Exhibit 2.2
LOAN
AGREEMENT
THIS LOAN
AGREEMENT (as amended, modified or supplemented from time to time, this “Agreement”) made this 24th day of July, 2007 (the “Effective Date”), by and between BANK MIDWEST, N.A. (“Lender”), with an address of 1100 Main Street, Kansas City,
Missouri 64105, LIQUIDMETAL COATINGS,
LLC (“LMC”), with an address of
c/o Liquidmetal Technologies, Inc., 30452 Esperanza, Rancho Santa
Margarita, California 92688 and
LIQUIDMETAL COATINGS SOLUTIONS, LLC (“LMCS”), with an
address of c/o Liquidmetal Technologies, Inc., 30452 Esperanza, Rancho
Santa Margarita, California 92688. LMC and LMCS, jointly and severally,
hereinafter referred to as “Borrowers”, and
each individually, “Borrower”.
WITNESSETH
WHEREAS,
Borrowers may from time to time request Loans from Lender, and the parties wish
to provide for the terms and conditions upon which such Loans or other
financial accommodations, if made by Lender, shall be made;
NOW,
THEREFORE, in consideration of any Loan (including any Loan by renewal or
extension) hereafter made to Borrowers by Lender, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each Borrower, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used
herein, the following definitions shall apply:
“Debt” means,
as to any Person, without duplication, (a) all indebtedness of such
Person; (b) all borrowed money of such Person (including principal, interest, fees and charges), whether or not
evidenced by bonds, debentures, notes or similar instruments; (c) all
obligations to pay the deferred purchase price of property or services; (d) all obligations, contingent or
otherwise, with respect to the maximum face
amount of all letters of credit (whether or not drawn), bankers’
acceptances and similar obligations issued for the account of such Person
(including the letters of credit), and all
unpaid drawings in respect of such letters of credit, bankers’ acceptances and
similar obligations; (e) all indebtedness secured by any Lien on any property
owned by such Person, whether or not such indebtedness has been assumed by such
Person (provided, however, if such Person has not assumed or otherwise become
liable in respect of such indebtedness, such indebtedness shall be deemed to be
in an amount equal to the fair market value of the property subject to such Lien at the time of
determination); (f) the aggregate amount of
all capitalized lease obligations of such Person; (g) all contingent
liabilities of such Person, whether or not reflected on its balance
sheet; (h) all hedging obligations
of such Person; (i) all Debt of any
partnership of which such Person is a general partner; and (j) all monetary obligations of such Person under
(i) a so-called synthetic, off-balance sheet or tax retention lease, or (ii) an
agreement for the use or possession of property creating obligations that do
not appear on the balance sheet of such Person but which, upon the insolvency
or bankruptcy of such Person, would be characterized as the indebtedness of
such Person (without regard to accounting
treatment). Notwithstanding the foregoing, Debt shall not
include trade payables and accrued expenses incurred by such Person in
accordance with customary practices and in the ordinary course of business of such
Person.
“Debtor Relief Proceeding” means any
bankruptcy, reorganization, liquidation, conservatorship, receivership or other
similar proceedings under any state or federal law now or hereafter in effect
which are commenced by or against either or both of the Borrowers or if either
or both of the Borrowers otherwise take any action to restrain, enjoin or
otherwise impede the Lender in the exercise of the remedies afforded to Lender
under this Agreement or under any of the obligations owed by each Borrower to
the Lender, or at law or in equity.
“Depreciation” shall mean the total amounts added to
depreciation, amortization, obsolescence, valuation and other proper reserves,
as reflected on Borrower’s financial statements and determined in accordance
with GAAP.
“EBITDA” means, for any period, the sum for such period of
(i) Net Income, plus (ii) Interest Charges, plus (iii) federal
and state income taxes, plus (iv) Depreciation, plus (v) all
other non-cash charges, in each case to the extent included in determining Net
Income for such period.
“Eligible Cash” means cash on deposit with Lender.
