EXHIBIT 10.18
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NU HORIZONS ELECTRONICS CORP.
(the "Borrower")
a Delaware corporation
having its principal executive office at
70 Maxess Road
Melville, New York 11747
AND
MELLON BANK, N.A.
(as "Agent" and as a "Bank")
a national banking association
having an office at
701 Market Street
Philadelphia, Pennsylvania 19103
AND
KEYBANK NATIONAL ASSOCIATION
(a "Bank")
a national banking association
having an office at
127 Public Square
Cleveland, Ohio 44114
LOAN AGREEMENT
DATED AS OF MAY 23, 1997
TABLE OF CONTENTS
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Section Headings Page
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SECTION 1. DEFINITIONS................................................ (1)
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1.1 Defined Terms.............................................. (1)
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1.2 Accounting Terms........................................... (7)
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SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS........... (7)
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2.1 Revolving Credit Commitments............................... (7)
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2.2 Revolving Credit Loans..................................... (8)
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2.3 Revolving Credit Notes..................................... (8)
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2.4 Interest................................................... (9)
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2.5 Procedure for Revolving Credit Borrowing................... (9)
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2.6 Conversion and Renewals....................................(10)
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2.7 Suspension of LIBOR Rate...................................(11)
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2.8 Applicable Margin; Periods, Etc............................(11)
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2.9 Commitment Fee.............................................(12)
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2.10 Additional Compensation in Certain Circumstances...........(12)
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2.11 Termination or Reduction of Commitment.....................(14)
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2.12 Prepayment.................................................(15)
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2.13 Payments...................................................(15)
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2.14 Pro Rata Treatment.........................................(16)
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2.15 Sharing of Setoffs.........................................(17)
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(i)
2.16 Use of Proceeds............................................(17)
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2.17 Issuance of Letters of Credit..............................(18)
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2.18 Actions of Agent...........................................(18)
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2.19 Indemnity as to Letters of Credit..........................(18)
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2.20 Letter of Credit Fees......................................(19)
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2.21 Acceptance Drafts..........................................(19)
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2.22 Payment in Respect of Letters of Credit and Acceptances;
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Reimbursement..............................................(20)
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2.23 Ineligibility of Acceptance Drafts.........................(23)
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SECTION 3. REPRESENTATIONS AND WARRANTIES.............................(24)
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3.1 Financial Condition........................................(24)
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3.2 No Change..................................................(24)
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3.3 Corporate Existence; Compliance with Law;
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Subsidiaries...............................................(24)
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3.4 Corporate Power; Authorization; Enforceable Obligations....(25)
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3.5 Legal Bar..................................................(25)
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3.6 No Material Litigation.....................................(25)
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3.7 No Default.................................................(25)
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3.8 No Burdensome Restrictions.................................(26)
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3.9 Federal Regulations........................................(26)
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3.10 Environmental Regulation...................................(26)
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3.11 Title to Properties........................................(27)
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(ii)
3.12 Taxes......................................................(27)
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3.13 ERISA......................................................(27)
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3.14 Operation of Business......................................(27)
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SECTION 4. CONDITIONS PRECEDENT.......................................(28)
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4.1 Conditions to Initial Revolving Credit Loan................(28)
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SECTION 5. AFFIRMATIVE COVENANTS......................................(30)
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5.1 Information................................................(31)
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5.2 Corporate Existence; Continuance of Business...............(33)
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5.3 Payment of Obligations.....................................(33)
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5.4 Insurance..................................................(34)
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5.5 Payment of Indebtedness and Performance of Obligations.....(34)
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5.6 Condition of Property......................................(34)
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5.7 Observance of Legal Requirements...........................(34)
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5.8 Books and Records..........................................(34)
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5.9 Inspection.................................................(34)
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5.10 Compliance with Environmental Laws; Indemnity..............(35)
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5.11 Agent's Fee................................................(35)
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SECTION 6. FINANCIAL COVENANTS........................................(35)
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6.1 Quick Ratio................................................(35)
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6.2 Leverage Ratio.............................................(36)
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6.3 Tangible Net Worth.........................................(36)
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6.4 Liabilities to Tangible Net Worth..........................(36)
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(iii)
SECTION 7. NEGATIVE COVENANTS.........................................(37)
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7.1 Indebtedness for Borrowed Money............................(37)
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7.2 Liens......................................................(37)
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7.3 Loans and Investments......................................(37)
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7.4 Fundamental Changes........................................(38)
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7.5 Contingent Liabilities.....................................(38)
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7.6 Sales of Receivables; Sale - Leasebacks....................(38)
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7.7 Lease Payments.............................................(38)
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7.8 Dividends..................................................(39)
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7.9 Supply and Purchase Contracts..............................(39)
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7.10 Nature of Business.........................................(39)
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7.11 Stock of Subsidiaries......................................(39)
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7.12 Liabilities of Subsidiaries................................(39)
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7.13 Transactions with Affiliates...............................(39)
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7.14 ERISA......................................................(40)
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7.15 Change of Management.......................................(40)
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SECTION 8. EVENTS OF DEFAULT..........................................(40)
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SECTION 9. AGENT......................................................(43)
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SECTION 10. MISCELLANEOUS..............................................(46)
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10.1 Notices....................................................(46)
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10.2 Survival of Agreement......................................(47)
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(iv)
10.3 Successors and Assigns: Participations.....................(47)
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10.4 Expenses: Indemnity........................................(51)
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10.5 Applicable Law.............................................(51)
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10.6 Right of Setoff............................................(51)
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10.7 Payments on Business Days..................................(52)
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10.8 Waivers; Amendments........................................(52)
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10.9 Severability...............................................(53)
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10.10 Entire Agreement; Waiver of Jury Trial, Etc................(53)
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10.11 Confidentiality............................................(53)
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10.12 Submission to Jurisdiction.................................(54)
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10.13 Further Assurances.........................................(55)
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10.14. Counterparts...............................................(55)
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10.15. Headings...................................................(55)
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SCHEDULE I Revolving Credit Commitments (Section 2.1).................(58)
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Liens (Section 7.2)........................................(58)
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(v)
LOAN AGREEMENT dated as of May 23, 1997, by and among NU HORIZONS
ELECTRONICS CORP., a Delaware corporation, having its principal executive office
at 70 Maxess Road, Melville, New York (the "Borrower"), MELLON BANK, N.A., a
national banking association having an office at 701 Market Street,
Philadelphia, Pennsylvania 19103 ("Mellon"), KEYBANK NATIONAL ASSOCIATION, a
national banking association, having an office at 127 Public Square, Cleveland,
Ohio 44114 ("Key") (Mellon and Key, collectively, the "Banks") and MELLON BANK,
N.A., as agent for the Banks (the "Agent").
W I T N E S S E T H :
SECTION 1. DEFINITIONS
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1.1 Defined Terms. As used herein, the following terms shall have
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the following meanings:
"Acceptance Drafts" shall have the meaning set forth in Section 2.21
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hereof.
"Acceptance Draft Exposure" shall mean at any time the sum of (a) the
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aggregate face amount of Acceptance Drafts outstanding and (b) the aggregate
amount of all payments in respect of Acceptance Drafts for which the Agent or
the Banks shall not have been reimbursed as provided in Section 2.22 hereof.
"Business Day" shall mean a day other than a Saturday, Sunday or other
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day on which commercial banks in New York, New York or Philadelphia,
Pennsylvania, are required or permitted by law to close.
"CERCLA" shall mean the Comprehensive Environmental Response,
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Compensation and Liability Act of 1980 (or any successor statute) and the rules
and regulations thereunder, all as from time to time in effect.
"CERCLIS" shall mean the Comprehensive Environmental Response
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Compensation Liability Information System List.
"Commitment Period" shall mean the period from and including the date
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hereof to, but not including, the Termination
Date or such earlier date as the Revolving Credit Commitments shall terminate as
provided herein.
"Contractual Obligations" shall mean as to any Person, any provision
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of any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Default" shall mean any of the events specified in Section 8 hereof,
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whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied or given, as the case may be.
"Dollars" and "$" shall mean dollars in lawful currency of the United
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States of America.
"Environmental Laws" shall mean all applicable federal, state or local
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statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public health and safety
and protection of the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of
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1974, and all rules and regulations promulgated pursuant thereto, as the same
may from time to time be supplemented or amended.
"ERISA Affiliate" shall mean any trade or business (whether or not
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incorporated) which together with the Borrower or its Subsidiaries would be
treated as a single employer under Section 4001 of ERISA.
"Event of Default" shall mean any of the events specified in Section 8
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hereof, provided that any requirement for the giving of notice, the lapse of
time, or both, of any other condition, has been satisfied.
"Funded Debt" means, on a consolidated basis with respect to the
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Borrower and the Guarantors, without duplication, (i) indebtedness for borrowed
money, (ii) obligations to pay the deferred purchase price of property or
services (other than trade payables arising in the ordinary course of business
which are not
(2)
overdue), (iii) obligations as lessee under leases which shall have been or
should be, in accordance with GAAP, recorded as capital leases, (iv) obligations
evidenced by bonds, debentures, notes or equivalent instruments and (v)
reimbursement obligations in respect of drawings made under letters of credit.
"GAAP" shall mean generally accepted accounting principles applied in
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a manner consistent with that employed in the preparation of the Borrower's
certified annual consolidated financial statements for the fiscal year ending
February 28, 1996.
"Governmental Authority" shall mean any nation or government, any
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state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled (through stock or capital ownership or otherwise) by any of the
foregoing.
"Guarantee" shall mean a Guarantee on the Agent's standard form
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executed by a Guarantor (collectively, "Guarantees").
"Guarantors" shall mean NIC Components Corp., Nu Horizons
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International Corp., Nu Visions Manufacturing, Inc. and Nu Horizons/Merit
Electronics Corp. and each other Subsidiary of the Borrower or of a Guarantor
whether now existing or hereafter formed or acquired.
"Hazardous Materials" shall mean: (a) any "hazardous substance" as
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defined by CERCLA; (b) any "hazardous waste" as defined by the Resource
Conservation and Recovery Act; (c) any petroleum product; or (d) any pollutant
or contaminant or hazardous, dangerous or toxic chemical, material or substance
within the meaning of any other applicable federal, state or local law,
regulation, ordinance or requirement (including consent decrees and
administrative orders) relating to or imposing liability or standards of conduct
concerning any hazardous, toxic or dangerous waste, substance or material, all
as amended or hereafter amended.
"Interest Period" shall mean with respect to any LIBOR Rate Loan, the
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period commencing on the date such loan is made and ending, as the Borrower may
select, pursuant to Section 2.5 hereof on the numerically corresponding day in
the first, second, third,
(3)
sixth, ninth or twelfth calendar month thereafter, except that each such
Interest Period that commences on the last Business Day of a calendar month (or
on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month; provided that: (a) no Interest Period may
extend beyond the Termination Date; and (b) if an Interest Period would end on a
day that is not a Business Day, such Interest Period shall be extended to the
next Business Day unless such Business Day would fall in the next calendar
month, in which event such Interest Period shall end on the immediately
preceding Business Day.
"Letter of Credit" or "Letters of Credit" shall mean letters of credit
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issued by the Agent pursuant to Section 2.17 hereof for the accounts of the
Borrower.
"Letter of Credit Exposure" shall mean at any time the sum of (a) the
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aggregate undrawn amount of all outstanding Letters of Credit and (b) the
aggregate amount of all drawings under Letters of Credit for which the Agent or
the Banks shall not have been reimbursed as provided in Section 2.22 hereof.
"Leverage Ratio" shall mean with respect to the Borrower and its
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Subsidiaries on a consolidated basis the ratio of Funded Debt (including
Subordinated Debt) to EBITDA (earnings before income, taxes, depreciation and
amortization) on a rolling four quarters basis.
"LIBOR Rate" shall mean for any day for each proposed or existing
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Interest Period the rate per annum determined by the Agent by dividing (the
resulting quotient to be rounded upward to the nearest 1/100 of 1%) (A) the rate
of interest (which shall be the same for each day of such Interest Period)
determined in good faith by the Agent in accordance with its usual procedures
(which determination shall be conclusive) to be the average of the rates per
annum for deposits in Dollars offered to major money center banks in the London
interbank market at approximately 11:00 o'clock a.m., London time, two London
Business Days prior to the first day of such Interest Period for delivery on the
first day of such Interest Period in amounts comparable to such LIBOR Rate Loan
and having maturities comparable to such Interest Period by (B) a number equal
to 1.00 minus the LIBOR Rate Reserve Percentage.
(4)
"LIBOR Rate Loan" shall mean any Revolving Credit Loan when and to the
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extent that the interest rate therefor is determined by reference to the LIBOR
Rate.
"LIBOR Rate Reserve Percentage" shall mean for any day the maximum
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effective percentage (expressed as a decimal fraction, rounded upward to the
nearest 1/100 of 1%), as determined in good faith by the Agent (which
determination shall be conclusive), which is in effect on such day as prescribed
by the Board of Governors of the Federal Reserve System (or any successor) for
determining the reserve requirements (including, without limitation,
supplemental, marginal and emergency reserve requirements) with respect to
eurocurrency funding (currently referred to as "Eurocurrency liabilities") of a
member bank in such System. The LIBOR Rate shall be adjusted automatically as
of the effective date of each change in the LIBOR Rate Reserve Percentage.
"Lien" shall mean any mortgage, pledge, security interest,
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hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or 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, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction pursuant to any of the types of security interests referred
to herein).
"Loan Documents" shall mean, collectively, this Agreement, the
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Revolving Credit Notes, documents executed in connection with a Letter of Credit
or an Acceptance Draft, the Guarantees, and any other documents executed by the
Borrower or the Guarantors in connection herewith.
"London Business Day" shall mean a day for dealing in deposits in
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Dollars by and among banks in the London interbank market which is also a
Business Day.
"Margin" means if the Leverage Ratio as reflected in the financial
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statements delivered pursuant to Section 5.1 hereof, is (i) less than 1.85:1,
.575% per annum; (ii) equal to or greater than 1.85:1 but less than 2.50:1, .75%
per annum and (iii) equal to or greater than 2.50:1 but less than 2.75:1, 1.125%
per annum,
(5)
provided, however, if the Borrower fails to provide the relevant financial
statements by the beginning of the corresponding Margin periods set forth in
Section 2.8 hereof, the Margin shall be deemed to be 1.125% per annum until the
delivery of the relevant financial statements.
"Multiemployer Plan" shall mean any Plan described in Section
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4001(a)(3) of ERISA.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
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"Permitted Acquisition" shall mean an acquisition by the Borrower or
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any Subsidiary by merger, consolidation or by purchase of a voting majority of
the stock of another Person or the purchase of all or substantially all of the
assets of another Person (or of a division or other operating component of
another Person) (an "Acquisition") if all of the following conditions are met:
(i) the purchase price for such Acquisition inclusive of any
indebtedness incurred or assumed in connection therewith does not
exceed fifteen (15%) percent of the Borrower's consolidated
tangible net worth as reflected in the most recent audited
financial statements delivered pursuant to Section 5.1;
(ii) The Agent and the Banks shall have received at least three (3)
years of historical financial statements of such Person (or, if
such Person has been in business for less than three (3) years,
financial statements for such lesser number of years) and a set of
projections setting forth in reasonable detail (with those stated
assumptions set forth below) the pro forma effect of the
Acquisition and showing compliance by the Borrower with all
covenants set forth in this Agreement for the next succeeding
three (3) years. The projections to be delivered hereunder shall
include and specify the assumptions used to prepare such
projections regarding growth of sales, margins
(6)
on sales and cost savings resulting from the Acquisition; and
(iii) The Agent and the Banks shall have received a certificate signed
by the chief financial officer of the Borrower to the effect that
(and including calculations indicating that) on a pro forma basis
after giving effect to the Acquisition: (a) all representations
and warranties contained in the Loan Documents will remain true
and correct except those, if any, made as of a specific time which
shall have been true and correct when made, (b) the Borrower will
remain in compliance with all covenants contained in the Loan
Documents, and (c) no Default or Event of Default has occurred and
is continuing or will occur as a result of the consummation of the
Acquisition.
"Person" shall mean any individual, corporation, partnership, joint
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venture, trust, unincorporated organization or any other juridical entity, or a
government or state or any agency or political subdivision thereof.
"Plan" shall mean any plan of a type described in Section 4021(a) of
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ERISA in respect of which the Borrower or any of its Subsidiaries is an
"employer" as defined in Section 3(5) of ERISA.
"Prime Rate" shall mean and refer to the per annum interest rate
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announced from time to time by the Agent as its Prime Rate. The Prime Rate may
be greater or less than other interest rates charged by the Agent and is not
dependent upon the interest rate which the Agent may charge any particular class
of borrower.
"Prime Rate Loan" shall mean any Revolving Credit Loan when and to the
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extent that the interest rate therefor is determined by reference to the Prime
Rate.
"Reportable Event" shall mean any of the events set forth in Section
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4043(b) of ERISA or the regulations thereunder.
