<PAGE>
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, 1999
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: 333-32041
---------------
PRECISE TECHNOLOGY, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 25-1205268
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
501 Mosside Boulevard
North Versailles, Pennsylvania 15137-2553
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(412) 823-2100
----------------------------------------------------
(Registrant's telephone number, including area code)
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 November 5, 1999, one share of the Company's Common Stock was
outstanding.
1
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements 3
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risk 13
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 14
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
PRECISE TECHNOLOGY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
PRECISE HOLDING CORPORATION)
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 312 $ 240
Accounts receivable, net 20,131 14,931
Inventories 8,432 6,510
Prepaid expenses and other 3,814 453
Deferred income taxes 806 806
--------- ---------
Total current assets 33,495 22,940
Property, plant and equipment, net 41,638 43,537
Intangible and other assets, net 25,378 26,931
--------- ---------
Total assets $ 100,511 $ 93,408
========= =========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities:
Current maturities of long-term debt $ 6,438 $ 10,193
Accounts payable 10,250 6,607
Accrued liabilities 6,876 4,109
Tooling deposits 4,087 3,963
--------- ---------
Total current liabilities 27,651 24,872
Long-term debt, less current maturities 84,140 80,031
Deferred income taxes 998 998
Commitments and contingencies -- --
Stockholder's deficit:
Common stock, no par value; 1,000 shares authorized, and
1 share issued and outstanding at September 30, 1999
and December 31, 1998 1 1
Additional paid-in-capital 3,555 3,555
Accumulated other comprehensive loss (292) (292)
Retained deficit (15,542) (15,757)
--------- ---------
Total stockholder's deficit (12,278) (12,493)
--------- ---------
Total liabilities and stockholder's deficit $ 100,511 $ 93,408
========= =========
</TABLE>
See accompanying notes.
3
<PAGE>
PRECISE TECHNOLOGY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
PRECISE HOLDING CORPORATION)
CONSOLIDATED STATEMENTS OF INCOME
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 26,684 $ 24,718 $ 82,418 $ 72,882
Cost of sales 20,617 19,365 63,795 57,989
-------- -------- -------- --------
Gross profit 6,067 5,353 18,623 14,893
Selling, general, and
administrative 3,088 2,755 9,373 7,881
Plant closure costs -- -- -- 31
Amortization of
intangible assets 253 274 761 901
-------- -------- -------- --------
Operating income 2,726 2,324 8,489 6,080
Other expense (income):
Interest expense 2,812 2,578 7,810 7,778
Other -- 12 (1) (21)
-------- -------- -------- --------
(Loss) income before
income taxes (86) (266) 680 (1,677)
(Benefit) provision for
income taxes (33) 292 465 52
-------- -------- -------- --------
Net (loss) income $ (53) $ (558) $ 215 $ (1,729)
======== ======== ======== ========
</TABLE>
See accompanying notes.
4
<PAGE>
PRECISE TECHNOLOGY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
PRECISE HOLDING CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1999 1998
---- ----
Operating Activities (unaudited)
<S> <C> <C>
Net income (loss) $ 215 $ (1,729)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 5,706 5,802
Amortization of financing fees 613 419
Loss on sale of fixed assets 57 71
Changes in assets and liabilities:
Accounts receivable (5,200) (535)
Inventories (1,922) (750)
Prepaid expenses and other (3,184) (685)
Accounts payable 3,643 784
Accrued liabilities 2,767 2,507
Tooling deposits 124 681
-------- --------
Net cash provided by operating activities 2,819 6,565
Investing Activities
Capital expenditures (1,987) (2,019)
Proceeds from sale of fixed assets 79 112
-------- --------
Net cash used in investing activities (1,908) (1,907)
Financing Activities
Borrowings on revolving line of credit 25,300 11,900
Payments on revolving line of credit (23,600) (14,300)
Repayment of long-term debt (2,539) (2,639)
-------- --------
Net cash used in financing activities (839) (5,039)
-------- --------
Net increase (decrease) in cash 72 (381)
Cash at beginning of period 240 560
-------- --------
Cash at end of period $ 312 $ 179
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 4,949 $ 5,276
======== ========
Income taxes, net of refund $ 489 $ 30
======== ========
Supplemental schedule of noncash investing and financing
activities:
Capital lease agreements for equipment $ 1,194 $ 1,469
======== ========
</TABLE>
See accompanying note
5
<PAGE>
PRECISE TECHNOLOGY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
PRECISE HOLDING CORPORATION)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
1. Financial Statement Presentation
The consolidated balance sheet at September 30, 1999, and the
consolidated statements of income and consolidated statements of cash flows for
the periods ended September 30, 1999 and 1998, have been prepared by Precise
Technology, Inc. (the "Company"), without audit. In the opinion of Management,
all normal and recurring adjustments necessary to present fairly the financial
position, results of operations and changes in cash flows at September 30, 1999
and for the periods presented have been made.
In late June and early July 1999, the Company caused each of its
wholly-owned subsidiaries; Precise Technology of Delaware, Inc., Precise
Technology of Illinois, Inc., Precise TMP, Inc., Precise Polestar, Inc., and
Massie Tool, Mold & Die, Inc., to engage in a series of mergers with the Company
as the ultimate sole surviving corporation of the mergers. Precise Polestar,
Inc., and Massie Tool, Mold & Die, Inc., were merged into Precise TMP, Inc., on
June 30, 1999. Precise Technology of Delaware, Inc., and Precise Technology of
Illinois, Inc., were merged into Precise Technology, Inc., on June 30, 1999, and
Precise TMP, Inc. was merged into Precise Technology, Inc., on July 1, 1999.
Upon consummation of the mergers, each of the Guarantors' separate corporate
existence ceased.
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required for complete financial statements prepared in accordance with
generally accepted accounting principles. It is suggested that these
consolidated financial statements be read in conjunction with the Company's
annual report on Form 10-K for the year ended December 31, 1998, which contains
a summary of the Company's accounting principles and other information.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The results of operations for the period ended September 30, 1999, are
not necessarily indicative of the operating results to be expected for the full
year.
2. Inventories
The major components of inventories were as follows (in thousands):
September 30, December 31,
1999 1998
------------- ------------
(unaudited)
Finished products $2,002 $1,309
Raw materials 1,998 2,085
Tooling and dies 4,432 3,116
------ ------
Total $8,432 $6,510
====== ======
6
<PAGE>
PRECISE TECHNOLOGY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
PRECISE HOLDING CORPORATION)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
3. Commitments and Contingencies
The Company is involved from time to time in lawsuits that arise in the
normal course of business. The Company actively and vigorously defends all
lawsuits. Management believes that there are no pending lawsuits that will have
a material affect on the Company's financial position or results of operations.
4. Long -Term Debt
On June 13, 1997, the Company entered into a $30 million Credit
Agreement with a financial institution, which expires in 2002. The Credit
Agreement contains certain covenants which require the Company to maintain
leverage ratios, fixed charge and interest coverage ratios and minimum net
worth. The Credit Agreement further limits capital expenditures, declaration of
dividends and other restricted payments, and additional indebtedness. The Credit
Agreement contains other operating covenants, including a restriction on the
sale, encumbrance or transfer of the Company's assets or capital stock. The
Credit Agreement was amended, effective March 31, 1999. The amendment reduced
the borrowing capacity of the Company by allowing for draws of a specified
percentage of certain assets, determined on a monthly basis, up to a maximum of
$30 million. The borrowing capacity of the Company as of September 30, 1999 was
approximately $17.8 million. As a result of the amendment, $270,000 of deferred
financing fees that related to the original Credit Agreement was written-off and
charged to interest expense.
5. Segment Information
The Company has two reportable segments: injection molding and mold
making. The Company's injection molding segment produces highly engineered,
close tolerance, precision plastic products. The Company's mold making segment
has extensive tool and die manufacturing capabilities.
The Company evaluates performance and allocates resources based on
gross margin. As a result, the Company does not allocate certain general and
administrative expenses to its operating segments, including depreciation,
amortization and interest expense.
The Company's reportable segments are business units that offer
different products and services. The reportable segments are each managed
separately because they manufacture and distribute distinct products or services
with different production processes.
7
<PAGE>
PRECISE TECHNOLOGY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
PRECISE HOLDING CORPORATION)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
5. Segment Information - (continued)
Information by industry segment is set forth below:
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1999
-----------------------------------------------------------------
Unallocated
Injection Mold Corporate Total
Molding Making Items Consolidated
--------- -------- ----------- ------------
(in thousands)
<S> <C> <C> <C> <C>
Revenues from external customers $ 65,781 $ 16,637 $ -- $ 82,418
Segment gross margin 17,378 1,245 -- 18,623
Depreciation and amortization expense 3,970 798 938 5,706
Interest expense -- -- 7,810 7,810
Segment assets 51,528 15,397 33,586 100,511
Net capital expenditures (including 2,318 590 273 3,181
capital leases)
<CAPTION>
Nine Months Ended September 30, 1998
-----------------------------------------------------------------
Unallocated
Injection Mold Corporate Total
Molding Making Items Consolidated
--------- -------- ----------- ------------
(in thousands)
<S> <C> <C> <C> <C>
Revenues from external customers $60,792 $12,090 $ -- $72,882
Segment gross margin 13,874 1,019 -- 14,893
Depreciation and amortization expense 2,559 508 2,735 5,802
Interest expense -- -- 7,778 7,778
Segment assets 49,122 10,743 32,555 92,420
Net capital expenditures (including 2,931 57 500 3,488
capital leases)
</TABLE>
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company's operating data for the three and nine months ended September 30,
1999 and 1998 are set forth below as percentages of net sales:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ---------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 77.3 78.4 77.4 79.6
----- ----- ----- -----
Gross profit 22.7 21.6 22.6 20.4
Selling, general and administrative 11.6 11.1 11.4 10.8
Amortization of intangible assets 0.9 1.1 0.9 1.3
----- ----- ----- -----
Operating income 10.2 9.4 10.3 8.3
Other expense (income):
Interest expense 10.5 10.5 9.5 10.6
Other 0.0 0.0 0.0 0.0
----- ----- ----- -----
(Loss) income before income taxes (0.3) (1.1) 0.8 (2.3)
(Benefit) provision for income taxes (0.1) 1.2 0.6 0.1
----- ----- ----- -----
Net (loss) income (0.2)% (2.3)% 0.2% (2.4)%
===== ===== ===== =====
</TABLE>
RESULTS OF OPERATIONS
Three Months Ended September 30, 1999 compared to Three Months Ended September
30, 1998
Net sales. The Company's net sales increased to $26.7 million for the
three months ended September 30, 1999, an increase of $2.0 million, or 8.0%,
from the comparable period in the prior year. The increase in net sales was
attributable to increased injection molding sales and mold making sales.
Injection molding sales for the three months ended September 30, 1999
increased $0.6 million, or 2.8%, to $21.1 million due to (1) a full quarter of
production in 1999 of a significant new program which was in the start-up phase
in 1998, (2) an increase in demand from certain product lines and (3) the
addition of other new product lines in 1999. This increase was partially offset
by decreased volumes to certain customers who have either insourced, selected
another molder with a closer "ship-to" point, or are experiencing product
maturity.
Mold making sales for the three months ended September 30, 1999
increased $1.4 million, or 34.8%, to $5.6 million. The increase is primarily due
to new mold making programs and increased mold sales related to the management
of mold making programs from outside vendors.
Gross Profit. The Company's gross profit increased to $6.1 million for
the three months ended September 30, 1999, an increase of $0.7 million, or
13.3%, from the comparable period in the prior year. The increase in gross
profit is primarily due to the higher injection molding and mold making sales.
Gross profit margin increased to 22.7% for the three months ended September 30,
1999 from 21.6% in the comparable period in the prior year.
Injection molding's gross profit for the three months ended September
30, 1999 increased $0.5 million, or 10.6%, to $5.5 million. Gross profit margin
increased to 26.0% for the three months ended September 30, 1999 from 24.2% in
the comparable period in the prior year. This increase is due to (1) increased
sales, (2) increased employee utilization and (3) decreased raw material content
from aggressive purchasing tactics.
9
<PAGE>
Mold making's gross profit for the three months ended September 30,
1999 increased $183,000 or 47.2%, to $0.6 million. Gross profit margin increased
to 9.8% for the three months ended September 30, 1999 from 9.2% in the
comparable period in the prior year. This increase in gross profit is primarily
due to the increase in mold sales.
Selling, general and administrative. Selling, general and
administrative expenses increased to $3.1 million for the three months ended
September 30, 1999, an increase of $0.3 million, or 12.1%, over the comparable
period in the prior year. The increase in selling, general and administrative
expenses was primarily due to increased salaries and wages due to an increase
in employees and annual merit and performance-based increases.
Amortization. The Company's amortization of intangible assets decreased
to $253,000 for the three months ended September 30, 1999 from $274,000 in the
comparable period in the prior year. This decrease resulted primarily from the
expiration of non-compete agreements during July of 1998.
Operating income. Operating income increased to $2.7 million for the
three months ended September 30, 1999, an increase of $0.4 million, or 17.3%,
over the comparable period in the prior year. Operating income as a percentage
of net sales increased to 10.2% for the three months ended September 30, 1999
from 9.4% in the comparable period in the prior year primarily due to higher
gross margin, which was partially offset by higher selling, general and
administrative expenses.
Interest expense. Interest expense increased to $2.8 million for the
three months ended September 30, 1999 from $2.6 million in the comparable period
in the prior year, representing an increase of 9.1%. This increase is primarily
the result of higher amounts outstanding under the Company's revolving credit
agreement (the "Credit Agreement") and a write-off of $270,000 of deferred
financing fees due to the reduced borrowing capacity under the Credit Agreement.
Provision for income tax. The Company's effective tax rates differed
from the applicable statutory rates for the three months ended September 30,
1999 and 1998 primarily due to nondeductible goodwill amortization.
Nine Months Ended September 30, 1999 compared to Nine Months Ended September 30,
1998
Net sales. The Company's net sales increased to $82.4 million for the
nine months ended September 30, 1999, an increase of $9.5 million, or 13.1%,
from the comparable period in the prior year. The increase in net sales was
attributable to increased injection molding sales and mold making sales.
Injection molding sales for the nine months ended September 30, 1999
increased $5.0 million, or 8.2%, to $65.8 million due to a full period of
production in 1999 of a significant new program which was in the start-up phase
in 1998, and the addition of other new product lines and customers in 1999. This
increase was partially offset by decreased volumes to certain customers who have
either insourced or have selected another molder with a closer "ship-to" point.
Mold making sales for the nine months ended September 30, 1999
increased $4.5 million, or 37.6%, to $16.6 million. The increase is primarily
due to new mold making programs and increased mold sales related to the
management of mold making programs from outside vendors.
Gross Profit. The Company's gross profit increased to $18.6 million for
the nine months ended September 30, 1999, an increase of $3.7 million, or 25.0%,
from the comparable period in the prior year. Gross profit margin increased to
22.6% for the nine months ended September 30, 1999 from 20.4% in the comparable
period in the prior year. The increase in gross profit and gross profit margin
was primarily due to the increased injection molding and mold making sales.
Injection molding's gross profit for the nine months ended September
30, 1999 increased $3.5 million, or 25.3%, to $17.4 million. Gross profit margin
increased to 26.4% for the nine months ended September 30, 1999 from 22.7% in
the comparable period in the prior year. These increases are due to (1)
10
<PAGE>
increased sales, (2) a favorable product mix and (3) decreased raw material
content from aggressive purchasing tactics and a favorable scrap rate.
Mold making's gross profit for the nine months ended September 30, 1999
increased $226,000, or 22.2%, to $1.2 million. Gross profit margin decreased to
7.3% for the nine months ended September 30, 1999 from 8.4% in the comparable
period in the prior year. The increase in sales contributed to the higher gross
profit although these sales earned lower margins which contributed to the
decrease in gross profit margin.
Selling, general and administrative. Selling, general and
administrative expenses increased to $9.4 million for the nine months ended
September 30, 1999, an increase of $1.5 million, or 18.9% over the comparable
period in the prior year. The increase in selling, general and administrative
expenses was primarily due to higher salaries, wages and fringe benefits due to
an increase in employess and annual merit and performance-based increases and
increased professional fees and travel costs relating to acquisition-related
activities, the implementation of the new computer system and the management of
significant new programs.
Amortization. The Company's amortization of intangible assets decreased
to $761,000 for the nine months ended September 30, 1999, from $901,000 in the
comparable period in the prior year. This decrease resulted primarily from the
expiration of non-compete agreements during July 1998.
Operating income. Operating income increased to $8.5 million for the
nine months ended September 30, 1999, an increase of $2.4 million, or 39.6%,
from the comparable period in the prior year. The increase in operating income
is due to higher gross margin partially offset by higher selling, general and
administrative expenses.
Provision for income tax. The Company's effective tax rates differed
from the applicable statutory rates for the nine months ended September 30, 1999
and 1998 primarily due to nondeductible goodwill amortization.
Liquidity and Capital Resources
The Company generated cash flows from operations totaling $2.8 million
and $6.6 million in the nine months ended September 30, 1999 and 1998,
respectively. The decrease in cash flows from operations is primarily
attributable to increases in accounts receivable, tool and die inventory, and
prepaid expenses, which were partially offset by an increase in accounts payable
and accrued liabilities.
The Company's cash flows used in investing activities totaled $1.9
million in each of the nine month periods ended September 30, 1999 and 1998,
excluding capital lease agreements for equipment totaling $1.2 million and $1.5
million, in the nine months ended September 30, 1999, and 1998, respectively.
As of September 30, 1999, the Company has $3.5 million invested as cash deposits
on new equipment which will eventually be financed. These cash deposits will be
refunded at the time the capital leases are executed. During the first nine
months of 1999, the Company expended approximately $1.0 million in cash capital
expenditures on plant refurbishment and approximately $0.9 million for machinery
and ancillary equipment. The Company estimates its remaining capital
expenditures for 1999 to be $2.5 million in cash and $4.0 million in capital
leases. This increase in anticipated capital expenditures for the remainder of
1999 is for significant new programs that are anticipated to start in the first
quarter of 2000. During the first nine months of 1998, the Company expended
approximately $0.5 million in cash capital expenditures primarily for its new
Enterprise Resource Planning system, $0.4 million in cash capital expenditures
on plant refurbishment and $0.5 million in cash capital expenditures on
machinery and ancillary equipment for a new project for one of the Company's
larger customers.
The Company's cash flows used in financing activities totaled $0.8
million and $5.0 million for the nine months ended September 30, 1999 and 1998,
respectively. During the nine months ended September 30, 1999 and 1998,
regularly scheduled principal payments on the Company's capital lease
obligations and payments on the revolving line of credit under the Credit
Agreement contributed to the cash used in financing activities.
11
<PAGE>
Management believes that the Company's cash flow from operations,
together with borrowing availability under the amended Credit Agreement, which
was $9.0 million at September 30, 1999, provides it with sufficient liquidity
necessary to fund capital improvements, service indebtedness and meet working
capital requirements for the Company's existing operations. However, the Company
is highly leveraged and, as a result, funds available for working capital,
capital expenditures, and other purposes may be limited or unavailable in the
event the Company does not generate cash flow at or above expected levels, which
could have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, borrowings under the Credit
Agreement are only available if the Company is in compliance with the covenants
and borrowing conditions contained in the agreement.
