This Amended and Restated Committed, Revolving Line of Credit Note replaces and supersedes a Revolving Line of Credit Note dated December 17, 2009 AMENDED AND RESTATED COMMITTED, REVOLVING LINE OF CREDIT NOTE

 

1.1

Borrower:  OMEGA FLEX, INC., a Pennsylvania corporation with a usual address of 213 Court Street, Suite 701, Middletown, Connecticut.

 

1.2

Bank:  SOVEREIGN BANK, a federal savings bank, and its successors and assigns, with a usual address of 1350 Main Street, Springfield, Massachusetts.

 

1.3

Principal Sum or Loan: up to Ten Million and 00/100 United States ($10,000,000.00) Dollars.

 

1.4

Interest Rate: See Paragraphs 2 and 6.1 below.

 

1.6

Maturity Date:  December 31, 2014, unless renewed by the Bank, in its sole discretion, at which time Bank may renew, terminate or extend this Note.

 

1.7

INTEREST RATE:  The interest rate payable with respect to a Loan Advance shall be either the Applicable Libor Margin or the Applicable Prime Margin, as selected by the Borrower in the column under the header “Pricing Tier” appearing on Exhibit A.

 

Interest rates applicable to subsequent Loan Advances shall be established on a quarterly basis by reference to the Pricing Tier corresponding with the Borrower’s then current Funded Debt to Tangible Net Worth Ratio as set forth in Exhibit A attached hereto and made a part hereof.

3.

DEBT: For value received, Borrower hereby promises to pay to the order of Bank the Principal Sum, or so much thereof as Bank advances to Borrower, together with interest on all unpaid balances from the date of any principal advance hereunder, at the Interest Rates set forth in this Note, together with all other amounts due hereunder or under the Loan Documents.

4.

PRINCIPAL ADVANCES; BORROWING AVAILABILITY:

 

4.1

So long as no prior Event of Default has occurred and is continuing, the Bank, shall, upon Borrower’s request, make advances to Borrower from time to time during the period commencing as of the date of this Note and until December 31, 2014.  All advances pursuant to this Note shall be limited to the aggregate amount of not more than $10,000,000.00.

 

4.2

Any advance by Bank hereunder shall be within the reasonable discretion of the Bank.  The making of an advance at any time shall not be deemed a waiver of the foregoing, or a consent, agreement or advance to the Borrower.  This Note and the Bank’s willingness to receive requests for advances from Borrower hereunder are subject to cancellation by Bank in its reasonable discretion at any time without prior notice.

 

4.3

Bank is authorized to make any advance hereunder upon the request of any person that has been authorized by Borrower in writing (with a copy to Bank) to request that advance, and that person will have authority to act on Borrower’s behalf to

5.

 

5.1

Calculation of Interest.  All computation of interest under this Note shall be made on the basis of a three hundred sixty (360) day year and the actual number

 

5.2

Payment of Principal and Interest.  Beginning on the day which is thirty (30) days from the date hereof and continuing on the same day of each month, Borrower shall make to Bank payments of interest only on the outstanding principal balance of all Loan Advances from the day that an advance is made.  The periodic interest payments due under this Section 5.2 shall be the sum of the daily interest amounts accruing during the relevant monthly interest period, calculated as (a) the total aggregate amount of all outstanding Loan Advances determined daily as of 1 p.m. Eastern Time during that monthly interest period, (b) multiplied by the interest rate applicable to those Loan Advances, (c) divided by 360.THE ENTIRE OUTSTANDING PRINCIPAL BALANCE (INCLUDING ANY BALLOON PAYMENT) AND ALL ACCRUED AND UNPAID INTEREST SHALL BE DUE AND PAYABLE, IN FULL, ON DECEMBER 31, 2014.

