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Exhibit 1058
CREDIT FACILITY AND SECURITY AGREEMENT
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THIS CREDIT FACILITY AND SECURITY AGREEMENT is made as of the
14 day of MARCH, 1996, by and between BANK ONE, AKRON, NA, a national banking
association organized and existing under the laws of the United States of
America ("Lender"), with its principal place of business located at 50 South
Main Street, Akron, Ohio 44308, and LEXINGTON PRECISION CORPORATION, a
corporation organized and existing under the laws of the State of Delaware
("LPC"), with its principal place of business and executive offices located at
767 Third Avenue, New York, New York 10017-2023, and LEXINGTON COMPONENTS,
INC., a corporation organized and existing under the laws of the State of
Delaware ("LCI"), with its principal place of business and executive offices
located at 767 Third Avenue, New York, New York 10017-2023 (hereinafter LPC and
LCI are referred to each as Borrower singularly and referred to jointly and
severally as the "Borrowers," which term shall mean each of the companies
individually and both of the companies collectively).
WITNESSETH:
WHEREAS, LPC is the parent of LCI; and
WHEREAS, LCI is a wholly subsidiary of LPC; and
WHEREAS, Borrowers desire, from time to time hereafter, to
borrow from Lender, and Lender is willing and may, from time to time hereafter,
be willing to make loans to each of the Borrowers, subject to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the terms and conditions
contained herein, and of any extension of credit heretofore, now or hereafter
made by Lender to Borrowers, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
All capitalized terms which are not defined herein are defined
in Rider A attached hereto and made a part hereof ("Rider A"). Accounting
terms not specifically defined shall be construed in accordance with generally
accepted accounting principles. All other terms contained in this Agreement
shall have, unless the context indicates to the contrary, the meanings provided
for by the Code to the extent the same are used or defined therein. All
definitions shall be equally applicable to both the singular and plural forms
of the defined terms.
SECTION 2. AMOUNT AND TERMS OF LOANS; GRANT OF SECURITY INTEREST
Subject to the terms and conditions of this Agreement and each
of the other Credit Documents and otherwise provided that no loan advances need
be made by Lender if, at the date of any request for a loan advance hereunder
by Borrower, an Event of Default, or event or condition which, with notice,
lapse of time or both, would constitute an Event of Default, then exists,
Lender will provide the credit facility described in this Section 2 for the
account of Borrower.
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A. EQUIPMENT TERM LOAN. Lender will make a term
loan (the "Equipment Term Loan") to LPC in a principal amount not to exceed ONE
MILLION EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS ($1,800,000.00) for the
purchase of the North Canton Equipment to be located at the North Canton
Location. The amount advanced pursuant to the Equipment Term Loan shall,
subject to the terms and conditions of this Agreement, be the lesser of ninety
percent (90%) of the purchase price of the North Canton Equipment Collateral or
ONE MILLION EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS ($1,800,000.00). Upon
ordering of specific equipment by LPC, the purchase orders for such orders
shall be submitted to Lender for Lender's review of the same as equipment to be
purchased under the Equipment Term Loan. To the extent the Seller of the
equipment has not already been paid, funds disbursed under the Equipment Term
Loan shall be paid directly to the seller of the equipment to such extent. All
purchases of equipment under the Equipment Term Loan shall be completed no
later than April 30, 1996. The Equipment Term Loan shall be subject to
repayment in accordance with, and bear interest as provided in Section 2.B of
this Agreement and shall otherwise be evidenced by, and repayable in accordance
with, the Equipment Term Note.
B. PAYMENT TERMS OF EQUIPMENT TERM LOAN.
(1) INTEREST. The Equipment Term Loan shall bear
interest on the unpaid principal balance until the date paid in full at a
rate per annum equal to the LIBOR Interest Rate on the Core Borrowing Amount, if
any, pursuant to Section 2.B.(2) below and at a rate per annum equal to
three-quarters percent (.75%) in excess of the Base Rate on the unpaid principal
amount excluding the Core Borrowing Amount, such interest being payable monthly
on the first day of each calendar month, commencing on the first day of the
second calendar month following the disbursement of the loan and continuing on
the first day of each calendar month thereafter. Interest shall be computed on
a three hundred sixty (360)-day year basis based upon the actual number of days
elapsed.
(2) CORE BORROWING AMOUNT. LPC may request that a
portion of the outstanding balance of the Equipment Term Loan accrue interest
at the LIBOR Interest Rate (the "Core Borrowing Amount") by delivering to Lender
a written, telephonic, or telegraphic request (effective upon receipt) by
facsimile, telephone, or telegraph by 12:00 p.m. three (3) Business Days prior
to the Business Day the LIBOR Interest Rate is to be effective. The request
shall specify (i) the Core Borrowing Amount, which shall be in incremental
amounts of ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00), not to exceed
the Core Cap and (ii) the duration of the LIBOR Interest Period which shall be
either one (1) month or two (2) months, provided that at no time may the Core
Borrowing Amount exceed the Core Cap. During the term of the Equipment Term
Loan, the Core Borrowing Amount shall not exceed the Core Cap. It shall be the
responsibility of the Borrowers to ensure that at no time shall the Core
Borrowing Amount exceed the Core Cap. If such an event occurs, the Core
Borrowing Amount shall be immediately reduced to a figure equal to or less than
the Core Cap, and LPC shall pay to Lender on demand a TWENTY-FIVE DOLLAR ($25)
fee, together with interest on the incremental amount(s) which was in excess of
the Core Cap at a rate per annum equal to three-quarters percent (.75%) in
excess of the Base Rate less any interest previously paid at the LIBOR Interest
Rate during such period that there was an amount in excess of the Core Cap.
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(3) FIXED PRINCIPAL INSTALLMENTS. Subject otherwise
to the terms and provisions of the Equipment Term Note, the principal
balance of the Equipment Term Loan shall be payable in fifty-nine (59)
consecutive equal monthly installments of THIRTY THOUSAND AND NO/100 DOLLARS
($30,000.00) each, commencing on the first day of the second month following
disbursement of the loan amount, and continuing on the first day of each
calendar month thereafter and a final installment of THIRTY THOUSAND AND
NO/100 DOLLARS ($30,000.00).
C. NORTH CANTON INTERIM LOAN. Lender will make
a demand loan (the "North Canton Interim Loan") to LPC in the principal amount
of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00).
D. PAYMENT TERMS OF NORTH CANTON INTERIM LOAN
(1) DEMAND OBLIGATION. Subject otherwise to the
terms and provisions of the Demand Note, the North Canton Interim Loan
shall be payable on demand on or after May 15, 1996, and bear interest as
provided in Section 2.D(2) of this Agreement and shall otherwise be evidenced
by, and repayable in accordance with, the Demand Note. Upon completion of the
construction at the North Canton Property, on or before May 15, 1996, and, if
the conditions for the North Canton Term Loan are met, the principal amount of
the Demand Note shall be paid in full out of the proceeds of the North Canton
Term Loan and the Demand Note shall be canceled.
(2) INTEREST. The North Canton Interim Loan shall bear
interest on the unpaid principal balance at a rate per annum equal to eight
and thirty-seven one-hundredths percent (8.37%) per annum, such interest being
payable monthly on the first day of each calendar month, commencing April 1,
1996, and continuing on the first day of each calendar month thereafter.
E. NORTH CANTON TERM LOAN. Lender will make a term loan
(the "North Canton Term Loan") to LPC in the principal amount not to exceed
TWO MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($2,500,000.00). The
amount advanced under the North Canton Term Loan shall be limited to the lesser
of (i) eighty percent (80%) of the appraised value of the North Canton
Property, (ii) ninety percent (90%) of the total cost of the project at the
North Canton Property, or (iii) TWO MILLION FIVE HUNDRED THOUSAND AND NO/100
DOLLARS ($2,500,000.00). The review of the appraised value and the project's
total cost shall be within the sole discretion of Lender. Upon the completion
of such project, LPC shall submit to Lender, in form and substance satisfactory
to Lender, an itemization of the project's total cost, together with an updated
appraisal of the property completed by an MAI appraiser, acceptable to Lender.
The completion of the project, the submission of the appraisal, cost reports,
and any other items requested or required by Lender, and the disbursement of
the loan amount shall be completed no later than May 15, 1996. The North
Canton Term Loan shall be subject to repayment in accordance with, and bear
interest as provided in Section 2.F of this Agreement and shall otherwise be
evidenced by, and repayable in accordance with, the North Canton Term Note.
