Exhibit 10.79
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LOAN AGREEMENT
Dated as of March 1, 1999
BETWEEN
C.P. CLARE CORPORATION
AND
BANKBOSTON, N.A.
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LOAN AGREEMENT
THIS LOAN AGREEMENT is made as of March 1, 1999, between C.P. CLARE
CORPORATION, a Massachusetts corporation having its principal place of business
and chief executive office at 78 Cherry Hill Drive, Beverly, Massachusetts
01915-1048 (the "Borrower"), and BANKBOSTON, N.A. (the "Lender"), a national
banking association with its head office at 100 Federal Street, Boston,
Massachusetts 02110.
SECTION 1. DEFINITIONS.
1.1 DEFINITIONS. As used herein, the following terms shall have the
following meanings:
"Acquisition" means any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the acquisition
of all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess of fifty percent (50%) of
the capital stock, partnership interests, membership interests or equity of any
Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger
or consolidation or any other combination with another Person (other than a
Person that is a Subsidiary) PROVIDED THAT a Company or a Subsidiary is the
surviving entity.
"Affiliate" means, with reference to any person, (i) any director,
officer or employee of that person, (ii) any other person controlling,
controlled by or under direct or indirect common control of that person, (iii)
any other person directly or indirectly holding 10% or more of any class of the
capital stock or other equity interests (including options, warrants,
convertible securities and similar rights) of that person and (iv) any other
person 10% or more of any class of whose capital stock or other equity interests
(including options, warrants, convertible securities and similar rights) is held
directly or indirectly by that person. For purposes of Section 5.1(viii) hereof,
"Affiliate" means, within the meaning of Section 414 of the Code, (i) any member
of a controlled group of corporations which includes the Borrower, (ii) any
trade or business, whether or not incorporated, under common control with the
Borrower, (iii) any member of an affiliated service group which includes the
Borrower, and (iv) any member of a group treated as a single employer by
regulation.
"Agreement" means this Loan Agreement, including the schedules and
exhibits hereto, as originally executed, or if this Agreement is amended, varied
or supplemented from time to time, as so amended, varied or supplemented.
"Applicable Commitment Multiplier" means (i) one-quarter of one percent
(0.25%) if the Average Unused Commitment during the relevant time period is
greater than or equal to fifty percent (50%) of the Maximum Amount and (ii)
one-eighth of one
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percent (0.125%) if the Average Unused Commitment during the relevant time
period is less than fifty percent (50%) of the Maximum Amount.
"Applicable Margin" means, for any day, with respect to any Revolving
Loan payable hereunder bearing interest based upon the LIBOR Rate, the
applicable rate PER ANNUM set forth below under the caption "Applicable Margin",
based upon the Liabilities to EBITDA Ratio as of the most recent determination
date:
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Liabilities to EBITDA Ratio Applicable Margin
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CATEGORY 1
Less than 1.00x 0.50%
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CATEGORY 2
1.00x to Less than equal 1.50x 0.75%
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CATEGORY 3
greater than 1.50x to
less than 2.00x 1.00%
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CATEGORY 4
greater than 2.00x to
less than equal 2.50x 1.25%
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CATEGORY 5
greater than 2.50x 1.50%
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For purposes of the foregoing, (x) the Liabilities to EBITDA Ratio shall be
determined, on a consolidated basis, as of the end of each fiscal quarter of the
Borrower's fiscal year based upon the Borrower's financial statements delivered
pursuant to Section 5.1(i) or (iii), and (y) each change in the Applicable
Margin resulting from a change in the Liabilities to EBITDA Ratio shall be
effective during the period commencing on and including the date 3 Business Days
after delivery to the Lender of such financial statements indicating such change
and ending on the date immediately preceding the effective date of the next such
change; PROVIDED THAT, until such time as Borrower first submits financial
statements to Lender pursuant to Section 5.1(i) or (ii), the Liabilities to
EBITDA Ratio shall be based upon the Initial Financial Statement.
Notwithstanding anything stated herein to the contrary, the Liabilities to
EBITDA Ratio shall be deemed to be in Category 5 (a) at any time that an Event
of Default has occurred and is continuing and (b) if the Borrower fails to
deliver the financial statements required to be delivered by it pursuant to
Section 5.1(i) or (ii), during the period from the expiration of the time for
delivery thereof until 3 Business Days after such financial statements are
delivered.
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"Average Unused Commitment" for any period of time means the average
daily difference between the Maximum Amount and the sum of the principal amount
of Revolving Loans actually outstanding hereunder during such period.
"Base Rate" means the greater of (i) the rate of interest announced
from time to time by the Lender at its head office as its "base rate" and (ii)
the Federal Funds Effective Rate plus 1/2 of 1% PER ANNUM (rounded upwards, if
necessary, to the next 1/8 of 1%).
"Business Day" means (i) for all purposes other than as covered by
clause (ii) below, any day other than a Saturday, Sunday or legal holiday on
which banks in Boston, Massachusetts are open for the conduct of a substantial
part of their commercial banking business; and (ii) with respect to all notices
and determinations in connection with, and payments of principal and interest
on, Revolving Loans bearing interest by reference to the Libor Rate, any day
that is a Business Day described in clause (i) and that is also a day for
trading by and between banks in United States dollar deposits in the London
interbank market.
"Capital Expenditures" means the amount of any expenditure for fixed
assets, computer software, leasehold improvements, capital leases under GAAP,
installment purchases of machinery and equipment, acquisitions of real estate,
expenditures in any construction in progress account of the Borrower and other
similar expenditures which are required to be capitalized on a balance sheet
pursuant to GAAP.
"Cash Equivalents" means:
(a) securities issued or fully guaranteed or insured by the United
States Government or any agency thereof and backed by the full faith and credit
of the United States having maturities of not more than six months from the date
of acquisition;
(b) certificates of deposit, time deposits, eurodollar time deposits,
repurchase agreements, reverse repurchase agreements, or banker's acceptances,
having in each case a tenor of not more than six months, issued by the Lender,
or by any U.S. commercial bank or any branch or agency of a non-U.S. bank
licensed to conduct business in the U.S. having combined capital and surplus of
not less than One Hundred Million Dollars ($100,000,000) whose short term
securities are rated at least A by Standard & Poor's Corporation and P-1 by
Moody's Investors Service, Inc., and not subject to any right of setoff by such
issuer;
(c) commercial paper of any issuer rated at least A by Standard &
Poor's Corporation or P-1 by Moody's Investor Service Inc. and in either case
having a tenor of not more than six months;
(d) investments with foreign banks similar to the investments set forth
in clauses (a), (b) and (c) above, so long as such foreign bank has combined
capital and surplus in excess of One Hundred Million Dollars ($100,000,000); and
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(e) variable rate municipal bonds that are backed by letters of credit
issued by the Lender, or by any U.S. commercial bank or any branch or agency of
a non-U.S. bank licensed to conduct business in the U.S. having combined capital
and surplus of not less than One Hundred Million Dollars ($100,000,000) whose
short term securities are rated at least A-1 by Standard & Poor's Corporation
and P-1 by Moody's Investors Service, Inc.
"Change of Control" means either of the following (i) if any "person"
as such term is used in Section 13(d) and 14(d) of the Exchange Act, is or
becomes directly or indirectly, the "beneficial owners", as defined in Rule
13d-3 under the Exchange Act, of securities of the Borrower that represent
twenty-five percent (25%) or more of the combined voting power of the Borrower's
then outstanding securities or (ii) during any period of twelve consecutive
calendar months, individuals who at the beginning of such period constituted the
Borrower's board of directors (together with any new directors whose election by
the Borrower's board of directors or whose nomination for election by the
Borrower's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reasons other than death or disability to constitute a
majority of the directors then in office.
"Closing Date" means the first date on which all of the conditions set
forth in Section 4 have been satisfied and any Revolving Loans are to be made
hereunder.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Current Assets" means the aggregate amount of assets of
the Borrower and its Subsidiaries which are classified as current assets on a
consolidated balance sheet for the Borrower and its Subsidiaries prepared in
accordance with GAAP.
"Consolidated Current Liabilities" means the aggregate amount of
liabilities of the Borrower and its Subsidiaries which are classified as current
liabilities on a consolidated balance sheet for the Borrower and its
Subsidiaries prepared in accordance with GAAP.
"Consolidated Tangible Net Worth" means the consolidated net worth of
the Borrower and its Subsidiaries less the net book value of all assets of the
Borrower and its Subsidiaries, on a consolidated basis, which would be treated
as intangibles under GAAP, including, without limitation, deferred charges,
franchise rights, non-compete agreements, research and development costs,
goodwill, unamortized debt discounts, patents, patent applications, trademarks,
trade names, copyrights, and licenses.
"Consolidated Working Capital" means the difference obtained by
subtracting from the Consolidated Current Assets the Consolidated Current
Liabilities.
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"Contingent Obligations" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or without
recourse, (a) with respect to any Indebtedness, lease, dividend, letter of
credit or other obligation (the "primary obligations") of another Person (the
"primary obligor"), including any obligation of that Person (i) to purchase,
repurchase or otherwise acquire such primary obligations or any security
therefor, (ii) to advance or provide funds for the payment or discharge of any
such primary obligation, or to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, (iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (iv)
otherwise to assure or hold harmless the holder of any such primary obligation
against loss in respect thereof (each, a "Guaranty Obligation"); (b) with
respect to any Surety Instrument issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings or payments;
(c) to purchase any materials, supplies or other property from, or to obtain the
services of, another Person if the relevant contract or other related document
or obligation requires that payment for such materials, supplies or other
property, or for such services, shall be made regardless of whether delivery of
such materials, supplies or other property is ever made or tendered, or such
services are ever performed or tendered, or (d) in respect of any Swap Contract.
The amount of any Contingent Obligation shall, in the case of Guaranty
Obligations, be deemed equal to the stated or determinable amount of the primary
obligation in respect of which such Guaranty Obligation is made or, if not
stated or if indeterminable, the maximum reasonably anticipated liability in
respect thereof, and in the case of other Contingent Obligations other than in
respect of Swap Contracts, shall be equal to the maximum reasonably anticipated
liability in respect thereof and, in the case of Contingent Obligations in
respect of Swap Contracts, shall be equal to the Swap Termination Value.
Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking ,contract,
guaranty, indenture, mortgage, deed of trust or other instrument, document or
agreement to which such Person is a party or by which it or any of its property
is bound.
"Credit Note" shall have the meaning set forth in Section 2.1.1.
"Default" means an event or condition that, but for the requirement
that time elapse or notice be given, or both, would constitute an Event of
Default.
"Divestiture" means shall have the meaning set forth in Section 5.9.
"Domestic Corporation" means any Subsidiary incorporated under the laws
of the United States or any State or Territory thereof.
"EBIT" means for any period, for the Borrower and its Subsidiaries on a
consolidated basis, determined in accordance with GAAP, the sum of (a) the Net
Income
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(or net loss) for such period plus (b) consolidated Interest Expense to
the extent included in the determination of such Net Income (or loss), plus (c)
provision of taxes to the extent included in the determination of such Net
Income (or loss); PROVIDED, HOWEVER, that Net Income (or loss) shall be computed
for these purposes without giving effect to extraordinary losses or
extraordinary gains, determined in accordance with GAAP.
"EBITDA" means, for any period, for the Borrower and its Subsidiaries
on a consolidated basis, determined in accordance with GAAP, the EBIT for such
period, plus all amounts treated as expenses for depreciation and amortization
of intangibles of any kind to the extent such amounts are included in the
determination of Net Income (or loss) for such period; PROVIDED, HOWEVER, that
such amounts shall be excluded from the calculation of EBITDA to the extent such
amounts were included in the calculation of consolidated Interest Expense.
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for any release or
injury to the environment.
"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities, in each case
relating to environmental, health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder.
"Event of Default" shall have the meaning set forth in Section 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
"Federal Funds Effective Rate" means, for any day, a fluctuating
interest rate PER ANNUM equal 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 that is a Business
Day, the average of the quotations for such day on such transactions received by
the Lender from 3 Federal funds brokers of recognized standing selected by the
Lender.
"Financial Services Agreement" means trade finance, foreign exchange,
risk management service agreements or agreements for other services provided by
the Lender, if any, whether verbal or written, entered into between the Lender
and the Borrower, each
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such agreement being in form and substance satisfactory to the Lender in its
sole discretion.
"Foreign Corporation" means any Subsidiary that is not a Domestic
Corporation.
"Foreign Permitted Receivables" shall mean all obligations of any
obligor located outside of the United States (whether now existing or hereafter
arising) under a contract for sale of goods or services by the Borrower or any
Subsidiary, which shall include any obligation of such obligor (whether now
existing or hereafter arising) to pay interest, finance charges or amounts with
respect thereto.
"FRB" means the Federal Reserve Board.
"Funded Debt" means, as of any date of determination, on a consolidated
basis, the sum of (i) the aggregate amount of Revolving Loans outstanding on
such date, plus (ii) all principal obligations arising under capital leases in
effect on such date required to be capitalized in accordance with GAAP, plus
(iii) all other guarantees and Indebtedness for borrowed money outstanding on
such date.
"Funded Debt Ratio" means, as of the end of any fiscal quarter of the
Borrower, the ratio of (i) Funded Debt as of the end of such fiscal quarter to
(ii) EBITDA for the four consecutive fiscal quarters ending on the last day of
such fiscal quarter.
"GAAP" means generally accepted accounting principles, consistently
applied.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Indebtedness" means, without duplication, all obligations,
contingent or otherwise, that should be classified as liabilities in
accordance with GAAP, including without limitation (a) all indebtedness for
borrowed money; (b) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into the ordinary course of business on ordinary terms); (c) all
non-contingent reimbursement or payment obligations with respect to Surety
Instruments; (d) all net obligations with respect to Swap Contracts
(excluding foreign exchange hedge contracts entered into in the normal course
of business); (e) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets, or businesses; (f) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
property acquired by the Borrower; (g) all obligations with respect to
capital leases; (h) all indebtedness
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referred to in clauses (a) through (g) above secured by (or for which the
holder of such indebtedness has an existing right, contingent or otherwise,
to be secured by) any lien upon or in property (including accounts and
contracts rights) owned by the Borrower, even though the Borrower has not
assumed or become liable for the payment of such indebtedness; and (i) all
guaranty obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (a) through (h) above.
