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Exhibit 4.3
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$20,000,000
AMENDED AND RESTATED
REVOLVING LOAN AND SECURITY AGREEMENT
By and Between
EMCORE CORPORATION
And
FIRST UNION NATIONAL BANK
Dated as of March 1, 2001
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TABLE OF CONTENTS
SECTION 1. DEFINITIONS................................................1
SECTION 2. TERMS OF REVOLVING LOANS...................................7
2.1. Revolving Loan Commitment; Maximum Credit..................7
2.2. Borrowing and Renewal Procedures...........................8
2.3. Borrowing Warranty.........................................8
2.4. Borrowing Conditions.......................................8
2.5. Procedures for Letters of Credit...........................8
2.6. Issuance Warranty..........................................9
2.7. Issuance Conditions........................................9
SECTION 3. NOTE EVIDENCING REVOLVING LOANS............................9
3.1. Promissory Note............................................9
3.2. Recordkeeping..............................................9
SECTION 4. INTEREST; ADMINISTRATION OF REVOLVING LOANS...............10
4.1. Interest Rate.............................................10
4.2. Payment of Interest.......................................10
4.3. Late Payment..............................................10
4.4. Maximum Interest..........................................10
4.5. Computation of Interest...................................10
SECTION 5. PREPAYMENTS...............................................10
5.1. Voluntary Prepayments.....................................10
5.2. Mandatory Prepayments.....................................10
SECTION 6. PAYMENTS AND FEES.........................................10
6.1. Making of Payments........................................10
6.2. Commitment Fee............................................10
6.3. Origination Fee...........................................10
6.4. Due Date..................................................10
6.5. Payments in Respect of Increased Costs....................11
SECTION 7. SECURITY; INSPECTIONS.....................................11
7.1. Security Interests........................................11
7.2. Trademarks and Licenses...................................11
7.3. Maintenance; Right of Inspection..........................12
7.4. Right of Set off..........................................12
7.5. Additional Collateral.....................................12
SECTION 8. REPRESENTATIONS AND WARRANTIES............................12
8.1. Capacity..................................................12
8.2. No Conflict...............................................12
8.3. Title; No Other Liens.....................................12
8.4. Accounts..................................................12
8.5. Inventory and Equipment...................................12
8.6. Validity and Binding Nature...............................13
8.7. Litigation................................................13
8.8. Environmental Matters.....................................13
8.9. Employee and Other Loans..................................13
8.10. ERISA.....................................................13
8.11. Tradenames................................................13
8.12. Subsidiaries..............................................14
8.13. Financial Statements......................................14
8.14. Tax Matters...............................................14
8.15. Ownership of Property; Liens..............................14
8.16. Compliance With Requirements of Law.......................14
8.17. Investment Company Act....................................15
8.18. Margin Stock..............................................15
8.19. General Collateral Representation.........................15
8.20. Accounts..................................................15
SECTION 9. CONDITIONS TO EFFECTIVENESS...............................15
SECTION 10. COVENANTS OF BORROWER.....................................16
10.1. Financial Statements and Other Information................16
10.2. Use of Proceeds...........................................17
10.3. Other Agreements..........................................17
10.4. Indebtedness for Borrowed Money...........................17
10.5. Liens.....................................................17
10.6. Accounts..................................................17
10.7. Insurance.................................................18
10.8. Taxes.....................................................18
10.9. ERISA.....................................................18
10.10. Compliance with Laws......................................18
10.11. Sale or Change of Business................................18
10.12. Further Documentation.....................................18
10.13. Maintenance of a Bank Account.............................19
10.14. Financial Covenants.......................................19
10.15. Limitations on Modifications, Waivers and Extensions of
Agreements Giving Rise to Accounts......................19
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10.16. Limitation on Discounts, Compromises and Extensions of
Accounts................................................19
10.17. Limitation on Investments.................................19
10.18. Fiscal Year...............................................19
10.19. Limitation on Contingent Obligations......................20
10.20. Limitation on Creation or Acquisition of Subsidiaries.....20
10.21. Dividends.................................................20
10.22. Environmental Liabilities.................................20
10.23. Lease Payments............................................20
10.24. Landlord's Waivers........................................20
10.25. Prepayment of Indebtedness................................20
10.26. Loans and Advances........................................20
10.27. Consigned Equipment.......................................20
SECTION 11. EVENTS OF DEFAULT AND REMEDIES............................20
11.1. Events of Default.........................................20
11.2. Effect of Event of Default................................22
11.3. Remedies..................................................22
11.4. Limitation on Duties Regarding Preservation of Collateral.22
11.5. Cash Collateral for Letter of Credit Obligation...........23
SECTION 12. GENERAL...................................................23
12.1. Waiver; Amendments........................................23
12.2. WAIVER OF TRIAL BY JURY...................................23
12.3. Arbitration...............................................23
12.4. Notices...................................................23
12.5. Appointment as Attorney-in-Fact...........................24
12.6. Costs, Expenses and Taxes.................................25
12.7. Captions..................................................25
12.8. Venue; Governing Law......................................25
12.9. Remedies..................................................25
12.10. Successors and Assigns....................................25
12.11. Counterparts..............................................25
12.12. Survival..................................................25
12.13. Executed Certification....................................25
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AMENDED AND RESTATED
REVOLVING LOAN AND SECURITY AGREEMENT
This AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT dated
as of March 1, 2001 is between EMCORE Corporation, a corporation organized under
the laws of the State of New Jersey (the "Borrower"), with its principal place
of business at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ and First Union
National Bank (the "Bank"), having an office at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇.
BACKGROUND
A. The Borrower and the Bank are parties to a certain Revolving Loan
and Security Agreement, dated as of March 31, 1997, as amended by a certain
Consent and Amendment Agreement, dated as of December 5, 1997 (the "First
Amendment"), as further modified pursuant to a certain Extension Letter dated
September 29, 1998 issued by the Bank and accepted by the Borrower (the "First
Extension Letter"), as further amended pursuant to a certain Second Amendment to
Revolving Loan and Security Agreement dated as of November 30, 1998 (the "Second
Amendment"), as further amended pursuant to a certain Waiver and Amendment
Letter Agreement dated as March 8, 1999 (the "First Amendment Letter"), as
further amended pursuant to a certain Acknowledgment, Consent and Amendment
Letter dated as of May 26, 1999 (the "Second Amendment Letter") and as further
modified pursuant to a certain letter of the Bank dated September 22, 1999 (the
"Second Extension Letter") and as further amended pursuant to a certain Third
Amendment to Revolving Loan and Security Agreement dated as December 1, 1999
(the "Third Amendment"). Said loan agreement, as amended by the First Amendment,
the First Extension Letter, the Second Amendment, First Amendment Letter, the
Second Amendment Letter, the Second Extension Letter and the Third Amendment is
hereinafter referred to as the "Existing Agreement".
B. The Borrower has requested an increase in the Maximum Credit
available under the Existing Agreement to an amount not to exceed $20,000,000,
together with certain other modifications to the terms and conditions set forth
therein. Furthermore, for administrative convenience and to assure proper
reflection of the terms and conditions of all prior amendments and modifications
to the Existing Agreement, as well as the above requested increase and
modifications, the parties desire to amend and restate the terms and conditions
of the Existing Agreement in their entirety with the terms and conditions set
forth herein.
NOW THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Bank and Borrower hereby agree that the
Existing Agreement shall be amended and restated in its entirety to read as
follows:
SECTION 1. DEFINITIONS
When used herein, the following terms shall have the following
meanings (such definitions to be equally applicable to both singular and plural
forms):
"Accounts" means all existing and hereafter arising or acquired
accounts, accounts receivable, notes, drafts, acceptances, chattel paper,
instruments, documents and other forms of obligations held by or payable to
Borrower relating to or arising from the sale of Inventory or the rendering of
services by Borrower, including, without limitation, the right to payment of
interest or finance charges, all rights of Borrower as an unpaid vendor, and all
pledged assets, credit insurance, guaranties, letters of credit and security
interests relating thereto. This definition includes, without limitation, the
definition of an "Account" as set forth in the Uniform Commercial Code.
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"Affiliate" of any Person means any other Person who, directly or
indirectly, controls or is controlled by or is under common control with such
Person. A Person shall be deemed to be "controlled by" any other Person who
possesses, directly or indirectly, power: (a) to vote 10% or more of the
securities having ordinary voting power for the election of directors of such
Person; or (b) to direct or cause the direction of the management and policies
of such Person, whether by contract or otherwise.
"Agreement" means this Amended and Restated Revolving Loan and
Security Agreement as the same may from time to time be amended, modified,
supplemented, renewed or restated.
"ASI" means Analytical Solutions, Inc., a New Mexico corporation and a
wholly-owned Subsidiary of the Borrower.
"Available Commitment" means, at any time, the Revolving Loan
Commitment minus the sum of (i) the aggregate principal amount of Revolving
Credit Loans then outstanding plus (ii) the Letter of Credit Obligations.
"Borrowing Base" means at any time the aggregate of:
(i) 85% of the value of the Net Amount of Eligible Accounts; plus
(ii) 25% of the value of Eligible Inventory; plus
(iii) 30% of the net book value of the Borrower's production Equipment
(excluding, however, any Consigned Equipment); plus
(iv) 25% of the net book value of the real property and improvements
encumbered by the NM Facility Mortgage or any other mortgage of the Borrower
granting to the Bank a first priority mortgage lien and security interest in and
to the real property and improvements encumbered thereby, in each case to secure
the Obligations.
For purposes of determining the Inventory component of the Borrowing Base, the
term "value" of Eligible Inventory shall mean the lower of cost or fair market
value determined by the Bank in its sole discretion, with cost determined on a
first in, first out basis.
"Borrowing Base Certificate" shall mean a certificate substantially in
the form of Exhibit 10.1(f) hereto.
"Business Day" means any day on which the Bank is open for business.
"Borrowing Notice" means a written, telecopied or telephonic notice to
the Bank by the Borrower in form and substance satisfactory to the Bank.
"Capital Expenditures" means any amounts paid or incurred in
connection with the purchase of plant, machinery, equipment or similar
expenditures (including any lease of any of the foregoing) which would be
required to be capitalized and shown on a balance sheet in accordance with GAAP.
"Capitalized Lease" means any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"Cash Equivalents and Marketable Securities" means (i) direct
obligations of, or obligations unconditionally guaranteed by, the United States
or any agency thereof maturing in less than one year from the date of purchase;
(ii) commercial paper bearing one of the two highest investment grades by
Moody's Investor's Service, Inc. and/or Standard and Poors Rating Service, a
division of ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. (iii) certificates of deposit due within
one year from the date of purchase, issued by any commercial bank, organized and
doing business under the laws of the United States or any state thereof having
capital surplus and undivided profits aggregating more than $100,000,000 and
otherwise meeting the applicable minimum risk capital levels required by the
applicable bank regulatory authority; and (iv) investments in money market funds
maintained by the Bank or any other entities reasonably satisfactory to the
Bank.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" is defined in Section 7, as supplemented by Section 7.5.
"Commitment Expiration Date" means January 31, 2003.
"Consigned Equipment" means the Equipment of the Borrower that is,
from time to time, subject to the consignment arrangements described in Schedule
8.5.1, or any other Equipment of the Borrower held from time to time by third
parties under similar arrangements.
"Contingent Obligation" means, as to any Person, any obligation of
such Person guaranteeing or in effect guaranteeing any Indebtedness, lease,
dividend or other obligation (the "primary obligations") of any other Person
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(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or not
contingent (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor or to permit the
primary obligor to meet financial covenants, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (d) otherwise to assure or hold harmless the owner of
any such primary obligation against loss in respect thereof; provided, however,
that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
"Core EBITDA" means, with respect to the Borrower, EBITDA, exclusive
of any gains or losses attributable to operations of any Unconsolidated
Affiliates.
"Default Rate" means a per annum rate of interest equal to the Prime
Rate plus an additional five percent (5%) per annum.
"Dollars" and "$" means dollars in lawful currency of the United
States of America.
"EBITDA" means, with respect to the Borrower, for any period, the sum
of (i) Net Income, (ii) Interest Expense, (iii) depreciation and amortization,
and (iv) provisions for Federal, state and local income taxes of the Borrower
based on income, computed in accordance with GAAP on a consolidated basis.
"Effective Net Worth" means, with respect to the Borrower, total
assets minus total liabilities, in each case determined in accordance with GAAP
on a consolidated basis.
