<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission File Number 1-3410
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
(Exact name of Registrant as specified in its charter)
A Delaware I.R.S. Employer
Corporation No. 13-3317668
399 Executive Boulevard
Elmsford, New York, 10523
Telephone - Area Code 914-592-2355
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 for the
past 90 days. Yes No X
At August 11, 1998 - 13,636,000 shares of common stock were outstanding.
<PAGE> 2
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
FORM 10-Q
I N D E X
PAGE
NO.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Balance Sheets
June 30, 1998 and December 31, 1997 . . . . . . . . . 3
Unaudited Condensed Statements of Income
For the Three and Six Months Ended June 30, 1998
and 1997. . . . . . . . . . . . . . . . . . . . . . 4
Unaudited Condensed Statement of Stockholder's
Equity For the Six Months Ended June 30, 1998 . . . . 5
Unaudited Condensed Statements of Cash Flows
For the Six Months Ended June 30, 1998 and 1997 . . . 6
Notes to Unaudited Condensed Financial Statements. . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . 12
Item 3. Quantitative and Qualitative Disclosures
About Market Risk . . . . . . . . . . . . . . . . . . 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 18
<PAGE> 3
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
CONDENSED BALANCE SHEETS -- UNAUDITED
(In thousands, except per share data)
<TABLE>
<CAPTION>
JUNE DECEMBER
30, 1998 31, 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents .................... $ 399 $ 253
Accounts receivable, net of allowance for
doubtful accounts of $236 and $375 ......... 14,134 14,479
Inventories, net of allowances of
$290 and $215 .............................. 8,036 5,989
Deferred income taxes ........................ 471 471
Prepaid expenses and other ................... 574 95
-------- --------
Total current assets ................. 23,614 21,287
Machinery, equipment and leasehold
improvements, net ............................ 5,525 5,695
Other assets ................................... 51 43
Excess of cost over net assets acquired,
net of accumulated amortization of
$1,745 and $1,568 ............................ 8,616 8,793
-------- --------
$ 37,806 $ 35,818
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Revolving credit ............................. $ 4,742 $ 674
Accounts payable and accrued expenses ........ 3,909 3,312
-------- --------
Total current liabilities ............ 8,651 3,986
Other long-term liabilities .................... 480 460
Deferred income taxes .......................... 1,556 1,590
Commitments and Contingencies -- Note D
Stockholder's equity
Common Stock, par value $.01 per share,
authorized, 30,000,000 shares; issued and
outstanding 13,636,000 shares .............. 136 136
Additional paid-in-capital ................... 11,627 11,627
Retained earnings ............................ 45,087 41,015
-------- --------
56,850 52,778
Due from Parent and affiliates ............... (29,731) (22,996)
-------- --------
Total stockholder's equity ........... 27,119 29,782
-------- --------
$ 37,806 $ 35,818
======== ========
</TABLE>
See Notes to Unaudited Condensed Financial Statements.
<PAGE> 4
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
CONDENSED STATEMENTS OF INCOME -- UNAUDITED
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales ................................ $ 9,581 $ 6,296 $ 16,616 $ 11,537
Costs and expenses:
Cost of goods sold ................. 4,007 2,591 6,445 5,220
Selling and administrative ......... 1,502 1,103 2,758 2,413
Depreciation and amortization ...... 292 288 584 581
-------- -------- -------- --------
5,801 3,982 9,787 8,214
-------- -------- -------- --------
3,780 2,314 6,829 3,323
Other, net:
Intercompany interest income ....... 76 76 152 152
Other income, net .................. 33 30 72 63
Interest expense ................... (135) -- (245) --
-------- -------- -------- --------
(26) 106 (21) 215
-------- -------- -------- --------
Income before income taxes ........... 3,754 2,420 6,808 3,538
Income taxes ......................... 1,475 998 2,736 1,459
-------- -------- -------- --------
Net income ........................... $ 2,279 $ 1,422 $ 4,072 $ 2,079
======== ======== ======== ========
Net income per share basic and diluted $ 0.17 $ 0.10 $ 0.30 $ 0.15
======== ======== ======== ========
</TABLE>
See Notes to Unaudited Condensed Financial Statements.
<PAGE> 5
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
STATEMENT OF STOCKHOLDER'S EQUITY -- UNAUDITED
SIX MONTHS ENDED JUNE 30, 1998
(In thousands)
<TABLE>
<CAPTION>
Common Stock Additional Due From
------------------------ Paid-In Retained Parent And
Shares Amount Capital Earnings Affiliates Total
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1998 . 13,636 $ 136 $ 11,627 $ 41,015 $(22,996) $ 29,782
Change during period .... (6,735) (6,735)
Net income .............. 4,072 4,072
-------- -------- -------- -------- -------- --------
Balance June 30, 1998 ... 13,636 $ 136 $ 11,627 $ 45,087 $(29,731) $ 27,119
======== ======== ======== ======== ======== ========
</TABLE>
See Notes to Unaudited Condensed Financial Statements.
<PAGE> 6
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
----------------------
June 30
----------------------
1998 1997
------- -------
<S> <C> <C>
Operating Activities:
Net cash from operations after adjustments to
reconcile net income to net cash provided by
operating activities .............................. $ 4,656 $ 2,660
Changes in operating assets and liabilities:
Accounts receivable ............................... 345 548
Inventories ....................................... (2,047) (609)
Prepaid expenses and other ........................ (479) 180
Accounts payable, accrued and other ............... 575 (659)
------- -------
Net cash provided by operating activities ............. 3,050 2,120
------- -------
Investing Activities:
Capital expenditures ................................ (237) (302)
------- -------
Net cash used in investing activities ................. (237) (302)
------- -------
Financing Activities:
Advances to Parent and affiliates, net .............. (6,735) (1,583)
Revolving credit borrowings, net .................... 4,068 --
------- -------
Net cash used in financing activities ................. (2,667) (1,583)
------- -------
Increase in cash and cash equivalents ................. 146 235
Cash and cash equivalents - beginning of period ....... 253 136
------- -------
Cash and cash equivalents - end of period ............. $ 399 $ 371
======= =======
Supplemental disclosure of cash payments for:
Taxes ............................................... $ 2,600 $ 1,350
Interest ............................................ $ 235 --
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE> 7
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE A -- BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
As of June 30, 1998, American Bank Note Holographics, Inc. (the "Company"),
incorporated in the State of Delaware, was a wholly-owned subsidiary of American
Banknote Corporation (the "Parent"). In July 1998, the Parent sold 100% of its
investment in the Company in a public offering of the Company's outstanding
common stock (See Note E).
As a wholly-owned subsidiary, the Company was provided certain corporate and
administrative services, including treasury functions, tax planning and
compliance, financial reporting, risk management, human resources and legal
services. Additionally, because the Parent managed cash and financing
requirements centrally, interest expense and financing requirements were based
on the existing capital structure. The financial position and operations of the
Company may differ from the results that may have been achieved had the Company
operated as an independent entity.
The accompanying unaudited condensed financial statements do not contain all
disclosures required by generally accepted accounting principles. Reference
should be made to the Company's audited financial statements included in the
Company's filings made with the Securities and Exchange Commission. The
accompanying unaudited condensed financial statements reflect all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of the results of the interim periods
presented and are not necessarily indicative of the results which may be
expected for a full year.
Sales Recognition
Sales are generally recognized when goods are shipped. However, pursuant to
terms with certain customers, completed items are sometimes stored at the
Company's secure premises and, in those instances, sales are recognized when the
goods are transferred to the on-site secured facility. At June 30, 1998 and
December 31, 1997, accounts receivable from these customers totaled $2.5 million
and $7.8 million, respectively.
<PAGE> 8
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE A -- BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
continued
Net Income Per Share
Net income per share is computed based on the number of outstanding shares
of common stock, after giving retroactive effect to the stock split (Note E).
The weighted average shares outstanding was 13,636,000 for the three and six
months ended June 30, 1998 and 1997.
Business Information
Sales to MasterCard were approximately 16% and 30% of total sales for the
six months ended June 30, 1998 and 1997, respectively. Sales to manufacturers of
VISA credit cards were approximately 41% and 21% of total sales for the six
months ended June 30, 1998 and 1997, respectively. At June 30, 1998 and December
31, 1997, accounts receivable from these customers approximated $8.5 million and
$11.6 million, respectively.
Impact of Accounting Pronouncements
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income."
Comprehensive income for the three months and six months ended June 30, 1998 was
the same as reported net income.
The AICPA Accounting Standards Executive Committee issued Statement of
Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities," in April
1998 which is effective for fiscal years beginning after December 15, 1998. SOP
98-5 provides guidance on the financial reporting of start-up costs and
organization costs. It requires costs of start-up activities and organization
costs to be expensed as incurred. The Company is evaluating the effect of this
recent pronouncement.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," issued in June 1998, is effective for periods beginning after June
15, 1999 The Company is currently evaluating the effect of this standard.
<PAGE> 9
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS - continued
NOTE B -- INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
June December
30, 1998 31, 1997
-------- --------
<S> <C> <C>
Work in process............. $4,917 $2,369
Origination costs*.......... 2,129 2,581
Raw materials............... 990 1,039
------ ------
$8,036 $5,989
====== ======
</TABLE>
- ---------------
* Includes approximately $0.5 million at both dates of costs relating to work
for customers in anticipation of orders in the ordinary course of business.
NOTE C -- RELATED PARTY TRANSACTIONS
The financial statements reflect both allocated and, where readily
determinable, actual expenses for services provided by the Company's Parent and
affiliates. Where allocations have been utilized, the Company and its Parent and
affiliates recorded transactions based upon systematic and reasonable methods,
including but not limited to, sales, asset values, and headcount all as a
percent of total.
The amounts by major category of historical transactions with the Parent
and affiliates follow for the six months ended June 30, 1998 (in thousands):
<TABLE>
<S> <C>
Due from (to) Parent and affiliates:
Balance at beginning of period...................... $22,996
Income tax liability payable to Parent........... (2,422)
Taxes paid to Parent............................. 2,422
Cash advances to Parent.......................... 7,338
Allocation of employee benefits(1)............... (402)
Allocation of security services.................. (100)
Sales and administration expenses(2)............. (244)
Intercompany interest (3)........................ 156
Executive benefits(4)............................ (13)
-------
Balance at end of period............................ $29,731
=======
</TABLE>
- -----------
(1) Primarily medical, life and disability insurance premiums.
(2) Includes legal fees and allocated portion of audit fees.
(3) Included in the above balances is a $5.3 million note receivable from the
Parent that bears interest at 5 3/4% per annum.
(4) Includes value of restricted stock of the Parent.
<PAGE> 10
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS - continued
NOTE C -- RELATED PARTY TRANSACTIONS -Continued
For financial reporting purposes, the amounts due from Parent and
affiliates has been classified within stockholder's equity.
In addition to the above, the Company sold $0.8 million and $0.2 million of
holograms in the six months ended June 30, 1998 and 1997, respectively, to its
affiliates in the normal course of business. There were no purchases by the
Company from affiliates in the six months of 1998 or 1997. Trade accounts
receivable from affiliates were $1.0 million and $0.7 million at June 30, 1998
and December 31, 1997, respectively. There were no trade payables to affiliates
at June 30, 1998.
NOTE D -- COMMITMENTS AND CONTINGENCIES
On February 14, 1997, James Rigby, Trustee in Bankruptcy for Holosonics,
Inc., Holotron Corp., Meadows Games, Inc. and Fire Diamond, Inc. commenced an
adversary proceeding in the United States Bankruptcy Court for the Western
District of Washington at Seattle against International Banknote Company, Inc.,
American Banknote Company and the Company. The complaint alleges that the
defendants are indebted to the bankruptcy estate for royalty payments under a
1981 license and that the Company is liable for unpaid royalties for 1990 in the
amount of $226,322, for 1991 in the amount of $853,582 and through July 1992 in
the amount of $568,762, plus attorney's fees and interest on unpaid amounts.
The plaintiff claims that pursuant to the 1981 arrangements, the Company is
required to pay royalties through July 1992 of 5% on sales of holographic
products using the patents covered by the license agreement for the origination
of holographic images. The Company denies all liability in the case on several
grounds, including that two of the three patents at issue expired on or before
September 30, 1991 and any obligation to pay royalties terminated with the
expiration of those patents and that the one remaining patent which expired in
July 1992 had been held invalid in part and not infringed as to its other parts
in prior litigation in the United States District Court for the Northern
District of California, which binds the plaintiff and bars the Trustee from
asserting claims against the Company. In addition, the Company claims that it
utilizes processes differently from those of the licensed patents and that at
the time the license agreement was executed by the Trustee, the debtors did not
own the patents and the license is therefore invalid and cannot be enforced.
The Company currently and from time to time is involved in litigation (as
both plaintiff and defendant) incidental to the conduct of its business, but the
Company is not a party to any lawsuit or proceeding which, in the opinion of the
Company, is likely to have a material impact on the Company's financial position
or results of operations.
<PAGE> 11
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS - continued
NOTE E -- SUBSEQUENT EVENTS
On July 20, 1998, pursuant to an effective Registration Statement on Form
S-1 (File No. 333-51845), the Parent completed the sale of 13,636,000 shares of
the Company's common Stock (the "Offering"). As a result of the Offering, the
Parent no longer owns any Common Stock of the Company. The Company did not
receive any proceeds of the Offering.
In connection with the Offering, the Company granted the Underwriters of
the Offering a 30-day option to purchase up to an additional 2,045,000
additional shares of Common Stock solely to cover over-allotments, if any (the
"Over-allotment Option"). On August 13, 1998, the Company and the Underwriters
agreed to extend by 15 days the period to exercise the Over-allotment Option
from 30 to 45 days.
On June 11, 1998, the Company declared a 1,363.6 to one stock split,
effective July 2, 1998, in the form of a stock dividend, of the Company's Common
Stock and increased its authorized Common Stock to 30,000,000 shares and its
authorized Preferred Stock to 5,000,000 shares. The accompanying unaudited
condensed financial statements give retroactive effect to the consummation of
the stock split. Additionally, in connection with the Offering the amounts due
from Parent and affiliates were canceled. For financial reporting purposes the
amounts due from Parent and affiliates have been classified within stockholder's
equity; accordingly, the cancellation of such amounts will result in a
reclassification within stockholder's equity.
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain operating
information expressed as a percentage of sales.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales................................ 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of goods sold................. 41.8 41.2 38.8 45.2
Selling and administrative......... 15.7 17.5 16.6 20.9
Depreciation and amortization...... 3.0 4.6 3.5 5.0
----- ----- ----- -----
Operating income..................... 39.5 36.8 41.1 28.8
Other income......................... 0.3 0.4 0.4 0.6
Interest, net........................ (0.6) 1.2 (1.5) 1.3
----- ----- ----- -----
Income before income taxes........... 39.2 38.4 41.0 30.7
Net income........................... 23.8% 22.6% 24.5% 18.0%
</TABLE>
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1998 TO THREE MONTHS ENDED JUNE 30,
1997
Sales. Sales increased by $3.3 million, or 52.2%, from $6.3 million for the
three months ended June 30, 1997 to $9.6 million for the three months ended June
30, 1998. The increase in sales was due primarily to increased sales of product
authentication and transaction card holograms. The increase in transaction card
hologram volumes was due to the growth in loyalty programs, competition among
financial institutions resulting in increased multi-card issuance and the
increased use of automated teller machine and debit cards. The increase in
product authentication sales volume was due to higher demand for this product
and new product authentication customers.
Cost of Goods Sold. Cost of goods sold increased by $1.4 million, from $2.6
million for the three months ended June 30, 1997 to $4.0 million for the three
months ended June 30, 1998. As a percentage of sales, cost of goods sold
increased from 41.2% in the three months ended June 30, 1997 to 41.8% for the
same period in 1998. The increase in cost of goods sold is principally due to
increased sales.
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS - Continued
Selling and Administrative. Selling and administrative expenses increased
by $0.4 million, from $1.1 million for the three months ended June 30, 1997 to
$1.5 million for the three months ended June 30, 1998. The increase in expenses
was principally due to increased sales. As a percentage of sales, selling and
administrative expenses decreased from 17.5% for the three months ended June 30,
1997 to 15.7% for the three months ended June 30, 1998.
Depreciation and Amortization. Depreciation and amortization
remained relatively unchanged.
Other Income. Other income remained relatively unchanged.
Interest, Net. Interest, net decreased from $76,000 of income in 1997 to
$59,000 of expense in 1998 as a result of increased interest expense on the
Revolving Credit Facility. Interest income in both periods represents interest
on a note due from the Parent.
Income Taxes. Income taxes are based on an estimated annual effective tax
rate. The rate is computed based on the taxes that would have been paid had the
Company operated on a stand alone basis. Income taxes increased by $0.5 million,
from $1.0 million for the three months ended June 30, 1997 to $1.5 million for
the three months ended June 30, 1998, as a result of higher taxable income due
to the factors described above.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 TO SIX MONTHS ENDED JUNE
30, 1997
Sales. Sales increased by $5.1 million, or 44.0%, from $11.5 million for
the six months ended June 30, 1997 to $16.6 million for the six months ended
June 30, 1998. The increase in sales was due primarily to increased sales of
transaction cards and product authentication holograms. The increase in
transaction card hologram volumes was due to the growth in loyalty programs,
competition among financial institutions resulting in increased multi-card
issuance and the increased use of automated teller machine and debit cards. The
increase in product authentication hologram sales volume was due to higher
demand for this product and new product authentication customers.
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - Continued
Cost of Goods Sold. Cost of goods sold decreased by $1.2 million, from $5.2
million for the six months ended June 30, 1997 to $6.4 million for the six
months ended June 30, 1998. As a percentage of sales, cost of goods sold
decreased from 45.2% in the six months ended June 30, 1997 to 38.8% for the same
period in 1998. This decrease reflects the Company's focus on improving
production efficiencies and the higher margins earned on security holograms.
Selling and Administrative. Selling and administrative expenses increased
by $0.3 million for the six months ended June 30, 1998. As a percentage of
sales, selling and administrative expenses decreased from 20.9% for the six
months ended June 30, 1997 to 16.6% for the six months ended June 30, 1998. This
decrease in selling and administrative expenses as a percentage of sales was due
primarily to the increased sales in 1998.
Depreciation and Amortization. Depreciation and amortization
remained relatively unchanged.
Other Income, Net. Other income remained relatively unchanged.
Interest, Net. Interest, net decreased from $152,000 of income in 1997 to
$93,000 of expense in 1998 as a result of interest expense on the Revolving
Credit Facility. Interest income in both periods represents interest on a note
due from the Parent.
Income Taxes. Income taxes are based on an estimated annual effective tax
rate. The rate is computed based on the taxes that would have been paid had the
Company operated on a stand alone basis. Income taxes increased by $1.2 million,
from $1.5 million for the six months ended June 30, 1997 to $2.7 million for the
six months ended June 30, 1998, as a result of higher taxable income due to the
factors described above.
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had $399,000 in cash and cash equivalents
and working capital of $15.0 million. The Company also had $5.9 million of
availability, on a stand alone basis, under a Revolving Credit Facility that the
Company entered into together with the Parent, in January 1996 (the "Revolving
Credit Facility").
After the consummation of the Offering, the Company entered into a $30.0
million credit facility (the "New Credit Facility") with The Chase Manhattan
Bank, as Agent which replaced the Revolving Credit Facility. The New Credit
Facility consists of a $10.0 million senior revolving credit facility for
working capital and general corporate purposes and a $20.0 million facility for
the acquisition of companies in related businesses. The Company refinanced its
outstanding borrowings under the Revolving Credit Facility (approximately $4.7
million at June 30, 1998) by borrowing an equal amount under the New Credit
Facility. The New Credit Facility is secured by a first priority security
interest in substantially all of the assets of the Company and a commitment to
pledge the capital stock of any future subsidiaries. On June 30, 1998, the
Company on a pro forma basis had the same availability under the New Credit
Facility as under the Revolving Credit Facility.
The Company's ability to borrow under the revolving credit portion of the
New Credit Facility is limited by its Borrowing Base (as defined therein). Such
Borrowing Base is a fixed percentage of eligible accounts receivable plus a
fixed percentage of eligible raw material inventory. Additionally, the Company
must make monthly interest payments in the case of any Alternate Base Loan (as
defined therein). With respect to any Eurodollar Loan (as defined therein), the
interest must be paid on the last day of the Interest Period (as defined
therein). If any Eurodollar Loan has an Interest Period exceeding three months,
interest will be paid every three months, under the New Credit Facility, at a
floating rate equal to either Chase's Alternate Base Rate (as defined therein)
or LIBOR plus, in each case, a margin as determined in accordance with the terms
of the New Credit Facility.
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES - Continued
Under the New Credit Facility, the Company paid an arrangement fee of 1.0%
of the New Credit Facility and an upfront fee of 0.5% of the New Credit
Facility. The Company is also required to pay a commitment fee of 0.5% per annum
on the average daily unused amount of the New Credit Facility. The latest
maturity date of all the loans under the New Credit Facility will be July 20,
2004. The New Credit Facility contains certain covenants which restrict the
Company's ability to, among other things, (i) incur additional indebtedness,
(ii) incur certain liens and encumbrances, (iii) make investments in other
persons, (iv) guaranty the indebtedness of other persons, (v) sell or dispose of
its assets, (vi) incur any rental or lease commitments, (vii) materially alter
the nature of its business, (viii) pay or declare dividends and (ix) make
capital expenditures.
Prior to the Offering, cash accounts for the Company were controlled on a
centralized basis by the Parent and, accordingly, cash receipts and
disbursements had been received or made through the Parent and were recorded as
due from Parent and affiliates. Subsequent to the Offering, the Company will
maintain its own centralized cash management system. In the ordinary course of
business, cash has been provided to the Parent by way of intercompany advances
to service its debt obligations and for general corporate purposes. This
practice continued until the consummation of the Offering and was discontinued
after such time. Upon consummation of the Offering, these intercompany advances
(approximately $29.7 million at June 30, 1998) were canceled and forgiven, and
the Company had a minimal amount of cash and cash equivalents on hand at that
time. See "Certain Relationships and Related Transactions".
Prior to the Offering, the Company's issued and outstanding Common Stock
was pledged as security for the Parent's 10 3/8% Senior Notes due 2002 ($126.5
million principal amount). Prior to the Offering, the Company and each of the
Parent's direct and indirect domestic operating subsidiaries had, jointly and
severally, fully and unconditionally guaranteed, on a senior subordinated basis,
the Parent's 11 1/4% Senior Subordinated Notes due 2007 ($95.0 million principal
amount). Immediately after consummation of the Offering, the Company was
released from its obligations under the Parent's debt instruments.
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES - Continued
For the six months ended June 30, 1998, the Company's operating activities
provided cash flow of $3.0 million compared to $2.1 million of cash flow
provided by operating activities in the same period in 1997, primarily as a
result of increased earnings ($2.0 million) partially offset by an increase in
inventories ($1.4 million) when compared to the same period in 1997.
Investing activities for the six months ended June 30, 1998 and 1997 used
cash flows of $234,000 and $302,000, respectively for capital expenditures.
Financing activities for the six months ended June 30, 1998 and 1997 used
cash flows of $2.7 million and $1.6 million, respectively. The activity in 1998
and 1997 was principally comprised of net advances to the Parent and affiliated
subsidiaries and, in 1998, included $4.1 million of net borrowings under the
Revolving Credit Facility.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q and in certain documents incorporated
by reference herein constitute "forward-looking" statements within the meaning
of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
"forward-looking" statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance, or achievements expressed or implied by such
"forward-looking" statements. Such factors are more fully described in the
Company's filings with the Securities and Exchange Commission which should be
considered in connection with a review of this report.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Not Applicable
<PAGE> 18
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Company's Prospectus, dated July 15, 1998, filed with
the Securities and Exchange Commission.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit Number
1 Amendment to Underwriting Agreement dated August 13, 1998**
10 Credit Agreement **
27 Article 5 Financial Data Schedule **
** Filed electronically herewith **
(b) Report on Form 8-K - None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN BANKNOTE CORPORATION
By: s/ Joshua C. Cantor
Joshua C. Cantor
President
By: s/ Richard P. Macchiarulo
Richard P. Macchiarulo
Vice President - Finance
Chief Financial Officer and
Chief Accounting Officer
Date: August 14, 1998
<PAGE> 19
Exhibit Index
List of Exhibits Pursuant to Item 601 of Regulation S-K:
Exhibit
1 Amendment to Underwriting Agreement dated August 13, 1998
10 Credit Agreement
27 Article 5 Financial Data Schedule
<PAGE> 1
Exhibit 1
FIRST AMENDMENT TO THE UNDERWRITING AGREEMENT
August 13, 1998
NATIONSBANC MONTGOMERY SECURITIES LLC
LAZARD FRERES & CO. LLC
RAYMOND JAMES & ASSOCIATES, INC.
SMITH BARNEY INC.
As Representatives of the several Underwriters
c/o NATIONSBANC MONTGOMERY SECURITIES LLC
600 Montgomery Street
San Francisco, California 94111
Ladies and Gentleman:
This First Amendment to the Underwriting Agreement (the "First
Amendment"), amending the Underwriting Agreement (the "Underwriting Agreement"),
dated as of July 14, 1998, among American Bank Note Holographics, Inc., a
Delaware corporation (the "Company"), American Banknote Corporation, a Delaware
corporation (the "Selling Stockholder") and the Underwriters named therein (the
"Underwriters" and together with the Company and the Selling Stockholder, the
"Parties"), is made and entered into by and between the Parties.
WHEREAS, pursuant to Section 2(c) of the Underwriting Agreement, the
Company granted an option to the several Underwriters to purchase, severally and
not jointly, up to an aggregate of 2,045,400 Optional Common Shares (as defined
therein) from the Company, which option may be exercised at any time (but not
more than once) upon notice by the Representatives to the Company, which notice
may be given at any time within 30 days from the date of the Underwriting
Agreement (the "Notice Period"); and
WHEREAS, it is desired to extend the Notice Period to 45 days from 30
days.
NOW, THEREFORE, it is hereby agreed as follows:
1. The third sentence of Section 2(c) of the Underwriting Agreement is
hereby amended to change the number "30" appearing therein to "45."
2. Subject to the foregoing amendment, the Underwriting Agreement shall
remain in full force and effect.
<PAGE> 2
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company and the Selling Stockholder the
enclosed copies hereof, whereupon this instrument, along with all counterparts
hereof, shall become a binding agreement in accordance with its terms.
Very truly yours,
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
By: /s/ Joshua C. Cantor
Name: Joshua C. Cantor
Title: President
AMERICAN BANKNOTE CORPORATION
By: /s/ Harvey Kesner
Name: Harvey Kesner
Title: Executive Vice-President and
General Counsel
The foregoing First Amendment to the Underwriting Agreement is hereby
confirmed and accepted by the Representatives in San Francisco, California as of
the date first above written.
NATIONSBANC MONTGOMERY SECURITIES LLC
LAZARD FRERES & CO. LLC
RAYMOND JAMES & ASSOCIATES, INC.
SMITH BARNEY INC.
Acting as Representatives of the
several Underwriters named in
the Underwriting Agreement.
By: NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ Richard A. Smith
Richard A. Smith,
Authorized Signatory
<PAGE> 1
Exhibit 10
CREDIT AGREEMENT
Dated as of July 20, 1998
Among
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
THE GUARANTORS NAMED HEREIN,
THE LENDERS NAMED HEREIN,
SOCIETE GENERALE, AS DOCUMENTATION AGENT
and
THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE
AND COLLATERAL AGENT
<PAGE> 2
TABLE OF CONTENTS
Page
I. DEFINITIONS.................................................................1
SECTION 1.01. Certain Defined Terms...................................1
SECTION 1.02. Accounting Terms.......................................21
II. THE LOANS.................................................................21
SECTION 2.01. Revolving Credit Commitments and Term
Loan...................................................21
SECTION 2.02. Loans..................................................23
SECTION 2.03. Notice of Loans........................................25
SECTION 2.04. Notes; Repayment of Loans..............................25
SECTION 2.05. Interest on Loans......................................27
SECTION 2.06. Fees...................................................27
SECTION 2.07. Termination and Reduction of Revolving Credit
Commitments............................................28
SECTION 2.08. Interest on Overdue Amounts; Alternate Rate
of Interest............................................29
SECTION 2.09. Prepayment of Loans....................................30
SECTION 2.10. Reserve Requirements; Change in Circumstances..........34
SECTION 2.11. Change in Legality.....................................36
SECTION 2.12. Indemnity..............................................37
SECTION 2.13. Pro Rata Treatment; Assumption by and Delegation
of Authority to the Agent..............................38
SECTION 2.14. Sharing of Setoffs.....................................40
SECTION 2.15. Payments and Computations..............................41
SECTION 2.16. Taxes..................................................42
SECTION 2.17. Issuance of Letters of Credit..........................45
SECTION 2.18. Payment of Letters of Credit; Reimbursement............45
SECTION 2.19. Agent's Actions with respect to Letters of Credit......47
SECTION 2.20. Letter of Credit Fees..................................48
III. COLLATERAL SECURITY......................................................48
SECTION 3.01. Security Documents.....................................48
SECTION 3.02. Filing and Recording...................................48
IV. REPRESENTATIONS AND WARRANTIES............................................49
SECTION 4.01. Organization, Legal Existence..........................49
SECTION 4.02. Authorization..........................................49
SECTION 4.03. Governmental Approvals.................................50
SECTION 4.04. Binding Effect.........................................50
SECTION 4.05. Material Adverse Change................................50
SECTION 4.06. Litigation; Compliance with Laws; Etc..................50
SECTION 4.07. Financial Statements...................................51
SECTION 4.08. Federal Reserve Regulations............................51
SECTION 4.09. Taxes..................................................52
<PAGE> 3
SECTION 4.10. Employee Benefit Plans.................................52
SECTION 4.11. No Material Misstatements..............................54
SECTION 4.12. Investment Company Act; Public Utility Holding
Company Act............................................54
SECTION 4.13. Security Interest......................................54
SECTION 4.14. Use of Proceeds........................................54
SECTION 4.15. Subsidiaries...........................................54
SECTION 4.16. Title to Properties; Possession Under Leases;
Trademarks.............................................55
SECTION 4.17. Solvency...............................................55
SECTION 4.18. Permits, etc...........................................56
SECTION 4.19. Compliance with Environmental Laws.....................56
SECTION 4.20. No Change in Credit Criteria or Collection
Policies...............................................57
SECTION 4.21. Employee Matters.......................................57
SECTION 4.22. Year 2000..............................................57
V. CONDITIONS OF CREDIT EVENTS................................................58
SECTION 5.01. All Credit Events......................................58
SECTION 5.02. First Borrowing........................................59
VI. AFFIRMATIVE COVENANTS.....................................................63
SECTION 6.01. Legal Existence........................................63
SECTION 6.02. Businesses and Properties..............................63
SECTION 6.03. Insurance..............................................63
SECTION 6.04. Taxes..................................................64
SECTION 6.05. Financial Statements, Reports, Etc.....................64
SECTION 6.06. Litigation and Other Notices...........................67
SECTION 6.07. ERISA..................................................68
SECTION 6.08. Maintaining Records; Access to Properties and
Inspections; Right to Audit............................68
SECTION 6.09. Use of Proceeds........................................69
SECTION 6.10. Fiscal Year-End........................................69
SECTION 6.11. Further Assurances.....................................69
SECTION 6.12. Additional Grantors and Guarantors.....................69
SECTION 6.13. Environmental Laws.....................................70
SECTION 6.14. Pay Obligations to Lenders and Perform Other
Covenants..............................................72
SECTION 6.15. Maintain Operating Accounts............................72
SECTION 6.16. Year 2000..............................................72
SECTION 6.17. Landlord and Mortgagee Waivers.........................73
VII. NEGATIVE COVENANTS.......................................................73
SECTION 7.01. Liens..................................................73
SECTION 7.02. Sale and Lease-Back Transactions.......................75
SECTION 7.03. Indebtedness...........................................75
SECTION 7.04. Dividends, Distributions and Payments..................76
SECTION 7.05. Consolidations, Mergers and Sales of Assets............76
<PAGE> 4
SECTION 7.06. Investments............................................77
SECTION 7.07. Capital Expenditures...................................79
SECTION 7.08. Rental Obligations.....................................79
SECTION 7.09. Debt Service Coverage Ratio............................79
SECTION 7.10. Leverage Ratio.........................................79
SECTION 7.11. Interest Coverage Ratio................................80
SECTION 7.12. Availability...........................................80
SECTION 7.13. Business...............................................80
SECTION 7.14. Sales of Receivables...................................80
SECTION 7.15. Use of Proceeds........................................80
SECTION 7.16. ERISA..................................................80
SECTION 7.17. Accounting Changes.....................................81
SECTION 7.18. Prepayment or Modification of Indebtedness;
Modification of Charter Documents......................81
SECTION 7.19. Transactions with Affiliates...........................81
SECTION 7.20. Negative Pledges, Etc..................................81
VIII. EVENTS OF DEFAULT.......................................................82
IX. AGENT.....................................................................86
X. MANAGEMENT, COLLECTION AND STATUS OF RECEIVABLES AND
OTHER COLLATERAL...........................................................90
SECTION 10.01. Collection of Receivables; Management of Collateral...90
SECTION 10.02. Receivables Documentation.............................92
SECTION 10.03. Status of Receivables and Other Collateral............92
SECTION 10.04. Monthly Statement of Account..........................94
SECTION 10.05. Collateral Custodian..................................94
XI. MISCELLANEOUS.............................................................94
SECTION 11.01. Notices...............................................94
SECTION 11.02. Survival of Agreement.................................95
SECTION 11.03. Successors and Assigns; Participations................95
SECTION 11.04. Expenses; Indemnity...................................99
SECTION 11.05. Applicable Law.......................................100
SECTION 11.06. Right of Setoff......................................100
SECTION 11.07. Payments on Business Days............................100
SECTION 11.08. Waivers; Amendments..................................101
SECTION 11.09. Severability.........................................102
SECTION 11.10. Entire Agreement; Waiver of Jury Trial, Etc..........102
SECTION 11.11. Confidentiality......................................103
SECTION 11.12. Submission to Jurisdiction...........................104
SECTION 11.13. Interest Rate Limitation.............................104
SECTION 11.14. Counterparts.........................................104
SECTION 11.15. Headings.............................................105
XII. GUARANTEES..............................................................105
<PAGE> 5
EXHIBITS
EXHIBIT A-1 Form of Tranche A Revolving Credit Note
EXHIBIT A-2 Form of Tranche B Revolving Credit Note
EXHIBIT B Form of Term Note
EXHIBIT C Form of Opinion of Counsel
EXHIBIT D Form of Pledge Agreement
EXHIBIT E Form of Security Agreement
EXHIBIT F Form of Assignment and Acceptance
EXHIBIT G Form of Security Agreement - Patents and
Trademarks
SCHEDULES
SCHEDULE 1.01 Eligible Receivables of Foreign Subsidiaries
SCHEDULE 2.01(a) Tranche A Revolving Credit Commitments
SCHEDULE 2.01(b) Tranche B Revolving Credit Commitments
SCHEDULE 2.02 Domestic Lending Offices
SCHEDULE 2.03 Eurodollar Lending Offices
SCHEDULE 4.01 Qualified Jurisdictions
SCHEDULE 4.05 Material Adverse Change
SCHEDULE 4.06(a) Litigation
SCHEDULE 4.06(b) Compliance with Laws
SCHEDULE 4.15 Subsidiaries
SCHEDULE 4.19 Environmental Law Compliance
SCHEDULE 4.21 Employee Matters
SCHEDULE 6.05(g) Inventory Designations
SCHEDULE 6.05(j) Borrowing Base Certificate
SCHEDULE 7.01(f) Existing Liens
SCHEDULE 7.03 Existing Indebtedness
SCHEDULE 7.06 Existing Investments
SCHEDULE 7.08 Rental Obligations
<PAGE> 6
CREDIT AGREEMENT dated as of July 20, 1998, among AMERICAN BANK NOTE
HOLOGRAPHICS, INC., a Delaware corporation (the "Borrower"), the
Guarantors named herein and signatory hereto, the financial
institutions from time to time party hereto, initially consisting of
those financial institutions listed on Schedules 2.01(a) and 2.01(b)
annexed hereto (collectively, the "Lenders"), SOCIETE GENERALE, as
documentation agent and THE CHASE MANHATTAN BANK, as administrative and
collateral agent for the Lenders (in such capacity, the "Agent").
The Borrower has applied to the Lenders for Credits (such term and all
other capitalized terms used in this paragraph having the respective meanings
ascribed to such terms above or hereinafter) up to an aggregate principal amount
of $30,000,000 in the form of (a) Tranche A Revolving Credit Loans to the
Borrower at any time and from time to time prior to the Revolving Credit
Termination Date in an aggregate principal amount not in excess of $10,000,000
at any time outstanding and (b) Tranche B Revolving Credit Loans to the Borrower
at any time and from time to time prior to the Conversion Date in an aggregate
principal amount not in excess of $20,000,000 at any time outstanding. The
proceeds of the Tranche A Revolving Credit Loans shall be used for working
capital and general corporate purposes. The proceeds of the Tranche B Revolving
Credit Loans shall be used to partially finance Permitted Acquisitions. The
Grantors will provide Collateral in accordance with the provisions of this
Agreement and the Security Documents. The Lenders are severally, and not
jointly, willing to extend such Loans to the Borrower subject to the terms and
conditions hereinafter set forth. Accordingly, the Borrower, the Guarantors, the
Lenders and the Agent hereby agree as follows:
I. DEFINITIONS
SECTION 1.01. Certain Defined Terms. For purposes hereof, the
following terms shall have the meanings specified below:
"Adjusted LIBO Rate" shall mean, with respect to any
Eurodollar Loan for any Interest Period, an interest rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the product of (i) the
LIBO Rate in effect for such Interest Period and (ii) Statutory Reserves. For
purposes hereof, "Statutory Reserves" shall mean a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including, without limitation, any marginal, special, emergency, or
supplemental reserves) expressed as a decimal established by the Board and any
other banking authority to which the Agent is subject for Eurocurrency
Liabilities (as defined in Regulation D). Such reserve percentages shall
include, without limitation, those imposed under Regulation D. Eurodollar Loans
shall be deemed to constitute Eurocurrency Liabilities and as such shall be
deemed to be subject to such reserve requirements without benefit of or credit
for proration, exemptions or offsets which may
<PAGE> 7
be available from time to time to any Lender under Regulation D. Statutory
Reserves shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage.
"Affiliate" of any person shall mean any other person which,
directly or indirectly, controls or is controlled by or is under common control
with such person. For the purposes of this definition, the term "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership of voting
securities or by contract or otherwise.
"Agent" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Alternate Base Loan" shall mean a Loan based on the Alternate
Base Rate in accordance with Article II hereof.
"Alternate Base Rate" shall mean, for any day, a rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1%, and (c) the Federal Funds Effective Rate in effect
on such day plus 1/2 of 1%. "Prime Rate" shall mean the rate of interest per
annum publicly announced from time to time by the Agent at its principal office
in New York City as its prime rate in effect at such time. "Base CD Rate" shall
mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate and
(ii) Statutory Reserves and (b) the Assessment Rate. "Three-Month Secondary CD
Rate" shall mean, for any day, the secondary market rate for three-month
certificates of deposit reported as being in effect on such day (or, if such day
shall not be a Business Day, the next preceding Business Day) by the Board
through the public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board, be published in
Federal Reserve Statistical Release H.15(519) during the week following such
day), or, if such rate shall not be so reported on such day or such next
preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 a.m., New York City time, on such day (or, if
such day shall not be a Business Day, on the next preceding Business Day) by the
Agent from three New York City negotiable certificate of deposit dealers of
recognized standing selected by it. "Statutory Reserves" shall mean a fraction
(expressed as a decimal), the numerator of which is the number one and the
denominator of which is the number one minus the maximum reserve percentage
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal, established by the Board and any other banking authority to which
the Agent is subject, for new negotiable nonpersonal time deposits in dollars of
over $100,000 with maturities approximately equal to three months. Statutory
Reserves shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage. "Assessment Rate" shall mean, for any day, the
annual
2
<PAGE> 8
assessment rate (net of refunds and rounded upwards, if necessary, to the next
1/100 of 1%) most recently estimated by the Agent (in good faith, but in no
event in excess of statutory or regulatory maximums) as the then current net
annual assessment rate that will be employed in determining amounts payable by
the Agent to the Federal Deposit Insurance Corporation (or any successor) for
insurance by such Corporation (or such successor) of time deposits made in
dollars at the Agent's domestic offices during the current calendar year.
"Federal Funds Effective Rate" shall mean, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by it. If for any reason
the Agent shall have determined (which determination shall be conclusive absent
manifest error) that it is unable to ascertain the Base CD Rate or the Federal
Funds Effective Rate, or both, for any reason, including, the inability or
failure of the Agent to obtain sufficient quotations in accordance with the
terms hereof, the Alternate Base Rate shall be determined without regard to
clause (b) or (c), or both, of the first sentence of this definition, as
appropriate, until the circumstances giving rise to such inability no longer
exist. Any change in the Alternate Base Rate due to a change in the Prime Rate,
the Base CD Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate, the Base CD Rate or the Federal
Funds Effective Rate, respectively.
"Applicable Lending Office" shall mean, with respect to each
Lender, such Lender's Domestic Lending Office in the case of an Alternate Base
Loan and such Lender's Eurodollar Lending Office in the case of a Eurodollar
Loan.
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Lender and an assignee and accepted by the Agent,
in substantially the form of Exhibit F annexed hereto.
"Availability" shall mean at any time (i) the lesser at such
time of (x) the Total Tranche A Revolving Credit Commitment and (y) the
Borrowing Base, minus (ii) the sum at such time of (x) the unpaid principal
balance of, and accrued interest and fees on the Tranche A Revolving Credit
Loans together with all reserves (without duplication of deductions taken in
determining Net Amount of Eligible Receivables) established by the Agent in its
reasonable credit judgment and (y) the Letter of Credit Usage.
"Board" shall mean the Board of Governors of the Federal
Reserve System of the United States.
"Borrower" shall have the meaning assigned to such term in the
preamble to this Agreement.
3
<PAGE> 9
"Borrowing Base" shall have the meaning assigned to such term
in Section 2.01(b) hereof.
"Business Day" shall mean any day, other than a Saturday,
Sunday or legal holiday in the State of New York, on which banks are open for
substantially all their banking business in New York City except that, if any
determination of a "Business Day" shall relate to a Eurodollar Loan, the term
"Business Day" shall in addition exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.
"Capital Expenditures" shall mean for any period, without
duplication, the aggregate of all expenditures (whether paid in cash or accrued
as a liability and including Capitalized Lease Obligations) by the Borrower and
its Consolidated subsidiaries during such period determined on a Consolidated
basis that, in accordance with GAAP, are or should be included in "additions to
property, plant or equipment", but excluding Permitted Acquisitions done as
purchases of assets.
"Capitalized Lease Obligation" shall mean an obligation to pay
rent or other amounts under any lease of (or other arrangement conveying the
right to use) real and/or personal property which obligation is required to be
classified and accounted for as a capital lease on a balance sheet prepared in
accordance with GAAP, and for purposes hereof the amount of such obligation
shall be the capitalized amount thereof determined in accordance with GAAP.
"Cash Interest Expense" shall mean, with respect to any person
for any period, the Interest Expense of such person for such period less all
non-cash items constituting Interest Expense during such period (including,
without limitation, amortization of debt discounts, deferred debt expense and
payments of interest on Indebtedness by issuance of Indebtedness).
"Change of Control" shall be deemed to have occurred if during
any period of two consecutive calendar years, individuals who at the beginning
of such period constituted the Borrower's Board of Directors (together with any
new directors whose elections to the Borrower's Board of Directors or whose
nomination for election to the Borrower's Board of Directors by the Borrower's
shareholders was approved by a vote of at least two-thirds of the Borrower's
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Borrower's
directors then in office;
"Charges" shall have the meaning assigned to such term in
Section 11.13 hereof.
"Closing Date" shall mean the date of the first borrowing
under this Agreement, but in no event later than July 31, 1998.
4
<PAGE> 10
"Code" shall mean the Internal Revenue Code of 1986 and the
rules and regulations promulgated thereunder, as amended from time to time.
"Collateral" shall mean all collateral and security as
described in the Security Documents.
"Commitment Letter" shall mean the letter dated May 13, 1998,
as amended to the Closing Date, addressed by the Agent to the Borrower, together
with all attachments thereto.
"Consolidated" shall mean, in respect of any person, as
applied to any financial or accounting term, such term determined on a
consolidated basis in accordance with GAAP (except as otherwise required herein)
for the person and all consolidated subsidiaries thereof.
"Contaminant" shall mean all Hazardous Materials and all those
substances which are regulated in a material respect by or form the basis of
liability under Federal, state or local jurisdiction environmental, health and
safety statutes or regulations, or any other material or substance which
constitutes a material health, safety or environmental hazard to any person or
property.
"Conversion Date" shall have the meaning assigned to such term
in Section 2.01 hereof.
"Credit Event" shall mean each borrowing and each issuance of
a Letter of Credit hereunder.
"Credits" shall mean each Loan and each Letter of Credit.
"Customer" shall mean and include the account debtor or
obligor with respect to any Receivable.
"Debt Service Coverage Ratio" shall mean, with respect to the
Borrower and its Consolidated subsidiaries on a Consolidated basis for any four
quarter period, the ratio of (i) the sum of EBITDA minus Capital Expenditures
(including, without limitation, Capitalized Lease Obligations) in each case for
the most recent four consecutive fiscal quarters ending on or prior to the date
of determination to (ii) the sum of the aggregate Debt Service Expense plus the
aggregate Cash Interest Expense plus Federal, state and local income taxes of
such person plus cash dividends or other cash distributions to the extent
permitted by Section 7.04 hereof in each case for the four most recent
consecutive fiscal quarters ending on or prior to the date of determination.
"Debt Service Expense" shall mean, with respect to any person
for any period, the aggregate of regularly scheduled principal payments of all
long-term Indebtedness (including, without limitation, Subordinated
Indebtedness) made or to be
5
<PAGE> 11
made by such person during such period on a Consolidated basis in accordance
with GAAP.
"Default" shall mean any condition, act or event which, with
notice or lapse of time or both, would constitute an Event of Default.
"dollars" or the symbol "$" shall mean lawful currency of the
United States of America.
"Domestic Lending Office" shall mean, with respect to any
Lender, the office of such Lender specified as its "Domestic Lending Office"
opposite its name in Schedule 2.02 annexed hereto, or such other office of such
Lender as such Lender may from time to time specify to the Borrower and the
Agent.
"EBITDA" shall mean for any period for the Borrower and its
Consolidated subsidiaries on a Consolidated basis, the sum of (i) Net Income,
(ii) Interest Expense, (iii) depreciation and amortization of assets, (iv)
Federal, state and local income taxes and (v) other non-cash charges properly
deducted in determining Net Income, in each case of such person for such period,
computed and calculated in accordance with GAAP.