"Requirements of Law" shall mean as to any Person, the certificate of
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incorporation and by-laws or other organizational or
(7)
governing documents of such Person, and any material law, treaty, rule or
regulation, or any determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"Revolving Credit Commitment" shall mean, with respect to each Bank,
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the obligation of such Bank to make Revolving Credit Loans to the Borrower
during the Commitment Period pursuant to the terms hereof as such Commitment is
described in Section 2.1 hereof.
"Revolving Credit Loan" shall mean a loan made pursuant to the terms
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of Section 2.2 hereof.
"Revolving Credit Note" or "Revolving Credit Notes" shall mean the
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Revolving Credit Notes referred to in Section 2.3 hereof in the form of Exhibit
"A" hereto.
"Subordinated Indebtedness" shall mean indebtedness of the Borrower
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subordinated in right of payment to the Revolving Credit Loans pursuant to
documentation containing maturities, amortization schedules, covenants,
defaults, remedies, subordination provisions and other material terms in form
and substance satisfactory to the Agent and the Banks.
"Subsidiary" shall mean as to any Person, a corporation of which
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shares of stock having ordinary voting power (other than stock having such power
only by reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation 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.
"Termination Date" shall mean May 23, 2001 or, if such date is not a
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Business Day, the Business Day next succeeding such date.
"Total Revolving Credit Commitment" shall mean the sum of the Banks'
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Revolving Credit Commitments, as the same may be reduced from time to time in
accordance with Section 2.11 hereof.
1.2 Accounting Terms. As used herein and in any certificate or other
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documents made or delivered pursuant hereto,
(8)
accounting terms not specifically defined herein shall have the respective
meanings given to them under GAAP.
SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS
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2.1 Revolving Credit Commitments. Subject to the terms and
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conditions and relying upon the representations and warranties herein set forth,
each Bank, severally and not jointly, agrees to make Revolving Credit Loans to
the Borrower, at any time and from time to time from the date hereof to the
Termination Date, or until the earlier termination of its Revolving Credit
Commitment in accordance with the terms hereof, in an aggregate principal amount
at any time outstanding not to exceed the amount of such Bank's Revolving Credit
Commitment set forth opposite its name in Schedule I hereto, as such Revolving
Credit Commitment may be reduced from time to time in accordance with the
provisions of this Agreement. Notwithstanding the foregoing, the sum of (i) the
aggregate principal amount of Revolving Credit Loans outstanding at any time to
the Borrower, (ii) the Letter of Credit Exposure and (iii) the Acceptance Draft
Exposure, shall not exceed the Total Revolving Credit Commitment. The Revolving
Credit Commitment of each Bank shall automatically and permanently terminate on
the Termination Date.
Within the foregoing limits, the Borrower may borrow, repay (or,
subject to the provisions of Section 2.10 hereof, prepay) and reborrow, on and
after the date hereof and prior to the Termination Date, subject to the terms,
provisions and limitations set forth herein.
2.2 Revolving Credit Loans.
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(a) The Revolving Credit Loans made by a Bank on any date shall be in
a minimum amount of $250,000 and in integral multiples of $100,000 in excess
thereof in the case of a LIBOR Rate Loan or $100,000 and in integral multiples
of $100,000 in the case of a Prime Rate Loan.
(b) Revolving Credit Loans shall be made ratably by the Banks in
accordance with their respective Revolving Credit Commitments; provided,
however, that the failure of any Bank to
(9)
make any Revolving Credit Loan shall not in itself relieve any other Bank of its
obligation to lend hereunder.
(c) Each Revolving Credit Loan shall be either a Prime Rate Loan or a
LIBOR Rate Loan as the Borrower may request pursuant to Section 2.5 hereof.
Loans of more than one type and Interest Period may be outstanding at the same
time.
(d) Each Bank shall make its Revolving Credit Loans on the proposed
dates thereof by paying the amount required to the Agent in Philadelphia,
Pennsylvania in immediately available funds not later than 12:00 noon,
Philadelphia time, and the Agent shall as soon as practicable, but in no event
later than 3:00 p.m., Philadelphia time, credit the amounts so received to the
general deposit account of the Borrower with the Agent in immediately available
funds or, if Revolving Credit Loans are not to be made on such date because any
condition precedent to a borrowing herein specified is not met, return the
amounts so received to the respective Banks.
2.3 Revolving Credit Notes. The Revolving Credit Loans made by the
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Banks pursuant to Section 2.2 hereof shall be evidenced by promissory notes of
the Borrower substantially in the form of Exhibit "A" hereto with appropriate
insertions (individually, a "Revolving Credit Note" and, collectively, the
"Revolving Credit Notes"), payable to the order of each Bank and representing
the obligations of the Borrower to pay to each Bank on the Termination Date the
lesser of (a) the amount of each Bank's Revolving Credit Commitment or (b) the
aggregate unpaid principal amount of all Revolving Credit Loans made by such
Bank, with interest thereon as hereinafter prescribed in Section 2.4 hereof.
The date and amount of each Revolving Credit Loan, the basis for calculating
interest, the Interest Period applicable thereto and each payment of principal
with respect thereto shall be endorsed by the Banks on the schedule annexed to
and constituting a part of the Revolving Credit Notes. The aggregate unpaid
amount of Revolving Credit Loans set forth on such schedule shall be presumed to
be the principal amount owing and unpaid thereon. The failure of a Bank to make
such endorsement on such schedule shall not prejudice such Bank in any way, nor
affect its rights hereunder with respect to any Revolving Credit Loan. The
Revolving Credit Notes shall be dated the date of this Agreement and be stated
to mature on the Termination Date.
(10)
2.4 Interest. Interest on each Revolving Credit Loan shall be at a
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per annum rate to be elected by the Borrower, in accordance with Section 2.5
hereof, and shall be one of the following:
(a) a fluctuating rate equal to the Prime Rate, which interest
rate shall change when and as the Prime Rate changes; or
(b) subject to availability, the LIBOR Rate for Interest Periods
selected by the Borrower plus the applicable Margin.
The Agent shall determine each interest rate applicable to the Revolving Credit
Loans and shall promptly advise the Borrower and the Banks of the interest rate
so determined. Interest on each Prime Rate Loan shall be payable monthly in
arrears to the Agent for the pro rata benefit of the Banks on the first Business
Day of each month, commencing on the first such day to occur after the pertinent
loan is made and upon payment in full thereof. Interest on each LIBOR Rate Loan
shall be payable to the Agent for the pro rata benefit of the Banks in arrears
(i) in the case of Revolving Credit Loans with Interest Periods of three months
or less, at the end of each applicable Interest Period and (ii) in the case of
Revolving Credit Loans with Interest Periods of more than three months, at the
end of each calendar quarter and at the end of the Interest Period. Whenever
the unpaid principal balance of any Revolving Credit Loan shall become due and
payable (whether at the stated maturity thereof, by acceleration or otherwise)
interest shall thereafter be payable on demand to the Agent for the pro rata
benefit of the Banks at a rate per annum (computed daily) equal to 2% percent
above the rate in effect at such maturity; provided, however, that no interest
payable hereunder shall be in excess of the rate permitted by applicable law.
Interest on each Revolving Credit Loan shall be calculated on the basis of a
year of 360 days for the actual number of days elapsed.
2.5 Procedure for Revolving Credit Borrowing. The Borrower may
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borrow under the Revolving Credit Commitments during the Commitment Period on
any Business Day by giving the Agent irrevocable notice of a request for a
Revolving Credit Loan hereunder setting forth the amount of the Revolving Credit
Loan requested, the date thereof and whether it is to be a LIBOR Rate
(11)
Loan or a Prime Rate Loan. Requests for LIBOR Rate Loans shall be received by
the Agent not later than 11:00 a.m. (Philadelphia time) three (3) Business Days
prior to the first day of the Interest Period for each such Revolving Credit
Loan. Requests for Prime Rate Loans may be made up to 1:00 p.m. (Philadelphia
time) on the Business Day prior to the Business Day each such Revolving Credit
Loan is to be made. Any request for a Revolving Credit Loan may be written or
oral, but if oral, it shall be confirmed in writing sent by the Borrower to the
Agent within two (2) Business Days thereafter. The Agent shall promptly advise
(but in any event, by 2:00 p.m. Philadelphia time, two (2) Business Days prior
to a LIBOR Rate Loan or by 11:00 a.m. on the same Business Day in the case of a
Prime Rate Loan) the Banks of any notice given pursuant to this Section 2.5 and
of each Bank's portion of the requested borrowing.
2.6 Conversion and Renewals. The Borrower may elect from time to
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time to convert all or a part of one type of Revolving Credit Loan into another
type of Revolving Credit Loan or to renew all or part of a Revolving Credit Loan
by giving the Agent notice at least one (1) Business Day before the conversion
into a Prime Rate Loan and at least three (3) Business Days before the
conversion into or renewal of a LIBOR Rate Loan, specifying: (1) the renewal or
conversion date; (2) the amount of the Revolving Credit Loan to be converted or
renewed; (3) in the case of conversions, the type of Revolving Credit Loan to be
converted into; and (4) in the case of renewals of or a conversion into LIBOR
Rate Loans, the duration of the Interest Period applicable thereto; provided
that (a) the minimum principal amount of each Revolving Credit Loan outstanding
after a renewal or conversion to a LIBOR Rate Loan shall be $250,000 or to a
Prime Rate Loan shall be $100,000; and (b) LIBOR Rate Loans can be converted
only on the last day of the Interest Period of such Loan. All notices given
under this Section 2.6 shall be irrevocable and shall be given not later than
11:00 a.m. (Philadelphia time) on the day which is not less than the number of
Business Days specified above for such notice. Any request for a conversion or
a renewal under this Section 2.6 may be written or oral, but if oral, it shall
be confirmed in writing sent by the Borrower to the Agent within two (2)
Business Days thereafter. If the Borrower shall fail to give the Agent the
notice as specified above for the renewal or conversion of a LIBOR Rate Loan
prior to the end of the Interest Period with respect thereto, such LIBOR Rate
Loan shall automatically be converted into a Prime Rate Loan on the last day
(12)
of the Interest Period for such Revolving Credit Loan. The Agent shall promptly
advise (but in any event, by 2:00 p.m. Philadelphia time, two (2) Business Days
prior to a LIBOR Rate Loan or by 11:00 a.m. on the same Business Day in the case
of a Prime Rate Loan) the Banks of any notice given pursuant to this Section 2.6
and of each Bank's portion of the requested conversion or renewal.
2.7 Suspension of LIBOR Rate Loans.
------------------------------
(a) Disaster. Notwithstanding anything contained in this
--------
Agreement to the contrary, if the Agent determines that:
(i) it is unable for any reason to quote or determine rates
based upon a LIBOR Rate, or
(ii) the LIBOR Rate does not accurately reflect the cost to a
Bank of making or maintaining a LIBOR Rate Loan
then the Agent shall give the Borrower prompt notice thereof, and so long as
such condition shall remain in effect the right of the Borrower to select a
LIBOR Rate Loan or to convert a Prime Rate Loan into a LIBOR Rate Loan shall be
suspended. The Borrower, in such event, shall, on the last day of a then
current Interest Period either prepay such loan together with accrued interest
thereon or convert such loan into a Prime Rate Loan.
(b) Illegality. Notwithstanding any other provisions herein, if any
----------
Requirements of Law, regulation, order or decree or any change therein or in the
interpretation or application thereof shall make it unlawful for a Bank to make
or maintain LIBOR Rate Loans as contemplated by this Agreement, the Commitment
hereunder to make LIBOR Rate Loans shall forthwith be canceled with respect to
such Bank upon notice to the Agent and the Borrower and Revolving Credit Loans
then outstanding as LIBOR Rate Loans, if any, shall, at the option of the
Borrower, be prepaid in full together with all interest accrued and unpaid to
the date of any such prepayment together with any amounts required by Section
2.10 hereof, or converted into a Prime Rate Loan.
2.8 Applicable Margin; Periods, Etc. The applicable Margin
-------------------------------
shall be reset four times each fiscal year for the relevant periods set forth
below, based upon the Leverage
(13)
Ratio, as reflected at the close of the statement period in the Borrower's
consolidated financial statements indicated in the table below, as follows:
Financial Margin Period of
Statements Each Fiscal Year
---------- ----------------
1st Quarter August 1 - October 31
2nd Quarter November 1 - January 31
3rd Quarter February 1 - June 15
Annual(Fiscal Year End) June 16 - July 31
2.9 Commitment Fee. As additional compensation for the Revolving
--------------
Credit Commitment, the Borrower agrees to pay the Agent for the pro rata benefit
of the Banks a commitment fee for the Commitment Period based on the average
daily unused portion of the Total Revolving Credit Commitments and the
applicable Leverage Ratio in the amount of:
.075% per annum if the Leverage Ratio is less
than 2.50:1,
.15% per annum if the Leverage Ratio is equal to or
greater than 2.50:1.
Any fee payable under this Section 2.9 which is not paid when due shall bear
interest at a rate per annum equal to 2% above the Prime Rate until paid,
payable on demand. Such fee shall be computed on the basis of a 360 day year
for the actual days elapsed and shall be payable monthly on the first day of
each month during the Commitment Period and on the Termination Date. The
"unused portion of the Total Revolving Credit Commitments" means, at any time,
the Total Revolving Credit Commitments less the sum of (a) the unpaid principal
balance of all Revolving Credit Loans, (b) Letter of Credit Exposure and (c)
Acceptance Draft Exposure. Upon termination or reduction of the Revolving
Credit Commitments, the Borrower will pay to the Agent, for the pro rata account
of the Banks, accrued unused fees on the portion of the Revolving Credit
Commitment terminated or reduced to the date of termination or reduction.
2.10 Additional Compensation in Certain Circumstances.
------------------------------------------------
(14)
(a) Increased Costs or Reduced Return Resulting From Taxes, Reserves,
-----------------------------------------------------------------
Capital Adequacy Requirements, Expenses, Etc. If any Law or guideline or
- ---------------------------------------------
interpretation or application thereof by any Governmental Authority charged with
the interpretation or administration thereof or compliance with any request or
directive of any Governmental Authority (whether or not having the force of law)
now existing or hereafter adopted:
(i) subjects the Agent or a Bank to any tax or changes the basis of
taxation with respect to this Agreement, the Revolving Credit
Notes, the Revolving Credit Loans or payments by the Borrower of
principal, interest, commitment fee or other amounts due from the
Borrower hereunder or under the Revolving Credit Notes (except for
taxes on the overall net income of the Agent or a Bank imposed by
the jurisdiction in which the Agent or such Bank's principal
office is located),
(ii) imposes, modifies or deems applicable any reserve, special deposit
or similar requirement against credits or commitments to extend
credit extended by, assets (funded or contingent) of, deposits
with or for the account of, or other acquisition of funds by, the
Agent or a Bank (or participation therein) (other than
requirements expressly included herein in the determination of the
LIBOR Rate hereunder),
(iii) imposes, modifies or deems applicable any capital adequacy or
similar requirement (A) against assets (funded or contingent) of,
or credits or commitments to extend credit extended by, the Agent
or a Bank (or participations therein) or (B) otherwise applicable
to the obligations of the Agent or a Bank under this Agreement, or
(iv) imposes upon the Agent or a Bank any other condition or expense
with respect to this Agreement, the Revolving Credit Notes or its
(15)
making, maintenance or funding any part of the Revolving Credit
Loans (or participations therein),
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense (including loss of margin) upon the
Agent or a Bank with respect to this Agreement, the Revolving Credit Notes or
the making, maintenance or funding of any part of the Revolving Credit Loans
(or, in the case of any capital adequacy or similar requirement, to have the
effect of reducing the rate of return on the Agent's or a Bank's capital, taking
into consideration the Agent's and such Bank's policies with respect to capital
adequacy) by an amount which the Agent or a Bank deems to be material, the Agent
or Bank shall from time to time notify the Borrower of the amount determined in
good faith (using any averaging and attribution methods) by the Agent or Bank
(which determination shall be conclusive) to be necessary to compensate the
Agent or Bank for such increase, reduction or imposition. Such amount shall be
due and payable by the Borrower to the Agent or Bank ten (10) ten Business Days
after such notice is given. A certificate by the Agent or Bank as to the amount
due and payable under this Section 2.10(a) from time to time and the method of
calculating such amount shall be conclusive absent manifest error.
All references to "Bank" shall be deemed to include any participant in
such Bank's Revolving Credit Commitment.
(b) Indemnity. In addition to the compensation required by subsection
---------
(a) of this Section 2.10, the Borrower shall indemnify the Agent and a Bank
against any loss or expense (including loss of margin) which the Agent or Bank
has sustained or incurred as a consequence of any
(i) payment, prepayment or conversion of any part of any LIBOR Rate
Loan on a day other than the last day of the applicable Interest
Period (whether or not such payment, prepayment or conversion is
mandatory or automatic and whether or not such payment or
prepayment is then due).