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F. PAYMENT TERMS OF NORTH CANTON TERM LOAN
(1) INTEREST. The North Canton Term Loan shall bear
interest at a fixed rate on the unpaid principal balance until the date paid
in full at a rate per annum equal to eight and thirty-seven one-hundredths
percent (8.37%), such interest being payable monthly on the first day of each
calendar month, commencing on the first day of the second calendar month
following the disbursement of the loan and continuing on the first day of each
calendar month thereafter. Interest shall be computed on a three hundred sixty
(360)-day year basis based upon the actual number of days elapsed.
(2) FIXED PRINCIPAL INSTALLMENTS. Subject otherwise
to the terms and provisions of the North Canton Term Note, the principal
balance of the North Canton Term Loan shall be payable in fifty-nine (59)
consecutive, equal monthly installments of principal, commencing on the first
day of the second calendar month following the disbursement of the loan and
continuing on the first day of each calendar month thereafter, based on a
fifteen (15) year amortization of the original loan amount, with a sixtieth
(60th) payment of the remaining balance.
G. VIENNA TERM LOAN. Lender will make a term loan (the
"Vienna Term Loan") to LCI in the principal amount of ONE MILLION FIVE
HUNDRED THOUSAND AND NO/100 DOLLARS ($1,500,000.00). The Vienna Term Loan
shall be subject to repayment in accordance with, and bear interest as provided
in Section 2.H of this Agreement and shall otherwise be evidenced by, and
repayable in accordance with, the Vienna Term Note.
H. PAYMENT TERMS OF VIENNA TERM LOAN.
(1) INTEREST. The Vienna Term Loan shall bear interest
at a fixed rate on the unpaid principal balance until the date paid in
full at a rate per annum equal to eight and thirty-seven one-hundredths percent
(8.37%), such interest being payable monthly commencing on April 1, 1996, and
continuing on the first day of each calendar month thereafter. Interest shall
be computed on a three hundred sixty (360)-day year basis based upon the actual
number of days elapsed.
(2) FIXED PRINCIPAL INSTALLMENTS. Subject otherwise to
the terms and provisions of the Vienna Term Note, the principal balance of
the Vienna Term Loan shall be payable in fifty-nine (59) consecutive, equal
monthly installments of EIGHT THOUSAND THREE HUNDRED THIRTY-THREE DOLLARS AND
THIRTY-THREE CENTS ($8,333.33) each, commencing on April 1, 1996, and
continuing on the first day of each calendar month thereafter and a final
installment of ONE MILLION EIGHT THOUSAND THREE HUNDRED THIRTY-THREE DOLLARS
AND FIFTY-THREE CENTS ($1,008,333.53) on March 1, 2001.
I. DEFAULT RATE. Upon and after the occurrence of an Event
of Default, and during the continuation thereof, unless Lender otherwise
agrees, the Notes and the obligations under this Agreement shall bear interest,
calculated daily on the basis of a three hundred and sixty (360)-day year, for
the actual days elapsed, at the Default Rate.
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J. LIBOR-RELATED PROVISIONS
(1) ILLEGALITY; LENDER'S POLICY. Notwithstanding any
other provision in this Agreement, if the Lender determines that any
applicable law, rule, regulation, or directive (whether or not having the force
of law) shall make it (1) unlawful or impossible for the Lender to extend the
LIBOR Interest Rate, or (2) imposes or modifies any reserve, special deposit,
compulsory loan, or similar requirements relating to any extensions of credit
or their assets, or any deposits with or other liabilities, of such Lender; or
(3) imposes any other condition adversely affecting Lender's rights hereunder,
or (4) if Lender no longer offers the LIBOR Interest Rate, then the interest
rate shall automatically convert to a rate per annum equal to three-quarters
percent (.75%) in excess of the Base Rate. Borrower shall not be required to
pay any costs, penalties, or other amounts as a result of or in connection with
any such conversion.
(2) DISASTER; COSTS. Notwithstanding anything to the
contrary herein, if the Lender determines (which determination shall be
conclusive) that (i) quotations of interest rates for the relevant deposits
referred to in the definition of LIBOR Interest Rate are not being provided in
the relevant amounts or for the relative maturities for purposes of determining
the LIBOR Interest Rate as provided in this Agreement; or (ii) if the Lender
determines (which determination shall be conclusive) that the relevant rates of
interest referred to in the definition of LIBOR Interest Rate, do not
accurately cover the cost to the Lender of extending the LIBOR Interest Rate,
or (iii) the Lender matches funds in the London Interbank market or in any
other money market, then the interest rate shall, upon notice to Borrower,
automatically convert to a rate per annum equal to three-quarters percent
(.75%) in excess of the Base Rate. Borrower shall not be required to pay any
costs, penalties, or other amounts as a result of or in connection with any
such conversion.
K. ALL ADVANCES TO CONSTITUTE ONE LOAN. The Equipment Term
Loan, North Canton Term Loan, and Vienna Term Loan, and all other sums owed
by Borrowers to Lender under this Agreement, whether or not evidenced by the
Notes, shall be secured by Lender's lien on and security interest in all of the
Collateral. Borrowers shall be liable, as provided under this Agreement and
their respective guarantees, to Lender for all Obligations.
L. ORIGINATION FEE. In order to compensate Lender for its
services in preparing and reviewing the Credit Documents and the
documentation relating thereto in connection with this Credit Facility,
Borrowers shall pay to Lender on the date of each advance hereunder an
origination fee of one-half of one percent (.5%) of the total principal amount
of the Notes, provided in the case of the North Canton Term Note, the
origination fee shall be paid on the principal amount in excess of the
principal amount of the Demand Note (the "Origination Fee").
M. SECURITY. As security for the prompt and complete payment
and performance when due of all the Obligations and in order to induce
Lender to enter into this Agreement and make the Loans and to extend other
credit from time to time to Borrower, whether under this Agreement or
otherwise, LPC hereby grants to Lender a first priority security interest in
all LPC's right, title, and interest in, to, and under the Equipment and the
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proceeds thereof. As security for the prompt and complete payment and
performance when due of all the Obligations and in order to induce Lender to
enter into this Agreement and make the Loans and to extend other credit from
time to time to Borrower, whether under this Agreement or otherwise, LPC or
LCI, as applicable, shall execute and deliver an open-end mortgage, granting
the Lender the first and best lien on the North Canton Property and the Vienna
Property subject only to Permitted Encumbrances.
SECTION 3. CONDITIONS OF BORROWING
Notwithstanding any other provision of this Agreement or any
of the other Credit Documents, and without affecting in any manner the rights
of Lender under the other sections of this Agreement, it is understood and
agreed that Lender shall have no obligation at any time under Section 2 of this
Agreement unless and until the following conditions have been and continue to
be satisfied, all in form and substance satisfactory to Lender and its counsel:
A. CONDITIONS. The following conditions shall have been
and shall continue to be satisfied, in the sole discretion of Lender:
(1) No legal action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or
proposed before any court, governmental agency or legislative body to enjoin,
restrain, or prohibit, or to obtain damages in respect of, or which is related
to or arises out of this Agreement or any of the other Credit Documents or the
consummation of the transactions contemplated hereby or thereby, or which, in
Lender's opinion would make it inadvisable to consummate the transactions
contemplated by this Agreement.
(2) The representations and warranties of the Borrowers
herein are true and correct in all respects and no Event of Default or
condition which, with notice, lapse of time or both would constitute an Event
of Default then exists.
(3) No event, occurrence or condition shall then exist
which might have a Material Adverse Effect.
B. DOCUMENTATION. Lender shall have received the following
documents, each to be in form and substance satisfactory to Lender and its
counsel:
(1) Certificates of insurance or certified copies of
Borrower's casualty insurance policies evidencing the existence of the
insurance coverage required pursuant to this Agreement, together with loss
payable endorsements thereto naming Lender as a loss payee or additional
insured in form and substance satisfactory to Lender.
(2) Such UCC financing statements as are required by
Lender to perfect the Liens of Lender in the Collateral (subject to the
provisions in Section 5.A.(8) hereof) and evidence, in a form acceptable to
Lender, that such Liens will constitute valid and first priority perfected
Liens.
(3) A Certificate of the secretary or an assistant
secretary of Borrower, dated as of the date Lender makes its initial advance
of loan proceeds pursuant hereto, certifying
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(i) that attached thereto is a true and complete copy of the Bylaws of
Borrower, as in effect on the date of such certification, (ii) that attached
thereto is a true and complete copy of resolutions, in form satisfactory to
Lender, adopted by the Board of Directors of Borrower, authorizing the
execution, delivery and performance of this Agreement and each of the other
Credit Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby, and (iii) as to the incumbency
and genuineness of the signature of each officer of Borrower executing this
Agreement or any of the other Credit Documents to which Borrower is a party.
