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SECOND AMENDED AND RESTATED MASTER CREDIT AGREEMENT
by and between
FLEET BANK, NATIONAL ASSOCIATION
and
THE ▇▇▇▇▇▇▇, ▇▇▇▇▇ COMPANY
November 3, 1995
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SECOND AMENDED AND RESTATED MASTER CREDIT AGREEMENT
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This SECOND AMENDED MASTER CREDIT AGREEMENT (the "Agreement") is made
as of this 3rd day of November, 1995 by and between FLEET BANK, NATIONAL
ASSOCIATION, a national banking association, with an office and principal
place of business at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-
1600 (the "Bank") and THE ▇▇▇▇▇▇▇, ▇▇▇▇▇ COMPANY, a Delaware corporation
with its chief executive office located at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Borrower").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Master Credit Agreement made as of
the 15th day of June, 1992 by and between Bank and Borrower (as amended
and in effect from time to time, the "Original Credit Agreement"), Bank
agreed to make loans and advances and otherwise extend credit to
Borrower; and
WHEREAS, Bank and Borrower amended and restated the terms and
conditions of the Original Credit Agreement pursuant to a certain First
Amended and Restated Master Credit Agreement made as of the 9th day of
November, 1994 (as amended and in effect from time to time, the "First
Restated Credit Agreement"); and
WHEREAS, Bank and Borrower wish to further amend and restate the
terms and conditions of the Original Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, Bank and Borrower hereby agree as follows:
SECTION 1. DEFINITIONS
All capitalized terms used in this Agreement, the Notes or the
Other Documents, or in any certificate, report or other document,
instrument or agreement executed or delivered pursuant hereto and thereto
(unless otherwise indicated therein) shall have the meanings ascribed to
such terms below.
Section 1.1. "Account Debtor" means any Person obligated to
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Borrower with respect to an Account Receivable.
Section 1.2. "Account Receivable" or "Accounts Receivable" means the
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unpaid portion of obligations as stated on the respective invoices issued
to a customer of Borrower or any of its Subsidiaries with respect to
Inventory sold and shipped or services performed or rendered in the
ordinary course of business.
Section 1.3. "Affiliate" means any Person (i) which directly or
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indirectly controls, or is controlled by, or is under common control
with, Borrower or any Subsidiary of Borrower; (ii) which directly or
indirectly beneficially owns or holds ten percent (10%) or more of any
class of voting stock of Borrower or any Subsidiary of Borrower; or (iii)
ten percent (10%) or more of the voting stock of which is
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directly or indirectly beneficially owned or held by Borrower or any
Subsidiary of Borrower. The term "control" (and its correlative meanings
"controlled by" and "under common control with") as used in this Section
1.3. means the possession, directly or indirectly, of the power to
direct, or cause the direction of, the management and policies of a
Person, whether through ownership of voting stock, by contract or
otherwise.
Section 1.4. "Agreement" means this Second Amended and Restated
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Master Credit Agreement, including all schedules and exhibits attached
hereto, and any and all amendments, modifications and supplements hereto.
Section 1.5. "Aristotle" means THE ARISTOTLE CORPORATION, a
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Delaware corporation, having its chief executive office located at ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Section 1.6. "Aristotle Guaranty" has the meaning set forth in
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Section 3.2.2. hereof.
Section 1.7. "Bank" has the meaning set forth in the Preamble
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hereof.
Section 1.8. "Bank Affiliate" or "Bank Affiliates" means any
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Affiliate of Bank or its parent bank holding company.
Section 1.9. "Bank Agents" has the meaning set forth in Section
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13.2.5. hereof.
Section 1.10. "Bankruptcy Code" means Title 11 of the United
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States Code, entitled "Bankruptcy", as amended from time to time and all
rules and regulations promulgated thereunder.
Section 1.11. "Beneficiary" means the beneficiary of any Letter
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of Credit or Letter of Credit Guaranty issued by Bank for the account of
Borrower or any Subsidiary of Borrower.
Section 1.12. "Borrower" has the meaning set forth in the
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Preamble hereof.
Section 1.13. "Borrowing Base" means, as of any date as of which
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the amount thereof shall be determined, an amount equal to the sum of (i)
the Security Value of Accounts Receivable as of such date and (ii) the
Security Value of Inventory as of such date.
Section 1.14. "Borrowing Base Certificate" has the meaning set
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forth in Section 7.1.3. hereof.
Section 1.15. "Breakage Costs" means an amount equal to all costs
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Bank sustains in breaking or unwinding or in not making after receiving a
Notice (except where such results from the failure of Bank to fund) any
Libor funding contract, and all expenses that Bank
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sustains or incurs as a result of prepayment or receipt of principal
with respect to a Libor Loan on a day other than the last day of the
then current Interest Period.
Section 1.16. "Business Day" means, in the case of a Libor Loan,
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any day in which dealings in foreign currencies and exchange between
banks may be carried on in the place where the Eurodollar Office is
located and in Boston, Massachusetts and, in all other cases, any day
other than a Saturday, Sunday, legal holiday or other day on which banks
in the State of Connecticut are required or permitted by law to close.
Section 1.17. "Capital Expenditures" means, without duplication,
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for any period, the aggregate of all expenditures on a consolidated
basis including deposits (whether paid in cash or property or accrued as
liabilities and including the aggregate amount of all principal payments
due for the entire term of all Capital Leases that are required to be
capitalized on the balance sheet) made by Borrower and its Subsidiaries
that, in conformity with GAAP, are required to be included in the
property, plant, equipment, or similar fixed asset account.
Section 1.18. "Capital Lease" means any lease of any property
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(whether real, personal or mixed) that, in conformity with GAAP, should
be accounted for as a capital lease.
Section 1.19. "Closing Date" means the date hereof.
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Section 1.20. "Code" means the Internal Revenue Code of 1986 and
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the rules and regulations promulgated thereunder, collectively, as the
same may from time to time be supplemented or amended and remain in
effect.
Section 1.21. "Collateral" means all collateral received or
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delivered as security for the Obligations pursuant to, and as more
particularly described in, the Security Agreement, the Stock Pledge, the
Letter of Credit Applications and the Collateral Disclosure List and any
property or interest provided in addition to or in substitution for any
of the foregoing.
Section 1.22. "Collateral Disclosure List" has the meaning set
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forth in Section 3.1. hereof.
Section 1.23. "Collection Fee" has the meaning set forth in
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Section 2.1.14. hereof.
Section 1.24. "Commitment Amount" means (i) the amount of EIGHT
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MILLION SEVEN HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($8,750,000.00)
during the period commencing as of the Closing Date and continuing
through the Revolving Credit Termination Date or (ii) any lesser amount,
including zero (0), resulting from a reduction or termination of such
amount in accordance with Section 2.1.5. or Section 12.1.
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Section 1.25. "Contractual Obligation" means, as applied to any
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Person, any indenture, mortgage, deed of trust, contract, undertaking,
agreement or other instrument to which that Person is a party or by which
it or any of its properties is bound or to which it or any of its
properties is subject.
Section 1.26. "Controlled Group" means all trades or businesses
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(whether or not incorporated) under common control that together with
Borrower, are treated as a single employer under Section 414(b) or 414(c)
of the Code or Section 4001 of ERISA.
Section 1.27. "Covered Employees" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
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▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
Section 1.28. "Credits Outstanding" means, as of any date as of
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which the amount thereof shall be determined, the aggregate undrawn
amount of all issued and outstanding Letters of Credit and Letter of
Credit Guaranties but excluding any amounts which constitute unpaid
Reimbursement Obligations as of such date.
Section 1.29. "Default" means an event or condition that, but for
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the lapse of time, the giving of notice, or both, would constitute an
Event of Default if that event or condition was not cured or removed
within any applicable grace or cure period.
Section 1.30. "Default Rate" has the meaning set forth in Section
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2.4.7. hereof.
Section 1.31. "Disqualified Accounts Receivable" means:
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a. An Account Receivable which does not arise out of a bona
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fide sale of goods or rendering of services of the kind sold or
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rendered by Borrower in the ordinary course of its business.
b. An Account Receivable which remains unpaid for more than
sixty (60) days after the due date; or
c. An Account Receivable owing by an Account Debtor if
fifty percent (50%) or more of the dollar value of all Accounts
Receivable owed by such Account Debtor remain unpaid for more
than sixty (60) days after the due date; or
d. An Account Receivable with respect to which the Account
Debtor is a director, officer, employee or agent of Borrower or
is a Subsidiary or an Affiliate of Borrower; or
e. An Account Receivable with respect to which any
covenant, representation or warranty set forth in this Agreement
has been breached; or
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f. An Account Receivable with respect to which the Account
Debtor has commenced a voluntary case in bankruptcy, or made an
assignment for the benefit of creditors, or if a decree or order
for relief has been entered by a court having jurisdiction over
the Account Debtor in an involuntary case in bankruptcy, or if
any petition or other application for relief in bankruptcy has
been filed against the Account Debtor, or if the Account Debtor
has failed, ceased business operations, become insolvent or
consented to or suffered a receiver, trustee, liquidator or
custodian to be appointed for it or all or substantially all of
its properties or assets unless Bank otherwise consents to the
inclusion of such Account Receivable in the calculation of the
Borrowing Base; or
g. An Account Receivable with respect to which the goods
giving rise thereto have not been shipped to the Account Debtor
or the services giving rise thereto have not been performed by
Borrower or if the Account Receivable does not otherwise
represent a final sale; or
h. An Account Receivable owing by a single Account Debtor
located outside of the United States of America, Canada or
Puerto Rico unless such Account Receivable is a Secured Foreign
Receivable or an Insured Foreign Receivable; or
i. An Account Receivable with respect to which the sale
giving rise thereto is on a ▇▇▇▇-and-hold, sale-and-return, sale
on approval, consignment or other repurchase or return basis; or
j. An Account Receivable with respect to which the Account
Debtor is the United States of America or any department, agency
or office thereof unless Borrower assigns its right to payment
of such Account Receivable to Bank in accordance with the
Federal Assignment of Claims Act of 1940; or
k. An Account Receivable to the extent that the Account
Debtor has paid or advanced to Borrower any deposit or other
advance in respect of the payment thereof; or
l. An Account Receivable to the extent that the Account
Debtor has earned or accrued, or is due, any rebate, credit or
other allowance by Borrower; or
m. An Account Receivable to the extent of any amounts owed
by Borrower to such Account Debtor; or
n. An Account Receivable in which Bank does not possess a
valid and perfected first priority security interest; or
o. An Account Receivable owing by an Account Debtor located
in a jurisdiction in which Borrower has not complied with any
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laws which might restrict Borrower's ability to collect such
Account Receivable; or
p. An Account Receivable which Bank, in its reasonable
credit judgment, excludes from the calculation of the
Borrowing Base under Section 2.1.3. hereof.
Section 1.32. "Disqualified Inventory" means:
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a. Inventory in which Bank does not possess a valid and
perfected first priority security interest; or
b. Inventory which is not in good, saleable and readily
usable condition or is obsolete or unmerchantable; or
c. Inventory which is located outside of, or in transit to,
the United States of America, Canada or Puerto Rico unless
Bank otherwise consents to the inclusion of such Inventory in
the calculation of the Borrowing Base; or
d. Inventory which has been produced in violation of the Fair
Labor Standards Act and subject to the so-called "hot goods"
provisions contained in 29 U.S.C. 215 (a); or
e. Inventory with respect to which any covenant,
representation or warranty set forth in this Agreement has been
breached; or
f. Inventory which Bank, in its reasonable credit judgment,
excludes from the calculation of the Borrowing Base under
Section 2.1.3. hereof.
Section 1.33. "Dividend" or "Dividends" means the payment of any
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dividend or other distribution in respect of the capital stock of a
corporation in cash or other property (excepting distribution in the form
of such stock) or the redemption or acquisition of any capital stock or
security of a corporation.
Section 1.34. "Drawing" or "Drawings" means any payment(s) or
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disbursement(s) made by Bank under any Letter of Credit or any Letter of
Credit Guaranty issued by Bank for the account of Borrower honoring any
demand for payment presented by the Beneficiary of such Letter of Credit
or such Letter of Credit Guaranty in accordance with the terms thereof.
Section 1.35. "Eligible Account Receivable" means an Account
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Receivable which is NOT a Disqualified Account Receivable.
Section 1.36. "Eligible Inventory" means that portion of
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Borrower's Finished Goods, Raw Materials and Work-in-Process which is NOT
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Disqualified Inventory.
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Section 1.37. "Encumbrance or "Encumbrances" means any security
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interest, mortgage, pledge, lien, claim, charge, encumbrance, title
retention agreement, lessor's interest under a financing lease or any
analogous arrangements in any of Borrower's properties or assets,
intended as, or having the effect of, security.
Section 1.38. "Environmental Certificate" has the meaning set
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forth in Section 5.2.11. hereof.
Section 1.39. "Environmental Laws" means any and all laws,
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statutes, ordinances, rules, regulations, orders, or determinations of any
Federal, state or local governmental body, instrumentality or agency pertaining
to the environment, including without limitation, the Clean Water Act, the Clean
Air Act, as amended, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("▇▇▇▇"), and as may be further amended (all
together herein called "CERCLA"), the Federal Water Pollution Control
Amendments, the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), the Hazardous Materials Transportation Act of 1975, as amended, the
Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, and any comparable or similar environmental laws of the State of
Connecticut and any other state in which Borrower maintains business premises.
Likewise, the terms "hazardous substance," "release," and "threatened release"
herein referenced in connection with Environmental Laws shall have the meanings
specified in CERCLA and the terms "solid waste" and "dispose" (or "disposed")
shall have the meanings specified in RCRA; provided, however, in the event
either CERCLA or RCRA is amended so as to broaden the meaning of any term
defined therein, such broader meaning shall apply subsequent to the effective
date of such amendment.
Section 1.40. "Equipment" means all of Borrower's machinery,
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equipment, office machinery, furniture, trade fixtures, conveyors, tools,
materials, storage and handling equipment, computer equipment and
hardware, including central processing units, terminals, drives, memory
units, printers, keyboards, screens, peripherals and input or output
devices, automotive equipment, trucks, molds, dies, stamps, motor
vehicles and other equipment of every kind and nature.
Section 1.41. "ERISA" means the Employee Retirement Income
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Security Act of 1974 and the rules and regulations promulgated
thereunder; collectively, as the same may from time to time be
supplemented or amended and remain in effect.
Section 1.42. "Eurodollar Office" means initially, Bank's office
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in Boston, Massachusetts, and thereafter such other office of offices of
Bank (as designated from time to time by notice from Bank)through which
the Libor Rate is determined. A Eurodollar Office may be, at the option
of the Bank, either a domestic or a foreign office.
Section 1.43. "Event of Default" has the meaning set forth in
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Section 11. hereof.
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Section 1.44. "Exchange Act" means the Securities Exchange Act of
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1934, as amended.
Section 1.45. "Extension of Credit" means any Loan, Letter of
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Credit, Letter of Credit Guaranty or any other loan, advance or extension
of credit by Bank to Borrower under this Agreement or the Other
Documents.
Section 1.46. "Facility Fee" has the meaning set forth in
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Section 2.1.13. hereof.
Section 1.47. "FIFO" means the first in, first out method of
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valuing inventory.
Section 1.48. "Financial Statement" or "Financial Statements"
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means, as of any date, or with respect to any period, as applicable, a
financial report or reports consisting of (i) a balance sheet; (ii) an
income statement; (iii) a statement of cash flow; and (iv) a statement
of changes in stockholders' equity.
Section 1.49. "Finished Goods" means that portion of Borrower's
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Eligible Inventory which consists of finished goods.
Section 1.50. "Fiscal Year" means June 30 in each year.
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Section 1.51. "Forecasts" has the meaning set forth in
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Section 4.8. hereof.
Section 1.52. "Foreign Credit Insurer" means either (i)
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collectively, the Foreign Credit Insurance Association and the Export
Import Bank of the United States of America or (ii) or any private
insurer approved in writing by Bank.
Section 1.53. "GAAP" means generally accepted accounting
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principles as set forth in Statement on Auditing Standards No. 69
entitled "The Meaning of `Present Fairly in Conformity with Generally
Accepted Accounting Principles' in the Independent Auditor's Report"
issued by the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board
that are applicable to the circumstances as of the date of determination.
Section 1.54. "Governmental Authority" means any Federal, state,
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local or foreign court, commission or tribunal, or governmental,
administrative or regulatory agency, department, authority,
instrumentality or other body.
Section 1.55. "Government Obligations" means securities which are
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general obligations of the United States of America or which are
unconditionally guaranteed by the United States of America as to timely
payment of principal and interest.
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Section 1.56. "Government Contract" means any contract for the
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purchase of goods or services by the United States of America or any
department, agency or office thereof.
Section 1.57. "Guarantees" means, as applied to Borrower and its
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Subsidiaries, all guarantees, endorsements or other contingent or surety
obligations with respect to obligations of any other Person, whether or
not reflected on the consolidated balance sheet of Borrower and its
Subsidiaries, including any obligation to furnish funds, directly or
indirectly (whether by virtue of partnership arrangements, by agreement
to keep-well or otherwise), through the purchase of goods, supplies or
services, or by way of stock purchase, capital contribution, advance or
loan, or to enter into a contract for any of the foregoing, for the
purpose of payment of obligations of any other Person.
Section 1.58. "Hazardous Materials" means (i) any chemical,
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compound, material, mixture or substance that is now or hereafter defined
as or included in the definition of "hazardous substances", "hazardous
wastes", "hazardous materials", "extremely hazardous waste",
"restricted hazardous waste", or "toxic substances" or terms of
similar import under any applicable Federal, state or local law or under
the regulations adopted or promulgated pursuant thereto, including,
without limitation, Environmental Laws; (ii) any oil, petroleum or
petroleum derived substance, any drilling fluids, produced waters and
other wastes associated with the exploration, development or production
of crude oil, any flammable substances or explosives, any radioactive
materials, any hazardous wastes or substances, any toxic wastes or
substances or any other materials or pollutants which (a) could pose a
hazard to any properties or assets of Borrower or its Subsidiaries or (b)
could cause any of such properties or assets to be in violation of any
Environmental Laws; (iii) asbestos in any form, urea formaldehyde foam
insulation, electrical equipment which contains any oil or dielectric
fluid containing levels of polychlorinated biphenyls in excess of fifty
(50) parts per million; and (iv) any other chemical, material or
substance, exposure to, or disposal of, which is now or hereafter
prohibited, limited or regulated by any Federal, state or local
governmental body, instrumentality or agency.
Section 1.59. "Indebtedness" means, as applied to any Person,
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without duplication: (a) all indebtedness for borrowed money; (b) that
portion of obligations with respect to Capital Leases that is properly
classified as a liability on a balance sheet in conformity with GAAP; (c)
notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money; (d) any
obligation owed for all or any part of the deferred purchase price of
property or services if the purchase price is due more than six months
from the date the obligation is incurred or is evidenced by a note or
similar written instrument; (e) all indebtedness secured by any
Encumbrance on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been
assumed by that Person or is nonrecourse to the credit of that Person
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and (f) any other obligations which would be classified as liabilities
on a balance sheet in conformity with GAAP but for purposes of
calculating "Indebtedness" of Borrower option, lease and subcontracting
obligations in respect of the Jamaica manufacturing facility shall be
excluded.
