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EXHIBIT 10.3
REVOLVING LINE OF CREDIT
NOTE
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up to $7,500,000.00
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Springfield, MA
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1.1
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Borrower: OMEGA FLEX,
INC., a Pennsylvania corporation with a usual address of 213 Court
Street, Suite 701, Middletown, Connecticut.
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1.2
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Bank: SOVEREIGN BANK, a
federal savings bank, and its successors and assigns, with a usual
address of 1350 Main Street, Springfield, Massachusetts.
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1.3
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Principal Sum or Loan: up to Seven Million Five Hundred Thousand and 00/100 United
States ($7,500,000.00) Dollars.
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1.4
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Interest Rate: See
Paragraphs 2 and 6.1 below.
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1.5.
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First Payment Date :
October 4, 2007
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1.6
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Maturity Date: September 4, 2008, unless renewed by the Bank, in its sole
discretion, at which time the Bank may renew, terminate or extend
this Note.
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“Adjusted LIBOR Rate” means for each
Interest Period the rate per annum obtained by dividing (i) LIBOR
for such Interest Period, by (ii) a percentage equal to one hundred
(100%) percent minus the maximum reserve percentage applicable
during such Interest Period under regulations issued from time to
time by the Board of Governors of the Federal Reserve System for
determining the maximum reserve requirements (including, without
limitation, any basic, supplemental, marginal and emergency reserve
requirements) for Bank (or of any subsequent holder of the Note
which is subject to such reserve requirements) in respect of
liabilities or assets consisting of or including Eurocurrency
liabilities (as such term is defined in Regulation D of the Board
of Governors of the Federal Reserve System) having a term equal to
the Interest Period.
“Base Rate” means the Bank’s Base
Rate as designated from time to time by the Bank. The Base Rate is
a reference rate and does not necessarily represent the lowest or
best rate being charged to any customer.
“Base Rate Advance” or “Base Rate
Loan(s)” shall mean any principal outstanding under this Note
which, pursuant to this Note, bears interest at the
Base Rate.
“Business Day” means, in respect of any
date that is specified in this Note to be subject to adjustment in
accordance with applicable Business Day Convention, a day on which
commercial banks settle payments in New York or London if the
payment
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payment obligation is calculated by reference to any
Base Rate.
“Default” means any of the events
specified in Section 11, whether or not any requirement for the
giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
“Dollars” or “$” means
lawful money of the United States.
“Event of Default” means any of the
events specified in Section 11, provided that any requirement for
the giving of notice, the lapse of time or both, or any other
condition, has been satisfied.
“Interest Period” means, with respect to
each LIBOR Advance, a period of 30, 60, 90, 180 or 360 consecutive
days. If the last day of an Interest Period would otherwise occur
on a day which is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day; but if such extension
would otherwise cause such last day of the Interest Period to occur
in a new calendar month, then such last day of the Interest Period
shall occur on the next preceding Business Day. The term
“Interest Period” shall mean with respect to each Base
Rate Advance consecutive periods of one (1) day each.
“LIBOR” means, with respect to each
Interest Period, the rate per annum (rounded upward, if necessary,
to the nearest 1/32 of one percent) as determined on the basis of
the offered rates for deposits in U.S. Dollars, for a period of
time comparable to such Interest Period, which appears on the
Telerate Page 3750 as of 11:00 a.m. London time on the date that is
two (2) London Banking Days preceding the first day of such
Interest Period; provided, however, that if the rate described
above does not appear on the Telerate System on any applicable
interest determination date, the LIBOR shall be the rate (rounded
upwards as described above, if necessary) for deposits in dollars
for a period substantially equal to the Interest Period on the
Reuters Page “LIBO” (or such other page as may replace
the LIBO Page on that service for the purpose of displaying such
rates), as of 11:00 a.m. (London time), on the date that is two (2)
London Banking Days prior to the beginning of such Interest Period.
A “Banking Date” shall mean, in respect of any city,
any date on which commercial banks are open for business in that
city. If both the Telerate and Reuters Systems are unavailable,
then the rate for that date will be determined on the basis of the
offered rates for deposits in U.S. Dollars for a period of time
comparable to the Interest Period which are offered by four (4)
major banks in the London Interbank Market at approximately 11:00
a.m. London time, on the day that is two (2) London Banking Days
preceding the first day of such Interest Period as selected by the
Bank. The principal London office of each of the four (4) major
London banks will be requested to provide a quotation of its U.S.
Dollar deposit offered rate. If at least two (2) such quotations
are provided, the rate for that date will be the arithmetic mean of
the quotations. If fewer than two (2) quotations are provided as
requested, the rate for that day will be determined on the basis of
the rates quoted for loans in U.S. Dollars to leading European
banks for a period of time comparable to such Interest Period
offered by major banks in New York City at approximately 11:00 a.m.
