<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
FORM 10-QSB
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended December 31, 1996
Commission file number 1-10790
INDUSTRIAL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2596252
(State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification Number
One Trefoil Drive, Trumbull, CT 06611
(Address of Principal Executive Offices) (Zip Code)
(203) 268-8000
(Issuer's Telephone Number, including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d)of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No .
--- ---
As of December 31, 1996, the registrant had outstanding 5,464,548
shares of Common Stock, $.01 par value.
Transitional Small Business Disclosure Format.
Yes No X .
--- ---
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INDEX
INDUSTRIAL TECHNOLOGIES, INC.
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3-7
Consolidated Balance Sheets,
December 31, 1996, and September 30, 1996 3
Consolidated Statements of Operations, Three
Months Ended, December 31, 1996, and 1995 4
Consolidated Statements of Cash Flows, Three
Months Ended December 31, 1996, and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on 8-K 10
SIGNATURES 11
<PAGE> 3
PART I - FINANCIAL INFORMATION
INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
----------- ----------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 474,142 $ 298,630
Trade accounts receivable, less allowance for doubtful
accounts of $60,602 in fiscal 1997 and $56,791 in fiscal 1996 1,591,205 954,346
Inventories 1,757,244 1,883,838
Prepaid expenses and other current assets 183,490 44,410
----------- -----------
Total current assets 4,006,081 3,181,224
Property and equipment, net 24,542 25,987
Intangible and other assets, net 73,419 65,214
Costs in excess of net assets of business acquired 3,189,915 3,266,780
----------- -----------
Total assets $ 7,293,957 $ 6,539,205
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 981,403 $ 440,425
Accounts payable 1,134,258 945,216
Accrued commissions and wages 498,840 331,283
Other accrued expenses 447,394 532,727
Warranty and installation costs 344,916 297,860
Deferred revenue and customer deposits 298,522 430,436
----------- -----------
Total current liabilities 3,705,333 2,977,947
Subordinated note payable to stockholders 180,000 180,000
----------- -----------
Total liabilities 3,885,333 3,157,947
Stockholders' equity:
Common stock, $.01 par value. Authorized 14,000,000
shares; issued and outstanding 5,464,548 shares in
fiscal 1997 and 5,368,298 shares in fiscal 1996 54,645 53,682
Additional paid-in capital 13,058,457 13,048,832
Accumulated deficit (9,704,478) (9,721,256)
----------- -----------
Total stockholders' equity 3,408,624 3,381,258
----------- -----------
Total liabilities and stockholders' equity $ 7,293,957 $ 6,539,205
=========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
3
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INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
December 31, December 31,
1996 1995
------------ -------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net Sales $2,394,957 $1,647,469
Cost of goods sold 1,274,430 844,135
---------- ----------
Gross profit 1,120,527 803,334
---------- ----------
Operating expenses:
Selling 397,324 351,769
General and administrative 392,801 385,437
Engineering 197,700 99,675
Amortization of costs in excess of
net assets of business acquired 76,865 76,865
---------- ----------
Total operating expenses $1,064,690 $ 913,746
---------- ----------
Operating income (loss) $ 55,837 $ (110,412)
---------- ----------
Interest income (expense), net $ (39,059) $ (26,443)
---------- ----------
Net income (loss) $ 16,778 $ (136,855)
========== ==========
Income/(loss) per share $ -- $ (0.03)
========== ==========
Weighted average common shares outstanding 5,416,423 5,218,298
========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
4
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INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
December 31, December 31,
1996 1995
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 16,778 $(136,855)
Adjustment to reconcile net income (loss) to net cash provided
by (used for) operating activities:
Depreciation 1,445 5,581
Amortization of costs in excess of net assets
of business acquired 76,865 76,865
Changes in assets and liabilities:
Trade accounts receivable (636,859) 504,490
Inventories 126,594 (252,314)
Prepaid expenses and other current assets (139,080) (48,625)
Accounts payable 189,042 120,189
Accrued expenses 82,224 (14,715)
Warranty and installation costs 47,056 (52,610)
Deferred revenue and customer deposits (131,914) (84,549)
--------- ---------
Net cash provided by (used for) operating activities (367,849) 117,457
--------- ---------
Cash flows from investing activities:
Other (8,205) (5,200)
--------- ---------
(8,205) (5,200)
--------- ---------
Cash flows from financing activities:
Net borrowings (repayments) on revolving credit agreement 540,978 (57,061)
Payments on notes payable 0 (18,501)
Proceeds from sale of common stock 10,588 0
--------- ---------
Net cash (used for) financing activities 551,566 (75,562)
--------- ---------
Net increase in cash and cash equivalents 175,512 36,695
Cash and cash equivalents at beginning of period: 298,630 214,448
--------- ---------
Cash and cash equivalents at end of period: $ 474,142 $ 251,143
========= =========
Supplemental disclosures of cash flow information:
Cash paid during period for:
Interest $ 35,307 $ 26,942
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
5
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INDUSTRIAL TECHNOLOGIES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. NATURE OF BUSINESS
Industrial Technologies, Inc., ("INTI" or the "Company"), is a
manufacturer of advanced sensing, monitoring, computer processing, and surface
inspection systems used in diverse industrial manufacturing and other
applications. INTI's specialized product divisions are directed to the common
mission of developing and implementing products and technologies for the
improvement of manufacturing productivity and quality.
INTI instruments, computers and turnkey systems are designed and
manufactured to meet the diverse needs and demanding conditions found in process
measurement and control applications. INTI serves its clients in a broad range
of industries ranging from aerospace, communications and industrial equipment
suppliers to specialized web process manufacturers in the paper, glass, steel,
film, photo-sensitives, aluminum, and rubber industries. INTI's products and
systems are dedicated to improving manufacturing efficiencies and quality
required to maintain leadership in highly competitive global markets.
Note 2. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
financial statements reflect all necessary, normal and recurring adjustments
which are required to present fairly the financial position of the Company and
its subsidiary as of December 31, 1996, and the results of operations and cash
flows for the three months ended December 31, 1996, and December 31, 1995.
Certain information and footnote disclosures normally included in the annual
financial statements, which are prepared in accordance with generally accepted
accounting principles, have been condensed or omitted. Accordingly, the Company
believes that although the disclosures are adequate to make the information
presented not misleading, these financial statements should be read in
conjunction with the annual financial statements of the Company and notes
thereto, contained in the Company's Form 10-KSB, for the fiscal year ended
September 30, 1996. The results of operations for the three month period ended
December 31, 1996, are not necessarily indicative of those that may be expected
for the full fiscal year.
Note 3. COMMITMENTS AND CONTINGENCIES
The Company has entered into employment agreements with certain officers.
The agreements are for terms ranging from one year to five years and provide for
a base salary and certain benefits which are specified in each of the
agreements. Each of the agreements also provide for severance pay for
termination under certain circumstances which are defined in the agreements. The
minimum annual commitments under the agreements are 1997: $376,000; 1998:
$276,000; and 1999: $47,167.
INTI's wholly owned subsidiary, Intec Corp., is currently working with the
Department of Environmental Protection of the State of Connecticut (CT-DEP) to
review, and to clear, all adverse findings with respect to the
Tetrachloroethylene Analysis performed in May 1992. This analysis was performed
in conjunction with the CT-DEP Property Transfer Program. A follow-up analysis
was made as recently as August 1995. Although the levels of the contaminant have
decreased substantially, they still remain above acceptable levels. Appropriate
methods are being employed to lower these levels. Tests will continue until
compliance levels have been met. The Company has spent approximately $35,000 to
date. The Company believes the resolution of this matter will not have a
material impact on the financial position, results of operations and cash flows
of the Company.
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Note 4. INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
----------- -------------
<S> <C> <C>
Raw materials and subassemblies $1,250,953 $1,341,073
Work in process 405,913 435,156
Finished goods 100,378 107,609
---------- ----------
$1,757,244 $1,883,838
========== ==========
</TABLE>
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended December 31, 1996, Compared to Three Months Ended December
31, 1995
The Company had net sales for the three months ended December 31, 1996
(the "current quarter"), of $2,394,957 compared to $1,647,469 for the three
months ended December 31, 1995 (the "prior year quarter"). The increase of
$747,488 primarily reflects the larger backlog of orders at the beginning of the
current quarter versus the prior year quarter and greater deliveries emanating
from that backlog.
The Company generated gross profits of $1,120,527 (46.8% of net sales)
for the current quarter compared to gross profits of $803,334 (48.8% of net
sales) for the prior year quarter. The 39.5% increased amount relates to the
increase in Company sales, and the decrease of gross profit percentage is a
result of product and market mix. Product mix has a direct effect on cost and
market mix has a direct effect on selling price; therefore, the combination
effects gross profit. As to the decrease in gross profit percentage, certain
system configurations included extra costs that were not immediately recoverable
from European customers, i.e., technical certification required for shipments
into the European Common Market.
Selling, general and administrative expenses for the current quarter
were $790,125 (33.0% of net sales) compared to $737,206 (44.7% of net sales) for
the prior year quarter. The increase in selling expense is due primarily to
increased sales commissions resulting from increase sales volume. The decrease
in expense to net sales percentage is a result of increased net sales.
Engineering expenses for the current quarter were $197,700 compared to
the prior year quarter of $99,675. This increase reflects the continuing
programs to accelerate new product development. The major areas of increase are
additional personnel and increased use of outside specialized consultants.
Amortization of costs in excess of net assets of business acquired are
the same for the current and prior quarters and will continue to be so during
the remaining established life of the asset.
The Company had net interest expense of $39,059 for the current quarter
compared to $26,443 in the prior year quarter. This increase is due to increased
borrowing for the period partially offset by a reduction in the rate of interest
paid.
The net profit of $16,778 in the current quarter compared to a loss of
$136,855 in the prior year quarter . The return to profitability is largely the
result of increased revenues.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity at December 31, 1996,
consisted of $474,142 of cash plus the borrowing power under the Company's
revolving credit loan agreement ("Loan Agreement") which provides a $1,500,000
revolving credit line at an annual interest rate of 4% over the prime interest
rate as published in the Wall Street Journal. The loan matures on October 31,
1999, unless sooner terminated by the lender. At December 31,1996, the Company
had
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borrowed $981,403 under the Loan Agreement and $518,597 of additional borrowings
would be available if there were additional eligible accounts receivable. The
revolving loan requires interest to be paid monthly and has a maximum borrowing
base of: the lesser of $1,500,000 or the aggregate of (1) 80% of the Company's
eligible domestic accounts receivable, (2) the lesser of 80% of the Company's
eligible European accounts receivable or $500,000 (increased from $250,000
effective January 30, 1997), and (3) 80% of the Company's eligible foreign
accounts receivable supported by irrevocable letters of credit, reduced by (4)
a $500,000 demand loan, which is payable in installments of principal of
approximately $16,700 commencing in May 1997, plus interest. From November 1996
through April 1997 payments are interest only on the $500,000 demand loan. The
Company is in material compliance with the covenants of this Loan Agreement.
The Company requires additional working capital to finance current
operations, to enhance and expand its manufacturing capacity and for inventory
and accounts receivable purposes. While the Company is actively seeking such
additional funds, there are currently no arrangements with respect to such
additional financing. No assurances can be given that such future financing
will be available under terms acceptable to the Company.Without such future
financing, the Company's ability to finance its operations and growth will be
severely limited.
At January 13, 1997, the Company's backlog of customer orders was
approximately $2,717,000 compared to approximately $1,095,000 at January 17,
1996. This increase in the backlog should result in an increase in the
associated accounts receivable generated which should increase the borrowing
base under the Company's Loan Agreement and, consequently, the Company's
liquidity.
CAPITAL EXPENDITURES
The Company does not have any material commitments for capital
expenditures at this time.
EFFECT OF INFLATION
The Company believes that inflation has not had a material effect on
its results of operations or financial condition during the last two fiscal
years.
9
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any material litigation which is not
routine and/or incidental to its business and which would have a material impact
on the financial position of the company.
ITEM 5. OTHER INFORMATION
At a special meeting of the Board of Directors held on November 20,
1996, Eric H. Twerdahl was elected President and Chief Operating Officer of the
Company. Gerald W. Stewart remains as Chairman and Chief Executive Officer.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are filed herewith:
3.2 Form of Amended and Restated Bylaws, as of February
4, 1997.
10.6 Commercial Revolving Loan, Demand Loan and Security
Agreement with American Commercial Finance
Corporation, dated November 1, 1996.
10.7 Revolving Promissory Note, dated November 1, 1996.
10.8 Demand Promissory Note, dated November 1, 1996.
27 Financial Data Schedule
(b) There was a report on Form 8-K filed by the registrant on
November 4, 1996, during the first quarter ended December 31, 1996, wherein the
registrant reported that it and its indirect wholly owned subsidiary, Intec
Europe, Ltd., entered into a commercial revolving loan, demand loan and security
agreement.
10
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SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
INDUSTRIAL TECHNOLOGIES, INC.
Date: February 13, 1997 By: /s/ Joseph Schlig
---------------------------------------
Joseph Schlig, Chief Financial Officer,
Vice President, Treasurer and Secretary
11
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered Page
Description of Exhibit Number
---------------------- -------------
<S> <C> <C>
3.2 Form of Amended and Restated Bylaws, as
of February 4, 1997.
10.6 Commercial Revolving Loan, Demand Loan
and Security Agreement with American
Commercial Finance Corporation, dated
November 1, 1996
10.7 Revolving Promissory Note, dated November 1, 1996
10.8 Demand Promissory Note, dated November 1, 1996
27 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 3.2
AMENDED AND RESTATED BYLAWS OF
INDUSTRIAL TECHNOLOGIES, INC.
(As adopted February 4, 1997)
Article I. Offices.
Section 1. Registered Office. The registered office of the Corporation
shall be at The Corporation Trust Company, 1209 Orange Street, City of
Wilmington, County of New Castle, State of Delaware, 19801.
Section 2. Additional Offices. The corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or as the business of the
Corporation may require.
Article II. Meetings of Stockholders.
Section 1. Time and Place. A meeting of stockholders for any purpose
may be held at such time and place within or without the State of Delaware as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
Section 2. Annual Meeting. Annual meetings of stockholders, commencing
with the year 1990, shall be held on the second Tuesday in April, if not a legal
holiday, or, if a legal holiday, then on the next secular day following, at
10:00 a.m., or at such other date and time as shall, from time to time, be
designated by the Board of Directors and stated in the notice of the meeting. At
such annual meetings, the stockholders shall elect a Board of Directors and
transact such other business as may properly be brought before the meetings.
Section 3. Notice of Annual Meeting. Written notice of the annual
meeting, stating the place, date, and time thereof, shall be given to each
stockholder entitled to vote at such meeting not less than ten (unless a longer
period is required by law) nor more than sixty days prior to the meeting.
Section 4. Special Meetings. Special meetings of the stockholders may
be called for any purpose or purposes, unless otherwise prescribed by statute or
by the Certificate of Incorporation, by the Chairman of the Board, if any, or
the Chief Executive Officer, and shall be called by the Chief Executive Officer
or Secretary at the request, in writing, of a majority of the Board of Directors
or of the stockholders owning a majority of the shares of capital stock of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose of the proposed meeting.
Section 5. Notice of Special Meeting. Written notice of a special
meeting, stating the place, date, and time thereof and the purpose or purposes
for which the meeting is called, shall be given to each stockholder entitled to
vote at such meeting not less than ten (unless a longer period is required by
law) nor more than sixty days prior to the meeting.
Section 6. List of Stockholders. The transfer agent or the officer in
charge of the stock ledger of the Corporation shall prepare and make, at least
ten days before every meeting of
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stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, at a place within the city where the meeting is
to be held, which place, if other than the place of the meeting, shall be
specified in the notice of the meeting. The list shall also be produced and kept
at the place of the meeting during the whole time thereof and may be inspected
by any stockholder who is present in person thereat.
Section 7. Presiding Officer and Order of Business.
(a) Meetings of stockholders shall be presided over by the Chairman of
the Board. If he is not present or there is none, they shall be presided over by
the Chief Executive Officer, or, if he is not present or there is none, by the
President, or, if he is not present or there is none, by a Vice President, or if
he is not present or there is none, by a person chosen by the Board of
Directors, or, if no such person is present or has been chosen, by a chairman to
be chosen by the stockholders owning a majority of the shares of capital stock
of the Corporation issued and outstanding and entitled to vote at the meeting
and who are present in person or represented by proxy. The Secretary of the
Corporation, or, if he is not present, an Assistant Secretary, or, if he is not
present, a person chosen by the Board of Directors, shall act as Secretary at
meetings of stockholders; if no such person is present or has been chosen, the
stockholders owning a majority of the shares of capital stock of the Corporation
issued and outstanding and entitled to vote at the meeting who are present in
person or represented by proxy shall choose any person present to act as
secretary of the meeting.
(b) The following order of business, unless otherwise determined at the
meeting, shall be observed as far as practicable and consistent with the
purposes of the meeting:
(1) Call of the meeting to order.
(2) Presentation of proof of mailing of the notice of the
meeting and, if the meeting is a special meeting, the
call thereof.
(3) Presentation of proxies.
(4) Announcement that a quorum is present.
(5) Reading and approval of the minutes of the previous
meeting.
(6) Reports, if any, of officers.
(7) Election of directors, if the meeting is an annual
meeting or a meeting called for that purpose.
(8) Consideration of the specific purpose or purposes,
other than the election of directors, for which the
meeting has been called, if the meeting is a special
meeting.
(9) Transaction of such other business as may properly come
before the meeting.
(10) Adjournment.
Section 8. Quorum and Adjournments. The presence in person or
representation by proxy of the holders of a majority of the shares of the
capital stock of the Corporation issued and outstanding and entitled to vote
shall be necessary to, and shall constitute a quorum for, the transaction of
business at all meetings of the stockholders, except as otherwise provided by
statute or by the Certificate of Incorporation. If, however, a quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat who are present in person or represented by
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proxy shall have the power to adjourn the meeting from time to time until a
quorum shall be present or represented. If the time and place of the adjourned
meeting are announced at the meeting at which the adjournment is taken, no
further notice of the adjourned meeting need be given. Even if a quorum shall be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat who are present in person or represented by proxy shall
have the power to adjourn the meeting from time to time for good cause to a date
that is not more than thirty days after the date of the original meeting.
Further notice of the adjourned meeting need not be given if the time and place
thereof are announced at the meeting at which the adjournment is taken. At any
adjourned meeting at which a quorum is present in person or represented by
proxy, any business may be transacted that might have been transacted at the
meeting as originally called. If the adjournment is for more than thirty days,
or if, after the adjournment, a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote thereat.
Section 9. Voting.
(a) At any meeting of the stockholders, every stockholder having the
right to vote shall be entitled to vote in person or by proxy. Except as
otherwise provided by law or the Certificate of Incorporation, each stockholder
of record shall be entitled to one vote for each share of capital stock
registered in his name on the books of the Corporation.
(b) All elections shall be determined by a plurality vote, and, except
as otherwise provided by law or the Certificate of Incorporation, all other
matters shall be determined by a vote of a majority of the shares present in
person or represented by proxy and voting on such other matters.