Section 1.60. "Insured Foreign Receivable" means an Account
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Receivable (other than a Secured Foreign Receivable) that arises from a
sale of goods to an Account Debtor having its principal assets or place
of business outside of the United States of America, Canada or Puerto
Rico, so long as a Foreign Credit Insurer has assumed the risk of
nonpayment due to the Account Debtor's financial inability to pay and due
to foreign currency restrictions and political matters in the country of
such Account Debtor, and Borrower has promptly and properly submitted to
the Foreign Credit Insurer proof of loss with respect to all Accounts
Receivable of such Account Debtor for which a claim could be submitted
under the foreign credit insurance policy insuring Borrower's sales to
such Account Debtor.
Section 1.61. "Interest Period" means,
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(a) with respect to each Libor Loan, the period commencing on
the date of the making or continuation of, or conversion to,
such Libor Loan and ending thirty (30), sixty (60), ninety (90)
or one hundred eighty (180) days (or such other period of time
as Bank may offer from time to time) thereafter, as Borrower may
elect in the applicable Notice; and
(b) with respect to each Matched Rate Loan, the period
commencing on the date of the making or continuation of or
conversion to such Matched Rate Loan and ending, in the case of
a Revolving Loan, on the Revolving Credit Termination Date, in
the case of the Term Loan, on the Maturity Date or, in the case
of any Loan, on such earlier date as Borrower may elect in the
applicable Notice; and
(c) with respect to each Prime Rate Loan, the period commencing
on the date of the making or continuation of, or conversion to,
such Prime Rate Loan and ending, in the case of a Revolving
Loan, on the Revolving Credit Termination Date, in the case of
the Term Loan, on the Maturity Date or, in the case of any Loan,
on such earlier date as the Borrower may elect in the applicable
Notice;
provided, however, that:
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(i) any Interest Period (other than an Interest Period
determined pursuant to clause (iii) below) that would
otherwise end on a day that is not a Business Day
shall be extended to the next succeeding Business Day
unless, in the case of Libor Loans,
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such Business Day falls in the next calendar month,
in which case such Interest Period shall end on the
immediately preceding Business Day;
(ii) any Interest Period applicable to a Libor Loan that
begins on the last Business Day of a calendar month
(or on a day for which there is no numerically
corresponding day in the calendar month at the end of
such Interest Period) shall, subject to clause (iii)
below, end on the last Business Day of a calendar
month;
(iii) any Interest Period applicable to a Revolving Loan
that would otherwise end after the Revolving Credit
Termination Date shall end on the Revolving Credit
Termination Date, and any Interest Period applicable
to the Term Loan that would otherwise end after the
Maturity Date of the Term Loan shall end on Maturity
Date; and
(iv) no Interest Period applicable to the Term Loan
shall include a principal repayment date for such
Term Loan unless an aggregate principal amount of
Loans at least equal to the principal amount due on
such principal repayment date shall be Prime Rate
Loans or other Loans having Interest Periods ending on
or before such date; and
(v) notwithstanding clause (iii) and (iv) above, no
Interest Period applicable to a Libor Loan or a
Matched Rate Loan shall have a duration of less than
thirty (30) days and if any Interest Period applicable
to such Loans would be for a shorter Interest Period,
such Interest Period shall not be available hereunder.
Section 1.62. "Inventory" means all goods, merchandise, raw
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materials, supplies, work in process, finished goods and other tangible
personal property held by Borrower for processing, sale or lease or
furnished or to be furnished by Borrower under contracts of service or to
be used or consumed in Borrower's business.
Section 1.63. "Inventory Cap" means the amount of FIVE MILLION
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AND NO/100 DOLLARS ($5,000,000.00) during the period commencing as of the
Closing Date and continuing through the Revolving Credit Termination
Date.
Section 1.64. "Investment" means, as applied to Borrower and its
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Subsidiaries, the purchase or acquisition of (i) any share of capital
stock, partnership interest, evidence of indebtedness or other equity
security of any other Person, or (ii) all or any material portion of the
properties and assets of any Person, any loan, advance or extension of
credit to, or contribution to the capital of, any other
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Person, any real estate held for sale or investment, any commodities
futures contracts held other than in connection with bona fide hedging
transactions, any other investment in any other Person, and the making of
any commitment or acquisition of any option to make an Investment.
Section 1.65. "Letter of Credit" or "Letters of Credit" means any
---------------- -----------------
letter(s) of credit issued by Bank for the account of Borrower or its
Subsidiaries and shall include any Letter of Credit as it may be amended,
modified or extended from time to time.
Section 1.66. "Letter of Credit Application" has the meaning set
----------------------------
forth in Section 2.2.2. hereof.
Section 1.67. "Letter of Credit Guaranty" means a guaranty issued
-------------------------
by Bank or a Bank Affiliate to guaranty the payment of a letter of credit
to a Bank which has issued such letter of credit for the account of
Borrower or a Subsidiary of Borrower.
Section 1.68. "Libor Base" means the rate per annum (rounded
----------
upwards, if necessary, to the nearest 1/16 of 1%) shown on the display
referred to as the "LIBO page" (or any display substituted therefor) of
the Reuters U.S. Domestic Money Service transmitted through the Reuters
monitor system as being the respective rates at which U.S.dollar deposits would
be offered two (2) Business Days prior to the beginning of the relevant Interest
Period by the principal London offices of each of the banks named thereon to
major banks in the London interbank Eurodollar market where the Eurodollar
Office is located at the Relevant Local Time for delivery on the first day of
such Interest Period for the number of days comprised therein and in the amount
of the requested Loan.
Section 1.69. "Libor Loan" means any Revolving Loan or any
----------
portion of the Term Loan bearing interest at a rate determined by
reference to the Libor Rate.
Section 1.70. "Libor Rate" means, with respect to each Interest
----------
Period, the rate per annum equal to (i) the Libor Base for such Interest
Period divided by (ii) a percentage equal to one hundred percent (100%)
----------
minus the maximum reserve percentage applicable during such interest
period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (the "Board") for determining the
maximum reserve requirements (including, without limitation, any basic,
supplemental, marginal or emergency reserve requirements) for Bank in
respect of liabilities or assets consisting of or including Eurocurrency
liabilities (as defined in Regulation D of the Board) having a term equal
to the Interest Period (Bank acknowledging that as of the Closing Date
there are no presently effective reserve requirements).
Section 1.71. "Line of Credit" has the meaning set forth in
--------------
Section 2.1.1. hereof.
Section 1.72. "Loan" means any Revolving Loan or the Term Loan
----
Loan.
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Section 1.73. "Loans" means each Revolving Loan and the Term
-----
Loan.
Section 1.74. "Loan Account" means the account established by
------------
Borrower with Bank or a Bank Affiliate for purposes of administering the
Line of Credit.
Section 1.75. "Lockbox Account" has the meaning set forth in
---------------
Section 10.1.1. hereof.
Section 1.76. "Matched Rate" means the fixed rated of interest
------------
offered by Bank in its sole discretion for loans having similar
maturities to that requested by Borrower in the applicable Notice.
Section 1.77. "Matched Rate Loan" means any Revolving Loan or any
-----------------
portion of the Term Loan bearing interest at a rate determined by
reference to the Matched Rate.
Section 1.78. "Material Adverse Effect" means (i) a material
-----------------------
adverse effect upon the business, operations, properties, assets or
condition (financial or otherwise) of Borrower and its Subsidiaries,
taken as a whole, or (ii) a material adverse effect on the ability of
Borrower to perform its obligations under this Agreement, the Notes or
the Other Documents or the ability of Bank to enforce or collect any of
the Obligations. In determining whether any individual event would
result in a Material Adverse Effect, notwithstanding that such event does
not of itself have such an effect, a Material Adverse Effect shall be
deemed to have occurred if the cumulative effect of such event and all
other then existing events would result in a Material Adverse Effect.
Section 1.79. "Maturity Date" means October 31, 1996.
-------------
Section 1.80. "Negative Pledge Agreement" means the negative
-------------------------
pledge agreement to be executed and delivered by Aristotle on the Closing
Date in favor of Bank with respect to the Net Settlement Amount, as it
may be amended, modified, confirmed or supplemented from time to time.
Section 1.81. "Net Settlement Amount" means the amount of monies
---------------------
paid to Aristotle from funds currently held in escrow in connection with
that tax refund litigation with the Federal Deposit Insurance Corporation
following (i) the Settlement and (ii) the release of escrowed monies,
said amount to be calculated net of legal fees paid to Aristotle's legal
counsel in connection with such litigation and/or claims.
Section 1.82. "Note" means the Revolving Credit Note or the Term
---- --
Note.
Section 1.83. "Notes" means the Revolving Credit Note and the
----- ---
Term Note.
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Section 1.84. "Notice" means a Notice of Borrowing or a Notice of
------ --
Continuation or Conversion.
Section 1.85. "Notice of Borrowing" has the meaning set forth in
-------------------
Section 2.1.3. hereof.
Section 1.86. "Notice of Continuation or Conversion" shall have
------------------------------------
the meaning set forth in Section 2.4.3. hereof.
Section 1.87. "Obligations" means any and all loans, advances,
-----------
indebtedness, liabilities, obligations, covenants or duties of Borrower to Bank
of any kind or nature, including obligations to pay money and to perform acts or
refrain from taking action, whether arising under a loan, lease, credit card,
line of credit, letter of credit, guaranty, indemnity, confirmation, acceptance,
currency exchange, interest rate protection arrangement, overdraft or other type
of financing arrangement, and any and all extensions and renewals thereof, and
modifications and amendments thereto, whether in whole or in part, whether any
of the foregoing are direct or indirect, joint or several, absolute or
contingent under, due or to become due, now existing or hereafter arising,
whether any present or future agreement or instrument, and whether or not
evidenced by a writing and specifically including but not being limited to (i)
the unpaid principal amount outstanding at any time under the Notes, plus
allaccrued and unpaid interest thereon, together with all fees, expenses,
including attorneys' fees, penalties, and other amounts owing by or chargeable
to by Borrower under this Agreement, the Notes or the Other Documents and (ii)
unpaid Reimbursement Obligations.
Section 1.88. "Other Documents" means the Collateral Disclosure
---------------
List, the Security Agreement, and the Letter of Credit Applications, all
of even date herewith and any other document, agreement or instrument
executed by Borrower in connection with any Extension of Credit and any
and all amendments, modifications and supplements thereto.
Section 1.89. "Outstanding Amount" means, as of any date as of
------------------
which the amount thereof shall be determined, the outstanding principal
amount of the Line of Credit as of the date of determination.
Section 1.90. "Overadvances" has the meaning set forth in Section
------------
2.1.2. hereof.
Section 1.91. "Overadvance Limit" means, as of any date as of
-----------------
which the amount thereof shall be determined, an amount not to exceed ONE
MILLION AND NO/100 DOLLARS ($1,000,000.00) during the period commencing
as of the Closing Date and continuing through December 31, 1995 and FIVE
HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00) during the period
commencing as of January 1, 1996 and continuing through the Revolving
Credit Termination Date.
-15-
Section 1.92. "PBGC" means the Pension Benefit Guaranty
----
Corporation or any entity succeeding to all or part of its functions
under ERISA.
Section 1.93. "Permitted Encumbrances" has the meaning set forth
----------------------
in Section 8.5. hereof.
Section 1.94. "Permitted Indebtedness" has the meaning set forth
----------------------
in Section 8.1. hereof.
Section 1.95. "Person" means an individual, partnership,
------
corporation, business trust, joint stock company, trust, unincorporated
association, joint venture or other entity of whatever nature, whether
public or private.
Section 1.96. "Plan" means, at any time, an employee pension or
----
other benefit plan that is subject to Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Code and is
either (i) maintained by Borrower or any member of the Controlled Group
for employees of Borrower or any member of the Controlled Group or (ii)
if such plan is established, maintained pursuant to a collective
bargaining agreement or any other arrangement under which more than one
(1) employer makes contributions and to which Borrower or any member of
the Controlled Group is then making or accruing an obligation to make
contributions or has within the preceding five (5) plan years made
contributions.
Section 1.97. "Post Closing Matters" has the meaning set forth on
--------------------
Section 11.1.(l) hereof.
Section 1.98. "Prime Rate" means a base interest rate used by Bank
----------
for loans making reference thereto and is not necessarily the lowest rate
at which Bank may lend money and is neither tied to any external rate of
interest nor is it a rate charged by Bank to any particular class or
category of customer.
Section 1.99. "Prime Rate Loan" means any Revolving Loan or portion
---------------
of the Term Loan bearing interest determined by reference to the Prime
Rate.
Section 1.100. "Qualifications" means, with respect to any report of
--------------
independent public accountants covering any Financial Statements of
Borrower and its Subsidiaries, a qualification to such report (such as a
"subject to" or "except for" statement therein) (i) resulting from a
limitation on the scope of examination of the Financial Statements or the
underlying data; (ii) as to the capability of the Person whose Financial
Statements are certified to continue operations as a going concern; or
(iii) which could be eliminated by changes in the Financial Statements or
notes thereto covered by such report (such as, by the creation of or
increase in a reserve or a decrease in the carrying value of assets) and
which if so eliminated by the making of any such change and after giving
effect thereto would constitute of and Event of Default; provided that
neither of the following shall
-16-
constitute a Qualification: (a) a consistency exception relating to a
change in accounting principles with which the independent public
accountants for the Person whose Financial Statements are being examined
have concurred or (b) a qualification relating to the outcome or
disposition of any uncertainty, including but not limited to threatened
litigation, pending litigation being contested in good faith, pending or
threatened claims or other contingencies, the impact of which litigation,
claims, contingencies or uncertainties cannot be determined with
sufficient certainty to permit certification in such Financial
Statements.
Section 1.101. "Qualified Investments" means, as applied to Borrower
---------------------
and its Subsidiaries, investments in (i) notes, bonds or other
obligations of the United States of America or any agency thereof that as
to principal and interest constitute direct obligations of or are
guaranteed by the United States of America; (ii) certificates of deposit
or other deposit instruments or accounts of Banks or trust companies
organized under the laws of the United States or any state thereof that
have capital and surplus of at least ONE HUNDRED MILLION AND NO/100
DOLLARS ($100,000,000.00); (iii) commercial paper that is rated not less
than prime-one or A-1 or their equivalents by ▇▇▇▇▇'▇ Investors Service,
Inc. or Standard & Poor's Corporation, respectively, or their successors;
and (iv) any repurchase agreement secured by any one (1) or more of the
foregoing.
Section 1.102. "Raw Materials" means that portion of Borrower's
-------------
Eligible Inventory which consists of raw materials.
Section 1.103. "Reimbursement Obligations" means, as of any date
-------------------------
as of which the amount thereof shall be determined, the aggregate
obligation of Borrower, as of such date, to reimburse Bank in respect of
Letters of Credit in accordance with Section 2.2.3. hereof.
Section 1.104. "Release" means any release, emission, disposal,
-------
leaching, or migration into the environment, (including, without
limitation, the abandonment or disposal of any barrels, containers, or
other closed receptacles containing any Hazardous Materials), or into or
out of any property owned, occupied or used by Borrower.
Section 1.105. "Relevant Local Time" means, with respect to Libor
-------------------
Loans, 10:00 a.m. local time in the place where the Eurodollar Office is
located.
Section 1.106. "Reportable Event" means any of the events
----------------
described in Section 4043(b) of ERISA.
Section 1.107. "Revolving Credit Period" means the period
-----------------------
beginning on the Closing Date and extending through and including the
Revolving Credit Termination Date or such earlier date on which the
obligation of Bank to make Revolving Loans is terminated or the
Commitment Amount is reduced to zero (0) in accordance with the terms
hereof.
-17-
Section 1.108. "Revolving Credit Termination Date" means October
---------------------------------
31, 1996, and any subsequent date to which the Revolving Credit
Termination Date may be extended under Section 2.1.10. hereof.
Section 1.109. "Revolving Credit Note" has the meaning set forth
---------------------
in Section 2.1.6. hereof.
Section 1.110. "Revolving Loan" or "Revolving Loans" means the
-------------- ---------------
loan(s) and advance(s) which Borrower requests or is deemed to have
requested pursuant to Section 2.1.1. hereof, and to the extent permitted
under this Agreement, Section 2.1.2. hereof.
Section 1.111. "Secured Foreign Receivable" means an Account
--------------------------
Receivable (other than an Insured Foreign Receivable) that arises from
the sale of goods to an Account Debtor having its principal assets or
place of business outside of the United States of America, Canada or
Puerto Rico so long as Bank has received in respect of such Account
Receivable a letter of credit or similar guaranty of payment in form and
substance and issued or confirmed by a financial institution satisfactory
to Bank and its legal counsel that has not expired, been revoked or
terminated, and has been pledged to, and had the proceeds thereof
assigned to, Bank.
Section 1.112. "Security Agreement" means the security agreement
------------------
executed and delivered by Borrower in favor of Bank as of April 11, 1994,
as it may be amended, modified, confirmed or supplemented from time to
time.
Section 1.113. "Security Value of Accounts Receivable" means, as
-------------------------------------
of any date as of which the amount thereof shall be determined, eighty
percent (80%) of Borrower's Eligible Account Receivables as of the date
of determination.
Section 1.114. "Security Value of Inventory" means, as of any
---------------------------
date as of which the amount thereof shall be determined, the lesser of
(i) the sum of twenty percent (20%) of Borrower's Work-in-Process as of
the date of determination plus fifty percent (50%) of Borrower's Raw
Materials and Finished Goods as of the date of determination, all of the
foregoing valued on a FIFO basis at the lower of cost or market value, or
(ii) the Inventory Cap in effect as of the date of determination.
Section 1.115. "Settlement" means the settlement or other final
----------
resolution by Aristotle of the litigation by, and the claims of, the
Federal Deposit Insurance Corporation against Aristotle, its Affiliates
and its officers and directors.
Section 1.116. "Solvent" means, when used with respect to any
-------
Person, that as of the date as to which the Person's solvency is to be
determined:
(a) the fair saleable value of such Person's properties and
assets is in excess of the total amount of its liabilities (including
contingent liabilities) as they become absolute and matured;
-18-
(b)it has sufficient capital to conduct its business; and
(c)it is able to meet its debts as they mature.
Section 1.117. "Stock Pledge" means the stock pledge agreement to
------------
be executed and delivered by Sub as of November 9, 1994 in favor of Bank
and confirmed and amended on the Closing Date, as it may be amended,
modified or supplemented from time to time.
Section 1.118. "Sub" means ARISTOTLE SUB, INC., a Delaware
---
corporation, with its chief executive office located at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Section 1.119. "Sub Guaranty" has the meaning set forth in
------------
Section 3.2.3. hereof.
Section 1.120. "Subordinated Indebtedness" means Indebtedness,
-------------------------
whether now existing or hereafter arising, with respect to which the
payment of the principal of and interest on is expressly subordinated in
right of payment, in form and on terms approved by Bank in writing, to
the prior payment of the Obligations.
