Exhibit 10.28
LOAN AGREEMENT
between
IEC ELECTRONICS CORP.
and
KELTIC FINANCIAL PARTNERS, LP
Dated: January 14, 2003
LOAN AGREEMENT
This LOAN AGREEMENT is made this 14th day of January, 2003 between IEC
ELECTRONICS CORP. ("Borrower"), a corporation organized and existing pursuant to
the laws of the State of Delaware having an address at 105 Norton Street,
Newark, New York 14513, and KELTIC FINANCIAL PARTNERS, LP ("Lender"), a Delaware
limited partnership, with a place of business at 555 Theodore Fremd Avenue,
Suite C-207, Rye, New York 10580 (the "Agreement"). W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender extend a $3,850,000 and 00/100
revolving credit facility and two term loans, one in the amount of $600,000, and
a second in the amount of $550,000, the proceeds of which will be used to repay
existing indebtedness and to provide Borrower with working capital support.
WHEREAS, Lender is willing to extend such revolving credit facility and term
loans on the terms and subject to the conditions set forth in this Agreement.
AGREEMENT
1. DEFINITIONS - As used herein, the following terms shall have the
following meanings (terms defined in the singular to have the same
meaning when used in the plural and vice versa):
1.1. "Account Debtor" - shall mean any Person who is or may become
obligated under or on account of any Receivable.
1.2. "Advance" - shall mean any loan or advance made by Lender in
connection with the Revolving Loan.
1.3. "Affiliate" - with respect to a Person, shall mean any other Person:
(i) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such
Person; (ii) which beneficially owns or holds 5% or more of any
class of the voting stock or other equity interest in such Person;
or (iii) 5% or more of the voting stock or other equity interest of
which is beneficially owned or held by such Person. For purposes
hereof, "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting stock
or other equity interests, by contract or otherwise.
1.4. "Authenticate" - shall mean to sign or to execute or otherwise adopt
a symbol, or encrypt or similarly process a record in whole or in
part, with the present interest of the authenticating person to
identify the person and adopt or accept a Record.
1.5. "Banking Day" - shall mean any day on which commercial banks are not
authorized or required to close in New York State.
1.6. "Banking Accounts" - as defined in Section 5.24 of this Agreement.
1.7. "Borrower" - shall mean IEC Electronics Corp.
1.8. "Borrowing Base Certificate" - shall mean a borrowing base
certificate substantially in the form of Exhibit E attached hereto.
1.9. "Capital Expenditure" - shall mean, as determined in accordance with
GAAP, the dollar amount of gross expenditures (including obligations
under capital leases) made or incurred for fixed assets, real
property, plant and equipment, and all renewals, improvements and
replacements thereto (but not repairs thereof) during any period.
1.10. "Carry Forward Amount" - shall mean, as of the end of any fiscal
quarter, the amount equal to 50% of the dollar amount (not including
any other Carry Forward Amount), if any, that caused the Fixed
Coverage Ratio as of the end of the immediately preceding fiscal
quarter to exceed 1.00 to 1.00.
1.11. "Code" - shall mean the Internal Revenue Code of the United States.
1.12. "Collateral" - shall mean all of the Property and interests in
Property described in the General Security Agreement, and all other
personal property of Borrower and interests of Borrower in personal
property that now or hereafter secures the payment and performance
of any of the Obligations pursuant to any of the Loan Documents or
otherwise including, without limitation, any proceeds and insurance
proceeds of the foregoing.
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1.13. "Contract Year" - shall mean, during the term of the Loans, each
consecutive twelve (12) month period commencing on the date hereof
and, in each case, ending on the date which is one day prior to the
applicable anniversary date hereof.
1.14. "Default" - shall mean an event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both,
become an Event of Default, whether or not Lender has declared an
Event of Default to have occurred.
1.15. "EBITDA" - shall mean Borrower's total income before interest
expense, taxes, depreciation and amortization, all determined on a
consolidated basis and calculated in accordance with GAAP.
1.16. "Eligible Inventory" - shall mean Inventory which has been identified
and described to Lender's reasonable satisfaction, is represented
by Borrower (by its acceptance of Revolving Loans thereon) as meeting
all of the following criteria on the date of any Revolving Loan based
thereon and thereafter while any Obligation is outstanding, and
is in all other respects acceptable to Lender: (a) Borrower is the
sole owner of the Inventory; none of the Inventory is being held or
shipped by Borrower on a consignment or approval basis; Borrower has
not sold, assigned or otherwise transferred all or any portion
thereof; and none of the Inventory is subject to any claim, lien or
security interest. (b) If any of the Inventory is represented or
covered by any document of title, instrument or chattel paper,
Borrower is the sole owner of all such documents, instruments and
chattel paper, all thereof are in the possession of Borrower, none
thereof has been sold, assigned or otherwise transferred, and none
thereof is subject to any claim, lien or security interest; and (c)
The Inventory shall consist of saleable non-obsolete, commodity type
raw materials that are earmarked for specific orders, is not Arrow
Inventory and is not excess as shown on the Borrower's Excess Stock
Report, and finished goods, manufactured or acquired by Borrower in
the ordinary course of Borrower's business, as conducted on the date
hereof, subject to its contract or sole possession and located in
compliance with Section 5.15 of this Agreement or at locations for
which landlord or bailee waivers in form and substance acceptable to
Lender have been executed and delivered by such landlord or bailee to
Lender. "Arrow Inventory" means any Inventory purchased from Arrow
Electronics, Inc., or its Affiliates.
1.17. "Eligible Receivables" - shall mean and include only Receivables of
Borrower, the records and accounts of which are located in
compliance with Section 5.14 of this Agreement, are acceptable to
Lender in Lender's reasonable discretion, arise out of sales in the
ordinary course of Borrower's business, made by Borrower to a
Person which is not an Affiliate of Borrower nor an employee of
Borrower nor controlled by an Affiliate of Borrower, which are not
in dispute and which do not then violate any warranty with respect
to Eligible Receivables set forth in the General Security Agreement.
No Receivable shall be an Eligible Receivable if more than 90 days
(except in the case of Motorola Inc., 60 days) have passed since the
original invoice date and the Inventory covered by such Receivable
were shipped to the customer on or prior to the invoice date, or
the services described in such invoice were provided on or prior
to the invoice date. Lender may treat any Receivable as ineligible
if: (a) any warranty contained in this Agreement or in the General
Security Agreement with respect to Eligible Receivables or any
warranty with respect to such Receivable contained in this
Agreement or in the General Security Agreement has been breached; or
(b) the Account Debtor or any Affiliate of the Account Debtor has
disputed liability, or made any claim with respect to such
Receivable or with respect to any other Receivable due from such
customer or Account Debtor to Borrower; provided, however, only such
portion of the Receivable which is disputed or subject to a claim
shall be treated as ineligible unless Lender reasonably determines
in its discretion that there is a material risk of nonpayment
(or Lender is unable to assess the risk of nonpayment) of the entire
Receivable or any other Receivable pending resolution of such
dispute or claim, in which case Lender may treat the entire
Receivable or such other Receivable as ineligible; or (c) the
Account Debtor or any Affiliate of the Account Debtor has filed a
case for bankruptcy or reorganization under the Bankruptcy Code, or
if any case under the Bankruptcy Code has been filed against the
Account Debtor or any Affiliate of the Account Debtor, or if the
Account Debtor or any Affiliate of the Account Debtor has assigned
for the benefit of creditors, or if the Account Debtor or any
Affiliate of the Account Debtor has failed, suspended business
operations, become insolvent, or had or suffered a receiver or a
trustee to be appointed for all or a significant portion of its
assets or affairs; or (d) if the Account Debtor is also a supplier
to or creditor of Borrower or if the Account Debtor has or asserts
any right of offset with respect to any Receivable or asserts any
claim or counterclaim against Borrower with respect to any
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Receivable or otherwise; or (e) the sale is to an Account Debtor
outside the United States or Canada, unless the sale is on letter of
credit, acceptance or other terms acceptable to Lender; or (f) 50%
or more of the Receivables of any Account Debtor and its Affiliates
is ineligible, then all the Receivables of such Account Debtor and
its Affiliates may be deemed ineligible by Lender under this
Agreement; or (g) the total unpaid Receivables of the Account
Debtor for such Receivable and its Affiliates exceeds the
Concentration Cap for such Account Debtor, to the extent of such
excess. "Concentration Cap" means for (a) Motorola , Inc., 50% for
the six month period immediately following the date of this
Agreement, and thereafter 30%, of the net amount of all Receivables;
(b) for Teradyne, Inc., 30% (determined without including the
Receivables of Teradyne UK) of the net amount of all Receivables ;
and (c) for any other Account Debtor, 15% of the net amount of all
Receivables. The higher Concentration Caps are provided for
Motorola, Inc. and Teradyne, Inc. subject to the conditions that
(x) Borrower shall monitor closely their respective financial
condition, (y) Borrower shall provide Lender periodic updates
with respect to their respective financial condition and (c) should
there be any material deterioration in their respective financial
condition, Lender may lower the applicable Concentra tion Cap
percentage and may require Borrower to take other steps to mitigate
collection risks. The foregoing conditions do not limit any other
provision of this Agreement providing a basis for determining that
a Receivable is an ineligible Receivable or otherwise providing
Lender rights. (h) it relates to a sale of goods or services to the
United States of America, or any agency or department thereof,
unless Borrower assigns its right to payment of such Receivable to
Lender, in form and substance satisfactory to Lender, so as to
comply with the Assignment of Claims Act of 1940, as amended; or
(i) it relates to sale of goods or services to a state or local
governmental authority or an agent or department thereof; or (j)
it relates to intercompany sales, employee sales or any Receivable
due from an Affiliate of Borrower; or (k) it consists of a sale
to an Account Debtor on consignment, bill and hold, guaranteed sale,
sale or return, sale on approval, payment plan, scheduled
installment plan, extended payment terms or any other repurchase or
return basis; or (l) the Account Debtor is located in a state in
which Borrower is deemed to be doing business under the laws of
such state and which denies creditors access to its courts in the
absence of qualifications to transact business in such state or of
the filing of any reports with such state, unless Borrower has
qualified as a foreign corporation authorized to do business in such
state or has filed all required reports; or (m) the Receivable
is evidenced by chattel paper or an instrument of any kind, or has
been reduced to judgment; or (n) the Receivable arises from a
sale of goods or services to an individual who is purchasing such
goods primarily for personal, family or household purposes; or
(o) if Lender believes, in its reasonable discretion, that
collection of such Receivable is insecure or that such Receivable
may not be paid by reason of the Account Debtor's financial
inability to pay.
