Exhibit 10.5
PROMISSORY NOTE
(Revolving Line of Credit)
$6,000,000.00 March 16, 2007
Albany, New York
FOR VALUE RECEIVED, the undersigned, BALCHEM CORPORATION, a corporation
organized and existing under the laws of the State of Maryland and having an
address of P.O. Box 600, 52 Sunrise Park Road, New Hampton, New York 10958
(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 organized and existing under the laws of the United States of
America, its successors and assigns (herein called the "Payee" or the "Bank"),
at such Payee's office at 69 State Street, Albany, New York 12207, or such other
location as the Payee shall designate in writing from time to time, the unpaid
amount of all sums that have been advanced to or for the benefit of the Company
in accordance with the terms hereof in an amount not to exceed the principal sum
of SIX MILLION AND NO\100 DOLLARS ($6,000,000.00), less the face amount of all
commercial letters of credit and standby letters of credit issued by the Payee
at the request of the Borrower during the term hereof, which aggregate face
amount of said letters of credit cannot exceed Six Million Dollars
($6,000,000.00) at any one time outstanding, together with interest on the
disbursed, unpaid principal or, if less, the aggregate unpaid principal amount
due hereunder, together with interest at the rate specified below until paid in
full. The records of the Payee maintained in the ordinary course of business
shall be prima facie evidence of the existence and amounts of the Company's
obligations recorded therein. All computations of interest under this Note shall
be made on the basis of a three hundred sixty (360) day year and the actual
number of days elapsed.
DEFINITIONS. As used herein, the following terms shall have the following
meanings:
"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
from time to time in the form of Exhibit "A" attached hereto, which shall serve
as a request by the Company that the Bank advance a Loan Portion.
"Business Day" - In respect of any date that is specified in the Note to
be subject to adjustment in accordance with applicable Following Business Day
Convention, a day 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.
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"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.
"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 Loan.
"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 up to $6,000,000.00 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.
"Loan Portion" - Each advance of Loan proceeds by the Bank to the Company,
each of which advances will be treated separately for the purposes of computing
interest. Each such Loan Portion shall accrue interest at the Adjusted Libor
Rate.
"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" - May 31, 2009.
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"Prime Rate" - Means the rate of interest publicly announced from time to
time by the Bank as its Prime Rate. The Prime Rate is set by the Bank based on
various factors, including the Bank's costs and desired return, general economic
conditions and other factors and is used as a reference point for pricing some
loans. The Bank may price loans to its customers at, above or below the Prime
Rate. Any change in the Prime Rate shall take effect at the opening of business
on the day specified in the public announcement of a change in the Bank's Prime
Rate.
"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.
ADVANCES. Advances under this Note shall be reflected on the records of the
Payee 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, as the
Company makes repayments of principal, it shall be permitted to re-borrow
hereunder until the Maturity Date. When requesting each advance of Loan proceeds
from the Bank, the Company shall deliver to the Bank an Advance Notice setting
forth the amount of the Loan Portion. Notwithstanding anything to the contrary
set forth herein, the Bank shall not be obligated to honor an Advance Notice in
the event either (i) dollar deposits in the principal amount requested, and for
the periods equal to the applicable Libor Interest Rate Period selected, are not
available in the London inter-bank market or (ii) the Libor Rate does not
accurately reflect the cost of said requested principal amount, in which event
the interest rate shall be determined by the Bank based upon a comparable Prime
Rate based rate of interest until such time as said conditions no longer exist.
PAYMENTS. In the event the entire amount of any payment due hereunder is not
paid within ten (10) days after the same is due, a late fee equal to five
percent (5%) of the required payment will be charged by the Payee provided,
however, that such late fee 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.
Accrued interest shall be payable on the first day of the month
immediately succeeding the date of this Note and on the first day of each
succeeding month thereafter during the term of this Note and all disbursed
unpaid principal together with accrued interest will be paid in full no later
than the Maturity Date. All payments shall be applied first to the payment of
all fees, expenses and other amounts due to the Payee (excluding principal and
interest), then to accrued interest and the balance on account of outstanding
principal; provided, however that after the occurrence of an Event of Default,
payments will be applied to the obligations of the Company to the Payee as the
Payee determines in its sole discretion. All payments shall be in lawful money
of the United States in
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immediately available funds, without counterclaim or setoff and free and clear
of and without any deduction or withholding for, any taxes or other payments and
are subject to the Following Business Day Convention with respect to date of
payment.
PREPAYMENT. The Company may prepay a Loan Portion only upon at least three (3)
Business Days prior written notice to the Bank (which notice shall be
irrevocable), and any such prepayment shall occur only on the last day of the
Libor Interest Rate Period. Each prepayment of a Loan Portion, 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
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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.
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.
LETTERS OF CREDIT. All commercial letters of credit and standby letters of
credit issued hereunder shall be issued pursuant to the standard documentation
provided by the Bank and shall be subject to the payment of an annual commission
equal to one percent (1.00%) of the face amount of all standby letters of credit
and one quarter of one percent (.25%) of the amount drawn on all commercial
letters of credit, so issued and outstanding, such commission to be due and
payable in advance at issuance and on each subsequent annual anniversary of the
issuance of any outstanding standby letter of credit and at the time of each
drawing on a commercial letter of credit. Any outstanding commercial letters of
credit issued pursuant to the terms hereof shall expire no later than 180 days
following the Maturity Date and any outstanding standby letter of credit issued
pursuant to the terms hereof shall expire no later than 365 days following: (a)
the issuance date of such standby letter of credit and (b) the Maturity Date.
The Company shall also be responsible for paying the Bank's standard issuance,
amendment, transfer and other fees associated with the issuance of letters of
credit.