Year 2000 Disclosure
The Company is currently working to resolve the potential impact of the
year 2000 on the processing of time-sensitive information by the Company's
computerized information systems. The year 2000 issue ("Y2K") is the result of
computer programs being written using two digits rather than four to define the
applicable year. Any of the Company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices or engage in similar business activities.
State of Readiness. In 1997, the Company began a program to assess the
impact of the Y2K issue on the software and hardware used in the Company's
operations and has identified various areas to focus its Y2K compliance efforts.
They include business computer systems, manufacturing and warehousing systems,
end-user computing, technical infrastructure, and supplier and service provider
systems. The program's phases include assessment and planning, remediation,
testing and implementation.
The Company's management has developed a program to prepare the
Company's computer systems and related applications for the Y2K. The Company
believes that a majority of its Y2K issues have been addressed by the
installation of an Enterprise Resource Planning ("ERP") system software package
by Baan. The ERP system, which is Y2K compliant, is being used for the Company's
primary business application at its headquarters and manufacturing facilities.
All of the Company's facilities are currently using the ERP system. The Company
has developed a comprehensive plan to assist all departments and manufacturing
facilities in working towards compliance with Y2K issues for all other systems
beyond those being addressed by the ERP system. The Company has identified and
performed procedures to make compliant those other systems beyond the ERP system
by December 1999. If the Company's systems or the systems of other companies on
whose services the Company depends or with whom the Company's systems interface
are not Y2K compliant, it could have a material adverse effect on the Company's
business, financial condition and results of operations.
Y2K Costs. Total costs for the Company's Y2K compliance efforts are
currently estimated to be approximately $2.8 to $3.2 million. The majority of
these costs relate to the ERP system installations and upgrades of which a
portion have been, and will be, capitalized and depreciated over the estimated
useful life of the associated software and hardware. The remaining costs have
been, and will be, charged directly to expense. Amounts capitalized for the
years ended December 31, 1998 and 1997 were approximately $0.5 million and $1.0
million, respectively. Amounts expensed for the years ended December 31, 1998,
and 1997 were approximately $0.5 million and $0.2 million, respectively. During
the nine months ended September 30, 1999 approximately $0.4 million was charged
to expense and approximately $50,000 was capitalized.
Y2K Risks. The reasonable worst-case scenario for the Company with
respect to the Y2K problem is the failure of a key system or supplier system
that causes shipments of the Company's products to customers to be temporarily
interrupted. This could result in the Company not being able to produce one or
more product lines for a period of time, which in turn could lead to lost sales
and profits for the Company and its customers. The Company is in the process of
conducting a Y2K assessment survey for all of its
12
<PAGE>
suppliers and customers. Favorable risk assessments for Y2K compliance have been
received by a majority of the Company's significant suppliers and customers.
Contingency Plans. As a part of the Company's Y2K strategy, contingency
plans have been developed and any systems requiring remediation have one or more
contingency plans. The Company's staff, independent accountants and the Board of
Directors are updated on a regular basis as to the Y2K status. In addition,
supplier site audits, where feasible, have been and will continue to be
performed in 1999. There can be no assurances, however, that these contingency
plans will be effective to eliminate all Y2K risks.
Cautionary Statement on Forward-Looking Statements
This Report contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Investors are cautioned
that any forward-looking statements, including statements regarding the intent,
belief, or current expectations of the Company or its management, are not
guarantees of future performance and involve risks, uncertainties, and other
factors, some of which are beyond the Company's control, and that actual results
may differ materially from those in forward-looking statements. Such risks,
uncertainties and other factors include, but are not limited to: (1) general
economic conditions in the markets in which the Company operates, (2) reliance
on key customers and supply contracts, (3) volatility of customer demand (4)
exposure to fluctuations in resin cost and supply, (5) customer outsourcing
decisions, (6) reliance on key manufacturing facilities, (7) the impact of
significant competition from companies of varying sizes including divisions or
subsidiaries of larger companies, (8) risks associated with Y2K issues and
(9) other risks detailed from time to time in the Company's Securities and
Exchange Commission filings. The Company does not intend to update these
forward-looking statements.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates.
The Company's primary interest rate risk relates to its long-term debt
obligations. At September 30, 1999, the Company had total long-term obligations,
including the current portion of those obligations, of approximately $90.5
million. Of that amount $81.8 million was in fixed rate obligations and $8.7
million was in variable rate obligations. Assuming a 10% increase in interest
rates on the Company's variable rate obligations (i.e., an increase from the
September 30, 1999 weighted average interest rate of 8.18% to a weighted average
interest rate of 9.0%), interest expense for the nine months ended September 30,
1999 would be approximately $47,000 higher based on the September 30, 1999
outstanding balance of variable rate obligations. The Company has no interest
rate swap or exchange agreements.
13
<PAGE>
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 3.1 - Certificate of Incorporation of Precise Intellectual
Property Holdings Company, Inc.
Exhibit 3.2 - By Laws of Precise Technology Intellectual Property
Holdings Company, Inc.
Exhibit 10.1 - License and Royalty Agreement between Precise
Intellectual Property Holdings Company, Inc. and Precise Technology,
Inc.
Exhibit 10.2 - Amended and Restated Second Amendment and Consent to
Credit Agreement as of March 31, 1999, among Precise Holding
Corporation, Precise Technology, Inc., the subsidiary guarantors party
thereto, the lenders party thereto and Fleet National Bank, as agent
and Issuing Bank.
Exhibit 10.3 - Consent and Third Amendment to Credit Agreement as of
September 30, 1999, among Precise Holding Corporation, Precise
Technology, Inc., the subsidiary guarantors party thereto, the lenders
party thereto and Fleet National Bank, as agent and Issuing Bank.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
14
<PAGE>
SIGNATURES
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.
PRECISE TECHNOLOGY, INC.
(Registrant)
Date November 9, 1999 /s/ John R. Weeks
----------------- --------------------------------------------
John R. Weeks
President and Chief Executive Officer
Date November 9, 1999 /s/ Gregory R. Conley
----------------- --------------------------------------------
Gregory R. Conley
Vice President and Chief Financial Officer
(Principal financial and accounting officer)
15
<PAGE>
CERTIFICATE OF INCORPORATION
OF
PRECISE INTELLECTUAL PROPERTY
HOLDINGS COMPANY, INC.
FIRST. The name of the corporation is Precise Intellectual
Property Holdings Company, Inc. (hereinafter the "Corporation").
SECOND. The address of the Corporation's registered office in
the State of Delaware is 1013 Centre Road, in the City of Wilmington, County of
New Castle. The name of its registered agent at such address is Corporation
Service Company.
THIRD. The nature of the business of or purpose to be
conducted or promoted by the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "General Corporation Law").
FOURTH. The total number of shares of capital stock which the
Corporation shall have authority to issue is 1,000 shares of common stock, par
value $.01 per share.
FIFTH. The Board of Directors is authorized to make, alter or
repeal the By-Laws of the Corporation. Election of directors need not be by
written ballot unless the By-Laws so provide.
SIXTH. The name and mailing address of the sole incorporator
is:
Name Mailing Address
Janelle Telesford Winston & Strawn
200 Park Avenue
New York, New York 10166
SEVENTH. No director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, provided, however, that this provision shall not
eliminate or limit the liability of a director: (i) for any breach of the
director's duty of loyalty to the Corporation and its stockholders; (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law; (iii) under Section 174 of the General Corporation
Law; or (iv) for any transaction from which the director derived an improper
personal benefit.
<PAGE>
EIGHTH. The Corporation shall, to the extent required, and
may, to the extent permitted by the General Corporation Law, indemnify and
reimburse all persons whom it may indemnify and reimburse pursuant thereto.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this 30th day of June, 1999.
/s/ Janelle Telesford
---------------------------
Janelle Telesford
Sole Incorporator
<PAGE>
BYLAWS
OF
PRECISE INTELLECTUAL PROPERTY HOLDINGS COMPANY, INC.
-------------
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be at Corporation Service Company, 1013 Centre Road, in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. Additional Offices. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 1. Time and Place. A meeting of stockholders for any purpose
may be held at such time and place, within or without the State of Delaware, as
the Board of Directors may fix from time to time and as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting. Annual meetings of stockholders, commencing
with the year 2000 shall be held on January 15, commencing on January 15, 2000
if not a legal holiday, or, if a legal holiday, then on the next secular day
following, at 2 P.M., or at such other date and time as shall, from time to
time, be designated by the Board of Directors and stated in the notice of the
meeting. At such annual meeting, the stockholders shall elect a Board of
Directors and transact such other business as may properly be brought before the
meeting.
Section 3. Notice of Annual Meeting. Written notice of the annual
meeting, stating the place, date and time thereof, shall be given to each
stockholder entitled to vote at such meeting not less than 10 (unless a longer
period is required by law) nor more than 60 days prior to the meeting.
<PAGE>
Section 4. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the Chairman of the Board, if
any, or the President and shall be called by the President or Secretary at the
request in writing of a majority of the Board of Directors, or at the request in
writing of the stockholders owning a majority of the shares of capital stock of
the Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting.
Section 5. Notice of Special Meeting. Written notice of a special
meeting, stating the place, date and time thereof and the purpose or purposes
for which the meeting is called, shall be given to each stockholder entitled to
vote at such meeting not less than 10 (unless a longer period is required by
law) nor more than 60 days prior to the meeting.
Section 6. List of Stockholders. The officer in charge of the stock
ledger of the Corporation or the transfer agent shall prepare and make, at least
10 days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least 10 days prior to the meeting, at a
place within the city where the meeting is to be held, which place, if other
than the place of the meeting, shall be specified in the notice of the meeting.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present in person thereat.
Section 7. Presiding Officer; Order of Business.
(a) Meetings of stockholders shall be presided over by the
Chairman of the Board, if any, or, if he is not present (or, if there is none),
by the President, or, if he is not present, by a Vice President, or, if he is
not present, by such person who may have been chosen by the Board of Directors,
or, if none of such persons is present, by a chairman to be chosen by the
stockholders owning a majority of the shares of capital stock of the Corporation
issued and outstanding and entitled to vote at the meeting and who are present
in person or represented by proxy. The Secretary of the Corporation, or, if he
is not present, an Assistant Secretary, or, if he is not present, such person as
may be chosen by the Board of Directors, shall act as secretary of meetings of
stockholders, or, if none of such persons is present, the stockholders owning a
majority of the share of capital stock of the Corporation issued and outstanding
and entitled to vote at the meeting and who are present in person or represented
by proxy shall choose any person present to act as secretary of the meeting.
(b) The following order of business, unless otherwise ordered
at the meeting, shall be observed as far as practicable and consistent with the
purposes of the meeting:
1. Call of the meeting to order.
2. Presentation of proof of mailing of the notice of the
meeting and, if the meeting is a special meeting, the
call thereof.
3. Presentation of proxies.
- 2 -
<PAGE>
4. Announcement that a quorum is present.
5. Reading and approval of the minutes of the previous
meeting.
6. Reports, if any, of officers.
7. Election of directors, if the meeting is an annual
meeting or a meeting called for that purpose.
8. Consideration of the specific purpose or purposes for
which the meeting has been called (other than the
election of directors), if the meeting is a special
meeting.
9. Transaction of such other business as may properly
come before the meeting.
10. Adjournment.
Section 8. Quorum; Adjournments. The holders of a majority of the
shares of capital stock of the Corporation issued and outstanding and entitled
to vote threat, present in person or represented by proxy, shall be necessary
to, and shall constitute a quorum for, the transaction of business at all
meetings of the stockholders, except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, a quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have the power to
adjourn the meeting from time to time, without notice of the adjourned meeting
if the time and place thereof are announced at the meeting at which the
adjournment is taken, until a quorum shall be present or represented. Even if a
quorum shall be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time for good
cause without notice of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken, until a date which
is not more than 30 days after the date of the original meeting. At any such
adjourned meeting, at which a quorum shall be present in person or represented
by proxy, any business may be transacted which might have been transacted at the
meeting as originally called. If the adjournment is for more than 30 days, of if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote thereat.
Section 9. Voting.
(a) At any meeting of stockholders, every stockholder having
the right to vote shall be entitled to vote in person or by proxy. Except as
otherwise provided by law or the Certificate of Incorporation, each stockholder
of record shall be entitled to one vote for each share of capital stock
registered in his name on the books of the Corporation.
(b) All elections shall be determined by a plurality vote,
and, except as otherwise provided by law or the Certificate of Incorporation,
all other matters shall be
- 3 -
<PAGE>
determined by a vote of a majority of the shares present in person or
represented by proxy and voting on such other matters.
Section 10. Action by Consent. Any action required or permitted by law
or the Certificate of Incorporation to be taken at any meeting of stockholders
may be taken without a meeting, without prior notice and without a vote, if a
written consent, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present or represented by proxy and
voted. Such written consent shall be filed with the minutes of meetings of
stockholders. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not so consented in writing thereto.
ARTICLE III
DIRECTORS
Section 1. General Powers; Number; Tenure. The business of the
Corporation shall be managed by its Board of Directors, which may exercise all
powers of the Corporation and perform all lawful acts and things which are not
by law, the Certificate of Incorporation or these Bylaws directed or required to
be exercised or performed by the stockholders. Within the limits specified in
this Section 1, the number of directors shall be 3, unless another number is
specified by the Board of Directors by resolution thereof. The directors shall
be elected at the annual meeting of the stockholders, except as provided in
Section 2 of this Article, and each director elected shall hold office until his
successor is elected and shall qualify. Directors need not be stockholders.
Section 2. Vacancies. If any vacancies occur in the Board of Directors,
or if any new directorships are created, they may be filled by vote of a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. Each director so chosen shall hold office until the
next annual meeting of stockholders and until his successor is duly elected and
shall qualify. If there are no directors in office, any officer or stockholder
may call a special meeting of stockholders in accordance with the provisions of
the Certificate of Incorporation or the Bylaws, at which meeting such vacancies
shall be filled.
Section 3. Removal; Resignation.
(a) Except as otherwise provided by law or the Certificate of
Incorporation, any director, directors or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
(b) Any directors may resign at any time by giving written
notice to the Board of Directors, the Chairman of the Board, the President or
the Secretary of the Corporation. Unless otherwise specified in such written
notice, a resignation shall take effect upon delivery thereof to the Board of
Directors or the designated officer. It shall not be necessary for a resignation
to be accepted before it becomes effective.
- 4 -
<PAGE>
Section 4. Place of Meetings. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. Annual Meeting. The annual meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present.
Section 6. Regular Meetings. Additional regular meetings of the Board
of Directors may be held without notice, at such time and place as may from time
to time be determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, the President or by 2 or more
directors on at least 2 days' notice to each director, if such notice is
delivered personally or sent by fax, telegram or an overnight courier such as
Federal Express, or on at least 3 days' notice if sent by first class U.S. mail.
Special meetings shall be called by the Chairman of the Board, President,
Secretary or 2 or more directors in like manner and on like notice on the
written request of one-half or more of the number of directors then in office.
Any such notice need not state the purpose or purposes of such meeting except as
provided in Article XI.
Section 8. Quorum; Adjournments. At all meetings of the Board of
Directors, a majority of the directors then in office shall constitute a quorum
for the transaction of business, and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by law or the
Certificate of Incorporation. If a quorum is not present at any meeting of the
Board of Directors, the directors present may adjourn the meeting, from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 9. Compensation. Directors shall be entitled to such
compensation for their services as directors and to such reimbursement for any
reasonable expenses incurred in attending directors' meetings as may from time
to time be fixed by the Board of Directors. The compensation of directors may be
on such basis as is determined by the Board of Directors. Any director may waive
compensation for any meeting. Any director receiving compensation under these
provisions shall not be barred from serving the Corporation in any other
capacity and receiving compensation and reimbursement for reasonable expenses
for such other services.
Section 10. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting if
a written consent to such action is signed by all members of the Board of
Directors and such written consent is filled with the minutes of its
proceedings.
Section 11. Meetings by Telephone or Similar Communications. The Board
of Directors may participate in a meeting by means of conference telephone or
similar communications equipment by means of which all directors participating
in the meeting can hear each other, and participation in such meeting shall
constitute presence in person by such director at such meeting.
- 5 -
<PAGE>
ARTICLE IV
COMMITTEES
Section 1. Executive Committee. The Board of Directors, by resolution
adopted by a majority of the whole Board, may appoint an Executive Committee
consisting of not more than 5 directors, one of whom shall be designated as
Chairman of the Executive Committee. Each member of the Executive Committee
shall continue as a member thereof until the expiration of his term as a
director, or his earlier resignation, unless sooner removed as a member or as a
director.
Section 2. Powers. Unless circumscribed by resolution of the Board
appointing the Executive Committee or except as otherwise provided by law, the
Executive Committee shall have and may exercise all of the powers and authority
of the Board of Directors in the management of the business and affairs of the
Corporation including, without limitation, the power and authority to declare a
dividend in cash, property or its own shares and to authorize the issuance of
any shares of capital stock of the Corporation of any class now or hereafter
authorized, and any options or warrants for, and rights to subscribe to, such
shares, and any securities convertible into or exchangeable for such shares; and
may authorize the seal of the Corporation to be affixed to all papers which may
require it.
Section 3. Procedure; Meetings. The Executive Committee shall fix its
own rules of procedure and shall meet at such times and at such place or places
as may be provided by such rules or as the members of the Executive Committee
shall provide. The Executive Committee shall keep regular minutes of its
meetings and deliver such minutes to the Board of Directors.
The Chairman of the Executive Committee, or, in his absence, a member
of the Executive Committee chosen by a majority of the members present, shall
preside at meetings of the Executive Committee, and another member thereof
chosen by the Executive Committee shall act as Secretary of the Executive
Committee.
Section 4. Quorum. A majority of the Executive Committee shall
constitute a quorum for the transaction of business, and the affirmative vote of
a majority of the members of the Executive Committee shall be required for any
action of the Executive Committee; provided, however, that when an Executive
Committee of one member is authorized under the provisions of Section 1 of this
Article, such one member shall constitute a quorum.
Section 5. Other Committees. The Board of Directors, by resolutions
adopted by a majority of the whole Board, may appoint such other committee or
committees as it shall deem advisable and with such functions and duties as the
Board of Directors shall prescribe.
Section 6. Vacancies; Changes; Discharge. The Board of Directors shall
have the power at any time to fill vacancies in, to change the membership of,
and to discharge any committee.
Section 7. Compensation. Members of any committee shall be entitled to
such compensation for their services as members of any such committee and to
such reimbursement for any reasonable expenses incurred in attending committee
meetings as may from time to time
- 6 -
<PAGE>
be fixed by the Board of Directors. Any member may waive compensation for any
meeting. Any committee member receiving compensation under these provisions
shall not be barred from serving the Corporation in any other capacity and from
receiving compensation and reimbursement of reasonable expenses for such other
services.
Section 8. Action by Consent. Any action required or permitted to be
taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if a written consent to such action is signed by all members
of the committee and such written consent is filed with the minutes of its
proceedings.
Section 9. Meetings by Telephone or Similar Communications. The members
of any committee designated by the Board of Directors may participate in a
meeting of such committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in such
meeting can hear each other and participation in such meeting shall constitute
presence in person at such meeting.