“Eligible Inventory” means all inventory of Borrowers which
meets each of the following requirements:
(a) it is subject to a perfected, first
priority Lien in favor of Lender and is not subject to any other assignment,
claim or Lien other than Permitted Liens;
(b) it is in the possession and control
of any Borrower and it is stored and held in facilities owned by a Borrower or,
if such facilities are not so owned, Lender is in possession of a collateral
access agreement with respect thereto;
(c) it is not inventory produced in
violation of the Fair Labor Standards Act and subject to the “hot goods”
provisions contained in Title 29 U.S.C. §215;
(d) it is not subject to any agreement or
license which would restrict Lender’s ability to sell or otherwise dispose of
such inventory;
(e) it is located in the United States or
in any territory or possession of the United States that has adopted Article 9
of the Uniform Commercial Code;
(f) it is not supply items, packaging or
any other similar materials;
(g) it is not identified to any purchase
order or contract to the extent progress or advance payments are received with
respect to such inventory;
(h) it does not breach any of the representations,
warranties or covenants pertaining to inventory set forth in the Loan
Documents; and
2
(i) Lender shall not have determined in
good faith in accordance with Lender’s reasonable and customary business
practices that it is unacceptable due to age, type, category, quality, quantity
and/or any other reason whatsoever.
Inventory which is
at any time Eligible Inventory but which subsequently fails to meet any of the
foregoing requirements shall forthwith cease to be Eligible Inventory.
“Eligible Receivables” means any right of payment for goods
sold, leased or licensed or service rendered by a Borrower, whether or not
earned by performance, and may, without limitation, in whole or in part, be in
the form of an account, chattel paper or instrument as determined by Lender in
good faith in accordance with Lender’s reasonable and customary business
practices, which are aged less than ninety (90) days.
“Event of Default” means any of the following in addition to
any event of default defined in the Loan Documents:
(a) A failure to pay when due any
principal, interest, fee, escrow payment or expense reimbursement.
(b) A failure to perform or pay when due
any other material obligation, covenant, representation, warranty, or agreement
under the terms of any Loan Document in strict accordance with the terms and
provisions thereof.
(c) Without Lender’s prior written
consent, a sale, conveyance, or encumbrance of any interest in the
Collateral. Notwithstanding the
foregoing, Lender’s prior written consent shall not be required for any sale or
conveyance which results in the Term Note and Revolving Note being paid in
full.
(d) The occurrence of any default under
any other promissory note, guaranty, security document, or loan document
executed by Borrower and owned by Lender at the time of default.
(e) The occurrence of any default under
any document executed by Borrower which (i) is owned by any person other
than Lender, (ii) constitutes a lien on the Collateral (no permission for
creation of such liens being implied), (iii) remains uncured after the
expiration of any applicable cure period and (iv) could reasonably result in a
material impairment of Borrower’s ability to pay or perform its obligations
under the Loan Documents.
(f) A violation, whether discovered or asserted
before or after closing of any federal, state, or local law, rule, regulation,
or order issued by a governmental agency or court which would or could have a
material adverse impact on Borrower’s business or properties (including without
limitation the Collateral) including but not limited to (i) any provisions
of the Comprehensive Environmental Response, Compensation and Liability Act of
1980, or any similar law which prohibits or restricts the storage, maintenance,
or discharge of hazardous materials or waste, or (ii) any provisions of
the Americans with Disabilities Act of 1990 or any similar federal, state, or
local law imposing requirements relating to the accessibility of buildings or
structures to persons with disabilities.
3
(g) The material falseness of any
statement, warranty, or representation when given or made by Borrower to Lender
or any such statement, warranty, or representation becoming materially false at
any time when any portion of the Loan remains outstanding.
(h) Borrower or any surety (i) makes an
assignment for the benefit of creditors, (ii) files a voluntary proceeding
seeking protection from creditors under any bankruptcy or other law,
(iii) becomes the subject of an involuntary proceeding under any
bankruptcy or other similar law, or (iv) makes any admission of its
inability to pay its debts generally as they become due.
(i) The appointment of a trustee,
receiver, or liquidator for Borrower, any surety or the Collateral.
(j)
The occurrence of any of the following with respect to Borrower or the
Collateral involving an amount in excess of $100,000.00 (i) the imposition
of any lien or other similar encumbrance (which does not include a voluntary
grant or conveyance of a lien or encumbrance by Borrower against assets other
than the Collateral), (ii) the issuance of any garnishment, attachment,
levy, or any other form of execution or (iii) the entry of a material adverse
judgment by a court having jurisdiction.
(k) The occurrence of a change in
Borrower’s (a) ownership which results in (i) Liquidmetal Technologies, Inc. (“LTC”) owning less than a majority of the
outstanding membership interests of LMC or (ii) LMC owning less than 100% of
LMCS, or (b) management, without Lender’s prior written consent, which consent
will not be unreasonably withheld or delayed.
