Exhibit 10(d)(ii)
REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
AMERICAN SCIENCE AND ENGINEERING, INC.
AND
HSBC BANK USA
NOVEMBER 30, 2000
TABLE OF CONTENTS
PAGE(S)
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ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS.......................................................1
Section 1.1 Certain Defined Terms..................................................................1
Section 1.2 Computation of Time Periods...........................................................16
Section 1.3 Other Terms...........................................................................16
ARTICLE II. AMOUNTS AND TERMS OF THE ADVANCES AND THE STANDBY LETTERS OF CREDIT...................16
Section 2.1 The Advances..........................................................................16
Section 2.2 Procedure for Working Capital Advances................................................17
Section 2.3 Issuance of and Drawings Under Letters of Credit; No Liability of the Bank............18
Section 2.4 The Note..............................................................................20
Section 2.5 Repayment of Advances.................................................................20
Section 2.6 Loan Account, Monthly Statements......................................................21
Section 2.7 Use of Facility.......................................................................22
ARTICLE III. INTEREST, LATE PAYMENT AND FEES.......................................................22
Section 3.1 Interest and Late Payments............................................................22
Section 3.2 Special Provisions Governing LIBOR Loans - Increased Costs............................24
Section 3.3 Required Termination and Repayment of LIBOR Loans.....................................25
Section 3.4 Other Fees............................................................................25
ARTICLE IV. FUNDING AND YIELD PROTECTION..........................................................26
Section 4.1 Increased Costs.......................................................................26
Section 4.2 Capital Adequacy Protection...........................................................27
Section 4.3 Section Payments - No Offset, Etc.....................................................27
Section 4.4 Survival..............................................................................28
ARTICLE V. REPRESENTATIONS AND WARRANTIES........................................................28
Section 5.1 Representations and Warranties........................................................28
ARTICLE VI. CONDITIONS OF LENDING.................................................................34
Section 6.1 Closing Conditions....................................................................34
Section 6.2 Conditions Precedent to Each Advance and Issuance of a Letter of Credit...............36
ARTICLE VII. COVENANTS.............................................................................37
Section 7.1 Reporting Requirements................................................................37
Section 7.2 Insurance and Endorsements............................................................38
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Section 7.3 Tax and Other Liens...................................................................39
Section 7.4 Place of Business.....................................................................39
Section 7.5 Inspections...........................................................................39
Section 7.6 Litigation............................................................................39
Section 7.7 Notice of Certain Events..............................................................39
Section 7.8 Collateral Duties.....................................................................41
Section 7.9 Encumbrances..........................................................................41
Section 7.10 Limitation on Indebtedness............................................................42
Section 7.11 Contingent Liabilities................................................................43
Section 7.12 Consolidation, Merger or Corporate Changes............................................44
Section 7.13 Loans, Advances, Investments..........................................................44
Section 7.14 Acquisition and Issuance of Stock of the Borrower; Dividends..........................44
Section 7.15 Prohibited Transfers..................................................................45
Section 7.16 Loans to Officers, Directors, Shareholders, Affiliates................................45
Section 7.17 Tangible Net Worth....................................................................45
Section 7.18 Current Ratio.........................................................................45
Section 7.19 Senior Debt to Tangible Net Worth.....................................................45
Section 7.20 Cash Flow Coverage Ratio..............................................................45
ARTICLE VIII. COLLATERAL............................................................................46
Section 8.1 Grant.................................................................................46
Section 8.2 Continuous Security Interest..........................................................46
Section 8.3 Priority in Proceeds of Collateral....................................................46
ARTICLE IX. EVENTS OF DEFAULT, ACCELERATION.......................................................46
Section 9.1 Events of Default, Acceleration.......................................................46
Section 9.2 Limitation on Eligible Collateral.....................................................49
ARTICLE X. COLLECTIONS...........................................................................50
Section 10.1 Collections...........................................................................50
ARTICLE XI. RIGHTS AND REMEDIES OF THE BANK.......................................................50
Section 11.1 Remedies of the Bank..................................................................50
Section 11.2 Collection of Other Accounts, Etc.....................................................51
Section 11.3 Specific Powers.......................................................................51
Section 11.4 Right of the Bank to Use and Operate Collateral, Etc..................................52
Section 11.5 Duties After Default..................................................................53
Section 11.6 Cumulative Remedies...................................................................54
Section 11.7 Employees and Bank....................................................................54
ARTICLE XII. INTENTIONALLY OMITTED.................................................................54
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ARTICLE XIII. TERMINATION...........................................................................54
Section 13.1 Termination...........................................................................54
ARTICLE XIV. EXPENSES..............................................................................55
Section 14.1 Expenses..............................................................................55
ARTICLE XV. ASSIGNMENT AND PARTICIPATION..........................................................55
Section 15.1 Assignment and Participations.........................................................55
Section 15.2 Disclosure............................................................................55
Section 15.3 Assignment by Borrower................................................................55
ARTICLE XVI. MISCELLANEOUS.........................................................................56
Section 16.1 Indemnification.......................................................................56
Section 16.2 Payment Set-Aside.....................................................................57
Section 16.3 Set-off...............................................................................57
Section 16.4 Covenants to Survive..................................................................57
Section 16.5 Cross-Collateralization...............................................................58
Section 16.6 Cross-Default.........................................................................58
Section 16.7 Amendments and Waivers................................................................58
Section 16.8 Notices...............................................................................58
Section 16.9 Waivers...............................................................................59
Section 16.10 Section Headings, Severability, Entire Agreement......................................59
Section 16.11 GOVERNING LAW.........................................................................60
ARTICLE XVII. INTENTIONALLY OMITTED.................................................................60
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EXHIBITS
Exhibit A Note
Exhibit B Continuing Letter of Credit Agreement
Exhibit C Compliance Certificate
Schedule 5.1(h) Litigation
Schedule 5.1(m) Existence of Material Indebtedness
Schedule 5.1(e) Places of Business
Schedule 5.1(s) Permitted Liens
Schedule 5.1(t) Subsidiaries
Schedule 5.1(u) Tradenames
Schedule 5.1(y) Government Contracts
Schedule 7.1 Borrowing Base Certificate
Schedule 7.9(m) Other Permitted Indebtedness
Schedule 7.16 Loans to Officers, Directors and Shareholders
Schedule 8.1 Description of the Collateral
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REVOLVING LOAN AND SECURITY AGREEMENT
This Revolving Loan and Security Agreement dated as of
November 30, 2000 between AMERICAN SCIENCE AND ENGINEERING, INC., a
Massachusetts corporation with its principal place of business at 829 Middlesex
Turnpike, Billerica, Massachusetts 01821 ("Borrower"), and HSBC BANK USA, a bank
organized under the laws of the State of New York ("Bank") having a place of
business at 17 South Broadway, Nyack, New York 10960.
WHEREAS, the Borrower and Bank have agreed to enter into
financing arrangements on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and after
good and valuable consideration, the Borrower and the Bank agree as follows:
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 CERTAIN DEFINED TERMS. As used herein, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "Accounts" shall mean all accounts and accounts receivable
related to or arising from the sale or lease of inventory or rendition
of services by the Borrower in the ordinary course of its business or
however otherwise arising, and all other accounts, deposit accounts,
contract rights and general intangibles related to or arising from any
account and notes, documents, chattel paper, instruments, acceptances,
letters of credit, drafts, bank notes or other forms of obligations and
receivables of the Borrower related to or arising from the foregoing or
evidencing any of the foregoing or issued in substitution for or
replacement of any of the foregoing, whether or not the same are listed
on any schedules, assignments or reports furnished to the Bank from
time to time, and whether now existing or are created at any time
hereafter, including, without limitation, all Accounts as such term is
defined in the UCC, together with all goods, inventory and merchandise
returned by or reclaimed by or repossessed from customers wherever such
goods, inventory and merchandise are located, and all proceeds thereto,
including without limitation, proceeds of insurance thereon and all
guaranties, securities, liens and other collateral security which the
Borrower may hold for the payment of any of the foregoing, including
without limitation, all rights of stoppage in transit, replevin and
reclamation and all other rights and remedies of an unpaid vendor or
lienor, and any liens held by the Borrower
as a mechanic, contractor, subcontractor, processor, materialman,
machinist, manufacturer, artisan, or otherwise.
(b) "Accounts Borrowing Base" means, at the time of its
computation, the aggregate amount of the outstanding Accounts in which
the Bank has a first priority perfected security interest less the
amount of Ineligible Accounts and any reserves established by the Bank
in accordance with Section 2.2 (c).
(c) "Account Debtor" shall mean a person or entity obligated
to the Borrower upon an Account.
(d) "Advance" shall mean a Working Capital Advance or a Letter
of Credit Advance to the Borrower.
(e) "Affiliate" shall mean any person that would be considered
to be an affiliate of the Borrower under Rule 144(a) of the Rules and
Regulations of the United States Securities and Exchange Commission, as
in effect on the date hereof, if the Borrower were issuing securities.
(f) "Agreement" shall mean this Revolving Loan and Security
Agreement as the same may from time to time be amended, supplemented or
otherwise modified.
(g) "Available Amount" of any letter of credit shall mean, at
any time, the maximum amount available to be drawn under such letter of
credit at such time (assuming compliance at such time with all
conditions to drawing).
(h) "Bank" shall have the meaning assigned in the Preamble to
this Agreement.
(i) "Borrower" shall have the meaning assigned in the Preamble
to this Agreement.
(j) "Borrower's Account" shall mean the account of the
Borrower maintained by the Borrower with the Bank at 17 South Broadway,
Nyack, New York 10960.
(k) "Borrowing Capacity" means, at the time of computation,
the net amount determined by taking the lesser of the following
amounts: (A) Commitment Amount or (B) the difference between (x) the
amount equal to the sum of: (i) eighty- five percent (85%) of the
Accounts Borrowing Base; plus (ii) the lesser of (x) forty percent
(40%) of the Inventory Borrowing Base; and (y) $5,000,000.00; plus
(iii) at the Borrower's option, twenty five percent (25%) of the
appraised value of the Borrower's Equipment and Fixtures, and (y) the
amount equal to the sum of (a) all
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outstanding Advances, plus (b) all Available Amounts of Standby Letters
of Credit, plus (c) any other financial accommodations made by the Bank
pursuant to this Agreement.
(l) "Business Day" shall mean any day other than a day on
which the Federal Reserve Bank in New York, New York or commercial
banks in New York, New York are required or permitted by law to close.
(m) "Capital Expenditure" shall mean, as determined in
accordance with GAAP, the dollar amount of gross expenditures
(including those that are financed by Capitalized Leases and/or the
Financing Agreements) made or incurred for fixed assets, real property,
plant and equipment, and all renewals, improvements and replacements
thereto (but not repairs thereof) during any period.
(n) "Capitalized Leases" shall mean leases under which the
Borrower or any of its Subsidiaries (or such other applicable Person as
the context requires) is the lessee or obligor, the discounted future
rental payment obligations under which are required to be capitalized
on the balance sheet of the lessee or obligor in accordance with
generally accepted accounting principles.
(o) "Cash Flow Coverage Ratio" shall mean as at any date of
determination for any period, the ratio of (X) (a) Net Income; PLUS (b)
the non-cash portion of Provisions for Income Taxes; PLUS (c) Interest
Expense; PLUS (d) depreciation and amortization of assets (including
patents, trademarks and goodwill) of the Borrower; to (Y) (a) Interest
Expense; PLUS (b) regularly scheduled principal payments on
Indebtedness and the Obligations; PLUS (c) Capital Expenditures.
(p) "Closing Date" shall mean the first date on which the
conditions set forth in Sections 6.1 and 6.2 have been satisfied and
any Advance is to be made or any Standby Letter of Credit is to be
issued hereunder.
(q) "Collateral" shall mean the property of the Borrower in
which the Agent has a security interest as described in Section 8.1
hereof.
(r) "Commencement Date" shall mean the first day of a LIBOR
Period with respect to any LIBOR Loan.
(s) "Commitment" shall mean the amount of $10,000,000.00, such
amount being the Bank's commitment to provide financing to the Borrower
under this Facility, as the same may be reduced from time to time
pursuant to the provisions hereof; or if such commitment is terminated
pursuant to the provisions hereof, zero.
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(t) "Commitment Amount" shall mean an amount equal to TEN
MILLION AND 00/100 ($10,000,000) DOLLARS such amount being on Bank's
commitment to provide financing to the Borrower under this Facility, as
same may be reduced from time to time pursuant to the provisions
hereof; or if such commitment is terminated pursuant to the provisions
hereof, zero.
(u) "Continuing Letter of Credit Agreement" shall have the
meaning assigned in Section 2.3 hereof.
(v) "Current Assets" shall mean all assets of the Borrower and
its Subsidiaries on a consolidated basis which are classified as
current assets in accordance with GAAP.
(w) "Current Liabilities" shall mean all liabilities of the
Borrower and its Subsidiaries on a consolidated basis maturing on
demand or within one (1) year from the date as of which Current
Liabilities are to be determined.
(x) "Defaulting Event" shall mean the occurrence of an Event
of Default or the occurrence of any condition or event which but for
the giving of notice or passage of time or both would constitute an
Event of Default.
(y) "Documents" shall mean all documents, as that term is
defined in Article 9 of the UCC.
(z) "Domestic Facility Obligations" shall mean all Obligations
arising under or relating to this Agreement and all other Financing
Agreements relating hereto.
(aa) "Drawdown Date" shall mean the date on which a Working
Capital Advance is to be made.
(bb) "Dollar" and the sign "$" shall mean lawful money of the
United States.
(cc) "Eligible Inventory" means all Inventory (including
domestic unbilled accounts at the cost of goods sold (as determined by
the Bank in its sole discretion)) other than Export Inventory (as such
term is defined in the Export Credit Agreement) of the Borrower in
which the Bank has a first priority perfected security interest reduced
by (x) any Inventory as to which a representation or warranty contained
in Section 5.1(e) and (s) is not, or does not continue to be, true and
accurate (except as to representations and warranties that, by their
terms, refer to a specific date); and (y) any Inventory which is
otherwise unacceptable to the Bank, in its reasonable judgment;
PROVIDED THAT Inventory at locations owned or controlled by third
parties
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for which Borrower has not delivered a fully executed bailee's
acknowledgment and lien waiver in form and substance satisfactory to
the Bank, shall not constitute Eligible Inventory.
(dd) "Environmental Laws" shall mean any and all applicable
foreign, federal, state and local statutes, laws, regulations, rules,
ordinances, orders, guidances, policies or common law (whether now
existing or hereafter enacted or promulgated) of any and all federal,
state or local governments and governmental and quasi-governmental
agencies, bureaus, subdivisions, commissions or departments which may
now or hereafter have jurisdiction over the Borrower and all applicable
judicial and administrative and regulatory decrees, judgments and
orders, including common law rulings and determinations, pertaining or
relating to injury to, or the protection of, the environment, health,
safety or Hazardous Materials, including without limitation, all
requirements pertaining to reporting, licensing, permitting,
investigation, remediation and removal of emissions, discharges,
releases or threatened releases of Hazardous Materials, chemical
substances, pollutants or contaminants whether solid, liquid or gaseous
in nature, into the environment or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of such Hazardous Materials, chemical substances,
pollutants or contaminants.
(ee) "Event of Default" and "Events of Default" shall have the
meanings assigned in Section 9.1 hereof.
(ff) "Export Credit Agreement" shall mean the Export Credit
and Security Agreement of even date herewith between the Borrower and
the Bank, together with any amendments, supplements or modifications
thereto.
(gg) "Export Facility Obligations" shall mean all Obligations
arising under or relating to the Export Credit Agreement and all other
Financing Agreements relating thereto.
(hh) "Export-Related Collateral" shall have the meaning
assigned to that term in the Export Credit Agreement.
(ii) "Facility" shall mean the working capital and letter of
credit facility being extended to the Borrower pursuant to this
Agreement.
(jj) "Financing Agreements" shall mean this Agreement, the
Note, the L/C Related Documents and any and all other instruments,
agreements and Documents executed in connection herewith or therewith
or related hereto or thereto, as well as all other "Financing
Agreements" as defined in the Export Credit Agreement, together with
any amendments, supplements or modifications hereto or thereto.
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(kk) "GAAP" shall mean the accounting principles issued by the
American Institute of Certified Public Accountants, as from time to
time in effect, as consistently applied or, when used in Sections 7.18
through 7.21, whether directly or indirectly through reference to a
capitalized term used therein.
(ll) "Hazardous Materials" shall mean any chemical, compound,
material, mixture or substance: (i) the presence of which requires or
may hereafter require notification, investigation, monitoring or
remediation under any Environmental Law; (ii) which is or becomes
defined as a "hazardous waste", "hazardous material" or "hazardous
substance" or "toxic substance" or "pollutant" or "contaminant" under
any present or future applicable federal, state or local law or under
the rules and regulations adopted or promulgated pursuant thereto,
including without limitation, the Environmental Laws; (iii) which is
toxic, explosive, corrosive, reactive, ignitable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or
becomes regulated by any governmental authority, agency, department,
commission, board, agency or instrumentality of any foreign country,
the United States, any state of the United States, or any political
subdivision thereof to the extent any of the foregoing has or had
jurisdiction over the Borrower; (iv) which contains gasoline, diesel
fuel or other petroleum products, asbestos or polychlorinated
biphenyls; or (v) any other chemical, material or substance, exposure
to, or disposal of, which is now or hereafter prohibited, limited or
regulated by any federal, state or local governmental body,
instrumentality or agency.
