UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 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: 001-13657
STANDARD AUTOMOTIVE CORPORATION
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-2018607
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(State of Incorporation) (I.R.S. Employer Identification No.)
321 Valley Road, Hillsborough, NJ 08876-4056
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(Address of principal executive offices) (Zip Code)
(908) 874-7778 3715
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(Registrant's telephone number) (Primary Standard Industrial Code)
Not applicable
--------------
(Former name, former address and former fiscal year, if changed since last
report)
Securities registered under Section 12(b) of the Exchange Act:
Title of each Class Name of each Exchange on which Registered
------------------- -----------------------------------------
Common Stock American Stock Exchange
8 1/2% Senior Convertible
Redeemable Preferred Stock American Stock Exchange
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 |_|
Indicate by check mark if disclosure of delinquent files pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K of any amendment of this
Form 10-K. |_|
The aggregate market value of the voting common stock held by
non-affiliates of the registrant as of June 25, 1999 was $34,610,000 based upon
a last sale price of $15.875.
As of June 25, 1999, the registrant had a total of 3,680,124 shares of
Common Stock outstanding and 1,150,000 shares of Preferred Stock outstanding.
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
For the Year Fiscal Ended March 31, 1999
Form 10-K Annual Report
Index
Page
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Part I
Item 1. Business 3
Item 2. Properties 8
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 10
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 16
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure 16
Part III
Item 10. Directors and Executive Officers of the Registrant 17
Item 11. Executive Compensation 18
Item 12. Security Ownership of Certain Beneficial Owners and
Management 23
Item 13. Certain Relationships and Related Transactions 23
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 28
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PART I
Item 1. Business
Standard Automotive Corporation (the "Company") designs, manufactures and
distributes trailer chassis for use in the transport of shipping containers and
a broad line of highly specialized customized dump truck trailers, dump bodies
and related products. The Company commenced operations in January 1998 with the
acquisition of Ajax Manufacturing Company ("Ajax") and substantially expanded
its operations with the acquisitions of R&S Truck Body Co. ("R&S") and CPS
Trailer Co. ("CPS") in July and September 1998. To further expand its business
by reaching potential customers on the West Coast in April 1999 the Company
commenced production at a new manufacturing facility in Sonora, Mexico,
established to produce trailer chassis identical to those produced at its New
Jersey facility.
The Company's business strategy is to grow through the acquisitions of
companies that manufacture complementary products and by diversifying the
product lines of the businesses acquired. The Company's most recent acquisition
(the "Ranor Acquisition") completed in June 1999, was of substantially all of
the assets of Ranor, Inc. ("Ranor") a fabricator of large precision assemblies
for the aerospace, nuclear, industrial and military markets. The consideration
paid for Ranor was $28,800,000, subject to final adjustment, of which
$23,500,000 was paid in cash and $5,300,000 was paid in the form of convertible
subordinated notes of the Company. In connection with the acquisition the
Company increased its existing credit facility by $30,000,000 of which
$25,000,000 was drawn down to consummate the acquisition.
The Company is continuing to seek out attractive acquisition candidates.
Depending upon the opportunities available, the Company will seek additional
debt or equity to finance the cost of future acquisitions and the expansion of
its business.
Product Lines
As a result of the acquisitions of Ajax, R&S and CPS, the Company now
offers a broad line of transportation equipment and related products. Moreover,
because of the strong relationships between management of the businesses
acquired and their customers, many of the Company's products have been
customized to fit customer needs. The Company's current line of transportation
equipment includes:
o Container Chassis - A container chassis is a trailer chassis
attached to a truck cab to transport international shipping
containers. The Company manufactures new chassis and remanufactures
used chassis at its Ajax and Mexican facilities.
o New Container Chassis. New chassis are manufactured from raw
materials, primarily steel, and fabricated purchased parts to
customer order, and in accordance with the International Standards
Organization ("ISO") specifications or such other specifications as
the customer may require.
o Remanufactured Container Chassis. The Company remanufactures to
customer order and ISO specifications chassis originally built by
the Company and other manufacturers. The Company remanufactures a
used chassis by removing all of its components, except the axles
which are refurbished, and replacing the discarded components with
new components. In periods of high demand, customers tend to
purchase new chassis because their existing chassis are in use ("on
hire") and cannot be decommissioned for remanufacture. When demand
eases, customers are able to remove chassis from service for
remanufacturing to prepare for renewed demand.
o Chassis Kits/Chassis Parts. Include front assemblies ("goosenecks"),
slider assemblies and rear bolster sets. Sales of chassis parts and
sub-assemblies have historically been small. However, the Company's
sales of such products have increased as the number of chassis in
service has grown.
o Dump Trailers. These are used to haul bulk products such as refuse,
scrap, demolition by-products, rocks, gravel, sand and agricultural
commodities. The Company, through its R&S and CPS acquisitions,
produce a variety of specialized dump truck trailers and dump bodies
to meet the needs of its customers. These include:
o Bottom Dump Trailer. The bottom dump trailer was introduced
approximately 15 years ago and is marketed primarily in the Western
United States. This trailer is constructed of steel and used to haul
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a variety of products and can be built to customer specifications
based on a variety of standard options. Over the past 10 years, the
Company has offered varying lengths of bottom dumps from 20' to 43'
to accommodate the different regulations throughout the United
States. Recent changes to the bottom dump trailer include anti-lock
brakes and rear underside protection. The life expectancy of a
bottom dump trailer is approximately fifteen years.
o Half Round End Dump Trailer. The half-round end dump is the newest
addition to the Company's steel trailer product lines. This trailer
was designed primarily for heavy use in large aggregate hauling,
demolition, and construction applications. The trailer has a
hydraulic cylinder which allows the trailer bed to be raised to a
45-degree angle for end dumping, and is available in lengths ranging
from 24' to 39'. The body of the half round is made of super tough
AR-400 steel. Since the introduction of the half round in March
1998, demand for the trailer has steadily increased.
o Grain Hopper Trailer. The Company began manufacturing the grain
hopper trailer in 1982. This trailer is used to haul grain. The
availability of increased side heights has made this trailer
attractive to growers of larger volume, lighter commodities, such as
peanuts. During the past 10 years the Company has added a sloped end
version with a more aerodynamic shape which has increased the grain
hopper's marketability. The trailer has two manually operated bottom
dump doors and is designed to withstand rough terrain without
breakage. The grain hopper is constructed of steel and is available
in lengths ranging from 20' to 48'.
o Walking Floor Van Trailer. The walking floor van trailer is an
innovative trailer that incorporates maximum strength with the
versatility to unload virtually anything. The combination of
heavy-duty steel construction and the live floor permits a more
effective use of higher load capacity. The trailer has many
applications, and is frequently used in the waste industry. The live
floor is hydraulically driven and allows for the proper distribution
of the load.
o Dump Trailers, Steel and Aluminum. These units pulled by a truck cab
are capable of lifting their load and discharging it from the rear.
Steel is used when abrasion and dent resistance is important.
Aluminum reduces the overall weight of a unit and allows for
increased payload of less abrasive material. Dump trailers come in
many sizes ranging from 19' to 40' in length. Trailers have a
suspension system separate and distinct form that of the truck cab.
The larger sizes and separate suspensions allow for bigger payloads
compared with a truck equipped with a dump body.
o Dump Truck Bodies, Steel and Aluminum. These bodies are offered in
lengths ranging from eight feet to twenty-six feet. Steel has been
the traditional fabrication material, offering resistance to
abrasion and denting. Every material used in the mining or
construction industries can be hauled in a steel body. Configuration
of the body is limited solely by the imagination and structural
ability of the design. Aluminum bodies are ideal for less abrasive
materials. They are lighter weight and allow for greater payloads of
material such as gravel and asphalt.
o Platform Bodies, Steel and Aluminum. Platform bodies are designed as
either dump type or stationary, driven by customer needs. A Platform
Body, as the name implies, is simply a flat surfaced bed, mounted on
a truck chassis to haul material of many shapes and sizes.
Construction materials including lumber, blocks and brick are hauled
on platforms. These are also built using either aluminum or steel.
o OEM and Manufactured Replacement Parts. Service parts are available
through a full service Parts Department. All parts used in the
manufacture process are available. Parts known as original equipment
manufacture are supplied by outside vendors and sold through our
parts department. We also supply small parts for several
manufacturing facilities.
o Suspensions for Truck and Trailers. Suspensions air and spring, are
supplied by our Page Suspension Division through R&S. Suspensions
are the weight-carrying unit mounted under either a truck or
trailer. These units provide lift, either through spring action or
air pressure contained in an air bag. There are many configurations
used in the industry and most are available through our Page
Suspension Division. These units are built in house and sold as
complete units, installed or shipped to other locations as required
by the customer.
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o Utility Bodies. Utility bodies are typically used as service trucks.
These bodies have several compartments allowing for tool and parts
storage. Most utility companies have a large fleet of this type of
truck. We provide both manufactured and purchased for re-sale units
to service this market. Re-sale units are known as distributor
products. We also offer full installation of these units.
o Small Cranes. These are units re-distributed and installed by us.
Small cranes are used to service heavy truck fleets in the field.
Many replacement parts are very heavy. These cranes are typically
mounted on a service truck to lift parts into position for mounting.
o New Products. In the summer of 1999, CPS Trailer Co. expects to
unveil the newest addition to the Company's steel trailer product
lines. The CPS Ultralight will utilize many of the components of the
half round end dump yet weigh much less. The Ultralight is designed
for small aggregate hauling such as sand and gravel and will be
available in lengths varying from 24' to 39'. The Company expects
the product will be well received because it was designed to meet
the demands of many CPS customers.
In response to customer demands and the changing regulatory environment,
the Company constantly seeks to refine its product groups to meet the demands of
the marketplace. The Company considers the engineering expertise and experience
of its management, as well as the skill of its work force, a key competitive
advantage. The individuals who formerly owned or managed the businesses which
the Company has acquired have extensive in-depth knowledge of their customer
needs enabling them to design and manufacture customized products.
Revenues by Product
Set forth below are the product group sales by percentage of the entities
acquired by the Company among Chassis, Dump Bodies, Dump Trailers and Others for
the last 5 years. The Company acquired Ajax in January 1998, R&S in July 1999
and CPS in September 1999 and the table reflects their sales before and after
acquisition by the Company. The information below does not give effect to the
business acquired in the Ranor Acquisition, but assumes that all other
subsidiaries were owned for the entire period.
Fiscal Year Ended
March 31, Chassis Dump Bodies Dump Trailers Other
--------- ------- ----------- ------------- -----
1999 52% 14% 20% 14%
1998 54% 37% 9%
1997 49% 45% 6%
1996 90% 7% 3%
1995 77% 19% 4%
Backlog
The Company's backlog of firm unfilled orders totaled approximately
$62,600,000 as of March 31, 1999, compared to approximately $27,200,000 as of
March 31, 1998. The Company estimates that its current backlog will be filled by
March 31, 2000.
Manufacturing
Trailer Chassis
The Company manufactures trailer chassis at the New Jersey and Sonora,
Mexico facilities of its Ajax Division. All chassis are manufactured or
remanufactured pursuant to specific customer orders, which can range from as few
as one hundred to thousands of trailers. Production scheduling is generally
planned three or more months in advance.
Dump Truck Bodies and Trailers
The Company manufactures its dump truck bodies and trailers at the
facilities of its R&S and CPS Divisions in Oran, Missouri and Ivel, Kentucky.
The Company's dump bodies and trailers are manufactured from customized designs
based on customer specifications and applicable regulations. Examples of custom
design features include length, extra platform supports, construction material
(steel or aluminum) depending upon weight requirements and
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need for dent resistance, support systems, contours of the dump bed (flat vs.
round), specialized brake systems, underside protection and specialized step
placements and cargo tie downs. Production scheduling at the CPS and R&S plants
is generally four to eight weeks in advance.
Raw Materials
The Company utilizes a variety of raw materials and components including
steel, aluminum, lumber, tires, axles and hydraulics which it purchases from a
variety of vendors. Raw materials represent approximately 75% of the cost of
goods manufactured. Significant price fluctuations or shortages in raw materials
or finished components would directly effect the cost of the Company's products
and could adversely effect the Company's result of operations.
The Company does business with suppliers and vendors with which it has had
long term relationships. The Company purchases materials on an as-needed basis.
Lead times are generally four to six weeks, except in the case of steel I-beams
used in the production of trailer chassis, where lead times are tied to the
production schedule of the steel mills. The Company maintains an inventory
position at each of its facilities, which it believes is sufficient to prevent
delays due to material shortages and vendor allocations.
Marketing and Distribution
The Company's customer base includes major leasing companies which, in
turn, lease trailer chassis to steamship and rail companies; truck dealers and
distributors, large private fleet owners and smaller end-users. To a limited
extent, the Company sells its trailer chassis direct to steamship companies.
Although the Company is dependent upon a limited number of leasing companies for
the sale of trailer chassis, they, in turn, lease the products to approximately
50 steamship lines and other end users.
Trac Leasing (53%) and Ned Lloyd (31%) represented 84% of the sales of the
Ajax Division for Fiscal 1997. Trac Leasing (49%) and Flexi Van Leasing (26%)
represented 75% of the sales of the Ajax Division for Fiscal 1998. As a result
of the diversification associated with the acquisition of R&S and CPS, no single
customer represented more than an aggregate of 40% of the Company's sales for
fiscal 1999.
Manufactured products are also sold directly to end users, fleet and
leasing companies, truck dealers and established truck equipment distributors.
The Company maintains a staff of fifteen Sales Managers and Customer Service
Representatives. Given the large volume purchases of certain customers,
management at all levels, including the Company's President, participate in the
selling process.
Historically, the Company has relied upon advertisements in trade
journals, participation at trade shows and direct mailings to market its
products. Sales of trailer chassis are to a limited number of customers and,
consequently, are generally made directly by the Company. Sales through truck
dealers and truck equipment distributors of the Company's dump trailers and dump
bodies afford the Company the opportunity to expand its geographical reach
without the costs that would be associated with in-house sales personnel.
In an effort to expand its dealer network, the Company has begun to
support the advertising programs of some of its dealers. Such co-op advertising
allows the Company to increase the awareness of its products and develop dealer
loyalty.
Machinery and Equipment
The Company's manufacturing equipment consists primarily of steel bending,
cutting, hole punching and welding equipment, and painting equipment. The
Company manufactures a portion and maintains most of its tools and dies. CNC
lasers and plasma/punch fabrication centers are used extensively. Robotic
welders are used whenever possible. If the Company implements its plans to
manufacture new products, it would acquire additional tooling and equipment as
necessary. The Company also uses paint spraying and material handling equipment.
The Company has its own internal maintenance department and performs regular
preventive maintenance on its equipment. Machinery and equipment are routinely
upgraded and replaced with new technology in order to produce the quality
product and efficiency customers have come to expect from the Company.
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Research and Development
The Company emphasizes design and product innovation and continually seeks
to modify its products to meet the needs of the marketplace. In addition to
striving to update its products, the Company also seeks to modernize its
manufacturing and tooling equipment to achieve operating efficiencies and
improved product performance. The Company has both designed and fabricated much
of its manufacturing equipment to meet its specific needs.
The Company utilizes the latest in 3D modeling in the design of trailers
and their components. Designers use AutoCAD to develop manufacturing and
presentation drawings. Some facilities use a computer aided manufacturing
program which translates the lines on the drawings into cutting diagrams for
computer controlled high production plasma cutting tables. Once cut, many of
these pieces are used in sub-assemblies that are welded together using a Robotic
Welding Cell. This piece of equipment is used to make most of the Company's more
labor-intensive subassemblies.
The Company has recently begun using the latest pulse-mig welding
technology at some of its plants. This welding process allows for a much higher
deposition rate of fillermetal while virtually eliminating the splatter commonly
associated with mig-welding. This reduces cleanup time and results in higher
productivity throughout the manufacturing process.
Competition for the Manufacture of Chassis, Dump Trailers and Bodies
The dump truck trailer and dump body industry, and the trailer chassis
industry are highly competitive and barriers to entry are relatively low.
Competition occurs on the basis of product innovations and capabilities,
quality, durability, warranties, and relationships, as well as on the basis of
product prices, availability and delivery times. Historically, there has been
manufacturing over-capacity in the truck manufacturing industry. With respect to
trailer chassis, shipping costs can impact customer purchasing decisions and
competition tends to be geographical. Nevertheless, the Company's New Jersey
facility faces competition from numerous competitors for sales on the Eastern
Seaboard, including Strick Corporation, H&A Moran and Hyundai, Mexico.
Similarly, the Company's Sonora, Mexico facility faces competition from Hyundai,
Mexico, and other large manufacturers for sales on the West Coast.
With respect to dump trailers and bodies, the Company faces competition
from numerous smaller independent producers and from The Heil Company and Galian
Dump Bodies, Inc., two large manufacturers which produce standardized products
and compete on the basis of price.
Product Warranties
The Company provides limited warranties against construction defects in
its products. These warranties generally provide for the replacement or repair
of defective parts or workmanship for a specified period following the date of
sale. Customers and end-users also receive warranties from suppliers of
components incorporated into the Company's manufactured products as well as
those that are distributed by the Company.
Violation of Federal and State Air Quality Regulation
On March 16, 1999 the Company and the New Jersey Department of
Environmental Protection (NJDEP) entered into a Stipulation of Settlement by
which the Company, without admission of liability, agreed to withdraw legal
challenges against NJDEP and pay NJDEP $234,000 over a three-year period
commencing December 31, 1999. In exchange, NJDEP (1) has withdrawn and settled
all alleged Company emission exceedences of air volatile compounds ("VOCS")
dating from the initiation of the Company's predecessor business in 1992 through
February 1999; and (2) has granted the Company a new VOC permit that roughly
doubles allowable emissions to 51.5 tons per year. As required under the new VOC
permit, the Company has installed a system to compute VOC emissions and
periodically reconcile such computations with purchasing and production data.
The Company projects that at current rates of production, VOC permit limits for
1999 may be exceeded. Options available to the Company are the additional
expansion of the VOC permit from NJDEP (such application would likely be
additionally reviewable by USEPA). Another option may be to upgrade the
production facility to allow use of zero-VOC or low VOC production materials.
This option might include Company purchases of Open-Market OVC Emission
Reduction Credits as permitted by recently adopted NJDEP regulations. A facility
upgrade would likely entail material capital costs and expenses and would allow
the Company to substantially increase production without exceeding VOC permit
limits.
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Other Environmental and Regulatory Compliance
Truck trailer length, height, width, gross vehicle weight and other
specifications are regulated by the National Highway Traffic Safety
Administration and individual states. Changes and anticipated changes in these
regulations have resulted in significant fluctuations in demand for new
trailers, thereby contributing to industry cyclicality. The Company also is
governed by a variety of regulations established by various federal, state and
local agencies governing such matters including employee safety and working
conditions, environmental protection and other activities.
The Company is subject to Federal, state and local laws and regulations
relating to its operations, including building and occupancy codes, occupational
safety and environmental laws, and laws governing the use, discharge and
disposal of hazardous materials. Except as otherwise described above with regard
to air quality regulations, the Company is not aware of any material
non-compliance with any such laws and regulations. The Company is a manufacturer
of truck trailer chassis and is covered by Standard Industrial Code (SIC) #3715.
Companies covered by SIC Code #3715 are among those companies subject to the New
Jersey Industrial Site Recovery Act ("ISRA"). Pursuant to ISRA, the Company has
begun an investigation for any environmental "Areas of Concern" ("AOCs") that
may be present at the facility. The Company has entered into a Remediation
Agreement with NJDEP by which the Company will fulfill its obligations under
ISRA. AOCs, if discovered, could require remediation, which could have a
material adverse effect on the Company.
In March 1998, as part of the ISRA Remediation Agreement with NJDEP, NJDEP
required the Company to perform soil and sediment sampling at various locations
at the facility. The sampling results were within NJDEP compliance limits with
the exception of results for certain metals detected in soil around roof
downspouts at the facility. The Company has engaged a contractor to perform
additional sampling at these locations, the results of which have been forwarded
to NJDEP. NJDEP and the Company are presently reviewing results generated March
1999. If the additional sampling indicates additional areas of contamination
above NJDEP compliance levels, additional investigations may be necessary or
remedial action including removal and replacement of affected soil may be
indicated. The cost of such action is not expected to be material to the
Company's financial position.
There can be no assurance that such additional investigations will not
reveal additional environmental regulatory compliance liabilities, nor can there
by any assurance that health-related or environmental issues will not arise in
the future and, if so, that they will not have a material adverse impact on the
Company's financial position or results of operations.
Employees
As of April 1999, the Company had 548 full-time employees of whom 3 are
officers, 31 are managers, 16 are supervisors, 33 are administrative personnel
and the rest are in production. The Company's employees do not belong to a
collective bargaining unit and the Company considers its relations with
employees to be satisfactory.
Item 2. Properties
The Company has four manufacturing plants, as described below:
The Company leases on a "triple net" basis, the 182,000 square foot
factory complex it currently occupies on 22 acres in Hillsborough Township, New
Jersey, approximately 45 miles southwest of New York City. The area is rural to
suburban and is convenient to major expressways and points of delivery. The
facility was built in 1964. Currently, approximately 2,500 square feet is
devoted to administrative offices and the balance is used for manufacturing and
warehousing. The site surrounding the plant is primarily used for storing
customer chassis, inventory and employee parking.
The lease for the Hillsborough facility provides for a five-year initial
term and is renewable at the Company's option for four successive, five year
renewal terms, at an annual base rent of $600,000 for the initial term, subject
to increase during each renewal term by the percentage increase in the Consumer
Price Index over the immediately preceding five year term. The Company has the
option, exercisable during the initial term of the lease, to purchase the
facility and land for a cash purchase price of $6,500,000 provided the Company
is not in default under the lease.
The Company owns a recently completed 140,000 square foot manufacturing
facility located on 21 acres in Floyd County, Ivel, Kentucky about 120 miles
east of Lexington, Kentucky and 85 miles south of Huntington, West
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Virginia. The facility is on US Highway 23 a heavily traveled four lane
north-south highway. The facility was occupied in September 1998. Approximately
10,000 square feet of the facility houses administrative office space.
The Company owns 25 acres of land in Oran, Missouri. The area is rural and
is convenient to major expressways and points of delivery. Buildings total
approximately 120,000 square feet and have been constructed in phases over the
years. The Company utilizes 105,000 square feet for manufacturing purposes,
60,000 square feet was newly constructed and put into service in May 1998.
The Company leases a 64,000 square foot manufacturing facility located on
5 acres of property in Sonora, Mexico, 24 miles south of Yuma, Arizona. The
lease provides for a six-year term at an annual rent of $289,000. The Company
has the option to purchase the land and facility for at the end of the fifth
year at a price not to exceed $1,500,000. The Company also owns 7 acres of real
property adjacent to the leased premises.
The Company leases 4,100 square feet of executive office space on the 21st
floor at 280 Park Avenue in New York City, for an annual rent of $193,000.
The Company also leases 3,100 square feet of office space at 401 Plaza
Route 206 in Somerville, New Jersey for an annual rental of $56,000. An
additional 1,100 square feet is expected to be occupied during the next fiscal
year, which will increase the annual rental to $76,000. This space houses the
Company's Corporate Finance and Administrative Personnel.
Item 3. Legal Proceedings
Litigation
The Company is involved in litigation arising in the normal course of its
business, none of which is believed, individually or in the aggregate, to be
material to the Company's financial position and results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Market information:
The Company's Common Stock and 8 1/2% Senior Convertible Redeemable
Preferred Stock ("Preferred Stock") are listed and traded on the American Stock
Exchange ("Amex") under the symbols "AJX" and "AJX.PR", respectively. The
following table sets forth on a per share basis the high and low sale prices for
the Company's securities from January 22, 1998, when trading commenced through
June 25, 1999.
Common Stock Preferred Stock
------------ ---------------
High Low High Low
---- --- ---- ---
Quarter ended March 31, 1998 12 3/4 8 1/2 14 1/8 10 1/2
Quarter through June 30, 1998 12 5/8 8 3/4 13 00 9 7/8
Quarter through September 30, 1998 11 3/8 5 1/4 11 1/4 8 00
Quarter through December 31, 1998 8 1/2 4 5/8 10 7/8 6 3/8
Quarter through March 31, 1999 10 3/8 8 3/8 11 7/8 8 3/4
Quarter through June 25, 1999 16 5/8 8 1/2 16 00 9 00
As of June 25, 1999 the Common Stock and Preferred Stock was held by
approximately 100 and 25 holders of record, respectively.
Dividends:
The holders of the Preferred Stock are entitled to receive cumulative
dividends at the rate of $1.02 per share per annum, paid quarterly on the last
business day of March, June, September and December of each year, commencing on
March 31, 1998. To date, the Company has paid all required dividends on the
Preferred Stock with cash generated from operations.
The Company has not paid dividends on its Common Stock. The future payment
of dividends is subject to the discretion of the Board of Directors and
prohibited by the Company's Credit Agreement. It is the present intention of the
Board to retain all earnings other than amounts paid to holders of the Preferred
Stock for use in the Company's business. Accordingly, the Company does not
currently anticipating paying dividends on its Common Stock.
Item 6. Selected Financial Data
The following table sets forth for the periods indicated summary
historical financial information of the Company. The Company had no operating
results prior to the year ended March 31, 1997. Accordingly, the information set
forth below at and for the periods ended March 31, 1995, 1996 and 1997 and
January 26, 1998, reflects only the results of Ajax. The information for the
period ended March 31, 1998 represents the consolidated results of Ajax and the
Company for the period from January 27, 1998, the date Ajax was acquired by the
Company, through March 31, 1998. The information for the year ended March 31,
1999, reflects the consolidated results of the Company (including Ajax) and R&S
and CPS from the date each of such companies was acquired by the Company through
March 31, 1999. The information contained in the table has been derived from
audited financial statements. The following information is qualified in its
entirety by, and should be read in connection with, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the audited
consolidated financial statements (and notes thereto) and other financial and
statistical information of the Company appearing elsewhere in this Annual
Report.
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<TABLE>
<CAPTION>
Selected Income Data: Ajax Standard
------------------------------------------------ --------------------
Period from
April 1, 1997
Year Ended March 31, through Year Ended March 31,
-------------------- January 26, --------------------
1995 1996 1997 1998 1998 1999
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenues, net $33,407 $42,538 $22,356 $25,134 $ 7,936 $75,452
Selling, general and administrative 1,419 3,082 2,510 1,431 407 6,613
Operating income 1,277 5,482 2,818 3,805 1,305 7,841
Interest expense 339 118 -- -- 450 1,813
Income before income taxes 1,012 5,449 2,896 3,015 801 5,748
Net income $ 514 $ 3,344 $ 1,728 $ 1,743 $ 343 $ 3,482
======= ======= ======= ======= ======= =======
Preferred stock dividend $ -- $ -- $ -- $ -- $ 184 $ 1,173
Basic and diluted net income per share (3) $ 0.32 $ 2.09 $ 1.08 $ 1.09 $ 0.09 $ 0.69
======= ======= ======= ======= ======= =======
Basic and diluted weighted average number
of common shares outstanding (3) 1,600 1,600 1,600 1,600 1,846 3,356
</TABLE>
<TABLE>
<CAPTION>
Selected Balance Sheet Data: Ajax Standard
--------------------------------- --------------------
As at March 31,
-----------------------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 512 $ 1,482 $ 1,558 $ 3,255 $ 3,686
Accounts receivable, net 503 751 2,536 4,838 7,032
Inventory 5,165 3,341 3,515 5,399 13,466
Property and equipment, net 949 946 994 1,225 19,975
Intangible assets, net -- -- -- 15,127 29,000
Current liabilities (excluding debt) 3,288 1,464 2,093 2,851 17,155
Total debt 2,373 -- -- 4,000 33,413
Stockholders' equity 2,151 5,495 7,222 24,709 30,916
Working capital 1,680 4,562 5,941 11,547 9,430
</TABLE>
(1) "Basic and Diluted Earnings per Share" and "Weighted Average number of
common shares outstanding" data assume Ajax had 1,600,000 of common stock
outstanding for periods prior to Standard acquiring Ajax.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read together with the
consolidated financial statements and notes thereto included elsewhere in this
Annual Report.
11
<PAGE>
Overview
Ajax, at both its New Jersey and Mexican Facilities, manufactures trailer
chassis to customer order and remanufacturers existing chassis. Revenues are
recognized when the finished product is inspected and accepted by the customer
or its agent and title has transferred. The market for chassis is cyclical and
is affected by overall economic conditions, in particular the needs of the
transportation industry. Remanufacturing existing chassis tends to be
counter-cyclical to the manufacturing of new chassis.
R&S is engaged in the design, manufacture and sale of customized dump
trucks and trailers, specialized truck suspension systems and related products
and parts. R&S also acts as a distributor for truck equipment manufactured by
other companies, including cranes, tarpaulins, spreaders, plows and specialized
service bodies.
CPS is primarily engaged in the design, manufacture and sale of dump
trailers, specializing in trailers for hauling bulk commodities such as gravel,
grain and corn, and for the construction and waste hauling industries.
The sales forces of R&S and CPS have begun to coordinate their activities
and each now offers the products of the other. The R&S and CPS product lines
complement each other. Coordinating activities allows each sales force to market
a more diverse product line and each of the product lines to be offered to a
wider customer base.
Part of the Company's strategy is to grow through expansion of product
lines and acquisitions such as the recently completed acquisitions of R&S, CPS
and Ranor, and the establishment of the Mexican Facility. The Company's
continued expansion may place a strain on the Company's management, operational,
financial and other resources. The Company's expansion plans will depend on our
ability to identify appropriate targets for acquisition and raise the necessary
financing for acquisitions. Further, the success of the Company's efforts will
depend on its ability to market new products, absorb new management and other
personnel, reduce duplicative overhead and manage geographically dispersed
operations. There can be no assurance that we can successfully expand our
operations or manage our growth.
Results of Operations
The following table sets forth, for the periods indicated, certain
components of the Company's Consolidated Statements of Income expressed in
dollar amounts (in thousands), and as a percentage of net revenues. Results of
operations for the year ended March 31, 1997 and the period ended January 26,
1998, reflect only Ajax's operations because Standard had no operations during
these periods. For the year ended March 31, 1998 the Company's results reflect
the operations of the Company for the entire year and those of Ajax for the
period from January 26 to March 31, 1998. The year ended March 31, 1999 reflects
the consolidated amounts of Standard (including Ajax), and R&S and CPS from
their respective dates of acquisition (rounded). Because the Ranor Acquisition
was accomplished in June 1999, its financial results are not reflected in the
discussion below or elsewhere in this Annual Report.
12
<PAGE>
<TABLE>
<CAPTION>
Ajax Manufacturing Co. Standard Automotive Corporation
---------------------- -------------------------------
Period from
April 1, 1997
Year Ended March 31, through January 26, Year Ended March 31,
-------------------- -------------------- -------------------------------------
1997 1998 1998 1999
-------------------- -------------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues, net $ 22,356 100.0% $ 25,134 100.0% $ 7,936 100.0% $ 75,452 100.0%
Cost of revenues 17,027 76.2 19,898 79.2 6,094 76.8 59,954 79.5
Selling, general and administrative 2,510 11.2 1,431 5.7 407 5.2 6,613 8.7
Amortization of intangiable assets -- -- -- -- 130 1.6 1,044 1.4
-------- ----- -------- ----- -------- ----- -------- -----
Operating income 2,819 12.6 3,805 15.1 1,305 16.4 7,841 10.4
Other income (expense) 77 0.3 (790) (3.1) (504) (6.4) (2,093) (2.8)
-------- ----- -------- ----- -------- ----- -------- -----
Income before provision for taxes 2,896 13.0 3,015 12.0 801 10.1 5,748 7.6
Provision for income taxes 1,168 5.2 1,272 5.1 458 5.8 2,266 3.0
-------- ----- -------- ----- -------- ----- -------- -----
Net income $ 1,728 7.7% $ 1,743 6.9% $ 343 4.3% $ 3,482 4.6%
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
The following discussion provides information regarding the Company's
results of operations for the fiscal years ended March 31, 1997 ("Fiscal 1997"),
March 31, 1998 ("Fiscal 1998") and March 31, 1999 ("Fiscal 1999"). For
comparison purposes the Fiscal 1998 results include Ajax's results of operations
for the entire twelve months.
Comparison of Year Ended March 31, 1999 to Year Ended March 31, 1998
Net Revenues in Fiscal 1999 were $ 75,452,000, an increase of 128% from
net revenues of $33,070,000 for Fiscal 1998. The increase in net revenues
reflects a shift of the Company's business to the manufacture of new chassis
from the remanufacture of used chassis, a general improvement in the trailer
industry, along with the acquisitions of R&S and CPS each with revenues
representing 21% and 12%, respectively of net revenues. During Fiscal 1999,
sales of new chassis represented 53% of total sales as compared to 54% in Fiscal
1998. Although the comparative percentage decreased due to the additional
revenue from the acquisitions, the volume of new chassis sold approximately
doubled in Fiscal 1999 compared to Fiscal 1998. In contrast, sales of
remanufactured chassis represented 9% of total sales in Fiscal 1999 compared to
37% in Fiscal 1998. The reduction in the sales of remanufactured chassis
resulted from a decline in the growth of remanufactured chassis sold in Fiscal
1998 as compared to the aforementioned growth of the sale of new chassis.
Because of certain customer requirements for new chassis, the Company's margins
declined moderately in Fiscal 1998.
Cost of Revenues increased to $59,954,000 or 80% of net sales in Fiscal
1999 from $25,992,000 or 79% of net revenues in Fiscal 1998, principally as a
result of the acquisitions of R&S and CPS and the shift in the Company's product
mix. Cost of revenues as a percentage of net revenues remained constant during
Fiscal 1999 as the mix of the Company's business reflected an increase in the
sale of new chassis.
Selling, General & Administrative Expenses were $6,613,000 during Fiscal
1999, an increase of 260% from the $1,838,000 incurred during Fiscal 1998. SG&A
expenses increased to 9% of net revenues, up from 5% of net revenues during
Fiscal 1998. The increase in SG&A as a percentage of net revenues in Fiscal 1999
principally reflects $2,547,000 arising from the addition of the R&S and CPS
acquisitions. Additional expenses related to an increase in selling efforts,
information technology systems and general corporate overhead including
officers' salaries incurred subsequent to the initial public offering.
Interest Expense increased to $1,813,000 in Fiscal 1999 from $450,000
during Fiscal 1998, reflecting debt incurred to complete the acquisitions of R&S
and CPS during Fiscal 1999 as compared to interest on the nonrecurring bridge
loan incurred by the Company prior to completion of the acquisition of Ajax
during Fiscal 1998.
13
<PAGE>
Comparison of Year Ended March 31, 1998 to Year Ended March 31, 1997
Net Revenues in Fiscal 1998 were $33,070,000, an increase of 48% from net
revenues of $22,356,000 for Fiscal 1997. The increase in net revenues reflects a
shift of the Company's business to the manufacture of new chassis from the
remanufacture of used chassis, and a general improvement in the trailer
industry. During Fiscal 1998, sales of new chassis represented 54% of total
sales as compared to 49% in Fiscal 1997. The increase in sales of new chassis
resulted principally from an increase in the volume of new chassis sold in
Fiscal 1998 as compared to Fiscal 1997. In contrast, sales of remanufactured
chassis represented 37% of total sales in Fiscal 1998 as compared to 45% in
Fiscal 1997; the reduction in the sales of remanufactured chassis resulted from
a decline in the growth of remanufactured chassis sold in Fiscal 1998 as
compared to the aforementioned growth of the sale of new chassis. Because of
certain customer requirements for new chassis, the Company's margins declined
moderately in Fiscal 1998.
Cost of Revenues increased to $25,992,000 or 79% of net sales in Fiscal
1998 from $17,027,000 or 76% of net sales in Fiscal 1997. Cost of revenues as a
percentage of net revenues increased moderately during Fiscal 1998 as the mix of
the Company's business reflected an increase in the sale of new chassis.
Selling, General & Administrative Expenses were $1,838,000 during Fiscal
1998 a decrease of 27% from the $2,510,000 incurred during Fiscal 1997. SG&A
expenses decreased to 6% of net sales, down from 11% of net sales during Fiscal
1997. The decrease in SG&A as a percentage of net sales in Fiscal 1998
principally reflects a reduction in executive incentive compensation of $936,000
in Fiscal 1998.
Interest Expense increased to $450,000 in Fiscal 1998 from $0 during
Fiscal 1997, reflecting interest on the nonrecurring bridge loan incurred by the
Company prior to completion of the acquisition of Ajax and the related note
payable.
Liquidity and Capital Resources
The Company generated $9,095,000 of cash in operating activities during
Fiscal 1999 as compared to $261,000 used in operating activities during Fiscal
1998. The cash generated in operating activities during Fiscal 1999 reflects
primarily an increase in net income and an increase in accounts payable and
accrued expenses and other liabilities of $8,372,000, which was partially offset
by an increase in inventory of $2,948,000. The net cash used in investing
activities was $27,580,000 during Fiscal 1999 as compared to $20,470,000 used in
investing activities during the prior year. The cash used in investing
activities during Fiscal 1999 was primarily for the acquisition of R&S and CPS,
the retirement of certain indebtedness of R&S, CPS and the Company and for the
acquisition of other property, plant and equipment and additional capitalized
acquisition costs. The cash generated by financing activities was principally
derived from the proceeds of the $40,000,000 July, 1998 Term Loan and Revolving
Credit Agreement between the Company and certain of its subsidiaries (acting as
Guarantors) and PNC Bank, National Association ("PNC"), both individually and as
agent for other financial institutions ("Credit Agreement"). The Credit
Agreement provided for a Term Loan in the amount of $25,000,000 and a Revolving
Loan in the principal amount of $15,000,000 (collectively, the "Loans"). The
Company made scheduled principal payments of $1,875,000 during Fiscal 1999, and
reduced the initial term loan of $25,000,000 to $23,125,000 at March 31, 1999.
The funds for the Ranor Acquisition were obtained by increasing from
$40,000,000 to $68,125,000 the amounts outstanding under the Company's Credit
Agreement. The Company's Credit Agreement, as amended, provides for Term Loans
in the principal amount of $48,125,000 and a Revolving Loan in the principal
amount of $20,000,0000. The principal of the Term Loans is payable in two
tranches of $23,125,000 and $25,000,000 in June 2004 and June 2005,
respectively. Amounts outstanding under the Revolving Loan are payable in full
in June 2002, subject to the Company's request, with the approval of the
lenders, to extend the due date for one year, with a maximum extension of two
one year periods. All amounts due under the Credit Agreement are secured by a
lien on all the Company's assets. The rate of interest for the amounts
outstanding under the Credit Agreement is 7.44% at March 31, 1999.
The terms on which the Company sells its products vary by subsidiary but
generally provide for payment within 30 days of acceptance. The Company's
account's receivable was collected in an average of less than 35 days.
Capital expenditures were $8,804,000 in Fiscal 1999 compared to $197,000
in Fiscal 1988. Capital expenditures incurred during Fiscal 1999 were primarily
for the initial investment of $3,328,000 in a new plant in
14
<PAGE>
Mexico to service the Western part of the United States, the purchase and
installation of a new computer network system and the refurbishing of the new
corporate office facility. The Company anticipates that capital expenditures
during the fiscal year ending March 31, 2000 will substantially exceed those of
the preceding years as the Company expands its operations. The Company's capital
expenditures relating to the Mexican operation were less than $5,000,000.
The annual dividend requirement on the Preferred Stock is $1,173,000. The
future earnings of the Company, if any, may not be adequate to pay the dividends
on the Preferred Stock, and, although the Company intends to pay quarterly
dividends out of available capital surplus, there can be no assurance that the
Company will maintain sufficient capital surplus or that future earnings, if
any, will be adequate to pay the dividends on the Preferred Stock. In addition,
at March 31, 1999, the Company had $33,413,000 in total debt outstanding,
consisting of $32,625,000 in notes payable to PNC, which currently bear interest
at a variable rate based on LIBOR which is payable quarterly and the balance to
various other small creditors.
The Company continues to seek opportunities for growth through
acquisitions, and, in connection therewith, may seek to raise additional cash in
the form of equity, bank debt or other debt financing, or may seek to issue
stock as consideration for acquisition targets.
At March 31, 1999, the Company had working capital of $9,430,000, which is
sufficient to meet its current operating requirements, and, if necessary, such
needs could be met out of the remaining cash on hand from the Revolving Loan
facility.
Subsequent Events
In June 1999, pursuant to the terms of a Stock Purchase Agreement dated
April 1999, the Company acquired all of the outstanding capital stock of
Critical Components Corporation ("CCC"). In consideration for such capital stock
the Company issued to the shareholders of CCC, who are also shareholders of the
Company, an aggregate of 180,000 shares of common stock of the Company. In
addition, the shareholders of CCC will receive up to an additional 120,000
shares of the Company's Common Stock if the Company acquires any of a group of
companies previously targeted for acquisition by CCC.
Simultaneously with the acquisition of CCC, the Company, through CCC,
acquired substantially all of the assets of Ranor, a fabricator of large
precision assemblies for the aerospace, nuclear, industrial and military
markets. The consideration paid for Ranor was $28,800,000, subject to final
adjustment, of which $23,500,000 was paid in cash and $5,300,000 was paid in the
form of convertible subordinated notes of the Company. Funds to complete the
Ranor Acquisition were obtained by increasing the amounts outstanding under the
Company's Credit Agreement as described above. The acquisition will be accounted
for as a purchase and, accordingly, the Company's first quarter ending June 30,
1999 financial statements will only reflect the activity of Ranor for the period
of June 15, 1999 through June 30, 1999.
In connection with the acquisitions the Company incurred approximately
$1,600,000 in investment advisory and finder's fees, and legal and accounting
expenses. The Company incurred approximately $1,000,000 in fees and expenses,
including bank fees, in connection with the increase and amendment of the
existing credit facility.
Year 2000 Compliance
The Company continues to address the impact of the Year 2000 issue on its
business. The Year 2000 issue is the result of computer hardware and software
programs designed to use two digits rather than four digits to define the
applicable year. If not corrected, certain computer applications may fail or
create erroneous results at the year 2000.
The Company has performed a comprehensive review of its computer systems
identifying those systems which could be adversely affected by the Year 2000
issue. The Company presently believes that with modifications to existing
hardware and software and conversion to new software, the Year 2000 problem will
not pose significant operational problems for the Company's computer systems as
modified and converted.
The Company replaced substantial portions of its computer hardware and
software during Fiscal 1999, as it integrated the operations of Ajax, R&S, CPS
and the Mexican facility. The R&S and CPS facilities
15
<PAGE>
require additional modification and conversion of their computer systems.
Management estimates that the cost of upgrading the R&S and CPS facilities will
be approximately $200,000.
It is anticipated that testing of all modifications and conversions will
be complete by late-summer 1999. This timing will allow management to assess and
implement a contingency plan if required. With our comprehensive assessment and
modification and conversion protocol, management does not believe that the Year
2000 issue will have a materially adverse affect on other Company's operations.
However, if such protocol is not timely completed, the Year 2000 issues may have
a material impact on the Company's operation.
In connection with the Ranor Acquisition, the Company received certain
representations and warranties from Ranor's Shareholders regarding its
compliance with the Year 2000 issue. Nevertheless, the Company will undertake an
analysis of Ranor's susceptibility to the Year 2000 issues.
Because Year 2000 issues may also impact our customers and suppliers, the
Company is in the process of obtaining information from key suppliers and
customers on their compliance with year 2000 issues.
Statement Regarding Forward-Looking Statements
This Annual Report includes "forward-looking statements" within the
meaning of Section 27A of the Exchange Act which represent the Company's
expectations or belief concerning future events that involve risks and
uncertainties, including the demand for our products, the costs of supplies and
raw materials. All statements other than statements of historical facts included
in this Annual Report including, without limitation, the statements under
"Management Discussion and Analysis of Results of Operations and Financial
Condition" and elsewhere in the Annual Report, are forward-looking statements.
While the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct.
Item 7A. Quantitative and Qualitative Discussions About Market Risk
The Company is exposed to interest rate risk primarily through its
borrowings under the Credit Agreement. As of June 25, 1999 the Company had
approximately $57,822,000 million of LIBOR based debt outstanding under the
Credit Agreement. A hypotethical 100 basis-point increase in the floating
interest rate from the current level corresponds to an increase in interest
expense over a one-year period of $578,000. This sensitivity analysis does not
account for the change in the Company's competitive environment indirectly
related to the change in interest rates and the potential managerial action
taken in response to these changes. Further, the Company has entered into an
interest rate hedge instrument to protect against interest rate increases.
Item 8. Financial Statements and Supplementary Data
The Company's financial statements required by this Item 8 are set forth
at the pages indicated in Item 14.
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
16
<PAGE>
PART III
Item 10. Executive Officers and Directors of the Registrant
The executive officers and directors of the Company are as follows:
Name Age Position with the Company
---- --- -------------------------
Steven Merker (2) 42 Chairman of the Board and Chief Executive
Officer
Karl Massaro 45 President and Director
Roy Ceccato 40 Chief Financial Officer and Director
William Merker 38 Director
Joseph Spinella (1)(2) 41 Secretary and Director
William Needham(1)(2) 58 Director
--------------------------------------------------------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Steven Merker has been the Chief Executive Officer and a Director of the
Company since August 1997. Mr. Merker was the Managing Director of Barclay
Partners LLC, an investment banking firm specializing in corporate buy-outs,
which he formed in 1995 with his brother, William Merker. From 1993 to 1995 he
was Senior Vice President of Branin Investments. From 1988 to 1993, he was a
partner with the Redstone Group, an investment banking firm. Mr. Merker
graduated with a B.S. degree in accounting from Fairleigh Dickinson University
in 1979.
Karl Massaro has been President and a Director of the Company since August
1997. Mr. Massaro has been Vice President and General Manager of Ajax since
1991. From 1984 to 1990, he was purchasing manager and chief product
designer/engineer of Ajax, and, prior to that, he worked for Ajax in various
other capacities from 1963 to 1984.
Roy Ceccato has been a Director of the Company since August 1997 and was
appointed Chief Financial Officer in February 1998. From 1995 to August 1997,
Mr. Ceccato had been Director of Finance of Complete Management, Inc., a
NYSE-listed physician practice management company. From 1990 to 1995, he was
President of Broad Partners, Inc., a management consulting firm. Mr. Ceccato
graduated from Pace University in 1980 with a BBA in management accounting.
William Merker has been a Director of the Company since August 1997. In
January 1999, Mr. Merker resigned as Vice President and Secretary of the
Company, positions he had occupied since August 1997. Mr. Merker had been
associated with the law firm of Loeb, Block & Partners LLP since 1990,
specializing in the field of corporate law. In 1995, Mr. Merker and his brother,
Steven Merker, founded Barclay Partners LLC. Mr. Merker received a B.S. degree
in accounting from The American University in 1982 and graduated from Georgetown
University Law School in 1985.
Joseph Spinella, CPA has been a Director of the Company since August 1997
and Secretary since June 1999. Since July 1998, Mr. Spinella has been Chief
Financial Officer and Treasurer of the Terminal Marketing Company, Inc. an
equipment leasing company. From October 1997, Mr. Spinella has been controller
of Sanwa Healthcare Finance Corporation. From November 1996 until October 1997,
Mr. Spinella was manager of financial reporting for Gruntal Financial L.L.C. (an
investment banking and brokerage company). From 1989 through 1995, Mr. Spinella
was Vice President-Director of Financial Services and Controller of Copelco
Capital, a subsidiary of Itochu International. From 1987 to 1989, he was an
Assistant Vice President with First Fidelity Bank. Mr. Spinella graduated from
Fairleigh Dickinson University with a B.S. in Accounting in 1979 and with an MBA
in Finance in December 1988.
William Needham has been a Director of the Company since November 1997.
Since March 1995, Mr. Needham has been a private merchant banker and investor.
From March 1994 to March 1995 he was a registered representative and corporate
finance specialist at First Hanover Securities, Inc., an investment banking and
brokerage firm. From December 1989 to March 1994, Mr. Needham was a registered
representative and corporate finance specialist at Emanuel & Company, an
investment banking and brokerage firm. Mr. Needham is a director of Modal
Systems, Inc., a housing construction company, and a director of Cutting Edge
Industries, Inc., a
17
<PAGE>
manufacturer of toys and novelties. Mr. Needham graduated from Wesleyan
University in 1963 with a B.A. in liberal arts.
Item 11. Executive Compensation
The following table sets forth the compensation paid by the Company for
services rendered in all capacities during the fiscal years ended March 31, 1999
and 1998 to its chief executive officer and to the most highly-compensated
executive officers and key employees (other than the chief executive officer)
whose annual salary and bonus exceeded $100,000 and who were serving at March
31, 1999 (collectively, the "Named Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Total Paid Compensation Compensation
--------------------------------- Awards Securities
Year Ended Underlying Other Annual
Name and Principal Position March 31, Salary Bonus Options/SARs(#) Compensation
- --------------------------- --------- ------ ----- --------------- ------------
<S> <C> <C> <C> <C>
Steven Merker, Chief Executive Officer 1999 $136,154 $ 30,000 75,000 $ --
1998 22,154 -- --
Karl Massaro, President 1999 203,461 -- 15,000 --
1998 173,231 -- --
Roy Ceccato, Chief Financial Officer 1999 109,616 15,000 12,000 --
</TABLE>
18
<PAGE>
Option Grants In Last Fiscal Year
The following table sets forth all options granted to the Named Executive
Officers during Fiscal 1999.
<TABLE>
<CAPTION>
Potential Realizable
Number of Percent of Value at Assumed
Securities Total Options Annual Rates Of Stock
Underlying Granted to Price Appreciation For
Options Employee in Exercise Price Expiration Option Term(1)
Name Granted Fiscal Year ($/Sh) Date 5%($) 10%($)
- ---- ------- ----------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Steven Merker 75,000 100 7.25 11/03 174,750 209,250
Karl Massaro 15,000 100 5.938 10/03 54,630 61,530
Roy Ceccato 12,000 100 7.25 11/03 27,960 33,480
</TABLE>
Year End Option Values
The following table sets forth the aggregate value as of March 31, 1999 of
unexercised stock options held by the Named Executive Officers. The Named
Executive Officers did not exercise any stock options during 1999 and the
relevant columns have therefore been omitted.
<TABLE>
<CAPTION>
Number of Securities Value(3) of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year-End At Fiscal Year End($)
-------------------------- ---------------------
Name Exercisable(2) Un-exercisable(2) Excisable(2) Un-exercisble(2)
- ---- -------------- ----------------- ------------ ----------------
<S> <C> <C> <C> <C>
Steven Merker -- 75,000 -- 543,750
Karl Massaro -- 15,000 -- 89,070
Roy Ceccato -- 12,000 -- 87,000
</TABLE>
- ----------
(1) The potential realizable value amounts shown illustrate the values that
might be realized upon exercise immediately prior to the expiration of
their term using five percent and ten percent appreciation rates as
required to be used in this table by the Securities and Exchange
Commission, compounded annually, and are not intended to forecast possible
future appreciation, if any, of the Company's Common Stock price.
Additionally, these values do not take into consideration the provisions
of the options providing for non-transferability or termination of the
options following termination of employment. Therefore, the actual values
realized may be greater or less than the potential realizable values set
forth the table.
(2) Options vest as follows: For options granted during 1999: 0% at date of
grant; 33 1/3% on each subsequent anniversary of the grant. Options
indicated as exercisable are those options which were vested as of March
31, 1999. All options which had not vested as of March 31, 1999 are
indicated to be un-exercisable.
(3) Market value of underlying securities is based on fair market value at
March 31, 1999 of $9.125 minus the exercise price.
19
<PAGE>
Employment Agreements
The Company has entered into employment agreements with Steven Merker,
Karl Massaro, and Roy Ceccato.
In January 1998 the Company entered into an employment agreement with
Steven Merker which will terminate three years thereafter, subject to earlier
termination upon the occurrence of certain specified events. Pursuant to his
employment agreement, Mr. Merker's current base annual salary is $240,000 and
such bonus compensation as the Board of Directors may determine. Mr. Merker is
required to devote at least 40 hours per week to the business of the Company.
In January 1998, the Company entered into an employment agreement with
Karl Massaro, which will terminate three years thereafter, subject to earlier
termination upon the occurrence of certain specified events. Pursuant to his
Employment Agreement, Mr. Massaro's current base annual salary is $215,000 and
such bonus compensation as the Board of Directors may determine. The agreement
also contains restrictive covenants prohibiting Mr. Massaro from directly or
indirectly competing with the Company east of the Mississippi River, during the
three-month period commencing upon the termination of his agreement, and, during
the six-month period following such termination, from soliciting or servicing
any supplier customer of the Company for any competitive purpose, and from
employing or retaining any employee of or consultant to the Company, or
soliciting any such employee or consultant to become affiliated with any entity
other than the Company.
In February 1998, the Company entered into an employment agreement with
Roy Ceccato, which will terminate three years thereafter, subject to earlier
termination upon the occurrence of certain specified events. Pursuant to his
employment agreement, Mr. Ceccato's current base annual salary is $150,000 and
such bonus compensation as the Board of Directors may determine.
Board of Directors
The Certificate of Incorporation divides the Board of Directors into three
classes, with, initially, one class having a term of one year, one class having
a term of two years and one class having a term of three years. Commencing with
the annual meeting of stockholders to be held in 1999, directors will be elected
to succeed those directors whose terms have expired, and each newly elected
director will serve for a three-year term. All officers are appointed annually
by the Board of Directors and, subject to existing employment agreements, serve
at the discretion of the Board. Directors who are employees of the Company
receive no compensation for serving on the Board of Directors. It is expected
that Directors who are not employees of the Company will receive compensation
for their services in an amount to be determined. All Directors are reimbursed
by the Company for any expenses incurred in attending Director's meetings and,
upon completion of this Offering, non-employee directors will receive
compensation of $500 per meeting attended and options to purchase 2,000 shares
of the Company's Common Stock in respect of the first year of such service as a
director, and 500 shares of the Company's Common Stock for each year of such
service thereafter. The Company has obtained Officers and Directors liability
insurance.
Audit Committee of the Board of Directors
The Board of Directors has designated an Audit Committee of the Board of
Directors consisting of Messrs. Spinella and Needham. The duties of the Audit
Committee are to (i) recommend to the full Board the auditing firm to be
selected each year as the Company's independent auditors and the terms and
conditions upon which such firm is to be engaged, (ii) consult with the persons
so chosen to be the independent auditors with regard to the plan of audit, (iii)
review, in consultation with the independent auditors, their report of audit, or
proposed report of audit, and the accompanying management letter, if any, (iv)
consult with the independent auditors (periodically, as appropriate, out of the
presence of management) with regard to the adequacy of the Company's internal
accounting and control procedures, (v) review the Company's financial condition
and results of operations with management and the independent auditors and (vi)
review any non-audit services and special engagements to be performed by the
independent auditors and consider the effect of such performance on the
auditors' independence.
Compensation Committee of the Board of Directors
The Board of Directors has designated a Compensation Committee of the
Board of Directors, consisting initially of Steven Merker, Joseph Spinella and
William Needham. The primary duties of the Compensation Committee are to (i)
determine the annual salary, bonus and other benefits, direct and indirect, of
any and all
20
<PAGE>
executive officers (as defined under Regulation S-K promulgated by the
Commission), (ii) prepare an Annual Report of the Compensation Committee for
inclusion in the Company's Proxy Statement, (iii) review and recommend to the
full Board any and all matters related to benefit plans covering the foregoing
officers and any other employees in the event such matters are appropriate for
stockholder approval, and (iv) administer any stock option plan or other bonus
or incentive plan or pool adopted by the Company (including the 1997 Incentive
Stock Option Plan).
1997 Stock Option Plan
The Company has adopted its 1997 Stock Option Plan ("Plan"). The Board
believes that the Plan is desirable to attract and retain executives and other
key employees of outstanding ability. Under the Plan, options to purchase an
aggregate of not more than 340,000 shares of Common Stock may be granted from
time to time to all employees of the Company or any parent corporation or
subsidiary corporation of the Company. To date, options have been granted
pursuant to the Plan totaling 337,500.
The Board of Directors currently administers the Plan, which has empowered
the Compensation Committee to administer the Plan. The Compensation Committee is
generally empowered to interpret the Plan, prescribe rules and regulations
relating thereto, determine the terms of the option agreements, amend them with
the consent of the optionee, determine the individuals to whom options are to be
granted, and determine the number of shares subject to each option and the
exercise price thereof. The per share exercise price for options granted under
the Plan are determined by the Compensation Committee; provided that the
exercise price of incentive stock options ("ISO's") will not be less than 100%
of the fair market value of a share of the Common Stock on the date the option
is granted (110% of fair market value on the date of grant of an ISO if the
optionee owns more than 10% of the Common Stock of the Company); and further
provided that, for a period of 18 months after the Company's Initial Public
Offering in January, 1998 ("IPO"), the exercise price will be the greater of
110% of fair market value on the date of grant and the IPO price of the Common
Stock. Upon exercise of an option, the optionee may pay the purchase price with
previously acquired shares of Common Stock of the Company, or at the discretion
of the Board, the Company may loan some or the entire purchase price to the
optionee.
Options will be exercisable for a term determined by the Compensation
Committee which will not be greater than ten years from the date of grant (or
five years in the case of ISO's granted to holders of more than 10% of the
Common Stock). The Compensation Committee shall determine the effect on an
option of the termination of the optionee's relationship with the Company. In
the event of certain basic changes in the Company, including a reorganization,
merger or consolidation of the Company, or the purchase of shares pursuant to a
tender offer for shares of Common Stock of the Company, in the discretion of the
Committee, each option may become fully and immediately exercisable. ISO's are
not transferable other than by will or the laws of descent and distribution.
Non-qualified stock options may be transferred to the optionee's spouse or
lineal descendants, subject to certain restrictions. Only the holder, his or her
guardian or legal representative, may exercise options during the holder's
lifetime.
Options granted pursuant to the Plan may be designated as ISO's, with the
attendant tax benefits provided under Section 421 and 422 of the Internal
Revenue Code of 1986. Accordingly, the Plan provides that the aggregate fair
market value (determined at the time an ISO is granted) of the Common Stock
subject to ISO's exercisable for the first time by an employee during any
calendar year (under all plans of the Company and its subsidiaries) may not
exceed $100,000. The Board may modify, suspend or terminate the Plan; provided,
that certain material modifications affecting the Plan must be approved by the
stockholders, and any change in the Plan that may adversely affect an optionee's
rights under an option previously granted under the Plan requires the consent of
the optionee.
1998 Profit Sharing Plan
Standard Automotive Corporation has adopted a Prototype Standardized
Profit Sharing Plan with CODA. This plan is qualified under the Internal Revenue
code section 401(a) provided all terms of the plan are followed under the
Summary Plan Description. The eligibility requirements and contributions or
benefit provisions, which are determined to be discretionary, are not to be more
favorable for highly compensated employees than for other employees.
21
<PAGE>
Comparative Performance by the Company
The following graph shows a comparison of cumulative total returns for the
Company, the American Stock Exchange Market and a peer group index during the
period from January 22, 1998 through March 31, 1999.
COMPARISON OF 2-YEAR CUMULATIVE TOTAL RETURN
AMONG STANDARD AUTOMOTIVE CORP., AMEX MARKET
INDEX, SIC CODE INDEX AND S&P GROUP INDEX
[The following table was represented as a line graph in the printed material.]
<TABLE>
<CAPTION>
1/22/98 3/31/98 6/30/98 9/30/98 12/31/98 3/31/99
------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
STANDARD AUTOMOTIVE CORP. 100.00 102.44 108.54 69.51 82.93 89.02
SIC CODE INDEX 100.00 96.69 89.96 55.29 72.24 49.27
S&P GROUP INDEX 100.00 114.42 91.65 78.99 95.12 97.91
AMEX MARKET INDEX 100.00 110.67 108.10 91.82 102.13 104.96
</TABLE>
ASSUMES $100 INVESTED ON JAN. 22, 1998
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING MAR. 31, 1999
22
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's Common Stock at June 25, 1999 by
(i) each person known by the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each of the Company's directors and executive
officers, and (iii) all officers and directors of the Company as a group. Except
as otherwise indicated, the Company believes that the beneficial owners of the
Common Stock listed below based on information furnished by such owners, have
sole investment and voting power with respect to such shares, subject to
community property laws, where applicable.
Name and Address of Number of Percent of Common
Beneficial Owner Shares Stock Owned
---------------- ------ -----------
Roy Ceccato (1) 70,000 1.9%
Andrew Levy (2) 335,430 9.1%
Karl Massaro (1) 145,000 3.9%
Steven Merker (3) 525,160 14.3%
William Merker (3) 424,410 11.5%
Joseph Spinella (1) -- --
William Needham(4) -- --
All Directors and Officers
as a group (6 persons) 1,500,000 40.8%
- --------------------------------------------------------------------------------
(1) The addresses of such persons are c/o the Company 401 Route 206 North,
Somerville, NJ 08876-4056.
(2) The address of such person is 46 Baldwin Farm N., Greenwich, CT 06831.
Includes 30,000 shares owned by a family trust and 85,000 shares owned by
Mr. Levy's wife. Mr. Levy disclaims beneficial ownership as to all such
shares.
(3) The addresses of such persons are c/o the Company, 280 Park Avenue, 21st
Floor West, New York, NY 10017-1216. Steven and William Merker each
disclaims beneficial ownership of shares owned by the other.
(4) The address of such person is 400 E. 58th Street, New York, NY 10022-2318
Item 13. Certain Relationships and Related Transactions
Steven Merker and William Merker are brothers. There are no other family
relationships among the Company's officers, directors and 5% shareholders.
Redstone Advisors, of which William Merker and Redstone Capital
Corporation, are the principals, was paid $600,000 in connection with the
acquisition of R&S and CPS. In connection with the acquisition of CPS and R&S
the Company acquired Barclay Investment, Inc., a corporation which had entered
into Purchase Agreements with CPS and R&S and of which Andrew Levy, Mr. Levy's
Spouse and a Levy Family Trust were shareholders. Mr. Levy (and affiliates)
received 100,000 shares of Common Stock for their interest in Barclay.