Section 10. Action by Consent. Any action required or permitted by law
or the Certificate of Incorporation to be taken at any meeting of stockholders
may be taken without a meeting, without prior notice if a written consent,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present or represented by proxy and voted. Such written
consent shall be filed with the minutes of the meetings of stockholders. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing thereto.
Article III. Directors.
Section 1. General Powers, Number, and Tenure. The business of the
Corporation shall be managed by its Board of Directors, which may exercise all
powers of the Corporation and perform all lawful acts that are not by law, the
Certificate of Incorporation, or these Bylaws directed or required to be
exercised or performed by the stockholders. The number of directors shall be
determined by the Board of Directors; if no such determination is made, the
number of directors shall be one. The directors shall be elected at the annual
meeting of the stockholders, except as provided in Section 2 of this Article,
and each director elected shall hold office until the next annual meeting and
until his successor is elected and shall qualify. Directors need not be
stockholders.
Section 2. Vacancies. If any vacancies occur in the Board of Directors,
or if any new directorships are created, they may be filled by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. Each director so chosen shall hold office until the next
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annual meeting of stockholders and until his successor is duly elected and shall
qualify. If there are no directors in office, any officer or stockholder may
call a special meeting of stockholders in accordance with the provisions of the
Certificate of Incorporation or these Bylaws, at which meeting such vacancies
shall be filled.
Section 3. Removal or Resignation.
(a) Except as otherwise provided by law or the Certificate of
Incorporation, any director or the entire Board of Directors may be removed,
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors.
(b) Any director may resign at any time by giving written notice to the
Board of Directors, the Chairman of the Board, if any, or the Chief Executive
Officer or Secretary of the Corporation. Unless otherwise specified in such
written notice, a resignation shall take effect on delivery thereof to the Board
of Directors or the designated officer. It shall not be necessary for a
resignation to be accepted before it becomes effective.
Section 4. Place of Meetings. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. Annual Meeting. The annual meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting shall be necessary to the newly
elected directors in order to constitute the meeting legally, provided a quorum
shall be present.
Section 6. Regular Meetings. Additional regular meetings of the Board
of Directors may be held without notice of such time and place as may be
determined from time to time by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, the Chief Executive Officer, or by
two or more directors on at least two days' notice to each director, if such
notice is delivered personally or sent by telegram, or on at least three days'
notice if sent by mail. Special meetings shall be called by the Chairman of the
Board, Chief Executive Officer, Secretary, or two or more directors in like
manner and on like notice on the written request of one-half or more of the
number of directors then in office. Any such notice need not state the purpose
or purposes of such meeting, except as provided in Article XI.
Section 8. Quorum and Adjournments. At all meetings of the Board of
Directors, a majority of the directors then in office shall constitute a quorum
for the transaction of business, and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by law or the
Certificate of Incorporation. If a quorum is not present at any meeting of the
Board of Directors, the directors present may adjourn the meeting from time to
time, without notice other than announcement at the meeting at which the
adjournment is taken, until a quorum shall be present.
Section 9. Compensation. Directors shall be entitled to such
compensation for their services as directors and to such reimbursement for any
reasonable expenses incurred in attending directors' meetings as may from time
to time be fixed by the Board of Directors. The compensation of directors may be
on such basis as is determined by the Board of Directors. Any director may waive
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compensation for any meeting. Any director receiving compensation under these
provisions shall not be barred from serving the Corporation in any other
capacity and receiving compensation and reimbursement for reasonable expenses
for such other services.
Section 10. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting,
and without prior notice, if a written consent to such action is signed by all
members of the Board of Directors and such written consent is filed with the
minutes of its proceedings.
Section 11. Meetings by Telephone or Similar Communications Equipment.
The Board of Directors may participate in a meeting by conference telephone or
similar communications equipment by means of which all directors participating
in the meeting can hear each other, and participation in such a meeting shall
constitute presence in person by any such director at such meeting.
Article IV. Committees.
Section 1. Executive Committee. The Board of Directors, by resolution
adopted by a majority of the whole Board, may appoint an Executive Committee
consisting of one or more directors, one of whom shall be designated as Chairman
of the Executive Committee. Each member of the Executive Committee shall
continue as a member thereof until the expiration of his term as a director or
his earlier resignation, unless sooner removed as a member or as a director.
Section 2. Powers. The Executive Committee shall have and may exercise
those rights, powers, and authority of the Board of Directors as may from time
to time be granted to it by the Board of Directors to the extent permitted by
law, and may authorize the seal of the Corporation to be affixed to all papers
that may require it.
Section 3. Procedure and Meetings. The Executive Committee shall fix
its own rules of procedure and shall meet at such times and at such place or
places as may be provided by such rules or as the members of the Executive
Committee shall fix. The Executive Committee shall keep regular minutes of its
meetings, which it shall deliver to the Board of Directors from time to time.
The Chairman of the Executive Committee or, in his absence, a member of the
Executive Committee chosen by a majority of the members present, shall preside
at meetings of the Executive Committee; and another member chosen by the
Executive Committee shall act as Secretary of the Executive Committee.
Section 4. Quorum. A majority of the Executive Committee shall
constitute a quorum for the transaction of business, and the affirmative vote of
a majority of the members present at any meeting at which there is a quorum
shall be required for any action of the Executive Committee; provided, however,
that when an Executive Committee of one member is authorized under the
provisions of Section 1 of this Article, that one member shall constitute a
quorum.
Section 5. Other Committees. The Board of Directors, by resolutions
adopted by a majority of the whole Board, may appoint such other committee or
committees as it shall deem advisable and with such rights, power, and authority
as it shall prescribe. Each such committee shall consist of one or more
directors.
Section 6. Committee Changes. The Board of Directors shall have the
power at any time to fill vacancies in, to change the membership of, and to
discharge any committee.
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Section 7. Compensation. Members of any committee shall be entitled to
such compensation for their services as members of the committee and to such
reimbursement for any reasonable expenses incurred in attending committee
meetings as may from time to time be fixed by the Board of Directors. Any member
may waive compensation for any meeting. Any committee member receiving
compensation under these provisions shall not be barred from serving the
Corporation in any other capacity and from receiving compensation and
reimbursement of reasonable expenses for such other services.
Section 8. Action by Consent. Any action required or permitted to be
taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if a written consent to such action is signed by all members
of the committee and such written consent is filed with the minutes of its
proceedings.
Section 9. Meetings by Telephone or Similar Communications Equipment.
The members of any committee designated by the Board of Directors may
participate in a meeting of such committee by conference telephone or similar
communications equipment by means of which all persons participating in such
meeting can hear each other, and participation in such a meeting shall
constitute presence in person by any such committee member at such meeting.
Article V. Notices.
Section 1. Form and Delivery. Whenever a provision of any law, the
Certificate of Incorporation, or these Bylaws requires that notice be given to
any director or stockholder, it shall not be construed to require personal
notice unless so specifically provided, but such notice may be given in writing,
by mail addressed to the address of the director or stockholder as it appears on
the records of the Corporation, with postage prepaid. These notices shall be
deemed to be given when they are deposited in the United States mail. Notice to
a director may also be given personally or by telephone or by telegram sent to
his address as it appears on the records of the Corporation.
Section 2. Waiver. Whenever any notice is required to be given under
the provisions of any law, the Certificate of Incorporation, or these Bylaws, a
written waiver thereof signed by the person entitled to said notice, whether
before or after the time stated therein, shall be deemed to be equivalent to
such notice. In addition, any stockholder who attends a meeting of stockholders
in person or is represented at such meeting by proxy, without protesting at the
commencement of the meeting the lack of notice thereof to him, or any director
who attends a meeting of the Board of Directors without protesting at the
commencement of the meeting of the lack of notice, shall be conclusively deemed
to have waived notice of such meeting.
Article VI. Officers.
Section 1. Designations. The officers of the Corporation shall be
chosen by the Board of Directors. The Board of Directors may choose a Chairman
of the Board, a Chief Executive Officer, a Chief Financial Officer, a Chief
Operating Officer, a President, a Vice President or Vice Presidents, a
Secretary, a Treasurer, one or more Assistant Secretaries and/or Assistant
Treasurers, and other officers and agents that it shall deem necessary or
appropriate. All officers of the Corporation shall exercise the powers and
perform the duties that shall from time to time be determined by the Board of
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Directors. Any number of offices may be held by the same person, unless the
Certificate of Incorporation or these Bylaws provide otherwise.
Section 2. Term of, and Removal From, Office. At its first regular
meeting after each annual meeting of stockholders, the Board of Directors shall
choose a Chief Executive Officer, a President, a Secretary, and a Treasurer. It
may also choose a Chairman of the Board, a Chief Financial Officer, a Chief
Operating Officer, a Vice President or Vice Presidents, one or more Assistant
Secretaries and/or Assistant Treasurers, and such other officers and agents as
it shall deem necessary or appropriate. Each officer of the Corporation shall
hold office until his successor is chosen and shall qualify. Any officer elected
or appointed by the Board of Directors may be removed, with or without cause, at
any time by the affirmative vote of a majority of the directors then in office.
Removal from office, however, shall not prejudice the contract rights, if any,
of the person removed. Any vacancy occurring in any office of the Corporation
may be filled for the unexpired portion of the term by the Board of Directors.
Section 3. Compensation. The salaries of all officers of the
Corporation shall be fixed from time to time by the Board of Directors, and no
officer shall be prevented from receiving a salary because he is also a director
of the Corporation.
Section 4. The Chairman of the Board. The Chairman of the Board, if
any, shall be an officer of the Corporation and, subject to the direction of the
Board of Directors, shall perform such executive, supervisory, and management
functions and duties as may be assigned to him from time to time by the Board of
Directors. He shall, if present, preside at all meetings of stockholders and of
the Board of Directors.
Section 5. The Chief Executive Officer.
(a) The Chief Executive Officer shall be the chief executive officer of
the Corporation and, subject to the direction of the Board of Directors, shall
have general charge of the business, affairs, and property of the Corporation
and general supervision over its other officers and agents. In general, he shall
perform all duties incident to the office of Chief Executive Officer and shall
see that all orders and resolutions of the Board of Directors are carried into
effect.
(b) Unless otherwise prescribed by the Board of Directors, the Chief
Executive Officer shall have full power and authority to attend, act, and vote
on behalf of the Corporation at any meeting of the security holders of other
corporations in which the Corporation may hold securities. At any such meeting,
the Chief Executive Officer shall possess and may exercise any and all rights
and powers incident to the ownership of such securities that the Corporation
might have possessed and exercised if it had been present. The Board of
Directors may from time to time confer like powers upon any other person or
persons.
Section 6. The President. The President shall be subject to the
direction and supervision of the Chief Executive Officer. In general, he shall
perform all duties incident to the office of President and shall have such
powers and duties as may from time to time be assigned by the Board of Directors
or the Chief Executive Officer.
Section 7. The Chief Operating Officer. The Chief Operating Officer, if
any, shall be subject to the direction and supervision of the Chief Executive
Officer. In general, he shall have
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authority for the management and control of the operations of the Corporation
and shall perform such duties as may be assigned by the Board of Directors or
the Chief Executive Officer of the Corporation.
Section 8 The Vice President. The Vice President, if any, or in the
event there be more than one, the Vice Presidents in the order designated, or in
the absence of any designation, in the order of their election, shall, in the
absence of the President or in the event of his disability, perform the duties
and exercise the powers of the President and shall generally assist the
President and perform such other duties and have such other powers as may from
time to time be prescribed by the Board of Directors.
Section 9 The Secretary. The Secretary shall attend all meetings of the
Board of Directors and the stockholders and record all votes and the proceedings
of the meetings in a book to be kept for that purpose. He shall perform like
duties for the Executive Committee or other committees, if required. He shall
give, or cause to be given, notice of all meetings of stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
from time to time be prescribed by the Board of Directors, the Chairman of the
Board, the Chief Executive Officer or the President, under whose supervision he
shall act. He shall have custody of the seal of the Corporation, and he, or an
Assistant Secretary, shall have authority to affix it to any instrument
requiring it, and, when so affixed, the seal may be attested by his signature or
by the signature of the Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing thereof by his signature.
Section 10. The Assistant Secretary. The Assistant Secretary, if any,
or in the event there be more than one, the Assistant Secretaries in the order
designated, or in the absence of any designation, in the order of their
election, shall, in the absence of the Secretary or in the event of his
disability, perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
Section 11. The Treasurer. The Treasurer shall have custody of the
corporate funds and other valuable effects, including securities, and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the Corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may from time
to time be designated by the Board of Directors. He shall disburse the funds of
the Corporation in accord with the orders of the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the Chairman of the
Board, if any, the President, and the Board of Directors, whenever they may
require it or at regular meetings of the Board, an account of all his
transactions as Treasurer and of the financial condition of the Corporation.
Section 12. The Assistant Treasurer. The Assistant Treasurer, if any,
or in the event there shall be more than one, the Assistant Treasurers in the
order designated, or in the absence of any designation, in the order of their
election, shall, in the absence of the Treasurer or in the event of his
disability, perform such other duties and have such other powers as may from
time to time be prescribed by the Board of Directors.
Article VII. Indemnification.
Reference is made to Section 145 and any other relevant provisions of
the General Corporation Law of the State of Delaware. Particular reference is
made to the class of persons, hereinafter called "Indemnitees", who may be
indemnified by a Delaware corporation pursuant to the provisions of such
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Section 145, namely, any person, or the heirs, executors, or administrators of
such person, who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, by reason of the fact that such
person is or was a director, officer, employee, or agent of such corporation or
is or was serving at the request of such corporation as a director, officer,
employee, or agent of such corporation or is or was serving at the request of
such corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise. The
Corporation shall, and is hereby obligated to, indemnify the Indemnitees, and
each of them, in each and every situation where the Corporation is obligated to
make such indemnification pursuant to the aforesaid statutory provisions. The
Corporation shall indemnify the Indemnitees, and each of them, in each and every
situation where, under the aforesaid statutory provisions, the Corporation is
not obligated, but is nevertheless permitted or empowered, to make such
indemnification, it being understood that, before making such indemnification
with respect to any situation covered under this sentence, (i) the Corporation
shall promptly make or cause to be made, by any of the methods referred to in
Subsection (d) of such Section 145, a determination as to whether each
Indemnitee acted in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the Corporation, and, in the case of
any criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful, and (ii) that no such indemnification shall be made unless
it is determined that such Indemnitee acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, in the case of any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful.
Article VIII. Affiliated Transactions and Interested Directors.
Section 1. Affiliated Transactions. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or participates
in the meeting of the Board of Directors or committee thereof that authorizes
the contract or transaction or solely because his or their votes are counted for
such purpose if:
(a) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(b) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by the vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved, or ratified by the Board of Directors, a
committee thereof, or the stockholders.
Section 2. Determining Quorum. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee thereof which authorizes the contract or
transaction.
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Article IX. Stock Certificates.
Section 1. Form and Signatures.
(a) Every holder of stock of the Corporation shall be entitled to a
certificate stating the number and class, and series, if any, of shares owned by
him, signed by the Chairman of the Board, if any, or the Chief Executive Officer
or the President and the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation, and bearing the seal of the
Corporation. The signatures and the seal may be facsimiles. A certificate may be
signed, manually or by facsimile, by a transfer agent or registrar other than
the Corporation or its employee. In case any officer who has signed, or whose
facsimile signature was placed on, a certificate shall have ceased to be such
officer before the certificate is issued, it may nevertheless be issued by the
Corporation with the same effect as if he were such officer at the date of its
issue.
(b) All stock certificates representing shares of capital stock that
are subject to restrictions on transfer or to other restrictions may have
imprinted thereon any notation to that effect determined by the Board of
Directors.
Section 2. Registration of Transfer. Upon surrender to the Corporation
or any transfer agent of the Corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment, or
authority to transfer, the Corporation or its transfer agent shall issue a new
certificate to the person entitled thereto, cancel the old certificate, and
record the transaction upon the books of the Corporation.
Section 3. Registered Stockholders.
(a) Except as otherwise provided by law, the Corporation shall be
entitled to recognize the exclusive right of a person who is registered on its
books as the owner of shares of its capital stock to receive dividends or other
distributions and to vote or consent as such owner, and to hold liable for calls
and assessments any person who is registered on its books as the owner of shares
of its capital stock. The Corporation shall not be bound recognize any equitable
or legal claim to, or interest in, such shares on the part of any other person.
(b) If a stockholder desires that notices and/or dividends shall be
sent to a name or address other than the name or address appearing on the stock
ledger maintained by the Corporation, or its transfer agent or registrar, if
any, the stockholder shall have the duty to notify the Corporation, or its
transfer agent or registrar, if any, in writing of his desire and specify the
alternate name or address to be used.
Section 4. Record Date. In order that the Corporation may determine the
stockholders of record who are entitled to receive notice of, or to vote at, any
meeting of stockholders or any adjournment thereof or to express consent to
corporate action in writing without a meeting, to receive payment of any
dividend or other distribution or allotment of any rights, or to exercise any
rights in respect of any change, conversion, or exchange of stock or for the
purpose of any lawful action, the Board of Directors may, in advance, fix a date
as the record date for any such determination. Such date shall not be more than
sixty nor less than ten days before the date of such meeting, nor more than
sixty days prior to the date of any other action. A determination of
stockholders of record entitled to notice of, or to vote at, a meeting of
stockholders shall apply to any adjournment of the meeting taken
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pursuant to Section 8 of Article II; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 5. Lost, Stolen, or Destroyed Certificates. The Board of
Directors may direct that a new certificate be issued to replace any certificate
theretofore issued by the Corporation that, it is claimed, has been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen, or destroyed. When authorizing the
issue of a new certificate, the Board of Directors may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of the lost,
stolen, or destroyed certificate, or his legal representative, to advertise the
same in such manner as it shall require, and/or to give the Corporation a bond
in such sum, or other security in such form, as it may direct as indemnity
against any claims that may be made against the Corporation with respect to the
certificate claimed to have been lost, stolen, or destroyed.
Article X. General Provisions.
Section 1. Dividends. Subject to the provisions of law and the
Certificate of Incorporation, dividends upon the outstanding capital stock of
the Corporation may be declared by the Board of Directors at any regular or
special meeting, and may be paid in cash, in property, or in shares of the
Corporation's capital stock.
Section 2. Reserves. The Board of Directors shall have full power,
subject to the provisions of law and the Certificate of Incorporation, to
determine whether any, and, if so, what part, of the funds legally available for
the payment of dividends shall be declared as dividends and paid to the
stockholders of the Corporation. The Board of Directors, in its sole discretion,
may fix a sum that may be set aside or reserved over and above the paid-in
capital of the Corporation as a reserve for any proper purpose, and may, from
time to time, increase, diminish, or vary such amount.
Section 3. Fiscal Year. Except as from time to time otherwise provided
by the Board of Directors, the fiscal year of the Corporation shall end on
September 30 in each year.
Section 4. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation, and the words "Corporate
Seal" and "Delaware".
Article XI. Amendments.
