Exhibit 10.2
LOAN AGREEMENT
Dated as of January 7, 1997
HIRSCH INTERNATIONAL CORP., a Delaware corporation having its principal
place of business at 200 Wireless Boulevard, Hauppauge, New York 11788 (the
"Borrower"), HAPL LEASING CO., INC., a New York corporation having its principal
place of business at 200 Wireless Boulevard, Hauppauge, New York 11788 ("HAPL"),
SEWING MACHINE EXCHANGE, INC., an Illinois corporation having its principal
place of business at 1847 South Michigan Avenue, Chicago, Illinois 60616
("SMX"), PULSE MICROSYSTEMS LTD., an Ontario, Canada corporation having its
principal place of business at 2660 Meadowvale Boulevard, Unit 10, Mississauga,
Ontario, Canada L5N6M6 ("Pulse") and SEDECO, INC., a Texas corporation having
its principal place of business at 1124 W. Fuller Avenue, Fort Worth, Texas
76115 ("Sedeco")(HAPL, SMX, Pulse and Sedeco being individually, a "Guarantor"
and collectively, the "Guarantors"), THE BANK OF NEW YORK, a New York banking
organization, having an office at 1401 Franklin Avenue, Garden City, New York
11530 ("BNY" or a "Bank") FLEET BANK, N.A., a national banking association,
having an office at 300 Broad Hollow Road, Melville, New York ("Fleet" or a
"Bank") and THE BANK OF NEW YORK, as agent for the Banks (the "Agent") hereby
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ABR Applicable Margin" shall have the meaning set forth in Sections 2.04
and 2.13 of this Agreement.
"Adjusted LIBOR Rate" means, with respect to any Eurodollar Loan for any
Interest Period, an interest rate per annum (rounded, if not already a whole
multiple of 1/100 of one (.01%) percent to the nearest 1/100 of one (.01%)
percent) determined by the Agent to be equal to the quotient of (a) the LIBOR
Rate divided by (b) a percentage equal to 100% minus the Eurocurrency Reserve
Requirement as determined by the Agent on the date the Adjusted LIBOR Rate is
determined.
"Affiliate" means, as to any Person (i) a Person which directly or
indirectly controls, or is controlled by, or is under common control with, such
Person; (ii) a Person which directly or indirectly beneficially owns or holds
ten (10%) percent or more of any class of voting stock of, or ten (10%) percent
or more of the equity interest in, such Person; or (iii) a Person ten (10%)
percent or more of the voting stock of which, or ten (10%) or more of the
equity interest of which, is directly or indirectly beneficially owned or held
by such Person. 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.
"Agent" means The Bank of New York, or any bank which succeeds to the
position of Agent, as provided in this Agreement.
"Aggregate Outstandings" means, at any time, the aggregate of (i) the
principal amount of outstanding Revolving Credit Loans and (ii) L/C Exposure.
"Agreement" means this Loan Agreement, as amended, supplemented or modified
from time to time.
"Alternate Base Rate" means, for any day, an interest rate per annum equal
to the higher of (i) the Prime Rate in effect on such day (computed on the basis
of the actual number of days elapsed over a year of 365/366 days) or (ii) the
Federal Funds Effective Rate in effect on such day plus 1/2 of 1% (computed on
the basis of the actual number of days elapsed over a year of 360 days). For
purposes of this Agreement any change in the Alternate Base Rate due to a change
in the Prime Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate or the Federal Funds Effective
Rate, respectively. The Agent shall use its best efforts to notify the Borrower
of any change in the Alternate Base Rate, but any failure of the Agent to so
notify the Borrower shall not void or otherwise delay the effectiveness of the
change in the Alternate Base Rate. If for any reason the Agent shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable to ascertain the Federal Funds Effective Rate for any reason,
including, without limitation, the inability or failure of the Agent to obtain
sufficient bids or publications in accordance with the terms thereof, the
Alternate Base Rate shall be determined without regard to clause (ii) of the
first sentence of this definition, as appropriate, until the circumstances
giving rise to such inability no longer exist.
"Alternate Base Rate Loan" means a Loan bearing interest at the Alternate
Base Rate.
"Arranger" means BNY Capital Markets, Inc.
"Bank" or "Banks" means one or more, as the context requires, of BNY, Fleet
and each other lender which becomes a party to this Agreement.
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"BNY Existing Facility" means the line of credit made available to the
Borrower by BNY prior to the date of this Agreement.
"BNY Existing Term Loan Agreement" means the Term Loan Agreement dated as
of June 10, 1996 among the Borrower, HAPL, Pulse, SMX, BNY as Agent, and BNY and
Fleet as lending banks, as it may be amended or supplemented from time to time.
"Board of Governors" means the Board of Governors of the Federal Reserve
System of the United States of America.
"Business Day" means a day of the year on which banks are not required or
authorized to close in New York City, provided that, if the relevant day relates
to a Eurodollar Loan, an Interest Period, or notice with respect to a Eurodollar
Loan, the term "Business Day" shall mean a day on which dealings in dollar
deposits are also carried on in the London interbank market and banks are open
for business in London.
"Capital Lease" means a lease which has been or should be, in accordance
with GAAP, capitalized on the books of the lessee.
"Commitment" means, with respect to each Bank, the aggregate obligations of
such Bank to (i) make Revolving Credit Loans to the Borrower pursuant to the
terms and conditions of the Agreement and (ii) participate in Letters of Credit
issued pursuant to the terms and conditions of this Agreement, in each case in
the aggregate Dollar amount set forth in Schedule 1.01-A annexed hereto.
"Commitment Letter" means the letter from BNY to the Borrower, dated
November 21, 1996 pursuant to which BNY agreed to extend sixty (60%) percent of
a credit facility as described therein to the Borrower and the Arranger agreed
to use its best efforts to arrange, structure and syndicate such credit
facility.
"Consolidated Affiliates" means, as to any Person, those Affiliates of such
Person which are consolidated with such Person in the financial statements
delivered pursuant to Section 5.01(b).
"Consolidated Capital Expenditures" means, as to any Person, the aggregate
amount of any expenditures (including purchase money Debt or purchase money
Liens) by such Person and its Consolidated Affiliates for assets (including
fixed assets acquired under Capital Leases) which it is contemplated will be
used or usable in fiscal years subsequent to the year of acquisition, all
computed and consolidated in accordance with GAAP.
"Consolidated Current Liabilities" means, as to any Person, the aggregate
amount of all liabilities of such Person and its Consolidated Affiliates
(including tax and other proper accruals)
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which would be properly classified as current liabilities, all computed and
consolidated in accordance with GAAP.
"Consolidated Funded Debt" means, as to the Borrower and its Consolidated
Affiliates, the aggregate of the Funded Debt of the Borrower and its
Consolidated Affiliates, computed and consolidated in accordance with GAAP.
"Consolidated Tangible Net Worth" means, as to any Person, the excess of
(i) such Person's Consolidated Total Assets, less all intangible assets properly
classified as such in accordance with GAAP, including, but without limitation,
patents, patent rights, trademarks, trade names, franchises, copyrights,
licenses, permits and goodwill, over (ii) such Person's Consolidated Total
Liabilities.
"Consolidated Total Assets" means, as to any Person, the aggregate net book
value of the assets of such Person and its Consolidated Affiliates after all
appropriate adjustments in accordance with GAAP (including without limitation,
reserves for doubtful receivables, obsolescence, depreciation and amortization
and excluding the amount of any write-up or revaluation of any asset).
"Consolidated Total Liabilities" means, as to any Person, all of the
liabilities of such Person and its Consolidated Affiliates, including all items
which, in accordance with GAAP, would be included on the liability side of the
balance sheet (other than capital stock, capital surplus and retained earnings)
computed and consolidated in accordance with GAAP.
"Debt" means, as to any Person, (i) all indebtedness or liability of such
Person for borrowed money; (ii) indebtedness of such Person for the deferred
purchase price of property or services (including trade obligations); (iii)
obligations of such Person as a lessee under Capital Leases; (iv) current
liabilities of such Person in respect of unfunded vested benefits under any
Plan; (v) obligations of such Person under letters of credit issued for the
account of such Person; (vi) obligations of such Person arising under acceptance
facilities; (vii) all guaranties, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any other
Person, or otherwise to assure a creditor against loss; (viii) obligations
secured by any Lien on property owned by such Person whether or not the
obligations have been assumed; and (ix) all other liabilities recorded as such,
or which should be recorded as such, on such Person's financial statements in
accordance with GAAP.
"Default" means any of the events specified in Section 6.01 of this
Agreement, whether or not any requirement for notice or lapse of time or any
other condition has been satisfied.
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"Dollars" and the sign "$" mean lawful money of the United States of
America.
"EBITDA" means, as to the Borrower and its Consolidated Affiliates for any
period, the sum of (i) net income (excluding extraordinary gains and excluding
extraordinary losses), (ii) interest expense, (iii) depreciation expense, (iv)
amortization of intangible assets and (v) federal, state and local income taxes
paid, in each case measured for the Borrower and its Consolidated Affiliates on
a consolidated basis for such period, computed and consolidated in accordance
with GAAP.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, the regulations promulgated thereunder and the
published interpretations thereof as in effect from time to time.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
which together with any other Person would be treated, with such Person, as a
single employer under Section 4001 of ERISA.
"Eurocurrency Reserve Requirement" means, with respect to the Adjusted
LIBOR Rate for an Interest Period, the daily average of the stated maximum rate
(expressed as a decimal) at which reserves (including any marginal, supplemental
or emergency reserves) are required to be maintained at the beginning of such
Interest Period under any regulation (including, but without limitation,
Regulation D) promulgated by the Board of Governors (or any successor thereto or
other governmental authority having jurisdiction over the Agent) by the Agent
against "Eurocurrency liabilities" (as such term is used in Regulation D), but
without benefit or credit for proration, exemptions or offsets that might
otherwise be available to the Agent from time to time under Regulation D.
Without limiting the effect of the foregoing, the Eurocurrency Reserve
Requirement shall reflect any other reserves required to be maintained by the
Agent against (1) any category of liabilities that includes deposits by
reference to which the Adjusted LIBOR Rate is to be determined; or (2) any
category of extension of credit or other assets that include loans bearing an
Adjusted LIBOR Rate.
"Eurodollar Loan" means a Loan bearing interest at a rate based on the
Adjusted LIBOR Rate in accordance with the provisions of Article II hereof.
"Event of Default" means any of the events specified in Section 6.01 of
this Agreement, provided that any requirement for notice or lapse of time or any
other condition has been satisfied.
"Existing Letters of Credit" means those letters of credit issued by BNY
under the BNY Existing Facility as described in
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Schedule 1.01-B annexed hereto and which are, on the date of this
Agreement, unexpired and on which no presentment has been made.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Agent from three (3) federal funds brokers
of recognized standing selected by it.
"Fee Letter" means the letter dated November 21, 1996 from BNY to the
Borrower in which the Borrower agreed to pay certain fees in connection with the
credit facility as described therein.
"Fixed Charge Coverage Ratio" means, as to the Borrower and its
Consolidated Affiliates for any period, the ratio of (i) the difference between
(a) EBITDA for such period and (b) the sum of (x) Consolidated Capital
Expenditures for such period and (y) the amount of treasury stock of the
Borrower acquired during such period to (ii) the sum of (a) the current portion
(as of the last day of such period) of long term Debt (including Capital
Leases), (b) interest expense for such period and (c) dividends payable in cash
during such period on preferred stock described in clause (v) of the definition
of "Funded Debt". The Fixed Charge Coverage Ratio shall be measured and tested
at the end of each fiscal quarter and for a period covering the four (4) fiscal
quarters then ended.
"Funded Debt" means, as to any Person, such Debt of such Person which is
(i) all indebtedness or liability for borrowed money; (ii) all indebtedness or
liability for the deferred purchase price of property (excluding trade
obligations); (iii) all obligations as a lessee under Capital Leases; (iv) all
obligations to reimburse the Issuing Bank for the amount of all unmatured drafts
accepted or deferred payment obligations incurred under Letters of Credit, and
(v) all liabilities of such Person under any preferred stock which, at the
option of the holder or upon the occurrence of one or more certain events, is
redeemable by such holder, or which, at the option of such holder is convertible
into Debt.
"Funded Debt to EBITDA Ratio" means, as to the Borrower and its
Consolidated Affiliates for any period, the ratio of (i) Consolidated Funded
Debt (as of the last day of such period) to (ii) EBITDA for such period. The
Funded Debt to EBITDA Ratio shall be measured and tested at the end of each
fiscal quarter and, in
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the case of EBITDA, for a period covering the four (4) fiscal quarters then
ended.
"GAAP" means Generally Accepted Accounting Principles.
"Generally Accepted Accounting Principles" means those generally accepted
accounting principles and practices which are recognized as such by the American
Institute of Certified Public Accountants acting through the Financial
Accounting Standards Board ("FASB") or through other appropriate boards or
committees thereof and which are consistently applied for all periods so as to
properly reflect the financial condition, operations and cash flows of a Person,
except that any accounting principle or practice required to be changed by the
FASB (or other appropriate board or committee of the FASB) in order to continue
as a generally accepted accounting principle or practice may be so changed. Any
dispute or disagreement between the Borrower and the Agent relating to the
determination of Generally Accepted Accounting Principles shall, in the absence
of manifest error, be conclusively resolved for all purposes hereof by the
written opinion with respect thereto, delivered to the Agent, of the independent
accountants selected by the Borrower and approved by the Agent for the purpose
of auditing the periodic financial statements of the Borrower.
"Guarantor" or Guarantors" means one or more of HAPL, SMX, Pulse or Sedeco,
and any other Person required to guarantee the obligations of the Borrower in
accordance with Section 5.01(k) of this Agreement.
"Guaranty" or "Guaranties" means the guaranty or guaranties executed and
delivered by the Guarantors pursuant to Section 3.01(h) or Section 5.01(k) of
this Agreement.
"HAPL Facility" means a revolving credit facility in the maximum principal
amount of $5,000,000.00 which may be made available by BNY and one or more other
banks to HAPL.
"Hazardous Materials" includes, without limit, any flammable explosives,
radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic
substances, or related materials defined in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C.
Sections 9601, et seq.), the Hazardous Materials Transportation Act, as amended
(49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Sections 9601 et. seq.), and in the regulations adopted and
publications promulgated pursuant thereto, or any other federal, state or local
environmental law, ordinance, rule or regulation.
"Interest Determination Date" means the date on which an Alternate Base
Rate Loan is converted to a Eurodollar Loan and, in
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the case of a Eurodollar Loan, the last day of the applicable Interest
Period.
"Interest Payment Date" means (i) as to each Eurodollar Loan, (a) in the
case of Eurodollar Loans with Interest Periods of less than three (3) months,
the last day of such Interest Period and (b) in the case of Eurodollar Loans
with Interest Periods of three (3) months or more, the last Business Day of each
calendar quarter during the applicable Interest Period and the last day of the
applicable Interest Period and (ii) as to each Alternate Base Rate Loan, the
last Business Day of each month.
"Interest Period" means as to any Eurodollar Loan, the period commencing on
the date of such Eurodollar Loan and ending on the numerically corresponding day
in the calendar month that is one, two, three or six months thereafter, as the
Borrower may elect (or, if there is no numerically corresponding day, on the
last Business Day of such month); provided, however, (i) that no Interest Period
shall end later than the Maturity Date or the Term Loan Maturity Date, as
applicable, (ii) if any Interest Period would end on a day which shall not be a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day, (iii) no Interest Period in respect of a Eurodollar Loan
representing a portion of the principal required to be paid in accordance with
Section 2.13 may be selected unless the outstanding Alternate Base Rate Loans
and Eurodollar Loans for which the relevant Interest Periods end on or prior to
the date of such payment are in an aggregate amount which will be sufficient to
make such payment, (iv) interest shall accrue from and including the first day
of such Interest Period to but excluding the date of payment of such interest,
and (v) no Interest Period of particular duration with respect to a Eurodollar
Loan may be selected by the Borrower if the Agent determines, in its sole, good
faith discretion, that Eurodollar Loans with such maturities are not generally
available.
"Investment" means any stock, evidence of Debt or other security of any
Person, any loan, advance, contribution of capital, extension of credit or
commitment therefor, including without limitation the guaranty of loans made to
others (except for current trade and customer accounts receivable for services
rendered in the ordinary course of business and payable in accordance with
customary trade terms in the ordinary course of business) and any purchase of
(i) any security of another Person or (ii) any business or undertaking of any
Person or any commitment or option to make any such purchase, or any other
investment.
"Issuing Bank" means BNY.
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"Letters of Credit" means trade letters of credit and standby letters of
credit issued by the Issuing Bank for the account of the Borrower pursuant to
the terms and conditions of this Agreement. Letters of Credit shall include, for
all purposes under this Agreement, Existing Letters of Credit.
"L/C Documents" means all documents required to be executed and delivered
by the Borrower in connection with the issuance of Letters of Credit in
accordance with the usual and customary practices of the Issuing Bank.
"L/C Exposure" means, at any time, the aggregate of (i) the amount
available to be drawn on all outstanding Letters of Credit, (ii) the aggregate
amount of all unmatured drafts accepted and deferred payment obligations
incurred by the Issuing Bank under any Letters of Credit (including such
unmatured drafts accepted and/or deferred payment obligations incurred by BNY
prior to the date of this Agreement and as identified on Schedule 1.01-C annexed
hereto), and (iii) the amount of any payments made by the Issuing Bank under any
Letters of Credit that has not been reimbursed by the Borrower.
"LIBOR Applicable Margin" shall have the meaning set forth in Sections 2.04
and 2.13 of this Agreement.
"LIBOR Rate" means the rate per annum (rounded upwards, if necessary to the
nearest one-tenth (1/10th) of one (1%) percent quoted approximately 11:00 a.m.
London time by the Agent two (2) Business Days prior to the requested Interest
Period, for the offering by the Agent to prime commercial banks in the London
interbank market of dollar deposits in immediately available funds for a period,
and in an amount, comparable to such Interest Period and principal amount of
such Eurodollar Loan, respectively.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance 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 to evidence any of the
foregoing.
"Loan" or Loans" means Revolving Credit Loans and Term Loans, or both as
the context requires, and may refer to Alternate Base Rate Loans and/or
Eurodollar Loans, as the context requires.
"Loan Documents" means this Agreement, the Notes, the Guaranties, the L/C
Documents, the Commitment Letter, the Fee
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Letter and any other document executed or delivered pursuant to this
Agreement.
"Material Adverse Change" means, as to any Person, (i) a material adverse
change in the financial condition, business, operations, properties or results
of operations of such Person or (ii) any event or occurrence which could have a
material adverse effect on the ability of such Person to perform its obligations
under the Loan Documents.
"Maturity Date" means January 7, 2000.
"Multiemployer Plan" means a Plan described in Section 4001(a)(3) of ERISA
which covers employees of the Borrower or any ERISA Affiliate.
"Note" or "Notes" means one or more of the Revolving Credit Notes or the
Term Loan Notes as the context requires.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Acquisition" means an acquisition by the Borrower or 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 majority of such Person's revenue is derived from one or more of
the following lines of business: (a) distribution of embroidery equipment, (b)
embroidery related software, (c) distribution of embroidery supplies, (d)
embroidery design, and/or (e) embroidery equipment servicing;
(ii) 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, (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; and
(iii) The Agent and the Banks shall have received at least two (2) years of
historical financial statements of such Person 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 Section 5.03 of this
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Agreement for the next succeeding four quarters. The projections to be
delivered hereunder shall include and specify the assumptions used to prepare
such projections regarding growth of sales, margins on sales and cost savings
resulting from the Acquisition.
"Permitted Acquisition Loans" means Revolving Credit Loans, the proceeds of
which are used to fund Permitted Acquisitions.
"Permitted Acquisition Sublimit" means Ten Million ($10,000,000.00)
Dollars.
