EXHIBIT 10
REVOLVING CREDIT AGREEMENT
dated as of September 4, 1996
between
ALLIED DEVICES CORPORATION, as "Borrower"
and
THE CHASE MANHATTAN BANK, as "Bank"
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS; ACCOUNTING TERMS.
Section 1.01 Definitions
Section 1.02 Accounting Terms
ARTICLE 2 THE CREDIT.
Section 2.01 Revolving Credit Loans
Section 2.02 Borrowing Base Formula
Section 2.03 The Revolving Credit Note
Section 2.04 Use of Proceeds
Section 2.05 Borrowing Procedures for Revolving Credit Loans
Section 2.06 Prepayments
Section 2.07 Changes of Commitment
Section 2.08 Certain Notices
Section 2.09 Minimum Amounts
Section 2.10 Interest on Revolving Credit Loans
Section 2.11 Revolving Credit Commitment Fee
Section 2.12 Payments Generally
Section 2.13 Capital Requirements
Section 2.14 HLT Classification
Section 2.15 Additional Costs
Section 2.16 Limitation on Types of Loans
Section 2.17 Illegality
Section 2.18 Compensation
Section 2.19 Survival
Section 2.20 Late Payment Fee
Section 2.21 Default Interest
Section 2.22 Excess of Borrowing Base Formula
Section 2.23 Interest Periods
ARTICLE 3 CONDITIONS PRECEDENT.
Section 3.01 Documentary Conditions Precedent
Section 3.02 Additional Conditions Precedent
Section 3.03 Deemed Representations
ARTICLE 4 REPRESENTATIONS AND WARRANTIES.
Section 4.01 Incorporation, Good Standing and Due Qualification
Section 4.02 Corporate Power and Authority; No Conflicts
Section 4.03 Legally Enforceable Agreements
Section 4.04 Litigation
Section 4.05 Financial Statements
Section 4.06 Ownership and Liens
Section 4.07 Taxes
Section 4.08 ERISA
Section 4.09 Subsidiaries and Ownership of Stock
Section 4.10 Credit Arrangements
Section 4.11 Operation of Business
Section 4.12 Hazardous Materials
Section 4.13 No Default on Outstanding Judgments or Orders
Section 4.14 No Defaults on Other Agreements
Section 4.15 Labor Disputes and Acts of God
Section 4.16 Governmental Regulation
Section 4.17 Partnerships
Section 4.18 No Forfeiture
Section 4.19 Solvency
Section 4.20 Permits and Licenses
ARTICLE 5 AFFIRMATIVE COVENANTS.
Section 5.01 Maintenance of Existence
Section 5.02 Conduct of Business
Section 5.03 Maintenance of Properties
Section 5.04 Maintenance of Records
Section 5.05 Maintenance of Insurance
Section 5.06 Compliance with Laws
Section 5.07 Right of Inspection
Section 5.08 Reporting Requirements
Section 5.09 Payment of Obligations
Section 5.10 Notice of Subsidiaries and/or Affiliates
Section 5.11 Maintenance of Licenses and Permits
Section 5.12 Continued Perfection of Lien and Security Agreement
Section 5.13 Notice of Adverse Change
ARTICLE 6 NEGATIVE COVENANTS.
Section 6.01 Debt
Section 6.02 Guaranties, Etc.
Section 6.03 Liens
Section 6.04 Investments
Section 6.05 Dividends
Section 6.06 Sale of Assets
Section 6.07 Stock of Subsidiaries, Etc.
Section 6.08 Transactions with Affiliates
Section 6.09 Mergers, Etc.
Section 6.10 Acquisitions
Section 6.11 No Activities Leading to Forfeiture
Section 6.12 Change in Senior Management
Section 6.13 Sale of Notes/Accounts Receivable
Section 6.14 Prepayment of Outstanding Debt
ARTICLE 7 FINANCIAL COVENANTS.
Section 7.01 Current Ratio
Section 7.02 Debt Service Ratio
Section 7.03 Leverage Ratio
ARTICLE 8 EVENTS OF DEFAULT.
Section 8.01 Events of Default
Section 8.02 Remedies
Section 8.03 Lock Box Arrangement
ARTICLE 9 MISCELLANEOUS
Section 9.01 Amendments and Waivers
Section 9.02 Usury
Section 9.03 Expenses
Section 9.04 Survival
Section 9.05 Assignment; Participations
Section 9.06 Notices
Section 9.07 Setoff
Section 9.08 Jurisdiction; Immunities
Section 9.09 Table of Contents; Headings
Section 9.10 Severability
Section 9.11 Counterparts
Section 9.12 Integration
Section 9.13 Governing Law
EXHIBITS
Exhibit A Promissory Note
Exhibit B Guaranty
Exhibit C Security Agreement
Exhibit D Declaration of Restrictions
Exhibit E Borrowing Base Certificate
Exhibit F Landlord Waiver
SCHEDULES
Schedule I Subsidiaries of Borrower
Schedule II Credit Arrangements
Schedule III Hazardous Materials
REVOLVING CREDIT AGREEMENT dated as of September 4, 1996, between ALLIED
DEVICES CORPORATION, a corporation organized under the laws of the State of
Nevada and authorized to do business under the laws of the State of New York
(the "Borrower") and THE CHASE MANHATTAN BANK, a banking corporation organized
under the laws of the State of New York (the "Bank").
The Borrower desires that the Bank extend credit as provided herein and the
Bank is prepared to extend such credit. Accordingly, the Borrower and the Bank
agree as follows:
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS.
Section 1.01. DEFINITIONS. As used in this Agreement the following terms
have the following meanings (terms defined in the singular to have a correlative
meaning when used in the plural and VICE VERSA):
"Acquisition" means any transaction pursuant to which the Borrower or any
of its Subsidiaries, (a) acquires, or enters into an agreement to acquire,
equity securities (or warrants, options or other rights to acquire such
securities) of any corporation or other business entity which is not then a
Subsidiary of the Borrower, pursuant to a solicitation of tenders therefor, or
in one or more negotiated block, market or other transaction not involving a
tender offer, or a combination of any of the foregoing, which results in the
Borrower having a controlling interest in such corporation or other business
entity, or (b) makes any entity not then a Subsidiary of the Borrower a
Subsidiary of the Borrower, or causes any such entity to be merged into the
Borrower or any of its Subsidiaries, in any case pursuant to a merger, purchase
of assets or any reorganization providing for the delivery or issuance to the
holders of such entity's then outstanding securities, in exchange for such
securities, of cash or securities of the Borrower or any of its Subsidiaries, or
a combination thereof, or (c) purchases all or substantially all of the business
or assets of any entity.
"Affiliate" means any Person: (a) which directly or indirectly controls,
or is controlled by, or is under common control with, the Borrower or any of its
Subsidiaries; (b) which directly or indirectly beneficially owns or holds 5% or
more of any class of voting stock of the Borrower or any such Subsidiary; (c)
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which 5% or more of the voting stock of which is directly or indirectly
beneficially owned or held by the Borrower or such Subsidiary; or (d) which is a
partnership in which the Borrower or any of its Subsidiaries is a general
partner; or (e) which is a limited liability company in which the Borrower or
any of its Subsidiaries is a member. The term "control" 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 the ownership of voting
securities, by contract, or otherwise.
Notwithstanding the above, excluded from the definition of Affiliate shall
be any natural person or institutional investor.
"Agreement" means this Credit Agreement, as amended or supplemented from
time to time. References to Articles, Sections, Exhibits, Schedules and the
like refer to the Articles, Sections, Exhibits, Schedules and the like of this
Agreement unless otherwise indicated.
"Amortization" means amortization in accordance with GAAP.
"Banking Day" means any day on which commercial banks are not authorized or
required to close in New York City.
"Borrowing Base" means at any time an amount equal to the sum of (i)
eighty-five percent (85%) (the "Accounts Receivable Advance Rate") of the
Borrower's "Eligible Accounts Receivable" and (ii) the lower of (x) thirty
percent (30%) (the "Inventory Advance Rate" and together with the Accounts
Receivable Advance Rate shall be collectively referred to as the "Advance
Rates") of the Borrower's "Eligible Inventory", or (y) Two Million and 00/100
($2,000,000.00) Dollars. At all times, the Bank shall require that 100% of the
Revolving Credit Loans shall not exceed the then current Borrowing Base.
Notwithstanding the above, the Bank reserves the right to change the
Accounts Receivable Advance Rate and/or Inventory Advance Rate in its sole
discretion whether such change is based upon the results of a field audit or
otherwise, upon 30 days prior written notice to the Borrower.
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"Borrowing Base Certificate" means a certificate signed by the Chairman of
the Board, President or the Chief Financial Officer of the Borrower in the form
of Exhibit E annexed hereto with such changes as the Bank may require from time
to time.
"Capital Expenditures" means for any period, the sum of (a) the Dollar
amount of gross expenditures (including obligations under Capital Leases) made
for fixed assets, real property, plant and equipment, and all renewals,
improvements, additions, and replacements thereto (but not repairs thereof)
incurred during such period which would be treated as Capital Expenditures in
accordance with GAAP and (b) the portion of all payments with respect to which
are required to be capitalized on the balance sheet of the lessor in accordance
with GAAP.
"Capital Lease" means any lease which has been or should be capitalized on
the books of the lessee in accordance with GAAP.
"Change In Control" means an event which results in any Person owning a
majority of the voting securities of the Borrower or which results in Xxxx
Xxxxxxxxx ceasing to hold his current position as an executive officer of the
Borrower or ceasing to be involved in the day to day management of the Borrower.
"Closing Date" means the date this Agreement and all Facility Documents
have been executed by the Borrower, the Guarantors and the Bank.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" means all personal property of the Borrower and each of the
Guarantors whether now existing or hereafter arising, which is subject or which
is to be subject to the Liens granted by the Security Agreement.
"Commitment" means the obligation of the Bank to make the Revolving Credit
Loans to the Borrower under this Agreement in the maximum aggregate principal
amount of $4,000,000.00, as such amount may be reduced or otherwise modified
from time to time pursuant to the terms and conditions of this Agreement.
8
"Consolidated Capital Expenditures" means Capital Expenditures of the
Borrower and its Consolidated Subsidiaries, as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Current Assets" means Current Assets of the Borrower and its
Consolidated Subsidiaries, as determined on a consolidated basis in accordance
with GAAP.
"Consolidated Current Liabilities" means Current Liabilities of the
Borrower and its Consolidated Subsidiaries, as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Debt Service Ratio" means the ratio of (i) consolidated Net
Income of the Borrower and its Subsidiaries before taxes (excluding
extraordinary gains net of cash taxes, if any) plus consolidated depreciation
and amortization expenses plus consolidated interest expense minus consolidated
unfunded Capital Expenditures minus consolidated cash dividends minus
consolidated cash tax payments to (ii) consolidated interest expense plus the
consolidated Current Portion of Long Term Debt. All categories shall be
measured on a consolidated basis over the immediately preceding four fiscal
quarters with the exception of the consolidated Current Portion of Long Term
Debt which shall be measured over the future four fiscal quarters.
"Consolidated Funded Debt" means Funded Debt of the Borrower and its
Consolidated Subsidiaries, as determined on a consolidated basis in accordance
with GAAP.
"Consolidated Subsidiary" means any Subsidiary whose accounts are or are
required to be consolidated with the accounts of the Borrower in accordance with
GAAP.
"Consolidated Tangible Net Worth" means Effective Net Worth of the Borrower
and its Consolidated Subsidiaries, as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Total Assets" means for any date with respect to the Borrower
and its Consolidated Subsidiaries, the consolidated aggregated amount which
would, in conformity with GAAP, be included under assets on the balance sheet of
the Borrower and its Consolidated Subsidiaries as at such date.
9
"Consolidated Total Liabilities" means for any date, the consolidated
aggregate amount, without duplication, of (i) all indebtedness outstanding of
the Borrower and its Consolidated Subsidiaries for borrowed money, (ii)
indebtedness for the deferred purchase price of property or services (including
trade obligations), (iii) obligations under capital leases, and (iv) all other
liabilities recorded on the consolidated financial statements of the Borrower
and its Subsidiaries in accordance with GAAP.
"Current Assets" means all assets of the Borrower and its Consolidated
Subsidiaries treated as current assets in accordance with GAAP.
"Current Liabilities" means all liabilities of the Borrower and its
Consolidated Subsidiaries treated as current liabilities in accordance with
GAAP, including without limitation (a) all obligations payable on demand or
within one year after the date in which the determination is made and (b)
installment and sinking fund payments required to be made within one year after
the date on which determination is made.
"Current Portion of Long Term Debt" means, on the date of determination
with respect to any entity, that portion of such entity's Funded Debt (including
Capital Leases) that is due and payable within the next 12 months.
"Debt" means, without duplication, with respect to any Person: (a)
indebtedness of such Person for borrowed money; (b) indebtedness for the
deferred purchase price of property or services; (c) Unfunded Benefit
Liabilities of such Person (if such Person is not the Borrower, determined in a
manner analogous to that of determining Unfunded Benefit Liabilities of the
Borrower); (d) the face amount of any outstanding letters of credit issued for
the account of such Person; (e) obligations arising under acceptance facilities;
(f) guaranties, endorsements (other than for collection in the ordinary course
of business) and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any Person, or otherwise to assure a
creditor against loss; (g) obligations secured by any Lien on property of such
Person; (h) obligations of such Person as lessee under Capital Leases; and (i)
indebtedness of such Person evidenced by a note, bond, indenture or similar
instrument and all other liabilities
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recorded on such Person's financial statements in accordance with GAAP.
"Declaration of Restrictions" means that certain agreement made by Borrower
and Guarantor to Bank dated as of the date hereof, whereby Borrower and
Guarantor agree and covenant not to transfer, assign or otherwise further
encumber the interest of the Borrower or Guarantor in the approximate 13,000
square foot building and property owned by Empire-Tyler Corporation and located
in Joplin, Missouri, so long as any indebtedness is owed by the Borrower and/or
Guarantor to the Bank or while the Commitment is in effect.
"Default" means any event which with the giving of notice or lapse of time,
or both, would become an Event of Default.
"Default Rate" means a rate per annum equal to 2% above the Prime Rate as
in effect from time to time.
"Depreciation" means depreciation determined in accordance with GAAP.
"Dividends" means, for any period, dividends paid by the applicable Person.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"Effective Net Worth" means, at any particular date with respect to any
Person, the amount of excess of Consolidated Total Assets over Consolidated
Total Liabilities, excluding subordinated debt, the subordination of which must
be satisfactory to the Bank in its sole discretion, which would, in conformity
with GAAP, be included under shareholders' equity on a balance sheet of such
entity as at such date, excluding, however, from the determination of
Consolidated Total Assets, without duplication (i) all intangible assets,
including, without limitation, organizational expenses, patents, trademarks,
copyrights, goodwill, covenants not to compete, research and developmental
costs, training costs, and deferred charges, (ii) all amounts due at any time
and from time to time from Affiliates, and (iii) all shareholder loans.
"Eligible Accounts Receivable" means accounts receivable of the Borrower
for which: (i) delivery of the merchandise or
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rendition of the service reflected in the applicable invoice has been completed;
(ii) no return, rejection or repossession has occurred; (iii) such merchandise
or services have been finally accepted by the account debtor without material
dispute, setoff, defense, or counterclaim; (iv) are not subject to offset or
deduction; (v) the Bank continues to be satisfied with the credit standing of
the account debtor in relation to the amount of credit extended; and (vi) are
not more than 90 days from invoice date. Ineligible accounts receivable shall
be determined by the Bank in its sole and absolute discretion and would include,
without limitation, accounts receivable where (i) the account debtor with
respect thereto is an Affiliate of the Borrower; (ii) the account debtor with
respect thereto is not located in the United States, however foreign accounts
receivable that are insured under an insurance policy which such policy to be
reviewed and satisfactory to the Bank in all respects, and under which policy
the Bank is named as loss payee, will be considered as Eligible Accounts
Receivable; (iii) the account debtor with respect thereto is also a supplier to
or creditor of the Borrower, unless such supplier or creditor has executed a
no-offset letter satisfactory to the Bank, provided however that to the extent
that the Bank has not received such no-offset letter and the account debtor's
account receivable due to the Borrower exceeds the account payable due from the
Borrower to the account debtor (the "Payable"), such excess shall be considered
Eligible Accounts Receivable to the extent that such Payable does not exceed
(10%), of total accounts receivable from that account debtor; (iv) the account
receivable is owing from an account debtor of which more than 50% of the total
accounts receivable from such account debtor are more than 90 days past due; (v)
the account receivable is owing from an account debtor of which there are credit
balances; (vi) the account receivable is a government receivable; (vii) the
account debtor has commenced a voluntary case under the federal bankruptcy laws,
as now constituted or hereafter amended, 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 in the premises in respect of the account debtor in an
involuntary case under any state or federal bankruptcy laws, as now constituted
or hereafter amended, or if any other petition or other application for relief
under any state or federal bankruptcy law has been filed against the account
debtor, or if the account debtor has failed, suspended business, ceased to be
solvent, called a meeting of its creditors, or consented to or suffered a
receiver, trustee, liquidator or
12
custodian to be appointed for it or for all or a significant portion of its
assets or affairs; and (viii) the sale to the account debtor is on a guaranteed
sale, sale-and-return, sale on approval, consignment or any other repurchase or
return basis or is evidenced by chattel paper. The foregoing criteria for
eligibility may be revised from time to time by the Bank in its exclusive
judgement.
"Eligible Inventory" means inventory of the Borrower including raw
materials such as bar stock stainless steel and aircraft grade aluminum and
finished goods consisting of standardized instrument components as sold through
the Borrower's current catalog (i) upon which the Bank has obtained a first
priority perfected security interest; (ii) for which the Bank has received a
properly executed landlord waiver, in form satisfactory to the Bank (should such
Eligible Inventory be located at a leased location); (iii) for which the
Borrower has made a sale within the past 360 days; (iv) which would not be
classified as "obsolete" inventory by the Borrower; (v) which is located in the
United States and (vi) which shall be at all times acceptable to the Bank in all
respects. In no event shall "Eligible Inventory" include work in process
inventory. All inventory or product built to specific customer specifications
shall be considered Eligible Inventory until June 30, 1997. At June 30, 1997 or
such date thereafter when the Borrower can provide detailed information on
inventory or product built to specific customer specifications, such inventory
shall be included as Eligible Inventory to the extent that there is a purchase
contract specifying delivery within the next ninety (90) days. The foregoing
criteria for eligibility may be revised from time to time by the Bank in its
exclusive judgment. Reserves against inventory may be established from time to
time at the sole discretion of the Bank in order to preserve collateral quality.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or Hazardous Materials or wastes into the
environment including, without limitation, ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage,
13
disposal, transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, including any rules and regulations promulgated
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which the Borrower is a member, or (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the
Borrower is a member.
"Event of Default" has the meaning given such term in Section 8.01.
"Facility Documents" means this Agreement, the Note, the Guaranty, the
Security Agreements, Declaration of Restrictions and any and all other documents
made by Borrower and/or Guarantor to Bank in connection with the Revolving
Credit Loan and/or this Agreement.
"Forfeiture Proceeding" means any action, proceeding or investigation
affecting the Borrower, Guarantor or any of their Subsidiaries or Affiliates
before any court, governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or the receipt of notice by any such party
that any of them is a suspect in or a target of any governmental inquiry or
investigation, which may result in an indictment of any of them or the seizure
or forfeiture of any of their property.
"Funded Debt" means, with respect to any Person, all Debt of such Person
for money borrowed which by its terms matures more than one year from the date
as of which such Funded Debt is incurred, and any Debt of such Person for money
borrowed maturing within one year from such date which is renewable or
extendable at the option of the obligor to a date beyond one year from such date
(whether or not theretofore renewed or extended), including any such
indebtedness renewable or extendable at the option of the obligor under, or
payable from the proceeds of other indebtedness which may
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be incurred pursuant to, the provisions of any revolving credit agreement or
other similar agreement.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, applied on a basis consistent with
those used in the preparation of the financial statements referred to in Section
4.05, except for any changes therein required by a change in GAAP.
"Grantor" has the meaning given such term in the Security Agreement.
"Guarantor" means Empire-Tyler Corporation and all Subsidiaries and
Affiliates, now existing or hereafter formed or acquired of the Borrower or any
Guarantor.
"Guaranty" means the guaranty in the form of Exhibit B to be delivered by a
Guarantor under the terms of this Agreement.
"Hazardous Materials" means any material, whether animate or inanimate,
raw, processed or waste by-product, which in itself or as found or used, is
potentially toxic, noxious or harmful to the health or safety of human or animal
life or vegetation, regardless of whether such material be found on or below the
surface of the ground, in any surface or underground water, or airborne in
ambient air or in the air inside of any structure built or located upon or below
the surface of the ground, or in any machinery, equipment or inventory located
or used in any such structure, including, but in no event limited to, all
hazardous materials, hazardous wastes, toxic substances, infectious wastes,
pollutants and contaminants from time to time defined or classified as such
under any Environmental Law regardless of the quantity found, used, manufactured
or removed from a given location.
"Interest Expense" means with respect to any entity, such entity's interest
expense as reflected in its financial statements and calculated in accordance
with GAAP.
"Interest Determination Date" shall mean the date on which a Floating Rate
Option Loan is converted to a LIBOR Option Loan and in the case of a LIBOR
Option Loan, the last day of the interest period.
15
"Interest Period" means the period commencing on the date a Loan is made
and ending, as the Borrower may select pursuant to Section 2.05 and in the case
of LIBOR Option Loans, either 1,2,3 or 6 months (subject to availability)
thereafter.
"Interest Rate" means either of the following interest rate options to be
selected by the Borrower:
(i) FLOATING RATE OPTION: Upon same Banking Day written notice to the
Bank, the Prime Rate per annum in effect from time to time. Interest
shall be computed on an actual/360 day basis and including any time
extended by reason of Saturdays, Sundays and holidays. Revolving
Credit Loans subject to the Floating Rate Option shall be in
minimum amounts of $100,000.00; or
(ii) LIBOR OPTION: Upon three (3) Banking Days written notice to the
Bank, the Bank's reserve adjusted London Interbank Offering Rate
("LIBOR") for corresponding deposits of U.S. Dollars, plus the LIBOR
Margin for periods of 1,2,3 and 6 months (subject to availability),
but in any event not beyond the Revolving Credit Termination Date and
for an amount not less than $500,000.00.
