<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO
_____________
COMMISSION FILE NUMBER 1-7726
REUNION INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1439715
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
62 SOUTHFIELD AVENUE
ONE STAMFORD LANDING SUITE 208
STAMFORD, CT 06902
(Address of principal executive offices)
(203) 324-8858
(Registrant's telephone number, including area code)
REUNION RESOURCES COMPANY
2801 POST OAK BOULEVARD, SUITE 400, HOUSTON, TX 77056
(Former name, former address and former fiscal year if changed)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No .
----- -----
As of September 30, 1996, the Registrant had 3,855,100 shares of common
stock, par value $.01, outstanding.
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<PAGE>
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1996 (Unaudited)
and December 31, 1995 2
Consolidated Statements of Operations (Unaudited) 4
Three Months and Nine months Ended September 30, 1996 and 1995
Consolidated Statements of Cash Flows (Unaudited) 5
Nine Months Ended September 30, 1996 and 1995
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURE 18
1
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
REUNION INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
September 30 December 31,
1996 1995
------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 5,145 $ 529
Accounts Receivable, Less Allowance for
Doubtful Accounts of $461 and $315, respectively 7,640 4,792
Inventories 4,175 2,560
Customer Tooling-in-Process 473 855
Note Receivable from Sale of Oil & Gas Operations 2,200 0
Prepaid Expenses and Other Current Assets 1,499 1,389
------- -------
Total Current Assets 21,132 10,125
------- -------
Property, Plant and Equipment---- Net 26,324 20,224
------- -------
Other Assets
Net Assets of Discontinued Oil and Gas Operations 93 11,590
Goodwill 8,595 4,591
Investment in Joint Venture 2,135 2,129
Assets Held for Sale 138 2,185
Other 1,428 1,091
------- -------
12,389 21,586
------- -------
$59,845 $51,935
======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
REUNION INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current Portion of Long-Term Debt $ 6,610 $ 4,279
Accounts Payable 5,272 3,376
Advances From Customers 1,397 1,574
Other Current Liabilities 3,755 2,886
------- -------
Total Current Liabilities 17,034 12,115
Long-Term Debt 7,554 3,132
Long-Term Debt - Related Parties 1,145 4,815
Other Liabilities 2,296 619
------- -------
Total Liabilities 28,029 20,681
------- -------
Commitments and Contingencies
Shareholders' Equity
Common Stock ($.01 par value; 20,000 authorized;
9/30/96 - 3,855 issued and outstanding
12/31/95 - 4,112 issued; and 3,855 outstanding 38 40
Additional Paid-in Capital 29,242 31,037
Retained Earnings (Since January 1, 1989) 2,536 1,975
Less Treasury Shares, at cost (257 shares) - (1,798)
------- -------
Total Shareholders' Equity 31,816 31,254
------- -------
$59,845 $51,935
======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
REUNION INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ---------------------------
1996 1995 1996 1995
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Operating Revenue
Plastic Products $14,041 $ 1,804 $42,285 $ 1,804
------- ------- ------- --------
14,041 1,804 42,285 1,804
Operating Costs and Expenses
Plastic Products - Cost of Sales 11,744 1,524 35,245 1,524
Agriculture - Operating Costs 73 90 225 159
Selling, General and Administrative 2,028 1,803 5,992 3,221
------- ------- ------- --------
13,845 3,417 41,462 4,904
------- ------- ------- --------
Operating Profit (Loss) 196 (1,613) 823 (3,100)
------- ------- ------- --------
Other Income and (Expense)
Interest Expense (517) (128) (1,746) (249)
Other, Including Interest Income 176 27 301 142
------- ------- ------- --------
(341) (101) (1,445) (107)
------- ------- ------- --------
Loss From Continuing Operations Before
Income Taxes (145) (1,714) (622) (3,207)
Income Tax Expense (15) - (65) -
------- ------- ------- --------
Loss From Continuing Operations (160) (1,714) (687) (3,207)
Income (Loss) From Discontinued Oil and Gas
Operations _ (1,430) 1,248 (7,079)
------- ------- ------- --------
Net Income (Loss) $ (160) $(3,144) $ 561 $(10,286)
======= ======= ======= ========
Net Income (Loss) Per Common Share and
Common Share Equivalent -- Primary and
Fully Diluted
Loss From Continuing Operations $ (0.04) $ (0.45) $ (0.17) $ (0.84)
Income (Loss) From Discontinued Operations - (0.37) 0.32 (1.85)
------- ------- ------- --------
Net Income (Loss) $ (0.04) $ (0.82) $ 0.15 $ (2.69)
------- ------- ------- --------
Weighted Average Number of Common Shares
and Common Share Equivalents Outstanding 3,855 3,845 3,855 3,825
======= ======= ======= ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
4
<PAGE>
REUNION INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------
1996 1995
--------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss) $ 561 $(10,286)
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided By Operating Activities
Impairment of Oil and Gas Properties - 6,979
Depreciation, Depletion and Amortization 1,594 1,889
Extension of Warrants to Purchase Common Stock 478
Other _ (107)
-------- --------
2,155 (1,047)
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 569 1,238
(Increase) Decrease in Inventory 272 241
(Increase) Decrease in Other Current Assets 339 (690)
Increase (Decrease) in Current Liabilities (1,122) 1,347
Other (64) (33)
-------- --------
Net Cash Provided by Operating Activities 2,149 1,056
Cash Flows From Investing Activities:
Acquisition of Rostone Net of Cash Acquired (118) -
Acquisition of Oneida Molded Plastics Corp. - (3,398)
Sale of Discontinued Operations 9,042 -
Sale of Real Estate 2,073 -
Exploration and Development of Oil and Gas Properties - (4,371)
Investment In and Advances to The Juliana Preserve (6) (805)
Capital Expenditures (833) (12)
Other - 128
-------- --------
Net Cash Provided by (Used in) Investing Activities 10,158 (8,458)
Cash Flows From Financing Activities:
Increase in Revolver Borrowings 393 -
Proceeds from Issuance of Debt Obligations 6,644 -
Payments of Debt Obligations (14,728) (324)
Proceeds From Exercise of Common Stock Options - 73
-------- --------
Net Cash Used in Financing Activities (7,691) (251)
Increase (Decrease) in Cash and Cash Equivalents 4,616 (7,653)
Cash and Cash Equivalents at Beginning of Period 529 9,225
-------- --------
Cash and Cash Equivalents at End of Period $ 5,145 $ 1,572
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
5
<PAGE>
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1. CONSOLIDATED FINANCIAL STATEMENTS
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Reunion
Industries, Inc. ("RII") (the successor by merger effective April 19, 1996 to
Reunion Resources Company, see Note 6) and its majority owned subsidiaries. As
used herein, the term "Company" refers to RII, its predecessors and its
subsidiaries, unless the context indicates otherwise. All intercompany
transactions and accounts are eliminated in consolidation. The consolidated
financial statements for September 30, 1996 include the financial statements of
Rostone Corporation which was acquired by the Company on February 2, 1996 (See
Note 2 - Business Acquisitions).
FINANCIAL STATEMENTS AT SEPTEMBER 30, 1996
The Consolidated Balance Sheet at September 30, 1996, and the Consolidated
Statements of Operations and Cash Flows for the three and nine months ended
September 30, 1996 and 1995 included herein are unaudited; however, in the
opinion of management of the Company, they reflect all adjustments necessary to
present fairly the results for the interim periods. Such results are not
necessarily indicative of results to be expected for the year. The
Consolidated Balance Sheet at December 31, 1995 has been derived from the
audited financial statements at that date. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
EARNINGS PER SHARE
Earnings per Common Share and Common Share Equivalent are computed based on
the weighted average number of common and common equivalent shares outstanding
during each period. Common equivalent shares include shares issuable upon
exercise of the Company's stock options and warrants. For the three and nine
months ended September 30, 1996 and 1995, common equivalent shares relating to
options and warrants to purchase common stock were not included in the weighted
average number of shares because their effect would have been anti-dilutive.
NOTE 2. BUSINESS ACQUISITIONS
ROSTONE
On February 2, 1996, the Company acquired Rostone Corporation ("Rostone")
which was merged with and into the Company's subsidiary, Oneida Molded Plastics
Corp. ("Oneida"). The surviving corporation changed its name to Oneida Rostone
Corp. ("ORC"). The purchase price payable to the stockholders of Rostone is an
amount up to $4,001 as follows: (i) $1 in 1996, (ii) up to $2,000 in 1997 if
Rostone achieves specified levels of earnings before interest and taxes (as
provided in the merger agreement ) for 1996 and (iii) up to $2,000 in 1998 if
Rostone achieves specified levels of earnings before interest and taxes for
1997. In addition, the Company incurred approximately $435 in acquisition
related costs. Based on Rostone's earnings through September 30, 1996 the
Company does not expect to pay any additional purchase price in 1997.
The Rostone acquisition is being accounted for using the purchase method,
with the purchase price of $436, including acquisition costs, allocated to the
assets acquired and liabilities assumed based upon their respective estimated
fair values at the date of acquisition. The excess of purchase price over the
net assets acquired ("Goodwill", approximately $4,535) is being amortized on a
straight-line basis over 15 years. Any additional consideration paid in future
years will increase Goodwill and will be amortized on the same basis. The
estimated fair values of assets and liabilities acquired in the Rostone
acquisition are summarized as follows:
6
<PAGE>
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Cash $ 318
Accounts Receivable 3,417
Inventories 1,887
Other Current Assets 67
Property, Plant and Equipment 6,445
Other Assets 43
Goodwill 4,535
Accounts Payable and Other Current Liabilities (3,980)
Long-term Debt (10,774)
Other liabilities (1,522)
--------
Total $ 436
ONEIDA
On September 14, 1995, the Company acquired all of the outstanding
preferred and common stock of Oneida from a subsidiary of Chatwins Group, Inc.
("Chatwins"), a related party. The acquisition was accounted for as a
purchase and the results of Oneida's operations are included in the Company's
consolidated financial statements from the date of the acquisition, September
14, 1995.
PRO FORMA RESULTS
The following pro forma results of operations for the three and nine
months ended September 30, 1996 and 1995 have been prepared assuming the
acquisitions of Rostone and of Oneida had occurred as of January 1, 1995. These
pro forma results are not necessarily indicative of the results of future
operations or of results that would have occurred had the acquisitions been
consummated as of January 1, 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ---------------------------
1996 1995 1996 1995
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Revenues $14,041 $16,761 $44,611 $48,946
Income (Loss) From Operations $ 196 $ (574) $ 896 $ 173
Net Income (Loss) $ (160) $(2,967) $ 521 $(9,026)
Earnings per Common Share and
Per Common Share Equivalent $ (0.04) $ (0.77) $ 0.14 $ (2.36)
</TABLE>
7
<PAGE>
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3. SALE OF REUNION ENERGY COMPANY
On April 2, 1996, the Company entered into an agreement to sell its
subsidiary Reunion Energy Company ("REC"), including substantially all of its
oil and gas assets, to Tri-Union Development Corp. ("Tri-Union") a subsidiary of
Tribo Petroleum Corporation for a total price of approximately $11,375. On May
24, 1996 the Company completed the sale of REC for proceeds of $8,000 cash and a
$2,200 six month note bearing interest at 12%. The purchase price received for
REC's stock reflected adjustments for intercompany cash transfers by REC to the
Company and certain expenditures by REC between January 1 and the May 24, 1996
closing date.
The Company used $5,014 of the aggregate $8,000 cash paid by Tri-Union to
pay related party indebtedness. This included $3,664 owed by ORC to Chatwins, a
38% shareholder of the Company, and $1,350 owed by the Company to Charles E.
Bradley, Sr., the Company's President and Chief Executive Officer. Mr. Bradley
is the Chairman of the Board and the majority shareholder of Chatwins.
NOTE 4. INVENTORIES
Inventories, principally for ORC's plastic products business, consisted of
the following:
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
Raw Materials $2,038 $1,307
Work-in process 1,328 1,036
Finished Goods 809 217
------ ------
Total $4,175 $2,560
====== ======
NOTE 5. SEVERANCE AND EXIT COSTS
During the year ended December 31, 1995, the Company recorded a provision
for severance and related benefit costs of $1,115 relating to 26 employees to be
terminated and a provision for exit costs of $175 relating to the remaining term
of its Houston office lease. These costs were recorded in connection with the
Company's closing of its Houston administrative office and relocating its
corporate headquarters to Connecticut. During the three months ended March
31, 1996, the Company paid $384 in severance and related benefits costs in
connection with employees terminated in January 1996. The office closure was
completed during the second quarter of 1996 and the Company wrote off
approximately $86 of surplus furniture and fixtures. During the three months
ended June 30, 1996, the Company paid $197 in severance and related benefit
costs in connection with employees terminated in May, 1996. As a result of the
final terms agreed upon with the purchaser of REC, certain provisions recorded
in 1995 were reversed during the second quarter of 1996 resulting in an offset
to SG&A expense of $276. During the three months ended September 30, 1996 the
Company paid $121 in severance and related benefit costs. The Company expects
to pay the remaining balance of the severance and exit cost accruals as
follows: approximately $44 during the remainder of 1996 and $179 in 1997.
8
<PAGE>
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 6. MERGER
On April 19, 1996, Reunion Resources Company was merged with and into RII
following approval by shareholders of a merger agreement dated November 14,
1995. RII's certificate of incorporation, which survives the merger, authorizes
the issuance of 20,000 shares of common stock, par value $.01 per share, and
10,000 shares of "blank check" preferred stock, par value $.01 per share, and
includes certain capital stock transfer restrictions which are intended to help
assure that the Company's substantial net operating loss carryforwards will
continue to be available to offset future taxable income by decreasing the
likelihood of an "ownership change" for federal income tax purposes.
NOTE 7. CONTINGENCIES
In early 1996, the State of California Franchise Tax Board initiated an
audit of the Company's franchise tax returns for the years 1991, 1992 and 1993.
In October 1996, the Company received a formal notice of assessment from the
taxing authority in the aggregate amount of $716. Of this amount, $645 results
from the auditor's conclusion that income from gain on sales of certain Canadian
assets in 1991 should be reclassified from nonbusiness to business income. The
Company believes its classification of such income was correct, and intends to
appeal the assessment of tax. If the Company's positions prevail on this
issue, management believes that the amounts due would not exceed amounts
previously paid or provided for. No additional accruals have been made for
any amounts that may be due if the Company does not prevail because the
outcome cannot be determined. The Company recorded a provision for $85 in
the three months ended June 30, 1996 for certain other adjustments proposed.
In connection with the sale of REC, the Company retained certain
properties in Louisiana because of litigation concerning environmental
matters. The Company has recorded an accrual for $307 concerning the estimated
costs to remediate the site based on plans and estimates developed by the
environmental consultants hired by the Company. Owners of a portion of the
property have objected to the Company's proposed cleanup methodology and have
filed suit to require additional procedures. The Company is contesting this
litigation, and believes its proposed clean up methodology is well within
accepted industry practice for remediation efforts of a similar nature. No
accrual has been made for any additional costs of possible alternative clean up
methods because the nature and dollar amount of such alternative cannot
presently be determined.
In September 1995, the Company amended its 1991 and 1992 Federal tax
returns to request a refund of Alternative Minimum Tax ("AMT") previously paid.
The refund is included in Current Assets in the Consolidated Balance Sheet in
the amount of $750. The refund resulted from the carryback of a capital loss
originating from the sale of Reunion common stock owned by a subsidiary of the
Company. The IRS is in the process of auditing the refund request. Based on the
nature of IRS agents correspondence and information requests, the Company
expects a formal IRS agent's report will be issued denying the refund
application (the "IRS Denial"). The Company intends to appeal the case to the
IRS appeals division upon receipt of the IRS Denial. Although management
believes it has provided a reasonable amount of documentation and technical
arguments in support of its claim, the ultimate outcome of any appeal will be
subject to the resolution of significant legal and factual issues by the appeals
division or by a court. The Company has not recorded a provision for the
possible denial of the AMT refund claim because the ultimate outcome of this
matter cannot presently be determined.
9
<PAGE>
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 8. SUBSEQUENT EVENTS
On October 21, 1996, the Company, through its ORC subsidiary, acquired a
27.5% interest in Data Packaging Limited ("DPL") for a cash payment of $700.
ORC has also entered into an agreement to acquire, subject to certain lender
consents, an additional 68% interest in DPL for $2,800, payable in cash of
$1,050 and an unsecured $1,750 10% three year note. DPL, headquartered in
Mullingar, Ireland, is a custom injection molder serving customers in the
computer and business equipment industries. DPL's revenues and operating profit
for the fiscal year ended April 30, 1996 were approximately $15,100 and $900
respectively.
On September 20, 1996, the Company, through its ORC subsidiary, reached a
non-binding agreement on the principal terms for the acquisition of the assets
and business of Quality Molded Products, Inc. of Siler City, North Carolina.
10
<PAGE>
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
On September 14, 1995, the Company acquired Oneida, which manufactures
precision plastic products and provides engineered plastics services. As a
result of the Oneida acquisition, the Company's principal operations are in the
plastic products industry. On February 2, 1996, the Company completed the
Rostone acquisition which added new customers and products to the plastic
products segment. In addition to the DPL and the proposed Quality Molded
Products acquisitions, the Company is considering additional acquisitions to
increase its customer base and expand its product offerings and service
capabilities in the plastics industry. In addition, the Company may consider
acquisitions in other industries. The Company is also engaged in real estate
development and wine grape agricultural operations in Napa County, California.
In November 1995, the Company's Board of Directors resolved to pursue the
sale of the Company's oil and gas assets and to discontinue the Company's oil
and gas operations. The Company engaged an investment bank specializing in oil
and gas transactions to assist in the sale of the oil and gas operations. On May
24, 1996, the Company sold its wholly owned subsidiary REC, including
substantially all of REC's oil and gas assets, to Tri-Union for a total price of
approximately $11.4 million. The purchase price was paid by $8.0 million in
cash at the closing , as adjusted for cash advances from REC prior to the
closing, and a $2.2 million 6-month note with interest at 12%. Upon completion
of this transaction, the Company has substantially discontinued oil and gas
operations.
The Company recognized a net loss of $0.2 million and net income of
$0.6 million., respectively, for the three months and nine months ended
September 30, 1996 compared to a net loss of $3.1 million and $10.3 million
for the three months and nine months ended September 30, 1995. The following
discussion of Results of Continuing Operations describes the Company's
continuing operations in plastic products and agriculture separately from
discontinued operations.
RESULTS OF CONTINUING OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996
- -------------------------------------
The Company recognized a loss from continuing operations of $0.2 million
for the three months ended September 30, 1996 compared to a loss of $1.7
million in 1995. The 1996 results include the plastic products segment, which
the Company entered in September 1995.
PLASTIC PRODUCTS SEGMENT: The Oneida acquisition on September 14, 1995
represented the Company's entry into a new operating segment, plastic
products. The Rostone acquisition in February 1996 increased operations in this
segment. Revenues and operating profit of the plastic products segment were
$14.0 million and $0.8 million, respectively, for the three months ended
September 30, 1996, compared to revenues and operating profit of $1.8 million
and $0.1 million for the last two weeks of September 1995.
On a pro forma basis, as if the Oneida and Rostone acquisitions had
occurred as of January 1, 1995, revenues decreased $ 2.7 million to $14.0
million for the three months ended September 30, 1996 from $16.7 million in the
three months ended September 30, 1995. This 16% decrease in revenues is
attributable primarily to decreased sales of thermoplastic products due to
departures of select parts programs and customer delays in bringing scheduled
new parts programs into production. Lower sales to existing customers reflect a
general growth slowdown in the market as well as customers withdrawing programs
to their own captive molding facilities. The Company's tooling sales,
historically a leading indicator of future sales, remain strong. Tooling sales
increased $0.2 million or 13% to $1.8 million for the three months ended
September 30, 1996. Plastic products segment backlog totaled $ 15.3 million at
September 30, 1996. This compares to backlog, on a pro forma basis, of $18.0
million at December 31, 1995 and $18.0 million at September 30, 1995.
On a pro forma basis, cost of sales totaled $11.7 million, or 83.6% of net
sales, for the three months ended September 30, 1996 compared to $14.1 million,
or 84.4% of net sales, for the three months ended September 30, 1995. The
plastic products segment continued to benefit from participation in reduced rate
electricity programs and from reductions in direct labor resulting from improved
efficiency. These factors were offset by higher material
11
<PAGE>
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
content as a percentage of sales due to the change in sales mix. As a result of
the decrease in sales, gross margins on a pro forma basis declined to $2.3
million, or 16.4% of net sales, from $2.6 million, or 15.6% of net sales, in
1995.
Selling, general and administrative expenses were $1.5 million on a pro
forma basis for the three months ended September 30, 1996, equal to pro forma
expenses for the three months ended September 30, 1995. Operating income on a
pro forma basis was $0.8 million, or 5.7% of net sales, for the three months
ended September 30, 1996 compared to $1.2 million, or 6.8% of net sales, for
the comparable prior year period.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSE: Corporate general and
administrative expenses, consisting primarily of executive and administrative
salaries and benefits, professional fees and other public company costs, totaled
$ 0.5 million for the three months ended September 30, 1996 compared to $ 1.6
million for the three months ended September 30, 1995. The expenses for the
three months ended September 30, 1995 include a $1.1 million severance charge
recorded in conjunction with the Company's decision to close its Houston office
and sell its oil and gas assets.
OTHER INCOME AND (EXPENSE): Interest expense was $0.5 million for the three
months ended September 30, 1996 compared to $0.1 million for the three months
ended September 30, 1995 as a result of interest on ORC debt. On a pro forma
basis, as if the Oneida and Rostone acquisitions had occurred as of January 1,
1995, interest expense was $ 0.7 million for the three months ended September
30, 1995.
NINE MONTHS ENDED SEPTEMBER 30, 1996
- -------------------------------------
The Company recognized a loss from continuing operations of $0.7 million
for the nine months ended September 30, 1996 compared to a loss of $3.2
million in the first nine months of 1995. The 1996 results include the
plastic products segment, which the Company entered in September 1995.
PLASTIC PRODUCTS SEGMENT: The Oneida acquisition on September 14, 1995
represented the Company's entry into a new operating segment, plastic
products. The Rostone acquisition in February 1996 increased operations in this
segment. Revenues and operating profit of the plastic products segment were
$42.3 million and $2.5 million, respectively for first nine months ended
September 30, 1996, compared to revenues and operating profit of $1.8 million
and $0.1 million for the last two weeks of September 1995.
On a pro forma basis, as if the Oneida and Rostone acquisitions had
occurred as of January 1, 1995, revenues decreased $ 4.3 million to $44.6
million for the nine months ended September 30, 1996 from $48.9 million in
the nine months ended September 30, 1995. This 9% decrease in revenues is
attributable primarily to decreased sales of plastic products due to departures
of select parts programs and customer delays in bringing scheduled new parts
programs into production. Lower sales to existing customers reflects a general
growth slowdown in the market as well as customers withdrawing programs to their
own captive molding facilities. The Company's tooling sales, historically a
leading indicator of future sales, remain strong. Tooling sales increased $0.4
million, or 9%, to $4.7 million for the nine months ended September 30, 1996
compared to $4.3 million in the prior year period. Plastic products segment
backlog totaled $15.3 million at September 30, 1996. This compares to backlog,
on a pro forma basis, of $18.0 million at December 31, 1995 and $ 18.0
million at September 30, 1995.
Pro forma cost of sales totaled $37.2 million, or 83.5% of net sales, for
the nine months ended September 30, 1996 compared to $40.9 million, or 83.6%
of net sales for the nine months ended September 30, 1995. The segment
continued to benefit from participation in reduced rate electricity programs and
from reductions in direct labor resulting from improved efficiency. These
factors were offset by higher material content as a percentage of sales due to
the change in sales mix. As a result of the decrease in sales, pro forma gross
margins declined to $7.4 million, or 16.5% of net sales in 1996 from $8.0
million, or 16.4% of net sales, in 1995.
Selling, general and administrative expenses were $4.8 million, on a pro
forma basis, for the nine months ended September 30, 1996, $0.2 million greater
than in the nine months ended September 30, 1995. This increase results
primarily from increased payroll and benefit related costs. Pro forma operating
income was $2.5 million, or 5.7% of net sales, for the nine months ended
September 30, 1996 compared to $3.4 million, or 6.9% of net sales, for the
comparable prior year period.
12
<PAGE>
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSE: Corporate general and
administrative expenses, consisting primarily of executive and administrative
salaries and benefits, professional fees and other public company costs, totaled
$1.4 million for the nine months ended September 30, 1996 compared to $ 3.2
million for the nine months ended September 30, 1995. The expenses for the
nine months ended September 30, 1996 included occupancy and office costs for
both the Company's previous headquarters in Houston, Texas, closed in May 1996,
and its new headquarters in Stamford, Connecticut and are net of $0.3 million
in reversals of certain charges for office closing and severance accrued in
1995. The expenses for the nine months ended September 30, 1995 include a $0.5
million charge related to the extension of the exercise period for certain
warrants and a $1.1 million severance charge recorded in conjunction with the
Company's decision to close its Houston office and sell its oil and gas assets.
OTHER INCOME AND (EXPENSE): Interest expense was $1.7 million for the nine
months ended September 30, 1996 compared to $0.2 million for the nine months
ended September 30, 1995 as a result of interest on ORC debt. On a pro forma
basis, as if the Oneida and Rostone acquisitions had occurred as of January 1,
1995, interest expense was $1.9 million for the nine months ended September
30, 1995.