"Eligible Accounts" means, without limiting the Bank's sole discretion
to determine Eligible Accounts, those Accounts created by the Borrower or any
Guarantor:
(i) which are genuine and not fraudulent;
(ii) which arise from undisputed, bona fide sales of goods and/or
services in the ordinary course of business completed in accordance
with the terms and provisions contained in any documents related
thereto;
(iii) as to which the amounts of such Accounts shown on any schedule
of Accounts provided to the Bank are actually and absolutely owing to
Borrower or the Guarantor, are not contingent for any reason and have
not remained unpaid for more than 90 days after the invoice date
thereof;
(iv) which do not arise from sales on consignment, guaranteed sale or
other terms under which payment by the Account debtor may be
conditional;
(v) which, in the case of Accounts where the Account debtor is a
non-resident of the United States or Canada, are secured by a letter
of credit issued by a bank that is reasonably acceptable to Bank,
provided, however, that Accounts where the Account debtor is any one
of Hakuto Co., Ltd., Hakuto Enterprises, Ltd., a wholly-owned
subsidiary of Hakuto Co., Ltd., Siemens AG, D.I. Systems, Philips AG,
▇▇▇▇▇▇▇, ▇.▇. Ericsson AB, Samsung Co., L.G. Semiconductor
Corporation, Hyundai Electronics, Daewoo Co. or Azea, ▇▇▇▇▇ and Bavari
(ABB) need not be secured by a letter of credit;
(vi) which do not consist of "▇▇▇▇ and hold" invoices or against
which deposits are held by the Account debtor thereunder;
(vii) with respect to which there are no set-offs, counterclaims or
disputes existing and there are no facts, events or occurrences which
in any manner would impair the validity or enforceability or
collectibility of such Accounts or reduce the amount payable or delay
payment thereunder;
(viii) as to which goods giving rise thereto are not, and were not, at
the time of the sale thereof, subject to any Liens except those
permitted by the Bank under this Agreement;
(ix) which are not Accounts with respect to which the Account debtor
is:
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i. an officer, employer or agent of the Borrower;
ii. the United States or any of its departments or
instrumentalities unless the Assignment of Claims Act has
been complied with;
iii. a Subsidiary or an Affiliate of the Borrower;
iv. a division of the Borrower; or
v. an Unconsolidated Affiliate;
(x) as to which there are no proceedings or actions which are
threatened or pending against the Account debtor of any such Account
which is reasonably likely to result in any material adverse change in
the Account debtor's financial condition;
(xi) which are owed by Account debtors deemed creditworthy and
acceptable at all times by the Bank in exercise of its reasonable
discretion; and
(xii) which otherwise constitute Collateral acceptable for lending
purposes in the sole discretion of the Bank.
"Eligible Inventory" means Inventory located at Borrower's facilities
at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, and the NM Facility and
comprising only of raw materials. Specifically excluded from the term "Eligible
Inventory" shall be work-in-process, finished goods, supplies, packing
materials, Inventory in transit, Inventory located in any location other than
the locations specified above (unless the Bank is satisfied it has a perfected
first priority security interest in such Inventory).
"Environmental Law" is defined in Section 8.8.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) which together with the Borrower would be deemed to be a single
employer under Section 414 of the Code.
"Equipment" means all equipment as such term in defined in the Uniform
Commercial Code and all accessories and parts that become part of the equipment
by accession, and all supplies used or to be used in connection therewith.
"Event of Default" means any of the events described in Section 11.1
of this Agreement.
"Existing Agreement" is defined in the Background Section of this
Agreement.
"Fiscal Year" means the fiscal year of the Borrower commencing October
1 of any calendar year and ending September 30 of the immediately succeeding
calendar year.
"GAAP" means generally accepted accounting principles in the United
States of America in effect from time to time, applied on a consistent basis.
"Governmental Authority" means any sovereign state, nation or
government, any state or other political subdivision thereof and any authority
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guarantor" shall be the collective reference to MODE, ASI and TSI.
"Guaranty" shall be the collective reference to the Guaranty dated
December 3, 1997 made by MODE and the Guaranty of ASI and TSI dated as of even
date herewith, in each case in favor of the Bank with respect to the Obligations
of the Borrower to the Bank, as the same may be affirmed, modified, amended, or
supplemented from time to time.
"Imputed Warrant Interest Expense" means, for any period of
determination, the non-cash interest expense of the Borrower in respect of the
Warrants determined in accordance with GAAP.
"Indebtedness" of any Person, means, at a particular date, the sum
(without duplication and in conformity with GAAP) at such date of (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (including, without limitation, all notes payable
and all obligations evidenced by bonds, debentures, notes or other similar
instruments but excluding trade payables incurred in the ordinary course of
business), (b) obligations with respect to any installment sale or conditional
sale agreement or title retention agreement, (c) indebtedness arising under
acceptance facilities, (d) unpaid reimbursement obligations arising in
connection with surety, performance or other similar bonds and in connection
with standby letters of credit issued in lieu of such bonds, (e) the outstanding
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amount of all other letters of credit (other than those referred to in clause
(d)) issued for the account of such Person and, without duplication, all unpaid
reimbursement obligations thereunder, (f) any lease obligation which is
capitalized on a balance sheet of the Borrower prepared in accordance with GAAP,
(g) net liabilities of such Person under interest rate cap agreements, interest
rate swap agreements, foreign currency exchange agreements and other hedging
agreements or arrangements, (h) Contingent Obligations of such Person and (h)
withdrawal liabilities of such Person or any Commonly Controlled Group (as such
term is defined in the Code) under a Plan.
"Interest Expense" means, for any period, the total interest expense
for such period (including, without limitation, that attributable to Capitalized
Leases in accordance with GAAP) of Borrower with respect to all outstanding
Indebtedness of Borrower including Imputed Warrant Interest Expense.
"Inventory" means all inventory of Borrower of every kind and
description, including, without limitation, all merchandise, raw materials,
parts, supplies, work-in-process and finished goods, together with all
accessions, attachments and other additions to, substitute for, replacements
for, improvements to and returns of such inventory, all accounts arising from
the disposition of inventory, containers, packing, packaging, shipping and
similar materials relating thereto.
"Lending Rate" means, with respect to each Revolving Loan, the lower
of (A) Prime Rate and (B) LIBOR Market Index Rate plus 150 basis points (1.50%).
Changes in the rate of interest charged hereunder shall become effective as of
the opening of business on the day on which such change in the Prime Rate or the
LIBOR Market Index Rate, as the case may be, is established.
"Letter(s) of Credit" means the one or more irrevocable standby
letters of credit issued from time to time by Bank at the request and for the
account of the Borrower in accordance with the terms hereof.
"Letter of Credit Agreement" means the Bank's standard form of
Application and Agreement for Irrevocable Standby Letters of Credit, as the same
may change from time to time.
"Letter of Credit Obligations" means, without duplication, the
aggregated stated amount of all Letters of Credit outstanding at any time and
all obligations of the Borrower to reimburse the Bank for any payments by the
Bank under any Letters of Credit in each case, at the time of determination of
said obligations.
"LIBOR Market Index Rate" means for any day, the rate for one (1)
month U.S. dollar deposits as reported on Telerate page 3750 as of 11:00 a.m.,
London time, on such day, or if such day is not a London business day, then the
immediately preceding London business day (or if not so reported, then as
determined by Bank from another recognized source or interbank quotation).
"Lien" means any mortgage, pledge, security interest, hypothecation,
assignment, deposit arrangement, encumbrance, or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction).
"Liquidity" means the sum of cash (in the form of Dollars) and Cash
Equivalents and Marketable Securities that is, in all cases, under the absolute
dominion and control of the Borrower and not subject to any Lien or any other
form of restriction as to use to satisfy the current liabilities of the
Borrower.
"Loan Documents" means, collectively, this Agreement, the Revolving
Note, each Letter of Credit Agreement, the Guaranty, the Security Agreement, the
NM Facility Mortgage, the NM Bond Pledge, and all other documents, instruments
and agreements delivered in connection herewith and therewith, as the same from
time to time may be amended, renewed, restated, supplemented or otherwise
modified.
"Material Adverse Effect" means any event or condition which is likely
to have a material adverse effect on the business operations, properties or
overall financial condition of the Borrower and its Subsidiaries, taken as a
whole, or the ability of the Borrower or any Guarantor to perform or comply with
any of their respective obligations under any of the Loan Documents.
"Maximum Credit" is defined in Section 2.1.
"MODE" means MicroOptical Devices, Inc., a Delaware corporation and a
wholly-owned Subsidiary of the Borrower.
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA contributed to by Borrower or an ERISA Affiliate or to which
the Borrower or an ERISA Affiliate has any obligation or liability.
"Net Amount of Eligible Accounts" means the gross amount of Eligible
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Accounts less sales, excise or similar taxes, and less returns, discounts,
claims, credits and allowances of any nature, at any time issued, owing,
granted, outstanding, available or claimed.
"Net Income" for any period means the net income (or net loss) of
Borrower for such period, determined in accordance with GAAP on a consolidated
basis.
"Net Loss In Unconsolidated Affiliates" means, with respect to the
Borrower, for the relevant period the net loss appearing as an expense on an
income statement of the Borrower prepared in accordance with GAAP, consistently
applied, attributable to its investment in Unconsolidated Affiliates.
"NM Facility" means that certain real property and improvements
located in the City of Albuquerque, County of Bernalillo, State of New Mexico,
as more fully described in the NM Facility Mortgage, which is occupied by the
Borrower pursuant to a certain long term lease dated June 1, 1998, by and
between the Borrower and the City of Albuquerque, New Mexico.
"NM Facility Bond Pledge" means that certain Bond Pledge Agreement,
dated as of November 30, 1999, given by EMCORE IRB Company, Inc. in favor of the
Bank with respect to the pledge of certain New Mexico taxable industrial revenue
bonds issued by the City of Albuquerque, New Mexico in connection with the
development of the NM Facility.
"NM Facility Mortgage" means that certain Mortgage and Security
Agreement, dated as of November 30, 1999, given by the Borrower in favor of the
Bank with respect to the Bank's first priority mortgage lien upon the NM
Facility.
"Obligations" means all of Borrower's liabilities, obligations and
Indebtedness to the Bank of any and every kind and nature (including, without
limitation, any and all reimbursement obligations owing to the Bank in respect
of this Agreement, the other Loan Documents, the Revolving Note, overadvances,
interest, commitment fees, charges, expenses, attorneys' fees and other sums
chargeable to Borrower by the Bank and future advances made to or for the
benefit of Borrower), including swap agreements (as defined in 11 U.S.C. ss.101)
whether arising hereunder or under the other Loan Documents or otherwise,
whether heretofore, now or hereafter owing, arising, due, or payable from
Borrower to the Bank and howsoever evidenced, created, incurred, acquired or
owing, whether primary, secondary, direct, contingent, fixed, or otherwise,
including obligations of performance.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Encumbrance" is defined in Section 10.5.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan" shall mean any employee benefit plan as defined in Section 3(3)
of ERISA which covers the employees or former employees of the Borrower or an
ERISA Affiliate, under which the Borrower or an ERISA Affiliate has any
obligation or liability or under which the Borrower or an ERISA Affiliate has
made contributions within the preceding five years, other than a Multiemployer
Plan.
"Prime Rate" means, on any date and with respect to all Obligations,
the rate of interest established by the Bank as its reference rate in making
loans, and is not tied to any external rate of interest or index. The rate of
interest charged hereunder in respect of the Prime Rate shall change
automatically and immediately as of the date of any change in the Prime Rate
without notice to the Borrower. The Prime Rate does not reflect the rate of
interest charged to any particular class of borrower nor is it necessarily
intended to be the lowest rate of interest determined by the Bank in connection
with extensions of credit. The Bank may make loans based on rates other than the
Prime Rate to any person, and these rates may be higher, lower or equal to the
prime rate or other reference rates used by the Bank as the Bank, shall from
time to time, in its sole discretion determine.
"Proceeds" means whatever is received when Collateral is sold,
exchanged, collected or otherwise disposed of, including, without limitation,
insurance proceeds.
"Quick Ratio" means with respect of the Borrower, for any period of
determination the ratio of (i) the sum of the Liquidity plus trade and non-trade
receivables (less any bad debt reserves) that are classified as current in
accordance with GAAP, whether or not evidenced by a promissory note to (ii) the
sum all of the Borrower's liabilities that are classified as current in
accordance with GAAP plus the long term portion of any debt due from the
Borrower to any of the Borrower's officers, employees, stockholders,
Subsidiaries or other Affiliates, which, in each case, are included in the
Borrower's current liabilities.
"Related Parties" has the meaning set forth in Section 8.9 hereof.
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"Reportable Event" shall mean any event set forth in Section 4043(b)
of ERISA or the regulations thereunder.
"Requirement of Law" means as to any Person, the certificate of
incorporation and bylaws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Revolving Loan Commitment" means, for the Bank, for the period from
and including the date hereof to but excluding the Commitment Expiration Date,
$20,000,000.
"Revolving Loan" has the meaning set forth in Section 2.1 hereof.
"Revolving Loan Maturity Date" means the earlier of (i) the day the
Loans are accelerated pursuant to Section 11.2, or (ii) the Commitment
Expiration Date.
"Revolving Note" is defined in Section 3.1.
"Security Agreement" shall be the collective reference to the Security
Agreement dated December 3, 1997 made by the MODE and the Security Agreement
dated even date herewith made by ASI and TSI, in each case in favor of the Bank,
as the same may be modified, amended or supplemented from time to time.