"LIBOR Margin" shall be determined and adjusted on a semi-annual basis
based upon the ratio of Consolidated Total Liabilities to Consolidated Tangible
Net Worth (the "Leverage Ratio"). Upon the receipt and satisfactory review by
the Bank of the consolidated financial statement of the Borrower for the fiscal
semi-annual period ended March 31, 1996 and for each fiscal semi-annual period
thereafter, the LIBOR Margin shall be determined based upon the Leverage Ratio
as contemplated below:
LEVERAGE RATIO LIBOR MARGIN (360 DAY BASIS)
-------------- ----------------------------
Xxxxx 0 < .49 1.50%
Xxxxx 0 > .50 but < 1.25 1.75%
Xxxxx 0 > 1.25 2.00%
Xxxxx 0 and 2 interest rates shall be available to the Borrower provided that
(i) the Borrower's financial statements are received
16
within the required time frame pursuant to this Agreement and (ii) no Event of
Default has occurred and is continuing under this Agreement. Provided that
there is no Event of Default under this Agreement or any related documents, the
referenced interest rates shall become effective and shall pertain to each new
LIBOR Option Loan five business days after the receipt by the Bank of the
consolidated financial statements of the Borrower for such period together with
a certificate of the Borrower demonstrating the calculation of the Leverage
Ratio and shall remain in effect for the succeeding period until the receipt by
the Bank of the financial statements for the next succeeding fiscal period.
However, should such financial statements not be submitted to the Bank within
the required time frames, LIBOR Margin shall be that outlined above for Level 3.
The Bank shall not be deemed to have waived any Event of Default or any of its
remedies in connection with the foregoing.
"Lending Office" means, the lending office of the Bank (or of an affiliate
of the Bank) designated as such on its signature page hereof or such other
office of the Bank (or of an affiliate of the Bank) as the Bank may from time to
time specify to the Borrower.
"Lien" means any lien (statutory or otherwise), security interest,
mortgage, deed of trust, priority, pledge, charge, conditional sale, title
retention agreement, financing lease or other encumbrance or similar right of
others, or any agreement to give any of the foregoing.
"Loans" means the Revolving Credit Loans.
"Multiemployer Plan" means a Plan defined as such in Section 3(37) of ERISA
to which contributions have been made by the Borrower or any ERISA Affiliate and
which is covered by Title IV of ERISA.
"Net Income" means with respect to any Person for any period, such Person's
net income after taxes for such period as reflected on such entity's financial
statements.
"Note" means the Revolving Credit Note in the form of Exhibit "A" annexed
hereto evidencing the Loans.
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"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority or other entity of whatever nature.
"Plan" means any employee benefit or other plan established or maintained,
or to which contributions have been made, by the Borrower or any ERISA Affiliate
and which is covered by Title IV of ERISA, other than a Multiemployer Plan.
"Prime Rate" means that rate of interest from time to time announced by the
Bank at the Principal Office as its prime commercial lending rate.
"Principal Office" means the principal office of the Bank, presently
located at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
"Regulation G, T, U or X" means Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System as the same may be amended or
supplemented from time to time.
"Reportable Event" means any of the events set forth in Section 4043(b) of
ERISA as to which events the PBGC by regulation has not waived the requirement
of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence
of such event, provided that a failure to meet the minimum funding standard of
Section 412 of the Code or Section 302 of ERISA shall be a Reportable Event
regardless of any waivers given under Section 412(d) of the Code.
"Revolving Credit Commitment" means the obligation of the Bank to extend
Revolving Credit Loans to the Borrower in accordance with the terms hereof in
the aggregate principal amount of $4,000,000.00 as such amount may be reduced or
otherwise modified from time to time in accordance with the terms hereof.
"Revolving Credit Loans" means any Loan made by the Bank pursuant to
Section 2.01 hereof.
18
"Revolving Credit Note" means a promissory note of the Borrower in the form
of Exhibit A hereto evidencing the Revolving Credit Loans made by the Bank
hereunder.
"Revolving Credit Termination Date" means the earlier of (i) the date on
which the Revolving Credit Loans are paid in full and the Revolving Credit
Commitments shall terminate hereunder and the obligations of the Borrower in
connection therewith have been satisfied or (ii) the date three (3) years from
the date hereof; provided that if such date is not a Business Day, the Revolving
Credit Termination Date shall be the next succeeding Business Day.
"Security Agreements" means the Security Agreement to be delivered by
Borrower and Guarantors under the terms of this Agreement.
"Solvent" means when used with respect to any Person on a particular date,
that on such date: (a) the present fair saleable value of its assets is in
excess of the total amount of its liabilities, including, without limitation,
the reasonably expected amount of such Person's obligations with respect to
contingent liabilities, (b) the present fair saleable value of the assets of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its Debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur Debts or liabilities beyond such Person's ability to pay as such Debts and
liabilities mature and (d) such Person is not engaged in business or a
transaction, for which such Person's property would constitute an unreasonably
small capital.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or joint venture, whether now existing or hereafter formed or
acquired, or other entity and (i) in the case of a corporation, of which at
least a majority of the securities or other ownership interests having ordinary
voting power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by such Person and (ii) in the case of a partnership or joint
venture, of which a majority of the partnership or other ownership interests are
at the time owned by such Person and/or Subsidiaries of such Person.
19
"Unfunded Benefit Liabilities" means, with respect to any Plan, the amount
(if any) by which the present value of all benefit liabilities (within the
meaning of Section 4001(a)(16) of ERISA) under the Plan exceeds the fair market
value of all Plan assets allocable to such benefit liabilities, as determined on
the most recent valuation date of the Plan and in accordance with the provisions
of ERISA for calculating the potential liability of the Borrower or any ERISA
Affiliate under Title IV of ERISA.
Section 1.02. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data required to be delivered hereunder shall be prepared in accordance with
GAAP.
ARTICLE 2. THE CREDIT.
Section 2.01. REVOLVING CREDIT LOANS. (a) Subject to the terms and
conditions of this Agreement, and relying on the representations and warranties
set forth herein, the Bank agrees to make Revolving Credit Loans in Dollars (the
"Revolving Credit Loans") to the Borrower from time to time from and including
the date hereof to and including the Revolving Credit Termination Date, up to
but not exceeding in the aggregate principal amount at any one time outstanding,
the amount of the Commitment. Subject to the foregoing limits, the Borrower may
borrow, repay, reborrow, on or after the date hereof and prior to the Revolving
Credit Termination Date, all or a portion of the Revolving Credit Commitment
hereunder. The Revolving Credit Loans may be made at the Floating Rate Option,
the LIBOR Option, or a combination thereof.
(b) The principal amount of each Revolving Credit Loan shall be due and payable
on the earlier of (i) the last day of the Interest Period therefor or (ii) the
Revolving Credit Termination Date .
Section 2.02. BORROWING BASE FORMULA. The Loans shall be extended and
maintained upon the Borrowing Base formula. The total outstandings under this
Agreement, including any requested borrowings, must either be equal to or less
than the amount determined each month and before each borrowing to be the
Borrower's Borrowing Base formula up to a limit of $4,000,000.00. The
borrowings are contingent upon the Bank's receipt of the most current monthly
aging of accounts receivable, the most current monthly inventory report and
Borrowing Base Certificate of the
20
Borrower. These reports must be delivered to the Bank not more than fifteen
(15) days from the last day of each month. A current Borrowing Base Certificate
(as of the last day of the preceding month prior to the drawdown) must be
submitted to the Bank before each drawdown;
Section 2.03. THE REVOLVING CREDIT NOTE. The Revolving Credit Loans shall
be evidenced by a single Revolving Credit Note in favor of the Bank
substantially in the form of Exhibit A with appropriate insertions, duly
executed and completed by the Borrower. The Bank is hereby authorized to record
the date and amount of each Revolving Credit Loan, the date and amount of each
payment or prepayment of principal thereof and the principal amount subject
thereto in the Bank's records and/or on the schedules annexed to and
constituting a part of the Note, and any such recordation shall constitute PRIMA
FACIE evidence of the accuracy of the information so recorded; provided that the
failure to make any such recordation shall not in any way affect the Borrower's
obligation to repay the Revolving Credit Loans. The Revolving Credit Note (a)
shall be dated the date hereof, (b) shall be stated to mature on the Revolving
Credit Termination Date and (c) shall bear interest from and including the date
hereof on the unpaid principal amount thereof from time to time outstanding as
provided herein.
Section 2.04. USE OF PROCEEDS. (a) The Borrower shall use the proceeds
of the Revolving Credit Loans to refinance existing bank loans and for general
working capital purposes. No part of the proceeds of any of the Revolving
Credit Loans will be used for any purpose which violates the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System
as in effect on the date of making such Loans.
(b) The Borrower agrees to indemnify the Bank and hold the Bank harmless
from and against any and all liabilities, losses, damages, costs and expenses of
any kind (including, without limitation, the reasonable fees and disbursements
of counsel for the Bank in connection with any investigative, administrative or
judicial proceeding, whether or not the Bank shall be designated a party
thereto) which may be incurred by the Bank, relating to or arising out of any
actual or proposed use of proceeds of Revolving Credit Loans hereunder.
21
Section 2.05 BORROWING PROCEDURES FOR REVOLVING CREDIT LOANS. The
Borrower may request a borrowing under the Revolving Credit Commitment hereunder
as provided in Section 2.08. On the date of such borrowing, the Bank shall,
subject to the conditions of this Agreement, make available to the Borrower, in
immediately available funds, the amount of such borrowing by crediting an
account of the Borrower designated by the Borrower and maintained with the Bank.
If the amount of said request for borrowing, when combined with all outstanding
Revolving Credit Loans exceeds the Borrowing Base formula, the Bank shall not be
obligated to make said Loan.
Section 2.06. PREPAYMENTS. On any Revolving Credit Loans subject to the
Floating Rate Option the Borrower shall have the right to make prepayments of
principal, at any time or from time to time, provided that the Borrower shall
give the Bank notice of each such prepayment as provided in Section 2.08, and
any prepayment must be in minimum amounts of $100,000.00.
On any Revolving Credit Loans subject to the LIBOR Option, the Borrower
shall have the right to make prepayments of principal only on the last day of
the Interest Period corresponding to each Revolving Credit Loan provided that
the Borrower shall give the Bank notice of each such prepayment as provided in
Section 2.08 and any prepayment must be in minimum amounts of $100,000.00.
Section 2.07. CHANGES OF COMMITMENT. The Borrower shall have the right to
reduce or terminate the amount of unused Commitment at any time or from time to
time, provided that: (a) the Borrower shall give notice of each such reduction
or termination to the Bank as provided in Section 2.08; and (b) each partial
reduction shall be in an aggregate amount at least equal to $100,000.00. The
Commitment once reduced or terminated may not be reinstated.
Section 2.08. CERTAIN NOTICES. Notices by the Borrower to the Bank of
each borrowing pursuant to Section 2.05, and each prepayment pursuant to Section
2.06, and each reduction or termination of the Commitment pursuant to Section
2.07 shall be irrevocable and shall be effective only if received by the Bank
not later than 12:00 noon New York City time, and in the case of borrowings and
prepayments, given on or prior to the Banking Day therefor. In the case of
reductions or termination of the Commitment, the Bank shall be given notice
three Banking Days prior thereto. Each such notice shall specify the Loans to
be borrowed
22
or prepaid, and the Interest Rate and the amount (subject to Section 2.09) and
the date of the borrowing or prepayment (which shall be a Banking Day). Each
such notice of reduction or termination shall specify the amount of the
Commitment to be reduced or terminated. Any notice of borrowing that does not
specify an Interest Rate option or if a Libor Option Loan matures and Bank does
not receive notice of an Interest Rate Option, the Interest Rate shall be deemed
a Floating Rate Option Loan and any request for a LIBOR Option Loan which does
not request an Interest Period shall be deemed to be a LIBOR Option Loan with an
Interest Period of one (1) month.
Section 2.09. MINIMUM AMOUNTS. Except for borrowings which exhaust the
full remaining amount of the Commitment, and prepayments (in the case of
Floating Rate Option Loans) which result in the prepayment of all Loans, each
borrowing and prepayment of principal of a Loan shall be in an amount of at
least equal to or a multiple of $100,000.00 ($500,000.00 in the case of LIBOR
Option Loan).
Section 2.10. INTEREST ON REVOLVING CREDIT LOANS.. The Borrower shall pay
interest, computed at the "Interest Rate" in effect, on the outstanding and
unpaid principal amount of each Revolving Credit Loan made under this Agreement.
Interest shall be payable (i) monthly in arrears commencing the last business
day of the first month following the date hereof, (ii) on any Interest
Determination Date, and (iii) on the Revolving Credit Termination Date.
Section 2.11. REVOLVING CREDIT COMMITMENT FEE. (a) The Borrower shall pay
to the Bank a commitment fee (the "Commitment Fee") equal to one-quarter of one
percent (0.25%) per annum on the average daily unused portion of the Revolving
Credit Commitment. The Commitment Fee shall be due and payable in arrears on
the last day of each calendar quarter commencing the first calendar quarter
immediately following the Closing Date and on the Revolving Credit Termination
Date.
Section 2.12. PAYMENTS GENERALLY. All payments under this Agreement or
the Note shall be made in Dollars in immediately available funds not later than
1:00 p.m. New York City time on the relevant dates specified above (each such
payment made after such time on such due date to be deemed to have been made on
the next
23
succeeding Banking Day) at the Lending Office of the Bank, provided that, when a
new Revolving Credit Loan is to be made by the Bank on a date the Borrower is to
repay any principal of any outstanding Revolving Credit Loans, the Bank shall
apply the proceeds thereof to the payment of principal to be repaid and only an
amount equal to the difference between the principal to be borrowed and the
principal to be repaid shall be made available by the Bank to the Borrower as
provided in Section 2.05 or paid by the Borrower to the Bank pursuant to this
Section 2.12, as the case may be. The Bank shall debit the Borrower's demand
deposit account maintained with the Bank for all principal payments, interest
payments and payments of any and all fees due the Bank on said due dates. The
Borrower shall, at the time of making each payment under this Agreement or the
Note, specify to the Bank the principal or other amount payable by the Borrower
under this Agreement or the Note to which such payment is to be applied (and in
the event that it fails to so specify, or if a Default or Event of Default has
occurred and is continuing, the Bank may apply such payment as it may elect in
its sole discretion). If the due date of any payment under this Agreement or
the Note would otherwise fall on a day which is not a Banking Day, such date
shall be extended to the next succeeding Banking Day and interest shall be
payable for any principal so extended for the period of such extension. If the
due date of any payment under this Agreement or the Note would otherwise fall on
a day which is not a Banking Day, such date shall be, in the case of LIBOR
Option Loans, extended to the next succeeding Banking Day unless the next
succeeding Banking Day would fall in the next calendar month, in which case such
date shall be on the next preceding Banking Day. All payments under this
Agreement shall be made by the Borrower without defense, setoff or counterclaim
to the Bank on the date when due and shall be made in lawful money of the United
States of America in immediately available funds.
Section 2.13. CAPITAL REQUIREMENTS. (a) The Borrower shall pay to the
Bank from time to time on demand such amounts as the Bank may determine to be
necessary to compensate the Bank for any costs which the Bank determines are
attributable to its obligation to extend credit hereunder in respect of any
amount of capital maintained by the Bank or any of its affiliates pursuant to
any law or regulation of any jurisdiction or any interpretation, directive or
request (whether or not having the force of law) of any court or governmental or
monetary authority, whether in effect on the date of this Agreement or
thereafter. Without limiting the foregoing,
24
such compensation shall include an amount equal to any reduction in return on
assets or return on equity to a level below that which the Bank could have
achieved but for such law, regulation, interpretation, directive or request.
The Bank will notify the Borrower if it is entitled to compensation pursuant to
this Section as promptly as practicable after it determines to request such
compensation.
(b) Determinations and allocations by the Bank for purposes of this
Section as to the effect of capital requirements on its obligation to extend
credit, and of the additional amounts required to compensate the Bank under this
Section shall be conclusive, provided that such determinations and allocations
are conclusive absent manifest error. For purposes of this Section 2.13, in
calculating the amount necessary to compensate the Bank for any such cost, the
Bank shall calculate the amount payable to it in a manner consistent with the
manner in which it shall calculate similar compensation payable to it by other
borrowers having provisions in their credit agreements comparable to this
Section 2.13.
Section 2.14. HLT CLASSIFICATION. If, after the date hereof, the Bank has
received notice from any governmental authority, central bank or comparable
agency having jurisdiction over the Bank that the definition of highly leveraged
transaction has been modified with the result that its Loans hereunder are
classified as a "highly leveraged transaction" (an "HLT Classification") or if
the Borrower takes any action which causes this transaction to be subject to HLT
Classification the Bank shall promptly give notice of such HLT Classification to
the Borrower. The Bank and the Borrower shall commence negotiations in good
faith to agree on whether and, if so, the extent to which commitment fees,
interest rates and/or margins hereunder should be increased so as to reflect
such HLT Classification. If the Borrower and the Bank fail to agree on such
increases within thirty (30) days after notice is given as provided above, then
(i) the Bank shall, by notice to the Borrower immediately terminate the
Commitment, and (ii) the Borrower shall be obligated to prepay on the date of
such termination of the Commitment each outstanding Loan by paying the aggregate
principal amount to be prepaid together with all accrued interest thereon to the
date of such prepayment; provided that, if the Borrower prepays any LIBOR Option
Loans pursuant to this clause, the Borrower shall compensate the Bank for any
resulting
25
funding losses. The Bank acknowledges that a HLT Classification is not a
Default or an Event of Default hereunder.
Section 2.15. ADDITIONAL COSTS. (a) Borrower shall pay to Bank from time
to time such amounts as Bank may determine to be necessary to compensate it for
any costs which the Bank determines are attributable to its making or
maintaining any LIBOR Option Loan under this Agreement or its undertaking to
make or maintain any such LIBOR Option Loans hereunder, or any reduction in any
amount receivable by Bank hereunder in respect of any such LIBOR Option Loans or
such undertaking (such increases in costs and reductions in amounts receivable
being herein called "Additional Costs"), resulting from any regulatory change
applicable to Bank which: (i) changes the basis of taxation of any amounts
payable to Bank under this Agreement in respect of any of such LIBOR Option
Loans (other than federal and state taxes imposed on the net income of Bank on
account of any of such LIBOR Option Loans by the jurisdiction in which the Bank
is located); or (ii) imposes or modifies any reserve, special deposit, deposit
insurance or assessment, capital or similar requirements relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, Bank; or (iii) imposes any other condition affecting this
Agreement (or any of such extensions of credit or liabilities ). Bank will
notify Borrower of any event occurring after the date of this Agreement which
will entitle Bank to compensation pursuant to this Section 2.15 as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation. All payments required from Borrower hereunder shall be made
within fifteen (15) days of Borrower's receipt of notice that such payments are
due.
(b) Without limiting the effect of the foregoing provisions of this
Section 2.15, in the event that, by reason of any regulatory change applicable
to Bank, Bank either (i) incurs Additional Costs based on or measured by the
excess above a specified level of the amount of a category of deposits or other
liabilities of Bank which includes deposits by reference to which the LIBOR
Option Interest Rate is determine, as provided in this Agreement or a category
of extensions of credit or other assets of Bank which includes LIBOR Option
Loans or (ii) becomes subject to restrictions on the amount of such a category
of liabilities or assets which it may hold, then, if Bank so elects by notice to
Borrower, the undertaking of Bank to make such LIBOR Option Loans, or to renew
the LIBOR Option Interest Rate or to convert any
26
interest rate option to the LIBOR Option Interest Rate shall be suspended until
the date such applicable regulatory change ceases to be in effect, and Borrower
shall on the last day of the then current Interest Period for such affected
outstanding Loans, pay such Loans in accordance with this Agreement.
(c) Determinations and allocations by Bank for purposes of this Section
2.15 of the effect of any applicable regulatory change on its costs of making or
maintaining such LIBOR Option Loans or on amounts receivable by it in respect of
such LIBOR Option Loans, and of the additional amounts required to compensate
Bank in respect of any Additional Costs, shall be conclusive, provided that such
determinations are made in good faith on a reasonable basis and are made in a
manner consistent with the manner in which it shall calculate similar
compensation payable to it by other borrowers having provisions in their credit
agreements comparable to this Section 2.15.
Section 2.16. LIMITATION ON TYPES OF LOANS. Anything herein to the
contrary notwithstanding, if Bank determines (which determination shall be
conclusive) that the relevant rates of interest which are the basis of the LIBOR
Option Interest Rate do not adequately cover the cost to Bank of making or
maintaining the LIBOR Option Loans, then Bank shall give Borrower prompt notice
thereof, and so long as such condition remains in effect, Bank shall be under no
obligation to make such LIBOR Option Loans and Borrower shall, on the last
day(s) of the current Interest Period(s) for the outstanding LIBOR Option Loans
of the affected type, pay such LIBOR Option Loans in accordance with this
Agreement.
Section 2.17. ILLEGALITY. Notwithstanding any other provisions in this
Agreement, in the event that it becomes unlawful for Bank to (a) honor its
undertaking to make LIBOR Option Loans hereunder, or (b) maintain such LIBOR
Option Loans hereunder, then Bank shall promptly notify Borrower thereof and
Bank's undertaking to make such LIBOR Option Loans shall be suspended until such
time as Bank may again make and maintain such affected LIBOR Option Loans and
LIBOR Option Interest Rate, and Borrower shall, on the last day(s) of the then
current Interest Period(s) for the outstanding LIBOR Option Loans (or on such
earlier date as Bank may specify to Borrower, due to the illegality of
maintaining such
27
LIBOR Option Loans), pay such LIBOR Option Loans in accordance with this
Agreement.
