UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1995
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 No. 1-8250
WELLS-GARDNER ELECTRONICS CORPORATION
(Exact name of registrant as specified in its charter)
ILLINOIS 36-1944630
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2701 North Kildare Avenue, Chicago, Illinois 60639
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 252-8220
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
As of November 2, 1995, 4,052,676 shares of the Common Stock,
$1.00 par value of the registrant were outstanding.
<PAGE>
WELLS-GARDNER ELECTRONICS CORPORATION
FORM 10-Q
For Quarter Ended September 30, 1995
PART I - FINANCIAL INFORMATION
Item 1. Page
Index to Financial Statements
Condensed Statements of Operations - 3 Months Ended,
September 30, 1995 & 1994 (Unaudited) 3
Condensed Statements of Operations - 9 Months Ended,
September 30, 1995 & 1994 (Unaudited) 4
Condensed Balance Sheets 5
Condensed Statements of Cash Flows 6
Notes to the Condensed Financial Statements 7
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 4.
Submission of Matters to a Vote of Security Holders 9
Item 5.
Other Information 9
Item 6.
Exhibits and Reports on Form 8-K 9
SIGNATURE 9
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
WELLS-GARDNER ELECTRONICS CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended September 30,
(000's Omitted)
1995 1994
<S> <C> <C>
Net sales $ 7,842 $ 8,943
Cost of sales 7,118 8,162
Selling & administrative expenses 547 674
Special charge 886 ---
Other (income) expense, net 33 (5)
Total costs 8,584 8,831
Earnings (loss) before income
taxes (742) 112
Income taxes --- ---
Net earnings (loss) $ (742) $ 112
Earnings (loss) per share:
Net earnings (loss) per share $ (0.18) $ 0.03
Weighted average common
shares outstanding 4,045,295 3,883,236
</TABLE>
<PAGE>
<TABLE>
WELLS-GARDNER ELECTRONICS CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended September 30,
(000's Omitted)
1995 1994
<S> <C> <C>
Net sales $ 21,782 $ 25,162
Cost of sales 19,729 23,364
Selling & administrative expenses 1,947 2,385
Special charge 886 1,201
Other (income) expense, net 68 16
Gain on sale of fixed asset (403) --
Total costs 22,227 26,966
Loss before income taxes (445) (1,804)
Income taxes -- --
Net loss $ (445) $ (1,804)
Loss per share:
Net loss per share $ (0.11) $ (0.47)
Weighted average common
shares outstanding 4,003,397 3,883,236
</TABLE>
<PAGE>
<TABLE>
WELLS-GARDNER ELECTRONICS CORPORATION
CONDENSED BALANCE SHEETS
(000's Omitted)
September 30, December 31,
1995 1994
(Unaudited) (Audited)
<S> <C> <C>
Assets:
Cash & short-term investments $ 694 $ 57
Accounts receivable (net) 5,644 6,105
Recoverable income taxes 62 329
Inventories:
Raw materials 4,099 3,239
Work in progress 585 435
Finished goods 2,818 7,502 2,157 5,831
Other current assets 237 491
Total current assets 14,139 12,813
Property, plant & equipment, net 2,641 2,806
Total assets $ 16,780 $ 15,619
Liabilities:
Notes payable $ -- $ 1,925
Accounts payable 3,567 1,923
Accrued expenses 763 1,404
Total current liabilities 4,330 5,252
Notes payable 2,225 --
Total long-term liabilities 2,225 --
Total liabilities 6,555 5,252
Shareholders' Equity:
Common stock-authorized 25,000,000
shares, $1.00 par value; issued
4,052,676 shares as of September 30,
1995 & 3,957,736 shares as of
December 31, 1994 4,053 3,958
Additional paid in capital 1,097 959
Retained earnings 5,369 5,814
Unearned compensation (294) (364)
Total shareholders'equity 10,225 10,367
Total liabilities &
shareholders' equity $ 16,780 $ 15,619
</TABLE>
<PAGE>
<TABLE>
WELLS-GARDNER ELECTRONICS CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
(000's Omitted)
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (445) $ (1,804)
Adjustments to reconcile net loss to
net cash used for operating activities:
Depreciation & amortization 356 336
Gain on sale of fixed asset (401) ---
Amortization of unearned compensation 70 (55)
Changes in current assets & liabilities:
Accounts receivable 461 208
Income taxes (net) 267 ---
Inventories (1,671) (27)
Prepaid expenses & other assets 174 227
Accounts payable 1,644 754
Accrued expenses (692) 334
Net cash used for operating activities (237) (27)
Cash flows from investing activities:
Additions to property, plant &
equipment (260) (628)
Proceeds from sale of fixed asset 601 ---
Net cash provided by (used for)
investing activities 341 (628)
Cash flows from financing activities:
Proceeds from notes payable 300 500
Stock options exercised 233 85
Net cash provided by financing activities 533 585
Net increase and decrease in cash &
short-term investments 637 (70)
Cash & short-term investments at
beginning of period 57 94
Cash & short-term investments at $ 694 $ 24
end of period
Supplemental cash flow disclosure:
Interest paid $ 101 $ 77
Taxes paid $ --- $ ---
</TABLE>
<PAGE>
WELLS-GARDNER ELECTRONICS CORPORATION
Notes to the Condensed Financial Statements
1. In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments (consisting of normal
reoccurring accruals, except as described below), which are necessary for
a fair statement of results for the periods presented. Certain information
and footnote disclosures normally included in the financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted. It is suggested that these condensed financial
statements be read in conjunction with the audited financial statements and
notes thereto included in the Company's 1994 annual report to shareholders.
The results of operations for the quarter ended September 30, 1995 are not
necessarily indicative of the operating results for the full year.
2. Earnings (loss) per common and common equivalent shares were calculated by
dividing net earnings (loss) by the weighted average number of shares of
common stock and common stock equivalents outstanding.
3. Included in the Company's net loss for the nine months ended September 30,
1995 was a $886,000, or 22 cents per share, special charge due to costs
incurred relating to the warranty on monitors sold to a major customer from
1991 to 1993. Also included in the 1995 results was a $403,000, or 10 cents
per share, gain on sale of fixed asset and $220,000 or 5 cents per share, for
a reversal of a 1994 special charge for management reorganization. Included
in the Company's net loss for the nine months ended September 30, 1994 was a
$1,201,000, or 31 cents per share, special charge for management
reorganization.
