Exhibit 10.1
____________________
CREDIT AGREEMENT
dated as of
February 18, 2003
Between
ENVIRONMENTAL TECTONICS CORPORATION
and
PNC BANK, NATIONAL ASSOCIATION
____________________
Table of Contents
Page
SECTION 1. DEFINITIONS ................................................................................................ 1
1.1 Defined Terms .................................................................................................. 1
1.2 Other Definitional Provisions .................................................................................. 18
SECTION 2. LOANS AND COMMITMENTS ...................................................................................... 18
2.1 Commitments .................................................................................................... 18
2.2 Note ........................................................................................................... 20
2.3 Procedure for Revolving Credit Loans; Issuance of Letters of Credit ............................................ 20
2.4 Requirements for Issuance of Letters of Credit ................................................................. 20
2.5 Fees. .......................................................................................................... 22
2.6 Interest Rates and Payment Dates ............................................................................... 23
2.7 Default Interest ............................................................................................... 24
2.8 Inability to Determine Interest Rate ........................................................................... 24
2.9 Termination and Reduction of Commitments; Mandatory Prepayments. ............................................... 24
2.10 Optional Prepayment of Loans .................................................................................. 25
2.11 Illegality .................................................................................................... 26
2.12 Requirements of Law ........................................................................................... 26
2.13 Taxes ......................................................................................................... 27
2.14 Indemnity ..................................................................................................... 28
2.15 Payments ...................................................................................................... 29
2.16 Conversion and Continuation Options ........................................................................... 30
2.17 Minimum Amounts of Tranches; Maximum Number of Tranches ....................................................... 30
2.18 Loan Account .................................................................................................. 30
2.19 Use of Proceeds ............................................................................................... 31
SECTION 3. REPRESENTATIONS AND WARRANTIES ............................................................................. 31
3.1 Financial Condition ............................................................................................ 31
3.2 No Change ...................................................................................................... 32
3.3 Existence; Compliance with Law ................................................................................. 32
3.4 Power; Authorization; Enforceable Obligations .................................................................. 32
3.5 No Legal Bar ................................................................................................... 33
3.6 No Material Litigation ......................................................................................... 33
3.7 No Default ..................................................................................................... 33
3.8 Taxes .......................................................................................................... 33
3.9 Federal Regulations ............................................................................................ 33
3.10 ERISA ......................................................................................................... 34
3.11 Investment Company Act; Public Utility Holding Company Act; Regulation
O ........................................................................................................... 34
3.12 Purpose of Loans .............................................................................................. 34
3.13 Environmental Matters ......................................................................................... 35
3.14 No Material Misstatements ..................................................................................... 36
3.15 Condition of and Title to Properties .......................................................................... 36
3.16 Intellectual Property ......................................................................................... 36
3.17 No Burdensome Restrictions .................................................................................... 37
3.18 Security Interests ............................................................................................ 37
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3.19 Solvency ...................................................................................................... 37
3.20 No Other Indebtedness ......................................................................................... 37
3.21 Insurance ..................................................................................................... 37
3.22 Subsidiaries .................................................................................................. 38
3.23 Business; Fictitious Names .................................................................................... 38
3.24 Compliance with Laws .......................................................................................... 38
3.25 Labor Matters; Payment of Wages ............................................................................... 38
3.26 Fiscal Year ................................................................................................... 38
3.27 Authorizations ................................................................................................ 38
SECTION 4. CONDITIONS PRECEDENT ....................................................................................... 39
4.1 Conditions to Initial Extension of Credit ...................................................................... 39
4.2 Conditions to Each Loan ........................................................................................ 42
SECTION 5. AFFIRMATIVE COVENANTS ...................................................................................... 42
5.1 Financial Statements ........................................................................................... 42
5.2 Certificates; Other Information ................................................................................ 43
5.3 Payment of Obligations ......................................................................................... 44
5.4 Conduct of Business and Maintenance of Existence ............................................................... 44
5.5 Maintenance of Insurance; Property ............................................................................. 44
5.6 Inspection of Property; Books and Records; Discussions ......................................................... 45
5.7 Notices ........................................................................................................ 45
5.8 Environmental Laws ............................................................................................. 46
5.9 Management Changes ............................................................................................. 47
5.10 Maintenance of Intellectual Property, Permits, Etc. ........................................................... 47
5.11 Plans and Benefit Arrangements ................................................................................ 47
5.12 Further Assurances; Power of Attorney ......................................................................... 47
5.13 Pledge of Property ............................................................................................ 48
5.14 Covenants Regarding Formation of Subsidiaries and Acquisitions ................................................ 48
5.15 Bank Accounts ................................................................................................. 48
5.16 Foreign Subsidiaries .......................................................................................... 48
SECTION 6. NEGATIVE COVENANTS ......................................................................................... 49
6.1 Financial Condition Covenants. ................................................................................. 49
6.2 Limitation on Liens ............................................................................................ 49
6.3 Limitation on Indebtedness ..................................................................................... 49
6.4 Subsidiaries, Partnerships and Joint Ventures .................................................................. 50
6.5 Dividends and Distributions .................................................................................... 50
6.6 Liquidations, Mergers, Consolidations, Acquisitions, Etc. ...................................................... 50
6.7 Dispositions of Assets ......................................................................................... 51
6.8 Loans and Other Advances ....................................................................................... 51
6.9 Investments .................................................................................................... 51
6.10 Use of Proceeds ............................................................................................... 51
6.11 Change of Business ............................................................................................ 52
6.12 Transactions with Affiliates .................................................................................. 52
6.13 Sale and Leaseback ............................................................................................ 52
6.14 Limitation on Contingent Obligations .......................................................................... 52
6.15 Limitation on Optional Payments and Modifications of Subordinated Debt ........................................ 52
6.16 Limitation on Negative Pledge Clauses ......................................................................... 52
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6.17 Fiscal Year ................................................................................................... 52
6.18 Changes in Organizational Documents ........................................................................... 53
SECTION 7. EVENTS OF DEFAULT .......................................................................................... 53
7.1 Events of Default .............................................................................................. 53
SECTION 8. MISCELLANEOUS .............................................................................................. 56
8.1 Amendments and Waivers ......................................................................................... 56
8.2 Notices ........................................................................................................ 56
8.3 No Waiver, Cumulative Remedies ................................................................................. 56
8.4 Survival of Representations and Warranties ..................................................................... 57
8.5 Payment of Expenses and Taxes .................................................................................. 57
8.6 Assignments; Participations .................................................................................... 58
8.7 Set-off ........................................................................................................ 58
8.8 Counterparts ................................................................................................... 58
8.9 Severability ................................................................................................... 59
8.10 Integration ................................................................................................... 59
8.11 GOVERNING LAW ................................................................................................. 59
8.12 Submission To Jurisdiction; Waivers ........................................................................... 59
8.13 Acknowledgments ............................................................................................... 60
8.14 WAIVERS OF JURY TRIAL ......................................................................................... 60
SCHEDULES
SCHEDULE 1.1-A Permitted Investments
SCHEDULE 1.1-B Existing Liens
SCHEDULE 3.2 Material Adverse Change
SCHEDULE 3.6 Litigation
SCHEDULE 3.7 Defaults
SCHEDULE 3.13 Environmental Matters
SCHEDULE 3.15 List of Real Property
SCHEDULE 3.16 Intellectual Property
SCHEDULE 3.18 List of Filing Locations
SCHEDULE 3.20 Permitted Indebtedness
SCHEDULE 3.21 List of Insurance
SCHEDULE 3.22 Subsidiaries
SCHEDULE 3.23 Description of Business
SCHEDULE 3.27(a) Authorizations
SCHEDULE 3.27(b) Investigations
SCHEDULE 6.12 Transactions with Affiliates
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EXHIBITS
EXHIBIT A Form of Revolving Credit Note
EXHIBIT B Form of Pledge Agreement
EXHIBIT C Form of Security Agreement
EXHIBIT D Form of Compliance Certificate
EXHIBIT E Form of Borrowing Base Certificate
EXHIBIT F Form of Notice of Borrowing
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CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of February 18, 2003, between ENVIRONMENTAL
TECTONICS CORPORATION (the "Borrower"), and PNC BANK, NATIONAL ASSOCIATION (the
"Bank").
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Bank make available to it
(i) a secured revolving credit facility in the initial maximum aggregate
principal amount of $12,000,000 to be used for the working capital requirements
and general purposes of the Borrower and providing sublimits for the issuance of
standby and trade letters of credit, (ii) a cash collateralized line of credit
in the aggregate amount of $2,800,000 for the issuance of standby and trade
letters of credit, and (iii) a standby letter of credit of up to $5,025,410 to
secure outstanding variable rate revenue bonds issued by the Borrower, and the
Bank has agreed to do so, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and adequacy of which are hereby acknowledged, and
with the intent to be legally bound hereby, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"Additional Subordinated Debt/Equity": additional Subordinated Debt
and/or preferred equity investment in the aggregate principal amount of
$10,000,000 incurred by the Borrower in favor of H.F. Lenfest on or before the
date of this Agreement.
"Affiliate": as to any Person, any other Person which, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, such Person and any member, partner, director,
officer or employee of any such Person. For purposes of this definition,
"control" shall mean the power, directly or indirectly, either to (a) vote 10%
or more of the Capital Stock of such Person, (b) vote 10% or more of the
securities having ordinary voting power for the election of directors of such
Person or (c) direct or in effect cause the direction of the management and
policies of such Person whether by contract or otherwise.
"Agreement": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"Annual EBIDTA": as of the last day of any Fiscal Quarter, the
Borrower's EBIDTA for the most recently completed four consecutive Fiscal
Quarters, determined on a Consolidated basis in accordance with GAAP. For
purposes of calculating Annual EBIDTA with respect to any Permitted Acquisition
occurring after the Closing Date, it shall be assumed that such acquisition
occurred on the first day of the period for which Annual EBIDTA is being
calculated.
"Applicable Margin": on any date, for a Base Rate Loan .75%, or for a
Eurodollar Loan 3.25%
"Application": as defined in subsection 2.3(b).
"Available Bond Letter of Credit Amount": at the time of
determination, the $5,025,410 (as such term is defined in the Bond Letter of
Credit).
"Available Revolving Credit Commitment": at any particular time, an
amount equal to the excess, if any, of the lesser of (a) Revolving Credit
Commitment at such time and (b) the Borrowing Base at such time over the
aggregate unpaid principal amount of the Revolving Credit Loans and the face
amount of the Revolving Credit Letters of Credit outstanding at such time.
"Bank": PNC Bank, National Association and each bank or other financial
institution which becomes a party hereto pursuant to Section 8.6, and their
respective successors and assigns.
"Base Rate": for any day, a rate per annum equal to the Prime Rate in
effect on such day. Any change in the Base Rate due to a change in the Prime
Rate shall be effective on the effective date of such change in the Prime Rate.
"Base Rate Loan": any Loan bearing interest at a rate determined by
reference to the Base Rate.
"Bond Letter of Credit": that certain Letter of Credit issued by the
Bank pursuant to the Reimbursement Agreement to support the Bonds, as the same
may be modified and amended from time to time.
"Bonds": the Borrower's $5,470,000 Taxable Variable Rate Demand/Fixed
Rate Revenue Bonds, Series of 2000.
"Borrower": as defined in the Preamble to this Agreement.
"Borrowing Base": the sum of (i) 80% of Eligible Receivables plus (ii)
the lesser of (A) 50% of Eligible Inventory and (B) $2,000,000, plus (iii) the
lesser of (A) 50% of Eligible Costs and Earnings and (B) $4,000,000, provided,
however, that for purposes of determining the Borrowing Base, the Existing
Centrifuge shall be included therein as Eligible Costs and Earnings at 50% of
its actual cost plus profit if it is subject to a binding agreement of sale and
is carried as "costs in excess of billings" on the books of the Borrower or,
during the period commencing on the Closing Date and ending six months
thereafter, (x) as Eligible Inventory at 25% of its actual cost if it is not
subject to a binding agreement of sale or letter of intent for sale or (y) as
Eligible Inventory at 50% of its actual cost if it is subject to a binding
agreement of sale or letter of intent for sale and is carried as "inventory" on
the books of the Borrower, less (iv) any Permitted Overadvance, all as set forth
in the most recent Borrowing Base Certificate delivered to the Bank.
"Borrowing Base Certificate": as defined in subsection 5.2(c).
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"Borrowing Date": any Business Day on which a Loan is to be made or a
Letter of Credit is to be issued at the request of the Borrower under this
Agreement.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in Philadelphia, Pennsylvania are authorized or required
by law to close; provided, however, that, when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London Interbank
Market.
"Capital Expenditure": any expenditure which would be classified as a
capital expenditure in accordance with GAAP.
"Capital Lease": a lease with respect to which the lessee is required
to recognize the acquisition of an asset and the incurrence of a liability in
accordance with GAAP.
"Capital Lease Obligations": at any time, the amount of the
obligations of a Person under Capital Leases which would be shown at such time
as a liability on a Consolidated balance sheet of such Person prepared in
accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
partnerships interests in a partnership (general or limited), any and all
equivalent ownership interests in a Person (other than a corporation or
partnership) and any and all warrants or options to purchase any of the
foregoing.
"Cash Collateral Account": a deposit account maintained by the Borrower
with the Bank which shall be pledged to and under control of the Bank as
security for the Obligations.
"Cash Collateralized Letters of Credit": as defined in subsection
2.1(e).
"Cash Collateralized Letters of Credit Commitment": the Commitment of
the Bank to issue Cash Collateralized Letters of Credit for the account of the
Borrower and on behalf of the Borrower or its Subsidiaries pursuant to
subsection 2.1(e) in an aggregate Dollar amount not to exceed at any one time
outstanding Two Million Eight Hundred Thousand Dollars ($2,800,000).
"Cash Collateralized Letters of Credit Commitment Period": the period
from and including the Closing Date to but not including the Cash Collateralized
Letters of Credit Termination Date, or such earlier date on which the Cash
Collateralized Letters of Credit Commitment shall terminate as provided herein.
"Cash Collateralized Letters of Credit Obligations": at any time, an
amount equal to the sum of (a) 100% of the maximum amount available to be drawn
under all Cash Collateralized Letters of Credit outstanding at such time
(determined without regard to whether any conditions to drawing could be met at
such time) and (b) the aggregate amount of drawings under Cash Collateralized
Letters of Credit which have not then been reimbursed pursuant to subsection
2.1(e).
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"Cash Collateralized Letters of Credit Termination Date": the earlier
of (a) February 19, 2004, or such later date to which the Borrower and the Bank
have agreed in writing, and (b) the date the Cash Collateralized Letters of
Credit Commitment is terminated as provided herein.
"Change of Control": an event or series of events by which (a) any
"person" or "group" (as such terms are defined in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder) is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under such Exchange Act, except that a Person shall be
deemed to have "beneficial ownership" of all shares that any such Person has the
right to acquire without condition, other than passage of time, whether such
right is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% or, if such person is H.F. Lenfest, 40% of the
total voting power of the then outstanding Voting Stock of the Borrower, or (b)
from and after the date hereof, individuals who on the date hereof constitute
the Board of Directors of the Borrower (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Borrower was approved by a vote of a majority of the
directors then still in office who were either directors on the date hereof or
whose election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors of the Borrower
then in office.
"Closing Date": the first date on which all of the conditions precedent
set forth in Section 4.1 have been satisfied or waived by the Bank and the
initial Loans are made and/or Letters of Credit issued.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": collectively, all of the property (whether real, personal
or mixed, and whether tangible or intangible), rights, titles and interests
subject to the Security Interest in favor of the Bank pursuant to this Agreement
or any of the Security Documents.
"Commitments": the collective reference to the Revolving Credit
Commitment and the Cash Collateralized Letter of Credit Commitment.
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group which includes the Borrower and which is
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code.
"Compliance Certificate": a certificate substantially in the form of
Exhibit D hereto which has been executed by a Responsible Officer of the
Borrower and delivered to the Bank.
"Consolidated" or "consolidated": with reference to any term defined
herein, that term as applied to the accounts of the Borrower and its
Subsidiaries, consolidated in accordance with GAAP.
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"Consolidated Tangible Net Worth": as of any date of determination, (a)
the aggregate amount of all assets of the Borrower and its Subsidiaries on a
consolidated basis at such date as may be properly classified as such in
accordance with GAAP, excluding such other assets as are properly classified as
intangible assets under GAAP, minus (b) the aggregate amount of all liabilities
(including any portion of any Subordinated Debt constituting original issue
discount in respect of the issuance by the Borrower of warrants) of the Borrower
and its Subsidiaries and minority interests in the Borrower or any of its
Subsidiaries on a consolidated basis at such date, as may be properly classified
as such in accordance with GAAP.
"Contamination": the uncontained presence of Materials of Environmental
Concern at any real property of the Borrower or any of its Subsidiaries, whether
owned or leased, which may require clean-up or remediation under any
Environmental Laws.
"Contingent Obligation": as to any Person, without duplication, any
guarantee of payment or performance by such Person of any Indebtedness or other
obligation of any other Person, or any agreement to provide financial assurance
with respect to the financial condition, or the payment of the obligations of,
such other Person (including, without limitation, purchase or repurchase
agreements, reimbursement agreements with respect to letters of credit or
acceptances, indemnity arrangements, grants of security interests to support the
obligations of another Person, keep well agreements and take-or-pay or
through-put arrangements) which has the effect of assuring or holding harmless
any third Person against loss with respect to one or more obligations owed to
such third Person; provided, however, the term Contingent Obligation shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Contingent Obligation of any Person shall
be deemed to be the lower of (a) an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made and (b) the maximum amount for which such contingently liable Person may
be liable pursuant to the terms of the instrument embodying such Contingent
Obligation, unless such primary obligation and the maximum amount for which such
contingently liable Person may be liable are not stated or determinable, in
which case the amount of such Contingent Obligation shall be such contingently
liable Person's maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith.
"Contractual Obligation": as to any Person, any provision of any
security issued by or operating agreement or organizational or formation
documents of such Person or any provision of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Debt Service": for any period, scheduled cash payments of principal
and interest on the Borrower's Indebtedness (including Capital Leases), all
determined on a Consolidated basis for such period.
"Default": any of the events specified in Section 7, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition precedent therein set forth, has been satisfied.
"Dollars" and "$": dollars in lawful currency of the United States of
America.
5
"EBIDTA": as of the last day of any Fiscal Quarter, Net Income of the
Borrower plus depreciation, amortization, other non-cash charges, in each case
to the extent deducted from earnings in determining such Net Income plus
Interest Expense and income tax expense, each to the extent deducted from
earnings in determining such Net Income minus the amount of non-cash credits
included in determining such Net Income, all of the above to be determined for
such Fiscal Quarter in accordance with GAAP on a Consolidated basis; provided,
however, that, in the above calculations there also shall be excluded from Net
Income (a) any addition for non-operating gains during such period (including,
without limitation, extraordinary or unusual gains, gains from discontinuance of
operations or gains arising from the sale of capital assets) and (b) any
subtraction for non-operating losses during such period (including, without
limitation, extraordinary or unusual losses, losses from the discontinuance of
operations or losses arising from the sale of capital assets).
