Collateral, the Borrower shall keep the collateral at the places specified in
Section 2.12(i); provided, however, that the Borrower may establish any other
location, on written notice delivered to the Secured Party not less than thirty
(30) days prior to establishing any such other location, if the Borrower has
complied with Section 5 hereof, and (ii) the Borrower shall cause the Collateral
to be maintained and preserved in good condition, repair and working order,
excepting ordinary wear and tear. The Borrower shall, on demand therefor by the
Lender, deliver to the Lender any
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and all evidence of ownership of any of the Collateral (including, without
limitation, certificates of title and applications for title).
SECTION 4.10. FURTHER ASSURANCES.
(a) The Borrower agrees that from time to time, at its expense, it will
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or appropriate, or that the Lender may
request, in order to create, evidence, perfect or preserve any security interest
granted or purported to be granted hereby or to enable the Lender to exercise
and enforce its rights and remedies hereunder with respect to any Collateral,
including, without limitation, executing and filing financing or continuation
statements, or amendments thereto, as the Lender may request, without the
signature of the Borrower where permitted by law. The Borrower hereby agrees
that a carbon, photographic, photostatic or other reproduction of this Agreement
or of a financing statement is sufficient as a financing statement where
permitted by law.
(b) The Borrower will furnish to the Lender from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Lender may reasonably request,
all in reasonable detail, and will permit the Lender, and/or its designated
agents, at any time during the Borrower's usual business hours, to inspect
and/or conduct audits with respect to the Collateral.
ARTICLE V
NEGATIVE COVENANTS
Borrower further covenants that so long as Lender remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Lender under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Lender's prior written
consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof.
SECTION 5.2. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist
any indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower to Lender, (b) any
other liabilities of Borrower existing as of, and disclosed to Lender prior to,
the date hereof, (c) purchase money indebtedness up to $2,500,000 secured only
by the assets purchased, (d) equipment leases up to $10,000,000 incurred after
the date hereof and (e) other lines of credit up to $5,000,000 incurred after
the date hereof; provided, however, that at the request of the Borrower, Lender
shall enter into subordination agreements and/or intercreditor arrangements with
the obligors of any indebtedness incurred pursuant to this clause (e) (such
agreement and/or arrangement to be reasonably satisfactory to the Lender)
subordinating any unsecured claim Lender may have against Borrower under this
Agreement.
SECTION 5.3. CHANGE, TRANSFER OF ASSETS. Make any substantial change in the
nature of Borrower's business as conducted as of the date hereof; nor sell,
lease, transfer or otherwise dispose of all or a
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substantial or material portion of Borrower's assets except in the ordinary
course of its business.
SECTION 5.4. GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except any of the
foregoing in favor of Lender and except in favor of Borrower's subsidiaries.
SECTION 5.5. LOANS AND ADVANCES. Make any loans or advances to any person
or entity, except any of the foregoing existing as of, and disclosed to Lender
prior to, the date hereof, and except for loans to subsidiaries.
SECTION 5.6. ACQUISITIONS AND MERGERS. Acquire (i) all or substantially all
of the assets of, or (ii) any equity securities in, any other entity, or merge
into or consolidate with any other entity, without the prior written consent of
Lender if the aggregate consideration to be paid by Borrower (whether in cash,
stock or otherwise) in connection with any such acquisition or merger (or series
of related acquisitions and/or mergers) exceeds $35,000,000.00; provided,
however, that (x) Borrower shall be the surviving entity in any merger or
consolidation, (y) each entity whose assets or equity securities are acquired by
Borrower, or which merges into or consolidates with Borrower, shall be engaged,
at the time of the applicable transaction, in substantially the same business as
Borrower, and (c) the consent of Lender, when required hereunder, shall not be
unreasonably withheld or delayed.