4. The Company sold land and a building in the first quarter of 1995. The
sale was closed and title passed on March 30, 1995. The proceeds were put
into escrow in the Company's name. Company completes some minor
environmental clean-up which the Company expects to be completed by year end,
1995. The Company has fully accrued for the clean-up. The proceeds are
included in cash and short-term investments on the Company's
September 30, 1995 balance sheet.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
For the third quarter ended September 30, 1995, sales decreased 12.3 percent to
$7,842,000 from $8,943,000 in the prior year's period. This decrease was due
mainly to lower sales to the video lottery segment. Gross operating profit, as
a percentage of sales, increased to 9.2 percent, or $724,000, compared to 8.7
percent, or $781,000, for the same period last year. This change is
attributed to sales of higher margin products. Net losses were $742,000, or 18
cents per share, compared to a net earnings of $112,000, or three cents per
share, for the comparable 1994 quarter. Included in the 1995 quarterly results
was a $886,000, or 22 cents per share, special charge due to costs incurred
relating to the warranty on monitors sold to a major customer from 1991 to
1993. Selling and administrative expenses decreased 18.8 percent to $547,000
from $674,000 due mainly to a gain from reversing $183,000, of a 1994 special
charge for management reorganization, lower sales commissions and selling
expense by $37,000, and an increase of $93,000 in general and administrative
expense.
For the nine months ended September 30, 1995, sales decreased 13.4 percent to
$21,782,000 from $25,162,000 in the prior year's period. Gross operating
profit, as a percentage of sales, increased to 9.4 percent, or $2,053,000,
compared to 7.1 percent, or $1,798,000, for the same period last year, due to
the sales of higher margin products. Net losses were $445,000, or 11 cents per
share, compared to a net loss of $1,804,000, or 47 cents per share, for the
comparable 1994 period. The 1995 results included a $886,000 or 22 cents per
share special charge related to warranty of a major customers product, $403,000
or 10 cents per share gain on the sale of fixed asset and $220,000, or 5 cents
per share, gain from reversing an excess portion of the 1994 special charge for
management reorganization. The 1994 results included a $1,201,000 or 31 cents
per share special charge for management reorganization. Selling and
administrative expenses decreased 18.4 percent to $1,947,000 from $2,385,000 due
to the lower sales volume, reversing $183,000 of a 1994 special charge for
management reorganization and reduced costs attributable to prior period cost
cutting measures.
As of September 30, 1995, cash and short term investments increased $637,000
from December 31, 1994 due mainly to the restricted cash balance. Accounts
receivable decreased $461,000 to $5,644,000 from $6,105,000 due to lower sales
volume and tighter collection policies. Inventory increased $1,671,000 or 28.7
percent to $7,502,000 from $5,831,000 at year end 1994 due to management's
position to attack the Company's all time high level of backlog orders.
As of September 30, 1995, long-term notes payable was $2,225,000 compared to the
short-term balance of $1,925,000 at December 31, 1994. The Company has secured
a new three year credit agreement with Harris Trust and Savings Bank for a $7
million revolving line of credit with an interest rate at prime. Accounts
payable increased $1,644,000 to $3,567,000 from $1,923,000 at year end due
mainly to the Company building up its inventory level. Accrued expenses
decreased $641,000 to $763,000 from $1,404,000 due mainly to the amount paid for
a special charge incurred during the first quarter of 1994 relating to the
Company's management restructuring. Working capital increased by $2,248,000
since year-end 1994, to $9,809,000, while corporate liquidity continues to be
strong as evidenced by a current ratio of 3.27 to 1.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
On October 2, 1995, the Company entered into a new revolving credit
agreement with Harris Trust and Savings Bank for a $7 million
revolving line of credit with an interest rate at prime.
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits:
Exhibit 27 Financial Data Schedule
Exhibit 10.1 Revolving Credit Agreement dated October 2,1995, between
Harris Trust and Savings Bank and the Company.
(b). Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
September 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WELLS-GARDNER ELECTRONICS CORPORATION
Date: November 2, 1995 By: RICHARD L. CONQUEST
Richard L. Conquest
(Vice President of Finance, Chief Financial
Officer, Secretary and Treasurer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 694
<SECURITIES> 0
<RECEIVABLES> 5644
<ALLOWANCES> 208
<INVENTORY> 7502
<CURRENT-ASSETS> 14139
<PP&E> 9366
<DEPRECIATION> 6725
<TOTAL-ASSETS> 16780
<CURRENT-LIABILITIES> 4330
<BONDS> 0
<COMMON> 4053
0
0
<OTHER-SE> 6172
<TOTAL-LIABILITY-AND-EQUITY> 16780
<SALES> 21782
<TOTAL-REVENUES> 21782
<CGS> 19729
<TOTAL-COSTS> 22159
<OTHER-EXPENSES> (33)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101
<INCOME-PRETAX> (445)
<INCOME-TAX> 0
<INCOME-CONTINUING> (445)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (445)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
WELLS-GARDNER ELECTRONICS CORPORATION
CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois 60690
Gentlemen:
The undersigned, Wells-Gardner Electronics Corporation, an Illinois
corporation (the "Company"), applies to you (the "Bank") for your commitment,
subject to all the terms and conditions hereof and on the basis of the
representations and warranties hereinafter set forth, to make credit
accommodations available to the Company, all as more fully hereinafter set
forth.
SECTION 1. THE CREDIT.
Section 1.1. Revolving Credit. Subject to the terms and conditions
hereof, the Bank agrees to extend a revolving credit (the "Revolving Credit") to
the Company which may be availed of by the Company from time to time during the
period from and including the date hereof to, but not including, the Termination
Date, at which time the commitment of the Bank to extend credit under the
Revolving Credit shall expire. The Revolving Credit may be utilized by the
Company in the form of Loans and Letters of Credit, all as more fully
hereinafter set forth. The aggregate principal amount of all Loans plus the
amount available for drawing under all Letters of Credit and the aggregate
principal amount of all unpaid Reimbursement Obligations outstanding at any one
time shall not exceed $7,000,000 (the "Commitment"), as such amount may be
reduced pursuant to Section 3.4 hereof. During the period from and including
the date hereof, to but not including the Termination Date, the Company may use
the Commitment by borrowing, repaying and borrowing Loans in whole or in part
and/or by having the Bank issue Letters of Credit, having such Letters of Credit
expire or otherwise terminate without having been drawn upon or, if drawn upon,
reimbursing the Bank for such drawing, and having the Bank issue new Letters of
Credit, all in accordance with the terms and conditions of this Agreement.
Section 1.2 Revolving Credit Loans. Subject to the terms and
conditions hereof, the Revolving Credit may be availed of by the Company in the
form of loans (individually a Loan and collectively the "Loans"). Each Loan
shall be in a minimum amount of $10,000 (subject to the provisions of Section 2
hereof which require different minimum amounts in the case of Loans bearing
interest with reference to Adjusted LIBOR). Each Loan shall be made against and
evidenced by a single promissory note of the Company in the form (with
appropriate insertions) attached hereto as Exhibit A (the "Note") payable to the
order of the Bank in the principal amount of $7,000,000. The Note shall be
dated the date of issuance thereof, be expressed to bear interest as set forth
in Section 2 hereof, and be expressed to mature on the Termination Date.
