Document:

arp-ex102g_456.htm

Exhibit 10.2(g)

3623924v.3 WEL554/10008SEVENTH AMENDMENT TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT

dated as of
July 24, 2015

among

ATLAS RESOURCE PARTNERS, L.P.,
as Borrower,

THE LENDERS PARTY HERETO,

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent

 

JPMORGAN CHASE BANK, N.A., and
BANK OF AMERICA, N.A.,
as Co-Documentation Agents

 

WELLS FARGO SECURITIES, LLC,
DEUTSCHE BANK SECURITIES INC., and
CITIBANK GLOBAL MARKETS, INC.,
as Joint Lead Arrangers and Joint Bookrunners

 

 

 

 

 

 

Seventh Amendment to

Second Amended and Restated Credit Agreement 

This Seventh Amendment to Second Amended and Restated Credit Agreement (this “Seventh Amendment”), dated as of July 24, 2015 (the “Seventh Amendment Effective Date”), is among Atlas Resource Partners, L.P., a limited partnership formed under the laws of the State of Delaware (the “Borrower”), each of the undersigned guarantors (the “Guarantors”, and together with the Borrower, the “Loan Parties”), each of the Lenders that is a signatory hereto, and Wells Fargo Bank, National Association, as administrative agent for the Lenders (in such capacity, together with its successors, the “Administrative Agent”).

Recitals

A.The Borrower, the Administrative Agent and the Lenders are parties to that certain Second Amended and Restated Credit Agreement dated as of July 31, 2013 (as amended prior to the date hereof, the “Credit Agreement”), pursuant to which the Lenders have, subject to the terms and conditions set forth therein, made certain credit available to and on behalf of the Borrower.

B.The parties hereto desire to enter into this Seventh Amendment to (i) amend the Credit Agreement in certain respects as set forth herein and (ii) reaffirm the Borrowing Base at $750,000,000, in each case, and except as set forth below, to be effective as of the Seventh Amendment Effective Date.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1.Defined Terms.  Each capitalized term which is defined in the Credit Agreement, but which is not defined in this Seventh Amendment, shall have the meaning ascribed such term in the Credit Agreement, as amended hereby.  Unless otherwise indicated, all section references in this Seventh Amendment refer to the Credit Agreement.

Section 2.Amendments.  In reliance on the representations, warranties, covenants and agreements contained in this Seventh Amendment, and subject to the satisfaction of the conditions precedent set forth in Section 4 hereof, the Credit Agreement shall be amended in the manner provided in this Section 2 effective (a) except as set forth in the following clause (b), as of the Seventh Amendment Effective Date and (b) with regard to the amendment to the definition of “EBITDA” contained in Section 2.2 hereof, as of January 1, 2015.

2.1Additional Definitions.  Section 1.02 of the Credit Agreement is hereby amended to add thereto in alphabetical order the following definitions which shall read in full as follows:

“Seventh Amendment” means that certain Seventh Amendment to Second Amended and Restated Credit Agreement dated as of July 24, 2015, among the 

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Borrower, the Guarantors, the Administrative Agent and the Lenders party thereto.

2.2Restated Definitions.  The definitions of “EBITDA” and “Loan Documents” contained in Section 1.02 of the Credit Agreement are hereby amended and restated in their entirety to read in full as follows:

“EBITDA” means, for any period, an amount determined for the Borrower and the Restricted Subsidiaries determined on a consolidated basis in accordance with Section 1.05 equal to (a) the sum of  (i) Consolidated Net Income for such period, plus, (ii) without duplication and to the extent deducted from Consolidated Net Income in such period, (A) interest, income taxes, depreciation, depletion, amortization, goodwill and other impairment, non-cash compensation on long-term incentive plans, non-cash losses including non-cash losses resulting from mark to market accounting of Swap Agreements, (B) reasonable and customary fees and expenses incurred or paid in connection with the consummation of the Transactions, the EP Acquisition and other acquisition transactions not prohibited by the terms of this Agreement or the other Loan Documents, (C) any net loss from disposed or discontinued operations, and (D) Restricted Payments made in respect of preferred Equity Interests of the Borrower permitted under Section 9.04 during such period, plus (iii) to the extent not included in Consolidated Net Income during such period, any settlement payment in connection with  Swap Agreements received in cash by the Borrower or any Restricted Subsidiary during such period minus (b) the sum of (i) to the extent included in Consolidated Net Income, non-cash gains including non-cash gains resulting from mark to market accounting of Swap Agreements, plus (ii) to the extent not deducted in Consolidated Net Income during such period, any settlement payment in connection with Swap Agreements paid in cash by the Borrower or any Restricted Subsidiary during such period; provided that the Partnership Oil and Gas Margin for any period shall not exceed 15% of the Consolidated Gross Margin for such period (and, if applicable, EBITDA shall be reduced by deducting any portions of Consolidated Net Income that are attributable to Partnership Oil and Gas Margin in excess of such percentage).  

 “Loan Documents” means this Agreement, the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth Amendment, the Sixth Amendment, the Seventh Amendment, the Notes, if any, the Letter of Credit Agreements, the Letters of Credit, the Security Instruments, the Intercreditor Agreement, the Second Lien Intercreditor Agreement, and any and all other material agreements or instruments now or hereafter executed and delivered by any Loan Party or any other Person (other than Swap Agreements or agreements regarding the provision of Bank Products with the Lenders or any Affiliate of a Lender or participation or similar agreements between any Lender and any other lender or creditor with respect to any Indebtedness pursuant to this Agreement) in connection with the Indebtedness, this Agreement and the transactions contemplated hereby, as such agreements may be amended, modified, supplemented or restated from time to time.

