REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
MERRIMAC INDUSTRIES, INC.
and
NORTH FORK BANK
DATED: OCTOBER 18, 2006
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
THIS REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT (the
"AGREEMENT")
is made effective the 18th day of October, 2006 by and between
MERRIMAC
INDUSTRIES, INC., a Delaware corporation ("BORROWER"), and NORTH
FORK BANK
("BANK").
BACKGROUND
----------
A. Borrower has requested that Bank extend certain credit
facilities to
Borrower, which Bank is willing to do on the terms set forth
herein.
B. Borrower and Bank after the date hereof may enter into one or
more
transactions pursuant to and as defined in the Master Agreement (as
defined
below) (the "Hedge Obligations").
C. Capitalized terms used herein will have the meanings set forth
therefor
in SECTION 1 of this Agreement.
NOW, THEREFORE, in consideration of the terms and conditions
contained
herein, and of any extensions of credit now or hereafter made to or
for the
benefit of Borrower by Bank, the parties hereto, intending to be
legally bound
hereby, agree as follows:
1. DEFINITIONS
1.1 DEFINED TERMS. The following words and phrases as used in
capitalized form in this Agreement, whether in the singular or
plural, shall
have the meanings indicated:
(a) "ADVANCE" means any loan or extension of credit by Bank to
Borrower including, without limitation, Revolving Line Advances,
the Mortgage
Loan, the Term Loan and the undrawn face amount of any letter of
credit issued
by Bank or any Affiliate of Bank for the account of Borrower.
(b) "AFFILIATE", as to any Person, means each other Person that
directly or indirectly through one or more intermediaries,
controls, or is
controlled by, or is under common control with, the Person in
question.
(c) "APPROVED FUND" shall have the meaning given such term in
SECTION 17.6 hereof.
(d) "ASSIGNEE" shall have the meaning given such term in SECTION
17.6 hereof.
(e) "BANK" shall have the meaning given such term in the
introductory paragraph of this Agreement and shall include all
permitted
successors and assigns of such Person.
(f) "BANK INDEBTEDNESS" means all obligations and Indebtedness of
Borrower to Bank or any Affiliate of Bank, whether now or hereafter
owing or
existing, including, without limitation, all obligations under the
Loan
Documents, all obligations to
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reimburse Bank or any Affiliate of Bank for payments made by Bank
or any such
Affiliate pursuant to any letter of credit issued for the account
or benefit of
Borrower by Bank or any Affiliate of Bank, all obligations to Bank
or any
Affiliate of Bank under any Hedging Agreements (including the Hedge
Obligations), all other obligations or undertakings now or
hereafter made by or
for the benefit of Borrower to or for the benefit of Bank or any
Affiliate of
Bank under any other agreement, promissory note or undertaking now
existing or
hereafter entered into by Borrower with Bank or any such Affiliate,
including,
without limitation, all obligations of Borrower to Bank or any
Affiliate of Bank
under any guaranty or surety agreement and all obligations of
Borrower to
immediately pay to Bank or any Affiliate of Bank the amount of any
overdraft on
any deposit account maintained with Bank or any Affiliate of Bank,
together with
all interest and other sums payable in connection with any of the
foregoing.
(g) "BORROWER" shall have the meaning given such term in the
introductory paragraph of this Agreement and shall include all
permitted
successors and assigns of such Person.
(h) "BORROWING BASE AMOUNT" means, at any time, the sum of (i)
eighty-five percent (85%) of the amount of Borrower's Eligible
Receivables, plus
(ii) fifty percent (50%) of the Value of Borrower's Raw Materials
located at the
Mortgaged Property, plus (iii) twenty-five percent (25%) of the
Value of
Borrower's Parts located at the Mortgaged Property; provided that
Revolving Line
Advances based on Value of Borrower's Raw Materials and Parts
located at the
Mortgaged Property shall not exceed $1,500,000.00.
(i) "BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which banks in Newark, New Jersey are authorized by
law to close.
(j) "CAPITAL EXPENDITURES" means any expenditure for property,
plant equipment or fixed assets that would be classified as a
capital
expenditure on a statement of cash flows of Borrower prepared in
accordance with
GAAP.
(k) "CAPITALIZED LEASES" means all lease obligations which have
been or should be, in accordance with GAAP, accounted for on the
books of the
lessee as a capital lease.
(l) "CAPITALIZED LEASE OBLIGATIONS" means all amounts payable
with respect to a Capitalized Lease.
(m) "COLLATERAL" shall have the meaning given such term in
SECTION 5.4 hereof.
(n) "CONTRACT PERIOD" means, collectively, the Revolving Line
Contract Period, the Mortgage Loan Contract Period, and the Term
Loan Contract
Period.
(o) "CORPORATION" means a corporation, partnership, limited
liability company, trust, unincorporated organization, association
or joint
stock company.
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(p) "COSTA RICAN SUBSIDIARY" shall mean Multi-Mix(R)
Microtechnology S.R.L., an entity formed under the laws of Costa
Rica.
(q) "DEFAULT" means any event which with the giving of notice,
passage of time or both, would constitute an Event of Default.
(r) "DEFAULT RATE" shall have the meaning given such term in
SECTION 3.10 hereof.
(s) "EBITDA" means, for any period, Net Income for such period,
plus the aggregate amounts deducted in determining such Net Income
in respect of
(i) Interest Expense for such period, (ii) depreciation for such
period, (iii)
amortization for such period, (iv) non-cash charges in respect of
equity-based
compensation expenses including, without limitation, expenses under
SFAS 123R,
(v) deferred costs write-off in connection with the Borrower's loan
facility
with CIT dated October 8, 2003 up to $170,000.00 in the fourth
quarter of 2006
and (vi) deferred financing costs in connection with the Loans of
up to
$30,000.00 in the aggregate per annum all as determined in
accordance with GAAP.
(t) "ELIGIBLE RECEIVABLES" means the gross amount of the
Borrower's accounts receivable that are subject to a valid,
exclusive, first
priority and fully perfected security interest in favor of Bank,
which conform
to the warranties contained herein and which, at all times,
continue to be
acceptable to Bank in the exercise of its reasonable judgment,
less, without
duplication, the sum of: (a) any returns, discounts, claims,
credits and
allowances of any nature (whether issued, owing, granted, claimed
or
outstanding), and (b) reserves for any such accounts receivable
that arise from
or are subject to or include: (i) sales to the United States of
America, any
state or other governmental entity or to any agency, department or
division
thereof, except for any such sales as to which the Borrower has
complied with
the Assignment of Claims Act of 1940 or any other applicable
statute, rules or
regulation to Bank's satisfaction in the exercise of its reasonable
business
judgment; (ii) foreign sales, (other than sales to Persons in
Canada (excluding
Quebec) by Borrower (i.e., not Filtran)), which shall be Eligible
Receivables if
not otherwise excluded pursuant to a clause in this definition of
Eligible
Receivables other than this clause (ii)) other than sales which
otherwise comply
with all of the other criteria for eligibility hereunder and are
either (x)
secured by letters of credit (in form and substance satisfactory to
Bank) issued
or confirmed by, and payable at, banks having a place of business
in the United
States of America and as to which Bank has a first priority
perfected security
interest by "control" as contemplated by the UCC or (y) subject to
a guarantee
duly executed by the Export-Import Bank of the United States
("EX-IM BANK") on
terms acceptable to Bank (together with all amendments,
modifications and
supplements thereto, the "EX-IM BANK GUARANTEE") and the Borrower
shall have
entered into any and all agreements required under the Ex-Im Bank
Guarantee,
which such Ex-Im Bank Guarantee and other agreements executed in
connection
therewith shall at all times be in full force and effect; (iii)
accounts
receivable that remain unpaid more than ninety (90) days from
invoice date; (iv)
contra accounts; (v) sales to any Subsidiary, or to any company
affiliated with
the Borrower in any way, other than E.I. DuPont de Nemours and
Company
("DuPont"), but only so long as DuPont does not increase its
ownership
percentage above such percentage as exists on the closing date of
the Loans and
the accounts receivable generated from sales to DuPont comply with
all other
requirements for eligibility
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hereunder; (vi) bill and hold (deferred shipment) or consignment
sales; (vii)
sales to any customer which is: (A) insolvent, (B) the debtor in
any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar
proceedings
under any federal or state law, (C) negotiating, or has called a
meeting of its
creditors for purposes of negotiating, a compromise of its debts,
or (D)
financially unacceptable to Bank or has a credit rating
unacceptable to Bank;
(viii) all sales to any customer if fifty percent (50%) or more of
the aggregate
dollar amount of all outstanding invoices to such customer are
unpaid more than
ninety (90) days from invoice date; (ix) sales to any customer
and/or its
affiliates to the extent such sales exceed at any one time twenty
percent (20%)
or more of all Eligible Receivables; provided that such percentage
shall be
thirty percent (30%) with respect to sales to Raytheon Company,
Northrop Grumman
Corporation, The Boeing Company, Lockheed Martin Corporation,
General Dynamics
Corporation and BAE Systems North America and/or their respective
affiliates
(only the amount exceeding such applicable percentage shall be
ineligible); (x)
pre-billed receivables and receivables arising from progress
billing; (xi) an
amount representing, historically, returns, discounts, claims,
credits,
allowances and applicable terms; (xii) sales not payable in United
States
currency; (xiii) any other reasons deemed necessary by Bank in its
reasonable
judgment, including without limitation those which are customary
either in the
commercial finance industry or in the lending practices of Bank;
(xiv) accounts
receivable or any agreements, purchase orders, invoices, proof of
shipment or
delivery or any other document or information in connection
therewith that are
subject to any Government Limitations, unless covered by the
exception in
subclause (i) above or as otherwise determined by Bank in it its
sole
discretion; (xv) sales to DuPont and its affiliates unless Bank has
received a
no-offset letter from DuPont in form and substance satisfactory to
Bank; and
(xvi) accounts receivable due from officers, directors, or
employees of Borrower
or any Affiliates of Borrower.