ARTICLE V
NOTICES
Section 1. Form; Delivery. Whenever, under the provisions of law, the
Certificate of Incorporation or these Bylaws, notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice
unless otherwise specifically provided, but such notice may be given in writing,
by mail, addressed to such director or stockholder, at his address as it appears
on the records of the Corporation, with postage thereon prepaid. Such notices
shall be deemed to be given at the time they are deposited in the United States
mail. Notice to a director may also be given personally or by telegram sent to
his address as it appears on the records of the Corporation.
Section 2. Waiver. Whenever any notice is required to be given under
the provisions of law, the Certificate of Incorporation or these Bylaws, a
written waiver thereof, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed to be
equivalent to such notice. In addition, any stockholder who attends a meeting of
stockholders in person, or is represented at such meeting by proxy, without
protesting at the commencement of the meeting the lack of notice thereof to him,
or any director who attends a meeting of the Board of Directors without
protesting, at the commencement of the meeting, such lack of notice, shall be
conclusively deemed to have waived notice of such meeting.
ARTICLE VI
OFFICERS
Section 1. Designations. The officers of the Corporation shall be
chosen by the Board of Directors. The Board of Directors may choose a Chairman
of the Board, a Vice Chairman of the Board or Vice Chairman, a President, a Vice
President or Vice Presidents, a Secretary, a Treasurer, one or more Assistant
Secretaries and/or Assistant Treasurers and other officers and agents as it
shall deem necessary or appropriate. All officers of the Corporation shall
exercise such powers and perform such duties as shall from time to time be
determined by
- 7 -
<PAGE>
the Board of Directors. Any number of offices may be held by the same person,
unless the Certificate of Incorporation or these Bylaws otherwise provide.
Section 2. Term of Office; Removal. The Board of Directors at its
annual meeting after each annual meeting of stockholders shall choose a
President, a Secretary and a Treasurer. The Board of Directors may also choose a
Chairman of the Board, a Vice President or Vice Presidents, one or more
Assistant Secretaries and/or Assistant Treasurers, and such other officers and
agents as it shall deem necessary or appropriate. Each officer of the
Corporation shall hold office until his successor is chosen and shall qualify.
Any officer elected or appointed by the Board of Directors may be removed, with
or without cause, at any time by the affirmative vote of a majority of the
directors then in office. Such removal shall not prejudice the contract rights,
if any, of the person so removed. Any vacancy occurring in any office of the
Corporation may be filled for the unexpired portion of the term by the Board of
Directors.
Section 3. Compensation. The salaries of all officers of the
Corporation shall be fixed from time to time by the Board of Directors and no
officer shall be prevented from receiving such salary by reason of the fact that
he is also a director of the Corporation.
Section 4. The Chairman of the Board. The Chairman of the Board, if
any, may be an officer of the Corporation and, subject to the direction of the
Board of Directors, shall perform such executive, supervisory and management
functions and duties as may be assigned to him from time to time by the Board of
Directors. He shall, if present, preside at all meetings of stockholders and of
the Board of Directors.
Section 5. The Vice Chairman of the Board. The Vice Chairman of the
Board, if any (or in the event there be more than one, the Vice Chairmen in the
order designated, or in the absence of any designation, in the order of their
election), shall, in the absence of the Chairman of the Board or in the event of
his disability, perform the duties and exercise the powers of the Chairman of
the Board and shall generally assist the Chairman of the Board and perform such
other duties and have such other powers as may from time to time be prescribed
by the Board of Directors.
Section 6. The President.
(a) The President shall be the chief executive officer of the
Corporation unless the Board of Directors elects the Chairman or a Vice Chairman
of the Board to such position, and, subject to the direction of the Board of
Directors, shall have general charge of the business, affairs and property of
the Corporation and general supervision over its other officers and agents. In
general, he shall perform all duties incident to the office of President and
shall see that all orders and resolutions of the Board of Directors are carried
into effect. In addition to and not in limitation of the foregoing, the
President shall be empowered to authorize any change of the registered office or
registered agent (or both) of the Corporation in the State of Delaware.
(b) Unless otherwise prescribed by the Board of Directors, the
President shall have full power and authority on behalf of the Corporation to
attend, act and vote at any meeting of security holders of other corporations in
which the Corporation may hold securities. At such meeting the President shall
possess and may exercise any and all rights and powers incident to
- 8 -
<PAGE>
the ownership of such securities which the Corporation might have possessed and
exercised if it had been present. The Board of Directors may from time to time
confer like powers upon any other person or persons.
Section 7. The Vice Presidents. The Vice President, if any (or in the
event there be more than one, the Vice Presidents in the order designated, or in
the absence of any designation, in the order of their election), shall, in the
absence of the President or in the event of his disability, perform the duties
and exercise the powers of the President and shall generally assist the
President and perform such other duties and have such other powers as may from
time to time be prescribed by the Board of Directors.
Section 8. The Secretary. The Secretary shall attend all meetings of
the Board of Directors and all meetings of stockholders and record all votes and
the proceedings of the meetings in a book to be kept for that purpose and shall
perform like duties for the Executive Committee or other committees, if
required. He shall give, or cause to be given, notice of all meetings of
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may from time to time be prescribed by the Board of
Directors, the Chairman of the Board or the President, under whose supervision
he shall act. He shall have custody of the seal of the Corporation, and he, or
an Assistant Secretary, shall have authority to affix the same to any instrument
requiring it, and, when so affixed, the seal may be attested by his signature or
by the signature of such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing thereof by his signature.
Section 9. The Assistant Secretary. The Assistant Secretary, if any (or
in the event there be more than one, the Assistant Secretaries in the order
designated, or in the absence of any designation, in the order of their
election), shall, in the absence of the Secretary or in the event of his
disability, perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
Section 10. The Treasurer. The Treasurer shall have the custody of the
corporate funds and other valuable effects, including securities, and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the Corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may from time
to time be designated by the Board of Directors. He shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Chairman of the Board,
the President and the Board of Directors, at regular meetings of the Board, or
whenever they may require it, an account of all his transactions as Treasurer
and of the financial condition of the Corporation.
Section 11. The Assistant Treasurer. The Assistant Treasurer, if any
(or in the event there shall be more than one, the Assistant Treasurers in the
order designated, or in the absence of any designation, in the order of their
election), shall, in the absence of the Treasurer or in the event of his
disability, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
- 9 -
<PAGE>
ARTICLE VII
INDEMNIFICATION OF
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
Reference is made to Section 145 (and any other relevant provisions) of
the General Corporation Law of the State of Delaware. Particular reference is
made to the class of persons (hereinafter called "Indemnitees") who may be
indemnified by a Delaware corporation pursuant to the provisions of such Section
145, namely, any person (or the heirs, executors or administrators of such
person) who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director, officer, employee or agent of such corporation, or
is or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise. The Corporation shall (and is hereby obligated to) indemnify
the Indemnitees, and each of them, in each and every situation where the
Corporation is obligated to make such indemnification pursuant to the aforesaid
statutory provisions. The Corporation shall indemnify the Indemnitees, and each
of them, in each and every situation where, under the aforesaid statutory
provisions, the Corporation is not obligated, but is nevertheless permitted or
empowered, to make such indemnification, it being understood, that, before
making such indemnification with respect to any situation covered under this
sentence, the Corporation shall promptly make or cause to be made, by any of the
methods referred to in subsection (d) of such Section 145, a determination as to
whether each Indemnitee acted in good faith and in a manner such Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, in the case of any criminal action or proceeding, had no
reasonable cause to believe that such Indemnitee's conduct was unlawful. No such
indemnification shall be made (where not required by statute) unless it is
determined that such Indemnitee acted in good faith and in a manner that such
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Corporation, and, in the case of any criminal action or proceeding, had no
reasonable cause to believe that such Indemnitee's conduct was unlawful.
ARTICLE VIII
AFFILIATED TRANSACTIONS AND INTERESTED DIRECTORS
Section 1. Affiliated Transactions. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction or solely because his or their votes are
counted for such purpose, if:
(a) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative
- 10 -
<PAGE>
vote of a majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or
(b) The material facts as to his relationship or interests and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of Directors,
a committee thereof, or the stockholders.
Section 2. Determining Quorum. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee thereof which authorizes the contract or
transaction.
ARTICLE IX
STOCK CERTIFICATES
Section 1. Form; Signatures.
(a) Every holder of stock in the Corporation shall be entitled
to have a certificate, signed by the Chairman of the Board or the President and
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation, exhibiting the number and class (and series, if
any) of shares owned by him, and bearing the seal of the Corporation. Such
signatures and seal may be facsimile. A certificate may be manually signed by a
transfer agent or registrar other than the Corporation or its employee but may
be a facsimile. In case any officer who has signed, or whose facsimile signature
was placed on, a certificate shall have ceased to be such officer before such
certificate is issued, it may nevertheless be issued by the Corporation with the
same effect as if he were such officer at the date of its issue.
(b) All stock certificates representing shares of capital
stock which are subject to restrictions on transfer or to other restrictions may
have imprinted thereon such notation to such effect as may be determined by the
Board of Directors.
Section 2. Registration of Transfer. Upon surrender to the Corporation
or any transfer agent of the Corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation or its transfer
agent to issue a new certificate to the person entitled thereto, to cancel the
old certificate and to record the transaction upon its books.
Section 3. Registered Stockholders.
(a) Except as otherwise provided by law, the Corporation shall
be entitled to recognize the exclusive right of a person who is registered on
its books as the owner of shares of its capital stock to receive dividends or
other distributions, to vote as such owner, and to hold liable for calls and
assessments any person who is registered on its books as the owner of shares
- 11 -
<PAGE>
of its capital stock. The Corporation shall not be bound to recognize any
equitable or legal claim to or interest in such shares on the part of any other
person.
(b) If a stockholder desires that notices and/or dividends
shall be sent to a name or address other than the name or address appearing on
the stock ledger maintained by the Corporation (or by the transfer agent or
registrar, if any), such stockholder shall have the duty to notify the
Corporation (or the transfer agent or registrar, if any) in writing, of such
desire. Such written notice shall specify the alternate name or address to be
used.
Section 4. Record Date. In order that the Corporation may determine the
stockholders of record who are entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution, or to make a determination of the
stockholders of record for any other proper purpose, the Board of Directors may,
in advance, fix a date as the record date for any such determination. Such date
shall not be more than 60 nor less than 10 days before the date of such meeting,
nor more than 60 days prior to the date of any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting taken pursuant to
Section 8 of Article II; provided, however, that the Board of Directors may fix
a new record date for the adjourned meeting.
Section 5. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct a new certificate to be issued in place of any certificate
theretofore issued by the Corporation which is claimed to have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Corporation a bond in such sum, or other security in such form, as
it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate claimed to have been lost, stolen or
destroyed.
ARTICLE X
GENERAL PROVISIONS
Section 1. Dividends. Subject to the provisions of the Certificate of
Incorporation, dividends upon the outstanding capital stock of the Corporation
may be declared by the Board of Directors at any regular or special meeting,
pursuant to law, and may be paid in cash, in property or in shares of the
Corporation's capital stock.
Section 2. Reserves. The Board of Directors shall have full power,
subject to the provisions of law and the Certificate of Incorporation, to
determine whether any, and, if so, what part, of the funds legally available for
the payment of dividends shall be declared as dividends and paid to the
stockholders of the Corporation. The Board of Directors, in its sole discretion,
may fix a sum which may be set aside or reserved over and above the paid-in
capital of the Corporation for working capital or as a reserve for any proper
purpose, and may, from time to time, increase, diminish or vary such fund or
funds.
- 12 -
<PAGE>
Section 3. Fiscal Year. The fiscal year of the Corporation shall be as
determined from time to time by the Board of Directors.
Section 4. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal" and "Delaware."
ARTICLE XI
AMENDMENTS
The Board of Directors shall have the power to make, alter and repeal
these Bylaws, and to adopt new bylaws, by an affirmative vote of a majority of
the whole Board, provided that notice of the proposal to make, alter or repeal
these Bylaws, or to adopt new bylaws, must be included in the notice of the
meeting of the Board of Directors at which such action takes place.
- 13 -
<PAGE>
LICENSE AND ROYALTY AGREEMENT
This License and Royalty Agreement (this "Agreement"), made this
30th day of September, 1999 by and between Precise Intellectual Property
Holdings Company, Inc., a Delaware corporation ("Licensor"), and Precise
Technology, Inc., a Delaware corporation, its successors and permitted assigns
and their respective Affiliates presently existing or hereafter created
("Licensee"), is made with reference to the following facts.
WHEREAS, Licensee has developed and manufactured precision plastic
products and mold design products (the "Licensed Products"), and has developed,
and is in the process of developing a marketing plan and marketing concepts,
trademarks, trade dress and packaging to market the Licensed Products throughout
the world;
WHEREAS, Licensee is a party to that certain credit agreement, dated as
of June 13, 1997, by and among Licensee, as borrower, certain subsidiaries of
Licensee then existing, the lenders party thereto (the "Lenders") and Fleet
National Bank, as collateral agent (the "Agent") thereunder, pursuant to which,
Licensee has granted a security interest in and liens upon the Intangible
Property, inter alia, to the Agent for the benefit of the Lenders (the "Fleet
Liens");
WHEREAS, Licensee recently formed Licensor as a wholly owned subsidiary
of Licensee to which it has assigned (the "Assignment") all its right, title and
interest in and to the Intangible Property (as defined below), all subject to
the Fleet Liens;
WHEREAS, the parties hereto wish Licensee to use and exploit the
Licensed Technology in the manufacture and sale of Licensed Products; and
WHEREAS, Licensor wishes Licensee to manufacture, distribute and sell
the Licensed Products under the Commercial Symbols (as defined below) and
Licensee wishes to do so upon the terms and subject to the conditions
hereinafter set forth;
NOW, THEREFORE, the parties hereto hereby agree as follows:
Section 1. Definitions.
"Affiliate" means any wholly or partially owned subsidiary of
Licensee, and any person, firm, corporation, or other legal entity, affiliated
with or under the common control of or with Licensee, its shareholders,
directors, executive officers or subsidiaries.
"Appraisal" has the meaning assigned to it in Section 5(a).
"Assignment" has the meaning assigned to it in the Recitals.
"Commercial Symbols" means trademarks, trade dress, logotypes,
and packaging (including, without limitation, the language for the writing on or
in any packaging) and any copyrightable material included therein, such as art
work, drawings, text and like, created by or for Licensor.
<PAGE>
"Effective Date" means the date first above written.
"Improvements" means any and all improvements, modifications,
enhancements, refinements and the like, whether patentable, or unpatentable, to
the Licensed Technology or Licensed Products.
"Initial Appraisal" has the meaning assigned to it in Section
5(a) hereof.
"Intangible Property" shall mean all intangible property owned
by Licensor or in which Licensor has any right, title or interest. Intangible
Property shall include, without limitation, the following: (i) the names
"Precise Technology, Inc.", "Precise Technology of Delaware, Inc.", "Precise
Technology of Illinois, Inc.", "Precise TMP, Inc.", "Precise Polestar, Inc.",
"Massie Tool, Mold & Die, Inc." and other names of subsidiaries (including
without limitation, fictitious or "d/b/a" names used by Licensee or any of its
subsidiaries), product lines, departments or divisions of Licensee, all
registered and unregistered trademarks, service marks, trade names and slogans
related thereto, all applications therefor, and all associated goodwill; (ii)
all statutory, common law and registered copyrights, together with all
applications and registrations therefor; (iii) all patents and patent
applications and all associated technical information; (iv) all industrial molds
and processes, machine designs, manufacturing know-how, product designs, product
application know-how, product specifications, testing specifications and quality
controls; (v) shop rights, know-how, trade secrets, processes, operating,
maintenance and other manuals, drawings and specifications, process flow
diagrams and related data; (vi) all "software" and associated documentation
(including all electronic data processing systems and program specifications,
source codes, input data and report layouts and format, record file layouts,
diagrams, functional specifications and narrative descriptions, and flow
charts); (vii) all other inventions, discoveries, improvements, processes,
formulae (secret or otherwise), data, drawings, specifications, trade secrets,
confidential information, know-how and ideas (including those in the possession
of third parties, but which are the property of the Licensor); (viii) all of the
rights to the licenses, permits (including environmental permits), approvals,
clearances and authorizations desirable or required to manufacture or sell the
Licensed Products (each, a "Permit"), provided, that any Permit, which by its
terms is not transferable or assignable, or becomes void upon an attempted
transfer or assignment shall not be included in such definition; (ix) all rights
and claims against third parties arising out of, relating to or in respect of
the business of the Licensee, including, without limitation, all chooses of
action, causes of action, rights of recovery and rights of set-off of any kind,
all rights under express or implied warranties from suppliers to Licensee and
all other interests in or claims or payments from or against vendors; and (x)
all drawings, records, books or other tangible media, including digital or
electronic media, embodying the foregoing.
"Licensed Products" has the meaning assigned to it in the
Recitals.
"Licensed Technology" means all intangible property embodied
in the Licensed Products or Improvements or the process or equipment for
manufacturing and producing the same, together with any and all improvements,
enhancements, modifications, alterations or additions thereof.
- 2 -
<PAGE>
"Licensee" has the meaning assigned to it in the Preamble.
"Licensor" has the meaning assigned to it in the Preamble.
"Licensor Confidential Information" means and includes any and
all confidential information provided by Licensor to Licensee hereunder,
together with any other information, documents (and the information contained
therein), other tangible and intangible materials (and the information contained
therein) provided by Licensor to Licensee either orally or in writing that are
indicated to be confidential at the time of disclosure or at any time thereafter
or are understood to be confidential. Notwithstanding the foregoing, the term
"Licensor Confidential Information" shall not mean or include information which:
(1) at the time of disclosure, or at any time prior to Licensor indicating to
Licensee the confidentiality of the information, was in the public domain or
generally available to the public; or (2) after disclosure becomes a part of the
public domain or is made generally available to the public through no fault of
Licensee (but only after, and to the extent that, it becomes a part of the
public domain or is made generally available to the public).
"Parties" mean Licensor and Licensee, collectively. The term
"Party" means either Licensor or Licensee, as the context shall require.
"Person" includes any individual, corporation, partnership,
joint venture, or other legal or commercial entity.
"Royalty Rate" shall be that rate determined in the most
recent Appraisal.
"Term" has the meaning assigned to it in Section 12.
"Territory" means any geographic area in which the Licensee or
its subsidiaries at any time conduct business or proposes to conduct business.
Section 2. Grant of License.
(a) Upon the terms and subject to the conditions set forth
herein, Licensor hereby grants to Licensee for the Term hereof, subject to the
Fleet Liens, an exclusive license to use any and all of the Intangible Property
for the benefit of its business, including without limitation, to manufacture,
distribute and sell Licensed Products in the Territory using Licensed
Technology.
(b) Licensee agrees to devote its best commercial effort to
exploit the Licensed Technology within the Territory. In furtherance of this
obligation, Licensee agrees that it shall devote sufficient funds and personnel
to market the Licensed Products to those Persons within the Territory which are
potential customers for the Licensed Products.
(c) Without the consent of Licensor, Licensee will not: (i)
market, advertise, distribute or sell, or permit any marketing, advertising,
distribution or sales, directly or indirectly, of the Licensed Products or any
component thereof outside of the Territory or (ii) deliver or transfer or, to
the extent legally controllable by Licensee, permit the delivery or transfer for
resale of any Licensed Products outside of the Territory.