New York City time, on the day that is two (2) London Banking Days
preceding the first
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day of such Interest Period. In the event that the
Bank is unable to obtain any such quotation as provided above, it
will be deemed that the LIBOR cannot be determined, and the
Variable Rate shall be substituted for the LIBOR for any such
Interest Period.
“LIBOR Advance” or “Libor Rate
Advance” or “Libor Rate Loan” shall mean any
principal outstanding under this Note which, pursuant to this Note,
bears interest at the LIBOR Rate.
“LIBOR Rate” means the per annum rate
equal to the Adjusted LIBOR Rate plus one hundred (100) basis
points (for the 30, 60, 90 or 360 day period selected by the
Borrower).
“Loan Advance” means that portion of the
Principal Sum that is outstanding at any time during the term of
this Note.
“Loan Documents” means this Note and
other documents related to the transactions discussed in this
Agreement as the same may be amended, modified or supplemented from
time to time.
“London Banking Day” means any day on
which dealings in deposits in Dollars are transacted in the London
Interbank market.
“Modified Following Business Day
Convention” shall mean the convention for adjusting any
relevant date if it would otherwise fall on a day that is not a
Business Day. The following terms, when used in conjunction with
the term “Modified Following Business Day Convention”,
and a date, shall mean that an adjustment will be made if that date
would otherwise fall on a day that is not a Business Day so that
the date will be the first following day that is a Business
Day.
“Treasury Rate” means, as of the date of
any calculation or determination, the latest published rate on
United States Government Securities (Bills issued on a discounted
basis shall be converted to a bond equivalent) as published weekly
in the Federal Reserve Statistical Release H.15(519) of Selected
Interest Rates in an amount which approximates (as determined by
Bank) the amount of any LIBOR Advance, or part thereof, which is
prepaid and with a maturity closest to the end of the Interest
Period of the LIBOR Advance which is prepaid in whole or in
part.
This line of credit is available for general working
capital purposes (and not for margin stock purchases) by the
Borrower.
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2.
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INTEREST RATE: The
interest rate payable with respect to the outstanding principal
balance hereunder shall be, at the Borrower’s election,
either:
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(i) the Bank’s Base Rate, less one (1.00%)
percent, as such rate changes from time to time; or
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(ii) the Libor Rate plus one (1.00%) percent, for
successive Interest Periods of 30, 60, 90,180 or 360 days each, as
selected by the Borrower.
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3 .
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DEBT: For value
received, Borrower hereby promises to pay to the order of Bank the
Principal Sum, or so much thereof as Bank advances to Borrower,
together with interest on all unpaid balances from the date of any
principal advance hereunder, at the Interest Rates set forth in
this Note, together with all other amounts due hereunder or under
the Loan Documents.
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4.
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PRINCIPAL ADVANCES; BORROWING
AVAILABILITY :
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4.1
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So long as no prior Event of Default has occurred,
the Bank, shall, upon Borrower’s request, make advances to
Borrower from time to time during the period commencing as of the
date of this Note and until August ___, 2008. All advances pursuant
to this Note shall be limited to the aggregate amount of not more
than $7,500,000.00.
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4.2
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Any advance by the Bank hereunder shall be within
the reasonable discretion of the Bank. The making of an advance at
any time shall not be deemed a waiver of the foregoing, or a
consent, agreement or advance to the Borrower. This Note and the
Bank’s willingness to receive requests for advances from the
Borrower hereunder are subject to cancellation by the Bank in its
reasonable discretion at any time without prior notice.
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4.3
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Bank is authorized to make any advance hereunder
upon the request of any person that has been authorized by Borrower
in writing (with a copy to Bank) to request that advance, and that
person will have authority to act on Borrower’s behalf to
request such advance until that authorization is revoked in writing
and provided to Bank. Bank may deliver any advance to Borrower by
direct deposit to any demand deposit account of Borrower with
Bank.
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5.
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PAYMENT OF INTEREST AND PRINCIPAL:
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5.1
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Calculation of Interest. All computation of interest under this Note shall be made on
the basis of a three hundred sixty (360) day year and the actual
number of days elapsed. Each change in the Base Rate shall
simultaneously change the interest rate payable under this Note
during any period when a Base Rate Advance is
outstanding.
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5.2
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Payment of Principal and Interest.
Beginning on the day which is thirty (30) days from
the date hereof and continuing on the same day of each month, the
Borrower shall make to the Bank payments of interest only on the
outstanding principal balance. THE ENTIRE OUTSTANDING PRINCIPAL
BALANCE (INCLUDING ANY BALLOON PAYMENT) AND ALL ACCRUED AND UNPAID
INTEREST SHALL BE DUE AND PAYABLE, IN FULL, ON SEPTEMBER 4,
2008.