Without regard to the principal amount of the Note stated on its face, the
actual principal amount at any time outstanding and owing by the Company on
account of the Note shall be the sum of all Loans made under this Section less
all payments of principal actually received by the Bank.
Section 1.3. Letters of Credit.
(a) General Terms. Subject to all of the terms and conditions
hereof, the Revolving Credit may be available in the form of
commercial letters of credit issued by the Bank for the account of the
Company (individually a "Letter of Credit" and collectively the
"Letters of Credit"). For all purposes of this Agreement, Letters of
Credit shall be deemed outstanding as of any one time in an amount
equal to the maximum amount which could be drawn thereunder under any
circumstances and over any period of time plus any unreimbursed
Reimbursement Obligations then outstanding with respect thereto. If
and to the extent any Letter of Credit expires or otherwise terminates
without having been drawn upon, the availability under the Commitment
shall to such extent be reinstated.
(b) Term. Each Letter of Credit issued hereunder shall expire
not later than the earlier of (i) twelve (12) months from the date of
issuance (or be cancelable not later twelve (12) months from the date
of issuance and each renewal) or (ii) the Termination Date.
<PAGE>
(c) General Characteristics. Each Letter of Credit issued
hereunder shall be payable in U.S. dollars, shall conform to the
general requirements of the Bank for the issuance of commercial
letters of credit as to form and substance, and shall be a letter of
credit which the Bank may lawfully issue.
(d) Applications. At the time the Company requests a Letter of
Credit to be issued (or prior to the first issuance of a Letter of
Credit, in the case of a continuing application), the Company shall
execute and deliver to the Bank an application for such Letter of
Credit in the form customarily prescribed by the Bank (individually an
"Application" and collectively the "Applications"). Subject to the
other provisions of this subsection, the obligation of the Company to
reimburse the Bank for drawings under a Letter of Credit shall be
governed by the Application for such Letter of Credit. This Agreement
supersedes any terms of the Applications which are irreconcilably
inconsistent with the terms hereof. Anything contained in the
Applications to the contrary notwithstanding, (i) the Company shall
pay fees in connection with each Letter of Credit as set forth in
Section 2 hereof, (ii) prior to the occurrence of a Default or an
Event of Default, the Bank will not call for collateral security for
the obligations of the Company under the Applications, and (iii)
prior to the occurrence of a Default or an Event of Default, the Bank
will not call for the funding of a Letter of Credit by the Company
prior to being presented with a draft drawn thereunder (or, in the
event the draft is a time draft, prior to its due date). The Company
hereby irrevocably authorizes the Bank to charge any of its deposit
accounts maintained with the Bank for the amount necessary to
reimburse the Bank for any drafts drawn under Letters of Credit issued
hereunder.
(e) Outstanding Letters of Credit. The Company and the Bank
each hereby agree that (i) certain commercial letters of credit (a) IM
number 94254 issued by the Bank in the amount of $312,896.60 and (b)
IM number 97149 issued by the Bank in the amount of $1,892,967.64,
each constitute a "Letter of Credit" for all purposes of this
agreement to the same extent, and with the same force and effect, as
if such Letter of Credit had been issued at the request of the Company
hereunder, and (ii) (a) that certain Application and Agreement for
Irrevocable Commercial Letter of Credit for the benefit of the Company
to the Bank, executed and delivered to the Bank in connection with the
Bank s commercial letter of credit IM number 94254 and (b) that
certain Application and Agreement for Irrevocable Commercial Letter of
Credit for the benefit of the Company to the Bank, executed and
delivered to the Bank in connection with the Bank s commercial letter
of credit IM number 97149; each constitute an "Application" for all
purposes of this Agreement to the same extent, and with the same force
and effect, as if such Application had been executed and delivered by
the Company to the Bank hereunder.
<PAGE>
Section 1.4. Reimbursement Obligations. The Company is obligated,
and hereby unconditionally agrees, to pay in immediately available funds to the
Bank each draft drawn and presented under a Letter of Credit issued by the Bank
hereunder not later than 12:00 noon on the date provided for in the relevant
Application (Chicago time) (the obligation of the Company under this Section 1.4
with respect to any Letter of Credit is a "Reimbursement Obligation"). The
Company's obligation to repay all Reimbursement Obligations shall be absolute
and unconditional, as more fully set forth in the relevant Application. If at
any time the Company fails to pay any Reimbursement Obligations when due, the
Company shall be deemed to have automatically requested a Domestic Rate Portion
Loan from the Bank hereunder, as of the maturity date of such Reimbursement
Obligation, the proceeds of which Loan shall be used to repay the such
Reimbursement Obligation. Such Loan shall only be made if no Default or Event
of Default shall exist and upon approval of the Bank, and shall be subject to
availability under the Commitment. If such Loan is not made by the Bank for any
reason, the unpaid amount of such Reimbursement Obligation shall be due and
payable to the Bank upon demand and shall bear interest at the Default Rate.
Section 1.5. Manner and Disbursement of Borrowing. The Company shall
give written or telephonic notice to the Bank (which notice shall be irrevocable
once given and, if given by telephone, shall be promptly confirmed in writing)
by no later than 11:00 a.m. (Chicago time) on the date the Company requests the
Bank to make a Loan hereunder. Each such notice shall specify the date of the
Loan requested (which shall be a Business Day) and the amount of such Loan.
Each Loan shall initially constitute part of the applicable Domestic Rate
Portion except to the extent the Borrower has otherwise timely elected a LIBOR
Portion as provided in Section 2 hereof. Subject to the provisions of Section
6.1 hereof, the proceeds of each Loan shall be made available to the Company at
the principal office of the Bank in Chicago, Illinois, in immediately available
funds, such funds to be deposited in the Company s general account with the Bank
known as Account Number 444-366-9. The Company agrees that the Bank may rely
upon any written or telephonic notice given by any person the Bank in good faith
believes is an Authorized Representative without the necessity of independent
investigation and in the event any telephonic notice conflicts with any written
confirmation, such notice shall govern if the Bank has acted in reliance
thereon.
<PAGE>
SECTION 2. INTEREST ON LOANS AND CHANGE IN CIRCUMSTANCE.
Section 2.1. Interest Rate Options.