 

5.3

Method of Payment; Date of Credit.   All payments of interest, principal and fees shall be made in lawful money of the United States immediately available funds: (a) by direct charge to an account of Borrower maintained with Bank (or the then holder of the Loan), or (b) to such other bank or address as the holder of the Loan may designate in a written notice to Borrower.  Payments shall be credited on the Business Day on which immediately available funds are received prior to one o’clock, P.M. Eastern Time; payments received after one o’clock P.M. Eastern Time shall be credited to the Loan on the next Business Day.  Payments which are by check, which Bank may at its option accept or reject, or which are not in the form of immediately available funds shall not be credited to the Loan until such funds become immediately available to the Bank, and, with respect to payments by check, such credit shall be provisional until the item is finally paid by the payor bank.  The date of payment of all payments of principal, interest and other charges shall be subject to the Modified Following Business Day Convention.

 

5.4

Billings.  Bank may submit monthly billings reflecting payments due; however, any changes in the interest rate which occur between the date of billing and the due date may be reflected in the billing for a subsequent month. Neither the failure of Bank to submit a billing nor any error in any such billing shall excuse Borrower from the obligation to make full payment of all Borrower’ payment obligations when due.

 

5.5

Default Rate.  Upon the declaration by Bank of an Event of Default pursuant to Section 11, below, Borrower shall pay upon billing therefor, an interest rate which

 

5.6

Late Charges.  The Borrower shall pay, upon billing therefor, a “Late Fee” equal to five (5%) percent of the entire amount of any payment of principal, interest, or both, which is not paid in full within fifteen (15) days of the due date thereof.  Late fees are: (a) payable in addition to, and not in limitation of, the Default Rate, (b) intended to compensate Bank for administrative and processing costs incident to late payments, (c) are not interest, and (d) shall not be subject to refund or rebate or credited against any other amount due.

 

5.7

Make Whole Provision.  Borrower shall pay to Bank, immediately upon request and notwithstanding contrary provisions contained in any of the Loan Documents, such amounts as shall, in the reasonable judgment of Bank, compensate Bank for the loss, cost or expense which it may reasonably incur as a result of (i) any prepayment, under any circumstances whatsoever, whether voluntary or involuntary, of all or any portion of a LIBOR Advance on a date other than the last day of the applicable Interest Period, or (ii) except in circumstances as set forth in Section 6.3, below, the conversion, for any reason, whether voluntary or involuntary, of any LIBOR Advance to a Prime Rate Advance on a date other than the last day of the applicable Interest Period.  Such amounts payable by Borrower shall be equal to any administrative costs actually incurred, plus any amounts required to compensate Bank for any out-of-pocket loss, cost or expense incurred by reason of the liquidation or re-employment of deposits or other funds acquired by Bank to fund or maintain a LIBOR Advance and in any event, but without duplication, a Yield Maintenance Fee, as defined below, in the event of the prepayment of all or any portion of a LIBOR Advance on a date other than the last day of the applicable Interest Period.  Both the provisions of this Paragraph 5.7

 

6.1

Election of Interest Rate.  Interest shall accrue on the unpaid principal balance of a Loan Advance from time to time outstanding at Borrower’s election of either:

 

6.2

Method of Selection.  At least two (2) Business Days prior to the last day of any Interest Period, Borrower may select by 1:00 p.m. of a Boston Banking Day both the Interest Period from the alternatives available in Paragraphs 6.1(a)  or 6.1(b), and the corresponding interest rate as of the same day as a request may be made, by giving irrevocable written notice to Bank, by electronic mail, telecopy (with authorized signature) or telephone, but if not written, such notice shall be immediately confirmed by written notice, specifying the Interest Period.  If no such selection is made, then the Prime Rate shall be deemed selected.

 

6.3

Illegality.  Notwithstanding any other provision of this Note, if the introduction of or change in or in the interpretation of any law, treaty, statute, regulation or interpretation thereof shall make it unlawful for Bank to make or maintain LIBOR Advances or to continue to fund or maintain LIBOR Advances then, on written notice thereof and demand by Bank to Borrower, (a) the obligation of Bank to make LIBOR Advances and to convert or continue any Loan Advances as LIBOR Advances shall terminate and (b) Borrower shall convert all principal outstanding under this Note into Prime Rate Advances

 

6.4

Additional LIBOR Rate Conditions.  The availability of the LIBOR Rate and the maintenance of Loan Advances at such rate shall be subject to the following additional terms and conditions:

7.