Section 1.121. "Subordination Agreement" means each subordination
-----------------------
and intercreditor agreement executed and delivered by Aristotle and Sub
in favor of Bank as of April 11, 1994 and confirmed and amended as of
November 9, 1994 and the Closing Date, as it may be amended, modified or
supplemented from time to time.
Section 1.122. "Subsidiary" means any Person of which fifty
----------
percent (50%) or more of the ordinary voting power for the election of a
majority of the members of the board of directors or other governing body
of such Person is held or controlled by Borrower or a Subsidiary of
Borrower; or any other such organization the management of which is
directly or indirectly controlled by Borrower or Subsidiary of Borrower
through the exercise of voting power or otherwise; or any joint venture,
whether incorporated or not, in which Borrower has a fifty percent (50%)
or more ownership interest. The term "control" (and its correlative
meanings "controlled by" and "under common control with") as used in this
Section 1.122. means the possession, directly or indirectly, of the power
to direct, or cause the direction of, the management and policies of a
Person, whether through ownership of voting stock, by contract or
otherwise.
Section 1.123. "Term Note" has the meaning set forth in Section
---------
2.3.2. hereof.
Section 1.124. "Term Loan" has the meaning set forth in Section
---------
2.3.1. hereof.
Section 1.125. "Unused Portion" means for any month the average
--------------
daily difference between the Commitment Amount and the aggregate
principal amount of Revolving Loans, Credits Outstanding and any
-19-
amounts deemed to be Revolving Loans, whether now existing or
hereafter arising.
Section 1.126. "Uniform Customs and Practice" means the Uniform
----------------------------
Customs and Practice for Documentary Credits (1993) Revision,
International Chamber of Commerce Publication No. 500.
Section 1.127. "Work-in-Process" means as of any date of which
---------------
the amount thereof shall be determined, that portion of Borrower's
Eligible Inventory which constitutes work-in-process.
SECTION 2. THE CREDIT FACILITIES
Section 2.1. Line of Credit.
--------------
Section 2.1.1. Revolving Loans. Upon the execution of this
---------------
Agreement, Bank agrees to extend to Borrower a line of credit, so that as long
as no Default or Event of Default has occurred and is continuing, Borrower may
borrow, repay and reborrow, on a revolving basis in one (1) or more Revolving
Loans from time to time prior to the close of business on the Revolving Credit
Termination Date, amounts which together with the amount of (i) Credits
Outstanding and (ii) unpaid Reimbursement Obligations deemed to be Revolving
Loans under this Section 2.1.1., do not exceed in the aggregate at any one time
outstanding the lesser of the Borrowing Base or the Commitment Amount in effect
from time to time (the "Line of Credit"). Bank shall have the right, in its
reasonable credit judgment, to deem any unpaid Reimbursement Obligations and any
other payments, deposits, guaranties or indemnifications made by Bank for the
account of Borrower under any letter of credit, reimbursement agreement,
acceptance, guaranty or similar instrument to be Revolving Loans, and Bank may,
in its reasonable credit judgment, establish such reserves as it deems
appropriate against any present or future obligation of Bank to make payment, to
deposit or to perform in respect of any of the same. Bank may, in its reasonable
credit judgment and upon notice to Borrower, fund such reserves and/or charge
the same to the Loan Account at such time as it deems appropriate.
Notwithstanding any provision of this Agreement to the contrary, all Revolving
Loans, including Overadvances, and any unpaid Reimbursement Obligations and
other payments, deposits, guaranties or indemnifications deemed to be Revolving
Loans by Bank hereunder, shall constitute one obligation of Borrower to Bank,
secured by Bank's security interest in the Collateral.
Section 2.1.2. Overadvances. Notwithstanding the provisions of
------------
Section 2.1.1. hereof, the Borrower may from time to time request, and
Bank shall make, Revolving Loans which exceed the available Borrowing
Base ("Overadvances") but which, in addition to all Revolving Loans,
Credits Outstanding and any unpaid Reimbursement Obligations and other
payments, deposits, guaranties or indemnifications deemed to be Revolving
Loans made under Section 2.1.1. hereof in respect of the Borrowing Base,
do not exceed the Commitment Amount in effect from
-20-
time to time; provided, however, that the aggregate outstanding
-------- -------
principal amount of Overadvances shall in no event exceed the Overadvance
Limit in effect from time to time and provided, further, that Borrower
-------- -------
must reduce the amount of Overadvances to zero (0) and maintain such zero
(o) balance for thirty (30) days on at least one (1) occasion during the
period commencing as of the Closing Date and continuing through July 31, 1996.
Section 2.1.3. Notice of Borrowing. Whenever Borrower desires to
-------------------
obtain a Revolving Loan, Borrower shall notify Bank (which notice shall
be irrevocable in the case of a Libor Loan or a Matched Rate Loan) by
telex, telegraph or telephone received no later than 10:00 a.m.
(Hartford, Connecticut time) on the date on which the requested Revolving
Loan is to be made as a Prime Rate Loan, received no later than 10:00
a.m. (Hartford, Connecticut time) on the date one (1) Business Day before
the day on which the requested Revolving Loan is to be made as a Matched
Rate Loan, and received no later than 10:00 a.m. (Hartford, Connecticut
time) on the date three (3) Business Days before the day on which the
requested Revolving Loan is to be made as a Libor Loan. Such notice
shall specify: (i) the effective date and amount of each Revolving Loan,
subject to the limitations set forth in Section 2.1.1. and Section 2.1.2.
hereof; (ii) the interest rate option to be applicable thereto; and (iii)
the duration of the applicable Interest Period, if any (subject to the
provisions of the definition of Interest Period and Section 2.4.4.
hereof). Each such notification (a "Notice of Borrowing") shall be
immediately followed by a written confirmation thereof by Borrower in
substantially the form of Exhibit A attached hereto; provided, however,
--------- -------- -------
that if such written confirmation differs in any material respect from the
action taken by Bank, the records of Bank shall control absent manifest error.
Subject to the terms and conditions of this Agreement, Bank shall make each
Revolving Loan on the effective date specified therefor by crediting the amount
of such Revolving Loan to the Loan Account.
Section 2.1.4. Calculation of Borrowing Base. The Borrowing Base as
-----------------------------
of any time shall be calculated by Bank using the most recent Borrowing Base
Certificate and other financial reports delivered by Borrower to Bank under
Section 7.1. hereof. Bank shall have the right, in its reasonable credit
judgment, and at any time and for any reason, to reduce the dollar amount of (i)
Eligible Accounts Receivable by the amount of discounts, credits, allowances and
returns of any kind then outstanding, issued, granted, owing, accrued or liable
to be accrued or (ii) Eligible Inventory by the amount of special order goods,
advertising, packaging, parts, supplies, tooling or similar items. Any Accounts
Receivable or Inventory which have been so excluded as well as any Accounts
Receivable or Inventory which are or have become Disqualified Accounts
Receivable or Disqualified Inventory for any other reason shall remain as
collateral for the Obligations notwithstanding such exclusion or
disqualification.
Section 2.1.5. Reduction of Commitment Amount. Borrower may from
------------------------------
time to time, by written notice delivered to Bank at least five (5)
-21-
Business Days prior to the date of the requested reduction, reduce by
integral multiples of ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($100,000.00) any unborrowed portion of the Commitment Amount. No
reduction of the Commitment Amount shall be subject to reinstatement.
Section 2.1.6. Revolving Credit Note. Revolving Loans shall be
---------------------
evidenced by a promissory note executed by Borrower in substantially the
form attached hereto as Exhibit B (the "Revolving Credit Note"), with all
---------
blanks therein appropriately completed, payable to the order of Bank,
which Revolving Credit Note is hereby incorporated herein by reference
and made a part hereof.
Section 2.1.7. Payment of Principal. The aggregate unpaid principal
--------------------
amount of all Revolving Loans, together with accrued and unpaid interest
thereon, as evidenced by the Revolving Credit Note, shall, unless sooner
accelerated by Bank following the occurrence of an Event of Default, be
repaid by Borrower on the Revolving Credit Termination Date.
Section 2.1.8. Record of Revolving Loans. Each Revolving Loan shall
-------------------------
be recorded on the books maintained by Bank with respect to the Loan Account by
Bank. Bank shall also record on such books all payments made by Borrower on the
Revolving Credit Note, interest and expenses and other appropriate debits and
credits as herein provided. Bank shall from time to time render and send to
Borrower a statement of the Loan Account showing the outstanding aggregate
principal balance of the Revolving Credit Note, together with interest and other
appropriate debits and credits as of the date of the statement. The statement of
Loan Account shall be considered correct in all respects and accepted by and be
conclusively binding upon Borrower unless Borrower makes specific written
objections thereto within sixty (60) days after the date the statement of the
Loan Account is received or later presents objective evidence demonstrating a
manifest error by Bank in the preparation of the statement of the Loan Account.
Bank may also record and endorse on Schedule A attached to and forming a part of
----------
the Revolving Credit Note appropriate notations evidencing (i) the date and
amount of each Revolving Loan to be evidenced by the Revolving Credit Note and
(ii) the date and amount of each payment of principal made by Borrower with
respect thereto; provided, however, that the failure of Bank to make such
notation shall not limit or otherwise affect the obligations of Borrower under
the Revolving Credit Note or this Agreement. Bank is hereby irrevocably
authorized by Borrower to so endorse such Schedule A and to attach to and make a
----------
part of the Revolving Credit Note a continuation of such Schedule A as and when
----------
required.
Section 2.1.9. Termination. The Line of Credit and Bank's
-----------
obligation to lend thereunder shall terminate on the Revolving Credit
Termination Date, at which point all of the sums due and owing under the
Line of Credit shall be immediately due and payable, unless the Line of
Credit is renewed in accordance with Section 2.1.10. hereof.
-22-
Section 2.1.10. Renewal. Bank may, in its sole and absolute
-------
discretion, upon written agreement with Borrower, renew the Line of
Credit for additional periods of time on such terms and conditions as it
may elect. In the event of the renewal of the Line of Credit, the
Revolving Credit Termination Date shall be extended for a corresponding
period.
Section 2.1.11. Use of Proceeds. The proceeds of Revolving Loans
---------------
may be used by the Borrower for general working capital purposes and for
any other purpose not prohibited under this Agreement.
Section 2.1.12. Mandatory Prepayment. If at any time the
--------------------
outstanding aggregate principal amount of all Revolving Loans shall
exceed the Borrowing Base plus the amount of the Overadvance Limit in
effect from time to time, then any such excess amount shall, at Bank's
election, be due and payable on demand.
Section 2.1.13. Facility Fee. In consideration of the maintenance of
------------
the Line of Credit, Borrower hereby agrees to pay to Bank commencing
November 15, 1995 and continuing on the fifteenth (15th) day of each
succeeding month a facility fee equal to one-half of one percentage point
(.50%) of the amount of the Unused Portion for the period commencing on
the fifteenth (15th) day of the preceding month and ending on the
fourteenth (14th) day of the month in which the payment is due times a
fraction, the numerator of which is the actual number of days in such
period and the denominator of which is 360 (the "Facility Fee").
Section 2.1.14. Collection Fee. In consideration of Bank crediting
--------------
Borrower with payments received from Account Debtors before the
collection of such payments in good funds as more particularly set forth
in Section 10.1.1. hereof, Borrower shall pay Bank on the fifteenth
(15th) day of each month a collection fee equal to interest
accrued for two (2) days at the rate equal to the Prime Rate plus one
percentage point (1.00%) on the aggregate of all payments received by
Bank in respect to Accounts Receivable during the preceding month (the
"Collection Fee").
Section 2.2. Letters of Credit.
-----------------
Section 2.2.1. Issuance. Upon the execution of this Agreement,
--------
and as long as no Default or Event of Default has occurred and is
continuing, Bank, either directly or through a Bank Affiliate, hereby
agrees to issue, extend, amend or renew Letters of Credit or Letter of
Credit Guaranties from time to time after the Closing Date, either
directly or through a Bank Affiliate, for the account of Borrower;
provided, however, that the amount of each requested Letter of Credit or
Letter of Credit Guaranty, when added to the aggregate amount of all
Revolving Loans, all Credits Outstanding and all unpaid Reimbursement
Obligations deemed to be Revolving Loans and other payments, deposits,
guaranties or indemnifications deemed to be Revolving Loans under Section
2.1.1. hereof, does not exceed the lesser of the Borrowing Base or the
Commitment Amount in effect from
-23-
time to time and provided, further, that the aggregate amount of
-------- -------
Credits Outstanding and unpaid Reimbursement Obligations (after taking
into account the amount of the requested Letter of Credit or Letter of
Credit Guaranty) shall not exceed ONE MILLION AND NO/100 DOLLARS
($1,000,000.00) Notwithstanding the foregoing, the issuance of each
Letter of Credit or Letter of Credit Guaranty other than documentary
letters of credit shall be made on a case by case basis in the sole and
absolute discretion of Bank.
Section 2.2.2. Application. Borrower shall request the issuance of
-----------
a Letter of Credit or Letter of Credit Guaranty by its execution and delivery to
Bank of an application in such form as Bank may require from time to time (the
"Letter of Credit Application"). If the Letter of Credit Application is
acceptable to Bank, in its sole and absolute discretion, then Bank shall prepare
the Letter of Credit or the Letter of Credit Guaranty in accordance with the
instructions set forth in the Letter of Credit Application and, provided that
there is adequate availability under the Line of Credit as set forth in Section
2.2.1. above, issue the Letter of Credit or the Letter of Credit Guaranty to the
Beneficiary thereof unless otherwise instructed by Borrower. Borrower
acknowledges and agrees that Bank shall have no obligation to issue any Letter
of Credit or any Letter of Credit Guaranty which provides for an expiration date
later than thirty (30) days prior to the Revolving Credit Termination Date.
Section 2.2.3. Reimbursement. Borrower hereby acknowledges and
-------------
agrees that it shall be obligated to reimburse Bank in respect of
obligations under Letters of Credit and Letter of Credit Guaranties:
(a) except as otherwise provided in this Agreement, or the applicable Letter
of Credit Application, on each date that any Drawing is honored by Bank or a
Bank Affiliate, Bank or a Bank Affiliate or otherwise makes a payment with
respect thereto, and only to the extent that such Drawing is not deemed to
be a Revolving Loan under Section 2.1.1. hereof, (i) the amount paid by Bank
or a Bank Affiliate under or with respect to such Drawing, and (ii) the
amount of any taxes, fees, charges or other reasonable costs and expenses
whatsoever incurred by Bank or any Bank Affiliate in connection with any
payment made by Bank or a Bank Affiliate under, or with respect to, such
Letter of Credit or the Letter of Credit Guaranty;
(b) upon the reduction (but not termination) of the Commitment
Amount to an amount less than the sum of (i) all Revolving Loans and
amounts deemed to be Revolving Loans as of such date and Credits
Outstanding as of such date plus (ii) the amount of unpaid
----
Reimbursement Obligations as of such date, an amount equal to any
such difference, which amount shall be held by Bank as cash
collateral for all Reimbursement Obligations; and
(c) upon the termination of the Commitment Amount, or the
acceleration of the Reimbursement Obligations in accordance with
-24-
Section 12.1. hereof, an amount equal to the sum of (i) Credits
Outstanding as of such date plus (ii) the amount of unpaid
Reimbursement Obligations as of such date, which amount shall be held
by Bank as cash collateral for all Reimbursement Obligations.
Borrower shall pay interest on any amounts due and payable under this
Section 2.2.3. from the date such amounts are payable (whether at
maturity, by acceleration or otherwise) until paid in full at the rate of
interest applicable to Prime Rate Loans for three (3) days and,
thereafter, at the Default Rate applicable to Prime Rate Loans.
Section 2.2.4. Debit to Line of Credit. Bank shall be
-----------------------
entitled, in its sole and absolute discretion, to debit the
amount of any Drawing as well as any fees, costs and expenses
incurred by Bank or a Bank Affiliate in connection with such Drawing
against the Line of Credit and deem such amount to be Revolving
Loans under Section 2.1.1. hereof.
Section 2.2.5. Termination of Obligation. The obligation
-------------------------
of Bank to issue Letters of Credit or Letter of Credit Guaranties
under this Section 2.2. shall terminate thirty (30) days prior to
the Revolving Credit Termination Date or any renewal thereof.
Section 2.2.6. Obligations Absolute. The obligations of
--------------------
Borrower with respect to Letters of Credit or Letter of Credit Guaranties issued
under this Agreement shall be unconditional and irrevocable, shall be paid
strictly in accordance with the terms of this Agreement under all circumstances
and shall not be reduced by: (a) any lack of validity or enforceability of any
document executed between Borrower and a Beneficiary; (b) the existence of any
claim, set-off, defense or other right which Borrower may have at any time
against a Beneficiary or any transferee of a Letter of Credit or Letter of
Credit Guaranties (or any Persons for which such Beneficiary or any such
transferee may be acting) or against any other Person, whether in connection
with this Agreement, the transactions contemplated herein or any unrelated
transaction; and (c) any statement or any other document presented under a
Letter of Credit or Letter of Credit Guaranties proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect, unless Bank had actual knowledge
(without any investigation having been made) that such statement or other
document was forged, fraudulent, invalid or insufficient.
Section 2.2.7. Indemnification. Borrower hereby
---------------
indemnifies and holds Bank, and its directors, officers, employees
and agents (collectively, the "Bank Agents"), harmless from and
against any and all claims, damages, losses, liabilities, costs or
expenses (including reasonable legal fees and expenses) which Bank
or any Bank Agents may incur or which may be claimed against Bank by
any Person by reason of or in
-25-
connection with the execution and delivery or transfer of, or
payment or failure to make lawful payment under, a Letter of Credit
or Letter of Credit Guaranties; provided, however, that Borrower
-------- -------
shall not be required to indemnify Bank or any Bank Agents for any claims,
damages, losses, liabilities, costs or expenses to the extent, but only to the
extent, caused by Bank's (i) failure to act in good faith and in conformity with
such laws, regulations or commercial or banking customs, as Bank may reasonably
deem to be applicable, or (ii) honoring a Drawing on a Letter of Credit or
Letter of Credit Guaranty issued hereunder when at the time of such honoring
Bank had actual knowledge (without any investigation having been made) that such
Drawing was forged, fraudulent, invalid or insufficient. Nothing in this Section
2.2.7. is intended to limit Borrower's obligations hereunder. Without prejudice
to the survival of any other obligation of Borrower hereunder, the indemnities
and obligations of Borrower contained in this Section 2.2.7. shall survive the
payment in full of the Obligations. In case any claim is asserted or any action
or proceeding is brought against Bank or any Bank Agents, Bank or any such Bank
Agents shall promptly notify Borrower of such claim, action or proceeding and
Borrower shall resist, settle or defend with counsel reasonably acceptable to
Bank, such claim, action or proceeding. If, within ten (10) days of Borrower's
receipt of such notice, Borrower does not commence and continue to prosecute the
defense of such claim, action or proceeding, Bank, or any such Bank Agents, may
retain legal counsel to represent it in such defense and Borrower shall
indemnify Bank, or any such Bank Agents, for the reasonable fees and expenses of
such legal counsel. Subject to the foregoing, Bank shall cooperate and join with
Borrower, at the expense of Borrower, as may be required in connection with any
action taken or defended by Borrower.