(a) Subject to all of the terms and conditions of this Section 2,
portions of the principal indebtedness evidenced by the Note (all of
the indebtedness evidenced by the Note bearing interest at the same
rate for the same period of time being hereinafter referred to as a
"Portion") may, at the option of the Company, bear interest with
reference to the Domestic Rate (the "Domestic Rate Portion") or with
reference to the Adjusted LIBOR ("LIBOR Portions"), and Portions may
be converted from time to time from one basis to another. All of the
indebtedness evidenced by the Note which is not part of a LIBOR
Portion shall constitute a single Domestic Rate Portion. All of the
indebtedness evidenced by the Note which bears interest with reference
to a particular Adjusted LIBOR for a particular Interest Period shall
constitute a single LIBOR Portion. Anything contained herein to the
contrary notwithstanding, there shall not be more than three (3) LIBOR
Rate Portions outstanding at any one time. The Company promises to pay
interest on each Portion at the rates and times specified in this
Section 2.
(b) Domestic Rate Portion. Each Domestic Rate Portion
applicable to the Note shall bear interest (which the Company
promises to pay at the times herein provided) at the rate per
annum equal to the Domestic Rate as in effect from time to time,
provided that if any Domestic Rate Portion or any part thereof is
not paid when due (whether by lapse of time, acceleration or
otherwise) such Portion shall bear interest (which the Company
promises to pay at the times herein provided), whether before or
after judgment, until payment in full thereof at the rate per
annum determined by adding the Default Rate to the interest rate
which would otherwise be applicable thereto from time to time.
Interest on each Domestic Rate Portion shall be payable monthly
on the last day of each month (commencing September 30, 1995) and
at maturity of the Note (whether by lapse of time, acceleration
or otherwise). Interest after maturity shall be due and payable
upon demand. Any change in the interest rate on any Domestic
Rate Portion resulting from a change in the Domestic Rate shall
be effective as of the date of the relevant change in the
Domestic Rate.
<PAGE>
(c) LIBOR Portions. Each LIBOR Portion shall bear interest
(which the Company promises to pay at the times herein provided) for
each Interest Period selected therefor at a rate per annum determined
by adding one and three-quarters percent (1 3/4%) to Adjusted LIBOR
for such Interest Period, provided that if any LIBOR Portion is not
paid when due (whether by lapse of time, acceleration or otherwise)
such Portion shall bear interest (which the Company promises to pay at
the times herein provided), whether before or after judgment, until
payment in full thereof through the end of the Interest Period then
applicable thereto at the rate per annum determined by adding the
Default Rate to the interest rate which would otherwise be applicable
thereto, and effective at the end of such Interest Period such LIBOR
Portion shall automatically be converted into and added to the
Domestic Rate Portion and shall thereafter bear interest at the
interest rate applicable to the Domestic Rate Portion after default.
Interest on each LIBOR Portion shall be due and payable on the last
day of each Interest Period applicable thereto and at maturity
(whether by lapse of time, acceleration or otherwise) and, with
respect to any Interest Period applicable to a LIBOR Portion in excess
of three (3) months, then on the date occurring every three (3) months
after the date such Interest Period began and at the end of such
Interest Period, and interest after maturity shall be due and payable
upon demand. The Company shall notify the Bank on or before 11:00 a.m.
(Chicago time) on the third Business Day preceding the end of an
Interest Period applicable to a LIBOR Portion whether such LIBOR
Portion is to continue as a LIBOR Portion, in which event the Company
shall notify the Bank of the new Interest Period selected therefor,
and in the event the Company shall fail to so notify the Bank, such
LIBOR Portion shall automatically be converted into and added to the
Domestic Rate Portion as of and on the last day of such Interest
Period. Anything contained herein to the contrary notwithstanding,
the obligation of the Bank to create, continue or effect by conversion
any LIBOR Portion shall be conditioned upon the fact that at the time
no Default or Event of Default shall have occurred and be continuing.
Each LIBOR Portion applicable to the Note shall be in a minimum amount
of $1,000,000 or such greater amount which is an integral multiple of
$100,000.
Section 2.2. Computation of Interest. All interest on the Note shall
be computed on the basis of a year of 360 days for the actual number
of days elapsed.
<PAGE>
Section 2.3. Manner of Rate Selection. The Company shall notify the
Bank (i) by 11:00 a.m. (Chicago time) at least three (3) Business Days prior to
the date upon which it requests that any LIBOR Portion applicable to the Note be
created or that any part of the Domestic Rate Portion applicable to the Note be
converted into a LIBOR Portion (each such notice to specify in each instance
the amount thereof and the Interest Period selected therefor). If any request is
made to convert a LIBOR Portion into the Domestic Rate Portion available
hereunder, such conversion shall only be made so as to become effective as of
the last day of the Interest Period applicable thereto. All requests for the
creation, continuance or conversion of Portions under this Agreement shall be
irrevocable. Such requests may be written or oral and the Bank is hereby
authorized to honor telephonic requests for creations, continuances and
conversions received by it from any person the Bank in good faith believes to be
an Authorized Representative, without the necessity of independent
investigation, the Company hereby indemnifies the Bank from any liability or
loss ensuing from so acting.
Section 2.4. Change of Law. Notwithstanding any other provisions of
this Agreement or of the Note, if at any time the Bank shall determine in good
faith that any change in applicable laws, treaties or regulations or in the
interpretation thereof makes it unlawful for the Bank to create or continue to
maintain any LIBOR Portion, it shall promptly so notify the Company and the
obligation of the Bank to create, continue or maintain such LIBOR Portion under
this Agreement shall terminate until it is no longer unlawful for the Bank to
create, continue or maintain such LIBOR Portion. The Company, on demand, shall,
if the continued maintenance of any LIBOR Portion is unlawful, thereupon prepay
the outstanding principal amount of the affected LIBOR Portion, together with
all interest accrued thereon and all other amounts payable to the Bank with
respect thereto under this Agreement; provided, however, that the Company may
elect to convert the principal amount of the affected Portion into the Domestic
Rate Portion available hereunder, subject to the terms and conditions of this
Agreement.
Section 2.5. Unavailability of Deposits or Inability to Ascertain
Adjusted LIBOR. Notwithstanding any other provision of this Agreement or of the
Note, if prior to the commencement of any Interest Period, the Bank shall
determine that deposits in the amount of any LIBOR Portion scheduled to be
outstanding during such Interest Period are not readily available to the Bank in
the relevant market or, by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining Adjusted
LIBOR, then the Bank shall promptly give notice thereof to the Company and the
obligations of the Bank to create, continue or effect by conversion any LIBOR
Portion, in such amount and for such Interest Period shall terminate until
deposits in such amount and for the Interest Period selected by the Company
shall again be readily available in the relevant market and adequate and
reasonable means exist for ascertaining Adjusted LIBOR.
