Exhibit 10.5
REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS REVOLVING CREDIT AND TERM LOAN AGREEMENT ("Agreement") is made this
30th day of September, 2004, by and between ADDVANTAGE TECHNOLOGIES GROUP, INC.,
an Oklahoma corporation ("Borrower") and BANK OF OKLAHOMA, N.A. ("Lender").
RECITALS
A. Borrower has requested that Lender extend to Borrower a $7,000,000
revolving line of credit and an $8,000,000 term loan.
B. Lender is willing to make such loan to Borrower upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
Borrower and Lender do hereby agree as follows:
1. CONSTRUCTION AND DEFINITION OF TERMS
All terms used herein without definition which are defined by the Oklahoma
Uniform Commercial Code shall have the meanings assigned to them by the Oklahoma
Uniform Commercial Code, as in effect on the date hereof, unless and to the
extent varied by this Agreement. All accounting terms used herein without
definition shall have the meanings assigned to them as determined by generally
accepted accounting principles. Whenever the phrase "satisfactory to Lender" is
used in this Agreement, such phrase shall mean "satisfactory to Lender in its
sole discretion." The use of any gender or the neuter herein shall also refer to
the other gender or the neuter and the use of the plural shall also refer to the
singular, and vice versa. In addition to the terms defined elsewhere in this
Agreement, unless the context otherwise requires, when used herein, the
following terms shall have the following meanings:
1.1. "Affiliate" means any Person: (i) which directly or indirectly
controls, or is controlled by, or is under common control with, Borrower; (ii)
which directly or indirectly beneficially owns or holds five percent (5%) or
more of any class of voting stock of Borrower; or (iii) five percent (5%) or
more of the voting stock of which is directly or indirectly beneficially owned
or held by Borrower. The term "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 securities, by
contract, or otherwise.
1.2. "Agreement" means this Revolving Credit and Term Loan Agreement, as
amended, supplemented, or modified from time to time.
1.3. "Base Rate" means a fluctuating interest rate per annum as in effect
from time to time, which interest rate per annum shall at all times be equal to
the rate of interest announced publicly from time to time (whether or not
charged in each instance), by JP Morgan Chase Bank, located at New York, NY
("Rate Lender"), as its base rate or general reference rate. Should the Rate
Lender abolish or abandon the practice of announcing or publishing a Base Rate,
then the Base Rate shall be that interest rate or other general reference rate
then in effect at the Rate Lender which, from time to time, in the reasonable
judgment of Lender, most effectively approximates the initial definition of the
"Base Rate."
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1.4. "Borrower's Authority Documents" shall mean the following: (i) a
Certificate of Good Standing from Borrower's state of incorporation and such
other states in which Borrower does business and is required to domesticate or
otherwise register; (ii) a certified copy of Borrower's certificate of
incorporation; (iii) a copy of Borrower's bylaws; and (iv) a certificate of the
secretary of Borrower, in form and content set forth on Schedule "1.4" hereto,
certifying resolutions authorizing Borrower to enter into the Loan.
1.5. "Borrowing Base" means, at any date of determination thereof, the sum
of eighty percent (80%) of Qualified Receivables at such date, plus fifty
percent (50%) of Qualified Inventory at such date less the outstanding balance
of the Term Loan at such date, as determined by Lender based upon the most
recent information relating thereto provided to Lender pursuant to Section 2.2.
1.6. "Borrowing Base Certificate" means each certificate from Borrower to
Lender relating to the Borrowing Base, substantially in the form of Schedule
"1.6" hereto.
1.7. "Business Day" means any day other than a Saturday, Sunday, or other
day on which commercial banks in Oklahoma are authorized or required to close
under the laws of the State of Oklahoma.
1.8. "Business Premises" means Borrower's principal place of business,
located at 1605 E. Iola, Broken Arrow, Oklahoma 74012.
1.9. "Capital Lease" means all leases which have been or should be
capitalized on the books of the lessee in accordance with GAAP.
1.10. "Closing" shall mean the date on which this Agreement is executed.
1.11. "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations and published interpretations thereof.
1.12. "Collateral" means all property in which Lender is intended to have a
security interest, as described in Section 3.
1.13. "Commitment" means the Lender's obligation to make loans to the
Borrower pursuant to this Agreement.
1.14. "Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Borrower within the meaning
of Section 414(b) or 414(c) of the Code.
1.15. "Compliance Certificate" means a quarterly compliance certificate
from the Borrower with respect to the terms and conditions of this Agreement, in
form and content as set forth on Schedule "1.15" hereto.
1.16. "Debt" means, including but not limited to: (i) indebtedness or
liability for borrowed money; (ii) obligations evidenced by bonds, debentures,
notes, or other similar instruments; (iii) obligations for the deferred purchase
price of property or services (including trade obligations); (iv) obligations
under letters of credit; (v) obligations under acceptance facilities; (vi) all
guaranties, endorsements (other than for collection or deposit in the ordinary
course of business), and other contingent obligations to purchase, to provide
funds for payment, to supply funds to invest in any Person or entity, or
otherwise to assure a creditor against loss; (vii) obligations secured by any
Liens, whether or not the obligations have been assumed; and (viii) any other
items which would properly be included in the liability section of a balance
sheet or in a footnote to a financial statement in accordance with GAAP, and
shall also include all contingent liabilities.
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1.17. "EBITDA" shall mean, for the applicable reporting period, the sum of:
(i) consolidated pre-tax earnings, (ii) interest expense, (iii) depreciation,
depletion, obsolescence and amortization of property and (iv) other Lender
approved non-cash expenses.
1.18. "Effective Net Worth" shall mean the sum of net worth, in accordance
with GAAP, plus debt determined by Lender in its sole discretion to be
subordinate to the Obligations.
1.19. "$8,000,000 Term Note" shall mean the $8,000,000 Promissory Note in
form and content as set forth on Schedule "1.19" attached hereto.
1.20. "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.
1.21. "Event of Default" means any of the events described in Section 9
hereof . 1.22. "Funded Debt" shall mean the sum of total borrowings under this
Agreement plus any additional funded debt determined by Lender in its sole
discretion as pari passu with this Agreement and the Obligations, in accordance
with GAAP.
1.23. "GAAP" means generally accepted accounting principles in the United
States, applied on a consistent basis.
1.24. "Guarantor Authority Documents" shall mean the following: (i) a
Certificate of Good Standing from Guarantor's state of [incorporation]
[formation] [organization] and such other states in which Guarantor does
business and is required to domesticate or otherwise register; (ii) a certified
copy of Guarantor's [certificate of incorporation] [articles of organization];
(iii) a copy of Guarantor's [bylaws] [operating agreement] [partnership
agreement] [limited partnership agreement]; and (iv) [a certificate of the
secretary of Guarantor, in form and content set forth on Schedule "1.24" hereto,
certifying resolutions authorizing Guarantor to enter into the Loan.] [a
{limited liability company} {partnership} consent, executed by all {members}
{partners} of Guarantor, in form and content as set forth on Schedule "1.24"
hereto, authorizing Guarantor to enter into the Loan.]
1.25. "Guarantor" means, separately and collectively, any Subsidiary of
Borrower, now existing or hereafter created.
1.26. "Guaranty Agreement" means, separately and collectively, the Guaranty
Agreement to be executed by each Guarantor, in form and content as set forth on
Schedule "1.26" hereto.
1.27. "Initial Default" means any Event of Default, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition has been satisfied.
1.28. "Insurance Certificate" means a certificate or certificates
evidencing that policies of insurance, with insurance companies satisfactory to
Lender, in such amounts and against such risks as shall be required by Lender,
as set forth herein, have been obtained by Borrower and are in full force and
effect, and that Lender is listed as an additional insured or loss payee
thereon.
1.29. "Letter of Credit" means any letter of credit issued pursuant to
Section 2.2, for which, when issued, a Letter of Credit Fee should be paid.
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1.30. "Letter of Credit Fee" means a fee of one and one-half percent
(1.50%) per annum on the face amount of any Letter of Credit issued or renewed
after the date hereof, payable quarterly for the immediately preceding quarter.
1.31. "LIBOR Rate" means a fluctuating interest rate per annum (rounded
upward, if necessary, to the nearest 1/100 of 1%) as in effect from time to
time, which interest rate per annum shall at all times be equal to the thirty
(30) day London Interbank Offered Rate per annum published in the Wall Street
Journal, which shall be initially determined as of September 1, 2004, and
redetermined as of the first Business Day of each subsequent calendar month. If
the information is unavailable from such service, the rate shall be determined
by the Lender from information supplied to Lender by a nationally recognized
reporting service for similar information acceptable to Lender. Lender shall
promptly confirm to Borrower in writing the LIBOR Rate.
1.32. "Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction in respect of
any of the foregoing.)
1.33. "Loan" means advances under the $7,000,000 Revolving Line or the
$8,000,000 Term Loan.
1.34. "Loan Documents" shall mean any and all agreements, contracts,
promissory notes, security agreements, assignments, subordination agreements,
pledge or hypothecation agreements, guaranties, instruments, letters of credit,
letter of credit agreements and documents now and hereafter existing between
Lender and Borrower, executed and/or delivered pursuant to this Agreement or
otherwise or guaranteeing, securing or in any other manner relating to any of
the Obligations, including, without limitation, the instruments and documents
referred to in Section 4 hereof together with any other instrument or document
executed by Borrower, Lender or any other person in connection with the Loans.