Section 2.18. COMPENSATION. Borrower shall pay to Bank, upon the request
of Bank and within fifteen (15) days of such request, such amount or amounts as
shall be sufficient (in the reasonable opinion of Bank) to compensate it for any
loss, cost or expense which Bank determines is attributable to:
(a) any payment or prepayment of a LIBOR Option Loan, where such payment
or prepayment occurs on a date other than the last day of an Interest Period for
the respective LIBOR Option Loans (whether by reason of demand by Bank for
payment or otherwise); or
(b) any failure by Borrower to, on the date specified therefor in the
relevant notice under this Agreement, enter into a LIBOR Option Loan.
Without limiting the foregoing, such compensation shall include an amount equal
to the excess, if any, of (i) the amount of interest which otherwise would have
accrued on the principal amount so paid or prepaid or not borrowed for the
period from and including the date of such payment or prepayment or failure to
borrow to but excluding the last day of the then current Interest Period for
such LIBOR Option Loan (or, in the case of a failure to borrow to but excluding
the last day of the Interest Period for such LIBOR Option Loan which would have
commenced on the date specified therefor in the relevant notice) at the
applicable rate of interest for such LIBOR Option Loan provided for herein over
(ii) the amount of interest (as reasonably determined by Bank) the reference
bank would have bid in the London interbank market (if such Loan is a LIBOR
Option Loan) for U.S. Dollar deposits for amounts comparable to such principal
amount and maturities comparable to such Interest Period. A determination of
the Bank as to the amounts payable pursuant to this Section 2.18 shall be
conclusive absent manifest error.
Section 2.19. SURVIVAL. The undertaking of Borrower under this Article 2
shall survive the repayment of the Loans and termination of the Revolving Credit
Commitment.
Section 2.20. LATE PAYMENT FEE. If Borrower fails to maintain sufficient
available funds on the respective payment due dates in
28
its demand deposit account maintained with the Bank, as set forth in Section
2.12, for the payment of principal, interest and/or fees due the Bank, the
Borrower shall be required to pay additional interest on said late payment by
calculating the amount of principal and/or interest and/or fees past due times
(x) the Prime Rate plus two percent (2%) per annum/(360 days) times (y) the
number of days the payment(s) are past due.
Section 2.21. DEFAULT INTEREST. Notwithstanding any other provision of
this Agreement, upon the occurrence and during the continuance of an Event of
Default, each Loan outstanding hereunder shall bear interest at a rate per annum
equal to the Default Rate until such Event of Default has been either cured or
waived by the Bank. No payment of the default interest shall be required in
respect to any amount for which a payment has been made pursuant to Section
2.20.
Section 2.22. EXCESS OF BORROWING BASE FORMULA. If at any time the total
outstandings of the Revolving Credit Loans exceed the maximum amount available
under the Borrowing Base formula, upon notice by the Bank to the Borrower, the
Borrower shall reduce the outstanding balance of the Revolving Credit Loans, on
the same day as notice is received by the Borrower, in an amount sufficient to
reduce the total outstandings of the Revolving Credit Loans to be within the
maximum amount available under the Borrowing Base formula. Said payments shall
be applied first to Floating Rate Option Loans and then the balance to the
reduction of LIBOR Option Loans.
Section 2.23. INTEREST PERIODS. In the case of each Loan, the Borrower
shall select an Interest Period of any duration in accordance with the
definition of Interest Period in Section 1.01, subject to the following
limitations: (a) no Interest Period may extend beyond the Revolving Credit
Termination Date; and (b) if an Interest Period would end on a day which is not
a Banking Day, such Interest Period shall be extended to the next Banking Day
unless such Banking Day would fall in the next calendar month in which event
such Interest Period shall end on the immediately preceding Banking Day.
ARTICLE 3. CONDITIONS PRECEDENT.
29
Section 3.01. DOCUMENTARY CONDITIONS PRECEDENT. The obligation of the
Bank to make the Revolving Credit Loan constituting the initial borrowing is
subject to the condition precedent that the Bank shall have received on or
before the date of such Revolving Credit Loan each of the following, in form and
substance satisfactory to the Bank and its counsel:
(a) the Note duly executed by the Borrower;
(b) the Guaranty duly executed by each Guarantor;
(c) a certificate of the Secretary or Assistant Secretary of the Borrower
and each Guarantor, dated the Closing Date, attesting to all corporate action
taken by the Borrower and each Guarantor, including resolutions of its Board of
Directors authorizing the execution, delivery and performance of the Facility
Documents to which it is a party and each other document to be delivered
pursuant to this Agreement together with certified copies of the certificate or
articles of incorporation and the by laws and any amendments thereto of the
Borrower and Guarantor; each such certificate shall be executed by the
respective Secretary or Assistant Secretary of the Borrower and Guarantor and
shall state that the resolutions and corporate documents thereby certified have
not been amended, modified , revoked or rescinded as of the date of the initial
borrowing of the Loans;
(d) a certificate of the Secretary or Assistant Secretary of the Borrower
and Guarantor, dated the Closing Date, certifying the names and true signatures
of the officers of the Borrower and Guarantor authorized to sign the Facility
Documents to which it is a party and the other documents to be delivered by the
Borrower and Guarantor under this Agreement;
(e) a certificate of a duly authorized officer of the Borrower and
Guarantor, dated the Closing Date, stating that the representations and
warranties in Article 4 are true and correct on such date as though made on and
as of such date and that no event has occurred and is continuing which
constitutes a Default or Event of Default;
(f) a "long form" certificate of good standing of the Borrower and
Guarantor;
30
(g) the Security Agreements duly executed by the Borrower and Guarantor
together with (a) Financing Statements on Form UCC-1 under the Uniform
Commercial Code for all jurisdictions necessary or, in the opinion of the Bank,
desirable to perfect the security interests created by the Security Agreement
and (b) UCC search results indicating that no party claims an interest in any of
the Collateral;
(h) satisfactory evidence that the Borrower's current lenders, including
Fleet Bank, N.A., shall have been (or shall concurrently be) paid in full, all
commitments shall have been terminated, all guaranties of Borrower and Guarantor
shall have been released and that all liens granted to such lenders by Borrower
and/or Guarantor shall have been terminated, which evidence shall include UCC-3
Termination Statements for all UCC-1 Financing Statements filed on behalf of
such lenders;
(i) a favorable opinion of counsel for the Borrower and Guarantor, dated
the Closing Date, which must be deemed acceptable to the Bank and its counsel;
(j) a Declaration of Restrictions of Guarantor, dated the Closing Date, in
substantially the form of Exhibit D and as to such other matters as the Bank may
request;
(k) an all-risk property insurance policy issued by a company satisfactory
to the Bank in its sole and absolute discretion, naming the Bank, as loss payee
and additional insured and a general public liability insurance policy
satisfactory to the Bank, in its sole discretion, naming the Bank as additional
insured. Said insurance policies must be issued by licensed New York insurance
companies maintaining an "A" rating or better by A.M. Best Insurance Guide;
(l) all documentation required by the terms and conditions of this
Agreement;
(m) the consolidated financial statements of the Borrower and its
Subsidiaries for the fiscal year ended September 30, 1995 and the interim
consolidated financial statements of the Borrower and its Subsidiaries for the
nine (9) month period ending June 30, 1996, which each must be in a form and
substance satisfactory to the Bank;
31
(n) a payoff letter from Fleet Bank, N.A. evidencing the full repayment and
satisfaction of all obligations of the Borrower and Guarantors under all
existing credit facilities with Fleet Bank, N.A.;
(o) the most recent (to be dated within 30 days of the date hereof) aging
of accounts receivable of the Borrower, in form and substance satisfactory to
the Bank;
(p) the most recent (to be dated within 30 days of the date hereof)
inventory designation schedule of the Borrower (and other inventory reports to
be determined by the Bank);
(q) an updated Borrowing Base Certificate which is dated as of the date
hereof;
(r) a field audit report which must be satisfactory in form and substance
to the Bank;
(s) landlord waivers for all leased locations where assets of the Borrower
and Guarantors are located, in the form of Exhibit F annexed hereto and which
must be satisfactory in form and substance to the Bank and the Bank's counsel;
(t) due diligence reports with respect to the Borrower and the Guarantors
including, without limitation, bank checkings, trade checkings, customer
checkings and litigation checkings and all due diligence with respect to
management;
(u) all material loan or credit agreements entered into by the Borrower or
any Guarantor and all material shareholder, employee and management agreements
with respect to the Borrower or any Guarantor;
(v) a schedule of all lease agreements affecting the Borrower and the
Guarantor which such schedule shall include without limitation the lessor, the
lessee, the term of the lease, the annual lease expenditure, the expiration of
the lease and whether such lease is an operating or capital lease;
(w) the agreement for the Borrower's private placement of the common stock
completed during 1994;
32
(x) nothing shall have occurred to the Borrower and/or Guarantor, which in
the Bank's sole judgment could, individually or in aggregate, have a material
adverse effect on (a) the rights and remedies of the Bank under the definitive
documentation for the Revolving Credit Loan, (b) the ability of the Borrower and
the Guarantor to perform their respective obligations or (c) the business,
property, assets, liabilities, condition (financial or otherwise), operations,
results of operations or prospects of the Borrower or any Guarantor prior to and
after giving effect to the financing contemplated herein;
(y) such other documents, instruments, approvals, opinions and evidence as
the Bank may reasonably require;
(z) the Borrower shall have paid or caused to be paid all fees required to
be paid hereunder or in connection herewith which are accrued through the date
hereof including audit and legal fees;
(aa) the Borrower and the Guarantor shall have obtained all consents,
permits and approvals required in connection with the execution, delivery and
performance by the Borrower of its obligations hereunder and under the other
Facility Documents and such consents, permits and approvals shall continue in
full force and effect;
(bb) the satisfactory evidence to the Bank that the Borrower and the
Guarantor are not in default with respect to any material contractual
obligations to which they are a party;
(cc) satisfactory evidence that no litigation is pending or threatened
against the Borrower or the Guarantor which, if adversely determined, may have a
materially adverse effect upon the business, properties, assets, financial or
other condition of the Borrower and the Guarantor or on the ability of the
Borrower or the Guarantor to perform its obligations hereunder or under the
Facility Documents;
(dd) satisfactory evidence that the Borrower and the Guarantor are in
compliance with all applicable laws and regulations, including without
limitation all Environmental Laws, which, if the Borrower and the Guarantor were
not in compliance therewith, may have a materially adverse effect upon the
business, properties, assets, financial or other condition of the Borrower and
the
33
Guarantor or on the ability of the Borrower and the Guarantor to perform its
obligations hereunder or under the Facility Documents; and
(ee) all legal matters in connection with this financing shall be
satisfactory to the Bank and its counsel.
Section 3.02. ADDITIONAL CONDITIONS PRECEDENT. The obligation of the Bank
to make the Loans pursuant to a borrowing which increases the amount outstanding
hereunder (including the initial borrowing) shall be subject to the further
conditions precedent that on the date of such Loan:
(a) the following statements shall be true and the Bank shall have
received a certificate signed by the Chairman of the Board or President or
Chief Financial Officer of the Borrower and Guarantor dated the date of such
Revolving Credit Loan stating that:
(i) the representations and warranties contained in Article 4, in the
Guaranty and in Article 2 of the Security Agreement, are true and
correct on and as of the date of such Loan as though made on and as of
such date; and
(ii) no Default or Event of Default has occurred and is continuing, or
would result from such Loan;
(b) the Bank shall have received the Borrowing Base Certificate; and
(c) the Bank shall have received such approvals, opinions or documents as
the Bank may reasonably request.
Section 3.03. DEEMED REPRESENTATIONS. Each notice of borrowing hereunder
and acceptance by the Borrower of the proceeds of such borrowing shall
constitute a representation and warranty that the statements contained in
Section 3.02(a) are true and correct both on the date of such notice and, unless
the Borrower otherwise notifies the Bank prior to such borrowing, as of the date
of such borrowing.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES.
34
The Borrower and each Guarantor (as appropriate) hereby represent and warrant
that:
Section 4.01. INCORPORATION, GOOD STANDING AND DUE QUALIFICATION. Each of
the Borrower and its Subsidiaries and Guarantor are duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its assets and to
transact the business in which it is now engaged or proposed to be engaged, and
is duly qualified as a foreign corporation and in good standing under the laws
of each other jurisdiction in which such qualification is required.
Section 4.02. CORPORATE POWER AND AUTHORITY; NO CONFLICTS. The execution,
delivery and performance by the Borrower and/or Guarantor of the Facility
Documents to which it is a party have been duly authorized by all necessary
corporate action and do not and will not: (a) require any consent or approval
of its stockholders; (b) contravene its charter or by-laws; (c) violate any
provision of, or require any filing (other than the filing of the financing
statements contemplated by the Security Agreement), registration, consent or
approval under, any law, rule, regulation (including, without limitation,
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System
as in effect from time to time), order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to the Borrower
or any of its Subsidiaries or Affiliates; (d) result in a breach of or
constitute a default or require any consent under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which the
Borrower is a party or by which it or its properties may be bound or affected;
(e) result in, or require, the creation or imposition of any Lien (other than as
created under the Security Agreement), upon or with respect to any of the
properties now owned or hereafter acquired by the Borrower; or (f) cause the
Borrower (or any Subsidiary or Affiliate, as the case may be) to be in default
under any such law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award or any such indenture, agreement, lease or instrument.
Section 4.03. LEGALLY ENFORCEABLE AGREEMENTS. Each Facility Document to
which the Borrower and/or Guarantor is a party is, or when delivered under this
Agreement will be, a legal, valid and binding obligation of the Borrower and/or
Guarantor enforceable
35
against the Borrower and/or Guarantor in accordance with its terms, except to
the extent that such enforcement may be limited by applicable bankruptcy,
insolvency and other similar laws affecting creditors' rights generally.
Section 4.04. LITIGATION. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower and/or Guarantor, threatened,
against or affecting the Borrower and/or Guarantor or any of their Subsidiaries
before any court, governmental agency or arbitrator, which may, in any one case
or in the aggregate, materially adversely affect the condition (financial or
otherwise), operations, properties, prospects or business of the Borrower and/or
Guarantor or any such Subsidiary or the ability of the Borrower and/or Guarantor
to perform its obligations under the Facility Documents to which it is a party.
Section 4.05. FINANCIAL STATEMENTS. The consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries for the fiscal year ended September
30, 1995, and the related consolidated income statement and statements of cash
flows and changes in stockholders' equity of the Borrower and its Consolidated
Subsidiaries for the fiscal year then ended, and the accompanying footnotes,
together with the opinion thereon, of BDO Xxxxxxx, LLP, independent certified
public accountants, and the interim financial statement of the Borrower and its
Consolidated Subsidiaries for the period ended June 30, 1996, copies of each of
which have been furnished to the Bank, are complete and correct in all material
respects and fairly present the financial condition of the Borrower and its
Subsidiaries as at such dates and the results of the operations of the Borrower
and its Subsidiaries for the periods covered by such statements, all in
accordance with GAAP consistently applied, subject (in the case of the interim
financial statements) to normal year-end audit adjustments. There are no
liabilities of the Borrower or any of its Subsidiaries, fixed or contingent,
which are material but are not reflected in the financial statements or in the
notes thereto, other than liabilities arising in the ordinary course of business
since September 30, 1995. No information, exhibit or report furnished by the
Borrower to the Bank in connection with the negotiation of this Agreement
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statements contained therein not misleading.
Since September 30, 1995, there has been no material adverse change in the
condition (financial or
36
otherwise), business, operations or prospects of the Borrower or any of its
Subsidiaries.
Section 4.06. OWNERSHIP AND LIENS. Each of the Borrower and its
Subsidiaries has title to, or valid leasehold interests in, all of its
properties and assets, real and personal, including the properties and assets,
and leasehold interests reflected in the financial statements referred to in
Section 4.05 (other than any properties or assets disposed of in the ordinary
course of business), and none of the properties and assets owned by the Borrower
or any of its Subsidiaries and none of its leasehold interests is subject to any
Lien, except as disclosed in such financial statements or as may be permitted
hereunder and except for the Lien created by the Security Agreement.
Section 4.07. TAXES. Each of the Borrower and its Subsidiaries has filed
all tax returns (federal, state and local) required to be filed and has paid all
taxes, assessments and governmental charges and levies thereon to be due,
including interest and penalties.
Section 4.08. ERISA. Each Plan, and, to the best knowledge of the
Borrower, each Multiemployer Plan, is in compliance in all material respects
with, and has been administered in all material respects in compliance with, the
applicable provisions of ERISA, the Code and any other applicable Federal or
state law, and no event or condition is occurring or exists concerning which the
Borrower would be under an obligation to furnish a report to the Bank in
accordance with Section 5.08(i) hereof. As of the most recent valuation date
for each Plan, each Plan was "fully funded", which for purposes of this Section
4.08 shall mean that the fair market value of the assets of the Plan is not less
than the present value of the accrued benefits of all participants in the Plan,
computed on a Plan termination basis. To the best knowledge of the Borrower, no
Plan has ceased being fully funded as of the date these representations are made
with respect to any Loan under this Agreement.
Section 4.09. SUBSIDIARIES AND OWNERSHIP OF STOCK. Schedule I is a
complete and accurate list of the Subsidiaries of the Borrower, showing the
jurisdiction of incorporation or organization of each Subsidiary and showing the
percentage of the Borrower's ownership of the outstanding stock or other
interest of each such
37
Subsidiary. All of the outstanding capital stock or other interest of each such
Subsidiary has been validly issued, is fully paid and nonassessable and is owned
by the Borrower free and clear of all Liens.
Section 4.10. CREDIT ARRANGEMENTS. Schedule II is a complete and correct
list of all credit agreements, indentures, purchase agreements, guaranties,
Capital Leases and other investments, agreements and arrangements presently in
effect providing for or relating to extensions of credit (including agreements
and arrangements for the issuance of letters of credit or for acceptance
financing) in respect of which the Borrower or any of its Subsidiaries is in any
manner directly or contingently obligated; and the maximum principal or face
amounts of the credit in question, outstanding and which can be outstanding, are
correctly stated, and all Liens of any nature given or agreed to be given as
security therefor are correctly described or indicated in such Schedule II.
Section 4.11. OPERATION OF BUSINESS. Each of the Borrower and its
Subsidiaries possesses all licenses, permits, franchises, patents, copyrights,
trademarks and trade names, or rights thereto, to conduct its business
substantially as now conducted and as presently proposed to be conducted, and
neither the Borrower nor any of its Subsidiaries is in violation of any valid
rights of others with respect to any of the foregoing, which violation, in any
one case or in the aggregate, may reasonably be expected to have a material
adverse affect on the consolidated financial condition, operations, business,
properties or prospects of the Borrower and its Subsidiaries.
Section 4.12. HAZARDOUS MATERIALS. The Borrower and each of its
Subsidiaries have obtained all permits, licenses and other authorizations which
are required under all Environmental Laws, except to the extent failure to have
any such permit, license or authorization would not have a material adverse
effect on the consolidated financial condition, operations, business, properties
or prospects of the Borrower and its Subsidiaries. The Borrower and each of its
Subsidiaries are in compliance with the terms and conditions of all such
permits, licenses and authorizations, and are also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations schedules and timetables contained in any applicable Environmental
38
Law or in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder,
except to the extent failure to comply would not have a material adverse effect
on the consolidated financial condition, operations, business, properties or
prospects of the Borrower and its Subsidiaries.
In addition, except as set forth in Schedule III hereto:
(a) No notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending or threatened by any
governmental or other entity with respect to any alleged failure by the Borrower
or any of its Subsidiaries to have any permit, license or authorization required
in connection with the conduct of the business of the Borrower or any of its
Subsidiaries or with respect to any generation, treatment, storage, recycling,
transportation, release or disposal, or any release as defined in 42 U.S.C.
Section 9601(22) ("RELEASE"), of any substance regulated under Environmental
Laws ("HAZARDOUS MATERIALS") generated by the Borrower or any of its
Subsidiaries.
(b) Neither the Borrower nor any of its Subsidiaries has handled any
Hazardous Materials, other than as a generator, on any property now or
previously owned or leased by the Borrower or any of its Subsidiaries to an
extent that it has, or may reasonably be expected to have, a material adverse
effect on the consolidated financial condition, operations, business or
prospects taken as a whole of the Borrower and its Subsidiaries; and
(i) no polychlorinated biphenyl is or has been present at any
property now or previously owned or leased by the Borrower or any of
its Subsidiaries;
(ii) no asbestos is or has been present at any property now or
previously owned or leased by the Borrower or any of its Subsidiaries;
(iii) there are no underground storage tanks for Hazardous Materials,
active or abandoned, at any property now or previously owned or leased
by the Borrower or any of its Subsidiaries; and
39
(iv) no Hazardous Materials have been Released, in a reportable
quantity, where such a quantity has been established by statute,
ordinance, rule, regulation or order, at, on or under any property now
or previously owned by the Borrower or any of its Subsidiaries.
(c) Neither the Borrower nor any of its Subsidiaries has transported or
arranged for the transportation of any Hazardous Material to any location which
is listed on the National Priorities List under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), listed
for possible inclusion on the National Priorities List by the Environmental
Protection Agency in the Comprehensive Environmental Response and Liability
Information System as provided by 40 C.F.R. Section 300.5 ("CERCLIS") or on any
similar state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims against the
Borrower or any of its Subsidiaries for clean-up costs, remedial work, damages
to natural resources or for personal injury claims, including, but not limited
to, claims under CERCLA.
(d) No Hazardous Materials generated by the Borrower or any of its
Subsidiaries have been recycled, treated, stored, disposed of or Released by the
Borrower or any of its Subsidiaries at any location other than those listed in
Schedule III hereto.
(e) No oral or written notification of a Release of a Hazardous Material
has been filed by or on behalf of the Borrower or any of its Subsidiaries and no
property now or previously owned or leased by the Borrower or any of its
Subsidiaries is listed or proposed for listing on the National Priorities List
promulgated pursuant to CERCLA, on CERCLIS or on any similar state list of sites
requiring investigation or clean-up.