"Initial Financial Statement" shall have the meaning set forth in
Section 3.5.
"Insolvent" or "Insolvency" means that there shall have occurred one or
more of the following events with respect to a person: death; dissolution;
liquidation; termination of existence; "insolvent" or "insolvency" within the
meaning of the United States Bankruptcy Code or other applicable statute; such
person's inability to pay its debts as they come due or failure to have adequate
capital to conduct its business; such person's failure to have assets having a
fair saleable value net of any cost to dispose of such assets in excess of the
amount required to pay the probable liability on its then existing debts
(including unmatured, unliquidated and contingent debts); appointment of a
receiver of any part of the property of, execution of a trust mortgage or an
assignment for the benefit of creditors by, or the filing of a petition in
bankruptcy or the commencement of any proceedings under any bankruptcy or
insolvency laws or any laws relating to the relief of debtors, readjustment of
indebtedness or reorganization of debtors by or against such person, or the
offering of a plan to creditors or such person for composition or extension,
except for an involuntary proceeding commenced against such person which is
dismissed within 30 days after the commencement thereof without the entry of an
order for relief or the appointment of a trustee.
"Interest Coverage Ratio" means, as of any date of determination, the
ratio of (a) the consolidated EBIT of the Borrower and its Subsidiaries for the
fiscal quarter ending on such determination date plus the aggregate amount of
all operating lease payments made or required to be made by the Borrower or any
of its Subsidiaries for such period; to (b) Interest Expense for such period
plus the aggregate amount of all operating lease payments made or required to be
made by the Borrower or any of its Subsidiaries for such period.
"Interest Expense" means, for any period, with respect to the Borrower
and its Subsidiaries, on a consolidated basis without duplication, all interest
and all amortization of debt discount and expense on any particular Indebtedness
for which such calculations are being made of the Borrower and its Subsidiaries,
plus (a) the portion of upfront costs and expenses for Swap Contracts and option
contracts to manage risk fairly allocated to such Swap Contracts and option
contracts as expenses for such period, plus (b) fees payable pursuant to the
Loan Documents during such period, plus (c) the portion of any payments made in
respect of capital leases allocated to interest expense during such period; all
as determined in accordance with GAAP. Computations of Interest Charges on a PRO
FORMA basis for Indebtedness having a variable interest rate shall be calculated
at the rate in effect on the date of any determination.
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"Interest Period" means, as to any Libor Rate Amount, the period, the
commencement and duration of which shall be determined in accordance with
Section 2.4, PROVIDED THAT if any such Interest Period would otherwise end on a
day which is not a Business Day, such Interest Period shall end on the Business
Day next preceding or next succeeding such day as determined by the Lender in
accordance with its usual practices and notified to the Borrower at the
beginning of such Interest Period.
"IRS" means the Internal Revenue Service of the United States
Department of the Treasury.
"Joint Venture" means a corporation, partnership, limited liability
company, joint venture or other legal arrangement (whether created by contract
or conducted through a separate legal entity) now or hereafter formed by the
Borrower or any of its Subsidiaries with another Person in order to conduct a
common venture or enterprise with such Person.
"Leases" means any agreement, whether written or oral, granting a
person the right to occupy space in a structure or real estate for any period of
time or any capital lease or other lease of or agreement to use personal
property.
"Liabilities to EBITDA Ratio" means, as of the end of any fiscal
quarter of the Borrower, the ratio of (i) the Consolidated Current Liabilities
as of the end of such fiscal quarter to (b) EBITDA for the four consecutive
fiscal quarters ending on the last day of such fiscal quarter.
"Libor Rate" means, with respect to any Interest Period, in the case of
any Libor Rate Amount, the annual rate of interest determined by the Lender, at
or before 11:00 a.m. (London time) (or as soon thereafter as practicable) on the
second Business Day prior to the first day of such Interest Period, to be the
annual rate of interest at which deposits of U.S. dollars are offered to major
commercial banks by prime banks in the London interbank market, at or about the
time of determination and in accordance with the usual practice in such market
for delivery on the first day of such Interest Period in immediately available
funds and having a maturity equal to such Interest Period in an amount equal (as
nearly as may be) to such Libor Rate Amount. Each such rate determination by the
Lender shall be conclusive.
"Libor Rate Amount" means, in relation to any Interest Period, any
portions of the principal amount of any Revolving Loans on which the Borrower
elects pursuant to Section 2.4 to pay interest at a rate determined by reference
to the Libor Rate.
"Liens" shall have the meaning set forth in Section 5.6.
"Loan Documents" means, collectively, this Agreement (including,
without limitation, the agreements and other instruments listed or described in
the Closing
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Checklist attached hereto as EXHIBIT E), the Credit Note, the Subsidiary
Guaranties, and any other agreements, instruments or documents referred to
herein or therein and/or delivered in connection herewith, and all schedules,
exhibits and annexes thereto.
"Maturity Date" means June 30, 2001.
"Maximum Amount" shall be $15,000,000.
"Net Income" means the gross revenues of the Borrower for the period in
question, less all expenses and other proper charges (including taxes on
income), all determined in accordance with GAAP but in any event, excluding from
Net Income (without duplication): (i) any gain or loss, amortization or
deduction arising from any write-up of assets, except to the extent inclusion
thereof shall be approved in writing by the Lender; (ii) earnings of any
Subsidiary accrued prior to the date it became a Subsidiary; (iii) the net
earnings of any business entity (other than a Subsidiary) in which the Borrower
has an ownership interest, except to the extent such net earnings shall have
actually been received by the Borrower in the form of cash distributions; (iv)
any gains or losses on the sale or other disposition of investments or fixed or
capital assets; (v) the proceeds of any life insurance policy; (vi) any deferred
or other credit representing any excess of the equity of any Subsidiary at the
date of acquisition thereof over the amount invested in such Subsidiary; and
(vii) any reversal of any contingency reserve, except to the extent that
provision for such contingency reserve shall be made from income arising during
such period.
"Obligations" means, collectively, any and all advances, debts,
liabilities, obligations, covenants and duties arising under any Loan Document
owing by the Borrower to the Lender, whether direct or indirect (including those
acquired by assignment), absolute or contingent, primary or secondary, due or to
become due, now existing or hereafter arising.
"Organization Documents" means, for any corporation, the certificate or
articles of incorporation, the by-laws, any certificate of determination or
instrument relating to the rights of preferred shareholders of such corporation,
any shareholder rights agreement, and all applicable resolutions of the board of
directors (or any committee thereof) of such corporation.
"Participant" shall have the meaning set forth in Section 7.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Acquisition" shall have the meaning set forth in
Section 5.7.
"Permitted Contingent Obligation(s)" shall have the meaning set
forth in Section 5.16.
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"Permitted Disposition(s)" shall have the meaning set forth in Section
5.9.
"Permitted Foreign Receivables Purchase Facility" shall mean any
agreement of the Borrower or any of its Subsidiaries providing for sales,
transfers or conveyances of Foreign Permitted Receivables purporting to be sales
(and considered sales under GAAP) that do not provide, directly or indirectly,
for recourse against the seller of such Foreign Permitted Receivables (or
against any of such seller's Affiliates) by way of a guaranty or any other
support arrangement, with respect to the amount of such Foreign Permitted
Receivables (based on the financial condition or circumstances of the obligor
thereunder), other than such limited recourse as is reasonable given market
standards for transactions of a similar type, taking into account such factors
as historical bad debt loss experience and obligor concentration levels;
PROVIDED THAT the aggregate amount of all Foreign Permitted Receivables
permitted to be sold pursuant to all Permitted Foreign Receivables Purchase
Facilities for the Borrower and its Subsidiaries shall not exceed Five Million
Dollars ($5,000,000) in any fiscal year of the Borrower.
"Permitted Indebtedness" shall have the meaning set forth in Section
5.5.
"Permitted Investments" shall have the meaning set forth in Section
5.8.
"Permitted Leases" shall have the meaning set forth in Section 5.18.
"Permitted Liens" shall have the meaning set forth in Section 5.6.
"Permitted Swap Obligations" means the Financial Services Agreements
which constitute Swap Contracts and all other obligations (contingent or
otherwise) of the Borrower or any Subsidiary existing or arising under Swap
Contracts; PROVIDED THAT each of the following criteria is satisfied: (a) such
obligations are (or were) entered into by such Person in the ordinary course of
business for the purpose of directly mitigating risks associated with (i)
interest rate fluctuations, PROVIDED THAT the aggregate exposure of the Borrower
and its Subsidiaries (to be determined by the Lender) under Swap Contracts
entered into for the purpose of mitigating risks associated with interest rate
fluctuations does not exceed One Million Dollars ($1,000,000) and the aggregate
notional amount of all such Swap Contracts does not exceed Twenty Million
Dollars ($20,000,000) or (ii) exchange rate fluctuations, PROVIDED THAT the
aggregate exposure of the Borrower and its Subsidiaries (as mutually agreed upon
by the Lender and Borrower) under Swap Contracts entered into for the purpose of
mitigating risks associated with exchange rate fluctuations does not exceed Two
Million Dollars ($2,000,000) and the aggregate notional amount of all such Swap
Contracts does not exceed Twenty Million Dollars ($20,000,000), (b) such
obligations are (or were) entered into by such Person in the ordinary course of
business for the purpose of directly mitigating risks associated with
liabilities, commitments or assets held by such Person; and (c) such Swap
Contracts do not contain (i) any provision ("walk-away" provision) exonerating
the non-defaulting party from its obligation to make payments on outstanding
transactions to the defaulting
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party, or (ii) any provision creating or permitting the declaration of an event
of default, termination event or similar event upon the occurrence of an Event
of Default hereunder.
"Person" or "person" means any individual, corporation, limited
liability company, partnership, trust, trade, business and governmental agency
and instrumentality.
"Plans" shall mean, collectively, each "employee pension benefit plan"
and each "employee welfare benefit plan" (each as defined in ERISA) maintained
by any Borrower.
"Pledge Agreement" means a Pledge Agreement, in form and substance
satisfactory to the Lender, executed by the Borrower in favor of the Lender
pursuant to which the Borrower pledges to the Lender, as to each Foreign
Corporation, stock of such Foreign Corporation representing 65% of the total
combined voting power of all classes of capital stock of such Foreign
Corporation.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Reserve Charge" means, for each day on which any Libor Rate Amount is
outstanding, a reserve charge in an amount equal to the product of:
(i) the outstanding principal amount of the Libor Rate Amount,
multiplied by
(ii) (a) the Libor Rate (expressed as a decimal) divided
by one minus the Reserve Rate, minus (b) the Libor
Rate (expressed as a decimal),
multiplied by
(iii) 1/360.
"Reserve Rate" means the rate in effect from time to time, expressed as
a decimal, at which the Lender would be required to maintain reserves under
Regulation D of the Board of Governors of the Federal Reserve System (or any
successor or similar regulation relating to such reserve requirements) against
"Eurocurrency Liabilities" (as such term is used in such Regulation D) if such
liabilities were outstanding.
"Revolving Loan" shall have the meaning set forth in Section 2.1.1.
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"Revolving Loan Account" means the account on the books of the Lender
in which will be recorded Revolving Loans made by the Lender to the Borrower
pursuant to this Agreement, payments made on such Revolving Loans and other
appropriate debits and credits as provided by this Agreement.
"SEC" means the Securities and Exchange Commission.
"Second Tier Subsidiary" means any Subsidiary in which (other than
directors' qualifying shares required by law) one hundred percent (100%) of the
capital stock, or memberships or other equity interests in the case of
Subsidiaries that are not corporations, of each class having ordinary voting
power, and one hundred percent (100%) of the capital stock, or memberships or
other equity interests in the case of Subsidiaries that are not corporations, of
every other class, in each case, at the time as of which any determination is
being made, is owned, beneficially and of record, by one or more of the
Wholly-Owned Subsidiaries.
"Subsidiary" means any corporation, association, joint stock company,
business trust or other similar organization of which 50% or more of the
ordinary voting power for the election of a majority of the members of the board
of directors or other governing body of such entity is held or controlled by the
Borrower or a Subsidiary of the Borrower; or any other such organization the
management of which is directly or indirectly controlled by the Borrower or a
Subsidiary of the Borrower through the exercise of voting power or otherwise; or
any joint venture, whether incorporated or not, in which the Borrower has a 50%
ownership interest or any other entity which would be consolidated with the
Borrower in presenting its financial statements in accordance with GAAP. The
Borrower's Subsidiaries include without limitation the following entities (the
parenthetical after each reflecting the such entity's jurisdiction of
incorporation: (1) Clare Capital, Inc. (New York); (2) Clare Capital, Inc.
(Delaware); (3) Clare Components, Inc. (New York); (4) Clare Components, Inc.
(Delaware); (5) Clare Electronics, Inc. (New York); (6) Clare Electronics, Inc.
(Delaware); (7) Clare Instruments, Inc. (New York); (8) Clare Instruments, Inc.
(Delaware); (9) Clare Services, Inc. (New York); (10) Clare Services, Inc.
(Delaware); (11) Clare Systems, Inc. (New York); (12) Clare Systems, Inc.
(Delaware); (13) Clare Technologies, Inc. (New York); (14) Clare Technologies,
Inc. (Delaware); (15) Clare Canada, Ltd. (Ontario, Canada); (16) Clare France
S.A.R.L. (France); (17) C.P. Clare Electronics, GmbH (Germany); (18) C.P. Clare
Foreign Sales Corporation (U.S. Virgin Islands); (19) C.P. Clare N.V.
(Belgium);(20) Clare Engineering N.V. (Belgium); (21) C.P. Clare Mexicana S.A.
de C.V. (Mexico); (22) Clare Technologies (Taiwan), Inc. (Taiwan); and (23)
Clare-Micronics Integrated Systems, Inc. (CA).
"Subsidiary Guaranty" means a Guaranty Agreement, in form and substance
satisfactory to the Lender, executed by each Subsidiary in favor of the Lender
pursuant to which each such Subsidiary guarantees the payment and performance of
the Obligations.