RESULTS OF DISCONTINUED OPERATIONS
The Company discontinued its U. S. oil and gas operations during the year
ended December 31, 1995. A provision was recorded during the year ended
December 31, 1995 to record estimated results of operations through the date of
disposition and the estimated loss on disposal. On May 24, 1996, the Company
completed the sale of its REC subsidiary for proceeds of $8.0 million cash and a
$2.2 million note due November 25, 1996. The Company retained certain
Louisiana oil and gas properties because of litigation concerning environmental
contamination.
THREE MONTHS ENDED SEPTEMBER 30, 1996
- -------------------------------------
The Company recognized a loss from discontinued operations of $1.4 million
for the three months ended September 30, 1995. The Company followed the full
cost method of accounting for oil and gas properties and, as a result of
substantial decreases in prices received for natural gas, recognized impairment
losses of $1.5 million during the three months ended September 30, 1995 to
reduce the carrying value of the investment in oil and gas properties to the
"full cost ceiling." Before these valuation charges, the Company realized income
from the discontinued oil and gas operations of $0.1 million on revenues of $1.5
million for the three months ended September 30, 1995. The Company recorded no
activity from discontinued operations during the three months ended September
30, 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1996
- ----------------------------------------
Results of discontinued operations during 1996, prior to the disposition on
May 24, 1996, were approximately break even on revenues of $2.1 million. An
additional loss from discontinued operations of $0.4 million was recorded in the
nine months ended September 30, 1996 reflecting the purchase price adjustment
resulting from the retention of the Louisiana properties and a $0.1 million
provision for taxes resulting from the California tax audit discussed below.
This loss was offset by a $1.6 million gain from an insurance reimbursement,
resulting in net income from discontinued operations of $1.2 million for the
nine months ended September 30, 1996. The Company recognized a loss from
discontinued operations of $7.1 million for the nine months ended September 30,
1995. The Company followed the full cost method of accounting for oil and gas
properties and, as a result of substantial decreases in prices received for
natural gas, recognized impairment losses of $7.0 million during the nine
months ended September 30, 1995 to reduce the carrying value of the investment
in oil and gas properties to the "full cost ceiling." Before these valuation
charges, the Company realized a loss from the discontinued oil and gas
operations of $ 0.1 million on revenues of $4.3 million for the nine months
ended September 30, 1995.
13
<PAGE>
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
SUMMARY OF 1996 ACTIVITIES
Cash and cash equivalents totaled $5.1 million at September 30, 1996.
Cash increased $4.6 million during the nine months ended September 30, 1996,
with $2.1 million provided by operations, $10.2 million provided by investing
activities, and $7.7 million used in financing activities.
INVESTING ACTIVITIES: As described above, the Company completed the
Rostone acquisition in February, 1996. The purchase price for the acquisition,
including acquisition costs, totaled $0.4 million which was funded
from the Company's cash balances. Capital expenditures were $0.8 million.
The sale of discontinued REC operations as discussed below generated cash of
approximately $9.0 million. This included $8.0 million cash at closing plus an
additional $1.0 million, net of transaction costs, transferred to the Company
prior to closing. In August 1996, the Company closed the sale of its Padre
Island, Texas real estate for net proceeds of $2.1 million.
FINANCING ACTIVITIES: Principal payments reduced long-term obligations by
$9.8 million in the nine months ended September 30, 1996. In addition the
Company used proceeds from the sale of REC as discussed below to pay $4.9
million in related party indebtedness. Proceeds from new borrowings totaled
$6.6 million.
OPERATING ACTIVITIES: Net cash provided by operating activities was $2.1
million in the nine months ended September 30, 1996.
FACTORS AFFECTING FUTURE LIQUIDITY
Because of various restrictions included in the Company's loan
arrangements, management must separately consider liquidity and financing for
corporate requirements, for ORC and for the Juliana Preserve.
CORPORATE: Management estimates that corporate expenses, including
salaries and benefits, professional fees and other public company costs, will
approximate $ 0.5 million for the remainder of 1996 and $1.8 million in 1997.
Approximately $0.1 million and $0.2 million of severance and exit costs
related to the closure of the Company's Houston administrative office, accrued
in 1995, are expected to be paid during the remainder of 1996 and in 1997,
respectively. The Company's source of funds for these requirements and for
future acquisitions, other than cash balances and additional borrowings, are
from payments by ORC permitted under a secured credit facility as described
below and from proceeds from the sale of discontinued oil and gas operations
and other assets held for sale. During 1996, the Company sold certain real
estate in Texas for net proceeds of $2.1 million and is pursuing the sale or
farmout of its mineral interests in Utah.
ORC's credit facility with Congress Financial Corporation ("Congress")
limits payments to the Company by ORC. If certain levels of availability (as
defined in the loan agreements) are maintained, ORC is permitted to pay the
Company management fees of up to $0.3 million per year and tax sharing payments
of up to 50% of the tax savings realized by ORC because of the Company's net
operating loss carryovers. There can be no assurances that ORC will be able to
maintain the required levels of availability and be permitted to make the
management fee and tax sharing fee payments to the Company. In any event, the
maximum amount of such payments is not expected to be sufficient for the
Company's corporate operating and debt service requirements.
On May 24, 1996 the Company completed the sale of REC to Tri-Union for
proceeds of $8.0 million in cash as adjusted for certain cash transfers from REC
from January 1, 1996 through the May 24 closing, and a $2.2 million six month
note bearing interest at 12%. Pursuant to existing agreements, the Company used
$5.0 million of the aggregate $8.0 million cash paid by Tri-Union to pay related
party indebtedness. This included approximately $3.6 million owed by CGI, a 38%
shareholder of the Company, and approximately $1.3 million owed by the Company
to Charles E. Bradley, Sr., the Company's President and Chief Executive Officer.
Mr. Bradley is the Chairman of the Board and the majority shareholder of CGI.
As result of the above transactions, management believes that the Company
will have sufficient resources to meet its corporate obligations as they become
due over the next twelve months.
ORC: On February 2, 1996, in connection with the Rostone acquisition, ORC
entered into a new credit facility with Congress. The new credit facility
provides for maximum borrowings of $16.0 million under a term loan in the
original amount of $6.6 million and revolving loans based on the eligible
balances of accounts receivable and
14
<PAGE>
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
inventory. Management believes that ORC's cash flow from operations, together
with this credit facility and permitted levels of capital and operating leases,
will be sufficient for ORC's operating requirements, including capital
expenditures and debt service, during the next twelve months.
THE JULIANA PRESERVE: In January 1995, the Juliana Preserve entered into
the Development and Marketing Agreement with Juliana Pacific, Inc. to develop
the Juliana Preserve into a master-planned estate-oriented residential community
encompassing the entire vineyard. The joint venture agreement contemplates that
development costs associated with the project will be financed solely from the
assets of the joint venture, including the sale of such assets, or by
development financing. In October 1995, the joint venture entered into a loan
agreement with Washington Federal Savings, the parent of Freedom Vineyards, to
provide $3.0 million of development financing for this project. Based on plans
and projections prepared by Juliana Pacific and approved by the joint venture
partners, and on projections of farming costs and capital requirements for the
1996 crop year, the Company believes that it will not be required to commit any
additional resources to the Juliana Preserve for either development or farming
activities during the next twelve months. Approximately $0.6 million of debt
collateralized by certain real estate in the Juliana Preserve matures in January
1997. The Company is presently negotiating an extension of this debt.
ACQUISITIONS: On September 20, 1996, the Company, through its ORC
subsidiary, reached a non-binding agreement on the principal terms for the
acquisition of the assets and business of Quality Molded Products, Inc. of Siler
City, North Carolina.
On October 21, 1996 the Company, through its ORC subsidiary, acquired a
27.5% interest in Data Packaging Limited ("DPL") for a cash payment of payment
of $0.7 million. ORC has entered into an agreement to acquire, subject to
certain lender consents, an additional 68% interest in DPL for $2.8 million,
payable in cash of $1.05 million and an unsecured $1.75 million 10% three year
note.
The Company expects to fund these acquisitons from its cash balances and
from borrowed funds.
CONTINGENCIES AND UNCERTAINTIES
In early 1996, the State of California Franchise Tax Board initiated an
audit of the Company's franchise tax returns for the years 1991, 1992 and 1993.
In October 1996, the Company received a formal notice of assessment from the
taxing authority in the aggregate amount of $0.7 million. Of this amount, $0.6
million results from the auditor's conclusion that income from gain on sales of
certain Canadian assets in 1991 should be reclassified from nonbusiness to
business income. The Company believes its classification of such income was
correct, and intends to appeal the assessment of tax. If the Company's
positions prevail on this issue, management believes that the amounts due would
not exceed amounts previously paid or provided for. No additional accruals
have been made for any amounts that may be due if the Company does not prevail
because the outcome cannot be determined. The Company recorded a provision
for $0.1 million in the three months ended June 30, 1996 for certain other
adjustments proposed.
In connection with the sale of REC the Company retained certain properties
in Louisiana because of litigation concerning environmental matters. The Company
has recorded an accrual for $0.3 million concerning the estimated costs to
remediate the site based on plans and estimates developed by the environmental
consultants hired by the Company. Owners of a portion of the property have
objected to the Company's proposed cleanup methodology and have filed suit to
require additional procedures. The Company is contesting this litigation, and
believes its proposed clean up methodology is well within accepted industry
practice for remediation efforts of a similar nature. No accrual has been made
for any additional costs of possible alternative clean up methods because the
nature and dollar amount of such alternative cannot presently be determined.
15
<PAGE>
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
In September 1995, the Company amended its 1991 and 1992 Federal tax
returns to request a refund of Alternative Minimum Tax ("AMT") previously paid.
The refund is included in Current Assets in the Consolidated Balance Sheet in
the amount of $0.8 million. The refund resulted from the carryback of a capital
loss originating from the sale of Reunion common stock owned by a subsidiary of
the Company. The IRS is in the process of auditing the refund request. Based on
the nature of IRS agent's correspondence and information requests, the Company
expects a formal IRS agent's report will be issued denying the refund
application (the "IRS Denial"). The Company intends to appeal the case to the
IRS appeals division upon receipt of the IRS Denial. Although management
believes it has provided a reasonable amount of documentation and technical
arguments in support of its claim, the ultimate outcome of any appeal will be
subject to the resolution of significant legal and factual issues by the court.
The Company has not recorded a provision for the possible denial of the AMT
refund claim because the ultimate outcome of this matter cannot presently be
determined.
16
<PAGE>
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBIT
10.1 Loan and Security Agreement dated February 2, 1996 between Congress
Financial Corporation as lender and Oneida Rostone Corp. and Oneida
Molded Plastics Corp. of North Carolina as borrowers.
10.2 Amendment No. 1 to Loan and Security Agreement dated October 21,
1996 modifying original Loan and Security Agreement dated
February 2, 1996 between Congress Financial Corporation as lender
and Oneida Rostone Corp. and Oneida Molded Plastics Corp. of North
Carolina as borrowers.
27 Financial Data Schedule
(B) CURRENT REPORTS ON FORM 8-K
During the quarter ended September 30, 1996, the Company filed no
reports on Form 8-K:
17
<PAGE>
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REUNION INDUSTRIES, INC.
(Registrant)
By /s/ Richard L. Evans
-------------------------------------
Richard L. Evans
Executive Vice President and Chief
Financial Officer (Principal Financial
and Accounting Officer)
Date: November 13, 1996
18
<PAGE>
EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
by and among
CONGRESS FINANCIAL CORPORATION
as Lender
and
ONEIDA ROSTONE CORP.
and
ONEIDA MOLDED PLASTICS, CORP. OF NORTH CAROLINA
as Borrowers
Dated: February __, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS................................................................................ 1
SECTION 2. ACKNOWLEDGEMENT, RATIFICATION AND RESTATEMENT.............................................. 14
2.1 Acknowledgement.............................................................................. 14
2.2 Treatment of OMPC and OMPC-NC Term Loans..................................................... 15
2.3 Ratification................................................................................. 15
2.4 Restatement.................................................................................. 16
SECTION 3. CREDIT FACILITIES.......................................................................... 17
3.1 Revolving Loans.............................................................................. 17
3.2 Letter of Credit Accommodations.............................................................. 18
3.3 Term Loans................................................................................... 21
3.4 Availability Reserves........................................................................ 22
SECTION 4. INTEREST AND FEES.......................................................................... 22
4.1 Interest..................................................................................... 22
4.2 Closing Fee.................................................................................. 23
4.3 Servicing Fee................................................................................ 23
4.4 Unused Line Fee.............................................................................. 23
SECTION 5. CONDITIONS PRECEDENT....................................................................... 24
5.1 Conditions Precedent to Initial Loans........................................................ 24
5.2 Conditions Precedent to All Loans and Letter of
Credit Accommodations..................................................................... 27
SECTION 6. GRANT OF SECURITY INTEREST................................................................. 28
SECTION 7. COLLECTION AND ADMINISTRATION.............................................................. 29
7.1 Borrowers' Loan Accounts..................................................................... 29
7.2 Statements................................................................................... 29
7.3 Collection of Accounts....................................................................... 30
7.4 Payments..................................................................................... 31
7.5 Authorization to Make Loans.................................................................. 32
7.6 Use of Proceeds.............................................................................. 32
SECTION 8. COLLATERAL REPORTING AND COVENANTS......................................................... 33
8.1 Collateral Reporting......................................................................... 33
8.2 Accounts Covenants........................................................................... 33
8.3 Inventory Covenants.......................................................................... 35
8.4 Equipment Covenants.......................................................................... 36
8.5 Power of Attorney............................................................................ 37
8.6 Right to Cure................................................................................ 37
8.7 Access to Premises........................................................................... 38
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 9. REPRESENTATIONS AND WARRANTIES............................................................... 38
9.1 Corporate Existence, Power and Authority;
Subsidiaries................................................................................. 38
9.2 Financial Statements; No Material Adverse Change............................................... 39
9.3 Chief Executive Office; Collateral Locations................................................... 39
9.4 Priority of Liens; Title to Properties......................................................... 39
9.5 Tax Returns.................................................................................... 40
9.6 Litigation..................................................................................... 40
9.7 Compliance with Other Agreements and Applicable
Laws......................................................................................... 40
9.8 Environmental Compliance....................................................................... 41
9.9 Employee Benefits.............................................................................. 41
9.10 Merger......................................................................................... 42
9.11 Capitalization................................................................................. 43
9.12 Accuracy and Completeness of Information....................................................... 43
9.13 Survival of Warranties; Cumulative............................................................. 44
SECTION 10. AFFIRMATIVE AND NEGATIVE COVENANTS........................................................... 44
10.1 Maintenance of Existence....................................................................... 44
10.2 New Collateral Locations....................................................................... 44
10.3 Compliance with Laws, Regulations, Etc......................................................... 45
10.4 [Intentionally Omitted.]....................................................................... 46
10.5 Payment of Taxes and Claims.................................................................... 46
10.6 Insurance...................................................................................... 47
10.7 Financial Statements and Other Information..................................................... 47
10.8 Sale of Assets, Consolidation, Merger,
Dissolution, Etc............................................................................. 49
10.9 Encumbrances................................................................................... 49
10.10 Indebtedness................................................................................... 51
10.11 Loans, Investments, Guarantees, Etc............................................................ 57
10.12 Dividends and Redemptions...................................................................... 57
10.13 Transactions with Affiliates................................................................... 58
10.14 Compliance with ERISA.......................................................................... 59
10.15 Working Capital................................................................................ 60
10.16 Adjusted Net Worth............................................................................. 60
10.17 Costs and Expenses............................................................................. 60
10.18 Further Assurances............................................................................. 61
SECTION 11. EVENTS OF DEFAULT AND REMEDIES............................................................... 61
11.1 Events of Default.............................................................................. 61
11.2 Remedies....................................................................................... 63
SECTION 12. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW.................................................................. 65
12.1 Governing Law; Choice of Forum; Service of
Process; Jury Trial Waiver................................................................... 65
12.2 Waiver of Notices.............................................................................. 67
12.3 Amendments and Waivers......................................................................... 67
12.4 Waiver of Counterclaims........................................................................ 67
12.5 Indemnification................................................................................ 67
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS................................................................. 68
13.1 Term............................................................................................... 68
13.2 Notices............................................................................................ 69
13.3 Partial Invalidity................................................................................. 70
13.4 Successors......................................................................................... 70
13.5 Entire Agreement................................................................................... 70
</TABLE>
(iii)
<PAGE>
INDEX TO
EXHIBITS AND SCHEDULES
----------------------
Exhibit A Information Certificates
Schedule 9.4 Existing Liens
Schedule 9.8 Environmental Matters
Schedule 10.10 Certain Indebtedness
<PAGE>
LOAN AND SECURITY AGREEMENT
---------------------------
This Loan and Security Agreement, dated February __, 1996, is entered into
by and among Congress Financial Corporation, a California corporation ("Lender")
and Oneida Rostone Corp., a New York corporation ("ORC", as hereinafter further
defined) and Oneida Molded Plastics, Corp. of North Carolina, a North Carolina
corporation ("OMPC-NC", as hereinafter further defined; together with ORC, each
individually a "Borrower" and collectively, "Borrowers").
W I T N E S S E T H:
--------------------
WHEREAS, Lender has heretofore entered into certain financing agreements
with ORC, formerly Oneida Molded Plastics Corp., a New York corporation ("OMPC",
as hereinafter further defined) and OMPC-NC pursuant to which Lender has made
certain loans and other financial accommodations to OMPC and OMPC-NC; and
WHEREAS, Rostone has heretofore or contemporaneously herewith merged with
and into OMPC, with OMPC as the surviving corporation, which, contemporaneously
with the merger and pursuant thereto, has changed its name to Oneida Rostone
Corp.; and
WHEREAS, Borrowers have requested that Lender amend and restate its
financing arrangements with Borrowers pursuant to which Lender may make loans
and provide other financial accommodations to Borrowers; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
-----------
All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural. All references to
Borrowers and Lender pursuant to the definitions set forth in the recitals
hereto, or to any other person herein, shall include their respective successors
and assigns. The words "hereof", "herein", "hereunder", "this Agreement" and
words of similar
<PAGE>
import when used in this Agreement shall refer to this Agreement as a whole and
not any particular provision of this Agreement and as this Agreement now exists
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced. An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 12.3 hereof. Any
accounting term used herein unless otherwise defined in this Agreement shall
have the meaning customarily given to such term in accordance with GAAP. For
purposes of this Agreement, the following terms shall have the respective
meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrowers to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: (a) the difference between: (i) the aggregate net book value of all
assets of such Person and its subsidiaries, calculating the book value of
inventory for this purpose on a first-in-first-out basis, after deducting from
such book values all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and amortization)
and (ii) the aggregate amount of the indebtedness and other liabilities of such
Person and its subsidiaries (including tax and other proper accruals) plus (b)
indebtedness of such Person and its subsidiaries which is subordinated in right
of payment to the full and final payment of all of the Obligations on terms and
conditions acceptable to Lender.
1.3 "Allan Bir" shall mean Allan C. Bir, and his heirs, executors, legal
representatives, successors and assigns.
1.4 "Amended and Restated OMPC-NC Term Note" shall mean the Amended and
Restated Term Promissory Note, dated of even date herewith, made by OMPC-NC
payable to the order of Lender in the principal amount of the OMPC-NC Term Loan,
amending and restating the Existing OMPC-NC Note in order to evidence the Pre-
Effective Date Obligations previously evidenced by or arising under the Existing
OMPC-NC Note and the additional Obligations evidenced by or arising under the
OMPC-NC Term Loan, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.5 "Amended and Restated ORC Term Note" shall mean the Amended and
Restated Term Promissory Note, dated of even date herewith, made by ORC payable
to the order of Lender in the principal amount of the ORC Term Loan, amending
and restating the
-2-
<PAGE>
Existing OMPC Note in order to evidence the Pre-Effective Date Obligations
evidenced by or arising under the Existing OMPC Note and the additional
Obligations evidenced by or arising under the ORC Term Loan, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.6 "Apex Principals" shall mean, individually and collectively, R.
Alastair Short and Timothy Bowman, and their respective heirs, executors, legal
representatives, successors and assigns.
1.7 "Availability Reserves" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Revolving Loans and Letter of Credit Accommodations which
would otherwise be available to Borrowers under the lending formula(s) provided
for herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, do or may affect either (i) the Collateral
or any other property which is security for the Obligations or its value, (ii)
the assets, business or prospects of Borrowers or any Obligor or (iii) the
security interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Lender's good
faith belief that any collateral report or financial information furnished by or
on behalf of Borrowers or any Obligor to Lender is or may have been incomplete,
inaccurate or misleading in any material respect or (c) in respect of any state
of facts which Lender determines in good faith constitutes an Event of Default
or may, with notice or passage of time or both, constitute an Event of Default.
1.8 "Blocked Accounts" shall have the meaning set forth in Section 7.3
hereof.
1.9 "CGII" shall mean CGI Investment Corp., a Delaware corporation, and
its successors and assigns.
1.10 "Charles Bradley" shall mean Charles E. Bradley, Sr., his heirs,
executors, legal representatives, successors and assigns.
1.11 "Chatwins" shall mean Chatwins Group, Inc., a Delaware corporation,
and its successors and assigns.
1.12 "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
-3-
<PAGE>
1.13 "Collateral" shall have the meaning set forth in Section 6 hereof.
1.14 "Consulting Agreements" shall mean, individually and collectively, (a)
the Consulting Agreement, dated April 16, 1990, between Rostone and Stanwich
Partners and (b) the Consulting Agreement, dated April 16, 1990, between Apex
Capital Partners, L.P. and Rostone, as the same may have heretofore been
amended, modified, supplemented, extended, renewed, restated or replaced.
1.15 "Effective Date" shall mean the date hereof.
1.16 "Eligible Accounts" shall mean Accounts created by Borrowers which are
and continue to be acceptable to Lender based on the criteria set forth below.
In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrowers or rendition of services by Borrowers in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than the earlier of (i) sixty
(60) days past the original due date thereof or (ii) ninety (90) days after the
date of the original invoice for them;
(c) such Accounts comply with the terms and conditions contained in
Section 8.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America, or the chief executive
office of the account debtor with respect to such Accounts is located in the
Province of Ontario, Canada and such Accounts are payable in United States
Dollars in the United States, or, at Lender's option, if either: (i) the
account debtor has delivered to the applicable Borrower an irrevocable letter of
credit issued or confirmed by a bank satisfactory to Lender, sufficient to cover
such Account, in form and substance satisfactory to Lender and, if required by
Lender, the original of such letter of credit has been delivered to Lender or
Lender's agent and the issuer thereof notified of the assignment of the proceeds
of such letter of credit to Lender, or (ii) such Account is subject to credit
insurance payable to Lender issued by an insurer and on terms and in an amount
acceptable to Lender, or (iii) such Account is otherwise
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acceptable in all respects to Lender (subject to such lending formula with
respect thereto as Lender may determine);
(f) such Accounts do not consist of progress billings, bill and hold
invoices or retainage invoices, except as to bill and hold invoices, if Lender
shall have received an agreement in writing from the account debtor, in form and
substance satisfactory to Lender, confirming the unconditional obligation of the
account debtor to take the goods related thereto and pay such invoice; provided,
that, the goods subject to such bill and hold invoices and agreements shall not
be deemed Eligible Inventory;
(g) the account debtor with respect to such Accounts has not asserted
a counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to, any right of setoff against such Accounts;
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee or agent of
or affiliated with Borrowers directly or indirectly by virtue of family
membership, ownership, control, management or otherwise;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition;
(m) such Accounts of a single account debtor or its affiliates do not
constitute more than thirty five (35%) percent of all otherwise Eligible
Accounts (but the portion of the
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Accounts not in excess of such percentage will nevertheless be deemed Eligible
Accounts if such Accounts otherwise meet all of Lender's other criteria for
Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has Accounts
unpaid more than sixty (60) days past the original due date for them, or more
than ninety (90) days after the date of the original invoice for them, which
constitute more than fifty (50%) percent of the total Accounts of such account
debtor;
(o) such Accounts are owed by account debtors whose total
indebtedness to Borrowers does not exceed the credit limit with respect to such
account debtors as determined by Lender from time to time (but the portion of
the Accounts not in excess of such credit limit will nevertheless be deemed
Eligible Accounts if such Accounts otherwise meet all of Lender's other criteria
for Eligible Accounts);
(p) such Account are not Tooling Accounts; and
(q) such Accounts are owed by account debtors deemed creditworthy at
all times by Lender, as determined by Lender.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.17 "Eligible Inventory" shall mean Inventory consisting of finished goods
held for resale in the ordinary course of the business of Borrowers and raw
materials for such finished goods which are acceptable to Lender based on the
criteria set forth below. In general, Eligible Inventory shall not include (a)
work-in-process; (b) components which are not part of finished goods; (c)
Inventory for which outside contractors furnish additional services or work; (d)
spare parts for equipment; (e) Inventory consisting of prototype or finished
tooling; (f) packaging and shipping materials; (g) inserts and supplies used or
consumed in each Borrower's business; (h) Inventory at premises other than those
owned and controlled by Borrowers, except (x) OMPC-NC's leased premises at 11694
US 70 West, Clayton, North Carolina so long as there is sufficient Revolving
Loan availability (as determined by Lender) so that an Availability Reserve can
be established and maintained with respect to OMPC-NC's lease obligations with
respect to such premises as provided in Section 3.4(b) hereof or (y) if Lender
shall have received an agreement in writing from the person in possession of
such Inventory and/or the owner or operator of such premises in form and
substance satisfactory to Lender acknowledging Lender's first priority security
interest in the Inventory, waiving or subordinating, on terms and conditions
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acceptable to Lender, security interests and claims by such person against the
Inventory and permitting Lender access to, and the right to remain on, the
premises so as to exercise Lender's rights and remedies and otherwise deal with
the Collateral; (i) Inventory subject to a security interest or lien in favor of
any person other than Lender except those permitted in this Agreement; (j) bill
and hold goods that are covered by invoices and agreements deemed sufficient by
Lender to constitute Eligible Accounts, or in the case of bill and hold goods
that are not covered by invoices and agreements deemed sufficient by Lender to
constitute Eligible Accounts, any such goods held by Borrowers at any time in
excess of $100,000 in Value thereof; (k) unserviceable, obsolete or slow moving
Inventory; (l) Inventory which is not subject to the first priority, valid and
perfected security interest of Lender; (m) returned, damaged and/or defective
Inventory; and (n) Inventory purchased or sold on consignment. General criteria
for Eligible Inventory may be established and revised from time to time by
Lender in good faith. Any Inventory which is not Eligible Inventory shall
nevertheless be part of the Collateral.
