FINANCING AGREEMENT
The CIT Group/Business Credit, Inc.
(as Lender)
And
Peerless Chain Company and
Peerless Chain of Iowa, Inc.
(as Borrowers)
Dated: December 13, 1995
TABLE OF CONTENTS
SECTION 1. Definitions .................................................. 1
SECTION 2. Conditions Precedent ......................................... 13
SECTION 3. Revolving Loans .............................................. 16
SECTION 4. Term Loans and CAPEX Term Loans .............................. 19
SECTION 5. Letters of Credit ............................................ 22
SECTION 6. Collateral ................................................... 25
SECTION 7. Representations, Warranties and Covenants .................... 28
SECTION 8. Interest, Fees and Expenses .................................. 37
SECTION 9. Powers ....................................................... 41
SECTION 10. Events of Default and Remedies ............................... 41
SECTION 11. Termination .................................................. 45
SECTION 12. Miscellaneous ................................................ 45
EXHIBIT
Exhibit A - Form of Promissory Note A
Exhibit B - Form of Promissory Note B
Exhibit C - Form of Capex Term Loan Note
SCHEDULES
Schedule 1 - List of Leased Locations and Monthly Rental Amounts
Schedule 2 - Existing Liens
Schedule 3 - Collateral Locations and Chief Executive Office
THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation,
(hereinafter "CITBC") with offices located at 10 South LaSalle Street, Chicago,
IL 60603, is pleased to confirm the terms and conditions under which CITBC shall
make revolving loans, term loans and other financial accommodations to Peerless
Chain Company (herein the "PCC"), a Minnesota corporation with a principal place
of business at 1416 East Sanborn Street and Peerless Chain of Iowa, Inc. (herein
"PCII"), an Iowa corporation with a principal place of business at 1416 East
Sanborn Street, Winona, MN 55987-5349 (PCC and PCII may be referred to herein
individually as a "Company" and collectively as the "Companies").
SECTION 1. DEFINITIONS
ACCOUNTS shall mean all of the Companies' now existing and future: (a) accounts
(as defined in the U.C.C.) and any and all other receivables (whether or not
specifically listed on schedules furnished to CITBC), including, without
limitation, all accounts created by or arising from all of their sales of goods
or rendition of services to their customers, and all accounts arising from sales
or rendition of services made under any of their trade names or styles, or
through any of their divisions; (b) any and all instruments (as defined in the
U.C.C.), documents (as defined in the U.C.C.), contract rights (as defined in
the U.C.C.) and chattel paper (as defined in the U.C.C.); (c) unpaid seller's
rights (including rescission, replevin, reclamation and stoppage in transit)
relating to the foregoing or arising therefrom; (d) rights to any goods
represented by any of the foregoing, including rights to returned or repossessed
goods; (e) reserves and credit balances arising hereunder; (f) guarantees or
collateral for any of the foregoing; (g) insurance policies or rights relating
to any of the foregoing; and (h) cash and non-cash proceeds of any and all the
foregoing.
ACCOUNTS RECEIVABLE ADVANCE PERCENTAGE shall mean eighty-five percent (85%),
provided that Accounts arising from sales to Walmart under the Companies'
guarantied sales programs shall be subject to a reduced advance percentage equal
to sixty percent (60%) and no dilution reserve shall be applicable to such sales
to Walmart.
ACQUISITION shall mean the purchase by Parent of all of the remaining
outstanding common stock of PCC after giving effect to the Redemption.
ADDITIONAL SELLER SUBORDINATED NOTE shall mean the promissory note in the
principal amount of $1,200,000 dated on or about the date hereof executed by
Parent to the order of Bridgewater Resources Corp. in connection with the
Acquisition.
ANNIVERSARY DATE shall mean the date occurring three (3) years from the date
hereof and the same date in every year thereafter.
AVAILABILITY shall mean, as to any Company, at any time the excess of the sum of
a) Eligible Accounts Receivable of such Company multiplied by the Accounts
Receivable Advance Percentage and b) the lesser of (i) Eligible Inventory of
such Company multiplied by the Inventory Advance Percentage or (ii) the
Inventory Loan Cap over the sum of x) the outstanding aggregate amount of all
Obligations of such Company, including, without limitation, all Obligations with
respect to Revolving Loans and Letters of Credit but excluding the Term Loans,
CAPEX Term Loans and all Obligations with respect to the $150,000 additional
Loan Facility Fee until such time as such fee is due and payable and y) the
Availability Reserve of such Company.
AVAILABLE RESERVE shall mean, as to any Company, the sum of two (2) months
rental payments on all of its leased premises (determined in accordance with
Schedule 1 hereto) for which it has not delivered to CITBC a landlord's waiver
(in form and substance satisfactory to CITBC in the exercise of its reasonable
business judgment), provided that such amount shall be adjusted from time to
time hereafter upon (i) delivery to CITBC of any such acceptable waiver, (ii)
the opening or closing of a Collateral location and/or (iii) and change in
rental payment.
BUSINESS DAY shall mean any day that CITBC is open for business in New York, New
York, which is not (i) a Saturday, Sunday or legal holiday in the state of New
York or (ii) a day on which banking institution chartered by the state of New
York or the United States are legally required to close.
CAPEX TERM LOANS shall mean the term loans made and to be made to the Companies
by CITBC in the aggregate principal amount of up to $4,000,000 as more fully
described in Section 4 of this Financing Agreement.
CAPEX TERM LOANS LIMITATION shall mean the sum of (a) $500,000, provided that
such amount set forth in this clause (a) shall apply only during the period from
the date hereof through and including the date occurring 12 months after the
date hereof, plus (b) an amount equal to (i) the Companies actual EBITDA for the
12 month period ending on the last day of the month preceding the request for a
CAPEX Term Loan (or in case of any calculation date occurring prior to one (1)
year after the date of this Financing Agreement the period from the date of this
Financing Agreement to such calculation date) minus (ii) the sum of (x) the
minimum EBITDA amount required by Section 7, Paragraph 10(d) hereof as at such
month end plus (y) $500,000, provided that such amount set forth in this clause
(y) shall apply only during the period from the date hereof through and
including the date occurring 12 months after the date hereof, plus (z) the
aggregate amount of CAPEX Term Loans theretofore borrowed by the Companies
during such 12 month period.
CAPEX TERM LOAN LINE OF CREDIT shall mean the commitment of CITBC to make CAPEX
Term Loans to the Companies pursuant to Section 4 of this Financing Agreement in
the aggregate amount of $4,000,000 for the Companies.
CAPITAL EXPENDITURES for any period shall mean the aggregate of all expenditures
of the Companies during such period that in conformity with GAAP are required to
be included in or reflected by the property, plant or equipment or similar fixed
asset account reflected in the balance sheet of the Companies.
CAPITAL IMPROVEMENTS shall mean operating Equipment and facilities (other than
land) acquired or installed for use in the Companies' business operations.
CAPITAL LEASE shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure on the balance sheet of the Companies.
CHEMICAL BANK RATE shall mean the rate of interest per annum announced by
Chemical Bank from time to time as its prime rate in effect at its principal
office in the City of New York. (The prime rate is not intended to be the lowest
rate of interest charged by Chemical Bank to its borrowers).
CITBC COMMITMENT LETTER shall have the mean the commitment letter dated November
7, 1995 issued by CITBC to, and accepted by, Parent.
CLOSING DATE shall mean the date on or after the date hereof upon which CITBC
makes the initial extension of credit hereunder whether in the form of Revolving
Loans, Letters of Credit, Term Loans or CAPEX Term Loans.
COLLATERAL shall mean all present and future Accounts, Equipment, Inventory,
Documents of Title, General Intangibles, and Other Collateral of the Companies.
COLLATERAL MANAGEMENT FEE shall mean the sum of $30,000.00 which shall be paid
to CITBC in accordance with Section 8, Paragraph 11 hereof to offset the
expenses and costs of CITBC in connection with record keeping, periodic
examinations, analyzing and evaluating the Collateral.
CONSOLIDATED BALANCE SHEET shall mean a consolidated balance sheet for Parent,
the Companies and the consolidated subsidiaries of each eliminating all
inter-company transactions and prepared in accordance with GAAP.
CONSOLIDATING BALANCE SHEET shall mean a Consolidated Balance Sheet plus
individual balance sheets for Parent, the Companies, and the subsidiaries of
each showing all eliminations of inter-company transactions and prepared in
accordance with GAAP and including a balance sheet for each Company exclusively.
CURRENT ASSETS shall mean those assets which in accordance with GAAP are
classified as current.
CURRENT LIABILITIES shall mean, wherever used through out this Financing
Agreement, those liabilities which in accordance with GAAP, are classified as
"current", provided, however, that notwithstanding GAAP, the Revolving Loans and
the current portion of Permitted Indebtedness shall be considered "current
liabilities".
CUSTOMARILY PERMITTED LIENS shall mean
(a) liens of local or state authorities for franchise or other like
taxes provided the aggregate amounts of such liens shall not exceed $100,000.00
in the aggregate for the Companies at any one time;
(b) statutory liens of landlords and liens of carriers, warehousemen,
mechanics, materialmen and other like liens imposed by law, created in the
ordinary course of business and for amounts not yet due (or which are being
contested in good faith by appropriate proceedings or other appropriate actions
which are sufficient to prevent imminent foreclosure of such liens) and with
respect to which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP;
(c) deposits made (and the liens thereon) in the ordinary course of
business (including, without limitation, security deposits for leases, surety
bonds and appeal bonds) in connection with workers' compensation, unemployment
insurance and other types of social security benefits or to secure the
performance of tenders, bids contracts (other than for the repayment or
guarantee of borrowed money or purchase money obligations), statutory
obligations and other similar obligations arising as a result of progress
payments under government contracts; and
(d) easements (including, without limitation, reciprocal easement
agreements and utility agreements), encroachments, minor defects or
irregularities in title, variation and other restrictions, charges or
encumbrances (whether or not recorded) affecting the Real Estate and which in
the aggregate (i) do no materially interfere with the occupation, use or
enjoyment by the Companies in their business of the property so encumbered and
(ii) in the reasonable business judgment of CITBC does not materially and
adversely affect the value of such Real Estate.
DEFAULT shall mean any event specified in Section 10 hereof, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, event or act, has been satisfied.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum equal to the
sum of: a) two percent (2%) plus b) the applicable contract rate of interest
based upon an increment over the Chemical Bank Rate as determined in accordance
with Section 8 hereof, which CITBC shall be entitled to charge the Company on
all Obligations due CITBC by the Companies to the extent provided in Section 10,
Paragraph 2 of this Financing Agreement.
DEPOSITORY ACCOUNTS shall have the meaning specified in Section 3, Paragraph 4
hereof.
DOCUMENTATION FEE shall mean i) the sum of $15,015 which is intended to
compensate CITBC for the use of CITBC's in-house Legal Department and facilities
in documenting, in whole or in part, the initial transaction solely on behalf of
CITBC, exclusive of Out-of-Pocket Expenses, and ii) CITBC's standard fees
relating to any and all modifications, waivers, releases, amendments or
additional collateral with respect to this Financing Agreement, the Collateral
and/or the Obligations.
DOCUMENTS OF TITLE shall mean all present and future documents (as defined in
the U.C.C.) including, without limitation all warehouse receipts, bills of
lading, shipping documents, chattel paper, instruments and similar documents,
all whether negotiable or not and all goods and Inventory relating thereto and
all cash and non-cash proceeds of the foregoing.
EARLY TERMINATION DATE shall mean the date on which the Companies terminate this
Financing Agreement or the Line of Credit which date is prior to an Anniversary
Date.
EARLY TERMINATION FEE shall: i) mean the fee CITBC is entitled to charge the
Companies in the event they terminate the Line of Credit or this Financing
Agreement on a date prior to an Anniversary Date; and ii) be determined by
calculating the sum of (x) the average daily loan balance of the Revolving Loans
of the Companies plus (y) the average daily balance of outstanding Letters of
Credit of the Companies for the period from the date of this Financing Agreement
to the Early Termination Date and multiplying that sum by two percent (2%) per
annum for the number of days from the Early Termination Date to the next
succeeding Anniversary Date.
EBIT shall mean, in any period, all earnings before all interest and tax
obligations for said period, determined in accordance with GAAP.
EBITDA shall mean, in any period, all earnings before all (i) interest and tax
obligations, (ii) depreciation, (iii) amortization for said period, and (iv) the
non-cash accrual for FASB106 for said period, all determined in accordance with
GAAP on a basis consistent with the latest audited financial statements of the
Companies, provided that for the purposes of this definition the effect of the
non-cash impact resulting from APB16 (inventory write-up) shall be excluded.
ELIGIBLE ACCOUNTS RECEIVABLE shall mean, as to any Company, the gross amount
such Company's Trade Accounts Receivable that are subject to a valid, first
priority and fully perfected security interest in favor of CITBC and which
conform to the warranties contained herein and at all times continue to be
acceptable to CITBC in the exercise of its reasonable business judgment, less,
without duplication, the sum of a) any returns, discounts, claims, credits and
allowances of any nature (whether issued, owing, granted or outstanding) and b)
reserves for: i) sales to the United States of America or to any agency,
department or division thereof; ii) foreign sales other than sales x) secured by
stand-by letters of credit (in form and substance satisfactory to CITBC) issued
or confirmed by, and payable at, banks having a place of business in the United
States of America and payable in United States currency, or y) to customers
residing in Canada provided such sales otherwise comply with all of the other
criteria for eligibility hereunder, are payable in United States currency and
such sales do not exceed $1,000,000.00 in the aggregate at any one time; iii)
(x) Accounts arising from Sales Subject To Acceptable Extended Dating Terms
provided that no payment due thereunder or with respect thereto remains unpaid
more than 30 days after the respective due date thereof and (y) Accounts (other
than Accounts arising from Sales Subject To Acceptable Extended Dating Terms)
that remain unpaid more than ninety (90) days from invoice date; iv) contras; v)
sales to Parent, any subsidiary, or to any company affiliated with the Companies
or Parent in any way; vi) bill and hold (deferred shipment) or consignment sales
or Accounts generated from sales under the Companies guaranteed sales programs
(other than those to Walmart which meet all of the other relevant criteria of
eligibility hereunder not to exceed $500,000 in the aggregate at any time); vii)
sales to any customer which is a) insolvent, b) the debtor in any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar proceedings
under any federal or state law, c) negotiating, or has called a meeting of its
creditors for purposes of negotiating, a compromise of its debts or d)
financially unacceptable to CITBC or has a credit rating unacceptable to CITBC;
viii) all sales to any customer if fifty percent (50%) or more of either x) all
outstanding invoices or y) the aggregate dollar amount of all outstanding
invoices, are unpaid more than the applicable time periods specified in clause
iii) above; ix) any other reasons deemed necessary by CITBC in its reasonable
business judgment and which are customary either in the commercial finance
industry or in the lending practices of CITBC; and x) an amount representing,
historically, returns, discounts, claims, credits and allowances.