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"Surety Instruments" means all letters of credit (including standby and
commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds
and similar instruments.
"Swap Contract" means any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
bond, note, forward foreign exchange transaction, currency swap, cross-currency
rate swap, swaption, or any other, similar transaction or any combination of the
foregoing, and, unless the context otherwise clearly requires, any master
agreement relating to or governing any or all of the foregoing.
"Swap Termination Value" means, in respect of any one or more Swap
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include the Lender).
"Taxes" means, any and all taxes (including, without limitation,
income, receipts, franchise, ad valorem or excise taxes, transfer or gains taxes
or fees, use taxes, withholding, payroll or minimum taxes) imposed on, or
otherwise payable by, or for which responsibility for payment, withholding or
collection lies with, the Borrower by any governmental authority, federal, state
or otherwise, including any taxes imposed on any of the Borrower's Subsidiaries
or other Affiliates for which the Borrower may be liable under applicable law or
by agreement to which the Borrower is a party or by which it is bound or subject
to, and including, but not limited to, any interest, penalties or additions to
tax with respect thereto.
"Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Plan pursuant to Section 412 of the Code for the applicable plan year
"Wholly-Owned Subsidiary" means any Subsidiary in which (other than
directors' qualifying shares required by law) one hundred percent (100%) of the
capital stock, or memberships or other equity interests in the case of
Subsidiaries that are not corporations, of each class having ordinary voting
power, and one hundred percent (100%) of the capital stock, or memberships or
other equity interests in the case of Subsidiaries that are not corporations, of
every other class, in each case, at the time as of which any determination is
being made, is owned, beneficially and of record, by the Borrower, or by one or
more of the other Wholly-Owned Subsidiaries, or both.
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"Year 2000 Problem" means any significant risk that computer hardware
or software used in the Borrower's business or operations will not, in the case
of dates or time periods occurring after December 31, 1999, function at least as
effectively as in the case of dates or time periods occurring prior to January
1, 2000.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with those applied
in the preparation of the financial statements referred to in Section 5.1, and
all financial data submitted pursuant to this Agreement shall be prepared in
accordance with such principles.
SECTION 2. REVOLVING LOANS.
2.1 REVOLVING LOANS.
2.1.1 Upon the terms and subject to the conditions of this
Agreement, and in reliance upon the representations, warranties and covenants of
the Borrower made herein, the Lender agrees to make loans ("Revolving Loans") to
the Borrower at the Borrower's request from time to time, from and after the
date hereof and prior to the Maturity Date, PROVIDED THAT the principal amount
of Revolving Loans outstanding at any time shall not exceed the Maximum Amount
at such time, and PROVIDED, FURTHER, that at the time the Borrower requests a
Revolving Loan and after giving effect to the making thereof there has not
occurred and is not continuing any Default or Event of Default. The Borrower
agrees that it shall be an Event of Default if at any time the debit balance of
the Revolving Loan Account shall exceed the Maximum Amount at such time, unless
the Borrower shall, upon notice of such excess from the Lender, promptly pay
cash to the Lender to be credited to the Revolving Loan Account in such amount
as shall be necessary to eliminate the excess. All requests for Revolving Loans
shall be in such form and shall be made in such manner as shall be agreed
between the Borrower and the Lender, except that each Revolving Loan shall be in
a minimum amount of $250,000 and shall be in an integral multiple of $100,000
or, if less, the remaining unused Maximum Amount. The Revolving Loans shall be
evidenced by a Revolving Credit Note (the "Credit Note") in the form of EXHIBIT
A hereto.
2.1.2 Subject to the provisions of Section 2.3, the Borrower may prepay
outstanding Revolving Loans and the Credit Note in whole or in part at any time
without premium or penalty. Amounts so paid in respect of the Revolving Loans
and the Credit Note and other amounts may be borrowed and reborrowed from time
to time as provided in Section 2.1.1. On the Maturity Date, the Borrower shall
repay all outstanding Revolving Loans and the Credit Note, together with all
unpaid interest thereon and all fees and other amounts due hereunder.
2.2 INTEREST AND FEES.
2.2.1 Subject to the provisions of Section 2.3, Revolving
Loans shall bear interest at a rate PER ANNUM equal to the Base Rate in effect
from time; PROVIDED THAT if an
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>
Event of Default shall occur, then at the option of the Lender the unpaid
balance of Revolving Loans shall bear interest, to the extent permitted by law,
at an annual interest rate equal to 3% above the rate of interest then
applicable hereunder to Revolving Loans bearing interest with reference to the
Base Rate, until such Event of Default is cured or waived. Subject to the
provisions of Section 2.3, interest on Revolving Loans (not at the time overdue)
shall be payable quarterly in arrears on the last Business Day of each fiscal
quarter of the Borrower, commencing March 31, 1999. Any change in the Base Rate
shall result in a change on the same day in the rate of interest to accrue from
and after such day on the unpaid balance of principal of the Revolving Loans.
2.2.2 The Borrower shall pay to the Lender a commitment fee,
payable quarterly in arrears on the last Business Day of each quarter, equal to
the Applicable Commitment Multiplier then in effect multiplied by the Average
Unused Commitment during the preceding quarter.
2.2.3 The Borrower shall pay to the Lender, on the Closing
Date, or promptly upon request by the Lender thereafter, all reasonable fees and
expenses incurred by the Lender in connection with the preparation and execution
of the loan facility represented by the Loan Documents, including without
limitation, legal and other direct out-of-pocket expenses.
2.2.4 The Borrower authorizes the Lender to charge to the
Revolving Loan Account or to any deposit account which the Borrower may maintain
with the Lender the interest, fees, charges, taxes and expenses provided for in
this Agreement or any other document executed or delivered in connection
herewith.
2.2.5 If, after the date hereof, the Lender shall have
determined that the adoption of any applicable law, rule, regulation, guideline,
directive or request (whether or not having the force of law) regarding capital
requirements for banks or bank holding companies, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Lender with any of the foregoing
imposes or increases a requirement by the Lender to allocate capital resources
to the Lender's commitment to make Revolving Loans hereunder which has or would
have the effect of reducing the return on the Lender's capital to a level below
that which the Lender could have achieved (taking into consideration the
Lender's then existing policies with respect to capital adequacy and assuming
full utilization of the Lender's capital) but for such adoption, change or
compliance by any amount deemed by the Lender to be material, then: (i) the
Lender shall promptly after its determination of such occurrence give notice
thereof to the Borrower; and (ii) to the extent that the costs of such increased
capital requirements are not reflected in the Base Rate (or in the Libor Rate
plus the Applicable Margin in the case of loans bearing interest by reference to
the Libor Rate), the Borrower and the Lender shall thereafter attempt to
negotiate in good faith, within 30 days following the date the Borrower receives
such notice, an adjustment payable hereunder that will adequately compensate the
Lender in light of the
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circumstances. If the Lender and the Borrower are unable to agree to such
adjustment within 30 days following the date upon which the Borrower receives
such notice, then commencing on the date of such notice (but no earlier than the
effective date of any such increased capital requirement), the fees payable
hereunder shall increase by an amount that will, in the Lender's reasonable
determination, provide adequate compensation. The provisions of this Section
2.2.5 shall be applied to the Borrower so as not to discriminate against the
Borrower vis-a-vis other customers of the Lender.
2.2.6 Anything hereinbefore to the contrary notwithstanding,
if any present or future applicable law (which expression, as used in this
Agreement, includes statutes and rules and regulations thereunder and
interpretations thereof by any competent court or by any governmental or other
regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time heretofore or hereafter made upon or otherwise issued
to the Lender by any central bank or other fiscal, monetary or other authority,
whether or not having the force of law) shall (i) subject the Lender to any tax,
levy, impost, duty, charge, fee, deduction or withholding of any nature with
respect to this Agreement, the maximum amount of the Revolving Loans, or the
payment to the Lender of any amounts due to it hereunder, or (ii) materially
change the basis of taxation of payments to the Lender of the principal or the
interest on or any other amounts payable to the Lender hereunder, or (iii)
impose or increase or render applicable any special or supplemental special
deposit or reserve or similar requirements or assessment against assets held by,
or deposits in or for the account of, or any liabilities of, or loans by an
office of the Lender in respect of the transactions contemplated herein, or (iv)
impose on the Lender any other conditions or requirements with respect to this
Agreement, the Maximum Amount or any Revolving Loan, and the result of any of
the foregoing is (A) to increase the cost to the Lender of making, funding or
maintaining all or any part of the Revolving Loans, or (B) to reduce the amount
of principal, interest or other amounts payable to the Lender hereunder, or (C)
to require the Lender to make any payment or to forego any interest or other sum
payable hereunder, the amount of which payment or foregoing interest or other
sum is calculated by reference to the gross amount of any sum receivable or
deemed received by the Lender from the Borrower hereunder, then, and in each
such case not otherwise provided for hereunder, the Borrower will, upon demand
made by the Lender accompanied by calculations thereof in reasonable detail, pay
to the Lender such additional amounts as will be sufficient to compensate the
Lender for such additional cost, reduction, payment or foregoing interest or
other sum, PROVIDED THAT the foregoing provisions of this sentence shall not
apply in the case of any additional cost, reduction, payment or foregoing
interest or other sum resulting from any taxes charged upon or by reference to
the overall net income, profits or gains of the Lender.
2.3 LIBOR INTEREST RATE OPTION.
2.3.1 At the option of the Borrower, so long as no Default or
Event of Default has occurred and is then continuing, the Borrower may elect
from time to time prior to the Maturity Date to have all or a portion of the
unpaid principal amount of any
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Revolving Loan bear interest during any particular Interest Period by reference
to the Libor Rate; PROVIDED THAT any such portion of any Revolving Loan shall be
in an amount not less than $250,000 or some greater integral multiple of
$100,000 with respect to any single Interest Period, and PROVIDED FURTHER, than
no more than 5 Revolving Loans bearing interest by reference to the Libor Rate
may be outstanding at any one time. Any election by the Borrower to have
interest calculated by reference to the Libor Rate shall be made by notice
(which shall be irrevocable) to the Lender at least 3 Business Days prior to the
first day of the proposed Interest Period, specifying the Libor Rate Amount and
the duration of the proposed Interest Period (which must be for one, two, three
or six months). Any such election of a Libor Rate shall lapse at the end of the
expiring Interest Period unless extended by a further election notice as
hereinbefore provided. Except as otherwise provided herein, each Libor Rate
Amount shall bear interest during each Interest Period relating thereto at an
annual rate equal to the Libor Rate plus the Applicable Margin then in effect,
it being agreed by the Borrower that it shall notify the Lender in writing of
any change in the Applicable Margin when it submits the financial statements
upon which such change in the Applicable Margin is based. Interest on each Libor
Rate Amount shall be payable on (a) the last day of each Interest Period
relating thereto, or (b) if any Interest Period is longer than 3 months, on the
last day of each 3-month period following the commencement of such 3-month
period and on the last day of such Interest Period.
Notwithstanding the foregoing, the Borrower may not select an
Interest Period which extends beyond the Maturity Date.
2.3.2 The Borrower shall pay to the Lender the Reserve Charge,
if any, with respect to Libor Rate Amounts of the Revolving Loans outstanding
from time to time on the dates interest is payable on such Libor Rate Amounts.
2.3.3 The Lender shall forthwith upon determining any Libor
Rate provide notice thereof to the Borrower. Each such notice shall be
conclusive and binding upon the Borrower.
2.3.4 If, with respect to any Interest Period, (i) the Lender
is unable to determine the Libor Rate relating thereto, (ii) adverse or unusual
conditions in or changes in applicable law relating to the applicable London
interbank market (a) make it illegal or, in the reasonable judgment of the
Lender, impracticable, to fund therein the Libor Rate Amount or (b) make the
projected Libor Rate unreflective of the actual costs of funds therefor to the
Lender, or (iii) if it shall become unlawful for the Lender to charge interest
on the Revolving Loans on a Libor Rate basis, then in any such event the Lender
shall so notify the Borrower and interest will be calculated and payable in
respect of such projected Interest Period (and thereafter for so long as the
conditions referred to in this sentence shall continue) by reference to the Base
Rate in accordance with Section 2.2.1.
2.3.5 If any Interest Period would otherwise end on a day
which is not a Business Day for Libor Rate purposes, that Interest Period shall
end on the Business Day
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next preceding or next succeeding such day as determined by the Lender in
accordance with its usual practices and notified to the Borrower at the
beginning of such Interest Period.
2.3.6 If for any reason any payment or prepayment of principal
of a Libor Rate Amount is made on any day other than the last day of an Interest
Period, then the Borrower shall reimburse the Lender for the loss, if any,
computed pursuant to the following formula:
L = (R-T) X P X D + RC
-------------------
360
L = amount of loss to be reimbursed to the Lender.
R = the Libor Rate plus the Applicable Margin at the
time of the payment.
T = effective interest rate in which United States
Treasury bills maturing on the last day of the
then current Interest Period and in the same amount
as the unpaid principal amount of the Revolving Loan
can be purchased by the Lender on the day of such
payment of principal.
D = the number of days remaining in the Interest Period
as of the date of such payment.
P = the amount of principal paid.
RC = the Reserve Charge due through the date of such
payment.
The Borrower shall pay to the Lender the amount of loss, computed in
accordance with the foregoing formula, upon presentation by the Lender of a
statement setting forth the Lender's calculation of the amount of such loss,
which notice shall be conclusive and binding upon the Borrower in the absence of
manifest error.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
The Borrower hereby represents, warrants and covenants as follows:
3.1 ORGANIZATION AND QUALIFICATION. The Borrower and each of its
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation; (ii) has all
requisite corporate power and authority to own its property and conduct its
business as now conducted and as presently contemplated, and to execute, deliver
and perform its Obligations under the Loan
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Documents; and (iii) is duly qualified and in good standing in each jurisdiction
(which jurisdictions are listed on EXHIBIT B hereto) where the nature of its
properties or its business (present or proposed) requires such qualification,
except where the failure to be so qualified would not have a material adverse
effect on the business, condition (financial or otherwise), results of
operations, prospects or assets of the Borrower or such Subsidiary. Since the
date of the Initial Financial Statement, the Borrower and each Subsidiary has
continued to engage in substantially the same business as that in which it was
then engaged and is engaged in no unrelated business.