The Board of Directors shall have the power to alter and repeal these
Bylaws and to adopt new Bylaws by an affirmative vote of a majority of the whole
Board, provided that notice of the proposal to alter or repeal these Bylaws or
to adopt new Bylaws must be included in the notice of the meeting of the Board
of Directors at which such action takes place.
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Exhibit 10.6
COMMERCIAL REVOLVING LOAN, DEMAND LOAN AND SECURITY AGREEMENT
This Commercial Revolving Loan, Demand Loan and Security Agreement dated
November 1, 1996 among INDUSTRIAL TECHNOLOGIES, INC. a Delaware corporation with
its chief executive office and principal place of business at One Trefoil Drive,
Trumbull, Connecticut 06601 ("ITI"), INTEC EUROPE, LTD., a Delaware corporation
with its chief executive office and principal place of business at One Trefoil,
Trumbull, Connecticut 06601 ("INTEC", and together with ITI, collectively
referred to as the "Borrowers"), and AMERICAN COMMERCIAL FINANCE CORPORATION, a
Delaware corporation with an office at 433 South Main Street, West Hartford,
Connecticut 06110 ("Lender").
PREAMBLE
WHEREAS, Borrowers have requested Lender to extend to Borrowers (a) a
revolving loan in the maximum aggregate principal amount of up to $1,500,000
(the "Revolving Loan") and (b) a demand loan in the original principal amount of
$500,000 (the "Demand Loan", and together with the Revolving Loan, the "Loans");
and
WHEREAS, Lender has agreed to extend the Loans to Borrowers on the
conditions set forth below.
NOW, THEREFORE, for the mutual considerations contained in this
Agreement, Borrowers and Lender agree as follows:
ARTICLE I. Definitions
Section 1.1. Accounting Terms; Etc. Unless otherwise defined, all
accounting terms shall be construed, and all computations or classifications of
assets and liabilities and of income and expenses shall be made or determined in
accordance with generally accepted accounting principles consistently applied.
As used herein, or in the Financing Agreements or in any certificate, document
or report delivered pursuant to this Agreement or any other Financing Agreement,
the following terms shall have the following meanings:
(a) "Account" and "Accounts" shall have the meanings
assigned in Section 8.1(a) hereof.
(b) "Account Debtor" and "Account Debtors" shall mean
the person or entity or persons or entities obligated to Borrowers upon the
Accounts.
(c) "Agreement" shall mean this Commercial Revolving
Loan, Demand Loan and Security Agreement as the same may from time to time be
amended, supplemented or otherwise modified.
(d) "Arrangement" and "Arrangements" shall have the
meaning assigned in Section 5.1(n) hereof.
(e) "Borrower" shall mean ITI or Intec and
"Borrowers" shall mean ITI and Intec.
(f) "Business Day" shall mean any day other than a
day on which commercial banks in Hartford, Connecticut are required or permitted
by law to close.
(g) "Collateral" shall mean the property of Borrowers
described in Section 8.1 hereof.
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(h) "Commitment Letter" shall mean that certain
commitment letter issued by Lender to Borrower and dated October 8, 1996.
(i) "Company" and "Companies" shall mean Borrowers
and any entities affiliated with Borrowers in connection with any Plan.
(j) "Corporate Guarantor" shall mean Intec Corp., a
Delaware corporation.
(k) "Corporate Guarantor Security Agreement" shall
have the meaning assigned in Section 6.1(f) hereof.
(l) "Corporate Guaranty" shall have the meaning
assigned in Section 6.1(e) hereof.
(m) "Defaulting Event" shall mean the occurrence of
an Event of Default or the occurrence of any condition or event which but for
the giving of notice or passage of time or both would constitute an Event of
Default.
(n) "Demand Loan" shall have the meaning assigned in
Section 3.1 hereof.
(o) "Demand Loan Borrowing Base" shall mean an amount
equal to the lesser of: (i) thirty percent (30%) of the cost of ITI's Eligible
Inventory located at the Premises determined from time to time by the Lender
based upon cost information provided to Lender by Borrower, or (ii) the Maximum
Inventory Amount.
(p) "Demand Promissory Note" shall have the meaning
assigned in Section 3.1 hereof.
(q) "Dollar" and the sign "$" shall mean lawful money
of the United States of America.
(r) "Eligible Accounts" shall mean those Accounts of
Borrowers which arise from the sale of inventory or rendition of services in the
ordinary course of Borrowers' business, are subject to Lender's perfected, first
lien security interest and no other lien or security interest, and are evidenced
by an invoice or other documentary evidence satisfactory to Lender. Further, no
Account shall be an Eligible Account if:
(i) it arises out of a sale made by Borrowers to any
affiliate, division, subsidiary or parent of Borrowers or to any person
or entity controlled by or under common control with an affiliate,
division, subsidiary or parent of Borrowers;
(ii) it is due or unpaid more than ninety (90) days after its
original invoice date;
(iii) the account debtor is also Borrowers' creditor or
supplier, has disputed liability or made any claim with respect to any
other account due from such account debtor to Borrowers, or the account
is otherwise subject to any defense, counterclaim or offset of or by
the account debtor;
(iv) the account debtor is located outside the United States
and Canada (unless such account is supported by a letter of credit or
credit insurance acceptable in form, scope and substance satisfactory
to Lender in Lender's sole discretion);
(v) the account debtor is located in New Jersey or Minnesota,
unless Borrowers have (x) filed a Notice of Business Activity Report in
the appropriate office or agency for such state in the then current
year, or (y) received a Certificate of Authority to do business and is
in good standing in such state;
(vi) the sale giving rise to the account is on a
bill-and-hold, guaranteed sale, sale-and-return, sale on approval,
consignment or other repurchase or return basis, or is evidenced by a
note or chattel paper;
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(vii) Borrowers have made an agreement with the account debtor
for any deduction from the invoice representing said account, except
for discounts or allowances made in the ordinary course of Borrowers'
business for prompt payment, which discounts or allowances are
reflected in the calculation of the face value of each respective
invoice related thereto;
(viii) twenty-five percent (25%) or more of the aggregate
invoices for an account debtor are due or unpaid for more than ninety
(90) days after their original invoice date;
(ix) it arises out of a sale made by the Borrowers to an
account debtor that is the United States Government or any agency or
subdivision thereof (collectively the "Government"), unless Borrowers
have complied in all respects with the Federal Assignment of Claims Act
of 1940, or has otherwise satisfied Lender as to the assignability and
collectability of said accounts; or
(x) the Lender in its sole discretion deems the Account to be
unacceptable for any reason.
If there is any dispute as to whether any Account is an Eligible
Account, the determination of Lender shall at all times control.
(s) "Eligible Foreign Accounts" shall mean an Account
that is otherwise an Eligible Account and further (i) is an account arising from
a sale by Intec in the ordinary course of its business, (ii) is an account in
which Lender has a first lien security interest perfected under Belgian law,
(iii) the account debtor has been notified to remit payment directly to Lender
pursuant to a notice in form and content satisfactory to Lender, and (iv) is an
account supported by a letter of credit or credit insurance in form, scope and
substance satisfactory to Lender in Lender's sole discretion.
(t) "Eligible Inventory" shall mean ITI's inventory
of raw material, finished goods and work-in-process to the extent Lender, in its
sole discretion, determines that such inventory is eligible for advance. In
addition and without limiting Lender's discretion, Eligible Inventory shall be
net of reserves and returns, valued at cost, and subject to Lender's perfected
first security interest and to no other lien or security interest. Further and
without limiting Lender's discretion, no inventory shall be eligible if it is:
(i) deemed by Lender as slow moving or obsolete;
(ii) not otherwise in good condition and salable through
normal trade channels; or
(iii) not salable in the ordinary course of Borrower's
business.
(u) "Environmental Laws" shall mean any and all
applicable foreign, federal, state and local statutes, laws, regulations, rules,
ordinances, orders, guidances, policies or common law (whether now existing or
hereafter enacted or promulgated) pertaining to the environment, of any and all
federal, state or local governments and governmental and quasi-governmental
agencies, bureaus, subdivisions, commissions or departments which may now or
hereafter have jurisdiction over Borrower and all applicable judicial and
administrative and regulatory decrees, judgments and orders, including common
law rulings and determinations, relating to injury to, or the protection of,
real or personal property or human health or the environment, including, without
limitation, all requirements pertaining to reporting, licensing, permitting,
investigation, remediation and removal of emissions, discharges, releases or
threatened releases of Hazardous Materials, chemical substances, pollutants or
contaminants whether solid, liquid or gaseous in nature, into the environment or
relating to the manufacture, processing, distribution, use, treatment, storage,
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disposal, transport or handling of such Hazardous Materials, chemical
substances, pollutants or contaminants.
Without limiting the generality of the foregoing, the term
"Environmental Laws" shall encompass each of the following statutes, and
regulations promulgated thereunder, and amendments and successors to such
statutes and regulations, as may be enacted and promulgated from time to time:
Federal Occupational Safety and Health Act ("OSHA"); the Clean Air Act ("CAA");
the Toxic Substances Control Act ("TSCA"); the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"); the Clean Water Act
("CWA"); the Resource Conservation and Recovery Act, as amended by the Hazardous
and Solid Waste Amendments of 1984 ("RCRA"); the Hazardous Materials
Transportation Act; and all applicable Environmental Laws of each state and
municipality in which Borrower conducts business or locates assets and all rules
and regulations thereunder and amendments thereto, and all similar state and
local laws, rules and regulations.
(v) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974 and all rules and regulations promulgated pursuant thereto,
as the same may from time to time be supplemented or amended.
(w) "Event of Default" and "Events of Default" shall
have the meanings assigned in Section 9.1 hereof.
(x) "Fidelity Guarantors" shall have the meaning
assigned in Section 6.1(d) hereof.
(y) "Fidelity Guaranties" shall have the meaning
assigned in Section 6.1(d) hereof.
(z) "Financing Agreement" or "Financing Agreements"
shall mean this Agreement, the Notes, the Fidelity Guaranties, the Corporate
Guaranty, the Corporate Security Agreement, and any and all other instruments,
agreements and documents executed in connection herewith or therewith or related
hereto or thereto, together with any amendments, supplements or modifications
hereto or thereto.
(aa) "Fixed Assets" shall mean equipment and other
assets of Borrowers which, by generally accepted accounting principles, must be
treated as fixed assets in financial statements of Borrowers.
(bb) "Further Loans" shall have the meaning assigned
in Section 6.2 hereof.
(cc) "Hazardous Material" shall mean any chemical,
compound, material, mixture or substance: (i) the presence of which requires or
may hereafter require notification, investigation, monitoring or remediation
under any Environmental Law; (ii) which is or becomes defined as a "hazardous
waste", "hazardous material" or "hazardous substance" or "toxic substance" or
"pollutant" or "contaminant" under any present or future applicable federal,
state or local law or under the rules and regulations adopted or promulgated
pursuant thereto, including, without limitation, the Environmental Laws; (iii)
which is toxic, explosive, corrosive, reactive, ignitable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of any foreign country, the United States, any state
of the United States, or any political subdivision thereof to the extent any of
the foregoing has or had jurisdiction over Borrowers; (iv) which contains
without limitation, gasoline, diesel fuel or other petroleum products, asbestos
or polychlorinated biphenyls ("PCBs"); or (v) any other chemical, material or
substance, exposure to, or disposal of, which is now or hereafter
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prohibited, limited or regulated by any federal, state or local governmental
body, instrumentality or agency.
(dd) "Indemnifiable Liability" shall have the meaning
assigned in Section 14.1(a) hereof.
(ee) "Indemnitee" and "Indemnitees" shall have the
meanings assigned in Section 14.1(a) hereof.
(ff) "Intec" shall have the meaning assigned in the
first paragraph hereof.
(gg) "ITI" shall have the meaning assigned in the
first paragraph hereof.
(hh) "Lender" shall have the meaning assigned in the
first paragraph hereof.
(ii) "Life Insurance Assignment" shall have the
meaning assigned in Section 6.1(k) hereof.
(jj) "Loan" means a Revolving Loan or the Demand Loan
and "Loans" means the Revolving Loans and the Demand Loan.
(kk) "Maximum Inventory Amount" shall mean (i)
$500,000 from the date hereof through March 31, 1997, and thereafter, (ii) the
amounts set forth on Schedule A attached hereto for the corresponding time
periods set forth therein.
(ll) "Minimum Balance" shall have the meaning
assigned in Section 4.1(a) hereof.
(mm) "Minimum Interest Amount" shall have the meaning
assigned in Section 13.1(c) hereof.
(nn) "Notes" shall mean the Revolving Promissory Note
and the Demand Promissory Note.
(oo) "Notice of Borrowing" shall have the meaning
assigned in Section 2.3 hereof.
(pp) "Obligation" and "Obligations" shall mean and
include all loans, advances, interest, indebtedness, liabilities, obligations,
fees, charges, expenses, guaranties, covenants and duties at any time owing by
Borrowers to Lender of every kind and description, whether or not evidenced by
any note or other instrument, whether or not for the payment of money, whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, including, but not limited to, the Loans, the Termination
Fee, all other indebtedness, liabilities and obligations of Borrowers arising
under this Agreement and the other Financing Agreements or otherwise, and all
costs, expenses, fees, charges incurred by Lender hereunder or otherwise with
respect to Borrowers, including without limitation, fees and expenses of
attorneys, paralegals and other professionals incurred in connection with any of
the foregoing, or in any way connected with, involving or relating to the
preservation, enforcement, protection or defense of, or realization under this
Agreement, any of the other Financing Agreements, any related agreement,
document or instrument, the Collateral and the rights and remedies hereunder or
thereunder, including without limitation, all costs, expenses and fees incurred
in inspecting or surveying mortgaged real estate, if any, or conducting
Environmental studies or tests, and all costs, expenses and fees incurred in
connection with any "workout" or default resolution negotiations involving legal
counsel or other professionals and further in connection with any modification,
renegotiation or restructuring of the indebtedness evidenced by this Agreement
and/or any of the other Financing Agreements and/or Obligations.
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(qq) "Plan" shall mean any employee benefit plan or
other plan maintained by Borrowers or any entity affiliated with Borrowers for
employees covered by Title I of ERISA.
(rr) "Premises" shall mean the real property located
at One Trefoil Drive, Trumbull, Connecticut 06601.
(ss) "Prime Rate" shall mean the Prime Rate as
published from time to time in the "Money Rates" section of The Wall Street
Journal or any successor publication, or in the event that such rate is no
longer published in The Wall Street Journal, a comparable index or reference
selected by Lender. The Prime Rate need not and may not necessarily be the
lowest or most favorable rate.
(tt) "Receivables" shall have the meaning assigned in
Section 8.1(a) hereof.
(uu) "Release" shall mean any release, emission,
disposal, leaching or migration into the environment (including, without
limitation, the abandonment or disposal of any barrels, containers, or other
closed receptacles containing any Hazardous Materials) or into or out of any
property owned, occupied or used by Borrowers.
(vv) "Renewal Term" shall have the meaning assigned
in Section 13.1 (a) hereof.
(ww) "Revolving Loan" and "Revolving Loans" shall
have the meanings assigned in Section 2.1 hereof.
(xx) "Revolving Loan Account" shall have the meaning
assigned in Section 2.3 hereof.
(yy) "Revolving Loan Borrowing Base" shall mean an
amount equal to the lesser of: (i) ONE MILLION FIVE HUNDRED THOUSAND DOLLARS
($1,500,000), or (ii) an amount equal to the aggregate of (1) eighty percent
(80%) of Eligible Accounts which arise out of sales by ITI, plus (2) the lesser
of (A) eighty percent (80%) of Eligible Foreign Accounts, or (B) TWO HUNDRED
FIFTY THOUSAND DOLLARS ($250,000); provided, however, that Borrowers'
eligibility under the Revolving Loan Borrowing Base shall be reduced dollar for
dollar by the outstanding principal amount of the Demand Loan. For example, if
the outstanding principal amount of the Demand Loan is $500,000, the Borrowers
shall be eligible to borrow $1,000,000 pursuant to subsection (i) of the
preceding sentence.
(zz) "Revolving Promissory Note" shall have the
meaning assigned in Section 2.3 hereof.
(aaa) "Subordinating Creditor" shall mean Carl Marks
New York, LP.
(bbb) "Subordination Agreement" shall have the
meaning set forth in Section 6.1(g) hereof.
(ccc) "Subsidiary" and "Subsidiaries" shall mean any
corporation or corporations of which the outstanding shares of any stock having
ordinary voting power is at the time owned by Borrowers and/or by one or more
Subsidiaries.
(ddd) "Term" shall have the meaning assigned in
Section 13.1(a) hereof.
(eee) "Termination Fee" shall have the meaning
assigned in Section 13.1(c) hereof.
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ARTICLE II. Revolving Loans
Section 2.1. Amount. Subject to the terms and conditions contained in
this Agreement, and so long as no Defaulting Event has occurred, Lender agrees,
in its sole discretion, to make loans (collectively, the "Revolving Loans" and,
individually, a "Revolving Loan") to Borrowers from time to time until
terminated as provided below in principal amounts not exceeding in the aggregate
at any one time outstanding the Revolving Loan Borrowing Base, it being agreed
and understood that at no time shall the maximum aggregate principal amount of
the Revolving Loans made by Lender exceed the Revolving Loan Borrowing Base.
Without limiting Lender's discretion, notwithstanding the actual net face value
of any Eligible Account of Borrowers, for purposes of computing the Revolving
Loan Borrowing Base, the value of any Eligible Account with a net face value in
excess of $50,000 shall be reduced to $50,000 prior to the application of such
Revolving Loan Borrowing Base unless, upon Borrowers' request, Lender approves a
higher limit. Lender may, in its sole discretion, raise or lower any such limits
without in any way creating a course of conduct which requires Lender to
maintain such raised or lowered limit or to raise or lower such limit again in
the future.
Section 2.2. Payment on Demand. ALL OBLIGATIONS OF BORROWERS ARISING
UNDER THE REVOLVING LOANS SHALL BE PAID BY BORROWERS IN FULL UPON DEMAND BY
LENDER, NOTWITHSTANDING LENDER'S RIGHTS UPON THE OCCURRENCE OF AN EVENT OF
DEFAULT AND WHETHER OR NOT SUCH EVENT OF DEFAULT HAS OCCURRED.