In January 1998, the Company and Carl Massaro entered into a "triple net"
lease of the factory and office facility owned by Mr. Massaro and presently
occupied by Ajax. The lease will provide for annual rent of $600,000, payable
monthly and the estimated amount of triple net expenses for the first year are
approximately $63,000. During the initial five-year term of the lease, the
Company will have the option to purchase the leased facility and land for a cash
purchase price of $6.5 million provided we are not in default under the lease.
The terms of the lease, including the purchase option, were determined through
arms' length negotiation between the Company and Carl Massaro.
In June 1999, the Company completed the acquisition of substantially all
of the assets of Ranor. As part of the fees related to the acquisition Redstone
Advisors, a partnership of which William Merker and Redstone Capital Corp. (a
corporation owned by Andrew Levy and certain of his affiliates) are principals,
received a cash fee of $905,000. In addition, for their interests as
shareholders of CCC William Merker and Andrew Levy (and certain of Mr. Levy's
affiliates) were issued 120,000 and 60,000 shares of the Company's Common Stock,
respectively and will receive up to a total of 120,000 shares of the Company's
Common Stock if the Company acquires any of a group of companies previously
targeted for acquisition by CCC.
23
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 10-K
Financial statements and schedules
The reports of independent certified public accountants, consolidated
financial statements and notes to consolidated financial statements required by
this Item 14 are submitted as part of this Annual Report beginning on page 31.
Financial Statements of Standard Automotive Corporation
Page
----
Report of Independent Certified Public Accountants F-1
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets as of March 31, 1998 and 1999 F-3
Consolidated Statements of Income for the years ended March 31, 1998
and 1999 F-4
Consolidated Statements of Stockholders' Equity for the year ended
March 31, 1999 F-5
Consolidated Statements of Cash Flows for the years ended March 31,
1998 and 1999 F-6
Notes to Consolidated Financial Statements F-7
Financial Statements of Ajax Manufacturing Company
(A wholly owned subsidiary of Standard Automotive Corporation)
Report of Independent Certified Public Accountants F-21
Statements of Income and Retained Earnings for the period
from April 1, 1997 through January 26, 1998 for and the
year ended March 31, 1997 F-22
Statements of Cash Flows for the period from April 1, 1997
through January 26, 1998 and for the year ended March 31, 1997 F-23
Notes to the Financial Statements F-24
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
applicable or not required under the related instructions or because the
required information is presented in the financial statements or notes thereto
and therefore, have been omitted.
24
<PAGE>
Exhibits
Exhibit No. Description of Exhibit
- ----------- ----------------------
3.1 Amended and Restated Certificate of Incorporation of the
Company (*)
3.2 Form of Certificate of Designation, Preferences and Rights of
8 1/2% Senior Convertible Redeemable Preferred Stock (*)
3.3 By-Laws of the Company (*)
10.1 Stock Purchase and Redemption Agreement between Standard
Automotive Corporation and Carl Massaro dated August 11, 1997
(*)
10.2 Form of Employment Agreement between the Company and Karl
Massaro (*) Form of Consulting Agreement between the Company
and Carl Massaro (*) Form of Employment Agreement between the
Company and Steven Merker (*) Form of Lease between the
Company and Carl Massaro (*)
10.7 1997 Incentive Stock Option Plan (*)
10.8 Advisory Agreement between the Company and Barclay partners
LLC (*)
10.9 Advisory Agreement between the company and Redstone Capital
Corp. (*)
10.10 Form of Redemption Note to be executed by the Company in
favor of Carl Massaro (*)
10.11 Form of Security Agreement between the Company and Carl
Massaro (*)
10.12 Form of Guaranty made by the Company in favor of Carl Massaro
(*)
10.14 Amendment to Stock Purchase and Redemption Agreement between
Standard Automotive Corporation and Carl Massaro dated August
11, 1997 (*)
10.15 Remediation Agreement between Ajax Manufacturing Company and
the NJDEP (*)
10.16 Second Amendment to Stock Purchase and Redemption Agreement
between Standard Automotive Corporation and Carl Massaro
dated August 11, 1997 (*)
10.17 Stock Purchase Agreement between Barclay Investments, Inc.,
CPS Trailer Company, Inc. and the shareholder of CPS Trailer
Company, Inc. (**)
10.18 Stock Purchase Agreement between Barclay Investments, Inc.,
R&S Truck Body, Inc. and the shareholders of R&S Truck Body,
Inc. (**)
10.19 Stock Purchase Agreement between Standard Automotive
Corporation, Barclay Investments, Inc. and the shareholders
of Barclay Investments, Inc. (**)
10.20 First amendment to Stock Purchase Agreement between Barclay
Investments, Inc., CPS Trailer Company, Inc. and the
shareholder of CPS Trailer Company, Inc.(***)
10.21 First amendment to Stock Purchase Agreement between Barclay
Investments, Inc., R&S Truck Body, Inc. and the shareholders
of R&S Truck Body, Inc. (***)
10.22 Second amendment to Stock Purchase Agreement between Barclay
Investments, Inc., R&S Truck Body, Inc. and the shareholders
of R&S Truck Body, Inc. (***)
10.23 Asset Purchase Agreement between Standard, Critical
Components Corp., Ranor, Inc. (Delaware), Ranor, Inc.
(Massachusetts), its shareholders and Five N Leasing Co.
(****).
10.24 Amended and restated Credit Agreement dated June 16, 1999
between Standard, its Subsidiaries (as Guarantors) and PNC Bank,
N.A., as Agent. (****)
27.0 Financial Data Schedule (****)
(*) Incorporated by reference to the Company's Registration Statement on Form
S-1, File No. 333-33465.
(**) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for December 31, 1997.
(***) Incorporated by reference to the Company's Form 8-K.
(****) Filed herewith
25
<PAGE>
(b) Reports on Form 8-K
A Form 8-K dated August 5, 1998 was filed with respect to the R&S
acquisition.
A Form 8-K dated September 21, 1998 was filed with respect to the
Company's financial statements for the year ended March 21, 1998 giving effect
to the acquisition of CPS.
A Form 8-K dated October 5, 1998 was filed with respect to the CPS
acquisition.
A Form 8-K dated October 5, 1998 was filed with respect to the Company's
change of principal independent accountants.
A Form 8-K dated October 5, 1998 was filed with respect to the Company's
financial statement for the year ended June 30, 1998 giving effect to the
acquisition of R&S.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
STANDARD AUTOMOTIVE CORPORATION
/s/ Steven Merker Date: June 29, 1999
By:
- --------------------------------------------
Steven Merker
Chairman and Chief Executive Officer
Pursuant to requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Date
- ---------- ----
/s/ Steven Merker June 29, 1999
- -------------------------------------------
Steven Merker
Chairman and Chief Executive Officer
/s/ Karl Massaro June 29, 1999
- -------------------------------------------
Karl Massaro
President and Director
/s/ Roy Ceccato June 29, 1999
- -------------------------------------------
Roy Ceccato
Chief Financial Officer and Director
/s/ William Merker June 29, 1999
- -------------------------------------------
William Merker
Director
/s/ Joseph Spinella June 29, 1999
- -------------------------------------------
Joseph Spinella
Director
/s/ William Needham June 29, 1999
- -------------------------------------------
William Needham
Director
27
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders of
Standard Automotive Corporation:
We have audited the accompanying consolidated balance sheet of Standard
Automotive Corporation as of March 31, 1999, and the related consolidated
statements of income, stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Standard Automotive
Corporation as of March 31, 1999, and the results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles.
New York, New York
May 14, 1999
Arthur Andersen LLP
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Standard Automotive Corporation
We have audited the accompanying balance sheet of Standard Automotive
Corporation as of March 31, 1998 and the related statements of income,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Standard Automotive
Corporation as of March 31, 1998 and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
BDO Seidman, LLP
Woodbridge, New Jersey
June 25, 1998
F-2
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
Consolidated Balance Sheets
(in thousands, except share data )
<TABLE>
<CAPTION>
March 31,
-----------------
1998 1999
------- -------
<S> <C> <C>
Assets
Cash and cash equivalents $ 3,255 $ 3,686
Marketable Securities 102 102
Accounts receivable, net of allowance for doubtful accounts
of $55 and $112, respectively 4,838 7,032
Other receivables -- 551
Inventory, net 5,399 13,466
Prepaid expenses 515 980
Deferred taxes 289 768
------- -------
Total current assets 14,398 26,585
Property and equipment, net of accumulated depreciation and
amortization of $35 and $917, respectively 1,225 19,975
Intangible assets, net of accumulated amortization of $130
and $1,173, respectively 15,127 29,000
Deferred acquisition and financing costs 810 1,477
Other assets -- 415
------- -------
Total assets $31,560 $77,452
======= =======
Liabilities and Stockholders' Equity
Accounts payable $ 1,146 $ 9,941
Accrued expenses 735 1,760
Current portion of long term debt -- 3,438
Income taxes payable 727 171
Other current liabilities 243 1,845
------- -------
Total current liabilities 2,851 17,155
Long term debt 4,000 29,381
------- -------
Total liabilities 6,851 46,536
Commitments and contingencies
Stockholders' equity:
Convertible Redeemable Preferred stock, $ .001 par value
3,000,000 shares authorized, 1,150,000 issued and outstanding 1 1
Common stock, $ .001 par value 10,000,000 shares authorized,
3,095,000 and 3,500,124 issued and outstanding, respectively 3 4
Common Stock Subscription Receivable (2) --
Additional paid-in capital 24,546 28,443
Retained earnings 159 2,468
------- -------
Total stockholders' equity 24,709 30,916
------- -------
Total liabilities and stockholders' equity $31,560 $77,452
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
balance sheets.
F-3
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
Consolidated Statements of Income
(in thousands, except net income per share data)
<TABLE>
<CAPTION>
For the Years Ended March 31,
-----------------------------
1998 1999
------- -------
<S> <C> <C>
Revenues, net $ 7,936 $75,452
Operating costs and expenses:
Cost of revenues 6,094 59,954
Selling, general and administrative expenses 407 6,613
Amortization of intangible assests 130 1,044
------- -------
Total operating costs and expenses 6,631 67,611
------- -------
Operating income 1,305 7,841
Interest expense 450 1,813
Other expense, net 54 280
------- -------
Income before income taxes 801 5,748
Provision for income taxes 458 2,266
------- -------
Net income 343 3,482
Preferred dividend 184 1,173
------- -------
Net income available to common stockholders $ 159 $ 2,309
======= =======
Basic net income per share $ 0.09 $ 0.69
======= =======
Diluted net income per share $ 0.09 $ 0.69
======= =======
Basic and diluted weighted average number of shares outstanding 1,846 3,356
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
Consolidated Statements of Stockholders' Equity
(in thousands)
<TABLE>
<CAPTION>
Preferred Common Common Stock Additional Total
Shares Preferred Shares Common Subscription Paid In Retained Stockholders'
Outstanding Stock Outstanding Stock Receivable Capital Earnings Equity
--------- --------- --------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - March 31, 1997 -- $ -- 1,567 $ 2 $ (2) $ -- $ -- $ --
Proceeds from sale of
common and preferred
shares, net of
expenses of $4,751 1,150 1 1,495 1 -- 23,997 -- 23,999
Issuance of shares to
Bridge Note Investors -- -- 33 -- -- 325 -- 325
Warrants and Options
Issued -- -- -- -- -- 226 -- 226
Preferred Stock
Dividend -- -- -- -- -- -- (184) (184)
Net Income 343 343
--------- --------- --------- --------- --------- --------- --------- ---------
Balance - March 31, 1998 1,150 1 3,095 3 (2) 24,548 159 24,709
Payment of Common
Stock Subscription
Receivable -- -- -- -- 2 -- -- 2
Shares Issued for
Acquisitions -- -- 405 1 -- 3,559 -- 3,560
Warrants and Options
Issued -- -- -- -- -- 336 -- 336
Preferred Stock
Dividend -- -- -- -- -- -- (1,173) (1,173)
Net Income 3,482 3,482
--------- --------- --------- --------- --------- --------- --------- ---------
Balance - March 31, 1999 1,150 $ 1 3,500 $ 4 $ -- $ 28,443 $ 2,468 $ 30,916
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
For the Years Ended March 31,
-----------------------------
Cash flows from operating activities: 1998 1999
-------- --------
<S> <C> <C>
Net income $ 343 $ 3,482
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 165 1,926
Non-cash interest and compensation 357 337
Deferred taxes (38) (350)
Change in assets and liabilites:
Accounts receivable 677 (331)
Inventory 145 (2,948)
Prepaid expenses and other (320) (656)
Accounts payable and accrued expenses (464) 6,665
Income taxes payable (604) (737)
Other liabilities -- 1,707
-------- --------
Net cash provided by operating activities 261 9,095
-------- --------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (19,361) (21,470)
Deferred acquisition costs (810) --
Purchase of marketable securities (102) --
Acquisition of property and equipment (197) (6,110)
-------- --------
Net cash used in investing activities (20,470) (27,580)
-------- --------
Cash flows from financing activities:
Proceeds from bank loan -- 26,710
Repayment bank loan -- (1,875)
Deferred financing costs -- (667)
Preferred dividend payment (184) (1,173)
Proceeds from the issuance of common and preferred shares, net 23,998 --
Repayment of acquisition note -- (4,000)
Payments on short term borrowings (350) --
Other -- (79)
-------- --------
Net cash provided by financing activities 23,464 18,916
-------- --------
Net increase in cash and cash equivalents 3,255 431
Cash and cash equivalents, beginning of period -- 3,255
-------- --------
Cash and cash equivalents, end of period $ 3,255 $ 3,686
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 114 $ 1,886
Income taxes 1,100 2,822
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. Organizational and Business Combination
Standard Automotive Corporation (the "Company" or "SAC") was formed and
incorporated in Delaware in January 1997. The Company had conducted no
operations for the year ended March 31,1997. The Company's principal activity is
the manufacture of trailer chassis, dump truck bodies, dump trailers, truck
suspensions and other related assemblies for domestic customers in the
inter-modal industry, construction and agricultural industries, through its
wholly owned subsidiaries, Ajax Manufacturing Co., Inc. ("Ajax"), R&S Truck Body
Co., Inc. ("R&S") and CPS Trailer Co., Inc. ("CPS"), hereafter collectively
referred to as the Company's subsidiaries.
In January 1998 the Company executed an agreement to purchase all the
outstanding shares of Ajax for a total purchase price of approximately
$23,819,000, comprised of a cash payment of approximately $19,618,000 and
incurred a debt obligation of approximately $4,000,000 to the Ajax shareholder
and other consideration valued at approximately $201,000. The acquisition was
accounted for as a purchase and, accordingly, the Company's 1998 financial
statements include the results and activity of Ajax for only the period of
January 27, 1998 through March 31, 1998. The excess of the purchase price over
the fair market value of Ajax's net assets at the date of acquisition totaled
approximately $15,257,000. This amount is being amortized on a straight-line
basis over a twenty-year period. The final allocation of the Ajax purchase price
was subject to a post closing balance sheet which increased the purchase price
by $453,000. In July 1999 concurrent with the Company's Credit Agreement, the
total amount due of $4,453,000 was paid to the Ajax shareholder.
In July and September 1998, the Company purchased all the outstanding
shares of Barclay Investments, Inc. ("Barclay") a non-operating entity, R&S and
CPS, respectively. The acquisitions were accounted for using the purchase-method
of accounting. The aggregate purchase price of approximately $24,000,000 has
been allocated to the assets acquired and liabilities assumed based on a
preliminary determination of respective fair market values at the date of
acquisition and is subject to adjustment. The excess of the purchase price over
the fair market value of R&S's and CPS's net assets at the dates of acquisition
totaled approximately $14,492,000. This amount is being amortized on a
straight-line basis over a period not to exceed forty years. The Company had
appraisals performed in order to properly value and amortize the useful lives of
the assets acquired.
2. Proforma Information (Unaudited)
The following summarized, unaudited pro forma information for the year
ended March 31, 1998 assumes that the acquisition of Ajax had occurred on April
1, 1997 and should be read in conjunction with the predecessor company's
financial statements as presented elsewhere in this report (in thousands except
per share data):
Historical Adjust-
Combined ments Proforma
-------- ------ --------
Revenues, net $ 33,070 $ -- $ 33,070
Operating income (loss) 5,110 (397) 4,713
Net income (loss) $ 2,086 $ (252) $ 1,834
======== ====== ========
Preferred dividend 184 989 1,173
Basic and diluted net income per share $ 0.21
========
Basic and diluted weighted average
number of shares outstanding 3,095
The following summarized unaudited pro forma information for the year
ended March 31, 1999 assumes that the acquisitions of R&S and CPS had occurred
on April 1, 1998 (in thousands except per share data):
F-7
<PAGE>
<TABLE>
<CAPTION>
Adjust- As Adjusted
SAC R&S CPS ments Proforma
-------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
Revenues, net $ 75,452 $ 7,337 $ 8,468 $ -- $ 91,257
Operating income (loss) 7,841 (84) 1,263 1,876 10,896
Net income (loss) $ 3,482 $ (42) $ 779 $ 703 $ 4,922
======== ======= ======= ======= ========
Preferred dividend 1,173 -- -- -- 1,173
Basic and diluted net income per share $ 0.75 $ 1.07
======== ========
Basic and diluted weighted average
number of shares outstanding 3,095 95 125 185 3,500
======== ======= ======= ======= ========
</TABLE>
The pro forma operating results reflect estimated adjustments for:
elimination of purchase accounting adjustments on the fair value of purchased
inventory; amortization expense on intangibles arising from the acquisitions;
elimination of certain owner related expenses; interest expense on the
acquisition debt and the related tax effect.
Pro forma results of operations information is not necessarily indicative
of the results of operations that would have occurred had the acquisitions been
consummated as of April 1, 1998 or of future results of the combined companies.
3. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All inter-company accounts and transactions are eliminated
in consolidation.
Revenue Recognition
The Company recognizes revenue when the product is inspected and accepted
by its customers or the customers' authorized agent and title has transferred.
The Company warrants that its products are free from defects in design,
materials and workmanship generally for one year from the date of purchase.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of
less than three months when purchased to be cash equivalents.
Marketable Securities
The Company applies Statement of Financial Accounting Standard ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." Under SFAS
No. 115, marketable debt and equity securities are reported at fair value, with
unrealized gains and losses from those securities reported as separate component
of stockholders' equity.
Income Taxes
The Company follows SFAS No. 109, "Accounting for Income Taxes," which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined on the difference between the financial statement and tax
basis of assets and liabilities using expected tax rates in effect for the year
in which the differences are expected to reverse.
F-8
<PAGE>
Inventory
Inventory is stated at the lower of cost, determined on a first-in,
first-out basis, or market. Acquired inventory from the acquisitions was
adjusted to its then fair market value. Costs of revenues include a charge of
$275,000 and $531,000 in March 31, 1998 and 1999, respectively, representing the
effects of this adjustment as the inventory was sold.
Property and Equipment
Property and equipment are stated at their fair values at the acquisition
dates. Property and equipment purchased by the Company are stated at cost.
Depreciation is computed using the straight-line method for financial reporting
purposes. The estimated lives used in depreciating the assets are:
Years
-----
Transportation equipment 3 - 5
Furniture, fixtures and office equipment 5 - 7
Machinery and equipment 5 - 7
Buildings 40
Shorter of lease term
Leasehold improvements or useful life
Depreciation on leasehold improvements is recorded over the lesser of the
useful lives of the assets or lease term. Expenditures for major renewals and
improvements that extend the useful lives of property and equipment are
capitalized. Expenditures for routine maintenance and repairs are charged to
expense as incurred.
Long - Lived Assets
The Company performs a periodic review of the carrying values of
long-lived assets. Impairments would be recognized if the expected future
operating non-discounted cash flows derived from the underlying asset would be
less that its carrying values.
Deferred Acquisition and Financing Costs
At March 31, 1999 and 1998 costs of approximately $1,477,000 and $810,000,
respectively, were capitalized in connection with financings and contemplated
acquisitions.
Computation of Earnings Per Share
In 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share". SFAS No. 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share exclude the dilutive
effects of options. Diluted earnings per share are very similar to the fully
diluted earnings per share. Earnings per share have been computed using the
weighted average number of shares of common stock outstanding. Diluted earnings
per share is the same as the basic amount and thus has not been presented since
the effects of unissued shares, underlying warrants and options, and the
conversion of preferred stock are anti-dilutive. The assumed exercise of stock
options and warrants and conversion of preferred shares could potentially dilute
basic earnings per share amounts in the future. Potential common shares totaling
2,288,000 and 1,732,000 were not included in the calculation of diluted earnings
per share for Fiscal 1999 and 1998, respectively, since the effects of common
stock equivalents were not encompassed in such calculation or are anti-dilutive.
Effects of Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board issued a new
disclosure standard.
SFAS No. 130, "Reporting Comprehensive Income", establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in equity
except those resulting from investments by owners and distributions to owners.
Among other disclosures, SFAS No. 130 requires that all items that are required
to be recognized under current accounting
F-9
<PAGE>
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. The adoption of SFAS No. 130 has not had a material effect on the
results of operations, or the financial position of the company.
Non-Cash Investing and Financing Activities
As additional compensation to the lenders, the Company issued 32,500
shares of common stock in connection with the settlement of the Bridge Notes.
(see note 6)
The Company acquired all the common stock of Ajax for $19,618,000 in
January 1998. The Company issued 405,238 shares of Capital stock valued at
$3,560,000 and paid $23,764,000 in cash, in connection with the acquisition of
all the common stock of Barclay Investments, Inc., R&S Truck Body Co., Inc. and
CPS Trailer Co. during fiscal 1999. In connection with the acquisitions, the
following liabilities were assumed:
March 31,
---------
1998 1999
---- ----
Fair value of assets acquired $13,846,000 $13,782,000
Liabilities assumed 5,772,000 9,982,000
----------- -----------
Cash paid for stock $19,618,000 $23,764,000
=========== ===========
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The costs the Company will ultimately incur and the value of
assets ultimately realized could differ in the near term from the related
amounts reflected in the accompanying financial statements.
Significant accounting estimates include valuation of inventory, useful
lives of property, equipment and intangible assets; the allocation of the Ajax,
R&S, CPS purchase price and the measurement of contingencies.
Fair Value of Financial Instruments
Generally accepted accounting principles require disclosing fair value to
the extent practicable for financial instruments which are recognized or
unrecognized in the balance sheet. The fair value of the financial instruments
disclosed herein is not necessarily representative of the amount that could be
realized or settled, nor does the fair value amount consider the tax
consequences of realization or settlement. For cash equivalents, marketable
securities, accounts receivable, accounts payable, and debt instruments, it is
estimated that the carrying amounts at March 31, 1999 and 1998 approximated fair
values for these instruments because of their short-term maturities, interest
rates or payment terms.
Reclassifications
Certain 1998 amounts have been reclassified to conform with the 1999
presentation.
4. Inventory, net
Inventory is comprised of the following:
F-10
<PAGE>
March 31,
---------
1998 1999
--------------- ---------------
Raw materials $ 4,881,000 $ 9,557,000
Work in progress 380,000 979,000
Finished goods 138,000 2,930,000
--------------- ---------------
$ 5,399,000 $ 13,466,000
=============== ===============
5. Property and Equipment, net
Property and equipment are summarized by major classifications as follows:
<TABLE>
<CAPTION>
March 31,
---------
1998 1999
--------------- ---------------
<S> <C> <C>
Transportation equipment $ 56,000 $ 572,000
Leasehold improvements 724,000 2,697,000
Furniture, fixtures and office equipment 69,000 1,002,000
Machinery and equipment 411,000 5,116,000
Building -- 8,883,000
Land -- 2,622,000
--------------- ---------------
Total 1,260,000 20,892,000
Less: Accumulated depreciation and amortization 35,000 917,000
--------------- ---------------
$ 1,225,000 $ 19,975,000
=============== ===============
</TABLE>
Depreciation and amortization expense for the years ended March 31, 1998
and 1999 was $250,000 and $ 581,000, respectively.
6. Long Term Debt and Credit Agreements
In August 1997, the Company sold $ 325,000 of 12 % Bridge Notes to private
investors. The Bridge Notes and accrued interest thereon were repaid in February
1998 and, pursuant to the Bridge Note agreements, the private investors were
issued 32,500 shares of common stock as additional consideration. The value
ascribed to the issuance of such shares was based on the initial public offering
price of the common stock and totaled $325,000. In addition, financing fees
related to the debt totaled $29,000. Such amounts were expensed over the period
that the Bridge Notes were outstanding. The annualized effective rate of
interest on the Bridge Notes was 121%.
In connection with the Acquisition, the Company incurred an obligation of
approximately $4,000,000 to the Ajax shareholder. The note was secured by the
assets of the Company and accrued interest at a rate of 10% per annum. The
outstanding principal was paid, in full in July 1999. Interest on the debt was
paid on a current basis and interest expense for the period from January 27,
1998 through March 31, 1998 totaled approximately $71,000.
In July 1998 the Company and certain of its subsidiaries (acting as
Guarantors) entered into, with PNC Bank, National Association ("PNC"), both
individually and as agent for other financial institutions a $40,000,000 Term
Loan and Revolving Credit Agreement ("Credit Agreement"). The Credit Agreement
provides for a Term Loan in the amount of $25,000,000 and a Revolving Loan in
the principal amount of $15,000,000 (collectively, the "Loans"). Portions of the
Term Loan were used to fund the R&S and CPS Acquisitions and to retire certain
indebtedness of R&S, CPS and the Company. Proceeds available under the Revolving
Loan may be used for general working capital. Interest on the amounts
outstanding under the Loans is payable quarterly and accrues at a variable rate
based upon LIBOR or the Base Rate of PNC, plus a percentage which adjusts from
time to time based upon the ratio of the Company's indebtedness to EBITDA, as
such terms are defined in the Credit Agreement. The rate of
F-11
<PAGE>
interest for the Loans is 7.44% at March 31, 1999. The principal amount of the
Term Loan is payable quarterly in gradually increasing amounts through July
2004. Amounts outstanding under the Revolving Loan are payable in full in July
2001, subject to the Company's request, with the approval of PNC, to extend the
due date for one-year periods, for a maximum extension period of three years.
All amounts outstanding under the Credit Agreement is secured by a lien on
substantially all of the Company's assets.
At March 31, 1999 the total amount outstanding under the Credit Agreement
was $32,625,000.
Future net minimum principal payments under the terms of the Credit
Agreement are as follows:
Year Ending March 31, Amount
--------------------- ------
2000 $ 3,438,000
2001 3,750,000
2002 4,688,000
2003 5,000,000
2004 and thereafter 6,249,000
---------------
$23,125,000
===============
7. Stockholders' Equity
Initial Public Offering
In January 1998, the Company completed an Initial Public Offering (the
"IPO") of its securities consisting of 1,150,000 shares of convertible preferred
stock and 1,495,000 shares of common stock, including the exercise of the
Underwriters' over-allotment option, from which it derived net proceeds of
approximately $23,988,000.
Common Stock Reserved for Issuance
At March 31, 1998 and 1999, the Company had reserved 2,072,000 and
2,288,000 shares, respectively, for the exercise of stock options, warrants and
the conversion of preferred stock.
In November 1997, the Company effected a .758162-for-one reverse stock
split, which reduced the number of shares of the Company outstanding from
2,067,500 to 1,567,500. All share and per share data have been changed to
reflect the split.
Convertible Redeemable Preferred Stock ("Preferred Stock")
Dividends on the Company's Preferred Stock are payable at a rate of $1.02
per year on a quarterly basis, when declared by the Company's Board of
Directors. The Preferred Stock is convertible into common stock on a one to one
basis after July 21, 2000; the conversion rate is subject to adjustment under
certain circumstances, including the failure of the Company to pay a dividend in
a timely manner.
The Preferred Stock is redeemable by the Company, with advance notice, on
or after July 22, 2000 at a price of $12 per share (plus unpaid dividends) if
certain market prices for the Common Stock are achieved. The Preferred Stock
holders have the authority, voting as a class, to approve or disapprove the
issuance of any Company securities that are senior or comparable to the rights
of the Preferred Stock, and also have a preference on the distribution of
assets. In the event that dividends are in arrears for four fiscal quarters, the
Preferred Stock holders will be entitled to elect two directors to the Company's
Board of Directors.
The Company's Board of Directors may not declare dividends to common stock
holders unless all accrued cash dividends have been paid to Preferred Stock
holders.
Stock Options and Warrants
F-12
<PAGE>
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, Accounting for Stock-Based Compensation. SFAS No. 123 encourages entities
to adopt that method in place of the provisions of Accounting Principles Board
Opinion Number 25, "Accounting for Stock Issued to Employees" ("APB No. 25"),
for all arrangements under which employees receive shares of stock or other
equity instruments of the employer or the employer incurs liabilities to
employees in amounts based on the price of its stock. The Company continues to
account for such transactions in accordance with APB No. 25 and, as required by
SFAS No. 123, has provided pro forma information regarding net income as if
compensation cost for the Company's stock option plan had been determined in
accordance with the fair value method prescribed by SFAS No. 123.
Under the 1997 Stock Option Plan the Company may grant non-qualified and
incentive stock options to certain officers, employees and directors. The
options expire one to seven years from the grant date or five years for grants
to shareholders who own more than 10% of the Company's stock. The options may be
exercised subject to continued service and certain other conditions. Accelerated
vesting occurs following a change in control of the Company and under certain
other conditions. The Company may grant an aggregate of 340,000 shares under the
plan. To date the Company has granted a total of 337,500 shares.
The per share exercise price for options granted under the Plan are
determined by the Board of Directors, provided that the exercise price of
incentive stock options ("ISO's") will not be less than 100% of the fair market
value of a share of the common stock on the date the option is granted (110% of
fair market value on the date of grant of an ISO if the optionee owns more than
10% of the common stock of the Company); and further provided that through July
27, 1999, the exercise price will be the greater of 110% of the fair market
value on the date of grant and the initial public offering price of the common
stock. Upon exercise of an option, the optionee may pay the purchase price with
previously acquired shares of common stock of the Company or, at the discretion
of the Board of Directors, the Company may loan some or the entire purchase
price to the optionee.
Prior to the establishment of the 1997 Stock Option Plan, the Company
granted 227,000 and 75,000 warrants to employees and a director, respectively.
Under SFAS No. 123, the Company estimates the fair value of each stock
option and warrant at the grant date by using the Black-Scholes option-pricing
model with the following weighted average assumptions used for 1998 grants: (1)
expected lives of one to seven years. (2) dividend yield of 0%; (3) expected
volatility of 46.5%; and (4) risk free interest rates of 5.43%. If compensation
cost for the Company's stock option and warrant grants had been determined in
accordance with SFAS No. 123, net income available to common stockholders would
have been reduced in 1998 by approximately $65,000 and earnings per share would
have been reduced by $0.04. For the year ended March 31, 1999 the stock option
and warrant grants were valued with the following weighted average assumptions
used for the options granted: (1) expected lives of one to seven years; (2)
dividend yield of 0%; (3) expected volatility of 0%; and (4) risk-free interest
rate of 4.89%. If compensation cost for the Company's stock option grants had
been determined in accordance with SFAS No. 123, net income available to common
stockholders and earnings per share would have been reduced by approximately
$221,000 and $0.07, respectively, for the year ended March 31, 1999.
The following table summarizes information about stock options and
warrants outstanding at March 31, 1999:
F-13
<PAGE>
<TABLE>
<CAPTION>
Options Outstanding
----------------------------------------
Options/Exercisable
W. A. ----------------------------
Range of Number Remaining W.A. Number W.A.
Exercise of Options Contractual Exercise of Options Exercise
Prices Outstanding Life Price Exercisable Price
- -------------- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$5.93 - 7.25 245,880 9.50 $ 6.43 -- $ --
$9.875 - 10.50 188,000 7.51 10.14 75,000 10.50
$10.89 - 11.50 352,000 6.96 11.00 18,667 11.43
----------- ----------------------------
785,880 7.89 $ 9.36 93,667 $ 10.69
=========== ============================
<CAPTION>
1998 1999
W.A. W.A.
Exercise Exercise
Shares Price Shares Price
------------------------ ----------------------------
<S> <C> <C> <C> <C>
Shares under Option/Warrant,
beginning of period -- $ -- 352,000 $ 10.890
Granted 352,000 10.89 436,500 8.120
Canceled -- -- (2,620) 5.938
Exercised -- -- -- --
------------------------ ----------------------------
Shares under Option/Warrant,
end of period 352,000 $10.89 785,880 $ 9.379
======================== ============================
</TABLE>
Options available for grant total 2,500. The weighted average fair value
of options and warrants granted during the years ended March 31, 1998 and 1999
was $4.85 and $7.28, respectively.
The Company has also granted 120,000 warrants to a non-related third party
in connection with services rendered to the Company. Such warrants vest over a
one and half year period. The compensation expense related to the grant
approximates $1,080,000 for the year ended March 31, 1999.
Underwriters' Warrants
In connection with the IPO, the Underwriters received 130,000 common stock
warrants and 100,000 of preferred stock warrants with exercise prices of $16.50
and $19.80, respectively. Such warrants expire on January 22, 2003.
8. Income Taxes
The provision (benefit) for income taxes for the years ended March 31,
1998 and 1999 consists of the following components:
F-14
<PAGE>
March 31,
---------
1998 1999
----------- -----------
Current:
Federal $ 384,000 $ 2,141,000
State 112,000 312,000
----------- -----------
496,000 2,453,000
----------- -----------
Deferred:
Federal (30,000) 199,000
State (8,000) (386,000)
----------- -----------
(38,000) (187,000)
----------- -----------
Total provision $ 458,000 $ 2,266,000
=========== ===========
Deferred tax assets (liabilities) consist of the following items:
March 31,
---------
1998 1999
----------- -----------
Deferred tax asset:
Property, plant and equipment $ -- $ 11,000
KREDA -- 373,000
Accounts receivable 12,000 94,000
Inventory 279,000 221,000
Accrued liabilities 10,000 45,000
Start-up costs -- 341,000
----------- -----------
Total deferred tax assets, gross 301,000 1,085,000
Less valuation allowance -- (317,000)
----------- -----------
Total deferred tax assets 301,000 768,000
Deferred tax liabilities:
Property, plant and equipment basis difference (12,000) --
----------- -----------
Deferred tax asset, net $ 289,000 $ 768,000
=========== ===========
During 1996, R&S applied for and was granted status under the Kentucky Rural
Economic Development Act ("KREDA"). KREDA allows the Company to receive a tax
credit on income earned as a result of the Company increasing its plant size and
conducting operations in a rural county. Under KREDA, the Company is allowed to
use this tax credit as debt repayment.
Reconciliation between the Company's effective tax-rate and the U.S.
statutory rate for the years ended March 31, 1999 and 1998 are as follows:
F-15
<PAGE>
March 31,
---------
1998 1999
------ ------
U.S. statutory rate applied to pretax income 34.0 34.0%
State tax provision, net of federal tax benefit 6.0 7.8
Non deductible acquisition costs 11.5 (1.7)
Amortization of goodwill 5.5 6.2
KREDA -- (2.1)
Valuation -- (5.5)
Other -- 0.7
------ ------
Total effective tax rate 57.0% 39.4%
====== ======
9. Related Party Transactions
The Company leases its New Jersey manufacturing facility from the sole
stockholder of Ajax prior to the acquisition. The lease provides for annual rent
of $600,000 per year plus reimbursable expenses, payable monthly, for a five
year period with four renewal options totaling twenty years. During the initial
term of the lease, the Company also has an option to purchase the leased Ajax
facility for $6.5 million.
Fees paid to Directors and officers for services rendered in connection
with the acquisition of Ajax totaled approximately $160,000. Fees for the
acquisition of R&S and CPS totaled approximately $813,000 including out of
pocket expenses and an advance on future acquisitions.
At March 31, 1998 and 1999, the Company had advanced $810,000 and
$215,000, respectively, to an entity controlled by a stockholder of the Company
for costs incurred on potential acquisitions.
The Company and certain officers and consultants have executed employment
agreements which provide for, in certain circumstances, minimum annual salaries
to be paid over specified terms. Future commitments for such payments are as
follows:
Year Ending March 31, Amount
--------------------- ------
2000 1,205,000
2001 1,089,000
2002 265,000
2003 78,000
-----------
$ 2,637,000
===========
10. Major Customers and Concentrations
Major Customers
Three customers individually accounted for 21%, 19% and 14% of net sales
for the year ended March 31, 1999.
Historically, the Company has relied on a limited number of customers for
a substantial portion of its total revenues. The Company expects that a
significant portion of its future revenues will continue to be generated by a
limited number of customers. The loss of any of these customers or any
substantial reduction in orders by any of these customers could have a material
adverse effect on operating results.
F-16
<PAGE>
Concentrations
The Company maintains cash balances at several financial institutions.
Accounts at each institution are insured by the Federal Deposit Insurance
Corporation up to $100,000. At March 31, 1999 approximately $506,000 and
$526,000 were invested in two domestic money market funds. At March 31, 1998
approximately $1,800,000 and $999,000 were invested in two Domestic Money Market
funds.
Credit Risk
Accounts receivable are primarily composed of unsecured balances. The
Company does not require collateral as a condition of sale.
At March 31, 1998, the Company had four customers with individual balances
in excess of ten percent of consolidated accounts receivable. In the aggregate,
these four customers comprised approximately 98% of the net accounts receivable.
At March 31, 1999, the Company has one customer with an individual balance in
excess of 10% of consolidated accounts receivable. In the aggregate, this one
customer comprises approximately 18% of the net accounts receivable balance.
11. Commitments and Contingencies
Environmental Matters
The Company is subject to various Federal, state and local laws and
regulations governing the use, discharge and disposal of hazardous materials.
Except as noted below, management believes that the Company is in substantial
compliance with current laws and regulations. Accordingly, no reserve has been
established for such exposures. Compliance with current laws and regulations has
not had, and is not expected to have, a material adverse effect on the Company's
financial condition. However, it is possible that additional health related or
environmental issues may arise in the future, which the Company cannot predict
at present.
On March 16 1999 the Company and the New Jersey Department of
Environmental Protection (NJDEP) entered into a Stipulation of Settlement by
which the Company, without admission of liability, agreed to withdraw legal
challenges against NJDEP and pay NJDEP $234,000 over a three-year period
commencing December 31, 1999. In exchange, NJDEP (1) has withdrawn and settled
all alleged Company emission exceedences of air volatile compounds ("VOCS")
dating from the initiation of Company and predecessor business in 1992 through
February 28, 1999; and (2) has granted the Company a new VOC permit that roughly
doubles allowable emissions to 51.5 tons per year. As required under the new VOC
permit, the Company has installed a system to compute VOC emissions and
periodically reconcile such computations with company purchasing and production
data. The Company projects that at current rates of production, VOC permit
limits for 1999 may be exceeded.
The Company is subject to federal, state and local regulation of
environmental matters relating to its operations. The Company and its
Stockholder are currently involved in site investigations to ascertain whether
any environmental remediation efforts are required and, if necessary, the
magnitude and extent of such costs.
While it is not feasible to predict the outcome of all these matters,
management, based upon all available information, is of the opinion that the
ultimate disposition of these environmental matters will not have a material
adverse effect on the Company's financial position or results of operations.
Disposal Costs
The Company also engages independent contractors to arrange, at no cost to
the Company or the lessor, for the disposal of parts of refurbished chassis and
used equipment that are stored at its present location. The Company has not
established reserves related to the associated disposal costs of such items (in
the event the current leasing arrangement ceases and the Company relocates),
since such costs will be the responsibility of its lessor.
Legal
F-17
<PAGE>
The Company is either a plaintiff or a defendant in several pending legal
matters arising in the normal course of operations. In the opinion of
management, the final resolution of these matters will not have a material
adverse effect on the Company's financial position or results of operations.
Operating Leases
The Company leases facilities and equipment under operating leases
expiring through 2004. Some of the leases have renewal options and most contain
provision for passing though certain incremental cost. Future net minimum annual
rental payments under non-cancelable leases are as follows:
Year Ending March 31, Amount
--------------------- ------
2000 $ 910,000
2001 870,000
2002 796,000
2003 685,000
2004 96,000
-----------
$ 3,357,000
===========
Rent expense for the year ended March 31, 1999 and 1998 totaled $610,000
and $140,000 respectively.
12. Quarterly Information (Unaudited)
Below is selected quarterly information for the year ended March 31, 1999.
(in thousands, except for per share data)
<TABLE>
<CAPTION>
For the Quarters ended
----------------------
1999 June 30 September 30 December 31 March 31
-----------------------------------------------------
in thousands, except per share data
<S> <C> <C> <C> <C>
Revenue $ 7,880 $ 17,245 $ 23,732 $ 26,595
Operating income 809 1,792 2,822 2,418
Income Taxes 327 586 785 568
Net Income 340 681 1,155 1,306
Net income available to common stockholders $ 47 $ 387 $ 861 $ 1,014
=====================================================
Basic and diluted net income per share $ 0.02 $ 0.12 $ 0.25 $ 0.30
=====================================================
</TABLE>
13. Segment Information
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", which supersedes SFAS No. 14, Financial Reporting for Segments of
A Business Enterprise, establishes standards for the way that public companies
report information about operating segments in annual financial statements and
requires reporting of selected information about operating segments in interim
financial statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographic areas and major
customers. SFAS
F-18
<PAGE>
No. 131 defines operating segments as components of a company about which
separate financial information is available that is evaluated regularly by
management in deciding how to allocate resources and in assessing performance.
Below are the selected financial segment data for the years ended March 31, 1999
and 1998. (in thousands)
Truck
March 31, 1999 Chassis Bodies Consolidated
- -------------- ------- ------ ------------
(in thousands)
Revenue $49,915 $25,537 $75,452
Operating Income 4,722 3,120 7,842
Identifiable Assets 50,692 36,317 87,009
Capital Expenditures 3,934 4,870 8,804
March 31, 1998
(in thousands)
Revenue $ 7,936 -- 7,936
Operating Income 1,305 -- 1,305
Identifiable Assets 31,560 -- 31,560
Capital Expenditures 197 -- 197
As a result of the acquisition of Ranor, Inc. (Note 13), the Company has
gone through a reorganization of its' operating divisions, whereby they created
an aerospace division and a trucking division. Any subsequent segment disclosure
will be prepared on this basis.
14. Subsequent Events (Unaudited)
In June 1999, pursuant to the terms of a Stock Purchase Agreement dated
April 1999, the Company acquired all of the outstanding capital stock of
Critical Components Corporation ("CCC"). In consideration for such capital stock
the Company issued to the shareholders of CCC an aggregate of 180,000 shares of
common stock of the Company. In addition, the shareholders of CCC will receive
up to an additional 120,000 shares of the Company's Common Stock if the Company
acquires any of a group of companies previously targeted for acquisition by CCC.
Simultaneously with the acquisition of CCC, the Company, through CCC,
acquired substantially all of the assets of Ranor, Inc. ("Ranor") a fabricator
of large precision assemblies for the aerospace, nuclear, industrial and
military markets. The consideration paid to Ranor was $28,800,000, subject to
final adjustment, of which $23,500,000 was paid in cash and $5,300,000 was paid
in the form of convertible subordinated notes of the Company. The acquisition
will be accounted for as a purchase and, accordingly, the Company's first
quarter ending June 30, 1999 financial statements will only reflect the activity
of Ranor for the period of June 15, 1999 through June 30, 1999.
The funds for the acquisitions were obtained by an increase from
$40,000,000 to $68,125,000 of the Company's credit facility arrangement through
PNC Bank, NA and PNC Capital Markets. The Company's Credit Agreement, as
amended, provides for Term Loans in the principal amount of $48,125,000 and a
Revolving Loan in the principal amount of $20,000,0000 (collectively, the
"Loans"). The principal of the Term Loans is payable in two tranches of
$23,125,000 and $25,000,000 in June 2004 and June 2005, respectively. Amounts
outstanding under the Revolving Loan are payable in full in July 2002, subject
to the Company's request, with the approval of the lenders, to extend the due
date for one year, with a maximum extension of two one year periods. All amounts
due under the Credit Agreement are secured by a lien on all the Company's
assets. The rate of interest for the amounts currently outstanding under the
Credit Agreement is approximately 7.44%.
In connection with the acquisitions the Company incurred approximately
$1,700,000 in investment advisory and finder's fees, and legal and accounting
expenses. The Company incurred approximately $1,000,000 in
F-19
<PAGE>
fees and expenses, including bank fees, in connection with the increase and
amendment of the existing credit facility.
F-20
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Standard Automotive Corporation
Hillsborough Township, New Jersey
We have audited the accompanying statements of income and retained
earnings and cash flows of Ajax Manufacturing Company (the "Company") for the
period of April 1, 1997 through January 26, 1998 and the year ended March 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of the Company's operations and its cash
flows for the period of April 1, 1997 through January 26, 1998 and the year
ended March 31, 1997 in conformity with generally accepted accounting
principles.
BDO Seidman, LLP
Woodbridge, New Jersey
June 25, 1998
F-21
<PAGE>
Ajax Manufacturing Company
Statements of Income and Retained Earnings
(in thousands)
<TABLE>
<CAPTION>
Period from
Year ended April 1, 1997
March 31, through January 26,
1997 1998
---------- -------------------
<S> <C> <C>
Revenues $ 22,356 $ 25,134
Operating costs and expenses:
Cost of revenues 17,027 19,898
Selling, general and administrative expenses 2,510 1,431
-------- --------
Total operating costs and expenses 19,537 21,329
-------- --------
Operating income 2,819 3,805
Interest expense -- --
Other income (expense):
Excise tax settlement -- (830)
Investment income 77 40
-------- --------
Income before income taxes 2,896 3,015
Provision for income taxes 1,168 1,272
-------- --------
Net income 1,728 1,743
Retained earnings, beginning of period 5,224 6,952
-------- --------
Retained earnings, end of period $ 6,952 $ 8,695
======== ========
</TABLE>
See accompanying notes to financial statements.
F-22
<PAGE>
Ajax Manufacturing Company
Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Year Period from
Ended April 1, 1997
March 31, through January 26,
1997 1998
--------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,728 $ 1,743
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Bad debt provision 7 25
Depreciation and amortization 124 133
Deferred taxes (7) (58)
Change in assets and liabilites:
Accounts receivable (1,793) (3,004)
Inventory (174) (2,429)
Other receivables 94 --
Prepaid expenses (61) 25
Accounts payable and accrued expenses 1,043 1,075
Income taxes payable (414) 1,087
------- -------
Net cash provided by (used in) operating activities 547 (1,403)
------- -------
Cash flows from investing activities:
Issuanceof note receivable - related parties (300) (35)
Acquisition of property and equipment (171) (211)
------- -------
Net cash used in investing activities (471) (246)
------- -------
Cash flows from financing activities:
Borrowings from (payment of) short term debt -- 350
------- -------
Net cash provided by financing activities -- 350
------- -------
Net increase (decrease) in cash and cash equivalents 76 (1,299)
Cash and cash equivalents, beginning of period 1,482 1,558
------- -------
Cash and cash equivalents, end of period $ 1,558 $ 259
======= =======
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ -- $ --
Income taxes 1,721 298
</TABLE>
See accompanying notes to financial statements.
F-23
<PAGE>
Ajax Manufacturing Company
Notes to Financial Statements
1. Business Description and Sale of Company
Ajax Manufacturing Company (the "Company") principally manufactures
trailer chassis at its Hillsborough, New Jersey facility. The Company also
manufactures industrial waste and refuse containers. Certain transactions of the
Company were initially executed under the name of an inactive, affiliated
corporation controlled by the Ajax Stockholder; related costs were funded by the
Company and reflected in the accompanying financial statements.
On January 27, 1998 the Company's Stockholder executed an agreement to
sell the company to an independent third party, Standard Automotive Corporation
("SAC"), for consideration approximating $23,618,000 million. The exact purchase
price is subject to adjustment by the parties and will be based on the financial
position of Ajax as of the closing date. The financial statements presented do
not include purchase accounting adjustments associated with this acquisition.
In connection with the sale, SAC has executed a lease with the Ajax
Stockholder for an initial term of five years with four renewal options totaling
twenty years. The annual base rent over the initial term will be $600,000.
2. Summary of Significant Accounting Policies
Revenue Recognition
The Company recognizes revenue when the product is inspected and accepted
by its customers or the customers' authorized agent and title has transferred.
Cash Equivalents
The Company considers all highly liquid investments with maturities of
less than three months when purchased to be cash equivalents.
Income Taxes
The Company follows Statement of Financial Accounting Standard ("SFAS")
No. 109, "Accounting for Income Taxes," which requires recognition of deferred
tax liabilities and assets for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined on the difference
between the financial statement and tax basis of assets and liabilities using
expected tax rates in effect for the year in which the differences are expected
to reverse.
Inventory
Inventory is stated at the lower of cost, determined on a first-in,
first-out basis, or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method for financial reporting purposes. The estimated lives
used in depreciating the assets are:
F-24
<PAGE>
Years
-----
Transportation equipment 3 - 5
Leasehold improvements 10 - 25
Furniture, fixtures and office equipment 5 - 7
Machinery and equipment 5 - 7
Depreciation on leasehold improvements is recorded over the lesser of the
useful lives of the assets or lease term. Expenditures for major renewals and
improvements that extend the useful lives of property and equipment are
capitalized. Expenditures for routine maintenance and repairs are charged to
expense as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The costs the Company will ultimately incur and the value of
assets ultimately realized could differ in the near term from the related
amounts reflected in the accompanying financial statements.
Significant accounting estimates include valuation of inventory, useful
lives of property and equipment and in the measurement of contingencies.
Fair Value of Financial Instruments
Generally accepted accounting principles require disclosing fair value to
the extent practicable for financial instruments which are recognized or
unrecognized in the balance sheet. The fair value of the financial instruments
disclosed herein is not necessarily representative of the amount that could be
realized or settled, nor does the fair value amount consider the tax
consequences of realization or settlement. For cash equivalents, accounts
receivable and accounts payable, it is estimated that the carrying amounts
approximated fair values for these instruments because of their short-term
maturities or payment terms. Amounts due from related parties were repaid at the
closing.
3. Short-Term Borrowings
In November 1995, the Company entered into a revolving line of credit
agreement with a bank (the "Agreement") which permits borrowings up to the
lesser of (1) $2,000,000 or (2) the sum of defined account receivables and
inventory levels, plus $750,000. Interest on the revolving line of credit was
payable monthly at the bank's rate, plus 2%. As of January 26, 1998 there was a
balance outstanding of $350,000. Interest expense for the year ended March 31,
1997 and the period ending January 26, 1998 totaled $0 and $1,000, respectively.
The Agreement contained certain restrictions, including prohibitions on
additional borrowings or guarantees, the sale of assets and the payment of
dividends. The Company was also required to maintain certain financial ratios.
As of March 31, 1997 and January 26, 1998, the Company was in compliance with
all financial and operating covenants as specified in the Agreement.
Substantially all of the assets of the Company were pledged as collateral
against outstanding borrowings. This Agreement will be terminated upon
completion of the sale of the Company, discussed in Note 1.
4. Income Taxes
The provision (benefit) for income taxes in the statements of income and
retained earnings consists of the following components:
F-25
<PAGE>
Year ended April 1, 1997
March 31, through January 26,
1997 1998
----------- ------------
Current:
Federal $ 910,000 $ 1,031,000
State 265,000 300,000
Deferred:
Federal (6,000) (46,000)
State (1,000) (13,000)
----------- -----------
Total provision $ 1,168,000 $ 1,272,000
=========== ===========
A reconciliation between the Company's effective tax-rate and the U.S.
statutory rate is as follows:
Period from
Year ended April 1, 1997
March 31, through January 26,
1997 1998
---------- -------------------
U.S. statutory rate applied to pretax income 34.0% 34.0%
State tax provision, net of federal tax benefit 7.0 7.0
Other (0.7) 1.0
---- ----
Total effective tax rate 40.3% 42.0%
==== ====
5. Related Party Transactions
Lease Obligations with Stockholder
The Company leases its manufacturing and office facilities from its sole
Stockholder on a monthly basis. Rent expense incurred by the Company is $620,000
and $508,000 for the year ended March 31, 1997 and for the period from April 1,
1997 through January 26, 1998, respectively.
Selling, General and Administrative Expense
The Company did not have employment agreements with its President; also
the Company's Stockholder and his son, an officer of the Company ("Officer").
The Stockholder's and Officer's compensation varies with the overall performance
of the Company and is generally subject to limitations imposed by financial
institutions, which have outstanding indebtedness with the Company. Salary and
incentives expense for the Company's Stockholder were $581,947 and $113,846 for
the year ended March 31, 1997 and the period from April 1, 1997 through January
26, 1998, respectively. Salaries and incentives expense for the Officer were
$680,546 and $173,231 for the year ended March 31, 1997 and for the period from
April 1, 1997 through January 26, 1998, respectively.
Guarantees
Through various guarantees, the Company's Stockholder is contingently
liable for repayment of certain indebtedness of the Company. There was no
outstanding principal of such borrowings at March 31, 1997, the balance
outstanding at January 26, 1998 totaled $350,000. There are no direct costs to
the Company associated with these guarantees.
F-26
<PAGE>
6. Major Customers and Concentrations
Major Customers
Listed below are customers who individually accounted for 10% or more of
net sales for the year ended March 31, 1997 and the period from April 1, 1997
through January 26, 1998.
Customer 1997 1998 Period
-------- ---- -----------
A 57% 59%
B 33 --
C -- --
D -- 24
----- -----
Total 90% 83%
Historically, the Company has relied on a limited number of customers for
a substantial portion of its total revenues. The Company expects that a
significant portion of its future revenues will continue to be generated by a
limited number of customers. The loss of any of these customers or any
substantial reduction in orders by any of these customers could have a material
adverse effect on operating results.
Concentrations
As discussed in Note 1, the Company's manufacturing and refurbishing
processes are concentrated in one facility.
The Company maintains cash balances at several financial institutions.
Accounts at each institution are insured by the Federal Deposit Insurance
Corporation up to $100,000.
7. Commitments and Contingencies
Environmental Matters
The Company is subject to various Federal, state and local laws and
regulations governing the use, discharge and disposal of hazardous materials.
Except as noted below, management believes that the Company is in substantial
compliance with current laws and regulations. Accordingly, no reserve has been
established for such exposures. Compliance with current laws and regulations has
not had, and is not expected to have, a material adverse effect on the Company's
financial condition. However, it is possible that additional health related or
environmental issues may arise in the future, which the Company cannot predict
at present.
The Company is subject to extensive federal, state and local regulation of
environmental matters relating to its operations. The Company and its
Stockholder are currently involved in site investigations to ascertain whether
any environmental remediation efforts are required and, if necessary, the
magnitude and extent of such costs.
The New Jersey Department of Environmental Protection ("NJDEP"), which
administers Title V of the Federal Clean Air Act in New Jersey, requires the
Company to obtain an air emission permit which limits the emission levels from
certain equipment at the Company's facility of various pollutants, including
volatile organic compounds ("VOC") generated by the drying of solvent-based
primers and paints. The equipment that requires Title V permitting includes
three paint spray booths, three natural gas fired heaters and two shot blaster
systems. In March 1997 the NJDEP issued two Notices of Violations to the
Company, which asserted that the Company had failed to obtain permits for the
shot blasters prior to February 1997 and the heaters for the paint spray booths.
The Company submitted permit applications for the heaters in March 1997, which
are pending. In May 1997 the NJDEP issued an Administrative Order of Civil
Administrative Penalty Assessment ("Order and Notice") assessing the Company a
$9,000 penalty for emitting VOCs from the paint spray booths in excess of
permissible limits in 1995. In response to the Order and Notice, the Company
submitted to the NJDEP an adjudicatory hearing request, which contests the
$9,000 assessment.
F-27
<PAGE>
In March 1998 the NJDEP issued a Notice of Violation ("NOV") to the
Company for emitting VOCs from the paint spray booths in excess of permissible
limits in 1996. The NOV directed the Company to achieve compliance by April 1998
and to submit a written report documenting the corrective measures taken to
achieve compliance. The Company timely responded, proposing to achieve
compliance by use of low VOC, water-base coatings, by re-engineering the
facility in order to facilitate use of the water-base coatings, and by
installing a fourth spray booth and other equipment, and submitting to NJDEP a
new, expanded air emission permit for the facility. The Company has been in
active negotiations with NJDEP. As requested by NJDEP, the Company submitted in
May 1998 a new air permit application that would allow the Company to install a
fourth spray booth and expand permitted emissions from the facility. The
application is pending and the Company continues to negotiate with NJDEP to
resolve all air emission issues.
In March 1998, as part of the ISRA Remediation Agreement with NJDEP, NJDEP
required the company to perform soil and sediment sampling at various locations
at the facility. The sampling results were within NJDEP compliance limits with
the exception of results for certain metals detected in soil around roof
downspouts at the facility. The company has engaged a contractor to perform
additional sampling at these locations, the results of which will be forwarded
to NJDEP. If the additional sampling indicates additional areas of contamination
above NJDEP compliance levels, additional investigations may be necessary.
The Company is presently preparing an amendment to its Title V Permit
application proposing that the Company and NJDEP enter into an Administrative
Consent Order or other form of agreement (a "Compliance Schedule") as to VOC
emissions from the three paint spray booths at the facility. The Company plans
to propose a timetable by which it will change its primer and topcoat paint
formulations from current, solvent based products that generate high amounts of
VOC upon drying to water-based and lower-solvent based primers and topcoats,
which would generate lower amounts of VOC upon drying. The Company believes that
such change is technically feasible and that by making such change, the Company
will reduce VOC emissions to levels allowable under the Company's present
permits while allowing the Company to produce numbers of completed chassis
comparable to those produced in recent years. Water-based primers are currently
available. The Company has been advised by paint manufacturers that topcoat
paints with progressively lower VOC content are currently being tested and will
become available during the next twelve months. The Company believes that these
primers and paints are suitable for the purposes of the Company's customers. Use
of the new primer and paint products is expected to require certain
modifications of the Company's production lines, primarily because water-based
primer requires an additionally heated drying environment than solvent-based
primer. The Company is preparing its plan for installing such modifications,
which will be presented to NJDEP as part of the planned Compliance Schedule
proposal. The estimated cost of such modifications and of the equipment required
therefor is estimated to be less than $100,000. There is no assurance that NJDEP
will grant a Compliance Schedule to the Company, or if granted the Compliance
Schedule will not include NJDEP demands for fines, penalties, or other
sanctions. If NJDEP does not grant a Compliance Schedule, the Company might need
to reduce its output of chassis until lower VOC formulations are utilized.
The outcome of NJDEP regulatory actions cannot be predicted with
certainty. The NJDEP could fine the Company for operating the shot blaster
booths without a completed permit until February 1997, for operating the heaters
for the paint spray booths without a permit, and/or for emitting more VOCs from
the paint spray booths than allowed by its permits. If changing to water-based
primers and low-VOC topcoat paints is not acceptable to NJDEP, NJDEP could
require the Company to take other steps to comply with NJDEP requirements and
the Clean Air Act, including capital improvements to ensure compliance with air
quality regulations. Such improvements could include a VOC incinerator and/or
other control apparatus, which could cost up to $2,000,000 or more and which
could result in increased operating expenses. Failure to comply with NJDEP
regulations and directives could result in fines and/or NJDEP orders to curtail
or shutdown operations, any or all of which could have a material adverse effect
on the Company's business and financial condition. The Company does not have
liabilities accrued for fines that may be assessed which respect to its air
quality violations or for potential purchases of any capital equipment that may
be mandated by the NJDEP or otherwise may be necessary to avoid future
violations.
While it is not feasible to predict the outcome of all these matters,
management, based upon all available information, is of the opinion that the
ultimate disposition of these environmental matters will not have a material
adverse effect on the Company's financial position or results of operations.
F-28
<PAGE>
Disposal Costs
The Company also engages independent contractors to arrange, at no cost to
the Company or the lessor, for the disposal of parts of refurbished chassis and
used equipment that are stored at its present location. The Company has not
established reserves related to the associated disposal costs of such items (in
the event the current leasing arrangement ceases and the Company relocates),
since such costs will be the responsibility of its lessor, also the Company's
Stockholder.
Legal
The Company is either a plaintiff or a defendant in several pending legal
matters arising in the normal course of operations. In the opinion of
management, the final resolution of these matters will not have a material
adverse effect on the Company's financial position or results of operations.
Internal Revenue Service ("IRS") Review
Revenue derived from sales of the Company's manufactured chassis is
subject to Federal excise tax. The Company uses certain estimates and valuation
assumptions in calculating excise tax liabilities. In July 1997, the IRS
notified Ajax of an assessment totaling $1,722,000, (which included $287,000 of
penalties) for the period from March 1995 through December 1996. In November of
1997 the Company and its outside counsel decided to pursue a settlement
agreement and the Company paid approximately $830,000 to settle this matter.