ELIGIBLE INVENTORY shall mean, as to any Company, the gross amount of such
Company's Inventory that is subject to a valid, first priority and fully
perfected security interest in favor of CITBC and which conform to the
warranties contained herein and which at all times continue to be acceptable to
CITBC in the exercise of its reasonable business judgment less any
work-in-process, supplies (other than raw material), goods not present in the
United States of America, goods returned or rejected by its customers other than
goods that are undamaged and resalable in the normal course of business, goods
to be returned to its suppliers, goods in transit to third parties (other than
its agents or warehouses), Inventory in possession of a warehouseman, bailee or
other third party unless such warehouseman, bailee or third party has executed a
notice of security interest agreement (in form and substance satisfactory to
CITBC) and CITBC has taken all other action required to perfect its security
interest in such Inventory, and less any reserves required by CITBC in its
reasonable discretion for special order goods, market value declines and bill
and hold (deferred shipment) or consignment sales.
EQUIPMENT shall mean all present and hereafter acquired equipment (as defined in
the U.C.C.) including, without limitation, all machinery, equipment, furnishings
and fixtures, and all additions, substitutions and replacements thereof,
wherever located, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto and all proceeds of
whatever sort.
ERISA shall mean the Employee Retirement Income Security Act or 1974, as amended
from time to time and the rules and regulations promulgated thereunder from time
to time.
EVENT(S) OF DEFAULT shall have the meaning provided for in Section 10 of this
Financing Agreement.
EXECUTIVE OFFICERS shall mean the Chairman, President, Chief Executive Officer,
Chief Operating Officer, Chief Financial Officer, Executive Vice President(s),
Senior Vice President(s), Treasurer, Controller and Secretary of the Company.
FISCAL QUARTER shall mean each three (3) month period ending on March 31, June
30, September 30, and December 31 of each year.
FISCAL YEAR shall mean each twelve (12) month period commencing on January 1 of
each year and ending on the following December 31.
FIXED CHARGE COVERAGE RATIO shall mean, for the relevant period, the ratio
determined by dividing EBITDA by the sum of (i) all interest obligations paid or
due, (ii) the amount of principal repaid or scheduled to be repaid on the Term
Loans, Capex Term Loans, Capital Leases and Subordinated Debt, (iii) Capital
Expenditures expended in cash, and (iv) all federal, state and local income tax
expenses due and payable after giving effect to applicable net operating losses.
GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply.
GENERAL INTANGIBLES shall have the meaning set forth in the U.C.C. and shall
include, without limitation, all present and future right, title and interest in
and to all tradenames, Trademarks (together with the goodwill associated
therewith), Patents, licenses, customer lists, distribution agreements, supply
agreements and tax refunds, together with all monies and claims for monies now
or hereafter due and payable in connection with any of the foregoing or
otherwise, and all cash and non-cash proceeds thereof.
GUARANTORS shall mean i) Parent, and ii) the Companies.
INDEBTEDNESS shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of money
(borrowed or otherwise) or for the deferred purchase price of property, services
or assets, other than Inventory, or (b) lease obligations which, in accordance
with GAAP, have been, or which should be capitalized.
INVENTORY shall mean all of the Companies' present and hereafter acquired
inventory (as defined in the U.C.C. including, without limitation all
merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same; in all
stages of production- from raw materials through work-in-process to finished
goods - and all proceeds thereof of whatever sort.
INVENTORY ADVANCE PERCENTAGE shall mean sixty percent (60%).
INVENTORY LOAN CAP shall mean $7,000,000.
ISSUING BANK shall mean the bank issuing Letters of Credit for the Companies.
LETTERS OF CREDIT shall mean all letters of credit issued with the assistance of
CITBC by the Issuing Bank for or on behalf of the Companies.
LETTER OF CREDIT GUARANTY shall mean the guaranty delivered by CITBC to the
Issuing Bank of the Companies' reimbursement obligation under the Issuing Bank's
Reimbursement Agreement, Application for Letter of Credit or other like
document.
LETTER OF CREDIT GUARANTY FEE shall mean the fee CITBC may charge the Companies
under Section 8, Paragraph 6 of this Financing Agreement for: i) issuing the
Letter of Credit Guaranty or ii) otherwise aiding the Company in obtaining
Letters of Credit.
LETTER OF CREDIT SUB-LINE shall mean $2,000,000 in the aggregate for the
Companies.
LEVERAGE RATIO shall mean the ratio determined by dividing Total Liabilities by
Net Worth.
LIBOR shall mean at any time of determination, and subject to availability, for
each interest period the higher of the applicable London Interbank Offered rate
paid in London on dollar deposits from other banks as (x) quoted by Chemical
Bank, (y) published under "Money Rates" in the new York City edition of the Wall
Street Journal or if there is no such publication or statement therein as to
Libor then in any publication used in the New York City financial community or
(z) determined by CITBC based upon information presented on Telerate Systems at
Page 3750 as of 11:00 a.m. (London Time).
LIBOR LOAN shall mean those Revolving Loans, Term Loans and/or CAPEX Term Loans
for which the Company has elected to use Libor for interest rate computations.
LIBOR PERIOD shall mean the Libor for one month, two month, three month or six
month U.S. dollar deposits, as selected by the Companies.
LINE OF CREDIT shall mean the commitment of CITBC to make Revolving Loans
pursuant to Section 3 of this Financing Agreement and to assist the Company in
opening Letters of Credit pursuant to Section 5 of this Financing Agreement, in
the aggregate amount equal to $13,000,000 for the Companies.
LINE OF CREDIT FEE shall: i) mean the fee due CITBC at the end of each month for
the Line of Credit, and ii) be determined by multiplying the difference between
the sum of (x) the Line of Credit and (y) the CAPEX Term Loan Line of Credit,
and the sum of (x) the average daily balance of Revolving Loans of the Companies
plus (y) the average daily balance of Letters of Credit of the Companies and (z)
the average daily balance of CAPEX Term Loans of the Companies for said month by
one half of one percent (1/2 of 1%) per annum for the number of days in said
month.
LOAN FACILITY FEE shall mean the fee payable to CITBC in accordance with, and
pursuant to, the provisions of Section 8, Paragraph 10 of this Financing
Agreement.
MANDATORY PREPAYMENT shall: i) mean the amount by which the Companies must
prepay the Term Loans on or before the 90th day after the end of their Fiscal
Year; and ii) be determined as set forth in Section 4, Paragraph 16 of this
Financing Agreement.
NET WORTH shall mean assets in excess of liabilities, and shall be determined in
accordance with GAAP, on a consistent basis with the latest audited statements,
provided that for the purpose of this definition the effect of the non-cash
impact to retained earnings resulting from APB16 (inventory write-up) shall be
excluded.
OBLIGATIONS shall mean all loans and advances made or to be made by CITBC to the
Companies or to others for the Companies' account (including, without
limitation, all Revolving Loans, Letters of Credit, Term Loans and CAPEX Term
Loans); any and all indebtedness and obligations which may at any time be owing
by the Companies to CITBC howsoever arising, whether now in existence or
incurred by the Companies from time to time hereafter; whether secured by
pledge, lien upon or security interest in any of the Companies' assets or
property or the assets or property of any other person, firm, entity or
corporation; whether such indebtedness is absolute or contingent, joint or
several, matured or unmatured, direct or indirect and whether the Companies are
liable to CITBC for such indebtedness as principal, surety, endorser, guarantor
or otherwise. Obligations shall also include indebtedness owing to CITBC by the
Companies under this Financing Agreement or under any other agreement or
arrangement now or hereafter entered into between the Companies and CITBC;
indebtedness or obligations incurred by, or imposed on, CITBC as a result of
environmental claims (other than as a result of actions of CITBC) arising out of
the Companies' operation, premises or waste disposal practices or sites; the
Companies' liability to CITBC as maker or endorser on any promissory note or
other instrument for the payment of money; the Companies' liability to CITBC
under any instrument of guaranty or indemnity, or arising under any guaranty,
endorsement or undertaking which CITBC may make or issue to others for the
Companies' account, including any accommodation extended with respect to
applications for Letters of Credit, CITBC's acceptance of drafts or CITBC's
endorsement of notes or other instruments for the Companies' account and
benefit.
OPERATING LEASES shall mean all leases of property (whether real, personal or
mixed) other than Capital Leases, provided that leases of Real Estate for more
than one (1) year shall be treated as Capital Leases hereunder.
OTHER COLLATERAL shall mean all now owned and hereafter acquired deposits
accounts maintained with any bank or financial institutions; all cash and other
monies and property in the possession or control of CITBC; all books, records,
ledger cards, disks and related data processing software at any time evidencing
or containing information relating to any of the Collateral described herein or
otherwise necessary or helpful in the collection thereof or realization thereon,
and all cash and non-cash proceeds of the foregoing.
OUT-OF-POCKET EXPENSES shall mean all of CITBC's present and future expenses
incurred relative to this Financing Agreement, whether incurred heretofore or
hereafter, which expenses shall include, without being limited to, the cost of
record searches, all costs and expenses incurred by CITBC in opening bank
accounts, depositing checks, receiving and transferring funds, and any charges
imposed on CITBC due to "insufficient funds" of deposited checks and CITBC's
standard fee relating thereto, any amounts paid by CITBC, incurred by or charged
to CITBC by the Issuing Bank under the Letter of Credit Guaranty or the
Company's Reimbursement Agreement, Application for Letter of Credit or other
like document which pertain either directly or indirectly to such Letters of
Credit, and CITBC's standard fees relating to the Letters of Credit and any
drafts thereunder, reasonable local counsel fees, fees and taxes relative to the
filing of financing statements and all expenses, costs and fees set forth in
Section 10, Paragraph 3 of this Financing Agreement.
PARENT shall mean Discus Acquisition Corporation, a Minnesota corporation.
PERMITTED ENCUMBRANCES shall mean: i) liens on specific items of Equipment
listed on Schedule 2 hereto and other liens expressly permitted, or consented
to, by CITBC; ii) Purchase Money Liens; iii) Customarily Permitted Liens; iv)
liens granted CITBC by the Companies; v) liens of judgment creditors provided
such liens do not exceed, in the aggregate for the Companies, at any time,
$50,000.00 (other than liens bonded or insured to the reasonable satisfaction of
CITBC); and vi) liens for taxes not yet due and payable or which are being
diligently contested in good faith by the Companies by appropriate proceedings
and which liens are not x) other than with respect to Real Estate, senior to the
liens of CITBC or y) for taxes due the United States of America.
PERMITTED INDEBTEDNESS shall mean: i) current indebtedness maturing in less than
one year and incurred in the ordinary course of business for raw materials,
supplies, equipment, services, taxes or labor; ii) the indebtedness secured by
the Purchase Money Liens; iii) Subordinated Debt; iv) indebtedness arising under
the Letters of Credit and this Financing Agreement; v) deferred taxes and other
expenses incurred in the ordinary course of business; and vi) other indebtedness
existing on the date of execution of this Financing Agreement and listed in the
most recent financial statement delivered to CITBC or otherwise disclosed to
CITBC in writing.
PREPAYMENT PREMIUM shall: i) mean the amount due CITBC by the Companies upon a
voluntary prepayment, in whole or in part, of the Term Loans, and/or the CAPEX
Term Loans, and ii) be computed by multiplying the amount so prepaid by two
percent (2%).
PROMISSORY NOTES shall mean the notes, in the form of Exhibits A, B and C
attached hereto, delivered by the Companies to CITBC to evidence the Term Loans
and CAPEX Term Loans pursuant to, and repayable in accordance with, the
provisions of Section 4 of this Financing Agreement.
PURCHASE MONEY LIENS shall mean liens on any item of equipment acquired after
the date of this Financing Agreement provided that i) each such lien shall
attach only to the property to be acquired, ii) a description of the property so
acquired is furnished to CITBC, and iii) the debt incurred in connection with
such acquisitions shall not exceed in the aggregate $100,000.00 in any fiscal
year.
REAL ESTATE shall mean the Companies' fee and/or leasehold interests in real
property.
REDEMPTION shall mean the redemption by PCC of 17,750 shares of its common stock
for an aggregate redemption price not to exceed $15,200,000 in cash and a
promissory note in principal amount of $2,500,000, all subject to, and in
accordance with the laws of the State of Minnesota.
REVOLVING LOANS shall mean the loans and advances made, from time to time, to or
for the account of the Companies by CITBC pursuant to Section 3 of this
Financing Agreement.
REVOLVING LOAN ACCOUNT(S) shall have the meaning specified in Section 3,
Paragraph 6 hereof.
SALES SUBJECT TO ACCEPTABLE EXTENDED DATING TERMS shall mean traction chain
sales by the Companies which (i) are made between October 1 and February 28, or
29 (as the case may be) of each year, (ii) grant the Companies' normal extended
dating terms in accordance with their past practices in the ordinary course of
their business and (iii) are due in three (3) installments, the last of which
shall be due and payable no later than the following April 10, provided that (i)
the maximum amount of the Accounts arising from such sales which may be included
in Eligible Accounts Receivable shall not exceed $800,000 in the aggregate at
any time and (ii) no such Accounts which are evidenced by chattel paper shall be
included in Eligible Accounts Receivable unless all originals of such chattel
paper are delivered to CITBC.
SELLER SUBORDINATED NOTE shall mean the note in the original principal amount of
$2,500,000 dated on or about the date hereof executed by PCC to the order of
Bridgewater Resources Corp. in connection with the Redemption.
SUBORDINATED DEBT shall mean the debt due a Subordinating Creditor (and the note
evidencing such) which has been subordinated, by a Subordination Agreement, to
the prior payment and satisfaction of the Obligations of the Companies to CITBC
(in form and substance satisfactory to CITBC).
SUBORDINATING CREDITOR shall mean Bridgewater Resources Corp. and any other
party hereafter executing a Subordination Agreement.
SUBORDINATION AGREEMENT shall mean the agreement among the Companies, a
Subordinating Creditor and CITBC pursuant to which a Subordinated Debt is
subordinated to the prior payment and satisfaction of the Companies' Obligations
to CITBC (in form and substance satisfactory to CITBC).
SURPLUS CASH shall mean for any Fiscal Year EBITDA less the sum of a) all
interest obligations paid or due CITBC by the Companies and interest obligations
paid or due on Subordinated Debt, b) the amount of principal repaid CITBC on the
Term Loans and CAPEX Term Loans, c) Capital Expenditures by the Companies, and
d) all federal, state and local tax obligations of the Companies.
