EXHIBIT 10.18
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FIRST AMENDED AND RESTATED MASTER CREDIT AGREEMENT
by and between
FLEET BANK, NATIONAL ASSOCIATION
and
THE STROUSE, ADLER COMPANY
October 2, 1995
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FIRST AMENDED AND RESTATED MASTER CREDIT AGREEMENT
This FIRST AMENDED MASTER CREDIT AGREEMENT (the "Agreement") is made
as of this 9th day of November, 1994 by and between FLEET BANK, NATIONAL
ASSOCIATION, a national banking association, with an office and principal place
of business at One Constitution Plaza, Hartford, Connecticut 06115-1600 (the
"Bank") and THE STROUSE, ADLER COMPANY, a Delaware corporation with its chief
executive office located at 78 Olive Street, New Haven, Connecticut 06507 (the
"Borrower").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Master Credit Agreement made as of the
15th day of June, 1992 by and between Bank and Borrower (as amended and in
effect from time to time, the "Original Credit Agreement"), Bank agreed to make
loans and advances and otherwise extend credit to Borrower; and
WHEREAS, Bank and Borrower wish to amend and restate the terms and
conditions of the Original Credit Agreement; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, Bank and Borrower hereby agree as follows:
SECTION 1. DEFINITIONS
All capitalized terms used in this Agreement, the Notes or the Other
Documents, or in any certificate, report or other document, instrument or
agreement executed or delivered pursuant hereto and thereto (unless otherwise
indicated therein) shall have the meanings ascribed to such terms below.
Section 1.1. "Account Debtor" means any Person obligated to
Borrower with respect to an Account Receivable.
Section 1.2. "Account Receivable" or "Accounts Receivable" means the
unpaid portion of obligations as stated on the respective invoices issued to a
customer of Borrower or any of its Subsidiaries with respect to Inventory sold
and shipped or services performed or rendered in the ordinary course of
business.
Section 1.3. "Affiliate" means any Person (i) which directly or
indirectly controls, or is controlled by, or is under common control with,
Borrower or any Subsidiary of Borrower; (ii) which directly or indirectly
beneficially owns or holds ten percent (10%) or more of any class of voting
stock of Borrower or any Subsidiary of Borrower; or (iii) ten percent (10%) or
more of the voting stock of which is directly or indirectly beneficially owned
or held by Borrower or any Subsidiary of Borrower. The term "control" (and its
correlative meanings "controlled by" and "under common control with") as used in
this Section 1.3. means the possession, directly
or indirectly, of the power to direct, or cause the direction of, the management
and policies of a Person, whether through ownership of voting stock, by contract
or otherwise.
Section 1.4. "Agreement" means this First Amended and Restated Master
Credit Agreement, including all schedules and exhibits attached hereto, and any
and all amendments, modifications and supplements hereto.
Section 1.5. "Bank" has the meaning set forth in the Preamble hereof.
Section 1.6. "Bank Affiliate" or "Bank Affiliates" means any
Affiliate of Bank or its parent bank holding company.
Section 1.7. "Bank Agents" has the meaning set forth in Section
13.2.5. hereof.
Section 1.8. "Bankruptcy Code" means Title 11 of the United States
Code, entitled "Bankruptcy", as amended from time to time and all rules and
regulations promulgated thereunder.
Section 1.9. "Beneficiary" means the beneficiary of any Letter of
Credit or Letter of Credit Guaranty issued by Bank for the account of Borrower
or any Subsidiary of Borrower.
Section 1.10. "Borrower" has the meaning set forth in the Preamble
hereof.
Section 1.11. "Borrowing Base" means, as of any date as of which the
amount thereof shall be determined, an amount equal to the sum of (i) the
Security Value of Accounts Receivable as of such date and (ii) the Security
Value of Inventory as of such date.
Section 1.12. "Borrowing Base Certificate" has the meaning set forth
in Section 7.1.3. hereof.
Section 1.13. "Breakage Costs" means an amount equal to all costs
Bank sustains in breaking or unwinding or in not making after receiving a Notice
(except where such results from the failure of Bank to fund) any Libor funding
contract, and all expenses that Bank sustains or incurs as a result of
prepayment or receipt of principal with respect to a Libor Loan on a day other
than the last day of the then current Interest Period.
Section 1.14. "Business Day" means, in the case of a Libor Loan, any
day in which dealings in foreign currencies and exchange between banks may be
carried on in the place where the Eurodollar Office is located and in Boston,
Massachusetts and, in all other cases, any day other than a Saturday, Sunday,
legal holiday or other day on which banks in the State of Connecticut are
required or permitted by law to close.
Section 1.15. "Capital Expenditures" means, without duplication, for
any period, the aggregate of all expenditures on a consolidated basis including
deposits (whether paid in cash or property or accrued as liabilities and
including the aggregate amount of all principal payments due for the entire term
of all Capital Leases that are required to be capitalized on the balance sheet)
made by Borrower and its Subsidiaries that, in conformity with GAAP, are
required to be included in the property, plant, equipment, or similar fixed
asset account.
Section 1.16. "Capital Lease" means any lease of any property
(whether real, personal or mixed) that, in conformity with GAAP, should be
accounted for as a capital lease.
Section 1.17. "Closing Date" means the date hereof.
Section 1.18. "Code" means the Internal Revenue Code of 1986 and the
rules and regulations promulgated thereunder, collectively, as the same may from
time to time be supplemented or amended and remain in effect.
Section 1.19. "Collateral" means all collateral received or delivered
as security for the Obligations pursuant to, and as more particularly described
in, the Security Agreement, the Stock Pledge, the Letter of Credit Applications
and the Collateral Disclosure List and any property or interest provided in
addition to or in substitution for any of the foregoing.
Section 1.20. "Collateral Disclosure List" has the meaning set forth
in Section 3.1. hereof.
Section 1.21. "Collection Fee" has the meaning set forth in Section
2.1.14. hereof.
Section 1.22. "Commitment Amount" means (i) the amount of EIGHT
MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($8,500,000.00) during the
period commencing as of the Closing Date and continuing through October 31,
1995, ELEVEN MILLION AND NO/100 DOLLARS ($11,000,000.00) during the period
commencing as of November 1, 1995 and continuing through October 31, 1996 and
THIRTEEN MILLION AND NO/100 DOLLARS ($13,000,000.00) during the period
commencing as of November 1, 1996 and continuing through the Revolving Credit
Termination Date or (ii) any lesser amount, including zero (0), resulting from a
reduction or termination of such amount in accordance with Section 2.1.5. or
Section 12.1.
Section 1.23. "Contractual Obligation" means, as applied to any
Person, any indenture, mortgage, deed of trust, contract, undertaking, agreement
or other instrument to which that Person is a party or by which it or any of its
properties is bound or to which it or any of its properties is subject.
Section 1.24. "Controlled Group" means all trades or businesses
(whether or not incorporated) under common control that
together with Borrower, are treated as a single employer under Section 414(b) or
414(c) of the Code or Section 4001 of ERISA.
Section 1.25. "Covered Employees" means David Howell, Alfred Kniberg,
Ann-Marie Howell, Joyce Baran, Paul McDonald and Graeme Caulfield.
Section 1.26. "Credits Outstanding" means, as of any date as of which
the amount thereof shall be determined, the aggregate undrawn amount of all
issued and outstanding Letters of Credit and Letter of Credit Guaranties but
excluding any amounts which constitute unpaid Reimbursement Obligations as of
such date.
Section 1.27. "Default" means an event or condition that, but for the
lapse of time, the giving of notice, or both, would constitute an Event of
Default if that event or condition was not cured or removed within any
applicable grace or cure period.
Section 1.28. "Default Rate" has the meaning set forth in Section 2.4.
7. hereof.
Section 1.29. "Disqualified Accounts Receivable" means:
a. An Account Receivable which does not arise out of a bona
fide sale of goods or rendering of services of the kind sold or
rendered by Borrower in the ordinary course of its business.
b. An Account Receivable which remains unpaid for more than
sixty (60) days after the due date; or
c. An Account Receivable owing by an Account Debtor if fifty
percent (50%) or more of the dollar value of all Accounts
Receivable owed by such Account Debtor remain unpaid for more
than sixty (60) days after the due date; or
d. An Account Receivable with respect to which the Account
Debtor is a director, officer, employee or agent of Borrower or
is a Subsidiary or an Affiliate of Borrower; or
e. An Account Receivable with respect to which any covenant,
representation or warranty set forth in this Agreement has been
breached; or
f. An Account Receivable with respect to which the Account
Debtor has commenced a voluntary case in bankruptcy, or made an
assignment for the benefit of creditors, or if a decree or order
for relief has been entered by a court having jurisdiction over
the Account Debtor in an involuntary case in bankruptcy, or if
any petition or other application for relief in bankruptcy has
been filed against the Account Debtor, or if the
Account Debtor has failed, ceased business operations, become
insolvent or consented to or suffered a receiver, trustee,
liquidator or custodian to be appointed for it or all or
substantially all of its properties or assets unless Bank
otherwise consents to the inclusion of such Account Receivable
in the calculation of the Borrowing Base; or
g. An Account Receivable with respect to which the goods giving
rise thereto have not been shipped to the Account Debtor or the
services giving rise thereto have not been performed by Borrower
or if the Account Receivable does not otherwise represent a
final sale; or
h. An Account Receivable owing by a single Account Debtor
located outside of the United States of America, Canada or
Puerto Rico unless such Account Receivable is a Secured Foreign
Receivable or an Insured Foreign Receivable; or
i. An Account Receivable with respect to which the sale giving
rise thereto is on a bill-and-hold, sale-and-return, sale on
approval, consignment or other repurchase or return basis; or
j. An Account Receivable with respect to which the Account
Debtor is the United States of America or any department, agency
or office thereof unless Borrower assigns its right to payment
of such Account Receivable to Bank in accordance with the
Federal Assignment of Claims Act of 1940; or
k. An Account Receivable to the extent that the Account Debtor
has paid or advanced to Borrower any deposit or other advance in
respect of the payment thereof; or
l. An Account Receivable to the extent that the Account Debtor
has earned or accrued, or is due, any rebate, credit or other
allowance by Borrower; or
m. An Account Receivable to the extent of any amounts owed by
Borrower to such Account Debtor; or
n. An Account Receivable in which Bank does not possess a valid
and perfected first priority security interest; or
o. An Account Receivable owing by an Account Debtor located in
a jurisdiction in which Borrower has not complied with any laws
which might restrict Borrower's ability to collect such Account
Receivable; or
p. An Account Receivable which Bank, in its reasonable credit
judgment, excludes from the calculation of the Borrowing Base
under Section 2.1.3. hereof.
Section 1.30. "Disqualified Inventory" means:
a. Inventory in which Bank does not possess a valid and
perfected first priority security interest; or
b. Inventory which is not in good, saleable and readily usable
condition or is obsolete or unmerchantable; or
c. Inventory which is located outside of, or in transit to, the
United States of America, Canada or Puerto Rico unless Bank
otherwise consents to the inclusion of such Inventory in the
calculation of the Borrowing Base; or
d. Inventory which has been produced in violation of the Fair
Labor Standards Act and subject to the so-called "hot goods"
provisions contained in 29 U.S.C. 215 (a); or
e. Inventory with respect to which any covenant, representation
or warranty set forth in this Agreement has been breached; or
f. Inventory which Bank, in its reasonable credit judgment,
excludes from the calculation of the Borrowing Base under
Section 2.1.3. hereof.
Section 1.31. "Dividend" or "Dividends" means the payment of any
dividend or other distribution in respect of the capital stock of a corporation
in cash or other property (excepting distribution in the form of such stock) or
the redemption or acquisition of any capital stock or security of a corporation.
Section 1.32. "Distribution Covenants" means the financial covenants
set forth in Section 9.2. hereof.
Section 1.33. "Drawing" or "Drawings" means any payment(s) or
disbursement(s) made by Bank under any Letter of Credit or any Letter of Credit
Guaranty issued by Bank for the account of Borrower honoring any demand for
payment presented by the Beneficiary of such Letter of Credit or such Letter of
Credit Guaranty in accordance with the terms thereof.
Section 1.34. "Eligible Account Receivable" means an Account
Receivable which is NOT a Disqualified Account Receivable.
Section 1.35. "Eligible Inventory" means that portion of Borrower's
Finished Goods, Raw Materials and Work-in-Process which is NOT Disqualified
Inventory.
Section 1.36. "Encumbrance or "Encumbrances" means any security
interest, mortgage, pledge, lien, claim, charge,
encumbrance, title retention agreement, lessor's interest under a financing
lease or any analogous arrangements in any of Borrower's properties or assets,
intended as, or having the effect of, security.
Section 1.37. "Environmental Certificate" has the meaning set forth in
Section 5.2.11. hereof.
Section 1.38. "Environmental Laws" means any and all laws, statutes,
ordinances, rules, regulations, orders, or determinations of any Federal, state
or local governmental body, instrumentality or agency pertaining to the
environment, including without limitation, the Clean Water Act, the Clean Air
Act, as amended, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), and as may be further amended (all
together herein called "CERCLA"), the Federal Water Pollution Control
Amendments, the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), the Hazardous Materials Transportation Act of 1975, as amended, the
Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, and any comparable or similar environmental laws of the State of
Connecticut and any other state in which Borrower maintains business premises.
Likewise, the terms "hazardous substance," "release," and "threatened release"
herein referenced in connection with Environmental Laws shall have the meanings
specified in CERCLA and the terms "solid waste" and "dispose" (or "disposed")
shall have the meanings specified in RCRA; provided, however, in the event
either CERCLA or RCRA is amended so as to broaden the meaning of any term
defined therein, such broader meaning shall apply subsequent to the effective
date of such amendment.
Section 1.39. "Equipment" means all of Borrower's machinery,
equipment, office machinery, furniture, trade fixtures, conveyors, tools,
materials, storage and handling equipment, computer equipment and hardware,
including central processing units, terminals, drives, memory units, printers,
keyboards, screens, peripherals and input or output devices, automotive
equipment, trucks, molds, dies, stamps, motor vehicles and other equipment of
every kind and nature.
Section 1.40. "ERISA" means the Employee Retirement Income Security
Act of 1974 and the rules and regulations promulgated thereunder; collectively,
as the same may from time to time be supplemented or amended and remain in
effect.
Section 1.41. "Eurodollar Office" means initially, Bank's office in
Boston, Massachusetts, and thereafter such other office of offices of Bank (as
designated from time to time by notice from Bank)through which the Libor Rate is
determined. A Eurodollar Office may be, at the option of the Bank, either a
domestic or a foreign office.
Section 1.42. "Event of Default" has the meaning set forth in Section
11. hereof.
Section 1.43. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
Section 1.44. "Extension of Credit" means any Loan, Letter of Credit,
Letter of Credit Guaranty or any other loan, advance or extension of credit by
Bank to Borrower under this Agreement or the Other Documents.
Section 1.45. "Facility Fee" has the meaning set forth in Section
2.1.13. hereof.
Section 1.46. "FIFO" means the first in, first out method of valuing
inventory.
Section 1.47. "Financial Statement" or "Financial Statements" means,
as of any date, or with respect to any period, as applicable, a financial report
or reports consisting of (i) a balance sheet; (ii) an income statement; (iii) a
statement of cash flow; and (iv) a statement of changes in stockholders' equity.
Section 1.48. "Finished Goods" means that portion of Borrower's
Eligible Inventory which consists of finished goods.
Section 1.49. "Fiscal Year" means June 30 in each year.
Section 1.50. "Forecasts" has the meaning set forth in Section 4.8.
hereof.
Section 1.51. "Foreign Credit Insurer" means either (i) collectively,
the Foreign Credit Insurance Association and the Export- Import Bank of the
United States of America or (ii) or any private insurer approved in writing by
Bank.
Section 1.52. "GAAP" means generally accepted accounting principles as
set forth in Statement on Auditing Standards No. 69 entitled "The Meaning of
`Present Fairly in Conformity with Generally Accepted Accounting Principles' in
the Independent Auditor's Report" issued by the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board that are applicable to the circumstances as of the date of
determination.
Section 1.53. "Governmental Authority" means any Federal, state, local
or foreign court, commission or tribunal, or governmental, administrative or
regulatory agency, department, authority, instrumentality or other body.
Section 1.54. "Government Obligations" means securities which are
general obligations of the United States of America or which are unconditionally
guaranteed by the United States of America as to timely payment of principal and
interest.
Section 1.55. "Government Contract" means any contract for the purchase of
goods or services by the United States of America or any department, agency or
office thereof.
Section 1.56. "Guarantees" means, as applied to Borrower and its
Subsidiaries, all guarantees, endorsements or other contingent or surety
obligations with respect to obligations of any other Person, whether or not
reflected on the consolidated balance sheet of Borrower and its Subsidiaries,
including any obligation to furnish funds, directly or indirectly (whether by
virtue of partnership arrangements, by agreement to keep-well or otherwise),
through the purchase of goods, supplies or services, or by way of stock
purchase, capital contribution, advance or loan, or to enter into a contract for
any of the foregoing, for the purpose of payment of obligations of any other
Person.
Section 1.57. "Hazardous Materials" means (i) any chemical, compound,
material, mixture or substance that is now or hereafter defined as or included
in the definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous waste", "restricted hazardous waste", or "toxic
substances" or terms of similar import under any applicable Federal, state or
local law or under the regulations adopted or promulgated pursuant thereto,
including, without limitation, Environmental Laws; (ii) any oil, petroleum or
petroleum derived substance, any drilling fluids, produced waters and other
wastes associated with the exploration, development or production of crude oil,
any flammable substances or explosives, any radioactive materials, any hazardous
wastes or substances, any toxic wastes or substances or any other materials or
pollutants which (a) could pose a hazard to any properties or assets of Borrower
or its Subsidiaries or (b) could cause any of such properties or assets to be in
violation of any Environmental Laws; (iii) asbestos in any form, urea
formaldehyde foam insulation, electrical equipment which contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty (50) parts per million; and (iv) any other chemical, material or
substance, exposure to, or disposal of, which is now or hereafter prohibited,
limited or regulated by any Federal, state or local governmental body,
instrumentality or agency.
Section 1.58. "Indebtedness" means, as applied to any Person, without
duplication: (a) all indebtedness for borrowed money; (b) that portion of
obligations with respect to Capital Leases that is properly classified as a
liability on a balance sheet in conformity with GAAP; (c) notes payable and
drafts accepted representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six months from the date the obligation is incurred or is evidenced by
a note or similar written instrument; and (e) all indebtedness secured by any
Encumbrance on any property or asset owned or held by that Person regardless of
whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person.