(4) A copy of the Articles of Incorporation of Borrower,
and all amendments thereto, certified by the Secretary of State of the
Borrower's state of incorporation.
(5) A good standing certificate for Borrower issued by
the Secretary of State of Borrower's state of incorporation and the Secretary
of State of Ohio.
(6) A certificate of Borrower signed by the chairman,
vice chairman, president or chief financial officer of Borrower and dated as of
the date Lender makes its initial advance of loan proceeds pursuant hereto,
stating that (i) the representations and warranties set forth in Section 4
hereof are true and correct on and as of such date, (ii) Borrower is on such
date in compliance with all the terms and provisions set forth in this
Agreement, and (iii) on such date no event or condition has occurred or is
continuing which, with the giving of notice, the lapse of time, or both, would
constitute an Event of Default.
(7) Written instructions from Borrowers directing the
disbursement of the loan proceeds made pursuant to this Agreement.
(8) The written opinion of counsel to Borrowers as to
the transactions contemplated by this Agreement, in form and substance
satisfactory to Lender.
(9) The Equipment Term Note, North Canton Term Note,
and Vienna Term Note, duly executed by Borrower, and such other
agreements, instruments and documents, including, without limitation,
assignments, security agreements, mortgages, deeds of trust, pledges,
guaranties and consents, which Lender may require to be executed in connection
herewith, including, but not limited to, the following:
(a) Duly executed guarantees of all Obligations
of Borrowers by both LPC and LCI, in form and substance
satisfactory to Lender and its counsel.
(b) Environmental Assessments, Appraisals of Real
Property and North Canton Equipment Collateral, ALTA Lender
Title Policies and Surveys of the North Canton Property and
the Vienna Property, together with any other items or
information requested by Lender in regard to the North Canton
Property and the Vienna Property.
(c) Duly executed Environmental Indemnity Agreement
from Borrower, in form and substance acceptable to Lender
and its counsel.
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(d) Duly executed UCC-1 Financing
Statements from Borrowers, in recordable form, in form and
substance acceptable to Lender and its counsel (subject to the
provisions of Section 5.A.(8) hereof).
(e) Duly executed and delivered open-end
mortgage of the North Canton Property from LPC in recordable
form, in form and substance acceptable to Lender and its
counsel, granting Lender the first lien on the North Canton
Property, subject only to the Permitted Encumbrances.
(f) Duly executed and delivered open-end
mortgage of the Vienna Property from LCI in recordable form,
in form and substance acceptable to Lender and its counsel,
granting Lender the first lien on the Vienna Property, subject
only to the Permitted Encumbrances.
(10) An Intercreditor Agreement executed by
Congress Financial Corporation in form and substance acceptable to Lender and
its counsel subordinating the rights of Congress Financial Corporation to
Lender's rights in the Collateral.
SECTION 4. REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Agreement and to
make each Loan, Borrower represents and warrants to Lender that:
A. Borrower is a corporation duly organized, validly
existing, and in good standing under the laws of its state of incorporation,
has the necessary authority and power to own its respective Collateral and its
other assets and to transact the business in which it is engaged, is duly
qualified to do business in each jurisdiction where the Collateral is located
and in each other jurisdiction in which the conduct of its business or the
ownership of its assets requires such qualification, and its chief executive
office is located at the address set forth in paragraph 4.B of Rider A;
B. Borrower has full power, authority, and legal right to
execute and deliver this Agreement and each of the other Credit Documents, to
perform its obligations hereunder and thereunder, to borrow hereunder and to
grant the security interest created hereby and to grant the mortgages on the
North Canton Property and the Vienna Property;
C. This Agreement and each of the other Credit Documents
has been (and each of the Notes when executed and delivered shall have been)
duly authorized, executed, and delivered by Borrower and constitutes (and each
of the Notes when executed and delivered shall constitute) a legal, valid, and
binding obligation of Borrower enforceable in accordance with their respective
terms;
D. The execution, delivery, and performance by Borrower
of this Agreement and each of the Credit Documents do not and will
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not violate any provision of any applicable law or regulation or of any
judgment or order of any court or governmental instrumentality, and will not
violate any provision of, or cause a default under, any loan, other agreement,
contract, or judgment to which Borrower is a party;
E. Borrowers' uses of the proceeds of the Equipment Term
Loan, North Canton Term Loan, and Vienna Term Loan made by Lender to Borrowers
pursuant to this Agreement are, and will continue to be, legal and proper
corporate uses, and such uses are and will continue to be consistent with all
applicable laws and statutes.
F. As of the date hereof, and after giving effect to the
transactions contemplated by this Agreement, (i) Borrower is able to pay its
debts as they mature and is not otherwise insolvent in any respect, and (ii)
Borrower's capital is sufficient and not unreasonably small for the business
and transactions in which Borrower is engaged or about to engage.
G. Borrower is not in default under any material agreement,
contract, or judgment to which Borrower is a party;
H. Borrower has filed all tax returns that are required to
be filed and has paid all taxes as shown on said returns and all assessments
received by it to the extent such taxes and assessments have become due other
than those which are the subject of valid extensions and those which are being
contested in good faith by appropriate proceedings and as to which appropriate
reserves are being maintained by Borrower in accordance with generally accepted
accounting principles and so long as such proceedings operate during the
pendency thereof to prevent the sale, forfeiture, or loss of the Collateral by
or to such taxing authority, and Borrower does not have any knowledge of any
actual or proposed deficiency or additional assessment in connection therewith;
I. To the best of its knowledge, there is no action, audit,
investigation, or proceeding pending or threatened against or affecting
Borrower or any of its assets which involves any of the Collateral or any of
the contemplated transactions hereunder or which, if adversely determined,
could reasonably be expected to have a Material Adverse Effect on Borrower's
business, operations, or financial condition;
J. On each Closing Date, Borrower shall have good and
marketable title to the Collateral being secured on such date and, upon the
filing of proper financing statements and recording of the Mortgages, Lender
shall have a perfected first Lien on such Collateral (subject to Permitted
Encumbrances); and
(1) Except as disclosed in writing to Lender
(including in any environmental audit or assessment report) the operations of
Borrower at the North Canton Property and the Vienna Property comply in all
material respects with all applicable Environmental Laws; and
(2) Except as disclosed in writing to Lender
(including in any environmental audit or assessment report):
(a) None of the operations of Borrower at
the North Canton Property and the Vienna Property are subject
to any judicial or
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administrative proceeding alleging the violation of any
Environmental Laws;
(b) None of the operations of Borrower at the
North Canton Property and the Vienna Property is the subject
of an investigation to determine whether any remedial action
is needed to respond to a release of any Hazardous Material
into the environment; and
(c) Borrower has no known contingent liability
with respect to the North Canton Property or the Vienna
Property in connection with any release of any Hazardous
Material into the environment;
K. All annual and quarterly financial statements of
Borrower, included in any annual reports on form 10-K or included in any
quarterly reports on form 10-Q, which have been delivered to Lender have been
prepared in accordance with generally accepted accounting principles
consistently applied, and present fairly in all material respects Borrower's
financial position as at, and the results of its operations for, the periods
ended on the dates set forth on such financial statements, and there has been
no material adverse change in Borrower's financial condition, business, or
operations since September 30, 1995, as reflected in such financial statements;
L. Borrower has not changed its name in the last five
(5) years or done business or been known under any other name except as
disclosed in writing to Lender; and
M. No consent of any person, and no consent, license,
approval, or authorization of, or registration or filing with, any governmental
authority, bureau, or agency is required in connection with the execution,
delivery, and performance of, and payment under, this Agreement or the Notes,
other than the consent of Congress, and the filing of financing statements and
the recording of the Mortgages.
N. Neither this Agreement, nor any written statement
made by Borrower in connection herewith, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact which Borrower has
not disclosed to Lender which has, or will have, a Material Adverse Effect.
O. All Equipment is in good operating condition and
repair and all necessary replacements of and repairs to the same have been made
so that the value and operating efficiency thereof has been maintained and
preserved, reasonable wear and tear excepted. None of the Equipment is so
affixed to the real property where located (other than the North Canton
Property) so that an interest therein arises under the real property laws of
such jurisdiction nor is any such Equipment an accession to any other personal
property not otherwise a part of the Collateral.
Each request for an advance made by Borrowers pursuant to this
Agreement shall, unless Lender is otherwise notified in writing prior to the
time of such advance, constitute (I) an automatic representation and warranty
by Borrowers to Lender that there does not then exist an Event of Default or
any event or condition which, with notice, lapse of time and/or the
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making of such advance, would constitute an Event of Default, and (ii) a
reaffirmation as of the date of said request of all of the representations and
warranties of Borrowers contained in this Agreement or any of the other Credit
Documents.