(f) There are no Liens arising under or pursuant to any Environmental Laws
on any of the real property or properties owned or leased by the Borrower or any
of its Subsidiaries, and no government actions have been taken or are in process
which could subject any of such properties to such Liens and neither the
Borrower nor any of its Subsidiaries would be required to place any notice or
restriction relating to the presence of Hazardous Materials at any property
owned by it in any deed to such property.
40
(g) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by or which are in the possession of
the Borrower or any of its Subsidiaries in relation to any property or facility
now or previously owned or leased by the Borrower or any of its Subsidiaries
which have not been made available to the Bank.
Section 4.13. NO DEFAULT ON OUTSTANDING JUDGMENTS OR ORDERS. Each of the
Borrower and its Subsidiaries has satisfied all judgments and neither the
Borrower nor any of its Subsidiaries is in default with respect to any judgment,
writ, injunction, decree, rule or regulation of any court, arbitrator or
federal, state, municipal or other governmental authority, commission, board,
bureau, agency or instrumentality, domestic or foreign.
Section 4.14. NO DEFAULTS ON OTHER AGREEMENTS. Neither the Borrower nor
any of its Subsidiaries is a party to any indenture, loan or credit agreement or
any lease or other agreement or instrument or subject to any charter or
corporate restriction which could have a material adverse effect on the
business, properties, assets, operations or condition, financial or otherwise,
of the Borrower or any of its Subsidiaries, or the ability of the Borrower to
carry out its obligations under the Facility Documents to which it is a party.
Neither the Borrower nor any of its Subsidiaries is in default in any respect in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any agreement or instrument material to its business
to which it is a party.
Section 4.15. LABOR DISPUTES AND ACTS OF GOD. Neither the business nor
the properties of the Borrower or of any of its Subsidiaries are affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance), materially and adversely
affecting such business or properties or the operation of the Borrower or such
Subsidiary.
Section 4.16. GOVERNMENTAL REGULATION. Neither the Borrower nor any of
its Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Investment Company Act of 1940, the Interstate Commerce
Act, the Federal Power Act or
41
any statute or regulation limiting its ability to incur indebtedness for money
borrowed as contemplated hereby.
Section 4.17. PARTNERSHIPS. Neither the Borrower nor any of its
Subsidiaries is a partner in any partnership.
Section 4.18. NO FORFEITURE. Neither the Borrower nor any of the
Guarantors is engaged in or proposes to be engaged in the conduct of any
business or activity which could result in a Forfeiture Proceeding and no
Forfeiture Proceeding against any of them is pending or threatened.
Section 4.19. SOLVENCY.
(a) The present fair saleable value of the assets of the Borrower after
giving effect to all the transactions contemplated by the Facility Documents and
the funding of all Commitments hereunder exceeds the amount that will be
required to be paid on or in respect of the existing debts and other liabilities
(including contingent liabilities) of the Borrower and its Subsidiaries as they
mature.
(b) The property of the Borrower does not constitute unreasonably small
capital for the Borrower to carry out its business as now conducted and as
proposed to be conducted including the capital needs of the Borrower.
(c) The Borrower does not intend to, nor does it believe that it will,
incur debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be received by the Borrower, and of
amounts to be payable on or in respect of debt of the Borrower). The cash
available to the Borrower after taking into account all other anticipated uses
of the cash of the Borrower, is anticipated to be sufficient to pay all such
amounts on or in respect of debt of the Borrower when such amounts are required
to be paid.
(d) The Borrower does not believe that final judgments against it in
actions for money damages will be rendered at a time when, or in an amount such
that, the Borrower will be unable to satisfy any such judgments promptly in
accordance with their terms (taking into account the maximum reasonable amount
of such judgments in any such actions and the earliest reasonable time at
42
which such judgments might be rendered). The cash available to the Borrower
after taking into account all other anticipated uses of the cash of the Borrower
(including the payments on or in respect of debt referred to in paragraph (c) of
this Section 4.19), is anticipated to be sufficient to pay all such judgments
promptly in accordance with their terms.
Section 4.20. PERMITS AND LICENSES. The Borrower, Guarantor and each of
their Subsidiaries have all the necessary permits and licenses to lawfully own
and operate their businesses.
ARTICLE 5. AFFIRMATIVE COVENANTS.
So long as the Note shall remain unpaid or the Bank shall have any
Commitment under this Agreement, the Borrower and each Guarantor shall:
Section 5.01. MAINTENANCE OF EXISTENCE. Preserve and maintain, and cause
each of its Subsidiaries to preserve and maintain, its corporate existence and
good standing in the jurisdiction of its incorporation, and qualify and remain
qualified, and cause each of its Subsidiaries to qualify and remain qualified,
as a foreign corporation in each jurisdiction in which such qualification is
required.
Section 5.02. CONDUCT OF BUSINESS. Continue, and cause each of its
Subsidiaries to continue, to engage in an efficient and economical manner in a
business of the same general type as conducted by it on the date of this
Agreement.
Section 5.03. MAINTENANCE OF PROPERTIES. Maintain, keep and preserve, and
cause each of its Subsidiaries to maintain, keep and preserve, all material
items of its properties, (tangible and intangible) necessary or useful in the
proper conduct of its business in good working order and condition, ordinary
wear and tear excepted.
Section 5.04. MAINTENANCE OF RECORDS. Keep, and cause each of its
Subsidiaries to keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP, reflecting all financial
transactions of the Borrower, the Guarantor and their Subsidiaries.
43
Section 5.05. MAINTENANCE OF INSURANCE. Maintain, and cause each of its
Subsidiaries to maintain, insurance with financially sound and reputable
insurance companies or associations in such amounts and covering such risks as
are usually carried by companies engaged in the same or a similar business and
similarly situated, which insurance may provide for reasonable deductibility
from coverage thereof. With respect to all such insurance coverage, the
Borrower shall cause the Bank to be named additional insured as to all liability
coverage and cause the Bank to be named loss payee and additional insured as to
all property insurance coverage. The Borrower shall provide to the Bank,
promptly upon receipt thereof, evidence of the annual renewal of each such
policy.
Section 5.06. COMPLIANCE WITH LAWS. Comply, and cause each of its
Subsidiaries to comply, in all material respects with all applicable laws,
rules, regulations and orders, such compliance to include, without limitation,
paying before the same become delinquent all taxes, assessments and governmental
charges imposed upon it or upon its property, except any such taxes, assessments
or charges being contested in good faith by appropriate proceedings and for
which appropriate reserves have been established.
Section 5.07. RIGHT OF INSPECTION. (a) At any reasonable time and from
time to time, and upon reasonable notice, permit the Bank or any agent or
representative thereof, to examine and make copies and abstracts from the
records and books of account of, and visit the properties of, the Borrower and
any of its Subsidiaries and Guarantor, and to discuss the affairs, finances and
accounts of the Borrower and any such Subsidiary and Guarantor with any of their
respective officers and directors and the Borrower's and Guarantor's independent
accountants.
(b) In the sole discretion of the Bank, the Bank may reasonably perform
field inventory and accounts receivable audits on the Borrower and Guarantor to
be performed by an organization acceptable to the Bank one time each year and
upon an Event of Default, at the sole cost and expense of the Borrower. The
Bank may perform additional field inventory and/or accounts receivable audits
upon reasonable notice to the Borrower at the Bank's sole cost and expense.
44
Section 5.08. REPORTING REQUIREMENTS. Borrower shall furnish to the Bank
and where applicable shall cause the Guarantor to furnish to the Bank:
(a) as soon as available and in any event within one hundred twenty [120]
days after the end of each fiscal year of the Borrower, a consolidated balance
sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and
a consolidated income statement and consolidated statements of cash flows and
changes in stockholders' equity of the Borrower and its Subsidiaries each on an
audited basis for such fiscal year, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and period in
the prior fiscal year and all prepared in accordance with GAAP and as to the
statements accompanied by an opinion thereon acceptable to the Bank by BDO
Xxxxxxx, LLP or other independent accountants of national standing and
acceptable to the Bank in their sole discretion selected by the Borrower;
(b) as soon as available and in any event within sixty (60) days after the
end of each of the first three quarters of each fiscal year of the Borrower and
its Subsidiaries, a balance sheet of the Borrower as of the end of such quarter
and a consolidated income statement of the Borrower and its Subsidiaries for the
period commencing at the end of the previous fiscal year and ending with the end
of such quarter, all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the previous fiscal
year and all internally prepared in accordance with GAAP and certified by the
chief financial officer of the Borrower (subject to year-end adjustments);
(c) promptly upon receipt thereof, copies of any reports submitted to the
Borrower or any of its Subsidiaries or Guarantor, including a copy of the
management letter, by independent certified public accountants in connection
with examination of the financial statements of the Borrower or any such
Subsidiary or Guarantor made by such accountants;
(d) simultaneously with the delivery of the annual financial statements
referred to above, a certificate of the chief financial officer of the Borrower
and Guarantor (i) certifying that to the best of his knowledge no Default or
Event of Default has occurred
45
and is continuing or, if a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof and the action which is
proposed to be taken with respect thereto, and (ii) with computations
demonstrating compliance with the covenants contained in Article 7;
(e) simultaneously with the delivery of the annual financial statements
referred to in Section 5.08(a), a certificate of the independent public
accountants who audited such statements to the effect that, in making the
examination necessary for the audit of such statements, they have obtained no
knowledge of any condition or event which constitutes a Default or Event of
Default, or if such accountants shall have obtained knowledge of any such
condition or event, specifying in such certificate each such condition or event
of which they have knowledge and the nature and status thereof;
(f) as soon as available and in any event within fifteen (15) days after
the end of each month, the monthly accounts receivable aging, inventory reports
of the preceding month and Borrowing Base Certificate as of the last business
day of the immediately preceding month in a form satisfactory to the Bank.
Notwithstanding the foregoing, the Borrower and Guarantors shall provide
inventory reporting commencing the month ended June 30, 1997, and each month
thereafter which shall include actual work-in-progress and usage (movement)
reports, provided however if the Borrower can not input historical data required
to prepare usage (movement) reports by June 30, 1997, such reporting shall begin
with the month ended November 30, 1997. The usage report shall provide a
breakdown of raw materials and finished goods and the most recent usage date for
each;
(g) promptly after the commencement thereof, notice of all actions, suits,
and proceedings before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, affecting the Borrower
or any of its Subsidiaries or Guarantor which, if determined adversely to the
Borrower or such Subsidiary or Guarantor, could have a material adverse effect
on the condition (financial or otherwise), properties, prospects, or operations
of the Borrower or such Subsidiary or Guarantor;
46
(h) as soon as possible and in any event within two (2) days after the
occurrence of each Default or Event of Default a written notice setting forth
the details of such Default or Event of Default and the action which is proposed
to be taken by the Borrower and/or Guarantor with respect thereto;
(i) as soon as possible, and in any event within two (2) days after the
Borrower knows or has reason to know that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan have occurred or
exist, a statement signed by a senior financial officer of the Borrower setting
forth details respecting such event or condition and the action, if any, which
the Borrower or its ERISA Affiliate proposes to take with respect thereto (and a
copy of any report or notice required to be filed with or given to PBGC by the
Borrower or an ERISA Affiliate with respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of ERISA,
with respect to a Plan, as to which PBGC has not by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within
30 days of the occurrence of such event (provided that a failure to
meet the minimum funding standard of Section 412 of the Code or
Section 302 of ERISA including, without limitation, the failure to make
on or before its due date a required installment under Section 412(m)
of the Code or Section 302(e) of ERISA, shall be a reportable event
regardless of the issuance of any waivers in accordance with Section
412(d) of the Code) and any request for a waiver under Section 412(d)
of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by the Borrower or an
ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Borrower or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan by
the Borrower or any ERISA Affiliate that
47
results in liability under Section 4201 or 4204 of ERISA (including the
obligation to satisfy secondary liability as a result of a purchaser
default) or the receipt by the Borrower or any ERISA Affiliate of
notice from a Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that it
intends to terminate or has terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Borrower or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days;
(vi) the adoption of an amendment to any Plan that pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA would result
in the loss of tax-exempt status of the trust of which such Plan is a
part if the Borrower or an ERISA Affiliate fails to timely provide
security to the Plan in accordance with the provisions of said
Sections;
(vii) any event or circumstance exists which may reasonably be
expected to constitute grounds for the Borrower or any ERISA Affiliate
to incur liability under Title IV of ERISA or under Sections
412(c)(11) or 412(n) of the Code with respect to any Plan; and
(viii) the Unfunded Benefit Liabilities of one or more Plans increase
after the date of this Agreement in an amount which is material in
relation to the financial condition of the Borrower and its
Subsidiaries, on a consolidated basis;
(j) promptly after the request of the Bank, copies of each annual report
filed pursuant to Section 104 of ERISA with respect to each Plan (including, to
the extent required by Section 104 of ERISA, the related financial and actuarial
statements and opinions and other supporting statements, certifications,
schedules and information referred to in Section 103) and each annual report
filed with respect to each Plan under Section 4065 of ERISA; provided, however,
that in the case of a Multiemployer Plan, such annual reports shall be furnished
only if they are available to the Borrower or an ERISA Affiliate;
48
(k) promptly after the furnishing thereof, copies of any statement or
report furnished to any other party pursuant to the terms of any indenture, loan
or credit or similar agreement and not otherwise required to be furnished to the
Bank pursuant to any other clause of this Section 5.08;
(l) promptly after the sending or filing thereof, copies of all proxy
statements, financial statements and reports which the Borrower, the Guarantors
or any of their Subsidiaries sends to its stockholders, and copies of all
regular, periodic and special reports, and all registration statements which the
Borrower or any such Subsidiary files with the Securities and Exchange
Commission or any governmental authority which may be substituted therefor, or
with any national securities exchange;
(m) promptly after the commencement thereof or promptly after the Borrower
and/or any Guarantor knows of the commencement or threat thereof, notice of any
Forfeiture Proceeding; and
(n) such other information respecting the condition or operations,
financial or otherwise, of the Borrower and/or any Guarantor or any of its
Subsidiaries as the Bank may from time to time reasonably request.
Section 5.09. PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy
as and when due and payable or before they become delinquent by their specific
terms, or if there are no specific terms, before an action for collection is
commenced, as the case may be, all of its material Debt and other material
obligations of whatever nature (including any obligation for taxes and wages),
except for any such obligation being contested in good faith by appropriate
proceedings and for which appropriate reserves have been established.
Section 5.10. NOTICE OF SUBSIDIARIES AND/OR AFFILIATES. Borrower shall
provide Bank and cause Guarantor to provide Bank with written notice, fifteen
(15) days prior to the creation, establishment or acquisition of any Subsidiary
or Affiliate of the Borrower and/or Guarantor. The Borrower shall and shall
cause Guarantor to have each Subsidiary or Affiliate execute a Guaranty and
Security Agreement within two (2) Business Days of said creation, establishment
or acquisition and shall furnish a legal
49
opinion of the Borrower and/or Guarantor's legal counsel and all other such
documentation as the Bank or its counsel may require.
Section 5.11. MAINTENANCE OF LICENSES AND PERMITS. Maintain and cause
each of its Subsidiaries to maintain all licenses and permits required of the
Borrower, Guarantor and each of their Subsidiaries in order to lawfully own and
operate their businesses.
Section 5.12 CONTINUED PERFECTION OF LIEN AND SECURITY AGREEMENT. Record
or file or rerecord or refile the Facility Documents or a financing statement or
any other filing or recording or refiling or rerecording in each and every
office where and when necessary to preserve and perfect the security interests
of the Facility Documents.
Section 5.13. NOTICE OF ADVERSE CHANGE. Promptly, but in any event not
later than one Banking Day after any change or information shall have come to
the attention of the Chief Financial Officer of the Borrower, Guarantor and/or
any of their Subsidiaries, notify the Bank in writing of (a) any material
adverse change in the business or the operation, prospects, properties or assets
or to the condition, financial or otherwise, of the Borrower, Guarantor and/or
any of their Subsidiaries disclosing the nature thereof, and (b) any information
which indicates that any financial statements which are the subject of any
representation contained in this Agreement, or which are furnished to the Bank
pursuant to this Agreement, fail, in any material respect, to present fairly the
financial condition and results of operations purported to be presented therein,
disclosing the nature thereof.
ARTICLE 6. NEGATIVE COVENANTS.
So long as the Revolving Credit Note shall remain unpaid or the Bank shall
have any Commitment under this Agreement, the Borrower and/or Guarantor shall
not:
Section 6.01. DEBT. Create, incur, assume or suffer to exist, or permit
any of its Subsidiaries to create, incur, assume or suffer to exist any Debt
without prior written consent from the Bank, except:
50
(a) Debt of the Borrower under this Agreement or the Revolving Credit Note
or any other Debt of the Borrower or Guarantors to the Bank;
(b) Debt described in Section 4.10, to be scheduled satisfactory to the
Bank, but no renewals, extensions or refinancing thereof, provided however that
any refinance shall be permitted provided there is no increase in the aggregate
amount of such debt or no increase in the amount of the scheduled payments;
(c) Debt subordinated to the Bank in a form and substance satisfactory to
the Bank and with the prior written consent of the Bank;
(d) Unsecured indebtedness of a Guarantor owing to the Borrower or another
Guarantor and unsecured indebtedness of the Borrower owing to a Guarantor;
(e) Debt of the Borrower to any such Subsidiary or of any Subsidiary to the
Borrower or another such Subsidiary;
(f) Debt of the Borrower or any such Subsidiary secured by purchase money
Liens permitted by Section 6.03;
(g) The Borrower's and its Subsidiaries unsecured accounts payable to trade
creditors for goods or services which are not aged more than ninety (90) days
from billing date and current operating liabilities (other than for borrowed
money) which are not more than ninety (90) days past due, in each case incurred
in the ordinary course of business and paid within the specified time, unless
contested in good faith and by appropriate proceedings or as agreed to by the
specific trade creditor.
Section 6.02. GUARANTIES, ETC. Assume, guarantee, endorse or otherwise be
or become directly or contingently responsible or liable, or permit any of its
Subsidiaries to assume, guarantee, endorse or otherwise be or become directly or
indirectly responsible or liable (including, but not limited to, an agreement to
purchase any obligation, stock, assets, goods or services or to supply or
advance any funds, asset, goods or services, or an agreement to maintain or
cause such Person to maintain a minimum working capital or net worth or
otherwise to assure the creditors of any Person against loss) for the
obligations of any Person,
51
except: (a) guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; (b)
existing guaranties, to be scheduled satisfactory to the Bank; and (c) the
guaranty of indebtedness hereunder or any other indebtedness to the Bank.
Section 6.03. LIENS. Create, incur, assume or suffer to exist, or permit
any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien,
upon or with respect to any of its properties, now owned or hereafter acquired,
except:
(a) Liens securing the Loans hereunder or any other Liens granted in favor
of the Bank;
(b) Liens for taxes or assessments or other government charges or levies,
statutory Liens or deposits under Social Security if not yet due and payable or
if due and payable if they are being contested in good faith by appropriate
proceedings and for which appropriate reserves are maintained in conformity with
GAAP;
(c) Liens imposed by law, such as mechanic's, supplier's, materialmen's,
landlord's, warehousemen's and carrier's Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due or which are being contested in good faith by appropriate proceedings
and for which appropriate reserves have been established;
(d) Liens, pledges or deposits under worker's compensation, unemployment
insurance, social security or similar legislation (other than ERISA);
(e) Liens, deposits or pledges to secure the performance of bids, tenders,
contracts (other than contracts for the payment of money), leases (permitted
under the terms of this Agreement), public or statutory obligations, surety,
stay, appeal, indemnity, performance or other similar bonds, or other similar
obligations arising in the ordinary course of business;
(f) judgment and other similar Liens arising in connection with court
proceedings; provided that the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being actively contested
in good faith and by appropriate proceedings;
52
(g) easements, rights-of-way, restrictions and other similar encumbrances
which, in the aggregate, do not materially interfere with the occupation, use
and enjoyment by the Borrower or any such Subsidiary of the property or assets
encumbered thereby in the normal course of its business or materially impair the
value of the property subject thereto;
(h) purchase money Liens on any property hereafter acquired or the
assumption of any Lien on property existing at the time of such acquisition, or
a Lien incurred in connection with any conditional sale or other title retention
agreement or a Capital Lease; provided that:
(i) any property subject to any of the foregoing is acquired by the
Borrower or any such Subsidiary in the ordinary course of its business
and the Lien on any such property is created contemporaneously with
such acquisition;
(ii) each such Lien shall attach only to the property so acquired and
fixed improvements thereon and shall not exceed the lesser of the
purchase price or the fair market value of the property acquired;
(iii) the Debt secured by any such Liens shall not exceed $100,000.00
at any time outstanding in the aggregate;
(iv) the obligations secured by such Lien are permitted by the
provisions of Section 6.01;
(v) no other covenants are violated; and
(i) Liens existing on the date hereof and described in Section 4.10 herein,
not to be renewed or rescheduled.
Section 6.04. INVESTMENTS. Make, or permit any of its Subsidiaries to
make, any loan or advance to any Person or purchase or otherwise acquire, or
permit any such Subsidiary to purchase or otherwise acquire, any capital stock,
assets (other than purchases of assets in the ordinary course of business),
obligations or other securities of, make any capital contribution to, or
otherwise invest in, or acquire any interest in, any Person without prior
written consent from the Bank, except: (a) direct obligations of the United
States of America or any agency thereof with maturities
53
of one year or less from the date of acquisition; (b) commercial paper of a
domestic issuer rated at least "A-1" by Standard & Poor's Corporation or "P-1"
by Xxxxx'x Investors Service, Inc.; (c) certificates of deposit in U.S. Dollars
with maturities of one year or less from the date of acquisition issued by any
commercial bank operating within the United States of America having capital and
surplus in excess of $1,000,000,000.00; (d) for stock, obligations or securities
received in settlement of debts (created in the ordinary course of business)
owing to the Borrower or any such Subsidiary; (e) any Acceptable Acquisition
permitted by Section 6.10; (f) money market funds with assets of
$2,500,000,000.00 or more; (g) tax exempt securities maturing within one (1)
year rated A or better by Standard & Poor's Corporation or Xxxxx'x Investors
Service, Inc.; (h) loans and advances from the Borrower to any Guarantor or (i)
purchases of warrants permitted by Section 6.05.
