Exhibit 10.4
PROMISSORY NOTE
(Term Loan)
Albany, New York March 16, 2007
$29,000,000.00
BALCHEM CORPORATION, a Maryland corporation having an address of P.O. Box
600, 52 Sunrise Park Road, New Hampton, New York 10955 (herein called the
"Company"), hereby promises to pay to the order of BANK OF AMERICA, N.A.
(successor by merger to Fleet National Bank) a national banking association
having an office at Peter D. Kiernan Plaza, Albany, New York 12207 (the "Bank"
or the "Holder"), or its successors or assigns, the principal sum of TWENTY-NINE
MILLION AND NO/100 DOLLARS ($29,000,000.00), or so much of said sum as may be
advanced hereunder, with interest thereon as set forth below.
SECTION 1. DEFINITION OF TERMS. The following words and terms as used in this
Note shall have the following meanings unless the context or use indicates
another or different meaning or intent:
"Adjusted Libor Rate" - Means a rate per annum subject to adjustment
approximately each one month equal to the Libor Rate plus one percent (1.00%).
"Advance Notice" - the Notice to be delivered by the Company to the Bank
in the form of Exhibit "A" attached hereto, which shall serve as a request by
the Company that the Bank advance proceeds of the Loan.
"Business Day" - In respect of any date that is specified in this Note to
be subject to adjustment in accordance with applicable Following Business Day
Convention, a day on which commercial banks settle payment in London if the
payment obligation is calculated by reference to any Libor Rate.
"Default Rate" - A per annum rate of two percent (2%) above the rate of
interest otherwise applicable to the Note.
"Event of Default" - Any of those events defined as an Event of Default
under the Loan Agreement.
"Following Business Day Convention" - The convention for adjusting any
relevant date if it would otherwise fall on a day that is not a Business Day.
The term "Business Day", when used in conjunction with the term "Following
Business Day Convention" and a date, shall mean that an adjustment will be made
if that date would otherwise fall on a day that is not a Business Day so that
the date will be the first following day that is a Business Day.
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"Libor Interest Rate Period" - The one month (or slightly longer or
shorter) period during which the Adjusted Libor Rate is in effect, provided,
however, that in no event shall any Libor Interest Rate Period extend beyond the
Maturity Date of this Note.
"Libor Rate" - Means the interest rate determined by the following formula
(all amounts in the calculation will be determined by the Bank as of the first
day of the Libor Interest Rate Period):
Libor Rate= London Inter-Bank Offered Rate
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(1.00 - Reserve Percentage)
"Loan" - The loan of $29,000,000.00 by the Lender to the Company that is
the subject of this Note.
"Loan Agreement" - Means the loan agreement dated the date hereof by and
between the Company and the Bank as such may be amended or supplemented from
time to time.
"London Inter-Bank Offered Rate" - Means, for any applicable Libor
Interest Rate Period, the rate per annum equal to the British Bankers
Association LIBOR Rate ("BBA LIBOR"), as published by Reuters (or other
commercially available source providing quotations of BBA LIBOR as selected by
the Bank from time to time) at approximately 11:00 a.m. London time two (2)
London Banking Days before the commencement of the applicable Libor Interest
Rate Period for U.S. Dollar deposits (for delivery on the first day of such
Interest Period) with a term equivalent to such Libor Interest Rate Period. If
such rate is not available at such time for any reason, then the rate for that
Libor Interest Rate Period will be determined by such alternate method as
reasonably selected by the Bank. A "London Banking Day" is a day on which banks
in London are open for business and dealing in offshore dollars.
"Maturity Date" - March 15, 2010.
"Reserve Percentage" - Means the total of the maximum reserve percentages
for determining the reserves to be maintained by member banks of the Federal
Reserve System for Eurocurrency Liabilities, as defined in the Federal Reserve
Board Regulation D, rounded upward to the nearest 1/100 of one percent. The
percentage will be expressed as a decimal and will include, but not be limited
to, marginal, emergency, supplemental, special and other reserve percentages.
All other capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Loan Agreement.