(l) Prior to payment in full of all
obligations of Borrowers to C3 Capital Partners, LP and C3 Capital Partners II,
L.P. (collectively “C3”) under
that certain Securities Purchase Agreement (“SPA”)
between and among Borrowers and C3 dated July 20, 2007, the failure of LMC to
maintain (i) the allocation of two (2) board votes to be controlled by C3 and
CEO Larry Buffington and (ii) a springing proxy control of a third board vote
in favor of C3 to be triggered upon the occurrence of an event of default under
the SPA.
(m) The loss or impairment of
(i) Lender’s lien or security interest or (ii) the priority of Lender’s
lien or security interest in the Collateral.
(n) A determination by Lender in good
faith that the prospect of payment or performance under the Loan Documents is
materially impaired.
“Excess Cash Flow” means, for any period, EBITDA less
(i) federal and state income taxes, less (ii) capital expenditures, less
(iii) Senior Debt Service, less (iv) Interest
Charges arising from Borrowers’ Debt to C3.
“Fixed Charge
Coverage Ratio” means, with respect to any period, the ratio of (i)
EBITDA minus federal and state income taxes minus capital expenditures to (ii) Total
Debt Service.
4
“General Intangibles”
means any and all existing or acquired educational licenses, certifications and
other similar items of value as determined by Lender in good faith in
accordance with Lender’s reasonable and customary business practices.
“Interest Charges” means, for any period, the sum of: (a) all interest charges and related expenses
payable with respect to that fiscal period to a lender in connection with
borrowed money or the deferred purchase price of assets that are treated as
interest in accordance with GAAP, plus (b) the portion of capitalized
lease obligations with respect to that fiscal period that should be treated as
interest in accordance with GAAP, plus (c) all charges paid or payable
(without duplication) during that period with respect to any hedging
agreements.
“Leverage Maximum” means (i) as of even date herewith through
month six (6): 1.75 to 1.00; (ii) for months seven (7) through month twelve
(12): 1.60 to 1.00; (iii) for months thirteen (13) to twenty-four (24): 1.50 to
1.00; (iv) for months twenty-five (25) through the Term Note Maturity Date:
1.25 to 1.00.
“Lien” means, with respect to any Person, any interest
granted by such Person in any real or personal property, asset or other right
owned or being purchased or acquired by such Person (including an interest in
respect of any capital lease) which secures payment or performance of any
obligation and shall include any mortgage, lien, encumbrance, title retention
lien, charge or other security interest of any kind, whether arising by
contract, as a matter of law, by judicial process or otherwise.
“Loans” shall mean all loans and advances made by Lender to
or on behalf of Borrowers hereunder.
“Loan Documents” shall mean all agreements instruments and
documents, including, without limitation, this Agreement, the Term Note, the Revolving
Note, the LCM Security Agreement, the LMCS Security Agreement and all other
writings heretofore, now or from time to time hereafter executed by or on
behalf of Borrower or any other Person delivered to Lender in connection with
the Loans or the transactions contemplated hereby, as each of the same may be
amended, modified or supplemented from time to time.
“Net Income” means, with respect to Borrowers for any period,
the net income (or loss) of Borrowers for such period as determined in
accordance with GAAP.
“Net Worth” means, as of any given date, a Person’s equity
calculated in conformance with GAAP by subtracting total liabilities from total
Tangible Assets.
“Permitted Liens” means:
(a) Liens pursuant to any Loan Document;
(b) Liens existing on the date hereof and
disclosed to Lender and any refinancing, refunding, renewal or extension
thereof; provided, that (i) the property covered thereby is not changed, (ii)
the amount secured or benefited thereby is not increased, and (iii) the direct
or any contingent obligor with respect thereto is not changed;
5
(c) Liens for taxes not yet due or which
are being contested in good faith and by appropriate proceedings diligently
conducted, if adequate reserves with respect thereto are maintained on the
books of the applicable Person in accordance with GAAP;
(d) carriers’, warehousemen’s, mechanics’,
materialmen’s, repairmen’s or other like Liens arising in the ordinary course
of business which are not overdue for a period of more than thirty (30) days or
which are being contested in good faith and by appropriate proceedings
diligently conducted, if adequate reserves with respect thereto are maintained
on the books of the applicable Person;
(e) pledges or deposits in the ordinary
course of business in connection with workers’ compensation, unemployment
insurance and other social security legislation, other than any Lien imposed by
ERISA;
(f) deposits to secure the performance
of bids, trade contracts and leases (other than indebtedness), statutory
obligations, surety and appeal bonds, performance bonds and other obligations
of a like nature incurred in the ordinary course of business;
(g) Liens in connection with capital
leases and purchase money obligations for fixed or capital assets; provided,
that (i) such Liens do not at any time encumber any property other than the
property financed by such indebtedness and (ii) the indebtedness secured
thereby does not exceed the cost or fair market value, whichever is lower, of
the property being acquired on the date of acquisition;
(h) Liens securing indebtedness (and any
refinancing, refunding, renewal or extension thereof) on property in existence
at the time such property is acquired by a borrower in connection with an
acquisition; provided, that (i) such Liens do not at any time encumber any
property other than the property so acquired, (ii) the amount secured or
benefited thereby is not increased, and (iii) the direct or any contingent
obligor with respect thereto is not changed;
(i) Liens not otherwise permitted by
this definition; provided, that the aggregate amount of indebtedness secured by
Liens permitted by this clause (j) shall not at any time exceed $50,000; and
(j) any and all other Liens specifically
approved by Lender, including the Notes made by the Borrowers and held by C3,
as such Notes are defined in the SPA.