Section 2.2.8. Liability of Bank. Any action, inaction or
-----------------
omission on the part of Bank under or in connection with a Letter of
Credit or Letter of Credit Guaranty issued hereunder or
related instruments or documents, if in good faith and in conformity
with such laws, regulations or commercial or banking customs as Bank
may reasonably deem to be applicable, shall be binding upon
Borrower, shall not place Bank under any liability to Borrower,
shall not affect, impair or prevent the vesting of any of Bank's
rights or powers hereunder or Borrower's obligation to make full
reimbursement to Bank. Borrower assumes all risks of the acts or
omissions of a Beneficiary or transferee of a Letter of Credit or
Letter of Credit Guaranty with respect to its use of the Letter of
Credit or Letter of Credit Guaranty. In furtherance of, and not in
limitation of Bank's rights and powers under the Uniform Customs and
Practice, but subject to all other provisions of this Section 2.2.
it is understood and agreed that Bank shall not have any liability
for and that Borrower assumes all responsibility for: (a) the
genuineness of any signature; (b) the form, correctness, validity,
sufficiency, genuineness, falsification and legal effect of any
draft, certification or
-26-
other document required by a Letter of Credit or Letter of Credit
Guaranty and the authority of the person signing the same; (c) the
failure of any instrument to bear any reference or adequate
reference to the Letter of Credit or Letter of Credit Guaranty or
the failure of any persons to note the amount of any instrument on
the reverse of the Letter of Credit or to surrender the Letter of
Credit or Letter of Credit Guaranty or otherwise to comply with the
terms and conditions of the Letter of Credit or Letter of Credit
Guaranty; (d) the good faith or acts of any person other than Bank
and its agents and employees; (e) the existence, form, sufficiency
or breach of or default under any other agreement or instrument of
any nature whatsoever; (f) any delay in giving or failure to give
any notice, demand or protest; and (g) any error, omission, delay in
or nondelivery of any notice or other communication, however sent.
The determination as to whether the required documents are presented
prior to the expiration of a Letter of Credit or Letter of Credit
Guaranty issued hereunder and whether such other documents are in
proper and sufficient form for compliance with the Letter of Credit
or Letter of Credit Guaranty shall be made by Bank in its sole and
absolute discretion.
Section 2.2.9. Fees. Borrower hereby agrees to pay to
----
Bank or a Bank Affiliate any issuance, drawing, renewal, amendment
or other fee or charge customarily assessed by Bank or a Bank
Affiliate in connection with any Letter of Credit or Letter of
Credit Guaranty. Any such fees shall be paid at the time Borrower
becomes obligated to pay any such fee.
Section 2.3. Term Loan.
---------
Section 2.3.1. Amount of Loan. Borrrower acknowledges and
--------------
agrees that Bank loaned to Borrower the principal amount of TWO MILLION
FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($2,500,000.00) under the First
Restated Credit Agreement (the "Term Loan") and that as of the Closing
Date the outstanding principal amount of the Term Loan is TWO MILLION
THREE HUNDRED THIRTY-THREE THOUSAND THREE HUNDRED THIRTY-THREE AND 44/100
($2,333,333.44).
Section 2.3.2. Term Note. The Term Loan shall be evidenced
---------
by a promissory note executed by Borrower in substantially the form
attached hereto as Exhibit C (the "Term Note"), with all blanks therein
---------
appropriately completed and payable to the order of Bank, which Term Note
is hereby incorporated by reference and made a part hereof.
Section 2.3.3. Payment of Principal. Commencing November
--------------------
15, 1995, and continuing on the same day of each succeeding month
thereafter, the principal amount of the Term Note shall be payable in
thirteen (13) consecutive monthly installments, the first twelve (12) of
such installments to be in the amount of THIRTEEN THOUSAND EIGHT HUNDRED
EIGHTY-EIGHT AND 88/100 DOLLARS ($13,888.88) and if not sooner paid, a
final installment in the then unpaid principal amount of the Term Loan,
together with all other amounts due and owing under the Term Note, shall
be due and payable on the Maturity Date.
-27-
Section 2.3.4. Maturity. Except where this Agreement or any
--------
instrument evidencing indebtedness hereunder provides that the
obligations of Borrower shall become due upon any earlier date and
notwithstanding any applicable provision permitting repayment at a later
date, the Term Loan shall become fully and finally due and payable on the
Maturity Date.
Section 2.3.5. Use of Proceeds. The proceeds of the Term
---------------
Loan shall be used to refinance existing Indebtedness of Borrower to
Bank.
Section 2.3.6. Mandatory Prepayment. Notwithstanding any
--------------------
provision of this Agreement to the contrary, Borrower shall make a
mandatory prepayment in respect of the principal amount of the Term Loan
within five (5) Business Days following the receipt of proceeds from the
Settlement in an amount equal to the lesser of (i) one-half of the Net
Settlement Amount or (ii) FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($500,00.00).
Section 2.4. Interest on the Loans.
---------------------
Section 2.4.1. Interest Rates and Payments of Interest. (a)
---------------------------------------
Each Prime Rate Loan which is a Revolving Loan shall bear interest on the
outstanding principal amount thereof at a rate per annum equal to the
Prime Rate plus one percentage point (1.0%) and each Prime Rate Loan
which relates to the Term Loan shall bear interest on the outstanding
principal amount thereof at a rate per annum equal to the Prime Rate plus
one percentage point (1.0%). Such interest shall be payable on the
fifteenth day of each month commencing November 15, 1995 and continuing
on the same day of each succeeding month until such Loan is due (whether
at maturity, by reason of acceleration, by reason of prepayment or
otherwise).
(b) Each Libor Loan shall bear interest on the outstanding principal
amount thereof, for each Interest Period applicable thereto, at a rate
per annum, in the case of Revolving Loans, equal to the Libor Rate plus
(i) two percentage points (2.0%) in the case of
Revolving Loans for the remainder of any Libor Rate Interest Period in
effect on the Closing Date and (ii) three percentage points (3.0%) in all
other cases and, in the case of the Term Loan, equal to the Libor Rate
plus (x) two and one-half percentage points (2.5%) for the remainder of
any Libor Rate Interest Period in effect on the Closing Date and (y)
three percentage points (3.0%) in all other cases. Such interest shall
be payable on the fifteenth day of each month commencing November 15,
1995, and continuing on the same day of each succeeding month until such
Libor Loan is due (whether at maturity, by reason of acceleration, by
reason of prepayment or otherwise).
(c) Each Matched Rate Loan shall bear interest on the outstanding
principal amount thereof, for each Interest Period applicable thereto, at
a rate per annum equal to the Matched Rate. Such interest shall be
payable on the fifteenth day of each month commencing November 15,
-28-
1995 and continuing on the same day of each succeeding month until
such Matched Rate Loan is due (whether at maturity, by reason of
acceleration, by reason of prepayment or otherwise).
(d) Interest shall be computed daily on the basis of a year of three
hundred sixty (360) days and paid for the actual number of days elapsed
during each Interest Period. If the due date for any payment of
principal is extended by operation of law, interest shall be payable for
such extended time. If any payment required by this Agreement becomes
due on a day that is not a Business Day such payment may be made on the
next succeeding Business Day (subject to clause (i) of the definition of
Interest Period), and such extension shall be included in computing
interest in connection with such payment.
Section 2.4.2. Prime Rate. Each adjustment in the Prime Rate
----------
shall result immediately, without notice or demand of any kind, in a new rate of
interest effective with respect to periods on and after the date of such
adjustment. The Prime Rate is a base interest rate used by Bank for loans making
reference thereto and is not necessarily the lowest rate at which Bank may lend
money. The Prime Rate is neither tied to any external rate of interest nor is it
a rate charged by Bank to any particular class or category of customer. If the
Prime Rate shall be discontinued or for any other reason not be available for
determining the rate of interest chargeable under this Agreement, then Bank
shall select a substitute method of determining the rate of interest chargeable
under this Agreement and shall notify Borrower of such selection, which method
shall, in Bank's estimation, yield a rate of return to Bank substantially
equivalent to the rate of return that Bank would have expected to receive if the
Prime Rate remained available for that purpose.
Section 2.4.3. Continuation or Conversion of Loans. As long as
-----------------------------------
no Default or Event of Default shall have occurred and be continuing, Borrower
may continue or convert all or any part (in integral multiples of TEN THOUSAND
AND NO/100 DOLLARS ($10,000.00) of any outstanding Loan into a Loan of any other
type provided for in this Agreement in the same aggregate principal amount, on
any Business Day (which, in the case of a conversion of a Libor Loan or a
Matched Rate Loan shall be the last day of the Interest Period applicable to
such Libor Loan or a Matched Rate Loan. Borrower shall give Bank prior notice of
each such conversion (which notice shall be effective upon receipt) in
accordance with Section 2.1.1. hereof. Such notice shall specify: (i) the
effective date and amount of each Loan or portion thereof to be continued or
converted; (ii) the interest rate option to be applicable thereto; and (iii) the
duration of the applicable Interest Period, if any (subject to the provisions of
the definition of Interest Period and Section 2.4.4. hereof). each such
notification (a "Notice of Continuation or Conversion") shall be immediately
followed by a written confirmation thereof by Borrower in substantially the form
of Exhibit D attached hereto; provided, however, that if such written
--------- -------- -------
confirmation differs in any material respect from the action taken by Bank, the
records of Bank shall control absent manifest error.
-29-
Section 2.4.4. Duration of Interest Periods.
----------------------------
(a) Subject to the provisions of the definition of Interest
Period, the duration of each Interest Period applicable to a Loan
shall be as specified in the applicable Notice.
(b) If the Bank does not receive a Notice for a Libor Loan or a Matched
Rate Loan pursuant to subsection (a) above within the applicable time limits
specified therein, or if, when such notice must be given, a Default or Event of
Default shall have occurred and be continuing, Borrower shall be deemed to have
elected to convert such Loan in whole into a Prime Rate Loan on the last day of
the then current Interest Period with respect thereto.
(c) Notwithstanding the foregoing, Borrower may not select an
Interest Period that would end, but for the provisions of the definition
of Interest Period, after the Revolving Credit Termination Date, in the
case of a Revolving Loan, or the Maturity Date, in the case of the Term
Loan.
Section 2.4.5. Changed Circumstances.
---------------------
(a) In the event that:
(i) on any date on which the Libor Base or the Matched
Rate would otherwise be set the Bank shall have
determined in good faith (which determination shall be
final and conclusive) that adequate and fair means do
not exist for ascertaining the Libor Base or the
Matched Rate as the case may be, or
(ii) at any time the Bank shall have determined in good
faith (which determination shall be final and
conclusive) that:
(A) the making or continuation of or conversion of
any Loan to a Libor Loan or a Matched Rate Loan
has been made impracticable or unlawful by (1)
the occurrence of a contingency that
materially and adversely affect the London
interbank Eurodollar market or the market for
certificates of deposit maintained by dealers in
New York City of recognized standing or (2)
compliance by the Bank in good faith with any
applicable law or governmental regulation,
guideline or order or interpretation or change
thereof by any Governmental Authority charged
with the interpretation or administration thereof
or with any request or directive of any such
Governmental Authority (whether or not having the
force of law); or
-30-
(B) the Libor Rate shall no longer represent the
effective cost to Bank for U.S. dollar deposits
in the London interbank Eurodollar market for
deposits in which it regularly participates, or
the Matched Fund Rate shall no longer represent
the effective cost to Bank for certificates of
deposit;
then, and in any such event, the Bank shall forthwith so notify Borrower
thereof. Until the Bank notifies Borrower that the circumstances giving
rise to such notice no longer apply, the obligation of the Bank to allow
selection by Borrower of the type of Loan affected by the contingencies
described in this Section 2.4.5. (herein called "Affected Loans") shall
--------------
be suspended. If at the time the Bank so notifies Borrower, Borrower has
previously given the Bank a Notice with respect to one or more Affected
Loans but such Revolving Loans have not yet gone into effect, such
notification shall be deemed to be void and Borrower may borrow Loans of
a non-affected type by giving a substitute Notice pursuant to Section
2.4.3. hereof.
Upon such date as shall be specified in such notice (which shall not be
earlier than five (5) days from the date such notice is given) Borrower shall,
with respect to the outstanding Affected Loans, prepay the same, together with
interest thereon and any amounts required to be paid pursuant to Section 2.4.8.
hereof, and may borrow a Revolving Loan of another type in accordance with
Section 2.4.3. hereof by giving a Notice pursuant to Section 2.4.3. hereof.
Section 2.4.6. Prepayments of the Loans. (a) Revolving Loans
------------------------
that are Libor Loans or Matched Rate Loans may be prepaid at any time, without
premium or penalty, on the last day of any Interest Period applicable thereto,
upon one (1) Business Day's notice in the case of Matched Rate Loans and three
(3) Business Days' notice, in the case of Libor Loans. Any prepayment of Matched
Rate Loans or Libor Loans not made on the last of the Interest Period applicable
thereto shall be subject to a prepayment penalty as set forth in Section 2.4.8.
hereof. Revolving Loans that are Prime Rate Loans may be prepaid, in whole or in
part, at any time, without premium or penalty, upon one (1) Business Day's
notice. Any interest accrued on the amounts so prepaid to the date of such
payment must be paid at the time of any such payment. No prepayment of the
Revolving Loans during the Revolving Credit Period shall affect the Commitment
Amount or impair Borrower's right to borrow as set forth in Section 2.1.1.
hereof.
(b) The Term Loan may be prepaid at any time, in whole or in
part, on the last day of any Interest Period applicable thereto in the
case of any portion of the Term Loan that is a Libor Loan or Matched Rate
Loan, and at any time in the case of any portion of the Term Loan that is
a Prime Rate Loan, without premium or penalty, upon one Business Day's
notice in the case of a Prime Rate Loan or Matched Rate Loan and upon
three Business Days' notice in the case of a Libor Loan, provided that
interest accrued on the amounts so paid to the date of
-31-
such payment must be paid at the time of any such payment. Prepayment
of the Term Loan shall be applied to installments of principal due
thereunder in the inverse order of their maturities.
Section 2.4.7. Default Rate. Upon the occurrence and during the
------------
continuance of an Event of Default, Bank shall have the right, in its
sole and absolute discretion, to increase the interest rate applicable to
any Loan to a rate which is three percentage points (3.0%) above the
interest rate applicable to such Loan during the then applicable Interest
Period until the expiration of such Interest Period, and thereafter,
three percentage points (3.0%) above the rate then applicable to Prime
Rate Loans.
Section 2.4.8. Payments Not at End of Interest Period. If Borrower
--------------------------------------
for any reason makes any payment of principal with respect to any Libor
Loan or Matched Rate Loan on any day other than the last day of an
Interest Period applicable to such Libor Loan or Matched Rate Loan
(including specifically in the event of the making of the mandatory
prepayment required by Section 2.3.6. hereof) or fails to borrow or
continue or convert to a Libor Loan or a Matched Rate Loan after giving a
Notice pursuant to Section 2.4.3. hereof, or if any Libor Loan or Matched
Rate Loan is accelerated pursuant to Section 12.1. hereof, Borrower shall
pay to Bank (i) all Breakage Costs in the case of a Libor Loan and (ii)
in the case of a Matched Rate Loan, an amount computed pursuant to the
following formula:
The latest published rate preceding the date of prepayment for
United States Treasury Notes or Bills (Bills on a discounted
basis shall be converted to a bond equivalent) as published
weekly in the Federal Reserve Statistical Release with a
maturity date closest to the last date of the then applicable
Interest Period as to which the prepayment is made shall be
subtracted from the interest rate in effect at the time of
prepayment with respect to the indebtedness being paid. If the
result is zero or a negative number, there shall be no
prepayment premium. If the result is positive number, then the
resulting percentage shall be multiplied by the amount of the
principal balance being prepaid. The resulting amount will be
divided by 360 and multiplied by the number of days remaining in
the then applicable Interest Period. Said amount shall be reduced to
present value calculated by using the above-referenced United States
Treasury Note or ▇▇▇▇ rate as of the date of prepayment as the discount
rate. The resulting amount shall be the prepayment premium due to the
Bank upon prepayment.
Borrower shall pay such amount upon presentation by Bank of a
statement setting forth the amount and the Bank's calculation thereof
pursuant hereto, which statement shall be deemed true and correct absent
manifest error.
Section 2.5. General Terms Applicable to Any Extension of Credit
---------------------------------------------------
Section 2.5.1. Increased Costs and Capital Adequacy.
------------------------------------
-32-
(a) If Bank determines that any change in any law or regulation or
directive or bulletin or in the interpretation thereof after the Closing Date by
any court or administrative or governmental authority charged with the
administration thereof shall either (i) impose, modify or deem applicable any
reserve, special deposit or similar requirement against any credit extended by
Bank under this Agreement, or (ii) impose on Bank or its parent bank holding
company any other condition regarding this Agreement and the result of any event
referred to in the preceding clause (i) or (ii) above shall be to increase the
cost to Bank or such holding company of issuing, funding or maintaining any
Extension of Credit (which increase in cost shall be determined by Bank's
reasonable allocation of the aggregate of such cost increases resulting from
such event), then, upon written demand by Bank, Borrower shall pay to Bank from
time to time as specified by Bank, additional amounts which shall be sufficient
to compensate Bank for such increased cost from the date of such change. A
certificate as to such increased cost incurred by Bank as a result of any event
mentioned in clause (i) or (ii) above prepared in reasonable detail (which shall
include the method employed by Bank in determining the allocation of such costs
to Borrower) and otherwise in accordance with this subsection (a), submitted by
Bank to Borrower, shall be conclusive evidence, absent manifest error, as to the
amount thereof.
(b) If Bank shall determine that the adoption after the Closing
Date of any applicable law, rule or regulation pursuant to or arising out of the
July 1988 report of the Basle Committee on Banking Regulations and Supervisory
Practices entitled "International Convergence of Capital Measurement and Capital
Standards", or the adoption after the date hereof of any other law, rule, or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof, or compliance by Bank or its
parent bank holding company with any requirement or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
Bank or comparable agency, except any such adoption or change or any such
compliance with a request or directive which applies or has been applied solely
to Bank or its parent Bank holding company by reason of events or conditions
relating solely to Bank, has the effect of reducing the rate of return on Bank's
or its parent Bank holding company's capital as a consequence of its commitment
hereunder or to a level below that which Bank or such holding company could have
achieved but for such adoption, change or compliance by an amount deemed by Bank
to be material (for which reduction of the rate of return shall be determined by
Bank's or such holding company's reasonable allocation of such reduction of the
rate of return resulting from such event) then, upon written demand by Bank,
Borrower shall pay to Bank, from time to time as specified by Bank, such
additional amount or amounts which shall be sufficient to compensate Bank for
such reduction. A certificate as to such increased cost incurred by Bank as a
result of any event mentioned in this subsection (b), prepared in reasonable
detail (which shall include the method employed by Bank in determining the
allocation of
-33-
such costs to Borrower) and otherwise in accordance with this
subsection (b) submitted by Bank to Borrower, shall be conclusive
evidence, absent manifest error, as to the amount thereof.