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Section 3.Borrowing Base Reaffirmation.   The Borrowing Base is hereby reaffirmed, effective as of the Seventh Amendment Effective Date, at $750,000,000, and shall remain at $750,000,000 until the next Scheduled Redetermination, Interim Redetermination or other redetermination or adjustment of the Borrowing Base thereafter, whichever occurs first pursuant to the Credit Agreement as amended hereby.  The Loan Parties, the Administrative Agent and the Lenders agree that the redetermination of the Borrowing Base provided for in this Section 3 shall constitute the Scheduled Redetermination of the Borrowing Base scheduled for on or about July 1, 2015 and shall not be considered or deemed to be an Interim Redetermination for purposes of Section 2.07 of the Credit Agreement. 

Section 4.Conditions Precedent.  The effectiveness of the amendments contained in Section 2 hereof and the reaffirmation of the Borrowing Base set forth in Section 3 hereof is subject to the following:

4.1The Administrative Agent shall have received duly executed counterparts of this Seventh Amendment from the Loan Parties and the Super Majority Lenders.

4.2The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Seventh Amendment Effective Date.  

4.3The conditions set forth in Section 6.02(a)(i) and (ii) of the Credit Agreement shall be satisfied.  

Section 5.Miscellaneous.

5.1Confirmation and Effect.  The provisions of the Credit Agreement (as amended by this Seventh Amendment) shall remain in full force and effect in accordance with its terms following the effectiveness of this Seventh Amendment, and this Seventh Amendment shall not constitute a waiver of any provision of the Credit Agreement or any other Loan Document, except as expressly provided for herein.  Each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof’, “herein”, or words of like import shall mean and be a reference to the Credit Agreement as amended hereby, and each reference to the Credit Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Credit Agreement shall mean and be a reference to the Credit Agreement as amended hereby.

5.2Ratification and Affirmation of Loan Parties.  Each of the Loan Parties hereby expressly (a) acknowledges the terms of this Seventh Amendment, (b) ratifies and affirms its obligations under the Guaranty Agreement and the other Loan Documents to which it is a party, (c) acknowledges, renews and extends its continued liability under the Guaranty Agreement and the other Loan Documents to which it is a party, (d) agrees that its guarantee under the Guaranty Agreement and the other Loan Documents to which it is a party remains in full force and effect with respect to the Indebtedness as amended hereby, (e) represents and warrants to the Lenders and the Administrative Agent that each representation and warranty of such Loan Party contained in the Credit Agreement and the other Loan Documents to which it is a party is true and correct in all material respects as of the date hereof and after giving effect to the amendments set forth in Section 2 hereof (other than representations and warranties that were 

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made as of a specific date, in which case such representations and warranties were true and correct in all material respects when made), (f) represents and warrants to the Lenders and the Administrative Agent that the execution, delivery and performance by such Loan Party of this Seventh Amendment are within such Loan Party’s corporate, limited partnership or limited liability company powers (as applicable), have been duly authorized by all necessary action and that this Seventh Amendment constitutes the valid and binding obligation of such Loan Party enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditor’s rights generally, and (g) represents and warrants to the Lenders and the Administrative Agent that immediately before and after giving effect to this Seventh Amendment, no Default, Event of Default or Borrowing Base Deficiency exists. 

5.3Counterparts.  This Seventh Amendment may be executed by one or more of the parties hereto in any number of separate counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of this Seventh Amendment by facsimile or electronic (e.g. pdf) transmission shall be effective as delivery of a manually executed original counterpart hereof.

5.4No Oral Agreement.  This written Seventh Amendment, the Credit Agreement and the other Loan Documents executed in connection herewith and therewith represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or unwritten oral agreements of the parties.  There are no subsequent oral agreements between the parties.

5.5Governing Law.  This Seventh Amendment (including, but not limited to, the validity and enforceability hereof) shall be governed by, and construed in accordance with, the laws of the State of New York.

5.6Payment of Expenses.  The Borrower agrees to pay or reimburse the Administrative Agent for all of its reasonable and documented out-of-pocket costs and expenses incurred in connection with this Seventh Amendment, any other documents prepared in connection herewith and the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent.

5.7Severability.  Any provision of this Seventh Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

5.8Successors and Assigns.  This Seventh Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

5.9FATCA.  For purposes of determining withholding Taxes imposed under FATCA, from and after the Seventh Amendment Effective Date, the Borrower and the Administrative Agent shall treat (and the Lenders hereby authorize the Administrative Agent to 

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treat) the Credit Agreement as not qualifying as a “grandfathered obligation” within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i). 

[Signature pages follow]

 

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The parties hereto have caused this Seventh Amendment to be duly executed as of the day and year first above written.

	
 
	
BORROWER:
	
ATLAS RESOURCE PARTNERS, L.P.