1.35. "Matured Default" means any Event of Default, provided that any
requirement for the giving of notice, the lapse of time, or both, or any other
condition has been satisfied.
1.36. "Multiemployer Plan" means a Plan described in Section 4001(a) (3) of
ERISA.
1.37. "Note" or "Notes" means, separately and collectively, the $8,000,000
Term Note and the $7,000,000 Line Note.
1.38. "Note Rate" shall mean the LIBOR Rate or Base Rate, as elected by
Borrower in writing from time to time, plus the applicable margin set forth on
the Pricing Grid set forth as Schedule "1.38" hereto.
1.39. "Obligations" shall include the full and punctual observance and
performance of all present and future duties, covenants and responsibilities due
to Lender by Borrower under this Agreement, the Note, the Loan Documents and
otherwise, all present and future obligations and liabilities of Borrower to
Lender for the payment of money under this Agreement, the Note, the Loan
Documents and otherwise, Rate Management Obligations and Rate Management
Transactions (extending to all principal amounts, interest, late charges, fees
and all other charges and sums, as well as all costs and expenses payable by
Borrower under this Agreement, the Note, the Loan Documents and otherwise),
whether direct or indirect, contingent or noncontingent, matured or unmatured,
accrued or not accrued, related or unrelated to this Agreement, whether or not
now contemplated, whether or not any instrument or agreement relating thereto
specifically refers to this Agreement and whether or not of the same character
or class as Borrower's obligations under this Agreement or the Note, including,
without limitation, overdrafts in any checking or other account of Borrower at
Lender and claims against Borrower acquired by assignment to Lender, whether or
not secured under any other document, or agreement or statutory or common law
provision, as well as all renewals, refinancings, consolidations, re-castings
and extensions of any of the foregoing, the parties acknowledging that the
nature of the relationship created hereby contemplates the making of future
advances by Lender to Borrower.
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1.40. "Opinion of Borrower's Counsel" means a legal opinion from Borrower's
legal counsel including, without limitation, the opinions relating to Borrower
and this loan transaction as set forth on Schedule "1.40" attached hereto.
1.41. "Opinion of Guarantor's Counsel" means a legal opinion from
Guarantor's legal counsel including, without limitation, the opinions relating
to Guarantor and this loan transaction as set forth on Schedule "1.41" attached
hereto.
1.42. "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
1.43. "Permitted Liens" means, as to Borrower and all Subsidiaries:
(1) Liens in favor of the Lender;
(2) Liens for taxes or assessments or other government charges or levies if
not yet due and payable or, if due and payable or, if they are being contested
in good faith by appropriate proceedings and for which appropriate reserves are
maintained;
(3) Liens imposed by law, such as mechanics', materialmen's, landlords',
warehousemen's, and carriers' liens, and other similar Liens, securing
obligations incurred in the ordinary course of business which are not past due
for more than thirty (30) days or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been
established;
(4) Liens under workers' compensation, unemployment insurance, Social
Security, or similar legislation;
(5) Liens, deposits, or pledges to secure the performance of bids, tenders,
contracts (other than contracts for the payment of money), leases (permitted
under the terms of this Agreement), public or statutory obligations, surety,
stay, appeal, indemnity, performance or other similar bonds, or other similar
obligations arising in the ordinary course of business;
(6) The liens described on Schedule "1.43(6)";
(7) Judgment and other similar liens arising in connection with court
proceedings, provided the execution or other enforcement of such Liens is
effectively bonded, stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
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(8) Easements, rights-of-way, restrictions, and other similar encumbrances
which, in the aggregate, do not materially interfere with the occupation, use
and enjoyment by the Borrower of the property or assets encumbered thereby in
the normal course of its business or materially impair the value of the property
subject thereto; and
(9) Purchase-money liens on any property hereafter acquired or the
assumption of any lien on property existing at the time of such acquisition (and
not created in contemplation of such acquisition), or a lien incurred in
connection with any conditional sale or other title retention agreement or a
Capital Lease; provided that:
(a) Any property subject to any of the foregoing is acquired by the
Borrower or any subsidiary in the ordinary course of its business; and
(b) Each such lien shall attach only to the property so acquired and fixed
improvements thereon.
1.44. "Person" shall include natural persons, corporations, associations,
limited liability companies, partnerships, joint ventures, trusts, governments
and agencies and departments thereof and every other entity of every kind.
1.45. "Plan" means any pension plan which is covered by Title IV of ERISA
and in respect of which the Borrower or a Commonly Controlled Entity is an
"employer" as defined in Section 3(5) of ERISA.
1.46. "Principal Office" means the Lender's main office located at Seven
East Second Street, One Williams Center - BOk Tower, Tulsa, Oklahoma.
1.47. "Prohibited Transaction" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Code.
1.48. "Qualified Inventory" means the amount of inventory of Borrower and
each Subsidiary a party to a Security Agreement located in the United States of
America or Canada that is not subject to any Lien or adverse claim and that
conforms to the representations and warranties contained in this Agreement and
that is acceptable to the Lender in its sole discretion, less any packaging
materials and supplies, damaged or unsalvageable goods returned or rejected by
its customers, goods to be returned to its suppliers, goods in transit to third
parties (other than its agent or warehouses) and goods out at contractors, and
less any reserves required by the Lender in its sole discretion for special
order goods, market value declines and bill and hold (deferred shipment) sales.
1.49. "Qualified Receivables" means and includes only accounts receivable
of Borrower and each Subsidiary party to a Security Agreement which meet the
following specifications at the time they came into existence and continue to
meet the same until collected in full.
1.49.1. The account is due and payable. No account shall be outstanding for
more than ninety (90) days from the date of the applicable invoice.
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1.49.2. The account arose from a bona fide outright sale of goods
previously made or from the performance of services, but not from leasing, and
the Borrower or Subsidiary has possession of or has delivered to Lender shipping
and delivery receipts evidencing shipment of the goods or, if representing
services, the services have been fully performed for the respective account
debtor.
1.49.3. The account is not subject to any assignment, claim, lien or
security interest of any character or subject to any attachment, levy,
garnishment or other judicial process, except the security interest of Lender.
1.49.4. The account is not subject to any claim for credit, setoff,
allowance, adjustment by the account debtor or counterclaim, and Borrower has
not received any notice of any such claim for credit, setoff, allowance,
adjustment or counterclaim from or on behalf of the account debtor.
1.49.5. The account arose in the ordinary course of Borrower's or
Subsidiary's business and no notice of the bankruptcy, insolvency or adverse
change in the financial condition of the account debtor has been received by
Borrower or Lender.
1.49.6. Lender has not previously notified Borrower that the account or the
account debtor is or has become unsatisfactory, based upon reasonable credit
standards, or the account debtor has been adjudicated bankrupt or is subject to
a similar proceeding.
1.49.7. The account is not evidenced by a judgment, an instrument or
chattel paper.
1.49.8. The account debtor is not a governmental entity or a foreign (i.e.,
residing or incorporated in or organized under a jurisdiction outside the United
States) person or company and is not a parent, subsidiary, officer, employee,
director, agent or Affiliate of any Borrower, and the account debtor and
Borrower do not have common shareholders, officers or directors; provided that
Lender specifically excludes any Lender Approved Account Debtor (defined below)
from this section.
1.49.9. All receivables of one account debtor shall become ineligible if
more than 10% of such receivables are over ninety (90) days past due from the
invoice.
1.49.10. The account debtor (excluding any Lender Approved Account Debtor)
cannot exceed 10% of the total accounts receivable, and any amounts over 10%
will be excluded from the Borrowing Base unless specifically waived in writing
in each instance by Lender in its sole discretion.
1.49.11. With regard only to Sections 1.49.8 and 1.49.10, the term "Lender
Approved Account Debtor" means an express written designation acceptable to
Borrower and Lender as to an account debtor on a annual basis, effective October
of each calendar year. Borrower shall submit a proposed list of account debtors
to Lender at least ten (10) days prior to the annual designation date, which
list must be accompanied by such information relating to the proposed account
debtor as Lender may reasonably require. Lender shall advise Borrower on or
before the applicable annual effective date whether any or all of the proposed
account debtors has been designated as a Lender Approved Account Debtor. Any
such designation shall be effective only for the ensuing twelve (12) month
period, and any designation by Lender shall have no relevance with regard to
subsequent designations. The initially approved Lender Approved Account Debtors
are Power & Telephone, Time Warner and Cox Communications.
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1.50. "Rate Management Obligations" of a Person means any and all
obligations of such Person, whether absolute or contingent and howsoever and
whensoever created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor), under (i) any
and all Rate Management Transactions, and (ii) any and all cancellations, buy
backs, reversals, terminations or assignments of any Rate Management
Transactions.
1.51. "Rate Management Transactions" means any transaction (including an
agreement with respect thereto) now existing or hereafter entered by the
Borrower which is a rate swap, basis swap, forward rate transaction, commodity
swap, commodity option, equity or equity index swap, equity or equity index
option, bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, forward transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
these transactions) or any combination thereof, whether linked to one or more
interest rates, foreign currencies, commodity prices, equity prices or other
financial measures.