"Eligible Costs and Earnings": all eligible costs and estimated
earnings in excess of billings (net of any billings in excess of cost and
estimated earnings) in respect of the Borrower's or any Guarantor's long-term
contracts less any uncollectable or doubtful amounts for counterclaims,
liquidated damages or other similar claims or offsets, all as determined by the
Borrower in accordance with its usual and customary practices and set forth as
such on its financial statements from time to time.
"Eligible Inventory": the sum of the lesser of cost or market value of
all of the Borrower's inventory (as that term is defined in the UCC) (but
excluding work- in-progress) except (1) inventory which is "slow- moving" or
"obsolete" (being defined as not readily saleable in a bona fide arm's length
transaction), (2) inventory, the title to which is not absolute or is subject to
any existing assignment or encumbrance, (3) inventory located outside of the
United States or on premises other than those owned or leased by the Borrower,
(4) inventory located on leased premises, unless a landlord's waiver
satisfactory in form and substance to the Bank shall have been delivered to the
Bank for such premises and (5) those items of inventory which are, based on the
results of a Bank audit, hereafter specified individually or categorically by
the Bank as unacceptable in the Bank's reasonable judgment.
"Eligible Receivables": the sum of all of the Borrower's accounts (as
that term is defined in the UCC) which are promptly invoiced upon shipment and
which are outstanding from time to time, except those accounts which (1) are not
fully paid as of a date more than 90 days past the date of invoice, (2) are due
from an affiliate, subsidiary, officer or employee, (3) are due from the United
States or any agency or department thereof unless the Borrower has assigned its
right of payment of such account to the Bank pursuant to the applicable
provisions of the Assignment of Claims Act of 1940, as amended, so that the Bank
has a perfected security interest and right to receive such receivables under
such Act, (4) are not assignable or in which a security interest may not be
fully perfected by filing UCC financing statements against the Borrower except
to the extent the Borrower has complied with the provisions of clause (3) above,
(5) are for merchandise not accepted by the account debtor or for sales not
consummated with an account debtor or are (but only to the extent) for service
charges for overdue payments, (6) are assigned by the account creditor a dating
after the actual date of the account, (7) are due from foreign account debtors
(other than those located in Canada) unless such account is backed by an
irrevocable letter of credit or credit insurance acceptable to the Bank or
guaranteed by the Export-Import Bank of the United States on terms and
conditions acceptable to the Bank, (8) are
6
subject to a prior assignment or encumbrance, (9) are (but only to the extent)
subject to a claim of reduction, counterclaim, set-off, recoupment, chargeback
or any claim for credits, deposits, retainage, allowances or adjustments by an
account debtor (except for customary discounts allowed for prompt payment), (10)
arise out of a contract with or order from an account debtor that by its terms
forbids or makes the assignment of that account to the Bank void or
unenforceable, (11) with respect to or in payment of such accounts, the Borrower
has received a note, trade acceptance, draft or other instrument or chattel
paper, unless the Borrower immediately notifies the Bank and endorses or assigns
and delivers the same to the Bank, (12) are payable by an account debtor who has
filed for or taken such action (or who has suffered such actions against it) for
termination of existence, insolvency, the appointment of a receiver for any part
of its property, an assignment for the benefit of creditors, the filing of a
petition in bankruptcy or the commencement of any proceeding under any
bankruptcy or insolvency laws, (13) have been partially paid by the account
debtor; (14) are from any customer if fifty percent (50%) or more of the
accounts from such customer are not deemed Eligible Receivables hereunder; or
(15) are, based on the results of a Bank audit, hereafter specified individually
or categorically by the Bank as unacceptable in the Bank's reasonable judgment.
"Environmental Claim": any claim, suit, notice, order, demand or other
written communication made by any Person with respect to the Borrower or any of
its properties, whether owned or leased, that: (a) asserts a violation of an
Environmental Law; (b) asserts a liability under an Environmental Law; (c)
orders an investigation, corrective action, remediation or other response under
an Environmental Law; (d) demands information under an Environmental Law; (e)
alleges personal injury or property damage resulting from Materials of
Environmental Concern or (f) alleges that there is or may be Contamination.
"Environmental Laws": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
or binding requirements of any Governmental Authority, or binding Requirement of
Law, regulating, relating to or imposing liability or standards of conduct
concerning protection of the environment, as now or may at any time hereafter be
in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto) dealing with
reserve requirements prescribed for eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such System.
"Eurodollar Base Rate": with respect to any Eurodollar Loan for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/100th of 1%) equal to the rate determined by the Bank in accordance
with its usual procedures (which determination shall be conclusive absent
manifest error) to be the average of the London interbank offered rates of
interest per annum for Dollars set forth on Telerate display page 3750
or such other display page on the Telerate System as may replace such page to
evidence the average of rates quoted by banks designated by the British Bankers'
Association (or appropriate successor, or if the British Bankers' Association or
its successor ceases to provide such quotes, a comparable replacement determined
by the Bank) for an amount approximately equal in principal amount to the
principal amount of such Eurodollar Loan for a maturity equal to the applicable
Interest Period.
7
"Eurodollar Loan": any Loan bearing interest at a rate determined by
reference to the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the nearest 1/100th of
1%):
Eurodollar Base Rate
--------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 7, provided
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Existing Centrifuge": the existing centrifuge constructed at and
located on the Borrower's real property located in Southampton, Pennsylvania.
"Existing Financing Agreements": that certain Revolving Credit
Agreement dated as of March 27, 1999, between the Borrower and First Union
National Bank (now known as Wachovia Bank, National Association) as heretofore
amended, supplemented or otherwise modified.
"Facility Fee": that certain fee payable to the Bank as described in
subsection 2.5(a).
"Federal Funds Effective Rate": for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Bank from three
Federal funds brokers of recognized standing selected by it.
"Fees": those certain fees payable to the Bank as described in Section
2.5.
"Financial Projections": as defined in subsection 3.1(d).
"Fiscal Quarter": during each Fiscal Year of the Borrower, each
approximately three- month fiscal period beginning respectively on the day
immediately following the last day of the prior Fiscal Year and on the
corresponding day of the third, sixth and ninth month thereafter and ending on
the three-month anniversary of each such date, except in the case of the fourth
Fiscal Quarter which ends on the last day of such Fiscal Year.
8
"Fiscal Year": each annual fiscal period of the Borrower beginning on
the day after the last Friday in February.
"Fixed Asset Availability": the sum of 80% of the orderly liquidation
value of the Borrower's existing equipment plus 75% of the current fair market
value of the property and plant of the Borrower each as established prior to the
date hereof based on appraisals thereof prepared by one or more appraisers
acceptable to the Bank.
"Fixed Charges": as of the last day of each Fiscal Quarter, the sum
(without duplication) of the Borrower's (a) Debt Service (including payments
under Capital Leases) for the immediately preceding period of four consecutive
Fiscal Quarters, (b) income taxes paid in cash in the immediately preceding
period of four consecutive Fiscal Quarters and (c) cash dividends paid on the
immediately preceding period of four consecutive Fiscal Quarters, all determined
on a Consolidated basis in accordance with GAAP.
"Foreign Lender": any lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"GAAP": at any time with respect to the determination of the character
or amount of any asset or liability or item of income or expense, or any
consolidation or other accounting computation, generally accepted accounting
principles as in effect on the date of, or at the end of the period covered by,
the financial statements from which such asset, liability, item of income, or
item of expense, is derived, or, in the case of any such computation, as in
effect on the date when such computation is required to be determined; provided,
however, that in the event of any change in GAAP which would affect the
calculation of the Borrower's compliance with any of the covenants contained in
Section 6.1, either favorably or unfavorably, the Bank and the Borrower will
make appropriate adjustments to such covenants.
"Governmental Approval": any filing, recording and registration by, and
any order, consent, authorization, license, validation, approval and permit,
including but not limited to any License, issued to or required to be obtained
by, the Borrower in connection with the ownership, construction, erection,
installation, operation and maintenance of the Borrower's properties, and the
conduct of the present and proposed business of the Borrower.
"Governmental Act": any act or omission, whether rightful or wrongful,
of any present or future Governmental Authority.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guarantor": each of Entertainment Technology Corporation, a
Pennsylvania corporation, ETC Delaware, Inc., a Delaware corporation, and any
other Subsidiary of the Borrower which hereafter joins in the Guaranty, and
their respective successors and permitted assigns.
9
"Guaranty": that certain Guaranty from the Guarantors to the Bank,
dated as of the date hereof, as the same may be amended, supplemented or
modified from time to time.
"Indebtedness": of any Person at any date means (without duplication):
(a) all indebtedness of such Person for borrowed money or for
the deferred purchase price of property or services (other than current
trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices),
(b) any other indebtedness which is evidenced by a note, bond,
debenture or similar instrument,
(c) all Capital Lease Obligations of such Person,
(d) all obligations of such Person in respect of outstanding
letters of credit, acceptances and similar obligations created for the
account of such Person,
(e) all liabilities secured by any Lien on any property owned
by such Person even though such Person has not assumed or otherwise
become liable for the payment thereof,
(f) all obligations of such Person with respect to Interest
Hedge Agreements (calculated on a basis satisfactory to the Bank and in
accordance with accepted practice), and
(g) withdrawal liabilities of such Person or any Commonly
Controlled Entity under a Plan.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": as defined in Section 3.16.
"Interest Expense": as of the last day of each Fiscal Quarter, the
amount of cash interest expense incurred by the Borrower for the most recently
completed four consecutive Fiscal Quarters determined on a Consolidated basis in
accordance with GAAP.
"Interest Hedge Agreement": any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement, interest rate insurance or
any other similar agreement which is not speculative in nature with all
extensions, renewals, amendments, substitutions and replacements to and any of
the foregoing, documentation of all of which shall conform to International Swap
Dealers Association Inc. standards.
10
"Interest Payment Date": (a) as to any Base Rate Loan, the last day of
each month while such Loan is outstanding, (b) as to any Eurodollar Loan having
an Interest Period of three months or less, the last day of such Interest
Period, and (c) as to any Eurodollar Loan having an Interest Period longer than
three months, each day which is three months, or a whole multiple thereof, after
the first day of such Interest Period and the last day of such Interest Period.
Interest shall accrue from and including the first day of an Interest Period to
but excluding the last day of such Interest Period.
"Interest Period": with respect to any Eurodollar Loan:
(a) initially the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan and ending one, two, three or six months thereafter, as selected
by the Borrower in their Notice of Borrowing or notice of conversion,
given with respect thereto; and
(b) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan and
ending one, two, three or six months thereafter, as selected by the
Borrower by irrevocable notice to the Bank not less than three Business
Days prior to the last day of the then current Interest Period with
respect thereto;
provided that, the foregoing provisions relating to Interest Periods are subject
to the following:
(i) if any Interest Period would end on a day other than a
Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless such next succeeding Business Day would
fall in the next calendar month, in which case such Interest Period
shall end on the next preceding Business Day;
(ii) with respect to Eurodollar Loans, an Interest Period that
would extend beyond the Termination Date shall end on the Termination
Date; and
(iii) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan.
"Letter of Credit Coverage Requirement": with respect to each Letter of
Credit at any time, 102% of the maximum amount available to be drawn thereunder
at such time (determined without regard to whether any conditions to drawing
could be met at such time).
"Letter of Credit Fees": as defined in subsection 2.5(d).
"Letters of Credit": the collective reference to Revolving Credit
Letters of Credit and Cash Collateralized Letters of Credit.
"License": any license, permit, consent, certificate of need,
authorization, certification, accreditation, franchise, approval, or grant of
rights by, or any filing or registration with, any Governmental Authority or
third Person necessary for the Borrower to own, build, maintain, or operate its
business or Property.
11
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Capital Lease having
substantially the same economic effect as any of the foregoing).
"Liquidity": at a particular date shall mean an amount equal to the sum
of the Borrower's unrestricted cash and the Available Revolving Credit
Commitment.
"Loan Account": as defined in Section 2.18.
"Loan Documents": this Agreement, the Revolving Credit Note, the
Guaranty, the Reimbursement Agreement, the Security Documents, any Letters of
Credit, the Bond Letter of Credit and any Interest Hedge Agreement entered into
with the Bank.
"Loans": the collective reference to the Revolving Credit Loans.
"Material Adverse Change": any set of circumstances or events which (a)
has or could reasonably be expected to have any material adverse effect
whatsoever upon the validity or enforceability of this Agreement or any other
Loan Document, (b) is or could reasonably be expected to be material and adverse
to the business, properties, assets, financial condition or results of
operations of the Borrower and its Subsidiaries taken as a whole, (c) impairs
materially or could reasonably be expected to impair materially the ability of
the Borrower to duly and punctually pay or perform its obligations under the
Loan Documents, or (d) impairs materially or could reasonably be expected to
impair materially the ability of the Bank to enforce its legal remedies pursuant
to this Agreement and the other Loan Documents.
"Material Adverse Effect": an effect that results in or causes or has a
reasonable likelihood of resulting in or causing a Material Adverse Change.
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls, and ureaformaldehyde insulation.
"Moody's": Moody's Investors Services, Inc.
"Mortgage": the Open-End Mortgage and Security Agreement of even date
herewith, encumbering and granting a mortgage lien in favor of the Bank on the
Borrower's real property at 125 James Way, Southampton, Pennsylvania, as the
same may be amended, supplemented or otherwise modified from time to time.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Net Income": for any fiscal period, the net income (or loss) after
income taxes (if any) of the Borrower for such period determined on a
Consolidated basis in accordance with GAAP.
12
"Notice of Borrowing": with respect to a Loan of any Type or a Letter
of Credit, a notice from the Borrower in respect of such Loan or Letter of
Credit, containing the information in respect of such Loan or Letter of Credit
and delivered to the Bank, in the manner and by the time specified pursuant to
the terms hereof. A form of the Notice of Borrowing is attached hereto as
Exhibit F.
"Obligations": collectively, (a) all unpaid principal of and accrued
and unpaid interest (including, without limitation, any interest accruing
subsequent to the commencement of a bankruptcy, insolvency or similar proceeding
with respect to the Borrower, whether or not such interest constitutes an
allowed claim in such proceeding) on the Loans, (b) all accrued and unpaid Fees,
(c) any other amounts due hereunder or under any of the other Loan Documents,
including all Reimbursement Obligations and reimbursement obligations in respect
of the Bond Letter of Credit, indemnities, Fees, costs, expenses, prepayment
premiums, break-funding costs and other obligations of the Borrower to the Bank
or any indemnified party hereunder and thereunder, (d) any obligations owed by
the Borrower to the Bank or to any Affiliate of the Bank pursuant to an Interest
Hedge Agreement or any other financing arrangement provided by the Bank, and (e)
all reasonable out-of-pocket costs and expenses incurred by the Bank in
connection with this Agreement and the other Loan Documents, including but not
limited to the reasonable fees and expenses of the Bank's counsel, which the
Borrower is responsible to pay pursuant to the terms of this Agreement and the
other Loan Documents.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"Permitted Acquisition": as defined in Section 6.6.
"Permitted Indebtedness": as defined in Section 3.20.
"Permitted Investments":
(a) debt securities having a maturity of not more than one
year issued or guaranteed by the United States government or by an
agency or instrumentality thereof;
(b) commercial paper maturing in 270 days or less from the
date of issuance which, at the time of acquisition by the Borrower
either (i) is accorded a rating of A-2 or P-2 or better by S&P or
Moody's respectively or (ii) is issued by a Qualified Lender;
(c) money market mutual funds made available by the Bank or
its Affiliate; and
(d) Investments listed on Schedule 1.1-B hereof.
"Permitted Lien": any of the following:
(a) the Security Interests and any other Liens in favor of the
Bank;
13
(b) Liens for taxes, assessments, governmental charges or
levies on the Borrower's properties if such taxes, assessments,
governmental charges or levies (i) are not at the time due and payable
or if they can thereafter be paid without penalty or are being
contested in good faith by appropriate proceedings diligently conducted
and with respect to which the Borrower has created reserves in
accordance with GAAP and (ii) are not pursuant to any Environmental
Law;
(c) Pledges or deposits to secure payment of workers'
compensation obligations, unemployment insurance, deposits or
indemnities to secure public or statutory obligations or for similar
purposes;
(d) Liens arising out of judgments or awards against the
Borrower with respect to which enforcement has been stayed or bonded
against to the satisfaction of the Bank and the Borrower at the time
shall currently be prosecuting an appeal or proceeding for review in
good faith by appropriate proceedings diligently conducted and with
respect to which the Borrower has created reserves in accordance with
GAAP or are fully covered by insurance (less any commercially
reasonable deductible) and the applicable insurance carrier has
acknowledged such full coverage in writing; provided, however, that at
no time may the aggregate Dollar amount of such judgment liens for the
Borrower exceed $100,000;
(e) Mechanics', carriers, workmen's, repairmen's, landlord's
and other similar statutory liens incurred in the ordinary course of
the Borrower's business, so long as the obligation secured is not
overdue or, if overdue, is being contested in good faith by appropriate
actions or proceedings being diligently conducted and as to which the
Borrower has created reserves in accordance with GAAP;
(f) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, performance bonds and other
obligations of a like nature;
(g) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do
not materially detract from the value of the affected property or
interfere with the ordinary conduct of business of the Borrower;
(h) Liens securing indebtedness incurred to finance the
acquisition of fixed or capital assets, the principal amount of which
shall not exceed $250,000 in the aggregate;
(i) Liens for the benefit of the Export-Import Bank of the
United States granted in connection with its guarantee of Borrower's
accounts;
(j) minor liens which in the aggregate are not substantial in
amount, do not materially detract from the value or transferability of
the property or assets subject thereto or interfere with the present
use thereof and have not arisen other than in the ordinary course of
business; and
14
(k) Liens existing on the Closing Date and listed on
Schedule 1.1-A. "Permitted Overadvance": the difference, if a positive
number, between (a) the sum of the Available Bond Letter of Credit
Amount plus the amount of any unreimbursed draws under the Bond Letter
of Credit and (b) the Fixed Asset Availability.
"Person": an individual, partnership, corporation or a division
thereof, limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or other
entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreement": the Pledge Agreement or Pledge Agreements, each
substantially in the form of Exhibit B hereto, pursuant to which the Bank is
granted a Lien on the issued and outstanding shares of Capital Stock in the
Guarantor, as the same may be amended, supplemented or otherwise modified from
time to time.
"Prime Rate": the rate of interest per annum publicly announced from
time to time by the Bank as its prime rate in effect at its principal office in
Philadelphia, Pennsylvania; each change in the Prime Rate shall be effective on
the date such change is publicly announced as effective. This rate of interest
is determined from time to time by the Bank as a means of pricing some loans to
its customers and is neither tied to any external rate of interest or index nor
does it necessarily reflect the lowest rate of interest actually charged by the
Bank to any particular class or category of customers of the Bank.
"Properties": the collective reference to the facilities and properties
owned, leased or operated by the Borrower.