	
 
	
By:
	
Atlas Energy Group, LLC,
its general partner

 

 

By:/s/ Sean McGrath

Name:  Sean McGrath

Title:  Chief Financial Officer

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

ATLAS ENERGY HOLDINGS OPERATING COMPANY, LLC, a Delaware limited liability company

	

	
ATLAS ENERGY COLORADO, LLC, a Colorado limited liability company

	

	
ATLAS ENERGY INDIANA, LLC, an Indiana limited liability company

	

	
ATLAS ENERGY OHIO, LLC, an Ohio limited liability company

	

	
ATLAS ENERGY TENNESSEE, LLC, a Pennsylvania limited liability company

	

	
ATLAS NOBLE, LLC, a Delaware limited liability company

	

	
ATLAS RESOURCES, LLC, a Pennsylvania limited liability company

	

	
REI-NY, LLC, a Delaware limited liability company

	

	
RESOURCE ENERGY, LLC, a Delaware limited liability company

	

	
RESOURCE WELL SERVICES, LLC, a Delaware limited liability company

	

	
VIKING RESOURCES, LLC, a Pennsylvania limited liability company

	

	
ARP BARNETT, LLC, a Delaware limited liability company

	

	
ARP OKLAHOMA, LLC, an Oklahoma limited liability company

	

	
ARP BARNETT PIPELINE, LLC, a Delaware limited liability company

	

	
ATLAS BARNETT, LLC, a Texas limited liability company

	

	
ARP PRODUCTION COMPANY, LLC, a Delaware limited liability company

	

	
ARP MOUNTAINEER PRODUCTION, LLC, a Delaware limited liability company

ARP RANGELY PRODUCTION, LLC, a Delaware limited liability company

	

	
ARP EAGLE FORD, LLC, a Texas limited liability company

	

	
ATLS PRODUCTION COMPANY, LLC, a Delaware limited liability company

By:/s/ Sean McGrath

Sean McGrath

Chief Financial Officer

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender, as Administrative Agent and an Issuing Bank

 

 

By:/s/ Matthew W. Coleman

Matthew W. Coleman

Director

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

CITIBANK, N.A., as a Lender and an Issuing Bank

 

 

By: /s/ Phil Ballard

Name: Phil Ballard

Title: Vice President

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

JPMORGAN CHASE BANK, N.A., 

as a Lender and an Issuing Bank

 

 

By: /s/ Linda Papadakis

Name: Linda Papadakis

Title: Authorized Officer

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

BANK OF AMERICA, N.A., as a Lender 

 

 

By: /s/ Kenneth Phelan

Name: Kenneth Phelan

Title: Vice President

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

NATIXIS, as a Lender 

 

 

By:  /s/ Stuart Murray

Name:  Stuart Murray

Title: Managing Director

 

 

By: /s/ Andrew Keene

Name: Andrew Keene

Title:  Vice President

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

SANTANDER BANK, N.A., formerly known as Sovereign Bank, N.A., as a Lender 

 

 

By: /s/ Aidan Lanigan

Name: Aidan Lanigan

Title:  Senior Vice President

 

 

By: /s/ Puiki Lok

Name:  Puiki Lok

Title:  Vice President

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

CAPITAL ONE, NATIONAL ASSOCIATION, as a Lender 

 

 

By: /s/ Nancy Mak

Name: Nancy Mak

Title: Senior Vice President

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

DEUTSCHE BANK AG NEW YORK BRANCH, as a Lender 

 

 

By:  /s/ Benjamin Souh

Name: Benjamin Souh

Title: Vice President

 

 

 

By: /s/ Keith C. Braun 

Name: Keith C. Braun

Title: Managing Director

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

COMERICA BANK, as a Lender 

 

 

By: /s/ John S. Lesikar

Name: John S. Lesikar

Title: Senior Vice President

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

ABN AMRO CAPITAL USA LLC, as a Lender 

 

 

By: /s/ Darrell Holley

Name: Darrell Holley

Title: Managing Director 

 

 

By:  /s/Elizabeth Johnson

Name: Elizabeth Johnson

Title:  Director

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

SUNTRUST BANK, as a Lender 

 

 

By: /s/ Shannon Juhan

Name: Shannon Juhan

Title: Director

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

ROYAL BANK OF CANADA, as a Lender 

 

 

By: /s/ Evans Swann, Jr.

Name: Evans Swann, Jr.

Title: Authorized Signatory

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

COMPASS BANK, as a Lender 

 

 

By:  /s/  Umar Hassan

Name: Umar Hassan

Title: Senior Vice President

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

CADENCE BANK, N.A., as a Lender 

 

 

By: /s/ Steven Taylor

Name: Steven Taylor

Title: Vice President

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK BRANCH, as a Lender 

 

 

By: /s/ Daria Mahoney

Name: Daria Mahoney

Title: Authorized Signatory

 

 

By: /s/  William M. Reid   

Name: William M. Reid

Title: Authorized Signatory

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

ING CAPITAL LLC, as a Lender 

 

 

By:  /s/ Scott Lamoreaux ___________

Name:  Scott Lamoreaux

Title:  Director

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

THE HUNTINGTON NATIONAL BANK, as a Lender 

 

 

By: /s/ Stephen Hoffman_______

Name: Stephen Hoffman

Title: Managing Director

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

BRANCH BANKING AND TRUST COMPANY, as a Lender 

 

 

By: /s/ Ryan K. Michael___________

Name: Ryan K. Michael

Title: Senior Vice President

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

THE BANK OF NOVA SCOTIA, as a Lender 

 

 

By: /s/ Alan Dawson___________

Name:  Alan Dawson

Title: Director

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

WHITNEY BANK, as a Lender 

 

 

By: /s/ Liana Tehernysheva

Name: Liana Tehernysheva

Title: Senior Vice President

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

PNC BANK, NATIONAL ASSOCIATION, as a Lender 

 

 

By: /s/  Jonathan Luchansky

Name: Jonathan Luchansky

Title:  Vice President

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.

 

ONEWEST BANK N.A., as a Lender 

 

 

By: /s/ Whitney Randolph

Name: Whitney Randolph

Title: Senior Vice President

 

 

Signature Page to Seventh Amendment to Second Amended and Restated Credit Agreement

Atlas Resource Partners, L.P.Exhibit

EXHIBIT 10.1

THIS CREDIT AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT TO THE FEDERAL ARBITRATION ACT AND/OR §15-48-10 OF THE SOUTH CAROLINA CODE OF LAWS (1976), AS AMENDED.