TERM LOANS shall mean the term loans in the respective principal amounts of
$4,200,000.00 and $2,500,000.00 made by CITBC pursuant to, and repayable in
accordance with, the provisions of Section 4 of this Financing Agreement.
TOTAL LIABILITIES shall mean total liabilities determined in accordance with
GAAP, on a basis consistent with the latest audited statements of the Companies.
TRADE ACCOUNTS RECEIVABLE shall mean that portion of Accounts which arises from
the sale of Inventory or the rendition of services in the ordinary course of
business.
TRADEMARKS shall mean all present and hereafter acquired trademarks and/or
trademark rights (together with the goodwill associated therewith) and all cash
and non-cash proceeds thereof.
U.C.C. shall mean the Uniform Commercial Code as in effect from time to time in
the state of Illinois.
WORKING CAPITAL shall mean Current Assets in excess of Current Liabilities.
SECTION 2. CONDITIONS PRECEDENT
The obligation of CITBC to make loans hereunder is subject to the
satisfaction of, or waiver of, immediately prior to or concurrently with the
making of such loans, the following conditions precedent:
a) LIEN SEARCHES - CITBC shall have received tax, judgment and Uniform
Commercial Code searches satisfactory to CITBC for all locations presently
occupied or used by the Companies.
b) CASUALTY INSURANCE - The Companies shall have delivered to CITBC
evidence satisfactory to CITBC that casualty insurance policies listing CITBC as
loss payee or mortgagee, as the case may be, are in full force and effect, all
as set forth in Section 7, Paragraph 5 of this Financing Agreement.
c) UCC FILINGS - Any documents (including without limitation, financing
statements) required to be filed in order to create, in favor of CITBC, a first
and exclusive perfected security interest in the Collateral with respect to
which a security interest may be perfected by a filing under the Uniform
Commercial Code shall have been properly filed in each office in each
jurisdiction required in order to create in favor of CITBC a perfected lien on
the Collateral. CITBC shall have received acknowledgement copies of all such
filings (or, in lieu thereof, CITBC shall have received other evidence
satisfactory to CITBC that all such filings have been made); and CITBC shall
have received evidence that all necessary filing fees and all taxes or other
expenses related to such filings have been paid in full.
d) GUARANTIES - The Guarantors shall have executed and delivered to
CITBC guaranties, in form acceptable to CITBC, guaranteeing all present and
future obligations of the Companies to CITBC.
e) OPINIONS - Counsel for the Companies and the Guarantors shall have
delivered to CITBC opinions satisfactory to CITBC opining, inter alia, that,
subject to the i) filing, priority and remedies provisions of the Uniform
Commercial Code, ii) the provisions of the Bankruptcy Code, insolvency statutes
or other like laws, iii) the equity powers of a court of law and iv) such other
matters as may be agreed upon with CITBC: (A)(a) this Financing Agreement, (b)
the Guaranty of the Guarantors, and (c) all other loan documents of the
Companies and the Guarantors are x) valid, binding and enforceable according to
their terms, y) are duly authorized and z) do not violate any terms, provisions,
representations or covenants in the charter or by-laws of the Companies or the
Guarantors or, to the best knowledge of such counsel, of any loan agreement,
mortgage, deed of trust, note, security or pledge agreement or indenture to
which the Companies or the Guarantors is a signatory or by which the Companies
or the Guarantors or their assets are bound; and (B) the Redemption is in
compliance with, and does not violate, any applicable provision of any state or
federal laws; and (C) the provisions of all federal and state securities laws
and the Hart-Scott-Rodino Anti-Trust Improvements Act have been fully complied
with or that compliance is not legally required and the reasons supporting such
non-compliance. In addition, counsel for the Subordinating Creditor shall have
delivered an opinion to CITBC (in form and substance satisfactory to CITBC) with
respect to the matters contained in Section 2.3 the Subordination Agreement(s)
f) PLEDGE AGREEMENT - Parent and PCC shall a) execute and deliver to
CITBC a pledge and security agreement and stock powers pledging to CITBC as
additional collateral for the Obligations of the Companies all of the issued and
outstanding stock of PCC and PCII, respectively and, b) deliver to CITBC the
stock certificates evidencing such stock together with duly executed stock
powers with respect thereto.
g) ADDITIONAL DOCUMENTS - The Companies shall have executed and
delivered to CITBC all loan documents necessary to consummate the lending
arrangement contemplated between the Companies and CITBC.
h) EQUITY INVESTMENT - Parent and/or the Companies shall provide CITBC
with documentation evidencing a contribution to the capital of (x) the Parent in
the amount of $4,850,000.00 and (y) PCC in the amount of $313,000.
i) SUBORDINATION AGREEMENT - The Subordinating Creditor with respect to
the Seller Subordinated Note and the Additional Seller Subordinated Note shall
have executed and delivered to CITBC a Subordination Agreement, in form and
substance satisfactory to CITBC, subordinating the debt due such Subordinating
Creditor by the Companies to the prior payment and satisfaction of the
Obligations of the Companies to CITBC.
j) ENVIRONMENTAL REPORT - CITBC shall have received, environmental
audit reports on i) all of the Companies' leasehold and fee interests, and ii)
the Companies' waste disposal practices. The reports must x) be satisfactory to
CITBC and y) not disclose or indicate any liability (real or potential) stemming
from the Companies' premises, operations, waste disposal practices or waste
disposal sites used by Companies'.
k) BOARD RESOLUTION - CITBC shall have received a copy of the
resolutions of the Board of Directors of the Companies and the Guarantors (as
the case may be) authorizing the execution, delivery and performance of (i) this
Financing Agreement, (ii) the Guaranties and (iii) any related agreements, in
each case certified by the Secretary or Assistant Secretary of the Companies and
the Guarantors (as the case may be) as of the date hereof, together with a
certificate of the Secretary or Assistant Secretary of the Companies and the
Guarantors (as the case may be) as to the incumbency and signature of the
officers of the Companies and/or the Guarantors executing such agreements and
any certificate or other documents to be delivered by them pursuant hereto,
together with evidence of the incumbency of such Secretary or Assistant
Secretary.
l) CORPORATE ORGANIZATION - CITBC shall have received (i) a copy of the
Certificate of Incorporation of the Companies and the Guarantors certified by
the Secretary of State of its incorporation, and (ii) a copy of the By-Laws (as
amended through the date hereof) of the Companies and the Guarantors certified
by the Secretary or Assistant Secretary thereof.
m) OFFICER'S CERTIFICATE - CITBC shall have received an executed
Officer's Certificate of the Companies, satisfactory in form and substance to
CITBC, certifying that (i) the representations and warranties contained herein
are true and correct in all material respects on and as of the date hereof; (ii)
the Companies are in compliance with all of the terms and provisions set forth
herein; and (iii) no Default or Event of Default has occurred.
n) ABSENCE OF DEFAULT - No Default, Event of Default or material
adverse change in the financial condition, business, prospects, profits,
operations or assets of the Companies shall have occurred.
o) APPRAISALS - CITBC shall have received appraisals on the Companies'
Equipment which appraisals shall be by an appraiser acceptable to CITBC and
shall indicate an Orderly Liquidation Value of not less than $5,209,078. with
respect to Equipment.
p) ACQUISITION - Parent shall have x) consummated the Acquisition of
all of the issued and outstanding stock of Peerless Chain Company and y)
delivered to CITBC a fully executed copy of the Purchase Agreement executed in
connection with the Acquisition.
q) REDEMPTION - PCC shall have consummated the Redemption and delivered
to CITBC an executed copy of all documentation executed in connection therewith,
which documentation shall be satisfactory to CITBC in all respects.
r) LEGAL RESTRAINTS/LITIGATION - At the date of execution of this
Financing Agreement, there shall be no x) litigation, investigation or
proceeding (judicial or administrative) pending or threatened against the
Companies or the Guarantors or their assets, by any agency, division or
department of any county, city, state or federal government arising out the
Acquisition, the Redemption or this Financing Agreement, y) injunction, writ or
restraining order restraining or prohibiting the Acquisition and/or the
Redemption or the consummation of the financing arrangements contemplated under
this Financing Agreement or z) to the best knowledge of the Companies, suit,
action, investigation or proceeding (judicial or administrative) pending or
threatened against the Companies or the Guarantors or their assets, which, in
the opinion of CITBC, if adversely determined could have a material adverse
effect on the business, operation, assets, financial condition or Collateral of
the Companies and/or the Guarantors
s) DISBURSEMENT AUTHORIZATION - The Companies shall have delivered to
CITBC all information necessary for CITBC to issue wire transfer instructions on
behalf of the Companies for the initial and subsequent loans and/or advances to
be made under this Agreement including, but not limited to, disbursement
authorizations in form acceptable to CITBC.
t) EXAMINATION & VERIFICATION - CITBC shall have completed to the
satisfaction of CITBC an examination and verification of the Accounts,
Inventory, books and records of the Companies and the Guarantors which
examination shall indicate that, after giving effect to all loans, advances and
extensions of credit to be made at closing, the Companies shall have an opening
additional Availability of $1,500,000 all as more fully required by the CITBC
Commitment Letter. It is understood that such requirement contemplates that all
debts, obligations and payables are current.
u) CASH BUDGET PROJECTIONS - CITBC shall have received, reviewed and be
satisfied with a 12 month cash budget projection prepared by the Companies in
the form provided by CITBC.
v) COLLECTION ACCOUNTS - The Companies shall have established a system
of bank accounts with respect to the collection of Accounts and the deposit of
proceeds of Inventory as shall be acceptable to CITBC in all respects.
w) CITBC COMMITMENT LETTER - The Companies shall have fully complied,
to the satisfaction of CITBC, with all of the terms and conditions of the CITBC
Commitment Letter.
Upon the execution of this Financing Agreement and the initial disbursement of
loans hereunder, all of the above Conditions Precedent shall have been deemed
satisfied except as the Company and CITBC shall otherwise agree herein or in a
separate writing.
SECTION 3. REVOLVING LOANS
1. CITBC agrees, subject to the terms and conditions of this Financing
Agreement from time to time, and within x) the Availability and y) the Line of
Credit, but subject to CITBC's right to make "overadvances", to make loans and
advances to each of the Companies on a revolving basis (i.e. subject to the
limitations set forth herein, the Companies may borrow, repay and re-borrow
Revolving Loans). Such loans and advances to each Company shall be in amounts up
to the sum of: a) outstanding Eligible Accounts Receivable of such Company
multiplied by the Accounts Receivable Advance Percentage, plus b) the lesser of
(x) the Inventory Loan Cap and (y) the aggregate value of Eligible Inventory of
such Company as determined at the lower of cost or market, and excluding the
effect of the non-cash impact resulting from APB16 (inventory write-up),
multiplied by the Inventory Advance Percentage. Each request shall constitute,
unless otherwise disclosed in writing to CITBC, a representation and warranty by
the Companies that (i) after giving effect to the requested advance, no Default
or Event of Default has occurred and (ii) such requested Revolving Loan is
within the Line of Credit and Availability. All requests for loans and advances
must be received by an officer of CITBC no later than 1:00 p.m., New York time,
of the day on which such loans and advances are required. Should CITBC for any
reason honor requests for advances in excess of the limitations set forth
herein, such advances shall be considered "overadvances" and shall be made in
CITBC's sole discretion, subject to any additional terms CITBC deems necessary.
2. In furtherance of the continuing assignment and security interest in
the Companies' Accounts, the Companies will, upon the creation of Accounts,
execute and deliver to CITBC in such form and manner as CITBC may reasonably
require, solely for CITBC's convenience in maintaining records of collateral,
such confirmatory schedules of Accounts as CITBC may reasonably request, and
such other appropriate reports designating, identifying and describing the
Accounts as CITBC may reasonably require. In addition, upon CITBC's request the
Companies shall provide CITBC with copies of agreements with, or purchase orders
from, the Companies' customers, and copies of invoices to customers, proof of
shipment or delivery and such other documentation and information relating to
said Accounts and other collateral as CITBC may reasonably require. Failure to
provide CITBC with any of the foregoing shall in no way affect, diminish, modify
or otherwise limit the security interests granted herein. The Companies hereby
authorize CITBC to regard the Companies' printed name or rubber stamp signature
on assignment schedules or invoices as the equivalent of a manual signature by
one of the Companies' authorized officers or agents.
3. Each of the Companies hereby represents and warrants that: each of
its Trade Accounts Receivable is based on an actual and bona fide sale and
delivery of goods or rendition of services to customers, made by them in the
ordinary course of their business; the goods and Inventory being sold and the
Trade Accounts Receivable created are their exclusive property and are not and
shall not be subject to any lien, consignment arrangement, encumbrance, security
interest or financing statement whatsoever, other than the Permitted
Encumbrances; the invoices evidencing such Trade Accounts Receivable are in
their name; and their customers have accepted the goods or services, owe and are
obligated to pay the full amounts stated in the invoices according to their
terms, without dispute, offset, defense, counterclaim or contra, except for
disputes and other matters arising in the ordinary course of business with
respect to which they have complied with the notification requirements of
Paragraph 5 of this Section 3. Each of the Companies confirms to CITBC that any
and all taxes or fees relating to its business, its sales, the Accounts or goods
relating thereto, are its sole responsibility and that same will be paid by them
when due and that none of said taxes or fees represent a lien on or claim
against the Accounts. Each of the Companies also warrants and represents that it
is a duly and validly existing corporation and is qualified in all states where
the failure to so qualify would have a adverse effect on their business or their
ability to enforce collection of Accounts due from customers residing in that
state. Each of the Companies agrees to maintain such books and records regarding
Accounts as CITBC may reasonably require and agrees that such books and records
will reflect CITBC's interest in the Accounts. All of the books and records of
the Companies will be available to CITBC at normal business hours, including any
records handled or maintained for the Companies by any other company or entity.
4. Until CITBC has advised the Companies to the contrary after the
occurrence of an Event of Default, the Companies may and will enforce, collect
and receive all amounts owing on the Accounts for CITBC's benefit and on CITBC's
behalf, but at the Companies' expense; such privilege shall terminate
automatically upon the institution by or against the Companies of any proceeding
under any bankruptcy or insolvency law or, at the election of CITBC, upon the
occurrence of any other Event of Default and until such Event of Default is
waived or cured to CITBC's satisfaction. Any checks, cash, notes or other
instruments or property received by the Companies with respect to any Accounts
shall be held by them in trust for CITBC, separate from their own property and
funds, and immediately turned over to CITBC with proper assignments or
endorsements by deposit to the special depository accounts in CITBC's name
designated by CITBC for such purposes (the "Depository Accounts"). All amounts
received by CITBC in payment of Accounts will be credited to the Companies'
appropriate Revolving Loan Account upon CITBC's receipt of "collected funds" at
CITBC's bank account in New York, New York on the business day of receipt if
received no later than 1:00 pm or on the next succeeding business day if
received after 1:00 pm. No checks, drafts or other instrument received by CITBC
shall constitute final payment to CITBC unless and until such instruments have
actually been collected.