"Permitted Investments" means, (i) direct obligations of the United States
of America or any governmental agency thereof, or obligations guaranteed by the
United States of America, provided that such obligations mature within one year
from the date of acquisition thereof; (ii) time certificates of deposit having a
maturity of two years or less issued by any commercial bank organized and
existing under the laws of the United States or any state thereof and having
aggregate capital and surplus in excess of $1,000,000,000.00; (iii) money market
mutual funds having assets in excess of $2,500,000,000; (iv) commercial paper
rated not less than P-1 or A-1 or their equivalent by Moody's Investor Services,
Inc. or Standard & Poor's Corporation, respectively; (v) foreign exchange
contracts with the Banks; (vi) treasury stock of the Borrower, (vii) tax exempt
securities rated Prime 2 or better by Moody's Investor Services, Inc. or A-1 or
better by Standard & Poor's Corporation or (viii) Inter Company Transactions
permitted by Section 5.02(r) or Section 5.02(s).
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity or a federal, state or
local government, or a political subdivision thereof or any agency of such
government or subdivision.
"Plan" means any employee benefit plan established, maintained, or to which
contributions have been made by the Borrower or any ERISA Affiliate.
"Prime Rate" means the prime commercial lending rate of the Agent as
publicly announced to be in effect from time to time, each change in the Prime
Rate to be effective on the date such change is announced to be effective.
"Prohibited Transaction" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended from time
to time.
"Quick Asset Ratio" means, as to the Borrower and its Consolidated
Affiliates, as of any date, the ratio of (i) the sum
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of (a) cash on hand or on deposit in banks, (b) readily marketable
securities issued by the United States, (c) readily marketable commercial paper
rated "A-2" by Standard and Poors Corporation (or having a similar rating by any
similar organization which rates commercial paper), (d) certificates of deposit
or banker's acceptances issued by commercial banks of recognized standing
operating in the United States, and (e) accounts receivable to (ii) Consolidated
Current Liabilities.
"Regulation D" means Regulation D of the Board of Governors, as the same
may be amended and in effect from time to time.
"Regulation G" means Regulation G of the Board of Governors, as the same
may be amended and in effect from time to time.
"Regulation T" means Regulation T of the Board of Governors, as the same
may be amended and in effect from time to time.
"Regulation U" means Regulation U of the Board of Governors, as the same
may be amended and in effect from time to time.
"Regulation X" means Regulation X of the Board of Governors, as the same
may be amended and in effect from time to time.
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA.
"Required Banks" means, (i) at any time while there are Revolving Credit
Loans outstanding, those Banks having, in the aggregate, sixty six and two
thirds (66 2/3%) percent of such Revolving Credit Loans, (ii) at any time while
there are no Revolving Credit Loans outstanding but the Total Commitment is
available, those Banks having, in the aggregate, sixty six and two thirds (66
2/3%) percent of the Total Commitment, and, (iii) after the Maturity Date, those
Banks having, in the aggregate, sixty six and two-thirds (66 2/3%) percent of
the outstanding principal amount of the Term Loans.
"Revolving Credit Loan" or "Revolving Credit Loans" means one or more, as
the context requires, of the revolving credit loans made by the Banks to the
Borrower pursuant to the terms and conditions of this Agreement.
"Revolving Credit Note" or "Revolving Credit Notes" means one or more, as
the context requires, of the promissory notes of the Borrower payable to the
order of each of the Banks, in substantially the form of Exhibit A annexed
hereto, evidencing the indebtedness of the Borrower to each such Bank resulting
from Revolving Credit Loans made by such Bank to the Borrower pursuant to this
Agreement.
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"Sedeco Tajima Agreement" means that certain distribution agreement dated
as of February 21, 1991 among Sedeco, Tajima Industries Ltd., Nomura Trading
Co., Inc. and Nomura (America) Corp., as same has been amended from time to
time.
"Subsidiary" means, as to any Person, any corporation, partnership, limited
liability company, joint venture or other Person whether now existing or
hereafter organized or acquired: (i) in the case of a corporation, of which a
majority of the securities having ordinary voting power for the election of
directors (other than securities having such power only by reason of the
happening of a contingency) are at the time owned by such Person and/or one or
more Subsidiaries of such Person or (ii) in the case of a partnership, limited
liability company, joint venture or similar entity, of which a majority of the
partnership, membership or other ownership interests are at the time owned by
such Person and/or one or more of its Subsidiaries.
"Tajima Agreement" means that certain distribution agreement dated as of
February 21, 1991 among the Borrower, Tajima Industries Ltd., Nomura Trading
Co., Ltd. and Nomura (America) Corp., as same has been amended from time to
time.
"Term Loan" or "Term Loans" means one or more, as the context requires, of
the term loans made by the Banks to the Borrower pursuant to the terms and
conditions of this Agreement.
"Term Loan Installment Date" shall mean (i) the day that is ninety (90)
days after the making of the Term Loans and (ii) the same day of each third
month thereafter.
"Term Loan Maturity Date" means the third anniversary of the making of the
Term Loans by the Banks, but not later than January 6, 2003.
"Term Loan Note" or "Term Loan Notes" means one or more, as the context
requires, of the promissory notes of the Borrower payable to the order of each
of the Banks, in substantially the form of Exhibit B annexed hereto, evidencing
the indebtedness of the Borrower to each such Bank resulting from the Term Loan
made by such Bank to the Borrower pursuant to this Agreement.
"Total Commitment" means the aggregate of the Commitments of each of the
Banks, which, on the date of this Agreement, is Thirty Million ($30,000,000.00)
Dollars.
"Unused Facility Fee" means the fee payable pursuant to Section 2.06 of
this Agreement.
SECTION 1.02. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a
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later specified date, the word "from" means "from and including" and the
words "to" and "until" each means "to but excluding".
SECTION 1.03. Accounting Terms. Except as otherwise herein specifically
provided, each accounting term used herein shall have the meaning given to it
under GAAP.
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ARTICLE II
AMOUNT AND TERMS OF THE LOANS
SECTION 2.01. The Revolving Credit Loans. (a) The Banks agree, severally
but not jointly, on the terms and subject to the conditions of this Agreement,
and in reliance upon the representations and warranties of the Borrower and the
Guarantors set forth in this Agreement that the Banks will, until the Maturity
Date, lend to the Borrower such Revolving Credit Loans as the Borrower may
request from time to time, which Loans may be borrowed, repaid and reborrowed,
provided, however, that (w) the Aggregate Outstandings at any one time shall not
exceed the Total Commitment as it may be reduced pursuant to Section 2.07
hereof, (x) each Bank's pro rata share of Revolving Credit Loans and L/C
Exposure shall not exceed its Commitment, (y) the aggregate principal amount of
Permitted Acquisition Loans made during the term of this Agreement shall not
exceed the Permitted Acquisition Sublimit and (z) if all or any part of a
Permitted Acquisition Loan is repaid, such amount may not be reborrowed as a
Permitted Acquisition Loan.
(b) Each Revolving Credit Loan shall be an Alternate Base Rate Loan or a
Eurodollar Loan (or a combination thereof) as the Borrower may request subject
to and in accordance with Section 2.02. Any Bank may at its option make any
Eurodollar Loan by causing a foreign branch or affiliate to make such Loan,
provided that any exercise of such option shall not affect the obligation of the
Borrower to repay such Loan in accordance with the terms of such Bank's
Revolving Credit Note. Subject to the other provisions of this Agreement,
Revolving Credit Loans of more than one type may be outstanding at the same time
provided, however, that not more than six (6) Eurodollar Loans may be
outstanding at the same time.
SECTION 2.02. Notice of Revolving Credit Loans.
(a) The Borrower shall give the Agent irrevocable written, telex,
telephonic (immediately confirmed in writing) or facsimile notice (i) at least
two (2) Business Days prior to each Revolving Credit Loan comprised in whole or
in part of one or more Eurodollar Loans (subject to availability) and (ii) prior
to 11:00 a.m. on the day of each Revolving Credit Loan consisting solely of an
Alternate Base Rate Loan. Upon receipt of such notice, the Agent shall promptly
notify each Bank of the contents thereof and of the amount, type and other
relevant information regarding the Loan requested. Thereupon, each Bank shall,
not later than 2:00 p.m. (New York time), transfer immediately available funds
equal to such Bank's share of the requested borrowing to the Agent, which,
provided the conditions of Section 3.01 and 3.02 of this Agreement have been
met, shall thereupon transfer immediately available funds equal to the requested
borrowing to the Borrower's account with the Agent. If a notice of borrowing is
received by the Agent after
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11:00 a.m. on a Business Day, such notice shall be deemed to have been
given on the next succeeding Business Day. Any Bank's failure to make any
requested Loan shall not relieve any other Bank of its obligation to make such
Loan, but such other Bank shall not be liable for such failure of the first
Bank.
(b) Each notice given pursuant to this Section 2.02 shall specify the date
of such borrowing, the amount thereof and whether such Loan is to be (or what
portion or portions thereof are to be) an Alternate Base Rate Loan or a
Eurodollar Loan and, if such Loan or any portion thereof is to consist of one or
more Eurodollar Loans, the principal amounts thereof and Interest Period or
Interest Periods with respect thereto. If no election as to a type of Loan is
specified in such notice, such Loan (or portion thereof as to which no election
is specified) shall be an Alternate Base Rate Loan. If no election as to the
Interest Period is specified in such notice with respect to any Eurodollar Loan,
the Borrower shall be deemed to have selected an Interest Period of one month's
duration and if a Eurodollar Loan is requested when such Loans are not
available, the Borrower shall be deemed to have requested an Alternate Base Rate
Loan.
(c) The Borrower shall have the right, on such notice to the Agent as is
required pursuant to (a) above, (x) to continue any Eurodollar Loan or a portion
thereof into a subsequent Interest Period (subject to availability) and (y) to
convert an Alternate Base Rate Loan into a Eurodollar Loan (subject to
availability) subject to the following:
(i) if a Default or an Event of Default shall have occurred and be
continuing at the time of any proposed conversion or continuation only Alternate
Base Rate Loans shall be available;
(ii) in the case of a continuation or conversion of fewer than all Loans,
the aggregate principal amount of each Eurodollar Loan continued or into which a
Loan is converted shall be in the minimum principal amount of $250,000.00 and in
minimum increased multiples of $100,000.00;
(iii) each continuation or conversion shall be effected by each Bank
applying the proceeds of the new Loan to the Loan (or portion thereof) being
continued or converted;
(iv) if the new Loan made as a result of a continuation or conversion shall
be a Eurodollar Loan, the first Interest Period with respect thereto shall
commence on the date of continuation or conversion;
(v) each request for a Eurodollar Loan which shall fail to state an
applicable Interest Period shall be deemed to be a request for an Interest
Period of one month's duration and each request for a Eurodollar Loan made when
such Loans are not
- 16 -
available shall be deemed to be a request for an Alternate Base Rate Loan;
(vi) in the event that the Borrower shall not give notice to continue a
Eurodollar Loan as provided above, such Loan shall automatically be converted
into an Alternate Base Rate Loan at the expiration of the then current Interest
Period.
(d) Unless the Agent shall have received notice from a Bank prior to 2:00
p.m. (New York time) on the requested date, that such Bank will not make
available to the Agent the Loan requested to be made on such date, the Agent may
assume that such Bank has made such Loan available to the Agent on such date in
accordance with Section 2.01(a) and the Agent in its sole discretion may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount on behalf of such Bank. If and to the extent such Bank
shall not have so made available to the Agent the Loan requested to be made on
such date and the Agent shall have so made available to the Borrower a
corresponding amount on behalf of such Bank, such Bank shall, on demand, pay to
the Agent such corresponding amount together with interest thereon, at the
Federal Funds Effective Rate, for each day from the date such amount shall have
been so made available by the Agent to the Borrower until the date such amount
shall have been repaid to the Agent. If such Bank does not pay such
corresponding amount promptly upon the Agent's demand therefor, the Agent shall
promptly notify the Borrower and the Borrower shall, not later than one (1)
Business Day following such notice, repay such corresponding amount to the Agent
together with accrued interest thereon at the applicable rate or rates provided
in Section 2.04.
SECTION 2.03. Revolving Credit Notes. (a) Each Revolving Credit Loan shall
be (i) in the case of each Alternate Base Rate Loan in the minimum principal
amount of $100,000.00, and in minimum increased multiples of $100,000.00 and
(ii) in the case of each Eurodollar Loan in the minimum principal amount of
$250,000.00 and in minimum increased multiples of $100,000.00 (except that, if
any such Alternate Base Rate Loan so requested shall exhaust the remaining
available Commitment, such Alternate Base Rate Loan may be in an amount equal to
the amount of the remaining available Commitment). Each Revolving Credit Loan
shall be evidenced by the Revolving Credit Notes. Each Revolving Credit Note
shall be dated the date hereof and be in the principal amount set forth next to
the applicable Bank's name on the signature pages hereto, and shall mature on
the Maturity Date, at which time the entire outstanding principal balance and
all interest thereon shall be due and payable. Each Revolving Credit Note shall
be entitled to the benefits and subject to the provisions of this Agreement.
(b) At the time of the making of each Revolving Credit Loan and at the time
of each payment of principal thereon, each Bank is hereby authorized by the
Borrower to make a notation on the
- 17 -
schedule annexed to its Revolving Credit Note of the date and amount, and
the type and Interest Period, if applicable, of the Revolving Credit Loan or
payment, as the case may be. Failure to make a notation with respect to any
Revolving Credit Loan shall not limit or otherwise affect the obligation of the
Borrower hereunder or under the applicable Revolving Credit Note with respect to
such Revolving Credit Loan, and any payment of principal by the Borrower shall
not be affected by the failure to make a notation thereof on said schedule.
SECTION 2.04. Payment of Interest on the Revolving Credit Notes.
(a) In the case of an Alternate Base Rate Loan, interest shall be payable
at a rate per annum equal to the Alternate Base Rate plus the ABR Applicable
Margin. Such interest shall be payable on each Interest Payment Date, commencing
with the first Interest Payment Date after the date of such Alternate Base Rate
Loan and on the Maturity Date. Any change in the rate of interest on the
Revolving Credit Notes due to a change in the Alternate Base Rate or a change in
the ABR Applicable Margin shall take effect as of the date of such change in the
Alternate Base Rate or ABR Applicable Margin, as applicable.
(b) In the case of a Eurodollar Loan, interest shall be payable at a rate
per annum equal to the Adjusted LIBOR Rate plus the LIBOR Applicable Margin.
Such interest shall be payable on each Interest Payment Date, commencing with
the first Interest Payment Date after the date of such Eurodollar Loan and on
the Maturity Date. In the event Eurodollar Loans are available, the Agent shall
determine the rate of interest applicable to each requested Eurodollar Loan for
each Interest Period at 11:00 a.m., New York City time, or as soon as
practicable thereafter, two (2) Business Days prior to the commencement of such
Interest Period and shall use its best efforts to notify the Borrower and the
Banks of the rate of interest so determined. Such determination shall be
conclusive absent manifest error.
(c) The ABR Applicable Margin and the LIBOR Applicable Margin shall each be
determined on the basis of the Borrower's Funded Debt to EBITDA Ratio, as
calculated based on the Borrower's consolidated financial statements for its
most recent fiscal quarter. The ABR Applicable Margin and the LIBOR Applicable
Margin shall be determined as follows:
(i) The initial ABR Applicable Margin shall be -0- basis points and the
initial LIBOR Applicable Margin shall be 100 basis points, and shall be
applicable until delivery of the Borrower's financial statements for its fiscal
year ending January 31, 1997 pursuant to Section 5.01(b) hereof (subject to
increase in the event that the Borrower fails to deliver such statements as
required below).
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Beginning with delivery of the Borrower's financial statements for the
fiscal year ending January 31, 1997, and for each fiscal quarter thereafter:
(ii) If the Borrower's Funded Debt to EBITDA Ratio as of the end of such
fiscal quarter is less than 1.25 to 1.00, the ABR Applicable Margin shall be -0-
basis points and the LIBOR Applicable Margin shall be 75 basis points.
(iii) If the Borrower's Funded Debt to EBITDA Ratio as of the end of such
fiscal quarter is equal to or greater than 1.25 to 1.00 but less than 1.85 to
1.00, the ABR Applicable Margin shall be -0- basis points and the LIBOR
Applicable Margin shall be 100 basis points.
(iv) If the Borrower's Funded Debt to EBITDA Ratio as of the end of such
fiscal quarter is equal to or greater than 1.85 to 1.00 but less than 2.00 to
1.00, the ABR Applicable Margin shall be -0- basis points and the LIBOR
Applicable Margin shall be 125 basis points.
(v) If the Borrower's Funded Debt to EBITDA Ratio as of the end of such
fiscal quarter is equal to or greater than 2.00 to 1.00, the ABR Applicable
Margin shall be -0- basis points and the LIBOR Applicable Margin shall be 150
basis points.
In the event that the Borrower fails to deliver any financial statements or
the related certificate within five (5) days of the due date therefor set forth
in Section 5.01(b)(i), (ii) or (iv) hereof, unless an Event of Default is
declared as a result of such failure, the ABR Applicable Margin shall be -0-
basis points and the LIBOR Applicable Margin shall be 150 basis points until the
Borrower delivers all required financial statements and certificates at which
time the ABR Applicable Margin and the LIBOR Applicable Margin shall be
redetermined as provided for in this Section 2.04.
Upon the occurrence and during the continuance of a Default or an Event of
Default the ABR Applicable Margin and the LIBOR Applicable Margin may, as a
result of changes in the Borrower's Funded Debt to EBITDA Ratio, increase but
will not decrease.
(d) All interest shall be paid to the Agent for the pro rata distribution
to the Banks.
SECTION 2.05. Use of Proceeds. (a) The proceeds of the Revolving Credit
Loans shall be used by the Borrower (i) to repay any indebtedness owing to BNY
under the Existing BNY Facility, (ii) to refinance the promissory notes issued
in connection with the acquisition of Sedeco, (iii) to finance working capital
of the Borrower and, subject to the limitations set forth in Section
- 19 -
5.02(r) and Section 5.02(s), to finance working capital of its Subsidiaries
and (iv) subject to the Permitted Acquisition Sublimit, to finance Permitted
Acquisitions. No part of the proceeds of any Loan may be used for any purpose
that directly or indirectly violates or is inconsistent with, the provisions of
Regulations G, T, U or X.
(b) Letters of Credit shall be issued exclusively to finance trade
transactions and other commercial transactions related to the working capital
needs of the Borrower and its Subsidiaries.
SECTION 2.06. Fees. (a) The Borrower agrees to pay to the Agent, for the
pro rata distribution to the Banks, from the date of this Agreement and for so
long as the Total Commitment remains in effect, on the first Business Day of
each calendar quarter, and on any day that the Total Commitment is reduced or
terminated, an Unused Facility Fee computed at a rate per annum as determined
below (computed on the basis of the actual number of days elapsed over 360 days)
on the average daily unused amount of the Total Commitment, such Unused Facility
Fee being payable for the calendar quarter, or part thereof, preceding the
payment date. The Unused Facility Fee shall be determined as follows, on the
basis of the Borrower's Funded Debt to EBITDA Ratio, as calculated based on the
Borrower's financial statements for its most recent fiscal quarter.
(i) The initial Unused Facility Fee shall be 0.15% per annum and shall be
applicable until delivery of the Borrower's financial statements for its fiscal
year ending January 31, 1997 pursuant to Section 5.01(b) hereof (subject to
increase in the event that the Borrower fails to deliver such statements as
required below).
Beginning with delivery of the Borrower's financial statements for the
fiscal year ending January 31, 1997, and for each fiscal quarter thereafter:
(ii) If the Borrower's Funded Debt to EBITDA Ratio as of the end of such
fiscal quarter is less than 1.25 to 1.00, the Unused Facility Fee shall be 0.10%
per annum.
(iii) If the Borrower's Funded Debt to EBITDA Ratio as of the end of such
fiscal quarter is equal to or greater than 1.25 to 1.00 but less than 1.85 to
1.00, the Unused Facility Fee shall be 0.15% per annum.
(iv) If the Borrower's Funded Debt to EBITDA Ratio as of the end of such
fiscal quarter is equal to or greater than 1.85 to 1.00 but less than 2.00 to
1.00, the Unused Facility Fee shall be 0.20% per annum.
(v) If the Borrower's Funded Debt to EBITDA Ratio as of the end of such
fiscal quarter is equal to or greater than
- 20 -
2.00 to 1.00, the Unused Facility Fee shall be 0.25% per annum.