"Subordinated Debt" means any Indebtedness the terms (including,
without limitation, interest rate, equity participation, principal amount,
amortization, collateralization, covenants, events of default and subordination
and lien priority) of which are in form and substance acceptable to the Bank in
its sole discretion, do not affect the rights or Liens granted to the Bank
pursuant to this Agreement or any of the other Loan Documents and in respect of
which the Bank has received a Subordination Agreement in form and substance
satisfactory to the Bank duly executed by the holder of such Indebtedness.
"Subsidiary" means any Person in which more than fifty (50%) percent
of the voting power or equity ownership shall, at the time as of which such
determination is being made, be owned or controlled directly by Borrower or one
or more Subsidiaries.
"TSI" means Training Solutions, Inc., a New Mexico corporation and a
wholly-owned Subsidiary of the Borrower.
"Unconsolidated Affiliates" means UMcore LLC, the Borrower's joint
venture with Union Miniere Inc., GELcore LLC, the Borrower's joint venture with
General Electric Company, and Uniroyal Optoelectronics LLC, the Borrower's joint
venture with Uniroyal Technology Corporation, in each case so long as the
Borrower's investment in each such joint venture can be accounted for using the
equity method of accounting as a result of the Borrower's inability to directly
or indirectly control economic and voting interests in said joint ventures.
"Unmatured Event of Default" means any event which, if it continues
uncured will, with lapse of time or the giving of notice, or both, constitute an
Event of Default.
"Warrants" means the warrants listed on Schedule 1.1 attached hereto.
SECTION 2. TERMS OF REVOLVING LOANS
2.1. Revolving Loan Commitment; Maximum Credit. (a) Subject to the
terms and conditions of this Agreement, the Bank agrees (i) to make revolving
loans to Borrower (hereinafter collectively referred to as "Revolving Loans" and
individually as a "Revolving Loan") and (ii) issue Letters of Credit, up to the
Revolving Loan Commitment at any time during the period commencing the date
hereof to, but excluding, the Revolving Loan Maturity Date, in such amounts as
Borrower may from time to time request; provided, however, that the sum of the
aggregate outstanding principal amount of the Revolving Loans, plus the Letter
of Credit Obligations, when added to any requested Revolving Loans or Letter of
Credit, as the case may, be shall at no time exceed the lesser of (A) the
Available Commitment or (B) the Borrowing Base (the "Maximum Credit"); provided,
further that in no event shall the Letter of Credit Obligations, when added to
any requested Letter of Credit, exceed at any time $1,000,000. Subject to the
terms hereof, the Borrower may borrow, prepay and reborrow until the Revolving
Loan Maturity Date when all Revolving Loans shall be due and payable. The Bank
has no obligation to make any Revolving Loan or issue any Letter of Credit on or
after the Revolving Loan Maturity Date.
(b) Amendment and Restatement of Revolving Loan Commitment Under
Existing Agreement. The Revolving Loan Commitment herein provided shall amend
and restate the revolving loan commitment set forth in the Existing Agreement.
Accordingly, as of the effective date of this Agreement (i) the revolving loan
commitment set forth in the Existing Agreement shall be terminated and of no
further force and effect, (ii) the revolving loans outstanding under the
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Existing Agreement shall be refinanced with Revolving Loans incurred hereunder,
and (iii) the obligations of the Borrower with respect to such existing
revolving loans evidenced by the Revolving Note issued under the Existing
Agreement shall be deemed to be evidenced by the Revolving Note issued
hereunder. It is the intention of the parties hereto that the amendment,
restatement and refinancing of the existing revolving loan commitment under the
Existing Agreement with the Revolving Loan Commitment herein provided shall be
deemed to be a modification of the Borrower's obligations thereunder and not an
extinguishment or novation thereof.
2.2. Borrowing and Renewal Procedures. With respect to any proposed
Revolving Loan, the Borrower shall deliver a Borrowing Notice to the Bank by
2:00 p.m. on the date of such proposed borrowing. Subject to the satisfaction of
the conditions set forth in Sections 2.1 and 2.4, the Bank shall lend to
Borrower the amount specified in such Borrowing Notice, provided, however, that
each Revolving Loan shall be made only on a Business Day. In the event that any
Borrowing Notice is given to the Bank by telephone, such notice must be
confirmed by the Borrower via same day facsimile. All Revolving Loans shall be
credited to an account of the Borrower maintained by the Bank.
2.3. Borrowing Warranty. Each Borrowing Notice delivered to the Bank
pursuant to Section 2.2 shall constitute a warranty and representation to the
Bank that, as of the date of such Borrowing Notice and the date of the borrowing
proposed in such Borrowing Notice, all of the following are true and correct:
(a) the representations and warranties of the Borrower set forth in Section 8
below are true and correct, (b) the covenants of the Borrower set forth in
Section 10 below have been complied with and are true and correct, and (c) no
Event of Default or Unmatured Event of Default shall have occurred or will
result from the Revolving Loan described in or the transaction contemplated by
such Borrowing Notice.
2.4. Borrowing Conditions. Notwithstanding anything contained in this
Agreement to the contrary, the Bank shall have no obligation to make any
Revolving Loan if an Event of Default or Unmatured Event of Default (a) shall
exist on the date of such proposed borrowing or (b) shall result from the making
of such Revolving Loan.
2.5. Procedures for Letters of Credit.
(A) Issuance of Letters of Credit. Within the Available
Commitment, until the Commitment Expiration Date, and provided that no
Event of Default shall have occurred and be continuing or would result
from the issuance of a Letter of Credit and subject to the limitations
of Section 2.1, the Bank may issue Letters of Credit for the account
of Borrower on the terms hereinafter set forth. No Letter of Credit
shall have a term in excess of 365 days and, in any event, an expiry
date beyond the Commitment Expiration Date. Each of the Letters of
Credit shall be issued in a form satisfactory to the Bank and pursuant
to a Letter of Credit Agreement duly executed by the Borrower. The
terms and conditions of the Letter of Credit Agreement(s) are hereby
incorporated herein by reference as if fully set forth at length. The
Borrower shall pay to the Bank any and all fees imposed by Bank in
connection with the issuance of Letters of Credit.
(B) Payments under Letters of Credit and Reimbursement by
Borrower. In the event of a drawing under any Letter of Credit and
payment by the Bank, the Borrower shall immediately reimburse the Bank
therefor, together with any fees in connection therewith, which may be
made by a charge against any of the Borrower's accounts with the Bank.
If the Borrower shall not so reimburse the Bank as provided above,
such failure shall be an Event of Default and the Borrower shall pay
to the Bank interest on the amount of such payment from the date of
such payment by the Bank or the failure of the Borrower to so
reimburse the Bank, as applicable, through and including the date of
such reimbursement by the Borrower at the Default Rate.
(C) Letter of Credit Obligations Absolute. The Borrower's
obligations to make payments to the Bank in order to reimburse
payments by the Bank on Letters of Credit as provided in Subsection
2.5(B) above shall be absolute, unconditional and irrevocable, and
shall be performed strictly in accordance with the terms of this
Agreement and the Letter of Credit Agreement(s), under any and all
circumstances whatsoever, and irrespective of:
(i) any lack of validity or enforceability of any Letter of Credit or
any Loan Document, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure from all
or any of the provisions of any Letter of Credit or any Loan Document
to which the Bank is not a party;
(iii) the existence of any claim, setoff, defense or other right that
the Borrower, the Guarantor, any other party guaranteeing, or
otherwise obligated with, the Borrower, any Affiliate thereof or any
other Person may at any time have against the beneficiary under any
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Letter of Credit, the Bank or any other Person, whether in connection
with this Agreement, any other Loan Document or any other related or
unrelated agreement or transaction;
(iv) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;
(v) payment by the Bank under a Letter of Credit against presentation
of a draft or other document that does not comply with the terms of
such Letter of Credit; and
(vi) any other act or omission to act or delay of any kind of the
Bank, or any other person or any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that
might, but for the provisions of this section, constitute a legal or
equitable discharge of the Borrower's obligations hereunder.
It is understood that the Bank may accept documents that appear on
their face to be in order, without responsibility for further
investigation, regardless of any notices or information to the
contrary and, in making any payment under any Letter of Credit (i) the
Bank's exclusive reliance on the documents presented to it under such
Letter of Credit as to any and all matters set forth therein,
including reliance on the amount of any drafts presented under such
Letter of Credit, whether or not the amount due to the beneficiary
thereunder equals (but does not exceed) the amount of such draft and
whether or not any document presented pursuant to such Letter of
Credit proves to be forged or invalid or any statement therein proves
to be inaccurate or untrue in any respect whatsoever and (ii) any
noncompliance in any immaterial respect of the documents presented
under such Letter of Credit with the terms thereof shall, in each
case, be deemed not to constitute willful misconduct or gross
negligence of the Bank.
(D) Outstanding Letter of Credit Obligations. In addition to the
provisions of this Section 2.5 (B), upon an Event of Default, the full
amount of all Letter of Credit Obligations shall be deemed to increase
the principal amount deemed outstanding under as Revolving Loans (and
any unpaid interest thereon and on unpaid letter of credit fees shall
be deemed principal of a Revolving Loan), for purposes of (x)
distribution of payments hereunder and (y) application of proceeds
realized upon the exercise of remedies hereunder or under any Loan
Document; provided, however, if any such Letter of Credit thereafter
expires without being drawn upon, the amount thereof shall reduce the
principal amount deemed outstanding under the Revolving Loans (as
previously increased pursuant to this subsection (D)) and the
distributions of payments and proceeds to the Bank shall be adjusted
accordingly.
2.6. Issuance Warranty. Each request for a Letter of Credit pursuant
to Section 2.5(A) shall constitute a warranty and representation to the Bank
that, as of the date of such request and the date of the issuance of any such
Letter of Credit, all of the following are true and correct: (a) the
representations and warranties of the Borrower set forth in Section 8 below are
true and correct, (b) the covenants of the Borrower set forth in Section 10
below have been complied with and are true and correct, and (c) no Event of
Default or Unmatured Event of Default shall have occurred or will result from
the issuance of any such Letter of Credit described in or the transaction for
which such Letter of Credit is being issued.
2.7. Issuance Conditions. Notwithstanding anything contained in this
Agreement to the contrary, the Bank shall have no obligation to issue any Letter
of Credit if an Event of Default or Unmatured Event of Default (a) shall exist
on the date of such proposed issuance or (b) shall result from the issuance of
such Letter of Credit.
SECTION 3. NOTE EVIDENCING REVOLVING LOANS
3.1. Promissory Note. The Revolving Loans shall be evidenced by an
Amended and Restated Secured Revolving Note (the "Revolving Note"), executed on
and dated the date hereof, in the principal amount of up to $20,000,000 made by
the Borrower in favor of the Bank. The outstanding principal balance of the
Revolving Note plus all accrued and unpaid interest shall be due and payable on
the Revolving Loan Maturity Date.
3.2. Recordkeeping. The Bank shall record, in accordance with its
usual and customary practices, the date and amount of each Revolving Loan, and
the interest rate. The Bank may, at its option, record such information on the
schedule attached to the Revolving Note. The Bank's records (including such
schedule) shall be presumptive evidence of the subject matter thereof. The
Bank's failure to so record any such amount or any error in so recording any
such amount shall not limit or otherwise affect the Obligations or any part
thereof.
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SECTION 4. INTEREST; ADMINISTRATION OF REVOLVING LOANS
4.1. Interest Rate. With respect to each Revolving Loan, the Borrower
promises to pay interest on the unpaid principal amount thereof for the period
commencing on the date of such Revolving Loan until such Revolving Loan is paid
in full at a rate per annum equal to the Lending Rate. Notwithstanding anything
contained in this Agreement or the Revolving Note to the contrary, with respect
to each Revolving Loan, after the Revolving Loan Maturity Date on upon the
occurrence and during the continuance of an Event of Default, the Borrower shall
pay interest to the Bank at a rate per annum equal to the Default Rate.
4.2. Payment of Interest. Interest on each of the Revolving Loans
shall be payable monthly, in arrears, on the first Business Day of each calendar
month and on the Revolving Loan Maturity Date. After the Revolving Loan Maturity
Date (whether by acceleration or otherwise) or upon the occurrence and during
the continuance of an Event of Default, accrued interest on all Revolving Loans
shall be payable on demand.
4.3. Late Payment. Any payment of principal or interest not received
within ten days of its due date shall be accompanied by a late charge of three
percent (3%) of the amount of such payment.
4.4. Maximum Interest. In no event shall any interest to be paid
hereunder exceed the maximum rate permitted by law. In the event the interest
rate paid hereunder exceeds the maximum rate permitted by law, the Loan
Documents (including the Revolving Note) shall automatically be deemed amended
to permit interest charges at an amount equal to, but no greater than the
maximum permitted by law.