1.52. "Reportable Event" means any of the events set forth in Section 4043
of ERISA.
1.53. "Security Agreement" means the Security Agreement and other
Collateral documents described in Section 3.
1.54. "$7,000,000 Line Note" shall mean the $7,000,000 Promissory Note in
form and content as set forth on Schedule "1.54" attached hereto.
1.55. "Shareholder Notes" means the promissory notes described on Schedule
"1.55" hereto, together with extensions and renewals thereof.
1.56. "Subordinating Parties" means the Subordination Agreements from each
of the Subordinating Parties, in form and content as set forth on Schedule
"1.56" hereto.
1.57. "Subsidiaries" means any corporation of which shares of stock having
ordinary voting power (other than stock having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors or
other managers of such corporation are at the time owned, or the management of
which is otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by the Borrower. Current Subsidiaries include the
entities set forth on Schedule "1.57" hereto.
1.58. "Total Fixed Charges" means, on a consolidated basis, the sum of: (i)
cash interest; (ii) cash taxes; (iii) scheduled principal payments; (iv) capital
lease payments; (v) cash dividends and other distributions (including payments
on Shareholder Notes); and (vi) capital expenditures.
1.59. "UCC" shall mean the Uniform Commercial Code of the State of
Oklahoma.
1.60. "UCC Chattel Check" means a UCC records search from the appropriate
filing office for the Collateral, and from any other office deemed necessary or
advisable by Lender, which records search must evidence no conflicting security
interests, except the Permitted Liens.
1.61. "UCC-1 Financing Statement" means a financing statement in form and
content acceptable to Lender, which will be filed with the appropriate filing
office and shall evidence perfection of a first and prior security interest in
the Collateral in favor of Lender, except for the Permitted Liens.
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2. AMOUNT AND TERMS OF THE LOANS.
2.1. $8,000,000 Term Loan. Subject to the terms and conditions of this
Agreement, the Lender agrees to loan Borrower $8,000,000, to be further
evidenced by the $8,000,000 Term Note. The purpose of the advance under the
$8,000,000 Term Note is to enable Borrower to repurchase convertible preferred
stock of Borrower.
2.2. $7,000,000 Revolving Line. Subject to the terms and conditions of this
Agreement, and so long as no Event of Default has occurred, Lender agrees to
loan to Borrower (by advancing funds or issuing Letters of Credit), such amounts
up to $7,000,000 as Borrower may request from time to time on or before the
maturity of the $7,000,000 Line Note, provided that the aggregate outstanding
principal amount of advances at any time outstanding shall not exceed the lesser
of (i) $7,000,000 or (ii) the Borrowing Base. Such Borrowing Base shall be
computed on a monthly basis, and Borrower agrees to provide to Lender on the
last day of each month with regard to the period commencing with the 16th day of
the immediately preceding month through the 15th day of the current month, all
information requested in connection therewith, including without limitation a
Borrowing Base Certificate. In the event Lender shall make advances in excess of
the formula set forth above, any such advance shall, nevertheless, be secured by
all Collateral. In the event outstanding advances with respect to Qualified
Receivables or Qualified Inventory fail to comply with such formula, by reason
of any accounts receivable or inventory ceasing to be so qualified, for whatever
reason, then Borrower shall immediately notify Lender of such situation and
shall, within five (5) Business Days of the imbalance, either (i) reduce the
amount of the outstanding balances to bring such amounts within the formulas
prescribed, or (ii) provide additional Qualified Receivables or Qualified
Inventory, without any additional advance being made by Lender with respect
thereto, necessary to comply with the formulas required herein. Within the
limits set forth in this Section 2.2, Borrower may borrow, repay and reborrow at
any one time and from time to time.
2.3. Notice and Manner of Borrowing. Subject to any other arrangement (e.g.
a swap) agreed to by Borrower and Bank, the Borrower shall give the Lender at
least one (1) Business Day's notice of any Loans under this Agreement,
specifying the date and amount thereof. Such notice shall be in writing or via
telephone (with voice verification by the appropriate officer), no later than
10:00 a.m. (Tulsa time) prior to the date of such Loan and upon fulfillment of
the applicable conditions, the Lender will make such Loan available to the
Borrower in immediately available funds by crediting the amount thereof to the
following account with the Lender: Account styled
_________________________________________________________________________ No.
_______________________________________________.
3. SECURITY. As security for the Obligations, Borrower and its Subsidiaries
shall grant to Lender the following liens and security interests:
3.1. A first and prior security interest in all assets of Borrower and each
Subsidiary, including without limitation all accounts; chattel paper; deposit
accounts; documents; equipment; general intangibles; goods; instruments;
inventory; letter-of-credit rights; commercial tort claims; and proceeds and
products of all of the foregoing; whether now owned or hereafter acquired,
howsoever arising or wheresoever located, all as evidenced by the Security
Agreement in form and content as set forth on Schedule "3.1" attached hereto.
3.2. All proceeds and products of the foregoing.
Borrower also agrees to execute and deliver all financing statements or
other instruments, documents or agreements required by Lender in order to
effectuate the intent of the parties in connection herewith, including without
limitation documents necessary for proper perfection as deemed necessary and/or
advisable by Lender and legal counsel.
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4. CONDITIONS PRECEDENT.
4.1. Closing. The Closing shall occur when all conditions described in this
Section 4.1 have been satisfied.
4.1.1. Borrower shall execute and /or deliver to Lender the following:
A. This Agreement;
B. $7,000,000 Line Note;
C. $8,000,000 Term Note;
D. Guaranty Agreement;
E. Security Agreement;
F. Copies of Shareholders Notes;
G. Subordination Agreements;
H. UCC-1 Financing Statement;
I. Borrower's Authority Documents;
J. Guarantors' Authority Documents;
K. UCC Chattel Check;
L. Opinion of Borrower's Counsel;
M. Opinion of Guarantor's Counsel;
N. Insurance Certificates;
O. completion of all schedules to this
Agreement; and
P. any other instruments, documents or
agreements reasonably requested by Lender
in connection herewith.
4.1.2. The following statements shall be true and correct.
A. The representations and warranties contained in this Agreement and the
other Loan Documents shall be true and correct; and
B. No Event of Default has occurred and is continuing or will occur as a
result of the execution, delivery and/or performance by Borrower under any of
the Loan Documents.
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4.1.3. The Lender shall have received such other approvals, opinions,
instruments, documents and/or agreements which it may reasonably request.
5. REPRESENTATIONS AND WARRANTIES. To induce Lender to enter into this
Agreement, Borrower represents and warrants to Lender that:
5.1. State of Incorporation and Legal Name. Borrower's state of
incorporation or formation and exact legal name are set forth in the first
paragraph of this Agreement.
5.2. Good Standing. Borrower is a corporation duly organized, legally
existing and in good standing under the laws of the State of its incorporation,
has the power to own its property and to carry on its business and is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the properties owned by it therein or in which the transaction
of its business makes such qualification necessary.
5.3. Authority. Borrower has full power and authority to enter into this
Agreement, to make the borrowings hereunder, to execute and deliver all
documents and instruments required hereunder and to incur and perform the
obligations provided for herein, all of which have been duly authorized by all
necessary and proper corporate and other action, and no consent or approval of
any person, including, without limitation, stockholders of Borrower and any
public authority or regulatory body, which has not been obtained is required as
a condition to the validity or enforceability hereof or thereof.
5.4. Binding Agreements. This Agreement has been duly and properly executed
by Borrower, constitutes the valid and legally binding obligation of Borrower
and is fully enforceable against Borrower in accordance with its terms, subject
only to laws affecting the rights of creditors generally and application of
general principles of equity.
5.5. No Conflicting Agreements. The execution, delivery and performance by
Borrower of this Agreement and the borrowings hereunder will not (a) violate (i)
any provision of law or any order, rule or regulation of any court or agency of
government, (ii) any award of any arbitrator, (iii) the Charter or Bylaws of
Borrower or (iv) any indenture, contract, agreement, mortgage, deed of trust or
other instrument to which Borrower is a party or by which Borrower or any of its
property is bound, or (b) be in conflict with, result in a breach of or
constitute (with due notice and/or lapse of time) a material default under, any
such award, indenture, contract, agreement, mortgage, deed of trust or other
instrument, or result in the creation or imposition of any Lien upon any of the
property or assets of Borrower except for Liens created in favor of Lender under
or pursuant to this Agreement.
5.6. Litigation. Except as disclosed to Lender in Schedule "5.6" attached
hereto, there are no judgments, injunctions or similar orders or decrees,
claims, actions, suits or proceedings pending in excess of $250,000 or, to the
knowledge of Borrower, threatened against or affecting Borrower or any property
of Borrower, at law or in equity, by or before any court or any federal, State,
county, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, which could result in any
material adverse change in the business, operations, prospects, properties or in
the condition, financial or otherwise, of Borrower, and Borrower is not, to
Borrower's knowledge, in default with respect to any judgment, order, writ,
injunction, decree, rule or regulation of any court or any federal, State,
county, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, which could have a material
adverse effect on Borrower.