F-29
ASSET PURCHASE AGREEMENT
by and among
STANDARD AUTOMOTIVE CORPORATION,
a Delaware corporation,
CRITICAL COMPONENTS CORP.,
a Delaware corporation,
RANOR, INC.,
a Delaware corporation,
RANOR, INC.,
a Massachusetts corporation,
THE SHAREHOLDERS NAMED HEREIN
and
FIVE N LEASING COMPANY,
a Massachusetts general partnership
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS.............................................................1
2. SALE OF ACQUIRED ASSETS.................................................5
2.1 Purchase and Sale of Acquired Assets.............................5
2.2 Assumption of Certain Liabilities................................5
2.3 Delivery of Possession and Instruments of Transfer...............6
3. CONSIDERATION...........................................................6
3.1 Cash Consideration...............................................6
3.2 Other Consideration..............................................7
3.3 Purchase Price Adjustments.......................................7
3.4 Allocation of Consideration for Tax Purposes.....................9
4. CLOSING.................................................................9
4.1 Closing and Closing Date.........................................9
5. REPRESENTATIONS AND WARRANTIES OF THE SELLERS...........................9
5.1 Organization, Good Standing, Power, Etc..........................9
5.2 Accuracy of Information.........................................10
5.3 Articles of Organization and By-Laws; Partnership Agreement.....10
5.4 Subsidiaries, Divisions and Affiliates..........................10
5.5 Equity Investments..............................................10
5.6 Authorization of Agreement......................................10
5.7 Effect of Agreement.............................................11
5.8 Restrictions....................................................11
5.9 Governmental and Other Consents.................................11
5.10 Financial Statements............................................11
5.11 Absence of Certain Changes or Events............................12
5.12 Title to Acquired Assets; Absence of Liens and Encumbrances.....12
5.13 Equipment.......................................................13
5.14 Insurance.......................................................13
5.15 Agreements, Arrangements, Etc...................................14
5.16 Patents, Trademarks, Copyrights, Etc............................17
5.17 Permits, Licenses, Security Clearances, Etc.....................17
5.18 Compliance with Applicable Laws.................................17
5.19 Litigation......................................................18
i
<PAGE>
5.20 No Interest in Competitors......................................18
5.21 Customers, Suppliers, Distributors and Agents...................18
5.22 Books and Records...............................................19
5.23 Employees.......................................................19
5.24 Employee Benefit Plans..........................................19
5.25 Powers of Attorney..............................................21
5.26 Sufficiency of Acquired Assets..................................21
5.27 Labor Disputes, Unfair Labor Practices..........................21
5.28 Past Due Obligations............................................21
5.29 Environmental Matters...........................................21
5.30 Tax and Other Returns and Reports...............................23
5.31 Certain Tax Definitions.........................................24
5.32 Recent Dividends and Other Distributions........................24
5.33 Inventory.......................................................24
5.34 Purchase and Sale Obligations...................................25
5.35 Accounts Receivable and Accounts Payable........................25
5.36 Investment Representation.......................................25
5.37 Year 2000.......................................................26
5.38 Addition........................................................26
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS ......................26
6.1 Organization....................................................27
6.2 Authorization of Agreement......................................27
6.3 Effect of Agreement.............................................27
6.4 Litigation......................................................27
6.5 Accuracy of Information.........................................27
6.6 Financial Statements............................................28
6.7 Material Adverse Change.........................................28
6.8 Governmental and Other Consents.................................28
7. PRE-CLOSING COVENANTS OF THE SELLERS...................................28
7.1 Conduct of Business Until Closing Date..........................28
7.2 Approvals, Consents and Further Assurances......................30
7.3 Access to Properties, Records, Suppliers, Agents, Etc...........30
7.4 Advice of Changes...............................................30
7.5 Conduct.........................................................30
7.6 Employee Benefit Plans..........................................31
7.7 Satisfaction of Conditions by the Sellers.......................31
7.8 Permitted Distribution..........................................31
ii
<PAGE>
7.9 Transfer of Insurance Policies..................................32
8. PRE-CLOSING COVENANTS OF THE PURCHASERS................................32
8.1 Satisfaction of Conditions by the Purchasers....................32
8.2 Title to Real Property..........................................32
9. POST-CLOSING COVENANTS.................................................33
9.1 Post-Closing Audit..............................................33
9.2 Post-Closing Tax Returns........................................33
9.3 Further Assurances..............................................33
9.4 Books and Records...............................................33
9.5 Change of Name..................................................33
10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASERS..............34
10.1 Accuracy of Representations and Warranties......................34
10.2 Performance of Agreements.......................................34
10.3 Approvals and Consents..........................................34
10.4 Sellers' Certificate............................................34
10.5 Officer's Certificate...........................................35
10.6 Clerk's Certificate; Partnership Certificate....................35
10.7 No Material Adverse Change......................................35
10.8 Actions, Proceedings, Etc.......................................35
10.9 Opinion of Counsel to the Company...............................35
10.10 Licenses, Permits, Consents, Etc................................35
10.11 Bills of Sale...................................................35
10.12 Documentation of Rights.........................................36
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS.................36
11.1 Accuracy of Representations and Warranties......................36
11.2 Performance of Agreements.......................................36
11.3 No Injunction...................................................36
11.4 Opinion of Counsel to Purchaser.................................36
11.5 Absence of Proceedings..........................................36
11.6 Compliance Certificate..........................................36
11.7 Title Insurance.................................................36
12. EMPLOYMENT MATTERS.....................................................37
12.1 Employment with Purchaser.......................................37
iii
<PAGE>
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION............38
13.1 Survival........................................................38
13.2 Indemnification by the Sellers and the Shareholders.............38
13.3 Indemnification by the Purchasers...............................38
13.4 Right to Defend.................................................39
13.5 Subrogation.....................................................39
13.6 Certain Limitations.............................................39
14. MISCELLANEOUS..........................................................40
14.1 Expenses........................................................40
14.2 Termination of Agreement........................................40
14.3 Waivers.........................................................41
14.4 Binding Effect; Benefits........................................41
14.5 Assignment......................................................41
14.6 Notices.........................................................41
14.7 Entire Agreement................................................42
14.8 Headings; Certain Terms.........................................43
14.9 Counterparts....................................................43
14.10 Governing Law...................................................43
14.11 Severability....................................................43
14.12 Amendments......................................................43
14.13 Transaction Taxes...............................................43
14.14 Section References..............................................43
14.15 Brokers and Finders.............................................43
14.16 Confidentiality.................................................44
14.17 Public Announcements; Disclosure to Certain Parties.............44
14.18 Exhibits........................................................45
15. DISPUTE RESOLUTION.....................................................45
iv
<PAGE>
APPENDIX INDEX
Appendix 1.20 Form of Convertible Term Note
Appendix 3.2(b) Form of Employment Agreement
Appendix 3.3(a) Analysis of Adjustments Format
Appendix 3.3(b) Analysis of Adjustments Example
Appendix 3.4 Allocation of Consideration
Appendix 4.1(a) Form of Escrow Agreement
Appendix 4.1(b) Form of Closing Memorandum
Appendix 10.9 Opinion of Counsel to the Company
Appendix 11.4 Opinion of Counsel to Purchaser
v
<PAGE>
EXHIBIT INDEX
Exhibit 1.l(h) Real Property
Exhibit 1.25 Vectra Assets
Exhibit 2.2 Adjusted December 31, 1998 Balance Sheet
Exhibit 5.1 Good Standing Certificates
Exhibit 5.4 Subsidiaries, Divisions and Affiliates
Exhibit 5.5 Equity Investments
Exhibit 5.7 Effect of Agreement
Exhibit 5.10 Financial Statements of the Company
Exhibit 5.11 Changes and Events
Exhibit 5.12 Permitted Encumbrances
Exhibit 5.13 Equipment
Exhibit 5.14 Insurance Policies
Exhibit 5.15(a) Commitments
Exhibit 5.15(b) Oral Commitments
Exhibit 5.15(d) Required Consents
Exhibit 5.16 Rights (Patents, Trademarks, Copyrights, etc.)
Exhibit 5.17 Permits, Licenses, Etc.
Exhibit 5.19 Litigation
Exhibit 5.20 Interests in Competitors
Exhibit 5.21 Purchasers and Providers
Exhibit 5.23 Employees
Exhibit 5.24 Employee Benefit Plans
Exhibit 5.27 Union Representation
Exhibit 5.29 Environmental Matters
Exhibit 5.30(a) Tax Examination Dates
Exhibit 5.30(b) Examinations of Tax Returns by Governmental Agency
Exhibit 5.30(c) Proposal by Governmental Entity of Deficiency, Assessment or
Claim of Taxes
Exhibit 5.33 Inventory
Exhibit 5.35 Accounts Receivable and Accounts Payable
Exhibit 6.6 Financial Statements of Standard
Exhibit 6.8 Required Consents of the Purchasers
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of this 16th day
of April, 1999, by and among Standard Automotive Corporation, a Delaware
corporation having an office at 321 Valley Road, Hillsborough Township, New
Jersey 08876 ("Standard"); Critical Components Corp., a Delaware corporation
having an office at 280 Park Avenue, New York, New York 10017 ("CCC"); Ranor,
Inc., a Delaware corporation having an office at the same location as CCC
("Purchaser" and, collectively with Standard and CCC, the "Purchasers"); Ranor,
Inc., a Massachusetts corporation having an office at Bella Drive, the juncture
of Route 2 and Town Farm Road in Westminster, Massachusetts 01473 (the
"Company"); Dennis Normandin, Peter Normandin, Mark Normandin and David
Normandin, residing at the addresses set forth under their respective names on
the signature pages hereof (the "Shareholders"); and Five N Leasing Company, a
Massachusetts general partnership having an office at the same location as the
Company ("Five N" and, collectively with the Company, the "Sellers").
RECITALS:
WHEREAS, the Company is engaged in the business of cutting, forming,
rolling, welding, assembling, testing and finishing machine parts (the
"Business");
WHEREAS, Purchaser desires to purchase from the Sellers, and the Sellers
desire to sell to Purchaser, substantially all of the assets used in the
Business on the terms and conditions set forth in this Agreement;
WHEREAS, Standard has entered into an agreement to become the record and
beneficial owner of all of the issued and outstanding capital stock of CCC, CCC
is the record and beneficial owner of all of the issued and outstanding capital
stock of Purchaser, and the Shareholders are the record and beneficial owners of
all of the issued and outstanding capital stock of the Company; and
WHEREAS, the Shareholders are the only general partners in Five N, and
Five N owns certain real property used in the Business;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements of the parties hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS
1.1 "Acquired Assets" means all the assets, business, properties,
production facilities (including real property, buildings, machines, technical
equipment, tools and other appliances, furniture, fixtures and other equipment),
contracts, claims and other rights of the
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Company of whatever kind and nature, tangible or intangible, real or personal,
existing or hereafter acquired, and wherever located, other than the Excluded
Assets, that are owned by the Sellers and used in connection with the Business,
including all of the right, title and interest of the Sellers in and to the
following assets (all of which shall be deemed to constitute assets that are
used in connection with the Business):
(a) the Business as a going concern, the goodwill pertaining thereto
and all of the Company's right, title and interest in and to the name
"Ranor, Inc.", and all other names used by the Company, as well as all
logos relating thereto;
(b) all raw materials, work-in-progress and finished products of the
Company and all other items of inventory owned by the Company
(collectively, the "Inventory");
(c) all personal property and interests therein, including all
vehicles, machinery, equipment (including equipment which has previously
been fully depreciated and all equipment loaned to customers), furniture,
fixtures and non-inventory supplies (including containers, packaging and
shipping material, tools and spare parts) and all other tangible personal
property used in connection with the Business including, but not limited
to, the property listed on Exhibit 5.13 (collectively, the "Equipment");
(d) all rights used in connection with the Business relating to
copyrights, licenses, patents, trademarks, trademark rights, tradenames,
service marks, service right marks, trade secrets, shop rights, know-how,
proprietary processes, technical information, techniques, discoveries,
designs, manufacturing, engineering and other drawings, engineering data
and design and engineering specifications, proprietary rights and
non-public information and registrations, reissues and extensions thereof
and applications and licenses therefor, including, but not limited to, the
items listed on Exhibit 5.16 (collectively, the "Rights");
(e) all books and records of the Company including all in-house
mailing lists, other customer and supplier lists, trade correspondence,
production and purchase records, promotional literature, data storage
tapes and computer disks, computer software, order forms, accounts payable
records (including invoices, correspondence and all related documents),
accounts receivable ledgers, all documents relating to uncollected
invoices, and all shipping records;
(f) all corporate opportunities relating to the Business;
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(g) all accounts, notes and other receivables of the Company and all
advance payments, prepaid items, rights to offset, claims and credits of
all kinds of the Company;
(h) all real property used in connection with the Business, together
with all fixtures attached thereto, as such real property is set forth in
Exhibit 1.1(h) (collectively, the "Real Property");
(i) all plans, contracts, financing commitments and other rights
with respect to the Addition;
(j) the Commitments, except to the extent excluded pursuant to
Section 10.3(b) and;
(k) all permits, licenses, security clearances, franchises,
approvals and authorizations from any governmental or non-governmental
entity that relate to the operations of the Business, including but not
limited to those items listed on Exhibit 5.17 (collectively, the
"Permits"), except to the extent that transfer thereof is restricted as
described in Exhibit 5.17.
1.2 "Addition" means the new plant addition, of approximately 25,000
square feet, under construction next to the existing facility of the Company in
Westminster, Massachusetts, including the items of Equipment identified on
Exhibit 5.13 as being included therein;
1.3 "Addition Adjustment" means the lesser of (a) the amount expended
prior to the Closing Date in the construction of the Addition and the
acquisition of Equipment therefor and (b) four million five hundred thousand
dollars ($4,500,000).
1.4 "Adjusted December 31, 1998 Balance Sheet" has the meaning set forth
in Section 2.2.
1.5 "Affiliate" means, as applied to any person, any other person directly
or indirectly controlling, controlled by, or under common control with, that
person. For purposes of this definition, "control" (including with correlative
meanings, the terms "controlling", "controlled by", and "under common control
with") as applied to any person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
that person or entity, whether through the ownership of voting securities, by
contract, or otherwise.
1.6 "Ancillary Documents" has the meaning set forth in Section 9.3.
1.7 "Assumed Liabilities" has the meaning set forth in Section 2.2.
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1.8 "Business" has the meaning set forth in the preamble of this
Agreement.
1.9 "CCC Shares" means shares of common stock of CCC issuable upon full or
partial conversion of any Note.
1.10 "Closing Date Balance Sheet"has the meaning set forth in Section 3.3.
1.11 "Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute.
1.12 "Commitments" means all agreements, arrangements and contracts,
including all amendments thereto (or where they are verbal, written summaries of
the materials terms thereof), fixed or contingent, (a) disclosed on Exhibit
5.15(a) or (b) excluded from Exhibit 5.15(a) solely because such agreements,
arrangements and contracts do not exceed the dollar amount thresholds set forth
in Section 5.15(a) or (c) entered into prior to the Closing Date in compliance
with this Agreement; provided, however, that any agreement, arrangement or
contract which is included in the Excluded Assets or the Excluded Liabilities is
not included in the Commitments.
1.13 "Employee" has the meaning set forth in Section 5.23.
1.14 "Employee Benefit Plan" has the meaning set forth in Section 5.24.
1.15 "Excluded Assets" means (a) all cash and cash equivalents held by the
Company, after reduction by the Prepaid Contracts Adjustment; (b) the Vectra
Assets and (c) any Commitments excluded pursuant to Section 10.3(b).
1.16 "Excluded Liabilities" has the meaning set forth in Section 2.2.
1.17 "Financial Statements" means the draft financial statements of the
Company for the fiscal years ended December 31, 1998, 1997 and 1996 attached
hereto as Exhibit 5.10.
1.18 "Governmental Authority" means any court, administrative or
regulatory agency or commission, or other governmental authority or
instrumentality.
1.19 A party has "Knowledge" of a fact for purposes of this Agreement if
the party actually knows or after diligent inquiry should have known of such
fact.
1.20 "Note" means a convertible term note, in the principal amount of one
million three hundred twenty five thousand dollars ($1,325,000), subject to
reduction or increase in accordance with Section 3.3, in the form attached as
Appendix 1.20.
1.21 "Permits" has the meaning set forth in Section 1.1.
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1.22 "Permitted Encumbrances" has the meaning set forth in Section 5.12.
1.23 "Prepaid Contracts Adjustment" has the meaning set forth in Section
3.3.
1.24 "Transferred Employee" has the meaning set forth in Section 12.1.
1.25 "Vectra Assets" means the assets set forth on Exhibit 1.25.
1.26 Other Terms. Other terms may be defined elsewhere in the text of this
Agreement and, unless otherwise indicated, shall have such meaning throughout
this Agreement.
2. SALE OF ACQUIRED ASSETS
2.1 Purchase and Sale of Acquired Assets. Upon and subject to the terms
and conditions of this Agreement, the Sellers jointly and severally agree to
sell, assign, transfer, convey and deliver to the Purchasers, at the Closing,
and the Purchasers agree to purchase and accept, all right, title and interest
in and to the Acquired Assets.
2.2 Assumption of Certain Liabilities. (a) Upon the terms and subject to
the conditions of this Agreement, at the Closing, Purchaser agrees to assume,
pay, perform and discharge when due, all liabilities or obligations listed in
this Section 2.2, and only such liabilities or obligations listed in this
Section 2.2, whether arising before or after the Closing and whether known or
unknown, fixed or contingent (the "Assumed Liabilities"):
(i) All liabilities set forth on the summary adjusted balance sheet
and income statement of the Company as of December 31, 1998, a copy of
which is included as Exhibit 2.2 (the "Adjusted December 31, 1998 Balance
Sheet") or arising thereafter in the ordinary course of business; and
(ii) all liabilities for payment or performance under the terms of
the Commitments, except Commitments excluded pursuant to Section 10.3(b).
(b) Notwithstanding anything herein to the contrary or any other writing
to the contrary, Purchaser shall assume only the Assumed Liabilities, and
neither Purchaser nor any of its Affiliates shall assume any other liability or
obligation of the Sellers (or any predecessor owner of all or part of the
Business) of whatever nature whether presently in existence or arising
hereafter. All such other liabilities and obligations shall be retained by and
remain obligations of the Sellers (or any such predecessor owner) (all such
liabilities and obligations not being assumed being herein referred to as the
"Excluded Liabilities"). Without limiting the generality of the foregoing, the
Excluded Liabilities shall include the following:
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(i) all liabilities and obligations which are attributable to any of
the Excluded Assets, or associated with the realization of the benefits of
any of the Excluded Assets;
(ii) all Tax liabilities (excluding the Permitted Encumbrances);
(iii) all liabilities and obligations relating to compensation and
any pension, deferred compensation, vacation, medical benefit, life
insurance, severance or other employee health or safety matters and any
other employee benefit plans, programs or arrangements associated with or
relating to the employment in the Business, prior to the Closing, of any
employee or former employee (including, but not limited to, all Employee
Benefit Plans) and all liabilities and obligations relating to or arising
from the employment or cessation of employment of any such employee prior
to the Closing, except to the extent that such liabilities are accrued on
the Closing Date Balance Sheet;
(iv) all liabilities and obligations arising from worker's
compensation claims relating to pre-Closing events;
(v) all liabilities and obligations covered, but only to the extent
covered, by any insurance maintained by the Sellers or any of their
respective Affiliates;
(vi) Commitments excluded pursuant to Section 10.3(b);
(vii) all liabilities and obligations arising from the suits, claims
and actions described on Exhibit 5.19; and
(viii) all other liabilities and obligations of the Sellers to the
extent not relating to the Business.
2.3 Delivery of Possession and Instruments of Transfer. At the Closing,
the Sellers shall deliver to Purchaser possession of all instruments of transfer
requested by and satisfactory to Purchaser and its counsel for the consummation
of the transactions contemplated under this Agreement and as are necessary to
vest in Purchaser all rights, title and interest of the Sellers in and to the
Acquired Assets, free and clear of any lien, encumbrance, security agreement,
equity, option, claim, charge or restriction, except for the Permitted
Encumbrances.
3. CONSIDERATION
3.1 Cash Consideration. The Purchasers shall pay to the Company, at the
Closing, cash equal to (a) twenty one million two hundred thousand dollars
($21,200,000) plus (b)
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the Addition Adjustment, minus (c) the adjustments set forth in Section 3.3,
minus (d) any Deposit which is applied against the Purchase Price.
3.2 Other Consideration.
(a) The Purchasers shall deliver to the Company, at the Closing,
four Notes.
(b) At the Closing, Purchaser will enter into an Employment
Agreement with each of Dennis Normandin, Peter Normandin, Mark Normandin
and David Normandin, in the form attached as Appendix 3.2(b).
(c) The Purchasers shall deliver to the Company any Additional Notes
provided for in Section 7.8.
3.3 Purchase Price Adjustments. (a) The cash consideration payable at
Closing shall be reduced by the following amounts:
(i) an amount (the "Prepaid Contracts Adjustment") equal to
the amount by which (A) the total amounts billed and received by the
Company for all items of work-in-progress exceeds (B) the sum of the
products of (I) the total amount to be received by the Company
pursuant to the contract relating to each such item multiplied by
(II) the percentage of completion of such contract, which shall be
the best indication of percentage of completion in order to comply
with generally accepted accounting principles and in a manner
consistent with the Financial Statements; and
(ii) an amount (the "Net Book Value Adjustment") equal to the
amount by which five million eight hundred five thousand dollars
($5,805,000) exceeds the Adjusted Net Book Value.
"Adjusted Net Book Value" means the book value of the Acquired Assets plus the
Prepaid Contracts Adjustment less (i) the book value of the Addition and (ii)
the Assumed Liabilities. The calculations required to determine the foregoing
adjustments shall be made in accordance with the "Analysis of Adjustments"
format set forth as Appendix 3.3(a), and in manner consistent with the example
set forth as Appendix 3.3(b); it being understood and agreed that, if the actual
financial condition of the Company as of the Closing is the same as the
projected financial condition of the Company set forth in Appendix 3.3(b) (as to
which projections, no representation or assurance is or shall be deemed made or
given), then the cash purchase price at Closing shall equal the amount set forth
for such line in Appendix 3.3(b). The Analysis of Adjustments shall be prepared
and delivered to the Purchasers by the Sellers three business days prior to the
Closing Date.
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(b) Within sixty days following the Closing Date, Purchaser shall prepare
(in a manner consistent with the Adjusted December 31, 1998 Balance Sheet,
including the adjustments referred to therein as "Owner's Adjustments") and
deliver to the Company a statement of financial condition of the Business, which
shall include a calculation of Adjusted Net Book Value, as of the time
immediately after the Closing (the "Closing Date Balance Sheet"). Unless the
Company notifies Purchaser in writing within thirty days after receipt of the
Closing Date Balance Sheet that the Company objects to the calculation of the
Adjusted Net Book Value in such Closing Date Balance Sheet, and specifies in
reasonable detail the basis for such objection and the amount in dispute (the
"Notice of Objection"), the Closing Date Balance Sheet shall become final and
binding upon the parties for purposes of this Section 3.3. During the thirty day
period following the Company's receipt of the Closing Date Balance Sheet, the
Company and its representatives shall have the right to review all books and
working papers of Purchaser and its accountants related to the preparation of
the Closing Date Balance Sheet. If the Company provides such Notice of Objection
to Purchaser within such thirty day period, the Company and Purchaser shall
negotiate in good faith to resolve the issues set forth in the Notice of
Objection, during the thirty day period following Purchaser's receipt thereof.
During such thirty day period, the Company and its representatives shall have
the right to review all the working papers of Purchaser and its accountants
related to the Notice of Objection, the calculations therein and the bases
therefor. If the Company and Purchaser are unable to resolve such objections
within such thirty day period, the disputed matters shall be submitted to a
public accounting firm mutually agreed upon by the Company and Purchaser or, if
the Company and Purchaser are unable to so agree within ten days after the end
of such thirty day period, then the Company and Purchaser shall each select such
a firm and such firms shall jointly select a third firm to resolve the disputed
matters. The decision of the accounting firm shall be made by a writing
delivered to the Company and Purchaser, which writing shall contain a
certification that the accounting firm made its determination in conformity with
the provisions of this Agreement; and such decision with respect to the disputed
matters shall be final and binding on the parties. The fees, costs and expenses
of the accounting firm retained to resolve any such dispute shall be borne
equally by the Company and Purchaser.
(c) If the final Closing Date Balance Sheet shall disclose that Adjusted
Net Book Value is less than five million eight hundred five thousand dollars
($5,805,000) (after taking into account any adjustments pursuant to Section
3.3(a)), then the principal amount of each Note shall be reduced (with
retroactive effect to the time of Closing) by one-fourth of the difference
between five million eight hundred five thousand dollars ($5,805,000) and the
Adjusted Net Book Value. In the event that (i) pursuant to Section 3.3(a)(ii)
there has been a reduction in the cash consideration payable at the Closing in
the amount of the Net Book Value Adjustment, and (ii) the final Closing Date
Balance Sheet shall disclose that the Adjusted Net Book Value exceeds the
preliminary Adjusted Net Book Value (determined at
8
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the Closing and on the basis of which the Net Book Value Adjustment was
calculated), then the principal amount of each Note shall be increased (with
retroactive effect to the time of Closing) by one-fourth of the amount by which
(X) the Adjusted Net Book Value as shown on such final Closing Date Balance
Sheet exceeds (Y) the preliminary Net Book Value as determined at the Closing;
provided, however, that in no event shall the aggregate amount of such increases
exceed the amount of the Net Book Value Adjustment.
3.4 Allocation of Consideration for Tax Purposes. The parties agree to
allocate the consideration paid pursuant to this Agreement in the manner and in
accordance with the values specified in Appendix 3.4 for tax purposes. None of
the parties shall, at any time hereafter, in any tax or information return filed
with any state or federal agency or in any audit, other tax proceeding or
otherwise, take a position which is contrary to such allocation.
4. CLOSING
4.1 Closing and Closing Date. Subject to the provisions of this Agreement,
the consummation of the transactions contemplated by this Agreement (the
"Closing") shall be held at the offices of Posternak, Blankstein & Lund, L.L.P.
("Sellers' Counsel") at 10:00 A.M. (local time), on June 15, 1999, or at such
later date, place or time as the parties shall otherwise mutually agree upon
(the date of the Closing being referred to herein as the "Closing Date"). The
Purchasers may extend the Closing Date through June 30, 1999 (or any earlier
date) by giving notice to the Sellers not later than June 8, 1999 and by placing
a deposit (the "Deposit") of two hundred thousand dollars ($200,000) in escrow
with Sellers' Counsel pursuant to an escrow agreement in the form attached as
Appendix 4.1(a). All Closing transactions shall be deemed to take place
simultaneously, and no Closing transaction shall be deemed consummated until all
transactions to take place at the Closing have been consummated. The actions and
documents necessary or contemplated for the consummation of the transactions
contemplated by this Agreement are set forth in the form of Closing Memorandum
attached hereto as Appendix 4.1(b).
5. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
As an inducement to the Purchasers to enter into this Agreement and
perform their obligations hereunder, the Sellers and Shareholders jointly and
severally hereby represent and warrant to the Purchasers as follows:
5.1 Organization, Good Standing, Power, Etc. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to own the Acquired Assets owned by it and to carry on the
operations of the Business as presently being conducted by it. The Company is
duly qualified or licensed to do business and is in good standing in each of the
jurisdictions listed on Exhibit 5.1, which are all the jurisdictions in
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which the nature of the activities of the Business conducted or the character of
the Acquired Assets owned, used or held for use therein require such
qualification or licensing and the failure to be so qualified or licensed would
adversely affect in any material respect the continuing conduct of the Business
as heretofore conducted or the value of the Acquired Assets. Five N is a general
partnership validly existing under the laws of Massachusetts and has the
requisite partnership power and authority to own the Acquired Assets owned by
it.
5.2 Accuracy of Information. None of the information which has been or may
be furnished by the Sellers or the Shareholders or any of their representatives
to Purchaser or any of its representatives in connection with the transactions
contemplated hereby, which is contained in this Agreement (including the
Exhibits hereto) or any Ancillary Document or any certificate or instrument
delivered or to be delivered by or on behalf of the Sellers or the Shareholders
in connection with the transactions contemplated hereby, does or will contain
any untrue statement of a material fact or omit a material fact necessary to
make the information contained herein or therein not misleading.
5.3 Articles of Organization and By-Laws; Partnership Agreement. The
Articles of Organization of the Company, the By-Laws of the Company and the
Partnership Agreement of Five N are in full force and effect.
5.4 Subsidiaries, Divisions and Affiliates. Except as set forth on Exhibit
5.4, there are no subsidiaries, divisions or Affiliates of the Company. Except
as set forth on Exhibit 5.4, the Business has been conducted solely by the
Company and not through any Affiliate, joint venture or other entity, person or
under any other name.
5.5 Equity Investments. Except as set forth in Exhibit 5.5, the Company
does not own or have any rights to any equity interest, directly or indirectly,
in any corporation, partnership, joint venture, firm or other entity.
5.6 Authorization of Agreement. The Company has all corporate power and
authority to execute and deliver this Agreement and the other agreements,
instruments and certificates to be executed and delivered pursuant hereto and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company and the Shareholders, and the execution and delivery of the other
agreements, instruments and certificates to be executed and delivered pursuant
hereto and the consummation of the transactions contemplated thereby have been
authorized by all necessary corporate and partnership action on the part of the
Sellers and the Shareholders. This Agreement has been duly executed and
delivered by the Sellers and the Shareholders and constitutes, and each other
agreement, instrument and certificate to be executed and delivered pursuant
hereto when duly executed and delivered by the Sellers and the Shareholders
party thereto will constitute, legal, valid and
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binding obligations of each Seller or Shareholder party thereto enforceable
against it or him in accordance with their terms.
5.7 Effect of Agreement. Except as set forth in Exhibit 5.7, the
execution, delivery and performance of this Agreement by the Sellers and the
Shareholders and the consummation by the Sellers and the Shareholders of the
transactions contemplated hereby, will not, with or without the giving of notice
and the lapse of time, or both, (a) violate any provision of the Articles of
Organization or By-laws of the Company, the Partnership Agreement of Five N, or
any law, statute, rule, regulation or executive order to which any of the
Sellers or the Shareholders are subject; (b) violate any judgment, order, writ
or decree of any court applicable to any of the Sellers or the Shareholders; or
(c) result in the breach of or conflict with any term, covenant, condition or
provision of, result in the modification or termination of, constitute a default
under, or result in the creation or imposition of any lien, security interest,
charge or encumbrance upon any of the Acquired Assets pursuant to, any corporate
charter, by-law, commitment, contract or other agreement or instrument,
including any of the Commitments, to which any of the Sellers or the
Shareholders are a party or by which any of the Acquired Assets is or may be
bound or affected or from which the Company derives benefit, which breach,
conflict, modification, termination, default or encumbrance described in this
clause (c) would be material to the Business or any of the Acquired Assets.
5.8 Restrictions. Except as otherwise disclosed in this Agreement, none of
the Sellers or the Shareholders is a party to any contract, commitment or
agreement, nor are Acquired Assets subject to, or bound or affected by, any
order, judgment, decree, law, statute, ordinance, rule, regulation or other
restriction of any kind or character, which would, individually or in the
aggregate, materially adversely affect the Business or any of the Acquired
Assets.
5.9 Governmental and Other Consents. No consent, authorization or approval
of, or exemption by, any Governmental Authority is required in connection with
the execution, delivery and performance by the Sellers or the Shareholders of
this Agreement or any of the instruments or agreements herein referred to, or
the taking of any action herein contemplated, provided that no representation or
warranty is made with respect to the requirement of filing a notification under
the "HSR Act" (as defined herein).
5.10 Financial Statements. The Financial Statements (a) have been prepared
in accordance with the books and records of the Company and generally accepted
accounting principles and practices consistently applied and (b) are accurate
and complete presentations of the financial position of the Company at their
respective dates and the results of operations and cash flows for the respective
periods covered thereby. All items that could have a material adverse effect on
the willingness of a prospective purchaser to acquire the Company
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have been disclosed in the Exhibits to this Agreement. There are no Assumed
Liabilities or other liabilities of the Business of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, and there
is no existing condition, situation or set of circumstances which could
reasonably be expected to result in any such liability, other than: (i)
liabilities as and to the extent fully reflected or reserved for on the Adjusted
December 31, 1998 Balance Sheet; (ii) liabilities for payment or performance
under the terms of the Commitments; and (iii) liabilities incurred since
December 31, 1998 in the ordinary course of business.
5.11 Absence of Certain Changes or Events. Except as set forth in Exhibit
5.11, since December 31, 1998, the Sellers have not: (a) suffered any adverse
change in, or the occurrence of any events which, individually or in the
aggregate, has or have had, or might reasonably be expected to have, a material
adverse effect on, the financial condition, results of operations or business of
the Company or the value of the Acquired Assets; (b) incurred damage to or
destruction of any material Acquired Asset or material portion of the Acquired
Assets, whether or not covered by insurance; (c) incurred any material
obligation or liability (fixed or contingent) except (i) current trade or
business obligations incurred in the ordinary course of business, none of which
were entered into for grossly inadequate consideration, (ii) obligations or
liabilities under the Commitments to the extent required thereby, and (iii)
obligations and liabilities under this Agreement; (d) made or entered into
contracts or commitments to make any capital expenditures in excess of fifty
thousand dollars ($50,000), except contracts and commitments relating to the
Addition; (e) mortgaged, pledged or subjected to lien or any other encumbrance
any of the Acquired Assets; (f) sold, transferred or leased any material
Acquired Asset or material portion of the Acquired Assets, or canceled or
compromised any debt or material claims, except in each case, in the ordinary
course of business; (g) sold, assigned, transferred or granted any rights under
or with respect to any licenses, agreements, patents, inventions, trademarks,
trade names, copyrights or formulae or with respect to know-how or any other
intangible asset including, but not limited to, the Rights; (h) amended or
terminated any of the contracts, agreements, leases or arrangements which
otherwise would have been set forth on Exhibit 5.15(a) hereto; (i) waived or
released any other rights of material value; or (j) entered into any
transactions not in the ordinary course of business which would, individually or
in the aggregate, materially adversely affect the Acquired Assets or the
Business.
5.12 Title to Acquired Assets; Absence of Liens and Encumbrances. (a) The
Sellers have good title to, and own outright, the Acquired Assets, which include
substantially all of the Company's assets reflected in the Adjusted December 31,
1998 Balance Sheet (except as sold, used or otherwise disposed of in the
ordinary course of business and except with respect to the Real Property, as to
which this representation is made to Sellers' and Shareholders' Knowledge), free
and clear of all mortgages, liens, charges, claims, security interests,
restrictions on use or transfer, defects as to title, or other encumbrances,
except the
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encumbrances set forth on Exhibit 5.12 (the "Permitted Encumbrances" and any
liens to be satisfied and discharged prior to or at the Closing); and (b)
subject to Section 8.2, at the Closing, the Sellers will transfer good and
marketable title to all Acquired Assets, free and clear of all mortgages, liens,
charges, claims, security interests, restrictions on use or transfer, defects as
to title, or other encumbrances, except the Permitted Encumbrances. The leases
and other agreements or instruments under which the Sellers hold, lease or are
entitled to the use of any real or personal property included in the Acquired
Assets are in full force and effect and all rentals, royalties or other payments
accruing thereunder have been duly paid. The Sellers enjoy peaceable and
undisturbed possession under all such leases, other agreements and instruments.
All Acquired Assets (except the Real Property, as to which this representation
is made to Sellers' and Shareholders' Knowledge) are in material conformance
with all applicable zoning and other laws, ordinances, rules and regulations,
and no notice of violation of any law, ordinance, rule or regulation thereunder
has been received by the Sellers.
5.13 Equipment. Exhibit 5.13 lists, as of March 31, 1999, all of the
Equipment (in excess of a fair market value of $3,000), indicating for each
piece of Equipment whether it is owned or leased, whether it is part of the
Addition and setting forth where it is located. Except as set forth in Exhibit
5.13, the Equipment includes all of the items of equipment, tooling, fixturing
and machinery owned by the Company and located within the Company's premises. No
item of tooling or fixturing loaned or supplied to the Company by a customer is
necessary, or utilized by the Company, for any purpose, other than for producing
products for such customer. Except as set forth on Exhibit 5.13, all of the
Equipment (a) has been maintained in accordance with industry standards and
generally has been suitable to the Company for the uses for which it was
designed or has been employed by the Company and (b) as of the date of its
installation, conformed in all material respects with any laws, ordinances,
regulations, orders or other similar governmental requirements relating to its
use, as the same were then in effect. The Sellers have not, through
modification, alteration or otherwise, caused any Equipment to cease to conform
in all material respects with any laws, ordinances, regulations, orders or other
similar governmental requirements relating to its use.
5.14 Insurance. There are no outstanding or unsatisfied written
requirements or verbal recommendations imposed or made by any of the Company's
current insurance companies with respect to current policies covering any of the
Acquired Assets, or by any Governmental Authority requiring or recommending that
any repairs or other work be done on or with respect to, or requiring or
recommending any equipment or facilities be installed on or in connection with,
any of the Acquired Assets. The Company carries, and (with respect to any period
for which a claim against the Company may still arise) has always carried
product liability insurance, worker's compensation insurance in reasonable
amounts, and other insurance which is reasonably necessary to the conduct of the
Company's business. Exhibit 5.14 hereto sets forth a correct and complete list
of (a) all currently effective
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insurance policies and bonds covering the Acquired Assets, the Business or the
executive officers of the Company, and their respective annual premiums (as of
the last renewal or purchase of new insurance) and (b) for the five-year period
ending on the date hereof, (i) all accidents, casualties or damage occurring on
or to the Acquired Assets or relating to the business or products of the Company
which in the aggregate are in excess or ten thousand dollars ($10,000) and (ii)
claims for product liability, damages, contribution or indemnification and
settlements (including pending settlement negotiations) relating thereto which
in the aggregate are in excess of ten thousand dollars ($10,000). Except as set
forth on Exhibit 5.14, as of the date hereof there are no disputes with
underwriters of any such policies or bonds, and all premiums due and payable
have been paid. There are no pending or threatened terminations or premiums
increases with respect to any of such policies or bonds and there is no
condition or circumstance applicable to the Business, other than the sale of the
Acquired Assets pursuant to this Agreement, which may result in such termination
or increase. The Company and the Acquired Assets are in compliance with all
conditions contained in such policies or bonds, except for noncompliance which,
individually or in the aggregate, would not have a material adverse affect on
the Business or the Acquired Assets.
5.15 Agreements, Arrangements, Etc.
(a) Except as set forth on Exhibit 5.15(a) and except as relates to the
Excluded Assets or Excluded Liabilities, none of the Sellers or the Shareholders
is a party to, nor are the Sellers nor any of the Acquired Assets bound by, any
of the following types of agreements, arrangements and contracts relating to the
Business:
(i) any lease agreement (whether as lessor or lessee);
(ii) any license agreement, assignment or contract (whether as
licensor or licensee, assignor or assignee) relating to trademarks, trade
names, patents, or copyrights (or applications therefor), unpatented
designs or processes, formulae, know-how or technical assistance, or other
proprietary rights;
(iii) any employment or other contract or agreement with an employee
or independent contractor which (A) may not be terminated without
liability to the Company upon notice to the employee or independent
contractor of not more than 30 days, or (B) provides payments (contingent
or otherwise) of more than thirty thousand dollars ($30,000) per year
(including all salary, bonuses and commissions);
(iv) any agreement, contract or order with any buying agent,
supplier or other individual or entity who assists, provides or is
otherwise involved in the acquisition, supplying or providing Acquired
Assets or other goods to the Company, in each case in excess of twenty
thousand dollars ($20,000);
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(v) any non-competition, secrecy or confidentiality agreements;
(vi) any agreement or other arrangement for the sale of goods or
services by the Company to any other person (including any Governmental
Authority) in excess of fifty thousand dollars ($50,000);
(vii) any agreement with any labor union;
(viii) any agreement with any distributor, brokerage company,
leasing company, management company or any other individual or entity who
assists, places, brokers or otherwise is involved with the marketing or
distribution of the Company's products to its customers;
(ix) any joint venture or partnership agreement with any other
person or entity (except the partnership agreement of Five N);
(x) any agreement guaranteeing, indemnifying or otherwise becoming
liable for the obligations or liabilities of another;
(xi) any agreement with any bank or other person, for the borrowing
or lending of money or payment or repayment of draws on letters of credit
or currency swap or exchange agreements (other than purchase money
security interests which may, under the terms of invoices from its
suppliers, be granted to suppliers with respect to goods so purchased);
(xii) any agreement with any bank, finance company or similar
organization which acquires from the Company receivables or contracts for
sales on credit;
(xiii) any agreement granting any person a lien, security interest
or mortgage on any of the Acquired Assets, including, without limitation,
any factoring or agreement for the assignment of receivables or inventory;
(xiv) any agreement for the incurrence of any capital expenditure in
excess of twenty thousand dollars ($20,000);
(xv) any advertising, publication or printing agreement;
(xvi) any agreement which restricts the Company from doing business
anywhere in the world;
(xvii) any agreement giving any party the right to renegotiate or
require a reduction in prices or the repayment of any amount previously
paid;
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(xviii) any agreement, arrangement or contract granting any right of
first offer, right of first refusal or similar preferential right to
purchase in respect of any of the Acquired Assets; or
(xix) any other agreement or contract, not included in or expressly
excluded from the terms of the foregoing clauses (i) through (xviii),
materially affecting the Acquired Assets or the Business.
The copies of all Commitments delivered to the Purchasers by the Sellers are
correct and complete.
(b) Each of the Commitments is valid, in full force and effect and
enforceable by the Sellers party thereto in accordance with its terms.
(c) Except as set forth on Exhibit 5.15(a), the Sellers have fulfilled, or
have taken all action reasonably necessary to enable them to fulfill when due,
all of their obligations under the Commitments, except where the failure to do
so would not, individually or in the aggregate, have a material adverse affect
on the Business or the Acquired Assets. There has not occurred, nor has the
Company received any notice of, any default by the Sellers or any event which,
with the lapse of time or the election of any person other than the Sellers,
will become a default, nor has there occurred any default by others or any event
which, with the lapse of time or the election of the Sellers, will become a
default under any of the Commitments, except for such defaults, if any, which
(a) have not resulted and will not result in any material loss to or liability
of the Company or (b) have been described on Exhibit 5.15(a). The Sellers are
not in arrears in any material respect with respect to the performance or
satisfaction of the terms or conditions to be performed or satisfied by them
under any of the Commitments and no waiver or variance has been granted by any
of the parties hereto.
(d) Except as set forth on Exhibit 5.15(d), the assumption of the
Commitments by Purchaser pursuant to this Agreement does not require the
approval, consent or waiver of any of the other parties thereto and, with
respect to any of the Commitments which do require the approval, consent or
waiver of the other parties thereto, the Sellers will have obtained such
approval, consent or waiver prior to the closing and has provided or will
provide Purchaser with copies thereof.
(e) Exhibit 5.15(e) sets forth a summary of the respective material terms
of, and course of dealing under, each oral Commitment that (i) imposes monetary
obligations (on a per Commitment basis) in excess of twenty thousand dollars
($20,000) or may not be fully performed (or terminated or canceled without
penalty or further obligation) within 18 months from the date hereof and (ii) is
related to the Business.
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5.16 Patents, Trademarks, Copyrights, Etc. Exhibit 5.16 sets forth, with
respect to each Right which has been registered with a Governmental Authority or
for which an application for such registration has been made, (i) the registered
and beneficial owner and the expiration date thereof or the applicant therefor
and (ii) the product, service, or products or services of the Company which make
use of, or are sold, licensed or made thereunder. Except for rights owned by
customers of the Company, the Rights constitute all copyrights, licenses,
patents, trademarks, trademark rights, tradenames, service marks, service right
marks, trade secrets, shop rights, know-how, proprietary processes, technical
information, techniques, discoveries, designs, drawings and specifications
necessary for the conduct of the Business, as currently conducted. None of the
rights owned by customers of the Company and utilized by the Company is
necessary for, or utilized by the Company for, any purpose other than in
connection with manufacturing of products for such customer. The Sellers have
not sold, assigned, transferred, licensed, sub-licensed or conveyed the Rights,
or any of them, or any interest in the Rights, or any of them, to any person,
and have the entire right, title and interest (free and clear of all security
interests, liens and encumbrances of every nature) in and to the Rights. Neither
the Rights nor the use thereof by the Company has been nor is the subject of any
pending or threatened opposition, interference, cancellation, nullification,
conflict, concurrent use, litigation or other proceeding. Except as set forth on
Exhibit 5.16, the conduct of the Business and the use of the Acquired Assets
does not and will not conflict with, or infringe, legally enforceable rights of
third parties. To the Knowledge of the Sellers, the Rights have not been used,
and no use is now being made, by any entity except the Company. Except as set
forth on Exhibit 5.16, there is no infringement of any Right.
5.17 Permits, Licenses, Security Clearances, Etc. Exhibit 5.17 sets forth
a list of each material Permit, together with the name of the Governmental
Authority issuing such Permit. Such Permits are valid and in full force and
effect and, except as set forth in Exhibit 5.17, are transferable by the
Sellers, and none of such Permits will be terminated or impaired or become
terminable as a result of the transactions contemplated by this Agreement. Upon
consummation of such transactions, except as set forth in Exhibit 5.17,
Purchaser will have all of the right, title and interest of the Sellers in the
Permits.
5.18 Compliance with Applicable Laws. The conduct by the Sellers of the
Business does not violate or infringe, and there is no basis for any claims of
violation or infringement of, any law, statute, ordinance, regulation or
executive order (including, without limitation, the Occupational Safety and
Health Act, the National Environmental Policy Act and the Foreign Corrupt
Practices Act and the respective regulations thereunder and similar applicable
state laws and regulations) currently in effect, except in each case for
violations or infringements which do not and will not, individually or in the
aggregate, have a material adverse affect on the Acquired Assets or the
Business. The Sellers are not in default under any governmental or
administrative registration, membership or license issued to them, under
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any governmental or administrative order or demand directed to them, or with
respect to any order, writ, injunction or decree of any court which, in any
case, materially adversely affects the financial condition, results of
operations or business of the Company or the value of the Acquired Assets.
5.19 Litigation. Except as set forth on Exhibit 5.19, there is no claim,
action, suit, proceeding, arbitration, reparation, investigation or hearing or
notice of hearing, pending or threatened in writing, before any court or
governmental, administrative or other competent authority or private arbitration
tribunal against or relating to or materially affecting (directly or indirectly,
including by way of indemnification) the Business or any of the Acquired Assets,
or the transactions contemplated by this Agreement; nor are any facts known to
the Company, which it believes could reasonably give rise to any such claim,
action, suit, proceeding, arbitration, investigation or hearing, which may have
any adverse effect, individually or in the aggregate in excess of ten thousand
dollars ($10,000) upon the Business, the value of the Acquired Assets or the
transactions contemplated by this Agreement. The Company has not waived any
statute of limitations or other affirmative defense with respect to any of its
obligations. There is no continuing order, injunction or decree of any court,
arbitrator or governmental, administrative or other competent authority to which
the Company is a party, or to which the Company or any of the Acquired Assets
are subject. Neither the Company, the Shareholders nor any current officer,
director, partner or employee of the Company or any Affiliate of the Company has
been permanently or temporarily enjoined or barred by order, judgment or decree
of any Governmental Authority from engaging in or continuing any conduct or
practice in connection with the Business.
5.20 No Interest in Competitors. Set forth on Exhibit 5.20 is a list
describing the extent to which the Company, the Shareholders or any other
officer or director of the Company or any Affiliate of any of the foregoing,
directly or indirectly, owns more than a five percent (5%) interest in or
controls or is an employee, officer, director, or partner of or participant in
(but only to the extent such a participation exceeds one percent), or consultant
to any corporation, partnership, limited partnership, joint venture, association
or other entity which is a competitor, supplier or customer of the Company or
has any type of business or professional relationship with the Company.
5.21 Customers, Suppliers, Distributors and Agents. The Sellers have no
Knowledge that any customer, client, distributor, supplier or any other person
or entity with material business dealings with the Business and relating to the
Acquired Assets will terminate or substantially reduce the extent of such
relationship at any time prior to or after the Closing Date. Except for common
public information, the Company has no Knowledge of (1) any other existing or
contemplated modification or change in the business relationship of the Company
with, or (2) any existing condition or state of facts which has affected
adversely, will adversely affect (in more than a minimal manner), or has a
reasonable
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likelihood of adversely affecting the business of the Company with its
customers, clients, suppliers or other persons or entities with material
business dealings with the Company or which has prevented or will prevent such
business from being carried on by Purchaser after the Closing in essentially the
same manner as it is currently carried on by the Company. Exhibit 5.21 sets
forth as to the Company (a) the twenty largest (in dollar value) purchasers of
its goods and/or services and (b) the twenty largest (in dollar value) providers
of goods and/or services to it, in each case with respect to each of the fiscal
years ended December 31, 1998 and 1997.
5.22 Books and Records. The books of account and other financial and
corporate records of the Company are in all material respects complete, correct
and up to date.
5.23 Employees. Exhibit 5.23 sets forth a correct and complete list as of
March 31, 1999 of all individuals employed as common law employees by the
Company in the conduct of the Business (each, an "Employee"), their date of
hire, their present position, rate of compensation (including cash and non-cash
compensation) and accrued vacation (such Exhibit being subject to change between
the date hereof and the Closing Date as a result of changes in the ordinary
course of business). Except as set forth in Exhibit 5.23, there are no Employees
who are on disability or not actively at work performing services for the
Business as of the date hereof. Except as disclosed on Exhibit 5.23, the Company
has no liabilities with respect to any independent contractors (or any
individual characterized by the Company as an independent contractor, whether or
not such individual is subsequently characterized as a common law employee of
the Company by a Governmental Authority) who perform or have performed services
for the Company in connection with the Business under any Employee Benefit Plans
or other benefit arrangement of any kind whatsoever or under any laws or
regulations applicable to the Business, including any liabilities under any
labor, employment or tax laws or regulations or imposed by common law.
5.24 Employee Benefit Plans. Except as described in Exhibit 5.24, the
Company does not maintain or have any obligation to contribute to any
hospitalization, health insurance, pension, retirement, profit sharing, stock
option or similar plans. Exhibit 5.24 sets forth a correct and complete list of
each and every employee benefit plan, including each pension, profit sharing,
stock bonus, bonus, deferred compensation, severance, stock option or purchase
plan, or other retirement plan, policy, agreement or arrangement, whether
written or oral, covering Employees, former employees or any director of the
Company (the "Employee Benefit Plans") at the Closing or at any time within the
five (5) year period prior to the Closing, including, but not limited to, an
"employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The Company has
delivered to Purchaser complete and accurate copies of (i) all Employee Benefit
Plans and all amendments thereto; (ii) the trust instrument or insurance
contract, if any, forming a part of the plans, and all amendments thereto; (iii)
the most recent
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and preceding year's Internal Revenue Service Form 5500 and all schedules
thereto for each Employee Benefit Plan required to file such Form; (iv) the most
recent Internal Revenue Service determination letter for each Employee Benefit
Plan intended to be qualified under Section 401(a) of the Internal Revenue Code,
or if no letter has been issued, any pending application to the Internal Revenue
Service for a determination letter regarding qualified tax-status; (v) any bond
required by Section 412 of ERISA; (vi) the current summary plan description of
each Employee Benefit Plan subject to ERISA or any other similar descriptive
materials, and (vii) the most recent accountings with respect to any Employee
Benefit Plan funded through a trust. To the Sellers' Knowledge, the Company has
substantially complied with all of the rules and regulations governing each of
the Employee Benefit Plans, including, without limitation, rules and regulations
promulgated pursuant to ERISA and the Code, by the Department of Treasury,
Department of Labor, and the Pension Benefit Plans Guaranty Corporation
("PBGC"), and each of the Employee Benefit Plans now in existence has since its
inception been operated, in all material respects, in accordance with its
provisions and is in substantial compliance with such rules and regulations. To
the Sellers' Knowledge, neither the Company, the Shareholders nor any Employee
Benefit Plans maintained by the Company or any fiduciaries thereof have engaged
in any prohibited transaction, as that term is defined in Section 406 of ERISA
or Section 4975 of the Code, that could result in a tax or penalty in any
material amount, nor have any of them committed any breach of fiduciary
responsibility with respect to any of the Employee Benefit Plans that could
result in any material liability, and the Sellers do not have any Knowledge that
any other person has not substantially complied with these rules and
regulations. Neither the Company nor any other corporation or organization
controlled by or under common control with the Company within the meaning of
Section 4001 of ERISA has at any time contributed to any "multiemployer plan",
as that term is defined in Section 4001 of ERISA. No transaction contemplated by
this Agreement will result in material liability to the PBGC under Section
302(c)(ii), 4062, 4063, 4064 or 4069 of ERISA, or otherwise, with respect to
Purchaser or any corporation or organization controlled by or under common
control with Purchaser within the meaning of Section 4001 of ERISA. The Company
has not received any written notice of any pending or threatened claims (other
than routine claims for benefits) by or on behalf of any Employee Benefit Plan,
by any person covered thereby or any regulatory agency, which allege violations
of law which could reasonably be expected to result in material liability to the
Purchasers. No Company securities, real property or other property of the
Company or any Shareholder is included in the assets of any Employee Benefit
Plan. All contributions and other payments required to be made by the Company to
any Employee Benefit Plan with respect to any period prior to and including the
Closing Date have been made or reserves adequate for such contributions or other
payments have been or will be set aside therefor and have been reflected in the
Financial Statements attached as Exhibit 5.10.
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5.25 Powers of Attorney. No person has any power of attorney to act on
behalf of the Company in connection with any of the Company's properties or
business affairs other than such powers to so act as normally pertain to the
officers of the Company.
5.26 Sufficiency of Acquired Assets. The Acquired Assets constitute, and
on the Closing Date will constitute, all of the assets and property of the
Business, except for the Excluded Assets. There are no assets, properties or
other rights, other than the Acquired Assets, that are used in or are necessary
to the Business, except for the Excluded Assets, and except for tooling and
fixtures supplied to the Company by customers, which is not owned or leased by
the Company but is from time to time located within the Company's premises and
used in connection with the Business.
5.27 Labor Disputes, Unfair Labor Practices. The Company is not engaged in
any labor practice which would have a material adverse affect on the Acquired
Assets or the Business. There is no pending or affirmatively threatened (i)
unfair labor practice complaint, charge, labor dispute, strike, slowdown,
walkout or work stoppage before the National Labor Relations Board or any other
authority or (ii) grievance or arbitration proceeding arising out of or under a
collective bargaining agreement involving employees of the Company. There have
been no strikes, labor disputes, slow-downs, walkouts, or work stoppages
involving employees of the Company during the last five (5) years. Union
representation of employees of the Company exists only as set forth on Exhibit
5.27. The Company has not received notice from any of its employees of such
employee's intent to terminate his or her employment or bring any action against
the Company for any reason related to the transactions contemplated by this
Agreement or for any other reason.
5.28 Past Due Obligations. Except as set forth in Exhibit 5.28, no past
due obligations of the Sellers over $5,000 have given rise or shall give rise
within 5 days after the Closing Date (except as such will be performed by the
Sellers prior to the Closing so as to relieve the Purchasers of all liability
therefor) to any additional liability to the Purchasers on account of their
being past due.
5.29 Environmental Matters.
(a) Except as set forth on Exhibit 5.29, (i) the Sellers have secured, and
to their Knowledge are in material compliance with, all environmental permits
material to the Business, all of which are freely transferable under the
circumstances of the transactions contemplated hereby; (ii) to their Knowledge
the Sellers are in material compliance with all environmental laws, regulations
and orders applicable to the Business, including all laws, regulations and
orders governing or relating to asbestos removal and abatement; (iii) to the
Knowledge of the Sellers and the Shareholders, the Company has not transported,
stored, treated or disposed, or allowed or arranged for any third parties to
transport, store, treat or dispose, of any Hazardous Substances or petroleum
products to or at any location other than
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a site then lawfully permitted to receive such Hazardous Substances or petroleum
products for such purposes, or had performed, arranged for or allowed by any
method or procedure such transportation, storage, treatment or disposal in
contravention of any laws or regulations nor has the Company disposed of, or
allowed or arranged for any third parties to dispose of, Hazardous Substances or
petroleum products upon property owned or leased by it in contravention of any
applicable laws or regulations; (iv) to the Knowledge of the Sellers and the
Shareholders, there has not occurred, nor is there presently occurring, a
Release of any Hazardous Substance or petroleum products on, into or beneath the
surface of any parcel of real property in which the Company has an ownership
interest or any leasehold interest in contravention of any applicable laws or
regulations; (v) the Company has not transported or disposed of, or allowed or
arranged for any third parties to transport or dispose of, any Hazardous
Substance or petroleum products to or at a site which, pursuant to the U.S.
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), has been placed on the National Priorities List; (vi) the
Sellers have not received notice and the Sellers have no Knowledge of any facts
which could give rise to any substantive notice, that any of the Sellers is a
potentially responsible party for a federal or state environmental cleanup site
or for corrective action under CERCLA or notice of any other Environmental
Claim; (vii) the Company has not undertaken (or been requested to undertake) any
response or remedial actions or cleanup actions of any kind relating to
Hazardous Substances at the request of any federal, state or local governmental
entity, or at the request of any other person or entity; (viii) the Sellers have
not entered into or agreed to any currently effective court decree or order, and
the Sellers are not subject to any currently effective judgment, decree or order
relating to compliance with any environmental law or to investigation or cleanup
of a Hazardous Substance under any environmental law; (ix) no lien has been
attached, asserted, or to the Knowledge of the Sellers, threatened to or against
the Acquired Assets pursuant to any environmental law; (x) there are no
licenses, permits or government orders relating to an Environmental Condition
requiring any repairs, construction or capital expenditures with respect to the
assets or properties of the Company; and (xi) there are no underground storage
tanks on, under or about the Real Property or any property owned, operated or
leased by the Company and any former underground tanks on such property have
been removed in accordance with all applicable environmental laws and no
residual contamination, if any, remains at such sites in excess of applicable
standards.
(b) For the purposes of this Agreement: (i) "Environmental Claim" shall
mean any written demand, claim, governmental notice or threat of litigation or
the actual institution of any action, suit or proceeding which asserts that an
Environmental Condition constitutes a violation of any statute, ordinance,
regulation, or other governmental requirement relating to the emission,
discharge, or Release of any Hazardous Substance into the environment or the
generation, treatment, storage, transportation, or disposal of any Hazardous
Substance, prior to Closing Date in each case in contravention of any applicable
laws or regulations; (ii)
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"Environmental Condition" shall mean the presence on any real property during
the period from the date such real property was first owned, leased or used by
the Company to the Closing Date, in surface water, ground water, drinking water
supply, land surface, subsurface strata or ambient air of any Hazardous
Substance arising out of or otherwise related to the operations or other
activities of the Company or of any predecessor of the Company, conducted or
undertaken prior to the Closing Date, and in each case in contravention of any
applicable laws or regulations; (iii) "Hazardous Substance" shall mean any
substance defined in the manner set forth in Section 101(14) of the U.S.
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, as applicable on the Closing Date, and shall include any additional
substances designated under Section 102(a) thereof prior to the Closing Date;
and (iv) "Release" shall mean releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment in each case in contravention of any applicable
laws or regulations.
5.30 Tax and Other Returns and Reports. The Company has timely filed or
will file all Tax Returns and information returns required to be filed by the
Company and has paid or will pay prior to the Closing Date all Taxes due for all
periods ended on or before December 31, 1998. The Shareholders have timely filed
or will file all Tax Returns and information returns required to be filed by
them with respect to the Company and have paid or will pay prior to the Closing
Date all Taxes due for all periods ended on or before December 31, 1998.
Adequate provision has been made in the books and records of the Company and in
the Financial Statements for all Taxes whether or not due and payable and
whether or not disputed. Exhibit 5.30(a) lists the date or dates from and after
January 1, 1990 through which any Governmental Authority has examined any Tax
Return of the Company. All required Tax Returns, including amendments to date,
have been prepared in good faith without negligence or willful misrepresentation
and are complete and accurate and in all material respects. Except as set forth
in Exhibit 5.30(b), no Governmental Authority has, during the past three years,
examined or is in the process of examining any Tax Returns of the Company.
Except as set forth on Exhibit 5.30(c), no Governmental Authority has proposed
(tentatively or definitively), asserted or assessed or threatened to propose or
assert, any deficiency, assessment, lien, or other claim for Taxes and there
would be no basis for any such delinquency, assessment, lien or claim. There are
no agreements, waivers or other arrangements providing for an extension of time
with respect to the assessment of any Taxes or deficiency against the Company or
with respect to any Tax Return filed or to be filed by the Company. The Company
has properly and timely elected under Section 1362 of the Code, and under each
analogous or similar provision of state and local law in each jurisdiction where
the Company is required to file a Tax Return, to be treated as an "S"
corporation for all taxable periods since November 1, 1991. With the exception
of the Permitted Encumbrances, the Sellers shall promptly cause the discharge of
any lien on the
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Acquired Assets which may arise from a Tax obligation of the Company existing
prior to the Closing Date. There has not been any voluntary or involuntary
termination or revocation of any such election. The copies of the Tax Returns
for the tax years ended December 31, 1997 and 1996 provided by the Company to
Purchaser are complete and correct.
5.31 Certain Tax Definitions. For purposes of this Agreement, the term
"Taxes" means all taxes, including without limitation all Federal, state, local,
foreign and other income, franchise, sales, use, property, payroll, withholding,
environmental, alternative or add-on minimum and other taxes, assessments,
charges, duties, fees, levies or other governmental charges of any kind
whatsoever, and all estimated taxes, deficiency assessments, additions to tax,
penalties, and interest, and any contractual or other obligation to indemnify or
reimburse any person with respect to any such assessment. For purposes of this
Agreement, the term "Tax Return" shall mean any report, statement, return,
declaration of estimated tax or other information required to be supplied by or
on behalf of the Company to a taxing authority in connection with Taxes, or with
respect to grants of tax exemption, including any consolidated, combined,
unitary, joint or other return filed by any person that properly includes the
income, deductions or other tax information concerning the Company.
5.32 Recent Dividends and Other Distributions. Except for (i) a
distribution in the aggregate amount of two hundred eighty thousand dollars
($280,000) paid to the Shareholders on January 13, 1999 and (ii) a distribution
in the aggregate amount of one million dollars ($1,000,000) paid to the
Shareholders on April 12, 1999, there has been no dividend or other distribution
of assets or securities whether consisting or money, property or any other thing
of value, declared, issued or paid by the Company to or for the benefit of the
Shareholders subsequent to the date of the most recent Financial Statements,
5.33 Inventory. The inventories set forth in the Adjusted December 31,
1998 Balance Sheet were properly stated therein at the lesser of cost or fair
market value determined in accordance with generally accepted accounting
principles consistently applied by the Sellers, and did not include any items
owned by any person other than the Company. Since December 31, 1998 the
inventories related to the Business have been maintained in the ordinary course
of business. All of the inventory recorded on the Adjusted December 31, 1998
Balance Sheet (net of reserves reflected therein) consists of items of a quality
useable or saleable in the normal course of the Business consistent with past
practices and are and will be in quantities sufficient for the normal operation
of the Business in accordance with past practice. Inventory other than raw stock
in useable condition shall not be considered "useable and saleable" if such
Inventory has been held in the Business for more than 12 months (determined for
purposes hereof on a first in-first out basis) unless the Company actually
utilizes such inventory. Exhibit 5.33 sets forth, as of March 31, 1999, with
respect to each item of work-in-progress having a contract price in excess of
two hundred thousand dollars ($200,000), the following information, as of the
date of this Agreement: (i) the total
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amount to be received by the Company pursuant to the contract relating to such
item; (ii) the total amounts already billed and received by the Company pursuant
to the contract relating to such item; (iii) the total anticipated cost to the
Company to perform its obligations under the contract; (iv) the total cost
incurred by the Company to date in performing its obligations under the
contract; (v) the percentage of completion of such contract, which shall be the
best indication of percentage of completion in order to comply with generally
accepted accounting principles and in a manner consistent with the Financial
Statements; (vi) the total amount of cumulative revenue, and the total amount of
cost, recognized to date with respect to such contract, and (vii) the total
amount of revenue, and the total amount of cost, recognized with respect to such
contract during the relevant accounting period.