<PAGE>
Section 2.6. Taxes and Increased Costs. With respect to any LIBOR
Portion, if the Bank shall determine in good faith that any change in any
applicable law, treaty, regulation or guideline (including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System) or any new
law, treaty, regulation or guideline, or any interpretation of any of the
foregoing by any governmental authority charged with the administration thereof
or any central bank or other fiscal, monetary or other authority having
jurisdiction over the Bank or its lending branch or the LIBOR Portion
contemplated by this Agreement (whether or not having the force of law) shall:
(i) impose, increase, or deem applicable any reserve, special deposit
or similar requirement against assets held by, or deposits in or for
the account of, or loans by, or any other acquisition of funds or
disbursements by, the Bank which is not in any instance already
accounted for in computing the interest rate applicable to such LIBOR
Portion;
(ii) subject the Bank, any LIBOR Portion or the Note to the extent it
evidences such Portion to any tax (including, without limitation, any
United States interest equalization tax or similar tax however named
applicable to the acquisition or holding of debt obligations and any
interest or penalties with respect thereto), duty, charge, stamp tax,
fee, deduction or withholding in respect of this Agreement, any LIBOR
Portion or the Note to the extent it evidences such Portion, except
such taxes as may be measured by the overall net income or gross
receipts of the Bank or its lending branches and imposed by the
jurisdiction, or any political subdivision or taxing authority
thereof, in which the Bank's principal executive office or its lending
branch is located;
(iii) change the basis of taxation of payments of principal and
interest due from the Company to the Bank hereunder or under the Note
to the extent it evidences any LIBOR Portion (other than by a change
in taxation of the overall net income or gross receipts of the Bank or
its lending branches); or
(iv) impose on the Bank any penalty with respect to the foregoing or
any other condition regarding this Agreement, its disbursement, any
LIBOR Portion or the Note to the extent it evidences any LIBOR
Portion; and the Bank shall determine that the result of any of the
foregoing is to increase the cost (whether by incurring a cost or
adding to a cost) to the Bank of creating or maintaining any LIBOR
Portion hereunder or to reduce the amount of principal or interest
received or receivable by the Bank (without benefit of, or credit
for, any prorations, exemption, credits or other offsets available
under any such laws, treaties, regulations, guidelines or
interpretations thereof), then the Company shall pay on demand to
the Bank from time to time as specified by the Bank such
additional amounts as the Bank shall reasonably determine are
sufficient to compensate and indemnify it for such increased cost
or reduced amount. If the Bank makes such a claim for
compensation, it shall provide to the Company a certificate
setting forth the computation of the increased cost or reduced
amount as a result of any event mentioned herein in reasonable
detail and such certificate shall be deemed conclusive if reasonably
determined.
<PAGE>
Section 2.7. Funding Indemnity. In the event the Bank shall incur any
loss, cost or expense (including, without limitation, any loss (including loss
of profit), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired or contracted to be acquired by
the Bank to fund or maintain any LIBOR Portion or the relending or reinvesting
of such deposits or other funds or amounts paid or prepaid to the Bank) as a
result of:
(i) any payment of a LIBOR Portion on a date other than the last day
of the then applicable Interest Period for any reason, whether before
or after default, and whether or not such payment is required by any
provision of this Agreement; or
(ii) any failure by the Company to create, borrow, continue or effect
by conversion a LIBOR Portion on the date specified in a notice given
pursuant to this Agreement;
then upon the demand of the Bank, the Company shall pay to the Bank such amount
as will reimburse the Bank for such reasonable loss, cost or expense (such loss,
cost or expense will not include any allocated salary of employees of the Bank).
If the Bank requests such a reimbursement it shall provide the Company with a
certificate setting forth the computation of the loss, cost or expense giving
rise to the request for reimbursement in reasonable detail and such certificate
shall be deemed conclusive if reasonably determined.
Section 2.8. Lending Branch. The Bank may, at its option, elect to
make, fund or maintain Portions of the Loan hereunder at such of its branches or
offices as the Bank may from time to time elect.
<PAGE>
Section 2.9. Discretion of Bank as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, the Bank shall
be entitled to fund and maintain its funding of all or any part of the Note in
any manner it sees fit, it being understood, however, that for the purposes of
this Agreement all determinations hereunder (including, without limitation,
determinations under Sections 2.5, 2.6, and 2.7 hereof) shall be made as if the
Bank had actually funded and maintained each LIBOR Portion during each Interest
Period applicable thereto through the purchase of deposits in the relevant
market in the amount of such LIBOR Portion, having a maturity corresponding to
such Interest Period and bearing an interest rate equal to the LIBOR for such
Interest Period.
SECTION 3. FEES, PREPAYMENTS, TERMINATIONS, APPLICATIONS AND
CAPITAL ADEQUACY.
Section 3.1. Letter of Credit Fees. On the date of
issuance of each Letter of Credit, and as a condition thereto,
the Company shall pay to the Bank a fee for the issuance of such
Letter of Credit which the Bank shall customarily impose; on the
date a draft is drawn thereunder, the Company shall pay to the
Bank a fee equal to one-quarter of one percent (1/4%) of the
amount drawn on the related Letter of Credit so drawn. In
addition to the letter of credit fee called for by the
immediately preceding sentence, the Company further agrees to pay
to the Bank such standard processing and transaction fees and
charges as the Bank may from time to time customarily impose in
connection with the processing and payment of letters of credit
and drafts drawn thereunder.
Section 3.2 Audit Fees. The Company shall pay to the Bank
charges for performed by the Bank or its agents or
representatives from time to time in such amounts as the Bank may
from time to time request (the Bank acknowledging and agreeing
that such charges shall be computed in the same manner as it at
the time customarily uses for the assessment of charges for
similar audits), with such charges not to exceed $800 per audit
plus all out-of-pocket expenses incurred by the Bank in
connection with each audit absent a Default or Event of Default;
provided, however, that in the absence of any Default or Event of
Default, the Company shall not be required to reimburse the Bank
for more than one (1) such audit per calendar year.
<PAGE>
Section 3.3. Voluntary Prepayments.
(a) Domestic Rate Portion. The Company shall have the
privilege of prepaying without premium or penalty and in
whole or in part (but, if in part, then in an amount not
less than $10,000) the Domestic Rate Portion of the Note at
any time upon notice to the Bank prior to 11:00 a.m.
(Chicago time) on the date fixed for prepayment, such
prepayment to be made by the payment of the principal amount
to be prepaid and accrued interest thereon to the date of
prepayment.