"Qualified Lender": the Bank, or any other bank or trust company
organized under the laws of the United States of America or any state thereof,
having either (a) capital, surplus and undivided profits aggregating at least
$250,000,000 or (b) total assets in excess of $500,000,000 and whose long-term
certificates of deposit are rated "AA" or better by S&P or "Aa" or better by
Moody's.
"Regulations T, U and X": Regulations T, U and X promulgated by the
Board of Governors of the Federal Reserve System (12 C.F.R. part 220 et seq., 12
C.F.R. Part 221 et seq. and 12 C.F.R. Part 224 et seq., respectively), as such
regulations are now in effect and as may hereafter be amended.
"Reimbursement Agreement": that certain Reimbursement and Security
Agreement between the Bank and the Borrower pursuant to the terms of which the
Bond Letter of Credit will be issued and secured.
"Reimbursement Obligation": the obligation of the Borrower to reimburse
the Bank pursuant to subsections 2.1(d) and (e) for amounts drawn under Letters
of Credit.
15
"Reorganization": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c)(1),
(2), (4), (5), (6), (10) and (13) of ERISA.
"Requirement of Law": as to any Person, the Certificate of
Incorporation, ByLaws, partnership agreement or other organizational or
governing documents of such Person, and any law, statute, treaty, rule,
regulation or ordinance or determination, order, writ, injunction, decree,
judgment, guideline, directive or decision of an arbitrator or a court or other
Governmental Authority, in each case binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"Responsible Officer": with respect to any Person, the chief executive
officer, chief financial officer, President or general partner of such Person.
Unless otherwise qualified, all references to a "Responsible Officer" in this
Agreement shall refer to a Responsible Officer of the Borrower.
"Revolving Credit Commitment": the Commitment of the Bank to make
Revolving Credit Loans to and/or issue Revolving Credit Letters of Credit on
behalf of the Borrower pursuant to subsection 2.1(a) in an aggregate Dollar
amount not to exceed at any one time outstanding Twelve Million Dollars
($12,000,000), as such amount may be decreased from time to time in accordance
with the provisions of this Agreement.
"Revolving Credit Commitment Fee": that certain fee payable to the Bank
on the Available Revolving Credit Commitment as described in subsection 2.5(b).
"Revolving Credit Commitment Period": the period from and including the
Closing Date to but not including the Revolving Credit Termination Date, or
such earlier date on which the Revolving Credit Commitment shall terminate as
provided herein.
"Revolving Credit Letters of Credit": as defined in subsection 2.1(d).
"Revolving Credit Loans": as defined in subsection 2.1(a).
"Revolving Credit Note": as defined in Section 2.2.
"Revolving Credit Termination Date": the earlier of (a) February 17,
2006 or such later date to which the Borrower and the Bank have agreed in
writing and (b) the date the Revolving Credit Commitment is terminated as
provided herein.
"S&P": Standard & Poor's Rating Group, a division of The McGraw-Hill
Corporation.
"Security": "security" as defined in Section 2(1) of the Securities Act
of 1933, as amended.
16
"Security Agreement": the Security Agreement in the form of Exhibit C
attached hereto, as the same may be amended, supplemented or otherwise modified
from time to time.
"Security Documents": any and all of (a) the Security Agreement, (b)
the Pledge Agreement, (c) the Mortgage, (d) the Guaranty and (e) all additional
documents and instruments entered into from time to time for the purpose of
securing the Obligations, as the foregoing may be amended, supplemented or
otherwise modified from time to time.
"Security Interest": all Liens in favor of the Bank created hereunder
or under any of the Loan Documents to secure the Obligations.
"Single Employer Plan": any Plan which is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
"Subordinated Debt": Indebtedness of the Borrower subordinated in right
of payment to the Obligations, the terms of which Indebtedness (including the
subordination provisions) are satisfactory to the Bank in its sole but
reasonable discretion.
"Subsidiary": as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only be reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Borrower.
"Taxes": as defined in Section 2.13.
"Total Funded Debt": as of the last day of a Fiscal Quarter, all of the
Borrower's outstanding obligations for borrowed money at such date, including
without limitation, the Obligations hereunder in respect of Loans and Revolving
Credit Letters of Credit (but not in respect of the Bond Letter of Credit or
Cash Collateralized Letters of Credit), the Bonds and all Subordinated Debt
(including any portion of any Subordinated Debt constituting original issue
discount in respect of the issuance by the Borrower of warrants), determined on
a Consolidated basis in accordance with GAAP.
"Tranche": the collective reference to (a) Eurodollar Loans whose
Interest Periods begin on the same date and end on the same later date (whether
or not such Loans originally were made on the same day) and (b) Base Rate Loans.
"Type": when used in respect of any Loan, shall refer to the Rate by
reference to which interest on such Loan is determined. For purposes hereof,
"Rate" shall include the Eurodollar Rate and the Base Rate.
"UCC": as defined in the Security Agreement
17
"Wholly-Owned Subsidiary": at any time, the Subsidiary one hundred
percent (100%) of all of the equity Securities (except directors' qualifying
shares) and voting Securities of which are owned by the Borrower at such time.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the same defined
meanings when used in the Note, the other Loan Documents or any certificate or
other document made or delivered pursuant hereto or thereto.
(b) As used herein and in the Note and the other Loan Documents,
and any certificate or other document made or delivered pursuant hereto or
thereto, accounting terms relating to the Borrower not defined in Section 1.1
and accounting terms partly defined in Section 1.1, to the extent not defined,
shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined in this Agreement shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. LOANS AND COMMITMENTS
2.1 Commitments. (a) Subject to the terms and conditions hereof, the
Bank agrees to make revolving credit loans (the "Revolving Credit Loans") to
the Borrower from time to time during the Revolving Credit Commitment Period in
an aggregate principal amount at any one time outstanding not to exceed the
Available Revolving Credit Commitment; provided that, no Revolving Credit Loan
shall be made if, after giving effect to the making of such Loan and the
simultaneous application of the proceeds thereof, the Borrower would not be in
compliance with any of the applicable financial ratios set forth in Section 6.1.
The Revolving Credit Commitment may be reduced or terminated from time to time
pursuant to Section 2.9. Within the foregoing limits, the Borrower may during
the Revolving Credit Commitment Period borrow, repay and reborrow under the
Revolving Credit Commitment, subject to and in accordance with the terms and
limitations hereof.
(b) The Revolving Credit Loans may from time to time be
(i) Eurodollar Loans, (ii) Base Rate Loans or (iii) a combination thereof, as
determined by the Borrower and notified to the Bank in accordance with Sections
2.3 and 2.16; provided that, no Revolving Credit Loan shall be made as a
Eurodollar Loan after the date that is one month prior to the Revolving Credit
Termination Date or if a Default shall exist and be continuing at the time of
the making of such Loan.
(c) Each Revolving Credit Loan shall be made in accordance with the
procedures set forth in subsection 2.3.
18
(d) Subject to the terms and conditions hereof, the Bank shall
during the Revolving Credit Commitment Period issue or cause the issuance of
letters of credit ("Revolving Credit Letters of Credit") on behalf of the
Borrower; provided, however, that the Bank will not be required to issue or
cause to be issued any Revolving Credit Letter of Credit which expires later
than the Revolving Credit Termination Date or to the extent that the face amount
of such Revolving Credit Letters of Credit would exceed the Available Revolving
Credit Commitment; provided further, that the Bank shall not be required to
issue any Revolving Credit Letter of Credit if, after giving effect to such
issuance, the Borrower would not be in compliance with any of the applicable
financial ratios set forth in Section 6.1. The maximum amount of outstanding
Revolving Credit Letters of Credit shall not exceed $7,500,000 at any time; the
maximum amount of outstanding Revolving Credit Letters of Credit which are
standby letters of credit shall not exceed $5,000,000 at any time; and the
maximum amount of outstanding Revolving Credit Letters of Credit which are trade
letters of credit shall not exceed $2,500,000 at any time. The Borrower shall be
required to reimburse the Bank any amounts paid by the Bank pursuant to drawings
on Revolving Credit Letters of Credit. All payments by the Bank of drawings on
Revolving Credit Letters of Credit shall be deemed to be Revolving Credit Loans
and shall bear interest at the applicable Base Rate until repaid in full.
(e) Subject to the terms and conditions hereof, the Bank shall
during the Cash Collateralized Letter of Credit Commitment Period issue or cause
the issuance of letters of credit which shall be fully collateralized by cash
collateral deposited by the Borrower in the Cash Collateral Account prior to
such issuance ("Cash Collateralized Letters of Credit") on behalf of the
Borrower; provided, however, that the Bank will not be required to issue or
cause to be issued any Cash Collateralized Letter of Credit which expires later
than the Revolving Credit Termination Date or to the extent that, after giving
effect to such issuance, the face amount of all outstanding Cash Collateralized
Letter of Credit Obligations would exceed either (i) the Cash Collateralized
Letters of Credit Commitment or (ii) the amount then held by the Bank in the
Cash Collateral Account. The Borrower shall be required to reimburse the Bank
any amounts paid by the Bank pursuant to drawings on Cash Collateralized Letters
of Credit. If any such amount is not otherwise reimbursed by the Borrower on the
date of such drawing, the Bank may debit a like amount from the Cash Collateral
Account and apply it to such Reimbursement Obligation. The Borrower shall at all
times maintain deposits in the Cash Collateral Account in an amount equal to or
greater than the Cash Collateralized Letters of Credit Obligations. The Bank
will invest such cash collateral (less applicable reserves) in such short-term
money- market investments as to which the Bank and the Borrower mutually agree
and the net return on such investments shall be credited to such account and
constitute additional cash collateral. Following the occurrence of a Default or
Event of Default the Borrower may not withdraw amounts credited to the Cash
Collateral Account except upon payment and performance in full of all
Obligations, expiration or surrender of all Letters of Credit and the Bond
Letter of Credit and termination of this Agreement.
(f) Subject to the terms and conditions hereof and of the
Reimbursement Agreement, the Bank shall issue the Bond Letter of Credit in an
amount not to exceed $5,025,410. The Borrower shall reimburse the Bank for any
amounts paid by the Bank pursuant to drawings on the Bond Letter of Credit as
provided in, and the Bond Letter of Credit shall otherwise be governed by and
subject to, the Reimbursement Agreement.
19
2.2 Note The Revolving Credit Loans shall be evidenced by a promissory
note of the Borrower, substantially in the form of Exhibit A hereto (the
"Revolving Credit Note"). The Bank is hereby authorized to record the date, Type
and amount of each Revolving Credit Loan, each continuation thereof, each
conversion of all or a portion thereof to another Type, the date and amount of
each payment or prepayment of principal thereof and, in the case of Eurodollar
Loans, the length of each Interest Period with respect thereto, on the schedule
annexed to and constituting a part of the Revolving Credit Note, provided that
the failure of the Bank to make such recordation (or any error in such
recordation) shall not affect the obligations of the Borrower hereunder or under
the Revolving Credit Note.
2.3 Procedure for Revolving Credit Loans; Issuance of Letters of
Credit. (a) The Borrower may borrow under the Revolving Credit Commitment during
the Revolving Credit Commitment Period on any Business Day. The Borrower shall
give the Bank irrevocable notice (which notice must be received by the Bank
prior to 12:00 noon, Philadelphia time, three Business Days prior to the
requested Borrowing Date, if all or any part of the requested Revolving Credit
Loans are to be initially Eurodollar Loans, or prior to 10:00 a.m., Philadelphia
time, on the requested Borrowing Date if all of the requested Revolving Credit
Loans are to be initially Base Rate Loans), specifying in the Notice of
Borrowing (a) the amount to be borrowed, (b) the requested Borrowing Date, (c)
whether the borrowing is to be of Eurodollar Loans, Base Rate Loans or a
combination thereof and (d) if the borrowing is to be entirely or partly of
Eurodollar Loans, the amount and the length of the initial Interest Period(s)
therefor. Each borrowing under the Revolving Credit Commitment shall be in an
amount equal to $100,000 or increments of $100,000 in excess thereof (or, if the
aggregate Available Revolving Credit Commitment at such time is less than
$100,000, such lesser amount).
(b) Borrower may request the Bank to issue or cause the issuance of
a Letter of Credit under either of the Commitments by delivering to the Bank, a
Letter of Credit Application (the "Application") in the form provided by the
Bank and completed to its reasonable satisfaction; and, such other certificates,
documents and other papers and information as the Bank may reasonably request.
Each Letter of Credit shall, among other things, (i) provide for the payment of
sight drafts when presented for honor thereunder in accordance with the terms
thereof and when accompanied by the documents described therein and (ii) have an
expiry date less than two years after such Letter of Credit's date of issuance
and in no event later than the Revolving Credit Termination Date (except that a
Letter of Credit may provide for automatic annual renewals in the absence of
notice from the Bank that it will not be renewed). Each Letter of Credit shall
be subject to the Uniform Customs and Practice for Documentary Credits, 1993
Revision, International Chamber of Commerce Publication No. 500 or International
Standby Practices, International Chamber of Commerce Publication No. 590, or
such other law as the Borrower and the Bank agree shall apply, and any
amendments or revision thereof adhered to by the Bank and, to the extent not
inconsistent therewith, the laws of the Commonwealth of Pennsylvania.
2.4 Requirements for Issuance of Letters of Credit. (a) In connection
with the issuance of any Letter of Credit, Borrower shall indemnify, save and
hold the Bank harmless from any loss, cost, expense or liability, including,
without limitation, payments made by the Bank and expenses and reasonable
attorneys' fees incurred by the Bank arising out of, or in connection with, any
Letter of Credit to be issued or created for the Borrower. The Borrower shall be
bound by the Bank's reasonable regulations and good faith interpretations of any
Letter of Credit issued or created for the Borrower, although this
interpretation may be different from its own; and, neither the Bank nor any of
its correspondents shall be liable for any error, negligence, or mistakes,
whether of omission or commission, in following the Borrower's instructions or
those contained in any Letter of Credit or of any modifications, amendments or
supplements thereto or in issuing or paying any Letter of Credit, except for the
Bank's or any such correspondent's gross negligence, bad faith or willful
misconduct.
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(b) The Borrower shall authorize and direct the Bank to name the
Borrower as the "Applicant" or "Account Party" of each Letter of Credit.
(c) In connection with all Letters of Credit issued or caused to be
issued or created by the Bank under this Agreement, the Borrower hereby appoints
the Bank, or its designee, as its attorney, with full power and authority (i) to
sign and/or endorse the Borrower's name upon any warehouse or other receipts,
letter of credit applications and acceptances; (ii) to sign the Borrower's name
on bills of lading; (iii) to clear inventory through the United States of
America Customs Department ("Customs") in the name of the Borrower or the Bank
or its designee, and to sign and deliver to Customs officials powers of attorney
in the name of the Borrower for such purpose; and (iv) to complete in the
Borrower's name any order, sale or transaction, obtain the necessary documents
in connection therewith, and collect the proceeds thereof. This power, being
coupled with an interest, is irrevocable as long as any Letters of Credit remain
outstanding.
(d) The Borrower and the Bank agree that the Bank shall not be
responsible for, and the Borrower's Reimbursement Obligations shall be absolute,
unconditional and irrevocable under all circumstances, and shall not be affected
by, among other things (1) the form, validity, enforceability, sufficiency,
accuracy, genuineness or legal effect of any Letter of Credit or any document
submitted by any party in connection with any Letter of Credit, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraud ulent or forged (even if the Bank shall have been notified
thereof), (2) the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any such Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason, (3) any claim of the
Borrower against any beneficiary of such Letter of Credit, or any such
transferee, (4) any dispute between the Borrower and any beneficiary of any
Letter of Credit or any other party to which such Letter of Credit may be
transferred, (5) any claims whatsoever of the Borrower against any beneficiary
of such Letter of Credit or any such transferee, (6) any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, (7) any
loss or delay in the transmission or otherwise of any document required in order
to make a drawing under any such Letter of Credit or of the proceeds thereof,
(8) errors in interpretation of technical terms, (9) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit, (10) any act or omission (including the honor of a
presentation failing to comply with the terms of such Letter of Credit or the
failure to honor a presentation complying with the terms of such Letter of
Credit as a result of Governmental Acts or otherwise) by the Bank in connection
with a Letter of Credit, (11) any consequences arising from causes beyond the
control of the Bank, including any Governmental Acts, (12) the existence of any
claim, set-off, defense or other right which the Borrower may have at any time
against a beneficiary or any transferee of any Letter of Credit (or any Persons
for whom any such transferee may be acting), the Bank or any other Person or,
whether in connection with this Agreement, the transactions contemplated herein
or any unrelated transaction (including any underlying transaction between the
Borrower and the beneficiary for which any Letter of Credit was procured), (13)
any adverse change in the business, operations, properties, assets, condition
(financial or otherwise) or prospects of the Borrower, (14) any breach of this
Agreement or any other Loan Document by the Borrower, (15) the occurrence or
continuance of an insolvency proceeding with respect to the Borrower, (16) the
fact that the Revolving Credit Termination Date shall have passed or this
Agreement or either of the Commitments hereunder shall have been terminated, and
(17) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing, and none of the above shall affect or impair, or prevent
the vesting of, any of the Bank's rights or powers hereunder, provided, in each
case, that a court of competent jurisdiction has not finally determined that the
reliance by the Bank on any of such documents, instruments or acts, or any such
action by or omission of the Bank, constituted gross negligence or willful
misconduct of the Bank.
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Without limiting the generality of the foregoing, the Bank (i) may rely
on any oral or other communication believed in good faith by the Bank to have
been authorized or given by or on behalf of the Borrower, (ii) may honor any
presentation if the documents presented appear on their face substantially to
comply with the terms and conditions of relevant Letter of Credit, (iii) shall
not be liable to the Borrower for any consequential, punitive or special
damages, or for any damages resulting from any change in the value of any
property relating to a Letter of Credit, (iv) may honor a previously dishonored
presentation under a Letter of Credit to settle or compromise any claim of
wrongful dishonor and shall be entitled to reimbursement to the same extent as
if such presentation had initially been honored, together with any interest paid
by the Bank, (v) may honor any drawing that is payable upon presentation of a
statement advising negotiation or payment, upon receipt of such statement (even
if such statement indicates that a draft or other document is being separately
delivered), and shall not be liable for any failure of any such draft or other
document to arrive, or to conform in any way with the relevant Letter of Credit,
and (vi) may pay any paying or negotiating bank claiming that it rightfully
honored under the laws or practices of the place where such bank is located.
2.5 Fees. (a) The Borrower agrees to pay to the Bank on the Closing
Date, as consideration for the Bank's commitment to make the Revolving Credit
Loans and to issue Revolving Credit Letters of Credit and the Bond Letter of
Credit, a nonrefundable facility fee (the "Facility Fee") equal to $170,254.10
less any portion of the $25,000 deposit fee previously paid to the Bank which
has not been applied to pay the expenses of the Bank in connection herewith.