In the event that the Borrower fails to deliver any financial statements or
the related certificate within five (5) days of the due date therefor set forth
in Section 5.01(b)(i), (ii) or (iv) hereof, unless an Event of Default is
declared as a result of such failure, the Unused Facility Fee shall be 0.25% per
annum until the Borrower delivers all required financial statements and
certificates.
Upon the occurrence and during the continuance of a Default or an Event of
Default the Unused Facility Fee may, as a result of changes in the Borrower's
Funded Debt to EBITDA Ratio, increase but will not decrease.
(b) The Borrower agrees to pay to the Agent, for its services as Agent
hereunder, those fees, charges and expenses as the Borrower and the Agent may
mutually agree in a separate writing.
SECTION 2.07. Reduction of Commitment. (a) Upon at least three (3) Business
Days' prior written notice to the Agent, the Borrower may irrevocably elect to
have the unused Total Commitment terminated in whole or reduced in part
provided, however, that any such partial reduction shall be in a minimum amount
of $1,000,000.00, or whole multiples thereof. The Total Commitment, once
terminated or reduced, shall not be reinstated without the express written
approval of the Agent and the Banks. Any reduction to the Total Commitment shall
be applied pro rata to the respective Commitments of each Bank.
(b) In the event that the Borrower, Tajima Industries Ltd., or any other
party to the Tajima Agreement gives notice that it intends to terminate the
Tajima Agreement, the Total Commitment shall automatically, and without notice
from the Agent or the Banks, terminate and the Aggregate Outstandings shall be
paid or provided for as provided in Section 2.08 of this Agreement.
(c) In the event that by March 31, 1997 the Borrower fails to provide the
Agent with a document evidencing that the term of the Sedeco Tajima Agreement is
extended by the parties thereto until the Maturity Date or beyond, or in the
event that before or after any such extension, any party thereto gives notice
that it intends to terminate the Sedeco Tajima Agreement, then, upon notice from
the Agent (i) the Permitted Acquisition Sublimit shall be reduced to
$4,165,000.00 and shall be further and permanently reduced by the amount of each
principal payment made pursuant to clause (iii) below; (ii) the Total Commitment
shall be reduced to $25,000,000.00 (and the Commitments of each Bank shall be
reduced pro-rata) and (iii) if such document is not received by June 29, 1997,
the aggregate amount of all Permitted Acquisition Loans used to fund the Sedeco
Acquisition (including, without limitation, amounts used
- 21 -
to pay the Borrower's Debt owing to Jimmy L. Yates, shall be prepaid in
four (4) equal principal installments, beginning on June 30, 1997 and continuing
on each of the three (3) succeeding 90th days thereafter until such amount has
been paid in full.
(d) Notwithstanding the provisions of clause (c) above, in the event that
any time prior to the Maturity Date, the Borrower provides the Agent with a
document evidencing that the term of the Sedeco Tajima Agreement is extended
until the Maturity Date or beyond, then (i) the Permitted Acquisition Sublimit
shall be increased to $10,000,000.00 (of which only $5,865,000.00 will be
available for Permitted Acquisitions other than the Sedeco Acquisition); (ii)
the Total Commitment shall be increased to $30,000,000.00 (and the Commitments
of each Bank shall be increased pro rata); and (iii) the Borrower may reborrow
those Permitted Acquisition Loans used to fund the Sedeco Acquisition and which
were repaid pursuant to clause (c) above.
(e) In the event that the Borrower fails to deliver to the Agent the
opinion of counsel required by Section 3.05 of this Agreement, the Permitted
Acquisition Sublimit shall be reduced to $4,165,000.00, all of which will have
been allocated to the acquisition of Sedeco.
SECTION 2.08. Prepayment. (a) The Borrower shall have the right at any time
and from time to time to prepay any Alternate Base Rate Loan, in whole or in
part, without premium or penalty on one (1) Business Day's prior irrevocable
written notice to the Agent provided, however, that each such prepayment shall
be on a Business Day and shall be in an aggregate principal amount which is in
the minimum amount of $100,000.00 and in increased integral multiples of
$100,000.00.
(b) The Borrower shall have the right at any time and from time to time,
subject to the provisions of this Agreement, including but without limitation
Section 2.21, to prepay any Eurodollar Loan, in whole or in part, on three (3)
Business Days' prior irrevocable written notice to the Agent, provided, however,
that each such prepayment shall be on a Business Day and shall be in an
aggregate principal amount which is in the minimum amount of $250,000.00 and in
increased integral multiples of $100,000.00.
(c) The notice of prepayment under this Section 2.08 shall set forth the
prepayment date and the principal amount of the Loan being prepaid and shall be
irrevocable and shall commit the Borrower to prepay such Loan by the amount and
on the date stated therein. All prepayments shall be accompanied by accrued
interest on the principal amount being prepaid to the date of prepayment. Each
prepayment under this Section 2.08 shall be applied first towards unpaid
interest on the amount being prepaid and then towards the principal in whole or
partial prepayment of Loans as specified by the Borrower. In the absence of such
specification,
- 22 -
amounts being prepaid shall be applied first to any Alternate Base Rate
Loan then outstanding and then to Eurodollar Loans in the order of the nearest
expiration of their Interest Periods.
(d) At any time that the Aggregate Outstandings exceed the Total
Commitment, the Borrower shall first, prepay so much of the Revolving Credit
Loans as shall exceed the Commitment and second, if Aggregate Outstandings still
exceed the Commitment, deposit with the Agent for the benefit of the Issuing
Bank cash collateral for any undrawn and outstanding Letters of Credit in an
amount equal to the amount by which the remaining Aggregate Outstandings exceed
the Total Commitment. Any such prepayments shall be applied as set forth in (c)
above and if such prepayments of Revolving Credit Loans shall result in a
prepayment of a Eurodollar Loan other than on the last day of its Interest
Period, such prepayment shall be subject to the reimbursement required by
Section 2.21.
(e) In the event that the Borrower, Tajima Industries Ltd. or any other
party to the Tajima Agreement gives notice that it intends to terminate the
Tajima Agreement, the Total Commitment shall terminate and the then outstanding
principal balance of Revolving Credit Loans (including Permitted Acquisition
Loans) shall be repaid in equal quarterly installments, each due on the first
day of each calendar quarter, beginning with the first such day after said
notice of termination. Such outstanding balance shall be payable over the
shorter of (i) twelve (12) quarterly installments or (ii) the number of full
calendar quarters between the date of notice of termination and the Maturity
Date. The payments required by this sub-section (e) shall be applied as set
forth, and subject to the other provisions of, this Section 2.08.
SECTION 2.09. The Term Loans. The Banks hereby agree, severally but not
jointly, on the Maturity Date, and on the terms and conditions and in reliance
upon the representations and warranties of the Borrower and the Guarantors
hereinafter set forth in this Agreement, and provided no Default or Event of
Default has occurred and is continuing, or would result from the making of the
Term Loan, to convert the then outstanding principal balance of Permitted
Acquisition Loans to a Term Loan and the Borrower agrees to convert such amounts
by executing and delivering to the Agent, for delivery to the Banks, the Term
Loan Notes. The Term Loans, or portions thereof, shall be Alternate Base Rate
Loans or Eurodollar Loans (or a combination thereof) as the Borrower may request
subject to and in accordance with Section 2.10 hereof. Any Bank may at its
option make any Eurodollar Loan by causing a foreign branch or affiliate to make
such Loan, provided that any exercise of such option shall not affect the
obligation of the Borrower to repay such Loan in accordance with the terms of
the Notes.
SECTION 2.10. Notice of Term Loan Designations. (a) The Borrower may elect
to designate the Term Loan (or a portion thereof) as an Alternate Base Rate Loan
or a Eurodollar Loan by so
- 23 -
specifying in the irrevocable notice given pursuant to this Section 2.10;
provided, however, that each Eurodollar Loan requested of the Agent for any
specific Interest Period shall be in the minimum principal amount of $250,000.00
and in minimum integral multiples of $100,000.00 thereafter.
(b) The Borrower shall give the Agent irrevocable written, telex,
telephonic (immediately confirmed in writing) or facsimile notice (i) at least
two (2) Business Days' prior to each election to designate each Term Loan (or a
portion thereof) as a Eurodollar Loan, and (ii) prior to 11:00 a.m. on the day
of each election to designate each Term Loan (or a portion thereof) as an
Alternate Base Rate Loan, in each case specifying the date (which shall be a
Business Day) thereof and the aggregate principal amount and, if any portion
thereof is to consist of one or more Eurodollar Loans, the respective principal
amounts and Interest Periods for each such Eurodollar Loan; provided that:
(i) if the Borrower shall fail to specify the duration of an Interest
Period with regard to any Eurodollar Loan in its notice, the Interest Period
shall be for a period of one month; and
(ii) if the Borrower shall fail to specify the type of Loan requested, the
request shall be deemed to be a request for an Alternate Base Rate Loan.
(c) Upon receipt of such notice, the Agent shall promptly notify each Bank
of the contents thereof and of the amount, type and other relevant information
regarding the Loan requested.
SECTION 2.11. Term Loan Notes. The Term Loans shall be evidenced by the
Term Loan Notes. The Term Loan Notes shall be dated as of the Maturity Date and
each of the Term Loan Notes shall mature on the Term Loan Maturity Date at which
time the entire outstanding principal balance and all interest thereon shall be
due and payable. The Term Loan Notes shall be entitled to the benefits and
subject to the provisions of this Agreement.
SECTION 2.12. Repayment of Term Loan Notes. (a) The principal balance of
each of the Term Loan Notes shall be payable in twelve (12) equal quarterly
installments, each due on a Term Loan Installment Date, beginning on the first
such day after the Maturity Date and continuing on each Term Loan Installment
Date thereafter. Each of the first eleven (11) of such quarterly principal
installments shall be in an amount equal to one twelfth (1/12th) of the
principal amount of the Permitted Acquisition Loans so converted to the Term
Loan and the final such quarterly principal installment shall be in an amount
equal to the then aggregate outstanding principal balance of the Term Loan
Notes.
(b) All payments of installments on the Term Loan Notes shall be made to
the Agent for the pro rata distributions to the Banks.
- 24 -
SECTION 2.13. Payment of Interest on the Term Loan Notes. (a) In the case
of an Alternate Base Rate Loan, interest shall be payable at a rate per annum
equal to the Alternate Base Rate plus the ABR Applicable Margin. Such interest
shall be payable to the Agent, for the pro rata distribution to the Banks, on
each Interest Payment Date, commencing with the first Interest Payment Date
after the date of such Alternate Base Rate Loan, on each Interest Determination
Date and on the Term Loan Maturity Date. Any change in the rate of interest on
the Term Loan Notes due to a change in the Alternate Base Rate or a change in
the ABR Applicable Margin shall take effect as of the date of such change in the
Alternate Base Rate or the ABR Applicable Margin.
(b) In the case of a Eurodollar Loan, interest shall be payable 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 Adjusted LIBOR Rate plus the LIBOR Applicable
Margin. Such interest shall be payable to the Agent, for the pro rata
distribution to the Banks on each Interest Payment Date, commencing with the
first Interest Payment Date after the date of such Eurodollar Loan, on each
Interest Determination Date and on the Term Loan Maturity Date. The Agent shall
determine the rate of interest applicable to each requested Eurodollar Loan for
each Interest Period at 11:00 a.m., New York City time, or as soon as
practicable thereafter, two (2) Business Days prior to the commencement of such
Interest Period and shall notify the Borrower of the rate of interest so
determined. Such determination shall be conclusive absent manifest error.
(c) The ABR Applicable Margin and the LIBOR Applicable Margin shall each be
determined on the basis of the Borrower's Funded Debt to EBITDA Ratio, as
calculated based on the Borrower's financial statements for its most recent
fiscal quarter. The ABR Applicable Margin and the LIBOR Applicable Margin shall
be determined as set forth in Section 2.04(c) of this Agreement.
SECTION 2.14. Conversion and Continuation of Loans. The Borrower shall have
the right, at any time, on such notice to the Agent as set forth in Section
2.10(b) of this Agreement, (i) to continue any Eurodollar Loan or portion
thereof into a subsequent Interest Period (subject to availability) or (ii) to
convert an Alternate Base Rate Loan into a Eurodollar Loan (subject to
availability), subject to the following:
(a) no Default or Event of Default shall have occurred and be continuing at
the time of any proposed conversion or continuation;
(b) in the case of a continuation or conversion of fewer than all Loans,
the aggregate principal amount of each Eurodollar Loan continued or converted
shall be in the minimum amount of $250,000.00 and in increased integral
multiples of $100,000.00;
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(c) each continuation or conversion shall be effected by each Bank applying
the proceeds of the new Loan to the Loan (or portion thereof) being continued or
converted;
(d) if the new Loan made as a result of a continuation or conversion shall
be a Eurodollar Loan, the first Interest Period with respect thereto shall
commence on the date of continuation or conversion;
(e) each request for a Eurodollar Loan which shall fail to state an
applicable Interest Period shall be deemed to be a request for an Interest
Period of one month;
(f) unless sufficient Alternate Base Rate Loans are outstanding or other
Eurodollar Loans are outstanding with Interest Periods expiring prior to the
next scheduled installment payment of the Term Loan Notes, and are sufficient to
enable the Borrower to make such installment payments, any Eurodollar Loan, a
portion of which is required to be repaid on any such installment payment date
shall be automatically converted at the end of such Interest Period into an
Alternate Base Rate Loan; and
(g) in the event that the Borrower shall not give notice to continue a
Eurodollar Loan as provided above, such Loan shall automatically be converted
into an Alternate Base Rate Loan at the expiration of the then current Interest
Period.
SECTION 2.15. Use of Proceeds. The proceeds of the Term Loans shall be used
by the Borrower exclusively to refinance the Permitted Acquisition Loans. No
part of the proceeds of any Term Loan may be used for any purpose that directly
or indirectly violates or is inconsistent with, the provisions of Regulation G,
T, U or X.
SECTION 2.16. Prepayment. (a) The Borrower shall have the right at any time
and from time to time to prepay any Alternate Base Rate Loan, in whole or in
part, without premium or penalty on one (1) Business Day's prior irrevocable
written notice to the Agent provided, however, that each such prepayment shall
be on a Business Day and shall be in an aggregate minimum principal amount of
$250,000.00 and in increased integral multiples of $100,000.00.
(b) The Borrower shall have the right at any time and from time to time,
subject to the provisions hereof and of Section 2.21, to prepay any Eurodollar
Loan, in whole or in part, on three (3) Business Days prior irrevocable written
notice to the Agent, provided, however, that such prepayment shall be in an
aggregate minimum principal amount of $250,000.00 and in increased integral
multiples of $100,000.00.
(c) The notice of prepayment under this Section 2.16 shall set forth the
prepayment date and the principal amount of the Loan
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being prepaid and shall be irrevocable and shall commit the Borrower to pay
such Loan by the amount and on the date stated therein. All prepayments shall be
accompanied by accrued interest on the principal amount being prepaid to the
date of prepayment. Each prepayment under this Section 2.16 shall be applied
first towards unpaid interest on the amount being prepaid and then towards the
principal in whole or partial prepayment of Loans by the Borrower. All
prepayments shall be applied first to any Alternate Base Rate Loans then
outstanding and then to Eurodollar Loans outstanding in the order of the nearest
expiration of their Interest Periods. All partial prepayments of the Term Loans
shall be applied to installments of principal of the Term Loans in the inverse
order of maturity. All principal payments or prepayments shall be made to the
Agent for the pro rata distribution to the Banks.
SECTION 2.17. Eurocurrency Reserve Requirement. It is understood that the
cost to the Banks of making or maintaining Eurodollar Loans may fluctuate as a
result of the applicability of, or change in, the Eurocurrency Reserve
Requirement. The Borrower agrees to pay to the Agent on behalf of the Banks from
time to time, as provided in Section 2.18 below, such amounts as shall be
necessary to compensate each Bank for the portion of the cost of making or
maintaining any Eurodollar Loans made by it resulting from any change in the
Eurocurrency Reserve Requirement, it being understood that the rates of interest
applicable to Eurodollar Loans hereunder have been determined on the basis of
the Eurocurrency Reserve Requirement in effect at the time of determination of
the Adjusted LIBOR Rate and that such rates do not reflect costs imposed on each
Bank in connection with any change to the Eurocurrency Reserve Requirement. It
is agreed that for purposes of this paragraph the Eurodollar Loans made
hereunder shall be deemed to constitute Eurocurrency Liabilities as defined in
Regulation D and to be subject to the reserve requirements of Regulation D
without benefit or credit of proration, exemptions or offsets which might
otherwise be available to each Bank from time to time under Regulation D.
SECTION 2.18. Increased Costs. If, after the date of this Agreement, the
adoption of, or any change in, any applicable law, regulation, rule or
directive, or any interpretation thereof by any authority charged with the
administration or interpretation thereof:
(i) subjects any Bank or the Letter of Credit Issuer to any tax with
respect to the Notes, the Letters of Credit or on any amount paid or to be paid
under or pursuant to this Agreement, the Notes or the Letters of Credit (other
than any tax measured by or based upon the overall net income of such Bank or
the Letter of Credit Issuer);
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(ii) changes the basis of taxation of payments to any Bank or the Letter of
Credit Issuer of any amounts payable hereunder (other than any tax measured by
or based upon the overall net income of such Bank or the Letter of Credit
Issuer);
(iii) imposes, modifies or deems applicable any reserve, capital adequacy
or deposit requirements against any assets held by, deposits with or for the
account of, or loans made by, any Bank or the Letter of Credit Issuer; or
(iv) imposes on the Agent, any Bank or the Letter of Credit Issuer, any
other condition affecting the Notes, the Letters of Credit or this Agreement;
and the result of any of the foregoing is to increase the cost to the Agent, a
Bank or the Letter of Credit Issuer of maintaining this Agreement, making the
Loans or issuing the Letters of Credit, or to reduce the amount of any payment
(whether of principal, interest or otherwise) receivable by the Agent, any Bank
or the Letter of Credit Issuer or to require the Agent, any Bank or the Letter
of Credit Issuer to make any payment on or calculated by reference to the gross
amount of any sum received by them, in each case by an amount which the Agent in
its sole, reasonable judgment deems material, then and in any such case:
(a) the Agent shall promptly advise the Borrower of such event, together
with the date thereof, the amount of such increased cost or reduction or payment
and the way in which such amount has been calculated; and
(b) the Borrower shall pay to the Agent on behalf of itself, such Bank or
the Letter of Credit Issuer, within ten (10) days after the advice referred to
in subsection (a) hereinabove, such an amount or amounts as will compensate the
Agent, the Bank or the Letter of Credit Issuer for such additional cost,
reduction or payment for so long as the same shall remain in effect.
The determination of the Agent as to additional amounts payable pursuant to
this Section 2.18 shall be conclusive evidence of such amounts absent manifest
error and if made in good faith.
SECTION 2.19. Capital Adequacy. If the Agent, any Bank or the Letter of
Credit Issuer shall have reasonably determined that, subsequent to the date
hereof, any change in the applicability of any law, rule, regulation or
guideline, or the adoption after the date hereof of any other law, rule,
regulation or guideline regarding capital adequacy, or any change in any of the
foregoing or in the interpretation or administration of any of the foregoing by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Bank or the
Letter of Credit Issuer (or any lending office of such Bank or the Letter of
Credit Issuer) or such
- 28 -
Bank's or the Letter of Credit Issuer's holding company with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Bank's or the Letter of Credit
Issuer's capital or on the capital of such Bank's or the Letter of Credit
Issuer's holding company, if any, as a consequence of its obligations hereunder
to a level below that which such Bank or the Letter of Credit Issuer or such
Bank's or the Letter of Credit Issuer's holding company could have achieved but
for such adoption, change or compliance (taking into consideration such Bank's
or the Letter of Credit Issuer's policies and the policies of such Bank's or the
Letter of Credit Issuer's holding company with respect to capital adequacy) by
an amount deemed by such Bank or the Letter of Credit Issuer to be material,
then from time to time the Borrower shall pay to the Agent on behalf of such
Bank or the Letter of Credit Issuer such additional amount or amounts as will
reasonably compensate such Bank or the Letter of Credit Issuer or its or their
holding company or companies for any such reduction suffered.