(16)
(ii) attempt by the Borrower to revoke (expressly, by later
inconsistent notices or otherwise) in whole or part any notice
stated herein to be irrevocable (the Agent having in its sole
discretion the options (A) to give effect to such attempted
revocation and obtain indemnity under this Section 2.10(b) or (B)
to treat such attempted revocation as having no force or effect,
as if never made), or
(iii) default by the Borrower in the performance or observance of any
covenant or condition contained in this Agreement or the Revolving
Credit Notes, including without limitation any failure of the
Borrower to pay when due (by acceleration or otherwise) any
principal, interest, commitment fee or any other amount due
hereunder or under a Revolving Credit Note.
If the Agent or Bank sustains or incurs any such loss or expense it shall from
time to time notify the Borrower of the amount determined in good faith by the
Agent or Bank (which determination shall be conclusive) to be necessary to
indemnify the Agent or Bank for such loss or expense. Such amount shall be due
and payable by the Borrower to the Agent or Bank ten (10) Business Days after
such notice is given.
All references to "Bank" shall be deemed to include any participant in
such Bank's Revolving Credit Commitment.
The indemnities set forth herein shall survive payment in full of all
LIBOR Rate Loans and all other Revolving Credit Loans made pursuant to this
Agreement.
2.11 Termination or Reduction of Commitment. Subject to the
--------------------------------------
indemnity agreement with respect to LIBOR Rate Loans set forth in Section
2.10(b) hereof, the Borrower shall have the right, upon not less than three (3)
Business Days' irrevocable notice to the Agent, to terminate the Total Revolving
Credit Commitment or, from time to time, to reduce the amount of the Total
Revolving Credit Commitment, provided that (a) any such reduction (i) shall be
in the minimum amount of $1,000,000 or a multiple thereof, (ii) shall
(17)
reduce permanently the amount of the Total Revolving Credit Commitment then in
effect, and (iii) shall be accompanied by prepayment of the Revolving Credit
Loans outstanding, together with accrued interest on the amount so prepaid to
the dates of each such prepayment, to the extent, if any, that the Revolving
Credit Loans then outstanding exceed the amount of the Total Revolving Credit
Commitment as then reduced, and (b) any such termination of the Total Revolving
Credit Commitment shall be accompanied by prepayment in full of the Revolving
Credit Loans outstanding, together with accrued interest thereon to the date of
prepayment, and the payment of any unpaid commitment fee then accrued hereunder.
2.12 Prepayment. Subject to the indemnity agreement with respect to
----------
LIBOR Rate Loans set forth in Section 2.10(b) hereof, the Borrower may prepay
any Revolving Credit Loan in whole or in part without premium or penalty
together with interest accrued on the amount prepaid to the date of prepayment.
Prepayments of Revolving Credit Loans may be reborrowed on a revolving basis as
aforesaid.
2.13 Payments.
--------
(a) All payments (including prepayments) to be made by the Borrower on
account of principal, interest and fees shall be made without setoff or
counterclaim and shall be made to the Bank on the date of payment at the office
of the Agent set forth in Section 10.1 hereof or at such other place as the
Agent may from time to time designate in writing on or before 11:00 a.m.
(Philadelphia time), in each case in lawful money of the United States of
America and in immediately available funds. If any payment hereunder (other
than payments on LIBOR Rate Loans) becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business Day
and, with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension. If any payment on a LIBOR Rate
Loan becomes due and payable on a day other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day unless the result
of such extension would be to extend such payment into another calendar month in
which event such payment shall be made on the immediately preceding Business
Day.
(18)
(b) The Borrower hereby authorizes the Agent to charge any of its
accounts maintained at the Agent on the date any payment is due hereunder or
under the Revolving Credit Note.
(19)
2.14 Pro Rata Treatment.
------------------
(a) Except for any payment, reimbursement or other indemnity to any
Bank or other indemnified person under Section 2.7(b), 2.10, 2.19 or 10.4
hereof, each borrowing, each payment or prepayment of principal of the Revolving
Credit Notes, each payment of interest on the Revolving Credit Notes, each
payment of any fee or other amount payable hereunder and each reduction of the
Total Revolving Credit Commitment shall be made pro rata between the Banks in
the proportions that their Revolving Credit Commitments bear to the Total
Revolving Credit Commitment.
(b) Unless the Agent shall have been notified in writing by any Bank
prior to the time the Bank is required to fund any proposed borrowing that such
Bank will not make the amount that would constitute its pro rata share of the
borrowing on such date available to the Agent, the Agent may (assuming that the
Agent has furnished such Bank with notice of the proposed borrowing as required
under Section 2.5 hereof) assume that such Bank has made such amount available
to the Agent on such date, and the Agent may, in reliance upon such assumption,
make available to the Borrower a corresponding amount. If such amount is made
available by such Bank to the Agent on a date after such borrowing date, such
Bank shall pay to the Agent on demand an amount equal to the product of (i) the
daily average Federal funds rate during such period as quoted by the Agent,
times (ii) the amount of such Bank's pro rata share of such borrowing, times
(iii) a fraction the numerator of which is the number of days that elapse from
and including such borrowing date to the date on which such Bank's pro rata
share of such borrowing shall have become immediately available to the Agent and
the denominator of which is 360. A certificate of the Agent submitted to any
Bank with respect to any amounts owing under this subsection shall be conclusive
in the absence of manifest error. If such Bank's pro rata share of such
borrowing is not in fact made available to the Agent by such Bank within three
(3) Business Days of such borrowing date, the Agent shall be entitled to recover
such amount with interest thereon at the rate per annum applicable to the
relevant Revolving Credit Loans hereunder, on demand, from the Borrower.
(c) Notwithstanding the foregoing provisions of this Section 2.14, in
the event that a Bank fails to make any amount that would constitute its pro
rata share of a borrowing available
(20)
to the Agent, the Agent shall so notify the other Bank(s) whereupon such Bank(s)
shall be required to make such amount available to the Agent on a pro rata basis
between (or among) the Banks in the proportions that their Revolving Credit
Commitments bear to the Total Revolving Credit Commitment, in an aggregate
amount not to exceed the amount of such Bank's Revolving Credit Commitment as
set forth on Schedule A attached hereto.
2.15 Sharing of Setoffs. Each Bank agrees that if it shall, through
------------------
the exercise of a right of banker's lien, setoff or counterclaim against the
Borrower or a Guarantor, including, but not limited to, a secured claim under
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Bank under any
applicable bankruptcy, insolvency or other similar law or otherwise, obtain
payment (voluntary or involuntary) in respect of a Revolving Credit Note held by
it as a result of which the unpaid principal portion of the Revolving Credit
Notes held by it shall be proportionately less than the unpaid principal portion
of the Revolving Credit Notes held by any other Bank, it shall be deemed to have
simultaneously purchased from such other Bank a participation in the Revolving
Credit Notes held by such other Bank with the purchase price payable in cash
upon demand by such other Bank, so that the aggregate unpaid principal amount of
the Revolving Credit Notes and participations in Revolving Credit Notes held by
it shall be in the same proportion to the aggregate unpaid principal amount of
all Revolving Credit Notes then outstanding as the principal amount of the
Revolving Credit Notes held by it prior to such exercise of banker's lien,
setoff or counterclaim was to the principal amount of all Revolving Credit Notes
outstanding prior to such exercise of banker's lien, setoff or counterclaim;
provided, however, that if any such purchase or purchases or adjustments shall
be made pursuant to this Section 2.15 and such other Bank shall thereafter
receive or recover from or respecting the Borrower or any Guarantor any amount
in respect of a Revolving Credit Note proportionally greater than that received
by the first Bank, such purchase or purchases or adjustments shall be
repurchased and rescinded to the extent of such receipt or recovery and the
purchase price or prices paid or adjustments made shall be repaid or restored,
as applicable, without interest; provided, that, if such disproportionate amount
received or recovered by such other Bank exceeds the amount necessary to restore
the Banks respective pro rata shares, then this section shall apply to such
(21)
excess. The Borrower expressly consents to the foregoing arrangements and
agrees that any Bank holding a participation in a Revolving Credit Note deemed
to have been so purchased may exercise any and all rights of banker's lien,
setoff or counterclaim with respect to any and all moneys owing by the Borrower
to such Bank as fully as if such Bank held a Revolving Credit Note in the amount
of such participation.
2.16 Use of Proceeds. The Borrower will utilize the proceeds of the
---------------
initial Revolving Credit Loans to repay any amounts owing to Fleet Bank, N.A.
("Fleet") under the existing revolving credit facility with Fleet. Any
remaining proceeds of the initial borrowing and of any subsequent Revolving
Credit Loans may be used by the Borrower for working capital purposes, capital
expenditures and to fund the purchase price of Permitted Acquisitions provided
no portion of the proceeds of any Revolving Credit Loan shall be used by any
Borrower in any manner which might cause the borrowing or the application of
such proceeds to violate Regulation G, Regulation U, Regulation T or Regulation
X of the Board of Governors of the Federal Reserve System.
2.17 Issuance of Letters of Credit. Upon the request of the
-----------------------------
Borrower, and subject to the conditions set forth herein and such other
conditions to the opening of Letters of Credit as the Agent requires of its
customers generally, the Agent shall from time to time issue documentary or
standby letters of credit (each, a "Letter of Credit") for the account of the
Borrower. The issuance of each Letter of Credit shall be made on at least one
(1) Business Day's prior written notice from the Borrower to the Agent which
written notice shall be an application for a Letter of Credit on the Agent's
customary form. The expiration date of any Letter of Credit shall not be later
than one (1) year from the date of issuance thereof nor, in any event, later
than the Termination Date. The Letters of Credit shall be issued in respect of
any transactions occurring in the Borrower's ordinary course of business.
2.18 Actions of Agent. Any Letter of Credit may, in the discretion
----------------
of the Agent or its correspondents, be interpreted by them (to the extent not
inconsistent with such Letter of Credit) in accordance with the Uniform Customs
and Practice for Documentary Credits of the International Chamber of Commerce,
as adopted or amended from time to time, or any other rules, regulations and
(22)
customs prevailing at the place where any Letter of Credit is available or the
drafts are drawn or negotiated. The Agent and its correspondents may in good
faith accept and act upon the name, signature, or act of any party purporting to
be the executor, administrator, receiver, trustee in bankruptcy, or other legal
representative of any party designated in any Letter of Credit in the place of
the name, signature, or act of such party.
2.19 Indemnity as to Letters of Credit. The Borrower hereby agrees
---------------------------------
to indemnify and hold harmless the Agent and the Banks from and against any and
all claims, damages, losses, liabilities, costs or expenses whatsoever which the
Agent or the Banks may incur or suffer by reason of or in connection with the
execution and delivery or assignment of, or payment under, any Letter of Credit,
except only if and to the extent that any such claim, damage, loss, liability,
cost or expense shall be caused by the willful misconduct or gross negligence of
the Agent or any Bank performing its obligations respecting such Letter of
Credit under this Agreement. Without limiting the foregoing, the Borrower
further agrees to indemnify and hold harmless the Agent, its officers and
directors, each person who controls the Agent within the meaning of Section 15
of the Securities Act of 1933 or any applicable state securities law and their
respective successors and assigns from and against any and all claims, damages,
losses, liabilities, costs or expenses, joint or several, to which they or any
of them may become subject under any federal or state securities law, rule or
regulation, at common law or otherwise, insofar as such claims, damages, losses,
liabilities, costs or expenses arise out of or are based upon the execution and
delivery by the Agent of any Letters of Credit or the execution and delivery of
any other document in connection therewith (but not including any claims,
damages, losses, liabilities, costs or expenses arising from the gross
negligence or willful misconduct of the Agent). The Borrower upon demand by the
Agent at any time, shall reimburse the Agent for any reasonable legal or other
expenses incurred in connection with investigating or defending against any of
the foregoing. The indemnities contained herein shall survive the expiration or
termination of the Letters of Credit and this Agreement.
2.20 Letter of Credit Fees. The Borrower agrees to pay to the Agent
---------------------
its standard draw fees and commissions in effect from time to time.
(23)
2.21 Acceptance Drafts.
-----------------
(a) Upon the terms and conditions hereof, the Borrower may, from time
to time from the date hereof until the Termination Date, request the Banks to
accept drafts in the form of Exhibit B (each an "Acceptance Draft" and,
collectively, the "Acceptance Drafts"), at the Borrower's election.
(b) The Borrower shall give the Agent telephonic notice (immediately
confirmed in writing) of its request that the Agent accept such Acceptance Draft
no later than 1:00 p.m. (Philadelphia time) on the same day of such request (the
"Acceptance Date"). Such notice shall contain the aggregate face amount (which
shall be in minimum aggregate principal amounts of $1,000,000 and in integral
multiples of $100,000 in excess thereof) and maturity date of such Acceptance
Draft, which maturity date shall not be later than the earlier of (a) 30, 60, 90
or 120 days after the Acceptance Date of such Acceptance Draft, as the Borrower
shall designate, and (b) the Termination Date. Such notices also shall describe
the underlying goods and indicate their origin and destination points or provide
other evidence of the underlying transaction in form and substance as may be
acceptable to the Agent to permit it to accurately complete the appropriate
eligibility legend (i.e., "eligibility certificate") on the face of the
Acceptance Draft. The Borrower shall promptly confirm such telephonic notices by
telecopy and mailing an original signed notice. Each draft shall mature on a
Business Day, which shall be at least thirty (30) days after the Acceptance
Date. No Acceptance Draft shall be dated or accepted more than thirty (30) days
before or more than thirty (30) days after the date of the shipment of goods to
which it relates. The Borrower hereby irrevocably authorizes the Agent to
complete its Acceptance Draft in accordance with the instructions given pursuant
to this Section 2.21. Any pre-signed drafts held by the Agent for completion
shall not be affected by the departure of the signer as an authorized signatory
of the Borrower, which drafts shall nevertheless remain valid and binding upon
the Borrower for all purposes as if the signer's authority had continued in
effect. (Such completion and presentment, however, shall not obligate the Agent
to accept any such Acceptance Draft.)
(c) Upon receipt of such notices from the Borrower, the Agent shall
promptly notify each Bank of (i) its pro rata (based on its Revolving Credit
Commitment) share of such Acceptance Draft,
(24)
(ii) the maturity date of such Acceptance Draft and (iii) the discount rate and
commission applicable to such Acceptance Draft. The Agent may decline to create
any such Acceptance Draft if the Agent is not then providing such financing to
its middle market customers with credit standings similar to the Borrower's.
(d) The Agent in its discretion at any time or from time to time may
sell, rediscount or otherwise dispose of any Acceptance Draft without any notice
or credit to or consent from the Borrower or any other Bank.
(e) Each Acceptance Draft shall relate to one or more specific
transactions involving the importation or exportation of goods or the domestic
shipment of goods within the United States. The goods relating to each
Acceptance Draft shall have a c.i.f. value equalling or exceeding the amount of
the Acceptance Draft, shall be of good and merchantable quality, shall be fully
insured in accordance with prudent industry practice and shall not be the
subject of any security interest granted by the Borrower or any Subsidiary. No
other source shall have financed the transaction underlying the Acceptance
Draft. The Borrower shall have procured all import, export and other licenses
essential to the underlying transaction and shall have complied with all
applicable laws pertaining to the underlying goods and transaction. Each
Acceptance Draft shall qualify (upon acceptance) in all respects with the
requirements for eligibility for discount of the Federal Reserve Banks of the
United States. With regard to each Acceptance Draft presented, the Borrower
represents and warrants to the Agent and the Banks that, as of the date of
presentment, the Acceptance Draft and underlying goods and transaction conform
to the requirements of this subsection, and the Borrower covenants and agrees
that they will continue to conform to those requirements for so long as the
Acceptance Draft is outstanding.