SECTION 5.7. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a
security interest or lien (collectively, a "Lien") in or upon, all or any
portion of Borrower's assets now owned or hereafter acquired, except any of the
foregoing (collectively, "Permitted Liens"):
(a) any Lien created under this Agreement;
(b) Liens for taxes, fees, assessments or other governmental charges which
are not delinquent or remain payable without penalty, or to the extent
that non-payment thereof is permitted by Section 4.6; provided, that
no notice of lien has been filed or recorded with respect thereto;
(c) suppliers', carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the
ordinary course of business which are not delinquent for a period of
more than thirty days or which are being contested in good faith and
by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto;
(d) Liens incurred in connection with the indebtedness permitted under
Section 5.2 hereof;
(e) Liens (other than any Lien imposed by ERISA) consisting of pledges or
deposits required in the ordinary course of business
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in connection with workers' compensation, unemployment insurance and
other social security legislation;
(f) Liens on the property securing (i) the non-delinquent performance of
bids, trade contracts (other than for borrowed money), leases,
statutory obligations, (ii) contingent obligations on surety and
appeal bonds, and (iii) other non-delinquent obligations of a like
nature; in each case, incurred in the ordinary course of business;
(g) leases, subleases, easements, rights-of-way, encroachments and other
survey defects, restrictions and other similar encumbrances incurred
in the ordinary course of business which do not impose material
financial obligations on the Borrower, and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of Borrower's business;
(h) purchase money security interests on assets acquired or held by
Borrower securing indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring such asset;
provided, that (i) any such Lien attaches to such equipment
concurrently with or within 20 days after the acquisition thereof,
(ii) such Lien attaches solely to the asset so acquired in such
transaction, and (iii) the principal amount of the debt secured
thereby does not exceed the cost of such asset;
(i) Liens securing obligations in respect of capital leases on assets
subject to such leases;
(j) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained
with a creditor depository institution;
(k) Liens assumed in connection with a business acquisition or merger;
provided, that, such Lien was created prior to such acquisition or
merger (and not in contemplation thereof) and if any such Lien is of a
type not permitted under the other provisions of this Section 5.7,
such Lien is satisfied and terminated within 30 days after such
acquisition or merger; and
(l) any Lien existing on property of Borrower or any Affiliate as of the
date hereof and set forth on Schedule 2 hereto; provided, that no such
Lien shall be amended to cover additional property and no such Lien
shall be amended to cover additional indebtedness.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. EVENTS OF DEFAULT. The occurrence of any of the following
shall constitute an "Event of Default" under this Agreement:
11
(a) Borrower shall fail to pay (i) when due, any principal or (ii) within
five (5) days after the date then due, interest, fees or other amounts, in each
case payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Lender in
connection with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those referred to in subsections (a) and (b) above), and with
respect to any such default which by its nature can be cured, such default shall
continue for a period of thirty (30) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower or any of its
subsidiaries has incurred any debt or other liability to any person or entity,
including Lender, and, if the debt or liability is owed to a party other than
Lender, the amount thereof exceeds $3,000,000.00.
(e) The filing of a notice of judgment lien against Borrower; or the
recording of any abstract of judgment against Borrower in any county in which
Borrower has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower or any of its subsidiaries; or the entry of a judgment
against Borrower or any of its subsidiaries, and with respect to any of the
foregoing, the amount thereof exceeds $3,000,000.00 individually or in the
aggregate.
(f) Borrower shall become insolvent, or shall suffer or consent to or apply
for the appointment of a receiver, trustee, custodian or liquidator of itself or
any of its property, or shall generally fail to pay its debts as they become
due, or shall make a general assignment for the benefit of creditors; Borrower
shall file a voluntary petition in bankruptcy, or seeking reorganization, in
order to effect a plan or other arrangement with creditors or any other relief
under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended
or recodified from time to time ("Bankruptcy Code"), or under any state or
federal law granting relief to debtors, whether now or hereafter in effect; or
any involuntary petition or proceeding pursuant to the Bankruptcy Code or any
other applicable state or federal law relating to bankruptcy, reorganization or
other relief for debtors is filed or commenced against Borrower, or Borrower
shall file an answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition, and such proceedings shall continue for
more than 60 days, or Borrower shall be adjudicated a bankrupt, or an order for
relief shall be entered against Borrower by any court of competent jurisdiction
under the Bankruptcy Code or any other applicable state or federal law relating
to bankruptcy, reorganization or other relief for debtors.
(g) There shall exist or occur any event or condition which Lender in good
faith believes impairs, or is substantially likely to impair, the prospect of
payment or performance by Borrower of its obligations under any of the Loan
Documents.
12
(h) The dissolution or liquidation of Borrower or any of its subsidiaries;
or Borrower, or any of its subsidiaries or any of its stockholders or creditors,
shall take action seeking to effect the dissolution or liquidation of Borrower
or any of its subsidiaries.
(i) Any change in ownership during the term of this Agreement of an
aggregate of twenty-five percent (25%) or more of the voting stock of Borrower
in a single or in a series of affiliated transaction, including but not limited
to the issuance of new shares or the implementation of any anti-dilution
adjustments ("Change in Control").
SECTION 6.2. REMEDIES. (a) Upon the occurrence of any Event of Default: (i)
all indebtedness of Borrower under each of the Loan Documents, any term thereof
to the contrary notwithstanding, shall at Lender's option and without notice
become immediately due and payable without presentment, demand, protest or
notice of dishonor, all of which are hereby expressly waived by each Borrower;
(ii) the obligation, if any, of Lender to extend any further credit under any of
the Loan Documents shall immediately cease and terminate; and (iii) Lender shall
have all rights, powers and remedies available under each of the Loan Documents,
or accorded by law, including without limitation the right to resort to any or
all security for any credit subject hereto and to exercise any or all of the
rights of a beneficiary or Lender pursuant to applicable law. All rights, powers
and remedies of Lender may be exercised at any time by Lender and from time to
time after the occurrence of an Event of Default, are cumulative and not
exclusive, and shall be in addition to any other rights, powers or remedies
provided by law or equity.