(mm) "Indebtedness" shall mean collectively, as to any Person
and whether recourse is secured by or is otherwise available against
all or only a portion of the assets of such Person and whether or not
contingent, but without duplication: (i)
(i) every obligation of such Person for money
borrowed,
(ii) every obligation of such Person evidenced by
bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the
acquisition of property, assets or businesses,
(iii) every reimbursement obligation of such Person
with respect to letters of credit, bankers' acceptances or
similar facilities issued for the account of such Person,
(iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services
(including securities repurchase agreements),
(v) every obligation of such Person under any
Capitalized Lease,
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(vi) every obligation of such Person under any lease
(a "synthetic lease") treated as an operating lease under
generally accepted accounting principles and as a loan or
financing for U.S. income tax purposes,
(vii) every obligation of such Person (an "equity
related purchase obligation") to purchase, redeem, retire or
otherwise acquire for value any shares of capital stock of any
class issued by such Person, any warrants, options or other
rights to acquire any such shares, or any rights measured by
the value of such shares, warrants, options or other rights,
(viii) every obligation of such Person under any
forward contract, futures contract, swap, option or other
financing agreement or arrangement (including, without
limitation, caps, floors, collars and similar agreements), the
value of which is dependent upon interest rates, currency
exchange rates, commodities or other indices (a "derivative
contract"),
(ix) every obligation in respect of Indebtedness of
any other entity (including any partnership in which such
Person is a general partner) to the extent that such Person is
liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to
the extent that the terms of such Indebtedness provide that
such Person is not liable therefor and such terms are
enforceable under applicable law,
(x) every obligation, contingent or otherwise, of
such Person guaranteeing, or having the economic effect of
guarantying or otherwise acting as surety for, any obligation
of a type described in any of clauses (i) through (x) (the
"primary obligation") of another Person (the "primary
obligor"), in any manner, whether directly or indirectly, and
including, without limitation, any obligation of such Person
(A) to purchase or pay (or advance or supply funds for the
purchase of) any security for the payment of such primary
obligation, (B) to purchase property, securities or services
for the purpose of assuring the payment of such primary
obligation, or (C) to maintain working capital, equity capital
or other financial statement condition or liquidity of the
primary obligor so as to enable the primary obligor to pay
such primary obligation.
The "amount" or "principal amount" of any
Indebtedness at any time of determination represented by (v)
any Indebtedness, issued at a price that is less than the
principal amount at maturity thereof, shall be the amount of
the liability in respect thereof determined in accordance with
generally accepted accounting principles, (w) any Capitalized
Lease shall be the principal component of the aggregate of the
rentals obligation under such Capitalized Lease payable over
the term thereof that is not subject to termination by the
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lessee, (x) any synthetic lease shall be the stipulated loss
value, termination value or other equivalent amount, (y) any
derivative contract shall be the maximum amount of any
termination or loss payment required to be paid by such Person
if such derivative contract were, at the time of
determination, to be terminated by reason of any event of
default or early termination event thereunder, whether or not
such event of default or early termination event has in fact
occurred and (z) any equity related purchase obligation shall
be the maximum fixed redemption or purchase price thereof
inclusive of any accrued and unpaid dividends to be comprised
in such redemption or purchase price.
(nn) "Indemnifiable Liability" shall have the meaning assigned
in Section 16.1(a) hereof.
(oo) "Indemnitees" shall have the meaning assigned in Section
16.1 (a) hereof.
(pp) "Ineligible Accounts" means the following described
Accounts and any other Accounts which are not reasonably satisfactory
to the Bank for credit or any other reason:
(i) Any Export Account (as such term is defined in the
Export Credit Agreement).
(ii) All Accounts owed by an Account Debtor which does not
maintain its chief executive office in the United
States or which is not organized under the laws of
the United States or any state.
(iii) Any Accounts which have remained unpaid for more than
the later of: (a) ninety (90) days after the invoice
date; or (b) thirty (30) days after the due date
thereof.
(iv) Any Accounts to the extent to which a representation
or warranty contained in Sections 5.1(d), (f) and (s)
is not, or does not continue to be, true and
accurate, including, without limitation, any Accounts
subject to a setoff.
(v) Any Accounts with respect to which Borrower has
extended the time for payment without the consent of
the Bank.
(vi) Any Accounts as to which any one or more of the
following events occurs: a Responsible Party shall
die or be judicially declared incompetent; a request
or petition for liquidation, reorganization,
arrangement, adjustment of debts, adjudication as a
bankrupt, or other
8
relief under the bankruptcy, insolvency, or similar
laws of the United States, any state or territory
thereof, or any foreign jurisdiction, now or
hereafter in effect, shall be filed by or against a
Responsible Party; a Responsible Party shall make any
general assignment for the benefit of creditors; a
receiver or trustee, including, without limitation, a
"custodian," as defined in the Federal Bankruptcy
Code, shall be appointed for a Responsible Party or
for any of the assets of a Responsible Party; any
other type of insolvency proceeding with respect to a
Responsible Party (under the bankruptcy laws of the
United States or otherwise) or any formal or informal
proceeding for the dissolution or liquidation of,
settlement of claims against, or winding up of
affairs of, a Responsible Party shall be instituted;
all or any material part of the assets of a
Responsible Party shall be sold, assigned, or
transferred; a Responsible Party shall fail to pay
its debts as they become due; or a Responsible Party
shall cease doing business as a going concern.
(vii) All Accounts owed by an Account Debtor if Borrower or
any person who, or entity which, directly or
indirectly controls Borrower, either owns in whole or
material part, or directly or indirectly controls,
such Account Debtor.
(viii) Any Accounts arising from a consignment or other
arrangement, pursuant to which the subject Inventory
is returnable if not sold or otherwise disposed of by
the Account Debtor; any Accounts constituting a
partial billing under terms providing for payment
only after full shipment or performance; unless
otherwise permitted by the United States government
procurement and equipment acceptance procedures any
Accounts arising from a bill and hold sale or in
connection with any prebilling where the Inventory or
services have not been delivered, performed, or
accepted by the Account Debtor if the Bank has not
entered into a satisfactory written agreement with
such Account Debtor relating to such Accounts; and
any Accounts as to which the Account Debtor contends
the balance reported by Borrower is incorrect or not
owing.
(ix) Any Accounts which are unenforceable against the
Account Debtor for any reason.
(x) Any Accounts which are an Instrument, Document, or
Chattel Paper or which is evidenced by a note, draft,
trade acceptance, or other instrument for the payment
of money where such Instrument,
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Document, Chattel Paper, note, draft, trade
acceptance, or other instrument has not been endorsed
and delivered by Borrower to Bank.
(xi) Any Accounts owed by an Account Debtor which exceeds
any credit limit established by Bank in its
reasonable discretion for such Account Debtor;
provided, that such Accounts shall be ineligible only
to the extent of such excess.
(xii) Any Accounts belonging or owing to International
and/or Global.
The foregoing to the contrary notwithstanding, Accounts consisting of
United States government accounts up to one hundred twenty (120) days from
invoice date shall in the Bank's sole discretion not be deemed to be Ineligible
Accounts for the purposes of computing the Accounts Borrowing Base.
(qq) "Inventory" shall mean (i) all goods manufactured or
acquired for sale or lease, and any piece goods, raw materials, work in
process and finished merchandise, findings or component materials, and
all supplies, goods, incidentals, office supplies, packing materials,
in which the Borrower now or at any time hereafter may have an
interest, whether or not the foregoing is listed in this agreement on
any reports furnished to the Bank from time to time, including, without
limitation, all Inventory as such term is defined in the UCC; (ii) all
of the foregoing whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of the
Borrower or is held by the Borrower or by others for the Accounts,
including without limitation all goods covered by purchase orders and
contracts with suppliers and all goods billed and held by suppliers;
(iii) all of the foregoing which may be located on premises of the
Borrower or of any carrier, forwarding agents, truckers, warehousemen,
vendors, selling agents or third parties; (iv) all documents, documents
of title, insurance and general intangibles relating to or arising out
of inventory; and (v) all proceeds and products of the foregoing
resulting from the sale, lease or other disposition of the foregoing,
including cash, accounts receivable, other non-cash proceeds and
trade-ins.
(rr) "Inventory Borrowing Base" means, at the time of
computation, the dollar value of Eligible Inventory, such dollar value
to be calculated at the lower of average actual cost or market value,
less the amount of any reserves established by Bank in accordance with
Section 2.2(c).
(ss) "Investments" shall mean, without duplication, all
expenditures made and all Indebtedness incurred (contingently or
otherwise) for the acquisition of stock or Indebtedness of, or for
loans, advances, capital contributions or transfers of property to, or
in respect of any guaranties (or other commitments or arrangements as
described under clauses (h) or (i) of the definition of Indebtedness),
or obligations of,
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any Person. In determining the aggregate amount of Investments
outstanding at any particular time: (a) the amount of any Investment
represented by any such guaranty or other commitment or arrangement
shall be taken at not less than the principal amount of the obligations
guaranteed or otherwise supported and still outstanding; (b) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest
is paid; (c) there shall not be deducted in respect of any Investment
any amounts received as earnings on such Investment, whether as
dividends, interest or otherwise, except that accrued interest included
as provided in the foregoing clause (b) may be deducted when paid; and
(d) there shall not be deducted from the aggregate amount of
Investments any decrease in the value thereof.
(tt) "Issuance Date" shall mean the date on which any Standby
Letter of Credit is to be issued.
(uu) "L/C Advance Amount" shall have the meaning assigned in
Section 2.3(c) hereto.
(vv) "L/C Related Documents" shall have the meaning assigned
in Section 2.5(b)(ii)(A) hereof.
(ww) "Letter of Credit" shall mean a Standby Letter of Credit.
(xx) "Letter of Credit Advance" shall have the meaning
assigned in Section 2.3(c) hereof.
(yy) "LIBOR" shall mean the rate of interest per annum
determined by Bank applicable to any selected LIBOR Period equal to the
rate appearing on Telerate Page 3750, or if no quotation appears on
Telerate Page 3750, the average rate per annum which the offices of
four leading banks selected by Bank and located in London offer, for
deposits in U.S. dollars in the London Interbank Eurodollar Market at
approximately 10:00 a.m. (London time) on a LIBOR Interest
Determination Date in an amount approximately equal to the amount of
the applicable LIBOR Loan.
(zz) "LIBOR Interest Determination Date" shall mean a Business
Day which is three (3) Business Days prior to the applicable
Commencement Date.
(aaa) "LIBOR Loan" shall mean any or all Advances from time to
time unpaid and bearing interest at the LIBOR Rate.
(bbb) "LIBOR Period" shall mean a period equal to one (1)
month, two (2) months or three (3) months selected by Borrower pursuant
to Section 3.1 of this Agreement.
11
(ccc) "LIBOR Rate" shall mean LIBOR, plus two hundred (200)
basis points.
(ddd) "Loan Account" shall have the meaning assigned in
Section 2.6 hereof.
(eee) "Material Adverse Effect" shall mean a material adverse
effect on (a) the business, condition (financial or otherwise),
operations, performance, properties or prospects of the Borrower,
individually, or the Borrower and its Subsidiaries taken as a whole,
(b) the validity, perfection, or priority of the security interest of
the Bank in the Collateral created pursuant to this Agreement and the
other Financing Agreements, (c) the rights and remedies of the Bank
under any Financing Agreements, or (d) the ability of the Borrower to
perform its Obligations under the Financing Agreements.
(fff) "Maturity Date" shall mean the Termination Date.
(ggg) "Maximum Amount" shall mean $10,000,000.00.
(hhh) "Net Income" shall mean the consolidated net income (or
loss) of the Borrower and its Subsidiaries, after deduction of all
expenses, taxes, and other charges against consolidated net income,
determined in accordance with generally accepted accounting principles.
(iii) "Note" shall mean the promissory note of the Borrower
payable to the order of a Bank, in the form of EXHIBIT A attached
hereto, evidencing the Obligations, including without limitation, the
indebtedness of the Borrower to Bank resulting from the Advances.
(jjj) "Notice of Borrowing" shall have the meaning assigned in
Section 2.2(a) hereof.
(kkk) "Notice of Issuance" shall have the meaning assigned in
Section 2.3(a) hereof.
(lll) "Obligations" shall mean and include all Advances,
interest, indebtedness, liabilities, obligations, fees, charges,
expenses, guaranties, covenants and duties at any time owing by the
Borrower to the Bank of every kind and description arising under the
Facility, whether or not evidenced by any note or other instrument,
whether or not for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
arising, and all other indebtedness, liabilities and obligations
arising under this Agreement and the other Financing Agreements,
including, without limitation, the reimbursement obligation of the
Borrower to the Bank upon any drawing or drawings under that certain
Standby Letter of Credit issued by the Bank on or about the Closing
Date for
12
the benefit of the Borrower in favor of the State Street Bank and Trust
Company ("State Street"), and all costs, expenses, fees, and charges
incurred by the Bank hereunder or otherwise with respect to the
Borrower, including without limitation, reasonable fees and expenses of
attorneys', paralegals' and other professional incurred in connection
with any of the foregoing, or in any way connected with, involving or
relating to the preservation, enforcement, protection or defense of, or
realization under this Agreement, the Note, the Continuing Letter of
Credit Agreements, any of the other Financing Agreements, the
Collateral and the rights and remedies hereunder or thereunder,
including without limitation, all costs and expenses in inspecting or
surveying mortgaged real estate, if any, or conducting environmental
studies or tests, and all reasonable costs, expenses and fees incurred
in connection with any "workout" or default resolution negotiations
involving legal counsel or other professionals and further in
connection with any re-negotiation or restructuring of the indebtedness
evidenced by this Agreement, the Note and/or any of the other Financing
Agreements.
(mmm) "Person" shall mean any individual, sole proprietorship,
partnership, limited liability partnership, joint venture, trust,
unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, business,
or other legal entity, or any government (whether national, federal,
provincial, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body, political subdivision or
department thereof, and shall include such Person's successors and
assigns.
(nnn) "Prime Rate" shall mean the rate of interest publicly
announced by HSBC Bank USA from time to time as its prime rate and is a
base rate for calculating interest on certain loans. The rate announced
by HSBC Bank USA as its prime rate may or may not be the most favorable
rate charged by HSBC Bank USA to its customers.
(ooo) "Prime Rate Loan" shall mean any or all Advances from
time to time unpaid and bearing interest at the Prime Rate.
(ppp) "Proceeds" shall mean all proceeds, as that term is
defined in Article 9 of the UCC, and, in any event, shall include (a)
any and all Accounts, chattel paper, instruments, cash and other
proceeds, including proceeds of letters of credit payable to the
Borrower from time-to-time in respect of any of the foregoing
Collateral, (b) any and all proceeds of any insurance (whether or not
the Bank is the loss payee thereof), indemnity, warranty or guaranty
payable to the Borrower from time-to-time with respect to any of the
Collateral, (c) any and all payments (in any form whatsoever) made or
due and payable to the Borrower from time-to-time in connection with
any requisition, confiscation, condemnation, seizure or forfeiture of
all or any part of the Collateral by any governmental body, authority,
bureau or
13
agency (or any person acting under color of governmental authority),
and (d) any and all other amounts from time-to-time paid or payable
under or in connection with any of the Collateral.
(qqq) "Purchase Order" shall mean an accepted offer, or order,
of a buyer to purchase the goods, Inventory or services of the Borrower
in the ordinary course of Borrower's business.
(rrr) "Responsible Party" shall mean an Account Debtor, a
general partner of an Account Debtor, or any party otherwise in any way
directly or indirectly liable for the payment of an Account.
(sss) "SEC" shall mean the Securities and Exchange Commission.
(ttt) "Senior Debt to Tangible Net Worth Ratio" shall mean as
at any date of determination, the ratio of (a) Total Senior
Indebtedness of the Borrower and its Subsidiaries outstanding on such
date to (b) Tangible Net Worth of the Borrower and its Subsidiaries for
the fiscal quarter ended on such date.
(uuu) "Standby Letter of Credit" shall mean each standby
letter of credit subject to Article 5 of the UCC issued by the Bank
pursuant to Section 2.1(b) hereof either (i) for the benefit of a buyer
in order to secure Borrower's performance of its obligations under a
Purchase Order; or (ii) for bid or performance bonds in connection with
a Purchase Order.
(vvv) "Standby Letter of Credit Fee" shall have the meaning
assigned in Section 3.4(c) hereto.
(www) "Subsidiary" shall mean any corporation, association,
trust, or other business entity of which the Borrower shall at any time
own directly or indirectly through a Subsidiary or Subsidiaries at
least a majority (by number of votes) of the outstanding voting stock.
(xxx) "Tangible Net Worth" shall mean the excess of Total
Assets over Total Liabilities, and less the total book value of all
assets of the Borrower properly classified as intangible assets under
GAAP, including such items as goodwill, the purchase price of acquired
assets in excess of the fair market value thereof, trademarks, trade
names, service marks, brand names, copyrights, patents and licenses,
and rights with respect to the foregoing.
(yyy) "Termination Date" shall mean the earlier of (i)
November 30, 2002, or, if such date is not a Business Day, the next
Business Day thereafter, and any subsequent date to which the
Termination Date may be extended pursuant to Section
14
13.1 hereof, or (ii) the date the Bank terminates its commitments
pursuant to Paragraph 9.1 hereof.
(zzz) "Total Assets" shall mean the sum of (i) all assets
("consolidated balance sheet assets") of the Borrower and its
Subsidiaries determined in accordance with GAAP, PLUS (ii) without
duplication, all assets leased by the Borrower as lessee under any
synthetic lease referred to in clause (vi) of the definition of the
term "Indebtedness" to the extent that such assets would have been
consolidated balance sheet assets had the synthetic lease been treated
for accounting purposes as a Capitalized Lease, PLUS (iii) without
duplication, all sold receivables referred to in clause (vii) of the
definition of the term "Indebtedness" to the extent that such
receivables would have been consolidated balance sheet assets had they
not been sold.