CREDIT AGREEMENT

THIS CREDIT AGREEMENT (this "Agreement") is entered into as of March 4, 2016, by and between Vicon Industries, Inc., a New York corporation ("Borrower"), and NIL Funding Corporation, a Delaware corporation ("Lender").

RECITALS

Borrower has requested that Lender extend credit to Borrower as described below, and Lender has agreed to provide such credit to Borrower on the terms and conditions contained herein.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lender and Borrower hereby agree as follows:

ARTICLE I
CREDIT TERMS

SECTION 1.1.    LINE OF CREDIT.

(a)    Line of Credit.  Subject to the terms and conditions of this Agreement, Lender hereby agrees to make advances to Borrower from time to time, not to exceed at any time the aggregate principal amount of Three Million and No/100 Dollars ($3,000,000.00) ("Line of Credit"), the proceeds of which shall be used for working capital purposes.  Borrower's obligation to repay advances under the Line of Credit shall be evidenced by a promissory note of even date herewith ("Line of Credit Note"), all terms of which are incorporated herein by this reference.
    
(b)    Limitation on Borrowings.  Outstanding borrowings under the Line of Credit, to a maximum of the principal amount set forth above, shall not at any time exceed an aggregate of Eighty and No/100 percent (80.0%) of Borrower's eligible accounts receivable that are less than sixty (60) days old, plus Fifty and No/100 percent (50.0%) of Borrower's eligible accounts receivable that are between sixty (60) and ninety (90) days old.   All of the foregoing shall be determined by Lender upon receipt and review of all collateral reports required hereunder and such other documents and collateral information as Lender may from time to time reasonably require.  Borrower acknowledges that said borrowing base was established by Lender with the understanding that, among other items, the aggregate of all returns, rebates, discounts, credits and allowances for the immediately preceding three (3) months at all times shall be less than five percent (5%) of Borrower's gross sales for said period.  If such dilution of Borrower's accounts for the immediately preceding three (3) months at any time exceeds five percent (5%) of Borrower's gross sales for said period, or if there at any time exists any other matters, events, conditions or contingencies which Lender reasonably believes may affect payment of any portion of Borrower's accounts, Lender, in its sole discretion, may reduce the foregoing advance rate against eligible accounts receivable to a percentage appropriate to reflect such additional dilution and/or establish additional reserves against Borrower's eligible accounts receivable.

As used herein, "eligible accounts receivable" shall consist solely of trade accounts created in the ordinary course of Borrower's business, upon which Borrower's right to receive payment is absolute and not contingent upon the fulfillment of any condition whatsoever, and in which Lender has a perfected security interest of first priority, and shall not include:

(i)    any account that has been outstanding more than 90 days from the date of the invoice;

(ii)    that portion of any account for which there exists any right of setoff, defense or discount (except regular discounts allowed in the ordinary course of business to promote prompt payment) or for which any defense or counterclaim has been asserted;

(iii)    any account which represents an obligation of any state or municipal government or of the United States government or any political subdivision thereof (except accounts which represent obligations of the United States government and for which the assignment provisions of the Federal Assignment of Claims Act, as amended or recodified from time to time, have been complied with to Lender's satisfaction);

(iv)    any account which represents an obligation of an account debtor located in a foreign country;

(v)    any account which arises from the sale or lease to or performance of services for, or represents an obligation of, an employee, affiliate, partner, member, parent or subsidiary of Borrower;

(vi)    that portion of any account, which represents interim or progress billings or retention rights on the part of the account debtor;

(vii)    any account which represents an obligation of any account debtor when twenty percent (20%) or more of Borrower's accounts from such account debtor are not eligible pursuant to (i) above;

(viii)    that portion of any account from an account debtor which represents the amount by which Borrower's total accounts from said account debtor exceeds twenty-five percent (25%) of Borrower's total accounts;

(ix)    any account deemed ineligible by Lender when Lender, in its sole discretion, deems the creditworthiness or financial condition of the account debtor, or the industry in which the account debtor is engaged, to be unsatisfactory.

(c)    Borrowing and Repayment.  Borrower may from time to time during the term of the Line of Credit borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions contained herein or in the Line of Credit Note; provided however, that the total outstanding borrowings under the Line of Credit shall not at any time exceed the maximum principal amount available thereunder, as set forth above. 

SECTION 1.2.    INTEREST/FEES.

(a)    Interest.  The outstanding principal balance of the Line of Credit shall bear interest at the rate of Six and 75/100 percent (6.75%) per annum.

(b)    Commitment Fee.  Borrower shall pay to Lender a non-refundable commitment fee for the Line of Credit equal to Thirty Seven Thousand Five Hundred and No/100 Dollars ($37,500.00), which fee shall be due and payable in full on the date hereof.

(c)    Unused Commitment Fee.  Borrower shall pay to Lender a fee equal to Zero and 50/100 percent (0.5%) per annum (computed on the basis of a 360-day year, actual days elapsed) on the daily unused amount of the Line of Credit, which fee shall be calculated on a monthly basis by Lender and shall be due and payable by Borrower in arrears on the 1st day of each month, commencing on May 1, 2016. 

SECTION 1.3.    COLLATERAL.

As security for all indebtedness and other obligations of Borrower to Lender, Borrower hereby grants to Lender security interests of first priority in all Borrower's personal property.