5.7. Financial Condition. The financial statements of Borrower heretofore
delivered to Lender are true and complete, fairly present the financial
condition of Borrower as at such dates and the results of its operations for the
period then ended and were prepared in accordance with GAAP applied on a
consistent basis for prior periods. There is no Indebtedness of Borrower as of
the date of such statements which is not reflected therein and no material
adverse change in Borrower's financial condition has occurred since the date of
such statements. No information, exhibit, or report furnished by the Borrower to
the Lender in connection with the negotiation of this Agreement contains any
material misstatement of fact or omits to state a material fact or any fact
necessary to make the statement contained therein not materially misleading.
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5.8. Taxes. Borrower has paid or caused to be paid all federal, State and
local taxes to the extent that such taxes have become due and has filed or
caused to be filed all federal, State and local tax returns which are required
to be filed by Borrower.
5.9. Title to Properties. Borrower has good and marketable title to all of
its properties and assets (including the Collateral) and all of the properties
and assets of Borrower are free and clear of Liens, except for Permitted Liens.
5.10. Place of Business. Borrower's principal place of business and chief
executive office is located at the Business Premises and Borrower has such other
business locations as disclosed to Lender prior to the date hereof. Borrower
will not change the location of the Business Premises or open additional
business locations (other than those locations heretofore disclosed to Lender)
without Lender's prior written consent, which shall not be unreasonably
withheld.
5.11. Financial Information. All financial statements, schedules, reports
and other information supplied to Lender by or on behalf of Borrower heretofore
and hereafter are and will be true and complete.
5.12. Licenses and Permits. Borrower has duly obtained and now holds all
licenses, permits, certifications, approvals and the like required by federal,
State and local laws of the jurisdictions in which Borrower conducts its
business, and each remains valid and in full force and effect.
5.13. Certain Indebtedness. There is no Indebtedness of Borrower owing to
any employee, officer, stockholder or director of Borrower other than accrued
salaries, commissions and the like.
5.14. Broker's or Finder's Commissions. No broker's or finder's fee or
commission is or will be payable in connection with this Agreement or the
transactions contemplated hereby, and Borrower agrees to save harmless and
indemnify Lender from and against any claim, demand, action, suit, proceeding or
liability for any such fee or commission, including any costs and expenses
(including attorneys' fees) incurred by Lender in connection therewith. The
provisions of this Section shall survive the termination of this Agreement and
Lender's security interest hereunder and the payment of all other Obligations.
5.15. Outstanding Indebtedness. Borrower has no outstanding Indebtedness
except as permitted by Section 1.43 hereof and there exists no default under the
provisions of any instrument evidencing such Indebtedness or under the
provisions of any agreement relating thereto.
5.16. Regulation U. Borrower does not own or presently intend to acquire
any "margin stock" as defined in Regulation U (12 CFR Part 221) of the Board of
Governors of the Federal Reserve System. None of the proceeds of any of the Loan
hereunder will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin stock or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry a margin stock
or for any other purpose which might constitute this transaction a "purpose
credit" within the meaning of Regulation U. Neither Borrower nor any agent
acting on its behalf has taken or will take any action which might cause this
Agreement to violate Regulation U or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Securities Exchange
Act of 1934, in each case as in effect now or as the same may hereafter be in
effect.
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5.17. Government Contracts. Borrower is not now, and has not been within
the past 3 years, in receipt of any communication from any of officer or
employee of the United States Government regarding Borrower's actual or possible
disqualification, suspension or debarment from contracting with the United
States Government. Further, Borrower has no information, in relation to the
obtaining, formation, pricing, performance, billing or administration of any one
of its contracts with the United States Government, of: (a) a violation of law,
regulation or contract provision, or any such fact(s) or circumstance(s)
reasonably indicating any such violation; (b) a pending or threatened
investigation; (c) an existing or threatened adverse audit finding, whether
draft or final; (d) an existing or threatened cost disallowance or finding of
defective pricing; (e) a pending or threatened claim or action seeking a fine,
penalty or damages; (f) a communication regarding, or actual initiation of,
payment withholding or suspension, setoff, recoupment or debt collection; or (g)
a contract termination or a communication reasonably indicating the potential
for such a termination.
5.18. Presence of Hazardous Materials or Hazardous Materials Contamination.
To the best of Borrower's knowledge and belief, and except as permitted by
applicable Laws, no Hazardous Materials are located on any real property owned,
operated or controlled by Borrower or for which Borrower is responsible and for
which remedial or corrective action would, be required under applicable Laws. To
the best of Borrower's knowledge and belief, and except as permitted by
applicable Laws, no property owned, operated or controlled by Borrower has ever
been used as a manufacturing, storage or dump site for Hazardous Materials.
5.19. Patents, Trademarks, etc. Borrower owns, possesses or has the right
to use all necessary patents, patent rights, licenses, trademarks, trade names,
trade name rights, copyrights and franchises to conduct its business as now
conducted, without any known conflict with any patent, patent right, license,
trademark, trademark rights, trade name right, trade name, copyright or
franchise right of any other person.
5.20. Perfection and Priority of Collateral. Lender has or upon proper
recording of any financing statement, execution of any control agreement or
delivery of Collateral to Lender's possession, will have and will continue to
have as security for the Obligations, a valid and perfected Lien on and security
interest in all Collateral free of all other Liens, claims and rights of third
parties whatsoever except Permitted Liens.
5.21. Commercial Purpose. The Loan is not a "consumer transaction" as
defined in the Uniform Commercial Code and none of the Collateral was or will be
purchased or held primarily for personal, family or household purposes.
5.22. Survival; Updates of Representations and Warranties. All
representations and warranties contained in or made in connection with this
Agreement and the other Loan Documents shall survive the Closing and any advance
made hereunder. Lender acknowledges and agrees that any and all representations
and warranties contained in or made under or in connection with this Agreement
may be amended, changed or otherwise modified by Borrower, with the consent of
Lender, at any time and from time to time after the Closing so as to accurately
reflect the matters represented and warranted therein; provided, that such
amendments, changes and/or modifications are disclosed in writing to and
approved by Lender. Lender shall have no obligation to waive any Event of
Default due to any present or future inaccuracy of such representation or
warranty or to agree to any amendment, change or modification of such
representation or warranty.
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5.23. Labor Disputes and Acts of God. Neither the business nor the
properties of Borrower is affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or other casualty (whether or not covered by insurance), materially
adversely affecting such business or the operation of Borrower.
6. AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that,
until (a) all Obligations have been paid in full, (b) there exists no commitment
by Lender which could give rise to any Obligations, and (c) all appropriate
termination statements have been filed terminating the security interest granted
Lender hereunder, Borrower will:
6.1. Financial Statements. Furnish to Lender in writing: (a) as soon as
available, but in no event more than 45 days after the close of each fiscal
quarter during each fiscal year, the consolidated balance sheet, profit and loss
statement and statement of cash flow of Borrower as of the close of such period,
all as prepared and certified by the chief financial officer, controller or
other duly authorized officer and accompanied by a Compliance Certificate and
statement of calculations of the chief financial of officer or other duly
authorized officer evidencing that Borrower is in compliance with all covenants
contained in Sections 8.1, 8.2 and 8.3 herein and, if not, stating the facts
with respect thereto and certifying that no Event of Default exists or is
believed to exist; (b) as soon as available, but in no event more than 120 days
after the close of each fiscal year, a copy of the annual financial statement of
Borrower, prepared in accordance with GAAP and audited by an independent
certified public accountant satisfactory to Lender, which financial statement
shall include, on a consolidated basis, a balance sheet of Borrower as of the
end of such fiscal year and a statement of income and changes in shareholders'
equity of Borrower for such fiscal year and a Compliance Certificate (including
all calculations) that Borrower is in compliance with all of the covenants
contained in Section 8.1, 8.2 and 8.3 herein and, if not, stating the facts with
respect thereto and certifying that no Event of Default exists or is believed to
exist; (c) as soon as available, but in no event more than 30 days after each
fiscal quarter, an accounts receivable report and a summary aging of accounts
payable; and (d) such additional information, reports or statements as Lender
may from time to time reasonably request.
6.2. Taxes. Pay and discharge all taxes, assessments and governmental
charges upon Borrower, its income and properties, prior to the date on which
penalties attach thereto unless and to the extent only that the same are being
diligently contested by Borrower in good faith in the normal course of business
by appropriate proceedings, provided, however, that: (a) Lender shall have been
given reasonable prior written notice of intention to contest; (b) nonpayment of
the same will not, in Lender's sole discretion, materially impair any of the
Collateral or Lender's rights or remedies with respect thereto or the prospect
for full and punctual payment of all of the Obligations; (c) Borrower at all
times effectively stays or prevents any official or judicial sale of or action
or filing against any of the Collateral by reason of nonpayment of the same; and
(d) Borrower establishes reasonable reserves for any liabilities being contested
and for expenses arising out of such contest.