Borrower covenants, warrants and represents to Lender that all representations
and warranties of Borrower contained in this Agreement and each of the other
Credit Documents shall be true at the time of Borrower's execution of this
Agreement and such other Credit Documents, and shall survive the execution,
delivery and acceptance thereof by Lender and the parties thereto and the
closing of the transactions described therein or related thereto.
SECTION 5. COVENANTS
Borrower covenants and agrees that from and after the date
hereof and so long as any Obligations remain unsatisfied, unless otherwise
consented to by Lender in writing:
A. It will:
(1) Promptly give written notice to Lender of the
occurrence of any Event of Loss;
(2) Observe all material requirements of any
governmental authorities relating to the conduct of its business, to the
performance of its obligations hereunder, to the use, operation or ownership of
the Equipment, or to its other properties or assets, maintain its existence as
a legal entity and obtain and keep in full force and effect all material
rights, franchises, licenses and permits which are necessary to the proper
conduct of its business, and pay all fees, taxes, assessments and governmental
charges or levies imposed upon any of the Equipment;
(3) At any reasonable time or times, permit Lender or
its authorized representative
(a) upon prior written notice, to inspect the
Collateral and Borrower's books and records pertaining to the
Collateral and,
(b) following the occurrence and during the
continuation of an Event of Default, to inspect all of the
books and records of Borrower,
(4) In accordance with generally accepted accounting
principles, keep proper books of record and account in which entries will be
made of all dealings or transactions in relation to its business and
activities;
(5) Furnish to Lender the following financial
statements, prepared in accordance with generally accepted accounting
principles applied on a basis consistently maintained throughout the period
involved,
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(a) as soon as available, but not later
than 120 days after the end of each fiscal year, its
consolidated balance sheet as at the end of such
fiscal year, and its consolidated statements of income and
consolidated statements of cash flow, including all footnotes,
or such fiscal year, together with comparative information for
the prior fiscal year, audited by Ernst & Young, LLP or other
certified public accountants reasonably acceptable to Lender;
and
(b) as soon as available, but not later
than 45 days after the end of each of the first three
quarterly periods of each fiscal year, its consolidated
balance sheet as at the end of such quarterly period and its
consolidated statements of income and consolidated statements
of cash flow for such quarterly period and for the portion of
the fiscal year then ended together with comparative
information for the prior comparable period, certified as to
their accuracy by its chief financial officer,
(6) Furnish to Lender, (i) together with the
financial statements described in clauses 5.A.(5)(a) and 5.A.(5)(b) above, a
statement of Borrower signed by Borrower's chief financial officer certifying
that Borrower is in compliance with all financial covenants contained herein,
or if Borrower is not in compliance, the nature of such noncompliance or
default, and the status thereof (such statement shall set forth the actual
calculations of any financial covenants), and (ii) promptly, such additional
financial and other information as Lender may from time to time reasonably
request;
(7) Promptly, at Borrower's expense, execute and
deliver to Lender such instruments and documents, and take such action, as
Lender may from time to time reasonably request in order to carry out the
intent and purpose of this Agreement and to establish and protect the rights,
interests and remedies created, or intended to be created, in favor of Lender
hereby, including, without limitation, the execution, delivery, recordation and
filing of financing statements (hereby authorizing Lender, in such
jurisdictions where such action is authorized by law, to effect any such
recordation or filing of financing statements without Borrower's signature, and
to file as valid financing statements in the applicable financing statement
records, photocopies hereof and of any other financing statement executed in
connection herewith); PROVIDED, HOWEVER, notwithstanding anything in this
Agreement or any other Credit Document to the contrary, in no event shall
Lender file or record any financing statement or other public document which
specifically lists the particular items of Equipment included in the
Collateral;
(8) Warrant and defend its good and marketable
title to the Equipment, and Lender's perfected first priority security interest
in the Collateral, against all claims and demands whatsoever (hereby agreeing
that the Equipment shall be and at all times remain separately identifiable
personal property, and shall not become part of any real estate other than the
North Canton Property), and will, at its expense, take such action as may be
necessary to prevent any other Person (other than Congress) from acquiring any
right or interest in the Equipment;
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(9) At Borrower's expense, if requested by Lender
in writing, attach to the Equipment a notice satisfactory to Lender disclosing
Lender's security interest in the Equipment;
(10) At Borrower's expense, maintain the Equipment
in good condition and working order and furnish all parts, replacements and
servicing required therefor so that the value, condition and operating
efficiency thereof will at all times be maintained, normal wear and tear
excepted, and any repairs, replacements and parts added to the Equipment in
connection with any repair or maintenance or with any improvement, change,
addition or alteration shall immediately, without further act, become part of
the Equipment and subject to the security interest created by this Agreement;
and
(11) Deliver to Lender, upon demand, any and all
evidence of ownership of the Equipment, inclusive of any certificates of title
or applications therefor, and maintain accurate, itemized records describing the
kind, type, quantity and value of all the Equipment, a summary of which shall be
provided to Lender on at least an annual basis and more frequently if requested
by Lender.
(12) Obtain and maintain at all times on the
Equipment, at Borrower's expense, "All-Risk" physical damage and, if required by
Lender, liability insurance (including bodily injury and property damage) in
such amounts, against such risks, in such form and with such insurers as shall
be reasonably satisfactory to Lender; PROVIDED, HOWEVER, that the amount of
physical damage insurance shall not be less than the then aggregate outstanding
principal amount of the Equipment Term Note. All physical damage insurance
policies shall be made payable to Lender as its interest may appear, if
liability insurance is required by Lender, the liability insurance policies
shall name Lender as an additional insured. Borrower shall maintain and deliver
to Lender the original certificates of insurance or other documents reasonably
satisfactory to Lender prior to policy expiration or upon Lender's request, but
Lender shall bear no duty or liability to ascertain the existence or adequacy of
such insurance. Each insurance policy shall, among other things, require that
the insurer give Lender at least 30 days' prior written notice of any material
alteration in the terms of such policy or the cancellation thereof and that the
interests of Lender continue to be insured regardless of any breach of or
violation by Borrower of any warranties, declarations or conditions contained in
such insurance policy. The insurance maintained by the Borrower shall be
primary with no other insurance maintained by Lender (if any) contributory.
Unless Lender otherwise agrees in writing, following the occurrence of an Event
of Default and during the continuance thereof Lender shall have the sole right,
in its name or in Borrower's name, to file claims under any insurance policies,
to receive, receipt, and give acquittance for any payments that may be payable
thereunder, and to execute any and all endorsements, receipts, releases,
assignments, reassignments, or other documents that may be necessary to effect
the collection, compromise, or settlement of any claims under any such insurance
policies.
B. It will not:
(1) Sell, convey, transfer, exchange, lease or
otherwise relinquish possession or dispose of any of the Collateral or attempt
or offer to do any of the foregoing;
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provided, however, that Borrower may offer to sell Collateral after giving
Lender notice of its wish to offer Collateral for sale;
(2) Create, assume or suffer to exist any Lien upon the
Collateral except for the security interest created hereby and the subordinate
security interest in favor of Congress subordinated to the extent provided in an
Intercreditor Agreement of even date herewith and except for Permitted
Encumbrances;
(3) Liquidate or dissolve;
(4) Change the form of organization of its business; or
(5) Without thirty (30) days prior written notice to
Lender, change its name or its chief executive office;
(6) At any time after Lender advances the North Canton Term
Loan, move (or in the case of titled vehicles, change the principal base of) any
of the Equipment from the North Canton Property without the prior written
consent of Lender except within the continental United States upon thirty (30)
days prior written notice to Lender (provided that Borrower delivers to Lender
such financing statements as Lender requests to maintain its perfected first
priority security interest in such Equipment); or
(7) Make or authorize any improvement, change, addition or
alteration to the Equipment which would impair its originally intended function
or use or its value.
C. After obtaining the written consent of Lender as to each item
of Equipment, Borrower shall have the right to substitute up to THREE HUNDRED
SIXTY THOUSAND AND NO/100 DOLLARS ($360,000.00) of items of Equipment with other
items of Equipment of a similar type and of a value to Lender equal to or
greater than the Equipment replaced or with other items of Equipment acceptable
to Lender.