Section 2.3. Procedure For Advances, Notice of Borrowing, Revolving
Promissory Note, Etc. Within the limits of the Revolving Loan Borrowing Base and
the Term, so long as Borrowers are in compliance with all of the terms and
conditions of this Agreement and no Defaulting Event has occurred, Borrowers may
request borrowings, repay and request reborrowings of Revolving Loans. Whenever
Borrowers desire an advance, Borrowers shall notify Lender (which notice shall
be irrevocable) by telex, telecopy or telephone of the proposed borrowing. Such
notice (each, a "Notice of Borrowing") shall specify the date of the proposed
borrowing and the amount to be borrowed. Each Notice of Borrowing must be
received by Lender no later than 11:00 a.m., Hartford, Connecticut time on the
day such borrowing is requested. In addition to this Agreement, the Revolving
Loans shall be evidenced by a revolving promissory note payable to Lender in the
form of Exhibit A attached hereto (the "Revolving Promissory Note"). Insofar as
Borrowers may request and Lender shall make Revolving Loans hereunder, Lender
shall enter such advances as debits on a revolving loan account maintained by
Borrowers with Lender (the "Revolving Loan Account"). In order to facilitate the
requesting and making of advances hereunder, Intec hereby appoints ITI as its
agent authorized to request, receive and distribute to Intec advances under the
Revolving Loan and to communicate with the Lender with respect to the Revolving
Loan, and ITI hereby accepts such appointment. Lender may also record to the
Revolving Loan Account, in accordance with customary accounting practices and
procedures, all fees, accrued and unpaid interest, late fees, usual and
customary charges for the maintenance and administration of checking and any
other accounts maintained by Borrowers with Lender and other fees and charges
which are properly chargeable to Borrowers under this Agreement; all payments,
subject to collection, made by Borrowers on account of indebtedness evidenced by
the Revolving Loan Account; all proceeds of Collateral which are finally paid to
Lender in its own office in cash or collected items; and other appropriate
debits and credits, including, without limitation, payments of interest due
hereunder.
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Section 2.4. Monthly Statements. On a monthly basis, Lender shall
render a statement for the Revolving Loan Account, which statement shall be
considered correct and accepted by Borrowers and conclusively binding upon
Borrowers unless Borrowers notifies Lender to the contrary within ten (10) days
of the receipt of said statement by Borrowers. Lender shall have the right to
debit the Revolving Loan Account for all interest charges on the Loan as and
when the same shall be due and payable, if not otherwise paid by Borrowers.
Section 2.5. Lender Discretion. Nothing herein shall be construed to
(a) require Lender to make Revolving Loans, and/or (b) prohibit Lender from
lending in excess of the Revolving Loan Borrowing Base, it being agreed that all
such loans and advances shall be at Lender's sole discretion and shall not
establish a pattern or custom binding upon Lender.
ARTICLE III. Demand Loan
Section 3.1. Amount. Subject to the terms and conditions contained in
this Agreement, Lender agrees to make a loan to Borrowers in the original
principal amount of $500,000 (the "Demand Loan"). In addition to this Agreement,
the Demand Loan shall be evidenced by a Demand Promissory Note payable to Lender
in the form of Exhibit B attached hereto (the "Demand Promissory Note").
Section 3.2. Payment on Demand. ALL OBLIGATIONS OF BORROWERS ARISING
UNDER THE DEMAND LOAN SHALL BE PAID BY BORROWERS IN FULL UPON DEMAND BY LENDER,
NOTWITHSTANDING LENDER'S RIGHTS UPON THE OCCURRENCE OF AN EVENT OF DEFAULT AND
WHETHER OR NOT SUCH EVENT OF DEFAULT HAS OCCURRED AND, IF DEMAND IS NOT SOONER
MADE, AS SET FORTH IN THE DEMAND NOTE.
Section 3.3. Monthly Statements. On a monthly basis, Lender shall
render a statement for the Demand Loan, which statement shall be considered and
accepted by Borrowers and conclusively binding upon Borrowers unless Borrowers
notifies Lender to the contrary within ten (10) days of the receipt of said
statement by Borrowers, Lender shall have the right to debit any account of
Borrowers for all principal, interest and other charges on the Demand Loan as
and when the same shall be due and payable, if not otherwise paid by Borrowers.
ARTICLE IV. Interest, Fees and other Charges
Section 4.1. Interest.
(a) INTEREST RATES. So long as no Defaulting Event
has occurred, the Loans shall bear interest (from the date made through and
including the date of payment in full), at a floating rate per annum equal to
four percentage points (4.0%) above the Prime Rate, on the greater of (i) the
actual aggregate monthly balance outstanding under the Loans, or (ii) a minimum
assumed aggregate monthly loan balance of $900,000 (the "Minimum Balance").
(b) PAYMENT OF INTEREST. So long as any of the
Obligations remain outstanding, interest on the Loans shall be due and payable
without notice or demand monthly in arrears beginning on November 1, 1996 and
continuing on the first business day of each and every month thereafter.
(c) DEFAULT INTEREST RATE. Notwithstanding the
foregoing, interest on the Loans, at all times after the occurrence of an Event
of Default, and interest on
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all payments of interest that are not paid when due, shall accrue at a rate per
annum equal to four percentage points (4.0%) above the applicable interest rates
otherwise in effect under this Agreement.
(d) CALCULATION OF INTEREST. Interest on the Loans
shall be calculated on the basis of a 360-day year and the actual number of days
elapsed.
(e) LATE PAYMENT. If any amount due hereunder or
under the Notes are not paid within ten (10) days after the date it is due and
payable, without in any way affecting Lender's right to make demand hereunder or
to declare an Event of Default to have occurred, Lender may in its sole
discretion assess a late charge equal to five percent (5.0%) of such late
payment against Borrowers, which late charge shall be immediately due and
payable and may be paid by a charge to Borrowers' loan account as contemplated
in Section 2.3 above.
(f) LAWFUL INTEREST. It being the intent of the
parties that the rate of interest and all other charges to Borrowers be lawful,
if for any reason the payment of a portion of interest, fees or charges as
required by this Agreement would exceed the limit established by applicable law
which a commercial lender such as Lender may charge to a commercial Borrowers
such as Borrowers, then the obligation to pay interest or charges shall
automatically be reduced to such limit and, if any amounts in excess of such
limits shall have been paid, then such amounts shall be applied to the unpaid
principal amount of the Obligations or refunded to Borrowers so that under no
circumstances shall interest or charges required hereunder exceed the maximum
rate allowed by law, as aforesaid.
Section 4.2. Closing Fees. On or before the date hereof, Borrowers
shall pay or have paid to Lender all fees, expenses and other costs incurred by
Lender in connection with the closing of the extension of the Loans (including,
without limitation, all attorney's and other professional's fees and expenses).
Section 4.3. Commitment Fee. Borrowers shall also pay to Lender a
nonrefundable commitment fee equal to one percent (1%) of the maximum principal
amount of the Loans on the date hereof and on each anniversary date of this
Agreement. It is understood that the determination of the maximum principal
amount of the Loans shall be made without regard to the component of the
Revolving Loan Borrowing Base based upon Eligible Accounts. For example, for
purposes of this provision, on the date hereof the maximum principal amount of
the Loans is $1,500,000 and the commitment fee payable on the date hereof is
$15,000.
ARTICLE V. Representations and Warranties
Section 5.1. Representations and Warranties. EACH OF THE BORROWERS
REPRESENTS AND WARRANTS TO LENDER THAT:
(a) GOOD STANDING AND QUALIFICATION. It is duly
organized, validly existing and in good standing under the laws of the State of
Delaware. It has all requisite corporate power and authority to own and operate
its properties and to carry on its business as presently conducted and is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction wherein the character of the properties owned or leased by it
therein or in which the transaction of its business therein makes such
qualification necessary.
(b) CORPORATE AUTHORITY. It has full power and
authority to enter into this Agreement and the other Financing Agreements to
which it is a party, to make the borrowings contemplated herein, to execute and
deliver the Notes and the other Financing Agreements to which it is a party, and
to incur the obligations provided for herein and therein,
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all of which have been duly authorized by all necessary and proper corporate
action. No other consent or approval or the taking of any other action in
respect of shareholders or of any public authority is required as a condition to
the validity or enforceability of this Agreement, the Notes, the other Financing
Agreements or any other instrument, document or agreement delivered in
connection herewith or therewith.
(c) BINDING AGREEMENTS. This Agreement constitutes,
and the Notes and the other Financing Agreements executed and/or delivered in
connection herewith or therewith, when issued and delivered pursuant hereto for
value received shall constitute, valid and legally binding obligations of
Borrowers, enforceable in accordance with their respective terms, except as
enforcement may be limited by principles of equity, bankruptcy, insolvency, or
other laws affecting the enforcement of creditors' rights generally.
(d) LITIGATION. There are no actions, suits or
proceedings pending against Borrowers before any court or administrative agency,
nor are there any actions, suits or proceedings threatened, which, individually
or in the aggregate, would materially and adversely affect the financial
condition, assets or operations of Borrowers, nor are there any such actions,
suits or proceedings which question the validity of this Agreement, the Notes,
any of the other Financing Agreements, or any action to be taken in connection
with the transactions contemplated hereby or thereby.
(e) NO CONFLICTING LAW OR AGREEMENTS. The execution,
delivery and performance by Borrowers of this Agreement, the Notes and each
other Financing Agreement, as the case may be, does not (i) violate any
provision of its Articles of Incorporation or By-laws or any order, decree or
judgment, or any provision of any statute, rule or regulation to which the
Borrowers may be subject; (ii) violate or conflict with, result in a breach of
or constitute (with notice or lapse of time, or both) a default under any
shareholder agreement, stock preference agreement, mortgage, indenture or other
contract or undertaking to which it is a party, or by which any of its
properties may be bound; and (iii) result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any property or assets
of Borrowers except for the liens granted hereunder to Lender.
(f) TAXES. With respect to all of its taxable periods
it has filed all tax returns which are required to be filed and all federal,
state, municipal, franchise and other taxes shown on such filed returns have
been paid or are being diligently contested by appropriate proceedings and have
been reserved against, as required by generally accepted accounting principles,
consistently applied.
(g) FINANCIAL STATEMENTS. It has heretofore delivered
to Lender: (i) its audited annual balance sheet as of September 30, 1995, and
the related statements of income, retained earnings and cash flows for the
fiscal year or period then ended. Each of such statements is complete and
correct in all material respects and fairly presents its consolidated financial
condition as of the dates and for the periods referred to therein and has been
prepared in accordance with generally accepted accounting principles
consistently applied by it throughout the periods involved. There are no
liabilities, direct or indirect, fixed or contingent, of Borrowers as of the
dates of said balance sheets which are not reflected in such statements or in
the notes thereto.
(h) ADVERSE DEVELOPMENTS. Except as disclosed in
Borrowers' most recent Form 10K filed with the Securities and Exchange
Commission and subsequently filed Form 10Qs and except that Borrowers anticipate
a loss for quarter ended August 30, 1996, since September 30, 1995 there has
been no material adverse change in its financial condition, business,
operations, affairs or prospects of Borrowers or in any of their properties or
assets.
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(i) EXISTENCE OF ASSETS AND TITLE THERETO. It has
good and marketable title to all of its properties and assets, including the
properties and assets reflected in the financial statements delivered in
connection herewith. None of such properties or assets are subject to any
mortgage, pledge, lien, lease, encumbrance or charge except those permitted
under the terms of this Agreement.
(j) REGULATIONS G, T, U AND X. The proceeds of the
borrowings hereunder are not being used and will not be used, directly or
indirectly, for the purposes of purchasing or carrying any margin stock in
contravention, or which would cause any Lender to be in violation, of
Regulations G, T, U or X promulgated by the Board of Governors of the Federal
Reserve System.
(k) COMPLIANCE. It is not in default with respect to
any order, writ, injunction or decree of any court or of any federal, state,
municipal or other governmental department, commission, board, bureau, agency,
authority or official, nor is it in violation of any law, statute, rule or
regulation to which it or any of its properties are subject and it has not
received notice of any such default from any party and is not in default in the
payment or performance of any of its obligations to any third parties or in the
performance of any mortgage, indenture, lease, contract or other agreement to
which it is a party or by which any of its assets or properties may be bound.
(l) LEASES It enjoys quiet and undisturbed possession
under all leases under which it is operating, and all of such leases are valid
and subsisting and not in default.
(m) PENSION PLANS.
(i) No fact, including but not limited to any "reportable
event", as that term is defined in Section 4043 of ERISA, exists in
connection with any Plan of any of the Companies under Sections 414(b),
(c), (m), (n) and (o) of the Internal Revenue Code of 1986, as amended
(the "Code") which might constitute grounds for termination of any such
Plan by the Pension Benefit Guaranty Corporation (the "PBGC"), or for
the appointment by the appropriate United States District Court of a
trustee to administer any such Plan. A list of all of the Companies'
respective Plans are attached hereto on Schedule 5.1(m) attached
hereto;
(ii) No "prohibited transaction" within the meaning of Section
406 of ERISA or Section 4975 of the Code exists or will exist upon the
execution and delivery of this Agreement and the other Financing
Agreements, or the performance by the parties hereto or thereto of
their respective duties and obligations hereunder and thereunder;
(iii) Each of the Companies agrees to do all acts, including,
but not limited to, making all contributions necessary to maintain
compliance with ERISA or the Code, and agrees not to terminate any such
Plan in a manner or do or fail to do any act which could result in the
imposition of a lien on any of its properties pursuant to Section 4068
of ERISA;
(iv) None of the Companies sponsors or maintains, and has
never contributed to, and has not incurred any withdrawal liability
under a "multi-employer plan" as defined in Section 3 of ERISA and none
of the Companies has any written or verbal commitment of any kind to
establish, maintain or contribute to any "multi-employer plan" under
the Multi-employer Pension Plan Amendment Act of 1980;
(v) None of the Companies has any unfunded liability in
contravention of ERISA and the Code;
(vi) Each and every Plan complies currently, and has complied
in the past, both as to form and operation, with its terms and with
provisions of the Code and
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ERISA, and all applicable regulations thereunder and all rules issued
by the Internal Revenue Service, U.S. Department of Labor and the PBGC
and as such, is and remains a "qualified" plan under the Code;
(vii) No actions, suits or claims are pending (other than
routine claims for benefits) against any Plan, or the assets of any
such Plan;
(viii) The Companies have performed all obligations required
to be performed by it under any Plan and the Companies are not in
default, or in violation of any Plan, and have no knowledge of any such
default or violation by any other party to any and all Plans;
(ix) No liability has been incurred by any of the Companies to
the PBGC or to participants or beneficiaries on account of any
termination of a Plan subject to Title IV of ERISA, no notice of intent
to terminate a Plan has been filed by (or on behalf of) any of the
Companies pursuant to Section 4041 of ERISA and no proceeding has been
commenced by the PBGC pursuant to Section 4042 of ERISA;
(x) The reporting and disclosure provisions of the Securities
Act of 1933 and Securities Exchange Act of 1934 have been complied with
for all such Plans.
(n) DEFERRED COMPENSATION ARRANGEMENTS. Except as set
forth in Schedule 5.1(n) attached hereto, none of the Companies has entered into
employment contracts or deferred compensation plans, incentive compensation
plans, executive compensation plans, arrangements or commitments (each,
individually, an "Arrangement"). With respect to each such Arrangement:
(i) Such Arrangement complies currently, and has complied in
the past, both as to form and operation with its terms and the
provisions of the Code and ERISA and all applicable laws, rules and
regulations;
(ii) The disclosure and reporting provisions of the Securities
Act of 1933 and the Securities Exchange Act of 1934 have been
satisfied;
(iii) Such Arrangement is legally valid and binding and is in
full force and effect;
(iv) The Companies have made all contributions required to be
made under any such Arrangement and no contributions are currently due
and owing;
(v) There are no actions, suits or claims pending (other than
routine claims for benefits) or, to the best of the Companies'
knowledge which could be reasonably expected to be asserted against any
such Arrangement; and
(vi) The Companies have performed all obligations required to
be performed by it under any such Arrangement and the Companies are not
in default or in violation of, and the Companies have no knowledge of a
default or violation by any other party to any such Arrangement.
(o) CHIEF EXECUTIVE OFFICE. Its chief executive
office and principal place of business, and the office where its books and
records concerning Collateral are kept, is as set forth in the first paragraph
of this Agreement.
(p) PLACES OF BUSINESS AND LOCATION OF COLLATERAL. It
has no other places of business and locates no Collateral, specifically
including books and records, at any location other than as set forth in the
first paragraph of this Agreement and as set forth on Schedule 5.1(p) attached
hereto. It shall maintain a full and complete set of its books and records in
its offices at the chief executive office described in the immediately preceding
paragraph.
(q) CONTINGENT LIABILITIES. It is not a party to any
suretyship, guaranty or other similar type agreement, nor has it offered its
endorsement to any individual,
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concern, corporation or other entity or acted or failed to act in any manner
which would in any way create a contingent liability that does not appear in the
financial statements referred to hereinbefore.
(r) CONTRACTS. No contract, governmental or
otherwise, to which it is a party, is subject to renegotiation, nor is it in
default in any material respect of any contract.
(s) UNIONS AND PENSIONS. It is not a party to any
collective bargaining or union agreement.
(t) LICENSES. It has all licenses, permits and other
permissions required by any government, agency or subdivision thereof, or from
any licensing entity to which Borrowers may be subject, necessary for the
conduct of its business, all of which it represents to be in good standing and
in full force and effect.
(u) COLLATERAL. It is and shall continue to be the
sole owner of the Collateral free and clear of all liens, encumbrances, security
interests and claims except the liens granted to Lender or permitted hereunder
and the security interests and liens listed on Schedule 5.1(u) attached hereto;
Borrowers are fully authorized to sell, transfer, pledge and/or grant a security
interest in each and every item of the Collateral to Lender; all documents and
agreements related to the Collateral shall be true and correct and in all
respects what they purport to be; all signatures and endorsements that appear
thereon shall be genuine and all signatories and endorsers shall have full
capacity to contract; none of the transactions underlying or giving rise to the
Collateral shall violate any applicable state or federal laws or regulations;
all documents relating to the Collateral shall be legally sufficient under such
laws or regulations and shall be legally enforceable in accordance with their
terms; and Borrowers agree to defend the Collateral against the claims of all
persons other than Lender.
(v) TRADENAMES. Except as set forth in Schedule
5.1(v) attached hereto, it does not have any tradenames.
(w) FINANCIAL INFORMATION. All financial information
including, but not limited to, information relating to the Receivables and
Inventory, submitted by it to Lender, whether previously or in the future, is
and will be true and correct in all material respects, and is and will be
complete insofar as may be necessary to render it a true and accurate depiction
of the subject matter to which it relates.
(x) PARENT, AFFILIATE OR SUBSIDIARY CORPORATIONS.
Except as set forth in Schedule 5.1(x) attached hereto, Borrowers have no parent
corporation and has no affiliates or Subsidiaries.
(y) ENVIRONMENTAL MATTERS.
(i) It has obtained all permits, licenses and other
authorizations which are required under all Environmental Laws. Except
for the alleged spill on a portion of Borrowers' Trumbull facility
previously disclosed to Lender, it is in compliance with the terms and
conditions of all such permits, licenses and authorizations, and is
also in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Environmental Law
or in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved
thereunder.
(ii) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is
pending or threatened by any governmental or other entity with respect
to any alleged failure by Borrowers to have any permit, license or
authorization required in connection with the conduct of its business
or with respect
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to any Environmental Laws, including without limitation, Environmental
Laws relating to the generation, treatment, storage, recycling,
transportation, disposal or release of any Hazardous Materials.
(iii) No oral or written notification of a release of any
Hazardous Material has been filed by or against Borrowers and no
property now or previously owned, leased or used by it, including
without limitation, the Premises, is listed or proposed for listing on
the Comprehensive Environmental Response, Compensation and Inventory of
Sites or National Priorities List under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or on any
similar state or federal list of sites requiring investigation or
cleanup.