3.2 CORPORATE AUTHORITY; VALID OBLIGATIONS; APPROVALS. The execution,
delivery and performance of the Loan Documents to which the Borrower and/or any
Subsidiary is a party, and the transactions and other documents contemplated
hereby and thereby, are within the corporate authority of the Borrower and each
such Subsidiary, have been authorized by all necessary corporate proceedings on
the part of the Borrower and each such Subsidiary, and do not and will not
contravene any provision of law, its charter document or its by-laws, or
contravene any provisions of, or constitute a Default or Event of Default
hereunder or a default under any other agreement, instrument, judgment, order,
decree, permit, license or undertaking binding upon or applicable to the
Borrower or such Subsidiary or any of its properties, or result in the creation,
other than in favor of the Lender, of any mortgage, pledge, security interest,
lien, encumbrance or charge upon any of the properties or assets of the Borrower
or such Subsidiary. The Loan Documents to which the Borrower and/or any
Subsidiary is a party have been duly executed and delivered and constitute the
legal, valid and binding obligations of the Borrower and each such Subsidiary
enforceable in accordance with their terms. The execution, delivery and
performance of the Loan Documents to which the Borrower and/or any Subsidiary is
a party and the transactions and other documents contemplated hereby and
thereby, do not require any approval or consent of, or filing or registration
with, any Person or Governmental Authority.
3.3 TITLE TO PROPERTIES; ABSENCE OF LIENS. The Borrower and each of its
Subsidiaries has good and marketable title to all of its properties, assets and
rights of every name and nature now purported to be owned by it, which
properties, assets and rights include all those necessary to permit Borrower and
each such Subsidiary to conduct its business as such business was conducted on
the date of the Initial Financial Statement, free from all liens, charges and
encumbrances whatsoever except for insubstantial and immaterial defects in title
and liens, charges or encumbrances permitted under Section 5.6.
3.4 COMPLIANCE. The Borrower and each of its Subsidiaries (i) has all
necessary permits, approvals, authorizations, consents, licenses, franchises,
registrations and other rights and privileges to allow it to own and operate its
business without any violation of law or the rights of others, (ii) is duly
authorized, qualified and licensed under and in compliance with all applicable
laws, regulations, authorizations and orders of public authorities (including,
without limitation, laws relating to hazardous materials, hazardous waste, oil,
and protection of the environment and laws relating to ERISA or to employee
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benefit plans generally), and (iii) has performed all obligations required to be
performed by it under, and is not in default under or in violation of, its
certificate of incorporation, articles of organization, by-laws or other
constitutive documents, or any agreement, lease, mortgage, note, bond,
indenture, license or other instrument or undertaking to which it is a party or
by which any of it or any of its properties are bound, except for any such
violations or failures to comply under subsections (i) through (iii) above
which, individually or in the aggregate, would not have a material adverse
effect on the business, condition (financial or otherwise), results of
operations, prospects or assets of the Borrower and/or such Subsidiary, and
neither the Borrower nor any of its Subsidiaries has received any notice by any
governmental authority or third party with respect to the generation, storage,
or disposal or release or threat of release of hazardous substances, hazardous
materials, or oil, or with respect to any violation of any federal, state or
local environmental, health or safety statute or regulation.
3.5 FINANCIAL STATEMENTS. The Borrower has furnished to the Lender (i)
the audited consolidated balance sheet of the Borrower and its Subsidiaries as
of March 31, 1998, and the related statements of earnings and retained earnings
for the fiscal year then ended, and related footnotes, prepared in accordance
with GAAP, together with the Report of Arthur Andersen LLP dated April 29, 1998
and (ii) the unaudited consolidated balance sheets of the Borrower and its
Subsidiaries as of June 30, 1998, September 30, 1998 and December 31, 1998, and
the related statements of earnings and retained earnings for the fiscal quarters
then ended, and related footnotes, prepared in accordance with GAAP and
certified by the chief financial officer of the Borrower (such December 31, 1998
financial statements being referred to herein as the "Initial Financial
Statement"). The Initial Financial Statement fairly presents the financial
position of the Borrower and its Subsidiaries as of the close of business on
such dates and the results of its operations for the fiscal year and quarters
then ended. In addition, the Borrower has furnished to the Lender PRO FORMA
projections for the 2 fiscal years ending March 31, 2001 (including, without
limitation, a PRO FORMA balance sheet of the Borrower, dated the Closing Date,
prepared in accordance with GAAP). Such projections were made in good faith and
based on assumptions which the Borrower believes were reasonable when made. At
the date hereof, the Borrower has no material Indebtedness or other liabilities,
whether accrued, absolute, contingent or otherwise, and whether due or to become
due, that are not set forth on EXHIBIT B hereto. Since the Initial Financial
Statement there have been no material adverse changes, individually or in the
aggregate, in the assets, liabilities, financial condition, prospects or
business of the Borrower and/or any of its Subsidiaries, except as set forth on
EXHIBIT B hereto.
3.6 EVENTS OF DEFAULT; SOLVENCY. As of the date of this Agreement, no
Default or Event of Default exists, or will exist upon consummation of the
transactions contemplated by the Loan Documents, and neither the Borrower nor
any of its Subsidiaries is, nor immediately after consummation of the
transactions contemplated by the Loan Documents will be, Insolvent.
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3.7 TAXES. The Borrower and each of its Subsidiaries has filed all
federal, state and other tax returns required to be filed for all Taxes, and has
paid (or has established adequate reserves in accordance with GAAP for the
payment of) all Taxes, assessments and other such governmental charges due from
such Borrower have been fully paid. Neither the Borrower nor any of its
Subsidiaries has executed any waiver that would have the effect of extending the
applicable statute of limitations in respect of any Tax.
3.8 LABOR RELATIONS; LITIGATION. Neither the Borrower nor any of its
Subsidiaries is engaged in any unfair labor practice and, except as set forth on
EXHIBIT B attached hereto, there is no litigation, proceeding, governmental
investigation (administrative or judicial) or labor dispute, pending or, to the
best knowledge of the Borrower, threatened against the Borrower, which, if
decided adversely to the Borrower, could have a materially adverse effect on the
business, properties, prospects or condition (financial or otherwise) of the
Borrower or any of its Subsidiaries, or on the ability of the Borrower or any of
its Subsidiaries to perform its obligations under the Loan Documents or under
any other agreement or document contemplated hereby or thereby, nor is any
substantial basis for any such litigation or labor dispute known to exist.
3.9 [Intentionally Omitted.]
3.10 CONTRACTS WITH AFFILIATES, ETC. Except as disclosed on EXHIBIT B
attached hereto, and except for agreements or transactions (in each case) in the
ordinary course of business and on an arm's-length basis, neither the Borrower
nor any of its Subsidiaries is a party to or otherwise bound by any agreements,
instruments or contracts (whether written or oral) with any Affiliate.
3.11 DISCLOSURE. No representations and warranties made by the Borrower
or any of its Subsidiaries in this Agreement, any other Loan Document, or in any
other agreement, instrument, document, certificate, statement or letter
furnished to the Lender by or on behalf of the Borrower or any of its
Subsidiaries, and no other factual information heretofore or contemporaneously
furnished by or on behalf of the Borrower or any of its Subsidiaries to the
Lender in connection with any of the transactions contemplated by any of the
Loan Documents contains (as of the date given) any untrue statement of fact or
omits to state a fact necessary in order to make the statements contained
therein not misleading in any material respect in light of the circumstances in
which they are made. Except as disclosed herein, there is no fact known to the
Borrower or any of its Subsidiaries which materially adversely affects, or which
would in the future materially adversely affect, the business, condition
(financial or otherwise), results of operations, prospects or assets of the
Borrower or any of its Subsidiaries.
3.12 ENVIRONMENTAL MATTERS. The Borrower conducts in the ordinary
course of business a review of the effect of existing Environmental Laws and
Environmental Claims on the business, operations and properties of the Borrower
and its Subsidiaries, and as a result thereof, the Borrower has reasonably
concluded that, except as specifically disclosed in EXHIBIT B, such
Environmental Laws and Environmental Claims could not,
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individually or in the aggregate, reasonably be expected to have a material
adverse effect on the business, condition (financial or otherwise), results of
operations, prospects or assets of the Borrower or any of its Subsidiaries.
3.13 REGULATED ENTITIES. Neither the Borrower, any Person controlling
the Borrower, nor any Subsidiary is an "Investment Company" within the meaning
of the Investment Company Act of 1940. The Borrower is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any other Federal
or state statute or regulation limiting the ability of the Borrower to incur
Indebtedness.
3.14 NO BURDENSOME RESTRICTIONS. Neither the Borrower nor any of its
Subsidiaries is a party to or bound by any Contractual Obligation, or subject to
any restriction in any Organizational Document, or any Requirement of Law, which
could reasonably be expected to have a material adverse effect on the business,
condition (financial or otherwise), results of operations, prospects or assets
of the Borrower or any such Subsidiary.
3.15 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC. The Borrower
and each of its Subsidiaries owns or is licensed or otherwise has the right to
use all of the patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and other rights that are reasonably
necessary for the operation of their respective businesses, without conflict
with the rights of any other Person. To the best knowledge of the Borrower, no
slogan or other advertising device, product, process, method, substance, part or
other material now employed, or now contemplated to be employed, by the Borrower
or any of its Subsidiaries infringes upon any rights held by any other Person,
which infringement could reasonably be expected to have a material adverse
effect on the business, condition (financial or otherwise), results of
operations, prospects or assets of the Borrower or any such Subsidiary. Except
as specifically disclosed in EXHIBIT B, no claim or litigation regarding any of
the foregoing is pending or threatened, and no patent or any statue, law, rule,
regulation, standard or code is pending or, to the knowledge of the Borrower, is
proposed, which, in either case, could reasonably be expected to have a material
adverse effect on the business, condition (financial or otherwise), results of
operations, prospects or assets of the Borrower or any such Subsidiary.
3.16 SUBSIDIARIES. The Borrower has no Subsidiaries other than those
specifically disclosed in part (a) of paragraph 3.6 of EXHIBIT B, and neither
the Borrower, nor any of its Subsidiaries, has equity investments in any other
corporation or entity other than those specifically disclosed in part (b) of
paragraph 3.6 of EXHIBIT B.
3.17 INSURANCE. Except as specifically disclosed on EXHIBIT B, the
properties of the Borrower and its Subsidiaries are insured with financially
sound and reputable insurance companies not Affiliates of the Borrower or any
Subsidiary, in such amounts, with such deductibles and covering such risks as
are customarily carried by companies
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engaged in similar businesses and owning similar properties in localities where
the Borrower or any its Subsidiary operate. The Borrower and its Subsidiaries
presently maintain the insurance coverage set forth in SCHEDULE 3.17 hereto.
3.18 SWAP OBLIGATIONS. Neither the Borrower nor any of its Subsidiaries
has incurred any outstanding obligations under any Swap Contracts, other than
Permitted Swap Obligations. The Borrower has undertaken its own independent
assessment of its consolidated assets, liabilities and commitments and has
considered appropriate means of mitigating and managing risks associated with
such matters and has not relied on any swap counterparty or any Affiliate of any
swap counterparty in determining whether to enter into any Swap Contract.
3.19 LEASES. Neither the Borrower nor any of its Subsidiaries has
incurred any obligations for the payment of rent or lease payments under any
lease or agreement to lease other than as specifically disclosed on EXHIBIT B or
as may be permitted pursuant to Section 5.18.
3.20 CONTINUING NATURE OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties made by the Borrower or any
Subsidiary in the Loan Documents shall be a continuing representation and/or
warranty, and the Borrower and each Subsidiary shall take (or refrain from
taking) such actions as are necessary to take (or refrain from taking) to insure
that all such representations and warranties remain true, accurate and complete
at all times during the term of this Agreement except as otherwise provided in
this Agreement or consented to in writing by the Lender.
3.21 REPRESENTATIONS CONCERNING CERTAIN SUBSIDIARIES.
The following Subsidiaries, all incorporated in the State of New York,
possess no material assets and are currently in the process of being dissolved
by the Borrower: (1) Clare Capital, Inc.; (2) Clare Components, Inc.; (3) Clare
Electronics, Inc.; (4) Clare Instruments, Inc.; (5) Clare Services, Inc.; (6)
Clare Systems, Inc.; and (7) Clare Technologies, Inc.
SECTION 4. CONDITIONS OF LOANS.
4.1 CONDITIONS TO INITIAL REVOLVING LOAN. The obligation of the Lender
to make the initial Revolving Loan is subject to the fulfillment to the
satisfaction of the Lender on the date hereof of the following conditions
precedent:
4.1.1 Receipt by the Lender of all of the agreements,
documents, instruments, certificates and opinions listed or described on the
Closing Checklist attached hereto as EXHIBIT E, in form and substance
satisfactory to the Lender, and duly
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executed and delivered by the parties thereto, along with such additional
instruments, certificates, opinions and other documents as the Lender shall
reasonably request.
4.1.2 The representations and warranties contained herein, or
otherwise made in writing by or on behalf of the Borrower pursuant hereto or in
connection with the transactions contemplated hereby, shall be true and accurate
on and as of the date hereof and as of the date of the initial Revolving Loan,
the Borrower shall have performed and complied with all covenants and conditions
required herein to be performed or complied with by it prior to the making of
such Revolving Loan, and no Default or Event of Default shall be continuing or
result from the making of the initial Revolving Loan or the transactions
contemplated hereby.