(c) Amounts payable by Borrower pursuant to this Section 2.5.1.
shall be payable within ten (10) Business Days of receipt by Borrower of
a certificate described in subsection (a) or (b) of this Section 2.5.1.
Section 2.5.2. Late Payment. Any payment of principal,
------------
interest, fees or expenses (other than payments of principal upon
scheduled maturity or upon acceleration) which is not paid within ten
(10) days of the date specified for payment shall be subject to a late
penalty of five percent (5%) of the amount due. The imposition or
collection of a late fee shall not affect Bank's right to exercise any of
its rights and remedies upon the occurrence of an Event of Default.
Section 2.5.3. Method of Payment. All payments and prepayments
-----------------
of principal and all payments of interest shall be made by Borrower to
Bank at its head office in immediately available funds, on or before 3:00
p.m. on the due date thereof, free and clear of, and without any
deduction or withholding for, any taxes or other payments. Bank may, and
Borrower hereby authorizes Bank to, debit the amount of any payment not
made by such time to the Loan Account.
SECTION 3. SECURITY FOR THE OBLIGATIONS
Section 3.1. Collateral Disclosure List. Borrower shall deliver to
--------------------------
Bank on the Closing Date a list identifying, inter alia, all of its
----- ----
properties and assets and the locations thereof on a form provided by
Bank (the "Collateral Disclosure List").
Section 3.2. Security. The Obligations shall be secured by:
--------
Section 3.2.1. All properties and assets of Borrower, including
goods, accounts receivable, inventory, contract rights, accounts,
documents, instruments and chattel paper, business and financial records
and general intangible assets of Borrower as more particularly defined in
the Security Agreement.
Section 3.2.2. A limited guaranty agreement executed by
Aristotle with respect to that portion of the Obligations which relate to
the Term Loan in substantially the form attached hereto as Exhibit
-------
E-1 (the "Aristotle Guaranty").
---
Section 3.2.3. A limited guaranty agreement executed by Sub
with respect to the Obligations but which limits Bank's direct recourse
against Sub and its assets (except as otherwise provided in the Stock
Pledge) to that portion of the Obligations which relate to the Term Loan
in substantially the form attached hereto as Exhibit E-2 (the "Sub
-----------
Guaranty"), which Sub Guaranty shall be secured by a pledge of all of
Sub's right, title and interest in and to all shares of capital stock of
Borrower pursuant to the Stock Pledge.
-34-
SECTION 4. REPRESENTATIONS AND WARRANTIES
In order to induce Bank to enter into this Agreement and to make
any Extension of Credit, Borrower makes the following representations
and warranties to Bank, which shall be deemed made as of the date
hereof and, except as otherwise provided in this Section 4., the date of
each Extension of Credit. Any knowledge acquired by Bank shall not
diminish its rights to rely upon such representations and warranties.
Section 4.1. Corporate Existence. Borrower is a corporation duly
-------------------
incorporated, validly existing and in good standing under the laws of its
state of incorporation and, to the best of its knowledge, is duly
qualified in all other jurisdictions in which the properties and assets
owned, leased or operated by it, or the nature of the business conducted
by it, make such qualification necessary and where failure to so qualify
would have a Material Adverse Effect.
Section 4.2. Corporate Authority. The execution, delivery and
-------------------
performance of this Agreement, the Notes and the Other Documents, the
consummation of the transactions herein and therein contemplated, the
fulfillment of and compliance with the terms and provisions hereof and
thereof have been duly authorized by all necessary corporate action of
Borrower and are within its corporate power and will not result in a
violation of its Certificate of Incorporation or Bylaws, if and as
amended.
Section 4.3. Binding Obligations. This Agreement, the Notes and
-------------------
the Other Documents constitute the legal, valid and binding obligations
of Borrower, enforceable against it in accordance with their respective
terms.
Section 4.4. Noncontravention. The execution, delivery and
----------------
performance by Borrower of this Agreement, the Notes and the Other
Documents will not violate any existing law, ordinance, rule, regulation
or order of any Governmental Authority or result in a breach of any of
the terms of, or constitute a default under, any contractual obligation
to which Borrower is a party or by which it or any of its properties or
assets are bound or result in or require the imposition of any
Encumbrances on any of Borrower's properties or assets.
Section 4.5. Permits. Borrower possesses all material permits,
-------
authorizations, licenses, approvals, waivers and consents, without
unusual restrictions or limitations, the failure of which to possess
would have a Material Adverse Effect, all of which are in full force and
effect.
Section 4.6. No Consents. The execution, delivery and performance
-----------
of this Agreement, the Notes and the Other Documents does not require
any approval, consent or waiver under any Contractual Obligation. No
approval, authorization, consent, waiver or order of,
-35-
or registration, application or filing with, any Governmental
Authority is required in connection with the transactions contemplated by
this Agreement, the Notes and the Other Documents.
Section 4.7. Financial Statements. Borrower has provided to Bank
--------------------
its Financial Statements dated as of June 30, 1995 and related footnotes,
audited and certified by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. Borrower has also
provided to Bank its internally prepared Financial Statements dated as
of September 30, 1995, certified by the chief financial officer of
Borrower but subject, however, to normal, recurring year-end adjustments
that shall not in the aggregate be material in amount. All Financial
Statements of Borrower heretofore provided to Bank present fairly in all
material respects the financial condition and results of business
operations of Borrower for the periods indicated in accordance with GAAP.
Borrower has no direct or contingent liabilities, liabilities for taxes,
unusual commitments or unrealized or unanticipated losses not disclosed
in such Financial Statements. Since the date of the latest dated balance
sheet included in the Financial Statements, there has been no material
adverse change in the business operations or financial condition of
Borrower from that set forth in the balance sheet contained in such
Financial Statements and no Dividends have been declared or made to
stockholders, nor have any shares of its capital stock (or any warrant to
purchase, options to acquire or notes convertible, in whole or in part,
into any shares of its capital stock) been purchased or acquired by any
Person in any manner nor has Borrower made any Investment except as set
forth on Schedule 4.7. attached hereto.
------------
Section 4.8. Financial Forecasts. Borrower has provided to Bank
-------------------
forecasted Financial Statements together with appropriate supporting
details and a statement of the underlying assumptions, ranges and
limitations, prepared on a monthly basis covering the Fiscal Year
commencing on July 1, 1995 (the "Forecasts"). The Forecasts have been
prepared in good faith and represent the good faith opinion of Borrower
and its senior management as to the most probable course of Borrower's
business operations for the periods covered thereby and have a reasonable
basis. Except as noted therein, the practices followed in preparing the
Forecasts do not materially differ from practices usually followed by
companies engaged in businesses similar to that of Borrower in the
preparation of accounting forecasts in good faith and are in conformity
with the guidelines established by the American Institute of Certified
Public Accountants in the presentation of a financial forecast.
Section 4.9. Financial Information. All written data, reports and
---------------------
information which Borrower has supplied to Bank or caused to be so
supplied by a third party on its behalf in connection with this
Agreement are complete and accurate and contain no material omission or
misstatement except such as have been corrected in a writing delivered
to Bank.
Section 4.10. Business Relationships. There exists no actual or
----------------------
threatened termination, cancellation or limitation of, or any
modification or change in, the business relationship of Borrower with
-36-
any customer or group of customers whose purchases individually or in
the aggregate are material to Borrower's business operations, or with any
material supplier (other than in the ordinary course of business where
one supplier is replaced by another offering terms which are no less
favorable to Borrower).
Section 4.11. Brokers. No broker or finder has brought about the
-------
obtaining, making or closing of, and no broker's or finder's fees or
commissions will be payable by Borrower to any Person in connection with,
the transactions contemplated by this Agreement.
Section 4.12. Use of Proceeds. Borrower is not an "investment
---------------
company," or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are defined in
the Investment Company Act of 1940, as amended (15 U.S.C. (S)(S)80(a)(1) et
--
seq.). No Extension of Credit, the application of the proceeds and
---
repayment thereof by Borrower or the performance of the transactions
contemplated by this Agreement will violate any provision of said Act, or
any rule, regulation or order issued by the Securities and Exchange
Commission thereunder. Borrower does not own any margin security as that
term is defined in Regulation U of the Board of Governors of the Federal
Reserve System and the proceeds of each Extension of Credit will be used
only for the purposes set forth in this Agreement. None of the proceeds
of any Extension of Credit will be used, or have been used, directly or
indirectly, for the purpose of purchasing or carrying any margin security
or for the purpose of reducing or retiring any Indebtedness which was
originally incurred to purchase or carry any margin security or for any
other purpose which might constitute such Extension of Credit a "purpose
credit" within the meaning of said Regulation U or Regulations G or X of
the Federal Reserve Board. Borrower will not take, or permit any Person
acting on its behalf to take, any action which might cause this Agreement
or any document or instrument delivered pursuant hereto to violate any
regulation of the Federal Reserve Board.
Section 4.13. Statutory Compliance. Borrower is in compliance with
--------------------
all material laws, ordinances, rules, regulations and orders of any
Governmental Authority applicable to it, its properties and assets and
the business conducted by it, including, without limitation, ERISA, the
United States Occupational Safety and Health Act of 1970 and all
Environmental Laws except where non-compliance would not have a Material
Adverse Effect.
Section 4.14. Commitments. Borrower has no fixed, contingent or
-----------
other obligations to issue any shares, or rights exercisable into shares,
of its capital stock.
Section 4.15. Events of Default. No Default or Event of Default
-----------------
has occurred and is continuing.
Section 4.16. Other Defaults. Borrower is not in default in the
--------------
performance, observance or fulfillment of any Contractual Obligation.
-37-
Section 4.17. Taxes. Borrower has filed all tax returns and
-----
reports required to be filed by it with any Governmental Authority and
has paid in full, or made adequate provisions or established adequate
reserves for, the payment of all taxes, interest, penalties, assessments
or deficiencies shown to be due or claimed to be due on or in respect to
such tax returns and reports.
Section 4.18. Ownership of Borrower. Sub is the holder of all of
---------------------
the issued and outstanding shares of capital stock of Borrower and no
other Person has any rights and/or claim to any issued or unissued shares
of such capital stock except for a pledge of capital stock to the Covered
Employees.
Section 4.19. Solvency. Borrower is currently Solvent; and
--------
Borrower is not contemplating either the filing of a petition by it under
Bankruptcy Code or any state bankruptcy or insolvency law or the
liquidating of all or a major portion of its properties and assets, and
Borrower has no knowledge of any Person contemplating the filing of any
such petition against it.
Section 4.20. Business Name. Borrower conducts its business
-------------
solely through the names set forth on Schedule 12 of the Collateral
-----------
Disclosure List, without the use of any trade name, or the intervention
of or through any other Person. Borrower has not, except as set forth in
the Collateral Disclosure List, during the preceding five (5) years,
conducted its business through any other name or trade name or been the
surviving corporation in a merger or consolidation or acquired all or
substantially all of the assets of any other Person.
Section 4.21. Affiliate Contracts. All contracts and
-------------------
transactions between Borrower and any Affiliate or Subsidiary of Borrower
have been executed or will be executed on such terms as would be
contained in an agreement executed at arms' length with an unrelated
third party.
Section 4.22. Capitalization. The outstanding shares of capital
--------------
stock of Borrower have been duly issued and are fully paid and non
assessable.
Section 4.23. Litigation. Except as set forth on Schedule 4.23.
---------- -------------
attached hereto, there are no actions, suits or proceedings by or before
any Governmental Authority or any arbitration or alternate dispute
resolution proceeding, pending or, to the knowledge of Borrower or any of
Borrower's officers, threatened against Borrower or its properties and
assets, which if adversely determined, would have a Material Adverse
Effect.
Section 4.24. Title to Properties. Each of Borrower and its
-------------------
Subsidiaries has good and marketable title to all of the properties,
assets and rights of every name and nature now purported to be owned by
it, including, without limitation, such properties, assets and rights as
are reflected in the Financial Statements referred to in Section 4.7.
(except such properties, assets or rights as have been
-38-
disposed of in the ordinary course of business since the date
thereof), free from all Encumbrances except Permitted Encumbrances or
those Encumbrances disclosed in Schedule 4.24. attached hereto, and, free
-------------
from all defects of title that might have a Material Adverse Effect.
Borrower's properties, assets and rights are sufficient to permit
Borrower to conduct the business in which it is presently engaged.
Borrower possesses all trademarks, service marks, trade names, trade
service styles, copyrights and patents that may be necessary to own its
properties and assets, and to conduct its business as it is presently
conducted or as Borrower intends to conduct it hereafter, without any
infringement or conflict with the rights of any other Person or any
violation of law.
Section 4.25. Labor Relations. Borrower is not a party to any
---------------
collective bargaining or other agreement with any union and there are no
material grievances, disputes or controversies with any union or other
organization of Borrower's employees, or threats of strikes, work
stoppages or demands by any union or such other organization.
Section 4.26. Guarantees. Except as set forth on Schedule 4.26.
---------- --------------
attached hereto, Borrower is not a party to any Guarantee or other
similar type of agreement, and it has not offered its endorsement to any
Person which would in any way create a contingent liability (except by
endorsement of negotiable instruments payable at sight for deposit or
collection or similar banking transactions in Borrower's ordinary course
of business).
Section 4.27. Subsidiaries. As of the date of this Agreement, all
------------
of the Subsidiaries and Affiliates of Borrower are set forth on Schedule
--------
14 of the Collateral Disclosure List. Borrower or a Subsidiary of
--
Borrower is the owner (subject to specified minority interests) free and
clear of all Encumbrances, of all of the issued and outstanding capital
stock of each Subsidiary. All shares of such capital stock have been
validly issued and are fully paid and nonassessable, and no rights to
subscribe to any additional shares have been granted, and no options,
warrants or similar rights are outstanding. Borrower is not engaged in
any joint venture, partnership or other business arrangement with any other
Person except as described on said Schedule 14.
-----------
Section 4.28. ERISA. Borrower and each member of the Controlled
-----
Group have fulfilled their obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and are in
compliance in all material respects with the applicable provisions of
ERISA and the Code, and have not incurred any liability to the PBGC or a
Plan under Title IV of ERISA; and no "prohibited transaction" or
"reportable event" (as such terms are defined in ERISA) has occurred with
respect to any Plan.
Section 4.29. Environmental Protection. Except as set forth on
------------------------
Schedule 4.29. attached hereto:
--------------
(a) The business operations of Borrower comply in all
material respects with all Environmental Laws.
-39-
(b) Borrower has not received (i) any notice or claim to the
effect that it is or may be liable to any Person as a result of the
Release or threatened Release of any Hazardous Materials or (ii) any
letter or request for information under CERCLA or any other Environmental
Laws, and, to the best of Borrower's knowledge, based upon reasonable
investigation, the operations of Borrower are not the subject of any
investigation by any Governmental Authority evaluating whether any
remedial action is needed to respond to a Release or threatened Release
of any Hazardous Material or claim, or threatened lawsuit or claim
arising under or related to any Environmental Law.
(c) Borrower and its properties, assets and operations are not
subject to any outstanding written order or agreement with any
Governmental Authority or private party respecting any Environmental
Laws.
(d) Borrower has not filed any notice under any Environmental
Law indicating past or present treatment or disposal of Hazardous
Materials, and none of the operations of Borrower involves the
generation, transportation, treatment, storage or disposal of Hazardous
Materials.
(e) To the best of Borrower's knowledge, based upon reasonable
investigation, no Hazardous Material exists on, under or about any of the
properties or assets of Borrower, real or personal, in a manner that
could give rise to any claim or suit against Borrower, and Borrower has
not filed any notice or report of a Release of any Hazardous Materials
that could give rise to any such claim or suit against Borrower.
Section 4.30. Accounts Receivable. All of Borrower's Accounts
-------------------
Receivable (i) are and shall be based on an actual and bona fide sale and
delivery of goods or the rendition of services to Account Debtors; (ii)
are and shall be made by Borrower in the ordinary course of its business;
(iii) result from goods and Inventory being sold which are the exclusive
property of Borrower; (iv) are the exclusive property of Borrower; (v)
are not subject to any Encumbrance other than Permitted Encumbrances; and
(vi) are represented by invoices or statements issued in the name of
Borrower.
Section 4.31. Investments. Except as set forth on Schedule 4.31.
-----------
attached hereto, Borrower has no Investment in any Person other than
existing Investments in Subsidiaries and Qualified Investments.
SECTION 5. CONDITIONS TO OBLIGATION OF BANK
Bank shall have no obligation under this Agreement to make any
Extension of Credit unless and until it is satisfied, in its sole and
absolute discretion, that all of the following conditions shall have
been satisfied prior to or on the Closing Date:
-40-
Section 5.1. Representations and Warranties True. The
-----------------------------------
representations and warranties contained in Section 4 are true and
correct, and Borrower, by its President, shall have so certified to Bank.
Section 5.2. Delivery of Documents. Borrower shall have duly
---------------------
executed and delivered to Bank, in form and substance satisfactory to
Bank and its legal counsel, this Agreement, the Notes, the Other
Documents and all further documents as Bank may request to evidence the
Obligations or to create, perfect or continue any security interest or
mortgage lien contemplated by this Agreement and the Other Documents. In
addition, Bank shall have received or agreed in writing to waive or delay
the receipt of:
Section 5.2.1. Copies of all corporate action taken by
Borrower to authorize the execution and delivery of this Agreement, the
Notes and the Other Documents, together with a certificate of the
corporate secretary of Borrower certifying that the same are true,
correct and complete as of the Closing Date.
Section 5.2.2. Copies of Borrower's Certificate of
Incorporation and Bylaws, if and as amended, together with a certificate
of the Secretary of Borrower certifying that the same are true, correct
and complete as of the Closing Date.
Section 5.2.3. INTENTIONALLY LEFT BLANK.
Section 5.2.4. A certificate issued by the office of the
Secretary of State of the state of Borrower's incorporation to the effect
that Borrower is legally existing and in good standing under the laws of
such states.
Section 5.2.5. A certificate issued by the office of the
Secretary of State of each state in which Borrower is qualified as a
foreign corporation to the effect that Borrower is duly qualified and in
good standing as a foreign corporation under the laws of such states.
Section 5.2.6. A certificate of the Secretary of Borrower
certifying to the incumbency and signatures of all officers of Borrower
who are authorized to execute this Agreement, the Notes and the Other
Documents.
Section 5.2.7. Objective evidence satisfactory to Bank and
its legal counsel of the payment of all taxes and assessments due or
claimed to be due to any Governmental Authority with respect to the
Collateral.
Section 5.2.8. A UCC-11 Request for Information certified by
the Office of the Secretary of State of the State of Connecticut (or an
acceptable equivalent thereto) for each name set forth on the
Collateral Disclosure List listing the filings against Borrower as
debtor under such names at such offices.
-41-
Section 5.2.9. Such UCC-1 Financing Statements as Bank deems
necessary to perfect any security interests contemplated by this
Agreement or the Other Documents.
Section 5.2.10. Insurance policies and certificates
evidencing adequate insurance coverage on Borrower's properties and
assets which insurance policies shall name Bank as an additional
insured/loss payee.