SECTION 2.20. Change in Legality. (a) Notwithstanding anything to the
contrary contained elsewhere in this Agreement, if any change after the date
hereof in law, rule, regulation, guideline or order, or in the interpretation
thereof by any governmental authority charged with the administration thereof,
shall make it unlawful for any of the Banks to make or maintain any Eurodollar
Loan or to give effect to its obligations as contemplated hereby with respect to
a Eurodollar Loan, then, by written notice to the Borrower, the Agent, on behalf
of such Bank may:
(i) declare that Eurodollar Loans will not thereafter be made by such Bank
hereunder, whereupon the Borrower shall be prohibited from requesting such
Eurodollar Loans from such Bank hereunder unless such declaration is
subsequently withdrawn; and
(ii) require that, subject to the provisions of Section 2.21, all
outstanding Eurodollar Loans made by it be converted to an Alternate Base Rate
Loan, whereupon all of such Eurodollar Loans shall be automatically converted to
an Alternate Base Rate Loan as of the effective date of such notice as provided
in paragraph (b) below.
(b) For purposes of this Section 2.20, a notice to the Borrower by the
Agent pursuant to paragraph (a) above shall be effective, for the purposes of
paragraph (a) above, if lawful, and if any Eurodollar Loans shall then be
outstanding, on the last day of the then current Interest Period; otherwise,
such notice shall be effective on the date of receipt by the Borrower.
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SECTION 2.21. Funding Losses. (a) The Borrower agrees to compensate each
Bank for any loss or expense which such Bank may sustain or incur as a
consequence of (a) default by the Borrower in payment when due of the principal
amount of or interest on any Eurodollar Loan, (b) default by the Borrower in
making a borrowing of, conversion into or continuation of Eurodollar Loans after
the Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (c) default by the Borrower in making any
prepayment after the Borrower has given a notice thereof in accordance with the
provisions of this Agreement or (d) the making of a prepayment of Eurodollar
Loans on a day which is not the last day of an Interest Period with respect
thereto, including, without limitation, in each case, any such loss (including,
without limitation, loss of margin) or expense arising from the reemployment of
funds obtained by it or from amounts payable by such Bank to lenders of funds
obtained by it in order to make or maintain such Loans. Such compensation may
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the amount so prepaid, or not so borrowed, converted
or continued, for the period from the date of such prepayment or of such failure
to borrow, convert or continue to the last day of such Interest Period (or, in
the case of a failure to borrow, convert or continue, the Interest Period that
would have commenced on the date of such failure) in each case at the applicable
rate of interest for such Loans provided for herein, including, the LIBOR
Applicable Margin included therein, if any, over (ii) the amount of interest (as
reasonably determined by such Bank) which would have accrued to such Bank on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. This covenant shall survive
the termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder. When claiming under this Section 2.21, the claiming
Bank shall provide to the Borrower a statement, signed by an officer of such
Bank, explaining the amount of any such loss or expense (including the
calculation of such amount), which statement shall, in the absence of manifest
error, be conclusive with respect to the parties hereto.
SECTION 2.22. Change in LIBOR; Availability of Rates. In the event, and on
each occasion, that, on the day the interest rate for any Eurodollar Loan is to
be determined, the Agent shall have determined (which determination, absent
manifest error, shall be conclusive and binding upon the Borrower) that dollar
deposits in the amount of the principal amount of the requested Eurodollar Loan
are not generally available in the London interbank market, or that the rate at
which such dollar deposits are being offered will not adequately and fairly
reflect the cost to the Banks of making or maintaining the principal amount of
such Eurodollar Loan during such Interest Period, such Eurodollar Loan shall be
unavailable. The Agent shall, as soon as practicable thereafter, given written,
telex or telephonic notice of such determination of unavailability to the
Borrower. Any request by the Borrower for an unavailable
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Eurodollar Loan shall be deemed to have been a request for an Alternate
Base Rate Loan. After such notice shall have been given and until the Agent
shall have notified the Borrower that the circumstances giving rise to such
unavailability no longer exist, each subsequent request for an unavailable
Eurodollar Loan shall be deemed to be a request for an Alternate Base Rate Loan.
SECTION 2.23. Authorization to Debit Borrower's Account. The Agent is
hereby authorized to debit the Borrower's account maintained with the Agent for
(i) all scheduled payments of principal and/or interest and/or commissions or
fees under the Notes and the Letters of Credit, (ii) the Agent's fees, and (iii)
all other amounts due hereunder; all such debits to be made on the days such
payments are due in accordance with the terms hereof.
SECTION 2.24. Late Charges, Default Interest. (a) If the Borrower shall
default in the payment of any principal installment of or interest on any Loan,
or any amount due under any Letter of Credit, or any other amount becoming due
hereunder, the Borrower shall pay to the Agent for the pro rata distribution to
the Banks or the Issuing Bank, as applicable, interest, to the extent permitted
by law, on such defaulted amount up to the date of actual payment (after as well
as before judgment) at a rate per annum (computed on the basis of the actual
number of days elapsed over a year of 360 days) equal to two (2%) percent in
excess of the interest rate otherwise in effect with respect to the type of Loan
or Letter of Credit reimbursement in connection with which the required payments
have not been made.
(b) Upon the occurrence and during the continuation of an Event of Default,
the Borrower shall pay to the Agent, for the pro rata distribution to the Banks,
interest on the Aggregate Outstandings (after as well as before judgment) at a
rate per annum (computed on the basis of the actual number of days elapsed over
a year of 360 days) equal to two (2%) percent in excess of the interest rate
otherwise in effect hereunder.
SECTION 2.25. Payments. All payments by the Borrower hereunder, under the
Notes or under the Letters of Credit shall be made in U.S. dollars in
immediately available funds at the office of the Agent by 12:00 noon, New York
City time on the date on which such payment shall be due.
SECTION 2.26. Interest Adjustments. (a) If the provisions of this
Agreement, the Notes or the L/C Documents would at any time otherwise require
payment by the Borrower to any Bank or the Issuing Bank of any amount of
interest in excess of the maximum amount then permitted by applicable law the
interest payments shall be reduced to the extent necessary so that such Bank or
the Issuing Bank shall not receive interest in excess of such maximum amount. To
the extent that, pursuant to the foregoing sentence, the Agent shall receive
interest payments on behalf of the Banks or the
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Issuing Bank hereunder, under the Notes or under the L/C Documents in an
amount less than the amount otherwise provided, such deficit (hereinafter called
the "Interest Deficit") will cumulate and will be carried forward (without
interest) until the termination of this Agreement. Interest otherwise payable to
any Bank or the Issuing Bank hereunder, under the Notes or under the L/C
Documents for any subsequent period shall be increased by such maximum amount of
the Interest Deficit that may be so added without causing such Bank or the
Issuing Bank to receive interest in excess of the maximum amount then permitted
by applicable law.
(b) The amount of the Interest Deficit shall be treated as a prepayment
penalty and paid in full at the time of any optional prepayment by the Borrower
of all or any part of the Term Loans. The amount of the Interest Deficit at the
time of any complete payment of the Term Loans at that time outstanding (other
than an optional prepayment thereof) shall be cancelled and not paid.
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ARTICLE IIA
THE LETTERS OF CREDIT
SECTION 2A.01. Letters of Credit. (a) On the terms and conditions set forth
herein, (i) the Issuing Bank agrees, from time to time on any Business Day
during the period from the date of this Agreement to the Maturity Date to issue
Letters of Credit for the account of the Borrower and (ii) the Banks severally
agree to participate in Letters of Credit issued for the account of the
Borrower. Within the foregoing limits, and subject to the other terms and
conditions hereof, the Borrower's ability to obtain Letters of Credit shall be
fully revolving, and, accordingly, the Borrower may, during the foregoing
period, obtain Letters of Credit to replace Letters of Credit which have expired
or which have been drawn upon and reimbursed.
(b) The Issuing Bank has no obligation to Issue any Letter of Credit if:
(i) any order, judgment or decree of any governmental authority or
arbitrator purports by its terms to enjoin or restrain the Issuing Bank from
issuing such Letter of Credit or any requirement of law applicable to the
Issuing Bank or any request or directive (whether or not having the force of
law) from any governmental authority with jurisdiction over the Issuing Bank
prohibits, or requests that the Issuing Bank refrain from, the issuance of
commercial or standby letters of credit generally or such Letter of Credit in
particular or imposes upon such Issuing Bank with respect to such Letter of
Credit any restriction, reserve or capital requirement (for which such Issuing
Bank is not otherwise compensated hereunder) not in effect on the date of this
Agreement, or imposes upon the Issuing Bank any unreimbursed loss, cost or
expense which was not applicable on the date of this Agreement and which the
Issuing Bank in good faith deems material to it;
(ii) the Issuing Bank has received written notice from any Bank, the Agent
or the Borrower, on or prior to the Business Day prior to the requested date of
issuance of such Letter of Credit, that one or more of the applicable conditions
contained in Article III is not then satisfied;
(iii) the expiry date of any requested Letter of Credit is (x) more than
one (1) year from its date of issuance or (y) later than five (5) Business Days
prior to the Maturity Date;
(iv) the aggregate L/C Exposure, after giving effect to the requested
Letter of Credit, under all standby Letters of Credit shall exceed
$2,250,000.00; or
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(v) any requested Letter of Credit is not in form and substance acceptable
to the Issuing Bank, or the issuance of a Letter of Credit violates any
applicable policies of the Issuing Bank.
SECTION 2A.02. Issuance of Letters of Credit. Each Letter of Credit shall
be issued upon the request of the Borrower (which request shall be irrevocable),
received by the Issuing Bank in accordance with arrangements between the Issuing
Bank and the Borrower to provide the Issuing Bank electronically with the
information necessary to issue, amend or renew Letters of Credit. The
arrangements between the Borrower and the Issuing Bank are set forth in the L/C
Documents (other than the Letters of Credit) between the Issuing Bank and the
Borrower. To the extent any term in any such L/C Documents (other than a Letter
of Credit) conflicts with or is inconsistent with the terms of this Agreement,
the term most favorable to the Issuing Bank shall apply, and an Issuing Bank may
exercise its rights under either such L/C Document or this Agreement vis-a-vis
the Borrower, but subject in any event to the provisions herein with respect to
sharing and notification. If any such inconsistency exists, the Agent and the
Banks shall not be deemed to have waived any rights hereunder, nor shall the
Issuing Bank be deemed to have waived any rights under such L/C Document, by
reason of such inconsistency.
SECTION 2A.03. Participations of Banks. (a) Immediately upon the issuance
of each Letter of Credit, each Bank shall be deemed to, and hereby irrevocably
unconditionally agrees to, purchase from the Issuing Bank a participation in
such Letter of Credit, each drawing thereunder in any amount and each draft
accepted or deferred payment obligation incurred in any amount under such Letter
of Credit equal in each case to the product of (i) the pro rata share (expressed
as a percentage) of each Bank, represented by the percentage that each Bank's
Commitment bears to the Total Commitment, times (ii) the maximum amount
available to be drawn under such Letter of Credit and the amount of such
drawing, accepted draft or deferred payment obligation, respectively. Each
issuance of a Letter of Credit shall be deemed to utilize the Commitment of each
Bank by an amount equal to the amount of such participation.
(b) The Issuing Bank will promptly notify the Borrower of any drawing under
a Letter of Credit. The Borrower shall reimburse the Issuing Bank on each date
that any amount is paid by the Issuing Bank under any Letter of Credit (each
such date, an "Honor Date") at such time(s) as are agreed upon by the Borrower
and the Issuing Bank, in an amount equal to the amount so paid by the Issuing
Bank. If the Borrower fails to reimburse the Issuing Bank for the full amount of
any drawing under any Letter of Credit at such agreed upon time on the Honor
Date, such Issuing Bank will promptly notify the Agent and the Agent will
promptly notify each Bank thereof. The Honor Date shall, in every case, be (i)
not later than seventy
- 34 -
(70) days beyond the date when the beneficiary of the Letter of Credit
makes presentment of the required documents under the Letter of Credit or (ii)
not later than five (5) Business Days prior to the Maturity Date.
(c) Upon receipt of any notice from the Agent of any failure by the
Borrower to reimburse the Issuing Bank, each Bank shall make available to the
Agent for the account of the Issuing Bank its pro rata share of the amount of
such reimbursement. If, after receipt of such notice, any Bank fails to transfer
its pro rata share of the amount of such reimbursement to the Agent, interest
shall accrue on such Bank's obligation to make such payment from the Honor Date
to the date such Bank makes such payment, at a rate per annum equal to the
Federal Funds Effective Rate in effect from time to time during such period. Any
failure of the Agent to give notice to the Banks on an Honor Date or in
sufficient time to enable any Bank to effect such payment on such date shall not
relieve such Bank from its obligations under this subsection (c).
(d) Each Bank's payment to the Issuing Bank pursuant to Section 2A.03(c)
shall be deemed payment in respect of and in satisfaction of its participation
in such Letter of Credit.
(e) Each Bank's obligation to make payment in respect of its participation
in Letters of Credit, shall be absolute and unconditional and without recourse
to the Issuing Bank and shall not be affected by any circumstance, including (i)
any setoff, counterclaim, recoupment, defense or other right which such Bank may
have against the Issuing Bank, the Borrower or any other Person for any reason
whatsoever; (ii) the occurrence or continuance of a Default or any Event of
Default; or (iii) any other circumstance, happening or event whatsoever, whether
or not similar to any of the foregoing.
(f) Notwithstanding anything herein to the contrary, no Bank shall have any
liability to BNY for any reimbursement or other obligation in connection with
unmatured drafts accepted and/or deferred payment obligations incurred by BNY
prior to the date of this Agreement and as identified on Schedule 1.01-C.
SECTION 2A.04. Repayment of Participations. (a) Upon receipt by the Issuing
Bank of (i) reimbursement from the Borrower for any payment made by the Issuing
Bank under a Letter of Credit with respect to which any Bank has paid for its
participation in such Letter of Credit or (ii) payment of interest thereon, the
Issuing Bank will pay such amounts to the Agent in the same funds as those
received by the Issuing Bank. The Agent shall promptly distribute to each Bank
its pro rata share thereof.
(b) If the Agent or any Issuing Bank is required at any time to return to
the Borrower, or to a trustee, receiver, liquidator, custodian, or any official
in any insolvency proceeding, any
- 35 -
portion of the payments made by the Borrower to the Agent or to the Issuing
Bank pursuant to Section 2A.04(a) in reimbursement of a payment made under a
Letter of Credit or interest thereon or fees relating thereto or as a result of
a setoff, each Bank shall, on demand of the Agent or the Issuing Bank, as the
case may be, forthwith return to the Agent or the Issuing Bank, as the case may
be, the amount of its pro rata share of any amounts so returned by the Agent or
the Issuing Bank plus interest thereon from the date such demand is made to the
date such amounts are returned by such Bank to the Agent or the Issuing Bank, at
a rate per annum equal to the Federal Funds Effective Rate in effect from time
to time.
(c) If any event described in subsection (b) above occurs, the obligation
of the Borrower in respect of the payment or setoff required to be returned
shall be revived and continued in full force and effect as if such payment had
not been make or such setoff had not been effected.
SECTION 2A.05 Role of the Issuing Bank. (a) The Issuing Bank shall not have
any responsibility to obtain any document in connection with paying any draw
under a Letter of Credit (other than any required sight or time draft,
certificate and other documents expressly required by the Letter of Credit) or
to ascertain or inquire as to the validity or accuracy of any such document or
the authority of the Person executing or delivering any such document.
(b) Neither the Issuing Bank nor any of its correspondents or assignees
shall be liable to any Bank for: (i) any action taken or omitted in connection
herewith at the request or with the approval of the Banks (including the
Required Banks, as applicable); (ii) any action taken or omitted in the absence
of gross negligence or willful misconduct; or (iii) the due execution,
effectiveness, validity or enforceability of any L/C Document.
(c) The Borrower hereby assumes all risks of the acts or omissions of any
beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
preclude the Borrower's pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. Neither the
Agent, nor any of its officers, directors or employees, nor any of the
respective correspondents, participants or assignees of the Issuing Bank, shall
be liable or responsible for any of the matters described in clauses (i) through
(vii) of Section 2A.06; provided, however, that the Borrower may have a claim
against the Issuing Bank, and the Issuing Bank may be liable to the Borrower, to
the extent of any direct, as opposed to consequential or exemplary, damages
suffered by the Borrower which the Borrower proves were caused by the Issuing
Bank's willful misconduct or gross negligence or the Issuing Bank's willful
failure to pay under any Letter of Credit after the presentation to it by the
beneficiary of a
- 36 -
required sight or time draft and certificate(s) strictly complying with the
terms and conditions of a Letter of Credit. In furtherance and not in limitation
of the foregoing: (i) the Issuing Bank may accept documents that appear on their
face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary; and (ii) the Issuing
Bank shall not be responsible for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Letter of Credit
or the rights or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reasons.
SECTION 2A.06. Obligations Absolute. The obligations of the Borrower under
this Agreement and any L/C Documents to reimburse the Issuing Bank for a drawing
under a Letter of Credit shall be unconditional and irrevocable, and shall be
paid strictly in accordance with the terms of this Agreement and the L/C
Documents under all circumstances, including the following:
(i) any lack of validity or enforceability of this Agreement or any L/C
Document;
(ii) any change in the time, manner or place of payment of, or in any other
term of, all or any of the obligations of the Borrower in respect of any Letter
of Credit or any other amendment or waiver of or any consent to departure from
all or any of the L/C Documents;
(iii) the existence of any claim, setoff, defense or other right that the
Borrower may have at any time against any beneficiary or any transferee of any
Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the Issuing Bank or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or by the
L/C Documents or any unrelated transaction;
(iv) any draft, demand, certificate or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
or any loss or delay in the transmission or otherwise of any document required
in order to make a drawing under any Letter of Credit;
(v) any payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or certificate that does not strictly comply with the
terms of any Letter of Credit; or any payment made by the Issuing Bank under any
Letter of Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or
- 37 -
successor to any beneficiary or any transferee of any Letter of Credit,
including any arising in connection with any insolvency proceeding;
(vi) any exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from any other
guarantee, for all or any of the obligations of the Borrower in respect of any
Letter of Credit; or
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the Borrower.
SECTION 2A.07. Uniform Customs and Practices. The Uniform Customs and
Practices for Documentary Credits as published by the International Chamber of
Commerce most recently at the time of issuance of any Letter of Credit shall
(unless otherwise expressly provided in the Letters of Credit) apply to the
Letters of Credit.
SECTION 2A.08. Fees and Commissions. (a) In the case of trade Letters of
Credit payable on sight, the Borrower shall pay to the Agent a payment
commission equal to 0.25% of the amount drawn, payable on the date of
presentment of the required documents under the Letter of Credit.
(b) In the case of trade Letters of Credit payable at a stated time, the
Borrower shall pay to the Agent a per annum commission on the average amount of
drafts accepted and deferred payment obligations as outstanding from the date of
presentment of required documents under the Letter of Credit to the date of
payment, equal to (i) 0.75% during such periods when the Borrower's Funded Debt
to EBITDA Ratio (as determined from the Borrower's most recent financial
statements) is less than 2.00 to 1.00 and (ii) 1.25% when the Borrower's Funded
Debt to EBITDA Ratio is equal to or greater than 2.00 to 1.00. Such commission
shall be payable on the Honor Date.
(c) In the case of standby Letters of Credit, the Borrower shall pay to the
Agent a per annum fee equal to the LIBOR Applicable Margin, as in effect from
time to time, on the average amount issued and available to be drawn on standby
Letters of Credit (computed on the basis of a year of 360 days for actual days
elapsed), payable quarterly in arrears.
(d) In the case of all Letters of Credit, the Borrower shall pay to the
Issuing Bank its usual and customary letter of credit fees as established from
time to time, including without limitation, fees, commissions and charges for
issuance, payment, processing amendment and expiration.
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(e) In the case of the fees and commissions set forth in (a), (b) and (c)
above, same shall be paid to the Agent for the pro rata distribution to the
Banks.