(u) "ENVIRONMENTAL AFFILIATE" means Borrower, and any other
Person for whom Borrower at any time has any liability (contingent
or otherwise)
with respect to any claims arising out of the failure of Borrower
or such Person
to comply with all applicable Environmental Requirements.
(v) "ENVIRONMENTAL CLEANUP SITE" means any location which is
listed or proposed for listing on the National Priorities List, on
CERCLIS or on
any similar state list of sites requiring investigation or cleanup,
or which is
the subject of any action, suit, proceeding or investigation
related to or
arising from any alleged violation of any Environmental
Requirements by any
Environmental Affiliate.
(w) "ENVIRONMENTAL CONSULTANTS" has the meaning given such term
in SECTION 10.6 hereof.
(x) "ENVIRONMENTAL REQUIREMENTS" means any and all applicable
federal, state or local laws, statutes, ordinances, regulations or
standards,
administrative or court orders or decrees, common law doctrines or
private
agreements, relating to (i) pollution or protection of the
environment and
natural resources, (ii) exposure of employees or other persons to
Special
Materials, (iii) protection of the public health and welfare from
the effects of
Special Materials and their products, by-products, wastes,
emissions, discharges
or releases, and (iv) regulation, licensing, approval or
authorization of the
manufacture, generation, use, formulation,
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packaging, labeling, transporting, distributing, handling, storing
or disposing
of any Special Materials.
(y) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(z) "EVENT OF DEFAULT" means each of the events specified in
SECTION 13.1 hereof.
(aa) "FILTRAN" means Filtran Microcircuits Inc., a Canadian
corporation.
(bb) "FIXED CHARGE COVERAGE RATIO" means the ratio of Borrower's
(i.e., excluding Filtran) and Costa Rican Subsidiary's consolidated
(a) EBITDA
less dividends and distributions to (b) Fixed Charges.
Notwithstanding the
foregoing, (i) cash and non-cash charges incurred with the
transition of the
Borrower's banking relationship to Bank during the Borrower's
fiscal quarter
ending December 30, 2006 and (ii) charges incurred during the
Borrower's fiscal
quarters ending September 30, 2006 and December 30, 2006 associated
with
employee downsizing not to exceed $100,000.00 in the aggregate
shall each be
added back in (a) above but only for the operating result of the
periods
specified.
(cc) "FIXED CHARGES" means, for any period, the sum of (a)
Borrower's (i.e., excluding Filtran) and Costa Rica Subsidiary's
Interest
Expense for such period, plus (b) scheduled principal payments paid
or due on
Borrower's long term Indebtedness and Capitalized Lease Obligations
for such
period, all as determined in accordance with GAAP.
(dd) "GAAP" means generally accepted accounting principles in the
United States of America, in effect from time to time, consistently
applied and
maintained.
(ee) "GOOD BUSINESS DAY" means any day except a Saturday, Sunday
or other day on which commercial banks in New York and London,
England are
authorized by law to close.
(ff) "GOVERNMENT DISCLOSURE REGULATIONS" means federal and/or
state government statutes and regulations governing the treatment,
handling,
access to and disclosure of classified information, including
without limitation
the Department of Defense Industrial Security Manual.
(gg) "GOVERNMENT LIMITATIONS" means the Government Disclosure
Regulations, the Government Property Handling Requirements and/or
the Government
Receivables and Account Requirements.
(hh) "GOVERNMENT PROPERTY HANDLING REQUIREMENTS" means federal
and/or state government statutes and regulations governing the
handling of
government inventory and materials, including without limitation
the Department
of Defense Regulation Federal Acquisition Supplement 245.604(4).
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(ii) "GOVERNMENT RECEIVABLES AND ACCOUNT REQUIREMENTS" means
federal and/or state government statutes and regulations governing
the
assignment and disposition of receivables and accounts owed by
federal or state
government agencies, including without limitation the Assignment of
Claims Act,
as amended (31 U.S.C. 3727, 41 U.S.C. 15 and Federal Acquisition
Regulation
32.8).
(jj) "HEDGING AGREEMENTS" means any interest rate protection
agreement, swap agreement (as defined in 11 U.S.C. Section 101),
foreign
currency exchange agreement, commodity purchase or option agreement
or other
interest or exchange rate or commodity price hedging agreements
between any
Borrower and Bank or any Affiliate of Bank, including the Master
Agreement.
(kk) "HOLDINGS" means 508790 N.B., Inc., a Canadian corporation
and the parent company of Filtran.
(ll) "IMPAIRMENT CHARGES" means any non-cash charge(s) relating
to the valuation of the long-term assets located at the Mortgaged
Property or
the Costa Rican Subsidiary and/or goodwill associated with Filtran,
determined
in accordance with GAAP.
(mm) "INDEBTEDNESS", as applied to a Person, means all items
(except items of capital stock or of surplus) which in accordance
with GAAP
would be included in determining total liabilities as shown on the
liability
side of a balance sheet of such Person as at the date as of which
Indebtedness
is to be determined.
(nn) "INTEREST EXPENSE", as applied to Borrower, means for any
period, the amount of interest paid or due on Indebtedness by
Borrower for such
period, determined in accordance with GAAP.
(oo) "INVESTMENT PROPERTY" means all now owned or hereafter
acquired investment property (as defined in the UCC) and all
proceeds thereof.
(pp) "LEVERAGE RATIO" means the ratio of Borrower's (i.e.,
excluding Filtran) and Costa Rica Subsidiary's (i) total
Indebtedness, to (ii)
Tangible Net Worth.
(qq) "LIBOR BASED RATE" means the LIBOR Rate, plus the LIBOR Rate
Margin.
(rr) "LIBOR MARKET INDEX RATE" means, for any day, the rate per
annum (extended to the next higher 1/100 of 1%) for one (1) month,
two (2)
month, three (3) month, four (4) month or six (6) month dollar
deposits, as
applicable, as reported on Telerate page 3750 as of 11:00 a.m.,
London time, on
such day, or if such day is not a Good Business Day, then the
immediately
preceding Good Business Day (or if not so reported, then as
determined by Bank
from another recognized source of interbank quotation acceptable to
Bank or as
estimated by Bank if not reported in a recognized source of
interbank quotation
acceptable to Bank).
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(ss) "LIBOR RATE" means, for any proposed or existing LIBOR Rate
Advances, the rate of interest for the applicable Rate Period which
is
determined by Bank to be the rate per annum obtained by dividing
(the resulting
quotient to be rounded upward to the nearest 1/100 of 1%) (i) the
rate of
interest estimated in good faith by Bank in accordance with its
usual procedures
(which determination shall be conclusive) to be the average of the
rates per
annum for deposits in United States dollars offered to major money
center banks
in the London interbank market at approximately 11:00 a.m., London
time, two (2)
Good Business Days prior to the first day of such Rate Period in
amounts
comparable to such portion (or, if there are no such comparable
amounts actively
traded, the smallest amounts actively traded) and have maturities
comparable to
such Rate Period, by (ii) a number equal to 1.00 minus the LIBOR
Rate Reserve
Percentage for such day.
(tt) "LIBOR RATE ADVANCE" means any Advance accruing interest at
the LIBOR Based Rate.
(uu) "LIBOR RATE MARGIN" means, (a) for Revolving Line Advances,
200 basis points and (b) for each of the Mortgage Loan and Term
Loan, 225 basis
points.