SECTION 2. ADVANCES. Advances under this Note shall be reflected on the records
of the Bank which said records shall be conclusive absent manifest error. In the
absence of an Event of Default or an event which, but for the passage of time,
the giving of notice or both would constitute an Event of Default, the Company
may request that the Bank advance Loan proceeds. When requesting each advance of
Loan proceeds from the
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Bank, the Company shall deliver to the Bank an Advance Notice setting forth the
amount of the advance requested. All advances must be requested prior to 3 p.m.
on the date an advance is requested.
SECTION 3. INTEREST; PAYMENTS. (A) Subject to the provisions of Section 6 of
this Note, commencing on March 15, 2007 and continuing thereafter, interest
(calculated on the principal balance hereof and based upon the actual number of
days elapsed over a 360 day year) shall accrue at a rate per annum equal to the
Adjusted Libor Rate. Interest payments shall be payable monthly as set forth in
Section 3(B) hereof. In the event the principal balance remains outstanding
after the Maturity Date, interest (calculated on the principal balance hereof
and based upon the actual number of days elapsed over a 360-day year) shall
accrue at a rate per annum equal to the Default Rate.
(B) Commencing on April 15, 2007 and continuing on the fifteenth (15th)
calendar day of each calendar month thereafter during the term hereof up to but
not including the Maturity Date, Borrower shall make monthly payments of accrued
interest at the Adjusted Libor Rate together with equal monthly payments of
principal in an amount equal to the quotient determined by dividing the amount
advanced under this Note as of March 15, 2007 by sixty (60).
(C) In the event that any portion of any payment due hereunder is not made
within ten (10) days of the date such payment became due, the Company shall pay
to the Holder on demand a late payment charge equal to five percent (5%) of the
portion of any such payment not paid within such ten (10) day period, provided,
however, that such late payment charge shall not exceed $10,000.00 in the
aggregate per incident and shall not exceed $10,000.00 in the aggregate upon the
maturity or acceleration of the Principal Balance.
(D) Notwithstanding anything to the contrary herein contained, on the
Maturity Date, the entire outstanding principal amount hereof and all
accumulated, accrued and unpaid interest thereon shall be due and payable.
(E) All payments received pursuant to this Note shall be applied first to
the payment of all fees, expenses, and other amounts due to the Holder
(excluding principal and interest), then to accrued, accumulated and unpaid
interest and the balance in reduction of the Principal Balance hereof, provided
that should an Event of Default have occurred and be continuing, payments
received hereunder shall be applied at the discretion of the Holder.
(F) All payments of interest and principal are to be made for the account
of Bank of America, N.A., 69 State Street, Albany, New York 12207 or at such
other place as the Holder may direct the Company by written notice. All payments
shall be in lawful money of the United States in immediately available funds and
are subject to the Following Business Day Convention with respect to date of
payment.
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SECTION 4. PREPAYMENT, MANDATORY REDEMPTION. (A) The Company may upon at least
three (3) prior Business Days' notice to the Holder (which notice shall be
irrevocable) prepay the Principal Balance and any such prepayment shall occur
only on the last day of the Libor Interest Rate Period. Each prepayment whether
voluntary, by reason of acceleration or otherwise, will be accompanied by the
amount of accrued interest on the amount prepaid and a prepayment fee as
described below. A "prepayment" is a payment of an amount on a date earlier than
the scheduled payment date for such amounts as required by this Note. The
prepayment fee will be the sum of fees calculated separately for each Prepayment
Installment, as follows:
(i) The Bank will first determine the amount of interest which would
have accrued each month for the Prepayment Installment had it remained
outstanding until the applicable Original Payment Date using the interest
rate applicable to the Prepayment Installment under this Note.
(ii) The Bank will then subtract from each monthly interest amount
determined in (i) above the amount of interest which would accrue for that
Prepayment Installment if it were reinvested from the date of prepayment
through the Original Payment Date using the Treasury Rate.
(iii) If (i) minus (ii) for the Prepayment Installment is greater
than zero, the Bank will discount the monthly differences to the date of
prepayment by the Treasury Rate. The Bank will then add together all of
the discounted monthly differences for the Prepayment Installment.
The following definitions will apply to the calculation of the prepayment fee:
(i) "Original Payment Dates" mean the dates on which the prepaid
principal would have been paid if there had been no prepayment. If any of
the principal would have been paid later than the end of the Libor
Interest Rate Period in effect at the time of prepayment, then the
Original Payment Date for that amount will be the last day of the Libor
Interest Rate Period.