- 3 -
<PAGE>
(d) Other than as specifically provided herein, Licensee shall
not be entitled to sub-license any of its rights under this Agreement. In the
event Licensee is not the manufacturer of a Licensed Product, Licensee shall,
subject to the prior written approval of Licensor (which approval shall not be
unreasonably withheld), be entitled to utilize a third-party manufacturer in
connection with the manufacture and production of such Licensed Product,
provided that such manufacturer shall execute a letter, a copy of which shall be
promptly delivered to Licensor, whereby it agrees to assume the obligations of
Licensee set forth in Section 5 (payment of royalties), Section 6 (Quality
Control), Section 7 (Recordkeeping and Audit Rights), Section 10
(Indemnification) and Section 11 (Confidentiality) with respect to such Licensed
Product. In that event, Licensee shall remain primarily obligated under all of
the provisions of this Agreement. In no event shall any such sub-license
agreement include the right to grant any further sub-licenses and any such
attempt to grant a further sub-license shall be void ab initio.
Section 3. Trademark Packaging and Marketing Plan.
(a) The Licensed Products shall be sold and distributed only
under the Commercial Symbols. Licensee agrees to place the Commercial Symbols
and such trademark, copyright and patent notices on advertising and packaging of
the Licensed Products as Licensor shall reasonably request or as necessary to
protect and preserve Licensor's trademark, copyright and patent rights;
provided, that nothing herein shall be construed to limit Licensee's right to
state or otherwise indicate that it is the manufacturer of the Licensed
Products. Licensor shall be, and Licensee expressly acknowledges and agrees that
Licensor shall be, the sole owner of all such Commercial Symbols, and the
goodwill identified thereby or appurtenant thereto (and any use of such
Commercial Symbols shall inure to the benefit of Licensor), whether or not they
were created by Licensor, and Licensee agrees to make, execute and deliver, or
cause to be made, executed and delivered, any and all such further documents,
instruments, agreements, and assurances, and take all such other actions as may
be reasonably necessary or proper to perfect, evidence, document, or record such
ownership in Licensor.
(b) Licensee shall have no right to create or have created
trademarks, trade dress, logotypes, and packaging for the Licensed Products,
except with the prior approval of Licensor in which case the trademarks, trade
dress, logotypes, and packaging shall be deemed to have been created by Licensee
as the agent on behalf of Licensor and thus created by Licensor so that the same
are considered "Commercial Symbols." When created, Licensee shall have the right
to use the Commercial Symbols only in connection with the sale of the Licensed
Products, and only for the Term hereof, and only upon the terms and subject to
the conditions herein set forth.
(c) In the event it becomes advisable at any time, in the sole
discretion of Licensor, to modify or discontinue the use of any one or more of
the Commercial Symbols (for example, to discontinue use of or to modify a
Commercial Symbol in response to an infringement charge), Licensee shall, within
a reasonable period of time, comply with the instructions of Licensor in that
regard, including, without limitation, preparing substitute packaging and
advertising materials. Such modification or discontinuance shall not cause the
reduction of any of the royalties or other monies due hereunder.
- 4 -
<PAGE>
Section 4. Patent and Trademark Registrations;
Commercial Symbols; Protection Thereof.
(a) Licensor shall have the sole right to apply for, prosecute
and maintain, and to authorize others to apply for, prosecute and maintain,
patents (utility, design or otherwise), copyright registrations, trademark
registrations, design registrations and the like for any such property relating
to the Licensed Technology, Licensed Products and Commercial Symbols.
(b) When the Commercial Symbols have been created and approved
by Licensor, Licensee shall promptly file trademark applications for all
registrable Commercial Symbols, with such governmental agencies in the countries
comprising the Territory as may be necessary or desirable (in Licensor's sole
discretion) in the name of and on behalf of Licensor in order to protect
Licensor's exclusive right and ownership therein. Licensee agrees to pay all
costs and expenses attendant to such applications and registrations in the
countries comprising the Territory, as well as all costs and expenses relating
to the maintenance thereof during the Term hereof. In the event that it is
subsequently determined that any portion of the Commercial Symbols created by
Licensor infringe any existing trademark, trade dress or logotype, Licensor
shall have the right to modify or revise such Commercial Symbols in such a
manner as to avoid the infringement and Licensee's license to use such
Commercial Symbols shall be deemed to include only such modified or revised
Commercial Symbols.
(c) Upon written notice and direction from Licensor, Licensee
shall have the obligation to prosecute at its sole cost and expense any and all
patent applications heretofore filed by Licensee, and Licensee agrees to fully
cooperate with Licensor with respect to the prosecution of such patent
applications.
(d) Licensee shall give immediate notice to Licensor of any
use of Licensed Technology or Commercial Symbols within the Territory by any
third party or if any third party shall assert any challenge, claim or action
against Licensee for infringement, unfair competition, or similar claim on
account of or relating to Licensee's use of the Licensed Technology or
Commercial Symbols. Upon receipt of such written notification, Licensor may, at
its option, elect to undertake and control the prosecution, defense or
settlement, as the case may be, of any legal action in connection with such
alleged improper use or infringement, and Licensee shall have no right to
initiate, prosecute, defend or settle any claim, suit or action against or by
any such third party without Licensor's prior written consent. Licensee shall
reimburse Licensor promptly for the legal fees and expenses incurred by Licensor
in connection with any such claim, action or defense upon submission by Licensor
to Licensee of suitable evidence of such fees and expenses, and Licensor shall
receive any recovery obtained from the infringer as a result of any such claim,
action or defense. Licensee shall assist Licensor in bringing any such claim,
action or defense.
Section 5. Payment of License Fees and Royalties. In
consideration for the license granted hereunder, Licensee hereby agrees to pay
to Licensor royalty payments determined as set forth below:
(a) Initial Appraisal. The Parties agree that promptly upon
execution hereof, a schedule and supporting documentation describing the
Licensed Products and Licensed
- 5 -
<PAGE>
Technology will be submitted to an expert in placing valuations upon transferred
intangible property such as the Licensed Technology. Using such valuation, such
expert will also deliver a royalty schedule (an "Appraisal") payable by Licensee
to Licensor as payment for the license contained herein (the "Initial
Appraisal"). If such expert is unable or unwilling to deliver such a valuation,
the Parties will agree on the selection of another expert. If no valuation has
been delivered to the Parties by December 24, 1999, then the amount deemed to be
owed for the period from the Effective Date until December 31, 1999 shall be
$600,000, and $300,000 per calendar quarter thereafter, payable no later than
January 15, 2000 or the 15th day after the close of the applicable calendar
quarter, respectively. Payment of the royalties shall be made by wire transfer
to a bank account in Wilmington or Newark, Delaware as specified from time to
time by the Licensor no later than the 10th day after the close of each calendar
quarter.
(b) Subsequent Appraisals. The Licensor hereby agrees to
accept the Royalty Rate set forth in the Initial Appraisal. The Licensor may,
but shall not be required to, obtain, at its own cost, subsequent Appraisals. If
a subsequent Appraisal's Royalty Rate differs from such rate in the most recent
Appraisal by more than 5%, Licensee shall pay the cost of such subsequent
Appraisal. Each Party shall promptly furnish a copy of any Appraisal to the
other Party.
(c) Reports. Licensee shall deliver to Licensor and to the
Agent a royalty report promptly after the end of each calendar quarter. Such
reports shall set forth the necessary facts (sales volumes, prices, etc.)
required for Licensor to calculate the royalties for such quarter, together with
explanations of any adjustments made. Regardless of whether or not royalties are
due for a given quarter, Licensee must deliver such a royalty report as provided
above for every quarter during which this Agreement is in effect.
(d) Withholding Taxes. Licensee's payments to Licensor
hereunder shall be net of any withholding taxes required under the law of any
jurisdiction within the Territory. All such withholding taxes shall be fully
paid by Licensee.
(e) No Refunds or Offsets. After expiration or termination of
this Agreement, Licensor shall have no obligation to refund any money paid to
Licensor hereunder. Licensee shall have no right to withhold, delay, or set off
any payments due hereunder for any reason whatsoever.
Section 6. Quality Control. To protect and enhance the
Licensed Technology and the goodwill identified thereby or appurtenant thereto,
Licensee shall not manufacture, offer or sell any Licensed Product unless it
complies with the following:
(a) Business Operating Standards. All activities undertaken by
Licensee relating to manufacturing, advertising, marketing, promoting and
selling of Licensed Product shall: (i) be ethical and reflect the highest
standards of good business and commercial practices, (ii) be in compliance with
all applicable laws and regulations and (iii) be of high standards and quality
in workmanship and materials. Licensee shall pay all of its expenses relating to
the foregoing in its normal course of business. The quality of all Licensed
Products shall be at least equal to the quality of comparable products sold by
Licensee and its Affiliates prior to the Assignment.
- 6 -
<PAGE>
(b) Manufacturing. At any time, Licensor shall have the right
to inspect all plants, warehouses and other premises used in connection with
production, storage and shipping of Licensed Products and randomly select a
reasonable number or quantity of samples from various lots to ensure the quality
of the Licensed Products. If Licensor determines that the quality standards for
a Licensed Product are not being met, then Licensor shall provide Licensee with
notice of same, and Licensee shall discontinue sales of such Licensed Product
until it can establish to Licensor's reasonable satisfaction that the quality of
such Licensed Product has been sufficiently improved.
(c) Packaging and Advertising. Licensor shall have the right,
reasonably exercised, to refuse to allow the sale or distribution of any
packaging or the contents thereof or any advertising material which fails to
meet Licensor's quality standards, and upon such rejection, Licensee shall
promptly cease using or selling the rejected advertising packaging or product.
If Licensor shall fail to advise Licensee within 15 business days after receipt
of any advertising packaging or contents thereof that it disapproves the use of
the advertising materials, packaging or the contents because of failure to meet
Licensor's quality control standards, such materials, packaging or the products
contained therein shall be deemed approved by Licensor.
Section 7. Recordkeeping and Audit Rights.
(a) Recordkeeping. During the Term, Licensee shall keep
accurate books of account and all business records at its principal place of
business covering all transactions potentially subject to a license fee, royalty
or other payment hereunder. Upon reasonable notice to Licensee, during
Licensee's normal business hours, and for the purpose of confirming that the
correct amount owing Licensor hereunder has been paid, Licensor, its accountants
and other representatives shall have the right to inspect such books of account
and records, and any other documentation or information which Licensor believes
in its sole discretion to be relevant for such purpose. Licensee shall continue
to maintain such books of account and records for at least five years after
termination hereof; provided, that if an inspection of such books of account and
records leads to a dispute between the Parties concerning the correctness of the
amounts paid by Licensee to Licensor, Licensee shall maintain such books and
records until the later of five years after termination hereof or the date that
such dispute is resolved.
(b) Audits. If the inspection discloses that payments made
hereunder (i) are greater or less than the amount owed, the Party having
benefited from such error shall promptly pay to such other Party such amount
necessary to correct the error, (ii) are less than the amount owed to Licensor,
Licensee shall promptly pay such amount as described in the immediately
preceding clause (i), plus interest on such amount at an interest rate equal to
2% above the "Prime" lending rate set by Chase Manhattan Bank, N.A., from time
to time, from the date such amount should have been paid until such correcting
payment is made to Licensor. If any such error or errors during any calendar
quarter exceeds 5% of the payments that were made to Licensor for such calendar
quarter, Licensee shall also reimburse Licensor for all reasonable costs and
expenses incurred in connection with the inspection.
- 7 -
<PAGE>
Section 8. Representations, Disclaimers and Limitations of
Liability.
Licensee has represented to Licensor that it is expert in (i) the
manufacture of precision plastic products, focusing on three broad markets:
healthcare, packaging and consumer/industrial products, with its expertise in
providing total project management, including value-added services, for the
manufacture of highly engineered, close tolerance products, such as disposable
medical devices, thin-wall consumer products containers and electrical
connectors and (ii) mold product design, prototype development, mold design and
mold manufacturing, focusing on high cavitation, close tolerance molds for the
healthcare, packaging and consumer/industrial markets. Licensor makes no
warranty or representation that any patent, trademark or other registrable
intellectual property right shall issue as a result of any patent application
heretofore or hereafter filed, or otherwise, or that any of the Licensed
Products or Commercial Symbols will be free from a charge of infringement by a
third party. THE EXPRESS WARRANTIES MADE IN THIS AGREEMENT ARE IN LIEU OF ALL
OTHER WARRANTIES AND INDEMNIFICATIONS, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION, WARRANTIES OF FITNESS, MERCHANTABILITY OR NON-INFRINGEMENT. LICENSOR
SHALL NOT BE LIABLE FOR ANY OF LICENSEE'S LOSS OF PROFITS, LOSS OF BUSINESS,
LOSS OF USE OR LOSS OF DATA OR INTERRUPTION OF BUSINESS, NOR FOR INDIRECT,
SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES OF ANY KIND
WHETHER UNDER THIS AGREEMENT OR OTHERWISE, EVEN IF LICENSOR HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH A LOSS AND REGARDLESS OF THE FORM OF ACTION OR THEORY OF
LIABILITY (INCLUDING, WITHOUT LIMITATION, ACTIONS IN CONTRACT, WARRANTY,
NEGLIGENCE, OR STRICT PRODUCTS LIABILITY).
Section 9. Remedies. Licensee recognizes the great value of
the publicity and goodwill associated with Licensed Technology and, acknowledges
that: (i) such goodwill is exclusively the property of the Licensor; and (ii)
certain of the Licensed Technology may have acquired a secondary meaning as
Licensor's trademarks and/or identifications in the mind of the purchasing
public. Licensee further recognizes and acknowledges that a breach by Licensee
of any of its covenants, agreements or undertakings hereunder will cause
Licensor irreparable damage that cannot be readily remedied in damages in an
action at law, and may, in addition thereto, constitute an infringement of
Licensor's copyrights, trademarks and/or proprietary rights in and to the
Licensed Technology, thereby entitling Licensor to equitable remedies and costs.
Section 10. Indemnification by Licensee. Licensee agrees to
defend, at its sole cost and expense, and to indemnify and hold Licensor
harmless from and against all losses, costs, expenses (including reasonable fees
and expenses of legal counsel and accounting firms), damages and liabilities,
however caused, resulting directly or indirectly from the conduct of Licensee's
business, including but not limited to the manufacture, distribution and sale of
the Licensed Products. This indemnity includes, but is not limited to, claims by
users of the Licensed Products that the Licensed Products are defectively
designed or manufactured or that they have caused injury or illness.
Section 11. Confidentiality. All Licensed Technology and
Licensor Confidential Information shall be maintained by Licensee in confidence
and Licensee shall use substantially the same care to maintain the
confidentiality of the documents and the information contained
- 8 -
<PAGE>
therein as it uses with respect to its own confidential information and, in any
event, will use its best efforts to: (i) restrict disclosure of such Licensed
Technology and Licensor Confidential Information so that it is disclosed only to
Persons to whom disclosure is required for the purpose contemplated hereby (ii)
advise such Persons of the obligation of confidentiality with respect to such
Licensed Technology and Licensor Confidential Information; (iii) obtain from
such Persons prior to disclosure of the Licensed Technology and Licensor
Confidential Information confidentiality agreements with respect to the Licensed
Technology and Licensor Confidential Information; (iv) limit the number of
copies made of any items of the Licensed Technology and Licensor Confidential
Information which are in documentary or other tangible form to that number
reasonably necessary for the purposes contemplated hereby; and (v) not to remove
any confidentiality legend on items of the Licensed Technology and Licensor
Confidential Information which are in documentary or other tangible form.
Licensee shall not undertake any searches or surveys for the sole purpose of
attempting to negate the confidential nature of Licensed Technology or Licensor
Confidential Information and thereby relieve itself of the obligation to treat
such information as confidential in the future. Licensor shall have the right
(but not the obligation) to enforce its rights in a legal proceeding directly
against any employee, agent or independent contractor of Licensee violating such
rights. Licensee agrees to provide Licensor a copy of every executed
confidentiality agreement required promptly upon the execution of each such
agreement.
Section 12. Term and Termination.
(a) Term of Agreement. The "Term" of this Agreement shall
commence on the Effective Date and shall terminate on the earliest of the
following to occur:
(i) The 30th day after either Party gives the other Party
notice of a material breach by the other Party of any material term or condition
of this Agreement, unless the breach is cured before that day; provided, that if
a breach of the same general type (e.g., failure to timely pay royalties) has
occurred and been cured more than twice during any 60-month period as the most
recent breach, the Party providing notice of termination can elect not to accept
the cure and cause this Agreement to terminate. The right of a Party to
terminate this Agreement shall be in addition to and not in lieu of any other
right or remedy that the terminating Party may have; or
(ii) The second anniversary of the delivery of written notice
by either party setting forth its election to terminate this Agreement.
(b) Continuing Obligations. Upon the expiration or termination
of this Agreement for any reason whatsoever:
(i) Licensee shall immediately cease to exploit the Licensed
Technology or to use the Commercial Symbols in any manner whatsoever, provided,
that for a period of 90 days after the expiration or termination of this
Agreement, Licensee shall have the right to sell the Licensed Products which it
manufactured prior to the termination hereof in the ordinary channels of
commerce, solely within the Territory;
(ii) Licensee shall immediately deliver to Licensor all
tangible items or devices using or embodying Licensed Technology or Licensor
Confidential Information or any
- 9 -
<PAGE>
portion thereof. Alternatively, at Licensor's written request, Licensee shall
destroy all such materials and shall certify to Licensor that such destruction
has been completely effectuated. Licensee shall retain no copies of any such
material; and
(iii) The expiration or termination hereof shall be without
prejudice to the rights of Licensor against Licensee, and the expiration or
termination shall not relieve Licensee of any of its obligations to Licensor
existing at the time of expiration or termination, or terminate those
obligations of Licensee set forth in Section 5 (payment of royalties), Section 7
(Recordkeeping and Audit Rights), Section 10 (Indemnification) and Section 11
(Confidentiality).
Section 13. Notices. All notices, requests, payments, consents
and other communications hereunder shall be transmitted in writing and shall be
delivered by hand, fax, or an overnight courier such as Federal Express or by
U.S. First Class Mail, postage prepaid, and shall be deemed so delivered at the
time delivered by hand, one business day after transmission by fax or such
courier when marked for "Next Day Delivery" or four business days after delivery
to the U.S. Postal Service first class, postage prepaid, and addressed as
follows:
If to Licensor:
Precise Intellectual Property Holdings Company, Inc.
103 Springer Building
3411 Silverside Road
Wilmington, Delaware 19810
Attention: Michael M. Farrell, Executive Vice President
If to Licensee:
Precise Technology, Inc.
501 Mosside Boulevard
North Versailles, Pennsylvania 15137-2553
Attention: John R. Weeks, President
Either Party may change its address by giving written notice
of such change of address to the other Party.
Section 14. Miscellaneous.
(a) Further Assurances. The Parties agree to execute such
other documents and perform such further acts as may be necessary or desirable
to carry out the purposes of this Agreement.
(b) Entire Agreement. This Agreement constitutes the entire
agreement between the Parties, and supersedes all prior and contemporaneous
negotiations and agreements between the Parties concerning this subject matter.
- 10 -
<PAGE>
(c) Waiver. Failure by either Party to enforce any rights
under this Agreement shall not be construed as wavier of such rights. Any
waiver, including waiver of default or breach, in any one instance shall not
constitute a continuing waiver or a waiver in any other instance.