(vv) "LIBOR RATE NOTIFICATION" means an irrevocable written
notice in form acceptable to Bank requesting the LIBOR Based Rate,
which notice
must be provided to Bank prior to 10:00 a.m. Newark, New Jersey
time on a
Business Day which is at least three (3) Good Business Days prior
to the date on
which such rate is requested to take effect, specifying:
(1) the principal amount which is to accrue interest at such
rate;
(2) the date on which such rate is to take effect and the
Rate Period; and
(3) whether such principal amount is a new advance, a
conversion from another interest rate or a renewal of another
interest rate.
(ww) "LIBOR RATE RESERVE PERCENTAGE" for any day means the
percentage (rounded upward to the nearest 1/100 of 1%), as
determined in good
faith by Bank (which determination shall be conclusive) as
representing for such
day the maximum effective reserve requirement (including without
limitation
supplemental, marginal and emergency requirements) for member banks
of the
federal reserve system with respect to eurocurrency funding
(currently referred
to as "Eurocurrency liabilities") of any maturity. Each LIBOR Based
Rate shall
be adjusted automatically as of the effective date of any change in
the LIBOR
Rate Reserve Percentage.
(xx) "LOAN ACCOUNT" has the meaning given such term in SECTION
4.15 hereof.
(yy) "LOAN DOCUMENTS" means this Agreement, the Notes, the
Mortgage, the Rent Assignment, Pledge Agreement and all other
documents,
executed or delivered by Borrower or any other Person pursuant to
this Agreement
or in connection herewith, as they may be amended, modified or
restated from
time to time.
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(zz) "LOANS" means, collectively, the Revolving Line, the
Mortgage Loan and the Term Loan.
(aaa) "MASTER AGREEMENT" means the then current version of the
ISDA Master Agreement used by the Bank.
(bbb) "MATERIAL ADVERSE EFFECT" means a material adverse effect,
(i) on the business, operations, assets, liabilities or condition
of Borrower on
a consolidated basis, (ii) in the value of or the perfection or
priority of
Bank's lien upon the Collateral, or (iii) in the ability of
Borrower to perform
its obligations under the Loan Documents
(ccc) "MAXIMUM REVOLVING LINE AMOUNT" means an amount up to Five
Million and 00/100 Dollars ($5,000,000.00).
(ddd) "MORTGAGE" means that certain Mortgage and Security
Agreement with Assignment of Cash Collateral executed by Borrower
in favor of
Bank dated of even date herewith.
(eee) "MORTGAGE LOAN" shall have the meaning given such term in
Section 2.2 hereof.
(fff) "MORTGAGE LOAN CONTRACT PERIOD" means the period of time
commencing on the date hereof and continuing through and including
October 1,
2016.
(ggg) "MORTGAGE NOTE" shall have the meaning given such term in
Section 2.2 hereof.
(hhh) "MORTGAGED PROPERTY" shall have the meaning given such term
in SECTION 5.2 hereof.
(iii) "NET INCOME" means consolidated income (or loss) of
Borrower (excluding Filtran) and Costa Rican Subsidiary after
income and
franchise taxes and shall have the meaning given such term by GAAP,
provided
that there shall be specifically excluded therefrom (i) gains or
losses from the
sale of capital assets, (ii) net income of any Person in which
Borrower has an
ownership interest (other than Costa Rican Subsidiary), unless
received by
Borrower in a cash distribution, (iii) any gains or losses arising
from
extraordinary or non-recurring items (approved by the Bank at its
sole
discretion) and, (iv) any Impairment Charge, all as determined in
accordance
with GAAP.
(jjj) "NOTES" means, collectively, the Revolving Line Note, the
Mortgage Note and the Term Note.
(kkk) "OUT-OF-FORMULA ADVANCE" means the amount by which (i) the
then outstanding Revolving Line Advances, exceeds (ii) the
Borrowing Base
Amount, subject to such restrictions on Advances as are set forth
in this
Agreement.
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(lll) "PARTICIPANT" shall have the meaning given such term in
SECTION 17.6 hereof.
(mmm) "PARTS" means purchased electronic components not
manufactured or processed by Borrower exclusive of slow moving or
obsolete
electronic components.
(nnn) "PBGC" has the meaning given such term in SECTION 6.16
hereof.
(ooo) "PERSON" means an individual, a Corporation or a government
or any agency or subdivision thereof, or any other entity.
(ppp) "PLAN" has the meaning given such term in SECTION 6.15
hereof.
(qqq) "PRIME BASED RATE" means the Prime Rate, minus the Prime
Rate Margin (such interest rate to change immediately upon any
change in the
Prime Rate).
(rrr) "PRIME RATE" means the annual interest rate established
from time to time by Bank and generally known by Bank as its "prime
rate",
whether published by it publicly or only for the internal guidance
of its loan
officers, which rate is used merely as a pricing index and is not
and should not
be considered to represent the lowest or best rate available to a
borrower.
(sss) "PRIME RATE ADVANCE" means any Advance accruing interest at
the Prime Based Rate.
(ttt) "PRIME RATE MARGIN" means 50 basis points.
(uuu) "RATE PERIOD" means, for any principal portion of the
Revolving Line, the Mortgage Loan or the Term Loan for which
Borrower elects the
LIBOR Based Rate, the period of time for which such rate shall
apply to such
principal portion.
(vvv) "RAW MATERIALS" means circuit board substrates and circuit
boards exclusive of slow moving or obsolete circuit board
substrates or circuit
boards.
(www) "REAL PROPERTY" shall have the meaning given such term in
SECTION 10.2 hereof.
(xxx) "REGISTER" shall have the meaning given such term in
SECTION 17.6 hereof.
(yyy) "RENT ASSIGNMENT" means that certain Absolute Assignment of
Leases and Rents executed by Borrower in favor of Bank of even date
herewith.
(zzz) "REQUESTED ADVANCE DATE" has the meaning given such term in
SECTION 2.5(b) hereof.
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(aaaa) "REVOLVING LINE" shall have the meaning given such term in
SECTION 2.1 hereof.
(bbbb) "REVOLVING LINE ADVANCES" means all Advances under the
Revolving Line.
(cccc) "REVOLVING LINE CONTRACT PERIOD" means the period of time
commencing on the date hereof and continuing through and including
October 17,
2008.
(dddd) "REVOLVING LINE NOTE" shall have the meaning given such
term in SECTION 2.1 hereof.
(eeee) "SPECIAL MATERIALS" means any and all materials which,
under Environmental Requirements, require special handling in use,
generation,
collection, storage, treatment or disposal, or payment of costs
associated with
responding to the lawful directives of any court or agency of
competent
jurisdiction. Special Materials shall include, without limitation:
(i) any
flammable substance, explosive, radioactive material, hazardous
material,
hazardous waste, toxic substance, solid waste, pollutant,
contaminant or any
related material, raw material, substance, product or by-product of
any
substance specified in or regulated or otherwise affected by any
Environmental
Requirements (including but not limited to any "hazardous
substance" as defined
in the Comprehensive Environmental Response, Compensation and
Liability Act of
1980 as amended or any similar state or local law), (ii) any toxic
chemical or
other substance from or related to industrial, commercial or
institutional
activities, and (iii) asbestos, gasoline, diesel fuel, motor oil,
waste and used
oil, heating oil and other petroleum products or compounds,
polychlorinated
biphenyls, radon, urea formaldehyde and lead-containing materials.
(ffff) "SUBORDINATED INDEBTEDNESS" means the debt due a
Subordinating Creditor (and the note(s) evidencing such) which has
been
subordinated, by a Subordination Agreement, to the prior payment
and
satisfaction of the obligations of the Borrower to Bank hereunder.
(gggg) "SUBORDINATING CREDITOR" means any party hereafter
executing a Subordination Agreement.
(hhhh) "SUBORDINATION AGREEMENT" means the agreement (in form and
substance satisfactory to Bank) among the Borrower, a Subordinating
Creditor and
Bank pursuant to which Subordinated Indebtedness is subordinated to
the prior
payment and satisfaction of the Borrower's obligations to Bank.
(iiii) "SUBSIDIARY" means a Corporation (i) which is organized
under the laws of the United States or any State thereof, or any
other country
or jurisdiction, (ii) which conducts substantially all of its
business and has
substantially all of its assets within the United States and (iii)
of which more
than fifty percent (50%) of its outstanding voting stock of every
class (or
other voting equity interest) is owned by Borrower or one or more
of its
Subsidiaries.