Section 6.05. DIVIDENDS. Declare or pay any dividends, purchase, redeem,
retire or otherwise acquire for value any of its capital stock now or hereafter
outstanding, or make any distribution of assets to its stockholders as such
whether in cash, assets or in obligations of the Borrower, or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption or retirement of any shares of its capital
stock, or make any other distribution by reduction of capital or otherwise in
respect of any shares of its capital stock or permit any of its Subsidiaries to
purchase or otherwise acquire for value any stock of the Borrower or another
such Subsidiary, except that Borrower may redeem warrants in an amount not to
exceed $100,000.00 in any fiscal year provided that no Default or Event of
Default exists or would result therefrom and except dividends from Subsidiaries
paid directly to the Borrower.
Section 6.06. SALE OF ASSETS. Sell, lease, assign, transfer or otherwise
dispose of or enter into any sale leaseback transaction, or permit any of its
Subsidiaries to sell, lease, assign, transfer or otherwise dispose of or enter
into any sale leaseback transaction of any of its now owned or hereafter
acquired assets except: (a) for inventory disposed of in the ordinary course of
business; (b) the sale or other disposition of assets no longer used or useful
in the conduct of its business; and (c) that any such Subsidiary may sell,
lease, assign, or otherwise transfer its assets to the Borrower.
54
Section 6.07. STOCK OF SUBSIDIARIES, ETC. Sell or otherwise dispose of
any shares of capital stock of any of its Subsidiaries or permit any such
Subsidiary to issue any additional shares of its capital stock, except
directors' qualifying shares.
Section 6.08. TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate or permit any of its Subsidiaries
to enter into any transaction, including, without limitation, the purchase, sale
or exchange of property or the rendering of any service, with any Affiliate,
except in the ordinary course of and pursuant to the reasonable requirements of
the Borrower's or such Subsidiary's business and upon fair and reasonable terms
no less favorable to the Borrower or such Subsidiary than would obtain in a
comparable arm's length transaction with a Person not an Affiliate.
Section 6.09. MERGERS, ETC. Merge or consolidate with, or sell, assign,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to, any Person, or acquire all or substantially all of the
assets or the business of any Person (or enter into any agreement to do any of
the foregoing), or permit any of its Subsidiaries to do so except: (a) that
upon thirty (30) days prior written notice to the Bank, any Guarantor may merge
with any other Guarantor or with the Borrower provided that the Borrower is the
surviving entity, and; (b) for Acceptable Acquisitions as contemplated below in
Section 6.10.
Section 6.10. ACQUISITIONS. Make any Acquisition without the prior written
consent from the Bank other than Acceptable Acquisitions.
"Acceptable Acquisitions" shall be defined as those acquisitions of the
stock or assets (excluding real property) of another person or entity of any
kind, which meet the following criteria: (i) the Borrower is the surviving
entity, (ii) the proposed acquiree is in the same general line of business as
the Borrower and the Guarantor (or the assets to be acquired are utilized in the
same general line of business as the Borrower and the Guarantor), (iii) the
proposed acquiree is incorporated or organized in the United States, (iv) the
acquisition is to be non-
55
hostile in nature, (v) prior to and immediately following such acquisition,
there shall not be a Default or Event of Default under the terms of this
Agreement, (vi) all third party consents and approvals necessary in connection
with the acquisition shall have been obtained, (vii) evidence that such stock or
assets are to be purchased free and clear of any liens or encumbrances other
than any liens or encumbrances permitted under this Agreement and, in the case
of stock, free of any restrictions other than those acceptable to the Bank,
(viii) if the proposed acquiree becomes a Subsidiary of the Borrower (1) the
Bank and its counsel shall be satisfied with all issues relating to
consideration for such entity to guaranty and pledge all of its assets as
Collateral and (2) such Subsidiary shall immediately (a) execute and deliver its
Guarantee of the Borrower's obligations under the Revolving Credit Commitment in
form and substance satisfactory to the Bank and its counsel and (b) pledge all
of its assets as Collateral to secure the Borrower's obligations under the
Revolving Credit Commitment and shall execute all such documentation required by
the Bank to perfect a first priority security interest in such Collateral, all
to be in form and substance satisfactory to the Bank and its counsel; (ix)
evidence that the proposed acquiree is in compliance with all environmental,
federal, state and local laws, rules and regulations with respect to all real
estate which is to be acquired by the Borrower; and (x) the aggregate
consideration to be paid by the Borrower (including without limitation, cash,
stock, transaction costs, guarantees and other contingent obligations, assumed
liabilities, compensation to be paid to former shareholders of the proposed
acquiree pursuant to any employment agreements, consulting agreements or
non-compete agreements, fees, earn-out provisions, any deferred portions of the
purchase price or any other costs paid in connection with the acquisition)
(collectively, "Consideration") does not exceed $2,000,000.00 in aggregate
during the term of this Agreement. The Bank shall have the right in its sole
discretion to reset the financial covenants to reflect the effects of the
acquisition immediately upon the consummation of said acquisition and the
Borrower and the Guarantors will execute any amendment or documents deemed
necessary by the Bank and its counsel.
In addition to all Acquisitions meeting the above criteria, the Bank shall
have received prior to the consummation of said Acceptable Acquisition, for its
satisfactory review and approval, the following: (i) copies of all documentation
(including but not limited to financial information and otherwise with respect
to the
56
Borrower, the Guarantors, the proposed acquiree and the proposed transaction, in
a level of detail satisfactory to the Bank, including evidence of compliance
with this Agreement) related to the Acceptable Acquisitions as may be required
by the Bank; (ii) (a) evidence that the Acquisitions shall not double the
Consolidated Total Liabilities (including non-perpetual preferred stock) and
shall not result in a leverage ratio as measured by Consolidated Total
Liabilities (including non-perpetual preferred stock) to Consolidated Total
Assets (the "Leverage Ratio") higher than 50% (for the purposes hereof,
Consolidated Total Liabilities and Consolidated Total Assets shall be of the
Borrower and its Subsidiaries); or (b) evidence that the acquisition shall not
result in a Leverage Ratio higher than 75% and shall not cause 25% or more of
the Consolidated Total Liabilities (including non-perpetual preferred stock)
after the acquisition to be derived from past or present buyouts, acquisitions
or recapitalizations (for the purposes hereof, Consolidated Total Liabilities
and Consolidated Total Assets shall be of the Borrower and its Subsidiaries);
and (iii) such other information, documentation, information (financial or
otherwise) or certificates as the Bank shall reasonably request, all in form and
substance satisfactory to the Bank.
Section 6.11. NO ACTIVITIES LEADING TO FORFEITURE. Neither the Borrower
nor any of its Subsidiaries or Affiliates shall engage in, or propose to be
engaged in, the conduct of any business or activity which could result in a
Forfeiture Proceeding.
Section 6.12. CHANGE IN SENIOR MANAGEMENT: Make any change in the
Chairman of the Board or President of the Borrower or any of its Subsidiaries or
Affiliates without the written consent of the Bank.
Section 6.13. SALE OF NOTES/ACCOUNTS RECEIVABLE. Sell, transfer, discount
or otherwise dispose of notes, accounts receivable or other rights to receive
payment, with or without recourse, except for collection in the ordinary course
of business.
Section 6.14. PREPAYMENT OF OUTSTANDING DEBT. Prepay any outstanding
Debt, in whole or in part, except for: i) any Debt owed to the Bank; and ii) as
permitted in Section 6.01(b).
ARTICLE 7. FINANCIAL COVENANTS.
57
So long as the Revolving Credit Note shall remain unpaid or the Bank shall
have any Commitment under this Agreement:
Section 7.01. CURRENT RATIO. The Borrower and its Subsidiaries shall
maintain a minimum ratio of Consolidated Current Assets of the Borrower and its
Subsidiaries to Consolidated Current Liabilities of the Borrower and its
Subsidiaries (including, without limitation, all outstanding Revolving Credit
Loans) of 1.50 to 1.0 at any time.
Section 7.02. DEBT SERVICE RATIO. The Borrower and its Subsidiaries shall
maintain a minimum Consolidated Debt Service Ratio of 1.25 to 1.0 at any time.
Section 7.03. LEVERAGE RATIO. The Borrower shall maintain a ratio of
Consolidated Total Liabilities (excluding subordinated debt, if any) to
Consolidated Tangible Net Worth (plus subordinated debt, if any) of not greater
than 1.50 to 1.0 at any time.
ARTICLE 8. EVENTS OF DEFAULT.
Section 8.01. EVENTS OF DEFAULT. Any of the following events shall be an
"Event of Default":
(a) the Borrower shall: (i) fail to pay the principal of or interest on the
Note as and when due and payable; or (ii) fail to pay any fee or other amount
due hereunder as and when due and payable; or (iii) fail to pay the principal of
or interest on any current or future Debt owed to the Bank; or
(b) any representation or warranty made or deemed made by the Borrower in
this Agreement or in any other Facility Document or by Guarantor in any Facility
Document to which it is a party or which is contained in any certificate,
document, opinion, financial or other statement furnished at any time under or
in connection with any Facility Document shall prove to have been incorrect in
any material respect on or as of the date made or deemed made; or
(c) the Borrower shall: (i) fail to perform or observe any term, covenant
or agreement contained in Section 2.04, 2.21, 5.07, 5.08, 5.10, 5.11, 5.12 or
Articles 6 or 7; or (ii) fail to perform or observe any term, covenant or
agreement on its part to be
58
performed or observed in any Facility Document and such failure shall continue
for 15 consecutive days; or
(d) the Borrower or any Guarantor or any Affiliate or their respective
Subsidiaries shall: (i) fail to pay any indebtedness in excess of $10,000.00 in
the aggregate (other than the Note), including but not limited to indebtedness
for borrowed money, of the Borrower, such Guarantor or such Affiliate or
Subsidiary, as the case may be, or any interest or premium thereon, when due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise); or (ii) fail to perform or observe any term, covenant or condition
on its part to be performed or observed under any agreement or instrument
relating to any such indebtedness, when required to be performed or observed, if
the effect of such failure to perform or observe is to accelerate, or to permit
the acceleration of, after the giving of notice or passage of time, or both, the
maturity of such indebtedness, whether or not such failure to perform or observe
shall be waived by the holder of such indebtedness; or any such indebtedness
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), prior to the stated maturity
thereof; or
(e) the Borrower, Guarantor or any Affiliate or their respective
Subsidiaries: (i) shall generally not, or be unable to, or shall admit in
writing its inability to, pay its debts as such debts become due; or (ii) shall
make an assignment for the benefit of creditors, petition or apply to any
tribunal for the appointment of a custodian, receiver or trustee for it or a
substantial part of its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or (iv) shall have had any such petition or application filed or any
such proceeding shall have been commenced, against it, in which an adjudication
or appointment is made or order for relief is entered, or which petition,
application or proceeding remains undismissed for a period of 30 days or more;
or shall be the subject of any proceeding under which its assets may be subject
to seizure, forfeiture or divestiture; or (v) by any act or omission shall
indicate its consent to, approval of or acquiescence in any such petition,
application or proceeding or order for relief or the appointment of a custodian,
receiver or trustee for all or any substantial part of its property; or (vi)
59
shall suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of 30 days or more; or
(f) one or more final judgments, decrees or orders for the payment of money
in excess of $50,000.00 in the aggregate shall be rendered against the Borrower,
or Guarantor or any of their respective Subsidiaries and such judgments, decrees
or orders shall continue unsatisfied and in effect for a period of 30
consecutive days without being vacated, discharged, satisfied or stayed or
bonded pending appeal; or
(g) any event or condition shall occur or exist with respect to any Plan or
Multiemployer Plan concerning which the Borrower is under an obligation to
furnish a report to the Bank in accordance with Section 5.08(i) hereof and as a
result of such event or condition, together with all other such events or
conditions, the Borrower or any ERISA Affiliate has incurred or in the opinion
of the Bank is reasonably likely to incur a liability to a Plan, a Multiemployer
Plan, the PBGC, or a Section 4042 Trustee (or any combination of the foregoing)
which is material in relation to the financial position of the Borrower and its
Subsidiaries, on a consolidated basis; or
(h) the Unfunded Benefit Liabilities of one or more Plans have increased
after the date of this Agreement in an amount which is material (as specified in
Section 8.01(g) hereof); or
(i) the Guaranty shall at any time after its execution and delivery and for
any reason cease to be in full force and effect or shall be declared null and
void, or the validity or enforceability thereof shall be contested by the
Guarantor or the Guarantor shall deny it has any further liability or obligation
thereunder or shall fail to perform its obligations thereunder; or
(j) the Security Agreement shall at any time after its execution and
delivery and for any reason cease: (A) to create a valid and perfected first
priority security interest in and to the property purported to be subject to
such Agreement; or (B) to be in full force and effect or shall be declared null
and void, or the validity or enforceability thereof shall be contested by the
Grantor or the Grantor shall deny it has any further liability or obligation
under the Security Agreement or the Grantor shall fail to perform any of its
obligations thereunder; or
60
(k) if Borrower, Guarantor and/or their Subsidiaries shall materially alter
the nature of their business; or
(l) if Borrower, Guarantor and/or their Subsidiaries shall change their
fiscal year ends; or
(m) if Borrower, Guarantor and/or their Subsidiaries shall change their tax
status from a "C" corporation; or
(n) if Borrower, Guarantor and/or their Subsidiaries shall change
accounting treatments and reporting practices except as otherwise required or
permitted by changes in GAAP; or
(o) if the Borrower or Guarantor shall incur a consolidated net loss (which
shall be calculated inclusive of extraordinary losses in any period but
exclusive of extraordinary gains in any period) for any fiscal quarter or any
fiscal year; or
(p) if there shall occur a Change In Control of the Borrower or any
Guarantor; or
(q) if there is a default under the Declaration of Restrictions.
Section 8.02. REMEDIES. If any Event of Default shall occur and be
continuing, the Bank may, by notice to the Borrower, (a) declare the Commitment
to be terminated, whereupon the same shall forthwith terminate, and (b) declare
the outstanding principal of the Note, all interest thereon and all other
amounts payable under this Agreement and the Note to be forthwith due and
payable, whereupon the Note, all such interest and all such amounts shall become
and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided that, in the case of an Event of Default referred to in
Section 8.01(e) above, the Commitment shall be immediately terminated, and the
Note, all interest thereon and all other amounts payable under this Agreement
shall be immediately due and payable without notice, presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Borrower.
Section 8.03. LOCK BOX ARRANGEMENT. If any Event of Default shall occur,
the Bank may, in addition to any and all other
61
remedies afforded to the Bank as per the terms of the Facility Documents, in its
sole and absolute discretion, require the Borrower to commence a lock-box
account arrangement with the Bank, on terms and conditions satisfactory to the
Bank in all respects.
ARTICLE 9. MISCELLANEOUS.
Section 9.01. AMENDMENTS AND WAIVERS. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement may be amended or
modified only by an instrument in writing signed by the Borrower and the Bank,
and any provision of this Agreement may be waived only by an instrument signed
by the Borrower and the Bank. No failure on the part of the Bank to exercise,
and no delay in exercising, any right hereunder shall operate as a waiver
thereof or preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
Section 9.02. USURY. Anything herein to the contrary notwithstanding, the
obligations of the Borrower under this Agreement and the Note shall be subject
to the limitation that payments of interest shall not be required to the extent
that receipt thereof would be contrary to provisions of law applicable to the
Bank limiting rates of interest which may be charged or collected by the Bank.
Section 9.03. EXPENSES. The Borrower shall reimburse the Bank on demand
for all costs, expenses, and charges (including, without limitation, reasonable
fees and charges of external legal counsel for the Bank and costs allocated by
its internal legal department) incurred by the Bank in connection with the
preparation, performance, or enforcement of this Agreement or the Note, provided
that the Borrower shall only be liable for up to $7,500.00, plus disbursements,
of such legal fees in connection with the preparation of the Facility Documents.
The Borrower agrees to indemnify the Bank and its directors, officers,
employees and agents from, and hold each of them harmless against, any and all
losses, liabilities, claims, damages or expenses incurred by any of them arising
out of or by reason of any investigation or litigation or other proceedings
(including any threatened investigation or litigation or other proceedings)
relating to any actual or proposed use by the Borrower or any
62
Subsidiary of the proceeds of the Loans, including without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation or litigation or other proceedings, but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified.
Section 9.04. SURVIVAL. The obligations of the Borrower under Sections
2.13, 2.15 and 9.03 shall survive the repayment of the Loans and the termination
of the Commitment.
Section 9.05. ASSIGNMENT; PARTICIPATIONS. (a) This Agreement shall be
binding upon, and shall inure to the benefit of, the Borrower, the Bank and
their respective successors and assigns, except that the Borrower may not assign
or transfer its rights or obligations hereunder. The Bank may assign, or sell
participations in, all or any part of the Revolving Credit Commitment or any
Loan to another bank or other entity which is not a competitor of the Borrower
or its Subsidiaries, in which event (i) in the case of an assignment, upon
notice thereof by the Bank to the Borrower, the assignee shall have, to the
extent of such assignment (unless otherwise provided therein), the same rights,
benefits and obligations as it would have if it were the Bank hereunder; and
(ii) in the case of a participation, the participant shall have no rights under
the Facility Documents. The agreement executed by the Bank in favor of the
participant shall not give the participant the right to require the Bank to take
or omit to take any action hereunder except action directly relating to (i) the
extension of a payment date with respect to any portion of the principal of or
interest on any amount outstanding hereunder allocated to such participant, (ii)
the reduction of the principal amount outstanding hereunder or (iii) the
reduction of the rate of interest payable on such amount or any amount of fees
payable hereunder to a rate or amount, as the case may be, below that which the
participant is entitled to receive under its agreement with the Bank. The Bank
may furnish any information concerning the Borrower in the possession of the
Bank from time to time to assignees and participants (including prospective
assignees and participants);
(b) In addition to the assignments and participations permitted under
paragraph (a) above, the Bank may assign and pledge all or any portion of its
Loans and Note to (i) any affiliate of the Bank or (ii) any Federal Reserve Bank
as collateral security
63
pursuant to Regulation A of the Board of Governors of the Federal Reserve System
and any Operating Circular issued by such Federal Reserve Bank. No such
assignment shall release the Bank from its obligations hereunder.
Section 9.06. NOTICES. Unless the party to be notified otherwise notifies
the other party in writing as provided in this Section, and except as otherwise
provided in this Agreement, notices shall be given to the Bank and to the
Borrower by ordinary mail or telex addressed to such party at its address on the
signature page of this Agreement. Notices shall be effective: (a) if given by
mail, 72 hours after deposit in the mails with first class postage prepaid,
addressed as aforesaid; and (b) if given by telex, when the telex is transmitted
to the telex number as aforesaid; provided that notices to the Bank shall be
effective upon receipt.
Section 9.07. SETOFF. The Borrower agrees that, in addition to (and
without limitation of) any right of setoff, banker's lien or counterclaim the
Bank may otherwise have, the Bank shall be entitled, at its option, to offset
balances (general or special, time or demand, provisional or final) held by it
or any of its Affiliates for the account of the Borrower at any of the Bank's or
any of its Affiliates offices, in Dollars or in any other currency, against any
amount payable by the Borrower under this Agreement or the Note which is not
paid when due (regardless of whether such balances are then due to the
Borrower), in which case it shall promptly notify the Borrower thereof; provided
that the Bank's failure to give such notice shall not affect the validity
thereof.
SECTION 9.08. JURISDICTION; IMMUNITIES. (A) THE BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR UNITED STATES
FEDERAL COURT SITTING IN NASSAU OR SUFFOLK COUNTIES OVER ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE NOTE, AND THE
BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT.
THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO THE
BORROWER AT ITS ADDRESS SPECIFIED IN SECTION 9.06. THE BORROWER AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
64
PROVIDED BY LAW. THE BORROWER FURTHER WAIVES ANY OBJECTION TO VENUE IN SUCH
STATE AND ANY OBJECTION TO AN ACTION OR PROCEEDING IN SUCH STATE ON THE BASIS OF
FORUM NON CONVENIENS. THE BORROWER FURTHER AGREES THAT ANY ACTION OR PROCEEDING
BROUGHT AGAINST THE BANK SHALL BE BROUGHT ONLY IN NEW YORK STATE OR UNITED
STATES FEDERAL COURT SITTING IN NASSAU OR SUFFOLK COUNTIES. EACH OF THE PARTIES
HERETO WAIVE ANY RIGHT IT MAY HAVE TO JURY TRIAL.
(b) Nothing in this Section 9.08 shall affect the right of the Bank to
serve legal process in any other manner permitted by law or affect the right of
the Bank to bring any action or proceeding against the Borrower or its property
in the courts of any other jurisdictions.
(c) To the extent that the Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether from
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, the Borrower
hereby irrevocably waives such immunity in respect of its obligations under this
Agreement and the Note.
Section 9.09. TABLE OF CONTENTS; HEADINGS. Any table of contents and the
headings and captions hereunder are for convenience only and shall not affect
the interpretation or construction of this Agreement.
Section 9.10. SEVERABILITY. The provisions of this Agreement are intended
to be severable. If for any reason any provision of this Agreement shall be
held invalid or unenforceable in whole or in part in any jurisdiction, such
provision shall, as to such jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
Section 9.11. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing any such
counterpart.
Section 9.12. INTEGRATION. The Facility Documents set forth the entire
agreement between the parties hereto relating to the
65
transactions contemplated thereby and supersede any prior oral or written
statements or agreements with respect to such transactions.