(d) Construction. The headings used herein are for purposes of
convenience only and shall not be used in construing the provisions hereof. As
used herein, the male gender shall include the female and neuter genders, the
singular shall include the plural and the plural, the singular.
(e) Third Parties. The Parties intend to confer no benefit or
right on any Person not a party to this Agreement and no third party shall have
the right to claim the benefit of any provision hereof as a third party
beneficiary.
(f) Governing Law; Venue. The Parties hereto agree that (i)
this Agreement shall be governed by and construed in accordance with the laws of
the State of Delaware applicable to contracts to be performed wholly within such
State and (ii) the state and federal courts sitting in the State of Delaware
shall have the sole jurisdiction to hear and resolve any disputes arising
hereunder.
(g) Severability. In the event that any term or provision of
this Agreement is held to be invalid, void, illegal or unenforceable in any
respect, the Agreement shall be enforced in accordance with its terms and shall
not in any way be affected or impaired thereby. In the event that any term or
provision hereof is held to be unreasonable, the same shall not fail, but shall
be deemed amended only to the extent necessary to render it reasonable and the
Parties agree in writing to be bound by the same as thus amended.
(h) Relationship Created by Agreement. Each of the Parties
hereto are separate and independent legal entities. Nothing herein contained
shall be construed or deemed hereby to create a principal/agent relationship
between the Parties or any form of partnership or joint venture.
(i) Assignment and Amendment. Licensee may not assign this
Agreement without the prior written consent of Licensor, and any such attempted
assignment shall be void ab initio. This Agreement may not be amended without
the written consent of the Agent under the Credit Agreement unless otherwise
permitted by the terms of the Credit Agreement.
[SIGNATURE PAGE FOLLOWS]
- 11 -
<PAGE>
The Parties hereto have caused this Agreement to be executed as of the
date first above written.
PRECISE TECHNOLOGY, INC.
By: /s/ John R. Weeks
---------------------------------
Name: John R. Weeks
Title: President
PRECISE INTELLECTUAL PROPERTY
HOLDINGS COMPANY, INC.
By: /s/ Michael M. Farrell
---------------------------------
Name: Michael M. Farrell
Title: Executive Vice President
- 12 -
<PAGE>
AMENDED AND RESTATED
SECOND AMENDMENT AND CONSENT
to
CREDIT AGREEMENT
AMENDED AND RESTATED SECOND AMENDMENT AND CONSENT dated as of March 31,
1999 (this "Amendment") by and among PRECISE HOLDING CORPORATION, a Delaware
corporation ("Parent"), PRECISE TECHNOLOGY, INC., a Delaware corporation (the
"Borrower"), each Subsidiary of the Borrower party to the Credit Agreement
referred to below (each a "Subsidiary Guarantor" and collectively, the
"Subsidiary Guarantors"), the banks, financial institutions and other
institutional lenders party to the Credit Agreement referred to below (the
"Lenders") and FLEET NATIONAL BANK ("Fleet"), as agent for the Lenders (the
"Agent") and as Issuing Bank, to the Credit Agreement. Capitalized terms used
but not defined herein shall have the meanings given to such terms in the Credit
Agreement.
WHEREAS, Parent, the Borrower, each Subsidiary Guarantor, the Lenders and
Fleet are parties to that certain Credit Agreement dated as of June 13, 1997 (as
the same has been and may be further amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), pursuant to which the Lenders made
loans to, and established credit facilities for, the Borrower;
WHEREAS, Parent, the Borrower, each Subsidiary Guarantor, the Lenders and
Fleet are parties to that certain Second Amendment and Consent dated as of March
12, 1999 (the "Second Amendment"), which Second Amendment is superseded by this
Amendment;
WHEREAS, the Borrower wishes to form a domestic Subsidiary, Precise Canada,
Inc., ("Precise Canada") to form a wholly-owned Canadian Subsidiary to acquire
and hold 100% of the issued and outstanding capital stock (the "Accura Stock")
of Accura Molding Company Ltd., a company incorporated under the laws of the
Province of Ontario, Canada ("Accura") in the manner and on the terms and
conditions set forth below;
WHEREAS, the Borrower has requested that the Lenders consent to certain
modifications and amendments to the Credit Agreement to permit, inter alia, (i)
the formation of Precise Canada and the Acquisition Sub; (ii) the Accura
Acquisition; and (iii) the Borrower to use loan proceeds of up to $5,000,000 for
the Accura Acquisition;
WHEREAS, subject, in each case, to the terms and conditions herein, the
Lenders are willing to grant such consent and agree to such modifications and
amendments;
<PAGE>
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and other valuable consideration the receipt and sufficiency of which are hereby
acknowledged, each of the parties hereto hereby agrees as follows:
1. Amendments to Credit Agreement.
(a) Preliminary Statement. On and after the Amendment Effective Date (as
hereinafter defined), the Preliminary Statement in the Credit Agreement is
hereby amended by replacing it in its entirety with the following:
"The Borrower has requested that the Lenders lend to the Borrower up
to $30,000,000 in order to (i) effect the Refinancing Transactions, (ii)
furnish certain working capital, (iii) fund the Permitted Acquisitions and
certain general corporate requirements of the Borrower and its
Subsidiaries, (iv) fund a portion of the Accura Acquisition and (v) to pay
transaction fees and expenses in connection with the transactions
contemplated hereby. The Lenders have indicated their willingness to agree
to lend such amounts on the terms and conditions of this Agreement."
(b) Definitions. On and after the Amendment Effective Date, Section 1.01 of
the Credit Agreement is hereby amended by (i) adding the following new
definitions in the appropriate alphabetical order:
"Accura" means Accura Molding Company Ltd., a company incorporated
under the laws of the Province of Ontario, Canada.
"Accura Acquisition" means the acquisition by the Borrower through
Precise Canada and the Acquisition Sub of 100% of the issued and
outstanding capital stock of Accura in accordance with the terms and
conditions of this Agreement and the Accura Acquisition Documents.
"Accura Acquisition Agreement" means the Share Purchase Agreement
entered into among Lori Hofing, John Hofing, Carey Brabant, Mark Brabant,
1293177 Ontario Limited and 1293178 Ontario Limited, as vendors, the
Acquisition Sub, as purchaser, the Borrower, as guarantor, and Accura, in
form and substance satisfactory to the Agent.
"Accura Acquisition Closing Date" means the date of consummation of
the Accura Acquisition.
"Accura Acquisition Documents" means the Accura Acquisition Agreement
and all other documents and instruments entered into or delivered in
connection with the Accura Acquisition, each in form and substance
satisfactory to the Agent.
"Acquisition Sub" means 3027214 Nova Scotia Company, a Wholly-Owned
Subsidiary of Precise Canada, and an unlimited liability company
<PAGE>
organized in the Province of Nova Scotia, Canada, for the sole purpose of
acquiring and holding the capital stock of Accura.
"Borrowing Base" on any date means the sum of (i) 85% of the value of
the Eligible Receivables plus (ii) 50% of the value of the Eligible
Inventory, provided, however, that no more than 50% of the Borrowing Base
shall consist of Eligible Inventory, in each case set forth in the most
recent Borrowing Base Certificate delivered to the Agent pursuant to the
terms of this Agreement on or prior to such date.
"Borrowing Base Certificate" means a certificate in substantially the
form of Exhibit K attached hereto, duly certified by the Chief Financial
Officer of the Borrower.
"Borrowing Base Deficiency" means, at any time, the failure of the
Borrowing Base at such time to equal or exceed the sum of (i) the aggregate
principal amount of the Revolving Credit Advances and the Letter of Credit
Advances outstanding at such time plus (ii) the aggregate Available Amount
under all Letters of Credit outstanding at such time.
"Borrowing Base Inventory" of any Person means all of such Person's
now owned and hereafter acquired inventory, goods, merchandise, and other
personal property, wherever located, to be furnished under any contract of
service or held for sale or lease, all returned goods, raw materials, other
materials and supplies of any kind, nature or description which are or
might be consumed in such Person's business or used in connection with the
packing, shipping, advertising, selling or finishing of such goods,
merchandise and such other personal property, and all documents of title or
other documents representing them.
"dollars" and the sign "$" shall each mean freely transferable lawful
money of the United States of America, except as otherwise defined herein.
"Determination Date" has the meaning specified in the definition of
Pro Forma Basis.
"Eligible Inventory" means any Borrowing Base Inventory owned by the
Borrower or any Subsidiary Guarantor (minus any reserves requested by the
Agent) free and clear of all Liens (other than Liens in favor of the
Secured Parties securing the Secured Obligations) and satisfactory to the
Agent in its sole discretion other than the following:
(a) Borrowing Base Inventory consisting of "perishable agricultural
commodities" within the meaning of the Perishable Agricultural Commodities
Act of 1930, as amended, and the regulations thereunder, or on which a Lien
has arisen or may arise in favor of agricultural producers under comparable
state or local laws;
<PAGE>
(b) Borrowing Base Inventory located on leaseholds or in warehouses or
with suppliers as to which no consent and agreement providing the Agent
with the right to repossess such Inventory at any time and such other
rights as may be acceptable to the Agent or for which a negotiable
warehouse receipt has been issued but not delivered to the Agent;
(c) Borrowing Base Inventory that is, consistent with past practices,
obsolete, unusable or otherwise unavailable for sale;
(d) Borrowing Base Inventory with respect to which any representation
or warranty set forth in this Agreement or in the Security Agreement
applicable to such Inventory is not true and correct in all material
respects;
(e) Borrowing Base Inventory that fails to meet all standards imposed
by any governmental agency, or department or division thereof, having
regulatory authority over such Inventory or its use or sale, including, but
not limited to, the Fair Labor Standards Act, and Borrowing Base Inventory
that is subject to the so-called "hot goods" provision contained in Title
29, Section 215(a)(1) of the Federal Bankruptcy Code;
(f) Borrowing Base Inventory located outside the continental United
States and Canada;
(g) Borrowing Base Inventory that is not in the possession of or under
the sole control of the Borrower or any Subsidiary Guarantor;
(h) Borrowing Base Inventory consisting of work in progress;
(i) Borrowing Base Inventory held for consumption by the Borrower or a
Subsidiary of the Borrower and not for sale in the ordinary course of
business, including, but not limited to, Borrowing Base Inventory
consisting of promotional, marketing, packaging and shipping materials and
supplies;
(j) Borrowing Base Inventory subject to the bill-and-hold arrangement
between Accura and Brita (Canada), Inc. or any affiliate of Brita (Canada),
Inc. described in the proviso to subclause (k) of the definition of
Eligible Receivables;
(k) Borrowing Base Inventory consisting of specific molds prepared for
special orders as determined by the Agent in its sole discretion; and
(l) Borrowing Base Inventory in respect of which the Security
Agreement, after giving effect to the related filings of financing
statements that have then been made, if any, does not or has ceased to
create a valid and perfected first and only priority security interest and
lien in favor of the Secured Parties securing the Secured Obligations and
as to which no other Liens exist.
<PAGE>
The value of such Eligible Inventory shall be its book value determined in
accordance with the "first-in, first-out" method of accounting for inventory and
in accordance with GAAP unless the Agent determines, in its sole discretion
(taking into consideration, among other factors, cost and liquidation value),
that such Eligible Inventory shall be valued at a lower value. Notwithstanding
the foregoing, the Agent, in its sole and absolute discretion, may include such
other items of Borrowing Base Inventory as Eligible Inventory as it shall deem
appropriate from time to time.
"Eligible Receivables" means only such Receivables owned by the
Borrower or any Subsidiary Guarantor (minus any reserves requested by the
Agent) as the Agent in its sole discretion shall from time to time elect to
consider Eligible Receivables for purposes of this Agreement that are free
and clear of all Liens (other than Liens in favor of the Secured Parties
securing the Secured Obligations) other than the following:
(a) Receivables that do not arise out of sales of goods or rendering
of services in the ordinary course of the business of the Borrower or any
Subsidiary Guarantor;
(b) Receivables on terms other than those normal or customary in the
business of the Borrower or any Subsidiary Guarantor;
(c) Receivables owing from any Person that is an employee, officer,
director or other Affiliate of the Borrower;
(d) Receivables more than 90 days past original invoice date or more
than 60 days past the date due;
(e) Receivables owing from any Person from which an aggregate amount
of more than 35% of the Receivables owing from such Person is more than 60
days past due;
(f) Receivables owing from any Person (i) that has disputed liability
for any Receivable owing from such Person, but only to the extent of the
amount in dispute or (ii) that has otherwise asserted any claim, demand or
liability, whether by action, suit, counterclaim or otherwise, but only to
the extent of the amount of any such claim, demand or liability;
(g) Receivables owing from any Person that shall take or be the
subject of any action or proceeding of a type described in Section 6.01(f);
(h) Receivables (i) owing from any Person that is also a supplier to
or creditor of the Borrower, unless such Person has waived any right of
set-off in a writing in form acceptable to the Agent, or (ii) representing
any manufacturer's or supplier's credits, discounts, incentive plans or
similar arrangements entitling the Borrower to discounts on future
purchases therefrom;
<PAGE>
(i) Receivables with respect to which any representation or warranty
set forth in this Agreement or in the Security Agreement applicable to
Receivables is not true and correct in all material respects;
(j) Receivables arising out of sales to account debtors outside the
continental United States and Canada unless (i) acceptable to the Agent in
its sole discretion and (ii) fully supported by an irrevocable letter of
credit issued or confirmed by a commercial bank having a long-term
unsecured debt rating of at least "A" (or the equivalent thereof) from S&P
or "A2" (or the equivalent thereof) from Moody's and on terms acceptable to
the Agent in its sole discretion;
(k) Receivables arising out of sales on a bill-and-hold, guaranteed
sale, installment sale, sale-or-return, sale on approval or consignment
basis or subject to any right of return, set-off or charge-back; provided,
however, that, notwithstanding the foregoing, Eligible Receivables shall
include Receivables arising out of sales by Accura of product to Brita
(Canada) Inc. or any of its affiliates on a bill-and-hold (deferred
shipment) basis so long as (i) the Collateral Agent shall have and maintain
a valid and perfected first and only priority security interest and lien in
favor of the Secured Parties in all such Receivables and (ii) such sales
are on terms and conditions satisfactory to the Agent and are valid,
legally enforceable obligations of Brita (Canada) Inc., unless the Agent
determines, in its sole discretion, that such Receivables are not Eligible
Receivables;
(l) Receivables owing from an account debtor that is an agency,
department or instrumentality of the United States, any State thereof
or of Canada or any Province thereof unless the Borrower has complied
in a manner satisfactory to the Agent with the Federal Assignment of
Claims Act of 1940, as amended, or any state, municipal or other
governmental agency or instrumentality statute, rule, regulation or
similar foreign legislation relating to the assignment of claims
against such governmental authority with respect to the assignment of
such Receivables and the Agent is satisfied as to the absence of
set-offs, counterclaims and other defenses on the part of such account
debtor;
(m) Receivables the full and timely payment of which the Agent in
its reasonable judgment believes to be doubtful;
(n) Receivables that arise from the retail sale of goods to a
Person who is purchasing such goods primarily for personal, family or
household purposes;
(o) Receivables arising out of sales to account debtors located
in any state that requires that the Borrower or any Subsidiary
Guarantor, in order to sue any account debtor in such state's courts,
either (i) qualify to do business in such state or (ii) file an annual
or similar report with the taxation department of such state, unless,
if the account debtor is located in any such state, the Borrower or
Subsidiary Guarantor, as applicable, has either qualified as a foreign
corporation
<PAGE>
authorized to transact business in such state, or has filed
appropriate reports with the taxation division on a timely basis;
(p) with respect to any Receivables in connection with which the
Borrower has been issued a credit insurance policy, the Agent is not
the beneficiary of such credit insurance policy; and
(q) Receivables in respect of which the Security Agreement, after
giving effect to the related filings of financing statements that have
then been made, if any, and blocked account letters, if any, does not
or has ceased to create a valid and perfected first and only priority
security interest and lien in favor of the Secured Parties securing
the Secured Obligations and as to which no other Liens exist.
The value of such Eligible Receivables shall be their book value determined in
accordance with GAAP unless the Agent determines, in its sole discretion, that
such Eligible Receivables shall be valued at a lower value. Notwithstanding the
foregoing, the Agent, in its sole and absolute discretion, may include such
other Receivables as Eligible Receivables as it shall deem appropriate from time
to time.
"Parent Contribution" has the meaning specified in Section
5.02(d)(v)(f).
"Parent Subordinated Debt" means unsecured Debt owing to Parent
in the aggregate outstanding principal amount of $1,000,000 which is
subordinated on terms satisfactory to the Agent to all Obligations
hereunder and any other obligations secured pursuant to the Collateral
Documents and evidenced by the Parent Subordinated Note, the express
terms of which (i) shall provide that interest thereon shall not be
paid in cash at any time and that such Debt shall require no
amortization, sinking fund payment or any other scheduled maturity of
the principal amount thereof on any date which is earlier than the
date occurring one year after the Final Maturity Date and (ii) shall
include such covenants, defaults and remedies satisfactory to the
Agent and the Required Lenders.
"Parent Subordinated Note" means the unsecured subordinated
promissory note issued by the Borrower in favor of Parent evidencing
the Parent Subordinated Debt, in form and substance satisfactory to
the Agent and the Required Lenders.
"Precise Canada" means Precise Canada, Inc., a Wholly-Owned
Subsidiary of the Borrower, incorporated in the State of Delaware, for
the sole purpose of holding and pledging the capital stock of the
Acquisition Sub.
"Revolving Credit Availability" means, at any time (a) prior to
September 30, 1999, the aggregate Unused Revolving Credit Commitment
of all Lenders under the Revolving Credit Facility, and (b) on and
after September 30, 1999, the lesser of (x) the aggregate Unused
Revolving Credit Commitment of all Lenders under the Revolving Credit
Facility and (y) the Borrowing Base (as determined based on the most
recent Borrowing Base Certificate delivered to the Agent
<PAGE>
hereunder) less the sum of the aggregate principal amount of all
Revolving Credit Advances then outstanding."; and
(ii) amending the definition of "Funded Debt" by inserting the
following at the end thereof:
"; provided, however, that for purposes of Section 5.04, "Funded
Debt" shall not include the Parent Subordinated Debt"; and
(iii) amending the definition of "Subsidiary Guarantors" by deleting
such definition in its entirety and inserting the following new definition in
lieu thereof:
"Subsidiary Guarantor" means (i) each Subsidiary of the Borrower
(including, but not limited to, Accura, Precise Canada and Acquisition
Sub), and (ii) each Person which shall have executed and delivered or
become a party to a Subsidiary Guaranty hereunder."