4.2 CONDITIONS TO ALL REVOLVING LOANS. The obligation of the Lender to
make any Revolving Loan is subject to the fulfillment to the satisfaction of the
Lender immediately prior to or contemporaneously with each such Revolving Loan
of each of the following conditions: (i) the representations and warranties
contained herein or otherwise made in writing by or on behalf of the Borrower
pursuant hereto or in connection with the transactions contemplated hereby shall
be true and correct in all material respects at the time of each such Revolving
Loan (except for representations and warranties limited as to time or with
respect to a specific event) with and without giving effect to the Revolving
Loans to be made at such time and the application of the proceeds thereof, (ii)
no Default or Event of Default shall be continuing or result from such Revolving
Loan, (iii) no material adverse change in the condition (financial or
otherwise), business or properties of the Borrower shall have occurred since the
date of the Initial Financial Statement, and (iv) no change in applicable law or
regulation shall have occurred as a consequence of which it shall have become
and continue to be unlawful for the Lender or the Borrower or any Subsidiary to
perform any of their respective agreements or obligations under any Loan
Document to which it is a party.
SECTION 5. COVENANTS.
During the term of this Agreement and so long as any Obligations of the
Borrower under any Loan Document remain outstanding:
5.1 FINANCIAL STATEMENTS AND OTHER REPORTING REQUIREMENTS. The Borrower
shall furnish to the Lender in the same form and with the same detail as
included in its financial reports filed with the SEC:
(i) as soon as available to the Borrower, but in any event
within 100 days after each fiscal year-end, the audited consolidated
balance sheet of the Borrower and its Subsidiaries as of the end of,
and related consolidated statements of income, retained earnings and
cash flow for, such year prepared in accordance with GAAP and certified
by Arthur Andersen LLP (or such other "Big Four" independent public
accounting firm satisfactory to the Lender) that such
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statements present fairly the consolidated financial position of the
Borrower and its Subsidiaries prepared in accordance with GAAP applied
in a manner consistent with the Borrower's past practices;
(ii) as soon as available to the Borrower, but in any event
within 50 days after the end of each of the first 3 fiscal quarters of
each fiscal year of the Borrower, the consolidated balance sheet of the
Borrower and its Subsidiaries as of the end of, and related
consolidated statements of income, retained earnings and cash flow for,
the portion of the year then ended and for the quarter then ended,
prepared in accordance with GAAP applied in a manner consistent with
the audited financial statements required by subsection (i) above
(subject to normal year-end audit adjustments, none of which shall be
materially adverse) and certified pursuant to the report to be
delivered to the Lender under subsection (v) of this Section 5.1;
(iii) [intentionally omitted];
(iv) promptly upon the request of the Lender, a copy of any
final report (including, in any event, any so-called management
letters) submitted to the Borrower by Arthur Andersen LLP (or such
other "Big Four" independent public accounting firm acceptable to the
Lender) in connection with each annual audit of the books of the
Borrower and its Subsidiaries by such accountants or in connection with
any interim audit thereof pertaining to any phase of the business of
the Borrower; and within 30 days following each fiscal year-end of the
Borrower, without the need for any request by the Lender, annual PRO
FORMA projections and budgets for the Borrower's next fiscal year,
prepared by the management of the Borrower and in the form published in
Borrower's Form 10-K;
(v) concurrently with each delivery of financial statements
pursuant to subsections (i) and (ii) of this Section 5.1 (commencing
with the fiscal quarter ending March 31, 1999), a chief financial
officer's report in substantially the form of EXHIBIT C hereto, and
including, without limitation, computations in reasonable detail
evidencing compliance with the covenants contained in Sections 5.21
through 5.25, inclusive;
(vi) immediately upon their completion, copies of all
financial statements and reports that the Borrower or any Subsidiary
sends to its shareholders, and copies of all financial statements and
regular, periodical or special reports (including Forms 10-K, 10-Q and
8-K) that the Borrower or any subsidiary may make or be required to
make to, or file with, the SEC;
(vii) promptly after obtaining knowledge of the existence
thereof, notice of (a) the occurrence of any event which constitutes a
Default or Event of Default, (b) the occurrence of any condition or
event with respect to the Borrower or any
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Affiliate which could be expected to constitute a material adverse
change in or to have a material adverse effect on the business,
properties, prospects or condition (financial or otherwise) of the
Borrower, (c) any litigation or any investigative proceedings of a
governmental agency or authority commenced or threatened against the
Borrower, any Subsidiary, any Affiliate or any Plan, or any development
in any such litigation or proceeding, which could be expected to have a
material adverse effect on the business, properties, prospects or
condition (financial or otherwise) of the Borrower, or the issuance of
any judgment, award, decree, order or other determination in or
relating to any such litigation or proceedings, (d) the occurrence of a
reportable event (as defined in ERISA) or any communications to, or
receipt of communications from, the PBGC, the United States Department
of Labor or the IRS by the Borrower, any Subsidiary or any Affiliate
relating to any Plan, along with copies of all such communications, (e)
the adoption by the Borrower of any stock option or executive
compensation plan, whether or not subject to ERISA, and any Plan
subject to ERISA, or the substantial modification of any such plan,
along with the vesting and funding schedules and other principal
provisions thereof, (f) a material increase in the Unfunded Pension
Liability of any Plan, (g) any material change in accounting policies
or financial reporting practices by the Borrower or any of its
Subsidiaries, except for changes disclosed in the financial reports of
the Borrower filed with the SEC and changes in GAAP; (h) after the
occurrence of a Default or an Event of Default, upon the request of the
Lender, the Swap Termination Values, together with a description of the
method by which such values were determined, relating to any
then-outstanding Swap Contracts to which the Borrower or any of its
Subsidiaries is a party, and (i) any communications given or received
by the Borrower in any way relating to compliance with, any violation
or potential violation of, or any potential liability under, any
environmental law or regulation (including those relating to pollution
control, hazardous materials and hazardous wastes), along with copies
of all such communications; and
(viii) from time to time, such other financial data and other
information about the Borrower and/or any of its Subsidiaries as the
Lender may reasonably request.
5.2 CONDUCT OF BUSINESS. The Borrower will, and will cause each of its
Subsidiaries to, maintain its corporate existence and good standing under the
laws of the state or jurisdiction of its incorporation and remain or engage in
substantially the same business as that in which it is now engaged, and will
duly observe and comply with all applicable laws and all requirements of any
governmental authorities relative to it, its assets or to the conduct of its
business, including laws relating to the environment, pollution control,
hazardous materials and hazardous waste, and will maintain and keep in full
force and effect all licenses, permits, patents, trademarks, trade names and
service marks necessary to the proper conduct of its business.
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5.3 MAINTENANCE AND INSURANCE. The Borrower will, and will cause each
of its Subsidiaries to, maintain and keep its properties in good repair, working
order and condition (ordinary wear and tear excepted) so that its business may
be properly and advantageously conducted at all times, and will comply with the
provisions of all Leases to which it is a party or under which it occupies
property so as to prevent any material loss or forfeiture thereof or thereunder.
The Borrower at all times will maintain insurance with such insurance companies,
in such amounts against such hazards and liabilities and for such purposes as is
customary in the industry for companies of established reputation engaged in the
same or similar businesses and owning or operating similar properties. If the
Borrower fails to provide such insurance resulting in an Event of Default
hereunder, the Lender, in its sole discretion, may provide such insurance and
charge the cost (plus applicable interest) to the Revolving Loan Account or to
the Borrower's deposit accounts with the Lender. Upon request of the Lender from
time to time, the Borrower shall furnish to the Lender certificates or other
evidence satisfactory to the Lender of compliance with the foregoing insurance
provisions.
5.4 TAXES. The Borrower will pay or cause to be paid, and will cause
each of the Subsidiaries to pay or cause to be paid, all taxes, assessments or
governmental charges on or against it or its properties prior to such taxes
becoming delinquent, except for any tax, assessment or charge which is being
contested in good faith by proper legal proceedings and with respect to which
adequate reserves have been established in accordance with GAAP and are being
maintained, PROVIDED THAT no enforcement action to enforce a lien has been
commenced against the Borrower or any of its Subsidiaries with respect to any
such tax, assessment or charge which is material in amount.
5.5 LIMITATION OF INDEBTEDNESS. The Borrower will not, nor will the
Borrower suffer or permit any of its Subsidiaries to, create, incur, assume or
suffer to exist, or in any manner become or be liable directly or indirectly
with respect to, any Indebtedness except for the following ("Permitted
Indebtedness"):
(i) the Obligations;
(ii) Indebtedness consisting of Permitted Contingent
Obligations;
(iii) Indebtedness existing on the Closing Date and set forth
in EXHIBIT B;
(iv) Indebtedness secured by those Permitted Liens described
in subsections (viii) and (ix) of Section 5.6 hereof in an aggregate
amount outstanding not to exceed Three Million Dollars ($3,000,000);
(v) Indebtedness incurred in connection with Permitted
Leases;
(vi) foreign exchange forward contracts entered into in the
ordinary course of business, PROVIDED THAT (i) the aggregate exposure
to the Borrower and
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its Subsidiaries under such foreign exchange forward contracts do not
exceed Six Million Dollars ($6,000,000) in any calendar month or Twenty
Million Dollars ($20,000,000) at any one time and (ii) no foreign
exchange forward contract exceeds twelve (12) months in length;
(vii) insurance premium financing for casualty, property and
director's and officer's insurance premiums up to a maximum amount of
Two Million Dollars ($2,000,000); and
(viii) unsecured Indebtedness entered into the ordinary course
of business, PROVIDED THAT (a) the aggregate principal amount of such
unsecured indebtedness incurred by the Borrower and its Subsidiaries
does not exceed Two Million Five Hundred Thousand Dollars ($2,500,000)
and (b) such unsecured indebtedness is repaid within one hundred and
eighty (180) days of the date incurred.
5.6 RESTRICTIONS ON LIENS. The Borrower will not, nor shall it suffer
or permit any of its Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist, any mortgage, deed of trust, pledge, security
interest, lien, hypothecation, assignment, "lockbox" or similar deposit
arrangement, or other arrangement preferential to any creditor(s), or other
charge or encumbrance, including the lien or retained security title of a
conditional vendor (collectively, "Liens"), upon or with respect to any property
or assets, real or personal, of the Borrower or any of its Subsidiaries, or
assign or otherwise convey any right to receive income, except for the following
("Permitted Liens"):
(i) any Lien existing on property of the Borrower or any of
its Subsidiaries on the Closing Date and set forth in EXHIBIT B
securing Indebtedness outstanding on such date;
(ii) any Lien created under any Loan Document in favor of the
Lender;
(iii) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or
to the extent that non-payment thereof is permitted by Section 5.4;
PROVIDED THAT no notice of lien has been filed or recorded under the
Code;
(iv) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the
ordinary course of business which are not delinquent or remain payable
without penalty or which are being contested in good faith and by
appropriate proceedings and as to which such reserves or other
appropriate provisions as may be required by GAAP are being maintained;
(v) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in
connection with
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workers' compensation, unemployment insurance and other social
security legislation;
(vi) Liens consisting of judgment or judicial attachment
liens, PROVIDED THAT the enforcement of such Liens is effectively
stayed and all such liens in the aggregate at any time outstanding for
the Borrower and its Subsidiaries do not exceed Two Million Dollars
($2,000,000);
(vii) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of the Borrower or
any of its Subsidiaries;
(viii) purchase money security interests on any property
acquired or held by the Borrower or any of its Subsidiaries in the
ordinary course of business, securing Indebtedness incurred or assumed
for the purpose of financing all or any part of the cost of acquiring
such property; PROVIDED THAT (a) any such Lien attaches to such
property concurrently with or within twenty (20) days after the
acquisition thereof, (b) such Lien attaches solely to the property so
acquired in such transaction, (c) the principal amount of the debt
secured thereby does not exceed one hundred percent (100%) of the cost
of such property, and (d) the principal amount of the Indebtedness
secured by any and all such purchase money security interests shall not
at any time exceed One Million Dollars ($1,000,000);
(ix) Liens securing obligations in respect of capital leases
on assets subject to such leases, PROVIDED THAT such capital leases are
otherwise permitted hereunder;
(x) Liens arising solely by virtue of any statutory or common
law provision relating to banker's liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained
with credit depository institution; PROVIDED THAT (a) no more than an
aggregate of One Million Dollars ($1,000,000) of such deposit accounts
are solely dedicated cash collateral accounts established in the
ordinary course of the business of the Borrower or the Subsidiary, (b)
other than as set forth in clause (a) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions
against access by the Borrower or the Subsidiary in excess of those set
forth by regulations promulgated by the FRB, and such deposit account
is not intended by the Borrower or the Subsidiary to provide collateral
to the depository institution; and
(xi) Liens consisting of pledges of cash collateral or
government securities to secure on a mark-to-market basis Permitted
Swap Obligations only, PROVIDED THAT (a) the counterparty to any Swap
Contract relating to such Permitted Swap Obligations is under a similar
requirement to deliver similar collateral from
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time to time to the Borrower or the Subsidiary party thereto on a
mark-to-market basis; and (b) the aggregate value of such collateral so
pledged by the Borrower and its Subsidiaries together in favor of all
counterparties does not at any time exceed Two Million Dollars
($2,000,000) in the aggregate.
5.7 CONSOLIDATIONS AND MERGERS. The Borrower shall not, nor shall it
suffer or permit any of its Subsidiaries to, merge, consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person, except:
(i) any Subsidiary may merge with the Borrower, PROVIDED THAT
the Borrower shall be the continuing or surviving corporation, or may
merge with any one or more Subsidiaries, PROVIDED THAT if any
transaction shall be between a Subsidiary and a Wholly-Owned
Subsidiary, the Wholly-Owned Subsidiary shall be the continuing or
surviving corporation; and
(ii) any Subsidiary may sell all or substantially all of its
assets (upon voluntary liquidation or otherwise), to the Borrower or a
Wholly-Owned Subsidiary.