“Person” means any natural person, partnership, limited
liability company, corporation, trust, joint venture, joint stock company,
association, unincorporated organization, government or agency or political
subdivision thereof, or other entity, whether acting in an individual,
fiduciary or other capacity.
“Security Agreements” means, collectively, the Security
Agreement executed by LMC in favor of Lender dated as of even date herewith and
the Security Agreement executed by LMCS in favor of Lender as of even date
herewith.
6
“Senior Debt Service” means, with
respect to any period, an amount equal to the sum of (i) Interest Charges
arising from the Loans for such period, plus (ii) the scheduled
amortization of any Loans during such period, plus (iii) Interest
Charges arising from any capitalized lease obligations of Borrower for such
period, plus (iv) the scheduled amortization of any capitalized lease
obligations of Borrowers during such period.
“Senior Debt Service Coverage Ratio”
means, with respect to any period, the ratio of (i) EBITDA minus federal
and state income taxes minus capital
expenditures to (ii) Senior Debt Service.
“Senior Funded Debt” means, at any time (i) the aggregate
amount outstanding of all Loans, plus (ii) the aggregate amount of all capitalized lease obligations of Borrowers.
“Subsidiary” and “Subsidiaries”
shall mean, respectively, with respect to any Person, each and all such
corporations, partnerships, limited partnerships, limited liability companies,
limited liability partnerships, joint ventures or other entities of which or in
which such Person owns, directly or indirectly, such number of outstanding
capital securities as have more than fifty percent (50%) of the ordinary voting
power for the election of directors or other managers of such corporation,
partnership, limited liability company or other entity. Unless the context otherwise requires, each
reference to Subsidiaries herein shall be a reference to Subsidiaries of
Borrower.
“Tangible Assets” means the total of all assets appearing on
a balance sheet of Borrowers prepared in accordance with GAAP (with inventory
being valued at the lower of cost or market), after deducting all proper
reserves (including reserves for Depreciation) minus the sum of (i) goodwill,
patents, trademarks, prepaid expenses, deposits, deferred charges and other
personal property which is classified as intangible property in accordance with
GAAP.
“Tangible Net Worth” means, as of any
given date, Borrowers’ consolidated Net Worth plus the outstanding
amount of all Debt from Borrowers to C3.
“Total Debt Service”
means, with respect to any period, an amount equal to the sum of (i) Interest
Charges for such period plus (ii) the scheduled amortization of any Debt
during such period.
Capitalized
terms not defined herein shall have the same definition as set forth in the
Security Agreements or the Uniform Commercial Code as adopted by the State of
Missouri.
ARTICLE
II
ADVANCES
Section 1. Term Loan Advance.
Subject to the terms and conditions of this Agreement and the Loan
Documents, as of even date herewith, Lender shall make an advance to Borrower
in an aggregate principal amount equal to Four Million and No/100 Dollars
($4,000,000.00) (the “Term Loan”). Amounts repaid with respect to the Term Loan
may not be reborrowed.
7
Section 2. Revolving Loan Advance. Subject to the terms and
conditions of this Agreement and the Loan Documents, as of even date herewith,
Lender shall make revolving loans and advances to Borrower (the “Revolving Loan”), in an aggregate principal
amount not to exceed One Million Five Hundred Thousand and 00/100 Dollars (the “Maximum Revolving Limit”) as follows:
(a) Initial Advance. As of even date herewith, Lender shall make
an initial advance of the loan amount in the sum of One Million and 00/100
Dollars ($1,000,000.00) (“Initial Advance”).