6.3. Corporate Existence, Continuation of Business and Compliance with
Laws. Maintain its corporate existence in good standing; continue its business
operations as now being conducted; and comply with all applicable federal, State
and local laws, rules, ordinances, regulations and orders unless and to the
extent only that the validity or applicability thereof is being diligently
contested by Borrower in good faith by appropriate proceedings, provided,
however, that: (a) Lender shall have been given reasonable prior written notice
of intention to contest; (b) such noncompliance will not, in Lender's sole
discretion, materially impair any of the Collateral or Lender's rights or
remedies with respect thereto or the prospect for full and punctual payment of
all of the Obligations; (c) Borrower at all times effectively stays or prevents
any official or judicial sale of or action or filing against any of the
Collateral by reason of such noncompliance; and (d) Borrower establishes
reasonable reserves for any liabilities or expenses which may arise out of such
noncompliance and contest.
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6.4. Civil and Criminal Proceedings. Promptly notify Lender in writing of
(a) the filing of any Criminal Referral Form or the threatened or actual
commencement of a criminal proceeding or investigation or (b) any action, suit
or proceeding at law or in equity by or before any court, governmental agency or
instrumentality which could result in any material adverse change in the
business, operations, prospects, properties or assets or in the condition,
financial or otherwise, of Borrower.
6.5. Extraordinary Loss. Promptly notify Lender in writing of any event
causing extraordinary loss or depreciation of the value of Borrower's assets
(whether or not insured) and the facts with respect thereto.
6.6. Books and Records. Keep and maintain proper and current books and
records in accordance with GAAP and permit access by Lender to, reproduction by
Lender of and copying by Lender from, such books and records during normal
business hours. All reasonable costs and expenses of such inspections and
examinations shall be paid by Borrower.
6.7. Right of Inspection. At any reasonable time and from time to time, and
following twenty-four (24) hours prior written notice, permit the Lender or any
agent or representative thereof, to reasonably examine and make copies of and
abstracts from the records and books of account of, and visit the properties of,
Borrower, and to discuss the affairs, finances, and accounts of Borrower with
any of its officers and directors and Borrower's independent accountants. Lender
contemplates conducting at least semi-annual field audits of the Borrower's
property.
6.8. Maintenance of Properties. Maintain all properties and improvements
necessary to the conduct of its business in good working order and condition,
ordinary wear and tear excepted, and cause replacements and repairs to be made
when necessary for the proper conduct of its business.
6.9. Patents, Franchises, etc. Maintain, preserve and protect all licenses,
patents, franchises, trademarks and trade names of Borrower or licensed by
Borrower which are necessary to the conduct of the business of Borrower as now
conducted, free of any conflict with the rights of any other person.
6.10. Maintenance of Insurance. Borrower will keep or cause to be kept
adequately insured by financially sound and reputable insurers its plant,
equipment, motor vehicles, and all other property of a character usually insured
by businesses engaged in the same or similar businesses. Any insurance policies
covering the Collateral shall be endorsed to provide for payment of losses to
the Lender as its interest may appear, to provide that such policies may not be
canceled, reduced or affected in any manner for any reason without thirty days
prior notice to the Lender, and to provide for any other matters which the
Lender may reasonably require; and such insurance shall be against fire,
casualty and any other hazards normally insured against and shall be in the
amount of the full value (less a reasonable deductible not to exceed amounts
customary in the industry for similarly situated businesses and properties) of
the property insured. The Borrower shall at all times maintain adequate
insurance against damage to persons or property, which insurance shall be by
financially sound and reputable insurers and shall, without limitation, provide
the following coverages: comprehensive general liability (including, without
limitation, coverage, where applicable, damage caused by explosion, broad form
property damage coverage, broad form coverage for contractually independent
contractors), worker's compensation, products liability and automobile
liability.
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6.11. Evidence of Insurance. Deliver to Lender from time to time, and
periodically if Lender shall so require, evidence satisfactory to Lender that
all insurance and endorsements required pursuant to this Agreement and the Loan
Documents are in effect.
6.12. Further Assurances and Corrective Instruments. Promptly execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered, to
Lender from time to time such supplements hereto and such financing statements
and other instruments and documents as may be requested by Lender to protect and
preserve the Collateral, Lender's security interest therein, perfection of
Lender's security interest and/or Lender's rights and remedies hereunder.
6.13. Financial Information. Deliver to Lender promptly upon Lender's
request, and periodically if Lender shall so require, such written statements,
schedules or reports (which shall be Certified if required by Lender) in such
form, containing such information and accompanied by such documents as may be
satisfactory to Lender from time to time concerning the Collateral, Borrower's
financial condition or business operations or any other matter or matters,
including, without limitation, copies of federal, State and local tax returns of
Borrower, and permit Lender, its agents and designees, to discuss Borrower's
financial condition and business operations with Borrower's officers and
employees.
6.14. Notice of Event of Default. Immediately notify Lender in writing of
the occurrence of any Event of Default or any event or existing condition which,
with the giving of notice and/or the lapse of time, could constitute an Event of
Default or which might materially and adversely affect the financial conditions
or operations of Borrower and the facts with respect thereto.
6.15. ERISA. (a) At all times maintain each of its employee pension benefit
plans, as that term is defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended from time to time ("ERISA"), in conformity with
all applicable provisions of ERISA and other federal and State statutes relating
to employee benefit plans; (b) at all times make prompt payments of
contributions required to meet the minimum funding standards set forth in
Sections 302 and 305 of ERISA with respect to each such plan; (c) if requested
by Lender, promptly after the filing thereof, furnish to Lender copies of each
annual report required to be filed pursuant to Section 103 of ERISA in
connection with each such plan for each plan year, including any certified
financial statements or actuarial statements required pursuant to said Section
103; (d) notify Lender immediately of any fact, including, without limitation,
any "Reportable Event" (as that term is defined in Section 4043(b) of ERISA)
arising in connection with any such plan which might constitute grounds for the
termination thereof by the Pension Benefit Guaranty Corporation or for the
appointment by the appropriate United States District Court of a trustee to
administer the plan; and (e) furnish to Lender, promptly upon its request
therefor such additional information concerning any such plan as Lender may
request.
6.16. Continuance of Business. Continue to operate the business as set
forth in Borrower's loan application to Lender and not to acquire or operate any
other business enterprise without Lender's prior consent.
6.17. Proceeds. Use of the proceeds of advances hereunder only for the
purposes set forth herein and to pay the costs, expenses and fees payable by
Borrower under this Agreement and the other Loan Documents.
6.18. Hazardous Materials: Contamination. Borrower agrees to, (a) give
notice to Lender immediately upon Borrower's acquiring knowledge of the presence
of any Hazardous Materials (other than those stored in compliance with
applicable Laws and are in Borrower's possession in the ordinary course of
business) on any property owned or controlled by Borrower or for which Borrower
is responsible or of any Hazardous Materials Contamination with a full
description thereof for which remedial or corrective action is required; (b)
promptly take action to comply with any Laws requiring the removal, treatment or
disposal of Hazardous Materials or Hazardous Materials Contamination and provide
Lender with satisfactory evidence of such action, which action must be in all
respects sufficient to avoid any penalty, assessment or notice of non-compliance
with any required remedial or corrective action on the part of any Governmental
Authority; (c) provide Lender, within 30 days after a demand by Lender, with a
bond, letter of credit or similar financial assurance evidencing to Lender's
reasonable satisfaction that the necessary funds are available to pay the cost
of removing, treating and disposing of Hazardous Materials described in item (b)
or Hazardous Materials Contamination and discharging any Lien which may be
established as a result thereof on any property owned or controlled by Borrower
or for which Borrower is responsible; and (d) defend, indemnify and hold
harmless Lender and its employees, trustees, successors and assigns from any and
all claims which may now or in the future (whether before or after the
termination of this Agreement) be asserted as a result of the presence of any
Hazardous Materials on any property owned or controlled by Borrower for which
Borrower is responsible for any Hazardous Materials Contamination.
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6.19. Compliance with Laws. Comply in all material respects with all
applicable laws, rules, regulations, and orders, such compliance to include,
without limitation, paying before the same become delinquent all taxes,
assessments, and governmental charges imposed upon it or upon its property.
6.20. Lender as Depository. Maintain Lender as its principal depository for
its deposit and other commercial accounts.
7. NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that,
until (a) all Obligations have been paid in full and (b) there exists no
commitment by Lender which could give rise to any Obligations, Borrower will
not, directly or indirectly, without Lender's prior written consent:
7.1. Indebtedness. Create, incur, assume or permit to exist, directly or
indirectly, any Indebtedness in excess of $250,000 in the aggregate outstanding
at any time except: (a) Indebtedness to Lender; (b) trade Indebtedness (which
shall not include any borrowing, trade acceptance or notes given in settlement
of trade Indebtedness) incurred in the ordinary course of business and not in
dispute or more than thirty days past due; (c) existing Indebtedness previously
disclosed by Borrower to Lender in writing; and (d) Indebtedness which shall be
consented to by Lender in writing in advance, in Lender's sole but reasonable
discretion, and if required by Lender, subordinated to the Obligations by a
written agreement satisfactory to Lender in form and substance.
7.2. Liens. Create, incur, assume or permit to exist, directly or
indirectly, any Lien upon any of Borrower's properties or assets, now owned by
Borrower, other than Permitted Liens and Liens to Lender.