1.18 "Environmental Indemnity Agreement" shall mean the Environmental
Indemnity Agreement, dated of even date herewith, by Charles Bradley in favor of
Lender with respect to the Real Property owned by ORC on the Effective Date, as
the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.19 "Environmental Laws" shall mean all Federal, State, district, local
and foreign laws, rules, regulations, ordinances, and consent decrees relating
to health, safety, hazardous substances, pollution and environmental matters, as
now or at any time hereafter in effect, applicable to Borrowers' business and
facilities (whether or not owned by it), including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contamination,
chemicals, or hazardous, toxic or dangerous substances, materials or wastes into
the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to the
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals, or
hazardous, toxic or dangerous substances, materials or wastes.
1.20 "Equipment" shall mean all of Borrowers' now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
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1.21 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.22 "ERISA Affiliate" shall mean any person required to be aggregated with
Borrowers or any of its subsidiaries under Sections 414(b), 414(c), 414(m) or
414(o) of the Code.
1.23 "Event of Default" shall mean the occurrence or existence of any event
or condition described in Section 11.1 hereof.
1.24 "Excess Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to: (a) the lesser of: (i) the amount of the
Revolving Loans available to Borrowers as of such time based on the applicable
lending formulas multiplied by the Net Amount of Eligible Accounts and the Value
of Eligible Inventory, as determined by Lender, and subject to the sublimits and
Availability Reserves from time to time established by Lender hereunder, and
(ii) the Maximum Credit (less the then outstanding principal amount of the Term
Loans), minus (b) the sum of: (i) the amount of all then outstanding and unpaid
Obligations (but not including for this purpose the then outstanding principal
amount of the Term Loans), plus (ii) the aggregate amount of all then
outstanding and unpaid trade payables of Borrowers which are more than sixty
(60) days past due as of such time.
1.25 "Existing OMPC Term Note" shall mean the Promissory Note, dated August
12, 1991, by OMPC payable to Lender in the original principal amount of
$1,830,000, as the same may have been amended, modified, supplemental, extended,
renewed, restated or replaced prior to the Effective Date.
1.26 "Existing OMPC-NC Term Note" shall mean the Promissory Note, dated
August 12, 1991, by OMPC-NC payable to Lender in the original principal amount
of $920,000, as the same may have been amended, modified, supplemental,
extended, renewal, restated or replaced prior to the Effective Date.
1.27 "Financing Agreements" shall mean, collectively, this Agreement, the
Mortgages, the Guarantees, the Amended and Restated OMPC-NC Term Note, the
Amended and Restated ORC Term Note, and all other notes, guarantees, security
agreements and other agreements, documents and instruments now or at any time
hereafter executed and/or delivered by Borrowers or any Obligor in connection
with this Agreement, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
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1.28 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 10.15 and 10.16 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
1.29 "Guarantees" shall mean, individually and collectively, (a) the
Amended and Restated Guarantee, dated the date hereof, executed and delivered by
ORC in favor of Lender absolutely and unconditionally guaranteeing payment and
performance of the Obligations of OMPC-NC, (b) the Amended and Restated
Guarantee, dated of even date herewith, executed and delivered by OMPC-NC in
favor of Lender absolutely and unconditionally guaranteeing payment and
performance of the Obligations of ORC, and (c) the Limited Guarantee, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.30 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including, without
limitation any that are or become classified as hazardous or toxic under any
Environmental Law).
1.31 "Information Certificates" shall mean the Information Certificate,
dated the date hereof, of each Borrower constituting Exhibit A hereto containing
material information with respect to such Borrower, its business and assets
provided by or on behalf of such Borrower to Lender in connection with the
preparation of this Agreement and the other Financing Agreements and the
financing arrangements provided for herein.
1.32 "Inventory" shall mean all of Borrowers' now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
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1.33 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of Borrowers or (b) with respect to
which Lender has agreed to indemnify the issuer or guaranteed to the issuer the
performance by Borrowers of their obligations to such issuer. Pursuant to
Section 3.2(h) hereof, notwithstanding anything to the contrary contained
herein, as of the date hereof, no portion of the financial accommodations
hereunder shall be available in the form of Letter of Credit Accommodations.
1.34 "Limited Guarantee" shall mean the absolute and unconditional limited
guarantee of payment and performance of the Obligations pursuant to the Amended
and Restated Limited Guarantee, dated of even date herewith, executed and
delivered by Charles Bradley in favor of Lender, pursuant to which the aggregate
liability of Charles Bradley shall be limited as provided therein, as the same
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.35 "Loans" shall mean the Revolving Loans and the Term Loans.
1.36 "Management Agreement" shall mean a Management Agreement to be entered
into among Reunion, ORC and OMPC-NC, in form and substance reasonably
satisfactory to Lender, providing for payments to Reunion, subject to
subordination in favor of Lender as provided herein, by Borrowers up to a
maximum amount of $300,000 in any calendar year, as the same may be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.37 "Maximum Credit" shall mean the amount of $16,000,000.
1.38 "Merger" shall mean the merger of Rostone with and into OMPC, with
OMPC as the surviving corporation, which shall, contemporaneously with that
merger and pursuant thereto, change its name to Oneida Rostone Corp. pursuant to
the terms of the Merger Agreements.
1.39 "Merger Agreements" shall mean, collectively, the Merger Agreement,
dated as of December 22, 1995, by and between Rostone and OMPC, the Certificates
of Merger of Rostone and OMPC and all related agreements, documents, consents
and instruments, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.40 "Merger Effective Time" shall mean the "Effective Time" as defined in
the Merger Agreements.
1.41 "Mortgages" shall mean, collectively, (a) the Mortgage and Security
Agreement, dated of even date herewith, by ORC in
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favor of Lender with respect to the Real Property and related assets of ORC
located in Tippecanoe County, Indiana, (b) the Mortgage, Spreader Agreement and
Agreement of Consolidation, Modification and Extension, dated of even date
herewith, by ORC in favor of Lender with respect to the Real Property and
related assets of ORC located in Madison County, New York and Oswego County, New
York, and (c) the Amended and Restated Mortgage and Security Agreement, dated
the date hereof, by ORC in favor of Lender with respect to the Real Property and
related assets of ORC located in Madison County, New York and Oswego County, New
York, as the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.42 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, available or claimed with
respect thereto.
1.43 "Obligations" shall mean any and all Revolving Loans, the Term Loans,
Letter of Credit Accommodations and all other obligations, liabilities and
indebtedness of every kind, nature and description owing by Borrowers to Lender
and/or its affiliates, including principal, interest, charges, fees, costs and
expenses, however evidenced, whether as principal, surety, endorser, guarantor
or otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after the commencement of any
case with respect to Borrowers under the United States Bankruptcy Code or any
similar statute (including, without limitation, the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case), whether direct or indirect, absolute or contingent, joint or several, due
or not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, and however acquired by Lender. As of the Effective Date, the
Obligations include, but are not limited to, the Pre-Effective Date Obligations.
1.44 "Obligor" shall mean Charles Bradley (but only for so long as his
obligations under both the Environmental Indemnity Agreement and the Limited
Guarantee have not been indefeasibly paid and satisfied in full or cancelled
pursuant to the terms thereof and hereof) and any other guarantor, endorser,
acceptor, surety or other person liable on or with respect to the Obligations or
who is the owner of any property which is security for the Obligations, other
than Borrowers.
1.45 "OMPC" shall mean Oneida Molded Plastics Corp., a New York
corporation, and its successors and assigns.
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1.46 "OMPC Financing Agreements" shall mean, individually and collectively,
(a) the Accounts Financing Agreement [Security Agreement], dated August 12,
1991, between Lender and OMPC, the Covenant Supplement to Accounts Financing
Agreement [Security Agreement], dated August 12, 1991, between Lender and OMPC
and all other agreements, documents and instruments at any time executed and/or
delivered in connection therewith or related thereto prior to the Effective Date
and (b) the Accounts Financing Agreement [Security Agreement], dated August 12,
1991, between Lender and OMPC-NC, the Covenant Supplement to Accounts Financing
Agreement [Security Agreement], dated August 12, 1991, between Lender and OMPC-
NC and all other agreements, documents and instruments at any time executed
and/or delivered in connection therewith or related thereto prior to the
Effective Date, as the same have heretofore been amended, modified,
supplemented, extended, renewed, restated or replaced prior to the Effective
Date.
1.47 "OMPC-NC" shall mean Oneida Molded Plastics, Corp. of North Carolina,
a North Carolina corporation, and its successors and assigns.
1.48 "OMPC-NC Term Loan" shall mean the term loan made by Lender to OMPC-
NC pursuant to Section 3.3(b) hereof.
1.49 "ORC" shall mean Oneida Rostone Corp., formerly known as Oneida Molded
Plastics Corp., as successor by merger of Rostone with and into OMPC, pursuant
to the Merger Agreements and applicable law, and its successors and assigns.
1.50 "ORC Term Loan" shall mean the term loan made by Lender to ORC
pursuant to Section 3.3(a) hereof.
1.51 "Payment Account" shall have the meaning set forth in Section 7.3
hereof.
1.52 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including, without limitation, any corporation which
elects subchapter S status under the Code, business trust, unincorporated
association, joint stock corporation, trust, joint venture, limited liability
company, limited liability partnership or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.53 "Pre-Effective Date Obligations" shall mean any and all revolving
loans, term loans, letter of credit accommodations and all other obligations,
liabilities and indebtedness of every kind, nature and description owing by OMPC
and OMPC-NC to Lender and/or its affiliates existing as of the Effective Date,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser,
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guarantor or otherwise, whether arising under the OMPC Financing Agreements or
otherwise, whether arising before, during or after the initial term of the OMPC
Financing Agreements, or during any renewal term thereof, whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, and however
acquired by Lender.
1.54 "Prime Rate" shall mean the rate from time to time publicly announced
by CoreStates Bank, N.A., or its successors, at its office in Philadelphia,
Pennsylvania, as its prime rate, whether or not such announced rate is the best
rate available at such bank.
1.55 "Real Property" shall mean all now owned and hereafter acquired real
property of ORC, including leasehold interests, together with all buildings,
structures, and other improvements located thereon and all licenses, easements
and appurtenances relating thereto, wherever located, including without
limitation, the real property and related assets more particularly described in
the Mortgages.
1.56 "Records" shall mean all of Borrowers' present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrowers with respect to the
foregoing maintained with or by any other person).
1.57 "Reunion" shall mean Reunion Resources Company, a Delaware
corporation, and its successors and assigns.
1.58 "Revolving Loans" shall mean the loans now or hereafter made by Lender
to or for the benefit of Borrowers on a revolving basis (involving advances,
repayments and readvances) as set forth in Section 3.1 hereof.
1.59 "Rostone" shall mean Rostone Corporation, a Delaware corporation.
1.60 "Stanwich Partners" shall mean Stanwich Partners, Inc., a Delaware
corporation, and its successors and assigns.
1.61 "Tax Sharing Agreement" shall mean a tax sharing agreement to be
entered into among Reunion, ORC and OMPC-NC, in form and substance reasonably
satisfactory to Lender, providing for certain payments by Borrowers to Reunion
in respect of their Federal and State income tax liabilities, as the same may be
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amended, modified, supplemented, extended, renewed, restated or replaced.
1.62 "Term Loans" shall mean, individually and collectively, the ORC Term
Loan and the OMPC-NC Term Loan.
1.63 "Tooling Accounts" shall mean Accounts representing amounts owed for
the design and/or manufacture of prototype or finished tooling or molds and/or
rendition of services relating thereto.
1.64 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in-first-out
basis in accordance with GAAP or (b) market value.
1.65 "Working Capital" shall mean as to any Person, at any time, in
accordance with GAAP, on a consolidated basis for such Person and its
subsidiaries (if any), the amount equal to the difference between: (a) the
aggregate net book value of all current assets of such Person and its
subsidiaries (as determined in accordance with GAAP), calculating the book value
of inventory for this purpose on a first-in-first-out basis, and (b) all current
liabilities of such Person and its subsidiaries (as determined in accordance
with GAAP); provided, that, as to Borrowers, for purposes of Section 10.15
hereof, the liabilities of Borrowers and their subsidiaries to Lender under this
Agreement shall not be considered current liabilities (whether or not classified
as current liabilities in accordance with GAAP).
SECTION 2. ACKNOWLEDGEMENT, RATIFICATION AND RESTATEMENT
---------------------------------------------
2.1 Acknowledgement.
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(a) Borrowers hereby acknowledge, confirm and agree that as of the
Effective Date immediately prior to the Merger OMPC and OMPC-NC were indebted to
Lender for the Pre-Effective Date Obligations under the OMPC Financing
Agreements in respect of loans, advances and other financial accommodations,
which amounts, together with interest accrued and accruing, and costs, expenses
and other charges accrued thereon, all without offset, defense or counterclaim
of any kind, nature or description whatsoever, as follows:
(i) in respect of loans, advances and other financial
accommodations to OMPC, the aggregate principal amount of $2,252,814.21
consisting of (A) revolving loans in the aggregate outstanding principal
amount of $2,143,714.21 (B) the term loan evidenced by the Existing OMPC
Term Note in the outstanding
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principal amount of $109,100.00, plus accrued fees and interest thereon;
and
(ii) in respect of loans, advances and other financial
accommodations to OMPC-NC, the aggregate principal amount of $889,928.94
consisting of (A) revolving loans in the aggregate outstanding principal
amount of $820,395.43 and (B) the term loan evidenced by the Existing OMPC-
NC Term Note in the outstanding principal amount of $69,533.51, plus
accrued fees and interest thereon.
(b) Borrowers hereby acknowledge, confirm and agree that the
respective guarantees delivered by each of OMPC and OMPC-NC with respect to the
obligations, liabilities and indebtedness of the other to Lender were in full
force and effect as of the Effective Date, and their respective Pre-Effective
Date Obligations thereunder were unconditionally owed to Lender, without offset,
defense or counterclaim of any kind, nature or description whatsoever.
2.2 Treatment of OMPC and OMPC-NC Term Loans. Borrowers acknowledge and
agree that a portion of (a) the ORC Term Loan represents the outstanding Pre-
Effective Date Obligations arising under or evidenced by the Existing OMPC Term
Note and (b) the OMPC-NC Term Loan represents the outstanding Pre-Effective Date
Obligations arising under or evidenced by the Existing OMPC-NC Term Note.
2.3 Ratification. Borrowers hereby acknowledge, confirm and agree that
contemporaneously with the Merger, at the Merger Effective Time, by operation of
law, the Merger Agreements and this Agreement:
(a) ORC, as survivor pursuant to the Merger, is and shall continue to
be directly and primarily liable in all respects for the Pre-Effective Date
Obligations of OMPC;
(b) OMPC-NC is and shall continue to be liable for the Pre-Effective
Date Obligations of OMPC-NC;
(c) their respective guarantees in favor of Lender shall, as amended
and restated pursuant to the Guarantees, continue to be in full force and
effect;
(d) Lender has and shall continue to have valid and perfected
security interests, liens and rights in and to all of the assets and properties
of OMPC, which ORC shall continue to own and hold pursuant to the Merger, and
which assets and properties shall be deemed included in the Collateral, and such
security interests, liens and rights and their perfection and
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priority and shall continue in all respects in full force and effect;
(e) Lender has and shall continue to have valid and perfected
security interests, liens and rights in and to all of the assets and properties
of OMPC-NC, and which assets and properties shall be deemed included in the
Collateral, and such security interests, liens and rights and their perfection
and priority shall continue in all respects in full force and effect; and
(f) without limiting the generality of the foregoing, (i) the Merger
shall in no way limit, impair or adversely affect the Pre-Effective Date
Obligations owed to Lenders or any security interests or liens securing the same
and (ii) the security interests, liens and rights of Lender in and to all of the
assets and properties of ORC, as successor pursuant to the Merger, and of OMPC-
NC, shall continue to secure all Pre-Effective Date Obligations of OMPC and
OMPC-NC, in addition to all other existing and future Obligations to Lender.
2.4 Restatement.
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(a) Concurrently with the execution and delivery of this Agreement:
(i) ORC, as survivor pursuant to the Merger, shall execute and deliver to Lender
the Amended and Restated ORC Term Note pursuant to Section 3.3(a) hereof,
effective as of the Effective Date, which note shall be deemed to evidence (A)
the amendment and restatement of, but not the extinguishment of, the unpaid
principal amount of the term loan previously evidenced by the Existing OMPC Term
Note, which note shall be substituted for and replaced thereby, plus (B)
additional Obligations in respect of the additional advance contemplated by
Section 3.3(a) hereof and (ii) OMPC-NC shall execute and deliver to Lender the
Amended and Restated OMPC-NC Term Note pursuant to Section 3.3(b) hereof,
effective as of the Effective Date, which note shall be deemed to evidence (A)
the amendment and restatement of, but not the extinguishment of, the unpaid
principal amount of the term loan previously evidenced by the Existing OMPC-NC
Term Note, which note shall be substituted for and replaced thereby, plus (B)
additional Obligations in respect of the additional advance contemplated by
Section 3.3(b) hereof.
(b) Borrowers hereby acknowledge and agree that (i) the Pre-Effective
Date Obligations consisting of revolving loans previously made by Lender to
OMPC, shall constitute and be deemed Revolving Loans under this Agreement to
ORC, as survivor of the Merger, and shall be debited to ORC's loan account(s)
with Lender in such manner as Lender shall, in its sole discretion, determine
and (ii) the Pre-Effective Date Obligations consisting of revolving loans
previously made by Lender to OMPC-NC, shall constitute and be deemed Revolving
Loans to OMPC-NC under this
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Agreement, and shall be debited to OMPC-NC's loan account(s) with Lender in such
manner as Lender shall, in its sole discretion, determine.
(c) The OMPC Financing Agreements are hereby amended and restated in
their entirety, and as so amended and restated, are replaced and superseded by,
the terms, conditions, agreements, covenants, representations, and warranties
set forth in this Agreement and the other Financing Agreements, except that
nothing herein or in the other Financing Agreements shall impair or adversely
affect the continuation of the liability of Borrowers for the Pre-Effective Date
Obligations or the security interests and liens heretofore granted, pledged
and/or assigned to Lender. Without limiting the foregoing, the amendment and
restatement contained herein shall not, in any manner, be construed to
constitute payment of, or impair, limit, cancel or extinguish, or constitute a
novation in respect of, the Pre-Effective Date Obligations of Borrowers
evidenced by or arising under the OMPC Financing Agreements, or the liens and
security interests securing such Obligations and liabilities, none of which are
in any manner being impaired, limited, terminated, waived or released hereby.
SECTION 3. CREDIT FACILITIES
-----------------
3.1 Revolving Loans.
---------------
(a) Subject to, and upon the terms and conditions contained herein,
Lender agrees to make Revolving Loans to each Borrower from time to time in
amounts requested by such Borrower up to the amount equal to the sum of:
(i) eighty-five (85%) percent of the Net Amount of the Eligible
Accounts of such Borrower, plus
(ii) in the case of ORC, the lesser of: (A) the sum of fifty (50%)
percent of the Value of Eligible Inventory of ORC consisting of finished
goods plus fifty (50%) percent of the Value of Eligible Inventory of ORC
consisting of raw materials for such finished goods, or (B) the amount equal
to: (1) $2,200,000 minus (2) fifty (50%) percent of the then undrawn amounts
of the outstanding Letter of Credit Accommodations for the account of ORC,
if any, for the purpose of purchasing goods, or
(iii) in the case of OMPC-NC, the lesser of: (A) the sum of fifty
(50%) percent of the Value of Eligible Inventory of OMPC-NC consisting of
finished goods plus fifty (50%) percent of the Value of Eligible Inventory
of OMPC-NC consisting of raw materials for
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such finished goods, or (B) the amount equal to: (1) $300,000 minus (2)
fifty (50%) percent of the then undrawn amounts of the outstanding Letter of
Credit Accommodations for the account of OMPC-NC, if any, for the purpose of
purchasing goods, less
(iv) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon not less
than five (5) days prior notice to Borrowers, (i) reduce the lending formula
with respect to Eligible Accounts to the extent that Lender determines in good
faith that: (A) the dilution with respect to the Accounts for any period (based
on the ratio of (1) the aggregate amount of reductions in Accounts other than as
a result of payments in cash to (2) the aggregate amount of total sales) has
increased in any material respect or may be reasonably anticipated to increase
in any material respect above historical levels, or (B) the general
creditworthiness of account debtors has declined or (ii) reduce the lending
formula(s) with respect to Eligible Inventory to the extent that Lender
determines that: (A) the number of days of the turnover of the Inventory for any
period has changed in any material respect or (B) the liquidation value of the
Eligible Inventory, or any category thereof, has decreased, or (C) the nature
and quality of the Inventory has deteriorated. In determining whether to reduce
the lending formula(s), Lender may consider events, conditions, contingencies or
risks which are also considered in determining Eligible Accounts, Eligible
Inventory or in establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the Loans
and the Letter of Credit Accommodations outstanding at any time shall not exceed
the Maximum Credit. In the event that the outstanding amount of any component
of the Loans, or the aggregate amount of the outstanding Loans and Letter of
Credit Accommodations, exceed the amounts available under the lending formulas,
the sublimits for Letter of Credit Accommodations set forth in Section 3.2(c)
hereof or the Maximum Credit, as applicable, such event shall not limit, waive
or otherwise affect any rights of Lender in that circumstance or on any future
occasions and Borrowers shall, upon demand by Lender, which may be made at any
time or from time to time, immediately repay to Lender the entire amount of any
such excess(es) for which payment is demanded.
3.2 Letter of Credit Accommodations.
-------------------------------
(a) Subject to, and upon the terms and conditions contained herein,
at the request of a Borrower, Lender agrees to provide or arrange for Letter of
Credit Accommodations for the account of such Borrower containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made
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by Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Revolving Loans to
such Borrower pursuant to this Section 3.
(b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, Borrowers
shall pay to Lender a letter of credit fee at a rate equal to [N/A] (N/A%)
percent per annum on the daily outstanding balance of the Letter of Credit
Accommodations for the immediately preceding month (or part thereof), payable in
arrears as of the first day of each succeeding month. Such letter of credit fee
shall be calculated on the basis of a three hundred sixty (360) day year and
actual days elapsed and the obligation of Borrowers to pay such fee shall
survive the termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless on
the date of the proposed issuance of any Letter of Credit Accommodations, the
Revolving Loans available to such Borrower (subject to the Maximum Credit and
any Availability Reserves) are equal to or greater than: (i) if the proposed
Letter of Credit Accommodation is for the purpose of purchasing Eligible
Inventory, the sum of (A) fifty (50%) percent of the cost of such Eligible
Inventory, plus (B) freight, taxes, duty and other amounts which Lender
estimates must be paid in connection with such Inventory upon arrival and for
delivery to one of such Borrower's locations for Eligible Inventory within the
United States of America and (ii) if the proposed Letter of Credit Accommodation
is for any other purpose, an amount equal to one hundred (100%) percent of the
face amount thereof and all other commitments and obligations made or incurred
by Lender with respect thereto. Effective on the issuance of each Letter of
Credit Accommodation, the amount of Revolving Loans which might otherwise be
available to such Borrower shall be reduced by the applicable amount set forth
in Section 3.2(c)(i) or Section 3.2(c)(ii).
(d) Except in Lender's discretion, (i) the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith, shall not at any time exceed $-0-
and (ii) the amount of all outstanding Letter of Credit Accommodations for the
purpose of purchasing Eligible Inventory and all other commitments and
obligations made or incurred by Lender in connection therewith shall not at any
time exceed: (A) $-0- minus (B) the amount of the then outstanding Revolving
Loans based on Eligible Inventory pursuant to Section 3.1(a)(ii) hereof. At any
time an Event of Default exists or has occurred and is continuing, upon Lender's
request, Borrowers will either furnish cash collateral to secure the
reimbursement obligations to the issuer in connection with any Letter of Credit
Accommodations or
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furnish cash collateral to Lender for the Letter of Credit Accommodations, and
in either case, the Revolving Loans otherwise available to Borrowers shall not
be reduced as provided in Section 3.2(c) hereof to the extent of such cash
collateral.