(b) LIBOR Portions. The Company may prepay, without
premium or penalty, any LIBOR Portion of the Note only on
the last date of the then applicable Interest Period, in
whole or in part (but, if in part, then in an amount not
less than $1,000,000 or such greater amount which is an
integral multiple of $100,000) upon three (3) Business Days
prior written notice to the Bank (which notice shall be
irrevocable once given, must be received by the Bank no
later than 11:00 a.m. (Chicago time) on the third Business
Day preceding the date of such prepayment and shall specify
the amount to be repaid); provided, however, that the
outstanding principal amount of any LIBOR Portion applicable
to the Note prepaid in part shall not be less than
$1,000,000 after giving effect to such prepayment. Any such
prepayment shall be effected by payment of the principal
amount to be prepaid and accrued interest thereon to the end
of the applicable Interest Period. Any prepayment of any
LIBOR Portion not made in accordance with the terms of this
Section 3.3(b) shall be subject to the funding indemnity
provisions of Section 2.7 hereof.
Section 3.4. Terminations. The Company shall have the
right at any time and from time to time, upon five (5) Business
Days' prior notice to the Bank, to terminate without premium or
penalty and in whole or in part (but, if in part, then in an
amount not less than $500,000) the Commitment, provided that the
Company may not terminate any portion of the Revolving Credit
which represents outstanding Loans, Letters of Credit or
Reimbursement Obligations. Any termination of the Revolving
Credit pursuant to this Section may not be reinstated.
<PAGE>
Section 3.5. Place and Application of Payments and
Collections. All payments of principal, interest, fees and all
other Obligations payable hereunder shall be made to the Bank at
its principal office in Chicago, Illinois no later than 11:00
a.m. (Chicago time) on the date any such payment is due and
payable. All such payments shall be made in lawful money of the
United States of America, in immediately available funds at the
place of payment, without setoff or counterclaim and without
reduction for, and free from, any and all present or future
taxes, levies, imposts, duties, fees, charges, deductions,
withholdings, restrictions or conditions of any nature imposed by
any government or any political subdivision or taxing authority
thereof (but excluding any taxes imposed or measured by the net
income of the Bank). Unless the Company otherwise directs,
principal payments shall be first applied to the Domestic Rate
Portion until payment in full thereof, with any balance applied
to the LIBOR Rate Portions in the order in which their Interest
Periods expire.
Section 3.6. Notations. The amount and date of each Loan
and the amount and date of each payment of principal and interest
thereon shall be recorded by the Bank on its books and records
or, at its options, recorded on a schedule attached to the Note,
and the amount of principal and interest shown on such books and
records or schedule as owing on the Note from time to time shall
be prima facie evidence of the amount so owing in any court or
other proceeding brought to enforce such Note of the principal
amount remaining unpaid thereon; provided that the failure of the
Bank to record any of the foregoing shall not limit or otherwise
affect the obligation of the Company to repay the principal
amount owing on the Note together with accrued interest thereon.
All Loans made against the Note, the status of all amounts
evidenced by the Note as constituting part of the Domestic Rate
Portion or a LIBOR Portion, and the rates of interest and
Interest Periods applicable to such Portions shall be recorded by
the Bank on its books and records or, at its option in any
instance, endorsed on a schedule to the Note and the unpaid
principal balance and status, rates and Interest Periods so
recorded or endorsed by the Bank shall be prima facie evidence in
any court or other proceeding brought to enforce the Note of the
principal amount remaining unpaid thereon, the status of the
Loans evidenced thereby and the interest rates and Interest
Periods applicable thereto; provided, however, that the failure
of the Bank to record any of the foregoing shall not limit or
otherwise affect the obligation of the Company to repay the
principal amount of the Note together with accrued interest
thereon. Prior to any negotiation of any Note, the Bank shall
record on a schedule thereto the status of all amounts evidenced
thereby as constituting part of the Domestic Rate Portion or a
LIBOR Portion and the rates of interest and the Interest Periods
applicable thereto.)
<PAGE>
Section 3.7. Change in Capital Adequacy Requirements. If
the Bank shall determine that the adoption after the date hereof
of any applicable law, rule or regulation regarding capital
adequacy, or any change in any existing law, rule or regulation,
or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by the Bank (or any of its branches) with any request
or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the
rate of return on the Bank's capital as a consequence of its
obligations hereunder or for the credit which is the subject
matter hereof to a level below that which the Bank could have
achieved but for such adoption, change or compliance (taking into
consideration the Bank's policies with respect to liquidity and
capital adequacy) by an amount deemed by the Bank to be material,
then from time to time, within fifteen (15) days after demand by
the Bank, the Company shall pay to the Bank such additional
amount or amounts reasonably determined by the Bank as will
compensate the Bank for such reduction.
<PAGE>
SECTION 4. DEFINITIONS, INTERPRETATION.
Section 4.1. Definitions. The following terms when used
herein shall have the following meanings:
"Adjusted LIBOR" means a rate per annum determined by the
Bank pursuant to the following formula:
Adjusted LIBOR = LIBOR
______________________
100% - Reserve Percentage
"Reserve Percentage" means, for the purpose of computing
Adjusted LIBOR, the maximum rate of all reserve requirements
(including, without limitation, any marginal, emergency,
supplemental or other special reserves) imposed by the Board
of Governors of the Federal Reserve System (or any
successor) under Regulation D on Eurocurrency liabilities
(as such term is defined in Regulation D) for the applicable
Interest Period as of the first day of such Interest Period,
but subject to any amendments to such reserve requirement by
such Board or its successor, and taking into account any
transitional adjustments thereto becoming effective during
such Interest period. For purposes of this definition,
LIBOR Portions shall be deemed to be Eurocurrency
liabilities as defined in Regulation D without benefit of or
credit for prorations, exemptions or offsets under
Regulation D. "LIBOR" means, for each Interest Period, (a)
the LIBOR Index Rate for such Interest Period, if such rate
is available, and (b) if the LIBOR Index Rate cannot be
determined, the arithmetic average of the rate of interest
per annum (rounded upward, if necessary, to nearest 1/100 of
1%) at which deposits in U.S. Dollars in immediately
available funds are offered to the Agent at 11:00 a.m.
(London, England time) two (2) Business Days before the
beginning of such Interest Period by major banks in the
interbank eurodollar market for a period equal to such
Interest Period and in an amount equal or comparable to the
applicable LIBOR Portion scheduled to be outstanding from
the Bank during such Interest Period. "LIBOR Index Rate"
means, for any Interest Period, the rate per annum (rounded
upwards, if necessary, to the next higher one hundred-
thousandth of a percentage point) for deposits in U.S.
Dollars for a period equal to such Interest Period, which
appears on the Telerate Page 3750 as of 11:00 a.m. (London,
England time) on the day two (2) Business Days before the
commencement of such Interest Period. "Telerate Page 3750"
means the display designated as "Page 3750" on the Telerate
Service (or such other page as may replace Page 3750 on that
service or such other service as may be nominated by the
British Bankers' Association as the information vendor for
the purpose of displaying British Bankers' Association
Interest Settlement Rates for U.S. Dollar deposits. Each
determination of LIBOR made by the Bank shall be conclusive
and binding absent manifest error.