SECTION 6. EVENTS OF DEFAULT; REMEDIES
The following events shall each constitute an "EVENT OF DEFAULT"
hereunder:
A. Borrower shall fail to pay any principal or interest on any
Notes within 10 days after the same becomes due (whether at the stated maturity,
by acceleration or otherwise) which failure is not cured within 10 days after
Borrower's receipt of written notice from Lender or shall fail to pay any other
Obligation when due (whether at the stated maturity, by acceleration or
otherwise), which failure is not cured within 10 days after Borrower's receipt
of written notice from Lender;
B. Any representation or warranty made by Borrower in this
Agreement or in any document, certificate or financial or other statement now or
hereafter furnished by Borrower in connection with this Agreement or any Loan
shall at any time prove to be untrue or misleading in any material respect as of
the time when made;
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C. Borrower shall fail to observe any covenant, condition or
agreement contained in Sections 5.A.(11) or 5.B hereof or in paragraphs 2 or 3.A
of Rider A, which failure shall continue for a period of 10 days after receipt
of written notice from Lender;
D. Borrower shall fail to observe or perform any other covenant
or condition contained in this Agreement, and such failure shall continue
unremedied for a period of 30 days after the date on which written notice
thereof shall be given by Lender to Borrower;
E. Borrowers or any guarantor of the Obligations fails to
perform, keep or observe any other term, provision, condition, covenant,
warranty or representation contained in any of the Credit Documents other than
this Agreement or the Notes, which is required to be performed, kept or observed
by Borrowers or any such guarantor, which failure shall continue unremedied for
a period of thirty (30) days after the date on which written notice thereof
shall be given by Lender to Borrower.
F. Borrower or any subsidiary of Borrower shall default (i) in
the payment of, or other performance under, any obligation for payment or lease
(whether or not capitalized) or any guarantee to Lender or any affiliate of
Lender (excluding all Participation Obligations) beyond the period of grace, if
any, provided with respect thereto, (ii) in the payment of any obligation for
borrowed money in excess of ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($100,000.00) to any other Person beyond the period of grace, if any, provided
with respect thereto, if such obligation for borrowed money is accelerated as a
result thereof, or (iii) in the performance of any obligation for borrowed money
in excess of ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) to any other
Person beyond the period of grace, if any, provided with respect thereto if such
obligation for borrowed money is accelerated as a result thereof;
G. A complaint in bankruptcy or for arrangement or
reorganization or for relief under any insolvency law is filed by or against
Borrower (and when filed against Borrower is in effect for 60 days) or Borrower
admits its inability to pay its debts as they mature; or
H. Any material adverse change in the value of the Collateral or
the financial condition or operating results of Borrower or any guarantor of the
Obligations.
I. The revocation of any Guaranty of the Obligations.
If an Event of Default shall occur and be continuing, Lender may
in addition to any of the remedies otherwise available to Lender, by notice of
default given to Borrower, do any one or more of the following:
J. Terminate the Commitment and/or
K. Declare the Notes to be due and payable, whereupon the
principal amount of the Notes, together with accrued interest thereon and all
other amounts owing under this Agreement and the Notes or the other Credit
Documents, shall become immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived
(and in the case of any Event of Default specified in clause 6.G of the above
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paragraph, such acceleration of the Notes shall be automatic, without any
notice by Lender). In addition, if an Event of Default shall occur and be
continuing, Lender may exercise all other rights and remedies available to it,
whether under this Agreement, under any other instrument or agreement securing,
evidencing or relating to the Obligations, under the Code, or otherwise
available at law or in equity. Without limiting the generality of the
foregoing, Borrower agrees that in any such event, Lender, without demand of
performance or other demand, advertisement or notice of any kind (except the
notice specified below of time and place of public or private sale and any
notice specified in any applicable mortgage) to or upon Borrower or any other
Person (all and each of which demands, advertisements and notices are hereby
expressly waived), may forthwith do any one or more of the following: collect,
receive, appropriate and realize upon the Collateral or any part thereof, and
sell, lease, assign, give an option or options to purchase or otherwise dispose
of and deliver, the Collateral (or contract to do so), or any part thereof, in
one or more parcels at public or private sale or sales at such places and at
such prices as it may deem best, for cash or on credit or for future delivery
without the assumption of any credit risk. Lender shall have the right upon
any such public sale or sales, and, to the extent permitted by law, upon any
such private sale or sales, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption of Borrower, which right or
equity is hereby expressly released. Borrower further agrees, at Lender's
request, to assemble (at Borrower's expense) the Collateral and make it
available to Lender at such places which Lender shall select, whether at
Borrower's premises or elsewhere but not more than 1000 miles from Borrower's
premises. Lender shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale (after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care, safekeeping or otherwise of any or all of the Collateral or in any
way relating to the rights of Lender hereunder, including reasonable attorney's
fees and legal expenses) to the payment in whole or in part of the Obligations,
in such order as Lender may elect. Borrower agrees that Lender need not give
more than 10 days' notice of the time and place of any public sale or of the
time after which a private sale may take place and that such notice is
reasonable notification of such matters. Borrower shall be liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all amounts to which Lender is entitled. Borrower agrees
to pay all costs of Lender, including reasonable attorneys' fees, incurred with
respect to collection of any of the Obligations and enforcement of any of
Lender's rights hereunder. To the extent permitted by law, Borrower hereby
waives presentment, demand, protest or any notice (except as expressly provided
in this Section 6) of any kind in connection with this Agreement or any of the
other Credit Documents or any Collateral except as otherwise specifically
provided in any Credit Document.
SECTION 7. MISCELLANEOUS
No failure or delay by Lender in exercising any right, remedy
or privilege hereunder or under any Notes or any of the other Credit Documents
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, remedy or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, remedy or
privilege. No right or remedy in this Agreement or any of the other Credit
Documents is intended to be exclusive but each shall be cumulative and in
addition to any other remedy referred to herein or otherwise available to
Lender at law or in equity; and the exercise by Lender of any one or more of
such remedies shall not preclude the simultaneous or later exercise by
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Lender of any or all such other remedies. No express or implied waiver by
Lender of an Event of Default shall in any way be, or be construed to be, a
waiver of any other or subsequent Events of Default. The acceptance by Lender
of any regular installment payment or any other sum owing hereunder shall not
(a) constitute a waiver of any Event of Default in existence at the time,
regardless of Lender's knowledge or lack of knowledge thereof at the time of
such acceptance, or (b) constitute a waiver of any Event of Default unless
Lender shall have agreed in writing to waive the Event of Default.
All notices, requests and demands to or upon any party hereto
shall be deemed duly given or made when sent, if given by telecopier, when
delivered, if given by personal delivery or overnight commercial carrier, or the
fifth calendar day after deposit in the United States mail, certified mail,
return receipt requested, addressed to such party at its address (or telecopier
number) set forth in paragraph 4 of Rider A or such other address or telecopier
number as may be hereafter designated in writing by such party to the other
party hereto.
Borrower agrees:
A. To pay or reimburse Lender for (i) all expenses
of Lender in connection with the documentation hereof, (ii) all fees, taxes and
expenses of whatever nature reasonably incurred in connection with the creation,
preservation and protection of Lender's security interest in the Collateral,
including, without limitation, all filing and lien search fees, payment or
discharge of any taxes or Liens upon, or in respect to, the Collateral, and all
other fees and expenses reasonably incurred in connection with protecting or
maintaining the Collateral or in connection with defending or prosecuting any
actions, suits or proceedings arising out of, or related to, the Collateral;
(iii) all costs and expenses (including reasonable legal fees and disbursements)
of Lender in connection with the enforcement of this Agreement or any of the
other Credit Documents, including, but not limited to (a) any court or
administrative proceeding involving the Collateral or the Credit Documents to
which Lender is made a party or is subject to subpoena by reason of its being
the holder of any Credit Documents, including, without limitation, bankruptcy,
insolvency, or a reorganization, and (b) any court or administrative proceeding
or other action undertaken by Lender to enforce any remedy or to collect any
indebtedness due under the Credit Documents and (c) any remedy exercised by
Lender; (iv) any activity in connection with any request by Borrowers or anyone
acting on behalf of Borrowers that the Lender consent to a proposed action
which, pursuant to the Credit Documents may be undertaken or consummated only
with the prior consent of Lender, whether or not such consent is granted, and
(v) any negotiation undertaken between Borrowers and Lender, or anyone acting on
behalf of Borrowers, pertaining to the existence or cure of any default under or
the modification or extension of any of the Credit Documents, and
B. to pay, and to indemnify and hold Lender harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, suits, out-of-pocket costs, expenses (including
reasonable legal expenses) or disbursements of any kind or nature whatsoever
arising out of or with respect to (a) this Agreement or any of the other Credit
Documents, the Collateral or Lender's interest therein, including, without
limitation, the execution, delivery, enforcement, performance or administration
of this Agreement or any of the other Credit Documents and the manufacture,
purchase, ownership, possession, use, selection,
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operation or condition of the Collateral or any part thereof, or (b) Borrower's
violation or alleged violation of any Environmental Laws or any law or
regulation relating to Hazardous Materials (the foregoing being referred to as
the "indemnified liabilities"), PROVIDED, that Borrower shall have no
obligation hereunder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of Lender. If Borrower fails to perform
or comply with any of its agreements contained in this Agreement or any of the
other Credit Documents and Lender shall itself perform, comply or cause
performance or compliance, the expenses of Lender so incurred, together with
interest thereon at the Default Rate, shall be payable by Borrower to Lender on
demand and until such payment is made shall constitute Obligations hereunder.