(e) Borrowers shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, any losses, claims, damages, liabilities, costs
and expenses due to any action taken by any issuer or correspondent with respect
to any Letter of Credit Accommodation, but excluding any such losses, claims,
damages, liabilities, costs and expenses directly caused or incurred solely by
reason of the willful misconduct of Lender as determined by a final, non-
appealable judgment of a court of competent jurisdiction. Borrowers assume all
risks with respect to the acts or omissions of the drawer under or beneficiary
of any Letter of Credit Accommodation and for such purposes the drawer or
beneficiary shall be deemed Borrowers' agent. Borrowers assume all risks for,
and agrees to pay, all foreign, Federal, State and local taxes, duties and
levies relating to any goods subject to any Letter of Credit Accommodations or
any documents, drafts or acceptances thereunder. Borrowers hereby release and
hold Lender harmless from and against any acts, waivers, errors, delays or
omissions, whether caused by Borrowers, by any issuer or correspondent or
otherwise with respect to or relating to any Letter of Credit Accommodation, but
excluding any acts, waivers, errors, delays or omissions arising directly from
or solely by reason of the willful misconduct of Lender as determined by a
final, non-appealable judgment of a court of competent jurisdiction. The
provisions of this Section 3.2(e) shall survive the payment of Obligations and
the termination or non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to grant
Borrowers any right or authority to pledge the credit of Lender in any manner.
Lender shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Lender unless Lender has duly
executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrowers shall be bound by any interpretation made in good faith by Lender, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrowers. Lender shall have the sole and exclusive right and
authority to, and Borrowers shall not: (i) at any time an Event of Default
exists or has occurred and is continuing, (A) approve or resolve any questions
of non-
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compliance of documents, (B) give any instructions as to acceptance or rejection
of any documents or goods or (C) execute any and all applications for steamship
or airway guaranties, indemnities or delivery orders, and (ii) at all times, (A)
grant any extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Lender may take such actions either in its
own name or in either or both Borrowers' names.
(g) Any rights, remedies, duties or obligations granted or undertaken
by Borrowers to any issuer or correspondent in any application for any Letter of
Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrowers to Lender. Any duties or
obligations undertaken by Lender to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Lender in favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by Borrowers to Lender
and to apply in all respects to Borrowers.
(h) Notwithstanding anything to the contrary contained in this
Agreement, no financial accommodations shall be available in the form of Letter
of Credit Accommodations.
3.3 Term Loans.
----------
(a) Lender is making an additional single advance to ORC and is
amending and restating the terms of the term loan to OMPC evidenced by the
Existing OMPC Term Note resulting in the term loan to ORC hereunder in the
original aggregate principal amount of $6,000,000 (the "ORC Term Loan"). The
ORC Term Loan is (a) evidenced by the Amended and Restated ORC Term Note in such
principal amount, duly executed and delivered by ORC to Lender concurrently
herewith; (b) to be repaid, together with interest and other amounts, in
accordance with this Agreement, the Amended and Restated ORC Term Note, and the
other Financing Agreements; and (c) secured by all of the Collateral.
(b) Lender is making an additional single advance to OMPC-NC and is
amending and restating the terms of the term loan to OMPC-NC evidenced by the
Existing OMPC-NC Term Note, resulting in a term loan to OMPC-NC hereunder in the
original principal amount of $600,000 (the "OMPC-NC Term Loan"). The OMPC-NC
Term Loan is (a) evidenced by the Amended and Restated OMPC-NC Term Note in such
original principal amount duly executed and delivered by OMPC-NC to Lender
concurrently herewith; (b) to be
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repaid, together with interest and other amounts, in accordance with this
Agreement, the Amended and Restated OMPC-NC Term Note, and the other Financing
Agreements; and (c) secured by all of the Collateral.
3.4 Availability Reserves.
---------------------
(a) All Revolving Loans otherwise available to Borrowers pursuant to
the lending formulas and subject to the Maximum Credit and other applicable
limits hereunder shall be subject to Lender's continuing right to establish and
revise Availability Reserves as provided in the definition of Availability
Reserves and elsewhere herein.
(b) Without limiting any other Availability Reserves established by
Lender hereunder, Lender may establish and revise Availability Reserves in an
amount equal to three (3) months rent and additional rent obligations of
Borrowers under leases covering any of Borrowers' present or future leased
premises with respect to which Borrowers have not delivered to Lender a written
agreement from the landlord and mortgagee of such premises, in form and
substance satisfactory to Lender, acknowledging Lender's first priority security
interest in the Collateral, waiving or subordinating, on terms and conditions
acceptable to Lender, any security interests and claims by such person against
the Collateral and permitting Lender access to, and the right to remain on, the
premises covered by such lease so as to exercise Lender's rights and remedies
and otherwise deal with the Collateral.
SECTION 4. INTEREST AND FEES
-----------------
4.1 Interest.
--------
(a) Borrowers shall pay to Lender (i) interest on the outstanding
principal amount of the non-contingent Obligations arising pursuant to or in
connection with the Term Loans at the rate of two and one quarter (2.25%)
percent per annum in excess of the Prime Rate, and (ii) interest on the
outstanding principal amount of all other non-contingent Obligations at the rate
of two (2.0%) percent per annum in excess of the Prime Rate.
(b) Notwithstanding Section 4.1(a) hereof, Borrowers shall pay to
Lender interest, at Lender's option, without notice, at the rate of four and one
quarter (4.25%) percent per annum in excess of the Prime Rate on the non-
contingent Obligations arising pursuant to or in connection with the Term Loans
and at the rate of four (4.0%) percent per annum in excess of the Prime Rate on
all other non-contingent Obligations for the period from and after the date of
termination or non-renewal hereof, or the date of the occurrence of an Event of
Default, and for so long as
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such Event of Default is continuing as determined by Lender and until such time
as Lender has received full and final payment of all such Obligations
(notwithstanding entry of any judgment against Borrowers). In addition,
Borrowers shall pay to Lender interest, at Lender's option, without notice, at
the rate of four (4.0%) percent per annum in excess of the Prime Rate on the
Revolving Loans at any time outstanding in excess of the amounts available to
Borrowers under Section 3 hereof (whether or not such excess(es), arise or are
made with or without Lender's knowledge or consent and whether made before or
after an Event of Default). All interest accruing hereunder on and after the
occurrence of any of the events referred to in this Section 4.1(b) shall be
payable on demand.
(c) Interest shall be payable by Borrowers to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate shall increase or decrease by an amount equal to
each increase or decrease in the Prime Rate effective on the first day of the
month after any change in such Prime Rate is announced based on the Prime Rate
in effect on the last day of the month in which any such change occurs. In no
event shall charges constituting interest payable by Borrowers to Lender exceed
the maximum amount or the rate permitted under any applicable law or regulation,
and if any part or provision of this Agreement is in contravention of any such
law or regulation, such part or provision shall be deemed amended to conform
thereto.
4.2 Closing Fee. Borrowers shall pay to Lender as a closing fee the
amount of $110,000, which shall be fully earned as of and payable on the date
hereof.
4.3 Servicing Fee. Borrowers shall pay to Lender monthly a servicing fee
in an amount equal to $10,000 in respect of Lender's services for each month (or
part thereof) while this Agreement remains in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on the date hereof and on the first day of each month
hereafter.
4.4 Unused Line Fee. Borrowers shall pay to Lender monthly an unused line
fee equal at a rate equal to one-half of one (.5%) percent per annum calculated
upon the amount by which $16,000,000 exceeds the average aggregate daily
principal balance of the outstanding Terms Loans, Revolving Loans and Letter of
Credit Accommodations during the immediately preceding month (or part thereof)
while this Agreement is in effect and for so long thereafter as any of the
Obligations are outstanding, which fee shall be payable on the first day of each
month in arrears.
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SECTION 5. CONDITIONS PRECEDENT
--------------------
5.1 Conditions Precedent to Initial Loans. Each of the following is a
condition precedent to Lender making the initial Loans hereunder:
(a) Lender shall have received, in form and substance satisfactory to
Lender, evidence that (i) the Merger Agreements have been duly executed and
delivered by and to the appropriate parties thereto, (ii) the Merger has been
approved by the unanimous written consent of the shareholders of Rostone and
OMPC, and (iii) the transactions contemplated under the terms of the Merger
Agreements have been consummated prior to or contemporaneously with the
execution of this Agreement;
(b) Lender shall have received, in form and substance satisfactory to
Lender, evidence that the Certificates of Merger with respect to the Merger have
been filed with the Secretary of State of the State of Delaware and the
Department of State of State of New York and that the Merger is valid and
effective in accordance with the terms and provisions of the Merger Agreements
and the applicable corporation statutes of the State of Delaware and the State
of New York;
(c) Lender shall have received, in form and substance satisfactory to
Lender, an unaudited consolidating pro forma balance sheet of Borrowers
reflecting the initial transactions contemplated hereunder, including, but not
limited to, (i) the consummation of the Merger and the transactions contemplated
in connection therewith in accordance with the Merger Agreements and (ii) the
Loans provided by Lender to Borrowers on the Effective Date and the use of the
proceeds of the initial Loans as provided herein, accompanied by a certificate,
dated of even date herewith, of the chief financial officer of each Borrower,
stating that such unaudited consolidating pro forma balance sheet represents the
reasonable, good faith opinion of each such officer as to the subject matter
thereof as of the date of such certificate;
(d) Lender shall have received, in form and substance satisfactory to
Lender, all releases, terminations and such other documents as Lender may
request to evidence and effectuate the termination by each of Society National
Bank, successor by merger to AmeriTrust Company National Association, and Key
Capital Corporation, successor by merger to Society Capital Corporation,
formerly known as Ameritrust Corporation, of each of their financing
arrangements with Rostone, and the termination and release by each of any
interest in and to any assets and properties of Rostone and each Obligor, duly
authorized, executed and delivered by it, including, but not limited to, (i)
UCC-3 Termination Statements for all UCC Financing Statements previously filed
by it or its predecessors, as secured party, and
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Rostone or any Obligor, as debtor, and (ii) satisfactions and discharges of any
mortgages, deeds of trust or deeds to secure debt by Rostone or any Obligor in
favor of such existing lender, in form acceptable for recording in the
appropriate governmental office;
(e) Lender shall have received, in form and substance satisfactory to
Lender, all releases and such other documents as Lender may request to evidence
and effectuate the release by ORIX Credit Alliance, Inc. of its security
interests in and to any of the Collateral, other than specific leased equipment
under existing equipment leases, in each case duly authorized, executed and
delivered by it, including, but not limited to, UCC-3 Partial Releases for all
UCC Financing Statements previously filed by it or its predecessors, as secured
party, and OMPC or any Obligor, as debtor;
(f) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property which
is intended to be security for the Obligations or the liability of any Obligor
in respect thereof, subject only to the security interests and liens permitted
herein or in the other Financing Agreements;
(g) all requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be satisfactory in form
and substance to Lender, and Lender shall have received all information and
copies of all documents, including, without limitation, records of requisite
corporate action and proceedings which Lender may have requested in connection
therewith, such documents where requested by Lender or its counsel to be
certified by appropriate corporate officers or governmental authorities;
(h) no material adverse change shall have occurred in the assets,
business or prospects of any of Rostone, OMPC, OMPC-NC or Borrowers since the
date of Lender's latest field examination and no change or event shall have
occurred which would impair the ability of Borrowers or any Obligor to perform
its obligations hereunder or under any of the other Financing Agreements to
which it is a party or of Lender to enforce the Obligations or realize upon the
Collateral;
(i) Lender shall have completed a field review of the Records and
such other information with respect to the Collateral as Lender may require to
determine the amount of Revolving Loans available to Borrowers, the results of
which shall be satisfactory to Lender, not more than three (3) business days
prior to the date hereof;
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(j) Lender shall have received, in form and substance satisfactory to
Lender, all consents, waivers, acknowledgments and other agreements from third
persons which Lender may deem necessary or desirable in order to permit, protect
and perfect its security interests in and liens upon the Collateral or to
effectuate the provisions or purposes of this Agreement and the other Financing
Agreements, including, without limitation, acknowledgements by lessors,
mortgagees and warehousemen of Lender's security interests in the Collateral,
waivers by such persons of any security interests, liens or other claims by such
persons to the Collateral and agreements permitting Lender access to, and the
right to remain on, the premises to exercise its rights and remedies and
otherwise deal with the Collateral;
(k) Lender shall have received, in form and substance satisfactory to
Lender, the Environmental Indemnity Agreement, duly executed and delivered by
Charles Bradley; provided, however, that notwithstanding the delivery of such
Environmental Indemnity Agreement and any disclosure contained in any
environmental assessment reports and/or updates thereof and/or other information
provided to Lender in any Exhibit or Schedule hereto or otherwise with respect
to Borrowers' facilities subject to the Mortgages, whether delivered to Lender
on, prior to or after the date hereof, nothing contained herein shall be deemed
to waive, affect or impair Lender's right to rely on (i) such reports or updates
thereof or information or any additional environmental reports and/or updates
thereof with respect to Borrowers' facilities subject to the Mortgages, whether
delivered to Lender on, prior to or after the date hereof and (ii) the
Environmental Indemnity Agreement in accordance with its terms;
(l) Lender shall have received, in form and substance satisfactory to
Lender, a valid and effective title insurance policy issued by a company and
agent acceptable to Lender (i) insuring the priority, amount and sufficiency of
the Mortgages, (ii) insuring against matters that would be disclosed by surveys
and (iii) containing any legally available endorsements, assurances or
affirmative coverage requested by Lender for protection of its interests;
(m) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(n) Lender shall have received, in form and substance satisfactory to
Lender, subordination agreements between Lender and each of Charles Bradley,
Reunion, Allan Bir, CGII, Chatwins and the Apex Principals, as acknowledged by
Borrowers, each duly authorized and/or executed and delivered by each of Charles
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Bradley, Allan Bir, CGII, Chatwins and the Apex Principals and Borrowers, as the
case may be;
(o) Lender shall have received, in form and substance satisfactory to
Lender, (i) the Limited Guarantee, duly executed and delivered by Charles
Bradley and (ii) a Guarantee by each Borrower guaranteeing the Obligations of
the other Borrower, each duly executed and delivered by each Borrower;
(p) Lender shall have received, in form and substance satisfactory to
Lender, the opinion letter of counsel(s) to Borrowers and Charles Bradley with
respect to the Merger Agreements, the effectiveness of the Merger as of the date
hereof, the Financing Agreements and the security interests and liens of Lender
with respect to the Collateral and such other matters as Lender may request;
(q) Lender shall have received, in form and substance satisfactory to
Lender, such opinion letters of counsel to OMPC and Rostone with respect to the
Merger Agreements, upon which Lender may expressly rely;
(r) Reunion, as the parent of OMPC, shall have received and delivered
to Lender, in form and substance satisfactory to Lender, a copy of the fairness
opinion, from Prudential Securities, Inc. or another nationally recognized
investment advisory company with respect to the fairness of the Merger to
Reunion;
(s) Lender shall have received, in form and substance satisfactory to
Lender, all releases, terminations and such other documents to evidence and
effectuate the termination by Apex Capital Partners, L.P. of its Consulting
Agreement and the assignment by Rostone to, and the assumption by CGII of
Stanwich Partners' Consulting Agreement, and the consent by Stanwich Partners
thereto, and as to both Consulting Agreements, the satisfaction or release of
all existing and future obligations of Rostone and ORC thereunder;
(t) Borrowers shall have Excess Availability as determined by Lender,
as of the Effective Date, in an amount not less than $500,000 after giving
effect to the initial Loans made or to be made and Letter of Credit
Accommodations issued or to be issued in connection with the initial
transactions hereunder; and
(u) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender,
in form and substance satisfactory to Lender.
5.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.
Each of the following is an additional condition
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precedent to Lender making Loans and/or providing Letter of Credit
Accommodations to Borrowers, including the initial Loans and any future Loans
and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan or providing each such
Letter of Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no event or condition which, with notice
or passage of time or both, would constitute an Event of Default, shall exist or
have occurred and be continuing on and as of the date of the making of such Loan
or providing each such Letter of Credit Accommodation and after giving effect
thereto.
SECTION 6. GRANT OF SECURITY INTEREST
--------------------------
To secure payment and performance of all Obligations (except for the Real
Property located in the State of New York, which shall only secure the
Obligations to the extent set forth in the Mortgage covering such Real
Property), Borrowers hereby grant to Lender, and hereby confirm, reaffirm and
restate the prior grant to Lender under the OMPC Financing Agreements of, a
continuing security interest in, a lien upon, and a right of set off against,
and hereby assign to Lender as security, the following property and interests in
property of Borrowers, whether now owned or hereafter acquired or existing, and
wherever located (collectively, the "Collateral"):
6.1 Accounts;
6.2 all present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee, choses in
action and other claims and existing and future leasehold interests in
equipment, real estate and fixtures), chattel paper, documents, instruments,
letters of credit, bankers' acceptances and guaranties;
6.3 all present and future monies, securities, credit balances, deposits,
deposit accounts and other property of Borrowers now or hereafter held or
received by or in transit to Lender or its affiliates or at any other depository
or other institution from or for the account of Borrowers, whether for
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safekeeping, pledge, custody, transmission, collection or otherwise, and all
present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including,
without limitation, (i) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (ii) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (iii) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing,
Accounts or other Collateral, including, without limitation, returned,
repossessed and reclaimed goods, and (iv) deposits by and property of account
debtors or other persons securing the obligations of account debtors;
6.4 Inventory;
6.5 Equipment;
6.6 Real Property;
6.7 Records; and
6.8 all products and proceeds of the foregoing, in any form, including,
without limitation, insurance proceeds and all claims against third parties for
loss or damage to or destruction of any or all of the foregoing.
SECTION 7. COLLECTION AND ADMINISTRATION
-----------------------------
7.1 Borrowers' Loan Accounts. Lender shall maintain one or more loan
account(s) on its books for each Borrower in which shall be recorded (a) all
Loans, Letter of Credit Accommodations and other Obligations and the Collateral,
(b) all payments made by or on behalf of each Borrower and (c) all other
appropriate debits and credits as provided in this Agreement, including, without
limitation, fees, charges, costs, expenses and interest. All entries in the
loan account(s) shall be made in accordance with Lender's customary practices as
in effect from time to time.
7.2 Statements. Lender shall render to ORC on behalf of Borrowers each
month a statement setting forth the balance in each Borrower's loan account(s)
maintained by Lender for each Borrower pursuant to the provisions of this
Agreement, including principal, interest, fees, costs and expenses. Each such
statement shall be subject to subsequent adjustment by Lender but shall, absent
manifest errors or omissions, be considered correct and deemed accepted by
Borrowers and conclusively binding upon Borrowers as an account stated except to
the extent that Lender receives a written notice from Borrowers of any specific
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exceptions of Borrowers thereto within thirty (30) days after the date such
statement has been mailed by Lender. Until such time as Lender shall have
rendered to Borrowers a written statement as provided above, the balance in each
Borrower's loan account(s) shall be presumptive evidence of the amounts due and
owing to Lender by such Borrower.
7.3 Collection of Accounts.
----------------------
(a) Borrowers shall establish and maintain, at their expense,
separate blocked accounts or lockboxes and related blocked accounts (in either
case, "Blocked Accounts"), as Lender may specify, with such banks as are
acceptable to Lender into which each Borrower shall promptly deposit and direct
its respective account debtors to directly remit all payments on Accounts and
all payments constituting proceeds of Inventory or other Collateral in the
identical form in which such payments are made, whether by cash, check or other
manner. The banks at which the Blocked Accounts are established shall enter
into an agreement, in form and substance satisfactory to Lender, providing that
all items received or deposited in the Blocked Accounts are the property of
Lender, that the depository bank has no lien upon, or right to setoff against,
the Blocked Accounts, the items received for deposit therein, or the funds from
time to time on deposit therein and that the depository bank will wire, or
otherwise transfer, in immediately available funds, on a daily basis, all funds
received or deposited into the Blocked Accounts to such bank account of Lender
as Lender may from time to time designate for such purpose ("Payment Account").
Borrowers agree that all payments made to such Blocked Accounts or other funds
received and collected by Lender, whether on the Accounts or as proceeds of
Inventory or other Collateral or otherwise shall be the property of Lender.
(b) For purposes of calculating interest on the Obligations, such
payments or other funds received will be applied (conditional upon final
collection) to the Obligations two (2) business days following the date of
receipt of immediately available funds by Lender in the Payment Account. For
purposes of calculating the amount of the Revolving Loans available to each
Borrower such payments will be applied (conditional upon final collection) to
the Obligations on the business day of receipt by Lender in the Payment Account,
if such payments are received within sufficient time (in accordance with
Lender's usual and customary practices as in effect from time to time) to credit
such Borrower's loan account on such day, and if not, then on the next business
day.
(c) Borrowers and all of their affiliates, subsidiaries,
shareholders, directors, employees or agents shall, acting as trustee for
Lender, receive, as the property of Lender, any monies, checks, notes, drafts or
any other payment relating
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to and/or proceeds of Accounts or other Collateral which come into their
possession or under their control and immediately upon receipt thereof, shall
deposit or cause the same to be deposited in the Blocked Accounts, or remit the
same or cause the same to be remitted, in kind, to Lender. In no event shall
the same be commingled with either Borrowers' own funds. Borrowers agree to
reimburse Lender on demand for any amounts owed or paid to any bank at which a
Blocked Account is established or any other bank or person involved in the
transfer of funds to or from the Blocked Accounts arising out of Lender's
payments to or indemnification of such bank or person. The obligation of
Borrowers to reimburse Lender for such amounts pursuant to this Section 7.3
shall survive the termination or non-renewal of this Agreement.
(d) Until separate Blocked Accounts are established for each Borrower
as required pursuant to Section 7.3(a) hereof, Lender may apply any proceeds of
Accounts or other Collateral to the Obligations of ORC, subject to weekly
reallocation of collections and adjustments by Lender to the Revolving Loan
Obligations and Revolving Loan availability calculations as to each of ORC and
OMPC-NC, based on collection reconciliation reports delivered by Borrowers to
Lender not less frequently than once each week that shall allocate to the
applicable Borrower and its Accounts any proceeds that are received in the
Blocked Account since the period covered by the most recent such reconciliation
report delivered to Lender.
7.4 Payments. All Obligations shall be payable to the Payment Account as
provided in Section 7.3 hereof or such other place as Lender may designate from
time to time. Lender may apply payments received or collected from Borrowers or
for the account of Borrowers (including, without limitation, the monetary
proceeds of collections or of realization upon any Collateral) to such of the
Obligations, whether or not then due, in such order and manner as Lender
determines; provided, that, so long as no Event of Default or event which with
notice or passage of time or both would constitute an Event of Default has
occurred and is continuing or exists, Lender shall not apply any such payments
or collections to the Obligations in respect of the Term Loans not then due. At
Lender's option, all principal, interest, fees, costs, expenses and other
charges provided for in this Agreement or the other Financing Agreements may be
charged directly to the loan account(s) of Borrowers. Borrowers shall make all
payments to Lender on the Obligations free and clear of, and without deduction
or withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Lender is required
to surrender or return such payment or proceeds to any Person for any reason,
then the Obligations intended to be
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satisfied by such payment or proceeds shall be reinstated and continue and this
Agreement shall continue in full force and effect as if such payment or proceeds
had not been received by Lender. Borrowers shall be liable to pay to Lender,
and does hereby indemnify and hold Lender harmless for the amount of any
payments or proceeds surrendered or returned. This Section 7.4 shall remain
effective notwithstanding any contrary action which may be taken by Lender in
reliance upon such payment or proceeds. This Section 7.4 shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
7.5 Authorization to Make Loans. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of a Borrower or
other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of
Credit Accommodations hereunder shall specify the date on which the requested
advance is to be made or Letter of Credit Accommodations established (which day
shall be a business day) and the amount of the requested Loan. Requests
received after 11:00 a.m. New York City time on any day shall be deemed to have
been made as of the opening of business on the immediately following business
day. All Loans and Letter of Credit Accommodations under this Agreement shall
be conclusively presumed to have been made to, and at the request of and for the
benefit of, a Borrower when deposited to the credit of such Borrower or
otherwise disbursed or established in accordance with the instructions of such
Borrower or in accordance with the terms and conditions of this Agreement.
7.6 Use of Proceeds. Borrowers shall use the initial proceeds of the
Loans provided by Lender to Borrowers hereunder only for: (a) payments to each
of the persons listed in the disbursement direction letter furnished by
Borrowers to Lender on or about the date hereof and (b) costs, expenses and fees
in connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided by Lender to Borrowers pursuant to the provisions
hereof shall be used by Borrowers only for general operating, working capital
and other proper corporate purposes of Borrowers not otherwise prohibited by the
terms hereof. None of the proceeds will be used, directly or indirectly, for
the purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause any of
the Loans to be considered a "purpose credit" within the meaning of Regulation G
of the Board of Governors of the Federal Reserve System, as amended.