(iv) There are no liens or encumbrances arising under or
pursuant to any Environmental Laws on any of the property or properties
owned, leased or used by it, including without limitation, any of the
properties owned or leased by it, and no governmental actions have been
taken or are in process which could subject any of such properties to
such liens or encumbrances or, as a result of which Borrowers would be
required to place any notice or restriction relating to the presence of
Hazardous Materials at any property owned by it in any deed to such
property.
(v) Neither it nor, to the best knowledge of Borrowers, any
previous owner, tenant, occupant or user of any property owned, leased
or used by Borrowers, has (i) engaged in or permitted any operations or
activities upon or any use or occupancy of such property, or any
portion thereof, for the purpose of or in any way involving the
release, discharge, refining, dumping or disposal (whether legal or
illegal, accidental or intentional) of any Hazardous Materials on,
under, or in or about such property; or (ii) transported or had
transported any Hazardous Materials to such property except to the
extent such Hazardous Materials are raw products commonly used in
day-to-day manufacturing operations of such property and, in such case,
in compliance with, all Environmental Laws; (iii) engaged in or
permitted any operations or activities which would allow the facility
to be considered a treatment, storage or disposal facility as that term
is defined in 40 CFR 264 and 265; (iv) engaged in or permitted any
operations or activities which would cause any of Borrowers' properties
to become subject to The Connecticut Transfer Act, Section 22a-134 et
seq. C.G.S.; or (v) constructed, stored or otherwise located Hazardous
Materials on, under, in or about any such property except to the extent
commonly used in day-to-day operations of any such property and, in
such case, in compliance with all Environmental Laws. Further, to the
best knowledge of Borrowers, no Hazardous Materials have migrated from
other properties upon, about or beneath any such property.
The representations contained in this subparagraph (y) are qualified in
their entirety by the matters disclosed on Schedule 5.1(y) attached
hereto.
(z) Use of Proceeds. It will use the proceeds of the
Loans solely (i) to satisfy in full loans outstanding to Boston Financial &
Equity and J.E. McConaughy on the date hereof, and (ii) for working capital
purposes.
ARTICLE VI. Conditions of Lending
Section 6.1. Conditions of the Initial Loans. Subject to the terms
hereof, the obligation of Lender to make the first Revolving Loan and the Demand
Loan under this Agreement is subject to the fulfillment of the following
conditions precedent at the time of the execution of this Agreement:
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(a) NOTES. Lender shall have received a duly executed
Revolving Promissory Note and Demand Promissory Note drawn to its order.
(b) EVIDENCE OF CORPORATE ACTION. Lender shall have
received certified copies of all corporate action (in form and substance
satisfactory to Lender) taken by Borrowers to authorize the execution, delivery
and performance of this Agreement, the Notes, and the other Financing Agreements
to which it is a party, and the borrowings to be made hereunder and thereunder,
together with true copies of Borrowers' Articles of Incorporation and By-laws
and such other papers as Lender or its counsel may require.
(c) OPINION OF COUNSEL. Lender shall have received a
favorable written opinion of counsel for Borrowers, the Fidelity Guarantors and
the Corporate Guarantor, accompanied by such supporting documents as Lender or
its counsel may require.
(d) FIDELITY GUARANTIES. Lender shall have received a
duly executed Fidelity Guaranty (individually, a "Fidelity Guaranty" and
collectively, the "Fidelity Guaranties") from each of Gerald W. Stewart and
Joseph Schlig (collectively, the "Fidelity Guarantors"). The Fidelity Guaranties
shall be in form, scope and substance satisfactory to Lender and its counsel.
(e) CORPORATE GUARANTY. Lender shall have received a
duly executed Guaranty Agreement (the "Corporate Guaranty") from Intec Corp.
(the "Corporate Guarantor"). The Corporate Guaranty shall be in form, scope and
substance satisfactory to Lender and its counsel.
(f) CORPORATE GUARANTOR SECURITY AGREEMENT. Lender
shall have received a security agreement (the "Corporate Guarantor Security
Agreement") from the Corporate Guarantor in form, scope and substance
satisfactory to Lender and its counsel.
(g) SUBORDINATION AGREEMENT. Lender shall have
received a subordination agreement from the Subordinating Creditor in form,
scope and substance satisfactory to Lender and its counsel (the "Subordination
Agreement").
(h) LESSOR'S AGREEMENT. Borrowers shall cause to be
delivered to Lender a lessor's agreement with respect to the Premises (the
"Lessor's Agreement") in form, scope and substance satisfactory to Lender and
its counsel.
(i) UCC-1 FINANCING STATEMENTS. Lender shall have
received from Borrowers and from the Corporate Guarantor duly executed UCC-1
financing statements and such other documents as Lender deems necessary or
proper to perfect the security interest in the Collateral, all of which shall be
in form, scope and substance satisfactory to Lender and its counsel.
(j) NOTICE OF ASSIGNMENTS AND POST OFFICE BOX CHANGE
OF ADDRESS CARDS. Lender shall have received from ITI a notice of assignment and
from each of Borrowers a post office change of address card which shall be in
form, scope and substance satisfactory to Lender and its counsel.
(k) LIFE INSURANCE ASSIGNMENT. Lender shall have
received a duly executed life insurance assignment as collateral (the "Life
Insurance Assignment") on the life of the Gerald W. Stewart, which shall be in
an amount equal to at least $500,000. The Life Insurance Assignment shall be in
form, scope and substance satisfactory to Lender and its counsel.
(l) WARRANT. Lender shall have received a duly
executed Warrant to purchase 100,000 shares of ITI's Common Stock, in form,
scope and substance satisfactory to Lender and its counsel.
(m) FURTHER DOCUMENTS. Lender shall have received
such further documents, instruments and agreements as Lender may request,
including without limitation,
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evidence that the insurance policies and certificates evidencing adequate
insurance and coverage on each of Borrowers' assets are currently in full force
and effect, continue to name Lender as loss payee or additional insured, as the
case may be, and that the premiums are current.
Section 6.2. Conditions of Loans Based Upon Eligible Foreign Accounts.
In addition to the conditions in Section 6.1 above, Lender shall make no
Revolving Loans based upon Eligible Foreign Accounts unless the following
conditions exist or have been satisfied by Borrowers at the time any Loan based
upon Eligible Foreign Accounts is requested:
(a) SECURITY DOCUMENTS. Lender shall have received such
documents, instruments and agreements as Lender may request to perfect its first
priority lien security interest in the assets of Intec, in form, scope and
substance satisfactory to Lender and its Belgian counsel.
(b) NOTIFICATION OF ACCOUNT DEBTORS. Lender shall have
received evidence that Intec's account debtors have been notified of Lender's
first priority lien security interest and to remit payment directly to Lender,
in form, scope and substance satisfactory to Lender and its Belgian counsel.
Section 6.3. Conditions of Additional Revolving Loans. In addition to
the conditions in Section 6.1 above, Lender shall make no further Revolving
Loans (collectively, the "Further Loans") unless the following conditions shall
exist or have been satisfied by Borrowers at the time any Further Loan is
requested:
(a) ABSENCE OF TERMINATION OR DEFAULT. Lender shall not have
terminated the Revolving Loan facility or the Demand Loan hereunder, nor shall a
Defaulting Event exist or have occurred.
(b) COMPLIANCE CERTIFICATES. On the date of each Revolving
Loan hereunder and after giving effect thereto, Borrowers shall have delivered
to Lender, upon Lender's request, a certificate executed by its chief financial
officer which states, among other things, that: (i) Borrowers have complied, and
is then in compliance, with all the terms, covenants and conditions of this
Agreement and the other Financing Agreements to which it is a party; (ii) there
exists no Event of Default or Defaulting Event; and (iii) the representations
and warranties contained herein and in the other Financing Agreements are true
and correct with the same effect as though such representations and warranties
had been made at the time of each Further Loan.
(c) REVOLVING LOAN BORROWING BASE AND DEMAND LOAN BORROWING
BASE. The indebtedness of Borrowers by virtue of the making of any Revolving
Loan shall not exceed the Revolving Loan Borrowing Base. Borrowers shall not
request any Revolving Loan if the effect of such Revolving Loan shall be to
cause the balance of all Revolving Loans to exceed the Revolving Loan Borrowing
Base. The indebtedness of Borrowers by virtue of the making of the Demand Loan
shall not exceed the Demand Loan Borrowing Base.
(d) FURTHER DOCUMENTS. Lender shall have received such further
documents, instruments and agreements as Lender may reasonably request.
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ARTICLE VII. Covenants
A. Affirmative Covenants.
Each of the Borrowers covenants and agrees that from the date hereof
until payment and performance in full of all Obligations, and until the
termination of this Agreement, unless Lender otherwise consents in writing,
Borrowers shall:
Section 7.1. Financial Statements. Deliver or caused to be
delivered to Lender: (a) within thirty (30) days after the close of each fiscal
month of Borrowers, consolidated and consolidating internally prepared financial
statements of Borrowers including balance sheets as of the close of each month,
and statements of income and retained earnings for such month, and for that
portion of the fiscal year-to-date then ended, which shall be prepared on a
basis consistent with that of the preceding period or containing disclosure of
the effect on financial condition or results of operations of any change in such
preparation, and which shall be certified by the chief financial officer of
Borrowers as being accurate and fairly presenting the financial condition of
Borrowers; (b) within ninety (90) days after the close of each fiscal year of
Borrowers, consolidated audited financial statements including a balance sheet
as of the close of such fiscal year and statements of income, stockholders'
capital and cash flow for the year then ended, prepared in conformity with
generally accepted accounting principles, applied on a basis consistent with
that of the preceding year or containing disclosure of the effect on financial
condition or results of operations of any change in the application of
accounting principles during the year, and accompanied by a report thereon of a
recognized certified public accounting firm selected by Borrowers and reasonably
satisfactory to Lender, which opinion shall state that such financial statements
fairly present the financial condition and results of operations of Borrowers in
accordance with generally accepted accounting principles, and also accompanied
by a written statement from such accountants stating that they have reviewed
such financial statements and have found no evidence of an Event of Default
having occurred or of an event which with passage of time and/or giving of
notice would constitute an Event of Default having occurred; (c) within ten (10)
days of the close of each month, monthly aging of accounts receivable and
accounts payable and inventory status reports in form, scope and substance
satisfactory to Lender; (d) daily sales and collection information in the form
supplied by Lender to Borrowers (converted into U.S. Dollars); (e)
contemporaneously with the delivery to shareholders or governmental agencies,
copies of all reports and information delivered to shareholders or filed with
governmental agencies; (f) within one hundred twenty (120) days after the close
of each fiscal year of the Fidelity Guarantors state and federal income tax
returns; (g) promptly upon Lender's written request, such other information
about the financial condition and operations of Borrowers or the Fidelity
Guarantors, as Lender may, from time to time, reasonably request; and (h)
promptly upon becoming aware of any Event of Default, or the occurrence or
existence of a Defaulting Event, notice thereof in writing.
Section 7.2. Insurance and Endorsements. (a) Keep its
properties and cause the Premises to be insured against fire and other hazards
(pursuant to so-called "All Risk" coverage) in amounts and with companies
satisfactory to Lender to the same extent and covering such risks as is
customary in the same or a similar business; maintain public liability coverage,
including without limitation, products liability coverage, against claims for
personal injuries or death; and maintain all worker's compensation, employment
or similar insurance as may be required by applicable law; and (b) all insurance
shall contain such terms, be in such form, and be for such periods reasonably
satisfactory to Lender, and be written by carriers duly
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licensed by the appropriate governmental authority of each state where any
Collateral is located. Without limiting the generality of the foregoing, such
insurance must provide that it may not be canceled without thirty (30) days'
prior written notice to Lender. Borrowers shall cause Lender to be endorsed as a
loss payee with a long form Lender's Loss Payable Clause, in form and substance
acceptable to Lender on all such insurance. In the event of failure to provide
and maintain insurance as herein provided, Lender may, at its option, provide
such insurance and charge the amount thereof to the Revolving Loan Account.
Borrowers shall furnish to Lender certificates or other satisfactory evidence of
compliance with the foregoing insurance provisions. Borrowers hereby irrevocably
appoint Lender as its attorney-in-fact, coupled with an interest, to make proofs
of loss and claims for insurance, and to receive payments of the insurance
proceeds and execute and endorse all documents, checks and drafts in connection
with payment of such insurance. Any insurance proceeds received by Lender shall
be applied to the Obligations in such order and manner as Lender shall determine
in its sole discretion.
Section 7.3. Tax and Other Liens. Comply with all statutes and
government regulations and pay all taxes, assessments, governmental charges or
levies, or claims for labor, supplies, rent and other obligations made against
it or its property which, if unpaid, might become a lien or charge against
Borrowers or its properties, except liabilities being contested in good faith
and against which adequate reserves have been established in accordance with
generally accepted accounting principles.
Section 7.4. Place of Business; Location of Collateral.
Maintain its chief place of business and chief executive offices at the address
set forth in the introductory sentence hereof and its other places of business
and locations of Collateral as set forth in Schedule 5.1(p) hereto unless
Borrowers shall have given Lender thirty (30) days' prior written notice of any
change thereof.
Section 7.5. Inspections. Allow Lender, at its expense prior
to an Event of Default or demand for payment of the Obligations and at the
expense of Borrowers at any time after an Event of Default or demand for payment
of the Obligations by or through any of its officers, attorneys, and/or
accountants designated by it, for the purpose of ascertaining whether or not
each and every provision hereof and of any related agreement, instrument and
document is being performed, to enter the offices and plants of Borrowers to
examine or inspect any of the properties, books and records or extracts
therefrom, to make copies of such books and records or extracts therefrom and to
make complete environmental studies and/or investigations, and to discuss the
affairs, finances and accounts thereof with Borrowers all at such reasonable
times, upon reasonable notice and as often as Lender or any representative of
Lender may reasonably request.
Section 7.6. Litigation. Promptly advise Lender of the
commencement or threat of litigation, including arbitration proceedings and any
proceedings before any governmental agency (but excluding product liability
claims which are either fully covered by insurance or adequately covered by
insurance and which are not likely to have a material adverse effect on the
business, assets or condition (financial or otherwise) of Borrowers), which is
instituted against Borrowers or, upon receipt of any information pertaining
thereto, the Fidelity Guarantors and is reasonably likely to have a materially
adverse effect upon the condition, financial, operating or otherwise, of
Borrowers or the Fidelity Guarantors.
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Section 7.7. Maintenance of Existence. Maintain its corporate
existence and comply with all valid and applicable statutes, rules and
regulations, and maintain its properties in good repair, working order and
operating condition. Borrowers shall immediately notify Lender of any event
causing material loss in the value of its assets.
Section 7.8. Inventory. Allow Lender to examine and inspect
the Inventory at reasonable times and intervals and upon reasonable notice.
Borrowers shall immediately notify Lender of any event causing material loss or
depreciation in value of Inventory and the amount of such loss or depreciation.
Section 7.9. ERISA. Immediately notify Lender of any event
which causes it not to be in compliance with ERISA in all material respects.
Section 7.10. Notice of Certain Events. Give prompt written
notice to Lender of:
(a) any material dispute that may arise between
Borrowers and any governmental regulatory body or law enforcement agency;
(b) any labor controversy resulting or likely to
result in a strike or work stoppage against Borrowers;
(c) any proposal by any public authority to acquire
the assets or business of Borrowers;
(d) the location of any Collateral other than at
Borrowers' places of business disclosed in this Agreement (other than Collateral
in transit in the ordinary course of Borrowers' business);
(e) any proposed or actual change of the name,
identity or corporate structure of Borrowers;
(f) any circumstance or event by virtue of which or
in connection with which Borrowers may have incurred or may incur any liability,
expense or responsibility under any Environmental Law including, without
limitation: (i) any Release of any Hazardous Material required to be reported to
any federal, state or local governmental authority, instrumentality or agency
under any applicable Environmental Law; (ii) any and all written communications
with respect to claims or suits under any applicable Environmental Law or any
Release of Hazardous Material required to be reported to any federal, state or
local governmental authority, instrumentality or agency; (iii) any remedial
action taken by Borrowers or any other person in response to (A) any Hazardous
Material on, under or about the properties or assets of Borrowers, the existence
of which may give rise to a claim or suit resulting in a material change of
Borrowers' business operations or financial condition, or (B) any claim or suit
resulting in a material change of Borrowers' business operations or financial
condition; (iv) Borrowers' discovery of any occurrence or condition on any real
property adjoining or in the vicinity of Borrowers' business premises which may
cause such premises to be in violation of any Environmental Law or to be subject
to any restrictions on the ownership, occupation, transferability or use thereof
under any Environmental Law; and (v) any request for information from any
federal, state or local governmental authority, instrumentality or agency that
indicates such entity is investigating Borrowers' potential responsibility for a
Release of Hazardous Material;
(g) any other matter which has resulted or is
reasonably likely to result in a material adverse change in the financial
condition or operations of Borrowers;
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(h) any information received by Borrowers with
respect to any Receivable that may materially affect the value thereof or the
rights and remedies of Lender with respect thereto; and
(i) any action, suit or claim pending or which could
be reasonably expected to be asserted against Borrowers.
Section 7.11. Defaults. Upon the occurrence of an Event of
Default or of a Defaulting Event, give prompt written notice of such occurrence
to Lender signed by the president or chief financial officer of Borrowers
describing such occurrence and the action, if any, being taken to cure the Event
of Default or Defaulting Event.
Section 7.12. Duties. Borrowers have complied and will
continue to comply with any and all federal, state and local laws affecting its
business, including, but not limited to, payment of all federal and state taxes
with respect to sales to Account Debtors by Borrowers and disclosures in
connection therewith. Borrowers jointly and severally agree to indemnify Lender
against and hold Lender harmless from, all claims, actions and losses, including
reasonable attorney's fees and costs incurred by Lender arising from any
contention, whether well founded or otherwise, that there has been a failure to
comply with such laws.
Section 7.13. Collateral Duties. Do whatever Lender may
reasonably request from time to time by way of obtaining, executing, delivering
and filing financing statements, assignments, landlord's or mortgagee's waivers,
warehouse agreements and other notices and amendments and renewals of any of the
foregoing, and Borrowers will take any and all steps and observe such
formalities as Lender may request, in order to create and maintain a valid and
enforceable first lien upon, pledge of, and first priority security interest in,
any and all of the Collateral. Lender hereby is authorized to file financing
statements without the signature of Borrowers and to execute and file such
financing statements on behalf of Borrowers as specified by the Uniform
Commercial Code to perfect or maintain its security interest in all of the
Collateral. All reasonable charges, expenses and fees Lender may incur in filing
any of the foregoing, together with reasonable costs and expenses of any lien
search required by Lender, and any taxes relating thereto, shall be charged to
the Revolving Loan Account and added to the Obligations.