2.22 Payment in Respect of Letters of Credit and Acceptances;
--------------------------------------------------------
Reimbursement. Upon the issuance of any Letter of Credit, the Agent shall
- -------------
notify each Bank of the principal amount, the number, and the expiration date
thereof and the amount of such Bank's participation therein. By the issuance of
a Letter of Credit hereunder and without further action on the part of the Agent
or the Banks, each Bank hereby accepts from the Agent a participation (which
participation shall be nonrecourse to the Agent) in such Letter of Credit equal
to such Bank's pro rata
(25)
(based on its Revolving Credit Commitment) share of such Letter of Credit,
effective upon the issuance of such Letter of Credit. The Agent shall notify
each Bank of the presentment to the Agent of any draft for acceptance hereunder,
which notice shall include the amount of such draft and the maturity date
thereof. Upon the acceptance of any Acceptance Draft, the Agent shall: (i)
notify each Bank of the net proceeds thereof and the amount of such Banks's
participation therein (acquired pursuant to the terms hereof) and (ii) credit
the net proceeds thereof to the Borrower's account maintained with the Agent for
such purpose. Such net proceeds shall be in an amount equal to the face amount
of such Acceptance Draft less the applicable discount and commission. The funds,
net of such discounts and commissions, so credited to the Borrower's account
shall be immediately available to the Borrower, and the Agent shall promptly
notify the Borrower as to the amount of the net funds so credited. By acceptance
of an Acceptance Draft and without further action on the part of the Agent or
the Banks, each Bank hereby accepts from the Agent a participation (which
participation shall be nonrecourse to the Agent) in such Acceptance Draft equal
to such Bank's pro rata (based on its Revolving Credit Commitment) share of such
Acceptance Draft, effective upon the issuance of such Acceptance Draft. Each
Bank hereby absolutely and unconditionally assumes, as primary obligor and not
as a surety, and agrees to pay and discharge, and to indemnify and hold the
Agent harmless from liability in respect of, such Bank's pro rata share of the
amount of any drawing under a Letter of Credit and payment of any Acceptance
Draft. Each Bank acknowledges and agrees that its obligation to acquire
participation in each Letter of Credit issued by and each Acceptance Draft
accepted by the Agent and its obligation to make the payments specified herein,
and the right of the Agent to receive the same, in the manner specified herein,
are absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, the occurrence and continuance of a
Default or an Event of Default hereunder, and that each such payment shall be
made without any offset, abatement, withholding or reduction whatsoever. The
Agent shall review, on behalf of the Banks, each draft presented under a Letter
of Credit and shall notify each Bank of any such presentment. Promptly after it
shall have ascertained that any draft presented under such Letter of Credit
appears on its face to be in substantial conformity with the terms and
conditions of the Letter of Credit, the Agent shall give telephonic or facsimile
notice to the Banks and the Borrower of the receipt and amount of
(26)
such draft and the date on which payment thereon will be made. The Borrower
shall reimburse the Agent for the amount specified in such notice by no later
than 11:00 a.m. (Philadelphia time) on the date such payment is scheduled to be
made. If the Borrower has not so discharged such reimbursement obligations and
the Agent is unable to recover the required amount by debiting the Borrower's
account (as hereinafter provided), the Agent shall give each Bank notice of any
amount that remains unreimbursed, and each Bank shall promptly, but in any event
within two hours of the receipt of such notice, pay the amounts required to the
Agent in immediately available funds, and the Agent, not later than 3:00 p.m.
(Philadelphia time) on such day, shall make the appropriate payment to the
beneficiary. If the Banks shall pay any draft presented under a Letter of Credit
or make any such payment upon the maturity of an Acceptance Draft, then the
Agent, on behalf of the Banks, shall charge the general deposit account of the
Borrower with the Agent for the amount thereof, together with the Agent's
customary overdraft or similar fee in the event the funds available in such
account shall not be sufficient to reimburse the Banks for such payment. If the
Banks have not been reimbursed with respect to such drawing as provided above,
the Borrower shall pay to, the Agent, for the account of the Banks, the amount
of the drawing together with interest on such amount at a rate per annum
(computed on the basis of the actual number of days elapsed over a year of 360
days) equal to the Prime Rate plus 2% payable on demand. The obligations of the
Borrower under this Section 2.22 to reimburse the Banks and the Agent for all
drawings under Letters of Credit and payments made in respect of Acceptance
Drafts shall be absolute, unconditional and irrevocable and shall be satisfied
strictly in accordance with their terms, irrespective of:
(a) any lack of validity or enforceability of any Letter of Credit or
Acceptance Draft;
(b) the existence of any claim, setoff, defense or other right which
the Borrower or any other person may at any time have against the beneficiary
under the Letter of Credit or the Acceptance Draft, the Agent or any Bank (other
than the defense of payment in accordance with the terms of this Agreement or a
defense not otherwise waived hereunder based on the gross negligence or willful
misconduct of the Agent or any Bank) or any other person in connection with this
Agreement or any other transaction;
(27)
(c) any draft or other document presented under any Letter of Credit
or Acceptance Draft proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
provided that payment by the Agent or any Bank under such Letter of Credit or
Acceptance Draft against presentation of such draft or document shall not have
constituted gross negligence or willful misconduct;
(d) payment by the Agent or any Bank under any Letter of Credit
against presentation of a draft or other document which does not comply with the
terms of such Letter of Credit; provided that such payment shall not have
constituted gross negligence or willful misconduct;
(e) the existence, character, quantity, quality, condition, packing,
value or delivery of any goods or other property relating to any Letter of
Credit or Acceptance Draft;
(f) the time, place, manner or order in which shipment is made;
(g) the provisions of any insurance policy or any act or omission of
any insurer, shipper, warehouseman, carrier, correspondent or other person;
(h) any other circumstance or event whatsoever, whether or not similar
to any of the foregoing; provided that such other circumstance or event shall
not have been the result of gross negligence or willful misconduct of the Agent
or any Bank.
It is understood that in making any payment under any Letter of Credit
or Acceptance Draft (x) the Agent's and any Bank's exclusive reliance on the
documents presented to it under such Letter of Credit or Acceptance Draft as to
any and all matters set forth therein, including, without limitation, good faith
reliance on the amount of any draft presented under such Letter of Credit or
Acceptance Draft, whether or not the amount due to the beneficiary equals the
amount of such draft and whether or not any document presented pursuant to such
Letter of Credit or Acceptance Draft proves to be insufficient in any respect,
if such document on its face appears to be in order, and whether or not any
other statement or any other document presented pursuant to such Letter of
Credit or Acceptance Draft proves to be forged or invalid or any statement
(28)
therein proves to be inaccurate or untrue in any respect whatsoever and (y) any
noncompliance in any immaterial respect of the documents presented under such
Letter of Credit or Acceptance Draft with the terms thereof shall, in each case,
not be deemed willful misconduct or gross negligence of the Agent or any Bank.
2.23 Ineligibility of Acceptance Drafts. In the event that any
----------------------------------
Acceptance Draft accepted pursuant to this Agreement does not, for reasons
beyond the control of the Agent, comply at the time of its acceptance with
applicable regulations of the Board governing bankers' acceptances and would not
be eligible under such regulations for discount with a Federal Reserve lender or
if for any other reason any Acceptance Draft is deemed by the Agent not eligible
for discount, the Borrower will, upon receipt of written notice from the Agent,
forthwith pay to the Agent any additional cost or costs, as determined by the
Agent, incurred by the Agent (including, without limitation, any costs resulting
from a higher discount rate upon disposition of such Acceptance Draft by the
Agent, any funding costs resulting from a higher discount rate upon disposition
of such Acceptance Draft by the Agent, reserve requirements or additional
premium liability to the Federal Deposit insurance Corporation) in connection
with such Acceptance Draft on account of such noncompliance or ineligibility.
(29)
SECTION 3. REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Agent and the Banks to enter into this
Agreement and to make the Revolving Credit Loans and to issue Letters of Credit
and to create Acceptance Drafts herein provided for, the Borrower hereby
covenants, represents and warrants to the Agent and the Banks that:
3.1 Financial Condition. The consolidated balance sheet and
-------------------
consolidated statements of income, retained earnings and cash flows of the
Borrower and its Subsidiaries as at February 28, 1996 audited by Lazar Levine &
Company, LLC, CPAs, and the interim consolidated balance sheet and consolidated
related statements of income, retained earnings and cash flows of the Borrower
and its Subsidiaries as at November 30, 1996 certified as true and correct by
the chief financial officer of the Borrower, have heretofore been furnished to
the Banks, and fairly present the financial condition of the Borrower and its
Subsidiaries as at such dates, and for the fiscal year and fiscal quarter,
respectively, then ended. Such annual financial statements have been prepared
in accordance with GAAP and, such interim financial statements have been
prepared on a basis consistent with the annual financial statements, subject to
year end adjustments. Neither the Borrower nor its Subsidiaries has any
material contingent obligations, contingent liabilities or liability for taxes,
long-term lease or unusual forward or long-term commitment, which are not
reflected in the foregoing statements or in the notes thereto.
3.2 No Change. Since November 30, 1996 there has been no material
---------
adverse change in the business, operations, assets or financial or other
condition of the Borrower or its Subsidiaries.
3.3 Corporate Existence; Compliance with Law; Subsidiaries. The
------------------------------------------------------
Borrower and each of its Subsidiaries (i) is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
(ii) has the corporate power and authority and the legal right to own and
operate its properties, and to conduct the business in which it is currently
engaged, (iii) does not own or operate properties or conduct business which
requires qualification as a foreign corporation in any jurisdiction in which it
is not so qualified, and (iv) is in compliance with all Requirements of Law;
except to the extent that the failure to so qualify as a foreign corporation
(30)
as required by clause (iii) of this Section 3.3 or to comply with all
Requirements of Law as required by clause (iv) of this Section 3.3 would not, in
the aggregate, have a material adverse effect on the business, operations,
property or financial or other condition of the Borrower and its Subsidiaries
taken as a whole, and would not materially adversely affect the ability of the
Borrower or a Subsidiary to perform its obligations under this Agreement and the
Revolving Credit Notes.
3.4 Corporate Power; Authorization; Enforceable Obligations. The
-------------------------------------------------------
Borrower and each of its Subsidiaries has the corporate power and authority and
the legal right to execute, deliver and perform its obligations under the Loan
Documents and to borrow hereunder. The Borrower has taken all necessary
corporate action to authorize the borrowings hereunder on the terms and
conditions of this Agreement and the Borrower and each of its Subsidiaries has
taken all necessary corporate action to authorize the execution, delivery and
performance of the Loan Documents. No consent or authorization of, filing with,
or other act by or in respect of any other Person (including stockholders and
creditors of the Borrower or its Subsidiaries) or any Governmental Authority, is
required in connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of the Loan Documents. Each
of the Loan Documents has been duly executed and delivered on behalf of the
Borrower or its Subsidiaries as applicable, and each of the Loan Documents
constitutes a legal, valid and binding obligation of the Borrower or its
Subsidiaries as applicable enforceable against the Borrower or its Subsidiaries
as applicable, 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.
3.5 Legal Bar. The execution, delivery and performance of each of
---------
the Loan Documents and the borrowings hereunder and the use of the proceeds
thereof, will not violate any of the Requirements of Law or Contractual
Obligations of the Borrower or its Subsidiaries, and will not result in, or
require the creation or imposition of any Lien on any of its respective
properties or revenues pursuant to any Requirements of Law or Contractual
Obligations except those in favor of the Banks as provided herein.
(31)
3.6 No Material Litigation. No litigation, investigation or
----------------------
proceeding of or before any arbitrator or Governmental Authority is pending by
or against the Borrower or any Subsidiary or any of its respective properties or
revenues (a) with respect to any of the Loan Documents or any of the
transactions contemplated hereby or thereby, or (b) which if adversely
determined, would have a material adverse effect on the business, operations,
property or financial or other condition of the Borrower and its Subsidiaries
taken as a whole.
3.7 No Default. Neither the Borrower nor any of its Subsidiaries is
----------
in default under or with respect to any Contractual Obligations in any respect
which would be materially adverse to the business, operations, property or
financial or other condition of the Borrower and its Subsidiaries taken as whole
or which would materially and adversely affect the ability of the Borrower or
its Subsidiaries to perform its respective obligations under any of the Loan
Documents. No Default or Event of Default has occurred and is continuing.
3.8 No Burdensome Restrictions. No Contractual Obligations of the
--------------------------
Borrower or its Subsidiaries and no Requirements of Law materially adversely
affect, or insofar as the Borrower or its Subsidiaries may reasonably foresee
may so affect, the business, operations, property or financial or other
condition of the Borrower and its Subsidiaries taken as a whole.
3.9 Federal Regulations. Neither the Borrower nor its Subsidiaries
-------------------
is engaged nor will it engage, principally or as one of its important
activities, in the business of extending credit for the purpose of "purchasing"
or "carrying" any "margin stock" within the respective meanings of each of the
quoted terms under Regulation U of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect. No part of the
proceeds of any Revolving Credit Loans hereunder will be used for "purchasing"
or "carrying" "margin stock" as so defined or for any purpose which violates, or
which would be inconsistent with the provisions of the regulations of such Board
of Governors.
3.10 Environmental Regulation.
------------------------
(a) The Borrower has no knowledge of receipt of any past, pending
or threatened:
(32)
(i) claims, complaints, notices or requests for information with
respect to any alleged violation of any Environmental Law that,
singly or in the aggregate, have resulted in, or may reasonably be
expected to result in, any material adverse change in the
financial or business conditions of the Borrower and its
Subsidiaries taken as a whole; or
(ii) complaints, notices or inquiries to the Borrower or any Subsidiary
regarding potential liability under any Environmental Law that,
singly or in the aggregate, have resulted in, or may reasonably be
expected to result in, any material adverse change in the
financial or business conditions of the Borrower and its
Subsidiaries taken as a whole;
(b) No property now or previously owned or leased by the Borrower or
any Subsidiary is listed or proposed for listing on the National Priorities List
pursuant to CERCLA, on the CERCLIS list or on any similar state list of sites
requiring investigation or clean-up; and
(c) Neither the Borrower nor any Subsidiary has directly transported
or directly arranged for the transportation of any Hazardous Material to any
location which is listed or proposed for listing on the National Priorities List
pursuant to CERCLA, on the CERCLIS list or on any similar state list or which is
the subject of federal, state or local enforcement actions or other
investigations which may lead to material claims against the Borrower for any
remedial work, damage to natural resources or personal injury, including claims
under CERCLA.
3.11 Title to Properties. The Borrower and its Subsidiaries have
-------------------
valid leases of or good and marketable title to its respective properties and
assets, including the properties and assets reflected in the balance sheets
described in Section 3.1. Such properties and assets are not subject to any
Lien, except as reflected in such balance sheets and except to the extent
otherwise permitted by Section 7.2 hereof.
(33)
3.12 Taxes. The Borrower and its Subsidiaries have filed all
-----
Federal, state and other tax returns which to the knowledge of the Borrower and
its Subsidiaries is required to be filed and have paid all taxes shown as due
and payable on said returns or on any assessments made against them or any of
its respective properties except such taxes, if any, as are being contested in
good faith and by proper proceedings and as to which adequate reserves have been
maintained.
3.13 ERISA. Based upon ERISA and the regulations and published
-----
interpretations thereunder, the Borrower, its Subsidiaries and each ERISA
Affiliate is in compliance in all material respects with all applicable
provisions, if any, of ERISA. Neither a Reportable Event nor a Prohibited
Transaction has occurred and is continuing with respect to any Plan; no notice
of intent to terminate a Plan has been filed nor has any Plan been terminated;
no circumstances exist which constitute grounds under Section 4042 of ERISA
entitling the PBGC to institute proceedings to terminate, or appoint a trustee
to administer a Plan, nor has the PBGC instituted such proceedings; the
Borrower, its Subsidiaries and each ERISA Affiliate has met its minimum funding
requirements under ERISA with respect to all of its Plans and the present fair
market value of all Plan assets exceeds the present value of all vested benefits
under each Plan, as determined on the most recent valuation date of the Plan in
accordance with the provisions of ERISA and the regulations thereunder for
calculating the potential liability of the Borrower, its Subsidiaries and each
ERISA Affiliate to the PBGC or the Plan under Title IV of ERISA, and neither the
Borrower, its Subsidiaries nor an ERISA Affiliate has incurred any liability to
the PBGC under ERISA.
3.14 Operation of Business. The Borrower and its Subsidiaries
---------------------
possess all licenses, permits, franchises, patents, copyrights, trademarks, and
trade names, or rights thereto, necessary to conduct their respective businesses
substantially as now conducted and as presently proposed to be conducted, and
neither the Borrower nor any Subsidiary is in material violation of any valid
rights of others with respect to any of the foregoing except where the failure
to obtain licenses or permits does not individually or in the aggregate
materially and adversely impair the ability of a Borrower or any of its
Subsidiaries to operate its business or perform its obligations under a Loan
Document.
(34)
SECTION 4. CONDITIONS PRECEDENT
--------------------
4.1 Conditions to Initial Revolving Credit Loan. The obligation of
-------------------------------------------
the Banks to make the initial Revolving Credit Loans to the Borrower hereunder
is subject to the satisfaction of the following conditions precedent:
(a) Revolving Credit Note. Each Bank shall have received a Revolving
---------------------
Credit Note conforming to the requirements hereof and duly executed by the
Borrower.
(b) Legal Opinion. The Agent and each Bank shall have received a
-------------
favorable opinion of counsel to the Borrower and the Guarantors satisfactory in
form and substance to the Agent and the Banks and covering such matters incident
to the transactions contemplated by this Agreement as the Agent and the Banks
shall reasonably require.
(c) Guarantees. Each Bank shall have received the Guarantees of each
----------
Guarantor duly executed by each Guarantor.