4.5. Computation of Interest. The interest chargeable hereunder shall
be computed on the basis of a 360-day year for the actual number of days in the
interest period ("Actual/360 Computation"). The Actual/360 Computation
determines the annual effective interest yield by taking the stated (nominal)
interest rate for a year's period and then dividing said rate by 360 to
determine the daily periodic rate to be applied for each day in the interest
period. Accordingly, the Borrower acknowledges that the application of the
Actual/360 Computation produces an annualized effective interest rate exceeding
that of the nominal rate.
SECTION 5. PREPAYMENTS
5.1. Voluntary Prepayments. Borrower may, from time to time, prepay
the Revolving Loans in whole or in part, provided that each partial prepayment
shall be in a minimum principal amount of $100,000 (or any integral multiple of
$50,000 in excess thereof), and any prepayment of the entire principal amount of
all Revolving Loans shall include accrued interest to the date of prepayment.
5.2. Mandatory Prepayments. The sum of the outstanding aggregate
principal amount of the Revolving Loans plus the Letter of Credit Obligations
shall not exceed the Maximum Credit at any time. Without limiting the Bank's
rights to demand payment of the Obligations in accordance with the terms of this
Agreement, in the event that at any time the sum of the aggregate amount of the
outstanding Revolving Loans plus the Letter of Credit Obligation exceed the
Maximum Amount (such excess is referred to herein as an "Overadvance"), such
Overadvance shall be payable and the Borrower shall pay to the Bank the entire
amount of such Overadvance (plus interest thereon) immediately upon the Bank's
demand for such amounts.
SECTION 6. PAYMENTS AND FEES
6.1. Making of Payments. All payments (including prepayments pursuant
to Section 5 above) of principal of, or interest on, the Revolving Loans,
together with all other Obligations, shall be made without set off, deduction or
counterclaim in Dollars when stated to be due by the Borrower to the Bank in
immediately available funds. All payments in respect of Obligations required to
be made hereunder and under the other Loan Documents shall be debited by the
Bank from a demand deposit account maintained by the Borrower with the Bank. The
Borrower agrees that in addition to any other rights of setoff granted to the
Bank in the Loan Documents, at the Bank's option, all principal, interest, fees,
costs or other charges with respect to the Revolving Loans and the Loan
Documents and the proceeds of any and all Revolving Loans made by the Bank to
the Borrower may be charged directly to the Borrower's account maintained by the
Bank; provided, that the foregoing shall not limit the recourse of the Bank to
any source of funds.
6.2. Commitment Fee. [INTENTIONALLY DELETED]
6.3. Origination Fee. In consideration of the renewal and increase of
the Maximum Credit contemplated herein, the Borrower shall pay to the Bank an
origination fee in the amount of $50,000.00, said fee to be due and payable upon
the execution and delivery of this Agreement.
6.4. Due Date. If any payment of principal or interest with respect to
any Revolving Loans falls due on a day which is not a Business Day, then such
date shall be extended to the next Business Day and additional interest shall
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accrue and be payable for the period of such extension.
6.5. Payments in Respect of Increased Costs. In the event that the
Bank shall have determined that any Requirement of Law regarding reserves,
capital adequacy, special deposit or other similar requirement(s) or any change
therein or in the interpretation or application thereof or compliance by the
Bank with any request or directive regarding any such requirements (whether or
not having the force of law, so long as the Bank reasonably believes that
compliance therewith is necessary) from any central bank or Governmental
Authority, does or shall have the effect of reducing the rate of return on the
Bank's capital as a consequence of its Commitment or any of its obligations
hereunder to a level below that which the Bank could have achieved but for such
law or change or compliance (taking into consideration such Bank's policies with
respect to capital adequacy or other similar requirements) by an amount deemed
by the Bank in the exercise of reasonable discretion to be material, then from
time to time, upon submission by the Bank to the Borrower of a written demand
therefor which sets forth in reasonable detail the basis for such request and
the computation of the amount requested (the amounts set forth in any such
demand shall be presumptive evidence thereof, absent manifest error), the
Borrower shall pay to the Bank such additional amount or amounts as will
compensate the Bank for such increased cost relating to this Agreement from the
date of such event, together with any late charge applicable thereto as provided
in Section 4.3 hereof and thereafter such similar payments requested by the Bank
on the basis set forth above.
SECTION 7. SECURITY; INSPECTIONS
7.1. Security Interests. To secure to the Bank the prompt and full
payment of all of the Obligations, the Borrower hereby grants the Bank a
continuing first priority and only security interest in and lien upon the
following of Borrower's described property, wherever the same may now or
hereafter be located, now existing or owned and hereafter arising or acquired:
(i) all Accounts; (ii) all Chattel Paper; (iii) all contract rights; (iv) all
Documents; (v) all General Intangibles but only as they relate to the Accounts,
Inventory and Equipment of Borrower (including, without limitation, all trade
secrets, trade names, copyrights, copyright applications, patent applications,
patents, trademarks, trademark registrations and applications therefor); (vi)
all Instruments but only as they relate to Accounts, Inventory and Equipment of
Borrower; (vii) all Equipment; (viii) all Inventory; (ix) to the extent not
otherwise included in clause (vii) above, all other machinery, apparatus,
equipment, fittings, furniture and furnishings now or hereafter located upon the
real property of the Borrower, or any part thereof, and used or usable in
connection with any future occupancy or use of such property; (x) any and all
deposits (general or special, including, but not limited to, indebtedness
evidenced by certificates of deposit, whether matured or unmatured but not
including trust accounts) and any other indebtedness at any time held or owing
by the Bank to or for the credit or the account of the Borrower; (xi) any and
all claims or payments made under any insurance policy; (xii) all interest of
the Borrower in any goods, the sale or lease of which shall have given or shall
give rise to, and in all guaranties and other property securing the payment of
or performance under, any Accounts, contracts, General Intangibles or any
Chattel Paper or Instruments referred to above; (xiii) all replacements,
substitutions, additions or accessions to or for any of the foregoing; (xiv) to
the extent related to the property described above, all books, correspondence,
credit files, records, invoices and other papers and documents, including,
without limitation, to the extent so related, all tapes, cards, computer runs,
computer programs and other papers and documents in the possession or control of
the Borrower or any computer bureau from time to time acting for the Borrower;
and (xv) all property or interests in property of the Borrower which now may be
owned or hereafter may come into the possession, custody or control of the Bank,
or any agent or affiliate of the Bank (whether for safekeeping, deposit,
custody, pledge, transmission, collection or otherwise), including, without
limitation, all rights and interests of the Borrower in respect of any and all
(a) notes, drafts, letters of credit, stocks, bonds, and debt and equity
securities, whether or not certificates, and warrants, options, puts, calls and
other rights to acquire or otherwise relating to the same, (b) cash, and (c)
proceeds of loans, advances and other financial accommodations, including,
without limitation, loans, advances and other financial accommodations made or
extended by the Bank; and (xviii) to the extent not otherwise included, all
Proceeds and products of any and all of the foregoing (collectively, the
"Collateral"). The Borrower shall make appropriate entries upon its financial
statements and books and records disclosing Bank's security interest in the
Collateral. The Bank shall file, and Borrower consents to such filing, the
appropriate forms to perfect its security interest in the Collateral in
accordance with the New Jersey Uniform Commercial Code. All capitalized terms
used in this Section 7.1 and not otherwise defined herein shall have the
meanings set forth in the New Jersey Uniform Commercial Code; provided, however,
that the Bank shall not file a UCC-1 Financing Statement evidencing its security
interest in the Collateral in any jurisdiction other than the State of New
Jersey unless the dollar value of the Collateral in such other jurisdiction
exceeds $500,000 at anytime.
7.2. Trademarks and Licenses. The Borrower further grants to the Bank,
an irrevocable, non-exclusive license at no charge to use the trademarks,
patents, copyrights and licenses used in connection with the sale of its goods
including, without limitation, those listed on Schedule 7.2 annexed hereto (the
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latter, the "Trademarks") associated with the Collateral in connection with any
foreclosure or liquidation together with the right to grant a non-exclusive
sublicense, without charge, to any buyer of such Collateral for the purpose of
resale. As used herein, the term "Trademarks" includes all computer programs,
and other Collateral used in connection with such Trademarks.
7.3. Maintenance; Right of Inspection. The Borrower shall maintain at
its own cost and expense, reasonably satisfactory and complete records of the
Collateral, including, without limitation, a record of all payments received and
all credits granted with respect to the Collateral. The Borrower shall ▇▇▇▇ its
books and records pertaining to the Collateral to evidence the security
interests granted hereunder. The Bank shall have the right (exercisable with
reasonable frequency), at any time during normal business hours on reasonable
notice to inspect the Collateral and all related records.
7.4. Right of Set off. The Borrower hereby grants to the Bank a
contractual possessory security interest in and hereby assigns, conveys,
delivers, pledges and transfers to the Bank all of the Borrower's right, title
and interest in and to, the Borrower's accounts with the Bank whether existing
now or hereafter arising, including, without limitation all accounts held
jointly with a third party. The Borrower authorizes the Bank to charge or set
off any Obligations against any such accounts.
7.5. Additional Collateral. Without limiting the generality of Section
7.1 above, the defined term "Collateral" shall also include, but is not limited
to, all of the real and personal property encumbered by the Lien created by the
NM Facility Mortgage, the NM Facility Bond Pledge and the Security Agreement.
SECTION 8. REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and to make the
Revolving Loans herein provided for, the Borrower makes the following
representations and warranties to the Bank:
8.1. Capacity. The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey and has
obtained all necessary governmental and corporate authorizations and consents
necessary to execute and deliver the Loan Documents and has full power and
capacity to execute and deliver the Loan Documents and to perform all
Obligations thereunder.
8.2. No Conflict. The execution and delivery of the Loan Documents and
the performance by the Borrower of all obligations under the Loan Documents do
not and will not contravene or conflict with any Requirements of Law applicable
to Borrower or of any other agreement binding upon the Borrower or any of its
assets, except for such contraventions or conflicts that will not cause a
Material Adverse Effect.
8.3. Title; No Other Liens. The Borrower has good and marketable title
to the Collateral subject only to Permitted Encumbrances. Other than with
respect to Permitted Encumbrances, no security agreement, financing statement or
other public notice with respect to all or any part of the Collateral is on file
or of record in any public office except as to which UCC-3 termination
statements have been received or which have expired and not been renewed. The
appropriate financing statements have been filed by the Bank in the
jurisdictions listed on Schedule A hereto against the Borrower, and the Liens
granted pursuant to this Agreement constitute perfected first priority liens (to
the extent such liens can be perfected by filing) on the Collateral in favor of
the Bank, which are prior to all other liens on the Collateral created by the
Borrower (other than certain Permitted Encumbrances that, by operation of law,
are prior to the Lien of the Bank in the specific Collateral in question) and
which are enforceable as such against all creditors of the Borrower.
8.4. Accounts. All Accounts of the Borrower represent sums due for
services rendered or goods provided and are enforceable obligations collectible
by the Borrower in the normal course of business.
8.5. Inventory and Equipment. All Inventory and Equipment of the
Borrower is kept at the locations set forth on Schedule 8.5 hereof and at no
other locations (all premises listed on Schedule 8.5 which are leased and/or are
warehouses are hereinafter referred to as the "Leased Premises"); provided,
however, that some Inventory may, upon purchase by the Borrower, be in transit
and in all such cases, all actions necessary to perfect the Bank's security
interest in such Inventory shall be taken by the Borrower, including, without
limitation, delivery to the Bank (with any necessary endorsements) of all
documents of title, bills of lading and warehouse receipts in respect thereof.
All Eligible Inventory of the Borrower is and will be of good and merchantable
quality, free from defects. No Inventory or Equipment is subject to any Lien
except for the security interest of Bank hereunder or Permitted Encumbrances.
Borrower hereby agrees that to the extent Inventory or Equipment is now, and at
any time hereafter be, stored with a bailee, warehouseman or similar party
without Bank's prior written consent and, if Bank gives such consent, Borrower
will concurrently therewith cause any such bailee, warehouseman or similar party
to issue and deliver to Bank, in form and substance acceptable to Bank,
warehouse receipts therefor in Bank's name. No Inventory or Equipment, to the
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extent Borrower wishes it to be included in the calculation of the Borrowing
Base, is now and nor shall be located at leased premises by the Borrower unless
the Bank receives a Landlord's Waiver and Consent, in form and substance
satisfactory to the Bank. No Equipment is under consignment to or from any
Person other than in accordance with the arrangements described is Schedule
8.5.1 or under similar arrangements in compliance with Section 10.27 hereof. All
Equipment is currently usable or currently saleable in the Borrowers' business
other than obsolete Equipment not reflected in the Financial Statements.
8.6. Validity and Binding Nature. The Loan Documents constitute legal,
valid and binding obligations of the Borrower enforceable against the Borrower
in accordance with their respective terms.