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(jjjj) "TANGIBLE NET WORTH" means, at any time, the aggregate
amount by which all assets of Borrower and Costa Rican Subsidiary
excluding
intangible assets, as that term would be defined under GAAP, exceed
the
aggregate amount of all liabilities (excluding Subordinated
Indebtedness) of
Borrower and Costa Rican Subsidiary, as would be shown on a balance
sheet of
Borrower and Costa Rican Subsidiary prepared as of such date in
accordance with
GAAP less (i) advances to Affiliates, (ii) advances to officers of
Borrower, and
(iii) Investment Property.
(kkkk) "TERM LOAN" shall have the meaning given such term in
SECTION 2.3 hereof.
(llll) "TERM LOAN CONTRACT PERIOD" means the period of time
commencing on the date hereof and continuing through and including
October 1,
2011.
(mmmm) "TERM NOTE" shall have the meaning given such term in
SECTION 2.3 hereof.
(nnnn) "UCC" means the Uniform Commercial Code as the same may be
amended and in effect from time to time in the State of New Jersey;
provided,
however, in the event that, by reason of mandatory provisions of
law, the
attachment, perfection or priority of the Bank's security interest
in any
Collateral is governed by the Uniform Commercial Code as enacted
and in effect
in a jurisdiction other than the State of New Jersey, the term
"UCC" shall mean
the Uniform Commercial Code as enacted and in effect in such other
jurisdiction
solely for the purposes of the provisions hereof relating to such
attachment,
perfection or priority and for purposes of definitions related to
such
provisions.
(oooo) "UNDRAWN AVAILABILITY" at a particular date shall mean an
amount equal to (i) the lesser of (A) the Borrowing Base Amount or
(B) the
Maximum Revolving Line Amount, minus (ii) the sum of (A) the
outstanding amount
of Advances under the Revolving Line, plus (B) the face amount of
all
outstanding Letters of Credit.
(pppp) "VALUE" means, with respect to Borrower's Raw Materials or
Parts located on the Mortgaged Property, the lower of cost
(determined on a
first-in-first-out basis) or market value, exclusive of any
transportation,
processing or handling charges.
(qqqq) "WAIVER AGREEMENT" means an agreement in form and content
satisfactory to Bank in its sole discretion executed by a landlord
of a leased
location of Borrower or a warehouseman of a warehouse location of
Borrower
pursuant to which, inter alia, such landlord or warehouseman waives
any and all
rights against any Collateral at such location and permits Bank
access to such
location for the purpose of selling and taking possession of any
Collateral at
such location.
1.2 ACCOUNTING TERMS. As used in this Agreement, or any
certificate,
report or other document made or delivered pursuant to this
Agreement,
accounting terms not defined elsewhere in this Agreement shall have
the
respective meanings given to them under GAAP.
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1.3 UCC TERMS. All terms used herein and defined in the UCC shall
have
the meanings given therein unless otherwise defined herein.
2. THE REVOLVING LINE; THE EQUIPMENT LINE; TERM LOAN; USE OF
PROCEEDS
2.1 REVOLVING LINE OF CREDIT. Bank will establish for Borrower for
and
during the Revolving Line Contract Period, subject to the terms and
conditions
hereof, a revolving line of credit (the "REVOLVING LINE") pursuant
to which Bank
will from time to time make Advances to Borrower in an aggregate
amount not
exceeding at any time the lesser of: (a) the Borrowing Base Amount
or (b) the
Maximum Revolving Line Amount. Within the limitations set forth
above, Borrower
may borrow, repay and reborrow under the Revolving Line. Borrower's
obligation
to repay Revolving Line Advances shall be evidenced by Borrower's
promissory
note (the "REVOLVING LINE NOTE") in the face amount of Five Million
and 00/100
Dollars ($5,000,000.00), which shall be in the form attached hereto
as EXHIBIT
"A", with the blanks appropriately filled in.
2.2 MORTGAGE LOAN. Bank shall lend to Borrower and Borrower shall
borrow from Bank the aggregate amount of Three Million and 00/100
Dollars
($3,000,000.00) (the "MORTGAGE LOAN"). Borrower's obligation to
repay the
Mortgage Loan shall be evidenced by Borrower's promissory note (the
"MORTGAGE
NOTE") in the face amount of Three Million and 00/100 Dollars
($3,000,000.00),
which shall be in the form of EXHIBIT "B", with the blanks
appropriately filled
in.
2.3 TERM LOAN. Bank shall lend to Borrower and Borrower shall
borrow
from Bank the aggregate amount of Two Million and 00/100 Dollars
($2,000,000.00)
(the "TERM LOAN"). Borrower's obligation to repay the Term Loan
shall be
evidenced by Borrower's promissory note (the "TERM NOTE") in the
face amount of
Two Million and 00/100 Dollars ($2,000,000.00), which shall be in
the form of
EXHIBIT "C", with the blanks appropriately filled in.
2.4 USE OF PROCEEDS. Borrower agrees to use Revolving Line Advances
for proper working capital purposes. Borrower agrees to use
Advances under the
Mortgage Loan to refinance in part certain existing Indebtedness of
Borrower to
CIT Group/Business Credit, Inc. ("CIT") and for working capital
purposes.
Borrower agrees to use Advances under the Term Loan to refinance in
part certain
existing Indebtedness of Borrower to CIT for working capital
purposes.
2.5 METHOD OF ADVANCES.
(a) REVOLVING LINE ADVANCES. On any Business Day, Borrower may
request a Revolving Line Advance by delivering to the Bank officer
designated by
Bank no later than 1:00 p.m. Newark, New Jersey time on the
Business Day such
Advance is requested to be funded (or if Borrower is requesting a
LIBOR Rate
Advance by 10:00 A.M., Newark, New Jersey time, three (3) Good
Business Days
prior to the first day of the selected Rate Period) a written
request for a
Revolving Line Advance and a completed and executed borrowing base
certificate
together with such collateral and back-up documentation as Bank may
from time to
time require (and if Borrower is requesting a LIBOR Rate Advance,
such request
shall include a LIBOR Rate Notification). Such request may be by
telephone,
unless Bank has advised Borrower that written requests are
required. Bank may
require prompt written confirmation of any telephone request and
additional
back-up documentation, from time to time. Each request
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for an Advance under the Revolving Line shall be conclusively
presumed to be
made by the Borrower's Chief Financial Officer and, once received
by Bank, shall
be deemed irrevocable. Availability for Advances shall be based
upon the most
recent accounts receivable aging report required pursuant to
Section 9.3 hereof
and the most recent inventory certification required pursuant to
Section 9.4
hereof, unless more frequent reports are required by Bank.
In addition to the foregoing, Borrower authorizes Bank, without
further
authorization or notice, to make Advances under the Revolving Line
into
Borrower's account with Bank. Such Advances will be in amounts
sufficient to
honor checks drawn on such account, provided that Borrower has
sufficient
availability for Advances and no Default or an Event of Default has
occurred.
Bank reserves the right not to honor any checks drawn on such
account if such
honor would result in a Revolving Line Advance in excess of the
Borrowing Base
Amount or if a Default or an Event of Default has occurred. All
Advances made by
Bank into such account shall be deemed Revolving Line Advances.
Such account
arrangements may be terminated by Bank at any time.
(b) MORTGAGE LOAN ADVANCES. The entire principal amount of the
Mortgage Loan shall be advanced on the date hereof.
(c) TERM LOAN ADVANCE. The entire principal amount of the Term
Loan shall be advanced on the date hereof.
(d) FUNDING OF ADVANCES. Subject to the terms and conditions of
this Agreement, Bank may make the proceeds of an Advance available
to Borrower
by crediting such proceeds to Borrower's deposit account with Bank.
2.6 LETTERS OF CREDIT. Pursuant to the terms hereof and subject to
borrowing availability, Bank shall issue for the account of
Borrower standby
letters of credit in form and content satisfactory to Bank and
Borrower, with a
term not to exceed the earlier to occur of (a) twelve (12) months
(for standby
letters of credit), or (b) the last day of the Revolving Line
Contract Period.
Notwithstanding the foregoing, at no time shall the principal
balance of the
Revolving Line, plus the aggregate face amount of all outstanding
letters of
credit issued under the Revolving Line, exceed the lesser of the
(A) Borrowing
Base Amount or (B) Maximum Revolving Line Amount.
Borrower will execute a letter of credit application and letter of
credit agreement, and such other documents mutually acceptable by
Bank and
Borrower as may be required by Bank in connection with the issuance
of letters
of credit hereunder. The outstanding face amount of all letters of
credit issued
by Bank pursuant hereto will reduce Borrower's ability to borrow
under the
Revolving Line as if such face amount were a Revolving Line
Advance. In the
event that Bank pays any sums due pursuant to such letters of
credit for any
reason, such payment shall be deemed to be a Revolving Line Advance
under the
Revolving Line repayable by Borrower pursuant to the terms hereof.