Section 1.59. "Insured Foreign Receivable" means an Account Receivable
(other than a Secured Foreign Receivable) that arises from a sale of goods to an
Account Debtor having its principal assets or place of business outside of the
United States of America, Canada or Puerto Rico, so long as a Foreign Credit
Insurer has assumed the risk of nonpayment due to the Account Debtor's financial
inability to pay and due to foreign currency restrictions and political matters
in the country of such Account Debtor, and Borrower has promptly and properly
submitted to the Foreign Credit Insurer proof of loss with respect to all
Accounts Receivable of such Account Debtor for which a claim could be submitted
under the foreign credit insurance policy insuring Borrower's sales to such
Account Debtor.
Section 1.60. "Interest Period" means,
(a) with respect to each Libor Loan, the period commencing on the
date of the making or continuation of, or conversion to, such Libor
Loan and ending thirty (30), sixty (60), ninety (90) or one hundred
eighty (180) days (or such other period of time as Bank may offer from
time to time) thereafter, as Borrower may elect in the applicable
Notice; and
(b) with respect to each Matched Rate Loan, the period commencing on
the date of the making or continuation of or conversion to such
Matched Rate Loan and ending, in the case of a Revolving Loan, on the
Revolving Credit Termination Date, in the case of the Term Loan, on
the Maturity Date or, in the case of any Loan, on such earlier date as
Borrower may elect in the applicable Notice; and
(c) with respect to each Prime Rate Loan, the period commencing on
the date of the making or continuation of, or conversion to, such
Prime Rate Loan and ending, in the case of a Revolving Loan, on the
Revolving Credit Termination Date, in the case of the Term Loan, on
the Maturity Date or, in the case of any Loan, on such earlier date as
the Borrower may elect in the applicable Notice;
provided, however, that:
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(i) any Interest Period (other than an Interest Period
determined pursuant to clause (iii) below) that would
otherwise end on a day that is not a Business Day shall be
extended to the next succeeding Business Day unless, in the
case of Libor Loans, such Business Day falls in the next
calendar month, in which
case such Interest Period shall end on the immediately
preceding Business Day;
(ii) any Interest Period applicable to a Libor Loan that begins
on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall,
subject to clause (iii) below, end on the last Business Day
of a calendar month;
(iii) any Interest Period applicable to a Revolving Loan that
would otherwise end after the Revolving Credit Termination
Date shall end on the Revolving Credit Termination Date, and
any Interest Period applicable to the Term Loan that would
otherwise end after the Maturity Date of the Term Loan shall
end on Maturity Date; and
(iv) no Interest Period applicable to the Term Loan shall include
a principal repayment date for such Term Loan unless an
aggregate principal amount of Loans at least equal to the
principal amount due on such principal repayment date shall
be Prime Rate Loans or other Loans having Interest Periods
ending on or before such date; and
(v) notwithstanding clause (iii) and (iv) above, no Interest
Period applicable to a Libor Loan or a Matched Rate Loan
shall have a duration of less than thirty (30) days and if
any Interest Period applicable to such Loans would be for a
shorter Interest Period, such Interest Period shall not be
available hereunder.
Section 1.61. "Inventory" means all goods, merchandise, raw materials,
supplies, work in process, finished goods and other tangible personal property
held by Borrower for processing, sale or lease or furnished or to be furnished
by Borrower under contracts of service or to be used or consumed in Borrower's
business.
Section 1.62. "Inventory Cap" means the amount of FIVE MILLION AND NO/100
DOLLARS ($5,000,000.00) during the period commencing as of the Closing Date and
continuing through October 31, 1995, SIX MILLION AND NO/100 DOLLARS
($6,000,000.00) during the period commencing as of November 1, 1995 and
continuing through October 31, 1996 and SEVEN MILLION AND NO/100 DOLLARS
($7,000,000.00) during the period commencing as of November 1, 1996 and
continuing through the Revolving Credit Termination Date.
Section 1.63. "Investment" means, as applied to Borrower and its
Subsidiaries, the purchase or acquisition of (i) any share of capital stock,
partnership interest, evidence of indebtedness or other equity security of any
other Person, or (ii) all or any material portion of the properties and assets
of any Person, any loan, advance or extension of credit to, or contribution to
the capital of, any other Person, any real estate held for sale or investment,
any commodities futures contracts held other than in connection with bona fide
hedging transactions, any other investment in any other Person, and the making
of any commitment or acquisition of any option to make an Investment.
Section 1.64. "Letter of Credit" or "Letters of Credit" means any
letter(s) of credit issued by Bank for the account of Borrower or its
Subsidiaries and shall include any Letter of Credit as it may be amended,
modified or extended from time to time.
Section 1.65. "Letter of Credit Application" has the meaning set forth in
Section 2.2.2. hereof.
Section 1.66. "Letter of Credit Guaranty" means a guaranty issued by Bank
or a Bank Affiliate to guaranty the payment of a letter of credit to a Bank
which has issued such letter of credit for the account of Borrower or a
Subsidiary of Borrower.
Section 1.67. "Libor Base" means the rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) shown on the display referred to as the
"LIBO page" (or any display substituted therefor) of the Reuters U.S. Domestic
Money Service transmitted through the Reuters monitor system as being the
respective rates at which U.S. dollar deposits would be offered two (2) Business
Days prior to the beginning of the relevant Interest Period by the principal
London offices of each of the banks named thereon to major banks in the London
interbank Eurodollar market where the Eurodollar Office is located at the
Relevant Local Time for delivery on the first day of such Interest Period for
the number of days comprised therein and in the amount of the requested Loan.
Section 1.68. "Libor Loan" means any Revolving Loan or any portion of the
Term Loan bearing interest at a rate determined by reference to the Libor Rate.
Section 1.69. "Libor Rate" means, with respect to each Interest Period,
the rate per annum equal to (i) the Libor Base for such Interest Period divided
by (ii) a percentage equal to one hundred percent (100%) minus the maximum
reserve percentage applicable during such interest period under regulations
issued from time to time by the Board of Governors of the Federal Reserve System
(the "Board") for determining the maximum reserve requirements (including,
without limitation, any basic, supplemental, marginal or emergency reserve
requirements) for Bank in respect of liabilities or assets consisting of or
including Eurocurrency liabilities (as defined in Regulation D of the Board)
having a term equal to the Interest Period (Bank acknowledging that
as of the Closing Date there are no presently effective reserve requirements).
Section 1.70. "Limited Guarantor" means ARISTOTLE SUB, INC., a Delaware
corporation, having its chief executive office located at 129 Church Street, New
Haven, Connecticut.
Section 1.71. "Limited Guaranty" has the meaning set forth in Section
3.2.2. hereof.
Section 1.72. "Line of Credit" has the meaning set forth in Section 2.1.1.
hereof.
Section 1.73. "Loan" means any Revolving Loan or the Term Loan Loan.
Section 1.74. "Loans" means each Revolving Loan and the Term Loan.
Section 1.75. "Loan Account" means the account established by Borrower
with Bank or a Bank Affiliate for purposes of administering the Line of Credit.
Section 1.76. "Lockbox Account" has the meaning set forth in Section
10.1.1. hereof.
Section 1.77. "Matched Rate" means the fixed rated of interest offered by
Bank in its sole discretion for loans having similar maturities to that
requested by Borrower in the applicable Notice.
Section 1.78. "Matched Rate Loan" means any Revolving Loan or any portion
of the Term Loan bearing interest at a rate determined by reference to the
Matched Rate.
Section 1.79. "Material Adverse Effect" means (i) a material adverse
effect upon the business, operations, properties, assets or condition (financial
or otherwise) of Borrower and its Subsidiaries, taken as a whole, or (ii) a
material adverse effect on the ability of Borrower to perform its obligations
under this Agreement, the Notes or the Other Documents or the ability of Bank to
enforce or collect any of the Obligations. In determining whether any individual
event would result in a Material Adverse Effect, notwithstanding that such event
does not of itself have such an effect, a Material Adverse Effect shall be
deemed to have occurred if the cumulative effect of such event and all other
then existing events would result in a Material Adverse Effect.
Section 1.80. "Maturity Date" means October 31, 1997.
Section 1.81. "Note" means the Revolving Credit Note or the Term Note.
Section 1.82. "Notes" means the Revolving Credit Note and the Term Note.
Section 1.83. "Notice" means a Notice of Borrowing or a Notice of
Continuation or Conversion.
Section 1.84. "Notice of Borrowing" has the meaning set forth in Section
2.1.3. hereof.
Section 1.85. "Notice of Continuation or Conversion" shall have the
meaning set forth in Section 2.4.3. hereof.
Section 1.86. "Obligations" means any and all loans, advances,
indebtedness, liabilities, obligations, covenants or duties of Borrower to Bank
of any kind or nature, including obligations to pay money and to perform acts or
refrain from taking action, whether arising under a loan, lease, credit card,
line of credit, letter of credit, guaranty, indemnity, confirmation, acceptance,
currency exchange, interest rate protection arrangement, overdraft or other type
of financing arrangement, and any and all extensions and renewals thereof, and
modifications and amendments thereto, whether in whole or in part, whether any
of the foregoing are direct or indirect, joint or several, absolute or
contingent under, due or to become due, now existing or hereafter arising,
whether any present or future agreement or instrument, and whether or not
evidenced by a writing and specifically including but not being limited to (i)
the unpaid principal amount outstanding at any time under the Notes, plus all
accrued and unpaid interest thereon, together with all fees, expenses, including
attorneys' fees, penalties, and other amounts owing by or chargeable to by
Borrower under this Agreement, the Notes or the Other Documents and (ii) unpaid
Reimbursement Obligations.
Section 1.87. "Other Documents" means the Collateral Disclosure List, the
Security Agreement, and the Letter of Credit Applications, all of even date
herewith and any other document, agreement or instrument executed by Borrower in
connection with any Extension of Credit and any and all amendments,
modifications and supplements thereto.
Section 1.88. "Outstanding Amount" means, as of any date as of which the
amount thereof shall be determined, the outstanding principal amount of the Line
of Credit as of the date of determination.
Section 1.89. "Overadvances" has the meaning set forth in Section 2.1.2.
hereof.
Section 1.90. "Overadvance Limit" means, as of any date as of which the
amount thereof shall be determined, an amount not to exceed FIVE HUNDRED
THOUSAND AND NO/100 DOLLARS ($500,000.00) during the period commencing as of the
Closing Date and continuing through June 30, 1995, ONE MILLION AND NO/100
DOLLARS ($1,000,000.00) during the period commencing as of July 1, 1995 and
continuing through June 30, 1996 and ONE MILLION FIVE HUNDRED THOUSAND AND
NO/100 DOLLARS ($1,500,000.00) during the period commencing as of July 1, 1996
and continuing through the Revolving Credit Termination Date.
Section 1.91. "PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to all or part of its functions under ERISA.
Section 1.92. "Performance Covenants" means the financial covenants set
forth in Section 9.1. hereof.
Section 1.93. "Permitted Encumbrances" has the meaning set forth in
Section 8.5. hereof.
Section 1.94. "Permitted Indebtedness" has the meaning set forth in
Section 8.1. hereof.
Section 1.95. "Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture or other entity of whatever nature, whether public or private.
Section 1.96. "Plan" means, at any time, an employee pension or other
benefit plan that is subject to Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Code and is either (i) maintained by
Borrower or any member of the Controlled Group for employees of Borrower or any
member of the Controlled Group or (ii) if such plan is established, maintained
pursuant to a collective bargaining agreement or any other arrangement under
which more than one (1) employer makes contributions and to which Borrower or
any member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five (5) plan years made
contributions.
Section 1.97. "Post Closing Matters" has the meaning set forth on Section
11.1.(l) hereof.
Section 1.98. "Prime Rate" means a base interest rate used by Bank for
loans making reference thereto and is not necessarily the lowest rate at which
Bank may lend money and is neither tied to any external rate of interest nor is
it a rate charged by Bank to any particular class or category of customer.
Section 1.99. "Prime Rate Loan" means any Revolving Loan or portion of the
Term Loan bearing interest determined by reference to the Prime Rate.
Section 1.100. "Qualifications" means, with respect to any report of
independent public accountants covering any Financial Statements of Borrower and
its Subsidiaries, a qualification to such report (such as a "subject to" or
"except for" statement therein) (i) resulting from a limitation on the scope of
examination of the Financial Statements or the underlying data; (ii) as to the
capability of the Person whose Financial Statements are certified to continue
operations as a going concern; or (iii) which could be eliminated by changes in
the Financial Statements or notes thereto covered by such report (such as, by
the creation of or increase in a reserve or a decrease in the carrying value of
assets) and which if so eliminated by the making of any such change and after
giving effect thereto would constitute of and Event of Default; provided that
neither of the following shall constitute a Qualification: (a) a consistency
exception relating to a change in accounting principles with which the
independent public accountants for the Person whose Financial Statements are
being examined have concurred or (b) a qualification relating to the outcome or
disposition of any uncertainty, including but not limited to threatened
litigation, pending litigation being contested in good faith, pending or
threatened claims or other contingencies, the impact of which litigation,
claims, contingencies or uncertainties cannot be determined with sufficient
certainty to permit certification in such Financial Statements.
Section 1.101. "Qualified Investments" means, as applied to Borrower and
its Subsidiaries, investments in (i) notes, bonds or other obligations of the
United States of America or any agency thereof that as to principal and interest
constitute direct obligations of or are guaranteed by the United States of
America; (ii) certificates of deposit or other deposit instruments or accounts
of Banks or trust companies organized under the laws of the United States or any
state thereof that have capital and surplus of at least ONE HUNDRED MILLION AND
NO/100 DOLLARS ($100,000,000.00); (iii) commercial paper that is rated not less
than prime-one or A-1 or their equivalents by Moody's Investors Service, Inc. or
Standard & Poor's Corporation, respectively, or their successors; and (iv) any
repurchase agreement secured by any one (1) or more of the foregoing.
Section 1.102. "Raw Materials" means that portion of Borrower's Eligible
Inventory which consists of raw materials.
Section 1.103. "Reimbursement Obligations" means, as of any date as of
which the amount thereof shall be determined, the aggregate obligation of
Borrower, as of such date, to reimburse Bank in respect of Letters of Credit in
accordance with Section 2.2.3. hereof.
Section 1.104. "Release" means any release, emission, disposal, leaching,
or migration into the environment, (including, without limitation, the
abandonment or disposal of any barrels, containers, or other closed receptacles
containing any Hazardous Materials), or into or out of any property owned,
occupied or used by Borrower.
Section 1.105. "Relevant Local Time" means, with respect to Libor Loans,
10:00 a.m. local time in the place where the Eurodollar Office is located.
Section 1.106. "Reportable Event" means any of the events described in
Section 4043(b) of ERISA.
Section 1.107. "Revolving Credit Period" means the period beginning on the
Closing Date and extending through and including the Revolving Credit
Termination Date or such earlier date on which the obligation of Bank to make
Revolving Loans is terminated or the Commitment Amount is reduced to zero (0) in
accordance with the terms hereof.
Section 1.108. "Revolving Credit Termination Date" means October 31, 1997,
and any subsequent date to which the Revolving Credit Termination Date may be
extended under Section 2.1.10. hereof.
Section 1.109. "Revolving Credit Note" has the meaning set forth in Section
2.1.6. hereof.
Section 1.110. "Revolving Loan" or "Revolving Loans" means the loan(s) and
advance(s) which Borrower requests or is deemed to have requested pursuant to
Section 2.1.1. hereof, and to the extent permitted under this Agreement, Section
2.1.2. hereof.
Section 1.111. "Secured Foreign Receivable" means an Account Receivable
(other than an Insured Foreign Receivable) that arises from the sale of goods to
an Account Debtor having its principal assets or place of business outside of
the United States of America, Canada or Puerto Rico so long as Bank has received
in respect of such Account Receivable a letter of credit or similar guaranty of
payment in form and substance and issued or confirmed by a financial institution
satisfactory to Bank and its legal counsel that has not expired, been revoked or
terminated, and has been pledged to, and had the proceeds thereof assigned to,
Bank.
Section 1.112. "Security Agreement" means the security agreement executed
and delivered by Borrower in favor of Bank as of April 11, 1994, as it may be
amended, modified, confirmed or supplemented from time to time.
Section 1.113. "Security Value of Accounts Receivable" means, as of any
date as of which the amount thereof shall be determined, eighty percent (80%) of
Borrower's Eligible Account Receivables as of the date of determination.
Section 1.114. "Security Value of Inventory" means, as of any date as of
which the amount thereof shall be determined, the lesser of (i) the sum of
twenty percent (20%) of Borrower's Work-in-Process as of the date of
determination plus fifty percent (50%) of Borrower's Raw Materials and Finished
Goods as of the date of determination, all of the foregoing valued on a FIFO
basis at the lower of cost or market value, or (ii) the Inventory Cap in effect
as of the date of determination.
Section 1.115. "Solvent" means, when used with respect to any Person, that
as of the date as to which the Person's solvency is to be determined:
(a) the fair saleable value of such Person's properties and assets is
in excess of the total amount of its liabilities (including contingent
liabilities) as they become absolute and matured;
(b) it has sufficient capital to conduct its business; and
(c) it is able to meet its debts as they mature.
Section 1.116. "Stock Pledge" means the stock pledge agreement to be
executed and delivered by the Limited Guarantor in favor of Bank, as it may be
amended, modified or supplemented from time to time.
Section 1.117. "Subordinated Indebtedness" means Indebtedness, whether now
existing or hereafter arising, with respect to which the payment of the
principal of and interest on is expressly subordinated in right of payment, in
form and on terms approved by Bank in writing, to the prior payment of the
Obligations.
Section 1.118. "Subsidiary" means any Person of which fifty percent (50%)
or more of the ordinary voting power for the election of a majority of the
members of the board of directors or other governing body of such Person is held
or controlled by Borrower or a Subsidiary of Borrower; or any other such
organization the management of which is directly or indirectly controlled by
Borrower or Subsidiary of Borrower through the exercise of voting power or
otherwise; or any joint venture, whether incorporated or not, in which Borrower
has a fifty percent (50%) or more ownership interest. The term "control" (and
its correlative meanings "controlled by" and "under common control with") as
used in this Section 1.118. means the possession, directly or indirectly, of the
power to direct, or cause the direction of, the management and policies of a
Person, whether through ownership of voting stock, by contract or otherwise.