All of the foregoing shall be evidenced by and subject to the terms of such security agreements, financing statements, and other documents as Lender shall reasonably require, all in form and substance satisfactory to Lender.  Borrower 

shall pay to Lender immediately upon demand the full amount of all charges, costs and expenses (to include fees paid to third parties), expended or incurred by Lender in connection with any of the foregoing security, including without limitation, filing and recording fees and costs of appraisals, audits and title insurance.

ARTICLE II
REPRESENTATIONS AND WARRANTIES

Borrower makes the following representations and warranties to Lender, which representations and warranties shall survive the execution of this Agreement and shall continue in full force and effect until the full and final payment, and satisfaction and discharge, of all obligations of Borrower to Lender subject to this Agreement.

SECTION 2.1.    LEGAL STATUS.  Borrower is a corporation, duly organized and existing and in good standing under the laws of New York, and is qualified or licensed to do business (and is in good standing as a foreign corporation, if applicable) in all jurisdictions in which such qualification or licensing is required except where the failure to so qualify or to be so licensed would not have a material adverse effect on Borrower.

SECTION 2.2.    AUTHORIZATION AND VALIDITY.  This Agreement and each promissory note, contract, instrument and other document required hereby or at any time hereafter delivered to Lender in connection herewith (collectively, the "Loan Documents") have been duly authorized, and upon their execution and delivery in accordance with the provisions hereof will constitute legal, valid and binding agreements and obligations of Borrower or the party which executes the same, enforceable in accordance with their respective terms.

SECTION 2.3.    NO VIOLATION.  The execution, delivery and performance by Borrower of each of the Loan Documents do not violate any provision of any law or regulation, or contravene any provision of the Articles of Incorporation or By-Laws of Borrower, or result in any breach of or default under any contract, obligation, indenture or other instrument to which Borrower is a party or by which Borrower may be bound, except for any such violation, breach or default which would not have a material adverse effect on Borrower.

SECTION 2.4.    LITIGATION.  There are no pending, or to the best of Borrower's knowledge threatened, actions, claims, investigations, suits or proceedings by or before any governmental authority, arbitrator, court or administrative agency which could have a material adverse effect on the financial condition or operation of Borrower other than those disclosed by Borrower to Lender in writing prior to the date hereof.

SECTION 2.5.    CORRECTNESS OF FINANCIAL STATEMENT.  The annual financial statements of Borrower for the year ended September 30, 2015, and all interim financial statements delivered to Lender since said date, true copies of which have been delivered or made available by Borrower to Lender prior to the date hereof, (a) are complete and correct and present fairly the financial condition of Borrower, (b) disclose all liabilities of Borrower that are required to be reflected or reserved against under generally accepted accounting principles, whether liquidated or unliquidated, fixed or contingent, and (c) have been prepared in accordance with generally accepted accounting principles consistently applied.  Since the dates of such financial statements there has been no material adverse change in the financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a security interest in or otherwise encumbered any of its assets or properties except in favor of Lender or as otherwise permitted by Lender in writing.

SECTION 2.6.    INCOME TAX RETURNS.  Borrower has no knowledge of any pending assessments or adjustments of its income tax payable with respect to any year.

SECTION 2.7.    NO SUBORDINATION.  There is no agreement, indenture, contract or instrument to which Borrower is a party or by which Borrower may be bound that requires the subordination in right of payment of any of Borrower's obligations subject to this Agreement to any other obligation of Borrower.

SECTION 2.8.    PERMITS, FRANCHISES.  Borrower possesses, and will hereafter possess, all material permits, consents, approvals, franchises and licenses required and rights to all trademarks, trade names, patents, and fictitious names, if any, necessary to enable it to conduct the business in which it is now engaged in compliance with applicable law.

SECTION 2.9.    ERISA.  Borrower is in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended or recodified from time to time ("ERISA"); Borrower has not violated any provision of any defined employee pension benefit plan (as defined in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan initiated by Borrower; Borrower has met its minimum funding requirements under ERISA with respect to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in accordance with the Plan documents and under generally accepted accounting principles.

SECTION 2.10.    OTHER OBLIGATIONS.  Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation.

SECTION 2.11.    ENVIRONMENTAL MATTERS.  Borrower is in compliance in all material respects with all applicable federal or state environmental, hazardous waste, health and safety statutes, and any rules or regulations adopted pursuant thereto, which govern or affect any of Borrower's operations and/or properties, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as any of the same may be amended, modified or supplemented from time to time.  None of the operations of Borrower is the subject of any federal or state investigation evaluating whether any remedial action involving a material expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the environment.  Borrower has no material contingent liability in connection with any release of any toxic or hazardous waste or substance into the environment.

ARTICLE III
CONDITIONS

SECTION 3.1.    CONDITIONS OF INITIAL EXTENSION OF CREDIT.  The obligation of Lender to extend any credit contemplated by this Agreement is subject to the fulfillment to Lender's satisfaction of all of the following conditions:

(a)    Approval of Lender Counsel.  All legal matters incidental to the extension of credit by Lender shall be satisfactory to Lender's counsel.

(b)    Documentation.  Lender shall have received, in form and substance satisfactory to Lender, each of the following, duly executed:

(i)    This Agreement and each promissory note or other instrument or document required hereby.
(ii)    The Security Agreement;
(iii)    Evidence of current hazard/casualty insurance and liability insurance of each entity constituting part of the Borrower, in amounts and otherwise satisfactory to Lender;
(iv)    (A) a certificate of the Secretary of Borrower certifying the current Articles of Incorporation and Bylaws of Borrower; (B) a true and complete copy of resolutions adopted by the Board of Directors of Borrower; and (C) a certificate executed by the Secretary of Borrower certifying as to the incumbency and genuineness of the signature of each officer of the Borrower;
(v)    The Lender shall have received certificates as of a recent date of the Borrower's good standing under the laws of each state where the Borrower is incorporated and authorized to transact business;
(vi)    An opinion of counsel to Borrower in form and content reasonably satisfactory to Lender and its counsel; and
(vii)    Such other documents as Lender may reasonably require.