The agreements and indemnities contained in this paragraph shall survive
termination of this Agreement or any of the other Credit Documents and payment
of the Notes.
This Agreement together with the other Credit Documents contains
the complete, final and exclusive statement of the terms of the agreement
between Lender and Borrower related to the contemplated transactions, and
neither this Agreement, the Notes, or the other Credit Documents, nor any terms
hereof, may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of a change,
waiver, discharge or termination is sought.
This Agreement and the other Credit Documents shall be binding
upon, and inure to the benefit of, Borrower and Lender and their respective
successors and assigns, except that Borrower may not assign or transfer its
rights hereunder or any interest herein without the prior written consent of
Lender. Borrowers hereby consent to Lender's participation, sale, assignment,
transfer, or other disposition to a bank or other financial institution which
does not and whose affiliates are not competitors of either Borrower, at any
time or times hereafter, of this Agreement, or any of the other Credit
Documents, or any portion hereof or thereof, including, without limitation,
Lender's rights, title, interest, remedies, powers, and/or duties hereunder or
thereunder.
Headings of sections and paragraphs are for convenience only, are
not part of this Agreement and shall not be deemed to affect the meaning or
construction of any of the provisions hereof. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Borrower hereby authorizes Lender to correct patent errors and to
fill in such blanks as dates herein and in the Notes and in any of the other
Credit Documents.
Except with the respect to obligations of the Borrowers to make
payments pursuant to the Notes, all agreements, obligations, and covenants
contained herein to be kept and performed by the Borrowers shall be joint and
several.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF OHIO.
EXCEPT AS OTHERWISE PROVIDED FOR IN THIS AGREEMENT OR AS REQUIRED BY APPLICABLE
LAW, BORROWER WAIVES (i) PRESENTMENT,
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DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NONPAYMENT,
MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL
COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL
PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER ON WHICH BORROWER MAY IN ANY
WAY BE LIABLE, (ii) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF THE
COLLATERAL WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO
EXERCISE ANY OF LENDER'S REMEDIES AND (iii) ITS RIGHT TO A JURY TRIAL IN THE
EVENT OF ANY LITIGATION INSTITUTED IN RESPECT OF THIS AGREEMENT, THE NOTES OR
ANY OF THE OTHER CREDIT DOCUMENTS. BORROWER ACKNOWLEDGES THAT IT HAS BEEN
ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO THIS AGREEMENT AND THE
TRANSACTIONS EVIDENCED BY THIS AGREEMENT. BORROWER HEREBY IRREVOCABLY CONSENTS
AND AGREES THAT ANY LEGAL ACTION IN CONNECTION WITH THIS AGREEMENT MAY BE
INSTITUTED IN THE COURTS OF THE STATE OF OHIO, IN THE COUNTY OF STARK OR THE
UNITED STATES COURTS FOR THE NORTHERN DISTRICT OF OHIO, AS LENDER MAY ELECT,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER HEREBY IRREVOCABLY
ACCEPTS AND SUBMITS TO, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, THE
NON-EXCLUSIVE JURISDICTION OF ANY SUCH COURT, AND TO ALL PROCEEDINGS IN SUCH
COURTS. BORROWER AND LENDER ACKNOWLEDGE THAT JURY TRIALS OFTEN ENTAIL
ADDITIONAL EXPENSES AND DELAYS NOT OCCASIONED BY NON-JURY TRIALS. BORROWER AND
LENDER AGREE AND STIPULATE THAT A FAIR TRIAL MAY BE HAD BEFORE A STATE OR
FEDERAL JUDGE BY MEANS OF A BENCH TRIAL WITHOUT A JURY. IN VIEW OF THE
FOREGOING, AND AS A SPECIFICALLY NEGOTIATED PROVISION OF THIS AGREEMENT,
BORROWER AND LENDER HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT, OR THE
TRANSACTIONS RELATED HERETO, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND BORROWER AND LENDER
HEREBY AGREE AND CONSENT THAT BORROWER OR LENDER MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
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EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered by their duly authorized officers as of MARCH 14,
1996.
LEXINGTON PRECISION CORPORATION
("Borrower")
By Dennis J. Welhouse
----------------------------------------------
Name: Dennis J. Welhouse
Title: Senior Vice President and Assistant
Secretary
LEXINGTON COMPONENTS, INC.
("Borrower")
By Dennis J. Welhouse
----------------------------------------------
Name: Dennis J. Welhouse
Title: Vice Chairman and Assistant
Secretary
Accepted at Canton, Ohio, as of the date
first above written.
BANK ONE, AKRON, NA
By Rudolf G Bentlage
------------------------------------------
Name: Rudolf G. Bentlage
Title: Vice President
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RIDER A TO CREDIT FACILITY AND SECURITY AGREEMENT DATED AS OF
MARCH 14, 1996, BETWEEN BANK ONE, AKRON, NA ("LENDER"), AND LEXINGTON
PRECISION CORPORATION ("LPC") AND LEXINGTON COMPONENTS, INC. ("LCI")
(HEREINAFTER LPC AND LCI ARE REFERRED TO EACH AS BORROWER SINGULARLY AND
REFERRED TO JOINTLY AND SEVERALLY AS THE "BORROWERS," WHICH TERM SHALL
MEAN EACH OF THE COMPANIES INDIVIDUALLY AND BOTH OF THE COMPANIES COLLECTIVELY)
1. DEFINITIONS
As used in the Credit Facility and Security Agreement, the
following terms shall have the following defined meanings (applicable to both
singular and plural forms), unless the context otherwise requires:
AGREEMENT: "Hereof," "hereto," "hereunder" and words of
similar meaning: the Credit Facility and Security Agreement of even date
herewith between Borrower and Lender including this Rider A and any other
rider, schedule and exhibit executed by Borrower and Lender in connection
herewith, as from time to time amended, modified or supplemented.
BASE RATE: The Lender's Prime Rate for commercial loans, as
in effect from time to time, or such other designation announced in replacement
of such Prime Rate for commercial loans, which in either instance may not
necessarily be the most favorable or lowest or best rate offered by Lender.
BUSINESS DAY: A day other than a Saturday, Sunday or legal
holiday under the laws of the State of Ohio or day on which commercial banks
are authorized or required to close in Ohio.
CASH FLOW RATIO: The ratio of cash flow to debt service
calculated as fiscal net income plus depreciation and amortization minus
dividends divided by current maturities of all long-term debt excluding the
twelve and three-quarter percent (12.75%) Senior Subordinated Notes of LPC due
February 1, 2000, in the original principal amount of THIRTY-ONE MILLION SEVEN
HUNDRED TWENTY THOUSAND ONE HUNDRED TWENTY-FIVE AND NO/100 DOLLARS
($31,720,125.00) the fourteen percent (14%) junior subordinated notes of LPC
due May 1, 2000, in the original principal amount of THREE HUNDRED FORTY-SIX
THOUSAND SIX HUNDRED SIXTY-SIX DOLLARS AND SIXTY-SEVEN CENTS ($346,666.67) and
the junior subordinated convertible increasing rate notes of LPC due May 1,
2000, in the original principal amount of ONE MILLION AND NO/100 DOLLARS
($1,000,000.00), provided that for the purposes of this calculation, the
Borrower's results of operations for any twelve (12) month period shall exclude
any write down or write-off of asset (whether tangible or intangible) of any
manufacturing facility or business unit of the Borrower which is recorded by
Borrower as a result of the restructuring, relocation, shutdown, or sale of
such manufacturing facility or business unit or as a result of compliance with
Financial Accounting Standard No. 121, accounting for the Impairment of
Long-Lived Assets and for the Long-Lived Assets to Be Disposed of.
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CLOSING DATE: Each date on which a Loan is made.
CODE: The Uniform Commercial Code as from time to time in
effect in any applicable jurisdiction.