Section 1.119. "Term Note" has the meaning set forth in Section 2.3.2.
hereof.
Section 1.120. "Term Loan" has the meaning set forth in Section 2.3.1.
hereof.
Section 1.121. "Unused Portion" means for any month the average daily
difference between the Commitment Amount and the aggregate principal amount of
Revolving Loans, Credits Outstanding and any amounts deemed to be Revolving
Loans, whether now existing or hereafter arising.
Section 1.122. "Uniform Customs and Practice" means the Uniform Customs and
Practice for Documentary Credits (1993) Revision, International Chamber of
Commerce Publication No. 500.
Section 1.123. "Work-in-Process" means as of any date of which the amount
thereof shall be determined, that portion of Borrower's Eligible Inventory which
constitutes work-in-process.
SECTION 2. THE CREDIT FACILITIES
Section 2.1. Line of Credit.
Section 2.1.1. Revolving Loans. Upon the execution of this Agreement, Bank
agrees to extend to Borrower a line of credit, so that as long as no Default or
Event of Default has occurred and is continuing, Borrower may borrow, repay and
reborrow, on a revolving basis in one (1) or more Revolving Loans from time to
time prior to the close of business on the Revolving Credit Termination Date,
amounts which together with the amount of (i) Credits Outstanding and (ii)
unpaid Reimbursement Obligations deemed to be Revolving Loans under this Section
2.1.1., do not exceed in the aggregate at any one time outstanding the lesser of
the Borrowing Base or the Commitment Amount in effect from time to time (the
"Line of Credit"). Bank shall have the right, in its reasonable credit judgment,
to deem any unpaid Reimbursement Obligations and any other payments, deposits,
guaranties or indemnifications made by Bank for the account of Borrower under
any letter of credit, reimbursement agreement, acceptance, guaranty or similar
instrument to be Revolving Loans, and Bank may, in its reasonable credit
judgment, establish such reserves as it deems appropriate against any present or
future obligation of Bank to make payment, to deposit or to perform in respect
of any of the same. Bank may, in its reasonable credit judgment and upon notice
to Borrower, fund such reserves and/or charge the same to the Loan Account at
such time as it deems appropriate. Notwithstanding any provision of this
Agreement to the contrary, all Revolving Loans, including Overadvances, and any
unpaid Reimbursement Obligations and other payments, deposits, guaranties or
indemnifications deemed to be Revolving Loans by Bank hereunder, shall
constitute one obligation of Borrower to Bank, secured by Bank's security
interest in the Collateral.
Section 2.1.2. Overadvances. Notwithstanding the provisions of Section
2.1.1. hereof, the Borrower may from time to time request, and Bank shall make,
Revolving Loans which exceed the available Borrowing Base ("Overadvances") but
which, in addition to all Revolving Loans, Credits Outstanding and any unpaid
Reimbursement Obligations and other payments, deposits, guaranties or
indemnifications deemed to be Revolving Loans made under Section 2.1.1. hereof
in respect of the Borrowing Base, do not exceed the Commitment Amount in effect
from time to time; provided, however, that the aggregate outstanding principal
amount of Overadvances shall in no event exceed the Overadvance Limit in effect
from time
to time and provided, further, that as of the first day of each Fiscal Year,
Borrower must reduce the amount of Overadvances to zero (0) and maintain such
zero (o) balance for thirty (30) days.
Section 2.1.3. Notice of Borrowing. Whenever Borrower desires to obtain a
Revolving Loan, Borrower shall notify Bank (which notice shall be irrevocable in
the case of a Libor Loan or a Matched Rate Loan) by telex, telegraph or
telephone received no later than 10:00 a.m. (Hartford, Connecticut time) on the
date on which the requested Revolving Loan is to be made as a Prime Rate Loan,
received no later than 10:00 a.m. (Hartford, Connecticut time) on the date one
(1) Business Day before the day on which the requested Revolving Loan is to be
made as a Matched Rate Loan, and received no later than 10:00 a.m. (Hartford,
Connecticut time) on the date three (3) Business Days before the day on which
the requested Revolving Loan is to be made as a Libor Loan. Such notice shall
specify: (i) the effective date and amount of each Revolving Loan, subject to
the limitations set forth in Section 2.1.1. and Section 2.1.2. hereof; (ii) the
interest rate option to be applicable thereto; and (iii) the duration of the
applicable Interest Period, if any (subject to the provisions of the definition
of Interest Period and Section 2.4.4. hereof). Each such notification (a "Notice
of Borrowing") shall be immediately followed by a written confirmation thereof
by Borrower in substantially the form of Exhibit A attached hereto; provided,
however, that if such written confirmation differs in any material respect from
the action taken by Bank, the records of Bank shall control absent manifest
error. Subject to the terms and conditions of this Agreement, Bank shall make
each Revolving Loan on the effective date specified therefor by crediting the
amount of such Revolving Loan to the Loan Account.
Section 2.1.4. Calculation of Borrowing Base. The Borrowing Base as of any
time shall be calculated by Bank using the most recent Borrowing Base
Certificate and other financial reports delivered by Borrower to Bank under
Section 7.1. hereof. Bank shall have the right, in its reasonable credit
judgment, and at any time and for any reason, to reduce the dollar amount of (i)
Eligible Accounts Receivable by the amount of discounts, credits, allowances and
returns of any kind then outstanding, issued, granted, owing, accrued or liable
to be accrued or (ii) Eligible Inventory by the amount of special order goods,
advertising, packaging, parts, supplies, tooling or similar items. Any Accounts
Receivable or Inventory which have been so excluded as well as any Accounts
Receivable or Inventory which are or have become Disqualified Accounts
Receivable or Disqualified Inventory for any other reason shall remain as
collateral for the Obligations notwithstanding such exclusion or
disqualification.
Section 2.1.5. Reduction of Commitment Amount. Borrower may from time to
time, by written notice delivered to Bank at least five (5) Business Days prior
to the date of the requested reduction, reduce by integral multiples of ONE
HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) any unborrowed portion of the
Commitment Amount. No reduction of the Commitment Amount shall be subject to
reinstatement.
Section 2.1.6. Revolving Credit Note. Revolving Loans shall be evidenced by
a promissory note executed by Borrower in substantially the form attached hereto
as Exhibit B (the "Revolving Credit Note"), with all blanks therein
appropriately completed, payable to the order of Bank, which Revolving Credit
Note is hereby incorporated herein by reference and made a part hereof.
Section 2.1.7. Payment of Principal. The aggregate unpaid principal amount
of all Revolving Loans, together with accrued and unpaid interest thereon, as
evidenced by the Revolving Credit Note, shall, unless sooner accelerated by Bank
following the occurrence of an Event of Default, be repaid by Borrower on the
Revolving Credit Termination Date.
Section 2.1.8. Record of Revolving Loans. Each Revolving Loan shall be
recorded on the books maintained by Bank with respect to the Loan Account by
Bank. Bank shall also record on such books all payments made by Borrower on the
Revolving Credit Note, interest and expenses and other appropriate debits and
credits as herein provided. Bank shall from time to time render and send to
Borrower a statement of the Loan Account showing the outstanding aggregate
principal balance of the Revolving Credit Note, together with interest and other
appropriate debits and credits as of the date of the statement. The statement of
Loan Account shall be considered correct in all respects and accepted by and be
conclusively binding upon Borrower unless Borrower makes specific written
objections thereto within sixty (60) days after the date the statement of the
Loan Account is received or later presents objective evidence demonstrating a
manifest error by Bank in the preparation of the statement of the Loan Account.
Bank may also record and endorse on Schedule A attached to and forming a part of
the Revolving Credit Note appropriate notations evidencing (i) the date and
amount of each Revolving Loan to be evidenced by the Revolving Credit Note and
(ii) the date and amount of each payment of principal made by Borrower with
respect thereto; provided, however, that the failure of Bank to make such
notation shall not limit or otherwise affect the obligations of Borrower under
the Revolving Credit Note or this Agreement. Bank is hereby irrevocably
authorized by Borrower to so endorse such Schedule A and to attach to and make a
part of the Revolving Credit Note a continuation of such Schedule A as and when
required.
Section 2.1.9. Termination. The Line of Credit and Bank's obligation to
lend thereunder shall terminate on the Revolving Credit Termination Date, at
which point all of the sums due and owing under the Line of Credit shall be
immediately due and payable, unless the Line of Credit is renewed in accordance
with Section 2.1.10. hereof.
Section 2.1.10. Renewal. Bank may, in its sole and absolute discretion,
upon written agreement with Borrower, renew
the Line of Credit for additional periods of time on such terms and conditions
as it may elect. In the event of the renewal of the Line of Credit, the
Revolving Credit Termination Date shall be extended for a corresponding period.
Section 2.1.11. Use of Proceeds. The proceeds of Revolving Loans may be
used by the Borrower for general working capital purposes and for any other
purpose not prohibited under this Agreement.
Section 2.1.12. Mandatory Prepayment. If at any time the outstanding
aggregate principal amount of all Revolving Loans shall exceed the Borrowing
Base plus the amount of the Overadvance Limit in effect from time to time, then
any such excess amount shall, at Bank's election, be due and payable on demand.
Section 2.1.13. Facility Fee. In consideration of the maintenance of
the Line of Credit, Borrower hereby agrees to pay to Bank commencing November
15, 1994 and continuing on the fifteenth (15th) day of each succeeding month a
facility fee equal to one-half of one percentage point (.50%) of the amount of
the Unused Portion for the period commencing on the fifteenth (15th) day of the
preceding month and ending on the fourteenth (14th) day of the month in which
the payment is due times a fraction, the numerator of which is the actual number
of days in such period and the denominator of which is 360 (the "Facility Fee").
Section 2.1.14. Collection Fee. In consideration of Bank crediting
Borrower with payments received from Account Debtors before the collection of
such payments in good funds as more particularly set forth in Section 10.1.1.
hereof, Borrower shall pay Bank on the fifteenth (15th) day of each month a
collection fee equal to interest accrued for two (2) days at the rate equal to
the Prime Rate plus one- quarter of one percentage point (.25%) on the aggregate
of all payments received by Bank in respect to Accounts Receivable during the
preceding month (the "Collection Fee").
Section 2.2. Letters of Credit.
Section 2.2.1. Issuance. Upon the execution of this Agreement, and as
long as no Default or Event of Default has occurred and is continuing, Bank,
either directly or through a Bank Affiliate, hereby agrees to issue, extend,
amend or renew Letters of Credit or Letter of Credit Guaranties from time to
time after the Closing Date, either directly or through a Bank Affiliate, for
the account of Borrower; provided, however, that the amount of each requested
Letter of Credit or Letter of Credit Guaranty, when added to the aggregate
amount of all Revolving Loans, all Credits Outstanding and all unpaid
Reimbursement Obligations deemed to be Revolving Loans and other payments,
deposits, guaranties or indemnifications deemed to be Revolving Loans under
Section 2.1.1. hereof, does not exceed the lesser of the Borrowing Base or the
Commitment Amount in effect from time to time and provided, further, that the
aggregate amount of Credits Outstanding and
unpaid Reimbursement Obligations (after taking into account the amount of the
requested Letter of Credit or Letter of Credit Guaranty) shall not exceed ONE
MILLION AND NO/100 DOLLARS ($1,000,000.00) Notwithstanding the foregoing, the
issuance of each Letter of Credit or Letter of Credit Guaranty other than
documentary letters of credit shall be made on a case by case basis in the sole
and absolute discretion of Bank.
Section 2.2.2. Application. Borrower shall request the issuance of a
Letter of Credit or Letter of Credit Guaranty by its execution and delivery to
Bank of an application in such form as Bank may require from time to time (the
"Letter of Credit Application"). If the Letter of Credit Application is
acceptable to Bank, in its sole and absolute discretion, then Bank shall prepare
the Letter of Credit or the Letter of Credit Guaranty in accordance with the
instructions set forth in the Letter of Credit Application and, provided that
there is adequate availability under the Line of Credit as set forth in Section
2.2.1. above, issue the Letter of Credit or the Letter of Credit Guaranty to the
Beneficiary thereof unless otherwise instructed by Borrower. Borrower
acknowledges and agrees that Bank shall have no obligation to issue any Letter
of Credit or any Letter of Credit Guaranty which provides for an expiration date
later than thirty (30) days prior to the Revolving Credit Termination Date.
Section 2.2.3. Reimbursement. Borrower hereby acknowledges and agrees
that it shall be obligated to reimburse Bank in respect of obligations under
Letters of Credit and Letter of Credit Guaranties:
(a) except as otherwise provided in this Agreement, or the applicable
Letter of Credit Application, on each date that any Drawing is honored by
Bank or a Bank Affiliate, Bank or a Bank Affiliate or otherwise makes a
payment with respect thereto, and only to the extent that such Drawing is
not deemed to be a Revolving Loan under Section 2.1.1. hereof, (i) the
amount paid by Bank or a Bank Affiliate under or with respect to such
Drawing, and (ii) the amount of any taxes, fees, charges or other
reasonable costs and expenses whatsoever incurred by Bank or any Bank
Affiliate in connection with any payment made by Bank or a Bank Affiliate
under, or with respect to, such Letter of Credit or the Letter of Credit
Guaranty;
(b) upon the reduction (but not termination) of the Commitment Amount to
an amount less than the sum of (i) all Revolving Loans and amounts deemed
to be Revolving Loans as of such date and Credits Outstanding as of such
date plus (ii) the amount of unpaid Reimbursement Obligations as of such
date, an amount equal to any such difference, which amount shall be held by
Bank as cash collateral for all Reimbursement Obligations; and
(c) upon the termination of the Commitment Amount, or the acceleration of
the Reimbursement Obligations in accordance
with Section 12.1. hereof, an amount equal to the sum of (i) Credits
Outstanding as of such date plus (ii) the amount of unpaid Reimbursement
Obligations as of such date, which amount shall be held by Bank as cash
collateral for all Reimbursement Obligations.
Borrower shall pay interest on any amounts due and payable under this Section
2.2.3. from the date such amounts are payable (whether at maturity, by
acceleration or otherwise) until paid in full at the rate of interest applicable
to Prime Rate Loans for three (3) days and, thereafter, at the Default Rate
applicable to Prime Rate Loans.
Section 2.2.4. Debit to Line of Credit. Bank shall be entitled, in its
sole and absolute discretion, to debit the amount of any Drawing as well as any
fees, costs and expenses incurred by Bank or a Bank Affiliate in connection with
such Drawing against the Line of Credit and deem such amount to be Revolving
Loans under Section 2.1.1. hereof.
Section 2.2.5. Termination of Obligation. The obligation of Bank to
issue Letters of Credit or Letter of Credit Guaranties under this Section 2.2.
shall terminate thirty (30) days prior to the Revolving Credit Termination Date
or any renewal thereof.
Section 2.2.6. Obligations Absolute. The obligations of Borrower with
respect to Letters of Credit or Letter of Credit Guaranties issued under this
Agreement shall be unconditional and irrevocable, shall be paid strictly in
accordance with the terms of this Agreement under all circumstances and shall
not be reduced by: (a) any lack of validity or enforceability of any document
executed between Borrower and a Beneficiary; (b) the existence of any claim,
set-off, defense or other right which Borrower may have at any time against a
Beneficiary or any transferee of a Letter of Credit or Letter of Credit
Guaranties (or any Persons for which such Beneficiary or any such transferee may
be acting) or against any other Person, whether in connection with this
Agreement, the transactions contemplated herein or any unrelated transaction;
and (c) any statement or any other document presented under a Letter of Credit
or Letter of Credit Guaranties proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect, unless Bank had actual knowledge (without any investigation
having been made) that such statement or other document was forged, fraudulent,
invalid or insufficient.
Section 2.2.7. Indemnification. Borrower hereby indemnifies and holds
Bank, and its directors, officers, employees and agents (collectively, the "Bank
Agents"), harmless from and against any and all claims, damages, losses,
liabilities, costs or expenses (including reasonable legal fees and expenses)
which Bank or any Bank Agents may incur or which may be claimed against Bank by
any Person by reason of or in connection with the execution and delivery or
transfer of, or payment or failure to make lawful
payment under, a Letter of Credit or Letter of Credit Guaranties; provided,
however, that Borrower shall not be required to indemnify Bank or any Bank
Agents for any claims, damages, losses, liabilities, costs or expenses to the
extent, but only to the extent, caused by Bank's (i) failure to act in good
faith and in conformity with such laws, regulations or commercial or banking
customs, as Bank may reasonably deem to be applicable, or (ii) honoring a
Drawing on a Letter of Credit or Letter of Credit Guaranty issued hereunder when
at the time of such honoring Bank had actual knowledge (without any
investigation having been made) that such Drawing was forged, fraudulent,
invalid or insufficient. Nothing in this Section 2.2.7. is intended to limit
Borrower's obligations hereunder. Without prejudice to the survival of any other
obligation of Borrower hereunder, the indemnities and obligations of Borrower
contained in this Section 2.2.7. shall survive the payment in full of the
Obligations. In case any claim is asserted or any action or proceeding is
brought against Bank or any Bank Agents, Bank or any such Bank Agents shall
promptly notify Borrower of such claim, action or proceeding and Borrower shall
resist, settle or defend with counsel reasonably acceptable to Bank, such claim,
action or proceeding. If, within ten (10) days of Borrower's receipt of such
notice, Borrower does not commence and continue to prosecute the defense of such
claim, action or proceeding, Bank, or any such Bank Agents, may retain legal
counsel to represent it in such defense and Borrower shall indemnify Bank, or
any such Bank Agents, for the reasonable fees and expenses of such legal
counsel. Subject to the foregoing, Bank shall cooperate and join with Borrower,
at the expense of Borrower, as may be required in connection with any action
taken or defended by Borrower.