(c)    Financial Condition.  There shall have been no material adverse change, as determined by Lender, in the financial condition or business of Borrower nor any material decline, as determined by Lender, in the market value of any collateral required hereunder or a substantial or material portion of the assets of Borrower.

SECTION 3.2.    CONDITIONS OF EACH EXTENSION OF CREDIT.  The obligation of Lender to make each extension of credit requested by Borrower hereunder shall be subject to the fulfillment to Lender's satisfaction of each of the following conditions:

(a)    Compliance.  The representations and warranties contained herein and in each of the other Loan Documents shall be true in all material respects on and as of the date of the signing of this Agreement and on the date of each extension of credit by Lender pursuant hereto, with the same effect as though such representations and warranties had been made on and as of each such date, and on each such date, no Event of Default as defined herein, and no condition, event or act which with the giving of notice or the passage of time or both would constitute such an Event of Default, shall have occurred and be continuing or shall exist.

(b)    Documentation.  Lender shall have received all additional documents which may be required in connection with such extension of credit.
       
ARTICLE IV
AFFIRMATIVE COVENANTS

Borrower covenants that so long as Lender remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Lender under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower shall, unless Lender otherwise consents in writing:

SECTION 4.1.    PUNCTUAL PAYMENTS.  Punctually pay all principal, interest, fees or other liabilities due under any of the Loan Documents at the times and place and in the manner specified therein, and immediately upon demand by Lender, the amount by which the outstanding principal balance of any credit subject hereto at any time exceeds any limitation on borrowings applicable thereto.

SECTION 4.2.    ACCOUNTING RECORDS.  Maintain adequate books and records in accordance with generally accepted accounting principles consistently applied, and permit any representative of Lender, at any reasonable time, to inspect, audit and examine such books and records, to make copies of the same, and to inspect the properties of Borrower.

SECTION 4.3.    FINANCIAL STATEMENTS.  Provide to Lender all of the following, in form and detail satisfactory to Lender:

(a)    not later than thirty (30) days after and as of the end of each fiscal quarter of Borrower, a financial statement of Borrower, prepared by Borrower, to include balance sheet, income statement and statement of cash flows and sources;

(b)    not later than ten (10) days after and as of the end of each month, a borrowing base certificate, in the form attached hereto as Exhibit A, an aged listing of accounts receivable and accounts payable, and a reconciliation of accounts, and immediately upon each request from Lender, a list of the names and addresses of all Borrower's account debtors;

SECTION 4.4.    COMPLIANCE.  Preserve and maintain all material licenses, permits, governmental approvals, rights, privileges and franchises necessary for the conduct of its business; and comply in all material respects with the provisions of all documents pursuant to which Borrower is organized and/or which govern Borrower's continued existence and with the requirements of all laws, rules, regulations and orders of any governmental authority applicable to Borrower and/or its business.

SECTION 4.5.    INSURANCE.  Maintain and keep in force, for each business in which Borrower is engaged, insurance of the types and in amounts customarily carried in similar lines of business, including but not limited to fire, extended coverage, public liability, flood, and, if required, seismic property damage and workers' compensation, with 

all such insurance carried with companies and in amounts satisfactory to Lender, and deliver to Lender from time to time at Lender's request schedules setting forth all insurance then in effect, together with a lender’s loss payee endorsement for all such insurance naming Lender as a lender loss payee. 

SECTION 4.6.    FACILITIES.  Keep all properties useful or necessary to Borrower's business in good repair and condition, and from time to time make necessary repairs, renewals and replacements thereto so that such properties shall be fully and efficiently preserved and maintained.

SECTION 4.7.    TAXES AND OTHER LIABILITIES.  Pay and discharge when due any and all indebtedness, obligations, assessments and taxes, both real or personal, including without limitation federal and state income taxes and state and local property taxes and assessments, except (a) such as Borrower may in good faith contest or as to which a bona fide dispute may arise, and (b) for which Borrower has made provision, to Lender's satisfaction, for eventual payment thereof in the event Borrower is obligated to make such payment.

SECTION 4.8.    LITIGATION.  Promptly give notice in writing to Lender of any litigation pending or threatened against Borrower with a claim in excess of Ten Thousand and No/100 Dollars ($10,000.00).

SECTION 4.9.    [Intentionally Left Blank]

SECTION 4.10.    NOTICE TO LENDER.  Promptly (but in no event more than five (5) days after the occurrence of each such event or matter) give written notice to Lender in reasonable detail of:  (a) the occurrence of any Event of Default, or any condition, event or act which with the giving of notice or the passage of time or both would constitute an Event of Default; (b) any change in the name or the organizational structure of Borrower; (c) the occurrence and nature of any Reportable Event or Prohibited Transaction, each as defined in ERISA, or any funding deficiency with respect to any Plan; or (d) any termination or cancellation of any insurance policy which Borrower is required to maintain, or any uninsured or partially uninsured loss through liability or property damage, or through fire, theft or any other cause affecting Borrower's property in excess of an aggregate of Thirty Five Thousand and No/100 Dollars ($35,000.00).
    
ARTICLE V
NEGATIVE COVENANTS

Borrower further covenants that so long as Lender remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Lender under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower will not without Lender's prior written consent:

SECTION 5.1.    USE OF FUNDS.  Use any of the proceeds of any credit extended hereunder except for the purposes stated in Article I hereof.