5. Each of the Companies agrees to notify CITBC promptly of any matters
materially affecting the value, enforceability or collectibility of any Account
and of all material customer disputes, offsets, defenses, counterclaims,
returns, rejections and all reclaimed or repossessed merchandise or goods. Each
of the Companies agrees to issue credit memoranda promptly (with duplicates to
CITBC upon request after the occurrence of an Event of Default) upon accepting
returns or granting allowances, and may continue to do so until CITBC has
notified the Companies that an Event of Default has occurred and that all future
credits or allowances are to be made only after CITBC's prior written approval.
Upon the occurrence of an Event of Default and until such time as such Event of
Default is waived in writing by CITBC or cured to CITBC's satisfaction and on
notice from CITBC, the Companies agree that all returned, reclaimed or
repossessed merchandise or goods shall be set aside by the Companies, marked
with CITBC's name and held by the Companies for CITBC's account as owner and
assignee.
6. CITBC shall maintain a separate account on its books in each of the
Companies' names (herein each a "Revolving Loan Account" and collectively the
"Revolving Loan Accounts") in which the Companies will be charged with loans and
advances made by CITBC to them or for their account, and with any other
Obligations, including any and all costs, expenses and reasonable attorney's
fees which CITBC may incur in connection with the exercise by or for CITBC of
any of the rights or powers herein conferred upon CITBC, or in the prosecution
or defense of any action or proceeding to enforce or protect any rights of CITBC
in connection with this Financing Agreement or the Collateral assigned
hereunder, or any Obligations owing to CITBC by the Companies. Each of the
Companies will be credited with all amounts received by CITBC from them or from
others for their account, including, as above set forth, all amounts received by
CITBC in payment of assigned Accounts and such amounts will be applied to
payment of the Obligations. In no event shall prior recourse to any Accounts or
other security granted to or by the Companies be a prerequisite to CITBC's right
to demand payment of any Obligation. Further, it is understood that CITBC shall
have no obligation whatsoever to perform in any respect any of the Companies'
contracts or obligations relating to the Accounts.
7. After the end of each month, CITBC shall promptly send the Companies
a statement showing the accounting for the charges, loans, advances and other
transactions occurring between CITBC and the Companies during that month. The
monthly statements shall be deemed correct and binding upon the Companies and
shall constitute an account stated between the Companies and CITBC unless CITBC
receives a written statement of the exceptions within thirty (30) days of the
date of the monthly statement.
8. In the event that the sum of (i) the outstanding balance of
Revolving Loans and (ii) outstanding balance of Letters of Credit exceeds (x) as
to any Company the maximum amount thereof available to such Company under
Sections 3 and 5 hereof or (y) for all of the Companies the Line of Credit
(herein the amount of any such excess under clauses (i) or (ii) shall be
referred to as the "Excess") such Excess shall be due and payable to CITBC
immediately upon CITBC's demand therefor.
SECTION 4. TERM LOANS AND CAPEX TERM LOANS
TERM LOAN A
1. PCC hereby agrees to execute and deliver to CITBC Promissory Note A,
in the form of Exhibit A attached hereto, to evidence Term Loan A to be extended
by CITBC.
2. Upon receipt of such Promissory Note A, CITBC hereby agrees to
extend to PCC Term Loan A in the principal amount of $4,200,000.
3. The principal amount of Term Loan A shall be repaid to CITBC by PCC
by eighty-four (84) equal monthly principal installments of $50,000.00 each,
whereof the first installment shall be due and payable on January 1, 1996 and
the subsequent installments shall be due and payable on the first Business Day
of each month thereafter until paid in full.
TERM LOAN B
4. PCC hereby agrees to execute and deliver to CITBC Promissory Note B,
in the form of Exhibit B attached hereto, to evidence Term Loan B to be extended
by CITBC.
5. Upon receipt of such Promissory Note B, CITBC hereby agrees to
extend to PCC Term Loan B in the principal amount of $2,500,000.00.
6. The principal amount of Term Loan B shall be repaid to CITBC by PCC
by: i) thirty-five (35) equal monthly principal installments of $69,444.00 each,
followed by ii) one (1) installment of $69,460.00, whereof the first installment
shall be due and payable on January 1, 1996 and the subsequent installments
shall be due and payable on the first Business Day of each month thereafter
until paid in full.
CAPEX TERM LOANS
7. Within the CAPEX Term Loan Line of Credit and upon receipt of a
Promissory Note in the form of Exhibit C attached hereto, from either of the
Companies in the amount of the CAPEX Term Loan, CITBC will extend to them a
CAPEX Term Loan, provided: a) no Default or Event of Default has occurred or
would occur after giving effect to such CAPEX Term Loan, b) all of the
conditions listed below are fulfilled to the sole but reasonable satisfaction of
CITBC.
8. CAPEX Term Loan proceeds: x) are to be used exclusively to pay for,
or reimburse the Companies for, the acquisition by the Companies of newly
acquired Capital Improvements (other than Real Estate) which are not subject to
Purchase Money Liens; and (y) will be disbursed upon completion of the delivery,
assembly and installation of the capital improvement.
9. The Companies must give CITBC thirty (30) days prior written notice
of its intention to enter into a CAPEX Term Loan and draw down the CAPEX Term
Loans no later than the close of business on the date occurring two (2) years
from the date hereof.
10. The Companies shall be entitled to four (4) CAPEX Term Loans per
Fiscal Year but no more than one (1) CAPEX Term Loan in any Fiscal Quarter.
11. No CAPEX Term Loan may exceed (i) seventy-five percent (75%) of the
total acquisition costs of the Capital Improvements (other than land) exclusive
of assembly costs, installation expenses, maintenance, shipping costs, taxes and
import or custom charges for which the CAPEX Term Loan is sought or (ii) the
CAPEX Term Loans Limitation in any Fiscal Year. In addition, with respect to
Company assembled Capital Improvements, CITBC's obligation to extend any
requested CAPEX Term Loan hereunder shall be subject to (x) CITBC's reasonable
discretion and (y) CITBC's receipt of and satisfaction with, an appraisal of
such Capital Improvement performed by an appraiser mutually acceptable to CITBC
and the Companies, which appraiser will be retained by CITBC and paid for by the
Companies.
12. The CAPEX Term Loans must be in increments of $250,000.00 or whole
multiples thereof.
13. Each CAPEX Term Loan will be repaid to CITBC by the Companies in
sixty (60) equal monthly installments of principal commencing on the next
monthly Term Loan installment payment date and each equal to the amount derived
by dividing such CAPEX Term Loan amount by sixty (60). To the extent repaid,
CAPEX Term Loans may not be reborrowed under this Section 4 of this Financing
Agreement.
ADDITIONAL PROVISIONS FOR TERM LOANS AND CAPEX TERM LOANS
14. In the event this Financing Agreement or the Line of Credit is
terminated by either CITBC or the Companies for any reason whatsoever, the Term
Loans and CAPEX Term Loans shall become due and payable on the effective date of
such termination notwithstanding any provision to the contrary in the Promissory
Notes or this Financing Agreement.
15. The Companies may prepay at any time, at its option, in whole or in
part, the Term Loans and/or the CAPEX Term Loans, provided that on each such
prepayment, the Companies shall pay: i) accrued interest on the principal so
prepaid to the date of such prepayment and ii) the Prepayment Premium, if any.
16. In the event the Companies have Surplus Cash in any Fiscal Year
beginning with the Fiscal Year ending December 31, 1996 the Companies must make
a Mandatory Prepayment of the Term Loans and the CAPEX Terms Loans by an amount
equal to fifty percent (50%) of said Surplus Cash.
17. Each prepayment (whether voluntary or mandatory) shall be applied
to the then last maturing installments of principal of the Term Loans and CAPEX
Loans in the following order:
(i) to Term Loan B until paid in full, and then (ii) to Term Loan A
until paid in full, and then (iii) to the CAPEX Term Loans until paid
in full.
18. Each of the Companies hereby authorizes CITBC to charge its
Revolving Loan Account with the amount of all amounts due under this Section 4
as such amounts become due. Each of the Companies confirms that any charges
which CITBC may so make to its account as herein provided will be made as an
accommodation to the Companies and solely at CITBC's discretion.
SECTION 5. LETTERS OF CREDIT
In order to assist the Companies in establishing or opening Letters of
Credit with an Issuing Bank to cover the importation of inventory under
documentary Letters of Credit, the purchase of equipment or other general
corporate purposes acceptable to CITBC, the Companies have requested CITBC to
join in the applications for such Letters of Credit, and/or guarantee payment or
performance of such Letters of Credit and any drafts or acceptances thereunder
through the issuance of the Letters of Credit Guaranty, thereby lending CITBC's
credit to the Companies and CITBC has agreed to do so. These arrangements shall
be handled by CITBC subject to the terms and conditions set forth below.
1. Within the Line of Credit and Availability, CITBC shall assist the
Companies in obtaining Letter(s) of Credit in an amount not to exceed the Letter
of Credit Sub-Line in the aggregate outstanding at any one time. CITBC's
assistance for amounts in excess of the limitation set forth herein shall at all
times and in all respects be in CITBC's sole discretion. It is understood that
the form and purpose of each Letter of Credit must be acceptable to CITBC in its
reasonable business judgment. Any and all outstanding Letters of Credit shall be
treated as a Revolving Loan for Availability purpose. Notwithstanding anything
herein to the contrary, upon the occurrence of a Default and/or Event of
Default, CITBC's assistance in connection with the Letter of Credit Guaranty
shall be in CITBC's sole discretion unless such Default and/or Event of Default
is cured to CITBC's satisfaction or waived by CITBC in writing.
2. CITBC shall have the right, without notice to the Companies, to
charge the Companies' Revolving Loan Accounts on CITBC's books with the amount
of any and all indebtedness, liability or obligation of any kind incurred by
CITBC under the Letters of Credit Guaranty at the earlier of a) payment by CITBC
under the Letters of Credit Guaranty, or b) the occurrence of an Event of
Default. Any amount charged to Companies' Revolving Loan Accounts shall be
deemed a Revolving Loan hereunder and shall incur interest at the rate provided
in Section 8, Paragraph 1 of this Financing Agreement.
3. Each of the Companies jointly and severally unconditionally
indemnifies CITBC and holds CITBC harmless from any and all loss, claim or
liability incurred by CITBC arising from any transactions or occurrences
relating to Letters of Credit established or opened for the Companies' account,
the collateral relating thereto and any drafts or acceptances thereunder, and
all Obligations thereunder, including any such loss or claim due to any action
taken by any Issuing Bank, other than for any such loss, claim or liability
arising out of the gross negligence or willful misconduct by CITBC under the
Letters of Credit Guaranty. Each of the Companies further agrees to jointly and
severally hold CITBC harmless from any errors or omission, negligence or
misconduct by the Issuing Bank, provided that nothing contained herein shall, or
shall be deemed to, affect, modify or release any claim that the Companies may
now or hereafter have against the Issuing Bank. The Companies' unconditional
obligation to CITBC hereunder shall not be modified or diminished for any reason
or in any manner whatsoever, other than as a result of CITBC's gross negligence
or willful misconduct. Each of the Companies agrees that any charges incurred by
CITBC for their account by the Issuing Bank shall be conclusive on CITBC and may
be charged to their account.
4. CITBC shall not be responsible for: the existence, character,
quality, quantity, condition, packing, value or delivery of the goods purporting
to be represented by any documents; any difference or variation in the
character, quality, quantity, condition, packing, value or delivery of the goods
from that expressed in the documents; the validity, sufficiency or genuineness
of any documents or of any endorsements thereon, even if such documents should
in fact prove to be in any or all respects invalid, insufficient, fraudulent or
forged; the time, place, manner or order in which shipment is made; partial or
incomplete shipment, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or documents; any deviation from
instructions; delay, default, or fraud by the shipper and/or anyone else in
connection with the Collateral or the shipping thereof; or any breach of
contract between the shipper or vendors and the Companies. Furthermore, without
being limited by the foregoing, CITBC shall not be responsible for any act or
omission with respect to or in connection with any Collateral covered by any
Letter of Credit.
5. Each of the Companies agrees that any action taken by CITBC, if
taken in good faith, or any action taken by any Issuing Bank, under or in
connection with the Letters of Credit, the guarantees, the drafts or
acceptances, or the Collateral, shall be binding on the them and shall not put
CITBC in any resulting liability to the Companies. In furtherance thereof, CITBC
shall have the full right and authority to clear and resolve any questions of
non-compliance of documents; to give any instructions as to acceptance or
rejection of any documents or goods; to execute any and all steamship or airways
guaranties (and applications therefore), indemnities or delivery orders; to
grant any extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances, or documents; and to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letters of Credit, drafts
or acceptances; all in CITBC's sole name, and the Issuing Bank shall be entitled
to comply with and honor any and all such documents or instruments executed by
or received solely from CITBC, all without any notice to or any consent from the
Companies.
6. Without CITBC's express consent and endorsement in writing, each of
the Companies agrees: a) not to execute any and all applications for steamship
or airway guaranties, indemnities or delivery orders; to grant any extensions of
the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents; or to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications, Letters of Credit, drafts or acceptances; and b) after the
occurrence of an Event of Default which is not cured within any applicable grace
period, if any, or waived by CITBC, not to i) clear and resolve any questions of
non-compliance of documents, or ii) give any instructions as to acceptances or
rejection of any documents or goods.
7. Each of the Companies agrees that any necessary import, export or
other licenses or certificates for the import or handling of the Collateral will
have been promptly procured; all foreign and domestic governmental laws and
regulations in regard to the shipment and importation of the Collateral, or the
financing thereof will have been promptly and full complied with; and any
certificates in that regard that CITBC may at any time request will be promptly
furnished. In this connection, each of the Companies warrants and represents
that all shipments made under any such Letters of Credit are in accordance with
the laws and regulations of the countries in which the shipments originate and
terminate, and are not prohibited by any such laws and regulations. The
Companies assume all risk, liability and responsibility for, and agrees to pay
and discharge, all present and future local, state, federal or foreign taxes,
duties, or levies. Any embargo, restriction, laws, customs or regulations of any
country, state, city, or other political subdivision, where the Collateral is or
may be located, or wherein payments are to be made, or wherein drafts may be
drawn, negotiated, accepted, or paid, shall be solely the Companies' risk,
liability and responsibility.