7.3. Merger. Enter into or be a party to any merger, consolidation,
reorganization or exchange of stock or assets.
7.4. Sale of Assets, etc. Sell, assign, transfer, convey or lease any
interest in all or any substantial part of its property except in the ordinary
course of Borrower's business as now being conducted; purchase or otherwise
acquire all or substantially all of the assets of any other person or persons,
or any shares of stock of, or similar interest in, any other person or persons.
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7.5. Investments. Make any capital contribution to any other person or
purchase or acquire a beneficial interest in any stock, securities or evidences
of Indebtedness of, or make any investment or acquire any interest in, any other
person in excess of $500,000 during any calendar year, except investments in
federally insured certificates of deposit or in direct obligations of the United
States of America maturing within one year from the date of acquisition or in
investment grade or better rated investments.
7.6. Fiscal Year. Change Borrower's fiscal year.
7.7. Subsidiaries. Organize or cause to exist any Subsidiaries without
Lender's prior written consent, which consent may be conditioned, without
limitation, upon the granting by such Subsidiary of a guarantee of payment of
the Note and all other indebtedness of Borrower to Lender. Lender shall have the
right at any time and from time to time at its sole discretion to require any
existing Subsidiaries to guarantee the Obligations.
7.8. Change of Name. Change the name of Borrower.
7.9. Trade Names. Use any trade name other than Borrower's true corporate
name.
7.10. ERISA Compliance. Engage in any "prohibited transaction" (as defined
in Section 406 or Section 2003(a) of ERISA and not otherwise exempted under
Title I, Part 4 of ERISA), any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, or terminate any pension plan in a
manner which could result in the imposition of a Lien on the property of
Borrower pursuant to Section 4068 of ERISA.
7.11. Dividends, Stock Redemptions. So long as any Initial Default or
Matured Default exists, directly or indirectly declare or pay any dividend on,
or make any other distribution with respect to (whether by reduction of capital
or otherwise), any shares of its capital stock or make any advances or loans to
stockholders.
7.12. Sale of Stock. Sell, convey, transfer, assign, pledge or otherwise
encumber any of the stock of Guarantor to any person.
7.13. Loans and Guaranties. Loan or make advances to any other person or
guarantee, indorse or otherwise be or become liable or contingently liable in
connection with the obligations or Indebtedness of any other person, firm or
corporation, directly or indirectly, except:
7.13.1. as an endorser of negotiable instruments for the payment of money
deposited to Borrower's bank account for collection in the ordinary course of
business;
7.13.2. trade credit extended in the ordinary course of Borrower's
business; or
7.13.3. advances made in the usual course of business to officers and
employees of Borrower for travel and other out-of-pocket expenses incurred by
them on behalf of Borrower in connection with such business.
7.14. Sale Leaseback. Except for leases existing on the date hereof and
previously disclosed to Lender in writing, and renewals or extension thereof,
become or be liable as lessee with respect to any lease of any property (real,
personal or mixed) which has been or is to be sold or transferred by Borrower to
any person or which Borrower intends to use for substantially the same purpose
as any other property which has been or is to be sold or transferred by Borrower
to any person in connection with such lease.
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7.15. Leases. Become liable as lessee with respect to any lease of any
property, real, personal or mixed, except for leases in existence on the date
hereof and previously disclosed to Lender in writing and renewals and extensions
thereof and leases assumed or entered into by Borrower or newly acquired
Subsidiaries in connection with acquisitions (stock, asset or otherwise) by
Borrower.
7.16. Asset Investments. Make any investments in non-current assets (which
shall include fixed assets and capitalized value of leased equipment and leased
real property).
7.17. Funded Debt. Redeem, call for redemption, purchase or otherwise
acquire or retire, directly or indirectly, or make any optional prepayment of
principal on, any Funded Debt, or amend, alter or otherwise modify the
provisions relating to any Funded Debt, if the affect of such amendment,
alteration or modification would or might be to accelerate such Funded Debt. For
the purposes of this Section, "Funded Debt" shall include any obligation of
Borrower to any person other than Lender payable more than one year from the
date of its creation which, under GAAP, is shown on the balance sheet as a
liability (excluding reserves for deferred income taxes and other reserves to
the extent that such reserves do not constitute an obligation).
7.18. Transactions with Affiliates. Enter into any transaction, including,
without limitation, the purchase, sale, or exchange of property or the rendering
of any service, with any Affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of each Borrower's business and upon
fair and reasonable terms no less favorable to the Borrower than would obtain in
a comparable arm's-length transaction with a Person not an Affiliate.
8. FINANCIAL COVENANTS. So long as any Notes shall remain unpaid or the
Lender shall have any Commitment under this Agreement, Borrower shall comply
with the following on a consolidated basis:
8.1. Leverage Ratio. Maintain at all times, a ratio of Funded Debt to
EBITDA of not greater than 3.0 to 1.0, determined quarterly with EBITDA
calculated on a rolling four-quarter basis.
8.2. Fixed Charge Coverage Ratio. Maintain a ratio of EBITDA to Total Fixed
Charges of not less than 1.25 to 1.0, determined quarterly on a rolling
four-quarter basis.
8.3. Effective Net Worth. Maintain at all times an Effective Net Worth
greater than or equal to $15,000,000 plus fifty percent (50%) of annual net
income (with no deduction for net losses), determined quarterly.
9. EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute an "Event of Default":
9.1. Failure to Pay. The failure of Borrower, any Guarantor or other
Obligor to pay any of the Obligations within five (5) days as and when due and
payable (whether by acceleration, declaration, extension or otherwise).
9.2. Covenants and Agreements. The failure of Borrower, any Guarantor or
other Obligor to perform, observe or comply with any of the covenants of this
Agreement or any of the Loan Documents, subject to a written notice and cure
period of ten (10) days for monetary defaults other than Note payments and
thirty (30) days for nonmonetary defaults.
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9.3. Information, Representations and Warranties. If any representation or
warranty made herein or if any information contained in any financial statement,
application, schedule, report or any other document given by Borrower, any
Guarantor or by any person in connection with the Obligations, with the
Collateral, or with any of the Loan Documents is not in all respects true and
accurate or if Borrower, any Guarantor or such other person omitted to state any
material fact or any fact necessary to make such information not misleading.
9.4. Default under Loan Documents. The occurrence of an Event of Default
under any of the Loan Documents.
9.5. Default on Other Obligations. The occurrence of any default under any
other borrowing in excess of $100,000 if the result of such default would permit
the acceleration of the maturity of any note, loan or other agreement between
Borrower or any Guarantor and any person other than Lender.
9.6. Insolvency. Borrower, any Guarantor or other Obligor shall be or
become insolvent (as defined in Section 101 of the United States Bankruptcy
Code) or unable to pay their debts as they become due, or admit in writing to
such insolvency or to such inability to pay their debts as they become due.
9.7. Involuntary Bankruptcy. There shall be filed against Borrower, any
Guarantor, or other Obligor an involuntary petition or other pleading seeking
the entry of a decree or order for relief under the United States Bankruptcy
Code or any similar federal or state insolvency or similar laws ordering: (a)
the liquidation of Borrower, any Guarantor or such Obligor or (b) a
reorganization of Borrower, any Guarantor or such Obligor or the business and
affairs of Borrower, the Guarantor or such Obligor, or (c) the appointment of a
receiver, liquidator, assignee, custodian, trustee or similar official for
Borrower, any Guarantor or other Obligor of the property of Borrower, the
Guarantor or such Obligor and the failure to have such petition or other
pleading denied or dismissed within 60 calendar days from the date of filing.
9.8. Voluntary Bankruptcy. The commencement by Borrower, any Guarantor or
other Obligor of a voluntary case under the federal bankruptcy laws or any
federal or state insolvency or similar laws or the consent by Borrower, any
Guarantor or other Obligor to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian or similar official for
Borrower, any Guarantor or other Obligor of any of the property of Borrower, any
Guarantor or other Obligor or the making by Borrower, any Guarantor or other
Obligor of an assignment for the benefit of creditors, or the failure by
Borrower, any Guarantor or other Obligor generally to pay their debts as the
debts become due.
9.9. Judgments, Awards. The entry of any judgment, order, award or decree
against Borrower, any Guarantor or other Obligor for an amount in excess of
$250,000 and a determination by Lender, in good faith but in its sole
discretion, that the same, when aggregated with all other judgments, orders,
awards and decrees outstanding against Borrower, any Guarantor or other Obligor,
could have a material adverse effect on the prospect for Lender to fully and
punctually realize the full benefits conferred on Lender by this Agreement.
9.10. Injunction. The injunction or restraint of Borrower, any Guarantor or
other Obligor in any manner from conducting its business in whole or in part and
a determination by Lender, in good faith but in its sole discretion, that the
same could have a material adverse effect on the prospect for Lender to fully
and punctually realize the full benefits conferred on Lender by this Agreement.
20
9.11. Attachment by Creditors. Any assets of Borrower, any Guarantor or
other Obligor shall be attached, levied upon, seized or repossessed, or come
into the possession of a trustee, receiver or other custodian and a
determination by Lender, in good faith but in its sole discretion, that the same
could have a material adverse effect on the prospect for Lender to fully and
punctually realize the full benefits conferred on Lender by this Agreement.