(b) Future Advance. Upon satisfaction of the conditions
referenced herein and provided no Event of Default has occurred and is
continuing, Lender shall, at Borrower’s request, from time to time, make
advances to Borrower in the aggregate amount of up to the lesser of (i)
eighty-five percent (85%) of the face amount (less maximum discounts, credits
and allowances which may be taken by or granted to Account Debtors in
connection therewith in the ordinary course of Borrower’s business) of Borrower’s
Eligible Receivables, plus fifty percent (50%) of Eligible Inventory,
each on a consolidated basis or (ii) the trailing twelve months EBITDA
multiplied by the applicable Leverage Maximum [less amount of lender term loan outstanding] (as the case may
be, the “Future Advance Amount”). Provided, however, the sum of all advances
with respect to the Revolving Loans shall at no time exceed the Maximum
Revolving Limit, except as such amount may be increased or, upon the occurrence
and continuation of an Event of Default, decreased by Lender, in its sole
discretion.
Section 3. Borrower Reporting. Each Borrower shall provide to Lender
the following:
(a) Within ninety (90) days after
Borrower’s fiscal year-end, Borrower shall provide to Lender, at Borrower’s
sole cost and expense, audited Financial Statements;
(b) Within forty-five (45) days after
Borrower’s fiscal year-end, Borrower shall provide to Lender, at Borrower’s
sole cost and expense, a copy of Borrower’s year-end tax return;
(c) Within thirty (30) days after the end
of Borrower’s fiscal quarter, or at the request of Lender, and together with
any request by Borrower for an Advance, Borrower shall deliver to Lender (i) a
Borrowing Base Certificate in substantially the same form as the closing
Borrowing Base Certificate attached hereto as Exhibit A, which shall be
accompanied by copies of Borrower’s sales journal, cash receipts journal and
credit memo journal for the relevant period, and (ii) a certification of
Borrower’s financial covenants substantially in the same form as attached
hereto as Exhibit B. Such
Borrowing Base Certificate shall reflect activity of the Borrower with respect
to Accounts for the immediately preceding period to the date of the last
Advance made by Lender to Borrower, and shall be in a form and with such
specificity as is satisfactory to Lender and shall contain additional
information concerning Accounts, Inventory and Equipment as may be requested by
Lender, including, without limitation, but only if specifically requested by
Lender, copies of all invoices prepared in connection with such Accounts; and
8
(d) Such other financial documents as
Lender deems appropriate in the course of normal business with reasonable
notice to Borrower.
Section 4. As
a condition to the Loan, Borrower shall at all times maintain all of its
deposit and operating accounts with Lender and Lender will provide
substantially competitive rates in its marketplace.
Notwithstanding
the foregoing, Lender shall not be obligated to make advances (“Advances”) of the Loan to Borrower, unless Lender is
satisfied that the conditions precedent to the making of such Advance have been
satisfied by Borrower.
ARTICLE
III
TERMS OF NOTES
Section 1. Term Note.
(a) Interest. The “Term
Interest Rate” prior to the occurrence of an Event of Default, will
be a fixed rate of 8.48% per annum. All
interest shall be calculated for the actual number of days elapsed over a year
assumed to consist of 360 days.
(b) Payments of Principal and Interest. Payments of principal and interest, at the
Term Interest Rate, shall be due and payable on August 1, 2007, and on the
first day of each calendar month thereafter (“Term
Note Period”). Principal
payments shall be (i) $62,500.00 during months 1 through 12, (ii) $83,333.33
during months 13 through 36 and (iii) $104,166.67 during months 37 through 48.
(c) Payment of Principal and Interest on the Maturity Date.
All remaining outstanding principal and interest shall be due and payable on
July 20, 2011 (“Term Note Maturity Date”).
(d) Fees. As of even date herewith, Borrower shall pay
to Lender an initial loan fee in the amount of $40,000.00.
(e) Prepayment. If the Term Note is prepaid within the first
twenty-four months (“Term Prepayment Penalty
Period”) following the Effective Date, Borrower must pay a
prepayment penalty of one percent (1%) of the outstanding principal balance of
the Term Loan, together with all accrued interest on the principal so
prepaid. After the expiration of the
Term Prepayment Penalty Period, Borrower shall have the right, at any time and
from time to time, to prepay the Term Note in whole or in part without premium
or penalty, provided that Borrower shall pay accrued interest on the principal
so prepaid to the date of such prepayment.