Section 7.14. Audit and Appraisals by Lender; Fees. Permit
Lender to audit the books and records of Borrowers and to conduct or cause to be
conducted appraisals of Borrowers' assets at such times, upon reasonable notice,
and in such manner and detail as Lender deems reasonable. Without limiting the
generality of the foregoing, Lender shall be allowed to verify the Receivables
and Inventory of Borrowers and to confirm with Account Debtors the validity and
amount of Receivables. At any time after Lender has made a demand for payment of
any Obligations or the occurrence of an Event of Default, Borrowers shall
promptly pay to Lender reasonable audit fees and any out-of-pocket expenses
incurred in connection with any audit performed by Lender, or by any third party
retained by Lender in its sole discretion if Lender, in its sole discretion,
deems it necessary to hire outside auditors. In addition, Borrowers shall
promptly pay or reimburse Lender for the costs of any such appraisals conducted
by or for Lender after an Event of Default or demand for payment of the
Obligations. Lender may charge any such audit fees and out-of-pocket expenses to
the Revolving Loan Account.
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Section 7.15. Bank Accounts. Maintain all of its bank
accounts, including without limitation, its operating and depository accounts,
with respect to ITI at Chase Manhattan Bank of Connecticut, People's Bank,
Silicon Valley Bank, and with respect to Intec at Banque Generale.
B. Negative Covenants.
Each of the Borrowers covenants and agrees that from the date hereof
until payment and performance in full of all Obligations, and until the
termination of this Agreement, unless Lender otherwise consents in writing,
neither of the Borrowers shall:
Section 7.16. Encumbrances. Incur or permit to exist any lien,
mortgage, charge or other encumbrance against any of its properties or assets,
whether now owned or hereafter acquired, except: (a) liens required or expressly
permitted by this Agreement; (b) pledges or deposits in connection with or to
secure worker's compensation, unemployment or liability insurance; (c) those
listed on Schedule 5.1(u) attached hereto; (d) tax liens which are being
contested in good faith with the prior written consent of Lender and against
which, if requested by Lender as a condition to its consent, the Borrowers shall
set up a cash reserve or post a surety bond in an amount equal to the total
amount of the lien being contested; and (e) purchase money lien securing
financing for machinery and equipment purchased in the ordinary course of
business as permitted pursuant to Section 7.17 below.
Section 7.17. Limitation on Indebtedness. Except as set forth in the
Subordination Agreement and except (with Lender's prior written consent which
shall not be unreasonably withheld) for purchase money financing for machinery
and equipment purchased in the ordinary course of business or for the leasing of
machinery and equipment in the ordinary course of business, create, incur or
guarantee any indebtedness or obligation for borrowed money (including without
limitation, any reimbursement obligations for any letter of credit issued by any
financial institution) from, or issue or sell any of its obligations to, any
lender.
Section 7.18. Contingent Liabilities. Assume, guarantee, endorse or
otherwise become liable upon the obligations of any person, firm or corporation,
or enter into any purchase or option agreement or other arrangement having
substantially the same effect as such a guarantee, except by the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business.
Section 7.19. Consolidation or Merger. Merge into or consolidate with
or into any corporation.
Section 7.20. Loans, Advances, Investments. Make or permit to exist any
loans or advances to, or purchase any stock, other securities or evidences of
indebtedness of, or make or permit to exist any investment (including without
limitation the acquisition of stock of a corporation), or acquire any assets or
any other interest whatsoever, in any other person.
Section 7.21. Acquisition of Stock of Borrowers; Dividends. Purchase,
acquire, redeem or retire, or make any commitment to purchase, acquire, redeem
or retire any of the capital stock of Borrowers, whether now or hereafter
outstanding, or declare or pay any dividend, or make any distribution to any of
its stockholders, except for reasonable and actual
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travel expenses not to exceed $10,000 per year, per person, or $100,000 per year
in the aggregate.
Section 7.22. Sale and Lease of Assets. Sell or lease any of the assets
of the Borrowers, except for sales of inventory in the ordinary course of
business consistent with past practices and on an arms-length basis.
Section 7.23. Name Changes. Change its name or style other than as set
forth in this Agreement.
Section 7.24. Prohibited Transfers. Transfer, in any manner, either
directly or indirectly, any cash, property, or other asset to any parent or any
of its affiliates or Subsidiaries, other than sales made in the ordinary course
of business and for fair consideration on terms no less favorable than if such
sale had been an arms-length transaction between Borrowers or such Subsidiary
and an unaffiliated entity.
Section 7.25. No Management/Ownership Change. Suffer any change in the
management of Borrowers.
Section 7.26. Leasebacks. Lease any real estate or other capital asset
from any lessor who shall have acquired such property from Borrowers.
Section 7.27. Loans to Officers, Directors and/or Shareholders. Make
any loan or advance or make any transfer, in any manner, of any cash, property
or other asset to or on behalf of any of its officers, directors or
shareholders.
Section 7.28. Payment of Subordinated Debt. Make payment of any sums to
the Subordinating Creditor in violation of the Subordination Agreement.
ARTICLE VIII. Collateral
Section 8.1. Grant. To secure the prompt payment and performance of
each and all of the Obligations, each of the Borrowers pledges, assigns,
transfers and grants to Lender a continuing, first lien security interest in the
following property of Borrowers, now owned or hereafter acquired or arising (the
"Collateral"):
(a) All accounts and accounts receivable related to or arising
from the sale or lease of inventory or rendition of services by Borrowers (the
"Accounts") and all other accounts, bank accounts, contracts, contract rights,
notes, documents, chattel paper, instruments, acceptances, drafts or other forms
of obligations and receivables (collectively with the Accounts, the
"Receivables"), whether or not the same are listed on any schedules, assignments
or reports furnished to Lender from time to time, and whether such Receivables
are now existing or are created or arise at any time hereafter, together with
all goods, inventory and merchandise returned by or reclaimed by or repossessed
from customers wherever such goods, inventory and merchandise are located, and
all proceeds thereto including without limitation, proceeds of insurance thereon
and all guaranties, securities, and liens which Borrowers may hold for the
payment of any such Receivables, including without limitation, all rights of
stoppage in transit, replevin and reclamation and all other rights and remedies
of an unpaid vendor or lienor, and any liens held by Borrowers as a mechanic,
contractor, subcontractor, processor, materialman, machinist, manufacturer,
artisan, or otherwise;
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(b) All documents, instruments, documents of title, general
intangibles, policies and certificates of insurance, guaranties, securities,
chattel paper, deposits, tax returns, proceeds of insurance, proceeds of an
eminent domain or condemnation award, cash, liens or other property, which are
now or may hereinafter be in the possession of Borrowers or as to which
Borrowers may now or hereafter control possession by documents of title or
otherwise, including, but not limited to, all property allocable to unshipped
orders relating to Receivables and Inventory;
(c) All books, records, customer lists, supplier lists,
ledgers, evidences of shipping, invoices, purchase orders, sales orders and all
other evidences of Borrowers' business records, including all cabinets, drawers,
etc. that may hold the same; computer records, lists, software, programs,
wherever located, all whether now existing or hereafter arising or acquired;
(d) All of Borrowers' inventory, whether now owned or
hereafter acquired, including without limitation (collectively, the
"Inventory"): (i) all goods manufactured or acquired for sale or lease, and any
piece goods, raw materials, work in process and finished merchandise, findings
or component materials, and all supplies, goods, incidentals, office supplies,
packaging materials, and any and all items including machinery and equipment
used or consumed in the operation of the business of Borrowers or which
contribute to the finished product or to the sale, promotion and shipment
thereof, in which Borrowers may now or at any time hereafter may have an
interest, whether or not such inventory is listed in this Agreement on any
reports furnished to Lender from time to time; (ii) all inventory whether or not
the same is in transit or in the constructive, actual or exclusive occupancy or
possession of Borrowers or is held by Borrowers or by others for the Accounts,
including without limitation, all goods covered by purchase orders and contracts
with suppliers and all goods billed and held by suppliers; (iii) all inventory
which may be located on the premises of Borrowers or of any carrier, forwarding
agents, truckers, warehousemen, vendors, selling agents or third parties; (iv)
all general intangibles relating to or arising out of inventory; (v) all
proceeds and products of the foregoing resulting from the sale, lease or other
disposition of inventory, including cash, accounts receivable, other non-cash
proceeds and trade-ins; and (vi) with respect to after-acquired inventory, the
security interest shall be deemed to be a purchase money security interest;
(e) All general intangibles, including without limitation, tax
refunds, proceeds of insurance, eminent domain awards, condemnation proceeds,
and patents, copyrights, tradenames, trademarks, applications therefor, and
licenses to any patent, copyright, trademark, or tradename that Borrowers now
own, has the right to use or may hereafter own or acquire the right to use;
(f) All equipment, machinery, appliances, and furniture and
fixtures, now existing or hereafter arising, wherever located, and all
contracts, contract rights and chattel paper arising out of any lease of any of
the foregoing;
(g) All other collateral in which Borrowers may hereafter
grant to Lender a security interest; and
(h) All renewals, substitutions, replacements, additions,
accessions, proceeds, and products of any and all of the foregoing, including
without limitation, all proceeds of credit, fire and other insurance and also
including, without limitation, rents and profits resulting from the temporary
use of the Collateral.
ARTICLE IX. Events of Default
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Section 9.1. Events of Default. Without affecting the demand
nature of the Loans which shall at all times be due and payable on demand, any
and all Obligations, including without limitation, the Obligations arising
pursuant to or in connection with the Loans shall, at the option of Lender and
notwithstanding any time or credit allowed by any note or agreement, become
immediately due and payable without notice if any one or more of the following
events (collectively, "Events of Default" and individually, an "Event of
Default") shall occur:
(a) Borrowers' failure to pay principal, interest or
any other sum due hereunder or under the Notes;
(b) Borrowers' failure to pay or perform when due any
other covenant, duty, indebtedness, liability or obligation arising under this
Agreement, the Notes or any of the other Financing Agreements, or any other
Obligation, or such failure by either Fidelity Guarantor or the Corporate
Guarantor,
(c) the making by Borrowers, either Fidelity
Guarantor or the Corporate Guarantor of any misrepresentation of a material fact
to Lender;
(d) loss, theft, or destruction of any Collateral in
excess of Fifty Thousand Dollars ($50,000) in value which is not covered by
insurance with Lender's loss payee endorsement as required herein;
(e) the filing, making or issuance of any lien, levy,
seizure, attachment, garnishment, injunction, execution, tax
lien or judgment upon or against Borrowers or any of the
Collateral, or any other property or assets of Borrowers which
lien, levy, seizure, attachment, garnishment, injunction,
execution, tax lien or judgment is not released within
thirty-five (35) days from its initial issuance or creation;
(f) any of the following of, by, or involving
Borrowers, either Fidelity Guarantor or the Corporate Guarantor: insolvency
(failure to pay debts generally as they mature or where the fair value of assets
is not in excess of liabilities); business failure; appointment of a receiver or
custodian; assignment for the benefit of creditors; calling of a meeting of
creditors; appointment of a committee of creditors, or liquidating banks, or
offering of a composition extension to creditors; or the commencement of any
proceedings under any bankruptcy or insolvency law;
(g) Borrowers' failure to keep the Collateral insured
against loss by fire or otherwise for the full insurable value thereof with
companies and for coverages (including Lender's Long Form Loss Payable
Endorsement) acceptable to Lender and making the loss, if any, payable to
Lender;
(h) the loss, revocation or failure to renew any
license and/or permit now held or hereafter acquired by Borrowers which
adversely affects the ability of Borrowers to continue their operations as
presently conducted;
(i) the occurrence of a default or event of default
(howsoever defined) under any other agreement between Lender, either Fidelity
Guarantor or the Corporate Guarantor; or
(j) the declaration of a default that permits
acceleration of maturity under any obligation of Borrowers to any other
creditor; or
(k) the occurrence of any event or circumstance with
respect to the Borrowers such that Lender shall believe in good faith that the
prospect of payment of all or any part of Obligations or the performance by the
Borrowers under this Agreement, or any other agreement between the Lender and
the Borrowers, is impaired or there shall occur any material adverse change in
the business or financial condition of the Borrowers.
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Upon the occurrence of any Event of Default, at the option of Lender:
(x) any and all Obligations, including without limitation the Obligations
arising from or in connection with the Loans, shall become immediately due and
payable, and (y) Borrowers' eligibility to request any Further Loans shall
automatically and immediately terminate, without presentment, demand, protest,
notice of protest or other notice or requirements of any kind, all of which
Borrowers expressly waive. Notwithstanding the foregoing sentence, if any Event
of Default under clause (f) occurs, the acceleration of the Obligations and
termination of Borrowers' eligibility to request Further Loans shall be
automatic.
At any time after an Event of Default, Lender may proceed to enforce
the rights of Lender whether by suit in equity or by action at law, whether for
specific performance of any covenant or agreement contained in this Agreement,
the Notes or the other Financing Agreements, or in aid of the exercise of any
power granted in either this Agreement or the Notes or any other Financing
Agreement, or it may proceed to obtain judgment or any other relief whatsoever
appropriate to the enforcement of such rights, or proceed to enforce any legal
or equitable right which Lender may have by reason of the occurrence of any
Event of Default hereunder.
ARTICLE X. Collection of Receivables
Section 10.1. Deposits. ITI agrees that it shall promptly
notify its account debtors to make payment of all Receivables directly to a
lockbox established in Lender's name at such financial institution as Lender
shall elect, and that ITI shall execute a lockbox agreement in form, scope and
substance satisfactory to Lender. All Receivables of Intec shall be directed for
payment directly to such account of Lender as designated by Lender from time to
time. All collections and other proceeds of Receivables which Borrowers receive
shall be received in trust for Lender and Borrowers shall: keep all such
collections separate and apart from all of its other funds and property;
identify such collections and proceeds as the property of Lender; and
immediately deposit such collections in the identical form received in such
accounts of Lender as designated by Lender from time to time.
Section 10.2. Schedule. All collections of Receivables shall
be set forth on a schedule in form and substance satisfactory to Lender.
Collections of Receivables shall be credited to the Obligations of Borrowers on
the day of their actual receipt by Lender; provided, however, that all credits
shall be conditional credits subject to collection and that returned items, at
Lender's option, may be charged to Borrowers; and further provided that for
purposes of the computation of interest, items shall not be deemed to be
collected until three (3) days after their actual receipt by Lender.
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ARTICLE XI. Returned Merchandise
Section 11.1. Procedures. Until Lender exercises its rights to
sue to collect the Receivables as provided for in this Agreement, Borrowers may
continue their present policies for returned merchandise and adjustments, but
shall promptly notify Lender of any credits, adjustments or disputes arising
concerning the goods or services represented by Receivables. In any event,
Borrowers will immediately pay Lender from their own funds (and not from the
proceeds of Receivables), for application to the Revolving Loans, an amount
equal to any credit or adjustment made to any Eligible Accounts; provided,
however, that so long as Borrowers are not in default hereunder, such payment
need not be made if Borrowers shall have, after making such credit or
adjustment, sufficient Receivables to maintain the aggregate outstanding balance
of the Revolving Loans under the Revolving Loan Borrowing Base.
ARTICLE XII. Rights and Remedies of Lender
Section 12.1. Remedies of Lender. Upon Lender's demand for
payment of the Loans or upon the occurrence of any Event of Default, Lender
shall have in any jurisdiction where enforcement of this Agreement, the Notes or
any other Financing Agreement is sought, in addition to all other rights and
remedies which Lender may have under law and equity, the following rights and
remedies, all of which may be exercised with or without further notice to
Borrowers and without a prior judicial or administrative hearing, which notice
and hearing are expressly waived: to occupy any of Borrowers' premises for up to
six (6) months rent free for the purposes of liquidating Collateral, including
without limitation, conducting an auction thereon; to enforce or foreclose the
liens and security interests created under this Agreement or under any other
agreement relating to Collateral by any available judicial procedure or without
judicial process; to enter any premises where any Collateral may be located for
the purpose of taking possession or removing the same; to sell, assign, lease,
or otherwise dispose of Collateral or any part thereof, either at public or
private sale, in lots or in bulk, for cash, on credit or otherwise, with or
without representations or warranties, and upon such terms as shall be
acceptable to Lender, all at Lender's sole option and as Lender in its sole
discretion may deem advisable; to bid or become purchaser at any such sale if
public; and, at the option of Lender, to apply or be credited with the amount of
all or any part of the Obligations owing to Lender against the purchase price
bid by Lender at any such sale.
Section 12.2. Specific Powers. Lender may at any time, before
(with respect to clauses (v), (vii) and (x) of this Section 12.2) or after the
occurrence of a demand for payment of the Loans or an Event of Default, at
Lender's sole discretion: (i) give notice of assignment to any Account Debtor
(it being understood and agreed that Lender may at any time, before or after
demand for payment of the Revolving Loan or the occurrence of an Event of
Default verify receivables directly with Account Debtors); (ii) collect
Receivables directly and charge, or cause to be charged, the collection costs
and expenses to the Revolving Loan Account; (iii) collect receivables submitted
by Borrowers to Lender for collection and charge, or cause to be charged, the
collection costs and expenses to the Revolving Loan Account; (iv) settle or
adjust disputes and claims directly with Account Debtors for amounts and upon
terms which Lender considers advisable, and credit, or cause to be credited, the
Revolving Loan Account with the net amounts received in payment of Receivables;
(v) exercise all other rights granted in this Agreement and the other Financing
Agreements; (vi) receive, open and dispose of all mail addressed to Borrowers
and notify the Post Office authorities to change the address for delivery of
Borrowers' mail to an address designated by Lender; (vii) endorse the name of
Borrowers on any checks or other evidence of payment that may come into
possession
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of Lender and on any invoice, freight or express bill, bill of lading or other
document; (viii) in the name of Borrowers or otherwise, demand, sue for, collect
and give acquittance for any and all monies due or to become due on Receivables;
(ix) compromise, prosecute or defend any action, claim or proceeding concerning
Receivables; and (x) do any and all things necessary and proper to carry out the
purposes contemplated in this Agreement, the other Financing Agreements and any
other agreement between the parties. Neither Lender nor any person acting as its
representative hereunder shall be liable for any acts or omissions or for any
error of judgment or mistake of fact or law, except for gross negligence or
willful misconduct. Borrowers agree that the powers granted hereunder, being
coupled with an interest, shall be irrevocable so long as any Obligation remains
unsatisfied. Notwithstanding the foregoing, it is understood that Lender is
under no duty to take any of the foregoing actions and that after having made
demand upon the Account Debtors for payment, Lender shall have no further duty
as to the collection or protection of Receivables or any income therefrom and no
further duty to preserve any rights pertaining thereto, other than the safe
custody thereof in the event Lender takes possession thereof.