(ii) "Prepayment Installment" means the amount of the prepaid
principal which would have been paid on a single Original Payment Date.
(iii) "Treasury Rate" means the interest rate yield for U.S.
Government Treasury Securities which the Bank determines could be obtained
by reinvesting a specified Prepayment Installment in such securities from
the date of prepayment through the Original Payment Date. The Bank may
adjust the Treasury Rate to reflect the compounding, accrual basis or
other costs of the prepaid amount. Each of the rates is the Bank's
estimate only and the Bank is under no obligation to actually reinvest any
prepayment. The rates will be based on information from either the
Telerate or Reuters information services, The Wall Street Journal or other
information sources the Bank deems appropriate.
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If by reason of an Event of Default the Bank elects to declare this Note to be
immediately due and payable, then any prepayment fee with respect to the
resulting prepayment shall become due and payable in the same manner as though
the Company had exercised a right of prepayment.
SECTION 5. LOAN AGREEMENT. The loan evidenced by this Note is being made
pursuant to the terms, provisions and conditions of a certain loan agreement
dated the date hereof (as amended or supplemented from time to time, the "Loan
Agreement") by and between the Company and the Holder.
SECTION 6. DOCUMENTS. Reference is hereby made to the Loan Agreement and to all
amendments and supplements thereto for the provisions, among others, with
respect to the nature and extent of the rights, duties and obligations of the
Company and the Holder and the terms upon which this Note is or may be secured.
SECTION 7. DEFAULT; ACCELERATION. The entire unpaid Principal Balance of this
Note, together with all accrued and unpaid interest due hereon, may be declared
immediately due and payable by the Holder upon the occurrence and during the
continuance of an "Event of Default" as defined in the Loan Agreement, provided,
however, that from and after the date of any such declaration, the outstanding
Principal Balance hereof and all accrued and unpaid interest thereon shall be
due and payable, interest shall continue to accrue on the unpaid Principal
Balance to the date of payment at a rate per annum equal to the Default Rate.
SECTION 8. COVENANT AGAINST USURY. All agreements between the Company and the
Holder are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of maturity of the indebtedness
evidenced hereby or otherwise, shall the amount paid or agreed to be paid to the
Holder for the use or the forbearance of the indebtedness evidenced hereby
exceed the maximum permissible under applicable law. As used herein, the term
"applicable law" shall mean the law in effect as of the date hereof, provided,
however, that in the event there is a change in the law which results in a
higher permissible rate of interest, then this Note shall be governed by such
law as of its effective date. In this regard, it is expressly agreed that it is
the intent of the Company and the Holder in the execution, delivery and
acceptance of this Note to contract in strict compliance with the laws of the
State of New York from time to time in effect. If, under or from any
circumstances whatsoever, fulfillment of any provision hereof or of any law of
the Financing Documents at the time of performance of such provision shall be
due shall involve transcending the limit of such validity prescribed by
applicable law, then the obligation to be fulfilled shall automatically be
reduced to the limits of such validity and if under or from circumstances
whatsoever the Holder should ever receive as interest an amount which would
exceed the highest lawful rate, such amount which would be excessive interest
shall be applied to the reduction of the principal balance evidenced hereby and
not to the payment of interest. This provision shall control every other
provision of all agreements between the Company and the Guarantors and the
Holder.
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SECTION 9. WAIVER OF DILIGENCE, PRESENTMENT, DEMAND, ETC. The Company hereby
waives with respect to this Note: diligence, presentment, demand for payment,
filing of claims with a court in the event of bankruptcy of the Company or any
other person or entity liable in respect to this Note, any right to require a
proceeding first against the Company or any other such Person, protest, notice
of dishonor or nonpayment of any such liabilities and any other notice and all
demands whatsoever except as specifically set forth in this Note or any of the
other Financing Documents.
SECTION 10. WAIVER, CHANGE, MODIFICATION OR DISCHARGE. The provisions of this
Note may not be waived, changed, modified or discharged orally, but only by
agreement in writing, signed by the party against whom any enforcement of any
waiver, change, modification or discharge is sought.