ACCELERATION; EVENT OF DEFAULT:  Upon the occurrence at any time of any one or more of the following events, each of which shall be an “Event of Default” hereunder and the other Loan Documents, at the option of the Bank, this Note and the indebtedness evidenced hereby shall become immediately due and payable without further notice or demand, and notwithstanding any prior waiver of any breach or default, or other indulgence:  (i) a Default continuing uncured beyond the applicable grace or cure period, if any, in making any payment of interest, principal, other charges or payments due hereunder; (ii) an Event of Default as defined herein or any other Loan Document, each as the same may from time to time hereafter be amended; or (iii) an event which pursuant to any express provision of any other Loan Document, gives Bank the right to accelerate the Loan.

8.

COSTS AND EXPENSES UPON DEFAULT: After a Default, in addition to principal, interest and delinquency charges, Bank shall be entitled to collect all reasonable out-of-pocket costs of collection, including, but not limited to, reasonable attorneys’ fees and expenses, incurred in connection with the protection or realization of collateral or in connection with any of Bank’s collection efforts, whether or not suit on this Note is filed, and all such costs and expenses shall be payable on demand.

9.

APPLICATION OF PAYMENTS: All payments hereunder shall be applied first to delinquency charges, costs of collection and enforcement and other similar amounts due, if any, under this Note and under the other Loan Documents, then to late charges, then to interest which is due and payable under this Note and the remainder, if any, to principal

 

10.1

Any Prime Rate Loan(s) may be prepaid at any time in whole or in part without charge.

 

10.2

If no Event of Default exists, Borrower shall have the right at any time and from time to time to prepay any LIBOR Advance on a date other than the last Banking Day of the then current Interest Period in whole (but not in part).  If Borrower elects to prepay a LIBOR Advance, of if payment of a LIBOR Advance is required by Bank on a date other than the last Banking Day of the then current Interest Period pursuant to Section 10.3, below, Borrower shall pay to Lender a yield maintenance fee (the “Yield Maintenance Fee”) in an amount computed as follows:  The current rate for United States Treasury securities (bills on a discounted basis shall be converted to a bond equivalent) with a maturity date closest to the maturity date of the term chosen pursuant to the Interest Period as to which the prepayment is made, shall be subtracted from the “cost of funds” component of the fixed rate in effect at the time of prepayment.  If the result is zero or a negative number, there shall be no Yield Maintenance Fee.  If the result is a positive number, then the resulting percentage shall be multiplied by the amount of the principal balance being prepaid.  The resulting amount shall be divided by 360 and multiplied by the number of days remaining in the term chosen pursuant to the Interest Period as to which the prepayment is made.  Said amount shall be reduced to present value calculated by using the number of days remaining in the designated term and using the above referenced United States Treasury security rate and the number of days remaining in the designated term chosen pursuant to the Interest Period as to which the prepayment is made.  The resulting amount shall be the Yield Maintenance Fee due to Lender upon prepayment of the fixed rate loan.

 

10.3

If by reason of any Event of Default Lender elects to declare the Loan to be immediately due and payable, then any Yield Maintenance Fee with respect to the Loan shall become due and payable in the same manner as though Borrower had exercised such right of prepayment.  Borrower recognizes that Lender will incur substantial additional costs and expenses including loss of yield and anticipated profitability in the event of a prepayment of the Loan and that the Yield Maintenance Fee compensates Lender for such costs and expenses.  Borrower acknowledges that the Yield Maintenance Fee is bargained for consideration and not a penalty.

 

10.4

All such prepayments of LIBOR Advances or Prime Rate Advances shall be applied first to fees and expenses then due hereunder, then to interest on the unpaid principal balance accrued to the date of prepayment and last to the principal balance then due hereunder.

12.