8.7. Litigation. Except as set forth on Schedule 8.7, no litigation,
arbitration proceedings or governmental proceedings are pending or known to be
threatened against the Borrower and no material development not so disclosed has
occurred in any litigation, arbitration proceedings or governmental proceedings
so disclosed, which would, if adversely determined as to the Borrower, cause a
Material Adverse Effect.
8.8. Environmental Matters. The Borrower, including its tenants, users
and uses of its property, is in full compliance with all federal, state, county
and municipal environmental laws, ordinances, rules, regulations and
requirements ("Environmental Law"), except where non-compliance with such
Environmental Laws would not have a Material Adverse Effect. There are no liens
or threatened liens against Borrower, its property or its tenants, users and
uses pursuant to any Environmental Law. If it is revealed that the Borrower or
its property, tenants, users or uses, are not in full compliance with any
Environmental Law the non-compliance with which would have a Material Adverse
Effect or that conditions exist, or may exist, at the property which are not
reasonably satisfactory to the Bank in its sole discretion, Borrower will
undertake, at its sole cost and expense, whatever actions are necessary to bring
Borrower, its property, tenants, users and uses into compliance with
Environmental Law and to correct any environmental condition unsatisfactory to
the Bank to the satisfaction of the Bank in its sole discretion and to the
satisfaction of federal, state, county and local environmental authorities.
8.9. Employee and Other Loans. Schedule 8.9 attached hereto lists (i)
all loans made by the Borrower to its partners, agents, directors, officers and
employees, Affiliates and other related parties (the "Related Parties"), and
(ii) the loans made by Related Parties to the Borrower, the principal balance of
the loans and the interest payable thereon and the amount of each monthly
payment required to be made thereon. All of the loans referred to in clause (ii)
have been subordinated to the Obligations on terms satisfactory to the Bank.
8.10. ERISA. (a) Compliance with ERISA. The Borrower and each of its
ERISA Affiliates is in compliance in all material respects with the applicable
provisions of ERISA and the Code with respect to each Plan.
(b) Prohibited Transactions. The Borrower has not engaged in a
transaction in connection with which the Borrower or the ERISA Affiliate could
be subject to a material liability for either a civil penalty assessed pursuant
to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code.
(c) Plan Termination. There has been no termination of a Multiemployer
Plan or trust created under any Multiemployer Plan that would give rise to
liability to the PBGC on the part of the Borrower or an ERISA Affiliate. No
liability to the PBGC has been or is expected to be incurred with respect to any
Multiemployer Plan by the Borrower or an ERISA Affiliate. The PBGC has not
instituted proceedings to terminate any Multiemployer Plan. There exists no
condition or set of circumstances which presents a material risk of termination
of any Multiemployer Plan by the PBGC.
(d) Employee Pension Benefit Plans. Neither the Borrower nor any ERISA
Affiliate has any obligation or liability under, or contributed within the
preceding five years to, an employee pension benefit plan with the meaning of
Section 3(2) of ERISA.
(e) Withdrawal Liability. Neither the Borrower nor any ERISA Affiliate
has made a complete or partial withdrawal from a Multiemployer Plan. To the best
knowledge of the Borrower, the aggregate liability to which the Borrower or any
ERISA Affiliate would become subject under ERISA if the Borrower and all ERISA
Affiliates were to withdraw completely from all Multiemployer Plans as of the
most recent valuation date, together with any secondary liability for withdrawal
liability the Borrower and any ERISA Affiliate may have as of the date hereof,
would not have a material adverse effect on the business, operations, property
or financial or other condition of the Borrower and its ERISA Affiliates, taken
as a whole. To the best knowledge of the Borrower, no such Multiemployer Plan is
in reorganization (as such term is defined in Section 4241 of ERISA) or is
insolvent (as such term is defined in Section 4245 of ERISA).
(f) Retiree Welfare Benefits. The Borrower does not provide
post-retirement health, medical and other welfare benefits for retired employees
of the Borrower.
8.11. Tradenames. Certain Accounts may be and/or certain of the
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Borrower's invoices may be, from time to time, rendered to customers under the
trade names listed on Schedule 8.11 (which together with any new trade names
used after the date hereof are referred to collectively, as the "Trade Names"
and individually, as a "Trade Name"). As to such Trade Names and the related
Accounts, the Borrower hereby warrants and agrees that:
(i) each Trade Name is a trade name and style (and not the name of an
independent corporation or other legal entity) by which the
Borrower may identify and sell certain of its goods or services
and conduct a portion of its business and Borrower has filed or
made all public or other notices in any jurisdiction required to
lawfully operate under such Trade Names except in those
jurisdictions, if any, where the failure to file would not have a
Material Adverse Effect;
(ii) all Accounts, Chattel Paper and proceeds thereof and returned
merchandise which arise from the sale of goods invoiced under the
Trade Names are and shall be (x) owned solely by the Borrower and
(y) subject to the security interest and other terms of this
Agreement and the other Loan Documents;
(iii) new Trade Names may only be used by the Borrower after the Bank
is given fifteen (15) days prior written notice of the use of any
such new Trade Name, which notice shall set forth the name of
such new Trade Name; and
(iv) the Borrower does not use any Trade Name other than the Trade
Names listed on Schedule 8.11 hereto.
8.12. Subsidiaries. As of the date hereof, the Borrower has no
Subsidiaries except for Guarantor, EMCORE IRB Company, Inc. ("IRB") and EMCORE
Real Estate Holding Corp. ("Holdings"). Holdings is a wholly-owned Subsidiary of
the Borrower organized and existing solely for the purpose of owning the
Borrower's facility located at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇. IRB
is a wholly-owned Subsidiary of the Borrower organized and existing solely to
purchase and fund certain taxable industrial revenue bonds issued by the City of
Albuquerque, New Mexico in connection with the development of the NM Facility
and certain other related facilities occupied and operated by the Borrower. No
other business activities are conducted, and no other material assets are held
or possessed, directly or indirectly in or through Holdings or IRB.
8.13. Financial Statements. The audited annual financial statements
for the fiscal year ended September 30, 2000 (the "Financial Statements") that
have been delivered by the Borrower to the Bank were prepared in conformity with
GAAP, consistently maintained throughout the period involved and are correct and
complete and fairly present the financial condition and the results of
operations of the Borrower as of the dates and for the periods thereof. The
Borrower does not have any direct liabilities or Contingent Liabilities not
disclosed in such statements. Since September 30, 2000, there has been no
material adverse change in the Financial Statements.
Neither the Financial Statements referred to above nor any other
statement or report furnished or made available to the Bank by or on Borrower's
behalf in connection with the negotiation or confirmation of the transactions
contemplated herein contain, as at the time such statements were furnished, any
untrue statement of a material fact or any omission of a material fact necessary
to make the statements contained therein not misleading, and all such statements
and reports, taken as a whole together with this Agreement, do not contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements contained herein or therein not misleading.
8.14. Tax Matters. The Borrower has filed all tax returns and reports
required to be filed by it with all federal, state or municipal authorities and
has paid in full or made adequate provision for the payment of all taxes,
interest, penalties, assessments or deficiencies shown to be due or claimed to
be due on or in respect of such tax returns and reports, except such amounts as
Borrower is contesting in good faith and against which Borrower has established
and maintains adequate reserves in accordance with GAAP.
8.15. Ownership of Property; Liens. The Borrower has good and
marketable title to its all of its property and assets both real and personal
and assets free and clear of any Liens other than Permitted Encumbrances.
8.16. Compliance With Requirements of Law. The Borrower is in
compliance with all Requirements of Law, except where such instances of
non-compliance are consistent with its normal operations and past practices and
in any event could not reasonably be expected to have a Material Adverse Effect.
The Borrower has all permits, certificates, licenses, approvals and other
authorizations required in connection with the operation of its business. No
notice has been issued and no investigation or review is pending or threatened
by any Governmental Authority (i) with respect to any alleged violation by
Borrower of any law, ordinance, regulation, order, policy or guideline of any
Governmental Authority, (ii) with respect to any alleged failure to have all
permits, certificates, licenses, approvals and other authorizations required in
connection with the operation of the business of the Borrower which will have a
Material Adverse Effect.
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8.17. Investment Company Act. The Borrower is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
8.18. Margin Stock. The Borrower does not own nor presently intends to
acquire any Margin Stock. Neither the Borrower, nor any agent acting on behalf
of the Borrower has taken any action which might cause this Agreement or any of
the other Loan Documents or any of the transactions contemplated hereby or
thereby to violate Regulation U or any other regulation of the Board of
Governors of the Federal Reserve System.
8.19. General Collateral Representation. (a) With respect to the
Collateral, at the time the Collateral becomes subject to the Bank's security
interest, the Borrower is and at all times will be the sole owner of and have
good and marketable title to the Collateral, free from all Liens, in favor of
any Person other than the Bank except Permitted Encumbrances, and has full right
and power to grant the Bank a security interest therein. All information
furnished to the Bank concerning the Collateral is and will be complete,
accurate and correct in all material respects when furnished;
(b) No security agreement, financing statement, equivalent security or
Lien instrument or continuation statement covering all or any part of the
Collateral is on file or of record in any public office, except such as may have
been filed (i) by such Borrower in favor of Bank pursuant to this Agreement, or
(ii) in respect of the items of Collateral subject to the Permitted
Encumbrances;
(c) The Agreement and the other Loan Documents constitute, as of the
date hereof, a valid and continuing first lien on and first security interest in
the Collateral in favor of Bank, prior to all other Liens in favor of others and
rights of others (except the Permitted Encumbrances) which are enforceable as
such as against creditors of and purchasers from Borrower and as against any
owner of the real property where any of the Equipment is located and as against
any purchaser of such real property and any present or future creditor obtaining
a Lien on such real property. All action necessary to protect and perfect such
security interest in each item of the Collateral has been duly taken, provided
that the Bank has filed the UCC financing statements in the offices listed on
Schedule A hereto; and
(d) No person now having possession or control of any of the
Collateral consisting of Inventory or Equipment has issued, in receipt therefor,
a negotiable ▇▇▇▇ of lading, warehouse receipt or other document of title.
8.20. Accounts.
(a) As to each and every Eligible Account of Borrower is a bona fide
existing obligation, valid and enforceable against the Account debtor for a sum
certain for sales of goods shipped or delivered, or goods leased, or services
rendered in the ordinary course of business;
(b) all supporting documents, instruments, chattel paper and other
evidence of Indebtedness, if any, delivered to the Bank are complete and correct
and valid and enforceable in accordance with their terms, and all signatures and
endorsements that appear thereon are genuine, and all signatories and endorsers
have full capacity to contract;
(c) the Account debtor is liable for and is obligated to make payment
of the amount expressed in such Account according to its terms;
(d) it will be subject to no discount, allowance or special terms of
payment without the prior approval of the Bank;
(e) it is subject to no dispute, defense or offset, real or claimed;
(f) it is not subject to any prohibition or limitation upon
assignment; and
(g) Borrower has full right and power to grant the Bank a security
interest therein and the security interest granted in such Account to the Bank
in Section 7 hereof, when perfected, will be a valid first priority and only
security interest which will inure to the benefit of the Bank without further
action.
SECTION 9. CONDITIONS TO EFFECTIVENESS
This Agreement, and the increase in the Maximum Credit herein
contemplated, shall be deemed effect upon satisfaction of the following
conditions precedent, as determined by the Bank in its sole discretion:
(a) No Default. (i) No Event of Default or Unmatured Event of Default
has occurred or will result from the making of such Revolving Loan, (ii) the
representations and warranties of the Borrower contained in Section 8 are true
and correct as of the date of such requested Revolving Loan, with the same
effect as though made on the date of such Revolving Loan, and (iii) the
covenants of the Borrower contained in Section 10 have been complied with as of
the date of the requested Revolving Loan.
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(b) Other Loan Documents. The Bank shall have received executed
counterparts of this Agreement by the Borrower and the following additional
documents prior to the execution hereunder:
(1) Revolving Note and the other Loan Documents to be executed and
delivered in connection with this Agreement to which Borrower is
a party, duly executed and delivered by the Borrower;
(2) Certificates of insurance with acceptable lender's loss payee,
lender's loss payable and additional insured endorsements;
(3) A Guaranty and Security Agreement of ASI and TSI, in the form
proposed by the Bank, together with related UCC financing
statements in proper form for filing in the State of New Mexico,
in each case duly executed and delivered by ASI and TSI;
(4) Opinion of Counsel for the Borrower in form and substance
satisfactory to the Bank;
(5) UCC, judgment, and federal and state tax lien search report on
the Borrower and each Guarantor from the Department of Treasury
of New Jersey, Somerset County, New Jersey and the Secretary of
State of New Mexico;
(6) Title search reports of the real estate records of City of
Albuquerque, New Mexico with respect to the NM Facility;
(7) Good Standing Certificates of the Borrower from the Secretary of
State of New Jersey and Good Standing Certificates of each
Guarantor from the Secretary of State of Delaware and New Mexico,
as applicable;
(8) Secretary's Certificate of Borrower attaching Certificate of
Incorporation, by-laws and resolutions of the Board of Directors
authorizing the transaction; and
(9) Secretary's Certificate of each Guarantor attaching Certificate
of Incorporation, by-laws and resolutions of its Board of
Directors authorizing the transaction; and
(10) Such other documents as may be requested by the Bank.