COLLATERAL: The Equipment, the North Canton Property, the
Vienna Property, and all other Property of the Borrower now or at any time or
times hereafter subject to a Lien in favor of Lender pursuant to the Credit
Documents and the Proceeds thereof.
COMMITMENT: Lender's obligation to make Loans in the
aggregate principal amount stated in paragraph 2 of this Rider A.
CONGRESS: Congress Financial Corporation and its successors
and assigns.
CORE BORROWING AMOUNT: That portion of the outstanding
balance of the Equipment Term Loan designated by Borrowers to accrue interest
at the LIBOR Interest Rate during the LIBOR Interest Period and which shall be
in incremental amounts of ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00)
and which shall not exceed the Core Cap.
CORE CAP: An amount that the Core Borrowing Amount shall
not exceed at any time during the term of the Equipment Term Loan. The Core
Cap shall be ONE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($1,500,000.00) until August 1, 1996, on which date it shall be reduced to ONE
MILLION FOUR HUNDRED THOUSAND AND NO/100 DOLLARS ($1,400,000.00) and shall be
reduced by another ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) on the
first day of each month every four (4) months thereafter until December 1,
2000, on which date it shall be reduced to ONE HUNDRED THOUSAND AND NO/100
DOLLARS ($100,000.00).
COST: With respect to any item of new Equipment, the
seller's invoiced purchase price therefor (after giving effect to any discount
or other reduction) payable by Borrower excluding all other amounts and
expenses payable by Borrower unless approved by Lender such as installation,
freight, tooling, delivery charges, sales taxes, site preparation, and other
similar costs with respect to Equipment or, with respect to any item of used
Equipment, such amount as Lender may approve.
CREDIT DOCUMENTS: This Agreement, the Notes, and all other
agreements, instruments and documents (including, without limitation, all
assignments, security agreements, mortgages, deeds of trust, lien waivers,
subordinations, guarantees, pledges, powers of attorney and consents)
heretofore, now or hereafter executed by Borrower in respect of the
transactions contemplated by this Agreement or any amendments or additions
thereto, in each instance as amended from time to time, provided, in no event
shall the Credit Documents include any agreement with respect to any
Participation Obligation.
DEFAULT: Any event which with notice, lapse of time, or
both would constitute an Event of Default.
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DEFAULT RATE: A fluctuating rate of interest equal to three
percentage points (3.0%) above the Base Rate but not to exceed the maximum rate
allowed by law.
DEMAND NOTE: The Demand Note to be executed by LPC in the
form attached as Exhibit F to this Agreement (with such changes or
modifications, if any, to which Lender may agree) evidencing the North Canton
Interim Loan made by Lender pursuant to Section 2.C of this Agreement, together
with all amendments thereto and all promissory notes issued in substitution
therefor or replacement thereof.
ENVIRONMENTAL LAWS: The Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Federal Occupational Safety and Health Act, the Environmental Protection
Act, any so-called "Superfund" or "Superlien law, the Toxic Substances Control
Act, or any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to, or imposing liability or
standards of conduct concerning, any solid or hazardous or, toxic or dangerous
waste, substance or material, as now or at any time hereafter in effect, as
well as any other substance the ownership, possession, use, storage, or
disposal of which is regulated under any federal, state, or local laws,
ordinances, regulations, codes, rules, orders, or decrees pertaining to
environmental, health, or safety matters.
EQUIPMENT: Specific machinery and equipment of Lexington
Precision Corporation ("LPC") consisting of: lathes, machining centers,
grinders, bandsaw, drilling machine, transfer molding presses, vacuum pump,
ultrasonic cleaning tank, compressor/dryer, lift truck, sweeper, scrubber and
cabinets, now owned or hereafter acquired by LPC, as more particularly
described on a certain Schedule of Equipment dated March 14, 1996, executed by
LPC and Bank One, Akron, NA (the "Specific Equipment"), together with all
currently owned or hereafter acquired accessories and parts for, and repairs,
modifications, improvements, upgrades, accessions and attachments to, the
Specific Equipment, PROVIDED, in each case that such machinery and equipment is
either (i) located at the North Canton Property as of March 14, 1996, or (ii)
moved to the North Canton Property at any time after March 14, 1996, or (iii)
removed from the North Canton Property at any time after March 14, 1996; and
replacements and substitutions for the Specific Equipment acquired after the
date hereof that are (i) located at the North Canton Property at any time after
March 14, 1996, or (ii) removed from the North Canton Property at any time
after March 14, 1996.
EQUIPMENT TERM LOAN: As defined in Section 2.A of this
Agreement.
EQUIPMENT TERM NOTE: The term promissory note to be
executed by LPC in the form attached as Exhibit B to this Agreement (with such
changes or modifications, if any, to which Lender may agree) evidencing the
Equipment Term Loan made by Lender pursuant to Section 2.A of this Agreement,
together with all amendments thereto and all promissory notes issued in
substitution therefor or replacement thereof.
EVENT OF DEFAULT: As set forth in Section 6 of the
Agreement.
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EVENT OF LOSS: With respect to any item of Equipment (i)
the actual or constructive loss or loss of use thereof, due to theft,
destruction, damage beyond repair or to an extent which makes repair
uneconomical, or (ii) the condemnation, confiscation or seizure thereof, or
requisition of title thereto, or use thereof, by any Person.
HAZARDOUS MATERIALS: Any substance, pollutant or
contaminant regulated by (or for the purposes of) any Environmental Laws
including, but not limited to, petroleum, any radioactive material, and
asbestos in any form or condition.
INDEBTEDNESS: Shall mean all items which, in accordance
with generally accepted accounting principles, consistently applied, would be
included in determining total liabilities of Borrower shown on the liability
side of its balance sheet as at the date such Indebtedness is to be calculated.
INSTALLMENT PAYMENT DATE: with respect to any Note, each
date on which a regular installment of interest is due.
LIBOR INTEREST PERIOD: The period commencing on the date
the LIBOR Interest Rate on the Core Borrowing Amount is to be made, and ending,
as the Borrowers may elect, pursuant to Section 2.B.(2) of the Agreement, one
(1) month or two (2) months thereafter; provided that all of the foregoing
provisions relating to interest periods are subject to the following:
(i) No interest period may extend beyond any demand of
payment made by Lender;
(ii) 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.
LIBOR INTEREST RATE: Means the London Interbank Offered
Rate on United States dollars plus three hundred (300) basis points per annum.
LIENS: Liens, mortgages, security interests, financing
statements or other encumbrances of any kind whatsoever.
MATERIAL ADVERSE EFFECT: As to any events, occurrences or
conditions, if the result thereof would, either singly or in the aggregate,
have a material and adverse effect on (i) the Borrower's Property, business,
operations, prospects, profitability or condition (financial or otherwise),
(ii) Borrower's ability to repay the Obligations or (iii) Lender's Lien on the
Collateral or the priority thereof.
MORTGAGES: The open-end mortgage by LPC in favor of Lender
with respect to the North Canton Property and the open-end mortgage by LCI in
favor of Lender with respect to the Vienna Property.
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NORTH CANTON INTERIM LOAN: As defined in Section 2.C of
this Agreement.
NORTH CANTON LOCATION: LPC's building and offices located
at 3565 Highland Park NW, North Canton, Ohio.
NORTH CANTON PROPERTY: Certain property owned by LPC
located in Stark County, Ohio, described on Exhibit C hereto.
NORTH CANTON TERM LOAN: As defined in Section 2.C of this
Agreement.
NORTH CANTON TERM NOTE: The term promissory note to be
executed by LPC in the form attached as Exhibit D to this Agreement (with such
changes or modifications, if any, to which Lender may agree) evidencing the
North Canton Term Loan made by Lender pursuant to Section 2.C of this
Agreement, together with all amendments thereto and all promissory notes issued
in substitution therefor or replacement thereof.
NOTES: The Equipment Term Note, the North Canton Term Note,
the Vienna Term Note, and any other promissory note or other instrument
evidencing a Borrower's obligation to repay any Obligations.
OBLIGATIONS: All debts, liabilities and obligations of the
Borrower to Lender under this Agreement and also any and all other debts,
liabilities and obligations of Borrower to Lender of every kind and
description, direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, including without limiting the generality of
the foregoing, any debt, liability or obligation of Borrower to Lender under
any guaranty, and all interest, fees, charges and expenses which at any time
may be payable by Borrower to Lender thereunder, provided that in no event
shall the Obligations include any Participation Obligations or any obligation,
guarantee, or liability of Borrower to any other Person which Lender may have
obtained by assignment, grant, or transfer.
ORIGINATION FEE: As defined in Section 2.I of this
Agreement.