5.8 LOANS AND INVESTMENTS.
The Borrower shall not, nor shall it suffer or permit any of its
Subsidiaries to, purchase or acquire, or make any commitment therefor, any
capital stock, equity interest, or any obligations or other securities of, or
any interest in, any Person, or make or commit to make any Acquisitions, or make
or commit to make any advance, loan, extension of credit or capital contribution
to or any other investment in, any Person including any Affiliate of the
Borrower (together, "INVESTMENTS"), except for the following ("Permitted
Investments"):
(i) Investments held by the Borrower or a Subsidiary in the
form of Cash Equivalents;
(ii) extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of goods
or services in the ordinary course of business;
(iii) extensions of credit by the Borrower to any of its
Wholly-Owned Subsidiaries or by any of its Wholly-Owned Subsidiaries to
another of its Wholly-Owned Subsidiaries;
(iv) extensions of credit by any Subsidiary to the Borrower;
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(v) Investments incurred in order to consummate
Acquisitions or Joint Ventures otherwise permitted herein, PROVIDED
THAT no portion of any Revolving Loan shall be used in connection
with such Acquisition or Joint Venture and, PROVIDED FURTHER, that
(a) in the case of Acquisitions, the Person to be acquired shall be
engaged in the same general line of business as that of the
Borrower, (b) any such Acquisition or Joint Venture is undertaken in
compliance with all applicable Requirements of Law, and (c) the
Borrower shall provide to the Lender consolidated PRO FORMA
financial statements, in form and substance satisfactory to the
Lender in its sole discretion, for the year commencing one year
prior to such Acquisition or Joint Venture and continuing through
the year of the Maturity Date, which demonstrate in the opinion of
the Lender in its sole discretion that, assuming such Acquisition or
Joint Venture had occurred one year earlier and after giving effect
to such Acquisition or Joint Venture, the Borrower is, and will
continue to be, in compliance with the covenants set forth in the
Loan Documents and no Default or Event of Default will exist; and
(vi) Investments constituting Permitted Swap Obligations or
payments or advances under Swap Contracts relating to Permitted Swap
Obligations.
5.9 DISPOSITION OF ASSETS. The Borrower shall not, nor shall it suffer
or permit any of its Subsidiaries to, directly or indirectly, sell, assign,
lease, convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) to any other Person (including without limitation the Borrower
or any of its Subsidiaries) or enter into any agreement to do any of the
foregoing, except for the following ("Permitted Dispositions"):
(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied
to the purchase price of such replacement equipment;
(c) dispositions of Foreign Permitted Receivables pursuant to
Permitted Foreign Receivables Purchase Facilities;
(d) the contribution of property to a Joint Venture as part of
the purchase thereof to the extent permitted under SECTION 5.8(v); and
(e) divestiture of a business unit by the Borrower (a
"Divestiture") so long as (i) no event of Default is in existence at
the time of the Divestiture or would be caused thereby; PROVIDED THAT
for purposes of determining compliance with the financial covenants
contained in Section 5 of this Agreement, the calculation of EBITDA
shall exclude the EBIT of the business unit being divested
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and (ii) the Borrower has provided to the Lender consolidated PRO FORMA
financial statements, in form and substance satisfactory to the Lender
in its sole discretion, for the twelve (12) month period commencing
with the date of the Divestiture, which demonstrate in the opinion of
the Lender in its sole discretion that, after giving effect to such
Divestiture, the Borrower will continue to be in compliance with the
covenants set forth in the Loan Documents.
5.10 RESTRICTED PAYMENTS. The Borrower shall not, nor shall it suffer
or permit any of its Subsidiaries to, declare or make any dividend payment or
other distribution of assets, properties, cash, rights, obligations or
securities on account of any shares of any class of its capital stock, or
purchase, redeem or otherwise acquire for value any shares of its capital stock
or any warrants, rights or options to acquire such shares, now or hereafter
outstanding; except that;
(a) the Borrower may declare and make dividend payments or other
distributions payable solely in its common stock;
(b) the Borrower may purchase, redeem or otherwise acquire shares
of its common stock or warrants or options to acquire any such shares
with the proceeds received from the substantially concurrent issue of
new shares of its common stock;
(c) a Subsidiary may declare and make dividend payments or other
distributions payable solely to the Borrower;
(d) a Second Tier Subsidiary may declare and make dividend
payments or other distributions payable solely to one or more of the
Wholly-Owned Subsidiaries having an ownership interest in such Second
Tier Subsidiary; and
(e) the Borrower may declare and make cash dividend payments;
PROVIDED THAT (i) such payment has been approved and authorized by the
Borrower's Board of Directors, (ii) such payment is made solely out of
ten percent (10%) of the consolidated Net Income of the Borrower and
its Subsidiaries for such fiscal year and (iii) no Event of Default is
in existence at the time of such declaration and payment or would be
caused thereby.
5.11 ERISA COMPLIANCE. None of the Borrower, any of its Subsidiaries,
any Plan or any fiduciary thereof shall (i) engage in any "prohibited
transaction" or incur, whether or not waived, any "accumulated funding
deficiency" (both as defined in ERISA and the Code), (ii) fail to satisfy any
additional funding requirements set forth in Section 412 of the Code and Section
302 of ERISA, or (iii) terminate or withdraw from participation in any Plan in a
manner which could result in the imposition of a lien on any property of, or
impose a substantial withdrawal liability on, the Borrower or any of its
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Subsidiaries. The Borrower, each of its Subsidiaries, and each Plan shall comply
in all material respects with ERISA.
5.12 INSPECTION BY THE LENDER; BOOKS AND RECORDS. The Borrower will
permit the Lender or its designees, at any reasonable time and from time to time
(and, prior to the occurrence of a Default or an Event of Default, upon
reasonable advance notice), to visit and inspect the properties of the Borrower,
to examine and make copies of the books and records of the Borrower and to
discuss the affairs, finances and accounts of the Borrower with appropriate
officers. The Borrower will keep adequate books and records of account in which
true and complete entries will be made reflecting all of its business and
financial transactions, and such entries will be made in accordance with GAAP
and applicable law.
5.13 USE OF PROCEEDS. The Borrower will use the proceeds of the
Revolving Loans solely for its working capital needs. No portion of any
Revolving Loans shall be used, directly or indirectly, for the purpose of
purchasing or carrying any "margin security" or "margin stock" as such terms are
used in Regulations U or X of the Board of Governors of the Federal Reserve
System.
5.14 TRANSACTIONS WITH AFFILIATES. The Borrower will not, nor shall it
suffer any of its Subsidiaries to, directly or indirectly, enter into any
transaction with any Affiliate of the Borrower or any of its Subsidiaries except
in the ordinary course of business on terms that are no less favorable to the
Borrower or such Subsidiary than those which might be obtained at the time in a
comparable arm's-length transaction with any Person who is not an Affiliate.
5.15 NO AMENDMENTS TO CERTAIN DOCUMENTS. The Borrower will not at any
time cause or permit any of the charter or other incorporation documents, or the
by-laws of the Borrower to be modified, amended or supplemented in any respect
whatever, without (in each case) the express prior written agreement, consent or
approval of the Lender, except for immaterial changes which could not adversely
affect the Lender or its rights hereunder.
5.16 CONTINGENT OBLIGATIONS. The Borrower shall not, nor shall it
suffer or permit any of its Subsidiaries to, create, incur, assume or suffer to
exist any Contingent Obligations except for the following ("Permitted Contingent
Obligations"):
(a) endorsements for collection or deposit in the ordinary course
of business;
(b) Permitted Swap Obligations;
(c) Contingent Obligations of the Borrower and/or its
Subsidiaries existing as of the Closing Date and listed in EXHIBIT B;
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(d) Contingent Obligations with respect to Surety Instruments
issued by the Lender or other Surety Instruments incurred in the
ordinary course of business and not exceeding Two Million Five Hundred
Thousand Dollars ($2,500,000) in the aggregate at any time in respect
of the Borrower and its Subsidiaries; and
(e) Contingent Obligations incurred by the Subsidiaries pursuant
to their guaranty of the Obligations.
5.17 JOINT VENTURES. The Borrower shall not, nor shall it suffer or
permit any of its Subsidiaries to, enter into any Joint Venture, except as
permitted in subsection (v) of Section 5.8 hereof and so long as each of the
following conditions is satisfied for each permitted Joint Venture (i) the
Borrower's or Subsidiary's liability with respect to each Joint Venture is
limited to the percentage of ownership of the Borrower or the Subsidiary in the
Joint Venture, to the extent such limitation is permitted by applicable law,
(ii) the liabilities of the Borrower and its Subsidiaries with respect to Joint
Ventures in the aggregate does not exceed Ten Million Dollars ($10,000,000) and
(iii) the Borrower shall, and shall require its Subsidiaries to, require that
the Joint Venture execute a negative pledge agreement, in form and substance
satisfactory to the Lender, with respect to its assets then owned and thereafter
acquired to the extent of the Borrower's and the Subsidiary's percentage
ownership of the Joint Venture.
5.18 LEASE OBLIGATIONS. The Borrower shall not, nor shall it suffer or
permit any of its Subsidiaries to, create or suffer to exist any obligations for
the payment of rent for any property under lease or agreement to lease or
industrial revenue bond financing, except for the following ("Permitted
Leases"): operating leases entered into by the Borrower or a Subsidiary in the
ordinary course of business and capital leases entered in to by the Borrower or
a Subsidiary after the Closing Date to finance the acquisition of equipment;
PROVIDED THAT the aggregate annual, rental and lease payments, as applicable,
for the Borrower and its Subsidiaries for all such operating and capital leases
shall not exceed the lesser of (i) Ten Million Dollars ($10,000,000) in any
fiscal year and (ii) the amount which allows the Borrower to be in compliance
with the covenants set forth in this Agreement.
5.19 SUBSIDIARIES. The Borrower will give the Lender written notice of
the formation after the date hereof of any Subsidiary, and agrees that it shall
cause any such Subsidiary to engage in the business of conducting branches or
divisions of the business now conducted by the Borrower or holding any of the
property of the Borrower. The Borrower will, at the direction of the Lender,
cause such Subsidiary to become a party to such of the Loan Documents as the
Lender shall require.
5.20 FISCAL YEAR. The Borrower shall have a fiscal year ending on March
31 of each year or shall notify the Lender of any change in such fiscal year
(whereupon the Lender shall have the right to modify the timing of the financial
covenants hereunder accordingly in order to correspond to any such change in the
fiscal year of the Borrower).
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5.21 FUNDED DEBT RATIO. The Borrower will not permit the Funded Debt
Ratio as of any fiscal quarter-end during any period specified below to be more
than the ratio identified below as applicable to such period:
Period Maximum Ratio
------ -------------
For any fiscal quarter ending on or before
June 30, 1999 2.50 to 1.00
For the fiscal quarters ending September 30, 1999
and December 31, 1999 2.25 to 1.00
For any fiscal quarter ending after
December 31, 1999 2.00 to 1.00
5.22 INTEREST COVERAGE. The Borrower will not permit the Interest
Coverage Ratio as of any fiscal quarter-end during any period specified below to
be less than the ratio specified below opposite such period:
Period Maximum Ratio
------ -------------
For the fiscal quarters ending on March 31, 1999
and June 30, 1999 1.25 to 1.00
For the fiscal quarters ending on September 30, 1999
and December 31, 1999 2.00 to 1.00
For any fiscal quarter ending on or after March 31, 1999 2.50 to 1.00
5.23 CONSOLIDATED TANGIBLE NET WORTH. The Borrower will not permit its
Consolidated Tangible Net Worth for any fiscal quarter to be less than an amount
equal to Seventy-Three Million Dollars ($73,000,000) plus fifty percent (50%) of
any positive Net Income for such fiscal quarter.
5.24 PROFITABILITY. The Borrower will not permit the consolidated Net
Income of the Borrower and its Subsidiaries for any two consecutive fiscal
quarters to be less than One Dollar ($1.00).
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5.25 MINIMUM CONSOLIDATED WORKING CAPITAL. The Borrower will not
permit, as of the end of any fiscal quarter, Consolidated Working Capital to be
less than Twenty-Seven Million Dollars ($27,000,000).
5.26 OPERATING ACCOUNTS. The Borrower will maintain its primary
checking and operating accounts with the Lender.
5.27 YEAR 2000. The Borrower will take all action necessary to assure
that its computer based systems are able to effectively process data, including
dates, on and after January 1, 2000. The Borrower will promptly notify the
Lender in writing of any Year 2000 Problem and, at the request of the Lender,
the Borrower will provide the Lender with assurance reasonably acceptable to the
Lender of the Borrower's year 2000 capability.
5.28 CHANGE OF TAX LAW; FOREIGN SUBSIDIARY GUARANTIES
(a) It is the intent of the parties that each Foreign Corporation
execute a Subsidiary Guaranty unless the execution of a Subsidiary
Guaranty would cause the undistributed income of such Foreign
Corporation, as determined for Federal income tax purposes, to be
treated as a so-called "deemed dividend" to the Borrower. The Borrower
has determined that under the Code as currently in effect the execution
of Subsidiary Guaranties by the Foreign Corporations would result in
undistributed income of the Foreign Corporations being treated as a
deemed dividend to the Borrower. Accordingly, in lieu of the execution
of a Subsidiary Guaranty by each Foreign Corporation, the Lender has
permitted the Borrower to execute a Pledge Agreement, pursuant to which
the Borrower has pledged to the Lender of a portion of the stock in
each Foreign Corporation. In the event of a change in the Code which,
in the Lender's judgment, could reasonably be viewed as eliminating the
deemed dividend tax treatment referenced above in this subsection, the
provisions of subsection (b) shall apply.
(b) In the circumstances specified in the final sentence of
subsection (a), by written notice to the Borrower (the "Request for
Evidence") the Lender may request that the Borrower produce evidence
(which shall include, without limitation, an opinion of legal counsel
to the Borrower reasonably acceptable to the Lender) that the execution
of a Subsidiary Guaranty by one or more of the Foreign Corporations
could reasonably be expected to result in a deemed dividend being
attributed to the Borrower under the Code. Such evidence shall be
produced to the Lender within 30 days following the Borrower's receipt
of the Request for Evidence. If the requested evidence is not produced
within such time period, each Foreign Corporation as to which such
evidence was requested and not produced shall execute a Subsidiary
Guaranty and deliver same to the Lender within 50 days following the
Borrower's receipt of the Request for Evidence together with evidence
in form and substance satisfactory to the Lender establishing that the
execution of each such Subsidiary Guaranty was duly authorized in
accordance with such Foreign Corporation's organizational documents.
Upon the Lender's receipt of the Subsidiary Guaranty and documentation
referenced in the immediately preceding sentence relating to
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a Foreign Corporation, the Lender will release the Borrower from its
obligations under the Pledge Agreement with respect to such Foreign
Corporation and return to the Borrower the stock certificates and any
other materials delivered to the Lender with respect to the pledge of
the stock of such Foreign Corporation.