"Eligible Inventory" shall mean inventory of the Borrower
comprised solely of raw materials and finished goods which is, in the opinion of
the Agent, not obsolete, slow-moving or unmerchantable and is and at all times
shall continue to be acceptable to the Agent in all respects; provided, however,
that Eligible Inventory shall in no event include inventory which (i) is not
located at one of the addresses for locations of Collateral set forth on
Schedule I to the Security Agreement and with respect to which the Agent has not
been granted and has not perfected a valid, first priority security interest or
(ii) has been returned or rejected by a Customer. Standards of eligibility may
be fixed and revised from time to time solely by the Agent in the Agent's
reasonable credit judgment. In determining eligibility, the Agent may, but need
not, rely on reports and schedules furnished by the Borrower, but reliance by
the Agent thereon from time to time shall not be deemed to limit the right of
the Agent to revise standards of eligibility at any time as to both present and
future inventory of the Borrower.
"Eligible Receivables" shall mean Receivables created by the
Borrower in the ordinary course of business arising out of the sale or lease of
goods or rendition of services by the Borrower, which are and at all times shall
continue to be acceptable to the Agent in all respects. Standards of eligibility
may be fixed and revised from time to time solely by the Agent in the Agent's
reasonable credit judgment. In general, without limiting the foregoing, a
Receivable shall in no event be deemed to be an Eligible Receivable unless: (a)
all payments due on the Receivable have been invoiced and the underlying goods
shipped or services performed, as the case may be; (b) the payment due on the
Receivable is not more than 90 days past the invoice date, unless a longer
period of time is approved by the Agent in its sole discretion; provided,
however, that in no event shall more than $500,000 in the aggregate of Eligible
Receivables be more
6
<PAGE> 12
than 90 days past the invoice date; (c) the payments due on more than 50% of all
Receivables from the same Customer are less than 90 days past the invoice date;
(d) the Receivable arose from a completed and bona fide transaction (and with
respect to a sale of goods, a transaction in which title has passed to the
Customer) which requires no further act under any circumstances on the part of
the Borrower in order to cause such Receivable to be payable in full by the
Customer; (e) the Receivable is in full conformity with the representations and
warranties made by the Borrower to the Agent and the Lenders with respect
thereto and is free and clear of all security interests and Liens of any nature
whatsoever other than any security interest deemed to be held by the Borrower or
any security interest created pursuant to the Security Documents or permitted by
Section 7.01 hereof; (f) the Receivable constitutes an "account" or "chattel
paper" within the meaning of the Uniform Commercial Code of the state in which
the Receivable is located; (g) the Customer has not asserted that the
Receivable, and the Borrower is not aware that the Receivable, (i) arises out of
a bill and hold, consignment or progress billing arrangement or (ii) is subject
to any setoff, contras, net-out contract, offset, deduction, dispute, credit,
counterclaim or other defense arising out of the transactions represented by the
Receivable or independently thereof (provided that such Receivable shall only be
ineligible to the extent thereof) and (iii) the Customer has finally accepted
the goods from the sale out of which the Receivable arose and has not objected
to its liability thereon or returned, rejected or repossessed any of such goods,
except for goods returned in the ordinary course of business provided that such
Receivable shall only be ineligible with respect to that portion thereof which
has been objected to or which relates to goods returned, rejected or
repossessed; (h) the Receivable arose in the ordinary course of business of the
Borrower; (i) the Customer is not (x) the United States government or the
government of any state or political subdivision thereof or therein, or any
agency or department of any thereof (unless there has been full compliance to
the satisfaction of the Agent with any applicable assignment of claims statute)
or (y) an Affiliate of the Borrower or any subsidiary; (j) the Customer is (w) a
United States or Canadian (other than Quebec, Newfoundland, Nova Scotia and
Prince Edward Island) person, (x) an obligor in the United States, (y) an
obligor outside the United States and its Receivables are backed by a letter of
credit or other guarantee satisfactory to the Agent or (z) a foreign subsidiary
of a United States based multinational organization as set forth on Schedule
1.01 annexed hereto, up to the amounts set forth on said schedule; (k) the
Receivable complies with all material requirements of all applicable laws and
regulations, whether Federal, state or local (including, without limitation,
usury laws and laws, rules and regulations relating to truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy); (l) to the knowledge of the Borrower, the
Receivable is in full force and effect and constitutes a legal, valid and
binding obligation of the Customer enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally and by general equity principles; (m) the Receivable is denominated in
and provides for payment by the Customer in dollars; (n) the Receivable has not
been and is not required to be charged off or written off as uncollectible in
accordance with GAAP or the customary business practices of the Borrower; (o)
the Agent on behalf of the Lenders possesses a valid, perfected first
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<PAGE> 13
priority security interest in such Receivable as security for payment of the
Obligations; (p) the Receivable is not with respect to a Customer located in New
Jersey, Minnesota, or any other state denying creditors access to its courts in
the absence of a Notice of Business Activities Report or other similar filing,
unless the 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; and (q) the Agent is satisfied with the credit standing of the Customer in
relation to the amount of credit extended.
"Environmental Claim" shall mean any written notice of a
material violation, claim, demand, abatement or other order by any governmental
authority or any person for personal injury (including sickness, disease or
death), tangible or intangible property damage, damage to the environment,
nuisance, pollution, contamination or other adverse effects on the environment,
or for fines, penalties or deed or use restrictions, resulting from or based
upon (i) the existence, or the continuation of the existence, of a Release
(including, without limitation, sudden or non-sudden, accidental or
nonaccidental Releases), of, or exposure to, any Contaminant at, in, by or from
any of the properties of the Borrower or its subsidiaries, (ii) the
environmental aspects of the transportation, storage, treatment or disposal of
Contaminants in connection with the operation of any of the properties of the
Borrower or its subsidiaries or (iii) the violation, or alleged violation by the
Borrower or any of its subsidiaries, of any statutes, ordinances, orders, rules,
regulations, Permits or licenses of or from any governmental authority, agency
or court relating to environmental matters connected with any of the properties
of the Borrower or its subsidiaries, under any applicable Environmental Law.
"Environmental Laws" shall mean the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601
et seq.), the Hazardous Material Transportation Act (49 U.S.C. Section 1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.),
the Oil Pollution Act of 1990 (33 U.S.C. Section 2701 et. seq.), the Safe
Drinking Water Act (42 U.S.C. Section 300f, et seq.), the Clear Air Act (42
U.S.C. Section 7401 et seq.), the Toxic Substances Control Act, as amended (15
U.S.C. Section 2601 et seq.), the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. Section 136 et seq.), and the Occupational Safety and
Health Act (29 U.S.C. Section 651 et seq.), as such laws have been and hereafter
may be amended or supplemented, and any related or analogous present or future
Federal, state or local, statutes, rules having the force of law, regulations,
ordinances, licenses, permits and interpretations having the force of law and
orders of regulatory and administrative bodies.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated thereunder, as in
effect from time to time.
8
<PAGE> 14
"ERISA Affiliate" shall mean any trade or business (whether or
not incorporated) which together with the Borrower or any of its subsidiaries
would be treated as a single employer under the provisions of Title I or Title
IV of ERISA.
"Eurodollar Lending Office" shall mean, with respect to any
Lender, the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name in Schedule 2.03 annexed hereto (or, if no such office is
specified, its Domestic Lending Office), or such other office of such Lender as
such Lender may from time to time specify to the Borrower and the Agent.
"Eurodollar Loan" shall mean a Loan based on the Adjusted LIBO
Rate in accordance with Article II hereof.
"Event of Default" shall have the meaning assigned to such
term in Article VIII hereof.
"Federal" shall mean the federal level of government in the
United States.
"Fee Letter" shall mean the letter dated May 13, 1998, as
amended to the Closing Date, addressed by the Agent to the Borrower with respect
to the payment of the fees described therein.
"Final Maturity Date" shall mean the sixth anniversary of the
Closing Date.
"Financial Officer" shall mean, with respect to any person,
the chief financial officer, vice president-finance or corporate controller of
such person.
"Fiscal Year" shall mean the fiscal year of the Borrower for
accounting purposes which ends on December 31 of each year.
"Funded Debt" shall mean, as of the date of determination
thereof, all Indebtedness of the Borrower and its subsidiaries on a Consolidated
basis outstanding at such time which matures more than one year after the date
of calculation, and any such Indebtedness maturing within one year from such
date of calculation which is renewable or extendable at the option of the
obligor to a date more than one year from such date and including in any event
the Revolving Credit Loans.
"GAAP" shall have the meaning assigned to such term in Section
1.02 hereof.
"Grantor" shall mean any Grantor, Pledgor or Debtor, as such
terms are defined in any of the Security Documents.
"Guarantee" shall mean any obligation, contingent or
otherwise, of any person guaranteeing or having the economic effect of
guaranteeing or giving financial assistance in respect of the repayment of any
Indebtedness or monetary obligation of
9
<PAGE> 15
any other person in any manner, whether directly or indirectly, and shall
include, without limitation, any obligation of such person, direct or indirect,
to (i) purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or monetary obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such
Indebtedness or obligation, (ii) purchase property, securities or services for
the purpose of assuring the owner of such Indebtedness or obligation of the
payment of such Indebtedness or monetary obligation, or (iii) maintain working
capital, equity capital, available cash or other financial condition of the
primary obligor so as to enable the primary obligor to pay such Indebtedness or
monetary obligation; provided, however, that the term Guarantee shall not
include endorsements for collection or collections for deposit, in either case
in the ordinary course of business.
"Guarantor" shall mean, collectively, any domestic subsidiary
of the Borrower in existence on the Closing Date, and each domestic subsidiary
of the Borrower which becomes a guarantor of the Obligations after the date
hereof.
"Hazardous Material" shall mean any pollutant, contaminant,
chemical, or industrial or hazardous, toxic or dangerous goods, waste, substance
or material, defined or regulated as such in (or for purposes of) any
Environmental Law and any other toxic, reactive, or flammable chemicals,
including (without limitation) any friable asbestos, any petroleum (including
crude oil or any fraction), any radioactive substance and any polychlorinated
biphenyls; provided, in the event that any Environmental Law is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment; and provided, further,
without limitation, to the extent that the applicable laws of any state
establish a meaning for "hazardous material," "hazardous substance," "hazardous
waste," "solid waste" or "toxic substance" which is broader than that specified
in any Federal Environmental Law, such broader meaning shall apply in the
relevant state.
"Indebtedness" shall mean, with respect to any person without
duplication, (a) all obligations of such person for borrowed money or with
respect to deposits or advances of any kind, (b) all obligations of such person
evidenced by bonds, debentures, notes or other similar instruments or upon which
interest charges are customarily paid (excluding trade accounts payable and
accrued expenses arising in the ordinary course of business in accordance with
customary trade terms), (c) all obligations of such person for the deferred
purchase price of property or services, (excluding trade accounts payable and
accrued expenses arising in the ordinary course of business in accordance with
customary trade terms), (d) all obligations of such person under conditional
sale or other title retention agreements relating to property purchased by such
person and all Capitalized Lease Obligations, (e) all payment obligations of
such person with respect to interest rate or currency protection agreements, (f)
all Indebtedness of such person as an account party under any letter of credit
or in respect of bankers' acceptances, (g) all obligations of any third party
secured by property or assets of such person (regardless of whether or not such
person is liable for repayment of such Indebtedness; provided, however, that the
amount of Indebtedness of such person shall be the lesser of (i) the fair market
value of such
10
<PAGE> 16
property or assets and (ii) the amount of such Indebtedness), (h) all Guarantees
of such person and (i) the redemption price of all redeemable preferred stock of
such person, but only to the extent that such stock is redeemable at the option
of the holder or requires sinking fund or similar payments at any time prior to
the Final Maturity Date.
"Indemnitees" shall have the meaning assigned to such term in
Section 11.04(c) hereof.
"Information" shall have the meaning assigned to such term in
Section 11.11 hereof.
"Interest Coverage Ratio" shall mean, with respect to any
person for any four-quarter period, the ratio of (i) (x) EBITDA less (y) Capital
Expenditures for the four most recent consecutive fiscal quarters ending on or
prior to the date of determination, to (ii) the Cash Interest Expense of such
person for such four-quarter period.
"Interest Expense" shall mean, with respect to any person for
any period, the interest expense of such person during such period determined on
a Consolidated basis in accordance with GAAP, and shall in any event include,
without limitation, (i) the amortization of debt discounts, (ii) the
amortization of all fees payable in connection with the incurrence of
Indebtedness to the extent included in interest expense, (iii) the portion of
any Capitalized Lease Obligation allocable to interest expense and (iv) payments
of interest expense in kind.
"Interest Margin" shall mean, with respect to any Loan, the
amount as set forth below in the last paragraph hereof as such amount shall be
adjusted in accordance with the terms of this definition. The Interest Margin
shall be adjusted thereafter in accordance with the table below, three (3)
Business Days after the delivery of the financial statements to the Agent
required pursuant to Section 6.05(a) or (b) hereof, as applicable, together with
the corresponding compliance certificates required pursuant to Section 6.05(e)
hereof, commencing with the financial statements and certificates for the period
ending September 30, 1998, and at the end of each fiscal quarter thereafter, or
if the Borrower shall fail to timely deliver such statements and certificates
for any such period or if a Default or an Event of Default shall have occurred
and be continuing, then at the highest Interest Margin provided for herein:
<TABLE>
<CAPTION>
Interest Margin Interest Margin
Leverage Ratio for Eurodollar Loans for Alternate Base Loans
<S> <C> <C>
Greater than or
equal to 3.00:1.00 2.50% .50%
Less than 3.00: 1.00
but greater than or
equal to 2.50:1.00 2.25% .25%
Less than 2.50: 1.00
but greater than or
equal to 2.00:1.00 2.00% 0.0%
</TABLE>
11
<PAGE> 17
<TABLE>
<CAPTION>
Interest Margin Interest Margin
Leverage Ratio for Eurodollar Loans for Alternate Base Loans
<S> <C> <C>
Less than 2.00:1.00 1.75% 0.0%
</TABLE>
On the Closing Date, the Interest Margin for Eurodollar Loans
shall be 1.75% and the Interest Margin for Alternate Base Loans shall be 0%;
each shall thereafter be adjusted in accordance with the provisions hereof.
"Interest Payment Date" shall mean (i) in the case of an
Alternate Base Loan, the first Business Day of each month, commencing August 1,
1998, and (ii) with respect to any Eurodollar Loan, the last day of the Interest
Period applicable to the borrowing of which such Loan is a part, and, in respect
of any Eurodollar Loan of more than three (3) months' duration, each earlier day
which is three (3) months after the first day of such Interest Period.
"Interest Period" shall mean, as to any Eurodollar Loan, the
period commencing on the date of such Eurodollar Loan and ending on the
numerically corresponding day (or, if there is no numerically corresponding day,
on the last day) in the calendar month that is one (1), two (2), three (3) or
six (6) months thereafter, as the Borrower may elect with respect to its
Eurodollar Loans; provided, however, that (x) if an Interest Period would end on
a day that is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless such next succeeding Business Day would fall
in the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day, (y) no Interest Period shall end later than the
Final Maturity Date and (z) interest shall accrue from and including the first
day of an Interest Period to but excluding the last day of such Interest Period.
"IPO" shall mean the initial public offering of shares of
common stock of the Borrower pursuant to a registration statement filed under
the Securities Act of 1933, as amended.
"Lenders" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Letter of Credit" shall have the meaning assigned to such
term in Section 2.17 hereof.
"Letter of Credit Usage" shall mean at any time, (i) the
aggregate undrawn amount of all outstanding Letters of Credit at such time plus
(ii) the unreimbursed drawings at such time under all such Letters of Credit.
"Leverage Ratio" with respect to any person at the end of any
fiscal quarter shall mean the ratio of (i) Funded Debt as at the date of
determination to (ii) EBITDA of such person for the four most recent consecutive
fiscal quarters ending on or prior to the date of determination.
"LIBO Rate" shall mean, with respect to any Eurodollar Loan
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next
12
<PAGE> 18
1/16 of 1%) equal to the rate at which dollar deposits approximately equal in
principal amount to the Agent's portion of such Eurodollar Loan and for a
maturity equal to the applicable Interest Period are offered in immediately
available funds to the principal London branch of the Agent in the London
interbank market for Eurodollars at approximately 11:00 a.m., London time, two
(2) Business Days prior to the first day of such Interest Period.
"Lien" shall mean, with respect to any asset, (i) any
mortgage, lien, pledge, encumbrance, charge or security interest in or on such
asset, (ii) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset, (iii) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities or (iv) any other right
of or arrangement with any creditor to have such creditor's claim satisfied out
of such assets, or the proceeds therefrom, prior to the general creditors of the
owner thereof.
"Loan" shall mean any Tranche A Revolving Credit Loan, any
Tranche B Revolving Credit Loan or the Term Loan.
"Loan Documents" shall mean this Agreement, each Security
Document, each Guarantee executed and delivered at any time with respect to the
Obligations, the Notes and each other document, instrument or agreement now or
hereafter delivered to the Agent or any Lender in connection herewith or
therewith.
"Loan Party" shall mean the Borrower, each Grantor, each
Guarantor, and each subsidiary thereof.
"Margin Stock" shall have the meaning assigned to such term in
Regulation U.
"Material Adverse Effect" shall mean a material adverse effect
on (i) the business, assets, prospects, operations or financial or other
condition of the Loan Parties taken as a whole, (ii) the ability of any Loan
Party to perform its obligations under the terms hereof or of any other Loan
Document, (iii) the rights of, or remedies available to, the Lenders or the
Agent under any Loan Document or (iv) the Agent's Lien on any material portion
of the Collateral or the priority of such Lien.
"Maximum Rate" shall have the meaning assigned to such term in
Section 11.13 hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA.
"Net Amount of Eligible Inventory" shall mean, at any time,
the aggregate value, computed at the lower of cost (on a FIFO basis) and current
market value, of Eligible Inventory of the Borrower.
13
<PAGE> 19
"Net Amount of Eligible Receivables" shall mean and include at
any time, without duplication, the gross amount of Eligible Receivables at such
time less (i) sales, excise or similar taxes and (ii) returns, discounts,
claims, credits and allowances of any nature at any time issued, owing, granted,
outstanding, available or claimed.
"Net Cash Proceeds" shall mean (a) the gross cash proceeds
received less (b) the sum of (i) the amount, if any, of all taxes (other than
income taxes) payable plus the good-faith best estimate of the amount of all
income taxes payable (to the extent such amount shall have been set aside), (ii)
the amount, if any, applied to repay any Indebtedness (other than the Loans)
including, without limitation, any premium, penalty, interest or other amount in
connection with such Indebtedness to the extent such Indebtedness is required by
its terms or by applicable law to be repaid, (iii) reasonable and customary
fees, discounts, commissions and expenses and other costs paid in connection
with the applicable transaction, (iv) reserves, if any, in connection with
indemnification or similar obligations and (v) amounts held in escrow, if any,
in each case to the extent not already deducted in arriving at the amount
referred to in clause (a).
"Net Income" shall mean, for any period, the aggregate income
(or loss) of the Borrower and its Consolidated subsidiaries on a Consolidated
basis for such period which shall be an amount equal to net revenues and other
proper items of income less the aggregate of any and all items that are treated
as expenses under GAAP, and less Federal, state and local income taxes, but
excluding any extraordinary gains or losses or any gains or losses from the sale
or disposition of assets other than in the ordinary course of business, all
computed and calculated in accordance with GAAP.
"Non Pro Rata Loans" shall have the meaning assigned to such
term in Section 2.16(d) hereof.
"Non-U.S. Lender" shall have the meaning assigned to such term
in Section 2.16(f) hereof.
"Notes" shall mean the Term Notes and the Revolving Credit
Notes.
"Obligations" shall mean all obligations, liabilities and
Indebtedness of the Borrower to the Lenders and the Agent, whether now existing
or hereafter created, direct or indirect, due or not, whether created directly
or acquired by assignment, participation or otherwise and arising in connection
with the transactions contemplated hereby, including without limitation all
obligations, liabilities and Indebtedness of the Borrower with respect to the
Security Documents and other Loan Documents, the principal of and interest on
the Revolving Credit Loans, the Term Loans and the payment or performance of all
other obligations, liabilities, and Indebtedness of the Borrower to the Lenders
and the Agent hereunder, under the Letters of Credit or under any one or more of
the other Loan Documents (including the payment of amounts which would become
due but for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, and interest that, but for the filing of a petition in
14
<PAGE> 20
bankruptcy with respect to the Borrower, would accrue on such obligations,
whether or not a claim is allowed against the Borrower for such interest in the
related bankruptcy proceeding), including without limitation all fees, costs,
expenses and indemnity obligations hereunder and thereunder.
"Other Taxes" shall have the meaning assigned to such term in
Section 2.16(b) hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean any Plan which is subject to the
provisions of Title IV of ERISA.
"Permits" shall have the meaning assigned to such term in
Section 4.18 hereof.
"Permitted Acquisition" or "Permitted Acquisitions" shall mean
(a) the acquisition or acquisitions of a business or of businesses which are
substantially similar or complimentary to that of the Borrower; provided that
(i) the total consideration for any single acquisition shall not exceed
$30,000,000; (ii) outstanding Tranche B Revolving Credit Loans, the proceeds of
which are utilized for a single Permitted Acquisition under this clause (a),
shall not exceed $15,000,000; and (iii) the excess, if any, of the total
consideration over the amount funded with Tranche B Revolving Credit Loans shall
be funded from either (x) the net proceeds of the issuance of the Borrower's
stock; (y) the exchange of the Borrower's capital stock for the capital stock or
assets of the acquired person; or (z) Subordinated Indebtedness, provided that
the Leverage Ratio with respect to the Borrower and its Consolidated
subsidiaries immediately after giving effect to such proposed Permitted
Acquisition on a pro forma basis would not exceed 3.00:1.00; (b) the acquisition
of less than 100% of the stock of target companies and/or joint venture
investments by the Borrower; provided that (i) outstanding Tranche B Revolving
Credit Loans or Term Loans, the proceeds of which are utilized for all such
Permitted Acquisitions under this clause (b), shall not exceed $7,500,000 at any
one time outstanding; and (ii) the Borrower shall obtain at least a 20%
ownership interest in the target company or joint venture entity; and (c) the
acquisition of stock of target companies and/or joint venture investments by the
Borrower; provided that (i) there are no Tranche B Revolving Credit Loans or
Term Loans outstanding at the time of the Permitted Acquisition under this
clause (c); (ii) no proceeds of Tranche B Revolving Credit Loans shall be used
for any Permitted Acquisition under this clause (c); and (iii) any Permitted
Acquisitions under this clause (c) shall be funded with proceeds of the
Borrower's IPO or any secondary offerings of the Borrower's capital stock
undertaken after the Closing Date; provided further that with respect to any
proposed Permitted Acquisition under clauses (a) or (b), immediately after
giving effect to such proposed Permitted Acquisition on a pro forma basis, the
ratio of outstanding Obligations to EBITDA for the four most recent consecutive
fiscal quarters ended prior to the closing of such Permitted Acquisition with
respect to the Borrower and its Consolidated subsidiaries shall not exceed
2.50:1.00; provided further that with respect
15
<PAGE> 21
to any proposed Permitted Acquisition under clauses (a), (b) or (c), (i) the
proposed Permitted Acquisition is not hostile; and (ii) both before and
immediately after giving effect to such proposed Permitted Acquisition
(including without limitation, compliance with the financial covenants on a pro
forma basis after giving effect to the proposed Permitted Acquisition), no
Default or Event of Default has or will occur or be continuing. The Borrower
shall give the Agent fifteen (15) days' prior written notice of each proposed
Permitted Acquisition, and together with such notice and also on the date of
such proposed Permitted Acquisition, the Borrower shall furnish the Agent with a
certificate of the Borrower regarding compliance with the terms of this
definition of "Permitted Acquisition" and such other evidence of compliance with
this definition of "Permitted Acquisition" as the Agent shall reasonably
request.
"person" shall mean any natural person, corporation, business
trust, limited liability company, association, company, joint venture, limited
liability partnership, partnership or government or any agency or political
subdivision thereof.
"Plan" shall mean any employee benefit plan within the meaning
of Section 3(3) of ERISA and subject thereto and which is maintained by the
Borrower (in whole or in part) for employees of the Borrower, any subsidiary or
any ERISA Affiliate.
"Pledge Agreement" shall mean the Pledge Agreement dated as of
the date hereof, between the Grantor(s) referred to therein and the Agent, for
its own benefit and for the benefit of the Lenders, in substantially the form of
Exhibit D annexed hereto, as amended, modified or supplemented from time to
time.
"Pledged Stock" shall have the meaning assigned to such term
in the Pledge Agreement.
"Receivables" shall mean and include all of the Borrower's
accounts, instruments, documents, chattel paper and general intangibles related
thereto, whether secured or unsecured, whether now existing or hereafter created
or arising, and whether or not specifically assigned to the Agent for its own
benefit and/or the ratable benefit of the Lenders.
"Register" shall have the meaning assigned to such term in
Section 11.03(e) hereof.
"Regulation D" shall mean Regulation D of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Regulation T" shall mean Regulation T of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
16
<PAGE> 22
"Regulation X" shall mean Regulation X of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Release" shall mean any releasing, spilling, leaking,
seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping, in each case as defined in Environmental Law,
and shall include any "Threatened Release," as defined in Environmental Law;
provided, in the event that any Environmental Law is amended so as to broaden
the meaning of any term defined thereby, such broader meaning shall apply
subsequent to the effective date of such amendment.
"Remedial Work" shall mean any investigation, site monitoring,
containment, cleanup, removal, restoration or other remedial work of any kind or
nature with respect to any property of any Loan Party (whether such property is
owned, leased, subleased or used), including, without limitation, with respect
to Contaminants and the Release thereof.
"Repayment Date" shall have the meaning assigned to such term
in Section 2.04(c) hereof.
"Reportable Event" shall mean a Reportable Event as defined in
Section 4043(c) of ERISA with respect to which the notice requirements have not
been waived.
"Required Lenders" shall mean Lenders having 66 2/3% of the
Total Commitment.
"Responsible Officer" shall mean, with respect to any person,
any vice president or president, or the chief financial officer or corporate
controller, of such person.
"Revolving Credit Alternate Base Loan" shall mean a Revolving
Credit Loan that is an Alternate Base Loan.
"Revolving Credit Commitment Fee" shall have the meaning set
forth in Section 2.06(a) hereof.
"Revolving Credit Eurodollar Loan" shall mean a Revolving
Credit Loan that is a Eurodollar Loan.
"Revolving Credit Loan" shall mean any Tranche A Revolving
Credit Loan or any Tranche B Revolving Credit Loan.
"Revolving Credit Notes" shall mean the Tranche A Revolving
Credit Notes and the Tranche B Revolving Credit Notes.
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"Revolving Credit Termination Date" shall mean the earlier to
occur of (i) the fifth anniversary of the Closing Date and (ii) such date as the
Revolving Credit Loans shall otherwise be payable in full and the Total
Revolving Credit Commitment shall terminate, expire or be canceled in accordance
with the terms of this Agreement.
"Security Agreement" shall mean the Security Agreement dated
as of the date hereof, between the Grantor(s) referred to therein and the Agent,
for its own benefit and for the benefit of the Lenders, substantially in the
form of Exhibit E annexed hereto, as amended, modified or supplemented from time
to time.
"Security Agreement - Patents and Trademarks" shall mean the
Security Agreement and Mortgage - Patents and Trademarks, dated as of the date
hereof, between the Debtor(s), as such term is defined therein, referred to
therein and the Agent, for its own benefit and for the benefit of the Lenders,
substantially in the form of Exhibit G annexed hereto, as amended, modified or
supplemented from time to time.
"Security Documents" shall mean the Pledge Agreement, the
Security Agreement, the Security Agreement - Patents and Trademarks and each
other agreement now existing or hereafter created providing collateral security
for the payment or performance of any of the Obligations.
"Settlement Date" shall have the meaning assigned to such term
in Section 2.15(c) hereof.
"Subordinated Indebtedness" shall mean, with respect to the
Borrower, Indebtedness subordinated in right of payment to such person's
monetary obligations under this Agreement or the other Loan Documents (as
applicable) upon terms reasonably satisfactory to and approved in writing by the
Agent.
"subsidiary" shall mean, with respect to any person, any
corporation, partnership, association or other business entity of which
securities or other ownership interests representing more than 50% of the equity
or more than 50% of the ordinary voting power are, at the time as of which any
determination is being made, owned or controlled, directly or indirectly, by
such person and/or one or more subsidiaries of such person.
"Taxes" shall have the meaning assigned to such term in
Section 2.16(a) hereof.
"Term Alternate Base Loan" shall mean a Term Loan that is an
Alternate Base Loan.
"Term Eurodollar Loan" shall mean a Term Loan that is a
Eurodollar Loan.
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"Term Loan" shall mean the Term Loan made on the Conversion
Date pursuant to Sections 2.01(c) and 2.02 hereof.
"Term Notes" shall mean the Term Notes of the Borrower when
subsequently executed and delivered as provided in Section 2.04, in
substantially the form of Exhibit B hereto, as amended, modified or supplemented
from time to time.
"Total Commitment" shall mean the sum of the Lenders' Total
Revolving Credit Commitment, as the same may be reduced from time to time
pursuant to this Agreement including, without limitation, Section 2.07 hereof.
"Total Revolving Credit Commitment" shall mean, with respect
to each Lender, the sum of the Tranche A Revolving Credit Commitment of such
Lender as set forth in Schedule 2.01(a), and the Tranche B Revolving Credit
Commitment of such Lender as set forth in Schedule 2.01(b), as each may be
adjusted from time to time pursuant to this Agreement including, without
limitation, Section 2.07 hereof.
"Total Tranche A Revolving Credit Commitment" shall mean the
sum of the Lenders' Tranche A Revolving Credit Commitments, as the same may be
reduced from time to time pursuant to this Agreement including, without
limitation, Section 2.07 hereof.
"Total Tranche B Revolving Credit Commitment" shall mean the
sum of the Lenders' Tranche B Revolving Credit Commitments, as the same may be
reduced from time to time pursuant to this Agreement including, without
limitation, Section 2.07 hereof.
"Tranche A Revolving Credit Commitment" shall mean, with
respect to each Lender, the commitment of such Lender to make Tranche A
Revolving Credit Loans hereunder and participate in Letters of Credit in an
aggregate amount at any time outstanding not in excess of the amount opposite
the name of such Lender in the column entitled "Tranche A Revolving Credit
Commitment" in the table appearing in Schedule 2.01(a), or if applicable, the
amount set forth in the Assignment and Acceptance pursuant to which such Lender
became a Lender hereunder, as such amount may be (a) reduced from time to time
pursuant to this Agreement including, without limitation, Section 2.07 hereof
and (b) reduced or increased from time to time pursuant to assignments by or to
such Lender pursuant to Section 11.03 hereof.
"Tranche A Revolving Credit Loan" shall mean a Revolving
Credit Loan made pursuant to Sections 2.01(a) and 2.02 hereof.
"Tranche A Revolving Credit Notes" shall mean the Tranche A
Revolving Credit Notes of the Borrower, executed and delivered as provided in
Section 2.04 hereof, in substantially the form of Exhibit A-1 annexed hereto, as
amended, modified or supplemented from time to time.
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"Tranche B Revolving Credit Commitment" shall mean, with
respect to each Lender, the commitment of such Lender to make Tranche B
Revolving Credit Loans in an aggregate amount at any time outstanding not in
excess of the amount opposite the name of such Lender in the column entitled
"Tranche B Revolving Credit Commitment" in the table appearing in Schedule
2.01(b), or if applicable, the amount set forth in the Assignment and Acceptance
pursuant to which such Lender became a Lender hereunder, as such amount may be
(a) reduced from time to time pursuant to this Agreement including, without
limitation, Section 2.07 hereof and (b) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 11.03 hereof.
"Tranche B Revolving Credit Loan" shall mean a Revolving
Credit Loan made pursuant to Sections 2.01(b) and 2.02 hereof.
"Tranche B Revolving Credit Notes" shall mean the Tranche B
Revolving Credit Notes of the Borrower, executed and delivered as provided in
Section 2.04 hereof, in substantially the form of Exhibit A-2 annexed hereto, as
amended, modified or supplemented from time to time.
"Transactions" shall have the meaning assigned to such term in
Section 4.02 hereof.
"Transferee" shall have the meaning assigned to such term in
Section 2.16 hereof.
SECTION 1.02. Accounting Terms. Unless otherwise expressly
provided herein, each accounting term used herein shall have the meaning given
it under generally accepted accounting principles in effect from time to time in
the United States ("GAAP"); provided, however, that for purposes of determining
compliance with the covenants contained in Article VII or determining the
Interest Margin, all accounting or financial terms herein shall be interpreted
and all accounting determinations shall be made in accordance with GAAP as in
effect on the date of this Agreement and applied on a basis consistent with that
used in the audited financial statements referred to in Section 4.07.
II. THE LOANS
SECTION 2.01. Revolving Credit Commitments and Term Loan. (a)
Subject to the terms and conditions and relying upon the representations and
warranties herein set forth, each Lender, severally and not jointly, agrees to
make Tranche A Revolving Credit Loans to the Borrower, at any time and from time
to time from the date hereof to the Revolving Credit Termination Date, in an
aggregate principal amount at any time outstanding not to exceed the amount of
such Lender's Tranche A Revolving Credit Commitment set forth opposite its name
in Schedule 2.01(a) annexed hereto, as such Tranche A Revolving Credit
Commitment may be reduced from time to
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time in accordance with the provisions of this Agreement. Not withstanding the
foregoing, the aggregate principal amount of Tranche A Revolving Credit Loans
outstanding at any time to the Borrower shall not exceed (1) the lesser of (a)
the Total Tranche A Revolving Credit Commitment (as such amount may be reduced
pursuant to this Agreement including, without limitation, Section 2.07 hereof)
and (b) an amount equal to the sum of (i) ninety percent (90%) of the Net Amount
of Eligible Receivables, plus (ii) sixty percent (60%) of the Net Amount of
Eligible Inventory (this clause 1(b) referred to herein as the "Borrowing Base")
minus (2) the Letter of Credit Usage at such time (not to exceed $2,000,000 at
any time). If the Agent does not have a current Borrowing Base delivered
pursuant to Section 6.05(i), then a Borrowing Base will be computed and
delivered to the Agent at least two (2) Business Days prior to a request for a
Tranche A Revolving Credit Loan or the opening of a Letter of Credit.
Subject to the foregoing and within the foregoing limits, the
Borrower may borrow, repay (or, subject to the provisions of Section 2.09
hereof, prepay) and reborrow Tranche A Revolving Credit Loans, on and after the
date hereof and prior to the Revolving Credit Termination Date, subject to the
terms, provisions and limitations set forth herein, including, without
limitation, the requirement that no Tranche A Revolving Credit Loan shall be
made hereunder if the amount thereof exceeds the Availability at such time.
(b) Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, each Lender, severally and not
jointly, agrees to make Tranche B Revolving Credit Loans to the Borrower, at any
time and from time to time from the date hereof to the earlier of (i) the
Revolving Credit Termination Date and (ii) the Conversion Date, in an aggregate
principal amount at any time outstanding not to exceed the amount of such
Lender's Tranche B Revolving Credit Commitment set forth opposite its name in
Schedule 2.01(b) annexed hereto, as such Tranche B Revolving Credit Commitment
may be reduced from time to time in accordance with the provisions of this
Agreement. Notwithstanding the foregoing, the aggregate principal amount of
Tranche B Revolving Credit Loans outstanding at any time to the Borrower shall
not exceed the Total Tranche B Revolving Credit Commitment (as such amount may
be reduced pursuant to this Agreement including, without limitation, Section
2.07 hereof).
Subject to the foregoing and within the foregoing limits, the
Borrower may borrow, repay (or, subject to the provisions of Section 2.09
hereof, prepay) and reborrow Tranche B Revolving Credit Loans, on and after the
date hereof and prior to earlier of (i) the Revolving Credit Termination Date
and (ii) the Conversion Date, subject to the terms, provisions and limitations
set forth herein, including, without limitation, the requirement that no Tranche
B Revolving Credit Loan shall be made hereunder if the amount thereof exceeds
the Total Tranche B Revolving Credit Commitment at such time.
(c) Subject to the terms and conditions of this Agreement
including, without limitation, that no Default or Event of Default shall then
exist on the second
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anniversary of the Closing Date (the "Conversion Date"), then, upon notice from
the Borrower and delivery of the applicable Term Notes, the unpaid principal
amount of Tranche B Revolving Credit Loans shall be converted into a Term Loan
(the "Term Loan") from the Lenders.
SECTION 2.02. Loans. (a) The Revolving Credit Loans made by
the Lenders on any date shall be in integral multiples of $100,000 (except that
the foregoing limitation shall not be applicable to the extent that the proceeds
of such Loans are requested to be disbursed to the Borrowers' controlled
disbursement account maintained with the Agent); provided, however, that the
Eurodollar Loans made on any date shall be in a minimum aggregate principal
amount of $1,000,000.
(a) Loans shall be made ratably by the Lenders in accordance
with their respective Tranche A Revolving Credit Commitments or Tranche B
Revolving Credit Commitments, as the case may be; provided, however, that the
failure of any Lender to make any Loan shall not in itself relieve any other
Lender of its obligation to lend hereunder. The initial Tranche A Revolving
Credit Loans shall be made by the Lenders against delivery of Tranche A
Revolving Credit Notes, payable to the order of the Lenders, as referred to in
Section 2.04 hereof. The initial Tranche B Revolving Credit Loans shall be made
by the Lenders against delivery of Tranche B Revolving Credit Notes, payable to
the order of the Lenders, as referred to in Section 2.04 hereof. On the
Conversion Date, the Term Loans to be made by the Lenders shall be made against
delivery of Term Notes payable to the order of the Lenders, as referred to in
Section 2.04.
(b) Each Loan shall be either an Alternate Base Loan or a
Eurodollar Loan as the Borrower may request pursuant to Section 2.03 hereof.
Each Lender may fulfill its obligations under this Agreement by causing its
Applicable Lending Office to make such Loan; provided, however, that the
exercise of such option shall not affect the obligation of the Borrower to repay
such Loan in accordance with the terms of the applicable Note. Loans of more
than one type may be outstanding at the same time, provided, however, not more
than three (3) Eurodollar Loans may be outstanding at any one time.
(c) Subject to the provisions of paragraph (e) below, each
Lender shall make its Term Loan and Revolving Credit Loans on the proposed dates
thereof by paying the amount required to the Agent in New York, New York in
immediately available funds not later than 12:00 noon, New York City time, and
the Agent shall as soon as practicable, but in no event later than 3:00 p.m.,
New York City time, credit the amounts so received to the general deposit
account of the Borrower with the Agent in immediately available funds or, if
Loans are not to be made on such date because any condition precedent to a
borrowing herein specified is not met, return the amounts so received to the
respective Lenders.
(d) The Borrower shall have the right at any time upon prior
irrevocable written, facsimile or telephonic notice (promptly confirmed by
written or facsimile notice)
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to the Agent given in the manner and at the times specified in Section 2.03
hereof with respect to the Loans into which conversion or continuation is to be
made, to convert all or any portion of Eurodollar Loans into Alternate Base
Loans, to convert all or any portion of Alternate Base Loans into Eurodollar
Loans (specifying the Interest Period to be applicable thereto), to convert the
Interest Period with respect to all or any portion of any Eurodollar Loans to
another permissible Interest Period, and to continue all or any portion of any
Eurodollar Loans into a subsequent Interest Period, subject to the terms and
conditions of this Agreement (including the last sentence of Section 2.02(c)
hereof) and to the following:
(i) each conversion or continuation shall be made pro
rata among the Lenders in accordance with the respective
principal amounts of the Loans comprising the conversion or
continuation, and in the case of a conversion or continuation
of fewer than all the Loans, the aggregate principal amount of
Loans converted to Alternate Base Loans shall not be less than
$100,000 or in the case of the continuation of or conversion
to Eurodollar Loans $1,000,000 and shall be an integral
multiple of $100,000;
(ii) accrued interest on a Eurodollar Loan (or
portion thereof) being converted shall be paid by the Borrower
at the time of conversion;
(iii) if any Eurodollar Loan is converted at any time
other than the end of an Interest Period applicable thereto,
the Borrower shall make such payments associated therewith as
are required pursuant to Section 2.12;
(iv) any portion of a Eurodollar Loan maturing or
required to be repaid in less than one month may not be
continued as a Eurodollar Loan and any portion of a Eurodollar
Loan that cannot be continued as a Eurodollar Loan by reason
of the foregoing shall be automatically converted at the end
of the Interest Period in effect into an Alternate Base Loan;
and
(v) at the time of any conversion to, or continuation
of, any Eurodollar Loan, no Default or Event of Default shall
have occurred and be continuing.
The Interest Period applicable to any Eurodollar Loan
resulting from a conversion or continuation shall be specified by the Borrower
in the irrevocable notice of conversion or continuation delivered pursuant to
this Section; provided, however, that if no such Interest Period shall be
specified, the Borrower shall be deemed to have selected an Interest Period of
one month's duration; and, provided further, that no such Interest Period may be
for more than one month for the period commencing on the Closing Date and ending
on the earlier to occur of (x) the 120th day following the Closing Date and (y)
the completion to the satisfaction of The Chase Manhattan Bank
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of the syndication of its portion of the Total Commitment and the Loans and
other Credits thereunder. If the Borrower shall not have given timely notice to
continue any Eurodollar Loan into a subsequent Interest Period (and shall not
otherwise have given notice to convert such Loan), such Loan (unless repaid or
required to be repaid pursuant to the terms hereof) shall automatically be
converted into an Alternate Base Loan. The Agent shall promptly advise the
Lenders of any notice given pursuant to this Section and of each Lender's
portion of the continuation or conversion hereunder.
SECTION 2.03. Notice of Loans. The Borrower shall, through a
Responsible Officer of the Borrower, give the Agent irrevocable written,
facsimile or telephonic notice (promptly confirmed by written or facsimile
notice) of each borrowing (including, without limitation, a conversion or
continuation as permitted by Section 2.02(e) hereof) not later than 11:00 A.M.,
New York City time, (i) three (3) Business Days before a proposed Eurodollar
Loan borrowing, conversion or continuation and (ii) one Business Day before an
Alternate Base Loan borrowing, conversion or continuation (except that no such
confirmation or notice as required by (ii) above will be required, unless
requested by the Agent, to the extent that the proceeds of such borrowing are
requested to be disbursed to Borrower's controlled disbursement account
maintained with the Agent). Such notice shall specify (w) whether the Loans then
being requested are to be Tranche A Revolving Credit Loans or Tranche B
Revolving Credit Loans, (x) whether the Loans then being requested are to be
Alternate Base Loans or Eurodollar Loans (except that no Eurodollar Loans may be
requested until five (5) days after the Closing Date), (y) the date of such
borrowing (which shall be a Business Day) and amount thereof and (z) if such
Loans are to be Eurodollar Loans, the Interest Period with respect thereto. If
no election as to the type of Loan is specified in any such notice, all such
Loans shall be Alternate Base Loans. If no Interest Period with respect to any
Eurodollar Loan is specified in any such notice, then an Interest Period of one
month's duration shall be deemed to have been selected; provided, however, that
no such Interest Period may be for more than one month for the period commencing
on the Closing Date and ending on the earlier to occur of (x) the 120th day
following the Closing Date and (y) the completion to the satisfaction of The
Chase Manhattan Bank of the syndication of its portion of the Total Commitment
and the Loans and other Credits thereunder. The Agent shall promptly advise the
Lenders of any notice given pursuant to this Section 2.03 and of each Lender's
portion of the requested borrowing.
SECTION 2.04. Notes; Repayment of Loans. All Tranche A
Revolving Credit Loans made by a Lender to the Borrower shall be evidenced by a
single Tranche A Revolving Credit Note, duly executed on behalf of the Borrower,
dated the Closing Date, in substantially the form of Exhibit A-1 annexed hereto,
delivered and payable to such Lender in a principal amount equal to its Tranche
A Revolving Credit Commitment on such date. The outstanding balance of each
Tranche A Revolving Credit Loan, as evidenced by any such Tranche A Revolving
Credit Note, shall mature and be due and payable on the Revolving Credit
Termination Date. All Tranche B Revolving Credit Loans made by a Lender to the
Borrower shall be evidenced by a single Tranche B Revolving Credit Note, duly
executed on behalf of the Borrower, dated the Closing
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Date, in substantially the form of Exhibit A-2 annexed hereto, delivered and
payable to such Lender in a principal amount equal to its Tranche B Revolving
Credit Commitment on such date. The outstanding balance of each Tranche B
Revolving Credit Loan, as evidenced by any such Tranche B Revolving Credit Note,
shall mature and be due and payable on the Revolving Credit Termination Date if
such date occurs earlier than the Conversion Date or shall be converted to a
Term Loan on the Conversion Date. The Term Loan made by a Lender on the
Conversion Date shall be evidenced by a single Term Note, duly executed on
behalf of the Borrower, dated the Conversion Date, in substantially the form of
Exhibit B annexed hereto, delivered and payable to such Lender in a principal
amount equal to its share of the Tranche B Revolving Credit Loans being
converted on such date; provided, however, that the failure of the Borrower to
deliver a Term Note shall not affect the liability of the Borrower to repay the
amount of Revolving Credit Loans being converted.
(a) Each Revolving Credit Note shall bear interest from its
date on the outstanding principal balance thereof, as provided in Section 2.05
hereof.
(b) The aggregate principal amount of the Term Loan, as
evidenced by the applicable Term Notes, shall be payable in sixteen (16)
consecutive installments on the last Business Date of each March, June,
September and December of each year (the date of each such installment, a
"Repayment Date"), commencing with the last Business Day of the first full
fiscal quarter succeeding the Conversion Date, in the amount set forth in the
next sentence, and such payments shall be distributed ratably among the Lenders
in accordance with their pro rata share of such Term Loan. Payments of principal
on each Repayment Date (i) occurring between the second anniversary of the
Closing Date and the third anniversary of the Closing Date shall be in equal
amounts to repay in the aggregate an amount equal to 15% of the Term Loan
outstanding on the Conversion Date, (ii) occurring between the third anniversary
of the Closing Date and the fourth anniversary of the Closing Date shall be in
equal amounts to repay in the aggregate an amount equal to 25% of the Term Loan
outstanding on the Conversion Date, (iii) occurring between the fourth
anniversary of the Closing Date and the fifth anniversary of the Closing Date
shall be in equal amounts to repay in the aggregate an amount equal to 30% of
the Term Loan outstanding on the Conversion Date, and (iv) occurring between the
fifth anniversary of the Closing Date and the sixth anniversary of the Closing
Date shall be in equal amounts to repay in the aggregate an amount equal to 30%
of the Term Loan outstanding on the Conversion Date. Payments of principal on
each Repayment Date shall be calculated on an amortization schedule which
assures a maturity date ending four (4) years subsequent to the Conversion Date
and which will be confirmed in writing to the Borrower by the Agent; provided,
however, that the final installment under such Term Note shall be in the amount
of the unpaid principal balance of such Term Note and shall be payable on the
Final Maturity Date.