In the event that the Revolving Line is terminated for any reason
or
demand is made thereunder, Borrower will deposit with Bank an
amount equal to
one hundred percent (100%) of the face amount of all letters of
credit then
outstanding which have been issued hereunder, plus all fees related
thereto or
to accrue thereunder. Such funds will be held by Bank as cash
collateral to
secure the Bank Indebtedness.
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Borrower hereby assumes all risks of the acts or omissions of Bank
and any
beneficiary of any letter of credit issued by Bank. Without
limiting the
generality of the foregoing, Borrower hereby indemnifies and holds
harmless Bank
and any Affiliate, shareholder, officer, director, official, agent,
employee and
attorney of Bank and any of their respective heirs, executors,
administrators,
successors and assigns (collectively, for this paragraph, the
"INDEMNITEES")
from and against any and all claims, damages, losses, liabilities,
costs or
expenses whatsoever by reason of or in connection with the
execution and
delivery or transfer of, or payment or failure to pay under, any
letter of
credit issued by Bank or any Indemnitee entering into any
transaction described
herein provided, however, the Borrower shall not be required to
indemnify any
Indemnitee for any claims, damages, losses, liabilities, costs or
expenses to
the extent, but only to the extent, caused by the willful
misconduct or gross
negligence of such Indemnitee.
2.7 CLOSING. Closing hereunder will take place at the offices of
Wolf
Block Brach Eichler, 101 Eisenhower Parkway, Roseland, New Jersey,
effective on
the date of this Agreement.
3. INTEREST RATE
3.1 INTEREST ON THE REVOLVING LINE. Interest on outstanding
Revolving
Line Advances will accrue from the date of advance until final
payment thereof
at the rate per annum which is one of the two (2) interest rates
options set
forth below, subject to the restrictions and in accordance with the
procedures
set forth in this Agreement:
(a) the LIBOR Based Rate; or
(b) the Prime Based Rate.
3.2 INTEREST ON THE MORTGAGE LOAN. Interest on the entire
outstanding
principal balance of the Mortgage Loan will accrue at the rate per
annum which
is one of the two (2) interest rates options set forth below,
subject to the
restrictions and in accordance with the procedures set forth in
this Agreement:
(a) the LIBOR Based Rate; or
(b) the Prime Based Rate.
3.3 INTEREST ON THE TERM LOAN. Interest on the entire outstanding
principal balance of the Term Loan will accrue at the rate per
annum which is
one of the two (2) interest rates options set forth below, subject
to the
restrictions and in accordance with the procedures set forth in
this Agreement:
(a) the LIBOR Based Rate; or
(b) the Prime Based Rate.
3.4 REQUEST FOR LIBOR RATE. Subject to the provisions and
limitations
set forth in Section 3.7 below, if Borrower desires that all or
part of the
Revolving Line Advances, the Mortgage Loan or the Term Loan accrue
interest at
the LIBOR Based Rate, Borrower shall give Bank a LIBOR Rate
Notification. Upon
delivery of a LIBOR Rate Notification, that portion of the
principal balance
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outstanding under the Revolving Line, the Mortgage Loan or the Term
Loan
identified in such LIBOR Rate Notification shall accrue interest at
the LIBOR
Based Rate as follows: (a) with respect to the principal amount of
any new
Revolving Line Advance, the initial advance of the Mortgage Loan
and the initial
advance of the Term Loan from the date of such advance until the
end of the Rate
Period specified in such LIBOR Rate Notification; and/or (b) with
respect to all
or any portion of Revolving Line Advances, the Mortgage Loan or the
Term Loan,
as applicable, outstanding and accruing interest at another LIBOR
Based Rate at
the time of the LIBOR Rate Notification related to such Advances,
from the
expiration of the then current Rate Period related to such Advances
until the
end of the Rate Period specified in such LIBOR Rate Notification;
and/or (c)
with respect to all or any portion of the Revolving Line Advances,
the Mortgage
Loan or the Term Loan, as applicable, outstanding and accruing
interest at the
Prime Based Rate at the time of the LIBOR Rate Notification related
to such
Advances, from the date set forth in such LIBOR Rate Notification
until the end
of the Rate Period specified in such LIBOR Rate Notification. Bank
shall, at the
request of the Borrower, deliver to the Borrower a statement
showing the
computations used in determining the interest rates pursuant to
this Section 3.
3.5 CERTAIN PROVISIONS REGARDING LIBOR RATES. Borrower understands
and
agrees that: (a) subject to the provisions of this Agreement, the
LIBOR Based
Rate may apply simultaneously to different portions of the
outstanding principal
of the Revolving Line; (b) the LIBOR Based Rate may apply
simultaneously to
various portions of the outstanding principal of the Revolving Line
for various
Rate Periods; (c) the Rate Periods for the LIBOR Based Rate shall
be either one
(1), two (2), three (3), four (4) or six (6) months; (d) the LIBOR
Based Rate
applicable to any portion of the outstanding principal of the
Revolving Line,
the Mortgage Loan or the Term Loan may be different from the LIBOR
Based Rate
applicable to any other portion of the outstanding principal of the
Revolving
Line; (e) individual portions of the Revolving Line accruing
interest at the
LIBOR Based Rate must be in amounts of at least One Hundred
Thousand Dollars
($100,000.00) each and in increments of Twenty Five Thousand
Dollars
($25,000.00); and (f) during the continuation of an Event of
Default, the LIBOR
Based Rate shall automatically convert on the last day of the LIBOR
Rate Period
during which such Event of Default occurred to the Prime Based
Rate.
3.6 PRIME BASED RATE FALL BACK. After expiration of any Rate
Period,
any principal portion of the Revolving Line, the Mortgage Loan or
the Term Loan
corresponding to such Rate Period which has not been converted or
renewed in
accordance with the terms of this Agreement shall accrue interest
automatically
at the Prime Based Rate from the date of expiration of such Rate
Period until
paid in full, unless and until receipt by Bank of a request for
another interest
rate in accordance with the terms of this Agreement.
3.7 LIBOR BASED RATE BORROWINGS. No more than four (4) separate
borrowings in the aggregate accruing interest at the LIBOR Based
Rate may be
outstanding at any one time under the Revolving Line. No more than
two (2)
separate borrowings in the aggregate accruing interest at the LIBOR
Based Rate
may be outstanding at any one time under the Term Loan. No more
than two (2)
separate borrowings in the aggregate accruing interest at the LIBOR
Based Rate
may be outstanding at any one time under the Mortgage Loan.
Notwithstanding
anything to the contrary set forth in Sections 3.4 or 3.7, the
Borrower shall at
all times maintain a portion of the Term Loan and the Mortgage Loan
at the Prime
Based Rate in an amount equal to the principal amortization due
under the Term
Loan and Mortgage Loan during a LIBOR Rate Period.
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3.8 LIBOR UNLAWFUL. In the event that, as a result of any changes
in
applicable law or regulation or the interpretation thereof, it
becomes unlawful
for Bank to maintain or fund any Advance at the LIBOR Based Rate,
then Bank
shall immediately notify Borrower thereof and Bank's obligation to
make, convert
to, or maintain any Advance at the LIBOR Based Rate shall be
suspended until
such time as Bank may again cause the LIBOR Based Rate to be
applicable and,
until such time, Advances subject to the LIBOR Based Rate shall
accrue interest
at the Prime Based Rate. Promptly after becoming aware that it is
no longer
unlawful for Bank to maintain or fund Advances at the LIBOR Based
Rate, Bank
shall notify Borrower thereof and such suspension shall cease to
exist.
3.9 LIBOR BASED RATE UNASCERTAINABLE OR UNAVAILABLE. If, at any
time,
Bank in good faith shall determine (which determination shall be
conclusive)
that the LIBOR Based Rate is unavailable or adequate means for
ascertaining the
LIBOR Based Rate do not exist, in either case due to circumstances
affecting the
InterBank LIBOR market, Bank shall promptly notify Borrower of such
determination. Upon such determination, the right of Borrower to
select,
maintain and/or convert to the LIBOR Based Rate shall be suspended
until notice
from Bank that the LIBOR Based Rate is again available or
ascertainable and,
until such time, all outstanding Advances under the Revolving Line,
the Mortgage
Loan and the Term Loan shall accrue interest at the Prime Based
Rate.
3.10 DEFAULT INTEREST. Interest will accrue on the principal
balance
of each of the Loans after the occurrence of an Event of Default or
expiration
of the applicable Contract Period at a rate which is four percent
(4%) in excess
of the applicable rate of interest in effect for such Loan from
time to time
(the "DEFAULT RATE").