(f) Security. The Term Note is secured by the Security
Agreements which are the first lien security interest on all assets of
Borrowers.
9
Section 2. Revolving Note.
(a) Interest. The “Revolving
Interest Rate”, prior to the occurrence of an Event of Default, will
be a fixed rate of 8.25% per annum until the first “Rate Adjustment Date” (as defined below). Thereafter, the Revolving Interest Rate,
prior to the occurrence of an Event of Default, will be a variable rate per
annum equal to the Index (as defined below).
The Index is the “prime rate” of interest published from time to time by
the Wall Street Journal in its listing of “Money
Rates”. The Revolving
Interest Rate shall be adjusted daily (each a “Rate Adjustment Date”).
If the Index is no longer available, Lender will choose a new index
which is based upon comparable information.
All interest will be calculated for the actual number of days elapsed
over a year assumed to be 360 days. Notwithstanding
anything herein to the contrary, the Revolving Interest Rate shall not be less
than 7% per annum.
(b) Interest Only Payments. Payments of interest only, at the Revolving
Interest Rate, shall be due and payable on August 1, 2007, and on the first day
of each calendar month thereafter.
(c) Payment of Principal and Interest
on the Maturity Date. All remaining
outstanding principal and interest shall be due and payable on July 20, 2008 (“Revolving Note Maturity Date”).
(d) Fees. As of even date therewith, Borrower shall pay
to Lender an initial loan fee in the amount of $15,000.00.
(e) Prepayment. Borrower shall have the right, at any time
and from time to time, to prepay the Revolving Note, in whole or in part
without premium or penalty, provided that Borrower shall pay accrued interest
on the principal so prepaid to the date of such prepayment.
(f) Security. The Revolving Note is secured by the Security
Agreements which are the first lien security interest on all assets of
Borrowers.
Section 3. Default Interest Rate. At any time that an incurred Event of Default
is outstanding, the Term Note will bear interest at a rate of interest which is
5.0 percentage points in excess of the Term Interest Rate in effect from time
to time and the Revolving Note will bear interest at a rate of 5.0- percentage
points in excess of the Revolving Interest Rate in effect from time to time
(each a “Default Rate”). The Default Rate will be paid without
prejudice to Lender’s right to collect other amounts due hereunder or to
declare a default under any Loan Documents.
If the Event of Default is cured during the applicable cure period, if
any, interest will begin to accrue at the Term Note Rate or Revolving Note
Rate, as applicable, commencing on the date the Event of Default is cured.
Section 4. Late Payment Charge. If Borrower fails to make any payment within
10 days after the due date, at Lender’s option, a late charge of 5.0% of the
payment amount due may be charged by Lender.
A tender to Lender of any payment more than 10 days past due which does
not include the late fee may be rejected as insufficient or Lender may accept
the tendered amount as a partial payment without waiving Lender’s right to
receive the late payment charge.
10
The Term Note and the Revolving Note will remain in default and
interest at the Default Rate will accrue until the late payment charge is
paid. The late payment charge shall be
paid without prejudice to Lender’s rights to collect other amounts due
hereunder or to declare a default under the Term Note, the Revolving Note or
any other Loan Document.
Section 5. Acceleration. Upon breach of any promise made in the Loan
Documents, or in any other instrument given to secure the payment hereof after
any applicable notice and cure period, at the option of Lender, the entire
indebtedness hereby evidenced shall become due, payable and collectible, then
or thereafter as Lender may elect, regardless of the date of maturity, subject
to any applicable cure period in the Security Agreements.
Section 6. Fees.
Borrower agrees to pay Lender’s reasonable attorneys’ fees if the Term
Note or Revolving Note is placed in the hands of an attorney for collection.
ARTICLE
IV
FINANCIAL COVENANTS
Section 1. Minimum Senior Debt Service Coverage Ratio. Borrowers shall have, on a consolidated basis
at the end of each fiscal quarter of Borrowers, a Senior Debt Service Coverage
Ratio of not less than 1.60:1.00.
Section 2. Minimum Fixed Charge Coverage Ratio.
Borrowers shall have, on a consolidated basis at the end of each fiscal quarter
of Borrowers, a Fixed Charge Coverage Ratio of not less than 1.10:1.00.