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SECTION 8. COLLATERAL REPORTING AND COVENANTS
----------------------------------
8.1 Collateral Reporting. Borrowers shall provide Lender with the
following documents in a form satisfactory to Lender: (a) on a regular basis as
required by Lender, a schedule of Accounts; (b) on a monthly basis or more
frequently as Lender may request, (i) perpetual inventory reports, (ii)
inventory reports by category and (iii) agings of accounts payable, (c) upon
Lender's request, (i) copies of customer statements and credit memos, remittance
advices and reports, and copies of deposit slips and bank statements, (ii)
copies of shipping and delivery documents, and (iii) copies of purchase orders,
invoices and delivery documents for Inventory and Equipment acquired by
Borrowers; (d) agings of accounts receivable on a monthly basis or more
frequently as Lender may request; and (e) such other reports as to the
Collateral as Lender shall request from time to time. If any of Borrowers'
records or reports of the Collateral are prepared or maintained by an accounting
service, contractor, shipper or other agent, Borrowers hereby irrevocably
authorize such service, contractor, shipper or agent to deliver such records,
reports, and related documents to Lender and to follow Lender's instructions
with respect to further services at any time that an Event of Default exists or
has occurred and is continuing.
8.2 Accounts Covenants.
------------------
(a) Without limiting the reporting requirements of Borrowers
elsewhere set forth in this Agreement or in any of the other Financing
Agreements, each Borrower shall promptly report to Lender on a separate basis:
(i) any material delay in such Borrower's performance of any of its obligations
to any account debtor or the assertion of any claims, offsets, defenses or
counterclaims by any account debtor, or any disputes with account debtors
involving amounts in excess of $50,000 in the aggregate for any one account
debtor, (ii) any settlement, adjustment or compromise by such Borrower of any
Account(s) involving an aggregate reduction in excess of $50,000 in respect of
the outstanding Accounts of any one account debtor, (iii) all material adverse
information relating to the financial condition of any account debtor and (iv)
any event or circumstance which, to such Borrower's knowledge would cause Lender
to consider any then existing Accounts as no longer constituting Eligible
Accounts. No credit, discount, allowance or extension or agreement for any of
the foregoing shall be granted to any account debtor without Lender's consent,
except in the ordinary course of such Borrower's business in accordance with
practices and policies previously disclosed in writing to Lender. So long as no
Event of Default exists or has occurred and is continuing, Borrowers may settle,
adjust or compromise any claim, offset, counterclaim or dispute with any of
their account debtors. At any time that an Event of Default exists or has
occurred and is
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continuing, Lender shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with account
debtors of Borrowers or grant any credits, discounts or allowances.
(b) Without limiting the other reporting Obligations of Borrowers
hereunder, Borrowers shall promptly report on a separate basis to Lender any
return of Inventory by an account debtor having a sales price in excess of
$50,000. At any time that Inventory is returned, reclaimed or repossessed, the
related Account shall not be deemed an Eligible Account. In the event any
account debtor returns Inventory when an Event of Default exists or has occurred
and is continuing, each Borrower shall, upon Lender's request, (i) hold the
returned Inventory in trust for Lender, (ii) segregate all returned Inventory
from all of its other property, (iii) dispose of the returned Inventory solely
according to Lender's instructions, and (iv) not issue any credits, discounts or
allowances with respect thereto without Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to Lender in
accordance with this Agreement and except for credits, discounts, allowances or
extensions made or given by a Borrower in the ordinary course of such Borrower's
business in accordance with practices and policies previously disclosed to
Lender, (iv) there shall be no setoffs, deductions, contras, defenses,
counterclaims or disputes existing or asserted with respect thereto except as
reported to Lender in accordance with the terms of this Agreement, (v) none of
the transactions giving rise thereto will violate any applicable State or
Federal laws or regulations, except for such violations by either Borrower that
Lender determines, in good faith, would not have a material adverse effect on
any Collateral or on either Borrower's financial condition, results of
operations or business; and (vi) all documentation relating to any of the
foregoing shall be legally sufficient under such laws and regulations and all
such documentation will be legally enforceable in accordance with its terms.
(d) Lender shall have the right at any time or times, in Lender's
name or in the name of a nominee of Lender, to verify the validity, amount or
any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
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(e) Each Borrower shall deliver or cause to be delivered to Lender,
with appropriate endorsement and assignment, with full recourse to such
Borrower, all chattel paper and instruments which such Borrower now owns or may
at any time acquire immediately upon such Borrower's receipt thereof, except as
Lender may otherwise agree.
(f) Lender may, at any time or times that an Event of Default exists
or has occurred and is continuing, (i) notify any or all account debtors that
the Accounts have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors to make
payment of Accounts directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable for its failure to collect or enforce
the payment thereof nor for the negligence of its agents or attorneys with
respect thereto and (iv) take whatever other action Lender may deem necessary or
desirable for the protection of its interests in the Collateral or the
Obligations. At any time that an Event of Default exists or has occurred and is
continuing, at Lender's request, all invoices and statements sent to any account
debtor shall state that the Accounts and such other obligations have been
assigned to Lender and are payable directly and only to Lender and Borrowers
shall deliver to Lender such originals of documents evidencing the sale and
delivery of goods or the performance of services giving rise to any Accounts as
Lender may require.
8.3 Inventory Covenants. With respect to the Inventory: (a) each Borrower
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, such Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) each Borrower shall conduct
physical counts of the Inventory at least once in each calendar year using a
counting methodology satisfactory to Lender, but at any time or times as Lender
may request on or after an Event of Default, and promptly following such
physical inventory shall supply Lender with a report in the form and with such
specificity as may be reasonably satisfactory to Lender concerning such physical
count; (c) Borrowers shall not remove any Inventory from the locations set forth
or permitted herein, without the prior written consent of Lender, except for
sales of Inventory in the ordinary course of each Borrower's business and except
to move Inventory directly from one location set forth or permitted herein to
another such location; (d) upon Lender's
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request, Borrowers shall, at their expense, no more than once in any twelve (12)
month period, but at any time or times as Lender may request on or after an
Event of Default, deliver or cause to be delivered to Lender written reports or
appraisals as to the Inventory in form, scope and methodology acceptable to
Lender and by an appraiser acceptable to Lender, addressed to Lender or upon
which Lender is expressly permitted to rely; (e) each Borrower shall produce,
use, store and maintain the Inventory, with all reasonable care and caution and
in accordance with applicable standards of any insurance and in conformity with
applicable laws (including, but not limited to, the requirements of the Federal
Fair Labor Standards Act of 1938, as amended and all rules, regulations and
orders related thereto); (f) each Borrower assumes all responsibility and
liability arising from or relating to the production, use, sale or other
disposition of its Inventory; (g) Borrowers shall not sell Inventory to any
customer on approval, or any other basis which entitles the customer to return
or may obligate such Borrower to repurchase such Inventory; (h) each Borrower
shall keep its Inventory in good and marketable condition; and (i) Borrowers
shall, without prior written notice to Lender, acquire or accept any Inventory
on consignment or approval.
8.4 Equipment Covenants. With respect to the Equipment: (a) upon Lender's
request, Borrowers shall, at their expense, at any time or times as Lender may
request on or after an Event of Default, deliver or cause to be delivered to
Lender written reports or appraisals as to the Equipment in form, scope and
methodology acceptable to Lender and by an appraiser acceptable to Lender; (b)
Borrowers shall keep the Equipment in good order, repair, running and marketable
condition (ordinary wear and tear excepted); (c) Borrowers shall use the
Equipment with all reasonable care and caution and in accordance with applicable
standards of any insurance and in conformity with all applicable laws; (d) the
Equipment is and shall be used in Borrowers' business and not for personal,
family, household or farming use; (e) Borrowers shall not remove any Equipment,
or any equipment of Borrowers leased from any Person, from the locations set
forth or permitted herein, except (i) to the extent necessary to have any
Equipment repaired or maintained in the ordinary course of the business of
Borrowers or to move Equipment, or any equipment of Borrowers leased from any
Person, directly from one location set forth or permitted herein to another such
location, (ii) for the movement of motor vehicles used by or for the benefit of
Borrowers in the ordinary course of their business and (iii) for the movement of
Equipment, or any equipment of Borrowers leased from any Person, in each case of
the personally carried, portable type (such as lap top computers and
calculators) intended to be moved from one location to another by Borrowers'
employees in the ordinary course of Borrowers' business; (f) the Equipment is
now and shall remain personal property and Borrowers shall not permit any of the
Equipment to be or become a part of or affixed
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to real property; and (g) Borrowers assume all responsibility and liability
arising from the use of the Equipment.
8.5 Power of Attorney. Each Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as such Borrower's true
and lawful attorney-in-fact, and authorizes Lender, in either or both Borrower's
or Lender's name, to: (a) at any time an Event of Default or event which with
notice or passage of time or both would constitute an Event of Default exists or
has occurred and is continuing (i) demand payment on Accounts or other proceeds
of Inventory or other Collateral, (ii) enforce payment of Accounts by legal
proceedings or otherwise, (iii) exercise all of such Borrower's rights and
remedies to collect any Account or other Collateral, (iv) sell or assign any
Account upon such terms, for such amount and at such time or times as the Lender
deems advisable, (v) settle, adjust, compromise, extend or renew an Account,
(vi) discharge and release any Account, (vii) prepare, file and sign in such
Borrower's name on any proof of claim in bankruptcy or other similar document
against an account debtor, (viii) notify the post office authorities to change
the address for delivery of such Borrower's mail to an address designated by
Lender, and open and dispose of all mail addressed to such Borrower, and (ix) do
all acts and things which are necessary, in Lender's determination, to fulfill
Borrower's Obligations under this Agreement and the other Financing Agreements
and (b) at any time to (i) take control in any manner of any item of payment or
proceeds thereof, (ii) have access to any lockbox or postal box into which such
Borrower's mail is deposited, (iii) endorse in such Borrower's name upon any
items of payment or proceeds thereof and deposit the same in the Lender's
account for application to the Obligations, (iv) endorse in such Borrower's name
upon any of such Borrower's chattel paper, document, instrument, invoice, or
similar document or agreement relating to any Account or any goods pertaining
thereto or any other Collateral, (v) sign in such Borrower's name on any
verification of such Borrower's Accounts and notices thereof to account debtors
and (vi) execute in such Borrower's name and file any UCC financing statements
or amendments thereto. Each Borrower hereby releases Lender and its officers,
employees and designees from any liabilities arising from any act or acts under
this power of attorney and in furtherance thereof, whether of omission or
commission, except as a result of Lender's own wilful misconduct as determined
pursuant to a final non-appealable order of a court of competent jurisdiction.
8.6 Right to Cure. Lender may, at its option, at any time an Event of
Default or event which with notice or passage of time or both would constitute
an Event of Default exists or has occurred and is continuing, (a) cure any
default of a Borrower under any agreement with a third party or pay or bond on
appeal any judgment entered against such Borrower, (b) discharge taxes,
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liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and (c) pay any amount, incur any
expense or perform any act which, in Lender's judgment, is necessary or
appropriate to preserve, protect, insure or maintain the Collateral and the
rights of Lender with respect thereto. Lender shall promptly notify such
Borrower that Lender has made any such payment. Lender may add any amounts so
expended to the Obligations and charge any loan account of Borrowers' therefor,
such amounts to be repayable by Borrowers on demand. Lender shall be under no
obligation to effect such cure, payment or bonding and shall not, by doing so,
be deemed to have assumed any obligation or liability of Borrowers. Any payment
made or other action taken by Lender under this Section shall be without
prejudice to any right to assert an Event of Default or incipient Event of
Default hereunder and to proceed accordingly.
8.7 Access to Premises. From time to time as requested by Lender, at the
cost and expense of Borrowers, (a) Lender or its designee shall have complete
access to all of Borrowers' premises during normal business hours and after
notice to Borrowers, or at any time and without notice to Borrowers if an Event
of Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrowers' books
and records, including, without limitation, the Records, and (b) Borrowers shall
promptly furnish to Lender such copies of such books and records or extracts
therefrom as Lender may request, and (c) use during normal business hours such
of Borrowers' personnel, equipment, supplies and premises as may be reasonably
necessary for the foregoing and if an Event of Default exists or has occurred
and is continuing for the collection of Accounts and realization of other
Collateral.
SECTION 9. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrowers hereby jointly and generally represent and warrant to Lender the
following (which shall survive the execution and delivery of this Agreement),
the truth and accuracy of which are a continuing condition of the making of
Loans and providing Letter of Credit Accommodations by Lender to Borrowers:
9.1 Corporate Existence, Power and Authority; Subsidiaries. Each Borrower
is a corporation duly organized and in good standing under the laws of its state
of incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on such Borrower's financial condition,
results of operation or business or the rights of Lender in or to any of the
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Collateral. The execution, delivery and performance of this Agreement, the
other Financing Agreements and the transactions contemplated hereunder and
thereunder are all within each Borrower's corporate powers, have been duly
authorized and are not in contravention of law or the terms of each Borrower's
certificate of incorporation, by-laws, or other organizational documentation, or
any indenture, agreement or undertaking to which either Borrower is a party or
by which either Borrower or its property are bound. This Agreement and the
other Financing Agreements constitute legal, valid and binding obligations of
Borrowers enforceable in accordance with their respective terms. Borrowers do
not have any subsidiaries except as set forth on the Information Certificates.
9.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrowers which have been or may hereafter be delivered
by Borrowers to Lender have been prepared in accordance with GAAP and fairly
present the financial condition and the results of operation of Borrowers as at
the dates and for the periods set forth therein. Except as disclosed in any
interim financial statements furnished by Borrowers to Lender prior to the date
of this Agreement, there has been no material adverse change in the assets,
liabilities, properties and condition, financial or otherwise, of Borrowers,
since the date of the most recent audited financial statements furnished by
Borrowers to Lender prior to the date of this Agreement.
9.3 Chief Executive Office; Collateral Locations. The chief executive
office of each Borrower and each Borrower's Records concerning Accounts are
located only at the address set forth below and such Borrower's only other
places of business and the only other locations of Collateral, if any, are the
addresses set forth in such Borrower's Information Certificate, subject to the
right of each Borrower to establish new locations in accordance with Section
10.2 below. The Information Certificate of each Borrower correctly identifies,
as of the date hereof, any of such locations which are not owned by such
Borrower and sets forth the owners and/or operators thereof and to the best of
such Borrower's knowledge, the holders of any mortgages on such locations.
9.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 9.4
hereto and the other liens permitted under Section 10.9 hereof. Each Borrower
has good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically
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listed on Schedule 9.4 hereto or permitted under Section 10.9 hereof.
9.5 Tax Returns. Borrowers have filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be filed
by them (without requests for extension except as previously disclosed in
writing to Lender), except where Lender determines, in good faith, that the
failure by either Borrower to so file would not have a material adverse effect
on any Collateral or on either Borrower's financial condition, results of
operations or business. To the best of the knowledge of each Borrower, all
information in such tax returns, reports and declarations is complete and
accurate in all material respects. Each Borrower has paid or caused to be paid
all taxes due and payable or claimed due and payable in any assessment received
by it, except taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to such Borrower and
with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid
Federal, State, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed.
9.6 Litigation. Except as set forth on the Information Certificate, as of
the date hereof, there is no present investigation by any governmental agency
pending, or to the best of Borrowers' knowledge threatened, against or affecting
Borrowers, their assets or business and there is no action, suit, proceeding or
claim by any Person pending, or to the best of Borrowers' knowledge threatened,
against Borrowers or their assets or goodwill, or against or affecting any
transactions contemplated by this Agreement, which if adversely determined
against Borrowers would result in any material adverse change in the assets,
business or prospects of Borrowers or would impair the ability of Borrowers to
perform their obligations hereunder or under any of the other Financing
Agreements to which Borrowers are parties or of Lender to enforce any
Obligations or realize upon any Collateral.
9.7 Compliance with Other Agreements and Applicable Laws. Borrowers are
not in default in any material respect under, or in violation in any material
respect of any of the terms of, any agreement, contract, instrument, lease or
other commitment to which it is a party or by which it or any of its assets are
bound and each Borrower is in compliance in all material respects with all
applicable provisions of laws, rules, regulations, licenses, permits, approvals
and orders of any foreign, Federal, State or local governmental authority,
except where Lender determines, in good faith, that the failure by either
Borrower to be in compliance would not have a material adverse effect on any
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Collateral or on either Borrower's financial condition, results of operations or
business.
9.8 Environmental Compliance.
------------------------
(a) Except as set forth on Schedule 9.8 hereto, Borrowers have not,
and, prior to the Merger, Rostone has not, generated, used, stored, treated,
transported, manufactured, handled, produced or disposed of any Hazardous
Materials, on or off its premises (whether or not owned by Borrowers) in any
manner which at any time violated or now violates any applicable Environmental
Law or any license, permit, certificate, approval or similar authorization
thereunder, unless fully cured prior to the date hereof, and the operations of
Borrowers complies in all material respects with all Environmental Laws and all
licenses, permits, certificates, approvals and similar authorizations
thereunder.
(b) Except as set forth on Schedule 9.8 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person nor is any pending or
to the best of Borrowers' knowledge threatened, with respect to any non-
compliance with or violation of the requirements of any Environmental Law at any
time by Borrowers or, prior to the Merger, by Rostone, or the release, spill or
discharge, threatened or actual, of any Hazardous Material or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or any other environmental, health or safety
matter, which affects Borrowers or their business, operations or assets or any
properties at which Borrowers or Rostone or their predecessors have transported,
stored or disposed of any Hazardous Materials.
(c) Borrowers have no material liability (contingent or otherwise)
in connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.
(d) Each Borrower has all licenses, permits, certificates, approvals
or similar authorizations required to be obtained or filed in connection with
the operations of such Borrower under any Environmental Law all of such
licenses, permits, certificates, approvals or similar authorizations are valid
and in full force and effect.
9.9 Employee Benefits.
-----------------
(a) None of Borrowers or Rostone has engaged in any transaction in
connection with which Borrowers or any of their ERISA Affiliates could be
subject to either a civil penalty
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assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of
the Code, including any accumulated funding deficiency described in Section
9.9(c) hereof and any deficiency with respect to vested accrued benefits
described in Section 9.9(d) hereof.
(b) No liability to the Pension Benefit Guaranty Corporation, other
than Borrowers' liability, which is not past due, for premium payments required
pursuant to Title IV of ERISA, has been or is expected by Borrowers to be
incurred with respect to any employee benefit plan of Borrowers or any of their
ERISA Affiliates. There has been no reportable event (within the meaning of
Section 4043(b) of ERISA) or any other event or condition with respect to any
employee benefit plan of Borrowers or any of their ERISA Affiliates which
presents a risk of termination of any such plan by the Pension Benefit Guaranty
Corporation.
(c) Full payment has been made of all amounts which Borrowers or any
of their ERISA Affiliates is required under Section 302 of ERISA and Section 412
of the Code to have paid under the terms of each employee benefit plan as
contributions to such plan within the time limits prescribed by law, and no
accumulated funding deficiency (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, exists with respect to any employee
benefit plan, including any penalty or tax described in Section 9.9(a) hereof
and any deficiency with respect to vested accrued benefits described in Section
9.9(d) hereof.
(d) The current value of all vested accrued benefits under all
employee benefit plans maintained by Borrowers that are subject to Title IV of
ERISA does not exceed the current value of the assets of such plans allocable to
such vested accrued benefits, including any penalty or tax described in Section
9.9(a) hereof and any accumulated funding deficiency described in Section 9.9(c)
hereof. The terms "current value" and "accrued benefit" have the meanings
specified in ERISA.
(e) None of Borrowers or Rostone nor any of their ERISA Affiliates is
or has ever been obligated to contribute to any "multiemployer plan" (as such
term is defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of
ERISA.
9.10 Merger.
------
(a) The Merger is valid and effective in accordance with the terms of
the Merger Agreements, and the corporation statutes of the States of Delaware
and New York and ORC is the surviving corporation pursuant to the Merger. The
name of ORC as the surviving corporation pursuant to the Merger has been changed
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in accordance with the applicable corporate state laws to its name as set forth
herein.
(b) All actions and proceedings required by the Merger Agreements,
applicable law and regulation (including, but not limited to, compliance with
the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended, if
applicable) have been taken and the transactions required thereunder had been
duly and validly taken and consummated.
(c) No court of competent jurisdiction has issued any injunction,
restraining order or other order which has prohibited consummation of the
transactions described in the Merger Agreements and no governmental action or
proceeding has been threatened or commenced seeking any injunction, restraining
order or other order which seeks to void or otherwise modify the Merger or other
transactions described in the Merger Agreements or hereunder.
(d) ORC has delivered, or caused to be delivered, to Lender, true,
correct and complete copies of the Merger Agreements.
9.11 Capitalization.
--------------
(a) As of the date hereof, all of the issued and outstanding shares
of capital stock of each Borrower are directly and beneficially owned and held
by the shareholders set forth on its Information Certificate who own the number
of shares or percentages of the outstanding shares set forth next to their names
and all of such shares have been duly authorized and are fully paid and non-
assessable, free and clear of all claims, liens, pledges and encumbrances of any
kind, except as disclosed prior to the date hereof in writing to Lender or in
such Information Certificate.
(b) Each Borrower is solvent and will continue to be solvent
after the creation of the Obligations, the security interests of Lender and the
other transaction contemplated hereunder, is able to pay its debts as they
mature and has (and has reason to believe it will continue to have) sufficient
capital (and not unreasonably small capital) to carry on its business and all
businesses in which it is about to engage. The assets and properties of each
Borrower at a fair valuation and at their present fair salable values are, and
will be, greater than the indebtedness of Borrowers, including subordinated and
contingent liabilities computed at the amount which, to the best of Borrowers'
knowledge, represents an amount which can reasonably be expected to become an
actual or matured liability.
9.12 Accuracy and Completeness of Information. All information furnished
by or on behalf of Borrowers in writing to
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Lender in connection with this Agreement or any of the other Financing
Agreements or any transaction contemplated hereby or thereby, including, without
limitation, all information on the Information Certificate is true and correct
in all material respects on the date as of which such information is dated or
certified and does not omit any material fact necessary in order to make such
information not misleading. No event or circumstance has occurred which has had
or could reasonably be expected to have a material adverse affect on the
business, assets or prospects of Borrowers, which has not been fully and
accurately disclosed to Lender in writing.
9.13 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder, except for those representations and
warranties expressly limited by the phrase "as of the date hereof," and shall be
conclusively presumed to have been relied on by Lender regardless of any
investigation made or information possessed by Lender. The representations and
warranties set forth herein shall be cumulative and in addition to any other
representations or warranties which Borrowers shall now or hereafter give, or
cause to be given, to Lender.
SECTION 10. AFFIRMATIVE AND NEGATIVE COVENANTS
----------------------------------
10.1 Maintenance of Existence. Each Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on its business as presently or proposed to be
conducted, except where Lender determines, in good faith, that the failure to do
so by either Borrower would not have a material adverse effect on any Collateral
or on either Borrower's financial condition, results of operations or business.
Each Borrower shall give Lender thirty (30) days prior written notice of any
proposed change in its corporate name, which notice shall set forth the new name
and such Borrower shall deliver to Lender a copy of the amendment to the
Certificate of Incorporation of such Borrower providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation of such
Borrower as soon as it is available.
10.2 New Collateral Locations. Each Borrower may open any new location
within the United States provided such Borrower (a) gives Lender twenty (20)
days prior written notice of the intended opening of any such new location and
(b) executes and
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delivers, or causes to be executed and delivered, to Lender such agreements,
documents, and instruments as Lender may deem reasonably necessary or desirable
to protect its interests in the Collateral at such location, including, without
limitation, UCC financing statements.
10.3 Compliance with Laws, Regulations, Etc.
---------------------------------------
(a) Each Borrower shall, at all times, comply in all material respects
with all laws, rules, regulations, licenses, permits, approvals and orders
applicable to it and duly observe all requirements of any Federal, State or
local governmental authority, including, without limitation, the Employee
Retirement Security Act of 1974, as amended, the Occupational Safety and Hazard
Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, and
all statutes, rules, regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including, without
limitation, all of the Environmental Laws.
(b) Each Borrower shall establish and maintain, at its expense, a
system to assure and monitor its continued compliance with all Environmental
Laws in all of its operations, which system shall include annual reviews of such
compliance by employees or agents of such Borrower who are familiar with the
requirements of the Environmental Laws. Copies of all environmental surveys,
audits, assessments, feasibility studies and results of remedial investigations
shall be promptly furnished, or caused to be furnished, by Borrowers to Lender.
Each Borrower shall take prompt and appropriate action to respond to any non-
compliance with any of the Environmental Laws and shall regularly report to
Lender on such response.
(c) Each Borrower shall give both oral and written notice to Lender
immediately upon such Borrower's receipt of any notice of, or either Borrower's
otherwise obtaining knowledge of, (i) the occurrence of any event involving the
release, spill or discharge, threatened or actual, of any Hazardous Material or
(ii) any investigation, proceeding, complaint, order, directive, claims,
citation or notice with respect to: (A) any non-compliance with or violation of
any Environmental Law by either Borrower or (B) the release, spill or discharge,
threatened or actual, of any Hazardous Material or (C) the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or (D) any other environmental, health or
safety matter, which affects either Borrower or its business, operations or
assets or any properties at which either Borrower transported, stored or
disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever Lender
reasonably determines that there is non-
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compliance, or any condition which requires any action by or on behalf of
Borrowers in order to avoid any material non-compliance, with any Environmental
Law, Borrowers shall, at Lender's request and Borrowers' expense: (i) cause an
independent environmental engineer acceptable to Lender to conduct such tests of
the site where such Borrower's non-compliance or alleged non-compliance with
such Environmental Laws has occurred as to such non-compliance and prepare and
deliver to Lender a report as to such non-compliance setting forth the results
of such tests, a proposed plan for responding to any environmental problems
described therein, and an estimate of the costs thereof and (ii) provide to
Lender a supplemental report of such engineer whenever the scope of such non-
compliance, or such Borrower's response thereto or the estimated costs thereof,
shall change in any material respect.