(d) Certified Copies and Other Documents. The Banks shall have
------------------------------------
received such certificates and other documents relating to the Borrower and the
Guarantors with respect to the matters herein contemplated as the Bank may
request, including but not limited to:
(i) certificates of good standing from the Secretary of State of New
York if incorporated under the laws of the State of New York or
doing business in New York and, if incorporated in a jurisdiction
other than New York, from the Secretary of State or applicable
Governmental Authority of such jurisdiction of incorporation and
from the Secretary of State or applicable Governmental Authority
of each jurisdiction in which an office is maintained;
(ii) certificates of incorporation and all amendments thereto certified
by the
(35)
applicable Secretary of State or applicable Governmental
Authority;
(iii) certificates of the Secretary of the Borrower dated the date of
this Agreement certifying, (x) true and correct copies of the by-
laws of the Borrower as in effect on the date of adoption of the
resolutions referred to in (y) of this subsection (iii), (y) true
and correct copies of resolutions adopted by the board of
directors of the Borrower (1) authorizing the borrowings from the
Bank hereunder, the execution, delivery and performance by the
Borrower of each of the Loan Documents to which it is a party and
the performance by the Borrower of its obligations under each of
the Loan Documents to which it is a party, (2) approving forms in
substantially execution form of each of the Loan Documents to
which it is a party, and (3) authorizing officers of the Borrower
to execute and deliver each of the Loan Documents to which it is a
party, and (z) the incumbency and specimen signatures of the
officers of the Borrower executing any documents delivered to the
Agent or a Bank by the Borrower in connection herewith;
(iv) certificates of the Secretary of each Guarantor dated the date of
this Agreement certifying, (w) true and correct copies of the by-
laws of each Guarantor as in effect on the date of adoption of the
resolutions referred to in (x) of this subsection (iii), (x) true
and correct copies of resolutions adopted by the board of
directors of each Guarantor authorizing (1) the execution,
delivery and performance by each Guarantor of each of the Loan
Documents to which it is a party and the performance by each
Guarantor of its obligations under each of the Loan Documents
(36)
to which it is a party, (2) approving forms in substantially
execution form of each of the Loan Documents to which it is a
party, and (3) authorizing officers of each Guarantor to execute
and deliver each of the Loan Documents to which it is a party, (y)
true and correct copies of resolutions adopted by the shareholders
of each Guarantor authorizing the execution and delivery of the
Loan Documents to which it is a party and (z) the incumbency and
specimen signatures of the officers of each Guarantor executing
any documents delivered to the Agent or a Bank by each Guarantor
in connection herewith.
(e) Fees. The Agent shall have received evidence of payment of the
----
Agent's per annum fee in the amount of $10,000.00 and the Agent's attorneys fees
and disbursements.
(f) Termination of Fleet Bank, N.A. facilities. The Banks shall have
------------------------------------------
received evidence of payment of any sums due under and the termination of the
revolving credit facility with Fleet Bank, N.A.
(g) Additional Matters. All other documents and legal matters in
------------------
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Agent and its counsel.
4.2 Conditions to All Revolving Credit Loans, Etc. The obligation of
---------------------------------------------
the Banks to make any Revolving Credit Loan (including the initial Revolving
Credit Loan), issue any Letter of Credit or accept any Acceptance Draft to be
made by it hereunder is subject to the satisfaction of the following conditions
precedent:
(a) Representations and Warranties. The representations and
------------------------------
warranties made by the Borrower herein or which are contained in any
certificate, document or financial or other
(37)
statement furnished at any time under or in connection herewith, shall be
correct on and as of the borrowing date for such Revolving Credit Loan as if
made on and as of such date.
(b) No Default or Event of Default. No Default or Event of Default
------------------------------
shall have occurred and be continuing on the date a Revolving Credit Loan is to
be made or after giving effect to the Revolving Credit Loan to be made on such
date.
Each borrowing by the Borrower hereunder shall constitute a
representation and warranty by the Borrower hereunder as of the date of each
such borrowing that the conditions in clauses (a) and (b) of this Section have
been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
---------------------
The Borrower hereby agrees that so long as the Revolving Credit
Commitments remain in effect, a Revolving Credit Note, any Letter of Credit or
any Acceptance Draft remains or remain outstanding and unpaid, or any other
amount is owing to the Agent or a Bank hereunder, the Borrower will and will
cause each of its Subsidiaries to:
5.1 Information. Furnish to the Banks or cause to be furnished to
-----------
the Banks:
(1) As soon as available, but not more than one hundred (100) days
after the close of each fiscal year, the financial statements of the Borrower
and its Subsidiaries including the consolidated and consolidating balance sheets
of the Borrower and its Subsidiaries with related consolidated and consolidating
statements of income, retained earnings and cash flows for such fiscal year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all prepared in accordance with GAAP consistently applied and
audited by a firm of independent certified public accountants acceptable to the
Bank. Such financial statements shall be accompanied by a certificate of the
chief financial officer of the Borrower demonstrating compliance with the
financial covenants contained in Section 6 of this Agreement and to the effect
that, having read this Agreement and the Loan Documents and based upon an
examination which in the opinion of such officer was sufficient to enable such
officer to
(38)
make an informed statement, nothing came to such officer's attention which would
cause such officer to believe that an Event of Default or Default had occurred
hereunder or thereunder, and, if so, stating the facts with respect thereto and
whether the same has been cured prior to the date of such certificate, and, if
not, what action is proposed to be taken with respect thereto.
(2) As soon as possible, but not more than fifty-five (55) days after
the close of the first three (3) fiscal quarters of each year, the financial
statements of the Borrower and its Subsidiaries including its consolidated and
consolidating balance sheets of the Borrower and its Subsidiaries with related
consolidated and consolidating statements of income, retained earnings and cash
flows as of the last day of and for such quarter and for the period of the
fiscal year ended as of the close of the particular quarter, all such quarterly
statements to be in reasonable detail, all prepared on a basis consistent with
the annual financial statements, subject to year end adjustments and certified
by the chief financial officer of the Borrower. Such financial statements shall
be accompanied by a certificate signed by the chief financial officer of such
Borrower as specified in paragraph (1) above.
(3) Prompt written notice if: (i) any obligation (other than an
obligation under this Agreement) of the Borrower or any of its Subsidiaries for
borrowed money or for the deferred purchase price of any property is declared or
shall become due and payable prior to its stated maturity, (ii) the holder of
any note (other than a Revolving Credit Note), or other evidence of
indebtedness, certificate or security evidencing any such obligation, has the
right to declare such obligation due and payable prior to its stated maturity,
or (iii) to the knowledge of any officer of the Borrower or any of its
Subsidiaries there shall occur an Event of Default or a Default.
(4) Prompt written notice of: (i) any citation, summons, subpoena,
order to show cause or other order naming the Borrower or any of its
Subsidiaries a party to any proceeding before any governmental body which if
adversely determined would have a material adverse effect on the business,
financial condition or operations of the Borrower and its Subsidiaries taken as
a whole, and include with such notice a copy of such citation, summons,
subpoena, order to show cause or other order, (ii) any
(39)
lapse or other termination of a license, permit or other authorization issued to
the Borrower or any of its Subsidiaries by any Governmental Authority or Person,
which lapse or other termination would have a material adverse effect on the
property, business, profits or conditions (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole, (iii) any refusal by any
Governmental Authority or Person to renew or extend such license, permit or
other authorization, and (iv) any suit between the Borrower or any of its
Subsidiaries and any Governmental Authority or Person or formal demand made upon
the Borrower or any of its Subsidiaries by any Governmental Authority or Person
which if adversely determined would have a material adverse effect on the
property, business, profits or conditions (financial or otherwise) of a Borrower
and its Subsidiaries taken as a whole.
(5) Prompt written notice in the event that: (i) a Borrower or an
ERISA Affiliate shall fail to make any payment when due and payable under any
Plan or (ii) the Borrower or an ERISA Affiliate shall receive notice from the
Internal Revenue Service or the Department of Labor that it shall have failed to
meet the minimum funding requirements of any Plan, and include therewith a copy
of such notice.
(6) Copies of any request for a waiver of the funding standards or
any extension of the amortization periods required by Sections 303 and 304 of
ERISA, or Section 402 of the Code, promptly after any such request is submitted
to the Department of Labor or the Internal Revenue Service, as the case may be.
(7) Promptly after a Reportable Event occurs which may result in a
termination of a Plan, or the Borrower or an ERISA Affiliate receives notice
that the PBGC has instituted or intends to institute proceedings under Section
4042 of ERISA to terminate a Plan, a copy of any notice of such Reportable Event
which is filed with the PBGC, or any notice delivered by the PBGC evidencing its
institution of such proceedings or its intent to institute such proceedings, or
any notice to the PBGC that a Plan is to be terminated, as the case may be.
(8) Promptly upon becoming aware of the occurrence of any Prohibited
Transaction in connection with any Plan, a written notice specifying the nature
thereof, what action the
(40)
Borrower or an ERISA Affiliate is taking or proposes to take with respect
thereto, and, when known, any action taken by the Internal Revenue Service with
respect thereto.
(9) Promptly after the filing thereof, copies of each annual report
required to be filed pursuant to Section 103 of ERISA and copies of any other
reports required to be filed with respect to any Plan.
(10) Within ten (10) days after the filing thereof, copies of all
periodic reports which any Borrower or any of its Subsidiaries may now or
hereafter be required to file with or deliver to any securities exchange or to
the Securities and Exchange Commission, or any other Governmental Authority
succeeding to the functions thereof.
(11) Promptly upon request therefor, such other information and
reports relating to the financial condition and operations of the Borrower or
any of its Subsidiaries as the Agent or a Bank at any time or from time to time
may reasonably request.
5.2 Corporate Existence; Continuance of Business. Preserve and
--------------------------------------------
maintain its corporate existence and its rights, privileges and franchises,
continue to engage in substantially the same line of business in which it was
engaged on the date hereof and its right to conduct business in all states in
which the nature of its business requires qualification to do business;
provided, however, that the Borrower may add a line of business to the extent
such addition is the result of a Permitted Acquisition and provided further,
however, that nothing herein shall prevent the dissolution or termination of the
existence, rights, privileges or franchises of a Subsidiary if the Board of
Directors of the Borrower shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Borrower and its
Subsidiaries taken as a whole. In the event of dispute between the Borrower or
any of its Subsidiaries and the Agent as to when qualification is necessary, the
decision of the Agent in its reasonable judgment shall control.
5.3 Payment of Obligations. Pay and discharge all taxes, assessments
----------------------
and governmental charges or levies imposed upon it or upon its income and
profits, or upon any property belonging to it, prior to the date upon which
penalties attach thereto except
(41)
where contested in good faith and by proper proceedings if appropriate reserves
are maintained with respect thereto.
5.4 Insurance. Maintain insurance, at all times throughout the term
---------
of this Agreement, on its property with responsible insurance carriers licensed
or authorized to do business in the State of New York and each state in which
the Borrower or any of its Subsidiaries conducts business against such risks,
loss, damage and liability (including liability to third parties) and in such
amounts as is customarily maintained by similar businesses, including, without
limitation, public liability and workers' compensation insurance, and file with
the Agent within ten (10) Business Days after request therefor a certificate of
such insurance then in effect on Acord form or other similar form acceptable to
the Agent.
5.5 Payment of Indebtedness and Performance of Obligations. Pay and
------------------------------------------------------
discharge promptly all lawful claims for labor, materials and supplies or
otherwise which, if unpaid, would have a material adverse effect on the
operations, business or financial or other condition of the Borrower and its
Subsidiaries taken as a whole except where contested in good faith and by proper
proceedings if appropriate reserves are maintained with respect thereto.
5.6 Condition of Property. At all times, maintain, protect and keep
---------------------
in good repair, working order and condition, normal wear and tear excepted, all
property of the Borrower and its Subsidiaries necessary and useful in the
judgment of the Borrower and its Subsidiaries in connection with the proper
conduct of the business of the Borrower and its Subsidiaries.
5.7 Observance of Legal Requirements. Observe and comply in all
--------------------------------
respects with all material laws (including but not limited to ERISA),
ordinances, orders, judgments, rules, regulations, certifications, franchises,
permits, licenses, directions and requirements of all governmental bodies which
now or at any time thereafter may be applicable to the Borrower or any of its
Subsidiaries.
5.8 Books and Records. Keep proper books of record and account.
-----------------
(42)
5.9 Inspection. At any reasonable times and from time to time, upon
----------
reasonable notice permit the Agent and the Banks, through officers or employees
or authorized representatives to visit and inspect any of the properties of the
Borrower or any of its Subsidiaries, and to examine the minute books, books of
account, reports and other records of the Borrower and its Subsidiaries and make
copies thereof or extracts therefrom, and discuss the affairs, finances and
accounts of the Borrower and its Subsidiaries with its principal officers or
with such Borrower's independent accountants.
(43)
5.10 Compliance with Environmental Laws; Indemnity.
---------------------------------------------
(a) Use and operate all of its facilities and properties in material
compliance with all Environmental Laws, keep all necessary permits, approvals,
certificates, licenses and other authorizations relating to environmental
matters in effect and remain in material compliance therewith, and handle all
Hazardous Materials in material compliance with all applicable Environmental
Laws;
(b) Immediately notify the Agent and the Banks, and provide copies
upon receipt, of all written claims, complaints, notices or inquires relating to
the condition of its facilities and properties relating to, or compliance with,
Environmental Laws, and promptly cure and have dismissed with prejudice to the
satisfaction of the Agent and the Bank any actions and proceedings relating to
compliance with Environmental Laws;
(c) Provide such information and certifications which the Agent or a
Bank may reasonably request from time to time to evidence compliance with this
Section 5.10; and
(d) Indemnify the Agent and the Banks for, and hold the Agent and the
Banks harmless from all liability, cost and expenses (including reasonable
attorney's fees) incurred by, or imposed upon, or sought to be imposed upon the
Bank arising out of the breach by the Borrower of any of the covenants set forth
in this Section 5.10. The provisions of this paragraph shall survive payment in
full of the Revolving Credit Loans.
5.11 Agent's Fee. The Borrower agrees to pay a fee to the Agent in
-----------
the amount of $10,000 per annum and an additional $10,000 for each bank added to
this Agreement at the Borrower's request or with the Borrower's consent payable
on the date of this Agreement and each annual anniversary thereof.
SECTION 6. FINANCIAL COVENANTS
-------------------
The Borrower hereby agrees that, so long as the Revolving Credit
Commitments remain in effect, a Revolving Credit Note, any Letter of Credit or
any Acceptance Draft remains or remain outstanding and unpaid, or any other
amount is owing to the Agent
(44)
or a Bank hereunder, the Borrower and its Subsidiaries, on a consolidated basis,
will comply with the following financial covenants:
6.1 Quick Ratio.
-----------
(a) Maintain at all times during the periods indicated, a Quick Ratio
of at least:
.85:1 from closing through 2/28/99, and
.95:1 from 3/1/99 and at all times thereafter
As used herein, Quick Ratio shall mean a ratio of (1) the sum of (a) cash on
hand or on deposit in banks, (b) readily marketable securities issued by the
United States of America and (c) accounts receivable not more than ninety (90)
days past due to (2) current liabilities. For purposes of calculating
compliance with this covenant, (i) the current portion of the Revolving Credit
Loans shall be included as a current liability and (ii) any portion of the
Revolving Credit Commitments used to fund a Permitted Acquisition shall be
included as a current liability to the extent of 20% of the amount of such
Revolving Credit Loans used for such purpose each [fiscal] year on a cumulative
basis.
6.2 Leverage Ratio. Maintain at all times Leverage Ratio not to
--------------
exceed 2.75:1.
6.3 Tangible Net Worth. Maintain Tangible Net Worth (including
------------------
Subordinated Debt) at all times during the Periods indicated of at least:
- $40,000,000 from closing to 2/27/97
- 2/28/97 to 2/27/98 - $40,000,000 plus 50% of '97 fiscal year 1997
net income ("'97 Base")
- 2/28/98 to 2/27/99 - '97 Base plus 75% of '98 fiscal year 1998
net income ("'98 Base")
- 2/28/99 to 2/27/00 - '98 Base plus 75% of '99 fiscal year 1999
net income ("'99 Base")
- 2/28/00 to 2/27/01-'99 Base plus 75% of fiscal year 2000 net
income
In addition, 75% of the net proceeds received by the Borrower or its
Subsidiaries from any equity offering, will be added to the
(45)
applicable base Tangible Net Worth amount required as set forth above for the
next fiscal year.
6.4 Liabilities to Tangible Net Worth. Maintain at all times a ratio
---------------------------------
of total liabilities to the sum of Tangible Net Worth plus long term portions of
Subordinated Debt not to exceed 1.25:1.
Except as specifically otherwise provided, all financial covenants
shall be calculated in accordance with GAAP consistently applied.
(46)
SECTION 7. NEGATIVE COVENANTS
------------------
The Borrower hereby agrees that, so long as the Revolving Credit
Commitments remain in effect, a Revolving Credit Note, any Letter of Credit or
any Acceptance Draft remains or remain outstanding and unpaid, or any other
amount is owing to a Bank hereunder, the Borrower will not, nor will it permit
any Subsidiary to:
7.1 Indebtedness for Borrowed Money. Incur, or permit to exist, any
-------------------------------
indebtedness for borrowed money except (i) indebtedness incurred pursuant to
borrowings hereunder, (ii) purchase money indebtedness secured by Liens
described in Section 7.2(iv) hereof, (iii) indebtedness existing on the date
hereof and reflected in the financial statements referred to in Section 3.1
hereof and extensions, renewals and refinancings thereof (without increase in
principal amount) other than amounts owing to Fleet Bank, N.A. under a revolving
credit facility which shall be repaid in full and terminated prior to or on the
date hereof, (iv) indebtedness incurred in the ordinary course of business
exclusive of that incurred in the borrowing of money, (v) the Subordinated
Indebtedness, and (vi) other indebtedness which shall not exceed in the
aggregate, for the Borrower and all Subsidiaries, at any time outstanding, the
sum of $500,000.