8. Upon any payments made to the Issuing Bank under the Letter of
Credit Guaranty, CITBC shall acquire by subrogation, any rights, remedies,
duties or obligations granted or undertaken by the Companies to the Issuing Bank
in any application for Letters of Credit, any standing agreement relating to
Letters of Credit or otherwise, all of which shall be deemed to have been
granted to CITBC and apply in all respects to CITBC and shall be in addition to
any rights, remedies, duties or obligations contained herein.
SECTION 6. COLLATERAL
1. As security for the prompt payment in full of all loans and advances
made and to be made to the Companies from time to time by CITBC pursuant hereto,
as well as to secure the payment in full of the other Obligations, each of the
Companies hereby pledges and grants to CITBC a continuing general lien upon and
security interest in all of its:
(a) present and hereafter acquired Inventory;
(b) present and hereafter acquired Equipment;
(c) present and future Accounts;
(d) present and future Documents of Title;
(e) present and future General Intangibles; and
(f) present and future Other Collateral.
2. The security interests granted hereunder shall extend and attach to:
(a) All Collateral which is presently in existence and which is owned
by the Companies or in which the Companies have any interest, whether held by
them or others for their account, and, if any Collateral is Equipment, whether
the Companies' interest in such Equipment is as owner or lessee or conditional
vendee;
(b) All Equipment whether the same constitutes personal property or
fixtures, including, but without limiting the generality of the foregoing, all
dies, jigs, tools, benches, tables, accretions, component parts thereof and
additions thereto, as well as all accessories, motors, engines and auxiliary
parts used in connection with or attached to the Equipment; and
(c) All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either CITBC or the Companies from the
Companies' customers, as well as to all supplies, goods, incidentals, packaging
materials, labels and any other items which contribute to the finished goods or
products manufactured or processed by the Companies, or to the sale, promotion
or shipment thereof.
3. The Companies agree to safeguard, protect and hold all Inventory for
CITBC's account and make no disposition thereof except in the regular course of
the business of the Companies as herein provided. Until CITBC has given the
Companies notice to the contrary, as provided for below, any Inventory may be
sold and shipped by the Companies to their customers in the ordinary course of
their business, on open account and on terms currently being extended by them to
their customers, provided that all proceeds of all sales (including cash,
accounts receivable, checks, notes, instruments for the payment of money and
similar proceeds) are forthwith transferred, endorsed, and turned over and
delivered to CITBC in accordance with Section 3, Paragraph 4 of this Financing
Agreement. CITBC shall have the right to withdraw this permission at any time
upon the occurrence of an Event of Default and until such time as such Event of
Default is waived or cured to CITBC's satisfaction, in which event no further
disposition shall be made of the Inventory by the Companies without CITBC's
prior written approval. Cash sales or sales of inventory in which a lien upon,
or security interest in, Inventory is retained by the Companies shall be made by
the Companies only with the approval of CITBC, and the proceeds of such sales or
sales of Inventory for cash shall not be commingled with the Companies' other
property, but shall be segregated, held by the Companies in trust for CITBC as
CITBC's exclusive property, and shall be delivered immediately by the Companies
to CITBC in the identical form received by the Companies by deposit to the
Depository Accounts. Upon the sale, exchange, or other disposition of Inventory,
as herein provided, the security interest in the Companies' Inventory provided
for herein shall, without break in continuity and without further formality or
act, continue in, and attach to, all proceeds, including any instruments for the
payment of money, accounts receivable, contract rights, documents of title,
shipping documents, chattel paper and all other cash and non-cash proceeds of
such sale, exchange or disposition. As to any such sale, exchange or other
disposition, CITBC shall have all of the rights of an unpaid seller, including
stoppage in transit, replevin, rescission and reclamation. Notwithstanding the
foregoing the Companies may make cash sales of Inventory, provided that (i) the
aggregate amount thereof for the Companies during any Fiscal Year does not
exceed $50,000 or such Fiscal Year and (ii) the proceeds of such sales are
turned over to CITBC by deposit in the Depository Accounts.
4. Each of the Companies agrees at its own cost and expense to keep the
Equipment in as good and substantial repair and condition as the same is now or
at the time the lien and security interest granted herein shall attach thereto,
reasonable wear and tear excepted, making any and all repairs and replacements
when and where necessary. Each of the Companies also agrees to safeguard,
protect and hold all Equipment for CITBC's account and make no disposition
thereof unless they first obtain the prior written approval of CITBC. Any sale,
exchange or other disposition of any Equipment shall only be made by the
Companies with the prior written approval of CITBC, and the proceeds of any such
sales shall not be commingled with the Companies' other property, but shall be
segregated, held by the Companies in trust for CITBC as CITBC's exclusive
property, and shall be delivered immediately by the Companies to CITBC in the
identical form received by the Companies by deposit to the Depository Accounts.
Upon the sale, exchange, or other disposition of the Equipment, as herein
provided, the security interest provided for herein shall, without break in
continuity and without further formality or act, continue in, and attach to, all
proceeds, including any instruments for the payment of money, accounts
receivable, contract rights, documents of title, shipping documents, chattel
paper and all other cash and non-cash proceeds of such sales, exchange or
disposition. As to any such sale, exchange or other disposition, CITBC shall
have all of the rights of an unpaid seller, including stoppage in transit,
replevin, rescission and reclamation. Notwithstanding anything hereinabove
contained to the contrary, the Companies may sell, exchange or otherwise dispose
of obsolete Equipment or Equipment no longer needed in the Companies'
operations, provided, however, that (a) the then book value of the Equipment so
disposed of does not exceed $150,000 in the aggregate for the Companies in any
Fiscal Year and (b) the proceeds of such sales or dispositions are delivered to
CITBC in accordance with the foregoing provisions of this paragraph, except that
the Companies may retain and use such proceeds to purchase forthwith replacement
Equipment which the Companies determine in their reasonable business judgment to
have a collateral value at least equal to the Equipment so disposed of or sold,
provided, however, that the aforesaid right shall automatically cease upon the
occurrence of an Event of Default which is not cured within any applicable grace
period or waived.
5. The rights and security interests granted to CITBC hereunder are to
continue in full force and effect, notwithstanding the termination of this
Financing Agreement or the fact that any account maintained in the Companies'
name on the books of CITBC may from time to time be temporarily in a credit
position, until the final payment in full to CITBC of all Obligations and the
termination of this Financing Agreement. Any delay, or omission by CITBC to
exercise any right hereunder, shall not be deemed a waiver thereof, or be deemed
a waiver of any other right, unless such waiver be in writing and signed by
CITBC. A waiver on any one occasion shall not be construed as a bar to or waiver
of any right or remedy on any future occasion.
6. To the extent that the Obligations are now or hereafter secured by
any assets or property other than the Collateral or by the guarantee,
endorsement, assets or property of any other person, then CITBC shall have the
right in its sole discretion to determine which rights, security, liens,
security interests or remedies CITBC shall at any time pursue, foreclose upon,
relinquish, subordinate, modify or take any other action with respect to,
without in any way modifying or affecting any of them, or any of CITBC's rights
hereunder.
7. Any reserves or balances to the credit of the Companies and any
other property or assets of the Companies in the possession of CITBC may be held
by CITBC as security for any Obligations and applied in whole or partial
satisfaction of such Obligations when due. The liens and security interests
granted herein and any other lien or security interest CITBC may have in any
other assets of the Companies, shall secure payment and performance of all now
existing and future Obligations. CITBC may in its discretion charge any or all
of the Obligations to the Revolving Loan Accounts of the Companies when due.
8. The Companies shall give to CITBC, and/or shall cause the
appropriate party to give to CITBC, from time to time such pledge or security
agreements with respect to General Intangibles and capital stock of the
Companies as CITBC shall require to obtain valid first liens thereon.
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS
1. Each of the Companies hereby warrants and represents and/or
covenants that: i) the fair value of its assets exceeds the book value of its
liabilities; ii) it is generally able to pay its debts as they become due and
payable; and iii) it does not have unreasonably small capital to carry on its
business as it is currently conducted absent extraordinary and unforeseen
circumstances. Each of the Companies further warrants and represents that
Schedule 2 hereto correctly and completely sets forth its chief executive office
and all of its Collateral locations; and except for the Permitted Encumbrances,
the security interests granted herein constitute and shall at all times
constitute the first and only liens on the Collateral; that, except for the
Permitted Encumbrances, the Companies are or will be at the time additional
Collateral is acquired by them, the absolute owner of the Collateral with full
right to pledge, sell, consign, transfer and create a security interest therein,
free and clear of any and all claims or liens in favor of others; that the
Companies will at their expense forever warrant and, at CITBC's request, defend
the same from any and all claims and demands of any other person other than the
Permitted Encumbrances; that the Companies will not grant, create or permit to
exist, any lien upon or security interest in the Collateral, or any proceeds
thereof, in favor of any other person other than the holders of the Permitted
Encumbrances; and that the Equipment does not comprise a part of its Inventory
and that the Equipment is and will only be used by the Companies in their
business and will not be held for sale or lease, or removed from its premises,
or otherwise disposed of by the Companies without the prior written approval of
CITBC except as otherwise permitted in Section 6, Paragraph 4 of this Financing
Agreement.
2. The Companies agree to maintain books and records pertaining to the
Collateral in such detail, form and scope as CITBC shall reasonably require. The
Companies agree that CITBC or its agents may enter upon the Companies' premises
at any time during normal business hours, and from time to time, for the purpose
of inspecting the Collateral, and any and all records pertaining thereto. The
Companies agree to afford CITBC prior written notice of any change in the
location of any Collateral, other than to locations, that as of the date hereof,
are known to CITBC and at which CITBC has filed financing statements and
otherwise fully perfected its liens thereon. Each of the Companies is also to
advise CITBC promptly, in sufficient detail, of any material adverse change
relating to the type, quantity or quality of the Collateral or on the security
interests granted to CITBC therein.
3. Each of the Companies agrees to: execute and deliver to CITBC, from
time to time, solely for CITBC's convenience in maintaining a record of the
Collateral, such written statements, and schedules as CITBC may reasonably
require, designating, identifying or describing the Collateral pledged to CITBC
hereunder. The Companies' failure, however, to promptly give CITBC such
statements, or schedules shall not affect, diminish, modify or otherwise limit
CITBC's security interests in the Collateral.
4. The Companies agree to comply with the requirements of all state and
federal laws in order to grant to CITBC valid and perfected first security
interests in the Collateral, subject only to the Permitted Encumbrances. CITBC
is hereby authorized by the Companies to file any financing statements covering
the Collateral whether or not the Companies' signature appears thereon. The
Companies agree to do whatever CITBC may reasonably request, from time to time,
by way of: filing notices of liens, financing statements, amendments, renewals
and continuations thereof; cooperating with CITBC's custodians; keeping stock
records; transferring proceeds of Collateral to CITBC's possession; and
performing such further acts as CITBC may reasonably require in order to effect
the purposes of this Financing Agreement.
5.(a) The Companies agree to maintain insurance on the Equipment and
Inventory under such policies of insurance, with such insurance companies, in
such reasonable amounts and covering such insurable risks as are at all times
reasonably satisfactory to CITBC. All policies covering the Equipment and
Inventory are, subject to the rights of any holders of Permitted Encumbrances
holding claims senior to CITBC, to be made payable to CITBC, in case of loss,
under a standard non-contributory "mortgagee", "lender" or "secured party"
clause and are to contain such other provisions as CITBC may require to fully
protect CITBC's interest in the Inventory and Equipment and to any payments to
be made under such policies. All original policies or true copies thereof are to
be delivered to CITBC, premium prepaid, with the loss payable endorsement in
CITBC's favor, and shall provide for not less than thirty (30) days prior
written notice to CITBC of the exercise of any right of cancellation. At the
Companies' request, or if the Companies fail to maintain such insurance, CITBC
may arrange for such insurance, but at the Companies' expense and without any
responsibility on CITBC's part for: obtaining the insurance, the solvency of the
insurance companies, the adequacy of the coverage, or the collection of claims.
Upon the occurrence of an Event of Default which is not waived or cured to
CITBC's satisfaction, CITBC shall, subject to the rights of any holders of
Permitted Encumbrances holding claims senior to CITBC, have the sole right, in
the name of CITBC or the Companies, to file claims under any insurance policies,
to receive, receipt and give acquittance for any payments that may be payable
thereunder, and to execute any and all endorsements, receipts, releases,
assignments, reassignments or other documents that may be necessary to effect
the collection, compromise or settlement of any claims under any such insurance
policies.
(b)(i) In the event of any loss or damage by fire or other casualty,
insurance proceeds relating to Inventory of any Company shall first reduce such
Company's Revolving Loans and then the Term Loans and CAPEX Term Loans;
ii) In the event any part of a Company's Equipment is damaged by fire
or other casualty and the insurance proceeds for such damage or other casualty
(the "Proceeds") is less than or equal to $100,000.00, CITBC shall promptly
apply such Proceeds to reduce such Company's outstanding balance in its
Revolving Loan Account.
iii) As long as an Event of Default has not occurred (which is not
cured to CITBC's satisfaction), the Companies' have sufficient business
interruption insurance to replace the lost profits of any of the Companies'
facilities, and the Proceeds are in excess of $100,000.00, such Company may
elect (by delivering written notice to CITBC) to replace, repair or restore such
Equipment to substantially the equivalent condition prior to such fire or other
casualty as set forth herein. If the Companies do not, or cannot, elect to use
the Proceeds as set forth above, CITBC may, subject to the rights of any holders
of Permitted Encumbrances holding claims senior to CITBC, apply the Proceeds to
the payment of the Obligations in such manner and in such order as CITBC may
reasonably elect.
iv) If a Company elects to use the Proceeds for the repair, replacement
or restoration of any Equipment, and there is then no Event of Default, i)
proceeds of insurance on Equipment in excess of $100,000.00 will be applied to
the reduction of the Revolving Loans of such Company and ii) CITBC may set up a
reserve against Availability for an amount equal to the proceeds referred to in
clause i) hereof. The reserve will be reduced dollar-for-dollar upon receipt of
non-cancelable executed purchase orders, delivery receipts or contracts for the
replacement, repair or restoration of Equipment and disbursements in connection
therewith.
(v) The Companies agree to pay any reasonable costs, fees or expenses
which CITBC may reasonably incur in connection herewith.
6. Each of the Companies agrees to pay, when due, all taxes,
assessments, claims and other charges (herein "taxes") lawfully levied or
assessed upon the Companies or the Collateral and if such taxes remain unpaid
after the date fixed for the payment thereof unless such taxes are being
diligently contested in good faith by the Companies by appropriate proceedings
or if any lien shall be claimed thereunder x) for taxes due the United States of
America or y) which in CITBC's opinion might create a valid obligation having
priority over the rights granted to CITBC herein, CITBC may, on the Companies'
behalf, pay such taxes, and the amount thereof shall be an Obligation secured
hereby and due to CITBC on demand.