(aaaa) "Total Liabilities" shall mean all liabilities of the
Borrower and its Subsidiaries determined on a consolidated basis in
accordance with GAAP and classified as such on the consolidated balance
sheet of the Borrower and its Subsidiaries and all other Indebtedness
of the Borrower and its Subsidiaries, whether or not so classified, but
specifically excluding all contingent obligations of the Borrower in
respect of (i) undrawn amounts under issued letters of credit; and (ii)
indemnity obligations in respect of surety bonds issued to any
governmental agency under the General Agreement of Indemnity executed
on September 21, 1998 between the Borrower and the Chubb Group of
Insurance Companies.
(bbbb) "Total Senior Indebtedness" shall mean as of any date
of determination, an amount equal to the sum of all Indebtedness of the
Borrower and its Subsidiaries (including, without limitation, any
unpaid reimbursement obligations from draws under letters of credit),
but excluding (i) contingent Indebtedness and (ii) any Indebtedness
that is subordinated to the Obligations on terms acceptable to the
Bank.
(cccc) "UCC" shall mean the Uniform Commercial Code as in
effect from time-to-time in the State of New York.
(dddd) "Unused Commitment Amount" on any day shall mean the
Commitment Amount, MINUS (ii) the sum of (A) the aggregate principal
amount of all Advances outstanding at such time, PLUS (B) the aggregate
Available Amount of all Standby Letters of Credit outstanding at such
time, PLUS (C) without duplication, the aggregate amount of all unpaid
reimbursement Obligations of the Borrower pursuant to Section 2.3(b)
outstanding at such time.
(eeee) "U.S." or "United States" shall mean the United States
of America and its territorial possessions.
15
(ffff) "Working Capital Advance" shall have the meaning
assigned in Section 2.1(a) hereof.
SECTION 1.2 COMPUTATION OF TIME PERIODS. In this Agreement in
the computation of periods of time from a specified date to a later specified
date, the word "from" shall mean "from and including" and the words "to" and
"until" each mean "to but excluding".
SECTION 1.3 OTHER TERMS. Unless otherwise defined, all
accounting terms shall be construed, and all computations or classifications of
assets and liabilities and of income and expenses shall be made or determined in
accordance with GAAP. All terms not specifically defined herein or by GAAP,
which terms are defined in the Uniform Commercial Code as in effect from time to
time in the State of New York, have the meanings assigned to them therein, with
the term "instrument" being that defined under Article 9 of the Uniform
Commercial Code as in effect from time to time in the State of New York.
ARTICLE II.
AMOUNTS AND TERMS OF THE ADVANCES
AND THE STANDBY LETTERS OF CREDIT
SECTION 2.1 THE ADVANCES.
(a) WORKING CAPITAL ADVANCES. Subject to the terms and
conditions contained in this Agreement, the Bank, upon the
representations and warranties of the Borrower contained herein, agrees
to make advances (each a "WORKING CAPITAL ADVANCE") to the Borrower
upon request of the Borrower from time to time on any Business Day
during the period from the date hereof until the Termination Date up to
a maximum aggregate amount outstanding (after giving effect to all
Advance amounts requested) at any one time up to the Commitment Amount;
PROVIDED, HOWEVER THAT the amount of such request shall not exceed the
Borrowing Capacity. Within the limits of the Borrowing Capacity, the
Borrower may borrow under this Section 2.1(a), repay pursuant to
Section 2.5 hereof and reborrow under this Section 2.1(a).
(b) LETTERS OF CREDIT.
(i) Subject to the terms and conditions hereof, the
Bank, upon the representations and warranties of the Borrower contained
herein, agrees to issue for the account of the Borrower upon the
Borrower's request one or more Standby Letters of Credit in such form
as may be requested from time to time by the Borrower and agreed to by
the Bank; PROVIDED, HOWEVER, THAT the amount of such request shall not
exceed the Borrowing Capacity. Subject to the limits referred to above,
the Borrower
16
may request the issuance of Letters of Credit under this Section
2.1(b), repay any such Letters of Credit Advances resulting from
drawing thereunder pursuant to Section 2.5 hereof and request the
issuance of additional Letters of Credit under this Section 2.l(b).
(ii) No Letters of Credit shall have an expiration
date (including all rights of the Borrower or the beneficiary to
require renewal) later than the Termination Date, unless approved in
writing by the Bank and Eximbank in their sole discretion.
(c) BORROWING CAPACITY. Any provision of this Agreement or any
other Financing Agreement to the contrary notwithstanding, in the event
that the Borrowing Capacity is less than zero (0) at any time, Borrower
shall upon the request of the Bank immediately pay to the Bank the
amount of the Available Amount of Standby Letters of Credit, all
Advances and any other financial accommodations made by the Bank
hereunder sufficient to cause the Borrowing Capacity to equal zero (0).
SECTION 2.2 PROCEDURE FOR WORKING CAPITAL ADVANCES.
(a) NOTICES OF BORROWING. Requests for Working Capital
Advances may be made only once per Business Day and shall be made on
notice, given not less than one (1) Business Day before the proposed
Drawdown Date for a Prime Rate Loan and three (3) Business Days before
the proposed Drawdown Date for a LIBOR Loan, by the Borrower to the
Bank. Each such notice (which notice shall be irrevocable and binding
on the Borrower) of a proposed borrowing (a "NOTICE OF BORROWING")
shall be by telephone, confirmed immediately in writing, or by telex or
telecopier, specifying the proposed Drawdown Date (which shall be a
Business Day) and the amount to be borrowed. In the event that written
confirmation of a telephonic Notice of Borrowing differs in any respect
from the action taken by the Bank, the records of the Bank shall
control absent manifest error. To be eligible to request a Working
Capital Advance, the Borrower must have submitted to the Bank, together
with its Notice of Borrowing, a Borrowing Base Certificate in the form
of Schedule 7.1 attached hereto (together with the attachments referred
to therein), to the extent required by Section 6.2(iii) hereof.
(b) PAYMENT AND DISBURSEMENT OF WORKING CAPITAL ADVANCES. Upon
receipt of the documents required by this Section 2.2, the Bank will
make available to the Borrower the requested Advance by crediting the
Borrower's Account.
(c) ESTABLISHMENT OF RESERVES. Bank may, at any time and from
time to time, in its reasonable judgment, establish reserves against
the Accounts, Inventory, Equipment or Fixtures of Borrower. Without
limiting the Bank's right to establish reserves against the Accounts,
Inventory, Equipment or Fixtures of Borrower at any
17
time and from time to time, in its reasonable judgment, Bank typically
shall establish such reserves after a collateral audit performed by the
Bank (or Bank's agent), but only if such reserves are established based
upon such collateral audit (or a prior collateral audit). The Bank
shall furnish the Borrower with written notice of the establishment of
such reserves, if practicable at least ten (10) days prior to the
implementation thereof, which notice shall describe the reason
therefor. The amount of such reserves shall be subtracted from the
Accounts Borrowing Base, the Inventory Borrowing Base and the amount of
the Equipment and/or Fixtures included in the calculation of Borrowing
Capacity, as applicable, when calculating the amount of the Borrowing
Capacity.
SECTION 2.3 ISSUANCE OF AND DRAWINGS UNDER LETTERS OF CREDIT;
NO LIABILITY OF THE BANK.
(a) NOTICES OF ISSUANCE. Requests for the issuance of Letters
of Credit may be made only once per Business Day and shall be made on
notice, given not less than five (5) Business Days before the proposed
Issuance Date, by the Borrower to the Bank. Each such notice (which
notice shall be irrevocable and binding on the Borrower) of issuance of
a Letter of Credit (a "NOTICE OF ISSUANCE") shall be by telephone,
confirmed immediately in writing, or by telex or telecopier, specifying
therein the requested (i) proposed Issuance Date (which shall be a
Business Day), (ii) Available Amount of such Letter of Credit in
Dollars, (iii) expiration date of such Letter of Credit, (iv) name and
address of the beneficiary of such Letter of Credit, and (v) form of
such Letter of Credit, and shall be accompanied by such application and
agreement for letter of credit substantially in the form of EXHIBIT B
hereto, if any, as the Bank may specify to the Borrower for use in
connection with such requested Letter of Credit (a "CONTINUING LETTER
OF CREDIT AGREEMENT"). If the requested form of such Letter of Credit
is acceptable to the Bank in its sole discretion, the Bank will, upon
fulfillment of the applicable conditions set forth in Article VI
hereof, make such Letter of Credit available to the Borrower at its
office referred to in the first paragraph of this Agreement or as
otherwise agreed with the Borrower in connection with such issuance. In
the event and to the extent that the provisions of any Continuing
Letter of Credit Agreement shall conflict with this Agreement, the
provisions of this Agreement shall govern.
(b) REIMBURSEMENT OBLIGATIONS OF THE BORROWER. In order to
induce the Bank to issue, extend and renew each Standby Letter of
Credit, the Borrower hereby agrees to reimburse or pay to the Bank with
respect to each Letter of Credit issued, extended or renewed by the
Bank hereunder, on each date that any draft presented under such Letter
of Credit is honored by the Bank, or the Bank otherwise makes a payment
with respect thereto, (i) the amount paid by the Bank under or with
respect to such Letter of Credit, and (ii) the amount of any taxes,
fees, charges or other costs and expenses whatsoever incurred by the
Bank in connection with any payment made
18
by the Bank under, or with respect to, such Letter of Credit. Each such
payment shall be made to the Bank at its address set forth above in
immediately available funds. Interest on any and all amounts remaining
unpaid by the Borrower under this Section 2.3 at any time from the date
such amounts become due and payable (whether as stated in this Section
2.3, by acceleration or otherwise) until payment in full (whether
before or after judgment) shall be payable to the Bank on demand at the
rate specified in Section 3.1(a)(ii) for overdue principal. All
payments and prepayments of principal, interest or fees by the Borrower
hereunder that are received by the Bank after 11:00 a.m. (New York City
time) will be deemed for all purposes to have been received on the next
Business Day.
(c) LETTER OF CREDIT PAYMENTS. If any draft shall be presented
or other demand for payment shall be made under any Letter of Credit,
the Bank shall notify the Borrower of the date and amount of the draft
presented or demand for payment and of the date and time when it
expects to pay such draft or honor such demand for payment. If the
Borrower fails to reimburse the Bank as provided in this Section 2.3 on
or before the date that such draft is paid or other payment is made by
the Bank, the Bank may at any time thereafter, but shall not be
obligated to, make an advance (a "LETTER OF CREDIT ADVANCE") to
Borrower in the amount of any such unreimbursed amount thereof (the
"L/C ADVANCE AMOUNT"). Subject to the limitations on liability
contained in the following paragraph (e), the Bank will endeavor in
good faith to determine that the documents (including each draft)
delivered under each Letter of Credit in connection with such
presentment shall be in strict conformity in all material respects with
such Letter of Credit.
(d) NO LIABILITY OF THE BANK. The Borrower assumes all risks
of the acts or omissions of any beneficiary or transferee of any Letter
of Credit with respect to its use of such Letter of Credit. Neither the
Bank nor any of its officers or directors shall be liable or
responsible for: (i) the use that may be made of any Letter of Credit
or any acts or omissions of any beneficiary or transferee in connection
therewith; (ii) the validity, sufficiency or genuineness of Documents,
or of any endorsement thereon, even if such Documents should prove to
be in any or all respects invalid, fraudulent or forged; (iii) payment
by the Bank against presentment of documents that do not comply with
the terms of a Letter of Credit, including failure of any documents to
bear any reference or adequate reference to the Letter of Credit; or
(iv) any other circumstances whatsoever in making or failing to make
payment under any Letter of Credit, except that the Borrower shall have
a claim against the Bank, and the Bank shall be liable to the Borrower,
to the extent of any direct, but not consequential, damages suffered by
the Borrower that the Borrower proves were caused by (A) the Bank's
willful misconduct or gross negligence in determining whether documents
presented under any Standby Letter of Credit comply with the terms of
the Letter of Credit, or (B) the Bank's willful failure to make lawful
payment under a Letter of Credit after presentation to it of a draft
and certificates strictly complying with the
19
terms and conditions of the Letter of Credit. In furtherance and not in
limitation of the foregoing, the Bank may accept documents that appear
on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary.
SECTION 2.4 THE NOTE. The Working Capital Advances and Letter
of Credit Advances shall be evidenced by a Note of the Borrower in substantially
the form of EXHIBIT A hereto, dated as of the Closing Date. The Note shall be
payable to the order of the Bank in a principal amount of up to the Commitment
Amount, plus interest accrued thereon, as set forth below. The Borrower
irrevocably authorizes the Bank to make or cause to be made, at or about the
time of the Drawdown Date of any Working Capital Advance or the Issuance Date of
any Standby Letter of Credit or at the time of receipt of any payment of
principal on the Note, an appropriate notation on the Bank's Note Record
reflecting the making of such Advance or (as the case may be) the receipt of
such payment. The outstanding amount of the Working Capital Advances and Standby
Letters of Credit set forth on the Bank's Note Record shall be PRIMA FACIE
evidence of the principal amount thereof owing and unpaid to the Bank, but the
failure to record, or any error in so recording, any such amount on the Bank's
Note Record shall not limit or otherwise affect the obligations of the Borrower
hereunder or under any Note to make payments of principal of or interest on any
Note when due.
SECTION 2.5 REPAYMENT OF ADVANCES.
(a) WORKING CAPITAL ADVANCES. ALL WORKING CAPITAL ADVANCES
HEREUNDER, TOGETHER WITH ACCRUED AND UNPAID INTEREST AND ANY OTHER
AMOUNTS DUE HEREUNDER, SHALL BE DUE AND PAYABLE TO THE BANK ON THE
MATURITY DATE OR EARLIER ACCELERATION OF THE OBLIGATIONS, at which time
the Borrower shall have no ability to request, and the Bank shall have
no obligation to make, any further advances hereunder. The Bank may, at
its option, debit principal, interest, fees, costs and expenses due and
payable hereunder, under any of the other Financing Agreements or under
any other agreements between the Bank and the Borrower to any of the
Borrower's accounts maintained with the Bank on each date any such
amount is due and payable.
(b) LETTER OF CREDIT ADVANCES.
(i) The Borrower shall repay to the Bank the
outstanding principal amount of each Letter of Credit Advance
on the Maturity Date.
(ii) Without limiting the generality of Section
2.3(d) hereof, the Obligations of the Borrower under this
Agreement, any Continuing Letter of Credit Agreement or any
other agreement or instrument relating to any Letter of Credit
shall be unconditional and irrevocable, and shall be paid
strictly in
20
accordance with the terms of this Agreement, such Continuing
Letter of Credit Agreement and such other agreement or
instrument under all circumstances, including without
limitation, the following circumstances:
(A) any lack of validity or enforcement of
any Financing Agreement, any Continuing Letter of
Credit Agreement, any Letter of Credit or any other
agreement or instrument relating thereto (all of the
foregoing being, collectively, the "L/C RELATED
DOCUMENTS");
(B) any change in the time, manner or place
of payment of, or in any other term of, all or any of
the Obligations in respect of any L/C Related
Document or any other amendment or waiver of or any
consent to departure from all or any of the L/C
Related Documents;
(C) the existence of any claim, set-off,
defense or other right that the Borrower may have at
any time against any beneficiary or any transferee of
a Letter of Credit (or any person or entity for whom
any such beneficiary or any such transferee may be
acting), the Bank or any other person or entity,
whether in connection with the transactions
contemplated by the L/C Related Documents or any
unrelated transaction;
(D) any statement or any other document
presented under a letter of credit proving to be
forged, fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate in any
respect;
(E) payment by the Bank under a Letter of
Credit against presentation of a draft or certificate
that does not strictly comply with the terms of such
letter of credit;
(F) any exchange, release or non-perfection
of any Collateral or other collateral, or any release
or amendment or waiver of or consent to departure
from any guarantee, for all or any of the Obligations
in respect of the L/C Related Documents; or
(G) any other circumstance or happening
whatsoever, whether or not similar to any of the
foregoing, including without limitation, any other
circumstance that might otherwise constitute a
defense available to, or a discharge of, the Borrower
or a guarantor.
SECTION 2.6 LOAN ACCOUNT, MONTHLY STATEMENTS. Insofar as the
Bank shall make Advances hereunder, the Bank shall enter the amounts of such
Advances as debits on an internal ledger account (the "LOAN ACCOUNT"). The Bank
may also record to the Loan
21
Account, in accordance with customary banking procedures, all fees, accrued and
unpaid interest, late fees, usual and customary bank charges for the maintenance
and administration of checking and other bank accounts maintained by the
Borrower and other fees and charges which are properly chargeable to the
Borrower under this Agreement; all payments, subject to collection, made by the
Borrower on account of indebtedness evidenced by the Loan Account; and all
proceeds of Collateral which are finally paid to the Bank in its own office in
cash or collected items. The aggregate amount of all such Obligations set forth
in the Loan Account shall be presumptive evidence of the principal amount owing
hereunder; PROVIDED, HOWEVER, that the failure to make any such entry with
respect to any Obligations shall not limit or otherwise affect the obligation of
the Borrower hereunder. On a monthly basis, the Bank may render a statement for
the Loan Account, which statement, if rendered, shall be considered correct and
accepted by the Borrower and conclusively binding upon the Borrower unless the
Borrower notifies the Bank to the contrary within thirty (30) days of the
receipt of said statement by the Borrower.