DEFAULT. Upon the occurrence of one or more Events of Default under the Loan
Agreement, the entire principal and interest on this Note shall become
immediately due and payable without presentment or protest or other notice of
demand, all of which are expressly waived by the Company. If the Bank, in its
sole and absolute discretion, elects not to demand payment by the Company,
notwithstanding said failure to demand, the Bank shall be under no obligation to
make advances pursuant to the terms of this Note unless and until the Event of
Default is cured to the satisfaction of the Bank.
If an Event of Default should occur and be continuing on or after the
Maturity Date or after judgment has been rendered on this Note, all Loan
Portions shall bear interest at the Default Rate until the earlier of (i) the
Event of Default is cured or (ii) all Loan Portions are paid in full.
The powers and remedies given hereby shall not be exclusive of any other
powers and remedies available to the Payee. No course of dealings between the
Company and the Payee and no delay on the part of the Payee in exercising any
rights with respect to any default shall operate as a waiver of any rights of
the Payee. Failure upon the part of the Payee to exercise any rights with
respect to any default shall not operate as a waiver of any rights with respect
to any other default.
Interest after maturity (whether by acceleration or otherwise) shall be
payable at the Default Rate set forth herein until this Note is paid in full.
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PARTIAL INVALIDITY. If any provision of this Note or the application of it to
any person or circumstance shall be invalid or unenforceable, the remainder of
this Note or the application of that provision to persons or circumstances other
than those as to which it is held invalid or unenforceable shall not be affected
and every other provision of this Note shall be valid and fully enforceable.
WAIVER, CHANGE, MODIFICATION OR DISCHARGE. 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.
COVENANT AGAINST USURY. All agreements between the Company and the Bank 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 Bank 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 Bank 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 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 Bank 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 Bank.
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.
TRANSFER AND ASSIGNMENT OF NOTE; PLEDGE OF RIGHTS; PARTICIPATION. (A) The Bank
may at any time pledge all or any portion of its rights under this Note 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 Bank from its obligations hereunder.
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(B) The Bank shall have the unrestricted right, at any time and from time
to time, and without the consent of or notice to the Company, to grant to one or
more banks or other financial institutions (each, a "Participant") participating
interests in the Bank's obligation to lend hereunder and/or any or all of the
loans held by the Bank hereunder. In the event of any such grant by the Bank of
a participating interest to a Participant, whether or not upon notice to the
Company, the Bank shall remain responsible for the performance of its
obligations hereunder and the Company shall continue to deal solely and directly
with the Bank in connection with the Bank's rights and obligations hereunder.
The Bank 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 Note and to the other Financing Documents as the Bank shall
deem necessary to effect the foregoing. In addition, at the request of the Bank
and any such Assignee, the Company shall issue one or more new promissory notes,
as applicable, to any such Assignee and, if the Bank has retained any of its
rights and obligations hereunder following such assignment, to the Bank, 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 Bank prior to such
assignment and shall reflect the amount of the respective commitments and loans
held by such Assignee and the Bank after giving effect to such assignment. Upon
the execution and delivery of appropriate assignment documentation, amendments
and any other documentation required by the Bank in connection with such
assignment, and the payment by Assignee of the purchase price agreed to by the
Bank and such Assignee, such Assignee shall be a party to this Note and shall
have all of the rights and obligations of the Bank hereunder and under the other
Financing Documents to the extent that such rights and obligations have been
assigned by the Bank pursuant hereto and to the assignment documentation between
the Bank and such Assignee and the Bank shall be released from its obligations
hereunder and thereunder to a corresponding extent.
Provided that no Event of Default has occurred and is continuing and
except with respect to an assignment or transfer of the Loans mandated by a
Governmental Authority, the Company shall have the right to approve the identity
of any Participant or Assignee under this subsection (B), which approval shall
not be unreasonably withheld, delayed or conditioned. Except as aforesaid, the
right of the Bank to assign or grant a participation interest shall not require
notice to or consent of the Company.
The Bank may furnish any information concerning the Company in its
possession from time to time to prospective Assignees and Participants, provided
that the Bank 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.
JURY TRIAL WAIVER. THE COMPANY AND THE BANK (BY ACCEPTANCE OF THIS NOTE)
MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
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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 BANK 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 BANK 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 BANK TO ACCEPT THIS NOTE
AND MAKE THE LOAN.
RIGHT OF SETOFF. The Company hereby grants to the Bank, a continuing lien,
security interest and right of setoff as security for all liabilities and
obligations to the Bank, 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 Bank 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, without demand or notice (any such notice
being expressly waived by the Company), the Bank 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 BANK TO EXERCISE ITS
RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THIS NOTE
PRIOR TO EXERCISING ITS RIGHT OF SET OFF WITH RESPECT TO SUCH DEPOSITS, CREDITS
OR OTHER PROPERTY OF THE COMPANY ARE HEREBY KNOWINGLY, VOLUNTARILY AND
IRREVOCABLY WAIVED.
EXPENSES INCURRED IN CONNECTION WITH ENFORCEMENT. The Company shall pay on
demand all reasonable expenses of the Payee in connection with the preparation,
administration, default, collection, waiver or amendment of loan terms or in
connection with the Payee'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 therefore, and the amount of all
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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.
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 IN 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.
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 be superseded 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 Bank.
USE OF 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.
LOST OR DAMAGED NOTE. Upon receipt of an affidavit of an officer of the Bank 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 Company 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: ___________
All Capitalized terms carry the meanings as defined in the Promissory Note
(Revolving Line of Credit) dated March , 2007 (the "Note").
This Notice serves as an irrevocable Advance Notice required under the Note for
the purpose of designating:
Account to Credit: __________________________
Loan Portion: $_________________________
Subject to confirmation and verification by Bank.
Authorized by: BALCHEM CORPORATION
By:__________________________
Authorized Representative