9.12. Dissolution, Merger, Consolidation, Reorganization. The voluntary or
involuntary dissolution, merger, consolidation, winding up or reorganization of
Borrower, any Guarantor or other Obligor or the occurrence of any action
preparatory thereto, excepting mergers of any Guarantor into the Borrower.
10. RIGHTS AND REMEDIES.
10.1. Rights and Remedies of Lender. Upon and after the occurrence of an
Event of Default, Lender may, without notice or demand, exercise in any
jurisdiction in which enforcement hereof is sought, the following rights and
remedies, in addition to the rights and remedies available to Lender under the
Loan Documents, the rights and remedies of a secured party under the Uniform
Commercial Code and all other rights and remedies available to Lender under
applicable law, all such rights and remedies being cumulative and enforceable
alternatively, successively or concurrently:
10.1.1. Declare the Note, all interest accrued and unpaid thereon and all
other Obligations to be immediately due and payable and the same shall thereupon
become immediately due and payable without presentment, demand for payment,
protest or notice of any kind, all of which are hereby expressly waived.
10.1.2. Institute any proceeding or proceedings to enforce the Obligations
and any Liens of Lender.
10.1.3. Take possession of the Collateral, and for that purpose, so far as
Borrower may give authority therefor, enter upon any premises on which the
Collateral or any part thereof may be situated and remove the same therefrom
without any liability for suit, action or other proceeding, and require
Borrower, at Borrower's expense, to assemble and deliver the Collateral to such
place or places as Lender may designate.
10.1.4. Operate, manage and control the Collateral (including use of the
Collateral and any other property or assets of Borrower in order to continue or
complete performance of Borrower's obligations under any contracts of Borrower),
or permit the Collateral or any portion thereof to remain idle or store the
same, and collect all rents and revenues therefrom and sell or otherwise dispose
of any or all of the Collateral upon such terms and under such conditions as
Lender, in its sole discretion, may determine, and purchase or acquire any of
the Collateral at any such sale or other disposition, all to the extent
permitted by applicable law.
10.1.5. Enforce Borrower's rights against any account debtors and other
obligors.
10.1.6. Cease making advances hereunder and under any other commitments or
credit accommodations of Lender to Borrower and stop and retract the making of
any advance hereunder or thereunder which may have been requested by Borrower.
10.2. Power of Attorney. Effective upon the occurrence of an Event of
Default, Borrower hereby designates and appoints Lender and its designees as
attorney-in-fact of Borrower, irrevocably and with power of substitution, with
authority to endorse Borrower's name on any notes, acceptances, checks, drafts,
money orders, instruments or other evidences of payment or proceeds of the
Collateral that may come into Lender's possession; to execute proofs of claim
and loss; to adjust and compromise any claims under insurance policies; and to
perform all other acts necessary and advisable, in Lender's sole discretion, to
carry out and enforce this Agreement and the Loan Documents. All acts of said
attorney or designee are hereby ratified and approved by Borrower and said
attorney or designee shall not be liable for any acts of commission or omission
nor for any error of judgment or mistake of fact or law. This power of attorney
is coupled with an interest and is irrevocable so long as any of the Obligations
remain unpaid or unperformed or there exists any commitment by Lender which
could give rise to any Obligations.
21
10.3. Costs and Expenses. Borrower agrees to pay to Lender on demand the
amount of all expenses paid or incurred by Lender in consulting with counsel
concerning any of its rights hereunder, under the Loan Documents or under
applicable law, all expenses, including reasonable attorneys' fees and court
costs paid or incurred by Lender in exercising or enforcing any of its rights
hereunder, under the Loan Documents or under applicable law together with
interest on all such expenses paid by Lender at the default rate under the Notes
and calculated in the manner provided in the Note. The provisions of this
Section shall survive the termination of this Agreement and the payment of all
other Obligations.
11. MISCELLANEOUS.
11.1. Performance for Borrower. Borrower agrees and hereby authorizes that
Lender may, in Lender's sole discretion, but Lender shall not be obligated to,
whether or not an Event of Default shall have occurred, advance funds on behalf
of Borrower, without prior notice to Borrower, in order to insure Borrower's
compliance with any covenant, warranty, representation or agreement of Borrower
made in or pursuant to this Agreement or any of the Loan Documents, to continue
or complete, or cause to be continued or completed, performance of Borrower's
obligations under any contracts of Borrower, to cover overdrafts in any checking
or other accounts of Borrower at Lender or to preserve or protect any right or
interest of Lender in the Collateral or under or pursuant to this Agreement or
any of the Loan Documents, including, without limitation, the payment of any
insurance premiums or taxes and the satisfaction or discharge of any judgment or
any Lien upon the Collateral or other property or assets of Borrower; provided,
however, that the making of any such advance by Lender shall not constitute a
waiver by Lender of any Event of Default with respect to which such advance is
made nor relieve Borrower of any such Event of Default. Borrower shall pay to
Lender upon demand all such advances made by Lender with interest thereon at the
highest rate and calculated in the manner provided in the Note. All such
advances shall be deemed to be included in the Obligations and secured by the
security interest granted Lender hereunder; provided, however, that the
provisions of this Section shall survive the termination of this Agreement and
Lender's security interest hereunder and the payment of all other Obligations.
11.2. Expenses. Whether or not any of the transactions contemplated hereby
shall be consummated, Borrower agrees to pay to Lender on demand the amount of
all expenses paid or incurred by Lender (including the reasonable fees and
expenses of its counsel) in connection with the preparation of all written
commitments of Lender antedating this Agreement, this Agreement and the Loan
Documents and all documents and instruments referred to herein and all expenses
paid or incurred by Lender in connection with the filing or recordation of all
financing statements and instruments as may be required by Lender at the time
of, or subsequent to, the execution of this Agreement, including, without
limitation, all documentary stamps, recordation and transfer taxes and other
costs and taxes incident to recordation of any document or instrument in
connection herewith. Borrower shall pay Lender $25.00 for each response to
Borrower's request for an accounting or confirmation of a list of Collateral or
statement of account exceeding one request per 6-month period. Borrower agrees
to save harmless and indemnify Lender from and against any liability resulting
from the failure to pay any required documentary stamps, recordation and
transfer taxes, recording costs or any other expenses incurred by Lender in
connection with this Agreement. The provisions of this Section shall survive the
termination of this Agreement, Lender's security interest, and the payment of
all other Obligations.
22
11.3. Applications of Payments and Collateral. Except as may be otherwise
specifically provided in this Agreement, all Collateral and proceeds of
Collateral coming into Lender's possession and all payments made by any Obligor
may be applied by Lender to any of the Obligations, whether matured or
unmatured, as Lender shall determine in its sole but reasonable discretion.
11.4. Waivers by Borrower. Borrower hereby waives, to the extent the same
may be waived under applicable law: (a) notice of acceptance of this Agreement;
(b) all claims, causes of action and rights of Borrower against Lender on
account of actions taken or not taken by Lender in the exercise of Lender's
rights or remedies hereunder, under the Loan Documents or under applicable law;
(c) all claims of Borrower for failure of Lender to comply with any requirement
of applicable law relating to enforcement of Lender's rights or remedies
hereunder, under the Loan Documents or under applicable law; (d) all rights of
redemption of Borrower with respect to the Collateral; (e) in the event Lender
seeks to repossess any or all of the Collateral by judicial proceedings, any
bond(s) or demand(s) for possession which otherwise may be necessary or
required; (f) presentment, demand for payment, protest and notice of non-payment
and all exemptions; (g) any and all other notices or demands which by applicable
law must be given to or made upon Borrower by Lender; (h) settlement, compromise
or release of the obligations of any person primarily or secondarily liable upon
any of the Obligations; (i) trial by jury in any action or proceeding of any
kind or nature in connection with any of the Obligations, this Agreement or any
of the Loan Documents; and (j) substitution, impairment, exchange or release of
any Collateral for any of the Obligations. Borrower agrees that Lender may
exercise any or all of its rights and/or remedies hereunder, under the Loan
Documents and under applicable law without resorting to and without regard to
any Collateral or sources of liability with respect to any of the Obligations.
Upon termination of this Agreement and Lender's security interest hereunder and
payment of all Obligations, within 45 days following Borrower's request to
Lender, Lender shall release control of any security interest in the Collateral
perfected by control and Lender shall send Borrower a statement terminating any
financing statement filed against the Collateral.
11.5. Waivers by Lender. Neither any failure nor any delay on the part of
Lender in exercising any right, power or remedy hereunder, under any of the Loan
Documents or under applicable law shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
11.6. Lender's Setoff. Lender shall have the right, in addition to all
other rights and remedies available to it, following an Event of Default, to set
off against any Obligations due Lender, any debt owing to Borrower by Lender,
including, without limitation, any funds in any checking or other account now or
hereafter maintained by Borrower at Lender. Borrower hereby confirms Lender's
right to banker's lien and setoff, and nothing in this Agreement or any of the
Loan Documents shall be deemed a waiver or prohibition of Lender's right of
banker's lien and setoff.