1.18. "Environment" - shall mean any water or water vapor, any land surface
or subsurface, air, fish, wildlife, biota and all other natural
resources.
1.19. "Environmental Laws" - shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances and codes relating to the
protection of the Environment and/or governing the use, storage,
treatment, generation, transportation, processing, handling,
production or disposal of "hazardous substances" and the rules,
regulations, policies, guidelines, interpretations, decisions,
orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
1.20. "ERISA" - shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.21. "Events of Default" - shall have the meaning set forth in Article 12
of this Agreement.
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1.22. "Excess Cash Flow" - shall mean, with respect to a Fiscal Year,
EBITDA for such Fiscal year, less (a) the portion of capital
expenditures for such Fiscal Year Paid in Cash during such Fiscal
Year, (b) regularly scheduled principal and interest payments on
term debt, (including subordinated notes held by trade creditors)
Paid in Cash during such Fiscal Year, (c) taxes Paid in Cash during
such Fiscal Year and (d) non-cash credits included in calculating
EBITDA. The phrase "Paid in Cash" in the foregoing definition means
paid with cash from operations, not from (x) the proceeds of sale of
any asset, other than inventory in the ordinary course of business,
or (y) any loan, capitalized obligation or lease, other than the
Revolving Loan, and determined on a cash basis without regard to
whether or not the expense was accrued during such Fiscal Year.
1.23. "First Contract Year" - means the period from the date of this
Agreement to but not including January 15, 2004.
1.24. "Fiscal Year" - shall mean with respect to any Person, a year of 365
or 366 days, as the case may be, ending on the last day of
September 30 in any calendar year.
1.25. "Fixed Charge Coverage Ratio" - shall mean, with respect to a fiscal
quarter, the ratio of EBITDA for such fiscal quarter, plus beginning
with the quarter ending September 30, 2003, the Carry Forward Amount
for such fiscal quarter, over the sum of (i) interest and fees on
Indebtedness, (ii) principal on any loans, (iii) principal on
any other indebtedness, (iv) capital expenditures, (v) taxes,
(vi) cash dividends, and (vii) distributions paid on subordinated
debt or equity, in each case paid or payable during such fiscal
quarter.
1.26. "GAAP" - shall mean generally accepted accounting principles
consistently applied and maintained throughout the period
indicated and consistent with the prior financial practice of
Borrower, except for changes mandated by the Financial Accounting
Standards Board or any similar accounting authority of comparable
standing. Whenever any accounting term is used herein which is not
otherwise defined, it shall be interpreted in accordance with GAAP.
1.27. "General Security Agreement" - shall mean the general security
agreement dated the date hereof executed and delivered by Borrower
to Lender.
1.28. "Governmental Rules" - shall have the meaning given to such term in
Section 5.25 of this Agreement.
1.29. "Indebtedness" - shall mean and include all obligations for borrowed
money of any kind or nature, including funded debt and unfunded
liabilities, contingent obligations under guaranties or letters of
credit, and all obligations for the acquisition or use of any fixed
asset, including capitalized leases, or improvements which are
payable over a period longer than one year, regardless of the term
thereof or the Person or Persons to whom the same is payable.
1.30. "Initial Success Fee"- shall mean $250,000, or if the Texas Real
Property is sold on or before February 28, 2003, $200,000.
1.31. "Inventory" - shall have the meaning given to such term in the
General Security Agreement.
1.32. "Loan Documents" - shall mean this Agreement, the General Security
Agreement, and all other documents and instruments to be delivered
by Borrower or any other Person under this Agreement or in
connection with the Loans or any other Indebtedness or Obligations
of Borrower to Lender, as the same may be amended, modified or
supplemented from time to time.
1.33. "Loan Interest Rate" - shall mean, the per annum interest rate equal
to the prime rate published in the "Money Rates" column of The
Wall Street Journal from time to time or, in the event that The Wall
Street Journal is not available at any time, such rate published in
another publication as determined by Lender, plus 200 basis points.
1.34. "Loans" - shall mean the loans and advances made by Lender under this
Agreement, including all Advances and the Term Loans.
1.35. "Lockbox" - shall mean the account established by Borrower pursuant
to the lockbox agreement among Borrower, Lender and a financial
institution with which Borrower maintains a depository account into
which the proceeds of all Collateral are to be deposited.
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1.36. "Material Adverse Effect" - shall mean any effect, as determined by
Lender in its discretion, that could reasonably be expected to be
materially adverse to (a) the business, assets, operations,
prospects or condition, financial or otherwise, of Borrower or
any guarantor(s), if any taken as a whole; (b) Borrower's or any
guarantor's, if any, ability to pay or perform the Obligations in
accordance with their terms; (c) the value, collectability or
salability of the Collateral or the perfection or priority of
Lender's liens; (d) the validity or enforceability of this Agreement
or any of the Loan Documents; or (e) the practical realization of
the benefits, rights and remedies inuring to Lender under this
Agreement or under the Loan Documents.
1.37. "Maximum Facility" - shall mean $3,850,000.
1.38. "Net Proceeds of Sale" - shall mean the gross purchase price of the
Texas Real Property less the direct expenses of sale of the Texas
Real Property.
1.39. "Obligations" - shall mean and include all loans (including the
Loans), advances, debts, liabilities, obligations, covenants and
duties owing by Borrower to Lender or any Affiliate of Lender of any
kind or nature, present or future, whether or not evidenced by any
note, guaranty or other instrument, whether arising under this
Agreement, the other Loan Documents or under any other agreement or
by operation of law, whether or not for the payment of money,
whether arising by reason of an extension of credit, opening,
guaranteeing or confirming of a letter of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect
(including those acquired by purchase or assignment), absolute or
contingent, due or to become due, now due or hereafter arising and
howsoever acquired including, without limitation, all interest,
charges, expenses, commitment, facility, collateral management or
other fees, attorneys' fees and expenses, consulting fees and
expenses and any other sum chargeable to Borrower under this
Agreement, the other Loan Documents or any other agreement with
Lender.
1.40. "Notice of Borrowing" - shall mean a borrowing request in a Record
substantially in the form of Exhibit D attached hereto.
1.41. "Person" - shall mean an individual, partnership, limited liability
company, limited liability partnership, corporation, joint venture,
joint stock company, land trust, business trust or unincorporated
organization, or a government or agency or political subdivision
thereof.
1.42. "Plan" - shall mean an employee benefit plan or other plan now or
hereafter maintained for employees of Borrower or any subsidiary of
Borrower and covered by Title IV of ERISA.
1.43. "Property" - shall have the meaning given such term in the General
Security Agreement.
1.44. "Receivables" - shall have the meaning given to such term in the
General Security Agreement.
1.45. "Reconciliation Report" - shall mean a report in form satisfactory to
Lender, reconciling Borrower's month-end Receivable agings, payable
agings and Inventory listings to Borrower's monthly financial
statements, and including bank reconciliations.
1.46. "Record" - shall mean information that is inscribed on a tangible
medium or which is stored in an electronic or other medium and is
retrievable in perceivable form. If Lender so specifies with respect
to a particular type of Record, that type of Record shall be signed
or otherwise authenticated by Borrowers.
1.47. "Remainder Success Fee" - shall mean 50% of the dollar amount equal
to the excess of (a) the Net Proceeds of Sale over (b) $800,000.
1.48. "Reportable Event" - shall have the meaning assigned to that term in
Title IV of ERISA.
1.49. "Revolving Loan" - shall mean the Advances to be made by Lender to
Borrower pursuant to Section 2.1 of this Agreement, and all interest
thereon and all fees, costs and expenses payable by Borrower in
connection therewith.
1.50. "Revolving Note" - shall mean, the promissory note substantially in
the form annexed hereto as Exhibit A, to be given by Borrower to
Lender to evidence the Revolving Loan.
1.51. "Second Contract Year" - means the period from January __, 2004
Agreement to but not including January __, 2005.
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1.52. "Solvent" - shall mean when used with respect to Borrower, that
Borrower, after giving effect to this Agreement and the concurrent
closing of a $2.3 million term loan from Suntrust Bank, (i) will
be able to pay all of its Indebtedness as such Indebtedness matures,
and (ii) will have sufficient working capital to carry on its then
existing business.
1.53. "Term Loans" - shall mean collectively the term loans made by Lender
pursuant to the terms of this Agreement as forth in Section 2.2
below.
1.54. "Termination Date" - shall mean the earlier of the date which is 3
years from the date hereof, or the date on which Lender
terminates this Agreement pursuant to Section 12.1 of this
Agreement.
1.55. "Termination Notice" - as defined in Section 3.6 of this Agreement.
1.56. "Texas Real Property" - shall mean the real property of Borrower
located in Edinburgh, Texas.
1.57. "Third Contract Year" - shall mean the period from January 15, 2005
Agreement to but not including January 15, 2006.