Section 2.2.8. Liability of Bank. Any action, inaction or omission on
the part of Bank under or in connection with a Letter of Credit or Letter of
Credit Guaranty issued hereunder or related instruments or documents, if in good
faith and in conformity with such laws, regulations or commercial or banking
customs as Bank may reasonably deem to be applicable, shall be binding upon
Borrower, shall not place Bank under any liability to Borrower, shall not
affect, impair or prevent the vesting of any of Bank's rights or powers
hereunder or Borrower's obligation to make full reimbursement to Bank. Borrower
assumes all risks of the acts or omissions of a Beneficiary or transferee of a
Letter of Credit or Letter of Credit Guaranty with respect to its use of the
Letter of Credit or Letter of Credit Guaranty. In furtherance of, and not in
limitation of Bank's rights and powers under the Uniform Customs and Practice,
but subject to all other provisions of this Section 2.2. it is understood and
agreed that Bank shall not have any liability for and that Borrower assumes all
responsibility for: (a) the genuineness of any signature; (b) the form,
correctness, validity, sufficiency, genuineness, falsification and legal effect
of any draft, certification or other document required by a Letter of Credit or
Letter of Credit Guaranty and the authority of the person signing the same; (c)
the failure of any instrument to bear any reference or adequate reference to the
Letter of Credit or
Letter of Credit Guaranty or the failure of any persons to note the amount of
any instrument on the reverse of the Letter of Credit or to surrender the Letter
of Credit or Letter of Credit Guaranty or otherwise to comply with the terms and
conditions of the Letter of Credit or Letter of Credit Guaranty; (d) the good
faith or acts of any person other than Bank and its agents and employees; (e)
the existence, form, sufficiency or breach of or default under any other
agreement or instrument of any nature whatsoever; (f) any delay in giving or
failure to give any notice, demand or protest; and (g) any error, omission,
delay in or nondelivery of any notice or other communication, however sent. The
determination as to whether the required documents are presented prior to the
expiration of a Letter of Credit or Letter of Credit Guaranty issued hereunder
and whether such other documents are in proper and sufficient form for
compliance with the Letter of Credit or Letter of Credit Guaranty shall be made
by Bank in its sole and absolute discretion.
Section 2.2.9. Fees. Borrower hereby agrees to pay to Bank or a Bank
Affiliate any issuance, drawing, renewal, amendment or other fee or charge
customarily assessed by Bank or a Bank Affiliate in connection with any Letter
of Credit or Letter of Credit Guaranty. Any such fees shall be paid at the time
Borrower becomes obligated to pay any such fee.
Section 2.3. Term Loan.
Section 2.3.1. Amount of Loan. Upon the execution of this Agreement,
Borrower agrees to borrow from Bank, and Bank agrees to lend to Borrower, the
principal amount of TWO MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($2,500,000.00) (the "Term Loan").
Section 2.3.2. Term Note. The Term Loan shall be evidenced by a
promissory note executed by Borrower in substantially the form attached hereto
as Exhibit C (the "Term Note"), with all blanks therein appropriately completed
and payable to the order of Bank, which Term Note is hereby incorporated by
reference and made a part hereof.
Section 2.3.3. Payment of Principal. Commencing November 15, 1994, and
continuing on the same day of each succeeding month thereafter, the principal
amount of the Term Note shall be payable in thirty-seven (37) consecutive
monthly installments, the first thirty- six (36) of such installments to be in
the amount of THIRTEEN THOUSAND EIGHT HUNDRED EIGHTY-EIGHT AND 88/100 DOLLARS
($13,888.88) and if not sooner paid, a final installment in the then unpaid
principal amount of the Term Loan, together with all other amounts due and owing
under the Term Note, shall be due and payable on the Maturity Date.
Section 2.3.4. Maturity. Except where this Agreement or any instrument
evidencing indebtedness hereunder provides that the obligations of Borrower
shall become due upon any earlier date and notwithstanding any applicable
provision permitting repayment at a
later date, the Term Loan shall become fully and finally due and payable on the
Maturity Date.
Section 2.3.5. Use of Proceeds. The proceeds of the Term Loan shall be
used to refinance existing Indebtedness of Borrower to Bank.
Section 2.4. Interest on the Loans.
Section 2.4.1. Interest Rates and Payments of Interest.
(a) Each Prime Rate Loan which is a Revolving Loan shall bear interest on the
outstanding principal amount thereof at a rate per annum equal to the Prime Rate
and each Prime Rate Loan which relates to the Term Loan shall bear interest on
the outstanding principal amount thereof at a rate per annum equal to the Prime
Rate plus one-quarter of one percentage point (.25%). Such interest shall be
payable on the fifteenth day of each month commencing November 15, 1994 and
continuing on the same day of each succeeding month until such Loan is due
(whether at maturity, by reason of acceleration, by reason of prepayment or
otherwise).
(b) Each Libor Loan shall bear interest on the outstanding principal
amount thereof, for each Interest Period applicable thereto, at a rate per
annum, in the case of Revolving Loans, equal to the Libor Rate plus two
percentage points (2.0%) and, in the case of the Term Loan, equal to the Libor
Rate plus two and one-half percentage points (2.5%). Such interest shall be
payable on the fifteenth day of each month commencing November 15, 1994, and
continuing on the same day of each succeeding month until such Libor Loan is due
(whether at maturity, by reason of acceleration, by reason of prepayment or
otherwise).
(c) Each Matched Rate Loan shall bear interest on the outstanding
principal amount thereof, for each Interest Period applicable thereto, at a rate
per annum equal to the Matched Rate Rate. Such interest shall be payable on the
fifteenth day of each month commencing November 15, 1994 and continuing on the
same day of each succeeding month until such Matched Rate Loan is due (whether
at maturity, by reason of acceleration, by reason of prepayment or otherwise).
(d) Interest shall be computed daily on the basis of a year of three
hundred sixty (360) days and paid for the actual number of days elapsed during
each Interest Period. If the due date for any payment of principal is extended
by operation of law, interest shall be payable for such extended time. If any
payment required by this Agreement becomes due on a day that is not a Business
Day such payment may be made on the next succeeding Business Day (subject to
clause (i) of the definition of Interest Period), and such extension shall be
included in computing interest in connection with such payment.
Section 2.4.2. Prime Rate. Each adjustment in the Prime Rate shall
result immediately, without notice or demand of any
kind, in a new rate of interest effective with respect to periods on and after
the date of such adjustment. The Prime Rate is a base interest rate used by Bank
for loans making reference thereto and is not necessarily the lowest rate at
which Bank may lend money. The Prime Rate is neither tied to any external rate
of interest nor is it a rate charged by Bank to any particular class or category
of customer. If the Prime Rate shall be discontinued or for any other reason not
be available for determining the rate of interest chargeable under this
Agreement, then Bank shall select a substitute method of determining the rate of
interest chargeable under this Agreement and shall notify Borrower of such
selection, which method shall, in Bank's estimation, yield a rate of return to
Bank substantially equivalent to the rate of return that Bank would have
expected to receive if the Prime Rate remained available for that purpose.
Section 2.4.3. Continuation or Conversion of Loans. As long as no
Default or Event of Default shall have occurred and be continuing, Borrower may
continue or convert all or any part (in integral multiples of TEN THOUSAND AND
NO/100 DOLLARS ($10,000.00) of any outstanding Loan into a Loan of any other
type provided for in this Agreement in the same aggregate principal amount, on
any Business Day (which, in the case of a conversion of a Libor Loan or a
Matched Rate Loan shall be the last day of the Interest Period applicable to
such Libor Loan or a Matched Rate Loan. Borrower shall give Bank prior notice of
each such conversion (which notice shall be effective upon receipt) in
accordance with Section 2.1.1. hereof. Such notice shall specify: (i) the
effective date and amount of each Loan or portion thereof to be continued or
converted; (ii) the interest rate option to be applicable thereto; and (iii) the
duration of the applicable Interest Period, if any (subject to the provisions of
the definition of Interest Period and Section 2.4.4. hereof). each such
notification (a "Notice of Continuation or Conversion") shall be immediately
followed by a written confirmation thereof by Borrower in substantially the form
of Exhibit D attached hereto; provided, however, that if such written
confirmation differs in any material respect from the action taken by Bank, the
records of Bank shall control absent manifest error.
Section 2.4.4. Duration of Interest Periods.
(a) Subject to the provisions of the definition of Interest Period,
the duration of each Interest Period applicable to a Loan shall be as specified
in the applicable Notice.
(b) If the Bank does not receive a Notice for a Libor Loan or a
Matched Rate Loan pursuant to subsection (a) above within the applicable time
limits specified therein, or if, when such notice must be given, a Default or
Event of Default shall have occurred and be continuing, Borrower shall be deemed
to have elected to convert such Loan in whole into a Prime Rate Loan on the last
day of the then current Interest Period with respect thereto.
(c) Notwithstanding the foregoing, Borrower may not select an
Interest Period that would end, but for the provisions of the definition of
Interest Period, after the Revolving Credit Termination Date, in the case of a
Revolving Loan, or the Maturity Date, in the case of the Term Loan.
Section 2.4.5. Changed Circumstances.
(a) In the event that:
(i) on any date on which the Libor Base or the Matched Rate
would otherwise be set the Bank shall have determined in
good faith (which determination shall be final and
conclusive) that adequate and fair means do not exist for
ascertaining the Libor Base or the Matched Rate as the case
may be, or
(ii) at any time the Bank shall have determined in good faith
(which determination shall be final and conclusive) that:
(A) the making or continuation of or conversion of any Loan
to a Libor Loan or a Matched Rate Loan has been made
impracticable or unlawful by (1) the occurrence of a
contingency that materially and adversely affect the
London interbank Eurodollar market or the market for
certificates of deposit maintained by dealers in New
York City of recognized standing or (2) compliance by
the Bank in good faith with any applicable law or
governmental regulation, guideline or order or
interpretation or change thereof by any Governmental
Authority charged with the interpretation or
administration thereof or with any request or directive
of any such Governmental Authority (whether or not
having the force of law); or
(B) the Libor Rate shall no longer represent the effective
cost to Bank for U.S. dollar deposits in the London
interbank Eurodollar market for deposits in which it
regularly participates, or the Matched Fund Rate shall
no longer represent the effective cost to Bank for
certificates of deposit;
then, and in any such event, the Bank shall forthwith so notify Borrower
thereof. Until the Bank notifies Borrower that the circumstances giving rise to
such notice no longer apply, the
obligation of the Bank to allow selection by Borrower of the type of Loan
affected by the contingencies described in this Section 2.4.5. (herein called
"Affected Loans") shall be suspended. If at the time the Bank so notifies
Borrower, Borrower has previously given the Bank a Notice with respect to one or
more Affected Loans but such Revolving Loans have not yet gone into effect, such
notification shall be deemed to be void and Borrower may borrow Loans of a non-
affected type by giving a substitute Notice pursuant to Section 2.4.3. hereof.
Upon such date as shall be specified in such notice (which shall not be
earlier than five (5) days from the date such notice is given) Borrower shall,
with respect to the outstanding Affected Loans, prepay the same, together with
interest thereon and any amounts required to be paid pursuant to Section 2.4.8.
hereof, and may borrow a Revolving Loan of another type in accordance with
Section 2.4.3. hereof by giving a Notice pursuant to Section 2.4.3. hereof.
Section 2.4.6. Prepayments of the Loans. (a) Revolving Loans that are
Libor Loans or Matched Rate Loans may be prepaid at any time, without premium or
penalty, on the last day of any Interest Period applicable thereto, upon one (1)
Business Day's notice in the case of Matched Rate Loans and three (3) Business
Days' notice, in the case of Libor Loans. Any prepayment of Matched Rate Loans
or Libor Loans not made on the last of the Interest Period applicable thereto
shall be subject to a prepayment penalty as set forth in Section 2.4.8. hereof.
Revolving Loans that are Prime Rate Loans may be prepaid, in whole or in part,
at any time, without premium or penalty, upon one (1) Business Day's notice. Any
interest accrued on the amounts so prepaid to the date of such payment must be
paid at the time of any such payment. No prepayment of the Revolving Loans
during the Revolving Credit Period shall affect the Commitment Amount or impair
Borrower's right to borrow as set forth in Section 2.1.1. hereof.
(b) The Term Loan may be prepaid at any time, in whole or in part, on
the last day of any Interest Period applicable thereto in the case of any
portion of the Term Loan that is a Libor Loan or Matched Rate Loan, and at any
time in the case of any portion of the Term Loan that is a Prime Rate Loan,
without premium or penalty, upon one Business Day's notice in the case of a
Prime Rate Loan or Matched Rate Loan and upon three Business Days' notice in the
case of a Libor Loan, provided that interest accrued on the amounts so paid to
the date of such payment must be paid at the time of any such payment.
Prepayment of the Term Loan shall be applied to installments of principal due
thereunder in the inverse order of their maturities.
Section 2.4.7. Overdue Payments. Overdue principal (whether at maturity, by
reason of acceleration or otherwise) and, to the extent permitted by applicable
law, overdue interest and fees or any other amounts payable under this Agreement
shall bear interest from and including the due date thereof until paid,
compounded
daily and payable on demand, at a rate per annum equal to (i) if such due date
occurs prior to the end of an Interest Period, three percentage points (3.0%)
above the interest rate applicable to such Loan for such Interest Period until
the expiration of such Interest Period, and thereafter, three percentage points
(3.0%) the Prime Rate; and (ii) in all other cases, three percentage points
(3.0%) above the rate then applicable to Prime Rate Loans (the "Default Rate").
Section 2.4.8. Payments Not at End of Interest Period. If Borrower for any
reason makes any payment of principal with respect to any Libor Loan or Matched
Rate Loan on any day other than the last day of an Interest Period applicable to
such Libor Loan or Matched Rate Loan or fails to borrow or continue or convert
to a Libor Loan or a Matched Rate Loan after giving a Notice pursuant to Section
2.4.3. hereof, or if any Libor Loan or Matched Rate Loan is accelerated pursuant
to Section 12.1. hereof, Borrower shall pay to Bank (i) all Breakage Costs in
the case of a Libor Loan and (ii) in the case of a Matched Rate Loan, an amount
computed pursuant to the following formula:
The latest published rate preceding the date of prepayment for United
States Treasury Notes or Bills (Bills on a discounted basis shall be
converted to a bond equivalent) as published weekly in the Federal
Reserve Statistical Release with a maturity date closest to the last
date of the then applicable Interest Period as to which the prepayment
is made shall be subtracted from the interest rate in effect at the
time of prepayment with respect to the indebtedness being paid. If the
result is zero or a negative number, there shall be no prepayment
premium. If the result is positive number, then the resulting
percentage shall be multiplied by the amount of the principal balance
being prepaid. The resulting amount will be divided by 360 and
multiplied by the number of days remaining in the then applicable
Interest Period. Said amount shall be reduced to present value
calculated by using the above-referenced United States Treasury Note
or Bill rate as of the date of prepayment as the discount rate. The
resulting amount shall be the prepayment premium due to the Bank upon
prepayment.
Borrower shall pay such amount upon presentation by Bank of a statement
setting forth the amount and the Bank's calculation thereof pursuant hereto,
which statement shall be deemed true and correct absent manifest error.
Section 2.5. General Terms Applicable to Any Extension of Credit
Section 2.5.1. Increased Costs and Capital Adequacy.
(a) If Bank determines that any change in any law or regulation or
directive or bulletin or in the interpretation
thereof after the Closing Date by any court or administrative or governmental
authority charged with the administration thereof shall either (i) impose,
modify or deem applicable any reserve, special deposit or similar requirement
against any credit extended by Bank under this Agreement, or (ii) impose on Bank
or its parent bank holding company any other condition regarding this Agreement
and the result of any event referred to in the preceding clause (i) or (ii)
above shall be to increase the cost to Bank or such holding company of issuing,
funding or maintaining any Extension of Credit (which increase in cost shall be
determined by Bank's reasonable allocation of the aggregate of such cost
increases resulting from such event), then, upon written demand by Bank,
Borrower shall pay to Bank from time to time as specified by Bank, additional
amounts which shall be sufficient to compensate Bank for such increased cost
from the date of such change. A certificate as to such increased cost incurred
by Bank as a result of any event mentioned in clause (i) or (ii) above prepared
in reasonable detail (which shall include the method employed by Bank in
determining the allocation of such costs to Borrower) and otherwise in
accordance with this subsection (a), submitted by Bank to Borrower, shall be
conclusive evidence, absent manifest error, as to the amount thereof.
(b) If Bank shall determine that the adoption after the Closing Date
of any applicable law, rule or regulation pursuant to or arising out of the July
1988 report of the Base Committee on Banking Regulations and Supervisory
Practices entitled "International Convergence of Capital Measurement and Capital
Standards", or the adoption after the date hereof of any other law, rule, or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof, or compliance by Bank or its
parent bank holding company with any requirement or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
Bank or comparable agency, except any such adoption or change or any such
compliance with a request or directive which applies or has been applied solely
to Bank or its parent Bank holding company by reason of events or conditions
relating solely to Bank, has the effect of reducing the rate of return on Bank's
or its parent Bank holding company's capital as a consequence of its commitment
hereunder or to a level below that which Bank or such holding company could have
achieved but for such adoption, change or compliance by an amount deemed by Bank
to be material (for which reduction of the rate of return shall be determined by
Bank's or such holding company's reasonable allocation of such reduction of the
rate of return resulting from such event) then, upon written demand by Bank,
Borrower shall pay to Bank, from time to time as specified by Bank, such
additional amount or amounts which shall be sufficient to compensate Bank for
such reduction. A certificate as to such increased cost incurred by Bank as a
result of any event mentioned in this subsection (b), prepared in reasonable
detail (which shall include the method employed by Bank in determining the
allocation of such costs to Borrower) and otherwise in accordance with this
subsection (b) submitted by Bank to Borrower, shall be
conclusive evidence, absent manifest error, as to the amount thereof.
(c) Amounts payable by Borrower pursuant to this Section 2.5.1. shall
be payable within ten (10) Business Days of receipt by Borrower of a certificate
described in subsection (a) or (b) of this Section 2.5.1.
Section 2.5.2. Late Payment. Any payment of principal due and payable
under the Term Loan or interest due under this Agreement with respect to any of
the Loans which is not made within ten (10) days of the date specified for
payment shall bear a late fee equal to five percent (5%) of the amount of the
payment then due to compensate Bank for the costs incurred in processing the
late payment. The imposition or collection of a late fee shall not affect Bank's
right to exercise any of its rights and remedies upon the occurrence of an Event
of Default.
Section 2.5.3. Method of Payment. All payments and prepayments of
principal and all payments of interest shall be made by Borrower to Bank at its
head office in immediately available funds, on or before 3:00 p.m. on the due
date thereof, free and clear of, and without any deduction or withholding for,
any taxes or other payments. Bank may, and Borrower hereby authorizes Bank to,
debit the amount of any payment not made by such time to the Loan Account.