<PAGE>
"Affiliate" means any Person, directly or indirectly
controlling or controlled by, or under direct or indirect
common control with, another Person. A Person shall be
deemed to control another Person for the purposes of this
definition if such first Person possesses, directly or
indirectly, the power to direct, or cause the direction of,
the management and policies of the second Person, whether
through the ownership of voting securities, common
directors, trustees or officers, by contract or otherwise.
"Agreement" means this Credit Agreement, as the same may be
amended, modified or restated from time to time in
accordance with the terms hereof.
"Application" is defined in Section 1.3(d) hereof.
"Authorized Representative" means those persons shown on the
list of officers provided by the Company pursuant to Section
6.2(b) hereof, or on any update of any such list provided by
the Company to the Bank, or any further or different officer
of the Company so named by any Authorized Representative of
the Company in a written notice to the Bank.
"Bank" is defined in the introductory paragraph hereof.
"Business Day" means a day (other than a Saturday or Sunday)
on which the Bank is not authorized or required to close in
Chicago, Illinois, and, when used with respect to LIBOR
Portions, a day when the Bank is also dealing in United
States Dollar deposits in London, England and Nassau,
Bahamas.
"Capital Lease" means at any date any lease of Property
which in accordance with GAAP is required to be capitalized
on the balance sheet of the lessee.
"Capitalized Lease Obligation" means the amount of liability
as shown on the balance sheet of any Person in respect of a
Capital Lease as determined at any date in accordance with
GAAP.
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended
and any successor statute thereto.
"Commitment" is defined in Section 1.1 hereof.
"Company" is defined in the introductory paragraph hereof.
"Controlled Group" means all members of a controlled group
of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the
Company or any Subsidiary, are treated as a single employer
under Section 414 of the Code.
"Current Ratio" means, as of any time the same is to be
determined, the ratio of (x) current assets of the Company
to (y) current liabilities of the Company plus the
Obligations owing hereunder, whether or not such Obligations
would be classified as a current liability in accordance
with GAAP, but otherwise determined in accordance with GAAP
consistantly applied.
"Default" means any event or condition the occurrence of
which would, with the passage of time or the giving of
notice, or both, constitute an Event of Default.
"Default Rate" means two percent (2%).
"Domestic Rate" means, for any day, the greater of (i) the
rate of interest announced by the Bank from time to time as
its prime commercial rate, as in effect on such day; and
(ii) the sum of (x) the rate determined by the Bank to be
the average (rounded upwards, if necessary, to the next
higher 1/100 of 1%) of the rates per annum quoted to the
Bank at approximately 10:00 a.m. (Chicago time) (or as soon
thereafter as is practicable) on such day (or, if such day
is not a Business Day, on the immediately preceding Business
Day) by two or more Federal funds brokers selected by the
Bank for the sale to the Bank at face value of Federal funds
in an amount equal or comparable to the principal amount
owed to the Bank for which such rate is being determined,
plus (y) 3/8 of 1% (0.375%).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute thereto.
"Event of Default" means any event or condition identified
as such in Section 8.1 hereof.
<PAGE>
"GAAP" means generally accepted accounting principles as in
effect from time to time applied by the Company on a basis
consistent with the preparation of the Company's most recent
financial statement furnished to the Bank pursuant to
Section 7.5 hereof.
"Indebtedness for Borrowed Money" means for any Person
(without duplication) (i) all indebtedness created,
assumed or incurred in any manner by such Person
representing money borrowed (including by the issuance
of debt securities), (ii) all indebtedness for the
deferred purchase price of property or services (other
than trade accounts payable arising in the ordinary
course of business), (iii) all indebtedness secured by
any Lien upon Property of such Person, whether or not
such Person has assumed or become liable for the
payment of such indebtedness, (iv) all Capitalized
Lease Obligations of such Person, and (v) all
obligations of such Person on or with respect to letters
of credit, banker's acceptances and other evidences of
indebtedness representing extensions of credit whether
or not representing obligations for borrowed money.
"Interest Period" means, with respect to any LIBOR
Portion, the period commencing on, as the case may be,
the creation, continuation or conversion date with
respect to such LIBOR Portion and ending one (1), two
(2), three (3), or six (6) months thereafter as
selected by the Company in its notice as provided
herein; provided that, the foregoing provision relating
to the Interest Period is subject to the following:
(i) if any Interest Period would otherwise end on a day
which is not a Business Day, that Interest Period shall
be extended to the next succeeding Business Day, unless
the result of such extension would be to carry such
Interest Period into another calendar month in which
event such Interest Period shall end on the immediately
preceding Business Day;
(ii) no Interest Period may extend beyond the
Termination Date;
<PAGE>
(iii) the interest rate to be applicable to each
Portion for each Interest Period shall apply from and
including the first day of such Interest Period to but
excluding the last day thereof; and
(iv) no Interest Period may be selected if after giving
effect thereto the Company will be unable to make a
principal payment scheduled to be made during such
Interest Period without paying part of a LIBOR Portion
on a date other than the last day of the Interest
Period applicable thereto.
For purposes of determining an Interest Period, a month
means a period starting on one day in a calendar month and
ending on a numerically corresponding day in the next
calendar month, provided, however, if an Interest Period
begins on the last day of a month or if there is no
numerically corresponding day in the month in which an
Interest Period is to end, then such Interest Period shall
end on the last Business Day of such month.
"Letter of Credit" means any and all letters of credit at
any time issued by the Bank for the account of the Company.
"Lien" means any mortgage, lien, security interest, pledge,
charge or encumbrance of any kind in respect of any
Property, including the interests of a vendor or lessor
under any conditional sale, capital lease or other title
retention arrangement.
"Loan Documents" means this Agreement, the Applications and
the Note.
"Loans" is defined in Section 1.2 hereof.
"Net Income" means, with reference to any period, the net
income (or net deficit) of the Company for such period as
computed in accordance with GAAP, and without limiting the
foregoing, after deduction from gross income of all expenses
and reserves, including reserves for all taxes on or
measured by income.
<PAGE>
"Note" is defined in Section 1.2 hereof.
"Obligations" means all obligations of the Company to pay
principal and interest on the Loans, all fees and charges
payable on the Letters of Credit, the Reimbursement
Obligations and all other payment obligations of the Company
arising under or relating to any Loan Document, in each
case, whether direct or indirect, absolute or contingent,
due or to become due, and whether now existing or hereafter
arising and howsoever held, evidenced or acquired.
"Old Loan Facility" means the $3,500,000 revolving loan
facility made available to the Company by the Bank under the
terms of Floating Rate Loan-Procedures Letter, as amended
and evidenced by a promissory note of the Company made
payable to the Bank in such principal amount, both dated
August 17, 1992.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Person succeeding to any or all of its functions under
ERISA.