To the extent not previously paid, the Term Loan shall be due
and payable on the Final Maturity Date. Each Term Note shall bear interest from
its date on the outstanding principal balance thereof, as provided in Section
2.05. All principal
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payments in respect of the Term Loan shall be accompanied by accrued interest on
the principal amount being repaid to the date of payment. No scheduled payment
of principal in respect of the Term Loan shall be made to the extent that a
lesser principal payment would result in the payment in full of the outstanding
amount of the Term Loan, and such lesser amount is paid.
(c) Each Lender, or the Agent on its behalf, shall, and is
hereby authorized by the Borrower to, endorse on the schedule attached to the
Term Note or Revolving Credit Note, as applicable, of such Lender (or on a
continuation of such schedule attached to such Note and made a part thereof) an
appropriate notation evidencing the date and amount of each Loan to the Borrower
from such Lender, as well as the date and amount of each payment and prepayment
with respect thereto; provided, however, that the failure of any person to make
such a notation on a Note shall not affect any obligations of the Borrower under
such Note. Any such notation shall be conclusive and binding as to the date and
amount of such Loan or portion thereof, or payment or prepayment of principal or
interest thereon, absent manifest error.
SECTION 2.05. Interest on Loans. Subject to the provisions of
Section 2.05(c) and Section 2.08 hereof, each Alternate Base Loan shall bear
interest at a rate per annum equal to the Alternate Base Rate plus the
applicable Interest Margin for Alternate Base Loans.
(a) Subject to the provisions of Section 2.05(c) and Section
2.08 hereof, each Eurodollar Loan shall bear interest at a rate per annum equal
to the Adjusted LIBO Rate plus the applicable Interest Margin for Eurodollar
Loans.
(b) Interest on each Loan shall be payable in arrears on each
applicable Interest Payment Date, the Conversion Date, the Revolving Credit
Termination Date and on the Final Maturity Date. Interest on each Alternate Base
Loan shall be computed based on the number of days elapsed in a year of 365 or
366 days, as the case may be. Interest on each Eurodollar Loan shall be computed
based on the number of days elapsed in a year of 360 days. The Agent shall
determine each interest rate applicable to the Loans and shall promptly advise
the Borrower and the Lenders of the interest rate so determined.
SECTION 2.06. Fees. The Borrower shall pay each Lender,
through the Agent, (i) on the first Business Day of each January, April, July
and October commencing October 1, 1998, (ii) on the date of any reduction of the
Total Tranche A Revolving Credit Commitment or the Total Tranche B Revolving
Credit Commitment pursuant to this Agreement including, without limitation,
Section 2.07 hereof and (iii) on the Revolving Credit Termination Date (but not
on the Conversion Date), in immediately available funds, a commitment fee (the
"Revolving Credit Commitment Fee") of one-half of one percent (1/2 of 1%) per
annum on the average daily unused amount of the Total Revolving Credit
Commitment of such Lender, during the quarter (or longer period commencing with
the Closing Date or ending with the Revolving Credit Termination
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Date) ending on such date. The Revolving Credit Commitment Fee due to each
Lender under this Section 2.06 shall commence to accrue on the date hereof and
cease to accrue on the earlier of (i) the Revolving Credit Termination Date and
(ii) the termination of the Total Revolving Credit Commitment of such Lender
pursuant to this Agreement including, without limitation, pursuant to Section
2.07 hereof. The Revolving Credit Commitment Fee shall be calculated on the
basis of the actual number of days elapsed in a year of 360 days.
(a) The Borrower shall pay the Agent the fees referenced in
the Fee Letter pursuant to the terms thereof.
SECTION 2.07. Termination and Reduction of Revolving Credit
Commitments. Upon at least three (3) Business Days' prior irrevocable written,
facsimile or telephonic notice (promptly confirmed by written or facsimile
notice) to the Agent, the Borrower may at any time in whole permanently
terminate, or from time to time in part permanently reduce, the Total Tranche A
Revolving Credit, ratably among the Lenders in accordance with the amounts of
their Tranche A Revolving Credit Commitments; provided, however, that the Total
Tranche A Revolving Credit Commitment shall not be reduced at any time to an
amount less than the Tranche A Revolving Credit Loans outstanding under the
Tranche A Revolving Credit Commitments and the Letter of Credit Usage at such
time. Each partial reduction of the Total Tranche A Revolving Credit Commitment
shall be in a minimum of $100,000 or an integral multiple of $100,000.
(a) Upon at least three (3) Business Days' prior irrevocable
written, facsimile or telephonic notice (promptly confirmed by written or
facsimile notice) to the Agent, the Borrower may at any time in whole
permanently terminate, or from time to time in part permanently reduce, the
Total Tranche B Revolving Credit, ratably among the Lenders in accordance with
the amounts of their Tranche B Revolving Credit Commitments; provided, however,
that the Total Tranche B Revolving Credit Commitment shall not be reduced at any
time to an amount less than the Tranche B Revolving Credit Loans outstanding
under the Tranche B Revolving Credit Commitments at such time. Each partial
reduction of the Total Tranche B Revolving Credit Commitment shall be in a
minimum of $100,000 or an integral multiple of $100,000.
(b) Simultaneously with any termination or reduction of the
Total Commitment pursuant to this Section 2.07, the Borrower shall pay to each
Lender, through the Agent, the Revolving Credit Commitment Fee accrued and
unpaid through and excluding the date of such termination or reduction on the
amount of the Total Revolving Credit Commitment of such Lender so terminated or
reduced.
(c) The Total Commitment shall be permanently reduced on each
date that a prepayment of principal of the Revolving Credit Loans is required
pursuant to Section 2.09(d) or 2.09(e) hereof by the amount of each such
required prepayment. In any event, (i) the Tranche A Revolving Credit Commitment
of each Lender shall
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automatically and permanently terminate on the Revolving Credit Termination
Date, and all Tranche A Revolving Credit Loans still outstanding on such date
shall be due and payable in full together with accrued interest thereon and (ii)
the Tranche B Revolving Credit Commitment of each Lender shall automatically and
permanently terminate on the earlier of (i) the Revolving Credit Termination
Date and (ii) the Conversion Date, and all Tranche B Revolving Credit Loans
still outstanding on such date shall be due and payable in full together with
accrued interest thereon on the Revolving Credit Termination Date, if such date
occurs earlier than the Conversion Date, or shall be converted to a Term Loan on
the Conversion Date.
SECTION 2.08. Interest on Overdue Amounts; Alternate Rate of
Interest. If the Borrower shall default in the payment of the principal of or
interest on any Loan or any other amount becoming due hereunder, by acceleration
or otherwise, the Borrower shall on demand from time to time pay interest, to
the extent permitted by law, on all Obligations outstanding up to the date of
actual payment of such defaulted amount (after as well as before judgment) at a
rate per annum equal to two percent (2%) in excess of the rates otherwise
applicable to the Obligations outstanding pursuant to Section 2.05 in the case
of Loans or Section 2.20 in the case of the letter of credit fees with respect
to Letters of Credit.
(a) In the event, and on each occasion, that on the day two
(2) Business Days prior to the commencement of any Interest Period for a
Eurodollar Loan the Agent shall have determined that dollar deposits in the
amount of each Eurodollar Loan are not generally available in the London
interbank market, or that the rate at which dollar deposits are being offered
will not reflect adequately and fairly the cost to the Required Lenders of
making or maintaining such Eurodollar Loan during such Interest Period, or that
reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the Agent
shall as soon as practicable thereafter give written, facsimile or telephonic
notice (promptly confirmed by written or facsimile notice) of such determination
to the Borrower and the Lenders, and any request by the Borrower for the making
of a Eurodollar Loan pursuant to Section 2.03 hereof or conversion or
continuation of any Loan into a Eurodollar Loan pursuant to Section 2.02 hereof
shall, until the circumstances giving rise to such notice no longer exist, be
deemed to be a request for an Alternate Base Loan. Each determination by the
Agent made hereunder shall be conclusive absent manifest error.
SECTION 2.09. Prepayment of Loans. Subject to the terms and
conditions contained in this Section 2.09 and elsewhere in this Agreement, the
Borrower shall have the right to prepay any Loan at any time in whole or from
time to time in part without penalty (except as otherwise provided for herein);
provided, however, that each such partial prepayment of a Loan shall be in an
integral multiple of $100,000.
(a) On the date of any termination or reduction of the Total
Commitment pursuant to Section 2.07 hereof or elsewhere in this Agreement, the
Borrower shall pay or prepay so much of the Tranche A Revolving Credit Loans as
shall
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be necessary in order that the Availability equals or exceeds zero following
such termination or reduction and so much of the Tranche B Revolving Credit
Loans as shall be necessary in order that the outstanding Tranche B Revolving
Credit Loans is less than or equal to the Tranche B Revolving Commitment as so
reduced or terminated. Any prepayments required by this paragraph (b) shall be
applied to the applicable outstanding Revolving Credit Alternate Base Loans up
to the full amount thereof before they are applied to the applicable outstanding
Revolving Credit Eurodollar Loans; provided, however, that the Borrower shall
not be required to make any prepayment of any Eurodollar Loan pursuant to this
Section until the last day of the Interest Period with respect thereto so long
as an amount equal to such prepayment is deposited by the Borrower in a cash
collateral account with the Agent to be held in such account on terms
satisfactory to the Agent (if not previously applied, such cash collateral shall
be applied by the Agent on the last day of the applicable Interest Period to
repay outstanding Eurodollar Loans as they become due).
(b) The Borrower shall make prepayments of the Tranche A
Revolving Credit Loans from time to time such that the Availability equals or
exceeds zero at all times. Any prepayments required by this paragraph (c) shall
be applied to outstanding Revolving Credit Alternate Base Loans that are Tranche
A Revolving Credit Loans up to the full amount thereof before they are applied
to outstanding Revolving Credit Eurodollar Loans that are Tranche A Revolving
Credit Loans; provided, however, that the Borrower shall not be required to make
any prepayment of any Eurodollar Loan pursuant to this Section until the last
day of the Interest Period with respect thereto so long as an amount equal to
such prepayment is deposited by the Borrower in a cash collateral account with
the Agent to be held in such account on terms satisfactory to the Agent (if not
previously applied, such cash collateral shall be applied by the Agent on the
last day of the applicable Interest Period to repay outstanding Eurodollar Loans
as they become due).
(c) Within three (3) days of the receipt of Net Cash Proceeds
from (i) the sale or other disposition of any assets of any of the Loan Parties
or their subsidiaries (excluding sales permitted by Section 7.05(a) and up to
$500,000 in the aggregate during the term of this Agreement of sales permitted
by Section 7.05(b) and (j)) or of the capital stock of any of the Loan Parties
or (ii) the consummation of the issuance of any debt securities not permitted by
Section 7.02 or Section 7.03 of any of the Loan Parties, the Borrower, unless
otherwise consented to by the Required Lenders, shall make a mandatory
prepayment of the Loans in an amount equal to 100% (or 50% in the case of the
sale of assets that are no longer serviceable and productive as determined by
the Agent in its reasonably discretion) of the Net Cash Proceeds received
(excluding any net proceeds that are to be applied within 180 days of any sale
or other disposition of assets to purchase replacement machinery and equipment;
provided, however, that the Borrower shall make a mandatory prepayment of the
Loans in an amount equal to the amount of any proceeds in excess of that used
for purchasing replacement machinery and equipment on such 180th day, and, if
such net proceeds are greater than $50,000, pending such application or
prepayment such net proceeds shall be maintained in a cash collateral account
with the Agent on terms
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and conditions acceptable to the Agent), which Net Cash Proceeds shall be
applied as set forth in paragraph (g) below. Nothing contained in this paragraph
(d) shall be or be deemed to be a consent to the sale of any assets or stock or
the issuance of any stock or debt securities.
(d) Upon the occurrence of a Change of Control, the Borrower
shall make a mandatory prepayment of the Loans in full.
(e) (i) Except as provided in clause (ii) below, promptly and
in any event not more than three (3) days following the receipt by the Agent or
the Borrower or any subsidiary of the Borrower of any (x) any net proceeds in
excess of $500,000 (or, if there shall be continuing a Default or an Event of
Default, of the full amount of net proceeds) of any casualty insurance required
to be maintained pursuant to Section 6.03 hereof on account of each separate
loss, damage or injury (each, a "Casualty Event") to any asset of the Borrower
or any subsidiary of the Borrower (including, without limitation, any
Collateral), or (y) net proceeds in excess of $500,000 (or, if there shall be
continuing a Default or Event of Default, of the full amount of net proceeds) of
any business interruption insurance required to be maintained pursuant to
Section 6.03 hereof on account of any business interruption event (each, a "BI
Event") the applicable party receiving such proceeds shall notify the other of
such receipt in writing, by facsimile or by telephone (promptly confirmed by
written or facsimile notice), and not later than one Business Day following
receipt by the Agent or the Borrower or subsidiary of any such proceeds, there
shall become due and payable a prepayment of the Loans in an amount equal to
100% of such proceeds. Prepayments from such net proceeds shall be applied as
set forth in paragraph (g) below.
(i) In the case of the receipt of net proceeds described in
clause (i) above with respect to a Casualty Event or BI Event, the Borrower may
elect, by written notice delivered to the Agent not later than the day on which
a prepayment would otherwise be required under clause (i), (x) in the case of
proceeds received with respect to a BI Event, to use such proceeds in the
ordinary course of Borrower's business and (y) in the case of proceeds received
with respect to any Casualty Event, to apply all or a portion of such net
proceeds for the purpose of replacing, repairing, restoring or rebuilding
(referred to herein as a "Rebuilding") the relevant tangible property, and, in
any such event, any required prepayment under clause (i) above shall be reduced
dollar for dollar by the amount of such election under clause (x) or clause (y)
of this sentence. An election under this clause (ii) shall not be effective
unless: (x) at the time of such election there is no continuing Default or Event
of Default; (y) the Borrower shall have certified to the Agent that: (i) the net
proceeds of the insurance adjustment with respect to a Casualty Event, together
with other funds available to the Borrower, shall be sufficient to complete such
Rebuilding in accordance in all material respects with all applicable laws,
regulations and ordinances; and (ii) no Default or Event of Default has arisen
or will arise as a result of such BI Event, Casualty Event or Rebuilding; and
(z) if the amount of net proceeds in question exceeds $1,000,000, the Borrower
shall have obtained the written consent of the Required Lenders to such
election.
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(ii) In the event of an election under clause (ii) above,
pending application of the net proceeds to business operations with respect to a
BI Event or to Rebuilding with respect to a Casualty Event, the Borrower shall
not later than the time at which prepayment would have been, in the absence of
such election, required under clause (i) above, apply such net proceeds to the
prepayment of the outstanding principal balance, if any, of the Revolving Credit
Loans (not in permanent reduction of the Revolving Credit Commitment), and
deposit (the "Special Deposit") with the Agent, the balance, if any, of such net
proceeds remaining after such application, pursuant to agreements in form, scope
and substance reasonably satisfactory to the Agent. The Special Deposit,
together with all earnings on such Special Deposit, shall be available to the
Borrower solely for the applicable Rebuilding or ordinary course business
operations, as the case may be; provided, however, that at such time as a
Default or Event of Default shall occur, the balance of the Special Deposit and
earnings thereon may be applied by the Agent to repay the Obligations in such
order as the Required Lenders shall elect. The Agent shall be entitled to
require reasonable proof, as a condition to the making of any withdrawal from
the Special Deposit, that the proceeds of such withdrawal are being applied for
the purposes permitted hereunder and, in the case of Rebuilding, that the
withdrawal is equivalent to the value of the improvements being rebuilt.
(f) When making a prepayment, pursuant to paragraph (a) above,
the Borrower shall furnish to the Agent, not later than 11:00 a.m. (New York
City time) (i) three (3) Business Days prior to the date of such prepayment of
Alternate Base Loans and (ii) three (3) Business Days prior to the date of such
prepayment of Eurodollar Loans, written, facsimile or telephonic notice
(promptly confirmed by written or facsimile notice) of prepayment which shall
specify the prepayment date and the principal amount of each Loan (or portion
thereof) to be prepaid, which notice shall be irrevocable and shall commit the
Borrower to prepay such Loan by the amount stated therein on the date stated
therein. All prepayments shall be accompanied by accrued interest on the
principal amount being prepaid to the date of prepayment. Prepayments made
pursuant to paragraph (d), (e) or (f)(i) above shall be applied as follows: (A)
first, (i) prior to the Conversion Date, to outstanding Revolving Credit
Alternate Base Loans that are Tranche B Revolving Credit Loans up to the full
amount thereof and then to Revolving Credit Eurodollar Loans that are Tranche B
Revolving Credit Loans up to the full amount thereof, and (ii) following the
Conversion Date, with respect to the Term Loan, to outstanding Term Alternate
Base Loans and then to outstanding Term Eurodollar Loans, to be applied 50% in
the inverse order of their maturity and 50% pro rata over the remaining
installments of principal up to the full amount thereof and (B) second, to
outstanding Revolving Credit Alternate Base Loans that are Tranche A Revolving
Credit Loans up to the full amount thereof and then to Revolving Credit
Eurodollar Loans that are Tranche A Revolving Credit Loans up to the full amount
thereof; provided, however, that if at the time of the making of any prepayment
in accordance with clause (B), there are undrawn Letters of Credit outstanding,
and there has occurred and is continuing an Event of Default, then in the
discretion of the Agent, all or a portion of any such prepayment (not to exceed
an amount equal to the aggregate undrawn amount of all such outstanding Letters
of Credit) shall be deposited
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by the Borrower in a cash collateral account to be held by the Agent for its own
benefit and for the benefit of the Lenders for application by the Agent to the
payment of any drawing made under any such Letters of Credit; and, provided,
however, that the Borrower shall not be required to make any prepayment of any
Term Eurodollar Loan or Revolving Credit Eurodollar Loan required pursuant to
this Section 2.09(g) until the last day of the Interest Period with respect
thereto so long as an amount equal to such prepayment is deposited by the
Borrower into a cash collateral account with the Agent to be held in such
account pursuant to terms satisfactory to the Agent (if not previously applied,
such cash collateral shall be applied by the Agent on the last day of the
applicable Interest Periods to repay outstanding Eurodollar Loans as they become
due).
(g) All prepayments under this Section 2.09 shall be subject
to Section 2.12 hereof.
(h) Except as otherwise expressly provided in this Section
2.09, payments with respect to any paragraph of this Section 2.09 are in
addition to payments made or required to be made under any other paragraph of
this Section 2.09.
(i) All prepayments of the Term Loan under this Section 2.09
shall be applied 50% in the inverse order of their maturity and 50% pro rata
over the remaining installments of principal up to the full amount thereof. The
amount of the Term Loan prepaid may not be reborrowed.
SECTION 2.10. Reserve Requirements; Change in Circumstances.
Notwithstanding any other provision herein, if after the date of this Agreement
(or in the case of any assignee of any Lender, the date of assignment) any
change in applicable law or regulation or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law), shall: (i) subject the Agent or any Lender (which shall for the purpose of
this Section 2.10 include any lending office of any Lender) to any charge, fee,
deduction or withholding of any kind or to any tax with respect to any amount
paid or to be paid to either the Agent or any Lender with respect to any
Eurodollar Loans made by such Lender to the Borrower or with respect to the
obligations of any Lender under Sections 2.17 through 2.20 hereof or under any
Letter of Credit (other than (x) taxes imposed on the overall net income of the
Agent or such Lender, (y) franchise or capital taxes imposed on the Agent or
such Lender, in either case by the jurisdiction in which such Lender or the
Agent has its principal office or its lending office with respect to such
Eurodollar Loan or any political subdivision or taxing authority of either
thereof and (z) taxes imposed by reason of any connection between the
jurisdiction imposing such tax and the Agent, such Lender or such Applicable
Lending Office other than a connection arising solely from this Agreement); (ii)
change the basis of taxation of payments to any Lender or the Agent of the
principal of or interest on any Eurodollar Loan or any other fees or amounts
payable with respect to any Letter of Credit or otherwise hereunder (other than
(x) taxes imposed on the overall net income of such Lender or the Agent, (y)
franchise or capital taxes imposed on the
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Agent or such Lender, in either case by the jurisdiction in which such Lender or
the Agent has its principal office or its lending office with respect to such
Eurodollar Loan or any political subdivision or taxing authority of either
thereof and (z) taxes imposed by reason of any connection between the
jurisdiction imposing such tax and the Agent, such Lender or such Applicable
Lending Office other than a connection arising solely from this Agreement); (ii)
change the basis of taxation of payments to any Lender or the Agent of the
principal of or interest on any Eurodollar Loan or any other fees or amounts
payable with respect to any Letter of Credit or otherwise hereunder (other than
(x) taxes imposed on the overall net income of such Lender or the Agent, (y)
franchise or capital taxes imposed on the Agent or such Lender, in either case,
by the jurisdiction in which such Lender or the Agent has its principal office
or its lending office with respect to such Eurodollar Loan or any political
subdivision or taxing authority of either thereof and (z) taxes imposed by
reason of any connection between the jurisdiction imposing such tax and the
Agent, such Lender or such Applicable Lending Office other than a connection
arising solely from this Agreement); (iii) impose, modify or deem applicable any
reserve, special deposit or similar requirement against assets of, deposits with
or for the account of, or loans or loan commitments extended by, or Letters of
Credit issued and maintained by, such Lender (except any such reserve
requirement reflected in the Adjusted LIBO Rate or in the Alternate Base Rate);
or (iv) impose on any Lender or, with respect to Eurodollar Loans, the London
interbank market, any other condition affecting this Agreement, Letters of
Credit issued and maintained by or Eurodollar Loans made by such Lender; and the
result of any of the foregoing shall be to increase the cost to any such Lender
of making or maintaining any Eurodollar Loan or Letter of Credit, or to reduce
the amount of any payment (whether of principal, interest, fee, compensation or
otherwise) receivable by such Lender, then the Borrower shall pay to such Lender
or the Agent, as the case may be, upon such Lender's or the Agent's demand, such
additional amount or amounts as will compensate such Lender or the Agent for
such additional costs or reduction; provided that the Agent or applicable Lender
has given notice to the Borrower of any such change in law, regulation,
interpretation or administration with reasonable promptness after becoming
actually aware thereof and of the applicability thereof to the Transactions.
Notwithstanding anything contained herein to the contrary, nothing in clause (i)
or (ii) of this Section 2.10(a) shall be deemed to (x) permit the Agent or any
Lender to recover any amount thereunder which would not be recoverable under
Section 2.16 hereof or (y) require the Borrower to make any payment of any
amount to the extent that such payment would duplicate any payment made by the
Borrower pursuant to Section 2.16 hereof.
(a) If at any time and from time to time any Lender shall
determine that the adoption after the date of this Agreement of any applicable
law, rule, regulation or guideline regarding capital adequacy, or any change
after the date of this Agreement in any applicable law, rule, regulation or
guideline regarding capital adequacy, including, without limitation, the July
1988 report of the Basle Committee on Banking Regulations and Supervisory
Practices entitled "International Convergence of Capital Measurement and Capital
Standards", or any change after the date of this Agreement in the interpretation
or administration of any thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by such Lender (or its lending office) with any request or directive
regarding capital adequacy issued or adopted after the date hereof (whether or
not having the force of law) of any such authority, central bank or comparable
agency, has or will have the effect of reducing the rate of return on such
Lender's capital or on the capital of such Lender's holding company, if any, as
a consequence of its obligations hereunder to a level below that which such
Lender could have achieved but for such adoption, change or compliance (taking
into consideration such Lender's policies and the policies of such Lender's
holding company with respect to capital adequacy) by an amount deemed by such
Lender to be material, then from time to time the Borrower shall pay to
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such Lender such additional amount or amounts as will compensate such Lender for
such reduction. Each Lender agrees to give notice to the Borrower of any
adoption of, change in, or change in interpretation or administration of, any
such law, rule, regulation or guideline with reasonable promptness after
becoming actually aware thereof and of the applicability thereof to the
Transactions.
(b) A statement of any Lender or the Agent setting forth such
amount or amounts, supported by calculations in reasonable detail, as shall be
necessary to compensate such Lender (or the Agent) as specified in paragraphs
(a) and (b) above shall be delivered to the Borrower and shall be conclusive
absent manifest error. The Borrower shall pay each Lender or the Agent the
amount shown as due on any such statement within ten (10) days after its receipt
of the same.
(c) Failure on the part of any Lender or the Agent to demand
compensation for any increased costs, reduction in amounts received or
receivable with respect to any Interest Period or any Letter of Credit or
reduction in the rate of return earned on such Lender's capital, shall not
constitute a waiver of such Lender's or the Agent's rights to demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in rate of return in such Interest Period or in any
other Interest Period or with respect to any Letter of Credit. The protection
under this Section 2.10 shall be available to each Lender and the Agent
regardless of any possible contention of the invalidity or inapplicability of
any law, regulation or other condition which shall give rise to any demand by
such Lender or the Agent for compensation.
(d) Any Lender claiming any additional amounts payable
pursuant to this Section 2.10 agrees to use reasonable efforts (consistent with
legal and regulatory restrictions) to designate a different Applicable Lending
Office if the making of such a designation would avoid the need for, or reduce
the amount of, any such additional amounts and would not, in the reasonable
judgment of such Lender, be otherwise disadvantageous to such Lender.
SECTION 2.11. Change in Legality. Notwithstanding anything to
the contrary herein contained, if after the date hereof, any change in any law
or regulation or in the interpretation thereof by any governmental authority
charged with the administration or interpretation thereof shall make it unlawful
for any Lender to make or maintain any Eurodollar Loan or to give effect to its
obligations to make Eurodollar Loans as contemplated hereby, then, by written
notice to Borrower and to the Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter
be made by such Lender hereunder (or be continued for
additional Interest Periods and Alternate Base Loans will not
thereafter be converted into Eurodollar Loans), whereupon the
Borrower shall be prohibited from requesting Eurodollar Loans
from such Lender hereunder unless such declaration is
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subsequently withdrawn and any such request shall be deemed a
request for an Alternate Base Loan; and
(ii) require that all outstanding Eurodollar Loans,
made by such Lender be converted to Alternate Base Loans, in
which event (A) all such Eurodollar Loans shall be
automatically converted to Alternate Base Loans as of the
effective date of such notice as provided in paragraph (b)
below and (B) if the Lender shall exercise its rights under
(i) or (ii) all payments of principal which would otherwise
have been applied to repay the Eurodollar Loans that would
have been made by such Lender or the converted Eurodollar
Loans of such Lender shall instead be applied to repay the
Alternate Base Loans made by such Lender in lieu of, or
resulting from the conversion of, such Eurodollar Loans.
(a) For purposes of Section 2.11(a) hereof, a notice to the
Borrower by any Lender shall be effective as to each Eurodollar Loan made by
such Lender, if lawful, on the last day of the then current Interest Period;
otherwise, such notice shall be effective on the date of receipt by the
Borrower.
SECTION 2.12. Indemnity. The Borrower shall indemnify the
Agent and each Lender against any loss or reasonable expense which the Agent or
such Lender may sustain or incur as a consequence of the following events
(regardless of whether such events occur as a result of the occurrence of an
Event of Default or the exercise of any right or remedy of the Agent or the
Lenders under this Agreement or any other agreement, or at law): (a) any failure
of the Borrower to fulfill on the date of any Credit Event the applicable
conditions set forth in Article V hereof applicable to it; (b) any failure of
the Borrower to borrow hereunder after irrevocable notice of borrowing pursuant
to Section 2.03 hereof has been given; (c) any payment, prepayment or conversion
of a Eurodollar Loan on a date other than the last day of the relevant Interest
Period; or (d) any default in payment or prepayment of the principal amount of
any Loan or any part thereof or interest accrued thereon, or with respect to any
Letter of Credit, in each case as and when due and payable (at the due date
thereof, by irrevocable notice of prepayment or otherwise). Such loss or
reasonable expense shall include, without limitation, an amount as reasonably
determined by such Lender equal to the excess, if any, of (i) the amount of
interest which would have accrued on the principal or other amount so paid,
prepaid or converted or not borrowed for the period from the date of such
payment, prepayment or conversion or failure to borrow to, in the case of a
Loan, the last day of the Interest Period for such Loan (or, in the case of a
failure to borrow, the Interest Period for such Loan which would have commenced
on the date of such failure to borrow), at the applicable rate of interest for
such Loan provided for herein over (ii) the amount of interest (as reasonably
determined by such Lender) that would be realized by such Lender in reemploying
the funds so paid, prepaid or converted or not borrowed for such period or
Interest Period, as the case may be. Any such Lender shall provide to the
Borrower a statement, signed by an officer of such Lender, explaining any loss
or expense and setting forth, if applicable, the computation pursuant to the
preceding sentence, and such statement shall be
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conclusive absent manifest error. The Borrower shall pay such Lender the amount
shown as due on any such statement within ten (10) days after the receipt of the
same. The indemnities contained in this Section 2.12 shall survive for one year
after the expiration or termination of this Agreement and of the Letters of
Credit.
(a) In the event that any Lender shall have delivered a notice
or certificate pursuant to Section 2.10 or 2.11, or the Borrower shall be
required to make additional payments to any Lender under Section 2.16, the
Borrower shall have the right, at its own expense, upon at least 60 days prior
written notice to such Lender and the Agent, to require such Lender to transfer
and assign without recourse (in accordance with and subject to the restrictions
contained in Section 11.03) all its interests, rights and obligations under this
Agreement to one or more other financial institutions approved by the Agent
(which approval shall not be unreasonably withheld) which shall assume such
obligations. A Lender shall not be required to make any such transfer and
assignment unless all Obligations owing to such Lender, including those pursuant
to Sections 2.10, 2.11 and 2.16, have been paid in full, and no Lender shall be
required to make any such transfer and assignment if prior thereto, as a result
of a waiver, the circumstances entitling the Borrower to require such transfer
and assignment cease to apply.
SECTION 2.13. Pro Rata Treatment; Assumption by and Delegation
of Authority to the Agent. Except as permitted under Sections 2.10, 2.11, 2.12,
2.15(c) and 2.16 hereof, or as described in subsection (d) below each borrowing,
each payment or prepayment of principal of the Notes, each payment of interest
on the Notes, each payment of any fee or other amount payable hereunder and each
reduction of the Total Tranche A Revolving Credit Commitment and the Total
Tranche B Revolving Credit Commitment shall be made pro rata among the Lenders
in the proportions that their Tranche A Revolving Credit Commitments bear to the
Total Tranche A Revolving Credit Commitment, that their Tranche B Revolving
Credit Commitments bears to the Total Tranche B Revolving Credit Loan
Commitment, or that the aggregate principal amount of such Lender's Term Loans
bears to the aggregate principal amount of the Term Loans made by all Lenders,
as the case may be.
(a) Notwithstanding the occurrence or continuance of a Default
or Event of Default or other failure of any condition to the making of Loans or
occurrence of other Credit Events hereunder subsequent to the Credit Events on
the Closing Date, unless the Agent shall have been notified in writing by any
Lender in accordance with the provisions of paragraph (c) below prior to the
date of a proposed Credit Event that such Lender will not make the amount that
would constitute its pro rata share of the applicable Credits on such date
available to the Agent, the Agent may assume that such Lender has made such
amount available to the Agent on such date, and the Agent may, in reliance upon
such assumption, make available to the Borrower a corresponding amount. If such
amount is made available to the Agent on a date after such Credit Event date,
such Lender shall pay to the Agent on demand an amount equal to the product of
(i) the daily average Federal funds rate during such period as quoted by the
Agent, times (ii) the amount of such Lender's pro rata share of such
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Credits, times (iii) a fraction the numerator of which is the number of days
that elapse from and including such Credit Event date to the date on which such
Lender's pro rata share of such Credits shall have become immediately available
to the Agent and the denominator of which is 360. A certificate of the Agent
submitted to any Lender with respect to any amounts owing under this subsection
shall be conclusive in the absence of manifest error. If such Lender's pro rata
share of such Credits is not in fact made available to the Agent by such Lender
within three Business Days of such Credit Event date, the Agent shall be
entitled to recover such amount with interest thereon at the rate per annum
applicable to the Loans hereunder, on demand, from the Borrower.
(b) Unless and until the Agent shall have received notice from
the Required Lenders as to the existence of a Default, an Event of Default or
some other circumstance which would relieve the Lenders of their respective
obligations to extend Credits hereunder, which notice shall be in writing and
shall be signed by the Required Lenders and shall expressly state that the
Required Lenders do not intend to make available to the Agent such Lenders'
ratable share of Credits extended after the effective date of such notice, the
Agent shall be entitled to continue to make the assumptions described in Section
2.13(b) above. After receipt of the notice described in the preceding sentence,
which shall become effective on the third Business Day after receipt of such
notice by the Agent (unless otherwise agreed by the Agent), the Agent shall be
entitled to make the assumptions described in Section 2.13(b) above as to any
Credits as to which it has not received a written notice to the contrary prior
to 11:00 a.m. (New York time) on the Business Day next preceding the day on
which such Credits are to be extended. The Agent shall not be required to extend
a Lender's ratable portion of any Credits if it shall have received notice from
such Lender of such Lender's intention not to make its ratable portion of such
Credits available to the Agent. Any withdrawal of authorization as described
under this Section 2.13(c) shall not affect the validity of any Credits extended
prior to the effectiveness thereof.
(c) In the event that any Lender fails to fund its ratable
portion (based on its applicable Tranche A Revolving Credit Commitment or
Tranche B Revolving Credit Commitment) of any Revolving Credit Loan which such
Lender is obligated to fund under the terms of this Agreement (the funded
portion of such borrowing being hereinafter referred to as a "Non Pro Rata
Loan"), until the earlier of such Lender's cure of such failure or the
termination of the Total Commitment, in the Agent's sole discretion, the
proceeds of all amounts thereafter repaid to Agent for the benefit of the
Lenders by the Borrower and otherwise required to be applied to such Lender's
share of any other Obligation pursuant to the terms of this Agreement, may be
advanced to the Borrower by the Agent on behalf of such Lender to cure, in full
or in part, such failure by such Lender, but shall nevertheless be deemed to
have been paid to such Lender in satisfaction of such other Obligation.
Notwithstanding anything in this Agreement to the contrary:
(i) the foregoing provisions to this subsection (d)
shall apply only with respect to the proceeds of payments of
Obligations and shall not affect the conversion or
continuation of Loans pursuant to Section 2.02;
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(ii) any such Lender shall be deemed to have cured
its failure to fund at such time as an amount equal to such
Lender's ratable portion (based on its applicable Tranche A
Revolving Credit Commitment or Tranche B Revolving Credit
Commitment) of the requested principal portion of such
Revolving Credit Loan is fully funded to the Borrower whether
made by such Lender itself or by operation of the terms of
this subsection (d) and whether or not the Non Pro Rata Loan
with respect thereto has been converted or continued;
(iii) amounts advanced to the Borrower to cure, in
full or in part, any such Lender's failure to fund its
Revolving Credit Loans ("Cure Loans") shall bear interest at
the rate applicable to Alternate Base Loans under Section 2.05
in effect from time to time, and for all other purposes of
this Agreement shall be treated as if they were Alternate Base
Loans;
(iv) Regardless of whether or not an Event of Default
has occurred and is continuing, and notwithstanding the
instructions of the Borrower as to their desired application,
all repayments of principal which would be applied to the
outstanding Revolving Credit Alternate Base Loans shall be
applied first, ratably to Revolving Credit Alternate Base
Loans constituting Non Pro Rata Loans, second, ratably to
Revolving Credit Alternate Base Loans other than those
constituting Non Pro Rata Loans or Cure Loans and, third,
ratably to Revolving Credit Alternate Base Loans constituting
Cure Loans;
(v) for so long as, and until the earlier of any such
Lender's cure of the failure to fund its ratable portion
(based on its applicable Tranche A Revolving Credit Commitment
or Tranche B Revolving Credit Commitment) of any Revolving
Credit Loan and the termination of the Total Commitment, the
term "Required Lenders" for all purposes of this Agreement
shall exclude all Lenders whose failure to fund their ratable
portion (based on their respective applicable Tranche A
Revolving Credit Commitment or Tranche B Revolving Credit
Commitment) of any Revolving Credit Loan have not been cured;
and
(vi) for so long as, and until any such Lender's
failure to fund its ratable portion (based on its applicable
Tranche A Revolving Credit Commitment or Tranche B Revolving
Credit Commitment) of any Revolving Credit Loan is cured in
accordance with this subsection (d), such Lender shall not be
entitled to any Revolving Credit Commitment Fee with respect
to its Total Revolving Credit Commitment.
SECTION 2.14. Sharing of Setoffs. Each Lender agrees that if
it shall, through the exercise of a right of banker's lien, setoff or
counterclaim against any Loan Party, including, but not limited to, a secured
claim under Section 506 of Title 11 of the
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United States Code or other security or interest arising from, or in lieu of,
such secured claim, received by such Lender under any applicable bankruptcy,
insolvency or other similar law or otherwise, obtain payment (voluntary or
involuntary) in respect of a Note or exposure under the Letter of Credit Usage
held by it as a result of which the unpaid principal portion of the Notes or
exposure under the Letter of Credit Usage held by it shall be proportionately
less than the unpaid principal portion of the Notes or exposure under the Letter
of Credit Usage held by any other Lender, it shall be deemed to have
simultaneously purchased from such other Lender a participation in the Notes or
exposure under the Letter of Credit Usage held by such other Lender, so that the
aggregate unpaid principal amount of the Notes and exposure under the Letter of
Credit Usage and participations in Notes and exposure under the Letter of Credit
Usage held by it shall be in the same proportion to the aggregate unpaid
principal amount of all Notes and exposure under the Letter of Credit Usage then
outstanding as the principal amount of the Notes and exposure under the Letter
of Credit Usage held by it prior to such exercise of banker's lien, setoff or
counterclaim was to the principal amount of all Notes and exposure under the
Letter of Credit Usage outstanding prior to such exercise of banker's lien,
setoff or counterclaim; provided, however, that if any such purchase or
purchases or adjustments shall be made pursuant to this Section 2.14 and the
payment giving rise thereto shall thereafter be recovered, such purchase or
purchases or adjustments shall be rescinded to the extent of such recovery and
the purchase price or prices or adjustments restored without interest. The
Borrower and Guarantors expressly consent to the foregoing arrangements and
agree that any Lender holding a participation in a Note or exposure under the
Letter of Credit Usage deemed to have been so purchased may exercise any and all
rights of banker's lien, setoff or counterclaim with respect to any and all
moneys owing by the Borrower to such Lender as fully as if such Lender held a
Note or exposure under the Letter of Credit Usage in the amount of such
participation.
SECTION 2.15. Payments and Computations. The Borrower shall
make each payment hereunder and under any instrument delivered hereunder not
later than 12:00 noon (New York City time) on the day when due in lawful money
of the United States (in freely transferable dollars) to the Agent at its
offices at 200 Jericho Quadrangle, Jericho, New York 11753 for the account of
the Lenders, in immediately available funds, without set-off or counterclaim.
Any amounts received after such time on any date may, in the discretion of the
Agent, be deemed to have been received on the next succeeding Business Day for
purposes of calculating interest thereon. The Agent shall distribute any such
payments received by it for the account of any other person to the appropriate
recipient promptly following receipt thereof. The Agent may charge, when due and
payable, any of the Borrower's accounts with the Agent (including, without
limitation, the Borrower's revolving credit loan account) with the Agent for all
interest, principal and Revolving Credit Commitment Fees or other fees owing to
the Agent or the Lenders on or with respect to this Agreement and/or the Loans
and other Loan Documents. If at any time there is not sufficient availability to
cover any of the payments referred to in the prior sentence, and in any event
upon the occurrence of any Default, the Borrower shall make any such payments
upon demand.
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(a) If Agent pays an amount to a Lender under this Agreement
in the belief or expectation that a related payment has been or will be received
by Agent from the Borrower and such related payment is not received by Agent,
then Agent will be entitled to recover such amount from such Lender without
setoff, counterclaim or deduction of any kind. If Agent determines at any time
that any amount received by Agent under this Agreement must be returned to the
Borrower or paid to any other person pursuant to any solvency law or otherwise,
then, notwithstanding any other term or condition of this Agreement, Agent will
not be required to distribute any portion thereof to any Lender. In addition,
each Lender will repay to Agent on demand any portion of such amount that Agent
has distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to the Borrower or such other person, without setoff,
counterclaim or deduction of any kind.
(b) The outstanding principal balance of Tranche A and Tranche
B Revolving Credit Loans may fluctuate from day to day, through Agent's
disbursement of funds to, and receipt of funds from the Borrower. In order to
minimize the frequency of transfers of funds between Agent and each Lender,
Tranche A Revolving Credit Loans and payments may be settled according to the
following procedures. On the third Business Day of each week, or more frequently
(including daily), if Agent so elects (each such day being a "Settlement Date"),
Agent will advise each Lender by telephone, telex or telecopy of the amount of
each such Lender's actual dollar investment and its ratable portion (based on
its Tranche A Revolving Credit Commitment) of the outstanding principal balance
of Tranche A Revolving Credit Loans as of the close of business on the third
Business Day immediately preceding the Settlement Date. In the event that
payments are necessary to adjust the amount of such Lender's actual dollar
investment in the outstanding principal balance of Tranche A Revolving Credit
Loans to such Lender's ratable portion (based on its Tranche A Revolving Credit
Commitment) of the outstanding principal balance of Tranche A Revolving Credit
Loans as of any Settlement Date (based on the outstanding balances as of the
close of business on the third Business Day immediately preceding such
Settlement Date), the party from which such payment is due will pay the other,
in immediately available funds, by wire transfer to the other's account not
later than 2:00 p.m. (New York time) on the Settlement Date. Notwithstanding the
foregoing, if Agent so elects, Agent may require that each Lender make its
ratable portion (based on its Tranche A Revolving Credit Commitment) of any
requested Tranche A Revolving Credit Loan available to Agent for disbursement on
the date of funding applicable to such Tranche A Revolving Credit Loan in
accordance with Sections 2.02(d) and 2.03 hereof. Notwithstanding these
procedures, each Lender's obligation to fund its portion of each Tranche A
Revolving Credit Loan made by Agent to Borrower will commence on the date such
advance is made by Agent.
SECTION 2.16. Taxes. Any and all payments by the Borrower for
the account of the Agent of any Lender hereunder shall be made, in accordance
with Section 2.15 hereof, free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges or
withholdings in any such case imposed by the United States or any political
subdivision thereof, excluding:
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(i) in the case of the Agent and each Lender (or any
transferee or assignee thereof (any such entity, a
"Transferee")), (A) taxes imposed or based on its net income,
and franchise or capital taxes imposed on it (including
withholding with respect to taxes imposed or based on its net
income or with respect to franchise or capital taxes), or (B)
taxes payable under laws (including, without limitation, any
treaty, ruling, determination or regulation) in effect on the
date hereof (or in effect on the date (i) a Transferee becomes
a party to this Agreement or (ii) a new Applicable Lending
Office is designated), but not any increase in withholding tax
resulting from any subsequent change in such laws,
(ii) taxes (including withholding taxes) imposed by
reason of the failure of the Agent or any Lender or any
Transferee, in each case that is organized outside the United
States, to comply with Section 2.16(f) hereof (or the
inaccuracy at any time of the certificates, documents and
other evidence delivered thereunder), and
(iii) taxes imposed by reason of any connection
between the jurisdiction imposing such tax and the Agent, such
Lender or such Applicable Lending Office, other than a
connection arising solely from this Agreement and the other
Loan Documents
(the taxes referred to in the foregoing clauses (i), (ii) and (iii) individually
or collectively being called "Excluded Taxes" and all such nonexcluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to the Lenders
or the Agent, (x) the sum payable shall be increased by the amount necessary so
that after making all required deductions such Lender or the Agent (as the case
may be) receives an amount equal to the sum it would have received had no such
deductions been made, (y) the Borrower shall make such deductions and (z) the
Borrower shall pay the full amount deducted to the relevant tax authority or
other authority in accordance with applicable law.
(a) In addition, the Borrower agrees to pay to the relevant
governmental authority in accordance with applicable United States law any
present or future stamp or documentary or similar taxes or any other excise or
property taxes, charges or similar levies which arise from the execution,
delivery or registration of, or otherwise with respect to, this Agreement
(hereinafter referred to as "Other Taxes").
(b) The Borrower will indemnify each Lender and the Agent for
the full amount of Taxes or Other Taxes paid directly by such Lender or the
Agent (as the case may be) and any liability (including penalties, interest and
expenses other than those resulting primarily from a failure by the Lender or
the Agent to pay any Taxes or Other Taxes which it is required to pay and for
which it received an indemnity payment) arising therefrom or with respect
thereto. This indemnification shall be made within 30
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days from the date such Lender or the Agent (as the case may be) makes written
demand therefor. If any Lender shall become aware that it is entitled to receive
a refund in respect of any Taxes or Other Taxes, it shall promptly notify the
Borrower thereof and shall promptly apply for such refund. If any Lender
receives a refund in respect of any Taxes or Other Taxes for which such Lender
has received payment from the Borrower hereunder, such Lender shall promptly
notify the Borrower of such refund and such Lender shall promptly repay such
refund to the Borrower, provided that the Borrower, upon the request of such
Lender, agrees to return such refund (plus any penalties, interest or other
charges) to such Lender in the event such Lender is required to repay such
refund.
(c) Within 30 days after the date of any payment of Taxes or
Other Taxes withheld by the Borrower in respect of any payment to any Lender,
the Borrower will furnish to the Agent, at its address referred to in Section
11.01 hereof, such certificates, receipts and other documents as may be
reasonably required to evidence payment thereof.
(d) Without prejudice to the survival of any other agreement
hereunder, the agreements and obligations contained in this Section 2.16 shall
survive the payment in full of principal and interest hereunder.
(e) Each Lender or Transferee that is organized outside of the
United States (a "Non-U.S. Lender") shall deliver to the Borrower or any
Guarantor, as the case may be, (with copies to the Agent) on the date hereof
(or, in the case of a Transferee, on the date of the assignment) and from time
to time as required for renewal under applicable law duly completed copies of
such certificates, documents or other evidence, as required by the Code or
Treasury Regulations issued pursuant thereto, including without limitation
Internal Revenue Service Form 4224, Form 1001 or any subsequent version thereof,
indicating in each case that such Lender is entitled to receive payments under
this Agreement without any deduction or withholding of any United States federal
income taxes. The Agent (if the Agent is an entity organized outside the United
States) and each Non-U.S. Lender shall promptly notify the Borrower and the
Agent of any change in its Applicable Lending Office and such Non-U.S. Lender
shall on or before the date such Non-U.S. Lender changes its Applicable Lending
Office, deliver to the Borrower or such Guarantor, as the case may be (with
copies to the Agent) such forms described in the preceding sentence revised as
necessary to reflect the change in such Non-U.S. Lender's Applicable Lending
Office. The Borrower or such Guarantor, as the case may be, shall be entitled to
rely on such forms in its possession until receipt of any revised or successor
form pursuant to this Section 2.16(f). If the Agent or a Lender fails to provide
a certificate, document or other evidence required pursuant to this Section
2.16(f), then (i) the Borrower shall be entitled to deduct or withhold on
payments to the Agent or such Lender as a result of such failure, as required by
law, and (ii) the Borrower shall not be required to make payments of additional
amounts with respect to such withheld Taxes pursuant to clause (x) of Section
2.16(a) to the extent such withholding is required by reason of the failure of
the Agent or such Lender to provide the necessary certificate, document or other
evidence.