3.11 POST JUDGMENT INTEREST. Any judgment obtained for sums due
hereunder or under the Loan Documents will accrue interest at the
applicable
default rate set forth above until paid.
3.12 CALCULATION. Interest will be computed on the basis of a year
of
360 days and paid for the actual number of days elapsed.
3.13 LIMITATION OF INTEREST TO MAXIMUM LAWFUL RATE. In no event
will
the rate of interest payable hereunder exceed the maximum rate of
interest
permitted to be charged by applicable law (including the choice of
law rules)
and any interest paid in excess of the permitted rate will be
refunded to
Borrower. Such refund will be made by application of the excessive
amount of
interest paid against any sums outstanding hereunder and will be
applied in such
order as Bank may determine. If the excessive amount of interest
paid exceeds
the sums outstanding, the portion exceeding the sums outstanding
will be
refunded in cash by Bank. Any such crediting or refunding will not
cure or waive
any default by Borrower. Borrower agrees, however, that in
determining whether
or not any interest payable hereunder exceeds the highest rate
permitted by law,
any non-principal payment (other than interest and outstanding
Default
Interest), such as prepayment fees and late charges, will be deemed
to the
extent permitted by law to be an expense, fee, premium or penalty
rather than
interest.
3.14 PAYMENT. If any payment under this Section 3 becomes due and
payable on a day other than a Business Day or Good Business Day,
the maturity
thereof shall be extended to the next succeeding Business Day or
Good Business
Day unless the results of such extension would be
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to extend such payment into another calendar month in which event
such payment
shall be made on the immediately preceding Business Day or Good
Business Day.
4. PAYMENTS AND FEES
4.1 INTEREST PAYMENTS ON THE REVOLVING LINE. Borrower will pay
interest on the outstanding principal balance of the Revolving Line
outstanding
monthly in arrears on the first day of each calendar month
commencing the first
day of the first calendar month following the date hereof.
4.2 PRINCIPAL PAYMENTS ON THE REVOLVING LINE. Borrower will pay the
outstanding Advances under the Revolving Line, together with any
accrued and
unpaid interest thereon, and any other sums due pursuant to the
terms hereof, ON
DEMAND after the occurrence of an Event of Default or after
expiration of the
Revolving Line Contract Period. If any Out-Of-Formula Advance
arises or exists
under the Revolving Line for any reason whatsoever, including
inventory or
accounts becoming ineligible, Borrower will repay such
Out-Of-Formula Advance
immediately, upon demand.
4.3 PRINCIPAL AND INTEREST PAYMENTS ON THE MORTGAGE LOAN . Borrower
will pay the principal of the Mortgage Loan and accrued interest
thereon based
on a twenty (20) year amortization schedule in one hundred nineteen
(119)
consecutive monthly installments, on the first day of calendar
month commencing
on November 1, 2006 and in one (1) final payment of the remaining
principal
balance plus all accrued and unpaid interest thereon on October 1,
2016.
4.4 PRINCIPAL AND INTEREST PAYMENTS ON THE TERM LOAN. Borrower will
pay the principal of the Term Loan and accrued interest thereon in
fifty-nine
(59) monthly installments, on the first day of each calendar month
commencing on
November 1, 2006, and in one final payment of the remaining
principal balance
plus all accrued and unpaid interest thereon on October 1, 2011.
4.5 LOAN FEE. In consideration of Bank's agreements contained
herein,
Borrower shall pay to Bank a loan fee in the amount of Twenty Five
Thousand and
00/100 Dollars ($25,000.00), which fee may be charged as a
Revolving Line
Advance or charged to any bank account of Borrower maintained with
Bank.
4.6 USAGE FEE. So long as the Revolving Line is outstanding and has
not been terminated, and the Bank Indebtedness has not been
satisfied in full,
Borrower shall unconditionally pay to Bank a fee equal to
one-eighth of one
percent (1/8%) per annum of the daily unused portion of the
Revolving Line
(which shall be calculated as the difference between Five Million
and 00/100
Dollars ($5,000,000.00) (or such greater amount if the maximum
committed amount
for the Revolving Line is ever increased), minus the average
outstanding
principal balance of cash advances under the Revolving Line for the
applicable
quarter, which fee shall be computed on a quarterly basis in
arrears and shall
be due and payable on the first day of the first full calendar
quarter after the
date hereof.
4.7 LATE CHARGE. In the event that Borrower fails to pay any
principal, interest or other fees or expenses payable hereunder for
a period of
at least ten (10) days after any such payment is first due, in
addition to
paying such sums, Borrower will pay to Bank a late charge equal to
four percent
(4%) of such past due payment as compensation for the expenses
incident to such
past due payment.
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4.8 TERMINATION OF REVOLVING LINE, PREPAYMENT OF MORTGAGE LOAN,
TERM
LOAN.
(a) RIGHT TO TERMINATE. Borrower may terminate the Revolving Line
upon sixty (60) days prior written notice to Bank.
(b) PREPAYMENT OF MORTGAGE LOAN; TERM LOAN. Borrower may prepay
all or any part of the principal balance of the Mortgage Loan
and/or Term Loan
at any time, following delivery of not less than thirty (30) days
prior written
notice to Bank without payment of a premium of penalty. All
prepayments will be
applied to the regularly scheduled payments in the inverse order in
which they
are due.
4.9 PAYMENT METHOD. Borrower irrevocably authorizes Bank to debit
all
payments required to be made by Borrower hereunder or under any of
the Loans on
the date due from deposit account number 3694002696 maintained by
Borrower with
Bank or to charge any or all of such payments as a Revolving Line
Advance.
Otherwise, Borrower will be obligated to make such payments
directly to Bank.
All payments are to be made in immediately available funds. If Bank
accepts
payment in any other form, such payment shall not be deemed to have
been made
until the funds comprising such payment have actually been received
by or made
available to Bank.
4.10 APPLICATION OF PAYMENTS. Any and all payments on account of
any
of the Loans will be applied to accrued and unpaid interest,
outstanding
principal and other sums due hereunder or under the Loan Documents,
in such
order as Bank, in its discretion, elects. If Borrower makes a
payment or
payments and such payment or payments, or any part thereof, are
subsequently
invalidated, declared to be fraudulent or preferential, set aside
or are
required to be repaid to a trustee, receiver, or any other person
under any
bankruptcy act, state or federal law, common law or equitable
cause, then to the
extent of such payment or payments, the obligations or part thereof
hereunder
intended to be satisfied shall be revived and continued in full
force and effect
as if said payment or payments had not been made.
4.11 LOAN ACCOUNT. Bank will open and maintain on its books a loan
account (the "LOAN ACCOUNT") with respect to Advances made,
repayments,
prepayments, the computation and payment of interest and fees and
the
computation and final payment of all other amounts due and sums
paid to Bank
under this Agreement. Except in the case of manifest error in
computation, the
Loan Account will be conclusive and binding on the Borrower as to
the amount at
any time due to Bank from Borrower under this Agreement or the
Notes.
4.12 LOSS OF MARGIN. In the event that any present or future law,
rule, regulation, treaty or official directive or the
interpretation or
application thereof by any central bank, monetary authority or
governmental
authority, or the compliance with any guideline or request of any
central bank,
monetary authority or governmental authority (whether or not having
the force of
law):
(a) subjects Bank to any tax with respect to any amounts payable
under this Agreement or the other Loan Documents by Borrower or
otherwise with
respect to the transactions contemplated under this Agreement or
the other Loan
Documents (except for taxes on the overall net income of Bank
imposed by the
United States of America or any political subdivision thereof); or
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(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit, capital maintenance, capital adequacy, or
similar
requirement against assets held by, or deposits in or for the
account of, or
loans or Advances or commitment to make loans or Advances by, or
letters of
credit issued or commitment to issue letters of credit by, the
Bank; or
(c) imposes upon Bank any other condition with respect to
Advances or extensions of credit or the commitment to make Advances
or
extensions of credit under this Agreement,
and the result of any of the foregoing is to increase the costs of
Bank, or
impose any expense upon Bank with respect to any Advances or
extensions of
credit or commitments to make Advances or extensions of credit
under this
Agreement, Bank shall so notify Borrower in writing. Borrower
agrees to pay Bank
the amount of such increase in cost, or additional expense within
ten (10) days
after presentation by Bank of a statement concerning such increase
in cost,
reduction in income, reduced return on equity or capital, or
additional expense.
Such statement shall set forth a brief explanation of the amount
and Bank's
calculation of the amount (in determining such amount the Bank may
use any
reasonable averaging and attribution methods), which statement
shall be
conclusively deemed correct absent manifest error. If the amount
set forth in
such statement is not paid within ten (10) days after such
presentation of such
statement, interest will be payable on the unpaid amount at the
highest default
rate payable hereunder from the due date until paid, both before
and after
judgment.