(b) The Borrower agrees to pay to the Bank, on the first day of
each month during the Revolving Credit Commitment Period and on the date on
which the Revolving Credit Commitment shall be permanently terminated as
provided herein, a commitment fee (the "Revolving Credit Commitment Fee") at a
rate per annum equal to 0.50% of the average daily amount of the Available
Revolving Credit Commitment during the preceding month (or shorter period
commencing with the date hereof or ending with the Revolving Credit Termination
Date or the date on which the Revolving Credit Commitment shall be terminated).
The Revolving Credit Commitment Fee shall be computed on the basis of the actual
number of days elapsed in a year of 360 days. The Revolving Credit Commitment
Fee shall commence to accrue on the date hereof and shall cease to accrue on the
Revolving Credit Termination Date.
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(c) The foregoing fees shall be paid on the dates due, in
immediately available funds, to the Bank. Once paid, none of the foregoing fees
shall be refundable under any circumstances.
(d) Borrower shall pay to the Bank, (x) fees for each Letter of
Credit for the period from and excluding the date of issuance of same to and
including the date of expiration or termination, equal to the average daily face
amount of each outstanding Letter of Credit multiplied by 1.75% per annum, such
fees to be calculated on the basis of a 360-day year for the actual number of
days elapsed and to be payable quarterly in arrears on the first day of each
Fiscal Quarter and on the Revolving Credit Termination Date and (y) any and all
fees and expenses as agreed upon by the Bank and the Borrower in connection with
any Letter of Credit, including, without limitation, in connection with the
opening, amendment or renewal of any such Letter of Credit and any acceptances
created thereunder (all of the foregoing fees, the "Letter of Credit Fees"). All
such charges shall be deemed earned in full on the date when the same are due
and payable hereunder and shall not be subject to rebate or proration upon the
termination of this Agreement for any reason. Any such charge in effect at the
time of a particular transaction shall be the charge for that transaction,
notwithstanding any subsequent change in the Bank's prevailing charges for that
type of transaction. All Letter of Credit Fees payable hereunder shall be deemed
earned in full on the date when the same are due and payable hereunder and shall
not be subject to rebate or proration upon the termination of this Agreement for
any reason.
2.6 Interest Rates and Payment Dates. (a) Subject to the provisions of
subsection 2.7, each Base Rate Loan shall bear interest (computed on the basis
of the actual number of days elapsed over a year of 365 or 366 days, as the case
may be) at a rate per annum equal to the Base Rate plus the Applicable Margin
applicable to Base Rate Loans.
(b) Subject to the provisions of subsection 2.7, each Eurodollar
Loan shall bear interest (computed on the basis of the actual number of days
elapsed over a year of 360 days) at a rate per annum equal to the Eurodollar
Rate for the Interest Period in effect for such Eurodollar Loan plus the
Applicable Margin applicable to Eurodollar Loans.
(c) Interest on each Loan shall be payable in arrears on each
Interest Payment Date applicable to such Loan; provided that, (i) interest
accruing on overdue amounts shall be payable on demand as provided in subsection
2.7 and (ii) as set forth in subsection 2.9, accrued and unpaid interest on the
Loans shall be payable on the Revolving Credit Termination Date.
(d) As soon as practicable the Bank shall notify the Borrower of
(i) each determination of a Eurodollar Rate and (ii) the effective date and the
amount of each change in the interest rate on a Eurodollar Loan or Base Rate
Loan. Each determination of an interest rate by the Bank pursuant to any
provision of this Agreement (including this subsection 2.6 and subsection 2.7)
shall be conclusive and binding on the Borrower in the absence of manifest
error. At the request of the Borrower, the Bank shall deliver to the Borrower a
statement showing the quotations used by it in determining any interest rate
pursuant to subsections 2.6(a) and (b).
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2.7 Default Interest. Upon the occurrence of and during the continuance
of an Event of Default, (i) the outstanding principal amount of all Obligations
other than Eurodollar Loans shall bear interest from the date of such occurrence
at a rate per annum which is equal to three percent (3%) in excess of the sum of
the Base Rate plus the Applicable Margin in effect at such time for Base Rate
Loans and (ii) Eurodollar Rate Loans shall bear interest at a rate per annum
which is equal to three percent (3%) in excess of the Eurodollar Rate plus the
Applicable Margin in effect at such time for Eurodollar Loans. The Borrower
acknowledges that such increased interest rate reflects, among other things, the
fact that such Loans, Letters of Credit or other amounts have become a
substantially greater risk given their default status and that the Bank is
entitled to additional compensation for such risk. Notwithstanding anything in
this Agreement to the contrary, upon the occurrence and during the continuance
of a Default or an Event of Default, all Eurodollar Loans shall be converted to
Base Rate Loans upon the expiration of any Interest Period.
2.8 Inability to Determine Interest Rate. In the event, and on each
occasion, that prior to the first day of the commencement of any Interest Period
for a Eurodollar Loan, the Bank shall have determined (which determination shall
be conclusive and binding upon the Borrower) that dollar deposits in the
principal amount of such Eurodollar Loan are not generally available in the
London Interbank Market, or that the rate at which such dollar deposits are
being offered will not adequately and fairly reflect the cost to the Bank of
making or maintaining the principal amount of such Eurodollar Loan during such
Interest Period, or that reasonable means do not exist for ascertaining the
Eurodollar Rate, the Bank shall, as soon as practicable thereafter, give
written, telegraphic or telephonic notice of such determination to the Borrower.
After such notice shall have been given and until the circumstances giving rise
to such notice no longer exist, each request for a Eurodollar Loan or for
conversion to or maintenance of a Eurodollar Loan pursuant to the terms of this
Agreement shall be deemed to be a request for a Base Rate Loan. Each
determination by the Bank hereunder shall be conclusive absent error in
calculation.
2.9 Termination and Reduction of Commitments; Mandatory Prepayments.
(a) Termination at Maturity. The Revolving Credit Commitment shall
be automatically terminated on the Revolving Credit Termination Date and the
Cash Collateralized Letters of Credit Commitment shall be automatically
terminated on the Cash Collateralized Letters of Credit Commitment Termination
Date. The entire outstanding principal balance of the Revolving Credit Loans and
all Reimbursement Obligations, plus all accrued and unpaid interest thereon, and
any Fees or other amounts owed under the Loan Documents, shall be due and
payable on the Revolving Credit Termination Date.
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(b) Voluntary Reductions of Commitments. Upon at least five
Business Days' prior irrevocable written (including telecopy) notice to the
Bank, the Borrower may from time to time voluntarily permanently reduce or
terminate the Revolving Credit Commitment or the Cash Collateralized Letter of
Credit Commitment, provided, however, in the event the Commitments are
terminated in whole and the Obligations are prepaid in full prior to the last
day of the Revolving Credit Termination Date (the date of such prepayment
hereinafter referred to as the "Early Termination Date"), the Borrower shall pay
to the Bank an early termination fee in an amount equal to (x) 2% of the sum of
the aggregate amount of the Commitments and the Available Bond Letter of Credit
Amount in effect prior such termination if the Early Termination Date occurs on
or after the Closing Date to and including the date immediately preceding the
first anniversary of the Closing Date, and (y) 1% of the sum of the aggregate
amount of the Commitments and the Available Bond Letter of Credit Amount in
effect prior such termination if the Early Termination Date occurs on or after
the first anniversary of the Closing Date to and including the date immediately
preceding the second anniversary of the Closing Date. Each voluntary reduction
shall be in a minimum amount of $500,000 or in integral multiples of $100,000 in
excess thereof.
(c) Effect of Reductions. The portion of the Commitments so
terminated pursuant to subsection 2.9(b) shall no longer be available for
borrowing or the issuance of Letters of Credit and, as of the effective date of
any such reduction, any Revolving Credit Commitment Fee shall no longer be
payable on the portion so terminated. Simultaneously with each voluntary
permanent reduction of the Revolving Credit Commitment, the Borrower shall make
a payment on the outstanding Revolving Credit Loans equal to the excess, if any,
of the aggregate principal amount of the outstanding Revolving Credit Loans and
the face amount of Revolving Credit Letters of Credit outstanding at such time
over the Revolving Credit Commitment, as so reduced. Notice of a reduction, once
given, shall be irrevocable. Except as otherwise provided in subsection 2.9(b),
all such reductions shall be without penalty or premium (except for amounts
owing pursuant to Section 2.14, if any).
(d) Mandatory Prepayments. If at any time the aggregate principal
amount of the outstanding Revolving Credit Loans and the face amount of
Revolving Credit Letters of Credit outstanding at such time exceeds the lesser
of the Revolving Credit Commitment and the Borrowing Base at such time, the
Borrower shall make a payment on the outstanding Revolving Credit Loans equal to
the amount of such excess.
(e) Application of Reductions and Prepayments. All prepayments made
pursuant to subsections 2.9(c) or (d) shall be applied to repay Base Rate Loans
or Eurodollar Loans, at the Borrower's option, provided that the Borrower shall
deliver written notice of such election prior to or simultaneously with such
prepayment. If no election is made by the Borrower, then all such voluntary
prepayments shall be applied by the Bank to first repay Base Rate Loans, and any
excess shall be applied to repay Eurodollar Loans, with payments applied to
Eurodollar Loans being applied in order of next maturing Interest Periods. All
such mandatory and voluntary prepayments shall be accompanied by all accrued and
unpaid interest thereon, all amounts due pursuant to subsection 2.9(b) or
Section 2.14, if any, and, in the case of a permanent reduction of the Revolving
Credit Commitment to zero, any accrued and unpaid Commitment Fees.
2.10 Optional Prepayment of Loans. (a) The Borrower shall have the
right at any time and from time to time to prepay the Loans, in whole or in
part, without premium or penalty (but in any event subject to Section 2.14),
upon prior written, telecopy or telephonic notice to the Bank given, in the case
of Base Rate Loans, no later than 10:00 a.m., Philadelphia time, on the date of
any proposed prepayment, and, in the case of Eurodollar Loans, no later than
10:00 a.m., Philadelphia time, three Business Days before any such proposed
prepayment. In each case the notice shall specify the date and amount of each
such prepayment, whether the prepayment is of Base Rate Loans, Eurodollar Loans,
or a combination thereof, and, if a combination thereof, the amount allocable to
each; provided, however, that each such partial prepayment shall be in the
principal amount of at least $100,000 or in multiples of $100,000 in excess
thereof.
25
(b) Each notice of prepayment shall be irrevocable and shall commit
the Borrower to prepay the amount specified in such notice.
2.11 Illegality. Notwithstanding any other provision herein, if any
change in any Requirement of Law or in the interpretation or application thereof
shall make it unlawful for the Bank to make or maintain Eurodollar Loans as
contemplated by this Agreement, (a) the commitment of the Bank hereunder to make
Eurodollar Loans, continue Eurodollar Loans as such and convert Base Rate Loans
to Eurodollar Loans shall forthwith be cancelled and (b) the Loans then
outstanding as Eurodollar Loans, if any, shall be converted automatically to
Base Rate Loans on the respective last days of the then current Interest Periods
with respect to such Loans or within such earlier period as required by law. If
any such conversion of a Eurodollar Loan occurs on a day which is not the
scheduled last day of the then current Interest Period with respect thereto, the
Borrower shall pay to the Bank such amounts, if any, as may be required pursuant
to subsection 2.14. The Bank shall endeavor to provide notice to the Borrower of
such change in any Requirement of Law or interpretation or application when the
Bank becomes aware of such change.
2.12 Requirements of Law. (a) In the event that any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by the Bank with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority made subsequent to
the date hereof:
(i) shall subject the Bank to any tax of any kind whatsoever
with respect to this Agreement, the Revolving Credit Note, any Eurodollar Loan
or any Letter of Credit, or change the basis of taxation of payments to the Bank
in respect thereof (except for taxes covered by subsection 2.13 and changes in
the rate of tax on the net income of the Bank);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans, letters
of credit or other extensions of credit by, or any other acquisition of funds
by, any office of the Bank which is not otherwise included in the determination
of the interest rate or fees on such Eurodollar Loan or Letter of Credit, as the
case may be, hereunder; or
(iii) shall impose on the Bank any other condition;
and the result of any of the foregoing is to increase the cost to the Bank, by
an amount which the Bank deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or maintaining the Commitments
hereunder or issuing or maintaining any Letter of Credit hereunder or to reduce
any amount receivable hereunder in respect thereof then, in any such case, the
Borrower shall as promptly as practicable pay the Bank, upon its demand, any
additional amounts necessary to compensate the Bank for such increased cost or
reduced amount receivable. If the Bank becomes entitled to claim any additional
amounts pursuant to this subsection, it shall as promptly as practicable notify
the Borrower of the event by reason of which it has become so entitled. A
certificate as to any additional amounts payable pursuant to this subsection
submitted by the Bank to the Borrower shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and the payment of the Revolving Credit Note and all other amounts payable
hereunder.
26
(b) In the event that the Bank shall have determined that any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by the Bank or any
corporation controlling the Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof does or shall have the effect of
reducing the rate of return on the Bank's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which the Bank or
such corporation could have achieved but for such change or compliance (taking
into consideration the Bank's or such corporation's policies with respect to
capital adequacy) by an amount deemed by the Bank to be material, then from time
to time, the Borrower shall pay the Bank, upon its demand, such additional
amount or amounts as will compensate the Bank for such reduction. If the Bank
becomes entitled to claim any additional amounts pursuant to this subsection, it
shall as promptly as practicable notify the Borrower of the event by reason of
which it has become so entitled. A certificate as to any additional amounts
payable pursuant to this subsection setting forth the calculation of such
amounts in reasonable detail submitted by the Bank to the Borrower shall be
conclusive in the absence of manifest error. This covenant shall survive the
termination of this Agreement and the payment of the Revolving Credit Note and
all other amounts payable hereunder.
(c) The Bank agrees that it will use reasonable efforts in order to
avoid or to minimize, as the case may be, the payment by the Borrower of any
additional amount under subsections 2.12(a) or (b); provided, however, that the
Bank shall not be obligated to incur any expense, cost or other amount in
connection with utilizing such reasonable efforts.
2.13 Taxes. (a) All payments made by the Borrower under this Agreement
and any Note shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority excluding (i) net income taxes and franchise or gross
receipts taxes imposed on the Bank as a result of a present or former connection
between the jurisdiction of the government or taxing authority imposing such tax
and the Bank (excluding a connection arising solely from the Bank having
executed, delivered or performed its obligations or received a payment under, or
enforced, this Agreement or the Revolving Credit Note (ii) any taxes which would
not be imposed but for the failure of the Bank or a participant to provide
properly completed and executed documentation reasonably requested by the
Borrower, as would permit the Borrower to make payments without withholding or
at a reduced rate, provided that the foregoing shall not apply if the Bank or
participant is not legally able or entitled to deliver such documentation, and
(iii) with respect to any Foreign Lender that is an assignee pursuant to Section
8.6, any withholding tax that is in effect and would apply to amounts payable to
such Foreign Lender at the time such Foreign Lender becomes a party to this
Agreement except to the extent the assignor with respect to such Foreign Lender
would have been entitled at the time of assignment to receive additional amounts
from the Borrower with respect to such withholding tax pursuant to this Section
2.13 (all such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions and withholdings being hereinafter called "Taxes"). If any Taxes are
required to be withheld from any amounts payable to the Bank hereunder or under
any Note, the amounts so payable to the Bank shall be increased to the extent
necessary to yield to the Bank (after payment of all Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts specified in this
Agreement and the Revolving Credit Note. If the Borrower fails to pay any Taxes
when due to the appropriate taxing authority or fails to remit to the Bank the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Bank for any incremental taxes, interest or penalties that may
become payable by the Bank as a result of any such failure. The agreements in
this subsection shall survive the termination of this Agreement and the payment
of the Revolving Credit Note and all other amounts payable hereunder.
27
(b) In the event of an assignment pursuant to Section 8.6, any
Foreign Lender that is entitled to an exemption from or reduction of withholding
tax under the law of the jurisdiction in which the Borrower is located, or any
treaty to which such jurisdiction is a party, with respect to payments under
this Agreement shall deliver to the Borrower, at the time or times prescribed by
applicable law, such properly completed and executed documentation prescribed by
applicable law or reasonably requested by the Borrower as will permit such
payment to be made without withholding or at a reduced rate. The Bank and
participant shall provide to the Borrower such properly completed and signed
United States federal income tax in the form of Internal Revenue Form W-9 (or
applicable successor form) in the case of a person that is a "United States
person" within the meaning of Section 7701(a)(3) of the Code or an Internal
Revenue Service Form W-8BEN, W-8ECI or W-8IMY (or applicable successor form) in
the case of a person that is not a "United States person" within the meaning of
Section 7701(a)(30) of the Code) as may be reasonably requested by the Borrower,
so that the Borrower may make payments of principal and interest on any Loan
without United States federal back- up withholding.
(c) If the Bank determines, in its sole discretion, that it has
received a refund of other Taxes as to which it has been indemnified by the
Borrower or with respect to which the Borrower has paid additional amounts
pursuant to this Section 2.13, it shall pay over such refund to the Borrower
(but only to the extent of indemnity payments made, or additional amounts paid
by the Borrower under this Section 2.13 with respect to the Taxes giving rise so
such refund), net of all out-of-pocket expenses of the Lender and without
interest (other than any interest paid by the relevant governmental authority
with respect to such refund); provided, that the Borrower, upon the request of
the Bank, agrees to repay the amount paid over to the Borrower (plus any
penalties, interest or other charges imposed by the relevant governmental
authority) to the Bank in the event the Lender is required to repay such refund
to such governmental authority. This Section shall not be construed to require
the Bank to make available its tax returns (or any other information relating to
its taxes which it deems confidential) to the Borrower or any other Person.
2.14 Indemnity. (a) The Borrower agrees to indemnify the Bank and to
hold the Bank harmless from any loss or expense which the Bank may sustain or
incur as a consequence of (i) default by the Borrower in payment when due of the
principal amount of or interest on any Eurodollar Loan, (ii) default by the
Borrower in making a borrowing of, conversion into or continuation of Eurodollar
Loans after the Borrower has given a notice requesting the same in accordance
with the provisions of this Agreement, (iii) default by the Borrower in making
any prepayment after the Borrower has given a notice thereof in accordance with
the provisions of this Agreement or (iv) the making of a prepayment (whether
voluntary, mandatory, as a result of acceleration or otherwise) of Eurodollar
Loans on a day which is not the last day of an Interest Period with respect
thereto, including, without limitation, in each case, any such loss or expense
arising from the reemployment of funds obtained by it or from fees payable to
terminate the deposits from which such funds were obtained. A certificate as to
any amounts that the Bank is entitled to receive under this Section 2.14
submitted by the Bank to the Borrower shall be conclusive in the absence of
clearly demonstrable error and all such amounts shall be paid by the Borrower
promptly upon demand by the Bank. This covenant shall survive the termination of
this Agreement and the payment of the Revolving Credit Note and all other
amounts payable hereunder.
28
(b) For the purpose of calculation of all amounts payable to the
Bank under this Section, the Bank shall be deemed to have actually funded its
relevant Eurodollar Loan through the purchase of a deposit bearing interest at
the Eurodollar Rate in an amount equal to the amount of such relevant Eurodollar
Loan and having a maturity comparable to the relevant Interest Period; provided,
however, that the Bank may fund each of its Eurodollar Loans in any manner it
sees fit, and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this Section. This covenant shall survive
the termination of this Agreement and the payment of the Revolving Credit Note
and all other amounts payable hereunder.