7. Each of the Companies: (a) agrees to comply with all acts, rules,
regulations and orders of any legislative, administrative or judicial body or
official, which the failure to comply with would have a material and adverse
impact on the Collateral, or any material part thereof, or on the operation of
the Companies' business; provided that the Companies may contest any acts,
rules, regulations, orders and directions of such bodies or officials in any
reasonable manner which will not, in CITBC's reasonable opinion, materially and
adversely effect CITBC's rights or priority in the Collateral; (b) agrees to
comply with all environmental statutes, acts, rules, regulations or orders as
presently existing or as adopted or amended in the future, applicable to the
ownership and/or use of its real property and operation of its business, which
the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the operation of the business of
the Companies. Each of the Companies hereby jointly and severally indemnifies
CITBC and agrees to defend and hold CITBC harmless from and against any and all
loss, damage, claim, liability, injury or expense which CITBC may sustain or
incur (other than as a result of actions of CITBC) in connection with: any claim
or expense asserted against CITBC as a result of any environmental pollution,
hazardous material or environmental clean-up of the Companies' real property; or
any claim or expense which results from the Companies' operations (including,
but not limited to, the Companies' off-site disposal practices) and the
Companies further agree that this indemnification shall survive termination of
this Financing Agreement as well as the payment of all Obligations or amounts
payable hereunder; and (c) shall not be deemed to have breached any provision of
this Paragraph 7 if (i) the failure to comply with the requirements of this
Paragraph 7 resulted from good faith error or innocent omission, (ii) the
Companies promptly commence and diligently pursues a cure of such breach and
(iii) such failure is cured within fifteen (15) business days following the
Companies' receipt of notice of such failure.
8. Until termination of the Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Companies agree that, unless
CITBC shall have otherwise consented in writing, the Companies will furnish to
CITBC, within ninety (90) days after the end of each Fiscal Year of the
Companies, an audited Consolidated Balance Sheet and an audited Consolidating
Balance Sheet as at the close of such year, and statements of profit and loss,
cash flow and reconciliation of surplus of Parent, the Companies and all
subsidiaries of each for such year, audited by independent public accountants
selected by the Companies and satisfactory to CITBC; within sixty (60) days
after the end of each Fiscal Quarter a Consolidated Balance Sheet and
Consolidating Balance Sheet as at the end of such period and statements of
profit and loss, cash flow and surplus of Parent, the Companies and all
subsidiaries of each, certified by an authorized financial or accounting officer
of the Companies; and within thirty (30) days after the end of each month a
Consolidated Balance Sheet as at the end of such period and statements of profit
and loss, cash flow and surplus of the Companies and all subsidiaries for such
period, certified by an authorized financial or accounting officer of the
Companies; and from time to time, such further information regarding the
business affairs and financial condition of the Parent, the Companies and/or any
subsidiaries thereof as CITBC may reasonably request, including without
limitation (a) the accountant's management practice letter and (b) annual cash
flow projections in form satisfactory to CITBC. Each financial statement which
the Companies are required to submit hereunder must be accompanied by an
officer's certificate, signed by the President, Vice President, Controller, or
Treasurer, pursuant to which any one such officer must certify that: (i) the
financial statement(s) fairly and accurately represent(s) the Companies'
financial condition at the end of the particular accounting period, as well as
the Companies' operating results during such accounting period, subject to
year-end audit adjustments; (ii) during the particular accounting period: (x)
there has been no Default or Event of Default under this Financing Agreement,
provided, however, that if any such officer has knowledge that any such Default
or Event of Default, has occurred during such period, the existence of and a
detailed description of same shall be set forth in such officer's certificate;
and (y) the Companies have not received any notice of cancellation with respect
to its property insurance policies; and (iii) the exhibits attached to such
financial statement(s) constitute detailed calculations showing compliance with
all financial covenants contained in this Financing Agreement.
9. Until termination of the Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Companies agree that, without
the prior written consent of CITBC, except as otherwise herein provided, the
Companies will not:
A. Mortgage, assign, pledge, transfer or otherwise permit any
lien, charge, security interest, encumbrance or judgment,
(whether as a result of a purchase money or title retention
transaction, or other security interest, or otherwise) to
exist on any of its assets or goods, whether real, personal or
mixed, whether now owned or hereafter acquired, except for the
Permitted Encumbrances;
B. Incur or create any Indebtedness other than the Permitted
Indebtedness;
C. Borrow any money on the security of the Collateral from
sources other than CITBC;
D. Sell, lease, assign, transfer or otherwise dispose of i)
Collateral, except as otherwise specifically permitted by this
Financing Agreement, or ii) either all or substantially all of
their assets, which do not constitute Collateral;
E. Merge, consolidate or otherwise alter or modify its corporate
name, principal place of business, structure, status or
existence, or enter into or engage in any operation or
activity materially different from that presently being
conducted by the Companies, except that the Companies may (i)
merge with each other and/or (ii) change their corporate name
or address; provided that in any instance under clauses (i)
and (ii) (x) the Companies shall give CITBC thirty (30) days
prior written notice thereof and (y) the Companies shall
execute and deliver prior to or simultaneously with any such
action any and all documents and agreements requested by CITBC
(including, without limitation, any and all U.C.C. financing
statements) to confirm (A) the assumption by the surviving
corporation of all Obligations to CITBC of the other company
so merged, (B) the continuation and preservation of all
security interests and liens granted to CITBC hereunder
and (C) that such surviving corporation adopts, ratifies and
confirms its agreement to be bound by and comply with this
Financing Agreement;
F. Assume, guarantee, endorse, or otherwise become liable upon
the obligations of any person, firm, entity or corporation,
except by the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business;
G. Declare or pay any dividend of any kind on, or purchase,
acquire, redeem or retire, any of the capital stock or equity
interest, of any class whatsoever, whether now or hereafter
outstanding, except that the Companies may consummate the
Redemption and declare and pay dividends on their capital
stock in an amount sufficient to enable the Parent to a)
redeem the capital stock owned by its retired, deceased or
terminated officers or shareholders which the Parent is
contractually obligated to redeem, provided that in no event
shall the aggregate amount of such dividend under this clause
(a) exceed $75,000.00 in the aggregate in any Fiscal Year; b)
pay income or franchise taxes of the Companies due as a result
of the filing of a consolidated, combined or unitary tax
return in which the operations of the Companies are included,
and c) pay quarterly dividends commencing after the end of the
Fiscal Quarter ending March 31, 1996 to enable the Parent to
make scheduled interest payments on the Additional Seller
Subordinated Note provided that (x) the Companies'
consolidated Fixed Charge Coverage Ratio for the 12 month
period then ending (or in case of any payment date occurring
prior to one (1) year after the date of this Financing
Agreement for the period from the date of this Financing
Agreement to such payment date) is not less than 1.0 to 1.0,
(y) the Companies' average daily Availability for the 90 day
period then ending was $500,000 or more and all of the
Companies' debts, obligations and payables are current in
accordance with their usual business practices and (z) the
total amount of such dividends paid in any Fiscal Year does
not exceed $185,000 in the aggregate provided that clauses (x)
and (y) shall apply only so long as Term Loan B remains
outstanding and unpaid; provided, further, that, in any
instance under this paragraph G, after giving effect to such
payment, no Default or Event of Default has occurred
hereunder;
H. Make any advance or loan to, or any investment in, any firm,
entity, person or corporation, except loans and advances from
PCC to PCII not to exceed $750,000 in the aggregate at any
time outstanding; or
I. Pay (x) total compensation to its Executive Officers, in the
aggregate, in excess of $700,000.00 during any calendar year,
(y) total management, consulting or other fees to Parent in
excess of $200,000 in the aggregate during any calendar year;
provided that each of such amounts shall be increased by an
amount equal to five percent (5%) thereof as of the first day
of each year hereafter commencing on January 1, 1997.
10. Until termination of the Financing Agreement and payment and
satisfaction in full of all Obligations hereunder, the Companies shall:
(a) maintain at the end of each month below a consolidated Net Worth of
the Companies of not less than the amount set forth below for the
applicable month:
Month Ending Net Worth
On the date hereof and
on December 31, 1995 $6,300,000
January 31, 1996 $6,382,000
February 29, 1996 $6,446,000
March 31, 1996 $6,501,000
April 30, 1996 $6,506,000
May 31, 1996 $6,532,000
June 30, 1996 $6,563,000
July 31, 1996 $6,555,000
August 31, 1996 $6,590,000
September 30, 1996 $6,657,000
October 31, 1996 $6,724,000
November 30, 1996 $6,935,000
December 31, 1996 $7,135,000
January 1, 1997 $7,289,000
February 28, 1997 $7,422,000
March 31, 1997 $7,546,000
April 30, 1997 $7,614,000
May 31, 1997 $7,706,000
June 30, 1997 $7,805,000
July 31, 1997 $7,860,000
August 31, 1997 $7,964,000
September 30, 1997 $8,106,000
October 31, 1997 $8,251,000
November 30, 1997 $8,388,000
December 31, 1997 $8,514,000
January 31, 1998 $8,664,000
February 28, 1998 $8,790,000
March 31, 1998 $8,907,000
April 30, 1998 $8,964,000
May 31, 1998 $9,047,000
June 30, 1998 $9,138,000
July 31, 1998 $9,181,000
August 31, 1998 $9,280,000
September 30, 1998 $9,421,000
October 31, 1998 $9,567,000
November 30, 1998 $9,705,000
December 31, 1998 and the last
day of each month in each Fiscal
Year thereafter $9,830,000
(b) maintain at the end of each month during each Fiscal Year a
consolidated Fixed Charge Coverage Ratio of the Companies calculated
for the 12 month period then ending (or in case of any calculation date
occurring prior to one (1) year after the date of this Financing
Agreement for the period from the date of this Financing Agreement to
such calculation date) of not less than 1.0 to 1.0.
(c) maintain at the end of each month set forth below a consolidated
Leverage Ratio of the Companies of no more than the ratio set forth
below for the applicable month:
Months Ending Ratio
January 31, 1996 5.4 to 1.0
February 29, 1996 5.3 to 1.0
March 31, April 30, and May 31, 1996 5.2 to 1.0
June 30, 1996 5.3 to 1.0
July 31 and August 31, 1996 5.4 to 1.0
September 30, 1996 5.5 to 1.0
October 31, 1996 5.4 to 1.0
November 30, 1996 5.3 to 1.0
December 31, 1996 5.1 to 1.0
January 31, 1997 4.9 to 1.0
February 28, 1997 4.7 to 1.0
March 31, April 30, May 31, June 30,
July 31, August 31, and September 30, 1997 4.5 to 1.0
October 31, 1997 4.4 to 1.0
November 30, 1997 4.3 to 1.0
December 31, 1997 4.2 to 1.0
January 31, 1998 4.0 to 1.0
February 28, 1998 3.9 to 1.0
March 31, April 30, and May 31, 1998 3.7 to 1.0
June 30, 1998 3.6 to 1.0
July 31, August 31, and September 30, 1998 3.7 to 1.0
October 31, 1998 3.6 to 1.0
November 30 and December 31, 1998 and
each month end in each Fiscal Year thereafter 3.5 to 1.0
(d) achieve a consolidated EBITDA calculated at the end of each month
below for the 12 month period then ending (or in case of any
calculation date occurring prior to one (1) year after the date of this
Financing Agreement for the period from the date of this Financing
Agreement to such calculation date) of not less than the amount set
forth below for the applicable month:
Month Ending EBITDA
January 31, 1996 $506,000
February 29, 1996 $981,000
March 31, 1996 $1,442,000
April 30, 1996 $1,823,000
May 31, 1996 $2,238,000
June 30, 1996 $2,663,000
July 31, 1996 $3,035,000
August 31, 1996 $3,479,000
September 30, 1996 $3,977,000
October 31, 1996 $4,494,000
November 30, 1996 $5,251,000
December 31,1996 $5,990,000
January 31, 1997 $6,156,000
February 28, 1997 $6,318,000
March 31, 1997 $6,479,000
April 30, 1997 $6,622,000
May 31, 1997 $6,771,000
June 30, 1997 $6,921,000
July 31, 1997 $7,061,000
August 31, 1997 $7,212,000
September 30, 1997 $7,372,000
October 31, 1997 $7,533,000
November 30, 1997 $7,442,000
December 31,1997 $7,350,000
January 31, 1998 $7,371,000
February 28, 1998 $7,388,000
March 31, 1998 $7,403,000
April 30, 1998 $7,406,000
May 31, 1998 $7,414,000
June 30, 1998 $7,424,000
July 31, 1998 $7,424,000
August 31, 1998 $7,435,000
September 30, 1998 $7,452,000
October 31, 1998 $7,471,000
November 30, 1998 $7,489,000
December 31,1998 $7,504,000
11. Without the prior written consent of CITBC, the Companies will not:
a) enter into any Operating Lease if after giving effect thereto the aggregate
obligations with respect to Operating Leases of the Companies during any Fiscal
Year would exceed $100,000.00 or b) contract for, purchase, make expenditures
for, lease pursuant to a Capital Lease or otherwise incur obligations with
respect to Capital Expenditures (whether subject to a security interest or
otherwise) during any period below in the aggregate amount for the Companies in
excess of the amount set forth for said period:
a) $3,700,000.00 for the period commencing on the date hereof and
ending December 31, 1996;
b) $3,400,000.00 for the Fiscal Year ending December 31, 1997;
c) $3,200,000.00 for the Fiscal Year ending December 31, 1998,
and for each Fiscal Year thereafter.
12. The Companies agree to advise CITBC in writing of: a) all
expenditures (actual or anticipated) in excess of $150,000.00 for x)
environmental clean-up, y) environmental compliance or z) environmental testing
and the impact of said expenses on the Companies' Working Capital; and b) any
notices the Companies receive from any local, state or federal authority
advising the Companies of any environmental liability (real or potential)
stemming from the Companies' operations, premises, waste disposal practices, or
waste disposal sites used by the Companies and to provide CITBC with copies of
all such notices if so required.
13. Without the prior written consent of CITBC, the Companies agree
that they will not enter into any transaction, including, without limitation,
any purchase, sale, lease, loan or exchange of property with the Parent, any of
the Companies or any subsidiary or affiliate of either the Companies or Parent.