SECTION 11. TRANSFER AND ASSIGNMENT OF NOTE; PLEDGE OF RIGHTS; PARTICIPATION.
(A) The Holder may at any time pledge all or any portion of its rights under
this Note and the other Financing Documents to any of the twelve (12) Federal
Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C.
Section 341. No such pledge or enforcement thereof shall release the Holder from
its obligations under any of the Financing Documents.
(B) The Holder shall have the unrestricted right, at any time and from
time to time, to grant to one or more banks or other financial institutions
(each, a Participant") participating interests in the Holder's obligation to
lend hereunder and/or any or all of the loans held by the Holder hereunder. In
the event of any such grant by the Holder of a participating interest to a
Participant, whether or not upon notice to the Company, the Holder shall remain
responsible for the performance of its obligations hereunder and the Company
shall continue to deal solely and directly with the Holder in connection with
the Holder's rights and obligations hereunder.
The Holder shall have the unrestricted right at any time or from time to
time to assign all or any portion of its rights and obligations hereunder and
under the other Financing Documents to one or more banks or other financial
institutions (each, an "Assignee") and the Company agrees that it shall execute,
or cause to be executed, such documents, including, without limitation,
amendments to this Loan Agreement and to the other Financing Documents as the
Holder shall deem necessary to effect the foregoing. In addition, at the request
of the Holder and any such Assignee, the Company shall issue one or more new
promissory notes, as applicable, to any such Assignee and, if the Holder has
retained any of its rights and obligations hereunder following such assignment,
to the Holder, which new promissory notes shall be issued in replacement of, but
not in discharge of, the liability evidenced by the promissory note held by the
Holder prior to such assignment and shall reflect the amount of the respective
commitments and loans held by such Assignee and the Holder after giving effect
to such assignment. Upon the execution and delivery of appropriate assignment
documentation, amendments and any other documentation required by the Holder in
connection with such assignment, and the payment by Assignee of the purchase
price agreed to by the Holder, and such Assignee, such Assignee shall be a party
to this Note and shall have all of the rights and obligations
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of the Holder hereunder and under the other Financing Documents to the extent
that such rights and obligations have been assigned by the Holder pursuant
hereto and to the assignment documentation between the Holder and such Assignee.
and the Holder shall be released from its obligations hereunder and thereunder
to a corresponding extent.
Provided no Event of Default has occurred and is continuing and except
with respect to an assignment or transfer of the Loan mandated by a Governmental
Authority, the Company shall have the right to approve the identity of any
Participant or Assignee pursuant to this subsection (B), which approval shall
not be unreasonably withheld, delayed or conditioned. Except as aforesaid, the
right of the Holder to assign or grant a participation interest shall not
require notice to or consent of the Company.
The Holder may furnish any information concerning the Company in its
possession from time to time to prospective Assignees and Participants, provided
that the Holder shall require any such prospective Assignee or Participant to
agree in writing for the benefit of the Company to maintain the confidentiality
of such information.
SECTION 12. JURY TRIAL WAIVER. THE COMPANY AND THE HOLDER (BY ACCEPTANCE OF THIS
NOTE) MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT
TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS NOTE OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING,
WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR
ACTIONS OF THE HOLDER RELATING TO THE ADMINISTRATION OF THE LOAN OR ENFORCEMENT
OF THIS NOTE AND AGREE THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH
ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. EXCEPT AS PROHIBITED BY LAW, THE COMPANY HEREBY WAIVES ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES. THE COMPANY CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE
HOLDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR THE HOLDER TO ACCEPT THIS NOTE AND MAKE
THE LOAN.