(f) Notwithstanding anything herein to the contrary, any amounts payable by
the Borrower with respect to unmatured drafts accepted and/or deferred payment
obligations incurred by BNY prior to the date of this Agreement and as
identified on Schedule 1.01-C annexed hereto, shall be paid to BNY for its own
account.
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ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to the Making of the Initial Revolving
Credit Loan and the Issuing of the Initial Letter of Credit. The obligation of
the Banks to make the initial Revolving Credit Loans contemplated by this
Agreement and the obligation of the Issuing Bank to issue the initial Letter of
Credit issued after the date of this Agreement contemplated by this Agreement
are each subject to the condition precedent that the Agent, the Banks and the
Issuing Bank shall have received from the Borrower and the Guarantors on or
before the date of this Agreement the following, each dated such day, in form
and substance satisfactory to the Agent and its counsel:
(a) A Revolving Credit Note, duly executed by the Borrower and payable to
the order of each of the Banks.
(b) Certified (as of the date of this Agreement) copies of the resolutions
of the Board of Directors of the Borrower authorizing the Loans and the Letters
of Credit and authorizing and approving this Agreement and the other Loan
Documents and the execution, delivery and performance thereof and certified
copies of all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this Agreement and the other
Loan Documents.
(c) Certified (as of the date of this Agreement) copies of the resolutions
of the Boards of Directors and the shareholders of each of the Guarantors,
authorizing and approving this Agreement, their Guaranties and any other Loan
Document applicable to the Guarantors, and the execution, delivery and
performance thereof and certified copies of all documents evidencing other
necessary corporate action and governmental approvals, if any, with respect to
this Agreement, their Guaranties and the other Loan Documents.
(d) A certificate of the Secretary or an Assistant Secretary (attested to
by another officer) of the Borrower certifying: (i) the names and true
signatures of the officer or officers of the Borrower authorized to sign this
Agreement, the Notes and the other Loan Documents to be delivered hereunder on
behalf of the Borrower; and (ii) a copy of the Borrower's by-laws as complete
and correct on the date of this Agreement.
(e) A Certificate of the Secretary or an Assistant Secretary (attested to
by another officer) of each of the Guarantors certifying (i) the names and true
signatures of the officer or officers of the Guarantors authorized to sign this
Agreement, their Guaranties and any other Loan Documents to be delivered
hereunder on behalf of the Guarantors; (ii) a copy of each of the Guarantors'
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by-laws as complete and correct on the date of this Agreement; and (iii)
the stock ownership of each Guarantor.
(f) Copies of the certificate of incorporation and all amendments thereto
of the Borrower and the Guarantors certified in each case by the Secretary of
State (or equivalent officer) of the state of incorporation of each of the
Borrower and the Guarantors and a certificate of existence and good standing
with respect to the Borrower and the Guarantors from the Secretary of State (or
equivalent officer) of the state of incorporation of the Borrower and the
Guarantors) and from the Secretary of State (or equivalent officer) of any state
in which the Borrower or the Guarantors are authorized to do business.
(g) An opinion of (i) Ruskin, Moscou, Evans & Faltischek, P.C., counsel for
the Borrower and the Guarantors as to certain matters referred to in Article IV
hereof and as to such other matters as the Agent or its counsel may reasonably
request and (ii) of Cantey & Hanger, L.L.P. with respect to Sedeco, concerning
such matters as the Agent or its counsel may reasonably request.
(h) From each of the Guarantors, an executed Guaranty.
(i) From the Borrower, copies of all of the Borrower's credit agreements,
loan agreements, indentures, mortgages and other documents relating to the
extension of credit.
(j) From the Borrower, a copy of the Sedeco Tajima Agreement.
(k) From the Borrower, the fees and expenses to be paid pursuant to this
Agreement, the Commitment Letter and the Fee Letter.
(l) The Agent and the Banks shall, prior to the date of this Agreement,
have completed their due diligence reviews of the Borrower, the results of which
shall be satisfactory to the Agent and the Banks in their sole discretion.
(m) From the Borrower, a copy of all contracts, documents and agreements
relating to the acquisition of Sedeco, the review of which shall be satisfactory
to the Banks and their counsel in all respects, and evidence that the
acquisition of Sedeco has been completed.
(n) From the Borrower, a copy of an amendment to the BNY Existing Term Loan
Agreement executed by each of the parties thereto, in form and substance
satisfactory to the Agent and its counsel, which conforms the covenants therein
to those set forth in Article V of this Agreement.
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(o) From the Borrower, a waiver, in form and substance satisfactory to the
Agent and its counsel, by which The Chase Manhattan Bank consents to this
Agreement and the transactions contemplated hereby.
(p) Intentionally omitted.
(q) The following statements shall be true and the Agent shall have
received a certificate signed by the President or Chief Financial Officer of the
Borrower and each Guarantor dated the date hereof, stating that:
(i) The representations and warranties contained in Article IV of this
Agreement and in the other Loan Documents are true and correct on and as of such
date; and
(ii) No Default or Event of Default has occurred and is continuing, or
would result from the making of the initial Revolving Credit Loans or the
issuance of the initial Letter of Credit, as applicable.
(r) All legal matters incident to this Agreement and the Loan transactions
contemplated hereby shall be satisfactory to Cullen and Dykman, counsel to the
Agent.
(s) Receipt by the Agent of such other approvals, opinions or documents as
the Agent or its counsel may reasonably request.
SECTION 3.02. Conditions Precedent to All Revolving Credit Loans and all
Letters of Credit. The obligation of the Banks to make each Revolving Credit
Loan and the obligation of the Issuing Bank to issue Letters of Credit shall
each be subject to the further condition precedent that on the date of such
Revolving Credit Loan or Letter of Credit:
(a) The following statements shall be true and the Agent shall have
received a certificate signed by the President or the Chief Financial Officer of
the Borrower dated the date of such Revolving Credit Loan or Letter of Credit,
stating that:
(i) The representations and warranties contained in Article IV of this
Agreement and in the other Loan Documents are true and correct in all material
respects on and as of such date as though made on and as such date (provided
that the representation made in Section 4.01(f) shall be deemed made as to the
then most recent fiscal year and interim period financial statements delivered
to the Agent and the Banks); and
(ii) No Default or Event of Default has occurred and is continuing, or
would result from such Revolving Credit Loan or Letter of Credit.
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(b) The Agent shall have received such other approvals, opinions or
documents as the Agent or its counsel may reasonably request.
SECTION 3.03. Conditions Precedent to the Making of Permitted Acquisition
Loans. The obligation of the Banks to make each Revolving Credit Loan which is
Permitted Acquisition Loan shall be subject to the further conditions precedent
that on the date of such Revolving Credit Loan:
(a) The Agent and the Banks shall have received, at least ten (10) Business
Days prior to such request, the certificate and information required under the
definition of Permitted Acquisition.
(b) The Agent and the Banks shall have received copies of all contracts,
documents and agreements relating to the Permitted Acquisition (the "Acquisition
Documents"), and evidence that except for the payment of that portion of the
purchase price to be funded by the proceeds of any Permitted Acquisition Loans,
the Permitted Acquisition has been completed in accordance with the terms of the
Acquisition Documents previously furnished and that no condition or material
obligation on the part of the acquired Person has been waived.
SECTION 3.04. Conditions Precedent to the Making of the Term Loan. The
obligation of each Bank to make its share of the Term Loan shall be subject to
the condition precedent that the Agent and the Banks shall have received on or
before the Maturity Date all of the documents required by Section 3.01, 3.02 and
3.03 and each of the following, in form and substance satisfactory to the Agent
and its counsel:
(a) A Term Loan Note, duly executed by the Borrower and payable to the
order of each of the Banks.
(b) The following statements shall be true and the Agent shall have
received a certificate signed by the President or the Chief Financial Officer of
the Borrower and each Guarantor dated the Maturity Date, stating that:
(i) The representations and warranties contained in Article IV of this
Agreement and in the other Loan Documents are true and correct in all material
respects on and as of the Maturity Date as though made on and as of such date
(provided that the representation made in Section 4.01(f) shall be deemed made
as to the then most recent fiscal year and interim period financial statements
delivered to the Agent and the Banks); and (ii) No Default or Event of Default
has occurred and is continuing, or would result from the making of the Term
Loan.
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(c) Additional Documentation. The Agent shall have received such other
approvals, opinions, or documents as the Agent or its counsel may reasonably
request.
SECTION 3.05 Special Condition Precedent. The Borrower shall deliver to the
Agent, on or before February 28, 1997, an opinion of Illinois counsel with
respect to SMX, concerning certain matters referred to in Article IV hereof and
as to such other matters as the Agent or its counsel may reasonably request. The
failure of the Borrower to deliver such opinion shall result in the provisions
of Section 2.07(d) becoming effective.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties. On the date of this
Agreement, on each date that the Borrower requests a Revolving Credit Loan or a
Letter of Credit and on the date the Term Loan is made, the Borrower and each of
the Guarantors represent and warrant as follows:
(a) Subsidiaries. On the date hereof, the only Subsidiaries of the Borrower
or a Guarantor are those set forth on Schedule 4.01(a) annexed hereto, which
Schedule accurately sets forth with respect to each such Subsidiary, its name
and address, any other addresses at which it conducts business, its state of
incorporation and each other jurisdiction in which it is qualified to do
business and the identity and share holdings of its stockholders. Except as set
forth on Schedule 4.01(a), all of the issued and outstanding shares of each
Subsidiary which are owned by the Borrower or a Guarantor are owned by the
Borrower or such Guarantor free and clear of any mortgage, pledge, lien or
encumbrance. Except as set forth on Schedule 4.01(a), there are not outstanding
any warrants, options, contracts or commitments of any kind entitling any Person
to purchase or otherwise acquire any shares of common or capital stock or other
equity interest of any Guarantor or any Subsidiary of the Borrower or a
Guarantor, nor are there outstanding any securities which are convertible into
or exchangeable for any shares of the common or capital stock of any Guarantor
or any Subsidiary of the Borrower or a Guarantor.
(b) Good Standing. The Borrower and the Guarantors are each corporations
duly incorporated, validly existing and in good standing under the laws of the
States of their respective incorporation and each has the corporate power to own
their assets and to transact the business in which they are presently engaged
and are duly qualified and are in good standing in such other jurisdictions
where failure to qualify or otherwise maintain such standing could result in a
Material Adverse Change in the Borrower and the Guarantors, taken as a whole.
(c) Due Execution, etc. The execution, delivery and performance by the
Borrower and each Guarantor of the Loan Documents to which they are a party are
within the Borrower's and the Guarantors' corporate power and have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the stockholders of the Borrower or Guarantors; (ii)
do not contravene the Borrower's or any of the Guarantors' certificates of
incorporation, charters or by-laws; (iii) violate any provision of any law,
rule, regulation, contractual restriction, order, writ, judgment, injunction, or
decree, determination or award binding on or affecting the Borrower or any
Guarantor; (iv) result in a breach of or constitute a
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default under any indenture or loan or credit agreement, or any other
agreement, lease or instrument to which the Borrower or any Guarantor is a party
or by which it or its properties may be bound or affected; or (v) result in, or
require, the creation or imposition of any Lien (other than the Lien of the Loan
Documents) upon or with respect to any of the properties now owned or hereafter
acquired by the Borrower or any Guarantor.
(d) No Consents Required. No authorization or approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the Borrower or
any Guarantor of any Loan Document to which it is a party, except
authorizations, approvals, actions, notices or filings which have been obtained,
taken or made, as the case may be.
(e) Validity and Enforceability. The Loan Documents when delivered
hereunder will have been duly executed and delivered on behalf of the Borrower
and each Guarantor, as the case may be, and will be legal, valid and binding
obligations of the Borrower and each Guarantor, as the case may be, enforceable
against the Borrower or such Guarantor in accordance with their respective
terms.
(f) Financial Statements. The consolidated financial statements of the
Borrower, the Guarantors and their respective Consolidated Affiliates for the
fiscal year ended January 31, 1996, and for the most recent interim fiscal
period, copies of which have been furnished to the Agent and the Banks, fairly
present the financial condition of the Borrower and its Consolidated Affiliates
as at such dates and the results of operations of the Borrower and its
Consolidated Affiliates for the periods ended on such dates, all in accordance
with GAAP, and since such dates (and each succeeding January 31) there has been
(i) no material increase in the liabilities of the Borrower and its Consolidated
Affiliates and (ii) no Material Adverse Change in the Borrower and its
Consolidated Affiliates.
(g) No Litigation. There is no pending or, to the Borrower's knowledge,
threatened action, proceeding or investigation affecting the Borrower, any
Guarantor or any Subsidiary of the Borrower or a Guarantor, before any court,
governmental agency or arbitrator, which may either in one case or in the
aggregate, result in a Material Adverse Change in the Borrower, any Guarantor or
any such Subsidiary.
(h) Taxes. The Borrower and each Guarantor have filed all federal, state
and local tax returns required to be filed and have paid all taxes, assessments
and governmental charges and levies thereon to be due, including interest and
penalties. The federal income tax liability of the Borrower and each Guarantor
has been
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finally determined and satisfied for all taxable years up to and including
the taxable year ending January 31, 1996.
(i) Licenses, etc. The Borrower, each Guarantor and each Subsidiary of the
Borrower or each Guarantor possess all licenses, permits, franchises, patents,
copyrights, trademarks and trade names, or rights thereto, to conduct their
respective businesses substantially as now conducted and as presently proposed
to be conducted, and neither the Borrower, any Guarantor nor any such Subsidiary
are in violation of any similar rights of others.
(j) Burdensome Agreements. To the best of Borrower's knowledge after due
inquiry, neither the Borrower nor any of the Guarantors are a party to any
indenture, loan or credit agreement or any other agreement, lease or instrument
or subject to any charter, corporate or partnership restriction which could
result in a Material Adverse Change in the Borrower and Guarantors, taken as a
whole. Neither the Borrower nor any Guarantor is in default in any respect in
the performance, observance, or fulfillment of any of the obligations or
covenants contained in any agreement or instrument material to its business.
(k) Margin Stock. The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation G, T, U or X), and no proceeds of any Loan will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock or in any other way which will cause
the Borrower to violate the provisions of Regulations G, T, U or X.
(l) Compliance With Laws. The Borrower, each Guarantor and each Subsidiary
of the Borrower or a Guarantor are in all material respects in compliance with
all federal and state laws and regulations in all jurisdictions where the
failure to comply with such laws or regulations could result in a Material
Adverse Change in the Borrower and the Guarantors, taken as a whole.
(m) ERISA. The Borrower, each Guarantor, each Subsidiary of the Borrower or
a Guarantor and each ERISA Affiliate are in compliance in all material respects
with all applicable provisions 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 administrate, a Plan, nor has the PBGC instituted any such
proceedings; neither the Borrower, any Guarantor, any Subsidiary of the Borrower
or a Guarantor, nor any ERISA Affiliate has completely or partially withdrawn
under Sections 4201 or 4204 of ERISA from a Multiemployer Plan; the Borrower,
each Guarantor, each Subsidiary of the Borrower or a
- 47 -
Guarantor and each ERISA Affiliate have met their minimum funding
requirements under ERISA with respect to all of their 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 for calculating the potential liability
of the Borrower, any Guarantor, any such Subsidiary or any ERISA Affiliate to
PBGC or the Plan under Title IV of ERISA; and neither the Borrower, any
Guarantor, any such Subsidiary nor any ERISA Affiliate has incurred any
liability to the PBGC under ERISA.
(n) Hazardous Materials. The Borrower, each Guarantor and each Subsidiary
of the Borrower or a Guarantor are in compliance with all federal, state or
local laws, ordinances, rules, regulations or policies governing Hazardous
Materials and neither the Borrower, any Guarantor nor any such Subsidiary has
used Hazardous Materials on, from, or affecting any property now owned or
occupied or hereafter owned or occupied by the Borrower, any Guarantor or any
such Subsidiary in any manner which violates federal, state or local laws,
ordinances, rules, regulations or policies governing the use, storage,
treatment, transportation, manufacture, refinement, handling, production or
disposal of Hazardous Materials, and that to the best of the Borrower's,
Guarantors' and such Subsidiaries' knowledge, no prior owner of any such
property or any tenant, subtenant, prior tenant or prior subtenant have used
Hazardous Materials on, from or affecting such property in any manner which
violates federal, state or local laws, ordinances, rules, regulations, or
policies governing the use, storage, treatment, transportation, manufacture,
refinement, handling, production or disposal of Hazardous Materials.
(o) Use of Proceeds. The proceeds of the Revolving Credit Loans shall be
used exclusively for the purposes set forth in Section 2.05(a) of this
Agreement. Letters of Credit shall be used exclusively for the purposes set
forth in Section 2.05(b) of this Agreement. The proceeds of the Term Loans shall
be used exclusively for the purposes set forth in Section 2.15 of this
Agreement.
(p) No Liens. The properties and assets of the Borrower and the Guarantors
are not subject to any Lien other than those described in Section 5.02(a)
hereof.
(q) Casualties. Neither the business nor the properties of the Borrower,
any Guarantor or any Subsidiary of the Borrower or a Guarantor are affected by
any fire, explosion, accident, strike, hail, earthquake, embargo, act of God or
of the public enemy, or other casualty (whether or not covered by insurance),
which could result in a Material Adverse Change in the Borrower and the
Guarantors, taken as a whole.
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(r) Solvency of Guarantors. The liability of the Guarantors as a result of
the execution of their respective Guaranties and the execution of this Agreement
shall not cause the liabilities (including contingent liabilities) of each of
the Guarantors to exceed the fair saleable value of their respective assets.
(s) Advantage to Guarantors. The Guarantors acknowledge they have derived
or expect to derive a financial or other advantage from the Loans obtained by
the Borrower from the Bank.
(t) Credit Agreements. Schedule 4.01(t) is a complete and correct list of
all credit agreements, indentures, purchase agreements, guaranties, Capital
Leases, and other investments, agreements and arrangements presently in effect
providing for or relating to extensions of credit (including agreements and
arrangements for the issuance of letters of credit or for acceptance financing)
in respect of which the Borrower or any Guarantor is in any manner directly or
contingently obligated, and the maximum principal or face amounts of the credit
in question, outstanding or to be outstanding, are correctly stated, and all
Liens of any nature given or agreed to be given as security therefor are
correctly described or indicated in such Schedule and neither the Borrower nor
any Guarantor is in default with respect to its obligations thereunder.
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ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as (i) the Total Commitment
shall be in effect, (ii) any amount shall remain outstanding under any of the
Notes, or (iii) any Letter of Credit, accepted draft or deferred payment
obligation under a Letter of Credit is outstanding, the Borrower and each of the
Guarantors will, unless the Agent and the Required Banks shall otherwise consent
in writing:
(a) Compliance with Laws, Etc. Comply, and cause each Subsidiary of the
Borrower or a Guarantor to comply, in all material respects with all applicable
laws, rules, regulations and orders, where the failure to so comply could result
in a Material Adverse Change in the Borrower, a Guarantor or any such
Subsidiary.
(b) Reporting Requirements. Furnish to the Agent and each of the Banks:
(i) Annual Financial Statements.
(1) As soon as available and in any event within ninety five (95) days
after the end of each fiscal year of the Borrower, a copy of the audited
consolidated financial statements of the Borrower and its Consolidated
Affiliates for such year, including a balance sheet with related statements of
income and retained earnings and statements of cash flows, all in reasonable
detail and setting forth in comparative form the figures for the previous fiscal
year (the comparative form of such statements for the fiscal year ending January
31, 1997 may exclude SMX and Sedeco for the fiscal years ending January 31, 1995
and January 31, 1996), together with an unqualified opinion, prepared by
Deloitte & Touche or such other independent certified public accountants
selected by the Borrower and reasonably satisfactory to the Agent, all such
financial statements to be prepared in accordance with GAAP, and
(2) As soon as available and in any event within ninety five (95) days
after the end of each fiscal year of the Borrower, a copy of the consolidating
financial statements of the Borrower and its Consolidated Affiliates for such
year, including balance sheets with related statements of income and retained
earnings and a statement of (x) the aggregate advances by the Borrower to HAPL,
(y) the aggregate advances by the Borrower to Sedeco, and (z) the aggregate
advances by the Borrower to all Subsidiaries other than HAPL or Sedeco, all in
reasonable detail and setting forth in comparative form the figures for the
previous fiscal year, prepared by management of the Borrower, all such financial
statements to be prepared in accordance with GAAP.