SECTION 9.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
ALLIED DEVICES CORPORATION
By:_____________________________________
Xxxx Xxxxxxxxx, Chairman of the Board
Address for Notices:
0000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000
00
XXX XXXXX XXXXXXXXX XXXX
By:_____________________________________
Xxxxxxx X. Xxxxx,
Assistant Vice President
Lending Office and Address for Notices:
The Chase Manhattan Bank
000 Xxxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
STATE OF NEW YORK)
SS.:
COUNTY OF SUFFOLK)
On this 4th day of September, 1996, before me personally came Xxxx
Xxxxxxxxx, to me known, who being by me duly sworn, did depose and say that he
resides at 000 Xxxx 00xx Xxxxxx, Xxx 0x, Xxx Xxxx, Xxx Xxxx 00000; that he is
the Chairman of the Board of ALLIED DEVICES CORPORATION, the corporation
described in and which executed the foregoing instrument; that by Order of the
Board of Directors of said corporation, he signed his name thereto.
__________________________
Notary Public
STATE OF NEW YORK)
) SS.
COUNTY OF SUFFOLK)
On this 4th day of September, 1996, before me personally came
Xxxxxxx X. Xxxxx, to me known , who being by me duly sworn did depose and say
that he resides at 000 Xxxxx Xxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx; that he is the
Assistant Vice President of THE CHASE MANHATTAN BANK, the corporation described
in and which executed the foregoing instrument; that he signed his name thereto
by order of the Board of Directors of said corporation.
_____________________________
Notary Public
67
EXHIBIT A
PROMISSORY NOTE
$4,000,000.00 Melville, New York
September 4, 1996
For value received, ALLIED DEVICES CORPORATION, a corporation organized
under the laws of the State of Nevada (the "Borrower"), having an office at 0000
Xxxxxxx Xxxxxx, Xxxxxxx, Xxx Xxxx 00000 hereby promises to pay to the order of
THE CHASE MANHATTAN BANK (the "Bank") at the office of the Bank, at 000 Xxxxx
Xxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000, for the account of the Lending Office of
the Bank, the principal sum of Four Million and 00/100 Dollars---$4,000,000.00
or, if less, the amount loaned by the Bank to the Borrower pursuant to the
Revolving Credit Agreement referred to below, in lawful money of the United
States of America and in immediately available funds, on the date(s) and in the
manner provided in said Revolving Credit Agreement. The Borrower also promises
to pay interest on the unpaid principal balance hereof, for the period such
balance is outstanding, at said principal office for the account of said Lending
Office, in like money, at the rates of interest as provided in the Revolving
Credit Agreement referred to below, on the date(s) and in the manner provided in
said Revolving Credit Agreement. This Note shall mature on the Revolving Credit
Termination Date.
The date and amount of each type of Loan made by the Bank to the Borrower
under the Revolving Credit Agreement referred to below, and each payment of
principal thereof, shall be recorded by the Bank on its books and, prior to any
transfer of this Note (or, at the discretion of the Bank, at any other time),
endorsed by the Bank on the schedule attached hereto or any continuation
thereof, provided however that failure of the Bank to set forth such Revolving
Credit Loans, payments or other information on the attached schedule shall not
in any manner affect the liability of the Borrower to repay the Revolving Credit
Loans made by the Bank in accordance with this Note.
This is the Note referred to in that certain Revolving Credit Agreement (as
amended from time to time the "Revolving Credit
68
Agreement") dated as of September 4, 1996 between the Borrower and the Bank and
evidences the Loans made by the Bank thereunder. All terms not defined herein
shall have the meanings given to them in the Revolving Credit Agreement.
The Revolving Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain Events of Default and for
prepayments on the terms and conditions specified therein.
The Borrower waives presentment, notice of dishonor, protest and any other
notice or formality with respect to this Note.
This Note shall be governed by, and interpreted and construed in accordance
with, the laws of the State of New York.
ALLIED DEVICES CORPORATION
By:_____________________________________
Xxxx Xxxxxxxxx, Chairman of the Board
STATE OF NEW YORK)
SS.:
COUNTY OF SUFFOLK)
On this 4th day of September, 1996, before me personally came Xxxx
Xxxxxxxxx, to me known, who being by me duly sworn, did depose and say that he
resides at 000 Xxxx 00xx Xxxxxx, Xxx 0x, Xxx Xxxx, Xxx Xxxx 00000; that he is
the Chairman of the Board of ALLIED DEVICES CORPORATION, the corporation
described in and which executed the foregoing instrument; that by Order of the
Board of Directors of said corporation, he signed his name thereto.
__________________________
Notary Public
69
Type Type
Amount of of Maturity Amount of Balance
Date of Loan Loan Interest Date Payment Outstanding Notation by
---- ------- ---- -------- ---- ------- ----------- -----------
70
EXHIBIT B
GUARANTY OF PAYMENT
Melville, New York
September 4, 1996
WHEREAS, Allied Devices Corporation, a Nevada Corporation having an office
at 0000 Xxxxxxx Xxxxxx, Xxxxxxx, Xxx Xxxx 00000 (the "BORROWER"), has applied to
THE CHASE MANHATTAN BANK, a New York banking corporation having an office at 000
Xxxxx Xxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000 (together with any of its
subsidiaries and/or affiliates and wherever located the "BANK") for loans in the
maximum principal sum of $4,000,000.00 (the "LOAN"), which Loan will be
evidenced by the Note, and advanced pursuant to the Revolving Credit Agreement,
all as described and defined in Exhibit A attached hereto;
WHEREAS, Bank is willing to make the Loan to the Borrower only if the
undersigned executes and delivers this Guaranty and guarantees payment to Bank
of the Debt (as herein defined) in the manner hereinafter provided;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, and in order to induce Bank to make the Loan to the Borrower, the
undersigned hereby acknowledges, agrees and confirms that all of the above
recitals are true, correct and complete and hereby covenants and agrees with
Bank as follows:
1. The undersigned guarantees jointly and severally, absolutely,
irrevocably and unconditionally, to Bank the performance and observance of every
agreement and condition contained in the Loan Documents (hereinafter defined)
and the full and punctual payment when due of all the Debt notwithstanding that
advances of the Loan have been, or may be, made in the face of a default under
the Loan Documents or otherwise not in compliance with the lending criteria set
forth in the Loan Agreement. The term ``DEBT'' as used in this Guaranty shall
mean all liabilities of the Borrower to Bank of whatever nature, whether now
existing or
71
hereafter incurred, whether created directly or acquired by Bank, by assignment
or otherwise, whether matured or unmatured and whether absolute or contingent,
all principal, interest, additional interest (including specifically all
interest accruing from and after the commencement of any case, proceeding or
action under any existing or future laws relating to bankruptcy, insolvency or
similar matters with respect to the Borrower) and other sums of any nature
whatsoever which may or shall become due and payable pursuant to the provisions,
including but not limited to, of the Note, the Revolving Credit Agreement or
any other document or instrument now or hereafter executed and/or delivered in
connection therewith or otherwise with respect to the Loan (said Note, Revolving
Credit Agreement and other documents and instruments, collectively, the ``LOAN
DOCUMENTS'') (all of the above unaffected by modification thereof in any
bankruptcy or insolvency proceeding), and even though Bank may not have an
allowed claim for the same against the Borrower as a result of any bankruptcy or
insolvency proceeding.
2. The undersigned agrees that the undersigned shall indemnify and hold
Bank harmless and defend Bank at the undersigned's sole cost and expense against
any loss or liability, cost or expense (including, but not limited to,
reasonable attorneys' fees and disbursements of Bank's counsel, whether in-house
staff, retained firms or otherwise), and all claims, actions, procedures and
suits arising out of or in connection with:
(a) any ongoing matters arising out of the transaction contemplated
hereby, this Guaranty, the Debt, the Note, the Revolving Credit Agreement or any
other Loan Document;
(b) any amendment to, or restructuring of, this Guaranty, the Debt,
the Note, the Revolving Credit Agreement or any of the other Loan Documents; and
(c) any and all lawful action that may be taken by Bank in connection
with the enforcement of the provisions of this Guaranty, the Note, the Revolving
Credit Agreement or any of the other Loan Documents, whether or not suit is
filed in connection with the same, or in connection with the undersigned, the
Borrower and/or any Subsidiary or Affiliate (as defined in the Revolving Credit
Agreement) of any thereof becoming a party to a voluntary or
72
involuntary federal or state bankruptcy, insolvency or similar proceeding.
All sums expended by Bank shall be payable on demand and, until reimbursed by
the Borrower or by the undersigned pursuant hereto, shall bear interest at the
Default Rate, as set forth in the Revolving Credit Agreement.
3. The undersigned hereby represents and warrants that all
representations and warranties contained in the Loan Documents are true and
correct, that there has occurred no event of default under the Loan Documents,
that all financial statements of the undersigned heretofore delivered to Bank by
or on behalf of the undersigned are true and correct in all material respects
and fairly present the financial condition of the undersigned as of the
respective dates thereof, and no material adverse change has occurred in the
financial conditions reflected therein since the respective dates thereof. In
addition, the undersigned covenants that so long as any portion of the Debt
remains outstanding and unpaid, the undersigned will, unless otherwise consented
to in writing by Bank:
(a) furnish to Bank, as soon as available, but in any event within
one hundred twenty (120) days next following the end of each fiscal year of the
undersigned, executed tax returns, including all supporting schedules, for such
fiscal year and containing a fully itemized statement of profit and loss and of
surplus and a balance sheet, which financial statements shall be in form and
substance reasonably satisfactory to Bank, such statement accompanied by a
certificate signed by the undersigned certifying on the date thereof that:
(i) such financial statement is true, correct and complete and (ii) either that
no default nor event which upon notice or lapse of time or both would constitute
a default has occurred hereunder or, if such default exists, the nature thereof
and the period of time it has existed (a ``CERTIFICATION''); and
(b) furnish to Bank, within ten (10) days after request, such further
detailed financial and other information (including, but not limited to,
financial statements) as may be reasonably requested by Bank with respect to the
undersigned, or any affiliate of, or entity controlled by the undersigned, as of
a date not earlier than that specified by Bank in such request, together with a
Certification with respect thereto.
73
4. In addition to any right available to Bank under applicable law or any
other agreement, the undersigned hereby gives to Bank a continuing lien on,
security interest in and right of set-off against all moneys, securities and
other property of the undersigned and the proceeds thereof, now on deposit or
now or hereafter delivered, remaining with or in transit in any manner to Bank,
its correspondents, participants or its agents from or for the undersigned,
whether for safekeeping, custody, pledge, transmission, collection or otherwise
or coming into possession of Bank in any way, and also, any balance of any
deposit account and credits of the undersigned with, and any and all claims of
the undersigned against, Bank at any time existing, as collateral security for
the payment of the Debt and all of the other obligations of the undersigned
under this Guaranty, including fees, contracted with or acquired by Bank,
whether joint, several, absolute, contingent, secured, matured or unmatured (for
the purposes of this paragraph 4 and paragraphs 6, 8 and 16 below, collectively,
the "LIABILITIES") , hereby authorizing Bank at any time or times, without prior
notice, to apply such balances, credits or claims, or any part thereof, to such
Liabilities in such amounts as it may select, whether contingent, unmatured or
otherwise and whether any collateral security therefore is deemed adequate or
not. The collateral security described herein shall be in addition to any
collateral security described in any separate agreement executed by the
undersigned. Bank, in addition to any right available to it under applicable
law or any other agreement, shall have the right, at its option, to immediately
set off against any Liabilities all monies owed by Bank in any capacity to the
undersigned, whether or not due, and Bank shall, at its option, be deemed to
have exercised such right to set off and to have made a charge against any such
money immediately upon the occurrence of any events of default set forth below,
even though such charge is made or entered on the books of Bank subsequent to
those events.
5. All moneys available to Bank for application in payment or reduction
of the Debt may be applied by Bank in such manner and in such amounts and at
such time or times and in such order, priority and proportions as Bank may see
fit to the payment or reduction of such portion of the Debt as Bank may elect.
6. The undersigned hereby expressly agrees that this Guaranty is
independent of, and in addition to, all collateral granted, pledged or assigned
under the Loan Documents, and the
74
undersigned hereby consents that from time to time, before or after any default
by the Borrower, with or without further notice to or assent from the
undersigned:
(a) any security at any time held by or available to Bank for any
obligation of the Borrower, or any security at any time held by or available to
Bank for any obligation of any other person or party primarily, secondarily or
otherwise liable for all or any portion of the Debt, any other Liabilities
and/or any other obligations of the Borrower or any other person or party, other
than Bank, under any of the Loan Documents (``OTHER OBLIGATIONS''), including
any guarantor of the Debt and/or any of such Other Obligations, may be
accelerated, settled, exchanged, surrendered or released and Bank may fail to
set off and may release, in whole or in part, any balance of any deposit account
or credit on its books in favor of the Borrower, or of any such other person or
party;
(b) any obligation of the Borrower, or of any such other person or
party, may be changed, altered, renewed, extended, continued, accelerated,
surrendered, compromised, settled, waived or released in whole or in part, or
any default with respect thereto waived; and
(c) Bank may extend further credit in any manner whatsoever to the
Borrower, and generally deal with the Borrower or any of the abovementioned
security, deposit account, credit on its books or other person or party as Bank
may see fit;
and the undersigned shall remain bound in all respects under this Guaranty,
without any loss of any rights by Bank and without affecting the liability of
the undersigned, notwithstanding any such exchange, surrender, release, change,
alteration, renewal, extension, continuance, compromise, waiver, inaction,
extension of further credit or other dealing. In addition, all moneys available
to Bank for application in payment or reduction of the Debt and/or any Other
Obligations may be applied by Bank in such manner and in such amounts and at
such time or times and in such order, priority and proportions as Bank may see
fit.
7. The undersigned hereby waives:
(a) notice of acceptance of this Guaranty and of the making of the
Loan or any advance thereof by Bank to the Borrower;
75
(b) presentment and demand for payment of the Debt or any portion
thereof;
(c) protest and notice of dishonor or default to the undersigned or
to any other person or party with respect to the Debt or any portion thereof;
(d) all other notices to which the undersigned might otherwise be
entitled; and
(e) any demand under this Guaranty.
8. If any of the following events should occur:
(a) default under any of the Loan Documents and its continuance
beyond any applicable notice and/or grace periods therein contained;
(b) the undersigned violates any provision of this Guaranty;
(c) default under the Declaration of Restrictions made by the
undersigned to the Bank dated the date hereof("DECLARATION OF RESTRICTION");
(d) the undersigned commences any case, proceeding or other action
under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, or
seeks to have an order for relief entered with respect to it, or seeks to be
adjudicated a bankrupt or insolvent, or seeks reorganization, arrangement,
adjustment, liquidation, dissolution, composition or other relief with respect
to it or its debts, or seeks the appointment of a receiver, trustee, custodian
or other similar official for it or for all or any substantial part of its
property;
(e) the undersigned makes a general assignment for the benefit of
creditors;
(f) there is commenced against the undersigned, any case, proceeding
or other action of a nature referred to in subparagraph (d) above or seeking the
issuance of a warrant of attachment, execution, distraint or similar process
against all or
76
any substantial part of its property, which case, proceeding or other action
results in the entry of an order for relief or remains undismissed, undischarged
or unbonded for a period of 60 days;
(g) the undersigned takes any action indicating its consent to,
approval of, or acquiescence in, or in furtherance of, any of the acts set forth
in subparagraphs (d) and (f) above;
(h) the undersigned admits in writing its inability to pay its debts
as they mature; or
(i) the undersigned terminates or dissolves or suspends its usual
business activities or conveys, sells, leases, transfers or otherwise disposes
of all or a substantial part of its property, business or assets other than in
the ordinary course of business;
then, and in such event, Bank may declare the Liabilities to be, and the same
shall become, immediately due and payable.
9. This is a guaranty of payment and performance and not of collection
and the undersigned further waives any right to require that any action be
brought against the Borrower or any other person or party or to require that
resort be had to any security or to any balance of any deposit account or credit
on the books of Bank in favor of the Borrower or any other person or party. Any
payment on account of or reacknowledgment of the Debt by the Borrower, or any
other party liable therefor, shall be deemed to be made on behalf of the
undersigned and shall serve to start anew the statutory period of limitations
applicable to the Debt.
10. Each reference herein to Bank shall be deemed to include its
successors and assigns, in whose favor the provisions of this Guaranty shall
also inure. Each reference herein to the undersigned shall be deemed to include
the successors and assigns of the undersigned, all of whom shall be bound by the
provisions of this Guaranty, provided, however, that the undersigned shall in no
event nor under any circumstance have the right, without obtaining the prior
written consent of Bank, to assign or transfer the undersigned's obligations and
liabilities under this Guaranty, in whole or in part, to any other person, party
or entity.
11. The term ``UNDERSIGNED'' as used herein shall, if this Guaranty is
signed by more than one party, unless otherwise stated
77
herein, mean the ``undersigned and each of them'' and each undertaking herein
contained shall be their joint and several undertaking. Bank may proceed
against none, one or more of the undersigned at one time or from time to time as
it sees fit in its sole and absolute discretion. If any party hereto shall be a
partnership, the agreements and obligations on the part of the undersigned
herein contained shall remain in force and application notwithstanding any
changes in the individuals composing the partnership and the term
``undersigned'' shall include any altered or successive partnerships, but the
predecessor partnerships and their partners shall not thereby be released from
any obligations or liability hereunder. If any party hereto shall be a
corporation, the agreements and obligations on the part of the undersigned
herein contained shall remain in force and application notwithstanding the
merger, consolidation, reorganization or absorption thereof, and the term
``undersigned'' shall include such new entity, but the old entity shall not
thereby be released from any obligations or liabilities hereunder.
12. No delay on the part of Bank in exercising any right or remedy under
this Guaranty or failure to exercise the same shall operate as a waiver in whole
or in part of any such right or remedy. No notice to or demand on the
undersigned shall be deemed to be a waiver of the obligations of the undersigned
or of the right of Bank to take further action without notice or demand as
provided in this Guaranty. No course of dealing between the undersigned and
Bank shall change, modify or discharge, in whole or in part, this Guaranty or
any obligations of the undersigned hereunder.
13. This Guaranty may only be modified, amended, changed or terminated by
an agreement in writing signed by Bank and the undersigned. No waiver of any
term, covenant or provision of this Guaranty shall be effective unless given in
writing by Bank and if so given by Bank shall only be effective in the specific
instance in which given. The execution and delivery hereafter to Bank by the
undersigned of a new instrument of guaranty or any reaffirmation of guaranty, of
whatever nature, shall not terminate, supersede or cancel this instrument,
unless expressly so provided therein, and all rights and remedies of Bank
hereunder or under any instrument of guaranty hereafter executed and delivered
to Bank by the undersigned shall be cumulative and may be exercised singly or
concurrently.
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14. The undersigned acknowledges that this Guaranty and the undersigned's
obligations under this Guaranty are and shall at all times continue to be
absolute, irrevocable and unconditional in all respects, and shall at all times
be valid and enforceable irrespective of any other agreements or circumstances
of any nature whatsoever which might otherwise constitute a defense to this
Guaranty and the obligations of the undersigned under this Guaranty or the
obligations of any other person or party (including, without limitation, the
Borrower) relating to this Guaranty or the obligations of the undersigned
hereunder or otherwise with respect to the Debt, including, but not limited to,
the realization upon any collateral given, pledged or assigned as security for
all or any portion of the Debt, or the filing of a petition under Title 11 of
the United States Code with regard to the Borrower or the undersigned, or the
commencement of an action or proceeding for the benefit of the creditors of the
Borrower or the undersigned, or the obtaining by Bank of title to any collateral
given, pledged or assigned as security for the Debt by reason of the foreclosure
or enforcement of any pledge or security agreement, the acceptance of a deed or
assignment in lieu of foreclosure or sale, or otherwise. This Guaranty sets
forth the entire agreement and understanding of Bank and the undersigned with
respect to the matters covered by this Guaranty and the undersigned acknowledges
that no oral or other agreements, understandings, representations or warranties
exist with respect to this Guaranty or with respect to the obligations of the
undersigned under this Guaranty, except those specifically set forth in this
Guaranty.
15. This Guaranty has been validly authorized, executed and delivered by
the undersigned. The undersigned represents and warrants to Bank that it has
the corporate power to do so and to perform its obligations under this Guaranty
and this Guaranty constitutes the legally binding obligation of the undersigned
fully enforceable against the undersigned in accordance with the terms hereof.
The undersigned further represents and warrants to Bank that:
(a) neither the execution and delivery of this Guaranty nor the
consummation of the transactions contemplated hereby nor compliance with the
terms and provisions hereof will violate any applicable provision of law or any
applicable regulation or other manifestation of governmental action; and
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(b) all necessary approvals, consents, licenses, registrations and
validations of any governmental regulatory body, including, without limitation,
approvals required to permit the undersigned to execute and carry out the
provisions of this Guaranty, for the validity of the obligations of the
undersigned hereunder and for the making of any payment or remittance of any
funds required to be made by the undersigned under this Guaranty, have been
obtained and are in full force and effect.
16. Notwithstanding any payments made by the undersigned pursuant to the
provisions of this Guaranty, the undersigned irrevocably waives all rights to
enforce or collect upon any rights which it now has or may acquire against the
Borrower either by way of subrogation, indemnity, reimbursement or contribution
for any amount paid under this Guaranty or by way of any other obligations
whatsoever of the Borrower to the undersigned, nor shall the undersigned file,
assert or receive payment on any claim, whether now existing or hereafter
arising, against the Borrower in the event of the commencement of a case by or
against the Borrower under Title 11 of the United States Code. In the event
either a petition is filed under said Title 11 of the United States Code with
regard to the Borrower or the commencement of an action or proceeding for the
benefit of the creditors of the Borrower, this Guaranty shall at all times
thereafter remain effective in regard to any payments or other transfers of
assets to Bank received from or on behalf of the Borrower prior to notice of
termination of this Guaranty and which are or may be held voidable on the
grounds of preference or fraud, whether or not the Debt has been paid in full.
The provisions of this paragraph 16 shall survive the term of this Guaranty and
the payment in full of the Debt and all other Liabilities and the termination of
any commitment to make any further advances of Loan proceeds pursuant to the
Revolving Credit Agreement.