(e) Each Borrower shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including attorneys' fees and legal expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including, without limitation, the costs of
any required or necessary repair, cleanup or other remedial work with respect to
any property of Borrowers and the preparation and implementation of any closure,
remedial or other required plans; provided, however, that Borrowers'
indemnification Obligations under this Section 10.3(e) shall not include any
such losses, claims, damages, liabilities, costs and expenses directly caused or
incurred solely by reason of the willful misconduct of Lender or such other
Person otherwise to be indemnified and held harmless under this Section 10.3(e)
as determined by a final, non-appealable judgment of a court of competent
jurisdiction. All representations, warranties, covenants and indemnifications
in this Section 10.3 shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
10.4 [Intentionally Omitted.]
10.5 Payment of Taxes and Claims. Borrowers shall duly pay and discharge
all taxes, assessments, contributions and governmental charges upon or against
them or their properties or assets, except for taxes the validity of which are
being contested in good faith by appropriate proceedings diligently pursued and
available to Borrowers and with respect to which adequate reserves have been set
aside on their books in accordance with GAAP. Borrowers shall be liable for any
tax or penalties imposed on Lender as a result of the financing arrangements
provided for herein and Borrowers agree to indemnify and hold Lender harmless
with respect to the foregoing, and to
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repay to Lender on demand the amount thereof, and until paid by Borrowers such
amount shall be added and deemed part of the Loans; provided, that, nothing
contained herein shall be construed to require Borrowers to pay any income or
franchise taxes attributable to the income of Lender from any amounts charged or
paid hereunder to Lender. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
10.6 Insurance. Borrowers shall, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated. Said policies
of insurance shall be satisfactory to Lender as to form, amount and insurer.
Borrowers shall furnish certificates, policies or endorsements to Lender as
Lender shall require as proof of such insurance, and, if Borrowers fail to do
so, Lender is authorized, but not required, to obtain such insurance at the
expense of Borrowers. All policies shall provide for at least thirty (30) days
prior written notice to Lender of any cancellation or reduction of coverage and
that Lender may act as attorney for Borrowers in obtaining, and at any time an
Event of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrowers shall cause Lender to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrowers shall obtain non-
contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by Borrowers or any of their affiliates.
At its option, Lender may apply any insurance proceeds received by Lender at any
time to the cost of repairs or replacement of Collateral and/or to payment of
the Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations; provided, however, Lender shall not apply any insurance proceeds
payable in respect of the damage to or loss or destruction of Inventory to the
payment of principal of the Term Loans unless an Event of Default exists or has
occurred and is continuing.
10.7 Financial Statements and Other Information.
------------------------------------------
(a) Borrowers shall keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in relation
to the Collateral and the business of Borrowers and their subsidiaries (if any)
in accordance with GAAP and Borrowers shall furnish or cause to be furnished to
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Lender: (i) within thirty (30) days after the end of each fiscal month, monthly
unaudited consolidated financial statements, and, if Borrowers have any
subsidiaries, unaudited consolidating financial statements (including in each
case balance sheets, statements of income and loss, statements of cash flow and
statements of shareholders' equity), all in reasonable detail, fairly presenting
the financial position and the results of the operations of Borrowers and their
subsidiaries as of the end of and through such fiscal month and (ii) within
ninety (90) days after the end of each fiscal year, audited consolidated
financial statements and, if Borrowers have any subsidiaries, audited
consolidating financial statements of Borrowers and their subsidiaries
(including in each case balance sheets, statements of income and loss,
statements of cash flow and statements of shareholders' equity), and the
accompanying notes thereto, all in reasonable detail, fairly presenting the
financial position and the results of the operations of Borrowers and their
subsidiaries as of the end of and for such fiscal year, together with the
opinion of independent certified public accountants, which accountants shall be
an independent accounting firm selected by Borrowers and reasonably acceptable
to Lender, that such financial statements have been prepared in accordance with
GAAP, and present fairly the results of operations and financial condition of
Borrowers and their subsidiaries as of the end of and for the fiscal year then
ended.
(b) Borrowers shall promptly notify Lender in writing of the details
of (i) any loss, damage, investigation, action, suit, proceeding or claim in
excess of $100,000 relating to the Collateral or any other property which is
security for the Obligations or which would result in any material adverse
change in either Borrower's business, properties, assets, goodwill or condition,
financial or otherwise and (ii) the occurrence of any Event of Default or event
which, with the passage of time or giving of notice or both, would constitute an
Event of Default.
(c) Borrowers shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which Borrowers
send to their stockholders generally and copies of all reports and registration
statements which Borrowers file with the Securities and Exchange Commission, any
national securities exchange or the National Association of Securities Dealers,
Inc.
(d) Borrowers shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrowers, as Lender may, from time to time, reasonably
request. Lender is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business of Borrowers to any
court or other government agency or to any participant or assignee or
prospective participant or assignee.
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Borrowers hereby irrevocably authorize and direct all accountants or auditors to
deliver to Lender, at Borrowers' expense, copies of the financial statements of
Borrowers and any reports or management letters prepared by such accountants or
auditors on behalf of Borrowers and to disclose to Lender such information as
they may have regarding the business of Borrowers. Any documents, schedules,
invoices or other papers delivered to Lender may be destroyed or otherwise
disposed of by Lender one (1) year after the same are delivered to Lender,
except as otherwise designated by Borrowers to Lender in writing.
(e) Borrowers shall deliver, or cause to be delivered, to Lender,
within ninety (90) days after the date hereof, opening unaudited balance sheets
as of the Effective Date, prepared in accordance with GAAP that present fairly
the financial condition of Borrowers as of such date.
10.8 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Neither of
Borrowers shall, directly or indirectly, (a) merge into or with or consolidate
with any other Person or permit any other Person to merge into or with or
consolidate with it (b) sell, assign, lease, transfer, abandon or otherwise
dispose of any stock or indebtedness to any other Person or any of its assets to
any other Person (except for (i) sales of Inventory in the ordinary course of
business and (ii) the disposition of worn-out or obsolete Equipment or Equipment
no longer used in the businesses of Borrowers so long as (A) any proceeds are
paid to Lender and (B) such sales do not involve Equipment of both Borrowers
having an aggregate fair market value in excess of $100,000 for all such
Equipment disposed of in any fiscal year of Borrowers and (iii) the disposition
of investments permitted to be made pursuant to Section 10.11(b) hereof so long
as Lender has specifically waived in writing its right to obtain a perfected
security interest in such investments and (iv) non-exclusive licenses of patents
and trademarks in the ordinary course of such Borrower's business to non-
affiliated Persons for license periods not exceeding one (1) year, or (c) form
or acquire any subsidiaries, or (d) wind up, liquidate or dissolve, or (e) agree
to do any of the foregoing without the prior written consent of Lender.
10.9 Encumbrances. Neither of Borrowers shall create, incur, assume or
suffer to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including, without limitation, the Collateral, except: (a) liens and security
interests of Lender; (b) liens securing the payment of taxes, either not yet
overdue or the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to such Borrower and
with respect to which adequate reserves have been set aside on its books; (c)
non-consensual statutory liens (other than liens securing the payment
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of taxes) arising in the ordinary course of such Borrower's business to the
extent: (i) such liens secure indebtedness which is not overdue or (ii) such
liens secure indebtedness relating to claims or liabilities which are either (A)
fully insured and being defended at the sole cost and expense and at the sole
risk of the insurer or (B) being contested in good faith by appropriate
proceedings diligently pursued and available to such Borrower, in each case
under this clause (ii) prior to the commencement of foreclosure or other similar
proceedings and with respect to which adequate reserves have been set aside on
its books in accordance with GAAP; (d) zoning restrictions, easements, licenses,
covenants and other restrictions affecting the use of real property which do not
interfere in any material respect with the use of such real property or ordinary
conduct of the business of such Borrower as presently conducted thereon or
materially impair the value of the real property which may be subject thereto;
(e) purchase money security interests in Equipment (including capital leases) of
Borrowers and purchase money mortgages on Real Property of Borrowers securing
indebtedness in a principal amount not to exceed $10,000,000 in the aggregate at
any time outstanding for all such purchase money security interests in Equipment
(including capital leases) and purchase money mortgages on Real Property, and,
in any case, provided that (i) such security interests in Equipment (including
capital leases) and mortgages do not apply to (A) any property of Borrowers
other than the Equipment or Real Property so acquired or (B) any fixtures,
attachments, accessions or additions to any of the Real Property or Equipment of
Borrowers owned or leased by Borrowers on the date hereof or hereafter acquired,
other than any such after acquired Equipment secured by a purchase money
security interest (including capital leases) or purchase money mortgage
permitted hereunder, and (ii) the indebtedness secured thereby does not exceed
the cost of the Equipment or Real Property so acquired, as the case may be; (f)
liens incurred upon any property of Borrowers other than Collateral or deposits
in cash made in the ordinary course of business that are required or imposed by
Federal or State law in connection with workers' compensation, unemployment
insurance and other types of social security; (g) liens incurred upon any
property of Borrowers other than Collateral or deposits in cash made in the
ordinary course of business to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases (permitted under the terms
and conditions of this Agreement), government contracts, and performance and
return-of-money bonds so long as the obligations secured thereby are not past
due or otherwise in default at any time such liens are incurred; (h) judgment
and attachment liens that have not given rise and do not thereafter give rise to
an Event of Default and, in any case, provided that (x) the execution or other
enforcement of such judgment and attachment liens is effectively stayed, (y) the
claims secured thereby are being actively contested in good faith and by
appropriate proceedings and Availability Reserves sufficient to
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cover the amount thereof plus interest and costs thereon have been established
by Lender if so required by Lender; provided, that, nothing contained in this
clause (h) shall permit either Borrower to incur any lien arising under ERISA or
any Environmental Law; and (i) the security interests and liens set forth on
Schedule 9.4 hereto.
10.10 Indebtedness. Neither of Borrowers shall incur, create, assume,
become or be liable in any manner with respect to, or permit to exist, any
obligations or indebtedness, except:
(a) the Obligations;
(b) trade obligations and normal accruals in the ordinary course of
business not yet due and payable, or with respect to which such Borrower is
contesting in good faith the amount or validity thereof by appropriate
proceedings diligently pursued and available to such Borrower and with respect
to which adequate reserves have been set aside on its books in accordance with
GAAP;
(c) purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including capital leases) in violation
of any other provision of this Agreement;
(d) unsecured indebtedness of Borrowers consisting of a monthly credit
support fee owed to Charles Bradley pursuant to the Credit Support Fee
Agreement, dated the date hereof, by and among Borrowers and Charles Bradley in
a monthly amount not to exceed one twelfth of one (1/12 of 1%) percent of the
Principal Liability (as defined in the Limited Guarantee) then in effect as
provided in the Limited Guarantee, which indebtedness is subject to, and
subordinate in right of payment to, the right of Lender to receive the prior
indefeasible payment in full of all of the Obligations in accordance with a
written subordination agreement between Lender and Charles Bradley in form and
substance satisfactory to Lender; provided, that: (i) Borrowers shall not,
directly or indirectly, make any payments in respect of such indebtedness,
including, but not limited to, any prepayments, other than regularly scheduled
monthly payments by Borrowers in accordance with such Credit Support Fee
Agreement as in effect on the date hereof so long as (A) no Event of Default or
condition or event which with notice or passage of time or both would constitute
an Event of Default has occurred or exists or would occur or exist after giving
effect to such payment and (B) ORC shall have Excess Availability of not less
than $1,000,000 and OMPC-NC shall have Excess Availability of not less than One
Dollar ($1.00), in each case for the period of thirty (30) consecutive days
immediately prior to making and immediately after giving effect to such payment,
(ii) Borrowers shall not, directly or indirectly, (A) amend, modify, alter or
change any
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terms of such indebtedness or any agreement, document or instrument related
thereto, or (B) redeem, retire, defease, purchase or otherwise acquire such
indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and (iii) Borrowers shall furnish to Lender all notices, demands or
other materials concerning such indebtedness either received by Borrowers or on
their behalf, promptly after receipt thereof, or sent by Borrowers or on their
behalf, concurrently with the sending thereof, as the case may be;
(e) unsecured indebtedness of ORC, as successor in interest to Rostone
by reason of the Merger, to Allan Bir and Charles Bradley evidenced by the two
(2) Replacement Subordinated Promissory Notes, each dated the date hereof, by
ORC payable to Charles Bradley and Allan Bir, respectively, each in the
principal amount of the sum of $1,016,325 plus $262.50 for each day after
January 30, 1996 until the date hereof, which indebtedness is subject to, and
subordinate in right of payment to, the right of Lender to receive the prior
indefeasible payment in full of all of the Obligations in accordance with
written subordination agreements between Lender and Allan Bir and between Lender
and Charles Bradley in form and substance satisfactory to Lender; provided,
that: (i) Borrowers shall not, directly or indirectly, make any payments in
respect of such indebtedness, including, but not limited to, any prepayments,
other than regularly scheduled quarterly interest payments by ORC in accordance
with such promissory notes as in effect on the date hereof so long as (A) no
Event of Default or condition or event which with notice or passage of time or
both would constitute an Event of Default has occurred or exists or would occur
or exist after giving effect to such payment and (B) ORC shall have Excess
Availability of not less than $1,000,000 and OMPC-NC shall have Excess
Availability of not less than One Dollar ($1.00), in each case for the period of
thirty (30) consecutive days immediately prior to making and immediately after
giving effect to such payment, (ii) Borrowers shall not, directly or indirectly,
(A) amend, modify, alter or change any terms of such indebtedness or any
agreement, document or instrument related thereto, or (B) redeem, retire,
defease, purchase or otherwise acquire such indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, and (iii) Borrowers shall
furnish to Lender all notices, demands or other materials concerning such
indebtedness either received by Borrowers or on their behalf, promptly after
receipt thereof, or sent by Borrowers or on their behalf, concurrently with the
sending thereof, as the case may be;
(f) unsecured indebtedness of ORC, as successor in interest to Rostone
by reason of the Merger, to CGII evidenced by the Subordinated Promissory Note,
dated May 21, 1993, issued by Rostone payable to CGII, in the original principal
amount of $250,000, plus accrued and unpaid interest thereon of $117,742
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through the date hereof and interest accruing on said principal amount after the
date hereof, which indebtedness is subject to, and subordinate in right of
payment to, the right of Lender to receive the prior indefeasible payment in
full of all of the Obligations in accordance with a written subordination
agreement between Lender and CGII in form and substance satisfactory to Lender;
provided, that: (i) Borrowers shall not, directly or indirectly, make any
payments in respect of such indebtedness, including, but not limited to, any
payments or prepayments, of principal, interest or other sums, other than
regularly scheduled monthly payments of interest accruing after the date hereof
made by ORC in accordance with such promissory note as in effect on the date
hereof so long as (A) no Event of Default or condition or event which with
notice or passage of time or both would constitute an Event of Default has
occurred or exists or would occur or exist after giving effect to such payment
and (B) ORC shall have Excess Availability of not less than $1,000,000 and OMPC-
NC shall have Excess Availability of not less than One Dollar ($1.00), in each
case for the period of thirty (30) consecutive days immediately prior to making
and immediately after giving effect to such payment, (ii) Borrowers shall not,
directly or indirectly, (A) amend, modify, alter or change any terms of such
indebtedness or any agreement, document or instrument related thereto, or (B)
redeem, retire, defease, purchase or otherwise acquire such indebtedness, or set
aside or otherwise deposit or invest any sums for such purpose, and (iii)
Borrowers shall furnish to Lender all notices, demands or other materials
concerning such indebtedness either received by Borrowers or on their behalf,
promptly after receipt thereof, or sent by Borrowers or on their behalf,
concurrently with the sending thereof, as the case may be;
(g) unsecured indebtedness of ORC, as successor in interest to OMPC by
reason of the Merger, to Chatwins evidenced by the Subordinated Promissory Note,
dated as of September 1, 1995, originally issued by OMPC payable to Chatwins in
the aggregate original principal amount of $4,932,940, the outstanding principal
amount of which, as of the date hereof, is $3,464,723.37 and accrued and unpaid
interest thereon is $89,228.50, which indebtedness is subject to, and
subordinate in right of payment to, the right of Lender to receive the prior
indefeasible payment in full of all of the Obligations in accordance with a
written subordination agreement between Lender and Chatwins in form and
substance satisfactory to Lender; provided, that: (i) Borrowers shall not,
directly or indirectly, make any payments in respect of such indebtedness,
including, but not limited to, any prepayments, other than (A) payments made to
the extent of, and out of, immediately available funds provided by Reunion to
ORC in the form of an equity investment having terms and conditions acceptable
to Lender or an unsecured loan subject to, and subordinate in right of payment
to, the right of Lender to receive the prior indefeasible payment in full of all
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of the Obligations in accordance with the written subordination agreement
between Lender and Reunion delivered pursuant to Section 10.10(h) hereof, so
long as, in either case, (1) Borrowers provide thirty (30) days prior written
notice to Lender of any such payments and (2) no Event of Default or condition
or event which with notice or passage of time or both would constitute an Event
of Default, has occurred or exists or would occur or exist after giving effect
to such payment, and (B) regularly scheduled monthly interest payments (but not
premium interest) by ORC in accordance with such promissory notes as in effect
on the date hereof so long as (1) no Event of Default or condition or event
which with notice or passage of time or both would constitute an Event of
Default has occurred or exists or would occur or exist after giving effect to
such payment and (2) ORC shall have Excess Availability of not less than
$1,000,000 and OMPC-NC shall have Excess Availability of not less than One
Dollar ($1.00), in each case for the period of thirty (30) consecutive days
immediately prior to making and immediately after giving effect to such payment,
(ii) Borrowers shall not, directly or indirectly, (A) amend, modify, alter or
change any terms of such indebtedness or any agreement, document or instrument
related thereto, or (B) redeem, retire, defease, purchase or otherwise acquire
such indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and (iii) Borrowers shall furnish to Lender all notices, demands or
other materials concerning such indebtedness either received by Borrowers or on
their behalf, promptly after receipt thereof, or sent by Borrowers or on their
behalf, concurrently with the sending thereof, as the case may be; and
(h) unsecured indebtedness of ORC, as successor in interest to OMPC by
reason of the Merger, to Reunion evidenced by the Amended and Restated
Subordinated Note, dated as of November 2, 1995, originally issued by OMPC
payable to Reunion in the aggregate principal amount of $1,550,000, and
indebtedness of ORC to Reunion to the extent of a loan to ORC, if made, as
referred to in clause (i)(A) of the proviso to Section 10.10(g) hereof
("Additional Subordinated Loan"), all of which indebtedness is subject to, and
subordinate in right of payment to, the right of Lender to receive the prior
indefeasible payment in full of all of the Obligations in accordance with a
written subordination agreement between Lender and Reunion in form and substance
satisfactory to Lender; provided, that: (i) Borrowers shall not, directly or
indirectly, make any payments in respect of such indebtedness, including, but
not limited to, any prepayments, other than regularly scheduled monthly interest
payments by ORC in accordance with such Subordinated Note as in effect of the
date hereof and, in the case of the Additional Subordinated Loan (if made), in
accordance with the promissory note evidencing such loan as in effect on the
date of issuance thereof, so long as (A) no Event of Default or condition or
event which with notice or passage of time or both would constitute an
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Event of Default has occurred or exists or would occur or exist after giving
effect to such payment and (B) ORC shall have Excess Availability of not less
than $1,000,000 and OMPC-NC shall have Excess Availability of not less than One
Dollar ($1.00), in each case for the period of thirty (30) consecutive days
immediately prior to making and immediately after giving effect to such payment,
(ii) Borrowers shall not, directly or indirectly, (A) amend, modify, alter or
change any terms of such indebtedness or any agreement, document or instrument
related thereto, or (B) redeem, retire, defease, purchase or otherwise acquire
such indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and (iii) Borrowers shall furnish to Lender all notices, demands or
other materials concerning such indebtedness either received by Borrowers or on
their behalf, promptly after receipt thereof, or sent by Borrowers or on their
behalf, concurrently with the sending thereof, as the case may be;
(i) unsecured indebtedness of ORC in respect of the merger
consideration now or hereafter owed to the former stockholders of Rostone
pursuant to the Merger Agreements as in effect on the date hereof, which
indebtedness is subject to, and subordinate in right of payment to, the right of
Lender to receive the prior indefeasible payment in full of all of the
Obligations in accordance with a written subordination agreement(s) between
Lender and the former stockholders of Rostone in form and substance satisfactory
to lender; provided, that: (i) Borrowers shall not, directly or indirectly,
make any payments in respect of such indebtedness, including, but not limited,
any prepayments, except in accordance with the Merger Agreements as in effect on
the date hereof so long as (A) no Event of Default, or condition or event which
with notice or passage of time or both would constitute an Event of Default, has
occurred or exists or would occur or exist after giving effect to such payment,
(B) ORC shall have Excess Availability of not less than $1,000,000 and OMPC-NC
shall have Excess Availability of not less than One Dollar ($1.00), in each case
for the period of thirty (30) consecutive days immediately prior to making and
immediately after giving effect to such payment, and (C) such payment is made
only to the extent of, and out of, legally available funds that are provided by
Reunion to ORC in the form of an equity investment having terms and conditions
acceptable to Lender, (ii) Borrowers shall not, directly or indirectly, (A)
amend, modify, alter or change any terms of such indebtedness or any agreement,
document or instrument related thereto, or (B) redeem, retire, defease, purchase
or otherwise acquire such indebtedness, or set aside or otherwise deposit or
invest any sums for any such purpose, and (iii) Borrowers shall furnish to
Lender all notices, demands or other materials concerning such indebtedness
either received by Borrowers or on their behalf, promptly after receipt thereof,
or sent by Borrowers or on their
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behalf, concurrently with the sending thereof, as the case may be;
(j) unsecured indebtedness of ORC owed to Chatwins and/or Charles
Bradley incurred in connection with purchase money financing of the purchase by
ORC of the equipment covered by the Chatwins/Bradley Lease, to the extent
permitted under Section 10.13(b), and representing that portion, not to exceed
fifteen (15%) percent of the total purchase price paid for such equipment, that
is not provided by such purchase money financing, which indebtedness shall be
subject to, and subordinate in right of payment to, the right of Lender to
receive the prior indefeasible payment in full of all of the Obligations in
accordance with the existing or supplemental written subordination agreement
between Lender and the holder(s) of such indebtedness, in form and substance
satisfactory to Lender; provided, that, (i) Borrowers shall not, directly or
indirectly, make any payments in respect of such indebtedness, including, but
not limited to, any prepayments, other than regularly scheduled monthly interest
payments by ORC in accordance with the promissory notes as in effect on the date
of issuance thereof, so long as (A) no Event of Default or condition or event
which with notice or passage of time or both would constitute an Event of
Default has occurred or exists or would occur or exist after giving effect to
such payment and (B) ORC shall have Excess Availability of not less than
$1,000,000 and OMPC-NC shall have Excess Availability of not less than One
Dollar ($1.00), in each case for the period of thirty (30) consecutive days
immediately prior to making and immediately after giving effect to such payment,
(ii) Borrowers shall not, directly or indirectly, (A) amend, modify, alter or
change any terms of such indebtedness or any agreement, document or instrument
related thereto, or (B) redeem, retire, defease, purchase or otherwise acquire
such indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and (iii) Borrowers shall furnish to Lender all notices, demands or
other materials concerning such indebtedness either received by Borrowers or on
their behalf, promptly after receipt thereof, or sent by Borrowers or on their
behalf, concurrently with the sending thereof, as the case may be; and
(k) unsecured indebtedness of Borrowers owed to the Persons identified
on Schedule 10.10 hereto in the amounts outstanding on the date hereof as set
forth on Schedule 10.10 hereto, plus interest accrued and accruing thereon, as
such amounts are from time to time reduced by payment or otherwise; provided,
that: (i) Borrowers shall not, directly or indirectly, make any payments in
respect of such indebtedness, including, but not limited to, any voluntary
prepayments, other than regularly scheduled payments by Borrowers in accordance
with the agreements evidencing such indebtedness identified on Schedule 10.10
hereto, each as in effect of the date hereof, (ii) Borrowers shall not,
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directly or indirectly, (A) amend, modify, alter or change any terms of such
indebtedness or any agreement, document or instrument related thereto, or (B)
redeem, retire, defease, purchase or otherwise acquire such indebtedness, or set
aside or otherwise deposit or invest any sums for such purpose, and (iii)
Borrowers shall furnish to Lender all notices, demands or other materials
concerning such indebtedness either received by Borrowers or on their behalf,
promptly after receipt thereof, or sent by Borrowers or on their behalf,
concurrently with the sending thereof, as the case may be.