SECTION 8. INTEREST, FEES AND EXPENSES
1. Interest on the Revolving Loans shall be payable monthly as of the
end of each month and shall be an amount equal to (a) one-half of one percent
(1/2 of 1%) plus the Chemical Bank Rate per annum on the average of the net
balances owing by the Company to CITBC in the Companies' Revolving Loan Accounts
at the close of each day during such month on balances other than Libor Loans
and (b) two and three-quarters percent (2 3/4%) plus the applicable Libor on any
Libor Loan, in each case on a per annum basis on the average of the net balances
owing by the Companies to CITBC in the Companies' Revolving Loan Accounts at the
close of each day during such month. In the event of any change in said Chemical
Bank Rate, the rate hereunder shall change, as of the first of the month
following any change, so as to remain one-half of one percent (1/2 of 1%) above
the Chemical Bank Rate. The rate hereunder shall be calculated based on a
360-day year. CITBC shall be entitled to charge the Companies Revolving Loan
Accounts at the rate provided for herein when due until all Obligations have
been paid in full.
2. Interest on the Term Loan A shall be payable monthly as of the end
of each month on the unpaid balance or on payment in full prior to maturity in
an amount equal to (a) one and one-half percent (1 1/2%) plus the Chemical Bank
Rate per annum on balances other than Libor Loans and (b) three and one-quarter
percent (3 1/4%) plus the applicable Libor on any Libor Loan, in each case on a
per annum basis on the average of the net balance of Term Loan A owing by the
Companies to CITBC at the close of each day during such month. In the event of
any change in said Chemical Bank Rate, the rate hereunder shall change, as of
the first of the month following any change, so as to remain one and one-quarter
percent (1 1/2%) above the Chemical Bank Rate. The rate hereunder shall be
calculated based on a 360 day year. CITBC shall be entitled to charge the
Companies' Revolving Loan Accounts at the rate provided for herein when due
until all Obligations have been paid in full.
3. Interest on the Term Loan B shall be payable monthly as of the end
of each month on the unpaid balance or on payment in full prior to maturity in
an amount equal to two and one-half percent (2 1/2%) plus the Chemical Bank Rate
per annum on the average of the net balance of Term Loan B owing by the Company
to CITBC at the close of each day during such month. In the event of any change
in said Chemical Bank Rate, the rate hereunder shall change, as of the first of
the month following any change, so as to remain two and one-half percent (2
1/2%) above the Chemical Bank Rate. The rate hereunder shall be calculated based
on a 360 day year. CITBC shall be entitled to charge the Companies' Revolving
Loan Accounts at the rate provided for herein when due until all Obligations
have been paid in full.
4. Interest on the CAPEX Term Loans shall be payable monthly as of the
end of each month on the unpaid balance or on payment in full prior to maturity
in an amount equal to (a) one and one-half percent (1 1/2%) plus the Chemical
Bank Rate per annum on balances other than Libor Loans and (b) three and
one-quarter percent (3 1/4%) plus the applicable Libor on any Libor Loan, in
each case on a per annum basis on the average of the net balance of CAPEX Term
Loans owing by the Companies to CITBC at the close of each day during such
month. In the event of any change in said Chemical Bank Rate, the rate hereunder
shall change, as of the first of the month following any change, so as to remain
one and one-half percent (1 1/2%) above the Chemical Bank Rate. The rate
hereunder shall be calculated based on a 360 day year. CITBC shall be entitled
to charge the Companies' Revolving Loan Accounts at the rate provided for herein
when due until all Obligations have been paid in full.
5. The Companies may elect to use Libor as to any other outstanding
Revolving Loans, Term Loans and/or CAPEX Term Loans provided A) there is then no
Default or Event of Default, B) the Companies have so advised CITBC of their
election to use Libor and the Libor Period selected no later than three (3)
Business Days preceding the first day of a Libor Period and C) the election and
Libor shall be effective, provided, there is then no Default or Event of
Default, on the fourth Business Day following said notice. The Libor elections
must be for $1,000,000 or whole multiples thereof and there shall be no more
than three (3) Libor Loans outstanding at one time. If no such election is
timely made or can be made, or if the Libor rate can not be determined, then
CITBC shall use the Chemical Bank Rate to compute interest. In the event the
Companies request any Libor election the Companies shall pay to CITBC a $500
processing fee upon the effective date of each such Libor election hereunder. In
addition, the Companies shall pay to CITBC, upon the request of CITBC such
amount or amounts as shall compensate CITBC for any loss, costs or expenses
incurred by CITBC (as reasonably determined by CITBC) as a result of: (i) any
payment or prepayment on a date other than the last day of a Libor Period for
such Libor Loan, or (ii) any failure of the Companies to borrow a Libor Loan on
the date for such borrowing specified in the relevant notice; such compensation
to include, without limitation, an amount equal to any loss or expense suffered
by CITBC during the period from the date of receipt of such payment or
prepayment or the date of such failure to borrow to the last day of such Libor
Period if the rate of interest obtained by CITBC upon the reemployment of an
amount of funds equal to the amount of such payment, prepayment or failure to
borrow is less than the rate of interest applicable to such Libor Loan for such
Libor Period. The determination by CITBC of the amount of any such loss or
expense, when set forth in a written notice to the Companies, containing CITBC
calculations thereof in reasonable detail, shall be conclusive on the Companies,
in the absence of manifest error.
6. In consideration of the Letter of Credit Guaranty of CITBC, the
Companies shall jointly and severally pay CITBC the Letter of Credit Guaranty
Fee which shall be an amount equal to (i) one and three quarters percent (1
3/4%) of the face amount of each documentary Letters of Credit payable upon date
of issuance thereof and (ii) one and three quarters percent (1 3/4%) per annum,
payable monthly, on the face amount of each standby Letter of Credit.
7. Any charges, fees, commissions, costs and expenses charged to CITBC
for the Companies' account by any Issuing Bank in connection with or arising out
of Letters of Credit issued pursuant to this Financing Agreement or out of
transactions relating thereto will be charged to the Companies' Revolving Loan
Accounts in full when charged to or paid by CITBC and when made by any such
Issuing Bank shall be conclusive on CITBC.
8. The Companies shall jointly and severally reimburse or pay CITBC, as
the case may be, for: i) all Out-of-Pocket Expenses of CITBC and b) any
applicable Documentation Fee.
9. Upon the last Business Day of each month, commencing with the last
day of the month in which this Financing Agreement is executed the Companies
shall jointly and severally pay CITBC the Line of Credit Fee.
10. To induce CITBC to enter into this Financing Agreement and to
extend to the Company the Revolving Loans, Letters of Credit, Term Loans and the
CAPEX Term Loan(s), the Companies shall jointly and severally pay to CITBC (i) a
Loan Facility Fee in the amount of $200,000 payable upon execution of this
Financing Agreement and (ii) an additional Loan Facility Fee in the amount of
$150,000 payable no later than December 31, 1996, provided that in the event
that on such date the Companies (x) are not in compliance with all of the terms
and provisions of this Financing Agreement or after giving effect to such
payment, the Companies would not be in compliance with all of the terms and
provisions of this Financing Agreement or (y) after giving effect to such
payment, would be left with insufficient Availability under the Line of Credit
to meet their obligations as they come due, the due date of such fee shall be
extended from December 31, 1996 to March 31, 1997. Any unpaid portion of such
fee shall be due and payable upon any termination of this Financing Agreement.
The Commitment Fee in the amount of $75,000 paid to CITBC upon execution of the
CITBC Commitment Letter and the Good Faith Deposit in the amount of $15,000 paid
to CITBC in conjunction with a certain financing proposal letter will (in each
case net of CITBC expenses) be credited against the Loan Facility Fee upon the
initial funding hereunder.
11. Upon the date hereof and on such annual anniversary hereof the
Companies shall jointly and severally pay to CITBC the Collateral Management
Fee, which shall be fully earned and not refundable or rebateable when due.
12. The Companies shall jointly and severally pay CITBC's standard
charges for, and the fees and expenses of, the CITBC personnel used by CITBC for
reviewing the books and records of the Companies and for verifying, testing
protecting, safeguarding, preserving or disposing of all or any part of the
Collateral provided, however, that the foregoing shall not be payable until the
occurrence of an Event of Default if the Companies are paying a Collateral
Management Fee.
13. Each of the Companies hereby authorizes CITBC to charge its
Revolving Loan Account with CITBC with the amount of all payments due hereunder
as such payments become due. Each of the Companies confirms that any charges
which CITBC may so make to the Companies' Revolving Loan Accounts as herein
provided will be made as an accommodation to the Companies and solely at CITBC's
discretion. CITBC may in its sole and absolute discretion allocate any of the
above fees and/or any other payments due under this Financing Agreement to the
Companies' respective Revolving Loan Accounts in any proportion that CITBC may
decide.
SECTION 9. POWERS
Each of the Companies hereby constitutes CITBC or any person or agent
CITBC may designate as its attorney-in-fact, at the Companies' cost and expense,
to exercise all of the following powers, which being coupled with an interest,
shall be irrevocable until all of the Companies' Obligations to CITBC have been
paid in full:
(a) To receive, take, endorse, sign, assign and deliver, all in the
name of CITBC or the Companies, any and all checks, notes, drafts, and other
documents or instruments relating to the Collateral;
(b) To receive, open and dispose of all mail addressed to the Companies
and to notify postal authorities to change the address for delivery thereof to
such address as CITBC may designate;
(c) To request from customers indebted on Accounts at any time, in the
name of CITBC or the Companies or that of CITBC's designee, information
concerning the amounts owing on the Accounts;
(d) To transmit to customers indebted on Accounts notice of CITBC's
interest therein and to notify customers indebted on Accounts to make payment
directly to CITBC for the Companies' account; and
(e) To take or bring, in the name of CITBC or the Companies, all steps,
actions, suits or proceedings deemed by CITBC necessary or desirable to enforce
or effect collection of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the
powers set forth in (b), (d) and (e) above may only be exercised after the
occurrence of an Event of Default and until such time as such Event of Default
is waived or cured to CITBC's satisfaction. In addition, the powers set forth in
(c) above will only be exercised in the name of the Companies or a certified
public accountant designated by CITBC prior to the occurrence of such Event of
Default.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
1. Notwithstanding anything hereinabove to the contrary, CITBC may
terminate this Financing Agreement immediately upon the occurrence of any of the
following (herein "Events of Default"):
a) cessation of the business of the Companies, or any one of
them, or the calling of a meeting of the creditors of the
Companies, or any one of them, for purposes of compromising
their debts and obligations;
b) the failure of the Companies, or any one of them, to generally
meet debts as they mature;
c) the commencement by or against the Companies, or any one of
them, of any bankruptcy, insolvency, arrangement,
reorganization, receivership or similar proceedings under any
federal or state law, provided that in the event of any
involuntary proceeding commenced against the Companies such
proceeding is not dismissed or discharged within thirty (30)
days after commencement thereof;
d) breach by the Companies, or any one of them, of any warranty,
representation or covenant contained herein (other than those
referred to in sub-paragraph e below) or in any other written
agreement between the Companies or CITBC, provided that such
breach by the Companies of any of the warranties,
representations or covenants referred in this clause d shall
not be deemed to be an Event of Default unless and until such
breach shall remain unremedied to CITBC's satisfaction for a
period of ten (10) days from the date of such breach;
e) breach by the Companies, or any one of them, of any warranty,
representation or covenant of Section 3, Paragraphs 3 (other
than the third sentence of paragraph 3) and 4; Section 6,
Paragraphs 3 and 4 (other than the first sentence of paragraph
4); Section 7, Paragraphs 1,5,6, and 9 through 11;
f) failure of the Companies to pay any of the Obligations within
five (5) Business Days of the due date thereof, provided that
nothing contained herein shall prohibit CITBC from charging
such amounts to the Companies' Revolving Loan Accounts on the
due date thereof;
g) the Companies, or any one of them, shall i) engage in any
"prohibited transaction" as defined in ERISA, ii) have any
"accumulated funding deficiency" as defined in ERISA, iii)
have any Reportable Event as defined in ERISA, iv) terminate
any Plan, as defined in ERISA or v) be engaged in any
proceeding in which the Pension Benefit Guaranty Corporation
shall seek appointment, or is appointed, as trustee or
administrator of any Plan, as defined in ERISA, and with
respect to this sub-paragraph h such event or condition x)
remains uncured for a period of thirty (30) days from date of
occurrence and y) could, in the reasonable opinion of CITBC,
subject the Companies to any tax, penalty or other liability
material to the business, operations or financial condition of
the Companies;
h) without the prior written consent of CITBC, the Companies
shall x) amend or modify the Subordinated Debt, or y) make any
payment on account of the Subordinated Debt except as
permitted in the Subordination Agreement;
i) the Companies sustain (x) a consolidated loss in excess of
$950,000 in the Fiscal Year ending December 31, 1996 or (y)
any consolidated loss in any Fiscal Year thereafter, all as
determined in accordance with GAAP;
j) the occurrence of any default or event of default (after
giving effect to any applicable grace or cure periods) under
any instrument or agreement evidencing (x) Subordinated Debt
or (y) any other Indebtedness of the Companies having a
principal amount in excess of $250,000; or
k) William Spell or John C. van Osnabrugge ceases for any reason
whatsoever (other than as a result of death) to be actively
engaged in the management of the Companies or the stock of (i)
the Companies presently held (directly or indirectly) by
Parent or (ii) Parent presently held (directly or indirectly)
by William Spell is transferred.
2. Upon the occurrence of a Default and/or an Event of Default, at the
option of CITBC, all loans, advances and extensions of credit provided for in
Sections 3, 4 and 5 of this Financing Agreement shall be thereafter in CITBC's
sole discretion and the obligation of CITBC to make Revolving Loans, open
Letters of Credit, and/or make CAPEX Term Loans shall cease unless such Default
or Event of Default is waived in writing by CITBC or cured to CITBC's
satisfaction, and at the option of CITBC upon the occurrence of an Event of
Default: i) all Obligations shall become immediately due and payable; ii) CITBC
may charge the Companies the Default Rate of Interest on all then outstanding or
thereafter incurred Obligations in lieu of the interest provided for in Section
8 of this Financing Agreement provided that respect to this clause ii) a) CITBC
has given the Company written notice of the Event of Default, provided, however,
that no notice is required if the Event of Default is the Event listed in
paragraph 1(c) of this Section 10 and b) the Companies have failed to cure the
Event of Default within ten (10) days after x) CITBC deposited such notice in
the United States mail or y) the occurrence of the Event of Default listed in
paragraph 1(c) of this Section 10; and iii) CITBC may immediately terminate this
Financing Agreement upon notice to the Companies, provided, however, that no
notice of termination is required if the Event of Default is the Event listed in
paragraph 1(c) of this Section 10. The exercise of any option is not exclusive
of any other option which may be exercised at any time by CITBC.