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(f) Each Lender and the Agent shall use reasonable efforts to
avoid or minimize any amounts which might otherwise be payable pursuant to this
Section 2.16 (including, without limitation, changing its Applicable Lending
Office, transferring Loans to an Affiliate and seeking refunds of any amounts
that are reasonably believed not to have been correctly or legally asserted);
provided, however, that such efforts shall not include the taking of any actions
by such Lender or the Agent that would result in any tax, cost or other expense
to such Lender or the Agent (other than a tax, cost or other expense for which
such Lender or the Agent shall have been reimbursed or indemnified by the
Borrower pursuant to this Agreement or otherwise) or any action which would or
might in the reasonable opinion of such Lender or the Agent have an adverse
effect upon its business, operations or financial condition or otherwise be
disadvantageous to such Lender or the Agent.
SECTION 2.17. Issuance of Letters of Credit. Upon the request
of the Borrower, and subject to the conditions set forth in Article V hereof and
such other conditions to the opening of letters of credit as the Agent requires
of its customers generally, the Agent shall from time to time open documentary
or standby letters of credit (each, a "Letter of Credit" and collectively, the
"Letters of Credit") for the account of the Borrower, the aggregate undrawn
amount of all outstanding Letters of Credit not at any time to exceed
$2,000,000; provided, however, that the Borrower may not request the Agent to
open a Letter of Credit if after giving effect thereto (measured by the face
amount of such Letter of Credit) Availability would be less than zero. The
issuance of each Letter of Credit shall be made on at least three (3) Business
Days' prior written notice from the Borrower to the Agent, at its Domestic
Lending Office, which written notice shall be an application for a Letter of
Credit on the Agent's customary form completed to the satisfaction of the Agent,
together with the proposed form of the Letter of Credit (which shall be
satisfactory to the Agent) and such other certificates, documents and other
papers and information as the Agent may reasonably request. The Agent shall not
at any time be obligated to issue any Letter of Credit if such issuance would
conflict with, or cause the Agent or any Lender to exceed any limits imposed by,
any applicable requirements of law. The expiration date of any (i) documentary
Letter of Credit shall not be later than 120 days from the date of issuance
thereof and (ii) any standby Letter of Credit shall not be later than 360 days
from the date of issuance thereof, and, in any event, no Letter of Credit shall
have an expiration date later than 30 days prior to the Revolving Credit
Termination Date or, if the Borrower has provided cash collateral to be
maintained in a cash collateral account with the Agent on terms and conditions
acceptable to the Agent, 180 days past the Revolving Credit Termination Date.
The Letters of Credit shall be issued with respect of transactions occurring in
the ordinary course of business of the Borrower or any of its subsidiaries.
SECTION 2.18. Payment of Letters of Credit; Reimbursement.
Upon the issuance of any Letter of Credit, the Agent shall notify each Lender of
the principal amount, the number, and the expiration date thereof and the amount
of such Lender's participation therein. By the issuance of a Letter of Credit
hereunder and without
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further action on the part of the Agent or the Lenders, each Lender hereby
accepts from the Agent a participation (which participation shall be nonrecourse
to the Agent) in such Letter of Credit equal to such Lender's pro rata (based on
its Tranche A Revolving Credit Commitment) share of such Letter of Credit,
effective upon the issuance of such Letter of Credit. At such time as the Agent
shall advise each Lender of its outstanding balance of Tranche A Revolving
Credit Loans pursuant to Section 2.15(c) hereof, the Agent will also advise such
Lender of its present letter of credit exposure under the Letters of Credit.
Each Lender hereby absolutely and unconditionally assumes, as primary obligor
and not as a surety, and agrees to pay and discharge, and to indemnify and hold
the Agent harmless from liability in respect of, such Lender's share of the
amount of any drawing under a Letter of Credit. Each Lender acknowledges and
agrees that its obligation to acquire participations in each Letter of Credit
issued by the Agent and its obligation to make the payments specified herein,
and the right of the Agent to receive the same, in the manner specified herein,
are absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, the occurrence and continuance of a
Default or an Event of Default hereunder, and that each such payment shall be
made without any offset, abatement, withholding or reduction whatsoever. The
Agent shall review, on behalf of the Lenders, each draft and any accompanying
documents presented under a Letter of Credit and shall notify each Lender of any
such presentment. Promptly after it shall have ascertained that any draft and
any accompanying documents presented under such Letter of Credit appear on their
face to be in substantial conformity with the terms and conditions of the Letter
of Credit, the Agent shall give telephonic (promptly confirmed in writing) or
facsimile notice to the Lenders and the Borrower of the receipt and amount of
such draft and the date on which payment thereon will be made, and the Lenders
shall, by 11:00 a.m., New York City time on the date such payment is to be made,
pay the amounts required to the Agent in New York, New York in immediately
available funds, and the Agent, not later than 3:00 P.M. on such day, shall make
the appropriate payment to the beneficiary of such Letter of Credit. If in
accordance with the prior sentence the Lenders shall pay any draft presented
under a Letter of Credit, then the Agent, on behalf of the Lenders, shall charge
the revolving credit loan account of the Borrower with the Agent for the amount
thereof, together with the Agent's customary overdraft fee in the event the
funds available in such account shall not be sufficient to reimburse the Lenders
for such payment and the Borrower shall not otherwise have discharged such
reimbursement obligation by 11:00 a.m., New York City time, on the date of such
payment. If the Lenders have not been reimbursed with respect to such drawing as
provided above, the Borrower shall pay to the Agent, for the account of the
Lenders, the amount of the drawing together with interest on such amount at a
rate per annum (computed on the basis of the actual number of days elapsed over
a year of 360 days) equal to the rate applicable to Alternate Base Loans
hereunder plus two percent (2%), payable on demand. The obligations of the
Borrower under this Section 2.18 to reimburse the Lenders and the Agent for all
drawings under Letters of Credit shall be absolute, unconditional and
irrevocable and shall be satisfied strictly in accordance with their terms,
irrespective of:
(a) any lack of validity or enforceability of any Letter of
Credit;
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(b) the existence of any claim, setoff, defense or other right
which the Borrower or any other person may at any time have against the
beneficiary under any Letter of Credit, the Agent or any Lender (other
than the defense of payment in accordance with the terms of this
Agreement or a defense based on the gross negligence or willful
misconduct of the Agent or any Lender) or any other person in
connection with this Agreement or any other transaction;
(c) any draft 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;
(d) payment by the Agent or any Lender under any Letter of
Credit against presentation of a draft or other document which does not
comply with the terms of such Letter of Credit; and
(e) any other circumstance or event whatsoever, whether or not
similar to any of the foregoing that might, but for the provisions of
this Section, constitute legal or equitable discharge of the Borrower's
obligations under this Section.
It is understood that in making any payment under any Letter
of Credit (x) the Agent's and any Lender's exclusive reliance on the documents
presented to it under such Letter of Credit as to any and all matters set forth
therein, including, without limitation, reliance on the amount of any draft
presented under such Letter of Credit, whether or not the amount due to the
beneficiary equals the amount of such draft and whether or not any document
presented pursuant to such Letter of Credit proves to be insufficient in any
respect, if such document on its face appears to be in order, and whether or not
any other statement or any other document presented pursuant to such Letter of
Credit proves to be forged or invalid or any statement therein proves to be
inaccurate or untrue in any respect whatsoever and (y) any noncompliance in any
immaterial respect of the documents presented under such Letter of Credit with
the terms thereof shall, in each case, not be deemed willful misconduct or gross
negligence of the Agent or any Lender.
SECTION 2.19. Agent's Actions with respect to Letters of
Credit. Any Letter of Credit may, in the discretion of the Agent or its
correspondents, be interpreted by them (to the extent not inconsistent with such
Letter of Credit) in accordance with the Uniform Customs and Practice for
Documentary Credits of the International Chamber of Commerce, as adopted or
amended from time to time, or any other rules, regulations and customs
prevailing at the place where any Letter of Credit is available or the drafts
are drawn or negotiated. The Agent and its correspondents may accept and act
upon the name, signature, or act of any party purporting to be the executor,
administrator, receiver, trustee in bankruptcy, or other legal representative of
any party designated in any Letter of Credit in the place of the name,
signature, or act of such party.
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SECTION 2.20. Letter of Credit Fees. The Borrower agrees to
pay to the Agent for the account of each Lender a participation fee with respect
to its participations in Letters of Credit, which shall accrue at a rate per
annum equal to the Interest Margin for Eurodollar Loans from time to time in
effect, minus 1/4 of 1% on the average daily amount of such Lender's pro rata
share of the Letter of Credit Usage (excluding any portion attributable to
unreimbursed drawings) during the period from and including the Closing Date to
but excluding the later of the date on which such Lender's Tranche A Revolving
Credit Commitment terminates and the date on which such Lender ceases to have
any share of the Letter of Credit Usage, as well as the Agent's standard fees
with respect to the issuance, amendment, renewal or extension of any Letter of
Credit or processing of drawings thereunder. Participation fees accrued through
and including the last day of March, June, September and December of each year
shall be payable on the first Business Day following each such period,
commencing October 1, 1998; provided that all such fees shall be payable on the
date on which the Total Tranche A Revolving Credit Commitment terminates and any
such fees accruing after the date on which the Total Tranche A Revolving Credit
Commitment terminates shall be payable on demand. Any other fees payable to the
Agent pursuant to this paragraph shall be payable on demand. All participation
fees shall be computed on the basis of a year of 360 days and shall be payable
for the actual number of days elapsed (including the first day but excluding the
last day).
III. COLLATERAL SECURITY
SECTION 3.01. Security Documents. The Obligations shall be
secured by the Collateral described in the Security Documents and are entitled
to the benefits thereof. The Borrower shall duly execute and deliver, or cause
each other Grantor to duly execute and deliver, the Security Documents, all
consents of third parties necessary to permit the effective granting of the
Liens created in such agreements, financing statements pursuant to the Uniform
Commercial Code and other documents, all in form and substance reasonably
satisfactory to the Agent, as may be reasonably required by the Agent to grant
to the Lenders a valid, perfected and enforceable first priority Lien on and
security interest in (subject only to the Liens permitted under Section 7.01
hereof) the Collateral.
SECTION 3.02. Filing and Recording. The Borrower shall, at its
sole cost and expense, cause all instruments and documents given as evidence of
security pursuant to this Agreement to be duly recorded, registered and/or filed
or otherwise perfected in all places necessary, in the opinion of the Agent, and
take such other actions as the Agent may reasonably request, in order to perfect
and protect the Liens of the Agent and Lenders in the Collateral. The Borrower,
to the extent permitted by law, hereby authorizes the Agent to file any
financing statement in respect of any Lien created pursuant to the Security
Documents which may at any time be required or which, in the opinion of the
Agent, may at any time be desirable although the same may have been executed
only by the Agent or, at the option of the Agent, to sign such financing
statement on behalf of the Borrower and file the same, and the Borrower
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hereby irrevocably designates the Agent, its agents, representatives and
designees as its agent and attorney-in-fact for this purpose. In the event that
any re-recording or refiling thereof (or the filing of any statements of
continuation or assignment of any financing statement) is required to protect
and preserve such Lien, the Borrower shall, at the Borrower's cost and expense,
cause the same to be recorded and/or refiled at the time and in the manner
reasonably requested by the Agent.
IV. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants for itself and its
subsidiaries to each of the Lenders that both before and after giving effect to
the consummation of the Transactions:
SECTION 4.01. Organization, Legal Existence. The Borrower and
each of its subsidiaries is a legal entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization, has the
requisite power and authority to own its property and assets and to carry on its
business as now conducted and as currently proposed to be conducted and is
qualified to do business in every jurisdiction where the nature of its business
so requires (all such jurisdictions being listed in Schedule 4.01 annexed
hereto), except where the failure to so qualify or be in good standing would not
reasonably be expected to result in a Material Adverse Effect. The Borrower and
each of its subsidiaries has the corporate power to execute, deliver and perform
its obligations under this Agreement and the other Loan Documents to which it is
a party, and, with respect to the Borrower, to borrow hereunder and to execute
and deliver the Notes.
SECTION 4.02. Authorization. The execution, delivery and
performance by each of the Loan Parties of this Agreement and each of the other
Loan Documents to which it is a party, the borrowings hereunder by the Borrower,
the execution and delivery by the Borrower of the Notes and the grant of
security interests in the Collateral created by the Security Documents
(collectively, the "Transactions") (a) have been duly authorized by all
requisite corporate, partnership or limited liability company action, as the
case may be, and, if required, stockholder, partner, or member, as the case may
be, action on the part of the applicable Loan Party and (b) will not (i) violate
(A) any provision of law, statute, rule or regulation or the certificate or
articles of incorporation or other applicable constitutive documents or the
by-laws of the Borrower, or its subsidiaries, as the case may be, (B) any order
of any court, or any rule, regulation or order of any other agency of government
binding upon the Borrower, or its subsidiaries, or (C) any provision of any
material indenture, material agreement or other material instrument to which the
Borrower, or its subsidiaries, or any of their respective properties or assets
are or may be bound, (ii) be in conflict with, result in a breach of or
constitute (alone or with notice or lapse of time or both) a default under any
material indenture, material agreement or other material instrument referred to
in (b)(i)(C) above except where any such conflict, violation, breach or other
default referred to in (i) or (ii) would not reasonably be expected to result in
a Material Adverse Effect or (iii) result in
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the creation or imposition of any Lien of any nature whatsoever (other than in
favor of the Agent, for its own benefit and for the benefit of the Lenders) upon
any property or assets of the Borrower, or its subsidiaries.
SECTION 4.03. Governmental Approvals. No registration or
filing with consent or approval of, or other action by, any Federal, state or
other governmental agency, authority or regulatory body is or will be required
in connection with the Transactions, except for (a) such registrations, filings,
consents, approvals or actions the failure of which to obtain or make would not
reasonably be expected to have a Material Adverse Effect or (b) such as have
been made or obtained or (c) the filings necessary to perfect the Liens created
by the Security Documents.
SECTION 4.04. Binding Effect. This Agreement and each of the
other Loan Documents to which it is a party constitutes, and each of the Notes
when duly executed and delivered by the Borrower will constitute, a legal, valid
and binding obligation of the applicable Loan Party enforceable against such
Loan Party in accordance with its terms subject (a) to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
enforcement of creditors' rights generally, from time to time in effect and (b)
to general principles of equity.
SECTION 4.05. Material Adverse Change. Except as set forth in
Schedule 4.05 annexed hereto, there has been no material adverse change in the
business, assets, operations or financial condition of the Borrower and its
subsidiaries taken as a whole since March 31, 1998.
SECTION 4.06. Litigation; Compliance with Laws; Etc. Except as
set forth in Schedule 4.06(a) annexed hereto (which shall set forth a brief
description thereof and an analysis of the expected disposition thereof), there
are not any actions, suits or proceedings at law or in equity or by or before
any governmental instrumentality or other agency or regulatory authority now
pending or, to the knowledge of any Responsible Officer of the Borrower,
threatened against or affecting the Borrower or any of its subsidiaries or the
businesses, assets or rights of the Borrower or any of its subsidiaries (i)
which involve any of the Transactions or (ii) as to which there is a reasonable
likelihood of an adverse determination and which, if adversely determined,
would, individually or in the aggregate, materially impair the ability of the
Borrower to conduct business substantially as now conducted, or would reasonably
be expected to result in a Material Adverse Effect.
(a) Except as set forth in Schedule 4.06(b) annexed hereto,
neither the Borrower nor any of its subsidiaries is in violation of any law, or
in default with respect to any judgment, writ, injunction, decree, rule or
regulation of any court or governmental agency or instrumentality where such
violation or default would reasonably be expected to result in a Material
Adverse Effect.
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SECTION 4.07. Financial Statements. The Borrower has
heretofore furnished to the Agent Consolidated balance sheets and statements of
income and cash flows of the Borrower (i) dated as of December 31, 1995,
December 31, 1996 and December 31, 1997 audited by and accompanied by the
opinion of independent public accountants and (ii) dated as of March 31,1998 for
the three month period then ended and prepared by management with comparative
information to the March 31, 1997 quarterly period. Such balance sheets and
statements of income and cash flows present fairly in all material respects the
Consolidated financial condition and results of operations of the Borrower and
its Consolidated subsidiaries as of the dates and for the periods indicated, and
such audited balance sheets and the notes thereto disclose all material
liabilities, direct or contingent, of the Borrower and its subsidiaries, as of
the dates thereof.
(a) The Borrower has heretofore furnished to the Agent
projected income statements, balance sheets and cash flows of the Borrower on a
Consolidated basis for a three (3) year period (quarterly for the remainder of
1998 and annually for the following two (2) years), such projections disclosing
all material assumptions made by the Borrower in formulating such projections
and giving effect to the Transactions. The projections are based upon estimates
and assumptions, all of which were believed by management to be reasonable in
light of the conditions which existed at the time the projections were made and
have been prepared on the basis of the assumptions stated therein.
(b) The Borrower has heretofore furnished to the Agent a
Consolidated and consolidating pro forma balance sheet of the Borrower and which
sets forth information before and after giving effect to the Transactions.
(c) The financial statements referred to in this Section 4.07
have been prepared in accordance with GAAP, except that the unaudited statements
do not contain footnotes and are subject to year-end audit adjustments.
SECTION 4.08. Federal Reserve Regulations. Neither the
Borrower nor any of its subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
(a) No part of the proceeds of the Loans will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately, (i)
to purchase or carry Margin Stock or to extend credit to others for the purpose
of purchasing or carrying Margin Stock or to refund indebtedness originally
incurred for such purpose, or (ii) for any purpose which entails a violation of,
or which is inconsistent with, the provisions of the Regulations of the Board,
including, without limitation, Regulation T, U or X thereof. If requested by any
Lender, and if required by applicable law, the Borrower or any subsidiary shall
furnish to such Lender a statement on Federal Reserve Form U-1 referred to in
said Regulation U.
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SECTION 4.09. Taxes. The Borrower and each of its subsidiaries
has filed or caused to be filed all material Federal, state, local and foreign
tax returns which are required to be filed by it, on or prior to the date
hereof. The Borrower and each of its subsidiaries has paid or caused to be paid
all taxes shown to be due and payable on such filed returns or on any
assessments received by it, in writing, except as permitted by Section 6.04,
except to the extent that the nonpayment of such taxes would not reasonably be
expected to result in a Material Adverse Effect. No Federal income tax returns
of the Borrower or any of its subsidiaries have been audited by the United
States Internal Revenue Service and neither the Borrower nor any of its
subsidiaries has as of the date hereof requested or been granted any extension
of time to file any Federal, state, local or foreign tax return. Neither the
Borrower nor any of its subsidiaries is party to or has any obligation under any
tax sharing agreement.
SECTION 4.10. Employee Benefit Plans. Except where the
incorrectness of any of the following would not reasonably be expected to have a
Material Adverse Effect:
(i) No Reportable Event has occurred or is continuing with
respect to any Pension Plan.
(ii) Neither the Borrower nor any ERISA Affiliate has
committed a prohibited transaction (within the meaning of Section 406 of ERISA
or Section 4975 of the Code) with respect to any Plan subject to Part 4 of
Subtitle B of Title I of ERISA, nor, to the Borrower's knowledge, has any such
prohibited transaction occurred.
(iii) Neither the Borrower nor any ERISA Affiliate is
obligated to contribute to a Pension Plan or a Multiemployer Plan. Neither the
Borrower nor any ERISA Affiliate has (A) ceased operations at a facility so as
to become subject to the provisions of Section 4062(e) of ERISA, (B) withdrawn
as a substantial employer so as to become subject to the provisions of Section
4063 of ERISA, (C) ceased making contributions to any Pension Plan subject to
the provisions of Section 4064(a) of ERISA to which the Borrower, any subsidiary
of the Borrower or any ERISA Affiliate made contributions, (D) incurred or
caused to occur a "complete withdrawal" (within the meaning of Section 4203 of
ERISA) or a "partial withdrawal" (within the meaning of Section 4205 of ERISA)
from a Multiemployer Plan that is a Pension Plan so as to incur withdrawal
liability under Section 4201 of ERISA (without regard to subsequent reduction or
waiver of such liability under Section 4207 or 4208 of ERISA), or (E) been a
party to any transaction or agreement under which the provisions of Section 4204
of ERISA were applicable.
(iv) No notice of intent to terminate a Pension Plan has been
filed, nor has any Plan been terminated pursuant to the provisions of Section
4041(e) of ERISA.
(v) The PBGC has not instituted proceedings to terminate (or
appoint a trustee to administer) a Pension Plan and no event has occurred or
condition exists
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which might constitute grounds under the provisions of Section 4042 of ERISA for
the termination of (or the appointment of a trustee to administer) any such
Plan.
(vi) With respect to each Pension Plan that is subject to the
provisions of Title I, Subtitle B, Part 3 of ERISA, the funding method used in
connection with such Plan is acceptable under ERISA, and the actuarial
assumptions and methods used in connection with funding such Pension Plan
satisfy the requirements of Section 302 of ERISA. The assets of each such
Pension Plan (other than the Multiemployer Plans) are at least equal to the
present value of the greater of (i) accrued benefits (both vested and
non-vested) under such Plan, or (ii) "benefit liabilities" (within the meaning
of Section 4001(a)(16) of ERISA) under such Plan, in each case as of the latest
actuarial valuation date for such Plan (determined in accordance with the same
actuarial assumptions and methods as those used by the Plan's actuary in its
valuation of such Plan as of such valuation date). No such Pension Plan has
incurred any "accumulated funding deficiency" (as defined in Section 412 of the
Code), whether or not waived.
(vii) There are no actions, suits or claims pending (other
than routine claims for benefits) or, to the knowledge of the Borrower or any
ERISA Affiliate, which could reasonably be expected to be asserted, against any
Plan or the assets of any such Plan. No civil or criminal action brought
pursuant to the provisions of Title I, Subtitle B, Part 5 of ERISA is pending or
threatened against any Plan or any fiduciary thereof (in its capacity as such).
None of the Plans or any fiduciary thereof (in its capacity as such) has been
the direct or indirect subject of any audit, investigation or examination by any
governmental or quasi-governmental agency.
(viii) All of the Plans materially comply currently, and have
materially complied in the past, both as to form and operation, with their terms
and with the provisions of ERISA and the Code, and all other applicable laws,
rules and regulations; all necessary governmental approvals for the Plans have
been obtained and a favorable determination as to the qualification under
Section 401(a) of the Code of each of the Plans which is an employee pension
benefit plan (within the meaning of Section 3(2) of ERISA) has been made by the
Internal Revenue Service and a recognition of exemption from federal income
taxation under Section 501(c) of the Code of each of the funded employee welfare
benefit plans (within the meaning of Section 3(1) of ERISA) has been made by the
Internal Revenue Service, and nothing has occurred since the date of each such
determination or recognition letter that would materially adversely affect such
qualification.
SECTION 4.11. No Material Misstatements. The information,
reports, financial statements, exhibits or schedules, taken as a whole,
furnished by or on behalf of the Loan Parties to the Agent or any Lender in
connection with any of the Transactions or this Agreement, the Security
Documents, the Notes or any other Loan Documents or included therein, do not
contain any material misstatement of fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading in any material respect; provided,
however, that to the extent any such information, report, financial statement,
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exhibit or schedule was based upon or constitutes a forecast or projection, the
Borrower represents only that it acted in good faith and used reasonable
assumptions in the preparation of such information, report, financial statement,
exhibit or schedule.
SECTION 4.12. Investment Company Act; Public Utility Holding
Company Act. Neither the Borrower nor any of its subsidiaries is an "investment
company" as defined in, or is otherwise subject to regulation under, the
Investment Company Act of 1940. Neither the Borrower nor any of its subsidiaries
is a "holding company" as that term is defined in or is otherwise subject to
regulation under, the Public Utility Holding Company Act of 1935.
SECTION 4.13. Security Interest. Upon the due filing of UCC-1
financing statements, the delivery of the Collateral under the Pledge Agreement
and the filing of assignments for security with the United States Patent and
Trademark Office, each of the Security Documents creates and grants to the
Agent, for its own benefit and for the benefit of the Lenders, a legal, valid
and perfected first priority (except as permitted pursuant to Section 7.01
hereof) Lien in the collateral identified therein to the extent a Lien can be
perfected in such Collateral by the taking of the foregoing actions. Such
collateral or property is not subject to any other Liens whatsoever, except
Liens permitted by Section 7.01 hereof.
SECTION 4.14. Use of Proceeds. All proceeds of the borrowing
under the Total Tranche A Revolving Credit Commitment shall be used to provide
for working capital requirements and for general corporate purposes of the
Borrower.
(a) All proceeds of each borrowing under the Tranche B
Revolving Credit Commitment shall be used to finance the consideration required
for Permitted Acquisitions in accordance with the definition of Permitted
Acquisition.
SECTION 4.15. Subsidiaries. As of the Closing Date, Schedule
4.15 annexed hereto sets forth each subsidiary, Affiliate and joint venture of
the Borrower, its jurisdiction of incorporation, its capitalization and
ownership of capital stock of each such person.
SECTION 4.16. Title to Properties; Possession Under Leases;
Trademarks. The Borrower and each of its subsidiaries have good title to, or
valid leasehold interest in, all of its respective properties and assets shown
on the most recent balance sheet referred to in Section 4.07(a) hereof and all
assets and properties acquired since the date of such balance sheet, except for
such properties as have been disposed of in the ordinary course of business or
as permitted by this Agreement, and except where lack of title or a valid
leasehold interest does not materially interfere with the ability of the
Borrower or any of its subsidiaries to conduct its business as now conducted.
All interests of such persons in such assets and properties are free and clear
of all Liens other than those permitted by Section 7.01 hereof.
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(a) The Borrower and each of its subsidiaries has complied with all
material obligations under all material leases to which it is a party and under
which it is in occupancy, and all such leases are in full force and effect and
the Borrower and each of its subsidiaries enjoys peaceful and undisturbed
possession under all such material leases.
(b) The Borrower and each of its subsidiaries owns or controls all
material trademarks, trademark rights, trade names, trade name rights,
copyrights, patents, patent rights and licenses which are necessary for the
conduct of the business of the Borrower and each of its subsidiaries. To its
knowledge, neither the Borrower nor any of its subsidiaries is infringing upon
or otherwise acting adversely to any of such trademarks, trademark rights, trade
names, trade name rights, copyrights, patent rights or licenses owned by any
other person or persons. There is no claim or action by any such other person
pending, or to the knowledge of any Responsible Officer of the Borrower or any
subsidiary thereof, threatened, against the Borrower or any of its subsidiaries
with respect to any of the rights or property referred to in this Section
4.16(c).
SECTION 4.17. Solvency. The fair salable value of the assets of the
Borrower and its Consolidated subsidiaries is not less than the amount that will
be required to be paid on or in respect of the probable liability on the
existing debts and other liabilities (including contingent liabilities) of the
Borrower and its Consolidated subsidiaries, as they become absolute and mature.
(a) The assets of the Borrower and its Consolidated subsidiaries do not
constitute unreasonably small capital for the Borrower and its Consolidated
subsidiaries to carry out their business as now conducted and as proposed to be
conducted.
(b) Neither the Borrower nor any of its subsidiaries intends to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be received by the Borrower and any of its
subsidiaries, and of amounts to be payable on or in respect of debt of the
Borrower and any of its subsidiaries).
(c) Neither the Borrower nor any of its subsidiaries believes that
final judgments against it in actions for money damages presently pending will
be rendered at a time when, or in an amount such that, it will be unable to
satisfy any such judgments promptly in accordance with their terms (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).
SECTION 4.18. Permits, etc. The Borrower and each of its subsidiaries
possesses all licenses, permits, approvals and consents, including, without
limitation, all environmental, health and safety licenses, permits, approvals
and consents of all Federal, state and local governmental authorities except
where the failure to do so does
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not materially interfere with the ability of such Loan Party to conduct its
business as currently conducted (collectively, "Permits"), each such Permit is
and will be in full force and effect, the Borrower and each of its subsidiaries
is in compliance in all material respects with all such Permits, and no event
(including, without limitation, any violation of any law, rule or regulation)
has occurred which allows the revocation or termination of any such Permit or
any restriction thereon.
SECTION 4.19. Compliance with Environmental Laws. Except as disclosed
in Schedule 4.19 hereto: (i) the operations of the Borrower and its subsidiaries
comply with all applicable Environmental Laws except for any such non-compliance
which would not reasonably be expected to result in a Material Adverse Effect;
(ii) the Borrower and its subsidiaries and all of their present facilities or
operations, as well as to the actual knowledge of the Borrower and its
subsidiaries their past facilities or operations, are not subject to any
judicial proceeding or administrative proceeding or any outstanding written
order or agreement with any governmental authority or private party respecting
(a) any Environmental Law, (b) any Remedial Work, or (c) any Environmental
Claims, arising from the Release of a Contaminant into the environment which, in
each case, would reasonably be expected to result in a Material Adverse Effect;
(iii) to the best of the knowledge of the Borrower and its subsidiaries, none of
their operations is the subject of any Federal or state investigation evaluating
whether any Remedial Work is needed to respond to a Release of any Contaminant
into the environment in each case which would reasonably be expected to result
in a Material Adverse Effect; (iv) neither the Borrower nor, to the actual
knowledge of the Borrower, any of its subsidiaries nor any predecessor of the
Borrower or any of its subsidiaries has filed any written notice with any
applicable state or Federal governmental authority under any Environmental Law
indicating within the last three (3) years treatment, storage, or disposal of a
Hazardous Material or reporting a spill or Release of a Contaminant into the
environment in each case which would reasonably be expected to result in a
Material Adverse Effect; (v) neither the Borrower nor any of its subsidiaries
has been notified in writing by any governmental authority or any legal
representative of any person that it has any material liability in connection
with any Release of any Contaminant into the environment in each case which
would reasonably be expected to result in a Material Adverse Effect; (vi) none
of the operations of the Borrower or any of its subsidiaries involves the
generation, transportation, treatment or disposal of Hazardous Materials in
violation of Environmental Law in each case which would reasonably be expected
to result in a Material Adverse Effect; (vii) neither the Borrower nor any of
its subsidiaries has disposed of any Contaminant by placing it in or on the
ground or waters of any premises owned, leased or used by any of them and to the
actual knowledge of the Borrower and its subsidiaries neither has any lessee,
prior owner, or other person in each case which would reasonably be expected to
result in a Material Adverse Effect; (viii) no underground storage tanks or
surface impoundments are on any property of the Borrower and its subsidiaries in
each case which would reasonably be expected to result in a Material Adverse
Effect; and (ix) to the actual knowledge of the Borrower and its subsidiaries,
no Lien in favor of any governmental authority for (A) any liability under any
Environmental Law or regulations, or (B) damages arising from or costs incurred
by such governmental authority in response
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to a Release of a Contaminant into the environment, has been filed or attached
to the property of the Borrower and its subsidiaries which would reasonably be
expected to result in a Material Adverse Effect.
SECTION 4.20. No Change in Credit Criteria or Collection Policies.
There has been no material change in credit criteria or collection policies
concerning account receivables of the Borrower since December 31, 1997.
SECTION 4.21. Employee Matters. Except as disclosed in Schedule 4.21
hereto, (a) neither the Borrower nor any of its subsidiaries nor any of such
person's employees is subject to any collective bargaining agreement, (b) to the
knowledge of Borrower, no petition for certification or union election is
pending with respect to the employees of Borrower or any of its subsidiaries and
no union or collective bargaining unit has sought such certification or
recognition with respect to the employees of Borrower or any of its subsidiaries
and (c) there are no strikes, slowdowns, work stoppages or controversies pending
or, to the knowledge of Borrower threatened between Borrower or any of its
subsidiaries and their respective employees, other than employee grievances
arising in the ordinary course of business none of which would reasonably be
expected to result in, either individually or in the aggregate, a Material
Adverse Effect. The Loan Parties are in compliance with all employment laws
applicable to each of such Loan Parties except where the failure to so comply
would not reasonably be expected to have a Material Adverse Effect.
SECTION 4.22. Year 2000. The cost to the Borrower of reprogramming and
testing of the Borrower's and its subsidiaries' computer systems and related
equipment to permit proper functioning in and following the year 2000
(including, without limitation, reprogramming errors) will not reasonably be
expected to result in a Material Adverse Effect.
V. CONDITIONS OF CREDIT EVENTS
The obligation of each Lender to make Loans and extend other Credits
hereunder shall be subject to the following conditions precedent:
SECTION 5.01. All Credit Events. On each date on which a Credit Event
is to occur:
(a) The Agent shall have received a notice of borrowing as required by
Section 2.03 hereof or a request for the issuance of a Letter of Credit
pursuant to Section 2.17 hereof.
(b) The representations and warranties set forth in Article IV hereof
and in any documents delivered herewith, including, without limitation, the
Loan Documents, shall be true and correct in all material respects with the
same effect
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as though made on and as of such date (except insofar as such
representations and warranties relate expressly to an earlier date).
(c) The Borrower shall be in compliance with all the terms and
provisions contained herein on its part to be observed or performed, and at
the time of and immediately after such Credit Event no Default or Event of
Default shall have occurred and be continuing.
(d) The Agent shall have received a certificate signed by a Financial
Officer of the Borrower (i) as to the compliance with (b) and (c) above and
(ii) with respect to each Tranche A Revolving Credit Loan and each Letter of
Credit, demonstrating that after giving effect thereto Availability is zero
or greater.
(e) With respect to each Tranche A Revolving Credit Loan and each
Letter of Credit, the Agent shall have received, at least two days prior to
the requested Credit Event, a certificate substantially in the form of
Schedule 6.05(j) hereto executed by the Financial Officer of the Borrower
demonstrating compliance with the Borrowing Base as at the end of the prior
month, unless the Agent has already received such certificate for the prior
month in accordance with Section 6.05(j) hereof.
(f) With respect to each Tranche B Revolving Credit Loan, the Agent
shall have received (i) a certificate signed by a Responsible Officer
certifying that the conditions set forth in the applicable clause of the
definition of Permitted Acquisition are satisfied with respect to the
related Permitted Acquisition and (ii) all documents reasonably requested by
the Agent in connection with the related Permitted Acquisition.
SECTION 5.02. First Borrowing. The obligations of the Lenders in
respect of the first Credit Event hereunder is subject to the following
additional conditions precedent:
(a) The Lenders shall have received the favorable written opinion of
counsel for the Borrower and each of the Guarantors and Grantors,
substantially in the form of Exhibit C hereto, dated the Closing Date,
addressed to the Lenders and satisfactory to the Agent.
(b) The Lenders shall have received (i) a copy of the certificate or
articles of incorporation or constitutive documents, in each case as amended
to date, of each of the Borrower, the Grantors and the Guarantors, certified
as of a recent date by the Secretary of State or other appropriate official
of the state of its organization, and a certificate as to the good standing
of each from the Secretary of State or other appropriate official of each
state in which it is qualified to do business, in each case dated as of a
recent date; (ii) a certificate of the Secretary of the Borrower, each
Grantor and each Guarantor, dated the Closing Date and certifying (A) that
attached thereto is a true and complete copy
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of such person's By-laws as in effect on the date of such certificate and at
all times since a date prior to the date of the resolutions described in
item (B) below, (B) that attached thereto is a true and complete copy of
resolutions adopted by such person's Board of Directors authorizing the
execution, delivery and performance of this Agreement, the Security
Documents, the Notes, the other Loan Documents and the Credit Events
hereunder, as applicable, and that such resolutions have not been modified,
rescinded or amended and are in full force and effect, (C) that such
person's certificate or articles of incorporation or constitutive documents
have not been amended since the date of the last amendment thereto shown on
the certificate of good standing furnished pursuant to (i) above, and (D) as
to the incumbency and specimen signature of each of such person's officers
executing this Agreement, the Notes, each Security Document or any other
Loan Document delivered in connection herewith or therewith, as applicable;
(iii) a certificate of another of such person's officers as to incumbency
and signature of its Secretary; and (iv) such other documents as the Agent
or any Lender may reasonably request.
(c) The Agent shall have received a certificate, dated the Closing Date
and signed by a Financial Officer of the Borrower, confirming compliance
with the conditions precedent set forth in paragraphs (b) and (c) of Section
5.01 hereof and the conditions set forth in this Section 5.02.
(d) Each Lender shall have received its Tranche A Revolving Credit Note
and Tranche B Revolving Credit Note duly executed by the Borrower, payable
to its order and otherwise complying with the provisions of Section 2.04
hereof.
(e) The Agent shall have received the Security Documents and
certificates evidencing the Pledged Stock, together with undated stock
powers executed in blank, each duly executed by the applicable Grantors.
(f) The Agent shall have received certified copies of requests for
copies or information on Form UCC-11 or certificates satisfactory to the
Lenders of a UCC Reporter Service, listing all effective financing
statements which name as debtor the Borrower, any Guarantor or any Grantor
and which are filed in the appropriate offices in the states or other
applicable jurisdictions in which are located the chief executive office and
other operating offices of such person, together with copies of such
financing statements or of the security agreements to which such filings
relate. With respect to any Liens not permitted pursuant to Section 7.01
hereof, the Agent shall have received termination statements in form and
substance satisfactory to it.
(g) Each document (including, without limitation, each Uniform
Commercial Code financing statement) required by law or reasonably requested
by the Agent to be filed, registered or recorded in order to create in favor
of the Agent for its own benefit and for the benefit of the Lenders a first
priority
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perfected Lien in the Collateral (subject to the Liens permitted by Section
7.01 hereof) shall have been prepared for filing, registration or
recordation in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested, and the Agent shall have
received a duly executed copy of each such filing, registration or
recordation, ready for immediate filing, registration or recordation.
(h) The Agent shall have received the results of a search of tax and
other Liens, and judgments and of the Uniform Commercial Code filings made
with respect to the Borrower, each Guarantor and each Grantor in the
jurisdictions in which the Borrower, each Guarantor and each Grantor is
doing business and/or in which any Collateral is located, and in which
Uniform Commercial Code filings have been made against the Borrower, each
Guarantor and each Grantor pursuant to paragraph (g) above.
(i) The Lenders and the Agent shall have received and determined to be
in form and substance satisfactory to them:
(i) the most recent (dated within thirty (30) days of the
Closing Date) schedule and aging of accounts receivable and
inventory designations of the Borrower;
(ii) evidence that the Borrower has raised not less than
$100,000,000 in cash net proceeds from an IPO;
(iii) evidence of the compliance by the Borrower with Section 6.03
hereof;
(iv) the financial statements described in Section 4.07 hereof;
(v) evidence that the Transactions are in compliance with all
material applicable laws and regulations;
(vi) evidence of payment of all fees owed to the Agent and the
Lenders by the Borrower under this Agreement, the Commitment
Letter, the Fee Letter or otherwise;
(vii) evidence that all requisite third party consents (including,
without limitation, consents with respect to the Borrower and each
of the Grantors and Guarantors) to the Transactions have been
received;
(viii) copies of all major customer, supplier contracts and
employment and non-compete agreements with respect to the Borrower
and its subsidiaries;
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(ix) evidence that there has been no material adverse change in the
business, assets, operations or financial condition of the Borrower
and its subsidiaries since March 31, 1998;
(x) evidence of the repayment in full of exiting credit
arrangements and the termination of all commitments to lend
thereunder, and the termination of all security interests securing
such indebtedness as required under paragraph (f) above; and
(xi) evidence that, except as disclosed on Schedule 4.06(a), there
are no actions, suits or proceedings at law or in equity or by or
before any governmental instrumentality or other agency or
regulatory authority now pending or to the knowledge of the
Borrower threatened against or affecting the Borrower or any of its
subsidiaries or any of their respective businesses, assets or
rights which involve any of the Transactions.
(j) The Borrower shall have utilized no more than $5,300,000 of the
Total Revolving Credit Commitment on the Closing Date.
(k) The Agent shall have received and had the opportunity to review and
determine to be in form and substance reasonably satisfactory to it:
(i) copies of all real property lease agreements entered into by
the Borrower and Guarantors;
(ii) copies of all loan agreements, notes and other documentation
evidencing Indebtedness for borrowed money of the Borrower, its
subsidiaries, Grantors or Guarantors which are to remain
outstanding after consummation of the Transactions; and
(iii) copies of all material contracts with third party payors.
(l) Messrs. Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel to the
Agent, shall have received payment in full for all reasonable legal fees
charged, and all reasonable costs and expenses incurred, by such counsel
through the Closing Date in connection with the transactions contemplated
under this Agreement, the Security Documents and the other Loan Documents
and instruments in connection herewith and therewith.
(m) The corporate structure and capitalization of the Loan Parties
shall be satisfactory to the Lenders in all respects.
(n) All legal matters in connection with the Transactions shall be
satisfactory to the Agent, the Lenders and their respective counsel in their
reasonable discretion.
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(o) The Borrower shall have executed and delivered to the Agent a
disbursement authorization letter with respect to the disbursement of the
proceeds of the Credit Events made on the Closing Date, in form and
substance satisfactory to the Agent.
(p) The Borrower and the Agent (or another financial institution
acceptable to the Agent) shall have entered into lockbox and cash management
arrangements pursuant to documentation satisfactory in form and substance to
the Agent.
(q) The Agent shall have received such other documents as the Lenders
or the Agent or Agent's counsel shall reasonably deem necessary.
VI. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with each Lender that, so long as
this Agreement shall remain in effect or the principal of or interest on any
Note, any amount under any Letter of Credit or any fee, expense or other
Obligation payable hereunder shall be unpaid, it will, and will cause each of
its subsidiaries and, with respect to Section 6.07 hereof, each ERISA Affiliate,
to:
SECTION 6.01. Legal Existence. Do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence except as otherwise permitted by Section 7.05.
SECTION 6.02. Businesses and Properties. At all times do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
the rights, licenses, Permits, franchises, patents, copyrights, trademarks and
trade names except where the failure to do so would not reasonably be expected
to have a Material Adverse Effect; maintain and operate such businesses in the
same general manner in which they are presently conducted and operated; comply
in all material respects with all applicable laws, rules, regulations and
governmental orders (whether Federal, state or local in all applicable
jurisdictions) applicable to the operation of such businesses whether now in
effect or hereafter enacted (including, without limitation, all applicable laws,
rules, regulations and governmental orders relating to employment matters,
public and employee health and safety and all Environmental Laws) and with any
and all other applicable laws, rules, regulations and governmental orders, the
lack of compliance of any of which would reasonably be expected to have a
Material Adverse Effect; and at all times maintain, preserve and protect all
property material to the conduct of such businesses and keep such property in
good repair, working order and condition (reasonable wear and tear excepted) and
from time to time make, or cause to be made, all needful and proper repairs,
renewals, additions, improvements and replacements thereto necessary in order
that the business carried on in connection therewith may be
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properly conducted in all material respects at all times, except where the
failure to do so would not reasonably be expected to have a Material Adverse
Effect.
SECTION 6.03. Insurance. (a) Keep its insurable properties adequately
insured at all times by financially sound and reputable insurers, (b) maintain
such other insurance, to such extent and against such risks, including fire and
other risks insured against by extended coverage, as is customary with companies
similarly situated and in the same or similar businesses, provided, however,
that such insurance shall insure the property of the Borrower against all risk
of physical damage, including, without limitation, loss by fire, explosion,
theft, fraud and such other casualties as may be reasonably satisfactory to the
Agent, and in no event at any time in an amount less than the replacement value
of the Collateral, (c) maintain in full force and effect public liability
insurance against claims for bodily injury or death or property damage occurring
upon, in, about or in connection with the use of any properties owned, occupied
or controlled by the Borrower or any of its subsidiaries, as is customary with
companies similarly situated and in the same or similar businesses, (d) maintain
business interruption and product liability insurance to such extent as is
customary with companies similarly situated and in the same or similar
businesses, and (e) maintain such other insurance as may be required by law or
as may be reasonably requested by the Agent for purposes of assuring compliance
with this Section 6.03. All insurance covering tangible personal property
subject to a Lien in favor of the Agent for its own benefit and for the benefit
of the Lenders granted pursuant to the Security Documents shall provide that, in
the case of each separate loss the full amount of insurance proceeds shall be
payable to the Agent and shall further provide for at least 30 days' prior
written notice to the Agent of the cancellation or substantial modification
thereof.
SECTION 6.04. Taxes. Pay and discharge promptly when due all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property before the same shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise, which, if unpaid, might give rise to Liens upon such
properties or any part thereof; provided, however, that such payment and
discharge shall not be required with respect to (i) any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and the applicable party,
shall have set aside on its books adequate reserves with respect thereto in
accordance with GAAP and such contest operates to suspend collection of the
contested tax, assessment, charge, levy or claims and enforcement of a Lien or
(ii) any tax, assessment, charge, levy or claims, the failure to pay and
discharge when due which, individually or in the aggregate would not reasonably
be expected to have a Material Adverse Effect.
SECTION 6.05. Financial Statements, Reports, Etc. Furnish to the Agent,
with copies for each of the Lenders:
(a) within 90 days after the end of each Fiscal Year, (i) Consolidated
and consolidating balance sheets and Consolidated and consolidating income
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statements showing the Consolidated financial condition of the Borrower and
its Consolidated subsidiaries as of the close of such Fiscal Year and the
results of their Consolidated operations during such year, (ii) a
Consolidated and consolidating statement of shareholders' equity, and (iii)
a Consolidated and consolidating statement of cash flow, as of the close of
such Fiscal Year, comparing such financial condition and results of
operations to such financial condition and results of operations for the
comparable period during the immediately preceding Fiscal Year, all the
foregoing Consolidated financial statements to be audited by a "Big 6"
accounting firm or any other independent public accountants acceptable to
the Agent and accompanied by an opinion of such accountants (which opinion
shall not contain any qualification with respect to a departure from GAAP or
a limitation on the scope of the auditor's engagement), and to be in form
and substance acceptable to the Agent;
(b) within 45 days after the end of each of the first three (3) fiscal
quarters of the Borrower, (i) unaudited Consolidated and consolidating
balance sheets and Consolidated and consolidating income statements showing
the Consolidated financial condition and results of operations of the
Borrower and its Consolidated subsidiaries as of the end of each such
quarter and during such quarter, (ii) a Consolidated and consolidating
statement of shareholders' equity and (iii) a Consolidated and consolidating
statement of cash flow, in each case for the fiscal quarter just ended and
for the period commencing at the end of the immediately preceding Fiscal
Year and ending with the last day of such quarter, and comparing such
financial condition and results of operations to the projections for the
applicable period provided under paragraph (h) below and to the results for
the comparable period during the immediately preceding Fiscal Year, in each
case prepared and certified by the Financial Officer of the Borrower as
presenting fairly in all material respects the Consolidated financial
condition and results of operations of the Borrower and its Consolidated
subsidiaries and as having been prepared in accordance with GAAP (except the
absence of footnote disclosure), in each case subject to normal year-end
audit adjustments;
(c) Intentionally Omitted.