17. Any notice, request or demand given or made under this Guaranty shall
be in writing and shall be hand delivered or sent by postage prepaid registered
or certified mail, return receipt requested, and shall be deemed given three (3)
business days after being postmarked and addressed as follows if sent by
registered or certified mail, return receipt requested:
If to Bank:
00
Xxx Xxxxx Xxxxxxxxx Bank
000 Xxxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxx,
Assistant Vice President
If to the undersigned:
Empire - Tyler Corporation
000 Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxxxx, President
Each party to this Guaranty may designate a change of address by notice
given, as herein provided, to the other party fifteen (15) days prior to the
date such change of address is to become effective.
18. This Guaranty is, and shall be deemed to be, a contract entered into
under and pursuant to the laws of the State of New York and shall be in all
respects governed, construed, applied and enforced in accordance with the laws
of the State of New York without regard to principles of conflicts of laws. The
undersigned acknowledges and agrees that this Guaranty is, and is intended to
be, an instrument for the payment of money only, as such phrase is used in
Section 3213 of the Civil Practice Law and Rules of the State of New York, and
the undersigned has been fully advised by its counsel of Bank's rights and
remedies pursuant to said Section 3213.
19. The undersigned agrees to submit to personal jurisdiction in the State
of New York in any action or proceeding arising out of this Guaranty. In
furtherance of such agreement, the undersigned hereby agrees and consents that
without limiting other methods of obtaining jurisdiction, personal jurisdiction
over the undersigned in any such action or proceeding may be obtained within or
without the jurisdiction of any court located in New York and that any process
or notice of motion or other application to any such court in connection with
any such action or proceeding may be served upon the undersigned by registered
or certified mail to, or by personal service at, the last known address of the
undersigned, whether such address be within or without the jurisdiction of any
such court. The undersigned hereby further agrees that the venue of any
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litigation arising in connection with the Debt or in respect of any of the
obligations of the undersigned under this Guaranty, shall, to the extent
permitted by law, be in Nassau or Suffolk Counties.
20. The undersigned absolutely, unconditionally and irrevocably waives any
and all right to assert or interpose any defense (other than the final and
indefeasible payment in full of the Debt), setoff, counterclaim or crossclaim of
any nature whatsoever with respect to this Guaranty or the obligations of the
undersigned under this Guaranty, or the obligations of any other person or party
(including without limitation, the Borrower) relating to this Guaranty, or the
obligations of the undersigned hereunder or otherwise with respect to the Loan
in any action or proceeding brought by Bank to collect the Debt, or any portion
thereof, or to enforce the obligations of the undersigned under this Guaranty
(provided, however, that the foregoing shall not be deemed a waiver of the right
of the undersigned to assert any compulsory counterclaim maintained in a court
of the United States, or of the State of New York if such counterclaim is
compelled under local law or rule of procedure, nor shall the foregoing be
deemed a waiver of the right of the undersigned to assert any claim which would
constitute a defense, setoff, counterclaim or crossclaim of any nature
whatsoever against Bank in any separate action or proceeding). The undersigned
hereby undertakes and agrees that this Guaranty shall remain in full force and
effect for all of the obligations and liabilities of the undersigned hereunder,
notwithstanding the maturity of the Loan, whether by acceleration, scheduled
maturity or otherwise.
21. No exculpatory provisions which may be contained in the Note, the
Revolving Credit Agreement or in any other Loan Document shall in any event or
under any circumstances be deemed or construed to modify, qualify, or affect in
any manner whatsoever the obligations and liabilities of the undersigned under
this Guaranty.
22. The obligations and liabilities of the undersigned under this Guaranty
are in addition to the obligations and liabilities of the undersigned under the
Other Guaranties (as hereinafter defined). The discharge of any or all of the
undersigned's obligations and liabilities under any one or more of the Other
Guaranties by the undersigned or by reason of operation of law or
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otherwise shall in no event or under any circumstance constitute or be deemed to
constitute a discharge, in whole or in part, of the undersigned's obligations
and liabilities under this Guaranty. Conversely, the discharge of any or all of
the undersigned's obligations and liabilities under this Guaranty by the
undersigned or by reason of operation of law or otherwise shall in no event or
under any circumstance constitute or be deemed to constitute a discharge, in
whole or in part, of the undersigned's obligations and liabilities under any of
the Other Guaranties. The term ``OTHER GUARANTIES'' as used herein shall mean
any other guaranty of payment, guaranty of performance, indemnification
agreement or other guaranty or instrument creating any obligation or undertaking
of any nature whatsoever (other than this Guaranty) now or hereafter executed
and delivered by the undersigned to Bank in connection with the Loan.
23. This Guaranty may be executed in one or more counterparts by some or
all of the parties hereto, each of which counterparts shall be an original and
all of which together shall constitute a single agreement of guaranty. The
failure of any party listed below to execute this Guaranty, or any counterpart
hereof, or the ineffectiveness for any reason of any such execution, shall not
relieve the other signatories from their obligations hereunder .
24. The undersigned hereby irrevocably and unconditionally waives, and
Bank by its acceptance of this Guaranty irrevocably and unconditionally waives,
any and all right to trial by jury in any action, suit or counterclaim arising
in connection with, out of or otherwise relating to this Guaranty.
IN WITNESS WHEREOF, the undersigned has/have duly executed this Guaranty
the day and year first above set forth.
Empire-Tyler Corporation, a
Missouri Corporation
By:___________________________
Name: Xxxx Xxxxxxxxx
Title: President
00
XXXXX XX XXX XXXX)
) SS.:
COUNTY OF SUFFOLK)
On the 4th day of September, 1996, before me personally came Xxxx
Xxxxxxxxx, to me known, who, being by me duly sworn, did depose and say that he
resides at 000 Xxxx 00xx Xxxxxx, Xxx 0x, Xxx Xxxx, Xxx Xxxx 00000; that he is
President of Empire - Tyler Corporation, the corporation described in and which
executed the above instrument; and that he signed his name thereto by authority
of the Board of Directors of said corporation.
_____________________________
Notary Public
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EXHIBIT A
NOTE: The term "NOTE" as used in this Guaranty shall mean a certain
Promissory Note dated September 4, 1996, in the maximum principal sum of
$4,000,000.00 to be given by the Borrower to Bank.
REVOLVING CREDIT AGREEMENT : The term "REVOLVING CREDIT AGREEMENT" as
used in this Guaranty shall mean a certain Revolving Credit Agreement dated as
of September 4, 1996, entered into between Bank and the Borrower.
85
EXHIBIT C
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is made
this 4th day of September, 1996, by and between:
ALLIED DEVICES CORPORATION, a Nevada corporation authorized to do business
under the laws of the State of New York, having an office at 0000 Xxxxxxx
Xxxxxx, Xxxxxxx, Xxx Xxxx 00000 (hereinafter referred to as the "Debtor"), and
THE CHASE MANHATTAN BANK, a banking corporation organized under the laws of
the State of New York, having an office at 000 Xxxxx Xxxxxxx Xxxx, Xxxxxxxx, Xxx
Xxxx 00000 (together with any of its subsidiaries and/or affiliates and wherever
located hereinafter referred to as the "Secured Party").
W I T N E S S E T H
WHEREAS, the Secured Party and the Debtor have entered into a Revolving
Credit Agreement dated as of September 4, 1996 (as it may hereafter be amended
or otherwise modified from time to time, being the "Agreement") pursuant to
which the Secured Party may lend to the Debtor the aggregate principal amount
set forth therein, upon and subject to the terms and conditions thereof;
WHEREAS, it is a condition precedent to the obligation of the Secured Party
to extend credit to the Debtor provided for in the Agreement that the Debtor
shall execute and deliver this Security Agreement; and
WHEREAS, all capitalized terms used herein without definition shall have
the respective meanings ascribed thereto in the Agreement.
NOW, THEREFORE, in consideration of the Collateral, hereinafter defined,
and in order to induce the Secured Party to continue to extend credit to the
Debtor, the Debtor agrees with the Secured Party as follows:
1. SECURITY INTEREST.
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(a) GRANT OF SECURITY. As security for the Obligations (as defined in
Section l(b) hereof), the Debtor hereby assigns and pledges to the Secured
Party, and hereby grants to the Secured Party a first priority security interest
in, all of the Debtor's right, title and interest, whether now existing or
hereafter arising or acquired, in and to the following (collectively, the
"Collateral"):
All personal property, inventory, fixtures and equipment of Debtor wherever
located and whether now owned or in existence or hereafter acquired or created
of every kind and description, tangible or intangible, including goods,
documents, instruments, general intangibles, chattel paper, accounts and
contract rights, such terms having the meanings ascribed by the UCC.
The term "accounts" shall mean, without limiting the generality of the
foregoing, any and all now existing or hereafter arising rights to payment held
by the Debtor, whether in the form of accounts receivable, notes, drafts,
acceptance or other forms of obligations and receivables now or hereafter
received by or belonging to the Debtor for (A) inventory sold or leased by it,
(B) services rendered by it, or (C) advances or loans made by it to customers,
together with all guarantees and security therefore and all proceeds thereof,
whether cash proceeds or otherwise, including, without limitation, all right,
title and interest of the Debtor in the inventory which gave rise to any such
accounts, including, without limitation, the right to stoppage in transit and
all returned, rejected, rerouted or repossessed inventory.
(b) SECURITY FOR OBLIGATIONS. This Security Agreement secures the payment
of all obligations of Debtor to the Secured Party, now or hereafter existing
under the Agreement, under any promissory notes or other documents evidencing
indebtedness under or related to or contemplated by the Agreement or under or in
connection with a guaranty dated the date hereof and executed by the Debtor in
favor of the Secured Party or any other document or instrument executed in
connection therewith, whether for principal, interest, fees, expenses or
otherwise, together with all costs of collection or enforcement, including,
without limitation, reasonable attorneys' fees incurred in any collection
efforts or in any judicial proceeding (including, without limitation, bankruptcy
or reorganization) (all such obligations being the "Obligations").
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(c) DEBTOR REMAINS LIABLE. Anything herein to the contrary notwithstanding,
(i) the Debtor shall remain liable to perform all of its duties and obligations
under the transactions giving rise to the Collateral to the same extent as if
this Security Agreement had not been executed, (ii) the exercise by the Secured
Party of any of the rights hereunder shall not release the Debtor from any of
its duties or obligations under the transactions giving rise to the Collateral,
which shall remain unchanged as if this Security Agreement had not been
executed, and (iii) the Secured Party shall have no obligation or liability
under the transactions giving rise to the Collateral by reason of this Security
Agreement, nor shall Secured Party be obligated to perform any of the
obligations or duties of the Debtor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
(d) CONTINUING AGREEMENT. This Security Agreement shall create a continuing
security interest in the Collateral and shall remain in full force and effect
until the indefeasible payment in full of the Obligations and until the
Agreement shall no longer be in effect. Upon the indefeasible payment in full of
the Obligations and when the Agreement shall no longer be in effect, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Debtor.
2. DEBTOR'S TITLE; LIENS AND ENCUMBRANCES.
The Debtor represents and warrants that the Debtor is, or to the extent
that this Security Agreement states that the Collateral is to be acquired
after the date hereof, will be, the owner of the Collateral, having good and
marketable title thereto, free from any and all liens, security interests,
encumbrances and claims, except as permitted by the Agreement. The Debtor
will not create or assume or permit to exist any such lien, security
interest, encumbrance or claim on or against the Collateral except as created
by this Security Agreement or as permitted by the Agreement, and the Debtor
will promptly notify the Secured Party of any such other claim, lien,
security interest or other encumbrance made or asserted against the
Collateral and will defend the Collateral against any such claim, lien,
security interest or other encumbrance.
3. REPRESENTATIONS AND WARRANTIES; LOCATION OF COLLATERAL
AND RECORDS; BUSINESS AND TRADE NAMES OF DEBTOR.
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(a) The Debtor represents and warrants that it has no place of business,
offices where Debtor's books of account and records are kept, or places where
the Collateral is used, stored or located, except as set forth on Schedule I
annexed hereto, and covenants that the Debtor will promptly notify the Secured
Party of any change in the foregoing representation. The Debtor shall at all
times maintain its records as to the Collateral at its chief place of business
at the address referred to on Schedule I and at none other. The Debtor further
covenants that except for Collateral delivered to the Secured Party or an agent
for the Secured Party, the Debtor will not store, use or locate any of the
Collateral at any place other than as listed on Schedule I annexed hereto;
provided that the Debtor may change any such address upon at least 30 days prior
written notice to the Secured Party.
(b) The Debtor represents and warrants that it currently uses, and during
the last five years has used, no business or trade names, except as set forth on
Schedule I annexed hereto, and covenants that the Debtor will promptly notify
the Bank, in sufficient detail, of any changes in, additions to, or deletions
from the business or trade names used by the Debtor for billing purposes.
(c) The Debtor represents and warrants that it has complied and is in
compliance with the provisions of the Fair Labor Standards Act, including,
without limitation, the minimum wage and overtime rules of that Act, and
covenants that the Debtor will continue to comply with the provisions of such
Act.
4. PERFECTION OF SECURITY INTEREST.
The Debtor will execute all such financing statements pursuant to the
Uniform Commercial Code or other notices appropriate under applicable law, as
Secured Party may require, each in form satisfactory to the Secured Party and
will pay all filing or recording costs with respect thereto, and all costs of
filing or recording this Security Agreement or any other instrument, agreement
or document executed and delivered pursuant hereto or to the Agreement
(including the cost of all federal, state or local mortgage, documentary, stamp
or other taxes), in each case, in all public offices where filing or recording
is reasonably deemed by the Secured Party to be necessary or desirable. The
Debtor hereby authorizes the Secured Party to take all action (including,
without
89
limitation, the filing of any Uniform Commercial Code financing statements or
amendments thereto without the signature of the Debtor or by signing of the
Debtor's name to any such financing statements as its attorney-in-fact) which
the Secured Party may deem reasonably necessary or desirable to perfect or
otherwise protect the liens and security interests created hereunder and to
obtain the benefits of this Security Agreement.
5. GENERAL COVENANTS.
The Debtor shall:
(a) furnish the Secured Party from time to time at the Secured Party's
request written statements and schedules further identifying and describing the
Collateral in such detail as the Secured Party may reasonably require;
(b) advise the Secured Party promptly, in sufficient detail,
of any substantial change in the Collateral, and of the occurrence of any event
which would have a material adverse effect on the value of the Collateral or on
the Secured Party's security interest therein;
(c) comply with all acts, rules, regulations and orders of any legislative,
administrative or judicial body or of fiscal authority applicable to the
Collateral or any part thereof or to the operation of the Debtor's business
except where the failure to comply (a) is non-material and (b) has no effect on
the value of the Collateral or on the ability of the Secured Party to exercise
its rights and remedies hereunder; provided, however, that the Debtor may
contest any acts, rules, regulations, orders and directions of such bodies or
officials in any reasonable manner which will not, in the Secured Party's
opinion, adversely affect the Secured Party's rights or the priority of its
security interests in the Collateral;
(d) perform and observe all covenants, restrictions and conditions
contained in the Agreement providing for payment of taxes, maintenance of
insurance and otherwise relating to the Collateral, as though such covenants,
restrictions and conditions were fully set forth in this Security Agreement;
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(e) promptly notify the Secured Party of all disputes with account debtors
involving amounts in excess of $100,000;
(f) promptly execute and deliver to the Secured Party such further deeds,
mortgages, assignments, security agreements or other instruments, documents,
certificates and assurances and take such further action as the Secured Party
may from time to time in its sole discretion deem necessary to perfect, protect
or enforce the Secured Party's security interests in the Collateral or otherwise
to effect the intent of this Security Agreement and the Agreement;
(g) keep or cause to be kept the Collateral in good working order, repair,
running and marketable condition, ordinary wear and tear excepted, at the
Debtor's own cost and expense; and
(h) not assign, sell, mortgage, lease, transfer, pledge, grant a security
interest in or lien upon, encumber or otherwise dispose of or abandon, any part
or all of the Collateral, without the express prior written consent of the
Secured Party, except (i) for the sale from time to time in the ordinary course
of business of the Debtor of such items of Collateral as may constitute part of
the business inventory of the Debtor; and (ii) as otherwise expressly provided
in the Agreement.
6. ASSIGNMENT OF INSURANCE.
At or prior to the date hereof, the Debtor shall deliver to Secured
Party copies of, or certificates of the issuing companies with respect to,
endorsements of any and all policies of insurance owned by the Debtor
covering or in any manner relating to the Collateral, in form and substance
satisfactory to the Secured Party naming the Secured Party as additional
insured party as its interests may appear with respect to liability coverage
and as loss payee with respect to property and extended insurance coverage,
and indicating that no such policy will be terminated, or reduced in coverage
or amount, without at least thirty (30) days prior written notice from the
insurer to the Secured Party. As further security for the due payment and
performance of the Obligations, the Debtor hereby assigns to the Secured
Party all sums, including returned or unearned premiums, which may become
payable under or in respect of any policy of insurance owned by the Debtor
covering or in any manner relating to the Collateral, and the Debtor hereby
directs each insurance company issuing any such policy to make payment of
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sums directly to the Secured Party. The Debtor hereby appoints the Secured Party
as the Debtor's attorney-in-fact and authorizes the Secured Party in the
Debtor's or in the Secured Party's name to endorse any check or draft
representing any such payment and to execute any proof of claim, subrogation
receipt and any other document required by such insurance company as a condition
to or otherwise in connection with such payment, and, upon the occurrence of any
Event of Default, to cancel, assign or surrender any such policies. All such
sums received by the Secured Party shall be applied by the Secured Party to
satisfaction of the Obligations or, to the extent that such sums represent
unearned premiums in respect of any policy of insurance on the Collateral
refunded by reason of cancellation, toward payment for similar insurance
protecting the respective interests of the Debtor and the Secured Party, or as
otherwise required by applicable law.
7. FIXTURES.
It is the intent of the Debtor and the Secured Party that none of the
Collateral is or shall be regarded as fixtures, as that term is used or defined
in Article 9 of the Uniform Commercial Code, and the Debtor represents and
warrants that it has not made and is not bound by any lease or other agreement
which is inconsistent with such intent. Nevertheless, if the Collateral or any
part thereof is or is to become attached or affixed to any real estate, the
Debtor will, upon request, furnish the Secured Party with a disclaimer or
subordination in form satisfactory to the Secured Party of the holder of any
interest in the real estate to which the Collateral is attached or affixed,
together with the names and addresses of the record owners of, and all other
persons having interest in, and a general description of, such real estate.
8. COLLECTIONS.
(a) The Debtor may collect all checks, drafts, cash or other remittances
(i) in payment of any of its accounts, contract rights or general intangibles
constituting part of the Collateral, (ii) in payment of any Collateral sold,
transferred, leased or otherwise disposed of, or (iii) in payment of or in
account of its accounts, contracts, contract rights, notes, drafts, acceptances,
general intangibles, chooses in action and all other forms of obligations
relating to any of the Collateral so sold, transferred, or leased or otherwise
disposed of, and all of the foregoing amounts so
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collected after the occurrence and during the continuance of an Event of Default
shall be held in trust by the Debtor for, and as the property of, the Secured
Party and shall not be commingled with other funds, money or property of the
Debtor.
(b) After the occurrence and during the continuance of an Event of Default,
the Debtor will immediately upon receipt of all such checks, drafts, cash or
other remittances in payment of any of its accounts, contract rights or general
intangibles constituting part of the Collateral, deliver any such items to the
Secured Party accompanied by a remittance report in form supplied or approved by
the Secured Party, such items to be delivered to the Secured Party in the same
form received, endorsed or otherwise assigned by the Debtor where necessary to
permit collection of such items and, regardless of the form of such endorsement,
the Debtor hereby waives presentment, demand, notice of dishonor, protest,
notice of protest and all other notices with respect thereto.
(c) After the occurrence and during the continuance of an Event of Default,
the Debtor will immediately upon receipt of all such checks, drafts, cash or
other remittances in payment for any Collateral sold, transferred, leased or
otherwise disposed of, or in payment or on account of its accounts, contracts,
contract rights, notes, drafts, acceptances, general intangibles, choses in
action and all other forms of obligations relating to any of the Collateral so
sold, transferred, leased or otherwise disposed of, deliver any such items to
the Secured Party accompanied by a remittance report in form supplied or
approved by the Secured Party, such items to be delivered to the Secured Party
in the same form received, endorsed or otherwise assigned by the Debtor where
necessary to permit collection of such items and, regardless of the form of such
endorsement, the Debtor hereby waives presentment, demand, notice of dishonor,
protest, notice of protest and all other notices with respect hereto.
(d) After the occurrence and during the continuance of an Event of Default,
the Debtor will promptly notify the Secured Party in writing of the return or
rejection of any goods represented by any accounts, contract rights or general
intangibles and the Debtor shall forthwith account therefore to the Secured
Party in cash without demand or notice and until such payment has been received
by the Secured Party the Debtor will receive and hold all such goods separate
and apart, in trust for and subject to the security
93
interest in favor of the Secured Party, and the Secured Party is authorized to
sell, for the Debtor's account and at the Debtor's sole risk, all or any part of
such goods.
(e) All of the foregoing remittances shall be applied and credited by the
Secured Party first to satisfaction of the Obligations or as otherwise required
by applicable law, and to the extent not so credited or applied, shall be paid
over to the Debtor.