1.58. "Total Facility" - shall mean $5,000,000.
1.59. "UCC" - means the Uniform Commercial Code as in effect from time to
time.
2. THE LOANS.
2.1. Advances of the Revolving Loan.- Subject to the terms and conditions
of this Agreement and relying upon the representations and warranties set forth
in this Agreement, for so long as no Default or Event of Default exists, Lender
shall lend to Borrower on its request, a sum ("Borrowing Capacity") equal to the
lesser of: (a) the Maximum Facility, or (b) the sum of (i) up 85 % of the net
face amount of Borrower's Eligible Receivables and (ii) the lesser of $750,000
or 25% of the Value of Borrower's Eligible Inventory, but the amount computed
under this clause (ii) shall in no event exceed 40% of the sum of the amounts
computed pursuant to clause 2.1(b). Value shall mean the lesser of cost or the
fair market value of such Inventory. Within the limits of the Borrowing
Capacity, and subject to the limitations set forth in this Agreement, Borrower
may borrow, repay and reborrow Advances.
2.2. Term Loans.- Lender shall make a loan to the Borrower on the date
hereof in the amount of $600,000 ("Equipment Loan"). The Equipment Loan shall be
payable in accordance with the terms of a term note attached hereto as Exhibit
B-1. Lender shall also make a loan to Borrower on the date hereof in the amount
of $550,000 ("Real Estate Loan"). The Real Estate Loan shall be payable in
accordance with the terms of a term note attached hereto as Exhibit B-2.
2.3. Overline. - Borrower acknowledges that Lender has advised Borrower
that Lender does not intend to permit Borrower to receive Advances at any time
in an outstanding principal amount exceeding either the Borrowing Capacity or
the Maximum Facility; however, it is agreed that should the outstanding
principal balance of Advances exceed either then, all such Obligations shall (a)
constitute Obligations under this Agreement, (b) be entitled to the benefit of
all security and protection under this Agreement and the other Loan Documents,
(c) be secured by the Collateral and (d) be payable immediately without notice
or demand by Lender.
2.4. Reserves. - The Borrowing Capacity shall be subject to such reserves
as Lender shall deem necessary and proper in Lender's discretion. Reserves may
be established by Lender from time to time in such manner (including reduction
of the advance rates set forth in Subsection 2.1(b) above) and for such reasons
as Lender may determine from time to time in Lender's reasonable discretion. In
addition, Lender may establish a reserve against the Borrowing Capacity to
mitigate risk if there is a material deterioration in the ratio of the net
auction value of Borrower's equipment to the balance of the Equipment Loan (as
defined in Section 2.2 hereof), as determined based on an updated appraisal
obtained by Lender. Payments, deposits, guaranties or indemnifications made by
Lender under any reimbursement agreement, guaranty or similar instrument made in
respect of any such instrument may be treated by Lender as Advances to Borrower
under this Agreement.
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2.5. Manner of Borrowing. - (a) Revolving Loan. Each Advance shall be
requested in an Authenticated Record sent via facsimile or electronic
transmission including, without limitation, via e-mail by a Notice of Borrowing
executed by an authorized officer of Borrower, not later than 12:00 p.m. Eastern
Time on any Banking Day on which an Advance is requested. Provided that Borrower
shall have satisfied all conditions precedent set forth in this Agreement,
including the reaffirmation of the representations and warranties and covenants
as required under Article 10 of this Agreement, and Borrower shall have
sufficient Borrowing Capacity to permit an Advance under this Agreement in
accordance with Section 2.1 of this Agreement, Lender shall make the Advance to
Borrower in the amount requested in the Record by Borrower in immediately
available funds for credit to any account of Borrower (other than a payroll
account) at a bank in the United States of America as Borrower may specify
(provided, however, that Borrower shall pay Lender its usual and customary fees
for such transfer). Lender shall not be responsible for any failure of any
amount so transferred to be credited to any such account, unless such failure is
due to Lender's gross negligence or willful misconduct. (b) Term Loans. The Term
Loans shall be advanced in a single advance on the date of this Agreement.
2.6. Evidence of Borrower's Obligations. - Borrower's obligation to pay the
principal of, and interest on, the Advances made to Borrower shall be evidenced
by the Revolving Note executed by Borrower and delivered to Lender.
2.7. Payments. - All payments with respect to the Obligations shall either
be charged by Lender to Borrower's account, charged as an Advance or made by
Borrower to Lender in U.S. currency and without any defense, offset or
counterclaim of any kind, at 555 Theodore Fremd Avenue, Suite C-207, Rye, New
York 10580, or to such other address as Lender shall specify, by 12:00 noon New
York, New York time on the date when due. Whenever any payment to be made shall
otherwise be due on a day that is not a Banking Day, such payment shall be made
on the next succeeding Banking Day and such extension of time shall be included
in computing interest in connection with any such payment. Lender may make an
Advance to reimburse itself for any payments on the Obligations (including fees
and expenses payable by Borrower), which are not paid when due, without notice
or demand to Borrower. Any delay or failure by Lender submitting any invoice for
such interest or fee or in the making of an Advance against the Re volving Loan
shall not discharge or relieve Borrower of its obligation to make such interest
or fee payment.
2.8. Collections/Balance/Statements/etc. (a) Collection and Remittance. (i)
Borrower covenants and agrees to open a Lockbox over which Lender shall have the
sole power of withdrawal. (ii) All proceeds of Collateral whether cash, checks,
drafts, notes, acceptances or other forms of payment, if received by Borrower,
shall be received by Borrower in trust for Lender, and Borrower agrees to
deliver or cause to be delivered, such payments forthwith, in the identical form
in which received, to Lender or to the Lockbox, as Lender shall require from
time to time. (iii) Collected funds in the Lockbox shall be swept daily and the
proceeds deposited to an account of Lender or Borrower as Lender shall elect.
(b) Determination of balance of Loans. In determining the outstanding balance of
the Loans, (i) available funds received from the Lockbox in the Lender's account
at Fleet Bank, Account Name: Keltic Financial Partners, LP; Account No.
9428395446, ABA #011 900 571 (or such other account as Lender may direct from
time to time), before 2 p.m. Eastern Time of a Banking Day will be applied on
that Banking Day, and if after 2:00 p.m., on the next Banking Day, as follows:
(A) First, to unpaid interest, (B) second to unpaid fees and expenses; (C) third
to the outstanding principal balance of the Revolving Loan, and (D) fourth to
all other Obligations then due and payable in such order as Lender shall elect;
(ii) any other form of funds received by Lender will be credited on the Banking
Day when Lender has received notification that such funds are collected and
available to Lender if before 2 p.m. (Eastern Time), and thereafter on the
following Banking Day; (iii) all credits shall be condition al upon final
payment to Lender in cash or solvent credits of the items giving rise to them
and, if any item is not so paid, the amount of any credit given for it shall be
charged to the balance of the Loans whether or not the item is returned; and
(iv) for the purpose of computing interest on the Loans and other Obligations,
interest shall continue to accrue on the amount of any payment applied to
Borrower's Loans by Lender, during the First Contract Year, for a period of 3
Banking Days after the date so credited, during the Second Contract Year, for a
period 2 Banking Days after the date so credited, and during the Third Contract
Year, for a period of 1 Banking Day after the date so credited
2.9. Payment on Termination Date. - Notwithstanding anything herein to the
contrary, the entire outstanding principal balance of the Loans, plus all
accrued and unpaid interest thereon and all fees and other amounts payable under
this Agreement and the Loan Documents, shall be due and payable in full, on the
Termination Date.
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3. LENDER'S COMPENSATION.
3.1. Interest on Loans. - Borrower shall pay interest monthly, in arrears,
on the first day of each month, commencing January 1, 2003 on the average daily
unpaid principal amount of the Revolving Loan, and on the principal balance of
the Term Loans, at a fluctuating rate which is equal to the Loan Interest Rate.
Notwithstanding the foregoing, on and after the occurrence of a Default or Event
of Default, Borrower shall pay interest on the Loans at a rate which is 3.5% per
annum above the Loan Interest Rate; provided, however, in no event shall any
interest to be paid under this Agreement or under any Loan Document exceed the
maximum rate permitted by law.
3.2. Commitment and Closing Fee. - Borrower shall have paid to Lender on or
before the date of this Agreement $95,500 as a commitment and closing fee, and
shall pay to Lender on the date 6 months following the date of this Agreement an
additional closing and commitment fee of $25,000.
3.3. Facility Fee. - Borrower shall pay to Lender monthly, in arrears, on
the first day of each month a facility fee in an amount equal to 1 % per annum
of the Total Facility, which facility fee is deemed earned in full for each year
on the date hereof and on each anniversary hereof.
3.4. Collateral Management Fee. - Borrower shall pay to Lender monthly, in
arrears, on the first day of each month, a collateral management fee in an
amount of $1,500.
3.5. Field Examination Fees. - Borrower shall promptly reimburse Lender for
all costs and expenses associated with periodic field examinations and fixed
asset appraisals performed by Lender and its agents, as deemed necessary by
Lender; provided, however, the cost of field examinations for which Borrower is
responsible shall not exceed in any one year $12,000 so long as an Event of
Default has not occurred.