(d) promptly after the same become publicly available, copies of such
registration statements, annual, periodic and other reports, and such proxy
statements and other information, if any, as shall be filed by the Borrower
or any subsidiaries with the Securities and Exchange Commission pursuant to
the requirements of applicable securities legislation, including the
Securities Act of 1933 or the Securities Exchange Act of 1934;
(e) (i) concurrently with any delivery under (a) or (b) above, a
certificate of the firm or person referred to therein (x) which certificate
shall, in the case of the certificate of a Financial Officer of the
Borrower, certify that to the best of his or her knowledge no Default or
Event of Default has occurred (including
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calculations demonstrating compliance, as of the dates of the financial
statements being furnished, with the covenants set forth in Sections 7.07,
7.08, 7.09, 7.10 and 7.11 hereof) and, if such a Default or Event of Default
has occurred, specifying the nature and extent thereof and any corrective
action taken or proposed to be taken with respect thereto and (y) which
certificate, in the case of the certificate furnished by the independent
public accountants referred to in paragraph (a) above, may be limited to
accounting matters and disclaim responsibility for legal interpretations,
but shall in any event certify that to the best of such accountants'
knowledge, as of the dates of the financial statements being furnished no
Default or Event of Default has occurred under any of the covenants set
forth in Sections 7.07, 7.08, 7.09, 7.10 and 7.11 hereof (such certificate
to include calculations demonstrating compliance with such covenants) and,
if such a Default or Event of Default has occurred, specifying the nature
and extent thereof and any corrective action taken or proposed to be taken
with respect thereto, and shall in addition certify that in the course of
preparing the audit and the certificate referred to herein, such accountants
have not become aware of the occurrence of any other Default or Event of
Default and, if such a Default or Event of Default has occurred, specifying
the nature thereof; provided, however, that any certificate delivered
concurrently with (a) above shall be accompanied by a supplemental
certificate confirming the accuracy of the accountants' certificate and
signed by a Financial Officer of the Borrower;
(f) concurrently with any delivery under (a) above, a management letter
prepared by the independent public accountants who reported on the financial
statements delivered under (a) above, with respect to the internal audit and
financial controls of the Borrower and its subsidiaries;
(g) within 30 days of the end of each fiscal month, an aging schedule
of the Receivables and payables of the Borrower in the form of the aging
schedule of Receivables dated May 31, 1998 previously furnished to the Agent
and a certificate executed by a Financial Officer of the Borrower with
respect to inventory designations substantially in the form of Schedule
6.05(g) hereto;
(h) prior to the beginning of each Fiscal Year, a summary of business
plans and financial projections (including, without limitation, with respect
to Capital Expenditures) for the Borrower and its subsidiaries for such
Fiscal Year (including quarterly Consolidated and consolidating balance
sheets, statements of income and of cash flow) and annual projections for
the next two Fiscal Years thereafter prepared by management and in form and
detail (including, without limitation, principal assumptions and projected
covenant compliance) satisfactory to the Required Lenders;
(i) as soon as practicable, copies of all reports, forms, filings, loan
documents and financial information submitted to governmental agencies
and/or its shareholders;
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(j) so long as any Tranche A Revolving Credit Loan or Letter of Credit
is outstanding, within 30 days after the end of each fiscal month, a
certificate substantially in the form of Schedule 6.05(j) hereto executed by
a Financial Officer of the Borrower demonstrating compliance as at the end
of each month with the Borrowing Base; and
(k) such other information as the Agent or any Lender may reasonably
request.
SECTION 6.06. Litigation and Other Notices. Give the Agent prompt
written notice of the following:
(a) the issuance by any court or governmental agency or authority of
any injunction, order, decision or other restraint prohibiting, or having
the effect of prohibiting, the making of the Loans or occurrence of other
Credit Events, or invalidating, or having the effect of invalidating, any
provision of this Agreement, the Notes or the other Loan Documents, or the
initiation of any litigation or similar proceeding seeking any such
injunction, order, decision or other restraint;
(b) the filing or commencement of any action, suit or proceeding
against the Borrower or any of its subsidiaries, whether at law or in equity
or by or before any court or any Federal, state, municipal or other
governmental agency or authority, (i) which is material and is brought by or
on behalf of any governmental agency or authority, or in which injunctive or
other equitable relief is sought or (ii) as to which there is a reasonable
likelihood of an adverse determination and which, if adversely determined,
could (A) reasonably be expected, individually or in the aggregate, to
materially impair the ability of any of the Loan Parties to conduct business
substantially as now conducted, or could reasonably be expected to result in
a Material Adverse Effect, or (B) materially impair the right of the
Borrower or a subsidiary thereof to perform its obligations under this
Agreement, any Note or any other Loan Document to which it is a party;
(c) immediately upon becoming aware thereof, notice to the Agent of the
breach by any party of any material agreement with any of the Loan Parties;
(d) any Default or Event of Default, specifying the nature and extent
thereof and the action (if any) taken or which is proposed to be taken with
respect thereto;
(e) immediately upon becoming aware thereof, notice to the Agent of any
loss or destruction of, or substantial damage to, any material portion of
the Collateral, and any other matters materially affecting the value,
enforceability or collectibility of any material portion of the Collateral;
and
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(f) any development in the business or affairs of the Borrower or any
of its subsidiaries which has had or which could reasonably be expected to
result in a Material Adverse Effect.
SECTION 6.07. ERISA. Pay and discharge promptly any material liability
imposed upon it pursuant to the provisions of Title IV of ERISA; provided,
however, that neither the Borrower nor any ERISA Affiliate shall be required to
pay any such liability if (1) the amount, applicability or validity thereof
shall be diligently contested in good faith by appropriate proceedings, and (2)
such person shall have set aside on its books reserves which, in the opinion of
the independent certified public accountants of such person, are adequate with
respect thereto.
(a) Deliver to the Agent, promptly, and in any event within 10 days,
after (i) the occurrence of any Reportable Event, a copy of the materials
that are filed with the PBGC, (ii) the Borrower or any ERISA Affiliate or an
administrator of any Pension Plan files with participants, beneficiaries or
the PBGC a notice of intent to terminate any such Plan, a copy of any such
notice, (iii) the receipt of notice by the Borrower or any ERISA Affiliate
or an administrator of any Pension Plan from the PBGC of the PBGC's
intention to terminate any Pension Plan or to appoint a trustee to
administer any such Plan, a copy of such notice, (iv) upon request, the
filing thereof with the Internal Revenue Service, copies of each annual
report that is filed on Treasury Form 5500 with respect to any Plan,
together with certified financial statements (if any) for the Plan and any
actuarial statements on Schedule B to such Form 5500, (v) the Borrower or
any ERISA Affiliate knows or has reason to know of any event or condition
which might constitute grounds under the provisions of Section 4042 of ERISA
for the termination of (or the appointment of a trustee to administer) any
Pension Plan, an explanation of such event or condition, (vi) the receipt by
the Borrower or any ERISA Affiliate of an assessment of withdrawal liability
under Section 4201 of ERISA from a Multiemployer Plan, a copy of such
assessment, (vii) the Borrower or any ERISA Affiliate knows or has reason to
know of any event or condition which might cause any one of them to incur a
material liability under Section 4062, 4063, 4064 or 4069 of ERISA or
Section 412(n) or 4971 of the Code, an explanation of such event or
condition, and (viii) the Borrower or any ERISA Affiliate knows or has
reason to know that an application is to be, or has been, made to the
Secretary of the Treasury for a waiver of the minimum funding standard under
the provisions of Section 412 of the Code, a copy of such application, and
in each case described in clauses (i) through (iii) and (v) through (vii)
together with a statement signed by a Financial Officer setting forth
details as to such Reportable Event, notice, event or condition and the
action which the Borrower or such ERISA Affiliate proposes to take with
respect thereto.
SECTION 6.08. Maintaining Records; Access to Properties and
Inspections; Right to Audit. Maintain financial records in accordance with
accepted financial practices and, upon reasonable notice (which may be
telephonic), at all reasonable times and as often as the Agent may reasonably
request, permit any authorized representative designated by the Agent to visit
and inspect the properties and financial records of the Borrower and its
subsidiaries and to make extracts from such
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financial records at the Agent's expense, and permit any authorized
representative designated by the Agent to discuss the affairs, finances and
condition of the Borrower and its subsidiaries with the appropriate Financial
Officer and such other officers as the Borrower shall deem appropriate and the
Borrower's independent public accountants, as applicable. The Agent agrees that
it shall schedule any meeting with any such independent public accountant
through the Borrower and a Responsible Officer of the Borrower shall have the
right to be present at any such meeting. Any Lender may accompany the Agent on
any visit and inspection and participate in any discussion and upon the
occurrence and continuance of an Event of Default any Lender in its own right
may visit and inspect to the same extent and on the same terms as the Agent, all
reasonable expenses of the Agent or any Lender after the occurrence and
continuance of an Event of Default to be paid by the Borrower. The Agent shall
have the right to audit the existence and condition of the accounts receivables,
inventory, books and records of the Borrower and its subsidiaries and to review
their compliance with the terms and conditions of this Agreement and the other
Loan Documents; provided, however, that the Borrower shall not be required to
pay for more than one such audit so long as no Default or Event of Default has
occurred and is continuing.
SECTION 6.09. Use of Proceeds. Use the proceeds of the Credits only for
the purposes set forth in Section 2.17 and Section 4.14 hereof.
SECTION 6.10. Fiscal Year-End. Cause its Fiscal Year to end on December
31 in each year.
SECTION 6.11. Further Assurances. Execute any and all further documents
and take all further actions which may be required under applicable law, or
which the Agent may reasonably request, to grant, preserve, protect and perfect
the first priority security interest (subject to the Liens permitted by Section
7.01) created by the Security Documents in the Collateral.
SECTION 6.12. Additional Grantors and Guarantors. Promptly inform the
Agent of the creation or acquisition of any direct or indirect domestic
subsidiary (subject to the provisions of Section 7.06 hereof) and cause each
direct or indirect domestic subsidiary not in existence on the date hereof to
enter into a Guarantee of the Obligations in form and substance satisfactory to
the Agent, and to execute the Security Documents, as applicable, as a Grantor,
and cause the direct parent of each subsidiary to pledge (x) all of the capital
stock owned by such direct parent of (i) each domestic subsidiary, (ii) each
other investment in a person made pursuant to clauses (a) or (b) of the
definition of Permitted Acquisitions and (iii) each other investment in a person
made pursuant to clause (c) of the definition of Permitted Acquisitions where
such direct parent has acquired 20% or more of such person, and (y) 662/3% of
the capital stock owned by such direct parent of each foreign subsidiary,
pursuant to the Pledge Agreement, and cause each such subsidiary to pledge its
accounts receivable and all other assets of the type pledged pursuant to the
Security Agreement.
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SECTION 6.13. Environmental Laws. Comply, and cause each of their
subsidiaries and use their best efforts to cause their tenants or other licensed
users of their owned properties to comply, in all material respects with the
provisions of all Environmental Laws, and shall keep their properties and the
properties of its subsidiaries free of any Lien imposed pursuant to any
Environmental Law except where any non-compliance or Lien would not reasonably
be expected to result in a Material Adverse Effect. The Borrower shall not cause
or suffer or permit, and shall not suffer or permit any of its subsidiaries to
cause or suffer or permit, the property of the Borrower or its subsidiaries to
be used for the generation, production, processing, handling, storage,
transporting or disposal of any Hazardous Material, except for Hazardous
Materials used, generated, produced, processed, handled, stored, transported or
disposed of in the ordinary course of business of the Borrower and its
subsidiaries or in connection with any investigation or remediation of any
applicable property, in which case such Hazardous Materials shall be used,
stored, generated, treated and disposed of only in compliance with Environmental
Law except where any non-compliance would not reasonably be expected to result
in a Material Adverse Effect.
(a) Supply to the Agent copies of all material Permits and all
submissions by the Borrower or any of its subsidiaries to any governmental body
and of the reports of all environmental audits and of all other environmental
tests, studies or assessments (including the data derived from any sampling or
survey of friable asbestos, soil, or subsurface or other materials or
conditions) that may be conducted or performed (by or on behalf of the Borrower
or any of its subsidiaries) on or regarding the properties owned, operated,
leased or occupied by the Borrower or any of its subsidiaries or regarding any
conditions that might have been affected by Hazardous Materials on or Released
or removed from such properties in each case that relate to matters that would
reasonably be expected to result in a Material Adverse Effect. The Borrower
shall also permit and authorize, and shall cause its subsidiaries to permit and
authorize, the consultants, attorneys or other persons that prepare such
submissions or reports or perform such audits, tests, studies or assessments to
discuss such submissions, reports or audits with the Agent and the Lenders. The
Agent and the Lenders agree that they shall schedule any meeting with any such
consultants, attorneys or other persons through the Borrower and a Responsible
Officer of the Borrower shall have the right to be present at any such meeting.
(b) Promptly (and in no event more than five (5) Business Days after
the Borrower has actual knowledge or is otherwise informed of such event)
provide oral and written notice to the Agent upon the happening of any of the
following:
(i) the Borrower, any subsidiary of the Borrower, or any tenant or
other occupant of any property of the Borrower or such subsidiary receives
written notice of any claim, complaint, charge or notice of a violation of
any Environmental Law that would reasonably be expected to result in a
Material Adverse Effect;
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(ii) there has been a spill or other Release of Hazardous Materials
upon, under or about or affecting any of the properties owned, operated,
leased or occupied by the Borrower or any of its subsidiaries, in amounts
that are required to be reported under Environmental Law or Hazardous
Materials at levels or in amounts that are required to be reported, remedied
or responded to under Environmental Law are detected on or in the soil or
groundwater in each case which would reasonably be expected to result in a
Material Adverse Effect;
(iii) the Borrower or any of its subsidiaries is or may be liable for
any costs of cleaning up or otherwise remedying a Release of Hazardous
Materials that would reasonably be expected to result in a Material Adverse
Effect;
(iv) any part of the properties owned, operated, leased or occupied by
the Borrower or any of its subsidiaries is or may be subject to a Lien under
any Environmental Law that would reasonably be expected to result in a
Material Adverse Effect; or
(v) the Borrower or any of its subsidiaries undertakes any Remedial
Work with respect to any Hazardous Materials that would reasonably be
expected to result in a Material Adverse Effect.
(c) Without in any way limiting the scope of Section 11.04(c) and in
addition to any obligations thereunder, the Borrower hereby indemnifies and
agrees to hold the Agent and the Lenders harmless from and against any
liability, loss, damage, suit, action or proceeding arising out of its business
or the business of its subsidiaries pertaining to Hazardous Materials,
including, but not limited to, claims of any governmental body or any third
person arising under any Environmental Law or under tort, contract or common law
except to the extent such liability, loss, damage, suit, action or proceeding
arises out of the gross negligence or wilful misconduct of any Lender, the Agent
or any of their authorized representatives. To the extent laws of the United
States or any applicable state or local law in which property owned, operated,
leased or occupied by the Borrower or any of its subsidiaries is located provide
that a Lien upon such property of the Borrower or such subsidiary may be
obtained for the removal of Hazardous Materials which have been or may be
Released, no later than sixty days after written notice that a Release has
occurred is given by the Agent to the Borrower or such subsidiary, the Borrower
or such subsidiary shall take appropriate action in the exercise of its
reasonable business judgment with respect to the Release. To the extent any
Hazardous Materials located in or under a specific property either results in
the imposition of a Lien on the property or would reasonably be expected to
result in a Material Adverse Effect, the remediation thereof to the extent
necessary to comply with applicable Environmental Law shall be an affirmative
covenant of the Borrower hereunder.
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(d) In the event that any Remedial Work is required to be performed by
the Borrower or any of its subsidiaries under any applicable Environmental Law,
any judicial order, or by any governmental entity, the Borrower or such
subsidiary shall commence all such Remedial Work at or prior to the time
required therefor under such Environmental Law or applicable judicial orders and
thereafter diligently prosecute to completion all such Remedial Work in
accordance with and within the time allowed under such applicable Environmental
Laws or judicial orders; provided, however, that such Remedial Work shall not be
required so long as it shall be contested in good faith by appropriate
proceedings and the applicable party shall have set aside on its books adequate
reserves with respect thereto in accordance with GAAP and such contest operates
to suspend any requirement that such Remedial Work be performed.
(e) Within 120 days after the Closing Date, provide the Agent with the
results of updated environmental audits, with respect to the Borrower's owned
and leased properties and operations, each of which shall be conducted by a firm
satisfactory to the Agent and the Lenders, and the scope, methodology and
results of each environmental audit shall be satisfactory to the Agent in all
respects.
SECTION 6.14. Pay Obligations to Lenders and Perform Other Covenants.
(a) Make full and timely payment of the Obligations, whether now existing or
hereafter arising, (b) duly comply with all the terms and covenants contained in
this Agreement (including, without limitation, the borrowing limitations and
mandatory prepayments in accordance with Article II hereof) and in each of the
other Loan Documents, all at the times and places and in the manner set forth
therein, subject to applicable cure and grace periods, and (c) except for the
filing of continuation statements and the making of other filings by the Agent
as secured party or assignee, at all times take all actions necessary to
maintain the Liens and security interests provided for under or pursuant to this
Agreement and the Security Documents as valid and perfected first Liens on the
property intended to be covered thereby (subject only to Liens expressly
permitted hereunder) and supply all information to the Agent necessary for such
maintenance.
SECTION 6.15. Maintain Operating Accounts. Maintain all of its
operating accounts and cash management arrangements with the Agent or with other
financial institutions approved by the Agent and on terms (which shall include
obtaining blocked account agreements) satisfactory to the Agent in its
reasonable discretion.
SECTION 6.16. Year 2000. Take all actions necessary to permit the
proper functioning, in and following the year 2000 of (i) the Borrower's
computer systems and (ii) equipment containing embedded microchips (including
systems and equipment supplied by others or with which Borrower's systems
interface and which are within the control of the Borrower) and the testing of
all such systems and equipment, as so programmed, unless the failure to take
such actions would not reasonably be expected to have a Material Adverse Effect.
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SECTION 6.17. Landlord and Mortgagee Waivers. Within 60 days of the
Closing Date, obtain and deliver to the Agent appropriate landlord and/or
mortgagee waivers with respect to each material Collateral location, in form and
substance reasonably satisfactory to the Agent or make rent escrow arrangements
with the Agent (covering at least three months rent).
VII. NEGATIVE COVENANTS
The Borrower covenants and agrees with each Lender that, so long as
this Agreement shall remain in effect or the principal of or interest on any
Note, any amount under any Letter of Credit, or any fee, expense or other
Obligation payable hereunder shall be unpaid, it will not and will not cause or
permit any of its subsidiaries and, in the case of Section 7.16 hereof, any
ERISA Affiliate to, either directly or indirectly:
SECTION 7.01. Liens. Incur, create, assume or permit to exist any Lien
on any of its property or assets (including the stock of any direct or indirect
subsidiary), whether owned at the date hereof or hereafter acquired, or assign
or convey any rights to or security interests in any future revenues, except:
(a) Liens incurred and pledges and deposits made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance, old-age pensions and other social security or similar laws (not
including any lien described in Section 412(m) of the Code);
(b) Liens imposed by law, such as carriers', warehousemen's,
mechanics', materialmen's and vendors' liens and other similar liens,
incurred in good faith in the ordinary course of business and securing
obligations which are not overdue for a period of more than 30 days or which
are being contested in compliance with Section 6.04;
(c) Liens securing the payment of taxes, assessments and governmental
charges or levies, that are not delinquent or are being diligently contested
in compliance with Section 6.04;
(d) zoning restrictions, easements, rights of way licenses, flowage
rights, reservations, provisions, covenants, conditions, waivers,
restrictions on the use of property or minor defects or irregularities of
title and similar encumbrances (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances incurred, created,
assumed or permitted to exist and arising by, through or under a landlord or
owner of the leased property, with or without consent of the lessee) which
do not in the aggregate materially detract from the value of its property or
assets or materially impair the use thereof in the operation of its
business;
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(e) purchase money Liens granted in connection with the incurrence of
Indebtedness permitted by Section 7.03(vi) hereof, to the vendor or person
financing the construction, acquisition or improvement of property, plant or
equipment, provided that (i) such Lien is limited to the particular assets
constructed, acquired or improved, (ii) the debt secured by the Lien does
not exceed 100% of the amount financed for the construction, acquisition or
improvement cost (including transaction costs and indemnities customarily
secured by a Lien of such type) of the specific assets on which the Lien is
granted, (iii) such Lien arises and the Indebtedness secured thereby is
created within 120 days of the completion of such construction of such
acquisition or of such improvement or are incurred to extend, renew or
refinance such Liens and Indebtedness incurred within such 120-day period
and (iv) such transaction does not otherwise violate this Agreement;
(f) Liens existing on the date of this Agreement and set forth in
Schedule 7.01 annexed hereto; provided, however, that the Indebtedness with
respect to such existing Lien shall not exceed the amount corresponding to
such Lien set forth in Schedule 7.01;
(g) Liens created in favor of the Agent for its own benefit and for the
benefit of the Lenders pursuant to the Loan Documents;
(h) Liens and deposits securing the performance of bids, tenders,
leases, contracts (other than for the repayment of borrowed money),
statutory obligations, surety, customs and appeal bonds, performance bonds
and other obligations of like nature, incurred as an incident to and in the
ordinary course of business;
(i) judgment Liens securing judgments and decrees, which would not
constitute an Event of Default under paragraph (j) of Article VIII;
(j) Liens on property prior to the acquisition thereof by the Borrower,
or any subsidiary thereof, provided that such Lien is not created in
contemplation of or in connection with such acquisition and such Lien does
not apply to any other property;
(k) Liens that arise automatically under Environmental Laws provided
that the Borrower is in compliance with Section 6.13 and any such Lien would
not reasonably expected to result in a Material Adverse Effect; or
(l) Liens arising from the refinancing of Indebtedness secured by Liens
permitted by paragraphs (e), (f) and (j) above on terms that are not
materially disadvantageous to the Agent or the Lenders, but without any
increase of the Indebtedness secured thereby.
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SECTION 7.02. Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby the Borrower or any
of its subsidiaries shall sell or transfer any property, real or personal, and
used or useful in its business, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property which the Borrower or
such subsidiary intends to use for substantially the same purpose or purposes as
the property being sold or transferred, except for sale and lease-back
transactions in the ordinary course of business not to exceed $2,000,000 in the
aggregate during the term of this Agreement.
SECTION 7.03. Indebtedness. Incur, create, assume or permit to exist
any Indebtedness other than (i) Indebtedness secured by Liens permitted under
Section 7.01, (ii) Indebtedness (including, without limitation, Guarantees)
existing on the date hereof and listed in Schedule 7.03 annexed hereto, but not
the extension, renewal or refunding thereof, unless any such extension, renewal
or refunding is on terms that are not materially disadvantageous to the Agent or
the Lenders as compared to the original Indebtedness, (iii) Indebtedness
incurred hereunder, (iv) Indebtedness to trade creditors incurred and deposits
from customers received in the ordinary course of business, (v) Guarantees
constituting the endorsement of negotiable instruments for deposit or collection
in the ordinary course of business, (vi) purchase money Indebtedness (including
Capital Lease Obligations) to finance Capital Expenditures permitted by Section
7.07 hereof provided that any Lien granted with respect to such Indebtedness is
permitted by Section 7.01(e) hereof, (vii) Subordinated Indebtedness in
connection with Permitted Acquisitions, but only if there is compliance with the
coverage test set forth therein, (viii) interest rate and currency protection
agreements occurring in the ordinary course of business; (ix) other unsecured
Indebtedness in addition to that permitted above not to exceed $1,000,000 in the
aggregate at any one time outstanding; (x) Indebtedness owing by the Borrower or
any Guarantor to another such person; (xi) Guarantees of Indebtedness permitted
under this Agreement; and (xii) Indebtedness of subsidiaries created or acquired
in connection with a Permitted Acquisition, to the extent such Indebtedness
existed on the date of such Permitted Acquisition, was not created in
anticipation thereof and a schedule of such Indebtedness has been provided to
the Agent and the incurrence thereof would not cause an Event of Default, but
not the extension, renewal or refunding thereof, unless any such extension,
renewal or refunding is on terms that are not materially disadvantageous to the
Agent or the Lenders as compared to the original Indebtedness.
SECTION 7.04. Dividends, Distributions and Payments. Declare or pay,
directly and indirectly, any cash dividends or make any other distribution,
whether in cash, property, securities (other than common stock) or a combination
thereof, with respect to (whether by reduction of capital or otherwise) any
shares of its capital stock or directly or indirectly redeem, purchase, retire
or otherwise acquire for value (or permit any subsidiary to purchase or acquire)
any shares of any class of its capital stock or set aside any amount for any
such purpose, except that (i) any subsidiary of the Borrower may pay dividends
or make other distributions to the Borrower and (ii) so long as no Default or
Event of Default shall have occurred and be continuing or result therefrom,
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and, in addition, prior to the fiscal quarter ending September 30, 2000, the
Leverage Ratio of the Borrower and its subsidiaries is not greater than
2.50:1.00, the Borrower may pay dividends or make other distributions in any
Fiscal Year following delivery of (x) with respect to any payment to be made in
the first fiscal quarter, the financial statements for the prior Fiscal Year
required to be delivered pursuant to Section 6.05(a) and with respect to any
payment to be made in any other fiscal quarter, the financial statements for the
prior fiscal quarter to be delivered pursuant to Section 6.05(b), (y) the
certificate required to be delivered concurrently therewith pursuant to Section
6.05(e) and (z) a certificate of a Financial Officer of the Borrower, certifying
that to the best of his or her knowledge no Default or Event of Default has
occurred and including calculations demonstrating compliance, after taking into
account the making of the proposed dividend or distribution, with the covenants
set forth in Sections 7.09 and 7.10 hereof (and prior to the fiscal quarter
ending September 30, 2000, Section 7.09 and the Leverage Ratio test set forth in
this Section 7.04).
SECTION 7.05. Consolidations, Mergers and Sales of Assets. Consolidate
with or merge into any other person, or sell, lease, transfer or assign to any
persons or otherwise dispose of (whether in one transaction or a series of
transactions) any portion of its assets (whether now owned or hereafter
acquired), or permit another person to merge into it, or acquire all or
substantially all the capital stock or assets of any other person; provided,
however, that the foregoing shall not prohibit:
(a) purchases and sales of inventory in the ordinary course;
(b) (i) sales of assets (excluding capital stock of a subsidiary) not
to exceed $500,000 in the aggregate in any Fiscal Year and $2,000,000 in the
aggregate during the term of this Agreement and (ii) sales of worn out,
obsolete, scrap or surplus assets;
(c) sales of accounts receivable, promissory notes, drafts or trade
acceptances or other rights to receive payment permitted by Section 7.14;
(d) leases, subleases and licenses in the ordinary course of business
(subject to any restrictions contained in the Security Documents);
(e) Capital Expenditures permitted by Section 7.07;
(f) liquidation of investments permitted pursuant to Sections 7.06(a)
through (e);
(g) so long as at the time thereof and immediately after giving effect
thereto no Event of Default shall have occurred and be continuing, the
merger or consolidation of (i) any subsidiary incorporated in the United
States with or into any other subsidiary incorporated in the United States,
(ii) any Guarantor into the Borrower, (iii) any subsidiary incorporated
outside the United States with or into any other subsidiary incorporated
outside the United States and (iv) any
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subsidiary incorporated outside the United States with or into any other
subsidiary incorporated in the United States, subject to a reasonable tax
review, which review shall be delivered to or made available to the Agent
promptly upon completion, to determine whether such merger would have a
Material Adverse Effect, and in each case, in which no person other than the
Borrower or any such subsidiary receives consideration and the Agent in its
sole discretion is satisfied that the surviving person has assumed all
Obligations of the person merging with or consolidating into such surviving
person and that there has been no Material Adverse Effect with respect to
the Collateral;
(h) Permitted Acquisitions;
(i) dividends permitted by Section 7.04 to the extent that such
dividends are deemed to be a transfer of assets; and
(j) sale and lease-back transactions permitted by Section 7.02.
SECTION 7.06. Investments. Own, purchase or acquire any stock,
obligations, assets (not in the ordinary course of business) or securities of,
or any interest in, or make any capital contribution or loan or advance to, any
other person, or make any other investments, except:
(a) certificates of deposit, time deposits and money market accounts in
dollars of any commercial banks registered to do business in any state of
the United States (i) having capital and surplus in excess of $500,000,000
and (ii) whose long-term debt rating is at least investment grade as
determined by either Standard & Poor's Ratings Group or Moody's Investors
Service, Inc. and certificates of deposit in dollars offered by money market
mutual funds meeting the criteria in (c) below;
(b) readily marketable direct obligations of the United States
government or any agency thereof which are backed by the full faith and
credit of the United States;
(c) investments in money market mutual funds having assets in excess of
$2,000,000,000;
(d) commercial paper at the time of acquisition having the highest
rating obtainable from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.;
(e) federally tax exempt securities rated A or better by either
Standard & Poor's Ratings Group or Moody's Investors Service, Inc.;
(f) investments in the stock of any subsidiary existing on the Closing
Date, but not any additional investments therein;
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(g) existing investments as set forth on Schedule 7.06 annexed hereto
and renewals, replacements and extensions thereof;
(h) investments in non-cash consideration received in connection with a
permitted sale of assets (subject to the granting of a Lien as required by
the Security Documents);
(i) investments arising from transactions by any Loan Party or any of
its subsidiaries with customers or suppliers in the ordinary course of
business, including, without limitation, endorsements of negotiable
instruments and debt obligations and other investments received in
connection with the bankruptcy or reorganization of customers and suppliers
or in settlement of delinquent obligations of, or other disputes with,
customers or suppliers, arising in the ordinary course of business (subject
to the granting of a Lien as required by the Security Documents);
(j) loans or advances to employees (i) to cover payroll, travel,
relocations and similar expenses, arising in the ordinary course or (ii) to
allow such employees to exercise options in the stock of the Borrower, so
long as the aggregate amount of such loans and advances does not exceed
$500,000 at any one time outstanding;
(k) Capital Expenditures and other purchases permitted under other
provisions of this Agreement;
(l) Indebtedness permitted by Section 7.03; and
(m) transactions permitted pursuant to Section 7.05.
provided that, in each case mentioned in (a), (b), (d) and (e) above, such
obligations shall mature not more than one year from the date of acquisition
thereof.
SECTION 7.07. Capital Expenditures. Permit the aggregate amount of
payments made for Capital Expenditures (other than Capital Expenditures made
with proceeds of insurance as permitted pursuant to Section 2.09(e) or sales of
assets as permitted pursuant to exception (b) of Section 7.05), including
Capitalized Lease Obligations and Indebtedness secured by Liens permitted under
Section 7.01(e) hereof, to exceed $2,000,000 for the Borrower and its
subsidiaries in any Fiscal Year; provided, however, if the aggregate amount of
such payments in any such period are less than the maximum amount indicated
above for such period, then the unused portion may be carried forward for the
immediately succeeding period only and any amounts carried forward will be
deemed used first before the maximum amount for the period into which such
amount was carried forward has been used.
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SECTION 7.08. Rental Obligations. Incur, create, assume or permit to
exist, in respect of leases of real and personal property (other than finance
leases), monetary rental obligations or other commitments thereunder to make any
direct or indirect payment, whether as rent or otherwise, for fixed or minimum
rentals, percentage rentals, property taxes, or insurance premiums, other than
(x) those set forth on Schedule 7.08 annexed hereto and any renewal or
replacement thereof and (y) other such obligations incurred in the ordinary
course of business or representing increased rental costs in replacing existing
rental facilities in an aggregate amount for the Borrower and its subsidiaries
not to exceed (i) $1,500,000 for the Fiscal Year ending December 31, 1998 and
(ii) in any Fiscal Year thereafter, an amount equal to the amount of the
preceding Fiscal Year increased by fifteen percent (15%).
SECTION 7.09. Debt Service Coverage Ratio. Permit the Debt Service
Coverage Ratio of the Borrower and its subsidiaries at the end of any fiscal
quarter, commencing with the fiscal quarter ending September 30, 1998, to be
less than 1.25:1.00.
SECTION 7.10. Leverage Ratio. Permit the Leverage Ratio of the Borrower
and its subsidiaries at the end of any fiscal quarter to be greater than the
respective amounts set forth below for the fiscal quarter indicated:
Period Ratio
------ -----
each fiscal quarter commencing with
the fiscal quarter ending September 30, 1998
through the fiscal quarter ending June 30, 2000 3:00:1.00
each fiscal quarter commencing with
the fiscal quarter ending September 30, 2000
through the fiscal quarter ending June 30, 2001 2:50:1.00
each fiscal quarter thereafter 2:00:1.00
SECTION 7.11. Interest Coverage Ratio. Permit the Interest Coverage
Ratio of the Borrower and its subsidiaries at the end of any fiscal quarter to
be less than the respective amounts set forth below for the fiscal quarter
indicated:
Period Ratio
------ -----
each fiscal quarter commencing with
the fiscal quarter ending September 30, 1998
through the fiscal quarter ending June 30, 2000 3:00:1.00
each fiscal quarter commencing with
the fiscal quarter ending September 30, 2000
through the fiscal quarter ending December 31, 2001 4:00:1.00
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each fiscal quarter thereafter 5:00:1.00
SECTION 7.12. Availability. Permit Availability at any time to be less
than zero.
SECTION 7.13. Business. Alter the nature of its business as operated on
the date of this Agreement in any material respect.
SECTION 7.14. Sales of Receivables. Sell, assign, discount, transfer,
or otherwise dispose of any accounts receivable, promissory notes, drafts or
trade acceptances or other rights to receive payment held by it, with or without
recourse, except (i) for the purpose of collection or settlement in the ordinary
course of business and (ii) the sale of any such accounts to the Agent.
SECTION 7.15. Use of Proceeds. Permit the proceeds of any Credit Event
to be used for any purpose which entails a violation of, or is inconsistent
with, Regulation T, U or X of the Board, or for any purpose other than those set
forth in Section 2.17 or Section 4.14 hereof.
SECTION 7.16. ERISA. Engage in any transaction in connection with which
the Borrower or any ERISA Affiliate could be subject to either a material civil
penalty assessed pursuant to the provisions of Section 502 of ERISA or a
material tax imposed under the provisions of Section 4975 of the Code.
(a) Terminate any Pension Plan in a "distress termination" under
Section 4041 of ERISA, or take any other action which could result in a material
liability of the Borrower or any ERISA Affiliate to the PBGC.
(b) Fail to make payment when due of all material amounts which, under
the provisions of any Plan, the Borrower or any ERISA Affiliate is required to
pay as contributions thereto, or, with respect to any Pension Plan, permit to
exist any material "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA and Section 412 of the Code), whether or not waived, with
respect thereto.
(c) Adopt an amendment to any Pension Plan requiring the provision of
security under Section 307 of ERISA or Section 401(a)(29) of the Code.
SECTION 7.17. Accounting Changes. Make any change in their accounting
treatment or financial reporting practices except as required or permitted by
GAAP.
SECTION 7.18. Prepayment or Modification of Indebtedness; Modification
of Charter Documents. Directly or indirectly prepay, redeem, purchase or retire
(other than at stated maturity) any Indebtedness, including, without limitation,
any Subordinated Indebtedness, other than Indebtedness incurred hereunder.
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(a) Modify, amend or otherwise alter the terms and provisions of any
Subordinated Indebtedness, unless approved by the Required Lenders in their
reasonable discretion.
(b) Modify, amend or alter their certificates or articles of
incorporation or other constitutive documents to the extent such would be
adverse to the Lenders in any material respect.
SECTION 7.19. Transactions with Affiliates. Except as otherwise
specifically set forth in this Agreement, directly or indirectly purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or enter into any other transaction with, any stockholder, Affiliate or agent of
the Borrower, except at prices and on terms not less favorable to it than that
which would have been obtained in an arm's-length transaction with a
non-affiliated third party.
SECTION 7.20. Negative Pledges, Etc. Enter into any agreement (other
than this Agreement or any other Loan Document or any agreement relating to any
Indebtedness permitted pursuant to Sections 7.03(ii) and (vi) but only with
respect to the property securing such Indebtedness) which (a) prohibits the
creation or assumption of any Lien upon any of the Collateral, including,
without limitation, any hereafter acquired property, or (b) specifically
prohibits the amendment or other modification of this Agreement or any other
Loan Document; provided, that the foregoing shall not apply to (i) any
restrictions with respect to a subsidiary pursuant to an agreement relating to
any Indebtedness incurred by such subsidiary on or prior to the date on which
such subsidiary becomes a subsidiary and outstanding on such date, (ii) any
restriction pursuant to an agreement effecting a refinancing of Indebtedness
referred to in clause (i) above contained in any amendment or modification with
respect to such Indebtedness so long as the restrictions contained in any such
agreement, amendment or modification are no more restrictive in any material
respect with respect to the matters referred to in clauses (a) and (b) above
than the restrictions with respect to the Indebtedness being refinanced, amended
or modified or (iii) in the case of clause (a) above, customary non-assignment
provisions of any leases governing a leasehold interest or of any supply,
license or other agreement entered into in the ordinary course of business of
the Borrower or any subsidiary.
VIII. EVENTS OF DEFAULT
In case of the happening of any of the following events (herein called
"Events of Default"):
(a) any representation or warranty made or deemed made by any Loan
Party in or in connection with this Agreement, any of the Security
Documents, the Notes or other Loan Documents or any Credit Events hereunder,
shall prove to have been incorrect in any material respect when made or
deemed to be made;
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(b) default shall be made in the payment of any principal of any Note
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or by acceleration thereof
or otherwise;
(c) default shall be made in the payment of any interest on any Note,
or any fee or any other amount payable hereunder, or under the Notes,
Letters of Credit, or any other Loan Document, the Commitment Letter or Fee
Letter or in connection with any other Credit Event when and as the same
shall become due and payable;
(d) default shall be made in the due observance or performance of any
covenant, condition or agreement to be observed or performed on the part of
any Loan Party pursuant to (i) Sections 6.01, 6.03, 6.05 (other than
subsections (a), (b) and (e)), 6.08 (with respect to inspection, visitation
and audits), 6.09, 6.10, 6.14, and 6.15 or Article VII hereof or any of the
Notes, (ii) the provisions of subsections (a), (b) and (e) of Section 6.05
and such default shall continue for a period of three (3) Business Days
(provided that such grace period shall only be available a maximum of three
times) or (iii) any other terms of this Agreement (other than as specified
in (a), (b), (c) or (d)(i) or (d)(ii) above) or any other Loan Document
(other than this Agreement and the Notes) and such default with respect to
any such other terms shall continue for a period of 30 days;
(e) any Loan Party shall (i) voluntarily commence any proceeding or
file any petition seeking relief under Title 11 of the United States Code or
any other Federal, state or foreign bankruptcy, insolvency, liquidation or
similar law, (ii) consent to the institution of, or fail to contravene in a
timely and appropriate manner, any such proceeding or the filing of any such
petition, (iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator or similar official for any Loan Party or
for a substantial part of its property or assets, (iv) file an answer
admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of creditors,
(vi) become unable, admit in writing its inability or fail generally to pay
its debts as they become due or (vii) take corporate action for the purpose
of effecting any of the foregoing;
(f) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of any Loan Party, or of a substantial part of the
property or assets of any Loan Party, under Title 11 of the United States
Code or any other Federal state or foreign bankruptcy, insolvency,
receivership or similar law, (ii) the appointment of a receiver, trustee,
custodian, sequestrator or similar official for any Loan Party or for a
substantial part of the property of any Loan Party or (iii) the winding-up
or liquidation of any Loan Party; and such proceeding or petition shall
continue undismissed for 45 days or an order or decree approving
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or ordering any of the foregoing shall continue unstayed and in effect for
30 days;
(g) default shall be made with respect to any Indebtedness of any Loan
Party (excluding Indebtedness outstanding hereunder) which either
individually or taken together with other such Indebtedness as to which a
default has occurred shall exceed $250,000 if the effect of any such default
shall be to accelerate, or to permit the holder or obligee of any such
Indebtedness or obligations under a capitalized lease (or any trustee on
behalf of such holder or obligee) at its option to accelerate, the maturity
of such Indebtedness or obligations under a capitalized lease;
(h) (i) a Reportable Event shall have occurred with respect to a
Pension Plan, (ii) the filing by any Loan Party, any ERISA Affiliate, or an
administrator of any Plan of a notice of intent to terminate such a Plan in
a "distress termination" under the provisions of Section 4041 of ERISA,
(iii) the receipt of notice by any Loan Party, any ERISA Affiliate, or an
administrator of a Plan that the PBGC has instituted proceedings to
terminate (or appoint a trustee to administer) such a Plan, (iv) any other
event or condition exists which might, in the reasonable opinion of the
Agent, constitute grounds under the provisions of Section 4042 of ERISA for
the termination of (or the appointment of a trustee to administer) any
Pension Plan by the PBGC, (v) a Pension Plan shall fail to maintain the
minimum funding standard required by Section 412 of the Code for any plan
year or a waiver of such standard is sought or granted under the provisions
of Section 412(d) of the Code, (vi) any Loan Party or any ERISA Affiliate
has incurred, or is likely to incur, a liability under the provisions of
Section 4062, 4063, 4064 or 4201 of ERISA and (vii) any Loan Party or any
ERISA Affiliate fails to pay the full amount of an installment required
under Section 412(m) of the Code, and in each case in clauses (i) through
(vii) of this subsection (h), such event or condition, together with all
other such events or conditions, if any, could subject any Loan Party or any
ERISA Affiliate to any taxes, penalties or other liabilities which, in the
reasonable opinion of the Agent, would result in a Material Adverse Effect;
(i) any Loan Party or any ERISA Affiliate (x) shall have been notified
by the sponsor of a Multiemployer Plan that it has incurred any material
withdrawal liability to such Multiemployer Plan, (y) does not have
reasonable grounds for contesting such withdrawal liability and is not in
fact contesting such withdrawal liability in a timely and appropriate
manner, and (z) the payment of such withdrawal liability would, in the
reasonable opinion of the Agent, result in a Material Adverse Effect;
(j) a judgment (not reimbursed by insurance policies of any Loan Party)
or decree for the payment of money, a fine or penalty which when taken
together with all other outstanding judgments, decrees, fines and penalties
shall exceed $250,000 shall be rendered by a court or other tribunal against
any Loan
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Party and (i) shall remain undischarged or unbonded for a period of 45
consecutive days during which the execution of such judgment, decree, fine
or penalty shall not have been stayed effectively or (ii) any judgment
creditor or other person shall legally commence actions to levy upon assets
or properties to enforce such judgment, decree, fine or penalty;
(k) this Agreement, any Note, any of the Security Documents or other
Loan Documents shall for any reason cease to be, or shall be asserted by any
Loan Party not to be, a legal, valid and binding obligation of any Loan
Party, enforceable in accordance with its terms (subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforcement of creditors' rights generally from time to time
in effect and to general principles of equity), or a Lien affecting a
material portion of the Collateral purported to be created by any of the
Security Documents shall for any reason cease to be, or be asserted by any
Loan Party not to be, a valid, first priority perfected Lien (except to the
extent otherwise permitted under this Agreement or any of the Security
Documents);
(l) a Change of Control shall occur;
(m) any material damage to, or loss, theft or destruction of, any
material Collateral, whether or not insured, or any strike, lockout, labor
dispute, embargo, condemnation, act of God or public enemy, or other
casualty which causes, for more than sixty (60) consecutive days beyond the
coverage period of any applicable business interruption insurance, the
cessation or substantial curtailment of revenue producing activities at any
facility of a Loan Party if, in the case of any of the foregoing, such event
or circumstance would reasonably be expected to result in a Material Adverse
Effect; or
(n) a Lien or Liens, individually or in the aggregate exceeding
$250,000 arising from unpaid Federal, state or local taxes shall be filed
against any Loan Party's properties or assets;
then, and in any such event (other than an event described in paragraph (e) or
(f) above with respect to the Borrower), and at any time thereafter during the
continuance of such event, the Agent may, and upon the written request of the
Required Lenders shall, by written notice (or facsimile notice promptly
confirmed in writing) to the Borrower, take any or all of the following actions
at the same or different times: (i) terminate forthwith all or any portion of
the Total Commitment and the obligations of the Lenders to issue Letters of
Credit hereunder; (ii) declare the Notes and any amounts then owing to the
Lenders on account of drawings under any Letters of Credit to be forthwith due
and payable, and (iii) require that the Borrower remit to the Agent cash
collateral in an amount equal to the aggregate undrawn amount of all outstanding
Letters of Credit at such time, such cash collateral to be held by the Agent for
its own benefit and the benefit of the Lenders in a cash collateral account on
terms and conditions satisfactory to the Agent (such cash collateral to the
extent not applied to satisfy the Obligations
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shall be returned to the Borrower within three (3) Business Days after all
Events of Default have been cured or waived), whereupon the principal of such
Notes, together with accrued interest and fees thereon and any amounts then
owing to the Lenders on account of drawings under any Letters of Credit and
other liabilities of the Borrower accrued hereunder, shall become forthwith due
and payable both as to principal and interest, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived by the Borrower, anything contained herein or in the Notes to the
contrary notwithstanding; provided, however, that with respect to a default of
the Borrower described in paragraph (e) or (f) above, the Total Commitment and
the obligation of the Lenders to issue Letters of Credit shall automatically
terminate and the principal of the Notes, together with accrued interest and
fees thereon and any amounts then owing to the Lenders on account of drawings
under any Letters of Credit and any other liabilities of the Borrower accrued
hereunder shall automatically become due and payable, both as to principal and
interest, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by the Borrower, any thing contained herein
or in the Notes to the contrary notwithstanding.
IX. AGENT
In order to expedite the transactions contemplated by this Agreement,
The Chase Manhattan Bank is hereby appointed to act as Agent on behalf of the
Lenders. Each of the Lenders and each subsequent holder of any Note or issuer of
any Letter of Credit by its acceptance thereof, irrevocably authorizes the Agent
to take such action on its behalf and to exercise such powers hereunder and
under the Security Documents and other Loan Documents as are specifically
delegated to or required of the Agent by the terms hereof and the terms thereof
together with such actions and powers as are reasonably incidental thereto.
Neither the Agent nor any of its directors, officers, employees or agents shall
be liable as such for any action taken or omitted to be taken by it or them
hereunder or under any of the Security Documents and other Loan Documents or in
connection herewith or therewith (a) at the request or with the approval of the
Required Lenders (or, if otherwise specifically required hereunder or
thereunder, the consent of all the Lenders) or (b) in the absence of its or
their own gross negligence or willful misconduct. For its services as Agent, the
Borrower has agreed to pay The Chase Manhattan Bank an administration fee which
has been negotiated between the parties.
The Agent is hereby expressly authorized on behalf of the Lenders,
without hereby limiting any implied authority, (a) to receive on behalf of each
of the Lenders any payment of principal of or interest on the Notes outstanding
hereunder and all other amounts accrued hereunder which are paid to the Agent,
and promptly to distribute to each Lender its proper share of all payments so
received, (b) to distribute to each Lender copies of all notices, agreements and
other material as provided for in this Agreement or in the Security Documents
and other Loan Documents as received by the Agent and (c) to take all actions
with respect to this Agreement and the Security Documents and other Loan
Documents as are specifically delegated to the Agent.