3. Immediately upon the occurrence of any Event of Default, CITBC may
to the extent permitted by law: (a) remove from any premises where same may be
located any and all documents, instruments, files and records, and any
receptacles or cabinets containing same, relating to the Accounts, or CITBC may
use, at the Companies' expense, such of the Companies' personnel, supplies or
space at the Companies' places of business or otherwise, as may be necessary to
properly administer and control the Accounts or the handling of collections and
realizations thereon; (b) bring suit, in the name of the Companies or CITBC, and
generally shall have all other rights respecting said Accounts, including
without limitation the right to: accelerate or extend the time of payment,
settle, compromise, release in whole or in part any amounts owing on any
Accounts and issue credits in the name of the Companies or CITBC; (c) sell,
assign and deliver the Collateral and any returned, reclaimed or repossessed
merchandise, with or without advertisement, at public or private sale, for cash,
on credit or otherwise, at CITBC's sole option and discretion, and CITBC may bid
or become a purchaser at any such sale, free from any right of redemption, which
right is hereby expressly waived by the Companies; (d) foreclose the security
interests created herein by any available judicial procedure, or to take
possession of any or all of the Inventory, Equipment and/or Other Collateral
without judicial process, and to enter any premises where any Inventory,
Equipment and/or Other Collateral may be located for the purpose of taking
possession of or removing the same and (e) exercise any other rights and
remedies provided in law, in equity, by contract or otherwise. CITBC shall have
the right, without notice or advertisement, 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, in the name of the Companies or CITBC, or in
the name of such other party as CITBC may designate, 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 other terms and
conditions as CITBC in its sole discretion may deem advisable, and CITBC shall
have the right to purchase at any such sale. If any Inventory and Equipment
shall require rebuilding, repairing, maintenance or preparation, CITBC shall
have the right, at its option, to do such of the aforesaid as is necessary, for
the purpose of putting the Inventory and Equipment in such saleable form as
CITBC shall deem appropriate. The Companies agree, at the request of CITBC, to
assemble the Inventory and Equipment and to make it available to CITBC at
premises of the Companies or elsewhere and to make available to CITBC the
premises and facilities of the Companies for the purpose of CITBC's taking
possession of, removing or putting the Inventory and Equipment in saleable form.
However, if notice of intended disposition of any Collateral is required by law,
it is agreed that ten (10) days notice shall constitute reasonable notification
and full compliance with the law. The net cash proceeds resulting from CITBC's
exercise of any of the foregoing rights, (after deducting all charges, costs and
expenses, including reasonable attorneys' fees) shall be applied by CITBC to the
payment of the Companies' Obligations, whether due or to become due, in such
order as CITBC may elect, and the Companies shall remain liable to CITBC for any
deficiencies, and CITBC in turn agrees to remit to the Companies or their
successors or assigns, any surplus resulting therefrom. The enumeration of the
foregoing rights is not intended to be exhaustive and the exercise of any right
shall not preclude the exercise of any other rights, all of which shall be
cumulative.
SECTION 11. TERMINATION
Except as otherwise permitted herein, the Companies or CITBC may
terminate this Financing Agreement and the Line of Credit only as of the initial
or any subsequent Anniversary Date and then only by giving the other at least
sixty (60) days prior written notice of termination. Notwithstanding the
foregoing CITBC may terminate the Financing Agreement immediately upon the
occurrence of an Event of Default, provided, however, that if the Event of
Default is an event listed in paragraph 1(c) of Section 10 of this Financing
Agreement, CITBC may regard the Financing Agreement as terminated and notice to
that effect is not required. This Financing Agreement, unless terminated as
herein provided, shall automatically continue from Anniversary Date to
Anniversary Date. Notwithstanding the foregoing, the Companies may terminate
this Financing Agreement and the Line of Credit prior to any applicable
Anniversary Date upon sixty (60) days' prior written notice to CITBC, provided
that the Companies pay to CITBC immediately on demand, an Early Termination Fee
and the Prepayment Premium, if applicable. Termination by either of the
Companies shall constitute termination with respect to all Companies. All
Obligations shall become due and payable as of any termination hereunder or
under Section 10 hereof and, pending a final accounting, CITBC may withhold any
balances in the Companies' accounts (unless supplied with an indemnity
satisfactory to CITBC) to cover all of the Companies' Obligations, whether
absolute or contingent. All of CITBC's rights, liens and security interests
shall continue after any termination until all Obligations have been paid and
satisfied in full.
SECTION 12. MISCELLANEOUS
1. Each of the Companies hereby waives diligence, demand, presentment
and protest and any notices thereof as well as notice of nonpayment. No delay or
omission of CITBC or the Companies to exercise any right or remedy hereunder,
whether before or after the happening of any Event of Default, shall impair any
such right or shall operate as a waiver thereof or as a waiver of any such Event
of Default. No single or partial exercise by CITBC of any right or remedy
precludes any other or further exercise thereof, or precludes any other right or
remedy.
2. This Financing Agreement and the documents executed and delivered in
connection therewith constitute the entire agreement between the Companies and
CITBC; supersede any prior agreements; can be changed only by a writing signed
by both the Companies and CITBC; and shall bind and benefit the Company and
CITBC and their respective successors and assigns.
3. In no event shall the Companies, upon demand by CITBC for payment of
any indebtedness relating hereto, by acceleration of the maturity thereof, or
otherwise, be obligated to pay interest and fees in excess of the amount
permitted by law. Regardless of any provision herein or in any agreement made in
connection herewith, CITBC shall never be entitled to receive, charge or apply,
as interest on any indebtedness relating hereto, any amount in excess of the
maximum amount of interest permissible under applicable law. If CITBC ever
receives, collects or applies any such excess, it shall be deemed a partial
repayment of principal and treated as such; and if principal is paid in full,
any remaining excess shall be refunded to the Companies. This paragraph shall
control every other provision hereof and of any other agreement made in
connection herewith.
4. If any provision hereof or of any other agreement made in connection
herewith is held to be illegal or unenforceable, such provision shall be fully
severable, and the remaining provisions of the applicable agreement shall remain
in full force and effect and shall not be affected by such provision's
severance. Furthermore, in lieu of any such provision, there shall be added
automatically as a part of the applicable agreement a legal and enforceable
provision as similar in terms to the severed provision as may be possible.
5. THE COMPANIES AND CITBC EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS FINANCING AGREEMENT. EACH
OF THE COMPANIES HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED.
6. Except as otherwise herein provided, any notice or other
communication required hereunder shall be in writing, and shall be deemed to
have been validly served, given or delivered when hand delivered or sent by
telegram or telex, or three days after deposit in the United State mails, with
proper first class postage prepaid and addressed to the party to be notified as
follows:
(A) if to CITBC, at:
The CIT Group/Business Credit, Inc.
10 South LaSalle Street
Chicago, IL 60603
Attn: Michael Egan, Vice President and Regional Manager
Fax No.: (312) 443-0139
(B) if to the Companies at:
Peerless Chain Company
1416 East Sanborn Street
Winona, MN 55987-5349
Attn: John C. van Osnabrugge
Fax No.: (507) 457-9241
with copy to:
William Spell
Discus Acquisition Corporation
2430 Metropolitan Center
333 S. Hope Street
Minneapolis, MN 55402
Fax No.: (612) 371-9651
or to such other address as any party may designate for itself by like notice.
7. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
FINANCING AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF ILLINOIS.
IN WITNESS WHEREOF, the parties hereto have caused this Financing
Agreement to be executed and delivered by their proper and duly authorized
officers as of the date set forth above.
Very truly yours,
THE CIT GROUP/BUSINESS
CREDIT, INC.
By Michael Egan
Vice President
Read and Agreed to:
PEERLESS CHAIN COMPANY
By: William H. Spell
Title: Chairman
PEERLESS CHAIN OF IOWA, INC
By: William H. Spell
Title: Chairman
EXHIBIT A
PROMISSORY NOTE A
December , 1995
$4,200,000
FOR VALUE RECEIVED, the undersigned, PEERLESS CHAIN COMPANY a Minnesota
corporation (the "Company"), promises to pay to the order of THE CIT
GROUP/BUSINESS CREDIT, INC. (herein "CITBC") at its office located at 10 South
LaSalle Street, Chicago, IL 60603, in lawful money of the United States of
America and in immediately available funds, the principal amount of Four Million
Two Hundred Thousand Dollars ($4,200,000) by eighty-four (84) equal monthly
principal installments of $50,000.00 each, whereof the first such installment
shall be due and payable on January 1, 1996 and subsequent installments shall be
due and payable on the first Business Day of each month thereafter until this
Note is paid in full.
The Company further agrees to pay interest at said office, in like money, on the
unpaid principal amount owing hereunder from time to time from the date hereof
on the date and at the rate specified in Section 8, Paragraph 2 of the Financing
Agreement dated of even date herewith between the Company and CITBC (the
"Financing Agreement"). Capitalized terms used herein and defined in the
Financing Agreement shall have the same meanings as set forth therein unless
otherwise specifically defined herein.
If any payment on this Note becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is Promissory Note A referred to in the Financing Agreement, evidences
Term Loan A thereunder, and is subject to, and entitled to, all provisions and
benefits thereof and is subject to optional and mandatory prepayment, in whole
or in part, as provided therein.
Upon the occurrence of any one or more of the Events of Default specified in the
Financing Agreement or upon termination of the Financing Agreement, all amounts
then remaining unpaid on this Note may become, or be declared to be, at the sole
election of CITBC, immediately due and payable as provided in the Financing
Agreement.
PEERLESS CHAIN COMPANY
By:
Title:
EXHIBIT B
PROMISSORY NOTE B
December , 1995
$2,500,000
FOR VALUE RECEIVED, the undersigned, PEERLESS CHAIN COMPANY a Minnesota
corporation (the "Company"), promises to pay to the order of THE CIT
GROUP/BUSINESS CREDIT, INC. (herein "CITBC") at its office located at 10 South
LaSalle Street, Chicago, IL 60603, in lawful money of the United States of
America and in immediately available funds, the principal amount of Two Million
Five Hundred Thousand Dollars ($2,500,000) as follows: 1) thirty-five (35) equal
monthly principal installments of $69,444 each, followed by 2) one (1) final
principal installment of $69,460, whereof the first such installment shall be
due and payable on January 1, 1996 and subsequent installments shall be due and
payable on the first Business Day of each month hereafter until this Note is
paid in full.
The Company further agrees to pay interest at said office, in like money, on the
unpaid principal amount owing hereunder from time to time from the date hereof
on the date and at the rate specified in Section 8, Paragraph 3 of the Financing
Agreement dated of even date herewith between the Company and CITBC (the
"Financing Agreement"). Capitalized terms used herein and defined in the
Financing Agreement shall have the same meanings as set forth therein unless
otherwise specifically defined herein.
If any payment on this Note becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is Promissory Note B referred to in the Financing Agreement, evidences
Term Loan B thereunder, and is subject to, and entitled to, all provisions and
benefits thereof and is subject to optional and mandatory prepayment, in whole
or in part, as provided therein.
Upon the occurrence of any one or more of the Events of Default specified in the
Financing Agreement or upon termination of the Financing Agreement, all amounts
then remaining unpaid on this Note may become, or be declared to be, at the sole
election of CITBC, immediately due and payable as provided in the Financing
Agreement.
PEERLESS CHAIN COMPANY
By:
Title:
EXHIBIT C
PROMISSORY NOTE C
_________________, 199__
$ ______________________
FOR VALUE RECEIVED, the undersigned, _________________ , a __________________
corporation (the "Company"), promises to pay to the order of THE CIT
GROUP/BUSINESS CREDIT, INC. (herein "CITBC") at its office located at 10 South
LaSalle Street, Chicago, IL 60603, in lawful money of the United States of
America and in immediately available funds, the principal amount of
______________ ($ _________ .00) by sixty (60) equal monthly principal
installments of $ _____________.00 each, whereof the first such installment
shall be due and payable on _______________, 199__ and subsequent installments
shall be due and payable on the first Business Day of each month thereafter
until this Note is paid in full.
The Company further agrees to pay interest at said office, in like money, on the
unpaid principal amount owing hereunder from time to time from the date hereof
on the date and at the rate specified in Section 8, Paragraph 4 of the Financing
Agreement dated December ___, 1995 between the Company and CITBC (the "Financing
Agreement"). Capitalized terms used herein and defined in the Financing
Agreement shall have the same meanings as set forth therein unless otherwise
specifically defined herein.
If any payment on this Note becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is Promissory Note C referred to in the Financing Agreement, evidences
a CAPEX Term Loan thereunder, and is subject to, and entitled to, all provisions
and benefits thereof and is subject to optional and mandatory prepayment, in
whole or in part, as provided therein.
Upon the occurrence of any one or more of the Events of Default specified in the
Financing Agreement or upon termination of the Financing Agreement, all amounts
then remaining unpaid on this Note may become, or be declared to be, at the sole
election of CITBC, immediately due and payable as provided in the Financing
Agreement.
By:
Title:
SCHEDULE 1 - LIST OF LEASED LOCATIONS AND MONTHLY RENTAL
AMOUNTS
LEASED LOCATIONS WITHOUT LANDLORD LIEN WAIVERS
PROPERTY ADDRESS MONTHLY RENTAL RATE
1201 East Main Street $1,200.00
Manchester, Iowa (old)
Manana Center $2,685.33
10736 North Stemmons Freeway
Dallas, Texas
WAREHOUSE WITHOUT WAIVER
PROPERTY ADDRESS
460 Sterling Road
E.C.D. Warehouse #3
Camp Hill, Pennsylvania
SCHEDULE 2 - EXISTING LIENS
Location Debtor Secured Party Filing # Collateral
SOS, MN PCC Lease America Corp. 1384082 Specific Equipment
SOS, MN PCC Citicorp Dealer Finance 1734037 Specific Equipment
SOS, MN PCC Citicorp Dealer Finance 1764927 Specific Equipment
SOS, IA PCC Altorfer Machine Company K654068 Specific Equipment
SCHEDULE 3 - COLLATERAL LOCATIONS AND CHIEF EXECUTIVE OFFICE
(a) Chief Executive Office
(i) Peerless Chain Company
1416 East Sanborn Street
Winona, Minnesota 55987-5349
(ii) Peerless Chain of Iowa, Inc.
1416 East Sanborn Street
Winona, Minnesota 55987-5349
Collateral Locations
1. 1416 East Sanborn Street
Winona, Minnesota (Winona County)
2. 52 Walnut Street
Winona, Minnesota (Winona County)
3. 1201 E. Main Street
Manchester, Iowa (Delaware County)
4. 4707 Fulton Industrial Boulevard
Atlanta, Georgia (Fulton County)
5. 10736 North Stemmons Freeway
Dallas, Texas (Dallas County)
6. 245 Freeport Blvd.
Sparks, Nevada (Washoe County)
7. 2244 Old Gettysburg Road
Camp Hills, Pennsylvania (Cumberland County)
8. 4920 Nome Street
Denver, Colorado (Denver County)