PARENT COMPANY: Any Person having beneficial ownership
(directly or indirectly) of 25% or more of Borrower's shares of voting stock.
PARTICIPATION OBLIGATIONS: Any obligation, guarantee, or
other liability of any kind whatsoever to Lender or any affiliate of Lender as
a result of or arising out of Lender's or any affiliate of Lender's
participation in any loan, credit facility, or other extension of credit to or
with any Borrower by Congress or any other Person.
PERMITTED ENCUMBRANCES: The (i) Lien of Congress Financial
Corporation, (ii) any Liens which are not in excess of TWENTY- FIVE THOUSAND
DOLLARS ($25,000) in the aggregate, and (iii) any "Permitted Encumbrances" as
defined in each of the Mortgages.
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PERSON: An individual, partnership, corporation, trust,
unincorporated association, joint venture, governmental authority or other
entity of whatever nature.
PRIME RATE: The interest rate established from time to time
by Lender as the Lender's Prime Rate, whether or not publicly announced, which
may not necessarily be the most favorable or lowest or best rate offered by
Lender.
PROCEEDS: All proceeds of the Equipment, which proceeds
shall include the meaning assigned to it in the Code, and in any event,
including, without limitation, (i) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Borrower from time to time with
respect to any of the Equipment; (ii) any and all payments made, or due and
payable from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Equipment by any
Person; (iii) any and all accounts arising out of a sale or lease of any of the
Equipment, or chattel paper evidencing a lease of any of the Equipment; (iv)
any and all other rents or profits or other amounts from time to time paid or
payable upon the sale, lease, or other disposition of any of the Equipment; and
(v) all books and records (including, without limitation, programs, printouts,
and other accounting records) of LPC pertaining to the Equipment.
SUBORDINATED DEBT: The 14% Junior Subordinated Notes of LPC
due May 1, 2000 in the original principal amount of $346,666.67, the Junior
Subordinated Convertible Increasing Rate Notes of LPC due May 1, 2000 in the
original principal amount of $1,000,000 and such other Indebtedness which is
subordinated and junior in right of payment to the Obligations to the extent,
in such manner, and pursuant to an instrument evidencing such subordination,
acceptable to Lender.
TANGIBLE NET WORTH: At any time, Stockholder's Equity plus
Preferred Stock plus Subordinated Debt, less the sum of:
(i) any surplus resulting from any write-up of assets of
Borrower subsequent to September 30, 1995; and
(ii) good will, including any amounts, however designated
on a balance sheet of the Borrower, representing the excess of the
purchase price paid for assets or stock acquired over the value
assigned thereto on the books of the Borrower; and
(iii) proprietary rights of Borrower, including all
patents, trademarks, trade names and copyrights; and
(iv) loans and advances to stockholders of Borrower who
own five percent (5%) or more of LPC's common stock.
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TREASURY RATE: The weekly average yield on United States
Treasury securities adjusted to a constant maturity of five (5) years as in
effect from time to time. Should the United States Treasury Department cease to
issue Treasury securities having a maturity as noted above in the same manner
existing on the date of this Agreement, then the Lender shall select an index
that in the opinion of the Lender, accurately reflects monetary trends intended
to be reflected by the Treasury Rate.
VIENNA PROPERTY: Certain property owned by LCI located in
Trumbull County, Ohio, described on Exhibit E hereto.
VIENNA TERM LOAN: As defined in Section 2.E of this
Agreement.
VIENNA TERM NOTE: The term promissory note to be executed
by LCI in the form attached as Exhibit F to this Agreement (with such changes
or modifications, if any, to which Lender may agree) evidencing the Vienna Term
Loan made by Lender pursuant to Section 2.E of this Agreement, together with
all amendments thereto and all promissory notes issued in substitution therefor
or replacement thereof.
2. FINANCIAL COVENANTS
So long as any Obligations remain unsatisfied, Borrowers
covenant that, unless otherwise consented to by Lender in writing, LPC shall:
A. Maintain on a basis consolidated with LPC's direct
and indirect subsidiaries at all times a Tangible Net Worth equal to or greater
than FIFTEEN MILLION THREE HUNDRED THOUSAND AND NO/100 DOLLARS
($15,300,000.00).
B. Maintain on a basis consolidated with LPC's direct
and indirect subsidiaries a positive Cash Flow Ratio of not less than one and
twenty-five hundredths (1.25) to one (1.0).
C. Maintain on a basis consolidated with LPC's direct
and indirect subsidiaries operating working capital (excess of current assets
over current liabilities) as determined in accordance with generally accepted
accounting principles (excluding notes payable and the current portion of
long-term indebtedness) of not less than THREE MILLION EIGHT HUNDRED THOUSAND
AND NO/100 DOLLARS ($3,800,000.00).
D. Not incur, make, or commit to make any expenditure in
respect of the purchase or other acquisition of fixed or capital assets,
including leases which in accordance with generally accepted accounting
principles should be capitalized on the books of LPC (including normal
replacements and maintenance), which after giving effect thereto would cause
the aggregate amount of such capital expenditures by LPC to exceed FIFTEEN
MILLION AND NO/100 DOLLARS ($15,000,000.00) (on a non-cumulative basis) in any
fiscal year.
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3. PREPAYMENT
E. Should any item of Equipment suffer an Event of Loss,
Borrower shall either replace such item of Equipment within 60 days with
equipment (which shall become Equipment) of a value and utility equal to or
greater than that of the Equipment suffering the Event of Loss (such
determination of value and utility being deemed made immediately prior to the
Event of Loss) or make a prepayment on the corresponding Note within 60 days
after the occurrence of the Event of Loss. The amount to be prepaid shall be
(i) the unpaid principal amount of such Note multiplied by a fraction the
numerator of which is the Cost of the item of Equipment which suffered the Event
of Loss and the denominator of which is the Cost of all items of Equipment less
the Cost of each item of Equipment which previously suffered an Event of Loss or
for which a prepayment has otherwise previously been made (the PREPAID
PRINCIPAL AMOUNT) and (ii) all other amounts then due and owing hereunder and
under the Notes.
F. On any Installment Payment Date Borrower may, at its
option, on at least 30 days' prior written notice to Lender, prepay all, but
not less than all, of the outstanding principal under all Notes executed
hereunder together with (i) all interest accrued thereon to the date of
prepayment and (ii) all other amounts then due and owing hereunder or under the
Notes.
4. ADDRESSES FOR NOTICE PURPOSES AND DEBTOR'S CHIEF EXECUTIVE OFFICE
A. If to Lender, at:
Bank One, Akron, NA
Attention: Rudolf G. Bentlage
50 South Main Street
Akron, Ohio 44308
Telecopier No. (216) 438-8212
With a copy to:
Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A.
Attention: Sam O. Simmerman
4775 Munson Street NW
P.O. Box 36963
Canton, Ohio 44735-6963
Telecopier No. (216) 497-4020
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B. If to Borrowers, at:
Lexington Precision Corporation
Attention: Warren Delano
767 Third Avenue
New York, New York 10017
Telecopier No. (212) 319-4659
With a copy to:
Nixon, Hargrave, Devans & Doyle
Attention: Lauren E. Wiesenberg
437 Madison Avenue, 24th Floor
New York, New York 10022
Telecopier No. (212) 940-3111
9
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or to such other address as each party may designate for itself by like notice
given in accordance with this section.
THE PROVISIONS SET FORTH IN THIS RIDER A ARE INCORPORATED IN
AND MADE A PART OF THE CREDIT FACILITY AND SECURITY AGREEMENT BETWEEN LENDER
AND DEBTOR DATED AS OF MARCH 14, 1996.
LEXINGTON PRECISION CORPORATION
("Borrower")
By Dennis J. Welhouse
-----------------------------------------------
Name: Dennis J. Welhouse
Title: Senior Vice President and
Assistant Secretary
LEXINGTON COMPONENTS, INC.
("Borrower")
By Dennis J. Welhouse
-----------------------------------------------
Name: Dennis J. Welhouse
Title: Vice Chairman and
Assistant Secretary
Accepted at Canton, Ohio, as of the date
first above written.
BANK ONE, AKRON, NA
By Rudolf G. Bentlage
----------------------------------------
Name: Rudolf G. Bentlage
Title: Vice President
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Exhibits to the Credit Facility and Security Agreement dated March 14,
1996 have been omitted.
The following is a list of the omitted Exhibits which the Registrant
agrees to furnish supplementally to the Commission upon request:
Exhibits:
A Equipment Term Note
B North Canton Property
C North Canton Term Note
D Vienna Property
E Vienna Term Note
F Demand Note