SECTION 3. SECURITY FOR THE OBLIGATIONS
Section 3.1. Collateral Disclosure List. Borrower shall deliver to Bank
on the Closing Date a list identifying, inter alia, all of its properties and
assets and the locations thereof on a form provided by Bank (the "Collateral
Disclosure List").
Section 3.2. Security. The Obligations shall be secured by:
Section 3.2.1. All properties and assets of Borrower, including goods,
accounts receivable, inventory, contract rights, accounts, documents,
instruments and chattel paper, business and financial records and general
intangible assets of Borrower as more particularly defined in the Security
Agreement.
Section 3.2.2. A limited guaranty executed by the Limited Guarantor in
substantially the form attached hereto as Exhibit E (the "Guaranty").
Section 3.2.3. A pledge of all of the Limited Guarantor's right, title
and interest in and to all shares of capital stock of Borrower pursuant to the
Stock Pledge.
SECTION 4. REPRESENTATIONS AND WARRANTIES
In order to induce Bank to enter into this Agreement and to make any
Extension of Credit, Borrower makes the following
representations and warranties to Bank, which shall be deemed made as of the
date hereof and, except as otherwise provided in this Section 4., the date of
each Extension of Credit. Any knowledge acquired by Bank shall not diminish its
rights to rely upon such representations and warranties.
Section 4.1. Corporate Existence. Borrower is a corporation duly
incorporated, validly existing and in good standing under the laws of its state
of incorporation and, to the best of its knowledge, is duly qualified in all
other jurisdictions in which the properties and assets owned, leased or operated
by it, or the nature of the business conducted by it, make such qualification
necessary and where failure to so qualify would have a Material Adverse Effect.
Section 4.2. Corporate Authority. The execution, delivery and performance
of this Agreement, the Notes and the Other Documents, the consummation of the
transactions herein and therein contemplated, the fulfillment of and compliance
with the terms and provisions hereof and thereof have been duly authorized by
all necessary corporate action of Borrower and are within its corporate power
and will not result in a violation of its Certificate of Incorporation or
Bylaws, if and as amended.
Section 4.3. Binding Obligations. This Agreement, the Notes and the Other
Documents constitute the legal, valid and binding obligations of Borrower,
enforceable against it in accordance with their respective terms.
Section 4.4. Noncontravention. The execution, delivery and performance by
Borrower of this Agreement, the Notes and the Other Documents will not violate
any existing law, ordinance, rule, regulation or order of any Governmental
Authority or result in a breach of any of the terms of, or constitute a default
under, any contractual obligation to which Borrower is a party or by which it or
any of its properties or assets are bound or result in or require the imposition
of any Encumbrances on any of Borrower's properties or assets.
Section 4.5. Permits. Borrower possesses all material permits,
authorizations, licenses, approvals, waivers and consents, without unusual
restrictions or limitations, the failure of which to possess would have a
Material Adverse Effect, all of which are in full force and effect.
Section 4.6. No Consents. The execution, delivery and performance of this
Agreement, the Notes and the Other Documents does not require any approval,
consent or waiver under any Contractual Obligation. No approval, authorization,
consent, waiver or order of, or registration, application or filing with, any
Governmental Authority is required in connection with the transactions
contemplated by this Agreement, the Notes and the Other Documents.
Section 4.7. Financial Statements. Borrower has provided to Bank its
Financial Statements dated as of June 30, 1994 and related footnotes, audited
and certified by R. Eisner & Co. Borrower has also provided to Bank its
internally prepared Financial Statements dated as of July 28, 1994, certified by
the chief financial officer of Borrower but subject, however, to normal,
recurring year-end adjustments that shall not in the aggregate be material in
amount. All Financial Statements of Borrower heretofore provided to Bank present
fairly in all material respects the financial condition and results of business
operations of Borrower for the periods indicated in accordance with GAAP.
Borrower has no direct or contingent liabilities, liabilities for taxes, unusual
commitments or unrealized or unanticipated losses not disclosed in such
Financial Statements. Since the date of the latest dated balance sheet included
in the Financial Statements, there has been no material adverse change in the
business operations or financial condition of Borrower from that set forth in
the balance sheet contained in such Financial Statements and no Dividends have
been declared or made to stockholders, nor have any shares of its capital stock
(or any warrant to purchase, options to acquire or notes convertible, in whole
or in part, into any shares of its capital stock) been purchased or acquired by
any Person in any manner nor has Borrower made any Investment except as set
forth on Schedule 4.7. attached hereto.
Section 4.8. Financial Forecasts. Borrower has provided to Bank
forecasted Financial Statements together with appropriate supporting details and
a statement of the underlying assumptions, ranges and limitations, prepared on a
monthly basis covering the Fiscal Year commencing on July 1, 1994 (the
"Forecasts"). The Forecasts have been prepared in good faith and represent the
good faith opinion of Borrower and its senior management as to the most probable
course of Borrower's business operations for the periods covered thereby and
have a reasonable basis. Except as noted therein, the practices followed in
preparing the Forecasts do not materially differ from practices usually followed
by companies engaged in businesses similar to that of Borrower in the
preparation of accounting forecasts in good faith and are in conformity with the
guidelines established by the American Institute of Certified Public Accountants
in the presentation of a financial forecast.
Section 4.9. Financial Information. All written data, reports and
information which Borrower has supplied to Bank or caused to be so supplied by a
third party on its behalf in connection with this Agreement are complete and
accurate and contain no material omission or misstatement except such as have
been corrected in a writing delivered to Bank.
Section 4.10. Business Relationships. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship of Borrower with any customer or group of customers
whose purchases individually or in the aggregate are material to Borrower's
business operations, or with any material supplier (other than in the ordinary
course of business where one supplier is replaced by another offering terms
which are no less favorable to Borrower).
Section 4.11. Brokers. No broker or finder has brought about the
obtaining, making or closing of, and no broker's or finder's fees or commissions
will be payable by Borrower to any Person in connection with, the transactions
contemplated by this Agreement.
Section 4.12. Use of Proceeds. Borrower is not an "investment company," or
an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended (15 U.S.C. (S)(S)80(a)(1) et seq.). No Extension of Credit, the
application of the proceeds and repayment thereof by Borrower or the performance
of the transactions contemplated by this Agreement will violate any provision of
said Act, or any rule, regulation or order issued by the Securities and Exchange
Commission thereunder. Borrower does not own any margin security as that term is
defined in Regulation U of the Board of Governors of the Federal Reserve System
and the proceeds of each Extension of Credit will be used only for the purposes
set forth in this Agreement. None of the proceeds of any Extension of Credit
will be used, or have been used, directly or indirectly, for the purpose of
purchasing or carrying any margin security or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might constitute such Extension
of Credit a "purpose credit" within the meaning of said Regulation U or
Regulations G or X of the Federal Reserve Board. Borrower will not take, or
permit any Person acting on its behalf to take, any action which might cause
this Agreement or any document or instrument delivered pursuant hereto to
violate any regulation of the Federal Reserve Board.
Section 4.13. Statutory Compliance. Borrower is in compliance with all
material laws, ordinances, rules, regulations and orders of any Governmental
Authority applicable to it, its properties and assets and the business conducted
by it, including, without limitation, ERISA, the United States Occupational
Safety and Health Act of 1970 and all Environmental Laws except where non-
compliance would not have a Material Adverse Effect.
Section 4.14. Commitments. Borrower has no fixed, contingent or other
obligations to issue any shares, or rights exercisable into shares, of its
capital stock.
Section 4.15. Events of Default. No Default or Event of Default has
occurred and is continuing.
Section 4.16. Other Defaults. Borrower is not in default in the
performance, observance or fulfillment of any Contractual Obligation.
Section 4.17. Taxes. Borrower has filed all tax returns and reports
required to be filed by it with any Governmental Authority and has paid in full,
or made adequate provisions or established adequate reserves for, the payment of
all taxes, interest, penalties, assessments or deficiencies shown to be due or
claimed to be due on or in respect to such tax returns and reports.
Section 4.18. Ownership of Borrower. The Limited Guarantor is the holder
of all of the issued and outstanding shares of capital stock of Borrower and no
other Person has any rights and/or claim to any issued or unissued shares of
such capital stock except for a pledge of capital stock to the Covered
Employees.
Section 4.19. Solvency. Borrower is currently Solvent; and Borrower is not
contemplating either the filing of a petition by it under Bankruptcy Code or any
state bankruptcy or insolvency law or the liquidating of all or a major portion
of its properties and assets, and Borrower has no knowledge of any Person
contemplating the filing of any such petition against it.
Section 4.20. Business Name. Borrower conducts its business solely through
the names set forth on Schedule 12 of the Collateral Disclosure List, without
the use of any trade name, or the intervention of or through any other Person.
Borrower has not, except as set forth in the Collateral Disclosure List, during
the preceding five (5) years, conducted its business through any other name or
trade name or been the surviving corporation in a merger or consolidation or
acquired all or substantially all of the assets of any other Person.
Section 4.21. Affiliate Contracts. All contracts and transactions between
Borrower and any Affiliate or Subsidiary of Borrower have been executed or will
be executed on such terms as would be contained in an agreement executed at
arms' length with an unrelated third party.
Section 4.22. Capitalization. The outstanding shares of capital stock of
Borrower have been duly issued and are fully paid and non-assessable.
Section 4.23. Litigation. Except as set forth on Schedule 4.23. attached
hereto, there are no actions, suits or proceedings by or before any Governmental
Authority or any arbitration or alternate dispute resolution proceeding, pending
or, to the knowledge of Borrower or any of Borrower's officers, threatened
against Borrower or its properties and assets, which if adversely determined,
would have a Material Adverse Effect.
Section 4.24. Title to Properties. Each of Borrower and its Subsidiaries
has good and marketable title to all of the properties, assets and rights of
every name and nature now purported to be owned by it, including, without
limitation, such properties, assets and rights as are reflected in the Financial
Statements referred to in Section 4.7. (except such properties,
assets or rights as have been disposed of in the ordinary course of business
since the date thereof), free from all Encumbrances except Permitted
Encumbrances or those Encumbrances disclosed in Schedule 4.24. attached hereto,
and, free from all defects of title that might have a Material Adverse Effect.
Borrower's properties, assets and rights are sufficient to permit Borrower to
conduct the business in which it is presently engaged. Borrower possesses all
trademarks, service marks, trade names, trade service styles, copyrights and
patents that may be necessary to own its properties and assets, and to conduct
its business as it is presently conducted or as Borrower intends to conduct it
hereafter, without any infringement or conflict with the rights of any other
Person or any violation of law.
Section 4.25. Labor Relations. Borrower is not a party to any collective
bargaining or other agreement with any union and there are no material
grievances, disputes or controversies with any union or other organization of
Borrower's employees, or threats of strikes, work stoppages or demands by any
union or such other organization.
Section 4.26. Guarantees. Except as set forth on Schedule 4.26. attached
hereto, Borrower is not a party to any Guarantee or other similar type of
agreement, and it has not offered its endorsement to any Person which would in
any way create a contingent liability (except by endorsement of negotiable
instruments payable at sight for deposit or collection or similar banking
transactions in Borrower's ordinary course of business).
Section 4.27. Subsidiaries. As of the date of this Agreement, all of the
Subsidiaries and Affiliates of Borrower are set forth on Schedule 14 of the
Collateral Disclosure List. Borrower or a Subsidiary of Borrower is the owner
(subject to specified minority interests) free and clear of all Encumbrances, of
all of the issued and outstanding capital stock of each Subsidiary. All shares
of such capital stock have been validly issued and are fully paid and
nonassessable, and no rights to subscribe to any additional shares have been
granted, and no options, warrants or similar rights are outstanding. Borrower is
not engaged in any joint venture, partnership or other business arrangement with
any other Person except as described on said Schedule 14.
Section 4.28. ERISA. Borrower and each member of the Controlled Group have
fulfilled their obligations under the minimum funding standards of ERISA and the
Code with respect to each Plan and are in compliance in all material respects
with the applicable provisions of ERISA and the Code, and have not incurred any
liability to the PBGC or a Plan under Title IV of ERISA; and no "prohibited
transaction" or "reportable event" (as such terms are defined in ERISA) has
occurred with respect to any Plan.
Section 4.29. Environmental Protection. Except as set forth on Schedule
4.29. attached hereto:
(a) The business operations of Borrower comply in all material
respects with all Environmental Laws.
(b) Borrower has not received (i) any notice or claim to the effect
that it is or may be liable to any Person as a result of the Release or
threatened Release of any Hazardous Materials or (ii) any letter or request for
information under CERCLA or any other Environmental Laws, and, to the best of
Borrower's knowledge, based upon reasonable investigation, the operations of
Borrower are not the subject of any investigation by any Governmental Authority
evaluating whether any remedial action is needed to respond to a Release or
threatened Release of any Hazardous Material or claim, or threatened lawsuit or
claim arising under or related to any Environmental Law.
(c) Borrower and its properties, assets and operations are not
subject to any outstanding written order or agreement with any Governmental
Authority or private party respecting any Environmental Laws.
(d) Borrower has not filed any notice under any Environmental Law
indicating past or present treatment or disposal of Hazardous Materials, and
none of the operations of Borrower involves the generation, transportation,
treatment, storage or disposal of Hazardous Materials.
(e) To the best of Borrower's knowledge, based upon reasonable
investigation, no Hazardous Material exists on, under or about any of the
properties or assets of Borrower, real or personal, in a manner that could give
rise to any claim or suit against Borrower, and Borrower has not filed any
notice or report of a Release of any Hazardous Materials that could give rise to
any such claim or suit against Borrower.
Section 4.30. Accounts Receivable. All of Borrower's Accounts Receivable
(i) are and shall be based on an actual and bona fide sale and delivery of goods
or the rendition of services to Account Debtors; (ii) are and shall be made by
Borrower in the ordinary course of its business; (iii) result from goods and
Inventory being sold which are the exclusive property of Borrower; (iv) are the
exclusive property of Borrower; (v) are not subject to any Encumbrance other
than Permitted Encumbrances; and (vi) are represented by invoices or statements
issued in the name of Borrower.
Section 4.31. Investments. Except as set forth on Schedule 4.31. attached
hereto, Borrower has no Investment in any Person other than existing Investments
in Subsidiaries and Qualified Investments.
SECTION 5. CONDITIONS TO OBLIGATION OF BANK
Bank shall have no obligation under this Agreement to make any Extension of
Credit unless and until it is satisfied, in its sole and absolute discretion,
that all of the following conditions shall have been satisfied prior to or on
the Closing Date:
Section 5.1. Representations and Warranties True The representations and
warranties contained in Section 4 are true and correct, and Borrower, by its
President, shall have so certified to Bank.
Section 5.2. Delivery of Documents Borrower shall have duly executed and
delivered to Bank, in form and substance satisfactory to Bank and its legal
counsel, this Agreement, the Notes, the Other Documents and all further
documents as Bank may request to evidence the Obligations or to create, perfect
or continue any security interest or mortgage lien contemplated by this
Agreement and the Other Documents In addition, Bank shall have received or
agreed in writing to waive or delay the receipt of:
Section 5.2.1. Copies of all corporate action taken by Borrower
to authorize the execution and delivery of this Agreement, the Notes and the
Other Documents, together with a certificate of the corporate secretary of
Borrower certifying that the same are true, correct and complete as of the
Closing Date.
Section 5.2.2. Copies of Borrower's Certificate of Incorporation and
Bylaws, if and as amended, together with a certificate of the Secretary of
Borrower certifying that the same are true, correct and complete as of the
Closing Date.
Section 5.2.3. INTENTIONALLY LEFT BLANK.
Section 5.2.4. A certificate issued by the office of the Secretary of
State of the state of Borrower's incorporation to the effect that Borrower is
legally existing and in good standing under the laws of such states.
Section 5.2.5. A certificate issued by the office of the Secretary of
State of each state in which Borrower is qualified as a foreign corporation to
the effect that Borrower is duly qualified and in good standing as a foreign
corporation under the laws of such states.
Section 5.2.6. A certificate of the Secretary of Borrower certifying
to the incumbency and signatures of all officers of Borrower who are authorized
to execute this Agreement, the Notes and the Other Documents.
Section 5.2.7. Objective evidence satisfactory to Bank and its legal
counsel of the payment of all taxes and assessments due or claimed to be due to
any Governmental Authority with respect to the Collateral.
Section 5.2.8. A UCC-11 Request for Information certified by the
Office of the Secretary of State of the State of Connecticut (or an acceptable
equivalent thereto) for each name set forth on the Collateral Disclosure List
listing the filings against Borrower as debtor under such names at such offices.
Section 5.2.9. Such UCC-1 Financing Statements as Bank deems necessary
to perfect any security interests contemplated by this Agreement or the Other
Documents.
Section 5.2.10. Insurance policies and certificates evidencing
adequate insurance coverage on Borrower's properties and assets which insurance
policies shall name Bank as an additional insured/loss payee.
Section 5.2.11. An environmental certificate and indemnity
agreement executed by Borrower, satisfactory in form and substance to Bank and
its legal counsel (the "Environmental Certificate").
Section 5.2.12. Such cash management, lockbox and similar
agreements required by Bank to administer the Line of Credit.
Section 5.2.13. Such further documents, instruments and agreements
as Bank shall reasonable request, all satisfactory in form and substance
satisfactory to Bank and its legal counsel.
Section 5.3. Validity of Liens. All Encumbrances in the Collateral shall
have been created in favor of Bank, which Encumbrances shall constitute legal,
valid and enforceable and, unless otherwise consented to by Bank, first security
interests in and liens upon the Collateral All filings, recordings, deliveries
of instruments and other actions necessary or desirable in the sole and absolute
discretion of Bank and its legal counsel to create said Encumbrances shall have
been made, taken and/or effected.
Section 5.4. Opinion of Counsel. Bank shall have received from counsel
for Borrower a written opinion, satisfactory in form and substance to Bank and
its legal counsel.
Section 5.5. Payment of Fees. Borrower shall have paid any applicable
fees and expenses due to Bank at closing, including the fees and expenses of
Bank's legal counsel.
Section 5.6. Legal Matters. All legal matters incident to the
transactions hereby contemplated shall be satisfactory to Bank and its legal
counsel.