5.29. DISSOLUTION OF CERTAIN SUBSIDIARIES.
The Borrower will cause the following Subsidiaries, all incorporated in
the State of New York, to be dissolved by the Borrower within one year following
the date of this Agreement: (1) Clare Capital, Inc.; (2) Clare Components, Inc.;
(3) Clare Electronics, Inc.; (4) Clare Instruments, Inc.; (5) Clare Services,
Inc.; (6) Clare Systems, Inc.; and (7) Clare Technologies, Inc.
SECTION 6. EVENTS OF DEFAULT; ACCELERATION.
6.1 The following shall constitute events of default (individually, an
"Event of Default"):
(i) default in the payment, when due or payable, (x) of any
Obligation for the payment of principal; or (y) within 5 days after
the due date therefor, of any other Obligation for the payment of
money; or
(ii) default in the performance or observance of or compliance
with (x) any of the provisions of Sections 2 (other than the payment
of principal and interest), 5.1, 5.2, 5.3 (other than with respect
to the first sentence thereof, which shall be covered by subsection
(iii) below), 5.5 through 5.10, inclusive, 5.12 through 5.29,
inclusive, of this Agreement, or (y) any term or condition of the
Credit Note (other than the payment of principal and interest); or
(iii) default in the performance or observance of or compliance
with any other covenant or condition of this Agreement or any Other
Obligation not listed in subsections (i) or (ii) above, and such
default continues for more than 30 days; or
(iv) any representation or warranty at any time made by or on
behalf of the Borrower in this Agreement, any other Loan Document,
or in connection with the transactions contemplated by the Loan
Documents, shall prove to have been false in any material respect
upon the date when made or deemed to have been made; or
(v) the occurrence of any of the following events: (a) the
Borrower or any Subsidiary (1) fails to make any payment in respect
of any Indebtedness or Contingent Obligation (other than in respect
of Swap Contacts) having an aggregate principal amount (including
undrawn committed or available amounts and including amounts owing
to all creditors under any combined or syndicated credit
arrangement) of more than Two Million Five Hundred Thousand Dollars
($2,500,000) when due (whether by scheduled
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maturity, required prepayment, acceleration, demand, or otherwise)
and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of
such failure or (2) fails to perform or observe any other condition
or covenant, or any other event shall occur or condition exist,
under any agreement or instrument relating to any Indebtedness or
Contingent Obligation (other than in respect of Swap Contracts)
having an aggregate principal amount (including undrawn committed or
available amounts and including amounts owing to all creditors under
any combined or syndicated credit arrangement) of more than Two
Million Five Hundred Thousand Dollars ($2,500,000) when due (whether
by scheduled maturity, required prepayment, acceleration, demand, or
otherwise) and such failure continues after the applicable grace or
notice period, if any, specified in the relevant document on the
date of such failure if the effect of such failure, event or
condition is to cause, or permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Indebtedness
(or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be
declared to be due and payable prior to its stated maturity, or such
Contingent Obligation to become payable or cash collateral in
respect thereof to be demanded; or (b) there occurs under any Swap
Contract an Early Termination Date (as defined in such Swap
Contract) resulting from (A) any event of default under such Swap
Contract as to which the Borrower or any Subsidiary is the
Defaulting Party (as defined in such Swap Contract) or (B) any
Termination Event (as defined in such Swap Contract) as to which the
Borrower or any Subsidiary is an Affected Party (as defined in such
Swap Contract), and, in either event, the Swap Termination Value
owed by the Borrower or such Subsidiary as a result thereof is
greater than Two Million Five Hundred Thousand Dollars ($2,500,000);
or
(vi) issuance of an injunction which might have a material
adverse effect on the condition (financial or otherwise),
properties, business or results of operations of the Borrower, or
attachment which in the aggregate exceeds $1,000,000 in value,
against the Borrower, any property of the Borrower or any endorser,
guarantor or surety for any Obligation which is not dismissed or
bonded, to the satisfaction of the Lender, within 10 days after its
issuance; or
(vii) calling of a meeting of creditors, formation or
appointment of a committee of creditors or liquidating agents or
offering of a composition or extension to creditors by, for or with
the consent or acquiescence of the Borrower or any endorser,
guarantor or surety for any Obligation; or
(viii) Insolvency of the Borrower or any endorser, guarantor or
surety for any Obligation (including without limitation any
Subsidiary); or
(ix) any money judgment or judgments aggregating in excess of
$1,000,000 are entered against the Borrower or any endorser,
guarantor or surety for any Obligation (except to the extent fully
covered by insurance and the insurance carrier has not reserved the
right to disallow such claim), and shall continue unsatisfied and in
effect for a period
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of 10 days, PROVIDED THAT the total cost of any bond applied in
order to procure a stay of execution in any such litigation shall
not exceed $100,000; or
(x) any Loan Document (other than a Subsidiary Guaranty),
or any covenant, agreement or obligation contained therein or
evidenced thereby, shall cease to be legal, valid, binding or
enforceable in accordance with its terms, or shall be canceled,
terminated, revoked or rescinded; or
(xi) a Subsidiary fails in any material respect to perform
or observe and term, covenant or agreement in its Subsidiary
Guaranty; or a Subsidiary Guaranty is for any reason partially
(including with respect to future advances) or wholly revoked or
invalidated, or otherwise ceases to be in full force and effect, or
a Subsidiary contests in any manner the validity or enforceability
of its Subsidiary Guaranty or denies that it has any further
liability or obligation thereunder;
(xii) any action at law, suit in equity or other legal
proceeding to cancel, revoke or rescind any Loan Document shall be
commenced by or on behalf of the Borrower or any other person bound
thereby, or by any court or any other governmental or regulatory
authority or agency of competent jurisdiction; or any court or any
other governmental or regulatory authority or agency of competent
jurisdiction shall make a determination that, or shall issue a
judgment, order, decree or ruling to the effect that, any one or
more of the Loan Documents, or any one or more of the obligations of
the Borrower or any other person under any one or more of the Loan
Documents, are illegal, invalid or unenforceable in accordance with
the terms thereof; or
(xiii) there occurs any Change of Control; or
(xiv) any event occurs which could reasonably be expected
to have a material adverse effect on the condition (financial or
otherwise), properties, business or results of operations of the
Borrower.
6.2 If an Event of Default shall occur and be continuing, the Lender
may, at its option, (i) declare any or all of the Obligations of the Borrower to
the Lender to be immediately due and payable without further notice or demand,
whereupon the same shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower, (ii) limit, suspend or terminate the Borrower's right to borrow
hereunder, and (iii) exercise any rights and remedies under the Loan Documents
and at law or in equity; PROVIDED THAT in the event of any Event of Default
specified in subsections (vii) or (viii) of Section 6.1 hereof, all Obligations
shall become immediately due and payable automatically and without any
requirement of notice from the Lender or action by the Lender.
SECTION 7. SET OFF; PARTICIPATIONS.
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Any deposits or other sums at any time credited by or due from the
Lender to the Borrower may, without notice (any such notice being expressly
waived hereby) and to the fullest extent permitted by law and without regard to
any source of payment whatsoever, at any time during the continuance of an Event
of Default, be applied to or set off against the Obligations.
The Borrower invites any financing institution which may consider
investing or participating in the Revolving Loans (each such financing
institution being referred to in this Section as a "Participant") to rely upon
all of the representations, warranties, covenants and other provisions of this
Agreement, the Credit Note, and the other agreements, instruments and documents
referred to herein or contemplated hereby in making such investment or
participation and agrees that its becoming a Participant in the Revolving Loans
shall constitute an acceptance of such offer and shall make the Participant a
creditor of the Borrower. Any Participant may exercise the rights of set-off
given to the Lender in this Section 7 with respect to any outstanding
indebtedness of the Borrower to such Participant hereunder.
SECTION 8. GENERAL.
8.1 WRITTEN NOTICES. Any notices, expressly required by this Agreement
to be in writing, to any party hereto shall be deemed to have been given when
delivered by hand, when sent by telecopier, when delivered to any overnight
delivery service freight pre-paid or 3 days after deposit in the mails, postage
prepaid, and addressed to such party at its address given at the beginning of
this Agreement or at any other address specified in writing. Written notices to
the Borrower shall be sent to the attention of Arthur R. Buckland, President,
with a copy to Stuart Cable, Esq., Goodwin, Procter & Hoar LLP, Exchange Place,
Boston, Massachusetts 02109, and written notices to the Lender shall be sent to
the attention of Peter McCarthy, Vice President, with a copy to Philip A.
Herman, Esq., Goulston & Storrs, P.C., 400 Atlantic Avenue, Boston,
Massachusetts 02110-3333. Any notice, unless otherwise specified, may be given
orally or in writing.
8.2 NO WAIVERS. No failure or delay by the Lender in exercising any
right, power or privilege hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and not exclusive of any rights or
remedies otherwise provided by law.
8.3 FURTHER ASSURANCES. The Borrower shall do, make, execute and
deliver all such additional and further acts, things, assurances, and
instruments as the Lender may reasonably require more completely to vest in and
assure to the Lender its rights hereunder and under the Credit Note, and to
carry into effect the provisions and intent of this Agreement and the Credit
Note.
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8.4 GOVERNING LAW. This Agreement and the Credit Note shall be deemed
to be contracts made under seal and shall be construed in accordance with and
governed by the laws of the Commonwealth of Massachusetts (without regard to
conflicts of laws rules). Any legal action or proceeding arising out of or
relating to this Agreement or any Obligation may be instituted in the courts of
the Commonwealth of Massachusetts or of the United States of America for the
District of Massachusetts, and the Borrower hereby irrevocably submits to the
jurisdiction of each such court in any such action or proceeding; PROVIDED,
HOWEVER, that the foregoing shall not limit the Lender's rights to bring any
legal action or proceeding in any other appropriate jurisdiction.
8.5 EXPENSES, TAXES AND INDEMNIFICATION.
(a) The Borrower will pay and indemnify and hold the
Lender harmless against all taxes (other than taxes on the income of
the Lender), charges and expenses of every kind or description,
including without limitation attorneys' fees and expenses and the
costs and expenses of field audits and commercial finance exams
(PROVIDED THAT, prior to the occurrence of an Event of Default, the
Borrower shall not be required to pay for more than 2 field audits
and commercial finance examinations in any fiscal year, and
PROVIDED, FURTHER, that unless the Lender determines that there
exists a material problem with the financial reporting to the Lender
or the Borrower's internal financial systems, the cost of each such
audit or field examination shall not exceed $5,000), reasonably
incurred or expended by the Lender in connection with or in any way
related to the Lender's relationship with the Borrower, whether
hereunder or otherwise, including, without limitation, those
incurred or expended in connection with the preparation, execution,
delivery, interpretation or amendment of this Agreement or any
related agreement, instrument or document, the making of the
Revolving Loans, and the protection or enforcement of the Lender's
rights hereunder or under any of the other Loan Documents.
(b) The Borrower shall absolutely and unconditionally
indemnify and hold the Lender harmless against any and all claims,
demands, suits, actions, causes of action, damages, losses,
settlement payments, obligations, costs, expenses and all other
liabilities whatsoever which shall at any time or times be incurred
or sustained by the Lender or by any of its shareholders, directors,
officers, employees, subsidiaries, affiliates or agents (except any
of the foregoing incurred or sustained as a result of the gross
negligence or willful misconduct of the Lender) on account of, or in
relation to, or in any way in connection with, associated with or
ancillary to this Agreement, and the other documents executed or
delivered in connection herewith, and the arrangements or
transactions contemplated therein, whether or not all or any of the
transactions contemplated by, associated with or ancillary to this
Agreement or any of such documents are ultimately consummated.
Without prejudice to the survival of any other covenant of the
Borrower hereunder, the covenants of this Section 8.5(b) shall
survive the termination of this Agreement and the payment or
satisfaction of payment of amounts owing with respect to the Credit
Note or any other Loan Document.
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8.6 AMENDMENTS, WAIVERS, ETC. This Agreement, any of the other Loan
Documents, the Credit Note, and any provision hereof or thereof, may be waived,
discharged or terminated only by an instrument in writing signed by the Lender
and may be amended only by an instrument in writing signed by the Borrower and
the Lender.
8.7 BINDING EFFECT OF AGREEMENT. This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Lender and their respective
successors and assigns. The Lender may sell, assign or otherwise transfer all or
any portion of its right, title and interest in, and its obligations under, this
Agreement, the Revolving Loans made and to be made hereunder, or grant
participations in its right, title and interest herein and therein. The Borrower
may not assign or transfer its rights or obligations hereunder.
8.8 COMPUTATION OF INTEREST AND FEES, ETC. Interest, fees and charges
shall be computed daily on the basis of a year of 360 days and paid for the
actual number of days for which due. If the due date for any payment of
principal is extended by operation of law, interest shall be payable for such
extended time. If any payment required by this Agreement becomes due on a day on
which banks in Boston, Massachusetts are required or permitted by law or an
appropriate authority to remain closed, such payment may be made on the next
succeeding day on which such banks are open, and such extension shall be
included in computing interest in connection with such payment. All payments
required of the Borrower hereunder or under the Credit Note shall be made in
lawful money of the United States of America in federal or other funds
immediately available to the recipient thereof at the prescribed place of
payment.
8.9 ENTIRE AGREEMENT; MISCELLANEOUS. This Agreement, including the
exhibits and schedules hereto, sets forth the entire agreement and understanding
of the parties hereto in respect of the subject matter contained herein, and
supersedes all prior or contemporaneous agreements, promises, covenants,
arrangements, communications, representations, warranties, whether oral or
written, by any officer, employee or representative of any party hereto. The
captions for the sections of this Agreement are for ease of reference only and
are not an integral part of this Agreement. This Agreement may be signed in any
number of counterparts with the same effect as if the signatures hereto and
thereto were upon the same instrument. The provisions of this Agreement are
severable, and if any of these provisions shall be held by any court of
competent jurisdiction to be unenforceable, such holdings shall not affect or
impair any other provision hereof.