(b) In addition to other rights and remedies provided for herein or
otherwise available to it, the Lender may exercise all the rights and remedies
of a Lender under applicable law and may also (i) in the name of the Lender, the
Borrower or otherwise, demand, ▇▇▇ for, collect or receive any money or property
at any time payable or receivable on account of or in exchange for, or make any
compromise or settlement deemed desirable with respect to, any of the
Collateral, and the Lender may modify the terms of payment or of a release, all
without incurring responsibility to, or discharging or otherwise affecting any
liability to the Lender of, the Borrower, (ii) sell the Collateral in possession
of the Lender or enter upon the premises, or wherever the Collateral is, and
take possession thereof, and maintain such possession on the Borrower's
premises, or demand and receive such possession from any person who has
possession thereof, or remove the Collateral or any part thereof, to such other
places as the Lender may desire, all without any obligation, (iii) require the
Borrower to, at its expense, assemble all or part of the Collateral as directed
by the Lender and make it available to the Lender at a place to be designated by
the Lender which is reasonably convenient to both parties, (iv) without notice
(except as specified below) and with or without taking the possession thereof,
sell, lease, assign, grant options to purchase or otherwise dispose of the
Collateral or any part thereof in one or more parcels at public or private sale,
at any location chosen by the Lender, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as the Lender
may deem commercially reasonable. The Borrower agrees that, to the extent notice
of sale shall be required by law, at least five days' notice to the Borrower of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. The Lender shall not be
obligated to make any sale of Collateral regardless of
13
notice of sale having been given. The Lender may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned. The Borrower agrees that the Lender shall have no obligation
to preserve rights in the Collateral against prior parties or to marshal any
Collateral for the benefit of any Person, and (v) apply, without notice, any
cash or cash items constituting Collateral in the possession of the Lender to
payment of any of the Obligations. The Borrower waives, to the extent permitted
by applicable law, all rights of the Borrower to prior notice and hearing under
any other applicable statute or constitution.
(c) All cash proceeds received by the Lender in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral
will, after payment of any amounts payable to the Lender pursuant to Section 1.1
and 1.2 hereof, be applied against the Obligations in such order as the Lender
shall elect, and any balance left thereafter returned to Borrower.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Lender in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Lender of any breach of or default under any of the Loan Documents must
be in writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWER: IPG Photonics Corporation
▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
LENDER: IP Fibre Devices (UK) Ltd.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Attn: Managing Director
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
14
SECTION 7.3. COSTS. Borrower shall pay to Lender immediately upon demand
the full amount of all payments, advances, charges, costs and expenses,
including reasonable attorneys' fees, expended or incurred by Lender in
connection with (a) the negotiation and preparation of this Agreement and the
other Loan Documents (up to $10,000), Lender's continued administration hereof
and thereof, (b) the enforcement of Lender's rights and/or the collection of any
amounts which become due under any of the Loan Documents, and (c) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including any of the foregoing incurred in connection with any
bankruptcy proceeding relating to any Borrower or any other person or entity.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Lender's
prior written consent. Lender reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest in,
Lender's rights and benefits under each of the Loan Documents.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan
Documents constitute the entire agreement between Borrower and Lender with
respect to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only in writing signed by each
party hereto.
SECTION 7.6. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
SECTION 7.7. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.
SECTION 7.8. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Massachusetts without
regard to its conflict of laws principles.
SECTION 7.9. LENDER APPOINTED ATTORNEY-IN-FACT. The Borrower hereby
irrevocably appoints the Lender the Borrower's attorney-in-fact, with full
authority to take any action and to execute any instrument that the Lender may
deem necessary to carry-out the provisions of Section 1.3 of this Agreement,
including without limitation to execute and file any UCC financing statements
the Lender deems necessary or appropriate.
15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
IPG PHOTONICS CORPORATION IP FIBRE DEVICES (UK) LTD.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------- ------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇. Gaponstev
President Managing Director
Location of Collateral:
IPG Photonics Corporation
▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
16
SCHEDULE 1
LIST OF COLLATERAL
P40-000392 SDL 63-00030 / 63-S9937 6360-A-962nm Diodes
1800 109418
1800 112065
1800 115607
3400 14549-004
3400 108757
Total 12,200 @ 135.00 = $1,647,000.00
P40-000393 SDL 63-00058 6350-A-962um Diodes on A-Block
1200 109345
1200 112646
1200 115555
1200 119172
1200 126732
1300 128609
1000 14550-005
850 12306-003
900 12306-004
Total 10,050 @ 135.00 = $1,356,750.00
Grand Total $3,003,750.00
1