(c) Payment of Fees and Expenses. The Bank shall have received
evidence of payment of (i) the origination fee as described in Section 6.3
hereof, (ii) payment of all fees and expenses of Bank's counsel, ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, LLP for legal services rendered in connection with the
transactions contemplated herein, as well as fees and expenses incurred in
connection with the administration of the Existing Agreement and other related
matters from and after January 2, 2000, and (iii) any and all other expenses or
reimbursable items incurred by the Bank in connection with the transactions
contemplated herein.
SECTION 10. COVENANTS OF BORROWER
The Borrower covenants and agrees that so long as the Revolving Loan
Commitment remains in effect, there are any Revolving Loans outstanding, or any
other Obligation remains unpaid, the Borrower shall and shall cause each of its
Subsidiaries to:
10.1. Financial Statements and Other Information. Borrower will
furnish to the Bank:
(a) Financial Statements. Copies of (i) Borrower's annual financial
statements reflecting its operations during such fiscal year, including, without
limitation, a balance sheet, profit and loss statement and statement of cash
flow, with supporting schedules (if any), all in reasonable detail, prepared in
conformity with GAAP, applied on a basis consistent with that of the preceding
year prepared and audited (without qualifications) by an independent certified
public accountant reasonably acceptable to the Bank, within ninety (90) days
after the end of each Fiscal Year, and (ii) Borrower's management prepared
fiscal quarter financial statements reflecting its operations through such
fiscal quarter end, including, without limitation, a balance sheet, profit and
loss statement and statement of cash flow, with supporting schedules (if any),
all in reasonable detail, prepared in conformity with GAAP, applied on a basis
consistent with that of the preceding year within sixty (60) days after the end
of each such fiscal quarter.
(b) Budgets. (i) On or prior to the effective date of this Agreement,
copies of Borrower's management prepared expenditure budget and revenue
forecasts for the fiscal year commencing October 1, 2000, together with any and
all amendments or modifications thereto through said effective date, and (ii) by
no later than September 30, 2001, copies of Borrower's management prepared
expenditure budget and revenue forecast to the fiscal year commencing October 1,
2001. Each such budget and forecast to be in reasonable detail, with schedules
supporting any substantial assumptions utilized in the preparation thereof,
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prepared in conformity under GAAP, applied on a consistent basis, and otherwise
in form and substance satisfactory to the Bank.
(c) Notice of Default. Promptly upon discovery thereof, written notice
of any Event of Default or Unmatured Event of Default describing such Event of
Default or Unmatured Event of Default in reasonable detail and describing the
steps being taken by the Borrower to cure the same if the same may be cured.
(d) Financial Covenant Compliance. Concurrently with the delivery of
the financial statements referred to in Section 10.1(a)(i) and (ii) above, a
certificate of the Chief Financial Officer or President of the Borrower stating
that such officer has obtained no knowledge of any Unmatured Event of Default or
Event of Default except as specified in such certificate and showing in detail
the calculations supporting such statement in respect of Section 10.14.
(e) Monthly Reports, Borrowing Base Certificate. Concurrently with the
initial Revolving Loan or Letter of Credit requested hereunder and on the 15th
day of each calendar month in which there is any Obligations outstanding
hereunder, a completed Borrowing Base Certificate (in the form annexed hereto as
Exhibit 10.1(f)) for the month most recently then ended, signed by the Chief
Financial Officer of the Borrower, detailing the Borrower's availability under
the Borrowing Base, together with a complete accounts receivable aging report
(including a detailed agings of accounts by total (including original date of
each invoice), a summary of aging of accounts by customer and a reconciliation
statement), and a report of the aggregate dollar value of all Inventory held by
the Borrower for the month just ended (showing individual values for raw
materials, work-in-process, finished goods inventory and any inventory
obsolescence), each of such reports to be in form and substance reasonably
satisfactory to the Bank.
(f) Other Public Statements and Report. Promptly, after the same are
sent copies of all financial statements and reports and proxy statements which
the Borrower sends to its public stockholders, if any, and promptly after the
same are filed, copies of all financial statements and reports which the Company
may make to, or file with, the Securities and Exchange Commission or any
successor or analogous Governmental Authority.
(g) Other Information. From time to time such other information
concerning the Borrower as the Bank may reasonably request, including, without
limitation, accounts receivable agings, accounts payable agings, contracts in
progress and lease copies.
All financial statements delivered by the borrower shall include
financial statements of its Subsidiaries on a consolidating basis.
10.2. Use of Proceeds. The Borrower shall use the proceeds of the
Revolving Loans and Letters of Credit for working capital and other lawful
general corporate purposes. In no event shall any Revolving Credit Loan or
Letter of Credit be used directly or indirectly to acquire or carry and "margin
stock" as such term is defined in Regulation U promulgated by The Board of
Governors of Federal Reserve Board, as in effect from time to time.
10.3. Other Agreements. The Borrower and each of its Subsidiaries will
not enter into any agreement containing any provision which would be violated or
breached by the performance of the Borrower's and each of its Subsidiaries'
obligations hereunder.
10.4. Indebtedness for Borrowed Money. The Borrower and each of its
Subsidiaries shall not incur, or permit to exist, any Indebtedness for borrowed
money except (i) Indebtedness incurred pursuant to borrowings hereunder, (ii)
Indebtedness incurred in respect of any other loans or other financial
accommodations made by the Bank in its discretion to the Borrower and each of
its Subsidiaries, (iii) Indebtedness existing on the date hereof and reflected
in the Financial Statements (other than Subordinated Debt), (iv) purchase money
Indebtedness incurred in the acquisition of fixed assets and (v) Subordinated
Debt; provided, that the Indebtedness permitted pursuant to clauses (ii)-(iv)
shall not exceed $4,000,000 in the aggregate at any time outstanding and
provided, further, that the financial accommodations to the Guarantor permitted
under Section 10.26 shall not be deemed to be in violation of this covenant.
10.5. Liens. The Borrower and all of its Subsidiaries shall not
create, assume or permit to exist, any Lien on any of its property or assets now
owned or hereafter acquired except (i) Liens in favor of the Bank; (ii) other
Liens incidental to the conduct of its business or the ownership of its property
and assets which were not incurred in connection with the borrowing of money or
the obtaining of advances or credit and which do not materially impair the use
thereof in the operation of its business; (iii) Liens for taxes or other
governmental charges which are not delinquent or which are being contested in
good faith and for which a reserve shall have been established in accordance
with generally accepted accounting principles; and (iv) purchase money Liens
granted to secure the unpaid purchase price of any fixed assets within the
limits imposed by Section 10.4 hereof. The Liens described in clauses (i)
through (iv) above are referred to herein as "Permitted Encumbrances".
10.6. Accounts. The Borrower and each of its Subsidiaries shall
observe and perform all obligations arising under all Accounts. In the event any
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of Borrower's and each of its Subsidiaries' Accounts is or becomes evidenced by
a promissory note, a trade acceptance or any other instrument for the payment of
money, Borrower and each of its Subsidiaries will promptly deliver such
instrument to the Bank appropriately endorsed to the Bank's order. Regardless of
the form of such endorsement, Borrower and each of its Subsidiaries hereby
waives presentment, demand, notice of dishonor, protest and notice of protest
and all other notices with respect thereto. After an occurrence of an Event of
Default and during the continuance thereof, upon the request of the Bank at any
time, the Borrower and each of its Subsidiaries shall notify Account debtors
that the Accounts have been assigned to the Bank and that payments in respect
thereof shall be made directly to the Bank. The Bank may at any time communicate
with account debtors to verify to its satisfaction the existence, amount and
terms of Accounts.
10.7. Insurance. The Borrower and each of its Subsidiaries shall
maintain insurance (including, without limitation, all risk, casualty and
liability and business interruption insurance on a full replacement cost basis
(with no co-insurance)) for the full insurable value of the Collateral of such
types, in such amounts as is customary in the case of companies engaged in a
similar business with insurers, and in form and substance reasonably
satisfactory to the Bank, which policy shall name the Bank as loss payee and
additional insured pursuant to a long form secured party endorsement and include
a 30 day notice of modification and cancellation clause. Borrower shall furnish
to the Bank, upon request of the Bank a copy of such policy and proof that all
premiums theretofore owing have been paid in full.
10.8. Taxes. The Borrower and each of its Subsidiaries shall pay when
due all federal, state or local or foreign taxes, levies, assessments, charges
or claims except when the amount or validity thereof is currently being
contested in good faith and reserves in conformity with GAAP with respect
thereto have been provided for on the books of the Borrower.
10.9. ERISA. (a) The Borrower shall notify Bank of the following
events, as soon as possible and in any event within thirty days after the
Borrower knows or has reason to know thereof: (i) the occurrence of a prohibited
transaction (as defined in Section 406 of ERISA or Section 4975 of the Code)
with respect to any Plan, or (ii) the institution of proceedings or the taking
or expected taking of any other action by the PBGC or the Borrower or any ERISA
Affiliate to terminate or withdraw or partially withdraw from any Multiemployer
Plan and the Reorganization or Insolvency of such Multiemployer Plan (as such
terms are defined in ERISA), and in addition to such notice, delivery to the
Bank of a certificate of a Responsible Officer setting forth details relating
thereto, and the action that the Borrower and the ERISA Affiliate propose to
take with respect thereto and when known, any action taken or threatened by the
Internal Revenue Service or the PBGC, together with a copy of any notice to the
PBGC or the Internal Revenue Service or any notice delivered by the PBGC or the
Internal Revenue Service.
(b) The Borrower and any ERISA Affiliate will not:
(i) knowingly engage in any transaction in connection with which the
Borrower could be subject to either a material civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Code; or
(ii) fail to make any payments when due to any Multiemployer Plan
which the Borrower or any ERISA Affiliate may be required to make under any
agreement relating to such Multiemployer Plan or any law pertaining
thereto. The Borrower agrees (x) upon the request of the Bank to obtain a
current statement of withdrawal liability from each Multiemployer Plan to
which the Borrower or an ERISA Affiliate contributes or to which the
Borrower or an ERISA Affiliate has an obligation to contribute and (y) to
transmit a copy of such statement to the Bank, so long as the Bank or its
nominee shall be the holder of the Revolving Note, within 15 days after the
Borrower receives the same.
10.10. Compliance with Laws. The Borrower and each of its Subsidiaries
shall remain in good standing in the laws of the state of their respective
organization and shall at all times comply in all material respects with all
Requirements of Law applicable to its business, including all Environmental
Laws. The Borrower and each of its Subsidiaries shall remain in good standing as
a foreign corporation in each jurisdiction wherein the failure to so qualify
will have a Material Adverse Effect.
10.11. Sale or Change of Business. The Borrower and each of its
Subsidiaries shall not (i) without the Bank's prior written consent (which shall
not be unreasonably withheld), enter into any merger or consolidation or
liquidate, windup or dissolve itself or sell, transfer or lease or otherwise
dispose of all or any substantial part of its assets (other than sales of
inventory and obsolescent equipment in the ordinary course of business) or
acquire by purchase or otherwise the business or assets of, or stock of, another
business entity or (ii) except upon 30 days prior written notice to the Bank (x)
change the name or location of its business or (y) move Inventory and Equipment
to any location other than at its locations set forth in Section 8.5 hereof.
10.12. Further Documentation. At any time and from time to time, upon
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the request of the Bank and at the sole expense of the Borrower and each of its
Subsidiaries, the Borrower and each of its Subsidiaries shall promptly and duly
execute and deliver such further instruments and documents and take such further
action as the Bank may reasonably request for the purpose of obtaining or
preserving the security interest granted to the Bank hereunder and of the rights
and powers granted herein, including, without limitation, the filing of any
financing, amendment or continuation statements under the Uniform Commercial
Code. The Borrower and each of its Subsidiaries hereby irrevocably constitutes
and appoints the Bank with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the Borrower and each of its Subsidiaries and in the name of the
Borrower and each of its Subsidiaries or in their own name, from time to time in
the Bank's discretion, to execute and file, in Borrower's and each of its
Subsidiaries' name and on its behalf, any Uniform Commercial Code financing,
amendment or continuation statement. The Borrower and each of its Subsidiaries
hereby ratify all that said attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney is a power coupled with an interest and
shall be irrevocable.
10.13. Maintenance of a Bank Account. The Borrower shall maintain its
primary operating accounts and one or more demand deposit accounts with the
Bank.
10.14. Financial Covenants
(a) Core EBITDA. The Borrower and its Subsidiaries, on a consolidated
basis, shall maintain a Core EBITDA of not less than the amounts set forth below
as of the end of the fiscal quarters set forth below:
Fiscal Quarter Ending Minimum Core EBITDA
March 31, 2001 $ 2,500,000
June 30, 2001 $ 5,000,000
September 30, 2001 $ 6,500,000
December 31, 2001 $ 8,500,000
March 31, 2002 and each $10,000,000
Fiscal year end thereafter
Said ratio to be tested no less frequently than quarterly.