3.6. Liquidated Damages. - If Borrower prepays the principal of the
Revolving Loan to Borrower (other than from time to time from working capital)
or if the outstanding Obligations become due prior to the Termination Date
because of a payment default or other material default by Borrower, Borrower
shall pay to Lender at the time of such prepayment, liquidated damages in an
amount equal to: (a) 5% of the Total Facility less $550,000 ("Adjusted Total
Facility") if the prepayment is made during the First Contract Year; (b) 4% of
the Adjusted Total Facility if the prepayment is made during the Second Contract
Year; and (c) 2% of the Adjusted Total Facility if the prepayment is made during
the Third Contract Year. Borrower shall give Lender at least ninety (90) days'
advance written notice ("Termination Notice") of Borrower's election to
terminate the availability of Revolving Loans under this Agreement prior to the
Termination Date. The Termination Notice shall be irrevocable and shall specify
the effective date of such termination, which effective date shall not be less
than ninety (90) days after the giving of the Termination Notice and shall be in
no event later than the Termination Date. After the Termination Date, Lender
shall have no obligation to make any Advance(s) to Borrower.
3.7. Success Fee. - (a) Lender has earned and is entitled to the Initial
Success Fee on the date of this Agreement. Borrower's obligation to pay the
Initial Success Fee shall be evidenced by a promissory note in form of Exhibit C
("Success Note"). The Success Note shall provide for interest on the unpaid
principal amount of the Initial Success Fee at a rate per annum of 5%, and for
payment of principal and accrued interest in installments as follows: (i) at the
time Borrower's annual financial statements and compliance certificate are
delivered to Lender for fiscal year ending September 30, 2003, but in any event
on or before December 31, 2003 , the lesser of (A) Excess Cash Flow for the
Borrower's Fiscal Year ending September 30, 2003 and (B) 1/3 of the Initial
Success Fee; plus all accrued and unpaid interest; (ii) at the time Borrower's
annual financial statements and compliance certificate are delivered to Lender
for fiscal year ending September 30, 2004, but in any event on or before
December 31, 2004, the lesser of (A) Excess Cash Flow for the Borrower's Fiscal
Year ending September 30, 2004 and (B) 2/3 of the Initial Success Fee (less the
amount of any installment paid to Lender pursuant to Section 3.7 (i)), plus all
accrued and unpaid interest; and (iii) on the Termination Date or early
termination of the Facility by Borrower under Section 3.6 above, the unpaid
balance of the Initial Success Fee, plus any accrued and unpaid interest. (b)
Borrower shall pay to Lender the Remainder Success Fee upon sale of the Texas
Real Property, but no Remainder Success Fee shall be payable if the Texas Real
Property is sold on or before February 28, 2003.
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3.8. Computation of Interest and Fees. - All interest and fees under this
Agreement shall be computed on the basis of a year consisting of three hundred
sixty (360) days for the number of days actually elapsed.
4. APPLICATION OF PROCEEDS. - The proceeds of the Advances shall be used
solely by Borrower to repay existing indebtedness incurred by Borrower, or for
working capital needed in the normal operation of Borrower's business.
5. INDUCING REPRESENTATIONS. - In order to induce Lender to
make the Loans, Borrower makes the following representations and warranties to
Lender:
5.1. Organization and Qualifications. - Borrower is a corporation duly
organized and existing under the laws of the State of Delaware. Borrower's tax
identification number is 13-3458955 and its organizational identification number
is 2158409 (not issued in New York State). Borrower is qualified to do business
in every jurisdiction where the nature of its business requires it to be so
qualified.
5.2. Name and Address. - During the preceding five (5) years, Borrower has
not been known by nor has used any other name whether corporate, fictitious or
otherwise, except as set forth on Schedule 5.2 attached hereto. Borrower's
office is at the address set forth above.
5.3. Structure. - Borrower has no subsidiaries or Affiliates, except as set
forth on Schedule 5.3 attached hereto, and the subsidiaries which are disclosed
are inactive and conduct no business.
5.4. Legally Enforceable Agreement. - The execution, delivery and
performance of this Agreement, each and all of the other Loan Documents and each
and all other instruments and documents to be delivered by Borrower or its
Affiliates under this Agreement and the creation of all liens and security
interests provided for herein are within Borrower's corporate power, have been
duly authorized by all necessary or proper corporate action (including the
consent of shareholders where required), are not in contravention of any
agreement or indenture to which Borrower is a party or by which it is bound, or
of the Certificate of Incorporation or By-Laws of Borrower, and are not in
contravention of any provision of law and the same do not require the consent or
approval of any governmental body, agency, authority or any other Person which
has not been obtained and a copy thereof furnished to Lender.
5.5. Solvent Financial Condition. - Borrower is Solvent.
5.6. Financial Statements. - The internally prepared financial statements
of Borrower for and as of the fiscal year ending September 30, 2002 and the
internally prepared interim financial statements for the two-month period ending
and as of November 30, 2002, copies of which have been delivered to Lender,
fairly present Borrower's and its consolidated subsidiaries' financial condition
and results of operations as relevant and as of such dates and there have been
no changes since such dates. Except as disclosed on Schedule 5.6, Borrower and
its consolidated subsidiaries have no contingent liabilities, liabilities for
taxes, unusual forward or long-term commitments, or unrealized or unanticipated
losses from any unfavorable commitments which were not disclosed in such
financial statements or the notes thereto.
5.7. Joint Ventures. - Borrower is not engaged in any joint venture or
partnership with any other Person.
5.8. Real Estate. - Attached hereto as Schedule 5.8 is a list showing all
real property owned or leased by Borrower, and if leased, the correct name and
address of the landlord and the date and term of the applicable lease.
5.9. Patents, Trademarks, Copyrights and Licenses. - Borrower owns or
possesses all the patents, trademarks, service marks, trade names, copyrights
and licenses necessary for the present and planned future conduct of its
business without, to the best of its knowledge, any conflict with the rights of
others. All such patents, trademarks, service marks, trade names, copyrights,
licenses and other similar rights are listed on Schedule 5.9 attached hereto, if
any.
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5.10. Intentionally Omitted.
5.11. Investment Company Act: Federal Reserve Board Regulations. - Borrower
is not an "investment company", or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company", as such terms are defined
in the Investment Company Act of 1940, as amended (15 U.S.C. ss.ss. 80(a)(1), et
seq.). The making of the Loans under this Agreement by Lender, the application
of the proceeds and repayment thereof by Borrower and the performance of the
transactions contemplated by this Agreement will not violate any provision of
such Act, or any rule, regulation or order issued by the Securities and Exchange
Commission thereunder. Borrower does not own any margin security as that term is
defined in Regulation U of the Board of Governors of the Federal Reserve System
and the proceeds of the Loans made pursuant to this Agreement will be used only
for the purposes contemplated under this Agreement. None of the proceeds will be
used, directly or indirectly, for the purpose of purcH a sing or carrying any
margin security or for the purpose of reducing or retiring any Indebtedness
which was originally incurred to purchase or carry margin security or for any
other purpose which might constitute any of the Loans under this Agreement a
"purpose credit" within the meaning of said Regulation U or Regulations T or X
of the Federal Reserve Board. Borrower will not take, or permit any agent acting
on its behalf to take, any action which might cause this Agreement or any
document or instrument delivered pursuant hereto to violate any regulation of
the Federal Reserve Board.
5.12. Tax Returns. - Borrower and the guarantor(s), if any, have filed all
tax returns (Federal, state or local) required to be filed and paid all taxes
shown thereon to be due including interest and penalties or has provided
adequate reserves therefor. No assessments have been made against Borrower or
any guarantor(s), if any, by any taxing authority nor has any penalty or
deficiency been made by any such authority. To the best of Borrower's knowledge,
no Federal income tax return of Borrower or any guarantor, if any, is presently
being examined by the Internal Revenue Service nor are the results of any prior
examination by the Internal Revenue Service or any State or local tax authority
being contested by Borrower or any guarantor, if any.
5.13. Litigation. - Except as disclosed in Schedule 5.13, no action or
proceeding is now pending or, to the knowledge of Borrower, is threatened
against Borrower or any guarantor, if any, at law, in equity or otherwise,
before any court, board, commission, agency or instrumentality of the Federal or
state government or of any municipal government or any agency or subdivision
thereof, or before any arbitrator or panel of arbitrators, and neither Borrower
nor any guarantor, if any, has accepted liability for any such action or
proceeding. There is no proceeding pending before any governmental agency
(Federal, state or local) and, to the best of Borrower's knowledge, no
investigation has been commenced before any such governmental agency the effect
of which, if adversely decided, would or could, have a Material Adverse Effect.
5.14. Receivables Locations. - Annexed hereto as Schedule 5.14 is a list
showing all places at which Borrower maintains, or will maintain, records
relating to Receivables.
5.15. Inventory Locations. - Annexed hereto as Schedule 5.15 is a list
showing all places where Borrower maintains, or will maintain, Inventory. Such
list indicates whether the premises are owned or leased by Borrower or whether
the premises are the premises of a warehouseman or other third party, and if
owned by a third party, the name and address of such third party.
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5.16. Equipment List and Locations. - Annexed hereto as Schedule 5.16 is a
list showing all of Borrower's equipment, and describing the places where the
same is located. Such list indicates whether such premises are owned or leased
by Borrower or whether the premises are the premises of another third party, and
if leased, the name and address of such third party.
5.17. Title/ Liens. - Borrower has good and marketable title to the
Collateral as sole owner thereof. There are no existing liens on any Property of
Borrower, except for liens in favor of Lender and liens described in Schedule
5.17. Except as set forth on Schedule 5.17, none of the Collateral is subject to
any prohibition against encumbering, pledging, hypothecating or assigning the
same or requires notice or consent in connection therewith.
5.18. Existing Indebtedness. - Borrower has no existing Indebtedness except
the Indebtedness described in Schedule 5.18.
5.19. ERISA Matters. - The Borrower has no Plans, has no liability to the
Pension Benefit Guaranty Corporation and has not engaged in any transaction
which would subject Borrower to tax, penalty or liability for prohibited
transactions imposed by ERISA or the Code.