Section 5.2.11. An environmental certificate and indemnity
agreement executed by Borrower, satisfactory in form and substance to
Bank and its legal counsel (the "Environmental Certificate").
Section 5.2.12. Such cash management, lockbox and similar
agreements required by Bank to administer the Line of Credit.
Section 5.2.13. Aristotle and Sub, as applicable, shall have
executed and delivered the Aristotle Guaranty, the Sub Guaranty, the
Negative Pledge Agreement, a confirmation with respect to the Stock
Pledge and confirmations and/or amendments of the Subordination
Agreements.
Section 5.2.14. Such further documents, instruments and
agreements as Bank shall reasonable request, all satisfactory in form and
substance satisfactory to Bank and its legal counsel.
Section 5.3. Validity of Liens. All Encumbrances in the Collateral
-----------------
shall have been created in favor of Bank, which Encumbrances shall
constitute legal, valid and enforceable and, unless otherwise consented
to by Bank, first security interests in and liens upon the Collateral.
All filings, recordings, deliveries of instruments and other actions
necessary or desirable in the sole and absolute discretion of Bank and
its legal counsel to create said Encumbrances shall have been made, taken
and/or effected.
Section 5.4. Opinion of Counsel. Bank shall have received from
------------------
counsel for Borrower a written opinion, satisfactory in form and
substance to Bank and its legal counsel.
Section 5.5. Payment of Fees. Borrower shall have paid any
---------------
applicable fees and expenses due to Bank at closing, including the fees
and expenses of Bank's legal counsel.
Section 5.6. Legal Matters. All legal matters incident to the
-------------
transactions hereby contemplated shall be satisfactory to Bank and its
legal counsel.
SECTION 6. CONDITIONS TO EXTENSION OF CREDIT
Bank shall have no obligation to make any Extension of Credit
unless and until, it is satisfied, in its sole and absolute
discretion, that all of the following conditions shall have been
fulfilled prior to or contemporaneously with the making of such
Extension of Credit.
-42-
Section 6.1. Notice of Borrowing. Bank shall have received, in a
-------------------
timely manner, a Notice of Borrowing in a form satisfactory to Bank.
Section 6.2. Borrowing Base Certificate. Bank shall have received a
--------------------------
Borrowing Base Certificate satisfactory in form and substance to Bank
showing that the Borrowing Base is sufficient to permit Bank to make the
requested Extension of Credit.
Section 6.3. No Material Adverse Change. There has been no change
--------------------------
in the financial condition or business operations of Borrower or its
Subsidiaries since the date of the last Financial Statements or other
financial reports delivered to Bank which has a Material Adverse Effect.
Section 6.4. Truth of Representations and Warranties. All of the
---------------------------------------
representations and warranties set forth in Section 4 of this Agreement
are either true and correct or, in the case of any such representations
and warranties which by their nature relate to the Closing Date or any
other specific date, restated as of the date on which the requested
Extension of Credit is made.
Section 6.5. No Default. No Default or Event of Default shall have
----------
occurred and be continuing or shall occur as a result of the requested
Extension of Credit.
Section 6.6. Payment of Fees. Borrower shall have paid any
---------------
applicable fees and expenses due to Bank, including any fees and expenses
of Bank's legal counsel.
Section 6.7. Corporate Action. The corporate action of Borrower
----------------
referred to in Section 5.2.1. shall remain in full force and effect and
the incumbency of officers shall be as stated in the certificates of
incumbency delivered pursuant to Section 5.2.6. or as subsequently
reflected in a new certificate of incumbency delivered to Bank in
connection with the requested Extension of Credit.
Section 6.8 Legal Matters. All legal matters incident to the
-------------
transactions contemplated by the requested Extension of Credit shall be
satisfactory to Bank and its legal counsel and no change shall have
occurred in any law or regulation or interpretation thereof, which, in
the opinion of Bank and its legal counsel, would make it illegal or
against the policy of any governmental body, agency or instrumentality
for Bank to make the requested Extension of Credit.
SECTION 7. AFFIRMATIVE COVENANTS OF BORROWER
Borrower covenants and agrees that from the date hereof until the
payment and performance in full of the Obligations, unless Bank otherwise
consents in writing:
7.1. Financial Statements and Reporting Requirements. Borrower
-----------------------------------------------
shall furnish to Bank:
-43-
Section 7.1.1. As soon as available, but in no event later
than ninety (90) days after the end of each Fiscal Year, Financial
Statements for such year, audited and certified by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co.
(or other independent certified public accountants acceptable to Bank) in
the case of such consolidated statements, and certified by the chief
financial officer of Borrower in the case of such consolidating
statements; and, concurrently with the delivery of such Financial
Statements, a copy of said certified public accountants' management
report, if any.
Section 7.1.2. As soon as available, but in no event later than
twenty (20) days after the end of each month, internally prepared
Financial Statements, prepared in accordance with GAAP on year-to-date
and month-to-date basis and internally prepared copies of the following
financial reports: (i) aging of accounts receivable and accounts payable
and (ii) summary of Inventory, all prepared in accordance with GAAP.
Section 7.1.3. As soon as available, but in no event later than
three (3) days after the end of each calendar week, a certificate in
substantially the form of Exhibit F attached hereto setting forth (i)
---------
Borrower's then existing Eligible Inventory or, if requested by Bank,
particular items, types or categories thereof; (ii) Borrower's then
existing Eligible Accounts Receivable; (iii) such other information in
respect of Inventory, Accounts Receivable, Equipment and other Collateral
as Bank may reasonably request; and (iv) a calculation of Borrowing Base
and borrowing availability as of the date of said certificate (the
"Borrowing Base Certificate").
Section 7.1.4. As soon as available, but in no event later than
the end of each Fiscal Year, forecasted Financial Statements prepared in
accordance with the standards set forth in Section 4.8. hereof, showing a
most likely scenario and including collateral availability and usage
under the Line of Credit and in such further reasonable detail as Bank
may request for each of the forthcoming twelve (12) months, month by
month, together with such appropriate supporting details and statements
or assumptions.
Section 7.1.5. As soon as available, but in no event later than
forty-five (45) days after the end of each Fiscal Year , a report in
substantially the form of Exhibit G attached hereto signed on behalf of
---------
Borrower by its chief financial officer.
Section 7.2. Fire and Hazard Insurance. Borrower shall keep its
-------------------------
properties and assets insured against fire and other hazards (so called
"All Risk Coverage") in amounts and with companies satisfactory to Bank
to the same extent and covering such risks as is customary in the state
or similar business, but in no event in an aggregate amount less than the
Obligations, which policies shall name Bank as first loss payee as its
interest may appear. Borrower shall also maintain public liability
coverage against claims for personal injuries or death, business
interruption, worker's compensation, employment or
-44-
similar insurance with coverage and in amounts satisfactory to Bank
and as may be required by applicable law. Such all risk policy shall
provide for a minimum of thirty (30) days' written cancellation notice to
Bank. Borrower agrees to deliver copies of all of the aforesaid
insurance policies to Bank. In the event of any loss or damage to the
Collateral, Borrower shall give immediate written notice to Bank and to
its insurers of such loss or damage and shall promptly file proof of loss
with its insurers.
Section 7.3. Maintenance of Existence. Borrower shall preserve
------------------------
and maintain its corporate existence, rights, franchises and privileges,
including its corporate name, in the jurisdiction of its incorporation,
and qualify and remain qualified as a foreign corporation in each
jurisdiction in which such qualification is necessary or desirable.
Section 7.4. Preservation of Collateral. Borrower shall preserve
--------------------------
and maintain the Collateral in good repair, working order and operating
condition and Borrower shall immediately notify Bank of any event causing
material loss or unusual depreciation in the value of the Collateral.
Section 7.5. Taxes and Other Assessments. Borrower shall pay and
---------------------------
discharge, and maintain adequate reserves for the payment and discharge
of, all taxes, assessments, government charges or levies, or claims for
labor, supplies, rent or other obligations made against it or its
properties and assets which, if unpaid, might become an Encumbrance
against Borrower or its properties and assets, except liabilities which
are being contested in good faith in appropriate proceedings. Borrower
shall file all Federal, state and local tax returns and other reports
that it is required by law to file. Borrower shall promptly notify or
cause notice to be given to Bank of any pending or future audits of its
income tax returns by the Internal Revenue Service or by any state in
which Borrower conducts business operations and the results of each such
audit.
Section 7.6. Inspection. Borrower shall permit Bank or its
----------
designees to (i) visit and inspect the properties and assets of Borrower
and its Subsidiaries; (ii) examine and make copies of and take abstracts
from the books and records of Borrower and its Subsidiaries; and (iii)
discuss the affairs, finances and accounts of Borrower and its
Subsidiaries with their appropriate officers, employees and accountants.
In handling such information Bank shall exercise the same degree of care
that it exercises with respect to its own proprietary information of the
same types, to maintain the confidentiality of any non-public information
thereby received or received pursuant to Section 7.1. hereof except that
disclosure of such information may be made (i) to Bank Affiliates in
connection with their present or prospective business relations with
Borrower; (ii) to prospective transferees or purchasers of an interest in
the Obligations; (iii) as required by law, regulation, rule or order,
subpoena, judicial order or similar order; and (iv) as may be required in
connection with the examination, audit or similar investigation of
-45-
Bank. Borrower shall permit Bank (or any of its officers, agents,
attorneys or accountants) for the purpose of ascertaining whether or not
each and every provision of this Agreement or the Other Documents is
being performed or for the purpose of examining the Collateral and the
records relating thereto, to enter the offices and business premises of
Borrower and its Subsidiaries, and to conduct an audit of the Collateral
and/or Borrower's financial and business records on three (3) occasions
during each twelve (12) month period at such times as Bank may select in
its sole and absolute discretion; provided, however, that Bank shall have
-------- -------
the right to conduct such an audit on more than three (3) occasions if a
Default or Event of Default shall have occurred and be continuing for
such services. Any such audit shall be conducted at Borrower's expense
at Bank's then current rates of $400.00 per man day plus expenses to a
maximum of EIGHT THOUSAND AND NO/100 DOLLARS ($8,000.00) per fiscal year;
provided, however, that such maximum shall not apply if a Default or an
-------- -------
Event of Default shall have occurred or be continuing. Any charges and
expenses relating to such audits shall be directly debited by Bank from
the Loan Account.
Section 7.7. Notices. Borrower shall promptly upon becoming aware
-------
of the occurrence of a Default or Event of Default notify Bank thereof in
writing. Borrower shall also promptly advise Bank of:
(a) any labor controversy resulting in or threatening to result
in a strike or work stoppage against Borrower or its Subsidiaries; or
(b) any change of independent public accountants, notice that
such change has occurred together with the name of the new accountants.
Section 7.8. Litigation. Borrower shall promptly inform Bank of any
----------
action, suit, or proceeding by or before any Government Authority or
arbitration or alternate dispute resolution proceeding, which might have
a Material Adverse Effect.
Section 7.9. Maintenance of Books and Records. Each of Borrower and
--------------------------------
its Subsidiaries shall keep adequate books and records of account, in
which true and complete entries will be made reflecting all of its
business and financial transactions, and such entries will be made in
accordance with GAAP including the maintenance of adequate reserves for
depreciation of property, if such reserves are required by GAAP. Each of
Borrower and its Subsidiaries shall maintain duplicate copies of all such
books and records (i) on-site at all times and (ii) offsite updated on a
monthly basis.
Section 7.10. Maintenance of Permits. Borrower shall obtain and/or
----------------------
maintain in full force and effect all material permits, authorizations,
licenses, approvals, waivers and consents which it presently possesses or
which may may become necessary in the future to conduct its business
operations.
-46-
Section 7.11. Use of Proceeds. Borrower will use the proceeds of
---------------
any Extension of Credit solely for the purposes set forth in this
Agreement.
Section 7.12. Payment of Indebtedness. Borrower shall promptly
-----------------------
pay and discharge when due and payable (or within applicable grace
periods) all Indebtedness due to any Person from Borrower, except when
the amount thereof is being contested in good faith by appropriate
proceedings and with reserves therefor being established as a current
liability on the books of Borrower as required by GAAP.
Section 7.13. Additional Offices. Borrower shall give Bank
------------------
written notice of each additional facility or office of Borrower to be
opened after the Closing Date. Except to the extent set forth in any
such notice, the chief executive office of Borrower and all records
relating to the Collateral shall be located at the locations set forth in
the Collateral Disclosure List.
Section 7.14. Access to Collateral. With respect to each
--------------------
location at which the Collateral is now or hereafter located, Borrower
will obtain such lien waivers, estoppel certificates or subordination
agreements as Bank may reasonably require to insure the priority of its
security interest in, and its ability to take possession of, the
Collateral situated at such locations.
Section 7.15. Compliance with Laws. Borrower shall comply with
--------------------
the requirements of all applicable laws, ordinances, rules, regulations
and orders of any Government Authority.
Section 7.16. ERISA. Borrower shall: (i) make prompt payments of
-----
contributions required to meet the minimum funding standards set forth
under ERISA with respect to each and every Plan and, promptly after the
filing thereof, furnish to Bank copies of each annual report required to
be filed under ERISA in connection with each and every Plan for each and
every Plan year; (ii) notify Bank immediately of any fact, including, but
not limited to, any "reportable event", arising in connection with any
Plan which might constitute grounds for the termination thereof by the
PBGC or for the appointment by the appropriate United States district
court of a trustee to administer the Plan; (iii) promptly after the
issuance thereof, furnish to Bank a copy of any notice of any "reportable
event" given to the PBGC with respect to any Plan; (iv) promptly after
receipt thereof, furnish to Bank a copy of any notice received from the
PBGC relating to the intention of the PBGC to terminate any Plan or to
appoint a trustee to administer any Plan; and (v) furnish to Bank,
promptly upon its request therefor, such additional information
concerning each and every Plan as may be reasonably requested.
Section 7.17. Compliance with Environmental Laws.
----------------------------------
(a) Borrower shall, from time to time, if requested by Bank
upon reasonable cause, retain, at Borrower's expense, an independent
professional consultant to prepare a report relating to Hazardous
-47-
Materials and to conduct an investigation of any or all of the
properties and assets of Borrower. Borrower agrees also that Bank (or
its agents) may, from time to time retain at Borrower's expense, an
independent professional consultant to advise Bank as to any such report
relating to Hazardous Materials. Borrower hereby grants to Bank, its
agents, employees, consultants and contractors the right to enter into or
onto Borrower's business premises to perform such tests as are reasonably
necessary to conduct such a review and/or investigation.
(b) Borrower shall promptly advise Bank in writing and in
reasonable detail of (i) any Release of any Hazardous Material required
to be reported to any Governmental Authority under any applicable
Environmental Laws; (ii) any and all written communications with respect
to claims or suits under such laws or any Release of Hazardous Materials
required to be reported to any Governmental Authority, instrumentality
or agency; (iii) any remedial action taken by Borrower or any other
Person in response to (A) any Hazardous Materials on, under or about the
properties or assets of Borrower, the existence of which could have a
Material Adverse Effect or (B) any claim or suit resulting in a material
adverse change of Borrower's business operations or financial condition;
(iv) Borrower's discovery of any occurrence or condition on any real
property adjoining or in the vicinity of Borrower's business premises
that could cause such premises or any part thereof to be classified as
"border-zone property" or to be otherwise subject to any restrictions on
the ownership, occupancy, transferability or use thereof under any
Environmental Laws; and (v) any request for information from any
Governmental Authority that indicates such authority, instrumentality or
agency is investigating whether Borrower may be potentially responsible
for a Release of Hazardous Materials.
(c) Borrower shall, at its own expense, provide copies of such
documents or information as Bank may reasonably request in relation to
any matters disclosed pursuant to this Section 7.17.
(d) Borrower shall comply with all Environmental Laws and
establish and maintain policies and procedures to ensure and monitor
continued compliance with all Environmental Laws. Borrower shall
promptly take any and all necessary remedial action in connection with
the presence, storage, use, disposal, transportation or Release of any
Hazardous Materials on, under or about its business premises. If
Borrower undertakes any remedial action with respect to any Hazardous
Materials on, under or about its business premises, Borrower shall
conduct and complete such remedial action in compliance with the
policies, orders and directives of any Governmental Authority except when
and only to the extent that Borrower's liability for such presence,
storage, use, disposal, transportation or discharge of any Hazardous
Material is being contested in good faith by Borrower.
Section 7.18. Operating Accounts. Borrower shall establish and
------------------
maintain all of its operating accounts, including its payroll account,
with Bank.
-48-
SECTION 8. NEGATIVE COVENANTS
Borrower covenants and agrees that from the date hereof until the
payment and performance in full of the Obligations, unless Bank
otherwise consents in writing:
Section 8.1. Limitation on Indebtedness. Neither Borrower nor
--------------------------
any of its Subsidiaries shall create, incur, assume, guarantee or be or
remain liable with respect to any Indebtedness other than the following
("Permitted Indebtedness"):
(a) Indebtedness of Borrower or any of its Subsidiaries to Bank
or any Bank Affiliates;
(b) Indebtedness existing as of the date of this Agreement and
disclosed on Schedule 8.1. attached hereto or in the Financial Statements
------------
referred to in Section 4.7. hereof;
(c) Subordinated Indebtedness incurred with the prior
written consent of Bank;
(d) Indebtedness secured by Permitted Encumbrances;
(e) Indebtedness incurred or arising as a result of the re
classification of Borrower's option, lease and subcontracting
relationship for its Jamaica manufacturing facility; and
(f) other Indebtedness of Borrower in an aggregate outstanding
principal amount not exceeding FIFTY THOUSAND AND NO/100 DOLLARS
($50,000.00) in any one (1) instance or ONE HUNDRED FIFTY THOUSAND AND
NO/100 DOLLARS ($150,000.00) in the aggregate during any twelve (12)
month period.
Section 8.2. Contingent Liabilities. Neither Borrower nor any of
----------------------
its Subsidiaries shall create, incur, assume, guarantee or remain liable
with respect to any Guarantees other than the following:
(a) Guarantees in favor of Bank or any Bank Affiliates;
(b) Guarantees existing on the date of this Agreement and
disclosed on Schedule 4.26. attached hereto or in the Financial
-------------
Statements referred to in Section 4.7. hereof;
(c) Guarantees resulting from the endorsement of negotiable
instruments for collection in the ordinary course of business;
(d) Guarantees with respect to surety, appeal, performance and
return-of-money and other similar obligations incurred in the ordinary
course of business (exclusive of obligations for the payment of borrowed
money) not exceeding ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($100,000.00) in the aggregate at any one time;
-49-
(e) Guarantees in support of Borrower's sub-contractors in
an amount not to exceed FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($500,000.00) in the aggregate at any one time; and
(f) Guarantees of normal trade debt relating to the
acquisition of goods and supplies.
Section 8.3. Sale and Leaseback. Neither Borrower nor any of its
------------------
Subsidiaries shall enter into any arrangement, directly or indirectly,
whereby it shall sell or transfer any property owned by it in order to
lease such property or lease other property that Borrower or any such
Subsidiary intends to use for substantially the same purpose as the
property being sold or transferred.