SECTION 6 CONDITIONS TO EXTENSION OF CREDIT
Bank shall have no obligation to make any Extension of Credit unless and
until, it is satisfied, in its sole and absolute discretion, that all of the
following conditions shall have been
fulfilled prior to or contemporaneously with the making of such Extension of
Credit.
Section 6.1. Notice of Borrowing. Bank shall have received, in a timely
manner, a Notice of Borrowing in a form satisfactory to Bank.
Section 6.2. Borrowing Base. Certificate Bank shall have received a
Borrowing Base Certificate satisfactory in form and substance to Bank showing
that the Borrowing Base is sufficient to permit Bank to make the requested
Extension of Credit.
Section 6.3. No Material Adverse Change. There has been no change in the
financial condition or business operations of Borrower or its Subsidiaries since
the date of the last Financial Statements or other financial reports delivered
to Bank which has a Material Adverse Effect.
Section 6.4. Truth of Representations and Warranties. All of the
representations and warranties set forth in Section 4 of this Agreement are
either true and correct or, in the case of any such representations and
warranties which by their nature relate to the Closing Date or any other
specific date, restated as of the date on which the requested Extension of
Credit is made.
Section 6.5. No Default. No Default or Event of Default shall have
occurred and be continuing or shall occur as a result of the requested Extension
of Credit.
Section 6.6. Payment of Fees. Borrower shall have paid any applicable
fees and expenses due to Bank, including any fees and expenses of Bank's legal
counsel.
Section 6.7. Corporate Action. The corporate action of Borrower referred
to in Section 5.2.1. shall remain in full force and effect and the incumbency of
officers shall be as stated in the certificates of incumbency delivered pursuant
to Section 5.2.6. or as subsequently reflected in a new certificate of
incumbency delivered to Bank in connection with the requested Extension of
Credit.
Section 6.8 Legal Matters. All legal matters incident to the transactions
contemplated by the requested Extension of Credit shall be satisfactory to Bank
and its legal counsel and no change shall have occurred in any law or regulation
or interpretation thereof, which, in the opinion of Bank and its legal counsel,
would make it illegal or against the policy of any governmental body, agency or
instrumentality for Bank to make the requested Extension of Credit.
SECTION 7 AFFIRMATIVE COVENANTS OF BORROWER
Borrower covenants and agrees that from the date hereof until the payment
and performance in full of the Obligations, unless Bank otherwise consents in
writing:
7.1. Financial Statements and Reporting Requirements. Borrower shall
furnish to Bank:
Section 7.1.1. As soon as available, but in no event later than ninety
(90) days after the end of each Fiscal Year, Financial Statements for such year,
audited and certified by Arthur Andersen & Co. (or other independent certified
public accountants acceptable to Bank) in the case of such consolidated
statements, and certified by the chief financial officer of Borrower in the case
of such consolidating statements; and, concurrently with the delivery of such
Financial Statements, a copy of said certified public accountants' management
report, if any.
Section 7.1.2. As soon as available, but in no event later than twenty
(20) days after the end of each month, internally prepared Financial Statements,
prepared in accordance with GAAP on year-to-date and month-to-date basis and
internally prepared copies of the following financial reports: (i) aging of
accounts receivable and accounts payable and (ii) summary of Inventory, all
prepared in accordance with GAAP.
Section 7.1.3. As soon as available, but in no event later than three
(3) days after the end of each calendar week, a certificate in substantially the
form of Exhibit F attached hereto setting forth (i) Borrower's then existing
Eligible Inventory or, if requested by Bank, particular items, types or
categories thereof; (ii) Borrower's then existing Eligible Accounts Receivable;
(iii) such other information in respect of Inventory, Accounts Receivable,
Equipment and other Collateral as Bank may reasonably request; and (iv) a
calculation of Borrowing Base and borrowing availability as of the date of said
certificate (the "Borrowing Base Certificate").
Section 7.1.4. As soon as available, but in no event later than the
end of each Fiscal Year, forecasted Financial Statements prepared in accordance
with the standards set forth in Section 4.8. hereof, showing a most likely
scenario and including collateral availability and usage under the Line of
Credit and in such further reasonable detail as Bank may request for each of the
forthcoming twelve (12) months, month by month, together with such appropriate
supporting details and statements or assumptions.
Section 7.1.5. As soon as available, but in no event later than forty-
five (45) days after the end of each Fiscal Year, a report in substantially the
form of Exhibit G attached hereto signed on behalf of Borrower by its chief
financial officer.
Section 7.2. Fire and Hazard Insurance. Borrower shall keep its
properties and assets insured against fire and other hazards (so called "All
Risk Coverage") in amounts and with companies satisfactory to Bank to the same
extent and covering such risks as is customary in the state or similar business,
but in no event in an aggregate amount less than the Obligations, which policies
shall name Bank as first loss payee as its interest may appear Borrower shall
also maintain public liability coverage against claims for personal injuries or
death, business interruption, worker's compensation, employment or similar
insurance with coverage and in amounts satisfactory to Bank and as may be
required by applicable law Such all risk policy shall provide for a minimum of
thirty (30) days' written cancellation notice to Bank Borrower agrees to deliver
copies of all of the aforesaid insurance policies to Bank In the event of any
loss or damage to the Collateral, Borrower shall give immediate written notice
to Bank and to its insurers of such loss or damage and shall promptly file proof
of loss with its insurers.
Section 7.3. Maintenance of Existence. Borrower shall preserve and
maintain its corporate existence, rights, franchises and privileges, including
its corporate name, in the jurisdiction of its incorporation, and qualify and
remain qualified as a foreign corporation in each jurisdiction in which such
qualification is necessary or desirable
Section 7.4. Preservation of Collateral. Borrower shall preserve and
maintain the Collateral in good repair, working order and operating condition
and Borrower shall immediately notify Bank of any event causing material loss or
unusual depreciation in the value of the Collateral.
Section 7.5. Taxes and Other Assessments. Borrower shall pay and
discharge, and maintain adequate reserves for the payment and discharge of, all
taxes, assessments, government charges or levies, or claims for labor, supplies,
rent or other obligations made against it or its properties and assets which, if
unpaid, might become an Encumbrance against Borrower or its properties and
assets, except liabilities which are being contested in good faith in
appropriate proceedings Borrower shall file all Federal, state and local tax
returns and other reports that it is required by law to file. Borrower shall
promptly notify or cause notice to be given to Bank of any pending or future
audits of its income tax returns by the Internal Revenue Service or by any state
in which Borrower conducts business operations and the results of each such
audit.
Section 7.6. Inspection. Borrower shall permit Bank or its designees to
(i) visit and inspect the properties and assets of Borrower and its
Subsidiaries; (ii) examine and make copies of and take abstracts from the books
and records of Borrower and its Subsidiaries; and (iii) discuss the affairs,
finances and accounts of Borrower and its Subsidiaries with their appropriate
officers, employees and accountants In handling such information Bank shall
exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types, to maintain the
confidentiality of any non-public information thereby received or received
pursuant to Section 7.1. hereof except that disclosure of such information may
be made (i) to Bank Affiliates in connection with their present or prospective
business relations with Borrower; (ii) to prospective transferees or purchasers
of an interest in the Obligations; (iii) as required by law, regulation, rule or
order, subpoena, judicial order or similar order; and (iv) as may be required in
connection with the examination, audit or similar investigation of Bank Borrower
shall permit Bank (or any of its officers, agents, attorneys or accountants) for
the purpose of ascertaining whether or not each and every provision of this
Agreement or the Other Documents is being performed or for the purpose of
examining the Collateral and the records relating thereto, to enter the offices
and business premises of Borrower and its Subsidiaries, and to conduct an audit
of the Collateral and/or Borrower's financial and business records on two (2)
occasions during each twelve (12) month period at such times as Bank may select
in its sole and absolute discretion; provided, however, that Bank shall have the
right to conduct such an audit on more than two (2) occasions if a Default or
Event of Default shall have occurred and be continuing for such services Any
such audit shall be conducted at Borrower's expense at Bank's then current rate
of plus expenses to a maximum of FIVE THOUSAND AND NO/100 DOLLARS ($5,000.00)
per fiscal year; provided, however, that such maximum shall not apply if a
Default or an Event of Default shall have occurred or be continuing Any charges
and expenses relating to such audits shall be directly debited by Bank from the
Loan Account.
Section 7.7. Notices. Borrower shall promptly upon becoming aware of the
occurrence of a Default or Event of Default notify Bank thereof in writing
Borrower shall also promptly advise Bank of:
(a) any labor controversy resulting in or threatening to result in a
strike or work stoppage against Borrower or its Subsidiaries; or
(b) any change of independent public accountants, notice that such
change has occurred together with the name of the new accountants.
Section 7.8. Litigation. Borrower shall promptly inform Bank of any
action, suit, or proceeding by or before any Government Authority or arbitration
or alternate dispute resolution proceeding, which might have a Material Adverse
Effect.
Section 7.9. Maintenance of Books and Records. Each of Borrower and its
Subsidiaries shall keep adequate books and records of account, in which true and
complete entries will be made reflecting all of its business and financial
transactions, and such entries will be made in accordance with GAAP including
the maintenance of adequate reserves for depreciation of property, if such
reserves are required by GAAP. Each of Borrower and its
Subsidiaries shall maintain duplicate copies of all such books and records (i)
on-site at all times and (ii) off- site updated on a monthly basis.
Section 7.10. Maintenance of Permits. Borrower shall obtain and/or
maintain in full force and effect all material permits, authorizations,
licenses, approvals, waivers and consents which it presently possesses or which
may may become necessary in the future to conduct its business operations.
Section 7.11. Use of Proceeds. Borrower will use the proceeds of any
Extension of Credit solely for the purposes set forth in this Agreement.
Section 7.12. Payment of Indebtedness. Borrower shall promptly pay and
discharge when due and payable (or within applicable grace periods) all
Indebtedness due to any Person from Borrower, except when the amount thereof is
being contested in good faith by appropriate proceedings and with reserves
therefor being established as a current liability on the books of Borrower as
required by GAAP.
Section 7.13. Additional Offices. Borrower shall give Bank written notice
of each additional facility or office of Borrower to be opened after the Closing
Date Except to the extent set forth in any such notice, the chief executive
office of Borrower and all records relating to the Collateral shall be located
at the locations set forth in the Collateral Disclosure List.
Section 7.14. Access to Collateral. With respect to each location at which
the Collateral is now or hereafter located, Borrower will obtain such lien
waivers, estoppel certificates or subordination agreements as Bank may
reasonably require to insure the priority of its security interest in, and its
ability to take possession of, the Collateral situated at such locations.
Section 7.15. Compliance with Laws. Borrower shall comply with the
requirements of all applicable laws, ordinances, rules, regulations and orders
of any Government Authority.
Section 7.16. ERISA. Borrower shall: (i) make prompt payments of
contributions required to meet the minimum funding standards set forth under
ERISA with respect to each and every Plan and, promptly after the filing
thereof, furnish to Bank copies of each annual report required to be filed under
ERISA in connection with each and every Plan for each and every Plan year; (ii)
notify Bank immediately of any fact, including, but not limited to, any
"reportable event", arising in connection with any Plan which might constitute
grounds for the termination thereof by the PBGC or for the appointment by the
appropriate United States district court of a trustee to administer the Plan;
(iii) promptly after the issuance thereof, furnish to Bank a copy of any notice
of any "reportable event" given to the PBGC with respect to any Plan; (iv)
promptly after receipt thereof, furnish to Bank a copy of any notice
received from the PBGC relating to the intention of the PBGC to terminate any
Plan or to appoint a trustee to administer any Plan; and (v) furnish to Bank,
promptly upon its request therefor, such additional information concerning each
and every Plan as may be reasonably requested.
Section 7.17. Compliance with Environmental Laws.
(a) Borrower shall, from time to time, if requested by Bank upon
reasonable cause, retain, at Borrower's expense, an independent professional
consultant to prepare a report relating to Hazardous Materials and to conduct an
investigation of any or all of the properties and assets of Borrower Borrower
agrees also that Bank (or its agents) may, from time to time retain at
Borrower's expense, an independent professional consultant to advise Bank as to
any such report relating to Hazardous Materials Borrower hereby grants to Bank,
its agents, employees, consultants and contractors the right to enter into or
onto Borrower's business premises to perform such tests as are reasonably
necessary to conduct such a review and/or investigation.
(b) Borrower shall promptly advise Bank in writing and in reasonable
detail of (i) any Release of any Hazardous Material required to be reported to
any Governmental Authority under any applicable Environmental Laws; (ii) any and
all written communications with respect to claims or suits under such laws or
any Release of Hazardous Materials required to be reported to any Governmental
Authority, instrumentality or agency; (iii) any remedial action taken by
Borrower or any other Person in response to (A) any Hazardous Materials on,
under or about the properties or assets of Borrower, the existence of which
could have a Material Adverse Effect or (B) any claim or suit resulting in a
material adverse change of Borrower's business operations or financial
condition; (iv) Borrower's discovery of any occurrence or condition on any real
property adjoining or in the vicinity of Borrower's business premises that could
cause such premises or any part thereof to be classified as "border-zone
property" or to be otherwise subject to any restrictions on the ownership,
occupancy, transferability or use thereof under any Environmental Laws; and (v)
any request for information from any Governmental Authority that indicates such
authority, instrumentality or agency is investigating whether Borrower may be
potentially responsible for a Release of Hazardous Materials.
(c) Borrower shall, at its own expense, provide copies of such
documents or information as Bank may reasonably request in relation to any
matters disclosed pursuant to this Section 7.17.
(d) Borrower shall comply with all Environmental Laws and establish
and maintain policies and procedures to ensure and monitor continued compliance
with all Environmental Laws Borrower shall promptly take any and all necessary
remedial action in connection with the presence, storage, use, disposal,
transportation or Release of any Hazardous Materials on, under or
about its business premises If Borrower undertakes any remedial action with
respect to any Hazardous Materials on, under or about its business premises,
Borrower shall conduct and complete such remedial action in compliance with the
policies, orders and directives of any Governmental Authority except when and
only to the extent that Borrower's liability for such presence, storage, use,
disposal, transportation or discharge of any Hazardous Material is being
contested in good faith by Borrower.
Section 7.18. Operating Accounts Borrower shall establish and maintain all
of its operating accounts, including its payroll account, with Bank.
SECTION 8 NEGATIVE COVENANTS
Borrower covenants and agrees that from the date hereof until the payment
and performance in full of the Obligations, unless Bank otherwise consents in
writing:
Section 8.1. Limitation on Indebtedness. Neither Borrower nor any of its
Subsidiaries shall create, incur, assume, guarantee or be or remain liable with
respect to any Indebtedness other than the following ("Permitted Indebtedness"):
(a) Indebtedness of Borrower or any of its Subsidiaries to Bank or
any Bank Affiliates;
(b) Indebtedness existing as of the date of this Agreement and
disclosed on Schedule 8.1. attached hereto or in the Financial Statements
referred to in Section 4.7. hereof;
(c) Subordinated Indebtedness incurred with the prior written consent
of Bank;
(d) Indebtedness secured by Permitted Encumbrances;
(e) Indebtedness incurred or arising as a result of the re-
classification of Borrower's option, lease and subcontracting relationship for
its Jamaica manufacturing facility; and
(f) other Indebtedness of Borrower in an aggregate outstanding
principal amount not exceeding FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00) in
any one (1) instance or ONE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($150,000.00) in the aggregate during any twelve (12) month period.
Section 8.2. Contingent Liabilities. Neither Borrower nor any of its
Subsidiaries shall create, incur, assume, guarantee or remain liable with
respect to any Guarantees other than the following:
(a) Guarantees in favor of Bank or any Bank Affiliates;
(b) Guarantees existing on the date of this Agreement and disclosed
on Schedule 4.26. attached hereto or in the Financial Statements referred to in
Section 4.7. hereof;
(c) Guarantees resulting from the endorsement of negotiable
instruments for collection in the ordinary course of business;
(d) Guarantees with respect to surety, appeal, performance and
return-of-money and other similar obligations incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money) not
exceeding ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) in the aggregate
at any one time;
(e) Guarantees in support of Borrower's sub-contractors in an amount
not to exceed FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00) in the
aggregate at any one time; and
(e) Guarantees of normal trade debt relating to the acquisition of
goods and supplies.
Section 8.3. Sale and Leaseback. Neither Borrower nor any of its
Subsidiaries shall enter into any arrangement, directly or indirectly, whereby
it shall sell or transfer any property owned by it in order to lease such
property or lease other property that Borrower or any such Subsidiary intends to
use for substantially the same purpose as the property being sold or
transferred.
Section 8.4. Encumbrances. Neither Borrower nor any of its Subsidiaries
shall create, incur, assume or suffer to exist any Encumbrance, or assign or
otherwise convey any right to receive income, including the Accounts Receivable,
with or without recourse, except the following ("Permitted Encumbrances"):
(a) Encumbrances in favor of Bank or any Bank Affiliates;
(b) Encumbrances existing as of the date of this Agreement and
disclosed in Schedule 4.24. attached hereto;
(c) liens for taxes, fees, assessments and other governmental charges
to the extent that payment of the same may be postponed or is not required in
accordance with the provisions of Section 8.4. hereof;
(d) landlords' and lessors' liens in respect of rent not in default
or liens in respect of pledges or deposits under worker's compensation,
unemployment insurance, social security laws, or similar legislation (other than
ERISA) or in connection with appeal and similar bonds incidental to litigation;
mechanics', laborers' and materialmen's and similar liens, if the obligations
secured by such liens are not then delinquent; liens securing the performance of
bids, tenders, contracts (other than for the payment
of money); and statutory obligations incidental to the conduct of its business
and that do not in the aggregate materially detract from the value of its
property or materially impair the use thereof in the operation of its business;
(e) judgment liens that shall not have been in existence for a period
longer than thirty (30) days after the creation thereof or, if a stay of
execution shall have been obtained, for a period longer than thirty (30) days
after the expiration of such stay;
(f) rights of lessors under Capital Leases;
(g) Encumbrances in respect of any purchase money obligations for
tangible property used in its business that at any time shall not exceed TWENTY
FIVE THOUSAND AND NO/100 DOLLARS ($25,000.00) in any one (1) instance or ONE
HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) in the aggregate during any
twelve (12) month period; provided, however, that any such Encumbrances shall
not extend to properties and assets of Borrower or any such Subsidiary not
financed by such purchase money obligation;
(h) easements, rights of way, restrictions and other similar charges
or Encumbrances relating to real property and not interfering in a material way
with the ordinary conduct of its business; and
(i) Encumbrances on its property or assets created in connection with
the refinancing of Indebtedness secured by Permitted Encumbrances on such
property; provided, however, that the amount of Indebtedness secured by any such
Encumbrance shall not be increased as a result of such refinancing and no such
Encumbrance shall extend to property and assets of Borrower or any such
Subsidiary not encumbered prior to any such refinancing.