Section 3. Maximum Senior Funded Debt to EBITDA. Borrowers shall have, on a consolidated basis
at the end of each fiscal quarter of Borrowers set forth below, a ratio of (i)
Senior Funded Debt measured as of the last day of such fiscal quarter of
Borrowers to (ii) EBITDA for such fiscal quarter of not more than the
following:
1.75:1.00 for the fiscal quarters ending
September 30, 2007, and December 31, 2007;
1.60:1.00 for the fiscal quarters ending
March 31, 2008, and June 30, 2008;
1.50:1.00 for the fiscal quarters ending
September 30, 2008, December 31, 2008, March 31, 2009, and June 30, 2009; and
1.25:1.00 for each fiscal quarter ending
thereafter.
Section 4. Minimum Tangible Net Worth. Borrowers shall have, on a consolidated basis
at the end of each fiscal quarter of Borrowers set forth below, a Tangible Net
Worth of not less than the following:
$7,000,000.00 for the fiscal quarters ending
September 30, 2007, December 31, 2007, March 31, 2008, and June 30, 2008;
11
$7,500,000.00 for the fiscal quarters ending
September 30, 2008, December 31, 2008, March 31, 2009, and June 30, 2009;
$8,500,000.00 for the fiscal quarters ending
September 30, 2009, December 31, 2009, March 31, 2010, and June 30, 2010;
$9,000,000.00 for the fiscal quarters ending
September 30, 2010, December 31, 2010, March 31, 2011, and June 30, 2011;
$9,500,000.00 for each fiscal quarter ending
thereafter.
Section 5. Excess Cash Flow Payments to Lender.
(a) Within ninety (90) days after the end
of Borrowers’ fiscal year ending December 31, 2007, Borrowers shall pay Lender
the lesser of (i) Excess Cash Flow, provided Excess Cash Flow for
purposes of this Section shall not be less than zero, or (ii) $104,000.00.
(b) Within ninety (90) days after the end
of Borrowers’ fiscal year ending December 31, 2008 and each fiscal year
thereafter, Borrowers shall pay Lender the lesser of (i) Excess Cash Flow, provided
Excess Cash Flow for purposes of this Section shall not be less than zero, or
(ii) $250,000.00.
ARTICLE V
MISCELLANEOUS PROVISIONS
Section 1. Waiver.
Except as otherwise provided herein, Borrower, endorsers, guarantors,
sureties and all other parties liable for the payment of any sum or sums due or
to become due under the terms of the Loan Documents jointly and severally waive
presentment, demand for payment, protest and notice of dishonor, and consent
that the time of payment of the Term Note or Revolving Note, or any installment
thereof, may be extended from time to time without notice to them.
Section 2. Notices. Any written notices required hereunder shall
be sent in accordance with requirements of the Security Agreements.
Section 3. Governing Law. This Agreement is to be construed and
enforced according to and governed by the laws of the State of Missouri.
Section 4. Ratification. Borrower hereby absolutely, unconditionally,
irrevocably, and without limitation on amount, agrees that it shall be
responsible for, and will perform all obligations contained in the Loan
Documents. Borrower’s obligations shall
include, without limitation,
the obligation to repay all amounts payable under the Term Note, the Revolving
Note and all other Loan Documents and to observe and perform all other
obligations contained in the Loan Documents, including without limitation the
obligation to indemnify and hold Lender harmless from any breach of the
agreements contained in Section 11 of the Security Agreements.
12
Section 5. Waiver of Jury Trial. EACH BORROWER HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING, OR COUNTERCLAIM THAT RELATES TO OR ARISES OUT OF ANY OF THE LOAN
DOCUMENTS OR THE ACTS OR FAILURE TO ACT OF OR BY LENDER IN THE ENFORCEMENT OF
ANY OF THE TERMS OR PROVISIONS OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS,
OR BY ANY PARTY IN THE PERFORMANCE OF ANY OF THE TERMS OF THE PROVISIONS OF
THIS AGREEMENT OR THE LOAN DOCUMENTS.
Section 6. Revival of Liability. To the extent any payment or payments made to
the Lender, or any payment of proceeds from the sale of any property are received
by Lender, in the reduction of the amounts due with respect to any of the
obligations evidenced by this Agreement or under any of the obligations any
Borrower owes the Lender are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a
trustee, to a surety, or any other person liable for any of the obligations
evidenced and/or secured by this agreement or under any of the obligations any
Borrower owes the Lender, whether directly or indirectly, as a
debtor-in-possession or to a receiver or any other person under any bankruptcy
law, state or federal law, common law or equitable cause (collectively, the “Invalidated
Payments”), then the portion of such indebtedness equal to the Invalidated
Payments and the liens, if any, given to secure this agreement or any of the
obligations each Borrowers owes the Lender will be revived and will continue in
full force and effect as if such payment or proceeds had never been received by
the Lender.