5.34 Purchase and Sale Obligations. All purchase and sales orders and all
other commitments for purchase and sales orders made by or on behalf of the
Company have been made in the usual and ordinary course of its business in
accordance with normal practices. On the Closing Date, the Shareholders shall
deliver to Purchaser a schedule of all such uncompleted purchase and sale orders
and other commitments with respect to any of the Company's obligations as of a
date not earlier than ten (10) days prior to the Closing.
5.35 Accounts Receivable and Accounts Payable. All of the accounts
receivable of the Company are actual and bona fide accounts receivable
representing obligations for the total dollar amount thereof showing on the
books of the Company, and the accounts receivable are not and will not be
subject to any recoupments, set-offs or counter-claims, except to the extent
provided for in the Adjusted December 31, 1998 Balance Sheet. Exhibit 5.35 sets
forth a true and correct aged (30-60-90 days) list of all accounts receivable
and accounts payable of the Company as of the end of the calendar month
preceding the date hereof.
5.36 Investment Representation. The Company and the Shareholders
acknowledge and agree that the Notes have not been, and the CCC Shares, when
issued upon conversion of the Notes, will not have been, registered under the
Securities Act of 1933 (the "Securities Act") or qualified under any applicable
state securities laws, on the ground that the issuance of the Notes to the
Company is, and the issuance of the CCC Shares to the holders of the Notes will
be, exempt from the registration and prospectus delivery requirements of the
Securities Act and from qualification under any applicable state securities
laws, and that such exemptions are based on the representations and warranties
of the Company and the Shareholders made herein. The Company is acquiring the
Notes for its own account and the account of the Shareholders, and not for that
of any other persons, and without a view to or in connection with any
distribution of the Notes or the CCC Shares which is proscribed by the
Securities Act or in violation of any applicable state securities laws.
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Neither the Company nor any Shareholder shall offer, sell or otherwise
dispose of any Note or the CCC Shares except in conformity with Rule 144 of the
Securities and Exchange Commission or pursuant to a registration statement under
the Securities Act and qualification under applicable state securities laws or
pursuant to an opinion of counsel satisfactory to CCC that such registration and
qualification is not required. The Company and the Shareholders acknowledge and
agree that the certificate or certificates representing the CCC Shares shall be
endorsed with a restrictive legend in accordance with this Section 5.36.
The Company shall notify CCC in advance of any proposed offer, sale,
transfer, pledge, hypothecation or other disposition of the Note and the CCC
Shares (other than a disposition in conformity with Rule 144 of the Securities
and Exchange Commission or pursuant to a registration statement under the
Securities Act), and CCC may require as a condition precedent to such
disposition that the proposed transferee first deliver to CCC an investment
agreement with respect to the Note and the CCC Shares containing substantially
the agreements, representations and warranties set forth in this Section 5.36.
5.37 Year 2000. To the Sellers' Knowledge the computer software which is
material to the conduct of the Business is capable of recording, storing,
processing and presenting calendar dates falling on or after January 1, 2000 in
substantially the same manner and with the same functionality as such software
records, stores, processes and presents such calendar dates falling on or before
December 31, 1999.
5.38 Addition. The amount expended through March 31, 1999 in the
construction of the Addition and the acquisition of the Equipment therefor does
not exceed two million nine hundred seventy seven thousand dollars ($2,977,000).
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
The Purchasers hereby jointly and severally represent and warrant to the
Sellers as follows, each of which representation and warranty shall be true as
of the Closing Date:
6.1 Organization. Each of the Purchasers is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated.
6.2 Authorization of Agreement. Each of the Purchasers has all corporate
power and authority to execute and deliver this Agreement and the other
agreements, instruments and certificates to be executed and delivered pursuant
hereto and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Purchasers, and the execution and delivery
of the other agreements, instruments and certificates to be executed and
delivered
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pursuant hereto and the consummation of the transactions contemplated thereby
have been authorized by all necessary corporate action on the part of the
Purchasers. This Agreement has been duly executed and delivered by the
Purchasers and constitutes, and each other agreement, instrument and certificate
to be executed and delivered pursuant hereto when duly executed and delivered by
the Purchasers will constitute, legal, valid and binding obligations of the
Purchasers party thereto, enforceable against each of them in accordance with
their terms.
6.3 Effect of Agreement. The execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, by the
Purchasers will not, with or without the giving of notice and the lapse of time,
or both, (a) violate any provision of law, statute, rule, regulation or
executive order to which any of the Purchasers is subject; (b) violate any
judgment, order, writ or decree of any court applicable to any of the Purchasers
or (c) result in the breach of or conflict with any term, covenant, condition or
provision of any corporate charter, by-law, commitment, contract or other
agreement or instrument, to which any of the Purchasers is a party which breach
or conflict described in this clause (c) would materially impair the ability of
the Purchasers to perform their respective obligations hereunder.
6.4 Litigation. To the Knowledge of the Purchasers, there are no actions,
suits, proceedings or governmental investigations or inquiries pending or
threatened against any of them which, in their reasonable judgment, would
prevent the consummation of the transactions contemplated hereby.
6.5 Accuracy of Information. None of the information which has been or may
be furnished by the Purchasers or any of their representatives to the Sellers or
any of their representatives in connection with the transactions contemplated
hereby, which is contained in this Agreement (including the Exhibits hereto) or
any Ancillary Document or any certificate or instrument delivered or to be
delivered by or on behalf of any of the Purchasers in connection with the
transactions contemplated hereby, does nor will contain any untrue statement of
a material fact or omit a material fact necessary to make the information
contained herein or therein not misleading.
6.6 Financial Statements. The financial statements of Standard attached
hereto as Exhibit 6.6 (a) have been prepared in accordance with the books and
records of Standard and generally accepted accounting principles and practices
consistently applied and (b) are accurate and complete presentations of the
financial position of Standard at their respective dates and the results of
operations and cash flows for the respective periods covered thereby.
6.7 Material Adverse Change. Since December 31, 1998, there has not been
any event, circumstance or condition that has had, or might reasonably have, a
material adverse effect on Standard.
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6.8 Governmental and Other Consents. Except as set forth in Exhibit 6.8,
as of the Closing Date, no consent, authorization or approval of, or exemption
by, any Governmental Authority or any other person or entity will be required in
connection with the execution, delivery and performance by the Purchasers of
this Agreement or any of the instruments or agreements herein referred to, or
the taking of any action herein contemplated.
7. PRE-CLOSING COVENANTS OF THE SELLERS
The Sellers hereby jointly and severally covenant and agree that the
Sellers shall do, or cause to be done, the following, between the date of this
Agreement and the Closing Date or date of termination of this Agreement, as the
case may be:
7.1 Conduct of Business Until Closing Date. Except as permitted or
required hereby or as Purchaser may otherwise consent in writing, the Sellers
shall:
(a) operate the Business only in the usual, regular and ordinary
manner, and use their best efforts to (i) preserve the present business
organization of the Company intact, (ii) keep available the services of
the present Employees, and (iii) preserve the current business
relationships of the Company with customers, clients, suppliers,
distributors and others having business dealings with it;
(b) maintain the books, records and accounts of the Company in the
usual, regular and ordinary manner, on the basis consistent with prior
periods;
(c) materially comply with all laws, rules and regulations
applicable to the Company and to the conduct of its business;
(d) satisfy the accounts payable of the Company in the usual,
regular and ordinary manner, consistent with prior periods and without
unusual aging;
(e) perform all of the obligations of the Sellers without default,
unless such default is of no significance to the Company and could have no
adverse impact on the Acquired Assets or the Business;
(f) neither (i) amend the Company's Articles of Organization or
By-Laws; (ii) amend the Partnership Agreement of Five N; (iii) merge with
or into, consolidate, amalgamate or otherwise combine with, any other
entity; nor (iv) change the character of the business of the Company;
(g) neither (i) encumber, mortgage, or voluntarily subject to lien
any of the existing Acquired Assets; (ii) transfer, sell, lease, license
or otherwise dispose of any of, or any part of, the Acquired Assets (other
than in the ordinary course of business), except that Five N is permitted
to transfer the Real Property to the Company; (iii)
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convey, transfer or acquire any material Acquired Asset or property to,
for or on behalf of the Company other than in the ordinary course of
business; (iv) other than in the ordinary course of business, enter into
any arrangement, agreement or undertaking with respect to any of the
Employees relating to the payment of bonus, severance, profit-sharing or
special compensation or any increase in the compensation payable or to
become payable to any such Employee; (vi) enter into any arrangement,
agreement or undertaking, with respect to any of the Shareholders relating
to the payment of bonus, severance, profit-sharing or special compensation
or any increase in the compensation payable or to become payable to any
such Shareholder; nor (vii) incur any material fixed or contingent
obligation or enter into any agreement, commitment, contract or other
transaction or arrangement relating to the Business or the Acquired Assets
except in the ordinary course of business;
(h) except to the extent reflected in the Adjusted December 31, 1998
Balance Sheet or permitted by Section 7.8, including the Analysis of
Adjustments contemplated thereby, not make any distributions or dividends,
nor any changes to the capital structure of the Company; not agree to make
or make any sales of its securities including the issuance of any
additional capital stock or rights or options or contracts to acquire, or
instruments convertible into, common stock;
(i) neither modify, change or terminate any of its material
obligations other than in the ordinary course of business, nor grant any
power of attorney with respect to the Business or the Acquired Assets to
any party except Purchaser; and
(j) maintain insurance policies with respect to the Acquired Assets,
the business and operation of the Business and its Employees at presently
existing levels (and the proceeds of any such insurance policy relating to
the Business shall, notwithstanding anything herein to the contrary, be
included as part of the Acquired Assets, except to the extent such
proceeds relate to any Excluded Assets).
Anything in this Section 7.1 notwithstanding, the Sellers shall have the right
in their discretion to make all decisions and expenditures required to keep the
Addition on schedule.
7.2 Approvals, Consents and Further Assurances. The Sellers shall use
their best efforts to obtain in writing as promptly as possible all approvals,
consents and waivers set forth in Exhibit 5.15(d), and shall deliver to
Purchaser copies, reasonably satisfactory in form and substance to counsel to
Purchaser, of such approvals, consents and waivers. The Sellers shall also use
their best efforts to assure that the other conditions set forth in Article 10
hereof are satisfied by the Closing Date. If requested by the Purchasers, the
Sellers shall use their best efforts to cooperate with the Purchaser with
respect to the filing of any notifications required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") and to respond as promptly as
practicable to any inquiries received from the
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Federal Trade Commission and the Antitrust Division of the Department of Justice
and any other applicable governmental bodies for additional information or
documentation. Any filing fee relating to such notification shall be borne
exclusively by the Purchasers.
7.3 Access to Properties, Records, Suppliers, Agents, Etc. Subject to
Section 14.17(b), the Sellers shall give to Purchaser and to Purchaser's
counsel, financiers, accountants and other representatives access to and copies
of such of the Company's properties, personnel, books, tax returns, contracts,
commitments and records as relate to the Acquired Assets, customers, employees,
suppliers, agents and distributors of the Company; and shall furnish to
Purchaser and such representatives all such additional instruments, contracts,
documents or other written obligations (certified by officers of the Company, if
so requested) and financial and other information concerning such business,
Acquired Assets, suppliers, agents, etc. as Purchaser or its representatives may
from time to time request.
7.4 Advice of Changes. If the Sellers become aware of any fact or facts
which, if known at the date hereof, would have been required to be set forth or
disclosed in or pursuant to this Agreement or which, individually or in the
aggregate, could materially adversely affect the Business or the Acquired
Assets, such person shall promptly advise Purchaser in writing thereof.
7.5 Conduct. Except as permitted or required hereby or as Purchaser may
otherwise consent in writing, the Sellers shall not enter into any transaction
or take any action which would result in any of the representations and
warranties of the Sellers contained in this Agreement or in any Ancillary
Document not being materially true and correct as of the time immediately after
such transaction has been entered into or such event has occurred and on the
Closing Date.
7.6 Employee Benefit Plans. Except for payment of the Company's current
obligations, the Company shall neither incur any additional obligations or
liabilities nor accelerate existing obligations or liabilities, including (i)
all liabilities for all claims incurred, whether or not reported, on or before
the Closing Date under all "employee welfare benefit plans," within the meaning
of Section 3(1) of ERISA, (ii) all liabilities or obligations for vacations or
sick leave or retiree, medical or life benefits to employees or former employees
of the Company, and (iii) all liabilities of the Company for all benefits
accrued under any "employee pension benefit plan," within the meaning of Section
3(2) of ERISA under each Employee Benefit Plan.
7.7 Satisfaction of Conditions by the Sellers. The Sellers hereby jointly
and severally covenant and agree with Purchaser that, between the date of this
Agreement and the Closing Date or date of termination of this Agreement, as the
case may be, they shall use their best efforts to assure that the conditions set
forth in Article 10 hereof are satisfied by the Closing Date.
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7.8 Permitted Distribution.
(a) The Company shall be entitled to distribute to the Shareholders prior
to or at the Closing an amount of cash (the "Permitted Distribution of 1999
Earnings") equal to the earnings from the ordinary operations of the Company, as
calculated consistently with prior years without any change in accounting
principles (except as required by the use of the percentage of completion method
of accounting), for the period from January 1, 1999 through the end of the last
full calendar month's operations ending prior to the Closing Date; provided,
however, that if the Purchasers extend the Closing to a date after June 15, 1999
as permitted by Section 4.1, the Permitted Distribution of 1999 Earnings shall
be calculated and distributed for the period from January 1, 1999 through the
Closing Date as so extended. Should the cash of the Company at Closing (after
withdrawal of cash in the amount of the Owner's Adjustment pursuant to the
Adjusted December 31, 1998 Balance Sheet) be less than the Permitted
Distribution of 1999 Earnings, as calculated pursuant to Appendix 3.3(a) (any
such difference being referred to herein as the "Cash Distribution Shortfall"),
the cash portion of the Purchase Price shall be increased by an amount equal to
the Cash Distribution Shortfall; provided, that to the extent the Cash
Distribution Shortfall exceeds one million dollars ($1,000,000), such excess
shall not be paid in cash at Closing, but rather shall be reflected by four new
promissory notes of Purchaser (the "Additional Notes"), each in an amount equal
to one-fourth of the excess of the Cash Distribution Shortfall over one million
dollars ($1,000,000). The Additional Notes will be on the same terms and
conditions as the Notes, except that the maturity date shall be thirteen (13)
months from the date of issue. In the event that the Adjusted Net Book Value is
less than $5,805,000, the cash consideration payable at the Closing shall be
reduced as provided in Section 3.3, and nothing in this Section 7.8 is intended
to obviate or vitiate the necessity of making such reduction.
(b) At the Closing, the Company shall deliver to Purchaser a certificate,
signed by each of the Shareholders, stating that the Permitted Distribution of
1999 Earnings has been calculated in compliance with the Analysis of
Adjustments, and setting forth in reasonable detail the calculations forming the
basis for such statement.
(c) The Company shall not terminate its Subchapter S election prior to the
Closing Date. The Company and the Shareholders shall be responsible for paying
federal, state and local income taxes on the Permitted Distribution of 1999
Earnings.
7.9 Transfer of Insurance Policies. The Company shall use its commercially
reasonable efforts, in accordance with instructions from the Purchasers, to
either cause the insurance policies listed on Exhibit 5.14, or comparable
policies, to be issued or reissued in the name of Purchaser effective at the
Closing; provided, however, that this provision shall not be a condition to the
Purchasers' obligation to consummate the transactions contemplated
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by this Agreement nor shall any failure to cause such transfer constitute a
breach of this Agreement by Sellers or Shareholders.
8. PRE-CLOSING COVENANTS OF THE PURCHASERS
8.1 Satisfaction of Conditions by the Purchasers. The Purchasers hereby
jointly and severally covenant and agree with the Sellers that, between the date
of this Agreement and the Closing Date or date of termination of this Agreement,
as the case may be, the Purchasers shall cause the conditions set forth in
Article 11 hereof to be satisfied by the Closing Date.
8.2 Title to Real Property. Prior to May 30, 1999, the Purchasers shall
take all actions they deem appropriate to confirm the accuracy of the
representation and warranties contained in Section 5.12(b) as they relate to the
Real Estate and the Purchasers shall notify the Sellers of any purported
inaccuracy no latter than such date. In the event that the Purchasers fail to
object to any matters of record or matters which would be disclosed by an
accurate survey of the Real Property complying with all so-called ALTA/ASCM
standards by May 30, 1999, then all such matters shall be deemed conclusively to
be Permitted Encumbrances; provided however, that the same shall not affect the
right of the Purchasers to object to any new matters arising after the date that
the Purchasers complete their title examination or the date of the survey, as
applicable. In the event that the Purchasers reasonably object to any such
matters prior to May 30, 1999, the Sellers shall use their commercially
reasonable efforts to correct such matters. If the Sellers are unable to deliver
title in conformance with the representations and warranties contained in
Section 5.12(b), then the Purchasers may, at their option, elect to terminate
this Agreement pursuant to Section 14.2(x)(i) hereof, provided that such
termination shall be without further recourse by the Purchasers against the
Sellers and the Shareholders. As used in this Section 8.2, "commercially
reasonable efforts" means that the Sellers shall remove all encumbrances which
secure the payment of monetary obligations, but such efforts shall not require
the Sellers in any event to (i) initiate litigation or (ii) expend any amounts
in excess of twenty five thousand dollars ($25,000).
9. POST-CLOSING COVENANTS
9.1 Post-Closing Audit. Purchaser will deliver to the Company the Closing
Date Balance Sheet in accordance with Section 3.3.
9.2 Post-Closing Tax Returns. The Company timely will file all Tax Returns
and information returns required to be filed by the Company, and pay all Taxes
due, for the period from January 1, 1999 through the Closing.
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9.3 Further Assurances. After the Closing, the Sellers, at the request of
Purchaser, shall execute, acknowledge and deliver to Purchaser, without further
consideration, all such further assignments, conveyances, endorsements, deeds,
powers of attorney, consents and other documents (together with the instruments
referred to in Section 1.1, referred to herein collectively as the "Ancillary
Documents") and take such other action as Purchaser may reasonably request (a)
to transfer to and fully vest in Purchaser, and protect Purchaser's right, title
and interest in and to all of the Company's right, title and interest in and to
the Acquired Assets, and (b) otherwise to consummate the transactions
contemplated by this Agreement.
9.4 Books and Records. Purchaser shall retain after the Closing Date all
material books and records pertaining to the business of Company prior to the
Closing for at least three years. After the Closing, the Sellers shall be
entitled at all reasonable times and upon reasonable notice to Purchaser to have
access to and to make copies of all such books and records to the extent
necessary in connection with the preparation and filing of, or any audit of, the
Company's or the Sellers' tax returns or any other matter related to an Excluded
Liability. In the event Purchaser desires to destroy within seven years after
Closing any of such books and records, Purchaser shall first give to Sellers
thirty days prior written notice and the Sellers shall within thirty days of
such notice have the right to remove and retain said books and records, and any
books and records not so removed by the Sellers may thereafter be destroyed by
Purchaser.
9.5 Change of Name. Immediately following the Closing, the Company shall
file in the Commonwealth of Massachusetts and in each other jurisdiction in
which the Company is qualified to do business, all documents necessary to change
the name of the Company to a new name which shall not include the word "Ranor"
or any variation thereof.
10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASERS
The obligations of the Purchasers pursuant to this Agreement are subject
to the satisfaction at the Closing of each of the following conditions, any or
all of which conditions may be waived by the Purchasers in their discretion:
10.1 Accuracy of Representations and Warranties. The representations and
warranties of the Sellers and the Shareholders set forth in this Agreement shall
be true and correct in all material respects as of the date of this Agreement
and as of the time of the Closing as though made at and as of such time, except
in the case of representations and warranties made as of a specific date, which
shall be true and correct in all material respects as of such date.
10.2 Performance of Agreements. The Sellers and the Shareholders shall
have performed and complied with all covenants, obligations and agreements to be
performed or
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complied with by them on or before the Closing Date pursuant to this Agreement;
and Purchaser shall have received a certificate to such effect signed by each of
the Shareholders, an authorized officer of the Company and a general partner of
Five N.
10.3 Approvals and Consents. (a) The Company shall have obtained, and
Purchaser shall have received copies of, all of the approvals, consents and
waivers set forth in Exhibit 5.15(d), each of which approvals, consents and
waivers shall be in full force and effect and reasonably satisfactory in form
and substance to Purchaser and its counsel.
(b) If the Company fails to obtain any such approval, consent or waiver
and Purchaser waives such failure, then the Commitment for which such approval,
consent or waiver is required shall be, if Purchaser so notifies the Company in
writing prior to or at the Closing, an Excluded Asset and an Excluded Liability.
10.4 Sellers' Certificate. Purchaser shall have received a certificate of
all of the Shareholders, an authorized officer of the Company and a general
partner of Five N, dated the Closing Date, satisfactory in form and substance to
Purchaser and its counsel, certifying (a) as to the fulfillment of the matters
specified in Sections 10.1 through 10.3, and (b) any changes that Purchaser is
required to be notified of pursuant to Section 7.4, or that previously had not
been disclosed to Purchaser.
10.5 Officer's Certificate. Purchaser shall have received a certificate,
dated the Closing Date, of Dennis Normandin, President of the Company, stating
that he is not aware of any material omissions or facts that would materially
alter any of the Financial Statements, nor is he aware of any facts or factors
that are reasonably likely to occur, or if known to other parties, that could
have a material adverse effect on the financial condition, business, operations,
Acquired Assets, liabilities, management or prospects of the Company.
10.6 Clerk's Certificate; Partnership Certificate. Purchaser shall have
received (a) a certificate of the clerk of the Company, dated the Closing Date,
satisfactory in form and substance to Purchaser and its counsel, certifying as
to the Articles of Organization and by-laws of the Company, resolutions of the
board of directors of the Company, the good standing of the Company and the
signatures and incumbency of the officers of the Company executing this
Agreement and all documents to be delivered by the Company at the Closing and
(b) a certificate of a general partner of Five N, dated the Closing Date,
satisfactory in form and substance to Purchaser and its counsel, certifying as
to the partnership agreement of Five N and the signatures and incumbency of the
general partners of Five N executing this Agreement and all documents to be
delivered by Five N at the Closing.
10.7 No Material Adverse Change. The Company shall not have suffered any
adverse change in, or the occurrence of any events which, individually or in the
aggregate, have had or might reasonably be expected to have a material adverse
effect on, the financial
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condition, results of operations or business of the Company or the value of the
Acquired Assets.
10.8 Actions, Proceedings, Etc. All actions, proceedings, instruments and
documents required to be taken or delivered by the Sellers or the Shareholders
to carry out the transactions contemplated by this Agreement shall have been
completed.
10.9 Opinion of Counsel to the Company. Purchaser shall have received an
opinion of Sellers' Counsel, addressed to Purchaser, dated the Closing Date, to
the effect set forth in, and substantially in the form of, Appendix 10.9.
10.10 Licenses, Permits, Consents, Etc. Purchaser shall have received
evidence, in form and substance reasonably satisfactory to counsel for
Purchaser, that such licenses, permits, consents, approvals, authorizations or
orders of Governmental Authorities as are necessary to the consummation of the
transactions contemplated by this Agreement and the continued operation of the
Business have been obtained.
10.11 Bills of Sale. The Sellers shall have delivered to Purchaser general
bills of sale, endorsements, consents, assignments, deeds and other good and
sufficient instruments of transfer as Purchaser deems reasonably necessary and
appropriate to vest in the Purchaser all of the right, title and interest of the
Sellers in, to and under the Acquired Assets.
10.12 Documentation of Rights. The Sellers shall have delivered, or will
at Closing by virtue of the transfer of the Acquired Assets deliver, to
Purchaser true and complete copies of all of the documentation held by the
Sellers relating to each of the Rights.
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS
The obligations of the Sellers under this Agreement are subject to the
satisfaction at the Closing of each of the following conditions.
11.1 Accuracy of Representations and Warranties. All representations and
warranties by the Purchasers in this Agreement shall be true as of the date of
this Agreement and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date, and the Company shall have received a
certificate to such effect signed by an authorized officer of each of the
Purchasers.
11.2 Performance of Agreements. The Purchasers shall have performed and
complied in all material respects with all covenants, obligations and agreements
to be performed or complied with by them on or before the Closing Date pursuant
to this Agreement.
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11.3 No Injunction. No third party injunction, stay or restraining order
shall be in effect prohibiting the consummation of the transactions contemplated
hereby.
11.4 Opinion of Counsel to Purchaser. The Shareholders shall have received
an opinion of Carter, Ledyard & Milburn, counsel to Purchaser, addressed to the
Company, dated as of the Closing Date, to the effect set forth in, and
substantially in the form, of Appendix 11.4.
11.5 Absence of Proceedings. There shall not be in force or pending any
claim, proceeding, action, order or decree restraining, enjoining, prohibiting,
invalidating or otherwise preventing (or seeking to prevent) the consummation of
the transactions contemplated by this Agreement.
11.6 Compliance Certificate. The Shareholders shall have received a
Compliance Certificate (as such term is defined in Appendix 1.20) dated as of a
date not more than five business days before the Closing.
11.7 Title Insurance. Purchaser shall have obtained an ALTA title
insurance policy with respect to the Real Property providing coverage in an
amount satisfactory to the Purchasers; provided, that such a title insurance
policy shall not include exceptions for encumbrances which are materially
greater than the encumbrances disclosed with respect to the Real Property on
Exhibit 5.12, unless such encumbrances were waived by the Purchasers pursuant to
the to the provisions of Section 8.2.
12. EMPLOYMENT MATTERS
12.1 Employment with Purchaser. Purchaser agrees to offer employment
immediately after the Closing to all Employees who, immediately prior to the
Closing, are employed in the Business. Such offer of employment shall require
that each such Employee accept Purchaser's normal employment practices in
advance of or contemporaneously with the commencement of such Employee's
employment by Purchaser and shall include provision for compensation which, with
respect to each such Employee, is substantially comparable to the Employee's
compensation (as explicitly set forth in Exhibit 5.23) in effect for such
Employee as of the Closing Date. Those Employees who accept employment with
Purchaser on such terms and conditions are hereinafter referred to as the
"Transferred Employees." Purchaser may create and may change the conditions of
employment of any Transferred Employee after the Closing Date; provided,
however, that for at least one year following the Closing Date, Purchaser will
use its reasonable efforts to offer to the Transferred Employees benefit plans
substantially equivalent to the Employee Benefit Plans disclosed in Exhibit 5.24
and in effect immediately prior to the Closing. The Company and the
Shareholders, jointly and severally, shall indemnify Purchaser, in the manner
and subject to the limitations set forth in Article 13, from and against any and
all employment-related
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claims of Transferred Employees (including claims for employment benefits) based
on events or circumstances occurring on or before the Closing Date, except to
the extent that such liabilities are accrued on the Closing Date Balance Sheet.
Purchaser shall indemnify the Company, in the manner and subject to the
limitations set forth in Article 13, from and against any and all
employment-related claims of Transferred Employees (including severance claims
by Transferred Employees actually severed by Purchaser at any time after the
Closing) based on events or circumstances occurring after the Closing Date.
Until the fifth anniversary of the Closing Date, the Company and the
Shareholders shall not, directly or indirectly, solicit or offer employment to,
or hire, any Transferred Employee (i) who is then an employee of Purchaser or
(ii) who has terminated such employment without the consent of Purchaser within
one year of such solicitation or offer.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
13.1 Survival. The representations and warranties set forth in this
Agreement, in any Exhibit or Appendix hereto and in any certificate or
instrument delivered in connection herewith shall survive for a period of one
year after the Closing Date and shall thereupon terminate and expire and shall
be of no force or effect thereafter, except (a) the representations and
warranties set forth in Section 5.12, which shall survive for the applicable
statute of limitations; (b) the representations and warranties set forth in
Section 5.26, which shall survive for two years; (c) all representations and
warranties herein relating to Taxes, which shall survive for a period equal to
the applicable statute of limitations; (d) with respect to any claims arising
from third parties, the representations and warranties herein shall survive for
a period of two years; (e) with respect to any claim, written notice of which
shall have been delivered to the party against which the claim is made, such
claim shall survive the termination of such period and shall survive for as long
as such claim is unsettled; and (f) with respect to any litigation which shall
have been commenced to resolve such claim on or prior to such date, and (g) all
representations and warranties relating to the Real Property shall not survive
the Closing.
13.2 Indemnification by the Sellers and the Shareholders. The Sellers and
the Shareholders hereby jointly and severally covenant and agree with the
Purchasers that, regardless of any investigation made at any time by or on
behalf of the Purchasers or any information the Purchasers may have and,
regardless of the Closing hereunder, but subject to the limitations set forth in
Sections 13.1 and 13.6, the Sellers and the Shareholders shall indemnify the
Purchasers and the directors, officers, employees and Affiliates of the
Purchasers, and each of their successors and assigns, and hold them harmless
from, against and in respect of any and all costs, losses, claims, liabilities,
fines, penalties, damages and expenses (including interest which may be imposed
in connection therewith, court costs and reasonable fees and disbursements of
counsel) incurred by any of them resulting from (i) any
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misrepresentation, breach of warranty or nonfulfillment of any agreement,
covenant or obligation by any Seller made in this Agreement (including without
limitation any Exhibit or Appendix hereto and any certificate or instrument
delivered in connection herewith) or (ii) any suit, claim, action or proceeding
described in Exhibit 5.19.
13.3 Indemnification by the Purchasers. Subject to the limitations set
forth in Sections 13.1 and 13.6, the Purchasers hereby jointly and severally
covenant and agree with the Sellers and the Shareholders that the Purchasers
shall indemnify the Sellers and the Shareholders and hold them harmless from,
against and in respect of any and all costs, losses, claims, liabilities, fines,
penalties, damages and expenses (including interest which may be imposed in
connection therewith and court costs and reasonable fees and disbursements of
counsel) incurred by any of them resulting from any misrepresentation, breach of
warranty or the nonfulfillment of any agreement, covenant or obligation by any
of the Purchasers made in this Agreement (including without limitation any
Exhibit hereto and any certificate or instrument delivered in connection
herewith).
13.4 Right to Defend. If any party shall become aware of any claim or
demand to which such party is entitled to indemnification pursuant to Section
13.2 or 13.3, the indemnifying parties shall be entitled to notice of and
entitled (without prejudice to the right of any indemnified party to participate
at its own expense through counsel of its own choosing) to defend or prosecute
such claim at their expense and through counsel of their own choosing if they
give written notice of their intention to do so no later than the time by which
the interest of the indemnified party would be materially prejudiced as a result
of its failure to have received such notice; provided, however, that if the
defendants in any action shall include both the indemnifying parties and an
indemnified party, and the indemnified party shall have reasonably concluded
that counsel selected by the indemnifying parties has a conflict of interest
because of the availability of different or additional defenses to the
indemnified party, the indemnified party shall cooperate fully in the defense of
such claim and shall make available to the indemnifying parties pertinent
information under its control relating thereto, but shall be entitled to be
reimbursed, as provided in this Article 13, for all costs and expense incurred
by it in connection therewith.
13.5 Subrogation. If a party receives payment or other indemnification
pursuant to Section 13.2 or 13.3, the indemnifying party shall be subrogated to
the extent of such payment or indemnification to all rights in respect of the
subject matter of such claim to which the indemnified party may be entitled, to
institute appropriate action for the recovery thereof, and the indemnified party
agrees reasonably to assist and cooperate with the indemnifying party at no
expense to the indemnified party in enforcing such rights.
13.6 Certain Limitations. (a) The Sellers and the Shareholders shall not
have any liability under this Agreement resulting from any misrepresentation,
breaches of
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representations and warranties or non-fulfillment of any agreement, covenant or
obligation except to the extent that the aggregate of all amounts for which the
Sellers and the Shareholders, but for this Section 13.6, would be liable exceeds
on a cumulative basis $265,000 (the "Threshold"). The Purchasers shall not have
any liability under this Agreement resulting from any misrepresentation,
breaches of representations and warranties or non-fulfillment of any agreement,
covenant or obligation except to the extent that the aggregate of all amounts
for which the Purchasers, but for this Section 13.6, would be liable exceeds on
a cumulative basis the Threshold. For purposes of determining whether the
Threshold has been met in respect of any matter to which it applies, the
references in this Agreement to Knowledge or materiality (or the correlative
meanings) shall be disregarded.
(b) No liability shall be enforced on a claim to the extent of any
insurance proceeds received by the party seeking indemnification (net of
self-insured retention or deductible amounts including, but not limited to, any
proceeds from title insurance coverage relating to the Real Property). If the
party seeking indemnification receives any such insurance proceeds after a claim
shall have been paid, the party seeking indemnification shall promptly return
such payment to the extent of such insurance proceeds received. All amounts due
under indemnification claims shall be net of all tax effects, including tax
effects on indemnification payments. The Purchasers shall not be entitled to
indemnification or damages with respect to any obligation, liability or matter
to the extent reserves or accruals for such matters are included in the Adjusted
December 31, 1998 Balance Sheet.
(c) The aggregate amount of liability that the Sellers and the
Shareholders may be required to indemnify the Purchasers for pursuant to Section
13.2, or pay to the Purchasers pursuant to a breach of this Agreement or
otherwise relating to the transactions contemplated under this Agreement, shall
be limited to five million dollars ($5,000,000); provided, however, that no such
limitation shall apply to any Tax liability.
14. MISCELLANEOUS
14.1 Expenses. Except as and to the extent otherwise provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, the parties hereto shall each pay their own respective expenses and
the fees and expenses of their respective counsel and other experts.
14.2 Termination of Agreement. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time, but not later
than the Closing Date, (x) by the Purchasers (i) at any time prior to the
Closing if a material default shall be made by the Sellers or the Shareholders
in the observance or in the due and timely performance of any of the terms
hereof to be performed by the Sellers or the Shareholders that cannot be cured
prior to Closing or (ii) at the Closing if any of the conditions precedent to
the performance of the Purchasers' obligations at the Closing shall
not have been fulfilled,
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(y) by the Sellers (i) at any time prior to Closing if a material default shall
be made by the Purchasers in the observance or in the due and timely performance
of any of the terms hereof to be performed by Purchasers that cannot be cured
prior to Closing, (ii) at the Closing if any of the conditions precedent to the
performance of the Sellers' or the Shareholders' obligations at the Closing
shall not have been fulfilled or (iii) if the Closing shall not have occurred by
June 30, 1999 (except as a result of breach of this Agreement by the Sellers or
the Shareholders), or (z) by the mutual written consent of the parties hereto at
any time. In the event of the termination of this Agreement, all further
obligations of the parties hereunder shall terminate, except for the provisions
of (a) this Section 14.2, (b) Section 14.1 regarding certain expenses and (c)
Section 14.16 relating to public announcements. If this Agreement is terminated
under Section 14.2(y), the Purchasers shall pay to the Sellers, as liquidated
damages, within ten (10) days of such termination, the sum of five hundred
thousand dollars ($500,000) (plus, if the Closing Date prior to termination had
been extended in accordance with Section 4.1, the sum of two hundred thousand
dollars ($200,000), representing payment of the Deposit), which amount the
parties agree constitutes fair and reasonable damages to the Sellers, and the
Purchasers shall have no further liability to any person under this Agreement or
the transactions contemplated hereunder. In the event that a condition precedent
to a party's obligation is not met, nothing contained herein shall be deemed to
require any party to terminate this Agreement rather than to waive such
condition precedent and proceed with the Closing.
14.3 Waivers. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein or in any other documents. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach. Any party
hereto may, at or before the Closing, waive any conditions to its obligations
hereunder which are not fulfilled.
14.4 Binding Effect; Benefits. This Agreement shall inure to the benefit
of the parties hereto and shall be binding upon the parties hereto and their
respective successors and assigns. Except as otherwise set forth herein, nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement.
14.5 Assignment. No party hereto may assign its rights or obligations
hereunder without the prior written consent of all other parties hereto;
provided, however, that without the consent, prior, written or otherwise, of any
other party hereto, this Agreement and all of the rights and obligations
hereunder may be assigned by Purchaser to any entity owned or
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controlled by, or affiliated with it, provided that all Purchasers shall remain
liable under this Agreement.
14.6 Notices. All notices, requests, demands and other communications
which are required to be or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given when delivered in person or
upon receipt when transmitted by facsimile or telex or after dispatch by
certified or registered first class mail, postage prepaid, return receipt
requested, to the party to whom the same is so given or made:
If to any of the Purchasers, to:
Andrew A. Levy, Esq.
Critical Components Corp.
280 Park Avenue
21st Floor
New York, New York 10017
Telecopier: 212-754-2411
With a copy to:
Vincent Monte-Sano, Esq.
Carter, Ledyard & Milburn
2 Wall Street
New York, New York 10005
Telecopier: 212-732-3232
If to any of the Sellers, to:
Mr. Dennis Normandin
Ranor, Inc.
P.O. Box 458
Westminster, Massachusetts 01473
Telecopier: 978-874-2748
With a copy to:
Noel G. Posternak, P.C.
Posternak, Blankstein & Lund, L.L.P.
100 Charles River Plaza
Boston, Massachusetts 02114
Telecopier: 617-367-2315
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14.7 Entire Agreement. This Agreement (including the Appendices and
Exhibits hereto) and the Ancillary Documents constitute the entire agreement and
supersede all prior agreements and understandings, oral and written, among the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements, representations, warranties, statements, promises and
understandings, whether written or oral, with respect to the subject matter
hereof. No party hereto shall be bound by or charged with any written or oral
arguments, representations, warranties, statements, promises or understandings
no specifically set forth in this Agreement or in any Appendix or Exhibit hereto
or any Ancillary Documents, or in certificates and instruments to be delivered
pursuant hereto on or before the Closing.
14.8 Headings; Certain Terms. The section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement. As used in this Agreement, the term "including" means "including, but
not limited to" unless otherwise specified; the word "or" means "and/or," and
the word "person" means and refers to any individual, corporation, trust,
partnership, joint venture, government or governmental authority, or any other
entity; and the plural and singular forms are used interchangeably.
14.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when executed, shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument.
14.10 Governing Law. This Agreement shall be construed in accordance with
the laws of the State of New York, without giving effect to the choice of law
principles thereof, except with respect to any matter involving the purchase and
sale of the Real Property, which shall be governed by the laws of the
Commonwealth of Massachusetts.
14.11 Severability. If any term or provision of this Agreement shall to
any extent be invalid or unenforceable, the remainder of this Agreement shall
not be affected thereby, and each term and provision of the agreement shall be
valid and enforced to the fullest extent permitted by law.
14.12 Amendments. This Agreement may not be modified or changed except by
an instrument or instruments in writing signed by the party or parties against
whom enforcement of any such modification or amendment is sought.
14.13 Transaction Taxes. The Sellers shall pay any and all taxes imposed
upon the sale of the Acquired Assets and transfer of ownership thereof, except
that transfer taxes relating to the sale of any motor vehicles shall be borne by
the Purchasers. At the Closing, the parties shall make customary adjustments
relating to the Real Property, including, without limitation, as to property
taxes, fuel and utility adjustments, etc. The parties hereto
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intend the transactions pursuant to this Agreement to qualify under
Massachusetts Reg. 830 CMR 64H. 6.1(1)(d) and (e) concerning casual sales.
14.14 Section References. All references contained in this Agreement to
any section number are references to sections of this Agreement unless otherwise
specifically stated.
14.15 Brokers and Finders. The Sellers and the Shareholders recognize that
(i) BKR International Mergers and Acquisitions Group, LLC is the broker which
brought about this transaction and (ii) the Company had an agreement with Joseph
Picano pursuant to which his successors may be entitled to payment upon the
Closing, and the Company in each case shall be solely responsible for the
payment of all fees and expenses thereof. Each party represents and warrants
there are no other brokers, finders or similar persons to whom compensation will
be due or owing as a result of consummation of the transactions contemplated by
this Agreement and each party hereby agrees to indemnify and hold the other
party harmless against any such claims.
14.16 Confidentiality. For a period of five (5) years from the Closing
Date, the Sellers and the Shareholders shall keep, and use their best efforts to
cause their respective Affiliates, officers, directors, employees and agents to
keep, confidential all information proprietary to the Business that has been
acquired by any Seller or Shareholder through its or his ownership and
management of the Business, including information acquired from the Purchasers,
provided that the foregoing restriction shall not apply to information that (i)
is or hereafter becomes generally available in the public domain through no
fault of the Sellers or the Shareholders, (ii) is lawfully acquired by the
Sellers or the Shareholders from a source other than the Purchasers, (iii)
generally relates to the industry in which the Company operates or (iv) is
required to be disclosed in compliance with the applicable law; provided,
however, that with respect to clause (iv) above, the Sellers and the
Shareholders shall take all reasonable measures to assure confidential treatment
of such disclosed information. Each Seller and each Shareholder agrees that the
Purchasers shall be entitled to specific performance and injunctive relief as
remedies for any breach of this Section 14.16. Such remedies shall not be deemed
to be the exclusive remedies for a breach of this Section 14.16 by any Seller or
Shareholder or any of their respective Affiliates, officers, directors,
employees and agents, but shall be in addition to all other remedies available
at law or equity. The confidentiality letter agreement dated July 7, 1998
between Hodin Associates, Inc./BKR International Mergers & Acquisitions Group,
LLC, as agent for the Company, and Standard shall survive the execution and
delivery of this Agreement, except as otherwise expressly provided therein.
14.17 Public Announcements; Disclosure to Certain Parties. Prior to the
Closing Date, (a) the Purchasers and the Company agree to consult with each
other as long as reasonably practical before any party hereto or any of their
respective Affiliates issues any
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press release or makes any public statement with respect to this Agreement or
the transactions contemplated hereby and, except as may be required by
applicable law, will not issue, or permit to be issued, any such press release
or make, or permit to be made, any such public statement prior to such
consultation (in which case the party issuing such press release or making such
public statement shall give as much advance notice as possible to the other
party) and (b) the Purchasers shall obtain the consent of the Company before
Purchaser or any of its Affiliates discloses this Agreement or the transactions
contemplated hereby to any customer, Employee, supplier, agent or distributor of
the Company, including without limitation any disclosure contemplated under
Section 7.3 hereof.
14.18 Exhibits. A fact or item disclosed in any Exhibit shall be deemed to
be disclosed with respect to all other relevant Exhibits, whether or not an
explicit cross-reference appears.
15. DISPUTE RESOLUTION
(a) Any claim shall be settled by an amicable effort on the part of the
parties. An attempt to arrive at a settlement shall be deemed to have failed
thirty days after either party so notifies the other party in writing and the
matter is not settled within that period, and neither party shall institute
arbitration until expiration of that notice period.
(b) If an attempt at settlement has failed, and written notice thereof has
been given as provided herein, any claim shall be decided by binding arbitration
pursuant to the Commercial Arbitration Rules, as amended and in effect January
1, 1996, of the American Arbitration Association (the "Rules"), subject to the
following:
(i) The arbitration shall take place in New York, New York if
initiated by the Purchasers and in Boston, Massachusetts if initiated by
the Sellers or the Shareholders.
(ii) Purchaser shall be entitled to designate one arbitrator and the
Company shall be entitled to designate one arbitrator. Within thirty days
after receipt by a party of a written notice of arbitration, each party
shall notify the other party of its designated arbitrator. The arbitrators
so chosen shall designate a third neutral arbitrator by unanimous vote
within ten days of their designation. The neutral arbitrator shall act as
Chair to the arbitration. In the event that a neutral arbitrator is not
designated pursuant to this subsection within said ten-day period, either
party may request that the American Arbitration Association select such
neutral arbitrator using its normal procedures.
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<PAGE>
(iii) If a designated arbitrator cannot for any reason continue to
serve as an arbitrator, then the party that so designated that arbitrator
shall have the right to appoint a replacement for that arbitrator.
(iv) An arbitration hearing shall be conducted not later than sixty
days after selection of the arbitrators. At the arbitration hearing, each
party may make written and oral presentations to the arbitration panel,
present testimony and written evidence, and examine witnesses.
(v) The written decision of the arbitration panel shall be final and
binding, and may be entered and enforced in any court of competent
jurisdiction. Each party hereby waives any right to jury trial in
connection with the enforcement of such written decision.
(vi) Each party to the arbitration shall pay the fees and expenses
of the arbitrator it designates and one-half of the fees and expenses of
the neutral arbitrator and of the American Arbitration Association.
Notwithstanding the foregoing, the arbitration panel, by majority vote,
may assess arbitration costs and the costs and fees of the arbitrators
against a party if it determines such party has brought or defended a
claim in bad faith.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement, or have
caused this Agreement to be signed in their respective names by an officer
thereunder duly authorized, on the date first above written.
STANDARD AUTOMOTIVE
CORPORATION
By:_____________________________
Name:
Title:
CRITICAL COMPONENTS CORP.
By:_____________________________
Name:
Title:
45
<PAGE>
RANOR, INC.
a Delaware corporation
By:_____________________________
Name:
Title:
RANOR, INC.
a Massachusetts corporation
By:_____________________________
Name:
Title:
FIVE N LEASING COMPANY
By:_____________________________
Name:
Title:
_________________________________________
Dennis Normandin
[Address]
_________________________________________
Peter Normandin
[Address]
_________________________________________
Mark Normandin
[Address]
_________________________________________
David Normandin
[Address]
46
AMENDED AND RESTATED
CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is dated as of June 16, 1999
and is made by and among STANDARD AUTOMOTIVE CORPORATION, a Delaware corporation
(the "Borrower"), each of the GUARANTORS (as hereinafter defined), the BANKS (as
hereinafter defined) and PNC BANK, NATIONAL ASSOCIATION, in its capacity as
agent for the Banks under this Agreement (hereinafter referred to in such
capacity as the "Agent"). Unless otherwise defined herein, all capitalized terms
used herein and defined in Section 1 are used herein as so defined.
WITNESSETH:
WHEREAS, the Borrower has requested the Banks to:
(a) amend and restate the terms of the Credit Agreement, dated as of
July 21, 1998 (the "Existing Credit Agreement"), among the Borrower, the
guarantors party thereto, the banks party thereto (the "Existing Banks") and PNC
Bank, as agent thereunder, on the terms and provisions set forth herein;
(b) continue Term Loans (as defined in the Existing Credit
Agreement) outstanding under the Existing Credit Agreement hereunder and to
continue the Existing Banks' commitments to make such Term Loans under the
Existing Credit Agreement as Term Loan Commitments hereunder;
(c) cause ING (U.S.) Capital LLC to make an additional $25,000,000
term loan hereunder;
(d) continue Revolving Credit Loans (as defined in the Existing
Credit Agreement) outstanding under the Existing Credit Agreement hereunder and
to continue the Existing Banks' commitments to make such Revolving Loans under
the Existing Credit Agreement as Revolving Credit Commitments hereunder; and
(e) to increase by $5,000,000 the Existing Banks' commitments to
make Revolving Loans (as defined in the Existing Credit Agreement) under the
Existing Credit Agreement as Revolving Credit Commitments hereunder;
WHEREAS, the Banks are willing on the terms and subject to the
conditions hereinafter set forth, to:
(a) amend, restate, consolidate, evidence and substitute for, but
not be a prepayment, satisfaction or cancellation of, the terms and conditions
of the Existing Credit Agreement as set forth herein;
(b) to continue such loans and such commitments hereunder as Loans
and Commitments;
<PAGE>
(c) make such additional loans; and
(d) increase such revolving credit commitment hereunder as Revolving
Credit Commitments;
WHEREAS, the Borrower, Critical Components Corp., a Delaware corporation
("CCC"), Ranor, Inc., a Delaware corporation ("Ranor" or the "Purchaser", as the
case may be, and collectively with the Borrower and CCC, the "Purchasers"),
Ranor, Inc., a Massachusetts corporation (the "Company"), Dennis Normandin,
Peter Normandin, Mark Normandin and David Normandin (the "Shareholders") and
Five N Leasing Company, a Massachusetts general partnership ("Five N" and
collectively with the Company and the Shareholders, the "Sellers") have entered
into an Asset Purchase Agreement, dated as of April 16, 1999 (including the
annexes, exhibits and schedules thereto, as the same may be supplemented or
amended from time to time, the "Ranor Purchase Agreement"), pursuant to which
the Purchaser will purchase from the Sellers and the Sellers will sell to the
Purchaser, substantially all the assets used in the Business (as such term is
defined in the Ranor Purchase Agreement) on the terms and conditions set forth
in the Ranor Purchase Agreement (the asset acquisition described in this recital
is the "Acquisition");
WHEREAS, consideration for the Acquisition shall consist of (a) the
payment by the Purchasers of cash equal to (1) $21,200,000 plus (ii) the
Addition Adjustment (as such term is defined in the Ranor Purchase Agreement),
minus (iii) the adjustments set forth in Section 3.3 of the Ranor Purchase
Agreement minus (iv) any Deposit (as such term is defined in the Ranor Purchase
Agreement) which is applied against the Purchase Price (as such term is defined
in the Ranor Purchase Agreement), and (b) the delivery by the Purchaser to the
Company of four Notes (as such term is defined in the Ranor Purchase Agreement),
in the aggregate principal amount of $5,300,000, subject to reduction or
increase in accordance with Section 3.3 of the Ranor Purchase Agreement and (c)
the delivery by the Purchaser to the Company of any Additional Notes (as such
term is defined in the Ranor Purchase Agreement) provided for in Section 7.8 of
the Ranor Purchase Agreement. Simultaneously with the Acquisition, the Purchaser
shall enter into an employment agreement with each of the Shareholders, in the
form attached as Appendix 3.2(b) to the Ranor Purchase Agreement;
WHEREAS, CCC, its shareholders and Borrower have entered into a stock
purchase agreement dated as of April 1, 1999 (including the annexes, exhibits
and schedules thereto, as the same may be supplemented, amended or clarified
from time to time, the "CCC/Borrower Stock Purchase Agreement"), pursuant to
which Borrower will acquire 100% of CCC's capital stock on the terms and
conditions set forth in the CCC/Borrower Stock Purchase Agreement. Consideration
for CCC's capital stock shall consist of up to 300,000 shares of Borrower's
common stock. Further, Borrower shall pay financial advisors to CCC a cash fee
equal to 3% of the purchase price of companies under letter of intent or under
contract with CCC when each are closed and as provided for under the
CCC/Borrower Stock Purchase Agreement.
WHEREAS, the Borrower shall use a portion of the credit facilities
provided for herein to make a capital contribution to CCC (the "CCC Capital
Contribution") on the Closing Date, which
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CCC shall use to make a capital contribution to Ranor (the "Ranor Capital
Contribution) on the Closing Date to be used by the Purchaser to finance the
Acquisition;
WHEREAS, CCC Capital Contribution, the Ranor Capital Contribution and the
Acquisition are sometimes collectively referred to herein as the "Transaction";
WHEREAS, the Borrower will pledge all of the capital stock of CCC and CCC
will pledge all of the capital stock of the Purchaser to secure the payment and
performance of the Borrower's obligations hereunder;
WHEREAS, CCC will execute a Subsidiary Guarantee, secured by a pledge of
all of the capital stock of the Purchaser, guaranteeing the Borrower's
obligations hereunder;
WHEREAS, the Purchaser will execute a Subsidiary Guarantee, secured by a
security interest in and lien on all assets of the Purchaser, guaranteeing the
Borrower's obligations hereunder; and
WHEREAS, the Banks are willing to make available the credit facilities
provided for herein.
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, covenant and agree to amend and restate the Existing Credit Agreement as
follows:
1. CERTAIN DEFINITIONS
1.1 Certain Definitions.
In addition to words and terms defined elsewhere in this Agreement,
the following words and terms shall have the following meanings, respectively,
unless the context hereof clearly requires otherwise:
Account shall mean any account, contract right, general
intangible, chattel paper, instrument or document representing any right to
payment for goods sold or services rendered, whether or not earned by
performance and whether or not evidenced by a contract, instrument or document,
which is now owned or hereafter acquired by any Loan Party.
Account Debtor shall mean any person which is or which may
become obligated to any Loan Party under, with respect to, or on account of, an
Account.
Acquisition means the consummation of the transactions
contemplated to be performed in connection with the Ranor Purchase Agreement.
Acquisition Date means the date of consummation of the
Acquisition.
Acquisition Documents means, with respect to the Acquisition,
the asset purchase agreement or similar agreement regarding such Acquisition and
all other agreements,
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instruments and documents delivered in connection with the consummation thereof
(including, without limitation, any equity financing documents related thereto).
Affiliate as to any Person shall mean any other Person (i)
which directly or indirectly controls, is controlled by, or is under common
control with such Person, (ii) which beneficially owns or holds 5% or more of
any class of the voting or other equity interests of such Person, or (iii) 5% or
more of any class of voting interests or other equity interests of which is
beneficially owned or held, directly or indirectly, by such Person. Control, as
used in this definition, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise, including the power to elect a majority of the directors or trustees
of a corporation or trust, as the case may be.
Agent shall mean PNC Bank, National Association, and its
successors and assigns.
Agent's Fee shall have the meaning assigned to that term in
Section 10.15.
Agent's Letter shall have the meaning assigned to that term in
Section 7.1.6.
Agent's Office means the office of the Agent located at Two
Tower Center, East Brunswick, New Jersey 08816, or such other office as the
Agent may designate in writing as such to the other parties hereto.
Agreement shall mean this Amended and Restated Credit
Agreement, as the same may be supplemented or amended from time to time,
including all schedules and exhibits.
Ajax Manufacturing means Ajax Manufacturing Co.
Amended and Restated Collateral Assignment of Lease shall mean
the Amended and Restated Collateral Assignment of Lease, dated as of June 16,
1999, executed and delivered by Ajax Manufacturing to the Agent for the benefit
of the Banks.
Amended and Restated Subordination, Non-Disturbance and
Attornment Agreement, dated as of June 16, 1999, executed and delivered by CPS
Trailer, CPS Enterprises and the Agent for the benefit of the Banks.
Applicable Margin shall mean with reference to Revolving Loans
and Term Loan A Loans to which the Base Rate Option or the Euro-Rate Option
applies, an amount in excess of the Base Rate or the Euro-Rate, as the case may
be, calculated in respect of the most-recently reported Leverage Ratio according
to the table set forth below. Applicable Margin shall be at "Level IV" in the
following table until delivery of the financial statements due pursuant to
Section 8.3.2 [Quarterly Financial Statements] for the period ending December
31, 1999. Thereafter, Applicable Margin shall change on the day financial
statements are due to be delivered pursuant to Sections 8.3.2 [Quarterly
Financial Statements] and 8.3.3 [Annual Financial Statements] and if information
necessary to make such determination is not timely delivered
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pursuant to such sections, Applicable Margin shall be at "Level IV" in the
following table until such information is delivered.
APPLICABLE MARGIN
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Level Leverage Applicable Margin for Applicable Margin for
Coverage Ratio Base Rate Loans (%) Euro-Rate Loans (%)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
I less than or equal to .25 2.25
2.00-to-1.0
II greater than 2.00-to-1.0 but .50 2.50
less than or equal to
2.50-to-1.0
III greater than 2.50-to-1.0 but .75 2.75
less than or equal to
3.00-to-1.0
IV greater than 3.00-to-1.0 1.00 3.00
- --------------------------------------------------------------------------------------------
</TABLE>
Applicable Margin shall mean, with reference to Term Loan B Loans to which the
Base Rate Option applies, 1.75% and, with reference to Term Loan B Loans to
which the Euro-Rate Option applies, 3.50%.
The rate on Base Rate Loans and Euro-Rate Loans shall change the date the
Applicable Margin changes.
Assignee Bank shall have the meaning assigned to such term in
Section 2.10.2.
Assignment and Assumption Agreement shall mean an Assignment
and Assumption Agreement by and among a Purchasing Bank, a Transferor Bank and
the Agent, as Agent and on behalf of the remaining Banks, substantially in the
form of Exhibit 1.1(A).
Assignments of Leases shall mean, collectively, and Assignment
of Leases shall mean, separately:
(i) that certain Amended and Restated Assignment of Leases and
Rents, dated of even date herewith, from R&S Truck Body Company, Inc. to the
Agent for the benefit of the Banks;
(ii) that certain Amended and Restated Assignment of Leases
and Rents, dated of even date herewith, from CPS Trailer Co. to the Agent for
the benefit of the Banks ;
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(iii) that certain Amended and Restated Assignment of Leases
and Rents, dated of even date herewith, from CPS Enterprises, Inc. to the Agent
for the benefit of the Banks;
(iv) that certain Assignment of Leases and Rents, dated of
even date herewith, from Ranor, Inc. to the Agent for the benefit of the Banks;
and
(v) those certain assignments of leases and rents which may be
delivered by the Loan Parties to the Agent for the benefit of the Banks,
all as the same may be supplemented, amended or restated from
time to time in accordance herewith or therewith.
Authorized Officer shall mean those individuals, designated by
written notice to the Agent from the Borrower, authorized to execute notices,
reports and other documents on behalf of the Loan Parties required hereunder.
The Borrower may amend such list of individuals from time to time by giving
written notice of such amendment to the Agent.
Bank to be Terminated shall have the meaning assigned to such
term in Section 2.10.2.
Banks shall mean the financial institutions named on Schedule
1.1(B) and their respective successors and assigns as permitted hereunder, each
of which is referred to herein as a Bank.
Barclay shall mean Barclay Investments, Inc., a New Jersey
corporation.
Barclay/SAC Purchase Agreement shall mean the Stock Purchase
Agreement, dated February 24, 1998, between Barclay and Standard Automotive
Corporation, as amended, modified or supplemented from time to time.
Base Net Worth shall mean the sum (measured as of the end of
each fiscal year) of $27,823,000 plus 50% of consolidated net income of the
Borrower and its Subsidiaries for each fiscal year in which net income (net of
preferred dividends) was earned (as opposed to a net loss) during the period
from April 1, 1999 through the date of determination.
Base Rate shall mean the greater of (i) the interest rate per
annum announced from time to time by the Agent at its Principal Office as its
then prime rate, which rate may not be the lowest rate then being charged
commercial borrowers by the Agent, or (ii) the Federal Funds Effective Rate plus
1/2% per annum.
Base Rate Option shall mean either the Revolving Credit Base
Rate Option or the Term Loan Base Rate Option.
Benefit Arrangement shall mean at any time an "employee
benefit plan," within the meaning of Section 3(3) of ERISA, which is neither a
Plan nor a Multiemployer Plan
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<PAGE>
and which is maintained, sponsored or otherwise contributed to by any member of
the ERISA Group.
Borrower shall mean Standard Automotive Corporation, a
corporation organized and existing under the laws of the State of Delaware.
Borrower Statements shall have the meaning assigned to that
term in Section 6.1.9(b)(i).
Borrowing Base shall mean at any time the sum of (i)
eighty-five percent (85%) of Qualified Accounts plus (ii) fifty-five percent
(55%) of Qualified Inventory (in any event not to exceed with respect to
Qualified Inventory the sum of $10,000,000), as any of the foregoing is modified
from time to time pursuant to Section 2.1. Each such advance rate is subject to
periodic review and analysis by the Banks and is therefore subject to change
from time to time or any time.
Borrowing Base Certificate shall mean the Borrowing Base
Certificate given by the Borrower to the Banks on the Closing Date and from time
to time pursuant to Section 8.3.3A in the form of Exhibit 1.1(B).
Borrowing Date shall mean, with respect to any Loan, the date
for the making thereof or the renewal or conversion thereof at or to the same or
a different Interest Rate Option, which shall be a Business Day.
Borrowing Tranche shall mean specified portions of Loans
outstanding as follows: (i) any Loans to which a Euro-Rate Option applies which
become subject to the same Interest Rate Option under the same Loan Request by
the Borrower and which have the same Interest Period shall constitute one
Borrowing Tranche, and (ii) all Loans to which a Base Rate Option applies shall
constitute one Borrowing Tranche.
Business Day shall mean any day other than a Saturday or
Sunday or a legal holiday on which commercial banks are authorized or required
to be closed for business in New Jersey and if the applicable Business Day
relates to any Loan to which the Euro-Rate Option applies, such day must also be
a day on which dealings are carried on in the London interbank market.
Cabore means Cabore Resources, Inc.
CCC shall have the meaning assigned to such term in the
recitals.
CCC/Borrower Stock Purchase Agreement shall have the meaning
ascribed to such term in the recitals.
Clayfort means Clayfort Industries, Inc.
Closing Date shall mean the Business Day on which the first
Loan shall be made, which shall be June 17, 1999 or, if all the conditions
specified in Section 7 have not been satisfied or waived by such date, not later
than June 30, 1999, as designated by the Borrower by
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<PAGE>
at least three Business Days' advance notice to the Agent at its Principal
Office, or such other date as the parties agree. The closing shall take place at
10:00 a.m., Eastern time, on the Closing Date at the offices of Buchanan
Ingersoll, 500 College Road East, Princeton, New Jersey 08540, or at such other
time and place as the parties agree.
Collateral shall mean the Pledged Collateral, the UCC
Collateral and the Real Property.
Commercial Letter of Credit shall mean a Letter of Credit
issued in respect of the purchase of goods or services by the Borrower or one of
its Subsidiaries in the ordinary course of business.
Commitment shall mean as to any Bank the aggregate of its
Revolving Credit Commitment, Term Loan A Commitment and Term Loan B Commitment,
and Commitments shall mean the aggregate of the Revolving Credit Commitments,
the Term Loan A Commitments and the Term Loan B Commitments of all of the Banks.
Commitment Fee shall have the meaning assigned to that term in
Section 2.4.
Company shall have the meaning ascribed to such term in the
recitals.