2.15 Payments. (a) The Borrower shall make each payment (including
principal of or interest on any borrowing or any fees or other amounts)
hereunder not later than 12:00 (noon), Philadelphia time, on the date when due
in Dollars to the Bank at its office set forth in Section 8.2, in immediately
available funds. Such payments shall be made without set off or counterclaim of
any kind.
(b) Whenever any payment (including principal of or interest on any
borrowing or any Fees or other amounts) hereunder (other than payments on
Eurodollar Loans) shall become due, or otherwise would occur, on a day that is
not a Business Day, such payment may be made on the next succeeding Business
Day.
(c) In the event that any payment of principal, interest, Fees,
expenses or other amounts due to the Bank under any of the Loan Documents is not
paid when due, the Bank is hereby authorized to effect such payment by debiting
any demand deposit account of the Borrower now or in the future maintained with
the Bank. This right of debiting accounts of the Borrower is in addition to any
right of setoff accorded the Bank hereunder or by operation of law.
29
2.16 Conversion and Continuation Options. The Borrower shall have the
right at any time upon prior irrevocable notice to the Bank (i) not later than
12:00 noon, Philadelphia time, three Business Days prior to conversion, to
convert any Eurodollar Loan to a Base Rate Loan, (ii) not later than 12:00 noon,
Philadelphia time, three Business Days prior to conversion or continuation, to
convert any Base Rate Loan into a Eurodollar Loan or to continue any Eurodollar
Loan as a Eurodollar Loan for any additional Interest Period and (iii) not later
than 12:00 noon, Philadelphia time, three Business Days prior to conversion, to
convert the Interest Period with respect to any Eurodollar Loan to another
permissible Interest Period, subject in each case to the following:
(a) a Eurodollar Loan may not be converted at a time other than the
last day of the Interest Period applicable thereto;
(b) any portion of a Loan maturing or required to be repaid in less
than one month may not be converted into or continued as a Eurodollar Loan;
(c) no Eurodollar Loan may be continued as such and no Base Rate
Loan may be converted to a Eurodollar Loan when any Default has occurred and is
continuing;
(d) any portion of a Eurodollar Loan that cannot be converted into
or continued as a Eurodollar Loan by reason of subsections 2.16(b) or 2.16(c)
automatically shall be converted at the end of the Interest Period in effect for
such Loan to a Base Rate Loan; and
(e) if the Borrower has failed to give notice of conversion or
continuation within the time periods set forth in this subsection or if such
conversion or continuation is not permitted pursuant to this Section 2.16, such
Loans shall be converted to Base Rate Loans on the last day of such then
expiring Interest Period.
Each request by the Borrower to convert or continue a Loan shall constitute a
representation and warranty that no Default shall have occurred and be
continuing. Accrued interest on a Loan (or portion thereof) being converted
shall be paid by the Borrower at the time of conversion.
2.17 Minimum Amounts of Tranches; Maximum Number of Tranches. (a) All
borrowings, conversions and continuations of Loans hereunder and all selections
of Interest Periods hereunder shall be in such amounts and be made pursuant to
such elections that, after giving effect thereto, the aggregate principal amount
of the Loans comprising each Tranche of Eurodollar Loans shall be equal to
$500,000 or in increments of $100,000 in excess thereof.
(b) The Borrower shall not have outstanding at any one time more
than four Tranches in the aggregate including the Base Rate Tranche (to the
extent any Base Rate Loans are then outstanding).
2.18 Loan Account. The Bank shall open and maintain on its books a loan
account (the "Loan Account") in the Borrower's name with respect to loans made,
Letters of Credit issued and drawings thereunder, repayments, prepayments, the
computation and payment of interest, Fees and other amounts due and sums paid to
the Bank hereunder and under the Loan Documents. Except in the case of manifest
error in computation, such records and any information recorded by the Bank on
the Revolving Credit Note shall constitute prima facie evidence of the accuracy
of the information so recorded; provided that, the failure of the Bank to make
an entry in the Loan Account or on the Revolving Credit Note (or any error in
such recordation) shall not affect the obligations of the Borrower hereunder or
under the Revolving Credit Note.
30
2.19 Use of Proceeds. The proceeds of the Loans shall be used by the
Borrower (a) for the Borrower's ongoing capital expenditures, working capital
and general purposes in the ordinary course of business, (b) to repay all
outstanding Indebtedness under the Existing Financing Agreements and (c) to pay
transaction costs in connection with the Loan Documents. The Borrower may not
transfer the proceeds of any Loans to, or otherwise directly or indirectly use
such funds or the proceeds thereof for the benefit of, any Subsidiary which is
not a Guarantor other than the payment of invoices in the ordinary course of
business for services rendered or goods sold by such Subsidiary.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and to make the Loans
and to issue Letters of Credit, the Borrower hereby represents and warrants to
the Bank that:
3.1 Financial Condition. (a) Audited Financials. The consolidated
balance sheet of the Borrower and its consolidated Subsidiaries as at
February 22, 2002 and the related consolidated statements of income and of cash
flows for the fiscal year ended on such date, present fairly the consolidated
financial condition of the Borrower and its consolidated Subsidiaries as at such
date, and the consolidated results of their operations and their consolidated
cash flows for the Fiscal Year then ended. All such financial statements,
including the related schedules and notes thereto, have been prepared in
accordance with GAAP applied consistently throughout the periods involved.
Neither the Borrower nor any of its consolidated Subsidiaries had, as of
February 22, 2002, any material Contingent Obligation, liability for taxes, or
any long-term lease or unusual forward or long-term commitment, including,
without limitation, any Interest Hedge Agreement, which is not reflected in the
foregoing statements or the notes thereto.
(b) Unaudited Financials. The unaudited consolidated balance sheet
of the Borrower and its consolidated Subsidiaries as at November 22, 2002 and
the related unaudited consolidated statements of income and of cash flows for
the twenty-six (26) week period ended on such date, certified by a Responsible
Officer, copies of which have heretofore been furnished to the Bank, are
complete and correct and present fairly the consolidated financial condition of
the Borrower and its consolidated Subsidiaries at such date, and the
consolidated results of their operations and their consolidated cash flows for
the twenty-six (26) week period then ended (subject to normal year-end audit
adjustments). All such financial statements have been prepared in accordance
with GAAP applied consistently throughout the periods involved (except (i) as
approved by such Responsible Officer and as disclosed therein and (ii) for the
exclusion of footnotes required by GAAP). Neither the Borrower nor any of its
consolidated Subsidiaries had, as of November 22, 2002, any material Contingent
Obligation, or material liability for taxes, or any long-term lease or unusual
forward or long-term commitment, including, without limitation, any Interest
Hedge Agreement, which has not been disclosed to the Bank in writing by the
Borrower.
(c) No Sales or Acquisitions. During the period from February 22,
2002, to and including the date hereof there has been no sale or other
disposition by the Borrower or any of its Subsidiaries of any material part of
its business or property and no purchase or other acquisition of any business or
property (including any Capital Stock of any other Person) material in relation
to the financial condition of the Borrower at February 22, 2002.
31
(d) Financial Projections. The Borrower has delivered to the Bank
financial projections of the income statements of the Borrower for each fiscal
quarter through February 28, 2004 (the "Financial Projections"). The Financial
Projections represent a reasonable range of possible results in light of the
history of the business, present and foreseeable conditions and the intentions
of the Borrower's management as of the Closing Date.
3.2 No Change. Except as set forth on Schedule 3.2, since February 22,
2002, there has been no Material Adverse Change and there has been no
development or event nor any prospective development or event which has had or
could reasonably be expected individually or in the aggregate to have a Material
Adverse Effect.
3.3 Existence; Compliance with Law. Each of the Borrower and each
Guarantor (a) is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, (b) has the power and authority,
and the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires such qualification, except where such non-qualification would
not have a Material Adverse Effect, and (d) is in material compliance with all
Requirements of Law.
3.4 Power; Authorization; Enforceable Obligations. Each of the Borrower
and each Guarantor has the power, authority, and legal right, to make, deliver
and perform this Agreement, each Application and each other Loan Document to
which it is a party (including, with respect to the Borrower, to borrow
hereunder). The Borrower has taken all necessary action to authorize the
borrowings on the terms and conditions of this Agreement, each Application and
each other Loan Document to which it is a party. No consent or approval or
authorization of, filing with or other act by or in respect of, any Governmental
Authority or any other Person (including shareholders and creditors of the
Borrower and each Guarantor) is required in connection with the borrowings
hereunder or with the execution, delivery, performance, validity or
enforceability of this Agreement, the Revolving Credit Note, each Application or
any other Loan Document. This Agreement has been and each Application and other
Loan Document to which it is a party will be, duly executed and delivered on
behalf of the Borrower. The Guaranty has been duly executed and delivered on
behalf of each Guarantor. This Agreement constitutes and each Application and
other Loan Document when executed and delivered will constitute, a legal, valid
and binding obligation of the Borrower, and in the case of the Guaranty, each
Guarantor, enforceable against the Borrower and each Guarantor, as the case may
be, in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law). No recording, filing, registration, notice or other similar action is
required in order to insure the legality, validity, binding effect or
enforceability of this Agreement or the Note or the other documents and
instruments executed hereunder as against all persons, other than such filings
as may be required under the UCC or in connection with the recording of
mortgages in favor of the Bank encumbering real property owned by the Borrower
32
3.5 No Legal Bar. The execution, delivery and performance of this
Agreement, the Revolving Credit Note, each Application and the other Loan
Documents by the Borrower and each Guarantor, the borrowings hereunder, the use
of the proceeds thereof and the consummation of the transactions herein or
therein contemplated (a) will not violate or materially conflict with any
Requirement of Law or Contractual Obligation (including any Licenses) of the
Borrower or any Guarantor and (b) will not result in, or require, the creation
or imposition of any Lien on any properties or revenues of the Borrower or any
Guarantor pursuant to any such Requirement of Law or Contractual Obligation.
3.6 No Material Litigation. No litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened against the Borrower or any Guarantor
against any of their respective businesses, operations, properties, prospects or
financial condition (a) with respect to this Agreement, the Revolving Credit
Note, the other Loan Documents or any of the transactions contemplated hereby,
or (b) as to which there is a reasonable likelihood of an adverse determination
and which, if adversely determined, could have a Material Adverse Effect. All
pending and, to the Borrower's knowledge, threatened material actions, suits,
proceedings and investigations affecting the Borrower or any Guarantor in
existence on the Closing Date are set forth on Schedule 3.6.
3.7 No Default. Except as set forth on Schedule 3.7, neither the
Borrower nor any Guarantor is in default under or with respect to any of its
Contractual Obligations in any respect which could reasonably be expected to
have a Material Adverse Effect. No Default or Event of Default has occurred and
is continuing.
3.8 Taxes. Each of the Borrower and each Guarantor has filed or caused
to be filed all tax returns which are required to be filed and have paid all
taxes shown to be due and payable on said returns or on any assessments made
against it or any of its property and all other taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority (other than
any the amount or validity of which are currently being contested in good faith
by appropriate proceedings and with respect to which reserves, if any, in
conformity with GAAP have been provided on the books of the Borrower); no tax
Lien has been filed against the Borrower or any Guarantor, and, to the knowledge
of the Borrower, no claim is being asserted, with respect to any such tax, fee
or other charges.
3.9 Federal Regulations. No part of the proceeds of any Loans will be
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U or for any purpose which
violates the provisions of Regulation U or any other Regulations of the Board of
Governors of the Federal Reserve System. If requested by the Bank, the Borrower
will furnish to the Bank a statement to the foregoing effect in conformity with
the requirements of FR Form U- l referred to in said Regulation U. No part of
the proceeds of the Loans hereunder will be used for any purpose which violates,
or which is inconsistent with, the provisions of either of Regulations T and X.
33
3.10 ERISA. Each Plan (such representations in respect of any
Multiemployer Plan being made to the best knowledge of the Borrower) has
complied in all material respects with the applicable provisions of ERISA and
the Code. No "prohibited transaction" or "accumulated funding deficiency" (each
as defined in subsection 7.1(j)) or Reportable Event has occurred with respect
to any Single Employer Plan. The present value of all accrued benefits under
each Single Employer Plan of which the Borrower or a Commonly Controlled Entity
is a sponsor (based on those assumptions used to fund the Plans), as calculated
by the Borrower's actuaries, did not, as of the last annual valuation date prior
to the date on which this representation is made or deemed made, exceed the
value of the assets of the Plans allocable to such benefits. Neither the
Borrower nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan and neither the Borrower nor any Commonly
Controlled Entity would become subject under ERISA to any liability if the
Borrower or any such Commonly Controlled Entity were to withdraw completely from
any Multiemployer Plan as of the valuation date most closely preceding the date
this representation is made or deemed made. Such Multiemployer Plans are neither
in Reorganization as defined in Section 4241 of ERISA nor Insolvent as defined
in Section 4245 of ERISA. The present value (determined using actuarial and
other assumptions which are reasonable in respect of the benefits provided and
the employees participating) of the liability of the Borrower and each Commonly
Controlled Entity for post-retirement benefits to be provided to their current
and former employees under Plans which are welfare benefit plans (as defined in
Section 3(1) of ERISA) does not, in the aggregate, exceed the assets under all
such Plans allocable to such benefits. Neither the Borrower nor any Commonly
Controlled Entity has any or has received notice of any liability under the Coal
Industry Retiree Health Benefit Act of 1992. Neither a Reportable Event nor an
"accumulated funding deficiency" (as defined in Subsection 7.1(j)) has occurred
during the five-year period to the date on which this representation is made or
deemed made with respect to any Single Employer Plan or Multiemployer Plan. No
termination of a Single Employer Plan has occurred, and no Lien on assets of the
Borrower or any Commonly Controlled Entity in favor of the PBGC or a Plan has
arisen during such five- year period.
3.11 Investment Company Act; Public Utility Holding Company Act;
Regulation O.
(a) Neither the Borrower nor any Guarantor is an "investment
company", or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
(b) Neither the Borrower nor any Guarantor is subject to regulation
as a "holding company", subject to regulation as an "affiliate" of a company",
or subject to regulation as a "subsidiary company" of a "holding company", in
each case under the Public Utility Holding Company Act of 1935, as amended.
(c) To the knowledge of the Borrower, no executive officer or
principal shareholder of the Borrower is a director, executive officer or
principal shareholder of the Bank and no director of any Bank is in control of
the Borrower. For the purposes of this Section, the terms "director" (when used
with reference to the Bank), "executive officer", "principal shareholder" and
"control" of the Bank have the respective meanings assigned thereto in
Regulation O issued by the Board of Governors of the Federal Reserve System.
3.12 Purpose of Loans. The proceeds of the Loans shall be used by the
Borrower only for the purposes permitted under Section 2.19.
34
3.13 Environmental Matters. Except as set forth on Schedule 3.13:
(a) To the best of Borrower's knowledge, the Properties do not
contain, in, on, or under, including, without limitation, the soil and
groundwater thereunder, any Materials of Environmental Concern in amounts or
concentrations that constitute a violation of, or reasonably could give rise to
liability under Environmental Laws.
(b) The Properties and all operations and facilities at the
Properties are in compliance, and have in the last five years been in compliance
with all Environmental Laws, and to the best of Borrower's knowledge, there is
no contamination at, under or about the Properties or violation of any
Environmental Law with respect to the Properties or the business operated by the
Borrower and its Subsidiaries which could interfere with the continued operation
of any of the Properties or impair the fair saleable value of any thereof. The
Borrower has not assumed any liability of any Person under any Environmental
Law.
(c) The Borrower has not received written notice and is not aware
of any claim, violation, alleged violation, non-compliance, investigation or
potential liability regarding environmental matters or compliance with
Environmental Law with regard to the Properties which has not been
satisfactorily resolved, nor is the Borrower aware or does it have reason to
believe that any such action is being contemplated, considered or threatened.
(d) Materials of Environmental Concern have not been generated,
treated, stored, transported, disposed of, at, on, from or under any of the
Properties, nor have any Materials of Environmental Concern been transferred
from the Properties to any other location except in either case in compliance
with all applicable Environmental Laws and such that it could not reasonably be
expected to give rise to liability of Borrower or its subsidiaries under any
applicable Environmental Law.
(e) There are no governmental, administrative actions or judicial
proceedings pending or, to the best of Borrower's knowledge, contemplated or
threatened under any Environmental Laws to which the Borrower is or will be
named as a party with respect to the Properties, nor to the best of Borrower's
knowledge are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
enforcement requirements outstanding under any Environmental Law with respect to
any of the Properties.
(f) To the best of Borrower's knowledge, there has been no release
or threat of release of Matters of Environmental Concern at or from the
Properties, or arising from or related to the operations of the Borrower in
connection with the Properties or otherwise in connection with the business
operated by the Borrower and its Subsidiaries in violation of or in amounts or
in a manner that could reasonably be expected to give rise to liability of the
Borrower or its subsidiaries under any Environmental Law.
(g) Each of the representations and warranties set forth in
paragraphs 3.13(a) through 3.13(f) is true and correct with respect to each
Property.
35
3.14 No Material Misstatements. No financial statement, exhibit or
schedule furnished by or on behalf of the Borrower to the Bank in connection
with the negotiation of this Agreement, the Revolving Credit Note, any
Application or any other Loan Document contains any misstatement of fact, or
omitted or omits to state any fact necessary to make the statements therein not
misleading under the circumstances under which they were made or given, where
such misstatement or omission would be material with respect to the performance
of the Borrower of its obligations hereunder or thereunder. Prior to the date
hereof, the Borrower has disclosed to the Bank in writing any and all facts
which materially and adversely affect (to the extent the Borrower can as of the
date hereof reasonably foresee), the business, operations or financial condition
of the Borrower and its Subsidiaries taken as a whole, and the ability of the
Borrower to perform its obligations under this Agreement, the Note, each
Application and the other Loan Documents.
3.15 Condition of and Title to Properties. The real property owned or
leased by the Borrower and any Guarantor in the United States as of the Closing
Date is described on Schedule 3.15 hereto. Each of the Borrower and each
Guarantor has good title to or valid leasehold interest in all properties,
assets and other rights which it purports to own or lease or which are reflected
as owned or leased on its books and records, free and clear of all Liens and
encumbrances except Permitted Liens, and subject to the terms and conditions of
the applicable leases. Except as described on Schedule 3.15, all leases of
property are in full force and effect. No consent under any lease is required in
connection with the consummation of the transactions contemplated hereby. Except
for financing statements evidencing Permitted Liens, no effective financing
statement under the Uniform Commercial Code is in effect in any jurisdiction and
no other filing which names the Borrower or any Guarantor as debtor or which
covers or purports to cover any of the assets of the Borrower or any Guarantor
is currently effective and on file in any state or other jurisdiction, and
neither the Borrower nor any Guarantor has signed any such financing statement
or filing or any security agreement authorizing any secured party thereunder to
file any such financing statement or filing. All of the assets and properties of
the Borrower and each Guarantor that are necessary for the operation of their
respective businesses are in good working condition and are able to serve the
functions for which they are currently being used, except for ordinary wear and
tear.