10.11 Loans, Investments, Guarantees, Etc. Neither of Borrowers shall,
directly or indirectly, make any loans or advance money or property to any
person, or invest in (by capital contribution, dividend or otherwise) or
purchase or repurchase the stock or indebtedness or all or a substantial part of
the assets or property of any person, or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the indebtedness,
performance, obligations or dividends of any Person or agree to do any of the
foregoing, except: (a) the endorsement of instruments for collection or deposit
in the ordinary course of business; (b) investments in: (i) short-term direct
obligations of the United States Government, (ii) negotiable certificates of
deposit issued by any bank satisfactory to Lender, payable to the order of such
Borrower or to bearer and delivered to Lender, (iii) commercial paper rated A1
or P1, and (iv) notes, stock, obligations, securities or other investments
received in connection with the bankruptcy or reorganization of customers of
Borrowers and in the settlement of delinquent obligations of, and other disputes
with customers, to the extent such settlement, acceptance and receipt thereof
are permitted under the terms of this Agreement; provided, that, as to any of
the foregoing, unless waived in writing by Lender, Borrowers shall take such
actions as are deemed necessary by Lender to perfect the security interest of
Lender in such investments; (c) the Guarantees and the guarantees set forth in
the Information Certificate; (d) loans and advances to employees of either
Borrower in the ordinary course of business not to exceed $20,000 for both
Borrowers in the aggregate amount of such employee loans outstanding at any one
time; (e) short-term loans between Borrowers in the ordinary course of business
solely for working capital purposes and out of legally available funds therefor;
and (f) equity investments by ORC in OMPC-NC on terms and conditions
satisfactory to Lender.
10.12 Dividends and Redemptions. Neither of Borrowers shall, directly or
indirectly, declare or pay any dividends on account of any shares of class of
capital stock of Borrowers now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of capital stock
of Borrowers (or set aside or otherwise deposit or invest
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any sums for such purpose) for any consideration other than common stock or
apply or set apart any sum, or make any other distribution (by reduction of
capital or otherwise) in respect of any such shares or agree to do any of the
foregoing, except for payment of the merger consideration to the former
stockholders of Rostone to the extent permitted pursuant to Section 10.10(i)
hereof.
10.13 Transactions with Affiliates.
----------------------------
(a) Neither of Borrowers shall enter into any transaction for the
purchase, sale or exchange of property or the rendering of any service to or by
any affiliate, except in the ordinary course of and pursuant to the reasonable
requirements of such Borrower's business and upon fair and reasonable terms no
less favorable to such Borrower than such Borrower would obtain in a comparable
arm's length transaction with an unaffiliated person, except that: (i) ORC may
make payments to Reunion in respect of management fees pursuant to the
Management Agreement, but only so long as (A) the obligations to make such
payments are subject to, and subordinate in right of payment to, the right of
Lender to receive the prior payment in full of the Obligations, in accordance
with the written subordination agreement between Reunion and Lender delivered
pursuant to Section 10.10(h) hereof, (B) the aggregate amount of all such
payments by ORC in any fiscal year of ORC shall not exceed $300,000, (C) as of
the date of each such payment and after giving effect thereto, no Event of
Default, or condition or event which with notice or passage of time or both
would constitute an Event of Default, shall exist or have occurred and be
continuing and (D) ORC shall have Excess Availability of not less than
$1,000,000 and OMPC-NC shall have Excess Availability of not less than One
Dollar ($1.00), in each case for the period of thirty (30) consecutive days
immediately prior to making and immediately after giving effect to such payment;
and (ii) Borrowers may make payments to Reunion in respect of tax sharing
payments pursuant to the Tax Sharing Agreement, but only so long as (A) the
obligations to make such payments are subject to, and subordinate in right of
payment to the right of Lender to receive the prior indefeasible payment in full
of the Obligations, in accordance with the written subordination agreement
between Reunion and Lender delivered pursuant to Section 10.10(h) hereof, (B)
such payments are made on not less than twenty (20) days' prior written notice
to Lender and do not exceed fifty (50%) percent of the Federal and State income
taxes that Borrowers' would have had to pay but for the availability and use of
Reunion's net operating losses pursuant to a consolidated Federal and State
income tax return filed for Reunion and including Borrowers for the applicable
fiscal year in respect of which such tax sharing payment is proposed to be made,
(C) as of the date of each such payment and after giving effect thereto, no
Event of Default, or condition or event which with notice or passage of time or
both would constitute an Event of
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Default, shall exist or have occurred and be continuing, and (D) ORC shall have
Excess Availability of not less than $500,000 and OMPC-NC shall have Excess
Availability of not less than One Dollar ($1.00), in each case for the period of
thirty (30) consecutive days immediately prior to making and immediately after
giving effect to such payment; and
(b) With respect to the indebtedness of ORC to Chatwins and/or Charles
Bradley in accordance with the Equipment Lease Agreement, dated as of July 1,
1995, originally between Chatwins and Rostone in respect of the lease of three
(3) Krause Maffei injection molding presses by Chatwins to ORC (the
"Chatwins/Bradley Equipment Lease") as in effect on the date hereof, Chatwins
and Charles Bradley have each agreed, pursuant to their respective written
subordination agreements delivered pursuant to Section 10.10 hereof, that the
obligations of ORC under the Chatwins/Bradley Equipment Lease are subordinated
in right of payment to the right of Lender to receive the prior indefeasible
payment in full of all of the Obligations; provided, that, ORC may make
regularly scheduled monthly lease payments when due in accordance with the
Chatwins/Bradley Equipment Lease, as in effect on the date hereof, so long as
(i) no Event of Default or condition or event which with notice or passage of
time or both would constitute an Event of Default has occurred or exists or
would occur or exist after giving effect to such payment, and (ii) ORC shall
have Excess Availability of not less than $1,000,000 and OMPC-NC shall have
Excess Availability of not less than One Dollar ($1.00), in each case for the
period of thirty (30) consecutive days immediately prior to making and
immediately after giving effect to such payment. Borrowers shall not, directly
or indirectly, (A) amend, modify, alter or change any terms of such indebtedness
or the lease or other agreement, document or instrument related thereto, or (B)
redeem, retire, defease, purchase or otherwise acquire such indebtedness, or set
aside or otherwise deposit or invest any sums for such purpose, and (C)
Borrowers shall furnish to Lender all notices, demands or other materials
concerning such indebtedness either received by Borrowers or on their behalf,
promptly after receipt thereof, or sent by Borrowers or on their behalf,
concurrently with the sending thereof, as the case may be; provided, further,
that, so long as no Event of Default exists or has occurred and is continuing,
ORC may purchase the equipment covered by the Chatwins/Bradley Equipment Lease
in accordance with the terms thereof as in effect on the date hereof, but only
to the extent paid out of funds received from purchase money financing
(including capital lease financing) provided by a non-affiliated Person on terms
not prohibited by the other terms of this Agreement.
10.14 Compliance with ERISA. Neither of Borrowers shall with respect to
any "employee benefit plans" maintained by Borrowers or any of their ERISA
Affiliates:
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(a) (i) terminate any of such employee benefit plans so as to incur
any liability to the Pension Benefit Guaranty Corporation established pursuant
to ERISA, (ii) allow or suffer to exist any non-exempt prohibited transaction
involving any of such employee benefit plans or any trust created thereunder
which would subject Borrowers or any of their ERISA Affiliates to a tax or
penalty or other liability on prohibited transactions imposed under Section 4975
of the Code or ERISA, (iii) fail to pay to any such employee benefit plan any
contribution which it is obligated to pay under Section 302 of ERISA, Section
412 of the Code or the terms of such plan, (iv) allow or suffer to exist any
accumulated funding deficiency, whether or not waived, with respect to any such
employee benefit plan, (v) allow or suffer to exist any occurrence of a
reportable event or any other event or condition which presents a material risk
of termination by the Pension Benefit Guaranty Corporation of any such employee
benefit plan that is a single employer plan, which termination could result in
any liability to the Pension Benefit Guaranty Corporation or (vi) incur any
withdrawal liability with respect to any multiemployer pension plan.
(b) As used in this Section 10.14, the term "employee benefit plans",
"accumulated funding deficiency" and "reportable event" shall have the
respective meanings assigned to them in ERISA, and the term "prohibited
transaction" shall have the meaning assigned to it in Section 4975 of the Code
and ERISA.
10.15 Working Capital. Borrowers shall, at all times, maintain Working
Capital, determined for ORC and its subsidiaries on a consolidated basis, of not
less than $2,750,000.
10.16 Adjusted Net Worth. Borrowers shall, at all times, maintain
Adjusted Net Worth, determined for ORC and its subsidiaries on a consolidated
basis, of not less than $9,133,000.
10.17 Costs and Expenses. Borrowers shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof (provided that Lender shall, upon
Borrowers' request, provide to Borrowers reasonable documentation for all such
amounts), including, but not limited to: (a) all costs and expenses of filing
or recording (including Uniform Commercial Code financing statement filing taxes
and fees, documentary taxes, intangibles taxes and mortgage recording taxes and
fees, if applicable); (b) all title insurance and other
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insurance premiums, environmental engineering fees, appraisal fees and search
fees; (c) costs and expenses of remitting loan proceeds, collecting checks and
other items of payment, and establishing and maintaining the Blocked Accounts,
together with Lender's customary charges and fees with respect thereto; (d)
charges, fees or expenses charged by any bank or issuer in connection with the
Letter of Credit Accommodations; (e) costs and expenses of preserving and
protecting the Collateral; (f) costs and expenses paid or incurred in connection
with obtaining payment of the Obligations, enforcing the security interests and
liens of Lender, selling or otherwise realizing upon the Collateral, and
otherwise enforcing the provisions of this Agreement and the other Financing
Agreements or defending any claims made or threatened against Lender arising out
of the transactions contemplated hereby and thereby (including, without
limitation, preparations for and consultations concerning any such matters); (g)
all out-of-pocket expenses and costs heretofore and from time to time hereafter
incurred by Lender during the course of periodic field examinations of the
Collateral and Borrowers' operations, plus a per diem charge at the rate of $600
per person per day for Lender's examiners in the field and office; and (h) the
reasonable fees and disbursements of counsel (including legal assistants) to
Lender in connection with any of the foregoing.
10.18 Further Assurances. At the request of Lender at any time and from
time to time, Borrowers shall, at their expense, duly execute and deliver, or
cause to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of each
Borrower representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In
the event of such request by Lender, Lender may, at its option, cease to make
any further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. Where permitted by law, each Borrower
hereby authorizes Lender to execute and file one or more UCC financing
statements signed only by Lender.
SECTION 11. EVENTS OF DEFAULT AND REMEDIES
------------------------------
11.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein
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individually as an "Event of Default", and collectively as "Events of Default":
(a) either Borrower fails to pay when due any of the Obligations or
fails to perform any of the terms, covenants, conditions or provisions contained
in this Agreement or any of the other Financing Agreements;
(b) any representation, warranty or statement of fact made by either
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(c) any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) any judgment for the payment of money is rendered against either
Borrower or any Obligor in excess of $250,000 in any one case or in excess of
$250,000 in the aggregate for both Borrowers and shall remain undischarged or
unvacated for a period in excess of thirty (30) days or execution shall at any
time not be effectively stayed, or any judgment other than for the payment of
money, or injunction, attachment, garnishment or execution is rendered against
either Borrower or any Obligor or any of their assets;
(e) any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or either Borrower or any Obligor, which is
a partnership or corporation, dissolves or suspends or discontinues doing
business;
(f) either Borrower or any Obligor becomes insolvent (however defined
or evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its principal creditors to
discuss any adjustment of its debts;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against either Borrower or any Obligor or all or any part of
its properties and such petition or application is not dismissed within thirty
(30) days after the date of its filing or either Borrower or any Obligor shall
file any answer admitting or not contesting such petition or application or
indicates its consent to, acquiescence in or approval of, any
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such action or proceeding or the relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by either Borrower or any Obligor or for all or any part of
its property; or
(i) any default by either Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money owing to
any person other than Lender, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, in any case
in an amount in excess of $250,000, which default continues for more than the
applicable cure period, if any, with respect thereto, or any default by either
Borrower or any Obligor under any material contract, lease, license or other
obligation to any person other than Lender, which default continues for more
than the applicable cure period, if any, with respect thereto;
(j) any change in the controlling ownership of either Borrower;
(k) the indictment or threatened indictment of either Borrower or any
Obligor under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against either Borrower or any Obligor,
pursuant to which statute or proceedings the penalties or remedies sought or
available include forfeiture of any of the property of such Borrower or such
Obligor;
(l) there shall be a material adverse change in the business, assets
or prospects of either Borrower or any Obligor after the date hereof; or
(m) there shall be an event of default under any of the other
Financing Agreements.
11.2 Remedies.
--------
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by either Borrower or any Obligor, except as such notice or
consent is expressly provided for hereunder or required
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<PAGE>
by applicable law. All rights, remedies and powers granted to Lender hereunder,
under any of the other Financing Agreements, the Uniform Commercial Code or
other applicable law, are cumulative, not exclusive and enforceable, in Lender's
discretion, alternatively, successively, or concurrently on any one or more
occasions, and shall include, without limitation, the right to apply to a court
of equity for an injunction to restrain a breach or threatened breach by either
Borrower of this Agreement or any of the other Financing Agreements. Lender
may, at any time or times, proceed directly against either Borrower or any
Obligor to collect the Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 11.1(g) and 11.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require either Borrower, at Borrowers' expense,
to assemble and make available to Lender any part or all of the Collateral at
any place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including, without limitation,
entering into contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Lender or elsewhere) at such prices
or terms as Lender may deem reasonable, for cash, upon credit or for future
delivery, with the Lender having the right to purchase the whole or any part of
the Collateral at any such public sale, all of the foregoing being free from any
right or equity of redemption of either Borrower, which right or equity of
redemption is hereby expressly waived and released by each Borrower and/or (vii)
terminate this Agreement. If any of the Collateral is sold or leased by Lender
upon credit terms or for future delivery, the Obligations shall not be reduced
as a result thereof until payment therefor is finally collected by Lender. If
notice of disposition of Collateral is required by law, five (5) days prior
notice by Lender to Borrowers designating the time and place of any public sale
or the time after which any private sale or other intended disposition of
Collateral is to be made, shall be deemed to be reasonable notice thereof and
each Borrower waives any other
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<PAGE>
notice. In the event Lender institutes an action to recover any Collateral or
seeks recovery of any Collateral by way of prejudgment remedy, each Borrower
waives the posting of any bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually received
by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrowers shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including reasonable attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an Event of
Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to either Borrower and/or (ii) terminate any provision
of this Agreement providing for any future Loans or Letter of Credit
Accommodations to be made by Lender to either Borrower.
SECTION 12. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
--------------------------------
12.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Agreement and
the other Financing Agreements and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of New York (without giving
effect to principles of conflicts of law).
(b) Each Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Supreme Court of the State of New York for New
York County and the United States District Court for the Southern District of
New York and waive any objection based on venue or forum non conveniens with
respect to any action instituted therein arising under this Agreement or any of
the other Financing Agreements or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of this Agreement or
any of the other Financing Agreements or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agree that any dispute
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<PAGE>
with respect to any such matters shall be heard only in the courts described
above (except that Lender shall have the right to bring any action or proceeding
against any Borrower or its property in the courts of any other jurisdiction
which Lender deems necessary or appropriate in order to realize on the
Collateral or to otherwise enforce its rights against either Borrower or its
property).
(c) Each Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails, or,
at Lender's option, by service upon Borrowers in any other manner provided under
the rules of any such courts. Within thirty (30) days after such service,
Borrowers shall appear, answer or move in respect of such process, failing which
Borrowers shall be deemed in default and judgment may be entered by Lender
against Borrowers for the amount of the claim and other relief requested.
(d) BORROWERS AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT
OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWERS AND LENDER EACH
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT EACH BORROWER OR
LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrowers (whether in tort,
contract, equity or otherwise) for losses suffered by either Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and non-
appealable judgment or court order binding on Lender, that the losses were the
result of acts or omissions constituting willful misconduct. In any such
litigation, Lender shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Agreement.
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<PAGE>
12.2 Waiver of Notices. Each Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on either Borrower which Lender may elect to give shall entitle
either Borrower to either other or further notice or demand in the same, similar
or other circumstances.
12.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of the
party against whom such amendment, modification, waiver or discharge is sought
to be enforced. Lender shall not, by any act, delay, omission or otherwise be
deemed to have expressly or impliedly waived any of its rights, powers and/or
remedies unless such waiver shall be in writing and signed by an authorized
officer of Lender. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Lender of any right, power and/or
remedy on any one occasion shall not be construed as a bar to or waiver of any
such right, power and/or remedy which Lender would otherwise have on any future
occasion, whether similar in kind or otherwise.
12.4 Waiver of Counterclaims. Each Borrower waives all rights to
interpose any claims, deductions, setoffs or counterclaims of any nature (other
then compulsory counterclaims or other claims that will be irrevocably barred if
not asserted in the same action or proceeding) in any action or proceeding with
respect to this Agreement, the Obligations, the Collateral or any matter arising
therefrom or relating hereto or thereto.
12.5 Indemnification. Each Borrower shall jointly and severally indemnify
and hold Lender, and its directors, agents, employees and counsel, harmless from
and against any and all losses, claims, damages, liabilities, costs or expenses
imposed on, incurred by or asserted against any of them in connection with any
litigation, investigation, claim or proceeding commenced or threatened related
to the negotiation, preparation, execution, delivery, enforcement, performance
or administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel, but excluding any such losses, claims, damages,
liabilities, costs and expenses directly caused or incurred solely by reason of
the willful misconduct of Lender or other Person otherwise to
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<PAGE>
be indemnified and held harmless under this Section 12.5 as determined by a
final, non-appealable judgment of a court of competent jurisdiction. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in
this Section may be unenforceable because it violates any law or public policy,
each Borrower shall pay the maximum portion which it is permitted to pay under
applicable law to Lender in satisfaction of indemnified matters under this
Section. The foregoing indemnity shall survive the payment of the Obligations
and the termination or non-renewal of this Agreement.
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS
--------------------------------
13.1 Term.
----
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof (the "Renewal Date"), and from year to year thereafter, unless
sooner terminated pursuant to the terms hereof; provided, that, Lender may, at
its option, extend the Renewal Date to the date four (4) year from the date
hereof by giving Borrowers notice at least sixty (60) days prior to the third
anniversary of this Agreement. Lender or both Borrowers (subject to Lender's
right to extend the Renewal Date as provided above) may terminate this Agreement
and the other Financing Agreements effective on the Renewal Date or on the
anniversary of the Renewal Date in any year by giving to the other party at
least sixty (60) days prior written notice; provided, that, this Agreement and
all other Financing Agreements must be terminated simultaneously. Upon the
effective date of termination or non-renewal of the Financing Agreements,
Borrowers shall pay to Lender, in full, all outstanding and unpaid Obligations
and shall furnish cash collateral to Lender in such amounts as Lender determines
are reasonably necessary to secure Lender from loss, cost, damage or expense,
including attorneys' fees and legal expenses, in connection with any contingent
Obligations, including issued and outstanding Letter of Credit Accommodations
and checks or other payments provisionally credited to the Obligations and/or as
to which Lender has not yet received final and indefeasible payment. Such cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrowers for such purpose. Interest shall be due until and including the next
business day, if the amounts so paid by Borrowers to the bank account designated
by Lender are received in such bank account later than 12:00 noon, New York City
time.
(b) No termination of this Agreement or the other Financing Agreements
shall relieve or discharge Borrowers of
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<PAGE>
their respective duties, obligations and covenants under this Agreement or the
other Financing Agreements until all Obligations have been fully and finally
discharged and paid, and Lender's continuing security interest in the Collateral
and the rights and remedies of Lender hereunder, under the other Financing
Agreements and applicable law, shall remain in effect until all such Obligations
have been fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to the end of
the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrowers agree to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
<TABLE>
<CAPTION>
Amount Period
-------------------- -----------------------
<S> <C> <C>
(i) 5% of Maximum Credit From the date hereof to
and including
February 2, 1997
(ii) 3% of Maximum Credit February 3, 1997 to
and including
February 2, 1998
(iii) 1% of Maximum Credit February 3, 1998 to and
including February 2,
1999 and each
anniversary thereafter
if renewed pursuant to
Section 13.1 hereof
</TABLE>
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrowers agree
that it is reasonable under the circumstances currently existing. The early
termination fee provided for in this Section 13.1 shall be deemed included in
the Obligations.
13.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrowers
at their chief executive offices set forth below, or to such other address as
either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver the
next business day, one (1) business day after sending; and if by
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<PAGE>
certified mail, return receipt requested, five (5) days after mailing.
13.3 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
13.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrowers and their respective
successors and assigns, except that neither of Borrowers may assign its rights
under this Agreement, the other Financing Agreements and any other document
referred to herein or therein without the prior written consent of Lender.
Lender may, after notice to Borrowers, assign its rights and delegate its
obligations under this Agreement and the other Financing Agreements and further
may assign, or sell participations in, all or any part of the Loans, the Letter
of Credit Accommodations or any other interest herein to another financial
institution or other person, in which event, the assignee or participant shall
have, to the extent of such assignment or participation, the same rights and
benefits as it would have if it were the Lender hereunder, except as otherwise
provided by the terms of such assignment or participation.
13.5 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represent the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and, to the extent set forth herein, supersede the
OMPC Financing Agreements and all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written.
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<PAGE>
IN WITNESS WHEREOF, Lender and Borrowers have caused these presents to be
duly executed as of the day and year first above written.
<TABLE>
<CAPTION>
LENDER BORROWERS
- ------ ---------
<S> <C>
CONGRESS FINANCIAL CORPORATION ONEIDA ROSTONE CORP.,
successor by merger of Rostone
By:___________________________ Corporation with and into
Oneida Molded Plastics Corp.
Title:________________________
By:___________________________
Title:________________________
</TABLE>
<TABLE>
<CAPTION>
Address: Chief Executive Office:
- ------- -----------------------
<S> <C>
1133 Avenue of the Americas 104 South Warner Street
New York, New York 10036 Oneida, New York 13421
ONEIDA MOLDED PLASTICS, CORP.
OF NORTH CAROLINA
By:___________________________
Title:________________________
Chief Executive Office:
----------------------
MAILING ADDRESS:
Route 70, East
P.O. Box 568
Clayton, North Carolina 27520
STREET ADDRESS:
11694 US 70, West
Clayton, North Carolina 27520
</TABLE>
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<PAGE>
SCHEDULE 10.10
TO
LOAN AND SECURITY AGREEMENT
---------------------------
Indebtedness of Borrowers
-------------------------
A. Oneida Rostone Corp.
--------------------
Description
of Agreement Maximum
Evidencing Amount of Scheduled Maturity
Obligee Indebtedness Indebtedness Payments Date
- ------- ------------ ------------ --------- --------
B. Oneida Molded Plastics, Corp. of North Carolina
-----------------------------------------------
Description
of Agreement Maximum
Evidencing Amount of Scheduled Maturity
Obligee Indebtedness Indebtedness Payments Date
- ------- ------------ ------------ --------- --------
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<PAGE>
EXHIBIT 10.2
October 21, 1996
Oneida Rostone Corp.
104 South Warner Street
Oneida, New York 13421
Oneida Molded Plastics, Corp.
of North Carolina
Route 70, East
P.O. Box 568
Clayton, North Carolina 27520
Re: Amendment No. 1 to Loan and Security Agreement
----------------------------------------------
Gentlemen:
Reference is made to the Loan and Security Agreement, dated February 2,
1996 (the "Loan Agreement"), by and among Congress Financial Corporation
("Lender"), Oneida Rostone Corp. ("ORC") and Oneida Molded Plastics, Corp. of
North Carolina ("OMPC-NC"; together with ORC, each individually a "Borrower" and
collectively, "Borrowers"), together with all other agreements, documents,
supplements and instruments now or at any time hereafter executed and/or
delivered by Borrowers or any other person, with to or in favor of Lender in
connection therewith (all of the foregoing, together with this Amendment and the
agreements and instruments delivered hereunder, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, collectively, the "Financing Agreements"). All capitalized terms used
herein and not otherwise defined herein shall have the meanings given to them in
the Loan Agreement.
Borrowers have requested that Lender enter into certain amendments and
grant certain consents in connection with the formation by ORC of certain
subsidiaries for the purpose of acquiring Data Packaging, Ltd. and waive the
failure of Borrowers to satisfy the existing Working Capital covenant and amend
the Working Capital covenant.
Lender is willing to enter into such amendments and grant such consents and
such waiver to the extent set forth herein and subject to the terms and
conditions hereof.
1. Additional Definitions. As used herein or in any of the other
Financing Agreements, the following terms shall have the respective meanings
given to them below, and the Loan Agreement shall be deemed and is hereby
amended to include, in
<PAGE>
addition and not in limitation, each of the following definitions:
(i) "DPIL" shall mean Data Packaging (Ireland) Limited, a
private limited liability company incorporated under the laws of the Republic of
Ireland, presently a wholly owned subsidiary of DPL, and its successors and
assigns.
(ii) "DPL" shall mean Data Packaging, Ltd., a limited liability
company incorporated under the laws of Bermuda, and its successors and assigns.
(iii) "DPLAC" shall mean DPL Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of ORC, and its successors and
assigns.