(ii) Quarterly Financial Statements.
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(1) As soon as available and in any event within fifty (50) days after the
end of each of the first three fiscal quarters of each fiscal year of the
Borrower, a copy of the consolidated financial statements of the Borrower and
its Consolidated Affiliates for such quarter and for year to date, including a
balance sheet with related statements of income and retained earnings and a
statement of cash flows, all in reasonable detail and setting forth in
comparative form the figures for the comparable quarter and comparable year to
date period for the previous fiscal year, all such financial statements to be
prepared by management of the Borrower in accordance with GAAP, and
(2) As soon as available and in any event within fifty (50) days after the
end of each of the first three fiscal quarters of each fiscal year of the
Borrower, a copy of the consolidating financial statements of the Borrower and
its Consolidated Affiliates, for such quarter and for year to date, including a
balance sheet with related statements of income and retained earnings and a
statement of (x) the aggregate advances by the Borrower to HAPL, (y) the
aggregate advances by the Borrower to Sedeco, and (z) the aggregate advances by
the Borrower to all Subsidiaries other than HAPL or Sedeco, all in reasonable
detail and setting forth in comparative form the figures for the comparable
quarter and comparable year to date period for the previous fiscal year, all
such financial statements to be prepared by management of the Borrower in
accordance with GAAP.
(iii) Management Letters. Promptly upon receipt thereof, copies of any
reports submitted to the Borrower or any Guarantor by independent certified
public accountants in connection with examination of the financial statements of
the Borrower and each Guarantor made by such accountants.
(iv) Certificate of No Default. Simultaneously with the delivery of the
financial statements referred to in Section 5.01(b)(i) and (ii), a certificate
of the President or the Chief Financial Officer of the Borrower or Guarantor, as
the case may be, (1) certifying that no Default or Event of Default has occurred
and is continuing, or if a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof and the action which is
proposed to be taken with respect thereto; and (2) with computations
demonstrating compliance with the covenants contained in Section 5.03.
(v) Intentionally omitted.
(vi) Notice of Litigation. Promptly after the commencement thereof, notice
of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, affecting the Borrower, any Guarantor or any Subsidiary of the Borrower
or a Guarantor which, if determined adversely to the Borrower, any
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Guarantor or any such Subsidiary could result in a Material Adverse Change
in the Borrower and the Guarantors, taken as a whole.
(vii) Notice of Defaults and Events of Default. As soon as possible and in
any event within five (5) days after the occurrence of each Default or Event of
Default, a written notice setting forth the details of such Default or Event of
Default and the action which is proposed to be taken by the Borrower with
respect thereto.
(viii) ERISA Reports. Promptly after the filing or receiving thereof,
copies of all reports, including annual reports, and notices which the Borrower
any Guarantor and any Subsidiary of the Borrower or a Guarantor, files with or
receives from the PBGC or the U.S. Department of Labor under ERISA; and as soon
as possible after the Borrower, any Guarantor or any such Subsidiary knows or
has reason to know that any Reportable Event or Prohibited Transaction has
occurred with respect to any Plan or that the PBGC or the Borrower, any
Guarantor or any such Subsidiary has instituted or will institute proceedings
under Title IV of ERISA to terminate any Plan, the Borrower or such Guarantor
will deliver to the Agent a certificate of the President or the Chief Financial
Officer of the Borrower or such Guarantor setting forth details as to such
Reportable Event or Prohibited Transaction or Plan termination and the action
the Borrower or such Guarantor proposes to take with respect thereto.
(ix) Reports to Other Creditors. Promptly after the furnishing thereof,
copies of any statement or report furnished to any other party pursuant to the
terms of any indenture, loan, or credit or similar agreement and not otherwise
required to be furnished to the Agent pursuant to any other clause of this
Section 5.01(b).
(x) Proxy Statements, Etc. Promptly after the sending or filing thereof,
copies of all proxy statements, financial statements and reports which the
Borrower or any Guarantor sends to its stockholders, and copies of all regular,
periodic, and special reports, and all registration statements which the
Borrower or any Guarantor files with the Securities and Exchange Commission or
any governmental authority which may be substituted therefor, or with any
national securities exchange.
(xi) Notice of Termination of Tajima Agreement or Sedeco Tajima Agreement.
Promptly upon receipt thereof, notice of the cancellation or suspension of the
Tajima Agreement or the Sedeco Tajima Agreement or of any notice by any party
thereto of its intent to cancel or suspend the Tajima Agreement or the Sedeco
Tajima Agreement, and notice of the existence of any default or event of default
thereunder.
(xii) General Information. Such other information respecting the condition
or operations, financial or otherwise, of the
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Borrower, any Guarantor or any Subsidiary of the Borrower or a Guarantor as
the Bank may from time to time reasonably request.
(c) Taxes. Pay and discharge, and cause its Subsidiaries to pay and
discharge, all taxes, assessments and governmental charges upon it or them, its
or their income and its or their properties prior to the dates on which
penalties are attached thereto, unless and only to the extent that (i) such
taxes shall be contested in good faith and by appropriate proceedings by the
Borrower, any Guarantor or any such Subsidiary, as the case may be, and (ii)
there be adequate reserves therefor in accordance with GAAP entered on the books
of the Borrower, any Guarantor or any such Subsidiary.
(d) Corporate Existence. Preserve and maintain, and cause its Subsidiaries
to preserve and maintain, their corporate existence and good standing in the
jurisdiction of their incorporation and the rights, privileges and franchises of
the Borrower, each Guarantor and each such Subsidiary in each case where failure
to so preserve or maintain could result in a Material Adverse Change in the
Borrower and the Guarantors, taken as a whole.
(e) Maintenance of Properties and Insurance. (i) Keep, and cause any
Subsidiaries to keep, the respective properties and assets (tangible or
intangible) that are useful and necessary in its business, in good working order
and condition, reasonable wear and tear excepted; and (ii) maintain, and cause
any Subsidiaries to maintain, insurance with financially sound and reputable
insurance companies or associations in such amounts and covering such risks as
are usually carried by companies engaged in similar businesses and owning
properties doing business in the same general areas in which the Borrower, any
Guarantors and any such Subsidiaries operate.
(f) Books of Record and Account. Keep and cause any Subsidiaries to keep,
adequate records and proper books of record and account in which complete
entries will be made in a manner to enable the preparation of financial
statements in accordance with GAAP, reflecting all financial transactions of the
Borrower, the Guarantors, and any such Subsidiaries.
(g) Visitation. At any reasonable time and upon reasonable notice, and from
time to time, permit the Agent or any of the Banks or any agents or
representatives thereof, to examine and make copies of and abstracts from the
books and records of, and visit the properties of, the Borrower or any Guarantor
and to discuss the affairs, finances and accounts of the Borrower or any
Guarantor with any of the respective officers or directors of the Borrower or
such Guarantor or the Borrower's or such Guarantor's independent accountants.
(h) Performance and Compliance with Other Agreements. Perform and comply
with each of the provisions of each and every agreement
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the failure to perform or comply with which could result in a Material
Adverse Change in the Borrower and the Guarantors, taken as a whole.
(i) Pension Funding. Comply with the following and cause each ERISA
Affiliate of the Borrower, any Guarantor or any Subsidiary of the Borrower or a
Guarantor to comply with the following:
(i) engage solely in transactions which would not subject any of such
entities to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Internal Revenue Code in either case in
an amount in excess of $25,000.00;
(ii) make full payment when due of all amounts which, under the provisions
of any Plan or ERISA, the Borrower, any Guarantor, any such Subsidiary or any
ERISA Affiliate of any of same is required to pay as contributions thereto;
(iii) all applicable provisions of the Internal Revenue Code and the
regulations promulgated thereunder, including but not limited to Section 412
thereof, and all applicable rules, regulations and interpretations of the
Accounting Principles Board and the Financial Accounting Standards Board;
(iv) not fail to make any payments in an aggregate amount greater than
$25,000.00 to any Multiemployer Plan that the Borrower, any Guarantor, any such
Subsidiary or any ERISA Affiliate may be required to make under any agreement
relating to such Multiemployer Plan, or any law pertaining thereto; or
(v) not take any action regarding any Plan which could result in the
occurrence of a Prohibited Transaction.
(j) Licenses. Maintain at all times, and cause each Subsidiary to maintain
at all times, all licenses or permits necessary to the conduct of its business
or as may be required by any governmental agency or instrumentality thereof.
(k) New Subsidiaries and Affiliates. Cause (i) any Subsidiary of the
Borrower or any Guarantor, or (ii) any Affiliate of the Borrower or any
Guarantor engaged in any of the businesses of Hirsch as set forth in Hirsch's
initial public offering prospectus dated as of February 17, 1994, in either case
formed after the date of this Agreement, to (x) become a guarantor of all
obligations of the Borrower under this Agreement and the other Loan Documents
and (y) become a party to this Agreement.
(l) Agent's Administrative Fee. Pay to the Agent an annual administrative
fee as set forth in the Fee Letter.
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(m) Prepayment of Sedeco Mortgage. Prepay, not later than January 31, 1997
all amounts outstanding under the existing mortgage loan owing from Sedeco to
Bank One, Texas N.A. (as described in Schedule 5.02(b)) and provide, not later
than February 28, 1997 evidence to the Agent (i) of such prepayment and the
satisfaction of such mortgage and related security documents and (ii) of the
release by Bank One, Texas N.A. of any security interest in any personal
property of Sedeco.
SECTION 5.02. Negative Covenants. So long as (i) the Total Commitment shall
be in effect, (ii) any amount shall remain outstanding under any of the Notes,
or (iii) any Letter of Credit, accepted draft or deferred payment obligation
under a Letter of Credit is outstanding, neither the Borrower nor any of the
Guarantors will, without the written consent of the Agent and the Required
Banks:
(a) Liens, Etc. Create, incur, assume or suffer to exist, any Lien, upon or
with respect to any of its properties, now owned or hereafter acquired, except:
(i) Liens in favor of the Banks securing Debt permitted by Section 5.02;
(ii) Liens for taxes or assessments or other government charges or levies
if not yet due and payable or if due and payable if they are being contested in
good faith by appropriate proceedings and for which appropriate reserves are
maintained;
(iii) Liens imposed by law, such as mechanics', materialmen's, landlords',
warehousemen's, and carriers' Liens, and other similar Liens, securing
obligations incurred in the ordinary course of business which are not past due
or which are being contested in good faith by appropriate proceedings and for
which appropriate reserves have been established;
(iv) Liens under workers' compensation, unemployment insurance, Social
Security, or similar legislation;
(v) Liens, deposits, or pledges to secure the performance of bids, tenders,
contracts (other than contracts for the payment of money), leases (permitted
under the terms of this Agreement), public or statutory obligations, surety,
stay, appeal, indemnity, performance or other similar bonds, or other similar
obligations arising in the ordinary course of business;
(vi) Liens described in Schedule 5.02(a), provided that no such Liens shall
be renewed, extended or refinanced;
(vii) Judgment and other similar Liens arising in connection with court
proceedings (other than those described in Section 6.01(f)), provided the
execution or other enforcement of
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such Liens is effectively stayed and the claims secured thereby are being
actively contested in good faith and by appropriate proceedings;
(viii) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with the
Borrower's or a Guarantor's occupation, use and enjoyment of the property or
assets encumbered thereby in the normal course of its business or materially
impair the value of the property subject thereto;
(ix) Purchase money Liens on any property hereafter acquired or the
assumption of any Lien on property existing at the time of such acquisition, or
a Lien incurred in connection with any conditional sale or other title retention
agreement or a Capital Lease, provided that:
(1) Any property subject to any of the foregoing is acquired by the
Borrower or any Guarantor in the ordinary course of its respective business and
the Lien on any such property is created contemporaneously with such
acquisition;
(2) The obligation secured by any Lien so created, assumed, or existing
shall not exceed one hundred (100%) percent of lesser of cost or fair market
value of the property acquired as of the time of the Borrower or any Guarantor
acquiring the same;
(3) Each such Lien shall attach only to the property so acquired and fixed
improvements thereon;
(4) The Debt secured by all such Liens shall not exceed Two Million
($2,000,000.00) Dollars at any time outstanding in the aggregate; and
(5) The obligation secured by such Lien is permitted by the provisions of
Section 5.02(b) and the related expenditure is permitted by the provisions of
Section 5.03(b); and
(x) Liens constituting mortgages on real property in an aggregate principal
amount not to exceed Five Million ($5,000,000.00) Dollars.
(b) Debt. Create, incur, assume, or suffer to exist, any Debt, except:
(i) Debt of the Borrower under this Agreement, the Notes or the Letters of
Credit;
(ii) Debt described in Schedule 5.02(b), provided that no such Debt shall
be renewed, extended or refinanced;
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(iii) Accounts payable to trade creditors for goods or services and current
operating liabilities (other than for borrowed money), in each case incurred in
the ordinary course of business and paid within the specified time, unless
contested in good faith and by appropriate proceedings;
(iv) Debt of the Borrower or any Guarantor secured by purchase money Liens
permitted by Section 5.02(a)(ix);
(v) Debt of HAPL under the HAPL Facility;
(vi) Unsecured Debt owing to Jimmy L. Yates in the principal amount of
$4,165,000.00 incurred in connection with the acquisition of Sedeco which is due
and payable on January 19, 1997.
(vii) Debt in connection with mortgage liens permitted pursuant to Section
5.02(a)(x) hereof;
(viii) Debt to the principals of SMX incurred in connection with the
acquisition of SMX in an aggregate principal amount of not greater than
$3,266,664.00, and which Debt is unsecured except for a Lien in the name "Sewing
Machine Exchange, Inc."; and
(ix) Debt owing to BNY in connection with unmatured drafts accepted and/or
deferred payment obligations incurred by BNY prior to the date of this Agreement
and as described on Schedule 1.01-C annexed hereto.
(c) Lease Obligations. Create, incur, assume, or suffer to exist any
obligation as lessee for the rental or hire of any real or personal property,
except (i) Capital Leases permitted by Section 5.02(a); (ii) leases existing on
the date of this Agreement and any extensions or renewals thereof; and (iii)
leases (other than Capital Leases) which do not in the aggregate require the
Borrower or any Guarantor to make payments (including taxes, insurance,
maintenance, and similar expenses which the Borrower or any Guarantor is
required to pay under the terms of any lease) in any fiscal year of the Borrower
in excess of $2,000,000.00.
(d) Merger. Merge into, or consolidate with or into, or have merged into
it, any Person (for the purpose of this subsection (d), the acquisition or sale
by the Borrower or any Guarantor by lease, purchase or otherwise, of all, or
substantially all, of the common stock or the assets of any Person or of it
shall be deemed a merger of such Person with the Borrower or any Guarantor)
other than (i) a merger of a Subsidiary into its parent corporation or (ii) in
connection with Permitted Acquisitions, provided that the total aggregate
consideration for all Permitted Acquisitions (including the consideration for
the acquisition of Sedeco and all Permitted Acquisition Loans) shall not exceed
$15,000,000.00 in the aggregate during the term of this Agreement.
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(e) Sale of Assets, Etc. Sell, assign, transfer, lease or otherwise dispose
of any of its assets, (including a saleleaseback transaction) with or without
recourse, except for (i) inventory disposed of in the ordinary course of
business; and (ii) the sale or other disposition of assets no longer used or
useful in the conduct of its business, (iii) saleleaseback transactions which in
the aggregate involve the sale of assets for total consideration of not greater
than $2,000,000.00 Dollars, (iv) leases sold by HAPL on a non-recourse basis and
(v) leases sold by HAPL on a recourse basis, provided that the aggregate
liability of HAPL for such recourse does not exceed $1,000,000.00 at any time.
(f) Investments, Etc. Make any Investment other than Permitted Investments.
(g) Transactions With Affiliates. Except in the ordinary course of business
and pursuant to the reasonable requirements of the Borrower's, a Guarantor's or
a Subsidiary's business and upon fair and reasonable terms no less favorable to
the Borrower, or the Guarantor or the Subsidiary than would be obtained in a
comparable arm's 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.
(h) Prepayment of Outstanding Debt. Pay, in whole or in part, any
outstanding Debt (other than the Loans) of the Borrower or any Guarantor which
by its terms is not then due and payable (other than the Loans), provided,
however that (i) Debt incurred in connection with the acquisition of SMX or
Sedeco may be prepaid, in whole or in part, but only if the Agent receives a
Certificate of No Default (after giving effect to such payment ) in the form set
forth in Section 5.01(b)(iv) hereof from the Chief Financial Officer of the
Borrower dated as of the date of the proposed prepayment and (ii) the Sedeco
mortgage referred to in Section 5.01(m) shall be prepaid as described therein.
(i) Guarantees. Guaranty, or in any other way become directly or
contingently obligated for any Debt of any other Person (including any
agreements relating to working capital maintenance, take or pay contracts or
similar arrangements) other than (i) the endorsement of negotiable instruments
for deposit in the ordinary course of business; (ii) guarantees existing on the
date hereof and set forth in Schedule 5.02(i) annexed hereto, or (iii)
guarantees of Debt permitted hereunder.
(j) Change of Business. Materially alter the nature of its business.
(k) Fiscal Year. Change the ending date of its fiscal year from January 31.
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(l) Losses. Incur a net loss for any fiscal year.
(m) Accounting Policies. Change any accounting policies, except as
permitted by GAAP.
(n) Change of Tax Status. Change its tax reporting status as a C
corporation.
(o) Change in Ownership. Fail or cease to maintain the ownership by Paul
Levine and Henry Arnberg, directly or indirectly, of a majority of such classes
of voting stock of the Borrower and the Guarantors such as would enable the
holder thereof to elect a majority of the members of the Board of Directors of
the Borrower and each Guarantor.
(p) Management. Fail to retain each of Henry Arnberg and Paul Levine in a
reasonably active full time capacity in the management of the Borrower and
Guarantors.
(q) Hazardous Material. The Borrower, each Guarantor and each Subsidiary of
the Borrower or a Guarantor shall not cause or permit any property owned or
occupied by the Borrower, any Guarantor or any such Subsidiary to be used to
generate, manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce or process Hazardous Materials, except in compliance with all
applicable federal, state and local laws or regulations nor shall the Borrower,
any Guarantor or any such Subsidiary cause or permit, as a result of any
intentional or unintentional act or omission on the part of the Borrower, any
Guarantor or any such Subsidiary or any tenant or subtenant, a release of
Hazardous Materials onto any property owned or occupied by the Borrower, any
Guarantor or any such Subsidiary or onto any other property. The Borrower, each
Guarantor and each such Subsidiary shall not fail in all material respects to
comply with all applicable federal, state and local laws, ordinances, rules and
regulations, whenever and by whomever triggered, and shall not fail to obtain
and comply with, any and all approvals, registrations or permits required
thereunder. The Borrower and the Guarantors shall execute any documentation
reasonably required by the Agent in connection with the representations,
warranties and covenants contained in this paragraph and Section 4.01 of this
Agreement.
(r) HAPL Transactions. (i) Permit HAPL to incur Debt for borrowed money
other than pursuant to the HAPL Facility and (ii) engage in any transaction
involving a loan, advance, capital or other contribution or any other
transaction pursuant to which cash or other assets are transferred from the
Borrower to HAPL (an "Inter Company Transaction"), other than transactions which
at any time do not exceed the lesser of (x) the difference between (i) one
hundred (100%) percent of the net present value of HAPL's lease receivables and
(2) the principal amount outstanding under the HAPL Facility or (y) the
following amounts: (a) from the date of this
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Agreement until January 31, 1998, $12,500,000.00; (b) from January 31, 1998
until January 31, 1999, $16,500,000.00; and (c) from January 31, 1999 and
thereafter, $21,000,000.00.
(s) Inter Company Transactions. Engage in any transaction involving a loan,
advance, capital or other contribution or any other transaction pursuant to
which cash or other assets are transferred from the Borrower to any Subsidiary
(an "Inter Company Transaction") (other than HAPL, for which Inter Company
Transactions are governed by Section 5.02(r)), if the aggregate (i) Inter
Company Transactions with Sedeco would exceed $5,000,000.00 at any time or (ii)
Inter Company Transactions with all Subsidiaries other than HAPL or Sedeco would
exceed $2,000,000.00 at any time.