Consolidated Capital Expenditures of any Person means, for any
period, the aggregate gross increase during that period, in the property, plant
or equipment reflected in the consolidated balance sheet of such Person and its
consolidated Subsidiaries, in conformity with GAAP, but excluding expenditures
made in connection with the replacement, substitution or restoration of assets
(i) to the extent financed from insurance proceeds paid on account of the loss
of or damage to the assets being replaced or restored, or from indemnity
payments received pursuant to the Acquisition Documents, (ii) with awards of
compensation arising from the taking by eminent domain or condemnation of the
assets being replaced or (iii) with regard to equipment that is purchased
simultaneously with the trade-in of existing equipment, fixed assets or
improvements, the credit granted by the seller of such equipment for the
trade-in of such equipment, fixed assets or improvements; provided, however,
that Consolidated Capital Expenditures shall in any event exclude the following:
(i) up to $9,900,000 in the aggregate of capital expenditures in respect of the
purchase or acquisition of fixed or capital assets by R&S in fiscal years 1998
and 1999 to be used in connection with the acquisition and development of a new
manufacturing plant in Floyd County, Kentucky and (ii)(a) up to $4,000,000 in
the aggregate of capital expenditures in respect of the purchase or acquisition
of fixed or capital assets by the Loan Parties to be used in connection with the
acquisition and development of a West Coast manufacturing facility, (b) up to
$1,500,000 in the aggregate of capital expenditures in respect of the purchase
or acquisition of fixed or capital assets by the Loan Parties at the Ajax
manufacturing facility located in Hillsborough, New Jersey, in each case for
fiscal years 1999 and 2000 and (c) up to $5,000,000 in the aggregate of capital
expenditures for fiscal years 1999 and 2000 for the 25,000 square foot addition
(including related machinery and equipment) at Ranor.
Consolidated Lease Expense shall mean for any period, the
aggregate amount of fixed and contingent rentals payable by the Borrower and its
Subsidiaries, determined
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<PAGE>
on a consolidated basis in accordance with GAAP, for such period with respect to
leases of real and personal property.
Consolidated Net Worth shall mean as of any date of
determination total stockholders' equity of the Borrower and its Subsidiaries as
of such date determined and consolidated in accordance with GAAP.
Contingent Obligations means, as to any Person, without
duplication, any obligation of such person guaranteeing or intended to guarantee
any Indebtedness, leases, dividends or other obligations ("primary obligations")
of any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business and amounts that are permitted by Section 8.2.3. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the maximum
amount that such Person may be obligated to expend pursuant to the terms of such
Contingent Obligation or, if such Contingent Obligation is not so limited, the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
Control Group means Steven Merker, William Merker and Karl
Massaro.
CPS means, collectively, CPS Enterprises and CPS Trailer.
CPS Enterprises means CPS Enterprises, Inc., a Missouri
corporation.
CPS Trailer means CPS Trailer Co., a Missouri corporation.
Dollar, Dollars, U.S. Dollars and the symbol $ shall mean
lawful money of the United States of America.
Drawing Date shall have the meaning assigned to that term in
Section 2.9.3.2.
EBITDA shall mean (i) the sum of net income (before (a)
extraordinary expenses and (b) owners compensation related expenses, excess CEO
compensation and private company related expenses not to exceed $300,000, in
each case as approved by the Agent in writing, in its sole discretion),
depreciation, amortization, interest expense, income tax expense minus (ii)
non-cash credits to net income, in each case of the Borrower and its
Subsidiaries determined and consolidated in accordance with GAAP (x) for the
four fiscal quarters ended
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March 31, 1999 and (y) at the end of each fiscal quarter thereafter calculated
for the four quarters then ended. EBITDA shall also include certain non-cash
charges related to purchase accounting adjustments to be agreed upon between the
Borrower and the Banks, in the Banks' sole discretion.
Environmental Complaint shall mean any written complaint
setting forth a cause of action for personal or property damage or natural
resource damage or equitable relief, order, notice of violation, citation,
request for information issued pursuant to any Environmental Laws by an Official
Body, subpoena or other written notice of any type relating to, arising out of,
or issued pursuant to, any of the Environmental Laws or any Environmental
Conditions, as the case may be.
Environmental Conditions shall mean any conditions of the
environment, including the workplace, the ocean, natural resources (including
flora or fauna), soil, surface water, groundwater, any actual or potential
drinking water supply sources, substrata or the ambient air, relating to or
arising out of, or caused by, the use, handling, storage, treatment, recycling,
generation, transportation, release, spilling, leaking, pumping, emptying,
discharging, injecting, escaping, leaching, disposal, dumping, threatened
release or other management or mismanagement of Regulated Substances resulting
from the use of, or operations on, any Property.
Environmental Laws shall mean all federal, state, local and
foreign Laws and regulations, including permits, licenses, authorizations,
bonds, orders, judgments, and consent decrees issued, or entered into, pursuant
thereto, relating to pollution or protection of human health or the environment
or employee safety in the workplace.
ERISA shall mean the Employee Retirement Income Security Act
of 1974, as the same may be amended or supplemented from time to time, and any
successor statute of similar import, and the rules and regulations thereunder,
as from time to time in effect.
ERISA Group shall mean, at any time, the Borrower and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control and all other entities which,
together with the Borrower, are treated as a single employer under Section 414
of the Internal Revenue Code.
Euro-Rate shall mean, with respect to the Loans comprising any
Borrowing Tranche to which the Euro-Rate Option applies for any Interest Period,
the interest rate per annum determined by the Agent by dividing (the resulting
quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per annum)
(i) the rate of interest determined by the Agent in accordance with its usual
procedures (which determination shall be conclusive absent manifest error) to be
the average of the London interbank offered rates for U.S. Dollars quoted by the
British Bankers' Association as set forth on Dow Jones Markets Service (formerly
known as Telerate) display page 3750 (or appropriate successor or, if the
British Bankers' Association or its successor ceases to provide such quotes, a
comparable replacement determined by the Agent) two (2) Business Days prior to
the first day of such Interest
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Period for an amount comparable to such Borrowing Tranche and having a borrowing
date and a maturity comparable to such Interest Period by (ii) a number equal to
1.00 minus the Euro-Rate Reserve Percentage. The Euro-Rate may also be expressed
by the following formula:
Average of London interbank offered rates on Dow Jones Markets
Service display page 3750 as quoted by
Euro-Rate = British Bankers' Association or appropriate successor
-----------------------------------------------------
1.00 - Euro-Rate Reserve Percentage
The Euro-Rate shall be adjusted with respect to any Euro-Rate Option outstanding
on the effective date of any change in the Euro-Rate Reserve Percentage as of
such effective date. The Agent shall give prompt notice to the Borrower of the
Euro-Rate as determined or adjusted in accordance herewith, which determination
shall be conclusive absent manifest error.
Euro-Rate Option shall mean either the Revolving Credit
Euro-Rate Option or the Term Loan Euro-Rate Option.
Euro-Rate Reserve Percentage shall mean the maximum percentage
(expressed as a decimal rounded upward to the nearest 1/100 of 1%) as determined
by the Agent which is in effect during any relevant period, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the reserve requirements (including supplemental, marginal and
emergency reserve requirements) with respect to eurocurrency funding (currently
referred to as "Eurocurrency Liabilities") of a member bank in such System.
Event of Default shall mean any of the events described in
Section 9.1 and referred to therein as an "Event of Default."
Excess Cash Flow shall be computed as of the close of each
fiscal year by taking the difference between (i) EBITDA for such fiscal year and
(ii) Fixed Charges, plus Consolidated Capital Expenditures, plus voluntary
prepayments to Term Loan A Loans, in each case for such fiscal year. All
determinations of Excess Cash Flow shall be based on the immediately preceding
fiscal year and shall be made following the delivery by the Borrower to the
Agent of the Borrower's audited financial statements for such preceding year.
Existing Banks shall have the meaning specified in the
recitals hereto.
Existing Credit Agreement shall have the meaning specified in
the recitals hereto.
Existing Debt means the Indebtedness of the Borrower and its
Subsidiaries set forth on Schedule 8.2.1.
Existing Lender shall mean any lender under an Existing
Financing Document.
Existing Financing Documents shall mean all credit agreements,
indentures, notes, guarantees and other financing documents, in each case, as
amended to the extent permitted hereunder, evidencing or governing the
Indebtedness listed on Schedule 8.2.1.
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Expiration Date shall mean, with respect to the Revolving
Credit Commitments, July 20, 2002, unless otherwise extended in accordance with
the provisions of Section 2.10.
Extending Bank shall have the meaning assigned to such term in
Section 2.10.2.
Federal Funds Effective Rate for any day shall mean the rate
per annum (based on a year of 360 days and actual days elapsed and rounded
upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New
York (or any successor) on such day as being the weighted average of the rates
on overnight federal funds transactions arranged by federal funds brokers on the
previous trading day, as computed and announced by such Federal Reserve Bank (or
any successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; provided, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.
Financial Projections shall have the meaning assigned to that
term in Section 6.1.9(b)(ii).
Five N shall have the meaning ascribed to such term in the
recitals.
Fixed Charge Coverage Ratio shall mean the ratio of (x) EBITDA
minus Consolidated Capital Expenditures to (y) Fixed Charges.
Fixed Charges shall mean the sum of cash interest expense,
cash income taxes, scheduled principal installments on Indebtedness (as adjusted
for prepayments), cash dividends and payments under capitalized leases, in each
case of the Borrower and its Subsidiaries determined and consolidated in
accordance with GAAP and measured as of the end of each fiscal quarter.
GAAP shall mean generally accepted accounting principles as
are in effect from time to time, subject to the provisions of Section 1.3, and
applied on a consistent basis both as to classification of items and amounts.
Governmental Acts shall have the meaning assigned to that term
in Section 2.9.8.
Governmental Authority means any federal, state, local,
foreign or other governmental or administrative (including self-regulatory)
body, instrumentality, department or agency or any court, tribunal,
administrative hearing body, arbitration panel, commission, or other similar
dispute-resolving panel or body including, without limitation, those governing
the regulation and protection of the environment, whether now or hereafter in
existence, or any officer or official thereof.
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Guarantor shall mean each of the parties to this Agreement
which is designated as a "Guarantor" on the signature page hereof and each other
Person which joins this Agreement as a Guarantor after the date hereof pursuant
to Section 11.19.
Guarantor Joinder shall mean a joinder by a Person as a
Guarantor under this Agreement, the Guaranty Agreement and the other Loan
Documents in the form of Exhibit 1.1(G)(1).
Guaranty of any Person shall mean any obligation of such
Person guaranteeing or in effect guaranteeing any liability or obligation of any
other Person in any manner, whether directly or indirectly, including, without
limitation, any agreement to indemnify or hold harmless any other Person, any
performance bond or other suretyship arrangement and any other form of assurance
against loss, except endorsement of negotiable or other instruments for deposit
or collection in the ordinary course of business.
Guaranty Agreements shall mean each Continuing Agreement of
Guaranty and Suretyship Agreement executed and delivered by each of the
Guarantors to the Agent for the benefit of the Banks, together with any
amendments thereto.
Haile means Haile Industries, Inc.
Historical Statements shall have the meaning assigned to that
term in Section 6.1.9(b)(i).
Indebtedness shall mean, as to any Person at any time, any and
all indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of: (i) borrowed money, (ii)
amounts raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii) reimbursement obligations (contingent or
otherwise) under any letter of credit, currency swap agreement, interest rate
swap, cap, collar or floor agreement or other interest rate management device;
provided, however, that the face amount of any letters of credit which are
secured with cash or cash equivalents pledged to the Banks through an escrow
account in form acceptable to the Agent and the Banks shall be excluded from the
amounts included in determining the amount of Indebtedness outstanding at any
given time, (iv) any other transaction (including forward sale or purchase
agreements, capitalized leases and conditional sales agreements) having the
commercial effect of a borrowing of money entered into by such Person to finance
its operations or capital requirements (but not including trade payables and
accrued expenses incurred in the ordinary course of business which are not
represented by a promissory note or other evidence of indebtedness and which are
not more than thirty (30) days past due), (v) any Guaranty of Indebtedness for
borrowed money or (vi) mandatory redeemable preferred stock.
Indemnity shall mean the Amended and Restated Environmental
Indemnity Agreement, dated as of the date hereof, from the Loan Parties to the
Agent for the benefit of the Banks, relating to possible environmental
liabilities associated with any of the Properties.
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Ineligible Security shall mean any security which may not be
underwritten or dealt in by member banks of the Federal Reserve System under
Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as
amended.
ING Barings shall mean ING (U.S.) Capital LLC, a Delaware
limited liability company.
Insolvency Proceeding shall mean, with respect to any Person,
(a) a case, action or proceeding with respect to such Person (i) before any
court or any other Official Body under any bankruptcy, insolvency,
reorganization or other similar Law now or hereafter in effect, or (ii) for the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or similar official) of any Loan Party or otherwise
relating to the liquidation, dissolution, winding-up or relief of such Person,
or (b) any general assignment for the benefit of creditors, composition,
marshaling of assets for creditors, or other, similar arrangement in respect of
such Person's creditors generally or any substantial portion of its creditors;
undertaken under any Law.
Intercompany Subordination Agreement shall mean the Amended
and Restated Subordination Agreement, dated the date hereof, among the Loan
Parties.
Interest Period shall have the meaning assigned to such term
in Section 4.2
Interest Rate Option shall mean any Euro-Rate Option or Base
Rate Option.
Internal Revenue Code shall mean the Internal Revenue Code of
1986, as the same may be amended or supplemented from time to time, and any
successor statute of similar import, and the rules and regulations thereunder,
as from time to time in effect.
Inventory shall mean any and all inventory of a Loan Party,
including, without limitation, goods in transit, wheresoever located and whether
now owned or hereafter acquired by a Loan Party which are or may at any time be
held as raw materials, finished goods, work-in-process, supplies or materials
used or consumed in a Loan Party's business or held for sale or lease,
including, without limitation, (i) all such property the sale or other
disposition of which has given rise to Accounts and which has been returned to
or repossessed or stopped in transit by a Loan Party, and (ii) all packing,
shipping and advertising materials relating to all or any such property.
Kylan means Kylan Industries, Inc.
Labor Contracts shall mean all employment agreements,
employment contracts, collective bargaining agreements and other agreements
among any Loan Party or Subsidiary of a Loan Party and its employees.
Landlord's Waiver shall mean that certain Landlord's Waiver,
dated July 21, 1998, made by Carl Massaro in favor of the Agent for the benefit
of the Banks.
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Law shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree or award of any Official Body.
L/C Fee Payment Date shall mean each September 30, December
31, March 31 and June 30 of each year.
Leasehold Mortgage shall mean each Leasehold Mortgage to be
executed and delivered by any Loan Party, as the same may be amended,
supplemented or otherwise modified from time to time.
Letter of Credit shall have the meaning assigned to that term
in Section 2.9.1.
Letter of Credit Borrowing shall mean an extension of credit
resulting from a drawing under any Letter of Credit which shall not have been
reimbursed on the date when made and shall not have been converted into a
Revolving Credit Loan under Section 2.9.3.2.
Letter of Credit Fee shall mean the fees referred to in
Section 2.9.2.
Letters of Credit Outstanding shall mean at any time the sum
of (i) the aggregate undrawn face amount of outstanding Letters of Credit and
(ii) the aggregate amount of all unpaid and outstanding Reimbursement
Obligations.
Leverage Ratio shall mean the ratio of (x) the sum of the
Borrower's consolidated Indebtedness, excluding the Notes (as defined in the
Ranor Purchase Agreement) to (y) EBITDA.
Lien shall mean any mortgage, deed of trust, pledge, lien,
security interest, charge or other encumbrance or security arrangement of any
nature whatsoever, whether voluntarily or involuntarily given, including any
conditional sale or title retention arrangement, and any assignment, deposit
arrangement or lease intended as, or having the effect of, security and any
filed financing statement or other notice of any of the foregoing (whether or
not a lien or other encumbrance is created or exists at the time of the filing).
LLC Interests shall have the meaning given to such term in
Section 6.1.3.
Loan Documents shall mean this Agreement, the Agent's Letter,
the Amended and Restated Collateral Assignment of Lease, the Amended and
Restated Subordination, Non-Disturbance and Attornment Agreement, the
Assignments of Leases, the Guaranty Agreements, the Indemnity, the Landlord
Waiver, the Intercompany Subordination Agreement, the Mortgages, the Notes, the
Pledge Agreements, the Security Agreements and any other instruments,
certificates or documents delivered or contemplated to be delivered hereunder or
thereunder or in connection herewith or therewith, as the same may be
supplemented or amended from time to time in accordance herewith or therewith,
and Loan Document shall mean any of the Loan Documents.
Loan Parties shall mean the Borrower and the Guarantors.
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Loan Request shall have the meaning given to such term in
Section 2.5.
Loans shall mean collectively and Loan shall mean separately
all Revolving Credit Loans and the Term Loans or any Revolving Credit Loan or
any Term Loan.
Mandatory Prepayment Date shall have the meaning assigned to
that term in Section 5.5.1.
Mandatory Prepayment of Excess Cash Flow shall have the
meaning assigned to that term in Section 5.5.1.
Massaro/SAC Purchase Agreement shall mean the Stock Purchase
Agreement, dated August 11, 1997, between Carl Massaro and Standard Automotive
Corporation, as amended, modified or supplemented from time to time.
Material Adverse Change shall mean any set of circumstances or
events which (a) has or could reasonably be expected to have any material
adverse effect whatsoever upon the validity or enforceability of this Agreement
or any other Loan Document, (b) is or could reasonably be expected to be
material and adverse to the business, properties, assets, financial condition,
results of operations or prospects of the Loan Parties taken as a whole, (c)
impairs materially or could reasonably be expected to impair materially the
ability of the Loan Parties taken as a whole to duly and punctually pay or
perform its Indebtedness, or (d) impairs materially or could reasonably be
expected to impair materially the ability of the Agent or any of the Banks, to
the extent permitted, to enforce their legal remedies pursuant to this Agreement
or any other Loan Document.
Month, with respect to an Interest Period under the Euro-Rate
Option, shall mean the interval between the days in consecutive calendar months
numerically corresponding to the first day of such Interest Period. If any
Euro-Rate Interest Period begins on a day of a calendar month for which there is
no numerically corresponding day in the month in which such Interest Period is
to end, the final month of such Interest Period shall be deemed to end on the
last Business Day of such final month.
Mortgages shall mean, collectively, and Mortgage shall mean,
separately:
(i) that certain Amended and Restated Mortgage and
Security Agreement, dated of even date herewith, from R&S Truck Body Company,
Inc. to the Agent for the benefit of the Banks;
(ii) that certain Amended and Restated Deed of Trust and
Security Agreement, dated of even date herewith, from CPS Trailer Co. to the
Trustee named therein for the benefit of the Agent on behalf of the Banks ;
(iii) that certain Amended and Restated Deed of Trust
and Security Agreement, dated of even date herewith, from CPS Enterprises, Inc.
to the Trustee named therein for the benefit of the Agent on behalf of the
Banks;
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(iv) that certain Open-End Mortgage and Security
Agreement, from Ranor, Inc. to the Agent for the benefit of the Banks; and
(v) those certain mortgage and security agreements and
deed of trust and security agreements which may be delivered by the Loan Parties
to the Agent for the benefit of the Banks or to a trustee for the benefit of the
Agent on behalf of the Banks.
Multiemployer Plan shall mean any employee benefit plan which
is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and
to which the Borrower or any member of the ERISA Group is then making or
accruing an obligation to make contributions or, within the preceding five Plan
years, has made or had an obligation to make such contributions.
Multiple Employer Plan shall mean a Plan which has two or more
contributing sponsors (including the Borrower or any member of the ERISA Group)
at least two of whom are not under common control, as such a plan is described
in Sections 4063 and 4064 of ERISA.
Net Proceeds shall mean: (i) the aggregate cash consideration
received by the Borrower or a Subsidiary in connection with any transaction
referred to in Section 5.5.2 or Section 5.5.3 less (ii) the expenses (including
out-of-pocket expenses) incurred by the Borrower or such Subsidiary in
connection with such transaction and the amount of any federal and state taxes
incurred in connection with such transaction, in each case as certified by an
Authorized Officer to the Agent at the time of such transaction.
Noray means Noray Resources, Inc.
Notes shall mean, collectively, the Revolving Credit Notes and
the Term Notes.
Notices shall have the meaning assigned to that term in
Section 11.6.
Obligation shall mean any obligation or liability of any of
the Loan Parties to the Agent or any of the Banks, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due, under or in connection with this Agreement,
the Notes, the Letters of Credit, the Agent's Letter or any other Loan Document.
Official Body shall mean any national, federal, state, local
or other government or political subdivision or any agency, authority, bureau,
central bank, commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
Participation Advance shall mean, with respect to any Bank,
such Bank's payment in respect of its participation in a Letter of Credit
Borrowing according to its Ratable Share pursuant to Section 2.9.3.
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Partnership Interests shall have the meaning given to such
term in Section 6.1.3.
PBGC shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any successor.
Permitted Investments shall mean:
(i) direct obligations of the United States of America
or any agency or instrumentality thereof or obligations backed by the full faith
and credit of the United States of America maturing in twelve (12) months or
less from the date of acquisition;
(ii) marketable general obligations issued by any state
of the United States of America or any political subdivision of any such state
or any public instrumentality thereof maturing within six months from the date
of acquisition thereof and, at the time of acquisition, having one of the two
highest ratings generally obtainable from either Standard & Poor's or Moody's
Investors Service, Inc.;
(iii) commercial paper maturing in 180 days or less
rated not lower than A-1, by Standard & Poor's or P-1 by Moody's Investors
Service, Inc. on the date of acquisition; and
(iv) demand deposits, time deposits or certificates of
deposit maturing within one year in commercial banks whose obligations are rated
A-1, A or the equivalent or better by Standard & Poor's on the date of
acquisition.
Permitted Liens shall mean:
(i) Liens for taxes, assessments, or similar charges,
incurred in the ordinary course of business and which are not yet due and
payable;
(ii) Pledges or deposits made in the ordinary course of
business to secure payment of workmen's compensation, or to participate in any
fund in connection with workmen's compensation, unemployment insurance, old-age
pensions or other social security programs;
(iii) Liens of mechanics, materialmen, warehousemen,
carriers, or other like Liens, securing obligations incurred in the ordinary
course of business that are not yet due and payable and Liens of landlords
securing obligations to pay lease payments that are not yet due and payable or
in default;
(iv) Good-faith pledges or deposits made in the ordinary
course of business to secure performance of bids, tenders, contracts (other than
for the repayment of borrowed money) or leases, not in excess of the aggregate
amount due thereunder, or to secure statutory obligations, or surety, appeal,
indemnity, performance or other similar bonds required in the ordinary course of
business;
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(v) Encumbrances consisting of zoning restrictions,
easements or other restrictions on the use of real property, none of which
materially impairs the use of such property or the value thereof, and none of
which is violated in any material respect by existing or proposed structures or
land use;
(vi) Liens, security interests and mortgages in favor of
the Agent for the benefit of the Banks;
(vii) Liens on property leased by any Loan Party or
Subsidiary of a Loan Party under capital and operating leases permitted in
Section 8.2.15 securing obligations of such Loan Party or Subsidiary to the
lessor under such leases;
(viii) Any Lien existing on the date of this Agreement
and described on Schedule 1.1(P) to the Existing Credit Agreement, provided that
the principal amount secured thereby is not hereafter increased, and no
additional assets become subject to such Lien;
(ix) Purchase Money Security Interests, provided that
the aggregate amount of loans and deferred payments secured by such Purchase
Money Security Interests shall not exceed $250,000 (excluding for the purpose of
this computation any loans or deferred payments secured by Liens described on
Schedule 1.1(P));
(x) The Lien granted to Summit Bank on the Municipal
Bond Stafford Township Board of Education Coupon due September 1, 2001, as
evidenced by UCC filing #1838942; and
(xi) The following, (A) if the validity or amount
thereof is being contested in good faith by appropriate and lawful proceedings
diligently conducted so long as levy and execution thereon have been stayed and
continue to be stayed or (B) if a final judgment is entered and such judgment is
discharged within thirty (30) days of entry, and in either case they do not
affect the Collateral or, in the aggregate, materially impair the ability of any
Loan Party to perform its Obligations hereunder or under the other Loan
Documents:
(1) Claims or Liens for taxes, assessments or charges due and
payable and subject to interest or penalty, provided that the
applicable Loan Party maintains such reserves or other appropriate
provisions as shall be required by GAAP and pays all such taxes,
assessments or charges forthwith upon the commencement of
proceedings to foreclose any such Lien;
(2) Claims, Liens or encumbrances upon, and defects of title
to, real or personal property other than the Collateral, including
any attachment of personal or real property or other legal process
prior to adjudication of a dispute on the merits; or
(3) Claims or Liens of mechanics, materialmen, warehousemen,
carriers, or other statutory nonconsensual Liens.
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(4) Liens resulting from final judgments or orders described
in Section 9.1.6.
Person shall mean any individual, corporation, partnership,
limited liability company, association, joint-stock company, trust,
unincorporated organization, joint venture, government or political subdivision
or agency thereof, or any other entity.
Plan shall mean at any time an employee pension benefit plan
(including a Multiple Employer Plan, but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Internal Revenue Code and either (i) is maintained by
any member of the ERISA Group for employees of any member of the ERISA Group or
(ii) has at any time within the preceding five years been maintained by any
entity which was at such time a member of the ERISA Group for employees of any
entity which was at such time a member of the ERISA Group.
Pledge Agreement shall mean each Pledge Agreement executed and
delivered by each of the Borrower, Barclay, Haile, Wyner, CCC, Noray, Clayfort,
Kylan and Cabore to the Agent for the benefit of the Banks, together with any
amendments thereto.
Pledged Collateral shall mean the property of the Loan Parties
in which security interests are to be granted under the Pledge Agreements.
PNC Bank shall mean PNC Bank, National Association, its
successors and assigns.
Potential Default shall mean any event or condition which with
notice, passage of time or a determination by the Agent or the Required Banks,
or any combination of the foregoing, would constitute an Event of Default.
Principal Office shall mean the main banking office of the
Agent in East Brunswick, New Jersey.
Prior Security Interest shall mean a valid and enforceable
perfected first-priority security interest under the Uniform Commercial Code in
the UCC Collateral and the Pledged Collateral which is subject only to Liens for
taxes not yet due and payable to the extent such prospective tax payments are
given priority by statute or Purchase Money Security Interests as permitted
hereunder.
Proforma Statement shall have the meaning ascribed to that
term in Section 6.1.9(b)(i).
Prohibited Transaction shall mean any prohibited transaction
as defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA
for which neither an individual nor a class exemption has been issued by the
United States Department of Labor.
Property shall mean all real property, both owned and leased,
of any Loan Party or Subsidiary of a Loan Party.
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Purchase Agreements shall mean the Barclay/SAC Purchase
Agreement, the R&S Purchase Agreement, the Massaro/SAC Purchase Agreement and
the Ranor Purchase Agreement.
Purchase Money Security Interest shall mean Liens upon
tangible personal property securing loans to any Loan Party or Subsidiary of a
Loan Party or deferred payments by such Loan Party or Subsidiary for the
purchase of such tangible personal property.
Purchaser shall have the meaning assigned to such term in the
recitals.
Purchasers shall have the meaning assigned to such term in the
recitals.
Purchasing Bank shall mean a Bank which becomes a party to
this Agreement by executing an Assignment and Assumption Agreement.
Qualified Account shall mean any Account which the Banks
(other than ING Barings), in their sole discretion, determine to have met all of
the following minimum requirements:
(i) The Account represents a complete bona fide transaction
for goods sold and delivered or services rendered (but excluding any amount in
the nature of a service charge added to the amount due on an invoice because the
invoice has not been paid when due) which requires no further act under any
circumstances on the part of the Loan Parties to make such Account payable by
the Account Debtor; and the Account arises from an arm's length transaction in
the ordinary course of the Loan Parties' business between a Loan Party and an
Account Debtor which is not an Affiliate, officer, or employee of a Loan Party,
or a member of the family of an Affiliate, officer, or employee of a Loan Party;
(ii) The Account shall not (a) be delinquent more than ninety
(90) days past the original invoice date and is not subject to "dating" terms,
or (b) be payable by an Account Debtor (1) more than fifty percent (50%) of
whose Accounts are delinquent more than ninety (90) days from the date of the
original invoice therefor, or (2) whose Accounts constitute, in the Banks'
determination, an unduly high percentage of the aggregate amount of all
outstanding Accounts;
(iii) The goods the sale of which gave rise to the Account
were shipped or delivered or provided to the Account Debtor on an absolute sale
basis and not on a bill-and-hold sale basis, a consignment sale basis, a
guaranteed sale basis, a sale-or-return basis, or on the basis of any other
similar understanding, and no part of such goods has been returned or rejected;
(iv) The Account is not evidenced by chattel paper or an
instrument of any kind;
(v) The Account Debtor with respect to the Account (a) is not
insolvent, (b) is not the subject of any bankruptcy or insolvency proceedings of
any kind or of any other proceeding or action, threatened or pending, which
might have a materially adverse effect
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on its business, and (c) is not, in the sole discretion of the Banks, deemed
ineligible for credit for other reasons (including, without limitation,
unsatisfactory past experience of a Loan Party or the Banks with the Account
Debtor or unsatisfactory reputation of the Account Debtor);
(vi) (a) The Account Debtor is not located outside of the
continental United States of America, or (b) if the Account Debtor is located
outside of the continental United States, the Account is supported by letters of
credit or FCIA insurance deemed adequate and acceptable by the Banks;
(vii) (a) The Account Debtor shall not be a foreign
Governmental Authority and (b) if the Account is an Account a security interest
in which would be subject to the Federal Assignment of Claims Act of 1940, as
amended (31 U.S.C. ss. 3727 et seq.), then the Federal Assignment of Claims Act
(or applicable similar legislation) has been fully complied with so as to
validly perfect the Banks' prior security interest to the Banks' satisfaction;
(viii) The Account is a valid, legally enforceable obligation
of the Account Debtor with respect thereto and is not pursuant to any progress
billing or warranty billing arrangement or subject to any dispute, condition,
contingency, offset, recoupment, reduction, claim for credit, allowance,
adjustment, counterclaim or defense on the part of such Account Debtor, and no
facts exist which may provide a basis for any of the foregoing in the present or
future;
(ix) The Account is not subject to any Lien, claim,
encumbrance or security interest whatsoever other than Permitted Liens;
(x) The Account is evidenced by an invoice or other
documentation in form acceptable to the Banks and arises from a contract which
is in form and substance satisfactory to the Banks;
(xi) Accounts with respect to which the Account Debtor is
located in any state (including, without limitation, New Jersey, Minnesota and
Indiana) denying creditor's access to its courts in the absence of a Notice of
Business Activities Report or other similar filing, unless a Borrower has either
qualified as a foreign corporation authorized to transact business in such state
or has filed a Notice of Business Activities Report or similar filing with the
applicable state agency for the then current year;
(xii) The Account is not subject to any provision prohibiting
its assignment or requiring notice of or consent to such assignment;
(xiii) The goods giving rise to the Account were not, at the
time of sale thereof, subject to any Lien or encumbrance except the Banks' prior
security interest;
(xiv) The Account is payable in freely transferable United
States Dollars;
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(xv) The Account is not, or should not be, disqualified for
any other reason generally accepted in the commercial finance business; and
(xvi) The Account is not owing by an Account Debtor to the
extent its obligations to a Loan Party exceed 40% of all Qualified Accounts
unless such excess is supported by letters of credit or FCIA insurance deemed
adequate and acceptable by the Banks or owing by an Account Debtor unacceptable
to the Banks in their sole discretion.
In addition to the foregoing requirements, Accounts of any Account Debtor which
are otherwise qualified shall be reduced to the extent of any "contra" accounts
or accounts payable (including, without limitation, the Banks' good faith
estimate of any contingent liabilities) by a Loan Party to such Account Debtor,
provided that the Banks, in their sole discretion, may determine that none of
the Accounts in respect to such Account Debtor shall be Qualified Accounts in
the event that such contra accounts or accounts payable represent an
unreasonably large amount owing to such Account Debtor. In addition, the Banks
may in their sole discretion exclude Accounts owing to one or more particular
Account Debtors based on the creditworthiness or other characteristics of such
Account Debtor.
Qualified Inventory shall mean any Inventory which the Banks
(other than ING Barings), in their sole discretion, determines to have met all
of the following minimum requirements:
(i) the Inventory is either (a) finished goods, (b) completed
components or (c) raw materials other than shipping and packing supplies and
racking, but excluding in all cases any work in process and any goods which have
been shipped, delivered, provided to, purchased or sold by a Loan Party on a
bill-and-hold sale, consignment sale (except to the extent such Inventory is the
subject of an enforceable consignment agreement with the consignee protecting a
Loan Party's exclusive rights in such Inventory and with respect to which there
are filed UCC-1 financing statements providing notice of such Loan Party's
interests therein), guaranteed sale, or sale-or-return basis, or any other
similar basis or understanding other than an absolute sale;
(ii) the Inventory is of new, good and merchantable quality
and which is of a type which has been purchased by a Loan Party within the prior
twelve (12) months;
(iii) the Inventory is not stored with a bailee, warehouseman,
or similar party unless the Banks have given their prior written consent and a
Loan Party has caused such bailee, warehouseman, consignee or similar party to
issue and deliver to the Banks, in form and substance acceptable to the Banks,
warehouse receipts or similar type of documentation therefor in the Banks' name;
(iv) the Inventory is intended for sale or lease by a Loan
Party in the ordinary course of business at regular prices;
(v) the Inventory is otherwise acceptable to the Banks in
their sole discretion;
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(vi) the Inventory is not subject to any Lien, claim,
encumbrance or security interest whatsoever other than Permitted Liens;
(vii) the Inventory has not been manufactured in violation of
any federal minimum wage or overtime laws, including, without limitation, the
Fair Labor Standards Act, 29 U.S.C. ss. 215(a)(1); and
(viii) the Inventory is not located outside of the United
States.
Ranor Purchase Agreement shall have the meaning set forth in
the recitals hereto.
Ratable Share shall mean, with respect to the Revolving Credit
Commitment, Term Loan A Commitment or Term Loan B Commitment, the proportion
that a Bank's Revolving Credit Commitment, Term Loan A Commitment or Term Loan B
Commitment, respectively, bears to the Revolving Credit Commitment, Term Loan A
Commitment or Term Loan B Commitment, respectively, of all of the Banks.
Real Property shall mean the real estate owned by Ranor, which
is located in the State of Massachusetts and which shall be encumbered by a
Mortgage and any other property owned by a Loan Party which shall be encumbered
by a Mortgage or Leasehold Mortgage.
Redemption Note shall mean the $3,401,905.00 aggregate
original principal amount of Redemption Note issued by Ajax in favor of Carl
Massaro, dated January 27, 1998.
Regulated Substances shall mean any substance, including any
solid, liquid, semisolid, gaseous, thermal, thoriated or radioactive material,
refuse, garbage, wastes, chemicals, petroleum products, by-products, coproducts,
impurities, dust, scrap, heavy metals, defined as a "hazardous substance,"
"pollutant," "pollution," "contaminant," "hazardous or toxic substance,"
"extremely hazardous substance," "toxic chemical," "toxic waste," "hazardous
waste," "industrial waste," "residual waste," "solid waste," "municipal waste,"
"mixed waste," "infectious waste," "chemotherapeutic waste," "medical waste," or
"regulated substance" or any related materials, substances or wastes as now or
hereafter defined pursuant to any Environmental Laws, ordinances, rules,
regulations or other directives of any Official Body, the generation,
manufacture, extraction, processing, distribution, treatment, storage, disposal,
transport, recycling, reclamation, use, reuse, spilling, leaking, dumping,
injection, pumping, leaching, emptying, discharge, escape, release or other
management or mismanagement of which is regulated by the Environmental Laws.
Regulation U shall mean Regulation G, T, U or X as promulgated
by the Board of Governors of the Federal Reserve System, as amended from time to
time.
Reimbursement Obligation shall have the meaning assigned to
such term in Section 2.9.3.2.
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Reportable Event shall mean a reportable event described in
Section 4043 of ERISA and regulations thereunder with respect to a Plan or
Multiemployer Plan.
Required Banks shall mean
(i) if there are no Loans, Reimbursement Obligations or
Letter of Credit Borrowings outstanding, Banks whose Commitments aggregate at
least 66 2/3% of the Commitments of all of the Banks, or
(ii) if there are Loans, Reimbursement Obligations, or
Letter of Credit Borrowings outstanding, any Bank or group of Banks if the sum
of the Loans, Reimbursement Obligations and Letter of Credit Borrowings of such
Banks then outstanding aggregates at least 66 2/3% of the total principal amount
of all of the Loans , Reimbursement Obligations and Letter of Credit Borrowings
then outstanding. Reimbursement Obligations and Letter of Credit Borrowings
shall be deemed, for purposes of this definition, to be in favor of the Agent
and not a participating Bank if such Bank has not made its Participation Advance
in respect thereof and shall be deemed to be in favor of such Bank to the extent
of its Participation Advance if it has made its Participation Advance in respect
thereof.
Revolving Credit Base Rate Option shall mean the option of the
Borrower to have Revolving Credit Loans bear interest at the rate and under the
terms and conditions set forth in Section 4.1.1(i).
Revolving Credit Commitment shall mean, as to any Bank the
amount initially set forth opposite its name on Schedule 1.1 (B) in the column
labeled "Amount of Commitment for Revolving Credit Loans," and thereafter on
Schedule 1 to the most recent Assignment and Assumption Agreement, and Revolving
Credit Commitments shall mean the aggregate Revolving Credit Commitments of all
of the Banks.
Revolving Credit Euro-Rate Option shall mean the option of the
Borrower to have Revolving Credit Loans bear interest at the rate and under the
terms and conditions set forth in Section 4.1.1(ii).
Revolving Credit Loans shall mean collectively and Revolving
Credit Loan shall mean separately all Revolving Credit Loans or any Revolving
Credit Loan made by the Banks or one of the Banks to the Borrower pursuant to
Section 2.1 or 2.9.3.
Revolving Credit Notes shall mean collectively and Revolving
Credit Note shall mean separately all the Revolving Credit Notes of the Borrower
in the form of Exhibit 1.1(R) evidencing the Revolving Credit Loans together
with all amendments, extensions, renewals, replacements, refinancings or
refundings thereof in whole or in part.
Revolving Facility Usage shall mean at any time the sum of the
Revolving Credit Loans outstanding and the Letters of Credit Outstanding.
R&S shall mean R&S Truck Body Company, Inc.
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Section 20 Subsidiary shall mean the Subsidiary of the bank
holding company controlling any Bank, which Subsidiary has been granted
authority by the Federal Reserve Board to underwrite and deal in certain
Ineligible Securities.
Security Agreement shall mean the Security Agreement executed
and delivered by each of the Borrower, Barclay, Ajax Manufacturing, CPS
Enterprises, R&S and CPS Trailer, Haile, Wyner, CCC, Ranor, Noray, Clayfort,
Kylan, Cabore, Denore and Mecox to the Agent for the benefit of the Banks,
together with any amendments thereto.
Security Documents means each of the Security Agreements, the
Pledge Agreements, the Landlord Waiver, and any other documents utilized to
pledge as Collateral for the Obligations any property or assets of whatever kind
or nature.
Seller shall have the meaning assigned to such term in the
recitals.
Sellers shall have the meaning assigned to such term in the
Recitals.
Shareholders shall have the meaning assigned to such term in
the recitals.
Shares shall have the meaning assigned to that term in Section
6.1.2.
Standard & Poor's shall mean Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc.
Standby Letter of Credit shall mean a Letter of Credit issued
to support obligations of one or more of the Loan Parties, contingent or
otherwise, which finance the working capital and business needs of the Loan
Parties incurred in the ordinary course of business.
Subsidiary of any Person at any time shall mean (i) any
corporation or trust of which 50% or more (by number of shares or number of
votes) of the outstanding capital stock or shares of beneficial interest
normally entitled to vote for the election of one or more directors or trustees
(regardless of any contingency which does or may suspend or dilute the voting
rights) is at such time owned directly or indirectly by such Person or one or
more of such Person's Subsidiaries, (ii) any partnership of which such Person is
a general partner or of which 50% or more of the partnership interests is at the
time directly or indirectly owned by such Person or one or more of such Person's
Subsidiaries, (iii) any limited liability company of which such Person is a
member or of which 50% or more of the limited liability company interests is at
the time directly or indirectly owned by such Person or one or more of such
Person's Subsidiaries or (iv) any corporation, trust, partnership, limited
liability company or other entity which is controlled or capable of being
controlled by such Person or one or more of such Person's Subsidiaries.
Subsidiary Shares shall have the meaning assigned to that term
in Section 6.1.3.
Syndications Period shall mean the period between the Closing
Date and the date which is ninety (90) days after the Closing Date.
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Term Loan shall mean either a Term Loan A Loan, a Term Loan
A-1 Loan or a Term Loan B Loan.
Term Loan A Loan shall have the meaning assigned to that term
in Section 3.1.
Term Loan A Loans shall mean collectively all of the Term Loan
A Loans.
Term Loan A-1 Loan shall have the meaning assigned to that
term in Section 3.1.
Term Loan A-1 Loans shall mean collectively all of the Term
Loan A-1 Loans.
Term Loan B Loan shall have the meaning assigned to that term
in Section 3.1.
Term Loan B Loans shall mean collectively all of the Term Loan
B Loans.
Term Loan Base Rate Option shall mean the option of the
Borrower to have Term Loans bear interest at the rate and under the terms and
conditions set forth in Section 4.1.2(i).
Term Loan A Commitment shall mean, as to any Bank the amount
initially set forth opposite its name on Schedule 1.1(B) in the columns labeled
"Amount of Commitment for Term Loan A," and Term Loan A-1 Commitment shall mean,
as to any Bank the amount initially set forth opposite its name on Schedule
1.1(B) in the columns labeled "Amount of Commitment for Term Loan A-1" and
thereafter on Schedule 1 to the most recent Assignment and Assumption Agreement,
and Term Loan A Commitments shall mean the aggregate Term Loan A Commitments and
Term Loan A-1 Commitments of all of the Banks.
Term Loan B Commitment shall mean, as to any Bank the amount
initially set forth opposite its name on Schedule 1.1(B) in the columns labeled
"Amount of Commitment for Term Loan B," and thereafter on Schedule 1 to the most
recent Assignment and Assumption Agreement, and Term Loan B Commitments shall
mean the aggregate Term Loan B Commitments of all of the Banks.
Term Loan Euro-Rate Option shall mean the option of the
Borrower to have Term Loans bear interest at the rate and under the terms and
conditions set forth in Section 4.1.2(ii).
Term Loan A Maturity Date shall have the meaning given to such
term in Section 3.3.
Term Loan A-1 Maturity Date shall have the meaning given to
such term in Section 3.3.
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Term Loan B Maturity Date shall have the meaning given to such
term in Section 3.3.
Term Loans shall mean collectively all of the Term Loans.
Term Notes shall mean collectively and Term Note shall mean
separately all of the Term Notes of the Borrower in the form of Exhibits
1.1(T-1), 1.1(T-2) and 1.1(T-3) evidencing the Term Loans together with all
amendments, extensions, renewals, replacements, refinancings or refunds thereof
in whole or in part.
Transaction shall have the meaning set forth in the recitals.
Transferor Bank shall mean the selling Bank pursuant to an
Assignment and Assumption Agreement.
UCC Collateral shall mean the property of the Loan Parties in
which security interests are to be granted under the Security Agreement.
Uniform Commercial Code shall have the meaning assigned to
that term in Section 6.1.16.
Wholly Owned Subsidiary of any Person means any Subsidiary of
such Person to the extent all of the capital stock or other ownership interests
in such Subsidiary, other than directors' or nominees' qualifying shares or
shares of capital stock required to be owned by foreign nationals under
applicable law, is owned directly or indirectly by such Person.
Wyner means Wyner Industries, Inc.
Year 2000 Problem shall have the meaning assigned to that term
in Section 6.1.27.
1.2 Construction.
Unless the context of this Agreement otherwise clearly requires, the
following rules of construction shall apply to this Agreement and each of the
other Loan Documents:
1.2.1 Number; Inclusion.
references to the plural include the singular, the plural, the
part and the whole; "or" has the inclusive meaning represented by the phrase
"and/or," and "including" has the meaning represented by the phrase "including
without limitation";
1.2.2 Determination.
references to "determination" of or by the Agent or the Banks
shall be deemed to include good-faith estimates by the Agent or the Banks (in
the case of quantitative determinations) and good-faith beliefs by the Agent or
the Banks (in the case of qualitative determinations) and such determination
shall be conclusive absent manifest error;
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1.2.3 Documents Taken as a Whole.
the words "hereof," "herein," "hereunder," "hereto" and
similar terms in this Agreement or any other Loan Document refer to this
Agreement or such other Loan Document as a whole and not to any particular
provision of this Agreement or such other Loan Document;
1.2.4 Headings.
the section and other headings contained in this Agreement or
such other Loan Document and the Table of Contents (if any), preceding this
Agreement or such other Loan Document are for reference purposes only and shall
not control or affect the construction of this Agreement or such other Loan
Document or the interpretation thereof in any respect;
1.2.5 Implied References to this Agreement.
article, section, subsection, clause, schedule and exhibit
references are to this Agreement or other Loan Document, as the case may be,
unless otherwise specified;
1.2.6 Persons.
reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are permitted by
this Agreement or such other Loan Document, as the case may be, and reference to
a Person in a particular capacity excludes such Person in any other capacity;
1.2.7 Modifications to Documents.
reference to any agreement (including this Agreement and any
other Loan Document together with the schedules and exhibits hereto or thereto),
document or instrument means such agreement, document or instrument as amended,
modified, replaced, substituted for, superseded or restated;
1.2.8 From, To and Through.
relative to the determination of any period of time, "from"
means "from and including," "to" means "to but excluding," and "through" means
"through and including"; and
1.2.9 Shall; Will.
references to "shall" and "will" are intended to have the same
meaning.
1.3 Accounting Principles.
Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP; provided, however, that all accounting terms
used in
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Section 8.2 [Negative Covenants] (and all defined terms used in the definition
of any accounting term used in Section 8.2 shall have the meaning given to such
terms (and defined terms) under GAAP as in effect on the date hereof applied on
a basis consistent with those used in preparing the annual statements referred
to in Section 6.1.9(i) [Historical Statements]. In the event of any change after
the date hereof in GAAP, and if such change would result in the inability to
determine compliance with the financial covenants set forth in Section 8.2 based
upon the Borrower's regularly prepared financial statements by reason of the
preceding sentence, then the parties hereto agree to endeavor, in good faith, to
agree upon an amendment to this Agreement that would adjust such financial
covenants in a manner that would not affect the substance thereof, but would
allow compliance therewith to be determined in accordance with the Borrower's
financial statements at that time.
2. REVOLVING CREDIT FACILITY
2.1 Revolving Credit Commitments.
Subject to the terms and conditions hereof and relying upon the
representations and warranties herein set forth, each Bank severally agrees to
make Revolving Credit Loans to the Borrower at any time or from time to time on
or after the date hereof to the Expiration Date provided that after giving
effect to such Loan the aggregate amount of Loans from such Bank shall not
exceed (x) the lesser of (i) such Bank's Revolving Credit Commitment or (ii)
such Bank's Ratable Share of the Borrowing Base minus (y) such Bank's Ratable
Share of the Letters of Credit Outstanding. Within such limits of time and
amount and subject to the other provisions of this Agreement, the Borrower may
borrow, repay and reborrow pursuant to this Section 2.1. Notwithstanding
anything to the contrary herein, the Banks may, in their sole discretion at any
time hereafter, decrease the ratio of their advances against Qualified Inventory
and Qualified Accounts, or increase the level of any reserves, or create or
maintain such other reserves, as the Banks may deem necessary or appropriate.
Any such change shall become effective immediately for the purpose of
calculating new advances hereunder.
2.2 Voluntary Reduction of Commitment.
The Borrowers shall have the right at any time and from time to time
upon five (5) Business Days' prior written notice to the Agent to permanently
reduce, in a minimum amount of $1,000,000 and whole multiples of $100,000 of
principal, or terminate the Commitment, without penalty or premium except as
hereinafter set forth, provided that any such reduction or termination shall be
accompanied by prepayment of the Notes, together with the full amount of
interest accrued on the principal sum to be prepaid (and all amounts referred to
in Section 5.6.2 hereof), to the extent that the aggregate amount thereof then
outstanding exceeds the Commitment as so reduced or terminated.
2.3 Nature of Banks' Obligations with Respect to Revolving Credit
Loans.
Each Bank shall be obligated to participate in each request for
Revolving Credit Loans pursuant to Section 2.5 [Revolving Credit Loan Requests]
in accordance with its Ratable Share. The aggregate of each Bank's Revolving
Credit Loans outstanding hereunder to the Borrower at any time shall never
exceed its Revolving Credit Commitment minus its Ratable
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Share of the Letter of Credit Outstandings. The obligations of each Bank
hereunder are several. The failure of any Bank to perform its obligations
hereunder shall not affect the Obligations of the Borrower to any other party
nor shall any other party be liable for the failure of such Bank to perform its
obligations hereunder. The Banks shall have no obligation to make Revolving
Credit Loans hereunder on or after the Expiration Date.
2.4 Commitment Fees.
Accruing from the date hereof until the Expiration Date, the
Borrower agrees to pay to the Agent for the account of each Bank, as
consideration for such Bank's Revolving Credit Commitment hereunder, a
nonrefundable commitment fee (the "Commitment Fee") equal to (x) the percentage
per annum determined in reference to the Borrower's Leverage Ratio according to
the table set forth below (computed on the basis of a year of 360 days and
actual days elapsed) multiplied by (y) the average daily difference between the
amount of (i) such Bank's Revolving Credit Commitment as the same may be
constituted from time to time and (ii) the sum of such Bank's Revolving Credit
Loans outstanding plus its Ratable Share of Letters of Credit Outstanding.
Commitment Fees shall be at "Level IV" in the following table until delivery of
the financial statements due pursuant to Section 8.3.2 [Quarterly Financial
Statements] for the period ending December 31, 1999. Thereafter, Commitment Fees
shall change on the day financial statements are due to be delivered pursuant to
Sections 8.3.2 [Quarterly Financial Statements] and 8.3.3 [Annual Financial
Statements] and if information necessary to make such determination is not
timely delivered pursuant to such sections, the "Commitment Fee Percentage" in
the following table shall be at "Level IV" until such information is delivered.
COMMITMENT FEE PERCENTAGE
----------------------------------------------------------------
Level Leverage Ratio Commitment Fee
Percentage (%)
------------------------------------------------------
I less than or equal to 2.00-to-1.0 .375
II greater than 2.00-to-1.0 but less .50
than or equal to 2.50-to-1.0
III greater than 2.50-to-1.0 but less .50
than or equal to 3.00 to 1
IV greater than 3.00-to-1.0 .50
----------------------------------------------------------------
All Commitment Fees shall be payable in arrears on the first Business Day of
each October, January, April and July after the date hereof and on the
Expiration Date or upon acceleration of the Notes.
2.4A Revolving Credit Amendment Fees.
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The Borrower agrees to pay on the Closing Date to the Agent for the
account of each Bank, as consideration for such Bank's Revolving Credit
Commitment, nonrefundable amendment fees, as more particularly described on
Schedule 2.4.
2.5 Revolving Credit Loan Requests.
Except as otherwise provided herein, the Borrower may from time to
time prior to the Expiration Date request the Banks to make Revolving Credit
Loans, or renew or convert the Interest Rate Option applicable to existing
Revolving Credit Loans or Term Loans pursuant to Section 4.2 [Interest Periods],
by delivering to the Agent, not later than 10:00 a.m., Eastern time, (i) three
(3) Business Days prior to the proposed Borrowing Date with respect to the
making of Revolving Credit Loans to which the Euro-Rate Option applies or the
conversion to or the renewal of the Euro-Rate Option for any Loans; and (ii) on
the proposed Borrowing Date with respect to the making of a Revolving Credit
Loan to which the Base Rate Option applies or the last day of the preceding
Interest Period with respect to the conversion to the Base Rate Option for any
Loan, of a duly completed request therefor substantially in the form of Exhibit
2.5 or a request by telephone immediately confirmed in writing by letter,
facsimile or telex in such form (each, a "Loan Request"), it being understood
that the Agent may rely on the authority of any individual making such a
telephonic request without the necessity of receipt of such written
confirmation. Each Loan Request shall be irrevocable and shall specify (i) the
proposed Borrowing Date; (ii) the aggregate amount of the proposed Loans
comprising each Borrowing Tranche, which shall be in integral multiples of
$100,000 and not less than $2,000,000 for each Borrowing Tranche to which the
Euro-Rate Option applies and not less than the lesser of $100,000 or the maximum
amount available for Borrowing Tranches to which the Base Rate Option applies;
(iii) whether the Euro-Rate Option or Base Rate Option shall apply to the
proposed Loans comprising the applicable Borrowing Tranche; and (iv) in the case
of a Borrowing Tranche to which the Euro-Rate Option applies, an appropriate
Interest Period for the Loans comprising such Borrowing Tranche.
2.6 Making Revolving Credit Loans.
The Agent shall, promptly after receipt by it of a Loan Request
pursuant to Section 2.5 [Revolving Credit Loan Requests], notify the Banks of
its receipt of such Loan Request specifying: (i) the proposed Borrowing Date and
the time and method of disbursement of the Revolving Credit Loans requested
thereby; (ii) the amount and type of each such Revolving Credit Loan and the
applicable Interest Period (if any); and (iii) the apportionment among the Banks
of such Revolving Credit Loans as determined by the Agent in accordance with
Section 2.2 [Nature of Banks' Obligations]. Each Bank shall remit the principal
amount of each Revolving Credit Loan to the Agent such that the Agent is able
to, and the Agent shall, to the extent the Banks have made funds available to it
for such purpose and subject to Section 7.2 [Each Additional Loan], fund such
Revolving Credit Loans to the Borrower in U.S. Dollars and immediately available
funds at the Principal Office prior to 2:00 p.m., Eastern time, on the
applicable Borrowing Date, provided that if any Bank fails to remit such funds
to the Agent in a timely manner, the Agent may elect in its sole discretion to
fund with its own funds the Revolving Credit Loans of such Bank on such
Borrowing Date, and such Bank shall be subject to the repayment obligation in
Section 10.16 [Availability of Funds].
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2.7 Revolving Credit Notes.
The Obligation of the Borrower to repay the aggregate unpaid
principal amount of the Revolving Credit Loans made to it by each Bank, together
with interest thereon, shall be evidenced by a Revolving Credit Note dated the
Closing Date payable to the order of such Bank in a face amount equal to the
Revolving Credit Commitment of such Bank.
2.8 Use of Proceeds.
The proceeds of the Revolving Credit Loans shall be used in
accordance with Section 8.1.10 [Use of Proceeds].
2.9 Letter of Credit Subfacility.
2.9.1 Issuance of Letters of Credit.
Borrower may request the issuance of a letter of credit (each
a "Letter of Credit") on behalf of itself or another Loan Party by delivering to
the Agent a completed application and agreement for letters of credit in such
form as the Agent may specify from time to time by no later than 10:00 a.m.,
Eastern time, at least three (3) Business Days, or such shorter period as may be
agreed to by the Agent, in advance of the proposed date of issuance. Each Letter
of Credit shall be either a Commercial Letter of Credit or a Standby Letter of
Credit. Subject to the terms and conditions hereof and in reliance on the
agreements of the other Banks set forth in this Section 2.9, the Agent will
issue a Letter of Credit provided that each Letter of Credit shall (A) have a
maximum maturity of twelve (12) months from the date of issuance, and (B) in no
event expire later than ten (10) Business Days prior to the Expiration Date and
providing that in no event shall (i) the Letters of Credit Outstanding exceed,
at any one time, $2,000,000 or (ii) the Revolving Facility Usage exceed, at any
one time, the Revolving Credit Commitments.
2.9.2 Letter of Credit Fees.
(a) The Borrower shall pay to the Agent a fronting fee with
respect to each Letter of Credit in an amount equal to .125% of the face amount
of such Letter of Credit. Such fronting fee shall be payable in advance on the
date of issuance of each Letter of Credit and shall be nonrefundable.
(b) The Borrower shall pay to the Agent, for the ratable
account of the Banks, a letter of credit commission with respect to each Standby
Letter of Credit, computed for the period from the date of such payment to the
date upon which the next such payment is due hereunder at the rate equal to the
Applicable Margin for Eurodollar Loans then in effect, calculated on the basis
of the actual days elapsed over a 360 day year, of the aggregate amount
available to be drawn under such Standby Letter of Credit on the date on which
such fee is calculated. Such commissions shall be payable in advance on the date
of issuance of each Standby Letter of Credit and on each L/C Fee Payment Date to
occur thereafter and shall be nonrefundable.
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(c) In addition, the Borrower shall pay to the Agent for the
Agent's sole account the Agent's then in effect customary fees and
administrative expenses payable with respect to the Letters of Credit as the
Agent may generally charge or incur from time to time in connection with the
issuance, maintenance, modification (if any), assignment or transfer (if any),
negotiation, and administration of Letters of Credit.
2.9.3 Disbursements, Reimbursement.
2.9.3.1 Immediately upon the Issuance of each Letter of
Credit, each Bank with a Revolving Credit Commitment shall be deemed to, and
hereby irrevocably and unconditionally agrees to, purchase from the Agent a
participation in such Letter of Credit and each drawing thereunder in an amount
equal to such Bank's Ratable Share of the maximum amount available to be drawn
under such Letter of Credit and the amount of such drawing, respectively.
2.9.3.2 In the event of any request for a drawing under
a Letter of Credit by the beneficiary or transferee thereof, the Agent will
promptly notify the Borrower. Provided that it shall have received such notice,
the Borrower shall reimburse (such obligation to reimburse the Agent shall
sometimes be referred to as a "Reimbursement Obligation") the Agent prior to
12:00 noon, Eastern time on each date that an amount is paid by the Agent under
any Letter of Credit (each such date, an "Drawing Date") in an amount equal to
the amount so paid by the Agent. In the event the Borrower fails to reimburse
the Agent for the full amount of any drawing under any Letter of Credit by 12:00
noon, Eastern time, on the Drawing Date, the Agent will promptly notify each
Bank thereof, and the Borrower shall be deemed to have requested that Revolving
Credit Loans be made by the Banks under the Base Rate Option to be disbursed on
the Drawing Date under such Letter of Credit, subject to the amount of the
unutilized portion of the Revolving Credit Commitment and subject to the
conditions set forth in Section 7.2 [Each Additional Loan] other than any notice
requirements. Any notice given by the Agent pursuant to this Section 2.9.3.2 may
be oral if immediately confirmed in writing; provided that the lack of such an
immediate confirmation shall not affect the conclusiveness or binding effect of
such notice.
2.9.3.3 Each Bank shall upon any notice pursuant to
Section 2.9.3.2 make available to the Agent an amount in immediately available
funds equal to its Ratable Share of the amount of the drawing, whereupon the
participating Banks shall (subject to Section 2.9.3.4) each be deemed to have
made a Revolving Credit Loan under the Base Rate Option to the Borrower in that
amount. If any Bank so notified fails to make available to the Agent for the
account of the Agent the amount of such Bank's Ratable Share of such amount by
no later than 2:00 p.m., Eastern time on the Drawing Date, then interest shall
accrue on such Bank's obligation to make such payment, from the Drawing Date to
the date on which such Bank makes such payment (i) at a rate per annum equal to
the Federal Funds Effective Rate during the first three days following the
Drawing Date and (ii) at a rate per annum equal to the rate applicable to Loans
under the Revolving Credit Base Rate Option on and after the fourth day
following the Drawing Date. The Agent will promptly give notice of the
occurrence of the Drawing Date, but failure of the Agent to give any such notice
on the Drawing Date or in sufficient time to enable any Bank to effect such
payment on such date shall not relieve such Bank from its obligation under this
Section 2.9.3.3.
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2.9.3.4 With respect to any unreimbursed drawing that is
not converted into Revolving Credit Loans under the Base Rate Option to the
Borrower in whole or in part as contemplated by Section 2.9.3.2 because of the
Borrower's failure to satisfy the conditions set forth in Section 7.2 [Each
Additional Loan] other than any notice requirements or for any other reason, the
Borrower shall be deemed to have incurred from the Agent a Letter of Credit
Borrowing in the amount of such drawing. Such Letter of Credit Borrowing shall
be due and payable on demand (together with interest) and shall bear interest at
the rate per annum applicable to the Revolving Credit Loans under the Base Rate
Option. Each Bank's payment to the Agent pursuant to Section 2.9.3.3 shall be
deemed to be a payment in respect of its participation in such Letter of Credit
Borrowing and shall constitute a Participation Advance from such Bank in
satisfaction of its participation obligation under this Section 2.9.3.
2.9.4 Repayment of Participation Advances.
2.9.4.1 Upon (and only upon) receipt by the Agent for
its account of immediately available funds from the Borrower (i) in
reimbursement of any payment made by the Agent under the Letter of Credit with
respect to which any Bank has made a Participation Advance to the Agent, or (ii)
in payment of interest on such a payment made by the Agent under such a Letter
of Credit, the Agent will pay to each Bank, in the same funds as those received
by the Agent, the amount of such Bank's Ratable Share of such funds, except the
Agent shall retain the amount of the Ratable Share of such funds of any Bank
that did not make a Participation Advance in respect of such payment by Agent.
2.9.4.2 If the Agent is required at any time to return
to any Loan Party, or to a trustee, receiver, liquidator, custodian, or any
official in any Insolvency Proceeding, any portion of the payments made by any
Loan Party to the Agent pursuant to Section 2.9.4.1 in reimbursement of a
payment made under the Letter of Credit or interest or fee thereon, each Bank
shall, on demand of the Agent, forthwith return to the Agent the amount of its
Ratable Share of any amounts so returned by the Agent plus interest thereon from
the date such demand is made to the date such amounts are returned by such Bank
to the Agent, at a rate per annum equal to the Federal Funds Effective Rate in
effect from time to time.
2.9.5 Documentation.
Each Loan Party agrees to be bound by the terms of the Agent's
application and agreement for letters of credit and the Agent's written
regulations and customary practices relating to letters of credit, though such
interpretation may be different from the such Loan Party's own. In the event of
a conflict between such application or agreement and this Agreement, this
Agreement shall govern. It is understood and agreed that, except in the case of
gross negligence or willful misconduct, the Agent shall not be liable for any
error, negligence and/or mistakes, whether of omission or commission, in
following any Loan Party's instructions or those contained in the Letters of
Credit or any modifications, amendments or supplements thereto.