3.16 Intellectual Property. Each of the Borrower and its Subsidiaries
owns, or is licensed to use, all material trademarks, tradenames, copyrights,
technology, know-how and processes necessary for the conduct of its business as
currently conducted (the "Intellectual Property"). Except as set forth on
Schedule 3.16, no claim has been asserted and is pending by any Person
challenging or questioning the use of any such Intellectual Property, nor does
the Borrower know of any valid basis for any such claim. The use of such
Intellectual Property by the Borrower and its Subsidiaries does not infringe the
rights of any Person, except for such claims and infringements that, in the
aggregate, do not have a Material Adverse Effect. To the best knowledge of the
Borrower, except as set forth on Schedule 3.16, no slogan or other advertising,
device, product, process, method, substance, part or component or other material
now employed, or now contemplated to be employed, by any of the Borrower and its
Subsidiaries infringes upon or conflicts with any rights owned by any other
Person, and no claim or litigation regarding any of the foregoing is pending or,
to the knowledge of the Borrower, threatened. No patent, invention, device,
application, and no statute, law, rule, regulation, standard or code involving
the Borrower's intellectual property is pending or, to the knowledge of the
Borrower, proposed, except where the consequences in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
36
3.17 No Burdensome Restrictions. No Requirement of Law or Contractual
Obligation of the Borrower or any Guarantor could reasonably be expected to have
a Material Adverse Effect.
3.18 Security Interests. (a) At all times after execution and delivery
of a Pledge Agreement by the pledgor thereunder and the delivery of the
certificates (if any) pledged thereunder, the security interests created for the
benefit of the Bank under such Pledge Agreement will constitute valid, perfected
security interests in the Capital Stock pledged thereunder, subject to no other
Liens.
(b) At all times after execution and delivery of the Security
Documents (other than the Pledge Agreements) by the party or parties thereto and
completion of the filings and recordings listed on Schedule 3.18, the security
interests created for the benefit of the Bank pursuant to the Security Documents
(other than the Pledge Agreements) will constitute valid, perfected security
interests in the collateral subject thereto, subject to no other Liens
whatsoever, except Permitted Liens.
3.19 Solvency. The Borrower is, and after giving effect to the receipt
and application of the initial Loans hereunder will be, solvent such that: (a)
the fair value of its assets (including without limitation the fair salable
value of the goodwill and other intangible property of the Borrower) is greater
than the total amount of its liabilities, including without limitation,
Contingent Obligations, (b) the present fair salable value of its assets
(including without limitation the fair salable value of the goodwill and other
intangible property of the Borrower) is not less than the amount that will be
required to pay the probable liability on its debts as they become absolute and
matured, and (c) it is able to realize upon its assets and pay its debts and
other liabilities and commitments (including Contingent Obligations) as they
mature in the normal course of business. The Borrower (a) does not intend to,
nor does it believe that it will, incur debts or liabilities beyond its ability
to pay as such debts and liabilities mature, and (b) is not engaged in a
business or transaction, or about to engage in a business or transaction, for
which its property would constitute unreasonably small capital after giving due
consideration to the prevailing practice and industry in which it is engaged.
3.20 No Other Indebtedness. The Borrower does not have any outstanding
Indebtedness to any person or entity other than to the Bank hereunder, except
for such Indebtedness as is set forth on Schedule 3.20 hereto ("Permitted
Indebtedness").
3.21 Insurance. The Borrower currently maintains insurance which meets
or exceeds the requirements of subsection 5.5 and the applicable insurance
requirements set forth in the other Loan Documents. Schedule 3.21 hereto lists,
as of the Closing Date, all insurance policies and other bonds to which the
Borrower is a party, all of which are valid and in full force and effect. No
written notice has been given or claim made and the Borrower has no knowledge
that any grounds exist to cancel or avoid any of such policies or bonds or to
reduce the coverage provided thereby or any replacements thereof. Such policies
and bonds or any replacements thereof provide adequate coverage from reputable
and financially sound insurers in amounts sufficient to insure the assets and
risks of the Borrower in accordance with prudent business practice in the
industry of the Borrower.
37
3.22 Subsidiaries. As of the Closing Date, the Borrower has no
Subsidiaries except for those set forth on Schedule 3.22, each of which was duly
formed and is existing under the law of the jurisdiction set forth opposite
their names. All of the issued and outstanding shares of Capital Stock of the
Subsidiaries are duly and validly authorized and issued and fully paid and
nonassessable and are owned by the Borrower, (except for directors qualifying
shares). As of the Closing Date, there are no options, warrants or other rights
outstanding to purchase any Capital Stock of any of the Subsidiaries, nor are
any securities of any of the Subsidiaries convertible into or exchangeable for
Capital Stock of the Subsidiaries except as referred to on Schedule 3.22.
3.23 Business; Fictitious Names. The Borrower is engaged only in the
businesses described on Schedule 3.23. Neither the Borrower nor any Guarantor
operates or does business under any assumed, trade or fictitious names, except
as shown on Schedule 3.23.
3.24 Compliance with Laws. Each of the Borrower and each Guarantor has
duly complied with, and its properties, business operations and leaseholds are
in compliance in all material respects with, all Requirements of Law applicable
to the Borrower and each Guarantor, its properties and the conduct of its
businesses. Neither the Borrower nor any Guarantor has received any notice, not
heretofore complied with, from any federal, state or local authority or any
insurance or inspection body to the effect that any of its properties,
facilities, equipment or business procedures or practices fail to comply with
any applicable law, ordinances, regulation, building or zoning law, or any other
requirement of any such authority or body.
3.25 Labor Matters; Payment of Wages. Neither the Borrower nor any
Guarantor is a party to any collective bargaining agreement, and there are no
strikes, work stoppages, material grievances, disputes or controversies with any
union or any other organization of the Borrower's or any Guarantor's employees,
or threats of strikes, work stoppages or any asserted pending demands for
collective bargaining by any union or organization, except to the extent that
such strikes, work stoppages, material grievances, disputes or controversies
could not reasonably be expected to cause a Material Adverse Change. Neither the
Borrower nor any Guarantor has, within the two- year period preceding the
Closing Date, taken any action which would have constituted or resulted in a
"plant closing" or "mass layoff" within the meaning of the Federal Worker
Adjustment and Retraining Notification Act of 1988 or any similar Requirement of
Law. The procedures by which each of the Borrower and each Guarantor has hired
or will hire its employees comply and will comply in all material respects with
each collective bargaining agreement to which the Borrower or the Guarantor is a
party and any applicable Requirement of Law. Each of the Borrower or the
Guarantor is in compliance with the Fair Labor Standards Act, as amended, and
has paid all minimum and overtime wages required by law to be paid to its
respective employees, except for violations which could not have a Material
Adverse Effect.
3.26 Fiscal Year. The Fiscal Year of the Borrower ends on the last
Friday in February.
3.27 Authorizations. (a) Except as set forth on Schedule 3.27(a), each
of the Borrower and each Guarantor possesses all material Governmental Approvals
necessary for the operations of its business and is not in material violation
thereof. All such Governmental Approvals are in full force and effect, and no
event has occurred that permits, or after notice or lapse of time could permit,
the revocation, termination or material and adverse modification of any such
Governmental Approval.
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(b) Except as set forth on Schedule 3.27(b), neither the Borrower
nor any Guarantor has knowledge of any investigation, notice of apparent
liability, violation, forfeiture or other order or complaint issued by or before
any Governmental Authority, or of any other proceedings of or before any
Governmental Authority, which could reasonably be expected to have a Material
Adverse Effect.
All of the foregoing representations and warranties shall survive the
execution and delivery of the Note and the making by the Bank of the Loans
hereunder and shall continue in full force and effect so long as any
indebtedness or obligation of the Borrower to the Bank hereunder or otherwise is
outstanding or unperformed or this Agreement remains in effect.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Extension of Credit. The agreement of the
Bank to make the initial Loans and to cause the issuance of Letters of Credit as
requested by the Borrower is subject to the satisfaction on the Closing Date of
the following conditions precedent:
(a) Credit Agreement and Note. The Bank shall have received (i)
this Agreement, executed and delivered by a duly authorized officer of the
Borrower and (ii) the Revolving Credit Note conforming to the requirements
hereof and executed by a duly authorized officer of the Borrower.
(b) Other Loan Documents. (i) The Bank shall have received the
following agreements duly executed and delivered by each party (other than the
Bank) thereto: (A) the Pledge Agreement(s), together with stock certificates (if
any) evidencing all of the Capital Stock pledged thereunder and, if applicable,
appropriate instruments of transfer, executed in blank, (B) the other Security
Documents and (C) the Guaranty.
(ii) Any document (including without limitation financing
statements) required to be filed, registered or recorded in order to create, for
benefit of the Bank, a perfected, first priority Lien, shall have been properly
prepared for filing, registration or recording in each office in each
jurisdiction in which such filings, registration and recordation are required to
perfect such first priority security interests created by the Security
Documents, and the Bank shall be satisfied that all necessary filing, recording
and other fees and all taxes and expenses related to such filings, registrations
and recordings will be paid in full by the Borrower.
(c) Proceedings; No Default. The Bank shall have received a
certificate of the Secretary or Assistant Secretary of the Borrower and of each
Guarantor, as the case may be, certifying (A) that attached thereto is a true
and complete copy of the resolutions or consents, in form and substance
satisfactory to the Bank, authorizing (i) the execution, delivery and
performance of this Agreement, the Revolving Credit Note and the Applications
and other Loan Documents to which it is a party, and (ii) the borrowings
contemplated hereunder, and that such resolutions or consents attached thereto
have not been amended, modified, revoked or rescinded, and (B) as to the
incumbency and specimen signature of each officer or member of the Borrower and
each Guarantor executing any Loan Document or Application on behalf of the
Borrower or such Guarantor; and such certificate and attachments thereto shall
be in form and substance satisfactory to the Bank.
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(d) Organizational Documents. The Bank shall have received true and
complete copies of the certificate or articles of incorporation and by-laws or
other organizational or governing documents of the Borrower and of each
Guarantor certified by the Secretary or an Assistant Secretary of the Borrower
or such Guarantor, as the case may be, as complete and correct copies as of the
Closing Date.
(e) Fees. The Bank shall have received payment in full of the
unpaid portion of the Facility Fee.
(f) Legal Opinions. The Bank shall have received the executed legal
opinion of Klehr, Harrison, Harvey, Branzburg & Ellers LLP, counsel to the
Borrower and each Guarantor, in form and substance satisfactory to the Bank and
its counsel.
(g) UCC Filing and Other Searches. The Bank shall have received the
results of (i) Uniform Commercial Code searches made with respect to the
Borrower in such jurisdictions as the Bank deems necessary, including without
limitation, the states in which filings are required to be made pursuant to
subsection 4.1(b)(ii), together with copies of financing statements disclosed by
such searches and (ii) such tax and judgment lien searches as the Bank shall
reasonably request, and each of the foregoing searches shall disclose no Liens,
except for Permitted Liens or, if unpermitted Liens are disclosed, the Bank
shall have received satisfactory evidence of the release of such Liens.
(h) Termination of Existing Financing Agreements and Release of
Liens. The Existing Financing Agreements shall have been terminated, all
outstanding principal, interest, fees and other amounts due thereunder shall
have been paid in full with the first Loan made hereunder, all Liens under the
Existing Financing Agreements with respect to property of the Borrower and all
credit support therefor shall have been released and satisfactory evidence of
the foregoing shall have been delivered to the Bank.
(i) Insurance. The Bank shall have received Certificates of
Insurance with respect to the Borrower's fire, casualty, liability and other
insurance covering property and business in accordance with Section 5.5,
including lender loss payee endorsements in favor of the Bank as to all
Collateral.
(j) Title Insurance. Receipt by the Bank of a commitment to issue a
title insurance policy insuring the priority of the lien of the Mortgage on the
property covered thereby issued by a title insurance company acceptable to the
Bank and containing only such exceptions as are acceptable to the Bank and
including such endorsements as the Bank may require.
(k) Key-man Insurance. The Bank shall have received evidence of
satisfactory to it $2,500,000 full amount of "key- man" life insurance on the
life of William F. Mitchell which has been duly assigned to the Bank by the
Borrower and, acknowledged by the issuer of such policy of life insurance.
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(l) Good Standing. The Bank shall have received certificates of
good standing, subsistence and/or status dated a recent date from the Secretary
of State or appropriate taxing or other authorities in the respective
jurisdiction of organization of the Borrower and each Guarantor and in each
jurisdiction where its ownership, lease, or operation of property or the conduct
of its business requires it to be qualified except where the failure to be so
qualified would not have a Material Adverse Effect.
(m) Governmental Approvals. Receipt by the Bank of evidence that
any necessary authorizations for the consummation of the transactions
contemplated hereby have been obtained.
(n) Proceeds of Settlement. The Borrower shall have provided the
Bank with such evidence as it reasonably requires of the receipt by the Borrower
of at least $6,900,000 in proceeds from the settlement of its contract dispute
with the United States Navy.
(o) Closing Certificate. Receipt by the Bank of a certificate,
dated as of the Closing Date and executed by the Borrower, stating that, as of
the Closing Date and after giving effect to the Loans made and Letters of Credit
issued on such date (i) all of the representations and warranties made by the
Borrower herein and in the other Loan Documents are true and correct, (ii) no
Default or Event of Default exists; no Material Adverse Change has occurred and
no circumstances exist which could reasonably be expected to cause a Material
Adverse Effect and (iii) on a pro forma basis as set forth on the Compliance
Certificate dated as of the Closing Date, all of the financial covenants set
forth in Section 6.1 are met, and the Bank's satisfaction with the accuracy and
completeness of all of the foregoing.
(p) Request for Initial Loans and Letters of Credit. Receipt by the
Bank of a Notice of Borrowing with respect to the Loans to be made and Letters
of Credit to be issued on the Closing Date, with written instructions as to the
disbursement of such Loans.
(q) Bond Letter of Credit. All of the conditions precedent in the
Reimbursement Agreement shall have been satisfied prior to the Bank's
obligation to execute and deliver the Bond Letter of Credit.
(r) Initial Borrowing Base Certificate; Liquidity. The Borrower
shall have delivered at least three (3) Business Days prior to the Closing Date,
and provided the Bank a reasonable opportunity to audit a completed Borrowing
Base Certificate as of the end of the immediately preceding month evidencing a
Borrowing Base sufficient such, that after giving effect to the initial Loans to
be made and the Letters of Credit to be issued on the Closing Date, the Borrower
has Liquidity of at least $4,000,000.
(s) Additional Subordinated Debt. The Bank shall have received
evidence satisfactory to it of the issuance by the Borrower of the Additional
Subordinated Debt and the receipt by the Borrower of the proceeds thereof
together with such subordination agreement in respect thereof as the Bank may
have required in connection with the approval of such Additional Subordinated
Debt.
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4.2 Conditions to Each Loan. The agreement of the Bank to make any Loan
or cause any Letter of Credit to be issued as requested by the Borrower on any
date (including, without limitation, the initial Loans and Letters of Credit) is
subject to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Borrower herein or under the other Loan Documents or
which are contained in any certificate, document or financial or other statement
furnished at any time under or in connection herewith or therewith, shall be
true and correct in all material respects on and as of such date as if made on
and as of such date.
(b) No Default. The Borrower shall have performed and complied with
all agreements and conditions herein required to be performed or complied with
by it prior to any Loan being made or Letter of Credit being issued. At the time
such Loan is made or as a result of making such Loan or issuing such Letter of
Credit, no Default or Event of Default has occurred and is continuing or will be
caused by the making of such Loan or issuing such Letter of Credit.
(c) Additional Matters. All corporate and other proceedings, and
all documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be satisfactory in form and substance to the Bank, and the Bank shall have
received such other documents and legal opinions in respect of any aspect or
consequence of the transactions contemplated hereby or thereby as it shall
reasonably request.
Each request by the Borrower for a Loan or Letter of Credit hereunder shall
constitute a representation and warranty by the Borrower as of the date of such
Loan or Letter of Credit that the conditions contained in this Section 4.2 have
been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Note or Letter of Credit remains outstanding and unpaid, or any
other amount is owing to the Bank hereunder or under any other Loan Document,
such Borrower shall, and shall cause each Guarantor to:
5.1 Financial Statements. Furnish to the Bank:
(a) as soon as available, but in any event not later than 90 days
after the close of each Fiscal Year of the Borrower, a copy of the annual audit
report for such year for the Borrower and its consolidated Subsidiaries,
including therein a consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such Fiscal Year, and related
consolidated statements of income and retained earnings and changes in cash
flows of the Borrower and its consolidated Subsidiaries for such Fiscal Year,
all in reasonable detail, prepared in accordance with GAAP applied on a basis
consistently maintained throughout the period involved and with the prior year
with such changes thereon as shall be approved by the Borrower's independent
certified public accountants, such financial statements to be certified by
recognized independent certified public accountants selected by the Borrower and
reasonably acceptable to the Bank, without a "going concern" or like
qualification or exception or qualification arising out of the scope of the
audit; and
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(b) as soon as available, but in any event not later than 60 days
after the end of each of the first three Fiscal Quarters of each Fiscal Year of
the Borrower, the unaudited consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such Fiscal Quarter, and the related
unaudited consolidated statements of income and retained earnings and cash flows
of the Borrower and its consolidated Subsidiaries all for the period from the
beginning of such Fiscal Quarter to the end of such Fiscal Quarter and the
portion of the Fiscal Year through the end of such Fiscal Quarter, setting forth
in each case in comparative form the corresponding figures for the like period
of the preceding Fiscal Year; all in reasonable detail, prepared in accordance
with GAAP (except for the absence of notes thereto) applied on a basis
consistently maintained throughout the period involved and with prior periods
and accompanied by a certificate of a Responsible Officer stating that the
financial statements fairly present the consolidated financial condition of the
Borrower and its consolidated Subsidiaries as of the date and for the periods
covered thereby (subject to normal year-end audit adjustments).
5.2 Certificates; Other Information. Furnish to the Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsection 5.1(a), a certificate of the Borrower's independent
certified public accountants reporting on such financial statements and stating
that in making the examination necessary for certifying such financial
statements no knowledge was obtained of any Default or Event of Default, except
as specifically indicated;
(b) concurrently with the delivery of the financial statements
referred to in subsections 5.1(a) and (b), a Compliance Certificate executed by
a Responsible Officer showing, among other things, in detail the calculations
demonstrating compliance with the financial covenants set forth in Section 6.1;
(c) within twenty days after the end of each month a duly completed
certificate in substantially the form of Exhibit E attached hereto (each, a
"Borrowing Base Certificate" for the prior month prepared in accordance with
GAAP, accompanied by an aging of the Borrower's accounts receivable and a report
on the Borrower's contracts in progress.