4.13 LIBOR INDEMNITY. Borrower shall indemnify Bank against any
loss
or expense (including loss of margin) which Bank has sustained or
incurred as a
consequence of (a)payment, prepayment or conversion of any portion
of any LIBOR
Rate Advances on a day other than the last day of the corresponding
Rate Period
(even if such payment is pursuant to demand by Bank pursuant to
this Agreement
and whether or not any such payment, prepayment or conversion is
consented to by
Bank); or (b) attempt by Borrower to revoke in whole or in part any
irrevocable
LIBOR Rate Notification pursuant to this Agreement.
If any such loss is sustained, Bank shall from time to time notify
Borrower
of the amount determined in good faith by Bank (which determination
shall be
conclusive) to be necessary to indemnify Bank for such loss or
expense. Such
amount shall be due and payable by Borrower on demand.
4.14 LETTER OF CREDIT FEES. For each issuance or renewal of a
standby
letter of credit hereunder, Borrower will pay to Bank an issuance
or renewal fee
in an amount equal to the greater of: (i) one and one half of one
percent (1.5%)
per annum of the face amount of such standby letter of credit or
(ii) Five
Hundred Dollars ($500.00) per annum, payable coincident with and as
a condition
of the issuance or renewal of such standby letter of credit. In
addition,
Borrower shall pay such other fees and charges in connection with
each standby
letter of credit as may be customarily charged by Bank. Such fees
shall be
computed on the basis of a year of 360 days.
5. SECURITY; COLLECTION OF RECEIVABLES AND PROCEEDS OF COLLATERAL
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5.1 PERSONAL PROPERTY. As security for the full and timely payment
and
performance the Loans and all obligations of Borrower to Bank
hereunder,
Borrower hereby grants to Bank a security interest in all existing
and
after-acquired property of Borrower of any nature (except as
limited by Section
5.4(b) below including, without limitation:
(a) Subject to Government Disclosure Regulations and Government
Receivables and Account Requirements to the extent applicable, all
present and
future accounts, contract rights, chattel paper, instruments and
documents and
all other rights to the payment of money whether or not yet earned,
for services
rendered or goods sold, consigned, leased or furnished by Borrower
or otherwise,
together with (i) all goods (including any returned, rejected,
repossessed or
consigned goods), the sale, consignment, lease or other furnishing
of which
shall be given or may give rise to any of the foregoing, (ii) all
of Borrower's
rights as a consignor, consignee, unpaid vendor or other lienor in
connection
therewith, including stoppage in transit, set-off, detinue,
replevin and
reclamation, (iii) all general intangibles related thereto, (iv)
all guaranties,
mortgages, security interests, assignments, and other encumbrances
on real or
personal property, leases and other agreements or property securing
or relating
to any accounts, (v) choses-in-action, claims and judgments, and
(vi) any
returned or unearned premiums, which may be due upon cancellation
of any
insurance policies.
(b) All present and future inventory of Borrower (including but
not limited to goods held for sale or lease or furnished or to be
furnished
under contracts for service, raw materials, work-in-process,
finished goods and
goods used or consumed in Borrower's business) whether owned,
consigned or held
on consignment, together with all merchandise, component materials,
supplies,
packing, packaging and shipping materials, and all returned,
rejected or
repossessed goods sold, consigned, leased or otherwise furnished by
such
Borrower and all embedded software related thereto.
(c) Subject to Government Disclosure Regulations and Government
Receivables and Account Requirements to the extent applicable, all
present and
future general intangibles (including but not limited to payment
intangibles,
tax refunds and rebates, manufacturing and processing rights,
designs, patents,
patent rights and applications therefor, trademarks and
registration or
applications therefor, tradenames, brand names, logos, inventions,
copyrights
and all applications and registrations therefor), licenses,
permits, approvals,
software and computer programs, license rights, royalties, trade
secrets,
methods, processes, know-how, formulas, drawings, specifications,
descriptions,
label designs, plans, blueprints, patterns and all memoranda, notes
and records
with respect to any research and development.
(d) All present and future machinery, equipment, furniture,
fixtures, motor vehicles, tools, dies, jigs, molds and other
articles of
tangible personal property of every type together with all parts,
substitutions,
accretions, accessions, attachments, accessories, additions,
components and
replacements thereof, and all manuals of operation, maintenance or
repair, and
all embedded software related thereto.
(e) All present and future general ledger sheets, files, books
and records, customer lists, books of account, invoices, bills,
certificates or
documents of ownership,
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bills of sale, business papers, correspondence, credit files,
tapes,
cards, computer runs and all other data and data storage systems
whether in the
possession of Borrower or any service bureau.
(f) All present and future letter of credit rights and supporting
obligations, including without limitation, all letters of credit
and letter of
credit rights now existing or hereafter issued naming Borrower as a
beneficiary
or assigned to Borrower, including the right to receive payment
thereunder, and
all documents and records associated therewith.
(g) All present and future deposit accounts of Borrower. With
respect to any deposit accounts not maintained with Bank, Borrower
shall enter
into a control agreement satisfactory to Bank for each such deposit
account.
(h) All present and future financial assets and investment
property of Borrower.
(i) All of Borrower's commercial tort claims from time to time
listed on SCHEDULE 5.1(i) hereto. Each amendment adding commercial
tort claims
to such SCHEDULE 5.1(i) pursuant to the provisions of SECTION 7.30
below shall
constitute a contemporaneous grant by the Borrower of a security
interest in all
of the Borrower's rights and interests in such commercial tort
claims.
(j) All funds, instruments, documents, policies and evidence and
certificates of insurance and rights thereunder, securities,
chattel paper and
other assets of Borrower or in which Borrower has an interest and
all proceeds
thereof, now or at any time hereafter on deposit with or in the
possession or
control of Bank or owing by Bank to Borrower or in transit by mail
or carrier to
Bank or in the possession of any other Person acting on Bank's
behalf, without
regard to whether Bank received the same in pledge, for
safekeeping, as agent
for collection or otherwise, or whether Bank has conditionally
released the
same, and in all assets of Borrower in which Bank now has or may at
any time
hereafter obtain a lien, mortgage, or security interest for any
reason.
(k) All products and proceeds of each of the items described in
the foregoing SUBPARAGRAPHS (a)-(j) and all supporting obligations
related
thereto.
5.2 REAL PROPERTY. As further security for the Bank Indebtedness,
Borrower shall grant to Bank a mortgage lien encumbering the
premises situated
at 41 Fairfield Place, West Caldwell, New Jersey and all
improvements thereon
and all rights, licenses, permits and approvals relating thereto,
together with
an assignment of all rents and leases related thereto
(collectively, the
"MORTGAGED PROPERTY").
5.3 PLEDGE AGREEMENT. As further security for the Bank
Indebtedness,
Borrower shall pledge and grant to Bank a security interest in
sixty-five (65%)
percent of the issued and outstanding capital stock owned by
Borrower in each of
the Costa Rican Subsidiary and Holdings pursuant to a Stock Pledge
Agreement
made by Borrower in favor of Bank (the "Pledge Agreement").
5.4 GENERAL.
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(a) The collateral described above in SECTIONS 5.1, 5.2 AND 5.3
is collectively referred to herein as the "COLLATERAL". The
above-described
security interests, assignments, liens shall not be rendered void
by the fact
that no Bank Indebtedness exists as of any particular date, but
shall continue
in full force and effect until the Bank Indebtedness has been
repaid, Bank has
no agreement or commitment outstanding pursuant to which Bank may
extend credit
to or on behalf of Borrower and Bank has executed termination
statements or
releases with respect thereto which statements and releases Bank
shall provide
upon request when the Bank Indebtedness has been repaid.
(b) Notwithstanding anything in this Agreement to the contrary,
Bank's pledge and grant of a lien upon and security interest in the
Borrower's
assets is subject to the following limitations:
(1) with respect to the Borrower's Investment Property
consisting of stock of Holdings and the Costa Rican Subsidiary,
such grant, lien
and security interest shall be limited to 65% of the capital stock
of such
entities, respectively; and
(2) with respect to each item of Collateral constituting an
agreement, contract, instrument, license or permit of the Borrower,
such item
shall be subject to the security interest created hereunder and
constitute
Collateral for all purposes of this Agreement only to the extent
that the
granting of such security interest does not, under the terms of
such agreement,
contract, instrument, license or permit, or as provided by
applicable law, cause
any default under or termination of such agreement, contract,
instrument,
license or permit, or the loss of any material right of the
Borrower thereunder,
provided that the exclusion of such items of Collateral, taken as a
whole, will
not materially reduce the aggregate value of the Collateral, taken
as a whole.