Section 8.5. Merger; Consolidation; Sale or Lease of Assets. Neither
Borrower nor any of its Subsidiaries shall sell, lease or otherwise dispose of
properties or assets (valued at the lower of cost or market), other than sales
of Inventory in the ordinary course of business or Equipment as permitted under
Section 10.3.5. hereof; or liquidate, merge or consolidate into or with any
other Person; provided, however, that any Subsidiary of Borrower may merge or
consolidate into or with (i) Borrower if no Default or Event of Default has
occurred and is continuing or would result from such merger and if Borrower is
the surviving company, or (ii) any other wholly-owned Subsidiary of Borrower.
Section 8.6. Additional Stock Issuance. Borrower shall not permit any
of its Subsidiaries to issue any additional shares of its capital stock or other
equity securities, any options therefor or any securities convertible thereto
other than to Borrower Neither Borrower nor any of its Subsidiaries shall sell,
transfer or otherwise dispose of any of the capital stock or other equity
securities of a Subsidiary, except (i) to Borrower or any of its
wholly-owned Subsidiaries, or (ii) in connection with a transaction permitted by
Section 8.5.
Section 8.7. Dividends. Borrower shall not pay any Dividends on any
class of its capital stock or make any other distribution or payment on account
of or in redemption, retirement or purchase of such capital stock except that,
as long as no Default or Event of Default shall have occurred and be continuing
and as long as Borrower is in compliance with all of the Distribution Covenants
at the time of the payment of any such Dividends, Borrower may pay Dividends in
an amount which does not exceed FIVE HUNDRED THOUSAND AND NO/100 ($500,000.00)
DOLLARS in any Fiscal Year Notwithstanding the foregoing, if, Borrower does not
pay all or any portion of the Dividends permitted to be paid under this Section
8.7. in any Fiscal Year, Borrower may pay any such unpaid Dividends in future
Fiscal Years as long as no Default or Event of Default shall have occurred and
be continuing and the payment thereof will not cause Borrower to violate any of
the Distribution Covenants as of the date of the payment of any such Dividends
This Section 8.7. shall not apply to (i) the issuance, delivery or distribution
by Borrower of shares of its capital stock pro rata to its existing shareholders
and (ii) the purchase or redemption by Borrower of its capital stock with the
proceeds of the issuance of additional shares of capital stock.
Section 8.8. Investments. Neither Borrower nor any of its Subsidiaries
shall make or maintain any Investments other than (i) existing Investments in
Subsidiaries and (ii) Qualified Investments.
Section 8.9. ERISA. Neither Borrower nor any member of the Controlled
Group shall permit any plan maintained by it to (i) engage in any "prohibited
transaction" (as defined in Section 4975 of the Code); (ii) incur any
"accumulated funding deficiency" (as defined in Section 302 of ERISA) whether or
not waived; or (iii) terminate any Plan in a manner that could result in the
imposition of an Encumbrance on the property and assets of Borrower or any of
its Subsidiaries pursuant to Section 4068 of ERISA.
Section 8.10. Change in Terms and Prepayment of Subordinated Indebtedness.
Borrower shall not:
(a) effect or permit any change in or amendment to (i) the terms by
which any Subordinated Indebtedness purports to be subordinated to the payment
and performance of the Obligations or (ii) the terms relating to the repayment
of any Subordinated Indebtedness; or
(b) directly or indirectly, make any payment of principal in respect
of or in redemption, retirement or repurchase of any Subordinated Indebtedness
except in accordance with the terms of any documents, agreements or instruments
which serve to subordinate such Indebtedness to the Obligations.
Section 8.11. Change in Management. Borrower shall not make nor suffer a
change in the overall composition of its present executive management which
would have a Material Adverse Effect.
Section 8.12. Change Name or Location. Borrower shall not change its
corporate name or conduct its business under any name other than those set forth
in the Collateral Disclosure List or change its chief executive office, place of
business or location of the Collateral or records relating to the Collateral
from the locations set forth in the Collateral Disclosure List unless it has
given Bank at least thirty (30) days prior written notice.
Section 8.13. Contracts. Borrower shall not enter into any contract other
than on such terms as would be contained in an agreement executed at arms'
length with an unrelated third party.
Section 8.14. Compliance with Environmental Laws. Borrower shall not
generate, handle, use, store or treat any Hazardous Materials except in
compliance with Environmental Laws.
Section 8.15. Lines of Business. Borrower shall not make a material change
in or discontinue its existing lines of business nor enter into any new line or
lines of business except as set forth in the Forecasts.
Section 8.16. Fiscal Year. Borrower shall not change its existing Fiscal
Year.
SECTION 9 FINANCIAL COVENANTS.
Borrower covenants and agrees that from the date hereof, until the payment
and performance in full of the Obligations, unless Bank otherwise consents in
writing:
Section 9.1. Performance Covenants.
Section 9.1.1. Net Worth Borrower's Net Worth shall not be less than
the following amounts at all times during the following Periods:
Amount Period
$3,250,000.00 September 30, 1994 through
June 29, 1995
$3,750,000.00 June 30, 1995 through
June 29, 1996
$4,250,000.00 June 30, 1996 through
June 29, 1997
$5,000,000.00 June 30, 1997 and thereafter
Section 9.1.2. Debt Service Coverage. Borrower shall not permit the
ratio of its EBITDA minus Capital Expenditures to its
Total Debt Service to be less than the following ratios at the end of each of
the following Fiscal Years:
Ratio Fiscal Year Ending
1.50 to 1.0 June 30, 1995
1.75 to 1.0 June 30, 1996
1.75 to 1.0 June 30, 1997
Section 9.1.3. Total Debt to Net Worth Ratio. The ratio of Borrower's
Total Debt to its Net Worth shall not be greater than the following ratios at
all times during the following Periods.
Ratio Period
3.75 to 1.0 September 30, 1994 through
June 29, 1995
3.5 to 1.0 June 30, 1995 through
June 29, 1996
3.5 to 1.0 June 30, 1996 through
June 29, 1997
3.0 to 1.0 June 30, 1997 and thereafter
Section 9.1.4. Inventory Turnover. Borrower shall "turn over" its
Inventory during each Fiscal Year at the rate of at least 1.5 to 1.0 (determined
as of the end of each Fiscal Year by dividing Borrower's cost of goods sold
during such Fiscal Year by the value of Borrower's Inventory as of such date).
Section 9.2. Distribution Covenants.
Section 9.2.1. Net Worth. Borrower's Net Worth shall not be less than
the following amounts at all times during the following Periods:
Amount Period
$4,750,000.00 June 30, 1995 through
June 29, 1996
$4,750,000.00 June 30, 1996 through
June 29, 1997
$5,500,000.00 June 30, 1997 and thereafter
Section 9.2.2. Debt Service Coverage. Borrower shall not permit the
ratio of its EBITDA minus Capital Expenditures to its Total Debt Service to be
less than the following ratios at the end of each of the following Fiscal Years:
Ratio Fiscal Year Ending
1.75 to 1.0 June 30, 1995
2.00 to 1.0 June 30, 1996
2.00 to 1.0 June 30, 1997
Section 9.2.3. Total Debt to Net Worth Ratio. The ratio of Borrower's
Total Debt to its Net Worth shall not be greater than the following ratios at
all times during the following Periods.
Ratio Periods
3.0 to 1.0 June 30, 1995 through
June 29, 1996
3.0 to 1.0 June 30, 1996 through
June 29, 1997
2.5 to 1.0 June 30, 1997 and thereafter
Section 9.2.4. Inventory Turnover. Borrower shall "turn over" its
Inventory during each Fiscal Year at the rate of at least 1.5 to 1.0 (determined
as of the end of each Fiscal Year by dividing Borrower's cost of goods sold
during such Fiscal Year by the value of Borrower's Inventory as of such date).
Section 9.5. Definitions. The following capitalized terms
used in this Section 9 and in any certificate, report or other document,
instrument or agreement executed or delivered in connection with the covenants
set forth in this Section 9 shall have the meanings ascribed to such terms
below:
Section 9.3.1. "EBITDA." means, for any period, the net income (as
such term is understood under GAAP) but excluding any extraordinary items of
gain of Borrower before any provision for (i) taxes paid or payable for such
period (other than real estate and sales and use taxes), (ii) all interest paid
or accrued for such period in respect of all Indebtedness, (iii) amounts in
respect of depreciation and amortization for such period and (iv) for the
calculation of EBITDA for the fiscal period ending August 31, 1994 only: (x) the
fees and expenses paid or incurred by Borrower in connection with the
transactions contemplated by that certain Capital Contribution Agreement dated
November 19, 1993 by and amount The Aristotle Corporation, Aristotle Sub, Inc.,
Borrower and the shareholders of Borrower as of such date, (y) a bonus of
approximately $349,540 paid to the Covered Employees (other than David Howell
and Ann-Marie Howell) and (z) a compensation deduction to Borrower of
approximately $620,000 due to the sale of Borrower's capital stock acquired by
such Covered Employees pursuant to the exercise of certain incentive stock
options, all of the foregoing determined in accordance with GAAP and valuing
Inventory on a "FIFO" basis.
Section 9.3.2 "Net Worth" means, as of any date, Borrower's total
shareholders equity plus additional paid in capital and retained earnings after
deducting treasury stock plus Subordinated Debt, all as determined in accordance
with GAAP but calculated valuing Inventory on a "FIFO" basis and Equipment on a
basis which is consistent with the manner in which Borrower has historically
valued Equipment on its internally prepared Financial Statements.
Section 9.3.3. "Total Debt" means, as of any date as of which the
amount thereof shall be determined, all Indebtedness of Borrower including the
Obligations but excluding Subordinated Indebtedness, as of such date and
Indebtedness described in Section 8.1(e).
Section 9.3.4 "Total Debt Service" means, for any period, the
aggregate amount of Borrower's obligation to make payments of principal,
interest and other amounts in respect of all Total Debt for such period;
provided, however, that for purposes of the calculation of Total Debt Service,
the obligation of Borrower to make payments of principal with respect to the
Revolving Loan shall be considered a long term obligation not payable within any
such period.
SECTION 10 SPECIAL COVENANTS RELATING TO COLLATERAL
Borrower covenants and agrees that from the date hereof until the payment
and performance in full of the Obligations, unless Bank otherwise consents in
writing:
Section 10.1. Accounts Receivable. With respect to its Accounts
Receivable:
Section 10.1.1. Borrower shall deposit all payments received from
or on behalf of an Account Debtor into an account established with Bank and
Borrower shall direct or otherwise cause all Account Debtors to pay all monies
due under their respective Accounts Receivable to a lockbox account (the
"Lockbox Account") maintained by Bank in Borrower's name at Borrower's expense
and, to the extent Borrower receives such payments directly, all remittances
received by Borrower on account of Accounts Receivable shall be held as Bank's
property by Borrower as trustee of an express trust for Bank's benefit, and
Borrower will immediately deliver to Bank the identical checks, moneys or other
forms of payment received Borrower hereby constitutes Bank, or any
representative whom Bank may designate, as Borrower's attorney-in-fact (i) to
endorse the name on any notes, acceptances, checks, drafts, money orders or
other evidence of payment or security interest that may come into Bank's
possession, and (ii) following the occurrence of an Event of Default, to sign
Borrower's name on any invoice or bill of lading relating to Accounts
Receivable, on drafts against customers, assignments and certificates of
Accounts Receivable, and notices to customers Bank retains the right at all
times after the occurrence of an Event of Default to notify Account Debtors that
their respective Accounts Receivable have been assigned to Bank and to collect
Accounts Receivable directly in its own name and to charge the collection costs
and expenses, including reasonable attorneys' fees to, the Loan Account Bank has
no duty to protect, insure, collect or realize upon the Accounts Receivable or
other collateral or preserve rights in them other than to act in a commercially
reasonable manner Borrower releases Bank from any liability for any
act or omission relating to the Obligations, the Accounts Receivable or other
Collateral or this Agreement, except Bank's failure to act in a commercially
reasonable manner, willful misconduct or gross negligence All amounts received
by Bank in payment in Accounts Receivable assigned to it are to be credited to
the Borrower's Account upon receipt by Bank, conditioned upon collection by Bank
of good funds in respect thereof.
Section 10.1.2. Following the occurrence of an Event of Default
and in connection with any audit conducted under Section 7.6. hereof, and in all
other instances following written notice to Borrower, any of Bank's officers,
employees, or agents shall have the right, in Bank's name or in the name of
Borrower, to request the verification of the validity, amount or any other
matter relating to any Account Receivable by mail, telephone, facsimile
transmission, telegraph, or other communication to Account Debtors.
Section 10.1.3. Borrower shall keep accurate and complete records
of its Accounts Receivable and accounts payable, and upon demand by Bank shall
deliver to Bank copies of proof of delivery and the original copy of all
documents, including, without limitation, repayment histories and present status
reports, relating to Borrower's Accounts Receivable and accounts payable and
such other matters and information relating to the status of the Accounts
Receivable and accounts payable as Bank shall reasonably request.
Section 10.1.4. Borrower shall promptly advise Bank:
(a) of any material delay in Borrower's performance of any of its
obligations to any Account Debtor or the assertion of any claim, offset or
setoff by any Account Debtor in excess of ONE HUNDRED THOUSAND AND NO/100
DOLLARS ($100,000.00); or
(b) in the event that any Eligible Account Receivable becomes
ineligible for reasons other than lapse of time in payment and the reasons
therefor; or
(c) of the receipt of any Government Contract which is subject to the
Federal Assignment of Claims Act of 1940; or
(d) of the receipt of any cancellation or termination of, or the
delivery of notice of default under, any Government Contract.
Section 10.1.5. Borrower shall promptly execute any assignment and
take any action requested or required by Bank with respect to any Account
Receivable, , which arises out of a Government Contract which is subject to the
Federal Assignment of Claims Act of 1940.
Section 10.1.6. Borrower shall maintain all Accounts Receivable
free of all Encumbrances other than those in favor of Bank and Permitted
Encumbrances.
Section 10.2. Inventory. With respect to its Inventory:
Section 10.2.1. Borrower shall maintain all Inventory free of all
Encumbrances other than those in favor of Bank.
Section 10.2.2. Borrower shall not store or deposit any Inventory
with a bailee, warehouseman, or similar party without Bank's prior written
consent and, if Bank gives such consent, Borrower will concurrently therewith
cause any such bailee, warehouseman, or similar party to issue and deliver to
Bank, in form and substance acceptable to Bank and its legal counsel, warehouse
receipts for such Inventory in Bank's name or a warehouseman's waiver and
agreement.
Section 10.2.3. If any Inventory is in the possession or control
of any third party other than a purchaser in the ordinary course of business or
a warehouseman where the warehouse receipt is in the name of or held by Bank or
whom has executed a warehouseman's waiver and consent in favor of Bank, Borrower
shall notify such Person of Bank's security interest therein and, upon request,
instruct such Person or Persons to hold all such Inventory for the account of
Bank and subject to Bank's instructions.
Section 10.3. Equipment. With respect to its Equipment:
Section 10.3.1. Borrower shall maintain the Equipment used in the
ordinary course of business in good operating condition and repair, and make all
necessary replacements of and repairs thereto so that the value and operating
efficiency of the Equipment shall be maintained and preserved.
Section 10.3.2. The Equipment, other than when being used in the
ordinary course of business, is located or stored at the locations described in
Schedule 3 of the Collateral Disclosure List (other than Equipment being
temporarily stored for purposes of repair or maintenance), and Borrower shall
promptly notify Bank, in writing, in the event Borrower shall store or locate
the Equipment at any location other than the locations specified in said
Schedule 3.
Section 10.3.3. Borrower, immediately on demand therefor by Bank,
shall deliver to Bank any and all evidence of ownership, if any, of any of the
Equipment Borrower purports to own (including, without limitation, certificates
of title and applications for title).
Section 10.3.4. Borrower shall maintain accurate, itemized
records, itemizing and describing the kind, type, quality, quantity and value of
its Equipment and shall furnish Bank with a current schedule containing the
foregoing information at Bank's reasonable request.
Section 10.3.5. Borrower shall not sell, lease, or otherwise
dispose of or transfer any interest in any of its
Equipment or any part thereof in excess of TEN THOUSAND AND NO/100 DOLLARS
($10,000.00) in any one (1) instance or FIFTY THOUSAND AND NO/100 DOLLARS
($50,000.00) in the aggregate during any fiscal year without the prior written
consent of Bank, unless (a) no Default or Event of Default shall exist at the
time of such sale, lease or disposition, (b) such sale, lease or disposition is
made in the ordinary course of Borrower's business, and (c) the net proceeds of
such sale, lease or disposition are used for the purchase of additional
Equipment on which Bank will have a first priority security interest Where
Borrower is permitted to dispose of any Equipment under this Agreement or by any
consent thereto hereafter given by Bank, it shall do so at arm's length, in good
faith and by obtaining the maximum amount of recovery practicable therefor and
without impairing the operating integrity of the remaining Equipment.
Section 10.3.6 Borrower shall, if requested by Bank with due
cause, provide to Bank a forced and orderly liquidation value appraisal of
Borrower's Equipment performed by an appraiser acceptable to Bank and at
Borrower's expense.