Section 7. Stay Waiver and/or Adequate Protection Payments. In the event either or both Borrowers for any
reason becomes the subject of any Debtor Relief Proceeding Lender shall be
entitled to the following: (i) the
automatic and absolute lifting of any stay, injunction, restraining order or
similar legal impediment (including, without limitation, the automatic stay
imposed pursuant to the United States Bankruptcy Code (“Bankruptcy Code”) §
362) to the enforcement of Lender’s remedies under this Agreement and under all
the obligations each Borrower owes to the Lender and, if applicable, (ii)
adequate protection, pursuant to the Bankruptcy Code or other law, of Lender’s
interest in any property of either or both of the Borrowers. Moreover, each Borrower hereby consents to the
immediate lifting of any such stay, injunction, restraining order or similar
legal impediment in such Bankruptcy Proceeding against Lender’s exercise of its
remedies and hereby covenants, promises and agrees that each will not contest
any effort by Lender to annul, lift, modify or extinguish such stay in such
Bankruptcy Proceeding. Each Borrower
also expressly acknowledges and agrees that:
(a) ”cause” shall exist to lift such stay pursuant to Bankruptcy
Code § 362(d) or other applicable law preventing Lender from exercising
its rights, and (b) neither Borrower has any equity in any property of any kind
in which Lender has an interest and such property is not now and will never be
necessary to any plan of reorganization of either or both Borrowers in such
Bankruptcy Proceeding.
Section 8. Mediation; Arbitration. Each Borrower agrees that any dispute under
this or any other Loan Document shall be resolved only through mediation
followed by arbitration, if necessary.
If a dispute arises which cannot otherwise be resolved by the parties,
Borrower and Lender shall mutually agree to a mediator within ten (10) days of
either party’s written notification to the other party that a dispute exists
which requires mediation. If the parties
cannot reach an agreement with respect to the selection of a mediator, then
each party
13
shall nominate a mediator. The
nominees shall jointly select a mediator who will undertake the mediation. The mediation must be completed within thirty
(30) days of the mediator’s selection.
If any dispute is not resolved through such mediation, then Borrower
agrees that any such dispute can only be resolved through binding
arbitration. The selection of the arbitrator
and the rules of arbitration shall be mutually agreed to by the parties. If, however, no agreement can be reached, then
both the arbitrator selection process and the arbitration itself shall be
governed by the rules of the American Arbitration Association in accordance
with its Commercial Arbitration Rules, and shall be arbitrated by a single
arbitrator. Such arbitrator’s fees and
any expenses shall be shared equally by Borrower and Lender.
Section 9. No Oral Agreements. The following notice is given to comply with
§ 432.045 of the Revised Statutes of Missouri.
Oral agreements or
commitments to loan money, extend credit or forbear from enforcing repayment of
a debt, including promises to extend or renew such debt, are not
enforceable. To protect Borrower and
Lender from misunderstanding or disappointment, any agreements reached
regarding such matters are contained in this Agreement, which is the complete
and exclusive statement of the agreement between Borrower and Lender, except as
they may later agree in writing to modify it.
[Remainder of Page
Intentionally Left Blank]
14
IN WITNESS WHEREOF, Borrower
and Lender have executed this Agreement as of the date first written above.
|
|
|
BORROWER:
|
|
|
|
|
|
|
|
|
|
LIQUIDMETAL
COATINGS, LLC,
|
|
|
|
|
a Delaware
limited liability company
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Larry Buffington
|
|
|
|
|
Name:
|
|
Larry Buffington
|
|
|
|
|
Its:
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
LIQUIDMETAL
COATINGS SOLUTIONS, LLC,
|
|
|
|
|
a Delaware
limited liability company
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Larry Buffington
|
|
|
|
|
Name:
|
|
Larry Buffington
|
|
|
|
|
Its:
|
|
President and Chief Executive Officer
|
|
[Signature of Lender Appears on the Following Page]
15
|
|
|
LENDER:
|
|
|
|
|
|
|
|
|
|
BANK MIDWEST, N.A.
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/
Judson Stanion
|
|
|
|
|
Name:
|
|
Judson
Stanion
|
|
|
|
|
Its:
|
|
Vice
President
|
|
16