(d) within five days after the same are sent, copies of all
financial statements and reports which the Borrower sends to any of its
shareholders and within five days after the same are filed, copies of all
financial statements and reports which the Borrower may make to, or file with,
the Securities Exchange Commission or any successor or analogous Governmental
Authority;
(e) within the time limits set forth in Section 6.19, written
notice of any amendment to the organizational documents of the Borrower or any
Guarantor;
(f) promptly upon their becoming available to the Borrower any
reports including management letters submitted to the Borrower by independent
accountants in connection with any annual, interim or special audit;
(g) within forty- five days after the end of each Fiscal Year of
the Borrower, updated Financial Projections for the current Fiscal Year; and
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(h) promptly, such additional financial statements, reports,
financial projections and other information as the Bank may from time to time
reasonably request.
5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature (including but not limited to all taxes,
assessments and governmental charges and levies upon them or upon any of their
respective income profits or property prior to the date on which penalties
attach thereto), except where the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and reserves in conformity
with GAAP with respect thereto have been provided on the books of the Borrower;
provided that, the foregoing exception shall not apply to, and the Borrower
shall pay, any contested liability on or prior to ten (10) days after the
commencement of proceedings to foreclose any Lien which may have attached as
security therefor.
5.4 Conduct of Business and Maintenance of Existence. Continue to
engage in the businesses described in Schedule 3.23 and businesses directly
related thereto and, preserve, renew and keep in full force and effect its
existence except as expressly permitted by subsection 6.6(b), and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business; comply with all material
Contractual Obligations and material Requirements of Law. The Borrower shall
maintain in full force and effect all Governmental Approvals and other material
agreements which are necessary for its operation as now conducted and in
compliance in all material respects with all applicable Requirements of Law.
5.5 Maintenance of Insurance; Property. (a) (i) Maintain insurance
including, but not limited to, business interruption coverage and public
liability coverage insurance, with responsible insurance companies reasonably
satisfactory to the Bank, in such amounts and against such risks to the Borrower
as is prudent for similarly situated companies engaged in similar businesses and
as is reasonably satisfactory to the Bank;
(ii) Keep its assets insured by insurers on terms and in a
manner reasonably acceptable to the Bank against loss or damage by fire, theft,
burglary, loss in transit, explosions and other hazards insured against by
extended coverage, in amounts which are prudent for the business which it is in
and reasonably satisfactory to the Bank, all premiums thereon to be paid by the
Borrower; and
(iii) Require that each insurance policy provide for at least
thirty (30) days' prior written notice to the Bank of any termination of or
proposed cancellation or nonrenewal of such policy, and name the Bank as
additional insured and loss payee, to the extent of the Obligations.
(b) Maintain in good repair, working order and condition (ordinary
wear and tear excepted) in accordance with the general practice of other
businesses of similar character and size, all of those properties useful or
necessary to its business, and from time to time, the Borrower will make or
cause to be made all appropriate repairs, renewals or replacements thereof.
44
5.6 Inspection of Property; Books and Records; Discussions. Keep proper
books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and upon reasonable
notice permit representatives of the Bank to visit and inspect and audit any of
its properties and examine, audit and make abstracts from any of its books and
records and such reports and returns as the Borrower may file with any
Governmental Authority during normal business hours and as often as may
reasonably be desired and to discuss the business, operations, properties and
financial and other condition of the Borrower with the executive officers of the
Borrower, and with their independent certified public accountants provide that
any such audits by the Bank at the Borrower's expense shall not, prior to the
occurrence of an Event of Default, exceed two in any twelve month period.
5.7 Notices. Promptly give notice to the Bank of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or (ii) litigation, investigation or proceeding which
may exist at any time between the Borrower and any Governmental Authority, which
in either case, if not cured or if adversely determined, as the case may be,
could not be reasonably expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any
Guarantor in which the amount involved is $150,000 or more and not covered by
insurance as reasonably determined by the Borrower's counsel or in which
injunctive or similar relief is sought;
(d) the following events, as soon as possible and in any event
within 15 days after the Borrower knows thereof: (i) the occurrence or expected
occurrence of any Reportable Event with respect to any Plan, a failure to make
any required contribution to a Plan, any Lien in favor of PBGC or a Plan or any
withdrawal from, or the termination, Reorganization or Insolvency of any
Multiemployer Plan, or (ii) the institution of proceedings or the taking of any
other action by the PBGC or the Borrower or any Commonly Controlled Entity or
any Multiemployer Plan with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan, or (iii) assessment of liability
under the Coal Industry Retiree Health Benefit Act of 1992;
(e) the occurrence or existence of a material default by any party,
including the Borrower or any Guarantor, to any material contract to which the
Borrower or any Guarantor is a party with an annual payment in excess of
$250,000, or the actual or threatened (in writing) termination, revocation or
non-renewal of any such material contract;
(f) (i) any correspondence or notices from any Governmental
Authority that regulates the operations of the Borrower or any Guarantor
relating to an actual or threatened change or development that could have a
Material Adverse Effect on such Borrower, and (ii) any notice of revocation or
non-renewal of a License;
45
(g) entry of any order, judgment, decree or decision issued by any
court, arbitrator or Governmental Authority in any proceeding to which the
Borrower or any Guarantor is a party which could not be reasonably expected to
have a Material Adverse Effect;
(h) any Environmental Claim that could result in liability to the
Borrower or any Guarantor in an amount exceeding $100,000;
(i) any notice from a Governmental Authority received by the
Borrower or any Guarantor of such Governmental Authority's intention to audit
any Federal, state, local or foreign tax return (except for notices of sales,
excise, use and property tax audits, which the Borrower shall provide to the
Bank upon request) of the Borrower, together with a copy of any such notice as
well as any subsequent notice with respect thereto from any such Governmental
Authority;
(j) any lapse, termination, non-renewal or reduction in coverage of
any insurance coverage required to be maintained by the Borrower pursuant to any
Loan Document;
(k) any information with respect to and copies of any notices
received from any Governmental Authority relating to any order, ruling, law,
information or policy that relates to a material breach of or noncompliance with
any Requirement of Law, or might result in the payment of money by the Borrower
or any Guarantor in an amount of $100,000 or more in the aggregate, or otherwise
have a Material Adverse Effect, or result in the loss or suspension of any
material License or any material contract; and
(l) any other event which the Borrower reasonably believes could
have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto. Upon
the request of the Bank, the Borrower shall send (or cause to be sent) to the
Bank copies of all Federal, state, local and foreign tax returns and reports
filed by the Borrower in respect of taxes measured by income.
5.8 Environmental Laws. (a) Comply in all material respects with, and
require compliance in all material respects by all tenants and all subtenants,
if any, with, all Environmental Laws and obtain and comply in all material
respects with and maintain, and require that all tenants and subtenants obtain
and comply in all material respects with and maintain, any and all licenses,
approvals, registrations or permits required by Environmental Laws.
(b) Comply with all lawful and binding orders and directives of all
Governmental Authorities respecting Environmental Laws.
(c) As often as deemed appropriate by the Borrower, inspect all
property owned or leased by them and audit operations thereon to maintain
material compliance with all Environmental Laws.
46
(d) Employ appropriate technology in order to maintain material
compliance with all applicable Environmental Laws, including without limitation
the replacement or updating, if required, of above- ground or underground
storage tanks owned by the Borrower.
(e) Investigate and remediate any material Contamination, using a
reputable environmental remediation firm, and, upon the request of the Bank,
inform the Bank in writing from time to time as to the status of any such
remediation.
(f) Defend, indemnify and hold harmless the Bank and its employees,
agents, officers, directors, successors and assigns from and against any claims,
demands, penalties, fines, liabilities, settlements, damages, costs and expenses
of whatever kind or nature known or unknown, contingent or otherwise, arising
out of, or in any way relating to any violation of or noncompliance with or
liability under any Environmental Laws, or any orders, requirements or demands
of Governmental Authorities related thereto which in each case relate to or
arise in connection with the Borrower, any Guarantor, any Property or any
activities relating to any other property or business of the Borrower or any
Guarantor or the enforcement of any rights provided herein or in the other Loan
Documents, including, without limitation, attorneys' and consultants' fees,
response costs, investigation and laboratory fees, court costs and litigation
expenses, except to the extent that any of the foregoing arise out of the gross
negligence or willful misconduct of any of the foregoing enumerated parties.
This indemnity shall continue in full force and effect regardless of the
termination of this Agreement and the payment of the Revolving Credit Note.
5.9 Management Changes. Notify the Bank in writing within fifteen (15)
days after any change of any of the following officers of the Borrower: chief
executive officer, chief financial officer, or president or other similar
executive position with similar responsibilities.
5.10 Maintenance of Intellectual Property, Permits, Etc. Except where
the failure to do so could not reasonably be expected to have a Material Ad
verse Effect, maintain in full force and effect all Intellectual Property and
all licenses, franchises, permits and other authorizations necessary for the
ownership and operation of their respective properties and business.
5.11 Plans and Benefit Arrangements. Comply and cause each Commonly
Controlled Entity to comply, with ERISA, the Code and all other applicable
Requirements of Law which are applicable to Plans, except where the failure to
do so, alone or in conjunction with any other failure, could not reasonably be
expected to have a Material Adverse Effect.
5.12 Further Assurances; Power of Attorney. (a) At any time and from
time to time, upon the Bank's reasonable request, make, execute and deliver, and
use its best efforts to cause any other Person to make, execute and deliver, to
the Bank, and where appropriate cause to be recorded or filed, and from time to
time thereafter to be re-recorded and refiled at such time and in such offices
and places as shall be deemed desirable by the Bank any and all such further
Security Documents, certificates and other documents and instruments as the Bank
may reasonably consider necessary or desirable in order to effectuate, complete,
perfect, continue or preserve the Obligations and the Liens created to secure
the Obligations. The Borrower hereby appoints the Bank, and any of its officers,
directors, employees and authorized agents, with full power of substitution,
upon any failure by the Borrower, to take or cause to be taken any action
described in the preceding sentence and to make, execute, record, file,
re-record or refile any and each such Security Document, instrument, certificate
and document for and in the name of the Borrower. The power of attorney granted
pursuant to this subsection is coupled with an interest and shall be irrevocable
until the Revolving Credit Note is paid in full, no other amount is owed to the
Bank hereunder or under the other Loan Documents and the Commitment is
terminated.
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(b) Without limiting the above, from time to time, at its expense,
faithfully preserve and protect the Bank's Lien on and security interest in the
Collateral as continuing first priority perfected Liens, subject only to
Permitted Liens, and shall do such other acts and things as the Bank in its sole
discretion may deem necessary or advisable from time to time in order to
preserve, perfect and protect the Liens granted under the Security Documents and
to exercise and enforce its rights and remedies thereunder with respect to the
Collateral.
5.13 Pledge of Property. At any time and from time to time at the
written request of the Bank, execute, deliver and, if requested, record and/or
file such security agreements, pledge agreements and/or related or similar
documents as the Bank shall reasonably request and take such further action as
the Bank shall reasonably request, in each case, in order to grant to the Bank a
Lien on all real or personal property or leasehold interests owned by the
Borrower.
5.14 Covenants Regarding Formation of Subsidiaries and Acquisitions. At
the time of (a) any Permitted Acquisition of a domestic Subsidiary or (b) the
formation of any new domestic Subsidiary of the Borrower which is permitted
under this Agreement (i) provide to the Bank an executed joinder agreement, in
form and substance acceptable to the Bank, pursuant to which such domestic
Subsidiary shall become a Guarantor under the Guaranty and a Security Agreement
and appropriate financing statements so that all of the assets of such domestic
Subsidiary shall be pledged to the Bank, (ii) pledge to the Bank all of the
stock, partnership interests or other ownership interests of such domestic
Subsidiary or Person which is acquired or formed which are beneficially owned by
the Borrower as additional Collateral for the Obligations, to be held by the
Bank in accordance with the terms of a Pledge Agreement, and execute and deliver
to the Bank all such documentation for such pledge as, in the reasonable opinion
of the Bank, is appropriate, (iii) provide a statement of a Responsible Officer
that no Default or Event of Default exists or would be caused by the Permitted
Acquisition or formation; and (iv) provide all other documentation, including
one or more opinions of counsel, reasonably satisfactory to the Bank, which in
its reasonable opinion is appropriate with respect to such Permitted Acquisition
or the formation of such domestic Subsidiary. Any document, agreement or
instrument executed or issued pursuant to this subsection 5.14 shall be a "Loan
Document" for purposes of this Agreement.
5.15 Bank Accounts. Establish and maintain at the Bank the Borrower's
primary depository accounts.
5.16 Foreign Subsidiaries. Within sixty (60) days following the Closing
Date execute and deliver such pledge agreement or similar documents as the Bank
shall reasonably request in order to grant to the Bank a Lien on 65% of the
outstanding shares of Capital Stock of each of the Subsidiaries of the Borrower
which are not formed under the laws of the United States or any state therein;
provided, however that neither the Borrower nor the Guarantor shall be required
to take any action otherwise required to comply with the requirements of this
Section 5.16 that is in violation of the laws of the jurisdiction under which
such Subsidiary was formed.
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SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, the Revolving Credit Note remains outstanding and unpaid, or any other
amount is owing to the Bank hereunder or under any other Loan Document, Borrower
shall not, and shall not permit any Guarantor to, directly or indirectly:
6.1 Financial Condition Covenants.
(a) Leverage Ratio. As of the last day of each Fiscal Quarter
during the periods set forth below, permit the ratio of Total Funded Debt to
Annual EBIDTA to exceed the ratio set forth below opposite such period as of the
last day of each such Fiscal Quarter:
- --------------------------------------------------------------------------------
Last Day of Fiscal Ratio of Total
Quarter During Period Indebtedness to Annual EBIDTA
Not to Exceed:
- --------------------------------------------------------------------------------
Closing Date through February 28, 2003 4.5 : 1.00
- --------------------------------------------------------------------------------
March 1, 2003 through February 29, 2004 4.0 : 1.00
- --------------------------------------------------------------------------------
March 1, 2004 and thereafter 3.5 : 1.00
- --------------------------------------------------------------------------------
(b) Fixed Charge Coverage Ratio. For each Fiscal Quarter, permit
the ratio of (i) the sum of Annual EBIDTA minus Capital Expenditures minus
capitalized software development costs to (ii) Fixed Charges to be less than
1.25 to 1.00, as of the last day of each such Fiscal Quarter.
(c) Maintenance of Tangible Net Worth. Permit Consolidated Tangible
Net Worth on any day to be less than (i) $17,500,000 plus (ii) an amount equal
to 75% of the consolidated net income (if positive) of the Borrower and its
Subsidiaries for each Fiscal Quarter commencing with the Fiscal Quarter ending
August 23, 2003, calculated on a cumulative basis plus (iii) 100% of the net
proceeds from the issuance after the date hereof of Capital Stock of the
Borrower or any Subsidiary thereof, other than to the Borrower or any Subsidiary
thereof.
(d) Net Losses. Incur any net operating losses determined in
accordance with GAAP on a Consolidated basis for any Fiscal Year.
6.2 Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for Permitted Liens.
6.3 Limitation on Indebtedness. Create, incur, assume or suffer or
permit to exist any Indebtedness except:
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(a) Indebtedness in respect of the Loans, the Letters of Credit,
the Revolving Credit Note and the other Obligations;
(b) the Additional Subordinated Debt;
(c) Indebtedness between the Borrower and any Guarantor or between
Guarantors incurred in the ordinary course of business other than for money
borrowed; and
(d) Indebtedness secured by mortgages, pledges, liens, security
interests or other encumbrances permitted by Section 6.2 hereof
(e) Permitted Indebtedness shown on Schedule 3.20; and
(f) Current trade accounts payable and other liabilities and
accruals incurred in the ordinary course of business.
6.4 Subsidiaries, Partnerships and Joint Ventures. Own or create
directly or indirectly any Subsidiaries, or become or agree to become a general
or limited partner in any other general or limited partnership or a joint
venturer in any joint venture unless (a) such entity is a Wholly-Owned
Subsidiary that promptly upon its formation or acquisition becomes a Guarantor,
(b) the provisions of subsection 5.14 are complied with, (c) no Default or Event
of Default exists at the time of or would be caused by such formation or
acquisition.
6.5 Dividends and Distributions. Except as is specifically authorized
in any Subordination Agreement, declare or pay any dividends or return any
capital to any of its stockholders or authorize or make any distribution,
payment or delivery of property or cash to its stockholders (other than
compensation for services rendered), or redeem, retire, purchase or otherwise
acquire, directly or indirectly, for a consideration, any shares of any class of
its stock now or hereafter outstanding or set aside any funds for any of the
foregoing purposes, except that (i) any Subsidiary may declare and pay dividends
to the Borrower, and (ii) Subsidiaries not formed under the laws of the United
States or any State may declare and pay dividends to their shareholders other
than the Borrower and any other Subsidiaries, in an aggregate amount not
exceeding $25,000 per year.
6.6 Liquidations, Mergers, Consolidations, Acquisitions, Etc. Dissolve,
liquidate or wind up its affairs, or become a party to any merger or
consolidation, or acquire by purchase, lease or otherwise all or substantially
all of the assets, or any Capital Stock or other equity or ownership interest
of, any other Person, except that
(a) the Borrower may acquire by purchase, lease or otherwise all or
substantially all of the assets of, or all of the Capital Stock or other equity
or ownership interests of, any other Person; provided that (i) such acquisition
must be related to the Borrower's existing business, and (ii) the Bank shall
have consented to the consummation of such transaction in writing, which consent
shall not be unreasonably withheld or delayed. Each acquisition permitted
pursuant to this clause (a) shall be deemed to be a "Permitted Acquisition"; and
(b) the Borrower may merge with any Subsidiary provided that the
Borrower is the survivor of any such merger.
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6.7 Dispositions of Assets. Sell, convey, assign, lease, abandon or
otherwise transfer or dispose of, voluntarily or involuntarily, any of its
Properties or assets, whether tangible or intangible, except for the following:
(a) any sale, transfer or lease in the ordinary course of business
of assets which are no longer necessary or required in the conduct of the
Borrower's or any Guarantor's business;
(b) any sale, transfer or lease of assets in the ordinary course of
business which are replaced by substitute assets acquired or leased by the
Borrower or any Guarantor, which substitute assets are acquired within one year
before or after such sale and are pledged to the Bank on terms reasonably
acceptable to the Bank;
(c) any sale or transfer of Intellectual Property between or among
the Borrower and the Guarantors;
(d) sales of inventory in the ordinary course of business; and
(e) other sales of assets by the Borrower or any Guarantor in any
one Fiscal Year, the aggregate net proceeds of which are not more than $250,000.
6.8 Loans and Other Advances. Make loans, payments or other advances of
funds to any Person, except for (a) extensions of trade credit in the ordinary
course of business to customers, (b) dividends permitted pursuant to Section
6.5, (c) advances for expenses made to the Borrower's or any Guarantor's
employees in reasonable amounts and in the ordinary course of business, and (d)
loans, payments or other advances between any Guarantor and the Borrower or
between Guarantors incurred in the ordinary course of business.