(c) Advances. On and after the Amendment Effective Date, Section 2.01
(a) of the Credit Agreement is hereby deleted in its entirety and the following
inserted in lieu thereof:
"SECTION 2.01. The Advances. (a) The Revolving Credit
Advances. each Lender severally agrees, on the terms and
conditions hereinafter set forth, to make advances (each a
"Revolving Credit Advance") to the Borrower from time to time on
any Business Day during the period from the Effective Date until
the Final Maturity Date in an amount for each such Advance not to
exceed such Lender's Unused Revolving Credit Commitment at such
time after giving effect to any repayment of Letter of Credit
Advances from proceeds of such Revolving Credit Advances, which
Revolving Credit Advances shall, at the option of the Borrower,
be Base Rate Advances or Eurodollar Rate Advances; provided,
however, that no Lender shall have any obligation to make a
Revolving Credit Advance pursuant to this Section 2.01(a) to the
extent that (A) for any Revolving Credit Advance requested prior
to September 30, 1999, based on calculations made by the Borrower
on a pro forma basis after giving effect to such Advance, the
Senior Leverage Ratio for the Borrower's most recently ended
fiscal quarter for which financial statements are available
immediately preceding the date of such Advance is greater than
the ratio for such fiscal quarter in Section 5.04(a)(ii), and (B)
on and after September 30, 1999, such Revolving Credit Advance
would cause the aggregate amount of Revolving Credit Advances
outstanding (after giving effect to any immediate application of
the proceeds thereof) to exceed the lesser of (i) Revolving
Credit Facility less the Letter of Credit Advances then
outstanding plus the aggregate Available Amount of all Letters of
Credit then outstanding and (ii) the Borrowing Base less the
Letter of Credit Advances then outstanding plus the aggregate
Available Amount of all Letters of Credit then outstanding. Each
Borrowing of (x) Base Rate Advances shall be in an aggregate
amount of $100,000 or any whole multiple thereof and (y)
Eurodollar Rate Advances shall be in an aggregate amount of
$300,000 or an integral multiple of
<PAGE>
$100,000 in excess thereof, (other than a Borrowing the proceeds
of which shall be used solely to repay or prepay in full
outstanding Letter of Credit Advances made by the Issuing Bank)
and shall consist of Revolving Credit Advances made
simultaneously by the Lenders ratably according to their
Revolving Credit Commitments. Within the limits of each Lender's
Unused Revolving Credit Commitment in effect from time to time,
the Borrower may borrow under this Section 2.01(a), prepay
pursuant to Section 2.06(a) and reborrow under this Section
2.01(a), subject to the terms and conditions hereof."
(d) Mandatory Prepayments. On and after the Amendment Effective
Date, (i) Section 2.06(b)(iii) of the Credit Agreement is hereby deleted in its
entirety and the following inserted in lieu thereof:
"(iii) The Borrower shall, on each Business Day, prepay an
aggregate principal amount of the Revolving Credit Advances
comprising part of the same Borrowings, and the Letter of Credit
Advances equal to the amount by which (A) the sum of the
aggregate principal amount of (x) the Revolving Credit Advances
and (y) the Letter of Credit Advances then outstanding plus the
aggregate Available Amount of all Letters of Credit then
outstanding exceeds (B) the Revolving Credit Availability. Each
such prepayment shall be applied as set forth in Section
2.06(c)."; and
(ii) Section 2.06(b)(iv) of the Credit Agreement is hereby
deleted in its entirety and the following inserted in lieu thereof:
"(iv) The Borrower, shall, on each Business Day, pay to the
Agent for deposit in the L/C Cash Collateral Account an amount
sufficient to cause the aggregate amount on deposit in such
Account to equal the amount by which the aggregate Available
Amount of all Letters of Credit then outstanding exceeds the
lesser of (A) the Revolving Credit Facility less the sum of the
aggregate principal amount of all Revolving Credit Advances then
outstanding and (B) the Letter of Credit Facility and, on and
after September 30, 1999, (C) the Borrowing Base (as determined
based on the most recent Borrowing Base Certificate delivered to
the Agent hereunder) less the sum of the aggregate principal
amount of all Revolving Credit Advances then outstanding."
(e) Use of Proceeds. On and after the Amendment Effective Date,
Section 2.14 of the Credit Agreement is hereby deleted in its entirety and the
following inserted in lieu thereof:
"SECTION 2.14. Use of Proceeds. The proceeds of the Advances
and issuances of Letters of Credit shall be available (and
the Borrower agrees that it shall use such proceeds and
Letters of Credit) solely to (i) effect the Refinancing
Transactions, (ii) furnish certain working capital, (iii)
fund the Permitted Acquisitions and certain general
corporate requirements of the Borrower and its Subsidiaries,
(iv) fund a portion of the Accura Acquisition (including
transaction fees and expenses in connection
<PAGE>
therewith) in an amount not to exceed $5,000,000 at the
closing thereof and (v) pay transaction fees and expenses in
connection with the transactions contemplated hereby."
(f) Conditions Precedent to Each Borrowing and Issuance. On and
after the Amendment Effective Date, Section 3.02 of the Credit Agreement is
hereby amended by (i) deleting the word "and" appearing at the end of clause (a)
thereof; (ii) adding the following new clauses after clause (a) thereof:
"(b) for each Revolving Credit Advance or issuance or
renewal of any Letter of Credit on or after September 30, 1999,
the Borrowing Base exceeds the aggregate principal amount of the
Revolving Credit Advances plus Letter of Credit Advances plus the
aggregate Available Amount of all Letters of Credit then
outstanding after giving effect to such Advances or issuance or
renewal, respectively;
(c) (A) for any Borrowing or issuance prior to September 30,
1999, and based on calculations made by the Borrower on a Pro
Forma Basis as if the incurrence of such Borrowing or issuance
had occurred on the first day of the respective Calculation
Period relating to such incurrence or issuance, no Default or
Event of Default will exist under the financial covenants
contained in Section 5.04, and the Agent shall have received a
certificate of the Borrower dated as of the date of such
Borrowing or issuance and in form satisfactory to the Agent,
signed on the Borrower's behalf by its Chief Financial Officer,
certifying compliance with, and containing the calculations
required by, this Section 3.02(c), and (B) for any Borrowing or
issuance on and after September 30, 1999, the Agent shall have
received a Borrowing Base Certificate dated as of the last day of
the most recently ended month in compliance with Section 5.03(t);
and";
and (iii) renaming clause (b) thereof as clause (d).
(g) Liens. On and after the Amendment Effective Date, Section
5.02(a)(iv) of the Credit Agreement is hereby amended by adding the following
after the words "Section 5.02(b)(ii)" in the second line thereof:
"and Section 5.02(b)(xii)".
(h) Debt. On and after the Amendment Effective Date, Section 5.02
(b) of the Credit Agreement is hereby amended by (i) deleting the word "and"
appearing at the end of clause (x) thereof; (ii) deleting the period at the end
of clause (xi) thereof and inserting in lieu thereof the text "; "; and (iii)
adding the following new clauses to the end thereof:
"(xii) Obligations of Accura under Capitalized Leases so
long as the aggregate principal amount of such Obligations shall
not exceed $2,000,000 at any time outstanding;
(xiii) Obligations in respect of the Parent Subordinated
Debt to the extent permitted by Section 5.02(d)(v)(f); and
<PAGE>
(xiv) Obligations of Parent in respect of the issuance by
Parent of a series of preferred stock solely for the purpose of
making the Parent Contribution to the extent permitted by Section
5.02(d)(v)(f).".
(i) Purchases, Sales, Etc. of Assets. On and after the Amendment
Effective Date, Section 5.02(d) of the Credit Agreement is hereby amended by (i)
deleting the word "and" appearing at the end of clause (iii) thereof; (ii)
deleting the period at the end of clause (iv) thereof and inserting in lieu
thereof the text "; and"; and (iii) adding the following new clause to the end
thereof:
"(v) the Borrower and/or Precise Canada and/or the
Acquisition Sub may acquire Accura pursuant to the Accura
Acquisition Documents; provided that (a) the proposed Accura
Acquisition is consummated prior to May 15, 1999; (b) the stock
being acquired directly or indirectly by the Borrower and/or
Precise Canada and/or the Acquisition Sub pursuant to the Accura
Acquisition shall be 100% of the issued and outstanding capital
stock of Accura; (c) the total consideration for the Accura
Acquisition to be paid at the closing thereof shall be no greater
than Canadian $8,200,000 and the loan proceeds to be used by the
Borrower for the Accura Acquisition (and for transaction fees and
expenses in connection therewith) at the closing thereof shall
not exceed $5,000,000; (d) the Collateral Agent for the benefit
of the Secured Parties is able to obtain a first priority
perfected security interest in and lien upon substantially all of
the assets and properties of Accura, Precise Canada and the
Acquisition Sub, stock certificates representing 65% of the
capital stock of Accura and the Acquisition Sub and stock
certificates representing 100% of the capital stock of Precise
Canada, together, in each case, with undated stock powers duly
executed in blank, are delivered to the Collateral Agent for the
benefit of the Secured Parties; (e) the terms and conditions of
the Accura Acquisition Documents shall be in form and substance
satisfactory to the Agent; (f) Parent shall have made a cash
contribution to the Borrower in the form of equity and/or Parent
Subordinated Debt in an aggregate amount of $1,000,000 (the
"Parent Contribution"), evidenced, in the case of Parent
Subordinated Debt, by the Parent Subordinated Note, the proceeds
of which shall be used by the Borrower to consummate the Accura
Acquisition; (g) the Parent Subordinated Note shall have been
pledged and promptly delivered to the Collateral Agent on behalf
of the Secured Parties pursuant to the Parent Pledge Agreement,
as amended, and the Borrower and Parent shall have taken such
further actions as shall be necessary, or in the opinion of the
Agent desirable, to effect the foregoing; (h) all approvals,
opinions, certificates, reports, instruments, statements and
documents required to be delivered pursuant to this Agreement and
to the Amended and Restated Second Amendment and Consent to
Credit Agreement dated as of March 31, 1999, among Parent, the
Borrower, each Subsidiary of the Borrower, the Lenders and the
Agent shall have been timely delivered as required; and (i) no
Default or Event of Default then exists or would result
therefrom.
Promptly following the consummation of the Accura Acquisition,
the Borrower shall deliver to the Agent true, correct and
complete copies, certified as such by
<PAGE>
the Chief Financial Officer of the Borrower, of all of the Accura
Acquisition Documents. The consummation of the Accura Acquisition
shall be deemed to be a representation and warranty by the
Borrower that all conditions thereto have been satisfied and that
same is permitted in accordance with the terms of this Agreement,
which representation and warranty shall be deemed to be a
representation and warranty for all purposes hereunder, including
without limitation, Article V."
(j) Investments in Other Persons. On and after the Amendment
Effective Date, Section 5.02(e) of the Credit Agreement is hereby amended by (i)
deleting the word "and" appearing at the end of clause (xii) thereof; (ii)
deleting the period at the end of clause (xiii) thereof and inserting in lieu
thereof the text "; and," and (iii) adding the following new clause to the end
thereof:
"(xiv) the Borrower and/or Precise Canada and/or the
Acquisition Sub may make Investments to consummate the Accura
Acquisition to the extent permitted by Section 5.02(d)(v)."
(k) Change in Nature of Business. On and after the Amendment
Effective Date, Section 5.02(g) of the Credit Agreement is hereby amended by
(i) adding the following language after the word "Subsidiaries"
in line five thereof:
"and the Parent Subordinated Note"; and
(ii) adding the following to the end thereof:
"Notwithstanding anything to the contrary contained in this
Agreement, (i) Precise Canada will not engage in any business,
will have no material assets other than its ownership interest in
Acquisition Sub and will have no significant liabilities other
than those in connection with this Agreement, the other Loan
Documents and the Senior Subordinated Notes Guaranty and (ii) the
Acquisition Sub will not engage in any business, will have no
material assets other than its ownership interest in Accura and
will have no significant liabilities other than those in
connection with this Agreement, the other Loan Documents and the
Senior Subordinated Notes Guaranty."
(l) Reporting Requirements. On and after the Amendment Effective
Date, Section 5.03 of the Credit Agreement is hereby amended by (i) deleting
clause (ii) in each of Sections 5.03(b) and (c) in its entirety and inserting
the following in lieu thereof:
"(ii) a schedule in form satisfactory to the Agent of the
computations used by the Borrower in determining compliance with
the covenants contained in Section 5.04 and";
(ii) deleting clause (ii) in Section 5.03(d) in its entirety and
inserting the following in lieu thereof:
<PAGE>
"(ii) a schedule in form satisfactory to the Agent of the
computations used by such accountants in determining, as of the
end of such Fiscal Year, compliance with the covenants contained
in Section 5.04,"; and
(iii) renaming clause (t) of Section 5.03 as clause (u) and
adding the following after clause (s) of Section 5.03:
"(t) Borrowing Base Certificate. As soon as available and in
any event within ten (10) Business Days after the end of each
month, commencing the month ended September 30, 1999, a Borrowing
Base Certificate, as at the end of the month, certified by the
Chief Financial Officer of the Borrower; provided, however, that
in the event the Borrower requests an Advance prior to October
14, 1999 but after September 30, 1999, the Borrower shall deliver
a Borrowing Base Certificate as of August 31, 1999 to the Agent
as a condition precedent to such Advance."
(m) Financial Covenants. On and after the Amendment Effective
Date, Section 5.04 of the Credit Agreement is hereby amended by:
(i) deleting Section 5.04(a)(i) in its entirety and inserting the
following new Section 5.04(a)(i) in lieu thereof:
"(a) (i) Total Leverage Ratio. Maintain a Total Leverage
Ratio for each period set forth below of not more than the amount
set forth below for such period:
Fiscal Quarter Ending Ratio
--------------------- -----
03/31/1998 6.70:1
06/30/1998 6.70:1
09/30/1998 6.25:1
12/31/1998 5.65:1
03/31/1999 5.40:1
06/30/1999 5.15:1
09/30/1999 4.65:1
12/31/1999 4.35:1
03/31/2000 4.05:1
06/30/2000 4.05:1
09/30/2000 4.05:1
12/31/2000 3.35:1
03/31/2001 3.35:1
06/30/2001 3.35:1
09/30/2001 3.35:1
12/31/2001 3.00:1
and thereafter"
<PAGE>
; (ii) deleting Section 5.04(a)(ii) in its entirety and inserting
the following new Section 5.04(a)(ii) in lieu thereof:
"(ii) Senior Leverage Ratio. Maintain a Senior Leverage
Ratio for each period set forth below of not more than the amount
set forth below for such period:
Fiscal Quarter Ending Ratio
--------------------- -----
09/30/1997 1.80:1
12/31/1997 1.80:1
03/31/1999 1.30:1
06/30/1999 1.10:1
09/30/1999 1.10:1"
; (iii) deleting Section 5.04(b) in its entirety and inserting
the following new Section 5.04(b) in lieu thereof:
"(b) Fixed Charge Coverage Ratio. Maintain a Fixed Charge
Coverage Ratio for each Rolling Period set forth below of not
less than the amount set forth below for such Rolling Period:
Rolling Period Ending Ratio
--------------------- -----
09/30/1997 1.05:1
12/31/1997 1.05:1
03/31/1998 1.00:1
06/30/1998 1.00:1
09/30/1998 1.00:1
12/31/1998 1.05:1
03/31/1999 1.10:1
06/30/1999 1.15:1
09/30/1999 1.20:1
12/31/1999 1.35:1
03/31/2000 1.40:1
06/30/2000 1.40:1
09/30/2000 1.40:1
12/31/2000 1.50:1
and thereafter"
; (iv) deleting Section 5.04(c) in its entirety and inserting the
following new Section 5.04(c) in lieu thereof:
<PAGE>
"(c) Interest Coverage Ratio. Maintain an Interest Coverage
Ratio for each Rolling Period set forth below of not less than
the amount set forth below for such Rolling Period:
Rolling Period Ending Ratio
--------------------- -----
09/30/1997 1.60:1
12/31/1997 1.60:1
03/31/1998 1.45:1
06/30/1998 1.45:1
09/30/1998 1.45:1
12/31/1998 1.60:1
03/31/1999 1.70:1
06/30/1999 1.80:1
09/30/1999 1.90:1
12/31/1999 2.05:1
03/31/2000 2.20:1
06/30/2000 2.20:1
09/30/2000 2.20:1
12/31/2000 2.60:1
03/31/2001 2.60:1
06/30/2001 2.60:1
09/30/2001 2.60:1
12/31/2001 3.00:1
and thereafter"
; (v) deleting the amount of "$2,000,000" opposite the Fiscal
Year 1999 in Section 5.04(e) of the Credit Agreement and inserting the amount of
"$3,000,000" in lieu thereof and adding the following proviso to the end of
Section 5.04(e):
"; provided, however, that (i) with respect to Fiscal Year
1999, the aggregate amount (without duplication) of all Capital
Expenditures made by the Borrower and its Subsidiaries shall not
exceed (x) $900,000 in the first fiscal quarter of 1999; (y)
$1,800,000 in the first two fiscal quarters of 1999, and (z)
$2,400,000 in the first three fiscal quarters of 1999 and (ii)
upon the occurrence of a Default or Event of Default in any
Fiscal Year, the aggregate amount of all Capital Expenditures
made by the Borrower and its Subsidiaries in such Fiscal Year
shall not exceed the greater of (x) the amount of all Capital
Expenditures made by the Borrower and its Subsidiaries during
such Fiscal Year to the date of such occurrence or (y)
$2,000,000."
; and (vi) inserting the following clause at the end thereof:
<PAGE>
"(f) Minimum EBITDA. As of any fiscal quarter end, maintain
EBITDA calculated as of that date for the period of four
consecutive fiscal quarters of the Borrower ending on or
immediately prior to such date of not less than $14,500,000;
provided, however, that for purposes of this Section 5.04(f),
EBITDA will not include any earnings or income related to any
non-domestic Subsidiary of the Borrower."
(n) Events of Default. On and after the Amendment Effective Date,
Section 6.01 of the Credit Agreement is hereby amended by (i) inserting the term
",5.03(t)" after the term "5.02" referred to in Section 6.01(c) thereof; and
(ii) inserting "or" at the end of clause (n) thereof and adding the following as
a new clause:
"(o) any Borrowing Base Deficiency shall occur on or after
September 30, 1999;".
2. Waiver and Consent. (a) The Agent and the Lenders waive
compliance by the Borrower and the Acquisition Sub with the requirement of
Section 5.02(l) of the Credit Agreement for 100% of the capital stock of Accura
and the Acquisition Sub to be pledged to the Collateral Agent pursuant to the
Security Agreement and agree to the pledge by the Borrower of 65% of such
capital stock.
(b) The Agent and the Lenders hereby agree and consent to (i) the
merger of the Acquisition Sub into Accura following the Accura Acquisition, with
Accura as the surviving corporation, so long as no Default or Event of Default
then exists or would result therefrom, and (ii) the incurrence by the Borrower
of the Parent Subordinated Debt so long as such debt is evidenced by the Parent
Subordinated Note and such note is pledged by Parent to the Collateral Agent for
the benefit of the Secured Parties pursuant to the Parent Pledge Agreement, as
amended, and immediately delivered to the Collateral Agent.
(c) The Agent and the Lenders hereby waive compliance by Parent
with the requirement of Section 5.02(h) of the Credit Agreement to not amend,
modify or change its charter, certificate of incorporation or bylaws (or
equivalent organizational documentation) for the purpose of permitting Parent to
amend its certificate of incorporation solely to (i) remove the designation of 9
1/2% preferred stock currently referred to therein, (ii) add a designation of a
series preferred stock with terms to be fixed by resolution of the Board of
Directors of Parent and (iii) authorize one thousand (1,000) shares of such
preferred stock, which amendment shall be in a form acceptable to the Agent and
the Required Lenders.