SECTION 5.2.    CAPITAL EXPENDITURES.  Make any additional investment in fixed assets in any calendar year in excess of an aggregate of Four Hundred Thousand and No/100 Dollars ($400,000.00).

SECTION 5.3.    LEASE EXPENDITURES.  Incur operating lease expense in any calendar year in excess of an aggregate of Eight Hundred Thousand and No/100 Dollars ($800,000.00)

SECTION 5.4.    OTHER INDEBTEDNESS.  Create, incur, assume or permit to exist any indebtedness or liabilities resulting from borrowings, loans or advances, whether secured or unsecured, matured or unmatured, liquidated or unliquidated, joint or several, except (a) the liabilities of Borrower to Lender, (b) any other liabilities of Borrower existing as of, and disclosed to Lender prior to, the date hereof, and (c) unsecured indebtedness of Borrower subordinated to Borrower’s indebtedness to Lender on terms acceptable to Lender in its sole and absolute discretion.

SECTION 5.5.    MERGER, CONSOLIDATION, TRANSFER OF ASSETS.  Merge into or consolidate with any other entity; make any substantial change in the nature of Borrower's business as conducted as of the date hereof; 

acquire all or substantially all of the assets of any other entity; nor sell, lease, transfer or otherwise dispose of all or a substantial or material portion of Borrower's assets except in the ordinary course of its business.

SECTION 5.6.    GUARANTIES.  Guarantee or become liable in any way as surety, endorser (other than as endorser of negotiable instruments for deposit or collection in the ordinary course of business), accommodation endorser or otherwise for, nor pledge or hypothecate any assets of Borrower as security for, any liabilities or obligations of any other person or entity, except any of the foregoing in favor of Lender.

SECTION 5.7.    LOANS, ADVANCES, INVESTMENTS.  Make any loans or advances to or investments in any person or entity other than to any direct or indirect subsidiary of Borrower.

SECTION 5.8.    PLEDGE OF ASSETS.  Mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of Borrower's assets now owned or hereafter acquired, except any of the foregoing in favor of Lender or which is existing as of, and disclosed to Lender in writing prior to, the date hereof. 

ARTICLE VI
EVENTS OF DEFAULT

SECTION 6.1.    The occurrence of any of the following shall constitute an "Event of Default" under this Agreement:

(a)    Borrower shall fail to pay within three (3) business days when due any principal, interest, fees or other amounts payable under any of the Loan Documents. 

(b)    Any financial statement or certificate furnished to Lender in connection with, or any representation or warranty made by Borrower or any other party under this Agreement or any other Loan Document shall prove to be incorrect, false or misleading in any material respect when furnished or made. 

(c)    Any default in the performance of or compliance with any obligation, agreement or other provision contained herein or in any other Loan Document (other than those specifically described as an “Event of Default” in this section 6.1) which is not cured within 30 days following notice from Lender, except for any default in the performance of or compliance with any obligation contained in Section 1.1(b) hereof, which must be cured immediately. 

(d)    Any default in the payment or performance of any obligation in excess of $100,000, or any defined event of default, under the terms of any contract, instrument or document (other than any of the Loan Documents) pursuant to which Borrower has incurred any debt or other liability in excess of $100,000 to any person or entity, including Lender. 

(e)    Borrower shall become insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or any of its property, or shall generally fail to pay its debts as they become due, or shall make a general assignment for the benefit of creditors; Borrower shall file a voluntary petition in bankruptcy, or seeking reorganization, in order to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time ("Bankruptcy Code"), or under any state or federal law granting relief to debtors, whether now or hereafter in effect; or Borrower shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary petition; or Borrower shall be adjudicated a bankrupt, or an order for relief shall be entered against Borrower by any court of competent jurisdiction under the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors.

(f)    The filing of a notice of judgment lien in excess of $100,000 against Borrower; or the recording of any abstract of judgment in excess of $100,000 against Borrower in any county in which Borrower has an interest in real property; or the service of a notice of levy and/or of a writ of attachment or execution, or other like process, against the assets of Borrower; or the entry of a judgment against Borrower in excess of $100,000; or any involuntary petition or proceeding pursuant to the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, 

reorganization or other relief for debtors is filed or commenced against Borrower, in each case, which is not lifted or discharged within 60 days of filing. 

(g)    The dissolution or liquidation of Borrower, or any of its directors, stockholders or members, shall take action seeking to effect the dissolution or liquidation of Borrower. 

SECTION 6.2.    REMEDIES.  Upon the occurrence of any Event of Default:  (a) all indebtedness of Borrower under each of the Loan Documents, any term thereof to the contrary notwithstanding, shall at Lender's option and without notice become immediately due and payable without presentment, demand, protest or notice of dishonor, all of which are hereby expressly waived by Borrower; (b) the obligation, if any, of Lender to extend any further credit under any of the Loan Documents shall immediately cease and terminate; and (c) Lender shall have all rights, powers and remedies available under each of the Loan Documents, or accorded by law, including without limitation the right to resort to any or all security for any credit subject hereto and to exercise any or all of the rights of a beneficiary or secured party pursuant to applicable law.  All rights, powers and remedies of Lender may be exercised at any time by Lender and from time to time after the occurrence of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity.

ARTICLE VII
MISCELLANEOUS

SECTION 7.1.    NO WAIVER.  No delay, failure or discontinuance of Lender in exercising any right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy.  Any waiver, permit, consent or approval of any kind by Lender of any breach of or default under any of the Loan Documents must be in writing and shall be effective only to the extent set forth in such writing.