7.2 Liens. Create, assume or permit to exist, any Lien on any of its
-----
property or assets now owned or hereafter acquired except (i) Liens in favor of
the Agent for the benefit of the Banks; (ii) other Liens incidental to the
conduct of its business or the ownership of its property and assets which were
not incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not materially impair the use thereof in the
operation of its business; (iii) Liens for taxes or other governmental charges
which are not delinquent or which are being contested in good faith and for
which a reserve shall have been established in accordance with GAAP; (iv)
purchase money Liens on fixed assets granted to secure either the unpaid balance
of the purchase price thereof or a Revolving Credit Loan made to finance the
purchase of such assets, all to the extent permitted under Section 7.7 hereof;
and (v) Liens existing on the date hereof and disclosed in writing to the Banks
as indicated on Schedule I hereto.
(47)
7.3 Loans and Investments. Lend or advance money, credit or property
---------------------
to or invest in (by capital contribution, loan, purchase or otherwise) any firm,
corporation, or other Person except (i) investments in United States Government
obligations, certificates of deposit of any banking institution with combined
capital and surplus of at least $200,000,000 and commercial paper of the highest
credit rating given by Moody's Investors Service, Inc. or Standard and Poors
Corporation, (ii) each Borrower may make loans provided that the aggregate
thereof at any time outstanding and owing by any one Person shall not exceed
$100,000 and (iii) investments in stocks, securities and assets of other
corporations in connection with any transaction not otherwise qualifying as a
Permitted Acquisition, the result of which will constitute an investment by the
Borrower in a new Subsidiary or a merger in which the Borrower is the surviving
corporation; provided, however, that the aggregate of such investments shall not
exceed $1,000,000, and provided, further, that the Borrower shall cause any new
Subsidiary which is so acquired to guarantee payment to the Banks of all of the
Borrower's obligations arising hereunder and (iv) Permitted Acquisitions.
7.4 Fundamental Changes. Wind up, liquidate, or dissolve itself,
-------------------
reorganize, merge or consolidate with or into, or convey, sell, assign,
transfer, lease, or otherwise dispose of (whether in one transaction or a series
of transactions) all or substantially all of its assets, (whether now owned or
hereafter acquired other than sales of inventory and obsolete equipment in the
ordinary course of business) to any Person, or acquire all or substantially all
of the assets or the business of any Person except: the Borrower or a wholly
owned Subsidiary may merge into or consolidate with a wholly owned Subsidiary,
provided in each case that immediately after giving effect thereto, the
surviving entity is obligated under this Agreement and no event shall occur and
be continuing which constitutes a Default or an Event of Default.
7.5 Contingent Liabilities. Assume, endorse, be or become liable for
----------------------
or guarantee the obligations of any Person if, as a result thereof, the
aggregate of such contingent liabilities with respect to any one Person would
exceed $100,000 excluding, however, (a) the endorsement of negotiable
instruments for deposit or collection in the ordinary course of business, and
(b) guarantees given by the Borrower for obligations of its Subsidiaries and
(48)
guarantees given by Subsidiaries for the obligations of the Borrower.
7.6 Sales of Receivables; Sale - Leasebacks. Sell, discount or
---------------------------------------
otherwise dispose of notes, accounts receivable or other obligations owing to
the Borrower, with or without recourse, except for the purpose of collection in
the ordinary course of business; or sell any asset pursuant to an arrangement to
thereafter lease such asset from the purchaser thereof.
7.7 Lease Payments. Expend in the aggregate for the Borrower and all
--------------
Subsidiaries in excess of $4,000,000 in any fiscal year for the lease, rental or
hire of real or personal property provided the limitation shall exclude leases
that have been or should be capitalized in accordance with GAAP.
7.8 Dividends. Declare or pay any dividends on its capital stock
---------
(other than dividends payable solely in shares of its own common stock), or
purchase, redeem, retire or otherwise acquire any of its capital stock at any
time outstanding, except that (i) the Borrower may, in any fiscal year, purchase
shares of its own common stock in an amount not to exceed 10% of the issued and
outstanding shares of such stock, excluding any shares purchased by an employee
stock ownership plan formed by the Borrower, (ii) any Subsidiary wholly-owned by
the Borrower may declare and pay dividends to, and purchase, redeem, retire and
otherwise acquire its capital stock from, the Borrower and (iii) the Borrower
may declare and pay cash dividends solely out of 25% of fiscal consolidated net
income (minus 100% of any loss) after the date hereof on a cumulative basis.
7.9 Supply and Purchase Contracts. Enter into or be a party to any
-----------------------------
contract for the purchase of materials, supplies or other property if such
contract requires that payment for such materials, supplies or other property be
made whether or not delivery of such materials, supplies or other property is
ever made or tendered.
7.10 Nature of Business. Materially alter the nature of a
------------------
Borrower's or a Subsidiary's business.
7.11 Stock of Subsidiaries. Sell or otherwise dispose of any
---------------------
Subsidiary (except in connection with a merger or consolidation
(49)
of a Subsidiary into the Borrower or another Subsidiary or with the dissolution
of a Subsidiary) or permit a Subsidiary to issue any additional shares of its
capital stock except pro rata to its stockholders.
7.12 Liabilities of Subsidiaries. Notwithstanding any prior
---------------------------
provision hereof which may indicate the contrary, permit a Subsidiary to have
any liabilities except liabilities incurred in the ordinary course of business
but not in connection with the borrowing of money, except for any guarantee of
the obligations of the Borrower hereunder.
7.13 Transactions with Affiliates. Except for existing
----------------------------
employment agreements and any stock options or warrants or except in the
ordinary course of and pursuant to the reasonable requirements of the Borrower's
or any of its Subsidiary's business and upon fair and reasonable terms no less
favorable to the Borrower or such Subsidiary than would obtain in a comparable
arms' length transaction with a Person not an Affiliate, enter into any
transaction, including, without limitation, the purchase, sale, or exchange of
property or the rendering of any service, with any Affiliate. "Affiliate" shall
mean a Person (1) which directly or indirectly controls, or is controlled by, or
is under common control with the Borrower or any of its Subsidiaries, (2) which
directly or indirectly beneficially owns or holds five (5%) percent or more of
any class of voting stock of the Borrower or any of its Subsidiaries, or (3)
five (5%) percent or more of the voting stock of which is directly or indirectly
beneficially owned or held by the Borrower or any of its Subsidiaries. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise.
7.14 ERISA. (a) Terminate any Plan so as to result in any
-----
material liability of the Borrower to the PBGC, (b) engage in or permit any
Person to engage in any Prohibited Transaction involving any Plan which would
subject the Borrower or any of its Subsidiaries to any material tax, penalty or
other liability, (c) incur or suffer to exist any material "accumulated funding
deficiency" (as defined in Section 202 of ERISA), whether or not waived,
involving any Plan, or (d) allow or suffer to exist any event or condition,
which presents a material risk of incurring a material liability of the Borrower
to the PBGC by reason of termination of any Plan.
(50)
7.15 Change of Management. Permit Arthur Nadata, Richard
--------------------
Schuster and Irving Lubman at any time not to be active on a substantially full
time basis in the affairs of the Borrower by maintaining the positions of
President/Chief Operating Officer, Vice President/Secretary and Chairman of the
Board, respectively, or their equivalents, provided that the failure of any one
or two of such individuals to comply with this Section 7.15 shall not be deemed
a violation of this Section 7.15.
SECTION 8. EVENTS OF DEFAULT
-----------------
Upon the occurrence of any of the following events (each an "Event of
Default"):
(a) The Borrower shall fail to pay within five (5) days of the due
date thereof any interest under or principal of the Revolving Credit Note; any
other amount payable hereunder including, without limitation, amounts necessary
to reimburse the Agent for a draw under a Letter of Credit or payment of an
Acceptance Draft or the Borrower shall default under any other agreement,
instrument or obligation made with or in favor of or owing to the Agent or a
Bank (including any applicable grace period or notice requirement); provided,
however, that the five-day grace period provided in this paragraph for payment
of interest and principal under the Revolving Credit Notes and for reimbursement
obligations with respect to Letters of Credit and Acceptance Drafts shall not
affect the obligation of the Borrower to pay interest for such period at the
rate in effect prior to maturity with respect to payments due under the
Revolving Credit Notes and at the rates provided in Section 2.22 with respect to
Letters of Credit and Acceptance Drafts; or
(b) Any representation or warranty made or deemed made by the Borrower
herein or which is contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this Agreement shall
prove to have been false 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 of its agreements set forth in Sections 5.11, 6 or 7 hereof; or
(51)
(d) The Borrower shall default in the observance or performance of any
other agreement contained in this Agreement and such default shall continue
unremedied for a period of ten (10) days after written notice thereof is given
to the Borrower by the Agent; or
(e) With respect to any indebtedness for borrowed money, which
indebtedness is in an outstanding principal amount in excess of One Hundred
Thousand and 00/100 ($100,000.00) Dollars (other than the Revolving Credit
Notes), the Borrower or any Subsidiary shall (i) default in any payment of any
such indebtedness beyond the grace period, if any, provided in the instrument or
agreement under which such indebtedness was created; or (ii) default in the
observance or performance of any other agreement or condition relating to any
such indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto or any event shall occur or condition exist, in
each case the effect of which default or other event or condition is to entitle
the holder or holders of such indebtedness (or a trustee or agent on behalf of
such holder or holders) to cause such indebtedness to become due prior to its
stated maturity; or
(f) (i) The Borrower or any of its Subsidiaries 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 a Borrower or any of
its Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Borrower or any of its
Subsidiaries 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 sixty (60) days; or (iii) there shall be commenced
against the Borrower or any of its Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or
(52)
any substantial part of its assets which results in the entry of an order for
any such relief which shall have not been vacated, discharged, or stayed or
bonded pending appeal within twenty (20) days from the entry thereof; or (iv)
the Borrower or any of its Subsidiaries 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) of this Section 8(f); or (v) the Borrower
or any of its Subsidiaries shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due; or
(g) Any of the following events occur or exist with respect to the
Borrower or an ERISA Affiliate: (1) any Prohibited Transaction involving any
Plan, (2) any Reportable Event shall occur with respect to any Plan, (3) a
notice of intent to terminate any Plan shall be filed or the termination of any
Plan, (4) any event or circumstance exists which might constitute grounds
entitling the PBGC to institute proceedings for the termination of, or for the
appointment of a trustee to administer, any Plan, or the institution by the PBGC
of any such proceedings, or (5) the complete or partial withdrawal from any
Multiemployer Plan, and in each case above, such event or condition, together
with all other events or conditions listed above, if any, would reasonably be
expected to subject the Borrower or any Subsidiary of the Borrower to any tax,
penalty, or other liability to a Plan, the PBGC or otherwise (or a combination
thereof) which in the aggregate exceed or may exceed One Hundred Thousand and
00/100 ($100,000.00) Dollars; or
(h) The rendition by any court of a final judgment or judgments
against the Borrower or any of its Subsidiaries which shall not be
satisfactorily stayed, discharged, vacated or set aside within sixty (60) days
of the making thereof; or the attachment of any property of the Borrower or any
of its Subsidiaries which has not been released or provided for to the
reasonable satisfaction of the Agent within sixty (60) days after the making
thereof, which judgment or attachment is for an amount of $100,000 or more; or
(i) A Loan Document shall cease to be in full force and effect, shall
be declared null and void, a default shall occur thereunder or any party thereto
shall assert that it has no further obligation to a Bank or the Agent thereunder
(unless such party has
(53)
been discharged from its obligation under such Loan Document by a Bank or the
Agent in writing); or
(j) Any representation or warranty made or deemed herein or in any
Loan Document or which is contained in any certificate, document or financial or
other statement furnished at any time under or in connection with this Agreement
shall prove to have been false in any material respect on or as of the date
made or deemed made.
then, in any such event, any or all of the following actions shall be taken:
(i) the Agent with the written consent of the Banks may, and upon the written
request of the Banks shall by notice of default to the Borrower, declare the
Revolving Credit Commitments to be terminated forthwith, whereupon the Revolving
Credit Commitments and all obligations of the Banks to make Revolving Credit
Loans, issue Letters of Credit or create Acceptance Drafts, shall immediately
terminate; (ii) the Agent with the written consent of the Banks may, and upon
the written request of the Banks shall, by notice of default to the Borrower,
declare the entire amounts due under the Revolving Credit Notes (with accrued
interest thereon) and all other amounts owing under this Agreement to be
immediately due and payable; provided, however, that upon the happening of an
event specified in subsection (f) of this Section 8, the obligation of the Banks
to make further Revolving Credit Loans and the Agent to issue Letters of Credit
and create Acceptance Drafts shall terminate and the Revolving Credit Notes
shall be immediately due and payable without declaration or other notice to the
Borrower. Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 9. AGENT
-----
In order to expedite the transactions contemplated by this Agreement,
Mellon Bank, N.A. is hereby appointed to act as Agent on behalf of the Banks.
Each of the Banks and each subse quent holder of any Revolving Credit Note or
issuer of any Letter of Credit, irrevocably authorizes the Agent to take such
action on its behalf and to exercise such powers hereunder and under the Loan
Documents as are specifically delegated to or required of the Agent by the terms
hereof and the terms thereof together with such powers as are reasonably
incidental thereto. Neither the Agent nor any of
(54)
its directors, officers, employees or agents shall be liable as such for any
action taken or omitted to be taken by it or them hereunder or under any of the
Loan Documents or in connection herewith or therewith (a) at the request or with
the approval of the Banks (or, if otherwise specifically required hereunder or
thereunder, the consent of the Banks) or (b) in the absence of its or their own
gross negligence or willful misconduct.
The Agent is hereby expressly authorized on behalf of the Banks,
without hereby limiting any implied authority, (a) to receive on behalf of each
of the Banks any payment of principal of or interest on the Revolving Credit
Notes outstanding hereunder and all other amounts accrued hereunder paid to the
Agent, and promptly to distribute to each Bank its proper share of all payments
so received, (b) to distribute to each Bank copies of all notices, agreements
and other material as provided for in this Agreement or in the other Loan
Documents as received by such Agent and (c) to take all actions with respect to
this Agreement and the other Loan Documents as are specifically delegated to the
Agent.
In the event that (a) the Borrower fails to pay when due the principal
of or interest on any Revolving Credit Note, any amount payable under any Letter
of Credit or Acceptance Draft, or any fee payable hereunder or (b) the Agent
receives written notice of the occurrence of a Default or an Event of Default,
the Agent within a reasonable time shall give written notice thereof to the
Banks; and shall take such action with respect to such Event of Default or other
condition or event as it shall be directed to take by the Banks; provided,
however, that, unless and until the Agent shall have received such directions,
the Agent may take such action or refrain from taking such action hereunder or
under any other Loan Documents with respect to a Default or Event of Default as
it shall deem advisable in the best interests of the Banks.
The Agent shall not be responsible in any manner to any of the Banks
for the effectiveness, enforceability, perfection, value, genuineness, validity
or due execution of this Agreement, the Revolving Credit Notes or any of the
other Loan Documents or any other agreements or certificates, requests,
financial statements, notices or opinions of counsel or for any recitals,
statements, warranties or representations contained herein or in any such
instrument or be under any obligation to ascertain or inquire as to the
performance or observance of any of the terms,
(55)
provisions, covenants, conditions, agreements or obligations of this Agreement
or any of the other Loan Documents or any other agreements on a part of the
Borrower and, without limiting the generality of the foregoing, the Agent shall,
in the absence of knowledge to the contrary, be entitled to accept in good faith
any certificate furnished pursuant to this Agreement or any of the other Loan
Documents as conclusive evidence of the facts stated therein and shall be
entitled to rely in good faith on any note, notice, consent, certificate,
affidavit, letter, telegram, teletype message, statement, order or other
document which it believes in good faith to be genuine and correct and to have
been signed or sent by the proper person or persons. It is understood and agreed
that the Agent may exercise its rights and powers under other agreements and
instruments to which it is or may be a party, and engage in other transactions
with the Borrower, as though it were not Agent of the Banks hereunder.
The Agent shall promptly give notice to the Banks of the receipt or
sending of any notice, schedule, report, projection, financial statement or
other document or information pursuant to this Agreement or any of the other
Loan Documents and shall promptly forward a copy thereof to each Bank.
Neither the Agent nor any of its directors, officers, employees or
agents shall have any responsibility to the Borrower on account of the failure
or delay in performance or breach by any Bank other than the Agent of any of its
obligations hereunder or to any Bank on account of the failure of or delay in
performance or breach by any other Bank or the Borrower of any of their
respective obligations hereunder or in connection herewith.