11.7. Modifications. No modifications or waiver of any provision of this
Agreement or any of the Loan Documents, and no consent by Lender to any
departure by Borrower therefrom, shall in any event be effective unless the same
shall be in writing, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand upon Borrower in any case shall entitle Borrower to any other or further
notice or demand in the same, similar or other circumstances.
23
11.8. Notices. Any notice or other communication in connection with this
Agreement, if by registered or certified mail, shall be deemed to have been
given when received by the party to whom directed, or, if by mail but not
registered or certified, when deposited in the mail, postage prepaid, provided
that any such notice or communication shall be addressed to a party hereto as
provided below (or at such other address as such party shall specify in writing
to the other parties hereto):
If to Borrower:
ADDVANTAGE TECHNOLOGIES GROUP, INC.
1605 E. Iola
Broken Arrow, Oklahoma 74012
Attention: Ken Chymiak, President and Chief Executive Officer
If to Lender:
BANK OF OKLAHOMA, N.A.
P.O. Box 2300
Tulsa, OK 74192
Attention: Mack Renner, Assistant Vice President
Notwithstanding anything to the contrary, all notices and demands for
payment from Lender actually received in writing by Borrower shall be considered
to be effective upon receipt thereof by Borrower regardless of the procedure or
method utilized to accomplish such delivery thereof to Borrower.
11.9. Applicable Law and Consent to Jurisdiction. The performance and
construction of this Agreement and the Loan Documents shall be governed by the
internal laws of the State of Oklahoma. Borrower agrees that any suit, action or
proceeding instituted against Borrower with respect to any of the Obligations,
the Collateral, this Agreement or any of the Loan Documents may be brought in
any court of competent jurisdiction located in the State of Oklahoma. By its
execution hereof, Borrower hereby irrevocably waives any objection and any right
of immunity on the ground of venue, the convenience of the forum or the
jurisdiction of such courts or from the execution of judgments resulting
therefrom. Borrower hereby irrevocably accepts and submits to the jurisdiction
of the aforesaid courts in any such suit, action or proceeding.
11.10. Survival: Successors and Assigns. All covenants, agreements,
representations and warranties made herein and in the Loan Documents shall
survive the execution and delivery hereof and thereof, shall survive Closing and
shall continue in full force and effect until all Obligations have been paid in
full, there exists no commitment by Lender which could give rise to any
Obligations and all appropriate termination statements have been filed
terminating the security interest granted Lender hereunder. Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party. In the event that
Lender assigns the Note, this Agreement and/or its security interest in the
Collateral, Lender shall give written notice to Borrower of any such assignment.
All covenants, agreements, representations and warranties by or on behalf of
Borrower which are contained in this Agreement and the Loan Documents shall
inure to the benefit of Lender, its successors and assigns. Borrower may not
assign this Agreement or any of its rights hereunder without the prior written
consent of Lender.
24
11.11. Severability. If any term, provision or condition, or any part
thereof, of this Agreement or any of the Loan Documents shall for any reason be
found or held invalid or unenforceable by any court or governmental agency of
competent jurisdiction, such invalidity or unenforceability shall not affect the
remainder of such term, provision or condition nor any other term, provision or
condition, and this Agreement and the Loan Documents shall survive and be
construed as if such invalid or unenforceable term, provision or condition had
not been contained therein.
11.12. Merger and Integration. This Agreement and the attached Schedules
(if any) contain the entire agreement of the parties hereto with respect to the
matters covered and the transactions contemplated hereby, and no other
agreement, statement or promise made by any party hereto, or by any employee,
officer, agent or attorney of any party hereto, which is not contained herein
shall be valid or binding.
11.13. WAIVER OF JURY TRIAL. BORROWER HEREBY (a) COVENANTS AND AGREES NOT
TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (b) WAIVES
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH LENDER AND BORROWER MAY BE
PARTIES, ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY PERTAINING TO THIS
AGREEMENT, ANY OF THE LOAN DOCUMENTS AND/OR ANY TRANSACTIONS, OCCURRENCES,
COMMUNICATIONS OR UNDERSTANDINGS (OR THE LACK OF ANY OF THE FOREGOING) RELATING
IN ANY WAY TO THE BORROWER-LENDER RELATIONSHIP BETWEEN THE PARTIES. IT IS
UNDERSTOOD AND AGREED THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF
ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS
AGAINST PARTIES WHO ARE NOT PARTIES TO THIS SECURITY AGREEMENT. THIS WAIVER OF
JURY TRIAL IS SEPARATELY GIVEN, KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY
BORROWER AND BORROWER HEREBY AGREES THAT NO REPRESENTATIONS OF FACT OR OPINION
HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN
ANY WAY MODIFY OR NULLIFY ITS EFFECT. LENDER IS HEREBY AUTHORIZED TO SUBMIT THIS
AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND BORROWER
AND LENDER, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF SUCH WAIVER OF RIGHT TO
TRIAL BY JURY. BORROWER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN
THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT
LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND/OR THAT IT HAS HAD THE
OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
11.14. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument.
11.15. Headings. The headings and sub-headings contained in the titling of
this Agreement are intended to be used for convenience only and shall not be
used or deemed to limit or diminish any of the provisions hereof.
11.16. Recitals. The Recitals hereto are hereby incorporated into and made
a part of this Agreement.
11.17. Tax Credits. Upon closing and Borrower's satisfaction of its
obligations under Section 4, Lender agrees to make available for purchase by
Borrower tax credits that may be used to pay Oklahoma State income taxes. A
maximum of $1,000,000 in tax credits will be available for a purchase price of
..90 on the dollar. The purchase must occur on or before December 15, 2004.
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[Signature Page to Follow]
26
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
"Borrower"
ADDVANTAGE TECHNOLOGIES GROUP, INC., an Oklahoma
corporation
By /s/ Ken Chymiak
-----------------------------------
Ken Chymiak, President and Chief
Executive Officer
"Lender"
BANK OF OKLAHOMA, N.A.
By /s/ W. Mack Renner
---------------------------------------
W. Mack Renner, Assistant Vice President
27
Schedule "1.4"
(Borrower Authority Documents)
Schedule "1.6"
(Borrowing Base Certificate)
Schedule "1.15"
(Compliance Certificate)
Schedule "1.19"
($8,000,000 Term Note)
Schedule "1.24"
(Guarantor Authority Documents)
Schedule "1.26"
(Form of Guaranty Agreement)
Schedule "1.38"
(Note Rate Pricing Grid)
- -------------------------------------- ---------------------------------- -----------------------------------
Leverage Ratio Prime Option LIBOR Option
(Funded Debt to EBITDA) Line Note Term Note Line Note Term Note
- -------------------------------------- ---------------------------------- -----------------------------------
> 2.50x -0.25% 0.25% 2.50% 3.00%
- -------------------------------------- ---------------- ----------------- ----------------- -----------------
>1.75x but = 2.50x -0.50% 0.00% 2.25% 2.75%
- -------------------------------------- ---------------- ----------------- ----------------- -----------------
>1.00x but = 1.75x -0.75% -0.25% 2.00% 2.50%
- -------------------------------------- ---------------- ----------------- ----------------- -----------------
< 1.00x -1.00% -0.50% 1.75% 2.25%
- -------------------------------------- ---------------- ----------------- ----------------- -----------------
The Note Rate shall be determined in accordance with the foregoing table
based on the Leverage Ratio as reflected in the then most recent Financials.
Adjustments, if any, to the Note Rate shall be effective five (5) Business Days
after the Lender has received the applicable Financials. If the Borrower fails
to deliver the Financials to the Lender at the time required pursuant to Section
6.1, then the Note Rate shall be the highest Margin set forth in the foregoing
table until five (5) Business Days after such Financials are so delivered. For
the quarterly period following the Closing Date, the Borrower's pricing shall be
deemed the pricing based on Leverage Ratio greater than or equal to 1.00x but
less than 1.75x.
The term "Financials" means the annual or quarterly consolidated financial
statements of the Borrower required to be delivered pursuant to Section 6.1 of
the Revolving Credit and Term Loan Agreement.
Schedule "1.40"
(Opinion of Borrower's Counsel)
Schedule "1.41"
(Opinion of Guarantor's Counsel)
Schedule "1.43(6)"
(Permitted Liens)
$440,000 mortgage lien from NCS Industries, Inc. to Wachovia Bank, National
Association (current balance of $387,351.00)
Schedule "1.54"
($7,000,000 Line Note)
Schedule "1.55"
(Shareholder Notes)
None.
Schedule "1.56"
(Subordination Agreements)
Schedule "1.57"
(Subsidiaries)
Tulsat Corporation, an Oklahoma corporation
ADDvantage Technologies Group of Missouri, Inc., a Missouri corporation
ADDvantage Technologies Group of Nebraska, Inc., a Nebraska corporation
ADDvantage Technologies Group of Texas, Inc., a Texas corporation
NCS Industries, Inc., a Pennsylvania corporation
Tulsat Atlanta, LLC, an Oklahoma limited liability company
(a subsidiary of Tulsat Corporation)
Schedule "3.1"
(Security Agreement)
Schedule "5.6"
(Pending or Threatened Litigation)
None.