5.20. O.S.H.A. - To the best of Borrower's knowledge, Borrower, its
facilities, business, leaseholds, equipment and other property are in compliance
in all material respects with the provisions of the federal Occupational Safety
and Health Act and all rules and regulations thereunder and all similar state
and local Governmental Rules. There are no outstanding citations, notices or
orders of non-compliance issued to Borrower or relating to its facilities,
business, leaseholds, equipment or other property under any such Governmental
Rules.
5.21. Environmental Matters. - Except as disclosed in Schedule 5.21, in the
Phase I and Phase II environmental site assessments relating to 105 Norton
Street, Newark, New York and in a Phase I environmental site assessment relating
to 1920 Southeast Industrial Drive, Edinburg, Texas, true, complete and correct
copies of which has been delivered to Lender, and to the best of its knowledge,
(a) No Property owned or used by Borrower is or has been used for the
generation, manufacture, refining, transportation, treatment, storage, handling
or disposal of any "hazardous substances" or "hazardous wastes"; (b) Borrower is
in material compliance with all applicable Environmental Laws; (c) there has
been no contamination or release of hazardous substances at, upon, under or
within any Property owned or leased by Borrower, and there has been no
contamination (as defined in any applicable Environmental Law) or release of
hazardous substances (as defined in any applicable Environmental Law) on any
other Property that has migrated or threatens to migrate to any Property owned
or leased by Borrower; (d) there are not now and never have been above-ground or
underground storage tanks at any Property owned or leased by Borrower; (e) there
are no transformers, capacitors or other items of Equipment containing
polychlorinated biphenyls at levels in excess of 49 parts per million, violativ
e of any applicable Environmental Law, at any Property owned or leased by
Borrower; (f) no hazardous substances are present at any Property owned or
leased by Borrower, nor will any hazardous substances be present upon any such
Property or in the operation thereof by Borrower; (g) all permits and
authorizations required under Environmental Laws for all operations of Borrower
have been duly issued and are in full force and effect, including but not
limited to those for air emissions, water discharges and treatment, storage
tanks and the generation, treatment, storage and disposal of hazardous
substances; (h) there are no pending or threatened environmental claims against
Borrower or any Property owned or leased by Borrower; and there is no condition
or occurrence on any Property owned or leased by Borrower that could be
anticipated (1) to form the basis of an environmental claim against Borrower or
its properties or (2) to cause any Property owned or leased by Borrower to be
subject to any restrictions on its ownership, occupancy or transferability under
any Environmental Law; (i) no portion of any Property owned or leased by
Borrower contains asbestos-containing material that is or threatens to become
friable; (j)] the representations and warranties set forth in this Section 5.21
shall survive repayment of the Obligations and the termination of this Agreement
and the other Loan Documents.
5.22. Labor Disputes. - There are no pending or, to Borrower's knowledge,
threatened labor disputes which could have a Material Adverse Effect.
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5.23. Intellectual Property. - Borrower is the owner of or possesses the
right to use all necessary patents, trademarks, service marks, copyrights and
other intellectual property necessary or useful in the operation of its
business, in each case free of any claims or infringements.
5.24. Location of Banking and Securities Accounts. -
Annexed hereto as Schedule 5.24 hereto sets forth a complete and accurate list
of all deposit, checking and other bank accounts, all securities and other
accounts maintained with any broker dealer and all other similar accounts
maintained by Borrower (collectively, "Bank Accounts"), together with a
description thereof.
5.25. Compliance With Laws. - Except as disclosed on Schedule 5.25, to the
best of Borrower's knowledge, Borrower is in compliance with all Federal, state
and local governmental rules, ordinances and regulations ("Governmental Rules")
applicable to its ownership or use of properties or the conduct of its business.
5.26. No Other Violations. - Except as disclosed on Schedule 5.26, Borrower
is not in violation of any term of its Certificate of Incorporation or By-laws
and no event or condition has occurred or is continuing which constitutes or
results in (or would constitute or result in, with the giving of notice, lapse
of time or other condition) (a) a breach of, or a default under, any agreement,
undertaking or instrument to which Borrower is a party or by which it or any of
its Property may be affected, or (b) the imposition of any lien on any Property
of Borrower.
5.27. Survival of Representations and Warranties. - Borrower covenants,
warrants and represents to Lender that all representations and warranties of
Borrower contained in this Agreement or in any other Loan Documents shall be
true at the time of Borrower's execution of this Agreement and the other Loan
Documents, and Lender's right to bring an action for breach of any such
representation or warranty or to exercise any remedy under this Agreement based
upon the breach of such representation or warranty shall survive the execution,
delivery and acceptance hereof by Lender and the closing of the transactions
described herein or related hereto until the Obligations are finally and
irrevocably paid in full.
6. FINANCIAL STATEMENTS AND INFORMATION; CERTAIN NOTICES TO LENDER. - So
long as Borrower shall have any Obligations to Lender under this Agreement,
Borrower shall deliver to Lender, or shall cause to be delivered to Lender:
6.1. Borrowing Base Certificate. - Weekly (on or before Tuesday of each
week as of the preceding week end), and monthly (within two (2) days after the
end of each month) and contemporaneously with each request for an Advance, a
satisfactorily completed and executed Borrowing Base Certificate in the form
attached as Exhibit E hereto.
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6.2. Monthly Reports. - Within twenty (20) days after the end of each
month, an accounts receivable aging, accounts payable aging, an inventory
listing, a collateral update certificate, and a Reconciliation Report of
Borrower for such month, all in form satisfactory to Lender, prepared by
Borrower and if Lender so requests, customer statements, sales journals, cash
receipts journals and detailed sales credit reports.
6.3. Annual Financial Statements. - Within ninety (90) days after the close
of each Fiscal Year of Borrower, a copy of a unqualified audited annual
financial statements of Borrower prepared by an independent certified public
accountant consisting of a balance sheet, statements of operations and retained
earnings and accompanying footnotes, statements of cash flow, reasonably
acceptable to Lender.
6.4. Monthly Financial Statements. - Within thirty (30) days after the end
of each month of Borrower, financial statements consisting of a balance sheet,
statements of operations and retained earnings and statements of cash flow,
prepared by management of Borrower in accordance with GAAP, together with a
compliance certificate in the form attached as Exhibit F hereto.
6.5. Projections. - Within thirty (30) days prior to the end of each Fiscal
Year of Borrower, monthly financial projections for the next fiscal year in form
satisfactory to Lender.
6.6. Customer Lists. - Semiannually, a list of all of Borrower's customers
and vendors, including the addresses, and telephone and facsimile numbers of
such customers and vendors which lists shall be delivered within thirty (30)
days of the end of the second fiscal quarter of each Fiscal Year and each Fiscal
Year end.
6.7. Insurance. - Annually, within thirty (30) days of the renewal date of
such insurance policy, evidence of insurance in form and content satisfactory to
Lender and otherwise in compliance with Section 8.6 of this Agreement, together
with the original insurance policy.
6.8. Notice of Event of Default and Adverse Business Developments. -
Immediately after becoming aware of the existence of a Default or an Event of
Default or after becoming aware of any developments or other information which
is likely to materially, adversely affect Borrower's properties, business,
prospects, profits or condition (financial or otherwise) or its ability to
perform its obligation under this Agreement or any other Loan Documents,
including, without limitation, the following: (a) any material dispute that may
arise between Borrower and any governmental regulatory body or law enforcement
authority, including any action relating to any tax liability of Borrower or
guarantor if any; (b) any labor controversy resulting in or threatening to
result in a strike or work stoppage against Borrower; (c) any proposal by any
public authority to acquire the assets or business of Borrower; (d) the location
of any Collateral other than at Borrower's place of business or as permitted
under this Agreement; (e) any proposed or actual change of Borrower's name,
identity, state of organization or corporate structure; or (f) any other matter
which has resulted or may result in a Material Adverse Effect. (g) In each case,
Borrower will provide Lender with telephonic notice followed by notice in a
Record specifying and describing the nature of such Default, Event of Default or
development or information, and such anticipated effect.
6.9. Other Information. - Such other information respecting the financial
condition of Borrower or any guarantor, if any, or any Property of Borrower in
which Lender may have a lien as Lender may, from time to time, request. Borrower
authorizes Lender to communicate directly with Borrower's independent certified
public accountants and authorizes those accountants to disclose to Lender any
and all financial statements and other information of any kind that they may
have with respect to Borrower and its business and financial and other affairs.
Lender shall treat information so obtained as confidential. On or before the
date of this Agreement, Borrower shall deliver to Lender a letter addressed to
such accountants instructing them to comply with the provisions of this Section
6.9, which letter shall be acknowledged by such accountants.
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7. ACCOUNTING. - Lender may account monthly to Borrower. Each and every
account shall be deemed final, binding and conclusive upon Borrower in all
respects, as to all matters reflected therein, unless Borrower, within
forty-five (45) days after the date the account was rendered, delivers to Lender
notice in a Record of any objections which Borrower may have to any such account
and in that event only those items expressly objected to in such notice shall be
deemed to be disputed by Borrower. If Borrower disputes the correctness of any
statement, Borrower's notice shall specify in detail the particulars of its
basis for contending that such statement is incorrect.
8. AFFIRMATIVE COVENANTS. - Borrower represents and warrants that, so long as
it shall have any Obligations to Lender under this Agreement, Borrower will:
8.1. Business and Existence. - Preserve and maintain Borrower's separate
existence and rights, privileges and franchises.
8.2. Trade Names. - Transact business in Borrower's own name and invoice
all of Borrower's receivables in Borrower's own name.
8.3. Transactions with Affiliates. - Whenever Borrower engages in
transactions with any of Borrower's Affiliates, conduct the same on an
arms-length basis or other basis more favorable to Borrower.