3. Conditions Precedent. (A) The obligation of the Lenders to
execute and deliver this Amendment and to make any Advance after the Amendment
Effective Date under the Credit Agreement as amended hereby is subject to the
following:
(a) this Amendment shall have been executed and delivered by an
authorized officer of Parent, the Borrower and each other Loan
Party;
(b) the representations and warranties contained in each Loan
Document are correct on and as of the Amendment Effective Date,
before and after giving effect to this Amendment, such Borrowing
or issuance and to the application of the
<PAGE>
proceeds therefrom, as though made on and as of such date other
than any such representations or warranties in all material
respects that, by their terms, refer to a specific date other
than the date of this Amendment, such Borrowing, in which case as
of such specific date; and
(c) no event shall have occurred and be continuing, or would
result from such Borrowing or issuance or from the application of
the proceeds therefrom, that constitutes a Default.
(B) The obligation of the Lenders to make Advances to the
Borrower after the Amendment Effective Date to fund the Accura Acquisition in
accordance with the Credit Agreement as amended hereby is subject to the
following (in addition to the conditions precedent set forth in Section 3(A)
above):
(a) the Lenders shall be satisfied that the assets and earnings
of the Borrower immediately following the Accura Acquisition
contemplated hereby will be sufficient to support the Obligations
of the Borrower under the Credit Agreement, the Notes and the
other Loan Documents and the timely amortization of all Debt and
other Obligations of the Borrower;
(b) the Accura Acquisition shall have been consummated in
accordance with the terms of the Accura Acquisition Documents,
without any waiver or amendment of any material term, provision
or condition set forth therein not consented to by the Agent and
the Required Lenders and in compliance with all applicable laws;
(c) the Parent Contribution shall have been made, the proceeds of
which shall be used to consummate the Accura Acquisition, and the
Parent Subordinated Note shall have been pledged to the
Collateral Agent for the benefit of the Secured Parties pursuant
to the Parent Pledge Agreement, as amended; and
(d) the Agent shall have received on or before the date of such
Borrowing, each dated as of the Accura Acquisition Closing Date
(unless otherwise specified), in form and substance satisfactory
to the Agent (unless otherwise specified) and in sufficient
copies for each Lender and Agent and Agent's counsel and to the
extent reasonably necessary to evidence the Borrowing to fund the
Accura Acquisition, the addition of any Subsidiary Guarantor and
to perfect the first priority security interest of the Secured
Parties and Collateral Agent in the assets of the Borrower and
its Subsidiaries, the documents required to be delivered pursuant
to Section 3.03 of the Credit Agreement, including, without
limitation:
(i) a supplement to the Credit Agreement duly
executed by Accura, Precise Canada and the
Acquisition Sub, together with amended schedules
to the Credit Agreement;
(ii) a Security Agreement duly executed by Accura,
Precise Canada and the Acquisition Sub in favor
of the Secured Parties and an
<PAGE>
Amendment to the Parent Pledge Agreement duly
executed by Parent in favor of the Secured
Parties, together with (A) appropriate executed
UCC-1 financing statements and/or the Canadian
equivalent and, if necessary, any amendments to
existing UCC-1 financing statements, (B)
certificates representing the Accura Stock and
the capital stock of the Acquisition Sub and
Precise Canada, accompanied, in each case, by
undated stock powers executed in blank, and the
Parent Subordinated Note, duly endorsed in
blank, (C) duly executed copies in proper form,
to be filed by Stikeman, Elliot or its local
agent in the case of Accura and the Acquisition
Sub, of all recordings and filings of or with
respect to the Security Agreement and the Parent
Pledge Agreement, as amended, that the
Collateral Agent may deem necessary or desirable
in order to perfect and protect the Liens
created thereby and (D) evidence of the
insurance for Accura required by the terms of
the Security Agreement;
(iii) an Intellectual Property Security Agreement duly
executed by Accura, Precise Canada and the
Acquisition Sub in favor of the Secured Parties;
(iv) a Guaranty duly executed by Accura, Precise
Canada and the Acquisition Sub in favor of the
Secured Parties;
(v) Phase I and Phase II Environmental Assessment
Reports with respect to Accura, each dated
reasonably near the date of such Borrowing, and
the Borrower and/or Accura shall have obtained
Environmental Permits necessary to operate the
business of Accura and Accura shall maintain its
operations in compliance with such permits;
(vi) a certificate of the Borrower, signed on its
behalf by its Chief Financial Officer,
certifying as to the compliance by the Borrower
and its Subsidiaries (on a Consolidated basis)
as of the fiscal quarter ended December 31, 1998
with the covenants set forth in Section 5.04 of
the Credit Agreement;
(vii) certified copies of the resolutions of the Board
of Directors (or comparable governing body) of
the Borrower, Precise Canada, Accura and the
Acquisition Sub (including, in the case of
Accura and the Acquisition Sub, the
shareholders) approving the Accura Acquisition,
all other transactions contemplated thereby, the
creation of the security interest in the stock
of Precise Canada, Accura and the Acquisition
Sub contemplated hereby, any transfer of such
shares of capital stock to and by the Collateral
Agent in the course of any enforcement
proceedings, and all other transactions
contemplated by this Amendment, and of all
documents
<PAGE>
evidencing other necessary corporate action and
governmental approvals, if any, with respect to
the Accura Acquisition and the Accura
Acquisition Documents related thereto, this
Amendment and the transactions contemplated
hereby;
(viii) an officer's certificate for Precise Canada,
Accura and the Acquisition Sub substantially in
the form required by Section 3.01(g)(v) of the
Credit Agreement;
(ix) certificate of status issued by the Ministry of
Consumer and Commercial Relations (Ontario) for
Accura dated on or reasonably near the date of
such Borrowing;
(x) certificate of status issued by the Deputy
Registrar of Joint Stock Companies (Nova Scotia)
for Acquisition Sub, dated on or reasonably near
the date of such Borrowing;
(xi) long form good standing certificate with
certified documents issued by the Secretary of
State of the State of Delaware dated on or
reasonably near the date of such Borrowing,
listing the charter of Precise Canada and each
amendment thereto on file in his office and
certifying that (A) such charter is a true and
correct copy thereof, (B) such amendments are
the only amendments to each such charter on file
in his office, (C) Precise Canada has paid all
franchise taxes to the date of such certificate
and (D) Precise Canada is duly incorporated and
in good standing under the laws of the
jurisdiction of its incorporation;
(xii) a certificate, in substantially the form of
Exhibit A attached hereto, attesting to the
Solvency of the Borrower and its Subsidiaries,
taken as a whole, immediately after giving
effect to the Accura Acquisition from the Chief
Financial Officer of the Borrower;
(xiii) blocked account letters duly executed by the
Borrower and its Subsidiaries;
(xiv) a favorable opinion of (A) Winston & Strawn,
special counsel for the Borrower and its
domestic Subsidiaries, (B) Stikeman, Elliot,
special Canadian counsel to the Borrower,
Precise Canada, Accura and the Acquisition Sub,
and (C) if the Agent deems necessary, special
tax counsel to the Borrower and its
Subsidiaries, each opinion as to such matters as
the Agent or its counsel may reasonably request,
including without limitation the due
authorization, execution and delivery of the
Accura Acquisition Documents and this Amendment,
the enforceability thereof, the perfection of
the security interests granted pursuant to the
<PAGE>
Collateral Documents and the subordination of
the Parent Subordinated Debt;
(xv) a favorable opinion of Stewart McKelvey Stirling
Scales, special Province of Nova Scotia, Canada
counsel to the Borrower, Precise Canada, Accura
and the Acquisition Sub, indicating that (i)
there are no particular requirements of any laws
of the Province of Nova Scotia concerning the
form of a pledge of, or a stock power relating
to, the shares of a company incorporated under
the Companies Act (Nova Scotia), such as the
Acquisition Sub, or the transfer of ownership of
pledged shares in connection with the
enforcement of a pledge (other than approval of
such transfer by resolution of the directors or
shareholders of the issuers of such shares),
(ii) the Pledge and Security Agreement is in a
form sufficient under the laws of the Province
of Nova Scotia to create a security interest in
the shares to be pledged thereby (the "Pledged
Shares") and to enable the Collateral Agent or
the Lenders to realize on the Pledged Shares by
becoming the owner of them or by transferring
ownership of them to a third party without first
becoming the owner, (iii) the stock power is a
sufficient endorsement of the share certificates
representing the Pledged Shares to allow for the
registration of a transfer of the Pledged Shares
on the records of the Acquisition Sub upon
approval of such transfer by resolution of the
directors or shareholders of the Acquisition
Sub; and (iv) the pledge to the Collateral Agent
for the benefit of the Lenders will not, in and
of itself, result in any of the Collateral Agent
or the Lenders being regarding as a member of
Acquisition Sub or liable for its debts and
liabilities; and with respect to any other
matters as the Agent or its counsel may
reasonably request, including without limitation
the due authorization, execution and delivery of
the Accura Acquisition Documents and this
Amendment, the enforceability thereof, the
perfection of the security interests granted
pursuant to the Collateral Documents and the
subordination of the Parent Subordinated Debt;
(xvi) a processor letter in substantially the form of
Exhibit B attached hereto;
(xvii) true, correct and complete copies of the Accura
Acquisition Documents certified as such by the
Chief Financial Officer of the Borrower,
together with a true, correct and complete copy
of the existing contract between Accura and
Brita (Canada) Inc.;
(xviii) audited financial statements of Accura as of
June 30, 1998 and unaudited financial statements
of Accura as of December 31, 1998, in each case
in compliance with GAAP;
<PAGE>
(xix) such financial, business and other information
regarding the Accura Acquisition as the Agent
and the Required Lenders shall have reasonably
requested, and, at the Borrower's expense, the
Agent, or any agents or representatives thereof,
may, if it deems necessary, visit and inspect
the property and assets of Accura and the Agent
shall be satisfied with the results of such
visit and inspection; and
(xx) the Agent shall have received such other
approvals, opinions, certificates, instruments
or documents, including, but not limited to,
such financing or continuation statements, and
other filing documents as the Collateral Agent
may deem necessary in order to perfect and
preserve the pledge, assignment and security
interest created under the Collateral Documents,
and as any Lender through the Agent may
reasonably request.
4. Fees. The Borrower shall pay to the Agent for the ratable
benefit of the Lenders on or prior to the Amendment Effective Date a fee (the
"Amendment Fee") in an amount equal to 1/4 of 1% of the amount of the total
Commitments together with all costs and expenses incurred by the Agent
(including, without limitation, the reasonable fees and disbursements of
counsel) in connection with the preparation and execution of this Amendment.
5. Representations and Warranties.
In order to induce the Agent and the Lenders to enter into this
Amendment, each of Parent and each Loan Party represents and warrants to the
Agent and the Lenders as follows:
(i) that no Default exists under the Credit
Agreement on the date hereof, both before and
after giving effect to this Amendment;
(ii) repeats and reaffirms, on and as of the
Amendment Effective Date, each of the
representations, warranties and agreements
contained in the Credit Agreement and each other
Loan Document after giving effect to this
Amendment;
(iii) the execution, delivery and performance by each
of Parent and each Loan Party of this Amendment
and the taking by it of all actions contemplated
hereby are within its corporate powers, have
been duly authorized by all necessary corporate
action and do not contravene (x) Parent's or any
Loan Party's charter or by-laws, or (y) any law
or any material contractual restriction binding
on or affecting Parent or any Loan Party;
(iv) no authorization, approval or other action by,
and no notice to or filing with, any
governmental authority or regulatory body is
required for the due execution, delivery and
performance by the each of Parent and each Loan
Party of this Amendment or for the
<PAGE>
taking by it of any action contemplated hereby
to be taken by it; and
(v) this Amendment constitutes the valid and binding
obligations of each of Parent and each Loan
Party, enforceable against it in accordance with
its terms, except as enforceability may be
limited by bankruptcy, insolvency,
reorganization, moratorium or other laws
relating to or limiting creditors' rights or by
equitable principles generally (regardless of
whether enforcement is sought in equity or at
law).
6. Miscellaneous.
(a) (i) This Amendment shall become effective on the date
(the "Amendment Effective Date") on which (A) Parent, the Borrower, each
Subsidiary Guarantor, the Agent and the Lenders shall have signed a copy of this
Amendment (whether the same or different counterpart) and the Borrower shall
have delivered the same to the Agent (including by way of facsimile device), and
(B) the Borrower shall have paid the Amendment Fee and the other costs and
expenses referred to in Section 4. This Amendment supersedes and terminates the
Second Amendment.
(ii) Notwithstanding anything to the contrary contained
above, it is hereby understood and agreed by each Loan Party that the consent by
the Agent and the Lenders herein to the Accura Acquisition is subject to all of
the conditions contained in Section 3 being met to the satisfaction of the Agent
and the Required Lenders.
(b) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
(c) Each of Parent and each Loan Party hereby irrevocably
and unconditionally:
(i) submits for itself and its property in any legal
action or proceeding relating to this Amendment,
or for recognition and enforcement of any
judgment in respect thereof, to the nonexclusive
general jurisdiction of the State of New York,
the courts of the United States of America for
the Southern District of New York, and appellate
courts from any thereof;
(ii) consents that any such action or proceeding may
be brought in such courts, and waives any
objection that it may now or hereafter have to
the venue of any such action or proceeding in
any such court or that such action or proceeding
was brought in an inconvenient court and agrees
not to plead or claim the same;
<PAGE>
(iii) agrees that service of process in any such
action or proceeding may be effected by mailing
a copy thereof by registered or certified mail
(or any substantially similar form of mail),
postage prepaid, to Parent or such Loan Party at
its address set forth in Section 8.02 of the
Credit Agreement or at such other address of
which the Agent has been notified pursuant
thereto;
(iv) agrees that nothing herein shall affect the
right to effect service of process in any other
manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
(v) WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING REFERRED TO IN PARAGRAPHS (i) THROUGH
(iv) OF THIS SECTION 6(c).
(d) Each of Accura and the Acquisition Sub hereby irrevocably
designates, appoints and empowers CT Corporation System, with offices at 1633
Broadway, New York, New York 10019, as its designee, appointee and agent to
receive, accept and acknowledge for and on its behalf, and in respect of its
property, service of any and all legal process, summons, notices and documents
which may be served in any action or proceeding referred to in Section 6(c). If
for any reason such designee, appointee and agent shall cease to be available to
act as such, each of Accura and the Acquisition Sub agrees to designate a new
designee, appointee and agent in New York City on the terms and for the purposes
of this provision satisfactory to the Agent under this Amendment and the Credit
Agreement.
(e) This Amendment may be executed in several counterparts, each
of which shall be an original and all of which shall constitute but one and the
same instrument.
(f) This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Loan Document. Except as otherwise provided
herein, all terms and conditions of the Credit Agreement and every other Loan
Document, respectively, and all obligations of Parent and each Loan Party and
rights of the Agent and each Lender thereunder shall remain in full force and
effect.
(g) This Amendment amends the terms of the Credit Agreement and
does and shall be deemed to form a part of, and shall be construed in connection
with and as part of, the Credit Agreement for any and all purposes. Any
reference to the Credit Agreement, following the execution and delivery of this
Amendment, shall be deemed a reference to such Credit Agreement as hereby
amended.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this
Amendment as of the date first above written.
PRECISE HOLDINGS CORPORATION
By /s/ William L. Remley
-----------------------------------------
Name: William L. Remley
Title:
PRECISE TECHNOLOGY, INC.,
as Borrower
By /s/ William L. Remley
-----------------------------------------
Name: William L. Remley
Title:
PRECISE TECHNOLOGY OF DELAWARE,
INC.
By /s/ William L. Remley
-----------------------------------------
Name: William L. Remley
Title:
PRECISE TECHNOLOGY OF ILLINOIS, INC.
By /s/ William L. Remley
-----------------------------------------
Name: William L. Remley
Title:
PRECISE TMP, INC.
By /s/ William L. Remley
-----------------------------------------
Name: William L. Remley
Title:
PRECISE POLESTAR, INC.
<PAGE>
By /s/ William L. Remley
-----------------------------------------
Name: William L. Remley
Title:
MASSIE TOOL, MOLD & DIE, INC.
By /s/ William L. Remley
-----------------------------------------
Name: William L. Remley
Title:
FLEET NATIONAL BANK, as Agent and as
Issuing Bank
By /s/ Howard J. Diamond
-----------------------------------------
Name: Howard J. Diamond
Title: Vice President
LENDERS:
-------
FLEET NATIONAL BANK
By /s/ Howard J. Diamond
-----------------------------------------
Name: Howard J. Diamond
Title: Vice President
BANK AUSTRIA
CREDITANSTALT
CORPORATE FINANCE, INC.
(as successor by assignment to
Creditanstalt AG)
By /s/ Clifford L. Wells
-----------------------------------------
Name: Clifford L. Wells
Title: Vice President
By /s/ Maura K. Connor
-----------------------------------------
Name: Maura K. Connor
Title: Vice President
<PAGE>
CONSENT AND THIRD AMENDMENT
TO
CREDIT AGREEMENT
CONSENT AND THIRD AMENDMENT TO CREDIT AGREEMENT, dated as of
September 30, 1999 (this "Consent"), by and among PRECISE HOLDING CORPORATION, a
Delaware corporation ("Parent"), PRECISE TECHNOLOGY, INC., a Delaware
corporation (the "Borrower"), each Subsidiary of the Borrower currently existing
(each a "Subsidiary Guarantor" and collectively, the "Subsidiary Guarantors"),
the banks, financial institutions and other institutional lenders party to the
Credit Agreement referred to below (the "Lenders") and FLEET NATIONAL BANK
("Fleet"), as agent (together with any successor agent, the "Agent") for the
lenders from time to time party thereto (the "Lenders") and as Issuing Bank.
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Credit Agreement (as defined below).
WHEREAS, Parent, the Borrower, each Subsidiary of the Borrower
then existing, the Lenders and Fleet are parties to that certain Credit
Agreement, dated as of June 13, 1997 (as the same has been and may be further
amended, supplemented, amended and restated or otherwise modified from time to
time, the "Credit Agreement"), pursuant to which the Lenders made loans to, and
established credit facilities for, the Borrower;
WHEREAS, the Borrower, Precise Technology of Delaware, Inc.