(iv) "DPL Acquisition" shall mean, individually and
collectively, the acquisition by DPLAC from Allied Irish Banks (Holdings and
Investments) Limited or its affiliates or nominees of twenty-seven one-half
(27.5%) percent of the issued and outstanding voting stock of DPL, the
acquisition by DPLAC from Frank J. Guzikowski of sixty-eight (68%) percent of
the issued and outstanding voting stock of DPL and the related transactions, as
such transactions are described on Exhibit A hereto.
(v) "DPL Group" shall mean, individually and collectively, DPL,
DPIL, DPLAC and the other direct and indirect subsidiaries of DPLAC identified
on Exhibit B hereto acquired pursuant to or formed or to be formed in connection
with the DPL Acquisition.
(vi) "DPL Purchase Agreements" shall mean, individually and
collectively, the DPL 27.5% Share Purchase Agreement, the DPL 68% Share Purchase
Agreement, and any other stock purchase agreements, together with all deeds,
bills of sale and assignments, assumption agreements and liabilities under
takings, and all other agreements, documents and instruments executed and/or
delivered in connection with the DPL Acquisition, including, but not limited to
those described on Exhibit C hereto, as all of the foregoing now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
(vii) "DPL 27.5% Share Purchase Agreement" shall mean the Share
Purchase Agreement dated on or about the date hereof between DPLAC and Allied
Irish Banks (Holdings and Investments Limited) or its affiliates or nominees
providing for the acquisition by DPLAC of twenty-seven and one-half (27.5%)
percent of the issued and outstanding voting stock of DPL.
-2-
<PAGE>
(viii) "DPL 68% Share Purchase Agreement" shall mean the Stock
Purchase Agreement to be entered into between DPLAC and Frank J. Guzikowski,
substantially in the form of Exhibit E attached hereto, providing for the
acquisition by DPLAC of sixty-eighty (68%) percent of the issued and outstanding
voting stock of DPL.
(ix) "Reunion DPL Subordinated Notes" shall mean, individually
and collectively, the Subordinated Promissory Note, dated of even date herewith,
by ORC payable to Reunion in the original principal amount of $750,000, as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced and the Subordinated Promissory to be executed
after the date hereof by ORC payable to Reunion in the original principal amount
of $1,050,000 in the form of Exhibit F attached hereto, as the same may
hereafter exist or may thereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
2. Amendments to Definitions.
-------------------------
(i) Section 1.2 of the Loan Agreement is hereby amended by
deleting the period at the end of Section 1.2 and adding a proviso immediately
following the word "Lender", as follows:
"; provided, that, solely for purposes of applying the financial
covenant set forth in Section 10.16 hereof, (x) the assets and
liabilities of the members of the DPL Group and their subsidiaries
shall not be considered assets and liabilities of ORC and its
subsidiaries, (y) the outstanding balance of any intercompany
accounts, loans and other indebtedness owed by members of the DPL
Group to ORC or its subsidiaries, other than current trade accounts
for goods and services to the extent permitted by Section
10.13(a)(iii) hereof, shall not be considered assets of ORC and its
subsidiaries, and (z) all investments by ORC or its subsidiaries in
the members of the DPL Group and their subsidiaries shall not be
considered assets of ORC and its subsidiaries."
(ii) Section 1.65 of the Loan Agreement is hereby amended by
deleting the proviso appearing at the end of Section 1.65 and substituting the
following proviso therefor:
"; provided, that, solely for purposes of applying the financial
covenant set forth in Section 10.15 hereof, (w) the liabilities of
Borrowers and their subsidiaries to Lender under this Agreement
shall not be considered current liabilities (whether or not
classified as current liabilities in
-3-
<PAGE>
accordance with GAAP), (x) the current assets and current
liabilities of the members of the DPL Group and their subsidiaries
shall not be considered current assets and current liabilities of
ORC and its subsidiaries, (y) current assets consisting of
outstanding intercompany accounts, loans and other indebtedness of
the members of the DPL Group or their subsidiaries owed to ORC or
its subsidiaries, other than current trade accounts for goods and
services to the extent permitted by Section 10.13(a)(iii) hereof,
shall not be considered current assets of ORC or its subsidi aries,
and (z) any current assets consisting of investments by ORC or its
subsidiaries in the members of the DPL Group and their subsidiaries
shall not be considered current assets of ORC and its subsidiaries."
3. Consents. Subject to the terms and conditions contained herein and in
the other Financing Agreements, Lender hereby consents to the formation by ORC
of the direct and indirect subsidiaries of ORC comprising part of the DPL Group
solely for the purpose of effecting the DPL Acquisition in accordance with the
terms and conditions of the DPL Purchase Agreements as in effect on the dates of
their execution and delivery, cash equity capital contributions of not more than
the aggregate amount of $1,800,000 by ORC to one or more of the members of the
DPL Group pursuant to the DPL Acquisition solely from the proceeds of the loans
made or to be made by Reunion to ORC as evidenced by the Reunion DPL
Subordinated Notes, to be used solely for the purposes of funding (i) the
aggregate cash portion of the purchase price to be paid to effect the stock
acquisitions contemplated by the DPL Acquisition pursuant to the terms and
conditions of the DPL Purchase Agreements as in effect on the dates of their
execution and delivery, and (ii) related acquisition costs and expenses for
maintaining the corporate organization and existence (including franchise taxes)
of DPLAC, the incurrence of the subordinated indebtedness of ORC to Reunion as
evidenced by the Reunion DPL Subordinated Notes and, if made, the Additional
Subordinated DPL Loans (as defined in the provisions of Section 10.10(l) of the
Loan Agreement as added hereby), (d) the loans and investments by ORC to the
members of the DPL Group solely from the proceeds of any Additional Subordinated
DPL Loans, and (e) the sale by ORC to the members of the DPL Group and the
purchase by the members of the DPL Group from ORC of Inventory or services of
ORC to the extent permitted by Section 10.13(a)(iii) of the Loan Agreement as
added hereby.
4. Indebtedness. Section 10.10 of the Loan Agreement is hereby amended
by deleting the word "and" at the end of Section 10.10(j), replacing the period
with a semicolon and
-4-
<PAGE>
adding the word "and" at the end of Section 10.10(k) and adding a new Section
10.10(l), as follows:
"(l) unsecured indebtedness of ORC to Reunion evidenced by the Reunion
DPL Subordinated Notes in the aggregate original principal amount of
$1,800,000 and unsecured indebtedness of ORC to Reunion to the extent
of any loans to ORC ("Additional Subordinated DPL Loans"), if made by
Reunion as permitted by Section 10.11(h) hereof, so long as (x) no
Event of Default or condition or event which with notice or passage of
time or both would constitute an Event of Default has occurred or
exists or would occur or exist after giving effect to any such
Additional Subordinated DPL Loan, (y) the proceeds of such Additional
Subordinated DPL Loans are used by ORC in the manner permitted in
Section 10.11(h) hereof, and (z) all of such indebtedness to Reunion
is subject to, and subordinated in right of payment to, the right of
Lender to receive the prior indefeasible payment in full of all of the
Obligations in accordance with a written subordination agreement
between Lender and Reunion in form and substance satisfactory to
Lender; provided, that: (i) Borrowers shall not, directly or
indirectly, make any payments in respect of such indebtedness,
including, but not limited to, any prepayments, other than regularly
scheduled monthly interest payments by ORC in accordance with the
Reunion DPL Subordinated Notes as each is in effect on the date of
issuance thereof, and, in the case of the Additional Subordinated DPL
Loans (if made), in accordance with the promissory note(s) evidencing
such loans as in effect on the date(s) of issuance thereof, so long as
(A) no Event of Default or condition or event which with notice or
passage of time or both would constitute an Event of Default has
occurred or exists or would occur or exist after giving effect to such
payment and (B) ORC shall have Excess Availability of not less than
$1,000,000 and OMPC-NC shall have Excess Availability of not less than
One Dollar ($1.00), in each case for the period of thirty (30)
consecutive days immediately prior to making and immediately after
giving effect to such payment, (ii) Borrowers shall not, directly or
indirectly, (A) amend, modify, alter or change any terms of such
indebtedness or any agreement, document or instrument related thereto,
or (B) redeem, retire, defease, purchase or otherwise acquire such
indebtedness, or set aside or otherwise deposit or
-5-
<PAGE>
invest any sums for such purpose, and (iii) Borrowers shall furnish to
Lender all notices, demands or other materials concerning such
indebtedness either received by Borrowers or on their behalf, promptly
after receipt thereof, or sent by Borrowers or on their behalf,
concurrently with the sending thereof, as the case may be."
5. DPL Loans and Investments.
-------------------------
(a) Section 10.11 of the Loan Agreement is hereby amended by deleting
the word "and" appearing at the end of Section 10.11(e), replacing the period
with a semicolon appearing at the end of Section 10.11(f), and adding new
Sections 10.11(g) and 10.11(h), as follows:
"(g) cash equity capital contributions of not more than the aggregate
amount of $1,800,000 by ORC to ORC's direct or indirect subsidiaries
comprising the DPL Group pursuant to the DPL Acquisition solely from
the proceeds of the loans made or to be made by Reunion to ORC as
evidenced by the Reunion DPL Subordinated Notes, to be used solely for
the purposes of (i) funding the aggregate cash portion of the purchase
price to be paid to effect the stock acquisitions contemplated by the
DPL Acquisition pursuant to the terms and conditions of the DPL
Purchase Agreements as in effect on the dates of execution and
delivery thereof and (ii) related acquisition costs and expenses for
main taining the corporate organization and existence (including
franchise taxes) of DPLAC; provided, that, at Lender's request, all
stock certificates evidencing such investments shall be delivered and
deemed pledged to Lender as additional Collateral hereunder; and (h)
loans and equity investments by ORC to the members of the DPL Group so
long as (i) such loans are made by ORC solely from the proceeds of
Additional Subordinated DPL Loans, subject to, and subordinated in
right of payment to, the right of Lender to receive the prior
indefeasible payment in full of all of the Obligations in accordance
with a written subordination agreement between Lender and Reunion in
form and substance satisfactory to Lender, (ii) in the case of loans,
such loans are evidenced by promissory notes that, at Lender's
request, shall be delivered and deemed pledged to Lender as additional
Collateral hereunder, (iii) in the case of equity investments, at
Lender's request, all stock certificates evidencing such equity invest
ments shall be delivered and deemed pledged to
-6-
<PAGE>
Lender as additional Collateral hereunder, and (iv) no Event of
Default or condition or event which with notice or passage of time or
both would constitute an Event of Default has occurred or exists or
would occur or exist after giving effect to such loans or
investments."
(b) Without limiting the covenants contained in Section 10.11 of the
Loan Agreement, as amended hereby, it is expressly agreed that neither Borrower
shall, directly or indirectly, guarantee, assume, endorse, or otherwise become
responsible for or acquire the indebtedness, performance, obligations or
dividends of any member of the DPL Group, or agree to do any of the foregoing.
6. Certain Transactions with the DPL Group. Section 10.13 of the Loan
Agreement is hereby amended by deleting the word "and" appearing at the end of
Section 10.13(a)(i), and adding a new Section 10.13(a)(iii) after the word "and"
appearing at the end of Section 10.13(a)(ii), as follows:
"(iii) ORC may sell and the members of the DPL Group may purchase
Inventory from ORC or purchase services from ORC, in each case in the
ordinary course of business on prices and terms no less favorable than
would have been obtained in an arm's length transaction with a non-
affiliated Person, but only so long as (A) the aggregate unpaid
amounts owed for such Inventory of ORC previously shipped or sold to
the members of the DPL Group or for services rendered by ORC to the
members of the DPL Group, and not yet paid for in cash received by ORC
from the members of the DPL Group and remitted to or received by
Lender through the Blocked Accounts, does not at any one time exceed
$100,000 and (B) the intercompany Accounts generated by such sales of
Inventory or rendition of services do not remain unpaid more than
sixty (60) days past the original invoice date of such Accounts; and"
7. Working Capital. Section 10.15 of the Loan Agreement is hereby
deleted in its entirety and replaced with the following:
"10.15 Working Capital. Borrowers shall, at all times, maintain
Working Capital, determined for ORC and its subsidiaries on a
consolidated basis, of not less than $750,000."
8. Waiver. Subject to the terms and conditions contained herein, Lender
hereby waives the failure of Borrowers
-7-
<PAGE>
to satisfy the Working Capital covenant set forth in Section 10.15 of the Loan
Agreement for the period from March 1, 1996 through the effective date hereof.
9. Amendments to Information Certificates.
(a) The Information Certificate, dated February 2, 1996, of ORC
attached as Exhibit A to the Loan Agreement is hereby amended by adding to
Section 12 thereof, the additional information set forth on Exhibit B hereto and
deleting the corporate chart attached thereto and replacing it with the
corporate chart attached as Exhibit D hereto.
(b) The Information Certificate, dated February 2, 1996, of OMPC-NC
attached as Exhibit A to the Loan Agreement is hereby amended by deleting the
corporate chart attached thereto and replacing it with the corporate chart
attached as Exhibit D hereto.
10. Corrective Amendments.
(a) Section 8.3(i) of the Loan Agreement is hereby amended by adding
the word "not" between the word "shall" and the comma contained in line 20 on
page 36 of the Loan Agreement.
(b) The initial unnumbered clause of Section 9 of the Loan Agreement
is hereby amended by deleting the phrase "and generally represent" contained in
the first line of such clause on page 38 of the Loan Agreement and substituting
the phrase "and severally represent" therefor.
11. Additional Representations, Warranties and Covenants. Borrowers
jointly and severally represent, warrant and covenant with and to Lender as
follows, which representa tions, warranties and covenants are continuing and
shall survive the execution and delivery hereof, and the truth and accuracy of,
or compliance with each, together with the representations, warranties and
covenants in the other Financing Agreements, being a continuing condition of the
making of any and all Loans by Lender to Borrowers:
(a) No Event of Default or condition or event which with notice or
passage of time or both would constitute an Event of Default exists or has
occurred as of the date of this Amendment (after giving effect to the amendments
made and con sents and waiver granted by Lender pursuant to this Amendment).
(b) This Amendment and each other agreement or instrument to be
executed and delivered by Borrowers hereunder has been duly executed and
delivered by Borrowers and is in full force and effect as of the date hereof,
and the agreements and
-8-
<PAGE>
obligations of Borrowers contained herein and therein constitute legal, valid
and binding obligations of each Borrower enforceable against each Borrower in
accordance with their terms.
(c) Neither the execution and delivery of the DPL Purchase
Agreements, nor the consummation of the transactions contemplated by the DPL
Purchase Agreements, nor compliance with the provisions of the DPL Purchase
Agreements or instruments thereunder shall result in the creation or imposition
of any lien, claim, charge or encumbrance upon any of the Collateral or the
incurrence, creation, assumption of any liability, obligation or indebtedness,
except the unsecured indebtedness of ORC to Reunion as permitted under, and
subject to the limitations contained in Section 10.10(l) of the Loan Agreement
as added hereby.
(d) Neither the execution and delivery of the DPL Purchase
Agreements nor the consummation of the transactions therein contemplated or
otherwise to be taken pursuant to the DPL Acquisition, nor compliance with the
provisions thereof will subject Borrowers to any tax, duty, fee or other charge,
including, without limitation, any registration or transfer tax, stamp or other
duty or levy, imposed by or within the United States of America, the Republic of
Ireland, Bermuda, the European Union or any political subdivision or taxing
authority of or in any of the foregoing.
(e) After giving effect to the consummation of the acquisitions of
stock effected pursuant to the DPL Acquisition, all of the issued and
outstanding shares of capital stock of the members of the DPL Group, shall be
directly and beneficially owned and held by the shareholders set forth on
Exhibit B hereto who own the number of shares or percentages of the issued and
outstanding shares set forth next to their names, and all of such shares shall
have been duly authorized and shall be fully paid and non-assessable, free and
clear of all claims, liens, pledges and encumbrances of any kind.
(f) The DPL 27.5% Share Purchase Agreement and the transactions
contemplated thereunder have been duly executed, delivered and performed in
accordance with their terms by the respective parties thereto in all respects,
including the fulfillment (not merely the waiver, except as may be disclosed to
Lender and consented to in writing by Lender) of all conditions precedent set
forth therein.
(g) After giving effect to the terms of the DPL 27.5% Share Purchase
Agreement and the instruments and documents to be executed and delivered by the
parties to the DPL 27.5% Share Purchase Agreement (or any of their affiliates or
subsidiaries) thereunder, DPLAC has acquired good and marketable title to
twenty-seven and one-half (27.5%) percent of the issued
-9-
<PAGE>
and outstanding voting stock of DPL and, upon execution, delivery and
performance of the transactions contemplated pursuant to the DPL 68% Share
Purchase Agreement, DPLAC shall have acquired good and marketable title to an
additional sixty-eight (68%) percent of the issued and outstanding voting stock
of DPL. ORC has delivered, or caused to be delivered, to Lender, true, correct
and complete copies of the DPL 27.5% Share Purchase Agreement together with all
other DPL Purchase Agreements relating to the acquisition by DPLAC of twenty-
seven and one-half (27.5%) percent of the voting stock of DPL.
(h) All actions and proceedings required by the DPL 27.5% Share
Purchase Agreement, applicable law or regulation (including, without limitation,
compliance with all applicable laws and regulations of the Republic of Ireland,
Bermuda and the European Union) have been taken and the transactions required
thereunder have been duly and validly taken and consummated.
(i) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the
transactions contemplated as part of the DPL Acquisition and no governmental or
other action or proceeding has been threatened or commenced in the United States
of America, Bermuda, the Republic of Ireland or any other country, seeking any
injunction, restraining order or other order which seeks to void or otherwise
modify the transactions described in the DPL 27.5% Share Purchase Agreement or
otherwise contemplated as part of the portion of the DPL Acquisition relating to
the acquisition by DPLAC of twenty-seven and one-half (27.5%) percent of the
issued and outstanding voting stock of DPL.
(j) Neither the execution and delivery of the DPL Purchase
Agreements and the Reunion DPL Subordinated Notes, nor the consummation of the
transactions therein contemplated or otherwise contemplated as part of the DPL
Acquisition, nor compliance with the provisions thereof, has violated or shall
violate any Federal or state securities laws or any other law or regulation
(including without limitation all applicable laws and regulations of the
Republic of Ireland, Bermuda and the European Union) or any order or decree of
any court or governmental instrumentality in any respect or does or shall
conflict with or result in the breach of, or constitute a default in any respect
under, any indenture, mortgage, deed of trust, security agreement, agreement or
instrument to which either Borrower, any member of the DPL Group, is a party or
may be bound, or violate any provision of the organizational documents of ORC or
any members of the DPL Group.
(k) ORC shall provide Lender not less than five (5) days prior
written notice before the consummation of any of the transactions related to the
DPL Acquisition described on
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<PAGE>
Exhibit A hereto, which notice shall describe in reasonable detail the
transactions to be consummated.
(l) ORC shall provide Lender not less than five (5) days prior
written notice before the consummation of the transactions contemplated by the
DPL 68% Share Purchase Agreement and the other DPL Purchase Agreements relating
to the acquisition by DPLAC of sixty-eighty (68%) percent of the issued and
outstanding voting stock of DPL, accompanied by true, correct and complete
copies of the final forms of the DPL 68% Share Purchase Agreement and all other
DPL Purchase Agreements related thereto.
(m) Prior to or contemporaneously with the consummation of the
transactions contemplated by the DPL 68% Share Purchase Agreement (i) ORC shall
deliver, or cause to be delivered, to Lender a true, correct and complete copy
of the Reunion DPL Subordinated Note in the original principal amount of
$1,050,000, duly authorized, executed and delivered by the parties thereto and
(ii) ORC shall deliver, or cause to be delivered, to Lender, evidence that ORC
has received from or on behalf of Reunion, cash or other immediately available
funds in the aggregate principal amount of $1,050,000 constituting the proceeds
of the loan by Reunion to ORC evidenced by the Reunion DPL Subordinated Note in
the original principal amount of $1,050,000. As of the consummation of the
transactions contemplated by the DPL 68% Share Purchase Agreement, the
representations and warranties contained in Sections 11(f), (g), (h) and (i) of
this Amendment shall be true and correct as applied, mutatis mutandis, to the
DPL 68% Share Purchase Agreement and the acquisition by DPLAC of sixty-eight
(68%) percent of the issued and outstanding voting stock of DPL.
(n) The final form of DPL 68% Share Purchase Agreement, as executed
and delivered by the parties thereto, shall be substantially in the form of
Exhibit E annexed hereto, and neither the DPL 68% Share Purchase Agreement nor
any of the other DPL Purchase Agreements relating to the acquisition by DPLAC of
sixty-eight (68%) percent of the issued and outstanding voting stock of DPL
shall impose any obligations, liabilities or responsibilities on either Borrower
or contain any provisions that directly or indirectly conflict with or are
otherwise inconsistent with any of the terms and conditions of this Amendment or
the Loan Agreement as amended hereby.
(o) The portion of the DPL Acquisition consisting of the acquisition
by DPLAC pursuant to the DPL 68% Share Purchase Agreement of sixty-eight (68%)
percent of the issued and outstanding voting stock of DPL, shall close, as
permitted hereby, on or before January 31, 1997.
12. Conditions to Effectiveness of Amendment. The effectiveness of the
amendments and consents pursuant to this
-11-
<PAGE>
Amendment (other than the provisions of Sections 7, 8 and 10 which shall be
effective immediately) shall be subject to the satisfaction of each of the
following conditions precedent:
(a) Lender shall have received an executed original or executed
original counterparts of this Amendment (as the case may be), duly authorized,
executed and delivered by the respective party or parties hereto;
(b) Lender shall have received, in form and substance satisfactory
to Lender, evidence that the DPL Purchase Agreements have been duly authorized,
executed and delivered by and to the appropriate parties thereto and that the
transactions contemplated under the terms and conditions of the DPL Purchase
Agreements have been consummated prior to or contemporaneously with the
execution of this Amendment;
(c) Lender shall have received, in form and substance satisfactory
to Lender, evidence that the Reunion DPL Subordinated Note in the original
principal amount of $750,000 has been duly authorized, executed and delivered by
ORC and that ORC has received from or on behalf of Reunion, cash or other
immediately available funds in the aggregate principal amount of $750,000
constituting the proceeds of the loan made by Reunion to ORC evidenced by the
Reunion DPL Subordinated Note in the original principal amount of $750,000;
(d) Lender shall have received, in form and substance satisfactory
to Lender, a letter agreement from Reunion in favor of Lender, acknowledging
that the indebtedness owed to Reunion by ORC evidenced by the Reunion DPL
Subordinated Notes is included in the "Junior Debt" as defined under the
Subordination Agreement, dated February 2, 1996, between Lender and Reunion, as
acknowledged by Borrowers, duly authorized, executed and delivered by Reunion
and Borrowers; and
(e) no Event of Default shall exist or have occurred and no event or
condition shall have occurred or exist which with notice or passage of time or
both would constitute an Event of Default.
13. Effect of this Amendment. This Amendment and the instruments and
agreements delivered pursuant hereto constitute the entire agreement of the
parties with respect to the subject matter hereof and thereof, and supersede all
prior oral or written communications, memoranda, proposals, negotiations,
discussions, term sheets and commitments with respect to the subject matter
hereof and thereof. Except as expressly amended pursuant hereto, and except for
the consents and waiver expressly set forth herein, no other changes or
modifications to the Financing Agreements or consents or waivers under any
provisions thereof are intended or implied, and in all other respects the
-12-
<PAGE>
Financing Agreements are hereby specifically ratified, restated and confirmed by
all parties hereto as of the effective date hereof. To the extent of conflict
between the terms of this Amendment and the other Financing Agreements, the
terms of this Amendment shall control.
14. Further Assurances. Borrower shall execute and deliver such
additional documents and take such additional action as may be reasonably
requested by Lender to effectuate the provisions and purposes of this Amendment.
15. Governing Law. The rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance
with the internal laws of the State of New York (without giving effect to
principles of conflicts of laws).
16. Binding Effect. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
17. Counterparts. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be
necessary to produce or account for more than one counterpart thereof signed by
each of the parties hereto.
Please sign in the spaces provided below and return a counterpart of this
Amendment, whereupon this Amendment, as so agreed to and accepted, shall become
a binding agreement between Borrowers and Lender.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
By: __________________________
Title: _______________________
AGREED TO AND ACCEPTED:
ONEIDA ROSTONE CORP.
By: _________________________
Title: ______________________
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
-13-
<PAGE>
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
ONEIDA MOLDED PLASTICS, CORP.
OF NORTH CAROLINA
By: _________________________
Title: ______________________
CONSENTED TO:
____________________________
CHARLES E. BRADLEY, SR.,
limited personal guarantor
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REUNION
INDUSTRIES FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,145
<SECURITIES> 0
<RECEIVABLES> 8,101
<ALLOWANCES> 461
<INVENTORY> 4,175
<CURRENT-ASSETS> 21,132
<PP&E> 29,117
<DEPRECIATION> 2,793
<TOTAL-ASSETS> 59,845
<CURRENT-LIABILITIES> 17,034
<BONDS> 8,699
0
0
<COMMON> 38
<OTHER-SE> 31,778
<TOTAL-LIABILITY-AND-EQUITY> 59,845
<SALES> 42,285
<TOTAL-REVENUES> 42,285
<CGS> 35,470
<TOTAL-COSTS> 35,470
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,746
<INCOME-PRETAX> (622)
<INCOME-TAX> 65
<INCOME-CONTINUING> (687)
<DISCONTINUED> 1,248
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 561
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</TABLE>