8.4. Taxes. - Pay and discharge all taxes, assessments, government charges
and levies imposed upon Borrower, Borrower's income or Borrower's profits or
upon any Property belonging to Borrower prior to the date on which penalties
attach thereto, except where the same may be contested in good faith by
appropriate proceedings being diligently conducted.
8.5. Compliance with Laws. - Comply with all Governmental Rules applicable
to Borrower including, without limitation, all laws and regulations regarding
the collection, payment and deposit of employees' income, unemployment and
Social Security taxes.
8.6. Maintain Properties: Insurance. - Safeguard and protect all Property
used in the conduct of Borrower's business and keep all of Borrower's Property
insured with insurance companies licensed to do business in the states where the
Property is located against loss or damage by fire or other risk under extended
coverage endorsement and against theft, burglary, and pilferage together with
such other hazards as Lender may from time to time request, in amounts
reasonably satisfactory to Lender. Borrower shall deliver the policy or policies
of such insurance or certificates of insurance to Lender containing endorsements
in form satisfactory to Lender naming Lender as lender loss payee and additional
insured and providing that the insurance shall not be canceled, amended or
terminated except upon thirty (30) days' prior written notice to Lender. All
insurance proceeds received by Lender shall be retained by Lender for
application to the payment of such the Revolving Loan, and then to such other
Obligations then due and payable, as Lender may determine in Lender's
discretion. Borrower shall promptly notify Lender of any event or occurrence
causing a loss or decline in the value of Property insured or the existence of
an event justifying a claim under any insurance and the estimated amount
thereof.
8.7. Business Records. - Keep adequate records and books of account with
respect to Borrower's business activities in which proper entries are made in
accordance with sound bookkeeping practices reflecting all financial
transactions of Borrower; and Borrower shall maintain all of its Bank Accounts
as set forth on Schedule 5.24 of this Agreement.
8.8. Litigation. - Give Lender prompt notice of any suit at law or in
equity against Borrower involving a claim for damages, money or property valued
in excess of $100,000, except where the same is fully covered by insurance and
the insurer has accepted liability therefor in writing.
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8.9. Damage or Destruction of Collateral. - Maintain or cause to be
maintained the Collateral and all its Properties in reasonably good condition
and repair at all times, preserve the Collateral and all its other Properties
from loss, damage, or destruction of any nature whatsoever and provide Lender
with prompt notice in a Record of any destruction or substantial damage to any
Collateral subject to Lender's security interest and of the occurrence of any
condition or event which has caused, or may cause, loss or depreciation in the
value of any Collateral.
8.10. Name Change. - Provide Lender with not fewer than thirty (30) days
notice in an Authenticated Record prior to any proposed change of name or the
creation of any subsidiary.
8.11. Access to Books and Records. - Provide Lender with such reports and
with such access to Borrower's books and records and permit Lender to copy and
inspect such reports and books and records all as Lender deems necessary or
desirable to enable Lender to monitor the credit facilities extended hereby.
Lender may examine and inspect the Inventory, equipment or other Collateral and
may examine, inspect and copy all books and records with respect thereto at any
time during Borrower's normal business hours. Borrower shall maintain full,
accurate and complete records respecting Inventory, including a perpetual
inventory, and all other Collateral at all times. Borrower will pay all costs to
be paid on taxes, assessments, governmental charges or private encumbrances
levied, assessed, imposed or payable upon or with respect to the Inventory,
equipment or other Collateral or any part thereof.
8.12. Solvent. - Continue to be Solvent.
8.13. Compliance With Environmental Laws. - Comply with all applicable
Environmental Laws.
8.14. Compliance with ERISA and other Employment Laws. - Comply with all
applicable provisions of ERISA and the Internal Revenue Code of 1986, as
amended, and any other applicable laws, rules or regulations relating to the
compensation of employees and funding of employee pension plans.
8.15. Proceeds of Collateral. - Forthwith upon receipt, pay to Lender the
proceeds of all Collateral, whereupon such proceeds shall be applied to the
Obligations in such order and manner as shall be determined in the discretion of
Lender.
8.16. Delivery of Documents. - Notify Lender if any proceeds of Receivables
shall include, or any of the Receivables shall be evidenced by, notes, trade
acceptances or instruments or documents, or if any Inventory is covered by
documents of title or chattel paper, whether or not negotiable, and if required
by Lender, immediately deliver them to Lender appropriately endorsed. Borrower
waives protest regardless of the form of the endorsement. If Borrower fails to
endorse any instrument or document, Lender is authorized to endorse it on
Borrower's behalf.
9. NEGATIVE COVENANTS. - So long as Borrower shall have any Obligation to
Lender under this Agreement and unless Lender has first consented thereto in an
Authenticated Record, Borrower shall not:
9.1. Indebtedness. - Create, incur, assume or suffer to exist, voluntarily
or involuntarily, any Indebtedness, except (i) Obligations to Lender, (ii) trade
debt incurred in the ordinary course of Borrower's business; (iii) purchase
money financing and equipment leases not to exceed $100,000 in any Fiscal Year;
and (iv) Indebtedness described on Schedule 5.18.
9.2. Mergers; Consolidations; Acquisitions. - (Enter into any merger,
consolidation, reorganization or recapitalization with any other Person; take
any steps in contemplation of dissolution or liquidation; conduct any part of
its business through any corporate subsidiary, unincorporated association or
other Person; acquire the stock or assets of any Person, whether by merger,
consolidation, purchase of stock or otherwise; or acquire all or any substantial
part of the properties of any Person) provided, however, that Lender shall not
unreasonably withhold its consent to any merger, consolidation or acquisition.
9.3. Sale or Disposition. - Sell or dispose of all or any Properties or
grant any Person an option to acquire any such Property; provided, however, that
the foregoing shall not prohibit sales of Inventory in the ordinary course of
Borrower's business and provided, further, however, Lender shall not
unreasonably withhold its consent to any such other sale or disposition.
9.4. Defaults. - Permit any landlord, mortgagee, trustee under deed of
trust or lienholder to declare a default under any lease, mortgage, deed of
trust or lien on real estate owned or leased by Borrower, which default remains
uncured after any stated cure period or for a period in excess of thirty (30)
days from its occurrence, whichever is less, unless such default is being
contested by Borrower in good faith by appropriate proceedings being diligently
conducted.
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9.5. Limitations on Liens. - Suffer any lien, encumbrance, mortgage or
security interest on any of its property, except such liens as appear on
Schedule 5.17 attached hereto, if any.
9.6. Dividends and Distributions. - Pay any cash dividends, make any
capital distribution in cash or other Property or return of capital, or purchase
or redeem any of its stock or other securities, or retire any of its stock, or
take any action which would have an effect equivalent to any of the foregoing.
9.7. Borrower's Name and Offices. - Transfer Borrower's chief executive
office or change its organizational name or office where it maintains its
records (including computer printouts and programs) with respect to Receivables
or any other Collateral, except with Lender's prior consent in an Authenticated
Record.
9.8. Fiscal Year. - Change its Fiscal Year.
9.9. Change of Control/Management. - Allow, without the prior written
consent of Lender, not to be unreasonably withheld, a change in the ownership
structure of Borrower, or have a Chairman other than W. Barry Gilbert or a
Controller other than Kevin Monacelli.
9.10. Guaranties; Contingent Liabilities. - Assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable upon the obligation of
any Person, except by the endorsement of negotiable instruments for deposit or
collection or similar transactions in its ordinary course of business as
currently conducted.
9.11. Removal of Collateral. - Remove, or cause or permit to be removed,
any of the Collateral or other Property from the premises where such Collateral
or Property is currently located and as set forth on Schedule 5.14, 5.15 or 5.16
of this Agreement, except for sales of Inventory in the ordinary course of
business.
9.12. Transfer of Notes or Accounts. - Sell, assign, transfer, discount or
otherwise dispose of any Receivables or any promissory note or other instrument
payable to it with or without recourse.
9.13. Settlements. Compromise, - settle or adjust any claim relating to any
of the Collateral, except for claims against insurers following casualty, and
any compromise or settlement for $10,000 in any one case or $50,000 for all such
compromises and settlements in the aggregate.
9.14. Change of Business. - Cause or permit a material change in the nature
of its business as conducted on the date of this Agreement.
9.15. Change of Accounting Practices. - Change its present accounting
principles or practices in any respect, except, upon notice to Lender in a
Record, as may be required by changes in GAAP.
9.16. Inconsistent Agreement. - Enter into any agreement containing any
provision which would be violated by the performance of Borrower's Obligations
or other obligations under this Agreement or any other Loan Document.
9.17. Loan or Advances. - Make any loans or advances to any Person, except
for loans and advances not exceeding $25,000 in the aggregate, and in no event
shall Borrower make any advance or transfer any asset to any of Borrower's
subsidiaries or Affiliates.
9.18. Investments. - Make any investment in any Person including, without
limitation, in any Affiliates or form any Affiliates or subsidiaries not
existing on the date hereof.
9.19. Fixed Charge Coverage Ratio. - Permit Borrower's Fixed Charge
Coverage Ratio for the fiscal quarter ending June 30, 2003 and each fiscal
quarter thereafter to be less than 1.00 to 1.00.
9.20. Capital Expenditures. - Make or agree to make Capital Expenditures in
an amount which exceeds $500,000 for each fiscal year, beginning with fiscal
year ending September 30, 2003.
9.21. EBITDA. - Permit Borrower's EBITDA to be less than $450,000 for each
fiscal quarter, calculated for each quarter on an individual, non-cumulative
basis, beginning with the fiscal quarter ending March 31, 2003.