SECTION 2.7 USE OF FACILITY. The Borrower represents that the
proceeds of the Working Capital Advances shall be used solely for general
working capital purposes and that the Letters of Credit shall be used solely in
connection with the Borrower's ordinary course of business activities; PROVIDED,
HOWEVER, that in no event shall the proceeds of the Working Capital Advances or
the issuance of the Letters of Credit be used for Capital Expenditures or
acquisitions.
ARTICLE III.
INTEREST, LATE PAYMENT AND FEES
SECTION 3.1 INTEREST AND LATE PAYMENTS.
(a) INTEREST RATES.
(i) PRE-EVENT OF DEFAULT INTEREST. So long as no
Event of Default has occurred, each Advance shall bear
interest (from the date made through and including the date of
payment in full) on the outstanding principal amount thereof
at a floating rate per annum equal to the Prime Rate or the
LIBOR Rate, as elected by the Borrower pursuant to the terms
hereof.
The Borrower may elect that any Advance to be made
shall be a LIBOR Loan, to continue any existing LIBOR Loan as
a new LIBOR Loan or to convert any Advances bearing interest
at the Prime Rate to a LIBOR Loan, by giving irrevocable
notice of such election to the Bank by 10:00 a.m. (New York
City time) at least three (3) Business Days prior to the
requested Commencement Date and, in the case of the
continuation of any LIBOR Loan, such continuation shall take
place on the last day of the applicable LIBOR
22
Period with respect to the LIBOR Loan being so continued. Each
such request for a LIBOR Loan, or to continue or convert shall
include the requested Commencement Date (which shall be a
Business Day), the LIBOR Period selected and the amount of the
LIBOR Loan to be made or continued, or into which a Prime Rate
Loan is to be converted (which shall be in a principal amount
of not less than $1,000,000 and an integral multiple of
$500,000.00). If no Default nor Event of Default has occurred
and is continuing at such time, such LIBOR Loan shall be made
or continued, or such Prime Rate Loan shall be converted, on
the requested Commencement Date.
Any Advance as to which the Borrower does not
exercise the foregoing election in accordance with the
provisions thereof shall be a Prime Rate Loan or shall remain
a Prime Rate Loan if it is already a Prime Rate Loan or shall
become a Prime Rate Loan at the end of the applicable LIBOR
Period if it is a LIBOR Loan.
The Bank shall not incur any liability to the
Borrower in acting upon telephonic or facsimile notice
referred to above which the Bank believes to have been given
by a duly authorized officer or other person authorized to and
on behalf of the Bank or for otherwise acting under this
Section.
(ii) DEFAULT INTEREST. Notwithstanding the foregoing,
interest on all Advances at all times after the occurrence of
an Event of Default, and interest on all payments of interest
that are not paid when due, shall accrue at a floating rate
per annum equal to three percent (3.0%) in excess of the rate
otherwise applicable to the Advance.
(b) PAYMENT OF INTEREST. So long as any of the Obligations
remain outstanding, interest on the Advances shall be due and payable,
without notice or demand, monthly in arrears beginning on January 1,
2001 and continuing on the first day of each and every month
thereafter.
(c) CALCULATION OF INTEREST. Interest on the Advances shall be
calculated on the basis of a 360 day year and the actual number of days
elapsed. Any change in the interest rate applicable to Prime Rate Loans
because of a change in the Prime Rate shall become effective
immediately, without notice or demand, on the date any change in the
Prime Rate occurs.
(d) LAWFUL INTEREST. It being the intent of the parties that
the rate of interest and all other charges to the Borrower be lawful,
if for any reason the payment of a portion of interest, fees or charges
as required by this Agreement would exceed the limit established by
applicable law which a commercial lender such as the Bank may charge to
a commercial borrower such as the Borrower, then the obligation to
23
pay interest or charges shall automatically be reduced to such limit
and, if any amounts in excess of such limits shall have been paid, then
such amounts shall be applied to the unpaid principal amount of the
Obligations or refunded so that under no circumstances shall interest
or charges required hereunder exceed the maximum rate allowed by law,
as aforesaid.
(e) LATE PAYMENT. In the event of Borrower's failure to pay
any installment of interest and/or any other sums due hereunder or
under the Note are not paid within five (5) days after the date it is
due and payable, without in any way affecting the Bank's right to
declare an Event of Default to have occurred, a late charge equal to
five (5%) percent of such late payment shall be assessed against the
Borrower for each month that said amount is late and shall be
immediately due and payable without demand or notice of any kind.
SECTION 3.2 SPECIAL PROVISIONS GOVERNING LIBOR LOANS -
INCREASED COSTS.
(a) In the event that on any LIBOR Interest Determination
Date, the Bank shall have determined (which determination shall be
final, conclusive and binding) that:
(1) by reason of conditions in the London interbank
market or of conditions affecting the position of the Bank in such
market occurring after the date hereof, adequate fair means do not
exist for establishing LIBOR, or
(2) by reason of (i) any applicable law or
governmental rule, regulation, guideline or order (or any written
interpretation thereof and including any new law or governmental rule,
regulation, guideline or order or (ii) other circumstances affecting
the Bank or the London interbank market or the position of the Bank in
such market (such as, but not limited to, official reserve
requirements), LIBOR does not represent the effective pricing to the
Bank for U.S. dollar deposits of comparable amounts for the relevant
period due to such increased costs then, the Bank shall give a notice
by telephone, confirmed in writing, to the Borrower of such
determination.
(b) Thereafter, the Borrower shall pay to the Bank upon
written request therefor, such additional amounts as the Bank shall
reasonably determine are required to compensate the Bank for such
increased costs. A certificate as to such additional amounts submitted
to the Borrower by the Bank shall, absent manifest error, be final,
conclusive and binding upon all parties hereto.
(c) In lieu of paying such additional amounts as required by
this Section 3.2, the Borrower may withdraw any request made pursuant
to Section 3.1 hereof.
24
SECTION 3.3 REQUIRED TERMINATION AND REPAYMENT OF LIBOR LOANS.
(a) In the event the Bank shall have determined, at any time
(which determination shall be final, conclusive and binding), that the
making or continuation of any or all of LIBOR Loans by the Bank:
(1) has become unlawful by compliance by the Bank in
good faith with any applicable law, governmental rule,
regulation, guideline or order, or
(2) would cause the Bank severe hardship as a result
of a contingency occurring after the date of this Agreement
which materially and adversely affects the London interbank
market (such as, but not limited to disruptions resulting from
political or economic events);
then, and in either such event, the Bank shall on such date
(and in any event as soon as possible after making such determination) give
telephonic notice to the Borrower, confirmed in writing, of such determination,
identifying which of the LIBOR Loans are so affected.
(b) the Borrower shall, upon the termination of the then
current LIBOR Period applicable to each LIBOR Loan so affected or, if earlier,
when required by law, either (1) repay each such affected LIBOR Loan, together
with all interest accrued thereon, or (2) convert each such affected LIBOR Loan
to a Prime Rate Loan at the end of the current LIBOR Period and pay all interest
accrued thereon.
(c) Upon notice of such determination being given to the
Borrower as provided in (a) above, each pending request made pursuant to Section
3.1 shall be deemed withdrawn.
SECTION 3.4 OTHER FEES.
(a) UNUSED COMMITMENT FEE. Borrower shall pay to the Bank a
fee in arrears on the first day of each fiscal quarter of the Borrower,
which fee shall be equal to one-fourth of one percent (.25%) per annum
of the average daily Unused Commitment Amount during the preceding
fiscal quarter (the "UNUSED COMMITMENT FEE").
(b) STANDBY LETTER OF CREDIT FEE. In connection with the
Bank's issuance of each Standby Letter of Credit, the Borrower shall
pay to the Bank: (i) a nonrefundable fee at the per annum rate not to
exceed one hundred fifty (150) basis points of the Available Amount of
each Standby Letter of Credit (the "STANDBY LETTER OF CREDIT FEE")
payable quarterly commencing simultaneously with the issuance of such
Standby Letter of Credit and each quarter thereafter, based upon the
Available
25
Amount of each outstanding Standby Letter of Credit at the beginning of
such quarter, and on each renewal date thereof in the event that any
such Standby Letter of Credit is renewed, and (ii) an additional
$250.00 at issuance. In addition, the Borrower agrees to pay the Bank
for its own account, upon the application therefor, the Bank's
customary processing fee for the issuance of any Standby Letter of
Credit, and any amendment to a Standby Letter of Credit in accordance
with the Bank's standard fee schedule, as the same may be updated from
time to time by the Bank and provided to the Borrower. Such fees shall
be payable in advance of the issuance of such Letter of Credit or any
amendment thereto or as they become due with respect to administrative
matters other than issuance or amendments of Letters of Credit.
ARTICLE IV.
FUNDING AND YIELD PROTECTION
SECTION 4.1 INCREASED COSTS. In the event that any applicable
law, treaty or regulation or directive from any government, governmental agency
or regulatory authority, or any change therein or in the interpretation or
application thereof, or compliance by the Bank with any request or directive
(whether or not having the force of law) from any central bank or government,
governmental agency or regulatory authority, shall:
(a) subject the Bank to any tax of any kind whatsoever (except
taxes on the overall net income of the Bank) with respect to this
Agreement, the Note or any of the Advances made by it, or change the
basis of taxation of payments to the Bank of principal, interest or any
other amount payable hereunder or thereunder (except for changes in the
rate of tax on the overall net income of the Bank);
(b) impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirements against assets held
by, or deposits or other liabilities in or for the account of, advances
or loans or other extensions of credit by, or any other acquisition of
funds by, any office of the Bank, including (without limitation)
pursuant to Regulations of the Board of Governors of the Federal
Reserve System; or
(c) in the opinion of the Bank, cause the Note, any Advance or
this Agreement to be included in any calculations used in the
computation of regulatory capital standards; or
(d) impose on the Bank any other condition;
and the result of any of the foregoing is to increase the cost
to the Bank of making, continuing and/or maintaining the Advances (or
any part thereof) by an
26
amount that the Bank deems to be material, or to reduce the amount of
any payment (whether of principal, interest or otherwise) in respect of
any of the Advances by an amount that the Bank deems to be material,
then, in any case, the Borrower shall promptly pay the Bank, upon its
demand, such additional amounts necessary to compensate the Bank for
such additional costs or such reduction in payment. The Bank shall
certify the amount of such additional costs to the Borrower, and such
certification, absent manifest error, shall be deemed conclusive.
SECTION 4.2 CAPITAL ADEQUACY PROTECTION. If, after the date
hereof, the Bank shall have determined that the adoption of any applicable law,
governmental rule, regulation or order regarding capital adequacy of banks or
bank holding companies, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Bank with any request or directive regarding
capital adequacy (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful, so long as the Bank believes in
good faith that such has the force of law or that the failure to so comply would
be unlawful) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on any of the Bank's
capital as a consequence of the Bank's obligations hereunder to a level below
that which the Bank could have achieved but for such adoption, change or
compliance (taking into consideration the Bank's policies with respect to
capital adequacy immediately before such adoption, change or compliance and
assuming that the Bank's capital was fully utilized prior to such adoption,
change or compliance) by an amount deemed by the Bank in its judgment to be
material, then, promptly upon demand, the Borrower shall immediately pay to the
Bank, from time to time as specified by the Bank, such additional amounts as
shall be sufficient to compensate the Bank for such reduced return, together
with interest on each such amount from the date of such specification by the
Bank until payment in full thereof at the highest rate of interest (other than
the default rate of interest) due on the Advances. A certificate of the Bank
setting forth the amount to be paid to the Bank shall, in the absence of
manifest error, be deemed conclusive. In determining such amount, the Bank shall
use any reasonable averaging and attribution methods.
SECTION 4.3 SECTION PAYMENTS - NO OFFSET, ETC. All payments by
the Borrower hereunder and under any of the other Financing Agreements shall be
made without recoupment, setoff or counterclaim and free and clear of and
without deduction for any taxes, levies, imposts, duties, charges, fees,
deductions, withholdings, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any political
subdivision thereof or taxing or other authority therein unless the Borrower is
compelled by law to make such deduction or withholding. If any such obligation
is imposed upon the Borrower with respect to any amount payable by it hereunder
or under any of the other Financing Agreements, the Borrower will pay to the
Bank, on the date on which such amount is due and payable hereunder or under
such other Financing Agreement, such additional amount in Dollars as shall be
necessary to enable the Bank to
27
receive the same net amount which the Bank would have received on such due date
had no such obligation been imposed upon the Borrower. The Borrower will deliver
promptly to the Bank certificates or other valid vouchers for all taxes or other
charges deducted from or paid with respect to payments made by the Borrower
hereunder or under such other Financing Agreement.
SECTION 4.4 SURVIVAL. The obligations and covenants of the
Borrower under this Article IV shall survive the termination of this Agreement
and payment of the Advances and the Obligations in full.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 REPRESENTATIONS AND WARRANTIES. In order to induce
the Bank to enter into this Agreement and to make Advances and issue Standby
Letters of Credit, the Borrower makes the following representations and
warranties to the Bank, which shall be deemed made as of the date hereof and of
each Advance and/or issuance of each Standby Letter of Credit and shall survive
the execution and delivery hereof and each performance hereunder. Any knowledge
acquired by the Bank shall not diminish its rights to rely upon such
representations and warranties.
(a) GOOD STANDING AND QUALIFICATION. Borrower is a duly
organized corporation, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts and has all requisite
corporate power and authority to own and operate its property and to
carry on its business as presently conducted and is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction wherein the character of the properties owned or leased by
it therein or in which the transaction of its business therein makes
such qualification necessary.
(b) AUTHORITY. The Borrower has full power and authority to
enter into this Agreement and the other Financing Agreements, to make
the borrowings contemplated herein, to execute and deliver the Note and
the other Financing Agreements, and to incur the obligations provided
for herein and therein, all of which have been duly authorized by all
necessary and proper action. No other consent or approval or the taking
of any other action in respect of shareholders, members or partners or
of any public authority is required as a condition to the validity or
enforceability of this Agreement, the Note, the other Financing
Agreements or any other instrument, document or agreement delivered in
connection herewith or therewith.
28
(c) BINDING AGREEMENTS. This Agreement constitutes, and the
Note and the other Financing Agreements executed and/or delivered in
connection herewith or therewith, when issued and delivered pursuant
hereto for value received shall constitute, the valid and legally
binding obligations of the Borrower, enforceable in accordance with
their respective terms, except as enforcement may be limited by
principles of equity, bankruptcy, insolvency, or other laws affecting
the enforcement of creditors' rights generally.
(d) VALIDITY OF ACCOUNTS. (a) Each Account is genuine and in
all material respects enforceable in accordance with its terms and
represents an undisputed and bona fide indebtedness owing to Borrower
by the Account Debtor obligated thereon; (b) there are no defenses,
setoffs, or counterclaims against any Account, except as otherwise
disclosed in writing to the Bank, and excluded from the Borrowing
Capacity; (c) no payment has been received on any Account, and no
Account is subject to any credit or extension or agreements therefor
unless written notice specifying such payment, credit, extension, or
agreement has been delivered to Bank; (d) each copy of each invoice is
a true and genuine copy of the original invoice sent to the Account
Debtor named therein and accurately evidences the transaction from
which the underlying Account arose, and the date payment is due as
stated on each such invoice or computed based on the information set
forth on each such invoice is correct; (e) all Chattel Paper, and all
promissory notes, drafts, trade acceptances, and other instruments for
the payment of money relating to or evidencing each Account, and each
endorsement thereon, are true and genuine and in all respects what they
purport to be, and are the valid and binding obligation of all parties
thereto, and the date or dates stated on all such items as the date on
which payment in whole or in part is due is correct; (f) all Inventory
described in each Invoice has been delivered to the Account Debtor
named in such Invoice or placed for such delivery in the possession of
a carrier not owned or controlled directly or indirectly by Borrower;
(g) all evidence of the delivery or shipment of Inventory is true and
genuine; (h) all services to be performed by Borrower in connection
with each Account have been performed by Borrower; and (i) all evidence
of the performance of such services by Borrower is true and genuine.
(e) INVENTORY. (a) All representations made by Borrower to the
Bank, and all documents and schedules given by Borrower to the Bank,
relating to the description, quantity, quality, condition, and
valuation of the Inventory are true and correct; (b) Borrower has not
received any Inventory on consignment or approval unless Borrower (i)
has delivered written notice to the Bank describing any Inventory which
Borrower has received on consignment or approval, (ii) has marked such
Inventory on consignment or approval or has segregated it from all
other Inventory, and (iii) has appropriately marked its records to
reflect the existence of such Inventory on consignment or approval; (c)
(i) Inventory is located only at the address or addresses of Borrower
set forth at the beginning of this Agreement, the locations
29
specified on Schedule 5.1(e) attached hereto and made a part hereof, or
such other place or places as approved by the Bank in writing or in
transit between such locations; (d) all Inventory is insured as
required by Section 7.2 hereof, pursuant to policies in full compliance
with the requirements of such Section; and (e) to Borrower's knowledge,
all Inventory that is of U.S. origin has been produced by Borrower
substantially in accordance with the Federal Fair Labor Standards Act
of 1938, as amended, and all rules, regulations, and orders promulgated
thereunder.
(f) NOTES RECEIVABLE. No Account is an Instrument, Document,
or Chattel Paper or is evidenced by any note, draft, trade acceptance,
or other instrument for the payment of money, any Instrument, Document,
Chattel Paper, note, draft, trade acceptance, or other instrument
unless it has been pledged to the Bank hereunder and endorsed and
delivered by Borrower to the Bank and has not been presented for
payment and returned uncollected for any reason.