Section 8.4. Encumbrances. Neither Borrower nor any of its
------------
Subsidiaries shall create, incur, assume or suffer to exist any
Encumbrance, or assign or otherwise convey any right to receive income,
including the Accounts Receivable, with or without recourse, except the
following ("Permitted Encumbrances"):
(a) Encumbrances in favor of Bank or any Bank Affiliates;
(b) Encumbrances existing as of the date of this Agreement and
disclosed in Schedule 4.24. attached hereto;
-------------
(c) liens for taxes, fees, assessments and other governmental
charges to the extent that payment of the same may be postponed or is not
required in accordance with the provisions of Section 8.4. hereof;
(d) landlords' and lessors' liens in respect of rent not in
default or liens in respect of pledges or deposits under worker's
compensation, unemployment insurance, social security laws, or similar
legislation (other than ERISA) or in connection with appeal and similar
bonds incidental to litigation; mechanics', laborers' and materialmen's
and similar liens, if the obligations secured by such liens are not then
delinquent; liens securing the performance of bids, tenders, contracts
(other than for the payment of money); and statutory obligations
incidental to the conduct of its business and that do not in the
aggregate materially detract from the value of its property or materially
impair the use thereof in the operation of its business;
(e) judgment liens that shall not have been in existence for a
period longer than thirty (30) days after the creation thereof or, if a
stay of execution shall have been obtained, for a period longer than
thirty (30) days after the expiration of such stay;
(f) rights of lessors under Capital Leases;
(g) Encumbrances in respect of any purchase money obligations
for tangible property used in its business that at any time shall not
exceed TWENTY FIVE THOUSAND AND NO/100 DOLLARS
-50-
($25,000.00) in any one (1) instance or ONE HUNDRED THOUSAND AND NO/100
DOLLARS ($100,000.00) in the aggregate during any twelve (12) month
period; provided, however, that any such Encumbrances shall not extend to
-------- -------
properties and assets of Borrower or any such Subsidiary not financed by
such purchase money obligation;
(h) easements, rights of way, restrictions and other similar
charges or Encumbrances relating to real property and not interfering in
a material way with the ordinary conduct of its business; and
(i) Encumbrances on its property or assets created in
connection with the refinancing of Indebtedness secured by Permitted
Encumbrances on such property; provided, however, that the amount of
-------- -------
Indebtedness secured by any such Encumbrance shall not be increased as a
result of such refinancing and no such Encumbrance shall extend to
property and assets of Borrower or any such Subsidiary not encumbered
prior to any such refinancing.
Section 8.5. Merger; Consolidation; Sale or Lease of Assets. Neither
----------------------------------------------
Borrower nor any of its Subsidiaries shall sell, lease or otherwise
dispose of properties or assets (valued at the lower of cost or market),
other than sales of Inventory in the ordinary course of business or
Equipment as permitted under Section 10.3.5. hereof; or liquidate, merge
or consolidate into or with any other Person; provided, however, that any
-------- -------
Subsidiary of Borrower may merge or consolidate into or with (i) Borrower
if no Default or Event of Default has occurred and is continuing or would
result from such merger and if Borrower is the surviving company, or (ii)
any other wholly-owned Subsidiary of Borrower.
Section 8.6. Additional Stock Issuance. Borrower shall not permit
-------------------------
any of its Subsidiaries to issue any additional shares of its capital
stock or other equity securities, any options therefor or any securities
convertible thereto other than to Borrower. Neither Borrower nor any of
its Subsidiaries shall sell, transfer or otherwise dispose of any of the
capital stock or other equity securities of a Subsidiary, except (i) to
Borrower or any of its wholly-owned Subsidiaries, or (ii) in connection
with a transaction permitted by Section 8.5.
Section 8.7. Dividends. Borrower shall not pay any Dividends on
---------
any class of its capital stock or make any other distribution or payment
on account of or in redemption, retirement or purchase of such capital
stock. This Section 8.7. shall not apply to (i) the issuance, delivery
or distribution by Borrower of shares of its capital stock pro rata to
its existing shareholders and (ii) the purchase or redemption by Borrower
of its capital stock with the proceeds of the issuance of additional
shares of capital stock.
Section 8.8. Investments. Neither Borrower nor any of its
-----------
Subsidiaries shall make or maintain any Investments other than (i)
existing Investments in Subsidiaries and (ii) Qualified Investments.
-51-
Section 8.9. ERISA. Neither Borrower nor any member of the
-----
Controlled Group shall permit any plan maintained by it to (i) engage in
any "prohibited transaction" (as defined in Section 4975 of the Code);
(ii) incur any "accumulated funding deficiency" (as defined in Section
302 of ERISA) whether or not waived; or (iii) terminate any Plan in a
manner that could result in the imposition of an Encumbrance on the
property and assets of Borrower or any of its Subsidiaries pursuant to
Section 4068 of ERISA.
Section 8.10. Change in Terms and Prepayment of Subordinated
----------------------------------------------
Indebtedness. Borrower shall not:
------------
(a) effect or permit any change in or amendment to (i) the
terms by which any Subordinated Indebtedness purports to be subordinated
to the payment and performance of the Obligations or (ii) the terms
relating to the repayment of any Subordinated Indebtedness; or
(b) directly or indirectly, make any payment of principal,
interest, fees or other amounts in respect of or in redemption,
retirement or repurchase of any Subordinated Indebtedness except in
accordance with the terms of any documents, agreements or instruments
which serve to subordinate such Indebtedness to the Obligations.
Section 8.11. Change in Management. Borrower shall not make nor
--------------------
suffer a change in the overall composition of its present executive
management which would have a Material Adverse Effect.
Section 8.12. Change Name or Location. Borrower shall not change
-----------------------
its corporate name or conduct its business under any name other than
those set forth in the Collateral Disclosure List or change its chief
executive office, place of business or location of the Collateral or
records relating to the Collateral from the locations set forth in the
Collateral Disclosure List unless it has given Bank at least thirty (30)
days prior written notice.
Section 8.13. Contracts. Borrower shall not enter into any
---------
contract other than on such terms as would be contained in an agreement
executed at arms' length with an unrelated third party.
Section 8.14. Compliance with Environmental Laws. Borrower shall
----------------------------------
not generate, handle, use, store or treat any Hazardous Materials except
in compliance with Environmental Laws.
Section 8.15. Lines of Business. Borrower shall not make a
-----------------
material change in or discontinue its existing lines of business nor
enter into any new line or lines of business except as set forth in the
Forecasts.
Section 8.16. Fiscal Year. Borrower shall not change its
-----------
existing Fiscal Year.
-52-
Section 8.17. Capital Expenditures. Borrower shall not make or
--------------------
become liable for Capital Expenditures in excess of FOUR HUNDRED FIFTY
THOUSAND AND NO/100 DOLLARS ($450,000.00) during the Fiscal Year ending
June 30, 1996.
SECTION 9. FINANCIAL COVENANTS.
Borrower covenants and agrees that from the date hereof, until the
payment and performance in full of the Obligations, unless Bank otherwise
consents in writing:
Section 9.1. Financial Covenants.
--------------------
Section 9.1.1. Net Worth. Borrower's Net Worth shall not be
---------
less than the following amounts at all times during the following
Periods:
Amount Period
------ ------
$3,100,000.00 Closing Date through
December 30, 1995
$3,250,000.00 December 31, 1995 through
March 30, 1996
$3,400,000.00 March 31, 1996 through
June 29, 1996
$3,700,000.00 June 30, 1996 and thereafter
Section 9.1.2. Debt Service Coverage. Borrower shall not
---------------------
permit the ratio of its EBITDA minus Capital Expenditures to its Total
Debt Service to be less than the following ratios at the end of each of
the following Fiscal Years:
Ratio Fiscal Year Ending
----- ------------------
1.40 to 1.0 June 30, 1996
Section 9.1.3. Total Debt to Net Worth Ratio. The ratio of
-----------------------------
Borrower's Total Debt to its Net Worth shall not be greater than the
following ratios at all times during the following Periods.
Ratio Period
----- ------
4.25 to 1.0 Closing Date through
December 30, 1995
4.25 to 1.0 December 31, 1995 through
March 30, 1996
4.0 to 1.0 March 31, 1996 through
June 29, 1996
3.75 to 1.0 June 30, 1996 and thereafter
Section 9.1.4. Inventory Turnover. Borrower shall "turn
------------------
over" its Inventory during each Fiscal Year at the rate of at least 1.5
to 1.0 (determined as of the end of each Fiscal Year by dividing
Borrower's cost of goods sold during such Fiscal Year by the value of
Borrower's Inventory as of such date).
-53-
Section 9.1.5. Interest Coverage. Borrower shall not permit
-----------------
the ratio of its EBIT to its Total Interest to be less than the following
ratios (calculated on a rolling basis) at the end of each of the
following periods:
Ratio Period
----- ------
1.5 to 1.0 July 1, 1995 through
December 31, 1995
1.5 to 1.0 July 1, 1995 through
March 31, 1995
1.75 to 1.0 July 1, 1995 through
June 30, 1996
Section 9.2. Definitions. The following capitalized terms used in
-----------
this Section 9 and in any certificate, report or other document,
instrument or agreement executed or delivered in connection with the
covenants set forth in this Section 9 shall have the meanings ascribed to
such terms below:
Section 9.2.1. "EBIT" means, for any period, the net income (as
----
such term is understood under GAAP) but excluding any extraordinary items
of gain of Borrower before any provision (i) taxes paid or payable for
such period (other than real estate and sales and use taxes) and (ii) all
interest paid or accrued for such period in respect of all Indebtedness,
all of the foregoing determined in accordance with GAAP and valuing
Inventory on a "FIFO" basis.
Section 9.2.2. "EBITDA" means, for any period, the net
------
income (as such term is understood under GAAP) but excluding any
extraordinary items of gain of Borrower before any provision for (i)
taxes paid or payable for such period (other than real estate and sales
and use taxes), (ii) all interest paid or accrued for such period in
respect of all Indebtedness and (iii) amounts in respect of depreciation
and amortization for such period, all of the foregoing determined in
accordance with GAAP and valuing Inventory on a "FIFO" basis.
Section 9.2.3. "Net Worth" means, as of any date, Borrower's
---------
total shareholders equity plus additional paid in capital and retained
----
earnings after deducting treasury stock plus Subordinated Debt, all as
----
determined in accordance with GAAP but calculated valuing Inventory on a
"FIFO" basis and Equipment on a basis which is consistent with the manner
in which Borrower has historically valued Equipment on its internally
prepared Financial Statements.
Section 9.2.4. "Total Debt" means, as of any date as of which
----------
the amount thereof shall be determined, all Indebtedness of Borrower
including the Obligations but excluding Subordinated Indebtedness, as of
such date and Indebtedness described in Section 8.1(e).
-54-
Section 9.2.5. "Total Debt Service" means, for any period, the
------------------
aggregate amount of Borrower's obligation to make payments of principal,
interest and other amounts in respect of all Total Debt and Subordinated
Debt for such period; provided, however, that for purposes of the
calculation of Total Debt Service, the obligation of Borrower to make
payments of principal with respect to the Line of Credit shall be
considered a long term obligation not payable within any such period.
Section 9.2.6. "Total Interest" means, for any period,
--------------
Borrower's aggregate obligation to make payments of interest in respect
of Total Debt and Subordinated Debt during such period.
SECTION 10. SPECIAL COVENANTS RELATING TO COLLATERAL
Borrower covenants and agrees that from the date hereof until the
payment and performance in full of the Obligations, unless Bank otherwise
consents in writing:
Section 10.1. Accounts Receivable. With respect to its Accounts
-------------------
Receivable:
Section 10.1.1. Borrower shall deposit all payments received
from or on behalf of an Account Debtor into an account established with
Bank and Borrower shall direct or otherwise cause all Account Debtors to
pay all monies due under their respective Accounts Receivable to a
lockbox account (the "Lockbox Account") maintained by Bank in Borrower's
name at Borrower's expense and, to the extent Borrower receives such
payments directly, all remittances received by Borrower on account of
Accounts Receivable shall be held as Bank's property by Borrower as
trustee of an express trust for Bank's benefit, and Borrower will
immediately deliver to Bank the identical checks, moneys or other forms
of payment received. Borrower hereby constitutes Bank, or any
representative whom Bank may designate, as Borrower's attorney-in-fact
(i) to endorse the name on any notes, acceptances, checks, drafts, money
orders or other evidence of payment or security interest that may come
into Bank's possession, and (ii) following the occurrence of an Event of
Default, to sign Borrower's name on any invoice or ▇▇▇▇ of lading
relating to Accounts Receivable, on drafts against customers, assignments
and certificates of Accounts Receivable, and notices to customers. Bank
retains the right at all times after the occurrence of an Event of
Default to notify Account Debtors that their respective Accounts
Receivable have been assigned to Bank and to collect Accounts Receivable
directly in its own name and to charge the collection costs and expenses,
including reasonable attorneys' fees to, the Loan Account. Bank has no
duty to protect, insure, collect or realize upon the Accounts Receivable
or other collateral or preserve rights in them other than to act in a
commercially reasonable manner. Borrower releases Bank from any
liability for any act or omission relating to the Obligations, the
Accounts Receivable or other Collateral or this Agreement, except Bank's
failure to act in a commercially reasonable manner, willful
-55-
misconduct or gross negligence. All amounts received by Bank in payment
in Accounts Receivable assigned to it are to be credited to the
Borrower's Account upon receipt by Bank, conditioned upon collection by
Bank of good funds in respect thereof.
Section 10.1.2. Following the occurrence of an Event of
Default and in connection with any audit conducted under Section 7.6.
hereof, and in all other instances following written notice to Borrower,
any of Bank's officers, employees, or agents shall have the right, in
Bank's name or in the name of Borrower, to request the verification of
the validity, amount or any other matter relating to any Account
Receivable by mail, telephone, facsimile transmission, telegraph, or
other communication to Account Debtors.
Section 10.1.3. Borrower shall keep accurate and complete
records of its Accounts Receivable and accounts payable, and upon demand
by Bank shall deliver to Bank copies of proof of delivery and the
original copy of all documents, including, without limitation, repayment
histories and present status reports, relating to Borrower's Accounts
Receivable and accounts payable and such other matters and information
relating to the status of the Accounts Receivable and accounts payable as
Bank shall reasonably request.
Section 10.1.4. Borrower shall promptly advise Bank:
(a) of any material delay in Borrower's performance of any of
its obligations to any Account Debtor or the assertion of any claim,
offset or setoff by any Account Debtor in excess of ONE HUNDRED THOUSAND
AND NO/100 DOLLARS ($100,000.00); or
(b) in the event that any Eligible Account Receivable becomes
ineligible for reasons other than lapse of time in payment and the
reasons therefor; or
(c) of the receipt of any Government Contract which is
subject to the Federal Assignment of Claims Act of 1940; or
(d) of the receipt of any cancellation or termination of, or
the delivery of notice of default under, any Government Contract.
Section 10.1.5. Borrower shall promptly execute any
assignment and take any action requested or required by Bank with respect
to any Account Receivable, , which arises out of a Government Contract
which is subject to the Federal Assignment of Claims Act of 1940.
Section 10.1.6. Borrower shall maintain all Accounts
Receivable free of all Encumbrances other than those in favor of Bank and
Permitted Encumbrances.
Section 10.2. Inventory. With respect to its Inventory:
---------
Section 10.2.1. Borrower shall maintain all Inventory free
of all Encumbrances other than those in favor of Bank.
-56-
Section 10.2.2. Borrower shall not store or deposit any
Inventory with a bailee, warehouseman, or similar party without Bank's
prior written consent and, if Bank gives such consent, Borrower will
concurrently therewith cause any such bailee, warehouseman, or similar
party to issue and deliver to Bank, in form and substance acceptable to
Bank and its legal counsel, warehouse receipts for such Inventory in
Bank's name or a warehouseman's waiver and agreement.
Section 10.2.3. If any Inventory is in the possession or
control of any third party other than a purchaser in the ordinary course
of business or a warehouseman where the warehouse receipt is in the name
of or held by Bank or whom has executed a warehouseman's waiver and
consent in favor of Bank, Borrower shall notify such Person of Bank's
security interest therein and, upon request, instruct such Person or
Persons to hold all such Inventory for the account of Bank and subject to
Bank's instructions.
Section 10.3. Equipment. With respect to its Equipment:
---------
Section 10.3.1. Borrower shall maintain the Equipment used
in the ordinary course of business in good operating condition and
repair, and make all necessary replacements of and repairs thereto so
that the value and operating efficiency of the Equipment shall be
maintained and preserved.
Section 10.3.2. The Equipment, other than when being used in
the ordinary course of business, is located or stored at the locations
described in Schedule 3 of the Collateral Disclosure List (other than
----------
Equipment being temporarily stored for purposes of repair or
maintenance), and Borrower shall promptly notify Bank, in writing, in the
event Borrower shall store or locate the Equipment at any location other
than the locations specified in said Schedule 3.
----------
Section 10.3.3. Borrower, immediately on demand therefor by
Bank, shall deliver to Bank any and all evidence of ownership, if any, of
any of the Equipment Borrower purports to own (including, without
limitation, certificates of title and applications for title).
Section 10.3.4. Borrower shall maintain accurate, itemized
records, itemizing and describing the kind, type, quality, quantity and
value of its Equipment and shall furnish Bank with a current schedule
containing the foregoing information at Bank's reasonable request.
Section 10.3.5. Borrower shall not sell, lease, or otherwise
dispose of or transfer any interest in any of its Equipment or any part
thereof in excess of TEN THOUSAND AND NO/100 DOLLARS ($10,000.00) in any
one (1) instance or FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00) in the
aggregate during any fiscal year without the prior written consent of
Bank, unless (a) no Default or Event of Default shall exist at the time
of such sale, lease or disposition, (b) such sale, lease or disposition
is made in the ordinary course of
-57-
Borrower's business, and (c) the net proceeds of such sale, lease or
disposition are used for the purchase of additional Equipment on which
Bank will have a first priority security interest. Where Borrower is
permitted to dispose of any Equipment under this Agreement or by any
consent thereto hereafter given by Bank, it shall do so at arm's length,
in good faith and by obtaining the maximum amount of recovery practicable
therefor and without impairing the operating integrity of the remaining
Equipment.
Section 10.3.6. Borrower shall, if requested by Bank with due
cause, provide to Bank a forced and orderly liquidation value appraisal
of Borrower's Equipment performed by an appraiser acceptable to Bank and
at Borrower's expense.