Section 12.3. Duties After Demand or Default. Borrowers will,
at Lender's request, assemble all Collateral and make it available to Lender at
places which Lender may reasonably select, whether at the premises of Borrowers
or elsewhere and will make available to Lender all premises and facilities of
Borrowers for the purpose of Lender taking possession of Collateral or of
removing or putting the Collateral in salable form. In the event that Lender
elects to exercise its right to take possession and control of any Collateral,
and any goods called for in any sales order, contract, invoice or other
instrument or agreement evidencing or purporting to give rise to any Receivable
shall not have been delivered or shall be claimed to be defective by any
customer, Lender shall have the right in its sole discretion to use and deliver
to such customer any goods of Borrowers to fulfill such order, contract or the
like so as to make good any such Receivable. If any Collateral shall require
repairing, maintenance, preparation, or the like, or is in process or other
unfinished state, Lender shall have the right, but shall not be obligated, to
effectuate such repair, maintenance, preparation, processing or completion of
manufacturing for the purpose of putting the same in such salable form as Lender
shall deem appropriate, provided that Lender shall nonetheless have the right to
sell or dispose of such Collateral without such processing. The net cash
proceeds resulting from the collection, liquidation, sale, lease or other
disposition of Collateral shall be applied first to the expenses (including all
attorneys' and professionals' fees) of retaking, holding, storing, processing
and preparing for sale, selling, collecting, liquidating and the like such
collateral and then to the satisfaction of all Obligations (application as to
particular Obligations or against principal or interest to be at Lender's sole
discretion), and then, upon full and final payment of the Obligations, and
unless otherwise prohibited by court order or law, to Borrowers, it being agreed
that if any such payment made to Lender is recovered from or repaid by Lender in
whole or in part in any bankruptcy, insolvency or similar proceeding instituted
by or against Borrowers, this Agreement automatically shall be reinstated
without any further action by Borrowers and Lender. Borrowers shall be liable to
Lender and shall pay to Lender on demand any deficiency which may remain after
such sale, disposition, collection or liquidation of Collateral.
Section 12.4. Cumulative Remedies. The enumeration of Lender's
rights and remedies set forth in this Article XII is not intended to be
exhaustive and the exercise by Lender of any right or remedy hereunder shall not
preclude the exercise of any other rights or
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remedies, all of which shall be cumulative and shall be in addition to any other
right or remedy given hereunder or under any other agreement between the parties
or which may now or hereafter exist in law or at equity or by suit or otherwise.
No delay or failure to take action on the part of Lender in exercising any
right, power or privilege shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or privilege preclude other
or further exercise thereof or the exercise of any other right, power or
privilege or shall be construed to be a waiver of any Event of Default. No
course of dealing between Borrowers and Lender or its employees shall be
effective to change, modify or discharge any provision of this Agreement or to
constitute a waiver of any Event of Default.
ARTICLE XIII. Term
Section 13.1. Term and Termination.
(a) REVOLVING LOAN. Unless sooner terminated by Lender as a
result of the occurrence of a demand, an Event of Default, or a Defaulting
Event, Borrowers' eligibility to request Revolving Loans shall commence on the
date hereof and shall continue for a period through and including October 31,
1999 (the "Term"). Borrowers' eligibility to request Revolving Loans may be
extended after the Term (and after any Renewal Term, as defined below). Any such
extension (and any further extension) shall be made only with the express
written consent of both Borrowers and Lender (each being a "Renewal Term"). At
the end of the Term (or at the end of a Renewal Term, if applicable), Borrowers
shall pay the entire balance of the Revolving Loans the Demand Loan and all
other outstanding Obligations. Further, upon termination of the Revolving Loan
facility, all of the rights, interests and remedies of Lender and Obligations of
Borrowers shall survive and Borrowers shall have no right to receive, and Lender
shall have no obligation to make, any further Revolving Loans. Upon full, final
and indefeasible payment of the Obligations to Lender, all rights and remedies
of Borrowers and Lender hereunder shall cease, so long as any payment so made to
Lender and applied to the Obligations is not thereafter recovered from or repaid
by Lender in whole or in part in any bankruptcy, insolvency or similar
proceeding instituted by or against Borrowers, whereupon this Agreement shall be
automatically reinstated without any further action by Borrowers and Lender and
shall continue to be fully applicable to such Obligations to the same extent as
though the payment so recovered or repaid had never been originally made on such
Obligations.
(b) DEMAND LOAN. Unless sooner terminated by Lender as a
result of the occurrence of a demand, an Event of Default or a Defaulting Event,
the Demand Loan shall be repaid as set forth in the Demand Promissory Note. The
Borrowers may not prepay the Demand Note.
(c) TERMINATION FEE AND MINIMUM INTEREST. In the event that
(a) this Agreement is terminated by Borrowers as of any date other than the end
of the Term or the end of a Renewal Term, or (b) this Agreement is terminated as
a result of the occurrence of an Event of Default or a Defaulting Event,
Borrowers shall pay to Lender on the effective date of such termination, in
addition to the Minimum Interest Amount, if applicable, and in addition to any
other payments Borrowers are required to make hereunder, a termination charge
equal to: five percent (5.0%) of the maximum principal amount of the Loans, if
terminated during the first year of the Loans, three percent (3.0%) of the
maximum principal amount of the Loans, if terminated during the second year of
the Loans and one percent (1.0%) of the maximum principal amount of the Loans,
if terminated during the third year of the Loans (the "Termination Fee");
provided, however, that there shall be no Termination Fee if, during the
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second year of the Loans, the Loans are paid in full directly or indirectly from
the proceeds of a loan from a commercial bank. It is understood that the
determination of the maximum principal amount of the Loans shall be made without
regard to the component of the Revolving Loan Borrowing Base based upon Eligible
Accounts. For example, for purposes of this provision, on the date hereof the
maximum principal amount of the Loans is $1,500,000 and the Termination Fee
would be $75,000 if the Loans were terminated during the first year. In the
event that (x) Borrowers attempt to breach this Agreement by terminating this
Agreement prior to the expiration of the Term, or (y) Borrowers give to Lender
less than sixty (60) days notice that Borrowers intend to decline to extend the
term of this Agreement at the end of the Term or any Renewal Term, or (z) this
Agreement is terminated as a result of the occurrence of an Event of Default or
a Defaulting Event, Borrowers shall pay to Lender the Minimum Interest Amount on
the effective date of such termination, in addition to the Termination Fee and
any other payments Borrowers are required to make hereunder. All other amounts
due from Borrowers to Lender prior to or in connection with any termination of
this Agreement, which have not been previously paid, shall be paid by Borrowers
on or before the effective date of the termination. As used herein, the "Minimum
Interest Amount" means interest upon the Minimum Balance at the interest rate in
effect on the date that express written notice of such termination is given to
Lender (or, if no such notice is given, the rate in effect on the effective date
of termination), for the period commencing on the date of such written notice of
termination (or, if no such notice is given, commencing on the effective date of
termination) and ending at the end of the Term (or at the end of a period of
sixty (60) days thereafter, if such termination notice is given by Borrowers
during or at the end of a Renewal Term on less than sixty (60) days notice or if
no termination notice is given).
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ARTICLE XIV. Miscellaneous
Section 14.1. Indemnification.
(a) In consideration of Lender's execution and delivery of
this Agreement and Lender's making of the Loans hereunder and in addition to all
other obligations of Borrowers under this Agreement, Borrowers jointly and
severally hereby agree to defend, protect, indemnify and hold harmless Lender,
its successors, assigns, officers, directors, employees and agents (including
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (individually, an "Indemnitee" and collectively,
the "Indemnitees") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages and
expenses in connection therewith (irrespective of whether any such Indemnitees
is a party to any action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements as and when incurred
(collectively, the "Indemnifiable Liabilities") incurred by the Indemnitees or
any of them as a result of, or arising out of, or relating to (i) the execution,
delivery, performance or enforcement of this Agreement and the other Financing
Agreements and any instrument, document or agreement executed pursuant hereto to
any of the Indemnitees; (ii) Lender's status as lender to, or creditor of,
Borrowers; or (iii) the operation of Borrowers' business from and after the date
hereof, including without limitation those arising under any Environmental Laws,
except for Indemnifiable Liabilities arising solely as a result of the
Indemnities' gross negligence or willful misconduct. To the extent that the
foregoing undertaking by Borrowers may be unenforceable for any reason,
Borrowers shall make the maximum contribution to the payment and satisfaction of
each of the Indemnifiable Liabilities which is permissible under applicable law.
(b) Borrowers jointly and severally hereby covenant and agree
at all times to indemnify, hold harmless and defend the Indemnitees, whether as
secured party in possession or as successor in interest to Borrowers as owner of
any personal property assets located on the real property of Borrowers, by
virtue of any action taken by Lender pursuant to the Financing Agreement, the
Uniform Commercial Code (as in effect in any applicable jurisdiction) or
otherwise from and against any and all liabilities, losses, damages, costs,
expenses, penalties, fines, causes of action, suits, claims, demands or
judgments, including without limitation, attorneys' fees and expenses, suffered
or incurred in connection with: (i) the Environmental Law, including, without
limitation, liens or claims of any federal, state or municipal government or
quasi-governmental agency or any third person, whether arising under any
Environmental Law or any other federal, state or municipal law or regulation;
(ii) any spill or contamination affecting the Premises or any other property
owned, leased, controlled or used by Borrowers, including without limitation,
any Hazardous Substance or other waste-like or toxic substances located on,
under, emanating from or relating to the Premises or such property from and on
and after the date hereof or any portion of any thereof or any property
contiguous to the Premises or such property from and after the date hereof, and
including without limitation, any loss of value of the Premises or such property
as a result of any such spill or contamination; and (iii) the direct or indirect
installation, use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal or presence of any Hazardous Substance,
on, under or about the Premises or any other property owned, leased, controlled
or used by Borrowers or any portion of any thereof, from and including all
consequential damages, the costs of any required or necessary repair, cleanup or
detoxification, and the costs of the preparation and implementation of any
closure, remedial or other required plans; provided, however, that Borrower
shall have no obligation to indemnify the Indemnities
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under this Subsection 14.1(b) for claims or losses resulting solely from the
Indemnities own action while on the Premises. Further, the mere fact that such
Indemnitee has been declared an "owner" or "operator" (as such term is defined
in any Environmental Law) resulting from such Indemnitee having taking
possession of any of the Collateral (without any negligence on the part of such
Indemnitee) shall not exonerate Borrowers from any claim by any Indemnitee
seeking such indemnification.
Section 14.2. Payment Set-Aside. To the extent that Borrowers
make a payment or payments to Lender (whether hereunder, under the Notes, or
under the other Financing Agreements) or Lender enforces its security interests
or rights or exercises its right of setoff, and such payment or payments or the
proceeds of such enforcement or setoff or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to Borrowers, a trustee, receiver or any other person under any law (including
without limitation, any bankruptcy law, state or federal law, common law or
equitable cause of action) in each case in connection with any bankruptcy or
similar proceeding involving Borrowers, then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.
Section 14.3. Set-off. Each of the Borrowers hereby grants to
Lender a lien and right of setoff for all its liabilities to Lender upon and
against all its deposits, credits, collateral and property now or hereafter in
the possession or control of Lender or in transit to Lender. Lender may, upon
the occurrence of any Event of Default or Defaulting Event or both, apply or
exercise the right of set off against any or all of the foregoing, or any part
thereof against any liability of Borrowers to Lender, regardless whether such
liability is matured or unmatured.
Section 14.4. Covenants to Survive; Binding Agreement. All
covenants, agreements, warranties and representations made herein, in the Notes,
in the other Financing Agreements, and in all certificates or other documents of
Borrowers shall survive the advances of money made by Lender to Borrowers
hereunder and the delivery of the Notes and the other Financing Agreements, and
all such covenants, agreements, warranties and representations shall be binding
upon and inure to the benefit of Lender and its successors and assigns, whether
or not so expressed.
Section 14.5. Cross-Collateralization. All Collateral which
Lender may at any time acquire from Borrowers or from any other source in
connection with Obligations arising under this Agreement and the other Financing
Agreements shall constitute collateral for each and every Obligation, without
apportionment or designation as to particular Obligations and all Obligations,
however and whenever incurred, shall be secured by all Collateral however and
whenever acquired, and Lender shall have the right, in its sole discretion, to
determine the order in which Lender's rights in or remedies against any
Collateral are to be exercised and which type of Collateral or which portions of
Collateral are to be proceeded against and the order of application of proceeds
of Collateral as against particular Obligations.
Section 14.6. Cross-Default. Each of the Borrowers
acknowledges and agrees that an Event of Default and/or Defaulting Event under
any one of the Financing Agreements shall constitute an Event of Default or
Defaulting Event under each of the other Financing Agreements.
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Section 14.7. Amendments and Waivers. Neither this Agreement,
the Notes, the other Financing Agreements, nor any term, covenant or condition
hereof or thereof may be changed, waived, discharged, modified or terminated
except by a writing executed by the parties hereto or thereto. No failure on the
part of Lender to exercise, and no delay in exercising, any right, remedy or
power hereunder or under the Note or the other Financing Agreements shall
preclude any other or future exercise thereof, or the exercise of any other
right, remedy or power.
Section 14.8. Notices. All notices, requests, consents,
demands and other communications hereunder shall be in writing and shall be
mailed by first class mail to the respective parties to this Agreement to the
address set forth in the introductory sentence hereof.
Section 14.9. Transfer of Lender's Interest. Each of the
Borrowers hereby agrees that Lender, in its sole discretion, may freely sell,
assign or otherwise transfer participations, portions, co-lender interests or
other interests in all or any portion of the indebtedness, liabilities or
obligations arising in connection with or in any way related to the financing
transactions of which this Agreement is a part provided that such transferee is
a recognized financial institution. In the event of any such transfer, the
transferee may, in Lender's sole discretion, have and enforce all the rights,
remedies and privileges of Lender. Each of the Borrowers consents to the release
by Lender to any potential transferee of any and all information (including
without limitation, financial information) pertaining to Borrowers as Lender, in
its sole discretion, may deem appropriate. If such transferee so participates
with Lender in making loans or advances hereunder or under any other agreement
between such Lender and Borrowers, each of the Borrowers hereby grants to such
transferee and such transferee shall have and is hereby given a continuing lien
and security interest in any money, securities or other property of Borrowers in
the custody or possession of such transferee, including the right of setoff
under circumstances consistent with this Agreement, to the extent of such
transferee's participation in the Obligations of Borrowers to Lender.
Section 14.10. Waivers.
(a) EACH OF THE BORROWERS ACKNOWLEDGES THAT THE LOANS
EVIDENCED HEREBY ARE COMMERCIAL TRANSACTIONS AND WAIVES ITS RIGHT TO NOTICE AND
HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE
ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH
LENDER MAY DESIRE TO USE, AND FURTHER WAIVES ITS RIGHTS TO REQUEST THAT LENDER
POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT BORROWERS AGAINST DAMAGES THAT
MAY BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY LENDER. EACH OF
THE BORROWERS FURTHER WAIVES DILIGENCE, DEMAND, PRESENTMENT FOR PAYMENT, NOTICE
OF NONPAYMENT, PROTEST AND NOTICE OF ANY RENEWALS OR EXTENSIONS.
(b) EACH OF THE BORROWERS HEREBY WAIVES TRIAL BY JURY IN ANY
COURT IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH
OR IN ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS AGREEMENT IS A
PART AND/OR THE ENFORCEMENT OF ANY OF LENDER'S RIGHTS, INCLUDING WITHOUT
LIMITATION, TORT CLAIMS. BORROWERS ACKNOWLEDGES THAT IT MAKES
32
<PAGE> 33
THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER CONSIDERATION
OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS. EACH OF THE BORROWERS
FURTHER ACKNOWLEDGES THAT LENDER HAS NOT REPRESENTED TO BORROWERS THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
(c) EACH OF THE BORROWERS ACKNOWLEDGES THAT IT MAKES
THE FOREGOING WAIVERS IN CLAUSE (a) AND CLAUSE (b) ABOVE, KNOWINGLY,
VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF
SUCH WAIVERS WITH ITS ATTORNEYS.
Section 14.11. Section Headings; Severability; Entire
Agreement. Section and subsection headings have been inserted herein for
convenience only and shall not be construed as part of this Agreement. Every
provision of this Agreement, the Notes and the other Financing Agreements is
intended to be severable; if any term or provision of this Agreement, the Notes,
the other Financing Agreements, or any other document delivered in connection
herewith shall be invalid, illegal or unenforceable for any reason whatsoever,
the validity, legality and enforceability of the remaining provisions hereof or
thereof shall not in any way be affected or impaired thereby. All Exhibits and
Schedules to this Agreement shall be annexed hereto and shall be deemed to be
part of this Agreement. This Agreement, the other Financing Agreements, and the
Exhibits and Schedules attached hereto and thereto embody the entire agreement
and understanding between Borrowers and Lender and supersede all prior
agreements and understandings relating to the subject matter hereof unless
otherwise specifically reaffirmed or restated herein.
Section 14.12. Governing Law, Notice and Service of Process,
Pleadings and Other Papers. This Agreement and the other Financing Agreements,
and all transactions, assignments and transfers hereunder and thereunder, and
all the rights of the parties, shall be governed as to validity, construction,
enforcement and in all other respects by the laws of the State of Connecticut
(but not its conflicts of law provisions). Each of the Borrowers hereby
designates and appoints, without power of revocation, the Secretary of the State
of Connecticut as Borrowers' agent upon whom may be served all process,
pleadings, notices or other papers which may be served upon it as a result of
any of its Obligations under this Agreement or other Financing Agreements. Each
of the Borrowers agrees that the Superior Court for the Judicial District of
Hartford/New Britain or the United States District Court for the District of
Connecticut shall have jurisdiction to hear and determine any claims or disputes
pertaining to the financing transactions of which this Agreement is a part
and/or to any matter arising or in any way related to this Agreement or any
other agreement between Lender and Borrowers, and each of the Borrowers
expressly submits and consents in advance to such jurisdiction in any action or
proceeding.
Section 14.13. Joint and Several Obligation. Each Borrower
acknowledges that (a) the Obligations are the joint and several obligation of
each Borrower, (b) the Borrowers are affiliate corporations, and (c) for reasons
of simplicity and administrative ease, the Borrowers desire that the Loans be
extended to them as co-borrowers. The security interests, liens and other rights
and interests in and relative to any of the real or personal property of the
Borrowers now or hereafter granted to Lender by the Borrowers or in any
instrument or agreement, shall serve as security for any and all of the
Obligations, including but not limited
33
<PAGE> 34
to, the obligations arising under the Loans and, for the repayment thereof,
Lender may resort to any security held by it in such order and manner as it may
elect. References in this Agreement to the Borrower in the singular shall
include the plural and all obligations herein contained are and shall be joint
and several.
34
<PAGE> 35
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized officers as of the date first above written.
Witnessed:
INDUSTRIAL TECHNOLOGIES, INC.
/s/ Joseph Schlig By: /s/ G.W Stewart
-------------------------- ----------------------------
/s/ Brian Haskell Its President/CEO
-------------------------
INTEC EUROPE, LTD.