9. RIGHTS AND REMEDIES.
In the event of the occurrence and continuance of any Event of Default, the
Secured Party shall at any time thereafter have the right, with or without (to
the extent permitted by applicable law) notice to the Debtor, as to any or all
of the Collateral, by any available judicial procedure or without judicial
process, to take possession of the Collateral and without purpose of taking
possession of or removing the Collateral, and, generally, to exercise any and
all rights afforded to a secured party under the Uniform Commercial Code or
other applicable law. Without limiting the generality of the foregoing, the
Debtor agrees that the Secured Party shall have the right to sell, lease, or
otherwise dispose of all or any part of the Collateral, whether in its then
condition or after further preparation or processing, either at public or
private sale or at any broker's board, in lots or in bulk, for cash or for
credit, with or without warranties or representations, and upon such terms and
conditions, all as the Secured Party in its sole discretion may deem advisable,
and it shall have the right to purchase at any such sale; and, if any Collateral
shall require rebuilding, repairing, maintenance, preparation, or is in process
or other unfinished state, the Secured Party shall have the right, at its sole
option and discretion, to do such rebuilding, repairing, preparation, processing
or completion of manufacturing, for the purpose of putting the Collateral in
such saleable or disposable form as it shall deem appropriate. At the Secured
Party's request, the Debtor shall assemble the Collateral and make it available
to the Secured at places which the Secured Party shall select, whether at the
Debtor's premises or elsewhere, and make available to the Secured Party, without
rent, all of the Debtor's premises and facilities for the purpose of the Secured
Party's taking possession of, removing or putting the Collateral in saleable or
disposable form. The proceeds of any such sale, lease
94
or other disposition of the Collateral shall be applied first to the expenses of
retaking, holding, storing, processing and preparing for sale, selling, and the
like, and to the attorneys' fees and legal expenses incurred by the Secured
Party, and then to satisfaction of the Obligations, and to the payment of any
other amounts required by applicable law, after which the Secured Party shall
account to the Debtor for any surplus proceeds. If, upon the sale, lease or
other disposition of the Collateral, the proceeds thereof are insufficient to
pay all amounts to which the Secured Party is legally entitled, the Debtor will
be liable for the deficiency, together with interest thereon, at the rate
prescribed in the Agreement, and the fees of any attorneys employed by the
Secured Party to collect such deficiency. To the extent permitted by applicable
law, the Debtor waives all claims, damages and demands against the Secured Party
arising out of the repossession, removal, retention or sale of the Collateral.
10. COSTS AND EXPENSES.
Any and all fees, costs and expenses, of whatever kind or nature, including
the reasonable attorneys' fees and legal expenses incurred by the Secured Party,
in connection with the preparation of this Security Agreement and all other
documents relating hereto and the consummation of this transaction, the filing
or recording of financing statements and other documents (including all taxes in
connection therewith) in public offices, the payment or discharge of any taxes,
insurance premiums, encumbrances or otherwise protecting, maintaining or
preserving the Collateral and the Secured Party's security interest therein,
whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions or proceedings arising out of or related to the
transaction to which this Security Agreement relates, shall be borne and paid by
the Debtor on demand by the Secured Party and until so paid shall be added to
the principal amount of the Obligations and shall bear interest at the rate
prescribed in the Agreement.
11. POWER OF ATTORNEY.
The Debtor authorizes the Secured Party and does hereby make, constitute
and appoint the Secured Party, and any officer or agent of the Secured Party,
with full power of substitution, as the Debtor's true and lawful
attorney-in-fact, with power, in its own name or in the name of the Debtor, upon
the occurrence and
95
continuance of an Event of Default: (a) to endorse any notes, checks, drafts,
money orders, or other instruments of payment (including payments payable under
or in respect of any policy of insurance) in respect of the Collateral that may
come into possession of the Secured Party; (b) to sign and endorse any invoice,
freight or express xxxx, xxxx of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications and notices in connection with
accounts, and other documents relating to Collateral; (c) to pay or discharge
any taxes, liens, security interest or other encumbrances at any time levied or
placed on or threatened against the Collateral; (d) to demand, collect, receipt
for, compromise, settle and xxx for monies due in respect of the Collateral; (e)
to receive, open and dispose of all mail addressed to the Debtor and to notify
the Post Office authorities to change the address for delivery of mail addressed
to the Debtor to such address as the Secured Party may designate; and (f)
generally to do, at the Secured Party's option and at the Debtor's expense, at
any time, or from time to time, all acts and things which the Secured Party
deems necessary to protect, preserve and realize upon the Collateral and the
Secured Party's security interest therein in order to effect the intent of this
Security Agreement and the Agreement, all as fully and effectually as the Debtor
might or could do; and the Debtor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. All acts of said attorney or
designee are hereby ratified and approved and said attorney or designee shall
not be liable for any acts of commission or omission, nor for any error of
judgment or mistake of fact or law except for its own gross negligence or
willful misconduct. This power of attorney shall be irrevocable for the term of
this Security Agreement and thereafter as long as any of the Obligations shall
be outstanding.
12. NOTICES.
Unless the party to be notified otherwise notifies the other party in
writing as provided in this Section, notices shall be given hereunder by
certified or registered mail or by recognized overnight delivery services to any
party at its address on the signature page of this Security Agreement. Notices
shall be effective (a) if given by registered or certified mail, on the third
day after deposit in the mails with postage prepaid, addressed as aforesaid or
(b) if given by recognized overnight delivery service, on the business day
following deposit with such
96
service, addressed as aforesaid; provided that all notices to the Secured Party
shall be effective on receipt.
13. OTHER SECURITY.
To the extent that the Obligations are now or hereafter secured by property
other than the Collateral or by the guarantee, endorsement or property of any
other person, then the Secured Party shall have the right in its sole discretion
to pursue, relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of the Secured Party's
rights and remedies hereunder.
14. DEPOSITS.
Any and all deposits or other sums at any time credited by or due from the
Secured Party to the Debtor, whether in regular or special depository accounts
or otherwise, shall at all times constitute additional Collateral for the
Obligations, and may be set-off by the Secured Party against any Obligations
that are then due and payable (after expiration of any applicable cure period)
at any time, whether or not other collateral held by the Secured Party is
considered to be adequate. No provision of this Section 14 shall permit the
Secured Party to set-off balances on accounts established by the Debtor as trust
accounts for third parties.
15. MISCELLANEOUS.
(a) Beyond the safe custody thereof, the Secured Party shall as to the
Debtor have no duty as to the collection of any Collateral in its possession or
control or in the possession or control of any agent or nominee of the Secured
Party, or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto.
(b) No course of dealing between the Debtor and the Secured Party, nor any
failure to exercise, nor any delay in exercising, on the part of the Secured
Party, any right, power or privilege hereunder or under the Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
97
(c) All of the Secured Party's rights and remedies with respect to the
Collateral, whether established hereby or by the Agreement, or by any other
agreements, instruments or documents or by law, shall be cumulative and may be
exercised singly or concurrently.
(d) The provisions of this Security Agreement are severable, and if any
clause or provision shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Security Agreement in any jurisdiction.
(e) This Security Agreement (including this subsection) is subject to
modification only by a writing signed by all of the parties hereto.
(f) The benefits and burdens of this Security Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties hereto; provided, however, that the rights and obligations of the Debtor
under this Security Agreement shall not be assigned or delegated without the
prior written consent of the Secured Party (exercisable in its sole discretion),
and any purported assignment or delegation without such consent shall be void.
16. TERM OF AGREEMENT.
The term of this Security Agreement shall commence on the date hereof and
shall continue in full force and effect, and be binding upon the Debtor, until
all of the Obligations have been fully paid and performed and such payment and
performance have been acknowledged in writing by the Secured Party, whereupon
this Security Agreement shall terminate.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first written above.
ALLIED DEVICES CORPORATION, as Debtor
98
By: ______________________________________
Name: Xxxx Xxxxxxxxx
Title: Chairman of the Board
Address for Notices:
0000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000
99
THE CHASE MANHATTAN BANK, as Secured Party
By: ______________________________________
Name: Xxxxxxx X. Xxxxx
Title: Assistant Vice President
Address for Notices:
000 Xxxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
100
SCHEDULE I
TO
SECURITY AGREEMENT
Offices Where Records Are Kept
0000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000
Other Locations Where Collateral
Is Stored, Used or Located:
000 Xxxxx
Xxxxxx, Xxxxxxxx 00000
000 Xxxxx Xxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
00 Xxxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
0000 0xx Xxxxxx
Xxxxxxxxxx, Xxx Xxxx 00000
Business and Trade Names
Used by Debtor:
ADCO Devices Company
Stroba Manufacturing Company
Astro Instrument Company
Absolute Precision Company
101
SCHEDULE A
TO
UCC-1 FINANCING STATEMENT
NAMING ALLIED DEVICES CORPORATION, AS DEBTOR, AND
THE CHASE MANHATTAN BANK, AS SECURED PARTY
All of the Debtor's right, title and interest, whether now existing or
hereafter arising, in and to the following:
(a) All personal property, inventory, fixtures and equipment of Debtor
wherever located and whether now owned or in existence or hereafter acquired or
created of any kind and description, tangible or intangible, including goods,
documents, instruments, general intangibles, chattel paper, accounts and
contract rights, such terms having the meanings ascribed by the UCC.
The term "accounts" shall mean, without limiting the generality of the
foregoing, any and all now existing or hereafter arising rights to payment held
by the Debtor, whether in the form of accounts receivable, notes, drafts,
acceptances or other forms of obligations and receivables now or hereafter
received by or belonging to the Debtor for (A) inventory sold or leased by it,
(B) services rendered by it, or (C) advances or loans made by it to customers,
together with all guarantees and security therefor and all proceeds thereof,
whether cash proceeds or otherwise, including, without limitation, all right,
title and interest of the Debtor in the inventory which gave rise to any such
accounts, including, without limitation, the right to stoppage in transit and
all returned, rejected, rerouted or repossessed inventory.
(b) All sums, including returned or unearned premiums, which may become
payable under or in respect of any policy of insurance owned by the Debtor
covering or in any manner relating to the Collateral.
(c) Any and all deposits or other sums at any time credited by or due from
the Secured Party to the Debtor whether in regular or special depository
accounts or otherwise.
102
EXHIBIT "D"
DECLARATION OF RESTRICTIONS
DECLARATION OF RESTRICTIONS made this 4th day of September, 1996 by
EMPIRE-TYLER CORPORATION, having an office at 000 Xxxxx, Xxxxxx, Xxxxxxxx 00000
(the "DECLARANT").
W I T N E S S E T H:
WHEREAS, the Declarant is the owner of the fee interest in the
premises commonly known as 000 Xxxxx, Xxxxxx, Xxxxxxxx 00000 as more
particularly described in Exhibit A attached hereto and made a part hereof (the
"PREMISES").
WHEREAS, the Declarant wishes to set forth herein a declaration of its
intention with respect to encumbrances affecting the Premises.
NOW, THEREFORE, the Declarant hereby declares as follows:
1. Allied Devices Corporation (the "Borrower") has executed and
delivered to The Chase Manhattan Bank (the "Bank") this date a promissory note
(the "Note") and a Revolving Credit Loan Agreement (the "Agreement") each made
between the Borrower and the Bank. To further secure the obligations of
Borrower arising out of the Note and Agreement, the Declarant has executed and
delivered to the Bank its guaranty (the "Guaranty") dated the date hereof.
2. The Declarant agrees not to transfer, assign or otherwise further
encumber the interest of the Declarant in the Premises without the consent of
the Bank, in its sole discretion, nor shall the Declarant, in any manner, amend
this Declaration so long as: (i) any indebtedness is owed by the Borrower to
Bank under the terms of the Note and Agreement; or (ii) if the Bank has any
obligation to make loans under the Note or Agreement; or (iii) if Declarant has
obligations to the Bank under the Guaranty, the Note or Agreement.
3. If the indebtedness owed by the Borrower to Bank is not repaid in
full in accordance with the terms of the Note and/or Agreement the Declarant
shall execute any and all documentation
103
deemed necessary by Bank to provide Bank with security interest in the Premises,
including, but not limited to a mortgage, collateral assignment of leases and
rents and UCC-1 financing statements, all in form and substance satisfactory to
Bank. The Declarant also agrees to reimburse Bank for any and all expenses,
including, but not limited to attorneys' fees, recording fees, title charges and
mortgage recording taxes, incurred by Bank with respect to the granting by the
Declarant to Bank of the aforementioned security interest.
4. This Declaration shall be binding upon the successors and assigns
of the Declarant.
5. This Declaration may not be changed or modified orally.
6. This Declaration shall be governed by and construed in accordance
with the laws of the State of New York.
IN WITNESS WHEREOF, the Declarant has executed this Declaration at
Melville, New York this 4th day of September, 1996.
EMPIRE-TYLER CORPORATION
By:_______________________________
Name: Xxxx Xxxxxxxxx
Title: President
Witness:
_________________________
STATE OF NEW YORK)
) ss:
COUNTY OF SUFFOLK)
On the 4th day of September, 1996, before me personally came Xxxx
Xxxxxxxxx, to me known, who, being by me duly sworn, did depose and say that he
resides at 000 Xxxx 00xx Xxxxxx, Xxx 0x, Xxx Xxxx, Xxx Xxxx 00000; that he is
President of EMPIRE-TYLER CORPORATION, the corporation described in and which
executed the
104
above instrument; and that he signed his name thereto by authority of the Board
of Directors of said corporation.
__________________________________
Notary Public
105
EXHIBIT A
(Description of Premises)
The land referred to in this Declaration of Restriction is situated in the
County of Jasper, State of Missouri, and described as follows:
All of Lots Numbered Eleven (11), Twelve (12), Thirteen (13), Fourteen
(14), Fifteen (15), Sixteen (16), Seventeen (17), Eighteen (18), Nineteen (19),
and Twenty (20) in SALZER'S FIRST ADDITION to the City of Xxxxxx, Xxxxxx County,
Missouri, according to the recorded plat thereof, and all that portion of the
vacated alley lying between Lots 11 through 15 both inclusive, and 16 through 20
both inclusive, and all of the vacated South one-half of Sixth Street lying
North of the adjoining Lots 11 through 15 both inclusive.
Said premises being more commonly known as 000 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxx
00000.
106
EXHIBIT "E"
ALLIED DEVICES CORPORATION
BORROWING BASE CERTIFICATE
DATE:____________________
(000's omitted)
1. Net accounts receivable of ALLIED DEVICES CORPORATION ("Allied") as
of:__________
Current $_________
31-60 days past invoice $_________
61-90 days past invoice $_________
Over 90 days past invoice $_________
Total net accounts receivable $_________
2. Computation of Borrowing Base:
A. Total accounts receivable of Allied as of:_________ $_________
Less the following deductions:
Accounts receivable more than 90 days from invoice date ______________
Foreign accounts receivable* ______________
Account debtor (see Agreement) ______________
Cross-aging (more than 50% are more than 90 days past due) ______________
Credit balances ______________
Government accounts receivable ______________
Consignment sales ______________
Other (per Agreement) ______________
*unless insured with a policy satisfactory to the Bank, naming the Bank
as loss payee.
B. Total deductions: $_________
C. Eligible Accounts Receivable: (A-B) $_________
D. Accounts Receivable Advance Rate X85%
E. Available accounts receivable (C times D) $_________
F. Perpetual inventory of Allied as of __________, 199__ $_________
Less the following deductions:
(i) Inventory subject to liens (other than the Bank) ______________
(ii) Inventory held at locations without landlord waiver ______________
(iii) Inventory "obsolete" ** ______________
(iv) Inventory without a sale for more than one year** ______________
(v) Inventory held at locations outside the U.S. ______________
(vi) Work in process** ______________
(vii) Inventory built to customer specifications for which
there is no purchase contract specifying delivery
within the next 90 days *** ______________
G. Total deductions $_________
**(iii) and (iv) shall be reported to the Bank beginning with the month ended
June 30, 1997 and monthly thereafter provided however, that if the Borrower can
not input historical data required to report (iii) and (iv) by June 30, 1997,
such reporting shall begin with the month ended November 30, 1997. (vi) shall
be calculated from the Closing Date until the month ended May 31, 1997 as the
higher of (a) 10% of perpetual inventory as reported for the month or (b) the
percentage work in process to total inventory reported on the last quarterly
financial statement of Allied
107
provided to the Bank under Section 5.08 (a) and (b). For the month ending June
30, 1997 and thereafter, Allied shall provide actual work in process levels.
***All Inventory built to customer specifications shall be included in inventory
for the Borrowing Base Certificate prior to 6/30/97. At 6/30/97 or such date
thereafter when the Borrower can provide detailed information on such inventory,
such inventory shall be included in inventory on the Borrowing Base Certificate,
to the extent that F.(vii) shall be completed at such time.
H. Eligible (F-G) $________
I. Inventory Advances Rate X30%
J. Eligible Inventory times Inventory Advance Rate $________
K. Available inventory (the lower of J or $2,000,000.00) $________
L. Total Borrowing Base (E plus K) $________
M. Aggregate Revolving Credit Loans outstanding at (Date:______) $________
N. Net available equals lesser of L minus M or $4,000,000.00 minus M
(if negative, our check for line N amount is attached) $________
O. Amount of loan requested (if any) $________
P. Net available after Loan request [the lesser of L minus (M plus O)
or ($4,000,000.00 minus (M plus O) $________
The undersigned hereby represents and warrants to the Bank that all information
set forth herein, including, without limitation, the information regarding the
status of Allied's accounts receivable and Allied's inventory, are true,
complete and accurate. The undersigned further acknowledges that the Bank will
rely on the information contained herein in making Loans to the undersigned.
The undersigned certifies that (i) no Event of Default or event which upon
notice, lapse of time or both constitute an Event of Default has occurred and is
continuing under the Agreement, and (ii) the undersigned has performed all
agreements and satisfied all conditions under the Agreement required to be
performed by it on or prior to the date hereof. Capitalized terms used herein
and not defined shall have the meaning set forth in the Agreement dated as of
September 4, 1996 among the undersigned and the Bank.
ALLIED DEVICES CORPORATION
By:_______________________
Title
108
EXHIBIT F
WAIVER OF LANDLORD'S LIEN
This Agreement made this 4th day of September, 1996, by and among
THE CHASE MANHATTAN BANK, a New York banking corporation having an office at 000
Xxxxx Xxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000 (hereinafter called "Bank"), ALLIED
DEVICES CORPORATION, a Nevada corporation having an office at 0000 Xxxxxxx
Xxxxxx, Xxxxxxx, Xxx Xxxx 00000 (hereinafter called "Borrower"), and ____
_____________________________________________ having an office at
__________________________________________, (hereinafter called "Landlord");
WHEREAS, Landlord, under a written lease with Borrower, has leased
premises at __________________________________________ (hereinafter called the
"Premises") to the Borrower; and
WHEREAS, the Borrower has requested the loan (hereinafter called
the "Loan") from the Bank for the purposes of refinancing existing debt of the
Borrower and for general working capital purposes; and
WHEREAS, the Bank desires to make the Loan to the Borrower provided
the Bank has a first position security interest lien on all of the Borrower's
personal property, inventory, fixtures and equipment wherever located and
whether now owned or in existence or hereafter acquired or created of every kind
and description, tangible or intangible, including goods, documents,
instruments, general intangibles, chattel paper, accounts and contract rights,
such terms having the meanings ascribed by the UCC (hereinafter called the
"Assets"); and
WHEREAS, Landlord has the right by virtue of the laws of the State
of New York to enforce collection of rent due by distraint on Borrower's
property on the Premises and the Landlord has an interest in property placed on
the Premises by Borrower which may be regarded as fixtures;
NOW, THEREFORE, in consideration of the mutual covenants contained,
the parties agree as follows:
109
1. Bank shall make the Loan to the Borrower which Loan shall be
secured by a first security interest loan on the Assets.
2. The Assets shall remain personal property of the Borrower even
though it may be affixed to the Premises until the Loan has been paid by
Borrower to Bank together with all interest thereon or until Borrower defaults
in the payment of the Loan.
3. Landlord waives any right, title or interest in the Assets that
Landlord may have by reason of said Assets being attached to or resting on the
Premises for the duration of Bank's security interest in the Assets which shall
exist until Borrower has paid Bank the outstanding balance of the Loan. The
Bank shall be entitled to remove the Assets from the Premises at any reasonable
time should Borrower default on payment of the Loan under the terms of the
documents evidencing the Loan.
4. Bank shall not be responsible for the condition of the Premises
after removal of the Assets so long as reasonable care is exercised in the
removal. Landlord shall not be responsible for the condition of the Assets
while the Assets remains on the Premises and under the control of the Borrower.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the date first above set forth.
THE CHASE MANHATTAN BANK - Bank
By:_____________________________________
Xxxxxxx X. Xxxxx,
Assistant Vice President
ALLIED DEVICES CORPORATION - Borrower
By:_____________________________________
Xxxx Xxxxxxxxx, Chairman of the Board
_____________________ - Landlord
By:_____________________________
000
XXXXX XX XXX XXXX)
) ss.:
COUNTY OF SUFFOLK)
On this 4th day of September, 1996, before me personally came
Xxxxxxx X. Xxxxx to me known, who being by me duly sworn, did depose and say
that he resides at 000 Xxxxx Xxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000; that he is
the Assistant Vice President of The Chase Manhattan Bank, the corporation
described in and which executed the foregoing instrument; that by order of the
Board of Directors of said corporation, he signed his name thereto.
_______________________________
Notary Public
STATE OF NEW YORK)
) ss.:
COUNTY OF SUFFOLK)
On this 4th day of September, 1996, before me personally came Xxxx
Xxxxxxxxx to me known, who being by me duly sworn, did depose and say that he
resides at 000 Xxxx 00xx Xxxxxx, Xxx 0x, Xxx Xxxx, Xxx Xxxx 00000; that he is
the Chairman of the Board of ALLIED DEVICES CORPORATION, the corporation
described in and which executed the foregoing instrument; that by order of the
Board of Directors of said corporation, he signed his name thereto.
_______________________________
Notary Public
STATE OF NEW YORK)
) ss.:
COUNTY OF SUFFOLK)
On this ____ day of _________, 1996, before me personally came
________________________ to me known, who being by me duly sworn, did depose and
say that he resides at ______________________ ____________________; that he is
the _________________ of the corporation described in and which executed the
foregoing instrument; that by order of the Board of Directors of said
corporation, he signed his name thereto.
_______________________________
Notary Public
111
SCHEDULE I
Subsidiaries of Borrower
Jurisdiction Percentage
Name and Address of Incorporation of Ownership
---------------- ---------------- ------------
EMPIRE-TYLER CORPORATION Missouri 100%
000 Xxxxx
Xxxxxx, Xxxxxxxx 00000
112
SCHEDULE II
Credit Arrangements
(to be Supplied by Borrower)
113
SCHEDULE III
Hazardous Materials
-NONE-
114