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In the event that (a) the Borrower fails to pay when due the principal
of or interest on any Note, any amount payable under any Letter of Credit, or
any fee payable hereunder or (b) the Agent receives written notice of the
occurrence of a Default or an Event of Default (the Agent being deemed not to
have knowledge of any Default or Event of Default unless and until written
notice thereof is given to the Agent by the Borrower or a Lender), the Agent
within a reasonable time shall give written notice thereof to the Lenders, and
shall take such action with respect to such Event of Default or other condition
or event as it shall be directed to take by the Required Lenders; provided,
however, that, unless and until the Agent shall have received such directions,
the Agent may take such action or refrain from taking such action hereunder or
under the Security Documents or other Loan Documents with respect to a Default
or Event of Default as it shall deem advisable in the best interests of the
Lenders.
The Agent shall not be responsible in any manner to any of the Lenders
for the effectiveness, enforceability, perfection, value, genuineness, validity
or due execution of this Agreement, the Notes or any of the other Loan Documents
or Collateral or any other agreements or certificates, requests, financial
statements, notices or opinions of counsel or for any recitals, statements,
warranties or representations contained herein or in any such instrument or be
under any obligation to ascertain or inquire as to the performance or observance
of any of the terms, provisions, covenants, conditions, agreements or
obligations of this Agreement or any of the other Loan Documents or any other
agreements on the part of the Borrower and, without limiting the generality of
the foregoing, the Agent shall, in the absence of knowledge to the contrary, be
entitled to accept any certificate furnished pursuant to this Agreement or any
of the other Loan Documents as conclusive evidence of the facts stated therein
and shall be entitled to rely on any note, notice, consent, certificate,
affidavit, letter, telegram, teletype message, statement, order or other
document which it believes in good faith to be genuine and correct and to have
been signed or sent by the proper person or persons. It is understood and agreed
that the Agent may exercise its rights and powers under other agreements and
instruments to which it is or may be a party, and engage in other transactions
with the Borrower, as though it were not the Agent of the Lenders hereunder.
The Agent shall promptly give notice to the Lenders of the receipt or
sending of any notice, schedule, report, projection, financial statement or
other document or information pursuant to this Agreement or any of the other
Loan Documents and shall promptly forward a copy thereof to each Lender.
Neither the Agent nor any of its directors, officers, employees or
agents shall have any responsibility to the Borrower on account of the failure
or delay in performance or breach by any Lender other than the Agent of any of
its obligations hereunder or to any Lender on account of the failure of or delay
in performance or breach by any other Lender or the Borrower of any of their
respective obligations hereunder or in connection herewith.
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The Agent may consult with legal counsel selected by it in connection
with matters arising under this Agreement or any of the other Loan Documents and
any action taken or suffered in good faith by it in accordance with the opinion
of such counsel shall be full justification and protection to it. The Agent may
exercise any of its powers and rights and perform any duty under this Agreement
or any of the other Loan Documents through agents or attorneys.
The Agent and the Borrower may deem and treat the payee of any Note as
the holder thereof until written notice of transfer shall have been delivered as
provided in Section 11.03 by such payee to the Agent and the Borrower and such
transfer is otherwise in accordance with Section 11.03.
With respect to the Loans made hereunder, the Notes issued to it and
any other Credit Event applicable to it, the Agent in its individual capacity
and not as an Agent shall have the same rights, powers and duties hereunder and
under any other agreement executed in connection herewith as any other Lender
and may exercise the same as though it were not the Agent, and the Agent and its
affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Borrower or other affiliate thereof as if it were not
the Agent. Each of the Lenders hereby acknowledges that the Agent and/or one or
more Affiliates of the Agent may at any time and from time to time be a holder
of equity interests in a Loan Party.
Each Lender agrees (i) to reimburse the Agent in the amount of such
Lender's pro rata share (based on its Total Revolving Credit Commitment
hereunder) of any expenses incurred for its own benefit and/or for the benefit
of the Lenders by the Agent, including counsel fees and compensation of agents
and employees paid for services rendered on behalf of the Lenders, not
reimbursed by the Borrower and (ii) to indemnify and hold harmless the Agent and
any of its directors, officers, employees or agents, on demand, in the amount of
its pro rata share, from and against any and 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 it in its capacity as the Agent or any of them in any way
relating to or arising out of this Agreement or any of the other Loan Documents
or any action taken or omitted by it or any of them under this Agreement or any
of the other Loan Documents, to the extent not reimbursed by the Borrower;
provided, however, that no Lender shall be liable to the Agent for any portion
of such liabilities, obligations, losses, damages, penalties, actions, judgment,
suits, costs, expenses or disbursements resulting from the gross negligence or
willful misconduct of the Agent or any of its directors, officers, employees or
agents.
With respect to the release of Collateral, the Lenders hereby
irrevocably authorize the Agent, at its option and in its discretion, to release
any Lien granted to or held by the Agent upon any property covered by this
Agreement or the other Loan Documents (i) upon termination of the Total
Commitments and payment and satisfaction of all Obligations; (ii) constituting
property being sold or disposed of in compliance with the provisions of this
Agreement (and the Agent may rely in good faith
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conclusively on any certificate, without further inquiry); or (iii) constituting
property leased to the Borrower or any subsidiary under a lease which has
expired or been terminated or is about to expire and which has not been, and is
not intended by the Borrower or such subsidiary to be, renewed or extended;
provided, however, that (x) the Agent shall not be required to execute any
release on terms which, in the Agent's opinion, would expose the Agent to
liability or create any obligation or entail any consequence other than the
release of such Liens without recourse or warranty, and (y) such release shall
not in any manner discharge, affect or impair the Obligations or any Liens upon
(or obligations of any Loan Party, in respect of), all interests retained by any
Loan Party, including (without limitation) the proceeds of any sale, all of
which shall continue to constitute part of the property covered by this
Agreement or the Loan Documents.
With respect to perfecting the Lenders' security interest in Collateral
which, in accordance with Article 9 of the Uniform Commercial Code or any
comparable provision of any Lien perfection statute in any applicable
jurisdiction, can be perfected only by possession, each Lender hereby appoints
each other Lender for the purpose of perfecting such interest. Should any Lender
(other than the Agent) obtain possession of any such Collateral, such Lender
shall notify the Agent, and, promptly upon the Agent's request, shall deliver
such Collateral to the Agent or in accordance with the Agent's instructions.
Each Lender agrees that it will not have any right individually to enforce or
seek to enforce this Agreement or any Loan Document or to realize upon any
Collateral for the Loans, it being understood and agreed that such rights and
remedies may be exercised only by the Agent.
In the event that a petition seeking relief under Title 11 of the
United States Code or any other Federal, state or foreign bankruptcy,
insolvency, liquidation or similar law is filed by or against any Loan Party,
the Agent is authorized to file a proof of claim on behalf of itself and the
Lenders in such proceeding for the total amount of Obligations owed by such Loan
Party. With respect to any such proof of claim which the Agent may file, each
Lender acknowledges that without reliance on such proof of claim, such Lender
shall make its own evaluation as to whether an individual proof of claim must be
filed in respect of such Obligations owed to such Lender and, if so, take the
steps necessary to prepare and timely file such individual claim.
Each Lender acknowledges that it has, independently and without
reliance upon the Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and any other Loan Document to which such
Lender is party. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document, any related agreement or any document furnished
hereunder.
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Subject to the appointment and acceptance of a successor Agent as
provided below, the Agent may resign at any time by notifying the Lenders and
the Borrower. Upon any such resignation, the Lenders shall have the right to
appoint a successor Agent, subject, so long as no Event of Default shall have
occurred and be continuing, to the consent of the Borrower, which consent shall
not be unreasonably withheld. If no successor Agent shall have been so appointed
by such Lenders and shall have accepted such appointment within 30 days after
the retiring Agent gives notice of its resignation, then the retiring Agent may,
on behalf of the Lenders, subject, so long as no Event of Default shall have
occurred and be continuing, to the consent of the Borrower, which consent shall
not be unreasonably withheld, appoint a successor Agent which shall be a bank
with an office (or an affiliate with an office) in New York, New York, having a
combined capital and surplus of at least $500,000,000. Upon the acceptance of
any appointment as Agent hereunder by a successor bank, such successor shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent and the retiring Agent shall be discharged from
its duties and obligations hereunder and under each of the other Loan Documents.
After any Agent's resignation hereunder, the provisions of this Article shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Agent.
The Lenders hereby acknowledge that the Agent shall be under no duty to
take any discretionary action permitted to be taken by the Agent pursuant to the
provisions of this Agreement or any of the other Loan Documents unless it shall
be requested in writing to do so by the Required Lenders. The Lenders further
hereby acknowledge that the Agent is not acting as the fiduciary of, or the
trustee for, any of the Lenders and except as expressly set forth herein, the
Agent shall not have any duty to disclose, and shall not be liable for the
failure to disclose, any information communicated to the Agent by or relating to
the Borrower or any of its subsidiaries.
X. MANAGEMENT, COLLECTION AND STATUS OF RECEIVABLES AND OTHER COLLATERAL
SECTION 10.01. Collection of Receivables; Management of Collateral. The
Borrower will, at its own cost and expense, (i) arrange for remittances on
Receivables of the Borrower to be made directly to lockboxes designated by the
Agent or in such other manner as the Agent may direct, and (ii) promptly
deposit, or cause to be deposited, all payments received by the Borrower on
account of Receivables, whether in the form of cash, checks, notes, drafts,
bills of exchange, money orders or otherwise, in one or more accounts designated
by the Agent in precisely the form received (but with any endorsements of the
Borrower necessary for deposit or collection), subject to withdrawal by the
Agent only, as hereinafter provided, and until such payments are deposited, such
payments shall be deemed to be held in trust by the Borrower for and as the
Lenders' property and shall not be commingled with the Borrower's other funds.
Upon the occurrence and during the continuance of any Default or Event of
Default, all remittances and payments that are deposited in
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accordance with the foregoing will be applied by the Agent to reduce the
outstanding balance (or if such balance is reduced to zero, to be held by the
Agent as cash collateral, subject to withdrawal by the Borrower) of the
Revolving Credit Loans, subject to final collection in cash of the item
deposited and subject to the assessment of a two-day collection charge.
Upon the occurrence and continuance of an Event of Default, the Agent
may send a notice of assignment and/or notice of the Agent's security interest
to any and all Customers or any third party holding or otherwise concerned with
any of the Collateral, and thereafter the Agent shall have the sole right to
collect the Receivables and/or take possession of the Collateral and the books
and records relating thereto. The Borrower shall not, without the Agent's prior
written consent, grant any extension of the time of payment of any Receivable,
compromise or settle any Receivable for less than the full amount thereof,
release, in whole or in part, any person or property liable for the payment
thereof, or allow any credit or discount whatsoever thereon except, prior to the
occurrence and continuance of an Event of Default, in the ordinary course of its
business.
(a) (i) The Borrower hereby constitutes the Agent or the Agent's
designee as such person's attorney-in-fact with power, upon the occurrence and
continuance of an Event of Default, to endorse such person's name upon any
notes, acceptances, checks, drafts, money orders or other evidences of payment
or Collateral that may come into its possession; to sign such person's name on
any invoice or bill of lading relating to any Receivables, drafts against
Customers, assignments and verifications of Receivables and notices to
Customers; to send verifications of Receivables; to notify the Postal Service
authorities to change the address for delivery of mail addressed to the Borrower
to such address as the Agent may designate; and to do all other acts and things
necessary to carry out this Agreement. All acts of said attorney or designee are
hereby ratified and approved, and said attorney or designee shall not be liable
for any acts of omission or commission, for any error of judgment or for any
mistake of fact or law, provided that the Agent or its designee shall not be
relieved of liability to the extent it is determined by a final judicial
decision that its act, error or mistake constituted gross negligence or willful
misconduct. This power of attorney being coupled with an interest is irrevocable
until all of the Obligations are paid in full and the Total Commitment is
terminated.
(ii) The Agent, without notice to or consent of the Borrower, upon the
occurrence and during the continuance of an Event of Default, (A) may sue upon
or otherwise collect, extend the time of payment of, or compromise or settle for
cash, credit or otherwise upon any terms, any of the Receivables or any
securities, instruments or insurance applicable thereto and/or release the
obligor thereon; (B) is authorized and empowered to accept the return of the
goods represented by any of the Receivables; and (C) shall have the right to
receive, endorse, assign and/or deliver in its name or the name of the Borrower
any and all checks, drafts and other instruments for the payment of money
relating to the Receivables, and the Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed.
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(b) Nothing herein contained shall be construed to constitute the
Borrower as agent of the Agent or any Lender for any purpose whatsoever, and the
Agent shall not be responsible or liable for any shortage, discrepancy, damage,
loss or destruction of any part of the Collateral wherever the same may be
located and regardless of the cause thereof (except to the extent it is
determined by a final judicial decision that the Agent's or a Lender's act or
omission constituted gross negligence or willful misconduct). The Agent and the
Lenders shall not, under any circumstances or in any event whatsoever, have any
liability for any error or omission or delay of any kind occurring in the
settlement, collection or payment of any of the Receivables or any instrument
received in payment thereof or for any damage resulting therefrom (except to the
extent it is determined by a final judicial decision that the Agent's or such
Lender's error, omission or delay constituted gross negligence or willful
misconduct). The Agent and the Lenders do not, by anything herein or in any
assignment or otherwise, assume any of the Borrower's obligations under any
contract or agreement assigned to the Agent or the Lenders, and the Agent and
the Lenders shall not be responsible in any way for the performance by the
Borrower of any of the terms and conditions thereof.
(c) If any of the Receivables includes a charge for any tax payable to
any governmental tax authority, the Agent is hereby authorized (but in no event
obligated) in its discretion to pay the amount thereof to the proper taxing
authority for the account of the Borrower and the Borrower shall reimburse the
Agent for any amount paid upon demand and the Agent may charge the Borrower's
account therefor. The Borrower shall notify the Agent if any Receivables include
any tax due to any such taxing authority and, in the absence of such notice, the
Agent shall have the right to retain the full proceeds of such Receivables and
shall not be liable for any taxes that may be due from the Borrower by reason of
the sale and delivery creating such Receivables.
SECTION 10.02. Receivables Documentation. The Borrower will, in
addition to the monthly Receivables agings delivered pursuant to this Agreement,
at such intervals as the Agent may reasonably require, furnish, or cause to be
furnished, such further schedules and/or information as the Agent may reasonably
require relating to the Receivables, including, without limitation, sales
invoices. In addition, the Borrower shall notify the Agent of any material
non-compliance in respect of the representations, warranties and covenants
contained in Section 10.03 hereof. The items to be provided under this Section
10.02 are to be in form reasonably satisfactory to the Agent and are to be
executed and delivered to the Agent from time to time solely for its convenience
in maintaining records of the Collateral; the Borrower's failure to give any of
such items to the Agent shall not affect, terminate, modify or otherwise limit
the Agent's Lien or security interest in the Collateral.
SECTION 10.03. Status of Receivables and Other Collateral. The Borrower
covenants, represents and warrants that: (a) it shall be the sole owner, free
and clear of all Liens except in favor of the Agent or otherwise permitted
hereunder, of and fully authorized to sell, transfer, pledge and/or grant a
security interest in each and
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every item of said Collateral owned by it; (b) it will not seek to qualify, or
maintain the qualification of, a Receivable as an Eligible Receivable unless
such Receivable shall be a good and valid account representing an undisputed
bona fide indebtedness incurred or an amount indisputably owed by the Customer
therein named, for a fixed sum as set forth in the invoice relating thereto with
respect to an absolute sale and delivery upon the specified terms of goods sold
by the Borrower, or work, labor and/or services theretofore rendered by the
Borrower; (c) it will not seek to qualify, or maintain the qualification of, a
Receivable as an Eligible Receivable unless such Receivable is not subject to
any defense, offset, counterclaim, discount or allowance (as of the time of its
creation) except as may be stated in the invoice relating thereto or discounts
and allowances as may be customary in the Borrower's business; (d) none of the
transactions underlying or giving rise to any Eligible Receivable shall violate
any applicable state or Federal laws or regulations, and all documents relating
to any Receivable shall be legally sufficient under such laws or regulations and
shall be legally enforceable in accordance with their terms (subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the enforcement of creditors' rights generally from time to time
in effect and to general principles of equity); (e) it will not seek to qualify,
or maintain the qualification of, a Receivable as an Eligible Receivable unless
to the best of its knowledge (without independent inquiry), each Customer,
guarantor or endorser with respect to such Receivable is solvent and will
continue to be fully able to pay all Eligible Receivables on which it is
obligated in full when due; (f) it will not seek to qualify, or maintain the
qualification of, a Receivable as an Eligible Receivable unless all documents
and agreements relating to such Receivable shall be materially true and correct
and in all material respects what they purport to be; (g) it will not seek to
qualify, or maintain the qualification of, a Receivable as an Eligible
Receivable unless to the best of its knowledge (without independent inquiry),
all signatures and endorsements that appear on all documents and agreements
relating to such Receivable shall be genuine and all signatories and endorsers
with respect thereto shall have full capacity to contract; (h) it shall maintain
books and records pertaining to the Collateral in such detail, form and scope as
are customary for businesses similarly situated; (i) it will not seek to
qualify, or maintain the qualification of, a Receivable as an Eligible
Receivable unless it shall have immediately notified the Agent as to any
accounts arising out of contracts with the United States or any department,
agency or instrumentality thereof, and shall have executed any instruments and
taken any steps required by the Agent in order that all monies due or to become
due under any such contract shall be assigned to the Agent and notice thereof
given to the United States Government under the Federal Assignment of Claims
Act; (j) if any amount payable under or in connection with any Receivable is
evidenced by a promissory note or other instrument, as such terms are defined in
the Uniform Commercial Code, such promissory note or instrument shall be
immediately pledged, endorsed, assigned and delivered to the Agent as additional
collateral; (k) it shall not re-date any invoice or sale or make sales on
extended dating beyond that customary in the industry; and (l) it is not nor
shall it be entitled to pledge the Lenders' credit on any purchases or for any
purpose whatsoever.
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SECTION 10.04. Monthly Statement of Account. The Agent shall render to
the Borrower each month a statement of the Borrower's account, which shall
constitute an account stated and shall be deemed to be correct and accepted by
and be binding upon the Borrower unless the Agent receives a written statement
of the Borrower's exceptions within 30 days after such statement was rendered to
the Borrower.
SECTION 10.05. Collateral Custodian. Upon the occurrence and during the
continuance of an Event of Default, the Agent may at any time and from time to
time employ and maintain in the premises of the Borrower a custodian selected by
the Agent who shall have full authority to do all acts necessary to protect the
Agent's and Lenders' interests and to report to the Agent thereon. The Borrower
hereby agrees to cooperate with any such custodian and to do whatever the Agent
may reasonably request to preserve the Collateral. All reasonable costs and
expenses incurred by the Agent by reason of the employment of the custodian
shall be paid by the Borrower on demand and then added to the Obligations if not
paid.
XI. MISCELLANEOUS
SECTION 11.01. Notices. Notices, consents and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service or mailed by certified or registered mail or sent by
telecopy addressed,
(a) if to the Borrower, Guarantors, or Grantors, at American Bank Note
Holographics, Inc., 399 Executive Boulevard, Elmsford, New York 10523,
Attention: ____________, (title), (Telecopy No. ____________) with a copy
to Paul, Hastings, Janofsky & Walker, LLP, at 1055 Washington Boulevard,
Stamford, Connecticut 06901, Attention: Mario J. Ippolito, Esq. (Telecopy
No. 203-359-3031);
(b) if to the Agent, at The Chase Manhattan Bank, 600 Fifth Avenue, 4th
Floor, Asset Based Lending, New York, New York 10020-2302, Attention: Credit
Deputy (Telecopy No. 212-332-4299), with a copy to Kaye, Scholer, et al.,
LLP, at 425 Park Avenue, New York, New York 10022, Attention: Jeffrey M.
Epstein, Esq. (Telecopy No. 212-836-7151); and
(c) if to any Lender, at the address or telecopy number set forth below
its name in Schedule 2.01(a) or (b) annexed hereto or in the Assignment and
Acceptance pursuant to which such Lender became a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if hand delivered or sent by overnight courier service or five
(5) days after being sent by registered or certified mail, postage prepaid,
return receipt requested, if by mail, or when receipt is acknowledged if sent by
facsimile, in each case addressed to such
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party as provided in this Section 11.01 or in accordance with the latest
unrevoked direction from such party.
SECTION 11.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrower or any of its subsidiaries
herein and in the certificates or other instruments prepared or delivered in
connection with this Agreement, any of the Security Documents, or any other Loan
Document, shall be considered to have been relied upon by the Lenders and shall
survive the making by the Lenders of the Loans and the execution and delivery to
the Lenders of the Notes and the occurrence of any other Credit Event and shall
continue in full force and effect as long as the principal of or any accrued
interest on the Notes or any other fee or amount payable under the Notes or this
Agreement or any other Loan Document is outstanding and unpaid and so long as
the Total Commitment has not been terminated.
SECTION 11.03. Successors and Assigns; Participations. Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the permitted successors and assigns of such party; and all
covenants, promises and agreements by or on behalf of any Loan Party, the Agent
or the Lenders, that are contained in this Agreement shall bind and inure to the
benefit of their respective successors and assigns. Without limiting the
generality of the foregoing, the Borrower specifically confirms that any Lender
may at any time and from time to time pledge or otherwise grant a security
interest in any Loan or any Note (or any part thereof) to any Federal Reserve
Bank. The Borrower may not assign or transfer any of its rights or obligations
hereunder without the written consent of all the Lenders.
(a) Each Lender, without the consent of the Borrower or the Agent, may
sell participations to one or more banks or other entities in all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Tranche A Revolving Credit Commitment and
Tranche B Revolving Credit Commitment and the Loans owing to it and undrawn
Letters of Credit and the Notes held by it); provided, however, that (i) such
Lender's obligations under this Agreement (including, without limitation, its
Tranche A Revolving Credit Commitment and Tranche B Revolving Credit Commitment)
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) the banks or
other entities buying participations shall be entitled to the cost protection
provisions contained in Sections 2.10, 2.12 and 2.16 hereof (provided such
participant shall have complied with the terms thereof), but only to the extent
any of such Sections would be available to the Lender which sold such
participation, and shall not be entitled to receive any greater amount than the
selling Lender would be entitled to receive and (iv) the Borrower, the
Guarantors, the Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement; provided, further, however, that such Lender
shall retain the sole right and responsibility to enforce the obligations of the
Loan Parties relating to the Loans, including, without limitation, the right to
approve any amendment, modification or waiver of any provision of this
Agreement, other than amendments, modifications or waivers with respect to
decreasing any fees payable
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hereunder or the amount of principal or the rate of interest payable on the
Loans, or extending the dates fixed for any payment of principal pursuant to
Section 2.04(c) or interest on the Loans or increasing or extending the
Commitments or the release of all Collateral.
(b) Each Lender may assign by novation, to any one or more banks or
other entities with the prior written consent of the Agent and, so long as no
Default or Event of Default is continuing, with the prior written consent of the
Borrower (which consent shall not be unreasonably withheld), all or a portion of
its interests, rights and obligations under this Agreement and the other Loan
Documents (including, without limitation, all or a portion of its Tranche A
Revolving Credit Commitment and Tranche B Revolving Credit Commitment and the
same portion of the Loans and undrawn Letters of Credit at the time owing to it
and the Note or Notes held by it), provided, however, that (i) each such
assignment shall be of a constant, and not a varying, percentage of all of the
assigning Lender's rights and obligations under this Agreement, which shall
include the same percentage interest in the Loans, Letters of Credit and Notes,
(ii) (a) prior to the Conversion Date, the amount of the Tranche A Revolving
Credit Commitment and Tranche B Revolving Credit Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date the Assignment and Acceptance with respect to such assignment is delivered
to the Agent) shall be in an aggregate minimum principal amount of $5,000,000,
the amount of the Tranche A Revolving Credit Commitment and Tranche B Revolving
Credit Commitment retained by such Lender shall not be less than $10,000,000 or
shall be zero and the aggregate amount of the Tranche A Revolving Credit
Commitment and Tranche B Revolving Credit Commitment to be held by such assignee
from all sources shall not be less than $10,000,000, and (b) after the
Conversion Date, the amount of the Tranche A Revolving Credit Commitment and the
Term Loans of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date the Assignment and Acceptance with respect
to such assignment is delivered to the Agent) shall be in an aggregate minimum
principal amount of $3,000,000, the amount of the Tranche A Revolving Credit
Commitment and the Term Loans retained by such Lender shall not be less than
$3,000,000 or shall be zero and the aggregate amount of the Tranche A Revolving
Credit Commitment and the Term Loans to be held by such assignee from all
sources shall not be less than $3,000,000, (iii) the parties to each such
assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register (as defined below), an Assignment and Acceptance,
together with any Note subject to such assignment and a processing and
recordation fee of $5,000 and (iv) the Assignee, if it shall not be a Lender,
shall deliver to the Agent an Administrative Questionnaire in the form provided
to such Assignee by the Agent. Upon such execution, delivery, acceptance and
recording and after receipt of the written consent of the Agent and the
Borrower, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five (5) Business Days after
the execution thereof, (x) the assignee thereunder shall be a party hereto and,
to the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and under the other Loan Documents and (y) the
Lender which is assignor thereunder shall, to the extent provided in such
Assignment and Acceptance,
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be released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Sections
2.10, 2.12, 2.16 and 11.04, as well as any fees accrued for its account
hereunder and not yet paid).
(c) By executing and delivering an Assignment and Acceptance, the
Lender which is assignor thereunder and the assignee thereunder confirm to, and
agree with, each other and the other parties hereto as follows: (i) other than
the representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereunder free and clear of any adverse claim, and that
its Total Revolving Credit Commitment and the outstanding balance of its Loans
and participations in Letters of Credit, in each case without giving effect to
assignments thereof which have not become effective, are as set forth in such
Assignment and Acceptance, such Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, perfection, genuineness, sufficiency or
value of this Agreement, the other Loan Documents or any Collateral or any other
instrument or document furnished pursuant hereto or thereto; (ii) such Lender
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of any Loan Party or the performance or observance by
any Loan Party of any of their respective obligations under this Agreement, or
any of the other Loan Documents or any other instrument or document furnished
pursuant hereto or thereto; (iii) such assignee represents and warrants that it
is legally authorized to enter into such Assignment and Acceptance and confirms
that it has received a copy of this Agreement and of the other Loan Documents,
together with copies of financial statements and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, such Lender or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee appoints and authorizes the Agent
to take such action as the Agent on its behalf and to exercise such powers under
this Agreement as are delegated to the Agent by the terms hereof, together with
such powers as are reasonably incidental thereto; and (vi) such assignee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement are required to be performed by it as a Lender.
(d) The Agent shall maintain at its address referred to in Section
11.01 hereof a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Lenders and the
Tranche A Revolving Credit Commitment or Tranche B Revolving Credit Commitment,
as the case may be, of, and principal amount of the Loans owing to, each Lender
from time to time (the "Register"). The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the other Loan
Parties, the Agent and the Lenders may treat each person whose name is recorded
in the Register as a Lender hereunder for all
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purposes of this Agreement. The Register shall be available for inspection by
the Borrower, the other Loan Parties or any Lender at any reasonable time and
from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee together with the Notes subject to such
assignment, any processing and recordation fee and, if required, an
Administrative Questionnaire and the written consents to such assignment, the
Agent shall, if such Assignment and Acceptance has been completed and is
substantially in the form of Exhibit F annexed hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Lenders and the Borrower.
Within five (5) Business Days after receipt of such notice, the Borrower, at its
own expense, shall execute and deliver to the Agent in exchange for the
surrendered Notes new Notes to the order of such assignee in an amount equal to
the portion of the Tranche A Revolving Credit Commitment and the portion of the
Tranche B Revolving Credit Commitment or of the Term Loan assumed by it pursuant
to such Assignment and Acceptance and, if the assigning Lender has retained any
Tranche A Revolving Credit Commitment and Tranche B Revolving Credit Commitment
or Term Loan hereunder, new Notes to the order of the assigning Lender in an
amount equal to the Tranche A Revolving Credit Commitment and Tranche B
Revolving Credit Commitment or Term Loan retained by it hereunder. Such new
Notes shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Notes, or, with respect to the Term Notes, the
principal amount of the Term Notes outstanding at such time as evidenced by the
Term Notes, shall be dated the effective date of such Assignment and Acceptance
and shall otherwise be in substantially the form of Exhibit A-1 and Exhibit A-2
or Exhibit B, as the case may be. Notes surrendered to the Borrower shall be
canceled by the Borrower.
(f) Notwithstanding any other provision herein, any Lender may, in
connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 11.03, disclose to the assignee or
participant or proposed assignee or participant, any information, including,
without limitation, any Information, relating to the Borrower furnished to such
Lender by or on behalf of the Borrower in connection with this Agreement;
provided, however, that prior to any such disclosure, each such assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any Information relating to the Borrower received from such
Lender to the extent required pursuant to Section 11.11.
SECTION 11.04. Expenses; Indemnity. The Borrower agrees to pay all
reasonable out-of-pocket expenses incurred by the Agent in connection with the
preparation of this Agreement and the other Loan Documents or with any
amendments, modifications, waivers, extensions, renewals, renegotiations or
"workouts" of the provisions hereof or thereof (whether or not the transactions
hereby contemplated shall be consummated) or incurred by the Agent or any of the
Lenders in connection with the enforcement or protection of its rights in
connection with this Agreement or any of the other Loan Documents or with the
Loans made or the Notes or Letters of Credit issued
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hereunder, or in connection with any pending or threatened action, proceeding,
or investigation relating to the enforcement or protection of its rights,
including but not limited to the reasonable fees and disbursements of counsel
for the Agent and ongoing field examination expenses and charges, and, in
connection with such enforcement or protection, the reasonable fees and
disbursements of counsel for the Lenders. The Borrower further indemnifies the
Lenders from and agrees to hold them harmless against any documentary taxes,
assessments or charges made by any governmental authority by reason of the
execution and delivery of this Agreement or the Notes.
(a) The Borrower indemnifies the Agent and each Lender and their
respective directors, officers, employees and agents against, and agrees to hold
the Agent, each Lender and each such person harmless from, any and all losses,
claims, damages, liabilities and related expenses, including reasonable counsel
fees and expenses, incurred by or asserted against the Lender or any such person
arising out of, in any way connected with, or as a result of any claim,
litigation, investigation or proceedings relating to any of the foregoing,
whether or not the Agent, any Lender or any such person is a party thereto (i)
the use of any of the proceeds of the Loans, (ii) this Agreement, any of the
Loan Documents or the other documents contemplated hereby or thereby, (iii) the
performance by the parties hereto and thereto of their respective obligations
hereunder and thereunder (including but not limited to the making of the Total
Commitment) and consummation of the transactions contemplated hereby and
thereby, or (iv) breach of any representation or warranty; provided, however,
that such indemnity shall not, as to the Agent or any Lender or such person,
apply to any such losses, claims, damages, liabilities or related expenses to
the extent that they result from the gross negligence or willful misconduct of
the Agent or any Lender or such person.
(b) The Borrower indemnifies, and agrees to defend and hold harmless
the Agent and the Lenders and their respective officers, directors,
shareholders, agents and employees (collectively, the "Indemnitees") from and
against any loss, cost, damage, liability, lien, deficiency, fine, penalty or
expense (including, without limitation, reasonable attorneys' fees and
reasonable expenses for investigation, removal, cleanup and remedial costs and
modification costs incurred to permit, continue or resume normal operations of
any property or assets or business of the Borrower or any subsidiary thereof)
arising from a violation of, or failure to comply with any Environmental Law and
to remove any Lien arising therefrom to the extent required to be in compliance
with this Agreement except to the extent caused by the gross negligence or
willful misconduct of any Indemnitee, which any of the Indemnitees may incur or
which may be claimed or recorded against any of the Indemnitees by any person.
(c) The provisions of this Section 11.04 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or
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the Notes, or any investigation made by or on behalf of the Agent or any Lender.
All amounts due under this Section 11.04 shall be payable on written demand
therefor.
SECTION 11.05. APPLICABLE LAW. THIS AGREEMENT AND THE NOTES SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK
(OTHER THAN THE CONFLICTS OF LAWS PRINCIPLES THEREOF).
SECTION 11.06. Right of Setoff. If an Event of Default shall have
occurred and be continuing, upon the request of the Agent, each Lender shall and
is hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Lender to or for the credit or the account of the
Borrower or the Guarantors against any and all of the obligations of the
Borrower or the Guarantors now or hereafter existing under this Agreement and
the Notes held by such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement or the Notes and although such
obligations may be unmatured. Each Lender agrees to notify promptly the Agent
and the Borrower after any such setoff and application made by such Lender, but
the failure to give such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) which may be available to such Lender.
SECTION 11.07. Payments on Business Days. Should the principal of or
interest on the Notes or any fee or other amount payable hereunder become due
and payable on other than a Business Day, payment in respect thereof may be made
on the next succeeding Business Day (except as otherwise specified in the
definition of "Interest Period"), and such extension of time shall in such case
be included in computing interest, if any, in connection with such payment.
(a) All payments by the Borrower hereunder and all Loans made by the
Lenders hereunder shall be made in lawful money of the United States of America
in immediately available funds at the office of the Agent set forth in Section
11.01 hereof.
SECTION 11.08. Waivers; Amendments. No failure or delay of any Lender
in exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such right or power, preclude
any other or further exercise thereof or the exercise of any other right or
power. The rights and remedies of the Lenders hereunder are cumulative and not
exclusive of any rights or remedies which they may otherwise have. No waiver of
any provision of this Agreement or the Notes nor consent to any departure by the
Borrower or the Guarantors therefrom shall in any event be effective unless the
same shall be authorized as provided in paragraph (b) below, and then such
waiver or consent shall be effective only in the specific
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instance and for the purpose for which given. No notice to or demand on the
Borrower in any case shall entitle it to any other or further notice or demand
in similar or other circumstances.
(a) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders; provided, however, that
no such agreement shall (i) decrease the principal amount of, or interest on,
any Note or reduce the rate of interest on any Note, (ii) increase the Tranche A
Revolving Credit Commitment or the Tranche B Revolving Credit Commitment of any
Lender, extend the Revolving Credit Termination Date, the Conversion Date or the
Final Maturity Date, modify the provisions of Section 2.04(c), increase any
percentage or amount contained in the definition of Borrowing Base or amend or
modify the provisions of this Section, Section 2.06 with respect to decreasing
any fee or extending the time for payment thereof, Section 2.13, Section 4.14 or
Section 11.04 hereof or the definition of "Required Lenders," or (iii) release
any Guarantee or any material portion of Collateral (except as may be expressly
permitted by the Loan Documents), in each case without the prior written consent
of each Lender affected thereby and provided, further, however, that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Agent under this Agreement or the other Loan Documents without the written
consent of the Agent. Each Lender and holder of any Note shall be bound by any
modification, amendment or waiver authorized in accordance with this Section
regardless of whether its Notes shall be marked to make reference thereto, and
any consent by any Lender or holder of a Note pursuant to this Section shall
bind any person subsequently acquiring a Note from it, whether or not such Note
shall be so marked.
(b) In the event that the Borrower requests, with respect to this
Agreement or any other Loan Document, an amendment, modification or waiver and
such amendment, modification or waiver would require the unanimous consent of
all of the Lenders in accordance with Section 11.08(b) above, and such
amendment, modification or waiver is agreed to in writing by the Borrower and
the Required Lenders but not by all of the Lenders, then notwithstanding
anything to the contrary in Section 11.08(b) above, with the written consent of
the Borrower and such Required Lenders, the Borrower and Required Lenders may,
but shall not be obligated to, amend this Agreement without the consent of the
Lender or Lenders who did not agree to the proposed amendment, modification or
waiver (the "Minority Lenders") solely to provide for (i) the termination of the
Tranche A Revolving Credit Commitment and Tranche B Revolving Credit Commitment
of each Minority Lender, (ii) the assignment in accordance with Section 11.03
hereof to one or more persons of each Minority Lender's interests, rights and
obligations under this Agreement (including, without limitation, all of such
Minority Lender's Tranche A Revolving Credit Commitment and Tranche B Revolving
Credit Commitment as well as its portion of all outstanding Loans and the Note
or Notes held by such Minority Lender) and the other Loan Documents and/or an
increase in the Tranche A Revolving Credit Commitment and Tranche B Revolving
Credit Commitment of one or more Required Lenders, in each case so that after
giving
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effect thereto the Total Commitment shall be in the same amounts as prior to the
events described in this paragraph, (iii) the repayment to the Minority Lenders
in full of all Loans outstanding and accrued interest thereon at the time of the
assignment and/or increase in the Total Revolving Credit Commitments described
in clause (ii) above with the proceeds of Loans made by such persons who are to
become Lenders by assignment or with the proceeds of Loans made by Required
Lenders who have agreed to increase their Tranche A Revolving Credit Commitment
and/or Tranche B Revolving Credit Commitment, (iv) the payment to the Minority
Lenders by the Borrower of all fees and other compensation due and owing such
Minority Lenders under the terms of this Agreement and the other Loan Documents
and (v) such other modifications as the Required Lenders and Borrower shall deem
necessary in order to effect the changes specified in clauses (i) through (iv)
hereof.
SECTION 11.09. Severability. In the event any one or more of the
provisions contained in this Agreement or in the Notes or any of the other Loan
Documents should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein or therein shall not in any way be affected or impaired thereby.
SECTION 11.10. Entire Agreement; Waiver of Jury Trial, Etc. This
Agreement, the Notes and the other Loan Documents constitute the entire contract
between the parties hereto relative to the subject matter hereof. Any previous
agreement among the parties hereto with respect to the transactions hereunder
(other than the Fee Letter) is superseded by this Agreement, the Notes and the
other Loan Documents. Except as expressly provided herein or in the Notes or the
Loan Documents (other than this Agreement), nothing in this Agreement, the Notes
or in the other Loan Documents, expressed or implied, is intended to confer upon
any party, other than the parties hereto, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, the Notes or the other Loan
Documents.
(a) Except as prohibited by law, each party hereto hereby waives any
right it may have to a trial by jury in respect of any litigation directly or
indirectly arising out of, under or in connection with this Agreement, the
Notes, any of the other Loan Documents or the transactions hereunder.
(b) Except as prohibited by law, each party hereto hereby waives any
right it may have to claim or recover in any litigation referred to in paragraph
(b) of this Section 11.10 any special, exemplary, punitive or consequential
damages or any damages other than, or in addition to, actual damages.
(c) Each party hereto (i) certifies that no representative, agent or
attorney of any Lender has represented, expressly or otherwise, that such Lender
would not, in the event of litigation, seek to enforce the foregoing waivers and
(ii) acknowledges that it has been induced to enter into this Agreement, the
Notes or the other Loan Documents, as applicable, by, among other things, the
mutual waivers and certifications herein.
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SECTION 11.11. Confidentiality. The Agent and each of the Lenders
agrees to keep confidential (and to cause their respective officers, directors,
employees, agents and representatives to keep confidential) all information,
materials and documents furnished to the Agent or any Lender (the
"Information"). Not withstanding the foregoing, the Agent and each Lender shall
be permitted to disclose Information (i) to such of its officers, directors,
employees, agents and representatives as need to know such Information (who will
be informed of the confidential nature thereof) in connection with its
participation in the transactions hereunder or the administration of this
Agreement or the other Loan Documents; (ii) to the extent required by applicable
laws and regulations or by any subpoena or similar legal process, or requested
by any governmental agency or authority (in any which case notice will be
provided to the Borrower and any other applicable Loan Party to the extent not
prohibited by law); (iii) to the extent such Information (A) becomes publicly
available other than as a result of a breach of this Agreement, (B) becomes
available to the Agent or such Lender on a non-confidential basis from a source
other than a Loan Party or any of their respective subsidiaries or (C) was
available to the Agent or such Lender on a non-confidential basis prior to its
disclosure to the Agent or such Lender by a Loan Party or any of their
respective subsidiaries; (iv) to the extent the any Loan Party or any of their
respective subsidiaries shall have consented to such disclosure in writing; (v)
in connection with the sale of any Collateral pursuant to the provisions of any
of the other Loan Documents; or (vi) pursuant to Section 11.03(g) hereof.
SECTION 11.12. Submission to Jurisdiction. Any legal action or
proceeding with respect to this Agreement or the Notes or any other Loan
Document may be brought in the courts of the State of New York or of the United
States of America for the Southern District of New York, and, by execution and
delivery of this Agreement, each of the Loan Parties hereby accepts for itself
and in respect of its property, generally and unconditionally, the jurisdiction
of the aforesaid courts.
(a) Each of the Loan Parties hereby irrevocably waives, in connection
with any such action or proceeding, any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions.
(b) Each of the Loan Parties hereby irrevocably consents to the service
of process of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to each such person, as the case may be, at its address set forth in
Section 11.01 hereof.
(c) Nothing herein shall affect the right of the Agent or any Lender to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against any Loan Party, the Borrower or any
Guarantor in any other jurisdiction.
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SECTION 11.13. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which are treated as interest
on such Loan under applicable law (collectively, the "Charges"), shall exceed
the maximum lawful rate (the "Maximum Rate") which may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of such
Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the interest and
Charges payable to such Lender in respect of other Loans or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon, at the Federal Funds Effective Rate (as defined
in the Alternate Base Rate) to the date of repayment, shall have been received
by such Lender.
SECTION 11.14. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract, and shall become effective
when copies hereof which, when taken together, bear the signatures of each of
the parties hereto shall be delivered to the Agent.
SECTION 11.15. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only and are not to affect
the construction of, or to be taken into consideration in interpreting, this
Agreement.
XII. GUARANTEES
Each Guarantor unconditionally guarantees, as a primary obligor and not
merely as a surety, jointly and severally with each other Guarantor, the due and
punctual payment of the principal of and interest on each of the Notes, when and
as due, whether at maturity, by acceleration, by notice of prepayment or
otherwise, and the due and punctual performance of all other Obligations. Each
Guarantor further agrees that the Obligations may be extended and renewed, in
whole or in part, without notice to or further assent from it, and that it will
remain bound upon its guarantee notwithstanding any extension or renewal of any
Obligations.
Each Guarantor waives presentment to, demand of payment from and
protest to the Borrower of any of the Obligations, and also waives notice of
acceptance of its guarantee and notice of protest for nonpayment. The
obligations of a Guarantor hereunder shall not be affected by (a) the failure of
any Lender or the Agent to assert any claim or demand or to enforce any right or
remedy against the Borrower or any other Guarantor under the provisions of this
Agreement, the Notes or any of the other Loan Documents or otherwise; (b) any
rescission, waiver, amendment or modification of any of the terms or provisions
of this Agreement, the Notes, any of the other Loan
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Documents, any guarantee or any other agreement; (c) the release of any security
held by the Agent for the Obligations or any of them; or (d) the failure of any
Lender to exercise any right or remedy against any other Guarantor of the
Obligations.
Each Guarantor further agrees that its guarantee constitutes a
guarantee of payment when due and not of collection, and waives any right to
require that any resort be had by any Lender to any security (including, without
limitation, any Collateral) held for payment of the Obligations or to any
balance of any deposit account or credit on the books of any Lender in favor of
the Borrower or any other person.
The obligations of each Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including,
without limitation, any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Guarantor hereunder shall
not be discharged or impaired or otherwise affected by the failure of the Agent
or any Lender to assert any claim or demand or to enforce any remedy under this
Agreement, the Notes or under any other Loan Document, any guarantee or any
other agreement, by any waiver or modification of any provision thereof, by any
default, failure or delay, willful or otherwise, in the performance of the
Obligations, or by any other act or omission which may or might in any manner or
to any extent vary the risk of such Guarantor or otherwise operate as a
discharge of such Guarantor as a matter of law or equity.
Each Guarantor further agrees that its guarantee shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of or interest on any Obligation is rescinded or must
otherwise be returned by the Agent or any Lender upon the bankruptcy or
reorganization of the Borrower or otherwise.
Each Guarantor hereby subordinates until all Obligations have been
indefeasibly paid in cash all rights of subrogation against the Borrower and its
property and all rights of indemnification, contribution and reimbursement from
the Borrower and its property, in each case in connection with this guarantee
and any payments made hereunder, and regardless of whether such rights arise by
operation of law, pursuant to contract or otherwise.
IN WITNESS WHEREOF, the Borrower, Guarantors, the Agent and the Lenders
have caused this Agreement to be duly executed by their respective duly
authorized officers as of the day and year first above written.
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
By: /s/ Joshua C. Cantor
---------------------------------
Name: Joshua C. Cantor
Title: President
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THE CHASE MANHATTAN BANK, as Administrative
and Collateral Agent and as Lender
By: /s/ ROBERT J. ARTH
----------------------------------------
Name: Robert J. Arth
Title: Vice President
SOCIETE GENERALE, as Documentation Agent and
as Lender
By: /s/ JERRY PARISI
----------------------------------------
Name: Jerry Parisi
Title: Director
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SCHEDULE 1.01
ELIGIBLE RECEIVABLES OF FOREIGN SUBSIDIARIES
None.
<PAGE> 109
SCHEDULE 2.01(a)
TRANCHE A REVOLVING CREDIT COMMITMENTS
<TABLE>
<CAPTION>
Approximate Percentage
Lender Tranche A Revolving of Total Tranche A
Commitment Credit Commitment Revolving Credit
- ---------- ------------------- ----------------------
<S> <C> <C>
The Chase Manhattan Bank $5,000,000 50%
600 Fifth Avenue
New York, NY 10020
Attention: Credit Deputy
Societe Generale $5,000,000 50%
1221 Avenue of the Americas
New York, NY 10020
Attention: Jerry Parisi
</TABLE>
<PAGE> 110
SCHEDULE 2.01(b)
TRANCHE B REVOLVING CREDIT COMMITMENTS
<TABLE>
<CAPTION>
Approximate Percentage
Lender Tranche B Revolving of Total Tranche B
Commitment Credit Commitment Revolving Credit
- ---------- ------------------- ----------------------
<S> <C> <C>
The Chase Manhattan Bank
600 Fifth Avenue
New York, New York 10020 $10,000,000 50%
Attention: Credit Deputy
Societe Generale $10,000,000 50%
1221 Avenue of the Americas
New York, NY 10020
Attention: Jerry Parisi
</TABLE>
<PAGE> 111
SCHEDULE 2.02
Domestic Lending Offices
Lender Domestic Lending Office
- ------ -----------------------
The Chase Manhattan Bank The Chase Manhattan Bank
600 Fifth Avenue
New York, NY 10020
Attn: Credit Deputy
Societe Generale Societe Generale
1221 Avenue of the Americas
New York, NY 10020
Attention: Jerry Parisi
<PAGE> 112
SCHEDULE 2.03
Eurodollar Lending Offices
Lender Eurodollar Lending Office
- ------ -------------------------
The Chase Manhattan Bank The Chase Manhattan Bank
600 Fifth Avenue
New York, NY 10020
Attn: Credit Deputy
Societe Generale Societe Generale
1221 Avenue of the Americas
New York, NY 10020
Attention: Jerry Parisi
<PAGE> 113
EXHIBIT A-1
FORM OF TRANCHE A REVOLVING CREDIT NOTE
New York, New York
$_______________ July __, 1998
FOR VALUE RECEIVED, the undersigned, AMERICAN BANK NOTE
HOLOGRAPHICS, INC., a Delaware corporation ("Maker"), hereby promises to pay to
the order of _______________________ (the "Lender"), at the office of THE CHASE
MANHATTAN BANK (the "Agent"), at 200 Jericho Quadrangle, Jericho, New York on
the Revolving Credit Termination Date as defined in the Credit Agreement dated
as of July __, 1998, among the Maker, the Guarantors named therein, the Lenders
named therein and the Agent (as the same may be amended, modified or
supplemented from time to time in accordance with its terms, the "Credit
Agreement") or earlier as provided for in the Credit Agreement, the lesser of
the principal sum of _____________________ ($____________) or the aggregate
unpaid principal amount of all Tranche A Revolving Credit Loans to the Maker
from the Lender pursuant to the terms of the Credit Agreement, in lawful money
of the United States of America in immediately available funds, and to pay
interest from the date thereof on the principal amount hereof from time to time
outstanding, in like funds, at said office, at a rate or rates per annum and, in
each case, and payable on such dates as determined pursuant to the terms of the
Credit Agreement.