WAIVERS:  The Borrower irrevocably waives presentment for payment, notice of intention to accelerate the maturity of this Note, diligence in collection, commencement of suit against any obligor, notice of protest, and protest of this Note  in connection with the delivery, acceptance, performance, default or enforcement of the payment of this Note, other than any notices required under the Loan Documents, before or after the maturity of this Note, with or without notice to Borrower, and agrees that its liability shall not be in any manner affected by any indulgence, extension of time, renewal, waiver or modification granted or consented to by Bank prior to the Event of Default. Borrower consents to any and all extensions of time, renewals, waivers or modifications that may be granted by Bank with respect to the payment or other provisions of this Note, and agrees to the addition or release of any obligor, with or without notice to Borrower, and without affecting its liability under this Note. Any delay on the part of Bank in exercising any right under this Note shall not operate as a waiver of any such right, and any waiver granted or consented to on one occasion shall not operate as a waiver in the event of any subsequent default.

13.

DELAY NOT A BAR:  No delay or omission on the part of the holder in exercising any right hereunder or any right under any instrument or agreement now or hereafter executed in connection herewith, or any agreement or instrument which is given or may be given to secure the indebtedness evidenced hereby, or any other agreement now or hereafter executed in connection herewith or therewith shall operate as a waiver of any such right or of any other right of such holder, nor shall any delay, omission or waiver on any one occasion be deemed to be a bar to or waiver of the same or of any other right on any future occasion.

14.

NO USURY: All agreements between Borrower and Bank are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the indebtedness evidenced hereby or otherwise, shall the amount paid or agreed to be paid to Bank for the use or the forbearance of the indebtedness evidenced hereby exceed the maximum permissible under applicable law.  As used herein, the term “applicable law” shall mean the law in effect as of the date hereof provided, however that in the event there is a change in the law which results in a higher permissible rate of interest, then this Note shall be governed by such new law as of its effective date.  In this regard, it is expressly agreed that it is the intent of Borrower and Bank in the execution, delivery and acceptance of this Note to contract in strict compliance with the laws of the Commonwealth of Massachusetts from time to time in effect.  If, under or from any circumstances whatsoever, fulfillment of any provision hereof or of any of the Loan Documents at the time of performance of such provision shall be due, shall involve transcending the limit of such validity prescribed by applicable law, then the obligation to be fulfilled shall automatically be reduced to the limits of such validity, and if under or from circumstances whatsoever Bank should ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the principal balance evidenced hereby and not to the payment of interest.  This provision shall control every other provision of all agreements between Borrower and Bank.

15.

SUCCESSORS AND ASSIGNS: This Note shall be binding upon Borrower and upon its respective heirs, successors, assigns and representatives, and shall inure to the benefit of Bank and its successors, endorsees, and assigns.

16.

SECURITY:  This Note is secured pursuant to the Loan and Security Agreement, as amended between Bank and Borrower.

17.

COLLECTION: Any check, draft, money order or other instrument given in payment of all or any portion hereof may be accepted by Bank and handled by collection in the customary manner, but the same shall not constitute payment hereunder or diminish any rights of Bank except to the extent that actual cash proceeds of such instrument are

18.

AMENDMENTS: This Note may be changed or amended only by an agreement in writing signed by the party against whom enforcement is sought.

19.

GOVERNING LAW; SUBMISSION TO JURISDICTION: This Note is given to evidence debt for business or commercial purposes, is being negotiated and executed in the Commonwealth of Massachusetts and delivered to Bank at one of its offices in The Commonwealth of Massachusetts and shall be governed by and construed under the laws of said Commonwealth. Borrower, each partner, or any partner of such partner, officer, director and employee of Borrower, hereby submit to personal jurisdiction in said Commonwealth for the enforcement of Borrower’s obligations hereunder, under the other Loan Documents, and waive any and all personal rights under the law of any other state to object to jurisdiction within such Commonwealth for the purposes of litigation to enforce such obligations of Borrower. In the event such litigation is commenced, Borrower agrees that service of process may be made, and personal jurisdiction over Borrower obtained, by service of a copy of the summons, complaint and other pleadings required to commence such litigation upon Borrower at 213 Court Street, Suite 701, Middletown, Connecticut or such other address as Borrower may designate.

20.