/s/ Joseph Schlig By: /s/ G.W Stewart
-------------------------- ----------------------------
/s/ Brian Haskell Its President/CEO
-------------------------
AMERICAN COMMERCIAL FINANCE
CORPORATION
/s/ Kevin Morrison By: /s/ Richard E. Mount
-------------------------- ----------------------------
/s/ Bruce Silver Its President
--------------------------
35
<PAGE> 1
EXHIBIT 10.7
REVOLVING PROMISSORY NOTE
$1,500,000 November 1, 1996
ON DEMAND, for value received, the undersigned, INDUSTRIAL
TECHNOLOGIES, INC., a Delaware corporation and INTEC EUROPE, LTD., a Delaware
corporation (collectively, the "Maker"), do hereby jointly and severally promise
to pay to AMERICAN COMMERCIAL FINANCE CORPORATION, or order ("Lender"), at its
office at 433 South Main Street, West Hartford, Connecticut 06110, or at such
other place as the holder hereof (including Lender, hereinafter referred to as
"Holder") may designate, the sum of up to ONE MILLION FIVE HUNDRED THOUSAND
DOLLARS ($1,500,000), together with interest on the unpaid balance of this Note,
beginning as of the date hereof, before or after maturity or judgment, at the
rate of four percentage points (4.0%) per annum above the Prime Rate on a
floating basis, which rate shall be computed and payable monthly in arrears on
the basis of a Three Hundred Sixty (360) day year and actual days elapsed,
together with all taxes levied or assessed on this Note or the debt evidenced
hereby against the Holder, and together with all costs, expenses and attorneys'
and other professional fees incurred in any action to collect this Note or to
enforce, preserve, realize or foreclose any mortgage, security agreement or
other agreement securing this Note or to preserve, enforce, protect or sustain
the lien of said mortgage, security agreement or other agreement or in any
litigation or controversy arising from or connected with said mortgage, security
agreement or other agreement or this Note. The term "Prime Rate" as used herein
shall mean the Prime Rate as published from time to time in the "Money Rates"
section of The Wall Street Journal or any successor publication, or in the event
that such rate is no longer published in The Wall Street Journal, a comparable
index or reference selected by the Lender. The Prime Rate may not necessarily be
the lowest or most favorable rate. Any change in the interest rate because of a
change in the Prime Rate shall become effective, without notice or demand, on
the first day of each month immediately following the month in which any change
in the Prime Rate occurs so that the Prime Rate in effect on the last day of any
month shall be the Prime Rate for interest computation purposes for the next
succeeding month.
The principal amount of this Note shall be advanced, at the sole
discretion of Holder, pursuant to a Commercial Revolving Loan, Demand Loan and
Security Agreement between Maker and Lender dated of even date herewith (the
"Loan Agreement") and, notwithstanding the demand nature of this Note, is
subject in all respects to the terms and conditions of the Loan Agreement,
including, but not limited to, the repayment terms and the termination date set
forth in the Loan Agreement. Advances and payments on this Note may be evidenced
by borrowing certificates, a grid (if any) attached to this Note or similar
certificates or documents, or by an internal ledger account of Lender which
shall set forth, among other things, the principal amount of any advances and
payments therefor. Maker shall pay interest, principal and all other sums due
hereunder ON DEMAND. If demand is not sooner made, interest shall be due and
payable on the first day of each and every month commencing on December 1, 1996
and continuing until the obligations evidenced by this Note are fully and
finally paid. Holder may, in its sole discretion, charge any amounts due
hereunder to Maker's revolving loan account maintained with Holder pursuant to
the Loan Agreement.
Without in any way limiting the demand nature of the indebtedness due
hereunder, which shall at all times be payable ON DEMAND, Maker agrees that (i)
if any installment of interest, principal or other sum due hereunder is not paid
on demand or when it is otherwise due and payable hereunder, under this Note,
the Loan Agreement or under any instrument
<PAGE> 2
evidencing any other obligation of Maker to Holder, including without
limitation, that certain Demand Promissory Note in the original principal amount
of $500,000 from Maker to Lender dated of even date herewith (the "Demand
Note"); or (ii) if Maker or Holder shall terminate the Loan Agreement; or (iii)
if Maker or any endorser hereof or any guarantor or surety of any obligation of
Maker hereunder shall make an assignment for the benefit of creditors or suffer
or permit the appointment of a receiver for any part of its property or suffer
or permit the filing by or against it of any petition for adjudication,
arrangement, reorganization or the like under any bankruptcy or insolvency law;
or (iv) if Maker or any endorser hereof or any guarantor or surety of any
obligation of Maker hereunder shall be in default under any other provision of
this Note, the Loan Agreement, the Demand Note, or any mortgage, security
agreement or any other agreement securing this Note, any other note by Maker to
Holder, or in the payment or performance of any other obligation to Holder, or
in the payment or performance of any other material obligation to any other
person as a result of which such other person accelerates or requires the
immediate performance of such obligation; or (v) if there shall be any material
adverse change from the present condition or affairs (financial or otherwise) of
Maker or any of the guarantors of the obligations of Maker, that in Holder's
reasonable opinion impairs its security or increases its risk; then an event of
default shall have occurred hereunder and, upon the happening of any such event,
the entire indebtedness with accrued interest thereon due under this Note shall,
at the option of Holder, accelerate and become immediately due and payable
without notice or demand. Failure to exercise such option shall not constitute a
waiver of the right to exercise the same in the event of any subsequent default.
Upon the occurrence of such an event of default or demand for payment of any
demand indebtedness owing by Maker to Holder, the interest rate on this Note
shall automatically increase without notice to a floating per annum rate equal
to four percentage points (4.0%) above the rate otherwise in effect hereunder.
In the event of Maker's failure to pay any installment of interest,
and/or to pay any other sum due hereunder or under the Loan Agreement for more
than ten (10) days after the date it is due and payable, without in any way
affecting Holder's right to make demand hereunder or to declare an event of
default to have occurred, a late charge equal to five percent (5.0%) of such
late payment shall be assessed against Maker and shall be due and payable
immediately.
Notwithstanding any provisions of this Note, it is the understanding
and agreement of Maker and Holder (and any guarantors of Maker's liabilities)
that the maximum rate of interest to be paid by Maker (or guarantors of Maker's
liabilities) to Holder shall not exceed the highest or the maximum rate of
interest permissible to be charged by a commercial lender such as Lender to a
commercial borrower such as Maker under the laws of the State of Connecticut.
Any amount paid in excess of such rate shall be considered to have been payments
in reduction of principal.
Maker, and each and all guarantors of this Note hereby give Holder a
lien and right of setoff for all Maker's liabilities upon and against all the
deposits, credits, collateral and property of Maker and guarantors, now or
hereafter in the possession or control of Holder or in transit to it. Holder
may, upon the occurrence of an event of default hereunder or upon demand for
payment of any demand indebtedness owing from Maker to Holder, apply or set off
the same, or any part thereof, to any liability of Maker even though unmatured.
Notwithstanding the foregoing, if this Note is secured wholly or in
part by the assignment of a life insurance policy or other agreement securing
this Note, and the proceeds
<PAGE> 3
therefrom are paid to the Holder pursuant to such assignment or other agreement
securing this Note, the Holder, at its option, may apply all or part of such
proceeds to the outstanding principal balance of this Note, interest thereon and
other obligations of Maker hereunder in such order as Holder, in its sole
discretion, deems proper.
Failure by Holder to insist upon the strict performance by Maker of any
terms and provisions herein shall not be deemed to be a waiver of any terms and
provisions herein, and Holder shall retain the right thereafter to insist upon
strict performance by Maker of any and all terms and provisions of this Note or
any document securing the repayment of this Note.
MAKER HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY SUIT, ACTION
OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY RELATED TO
THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART AND/OR THE ENFORCEMENT
OF ANY OF HOLDER'S RIGHTS AND REMEDIES, INCLUDING, WITHOUT LIMITATION, TORT
CLAIMS. MAKER ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY,
WITHOUT DURESS, AND ONLY AFTER CONSIDERATION OF RAMIFICATIONS OF THIS WAIVER
WITH ITS ATTORNEYS. MAKER FURTHER ACKNOWLEDGES THAT LENDER HAS NOT AGREED WITH
OR REPRESENTED TO MAKER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
MAKER AND EACH AND ALL GUARANTORS OF THIS NOTE ACKNOWLEDGE THAT THE
LOAN EVIDENCED BY THIS NOTE IS A COMMERCIAL TRANSACTION AND WAIVE THEIR RIGHTS
TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR
AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH HOLDER MAY DESIRE TO USE, AND FURTHER WAIVES ITS RIGHTS TO REQUEST
THAT HOLDER POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT SAID MAKER AGAINST
DAMAGES THAT MAY BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY
HOLDER. Maker further waives diligence, demand, presentment for payment, notice
of nonpayment, protest and notice of protest, and notice of any renewals or
extensions of this Note, and all rights under any statute of limitations, and
all guarantors agree that the time for payment of this Note may be extended at
Holder's sole discretion, without impairing their liability thereon, and further
consent to the release of all or any part of the security for the payment
hereof, at the discretion of Holder, or the release of any party liable for this
obligation without affecting the liability of the other parties hereto. MAKER
ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT DURESS
AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS
ATTORNEYS. MAKER FURTHER ACKNOWLEDGES THAT LENDER HAS NOT AGREED WITH OR
REPRESENTED TO MAKER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
This Note shall be governed by and construed in accordance with the
laws of the State of Connecticut (but not its conflicts of law provisions).
References in this Note to the Maker in the singular shall include the
plural and all obligations herein contained are and shall be joint and several.
<PAGE> 4
INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ G.W Stewart
-----------------------------
Its President/CEO
INTEC EUROPE, LTD.
By: /s/ G.W Stewart
-----------------------------
Its President/CEO
<PAGE> 1
EXHIBIT 10.8
DEMAND PROMISSORY NOTE
$500,000 November 1, 1996
ON DEMAND, for value received, the undersigned, INDUSTRIAL
TECHNOLOGIES, INC., a Delaware corporation and INTEC EUROPE, LTD., a Delaware
corporation (collectively, the "Maker"), do hereby jointly and severally promise
to pay to AMERICAN COMMERCIAL FINANCE CORPORATION, or order ("Lender"), at its
office at 433 South Main Street, West Hartford, Connecticut 06110, or at such
other place as the holder hereof (including Lender, hereinafter referred to as
"Holder") may designate, the sum of FIVE HUNDRED THOUSAND DOLLARS ($500,000),
together with interest on the unpaid balance of this Note, beginning as of the
date hereof, before or after maturity or judgment, at the rate of four
percentage points (4.0%) per annum above the Prime Rate on a floating basis,
which rate shall be computed and payable monthly in arrears on the basis of a
Three Hundred Sixty (360) day year and actual days elapsed, together with all
taxes levied or assessed on this Note or the debt evidenced hereby against the
Holder, and together with all costs, expenses and attorneys' and other
professional fees incurred in any action to collect this Note or to enforce,
preserve, realize or foreclose any mortgage, security agreement or other
agreement securing this Note or to preserve, enforce, protect or sustain the
lien of said mortgage, security agreement or other agreement or in any
litigation or controversy arising from or connected with said mortgage, security
agreement or other agreement or this Note. The term "Prime Rate" as used herein
shall mean the Prime Rate as published from time to time in the "Money Rates"
section of The Wall Street Journal or any successor publication, or in the event
that such rate is no longer published in The Wall Street Journal, a comparable
index or reference selected by the Lender. The Prime Rate may not necessarily be
the lowest or most favorable rate. Any change in the interest rate because of a
change in the Prime Rate shall become effective, without notice or demand, on
the first day of each month immediately following the month in which any change
in the Prime Rate occurs so that the Prime Rate in effect on the last day of any
month shall be the Prime Rate for interest computation purposes for the next
succeeding month.
The principal amount of this Note shall be advanced, at the sole
discretion of Holder, pursuant to a Commercial Revolving Loan, Demand Loan and
Security Agreement between Maker and Lender dated of even date herewith (the
"Loan Agreement") and, notwithstanding the demand nature of this Note, is
subject in all respects to the terms and conditions of the Loan Agreement,
including, but not limited to, the repayment terms and the termination date set
forth in the Loan Agreement. Maker shall pay interest, principal and all other
sums due hereunder ON DEMAND. If demand is not sooner made, interest shall be
due and payable on the first day of each and every month commencing on December
1, 1996 and continuing until the obligations evidenced by this Note are fully
and finally paid, and principal shall be due and payable as follows: (a) one
installment of $16,686, due and payable on April 1, 1997; (b) twenty-eight (28)
equal monthly installments of $16,666 commencing on May 1, 1997 and continuing
through and including August 1, 1999, and (c) one final installment of $16,666,
plus all accrued and unpaid interest, principal and any other sums due hereunder
on September 1, 1999.
Without in any way limiting the demand nature of the indebtedness due
hereunder, which shall at all times be payable ON DEMAND, Maker agrees that (i)
if any installment of interest, principal or other sum due hereunder is not paid
on demand or when it is otherwise due and payable hereunder, under this Note,
the Loan Agreement or under any instrument
<PAGE> 2
evidencing any other obligation of Maker to Holder, including without
limitation, that certain Revolving Promissory Note in the maximum aggregate
principal amount of up to $1,500,000 from Maker to Lender dated of even date
herewith (the "Revolving Note"); or (ii) if Maker or Holder shall terminate the
Loan Agreement; or (iii) if Maker or any endorser hereof or any guarantor or
surety of any obligation of Maker hereunder shall make an assignment for the
benefit of creditors or suffer or permit the appointment of a receiver for any
part of its property or suffer or permit the filing by or against it of any
petition for adjudication, arrangement, reorganization or the like under any
bankruptcy or insolvency law; or (iv) if Maker or any endorser hereof or any
guarantor or surety of any obligation of Maker hereunder shall be in default
under any other provision of this Note, the Loan Agreement, the Revolving Note,
or any mortgage, security agreement or any other agreement securing this Note,
any other note by Maker to Holder, or in the payment or performance of any other
obligation to Holder, or in the payment or performance of any other material
obligation to any other person as a result of which such other person
accelerates or requires the immediate performance of such obligation; or (v) if
there shall be any material adverse change from the present condition or affairs
(financial or otherwise) of Maker or any of the guarantors of the obligations of
Maker, that in Holder's reasonable opinion impairs its security or increases its
risk; then an event of default shall have occurred hereunder and, upon the
happening of any such event, the entire indebtedness with accrued interest
thereon due under this Note shall, at the option of Holder, accelerate and
become immediately due and payable without notice or demand. Failure to exercise
such option shall not constitute a waiver of the right to exercise the same in
the event of any subsequent default. Upon the occurrence of such an event of
default or demand for payment of any demand indebtedness owing by Maker to
Holder, the interest rate on this Note shall automatically increase without
notice to a floating per annum rate equal to four percentage points (4.0%) above
the rate otherwise in effect hereunder.
In the event of Maker's failure to pay any installment of interest,
and/or to pay any other sum due hereunder or under the Loan Agreement for more
than ten (10) days after the date it is due and payable, without in any way
affecting Holder's right to make demand hereunder or to declare an event of
default to have occurred, a late charge equal to five percent (5.0%) of such
late payment shall be assessed against Maker and shall be due and payable
immediately.
Notwithstanding any provisions of this Note, it is the understanding
and agreement of Maker and Holder (and any guarantors of Maker's liabilities)
that the maximum rate of interest to be paid by Maker (or guarantors of Maker's
liabilities) to Holder shall not exceed the highest or the maximum rate of
interest permissible to be charged by a commercial lender such as Lender to a
commercial borrower such as Maker under the laws of the State of Connecticut.
Any amount paid in excess of such rate shall be considered to have been payments
in reduction of principal.
Maker, and each and all guarantors of this Note hereby give the Holder
a lien and right of setoff for all Maker's liabilities upon and against all the
deposits, credits, collateral and property of Maker and guarantors, now or
hereafter in the possession or control of Holder or in transit to it. Holder
may, upon the occurrence of an event of default hereunder or upon demand for
payment of any demand indebtedness owing from Maker to Holder, apply or set off
the same, or any part thereof, to any liability of Maker even though unmatured.
Notwithstanding the foregoing, if this Note is secured wholly or in
part by the assignment of a life insurance policy or other agreement securing
this Note, and the proceeds
<PAGE> 3
therefrom are paid to Holder pursuant to such assignment or other agreement
securing this Note, Holder, at its option, may apply all or part of such
proceeds to the outstanding principal balance of this Note, interest thereon and
other obligations of Maker hereunder in such order as Holder, in its sole
discretion, deems proper.
Failure by Holder to insist upon the strict performance by Maker of any
terms and provisions herein shall not be deemed to be a waiver of any terms and
provisions herein, and Holder shall retain the right thereafter to insist upon
strict performance by Maker of any and all terms and provisions of this Note or
any document securing the repayment of this Note.
MAKER HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY SUIT, ACTION
OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY RELATED TO
THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART AND/OR THE ENFORCEMENT
OF ANY OF HOLDER'S RIGHTS AND REMEDIES, INCLUDING, WITHOUT LIMITATION, TORT
CLAIMS. MAKER ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY,
WITHOUT DURESS, AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER
WITH ITS ATTORNEYS. MAKER FURTHER ACKNOWLEDGES THAT LENDER HAS NOT AGREED WITH
OR REPRESENTED TO MAKER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
MAKER AND EACH AND ALL GUARANTORS OF THIS NOTE ACKNOWLEDGE THAT THE
LOAN EVIDENCED BY THIS NOTE IS A COMMERCIAL TRANSACTION AND WAIVE THEIR RIGHTS
TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR
AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH HOLDER MAY DESIRE TO USE, AND FURTHER WAIVES ITS RIGHTS TO REQUEST
THAT HOLDER POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT SAID MAKER AGAINST
DAMAGES THAT MAY BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY
HOLDER. Maker further waives diligence, demand, presentment for payment, notice
of nonpayment, protest and notice of protest, and notice of any renewals or
extensions of this Note, and all rights under any statute of limitations, and
all guarantors agree that the time for payment of this Note may be extended at
Holder's sole discretion, without impairing their liability thereon, and further
consent to the release of all or any part of the security for the payment
hereof, at the discretion of Holder, or the release of any party liable for this
obligation without affecting the liability of the other parties hereto. MAKER
ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT DURESS
AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS
ATTORNEYS. MAKER FURTHER ACKNOWLEDGES THAT LENDER HAS NOT AGREED WITH OR
REPRESENTED TO MAKER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
This Note shall be governed by and construed in accordance with the
laws of the State of Connecticut (but not its conflicts of law provisions).
<PAGE> 4
References in this Note to the Maker in the singular shall include the
plural and all obligations herein contained are and shall be joint and several.
INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ G.W Stewart
-----------------------------
Its President/CEO
INTEC EUROPE, LTD.
By: /s/ G.W Stewart
-----------------------------
Its President/CEO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 474,142
<SECURITIES> 0
<RECEIVABLES> 1,651,807
<ALLOWANCES> (60,602)
<INVENTORY> 1,757,244
<CURRENT-ASSETS> 4,006,081
<PP&E> 1,004,483
<DEPRECIATION> (979,941)
<TOTAL-ASSETS> 7,293,957
<CURRENT-LIABILITIES> 3,705,333
<BONDS> 0
0
0
<COMMON> 54,645
<OTHER-SE> 3,353,979
<TOTAL-LIABILITY-AND-EQUITY> 7,293,957
<SALES> 2,394,957
<TOTAL-REVENUES> 2,394,957
<CGS> 1,064,690
<TOTAL-COSTS> 1,064,690
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,000
<INTEREST-EXPENSE> 39,059
<INCOME-PRETAX> 16,778
<INCOME-TAX> 0
<INCOME-CONTINUING> 16,778
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,778
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