9.22. Vendor Settlements. - Fail to provide Lender on or before February
28, 2003 with written, final documentation of all vendor settlements shown as
"accepted" on the Trade Summary and back-up schedule delivered by Borrower to
Lender, which documentation shall evidence settlements consistent with the terms
represented by Borrower to have been accepted by such vendors in such Trade
Summary, back-up schedule or other supporting documentation provided by Borrower
to Lender on or before the date of this Agreement.
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10. CONDITIONS TO ADVANCES.
10.1. Lender's Right to Take Certain Actions. - Lender's obligation to make
any Advance is subject to the condition that, as of the date of the Advance, no
Default or Event of Default shall have occurred and be continuing and that the
matters set forth in Section 5 of this Agreement and the representations and
covenants set forth in the other Loan Documents continue to be true and
complete. Borrower's acceptance of each Advance under this Agreement shall
constitute a confirmation, as of the date of the Advance, of the matters set
forth in Section 5 of this Agreement, of the representations and covenants set
forth in the other Loan Documents, and that no Default or Event of Default then
exists. If requested by Lender, Borrower shall further confirm such matters by
delivery of a Record dated the day of the Advance and signed by an authorized
officer of Borrower.
11. TERM. - Unless sooner terminated by Lender pursuant to the terms of
this Agreement, the period during which the Revolving Loan shall be available
shall initially be a period commencing on the date hereof and concluding on the
Termination Date.
12. EVENTS OF DEFAULT.
12.1. Defaults. - Upon the happening of any of the following events
(individually, an "Event of Default;" collectively, "Events of Default"): (a) if
Borrower shall fail to make any payment when due on any Obligation under this
Agreement or any other Loan Document; or (b) if Borrower shall fail to comply
with any term, condition, covenant, warranty or representation contained in
Articles 6 or 9 of this Agreement; or (c) if Borrower shall fail to comply with
any term, condition, covenant or warranty of or in this Agreement other than in
Articles 6 or 9 of this Agreement, and such failure continues for a period in
excess of ten (10) days after notice thereof is given by Lender to Borrower; or
(d) if Borrower shall fail to comply with any term, condition, covenant,
warranty or representation contained in any of the other Loan Documents or any
other agreement between Lender and Borrower (not otherwise constituting an Event
of Default) and such failure continues for a period in excess of 10 days after
notice given by Lender to Borrower; or (e) if Borrower shall cease to be
Solvent, make an assignment for the benefit of its creditors, call a meeting of
its creditors to obtain any general financial accommodation, suspend business or
if any case under any provision of the Bankruptcy Code including provisions for
reorganizations, shall be commenced by or against Borrower or if a receiver,
trustee or equivalent officer shall be appointed for all or any of the
Properties of Borrower; or (f) if any statement or representation contained in
any financial statement or certificate delivered by Borrower to Lender shall be
false, in any respect, when made; or (g) if any federal or state tax lien is
filed of record against Borrower or any guarantor(s), if any, and is not bonded
or discharged within ten (10) days of filing; or (h) if Borrower's independent
public accountants shall refuse to deliver any financial statement required by
this Agreement; or (i) if a judgment for more than $50,000 shall be entered
against Borrower in any action or proceeding and shall not be stayed, vacated,
bonded, paid or discharged within ten (10) days of entry, except a judgment
where the claim is fully covered by insurance and the insurance company has
accepted liability therefore in writing; or (j) if any obligation of Borrower in
respect of any Indebtedness (other than Indebtedness to Lender) shall be
declared to be or shall become due and payable prior to its stated maturity or
such obligation shall not be paid as and when the same becomes due and payable;
or there shall occur any event or condition which constitutes an event of
default under any mortgage, indenture, instrument, agreement or evidence of
Indebtedness relating to any obligation of Borrower in respect of any such
Indebtedness the effect of which is to permit the holder or the holders of such
mortgage, indenture, instrument, agreement or evidence of Indebtedness, or a
trustee, agent or other representative on behalf of such holder or holders, to
cause the Indebtedness evidenced thereby to become due prior to its stated
maturity; or (k) Intentionally omitted. (l) upon the occurrence and continuance
of any Material Adverse Effect, which in the sole and absolute opinion of
Lender, impairs Lender's security, increases Lender's risks; or impairs
Borrower's ability to perform under this Agreement or under the other Loan
Documents; or (m) upon the happening of any of the events described in
Subsections 12.1 (d), (e), (f), (g), (h), (i) or (j) with respect to any
guarantor, if any, or if any such guarantor purports to terminate its guaranty
or upon the death of a guarantor, if any, that is a natural person, if any.
Then, and in any such event, Lender may terminate this Agreement without prior
notice or demand to Borrower or may demand payment in full of all Obligations
(whether otherwise then payable on demand or not) without terminating this
Agreement and shall, in any event, be under no further responsibility to extend
any credit or afford any financial accommodation to Borrower, whether under this
Agreement or otherwise.
12.2. Obligations Immediately Due. - Upon the Termination Date for any
reason, all of Borrower's Obligations to Lender including, but not limited to,
the Loans shall immediately become due and payable without further notice or
demand.
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12.3. Continuation of Security Interests. - Notwithstanding any
termination, until all Obligations of Borrower shall have been fully paid and
satisfied, Lender shall retain all security in and title to all existing and
future Receivables, General Intangibles, Inventory, Equipment, Fixtures,
Investment Property, and other Collateral held by Lender under the General
Security Agreement or under any other Loan Document and Borrower shall continue
to assign Receivables and consign Inventory to Lender and continue to turn over
all proceeds of Collateral to Lender.
13. REMEDIES OF LENDER. - Upon the occurrence of any Event of Default or
upon any termination of this Agreement, then Lender shall have, in addition to
all of its other rights under this Agreement all of the rights and remedies
provided in the General Security Agreement.
14. GENERAL PROVISIONS.
14.1. Rights Cumulative. - Lender's rights and remedies under this
Agreement shall be cumulative and non-exclusive of any other rights or remedies
which Lender may have under any other agreement or instrument, by operation of
law or otherwise.
14.2. Successors and Assigns. - This Agreement is entered into for the
benefit of the parties hereto and their successors and assigns. It shall be
binding upon and shall inure to the benefit of the parties, their successors and
assigns. Lender shall have the right, without the necessity of any further
consent or authorization by Borrower, to sell, assign, securitize or grant
participation in all, or a portion of, Lender's interest in the Loans, to other
financial institutions of the Lender's choice and on such terms as are
acceptable to Lender in its discretion.
14.3. Notice. - Wherever this Agreement provides for notice to any party
(except as expressly provided to the contrary), it shall be given by messenger,
facsimile, certified U.S. mail with return receipt requested, or nationally
recognized overnight courier with receipt requested, effective when either
received or receipt rejected by the party to whom addressed, and shall be
addressed as follows, or to such other address as the party affected may
hereafter designate: If to Lender: Keltic Financial Partners, LP Attn: John P.
Reilly, Managing Partner 555 Theodore Fremd Avenue, Suite C-207 Rye, New York
10580 Fax: (914) 921-1154
With a copy to:
Hodgson Russ LLP
Attn: Victoria J. Saxon
One M&T Plaza, Suite 2000
Buffalo, New York 14203
Fax: (716) 849-0349
If to Borrower:
IEC Electronics Corp.
Attn: W. Barry Gilbert
105 Norton Street
Newark, New York, NY 14513
Fax: (315) 331-4430
With a copy to:
Boylan, Brown, Code, Vigdor & Wilson, LLP
Attn: Justin L. Vigdor
2400 Chase Square
Rochester, New York 14604
Fax: (585) 232-3528
14.4. Strict Performance. - The failure, at any time or times hereafter, to
require strict performance by Borrower of any provision of this Agreement shall
not waive, affect or diminish any right of Lender thereafter to demand strict
compliance and performance therewith. Any suspension or waiver by Lender of any
Default or Event of Default by Borrower under this Agreement or any other Loan
Document shall not suspend, waive or affect any other Default or Event of
Default by Borrower under this Agreement or any other Loan Document, whether the
same is prior or subsequent thereto and whether of the same or a different type.
14.5. Waiver. - Borrower waives presentment, protest, notice of dishonor
and notice of protest upon any instrument on which it may be liable to Lender as
maker, endorser, guarantor or otherwise.
14.6. Construction of Agreement. - The parties hereto agree that the terms
and language of this Agreement were the result of negotiations between the
parties, and, as a result, there shall be no prescription that any ambiguities
in this Agreement shall be resolved against either party. Any controversy over
the construction of this Agreement shall be decided mutually without regard to
events of authorship or negotiation.
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14.7. Expenses. If, at any time or times prior or subsequent to the date
hereof, regardless of whether or not a Default or an Event of Default then
exists or any of the transactions contemplated under this Agreement are
concluded, Lender employs counsel for advice or other representation, or incurs
legal expenses, or consulting fees and expenses, or other costs or out-of-pocket
expenses in connection with: (A) the negotiation and preparation of this
Agreement or any other Loan Document, or any amendment of or modification of
this Agreement or any other Loan Document; (B) the administration of this
Agreement or any of the other Loan Documents and the transactions contemplated
hereby and thereby; (C) periodic audits and appraisals performed by Lender; (D)
any litigation, contest, dispute, suit, proceeding or action (whether instituted
by Lender, Borrower or any other Person) in any way relating to the Collateral,
this Agreement or any other Loan Document or Borrower's affairs; (E) the perfect
ion of any lien on the Collateral; (F) any attempt to enforce any rights or
remedies of Lender against Borrower or any other Person which may be obligated
to Lender by virtue of this Agreement or any other Loan Document including,
without limitation, the Account Debtors; or (G) any attempt to inspect, verify,
protect, preserve, restore, collect, sell, liquidate or otherwise dispose of or
realize upon the Collateral; then, in any such event, the actual attorneys' fees
and expenses arising from such services and all expenses, costs, charges and
other fees of such counsel of Lender or relating to any of the events or actions
described in this Section 14.7 shall be payable by Borrower to Lender, and shall
be additional Obligations under this Agreement secured by the Collateral.