SECTION 13. RIGHT OF SETOFF. The Company hereby grants to the Holder a
continuing lien, security interest and right of setoff as security for all
liabilities and obligations to the Holder, whether now existing or hereafter
arising, upon and against all deposits, credits, collateral and property, now or
hereafter in the possession, custody, safekeeping or control of the Holder or
any entity under the control of Bank of America Corporation and its successors
and assigns or in transit to any of them. At any time,
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without demand or notice (any such notice being expressly waived by the
Company), the Holder may set off the same or any part thereof and apply the same
to any liability or obligation of the Company even though unmatured and
regardless of the adequacy of any other collateral securing this Note. ANY AND
ALL RIGHTS TO REQUIRE THE HOLDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT
TO ANY OTHER COLLATERAL WHICH SECURES THIS NOTE, PRIOR TO EXERCISING ITS RIGHT
OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
COMPANY, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
SECTION 14. EXPENSES INCURRED IN CONNECTION WITH ENFORCEMENT. The Company shall
pay on demand all reasonable expenses of the Holder in connection with the
preparation, administration, default, collection, waiver or amendment of loan
terms, or in connection with the Holder's exercise, preservation or enforcement
of any of its rights, remedies or options hereunder, including, without
limitation, reasonable fees of outside legal counsel or the allocated costs of
in-house legal counsel, accounting, consulting, brokerage or other similar
professional fees or expenses and any reasonable fees or expenses associated
with travel or other costs relating to any appraisals or examinations conducted
in connection with the Loan or any collateral therefor, and the amount of all
such expenses shall, until paid, bear interest at the rate applicable to
principal hereunder (including any default rate) and be an obligation secured by
any collateral.
SECTION 15. CHOICE OF LAW. This Note and the rights and obligations of the
parties hereunder shall be construed and interpreted in accordance with the laws
of the State of New York (the "Governing State") (excluding the laws applicable
to conflicts or choice of law).
THE COMPANY AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE BROUGHT
IN THE COURTS OF THE GOVERNING STATE OR ANY FEDERAL COURT SITTING THEREIN AND
CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS
OF ANY SUCH SUIT BEING MADE UPON THE COMPANY BY MAIL AT THE ADDRESS SET FORTH
HEREIN. THE COMPANY HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS
BROUGHT IN AN INCONVENIENT FORUM.
SECTION 16. MERGER. This Note is intended by the parties as the final, complete
and exclusive statement of the transactions evidenced by this Note. All prior
contemporaneous promises, agreements and understandings, whether oral or
written, are deemed to he superceded by this Note, and no party is relying on
any promise, agreement or understanding not set forth in this Note. This Note
may not be amended or modified except by a written instrument describing such
amendment or modification executed by the Company and the Holder.
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SECTION 17. USE OR PROCEEDS. No portion of the proceeds of this Note shall be
used, in whole or in part, for the purpose of purchasing or carrying any "margin
stock" as such term is defined in Regulation U of the Board of Governors of the
Federal Reserve System.
SECTION 18. LOST OR DAMAGED NOTE, Upon receipt of an affidavit of an officer of
the Holder as to the loss, theft, destruction or mutilation of this Note or any
other security document which is not of public record, and, in the case of any
such, loss, theft, destruction or mutilation, upon surrender and cancellation of
such Note or other security document, the Holder will issue, in lieu thereof a
replacement Note or other security document in the same principal amount thereof
and otherwise of like tenor.
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BALCHEM CORPORATION
By: /s/ Frank Fitzpatrick
---------------------
Name: Frank Fitzpatrick
Title: Chief Financial Officer
STATE OF NEW YORK )
) ss.:
COUNTY OF ORANGE )
On the 16th day of March, in the year 2007, before me, the undersigned, a
notary public in and for said state, personally appeared Frank Fitzpatrick,
personally known to me or proven to me on the basis of satisfactory evidence, to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual or the person upon behalf of which
the individual acted, executed the instrument.
/s/ Kathleen M. Perry
---------------------
Notary Public, State of New York
No. 01PE508519
Qualified in Sullivan County
Commission Expires 9/27/09
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EXHIBIT "A"
FORM OF ADVANCE NOTICE
BORROWER: BALCHEM CORPORATION
DATE: March 16, 2007
All Capitalized terms carry the meanings as defined in the Promissory Note (Term
Loan) dated March 16, 2007 (the "Note").
This Notice serves as an irrevocable Advance Notice required under the Note for
the purpose of designating:
Account to Credit:
Bank Name: Bank of America
Acct Name: Robinson, Bradshaw & Hinson, PA Trust Account
ABA or Routing #: 026 009 593
Account #: 000 149 3733
Reference: Richard S. Starling, 15017.00017
Advance Amount: $29,000,000.00
Subject to confirmation and verification by Bank.
Authorized by: BALCHEM CORPORATION
By: /s/ Frank Fitzpatrick
----------------------
Authorized Representative
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