SECTION 5.03. Financial Requirements. So long as (i) the Total Commitment
shall be in effect, (ii) any amount shall remain outstanding under any of the
Notes, or (iii) any Letter of Credit, accepted draft or deferred payment
obligation under a Letter of Credit is outstanding:
(a) Minimum Consolidated Tangible Net Worth. The Borrower and
Guarantors will maintain at all times a Consolidated Tangible Net
Worth ("TNW") of not less than the following, to be tested
quarterly:
Period Minimum TNW
From the date of this Agreement until $23,000,000.00
January 31, 1997
From January 31, 1997 until $25,000,000.00
January 31, 1998
From January 31, 1998 and until $30,000,000.00
January 31, 1999
From January 31, 1999 and until $35,000,000.00
January 31, 2000
From January 31, 2000 and $40,000,000.00
thereafter
(b) Consolidated Capital Expenditures. The Borrower, the Guarantors and
their respective Subsidiaries will not make Consolidated Capital Expenditures in
excess of Two Million ($2,000,000.00) Dollars in the aggregate during any fiscal
year, provided that the Borrower, the Guarantors and their respective
Subsidiaries may make Consolidated Capital Expenditures in excess of such amount
solely for the purchase of a new building(s) or
- 60 -
expansion of their existing building(s) in amounts not in excess of
$5,000,000.00 in the aggregate.
(c) Quick Asset Ratio. The Borrower and the Guarantors will at all times
maintain a Quick Asset Ratio of not less than 0.75 to 1.0, such ratio to be
tested quarterly.
(d) Funded Debt to EBITDA Ratio. The Borrower and Guarantors will maintain
at all times on a consolidated basis, a Funded Debt to EBITDA Ratio, to be
tested quarterly, of not greater than the following:
Period Funded Debt to EBITDA Ratio
From the date of this Agreement 2.50 to 1.0
until January 31, 1998
From January 31, 1998 and 2.25 to 1.0
thereafter.
(e) Fixed Charge Coverage Ratio. The Borrower and Guarantors will maintain
at all times on a consolidated basis a minimum Fixed Charge Coverage Ratio of
not less than 3.50 to 1.0, such ratio to be tested quarterly.
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ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events ("Events of
Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any installment of principal of, or
interest on, any of the Notes when due, or any fees or other amounts owed in
connection with this Agreement or the Borrower shall fail to reimburse the
Letter of Credit Issuer for any draw, accepted draft, deferred payment
obligations or any other amounts owed in connection with any Letters of Credit
when due; or
(b) Any representation or warranty made by the Borrower or any Guarantor
herein or in the Loan Documents or which is contained in any certificate,
document, opinion, or financial or other statement furnished at any time under
or in connection with any Loan Document shall prove to have been incorrect in
any material respect when made; or
(c) The Borrower or any Guarantor shall fail to perform any affirmative
covenant contained in Section 5.01 hereof within twenty (20) calendar days of
the date required thereunder, or shall fail to perform any other term, covenant,
or agreement contained in this Agreement in any other Loan Document (other than
the Notes) on its part to be performed or observed; or
(d) The Borrower, any Guarantor, or any Subsidiary of the Borrower or a
Guarantor shall fail to pay any Debt (excluding Debt evidenced by the Notes or
the Letters of Credit) of the Borrower, any Guarantor or any such Subsidiary (as
the case may be), or any interest or premium thereon, when due (other than trade
payables in the ordinary course of business of less than $250,000.00 in the
aggregate) (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such Debt;
or any other default under any agreement or instrument relating to any such
Debt, or any other event shall occur and shall continue after the applicable
grace period, if any, specified in such agreement or instrument, if the effect
of such default or event is to accelerate, or to permit the acceleration of, the
maturity of such Debt; or any such Debt shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof; or
(e) The Borrower, any Guarantor or any Subsidiary of the Borrower or a
Guarantor shall generally not pay its Debts as such Debts become due, or shall
admit in writing its inability to pay its Debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding shall be
instituted by or
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against the Borrower, any Guarantor or any such Subsidiary seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its Debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property and if instituted against the Borrower,
any Guarantor or any such Subsidiary shall remain undismissed for a period of 90
days; or the Borrower, any Guarantor or any such Subsidiary shall take any
action to authorize any of the actions set forth above in this subsection (e);
or
(f) Any judgment or order or combination of judgments or orders for the
payment of money, in excess of $500,000.00 in the aggregate, which sum shall not
be subject to full, complete and effective insurance coverage, shall be rendered
against the Borrower, any Guarantor or any Subsidiary of the Borrower or a
Guarantor and either (i) enforcement proceedings shall have been commenced by
any creditor upon such judgment or order or (ii) there shall be any period of 60
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect; or
(g) Any Guarantor shall fail to perform or observe any term or provision of
its Guaranty or any representation or warranty made by any Guarantor (or any of
its officers or partners) in connection with such Guarantor's Guaranty shall
prove to have been incorrect in any material respect when made; or
(h) Any of the following events occur or exist with respect to the
Borrower, any Guarantor, any Subsidiary of the Borrower or a Guarantor, or any
ERISA Affiliate: (i) any Prohibited Transaction involving any Plan; (ii) any
Reportable Event with respect to any Plan; (iii) the filing under Section 4041
of ERISA of a notice of intent to terminate any Plan or the termination of any
Plan; (iv) any event or circumstance that might constitute grounds entitling the
PBGC to institute proceedings under Section 4042 of ERISA for the termination
of, or for the appointment of a trustee to administer, any Plan, or the
institution of the PBGC of any such proceedings; (v) complete or partial
withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
reorganization insolvency, or termination of any Multiemployer Plan; and in each
case above, such event or condition, together with all other events or
conditions, if any, could in the opinion of the Agent subject the Borrower, any
Guarantor, any such Subsidiary or any ERISA Affiliate to any tax, penalty, or
other liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise (or any
combination thereof) which in the aggregate exceeds or may exceed $500,000.00;
or
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(i) This Agreement or any other Loan Document, at any time after its
execution and delivery and for any reason, ceases to be in full force and effect
in all material respects or shall be declared to be null and void, or the
validity or enforceability of any document or instrument delivered pursuant to
this Agreement shall be contested by the Borrower, any Guarantor or any party to
such document or instrument or the Borrower, any Guarantor or any party to such
document or instrument shall deny that it has any or further liability or
obligation under any such document or instrument; or
(j) An event of default specified in any Loan Document other than this
Agreement shall have occurred and be continuing.
SECTION 6.02. Remedies on Default. Upon the occurrence and continuance of
an Event of Default the Agent may, and at the request of the Required Banks
shall, by notice to the Borrower take any or all of the following actions: (i)
terminate the Commitment, (ii) declare the Notes, all interest thereon and all
other amounts payable under this Agreement to be forthwith due and payable, and
(iii) demand that the Borrower provide the Letter of Credit Issuer with cash
collateral for any undrawn Letters of Credit and any accepted drafts or deferred
payment obligations under any Letters of Credit, whereupon the Commitment shall
be terminated, the Notes, all such interest, all such cash collateral and all
such other amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrower and (iv) proceed to enforce its rights
whether by suit in equity or by action at law, whether for specific performance
of any covenant or agreement contained in this Agreement or any Loan Document,
or in aid of the exercise of any power granted in either this Agreement or any
Loan Document or proceed to obtain judgment or any other relief whatsoever
appropriate to the enforcement of its rights, or proceed to enforce any other
legal or equitable right which the Agent or the Banks may have by reason of the
occurrence of any Event of Default hereunder or under any Loan Document,
provided, however, upon the occurrence of an Event of Default referred to in
Section 6.01(e), the Commitment shall be immediately terminated, the Notes, all
interest thereon, all such cash collateral and all other amounts payable under
this Agreement shall be immediately due and payable without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Borrower. Any amounts collected pursuant to action taken under this
Section 6.02 shall be applied to the payment of, first, any costs incurred by
the Agent in taking such action, including but without limitation attorneys fees
and expenses, second, to provide cash collateral to the Letter of Credit Issuer
for any undrawn Letters of Credit, accepted drafts or deferred payment
obligations, third, to payment of the accrued interest on the Notes and fourth,
to payment of the unpaid principal of the Notes.
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SECTION 6.03. Remedies Cumulative. No remedy conferred upon or reserved to
the Agent or the Banks hereunder or in any Loan Document is intended to be
exclusive of any other available remedy, but each and every such remedy shall be
cumulative and in addition to every other remedy given under this Agreement or
any Loan Document or now or hereafter existing at law or in equity. No delay or
omission to exercise any right or power accruing upon any Event of Default shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to time and as often as may
be deemed expedient. In order to entitle the Agent or the Banks to exercise any
remedy reserved in this Article VI, it shall not be necessary to give any
notice, other than such notice as may be herein expressly required in this
Agreement or in any Loan Document.
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ARTICLE VII
THE AGENT; RELATIONS AMONG BANKS AND BORROWER
SECTION 7.01. Appointment, Powers and Immunities of Agent. Each Bank hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under any other Loan Document with such powers as are specifically delegated to
the Agent by the terms of this Agreement and any other Loan Document, together
with such other powers as are reasonably incidental thereto. The Agent shall
have no duties or responsibilities except those expressly set forth in this
Agreement and any other Loan Document, and shall not by reason of this Agreement
be a trustee or fiduciary for any Bank. The Agent shall not be responsible to
the Banks for any recitals, statements, representations or warranties made by
the Borrower or the Guarantors, or any officer or official of the Borrower or
Guarantors, or any of them, or any other Person contained in this Agreement or
any other Loan Document, or in any certificate or other document or instrument
referred to or provided for in, or received by any of them under, this Agreement
or any other Loan Document, or for the value, legality, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or any other document or instrument referred to or provided for herein
or therein, except as explicitly provided herein, or for the failure by the
Borrower, the Guarantors, or any of them to perform any of their or its
respective obligations hereunder or thereunder. The Agent may employ agents and
attorneys-in-fact and shall not be responsible, except as to money or securities
received by it or its authorized agents, for the negligence or misconduct of any
such agents or attorneys-in-fact selected by it with reasonable care. Except as
otherwise explicitly provided herein, neither the Agent nor any of its
directors, officers, employees or agents shall be liable or responsible to any
Bank for any action taken or omitted to be taken by it or them hereunder or
under any other Loan Document or in connection herewith or therewith, except for
its or their own gross negligence or wilful misconduct. The Borrower shall pay
any fee agreed to by the Borrower and the Agent with respect to the Agent's
services hereunder.
SECTION 7.02. Reliance by Agent. The Agent shall be entitled to rely upon
any certification, notice or other communication (including any thereof by
telephone, telex, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel, independent accountants and
other experts selected by the Agent with reasonable care. The Agent may deem and
treat each Bank as the holder of the Loans made by it for all purposes hereof
unless and until a notice of the permitted transfer thereof satisfactory to, the
Agent signed by such Bank shall have been furnished to the Agent but the Agent
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shall not be required to deal with any Person who has acquired a
participation in any Loan from a Bank. As to any matters not expressly provided
for by this Agreement or any other Loan Document, the Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder in
accordance with instructions signed by the Required Banks, and such instructions
of the Required Banks and any action taken or failure to act pursuant thereto
shall be binding on all of the Banks and any other holder of all or any portion
of any Loan.
SECTION 7.03. Defaults. The Agent shall not be deemed to have knowledge of
the occurrence of a Default or Event of Default (other than the non-payment of
principal of or interest on the Loans) unless the Agent has actual knowledge of
any Default or Event of Default or has received notice from a Bank or the
Borrower specifying such Default or Event of Default and stating that such
notice is a "Notice of Default." In the event that the Agent receives such a
notice of, or otherwise has actual knowledge of the occurrence of a Default or
Event of Default, the Agent shall give prompt notice thereof to the Banks (and
shall give each Bank prompt notice of each such non-payment). The Agent shall
(subject to Section 7.08) take such action with respect to such Default or Event
of Default which is continuing as shall be directed by the Required Banks;
provided that, unless and until the Agent shall have received such directions,
the Agent may take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interest of the Banks; and provided further that the Agent shall not be required
to take any such action which it determines to be contrary to law.
SECTION 7.04. Rights of Agent as a Bank. With respect to the Loans made by
it, the Agent in its capacity as a Bank hereunder shall have the same rights and
powers hereunder as any other Bank and may exercise the same as though it were
not acting as the Agent, and the term "Bank" or "Banks" shall, unless the
context otherwise indicates, include the Agent in its capacity as a Bank. The
Agent or any Bank and their respective Affiliates may (without having to account
therefor to any other Bank except as otherwise expressly provided in this
Agreement) accept deposits from, lend money to (on a secured or unsecured
basis), and generally engage in any kind of banking, trust or other business
with, the Borrower, the Guarantors or any of them (and any of their Affiliates);
provided that no payment or lien priority shall be given to the Agent or to any
Bank for any other transaction without the express written approval of all of
the other Banks. In the case of BNY, it may do so as if it were not acting as
the Agent, and the Agent may accept fees and other consideration from the
Borrower, the Guarantors or any of them for services in connection with this
Agreement or otherwise without having to account for the same to the Banks.
Although the Agent or a Bank or any of their respective Affiliates may in the
course of such relationships and
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relationships with other Persons acquire information about the Borrower,
the Guarantors, their Affiliates and such other Persons, neither the Agent nor
such Bank shall have any duty to the other Banks or the Agent to disclose such
information to the other Banks or the Agent except as otherwise provided herein
with respect to the occurrence of an Event of Default.
SECTION 7.05. Indemnification of Agent. The Banks agree to indemnify the
Agent (to the extent not reimbursed under Section 8.04 or under the applicable
provisions of any other Loan Document, but without limiting the obligations of
the Borrower and Guarantors under Section 8.04 or such provisions), ratably in
accordance with their respective percentages of the Total Commitment (without
giving effect to any participation in all or any portion of the Total Commitment
sold by them to any other Person), for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of this Agreement, any other Loan Document or any other documents contemplated
by or referred to herein or the transactions contemplated hereby or thereby
(including, without limitation, the costs and expenses which the Borrower and
Guarantors are obligated to pay under Section 8.04 or under the applicable
provisions of any other Loan Document but excluding, unless a Default or Event
of Default has occurred, normal administrative costs and expenses incidental to
the performance of its agency duties hereunder) or the enforcement of any of the
terms hereof or thereof or of any such other documents or instruments; provided
that no Bank shall be liable for any of the foregoing to the extent they arise
from the gross negligence or wilful misconduct of the party to be indemnified.
SECTION 7.06. Documents. It is the responsibility of the Borrower to
forward to each Bank, on or before the due dates set forth herein, a copy of
each report, notice or other document required by this Agreement or any other
Loan Document to be delivered to the Agent. The Agent is not responsible for
forwarding such information to the Banks.
SECTION 7.07. Non-Reliance on Agent and Other Banks. Each Bank agrees that
it has, independently and without reliance on the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Borrower, the Guarantors and their Subsidiaries and
decision to enter into this Agreement and 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 analysis and decisions in taking or not taking action under this Agreement
or any other Loan Document. The Agent shall not be required to keep itself
informed as to the performance or observance by the Borrower
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or Guarantors of this Agreement or any other Loan Document or any other
document referred to or provided for herein or therein or to inspect the
properties or books of the Borrower, the Guarantors or any Subsidiary. Except
for notices, reports and other documents and information expressly required to
be furnished to the Banks by the Agent hereunder, the Agent shall not have any
duty or responsibility to any other Bank to provide any Bank with any credit or
other information concerning the affairs, financial condition or business of the
Borrower, the Guarantors or any Subsidiary (or any of their Affiliates) which
may come into the possession of the Agent or of its Affiliates. The Agent shall
not be required to file this Agreement, any other Loan Document or any document
or instrument referred to herein or therein, or record or give notice of this
Agreement, any other Loan Document or any document or instrument referred to
herein or therein, to any Person.
SECTION 7.08. Failure of Agent to Act. Except for action expressly required
of the Agent hereunder, the Agent shall in all cases be fully justified in
failing or refusing to act hereunder unless it shall have received further
assurances (which may include cash collateral) of the indemnification
obligations of the Banks under Section 7.05 in respect of any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action.
SECTION 7.09. Resignation of Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign at any
time by giving written notice thereof to the Banks and the Borrower. Upon any
such resignation, the Required Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required Banks
and shall have accepted such appointment within 30 days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Banks, appoint a successor Agent, which shall be a bank which has an
office in New York, New York. The Required Banks or the retiring Agent, as the
case may be, shall upon the appointment of a Successor Agent promptly so notify
the Borrower, the Guarantors and the other Banks. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent 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. After any retiring Agent's
resignation as Agent, the provisions of this Article 7 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 the Agent.
SECTION 7.10. Amendments Concerning Agency Function. The Agent shall not be
bound by any waiver, amendment, supplement or modification of this Agreement or
any other Loan Document which
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affects its duties hereunder or thereunder unless it shall have given its
prior written consent thereto.
SECTION 7.11. Liability of Agent. The Agent shall not have any liabilities
or responsibilities to the Borrower, the Guarantors or any of them on account of
the failure of any Bank to perform its obligations hereunder or to any Bank on
account of the failure of the Borrower, the Guarantors or any of them to perform
their or its obligations hereunder or under any other Loan Document.
SECTION 7.12. Transfer of Agency Function. Without the consent of the
Borrower, the Guarantors or any Bank, the Agent may at any time or from time to
time transfer its functions as Agent hereunder to any of its offices wherever
located, provided that the Agent shall promptly notify the Borrower, the
Guarantors and the Banks thereof.
SECTION 7.13. Withholding Taxes. Each Bank represents that it is entitled
to receive any payments to be made to it hereunder without the withholding of
any tax and will furnish to the Agent such forms, certifications, statements and
other documents as the Agent may request from time to time to evidence such
Bank's exemption from the withholding of any tax imposed by any jurisdiction or
to enable the Agent to comply with any applicable laws or regulations relating
thereto. Without limiting the effect of the foregoing, if any Bank is not
created or organized under the laws of the United States of America or any state
thereof, in the event that the payment of interest by the Borrower is treated
for U.S. income tax purposes as derived in whole or in part from sources from
within the U.S., such Bank will furnish to the Agent Form 4224 or Form 1001 of
the Internal Revenue Service, or such other forms, certifications, statements or
documents, duly executed and completed by such Bank as evidence of such Bank's
exemption from the withholding of U.S. tax with respect thereto. The Agent shall
not be obligated to make any payments hereunder to such Bank in respect of any
Loan until such Bank shall have furnished to the Agent the requested form,
certification, statement or document.
SECTION 7.14. Several Obligations and Rights of Banks. The failure of any
Bank to make any Loan to be made by it on the date specified therefor shall not
relieve any other Bank of its obligation to make its Loan on such date, but no
Bank shall be responsible for the failure of any other Bank to make a Loan to be
made by such other Bank.
SECTION 7.15. Pro Rata Treatment of Loans, Etc. Except to the extent
otherwise provided, each prepayment and payment of principal of or interest on
Loans of a particular type and a particular Interest Period shall be made to the
Agent for the account of the Banks holding Loans of such type and Interest
Period pro rata in accordance with the respective unpaid principal amounts of
such Loans of such Interest Period held by such Banks.
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SECTION 7.16. Sharing of Payments Among Banks. If a Bank shall obtain
payment of any principal of or interest on any Loan made by it through the
exercise of any right of setoff, banker's lien, counterclaim, or by any other
means, it shall share such payment with the other Banks and the amount of such
payment shall be applied to reduce the Loans of all the Banks pro rata in
accordance with the unpaid principal on the Loans held by each of them, and make
such other adjustments from time to time as shall be equitable to the end that
all the Banks shall share the benefit of such payment (net of any expenses which
may be incurred by such Bank in obtaining or preserving such benefit) pro rata
in accordance with the unpaid principal and interest on the Loans held by each
of them. To such end the Banks shall make appropriate adjustments among
themselves if such payment is rescinded or must otherwise be restored. The
Borrower agrees that any Bank so purchasing a participation (or direct interest)
in the loans made by the other Banks may exercise all rights of set off,
banker's lien, counterclaim or similar rights with respect to such participation
(or direct interest). Nothing contained herein shall require any Bank to
exercise any such right or shall affect the right of any Bank to exercise, and
retain the benefits of exercising, any such right with respect to any other
indebtedness of the Borrower. Notwithstanding the foregoing or any other
provision of this Agreement, no right or remedy of any Bank relating to any
assets of the Borrower (including real property, improvements or fixtures) not
covered by this Agreement or the Loan Documents shall in any way be affected by
this Agreement or otherwise with respect to any other indebtedness of the
Borrower to any of the Banks.