2.9.6 Determinations to Honor Drawing Requests.
In determining whether to honor any request for drawing under
any Letter of Credit by the beneficiary thereof, the Agent shall be responsible
only to determine that the
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documents and certificates required to be delivered under such Letter of Credit
have been delivered and that they comply on their face with the requirements of
such Letter of Credit.
2.9.7 Nature of Participation and Reimbursement Obligations.
The Obligations of the Borrower to reimburse the Agent upon a
draw under a Letter of Credit, shall be absolute, unconditional and irrevocable,
and shall be performed strictly in accordance with the terms of this Section 2.9
under all circumstances, including the following circumstances:
(i) any set-off, counterclaim, recoupment, defense or
other right which such Bank may have against the Agent, the Borrower or any
other Person for any reason whatsoever;
(ii) the failure of any Loan Party or any other Person
to comply, in connection with a Letter of Credit Borrowing, with the conditions
set forth in Section 2.1 [Revolving Credit Commitments], 2.5 [Revolving Credit
Loan Requests], 2.6 [Making Revolving Credit Loans] or 7.2 [Each Additional
Loan] or as otherwise set forth in this Agreement for the making of a Revolving
Credit Loan, it being acknowledged that such conditions are not required for the
making of a Letter of Credit Borrowing and the obligation of the Banks to make
Participation Advances under Section 2.9.3;
(iii) any lack of validity or enforceability of any
Letter of Credit;
(iv) the existence of any claim, set-off, defense or
other right which any Loan Party or any Bank may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any Persons for whom
any such transferee may be acting), the Agent or any Bank or any other Person
or, whether in connection with this Agreement, the transactions contemplated
herein or any unrelated transaction (including any underlying transaction
between any Loan Party or Subsidiaries of a Loan Party and the beneficiary for
which any Letter of Credit was procured);
(v) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(vi) payment by the Agent under any Letter of Credit
against presentation of a demand, draft or certificate or other document which
does not comply with the terms of such Letter of Credit;
(vii) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of any Loan
Party or Subsidiaries of a Loan Party;
(viii) any breach of this Agreement or any other Loan
Document by any party thereto;
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(ix) the occurrence or continuance of an Insolvency
Proceeding with respect to any Loan Party;
(x) the fact that an Event of Default or a Potential
Default shall have occurred and be continuing;
(xi) the fact that the Expiration Date shall have passed
or this Agreement or the Commitments hereunder shall have been terminated; and
(xii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing.
2.9.8 Indemnity.
In addition to amounts payable as provided in Section 10.5
[Reimbursement of Agent by Borrower, Etc.], the Borrower hereby agrees to
protect, indemnify, pay and save harmless the Agent from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable fees, expenses and disbursements of counsel and allocated
costs of internal counsel) which the Agent may incur or be subject to as a
consequence, direct or indirect, of (i) the issuance of any Letter of Credit,
other than as a result of (A) the gross negligence or willful misconduct of the
Agent as determined by a final judgment of a court of competent jurisdiction or
(B) subject to the following clause (ii), the wrongful dishonor by the Agent of
a proper demand for payment made under any Letter of Credit, or (ii) the failure
of the Agent to honor a drawing under any such Letter of Credit as a result of
any act or omission, whether rightful or wrongful, of any present or future de
jure or de facto government or governmental authority (all such acts or
omissions herein called "Governmental Acts").
2.9.9 Liability for Acts and Omissions.
As between any Loan Party and the Agent, such Loan Party
assumes all risks of the acts and omissions of, or misuse of the Letters of
Credit by, the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, the Agent shall not be
responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any party in connection with the
application for an issuance of any such Letter of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged (even if the Agent shall have been notified thereof); (ii)
the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) the failure of the beneficiary
of any such Letter of Credit, or any other party to which such Letter of Credit
may be transferred, to comply fully with any conditions required in order to
draw upon such Letter of Credit or any other claim of any Loan Party against any
beneficiary of such Letter of Credit, or any such transferee, or any dispute
between or among any Loan Party and any beneficiary of any Letter of Credit or
any such transferee; (iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (v) errors in interpretation of
technical terms; (vi) any loss or
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delay in the transmission or otherwise of any document required in order to make
a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of the Agent, including any Governmental Acts,
and none of the above shall affect or impair, or prevent the vesting of, any of
the Agent's rights or powers hereunder. Nothing in the preceding sentence shall
relieve the Agent from liability for the Agent's gross negligence or willful
misconduct in connection with actions or omissions described in such clauses (i)
through (viii) of such sentence.
In furtherance and extension and not in limitation of the
specific provisions set forth above, any action taken or omitted by the Agent
under or in connection with the Letters of Credit issued by it or any documents
and certificates delivered thereunder, if taken or omitted in good faith, shall
not put the Agent under any resulting liability to the Borrower or any Bank.
2.10 Extension by Banks of the Expiration Date.
2.10.1 Requests; Approval by All Banks.
Upon or promptly after delivery by the Borrower of the annual
financial statements to be provided under Section 8.3.3 [Annual Financial
Statements] for the fiscal year ending March 31, 2000 or any subsequent fiscal
year, the Borrower may request a one-year extension of the Expiration Date, for
a maximum extension period of two years, by written notice to the Banks, and the
Banks agree to respond to the Borrower's request for an extension by the later
of sixty (60) days following receipt of the request; provided, however, that (i)
the failure of any Bank to respond within such time period shall not in any
manner constitute an agreement by such Bank to extend the Expiration Date and
(ii) in no event shall the Expiration Date be extended beyond June 30, 2004. If
all Banks elect to extend, the Expiration Date shall be extended for a period of
one year. If one or more Banks decline to extend or do not respond to Borrower's
request, the provisions of Section 2.10.2 shall apply.
2.10.2 Approval by Required Banks.
In the event that one or more Banks do not agree to extend the
Expiration Date or do not respond to Borrower's request for an extension within
the time required under Section 2.10.1 (each a "Bank to be Terminated"), but the
Required Banks agree to such extension within such time, then the Banks which
have agreed to such extension within the time required under Section 2.10.1
(each an "Extending Bank") may, with the prior written approval of the Borrower
and the Agent, arrange to have one or more other banks (each an "Assignee Bank")
purchase all of the outstanding Loans, if any, of the Bank to be Terminated and
succeed to and assume the Commitments and all other rights, interests and
obligations of the Bank to be Terminated under this Agreement and the other Loan
Documents. Any such purchase and assumption shall be (1) pursuant to an
Assignment and Assumption Agreement, (2) subject to and in accordance with
Section 11.11 [Successors and Assigns], and (3) effective on the last day of the
Interest Period if any Loans are outstanding under the Euro-Rate Option. The
Borrower shall pay all amounts due and payable to the Bank to be Terminated on
the effective date of such Assignment and Assumption Agreement. In the event
that the Agent shall become a Bank to be Terminated, the provisions of this
Section 2.10 shall be subject to Section 10.14 [Successor
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Agent]. In the event that the Loans and Commitments of a Bank to be Terminated
are not fully assigned and assumed pursuant to Section 2.10.2, then the
Expiration Date shall not be extended for any Bank.
3. TERM LOANS
3.1 Term Loan Commitments.
Subject to the terms and conditions hereof, and relying upon the
representations and warranties herein set forth, each Bank severally agrees to
make a term loan to the Borrower on the Closing Date in such principal amount as
the Borrower shall request up to, but not exceeding, such Bank's Term Loan A
Commitment, Term Loan A-1 Commitment or Term Loan B Commitment (each such Term
Loan being referred to herein as a "Term Loan A Loan", "Term Loan A-1 Loan" or a
"Term Loan B Loan", as the case may be).
3.2 Nature of Banks' Obligations with Respect to Term Loans.
Schedule 1 hereto contains an allocation for each Bank of (i) the
amount of its Commitment representing its Term Loan A Commitment, (ii) the
amount of its Commitment representing its Term Loan A-1 Commitment and (iii) the
amount of its Commitment representing its Term Loan B Commitment. The Loan
Parties, the Agent and the Banks have approved all such allocations. The failure
of any Bank to make a Term Loan shall not relieve any other Bank of its
obligations to make a Term Loan nor shall it impose any additional liability on
any other Bank hereunder. The Banks shall have no obligation to make Term Loans
hereunder after the Closing Date. The Term Loan Commitments are not revolving
credit commitments, and the Borrower shall not have the right to borrow, repay
and reborrow under Section 3.1 [Term Loan Commitments].
3.3 Maturity
The Term Loan A Loan's shall be repaid in their entirety, together
with all interest accrued thereon on June 30, 2004 (the "Term Loan A Maturity
Date"), unless due earlier by acceleration, prepayment or otherwise.
The Term Loan A-1 Loan's shall be repaid in their entirety, together
with all interest accrued thereon on June 30, 2004 (the "Term Loan A-1 Maturity
Date"), unless due earlier by acceleration, prepayment or otherwise.
The Term Loan B Loan's shall be repaid in their entirety, together
with all interest accrued thereon on June 14, 2005 (the "Term Loan B Maturity
Date"), unless due earlier by acceleration, prepayment or otherwise.
3.4 Term Loan Notes.
The Obligation of the Borrower to repay the unpaid principal amount
of the Term Loans made to it by each Bank, together with interest thereon, shall
be evidenced by a Term Note dated the Closing Date payable to the order of each
Bank in a face amount equal to the Term
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Loan of such Bank. Each Term Note shall (a) be dated the Closing Date, (b) be
stated to mature in installments in amounts equal to such Bank's Ratable Share
of the Term Loan Commitment of the amounts, and payable on the dates, set forth
on Schedule 2.2(A), Schedule 2.2(A-1) and Schedule 2.2(B), as the case may be,
and (c) bear interest for the period from the date thereof on the unpaid
principal amount thereof at the applicable interest rates per annum specified in
Section 4. Interest on the Term Notes shall be payable on the dates specified in
Section 5.3.
3.5 Use of Proceeds.
The proceeds of the Term Loans shall be used in accordance with
Section 8.1.10 [Use of Proceeds].
3.6 Term Loan Amendment Fees.
The Borrower agrees to pay on the Closing Date to the Agent for the
account of each Bank, as consideration for such Bank's Term Loan A Commitment,
Term Loan A-1 Commitment and Term Loan B Commitment, as applicable,
nonrefundable amendment fees, as more particularly described on Schedule 2.4.
4. INTEREST RATES
4.1 Interest Rate Options.
The Borrower shall pay interest in respect of the outstanding unpaid
principal amount of the Loans as selected by it from the Base Rate Option or
Euro-Rate Option set forth below applicable to the Loans, it being understood
that, subject to the provisions of this Agreement, the Borrower may select
different Interest Rate Options and different Interest Periods to apply
simultaneously to the Loans comprising different Borrowing Tranches and may
convert to or renew one or more Interest Rate Options with respect to all or any
portion of the Loans comprising any Borrowing Tranche, provided that there shall
not be at any one time outstanding more than five (5) Borrowing Tranches in the
aggregate among all of the Loans. If at any time the designated rate applicable
to any Loan made by any Bank exceeds such Bank's highest lawful rate, the rate
of interest on such Bank's Loan shall be limited to such Bank's highest lawful
rate.
4.1.1 Revolving Credit Interest Rate Options.
The Borrower shall have the right to select from the following
Interest Rate Options applicable to the Revolving Credit Loans:
(i) Revolving Credit Base Rate Option: A fluctuating
rate per annum (computed on the basis of a year of 365 or 366 days, as the case
may be, and actual days elapsed) equal to the Base Rate plus the Applicable
Margin, such interest rate to change automatically from time to time effective
as of the effective date of each change in the Base Rate; or
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(ii) Revolving Credit Euro-Rate Option: A rate per annum
(computed on the basis of a year of 360 days and actual days elapsed) equal to
the Euro-Rate plus the Applicable Margin.
4.1.2 Term Loan Interest Rate Options.
The Borrower shall have the right to select from the following
Interest Rate Options applicable to the Term Loans:
(i) Term Loan Base Rate Option: A fluctuating rate per
annum (computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed) equal to the Base Rate plus the Applicable Margin, such
interest rate to change automatically from time to time effective as of the
effective date of each change in the Base Rate; or
(ii) Term Loan Euro-Rate Option: A rate per annum
(computed on the basis of a year of 360 days and actual days elapsed) equal to
the Euro-Rate plus the Applicable Margin.
4.1.3 Rate Quotations.
The Borrower may call the Agent on or before the date on which
a Loan Request is to be delivered to receive an indication of the rates then in
effect, but it is acknowledged that such projection shall not be binding on the
Agent or the Banks nor affect the rate of interest which thereafter is actually
in effect when the election is made.
4.2 Interest Periods.
At any time when the Borrower shall select, convert to or renew a
Euro-Rate Option, the Borrower shall notify the Agent thereof at least three (3)
Business Days prior to the effective date of such Euro-Rate Option by delivering
a Loan Request. The notice shall specify an interest period (the "Interest
Period") during which such Interest Rate Option shall apply, such Interest
Period to be (i) one Month if Borrower selects the Euro-Rate Option during the
Syndications Period and (ii) one, two, three or six Months if Borrower selects
the Euro-Rate Option after the Syndications Period has ended. Notwithstanding
the preceding sentence, the following provisions shall apply to any selection
of, renewal of, or conversion to a Euro-Rate Option:
4.2.1 Ending Date and Business Day.
any Interest Period which would otherwise end on a date which
is not a Business Day shall be extended to the next succeeding Business Day
unless such Business Day falls in the next calendar month, in which case such
Interest Period shall end on the next preceding Business Day;
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4.2.2 Amount of Borrowing Tranche.
each Borrowing Tranche of Euro-Rate Loans shall be in integral
multiples of $100,000 and not less than $2,000,000;
4.2.3 Termination Before Expiration Date.
the Borrower shall not select, convert to or renew an Interest
Period for any portion of the Loans that would end after the Expiration Date;
and
4.2.4 Renewals.
in the case of the renewal of a Euro-Rate Option at the end of
an Interest Period, the first day of the new Interest Period shall be the last
day of the preceding Interest Period, without duplication in payment of interest
for such day.
4.3 Interest After Default.
To the extent permitted by Law, upon the occurrence of an Event of
Default and until such time such Event of Default shall have been cured or
waived:
4.3.1 Interest Rate, Other Obligations.
the rate of interest for each Loan otherwise applicable
pursuant to 4.1 [Interest Rate Options] shall be increased by 2.0% per annum and
each other Obligation hereunder if not paid when due shall bear interest at a
rate per annum equal to the sum of the rate of interest applicable under the
Revolving Credit Base Rate Option or Term Loan Base Rate Option, as the case may
be, plus an additional 2.0% per annum from the time such Obligation becomes due
and payable and until it is paid in full.
4.3.2 Acknowledgment.
The Borrower acknowledges that the increase in rates referred
to in this Section 4.3 reflects, among other things, the fact that such Loans or
other amounts have become a substantially greater risk given their default
status and that the Banks are entitled to additional compensation for such risk;
and all such interest shall be payable by Borrower upon demand by Agent.
4.4 Euro-Rate Unascertainable; Illegality; Increased Costs; Deposits
Not Available.
4.4.1 Unascertainable.
If on any date on which a Euro-Rate would otherwise be
determined, the Agent shall have determined that:
(i) adequate and reasonable means do not exist for
ascertaining such Euro-Rate, or
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(ii) a contingency has occurred which materially and
adversely affects the London interbank eurodollar market relating to the
Euro-Rate, the Agent shall have the rights specified in Section 4.4.3.
4.4.2 Illegality; Increased Costs; Deposits Not Available.
If at any time any Bank shall have determined that:
(i) the making, maintenance or funding of any Loan to
which a Euro-Rate Option applies has been made impracticable or unlawful by
compliance by such Bank in good faith with any Law or any interpretation or
application thereof by any Official Body or with any request or directive of any
such Official Body (whether or not having the force of Law), or
(ii) such Euro-Rate Option will not adequately and
fairly reflect the cost to such Bank of the establishment or maintenance of any
such Loan, or
(iii) after making all reasonable efforts, deposits of
the relevant amount in Dollars for the relevant Interest Period for a Loan to
which a Euro-Rate Option applies, respectively, are not available to such Bank
with respect to such Loan, in the London interbank market, then the Agent shall
have the rights specified in Section 4.4.3.
4.4.3 Agent's and Bank's Rights.
In the case of any event specified in Section 4.4.1 above, the
Agent shall promptly so notify the Banks and the Borrower thereof, and in the
case of an event specified in Section 4.4.2 above, such Bank shall promptly so
notify the Agent and endorse a certificate to such notice as to the specific
circumstances of such notice, and the Agent shall promptly send copies of such
notice and certificate to the other Banks and the Borrower. Upon such date as
shall be specified in such notice (which shall not be earlier than the date such
notice is given), the obligation of (A) the Banks, in the case of such notice
given by the Agent, or (B) such Bank, in the case of such notice given by such
Bank, to allow the Borrower to select, convert to or renew a Euro-Rate Option
shall be suspended until the Agent shall have later notified the Borrower, or
such Bank shall have later notified the Agent, of the Agent's or such Bank's, as
the case may be, determination that the circumstances giving rise to such
previous determination no longer exist. If at any time the Agent makes a
determination under Section 4.4.1 and the Borrower has previously notified the
Agent of its selection of, conversion to or renewal of a Euro-Rate Option and
such Interest Rate Option has not yet gone into effect, such notification shall
be deemed to provide for selection of, conversion to or renewal of the Base Rate
Option otherwise available with respect to such Loans. If any Bank notifies the
Agent of a determination under Section 4.4.2, the Borrower shall, subject to the
Borrower's indemnification Obligations under Section 5.6.2 [Indemnity], as to
any Loan of the Bank to which a Euro-Rate Option applies, on the date specified
in such notice either convert such Loan to the Base Rate Option otherwise
available with respect to such Loan or prepay such Loan in accordance with
Section 5.4 [Voluntary Prepayments]. Absent due notice from the Borrower of
conversion or prepayment, such Loan shall automatically be converted to the Base
Rate Option otherwise available with respect to such Loan upon such specified
date.
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4.5 Selection of Interest Rate Options.
If the Borrower fails to select a new Interest Period to apply to
any Borrowing Tranche of Loans under the Euro-Rate Option at the expiration of
an existing Interest Period applicable to such Borrowing Tranche in accordance
with the provisions of Section 4.2 [Interest Periods], the Borrower shall be
deemed to have converted such Borrowing Tranche to the Revolving Credit Base
Rate Option or Term Loan Base Rate Option, as applicable, commencing upon the
last day of the existing Interest Period.
5. PAYMENTS
5.1 Payments.
All payments and prepayments to be made in respect of principal,
interest, Commitment Fees, Letter of Credit Fees, Agent's Fee, closing fees or
other fees or amounts due from the Borrower hereunder shall be payable prior to
11:00 a.m., Eastern time, on the date when due without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived by the
Borrower, and without set-off, counterclaim or other deduction of any nature,
and an action therefor shall immediately accrue. Such payments shall be made to
the Agent at the Principal Office for the ratable accounts of the Banks with
respect to the Loans in U.S. Dollars and in immediately available funds, and the
Agent shall promptly distribute such amounts to the Banks in immediately
available funds, provided that in the event payments are received by 11:00 a.m.,
Eastern time, by the Agent with respect to the Loans and such payments are not
distributed to the Banks on the same day received by the Agent, the Agent shall
pay the Banks the Federal Funds Effective Rate with respect to the amount of
such payments for each day held by the Agent and not distributed to the Banks.
The Agent's and each Bank's statement of account, ledger or other relevant
record shall, in the absence of manifest error, be conclusive as the statement
of the amount of principal of and interest on the Loans and other amounts owing
under this Agreement and shall be deemed an "account stated."
5.2 Pro Rata Treatment of Banks.
Each borrowing shall be allocated to each Bank according to its
Ratable Share, and each selection of, conversion to or renewal of any Interest
Rate Option and each payment or prepayment by the Borrower with respect to
principal, interest, Commitment Fees, Letter of Credit Fees, closing fees, or
other fees (except for the Agent's Fee) or amounts due from the Borrower
hereunder to the Banks with respect to the Loans, shall (except as provided in
Section 4.4.3 [Agent's and Bank's Rights] in the case of an event specified in
Section 4.4 [Euro-Rate Unascertainable; Etc.], 5.4.2 [Replacement of a Bank] or
5.6 [Additional Compensation in Certain Circumstances]) be made in proportion to
the applicable Loans outstanding from each Bank and, if no such Loans are then
outstanding, in proportion to the Ratable Share of each Bank.
5.3 Interest Payment Dates.
Interest on Loans to which the Base Rate Option applies shall be due
and payable in arrears on September 30, December 31, March 31 and June 30 of
each year after the date hereof and on the Expiration Date or upon acceleration
of the Notes. Interest on Loans to which
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the Euro-Rate Option applies shall be due and payable on the last day of each
Interest Period for those Loans and, if such Interest Period is longer than
three (3) Months, also on the 90th day of such Interest Period. Interest on
mandatory prepayments of principal under Section 5.5 [Mandatory Prepayments]
shall be due on the date such mandatory prepayment is due. Interest on the
principal amount of each Loan or other monetary Obligation shall be due and
payable on demand after such principal amount or other monetary Obligation
becomes due and payable (whether on the stated maturity date, upon acceleration
or otherwise).
5.4 Voluntary Prepayments.
5.4.1 Right to Prepay.
The Borrower shall have the right at its option from time to
time to prepay the Loans in whole or part without premium or penalty (except as
provided in Section 5.4.2 below or in Section 5.6 [Additional Compensation in
Certain Circumstances]):
(i) at any time with respect to any Loan to which the
Base Rate Option applies,
(ii) on the last day of the applicable Interest Period
with respect to Loans to which a Euro-Rate Option applies,
(iii) on the date specified in a notice by any Bank
pursuant to Section 4.4 [Euro-Rate Unascertainable, Etc.] with respect to any
Loan to which a Euro-Rate Option applies.
Whenever the Borrower desires to prepay any part of the Loans,
it shall provide a prepayment notice to the Agent and the Banks by 1:00 p.m. at
least three (3) Business Days prior to the date of prepayment of Loans setting
forth the following information:
(x) the date, which shall be a Business Day, on which the
proposed prepayment is to be made;
(y) a statement indicating the application of the prepayment
between the Revolving Credit Loans and the Term Loans in accordance
with the terms hereof; and
(z) the total principal amount of such prepayment, which
shall, in the case of Revolving Credit Loans, not be less than
$1,000,000 and, in the case of Term Loans, not be less than
$250,000.
All prepayment notices shall be irrevocable. The principal
amount of the Loans for which a prepayment notice is given, together with
interest on such principal amount except with respect to Loans to which the Base
Rate Option applies, shall be due and payable on the date specified in such
prepayment notice as the date on which the proposed prepayment is to be made.
All Term Loan prepayments permitted pursuant to this Section 5.4.1 shall be
applied to the unpaid installments of principal of the Term Loans prorata as
between Term Loan A Loans, Term Loan A-1 Loans and Term Loan B Loans and prorata
to all remaining payments, provided
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that if any holder of the Term Loan B Loans shall elect, by written notice to
the Agent and the Borrower, to reject any portion of such proposed prepayment,
the rejected portion of the proposed prepayment shall be applied first to the
unpaid installments of principal of the Term Loan A Loans or the Term A-1 Loans,
at the option of the Borrower, pro rata relative to the then remaining payments
on such Term Loan A Loans, as applicable, until all the Term Loan A Loans and
the Term Loan A-1 Loans have been paid in full, and second to the unpaid
installments of principal of the Term Loan B Loans, pro rata, until paid in
full. Except as provided in Section 4.4.3 [Agent's and Bank's rights], if the
Borrower prepays a Loan but fails to specify the applicable Borrowing Tranche
which the Borrower is prepaying, the prepayment shall be applied (i) first to
Revolving Credit Loans, and then to the Term Loans on a pro-rata basis; and (ii)
after giving effect to the allocations in clause (i) above and in the preceding
sentence, first to Loans to which the Base Rate Option applies, then to Loans to
which the Euro-Rate the Option applies. Any prepayment hereunder shall be
subject to the Borrower's Obligation to indemnify the Banks under Section 5.6.2
[Indemnity].
5.4.2 Replacement of a Bank.
In the event any Bank (i) gives notice under Section 4.4
[Euro-Rate Unascertainable, Etc.] or Section 5.6.1 [Increased Costs, Etc.], (ii)
does not fund Revolving Credit Loans because the making of such Loans would
contravene any Law applicable to such Bank, (iii) does not approve any action as
to which consent of the Required Banks is requested by the Borrower and obtained
hereunder, or (iv) becomes subject to the control of an Official Body (other
than normal and customary supervision), then the Borrower shall have the right
at its option, with the consent of the Agent, which shall not be unreasonably
withheld, to prepay the Loans of such Bank in whole, together with all interest
accrued thereon, and terminate such Bank's Commitment within ninety (90) days
after (w) receipt of such Bank's notice under Section 4.4 [Euro-Rate
Unascertainable, Etc.] or 5.6.1 [Increased Costs, Etc.], (x) the date such Bank
has failed to fund Revolving Credit Loans because the making of such Loans would
contravene Law applicable to such Bank, (y) the date of obtaining the consent
which such Bank has not approved, or (z) the date such Bank became subject to
the control of an Official Body, as applicable; provided that the Borrower shall
also pay to such Bank at the time of such prepayment any amounts required under
Section 5.6 [Additional Compensation in Certain Circumstances] and any accrued
interest due on such amount and any related fees; provided, however, that the
Commitment and any Term Loan of such Bank shall be provided by one or more of
the remaining Banks or a replacement bank acceptable to the Agent; provided,
further, the remaining Banks shall have no obligation hereunder to increase
their Commitments. Notwithstanding the foregoing, the Agent may only be replaced
subject to the requirements of Section 10.14 [Successor Agent] and provided that
all Letters of Credit have expired or been terminated or replaced.
5.4.3 Change of Lending Office.
Each Bank agrees that upon the occurrence of any event giving
rise to increased costs or other special payments under Section 4.4.2
[Illegality, Etc.] or 5.6.1 [Increased Costs, Etc.] with respect to such Bank,
it will if requested by the Borrower, use reasonable efforts (subject to overall
policy considerations of such Bank) to designate another lending office for any
Loans or Letters of Credit affected by such event, provided that such
designation is made on such
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terms that such Bank and its lending office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of such Section. Nothing is this Section
5.4.3 shall affect or postpone any of the Obligations of the Borrower or any
other Loan Party or the rights of the Agent or any Bank provided in this
Agreement.
5.5 Mandatory Prepayments.
5.5.1 Excess Cash Flow.
Within five (5) Business Days of delivery of the Borrower's
annual financial statements pursuant to Section 8.3.3 [Annual Financial
Statements], but in any event no later than July 5 of each year during the term
hereof (each, a "Mandatory Prepayment Date"), the Borrower shall make a
mandatory prepayment of principal on the Term Loans equal to 75% of Excess Cash
Flow for the immediately preceding fiscal year, beginning on July 1, 2000 and
continuing on each July 1 thereafter for the immediately preceding fiscal year
or portion thereof, together with accrued interest on such principal amount
(each, a "Mandatory Prepayment of Excess Cash Flow") until the Loan Parties
Leverage Ratio, calculated as of the Mandatory Prepayment Date for the fiscal
year then ended, shall be less than 2.00 to 1 for such year of determination. At
such time as the Loan Parties Leverage Ratio, determined in accordance with this
Section 5.5.1, is less than 2.00 to 1 for such year, mandatory prepayments of
principal on the Term Loans shall equal 50% of Excess Cash Flow for the
immediately preceding fiscal year or portion thereof, together with accrued
interest on such principal amount. Each Mandatory Prepayment of Excess Cash Flow
shall be applied to payment in full of the principal amount of the Term Loans by
application to the unpaid installments of principal prorata (without giving
effect to any voluntary prepayments made on any Term Loan A Loans during the
preceding fiscal year) to all remaining payments. To the extent that a Mandatory
Prepayment of Excess Cash Flow exceeds the outstanding principal amount of the
Term Loans, such prepayment shall be limited to the amount necessary to prepay
the Term Loans in full.
5.5.2 Sale of Assets.
(a) Within five (5) Business Days of any sale of assets
authorized by Section 8.2.7(v) [Disposition of Assets or Subsidiaries]
(including, without limitation, but subject to clause (b) of this Section 5.5.2,
insurance proceeds paid as a result of any destruction, casualty or taking of
any property of the Borrower or any Subsidiary and the proceeds of key man life
insurance required by the terms hereof), the Borrower shall make a mandatory
prepayment of principal on the Term Loan A Loans and the Term Loan B Loans equal
to the Net Proceeds of such sale (as estimated in good faith by the Borrower),
together with accrued interest on such principal amount. All prepayments
pursuant to this Section 5.5.2 shall be applied to payment in full of the
principal amount of the Term Loans by application to the unpaid installments of
principal prorata to all remaining payments.
(b) Net Proceeds received by the Borrower or any Subsidiary as
proceeds of insurance upon any destruction, casualty or taking with respect to
any property of the Borrower or any Subsidiary need not be applied as set forth
in clause (a) of this Section 5.5.2 to the extent that such Net Proceeds are
applied to the repair, rebuilding or replacement of the
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property which was the subject of such destruction, casualty or taking within 60
days after the receipt of such Net Proceeds. If required by the Agent, such Net
Proceeds shall be held in a special collateral account, subject to the sole
dominion and control of the Agent and in a manner reasonably satisfactory to the
Agent, as additional Collateral for the Obligations and the Subsidiaries
Guarantee, until such time as it is to be applied to such repair, rebuilding or
replacement.
5.5.3 Sale or Issuance of Debt or Equity Securities
Unless the Required Banks otherwise agree, the Borrower shall
prepay the Loans and reduce the Commitments in an amount equal to (i) 100% of
the Net Proceeds of any sale or issuance of debt securities, and 75% of the Net
Proceeds of any sale or issuance of any equity securities in either case by the
Borrower or any Subsidiary, whether in a public offering, a private placement or
otherwise, in any such case no later than three Business Days following receipt
by the Borrower or such Subsidiary of such proceeds, together with accrued
interest to such date on the amount prepaid. Amounts prepaid pursuant to this
5.5.3 shall be applied first to the Term Loan A Loans and the Term Loan B Loans,
pro rata, until paid in full, and second to the reduction of the Revolving
Credit Commitments and the prepayment of the Revolving Credit Loans and/or cash
collateralization of the Letters of Credit. Prepayments of installments of Term
Loans shall be applied in the inverse order of maturity and such amounts so
prepaid may not be reborrowed. Nothing in this Section 5.5.3 shall be construed
to derogate any restriction or limitation contained in any Loan Document imposed
on any transaction of the types described in this Section 5.5.3, including
without limitation the restrictions set forth in Section 8.2.1, 8.2.6 and 8.2.7
hereof.
5.5.4 Application Among Interest Rate Options.
All prepayments required pursuant to this Section 5.5 shall
first be applied among the Interest Rate Options to the principal amount of the
Loans subject to the Base Rate Option, then to Loans subject to a Euro-Rate
Option. In accordance with Section 5.6.2 [Indemnity], the Borrower shall
indemnify the Banks for any loss or expense, including loss of margin, incurred
with respect to any such prepayments applied against Loans subject to a
Euro-Rate Option on any day other than the last day of the applicable Interest
Period.
5.6 Additional Compensation in Certain Circumstances.
5.6.1 Increased Costs or Reduced Return Resulting from Taxes,
Reserves, Capital Adequacy Requirements, Expenses, Etc.
If any Law, guideline or interpretation or any change in any
Law, guideline or interpretation or application thereof by any Official Body
charged with the interpretation or administration thereof or compliance with any
request or directive (whether or not having the force of Law) of any central
bank or other Official Body:
(i) subjects any Bank to any tax or changes the basis of
taxation with respect to this Agreement, the Notes, the Loans or payments by the
Borrower of principal, interest, Commitment Fees, or other amounts due from the
Borrower hereunder or under the Notes (except for taxes on the overall net
income of such Bank),
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(ii) imposes, modifies or deems applicable any reserve,
special deposit or similar requirement against credits or commitments to extend
credit extended by, or assets (funded or contingent) of, deposits with or for
the account of, or other acquisitions of funds by, any Bank, or
(iii) imposes, modifies or deems applicable any capital
adequacy or similar requirement (A) against assets (funded or contingent) of, or
letters of credit, other credits or commitments to extend credit extended by,
any Bank, or (B) otherwise applicable to the obligations of any Bank under this
Agreement which is not otherwise included in the determination of the Eurodollar
Rate hereunder,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense (including loss of margin) upon any
Bank with respect to this Agreement, the Notes or the making, maintenance or
funding of any part of the Loans (or, in the case of any capital adequacy or
similar requirement, to have the effect of reducing the rate of return on any
Bank's capital, taking into consideration such Bank's customary policies with
respect to capital adequacy) by an amount which such Bank in its sole discretion
deems to be material, such Bank shall from time to time notify the Borrower and
the Agent of the amount determined in good faith (using any averaging and
attribution methods employed in good faith) by such Bank to be necessary to
compensate such Bank for such increase in cost, reduction of income, additional
expense or reduced rate of return. Such notice shall set forth in reasonable
detail the basis for such determination. Such amount shall be due and payable by
the Borrower to such Bank ten (10) Business Days after such notice is given.
5.6.2 Indemnity.
In addition to the compensation required by Section 5.6.1
[Increased Costs, Etc.], the Borrower shall indemnify each Bank against all
liabilities, losses or expenses (including loss of margin, any loss or expense
incurred in liquidating or employing deposits from third parties and any loss or
expense incurred in connection with funds acquired by a Bank to fund or maintain
Loans subject to a Euro-Rate Option) which such Bank sustains or incurs as a
consequence of any
(i) payment, prepayment, conversion or renewal of any
Loan to which a Euro-Rate Option applies on a day other than the last day of the
corresponding Interest Period (whether or not such payment or prepayment is
mandatory, voluntary or automatic and whether or not such payment or prepayment
is then due),
(ii) attempt by the Borrower to revoke (expressly, by
later inconsistent notices or otherwise) in whole or part any Loan Requests
under Section 2.5 [Revolving Credit Loan Requests] or Section 4.2 [Interest
Periods] or notice relating to prepayments under Section 5.4 [Voluntary
Prepayments], or
(iii) default by the Borrower in the performance or
observance of any covenant or condition contained in this Agreement or any other
Loan Document, including any failure of the Borrower to pay when due (by
acceleration or otherwise) any principal, interest, Commitment Fee or any other
amount due hereunder.
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If any Bank sustains or incurs any such loss or expense, it shall
from time to time notify the Borrower of the amount determined in good faith by
such Bank (which determination may include such assumptions, allocations of
costs and expenses and averaging or attribution methods as such Bank shall deem
reasonable) to be necessary to indemnify such Bank for such loss or expense.
Such notice shall set forth in reasonable detail the basis for such
determination. Such amount shall be due and payable by the Borrower to such Bank
ten (10) Business Days after such notice is given.
6. REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties.
The Loan Parties, jointly and severally, represent and warrant to
the Agent and each of the Banks as follows (with the execution and delivery of
this Agreement and the making of each Loan thereafter being deemed to constitute
a representation and warranty that the matters specified in this Section 6 are
true and correct in all material respects both before and after giving effect to
the Transaction and the related transactions and as of the date of each such
Loan unless such representation and warranty expressly indicates that it is
being made as of any specific date):
6.1.1 Organization and Qualification.
Each Loan Party and each Subsidiary of each Loan Party is a
corporation, partnership or limited liability company duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. Each Loan Party and each Subsidiary of each Loan Party has the
lawful power to own or lease its properties and to engage in the business it
presently conducts or proposes to conduct. Each Loan Party and each Subsidiary
of each Loan Party is duly licensed or qualified and in good standing in each
jurisdiction listed on Schedule 6.1.1 and in all other jurisdictions where the
property owned or leased by it or the nature of the business transacted by it or
both makes such licensing or qualification necessary.
6.1.2 Capitalization and Ownership.
The authorized capital stock of the Borrower consists of (i)
10,000,000 shares of common stock of which 3,500,124 shares (referred to herein
as the "Common Shares") and (ii) 3,000,000 shares of preferred stock, of which
1,150,000 preferred shares (referred to herein as the "Preferred Shares") (the
Common Shares and the Preferred Shares are herein referred to as the "Shares")
are issued and outstanding and are owned as indicated on Schedule 6.1.2. All of
the Shares have been validly issued and are fully paid and nonassessable. There
are no options, warrants or other rights outstanding to purchase any such shares
except as indicated on Schedule 6.1.2.
6.1.3 Subsidiaries.
Schedule 6.1.3 states the name of each of the Borrower's
Subsidiaries, its jurisdiction of incorporation, its authorized capital stock,
the issued and outstanding shares (referred to herein as the "Subsidiary
Shares") and the owners thereof if it is a corporation, its outstanding
partnership interests (the "Partnership Interests") if it is a partnership and
its
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outstanding limited liability company interests, interests assigned to managers
thereof and the voting rights associated therewith (the "LLC Interests") if it
is a limited liability company, in each case as they exist on the Closing Date
after giving effect to the Transaction. The Borrower and each subsidiary of the
Borrower has good and marketable title to all of the Subsidiary Shares,
Partnership Interests and LLC Interests it purports to own, free and clear in
each case of any Lien. All Subsidiary Shares, Partnership Interests and LLC
Interests have been validly issued, and all Subsidiary Shares are fully paid and
nonassessable. All capital contributions and other consideration required to be
made or paid in connection with the issuance of the Partnership Interests and
LLC Interests have been made or paid, as the case may be. There are no options,
warrants or other rights outstanding to purchase any such Subsidiary Shares,
Partnership Interests or LLC Interests except as indicated on Schedule 6.1.3.
Barclay, Ajax, CPS Enterprises, Haile, Wyner and CCC are each Wholly Owned
Subsidiaries of the Borrower. R&S and CPS Trailer are each Wholly Owned
Subsidiaries of Barclay. Ranor is a Wholly Owned Subsidiary of CCC. Noray and
Clayfort are each Wholly Owned Subsidiaries of Haile. Kylan and Cabore are each
Wholly Owned Subsidiaries of Wyner. Denore is owned 50% by Noray and 50% by
Clayfort. Mecox is owned 50% by Kylan and 50% by Cabore.
6.1.4 Power and Authority; Business.
(a) Each Loan Party has full power to enter into, execute,
deliver and carry out this Agreement and the other Loan Documents to which it is
a party, to incur the Indebtedness contemplated by the Loan Documents and to
perform its Obligations under the Loan Documents to which it is a party, and all
such actions have been duly authorized by all necessary proceedings on its part.
(b) The Borrower was incorporated on January 2, 1997. Prior to
the Closing Date, the Borrower will not have engaged in any business or incurred
any liabilities except for activities, expenses and liabilities incident to its
organization, the acquisition and operation of Barclay, Ajax, CPS Enterprises,
Haile, Wyner and CCC and to the carrying out of the transactions contemplated by
the Loan Documents. The Borrower's business is the ownership of all of the
capital stock of Barclay, Ajax, CPS Enterprises, Haile, Wyner and CCC.
6.1.5 Validity and Binding Effect.
This Agreement has been duly and validly executed and
delivered by each Loan Party, and each other Loan Document which any Loan Party
is required to execute and deliver on or after the date hereof will have been
duly executed and delivered by such Loan Party on the required date of delivery
of such Loan Document. This Agreement and each other Loan Document constitutes,
or will constitute, legal, valid and binding obligations of each Loan Party
which is or will be a party thereto on and after its date of delivery thereof,
enforceable against such Loan Party in accordance with its terms, except to the
extent that enforceability of any of such Loan Document may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforceability of creditors' rights generally or limiting the
right of specific performance.
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6.1.6 No Conflict.
Neither the execution and delivery of this Agreement or the
other Loan Documents by any Loan Party nor the consummation of the transactions
herein or therein contemplated or compliance with the terms and provisions
hereof or thereof by any of them will conflict with, constitute a default under
or result in any breach of (i) the terms and conditions of the certificate of
incorporation, bylaws, certificate of limited partnership, partnership
agreement, certificate of formation, limited liability company agreement or
other organizational documents of any Loan Party or (ii) any Law (except to the
extent that the failure to comply therewith could not have a Material Adverse
Effect) or any material agreement or instrument or order, writ, judgment,
injunction or decree to which any Loan Party or any of its Subsidiaries is a
party or by which it or any of its Subsidiaries is bound or to which it is
subject, or result in the creation or enforcement of any Lien, charge or
encumbrance whatsoever upon any property (now or hereafter acquired) of any Loan
Party or any of its Subsidiaries (other than Liens granted under the Loan
Documents).
6.1.7 Litigation.
Except as described on Schedule 6.1.7, there are no actions,
suits, proceedings or investigations pending or, to the knowledge of any Loan
Party, threatened against such Loan Party or any Subsidiary of such Loan Party
at law or equity before any Official Body which individually or in the aggregate
may result in any Material Adverse Change. None of the Loan Parties or any
Subsidiaries of any Loan Party is in violation of any order, writ, injunction or
any decree of any Official Body which may result in any Material Adverse Change.
6.1.8 Title to Properties.
The real property owned or leased by each Loan Party and each
Subsidiary of each Loan Party is described on Schedule 6.1.8. Each Loan Party
and each Subsidiary of each Loan Party has good record and marketable title in
fee simple to, or a valid leasehold interest in, all its real property, and good
title to, or a valid leasehold interest in, all its other properties, assets and
other rights which it purports to own or lease or which are reflected as owned
or leased on its books and records, free and clear of all Liens and encumbrances
except Permitted Liens, and subject to the terms and conditions of the
applicable leases. All leases of property are in full force and effect without
the necessity for any consent which has not previously been obtained upon
consummation of the transactions contemplated hereby.
6.1.9 Financial Condition; Financial Statements; Projections.
(a) No Loan Party is entering into the arrangements
contemplated hereby and by the other Loan Documents, or intends to make any
transfer or incur any obligations hereunder or thereunder with actual intent to
hinder, delay or defraud either present or future creditors. On and as of the
Closing Date, on a pro forma basis after giving effect to the Transaction and to
all Indebtedness incurred and Liens and Guarantees created, or to be created, by
each Loan Party in connection with the Transaction, (w) the Borrower does not
expect that final judgments against any Loan Party in actions for money damages
with respect to pending or threatened litigation will be rendered at a time
when, or in an amount such that, such Loan Party will be unable to satisfy any
such judgments promptly in accordance with their terms
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(taking into account the maximum reasonable amount of such judgments in any such
actions and the earliest reasonable time at which such judgments might be
rendered and the cash available to each Loan Party, after taking into account
all other anticipated uses of the cash of such Loan Party (including the
payments on or in respect of debts (including their Contingent Obligations));
(x) no Loan Party will have incurred or intends to, or believes that it will,
incur debts beyond its ability to pay such debts as such debts mature (taking
into account the timing and amounts of cash to be received by such Loan Party
from any source, and amounts to be payable on or in respect of debts of such
Loan Party and the amounts referred to in the preceding clause (w)); (y) each
Loan Party, after taking into account all other anticipated uses of the cash of
such Loan Party, anticipates being able to pay all amounts on or in respect of
debts of such Loan Party when such amounts are required to be paid; and (z) each
Loan Party will have sufficient capital with which to conduct its present and
proposed business and the property of such Loan Party does not constitute
unreasonably small capital with which to conduct its present or proposed
business. For purposes of this Section 6.1.9, "debt" means any liability on a
claim, and "claim" means a (i) right to payment whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (ii)
right to an equitable remedy for breach of performance if such breach gives rise
to a payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured. On the date of each borrowing hereunder (and after giving effect
to all borrowings as of such date), the representations set forth in this
Section 6.1.9(a) shall be true and correct with respect to each Loan Party on
such date.
(b) (i) Historical Statements. The Borrower has
delivered to the Agent copies of (x) (i) the audited year end financial
statements of Ajax, including a balance sheet and statement of income and
shareholder's equity and cashflows, for and as of the end of March 31, 1996 and
1997 (the "Ajax Statements") and (ii) the Borrower's audited consolidated and
consolidating year-end financial statements, including a balance sheet and
statement of income and shareholder's equity and cash flows, for and as of the
end of the fiscal year March 31, 1998 (the "Borrower Statements") (the Ajax
Statements and the Borrower Statements being collectively referred to herein as
the "Historical Statements"). In addition, the Borrower has delivered to the
Agent copies of the pro forma (after giving effect to the Transaction, the
related financing of the Acquisition, the borrowings under this Agreement and
the Notes) consolidated balance sheet for the Borrower and its consolidated
Subsidiaries as of March 31, 1999 (the "Pro Forma Statement"), which presents a
good faith estimate of the consolidated pro forma condition of the Borrower and
its consolidated Subsidiaries at the date thereof. The Historical Statements
were compiled from the books and records maintained by the Borrower's
management, are correct and complete and fairly represent the consolidated
financial condition of the Borrower and its Subsidiaries as of their dates and
the results of operations for the fiscal periods then ended and have been
prepared in accordance with GAAP consistently applied, subject (in the case of
the Interim Statements) to normal year-end audit adjustments.
(ii) Financial Projections. The Borrower has delivered
to the Agent pro forma financial projections of the Borrower and its
consolidated Subsidiaries on a quarterly basis for the fiscal year ending March
31, 1999 and on an annual basis thereafter through March 31, 2004, inclusive,
which projections have been derived from various assumptions of the Borrower's
management which give effect to the Transaction and all Indebtedness and Liens
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incurred or created in connection with the Acquisitions (the "Financial
Projections"). The Financial Projections represent a reasonable range of
possible results in light of the history of the business, present and
foreseeable conditions and the intentions of the Borrower's management. The
Financial Projections accurately reflect the liabilities of the Borrower and its
consolidated Subsidiaries upon consummation of the transactions (including the
Transaction) contemplated hereby as of the Closing Date.
(iii) Accuracy of Financial Statements. Neither the
Borrower nor any Subsidiary of the Borrower has any liabilities, contingent or
otherwise, or forward or long-term commitments that are not disclosed in the
Historical Statements or in the notes thereto, and except as disclosed therein
there are no unrealized or anticipated losses from any commitments of the
Borrower or any Subsidiary of the Borrower which may cause a Material Adverse
Change. Since March 31, 1998 (on a pro forma basis after giving effect to the
Transaction and the financing related to the Acquisitions), no event or events
have occurred that are likely to result in a Material Adverse Change.
6.1.10 Use of Proceeds; Margin Stock; Section 20 Subsidiaries.
6.1.10.1 General.
The Loan Parties intend to use the proceeds of the Loans in
accordance with Section 8.1.10.
6.1.10.2 Margin Stock.
None of the Loan Parties or any Subsidiaries of any Loan Party
engages or intends to engage principally, or as one of its important activities,
in the business of extending credit for the purpose, immediately, incidentally
or ultimately, of purchasing or carrying margin stock (within the meaning of
Regulation U). No part of the proceeds of any Loan has been or will be used,
immediately, incidentally or ultimately, to purchase or carry any margin stock
or to extend credit to others for the purpose of purchasing or carrying any
margin stock or to refund Indebtedness originally incurred for such purpose, or
for any purpose which entails a violation of or which is inconsistent with the
provisions of the regulations of the Board of Governors of the Federal Reserve
System. None of the Loan Parties or any Subsidiary of any Loan Party holds or
intends to hold margin stock.
6.1.10.3 Section 20 Subsidiaries.
The Loan Parties do not intend to use and shall not use any
portion of the proceeds of the Loans, directly or indirectly (i) knowingly to
purchase any Ineligible Securities from a Section 20 Subsidiary during any
period in which such Section 20 Subsidiary makes a market in such Ineligible
Securities, (ii) knowingly to purchase during the underwriting or placement
period Ineligible Securities being underwritten or privately placed by a Section
20 Subsidiary, or (iii) to make payments of principal or interest on Ineligible
Securities underwritten or privately placed by a Section 20 Subsidiary and
issued by or for the benefit of any Loan Party or any Affiliate of any Loan
Party.
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6.1.11 Full Disclosure.
Neither this Agreement nor any other Loan Document, nor any
certificate, statement, agreement or other documents furnished to the Agent or
any Bank in connection herewith or therewith, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which they were made, not misleading. There is no fact known to any Loan Party
which materially adversely affects the business, property, assets, financial
condition, results of operations or prospects of any Loan Party or Subsidiary of
any Loan Party which has not been set forth in this Agreement or in the
certificates, statements, agreements or other documents furnished in writing to
the Agent and the Banks prior to or at the date hereof in connection with the
transactions contemplated hereby.
6.1.12 Taxes.
All federal, state, local and other tax returns required to
have been filed with respect to each Loan Party and each Subsidiary of each Loan
Party have been filed, and payment or adequate provision has been made for the
payment of all taxes, fees, assessments and other governmental charges which
have or may become due pursuant to said returns or to assessments received,
except to the extent that such taxes, fees, assessments and other charges are
being contested in good faith by appropriate proceedings diligently conducted
and for which such reserves or other appropriate provisions, if any, as shall be
required by GAAP shall have been made. There are no agreements or waivers
extending the statutory period of limitations applicable to any federal income
tax return of any Loan Party or Subsidiary of any Loan Party for any period.
6.1.13 Consents and Approvals.
(a) Except for the filing of financing statements and the
Mortgages in the state and county filing offices, no consent, approval,
exemption, order or authorization of, or a registration or filing with, any
Official Body or any other Person is required by any Law or any agreement in
connection with the execution, delivery and carrying out of this Agreement and
the other Loan Documents by any Loan Party, except as listed on Schedule 6.1.13,
all of which shall have been obtained or made on or prior to the Closing Date
except as otherwise indicated on Schedule 6.1.13.
(b) At the time of making the initial Loans, all necessary
governmental and third-party approvals (except as set forth on Schedule 6.1.13
hereto) in connection with the transactions contemplated by the Purchase
Agreements and otherwise referred to therein, including, without limitation, any
approval, consent or filing required by the provisions of the Hart-Scott-Rodino
Antitrust Improvement Act of 1976, as amended, have been or, prior to the time
when required, will have been, obtained and remain in effect, and all applicable
waiting periods have or, prior to the time when required, will have, expired
without, in all such cases, any action being taken by any competent authority
which may result in a Material Adverse Change on the transactions contemplated
by the Purchase Agreements. At the time of the making of the initial Loans,
there does not exist any adverse judgment, order, injunction or other restraint
issued or filed with respect to the transactions contemplated by the Purchase
Agreements and the
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consummation of the Acquisitions or the making of Loans or the performance by
the Loan Parties of their obligations under the Loan Agreements or the Purchase
Agreements.
6.1.14 No Event of Default; Compliance with Instruments.
No event has occurred and is continuing and no condition
exists or will exist after giving effect to the borrowings or other extensions
of credit to be made on the Closing Date under or pursuant to the Loan Documents
which constitutes an Event of Default or Potential Default. None of the Loan
Parties or any Subsidiaries of any Loan Party is in violation of (i) any term of
its certificate of incorporation, bylaws, certificate of limited partnership,
partnership agreement, certificate of formation, limited liability company
agreement or other organizational documents or (ii) any agreement, lease or
instrument to which it is a party or by which it or any of its properties may be
subject or bound where such violation would constitute a Material Adverse
Change.
6.1.15 Patents, Trademarks, Copyrights, Licenses, Etc.
Each Loan Party and each Subsidiary of each Loan Party owns or
possesses all the material patents, trademarks, service marks, trade names,
copyrights, licenses, registrations, franchises, permits and rights necessary to
own and operate its properties and to carry on its business as presently
conducted and planned to be conducted by such Loan Party or Subsidiary, without
known possible, alleged or actual conflict with the rights of others. All
material patents, trademarks, service marks, trade names, copyrights, licenses,
registrations, franchises and permits of each Loan Party and each Subsidiary of
each Loan Party are listed and described on Schedule 6.1.15.
6.1.16 Security Interests.
The Liens and security interests granted to the Agent for the
benefit of the Banks pursuant to the Collateral Assignment, the Pledge
Agreements and the Security Agreements in the Collateral (other than the Real
Property) constitute and will continue to constitute Prior Security Interests
under the Uniform Commercial Code as in effect in each applicable jurisdiction
(the "Uniform Commercial Code") or other applicable Law entitled to all the
rights, benefits and priorities provided by the Uniform Commercial Code or such
Law. Upon the filing of financing statements relating to said security interests
in each office and in each jurisdiction where required in order to perfect the
security interests described above, taking possession of any stock certificates
or other certificates evidencing the Pledged Collateral, as applicable, all such
action as is necessary or advisable to establish such rights of the Agent will
have been taken, and there will be upon execution and delivery of the Collateral
Assignment, the Pledge Agreements and the Security Agreements, such filings and
such taking of possession, no necessity for any further action in order to
preserve, protect and continue such rights, except the filing of continuation
statements with respect to such financing statements within six months prior to
each five-year anniversary of the filing of such financing statements. All
filing fees and other expenses in connection with each such action have been or
will be paid by the Borrower.
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6.1.17 Mortgage Liens.
The Liens granted to the Agent for the benefit of the Banks
pursuant to the Mortgages constitute a valid first priority Lien under
applicable law. All such action as will be necessary or advisable to establish
such Lien of the Agent and its priority as described in the preceding sentence
will be taken at or prior to the time required for such purpose, and there will
be as of the date of execution and delivery of the Mortgages no necessity for
any further action in order to protect, preserve and continue such Lien and such
priority.
6.1.18 Status of the Pledged Collateral.
All the shares of capital stock, Partnership Interests or LLC
Interests included in the Pledged Collateral to be pledged pursuant to the
Pledge Agreements are or will be upon issuance validly issued and nonassessable
and owned beneficially and of record by the pledgor free and clear of any Lien
or restriction on transfer, except as otherwise provided by the Pledge
Agreements and except as the right of the Banks to dispose of the Shares,
Partnership Interests or LLC Interests may be limited by the Securities Act of
1933, as amended, and the regulations promulgated by the Securities and Exchange
Commission thereunder and by applicable state securities laws. There are no
shareholder, partnership, limited liability company or other agreements or
understandings with respect to the shares of capital stock, Partnership
Interests or LLC Interests included in the Pledged Collateral except for the
partnership agreements and limited liability company agreements described on
Schedule 6.1.18. The Loan Parties have delivered true and correct copies of such
partnership agreements and limited liability company agreements to the Agent.
6.1.19 Insurance.
Schedule 6.1.19 lists all insurance policies and other bonds
to which any Loan Party or Subsidiary of any Loan Party is a party, all of which
are valid and in full force and effect. No notice has been given or claim made
and no grounds exist to cancel or avoid any of such policies or bonds or to
reduce the coverage provided thereby. Such policies and bonds provide adequate
coverage from reputable and financially sound insurers in amounts sufficient to
insure the assets and risks of each Loan Party and each Subsidiary of each Loan
Party in accordance with prudent business practice in the industry of the Loan
Parties and their Subsidiaries.
6.1.20 Compliance with Laws.
The Loan Parties and their Subsidiaries are in compliance in
all material respects with all applicable Laws (other than Environmental Laws
which are specifically addressed in Section 6.1.25 [Environmental Matters]) in
all jurisdictions in which any Loan Party or Subsidiary of any Loan Party is
presently or will be doing business except where the failure to do so would not
constitute a Material Adverse Change.
6.1.21 Material Contracts; Burdensome Restrictions.
Schedule 6.1.21 lists all material contracts relating to the
business operations of each Loan Party and each Subsidiary of any Loan Party,
including all employee
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benefit plans and Labor Contracts. All such material contracts are valid,
binding and enforceable upon such Loan Party or Subsidiary and each of the other
parties thereto in accordance with their respective terms, and there is no
default thereunder, to the Loan Parties' knowledge, with respect to parties
other than such Loan Party or Subsidiary. None of the Loan Parties or their
Subsidiaries is bound by any contractual obligation, or subject to any
restriction in any organization document, or any requirement of Law which could
result in a Material Adverse Change.
6.1.22 Investment Companies; Regulated Entities.
None of the Loan Parties or any Subsidiaries of any Loan Party
is an "investment company" registered or required to be registered under the
Investment Company Act of 1940 or under the "control" of an "investment company"
as such terms are defined in the Investment Company Act of 1940 and shall not
become such an "investment company" or under such "control." None of the Loan
Parties or any Subsidiaries of any Loan Party is subject to any other Federal
state statute or regulation limiting its ability to incur Indebtedness for
borrowed money.
6.1.23 Plans and Benefit Arrangements.
Except as set forth on Schedule 6.1.23:
(i) Each Loan Party and each other member of the ERISA
Group are in compliance in all material respects with any applicable provisions
of ERISA with respect to all Benefit Arrangements, Plans and Multiemployer
Plans. There has been no Prohibited Transaction with respect to any Benefit
Arrangement or any Plan or, to the best knowledge of each Loan Party, with
respect to any Multiemployer Plan or Multiple Employer Plan, which could result
in any material liability of the Borrower or any other member of the ERISA
Group. Each Loan Party and all other members of the ERISA Group have made when
due any and all payments required to be made under any agreement relating to a
Multiemployer Plan or a Multiple Employer Plan or any Law pertaining thereto.
With respect to each Plan and Multiemployer Plan, each Loan Party and each other
member of the ERISA Group (i) have fulfilled in all material respects their
obligations under the minimum funding standards of ERISA, (ii) have not incurred
any liability to the PBGC, and (iii) have not had asserted against them any
penalty for failure to fulfill the minimum funding requirements of ERISA.
(ii) To the best of each Loan Party's knowledge, each
Multiemployer Plan and Multiple Employer Plan is able to pay benefits thereunder
when due.
(iii) Neither any Loan Party nor any other member of the
ERISA Group has instituted or intends to institute proceedings to terminate any
Plan.
(iv) No event requiring notice to the PBGC under Section
302(f)(4)(A) of ERISA has occurred or is reasonably expected to occur with
respect to any Plan, and no amendment with respect to which security is required
under Section 307 of ERISA has been made or is reasonably expected to be made to
any Plan.
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(v) The aggregate actuarial present value of all benefit
liabilities (whether or not vested) under each Plan, determined on a plan
termination basis, as disclosed in, and as of the date of, the most recent
actuarial report for such Plan, does not exceed the aggregate fair market value
of the assets of such Plan.
(vi) Neither any Loan Party nor any other member of the
ERISA Group has incurred or reasonably expects to incur any material withdrawal
liability under ERISA to any Multiemployer Plan or Multiple Employer Plan.
Neither any Loan Party nor any other member of the ERISA Group has been notified
by any Multiemployer Plan or Multiple Employer Plan that such Multiemployer Plan
or Multiple Employer Plan has been terminated within the meaning of Title IV of
ERISA and, to the best knowledge of each Loan Party, no Multiemployer Plan or
Multiple Employer Plan is reasonably expected to be reorganized or terminated,
within the meaning of Title IV of ERISA.
(vii) To the extent that any Benefit Arrangement is
insured, each Loan Party and all other members of the ERISA Group have paid when
due all premiums required to be paid for all periods through the Closing Date.
To the extent that any Benefit Arrangement is funded other than with insurance,
each Loan Party and all other members of the ERISA Group have made when due all
contributions required to be paid for all periods through the Closing Date.
(viii) All Plans, Benefit Arrangements and Multiemployer
Plans have been administered in accordance with their terms and applicable Law.
6.1.24 Employment Matters.
Each of the Loan Parties and each of their Subsidiaries is in
compliance with the Labor Contracts and all applicable federal, state and local
labor and employment Laws including those related to equal employment
opportunity and affirmative action, labor relations, minimum wage, overtime,
child labor, medical insurance continuation, worker adjustment and relocation
notices, immigration controls and worker and unemployment compensation, where
the failure to comply would constitute a Material Adverse Change. There are no
outstanding grievances, arbitration awards or appeals therefrom arising out of
the Labor Contracts or current or threatened strikes, picketing, handbilling or
other work stoppages or slowdowns at facilities of any of the Loan Parties or
any of their Subsidiaries which in any case would constitute a Material Adverse
Change. The Borrower has delivered to the Agent true and correct copies of each
of the Labor Contracts.
6.1.25 Environmental Matters.
Except as disclosed on Schedule 6.1.25:
(i) None of the Loan Parties or any Subsidiaries of any
Loan Party has received any Environmental Complaint from any Official Body or
private Person alleging that such Loan Party or Subsidiary or any prior or
subsequent owner of any of the Property is a potentially responsible party under
the Comprehensive Environmental Response, Cleanup and Liability Act, 42 U.S.C.
ss. 9601, et seq., and none of the Loan Parties has any reason to believe that
such an Environmental Complaint might be received. There are no pending or, to
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any Loan Party's knowledge, threatened Environmental Complaints relating to any
Loan Party or Subsidiary of any Loan Party or, to any Loan Party's knowledge,
any prior or subsequent owner of any of the Property pertaining to, or arising
out of, any Environmental Conditions.
(ii) There are no circumstances at, on or under any of
the Property that constitute a breach of or non-compliance with any of the
Environmental Laws, and there are no past or present Environmental Conditions
at, on or under any of the Property or, to any Loan Party's knowledge, at, on or
under adjacent property, that prevent compliance with the Environmental Laws at
any of the Property.
(iii) Neither any of the Property nor any structures,
improvements, equipment, fixtures, activities or facilities thereon or
thereunder contain or use Regulated Substances except in compliance with
Environmental Laws. There are no processes, facilities, operations, equipment or
other activities at, on or under any of the Property, or, to any Loan Party's
knowledge, at, on or under adjacent property, that currently result in the
release or threatened release of Regulated Substances onto any of the Property,
except to the extent that such releases or threatened releases are not a breach
of or otherwise not a violation of the Environmental Laws.
(iv) There are no aboveground storage tanks, underground
storage tanks or underground piping associated with such tanks, used for the
management of Regulated Substances at, on or under any of the Property that (a)
do not have, to the extent required by Environmental Laws, a full operational
secondary containment system in place, and (b) are not otherwise in compliance
with all Environmental Laws. There are no abandoned underground storage tanks or
underground piping associated with such tanks, previously used for the
management of Regulated Substances at, on or under any of the Property that have
not either been closed in place in accordance with Environmental Laws or removed
in compliance with all applicable Environmental Laws and no contamination
associated with the use of such tanks exists on any of the Property that is not
in compliance with Environmental Laws.