The Agent may consult with legal counsel selected by it in connection
with matters arising under this Agreement or any of the other Loan Documents and
any action taken or suffered in good faith by it in accordance with the opinion
of such counsel shall be full justification and protection to it. The Agent may
exercise any of its powers and rights and perform any duty under this Agreement
or any of the other Loan Documents through agents or attorneys.
The Agent and the Borrower may deem and treat the payee or most recent
assignee pursuant to Section 10.3 hereof, as applicable, of any Revolving Credit
Note as the holder thereof
(56)
until written notice of transfer shall have been delivered as provided in
Section 10.3 hereof by such payee to the Agent and the Borrower.
With respect to the Revolving Credit Loans made hereunder, the
Revolving Credit Notes issued to it and any other extension of credit applicable
to it, the Agent in its individual capacity and not as an Agent shall have the
same rights, powers and duties hereunder and under any other Agreement executed
in connection herewith as any other Bank and may exercise the same as though it
were not the Agent, and the Agent and its affiliates may accept deposits from,
lend money to and generally engage in any kind of business with the Borrower or
other affiliate thereof as if it were not the Agent.
Each Bank agrees (i) to reimburse the Agent in the amount of such
Bank's pro rata share (based on its Revolving Credit Commitment hereunder) of
any expenses incurred for the benefit of the Banks by the Agent, including
counsel fees and compensation of agents and employees paid for services rendered
on behalf of the Banks, not reimbursed by the Borrower and (ii) to indemnify and
hold harmless the Agent and any of its directors, officers, employees or agents,
on demand, in the amount of its pro rata share, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against it in its capacity as the Agent or
any of them in any way relating to or arising out of this Agreement or any of
the other Loan Documents or any action taken or omitted by it or any of them
under this Agreement or any of the other Loan Documents, to the extent not
reimbursed by the Borrower; provided, however, that no Bank shall be liable to
the Agent for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the gross negligence or willful misconduct of the Agent or any of its
directors, officers, employees or agents.
Each Bank acknowledges that it has, independently and without reliance
upon the Agent or any other Bank and based on such documents and information as
it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement and any other Loan Document to which such Bank is a party.
Each Bank
(57)
also acknowledges that it will, independently and without reliance upon the
Agent or any other Bank and based on such documents and information as it shall
deem appropriate at the time, continue to make its own decisions in taking or
not taking action under or based upon this Agreement, any other Loan Document,
any related agreement or any document furnished hereunder.
Subject to the appointment and acceptance of a successor Agent as
provided below, the Agent may resign at any time by notifying the Banks and the
Borrower. Upon any such resignation, the Banks shall have the right to appoint
a successor Agent. If no successor Agent shall have been so appointed by such
Banks and shall have accepted such appointment within thirty (30) days after the
retiring Agent gives notice of its resignation, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent which shall be a bank with an
office (or an affiliate with an office) in the New York metropolitan area having
a combined capital and surplus of at least $500,000,000. Upon the acceptance of
any appointment as Agent hereunder by a successor bank, such successor shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent and the retiring Agent shall be discharged from
its duties and obligations hereunder and under each of the other Loan Documents.
After any Agent's resignation hereunder, the provisions of this Article shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Agent.
The Banks hereby acknowledge that the Agent shall be under no duty to
take any discretionary action permitted to be taken by the Agent pursuant to the
provisions of this Agreement or any of the other Loan Documents unless it shall
be requested in writing to do so by the Required Banks.
SECTION 10. MISCELLANEOUS
-------------
10.1 Notices. Notices, consents and other communications provided
-------
for herein shall be in writing and shall be delivered or mailed (or in the case
of telex or facsimile communication, delivered by telex, telecopier or other
telecommunications equipment, with receipt confirmed) addressed,
(58)
(a) if to the Borrower, any Guarantor or any of their respective
subsidiaries at Nu Horizons Electronics Corp., 70 Maxess Road, Melville, New
York 11747, Attn.: Mr. Paul Durando, Vice President/Finance with a copy to
Blau, Kramer, Wactlar & Lieberman, P.C., 100 Jericho Quadrangle, Suite 225,
Jericho, New York 11753, Attn: Nancy Lieberman, Esq.
(b) if to the Agent, Mellon Bank, N.A., 701 Market Street,
Philadelphia, Pennsylvania 19106, Attn.: Ms. Helen Goode, Vice President, with
a copy to Mellon Bank, N.A., 165 EAB Plaza, West Tower - 6th Floor, Uniondale,
New York 11556, Attn.: Mr. Jeffrey B. Carstens, Vice President; and
(c) if to Key, at KeyBank National Association, 127 Public Square,
Cleveland, Ohio 44114, Attn.: Ms. Marianne Meil
Vice President.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if hand delivered or three (3) Business Days after being sent by
registered or certified mail, postage prepaid, return receipt requested, if by
mail, or upon receipt during normal business hours on any Business Day (or
otherwise the next Business Day) if by any telex, facsimile or other
telecommunications equipment, in each case addressed to such party as provided
in this section 10.1 or in accordance with the latest unrevoked direction from
such party.
10.2 Survival of Agreement. All covenants, agreements,
---------------------
representations and warranties made by the Borrower or any of its Subsidiaries
herein and in the certificates or other instruments prepared or delivered in
connection with this Agreement or any other Loan Document, shall be considered
to have been relied upon by the Banks and shall survive the making by the Banks
of the Revolving Credit Loans and the execution and delivery to the Banks of the
Revolving Credit Notes and occurrence of any other extension of credit and shall
continue in full force and effect as long as the principal of or any accrued
interest on the Revolving Credit Notes or any other fee or amount payable under
the Revolving Credit Notes or this Agreement or any other Loan Document is
outstanding and unpaid and so long as any Banks' Revolving Credit Commitment has
not been terminated.
(59)
10.3 Successors and Assigns: Participations.
--------------------------------------
(a) Whenever in this Agreement any of the parties hereto is referred
to, such reference shall be deemed to include the successors and assigns of such
party; and all covenants, promises and agreements by or on behalf the Borrower,
any Guarantor, any ERISA Affiliate, any Subsidiary of any thereof, the Agent or
the Banks, that are contained in this Agreement shall bind and inure to the
benefit of their respective successors and assigns. Without limiting the
generality of the foregoing, the Borrower specifically confirms that the Agent
and each Bank may at any time and from time to time assign or pledge or
otherwise grant a security interest in any Revolving Credit Loan or any
Revolving Credit Note or Acceptance Draft (or any part thereof) to any Federal
Reserve Bank. The Borrower may not assign or transfer any of its rights or
obligations hereunder without the written consent of all the Banks.
(b) Each Bank, without the consent of the Borrower, may sell
participations to one or more banks or other entities in all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Revolving Credit Commitment) and the Revolving Credit Loans
owing to it and undrawn Letters of Credit and Acceptance Drafts and the
Revolving Credit Notes held by it); provided, however, that (i) such Bank's
obligations under this Agreement (including, without limitation, its Revolving
Credit Commitment) shall remain unchanged, (ii) such Bank shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the banks or other entities buying participations shall be entitled to the
cost protection provisions contained in Sections 2.10 (except to the extent that
application of such Section 2.10 to such banks and entities would cause the
Borrower to make duplicate payments thereunder) and Section 2.7 hereof, and (iv)
the Borrower, the Agent and the other Banks shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and obligations
under this Agreement.
(c) Each Bank may assign by novation as of the date of assignment, to
any one or more banks or other entities with the consent of the Borrower (which
consent shall be given in its sole discretion unless the Agent waives its
additional fee for the assignment to such bank or banks in which case consent
will not be unreasonably withheld) and the Agent (which consent will not be
(60)
unreasonably withheld) (except that in the case of an assignment by a Bank to
one of its Affiliates or to another Bank no such consent of the Agent shall be
required), all or a portion of its interests, rights and obligations under this
Agreement and the other Loan Documents (including, without limitation, all or a
portion of its Revolving Credit Commitment and the same portion of the Revolving
Credit Loans and undrawn Letters of Credit and Acceptance Drafts at the time
owing to it and the Revolving Credit Note held by it), provided, however, that
(i) each such assignment shall be of a constant, and not a varying, percentage
of all of the assigning Bank's rights and obligations under this Agreement,
which shall include the same percentage interest in the Revolving Credit Loans,
Letters of Credit, Acceptance Drafts and Revolving Credit Notes, (ii) the amount
of the Revolving Credit Commitment of the assigning Bank being assigned pursuant
to each such assignment (determined as of the date the Assignment and Acceptance
with respect to such assignment is delivered to the Agent) shall be in a minimum
principal amount of $3,000,000 Revolving Credit Commitment of such Bank and
(iii) the parties to each such assignment shall execute and deliver to the
Agent, for its acceptance and recording in the Register (as defined below), an
assignment and acceptance in form and substance acceptable to the Agent (an
"Assignment and Acceptance"), together with any Revolving Credit Note subject to
such assignment and a processing and recordation fee of $2,500.00 payable by the
assigning Bank. Upon such execution, delivery, acceptance and recording and
after receipt of the written consent of the Agent, from and after the effective
date specified in each Assignment and Acceptance, which effective date shall be
at least five (5) Business Days after the execution thereof, (x) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank hereunder
and under the other Loan Documents and (y) the Bank which is assignor thereunder
shall, to the extent provided in such Assignment and Acceptance, be released
from its obligations under this Agreement and the other Loan Documents (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of an assigning Bank's rights and obligations under this Agreement, such Bank
shall cease to be a party hereto and thereto).
(d) By executing and delivering an Assignment and Acceptance, the Bank
which is assignor thereunder and the assignee thereunder confirm to, and agree
with, each other and the other
(61)
parties hereto as follows: (i) other than the representation and warranty that
it is the legal and beneficial owner of the interest being assigned thereunder
free and clear of any adverse claim, responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, perfection,
genuineness, sufficiency or value of this Agreement, the other Loan Documents or
any other instrument or document furnished pursuant hereto or thereto; (ii) such
Bank makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower, any Guarantor or any
Subsidiary of any thereof or the performance or observance by the Borrower, any
Guarantor or any Subsidiary of any thereof of any of their respective
obligations under this Agreement or any of the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; (iii) such assignee
confirms that it has received a copy of this Agreement, and the other Loan
Documents, together with copies of financial statements and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, such Bank or any other Bank
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such assignee appoints and authorizes the Agent to
take such action as the Agent on its behalf and to exercise such powers under
this Agreement as are delegated to the Agent by the terms hereof, together with
such powers as are reasonably incidental thereto; and (vi) such assignee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement are required to be performed by it as a Bank.
(e) The Agent shall maintain at its address referred to in Section
10.1 hereof a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Banks and the
Revolving Credit Commitment of, and principal amount of the Loans owing to, each
Bank from time to time (the "Register"). The entries in the Register shall be
conclusive, in the absence of manifest error or written notice to the contrary
delivered in accordance with this Agreement, and the Borrower, the Agent and the
Banks may treat each person whose name is so recorded in the Register as a Bank
hereunder for all purposes of this
(62)
Agreement. The Register shall be available for inspection by the Borrower or any
Bank at any reasonable time and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee together with any Revolving Credit Note subject
to such assignment and the written consent to such assignment, the Agent shall
(i) accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Banks and
the Borrower. Within five (5) Business Days after receipt of such notice, the
Borrower, at its own expense, shall execute and deliver to the Agent in exchange
for each surrendered Note or Notes a new Revolving Credit Note to the order of
such assignee in an amount equal to the Revolving Credit Commitment assumed by
it pursuant to such Assignment and Acceptance and, if the assigning Bank has
retained any Revolving Credit Commitment hereunder, a new Revolving Credit Note
to the order of the assigning Bank in an amount equal to the Revolving Credit
Commitment retained by it hereunder. Such new Revolving Credit Note shall be in
an aggregate principal amount equal to the aggregate principal amount of such
surrendered Revolving Credit Note shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be in substantially the form of
Exhibit A hereto.
(g) Notwithstanding any other provision herein, any Bank may, in
connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 10.03, disclose to the assignee or
participant or proposed assignee or participant, any information relating to the
Borrower furnished to such Bank by or on behalf of the Borrower in connection
with this Agreement; provided, however, that prior to any such disclosure,
each such assignee or participant or proposed assignee or participant shall
agree to preserve the confidentiality of any confidential information relating
to the Borrower received from such Bank.
(h) Nothing in this Section shall limit or restrict the ability of any
Bank to sell, rediscount or otherwise dispose of any Acceptance Draft.
(63)
(i) The annual Agent's fee shall be payable in accordance with the
provisions of Section 5.11 hereof.
10.4 Expenses: Indemnity.
-------------------
(a) The Borrower agrees to pay all reasonable out-of-pocket expenses
incurred by the Agent in connection with the preparation of this Agreement, the
Revolving Credit Notes and the other Loan Documents or with any amendments,
modifications or waivers of the provisions hereof or thereof or incurred by the
Agent or any of the Banks in connection with the enforcement, adjudication or
protection of its rights in connection with this Agreement or any of the other
Loan Documents or with the Loans made or the Revolving Credit Notes or Letters
of Credit or Acceptance Drafts issued hereunder, or in connection with any
pending or threatened action, proceeding, or investigation relating to the
foregoing, including but not limited to the reasonable fees and disbursements of
counsel for the Agent and, in connection with such enforcement or protection,
the reasonable fees and disbursements of counsel for the Banks. The Borrower
further indemnifies the Banks from and agrees to hold them harmless against any
documentary taxes, assessments or charges made by any governmental authority by
reason of the execution and delivery of this Agreement or the Revolving Credit
Notes.
(b) The provisions of this Section 10.4 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Revolving Credit Loans, the invalidity or
unenforceability of any term or provision of this Agreement or the Notes, or any
investigation made by or on behalf of the Agent or any Bank. All amounts due
under this Section 10.04 shall be payable on written demand therefor.
10.5 Applicable Law. THIS AGREEMENT AND THE REVOLVING CREDIT NOTES
--------------
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF
NEW YORK.
10.6 Right of Setoff. If an Event of Default shall have occurred and
---------------
be continuing, upon the request of the Banks each Bank shall and is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional
(64)
or final) at any time held and other indebtedness at any time owing by such Bank
to or for the credit or the account of the Borrower or any Guarantor against any
and all of the obligations of the Borrower now or hereafter existing under this
Agreement and the Revolving Credit Notes held by such Bank, irrespective of
whether or not such Bank shall have made any demand under this Agreement or the
Revolving Credit Notes and although such obligations may be unmatured. Each Bank
agrees to notify promptly the Agent and the Borrower and any applicable
Guarantor after any such setoff and application made by such Bank, but the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of each Bank under this Section are in addition to other
rights and remedies (including, without limitation, other rights of setoff)
which may be available to such Bank.
10.7 Payments on Business Days. Should the principal of or interest
-------------------------
on the Revolving Credit Notes or any fee or other amount payable hereunder
become due and payable on other than a Business Day, payment in respect thereof
may be made on the next succeeding Business Day (except as otherwise specified
in the definition of "Interest Period"), and such extension of time shall in
such case be included in computing interest, if any, in connection with such
payment.
10.8 Waivers; Amendments.
-------------------
(a) No failure or delay of any Bank in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Bank hereunder are cumulative and not exclusive of any rights or remedies
which they may otherwise have. No waiver of any provision of this Agreement or
the Revolving Credit Notes nor consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be authorized as
provided in paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on the Borrower in any case shall entitle it to any other or
further notice or demand in similar or other circumstances. Each holder of any
of the Revolving Credit Notes shall be bound by any amendment,
(65)
modification, waiver or consent authorized as provided herein, whether or not
such Revolving Credit Note shall have been marked to indicate such amendment,
modification, waiver or consent.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower, the Agent and the Banks. Each Bank and holder of
any Revolving Credit Note shall be bound by any modification or amendment
authorized by this Section regardless of whether its Revolving Credit Note shall
be marked to make reference thereto, and any consent by any Bank or holder of a
Revolving Credit Note pursuant to this Section shall bind any person
subsequently acquiring a Revolving Credit Note from it, whether or not such
Revolving Credit Note shall be so marked.
10.9 Severability. In the event any one or more of the provisions
------------
contained in this Agreement or in the Revolving Credit Notes should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall not
in any way be affected or impaired thereby. The parties shall endeavor in good
faith negotiations to replace the invalid, illegal or unenforceable provisions
with valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
10.10 Entire Agreement; Waiver of Jury Trial, Etc.
-------------------------------------------
(a) This Agreement, the Revolving Credit Notes and the other Loan
Documents constitute the entire contract between the parties hereto relative to
the subject matter hereof. Any previous agreement among the parties hereto with
respect to the transactions contemplated hereby is superseded by this Agreement,
the Revolving Credit Notes and the other Loan Documents. Except as expressly
provided in this Agreement, the Revolving Credit Notes or the other Loan
Documents, nothing in this Agreement, the Revolving Credit Notes or in the other
Loan Documents is intended to confer upon any party, other than the parties
hereto, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, the Notes or the other Loan Documents.