(b) The Borrower shall maintain a Liquidity of not less than
$10,000,000 at all times, said requirement to be tested no less frequently than
quarterly.
(c) Effective Net Worth. The Borrower and its Subsidiaries, on a
consolidated basis, shall maintain an Effective Net Worth all times of not less
than $180,000,000, said requirement to be tested no less frequently than
quarterly.
(d) Quick Ratio. The Borrower and its Subsidiaries, on a consolidated
basis, shall maintain a Quick Ratio at all times of not less than 1.10 to 1.00,
said ratio to be tested no less frequently than quarterly.
10.15. Limitations on Modifications, Waivers and Extensions of
Agreements Giving Rise to Accounts. The Borrower will not (i) amend, modify,
terminate or waive any provision of any material agreement giving rise to an
Account in any manner which could reasonably be expected to materially adversely
affect the value of such material Account as Collateral as the value of such
account is calculated by the Bank in accordance with determination of the
Borrowing Base, (ii) fail to exercise promptly and diligently each and every
material right which it may have under each agreement giving rise to an Account
or (iii) fail to deliver to the Bank a copy of each material demand, notice or
document received by it relating in any way to any agreement giving rise to a
material Account.
10.16. Limitation on Discounts, Compromises and Extensions of
Accounts. Upon the occurrence and during the continuance of an Event of Default,
the Borrower will not grant any extension of the time of payment of any of the
Accounts or compromise, compound or settle the same for less than the full
amount thereof, release, wholly or partially, any Person liable for the payment
thereof, or allow any credit or discount whatsoever thereon.
10.17. Limitation on Investments. The Borrower and each of its
Subsidiaries shall not purchase any stock, bonds, notes, debentures or other
securities of or any assets constituting a business unit of any Person, except
(i) investments in direct obligations of the United States government and
certificates of deposit of United States commercial banks having a tier 1
capital ratio of not less than 6%, and then in an amount not to exceed 10% of
the issuing bank's unimpaired capital and surplus and (ii) investments in the
form of capital contributions to Uniroyal Optoelectronics LLC, UMCORE LLC and/or
GELcore LLC. The foregoing shall not, however, be construed as an express or
implied consent by the Bank to any transaction otherwise prohibited or
restricted by this Agreement undertaken by the Borrower and each of its
Subsidiaries to obtain the funds for any such investment.
10.18. Fiscal Year. The Borrower shall not change its Fiscal Year.
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10.19. Limitation on Contingent Obligations. Subject to Section 10.4
hereof, the Borrower and each of its Subsidiaries shall not create, incur,
assume or suffer to exist any Contingent Obligation(s) in excess of $100,000 in
the aggregate in any Fiscal Year.
10.20. Limitation on Creation or Acquisition of Subsidiaries. The
Borrower and each of its Subsidiaries shall not create, make any capital
contributions to or acquire any Subsidiary or transfer any assets to any
Subsidiary.
10.21. Dividends. The Borrower and each of its Subsidiaries shall not
declare any dividends (other than dividends payable solely in stock of Borrower)
on, or make any payment on account of, any shares of any class of stock of the
Borrower and each of its Subsidiaries, whether now or hereafter outstanding, or
make any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of the Borrower and each of its
Subsidiaries, or make any payment on account of, or purchase or otherwise
acquire, any securities of the Borrowers from any Person.
10.22. Environmental Liabilities. The Borrower and each of its
Subsidiaries shall not violate any Requirement of Law, rule or regulation
regarding Hazardous Material; and, without limiting the foregoing, dispose of
(or permit any Person to dispose of) any Hazardous Material into or onto, or
(except in accordance with applicable law) from, any real property owned or
operated by the Borrower or any of its Subsidiaries, nor allow any Lien imposed
pursuant to any Requirement of Law relating to Hazardous Materials or the
disposal thereof to be imposed or to remain on such real property, which
violation or Lien would have a Material Adverse Effect.
10.23. Lease Payments. The Borrower and each of its Subsidiaries shall
not expend in the aggregate, either directly or indirectly, in excess of
$2,000,000 in any Fiscal Year for the lease, rental or hire of real or personal
property pursuant to any rental agreement therefor, whether an operating lease,
or otherwise (but excluding Capitalized Leases).
10.24. Landlord's Waivers. The Borrower shall obtain with respect to
all of its leased premises, a Landlord's Waiver of Lien from each landlord in
form and substance satisfactory to the Bank to the extent Borrower wishes to
include Inventory (to the extent it would otherwise be considered Eligible
Inventory) located at such premises in the Borrowing Base.
10.25. Prepayment of Indebtedness. The Borrower shall not pay,
discharge or satisfy (either in whole or in part), at or before maturity any
long term Indebtedness (as determined in accordance with GAAP), except the
foregoing shall not be construct to prohibit the prepayment of any of the
Obligations or any non-cash retirement of debt relating to the exercise of the
Warrants.
10.26. Loans and Advances. The Borrower and each of its Subsidiaries
shall not, during any Fiscal Year, make loans or advances to any Person
(excluding ordinary course of business travel and expense advances) other than
(i) the existing loans to Related Parties listed on Schedule 8.9 hereof (the
"Existing Loans") and (ii) loans to Related Parties made after the date hereof,
provided, that the aggregate principal amount of all such loans does not exceed
$100,000 at any time outstanding except that the Borrower may (i) make financial
accommodations to the Guarantor, however characterized, whether as loans, notes
payable, accounts receivable, advances or otherwise, in an amount not to exceed
$2,000,000 at any time outstanding, and (ii) accept the notes secured by Stock
Pledge Agreements dated on or about December 4, 1997 made in its favor by (1)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (in the principal amount of $3,127,560.72), (2) Gallium
Enterprises Inc. (in the principal amount of $2,632,338.48), (3) ▇▇▇▇▇▇ ▇. ▇▇▇▇
(in the principal amount of $556,067.36), (4) ▇▇▇▇▇▇ ▇. ▇▇▇▇ (in the principal
amount of $556,067.36) and (5) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. (in the principal amount
of $556,067.36). The Borrower and each of its Subsidiaries agrees that all
payments made in respect of the Existing Loans shall permanently reduce the
permitted amount of such loans for purposes of determining compliance with this
covenant. The Borrower and each of its Subsidiaries shall deliver the
instruments evidencing such loans and advances promptly to the Bank.
10.27. Consigned Equipment. The Borrower and each of its Subsidiaries
shall not permit Equipment with a value (in the aggregate as to all such
Equipment) in excess of $4,000,000 to become Consigned Equipment.
SECTION 11. EVENTS OF DEFAULT AND REMEDIES
11.1. Events of Default. Each of the following shall constitute an
Event of Default under this Agreement and the other Loan Documents.
(a) Non-Payment of Principal or Interest. Non-payment when due of any
principal of or interest due on the Revolving Note or non-payment of any of
Borrower's other Obligations when due and payable or declared due and payable;
or
(b) Bankruptcy or Insolvency. Either Borrower or Guarantor becomes
insolvent or generally fails to pay, or admits in writing its inability to pay
debts as they become due; or applies for, consents to, or acquiesces in the
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appointment of, a trustee, receiver, guardian, conservator or other custodian
for the Borrower or Guarantor or any of their respective property, or the
Borrower or Guarantor makes a general assignment for the benefit of creditors;
or, in the absence of such application, consent or acquiescence, a trustee,
receiver, guardian, conservator or other custodian is appointed for the Borrower
or Guarantor or for a substantial part of any of their respective property and
is not discharged within 30 days; or any bankruptcy, reorganization, debt
arrangement or other case or proceeding under any bankruptcy or insolvency law,
or any liquidation proceeding, is commenced in respect of the Borrower or
Guarantor and if such case or proceeding is not commenced by the Borrower or
Guarantor, it is consented to or acquiesced in by the Borrower or Guarantor or
remains undismissed for thirty (30) days; or
(c) Non-Compliance with Certain Covenants. Borrower shall fail in the
observance or performance of any covenant or agreement set forth in Sections
10.1, 10.3, 10.4, 10.5, 10.7, 10.10, 10.11, 10.13, 10.14, 10.16, 10.17, 10.18,
10.19, 10.20, 10.21, 10.22, 10.23, 10.25, 10.26, or 10.27; or
(d) Non-Compliance with Other Terms of this Agreement or any of the
other Loan Documents or any other Agreements. (i) Failure by either Borrower or
Guarantor to comply with or to perform any provision of this Agreement or the
other Loan Documents (and not constituting an Event of Default under any of the
preceding or following provisions of this Section 11 or under any specific
provision set forth in the other Loan Documents) and continuance of such failure
for 15 days after notice thereof to the Borrower from the Bank or (ii) a breach
by the either Borrower or Guarantor or any Subsidiary or Affiliate of Borrower
or Guarantor of any term, obligation, provision, covenant, representation or
warranty, arising under any present or future agreement, including swap
agreements (as defined in 11 U.S.C. ss.101), with or in favor of the Bank and/or
any Affiliate, including the failure to make any payment when due; or
(e) Guarantor. If (i) Guarantor fails to comply with any payment
obligation set forth in the Guaranty or if Guarantor fails to comply with any of
the covenants or other agreements set forth in the Guaranty or any other Loan
Document to which it is a party beyond any applicable grace period provided for
therein, or (ii) any representation or warranty made or deemed made by Guarantor
in the Guaranty or any other Loan Document to which it is a party or which is
contained in any exhibit, schedule or any other document or other statement
furnished at any time under or in connection with the Guaranty or any of the
other Loan Documents shall prove to have been incorrect in any material respect
on or as of the date made or deemed made, or (iii) if Guarantor shall terminate,
purport to terminate or take any steps which have the effect of decreasing its
liability under the Guaranty; or
(f) Warranties. Any representation or warranty made by the Borrower
herein is breached or is false or misleading in any material respect or omits to
state a material fact, or any schedule, certificate, financial statement,
report, notice, or other writing furnished by the Borrower to the Bank is false
or misleading in any material respect or omits to state a material fact on the
date as of which the facts therein set forth are stated or certified; or
(g) Defaults under other Loans. Borrower or Guarantor defaults under
(i) any Contingent Obligation, loan, extension of credit, security agreement,
mortgage or other agreement with respect to Indebtedness for borrowed money with
the Bank or any other Person, or (ii) any material contract with any Person and
such default is declared and is not cured within the time, if any, specified
therefor in any agreement covering same; or
(h) Collateral. If any portion of the Collateral or any other assets
of Borrower or Guarantor having a value singly or in the aggregate in excess of
$100,000 are attached, seized, subjected to a writ or distress or warrant, or
are levied upon or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors and the same is not
terminated or dismissed within thirty (30) days or if a notice of lien, levy or
assessment of record is filed against the Collateral; or
(i) Judgements. One or more judgements, decrees, arbitration awards or
rulings shall be entered against the Borrower or Guarantor involving in the
aggregate a liability of $100,000 or more and all such judgements, decrees,
awards and rulings shall not have been vacated, paid, discharged, stayed or
bonded pending appeal within thirty (30) days from the entry thereof; or
(j) ERISA. (i) if any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Multiemployer Plan, which
Reportable Event or institution of proceedings or appointment of a trustee is
likely to result in the termination of such Multiemployer Plan for purposes of
Title IV of ERISA, and, in the case of a Reportable Event, the continuance of
such Reportable Event unremedied for ten days after notice of such Reportable
Event pursuant to Section 4043(a), (c) or (d) of ERISA is given and, in the case
of the institution of proceedings, the continuance of such proceedings for ten
days after commencement thereof, (iii) the Borrower or an ERISA Affiliate incurs
a partial or complete withdrawal from a Multiemployer Plan or (iv) any other
event or condition shall occur or exist, with respect to a Plan or Multiemployer
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Plan; and in each case in clauses (i) through (iv) above, such event or
condition, together with all other such events or conditions, if any, could
subject the Borrower or any of its Subsidiaries to any tax, penalty or other
liabilities in the aggregate material in relation to the business, operations,
property or financial or other condition of the Borrower taken as a whole; or
(k) Change of Control. There shall occur a Change of Control (as
defined below). As used herein, "Change of Control" means the acquisition by any
person or group of persons (within the meaning of the Securities Exchange Act of
1934, as amended, and the rules and regulation promulgated thereunder, the
"Exchange Act") of beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission, or any successor thereto,
under the Exchange Act) of 50.1% or more of the issued and outstanding shares of
common stock of the Borrower.