5.5 COLLECTION OF RECEIVABLES; PROCEEDS OF COLLATERAL.
(a) All accounts receivable collections of Borrower and all
checks, drafts and other monies received by Borrower which are
proceeds of the
Collateral will be deposited in Borrower's operating account
maintained at Bank
(the "OPERATING ACCOUNT").
(b) Borrower agrees that all monies, checks, notes, instruments,
drafts or other payments relating to or constituting proceeds of
any accounts
receivable or other Collateral of Borrower which come into the
possession or
under the control of Borrower or any employees, agents or other
persons acting
for or in concert with Borrower, shall be received and such items
shall
constitute Collateral for the Bank hereunder. Immediately upon
receipt thereof,
Borrower and such other persons shall remit the same or cause the
same to be
remitted, in kind, to Bank. Borrower shall deliver or cause to be
delivered to
Bank, with appropriate endorsement and assignment to Bank with full
recourse to
Borrower, all instruments, notes and chattel paper constituting an
account
receivable or proceeds thereof or other Collateral. Upon the
occurrence of an
Event of Default and at anytime thereafter until such time as it
has been waived
in writing by the Bank, Bank is hereby authorized to open all mail
addressed to
Borrower and endorse all checks, drafts or other items for payment
on behalf of
Borrower. Bank is granted a power of attorney by Borrower with full
power of
substitution to execute on behalf of Borrower and in
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Borrower's name or to endorse Borrower's name on any check, draft,
instrument,
note or other item of payment or to take any other action or sign
any document
in order to effectuate the foregoing. Such power of attorney being
coupled with
an interest is irrevocable until the Bank Indebtedness is repaid.
6. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants
as
follows:
6.1 VALID ORGANIZATION, GOOD STANDING AND QUALIFICATION. Borrower
is a
corporation duly incorporated, validly existing and in good
standing under the
laws of the State of Delaware, has full power and authority to
execute, deliver
and comply with the Loan Documents, and to carry on its business as
it is now
being conducted and is duly licensed or qualified as a foreign
corporation in
good standing under the laws of each jurisdiction in which the
character or
location of the properties owned by it or the business transacted
by it requires
such licensing or qualification, including the State of New Jersey,
except where
the failure to be so licensed or qualified does not have a Material
Adverse
Effect. SCHEDULE 6.1 lists Borrower's jurisdiction of
incorporation, each
jurisdiction of foreign qualification and the organizational
identification
number of Borrower (if any) issued by each such jurisdiction,
except any the
failure of which to have does not have a Material Adverse Effect.
6.2 LICENSES. Borrower and its respective employees and agents have
all licenses, registrations, approvals and other authority as may
be necessary
to enable Borrower to own and operate its business and perform all
services and
business which Borrower has agreed to perform in any state,
municipality or
other jurisdiction, except the failure of which does not have a
Material Adverse
Effect.
6.3 SUBSIDIARIES. Except as set forth on SCHEDULE 6.3 attached
hereto,
Borrower does not own any shares of stock or other equity interests
in any
Person, directly or indirectly (by any Subsidiary or otherwise).
6.4 FINANCIAL STATEMENTS. Borrower has furnished to Bank the
audited
consolidated financial statements of Borrower and its subsidiaries
for its
fiscal year ended December 31, 2005 certified without qualification
by
independent public accountants and all management and comment
letters in
connection therewith. Borrower has furnished to Bank unaudited
consolidated
financial statements of Borrower for its fiscal quarters ended
April 1, 2006 and
July 1, 2006 ("Interim Statements"). Such financial statements of
Borrower
(together with the related notes and comments), are correct and
complete, fairly
present the financial condition and the assets and liabilities of
Borrower at
such dates, and have been prepared in accordance with GAAP. With
respect to the
Interim Statements, such statements are subject to year-end
adjustment and lack
certain accompanying footnotes.
6.5 [INTENTIONALLY OMITTED]
6.6 PENDING LITIGATION OR PROCEEDINGS. Except as set forth on
SCHEDULE
6.6 attached hereto, there are no judgments outstanding or actions,
suits or
proceedings pending or, to the best of Borrower's knowledge,
threatened against
or affecting Borrower, at law or in equity or before or by any
federal, state,
municipal or other governmental department, commission, board,
bureau,
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agency or instrumentality, domestic or foreign other than any of
the foregoing
as would not have a Material Adverse Effect.
6.7 DUE AUTHORIZATION; NO LEGAL RESTRICTIONS. Except as set forth
on
SCHEDULE 6.7, the execution and delivery by Borrower of the Loan
Documents, the
consummation of the transactions contemplated by the Loan Documents
and the
fulfillment and compliance with the respective terms, conditions
and provisions
of the Loan Documents: (a) have been duly authorized by all
requisite corporate
action of Borrower, (b) will not result in a breach of, or
constitute a default
(or might, upon the passage of time or the giving of notice or
both, constitute
a default) under, any of the terms, conditions or provisions of (i)
Borrower's
certificate or articles of incorporation or by-laws, or (ii) any
applicable
statute, law, rule, regulation or ordinance other than any of the
foregoing as
would not have a Material Adverse Effect, or (iii) any indenture,
mortgage, loan
or credit agreement or instrument to which Borrower is a party or
by which
Borrower may be bound or affected, other than any of the foregoing
as would not
have a Material Adverse Effect, or (iv) any judgment or order of
any court or
governmental department, commission, board, bureau, agency or
instrumentality,
domestic or foreign other than any of the foregoing as would not
have a Material
Adverse Effect, and (c) will not result in the creation or
imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of
the property or
assets of Borrower under the terms or provisions of any such
agreement or
instrument, except liens in favor of Bank or as otherwise permitted
hereunder by
Section 7.9.
6.8 ENFORCEABILITY. The Loan Documents have been duly executed by
Borrower and delivered to Bank and constitute legal, valid and
binding
obligations of Borrower, enforceable in accordance with their
terms, except as
enforceability may be limited by any bankruptcy, insolvency,
reorganization,
moratorium or other laws or equitable principles affecting
creditors' rights
generally.
6.9 NO DEFAULT UNDER OTHER INDEBTEDNESS OBLIGATIONS, ORDERS OR
GOVERNMENTAL REGULATIONS. Borrower is not in violation of its
certificates or
articles of incorporation or by-laws, and Borrower is not in
default in the
performance or observance of any of its obligations, covenants or
conditions
contained in any indenture or other agreement creating, evidencing
or securing
any Indebtedness with a principal amount in excess of $100,000.00
or pursuant to
which any such Indebtedness is issued other than any of the
foregoing as would
not have a Material Adverse Effect or in violation of or in default
under any
judgment, decree, order, statute, rule or governmental regulation,
applicable to
it or by which its properties may be bound or affected other than
any of the
foregoing as would not have a Material Adverse Effect.
6.10 GOVERNMENTAL CONSENTS. Except as set forth in Schedule 6.10,
no
consent, approval or authorization of or designation, declaration
or filing with
any governmental authority on the part of Borrower is required in
connection
with the execution, delivery or performance by Borrower of the Loan
Documents or
the consummation of the transactions contemplated thereby.
6.11 TAXES. Borrower has filed all tax returns which it is required
to
file and has paid, or made provision for the payment of, all taxes
which have or
may have become due pursuant to such returns or pursuant to any
assessment
received by it, except for any of the foregoing being contested by
Borrower in
good faith in appropriate proceedings. Such tax returns are
complete and
accurate in all respects. Borrower does not know of any proposed
additional
assessment.
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6.12 TITLE TO COLLATERAL. The Collateral is and will be owned by
Borrower free and clear of all liens and other encumbrances of any
kind
(including liens or other encumbrances upon properties acquired or
to be
acquired under conditional sales agreements or other title
retention devices),
excepting only liens in favor of the Bank and those liens and
encumbrances
permitted under SECTION 7.9 below. Borrower will defend the
Collateral against
any claims of all persons or entities other than the Bank.
6.13 NAMES; ADDRESSES. During the past five (5) years, Borrower has
not been known by any names (including trade names) other than
those set forth
in SCHEDULE 6.13 attached hereto and has not been located at any
addresses other
than those set forth on SCHEDULE 6.13 attached hereto. The portions
of the
Collateral which are tangible property and Borrower's books and
records (both
pertaining to the Collateral and otherwise) will at all times be
located at the
addresses set forth on SCHEDULE 6.13; or such other location
determined by
Borrower after prior notice to Bank and delivery to Bank of any
items requested
by