SECTION 11. DEFAULT
Section 11.1. The occurrence of any of the following events shall
constitute a default under this Agreement, the Notes and the Other Documents (an
"Event of Default"):
(a) Borrower shall fail to pay (i) any outstanding principal amount
of the Line of Credit when due, (ii) any Reimbursement Obligations when due, or
(iii) any outstanding principal amount of the Term Loan, any accrued and unpaid
interest on the Loans or any fees or expenses payable under this Agreement, the
Notes or the Other Documents within fifteen (15) days of the due date therefor;
or
(b) Borrower shall fail to perform any term, covenant or agreement
contained in Sections 7.1., 7.6., 8.7., 8.11. or 10 of this Agreement or fail to
reduce the balance of Overadvances to zero (O) as required by Section 2.1.2. of
this Agreement; or
(c) Borrower shall fail to perform any act, duty, obligation or other
agreement contained in this Agreement, the Notes or Other Documents and not
otherwise constituting an Event of Default hereunder; provided, however, if the
act, duty, obligation or other agreement does not materially affect, in Bank's
sole and absolute discretion, Bank's rights under this Agreement, the Notes or
the other Documents, then Borrower shall have thirty (30) calendar days
following the date on which it becomes aware of any such non- performance in
which to make the required performance before the exercise by Bank of any of its
remedies under this Agreement, the Notes and the Other Documents; or
(d) any representation or warranty of Borrower made in this
Agreement, the Notes or the Other Documents or in any certificate or report
delivered hereunder or thereunder shall prove to have been false in any material
respect upon the date when made or deemed to have been made; or
(e) Borrower or any of its Subsidiaries shall fail to pay at maturity
(unless disputed in good faith), or within any applicable period of grace, any
Indebtedness or obligations for the use of real or personal property in excess
of FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00) in the aggregate or fail to
observe or perform any term, covenant or agreement evidencing or securing such
Indebtedness, or obligations for the use of real or personal property, or
relating to such use of real or personal property, the result of which failure
is to permit (i) the holder or holders of such Indebtedness or obligations to
cause the same to become due prior to its stated maturity or (ii) the lessor of
such real or personal property to terminate Borrower or any Subsidiary's use
thereof prior to the specified term therefor; or
(f) Borrower or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar official of itself or of all or a
substantial part of its properties and assets; (ii) be generally not paying its
debts as such debts become due; (iii) make a general assignment for the benefit
of its creditors; (iv) commence a voluntary case under the Bankruptcy Code; (v)
take any action or commence any case or proceeding under any law relating to
bBankruptcy, insolvency, reorganization, winding-up or composition or adjustment
of debts, or any other law providing for the relief of debtors; (vi) fail to
contest in a timely or appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under Bankruptcy Code or other
law; (vii) take any action under the laws of its jurisdiction of incorporation
or organization similar to any of the foregoing; or (viii) take any corporate
action for the purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the application
or consent of Borrower or any of its Subsidiaries in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, dissolution, winding
up, or composition or readjustment of its debts; (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of it or of all or any
substantial part of its properties and assets; or (iii) similar relief in
respect of it, under any law relating to Bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts or any other law providing for
the relief of debtors, or an order for relief shall be entered in an involuntary
case under the Bankruptcy Code, against Borrower or such Subsidiary; or action
under the laws of the jurisdiction of incorporation or organization of Borrower
or any of its Subsidiaries similar to any of the foregoing shall be taken with
respect to Borrower or such Subsidiary; or
(h) a judgment or order for the payment of money shall be entered
against Borrower or any of its Subsidiaries by any court, or a warrant of
attachment or execution or similar process shall be issued or levied against
property of Borrower or such Subsidiary and such judgment, order, warrant or
process shall continue undischarged or unstayed for sixty (60) days; or
(i) Borrower or any member of the Controlled Group shall fail to pay
when due an amount or amounts that it shall have become liable to pay to the
PBGC or to a plan under Title IV of ERISA; intent to terminate a plan or plans
shall be filed under Title IV of ERISA by Borrower, any member of the Controlled
Group, any plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate or to cause a
trustee to be appointed to administer any such plan or plans or a proceeding
shall be instituted by a fiduciary of any such plan or plans against Borrower
and such proceedings shall not have been dismissed within sixty (60) days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any such plan or plans must be
terminated; or
(j) Borrower shall fail to meet any Performance Covenant set forth in
Section 9.1. hereof; or
(k) Borrower's independent certified public accountants shall refuse
to deliver an opinion with no Qualification with respect to any Financial
Statements required to be delivered under Section 7.1.1. of this Agreement; or
(l) The failure of Borrower to execute, deliver or address, or cause
to be executed, delivered and addressed, the matters set forth on Schedule 11.1.
attached hereto within thirty (30) days after the Closing Date (the "Post
Closing Matters"); or
(m) Any Government Authority shall condemn, seize or otherwise
appropriate, or take custody or control of, or file a lien, levy or assessment
in respect of, all or any substantial portion of the properties or assets of
Borrower; or
(n) Any Governmental Authority or other Person shall garnish, seize
or levy or execute upon any monies of Borrower on deposit with or otherwise in
the custody of Bank or any Bank affiliate; or
(o) If the Limited Guarantor, The Aristotle Corporation Borrower or
the holders of any of the Limited Guarantor's $10.00 par value Preferred Stock
(the "Preferred Stock") or any other Person should contest the right of the
holders of the Preferred Stock to compel a Partial Unwinding (as such term is
defined in Section 8.2. of that certain Capital Contribution Agreement dated
November 19, 1993 by and among The Aristotle Corporation, the Limited Guarantor,
Borrower and the Covered Employees.
SECTION 12. REMEDIES
Section 12.1. Remedies. Upon the occurrence of an Event of Default, and at
any time thereafter while such Event of Default is continuing, immediately and
automatically in the case of an event of Default specified in Section 11.1(f) or
11.1.(g), and in all other cases, at Bank's option and upon Bank's declaration:
(a) Bank's obligation to make any Extension of Credit shall
terminate;
(b) the unpaid principal amount of the Loans, and all Reimbursement
Obligations together with accrued interest thereon, and all other Obligations
shall become immediately due and payable without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived;
(c) Bank may exercise any right of setoff granted to Bank pursuant to
Section 13.2.4 hereof;
(d) Bank may reduce any advance rate in respect of Borrower's
Accounts Receivable or Inventory as set forth in Sections 1.113 and 1.114 of
this Agreement; and
(e) Bank may exercise any and all other rights and remedies it has
under this Agreement, the Notes or the Other Documents or at law or in equity,
and proceed to protect and enforce Bank's rights by any action at law, in equity
or other appropriate proceeding.
SECTION 13. MISCELLANEOUS
Section 13.1. Cross Default, Cross Collateral and Cross Pay-out. Borrower
acknowledges and agrees that the occurrence of an Event of Default under this
Agreement, the Notes or the Other Documents shall constitute a default under the
documents and instruments evidencing or securing any other loan now existing or
hereafter made by Bank to Borrower, and a default under any of said existing or
future loans shall constitute an Event of Default under this Agreement, the
Notes and the Other Documents The security interests, liens and other rights and
interests in and relative to any collateral now or hereafter granted to Bank by
Borrower by or in any instrument or agreement, including but not limited to this
Agreement and the Other Documents, shall serve as security for any and all
liabilities of Borrower to Bank, including but not limited to the liabilities
described in this Agreement, the Notes and the Other Documents, and, for the
repayment thereof, Bank may resort to any security held by it in such order and
manner as it may elect Notwithstanding the terms of any of the documents and
instruments evidencing or securing the Obligations, Borrower hereby acknowledges
and agrees that if Borrower elects to terminate the Line of Credit at any time
prior to the Revolving Credit Termination Date, then then any remaining portion
of the
Obligations shall be immediately due and payable without notice or demand by
Bank to Borrower.
Section 13.2. Waivers.
Section 13.2.1. In General. Borrower waives presentment, demand,
notice, protest, notice of acceptance, notice of loans made, credit extended,
collateral received or delivered or other action taken in reliance hereon and
all other demands and notices of any description With respect both to the
Obligations and the Collateral, Borrower assents to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of the Collateral, to the addition or release
of any party or Person primarily or secondarily liable therefor, to the
acceptance of partial payments thereon and the settlement, compromising or
adjusting of any thereof, all in such manner and at such time or times as Bank
may deem advisable in its sole and absolute discretion. Bank shall have no duty,
other than to act in a commercially reasonable manner, as to the collection or
protection of the Collateral or any income thereon, as to the preservation of
rights or remedies against prior parties, or as to the preservation of any
rights and remedies pertaining thereto Bank may exercise its rights and remedies
with respect to the Collateral without resorting or regard to other collateral
or sources of reimbursement for liability. Bank shall not be deemed to have
waived any of its rights and remedies with respect to the Obligations or the
Collateral unless such waiver be in writing and signed by Bank No delay or
omission on the part of Bank in exercising any right or remedy shall operate as
a waiver of such right or remedy or any other right or remedy. A waiver on any
one occasion shall not be construed as a bar to any subsequent enforcement by
Bank. All rights and remedies of Bank with respect to the Obligations or the
Collateral shall be cumulative and may be exercised singularly or concurrently.
Section 13.2.2. PREJUDGMENT REMEDY. BORROWER ACKNOWLEDGES THAT THE
TRANSACTION OF WHICH THIS AGREEMENT IS A PART IS A COMMERCIAL TRANSACTION AND
HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE
CONNECTICUT GENERAL STATUTES OR BY OTHER APPLICABLE LAW WITH RESPECT TO ANY
PREJUDGMENT REMEDY WHICH BANK MAY DESIRE TO USE.
Section 13.2.3. JURY TRIAL BORROWER HEREBY WAIVES TRIAL BY JURY IN
ANY COURT IN ANY SUIT, ACTION OR PROCEEDING OR ANY MATTER ARISING IN CONNECTION
WITH OR IN ANY WAY RELATED TO THE TRANSACTION OF WHICH THIS AGREEMENT IS A PART
AND/OR IN THE ENFORCEMENT BY BANK OF ANY OF ITS RIGHTS AND REMEDIES HEREUNDER OR
UNDER APPLICABLE LAW. BORROWER ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY,
VOLUNTARILY AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER
WITH ITS ATTORNEY.
Section 13.2.4. Lien and Setoff. Regardless of the adequacy of any
collateral or other means of obtaining repayment of the Obligations, any
deposits (general or special, time or demand,
provisional or final), balances or other sums credited by or due from Bank or
any Bank Affiliate to Borrower (other than payroll and payroll tax deposit
accounts) may, at any time and from time to time after the occurrence of an
Event of Default, without notice to Borrower or compliance with any other
condition precedent now or hereafter imposed by statute, rule of law, or
otherwise (all of which are hereby expressly waived) be setoff, appropriated,
and applied by Bank or any Bank Affiliate against any and all obligations of
Borrower to Bank or any Bank Affiliate in such manner as Bank or any Bank
Affiliate in their sole and absolute discretion may determine, and Borrower
hereby grants Bank a continuing security interest in such deposits, balances or
other sums for the payment and performance of all such obligations. The rights
provided to Bank and any Bank Affiliate in this Section 13.2.4. shall be in
addition to and shall not limit any common law right of setoff available to Bank
or any Bank Affiliate.
Section 13.2.5. Claims. Borrower does hereby (i) waive any claim
in tort, contract or otherwise which Borrower may have against Bank, a Bank
Affiliate or their officers, directors, agents, or employees (collectively,
"Bank Agents") which may arise out of the relationship between Borrower and Bank
or any Bank Affiliate prior to the Closing Date; and (ii) absolutely and
unconditionally release and discharge Bank and any Bank Affiliate or Bank Agents
from any and all claims, causes of action, losses, damages or expenses which may
arise out of any relationship between it and Bank or any Bank Affiliate which
Borrower may have as of the Closing Date. Borrower acknowledges that it makes
this waiver and release knowingly, voluntarily and only after considering the
ramifications of this waiver and release with its attorney.
Section 13.3. Notices. All notices, requests, demands or other
communications required by this Agreement shall be made in writing, and unless
otherwise specifically provided herein, shall be deemed to have been duly given
when delivered by hand or mailed first class mail postage prepaid, or, in the
case of telecopy or facsimile notice, when transmitted, answer back received,
addressed as follows, or to such other address as either party may designate in
writing:
If to Bank:
Fleet Bank, National Association
One Constitution Plaza
Secured Lending Department
Hartford, CT 06115-1600
Attn: Linda D. Mowry, Vice President
with a copy to:
Updike, Kelly & Spellacy, P.C.
One State Street
P.O. Box 231277
Hartford, CT 06123-1277
Attn: John F. Wolter, Esq.
If to Borrower:
The Strouse, Adler Company
78 Olive Street
New Haven, CT 06507
Attn: David S. Howell, Chairman
with a copy to:
Brenner, Saltzman & Wallman
271 Whitney Avenue
New Haven, CT 06507-1746
Attn: Wayne A. Martino, Esq.
Section 13.4. Fees and Expenses. Borrower will pay on demand all expenses
incurred by Bank in connection with (i) the preparation, execution and delivery
of this Agreement, the Notes or the Other Documents, (ii) the administration of
Bank's obligations under this Agreement or (iii) Bank's exercise, preservation
or enforcement of any of its rights and remedies thereunder, including, without
limitation, reasonable fees and expenses of outside legal counsel or the
allocated costs of in-house legal counsel, accounting, appraisal, auditing,
consulting, brokerage or other similar professional fees or expenses, and any
fees or expenses associated with any travel or other costs relating to any
appraisals or examinations conducted in connection with the Obligations or the
Collateral.
Section 13.5. Term of Agreement. This Agreement shall continue in force
and effect so long as Bank has any commitment to extend credit or any of the
Obligations shall be outstanding.
Section 13.6. Stamp Tax. Borrower will pay any stamp, franchise or other
recording tax which becomes payable in respect of this Agreement, the Notes or
the Other Documents.
Section 13.7. Schedules and Exhibits. The schedules and exhibits which are
attached hereto are and shall constitute a part of this Agreement.
Section 13.8. Governing Law; Consent to Jurisdiction. This Agreement, the
Notes and the Other Documents, and the rights and obligations of the parties
hereunder and thereunder, shall be governed by and construed and interpreted in
accordance with, the laws of the State of Connecticut Borrower agrees that any
suit for the enforcement of this Agreement, the Notes or the Other Documents
may be brought in the courts of the State of Connecticut or any federal court
sitting therein and consents to the non-exclusive jurisdiction of such court and
to service of process in any such suit being made upon Borrower by mail at the
address referred to Section 13.3. hereof. Borrower hereby waives any objection
that Borrower may now or hereafter have to the venue of any such suit or any
such court or that such suit is brought in an inconvenient court.
Section 13.9. Survival of Representations. All representa tions,
warranties, covenants and agreements contained in this Agreement, the Notes or
the Other Documents shall survive the Closing Date and continue in full force
and effect until the payment and the performance of the Obligations in full.
Section 13.10. Amendments. No modification or amendment of this Agreement,
the Notes or the Other Documents shall be effective unless the same shall be in
writing and signed by the parties hereto.
Section 13.11. Binding Effect of Agreement. This Agreement shall be binding
upon and inure to the benefit of Borrower and Bank and their respective
successors and assigns; provided, however, that Borrower may not assign or
transfer its rights or obligations hereunder Bank may sell, transfer or grant
participations in the obligations without the prior written consent of Borrower
(but after obtaining an agreement to maintain the confidentiality of any
financial and business information of Borrower), and Borrower agrees that any
transferee or participant shall be entitled to the benefits of this Agreement to
the same extent as if such transferee or participant were Bank; provided,
further, that notwithstanding any such transfer or participation, Borrower may,
for all purposes of this Agreement, treat Bank as the Person entitled to
exercise all rights and remedies under this Agreement and under the Notes and
the Other Documents and to receive all payments with respect to the Obligations.
Section 13.12. Interest Rate. If the rate of interest payable by Borrower
under this Agreement, the Notes or the Other Documents shall be or become
usurious or otherwise unlawful under laws applicable thereto, the interest rate
shall be reduced to the maximum lawful rate and any amount paid by Borrower in
excess of the maximum lawful rate shall be considered a payment in reduction of
principal or, at the sole election of Bank, shall be returned to Borrower.
Section 13.13. Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures hereto and thereto were
upon one and the same instrument.
Section 13.14. No Agency Relationship. Bank is not the agent, fiduciary or
representative of Borrower nor is Borrower the agent, fiduciary or
representative of Bank and this Agreement shall not
make Bank liable to any third party, including but not limited to, Borrower's
shareholders, directors, officers, creditors or any other person.
Section 13.15. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
Section 13.16. Headings. All article, section and subsection headings in
this Agreement, the Notes and the Other Documents are included for convenience
of reference only and shall not constitute a part of this Agreement, the Notes
or the Other Documents for any other purpose.
Section 13.17. Reinstatement. This Agreement shall continue to be effective
or be reinstated, as the case may be, if at any time any amount received by Bank
in respect of the Obligations is rescinded or must otherwise be restored or
returned by Bank upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of Borrower or upon the appointment of any intervenor or
conservator of, or trustee or similar official for, Borrower or any substantial
part of its properties or assets, or otherwise, all as though such payments had
not been made.
Section 13.18. Interpretation and Construction. The following rules shall
apply to the interpretation and construction of this Agreement, the Notes and
the Other Documents unless the context requires otherwise: (a) the singular
includes the plural and the plural includes the singular; (b) words importing
any gender include the other genders; (c) references to statutes are to be
construed as including all statutory provisions consolidating, amending or
replacing the statute to which reference is made and all regulations promulgated
pursuant to such statutes; (d) references to "writing" shall include printing,
photocopy, typing, lithography and other means of reproducing words in a
tangible, visible form; (e) the words "including", "includes" and "include"
shall be deemed to be followed by the words "without limitation"; (f) references
to the introductory paragraph, preliminary statements, articles, sections (or
subdivisions of sections), exhibits or schedules are to those of this Agreement
unless otherwise indicated; (g) references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications to such instruments, but only to the extent that such amendments
and other modifications are permitted or not prohibited by the terms of this
Agreement; (h) references to Persons include their respective permitted
successors and assigns; and (i) "or" is not exclusive.
Section 13.19. Relation to Other Documents. Nothing in this Agreement shall
be deemed to amend, or relieve Borrower of its obligations under, any of the
Other Documents and to the extent
that the provisions of any of the Other Documents allow Borrower to take certain
actions, or not take certain actions, with regard for example to the granting of
liens, transfers of properties or assets, maintenance of financial ratios and
similar matters, Borrower nevertheless shall be fully bound by the provisions of
this Agreement.
IN WITNESS WHEREOF, Bank and Borrower have executed this Agreement as of
the date first above written.
FLEET BANK,
NATIONAL ASSOCIATION
By: /s/Linda D. Mowry
----------------------------------------
Linda D. Mowry
Its Vice President
Duly Authorized
THE STROUSE, ADLER COMPANY
By: /s/David S. Howell
----------------------------------------
David S. Howell
Its Chairman
Duly Authorized