11.2. Effect of Event of Default. If any Event of Default described in
Section 11.1(b) shall occur, the Revolving Loan Commitment (if not theretofore
terminated) shall automatically and immediately terminate and the Revolving Note
and the other Obligations and all other amounts payable under the Loan Documents
shall become automatically and immediately due and payable, all without
presentment, demand, protest or notice of any kind. Upon the occurrence of any
Event of Default and during the continuance thereof (other than the event
described in Section 11.1(b)), the Bank may declare the Commitment (if not
theretofore terminated) to be terminated and may also declare the Revolving
Note, the other Obligations and all other amounts payable under the Loan
Documents to be due and payable, whereupon the Revolving Loan Commitment shall
immediately terminate and the Revolving Note and the other Obligations shall
become immediately due and payable, all without presentment, demand, protest or
other notice of any kind. The Bank shall promptly advise the Borrower of any
such declaration, but failure to do so shall not impair the effect of such
declaration. Except as expressly provided above in this Section presentment,
demand, protest and all other notices of any kind are hereby expressly waived by
the Borrower. Upon the occurrence of any Event of Default and during the
continuance thereof, the Bank, may, at its option, exercise any of its rights
under this Agreement, the other Loan Documents or any rights and remedies of a
secured party under the Uniform Commercial Code.
11.3. Remedies. Without limiting the generality of the remedies
available to the Bank may, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Borrower (all and each of
which demands, presentments, protests, advertisements and notices are hereby
waived), upon the occurrence and during the continuance of an Event of Default,
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and/or may forthwith sell, lease, assign, give option or options to
purchase, or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing) in one or more parcels at public or
private sale or sales, at any exchange, broker's board or office of the Bank or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Bank shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold. The
Borrower further agrees, at the Bank's request, to assemble the Collateral and
make it available to the Bank at places which the Bank shall reasonably select,
whether at the Borrower's premises or elsewhere. The Bank shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Bank
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations, in such
order as the Bank may elect; and only after such application and after the
payment by the Bank of any other amount required by any provision of law,
including, without limitation, any provision of the Uniform Commercial Code,
need the Bank account for the surplus, if any, to the Borrower. To the extent
permitted by applicable law, the Borrower waives all claims, damages and demands
it may acquire against the Bank arising out of the exercise by the Bank of any
of its rights hereunder. If any notice of a proposed sale or other disposition
of Collateral shall be required by law, such notice shall be deemed reasonable
and proper if given at least 10 days before such sale or other disposition. The
Borrower shall remain liable for any deficiency if the proceeds of any sale or
other disposition of the Collateral are insufficient to pay the Obligations and
the reasonable fees and disbursements of any attorneys employed by the Bank to
collect such deficiency.
11.4. Limitation on Duties Regarding Preservation of Collateral. The
Bank's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under the Uniform Commercial
Code or otherwise, shall be to deal with it in the same manner as the Bank deals
with similar property for its own account. Neither the Bank nor any of its
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Borrower or otherwise.
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11.5. Cash Collateral for Letter of Credit Obligation. Without
limiting the generality of any right or remedy granted to the Bank hereunder or
under any other Loan Document, upon the occurrence, and during the continuance
of an Event of Default; the Bank may demand that the Borrower deposit with the
Bank cash collateral for the undrawn amount of any Letter of Credit then in
effect pursuant to such terms as the Bank may require. In connection therewith,
the Borrower shall execute and deliver such agreements, assignments,
instruments, financing statement or other documentation as the Bank may deem
necessary or appropriate.
SECTION 12. GENERAL
12.1. Waiver; Amendments. No delay on the part of the Bank in the
exercise of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise by the Bank of any right, power or remedy
preclude other or further exercise thereof, or the exercise of any other right,
power or remedy. No amendment, modification or waiver of, or consent with
respect to, any provision of the Loan Documents shall in any event be effective
unless the same shall be in writing and signed and delivered by the Bank and the
Borrower (in the case of a document to which the Borrower is a party) and then
any such amendment, modification, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
12.2. WAIVER OF TRIAL BY JURY. THE BORROWER WAIVES TRIAL BY JURY IN
ANY ACTION, PROCEEDING, CLAIM, OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT
LAW OR IN EQUITY, WITH RESPECT TO, IN CONNECTION WITH OR ARISING OUT OF OR IN
ANY WAY RELATED TO THIS AGREEMENT OR THE LOAN DOCUMENTS OR THE VALIDITY,
PROTECTION, INTERPRETATION, ADMINISTRATION, COLLECTION OR ENFORCEMENT HEREOF OR
THEREOF, OR ANY CLAIM OR DISPUTE HEREUNDER OR THEREUNDER. NO OFFICER OF THE BANK
HAS AUTHORITY TO WAIVE, CONDITION OR MODIFY THIS PROVISION.
12.3. Arbitration. (a) Upon demand of any party hereto, whether made
before or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to this Agreement and the
other Loan Documents ("Disputes") between or among parties to this Agreement and
other Loan Documents shall be resolved by binding arbitration as provided
herein. Institution of a judicial proceeding by a party does not waive the right
of that party to demand arbitration hereunder. Disputes may include, without
limitation, tort claims, counterclaims, disputes as to whether a matter is
subject to arbitration, claims bought as class actions, claims arising from Loan
Documents executed in the future, or claims arising out of or connected with the
transaction reflected by this Agreement and other Loan Documents.
(b) Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in the city in which the office of the
Bank first stated above is located. The expedited procedure set forth in Rule 51
et seq. of the Arbitration Rules shall be applicable to claims of less that
$1,000,000. All applicable statutes of limitation shall apply to any Dispute. A
judgment upon the award may be entered in any court having jurisdiction. The
panel from which all arbitrators are selected shall be comprised of licensed
attorneys. The single arbitrator selected for expedited procedure shall be a
retired judge from the highest court of general jurisdiction, state or federal,
of the state where the hearing will be conducted or if such person is not
available to serve, the single arbitrator may be licensed attorney.
Notwithstanding the foregoing, this arbitration provision does not apply to
Disputes under or related to swap agreements.
(c) Notwithstanding the preceding binding arbitration provisions, Bank
and Borrower agree to preserve, without diminution, certain remedies that any
party hereto may employ or exercise freely, independently or in connection with
an arbitration proceeding or after an arbitration action is brought. Bank and
Borrower shall have the right to proceed in any court of proper jurisdiction or
by self-help or exercise or prosecute the following remedies, as applicable: (i)
all rights to foreclose against any real or personal property or other security
by exercising a power of sale granted under Loan Documents or under applicable
law or by judicial foreclosure and sale, including a proceeding to confirm the
sale; (ii) all rights of self-help including peaceful occupation of real
property and collection of rents, set-off, and peaceful possession of personal
property; (iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver and
filing an involuntary bankruptcy proceeding; and (iv) when applicable, a
judgment by confession of judgment. Preservation of these remedies does not
limit the power of an arbitrator to grant similar remedies that may be requested
by a party in a Dispute.
Borrower and Bank agree that they shall not have a remedy of punitive
or exemplary damages against the other in any Dispute and hereby waive any right
or claim to punitive or exemplary damages they have now or which may arise in
the future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
12.4. Notices. Except as otherwise expressly provided herein, all
notices hereunder shall be in writing and shall be delivered by telecopier,
hand, overnight delivery or by mail. Notices given by mail shall be deemed to
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have been given three (3) days after the date sent if sent by registered or
certified mail, postage prepaid, and:
(i) if to the Borrower, to:
EMCORE Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., President
(ii) if to the Bank, to:
First Union National Bank
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
or in the case of either party, such other address as such party may, by written
notice, received by the other party to this Agreement, have designated as its
address for notices. Notices given by (i) telecopier shall be deemed to have
been given when sent, (ii) hand shall be deemed to have been given the same day
they have been sent and (iii) overnight delivery shall be deemed to have been
given the day after they have been sent, in each case if properly addressed to
the party to whom sent, at its address, as aforesaid. The Bank shall be entitled
to reasonably rely upon any telephonic notices purportedly given pursuant to the
terms of this Agreement and the Borrower shall hold the Bank harmless from any
loss, cost or expense ensuing from any such reliance (other than that which
results from the Bank's gross negligence or willful misconduct).
12.5. Appointment as Attorney-in-Fact.
(a) Powers. The Borrower hereby irrevocably constitutes and appoints
the Bank with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the Borrower and in the name of the Borrower or in its own name, from
time to time in the Bank's discretion, for the purpose of carrying out the terms
of this Agreement and, upon the occurrence and during the continuance of any
Event of Default to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement and the security interests granted herein, and
without limiting the generality of the foregoing, the Borrower hereby gives the
Bank the power and right (but not the obligation), on behalf of the Borrower,
without notice to or assent by the Borrower, to do the following:
(i) in the case of any Account, upon the occurrence and during the
continuance of an Event of Default, or in the case of any other Collateral,
at any time when any Event of Default shall have occurred and be
continuing, in the name of the Borrower or its own name, or otherwise, to
open mail addressed to the Borrower, to take possession of and endorse and
collect any checks, drafts, notes, acceptances or other instruments for the
payment of moneys due under any Account, Instrument, General Intangible or
contract right or with respect to any other Collateral and to file any
claim or to take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Bank for the purpose of
collecting any and all such moneys due under any such Account, Instrument,
General Intangible or contract right or with respect to any other
Collateral whenever payable;
(ii) to pay or discharge taxes and liens levied or placed on or
threatened against the Collateral, to effect any repairs or any insurance
called for by the terms of this Security Agreement and to pay all or any
part of the premiums therefor and the costs thereof; and
(iii) upon the occurrence and during the continuance of any Event of
Default, (A) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Bank or as the Bank shall direct; (B) to ask or
demand for, collect, receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (c) to sign and endorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, notices and
other documents in connection with any of the Collateral; (D) to commence
and prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any thereof
and to enforce any other right in respect of any Collateral; (E) to defend
any suit, action or proceeding brought against the Borrower with respect to
any Collateral; (F) to settle, compromise or adjust any suit, action or
proceeding described in clause (E) above and in connection therewith, to
give such discharges or releases as the Bank may deem appropriate; and (G)
generally, to sell, transfer, pledge and make any agreement with respect to
or otherwise deal with any of the Collateral as fully and completely as
though the Bank was the absolute owner thereof for all purposes, and to do
at the Bank's option and the Borrower's expense, at any time, or from time
to time, all acts and things which the Bank deems necessary to protect,
preserve or realize upon the Collateral and the liens granted hereunder and
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to effect the intent of this Agreement, all as fully and effectively as the
Borrower might 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 a power coupled with an
interest and shall be irrevocable.
(b) Other Powers. The Borrower also authorizes the Bank, at any time
and from time to time, to execute, in connection with the sale provided for in
Section 13.4 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(c) No Duty on Bank's Part. The powers conferred on the Bank hereunder
are solely to protect its interests in the Collateral and shall not impose any
duty upon the Bank to exercise any such powers. Neither the Bank nor any of its
officers, directors, employees or agents shall be responsible to the Borrower
for any act or failure to act hereunder, except for their own gross negligence
or willful misconduct.
12.6. Costs, Expenses and Taxes. The Borrower agrees to pay on demand
all out-of-pocket costs and expenses of the Bank (including the reasonable fees
and out-of-pocket expenses of legal counsel for the Bank) in connection with the
incurred by the Bank in connection with the administration of this Agreement and
the other Loan Documents, any amendments thereto and the enforcement of the Loan
Documents or any Collateral for any of the foregoing. All obligations provided
for in this Section 12.6 shall survive any termination of this Agreement.
12.7. Captions. Section captions used in this Agreement are for
convenience only, and shall not be deemed to be a part of this Agreement.
12.8. Venue; Governing Law. The Loan Documents have been delivered to
the Bank, accepted by the Bank and executed in New Jersey and the Loan Documents
shall be governed by and construed by the laws of the State of New Jersey. The
Borrower hereby irrevocably consents and agrees to the jurisdiction of the
courts of New Jersey, and further waives any and all obligations the Borrower
may have to the venue of any action, claim, proceeding or counterclaim in
connection with the Loan being paid in the Courts of New Jersey. The Borrower
further agrees that any such suit, claim or other legal proceeding shall be
brought in the courts of the State of New Jersey. The provisions of this
paragraph are a material inducement for the Bank entering into this Agreement.
12.9. Remedies. All obligations of the Borrower and rights of the Bank
expressed herein, and in the Loan Documents, shall be in addition to and not in
limitation of those provided by applicable law.
12.10. Successors and Assigns. This Agreement shall be binding upon
the Borrower, its successors, and assigns, and upon the Bank and its successors
and assigns, and shall inure to the benefit of the Borrower, the Bank and their
respective successors and assigns. However, the Borrower may not assign its
rights or obligations under the Loan Documents and no third party shall have any
interest therein.
12.11. Counterparts. This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
12.12. Survival. All representations and warranties of Borrower shall
survive the execution and delivery of this Agreement.
12.13. Executed Certification. This Agreement was executed by the
Borrower and delivered to the Bank in the State of New Jersey.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first written above.
EMCORE CORPORATION,
a New Jersey corporation
By:/s/ ▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇ ▇▇▇▇▇▇▇
Title: CFO
FIRST UNION NATIONAL BANK
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title: VP
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