(v) Each Loan Party and each Subsidiary of any Loan
Party has all material permits, licenses, authorizations, plans and approvals
necessary under the Environmental Laws for the conduct of the business of such
Loan Party or Subsidiary as presently conducted. Each Loan Party and each
Subsidiary of any Loan Party has submitted all material notices, reports and
other filings required by the Environmental Laws to be submitted to an Official
Body which pertain to past and current operations on any of the Property.
(vi) All past and present on-site generation, storage,
processing, treatment, recycling, reclamation, disposal or other use or
management of Regulated Substances at, on, or under any of the Property and all
off-site transportation, storage, processing, treatment, recycling, reclamation,
disposal or other use or management of Regulated Substances have been done in
accordance with the Environmental Laws.
6.1.26 Senior Debt Status.
The Obligations of each Loan Party under this Agreement, the
Notes, the Guaranty Agreements and each of the other Loan Documents to which it
is a party do rank and
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will rank at least pari passu in priority of payment with all other Indebtedness
of such Loan Party except (i) Indebtedness of such Loan Party to the extent
secured by Permitted Liens and (ii) if required by such Person, Indebtedness
owing to a Person providing interest rate hedging as (and to the extent)
required under Section 8.1. There is no Lien upon or with respect to any of the
properties or income of any Loan Party or Subsidiary of any Loan Party which
secures indebtedness or other obligations of any Person except for Permitted
Liens.
6.1.27 Year 2000.
The Borrower and each Loan Party have reviewed the areas
within their business and operations which could be adversely affected by, and
will have developed by December 31, 1998 a program to address on a timely basis,
the risk that certain computer applications used by the Borrower or any Loan
Party (or any of their respective material suppliers, customers or vendors) may
be unable to recognize and perform date-sensitive functions involving dates
prior to and after December 31, 1999 (the "Year 2000 Problem"). The Year 2000
Problem will not result in any Material Adverse Change.
6.1.28 Solvency.
After giving effect to the Transaction, the contemplated
borrowings of the full amount of the Term Loan Commitments and the Revolving
Loan Commitments, the Borrower and its Subsidiaries will not be insolvent, will
not be rendered insolvent by the indebtedness incurred in connection therewith,
will not be left with unreasonably small capital with which to engage in their
respective businesses and will not have incurred debts, including Contingent
Obligations, beyond their respective ability to pay such debts as they mature.
6.1.29 [Reserved].
6.1.30 Representations and Warranties in the Purchase
Agreement
As of the Closing Date, all representations and warranties of
the Borrower and, to the best knowledge of the Borrower, of the Sellers set
forth in the Purchase Agreements, were true and correct in all material respects
as of the time as of which such representations and warranties were made and
shall be true and correct in all material respects as of the Closing Date as if
such representations and warranties were made on and as of such date, unless
such representation and warranty expressly indicates that it is being made as of
any other specific date.
6.2 Updates to Schedules.
Should any of the information or disclosures provided on any
of the Schedules attached hereto become outdated or incorrect in any material
respect, the Borrower shall promptly provide the Agent in writing with such
revisions or updates to such Schedule as may be necessary or appropriate to
update or correct same; provided, however, that no Schedule shall be deemed to
have been amended, modified or superseded by any such correction or update, nor
shall any breach of warranty or representation resulting from the inaccuracy or
incompleteness of any such Schedule be deemed to have been cured thereby, unless
and until the Required Banks,
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in their sole and absolute discretion, shall have accepted in writing such
revisions or updates to such Schedule.
7. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT
The obligation of each Bank to make Loans and of the Agent to issue
Letters of Credit hereunder is subject to the performance by each of the Loan
Parties of its Obligations to be performed hereunder at or prior to the making
of any such Loans or issuance of such Letters of Credit and to the satisfaction
of the following further conditions:
7.1 First Loans and Letters of Credit.
On the Closing Date:
7.1.1 Officer's Certificate.
The representations and warranties of each of the Loan Parties
contained in Section 6 and in each of the other Loan Documents shall be true and
accurate on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date (except
representations and warranties which relate solely to an earlier date or time,
which representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein), and each of the Loan Parties shall
have performed and complied with all covenants and conditions hereof and
thereof, no Event of Default or Potential Default shall have occurred and be
continuing or shall exist; and there shall be delivered to the Agent for the
benefit of each Bank a certificate of each of the Loan Parties, dated the
Closing Date and signed by the Chief Executive Officer, President or Chief
Financial Officer of each of the Loan Parties, to each such effect.
7.1.2 Secretary's Certificate.
There shall be delivered to the Agent for the benefit of each
Bank a certificate dated the Closing Date and signed by the Secretary or an
Assistant Secretary of each of the Loan Parties, certifying as appropriate as
to:
(i) all action taken by each Loan Party in connection
with this Agreement, the Transaction and the other Loan Documents;
(ii) the names of the officer or officers authorized to
sign this Agreement and the other Loan Documents and the true signatures of such
officer or officers and specifying the Authorized Officers permitted to act on
behalf of each Loan Party for purposes of this Agreement and the Transaction,
and the true signatures of such officers, on which the Agent and each Bank may
conclusively rely; and
(iii) copies of its organizational documents, including
its certificate of incorporation, bylaws, certificate of limited partnership,
partnership agreement, certificate of formation, and limited liability company
agreement as in effect on the Closing Date certified by the appropriate state
official where such documents are filed in a state office together
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with certificates from the appropriate state officials as to the continued
existence and good standing of each Loan Party in each state where organized or
qualified to do business and a bring-down certificate by facsimile dated the
Closing Date.
7.1.3 Delivery of Documents.
7.1.3.1 Acquisition Documents.
All terms of the Acquisition Documents (including,
without limitation, the amount and form of consideration included in the
purchase price and conditions contained therein) and any amendments thereto
shall be in form and substance satisfactory to the Agent; and at the Closing
Date each of the conditions to purchase contained in the Acquisition Documents
shall have been satisfied in all material respects (or waived in writing, such
waiver to be satisfactory to the Agent) to the satisfaction of the Agent.
7.1.3.2 Loan Documents.
The Assignments of Leases, Guaranty Agreements,
Indemnity, the Landlord Waiver, Mortgages, Notes, Pledge Agreements,
Intercompany Subordination Agreement, Security Agreements and other Loan
Documents shall have been duly executed and delivered to the Agent for the
benefit of the Banks, together with all appropriate financing statements and
appropriate stock powers and certificates evidencing the Shares, the Partnership
Interests and the LLC Interests.
7.1.3.3 Consummation of Acquisition.
The Acquisition shall have been, or shall be
concurrently with the making of the Loans hereunder, consummated in accordance
with the terms of the Acquisition Documents therefor, without any material
amendment thereto or modification or waiver thereof, except with the consent of
the Required Lenders and with notice of all amendments thereto and modifications
and waivers thereof, and the Agent shall have received evidence satisfactory to
it to that effect.
7.1.4 Opinion of Counsel.
There shall be delivered to the Agent for the benefit of each
Bank a written opinion of Phillips, Nizer, Benjamin, Krim & Ballon, LLP, counsel
for the Loan Parties, dated the Closing Date and in form and substance
satisfactory to the Agent and its counsel as to such matters incident to the
transactions contemplated herein as the Agent may request.
7.1.5 Legal Details.
All legal details and proceedings in connection with the
transactions contemplated by this Agreement, the Transaction and the other Loan
Documents shall be in form and substance satisfactory to the Agent and counsel
for the Agent, and the Agent shall have received all such other counterpart
originals or certified or other copies of such documents and proceedings in
connection with such transactions, in form and substance satisfactory to the
Agent and said counsel, as the Agent or said counsel may reasonably request.
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7.1.6 Payment of Fees.
(a) All reasonable costs, fees and expenses (including,
without limitation, reasonable legal fees and expenses) payable to PNC Bank by
the Borrower pursuant to the letter agreement between Standard Automotive
Corporation and PNC Bank, dated May 13, 1999, as amended from time to time (the
"Agent's Letter"), shall have been paid in full and the Borrower shall have paid
or have caused to be paid the commitment, closing and other fees and expenses
(including, without limitation, reasonable legal fees and expenses) contemplated
hereby and/or in connection with any other documents executed in connection
herewith.
(b) The Borrower shall have provided evidence reasonably
satisfactory in form and substance to the Agent that the aggregate fees and
expenses payable by the Borrower in connection with this Agreement and the
Transaction (including fees and expenses payable to CCC or any of CCC's
Affiliates) shall not exceed $2,750,000 without the prior written consent of the
Agent.
7.1.7 Environmental Audit.
The Loan Parties shall cause to be performed and completed an
environmental audit with respect to the Real Property by consultants
satisfactory to the Agent and shall provide all reports and results of such
audit in writing to the Agent. Such reports shall meet the Agent's minimum
requirements for phase I environmental assessments and any other requirements of
the Agent or the Banks. The environmental condition of the Loan Parties' and
their Subsidiaries' assets, as substantiated by such audit, shall be
satisfactory to the Agent in all respects. On the Closing Date the appropriate
officers of the applicable Loan Parties shall have delivered to the Agent in
form and substance satisfactory to the Agent a certificate to the effect that
the Loan Parties have made known to the Agent all information known to them and
their Subsidiaries concerning Environmental Conditions and Environmental
Complaints and the Loan Parties and their Subsidiaries' compliance with the
Environmental Laws relating to any of the Property and any other site for which
any Loan Party or Subsidiary of a Loan Party has received notice that it is
potentially responsible for Environmental Conditions.
7.1.8 Appraisals.
The Agent shall have received appraisals or valuations of the
Loan Parties' and their Subsidiaries' assets as the Agent may require in form
and substance satisfactory to the Agent in all respects.
7.1.9 Consents.
All material consents required to effectuate the transactions
contemplated hereby as set forth on Schedule 6.1.13, and in connection with the
Transaction, shall have been obtained and remain in effect, and all applicable
waiting periods shall have expired without any action being taken by competent
authority which restrains, prevents or imposes, in the judgment of the Agent or
any Bank, materially adverse conditions upon the consummation of the
Acquisition.
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7.1.10 Officer's Certificate Regarding MACs.
Since March 31, 1998, no Material Adverse Change shall have
occurred; prior to the Closing Date, there shall have been no material change in
the management of any Loan Party or Subsidiary of any Loan Party; and there
shall have been delivered to the Agent for the benefit of each Bank a
certificate dated the Closing Date and signed by the Chief Executive Officer,
President or Chief Financial Officer of each Loan Party to each such effect.
7.1.11 No Violation of Laws.
The making of the Loans and the issuance of the Letters of
Credit shall not contravene any Law applicable to any Loan Party or any of the
Banks.
7.1.12 No Actions or Proceedings.
No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, this Agreement, the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby or which, in the
Agent's sole discretion, would make it inadvisable to consummate the
transactions contemplated by this Agreement or any of the other Loan Documents.
7.1.13 Insurance Policies; Certificates of Insurance;
Endorsements.
The Loan Parties shall have delivered evidence acceptable to
the Agent that adequate insurance in compliance with Section 8.1.3 [Maintenance
of Insurance] is in full force and effect and that all premiums then due thereon
have been paid, together with a certified copy of each Loan Party's casualty
insurance policy or policies evidencing coverage satisfactory to the Agent, with
additional insured, mortgagee and lender loss payable special endorsements
attached thereto in form and substance satisfactory to the Agent and its counsel
naming the Agent as additional insured, mortgagee and lender loss payee.
7.1.14 Title Insurance.
The Loan Parties shall deliver a title insurance policy or
policies or binder or binders in favor of the Agent for the benefit of the
Banks, in customary ALTA current mortgagee's form, and in amounts not less than
$6,000,000 with respect to property located in Worcester County, Massachusetts
which is owned by Five N and with respect to other properties no less than fair
market value thereof, with premiums paid thereon, issued by a title insurance
company acceptable to the Agent and insuring the Mortgages as a valid first
priority Lien upon the applicable Loan Parties' fee simple title to, or
leasehold interest in, the Real Property Collateral and all improvements and all
appurtenances thereto (including such easements and appurtenances as may be
required by the Agent), free and clear of any and all defects and encumbrances
whatsoever, subject only to such exceptions as may be approved in writing by the
Agent, with endorsements thereto as to such matters as the Agent may designate.
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7.1.15 Filing Receipts.
The Agent shall have received (1) copies of all filing
receipts and acknowledgments issued by any governmental authority to evidence
any recordation or filing necessary to perfect the Lien of the Banks on the
Collateral or other satisfactory evidence of such recordation and filing and (2)
evidence in a form acceptable to the Agent that such Lien constitutes a Prior
Security Interest in favor of the Banks and, in the case of the Mortgage, a
valid and perfected first priority Lien.
7.1.16 [Reserved].
7.1.17 Administrative Questionnaire. Each of the Banks and the
Borrower shall have completed and delivered to the Agent the Agent's form of
administrative questionnaire.
7.1.18 Proceedings; Receipt of Documents.
All proceedings in connection with the transactions
contemplated in connection with (a) the acquisition by the Borrower of the
assets of the Sellers and (b) any actions against the Loan Parties or any of
their respective Subsidiaries pending at the National Labor Relations Board, and
all documents incidental thereto, shall be satisfactory to the Agent and its
counsel, and the Agent and such counsel shall have received all such information
and such counterpart originals or certified or other copies of such documents as
the Agent or such counsel may reasonably request, and if requested by the Agent,
the Borrower shall use its best efforts to obtain reliance letters from counsel
rendering opinions pursuant to any such acquisitions.
7.1.19 Audit.
The Agent shall have obtained an audit of the assets and
liabilities of the Borrower and its Subsidiaries (including Ranor) and the Agent
shall be satisfied (in its sole discretion) with the results of such audit.
7.1.20 Financial Statements.
The Agent and the Banks shall have received a copy of (A) the
Historical Statements and the Pro Forma Statements together with a certificate
of the Chief Executive Officer or Chief Financial Officer of the Borrower
setting forth (x) all existing Indebtedness, guarantees, pending or threatened
litigation or claims and other contingent liabilities of the Borrower and its
Subsidiaries, and (y) all dividends declared or paid since the date of such
Historical Statements and all intercompany payments made or obligations incurred
to Affiliates outside the ordinary course of the Borrower business since such
date and (B) the preliminary combined balance sheets and combined statements of
income and retained earnings of the Borrower and its Subsidiaries as of March
31, 1998 and (C) the Financial Projections described in Section 6.1.9(b)(ii)
hereof.
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7.1.21 Cancellation of Existing Credit Facilities.
The Agent shall have received the following from each of the
Existing Lenders: (A) terminations (including UCC-3 terminations) of all rights
of the Existing Lenders under the Existing Financing Documents and all related
security documents and other related agreements and (B) a termination of any
existing collateral assignment of the key man life insurance policy on the life
of Karl Massaro.
7.1.22 Key Man Life Insurance Policy.
The Agent shall have received a copy of a key man life
insurance policy on the life of Karl Massaro from a responsible and reputable
life insurance company in the amount of $2,000,000 together with a collateral
assignment of such life insurance policy to the Agent for the benefit of the
Banks (in a form acceptable to the Agent in its sole discretion), duly executed
by the Borrower, and acknowledged by the home office of the insurance company.
7.1.23 [Reserved].
7.1.24 Debt of Acquired Companies.
The Company's indebtedness of $1,505,166.68 shall be repaid on
the Closing Date.
7.1.25 Purchase Agreement.
Full, complete and accurate copies of the Purchase Agreements
(including all annexes, schedules and exhibits thereto) shall have been provided
to the Agent. The Purchase Agreements shall be satisfactory to the Agent and
shall have been duly authorized, executed and delivered by each of the parties
thereto and shall be in full force and effect. No term or provisions of the
Purchase Agreements, after the execution and delivery of this Agreement, shall
have been modified, and no condition to the consummation of the transactions
contemplated thereby shall have been waived (unless waived in a writing which is
satisfactory to the Agent), by any of the parties thereto.
7.1.26 Work Papers.
The Agent shall have reviewed Arthur Andersen's work papers
regarding its review of the financial statements of the Company, including any
audits of the Company, and the Agent shall be satisfied (in its sole discretion)
with the results of such review.
7.1.27 Management Letters.
The Agent shall have received and reviewed copies of
management letter(s), if any, for each of the past two years of independent
certified public accountants for each Loan Party or letter(s) from each such
independent certified public accountant confirming that no management letter was
prepared for the respective Loan Party and the Agent shall be satisfied (in its
sole discretion) with the results of such review.
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7.1.28 Material Contracts.
The Agent shall have received and reviewed copies, certified
by the Chief Executive Officer of the Borrower, of each material contract which
each Loan Party has with its respective customers and vendors.
7.1.29 Borrowing Base Certificate.
On or prior to the Closing Date, the Agent and the Banks shall
have received and the Agent and the Banks shall be satisfied (both as to form
and substance) with a pro forma Borrowing Base Certificate which shall be
prepared as of a date prior to the Closing Date and which shall indicate that
the Borrowing Base on the Closing Date will exceed the initial borrowings under
the Revolving Loan Facility by not less than $4,000,000.
7.1.30 Maximum Indebtedness; Maximum Leverage Ratio.
On the Closing Date, the Company's Indebtedness outstanding
shall not exceed $60,000,000 and the Company's Leverage Ratio shall not exceed
3.10 to 1.0.
7.2 Each Additional Loan or Letter of Credit.
At the time of making any Loans or issuing any Letters of Credit
other than Loans made or Letters of Credit issued on the Closing Date and after
giving effect to the proposed extensions of credit: (a) the representations and
warranties of the Loan Parties contained in Section 6 and in the other Loan
Documents shall be true on and as of the date of such additional Loan or Letter
of Credit with the same effect as though such representations and warranties had
been made on and as of such date (except representations and warranties which
expressly relate solely to an earlier date or time, which representations and
warranties shall be true and correct on and as of the specific dates or times
referred to therein) and the Loan Parties shall have performed and complied with
all covenants and conditions hereof; no Event of Default or Potential Default
shall have occurred and be continuing or shall exist; the making of the Loans or
issuance of such Letter of Credit shall not contravene any Law applicable to any
Loan Party or Subsidiary of any Loan Party or any of the Banks; and the Borrower
shall have delivered to the Agent a duly executed and completed Loan Request or
application for a Letter of Credit as the case may be; (b) the Agent shall have
received such documentation and opinion or opinions, addressed to each of the
Banks from (i) such counsel to each Loan Party as reasonably requested by the
Agent and (ii) appropriate local counsel, which opinions shall cover such
matters as reasonably requested by, and be in form and substance reasonably
satisfactory to, the Agent; and (c) the Agent and the Banks shall have received
and shall be reasonably satisfied (both as to form and substance) with the
Borrowing Base Certificate last delivered to the Banks.
The acceptance of the proceeds of each borrowing of Loans shall
constitute a representation and warranty by each Loan Party to each of the Banks
that all of the applicable conditions specified in Section 7.2 (in each case
disregarding any reference therein that such condition be deemed satisfactory by
the Agent and/or the Banks) have been satisfied or waived.
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All of the certificates, legal opinions and other documents and
papers referred to in this Section 7.2, unless otherwise specified, shall be
delivered to the Agent at the Agent's Office (or such other location as may be
specified by the Agent) for the account of each of the Banks and in sufficient
counterparts for each of the Banks and shall be satisfactory in form and
substance to the Agent.
8. COVENANTS
8.1 Affirmative Covenants.
The Loan Parties, jointly and severally, covenant and agree that
until payment in full of the Loans, Reimbursement Obligations and Letter of
Credit Borrowings, and interest thereon, expiration or termination of all
Letters of Credit, satisfaction of all of the Loan Parties' other Obligations
under the Loan Documents and termination of the Commitments, the Loan Parties
shall comply at all times with the following affirmative covenants:
8.1.1 Preservation of Existence, Etc.
Each Loan Party shall, and shall cause each of its
Subsidiaries to, maintain its legal existence as a corporation, limited
partnership or limited liability company and its license or qualification and
good standing in each jurisdiction in which its ownership or lease of property
or the nature of its business makes such license or qualification necessary,
except as otherwise expressly permitted in Section 8.2.6 [Liquidations, Mergers,
Etc.].
8.1.2 Payment of Liabilities, Including Taxes, Etc.
Each Loan Party shall, and shall cause each of its
Subsidiaries to, duly pay and discharge all liabilities to which it is subject
or which are asserted against it, promptly as and when the same shall become due
and payable, including all taxes, assessments and governmental charges upon it
or any of its properties, assets, income or profits, prior to the date on which
penalties attach thereto, except to the extent that such liabilities, including
taxes, assessments or charges, are being contested in good faith and by
appropriate and lawful proceedings diligently conducted and for which such
reserve or other appropriate provisions, if any, as shall be required by GAAP
shall have been made, but only to the extent that failure to discharge any such
liabilities would not result in any additional liability which would adversely
affect to a material extent the financial condition of any Loan Party or
Subsidiary of any Loan Party or which would affect the Collateral, provided that
the Loan Parties and their Subsidiaries will pay all such liabilities forthwith
upon the commencement of proceedings to foreclose any Lien which may have
attached as security therefor.
8.1.3 Maintenance of Insurance.
Each Loan Party shall, and shall cause each of its
Subsidiaries to, insure its properties and assets against loss or damage by fire
and such other insurable hazards as such assets are commonly insured (including
fire, extended coverage, property damage, workers' compensation, public
liability and business interruption insurance) and against other risks
(including errors and omissions) in such amounts as similar properties and
assets are insured by
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prudent companies in similar circumstances carrying on similar businesses, and
with reputable and financially sound insurers, including self-insurance to the
extent customary, all as reasonably determined by the Agent. At the request of
the Agent, the Loan Parties shall deliver to the Agent and each of the Banks (x)
on the Closing Date and annually thereafter an original certificate of insurance
signed by the Loan Parties' independent insurance broker describing and
certifying as to the existence of the insurance on the Collateral required to be
maintained by this Agreement and the other Loan Documents, together with a copy
of the endorsement described in the next sentence attached to such certificate
and (y) from time to time a summary schedule indicating all insurance then in
force with respect to each of the Loan Parties. Such policies of insurance shall
contain special endorsements, in form and substance acceptable to the Agent,
which shall (i) specify the Agent as an additional insured, mortgagee and lender
loss payee as its interests may appear, with the understanding that any
obligation imposed upon the insured (including the liability to pay premiums)
shall be the sole obligation of the applicable Loan Parties and not that of the
insured, (ii) provide that the interest of the Banks shall be insured regardless
of any breach or violation by the applicable Loan Parties of any warranties,
declarations or conditions contained in such policies or any action or inaction
of the applicable Loan Parties or others insured under such policies, (iii)
provide a waiver of any right of the insurers to set off or counterclaim or any
other deduction, whether by attachment or otherwise, (iv) provide that any and
all rights of subrogation which the insurers may have or acquire shall be, at
all times and in all respects, junior and subordinate to the prior payment in
full of the Indebtedness hereunder and that no insurer shall exercise or assert
any right of subrogation until such time as the Indebtedness hereunder has been
paid in full and the Commitments have terminated, (v) provide, except in the
case of public liability insurance and workmen's compensation insurance, that
all insurance proceeds for losses of less than $150,000 shall be adjusted with
and payable to the applicable Loan Parties and that all insurance proceeds for
losses of $150,000 or more shall be adjusted with and payable to the Agent, (vi)
include effective waivers by the insurer of all claims for insurance premiums
against the Agent, (vii) provide that no cancellation of such policies for any
reason (including non-payment of premium) nor any change therein shall be
effective until at least thirty (30) days after receipt by the Agent of written
notice of such cancellation or change, (viii) be primary without right of
contribution of any other insurance carried by or on behalf of any additional
insureds with respect to their respective interests in the Collateral, and (ix)
provide that inasmuch as the policy covers more than one insured, all terms,
conditions, insuring agreements and endorsements (except limits of liability)
shall operate as if there were a separate policy covering each insured. The
applicable Loan Parties shall notify the Agent promptly of any occurrence
causing a material loss or decline in value of the Collateral and the estimated
(or actual, if available) amount of such loss or decline. Any monies received by
the Agent constituting insurance proceeds or condemnation proceeds (pursuant to
the Mortgage) may, at the option of the Agent, (i) be applied by the Agent to
the payment of the Loans in such manner as the Agent may reasonably determine,
or (ii) be disbursed to the applicable Loan Parties on such terms as are deemed
appropriate by the Agent for the repair, restoration and/or replacement of
property in respect of which such proceeds were received.
8.1.4 Maintenance of Properties and Leases.
Each Loan Party shall, and shall cause each of its
Subsidiaries to, maintain in good repair, working order and condition (ordinary
wear and tear excepted) in accordance with the general practice of other
businesses of similar character and size, all of those properties useful
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or necessary to its business, and from time to time, such Loan Party will make
or cause to be made all appropriate repairs, renewals or replacements thereof.
8.1.5 Maintenance of Patents, Trademarks, Etc.
Each Loan Party shall, and shall cause each of its
Subsidiaries to, maintain in full force and effect all patents, trademarks,
service marks, trade names, copyrights, licenses, franchises, permits and other
authorizations necessary for the ownership and operation of its properties and
business if the failure so to maintain the same would constitute a Material
Adverse Change.
8.1.6 Visitation Rights.
Each Loan Party shall, and shall cause each of its
Subsidiaries to, permit any of the officers or authorized employees or
representatives of the Agent or any of the Banks to visit and inspect any of its
properties and to examine and make excerpts from its books and records and
discuss its business affairs, finances and accounts with its officers, all in
such detail and at such times and as often as any of the Banks may reasonably
request, provided that each Bank shall provide the Borrower and the Agent with
reasonable notice prior to any visit or inspection. In the event any Bank
desires to conduct an audit of any Loan Party, such Bank shall make a reasonable
effort to conduct such audit contemporaneously with any audit to be performed by
the Agent.
8.1.7 Keeping of Records and Books of Account.
The Borrower shall, and shall cause each Subsidiary of the
Borrower to, maintain and keep proper books of record and account which enable
the Borrower and its Subsidiaries to issue financial statements in accordance
with GAAP and as otherwise required by applicable Laws of any Official Body
having jurisdiction over the Borrower or any Subsidiary of the Borrower, and in
which full, true and correct entries shall be made in all material respects of
all its dealings and business and financial affairs.
8.1.8 Plans and Benefit Arrangements.
The Borrower shall, and shall cause each other member of the
ERISA Group to, comply with ERISA, the Internal Revenue Code and other
applicable Laws applicable to Plans and Benefit Arrangements except where such
failure, alone or in conjunction with any other failure, would not result in a
Material Adverse Change. Without limiting the generality of the foregoing, the
Borrower shall cause all of its Plans and all Plans maintained by any member of
the ERISA Group to be funded in accordance with the minimum funding requirements
of ERISA and shall make, and cause each member of the ERISA Group to make, in a
timely manner, all contributions due to Plans, Benefit Arrangements and
Multiemployer Plans.
8.1.9 Compliance with Laws.
Each Loan Party shall, and shall cause each of its
Subsidiaries to, comply with all applicable Laws, including all Environmental
Laws, in all respects, provided that it shall not be deemed to be a violation of
this Section 8.1.9 if any failure to comply with any Law would
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not result in fines, penalties, remediation costs, other similar liabilities or
injunctive relief which in the aggregate would constitute a Material Adverse
Change.
8.1.10 Use of Proceeds.
(a) All the proceeds of Term Loan A made hereunder shall
be utilized to refinance the Borrower's existing term loan with the Agent.
(b) All the proceeds of Term Loan B made hereunder shall
be utilized to provide the financing required to consummate the Acquisition, to
fund the CCC/Ranor Capital Contribution and the Ranor Capital Contribution, and
to pay related fees and expenses.
(c) Up to $2,000,000 of Letters of Credit may be used by
the Borrower for financing purposes in the ordinary course of the business of
the Borrower and its Subsidiaries and the remaining availability of Revolving
Loans may be utilized to finance the ongoing working capital requirements of the
Borrower and its Subsidiaries and to fund a portion of the financing required to
consummate the Acquisition. The Loan Parties shall not use the Letters of Credit
and the proceeds of the Loans for any purposes which contravenes any applicable
Law or any provision hereof.
8.1.11 Further Assurances.
Each Loan Party shall, from time to time, at its expense,
faithfully preserve and protect the Agent's Lien on and Prior Security Interest
in the Collateral as a continuing first priority perfected Lien, subject only to
Permitted Liens, and shall do such other acts and things as the Agent in its
sole discretion may deem necessary or advisable from time to time in order to
preserve, perfect and protect the Liens granted under the Loan Documents and to
exercise and enforce its rights and remedies thereunder with respect to the
Collateral.
8.1.12 Subordination of Intercompany Loans.
Each Loan Party shall cause any intercompany Indebtedness,
loans or advances owed by any Loan Party to any other Loan Party to be
subordinated pursuant to the terms of the Intercompany Subordination Agreement.
8.1.13 Interest Rate Protection.
The Borrower shall, no later than 60 days after the Closing
Date and in respect of 50% of the outstanding Term Loans as in effect from time
to time, enter into Interest Rate Protection Agreements to the extent available
on commercially reasonable terms, reasonably acceptable to the Agent.
8.1.14 Additional Collateral.
In the event that the Borrower or any Subsidiary acquires any
property or interest in property (including, without limitation, real property)
that is not subject to a perfected Lien in favor of the Agent pursuant to, the
Security Documents, the Borrower shall, and shall cause any such Subsidiary to,
notify the Agent within 10 days of the occurrence of such event and
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the Borrower shall, and shall cause any such Subsidiary to, take such action
(including, without limitation, the preparation and filing of mortgages or deeds
of trust in form and substance satisfactory to the Agent) as the Agent shall
request in order to create and/or perfect a Lien in favor of the Agent on such
property.
8.1.15 Compliance with Mortgage, Grant Agreement and Note.
The Borrower shall cause R&S to comply with the terms of that
certain Mortgage, dated October 23, 1997, from R&S to the Floyd County
Development Authority ("FCDA"), that certain Grant Agreement, dated August 4,
1995, among the Kentucky Economic Development Finance Authority, Floyd County
Fiscal Court, FCDA and R&S and that certain Promissory Note, dated October 23,
1997 from R&S to the FCDA, and in particular, shall cause R&S to comply with the
"Jobs Requirement", as defined in such Grant Agreement.
8.2 Negative Covenants.
The Loan Parties, jointly and severally, covenant and agree that
until payment in full of the Loans, Reimbursement Obligations and Letter of
Credit Borrowings and interest thereon, expiration or termination of all Letters
of Credit, satisfaction of all of the Loan Parties' other Obligations hereunder
and termination of the Commitments, the Loan Parties shall comply with the
following negative covenants:
8.2.1 Indebtedness.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, at any time create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) Existing Indebtedness as set forth on Schedule
8.2.1 (including any extensions or renewals thereof, provided there is no
increase in the amount thereof or other significant change in the terms thereof
unless otherwise specified on Schedule 8.2.1);
(iii) Capitalized and operating leases as and to the
extent permitted under Section 8.2.15 [Capital Expenditures and Leases];
(iv) Indebtedness secured by Purchase Money Security
Interests not exceeding $250,000;
(v) Other Indebtedness for interest rate hedging
arrangements required by Section 8.1.13;
(vi) Indebtedness of a Loan Party to another Loan Party
which is subordinated in accordance with the provisions of Section 8.1.12
[Subordination of Intercompany Loans]; and
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(vii) Indebtedness under the Notes (as such term is
defined in Ranor Purchase Agreement) having terms approved by the Required
Lenders which is subordinated on terms approved by the Required Lenders in each
case in their sole discretion.
8.2.2 Liens.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, at any time create, incur, assume or suffer to exist any
Lien on any of its property or assets, tangible or intangible, now owned or
hereafter acquired, or agree or become liable to do so, except Permitted Liens.
8.2.3 Guaranties.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, at any time, directly or indirectly, become or be liable
in respect of any Contingent Obligation, or assume, guarantee, become surety
for, endorse (other than endorsements of instruments for deposit or collection
in the ordinary course of business); or otherwise agree, become or remain
directly or contingently liable upon or with respect to any obligation or
liability of any other Person, except for Guaranties of Indebtedness of the Loan
Parties permitted hereunder.
8.2.4 Loans and Investments.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, at any time make or suffer to remain outstanding any
loan or advance to, or purchase, acquire or own any stock, bonds, notes or
securities of, or any partnership interest (whether general or limited) or
limited liability company interest in, or any other investment or interest in,
or make any capital contribution to, any other Person, or agree, become or
remain liable to do any of the foregoing, except:
(i) trade credit extended on usual and customary terms
in the ordinary course of business;
(ii) advances to employees to meet expenses incurred by
such employees in the ordinary course of business not to exceed $150,000 in the
aggregate outstanding at any time;
(iii) Permitted Investments;
(iv) loans, advances and investments in other Loan
Parties; and
(v) investments by the Borrower in assets located
outside the United States provided that any such investment shall not exceed
$4,000,000 in the aggregate at any one time outstanding.
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8.2.5 Dividends and Related Distributions.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, make or pay, or agree to become or remain liable to make
or pay, any dividend or other distribution of any nature (whether in cash,
property, securities or otherwise) on account of or in respect of its shares of
capital stock, partnership interests or limited liability company interests on
account of the purchase, redemption, retirement or acquisition of its shares of
capital stock (or warrants, options or rights therefor), partnership interests
or limited liability company interests, except (i) dividends or other
distributions payable to another Loan Party and (ii) dividends on existing
preferred stock of the Borrower, provided that (a) any such dividends paid from
and after July 21, 1998 do not exceed $1,173,000 per year, (b) after giving
effect to any such dividends, no Potential Default or Event of Default shall
exist hereunder and (c) no payment of any such dividend shall violate any Law.
8.2.6 Liquidations, Mergers, Consolidations, Acquisitions.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, dissolve, liquidate or wind-up its affairs, or become a
party to any merger or consolidation, or acquire by purchase, lease or otherwise
all or substantially all of the assets or capital stock of any other Person,
provided that any Subsidiary of the Borrower may be merged or consolidated with
or into (i) the Borrower, if the Borrower is the continuing or surviving
corporation or (ii) any other such Subsidiary if the continuing or surviving
corporation is a Wholly-Owned Subsidiary of the Borrower.
8.2.7 Dispositions of Assets or Subsidiaries.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, sell, convey, assign, lease, abandon or otherwise
transfer or dispose of, voluntarily or involuntarily, any of its properties or
assets, tangible or intangible (including sale, assignment, discount or other
disposition of accounts, contract rights, chattel paper, equipment or general
intangibles with or without recourse or of capital stock, shares of beneficial
interest, partnership interests or limited liability company interests of a
Subsidiary of such Loan Party), except:
(i) transactions involving the sale of inventory in the
ordinary course of business;
(ii) any sale, transfer or lease of assets in the
ordinary course of business which are no longer necessary or required in the
conduct of such Loan Party's or such Subsidiary's business;
(iii) any sale, transfer or lease of assets by any
wholly owned Subsidiary of such Loan Party to another Loan Party;
(iv) any sale, transfer or lease of assets in the
ordinary course of business which are replaced by substitute assets acquired or
leased within the parameters of Section 8.2.15 [Capital Expenditures and
Leases], provided such substitute assets are subject to the Banks' Prior
Security Interest; or
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(v) any sale, transfer or lease of assets, other than
those specifically excepted pursuant to clauses (i) through (iv) above, which is
approved by the Required Banks so long as the Net Proceeds are applied as a
mandatory prepayment of the Term Loans in accordance with the provisions of
Section 5.5.2 [Sale of Assets] above.
8.2.8 Affiliate Transactions.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, enter into or carry out any transaction (including
purchasing property or services from or selling property or services to any
Affiliate of any Loan Party or other Person) unless such transaction is not
otherwise prohibited by this Agreement, is entered into in the ordinary course
of business upon fair and reasonable arm's-length terms and conditions which are
fully disclosed to the Agent and is in accordance with all applicable Law.
8.2.9 Subsidiaries, Partnerships and Joint Ventures.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, own or create directly or indirectly any Subsidiaries
other than (i) any Subsidiary which has joined this Agreement as Guarantor on
the Closing Date; and (ii) any Subsidiary formed after the Closing Date which
joins this Agreement as a Guarantor pursuant to Section 11.19 [Joinder of
Guarantors], provided that the Required Banks shall have consented to such
formation and joinder and that such Subsidiary and the Loan Parties, as
applicable, shall grant and cause to be perfected first priority Liens to the
Agent for the benefit of the Banks in the assets held by, and stock of or other
ownership interests in, such Subsidiary. Each of the Loan Parties shall not
become or agree to (1) become a general or limited partner in any general or
limited partnership, except that the Loan Parties may be general or limited
partners in other Loan Parties, (2) become a member or manager of, or hold a
limited liability company interest in, a limited liability company, except that
the Loan Parties may be members or managers of, or hold limited liability
company interests in, other Loan Parties, or (3) become a joint venturer or hold
a joint venture interest in any joint venture.
8.2.10 Continuation of or Change in Business.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, engage in any business other than the manufacturing of
new trailer chassis, bottom dump and grain hopper trailers, dump truck bodies,
other specialty, trailers and dumpsters and remanufacturing of used trailer
chassis, and the cutting, forming, rolling, welding, assembling, testing and
finishing of machine parts, substantially as conducted and operated by such Loan
Party or Subsidiary during the present fiscal year, and such Loan Party or
Subsidiary shall not permit any material change in such business.
8.2.11 Plans and Benefit Arrangements.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to:
(i) fail to satisfy the minimum funding requirements of
ERISA and the Internal Revenue Code with respect to any Plan;
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(ii) request a minimum funding waiver from the Internal
Revenue Service with respect to any Plan;
(iii) engage in a Prohibited Transaction with any Plan,
Benefit Arrangement or Multiemployer Plan which, alone or in conjunction with
any other circumstances or set of circumstances resulting in liability under
ERISA, would constitute a Material Adverse Change;
(iv) permit the aggregate actuarial present value of all
benefit liabilities (whether or not vested) under each Plan, determined on a
plan termination basis, as disclosed in the most recent actuarial report
completed with respect to such Plan, to exceed, as of any actuarial valuation
date, the fair market value of the assets of such Plan;
(v) fail to make when due any contribution to any
Multiemployer Plan that the Borrower or any member of the ERISA Group may be
required to make under any agreement relating to such Multiemployer Plan, or any
Law pertaining thereto;
(vi) withdraw (completely or partially) from any
Multiemployer Plan or withdraw (or be deemed under Section 4062(e) of ERISA to
withdraw) from any Multiple Employer Plan, where any such withdrawal is likely
to result in a material liability of the Borrower or any member of the ERISA
Group;
(vii) terminate, or institute proceedings to terminate,
any Plan, where such termination is likely to result in a material liability to
the Borrower or any member of the ERISA Group;
(viii) make any amendment to any Plan with respect to
which security is required under Section 307 of ERISA; or
(ix) fail to give any and all notices and make all
disclosures and governmental filings required under ERISA or the Internal
Revenue Code, where such failure is likely to result in a Material Adverse
Change.
8.2.12 Fiscal Year.
The Borrower shall not, and shall not permit any Subsidiary of
the Borrower to, change its fiscal year from the twelve-month period beginning
April 1 and ending March 31.
8.2.13 Issuance of Stock.
Except as otherwise set forth on Schedule 8.2.13, each of the
Loan Parties shall not, and shall not permit any of its Subsidiaries to, issue
any additional shares of its capital stock or any options, warrants or other
rights in respect thereof, other than options to employees not to exceed
$1,000,000 in value issued pursuant to the Borrower's existing Incentive Stock
Option Plan.
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8.2.14 Changes in Organizational Documents.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, amend in any respect its certificate of incorporation
(including any provisions or resolutions relating to capital stock), by-laws,
certificate of limited partnership, partnership agreement, certificate of
formation, limited liability company agreement or other organizational documents
without providing at least thirty (30) calendar days' prior written notice to
the Agent and the Banks and, in the event such change would be adverse to the
Banks as determined by the Agent in its sole discretion, obtaining the prior
written consent of the Required Banks.
8.2.15 Capital Expenditures and Leases.
(a) Each of the Loan Parties shall not, and shall not permit
any of its Subsidiaries to, make or commit to make (by way of the acquisition of
securities of a Person or otherwise) any Consolidated Capital Expenditures
except for expenditures not exceeding, in the aggregate for the Borrower and its
Subsidiaries, $3,500,000 during any fiscal year of the Borrower; provided, that
up to 25% of any such amount, if not expended in the fiscal year for which it is
permitted above, may be carried over for expenditure in the next following
fiscal year.
(b) Each of the Loan Parties shall not permit Consolidated
Lease Expense for any fiscal year of the Borrower to exceed $1,500,000.
8.2.16 Minimum Fixed Charge Coverage Ratio.
The Loan Parties shall not permit the Fixed Charge Coverage
Ratio, calculated as of the end of each fiscal quarter for the four fiscal
quarters then ended, to exceed the ratio set forth below for the periods
specified below:
Period Ratio
------ -----
Closing Date to 6/29/02 1.25 to 1.0
6/30/02 to 6/29/03 1.10 to 1.0
6/30/03 and thereafter 1.25 to 1.0
8.2.17 Maximum Leverage Ratio.
The Loan Parties shall not at any time permit its Leverage
Ratio to exceed the ratio set forth below for the periods specified below:
Period Ratio
------ -----
Closing Date to 3/30/00 3.25 to 1.0
3/31/00 to 3/30/01 3.00 to 1.0
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3/31/01 to 3/30/02 2.75 to 1.0
3/31/02 and thereafter 2.25 to 1.0
8.2.18 Minimum Interest Coverage Ratio.
The Loan Parties shall not permit its ratio of EBITDA to
consolidated interest expense of the Borrower and its Subsidiaries, calculated,
on a pro forma basis (after giving effect to the Transaction and the related
financing of the Acquisition), as of the end of each fiscal quarter for the four
fiscal quarters then ended, to be less than 3.00 to 1.0.
8.2.19 Minimum Consolidated Net Worth.
The Borrower shall not at any time permit Consolidated Net
Worth to be less than the Base Net Worth.
8.2.20 Amendments or Waivers of Certain Documents.
(a) The Borrower will not, and will not permit any of its
Subsidiaries to, amend or otherwise change the terms of any Existing Debt,
including the Notes (as defined in the Ranor Purchase Agreement).
(b) After the Closing Date, the Borrower will not, and will
not permit any of its Subsidiaries to, amend or otherwise change the terms of
any of the Acquisition Documents in any manner adverse to the Banks without the
prior consent of the Agent.
8.2.21 Restrictions on Transfer of Shares by Members of the
Control Group.
The Borrower shall not permit, and shall not permit any of its
Subsidiaries to permit, any member of the Control Group to sell any of the
Shares currently owned by such member until the earlier to occur of (i)
twenty-four (24) months from the Closing Date or (ii) the date upon which the
Borrower has achieved a Leverage Ratio of no greater than 2.50 to 1.0,
calculated as of the end of each fiscal quarter for any period of four
consecutive quarters following the Closing Date; provided however that no such
sale shall be permitted in any event at such time if there shall be any
Potential Default or Event of Default hereunder.
8.2.22 Payments on Ranor Notes.
The Borrower shall not make, nor permit to be made, any
payment on the Notes (as defined in the Ranor Purchase Agreement) unless (i) the
Loan Parties shall be in compliance with the covenants provided for in Section
8.2.16, 8.2.17, 8.2.18 and 8.2.19 (collectively, the "Financial Covenants") for
the most recent period of four consecutive fiscal quarters preceding such
proposed payment (calculated on a pro-forma basis as if such proposed payment
had been made as of the first day of such four quarter period) and (ii) no later
than five Business Days prior to any such proposed payment, the Agent shall have
received a certificate of
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an Authorized Officer with detailed calculations establishing to the reasonable
satisfaction of the Agent that the foregoing requirements have been satisfied.
8.3 Reporting Requirements.
The Loan Parties, jointly and severally, covenant and agree that
until payment in full of the Loans, Reimbursement Obligations and Letter of
Credit Borrowings and interest thereon, expiration or termination of all Letters
of Credit, satisfaction of all of the Loan Parties' other Obligations hereunder
and under the other Loan Documents and termination of the Commitments, the Loan
Parties will furnish or cause to be furnished to the Agent and each of the
Banks:
8.3.1 [Reserved].
8.3.2 Quarterly Financial Statements.
As soon as available and in any event within forty-five (45)
calendar days after the end of each of the first three fiscal quarters in each
fiscal year, financial statements of the Borrower, consisting of a consolidated
and consolidating balance sheet as of the end of such fiscal quarter and related
consolidated and consolidating statements of income, stockholders' equity and
cash flows for the fiscal quarter then ended and the fiscal year through that
date, all in reasonable detail and certified (subject to normal year-end audit
adjustments) by the Chief Executive Officer, President or Chief Financial
Officer of the Borrower as having been prepared in accordance with GAAP,
consistently applied, and setting forth in comparative form the respective
financial statements for the corresponding date and period in the previous
fiscal year.
8.3.3 Annual Financial Statements.
As soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Borrower, financial statements of the
Borrower consisting of a consolidated and consolidating balance sheet as of the
end of such fiscal year, and related consolidated and consolidating statements
of income, stockholders' equity and cash flows for the fiscal year then ended,
all in reasonable detail and setting forth in comparative form the financial
statements as of the end of and for the preceding fiscal year, and certified by
independent certified public accountants of nationally recognized standing
satisfactory to the Agent. The certificate or report of accountants shall be
free of qualifications (other than any consistency qualification that may result
from a change in the method used to prepare the financial statements as to which
such accountants concur) and shall not indicate the occurrence or existence of
any event, condition or contingency which would materially impair the prospect
of payment or performance of any covenant, agreement or duty of any Loan Party
under any of the Loan Documents. The Loan Parties shall deliver with such
financial statements and certification by their accountants a letter of such
accountants to the Agent and the Banks substantially (i) to the effect that,
based upon their ordinary and customary examination of the affairs of the
Borrower, performed in connection with the preparation of such consolidated
financial statements, and in accordance with generally accepted auditing
standards, they are not aware of the existence of any condition or event which
constitutes an Event of Default or Potential Default or, if they are aware of
such condition or event, stating the nature thereof and confirming the
Borrower's calculations with respect to the
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certificate to be delivered pursuant to Section 8.3.4 [Certificate of the
Borrower] with respect to such financial statements and (ii) to the effect that
the Banks are intended to rely upon such accountant's certification of the
annual financial statements and that such accountants authorize the Loan Parties
to deliver such reports and certificate to the Banks on such accountants' behalf
(as expressed in a privity or reliance letter acceptable to the Agent).
8.3.3A Borrowing Base Certificate.
On or before the fifteenth (15th) calendar day of each
calendar month, the Borrower shall deliver to the Bank a Borrowing Base
Certificate. The Borrowing Base Certificate shall reflect Borrower's calculation
of the Borrowing Base as of the last day of the preceding calendar month, and a
comparison of such number to the Commitment and to the amount of outstanding
Obligations.
8.3.4 Certificate of the Borrower.
Concurrently with the financial statements of the Borrower
furnished to the Agent and to the Banks pursuant to Sections 8.3.2 [Quarterly
Financial Statements] and 8.3.3 [Annual Financial Statements], a certificate of
the Borrower signed by the Chief Executive Officer, President or Chief Financial
Officer of the Borrower, in the form of Exhibit 8.3.4, to the effect that,
except as described pursuant to Section 8.3.5 [Notice of Default], (i) the
representations and warranties of the Borrower contained in Section 8.3.5 and in
the other Loan Documents are true on and as of the date of such certificate with
the same effect as though such representations and warranties had been made on
and as of such date (except representations and warranties which expressly
relate solely to an earlier date or time) and the Loan Parties have performed
and complied with all covenants and conditions hereof, (ii) no Event of Default
or Potential Default exists and is continuing on the date of such certificate
and (iii) containing calculations in sufficient detail to demonstrate compliance
as of the date of such financial statements with all financial covenants
contained in Section 8.2 [Negative Covenants]. The certificate delivered with
the annual financial statements pursuant to Section 8.3.3 shall include a
determination in reasonable detail of the Excess Cash Flow and the amount of the
Mandatory Prepayment of Excess Cash Flow applicable to such fiscal year.
8.3.5 Notice of Default.
Promptly after any officer of any Loan Party has learned of
the occurrence of an Event of Default or Potential Default, a certificate signed
by the Chief Executive Officer, President or Chief Financial Officer of such
Loan Party setting forth the details of such Event of Default or Potential
Default and the action which the such Loan Party proposes to take with respect
thereto.
8.3.6 Notice of Litigation.
Promptly after the commencement thereof, notice of all
actions, suits, proceedings or investigations before or by any Official Body or
any other Person against any Loan Party or Subsidiary of any Loan Party which
relate to the Collateral, involve a claim or series of claims in excess of
$100,000 (not covered by insurance) or which if adversely determined would
constitute a Material Adverse Change.
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8.3.7 Certain Events.
Written notice to the Agent:
(i) at least thirty (30) calendar days prior thereto,
with respect to any proposed sale or transfer of assets pursuant to Section
8.2.7 (iv) or (v),
(ii) within the time limits set forth in Section 8.2.14
[Changes in Organizational Documents], any amendment to the organizational
documents of any Loan Party; and
(iii) at least thirty (30) calendar days prior thereto,
with respect to any change in any Loan Party's locations from the locations set
forth in Schedule A to the Security Agreement.
8.3.8 Budgets, Forecasts, Other Reports and Information.
Promptly upon their becoming available to the Borrower:
(i) the annual budget and any forecasts or projections
of the Borrower, to be supplied not later than ten (10) days prior to
commencement of the fiscal year to which any of the foregoing may be applicable,
together with budgets and forecasts, including a comparison of actual to budget
financial statements, to be supplied not later than sixty (60) days after the
end of each of the first three fiscal quarters to which any of the foregoing may
be applicable,
(ii) any reports including management letters submitted
to the Borrower by independent accountants in connection with any annual,
interim or special audit,
(iii) any reports, notices or proxy statements generally
distributed by the Borrower to its stockholders on a date no later than the date
supplied to such stockholders,
(iv) regular or periodic reports, including Forms 10-K,
10-Q and 8-K, registration statements and prospectuses, filed by the Borrower
with the Securities and Exchange Commission,
(v) a copy of any order in any proceeding to which the
Borrower or any of its Subsidiaries is a party issued by any Official Body,
(vi) (a) on or prior to the Closing Date and within 90
days after the commencement of each fiscal year, a complete and accurate list of
the officers and directors of the Borrower and (b) within 30 days of any change
in personnel affecting the accuracy of such list, a notice specifying such
change in personnel,
(vii) with reasonable promptness, such other information
and data with respect to the Borrower or any of its Subsidiaries or any other
similar entity in
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which the Borrower or any Subsidiary has an investment, as from time to time may
be reasonably requested by any Bank and may be reasonably available to the
Borrower,
(viii) as soon as available and in any event within 90
days of the Closing Date, an opening balance sheet of the Borrower and its
Subsidiaries as of the Closing Date, after giving effect to the Transaction, the
borrowings hereunder and the other transactions contemplated hereby, accompanied
by an auditor's report thereon from Arthur Andersen or such other nationally
recognized accounting firm as shall be acceptable to the Agent, and
(ix) the Borrower shall also notify the Banks promptly
of the enactment or adoption of any Law which may result in a Material Adverse
Change.
8.3.9 Notices Regarding Plans and Benefit Arrangements.
8.3.9.1 Certain Events.
Promptly upon becoming aware of the occurrence thereof,
notice (including the nature of the event and, when known, any action taken or
threatened by the Internal Revenue Service or the PBGC with respect thereto) of:
(i) any Reportable Event with respect to the Borrower or
any other member of the ERISA Group (regardless of whether the obligation to
report said Reportable Event to the PBGC has been waived),
(ii) any Prohibited Transaction which could subject the
Borrower or any other member of the ERISA Group to a civil penalty assessed
pursuant to Section 502 (i) of ERISA or a tax imposed by Section 4975 of the
Internal Revenue Code in connection with any Plan, any Benefit Arrangement or
any trust created thereunder,
(iii) any assertion of material withdrawal liability
with respect to any Multiemployer Plan,
(iv) any partial or complete withdrawal from a
Multiemployer Plan by the Borrower or any other member of the ERISA Group under
Title IV of ERISA (or assertion thereof), where such withdrawal is likely to
result in material withdrawal liability,
(v) any cessation of operations (by the Borrower or any
other member of the ERISA Group) at a facility in the circumstances described in
Section 4062(e) of ERISA,
(vi) withdrawal by the Borrower or any other member of
the ERISA Group from a Multiple Employer Plan,
(vii) a failure by the Borrower or any other member of
the ERISA Group to make a payment to a Plan required to avoid imposition of a
Lien under Section 302(f) of ERISA,
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(viii) the adoption of an amendment to a Plan requiring
the provision of security to such Plan pursuant to Section 307 of ERISA, or
(ix) any change in the actuarial assumptions or funding
methods used for any Plan, where the effect of such change is to materially
increase or materially reduce the unfunded benefit liability or obligation to
make periodic contributions.
8.3.9.2 Notices of Involuntary Termination and Annual Reports.
Promptly after receipt thereof, copies of (a) all notices
received by the Borrower or any other member of the ERISA Group of the PBGC's
intent to terminate any Plan administered or maintained by the Borrower or any
member of the ERISA Group, or to have a trustee appointed to administer any such
Plan; and (b) at the request of the Agent or any Bank each annual report (IRS
Form 5500 series) and all accompanying schedules, the most recent actuarial
reports, the most recent financial information concerning the financial status
of each Plan administered or maintained by the Borrower or any other member of
the ERISA Group, and schedules showing the amounts contributed to each such Plan
by or on behalf of the Borrower or any other member of the ERISA Group in which
any of their personnel participate or from which such personnel may derive a
benefit, and each Schedule B (Actuarial Information) to the annual report filed
by the Borrower or any other member of the ERISA Group with the Internal Revenue
Service with respect to each such Plan.
8.3.9.3 Notice of Voluntary Termination.
Promptly upon the filing thereof, copies of any Form 5310, or
any successor or equivalent form to Form 5310, filed with the PBGC in connection
with the termination of any Plan.
9. DEFAULT
9.1 Events of Default.
An Event of Default shall mean the occurrence or existence of any
one or more of the following events or conditions (whatever the reason therefor
and whether voluntary, involuntary or effected by operation of Law):
9.1.1 Payments Under Loan Documents.
The Borrower shall fail to pay any principal of any Loan
(including scheduled installments, mandatory prepayments or the payment due at
maturity), Reimbursement Obligation or Letter of Credit Borrowing; or shall fail
to pay any interest on any Loan , Reimbursement Obligation or Letter of Credit
Borrowing or any other amount owing hereunder or under the other Loan Documents
within five days after such interest or other amount becomes due in accordance
with the terms hereof or thereof;
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9.1.2 Breach of Warranty.
Any representation or warranty made at any time by any of the
Loan Parties herein or by any of the Loan Parties in any other Loan Document, or
in any certificate, other instrument or statement furnished pursuant to the
provisions hereof or thereof, shall prove to have been false or misleading in
any material respect as of the time it was made or furnished;
9.1.3 Breach of Negative Covenants or Visitation Rights.
Any of the Loan Parties shall default in the observance or
performance of any covenant contained in Section 8.2 [Negative Covenants];
9.1.4 Breach of Other Covenants.
Any of the Loan Parties shall default in the observance or
performance of any other covenant, condition or provision hereof or of any other
Loan Document and such default shall continue unremedied for a period of thirty
(30) days after any officer of any Loan Party becomes aware of the occurrence
thereof (such grace period to be applicable only in the event such default can
be remedied by corrective action of the Loan Parties as determined by the Agent
in its sole discretion);
9.1.5 Defaults in Other Agreements or Indebtedness.
A default or event of default shall occur at any time under
the terms of any other agreement involving borrowed money or the extension of
credit or any other Indebtedness under which any Loan Party or Subsidiary of any
Loan Party may be obligated as a borrower or guarantor in excess of $250,000 in
the aggregate, and such breach, default or event of default consists of the
failure to pay (beyond any period of grace permitted with respect thereto,
whether waived or not) any indebtedness when due (whether at stated maturity, by
acceleration or otherwise) or if such breach or default permits or causes the
acceleration of any indebtedness (whether or not such right shall have been
waived) or the termination of any commitment to lend;
9.1.6 Final Judgments or Orders.
Any final judgments or orders for the payment of money in
excess of $100,000 in the aggregate shall be entered against any Loan Party by a
court having jurisdiction in the premises, which judgment is not discharged,
vacated, bonded or stayed pending appeal within a period of thirty (30) days
from the date of entry;
9.1.7 Loan Document Unenforceable.
Any of the Loan Documents shall cease to be legal, valid and
binding agreements enforceable against the party executing the same or such
party's successors and assigns (as permitted under the Loan Documents) in
accordance with the respective terms thereof or shall in any way be terminated
(except in accordance with its terms) or become or be declared ineffective or
inoperative or shall in any way be challenged or contested or cease to give or
provide the respective Liens, security interests, rights, titles, interests,
remedies, powers or privileges intended to be created thereby;
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9.1.8 Uninsured Losses; Proceedings Against Assets.
There shall occur any material uninsured damage to or loss,
theft or destruction of any of the Collateral in excess of $100,000 or the
Collateral or any other of the Loan Parties' or any of their Subsidiaries'
assets are attached, seized, levied upon or subjected to a writ or distress
warrant; or such come within the possession of any receiver, trustee, custodian
or assignee for the benefit of creditors and the same is not cured within thirty
(30) days thereafter;
9.1.9 Notice of Lien or Assessment.
A notice of Lien or assessment in excess of $100,000 which is
not a Permitted Lien is filed of record with respect to all or any part of any
of the Loan Parties' or any of their Subsidiaries' assets by the United States,
or any department, agency or instrumentality thereof, or by any state, county,
municipal or other governmental agency, including the PBGC, or any taxes or
debts owing at any time or times hereafter to any one of these becomes payable
and the same is not paid within thirty (30) days after the same becomes payable;
9.1.10 Material Adverse Change; Insolvency.
There shall occur any Material Adverse Change or any Loan
Party or any Subsidiary of a Loan Party ceases to be solvent or admits in
writing its inability to pay its debts as they mature;
9.1.11 Events Relating to Plans and Benefit Arrangements.
Any of the following occurs: (i) any Reportable Event, which
the Agent determines in good faith constitutes grounds for the termination of
any Plan by the PBGC or the appointment of a trustee to administer or liquidate
any Plan, shall have occurred and be continuing; (ii) proceedings shall have
been instituted or other action taken to terminate any Plan, or a termination
notice shall have been filed with respect to any Plan; (iii) a trustee shall be
appointed to administer or liquidate any Plan; (iv) the PBGC shall give notice
of its intent to institute proceedings to terminate any Plan or Plans or to
appoint a trustee to administer or liquidate any Plan; and, in the case of the
occurrence of (i), (ii), (iii) or (iv) above, the Agent determines in good faith
that the amount of the Borrower's liability is likely to exceed 10% of its
Consolidated Tangible Net Worth; (v) the Borrower or any member of the ERISA
Group shall fail to make any contributions when due to a Plan or a Multiemployer
Plan; (vi) the Borrower or any other member of the ERISA Group shall make any
amendment to a Plan with respect to which security is required under Section 307
of ERISA; (vii) the Borrower or any other member of the ERISA Group shall
withdraw completely or partially from a Multiemployer Plan; (viii) the Borrower
or any other member of the ERISA Group shall withdraw (or shall be deemed under
Section 4062(e) of ERISA to withdraw) from a Multiple Employer Plan; or (ix) any
applicable Law is adopted, changed or interpreted by any Official Body with
respect to or otherwise affecting one or more Plans, Multiemployer Plans or
Benefit Arrangements and, with respect to any of the events specified in (v),
(vi), (vii), (viii) or (ix), the Agent determines in good faith that any such
occurrence would be reasonably likely to materially and adversely affect the
total enterprise represented by the Borrower and the other members of the ERISA
Group;
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9.1.12 Cessation of Business.
Any Loan Party or Subsidiary of a Loan Party ceases to conduct
its business as contemplated, except as expressly permitted under Section 8.2.6
[Liquidations, Mergers, Etc.] or 8.2.7, or any Loan Party or Subsidiary of a
Loan Party is enjoined, restrained or in any way prevented by court order from
conducting all or any material part of its business and such injunction,
restraint or other preventive order is not dismissed within thirty (30) days
after the entry thereof;
9.1.13 Ownership.
(i) Any Person or "group" (within the meaning of Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) other than
Steven Merker, William Merker or Karl Massaro shall obtain the power (whether or
not exercised) to elect a majority of the Borrower's directors or (ii) the Board
of Directors of the Borrower shall not consist of a majority of Continuing
Directors; "Continuing Directors" shall mean the directors of the Borrower on
the Closing Date and each other director, if such other director's nomination
for election to the Board of Directors of the Borrower is recommended by a
majority of the then Continuing Directors, provided that notwithstanding
anything in this Section 9.1.13 to the contrary, the transfer of Capital Stock
owned by any of Steven Merker, William Merker or Karl Massaro upon their death
shall not be deemed an Event of Default hereunder;
9.1.14 Involuntary Proceedings.
A proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect of
any Loan Party or Subsidiary of a Loan Party in an involuntary case under any
applicable bankruptcy, insolvency, reorganization or other similar law now or
hereafter in effect, or for the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator, conservator (or similar official) of any Loan
Party or Subsidiary of a Loan Party for any substantial part of its property, or
for the winding-up or liquidation of its affairs, and such proceeding shall
remain undismissed or unstayed and in effect for a period of sixty (60)
consecutive days or such court shall enter a decree or order granting any of the
relief sought in such proceeding; or
9.1.15 Voluntary Proceedings.
Any Loan Party or Subsidiary of a Loan Party shall commence a
voluntary case under any applicable bankruptcy, insolvency, reorganization or
other similar law now or hereafter in effect, shall consent to the entry of an
order for relief in an involuntary case under any such law, or shall consent to
the appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator, conservator (or other similar official) of
itself or for any substantial part of its property or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any action in furtherance of any of the
foregoing.