8.10 WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER EACH HEREBY
IRREVOCABLY WAIVES TRIAL BY JURY IN ANY JURISDICTION AND IN ANY COURT WITH
RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE
OBLIGATIONS, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT HERETO OR THERETO,
OR ANY CLAIM OR DISPUTE HOWSOEVER ARISING, BETWEEN THE BORROWER AND THE LENDER.
THIS WAIVER SHALL BE EFFECTIVE FOR EACH DOCUMENT EXECUTED BY THE BORROWER OR THE
LENDER
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AND DELIVERED TO THE LENDER OR THE BORROWER, AS THE CASE MAY BE, WHETHER OR NOT
SUCH DOCUMENT SHALL CONTAIN A WAIVER OF JURY TRIAL. THE BORROWER FURTHER
ACKNOWLEDGES THAT ALL DOCUMENTS DELIVERED BY THE LENDER OR THE BORROWER ARE
SUBJECT TO THIS WAIVER OF JURY TRIAL AS TO ANY ACTION THAT MAY BE BROUGHT AS TO
ANY OF SUCH DOCUMENTS, AND CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND
FREELY MADE.
(Signatures on next page)
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WITNESS the execution hereof under seal on the day and year first above
written.
C.P. CLARE CORPORATION
By:
-------------------------------
Name: Harry Andersen
Title: Senior Vice President and
Chief Financial Officer
BANKBOSTON, N.A.
By:
---------------------------------
Name: Peter McCarthy
Title: Vice President
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EXHIBIT A
[FORM OF] REVOLVING CREDIT NOTE
$15,000,000.00 Boston, Massachusetts
February __, 1999
FOR VALUE RECEIVED, the undersigned (the "Borrower") absolutely and
unconditionally promises to pay to BANKBOSTON, N.A. (the "Lender"), or order,
the principal amount of Fifteen Million Dollars ($15,000,000.00) or, if less,
the aggregate unpaid principal amount of all Revolving Loans (as defined in the
Agreement referred to below) made by the Lender to the Borrower pursuant to the
Agreement and noted on the records of the Lender, such payment to be made as
hereinafter provided, together with interest (computed on the basis of the
actual number of days elapsed over a 360-day year) on the unpaid principal
amount hereof until paid in full.
The entire unpaid principal (not at the time overdue) of this Note
shall bear interest at the rate or rates from time to time in effect under the
Agreement, as defined below. Accrued interest on the unpaid principal under this
Note shall be payable on the dates specified in the Agreement.
The Borrower absolutely and unconditionally agrees to repay so much of
the Revolving Loans as may be necessary so that the aggregate outstanding
principal amount of the Revolving Loans will not exceed the Maximum Amount. On
June 30, 2001, the date of the final maturity of this Note, there shall become
absolutely due and payable by the Borrower hereunder, and the Borrower hereby
promises to pay to the holder hereof, the balance (if any) of the principal
hereof then remaining unpaid, all of the unpaid interest accrued hereon and all
(if any) other amounts payable on or in respect of this Note or the indebtedness
evidenced hereby.
All payments under this Note shall be made at the head office of the
Lender at 100 Federal Street, Boston, Massachusetts 02110 (or at such other
place as the Lender may designate from time to time in writing) in lawful money
of the United States of America in federal or other immediately available funds.
Subject to the provisions of Section 2.4 of the Agreement, the Borrower may
prepay this Note in whole or in part at any time without premium or penalty.
Amounts so paid and other amounts may be borrowed and reborrowed by the Borrower
hereunder from time to time as provided in the Agreement referred to below.
This Note is issued pursuant to, is entitled to the benefits of, and is
subject to the provisions of a certain Loan Agreement of even date herewith by
and between the undersigned and the Lender (herein, as the same may from time to
time be amended or extended, referred to as the "Agreement"), but neither this
reference to the Agreement nor
A-1
any provision thereof shall affect or impair the absolute and unconditional
obligation of the undersigned maker of this Note to pay the principal of and
interest on this Note as herein provided.
Upon an Event of Default, as defined in the Agreement, the aggregate
unpaid balance of principal plus accrued interest may become or may be declared
to be due and payable in the manner and with the effect provided in the
Agreement.
The maker of this Note hereby waives presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.
WITNESS the execution of this Note under seal on the date written
above.
C.P. CLARE CORPORATION
WITNESS:
By:
---------------------------------
- ---------------------------- Title: President
A-2
EXHIBIT B
DISCLOSURE
PARAGRAPH 3.1 (ORGANIZATION AND QUALIFICATION)
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Name Organized Foreign Qualification
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Borrower Massachusetts California
Florida
Illinois (in process of
reinstatement)
Missouri
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Clare Canada, Ltd. Ontario
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Clare Mexicana S.A. de C.V. Mexico
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Clare Engineering N.V. Belgium
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C.P. Clare Foreign Sales Corporation U.S. Virgin Islands
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Clare Technologies, Inc. Delaware
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Clare Components, Inc. Delaware
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Clare Systems, Inc. Delaware
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Clare Electronics, Inc. Delaware
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Clare Instruments, Inc. Delaware
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Clare Services, Inc. Delaware
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Clare Capital, Inc. Delaware
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C.P. Clare Electronics GmbH Germany
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Clare France S.A.R.L. France
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Clare Technologies (Taiwan), Inc. Taiwan
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Clare Micronics Integrated Systems, Inc. California
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C.P. Clare N.V. Belgium (in process of
dissolution
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B-1
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Clare Technologies, Inc. New York (all in the
Clare Components, Inc. process of dissolution)
Clare Systems, Inc.
Clare Electronics, Inc.
Clare Instruments, Inc.
Clare Services, Inc.
Clare Capital, Inc.
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PARAGRAPH 3.5 (FINANCIAL STATEMENTS)
SEE attached.
PARAGRAPH 3.8 (LABOR RELATIONS; LITIGATION)
None, other than as may be set forth in the Borrower's Form 10-K for
the fiscal year ended March 31, 1998 filed with the Securities and Exchange
Commission.
PARAGRAPH 3.10 (CONTRACTS WITH AFFILIATES, ETC.)
None.
PARAGRAPH 3.12 (ENVIRONMENTAL MATTERS)
None.
PARAGRAPH 3.15 (COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC.)
None.
PARAGRAPH 3.16 (SUBSIDIARIES)
PART (a)
SEE list incorporated herein as part of disclosure for Paragraph 3.1.
SEE ALSO attached Corporate Structure chart.
PART (b)
None.
PARAGRAPH 3.17 (INSURANCE)
None.
B-2
PARAGRAPH 3.19 (LEASES)
SEE attached lists entitled "Leased Real Estate" and "Operating Lease
Equipment."
PARAGRAPH 5.5 (EXISTING INDEBTEDNESS)
SEE attached schedule entitled "Paragraph 5.5 (Existing Indebtedness).
PARAGRAPH 5.6 (EXISTING LIENS)
None.
PARAGRAPH 5.16 (EXISTING CONTINGENT OBLIGATIONS)
None.
B-3
EXHIBIT C
[FORM OF CERTIFICATE OF CHIEF FINANCIAL OFFICER]
CERTIFICATE OF CHIEF FINANCIAL OFFICER
C.P. Clare Corporation (the "Borrower") HEREBY CERTIFIES THAT:
This Certificate is furnished pursuant to Section 5.1(vii) of the Loan
Agreement dated as of February __, 1999 by and between the Borrower and
BankBoston, N.A. (the "Agreement"). Unless otherwise defined herein, the terms
used in this Certificate and SCHEDULE 1 attached hereto have the meanings
described in the Agreement.
As required by Section 5.1(i) or (ii) of the Agreement, financial
statements of the Borrower for the (year) (quarter) ended _____________, 19__
(the "Financial Statements") prepared in accordance with GAAP (subject, in the
case of quarterly statements, to normal year-end audit adjustments, none of
which are materially adverse) accompany this Certificate. The Financial
Statements present fairly the consolidated financial position of the Borrower
and the Subsidiaries as of the date thereof and the results of operations of the
Borrower and the Subsidiaries for the period covered thereby.
Schedule 1 attached hereto sets forth financial data and computations
evidencing the Borrower's compliance with the covenants of the Agreement set
forth in Sections 5.21 through 5.25, inclusive, all of which data and
computations, to the best of the knowledge and belief of the chief financial
officer (the "Chief Financial Officer") executing and delivering this
Certificate on behalf of the Borrower, are true, complete and correct.
The activities of the Borrower and the Subsidiaries during the period
covered by the Financial Statements have been reviewed by the Chief Financial
Officer and by employees or agents under his immediate supervision. Based on
such review, to the best knowledge and belief of the Chief Financial Officer,
during the period covered by the Financial Statements, and as of the date of
this Certificate, (a) the Borrower has, or has caused to have, kept, observed,
performed and fulfilled each and every covenant and condition of the Agreement
(except to the extent waived by the Lender and noted on Schedule 1 attached
hereto) and the Credit Note, and (b) no Default or Event of Default has occurred
or is occurring.
Witness my hand this ___ day of ____________, 19__.
C.P. CLARE CORPORATION
By:
---------------------------------
Title: Chief Financial Officer
C-1
EXHIBIT D
FORM OF LEGAL OPINION OF
GOODWIN, PROCTER & HOAR
[To Be Provided by GP&H.]
D-1
EXHIBIT E
CLOSING AGENDA
A. ITEMS DELIVERED BY, OR PERTAINING TO, BORROWER:
1. Loan Agreement and all Exhibits and Schedules thereto
Exhibit A (Form of Revolving Credit Note)
Exhibit B (Disclosures)
Exhibit C (Form of Certificate of CFO)
Exhibit D (Form of Opinion of GP&H)
Exhibit E (Closing Checklist)
Schedule 3.17 (Updated Insurance Summary)
2. Revolving Credit Note
3. Pledge Agreement
4. Clerk's Certificate regarding articles of organization, by-laws,
board resolutions (covering loan documents) and incumbency of
officers
5. Certified copy of Borrower's Articles of Organization
6. Certificates of good standing and qualification to do business in
the following States listed in Exhibit B:
California
Florida
Illinois
Massachusetts
Missouri
7. Closing Certificate
B. ITEMS TO BE DELIVERED BY, OR PERTAINING TO CLARE CAPITAL, INC.
(DELAWARE):
8. Guaranty
9. Certificate regarding board resolutions and incumbency of officers
and directors
E-1
C. ITEMS TO BE DELIVERED BY, OR PERTAINING TO CLARE COMPONENTS, INC.
(DELAWARE):
10. Guaranty
11. Certificate regarding board resolutions and incumbency of officers
and directors
D. ITEMS TO BE DELIVERED BY, OR PERTAINING TO CLARE ELECTRONICS,
INC.(DELAWARE):
12. Guaranty
13. Certificate regarding board resolutions and incumbency of officers
and directors
E. ITEMS TO BE DELIVERED BY, OR PERTAINING TO CLARE INSTRUMENTS, INC.
(DELAWARE):
15. Guaranty
16. Certificate regarding board resolutions and incumbency of officers
and directors
F. ITEMS TO BE DELIVERED BY, OR PERTAINING TO CLARE SERVICES, INC.
(DELAWARE):
17. Guaranty
18. Certificate regarding board resolutions and incumbency of officers
and directors
G. ITEMS TO BE DELIVERED BY, OR PERTAINING TO CLARE SYSTEMS, INC.
(DELAWARE):
19. Guaranty
20. Certificate regarding board resolutions and incumbency of officers
and directors
H. ITEMS TO BE DELIVERED BY, OR PERTAINING TO CLARE TECHNOLOGIES, INC.
(DELAWARE):
21. Guaranty
22. Certificate regarding board resolutions and incumbency of officers
and directors
E-2
I. ITEMS TO BE DELIVERED BY, OR PERTAINING TO CLARE MICRONICS INTEGRATED
SYSTEMS, INC. (CA):
23. Guaranty
24. Certificate regarding board resolutions and incumbency of officers
and directors
J. ITEMS TO BE DELIVERED BY, OR PERTAINING TO CLARE CANADA, LTD. (ONTARIO,
CANADA):
25. Negative Pledge Agreement
26. Certificate regarding board resolutions and incumbency of officers
and directors
K. ITEMS TO BE DELIVERED BY, OR PERTAINING TO CLARE FRANCE S.A.R.L.
(FRANCE):
27. Negative Pledge Agreement
28. Certificate regarding board resolutions and incumbency of officers
and directors
L. ITEMS TO BE DELIVERED BY, OR PERTAINING TO C.P. CLARE ELECTRONICS, GMBH
(GERMANY):
29. Negative Pledge Agreement
30. Certificate regarding board resolutions and incumbency of officers
and directors
M. ITEMS TO BE DELIVERED BY, OR PERTAINING TO CP. CLARE FOREIGN SALES
CORPORATION (U.S. VIRGIN ISLANDS):
31. Negative Pledge Agreement
32. Certificate regarding board resolutions and incumbency of officers
and directors
N. ITEMS TO BE DELIVERED BY, OR PERTAINING TO C.P. CLARE N.V. (BELGIUM):
33. Negative Pledge Agreement
34. Certificate regarding board resolutions and incumbency of officers
and directors
E-3
O. ITEMS TO BE DELIVERED BY, OR PERTAINING TO CLARE ENGINEERING N.V.
(BELGIUM):
35. Negative Pledge Agreement
36. Certificate regarding board resolutions and incumbency of officers
and directors
P. ITEMS TO BE DELIVERED BY, OR PERTAINING TO C.P. CLARE MEXICANA S.A. DE
C.V. (MEXICO):
37. Negative Pledge Agreement
38. Certificate regarding board resolutions and incumbency of officers
and directors
Q. ITEMS TO BE DELIVERED BY, OR PERTAINING TO CLARE TECHNOLOGIES (TAIWAN),
INC. (TAIWAN):
39. Negative Pledge Agreement
40. Certificate regarding board resolutions and incumbency of officers
and directors
R. OTHER CLOSING ITEMS:
41. Opinion of counsel to Borrower
E-4
SCHEDULE 3.17 (INSURANCE COVERAGE)
SEE attached schedule.
E-5