Additionally, if any taxes (excluding taxes imposed upon or measured by the net
income of Lender, but including any intangibles tax, stamp tax or recording tax)
shall be payable on account of the execution or delivery of this Agreement, or
the execution, delivery, issuance or recording of any other Loan Document, or
the creation of any of the Obligations under this Agreement, by reason of any
existing or hereafter enacted federal or state statute, Borrower will pay (or
will promptly reimburse Lender for the payment of) all such taxes including, but
not limited to, any interest and penalties thereon, and will indemnify, defend
and hold Lender harmless from and against any liability in connection therewith.
Borrower shall also reimburse Lender for all other expenses incurred by Lender
in connection with the transactions contemplated under this Agreement or the
other Loan Documents, including, without limitation, fees in connection with any
bank account, the Lockbox, wire charges, automatic clearing house fees and other
similar costs and expenses.
14.8. Reimbursements Charged to Revolving Loan. - With respect to any
amount advanced by Lender and required to be reimbursed by Borrower pursuant to
the foregoing provisions of Section 14.7, it is hereby agreed that Lender may
charge any such amount to Borrowers' Revolving Loan on the dates such
reimbursement is made. Borrower's obligations under Section 14.7 shall survive
termination of the other provisions of this Agreement.
14.9. Waiver of Right to Jury Trial. - Borrower and Lender recognize that
in matters related to the Loan and this Agreement, and as it may be subsequently
modified and/or amended, any such party may be entitled to a trial in which
matters of fact are determined by a jury (as opposed to a trial in which such
matters are determined by a federal or state judge). By execution of this
Agreement, Lender and Borrower will give up their respective right to a trial by
jury. Borrower and Lender each hereby expressly acknowledged that this waiver is
entered into to avoid delays, minimize trial expenses, and streamline the legal
proceedings in order to accomplish a quick resolution of claims arising under or
in connection with the Note and this Agreement. WAIVER OF JURY TRIAL. TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, BORROWER AND LENDER EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT THAT BORROWER OR LENDER MAY HAVE
TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION, DIRECTLY OR INDIRECTLY, AT ANY
TIME ARISING OUT OF, UNDER, OR IN CONNECTION WITH THE LOAN, THIS AGREEMENT, OR
ANY TRANSACTION CONTEMPLATED THEREBY OR HEREBY, BEFORE OR AFTER MATURITY.
CERTIFICATIONS. BORROWER HEREBY CERTIFIES THAT NEITHER ANY REPRESENTATIVE NOR
AGENT OF LENDER NOR LENDER'S COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR
IMPLIED THAT LENDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER. BORROWER ACKNOWLEDGES THAT LENDER HAS BEEN INDUCED TO ENTER
INTO THE TRANSACTION BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATION HEREIN.
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14.10. Indemnification by Borrower/Waiver of Claims. - Except in the case
of Lender's willful misconduct or gross negligence, Borrower hereby covenants
and agrees to indemnify, defend (with counsel selected by Lender) and hold
harmless Lender and its officers, partners, employees, consultants and agents
from and against any and all claims, damages, liabilities, costs and expenses
(including, without limitation, the actual fees and expenses of counsel) which
may be incurred by or asserted against Lender or any such other Person in
connection with: (a) any investigation, action or proceeding arising out of or
in any way relating to this Agreement, any of the Loans, any of the other Loan
Documents, any other agreement relating to any of the Obligations, any of the
Collateral, or any act or omission relating to any of the foregoing; or (b) any
taxes, liabilities, claims or damages relating to the Collateral or Lender's
liens thereon; or (c) the correctness, validity or genuineness of any instrument
or document that may be released or endorsed to Borrower by Lender (which shall
automatically be deemed to be without recourse to Lender in any event), or the
existence, character, quantity, quality, condition, value or delivery of any
goods purporting to be represented by any such documents; or (d) any broker's
commission, finder's fee or similar charge or fee in connection with the Loans
and the transactions contemplated in this Agreement.
14.11. Savings Clause for Indemnification. - To the extent that the
undertaking to indemnify, pay and hold harmless set forth in Section 14.10 above
may be unenforceable because it is violative of any law or public policy,
Borrower shall contribute the maximum portion which it is permitted to pay and
satisfy under applicable law to the payment and satisfaction of all matters
referred to under Section 14.10.
14.12. Waiver. - To the extent permitted by applicable law, no claim may be
made by Borrower or any other Person against Lender or any of its Affiliates,
partners, officers, employees, agents, attorneys or consultants for any special,
indirect, consequential or punitive damages in respect of any claim for breach
of contract, tort or any other theory of liability arising out of or related to
the transactions contemplated by this Agreement or the other Loan Documents or
any act, omission or event occurring in connection therewith; and Borrower
hereby waives, releases and agrees not to sue upon any claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor. Neither Lender nor any of its Affiliates, partners, officers,
employees, agents, attorneys or consultants shall be liable for any action taken
or omitted to be taken by it or them under or in connection with this Agreement
or the transactions contemplated hereby, except for its or their own gross
negligence or willful misconduct.
14.13. Entire Agreement; Amendments; Lender's Consent. - This Agreement
(including the Exhibits and Schedules thereto) and the other Loan Documents
supersede, with respect to their subject matter, all prior and contemporaneous
agreements, understandings, inducements or conditions between the respective
parties, whether express or implied, oral or written. No amendment or waiver of
any provision of this Agreement or any other Loan Document, nor consent to any
departure by Borrower therefrom, shall in any event be effective unless the same
shall be in a Record Authenticated by Lender, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
14.14. Cross Default; Cross Collateral. - Borrower hereby agrees that (a)
all other agreements between Borrower and Lender are hereby amended so that a
Default or an Event of Default under this Agreement is a default under all such
other agreements and a default under any one of the other agreements is a
Default or an Event of Default under this Agreement, and (b) the Collateral
under this Agreement secures the Obligations now or hereafter outstanding under
all other agreements between Borrower and Lender and the Collateral pledged
under any other agreement with Lender secures the Obligations under this
Agreement.
14.15. Execution in Counterparts. - This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement.
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14.16. Severability of Provisions. - Any provision of this Agreement or any
of the other Loan Documents that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or the other Loan Documents or affecting the
validity or enforceability of such provision in any other jurisdiction.
14.17. Table of Contents; Headings. - The table of contents and headings
preceding the text of this Agreement are inserted solely for convenience of
reference and shall not constitute a part of this Agreement or affect its
meaning, construction or effect.
14.18. Exhibits and Schedules. - All of the Exhibits and Schedules to this
Agreement are hereby incorporated by reference herein and made a part hereof.
15. GOVERNING LAW; CONSENT TO JURISDICTION. A. THIS AGREEMENT WAS NEGOTIATED IN
THE STATE OF NEW YORK, AND MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE
OF NEW YORK, AND THE PROCEEDS OF THE SECURED REVOLVING NOTE DELIVERED PURSUANT
THERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE
HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION
EMBODIED HEREIN, AND IN ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY
APPLICABLE LAW OF THE UNITED STATES OF AMERICA EXCEPT THAT AT ALL TIMES THE
PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND
SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE
IN WHICH THE APPLICABLE INDIVIDUAL PROPER TY IS LOCATED, IT BEING UNDERSTOOD
THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE
STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND THE ENFORCEABILITY OF ALL LOAN
DOCUMENTS AND ALL OF THE INDEBTEDNESS OR OBLIGATIONS ARISING HEREUNDER OR
THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, LENDER AND BORROWER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVE ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE SECURED REVOLVING NOTE, AND
THIS AGREEMENT AND THE SECURED REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. B. ANY LEGAL SUIT, ACTION
OR PROCEEDING AGAINST LENDER OR BORROWER, ANY GUARANTOR OR OTHER PARTY TO THIS
TRANSACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN
THE SOLE OPTION OF LENDER IN ANY FEDERAL OR STATE COURT LOCATED IN WESTCHESTER
COUNTY, NEW YORK, PURSUANT TO ss. 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS
LAW, AND LENDER AND BORROWER WAIVE ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND LENDER
AND BORROWER HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY SUCH COURT IN
ANY SUIT, ACTION OR PROCEEDING. BORROWER WAIVES PERSONAL SERVICE OF PROCESS IN
ANY SUCH SUIT, ACTION OR PROCEEDING AND CONSENTS TO THE MAKING OF SERVICE OF
PROCESS IN EACH SUCH SUIT, ACTION AND OTHER PROCEEDING (1) BY REGISTERED MAIL TO
THE LAST ADDRESS OF BORROWER SHOWN IN THE RECORDS OF LENDER RELATING TO THIS
AGREEMENT MAINTAINED BY LENDER WITH SUCH SERVICE OF PROCESS TO BE DEEMED
COMPLETE FIVE DAYS AFTER THE MAILING THERE OF, OR (2) AS OTHERWISE PERMITTED BY
LAW. BORROWER REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS CONSENT TO
JURISDICTION PROVISION WITH ITS LEGAL COUNSEL, AND HAS MADE THIS WAIVER
KNOWINGLY AND VOLUNTARILY. [Remainder of this Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized on the day and year first
above written.
KELTIC FINANCIAL PARTNERS, LP
By: KELTIC FINANCIAL SERVICES LLC,
its general partner
By:
-------------------------
Name: John P. Reilly
Title: Managing Partner
IEC ELECTRONICS CORP.
By: ------------------------
Name: W. Barry Gilbert
Title: Chairman
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