The Maker promises to pay interest, on demand, on any overdue
principal and fees and, to the extent permitted by law, overdue interest from
their due dates at a rate or rates determined as set forth in the Credit
Agreement.
The Maker hereby waives diligence, presentment, demand,
protest and notice of any kind whatsoever. The non-exercise by the holder of any
of its rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
All borrowings evidenced by this Tranche A Revolving Credit
Note and all payments and prepayments of the principal hereof and interest
hereon and the respective dates thereof shall be endorsed by the holder hereof
on the schedule attached
<PAGE> 114
hereto and made a part hereof, or on a continuation thereof which shall be
attached hereto and made a part hereof, or otherwise recorded by such holder in
its internal records; provided, however, that the failure of the holder hereof
to make such a notation or any error in such a notation shall not in any manner
affect the obligation of the Maker to make payments of principal and interest in
accordance with the terms of this Tranche A Revolving Credit Note and the Credit
Agreement.
This Tranche A Revolving Credit Note is one of the Notes
referred to in the Credit Agreement (and is secured by the Collateral referred
to therein), which, among other things, contains provisions for the acceleration
of the maturity hereof upon the happening of certain events, for optional and
mandatory prepayment of the principal hereof prior to the maturity hereof and
for the amendment or waiver of certain provisions of the Credit Agreement, all
upon the terms and conditions therein specified. THIS TRANCHE A REVOLVING CREDIT
NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO CHOICE OF LAW DOCTRINE, AND ANY APPLICABLE LAWS
OF THE UNITED STATES OF AMERICA.
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
By:
-----------------------------------
Name:
Title:
2
<PAGE> 115
Loans and Payment
<TABLE>
<CAPTION>
Unpaid
Name of Principal
Amount and Payments Balance of Person Making
Date Type of Loan Principal Interest Note Notation
<S> <C> <C> <C> <C>
</TABLE>
3
<PAGE> 116
EXHIBIT A-2
FORM OF TRANCHE B REVOLVING CREDIT NOTE
New York, New York
$________________ July __, 1998
FOR VALUE RECEIVED, the undersigned, AMERICAN BANK NOTE
HOLOGRAPHICS, INC., a Delaware corporation ("Maker"), hereby promises to pay to
the order of _______________________ (the "Lender"), at the office of THE CHASE
MANHATTAN BANK (the "Agent"), at 200 Jericho Quadrangle, Jericho, New York on
the earlier of (i) the Conversion Date and (ii) Revolving Credit Termination
Date as each such term is defined in the Credit Agreement dated as of July __,
1998, among the Maker, the Guarantors named therein, the Lenders named therein
and the Agent (as the same may be amended, modified or supplemented from time to
time in accordance with its terms, the "Credit Agreement") or earlier as
provided for in the Credit Agreement, the lesser of the principal sum of
_____________________ ($_____________) or the aggregate unpaid principal amount
of all Tranche B Revolving Credit Loans to the Maker from the Lender pursuant to
the terms of the Credit Agreement, in lawful money of the United States of
America in immediately available funds, and to pay interest from the date
thereof on the principal amount hereof from time to time outstanding, in like
funds, at said office, at a rate or rates per annum and, in each case, and
payable on such dates as determined pursuant to the terms of the Credit
Agreement.
The Maker promises to pay interest, on demand, on any overdue
principal and fees and, to the extent permitted by law, overdue interest from
their due dates at a rate or rates determined as set forth in the Credit
Agreement.
The Maker hereby waives diligence, presentment, demand,
protest and notice of any kind whatsoever. The non-exercise by the holder of any
of its rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
All borrowings evidenced by this Tranche B Revolving Credit
Note and all payments and prepayments of the principal hereof and interest
hereon and the
<PAGE> 117
respective dates thereof shall be endorsed by the holder hereof on the schedule
attached hereto and made a part hereof, or on a continuation thereof which shall
be attached hereto and made a part hereof, or otherwise recorded by such holder
in its internal records; provided, however, that the failure of the holder
hereof to make such a notation or any error in such a notation shall not in any
manner affect the obligation of the Maker to make payments of principal and
interest in accordance with the terms of this Tranche B Revolving Credit Note
and the Credit Agreement.
This Tranche B Revolving Credit Note is one of the Notes
referred to in the Credit Agreement (and is secured by the Collateral referred
to therein), which, among other things, contains provisions for the acceleration
of the maturity hereof upon the happening of certain events, for optional and
mandatory prepayment of the principal hereof prior to the maturity hereof and
for the amendment or waiver of certain provisions of the Credit Agreement, all
upon the terms and conditions therein specified. THIS TRANCHE B REVOLVING CREDIT
NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO CHOICE OF LAW DOCTRINE, AND ANY APPLICABLE LAWS
OF THE UNITED STATES OF AMERICA.
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
By:
------------------------------------
Name:
Title:
2
<PAGE> 118
Loans and Payment
<TABLE>
<CAPTION>
Unpaid
Name of Principal
Amount and Payments Balance of Person Making
Date Type of Loan Principal Interest Note Notation
<S> <C> <C> <C> <C>
</TABLE>
3
<PAGE> 119
EXHIBIT B
FORM OF TERM NOTE EVIDENCING
CONVERSION TERM LOAN
$__________ New York, New York
July __, 2000
FOR VALUE RECEIVED, the undersigned, AMERICAN BANK NOTE
HOLOGRAPHICS, INC., a Delaware corporation (the "Maker"), hereby promises to pay
to the order of ____________________ (the "Lender"), at the office of THE CHASE
MANHATTAN BANK (the "Agent"), at 200 Jericho Quadrangle, Jericho, New York, in
sixteen (16) consecutive installments, the first four of which shall be in the
amount of $____ each, the next four of which shall be in the amount of $____
each, the next four of which shall be in the amount of $____ each, and the final
four of which shall be in the amount of $____ each, commencing on the last
Business Day (as defined in the Credit Agreement dated as of July __, 1998,
among the Maker, the Guarantors named therein, the Lenders named therein, and
the Agent; as the same may be amended, modified or supplemented from time to
time in accordance with its terms, the "Credit Agreement") of September 2000 and
thereafter on the last Business Day of December 2000 and thereafter on the last
Business Day of each March, June, September and December of each year; provided,
however that the final such installment shall be in the amount of the unpaid
principal balance hereof and shall be payable on the Final Maturity Date (as
defined in the Credit Agreement), the principal sum of _________________ DOLLARS
($__________) in lawful money of the United States of America in immediately
available funds, and to pay interest from the date hereof on the principal
amount hereof from time to time outstanding, in like funds, at said office, at a
rate or rates per annum and, in each case, payable on such dates as determined
pursuant to the terms of the Credit Agreement.
The Maker promises to pay interest, on demand, on any overdue
principal and fees and, to the extent permitted by law, overdue interest from
their due dates at a rate or rates determined as set forth in the Credit
Agreement.
<PAGE> 120
The Maker hereby waives diligence, presentment, demand,
protest and notice of any kind whatsoever. The non-exercise by the holder of any
of its rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
All borrowings evidenced by this Term Note and all payments
and prepayments of the principal hereof and interest hereon and the respective
dates thereof shall be endorsed by the holder hereof on the schedule attached
hereto and made a part hereof, or on a continuation thereof which shall be
attached hereto and made a part hereof, or otherwise recorded by such holder in
its internal records; provided, however, that the failure of the holder hereof
to make such a notation or any error in such a notation shall not in any manner
affect the obligations of the Maker to make payments of principal and interest
in accordance with the terms of this Term Note and the Credit Agreement.
This Term Note is one of the Notes referred to in the Credit
Agreement (and is secured by the Collateral referred to therein) which, among
other things, contains provisions for the acceleration of the maturity hereof
upon the happening of certain events, for optional and mandatory prepayment of
the principal hereof prior to the maturity hereof and for the amendment or
waiver of certain provisions of the Credit Agreement, all upon the terms and
conditions therein specified. THIS TERM NOTE SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CHOICE
OF LAW DOCTRINE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
By: ___________________________________
Name:
Title:
2
<PAGE> 121
Loans and Payment
<TABLE>
<CAPTION>
Unpaid
Name of Principal
Amount and Payments Balance of Person Making
Date Type of Loan Principal Interest Note Notation
<S> <C> <C> <C> <C>
</TABLE>
3
<PAGE> 122
EXHIBIT D
FORM OF PLEDGE AGREEMENT
AND IRREVOCABLE PROXY
PLEDGE AGREEMENT dated as of _______ __, 19__ (this
"Agreement") among American Bank Note Holographics, Inc., a Delaware corporation
(the "Borrower" or "Grantor"), and The Chase Manhattan Bank, a New York banking
corporation, as agent (the "Agent") for (i) the lenders (the "Lenders") named in
Schedules 2.01(a) and 2.01(b) of the Credit Agreement dated as of July ___,
1998, among the Grantor, the Lenders and the Agent (as amended, modified or
supplemented from time to time in accordance with its terms, the "Credit
Agreement") and (ii) for itself as issuer of the Letters of Credit. Capitalized
terms used herein and not defined herein shall have the respective meanings
assigned to such terms in the Credit Agreement.
The Agent and the Lenders have agreed to extend Loans and
certain other financial accommodations including, without limitation, the
issuance of Letters of Credit to the Borrower pursuant to, and subject to the
terms and conditions of, the Credit Agreement. The obligation of the Lenders to
extend such Loans and of the Agent to issue the Letters of Credit under the
Credit Agreement is conditioned on the execution and delivery by the Grantor of
a pledge agreement in the form hereof to secure the following (collectively, the
"Secured Obligations"): all Obligations, such Obligations to include, without
limitation, the due and punctual payment and performance of (a) the principal of
and interest on the Loans, when and as due, after giving effect to any
applicable grace periods, whether at maturity, by acceleration or upon one or
more dates set for prepayment, (b) Indebtedness at any time and from time to
time under the Letters of Credit, (c) all obligations of the Grantor at any time
and from time to time under this Agreement and (d) all other obligations of the
Grantor at any time and from time to time under the Credit Agreement and the
other Loan Documents.
Accordingly, the Grantor and the Agent hereby agree as
follows:
1. Pledge. As security for the payment and performance in full
of the Secured Obligations, the Grantor hereby transfers, grants, bargains,
sells, conveys, hypothecates, pledges, sets over, endorses over, and delivers
unto the Agent, and grants to the Agent, for its own benefit and for the benefit
of the Lenders, a security interest in, (a) the shares of capital stock listed
in Schedule I annexed hereto next to the Grantor's name (the "Initial Pledged
Stock") and any additional shares of common stock of the issuers listed in
Schedule I annexed hereto obtained in the future by the Grantor (collectively,
the Initial Pledged Stock together with all such additional shares pledged in
the future, the "Pledged Stock"), (b) all instruments of indebtedness (whether
now existing or hereinafter arising) by any of the issuers listed in Schedule I
annexed hereto
<PAGE> 123
which name the Grantor as payee thereunder (the "Pledged Debt") and (c) subject
to Section 5 below, all proceeds of the Pledged Stock and Pledged Debt,
including, without limitation, all cash, securities or other property at any
time and from time to time receivable or otherwise distributed in respect of or
in exchange for any of or all such Pledged Stock or Pledged Debt (the items
referred to in clauses (a) through (c) being collectively called the
"Collateral"). Upon delivery to the Agent, any securities now or hereafter
included in the Collateral including, without limitation, the Pledged Stock (the
"Pledged Securities") shall be accompanied by undated stock powers duly executed
in blank or other instruments of transfer satisfactory to the Agent and by such
other instruments and documents as the Agent may reasonably request. Each
delivery of Pledged Securities shall be accompanied by a schedule showing a
description of the securities theretofore and then being pledged hereunder,
which schedule shall be attached hereto as Schedule I and made a part hereof.
Each schedule so delivered shall supersede any prior schedules so delivered.
2. Delivery of Collateral. The Grantor agrees to deliver
promptly or cause to be delivered to the Agent any and all Pledged Securities,
and any and all certificates or other instruments or documents representing any
of the Collateral (together with any necessary endorsement).
3. Representations, Warranties and Covenants. The Grantor
hereby represents, warrants and covenants to and with the Agent that:
(a) except for the security interest granted to the Agent, the
Grantor (i) is and, subject to the provisions of the Credit Agreement, will at
all times continue to be the direct owner, beneficially and of record, of the
Pledged Securities that it is pledging hereunder and is and will continue to be
the holder of the Pledged Debt that it is pledging hereunder except for the
delivery and endorsement over of such Pledged Debt to the Agent as contemplated
hereunder, (ii) except as permitted by the Credit Agreement, holds the
Collateral that it is pledging hereunder free and clear of all Liens, charges,
encumbrances and security interests of every kind and nature, and the Pledged
Stock is subject to no options to purchase or any similar or other rights of any
person, (iii) will make no assignment, pledge, hypothecation or, subject to the
provisions of the Credit Agreement, transfer of, or create any security interest
in, the Collateral that it is pledging hereunder including, without limitation,
by virtue of becoming bound by any agreement which restricts in any manner the
rights of any present or future holder of any Pledged Stock with respect
thereto, and (iv) subject to Section 5 below, will cause any and all Collateral,
whether for value paid by a Grantor or otherwise, to be forthwith deposited with
the Agent and pledged or assigned hereunder;
(b) the Grantor (i) has good right and legal authority to
pledge the Collateral it is pledging hereunder in the manner hereby done or
contemplated, (ii) will not amend, modify or supplement any Pledged Security
(including, without limitation,
<PAGE> 124
any Pledged Debt) without the prior written consent of the Agent, nor forgive
any Indebtedness evidenced by any Pledged Security, and (iii) will defend its
title or interest thereto or therein against any and all attachments, Liens,
claims, encumbrances, security interests or other impediments of any nature,
however arising, of all persons whomsoever, other than Liens permitted by the
Credit Agreement;
(c) no consent or approval of any governmental body or
regulatory authority or any securities exchange was or is necessary to the
validity of the pledge effected hereby;
(d) by virtue of the execution and delivery by the Grantor of
this Agreement, when the certificates, instruments or other documents
representing or evidencing the Collateral are delivered to the Agent in
accordance with this Agreement, the Agent will obtain a valid and perfected
first Lien upon and security interest in such Collateral as security for the
repayment of the Secured Obligations, prior to all other Liens and encumbrances
thereon and security interests therein;
(e) the pledge effected hereby is effective to vest in the
Agent the rights of the Agent in the Collateral as set forth herein; and
(f) all of the Pledged Stock has been duly authorized and
validly issued and as at the date hereof, the Initial Pledged Stock constitutes
all of the issued and outstanding shares of capital stock of the issuers listed
on Schedule I annexed hereto.
All representations, warranties and covenants of the Grantor contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement until the termination of this Agreement pursuant to Section 15 hereof.
4. Registration in Nominee Name; Denominations. Upon the
occurrence and during the continuance of an Event of Default, the Agent shall
have the right (in its sole and absolute discretion with subsequent notice to
the Grantor) to transfer to or to register the Pledged Securities in its own
name or the name of its nominee. In addition, the Agent shall at all times have
the right to exchange the certificates representing Pledged Securities for
certificates of smaller or larger denominations for any purpose consistent with
this Agreement.
5. Voting Rights; Dividends; etc. (a) Unless and until an
Event of Default hereunder shall have occurred and be continuing:
(i) The Grantor shall be entitled to exercise
any and all voting and/or consensual rights and powers accruing to an owner of
Pledged Securities or any part thereof for any purpose not inconsistent with the
terms of this Agreement and the
<PAGE> 125
Credit Agreement provided that such action would not adversely affect the rights
inuring to the Agent or the Lenders under this Agreement or the Credit Agreement
or adversely affect the rights and remedies of the Agent or the Lenders under
this Agreement or the Credit Agreement or the ability of the Agent or the
Lenders to exercise the same.
(ii) The Agent shall execute and deliver to the Grantor,
or cause to be executed and delivered to the Grantor, all such proxies, powers
of attorney, and other instruments as the Grantor may reasonably request for the
purpose of enabling the Grantor to exercise the voting and/or consensual rights
and powers which they are entitled to exercise pursuant to subparagraph (i)
above.
(iii) The Grantor shall be entitled to receive and retain
any and all cash dividends paid on the Pledged Securities only to the extent
that such cash dividends are permitted by, and otherwise paid in accordance with
the terms and conditions of, the Credit Agreement and applicable laws. Any and
all
a. noncash dividends,
b. stock or dividends paid or payable in cash or
otherwise in connection with a partial or total liquidation or dissolution, and
c. instruments, securities, other distributions in
property, return of capital, capital surplus or paid-in surplus or other
distributions made on or in respect of Pledged Securities (other than dividends
permitted by this Section 5(a)(iii)), whether paid or payable in cash or
otherwise, whether resulting from a subdivision, combination or reclassification
of the outstanding capital stock of the issuer of any Pledged Securities or
received in exchange for Pledged Securities or any part thereof, or in
redemption thereof, as a result of any merger, consolidation, acquisition or
other exchange of assets to which such issuer may be a party or otherwise,
shall be and become part of the Collateral, and, if received by the Grantor,
shall not be commingled by the Grantor with any of its other funds or property
but shall be held separate and apart therefrom, shall be held in trust for the
benefit of the Agent and the Lenders and shall be forthwith delivered to the
Agent in the same form as so received (with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event
of Default, all rights of the Grantor to receive any dividends, stock,
instruments, securities and other distributions which the Grantor is authorized
to receive pursuant to paragraph (a)(iii) of this Section 5 shall cease, and all
such rights shall thereupon become vested in the Agent, which shall have the
sole and exclusive right and authority to receive and retain such dividends. All
dividends which are received by the Grantor contrary to the provisions of this
Section 5(b) shall be received in trust for the benefit of the Agent, shall be
segregated from other property or funds of the Grantor and shall be forthwith
<PAGE> 126
delivered to the Agent as Collateral in the same form as so received (with any
necessary endorsement). Any and all money and other property paid over to or
received by the Agent pursuant to the provisions of this Section 5(b) shall be
retained by the Agent in an account to be established by the Agent upon receipt
of such money or other property and shall be applied in accordance with the
provisions of Section 9 hereof.
(c) Upon the occurrence and during the continuance of an Event
of Default, all rights of the Grantor to exercise the voting and consensual
rights pursuant to the irrevocable proxy granted herein, powers which it is
entitled to exercise pursuant to Section 5(a)(i) shall cease, and all such
rights shall thereupon become vested in the Agent, which shall have the sole and
exclusive right and authority to exercise such voting and consensual rights and
powers.
(d) As long as the Credit Agreement remains in effect and
until all of the Secured Obligations have been paid fully and indefeasibly, so
long as an Event of Default has occurred and is continuing, any payments made in
respect of the Pledged Debt shall be and become part of the Collateral, and, if
received by the Grantor, shall not be commingled by such Grantor with any of its
other funds or property but shall be held separate and apart therefrom, shall be
held in trust for the benefit of the Agent and the Lenders and shall be
forthwith delivered to the Agent in the same form as so received.
(e) In order to permit the Agent to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant to Section
5(c) and to receive all dividends and other distributions which it may be
entitled to receive under Section 5(a)(iii) or Section 5(b), the Grantor shall
promptly execute and deliver (or cause to be executed and delivered) to the
Agent all such proxies, dividend payment orders and other instruments as the
Agent may from time to time reasonably request.
Without limiting the effect of the foregoing, the Grantor does
hereby constitute and appoint the Agent as its proxy, and the Agent shall have
the right, upon the occurrence and during the continuance of an Event of
Default, to exercise all rights, benefits, privileges and powers accruing to the
Grantor, as owner of the Pledged Securities, including, without limitation,
giving or withholding consent, calling and attending shareholders' meetings to
be held from time to time with full power to vote and act for and in the name,
place, and stead of the Grantor and in the same manner, to the same extent, and
with the same effect that the Grantor would if personally present at such
meetings, giving to the Agent full power of substitution and revocation, which
proxy shall be effective, automatically and without the necessity of any action
(including any transfer of any Pledged Stock on the record books of the issuer
thereof) by any person (including the issuer of the Pledged Stock or any officer
or agent thereof).
<PAGE> 127
THIS PROXY IS IRREVOCABLE
Any proxy or proxies heretofore given by the Grantor to any
person or persons whatsoever are hereby revoked. This proxy shall continue in
full force and effect until such time as all Secured Obligations are paid and
satisfied in full in accordance with the terms of the Credit Agreement.
6. Issuance of Additional Stock. The Grantor agrees that it
will cause each of its subsidiaries not to issue any stock or other securities,
whether in addition to, by stock dividend or other distribution upon, or in
substitution for, the Pledged Securities or otherwise, unless such securities
are pledged by such Grantor to the Agent, pursuant to this Agreement.
7. Intentionally Omitted.
8. Remedies upon Event of Default. If an Event of Default
shall have occurred and be continuing, the Agent may sell or otherwise dispose
of all or any part of the Collateral, at public or private sale or at any
broker's board or on any securities exchange, for cash, upon credit or for
future delivery as the Agent shall deem appropriate. Each such purchaser at any
such sale shall hold the property sold absolutely, free from any claim or right
on the part of the Grantor, and the Grantor hereby waives (to the extent
permitted by law) all rights of redemption, stay and appraisal which such
Grantor now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.
The Agent shall give the Grantor 10 days' written notice
(which each Grantor agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code as in effect in New York) of the Agent's
intention to make any sale of Collateral. Such notice, in the case of a public
sale, shall state the time and place for such sale and, in the case of a sale at
a broker's board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Agent may fix and state in the notice (if
any) of such sale. At any such sale, the Collateral, or portion thereof, to be
sold may be sold in one lot as an entirety or in separate parcels, as the Agent
may (in its sole and absolute discretion) determine. The Agent shall not be
obligated to make any sale of any Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of such Collateral shall have been
given. The Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further notice,
be made at the time and place to which the same was so adjourned. In case any
sale of all or any part of the Collateral is made on credit or for future
delivery, the Collateral so sold may be retained by the Agent until the sale
price is paid by the
<PAGE> 128
purchaser or purchasers thereof, but the Agent shall not incur any liability in
case any such purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may be sold
again upon like notice. At any public sale made pursuant to this Section 8, the
Agent or any Lender may bid for or purchase, free (to the extent permitted by
law) from any right of redemption, stay or appraisal on the part of the Grantor
(all said rights being also hereby waived and released to the extent permitted
by law), with respect to the Collateral or any part thereof offered for sale and
the Agent or any such Lender may make payment on account thereof by using any
claim then due and payable to the Agent or any such Lender from the Grantor as a
credit against the purchase price, and the Agent or any such Lender may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to the Grantor therefor. The Grantor shall remain
liable for any deficiency. For purposes hereof, a written agreement to purchase
the Collateral or any portion thereof shall be treated as a sale thereof; the
Agent shall be free to carry out such sale and purchase pursuant to such
agreement, and the Grantor shall not be entitled to the return of the Collateral
or any portion thereof subject thereto, notwithstanding the fact that after the
Agent shall have entered into such an agreement all Events of Default shall have
been remedied and the Secured Obligations paid in full. As an alternative to
exercising the power of sale herein conferred upon it, the Agent may proceed by
a suit or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver.
9. Application of Proceeds of Sale. The proceeds of any sale
of Collateral, as well as any Collateral consisting of cash, shall be applied by
the Agent as follows:
FIRST, to the Agent to reimburse the Agent for that portion of
the payments, if any, made by it with respect to Letters of Credit for which a
Lender, as a participant in such Letter of Credit pursuant to Section 2.18 of
the Credit Agreement, failed to pay its pro rata share thereof as required
pursuant to such Section 2.18;
SECOND, to the payment of all reasonable costs and expenses
incurred by the Agent in connection with such sale or otherwise in connection
with this Agreement or any of the Secured Obligations, including, but not
limited to, all court costs and the reasonable fees and expenses of its agents
and legal counsel, the repayment of all advances made by the Agent hereunder on
behalf of the Grantor or to protect and preserve the Collateral and any other
reasonable costs or expenses incurred in connection with the exercise of any
right or remedy hereunder;
THIRD, to the Agent to be held as cash collateral to the
extent of undrawn amounts, if any, of outstanding Letters of Credit;
<PAGE> 129
FOURTH, to the payment in full of principal and interest in
respect of any Loans outstanding (pro rata as among the Lenders in accordance
with the amounts of the Loans made by them pursuant to the Credit Agreement);
FIFTH, pro rata to the payment in full of all Secured
Obligations (other than those referred to above) owed to the Lenders (pro rata
as among the Lenders in accordance with their respective Commitments); and
SIXTH, to the Grantor, its successors or assigns, or as a
court of competent jurisdiction may otherwise direct.
10. Agent Appointed Attorney-in-Fact. The Grantor hereby
appoints the Agent its attorney-in-fact for the purpose of carrying out the
provisions of this Agreement and taking any action and executing any instrument
which the Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment is irrevocable and coupled with an interest. Without
limiting the generality of the foregoing, the Agent shall have the right, upon
the occurrence and during the continuance of an Event of Default, with full
power of substitution either in the Agent's name or in the name of the Grantor,
to ask for, demand, sue for, collect, receive receipt and give acquittance for
any and all moneys due or to become due and under and by virtue of any
Collateral, to endorse checks, drafts, orders and other instruments for the
payment of money payable to the Grantor representing any interest or dividend,
or other distribution payable in respect of the Collateral or any part thereof
or on account thereof and to give full discharge for the same, to settle,
compromise, prosecute or defend any action, claim or proceeding with respect
thereto, and to sell, assign, endorse, pledge, transfer and make any agreement
respecting, or otherwise deal with, the same; provided, however, that nothing
herein contained shall be construed as requiring or obligating the Agent or the
Lenders to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Agent or the Lenders, or to present
or file any claim or notice, or to take any action with respect to the
Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby, and no action taken by the Agent or the
Lenders or omitted to be taken with respect to the Collateral or any part
thereof shall give rise to any defense, counterclaim or offset in favor of the
Grantor or to any claim or action against the Agent or the Lenders in the
absence of the gross negligence or wilful misconduct of the Agent or the
Lenders.
11. No Waiver. No failure on the part of the Agent to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy by the Agent preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law. The Agent and the Lenders shall not be deemed
<PAGE> 130
to have waived any rights hereunder or under any other agreement or instrument
unless such waiver shall be in writing and signed by such parties.
12. Intentionally Omitted.
13. Security Interest Absolute. All rights of the Agent
hereunder, the grant of a security interest in the Collateral and all
obligations of the Grantor hereunder, shall be absolute and unconditional
irrespective of (i) any lack of validity or enforceability of the Credit
Agreement, any agreement with respect to any of the Secured Obligations or any
other agreement or instrument relating to any of the foregoing, (ii) any change
in time, manner or place of payment of, or in any other term of, all or any of
the Secured Obligations, or any other amendment or waiver of or any consent to
any departure from the Credit Agreement or any other agreement or instrument,
(iii) any exchange, release or nonperfection of any other collateral, or any
release or amendment or waiver of or consent to or departure from any guarantee,
for all or any of the Secured Obligations or (iv) any other similar circumstance
which might otherwise constitute a defense available to, or a discharge of, the
Grantor in respect of the Secured Obligations or in respect of this Agreement.
14. Agent's Fees and Expenses. The Grantor shall, upon demand,
pay to the Agent the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts or agents which
the Agent may incur in connection with (i) the administration of this Agreement,
(ii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Agent hereunder or (iv) the failure by the Grantor to
perform or observe any of the provisions hereof. In addition, the Grantor
indemnifies and holds the Agent and the Lenders harmless from and against any
and all liability incurred by the Agent or the Lenders hereunder or in
connection herewith, unless such liability shall be due to the gross negligence
or wilful misconduct of the Agent or the Lenders, as the case may be. Any such
amounts payable as provided hereunder or thereunder shall be additional Secured
Obligations secured hereby and by the other Security Documents.
15. Termination. This Agreement shall terminate when (a) all
the Secured Obligations have been fully and indefeasibly paid in cash, (b) the
Lenders have no further commitment to make any Loans under the Credit Agreement,
and (c) the Agent shall have no further obligation to issue any Letters of
Credit, at which time the Agent shall reassign and deliver to the Grantor, or to
such person or persons as the Grantor shall designate, against receipt, such of
the Collateral (if any) as shall not have been sold or otherwise still be held
by it hereunder, together with appropriate instruments of reassignment and
release; provided, however, that all indemnities of the Grantor contained in
this Agreement shall survive, and remain operative and in full force and effect
regardless of, the termination of this Agreement. Any such reassignment shall be
without recourse to or warranty by the Agent and at the expense of the Grantor.
<PAGE> 131
16. Notices. All communications and notices hereunder shall be
in writing and given as provided in the Credit Agreement.
17. Further Assurances. The Grantor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Agent may at any time reasonably
request in connection with the administration and enforcement of this Agreement
or with respect to the Collateral or any part thereof or in order better to
assure and confirm unto the Agent its rights and remedies hereunder.
18. Binding Agreement; Assignments. This Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that the Grantor shall not be permitted to assign this Agreement or any
interest herein or in the Collateral, or any part thereof, or otherwise pledge,
encumber or grant any option with respect to the Collateral, or any part
thereof, or any cash or property held by the Agent as Collateral under this
Agreement.
19. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (EXCEPT
CONFLICTS OF LAWS PRINCIPLES THEREOF), EXCEPT AS REQUIRED BY MANDATORY
PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
20. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
21. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument. This Agreement shall
be effective when a counterpart which bears the signature of the Grantor shall
have been delivered to the Agent.
22. Section Headings. Section headings used herein are for
convenience only and are not to affect the construction of, or be taken into
consideration in interpreting, this Agreement.
<PAGE> 132
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
By____________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as Agent
By_____________________________
Name:
Title:
<PAGE> 133
SCHEDULE I
to Pledge Agreement
<TABLE>
<CAPTION>
Stock of
Certificate Number Outstanding
Stock Issuer Class of Stock No(s). Par Value of Shares Shares
- ------------ -------------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Percentage
Percentage
</TABLE>
Description of Pledged Debt:
<TABLE>
<CAPTION>
Original
Description of Maturity Principal
Obligation Issuer Obligation Date Amount
<S> <C> <C> <C>
</TABLE>
<PAGE> 134
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of July 20, 1998, among AMERICAN BANK NOTE
HOLOGRAPHICS, INC., a Delaware corporation (the "Borrower", the Borrower is
sometimes referred to herein as the "Grantor") and The Chase Manhattan Bank, a
New York banking corporation, as agent ("Agent") for (i) the lenders (the
"Lenders") named in Schedules 2.01(a) and 2.01(b) of the Credit Agreement dated
as of the date hereof, among the Grantor, the guarantors named therein (the
"Guarantors"), the Agent and the Lenders (as amended, modified or supplemented
from time to time in accordance with its terms, the "Credit Agreement") and (ii)
itself as issuer of the Letters of Credit.
The Agent and the Lenders have agreed to extend Loans and certain other
financial accommodations, including, without limitation, the issuance of the
Letters of Credit to the Borrower pursuant to, and subject to the terms and
conditions of, the Credit Agreement. The obligation of the Lenders to extend
such Loans and of the Agent to issue the Letters of Credit under the Credit
Agreement is conditioned on the execution and delivery by the Grantor of a
security agreement in the form hereof to secure the following (collectively, the
"Secured Obligations": all Obligations (such Obligations to include, without
limitation, the due and punctual payment and performance of (a) the principal of
and interest on the Loans, when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise, (b)
Indebtedness at any time and from time to time under the Letters of Credit, (c)
all obligations of the Grantor at any time and from time to time under this
Agreement and (d) all other obligations of the Grantor and Guarantors at any
time and from time to time under the Credit Agreement and the other Loan
Documents).
Accordingly, the Grantor and the Agent hereby agree as follows:
1. Definitions of Terms Used Herein. All capitalized terms used herein
but not defined herein shall have the meanings set forth in the Credit
Agreement. As used herein, the following terms shall have the following
meanings:
(a) "Accounts Receivable" shall mean (i) all of the Grantor's
present and future accounts, general intangibles, chattel paper and instruments,
as such terms are defined in the Uniform Commercial Code as in effect in the
State of New York ("NYUCC"), (ii) all moneys, securities and other property and
the proceeds thereof, now or hereafter held or received by, or in transit to,
the Agent from or for the Grantor, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, and all of the deposits (general or
special) of the Grantor, balances, sums and credits with, and all of the
Grantor's claims against the Agent arising out of such banking transactions at
any time existing, (iii) all of the Grantor's right, title and interest, and all
of the Grantor's rights, remedies, security and Liens, in, to and in respect of
any
<PAGE> 135
accounts receivable, including, without limitation, rights of stoppage in
transit, replevin, repossession and reclamation and other rights and remedies of
an unpaid vendor, lienor or secured party, guaranties or other contracts of
suretyship with respect to accounts receivable, deposits or other security for
the obligation of any account debtor, and credit and other insurance, (iv) all
of the Grantor's right, title and interest in, to and in respect of all goods
relating to, or which by sale have resulted in, accounts receivable, including,
without limitation, all goods described in invoices or other documents or
instruments with respect to, or otherwise representing or evidencing, any
account receivable, and all returned, reclaimed or repossessed goods.
(b) "Collateral" shall mean all (i) Accounts Receivable, (ii)
Documents, (iii) Equipment, (iv) General Intangibles, (v) Inventory, (vi)
Proceeds and (vii) Investment Property.
(c) "Documents" shall mean all instruments, files, records,
ledger sheets and documents covering or relating to any of the Collateral.
(d) "Equipment" shall mean all of the Grantor's machinery,
equipment, furniture and fixtures and all attachments, accessories and equipment
now or hereafter owned or acquired in the Grantor's business or used in
connection therewith, and all substitutions and replacements thereof, wherever
located, whether now owned or hereafter acquired by the Grantor.
(e) "General Intangibles" shall mean all of the Grantor's
present and future general intangibles of every kind and description, including
(without limitation) patents, patent applications, trade names and trademarks
and the goodwill of the business symbolized thereby, Federal, State and local
tax refund claims of all kinds.
(f) "Inventory" shall mean all of the Grantor's right, title
and interest in and to raw materials, work in process, finished goods and all
other inventory (as such term is defined in the NYUCC), whether now owned or
hereafter acquired, and all wrapping, packaging, advertising and shipping
materials, and any documents relating thereto.
(g) "Investment Property" shall mean all of the Grantor's
right, title and interest in and to all present and future securities, security
entitlements and securities accounts.
(h) "Proceeds" shall mean any consideration received from the
sale, exchange, lease or other disposition of any asset or property which
constitutes Collateral, any other value received as a consequence of the
possession of any Collateral and any payment received from any insurer or other
person or entity as a result of the destruction, loss, theft or other
involuntary conversion of whatever nature of any asset or property that
constitutes Collateral, and shall include, without limitation,
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<PAGE> 136
all cash and negotiable instruments received or held by any of the Lenders
pursuant to any lockbox or similar arrangement relating to the payment of
Accounts Receivable.
2. Security Interests. As security for the payment or performance, as
the case may be, of the Secured Obligations, the Grantor hereby creates and
grants to the Agent, its successors and its assigns, for its own benefit and for
the pro rata benefit of the Lenders, their successors and their assigns, a
security interest in the Collateral (the "Security Interest"). Without limiting
the foregoing, the Agent is hereby authorized to file one or more financing
statements, continuation statements or other documents for the purpose of
perfecting, confirming, continuing, enforcing or protecting the Security
Interest, naming the Grantor as debtor and the Agent as secured party.
The Grantor agrees at all times to keep in all material respects
accurate and complete accounting records with respect to the Collateral,
including, but not limited to, a record of all payments and Proceeds received.
The foregoing grant of a security interest shall not include any rights
or interests in any General Intangible or contracts if and to the extent that
(a) the terms of the contract or document creating or evidencing such General
Intangible or contract right prohibits assignment or encumbrance thereof and (b)
the term prohibiting such assignment or encumbrances is effective as a matter of
law and (c) the term prohibiting such assignment or encumbrances has not been
waived or the consent of the necessary party to the grant of such security
interest to the Agent has not been obtained.
3. Further Assurances. The Grantor agrees, at its expense, to execute,
acknowledge, deliver and cause to be duly filed all such further instruments and
documents and take all such actions as the Agent may from time to time
reasonably request for the assuring and preserving of the Security Interest and
the rights and remedies created hereby, including, without limitation, the
payment of any fees and taxes required in connection with the execution and
delivery of this Agreement, the granting of the Security Interest and the filing
of any financing statements or other documents in connection herewith. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note or other instrument, such note or
instrument shall be promptly pledged and delivered to the Agent, duly endorsed
in a manner satisfactory to the Agent. The Grantor agrees to notify promptly the
Agent of any change in its corporate name or in the location of its chief
executive office, its chief place of business or the office where it keeps its
records relating to the Accounts Receivable owned by it and the location of any
Collateral. The Grantor agrees promptly to notify the Agent if any material
portion of the Collateral is damaged or destroyed.
4. Inspection and Verification. The Agent and such persons as the Agent
may designate shall have the right, at any reasonable time or times during the
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<PAGE> 137
Grantor's usual business hours, and upon reasonable notice (which may be
telephonic), to inspect the Collateral owned by the Grantor, all records related
thereto (and to make extracts and copies from such records), and the premises
upon which any such Collateral is located, to discuss the Grantor's affairs with
the officers of the Grantor and its independent accountants and to verify under
reasonable procedures the validity, amount, quality, quantity, value, and
condition of or any other matter relating to, such Collateral, including, in the
case of Accounts Receivable or Collateral in the possession of a third person,
contacting account debtors and third persons possessing such Collateral. So long
as no Event of Default has occurred and is continuing, the Agent agrees that it
shall schedule any meeting with the Grantor's independent accountants or any
such account debtors or third persons through the Grantor, and a Responsible
Officer of the Borrower shall have the right to be present at any such meeting.
Subject to the provisions of Section 11.11 of the Credit Agreement, the Agent
shall have the absolute right to share any information it gains from such
inspection or verification with any or all of the Lenders.
5. Taxes; Encumbrances. At its option, the Agent may discharge past due
taxes, liens, security interests or other encumbrances at any time levied or
placed on the Collateral and not permitted under the Credit Agreement, and may
pay for the maintenance and preservation of the Collateral to the extent the
Grantor fails to do so as required by the Credit Agreement, and the Grantor
agrees to reimburse the Agent on demand for any payment made or any expense
incurred by it pursuant to the foregoing authorization; provided, however, that
nothing in this Section 5 shall be interpreted as excusing the Grantor from the
performance of any covenants or other promises with respect to taxes, liens,
security interests or other encumbrances and maintenances as set forth herein or
in the Credit Agreement.
6. Assignment of Security Interest. If at any time the Grantor shall
take and perfect a security interest in any property of an account debtor or any
other person to secure payment and performance of an Account Receivable, the
Grantor shall promptly assign such security interest to the Agent. Such
assignment need not be filed of public record unless necessary to continue the
perfected status of the security interest against creditors of and transferees
from the account debtor or other person granting the security interest.
7. Representations and Warranties. The Grantor represents and warrants
to the Agent that:
(a) Title and Authority. It has (i) rights in and good title
to the Collateral in which it is granting a security interest hereunder and (ii)
the requisite power and authority to grant to the Agent the Security Interest in
such Collateral pursuant hereto and to execute, deliver and perform its
obligations in accordance with the terms of this Agreement, without the consent
or approval of any other person other than any consent or approval which has
been obtained.
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<PAGE> 138
(b) Filing. Fully executed Uniform Commercial Code financing
statements containing a description of the Collateral shall have been, or shall
be delivered to the Agent in a form such that they can be, filed of record in
every govern mental, municipal or other office in every jurisdiction in which
any portion of the Collateral is located necessary to publish notice of and
protect the validity of and to establish a valid, legal and perfected security
interest in favor of the Agent in respect of the Collateral in which a security
interest may be perfected by filing in the United States and its territories and
possessions, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of Uniform Commercial Code continuation statements.
(c) Validity of Security Interest. The Security Interest
constitutes a valid, legal and perfected first priority security interest in all
of the Collateral, other than patents, patent applications, trade names and
trademarks outside the United States which require registration and recording,
for payment and performance of the Secured Obligations, except as otherwise
permitted under the Credit Agreement.
(d) Information Regarding Names. It has disclosed in writing
to the Agent any trade names or styles (the "Tradenames") used to identify it in
its business or in the ownership of its properties and as to each such Tradename
confirms that:
(i) each Tradename is a trade name and style (and not the name
of an independent corporation or other legal entity) by which the
Grantor may identify and sell certain of its goods or services and
conduct a portion of its business;
(ii) all Accounts Receivable involved under the Tradenames are
and shall be (x) owned solely by the Grantor and (y) subject to the
security interests and other terms of this Security Agreement and the
Credit Agreement;
(iii) any dispute which may arise with customers with respect
to the products invoiced under the name of any of the Tradenames are to
be subject to the terms of this Security Agreement and the Credit
Agreement as through the Tradenames did not exist; and
(iv) new Tradenames may only be used after notice to the
Agent, which notice shall set forth the name of such new Tradename.
(e) Absence of Other Liens. The Collateral is owned by it free
and clear of any Lien of any nature whatsoever, except as granted pursuant to
this
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<PAGE> 139
Agreement and as permitted by the Credit Agreement, and, except as provided by
paragraph (b) of this Section 7, no financing statement has been filed, under
the Uni form Commercial Code as in effect in any state or otherwise, covering
any Collateral except as indicated on Schedule 7.01 to the Credit Agreement.
(f) Additional Representations for Accounts Receivable. (i)
All Accounts Receivable owned by the Grantor on the Closing Date constitute bona
fide receivables arising in the ordinary course of business, the amount of which
is actually owing and payable to the Grantor in the ordinary course of business,
and with respect to Eligible Receivables subject to no defense, claim of
disability, counterclaim or offset with respect thereto. All such Accounts
Receivable, net of a bad debt reserve determined in accordance with generally
accepted accounting principles, are collectible in accordance with their terms.
(ii) Each Account Receivable arising after the Closing Date
shall be on the date of its creation a good and valid account representing an
undisputed bona fide indebtedness incurred or an amount indisputably owed by the
Customer therein named, for a fixed sum, to the extent, set forth in the invoice
relating thereto, with respect to an absolute sale and delivery upon the
specified terms of goods sold by the Grantor, or work, labor and/or services
theretofore rendered by the Grantor; no such Account Receivable is or shall at
any time be subject to any defense, offset, counterclaim, discount or allowance
except as may be stated in the invoice relating thereto or discounts and
allowances as may be customary in the Grantor's business, and the Grantor with
respect to Eligible Receivables has no reason to believe such Accounts
Receivable will not be paid when due; none of the transactions underlying or
giving rise to any such Account Receivable shall violate any applicable State or
Federal laws or regulations, and all documents relating to any such Account
Receivable shall be legally sufficient under such laws or regulations and are
legally enforceable in accordance with their terms; to the knowledge of the
Grantor, each customer, guarantor or endorser is solvent and will continue to be
fully able to pay all such Accounts Receivable on which it is obligated in full
when due; no agreement under which any deduction or offset of any kind, other
than normal trade discounts and discounts granted by the Grantor in the ordinary
course of its business in accordance with its historical practices, have been
granted by the Grantor, at or before the time such Account Receivable was
created; all documents and agreements relating to such Accounts Receivable shall
be true and correct and in all material respects what they purport to be; to the
Grantor's knowledge, all signatures and endorsements that appear on all
documents and agreements relating to such Accounts Receivable are genuine and
all signatories and endorsers shall have full capacity to contract.
(g) Survival of Representations and Warranties. All
representations and warranties of the Grantor contained in this Agreement shall
survive the execution, delivery and performance of this Agreement until the
termination of this Agreement pursuant to Section 28.
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8. Records of Accounts Receivable; Physical Count of Inventory. (a) The
Grantor shall keep or cause to be kept records of its Accounts Receivable which
are accurate in all material respects. In addition, the Grantor will provide the
Agent with such further schedules and/or information respecting each Account
Receivable as the Agent may reasonably require.
(b) The Grantor shall conduct a physical count of its Inventory not
less than once each Fiscal Year and, upon the occurrence and during the
continuance of an Event of Default, at such intervals as the Agent may request,
and promptly supply the Agent with a copy of such counts accompanied by a report
of the value (based on the lower of cost (on a FIFO basis) or market value) of
such Inventory.
9. Intentionally Omitted.
10. Protection of Security. The Grantor shall, at its own cost and
expense, take any and all actions reasonably necessary to defend title to the
Collateral owned by it against all persons and to defend the Security Interest
of the Agent in such Collateral, and the priority thereof, against any adverse
Lien of any nature whatsoever except for Liens permitted pursuant to Section
7.01 of the Credit Agreement.
11. Continuing Obligations of the Grantor. The Grantor shall remain
liable to observe and perform all the conditions and obligations to be observed
and performed by it under each contract, agreement, interest or obligation
relating to the Collateral, all in accordance with the terms and conditions
thereof, and shall indemnify and hold harmless the Agent, and the Lenders from
any and all such liabilities.
12. Use and Disposition of Collateral. Except as set forth in Sections
7.01 and 7.14 of the Credit Agreement, the Grantor shall not make or permit to
be made any assignment, pledge or hypothecation of the Collateral, or grant any
security interest in the Collateral except for the Security Interest. The
Grantor shall not make or permit to be made any transfer of any Collateral,
except Inventory in the ordinary course of business or as otherwise permitted by
the Credit Agreement, and the Grantor shall remain at all times in possession of
the Collateral owned by it other than transfers to the Agent pursuant to the
provisions hereof or as otherwise provided in this Agreement or the Credit
Agreement.