SECTION 7.2.    NOTICES.  All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered to each party at the following address:

BORROWER:
Vicon Industries, Inc.
135 Fell Court
Hauppauge, New York 11788
Attention: John M. Badke
jbadke@vicon-security.com

LENDER:     
NIL Funding Corporation
4838 Jenkins Avenue
North Charleston, South Carolina 29405
Attention: Michael Bender, Esq.
(843) 202-4325
benderm@intertechsc.com

or to such other address as any party may designate by written notice to all other parties.  Each such notice, request and demand shall be deemed given or made as follows:  (a) if sent by hand delivery, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon receipt.

SECTION 7.3.    COSTS, EXPENSES AND ATTORNEYS' FEES.  Borrower shall pay to Lender immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees), expended or incurred by Lender in connection with (a) the negotiation and preparation of this Agreement and the other Loan Documents, Lender's continued administration hereof and thereof, 

and the preparation of any amendments and waivers hereto and thereto, (b) the enforcement of Lender's rights and/or the collection of any amounts which become due to Lender under any of the Loan Documents, and (c) the prosecution or defense of any action in any way related to any of the Loan Documents, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Lender or any other person) relating to Borrower or any other person or entity.

SECTION 7.4.    SUCCESSORS, ASSIGNMENT.  This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Borrower may not assign or transfer its interests or rights hereunder without Lender's prior written consent.  Lender reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, Lender's rights and benefits under each of the Loan Documents.  In connection therewith, Lender may disclose all documents and information which Lender now has or may hereafter acquire relating to any credit subject hereto, Borrower or its business, any guarantor hereunder or the business of such guarantor, if any, or any collateral required hereunder.

SECTION 7.5.    ENTIRE AGREEMENT; AMENDMENT.  This Agreement and the other Loan Documents constitute the entire agreement between Borrower and Lender with respect to each credit subject hereto and supersede all prior negotiations, communications, discussions and correspondence concerning the subject matter hereof.  This Agreement may be amended or modified only in writing signed by each party hereto.

SECTION 7.6.    NO THIRD PARTY BENEFICIARIES.  This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other of the Loan Documents to which it is not a party.

SECTION 7.7.    TIME.  Time is of the essence of each and every provision of this Agreement and each other of the Loan Documents.

SECTION 7.8.    SEVERABILITY OF PROVISIONS.  If any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement.

SECTION 7.9.    COUNTERPARTS.  This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same Agreement.

SECTION 7.10.    GOVERNING LAW.  This Agreement shall be governed by and construed in accordance with the laws of the State of South Carolina.

SECTION 7.11.    ARBITRATION.

(a)    Arbitration.  The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise in any way arising out of or relating to (i) any credit subject hereto, or any of the Loan Documents, and their negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit.  In the event of a court ordered arbitration, the party requesting arbitration shall be responsible for timely filing the demand for arbitration and paying the appropriate filing fee within 30 days of the abatement order or the time specified by the court.  Failure to timely file the demand for arbitration as ordered by the court will result in that party’s right to demand arbitration being automatically terminated.

(b)    Governing Rules.  Any arbitration proceeding will (i) proceed in a location in South Carolina selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the “Rules”).  If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control.  Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute.  Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.

(c)    No Waiver of Provisional Remedies, Self-Help and Foreclosure.  The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before, during or after the pendency of any arbitration proceeding.  This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.

(d)    Arbitrator Qualifications and Powers.  Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00.  Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations.  The arbitrator will be a neutral attorney licensed in the State of South Carolina or a neutral retired judge of the state or federal judiciary of South Carolina, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated.  The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim.  In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator's discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication.  The arbitrator shall resolve all disputes in accordance with the substantive law of South Carolina and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award.  The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the South Carolina Rules of Civil Procedure or other applicable law.  Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction.  The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

(e)    Discovery.  In any arbitration proceeding, discovery will be permitted in accordance with the Rules.  All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date.  Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available.

(f)    Class Proceedings and Consolidations.  No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except parties who have executed any Loan Document, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity. 

(g)    Payment Of Arbitration Costs And Fees.  The arbitrator shall award all costs and expenses of the arbitration proceeding.

(h)    Miscellaneous.  To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA.  No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation.  If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the dispute shall control.  This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties.

(i)    Small Claims Court.  Notwithstanding anything herein to the contrary, each party retains the right to pursue in Small Claims Court any dispute within that court’s jurisdiction.  Further, this arbitration provision shall apply only to disputes in which either party seeks to recover an amount of money (excluding attorneys’ fees and costs) that exceeds the jurisdictional limit of the Small Claims Court.

SECTION 7.12    WAIVER OF JURY TRIAL.    WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO ARBITRATE ANY DISPUTE AS SET FORTH HEREIN, TO THE EXTENT ANY DISPUTE IS NOT SUBMITTED TO ARBITRATION OR IS DEEMED BY THE ARBITRATOR OR BY ANY COURT WITH JURISDICTION TO BE NOT ARBITRABLE OR NOT REQUIRED TO BE ARBITRATED, BORROWER AND LENDER WAIVE TRIAL BY JURY IN RESPECT OF ANY SUCH DISPUTE AND ANY ACTION ON SUCH DISPUTE.  THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER AND LENDER, AND BORROWER AND LENDER HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY PERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THE LOAN DOCUMENTS.  BORROWER AND LENDER ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL.  BORROWER FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed, with the intention that it constitute an instrument under seal, as of the day and year first written above.

Vicon Industries, Inc.

By: /s/ John M. Badke
John M. Badke
Chief Financial Officer

NIL Funding Corporation

By: /s/ Michael Bender
Michael Bender
Secretary

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