(g) EQUIPMENT. Equipment is located, and Equipment which is a
Fixture is affixed to real property, only at the address or addresses
of Borrower set forth at the beginning of this Agreement, the locations
specified on Schedule 5.1(e), or such other place or places as approved
by the Bank in writing. Such real property is leased by Borrower as
specified on Schedule 5.1(e) and such leasehold interests of Borrower
are unencumbered.
(h) LITIGATION. Except as set forth in SCHEDULE 5.1(h), there
are no actions, suits or proceedings pending against the Borrower
before any court or administrative agency, nor are any actions, suits
or proceedings threatened, which, either in any case or in the
aggregate, would materially and adversely affect the financial
condition, assets or operations of the Borrower, nor are there any such
actions, suits or proceedings which question the validity of this
Agreement, the Note, any of the other Financing Agreements, or any
action to be taken in connection with the transactions contemplated
hereby or thereby.
(i) NO CONFLICTING LAW OR AGREEMENTS. The execution, delivery
and performance by the Borrower of this Agreement, the Note and the
other Financing Agreements: (i) do not violate any provision of the
Certificate of Incorporation and By-laws, of the Borrower, (ii) do not
violate any order, decree or judgment, or any provision of any statute,
rule or regulation, (iii) do not violate or conflict with, result in a
breach of or constitute (with notice or lapse of time, or both) a
default under any shareholder agreement, stock preference agreement,
mortgage, indenture or other contract or undertaking to which the
Borrower is a party, or by which any of its properties is bound, and
(iv) do not result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any property or assets of the
Borrower, except for the liens granted hereunder to the Bank.
30
(j) TAXES. With respect to all taxable periods of the
Borrower, the Borrower has filed all tax returns which are required to
be filed and all federal, state, municipal, franchise and other taxes
shown on such filed returns have been paid.
(k) FINANCIAL INFORMATION. All written data, reports and
information which the Borrower has heretofore delivered or caused to be
so delivered to the Bank in connection with this Agreement are complete
and correct in all material respects, contain no material omission or
misstatement and fairly present the financial condition of the Borrower
as of the dates and for the periods referred to and have been prepared
in accordance with GAAP consistently applied by the Borrower throughout
the periods involved. All financial and other information including,
but not limited to, information relating to the Accounts and Inventory,
submitted by the Borrower to the Bank, whether previously or in the
future, is and will be true and correct in all material respects, and
is and will be complete insofar as may be necessary to give the Bank a
true and accurate knowledge of the subject matter.
(l) ADVERSE DEVELOPMENTS. Since the date of the most recent
financial statements of the Borrower delivered to the Bank, there have
not occurred any events that, singularly or in the aggregate, have had
a Material Adverse Effect.
(m) EXISTENCE OF INDEBTEDNESS. Set forth on SCHEDULE 5.1(m) is
a complete and accurate list of all existing material indebtedness of
the Borrower (not including debt incurred in the ordinary course of
business as accounts payable) to any person or entity, including
without limitation, all indebtedness owing to any officer, director,
shareholder and/or employee of the Borrower, showing as of the date
hereof the principal amount outstanding thereunder.
(n) COMPLIANCE. The Borrower is not in default with respect to
any order, writ, injunction or decree of any court or of any federal,
state, municipal or other governmental department, commission, board,
bureau, agency, authority or official; is not in violation of any law,
statute, rule or regulation to which it or its properties is or are
subject and has not received notice of any such default from any party;
and is not in default in the payment or performance of any of its
obligations to any third parties or in the performance of any mortgage,
indenture, lease, contract or other agreement to which it is a party or
by which any of its assets or properties are bound.
(o) NO DEFAULTING EVENT. No Defaulting Event has occurred
and/or is continuing.
(p) OFFICE. The chief executive office and principal place of
business of the Borrower, and the office where its books and records
concerning Collateral are kept, is as set forth in the first paragraph
of this Agreement.
31
(q) PLACES OF BUSINESS. The Borrower has no other places of
business and locates no Collateral, specifically including books and
records, at any location other than as set forth in the first paragraph
of this Agreement or as set forth in SCHEDULE 5.1(e).
(r) LICENSES. The Borrower has all licenses, permits and other
permissions required by any government, agency or subdivision thereof,
or from any licensing entity necessary for the conduct of its business,
all of which the Borrower represents to be in good standing and in full
force and effect.
(s) COLLATERAL. The Borrower is and shall continue to be the
legal and beneficial owner of the Collateral free and clear of all
liens, encumbrances, security interests and claims, except for the
liens granted to the Bank and those set forth on SCHEDULE 5.1(s); the
Borrower is fully authorized to sell, transfer, pledge and/or grant a
security interest in each and every item of the Collateral to the Bank;
all Documents and agreements related to the Collateral shall be true
and correct and in all respects what they purport to be; all signatures
and endorsements that appear thereon shall be genuine and all
signatories and endorser shall have full capacity to contract; none of
the transactions underlying or giving rise to the Collateral shall
violate any applicable state or federal laws or regulations; all
Documents relating to the Collateral shall be legally sufficient under
such laws or regulations and shall be legally enforceable in accordance
with their terms; this Agreement creates a valid and perfected first
priority security interest in the Collateral, subject only to the prior
liens set forth on SCHEDULE 5.1(s), securing the payment of the
Obligations, and all filings and other actions necessary or desirable
to perfect and protect such security interests have been or will be
duly taken; and the Borrower agrees to defend the Collateral against
the claims of all persons other than the Bank and those persons whose
security interests are prior to the Bank as set forth on SCHEDULE
5.1(s).
(t) PARENT, AFFILIATE OR SUBSIDIARY CORPORATIONS. The Borrower
has no parent corporation and no subsidiaries, except as set forth on
SCHEDULE 5.1(t).
(u) TRADENAMES. The Borrower does not use any tradenames,
except as set forth on SCHEDULE 5.1(u).
(v) ENVIRONMENTAL MATTERS.
(i) The Borrower has obtained all permits, licenses
and other authorizations which are required under all
Environmental Laws with regard to the operation of Borrower's
business and property. The Borrower is in compliance with the
terms and conditions of all such permits, licenses and
authorizations, and is also in compliance with all other
limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations,
32
schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder.
(ii) No notice, notification, demand, request for
information, citation, summons or order has been issued, no
complaint has been filed, no penalty has been assessed and no
investigation or review is pending or threatened by any
governmental or other entity with respect to any alleged
failure by the Borrower to have any permit, license or
authorization required in connection with the conduct of its
business or with respect to any Environmental Laws, including
without limitation, Environmental Laws relating to the
generation, treatment, storage, recycling, transportation,
disposal or release of any Hazardous Materials.
(iii) No oral or written notification of a release of
a Hazardous Material has been filed by or against the Borrower
and no property now or previously owned, leased or used by the
Borrower is listed or proposed for listing on the
Comprehensive Environmental Response, Compensation and
Liability Inventory of Sites or National Priorities List under
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or on any similar state or
federal list of sites requiring investigation or clean-up.
(iv) There are no liens or encumbrances arising under
or pursuant to any Environmental Laws on any of the property
or properties owned, leased or used by the Borrower and no
governmental actions have been taken or are in process which
could subject any of such properties to such liens or
encumbrances or, as a result of which the Borrower would be
required to place any notice or restriction relating to the
presence of Hazardous Materials at any property owned by it in
any deed to such property.
(v) Neither the Borrower nor, to the best knowledge
and belief of the Borrower, any previous owner, tenant,
occupant or user of any property owned, leased or used by the
Borrower has (A) engaged in or permitted any operations or
activities upon or any use or occupancy of such property, or
any portion thereof, for the purpose of or in any way
involving the release, discharge, refining, dumping or
disposal (whether legal or illegal, accidental or intentional)
of any Hazardous Materials on, under, or in or about such
property, (B) transported or had transported any Hazardous
Materials to such property except to the extent such Hazardous
Materials are raw products commonly used in day-to-day
manufacturing operations of such property and, in such case,
in compliance with, all Environmental Laws; (C) engaged in or
permitted any operations or activities which would allow the
facility to be
33
considered a treatment, storage or disposal facility as that
term is defined in 40 CFR 264 and 265, or (D) constructed,
stored or otherwise located Hazardous Materials on, under, in
or about any such property except to the extent commonly used
in day-to-day operations of such Property and, in such case,
in compliance with all Environmental Laws. Further, to the
best knowledge and belief of the Borrower, no Hazardous
Materials have migrated from other properties upon, about or
beneath any property owned, leased or used by the Borrower.
(w) JUDGMENTS. The Borrower has no unsatisfied judgments.
(x) ERISA COMPLIANCE. The Borrower and each Affiliate of
Borrower is in compliance in all material respects with all applicable
provisions of the Employee Retirement Income Security Act of 1974
("ERISA"), as it may be amended from time to time. Neither a Reportable
Event nor a Prohibited Transaction has occurred and is continuing with
respect to any Plan; no notice of intent to terminate a Plan has been
filed, nor has any Plan been terminated; no circumstances exist which
constitute grounds entitling the Pension Benefit Guaranty Corporation
("PBGC") to institute proceedings to terminate, or appoint a trustee to
administer, a Plan, nor has the PBGC instituted any such proceedings;
neither the Borrower nor any Commonly Controlled Entity has completely
or partially withdrawn from a Multiemployer Plan; the Borrower and each
Commonly Controlled Entity has met its minimum funding requirements
under ERISA with respect to all of its Plans and the present value of
all vested benefits under each Plan exceeds the fair market value of
all Plan assets allocable to such benefits, as determined on the most
recent valuation date of the Plan and in accordance with the provisions
of ERISA; and neither the Borrower nor any Commonly Controlled Entity
has incurred any liability to the PBGC under ERISA. Capitalized terms
used in this subsection shall have the meanings ascribed thereto under
ERISA.
(y) GOVERNMENT CONTRACTS. As of the date hereof, the Borrower
does not have any contracts with any agency of the United States
government regarding the sale of Inventory by the Borrower except for
the contracts listed on Schedule 5.1(y) (The "Government Contracts").
ARTICLE VI.
CONDITIONS OF LENDING
SECTION 6.1 CLOSING CONDITIONS. Subject to the terms of
Section 6.2 hereof, the obligation of the Bank to make the initial Advance or
issue the initial Standby Letter of Credit under this Agreement and the
effectiveness of this Credit Agreement shall be subject to the fulfillment of
the following conditions precedent on or prior to November 30, 2000:
34
(a) NOTE; CONTINUING LETTER OF CREDIT AGREEMENT. The Bank
shall have received a duly executed Note drawn to its order in the form
of EXHIBIT A attached hereto and, if applicable, a Continuing Letter of
Credit Agreement in form and content satisfactory to the Bank in its
sole discretion.
(b) EVIDENCE OF AUTHORITY. The Bank shall have received
certified copies of all corporate, membership or partnership action (in
form and substance satisfactory to the Bank) taken by the Borrower to
authorize the execution, delivery and performance of this Agreement,
the Note and the other Financing Agreements, and the borrowings to be
made hereunder and thereunder, together with such other papers as the
Bank may require.
(c) LIEN SEARCHES. The Bank shall be in receipt of searches of
the appropriate filing records, as the Bank reasonably may require in
order to confirm the priority of the security interest.
(d) MATERIAL ADVERSE CHANGE. The Bank shall: (a) have
determined to its reasonable satisfaction that there has not occurred
any Material Adverse Effect on the financial condition, business,
operations or properties of Borrower set forth in the financial
statements of the Borrower as of March 31, 2000; and (b) shall not have
become aware of any facts or conditions not previously known which the
Bank, in its reasonable discretion, shall determine could have a
Material Adverse Effect.
(e) WAIVERS, WAREHOUSEMEN AND PROCESSOR'S NOTIFICATIONS AND
ACKNOWLEDGMENTS AND FREIGHT FORWARDER'S AGREEMENTS. The Borrower shall
have caused to be executed and delivered to the Bank such landlord
waivers, warehousemen and processor's notifications and
acknowledgments, and freight forwarder's agreements in form and content
reasonably satisfactory to the Bank and executed by such landlords,
warehouseman, processors and freight forwarders as the Bank reasonably
shall request.
(f) COLLATERAL AUDIT. The Bank shall have performed an audit
of the Collateral, the results of which reasonably shall be
satisfactory to the Bank. Borrower shall, at Borrower's sole cost and
expense, cooperate with and assist the Bank in connection with the
Collateral audit, including, without limitation, giving the Bank access
to Borrower's books and records and furnishing other information and
material reasonably requested by the Bank.
(g) INSURANCE. Borrower shall have caused to be delivered to
the Bank evidence of insurance coverage indicating compliance with
Section 7.2.
35
(h) OPINION OF COUNSEL. The Bank shall have received a
favorable written opinion of counsel for the Borrower which shall be
accompanied by such supporting documents as the Bank or its counsel may
require.
(i) FURTHER DOCUMENTS. The Bank shall have received such
further Documents, Instruments and agreements as the Bank may
reasonably request, including without limitation, (i) evidence that the
insurance policies and certificates evidencing adequate insurance and
coverage on the Borrower's assets are currently in full force and
effect, continue to name the Bank as loss payee, mortgagee or
additional insured, as the case may be, and that the premiums are
current, (ii) assignments in form and substance satisfactory to the
Bank (collectively "Assignments") whereby the Borrower shall have
assigned to the Bank its right, title and interest in each of the
Government Contracts (provided that the Bank shall hold the Assignments
and not deliver them to any government agency until after the
occurrence of an Event of Default), (iii) a negative pledge in form and
substance satisfactory to the Bank with respect to the Borrower's
General Intangibles consisting of trademarks, (iv) and the closing
shall have occurred under the Export Credit Agreement, (v) UCC-3
termination statements with respect to the liens of State Street Bank
and Trust Company, (vi) originals of each letter of credit which
benefits the Borrower, together with an executed assignment of proceeds
with respect to each such letter of credit, acknowledged by the issuer
thereof.
SECTION 6.2 CONDITIONS PRECEDENT TO EACH ADVANCE AND ISSUANCE
OF A LETTER OF CREDIT. The obligation of the Bank to make an Advance (including
the initial Advance) or issue a Standby Letter of Credit (including the initial
issuance) on the occasion of each request therefor shall be subject to the
further conditions precedent that on the date of such Advance or issuance of a
letter of credit the following statements shall be true (and each of the giving
of the applicable Notice of Borrowing or Notice of Issuance and the acceptance
by the Borrower of the proceeds of such Advance or the issuance of a Standby
Letter of Credit shall constitute a representation and warranty by the Borrower
that both on the date of such notice and on the date of such borrowing or
issuance such statements are true):
(i) ABSENCE OF TERMINATION OR DEFAULTING EVENT.
Neither the Bank nor the Borrower shall have terminated the
Facility, nor shall a Defaulting Event exist or have occurred,
nor would exist a Defaulting Event exist or occur as a result
of such borrowing or issuance or from the application of the
proceeds thereof; and
(ii) TRUTH OF REPRESENTATIONS AND WARRANTIES. All of
the representations and warranties set forth in Article V
hereof are true and correct in all material respects on and as
of such date, before and after giving effect to such borrowing
or issuance and to the application of proceeds therefrom, as
36
though made on and as of such date other than any such
representations or warranties that, by their terms, refer to a
specific date other than the date of such borrowing or
issuance, in which case as of such specific date.
(iii) BORROWING BASE CERTIFICATE. (a) In conjunction
with each request from the Borrower for the issuance of a
Working Capital Advance and/or the issuance of a Standby
Letter of Credit, the Bank shall have received (x) a Borrowing
Base Certificate in the form attached hereto as Schedule 7.1
which demonstrates that, after giving effect to the requested
Working Capital Advance and/or Standby Letter of Credit
issuance, the Borrower shall not have exceeded the Borrowing
Capacity, and (y) such further documents, instruments and
agreements as the Bank may reasonably request.
To satisfy the terms of this section, the Borrower may submit
the prior month end Borrowing Base Certificate, required under
Section 7.1(d), provided that the aggregate amount of Working
Capital Advances and/or Standby Letter of Credit issuances,
including the amount of the pending request, has not exceeded
$500,000 since the submission of the prior month end Borrowing
Base Certificate. If the aggregate amount of such Working
Capital Advances and/or Standby Letter of Credit issuances
exceeds $500,000 since the date of the prior month end
Borrowing Base Certificate then the Borrower must submit an
intramonth Borrowing Base Certificate, which shall contain
information that is effective as of a date no more than one
(1) Business Day prior to the date of the proposed issuance
request or borrowing request.
ARTICLE VII.
COVENANTS
A. Affirmative Covenants.
The Borrower covenants and agrees that from the date hereof
until payment and performance in full of all Obligations, and until the
termination of this Agreement, unless the Bank otherwise consents in writing,
the Borrower shall:
SECTION 7.1 REPORTING REQUIREMENTS. Deliver or cause to be
delivered to the Bank (a) within ninety (90) days after the close of each fiscal
year of Borrower, consolidated financial statements including a balance sheet as
of the close of such fiscal year and statements of income, shareholders' equity
and cash flow for the year then ended, prepared in conformity with GAAP, applied
on a basis consistent with that of the preceding year or containing disclosure
of the effect on financial position or results of operations of any change in
the application of accounting principles during the year, and audited by a firm
37
of independent certified public accountants selected by the Borrower and
satisfactory to the Bank, (b) within ninety (90) days after the close of each
fiscal year of Borrower, Borrower's annual report on Form 10K, together with any
other filings made with the SEC; (c) within forty-five (45) days of the end of
each fiscal quarter of the Borrower, quarterly financial statements on Form 10Q;
(d) monthly within twenty (20) days of each month end, a borrowing base
certificate in the form of Schedule 7.1 attached hereto, including supporting
domestic accounts receivable aging (from invoice date), domestic inventory
report, unbilled domestic receivables schedule and a schedule of outstanding
domestic letters of credit; (e) monthly within twenty (20) days of each month
end, a schedule of contracts in progress and such other supporting schedules as
the Bank may deem appropriate, PROVIDED HOWEVER, that for months ending on other
than a quarter end, the Borrower shall deliver a balance sheet with appropriate
disclaimers and notations indicating that all final accounting adjustments may
not have been made and also deliver a report on operational metrics (e.g.
bookings, backlogs, etc.) certified by the chief financial officer of the
Borrower as being accurate and fairly presenting the financial position of the
Borrower; (f) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (c) above, a statement certified by the
principal financial or accounting officer of the Borrower in substantially the
form of EXHIBIT C hereto and setting forth in reasonable detail computations
evidencing compliance with the covenants contained in Sections 7.17 through 7.20
and (if applicable) reconciliations to reflect changes in generally accepted
accounting principles since the end of the last year of the Borrower; (g)
promptly upon the Bank's written request, such other information about the
financial condition and operations of the Borrower as the Bank may, from time to
time, reasonably request; and (h) promptly upon becoming aware of the occurrence
of any Defaulting Event, written notice of such occurrence signed by the chief
financial officer of the Borrower describing such occurrence and the steps, if
any, being taken to cure the Defaulting Event.