RECOVERY OF PREFERENCE PAYMENTS: In the event any payment of principal or interest received upon this Note and paid by the Borrower, or by any guarantor, surety, co-maker or endorser, shall be deemed by final order of a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under the bankruptcy or insolvency laws of the United States, or otherwise due to any party other than the Bank, then in any such event, the obligation with respect to that payment or payments of the Borrower, or any guarantor, surety, co-maker or endorser shall, jointly and severally, survive as an obligation due hereunder and shall not be discharged or satisfied by said payment or payments, notwithstanding the return by Bank to said parties of the original hereof, or any guaranty, endorsement, or the like.

21.

REMEDIES CUMULATIVE: The rights and remedies of Bank as provided in this Note and in the Loan Documents shall be cumulative and concurrent, and may be pursued singly, successively, or together against Borrower, or any one of them, the real and personal property described in the Loan Documents, any guarantor hereof, any of the parties and any other funds, property or security held by Bank for the payment hereof or otherwise at the sole discretion of the Bank.  The failure to exercise any such right or remedy shall in no event be construed as a waiver or release of said rights or remedies or of the right to exercise them at any later time.  The acceptance by Bank of the payment of any sum payable hereunder after the due date of such payment shall not be a waiver of Bank’s right to either require prompt payment when due of all other sums payable hereunder or to declare a default for failure to make prompt payment.

22.

NO ORAL CHANGE:  This Note and other Loan Documents may only be amended, terminated, extended or otherwise modified by a writing signed by the party against which enforcement is sought.  In no event shall any oral agreements, promises, actions,

23.

RIGHTS OF HOLDER:  This Note and the rights and remedies provided for herein may be enforced by Bank or any subsequent holder hereof.  Wherever the context permits each reference to the term “holder” herein shall mean and refer to Bank or the then subsequent holder of this Note.

24.

SUCCESSORS AND ASSIGNS:  This Note shall be binding upon Borrower and upon its respective heirs, successors, assigns and representatives, and shall inure to the benefit of the Bank, its successors, endorsees and assigns.

25.

FEDERAL RESERVE PLEDGE: Bank may at any time pledge all or any portion of its rights under the Loan Documents including any portion of this Note to any of the twelve (12) Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341.  No such pledge or enforcement thereof shall release Bank from its obligations under any of the Loan Documents.

26.

LOAN PARTICIPATION: Bank shall have the unrestricted right at any time and from time to time, and without the consent of or notice to Borrower, to grant to one or more banks or other financial institutions (each, a “Participant”) participating interests in Bank’s obligation to lend hereunder and/or any or all of the loans held by Bank hereunder.  In the event of any such grant by Bank of a participating interest to a Participant, whether or not upon notice to Borrower, Bank shall remain responsible for the performance of its obligations hereunder and Borrower shall continue to deal solely and directly with Bank in connection with Bank’s rights and obligations hereunder.

27.

REPLACEMENT OF NOTE: Upon receipt of an affidavit of an officer of Bank as to the loss, theft, destruction or mutilation of the Note or any other security document which is not of public record, and, in the case of any such loss, theft, destruction or mutilation, upon surrender and cancellation of such Note or other security document, Borrower will issue, in lieu thereof, a replacement Note or other security document in the same principal amount thereof and otherwise of like tenor.

28.

ASSIGNABILITY OF NOTE: The Bank may assign and transfer this Note to any person(s), firm or corporation who shall thereupon become vested with all of the rights and powers herein given to Bank as holder, and Bank shall thereafter be forever relieved and discharged from any responsibility or liability in respect herein.

29.

CAPTIONS: All paragraph and subparagraph captions are for convenience of reference only and shall not affect the construction of any provision herein.

Witness:

THE BORROWER

OMEGA FLEX, INC.

By:

/s/ Paul J. Kane

Paul J. Kane,

Its Vice President - Finance and Chief

Financial Officer

FUNDED DEBT TO TANGIBLE NET WORTH  Ratio

Applicable LIBOR Margin

Applicable Prime Margin

Applicable Unused Fee

­>  3.50x

2.75%

0.50%

35 bps

­> 3.0x and <3.50x

2.50%

0.25%

30 bps

­> 2.5x and  <3.0x

2.25%

0.00%

25 bps

> 2.0x and < 2.5x

2.00%

20 bps

<2.0x

1.75%

17.5 bps