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5.3
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Method of Payment; Date of Credit.
All payments of interest, principal and fees shall
be made in lawful money of the United States immediately available
funds: (a) by direct charge to an account of the Borrower
maintained with Bank (or the then holder of the Loan), or (b) to
such other bank or address as the holder of the Loan may designate
in a written notice to Borrower. Payments shall be credited on the
Business Day on which immediately available funds are received
prior to one o’clock, P.M. Eastern Time; payments received
after one o’clock P.M. Eastern Time shall be credited to the
Loan on the next Business Day. Payments which are by check, which
Bank may at its option accept or reject, or which are not in the
form of immediately available funds shall not be credited to the
Loan until such funds become immediately available to the Bank,
and, with respect to payments by check, such credit shall be
provisional until the item is finally paid by the payor bank. The
date of payment of all payments of principal, interest and other
charges shall be subject to the Modified Following Business Day
Convention.
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5.4
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Billings. Bank may
submit monthly billings reflecting payments due; however, any
changes in the interest rate which occur between the date of
billing and the due date may be reflected in the billing for a
subsequent month. Neither the failure of Bank to submit a billing
nor any error in any such billing shall excuse the Borrower from
the obligation to make full payment of all Borrower’ payment
obligations when due.
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5.5
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Default Rate. Upon the
declaration by the Bank of an Event of Default pursuant to Section
11, below the Borrower shall pay upon billing therefor, an interest
rate which is five (5%) percent per annum above the rate in effect
for any Loan Advance (“Default Rate”): (a) during the
period of any delinquency, which shall mean if any payment of
principal, interest or other monetary obligation due with respect
to the Loan is not paid when due, that period between the date that
is 15 days after the due date and the date of payment; (b) during
the period any Event of Default exists and remains uncured; (c)
after the Maturity Date; and (d) after judgment has been rendered
on this Note.
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5.6
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Late Charges. The
Borrower shall pay, upon billing therefore, a “Late
Fee” equal to five (5%) percent of the entire amount of any
payment of principal, interest, or both, which is not paid in full
within fifteen (15) days of the due date thereof. Late fees are:
(a) payable in addition to, and not in limitation of, the Default
Rate, (b) intended to compensate the Bank for administrative and
processing costs incident to late payments, (c) are not interest,
and (d) shall not be subject to refund or rebate or credited
against any other amount due.
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5.7
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Make Whole Provision. Borrower shall pay to Bank, immediately upon request and
notwithstanding contrary provisions contained in any of the Loan
Documents, such amounts as shall, in the reasonable judgment of
Bank, compensate Bank for the loss, cost or expense which it may
reasonably incur as a result of (i) any prepayment, under any
circumstances whatsoever, whether voluntary or involuntary, of all
or any portion of a LIBOR Advance on a date other than
the
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last day of the applicable Interest Period, or (ii)
the conversion, for any reason whatsoever, whether voluntary or
involuntary, of any LIBOR Advance to a Base Rate Advance on a date
other than the last day of the applicable Interest Period. Such
amounts payable by Borrower shall be equal to any administrative
costs actually incurred, plus any amounts required to compensate
Bank for any loss, cost or expense incurred by reason of the
liquidation or re-employment of deposits or other funds acquired by
Bank to fund or maintain a LIBOR Advance and in any event, but
without duplication, a Yield Maintenance Fee, as defined below, in
the event of the prepayment of all or any portion of a LIBOR
Advance on a date other than the last day of the applicable
Interest Period. Both the provisions of this Paragraph 5.7 and the
provisions of Paragraph 10 relating to the payment of a Yield
Maintenance Fee shall not apply either to monthly principal
payments due pursuant to this Note which are not prepaid or
principal payments made on the last day of an applicable Interest
Period that constitute a prepayment of the Principal
Sum.
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6.
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ADDITIONAL PROVISIONS RELATED TO INTEREST RATE
SELECTION.
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6.1
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Election of Interest Rate . Interest shall accrue on the unpaid principal balance from
time to time outstanding at Borrower’s election of
either:
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a.
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the LIBOR Rate plus one (1.00%) percent;
or
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b.
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the Bank’s Base Rate less one (1.00%)
percent.
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The Borrower shall have the same continuing right of
election as between the above rates upon the conclusion of any
Interest Period.
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6.2
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Method of Selection .
At least two (2) Business Days prior to the last day of any
Interest Period, the Borrower may select by 11:00 a.m. of a Boston
Banking Day both the Interest Period from the alternatives
available in Paragraphs 2(i) or 2(ii), and the corresponding
interest rate as of the same day as a request may be made, by
giving irrevocable written notice to Bank, by electronic mail,
telecopy (with authorized signature) or telephone, but if not
written, such notice shall be immediately confirmed by written
notice, specifying the Interest Period. If no such
selection
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