6.9 Investments. Purchase, acquire or own any stock, bonds, notes, or
securities of, or any partnership interest (whether general or limited) in, or
any other interest in, or make any capital contribution to, any other Person, or
become a joint venture partner in any joint venture, or repurchase any of its
Capital Stock, or agree, become or remain liable to do any of the foregoing,
except for:
(a) investments in Subsidiaries as of the date hereof;
(b) investments in Subsidiaries in an amount not to exceed an amount
equal to the amount of equity contributed to the capital of the Borrower after
the Closing Date; and
(c) Permitted Investments.
6.10 Use of Proceeds. Use proceeds of the Loans for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any margin
stock which would cause the outstanding Loans to be in violation of Regulations
T, U or X. The Borrower shall not request or accept any Loan in violation of
Regulations T, U or X. The Borrower shall not use proceeds of the Loans in a
manner which violates any term or condition of any Loan Document or which
violates any applicable law.
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6.11 Change of Business. Engage in any business other than that
described in Schedule 3.23 and businesses directly related thereto. The Borrower
shall not permit any material change in such businesses.
6.12 Transactions with Affiliates. Except as expressly permitted in
this Agreement or set forth on Schedule 6.12 hereto, directly or indirectly
enter into any transaction or arrangement whatsoever (including without
limitation, any purchase, sale, lease or exchange of property or the rendering
of any service) or make any payment to or otherwise deal with any Affiliate,
except (a) as to all of the foregoing in the ordinary course of and pursuant to
the reasonable requirements of the Borrower's business and upon fair and
reasonable terms no less favorable to the Borrower than would be obtained in a
comparable arm's length transaction with a Person not an Affiliate, (b) such
transaction is not prohibited by the terms of this Agreement or any other Loan
Documents and (c) such transaction is in accordance with all Requirements of
Law.
6.13 Sale and Leaseback. Enter into any arrangement with any Person
providing for the leasing by the Borrower of real or personal property which has
been or is to be sold or transferred by the Borrower to such Person or to any
other Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations thereof.
6.14 Limitation on Contingent Obligations. Create, incur, assume or
suffer to exist any Contingent Obligation other than guarantees by the Borrower
of Indebtedness of a Subsidiary, but only to the extent such Indebtedness is
permitted hereunder.
6.15 Limitation on Optional Payments and Modifications of Subordinated
Debt. Make any optional payment or prepayment on or redemption, defeasance or
purchase of any Indebtedness (other than Indebtedness under this Agreement),
including, without limitation, any Subordinated Debt, or amend, modify or
change, or consent or agree to any amendment, modification or change to or
waiver of any of the terms (a) of the Subordinated Debt other than any
amendment, modification, waiver, or change which does not increase the rate of
interest, shorten the maturity date, make more restrictive any covenant therein
or increase the principal amount of such Subordinated Debt or grant any Lien or
security interest in any of the Borrowers assets in favor of the holder of any
of the Subordinated Debt or (b) relating to the payment or prepayment of
principal of or interest on, any Indebtedness (other than Indebtedness under
this Agreement), other than any amendment, modification or change which would
extend the maturity or reduce the amount of any payment of principal thereof or
which would reduce the rate or extend the date for payment of interest thereon.
6.16 Limitation on Negative Pledge Clauses. Enter into any agreement
with any Person other than the Bank which prohibits or limits the ability of the
Borrower to create, incur, assume or suffer to exist any Lien upon any of its
properties, assets or revenues, whether now owned or hereafter acquired.
6.17 Fiscal Year. Permit the Fiscal Year of the Borrower to end on a day
other than the last Friday in February.
52
6.18 Changes in Organizational Documents. Amend in any respect its
certificate of incorporation (including any provisions or resolutions relating
to Capital Stock), by- laws or other organizational documents without prior
written approval by the Bank or providing at least thirty (30) calendar days'
prior written notice to the Bank.
SECTION 7. EVENTS OF DEFAULT
7.1 Events of Default. If any of the following events shall occur and
be continuing:
(a) The Borrower shall fail to pay when due any principal of, or
any interest on the Note, or any other amount payable hereunder; or
(b) Any representation or warranty made or deemed made by the
Borrower or any Guarantor herein or in any other Loan Document or which is
contained in any certificate or financial statement furnished at any time under
or in connection with this Agreement shall prove to have been incorrect or
misleading in any material respect on or as of the date made or deemed made; or
(c) The Borrower shall default in the observance or performance of
any agreement contained in Section 6 of this Agreement; or
(d) An Event of Default (as defined in the Mortgage); or
(e) The Borrower or any Guarantor shall default in the observance
or performance of any other agreement contained in this Agreement (other than as
provided in subsections (a) through (c) above) or any other Loan Document other
than the Mortgage, and such default shall continue unremedied for a period of 30
days after written notice from the Bank to the Borrower; or
(f) The Borrower or any Guarantor shall (i) default in the payment
of any principal of or interest on or any other amount payable on any
Indebtedness (other than the Revolving Credit Note) or in the payment of any
Contingent Obligation, beyond the period of grace (not to exceed 30 days), if
any, provided in the instrument or agreement under which such Indebtedness or
Contingent Obligation was created and the aggregate amount of such Indebtedness
and/or Contingent Obligations in respect of which such default or defaults shall
have occurred is at least $250,000; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Contingent Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Contingent Obligation to cause, with the
giving of notice if required, such Indebtedness to become due and payable prior
to its stated maturity or such Contingent Obligation to become payable; or
53
(g) (i) The Borrower or any Guarantor shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or the Borrower or any
Guarantor shall make a general assignment for the benefit of its creditors; or
(ii) there shall be commenced against the Borrower or any Guarantor any case,
proceeding or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
60 days; or (iii) there shall be commenced against the Borrower or any Guarantor
any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for any
such relief or any such adjudication or appointment or which shall not have been
vacated, discharged, satisfied, or stayed or bonded pending appeal within 60
days from the entry thereof; or (iv) the Borrower or any Guarantor shall take
any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above;
or (v) the Borrower or any Guarantor shall generally not, or shall be unable to,
or shall admit in writing its inability to, pay its debts as they generally
become due; or
(h) One or more judgments or decrees shall be entered against the
Borrower or any Guarantor involving in the aggregate a liability (excluding any
such judgments or orders which are fully covered by insurance and under which
the applicable insurance carrier has acknowledged such full coverage in writing)
of $250,000 or more and all such judgments or decrees shall not have been
vacated, discharged, settled, satisfied or paid, or stayed or bonded pending
appeal, within 30 days from the entry thereof; or
(i) Any Change of Control shall occur; or
(j) Any Loan Document shall, at any time, cease to be in full force
and effect (unless released by the Bank) or shall be declared null and void, or
the validity or enforceability thereof shall be contested by the Borrower or any
Guarantor or the Bank shall not have or shall cease to have valid, perfected
security interests in the collateral subject to any Security Document, subject
to no other Liens whatsoever, except Permitted Liens;
(k) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan, (iii) a Reportable
Event shall occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or institution of
proceedings is, in the reasonable opinion of the Bank, likely to result in the
termination by action of the PBGC or any court of such Plan for purposes of
Title IV of ERISA, or (iv) any Single Employer Plan shall terminate for purposes
of Title IV of ERISA; and in each case in clauses (i) through (iv) above, such
event or condition, together with all other such events or conditions, if any
would have a Material Adverse Effect; or
54
(l) The Borrower or any Guarantor (except as otherwise provided
herein) shall terminate its existence, cease to exist, permanently cease
operations or abandon the operation of any material portion of its business; or
(m) The loss, revocation or failure to file for renewal of any
material License; the commencement of proceedings to suspend, revoke, terminate
or substantially and adversely modify any material License, which proceedings
are not dismissed or discharged within sixty (60) days; or the designation of an
application for renewal of any such License for an evidentiary hearing, which
License is now held or hereafter acquired by the Borrower and is necessary for
the continued operating of the Borrower's business in the same manner as is
being conducted at the time of such loss, revocation, failure to renew,
commencement of proceedings or scheduling of a hearing; or
(n) any of the following shall have occurred: (i) a final
non-appealable order is issued by any Governmental Authority, including,
requiring the Borrower or any Guarantor to divest a substantial portion of its
assets pursuant to any antitrust, restraint of trade, unfair competition,
industry regulation, or similar Requirement of Law, or (ii) any Governmental
Authority shall condemn, seize or otherwise appropriate, or take custody or
control of all or any substantial portion of the assets of the Borrower or any
Guarantor;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to any of the
Borrower, automatically the Commitments shall immediately terminate and the
Revolving Credit Loans and Reimbursement Obligations (each with accrued interest
thereon) and all other amounts owing under this Agreement, the Revolving Credit
Note and the other Loan Documents shall automatically and immediately become due
and payable, and (B) if such event is any other Event of Default, the Bank may
(i) by notice to the Borrower declare the Commitments to be terminated
forthwith, whereupon such Commitments and the obligations of the Bank to make
Loans and to issue Letters of Credit shall immediately terminate; (ii) by notice
of default to the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement, the Notes and the
other Loan Documents to be due and payable forthwith, whereupon the same shall
immediately become due and payable (including, without limitation, all
Obligations in respect of Letters of Credit, whether or not the beneficiaries of
the then outstanding Letters of Credit shall have presented the documents
required thereunder); and/or (iii) by notice to the Borrower require the
Borrower to, and the Borrower shall thereupon, deposit in the Cash Collateral
Account, as cash collateral for its Obligations under this Agreement, the Notes
and the Letters of Credit, an amount equal to the aggregate Letter of Credit
Coverage Requirement, and the Borrower hereby pledges to the Bank, and grants to
the Bank a security interest in, all such cash as security for such Obligations.
Amounts held in such Cash Collateral Account shall be applied by the Bank to the
payment of drafts drawn under such Letters of Credit, and the unused portion
thereof after all such Letters of Credit shall have expired or been fully drawn
upon, if any, shall be applied to repay other Obligations of the Borrower
hereunder and under the Note. After all such Letters of Credit shall have
expired or been fully drawn upon, all Reimbursement Obligations shall have been
satisfied and all other obligations of the Borrower hereunder and under the Note
shall have been paid in full, the balance, if any, in such cash collateral
account shall be returned to the Borrower. The Borrower shall execute and
deliver to the Bank, such further documents and instruments as the Bank may
request to evidence the creation and perfection of the within security interest
in such Cash Collateral Account. Except as expressly provided above in this
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived.
55
SECTION 8. MISCELLANEOUS
8.1 Amendments and Waivers. No modification, amendment or change to or
waiver of any provision of this Agreement or any other Loan Document or any of
the rights of the Bank or the Borrower hereunder or thereunder shall be
effective unless set forth in a written agreement duly executed by the Bank and
the Borrower.
8.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy, telegraph or telex confirmed in writing), and, unless otherwise
expressly provided herein, shall be deemed to have been duly given or made when
delivered by hand, or three days after being deposited in the mail, postage
prepaid, or the next Business Day if sent by reputable overnight courier,
postage prepaid, for delivery on the next Business Day, or, in the case of
telecopy notice, when received during normal business hours, or, in the case of
telegraphic notice, when delivered to the telegraph company, or, in the case of
telex notice, when sent, answerback received, addressed as follows:
The Borrower: Environmental Tectonics Corporation
125 James Way
Southampton, PA 18966
Attention: Duane Deaner
Telecopy: (215) 357-4000
With a copy to: Klehr, Harrison, Harvey, Branzburg & Ellers LLP
260 South Broad Street
Philadelphia, PA 19102
Attention: Jeffrey Greenfield
Telecopy: (215) 568-6603
The Bank: PNC Bank, National Association
1600 Market Street, 21st Floor
Philadelphia, PA 19103
Attention: John G. Siegrist
Telecopy: (215) 585-4144
provided that, any notice, request or demand to or upon the Bank
pursuant to Sections 2.3, 2.9, 2.10 and 2.16 shall not be effective until
received; and provided, further, that failure to provide a copy of any notice,
request or demand to or upon the Borrower to its counsel shall not render
ineffective or otherwise limit any such notice, request or demand given to the
Borrower in accordance with this Section.
8.3 No Waiver, Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Bank, any right, remedy, power or privilege
hereunder or under the other Loan Documents shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein and therein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
56
8.4 Survival of Representations and Warranties. All representations and
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement, the Revolving Credit Note and the other Loan
Documents.
8.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or
reimburse the Bank for all of its out-of-pocket costs and expenses incurred in
connection with the development, preparation and execution of this Agreement,
the Revolving Credit Note, the other Loan Documents and any other documents
executed and delivered in connection herewith or therewith, and the consummation
of the transactions contemplated hereby and thereby, including, without
limitation, the reasonable fees and disbursements of counsel to the Bank, (b) to
pay or reimburse the Bank for all of its out-of-pocket costs and expenses
incurred in connection with the administration and interpretation of, or any
amendment, supplement or modification to, this Agreement, the Revolving Credit
Note and the other Loan Documents and any other documents executed and delivered
in connection herewith or therewith, including without limitation, the
reasonable fees and disbursements of counsel, (c) to pay or reimburse the Bank
for all its costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the Revolving Credit Note, the
other Loan Documents and any such other documents, including, without
limitation, reasonable fees and disbursements of counsel to the Bank, (d) to
pay, indemnify, and hold the Bank harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
delay in paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the Revolving Credit Note, the other Loan Documents and any such
other documents, and (e) to pay, indemnify, and hold the Bank harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions (whether sounding in contract, in tort or on any other ground),
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of or in any other way arising out of or relating to the
Borrower's obligations under the Existing Financing Agreements, this Agreement,
the Revolving Credit Note, the other Loan Documents, or any such other documents
contemplated by or referred to herein or therein or any action taken by the Bank
with respect to the foregoing (all the foregoing, collectively, the "indemnified
liabilities"), provided, that the Borrower shall have no obligation hereunder to
the Bank with respect to indemnified liabilities arising from the gross
negligence or willful misconduct of the Bank. The agreements in this subsection
shall survive repayment of the Revolving Credit Note and all other amounts
payable hereunder.
57
8.6 Assignments; Participations. Notwithstanding any other provision of
this Agreement, the Borrower understands and agrees that the Bank may at any
time enter into participation or assignment agreements with one or more banks or
other financial institutions whereby the Bank will allocate certain percentages
of the Loans and/or Letters of Credit to them; provided that, the prior written
consent (which consent shall not be unreasonably withheld or delayed) of the
Borrower shall be required for any assignment (provided that no such consent
shall be required if an Event of Default shall exist). Any assignment shall be
in a minimum amount of $2,500,000, unless an Event of Default shall occur in
which case there shall be no minimum amount. In connection with any
participation, the Bank shall retain the sole right to approve, without the
consent of a participant, any amendment, modification or waiver of any provision
of this Agreement or any other Loan Document, other than any such amendment,
modification or waiver with respect to any Loan, Letter of Credit or Commitment
in which such participant has an interest that forgives principal, interest or
fees or reduces the interest rate or fees payable with respect to any such Loan,
Letter of Credit or Commitment, postpones any date fixed for any regularly
scheduled payment of principal of, or interest or fees on, any such Loan or
Letter of Credit, releases any guarantor of such Loan or releases any
Collateral. The Borrower acknowledges that, for the convenience of all parties,
this Agreement is being entered into with the Bank only and that its obligations
under this Agreement are undertaken for the benefit of, and as an inducement to,
any such assignee or participating bank or other financial institution as well
as the Bank, and the Borrower hereby grants to each assignee or participating
bank, to the extent of its assignment/participation in the Loans and Letters of
Credit, the right to set off deposit accounts maintained by the Borrower with
such bank or other financial institution and otherwise to enjoy the benefits,
rights and privileges granted to the Bank in this Agreement, the Revolving
Credit Note and the other Loan Documents. All of the rights granted to the Bank
pursuant to this Agreement shall be for the benefit of the Bank for itself and
for any other lending institutions who are assignees or participants under this
Agreement and all grants, security interests, liens, rights of set off and other
rights incident to this Agreement shall be held by the Bank as agent for any
such other lending institutions. If the Bank shall assign all or a portion of
the Commitment or the Loans or Letters of Credit hereunder, the Borrower shall
execute such documents and instruments as the Bank shall reasonably request to
effectuate the purposes of this paragraph.
8.7 Set-off. In addition to any rights and remedies of the Bank
provided by law, upon the occurrence and during the continuance of an Event of
Default, the Bank shall have the right, without prior notice to the Borrower,
any such notice being expressly waived by the Borrower to the extent permitted
by applicable law, upon any amount becoming due and payable by the Borrower
hereunder or under the Revolving Credit Note (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by the Bank to or for the credit
or the account of the Borrower. The Bank agrees promptly to notify the Borrower
after any such set-off and application made by the Bank, provided that the
failure to give such notice shall not affect the validity of such set-off and
application.
8.8 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Borrower and the Bank.
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8.9 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, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.10 Integration. This Agreement and the other Loan Documents represent
the agreement of the parties hereto with respect to the subject matter hereof,
and there are no promises, undertakings, representations or warranties by the
Bank relative to the subject matter hereof not expressly set forth or referred
to herein or in the other Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE SUBSTANTIVE LAW OF THE
COMMONWEALTH OF PENNSYLVANIA.
8.12 Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement or the Revolving Credit Note, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the Commonwealth of
Pennsylvania, the courts of the United States of America for the Eastern
District of Pennsylvania, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) waives and hereby acknowledges that it is estopped from raising
any objection based on forum non conveniens, any claim that any of the
above-referenced courts lack proper venue or any objection that any of such
courts lack personal jurisdiction over it so as to prohibit such courts from
adjudicating any issues raised in a complaint filed with such courts against the
Borrower concerning this Agreement or the other Loan Documents;
(d) acknowledges and agrees that the choice of forum contained in
this subsection 8.12 shall not be deemed to preclude the enforcement of any
judgment obtained in any forum or the taking of any action under the Loan
Documents to enforce the same in any appropriate jurisdiction;
(e) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to the Borrower at its
address set forth in subsection 8.2 or at such other address of which the Bank
shall have been notified pursuant thereto;
(f) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
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(g) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred to in
this subsection any special, exemplary or punitive or consequential damages.
8.13 Acknowledgments. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement, the Revolving Credit Note and the other Loan
Documents;
(b) the Bank does not have any fiduciary relationship to the
Borrower or any other party to the Loan Documents (or any of them) and the
relationship hereunder between the Bank, on the one hand, and the Borrower, on
the other hand, is solely that of debtor and creditor; and
(c) no joint venture exists between the Borrower and the Bank.
8.14 WAIVERS OF JURY TRIAL. THE BORROWER AND THE BANK EACH HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT AND
FOR ANY MANDATORY COUNTERCLAIM THEREIN.
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IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed this Agreement as of the day and year
first above written.
ENVIRONMENTAL TECTONICS CORPORATION
By: /s/ Duane Deaner
-----------------------------
Name: Duane Deaner
Title: C.F.O.
PNC BANK, NATIONAL ASSOCIATION
By: /s/ John G. Siegrist
-----------------------------
Name: John G. Siegrist
Title: Vice President
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