13. Limitation on Modifications of Accounts Receivable. The Grantor
will not, without the Agent's prior written consent, grant any extension of the
time of payment of any of its Accounts Receivable, compromise, compound or
settle the same for less than the full amount thereof, release, in whole or in
part, any person liable for the payment thereof, or allow any credit or discount
whatsoever thereon other than extensions, credits, discounts, compromises or
settlements granted or made in the ordinary course of business.
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<PAGE> 141
14. Collections. (a) To the extent provided in Section 10.01 of the
Credit Agreement, the Grantor shall have the right to collect its Accounts
Receivable in the ordinary course of its business; provided, however, that at
the request of the Agent, the Grantor shall (i) arrange for remittances on any
of its Account Receivable to be made directly to lockboxes or blocked accounts
designated by the Agent or in such other manner as the Agent may direct, and
(ii) promptly deposit all payments received by the Grantor on account of
Accounts Receivable, whether in the form of cash, checks, notes, drafts, bills
of exchange, money orders or otherwise, in one or more accounts designated by
the Agent in precisely the form received (but with any endorsements of the
Grantor necessary for deposit or collection), subject to withdrawal by the Agent
only, as hereinafter provided, and until they are deposited, shall be deemed to
be held in trust by the Grantor for and as the Agent's property on its own
behalf and on behalf of the Lenders and shall not be commingled with the
Grantor's other funds.
(b) The Agent shall have the right, as the true and lawful
agent of the Grantor, with power of substitution for the Grantor and in the
Grantor's name, the Agent's name or otherwise, for the use and benefit of the
Agent and the Lenders, (i) upon the occurrence and continuance of an Event of
Default, to endorse the Grantor's name upon any notes, acceptances, checks,
drafts, money orders or other evidences of payment or Collateral that may come
into its possession; (ii) to sign the name of the Grantor on any invoice or bill
of lading relating to any of the Collateral, drafts against Customers,
assignments and verifications of Accounts Receivable and notices to Customers;
(iii) to send verifications of Accounts Receivable to any Customer; and (iv)
upon the occurrence and during the continuance of an Event of Default, (A) to
receive, endorse, assign and/or deliver any and all notes, acceptances, checks,
drafts, money orders or other evidences or instruments of payment relating to
the Collateral or any part thereof, and the Grantor hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed, (B) to
demand, collect, receive payment of, give receipt for, extend the time of
payment of and give discharges and releases of all or any of the Collateral
and/or release the Obligor thereon, (C) to commence and prosecute any and all
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the Collateral or
to enforce any rights in respect of any Collateral, (D) to settle, compromise,
compound, adjust or defend any actions, suits or proceedings relating to or
pertaining to all or any of the Collateral, (E) to notify, or to require the
Grantor to notify, the account debtors obligated on any or all of the Accounts
Receivable to make payment thereof directly to the Agent, (F) to notify the
Postal Service authorities to change the address for delivery of mail addressed
to the Grantor to such address as the Agent may designate, (G) to accept the
return of goods represented by any of the Accounts Receivable, and (H) to use,
sell, assign, transfer, pledge, make any agreement with respect to or otherwise
deal with all or any of the Collateral, and to do all other acts and things
necessary to carry out the purposes of this Agreement, as fully and completely
as though the Agent were the absolute owner of the Collateral for all purposes;
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provided, however, that nothing herein contained shall be construed as requiring
or obligating the Agent or any Lender to make any commitment or to make any
inquiry as to the nature or sufficiency of any payment received by the Agent or
such Lender or to present or file any claim or notice, or to take any action
with respect to the Collateral or any part thereof or the moneys due or to
become due in respect thereof or any property covered thereby, and no action
taken by the Agent or any Lender or omitted to be taken with respect to the
Collateral or any part thereof shall give rise to any defense, counterclaim or
offset in favor of the Grantor or to any claim or action against the Agent or
any Lender in the absence of the gross negligence or willful misconduct of the
Agent or such Lender. It is understood and agreed that the appointment of the
Agent as the agent of the Grantor for the purposes set forth above in this
Section 14 is coupled with an interest and is irrevocable. The provisions of
this Section 14 shall in no event relieve the Grantor of any of its obligations
hereunder or under the Credit Agreement with respect to the Collateral or any
part thereof or impose any obligation on the Agent or any Lender to proceed in
any particular manner with respect to the Collateral or any part thereof, or in
any way limit the exercise by the Agent or any Lender of any other or further
right which it may have on the date of this Agreement or hereafter, whether
hereunder or by law or otherwise.
15. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, the Grantor agrees to deliver each item of
Collateral to the Agent on demand, and it is agreed that the Agent shall have
the right to take any or all of the following actions at the same or different
times: with or without legal process and with or without previous notice or
demand for performance, to take possession of the Collateral and without
liability for trespass (except for actual damage caused by the Agent's gross
negligence or willful misconduct) to enter any premises where the Collateral may
be located for the purpose of taking possession of or removing the Collateral
and, generally, to exercise any and all rights afforded to a secured party
under, and subject to its obligations contained in, the Uniform Commercial Code
as in effect in any state or other applicable law. Without limiting the
generality of the foregoing, the Grantor agrees that the Agent shall have the
right, subject to the mandatory requirements of applicable law, to sell or
otherwise dispose of all or any part of the Collateral, at public or private
sale or at any broker's board or on any securities exchange, for cash, upon
credit or for future delivery as the Agent shall deem appropriate. Each such
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of the Grantor, and the Grantor hereby waives (to the
extent permitted by law) all rights of redemption, stay and appraisal which the
Grantor now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.
The Agent shall give the Grantor 10 days' written notice
(which the Grantor agrees is reasonable notice within the meaning of Section
9-504(3) of the NYUCC) of the Agent's intention to make any sale of Collateral.
Such notice, in the case of a public sale, shall state the time and place for
such sale and, in the case of a
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sale at a broker's board or on a securities exchange, shall state the board or
exchange at which such sale is to be made and the day on which the Collateral,
or portion thereof, will first be offered for sale at such board or exchange.
Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Agent may fix and state in the
notice (if any) of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Agent may (in its sole and absolute discretion) determine. The
Agent shall not be obligated to make any sale of any Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given. The Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Agent until the sale price is paid by the purchaser or purchasers thereof, but
the Agent shall not incur any liability in case any such purchaser or purchasers
shall fail to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may be sold again upon like notice. At any public
sale made pursuant to this Section 15, the Agent or any Lender may bid for or
purchase, free (to the extent permitted by law) from any right of redemption,
stay or appraisal on the part of the Grantor (all said rights being also hereby
waived and released to the extent permitted by law), with respect to the
Collateral or any part thereof offered for sale and the Agent or any such Lender
may make payment on account thereof by using any claim then due and payable to
the Agent or any such Lender from the Grantor as a credit against the purchase
price, and the Agent or any such Lender may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to the Grantor therefor. For purposes hereof, a written agreement to purchase
the Collateral or any portion thereof shall be treated as a sale thereof; the
Agent shall be free to carry out such sale and purchase pursuant to such
agreement, and the Grantor shall not be entitled to the return of the Collateral
or any portion thereof subject thereto, notwithstanding the fact that after the
Agent shall have entered into such an agreement all Events of Default shall have
been remedied and the Secured Obligations paid in full and/or the Total
Commitment shall have been terminated. The Grantor shall remain liable for any
deficiency. As an alternative to exercising the power of sale herein conferred
upon it, the Agent may proceed by a suit or suits at law or in equity to
foreclose this Agreement and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.
16. Application of Proceeds. The proceeds of any collection or sale of
Collateral, as well as any Collateral consisting of cash, shall be applied by
the Agent as follows:
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FIRST, to the Agent to reimburse the Agent for that portion of
the payments, if any, made by it with respect to Letters of Credit for which a
Lender, as a participant in such Letter of Credit pursuant to Section 2.18 of
the Credit Agreement, failed to pay its pro rata share thereof as required
pursuant to such Section 2.18;
SECOND, to the payment of all reasonable costs and expenses
incurred by the Agent in connection with such collection or sale or otherwise in
connection with this Agreement or any of the Secured Obligations, including, but
not limited to, all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by the Agent
hereunder on behalf of the Grantor and any other reasonable costs or expenses
incurred in connection with the exercise of any right or remedy hereunder;
THIRD, to the Agent to be held as cash collateral to the
extent of the undrawn amounts, if any, of outstanding Letters of Credit;
FOURTH, to the payment in full of principal and interest in
respect of any Loans outstanding (pro rata as among the Lenders in accordance
with the amounts of the Loans made by them pursuant to the Credit Agreement);
FIFTH, pro rata to the payment in full of all Secured
Obligations (other than those referred to above) owed to the Lenders (pro rata
as among the Lenders in accordance with their respective Commitments); and
SIXTH, to the Grantor, its successors and assigns, or as a
court of competent jurisdiction may otherwise direct.
Upon any sale of the Collateral by the Agent (including, without limitation,
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Agent or such officer or be
answerable in any way for the misapplication thereof.
17. Locations of Collateral; Place of Business. (a) The Grantor hereby
represents and warrants that all the Collateral is located at the locations
listed on Schedule I hereto and that its federal employer identification number
is as set forth on said Schedule. The Grantor agrees not to establish, or permit
to be established, any other location for Collateral unless all filings under
the Uniform Commercial Code as in effect in any state or otherwise which are
required by this Agreement or the Credit Agreement to be made with respect to
the Collateral have been made and the Agent has a valid, legal and perfected
first priority security interest in the Collateral.
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<PAGE> 145
(b) The Grantor confirms that its chief executive office is
located as indicated on Schedule I hereto. The Grantor agrees not to change, or
permit to be changed, the location of its chief executive office unless all
filings under the Uniform Commercial Code or otherwise which are required by
this Agreement or the Credit Agreement to be made have been made and the Agent
has a valid, legal and perfected first priority security interest, except as
otherwise permitted by Section 7.01 of the Credit Agreement.
18. Security Interest Absolute. All rights of the Agent hereunder, the
Security Interest, and all obligations of the Grantor hereunder, shall be
absolute and unconditional irrespective of (i) any lack of validity or
enforceability of the Credit Agreement, any other Loan Document, any other
agreement with respect to any of the Secured Obligations or any other agreement
or instrument relating to any of the foregoing, (ii) any change in the time,
manner or place of payment of, or in any other term of, all or any of the
Secured Obligations, or any other amendment or waiver of or consent to any
departure from the Credit Agreement, any other Loan Document or any other
agreement or instrument, (iii) any exchange, release or nonperfection of any
other Collateral, or any release or amendment or waiver of or consent to or
departure from any guarantee, for all or any of the Secured Obligations, or (iv)
any other circumstance which might otherwise constitute a defense available to,
or discharge of, the Grantor, any of the Guarantors or any other obligor in
respect of the Secured Obligations or in respect of this Agreement.
19. No Waiver. No failure on the part of the Agent to exercise, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy by the Agent preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law. The
Agent and the Lenders shall not be deemed to have waived any rights hereunder or
under any other agreement or instrument unless such waiver shall be in writing
and signed by such parties.
20. Agent Appointed Attorney-in-Fact. The Grantor hereby appoints the
Agent the attorney-in-fact of the Grantor solely for the purpose of carrying out
the provisions of this Agreement and taking any action and executing any
instrument which the Agent may deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled with an interest.
21. Agent's Fees and Expenses. The Grantor shall be obligated to, upon
demand, pay to the Agent the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts or
agents which the Agent may incur in connection with (i) the administration of
this Agreement, (ii) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Agent
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<PAGE> 146
hereunder, or (iv) the failure of any representation or warranty of the Grantor
hereunder to be true and correct in all material respects or the failure by the
Grantor to perform or observe any of the provisions hereof. In addition, the
Grantor agrees to indemnify and hold the Agent and the Lenders harmless from and
against any and all liability incurred by the Agent or the Lenders hereunder or
in connection herewith, unless such liability shall be due to the gross
negligence or willful misconduct of the Agent or the Lenders, as the case may
be. Any such amounts payable as provided hereunder or thereunder shall be
additional Secured Obligations secured hereby and by the other Security
Documents.
22. Binding Agreement; Assignments. This Agreement, and the terms,
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Grantor shall not be permitted to assign this Agreement or any interest
herein or in the Collateral, or any part thereof, or any cash or property held
by the Agent as Collateral under this Agreement, except as contemplated by this
Agreement or the Credit Agreement.
23. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
24. Notices. All communications and notices hereunder shall be in
writing and given as provided in the Credit Agreement.
25. Severability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable the remaining
provisions contained herein shall not in any way be affected or impaired.
26. Section Headings. Section headings used herein are for convenience
only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
27. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument. This Agreement shall be
effective when a counterpart which bears the signature of the Grantor shall have
been delivered to the Agent.
28. Termination. This Agreement and the Security Interest shall
terminate when (a) all the Secured Obligations have been fully and indefeasibly
paid in
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<PAGE> 147
cash, (b) the Lenders have no further commitment to make any Loans under the
Credit Agreement, and (c) the Agent shall have no further obligation to issue
any Letters of Credit, at which time the Agent shall execute and deliver to the
Grantor all Uniform Commercial Code termination statements and similar documents
which the Grantor shall reasonably request to evidence such termination;
provided, however, that all indemnities of the Grantor contained in this
Agreement shall survive, and remain operative and in full force and effect
regardless of, the termination of this Agreement.
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<PAGE> 148
IN WITNESS WHEREOF, the parties hereto have duly executed this Security
Agreement as of the day and year first above written.
AMERICAN BANK NOTE HOLOGRAPHICS,
INC.
By:______________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as Agent
By:______________________________
Name:
Title:
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<PAGE> 149
EXHIBIT F
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of July
__, 1998 (as amended, modified or supplemented from time to time, the "Credit
Agreement") among American Bank Note Holographics, Inc., a Delaware corporation
(the "Borrower"), the lenders named therein (collectively, the "Lenders"),
Societe Generale, as documentation agent and The Chase Manhattan Bank, as agent
for the Lenders ( in such capacity, the "Agent"). Capitalized terms used herein
and not otherwise defined herein shall have the meanings assigned to such terms
in the Credit Agreement.
1. The Assignor hereby sells and assigns, without recourse, to
the Assignee, and the Assignee hereby purchases and assumes, without recourse,
from the Assignor, effective as of the Effective Date as set forth on the second
page hereof, the interests set forth on the second page hereof (the "Assigned
Interests") in the Assignor's rights and obligations under the Credit Agreement,
including, without limitation, the interests set forth on the second page hereof
in the Tranche A Revolving Credit Commitment and Tranche B Revolving Credit
Commitment of the Assignor on the Effective Date and/or the interests set forth
on the second page hereof in the Revolving Credit Loans, Letters of Credit and
Term Loans owing to the Assignor outstanding on the Effective Date, together
with unpaid interest accrued on the assigned Loans to the Effective Date and the
amount, if any, set forth on the second page hereof of the fees accrued to the
Effective Date for the account of the Assignor. Each of the Assignor and the
Assignee hereby makes and agrees to be bound by all the representations,
warranties and agreements set forth in Section 11.03(d) of the Credit Agreement,
a copy of which has been received by each such party. From and after the
Effective Date, (i) the Assignee shall be a party to and be bound by the
provisions of the Credit Agreement and, to the extent of the interests assigned
by this Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and under the other Loan Documents and (ii) the Assignor shall, to
the extent of the interests assigned by this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
2. This Assignment and Acceptance is being delivered to the
Agent together with (i) the Notes evidencing the Loans included in the Assigned
Interests, (ii) if the Assignee is organized under the laws of the jurisdiction
outside the United States, the forms specified in Section 2.16(f) of the Credit
Agreement, duly completed and executed by such Assignee.
3. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Date of Assignment:
Legal Name of Assignor:
Legal Name of Assignee:
<PAGE> 150
Assignee's Address for Notices:
Effective Date of Assignment:
<TABLE>
<CAPTION>
Percentage Assigned of Facility/Commitment
(set forth, to at least two decimals, as a
percentage of the Facility and the aggregate
Facility Principal Amount Assigned Commitments of all Lenders thereunder)
<S> <C> <C>
Tranche A
Revolving Credit
Commitment Assigned: $ %
Tranche B
Revolving Credit
Commitment Assigned: %
Tranch A Revolving Credit Loans:
Tranch B Revolving Credit
Loans or Term Loans as applicable:
Participation in Letters
of Credit:
Fees Assigned (if any):
</TABLE>
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<PAGE> 151
The terms set forth above are hereby Accepted:
agreed to:
____________________, as Assignor THE CHASE MANHATTAN BANK,
as Agent
By:____________________________ By:_______________________
Name: Name:
Title: Title:
____________________, as Assignee
By:____________________________
Name:
Title:
Agreed to: (pursuant to Section 11.03(c) of the Credit Agreement)
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
By:_____________________________
Name:
Title:
<PAGE> 152
PRIMARY CONTACT INFORMATION
These contacts are for critical notification (drawdowns, repayments, rate
setting, etc.)
Institution's Name: ____________________________________________
Address: ____________________________________________
Primary Contact: ____________________________________________
Title and Department: ____________________________________________
Phone Number: ____________________________________________
Primary Telecopier: ____________________________________________
Alternate Telecopier: ____________________________________________
ALTERNATE CONTACT INFORMATION
Alternate Contact: ____________________________________________
Title and Department: ____________________________________________
Phone Number: ____________________________________________
Primary Telecopier: ____________________________________________
Alternate Telecopier: ____________________________________________
GENERAL OPERATIONAL INFORMATION
Wire Instructions to Your Bank Name: _________________________
Institution: Dept.: _________________________
ABA #: _________________________
A/C #: _________________________
Attn: _________________________
Ref: _________________________
Telex Information: Contact Name: _________________________
Number: _________________________
Answerback: _________________________
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<PAGE> 153
If any changes are made to the above information, please notify by telecopier to
_______________ at (212) ________.
Movement of Funds: To us: Wire Fed Funds to:
The Chase Manhattan Bank
_________________________
_________________________
New York, New York
Attn: _______________
Reference: American Bank Note Holographics, Inc.
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<PAGE> 154
EXHIBIT G
SECURITY AGREEMENT AND MORTGAGE -
TRADEMARKS AND PATENTS
AGREEMENT made this 20th day of July, 1998 between AMERICAN
BANK NOTE HOLOGRAPHICS, INC., a Delaware corporation ("Debtor"), having an
office at 399 Executive Boulevard, Elmsford, New York 10523, and THE CHASE
MANHATTAN BANK, a New York banking corporation having an office at 600 Fifth
Avenue, New York, New York 10020, as agent (referred to herein as the "Secured
Party") for (i) the lenders (the "Lenders") named in Schedules 2.01(a) and
2.01(b) of the Credit Agreement dated as of the date hereof, among the Debtor,
the guarantors named therein (the "Guarantors"), the Lenders and the Secured
Party (as amended, modified or supplemented from time to time in accordance with
its terms, the "Credit Agreement") and (ii) for itself as issuer of the Letters
of Credit.
A. Debtor has adopted the marks, names and/or designs
described in Schedule A annexed hereto and made a part hereof.
B. Debtor is the owner and holder of the patents listed on
Schedule B annexed hereto and made a part hereof.
C. The Secured Party and the Lenders have agreed to extend
Loans and certain other financial accommodations including, without limitation,
the issuance of Letters of Credit to the Debtor pursuant to, and subject to the
terms and conditions of, the Credit Agreement. The obligation of the Lenders to
extend such Loans and of the Agent to issue Letters of Credit under the Credit
Agreement is conditioned on the execution and delivery by the Debtor of a
security agreement in the form hereof to secure the following (the "Secured
Obligations"): (i) all Obligations (such Obligations to include, without
limitation, the due and punctual payment and performance of (a) the principal of
and interest on the Loans, when and as due, whether at maturity, by acce
leration, upon one or more dates set for prepayment or otherwise, (b)
Indebtedness at any time and from time to time under the Letters of Credit, (c)
all obligations of the Debtor at any time and from time to time under this
security agreement and (d) all other obligations of the Debtor and the
Guarantors at any time and from time to time under the Credit Agreement and the
other Loan Documents).
NOW, THEREFORE, IT IS AGREED that, as security for the full
and prompt payment and performance of the Secured Obligations, Debtor does
hereby mortgage to and pledge with the Secured Party for its own benefit and the
benefit of the Lenders, and grant to the Secured Party a security interest in,
all of its right, title and interest in and to (i) each of the Trademarks (as
hereinafter defined), and the goodwill of the business symbolized by each of the
Trademarks, all customer lists and other records of Debtor relating to the
distribution of products bearing the Trademarks and each of the registrations
described in Schedule A hereto; (ii) each of the Patents (as hereinafter
defined) and each of the applications and issued patents listed on Schedule
<PAGE> 155
B hereto; and (iii) any and all proceeds of the foregoing, including, without
limitation, any claims by Debtor against third parties for infringement of the
Trademarks or the Patents (collectively, the "Collateral").
1. Terms defined in the Credit Agreement and not otherwise
defined herein, shall have the meaning set forth in the Credit Agreement. As
used in this Agreement, unless the context otherwise requires:
"Patents" shall mean (i) all letters patent of the
United States or any other country, all right, title and interest therein and
thereto, and all applications, patents and recordings thereof, including,
without limitation, applications, patents and recordings in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any state thereof or any other country or any political subdivision
thereof, all whether now owned or hereafter acquired by Debtor, including, but
not limited to, those described in Schedule B annexed hereto and made a part
hereof, and (ii) all licenses thereof.
"Trademarks" shall mean (i) all common law and
statutory trademarks and service marks, trade names and prints and labels on
which said trademarks, service marks and trade names have appeared or appear,
designs and general intangibles of like nature, now existing or hereafter
adopted or acquired and all applications, registrations and recordings thereof,
including, without limitation, applications, registrations and recordings in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any state thereof, or any other country or any political
subdivision thereof, all whether now owned or hereafter acquired by Debtor,
including, but not limited to, those described in Schedule A annexed hereto and
made a part hereof, and (ii) all reissues, extensions or renewals thereof and
all licenses thereof.
The foregoing grant of a security interest shall not include
any rights or interests in any Patents and/or Trademarks or contracts if and to
the extent that (a) the terms of the contract or document creating or evidencing
such Patent and/or Trademark or contract right prohibits assignment or
encumbrance thereof and (b) the term prohibiting such assignment or encumbrances
is effective as a matter of law and (c) the term prohibiting such assignment or
encumbrances has not been waived or the consent of the necessary party to the
grant of such security interest to the Agent has not been obtained.
2. Debtor hereby represents, warrants, covenants and agrees as
follows:
(a) Except as contemplated by that certain letter dated as of
the date hereof from the Debtor to the Agent, Debtor has the sole, full and
clear title to the Trademarks shown on Schedule A for the goods and services
covered by the
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<PAGE> 156
registrations thereof and such registrations are valid and subsisting and in
full force and effect.
(b) Debtor will perform all acts and execute all documents,
including, without limitation, assignments for security in form suitable for
filing with the United States Patent and Trademark Office, substantially in the
forms of Exhibits 1 and 2 hereof, respectively, reasonably requested by the
Secured Party at any time to evidence, perfect, maintain, record and enforce the
Secured Party's interest in the Collateral or otherwise in furtherance of the
provisions of this Agreement, and Debtor hereby authorizes the Secured Party to
execute and file one or more financing statements (and similar documents) or
copies thereof or of this Security Agreement with respect to the Collateral
signed only by the Secured Party.
(c) Except to the extent that the Secured Party, upon prior
written notice of Debtor, shall consent, subject to Debtor's reasonable business
judgment (unless the failure to so act would have a Material Adverse Effect),
Debtor (either itself or through licensees) will continue to use the Trademarks
on each and every trademark class of goods applicable to its current line as
reflected in its current catalogs, brochures and price lists in order to
maintain the Trademarks in full force free from any claim of abandonment for
nonuse and Debtor will not (and will not permit any licensee thereof to) do any
act or knowingly omit to do any act whereby any Trademark may become
invalidated.
(d) Debtor has the sole, full and clear title to each of the
Patents shown on Schedule B hereto and the issued Patents are subsisting. None
of the Patents has been abandoned or dedicated, and, except to the extent that
the Secured Party, upon prior written notice by Debtor, shall consent, subject
to Debtor's reasonable business judgment (unless the failure to so act would
have a Material Adverse Effect), Debtor will not do any act, or omit to do any
act, whereby the Patents may become abandoned or dedicated and shall notify the
Secured Party immediately if it knows of any reason or has reason to know that
any pending application or issued Patent may become abandoned or dedicated.
(e) The Debtor shall be obligated to, upon demand, pay to the
Secured Party the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts or agents which
the Secured Party may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Secured Party hereunder, or (iv) the
failure of any representation or warranty of Debtor hereunder to be true and
correct in all material respects or the failure by Debtor to perform or observe
any of the provisions hereof. In addition, the Debtor indemnifies and holds the
Secured Party and the Lenders harmless from and against any and all liability
incurred by the Secured Party or the Lenders hereunder or in connection with the
security
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<PAGE> 157
interest granted hereunder, unless such liability shall be due to the gross
negligence or willful misconduct of the Secured Party or the Lenders, as the
case may be. Any such amounts payable as provided hereunder or thereunder shall
be additional Secured Obligations secured hereby and by the other Security
Documents.
(f) In no event shall Debtor, either itself or through any
agent, employee, licensee or designee, (i) file an application for the
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency of the United States, any state
thereof, any other country or any political subdivision thereof or (ii) file any
assignment of any patent or trademark, which Debtor may acquire from a third
party, with the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state thereof, any other country or
any political subdivision thereof, unless Debtor shall, on or prior to the date
of such filing, notify the Secured Party thereof and, upon request of the
Secured Party, execute and deliver any and all assignments, agreements,
instruments, documents and papers as the Secured Party may reasonably request to
evidence the Secured Party's mortgage and security interest in such Patent or
Trademark and the goodwill and general intangibles of Debtor relating thereto or
represented thereby, and Debtor hereby constitutes the Secured Party its
attorney-in-fact to execute and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed; such
power being coupled with an interest is irrevocable until the Secured
Obligations are paid in full.
(g) Debtor has the right and power to make the assignment and
to grant the security interest herein granted; and the Collateral is not now,
and at all times hereafter will not be, subject to any liens, mortgages,
assignments, security interests or encumbrances of any nature whatsoever, except
in favor of the Secured Party or as to which executed UCC-3 termination
statements have been delivered to the Secured Party or as otherwise permitted by
the Credit Agreement, and to the best knowledge of Debtor none of the Collateral
is subject to any claim.
(h) Except to the extent that Secured Party, upon prior
written notice from Debtor, shall consent or as otherwise permitted by the
Credit Agreement, Debtor will not assign, sell, mortgage, lease, transfer,
pledge, hypothecate, grant a security interest in or lien upon, encumber, grant
an exclusive or non-exclusive license or otherwise dispose of any of the
Collateral, and nothing in this Agreement shall be deemed a consent by the
Secured Party to any such action except as expressly permitted herein.
(i) As of the date hereof neither Debtor nor any affiliate or
subsidiary thereof owns any material Patents or Trademarks registered in, or the
subject of pending applications in, the United States Patent and Trademark
Office or in any similar office or agency of the United States, or any state
thereof, other than those described in Schedules A and B hereto.
4
<PAGE> 158
(j) Debtor will take all necessary steps in any proceeding
before the United States Patent and Trademark Office or in any similar office or
agency of the United States, or any state thereof, to maintain each application
and registration of the material Trademarks and Patents, including, without
limitation, filing of renewals, affidavits of use, affidavits of
incontestability and opposition, interference and cancellation proceedings
(except to the extent that dedication, abandonment or invalidation is permitted
under paragraphs 2(c) and 2(d) hereof).
(k) Debtor assumes all responsibility and liability arising
from the use of the Trademarks, and Debtor hereby indemnifies and holds Secured
Party harmless from and against any claim, suit, loss, damage or expense
(including reasonable attorneys' fees) arising out of any alleged defect in any
product manufactured, promoted or sold by Debtor (or any affiliate or subsidiary
thereof) in connection with any Trademark or out of the manufacture, promotion,
labeling, sale or advertisement of any such product by Debtor (or any affiliate
or subsidiary thereof). Debtor agrees that Secured Party does not assume, and
shall have no responsibility for, the payment of any sums due or to become due
under any agreement or contract included in the Collateral or the performance of
any obligations to be performed under or with respect to any such agreement or
contract by Debtor, and Debtor hereby agrees to indemnify and hold the Secured
Party harmless with respect to any and all claims by any person relating
thereto.
(l) Secured Party may, in its sole discretion, pay any amount
or do any act required of Debtor hereunder or reasonably requested by Secured
Party to preserve, defend, protect, maintain, record or enforce Debtor's
obligations contained herein, the Secured Obligations, the Collateral, or the
right, title and interest granted Secured Party herein, and which Debtor fails
to do or pay, and any such payment shall be deemed an advance by Secured Party
to Debtor and shall be payable on demand together with interest at the highest
rate then payable on the Secured Obligations.
(m) Debtor agrees that if it, or any affiliate or subsidiary
thereof, learns of any use by any person of any term or design likely to cause
confusion with any Trademark, it shall promptly notify Secured Party of such use
and, if requested by Secured Party, subject to Debtor's reasonable business
judgment (unless the failure to so act would have a Material Adverse Effect),
shall join with Secured Party, at its expense, in such action as Secured Party,
in its reasonable discretion may deem advisable for the protection of Secured
Party's interest in and to such Trademarks.
(n) All licenses of its Trademarks and Patents which Debtor
has granted to third parties are set forth in Schedule C hereto.
(o) If the Debtor shall acquire title to any new Trademarks or
Patents, the provisions of this Agreement shall automatically apply thereto. On
a quarterly basis or more frequently upon the occurrence and continuance of an
Event of Default and
5
<PAGE> 159
upon Secured Party's request in such event, the Debtor shall promptly notify the
Secured Party in writing of any rights to any new Trademarks or Patents acquired
by the Debtor after the date hereof and of any registrations issued or
applications for registration made after the date hereof. Concurrently with the
filing of an application for registration for any Trademarks or Patents, the
Debtor shall execute, deliver and record in all places where Exhibit 1 and
Exhibit 2 to this Agreement are recorded an appropriate agreement, substantially
in the form thereof, with appropriate insertions, or an amendment to Exhibit 1
and Exhibit 2 to this Agreement, in form and substance reasonably satisfactory
to the Secured Party, pursuant to which the Debtor shall grant a security
interest to the extent of its interest in such registration as provided herein
to the Secured Party.
3. Upon the occurrence and continuance of an Event of Default,
in addition to all other rights and remedies of the Secured Party, whether under
law, the Credit Agreement or otherwise, all such rights and remedies being
cumulative, not exclusive and enforceable alternatively, successively or
concurrently, without (except as provided herein) notice to, or consent by,
Debtor, the Secured Party shall have the following rights and remedies: (a)
Debtor, other than in the ordinary course of business, shall not make any
further use of the Patents or the Trademarks or any mark similar thereto for any
purpose; (b) the Secured Party may, at any time and from time to time, upon 10
days' prior notice to Debtor, license, whether general, special or otherwise,
and whether on an exclusive or nonexclusive basis, any of the Patents or
Trademarks, throughout the world for such term or terms, on such conditions, and
in such manner, as the Secured Party shall in its sole discretion determine; (c)
the Secured Party may (without assuming any obligations or liability
thereunder), at any time, subject to the terms of applicable license agreements,
enforce (and shall have the exclusive right to enforce) against any licensee or
sublicensee all rights and remedies of Debtor in, to and under any one or more
license agreements with respect to the Collateral, and take or refrain from
taking any action under any thereof, and Debtor hereby releases the Secured
Party from, and agrees to hold the Secured Party free and harmless from and
against any claims arising out of, any action taken or omitted to be taken with
respect to any such license agreement, other than acts which constitute gross
negligence or willful misconduct of Secured Party; (d) the Secured Party may, at
any time and from time to time, upon 10 days' prior notice to Debtor, assign,
sell, or otherwise dispose of, the Collateral or any of it, either with or
without special or other conditions or stipulations, with power to buy the
Collateral or any part of it, and with power also to execute assur ances, and do
all other acts and things for completing the assignment, sale or disposi tion
which the Secured Party shall, in its sole discretion, deem appropriate or
proper; and (e) in addition to the foregoing, in order to implement the
assignment, sale or other disposal of any of the Collateral pursuant to
subparagraph 3(d) hereof, the Secured Party may, at any time, pursuant to the
authority granted in the Powers of Attorney described in paragraph 4 hereof
(such authority becoming effective on the occurrence or continuation as
hereinabove provided of an Event of Default), execute and deliver on behalf of
Debtor, one or more instruments of assignment of the Patents or Trademarks
6
<PAGE> 160
(or any application or registration thereof), in form suitable for filing,
recording or registration in any country. Debtor agrees to pay when due all
reasonable costs incurred in any such transfer of the Patents or Trademarks,
including any taxes, fees and reasonable attorneys' fees, and all such costs
shall be added to the Secured Obligations. The Secured Party may apply the
proceeds actually received from any such license, assignment, sale or other
disposition to the reasonable costs and expenses thereof, including, without
limitation, reasonable attorneys' fees and all legal, travel and other expenses
which may be incurred by the Secured Party, and then to the Secured Obligations,
in such order as to principal or interest as is set forth herein; and Debtor
shall remain liable and will pay the Secured Party on demand any deficiency
remaining, together with interest thereon at a rate equal to the highest rate
then payable on the Secured Obligations and the balance of any expenses unpaid.
Nothing herein contained shall be construed as requiring the Secured Party to
take any such action at any time. In the event of any such license, assignment,
sale or other disposition of the Collateral, or any of it, after the occurrence
or continuation as hereinabove provided of an Event of Default, Debtor shall
supply its know-how and ex pertise relating to the manufacture and sale of the
products bearing or in connection with the Trademarks or Patents, and its
customer lists and other records relating to the Trademarks or Patents and to
the distribution of said products, to the Secured Party or its designee, subject
to the provisions of Section 11.11 of the Credit Agreement; provided, however,
that any such license, assignment, sale or other disposition of the Collateral
or supply of know-how or expertise shall be contingent on the Debtor's failure
to cure such Event of Default.
The proceeds of any sale of Collateral, as well as any
Collateral consisting of cash, shall be applied by the Secured Party as follows:
FIRST, to the Secured Party to reimburse the Secured Party for
that portion of the payments, if any, made by it with respect to Letters of
Credit for which a Lender, as a participant in such Letter of Credit pursuant to
Section 2.18 of the Credit Agreement, failed to pay its pro rata share thereof
as required pursuant to such Section 2.18;
SECOND, to the payment of all reasonable costs and expenses
incurred by the Secured Party in connection with such sale or otherwise in
connection with this Agreement or any of the Secured Obligations, including, but
not limited to, all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by the Secured
Party hereunder on behalf of the Debtor and any other reasonable costs or
expenses incurred in connection with the exercise of any right or remedy
hereunder;
THIRD, to the Secured Party to be held as cash collateral to
the extent of the undrawn amount, if any, or outstanding Letters of Credit;
7
<PAGE> 161
FOURTH, to the payment in full of principal and interest in
respect of any Loans outstanding (pro rata as among the Lenders in accordance
with the amounts of the Loans made by them pursuant to the Credit Agreement);
FIFTH, to the payment in full of all Secured Obligations
(other than those referred to above) owed to the Lenders (pro rata as among the
Lenders in accordance with their respective Commitments); and
SIXTH, to the Debtor, its successors or assigns, or as a court
of competent jurisdiction may otherwise direct.
4. Concurrently with the execution and delivery hereof, Debtor
is executing and delivering to the Secured Party, in the form of Exhibit 3
hereto, five originals of a Power of Attorney for the implementation of the
assignment, sale or other disposal of the Trademarks and Patents pursuant to
paragraphs 3(d) and (e) hereof and Debtor hereby releases the Secured Party from
any claims, causes of action and demands at any time arising out of or with
respect to any actions taken or omitted to be taken by the Secured Party under
the powers of attorney granted herein, other than actions taken or omitted to be
taken through the gross negligence or willful misconduct of the Secured Party.
5. All rights of the Secured Party hereunder, the security
interest granted to the Secured Party hereunder, and all obligations of the
Debtor hereunder, shall be absolute and unconditional irrespective of (i) any
lack of validity or enforceability of the Credit Agreement, any other Loan
Document, any other agreement with respect to any of the Secured Obligations or
any other agreement or instrument relating to any of the foregoing, (ii) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Secured Obligations, or any other amendment or waiver of or
consent to any departure from the Credit Agreement, any other Loan Document or
any other agreement or instrument, (iii) any exchange, release or nonperfection
of any Lien on other Collateral, or any release or amendment or waiver of or
consent to or departure from any guarantee, for all or any of the Secured
Obligations, or (iv) any other circumstance which might otherwise constitute a
defense available to, or discharge of, the Debtor, any of the Guarantors or any
other obligor in respect of the Secured Obligations or in respect of this
Agreement.
6. No failure on the part of the Secured Party to exercise,
and no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy by the Secured Party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law. The Secured Party and the Lenders shall not be deemed to have waived any
rights hereunder or under any other
8
<PAGE> 162
agreement or instrument unless such waiver shall be in writing and signed by
such parties.
7. This Agreement, and the terms, covenants and conditions
hereof, shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, except that the Debtor shall not be
permitted to assign this Agreement or any interest herein or in the Collateral,
or any part thereof, or any cash or property held by the Secured Party as
Collateral under this Agreement, except as contemplated by this Agreement or the
Credit Agreement.
8. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
9. All communications and notices hereunder shall be in
writing and given as provided in the Credit Agreement.
10. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable the remaining
provisions contained herein shall not in any way be affected or impaired.
11. Section headings used herein are for convenience only and
are not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
12. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument. This Agreement shall be
effective when a counterpart which bears the signature of the Debtor shall have
been delivered to the Secured Party.
13. This Agreement and the security interest granted hereunder
shall terminate when (a) all the Secured Obligations have been fully and
indefeasibly paid, (b) the Lenders have no further commitment to make any Loans
under the Credit Agreement, and (c) the Secured Party shall have no further
obligation to issue any Letters of Credit, at which time the Secured Party shall
execute and deliver to the Debtor all Uniform Commercial Code termination
statements, terminations of assignment and similar documents which the Debtor
shall reasonably request to evidence such termination; provided, however, that
all indemnities of the Debtor contained in this Agreement shall survive, and
remain operative and in full force and effect regardless of, the termination of
this Agreement.
9
<PAGE> 163
IN WITNESS WHEREOF, Debtor and the Secured Party have caused
this Agreement to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
AMERICAN BANK NOTE HOLOGRAPHICS,
INC.
By
Name:
Title:
THE CHASE MANHATTAN BANK, as Agent
By
Name:
Title:
10
<PAGE> 164
Schedule A to Security Agreement
TRADEMARKS
<PAGE> 165
Schedule B to Security Agreement
PATENTS
<PAGE> 166
Schedule C to Security Agreement
<PAGE> 167
ASSIGNMENT FOR SECURITY
(PATENTS)
WHEREAS, AMERICAN BANK NOTE HOLOGRAPHICS, INC., a
Delaware corporation (herein referred to as "Assignor"), owns the letters
patent, and/or applications for letters patent, of the United States, more
particularly described on Schedule 1-A annexed hereto as part hereof (the
"Patents");
WHEREAS, Assignor is obligated to The Chase Manhattan Bank, as
agent (referred to herein as the "Assignee") for (i) the lenders (the "Lenders")
named in Schedules 2.01(a) and 2.01(b) of the Credit Agreement dated as of the
date hereof, among the Assignor, the Lenders, the Guarantors and the Assignee
(as amended, modified or supplemented from time to time in accordance with its
terms, the "Credit Agreement") and (ii) for itself as issuer of the Letters of
Credit, and Assignor has en tered into a Security Agreement and Mortgage
- -Trademarks and Patents dated the date hereof (the "Agreement") in favor of
Assignee; and
WHEREAS, pursuant to the Agreement, Assignor assigns to
Assignee, and grants to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Patents, together with any
reissue, continuation, con tinuation-in-part or extension thereof, and all
proceeds thereof, including, without limitation, any and all causes of action
which may exist by reason of infringement thereof for the full term of the
Patents (the "Collateral"), to secure the prompt payment, performance and
observance of the Secured Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Assignor does hereby acknowledge the assignment
to Assignee and the grant to Assignee of a security interest in, and mortgage
on, the Collateral to secure the prompt payment, performance and observance of
the Secured Obligations.
Assignor does hereby further acknowledge and affirm that the
rights and remedies of Assignee with respect to the assignment of a security
interest in and mortgage on the Collateral made and granted hereby are more
fully set forth in the Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.
Assignee's address is 600 Fifth Avenue, New York, New York
10020.
<PAGE> 168
IN WITNESS WHEREOF, Assignor has caused this Assignment to be
duly executed by its officer thereunto duly authorized as of the ___ day of
July, 1998.
AMERICAN BANK NOTE HOLOGRAPHICS,
INC.
By
Name:
Title:
2
<PAGE> 169
Schedule I to the
Security Agreement
Locations of Collateral
Chief Executive Office of the Grantor
Trade names of the Grantor
Federal Employer Identification Number of the Grantor
<PAGE> 170
SCHEDULE 1-A TO ASSIGNMENT FOR SECURITY
PATENTS
Title Date Issued Patent No.
3
<PAGE> 171
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
WHEREAS, AMERICAN BANK NOTE HOLOGRAPHICS, INC., a Delaware
corporation (herein referred to as "Assignor"), has adopted, used and is using
the trademarks listed on the annexed Schedule 2-A, including registrations in,
and/or applications filed with, the United States Patent and Trademark Office
(the "Trademarks");
WHEREAS, Assignor is obligated to The Chase Manhattan Bank, as
agent (referred to herein as the "Assignee") for (i) the lenders (the "Lenders")
named in Schedules 2.01(a) and 2.01(b) of the Credit Agreement dated as of the
date hereof, among the Assignor, the Guarantors, the Lenders and the Assignee
(as amended, modified or supplemented from time to time in accordance with its
terms, the "Credit Agreement") and (ii) for itself as issuer of the Letters of
Credit and Assignor has entered into a Security Agreement and Mortgage
- -Trademarks and Patents dated the date hereof (the "Agreement") in favor of
Assignee; and
WHEREAS, pursuant to the Agreement, Assignor assigns to
Assignee and grants to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Trademarks, together with
the goodwill of the business symbolized by the Trademarks and the applications
and registrations thereof, and all proceeds thereof, including, without
limitation, any and all causes of action which may exist by reason of
infringement thereof (the "Collateral"), to secure the payment, performance and
observance of the Secured Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Assignor does hereby acknowledge the assignment
to Assignee and the grant to Assignee of a security interest in, and mortgage
on, the Collateral to secure the prompt payment, performance and observance of
the Secured Obligations.
Assignor does hereby further acknowledge and affirm that the
rights and remedies of Assignee with respect to the assignment of a security
interest in and mortgage on the Collateral made and granted hereby are more
fully set forth in the Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.
Assignee's address is 600 Fifth Avenue, New York, New York
10020.
<PAGE> 172
IN WITNESS WHEREOF, Assignor has caused this Assignment to be
duly executed by its officer thereunto duly authorized as of the ___ day of
July, 1998.
AMERICAN BANK NOTE HOLOGRAPHICS,
INC.
By
Name:
Title:
2
<PAGE> 173
SCHEDULE 2-A TO ASSIGNMENT FOR SECURITY
TRADEMARKS
Trademark Reg. Date Reg. No.
3
<PAGE> 174
SPECIAL POWER OF ATTORNEY
STATE OF )
) ss.:
COUNTY OF )
KNOW ALL MEN BY THESE PRESENTS, THAT AMERICAN BANK NOTE
HOLOGRAPHICS, INC., a Delaware corporation, with its principal office at 399
Executive Boulevard, Elmsford, New York 10523 (hereinafter called "Assignor")
hereby appoints and constitutes The Chase Manhattan Bank, as agent (referred to
herein as the "Assignee") for (i) the lenders (the "Lenders") named in Schedules
2.01(a) and 2.01(b) of the Credit Agreement dated as of the date hereof, among
the Assignor, the Lenders and the Assignee (as amended, modified or supplemented
from time to time in accordance with its terms, the "Credit Agreement") and (ii)
for itself as issuer of the Letters of Credit,(hereinafter called "Assignee"),
its true and lawful attorney, with full power of substitution, and with full
power and authority to perform the following acts on behalf of Assignor:
1. For the purpose of assigning, selling, licensing
or otherwise disposing of all right, title and interest of
Assignor in and to any letters patent of the United States or
any other country or political subdivision thereof, and all
patents, recordings, reissues, continuations,
continuations-in-part and extensions thereof, and all pending
applications there for, and for the purpose of the recording,
registering and filing of, or accomplishing any other
formality with respect to, the foregoing, to execute and
deliver any and all agree ments, documents, instruments of
assignment or other papers necessary or advisable to effect
such purpose;
2. For the purpose of assigning, selling, licensing
or otherwise disposing of all right, title and interest of
Assignor in and to any common law and statutory trademarks and
service marks, trade names and all registrations, recordings,
reissues, extensions and renewals thereof, and all pending
applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other
formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of
assignment or other papers necessary or advisable to effect
such purpose;
3. To execute any and all documents, statements,
certificates or other papers necessary or advisable in order
to
<PAGE> 175
obtain the purposes described above as Assignee may in its
sole discretion determine.
This power of attorney is made pursuant to a Security
Agreement And Mortgage - Trademarks And Patents, dated the date hereof, between
Assignor and Assignee and takes effect solely for the purposes of paragraphs
3(d) and (e) of the Security Agreement And Mortgage and is subject to the
conditions thereof and may not be revoked until the payment in full of all
"Secured Obligations" as defined in such Security Agreement And Mortgage.
Dated: July ___, 1998
AMERICAN BANK NOTE HOLOGRAPHICS,
INC.
By
Name:
Title:
2
<PAGE> 176
STATE OF )
) ss.:
COUNTY OF )
On this ___ day of July, 1998, before me personally appeared
______________________, to me known, who, being by me duly sworn, did depose and
say that he resides at and that he is the _______________ of American Bank Note
Holographics, Inc., the Delaware corporation described in and which executed the
foregoing instrument and that he signed his name thereto pursuant to such
authority.
Notary Public
3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements contained in the body of the accompanying Form 10-Q and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 0399
<SECURITIES> 0
<RECEIVABLES> 14370
<ALLOWANCES> 236
<INVENTORY> 80366
<CURRENT-ASSETS> 23614
<PP&E> 11835
<DEPRECIATION> 6310
<TOTAL-ASSETS> 37806
<CURRENT-LIABILITIES> 8651
<BONDS> 0
0
0
<COMMON> 136
<OTHER-SE> 26983
<TOTAL-LIABILITY-AND-EQUITY> 37806
<SALES> 16616
<TOTAL-REVENUES> 16616
<CGS> 6445
<TOTAL-COSTS> 9787
<OTHER-EXPENSES> (224)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 245
<INCOME-PRETAX> 6808
<INCOME-TAX> 2736
<INCOME-CONTINUING> 4072
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4072
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