SECTION 11. DEFAULT
Section 11.1. The occurrence of any of the following events shall
constitute a default under this Agreement, the Notes and the Other
Documents (an "Event of Default"):
(a) Borrower shall fail to pay (i) any outstanding principal
amount of the Line of Credit when due, (ii) any Reimbursement Obligations
when due, or (iii) any outstanding principal amount of the Term Loan, any
accrued and unpaid interest on the Loans or any fees or expenses payable
under this Agreement, the Notes or the Other Documents within fifteen
(15) days of the due date therefor; or
(b) Borrower shall fail to perform any term, covenant or
agreement contained in Sections 7.1., 7.6., 8.7., 8.11. or 10 of this
Agreement or fail to reduce the balance of Overadvances to zero (O) as
required by Section 2.1.2. of this Agreement; or
(c) Borrower shall fail to perform any act, duty, obligation or
other agreement contained in this Agreement, the Notes or Other Documents
and not otherwise constituting an Event of Default hereunder; provided,
however, if the act, duty, obligation or other agreement does not
materially affect, in Bank's sole and absolute discretion, Bank's rights
under this Agreement, the Notes or the other Documents, then Borrower
shall have thirty (30) calendar days following the date on which it
becomes aware of any such nonperformance in which to make the required
performance before the exercise by Bank of any of its remedies under this
Agreement, the Notes and the Other Documents; or
(d) any representation or warranty of Borrower made in this
Agreement, the Notes or the Other Documents or in any certificate or
report delivered hereunder or thereunder shall prove to have been false
in any material respect upon the date when made or deemed to have been
made; or
(e) Borrower or any of its Subsidiaries shall fail to pay at
maturity (unless disputed in good faith), or within any applicable period
of grace, any Indebtedness or obligations for the use of real
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or personal property in excess of FIFTY THOUSAND AND NO/100 DOLLARS
($50,000.00) in the aggregate or fail to observe or perform any term,
covenant or agreement evidencing or securing such Indebtedness, or
obligations for the use of real or personal property, or relating to such
use of real or personal property, the result of which failure is to
permit (i) the holder or holders of such Indebtedness or obligations to
cause the same to become due prior to its stated maturity or (ii) the
lessor of such real or personal property to terminate Borrower or any
Subsidiary's use thereof prior to the specified term therefor; or
(f) Borrower or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar official of itself or
of all or a substantial part of its properties and assets; (ii) be
generally not paying its debts as such debts become due; (iii) make a
general assignment for the benefit of its creditors; (iv) commence a
voluntary case under the Bankruptcy Code; (v) take any action or commence
any case or proceeding under any law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or adjustment of debts, or any
other law providing for the relief of debtors; (vi) fail to contest in a
timely or appropriate manner, or acquiesce in writing to, any petition
filed against it in an involuntary case under Bankruptcy Code or other
law; (vii) take any action under the laws of its jurisdiction of
incorporation or organization similar to any of the foregoing; or (viii)
take any corporate action for the purpose of effecting any of the
foregoing; or
(g) a proceeding or case shall be commenced, without the
application or consent of Borrower or any of its Subsidiaries in any
court of competent jurisdiction, seeking (i) the liquidation,
reorganization, dissolution, winding up, or composition or readjustment
of its debts; (ii) the appointment of a trustee, receiver, custodian,
liquidator or the like of it or of all or any substantial part of its
properties and assets; or (iii) similar relief in respect of it, under
any law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts or any other law providing for the
relief of debtors, or an order for relief shall be entered in an
involuntary case under the Bankruptcy Code, against Borrower or such
Subsidiary; or action under the laws of the jurisdiction of incorporation
or organization of Borrower or any of its Subsidiaries similar to any of
the foregoing shall be taken with respect to Borrower or such Subsidiary;
or
(h) a judgment or order for the payment of money shall be
entered against Borrower or any of its Subsidiaries by any court, or a
warrant of attachment or execution or similar process shall be issued or
levied against property of Borrower or such Subsidiary and such judgment,
order, warrant or process shall continue undischarged or unstayed for
sixty (60) days; or
(i) Borrower or any member of the Controlled Group shall fail
to pay when due an amount or amounts that it shall have become liable to
pay to the PBGC or to a plan under Title IV of ERISA; intent
-59-
to terminate a plan or plans shall be filed under Title IV of ERISA by
Borrower, any member of the Controlled Group, any plan administrator or
any combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate or to cause a trustee
to be appointed to administer any such plan or plans or a proceeding
shall be instituted by a fiduciary of any such plan or plans against
Borrower and such proceedings shall not have been dismissed within sixty
(60) days thereafter; or a condition shall exist by reason of which the
PBGC would be entitled to obtain a decree adjudicating that any such
plan or plans must be terminated; or
(j) Borrower shall fail to meet any financial covenant set
forth in Section 9.1. hereof; or
(k) Borrower's independent certified public accountants shall
refuse to deliver an opinion with no Qualification with respect to any
Financial Statements required to be delivered under Section 7.1.1. of
this Agreement; or
(l) The failure of Borrower to execute, deliver or address, or
cause to be executed, delivered and addressed, the matters set forth on
Schedule 11.1. attached hereto within thirty (30) days after the Closing
--------------
Date (the "Post Closing Matters"); or
(m) Any Government Authority shall condemn, seize or otherwise
appropriate, or take custody or control of, or file a lien, levy or
assessment in respect of, all or any substantial portion of the
properties or assets of Borrower; or
(n) Any Governmental Authority or other Person shall
garnish, seize or levy or execute upon any monies of Borrower on deposit
with or otherwise in the custody of Bank or any Bank affiliate; or
(o) If Sub,, Aristotle, Borrower or the holders of any of Sub's
$10.00 par value Preferred Stock (the "Preferred Stock") or any other
Person should contest the right of the holders of the Preferred Stock to
compel a Partial Unwinding (as such term is defined in Section 8.2. of
that certain Capital Contribution Agreement dated
November 19, 1993 and amended as of _______ __, 199_ by and among
Aristotle, Sub, Borrower and the Covered Employees; (or)
(p) If Aristotle or Sub shall default under any of their
obligations under the Aristotle Guaranty or the Sub Guaranty, as
applicable; or
(q) If Aristotle shall default under the Negative Pledge
Agreement; or
(r) If Borrower shall fail to make the mandatory prepayment in
respect of the Term Loan in accordance with Section 2.3.6. hereof.
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SECTION 12. REMEDIES
Section 12.1. Remedies. Upon the occurrence of an Event of
--------
Default, and at any time thereafter while such Event of Default is
continuing, immediately and automatically in the case of an event of
Default specified in Section 11.1(f) or 11.1.(g), and in all other cases,
at Bank's option and upon Bank's declaration:
(a) Bank's obligation to make any Extension of Credit shall
terminate;
(b) the unpaid principal amount of the Loans, and all
Reimbursement Obligations together with accrued interest thereon, and all
other Obligations shall become immediately due and payable without
presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived;
(c) Bank may exercise any right of setoff granted to Bank
pursuant to Section 13.2.4 hereof;
(d) Bank may reduce any advance rate in respect of Borrower's
Accounts Receivable or Inventory as set forth in Sections 1.113 and 1.114
of this Agreement; and
(e) Bank may exercise any and all other rights and remedies it
has under this Agreement, the Notes or the Other Documents or at law or
in equity, and proceed to protect and enforce Bank's rights by any action
at law, in equity or other appropriate proceeding.
SECTION 13. MISCELLANEOUS
Section 13.1. Cross Default, Cross Collateral and Cross Pay-out.
--------------------------------------------------
Borrower acknowledges and agrees that the occurrence of an Event of
Default under this Agreement, the Notes or the Other Documents shall
constitute a default under the documents and instruments evidencing or
securing any other loan now existing or hereafter made by Bank to
Borrower, and a default under any of said existing or future loans shall
constitute an Event of Default under this Agreement, the Notes and the
Other Documents. The security interests, liens and other rights and
interests in and relative to any collateral now or hereafter granted to
Bank by Borrower by or in any instrument or agreement, including but not
limited to this Agreement and the Other Documents, shall serve as
security for any and all liabilities of Borrower to Bank, including but
not limited to the liabilities described in this Agreement, the Notes and
the Other Documents, and, for the repayment thereof, Bank may resort to
any security held by it in such order and manner as it may elect.
Notwithstanding the terms of any of the documents and instruments
evidencing or securing the Obligations, Borrower hereby acknowledges and
agrees that if Borrower elects to terminate the Line of Credit at any
time prior to the Revolving Credit Termination Date, then then any
remaining portion of the Obligations shall be immediately due and payable
without notice or demand by Bank to Borrower.
-61-
Section 13.2. Waivers.
-------
Section 13.2.1. In General. Borrower waives presentment,
----------
demand, notice, protest, notice of acceptance, notice of loans made,
credit extended, collateral received or delivered or other action
taken in reliance hereon and all other demands and notices of any
description. With respect both to the Obligations and the Collateral,
Borrower assents to any extension or postponement of the time of payment
or any other indulgence, to any substitution, exchange or release of the
Collateral, to the addition or release of any party or Person primarily
or secondarily liable therefor, to the acceptance of partial payments
thereon and the settlement, compromising or adjusting of any thereof, all
in such manner and at such time or times as Bank may deem advisable in
its sole and absolute discretion. Bank shall have no duty, other than to
act in a commercially reasonable manner, as to the collection or
protection of the Collateral or any income thereon, as to the
preservation of rights or remedies against prior parties, or as to the
preservation of any rights and remedies pertaining thereto. Bank may
exercise its rights and remedies with respect to the Collateral without
resorting or regard to other collateral or sources of reimbursement for
liability. Bank shall not be deemed to have waived any of its rights and
remedies with respect to the Obligations or the Collateral unless such
waiver be in writing and signed by Bank. No delay or omission on the
part of Bank in exercising any right or remedy shall operate as a waiver
of such right or remedy or any other right or remedy. A waiver on any
one occasion shall not be construed as a bar to any subsequent
enforcement by Bank. All rights and remedies of Bank with respect to the
Obligations or the Collateral shall be cumulative and may be exercised
singularly or concurrently.
Section 13.2.2. PREJUDGMENT REMEDY. BORROWER ACKNOWLEDGES THAT
-------------------
THE TRANSACTION OF WHICH THIS AGREEMENT IS A PART IS A COMMERCIAL
TRANSACTION AND HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING UNDER
CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES OR BY OTHER APPLICABLE
LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH BANK MAY DESIRE TO USE.
Section 13.2.3. JURY TRIAL. BORROWER HEREBY WAIVES TRIAL BY
----------
JURY IN ANY COURT IN ANY SUIT, ACTION OR PROCEEDING OR ANY MATTER ARISING
IN CONNECTION WITH OR IN ANY WAY RELATED TO THE TRANSACTION OF WHICH THIS
AGREEMENT IS A PART AND/OR IN THE ENFORCEMENT BY BANK OF ANY OF ITS
RIGHTS AND REMEDIES HEREUNDER OR UNDER APPLICABLE LAW. BORROWER
ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY
AFTER CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS
ATTORNEY.
Section 13.2.4. Lien and Setoff. Regardless of the adequacy of
---------------
any collateral or other means of obtaining repayment of the Obligations,
any deposits (general or special, time or demand, provisional or final),
balances or other sums credited by or due from Bank or any Bank Affiliate
to Borrower (other than payroll and payroll
-62-
tax deposit accounts) may, at any time and from time to time after the
occurrence of an Event of Default, without notice to Borrower or
compliance with any other condition precedent now or hereafter imposed by
statute, rule of law, or otherwise (all of which are hereby expressly
waived) be setoff, appropriated, and applied by Bank or any Bank
Affiliate against any and all obligations of Borrower to Bank or any Bank
Affiliate in such manner as Bank or any Bank Affiliate in
their sole and absolute discretion may determine, and Borrower hereby
grants Bank a continuing security interest in such deposits, balances or
other sums for the payment and performance of all such obligations. The
rights provided to Bank and any Bank Affiliate in this Section 13.2.4.
shall be in addition to and shall not limit any common law right of
setoff available to Bank or any Bank Affiliate.
Section 13.2.5. Claims. Borrower does hereby (i) waive any
------
claim in tort, contract or otherwise which Borrower may have against
Bank, a Bank Affiliate or their officers, directors, agents, or employees
(collectively, "Bank Agents") which may arise out of the relationship
between Borrower and Bank or any Bank Affiliate prior to the Closing
Date; and (ii) absolutely and unconditionally release and discharge Bank
and any Bank Affiliate or Bank Agents from any and all claims, causes of
action, losses, damages or expenses which may arise out of any
relationship between it and Bank or any Bank Affiliate which Borrower may
have as of the Closing Date. Borrower acknowledges that it makes this
waiver and release knowingly, voluntarily and only after considering the
ramifications of this waiver and release with its attorney.
Section 13.3. Notices. All notices, requests, demands or other
-------
communications required by this Agreement shall be made in writing, and
unless otherwise specifically provided herein, shall be deemed to have
been duly given when delivered by hand or mailed first class mail postage
prepaid, or, in the case of telecopy or facsimile notice, when
transmitted, answer back received, addressed as follows, or to such other
address as either party may designate in writing:
If to Bank:
Fleet Bank, National Association
One Constitution Plaza
Secured Lending Department
Hartford, CT 06115-1600
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Vice President
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
-63-
If to Borrower:
The ▇▇▇▇▇▇▇, ▇▇▇▇▇ Company
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Chief Financial Officer
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Section 13.4. Fees and Expenses. Borrower will pay on demand all
-----------------
expenses incurred by Bank in connection with (i) the preparation,
execution and delivery of this Agreement, the Notes or the Other
Documents, (ii) the administration of Bank's obligations under this
Agreement or (iii) Bank's exercise, preservation or enforcement of any of
its rights and remedies thereunder, including, without limitation,
reasonable fees and expenses of outside legal counsel or the allocated
costs of in-house legal counsel, accounting, appraisal, auditing,
consulting, brokerage or other similar professional fees or expenses, and
any fees or expenses associated with any travel or other costs relating
to any appraisals or examinations conducted in connection with the
Obligations or the Collateral.
Section 13.5. Term of Agreement. This Agreement shall continue
-----------------
in force and effect so long as Bank has any commitment to extend credit
or any of the Obligations shall be outstanding.
Section 13.6. Stamp Tax. Borrower will pay any stamp, franchise
---------
or other recording tax which becomes payable in respect of this
Agreement, the Notes or the Other Documents.
Section 13.7. Schedules and Exhibits. The schedules and exhibits
----------------------
which are attached hereto are and shall constitute a part of this
Agreement.
Section 13.8. Governing Law; Consent to Jurisdiction. This
--------------------------------------
Agreement, the Notes and the Other Documents, and the rights and
obligations of the parties hereunder and thereunder, shall be governed by
and construed and interpreted in accordance with, the laws of the State
of Connecticut. Borrower agrees that any suit for the enforcement of
this Agreement, the Notes or the Other Documents may be brought in the
courts of the State of Connecticut or any federal court sitting therein
and consents to the non-exclusive jurisdiction of such court and to
service of process in any such suit being made upon Borrower by mail at
the address referred to Section 13.3. hereof. Borrower hereby waives any
objection that Borrower may now or hereafter have to the venue of any
such suit or any such court or that such suit is brought in an
inconvenient court.
-64-
Section 13.9. Survival of Representations. All representations,
---------------------------
warranties, covenants and agreements contained in this Agreement, the
Notes or the Other Documents shall survive the Closing Date and continue
in full force and effect until the payment and the performance of the
Obligations in full.
Section 13.10. Amendments. No modification or amendment of this
----------
Agreement, the Notes or the Other Documents shall be effective unless
the same shall be in writing and signed by the parties hereto.
Section 13.11. Binding Effect of Agreement. This Agreement shall
---------------------------
be binding upon and inure to the benefit of Borrower and Bank and their
respective successors and assigns; provided, however, that Borrower may
-------- -------
not assign or transfer its rights or obligations hereunder. Bank may
sell, transfer or grant participations in the obligations without the
prior written consent of Borrower (but after obtaining an agreement to
maintain the confidentiality of any financial and business information of
Borrower), and Borrower agrees that any transferee or participant shall
be entitled to the benefits of this Agreement to the same extent as if
such transferee or participant were Bank; provided, further, that
-------- -------
notwithstanding any such transfer or participation, Borrower may, for all
purposes of this Agreement, treat Bank as the Person entitled to exercise
all rights and remedies under this Agreement and under the Notes and the
Other Documents and to receive all payments with respect to the
Obligations.
Section 13.12. Interest Rate. If the rate of interest payable by
-------------
Borrower under this Agreement, the Notes or the Other Documents shall be
or become usurious or otherwise unlawful under laws applicable thereto,
the interest rate shall be reduced to the maximum lawful rate and any
amount paid by Borrower in excess of the maximum lawful rate shall be
considered a payment in reduction of principal or, at the sole election
of Bank, shall be returned to Borrower.
Section 13.13. Counterparts. This Agreement may be signed in any
------------
number of counterparts with the same effect as if the signatures hereto
and thereto were upon one and the same instrument.
Section 13.14. No Agency Relationship. Bank is not the agent,
----------------------
fiduciary or representative of Borrower nor is Borrower the agent,
fiduciary or representative of Bank and this Agreement shall not make
Bank liable to any third party, including but not limited to, Borrower's
shareholders, directors, officers, creditors or any other person.
Section 13.15. Severability. Any provision of this Agreement
------------
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 or
affecting the validity or enforceability of such provisions in any other
jurisdiction.
-65-
Section 13.16. Headings. All article, section and subsection
--------
headings in this Agreement, the Notes and the Other Documents are
included for convenience of reference only and shall not constitute a
part of this Agreement, the Notes or the Other Documents for any other
purpose.
Section 13.17. Reinstatement. This Agreement shall continue to
-------------
be effective or be reinstated, as the case may be, if at any time any
amount received by Bank in respect of the Obligations is rescinded or
must otherwise be restored or returned by Bank upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of Borrower or
upon the appointment of any intervenor or conservator of, or trustee or
similar official for, Borrower or any substantial part of its properties
or assets, or otherwise, all as though such payments had not been made.
Section 13.18. Interpretation and Construction. The following rules
-------------------------------
shall apply to the interpretation and construction of this Agreement, the
Notes and the Other Documents unless the context requires otherwise: (a)
the singular includes the plural and the plural includes the singular;
(b) words importing any gender include the other genders; (c) references
to statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute to which reference is
made and all regulations promulgated pursuant to such statutes; (d)
references to "writing" shall include printing, photocopy, typing,
lithography and other means of reproducing words in a tangible, visible
form; (e) the words "including", "includes" and "include" shall be deemed
to be followed by the words "without limitation"; (f) references to the
introductory paragraph, preliminary statements, articles, sections (or
subdivisions of sections), exhibits or schedules are to those of this
Agreement unless otherwise indicated; (g) references to agreements and
other contractual instruments shall be deemed to include all subsequent
amendments and other modifications to such instruments, but only to the
extent that such amendments and other modifications are permitted or not
prohibited by the terms of this Agreement; (h) references to Persons
include their respective permitted successors and assigns; and (i) "or"
is not exclusive.
Section 13.19. Relation to Other Documents. Nothing in this
---------------------------
Agreement shall be deemed to amend, or relieve Borrower of its
obligations under, any of the Other Documents and to the extent that the
provisions of any of the Other Documents allow Borrower to take certain
actions, or not take certain actions, with regard for example to the
granting of liens, transfers of properties or assets, maintenance of
financial ratios and similar matters, Borrower nevertheless shall be
fully bound by the provisions of this Agreement.
-66-
IN WITNESS WHEREOF, Bank and Borrower have executed this Agreement
as of the date first above written.
FLEET BANK,
NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
THE ▇▇▇▇▇▇▇, ▇▇▇▇▇ COMPANY
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Vice President of Operations