SECTION 7.2 INSURANCE AND ENDORSEMENTS. Keep its properties
insured against fire and other hazards (so-called "ALL RISK" coverage), in
amounts and with companies satisfactory to the Bank to the same extent and
covering such risks as is customary in the same or a similar business; maintain
public liability coverage, including without limitation, products liability
coverage, against claims for personal injuries or death; and maintain all
worker's compensation, employment or similar insurance as may be required by
applicable law. All insurance shall contain such terms, be in such form, and be
for such periods reasonably satisfactory to the Bank and be written by such
carriers duly licensed by the appropriate states where any Collateral is located
and reasonably satisfactory to the Bank. Without limiting the generality of the
foregoing, domestic and maritime insurance must provide that it may not be
canceled without ten (10) days' prior written notice to the Bank. The Borrower
shall cause the Bank to be endorsed as a loss payee with a long form Lender's
Loss Payable Clause, in form and substance acceptable to the Bank on all such
insurance. In the event of failure to provide and maintain insurance as herein
provided, the Bank may, at its option (but shall not be obligated to), provide
such insurance and charge the amount thereof to the Loan Account. The Borrower
shall furnish to the Bank
38
certificates or other satisfactory evidence of compliance with the foregoing
insurance provisions. The Borrower hereby irrevocably appoints the Bank as its
attorney-in-fact, coupled with an interest, to make proofs of loss and claims
for insurance, and to receive payments of the insurance and execute and endorse
all Documents, checks and drafts in connection with payment of the insurance.
Any Proceeds received by the Bank shall be applied to the Obligations, or paid
over to the Borrower for repair and replacement of the Collateral as the Bank
shall determine in its reasonable discretion.
SECTION 7.3 TAX AND OTHER LIENS. Comply with all statutes and
government regulations, licenses and permits, including ERISA, all as may be
amended from time to time, and pay all taxes, assessments, governmental charges
or levies, or claims for labor, supplies, rent and other obligations made
against it or its property which, if unpaid, might become a lien or charge
against the Borrower or its properties, except liabilities being contested in
good faith and against which, if requested by the Bank, the Borrower shall set
up reserves in amounts and in form satisfactory to the Bank. The Borrower shall
give immediate notice to the Bank of any charge or lien levied or filed against
the Borrower or its properties.
SECTION 7.4 PLACE OF BUSINESS. Maintain its and any
subsidiaries' principal place of business and chief executive offices at the
address set forth in the first paragraph of this Agreement, unless the Borrower
shall have given the Bank thirty (30) days' prior written notice of any change
in such places of business.
SECTION 7.5 INSPECTIONS. Allow the Bank, by or through any of
its officers, attorneys, professional appraisers auditors and/or accountants,
for the purpose of ascertaining whether or not each and every provision hereof
and of any related agreement, instrument and document is being performed,
including, without limitation, the provisions of Section 7.7, and to ascertain
the quality of Accounts and Inventory or the Collateral; to enter the offices
and plants of the Borrower at any time during normal business hours to examine
or inspect any of the Borrower's properties, books and records or extracts, to
make copies of such books and records or extracts therefrom, and to perform
accountings, appraisals and inventories or other audits or examinations of the
Borrower's books, records, assets or operations and related systems; and to
cause its officers and employees to give full cooperation and assistance to the
Bank in connection therewith.
SECTION 7.6 LITIGATION. Promptly advise the Bank of the
commencement or threat of any litigation, including arbitration proceedings and
any proceedings before any governmental agency, which is instituted against the
Borrower and is reasonably likely to have a Material Adverse Effect.
SECTION 7.7 NOTICE OF CERTAIN EVENTS. Give immediate written
notice to the Bank of the occurrence of any of the following:
39
(a) the Borrower's commencement or consent in any manner to
any proceeding or arrangement for its liquidation in whole or in part
or to any other proceeding or arrangement whereby any of its assets are
subject generally to the payment of its liabilities or whereby any
receiver, trustee, liquidator or the like is appointed for it or any
substantial part of its assets (including without limitation, the
filing by the Borrower of a petition for appointment as a
debtor-in-possession under Title 11 of the United States Bankruptcy
Code);
(b) the Borrower's commencement of any other procedure for the
relief of financially distressed or insolvent debtors, or such
procedure having been commenced against it, whether voluntarily or
involuntarily;
(c) the Borrower's commencement of any procedure for its
dissolution, or a procedure therefore having been commenced against it;
(d) if (but without in any way constituting the Bank's
acquiescence to the same): (i) the Borrower changes its name or
identity in any manner, or (ii) the nature of any of the Collateral is
changed or any of the Collateral or books and records of the Borrower
is transferred to a location other than as set forth in the first
paragraph of this Agreement (except for any Inventory in transit to the
buyer thereof);
(e) any event causing material loss or depreciation in value
of the Inventory and the amount of such loss or depreciation;
(f) any circumstance or event by virtue of which or in
connection with which the Borrower has incurred or may incur any
liability, expense or responsibility, except in the ordinary course of
business, under any Environmental Law, the Employee Retirement Security
Act of 1974, or any tax or revenue law or regulation, including any
request for information from any federal, state or local governmental
authority, instrumentality or agency that indicates such entity is
investigating the Borrower's potential responsibility for a violation
of such laws or regulations;
(g) any other matter which has resulted or is reasonably
likely to result in a material adverse change in the financial
condition or operations of the Borrower;
(h) any information received by the Borrower with respect to
Accounts that may materially affect the value thereof or the rights and
remedies of Bank with respect thereto; and
(i) any action, suit or claim pending or which could be
reasonably expected to be asserted against the Borrower, before any
court or administrative agency.
40
SECTION 7.8 COLLATERAL DUTIES. Do whatever the Bank reasonably
may request from time to time by way of obtaining, executing, delivering and
filing financing statements, assignments, waivers, agreements and other notices
and amendments and renewals thereof, and the Borrower will take any and all
steps and observe such formalities as the Bank may request, in order to create
and maintain a valid and enforceable lien upon, pledge of, and security interest
in, any and all of the Collateral in accordance with the priorities required
herewith. The Bank, is authorized, as Borrower's duly appointed agent, to file
financing statements without the signature of the Borrower and to execute and
file such financing statements on behalf of the Borrower as specified by the UCC
and/or the Uniform Commercial Code of any other State to perfect or maintain its
security interest in all of the Collateral. All reasonable charges, expenses and
fees the Bank may incur in filing any of the foregoing, together with reasonable
costs and expenses of any lien search required by the Bank, and any taxes
relating thereto, shall be charged to the Loan Account and added to the
Obligations.
Borrower will notify the Bank in writing if it enters into any
contracts with any agency of the United States government regarding the sale of
Inventory by the Borrower which are not listed on Schedule 5.1(y) and shall
execute and deliver to the Bank Assignments whereby the Borrower shall have
assigned to the Bank its right, title and interest in such government contract,
provided that the Bank shall hold the Assignments and not deliver thereof to any
government agency until after the occurrence of an Event of Default.
B. Negative Covenants
The Borrower covenants and agrees that from the date hereof
until payment and performance in full of all Obligations, and until the
termination of this Agreement, unless the Bank otherwise consents in writing,
which consent shall not be unreasonably withheld or delayed, the Borrower shall
not, and shall not permit any of its Subsidiaries to:
SECTION 7.9 ENCUMBRANCES. (a) Create or incur or suffer to be
created or incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its property or
assets of any character whether now owned or hereafter acquired, or upon the
income or profits therefrom; (b) transfer any of such property or assets or the
income or profits therefrom for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors; (c) acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device or arrangement; (d) suffer to exist
for a period of more than thirty (30) days after the same shall have been
incurred any Indebtedness or claim or demand against it that if unpaid might by
law or upon bankruptcy or insolvency, or otherwise, be given any priority
whatsoever over its general creditors; or (e) sell, assign, pledge or otherwise
transfer any accounts, contract rights, general intangibles, chattel paper or
instruments, with or
41
without recourse; PROVIDED that the Borrower may create or incur or suffer to be
created or incurred or to exist:
(i) liens to secure taxes, assessments and other
government charges in respect of obligations not overdue or
liens on properties to secure claims for labor, material or
supplies in respect of obligations not overdue, or which are
being contested in good faith by appropriate proceedings
diligently conducted and with respect to which adequate
reserves are being maintained in accordance with generally
accepted accounting principles so long as such liens are not
being foreclosed;
(ii) deposits or pledges made in connection with, or
to secure payment of, workmen's compensation, unemployment
insurance, old age pensions or other social security
obligations;
(iii) liens of carriers, warehousemen, mechanics and
materialmen, and other like liens on properties in existence
less than 90 days from the date of creation thereof in respect
of obligations not overdue or which are being contested in
good faith by appropriate proceedings diligently conducted and
with respect to which adequate reserves are being maintained
in accordance with generally accepted accounting principles so
long as such liens are not being foreclosed;
(iv) encumbrances on real estate consisting of
easements, rights of way, zoning restrictions, restrictions on
the use of real property and defects and irregularities in the
title thereto, landlord's liens or lessor's liens under leases
to which the Borrower or a Subsidiary of the Borrower is a
party, and other similar minor liens or encumbrances none of
which interferes materially with the use of the property
affected in the ordinary conduct of the business of the
Borrower's and its Subsidiaries, which defects do not
individually or in the aggregate have a Material Adverse
Effect;
(v) liens existing on September 28, 2000 and listed
and described on SCHEDULE 5.1(s) hereto;
(vi) liens in favor of the Bank under the Financing
Agreements; and
(vii) liens in favor of the Export-Import Bank of the
United States with respect to Borrower's patents and patent
applications.
SECTION 7.10 LIMITATION ON INDEBTEDNESS. Create, incur,
assume, guarantee or be or remain liable, contingently or otherwise, with
respect to any Indebtedness other than:
42
(a) Indebtedness to the Bank arising under any of the
Financing Agreements;
(b) current liabilities of the Borrower or such Subsidiary
incurred in the ordinary course of business not incurred through (i)
the borrowing of money, or (ii) the obtaining of credit except for
credit on an open account basis customarily extended and in fact
extended in connection with normal purchases of goods and services;
(c) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, materials and
supplies to the extent that payment therefor shall not at the time be
required to be made in accordance with the provisions of this
Agreement;
(d) Indebtedness in respect of judgments or awards that have
been in force for less than the applicable period for taking an appeal
so long as execution is not levied thereunder or in respect of which
the Borrower or such Subsidiary shall at the time in good faith be
prosecuting an appeal or proceedings for review and in respect of which
a stay of execution shall have been obtained pending such appeal or
review;
(e) endorsements of checks and similar negotiable instruments
for collection, deposit or negotiation, and warranties of products or
services, in each case incurred in the ordinary course of business; and
(f) Indebtedness existing on the September 28, 2000 and listed
and described on SCHEDULE 7.9(m) hereto, and Indebtedness extending the
maturity of, or refunding or refinancing, in whole or in part, any such
Indebtedness, PROVIDED that the terms of any such extending, refunding
or refinancing Indebtedness, and of any agreement or instrument
relating thereto, are otherwise permitted by the Financing Agreements
and FURTHER PROVIDED that the principal amount of such Indebtedness
shall not be increased above the amount of such Indebtedness
immediately prior to the extension, refunding or refinancing, and the
direct (and any contingent) obligors therefor and any collateral
security in respect thereof shall not be changed (or increased), (but
any lien or encumbrance on such collateral may be released or
discharged) as a result of or in connection with such extension,
refunding, or refinancing.
SECTION 7.11 CONTINGENT LIABILITIES. Assume, guarantee,
endorse or otherwise become liable upon the obligations of any person, firm or
corporation, or enter into any purchase or option agreement or other arrangement
having substantially the same effect as such a guarantee, except by the
endorsement of negotiable Instruments for deposit or collection or similar
transactions in the ordinary course of business and except for indemnity
obligations in respect of surety bonds issued to any governmental agency under
43
the General Agreement of Indemnity executed on September 21, 1998 between the
Borrower and the Chubb Group of Insurance Companies.
SECTION 7.12 CONSOLIDATION, MERGER OR CORPORATE CHANGES.
Become a party to any merger or consolidation, or agree to or effect any asset
acquisition or stock acquisition (other than the acquisition of assets in the
ordinary course of business consistent with past practices) except (a) the
merger or consolidation of one or more of the Subsidiaries of the Borrower with
and into the Borrower, and (b) the merger or consolidation of a Subsidiary with
one or more other Subsidiaries of the Borrower.
SECTION 7.13 LOANS, ADVANCES, INVESTMENTS. Make or permit to
exist or to remain outstanding any Investment except Investments:
(a) in readily marketable direct or guaranteed obligations of
the United States of America that mature within one (1) year from the
date of purchase by such Person;
(b) in demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks having in each
case total capital and surplus in excess of $1,000,000,000;
(c) in securities commonly known as "commercial paper" issued
by a corporation organized and existing under the laws of the United
States of America or any state thereof that at the time of purchase
have been rated and the ratings for which are not less than "P 1" if
rated by Moody's, and not less than "A 1" if rated by Standard &
Poor's;
(d) constituting trade credit extended pursuant to customer
accounts receivable in the ordinary course of business;
(e) customary prepaid expenses in the ordinary course of
business;
(f) acceptance and endorsements of checks or other negotiable
instruments for deposit or collection in the ordinary course of
business; and
(g) consisting of loans or advances made in the ordinary
course of business to officers, directors or employees of the Borrower
or any of the Subsidiaries for travel, transportation, entertainment,
and moving and other relocation expenses.
SECTION 7.14 ACQUISITION AND ISSUANCE OF STOCK OF THE
BORROWER; DIVIDENDS. Purchase, acquire, redeem or retire, or make any commitment
or payment to purchase, acquire, redeem or retire any of the capital stock of
the Borrower, or any option, warrant or other right to acquire such stock,
whether now or hereafter outstanding, or declare
44
or pay or set apart for the payment of any dividend (other than dividends
payable in shares of the Borrower's stock), or make any distribution (other than
in shares of the Borrower's stock issued to employees pursuant to the exercise
of stock options and/or normal bonus compensation) to any of its shareholders.
SECTION 7.15 PROHIBITED TRANSFERS. Transfer, in any manner,
either directly or indirectly, any cash, property, or other assets to any person
or entity including to any parent or any of its Affiliates or Subsidiaries,
other than (i) sales made in the ordinary course of business and for fair
consideration on terms no less favorable than if such sale had been an
arms-length transaction between the Borrower or such Subsidiary or Affiliate and
an unaffiliated entity; or (ii) shares of the Borrower's stock.
SECTION 7.16 LOANS TO OFFICERS, DIRECTORS, SHAREHOLDERS,
AFFILIATES. Make any loans or non-salary advances or make any transfers, in any
manner, of any cash, property or other assets to or on behalf of any of its
officers, directors, shareholders, Affiliates or Subsidiaries, except as
disclosed on SCHEDULE 7.16. In no event shall the proceeds of any Advance be
transferred by AS&E to International and/or Global or used by AS&E to make any
loans or other advances to International and/or Global.
C. FINANCIAL COVENANTS
The Borrower covenants and agrees that from the date hereof
until payment and performance in full of all Obligations, and until the
termination of this Agreement, the Borrower shall:
SECTION 7.17 TANGIBLE NET WORTH. Have a Tangible Net Worth of
not less than: (a) $21,400,000.00 from the date hereof through and including
March 30, 2001; (b) $22,400,000.00 from March 31, 2001 through and including
March 30, 2002; and (c) $23,400,000.00 from March 31, 2002 and at all times
thereafter, in each case to be tested at the end of every fiscal quarter.
SECTION 7.18 CURRENT RATIO. Have a ratio of Current Assets to
Current Liabilities of not less than 1.50 to 1.00 at the end of any fiscal
quarter.
SECTION 7.19 SENIOR DEBT TO TANGIBLE NET WORTH. Not permit its
Senior Debt to Tangible Net Worth Ratio to be greater than 1.50 to 1 at the end
of any fiscal quarter.
SECTION 7.20 CASH FLOW COVERAGE RATIO. Not permit its Cash
Flow Coverage Ratio to be less than: (a) 0.65 to 1 for the quarter ending
September 30, 2000; (b) 0.80 to 1 for the quarter ending December 31, 2000; and
(c) 1.0 to 1 for the quarter ending March 31, 2001 and at all times thereafter,
tested quarterly at the end of each fiscal quarter on a rolling four-quarter
basis.