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9.2 Consequences of Event of Default.
9.2.1 Events of Default Other Than Bankruptcy, Insolvency or
Reorganization Proceedings.
If an Event of Default specified under Sections 9.1.1 through
9.1.13 shall occur and be continuing, the Banks and the Agent shall be under no
further obligation to make Loans or issue Letters of Credit, as the case may be,
and the Agent may, and upon the request of the Required Banks, shall (i) by
written notice to the Borrower, declare the unpaid principal amount of the Notes
then outstanding and all interest accrued thereon, any unpaid fees and all other
Indebtedness of the Borrower to the Banks hereunder and thereunder to be
forthwith due and payable, and the same shall thereupon become and be
immediately due and payable to the Agent for the benefit of each Bank without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived, and (ii) require the Borrower to, and the Borrower
shall thereupon, deposit in a non-interest-bearing account with the Agent, as
cash collateral for its Obligations under the Loan Documents, an amount equal to
the maximum amount currently or at any time thereafter available to be drawn on
all outstanding Letters of Credit, and the Borrower hereby pledges to the Agent
and the Banks, and grants to the Agent and the Banks a security interest in, all
such cash as security for such Obligations. Upon the curing of all existing
Events of Default to the satisfaction of the Required Banks, the Agent shall
return such cash collateral to the Borrower; and
9.2.2 Bankruptcy, Insolvency or Reorganization Proceedings.
If an Event of Default specified under Section 9.1.14
[Involuntary Proceedings] or 9.1.15 [Voluntary Proceedings] shall occur, the
Banks shall be under no further obligations to make Loans hereunder and the
unpaid principal amount of the Loans then outstanding and all interest accrued
thereon, any unpaid fees and all other Indebtedness of the Borrower to the Banks
hereunder and thereunder shall be immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived; and
9.2.3 Set-off.
If an Event of Default shall occur and be continuing, any Bank
to whom any Obligation is owed by any Loan Party hereunder or under any other
Loan Document or any participant of such Bank which has agreed in writing to be
bound by the provisions of Section 10.13 [Equalization of Banks] and any branch,
Subsidiary or Affiliate of such Bank or participant anywhere in the world shall
have the right, in addition to all other rights and remedies available to it,
without notice to such Loan Party, to set-off against and apply to the then
unpaid balance of all the Loans and all other Obligations of the Borrower and
the other Loan Parties hereunder or under any other Loan Document any debt owing
to, and any other funds held in any manner for the account of, the Borrower or
such other Loan Party by such Bank or participant or by such branch, Subsidiary
or Affiliate, including all funds in all deposit accounts (whether time or
demand, general or special, provisionally credited or finally credited, or
otherwise) now or hereafter maintained by the Borrower or such other Loan Party
for its own account (but not including funds held in custodian or trust
accounts) with such Bank or participant or such branch, Subsidiary or Affiliate.
Such right shall exist whether or not any Bank or the Agent shall have
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made any demand under this Agreement or any other Loan Document, whether or not
such debt owing to or funds held for the account of the Borrower or such other
Loan Party is or are matured or unmatured and regardless of the existence or
adequacy of any Collateral, Guaranty or any other security, right or remedy
available to any Bank or the Agent; and
9.2.4 Suits, Actions, Proceedings.
If an Event of Default shall occur and be continuing, and
whether or not the Agent shall have accelerated the maturity of Loans pursuant
to any of the foregoing provisions of this Section 9.2, the Agent or any Bank,
if owed any amount with respect to the Loans, may proceed to protect and enforce
its rights by suit in equity, action at law and/or other appropriate proceeding,
whether for the specific performance of any covenant or agreement contained in
this Agreement or the other Loan Documents, including as permitted by applicable
Law the obtaining of the ex parte appointment of a receiver, and, if such amount
shall have become due, by declaration or otherwise, proceed to enforce the
payment thereof or any other legal or equitable right of the Agent or such Bank;
and
9.2.5 Application of Proceeds.
From and after the date on which the Agent has taken any
action pursuant to this Section 9.2 and until all Obligations of the Loan
Parties have been paid in full, any and all proceeds received by the Agent from
any sale or other disposition of the Collateral, or any part thereof, or the
exercise of any other remedy by the Agent, shall be applied as follows:
(i) first, to reimburse the Agent and the Banks for
out-of-pocket costs, expenses and disbursements, including reasonable attorneys'
and paralegals' fees and legal expenses, incurred by the Agent or the Banks in
connection with realizing on the Collateral or collection of any Obligations of
any of the Loan Parties under any of the Loan Documents, including advances made
by the Banks or any one of them or the Agent for the reasonable maintenance,
preservation, protection or enforcement of, or realization upon, the Collateral,
including advances for taxes, insurance, repairs and the like and reasonable
expenses incurred to sell or otherwise realize on, or prepare for sale or other
realization on, any of the Collateral;
(ii) second, to the repayment of all Indebtedness then
due and unpaid of the Loan Parties to the Banks incurred under this Agreement or
any of the other Loan Documents, whether of principal, interest, fees, expenses
or otherwise, on a pro-rata basis; and
(iii) the balance, if any, to the applicable Loan Party
or as otherwise required by Law.
9.2.6 Other Rights and Remedies.
In addition to all of the rights and remedies contained in
this Agreement or in any of the other Loan Documents (including the Mortgage),
the Agent shall have all of the rights and remedies of a secured party under the
Uniform Commercial Code or other applicable Law, all of which rights and
remedies shall be cumulative and non-exclusive, to the extent
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permitted by Law. The Agent may, and upon the request of the Required Banks
shall, exercise all post-default rights granted to the Agent and the Banks under
the Loan Documents or applicable Law.
9.3 Notice of Sale.
Any notice required to be given by the Agent of a sale, lease, or
other disposition of the Collateral or any other intended action by the Agent,
if given ten (10) days prior to such proposed action, shall constitute
commercially reasonable and fair notice thereof to the Borrower.
10. THE AGENT
10.1 Appointment.
Each Bank hereby irrevocably designates, appoints and authorizes PNC
Bank to act as Agent for such Bank under this Agreement and to execute and
deliver or accept on behalf of each of the Banks the other Loan Documents. Each
Bank hereby irrevocably authorizes, and each holder of any Note by the
acceptance of a Note shall be deemed irrevocably to authorize, the Agent to take
such action on its behalf under the provisions of this Agreement and the other
Loan Documents and any other instruments and agreements referred to herein, and
to exercise such powers and to perform such duties hereunder as are specifically
delegated to or required of the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. PNC Bank agrees to act as the Agent
on behalf of the Banks to the extent provided in this Agreement.
10.2 Delegation of Duties. The Agent may perform any of its duties
hereunder by or through agents or employees (provided such delegation does not
constitute a relinquishment of its duties as Agent) and, subject to Sections
10.5 [Reimbursement of Agent by Borrower, Etc.] and 10.6, shall be entitled to
engage and pay for the advice or services of any attorneys, accountants or other
experts concerning all matters pertaining to its duties hereunder and to rely
upon any advice so obtained.
10.3 Nature of Duties; Independent Credit Investigation.
The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and no implied covenants, functions,
responsibilities, duties, obligations, or liabilities shall be read into this
Agreement or otherwise exist. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement a
fiduciary or trust relationship in respect of any Bank; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Agreement except as
expressly set forth herein. Without limiting the generality of the foregoing,
the use of the term "agent" in this Agreement with reference to the Agent is not
intended to connote any fiduciary or other implied (or express) obligations
arising under agency doctrine of any applicable Law. Instead, such term is used
merely as a matter of market custom, and is intended to create or reflect only
an administrative relationship between independent contracting parties. Each
Bank expressly acknowledges (i) that the Agent has not made any
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representations or warranties to it and that no act by the Agent hereafter
taken, including any review of the affairs of any of the Loan Parties, shall be
deemed to constitute any representation or warranty by the Agent to any Bank;
(ii) that it has made and will continue to make, without reliance upon the
Agent, its own independent investigation of the financial condition and affairs
and its own appraisal of the creditworthiness of each of the Loan Parties in
connection with this Agreement and the making and continuance of the Loans
hereunder; and (iii) except as expressly provided herein, that the Agent shall
have no duty or responsibility, either initially or on a continuing basis, to
provide any Bank with any credit or other information with respect thereto,
whether coming into its possession before the making of any Loan or at any time
or times thereafter.
10.4 Actions in Discretion of Agent; Instructions From the Banks.
The Agent agrees, upon the written request of the Required Banks (or
such greater number of Banks as may be required hereunder, including Section
11.1), to take or refrain from taking any action of the type specified as being
within the Agent's rights, powers or discretion herein, provided that the Agent
shall not be required to take any action which exposes the Agent to personal
liability or which is contrary to this Agreement or any other Loan Document or
applicable Law. In the absence of a request by the Required Banks, the Agent
shall have authority, in its sole discretion, to take or not to take any such
action, unless this Agreement specifically requires the consent of the Required
Banks or all of the Banks. Any action taken or failure to act pursuant to such
instructions or discretion shall be binding on the Banks, subject to Section
10.6 [Exculpatory Provisions, Etc.]. Subject to the provisions of Section 10.6,
no Bank shall have any right of action whatsoever against the Agent as a result
of the Agent acting or refraining from acting hereunder in accordance with the
instructions of the Required Banks, or in the absence of such instructions, in
the absolute discretion of the Agent.
10.5 Reimbursement and Indemnification of Agent by the Borrower.
The Borrower unconditionally agrees to pay or reimburse the Agent
and hold the Agent harmless against (a) liability for the payment of all
reasonable out-of-pocket costs, expenses and disbursements, including fees and
expenses of counsel (including the allocated costs of staff counsel), appraisers
and environmental consultants, incurred by the Agent (i) in connection with the
development, negotiation, preparation, printing, execution, administration,
syndication, interpretation and performance of this Agreement and the other Loan
Documents, (ii) relating to any requested amendments, waivers or consents
pursuant to the provisions hereof, (iii) in connection with the enforcement of
this Agreement or any other Loan Document or collection of amounts due hereunder
or thereunder or the proof and allowability of any claim arising under this
Agreement or any other Loan Document, whether in bankruptcy or receivership
proceedings or otherwise, and (iv) in any workout or restructuring or in
connection with the protection, preservation, exercise or enforcement of any of
the terms hereof or of any rights hereunder or under any other Loan Document or
in connection with any foreclosure, collection or bankruptcy proceedings, and
(b) all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent,
in its capacity as such, in any way relating to or arising out of this Agreement
or any other Loan Documents or any action taken or omitted by the Agent
hereunder or thereunder, provided that the Borrower shall not be liable for
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any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements if the same results
from the Agent's gross negligence or willful misconduct, or if the Borrower was
not given notice of the subject claim and the opportunity to participate in the
defense thereof, at its expense (except that the Borrower shall remain liable to
the extent such failure to give notice does not result in a loss to the
Borrower), or if the same results from a compromise or settlement agreement
entered into without the consent of the Borrower, which shall not be
unreasonably withheld. In addition, the Borrower agrees to reimburse and pay all
reasonable out-of-pocket expenses of the Agent's regular employees and agents
engaged periodically to perform audits of the Loan Parties' books, records and
business properties.
10.6 Exculpatory Provisions; Limitation of Liability.
Neither the Agent nor any of its directors, officers, employees,
agents, attorneys or Affiliates shall (a) be liable to any Bank for any action
taken or omitted to be taken by it or them hereunder, or in connection herewith
including pursuant to any Loan Document, unless caused by its or their own gross
negligence or willful misconduct, (b) be responsible in any manner to any of the
Banks for the effectiveness, enforceability, genuineness, validity or the due
execution of this Agreement or any other Loan Documents or for any recital,
representation, warranty, document, certificate, report or statement herein or
made or furnished under or in connection with this Agreement or any other Loan
Documents, or (c) be under any obligation to any of the Banks to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions hereof or thereof on the part of the Loan Parties, or the financial
condition of the Loan Parties, or the existence or possible existence of any
Event of Default or Potential Default. No claim may be made by any of the Loan
Parties, any Bank, the Agent or any of their respective Subsidiaries against the
Agent, any Bank or any of their respective directors, officers, employees,
agents, attorneys or Affiliates, or any of them, for any special, indirect or
consequential damages or, to the fullest extent permitted by Law, for any
punitive damages in respect of any claim or cause of action (whether based on
contract, tort, statutory liability, or any other ground) based on, arising out
of or related to any Loan Document or the transactions contemplated hereby or
any act, omission or event occurring in connection therewith, including the
negotiation, documentation, administration or collection of the Loans, and each
of the Loan Parties, (for itself and on behalf of each of its Subsidiaries), the
Agent and each Bank hereby waive, releases and agree never to sue upon any claim
for any such damages, whether such claim now exists or hereafter arises and
whether or not it is now known or suspected to exist in its favor. Each Bank
agrees that, except for notices, reports and other documents expressly required
to be furnished to the Banks by the Agent hereunder or given to the Agent for
the account of or with copies for the Banks, the Agent and each of its
directors, officers, employees, agents, attorneys or Affiliates shall not have
any duty or responsibility to provide any Bank with an credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of the Loan Parties which may come
into the possession of the Agent or any of its directors, officers, employees,
agents, attorneys or Affiliates.
10.7 Reimbursement and Indemnification of Agent by Banks.
Each Bank agrees to reimburse and indemnify the Agent (to the extent
not reimbursed by the Borrower and without limiting the Obligation of the
Borrower to do so) in
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proportion to its Ratable Share of the Commitments from and against all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements, including attorneys' fees and disbursements
(including the allocated costs of staff counsel), and costs of appraisers and
environmental consultants, of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Agent, in its capacity as such, in any
way relating to or arising out of this Agreement or any other Loan Documents or
any action taken or omitted by the Agent hereunder or thereunder, provided that
no Bank shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements (a) if the same results from the Agent's gross negligence or
willful misconduct, or (b) if such Bank was not given notice of the subject
claim and the opportunity to participate in the defense thereof, at its expense
(except that such Bank shall remain liable to the extent such failure to give
notice does not result in a loss to the Bank), or (c) if the same results from a
compromise and settlement agreement entered into without the consent of such
Bank, which shall not be unreasonably withheld. In addition, each Bank agrees
promptly upon demand to reimburse the Agent (to the extent not reimbursed by the
Borrower and without limiting the Obligation of the Borrower to do so) in
proportion to its Ratable Share for all amounts due and payable by the Borrower
to the Agent in connection with the Agent's periodic audit of the Loan Parties'
books, records and business properties.
10.8 Reliance by Agent.
The Agent shall be entitled to rely upon any writing, telegram,
telex or teletype message, resolution, notice, consent, certificate, letter,
cablegram, statement, order or other document or conversation by telephone or
otherwise believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person or Persons, and upon the advice and opinions of
counsel and other professional advisers selected by the Agent. The Agent shall
be fully justified in failing or refusing to take any action hereunder unless it
shall first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.
10.9 Notice of Default.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Potential Default or Event of Default unless the Agent has
received written notice from a Bank or the Borrower referring to this Agreement,
describing such Potential Default or Event of Default and stating that such
notice is a "notice of default."
10.10 Notices.
The Agent shall promptly send to each Bank a copy of all notices
received from the Borrower pursuant to the provisions of this Agreement or the
other Loan Documents promptly upon receipt thereof. The Agent shall promptly
notify the Borrower and the other Banks of each change in the Base Rate and the
effective date thereof.
10.11 Banks in Their Individual Capacities.
With respect to its Revolving Credit Commitment, the Revolving
Credit Loans, the Term Loan Commitment and the Term Loan made by it and any
other rights and powers given to
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it as a Bank hereunder or under any of the other Loan Documents, the Agent shall
have the same rights and powers hereunder as any other Bank and may exercise the
same as though it were not the Agent, and the term "Banks" shall, unless the
context otherwise indicates, include the Agent in its individual capacity. PNC
Bank and its Affiliates and each of the Banks and their respective Affiliates
may, without liability to account, except as prohibited herein, make loans to,
accept deposits from, discount drafts for, act as trustee under indentures of,
and generally engage in any kind of banking or trust business with, the Loan
Parties and their Affiliates, in the case of the Agent, as though it were not
acting as Agent hereunder and in the case of each Bank, as though such Bank were
not a Bank hereunder. The Banks acknowledge that, pursuant to such activities,
the Agent or its Affiliates may (i) receive information regarding the Loan
Parties (including information that may be subject to confidentiality
obligations in favor of the Loan Parties) and acknowledge that the Agent shall
be under no obligation to provide such information to them, and (ii) accept fees
and other consideration from the Loan Parties for services in connection with
this Agreement and otherwise without having to account for the same to the
Banks.
10.12 Holders of Notes.
The Agent may deem and treat any payee of any Note as the owner
thereof for all purposes hereof unless and until written notice of the
assignment or transfer thereof shall have been filed with the Agent. Any
request, authority or consent of any Person who at the time of making such
request or giving such authority or consent is the holder of any Note shall be
conclusive and binding on any subsequent holder, transferee or assignee of such
Note or of any Note or Notes issued in exchange therefor.
10.13 Equalization of Banks.
The Banks and the holders of any participations in any Notes agree
among themselves that, with respect to all amounts received by any Bank or any
such holder for application on any Obligation hereunder or under any Note or
under any such participation, whether received by voluntary payment, by
realization upon security, by the exercise of the right of set-off or banker's
lien, by counterclaim or by any other non-pro rata source, equitable adjustment
will be made in the manner stated in the following sentence so that, in effect,
all such excess amounts will be shared ratably among the Banks and such holders
in proportion to their interests in payments under the Notes, except as
otherwise provided in Section 4.4.3 [Agent's and Bank's Rights], 5.4.2
[Replacement of a Bank] or 5.6 [Additional Compensation in Certain
Circumstances]. The Banks or any such holder receiving any such amount shall
purchase for cash from each of the other Banks an interest in such Bank's Loans
in such amount as shall result in a ratable participation by the Banks and each
such holder in the aggregate unpaid amount under the Notes, provided that if all
or any portion of such excess amount is thereafter recovered from the Bank or
the holder making such purchase, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, together with interest
or other amounts, if any, required by law (including court order) to be paid by
the Bank or the holder making such purchase.
10.14 Successor Agent.
The Agent may resign as Agent by giving not less than thirty (30)
days' prior written notice to the Borrower. If the Agent shall resign under this
Agreement, then either (a) the
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Required Banks shall appoint from among the Banks a successor agent for the
Banks, subject to the consent of the Borrower, such consent not to be
unreasonably withheld, or (b) if a successor agent shall not be so appointed and
approved within the thirty (30) day period following the Agent's notice to the
Banks of its resignation, then the Agent shall appoint, with the consent of the
Borrower, such consent not to be unreasonably withheld, a successor agent who
shall serve as Agent until such time as the Required Banks appoint and the
Borrower consents to the appointment of a successor agent. Upon its appointment
pursuant to either clause (a) or (b) above, such successor agent shall succeed
to the rights, powers and duties of the Agent, and the term "Agent" shall mean
such successor agent, effective upon its appointment, and the former Agent's
rights, powers and duties as Agent shall be terminated without any other or
further act or deed on the part of such former Agent or any of the parties to
this Agreement. After the resignation of any Agent hereunder, the provisions of
this Section 10 shall inure to the benefit of such former Agent and such former
Agent shall not by reason of such resignation be deemed to be released from
liability for any actions taken or not taken by it while it was an Agent under
this Agreement.
10.15 Agent's Fee.
The Borrower shall pay to the Agent a periodic nonrefundable fee
(the "Agent's Fee") under the terms of the Agent's Letter.
10.16 Availability of Funds.
The Agent may assume that each Bank has made or will make the
proceeds of a Loan available to the Agent unless the Agent shall have been
notified by such Bank on or before the later of (1) the close of Business on the
Business Day preceding the Borrowing Date with respect to such Loan or two (2)
hours before the time on which the Agent actually funds the proceeds of such
Loan to the Borrower (whether using its own funds pursuant to this Section 10.16
or using proceeds deposited with the Agent by the Banks and whether such funding
occurs before or after the time on which Banks are required to deposit the
proceeds of such Loan with the Agent). The Agent may, in reliance upon such
assumption (but shall not be required to), make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact made available
to the Agent by such Bank, the Agent shall be entitled to recover such amount on
demand from such Bank (or, if such Bank fails to pay such amount forthwith upon
such demand from the Borrower) together with interest thereon, in respect of
each day during the period commencing on the date such amount was made available
to the Borrower and ending on the date the Agent recovers such amount, at a rate
per annum equal to (i) the Federal Funds Effective Rate during the first three
(3) days after such interest shall begin to accrue and (ii) the applicable
interest rate in respect of such Loan after the end of such three-day period.
10.17 Calculations.
In the absence of gross negligence or willful misconduct, the Agent
shall not be liable for any error in computing the amount payable to any Bank
whether in respect of the Loans, fees or any other amounts due to the Banks
under this Agreement. In the event an error in computing any amount payable to
any Bank is made, the Agent, the Borrower and each affected Bank shall,
forthwith upon discovery of such error, make such adjustments as shall be
required to
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correct such error, and any compensation therefor will be calculated at the
Federal Funds Effective Rate.
10.18 Beneficiaries.
Except as expressly provided herein, the provisions of this Section
10 are solely for the benefit of the Agent and the Banks, and the Loan Parties
shall not have any rights to rely on or enforce any of the provisions hereof. In
performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Banks and does not assume and shall not be deemed to have
assumed any obligation toward or relationship of agency or trust with or for any
of the Loan Parties.
11. MISCELLANEOUS
11.1 Modifications, Amendments or Waivers.
With the written consent of the Required Banks, the Agent, acting on
behalf of all the Banks, and the Borrower, on behalf of the Loan Parties, may
from time to time enter into written agreements amending or changing any
provision of this Agreement or any other Loan Document or the rights of the
Banks or the Loan Parties hereunder or thereunder, or may grant written waivers
or consents to a departure from the due performance of the Obligations of the
Loan Parties hereunder or thereunder. Any such agreement, waiver or consent made
with such written consent shall be effective to bind all the Banks and the Loan
Parties; provided, that, without the written consent of all the Banks, no such
agreement, waiver or consent may be made which will:
11.1.1 Increase of Commitment; Extension or Expiration Date.
Increase the amount of the Revolving Credit Commitment, Term
Loan A Commitment or Term Loan B Commitment of any Bank hereunder or extend the
Expiration Date;
11.1.2 Extension of Payment; Reduction of Principal Interest
or Fees; Modification of Terms of Payment.
Whether or not any Loans are outstanding, subordinate any of
the Loans to any Indebtedness, extend the time for payment of principal or
interest of any Loan (excluding the due date of any mandatory prepayment of a
Loan or any mandatory Commitment reduction in connection with such a mandatory
prepayment hereunder except for mandatory reductions of the Commitments on the
Expiration Date), the Commitment Fee or any other fee payable to any Bank, or
reduce the principal amount of or the rate of interest borne by any Loan or
reduce the Commitment Fee or any other fee payable to any Bank, or otherwise
affect the terms of payment of the principal of or interest of any Loan, the
Commitment Fee or any other fee payable to any Bank;
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11.1.3 Release of Collateral or Guarantor.
Except for sales of assets permitted by Section 8.2.7
[Disposition of Assets or Subsidiaries], release any Collateral consisting of
capital stock or other ownership interests of any Loan Party or its Subsidiary
or any material portion of the assets of any Loan Party, any Guarantor from its
Obligations under the Guaranty Agreement or any other security for any of the
Loan Parties' Obligations; or
11.1.4 Miscellaneous
Amend Section 5.2 [Pro Rata Treatment of Banks], 10.6
[Exculpatory Provisions, Etc.] or 10.13 [Equalization of Banks] or this Section
11.1 alter any provision regarding the pro rata treatment of the Banks, change
the definition of Required Banks, or change any requirement providing for the
Banks or the Required Banks to authorize the taking of any action hereunder;
provided, further, that no agreement, waiver or consent which would modify the
interests, rights or obligations of the Agent in its capacity as Agent or as the
issuer of Letters of Credit shall be effective without the written consent of
the Agent.
11.2 No Implied Waivers; Cumulative Remedies; Writing Required.
No course of dealing and no delay or failure of the Agent or any
Bank in exercising any right, power, remedy or privilege under this Agreement or
any other Loan Document shall affect any other or future exercise thereof or
operate as a waiver thereof, nor shall any single or partial exercise thereof or
any abandonment or discontinuance of steps to enforce such a right, power,
remedy or privilege preclude any further exercise thereof or of any other right,
power, remedy or privilege. The rights and remedies of the Agent and the Banks
under this Agreement and any other Loan Documents are cumulative and not
exclusive of any rights or remedies which they would otherwise have. Any waiver,
permit, consent or approval of any kind or character on the part of any Bank of
any breach or default under this Agreement or any such waiver of any provision
or condition of this Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing.
11.3 Reimbursement and Indemnification of Banks by the Borrower;
Taxes.
The Borrower agrees unconditionally upon demand to pay or reimburse
to each Bank (other than the Agent, as to which the Borrower's Obligations are
set forth in Section 10.5 [Reimbursement of Agent By Borrower, Etc.]) and to
save such Bank harmless against (i) liability for the payment of all reasonable
out-of-pocket costs, expenses and disbursements (including fees and expenses of
counsel (including allocated costs of staff counsel) for each Bank except with
respect to (a) and (b) below), incurred by such Bank (a) in connection with the
administration and interpretation of this Agreement, and other instruments and
documents to be delivered hereunder, (b) relating to any amendments, waivers or
consents pursuant to the provisions hereof, (c) in connection with the
enforcement of this Agreement or any other Loan Document, or collection of
amounts due hereunder or thereunder or the proof and allowability of any claim
arising under this Agreement or any other Loan Document, whether in bankruptcy
or receivership proceedings or otherwise, and (d) in any workout or
restructuring or in connection with the protection,
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preservation, exercise or enforcement of any of the terms hereof or of any
rights hereunder or under any other Loan Document or in connection with any
foreclosure, collection or bankruptcy proceedings, or (ii) all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against such Bank, in its capacity as such, in any
way relating to or arising out of this Agreement or any other Loan Documents or
any action taken or omitted by such Bank hereunder or thereunder, provided that
the Borrower shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements (A) if the same results from such Bank's gross
negligence or willful misconduct, or (B) if the Borrower was not given notice of
the subject claim and the opportunity to participate in the defense thereof, at
its expense (except that the Borrower shall remain liable to the extent such
failure to give notice does not result in a loss to the Borrower), or (C) if the
same results from a compromise or settlement agreement entered into without the
consent of the Borrower, which shall not be unreasonably withheld. The Banks
will attempt to minimize the fees and expenses of legal counsel for the Banks
which are subject to reimbursement by the Borrower hereunder by considering the
usage of one law firm to represent the Banks and the Agent if appropriate under
the circumstances. The Borrower agrees unconditionally to pay all stamp,
document, transfer, recording or filing taxes or fees and similar impositions
now or hereafter determined by the Agent or any Bank to be payable in connection
with this Agreement or any other Loan Document, and the Borrower agrees
unconditionally to save the Agent and the Banks harmless from and against any
and all present or future claims, liabilities or losses with respect to or
resulting from any omission to pay or delay in paying any such taxes, fees or
impositions.
11.4 Holidays.
Whenever payment of a Loan to be made or taken hereunder shall be
due on a day which is not a Business Day such payment shall be due on the next
Business Day and such extension of time shall be included in computing interest
and fees, except that the Loans shall be due on the Business Day preceding the
Expiration Date if the Expiration Date is not a Business Day. Whenever any
payment or action to be made or taken hereunder (other than payment of the
Loans) shall be stated to be due on a day which is not a Business Day, such
payment or action shall be made or taken on the next following Business Day
(except as provided in Section 4.2 [Interest Periods] with respect to Interest
Periods under the Euro-Rate Option), and such extension of time shall not be
included in computing interest or fees, if any, in connection with such payment
or action.
11.5 Funding by Branch, Subsidiary or Affiliate.
11.5.1 Notional Funding.
Each Bank shall have the right from time to time, without
notice to the Borrower, to deem any branch, Subsidiary or Affiliate (which for
the purposes of this Section 11.5 shall mean any corporation or association
which is directly or indirectly controlled by or is under direct or indirect
common control with any corporation or association which directly or indirectly
controls such Bank) of such Bank to have made, maintained or funded any Loan to
which the Euro-Rate Option applies at any time, provided that immediately
following (on the assumption that a payment were then due from the Borrower to
such other office), and as a result
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of such change, the Borrower would not be under any greater financial obligation
pursuant to Section 5.6 [Additional Compensation in Certain Circumstances] than
it would have been in the absence of such change. Notional funding offices may
be selected by each Bank without regard to such Bank's actual methods of making,
maintaining or funding the Loans or any sources of funding actually used by or
available to such Bank.
11.5.2 Actual Funding.
Each Bank shall have the right from time to time to make or
maintain any Loan by arranging for a branch, Subsidiary or Affiliate of such
Bank to make or maintain such Loan subject to the last sentence of this Section
11.5.2. If any Bank causes a branch, Subsidiary or Affiliate to make or maintain
any part of the Loans hereunder, all terms and conditions of this Agreement
shall, except where the context clearly requires otherwise, be applicable to
such part of the Loans to the same extent as if such Loans were made or
maintained by such Bank, but in no event shall any Bank's use of such a branch,
Subsidiary or Affiliate to make or maintain any part of the Loans hereunder
cause such Bank or such branch, Subsidiary or Affiliate to incur any cost or
expenses payable by the Borrower hereunder or require the Borrower to pay any
other compensation to any Bank (including any expenses incurred or payable
pursuant to Section 5.6 [Additional Compensation in Certain Circumstances])
which would otherwise not be incurred.
11.6 Standard Automotive Corporation as Agent for Loan Parties.
Each Loan Party hereby irrevocably appoints Standard
Automotive Corporation as the borrowing agent and attorney-in-fact for the Loan
Parties (the "Administrative Borrower") which appointment shall remain in full
force and effect unless and until the Agent shall have received prior written
notice signed by all of the Loan Parties that such appointment has been revoked
and that another Loan Party has been appointed Administrative Borrower. Each
Loan Party hereby irrevocably appoints and authorizes the Administrative
Borrower (i) to provide the Agent with all notices with respect to Loans
obtained for the benefit of any Loan Party and all other notices and
instructions under this Agreement and (ii) to take such action as the
Administrative Borrower deems appropriate on its behalf to obtain Loans and to
exercise such other powers as are reasonably incidental thereto to carry out the
purposes of this Agreement. Each Loan Party hereby irrevocably appoints and
authorizes the Administrative Borrower to provide the Agent with all notices and
to take all action as the Administrative Borrower deems appropriate with respect
to all Letters of Credit under this Agreement. It is understood that the
handling of the loan account and Collateral of the Loan Parties in a combined
fashion, as more fully set forth herein, is done solely as an accommodation to
the Loan Parties in order to utilize the collective borrowing powers of the Loan
Parties in the most efficient and economical manner and at their request, and
that neither the Agent nor any Bank shall incur liability to the Loan Parties as
a result hereof. Each of the Loan Parties expects to derive benefit, directly or
indirectly, from the handling of the loan account and the Collateral in a
combined fashion since the successful operation of each Loan Party is dependent
on the continued successful performance of the integrated group. To induce the
Agent and the Banks to do so, and in consideration thereof, each of the Loan
Parties hereby jointly and severally agrees to indemnify the Agent and the Banks
and hold the Agent and the Banks harmless against any and all liability,
expense, loss or claim of damage or injury, made against the Agent or such Banks
by any of the Loan Parties or by any third party whosoever, arising from or
incurred by reason of (a) the handling of the loan account
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and Collateral of the Loan Parties as herein provided, (b) the Agent and the
Banks relying on any instructions of the Administrative Borrower, or (c) any
other action taken by the Agent or any Bank hereunder or under the other Loan
Documents.
11.7 Notices.
All notices, requests, demands, directions and other communications
(as used in this Section 11.7, collectively referred to as "notices") given to
or made upon any party hereto under the provisions of this Agreement shall be by
telephone or in writing (including telex or facsimile communication) unless
otherwise expressly permitted hereunder and shall be delivered or sent by telex
or facsimile to the respective parties at the addresses and numbers set forth
under their respective names on Schedule 1.1(B) hereof or in accordance with any
subsequent unrevoked written direction from any party to the others. All notices
shall, except as otherwise expressly herein provided, be effective (a) in the
case of telex or facsimile, when received, (b) in the case of hand-delivered
notice, when hand-delivered, (c) in the case of telephone, when telephoned,
provided, however, that in order to be effective, telephonic notices must be
confirmed in writing no later than the next day by letter, facsimile or telex,
(d) if given by mail, four (4) days after such communication is deposited in the
mail with first-class postage prepaid, return receipt requested, and (e) if
given by any other means (including by air courier), when delivered; provided,
that notices to the Agent shall not be effective until received. Any Bank giving
any notice to any Loan Party shall simultaneously send a copy thereof to the
Agent, and the Agent shall promptly notify the other Banks of the receipt by it
of any such notice.
11.8 Severability.
The provisions of this Agreement are intended to be severable. If
any provision of this Agreement shall be held invalid or unenforceable in whole
or in part in any jurisdiction, such provision shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without in
any manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.
11.9 Governing Law.
Each Letter of Credit and Section 2.9 [Letter of Credit Subfacility]
shall be subject to the Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500, as the
same may be revised or amended from time to time, and to the extent not
inconsistent therewith, the internal laws of the State of New Jersey without
regard to its conflict of laws principles and the balance of this Agreement
shall be deemed to be a contract under the Laws of the State of New Jersey and
for all purposes shall be governed by and construed and enforced in accordance
with the internal laws of the State of New Jersey without regard to its conflict
of laws principles.
11.10 Prior Understanding.
This Agreement and the other Loan Documents supersede all prior
understandings and agreements, whether written or oral, between the parties
hereto and thereto relating to the
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transactions provided for herein and therein, including any prior
confidentiality agreements and commitments.
11.11 Duration; Survival.
All representations and warranties of the Loan Parties contained
herein or made in connection herewith shall survive the making of Loans and
issuance of Letters of Credit and shall not be waived by the execution and
delivery of this Agreement, any investigation by the Agent or the Banks, the
making of Loans, issuance of Letters of Credit, or payment in full of the Loans.
All covenants and agreements of the Loan Parties contained in Sections 8.1
[Affirmative Covenants], 8.2 [Negative Covenants] and 8.3 [Reporting
Requirements] herein shall continue in full force and effect from and after the
date hereof so long as the Borrower may borrow or request Letters of Credit
hereunder and until termination of the Commitments and payment in full of the
Loans and expiration or termination of all Letters of Credit. All covenants and
agreements of the Borrower contained herein relating to the payment of
principal, interest, premiums, additional compensation or expenses and
indemnification, including those set forth in the Notes, Section 5 [Payments]
and Sections 10.5 [Reimbursement of Agent by Borrower, Etc.], 10.7
[Reimbursement of Agent by Banks, Etc.] and 11.3 [Reimbursement of Banks by
Borrower; Etc.], shall survive payment in full of the Loans, expiration or
termination of the Letters of Credit and termination of the Commitments.
11.12 Successors and Assigns.
(i) This Agreement shall be binding upon and shall inure
to the benefit of the Banks, the Agent, the Loan Parties and their respective
successors and assigns, except that none of the Loan Parties may assign or
transfer any of its rights and Obligations hereunder or any interest herein.
Each Bank may, at its own cost, make assignments of or sell participations in
all or any part of its Commitments and the Loans made by it to one or more banks
or other entities, subject to the consent of the Borrower and the Agent with
respect to any assignee, such consent not to be unreasonably withheld, provided
that (1) no consent of the Borrower shall be required (A) if an Event of Default
exists and is continuing, or (B) in the case of an assignment by a Bank to an
Affiliate of such Bank, and (2) any assignment by a Bank to a Person other than
an Affiliate of such Bank may not be made in amounts less than the lesser of
$2,500,000 or the amount of the assigning Bank's Commitment. In the case of an
assignment, upon receipt by the Agent of the Assignment and Assumption
Agreement, the assignee shall have, to the extent of such assignment (unless
otherwise provided therein), the same rights, benefits and obligations as it
would have if it had been a signatory Bank hereunder, the Commitments shall be
adjusted accordingly, and upon surrender of any Note subject to such assignment,
the Borrower shall execute and deliver a new Note to the assignee in an amount
equal to the amount of the Revolving Credit Commitment or Term Loan assumed by
it and a new Revolving Credit Note or Term Note to the assigning Bank in an
amount equal to the Revolving Credit Commitment or Term Loan retained by it
hereunder. Any Bank which assigns any or all of its Commitment or Loans to a
Person other than an Affiliate of such Bank shall pay to the Agent a service fee
in the amount of $3,000 for each assignment. In the case of a participation, the
participant shall only have the rights specified in Section 9.2.3 [Set-off] (the
participant's rights against such Bank in respect of such participation to be
those set forth in the agreement executed by such Bank in favor of the
participant relating thereto and not to include any voting rights except with
respect to
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changes of the type referenced in Sections 11.1.1 [Increase of Commitment,
Etc.], 11.1.2 [Extension of Payment, Etc.], or 11.1.3 [Release of Collateral or
Guarantor], all of such Bank's obligations under this Agreement or any other
Loan Document shall remain unchanged, and all amounts payable by any Loan Party
hereunder or thereunder shall be determined as if such Bank had not sold such
participation.
(ii) Any assignee or participant which is not
incorporated under the Laws of the United States of America or a state thereof
shall deliver to the Borrower and the Agent the form of certificate described in
Section 11.17 [Tax Withholding Clause] relating to federal income tax
withholding. Each Bank may furnish any publicly available information concerning
any Loan Party or its Subsidiaries and any other information concerning any Loan
Party or its Subsidiaries in the possession of such Bank from time to time to
assignees and participants (including prospective assignees or participants),
provided that such assignees and participants agree to be bound by the
provisions of Section 11.13 [Confidentiality].
(iii) Notwithstanding any other provision in this
Agreement, any Bank may at any time pledge or grant a security interest in all
or any portion of its rights under this Agreement, its Note and the other Loan
Documents to any Federal Reserve Bank in accordance with Regulation A of the FRB
or U.S. Treasury Regulation 31 CFR Section 203.14 without notice to or consent
of the Borrower or the Agent. No such pledge or grant of a security interest
shall release the transferor Bank of its obligations hereunder or under any
other Loan Document.
11.13 Confidentiality.
11.13.1 General.
The Agent and the Banks each agree to keep confidential all
information obtained from any Loan Party or its Subsidiaries which is designated
by the Borrower in writing to be confidential, except as provided below, and to
use such information only in connection with their respective capacities under
this Agreement and for the purposes contemplated hereby. The Agent and the Banks
shall be permitted to disclose such information (i) to outside legal counsel,
accountants and other professional advisors who need to know such information in
connection with the administration and enforcement of this Agreement, subject to
agreement of such Persons to maintain the confidentiality, (ii) to assignees and
participants as contemplated by Section 11.12, (iii) to the extent requested by
any bank regulatory authority or, with notice to the Borrower, as otherwise
required by applicable Law or by any subpoena or similar legal process, or in
connection with any investigation or proceeding arising out of the transactions
contemplated by this Agreement, (iv) if it becomes publicly available other than
as a result of a breach of this Agreement or becomes available from a source not
known to be subject to confidentiality restrictions, or (v) if the Borrower
shall have consented to such disclosure.
11.13.2 Sharing Information With Affiliates of the Banks.
Each Loan Party acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Borrower or one or more of its Affiliates (in connection with this Agreement
or otherwise) by any Bank or by one or
-102-
<PAGE>
more Subsidiaries or Affiliates of such Bank and each of the Loan Parties hereby
authorizes each Bank to share any information delivered to such Bank by such
Loan Party and its Subsidiaries pursuant to this Agreement, or in connection
with the decision of such Bank to enter into this Agreement, to any such
Subsidiary or Affiliate of such Bank, it being understood that any such
Subsidiary or affiliate of any Bank receiving such information shall be bound by
the provisions of Section 11.12.1 as if it were a Bank hereunder. Such
Authorization shall survive the repayment of the Loans and other Obligations and
the termination of the Commitments.
11.14 Counterparts.
This Agreement may be executed by different parties hereto on any
number of separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together constitute one
and the same instrument.
11.15 Agent's or Bank's Consent.
Whenever the Agent's or any Bank's consent is required to be
obtained under this Agreement or any of the other Loan Documents as a condition
to any action, inaction, condition or event, the Agent and each Bank shall be
authorized to give or withhold such consent in its sole and absolute discretion
and to condition its consent upon the giving of additional collateral, the
payment of money or any other matter.
11.16 Exceptions.
The representations, warranties and covenants contained herein shall
be independent of each other, and no exception to any representation, warranty
or covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein unless expressly provided, nor shall any
such exceptions be deemed to permit any action or omission that would be in
contravention of applicable Law.
11.17 CONSENT TO FORUM; WAIVER OF JURY TRIAL.
EACH LOAN PARTY HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE STATE COURTS OF MIDDLESEX COUNTY, NEW JERSEY AND THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY, AND WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH LOAN PARTY AT
THE ADDRESSES PROVIDED FOR IN SECTION 11.7 AND SERVICE SO MADE SHALL BE DEEMED
TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH LOAN PARTY WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS
PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE. EACH LOAN PARTY, THE AGENT AND THE BANKS HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW.
-103-
<PAGE>
11.18 Tax Withholding Clause.
Each Bank or assignee or participant of a Bank that is not
incorporated under the Laws of the United States of America or a state thereof
agrees that it will deliver to each of the Borrower and the Agent two (2) duly
completed copies of the following: (i) Internal Revenue Service Form W-9, 4224
or 1001, or other applicable form prescribed by the Internal Revenue Service,
certifying that such Bank, assignee or participant is entitled to receive
payments under this Agreement and the other Loan Documents without deduction or
withholding of any United States federal income taxes, or is subject to such tax
at a reduced rate under an applicable tax treaty, or (ii) Internal Revenue
Service Form W-8 or other applicable form or a certificate of such Bank,
assignee or participant indicating that no such exemption or reduced rate is
allowable with respect to such payments. Each Bank, assignee or participant
required to deliver to the Borrower and the Agent a form or certificate pursuant
to the preceding sentence shall deliver such form or certificate as follows: (A)
each Bank which is a party hereto on the Closing Date shall deliver such form or
certificate at least five (5) Business Days prior to the first date on which any
interest or fees are payable by the Borrower hereunder for the account of such
Bank; (B) each assignee or participant shall deliver such form or certificate at
least five (5) Business Days before the effective date of such assignment or
participation (unless the Agent in its sole discretion shall permit such
assignee or participant to deliver such form or certificate less than five (5)
Business Days before such date in which case it shall be due on the date
specified by the Agent). Each Bank, assignee or participant which so delivers a
Form W-8, W-9, 4224 or 1001 further undertakes to deliver to each of the
Borrower and the Agent two (2) additional copies of such form (or a successor
form) on or before the date that such form expires or becomes obsolete or after
the occurrence of any event requiring a change in the most recent form so
delivered by it, and such amendments thereto or extensions or renewals thereof
as may be reasonably requested by the Borrower or the Agent, either certifying
that such Bank, assignee or participant is entitled to receive payments under
this Agreement and the other Loan Documents without deduction or withholding of
any United States federal income taxes or is subject to such tax at a reduced
rate under an applicable tax treaty or stating that no such exemption or reduced
rate is allowable. The Agent shall be entitled to withhold United States federal
income taxes at the full withholding rate unless the Bank, assignee or
participant establishes an exemption or that it is subject to a reduced rate as
established pursuant to the above provisions.
11.19 Joinder of Guarantors.
Any Subsidiary of the Borrower which is required to join this
Agreement as a Guarantor pursuant to Section 8.2.9 [Subsidiaries, Partnerships
and Joint Ventures] shall execute and deliver to the Agent (i) a Guarantor
Joinder in substantially the form attached hereto as Exhibit 1.1(G)(1) pursuant
to which it shall join as a Guarantor each of the documents to which the
Guarantors are parties; (ii) documents in the forms described in Section 7.1
[First Loans] modified as appropriate to relate to such Subsidiary; and (iii)
documents necessary to grant and perfect Prior Security Interests to the Agent
for the benefit of the Banks in all Collateral held by such Subsidiary. The Loan
Parties shall deliver such Guarantor Joinder and related documents to the Agent
within five (5) Business Days after the date of the filing of such Subsidiary's
articles of incorporation if the Subsidiary is a corporation, the date of the
filing of its certificate of limited partnership if it is a limited partnership
or the date of its organization if it is an entity other than a limited
partnership or corporation.
-104-
<PAGE>
11.20 Contribution.
(a) On any date a payment in respect of the Obligations is
made, the right of contribution, if any, of the Borrower and each Guarantor
(each an "Obligor") against each Contributor shall be determined as provided in
the immediately succeeding sentence, with the right of contribution of each
Obligor to be revised and restated as of each such date. At any time that a
payment (a "Relevant Payment") is made by an Obligor in respect of the
Obligations and results in the aggregate payments made by such Obligor in
respect of the Obligations to and including the date of such Relevant Payment to
exceed such Obligor's Contribution Percentage of the aggregate payments made by
all Obligors in respect of the Obligations to and including such date (such
excess, the "Aggregate Excess Amount"), each such Obligor shall have a right of
contribution against each Contributor who has made payments in respect of the
Obligations to and including such date in an aggregate amount less than such
Contributor's Contribution Percentage of the aggregate payments made to and
including such date by all Obligors in respect of the Obligations (the aggregate
amount of such deficit, the "Aggregate Deficit Amount") in an amount equal to
(x) a fraction the numerator of which is the Aggregate Excess Amount of such
Obligor and the denominator of which is the sum of the Aggregate Excess Amounts
of all Obligors multiplied by (y) the Aggregate Deficit Amount of such
Contributor. An Obligor's right of contribution, if any, pursuant to this
paragraph shall arise at the time of each computation, subject to adjustment at
the time of subsequent computations, provided that such Obligor may not take any
action to enforce such right until the Obligations have been paid in full, it
being expressly recognized and agreed by all Obligors that any Obligor's right
of contribution arising pursuant hereto against any Contributor shall be
expressly junior and subordinate to such Contributor's obligations and
liabilities in respect of the Obligations. As used in this Section 11.20(i)
"Contributor" shall mean each Obligor required to make any payment to any other
Obligor pursuant to this Section 11.20, (ii) the "Contribution Percentage" of
each Obligor shall mean the percentage obtained by dividing (x) the Benefit
Amount of such Obligor by (y) the aggregate Benefit Amount of all Obligors and
(iii) the "Benefit Amount" of each Obligor shall mean the net value of the
benefits to such Obligor from the credit extensions made under the Loan
Documents.
(b) Each of the Obligors recognizes and agrees that, except
for any right of contribution arising pursuant to Section 11.20(a), each Obligor
which makes any payment in respect of the Obligations shall have no right of
contribution, reimbursement or subrogation against any other Obligor in respect
of such payment, any such right of contribution, reimbursement or subrogation
arising under law or otherwise being expressly waived by all Obligors.
(c) Each of the Obligors recognizes and acknowledges that the
rights to contribution arising hereunder shall constitute an asset in favor of
the party entitled to such contribution. In this connection each Obligor has the
right to waive its contribution right against any Contributor to the extent that
after giving effect to such waiver such Obligor would remain solvent in the
determination of the Agent.
[Signature Page Follows]
-105-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.
WITNESS: STANDARD AUTOMOTIVE
CORPORATION
____________________________________ By:___________________________________
Title:________________________________
GUARANTORS
WITNESS: BARCLAY INVESTMENTS, INC.
____________________________________ By:___________________________________
Title:________________________________
WITNESS: AJAX MANUFACTURING COMPANY, INC.
____________________________________ By:___________________________________
Title:________________________________
WITNESS: CPS ENTERPRISES, INC.
____________________________________ By:___________________________________
Title:________________________________
<PAGE>
WITNESS: HAILE INDUSTRIES, INC.
____________________________________ By:___________________________________
Title:________________________________
WITNESS: WYNER INDUSTRIES, INC.
____________________________________ By:___________________________________
Title:________________________________
WITNESS: CRITICAL COMPONENTS CORP.
____________________________________ By:___________________________________
Title:________________________________
WITNESS: R&S TRUCK BODY COMPANY, INC.
____________________________________ By:___________________________________
Title:________________________________
WITNESS: CPS TRAILER CO.
____________________________________ By:___________________________________
Title:________________________________
<PAGE>
WITNESS: RANOR, INC.
____________________________________ By:___________________________________
Title:________________________________
WITNESS: NORAY RESOURCES, INC.
____________________________________ By:___________________________________
Title:________________________________
WITNESS: CLAYFORT INDUSTRIES, INC.
____________________________________ By:___________________________________
Title:________________________________
WITNESS: KYLAN INDUSTRIES, INC.
____________________________________ By:___________________________________
Title:________________________________
WITNESS: CABORE RESOURCES, INC.
____________________________________ By:___________________________________
Title:________________________________
<PAGE>
WITNESS: DENORE RESOURCES S.R.L. de C.V.
____________________________________ By:___________________________________
Title:________________________________
WITNESS: MECOX S.A. de C.V.
____________________________________ By:___________________________________
Title:________________________________
BANKS
PNC BANK, NATIONAL ASSOCIATION,
individually and as Agent
By:___________________________________
Title:________________________________
ING (U.S.) CAPITAL LLC
By:___________________________________
Title:________________________________
FIRSTAR BANK, N.A.
By:___________________________________
Title:________________________________
<PAGE>
SUMMIT BANK
By:___________________________________
Title:________________________________
<PAGE>
SCHEDULE 1.1(B)
COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES
Page 1 of 8
Part 1 - Commitments of Banks and Addresses for Notices to Banks
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Ratable
Amount of Share of
Commitment Revolving
for Amount of Amount of Amount of Credit Ratable
Revolving Commitment Commitment Commitment Loans and Share of
Credit for Term for Term for Term Total Term Loan A Term Loan
Bank Loans Loans A Loan A-1 Loans B Commitment Loans B Loans
---- ----- ------- -------- ------- ---------- ----- -------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Name: PNC Bank, N.A.
Address: One PNC Plaza - 22nd Floor
249 Fifth Avenue
Pittsburgh, PA 15222-2707
Attention: Ms. Arlene Ohler
Telephone (412) 762-3627 $12,000,000 $5,439,000 $8,436,000 $0 $25,875,000 60% 0%
Telecopy: (412) 762-8672
With a copy to:
Name: PNC Bank, N.A.
Address: Two Tower Center Boulevard
East Brunswick, NJ 08818
Attention: Ms. Virginia Alling
Telephone (732) 220-3875
Telecopy: (732) 220-3503
- ------------------------------------------------------------------------------------------------------------------------------------
Name: ING (U.S.) Capital LLC $0 $0 $0 $25,000,000 $25,000,000 0% 100%
Address: 55 East 52nd Street
New York, New York 10055
Attention: Mr. Robert Fellows
Telephone (212) 409-1727
Telecopy: (212) 309-8900
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SCHEDULE 1.1(B)
<PAGE>
Page 2 of 8
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Name: Firstar Bank $3,500,000 $1,586,375 $2,460,500 $0 $7,546,875 17.5% 0%
Address: 425 Walnut Street
Cincinnati, OH 45201-1038
Attention: Mr. James Griffith
Telephone (513) 287-8302
Telecopy: (513) 632-2068
- ------------------------------------------------------------------------------------------------------------------------------------
Name: Summit Bank $4,500,000 $2,039,625 $3,163,500 $0 $9,703,125 22.5% 0%
Address: Raritan Center Plaza II
91 Fieldcrest Avenue
2nd Floor
Edison, NJ 08837
Attention: Ms. Cynthia Colucci
Telephone (732) 417-3789
Telecopy: (732) 417-0254
- ------------------------------------------------------------------------------------------------------------------------------------
Totals $20,000,000 $9,065,000 $14,060,000 $25,000,000 $68,125,000 100% 100%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SCHEDULE 1.1(B)
<PAGE>
Page 3 of 8
Part 2 - Addresses for Notices to Borrower and Guarantors:
AGENT
Name: PNC Bank, National Association
Address: One PNC Plaza - 22nd Floor
249 Fifth Avenue
Pittsburgh, PA 15222-2707
Attention: Ms. Arlene Ohler
Telephone (412) 762-3627
Telecopy: (412) 762-8672
With a copy to:
Name: PNC Bank, National Association
Address: Two Tower Center Boulevard
East Brunswick, NJ 08818
Attention: Ms. Virginia Alling
Telephone: (732) 220-3875
Telecopy: (732) 220-3503
and
Name: Buchanan Ingersoll Professional Corporation
Address: 500 College Road East
Princeton, New Jersey 08540
Attention: Douglas A. Beimfohr, Esq.
Telephone: (609) 987-6803
Telecopy: (609) 520-0360
Name: ING (U.S.) Capital LLC
Address: 55 East 52nd Street
New York, New York 10055
Attention: Mr. Robert Fellows
Telephone (212) 409-1727
Telecopy: (212) 309-8900
SCHEDULE 1.1(B)
<PAGE>
Page 4 of 8
Name: Firstar Bank
Address: 425 Walnut Street
Cincinnati, Ohio 45201-1038
Attention: James R. Griffiths
Telephone: (513) 287-8302
Telecopy: (513) 632-2068
Name: Summit Bank
Address: Raritan Center Plaza II
91 Fieldcrest Avenue, 2nd Floor
Attention: Cynthia Colucci
Telephone: (732) 417-3789
Telecopy: (732) 417-0254
With a copy to: Summit Bank
Raritan Center Plaza II
91 Fieldcrest Avenue, 2nd Floor
Ellen Gendron
Telephone: (732) 417-4289
Telecopy: (732) 417-0254
BORROWER:
Name: STANDARD AUTOMOTIVE CORPORATION
Address: 401 Route 206 North
Somerville, New Jersey 08876
Attention: Roy Ceccato
Telephone: (908) 874-7778
Telecopy: (908) 874-8249
With a copy to: Vince McGill, Esq.
Phillips, Nizer, Benjamin, Krim & Ballon, LLP
666 Fifth Avenue
New York, New York 10103
Telephone: (212) 841-0566
Telecopy: (212) 262-5152
GUARANTORS:
Name: BARCLAY INVESTMENTS, INC.
Address: 401 Route 206 North
Somerville, New Jersey 08876
SCHEDULE 1.1(B)
<PAGE>
Attention: Roy Ceccato
Telephone: (908) 874-7778
Telecopy: (908) 874-8249
SCHEDULE 1.1(B)
<PAGE>
Page 5 of 8
Name: AJAX MANUFACTURING COMPANY, INC.
Address: 401 Route 206 North
Somerville, New Jersey 08876
Attention: Roy Ceccato
Telephone: (908) 874-7778
Telecopy: (908) 874-8249
Name: CPS ENTERPRISES, INC.
Address: 401 Route 206 North
Somerville, New Jersey 08876
Attention: Roy Ceccato
Telephone: (908) 874-7778
Telecopy: (908) 874-8249
Name: HAILE INDUSTRIES, INC.
Address: 401 Route 206 North
Somerville, New Jersey 08876
Attention: Roy Ceccato
Telephone: (908) 874-7778
Telecopy: (908) 874-8249
Name: WYNER INDUSTRIES, INC.
Address: 401 Route 206 North
Somerville, New Jersey 08876
Attention: Roy Ceccato
Telephone: (908) 874-7778
Telecopy: (908) 874-8249
Name: CRITICAL COMPONENTS CORP.
Address: 401 Route 206 North
Somerville, New Jersey 08876
Attention: Roy Ceccato
Telephone: (908) 874-7778
Telecopy: (908) 874-8249
SCHEDULE 1.1(B)
<PAGE>
Page 6 of 8
Name: R&S TRUCK BODY COMPANY, INC.
Address: Route 1428, P.O. Box 420
Allen, Kentucky 41601
Attention: Paul Nunn
Telephone: (606) 874-2151
Telecopy: (606) 874-9136
Name: CPS TRAILER CO.
Address: 401 Route 206 North
Somerville, New Jersey 08876
Attention: Roy Ceccato
Telephone: (908) 874-7778
Telecopy: (908) 874-8249
Name: RANOR, INC.
Address: 401 Route 206 North
Somerville, New Jersey 08876
Attention: Roy Ceccato
Telephone: (908) 874-7778
Telecopy: (908) 874-8249
Name: NORAY RESOURCES, INC.
Address: 401 Route 206 North
Somerville, New Jersey 08876
Attention: Roy Ceccato
Telephone: (908) 874-7778
Telecopy: (908) 874-8249
Name: CLAYFORT INDUSTRIES, INC.
Address: 401 Route 206 North
Somerville, New Jersey 08876
Attention: Roy Ceccato
Telephone: (908) 874-7778
Telecopy: (908) 874-8249
SCHEDULE 1.1(B)
<PAGE>
Page 7 of 8
Name: KYLAN INDUSTRIES, INC.
Address: 401 Route 206 North
Somerville, New Jersey 08876
Attention: Roy Ceccato
Telephone: (908) 874-7778
Telecopy: (908) 874-8249
Name: CABORE RESOURCES, INC.
Address: 401 Route 206 North
Somerville, New Jersey 08876
Attention: Roy Ceccato
Telephone: (908) 874-7778
Telecopy: (908) 874-8249
Name: DENORE RESOURCES S.R.L. de C.V.
Address: 401 Route 206 North
Somerville, New Jersey 08876
Attention: Roy Ceccato
Telephone: (908) 874-7778
Telecopy: (908) 874-8249
Name: MECOX S.A. de C.V.
Address: 401 Route 206 North
Somerville, New Jersey 08876
Attention: Roy Ceccato
Telephone: (908) 874-7778
Telecopy: (908) 874-8249
With a copy in each case to: Vince McGill, Esq.
Phillips, Nizer, Benjamin, Krim & Ballon, LLP
666 Fifth Avenue
New York, New York 10103
Telephone: (212) 841-0566
Telecopy: (212) 262-5152
SCHEDULE 1.1(B)
<PAGE>
Schedule 2.2(A)
SCHEDULED TERM LOAN A REPAYMENTS
------------------------------------------------
Installment Date Installment Amount
---------------- ------------------
------------------------------------------------
6/30/99 $245,000.00
9/30/99 $367,500.00
12/31/99 $367,500.00
3/31/00 $367,500.00
6/30/00 $367,500.00
9/30/00 $367,500.00
12/31/00 $367,500.00
3/31/01 $367,500.00
6/30/01 $367,500.00
9/30/01 $490,000.00
12/31/01 $490,000.00
3/31/02 $490,000.00
6/30/02 $490,000.00
9/30/02 $490,000.00
12/31/02 $490,000.00
3/31/03 $490,000.00
6/30/03 $490,000.00
9/30/03 $490,000.00
12/31/03 $490,000.00
3/31/04 $490,000.00
6/30/04 $490,000.00
------------------------------------------------
SCHEDULE 2.2(A)
<PAGE>
Schedule 2.2(A-1)
SCHEDULE TERM LOAN A-1 REPAYMENTS
------------------------------------------------
Installment Date Installment Amount
---------------- ------------------
------------------------------------------------
6/30/99 $380,000.00
9/30/99 $570,000.00
12/31/99 $570,000.00
3/31/00 $570,000.00
6/30/00 $570,000.00
9/30/00 $570,000.00
12/31/00 $570,000.00
3/31/01 $570,000.00
6/30/01 $570,000.00
9/30/01 $760,000.00
12/31/01 $760,000.00
3/31/02 $760,000.00
6/30/02 $760,000.00
9/30/02 $760,000.00
12/31/02 $760,000.00
3/31/03 $760,000.00
6/30/03 $760,000.00
9/30/03 $760,000.00
12/31/03 $760,000.00
3/31/04 $760,000.00
6/30/04 $760,000.00
------------------------------------------------
SCHEDULE 2.2(A-1)
<PAGE>
Schedule 2.2(B)
SCHEDULED TERM LOAN B REPAYMENTS
------------------------------------------------
Installment Date Installment Amount
---------------- ------------------
------------------------------------------------
9/30/99 $62,500
12/31/99 $62,500
3/31/00 $62,500
6/30/00 $62,500
9/30/00 $62,500
12/31/00 $62,500
3/31/01 $62,500
6/30/01 $62,500
9/30/01 $62,500
12/31/01 $62,500
3/31/02 $62,500
6/30/02 $62,500
9/30/02 $62,500
12/31/02 $62,500
3/31/03 $62,500
6/30/03 $62,500
9/30/03 $62,500
12/31/03 $62,500
3/31/04 $62,500
6/30/04 $62,500
9/30/04 $62,500
12/31/04 $62,500
3/31/05 $62,500
6/14/05 $23,562,500
------------------------------------------------
SCHEDULE 2.2(B)
<PAGE>
SCHEDULE 2.4
--------------------------------------------------------------
Installment Date Installment Amount
---------------- ------------------
--------------------------------------------------------------
ING (U.S.) Capital LLC $375,000.00
-----------------------------------
Summit Bank $49,042.97
-----------------------------------
Firstar Bank, N.A. $38,144.53
-----------------------------------
PNC Bank, N.A. $81,738.28
--------------------------------------------------------------
SCHEDULE 2.4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and Statement of Income found on pages 32 & 33 of the
company's Form 10-K for the year ending March 31, 1999 and is qualified in its
entirety by reference to such consolidated financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,686
<SECURITIES> 0
<RECEIVABLES> 7,695
<ALLOWANCES> 112
<INVENTORY> 13,466
<CURRENT-ASSETS> 26,585
<PP&E> 25,446
<DEPRECIATION> 5,471
<TOTAL-ASSETS> 77,452
<CURRENT-LIABILITIES> 17,155
<BONDS> 29,381
0
1
<COMMON> 4
<OTHER-SE> 30,911
<TOTAL-LIABILITY-AND-EQUITY> 77,452
<SALES> 75,452
<TOTAL-REVENUES> 75,452
<CGS> 59,954
<TOTAL-COSTS> 67,611
<OTHER-EXPENSES> 280
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,813
<INCOME-PRETAX> 5,748
<INCOME-TAX> 2,266
<INCOME-CONTINUING> 3,482
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,482
<EPS-BASIC> 0.69
<EPS-DILUTED> 0.69
</TABLE>