("Delaware"), Precise Technology of Illinois, Inc. ("Illinois"), Precise TMP,
Inc. ("TMP"), Precise Polestar, Inc. ("Polestar") and Massie Tool, Mold & Die,
Inc. ("Massie," and together with Delaware, Illinois, TMP and Polestar, the
"Merged Subsidiaries") have entered into a series of merger agreements effective
June 30, 1999 (with the merger of TMP with and into the Borrower effective July
1, 1999) (the "Merger Agreements"), with the Borrower as the ultimate sole
surviving corporation, and pursuant to which the Borrower has assumed all of the
rights, liabilities and obligations of each Merged Subsidiary (the "Mergers");
WHEREAS, the Borrower desires to create a new Subsidiary, namely
Precise Intellectual Property Holdings Company, Inc., a Delaware corporation
("IP Holdings"), of which 100% of capital stock and 100% of voting power will be
owned by the Borrower, and the Borrower and IP Holdings will enter into an
Intangible Property Assignment and a Patent and Trademark Assignment, each dated
as of September 30, 1999 (the "IP Assignment" and the "P&T Assignment",
respectively), in form and substance satisfactory to the Agent, pursuant to
which the Borrower will transfer to IP Holdings all of its intangible property,
subject to the security interests of the Collateral Agent in such property
pursuant to the Collateral Documents on behalf of the Secured Parties, which
intangible property shall include patents, trademarks and copyrights,
manufacturing processes, know how, trade secrets and other proprietary
information, all of which intangible property is described in the IP Assignment
and the P&T Assignment (collectively, the "Intangible Property");
WHEREAS, pursuant to a License and Royalty Agreement, in form and
substance satisfactory to the Agent, between IP Holdings and the Borrower, dated
as of September 30,
<PAGE>
1999 (the "Royalty Agreement"), IP Holdings will grant an exclusive right and
license to use the Intangible Property to the Borrower on an arm's-length basis
to each of the Borrower and IP Holdings in consideration of the payment in cash,
in accordance with the terms of the Royalty Agreement, by the Borrower to IP
Holdings of royalties (the "Royalties");
WHEREAS, after entering into the Royalty Agreement, it is
expected that IP Holdings will from time to time make a loan or loans to the
Borrower in amounts equal to the amount of the Royalties from time to time due
and payable by the Borrower to IP Holdings, which loan or loans will be (i)
evidenced by intercompany promissory notes in form and substance satisfactory to
the Agent (each, an "Intercompany Note") and (ii) expressly subordinated in
right of payment and enforcement to the prior payment in full and enforcement of
all of the Obligations and each such Intercompany Note will be pledged by IP
Holdings to the Collateral Agent pursuant to the Security Agreement (each such
loan, a "Subordinated Loan"); and
WHEREAS, the Borrower has requested, and subject to the terms and
conditions set forth below the Agent and the Lenders are willing to grant, the
consent of the Agent and the Lenders to (i) the creation of IP Holdings, (ii)
the transfer of the Intangible Property to IP Holdings pursuant to the terms of
the IP Assignment and the P&T Assignment, subject to the security interests of
the Collateral Agent in such property pursuant to the Collateral Documents on
behalf of the Secured Parties (the "Transfer"), (iii) the grant by IP Holdings
to the Borrower of an exclusive right and license to use the Intangible Property
pursuant to the terms of the Royalty Agreement, and (iv) certain amendments to
the Credit Agreement, in each case subject to the terms and conditions provided
herein;
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and other valuable consideration the receipt and sufficiency of
which are hereby acknowledged, each of the parties hereto hereby agrees as
follows:
1. Consent. (a) Notwithstanding anything to the contrary
contained in Section 5.02(l) of the Credit Agreement, the Agent
and the Lenders consent to the creation by the Borrower of IP
Holdings.
(b) Notwithstanding anything to the contrary contained
in Section 5.02(d) of the Credit Agreement, the Agent and the
Lenders consent to (i) the Transfer and (ii) the grant by IP
Holdings to the Borrower of an exclusive right and license to
use the Intangible Property, and agree that the Borrower and IP
Holdings may enter into the IP Assignment, the P&T Assignment
and the Royalty Agreement.
2. Amendments to Credit Agreement. On and after the Consent
Effective Date, (a) Section 1.01 of the Credit Agreement is hereby amended by
adding the following new definition in alphabetical order:
""Intercompany Note" has the meaning specified in Section
5.02(e)(xi)"; and
-2-
<PAGE>
(b) Section 5.02(e)(xi) of the Credit Agreement is hereby amended
by adding the following at the end thereof:
"; provided that (A) in the case of intercompany loans
that are evidenced by an intercompany promissory note (each, an
"Intercompany Note"), each such Intercompany Note shall be in
form and substance satisfactory to the Agent and shall be
pledged by the Borrower or such Subsidiary to the Collateral
Agent pursuant to the Security Agreement and (B) any such
intercompany loans shall be expressly subordinated in right of
payment and enforcement to the prior payment in full and
enforcement of the Obligations and the subordination provisions
in such Intercompany Notes shall be satisfactory to the Agent".
3. Conditions Precedent. The obligation of the Agent and
the Lenders to execute and deliver this Consent and to make any Advance under
the Credit Agreement after the Consent Effective Date (as hereinafter defined)
is subject to the following:
(a) the representations and warranties contained in each
Loan Document are true and correct on and as of the
Consent Effective Date, both before and after giving
effect to this Consent, as though made on and as of such
date, other than any such representations or warranties
that, by their terms, refer to a specific date other
than the Consent Effective Date, in which case such
representations and warranties shall be true and correct
as of such specific date;
(b) no event shall have occurred and be continuing, or
would result from the consummation of any of the
transactions contemplated herein, that constitutes a
Default;
(c) the representations and warranties contained in
Section 4 of this Consent shall be true and correct on
and as of the date hereof;
(d) the Agent shall have received, on behalf of the
Lenders, in each case in form and substance satisfactory
to the Agent, the following documents:
(i) a Patent, Trademark & Copyright Pledge and
Security Agreement (the "IP Security Agreement")
duly executed by IP Holdings in favor of the
Secured Parties, together with (A) appropriate
executed UCC-1 financing statements, and (B) all
other instruments, financing statements and
other documents that the Collateral Agent may
deem necessary or desirable in order to perfect
and protect, and continue and maintain the
perfection of, the security interests granted by
the IP Security Agreement;
(ii) a supplement to the Security Agreement (the
"Security Agreement Supplement") duly executed
by the Borrower and IP Holdings in favor of the
Secured Parties, together with (A) appropriate
executed UCC-1 and UCC-3 financing statements,
(B) certificates representing the capital stock
of IP Holdings, accompanied by undated stock
powers executed in blank, and (C) the Blocked
Account Letters and an Investment Account
Control Agreement, in each case duly executed by
the Borrower in favor of the
-3-
<PAGE>
Collateral Agent on behalf of the Secured
Parties and (D) all other instruments, financing
statements and other documents that the
Collateral Agent may deem necessary or desirable
in order to perfect and protect, and continue
and maintain the perfection of, the Liens
created by the Security Agreement, as
supplemented by the Security Agreement
Supplement;
(iii) true and complete copies of the documents
necessary to effect the Mergers (the "Merger
Documents") including, without limitation, the
Merger Agreements, the Agreements and Plans of
Merger, the Certificates of Ownership and Merger
and Articles of Merger, as appropriate for each
of the Merged Subsidiaries and the Borrower;
(iv) a supplement to the Credit Agreement (the
"Credit Agreement Supplement") duly executed by
IP Holdings, together with amended schedules to
the Credit Agreement;
(v) a Subsidiary Guaranty duly executed by IP
Holdings in favor of the Secured Parties;
(vi) evidence of the insurance for IP Holdings
required by the terms of the Security Agreement;
(vii) copies of the resolutions of the Boards of
Directors of the Borrower, each Merged
Subsidiary and IP Holdings authorizing the
Mergers, the Merger Documents and the
consummation of the transactions contemplated
thereby;
(viii) copies of the resolutions of the Board of
Directors of the Borrower and IP Holdings
authorizing the Transfer and the entering into
of the IP Assignment, the P&T Assignment and the
Royalty Agreement and the consummation of the
transactions contemplated thereby;
(ix) certified copies of the resolutions of the
Board of Directors of Parent, the Borrower and
IP Holdings approving the entering into of this
Consent, the Credit Agreement Supplement,
Security Agreement Supplement, IP Security
Agreement and Subsidiary Guaranty (together, the
"Supplemental Loan Documents") to which it is a
party, the creation of the security interests in
the Intangible Property and all other assets of
IP Holdings, the guarantee by IP Holdings of the
Obligations pursuant to the Subsidiary Guaranty,
and all other transactions contemplated by this
Consent, and of all documents evidencing other
necessary corporate action and governmental
approvals, if any, with respect to Parent, the
Borrower and IP Holdings, the Supplemental Loan
Documents and the transactions contemplated
hereby and thereby;
(x) an officer's certificate for IP Holdings
substantially in the form required by Section
3.01(g)(v) of the Credit Agreement, together
with a
-4-
<PAGE>
copy of the Certificate of Incorporation of IP
Holdings certified by the Secretary of State of
the State of Delaware;
(xi) a certificate of the treasurer of IP
Holdings, in form, scope and substance
satisfactory to the Agent, attesting to the
Solvency of IP Holdings immediately after giving
effect to the Transfer;
(xii) a favorable opinion of Winston & Strawn,
counsel for the Borrower and its Subsidiaries,
as to such matters as the Agent or its counsel
may reasonably request; and
(xiii) such other approvals, opinions,
certificates, instruments or documents,
including, but not limited to, such financing or
continuation statements, and other filing
documents as the Collateral Agent may deem
necessary in order to perfect and preserve the
pledge, assignment and security interest created
under the Collateral Documents, and as any
Lender through the Agent may reasonably request.
4. Representations and Warranties. In order to induce the Agent
and the Lenders to enter into this Consent, each of Parent, the Borrower and
each Subsidiary Guarantor hereby, jointly and severally, represents and warrants
to the Agent and the Lenders as follows:
(i) that no Default or Event of Default exists on the Consent
Effective Date, both before and after giving effect to this Consent;
(c) that all of the representations and warranties contained in
the Loan Documents shall be true and correct as of the Consent Effective
Date both before and after giving effect to this Consent, with the same
effect as though such representations and warranties had been made on
and as of the Consent Effective Date (it being understood and agreed
that any representation or warranty made as of a specified date shall be
required to be true and correct only as of such specific date);
(d) that the execution, delivery and performance by Parent and
each Loan Party of this Consent and the Supplemental Loan Documents to
which it is a party are within Parent's and such Loan Party's corporate
powers, have been duly authorized by all necessary corporate action, and
do not (i) contravene Parent's and such Loan Party's charter or bylaws
(or equivalent documentation), (ii) violate any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award, (iii)
conflict with or result in the breach of, or constitute a default under,
any material contract, loan agreement, indenture, mortgage, deed of
trust, lease or other instrument binding on or affecting Parent or such
Loan Party, any of their respective Subsidiaries or any of their
respective properties or assets or (iv) except for the Liens created
under the Loan Documents, result in or require the creation or
imposition of any Lien upon or with respect to any of the properties or
assets of Parent, such Loan Party or any of their respective
Subsidiaries;
-5-
<PAGE>
(f) that no authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or regulatory body
or any other third party is required for the due execution, delivery or
performance by Parent or any Loan Party of this Consent or any of the
Supplemental Loan Documents to which it is a party or for the
consummation of the transactions contemplated hereby and thereby;
(g) that this Consent and each of the Supplemental Loan
Documents to which it is a party has been duly executed and delivered by
Parent and each Loan Party thereto and is the legal, valid and binding
obligation of Parent and each Loan Party thereto, enforceable against
Parent and such Loan Party in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or limiting creditors' rights or by
equitable principles generally (regardless of whether enforcement is
sought in equity or at law);
(h) that there is no action, suit, investigation, litigation or
proceeding affecting Parent, any Loan Party or any of their respective
Subsidiaries, including any Environmental Claim, pending or threatened
before any court, governmental agency or arbitrator that (i) would be
reasonably expected to have a Material Adverse Effect or (ii) affects or
purports to affect the legality, validity or enforceability of this
Consent, the Supplemental Loan Documents, any other Loan Document or the
consummation of the transactions contemplated hereby or thereby; and
(i) other than exceptions to any of the following that would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, any reprogramming required to permit the proper
functioning, in and following the year 2000, of (i) the Borrower's,
Parent's and each of the Subsidiary Guarantor's computer systems and
(ii) equipment containing embedded microchips (including systems and
equipment supplied by others or with which the Borrower's, Parent's or
any of the Subsidiary Guarantor's systems interface) and the testing of
all such systems and equipment, as so reprogrammed, will be completed by
December 1, 1999. The cost to the Borrower, Parent and the Subsidiary
Guarantors of such reprogramming and testing and of the reasonably
foreseeable consequences of year 2000 to the Borrower, Parent and the
Subsidiary Guarantors (including, without limitation, reprogramming
errors and the failure of others' systems or equipment) would not
reasonably be expected to result in a Default or a Material Adverse
Effect.
5. Intercompany Notes. The Borrower hereby agrees and covenants
with the Agent and the Lenders that simultaneously with the making of each
Subordinated Loan by IP Holdings to the Borrower pursuant to the Royalty
Agreement, the Borrower will cause IP Holdings to execute and deliver to the
Agent an appropriate Intercompany Note evidencing such Subordinated Loan and
pledge and deliver such Intercompany Note, duly endorsed in blank, to the
Collateral Agent pursuant to the Security Agreement.
6. Year 2000. Each of Parent and the Borrower shall take, and
shall cause each of its Subsidiaries to take, all action necessary and commit
adequate resources to assure that the computer-based and other systems that it
owns or are used in its business by Parent, the Borrower and each such
Subsidiary are able to effectively process data including dates before, on
-6-
<PAGE>
and after January 1, 2000 without experiencing any year 2000 problem that would
reasonably be expected to cause a Material Adverse Effect. At the request of the
Agent, the Borrower shall provide or cause to be provided to the Agent with
assurance and substantiation (including, but not limited to, the results of
internal or external audit reports prepared in the ordinary course of business)
reasonably acceptable to the Agent as to the year 2000 capability of Parent, the
Borrower and their Subsidiaries and their ability to conduct their business and
operations before, on and after January 1, 2000 without experiencing a year 2000
problem causing a Material Adverse Effect. For purposes hereof, "year 2000
problem" means the failure of computer-based and other systems or equipment,
whether of the Borrower, Parent, any Subsidiary Guarantor or otherwise, to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999, and any reprogramming errors
resulting therefrom.
7. Expenses. The Borrower shall pay to the Agent all costs and
expenses incurred by the Agent (including, without limitation, the reasonable
fees and disbursements of counsel) in connection with the preparation and
execution of this Consent.
8. Miscellaneous.
(a) This Consent shall become effective on the date (the
"Consent Effective Date") on which (A) Parent, the Borrower, each Subsidiary
Guarantor then existing, the Agent and the Lenders shall have signed a copy of
this Consent (whether the same or different counterpart) and the Borrower shall
have delivered the same to the Agent (including by way of facsimile device), (B)
all of the conditions contained in Section 3 and all other terms, covenants and
agreements of this Consent are met to the satisfaction of the Agent and the
Lenders, (C) the Agent shall have received a certificate signed by a duly
authorized officer of the Borrower stating that the representations and
warranties contained in Section 4 of this Consent are true, complete and correct
on and as of the date of such certificate as though made on and as of such date,
other than any such representations or warranties that, by their terms, refer to
a date other than the date of such certificate, such certificate in form and
substance satisfactory to the Agent, (D) the Borrower shall have paid in full
the costs and expenses referred to in Section 7, and (E) the Borrower shall have
paid all costs and expenses of counsel to the Agent currently due and owing by
the Borrower.
(b) THIS CONSENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE.
(c) This Consent may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and
the same instrument. Delivery of an executed counterpart of a signature page to
this Consent by telecopier shall be effective as delivery of a manually executed
counterpart of this Consent.
(d) This Consent is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other
-7-
<PAGE>
Loan Document. Except as specifically amended herein, all terms and conditions
of the Credit Agreement and every other Loan Document, respectively, and all
obligations of Parent and each Loan Party and rights of the Agent and each
Lender thereunder shall remain in full force and effect.
(e) From and after the Consent Effective Date, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like
import referring to the Credit Agreement, and each reference in the Notes and
each of the other Loan Documents to "the Credit Agreement", "thereunder",
"thereof" or words of like import referring to the Credit Agreement, shall mean
and be a reference to the Credit Agreement, after giving effect to the
Supplemental Loan Documents and as amended and modified by this Consent. From
and after the Consent Effective Date, all references in the Credit Agreement and
all references in the other Loan Documents to the "Loan Documents" shall be
deemed to include this Consent and the Supplemental Loan Documents.
(f) The Credit Agreement, the Notes and each of the other Loan
Documents, as specifically amended and modified by this Consent, are and shall
continue to be in full force and effect and are hereby in all respects ratified
and confirmed. Without limiting the generality of the foregoing, the Collateral
Documents and all of the Collateral described therein do and shall continue to
secure the payment of all Obligations of the Loan Parties (including IP
Holdings) under the Loan Documents. Parent and Each Loan Party hereby agrees
that (i) Parent and such Loan Party is truly and justly indebted to the Secured
Parties, without defense, counterclaim or offset of any kind in the full amount
of the Secured Obligations and (ii) the Secured Obligations are secured by
valid, perfected, enforceable and unavoidable first priority Liens and security
interests upon the Collateral senior to all other security interests and Liens
upon the Collateral (except as expressly permitted by the Credit Agreement),
granted by Parent and the Loan Parties to the Agent for the ratable benefit of
the Secured Parties.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Consent to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
PRECISE HOLDING CORPORATION
By /s/ William L. Remley
--------------------------------------
Name: William L. Remley
Title:
PRECISE TECHNOLOGY, INC.,
as Borrower
By /s/ John R. Weeks
--------------------------------------
Name: John R. Weeks
Title: President
PRECISE INTELLECTUAL PROPERTY
HOLDINGS COMPANY, INC.,
By /s/ Michael M. Farrell
--------------------------------------
Name: Michael M. Farrell
Title: Executive Vice President
FLEET NATIONAL BANK, as Agent, as
Collateral Agent and as Issuing Bank
By /s/ Howard J. Diamond
--------------------------------------
Name: Howard J. Diamond
Title: Vice President
[Signature Page to the Consent and Third Amendment
to Credit Agreement]
-9-
<PAGE>
LENDERS:
--------
FLEET NATIONAL BANK
By /s/ Howard J. Diamond
--------------------------------------
Name: Howard J. Diamond
Title: Vice President
BANK AUSTRIA
CREDITANSTALT
CORPORATE FINANCE, INC.
(as successor by assignment to
Creditanstalt AG)
By /s/ Clifford L. Wells
--------------------------------------
Name: Clifford L. Wells
Title: Vice President
By /s/ Maura K. Connor
--------------------------------------
Name: Maura K. Connor
Title: Vice President
[Signature Page to the Consent and Third Amendment
to Credit Agreement]
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (1) THE
CONSOLIDATED UNAUDITED INTERIM FINANCIAL STATEMENTS OF PRECISE TECHNOLOGY, INC.
AS OF SEPTEMBER 30, 1999 AND FOR THE NINE MONTHS THEN ENDED AND (2) THE
CONSOLIDATED FINANCIAL STATEMENTS OF PRECISE TECHNOLOGY, INC. AS OF DECEMBER 31,
1998 AND FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> SEP-30-1999 DEC-31-1998
<CASH> 312 240
<SECURITIES> 0 0
<RECEIVABLES> 20,273 15,097
<ALLOWANCES> 142 166
<INVENTORY> 8,432 6,510
<CURRENT-ASSETS> 33,495 22,940
<PP&E> 65,068 62,080
<DEPRECIATION> 23,430 18,543
<TOTAL-ASSETS> 100,511 93,408
<CURRENT-LIABILITIES> 27,651 24,872
<BONDS> 0 0
0 0
0 0
<COMMON> 1 1
<OTHER-SE> (12,278) (12,493)
<TOTAL-LIABILITY-AND-EQUITY> 100,511 93,408
<SALES> 82,418 98,025
<TOTAL-REVENUES> 82,418 98,025
<CGS> 63,795 77,459
<TOTAL-COSTS> 73,929 89,382
<OTHER-EXPENSES> (1) (51)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,810 10,311
<INCOME-PRETAX> 680 (1,617)
<INCOME-TAX> 465 427
<INCOME-CONTINUING> 215 (2,044)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 215 (2,044)
<EPS-BASIC> 0.0 0.0
<EPS-DILUTED> 0.0 0.0
</TABLE>