(b) THE BORROWER HEREBY EXPRESSLY WAIVES ANY AND EVERY RIGHT TO A
TRIAL BY JURY IN ANY ACTION ON OR RELATED TO ANY OF THE
(66)
LOAN DOCUMENTS OR THE ENFORCEMENT OF ANY OR ALL OF THE SAME. THE BORROWER HEREBY
EXPRESSLY WAIVES ANY RIGHT TO INTERPOSE A COUNTERCLAIM IN ANY ACTION OR
PROCEEDING ON OR RELATED TO THIS AGREEMENT EXCEPT FOR MANDATORY COUNTERCLAIMS.
(c) Each party hereto (i) certifies that no representative, agent or
attorney of any Bank has represented, expressly or otherwise, that such Bank
would not, in the event of litigation, seek to enforce the foregoing waivers and
(ii) acknowledges that it has been induced to enter into this Agreement, the
Revolving Credit Notes or the other Loan Documents, as applicable, by, among
other things, the mutual waivers and certifications herein.
10.11 Confidentiality. The Agent and the Banks agree to keep
---------------
confidential (and to cause their respective officers, directors, employees,
agents and representatives to keep confidential) all information, materials and
documents furnished to the Agent or any Bank (the "Information").
Notwithstanding the foregoing, the Agent and each Bank shall be permitted to
disclose Information (i) to such of its officers, directors, employees, agents,
attorneys and representatives as need to know such Information in connection
with its participation in any of the Transactions or the administration of this
Agreement or the other Loan Documents; (ii) to the extent required by applicable
laws and regulations or by any subpoena or similar legal process, or requested
by any governmental agency or authority; (iii) to the extent such Information
(A) becomes publicly available other than as a result of a breach of this
Agreement, (B) becomes available to the Agent or such Bank on a non-confidential
basis from a source other than the Borrower, any Guarantor or any of their
respective subsidiaries or (C) was available to the Agent or such Bank on a non-
confidential basis prior to its disclosure to the Agent or such Bank by the
Borrower, any Guarantor or any of their respective subsidiaries; (iv) to the
extent the Borrower, any Guarantor or any of their respective subsidiaries shall
have consented to such disclosure in writing; (v) in connection with the sale of
any collateral pursuant to the provisions of any of the other Loan Documents; or
(vi) pursuant to subsection 10.3(g) hereof.
10.12 Submission to Jurisdiction.
--------------------------
(67)
(a) Any legal action or proceeding with respect to this Agreement or
the Revolving Credit Notes or any other Loan Document may be brought in the
courts of the State of New York or of the United States of America for the
Southern District of New York, and, by execution and delivery of this Agreement,
the Borrower and each of the Guarantors hereby accept for themselves and in
respect of their property, generally and unconditionally, the jurisdiction of
the aforesaid courts.
(b) The Borrower and each of the Guarantors hereby irrevocably waive,
in connection with any such action or proceeding, any objection, including,
without limitation, any objection to the laying of venue or based on the grounds
of forum non conveniens, which they may now or hereafter have to the bringing of
any such action or proceeding in such respective jurisdictions.
(c) The Borrower and each of the Guarantors hereby irrevocably consent
to the service of process of any of the aforementioned courts in any such action
or proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to each such person, as the case may be, at its address set
forth in Section 10.1 hereof.
(d) Nothing herein shall affect the right of the Agent or any Bank to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Borrower or any Guarantor in any
other jurisdiction.
10.13 Further Assurances. The Borrower agrees at any time and from
------------------
time to time at its expense, upon request of the Bank, to promptly execute,
deliver, or obtain or cause to be executed, delivered or obtained any and all
further instruments and documents and to take or cause to be taken all such
other action as the Bank may reasonably deem desirable in obtaining the full
benefits of the Loan Documents.
10.14. Counterparts. This Agreement each of the other Loan Documents
------------
may be executed in counterparts of the entire document, or of signature pages to
the document, each of which shall constitute an original but all of which when
taken together shall constitute but one contract, and shall become effective
when copies which, when taken together, bear the signatures of each of
(68)
the parties hereto or thereto shall be delivered to the Agent and the Borrower.
10.15. Headings. Article and Section headings and the Table of
--------
Contents used herein are for convenience of reference only and are not to affect
the construction of, or to be taken into consideration in interpreting, this
Agreement.
(69)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
Borrower:
---------
NU HORIZONS ELECTRONICS CORP.
By:__________________________
Paul Durando
Vice President/Finance
Agent:
------
MELLON BANK, N.A., as Agent
By:___________________________
Paul A. Briggs
Senior Vice President
Banks:
------
MELLON BANK, N.A.
By:___________________________
Paul A. Briggs
Senior Vice President
KEYBANK NATIONAL ASSOCIATION
By:___________________________
Marianne Meil
Vice President
(70)
STATE OF NEW YORK)
:ss.:
COUNTY OF NASSAU )
On the 23rd day of May, 1997, before me personally came PAUL DURANDO, to me
known, who, being by me duly sworn, did depose and say that he resides at c/o 70
Maxess Road, Melville, New York; that he is the Vice President/Finance of NU
HORIZONS ELECTRONICS CORP., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the board
of directors of said corporation.
---------------------------
Notary Public
(71)
STATE OF PENNSYLVANIA )
:ss.:
COUNTY OF )
On the ____ day of May, 1997, before me personally came Paul A.
Briggs, to me known, who, being by me duly sworn, did depose and say that he
resides at c/o 2 Mellon Bank Center, Room 0270, Pittsburgh, Pennsylvania; that
he is a Senior Vice President of MELLON BANK, N.A., the banking institution
described in and which executed the foregoing document and that he signed his
name thereto by authority of such banking institution.
____________________________
Notary Public
(72)
STATE OF OHIO )
:ss.:
COUNTY OF )
On the ____ day of May, 1997, before me personally came Marianne Meil,
to me known, who, being by me duly sworn, did depose and say that she resides at
c/o 127 Public Square, Cleveland, Ohio; that she is a Vice President of KEYBANK
NATIONAL ASSOCIATION , the banking institution described in and which executed
the foregoing document and that she signed her name thereto by authority of such
banking institution.
____________________________
Notary Public
(73)
SCHEDULE I
----------
REVOLVING CREDIT COMMITMENTS (SECTION 2.1)
------------------------------------------
Percentage of
Revolving Total
Credit Revolving Credit
Bank Commitment Commitment
- ---- ---------- ----------------
Mellon Bank, N.A. $24,500,000 70%
KeyBank National Association $10,500,000 30%
(Schedule I/Page 1)
Liens (Section 7.2)
--------------------
NU HORIZONS ELECTRONICS CORP. UCC FILINGS
------------------------------------------
Jurisdiction Secured Party Filing Number Filing Date Description of Collateral
- ------------------------ --------------------------------------- ---------------------- ------------ -------------------------
Suffolk County, NY The CIT Group/Equipment Financing, Inc. 92-10767 6/25/92 computer equipment
Suffolk County, NY The CIT Group/Equipment Financing, Inc. 92-13366 (Amendment 8/06/92 computer equipment
to 92-10767)
Suffolk County, NY Deutsche Credit Corporation 92-11844 7/13/92 computer equipment
Secretary of State, NY The CIT Group/Equipment Financing, Inc. 133062 6/25/92 computer equipment
Secretary of State, NY Deutsche Credit Corporation 155898 7/24/92 computer equipment
Secretary of State, NY Metlife Capital Corporation 237730 11/21/94 computer equipment
Secretary of State, NY Metife Capital Corporation 253875(Amendment to 12/14/94 computer equipment
237730)
Dallas County, TX Petula Associates, Ltd. 003549 4/22/97 inventory, equipment
Secretary of State, MA Deutsch Credit Corporation 104657 7/23/92 computer equipment
Secretary of State, MA The CIT Group/Equipment Financing, Inc. 105152 7/27/92 computer equipment
Secretary of State, CA Integrated Circuit Systems Inc. 9524360152 8/30/95 inventory
Secretary of State, TX [BLANK] 9400083292 4/28/94 property
(Schedule I/Page 2)
NU VISIONS MANUFACTURING INC. UCC FILINGS
-----------------------------------------
Jurisdiction Secured Party Filing Number Filing Date Description of Collateral
- --------------------------- -------------------------------- ------------- ----------- -------------------------
Secretary of State, MA The CIT Group/Equipment 099795 6/25/92 computer equipment
Financing, Inc.
Secretary of State, MA Deutsche Credit Corporation 101824 7/07/92 computer equipment
Secretary of State, MA Metlife Capital Corporation 129000 12/07/92 solder machine
Secretary of State, MA Metlife Capital Corporation 129080 12/07/92 machinery
Springfield City Clerk, MA Amplicon, Inc. 101655 7/10/92 computer equipment
Springfield City Clerk, MA Amplicon,Inc. 101655 (Amendment to 7/24/92 computer equipment
101655)
Springfield City Clerk, MA Nu Horizons Electronics 101878 9/09/92 computer equipment
Springficld City Clerk, MA Metlife Capital Corp. 102145 12/09/92 equipment
Springfield City Clerk, MA Metlife Capital Corp. 102146 12/09/92 solder machine
(Schedule I/Page 3)
EXHIBIT A
REVOLVING CREDIT NOTE
---------------------
[$24,500,000][$10,500,000] [Philadelphia, Pennsylvania][Cleveland, Ohio]
As of ___________, 1997
FOR VALUE RECEIVED, NU HORIZONS ELECTRONICS CORP., (the "Borrower")
promises to pay to the order of [MELLON BANK, N.A.][KEYBANK NATIONAL
ASSOCIATION] (the "Bank") on the Termination Date, at the office of the Bank
specified in Section 10.1 of the Loan Agreement, dated as of ________________,
1997 among the Borrower, the Bank and [Mellon Bank, N.A.][KeyBank National
Association] (as amended from time to time, the "Agreement"; terms defined in
the Agreement shall have their defined meanings when used in the Note), in
lawful money of the United States of America and in immediately available funds
the principal amount of [TWENTY-FOUR MILLION FIVE HUNDRED THOUSAND AND 00/100
($24,500,000) DOLLARS][TEN MILLION FIVE HUNDRED THOUSAND AND 00/100
($10,500,000) DOLLARS] or, if less than such principal amount, the aggregate
unpaid principal amount of all Revolving Credit Loans made by the Bank to the
Borrower pursuant to Section 2.1 of the Agreement. The Borrower further
promises to pay interest in like money on the unpaid principal balance of this
Note from time to time outstanding at such rates, and payable at such times, as
are specified in the Agreement. All Revolving Credit Loans made by the Bank
pursuant to Section 2.1 of the Agreement and all payments of principal thereon
shall be endorsed by the holder of this Note on the schedule annexed hereto,
which holder may add additional pages to such schedule. The aggregate net
unpaid amount of Revolving Credit Loans set forth in such schedule shall be
presumed to be the principal balance hereof. After the stated or any
accelerated maturity hereof, this Note shall bear interest at such rates as are
specified in the Agreement, payable on demand, but in no event in excess of the
maximum rate of interest permitted under applicable law.
This Note is one of the Revolving Credit Notes referred to in the
Agreement, and is entitled to the benefits thereof and may be prepaid in whole
or in part as provided therein.
Upon the occurrence of any one or more of the Events of Default specified
in the Agreement, all amounts then remaining
unpaid on this Note may be declared to be immediately due and payable as
provided in the Agreement.
-5-
This Note shall be construed in accordance with and governed by the laws of
the State of New York.
NU HORIZONS ELECTRONICS CORP.
By:______________________
Paul Durando
Vice President-Finance
STATE OF NEW YORK)
:ss.:
COUNTY OF )
On the ____ day of _________, 1997, before me personally came PAUL DURANDO,
to me known, who, being by me duly sworn, did depose and say that he resides at
c/o 70 Maxess Road, Melville, New York; that he is the Vice President-Finance of
NU HORIZONS ELECTRONICS CORP., the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto by order of the
board of directors of said corporation.
---------------------------
Notary Public
-6-
SCHEDULE OF REVOLVING CREDIT LOANS AND PAYMENTS OF PRINCIPAL
TO REVOLVING CREDIT NOTE
DATED AS OF ______________________, 1997
NU HORIZONS ELECTRONICS CORP.
TO
[MELLON BANK, N.A.][KEYBANK NATIONAL ASSOCIATION]
- --------------------------------------------------------------------------------
Amount Balance
and Type Interest Principal Remaining Notation
Date Borrower of Loan Period Paid Unpaid Made By
- ---- -------- ------- ------ ---- ------ -------
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
-7-
EXHIBIT B
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FORM OF ASSIGNMENT AND ACCEPTANCE
Dated: _________, 199_
Reference is made to the Loan Agreement, dated as of ______ __, 1997 (as
amended, modified or supplemented from time to time in accordance with its
terms, the "Loan Agreement"), among NU HORIZONS ELECTRONICS CORP. (the
"Borrower"), MELLON BANK, N.A. and KEYBANK NATIONAL ASSOCIATION (collectively,
the "Banks") and MELLON BANK, N.A., as agent for the Banks (in such capacity,
the "Agent"). Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Loan Agreement.
______________________________ (the "Assignor") and
______________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, ____% interest in and
to all the Assignor's rights and obligations under the Loan Agreement as of the
Effective Date (as defined below) (including, without limitation, such
percentage interest in the Revolving Credit Commitment of the Assignor on the
Effective Date and/or such percentage interest in the Revolving Credit Loans
owing to the Assignor outstanding on the Effective Date and/or such percentage
interest in the Letters of Credit and Acceptance Drafts outstanding on the
Effective Date, together with such percentage interest in all unpaid interest
and commitment fees accrued to the Effective Date and such percentage interest
in the Revolving Credit Note held by the Assignor).
2. The Assignor (i) represents that as of the date hereof, its Revolving
Credit Commitment (without giving effect to assignments thereof which have not
yet become effective) is $___________, the outstanding balance of its Revolving
Credit Loans (unreduced by any assignments thereof which have not yet become
effective) is $___________, and the amount of its participation in Letters of
Credit and Acceptance Drafts (unreduced by any assignments thereof which have
not yet become effective) that have been issued and remain undrawn is
$___________, (ii) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or
in connection with the Loan Agreement or the execution, legality, validity,
enforceability, perfection, genuineness, sufficiency or value of the Loan
Agreement or any other Loan Documents or any other instrument or document
furnished pursuant to any thereof, other than that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (iii) makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of the Borrower or any Guarantor, or the performance or observance by
the Borrower or any Guarantor, of its obligations under the Loan Agreement or
any other Loan Documents or any other instrument or document furnished pursuant
to any thereof; and (iv) attaches the Revolving Credit Note referred to in
paragraph 1 above and requests that the Agent exchange such Revolving Credit
Note for a new Revolving Credit Note [payable to Assignee] [payable to Assignor]
in principal amounts equal to _______ and _______, respectively.
3. The Assignee (i) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance and the other documents executed
and delivered in connection therewith; (ii) confirms that it has received a copy
of the Loan Agreement and the other Loan Documents, together with copies of such
financial statements and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (iii) agrees that it will, independently and without
reliance upon the Agent, the Assignor or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Agreement; (iv) appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under the Loan Agreement as are
delegated to the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Loan Agreement
are required to be performed by it as a Bank; and (vi) agrees that it will keep
confidential all information with respect to the Borrower furnished to it by the
Borrower or the Assignor (other than information generally available to the
public or otherwise available to the Assignor on a nonconfidential basis). [;
and (vii) attaches the forms prescribed by the Internal Revenue
(Exhibit B/Page 9)
Service of the United States certifying as to the Assignee's exemption from
United States withholding taxes with respect to all payments to be made to the
Assignee under the Loan Agreement or such other documents as are necessary to
indicate that all such payments are subject to such tax at a rate reduced by an
applicable tax treaty.]/1/
4. The effective date for this Assignment and Acceptance shall be
__________________ (the "Effective Date")./2/ Following the execution of this
Assignment and Acceptance, it will be delivered to the Agent for acceptance and
recording by the Agent.
5. Upon such acceptance and recording, from and after the Effective Date,
(i) the Assignee shall be a party to the Loan Agreement and, to the extent
provided in this Assignment and Acceptance, have the rights and obligations of a
Bank thereunder and (ii) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Loan Agreement.
6. Upon such acceptance and recording, from and after the Effective Date,
the Agent shall make all payments in respect of the interest assigned hereby
(including payments of principal, interest, fees and other amounts) to the
Assignee. The Assignor and Assignee shall make all appropriate adjustments in
payments for periods prior to the Effective Date by the Agent or with respect to
the making of this assignment directly between themselves.
7 . THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN SAID STATE.
[NAME OF ASSIGNOR]
By:______________________
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/1/ If the Assignee is organized under the laws of a jurisdiction outside the
United States.
/2/ See Section 10.3. Such date shall be at least five Business Days after
the execution of this Assignment and Acceptance and delivery thereof to
the Agent.
(Exhibit B/Page 10)
Name/Title
[NAME OF ASSIGNEE]
By:______________________
Name/Title
Accepted this ____ day
of _________________, 19__
MELLON BANK, N.A., as Agent
By:______________________
Name/Title
(Exhibit B/Page 11)