45
ARTICLE VIII.
COLLATERAL
SECTION 8.1 GRANT. To secure the prompt payment and
performance of each and all of the Obligations, the Borrower pledges, assigns
(including the assignment of proceeds of Letters of Credit), transfers and
grants to the Bank a continuing security interest in all of the assets of the
Borrower set forth in SCHEDULE 8.1 and all Proceeds thereof (hereinafter,
collectively called the "COLLATERAL").
SECTION 8.2 CONTINUOUS SECURITY INTEREST. The Borrower
expressly acknowledges that the security interest granted hereunder shall remain
as security for payment and performance of the Obligations, whether now existing
or which may hereafter be incurred by future advances, or otherwise. The notice
of the continuing grant of this security interest therefore shall not be
required to be stated on the face of any document representing any such
Obligations, nor otherwise identify it as being secured hereby.
SECTION 8.3 PRIORITY IN PROCEEDS OF COLLATERAL. The Borrower
acknowledges and agrees that solely as between the Bank and Eximbank and as more
particularly set forth in and subject to the terms of the Eximbank Documents (as
defined in the Export Credit Agreement), the Proceeds from any foreclosure,
sale, liquidation or other disposition of, or realization upon, the Collateral
shall be applied in the following order of priority: (a) with respect to the
Proceeds of Collateral consisting of the Export-Related Collateral (i) first,
for application to the Export Facility Obligations, and (ii) second, for
application to the Domestic Facility Obligations, and (b) with respect to the
Proceeds of all Collateral other than the Export-Related Collateral, (i) first,
for application to the Domestic Facility Obligations, and (ii) second, for
application to the Export Facility Obligations.
ARTICLE IX.
EVENTS OF DEFAULT, ACCELERATION
SECTION 9.1 EVENTS OF DEFAULT, ACCELERATION. If any one or
more of the following events (herein called "EVENTS OF DEFAULT" and
individually, an "EVENT OF DEFAULT") shall occur:
(a) failure of the Borrower to pay principal, interest or any
other sum due hereunder or under the Note when due and payable;
(b) failure of the Borrower to pay when due and payable any
amount (whether principal, interest or any other sum) to the Bank under
any other loan that has been extended by the Bank to the Borrower;
46
(c) breach by Borrower of any covenants forth in Article VII
(B) or (C) hereof;
(d) failure of the Borrower to perform when due, or to comply
with any other covenant, duty, indebtedness, liability or obligation
arising under, this Agreement or any of the other Financing Agreements
and a continuation of such failure for a period of thirty (30) calendar
days thereafter;
(e) any representation or warranty of the Borrower in this
Agreement or any of the other Financing Agreements or in any other
document or instrument delivered pursuant to or in connection with this
Agreement shall have been false in any material respect upon the date
when made or deemed to have been made or repeated;
(f) the Borrower or any of its Subsidiaries shall fail to pay
when due, or within any applicable period of grace, any obligation for
borrowed money or credit received, or in respect of any Capitalized
Leases, in an amount in excess of $300,000; or fail to observe or
perform any material term, covenant or agreement contained in any
agreement by which it is bound, evidencing or securing borrowed money
or credit received, or in respect of any Capitalized Leases, in an
amount in excess of $300,000, for such period of time as would permit
(assuming the giving of appropriate notice if required) the holder or
holders thereof or of any obligations issued thereunder to accelerate
the maturity thereof;
(g) the Borrower or any of its Subsidiaries shall make an
assignment for the benefit of creditors, or admit in writing its
inability to pay or generally fail to pay its debts as they mature or
become due, or shall petition or apply for the appointment of a trustee
or other custodian, liquidator or receiver for the Borrower or any of
its Subsidiaries or of any substantial part of the assets of any of
them or shall commence any case or other proceeding relating to any of
them under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or shall take any action to
authorize or in furtherance of any of the foregoing; or if any such
petition or application shall be filed or any such case or other
proceeding shall be commenced against any of such entities and it
indicates its approval thereof, consents thereto or acquiesce therein
or such petition or application shall not have been dismissed within
forty-five (45) days following the filing thereof;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating any of the Borrower
or any of its Subsidiaries bankrupt or insolvent, or approving a
petition in any such case or other proceeding, or a decree or order for
relief is entered in respect of any of them in an involuntary case
under federal bankruptcy laws as now or hereafter constituted;
47
(i) there shall be commenced against the Borrower any lawsuit
or proceeding that could reasonably be expected to have a Material
Adverse Effect on the Borrower and is not dismissed within thirty (30)
days;
(j) there shall remain in force, undischarged, unappealed,
unsatisfied and unstayed, for more than thirty (30) days, whether or
not consecutive, any final judgment in a court of competent
jurisdiction over the Borrower or any Subsidiary against any of the
Borrower and the Subsidiaries;
(k) if any of the Financing Agreements shall be cancelled,
terminated, revoked or rescinded or the Bank's security interests, in
any of the Collateral shall cease to be perfected, or shall cease to
have the priority contemplated hereby, in each case otherwise than in
accordance with the terms thereof and without the Bank's prior written
consent, or any action at law, suit or in equity or other legal
proceeding to cancel, revoke or rescind any of the Financing Agreements
shall be commenced by or on behalf of the Borrower or any of its
Subsidiaries party thereto or any of their respective stockholders, or
any court or any other governmental or regulatory authority or agency
of competent jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one or more
of the Financing Agreements is illegal, invalid or unenforceable in
accordance with the terms thereof;
(l) the Borrower or any of its Subsidiaries shall be enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency in a manner that has a Material
Adverse Effect and such order shall continue in effect for more than
fifteen (15) days;
(m) there shall occur any strike, lockout, labor dispute,
embargo, condemnation, act of God or public enemy, or other casualty,
which in any such case causes, for more than fifteen (15) consecutive
days, the cessation or substantial curtailment of revenue producing
activities at any facility or location of the Borrower or any of its
Subsidiaries, and which may have a Material Adverse Effect;
(n) there shall occur the loss, suspension or revocation of,
or failure to renew, any license or permit now held or hereafter
acquired by the Borrower or any of its Subsidiaries, if such loss,
suspension, revocation or failure to renew may have a Material Adverse
Effect;
(o) the Borrower or any of its Subsidiaries shall be indicted
for a state or federal crime, or any civil or criminal action shall
otherwise have been brought or threatened against the Borrower or any
of its Subsidiaries, a punishment for which in any such case could
include the forfeiture of any assets of such entity having a fair
market value sufficient to constitute a Material Adverse Effect;
48
(p) the occurrence of any event which has a Material Adverse
Effect;
(q) the occurrence of a default or event of default (howsoever
defined) under any other agreements between the Bank and the Borrower;
(r) the honoring by the Bank of drafts in excess of $5,000,000
in the aggregate presented under Standby Letters of Credit in any
twelve (12) month period from the date hereof (other than drafts which
the Bank believes are being contested by Borrower in good faith), or
(s) the occurrence of a transfer of a controlling interest of
the capital stock of the Borrower to a single entity or a group of
entities under common control;
then, (1) upon the happening of any Event of Default set forth in subsections
(g) and (h) above, any Obligations of the Bank to make Working Capital Advances
and any requirement that the Bank issue additional Standby Letters of Credit
shall automatically and immediately terminate and any and all Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest, notice of protest or other notice or requirements of any kind, all of
which are expressly waived by the Borrower, and the Borrower shall be required
to immediately deliver cash collateral to the Bank in an amount equal to the
aggregate Available Amounts of all Standby Letters of Credit, and (2) upon the
happening of any one or more of the other Events of Default, the Bank may notify
the Borrower that the Bank will not make any further Working Capital Advances
and the Bank will not issue any further Standby Letters of Credit, and that all
of the Obligations have become immediately due and payable, without presentment,
demand, protest, notice of protest or other notice or requirements of any kind,
all of which are expressly waived by the Borrower, and that the Borrower is
required to immediately deliver cash collateral to the Bank in an amount equal
to the aggregate Available Amounts of all outstanding Standby Letters of Credit.
The Bank may proceed to enforce its rights whether by suit in equity or by
action at law, whether for specific performance of any covenant or agreement
contained in this Agreement, the Note or the other Financing Agreements, or in
aid of the exercise of any power granted in either this Agreement or the Note or
any other Financing Agreement, or it may proceed to obtain judgment or any other
relief whatsoever appropriate to the enforcement of such rights, or proceed to
enforce any legal or equitable right which the Bank may have by reason of the
occurrence of any Event of Default hereunder.
Section 9.2 LIMITATION ON ELIGIBLE COLLATERAL. Any provision of this
Agreement or any other Financing Agreement to the contrary notwithstanding, no
Collateral belonging to, owned by or owing to International and/or Global shall
constitute Eligible Collateral.
49
ARTICLE X.
COLLECTIONS
SECTION 10.1 COLLECTIONS. All Proceeds and collections of the
Accounts which the Borrower may receive shall be and remain subject to the lien
of this Security Agreement notwithstanding the commingling thereof with other
funds or accounts of Borrower, and notwithstanding the failure of the Borrower
to segregate or otherwise specifically identify such Proceeds or collections as
such.
ARTICLE XI.
RIGHTS AND REMEDIES OF THE BANK
SECTION 11.1 REMEDIES OF THE BANK. In case any one or more of
the Events of Default shall have occurred and be continuing, and whether or not
the Bank shall have taken any action pursuant to Article IX hereof, the Bank, if
owed any Obligations, may proceed to protect and enforce its rights by suit in
equity, action at law or other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in this Agreement and the
other Financing Agreements or any instrument pursuant to which the Obligations
to the Bank are evidenced, including as permitted by applicable law the
obtaining of the EX PARTE appointment of a receiver, and, if such amount shall
have become due, by acceleration or otherwise, proceed to enforce the payment
thereof or any other legal or equitable right of the Bank. The Borrower hereby
grants the Bank an irrevocable power of attorney and appoints HSBC its
attorney-in-fact, upon the occurrence of any Event of Default hereunder, to file
the Assignments with the appropriate government agencies, to amend the
Assignments on behalf of the Borrower if needed to file same and to obtain
acknowledgments of such filings from an appropriate government agencies. No
remedy herein conferred upon the Bank or the holder of the Note is intended to
be exclusive of any other remedy and each and every remedy shall be cumulative
and shall be in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or by statute or any other provision of
law. Without limiting the generality of the foregoing, the Bank shall have in
any jurisdiction where enforcement hereof is sought, in addition to all other
rights and remedies which the Bank may have under law and equity, the following
rights and remedies, all of which may be exercised with or without further
notice to the Borrower and without a prior judicial or administrative hearing or
notice, which notice and hearing are expressly waived: to occupy any of the
Borrower's premises, subject to an agreement with the lessor, for up to one (1)
year rent free for the purposes of liquidating Collateral, including without
limitation, conducting an auction thereon; to enforce or foreclose the liens and
security interests created under this Agreement or under any other agreement
relating to Collateral by any available judicial procedure or without judicial
process; to enter any premises where any Collateral may be located for the
purposes of taking possession or removing the same; to sell, assign, lease, or
otherwise dispose of
50
Collateral or any part thereof, either at public or private sale, in lots or in
bulk, for cash, on credit or otherwise, with or without representations or
warranties, and upon such terms as shall be acceptable to the Bank, all at the
Bank's sole option and as the Bank in its sole discretion may deem advisable; to
bid or become purchaser at any such sale if public; and, at the option of the
Bank, to apply or be credited with the amount of all or any part of the
Obligations owing to the Bank against the purchase price bid by the Bank at any
such sale.
SECTION 11.2 COLLECTION OF OTHER ACCOUNTS, ETC. In addition to
and without limiting the rights of the Bank and obligations of the Borrower set
forth elsewhere in this Article XI, at any time after the occurrence of an Event
of Default, the Bank shall have the right to require the Borrower to and the
Borrower shall, upon written notice from the Bank:
(a) Make collections of Proceeds upon its Accounts, hold the
Proceeds received from collections in trust for the Bank and turn over
such Proceeds to the Bank daily in the exact form which they are
received, together with a collection report in form satisfactory to the
Bank. The Bank shall thereafter apply, subject to actual collection,
such Proceeds and any Proceeds of Accounts received by it pursuant to
the following provisions of this Article XI, to the payment of the
Obligations in such order of priority as the Bank shall determine;
(b) Assign or endorse the Accounts to the Bank, and notify
Account Debtors that the Accounts have been assigned and should be paid
directly to the Bank;
(c) Turn over to the Bank all Inventory returned in connection
with any of the Accounts;
(d) Mark or stamp each of its individual ledger sheets or
cards pertaining to its Accounts with the legend "Assigned to HSBC Bank
USA" and stamp or otherwise mark and keep its books, records, documents
and instruments relating to the Accounts in such manner as the Bank may
require; and
(e) Mark or stamp all invoices with a legend satisfactory to
the Bank so as to indicate that the same should be paid directly to the
Bank.
SECTION 11.3 SPECIFIC POWERS. The Bank may at any time, before
(with respect to subsection (j)) or after the occurrence of an Event of Default,
at the Bank's sole discretion: (a) give notice of assignment to any Account
Debtor; (b) collect Accounts directly and charge, or cause to be charged, the
collection costs and expenses to the Loan Account; (c) collect Accounts
submitted by the Borrower to the Bank for collection and charge, or cause to be
charged, the collection costs and expenses to the Loan Account; (d) settle or
adjust disputes and claims directly with Account Debtors for amounts and upon
terms which the Bank considers advisable, and credit, or cause to be credited,
the Loan
51
Account with the net amounts received in payment of Accounts; (e) exercise all
other rights granted in this Agreement and the other Financing Agreements; (f)
receive, open and dispose of all mail addressed to the Borrower and notify the
Post Office authorities to change the address for delivery of the Borrower's
mail to an address designated by the Bank; (g) endorse the name of the Borrower
on any checks or other evidence of payment that may come into possession of the
Bank and on any invoice, freight or express bill, bill of lading or other
document; (h) in the name of the Borrower or otherwise, demand, sue for, collect
and give acquittance for any and all monies due or to become due on Accounts;
(i) compromise, prosecute or defend any action, claim or proceeding concerning
Accounts; and (j) do any and all things necessary and proper to carry out the
purposes contemplated in this Agreement, the other Financing Agreements and any
other agreement between the parties. Neither the Bank its officers, directors,
employees and agents (including its attorneys) shall be liable for any acts or
omissions or for any error of judgment or mistake of fact or law, except for bad
faith or willful misconduct. For the purposes of this Section 11.3, the Borrower
hereby irrevocably constitutes the Bank as the Borrower's attorney-in-fact to
issue in the name and execute or endorse on behalf of the Borrower each and
every notice, instrument and document necessary to carry out the purposes of the
provisions of this Section 11.3. The power of attorney granted hereby shall be
self-executing, but the Borrower shall promptly execute and deliver to the Bank,
upon written request of the Bank, such additional separate powers of attorney as
the Bank may from time to time request. Notwithstanding the foregoing, it is
understood that the Bank is under no duty to take any of the foregoing actions
and that after having made demand upon the Account Debtors for payment, the Bank
shall have no further duty as to the collection or protection of Accounts or any
income therefrom and no further duty to preserve any rights pertaining thereto,
other than the safe custody thereof.
SECTION 11.4 RIGHT OF THE BANK TO USE AND OPERATE COLLATERAL,
ETC. Upon the occurrence of any Event of Default, the Bank shall have the right
and power to take possession of all or any part of the Collateral, and to
exclude the Borrower and all persons claiming under the Borrower wholly or
partly therefrom, and thereafter to hold, store, and/or use, operate, manage and
control the same. Upon any such taking of possession, the Bank may, from time to
time, at the expense of the Borrower, make all such repairs, replacements,
alterations, additions and improvements to the Collateral as the Bank may deem
proper. In any such case the Bank shall have the right to manage and control the
Collateral and to carry on the business and to exercise all rights and powers of
the Borrower in respect thereto as the Bank shall reasonably deem best,
including the right to enter into any and all such agreements with respect to
the operation of the Collateral or any part thereof as the Bank may see fit; and
the Bank shall be entitled to collect and receive all issues, profits, fees,
revenues and other income of the same and every part thereof. Such issues,
profits, fees, revenues and other income shall be applied to pay the expenses of
holding and operating the Collateral and of conducting the business thereof, and
of all maintenance, repairs, replacements, alterations, additions and
improvements, and to make all payments which the Bank may be required or may
elect to make, if any, for taxes, assessments, insurance and
52
other charges upon the Collateral or any part thereof, and all other payments
which the Bank may be required or authorized to make under any provision of this
Agreement (including reasonable legal costs and attorneys' fees). The remainder
of such issues, profits, fees, revenues and other income shall be applied to the
payment of the Obligations in such order of priority as the Bank shall
determine, in its sole discretion. Without limiting the generality of the
foregoing, the Bank shall have the right to apply for and have a receiver
appointed by a court of competent jurisdiction in any action taken by the Bank
to enforce its rights and remedies hereunder in order to manage, protect and
preserve the Collateral and continue the operation of the business of the
Borrower and to collect all revenues and profits thereof and apply the same to
the payment of all expenses and other charges of such receivership including the
compensation of the receiver and to the payment of the Obligations as aforesaid
until a sale or other disposition of such Collateral shall be finally made and
consummated.