SECTION 7.17. Nonreceipt of Funds by Agent. Unless the Agent shall have
received notice from a Bank prior to the date on which such Bank is to provide
funds to the Agent for a Loan to be made by such Bank that such Bank will not
make available to the Agent such funds, the Agent may assume that such Bank has
made such funds available to the Agent on the date of such Loan, and the Agent
in its sole discretion may, but shall not be obligated to, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Bank shall not have so made such funds available
to the Agent, such Bank agrees to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Agent, at the customary rate set by the Agent for the correction
of errors among banks for three Business Days and thereafter at the Prime Rate.
If such Bank shall repay to the Agent such corresponding amount, such amount so
repaid shall constitute such Bank's Loan for purposes of this Agreement. If such
Bank does not pay such corresponding amount forthwith upon Agent's demand
therefor, the Agent shall promptly notify the Borrower, and the Borrower shall
immediately pay such corresponding amount to the Agent with interest thereon,
for each day from the
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date such amount is made available to the Borrower until the date such
amount is repaid to the Agent, at the rate of interest applicable at the time to
such proposed Loan.
Unless the Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Banks hereunder that the Borrower will
not make such payment in full, the Agent may assume that the Borrower has made
such payment in full to the Agent on such date and the Agent in its sole
discretion may, but shall not be obligated to, in reliance upon such assumption,
cause to be distributed to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent the Borrower shall repay to the
Agent forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed to such
Bank until the date such Bank repays such amount to the Agent, at the customary
rate set by the Agent for the correction of errors among banks for three
Business Days and thereafter at the Prime Rate.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments. Etc. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be amended or modified only
by an instrument in writing signed by the Borrower, the Guarantors, the Agent
and the Required Banks, and any provision of this Agreement may be waived by the
Borrower (if such provision requires performance by the Agent or the Banks) or
by the Agent acting with the consent of the Required Banks (if such provision
requires performance by the Borrower); provided that no amendment, modification
or waiver shall, unless by an instrument signed by all of the Banks or by the
Agent acting with the consent of all of the Banks: (a) increase or extend the
term of the Commitment or the Loans, (b) extend the date fixed for the payment
of principal of or interest on any Loan, (c) reduce the amount of any payment of
principal thereof or the rate at which interest is payable thereon or any fee
payable hereunder, (d) alter the terms of this Section 8.01, (e) amend the
definition of the term "Required Banks", (f) change the fees payable to any Bank
except as otherwise provided herein, (g) permit the Borrower to transfer or
assign any of its obligations hereunder or under the Loan Documents, (h) amend
the provisions of Article 7 hereof, or (i) give any payment priority to any
Person (including any of the Banks) over amounts due in connection with the
Loans or the Letters of Credit. No failure on the part of the Agent or any Bank
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof or preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 8.02. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing (including telegraphic communication) and
mailed via certified mail, telegraphed, sent by overnight mail delivery service,
sent by facsimile or delivered, if to the Borrower or any Guarantor, at the
address of the Borrower or Guarantor, as the case may be, set forth at the
beginning of this Agreement with a copy to Irvin Brum, Esq., Ruskin, Moscou,
Evans & Faltischek, P.C., 170 Old Country Road, Mineola, New York 11501 and if
to the Agent or any Bank, at the address of the Agent or such Bank set forth at
the beginning of this Agreement to the attention of Hirsch International Corp.
Account Officer, or, as to each party, at such other address as shall be
designated by such party in a written notice complying as to delivery with the
terms of this Section 8.02 to the other parties. All such notices and
communications shall be effective when mailed, telegraphed or delivered, except
that notices to the Bank shall not be effective until received by the Bank.
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SECTION 8.03. No Waiver, Remedies. No failure on the part of the Agent or
any Bank to exercise, and no delay in exercising, any right, power or remedy
under any Loan Document, shall operate as a waiver thereof; nor shall any single
or partial exercise of any right under any Loan Document preclude any other or
further exercise thereof or the exercise of any other right. The remedies
provided in the Loan Documents are cumulative and not exclusive of any remedies
provided by law.
SECTION 8.04. Costs, Expenses and Taxes. The Borrower agrees to pay on
demand all costs and expenses of the Agent in connection with the preparation,
execution, delivery and administration of this Agreement, the Notes, the Letters
of Credit and any other Loan Documents, including, without limitation, the
reasonable fees and expenses of counsel for the Agent with respect thereto and
with respect to advising the Banks as to their respective rights and
responsibilities under this Agreement, and all costs and expenses, if any
(including reasonable counsel fees and expenses), in connection with the
enforcement of this Agreement, the Notes, the Letters of Credit and any other
Loan Documents. The Borrower shall at all times protect, indemnify, defend and
save harmless the Agent and the Banks from and against any and all claims,
actions, suits and other legal proceedings, and liabilities, obligations,
losses, damages, penalties, judgments, costs, expenses or disbursements which
the Agent or the Banks may, at any time, sustain or incur by reason of or in
consequence of or arising out of the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby. The Borrower
acknowledges that it is the intention of the parties hereto that this Agreement
shall be construed and applied to protect and indemnify the Agent and the Banks
against any and all risks involved in the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, all of
which risks are hereby assumed by the Borrower, including, without limitation,
any and all risks of the acts or omissions, whether rightful or wrongful, of any
present or future de jure or de facto government or governmental authority,
provided that the Borrower shall not be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent or any Bank's gross
negligence or willful misconduct. The provisions of this Section 8.04 shall
survive the payment of the Notes and the termination of this Agreement.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during the
continuance of any Event of Default and (ii) the declaration of the making of
the Notes due and payable pursuant to the provisions of Section 6.02, the Banks
each are 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 or final) at any time held and other
indebtedness at any time owing by the Banks to or for the credit or the account
of the Borrower or any Guarantor
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against any and all of the obligations of the Borrower or any Guarantor now
or hereafter existing under this Agreement and the Notes, irrespective of
whether or not the Agent or the Banks shall have made any demand under this
Agreement or the Term Loan Notes and although such obligations may be unmatured.
The rights of the Banks under this Section are in addition to all other rights
and remedies (including, without limitation, other rights of set-off) which the
Agent and the Banks may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective when it
shall have been executed by the Borrower, the Guarantors, the Agent and the
Banks.
SECTION 8.07. Successors and Assigns. (a) The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Borrower may not assign or
otherwise transfer any of its rights under this Agreement without the prior
written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Agent, such Bank shall remain responsible for the performance
of its obligations hereunder, and the Borrower and the Agent shall continue to
deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement. Any agreement pursuant to which any Bank
may grant such a participating interest shall provide that such Bank shall
retain the sole right and responsibility to enforce the obligations of the
Borrower hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such participation agreement may provide that such Bank will not agree to
any modification, amendment or waiver of this Agreement described in clauses (a)
through (i) of Section 8.01 without the consent of the Participant. The Borrower
agrees that each Participant shall, to the extent provided in its participation
agreement, be entitled to the benefits of this Article VIII with respect to its
participating interest. An assignment or other transfer which is not permitted
by subsection (c) or (d) below shall be given effect for purposes of this
Agreement only to the extent of a participating interest granted in accordance
with this subsection (b).
(c) (i) Any Bank may at any time assign to one or more banks or other
institutions (each an"Assignee") all, or a proportionate part (equivalent to an
initial Commitment of not less than $5,000,000) of all, of its rights and
obligations under this Agreement and the Notes, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement
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in substantially the form of Exhibit C hereto executed by such Assignee and
such transferor Bank, with, so long as no Default or Event of Default has
occurred and is continuing, (and subject to) the subscribed consent of the
Borrower, which shall not be unreasonably withheld, and the Agent; provided that
if an Assignee is an affiliate of such transferor Bank, no such consent shall be
required. Upon execution and delivery of such instrument and payment by such
Assignee to such transferor Bank of an amount equal to the purchase price agreed
between such transferor bank and such Assignee, such Assignee shall be a Bank
party to this Agreement and shall have all the rights and obligations of a Bank
with a Commitment as set forth in such instrument of assumption, and the
transferor Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any party shall be
required.
(ii) Upon the consummation of any assignment pursuant to this subsection
(c), the transferor Bank, the Agent and the Borrower shall make appropriate
arrangements so that, if required, a new Note is issued to the Assignee. In
connection with any such assignment, the tranferor Bank shall pay to the Agent
an administrative fee for processing such assignment in the amount of $3,500.00.
If the Assignee is not incorporated under the laws of the United States of
America or a state thereof, it shall deliver to the Borrower and the Agent
certification as to exemption from deduction or withholding of any Unites States
federal income taxes in accordance with Section 7.13.
(d) Any Bank may at any time assign all or any portion of its rights under
this Agreement and its Note to a Federal Reserve Bank. No such assignment shall
release the transferor Bank from its obligations hereunder.
SECTION 8.08. Further Assurances. The Borrower and each Guarantor agree at
any time and from time to time at its expense, upon request of the Agent, the
Banks or their respective counsel, 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 the Agent or
any Bank may deem desirable in obtaining the full benefits of this Agreement.
SECTION 8.09. Section Headings, Severability, Entire Agreement. Section and
subsection headings have been inserted herein for convenience only and shall not
be construed as part of this Agreement. Every provision of this Agreement and
each Loan Document is intended to be severable; if any term or provision of this
Agreement, any Loan Document, or any other document delivered in connection
herewith shall be invalid, illegal or unenforceable for any reason whatsoever,
the validity, legality and enforceability of the remaining provisions hereof or
thereof shall not in any way be affected or impaired thereby. All exhibits and
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schedules to this Agreement shall be annexed hereto and shall be deemed to
be part of this Agreement. This Agreement and the exhibits and schedules
attached hereto embody the entire Agreement and understanding between the
Borrower, the Guarantors, the Agent and the Banks and supersede all prior
agreements and understandings relating to the subject matter hereof provided,
however, that to the extent that the provisions of the Commitment Letter and/or
the Fee Letter are not inconsistent with the provisions of this Agreement and
the other Loan Documents but are cumulative with respect thereto, such
provisions of the Commitment Letter and the Fee Letter shall survive the
execution and delivery of this Agreement.
SECTION 8.10. Governing Law. This Agreement, the Notes and all other Loan
Documents shall be governed by, and construed in accordance with, the laws of
the State of New York.
SECTION 8.11. Waiver of Jury Trial. The Borrower, each Guarantor, the Agent
and the Banks waive all rights to trial by jury on any cause of action directly
or indirectly involving the terms, covenants or conditions of this Agreement or
any Loan Document.
SECTION 8.12. Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed
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shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE BANK OF NEW YORK, as Agent
By:____________________________
Adam Ostrach, Vice President
THE BANK OF NEW YORK
By:____________________________
Adam Ostrach, Vice President
FLEET BANK, N.A.
By:____________________________
Alice Adelberg
Vice President
HIRSCH INTERNATIONAL CORP.
By:____________________________
Kenneth Shifrin
Chief Financial Officer
PULSE MICROSYSTEMS, LTD.
By:____________________________
Kenneth Shifrin
Vice President
HAPL LEASING CO., INC.
By:____________________________
Kenneth Shifrin
Vice President
SEWING MACHINE EXCHANGE, INC.
By:____________________________
Kenneth Shifrin
Vice President
SEDECO, INC.
By:____________________________
Kenneth Shifrin
Vice President
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SCHEDULE 1.01-A
Commitments of Each Bank
The Bank of New York - $18,000,000.00
Fleet Bank, N.A. - $12,000,000.00
SCHEDULE 1.01-B
Existing Letters of Credit
SCHEDULE 1.01-C
Unmatured Drafts Accepted and
Deferred Payment Obligations
SCHEDULE 4.01(a)
STATE OF INCORPORATION IDENTITY AND
AND EACH STATE IN WHICH PERCENTAGE OF
SUBSIDIARY'S NAME IT IS QUALIFIED TO DO OWNERSHIP OF
AND ADDRESS BUSINESS EACH SHAREHOLDER
SCHEDULE 4.01 (t)
Nature of Amount of Liens Securing
Creditor Agreement Credit Credit
SCHEDULE 5.02(a)
Creditor Amount Property Subject to Lien
SCHEDULE 5.02(b)
Creditor Amount
SCHEDULE 5.02(i)
Description of All Guaranties:
EXHIBIT A
REVOLVING CREDIT NOTE
$_________________ Garden City, New York
__________, 199_
FOR VALUE RECEIVED, on the Maturity Date, HIRSCH INTERNATIONAL CORP., a
Delaware corporation, having its principal place of business at 200 Wireless
Boulevard, Hauppauge, New York 11788 ("Borrower"), promises to pay to the order
of __________________ ("Bank") at the office of The Bank of New York, as Agent,
located at 1401 Franklin Avenue, Garden City, New York 11530, the principal sum
of the lesser of: (a) ________________ ($___________) DOLLARS; or (b) the
aggregate unpaid principal amount of all Revolving Credit Loans made by Bank to
Borrower pursuant to the Agreement (as defined below). Borrower shall pay
interest on the unpaid principal balance of this Note from time to time
outstanding, at said office, at the rates of interest, at the times and for the
periods set forth in the Agreement. All payments including prepayments on this
Note shall be made in lawful money of the United States of America in
immediately available funds. Except as otherwise provided in the Agreement, if a
payment becomes due and payable on a day other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day, and interest
shall be payable thereon at the rate herein specified during such extension.
Borrower hereby authorizes Bank to enter from time to time the amount of each
Loan to Borrower and the amount of each payment on a Loan on the schedule
annexed hereto and made a part hereof. Failure of Bank to record such
information on such schedule shall
not in any way effect the obligation of Borrower to pay any amount due
under this Note. This Note is one of the Revolving Credit Notes referred to in
that certain Loan Agreement among Borrower, certain Guarantors, The Bank of New
York, as Agent, [The Bank of New York] [Fleet Bank, N.A.] and Bank of even date
herewith (the "Agreement"), as such Agreement may be amended from time to time,
and is subject to prepayment and its maturity is subject to acceleration upon
the terms contained in said Agreement. All capitalized terms used in this Note
and not defined herein shall have the meanings given them in the Agreement. If
any action or proceeding be commenced to collect this Note or enforce any of its
provisions, Borrower further agrees to pay all costs and expenses of such action
or proceeding and attorneys' fees and expenses and further expressly waives any
and every right to interpose any counterclaim in any such action or proceeding.
Borrower hereby submits to the jurisdiction of the Supreme Court of the State of
New York and agrees with Bank that personal jurisdiction over Borrower shall
rest with the Supreme Court of the State of New York for purposes of any action
on or related to this Note, the liabilities, or the enforcement of either or all
of the same. Borrower hereby waives personal service by manual delivery and
agrees that service of process may be made by post-paid certified mail directed
to the Borrower at the Borrower's address set forth above or at such other
address as may be designated in writing by the Borrower to Bank in accordance
with Section 8.02 of the Agreement, and that upon mailing of such process such
service be effective with the same effect as though personally served. Borrower
hereby expressly waives any and every right to a trial by
jury in any action on or related to this Note, the liabilities or the
enforcement of either or all of the same. Subject to the provisions of the
Agreement, Bank may transfer this Note and may deliver the security or any part
thereof to the transferee or transferees, who shall thereupon become vested with
all the powers and rights above given to Bank in respect thereto, and Bank shall
thereafter be forever relieved and fully discharged from any liability or
responsibility in the matter. The failure of any holder of this Note to insist
upon strict performance of each and/or all of the terms and conditions hereof
shall not be construed or deemed to be a waiver of any such term or condition.
Borrower and all endorsers and guarantors hereof waive presentment and demand
for payment, notice of non-payment, protest, and notice of protest. This Note
shall be construed in accordance with and governed by the laws of the State of
New York. HIRSCH INTERNATIONAL CORP.
By ----------------------------------
Kenneth Shifrin
Chief Financial Officer
Schedule of Revolving Credit Loans
Amount of
Principal Unpaid Name of
Making Amount of Type of Paid or Principal Person Making
Date Loan Loan Prepaid Balance Notation
EXHIBIT B
TERM LOAN NOTE
Garden City, New York
$_______________ _____________, 199_
FOR VALUE RECEIVED, HIRSCH INTERNATIONAL CORP., a Delaware corporation,
having its principal place of business at 200 Wireless Boulevard, Hauppauge, New
York 11788 ("Borrower") promises to pay to the order of _____________ ("Bank")
at the office of The Bank of New York, as Agent, located at 1401 Franklin
Avenue, Garden City, New York 11530, the principal sum of _____________
($___________) DOLLARS in twelve (12) quarterly principal installments, each of
the first eleven (11) such installments being in the principal amount of
$_____________, commencing on the first Term Loan Installment Date after the
date hereof and continuing on each Term Loan Installment Date thereafter until
the twelfth (12th) Term Loan Installment Date, when any remaining principal
amount shall be due and payable. Borrower shall pay interest on the unpaid
balance of this Note from time to time outstanding at said office, at the rates
of interest, at the times and for the periods as set forth in the Agreement (as
defined below). All payments including prepayments on this Term Loan Note shall
be made in lawful money of the United States of America in immediately available
funds. Except as otherwise provided in the Agreement, if a payment becomes due
and payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day, and interest shall be payable
thereon at the rate herein specified during such extension.
This Term Loan Note is one of the Term Loan Notes referred to in that
certain Loan Agreement among Borrower, certain Guarantors, The Bank of New York,
as Agent, [The Bank of New York] [Fleet Bank, N.A.] and Bank dated as of January
7, 1997 (the "Agreement"), as such Agreement may be amended from time to time,
and is subject to prepayment and its maturity is subject to acceleration upon
the terms contained in said Agreement. All capitalized terms used in this Term
Loan Note and not defined herein shall have the meanings given them in the
Agreement. If any action or proceeding be commenced to collect this Term Loan
Note or enforce any of its provisions, Borrower further agrees to pay all costs
and expenses of such action or proceeding and attorneys' fees and expenses and
further expressly waives any and every right to interpose any counterclaim in
any such action or proceeding. Borrower hereby submits to the jurisdiction of
the Supreme Court of the State of New York and agrees with Bank that personal
jurisdiction over Borrower shall rest with the Supreme Court of the State of New
York for purposes of any action on or related to this Term Loan Note, the
liabilities, or the enforcement of either or all of the same. Borrower hereby
waives personal service by manual delivery and agrees that service of process
may be made by post-paid certified mail directed to Borrower at Borrower's
address designated in the Agreement or at such other address as may be
designated in writing by Borrower to Bank in accordance with Section 7.02 of the
Agreement, and that upon mailing of such process such service be effective with
the same effect as though personally served. Borrower hereby expressly waives
any and every right to a trial by jury in any action on or
related to this Term Loan Note, the liabilities or the enforcement of
either or all of the same. Subject to the provisions of the Agreement, Bank may
transfer this Term Loan Note and may deliver the security or any part thereof to
the transferee or transferees, who shall thereupon become vested with all the
powers and rights above given to Bank in respect thereto, and Bank shall
thereafter be forever relieved and fully discharged from any liability or
responsibility in the matter. The failure of any holder of this Term Loan Note
to insist upon strict performance of each and/or all of the terms and conditions
hereof shall not be construed or deemed to be a waiver of any such term or
condition. Borrower and all endorsers and Guarantors hereof waive presentment
and demand for payment, notice of non-payment, protest, and notice of protest.
This Term Loan Note shall be construed in accordance with and governed by the
laws of the State of New York.
HIRSCH INTERNATIONAL CORP.
By:___________________________
Kenneth Shifrin
Chief Financial Officer