SECTION 11.5 DUTIES AFTER DEFAULT. After the occurrence of an
Event of Default, the Borrower will, at the Bank's request, assemble all
Collateral and make it available to the Bank at places which the Bank may
reasonably select, whether at the premises of the Borrower or elsewhere and will
make available to the Bank all premises and facilities of the Borrower for the
purpose of the Bank taking possession of Collateral or of removing or putting
the Collateral in salable form. In the event any goods called for in any sales
order, contract, invoice or other instrument or agreement evidencing or
purporting to give rise to any Account shall not have been delivered or shall be
claimed to be defective by any customer, the Bank shall have the right in its
discretion to use and deliver to such customer any goods of the Borrower to
fulfill such order, contract or the like so as to make good any such Account. If
any Collateral shall require repairing, maintenance, preparation, or the like,
or is in process or other unfinished state, the Bank shall have the right, but
shall not be obligated, to do such repairing, maintenance, preparation,
processing or completion of manufacturing for the purpose of putting the same in
such salable form as the Bank shall deem appropriate, but the Bank shall have
the right to sell or dispose of such Collateral without such processing. The net
cash Proceeds resulting from the collection, liquidation, sale, lease or other
disposition of Collateral shall be applied first to the expenses (including all
reasonable attorney's and professional fees) of retaking, holding, storing,
processing and preparing for sale, selling, collecting, liquidating and the like
and then to the satisfaction of all Obligations, any balance to be held as cash
collateral for the Borrower's reimbursement Obligations with respect to drawings
upon the Standby Letters of Credit. In the event the Proceeds of any sale, lease
or other disposition of the Collateral hereunder, including without limitation,
the Proceeds from the collection of Accounts, are insufficient to pay all of the
Obligations in full, the Borrower will be liable for the deficiency, together
with interest thereon, at the maximum rate allowable by law, and the costs and
expenses of collection of such deficiency, including (to the extent permitted by
law) without limitation, attorneys' fees, expenses and disbursements.
53
SECTION 11.6 CUMULATIVE REMEDIES. The enumeration of the
Bank's rights and remedies set forth in this Article XI is not intended to be
exhaustive and the exercise by the Bank of any right or remedy shall not
preclude the exercise of any other rights or remedies, all of which shall be
cumulative and shall be in addition to any other right or remedy given hereunder
or under any other agreement between the parties or which may now or hereafter
exist in law or at equity or by suit or otherwise. No delay or failure to take
action on the part of the Bank in exercising any right, power or privilege
hereunder or under any of the other Financing Agreements shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or privilege preclude other or further exercise thereof or the exercise of
any other right, power or privilege or shall be construed to be a waiver of any
Defaulting Event.
SECTION 11.7 EMPLOYEES AND BANK. The Bank may exercise its
powers and execute its duties by or through employees or agents and shall be
entitled to take, and to rely on, advice of counsel concerning all matters
pertaining to its rights and duties under this Agreement and the other Financing
Agreements. The Bank may utilize the services of such Persons as the Bank in its
sole discretion may reasonably determine, and all reasonable fees and expenses
of any such Persons shall be paid by the Borrower.
ARTICLE XII.
INTENTIONALLY OMITTED.
ARTICLE XIII.
TERMINATION
SECTION 13.1 TERMINATION. Unless sooner terminated by the Bank
as a result of the occurrence of a Defaulting Event, the obligation of the Bank
to make Working Capital Advances and issue Standby Letters of Credit shall
terminate on the Termination Date. The Bank may, in its sole and absolute
discretion upon written notice to the Borrower, elect to renew the Facility for
an additional period of time and on such other terms and conditions as they may
elect, in which case the Termination Date shall be extended for a corresponding
period. Upon any such termination of the Facility, all of the rights, interests
and remedies of the Bank and Obligations of the Borrower shall survive and the
Borrower shall have no right to request, and the Bank shall have no further
obligation to make Working Capital Advances and issue any further Standby
Letters of Credit. In addition, upon termination of the Facility, the Borrower
shall immediately deposit with the Bank as cash collateral (pursuant to the Cash
Collateral Agreement) an amount equal to the aggregate Available Amount of all
Standby Letters of Credit then outstanding, if any.
54
ARTICLE XIV.
EXPENSES
SECTION 14.1 EXPENSES. The Borrower agrees to pay on demand
all reasonable out-of-pocket expenses, costs, fees, charges, expenses and
reasonable attorneys' and other professionals' fees and expenses incurred by the
Bank in connection with the preparation of this Agreement, the Note, the other
Financing Agreements and any amendments or supplements hereto and thereto and
all expenses (including reasonable fees and expenses of Bank's counsel)
incidental to the collection of monies due hereunder or thereunder and in any
way connected with, involving or related to the preservation, enforcement,
protection or defense of this Agreement, the Note, the other Financing
Agreements, any related agreement, document or instrument, the Collateral, and
the rights and remedies hereunder or thereunder.
ARTICLE XV.
ASSIGNMENT AND PARTICIPATION
SECTION 15.1 ASSIGNMENT AND PARTICIPATIONS. The Borrower
hereby acknowledges and agrees that the Bank may assign or sell participation
interests in all or a portion of its interests, rights and obligations under
this Agreement, the Note and the other Financing Agreements; PROVIDED, HOWEVER,
that any such assignment or sale of a participation shall be at no cost to the
Borrower and the Bank shall provide the Borrower with written notice of any
assignments or re-assignments of its interests, rights and obligations under
this Agreement, the Note and other Financing Agreements.
SECTION 15.2 DISCLOSURE. Notwithstanding the limitations on
assignments in Section 15.1 above, the Borrower agrees that in addition to
disclosures made in accordance with standard and customary banking practices,
Bank may disclose information obtained by the Bank pursuant to this Agreement to
assignees or participants and potential assignees or participants hereunder that
agree to maintain the confidentiality thereof pursuant to the terms hereof.
SECTION 15.3 ASSIGNMENT BY BORROWER. The Borrower shall not
assign or transfer any of its rights or obligations under this Agreement, the
Note or any of the Financing Agreements without the prior written consent of the
Bank.
55
ARTICLE XVI.
MISCELLANEOUS
SECTION 16.1 INDEMNIFICATION.
(a) In consideration of the Bank's execution and delivery of
this Agreement and the Bank's extension of the Facility and in addition
to all other obligations of Borrower under this Agreement, Borrower
hereby agrees to defend, protect, indemnify and hold harmless the Bank
and its successors, assigns, officers, directors, employees and agents
(including without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages
and expenses in connection therewith (irrespective of whether any such
Indemnitees is a party to any action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and
disbursements as and when incurred (the "INDEMNIFIABLE LIABILITIES")
incurred by the Indemnitees or any of them as a result of, or arising
out of, or relating to (i) the execution, delivery, performance or
enforcement of this Agreement and the other Financing Agreements and
any instrument, document or agreement executed pursuant hereto to any
of the Indemnitees; (ii) Bank's status as lender to, or creditor of,
Borrower; or (iii) the operation of Borrower's business, including
without limitation, those arising under any Environmental Laws,
excluding Indemnifiable Liabilities arising from an Indemnitee's gross
negligence or willful misconduct. To the extent that the foregoing
undertaking by Borrower may be unenforceable for any reason, Borrower
shall make the maximum contribution to the payment and satisfaction of
each of the Indemnifiable Liabilities which is permissible under
applicable law.
(b) Borrower hereby covenants and agrees at all times to
indemnify, hold harmless and defend the Indemnitees, whether as the
Bank in possession or as successor in interest to Borrower as owner of
any personal property assets located on the real property of Borrower
(the "PREMISES"), by virtue of any action taken by the Bank pursuant to
the Financing Agreements, the UCC or otherwise from and against any and
all liabilities, losses, damages, costs, expenses, penalties, fines,
causes of action, suits, claims, demands or judgments (except when
arising out of the Bank's gross negligence or willful misconduct),
including without limitation, reasonable attorneys' fees and expenses,
suffered or incurred in connection with: (i) the Environmental Laws,
including without limitation, liens or claims of any federal, state or
municipal government or quasi-governmental agency or any third person,
whether arising under the Environmental Laws or any other federal,
state or municipal law or regulation; (ii) any spill or contamination
affecting the Premises, including without limitation, any Hazardous
Materials or other waste-like or toxic substances located on, under,
emanating from or relating to the Premises or any
56
portion thereof or any property contiguous to the Premises, and
including without limitation, any loss of value of the Premises as a
result of any such spill or contamination; and (iii) the direct or
indirect installation, use, generation, manufacture, production,
storage, release, threatened release, discharge, disposal or presence
of any Hazardous Materials, on, under or about the Premises or any
portion thereof, from and including all consequential damages, the
costs of any required or necessary repair, cleanup or detoxification,
and the costs of the preparation and implementation of any closure,
remedial or other required plans. Further, the mere fact that such
Indemnified Party has been declared an "owner" or "operator" (as such
term is defined in any Environmental Law) resulting from the
Indemnified Party having taking possession of any of the Collateral
shall not exonerate Borrower from any claim by the Indemnified Parties
seeking such indemnification. The provisions of this Section 16.1 shall
survive the termination of this Agreement and the other Financing
Agreements.
SECTION 16.2 PAYMENT SET-ASIDE. To the extent that the
Borrower or any other person makes a payment or payments to the Bank (whether
hereunder, under the Note or under the other Financing Agreements) with respect
to the Obligations, or the Bank enforces its security interests or rights or
exercises its right of setoff, and such payment or payments or the Proceeds of
such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Borrower
or such person, a trustee, receiver or any other person under any law (including
without limitation, any bankruptcy law, state or federal law, common law or
equitable cause of action) in each case in connection with any bankruptcy or
similar proceeding involving the Borrower or such person, then to the extent of
any such restoration, the Obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred,
whereupon this Agreement shall be automatically reinstated without any further
action by the Borrower or the Bank and continue to be fully applicable to such
Obligation to the same extent as though the payment so repaid or recovered had
never been originally made on such Obligation.
SECTION 16.3 SET-OFF. The Borrower hereby gives the Bank a
lien, security interest, and right of setoff for all its liabilities to the Bank
upon and against all its deposits, credits, collateral and property now or
hereafter in the possession or control of the Bank or in transit to it. The Bank
may, at any time, apply or set off the same, or any part thereof, to any
liability of the Borrower to the Bank, even though unmatured.
SECTION 16.4 COVENANTS TO SURVIVE. All covenants, agreements,
warranties and representations made herein, in the Note, in the other Financing
Agreements, and in all certificates or other Documents of the Borrower shall
survive the advances of money and the issuance of Standby Letters of Credit made
by the Bank to the Borrower hereunder and the delivery of the Note, and the
other Financing Agreements, and all such covenants,
57
agreements, warranties and representations shall be binding upon and inure to
the benefit of the Bank, the Borrower and their respective successors and
assigns, whether or not so expressed, except that the Borrower shall not have
the right to assign its rights hereunder or under any of the other Financing
Agreements or any interest herein or therein.
SECTION 16.5 CROSS-COLLATERALIZATION. All Collateral which the
Bank may at any time acquire from the Borrower or from any other source in
connection with the Obligations shall constitute collateral for each and every
Obligation, without apportionment or designation as to particular Obligations
and that all Obligations, however and whenever incurred, shall be secured by all
Collateral however and whenever acquired, and the Bank shall have the right, in
its sole discretion, to determine the order in which the Bank's rights in or
remedies against any Collateral are to be exercised and which type of Collateral
or which portions of Collateral are to be proceeded against and the order of
application of Proceeds of Collateral as against particular Obligations (subject
to any express provisions herein regarding the priorities of security interests
in any Collateral with respect to the various Obligations).
SECTION 16.6 CROSS-DEFAULT. The Borrower acknowledges and
agrees that a default under any one of the Financing Agreements, including,
without limitation, under the Export Credit Agreement, shall constitute a
default under any of the other Financing Agreements; that a default under any
other indebtedness owing by the Borrower to the Bank, whether now existing or
hereafter arising, shall constitute an Event of Default under this Agreement and
the other Financing Agreements; and that an Event of Default under any of the
Financing Agreements shall constitute a default under any other indebtedness
owing by the Borrower to the Bank, whether now existing or hereafter arising.
SECTION 16.7 AMENDMENTS AND WAIVERS. No modification,
rescission, waiver, release or amendment of any provision of this Agreement
shall be made, except by a written agreement signed by the Borrower and a duly
authorized officer of the Bank.
SECTION 16.8 NOTICES. All notices, requests, consents, demands
and other communications hereunder shall be in writing and shall be either hand
delivered or sent by first class mail, or by certified or registered mail,
return receipt requested, or by recognized overnight courier, or by telecopy,
addressed to the respective parties to this Agreement at their respective
addresses set forth above or, as to each party, at such other address as shall
be designated by such party by written notice given in accordance with this
Section 16.8. All such notices and correspondence shall be deemed given (a) if
sent by first class, certified or registered mail, two (2) Business Days after
being postmarked, or (b) if hand delivered or sent by overnight courier or by
telecopy, when received at the above stated addresses, whether or not receipt
thereof is acknowledged or is refused by the addressee or any person at such
address.
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SECTION 16.9 WAIVERS
(a) PREJUDGMENT REMEDY, ETC. THE BORROWER ACKNOWLEDGES THAT
THE ADVANCES EVIDENCED HEREBY ARE COMMERCIAL TRANSACTIONS AND WAIVES
ITS RIGHT TO NOTICE AND HEARING ALLOWED BY ANY STATE OR FEDERAL LAW
WITH RESPECT TO ANY PREJUDGMENT REMEDY AND FURTHER WAIVES ALL RIGHTS TO
REQUEST POSTING OF A BOND, WITH OR WITHOUT SURETY, TO PROTECT THE
BORROWER OR ANY ENDORSER, GUARANTOR OR SURETY OF ANY OF THE OBLIGATIONS
AGAINST DAMAGES THAT MAY BE CAUSED BY ANY PREJUDGMENT REMEDY. THE
BORROWER FURTHER WAIVES DILIGENCE, DEMAND, PRESENTMENT FOR PAYMENT,
NOTICE OF NONPAYMENT, PROTEST AND NOTICE OF ANY RENEWALS OR EXTENSIONS.
(b) JURY WAIVER. THE BORROWER HEREBY WAIVES TRIAL BY JURY IN
ANY COURT IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN
CONNECTION WITH OR IN ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF
WHICH THIS AGREEMENT IS A PART AND/OR THE ENFORCEMENT OF ANY OF THE
BANK'S RIGHTS, INCLUDING WITHOUT LIMITATION, TORT CLAIMS.
(c) VOLUNTARY NATURE OF WAIVERS. THE BORROWER ACKNOWLEDGES
THAT IT MAKES THE FOREGOING WAIVERS IN SUBSECTIONS (a) AND (b) ABOVE,
KNOWINGLY, WILLINGLY, WITHOUT DURESS AND VOLUNTARILY AND ONLY AFTER
CONSIDERATION OF THE RAMIFICATIONS OF SUCH WAIVERS WITH ITS ATTORNEYS.
SECTION 16.10 SECTION HEADINGS, SEVERABILITY, ENTIRE
AGREEMENT. Section and subsection headings have been inserted herein for
convenience only and shall not be construed as part of this Agreement. Every
provision of this Agreement, the Note and the other Financing Agreements is
intended to be severable; if any term or provision of this Agreement, the Note,
the other Financing Agreements, or any other document delivered in connection
herewith shall be invalid, illegal or unenforceable for any reason whatsoever,
the validity, legality and enforceability of the remaining provisions hereof or
thereof shall not in any way be affected or impaired thereby. All Exhibits and
Schedules to this Agreement shall be annexed hereto and shall be deemed to be
part of this Agreement. This Agreement, the other Financing Agreements, and the
Exhibits and Schedules attached hereto and thereto embody the entire agreement
and understanding between the Borrower, the Bank and supersede all prior
agreements and understandings relating to the subject matter hereof unless
otherwise specified or specifically reaffirmed or restated herein.
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SECTION 16.11 GOVERNING LAW. THIS AGREEMENT AND THE OTHER
FINANCING AGREEMENTS, AND ALL TRANSACTIONS, ASSIGNMENTS AND TRANSFERS HEREUNDER
AND THEREUNDER, AND ALL THE RIGHTS OF THE PARTIES, SHALL BE GOVERNED AS TO
VALIDITY, CONSTRUCTION, ENFORCEMENT AND IN ALL OTHER RESPECTS BY THE LAWS OF THE
STATE OF NEW YORK. THE BORROWER AGREES THAT THE COURTS OF THE STATE OF NEW YORK
OR THE UNITED STATES DISTRICT COURT FOR THE UNITED STATES IN THE SOUTHERN
DISTRICT OF NEW YORK SHALL HAVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES PERTAINING TO THE FINANCING TRANSACTIONS OF WHICH THIS AGREEMENT IS A
PART AND/OR TO ANY MATTER ARISING OR IN ANY WAY RELATED TO THIS AGREEMENT OR ANY
OTHER AGREEMENT BETWEEN THE BANK AND THE BORROWER EXPRESSLY SUBMITS AND CONSENTS
IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING AND BORROWER WAIVES
PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING
AN ACTION OR PROCEEDING IN ANY SUCH COURT SHALL BE PROPERLY SERVED AND SHALL
CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO
BORROWER, OR AS OTHERWISE PROVIDED BY THE LAWS OF NEW YORK STATE OR THE UNITED
STATES. NOTHING HEREIN SHALL AFFECT THE RIGHT OF BANK TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE UNDERSIGNED EITHER IN ANY OTHER
JURISDICTION OR TO SERVE PROCESS IN ANY OTHER JURISDICTION OR TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
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ARTICLE XVII.
INTENTIONALLY OMITTED
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized officers as of the date first written
above.
AMERICAN SCIENCE AND
ENGINEERING, INC.
By: Lee C. Steele
---------------------------------
Lee C. Steele
Its Chief Financial Officer
duly authorized
HSBC BANK USA
By: William L. Meli
---------------------------------
Name: William L. Meli
Title: AVP
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