"Person" means an individual, partnership, corporation,
association, trust, unincorporated organization or any other
entity or organization, including a government or agency or
political subdivision thereof.
"Plan" means any employee pension benefit plan covered by
Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code that either (i) is
maintained by a member of the Controlled Group for employees
of a member of the Controlled Group or (ii) is maintained
pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes
contributions and to which a member of the Controlled Group
is then making or accruing an obligation to make
contributions or has within the preceding five plan years
made contributions.
<PAGE>
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or
intangible.
"Reimbursement Obligation" is defined in Section 1.5 hereof.
"Revolving Credit" is defined in Section 1.1 hereof.
"Subsidiary" means any corporation or other Person more than
50% of the outstanding ordinary voting shares or other
equity interest of which is at the time directly or
indirectly owned by the Company, by one or more of its
Subsidiaries, or by the Company and one or more of its
Subsidiaries.
"Tangible Net Worth" means, as of any time the same is to be
determined, the excess of total assets of the Company over total
liabilities of the Company, total assets and total liabilities
each to be determined in accordance with GAAP, excluding,
however, from the determination of total assets (i) all notes
receivable from officers and employees of the Company and its
Affiliates (ii) all assets which would be classified as
intangible assets under GAAP, including, without limitation,
goodwill, patents, trademarks, trade names, copyrights,
franchises and deferred charges (including, without limitation,
unamortized debt discount and expense, organization costs and
deferred research and development expense) and similar assets and
(iii) the write-up of assets above cost.
"Termination Date" means September 30, 1998, or such
earlier date on which the Revolving Credit is terminated
pursuant to Sections 8.2 and 8.3 hereof.
<PAGE>
"Total Liabilities" means, as of any time the same is to be
determined, the aggregate of all indebtedness, obligations,
liabilities, reserves and any other items which would be
listed as a liability on a balance sheet of the Company
determined on a consolidated basis in accordance with GAAP,
and in any event including all indebtedness and liabilities
of any other Person which the Company may guarantee or
otherwise be responsible or liable for (other than any
liability arising out of the endorsement of commercial paper
for deposit or collection in the ordinary course of
business), all indebtedness and liabilities secured by any
Lien on any Property of the Company, whether or not the same
would be classified as a liability on a balance sheet, the
liability of the Company in respect of banker's acceptances
and letters of credit, and the aggregate amount of rentals
or other consideration payable by the Company in accordance
with GAAP over the remaining unexpired term of all Capital
Leases, but excluding all general contingency reserves and
reserves for deferred income taxes and investment credit.
"Unfunded Vested Liabilities" means, for any Plan at any
time, the amount (if any) by which the present value of all
vested nonforfeitable accrued benefits under such Plan
exceeds the fair market value of all Plan assets allocable
to such benefits, all determined as of the then most recent
valuation date for such Plan, but only to the extent that
such excess represents a potential liability of a member of
the Controlled Group to PBGC or the Plan under Title IV of
ERISA.
"Welfare Plan" means a "welfare plan", as said term is
defined in Section 3(1) of ERISA.
Section 4.2. Interpretation. The foregoing definitions are
equally applicable to both the singular and plural forms of the
terms defined. All references to time of day herein are
references to Chicago, Illinois time unless otherwise
specifically provided. Where the character or amount of any
asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation
is required to be made for the purposes of this Agreement, the
same shall be done in accordance with GAAP, to the extent
applicable, except where such principles are inconsistent with
the specific provisions of this Agreement.
<PAGE>
SECTION 5. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Bank as follows:
Section 5.1. Organization and Qualification. The Company
is duly organized, validly existing and in good standing as a
corporation under the laws of the State of Illinois, has full and
adequate corporate power to own its Property and conduct its
business as now conducted, and is duly licensed or qualified and
in good standing in each jurisdiction in which the nature of the
business conducted by it or the nature of the Property owned or
leased by it requires such licensing or qualifying, and in which
the failure to do so qualify would result in a material adverse
change in the financial condition, Properties, business or
operations of the Company. The Company has full right and
authority to enter into this Agreement and the other Loan
Documents executed by it, to make the borrowings herein provided
for, to issue its Note in evidence thereof, to grant to the Bank
a Lien on the assets and properties of the Company, and to
perform each and all of the matters and things herein and therein
provided for; and this Agreement and the other Loan Documents do
not, nor does the performance or observance by the Company of any
of the matters or things herein or therein provided for,
contravene any provision of law or any charter or by-law
provision of the Company or any covenant, indenture or agreement
of or affecting the Company or any of its Properties.
Section 5.2. Subsidiaries. The Company has no
Subsidiaries.
Section 5.3. Margin Stock. The Company is not engaged in
the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System), and no part of
the proceeds of any Loan hereunder will be used to purchase or
carry any such margin stock or extend credit to others for the
purpose of purchasing or carrying any such margin stock.
<PAGE>
Section 5.4. Financial Reports. The statement of
financial condition of the Company as at December 31, 1994 and
the related statements of income, retained earnings and cash
flows of the Company for the fiscal year then ended and
accompanying notes thereto, which financial statements are
accompanied by the audit of KPMG Peat Marwick, independent public
accountants, and the unaudited interim statement of financial
condition of the Company as at July 31, 1995 and the related
statements of income and cash flows of the Company for the seven
(7) months then ended heretofore furnished to the Bank, fairly
present the financial condition of the Company as at said dates
and the results of its operations and cash flows for the periods
then ended in conformity with GAAP applied on a consistent basis.
The Company has no contingent liabilities which are material to
it other than as indicated on said financial statements..
Section 5.5. No Material Adverse Change. Since July 31,
1995 there has been no change in the condition (financial or
otherwise) or business prospects of the Company except those
occurring in the ordinary course of business, none of which
individually or in the aggregate have been materially adverse.
Section 5.6. Full Disclosure. The statements and other
information furnished to the Bank in connection with the
negotiation of this Agreement and the other Loan Documents and
the commitment by the Bank to provide all or part of the
financing contemplated hereby do not contain any untrue
statements of a material fact or omit a material fact necessary
to make the material statements contained herein or therein not
misleading, the Bank acknowledging that as to any projections
furnished to the Bank, the Company only represents that the same
were prepared on the basis of information and estimates the
Company believed to be reasonable.
Section 5.7. Litigation. There is no litigation or
governmental proceeding pending, nor to the knowledge of the
Company threatened, against the Company which if adversely
determined would result in any material adverse change in the
financial condition, Properties, business or operations of the
Company.
<PAGE>
Section 5.8. Tax Returns. The United States federal
income tax returns of the Company for the taxable year ended
December 31, 1994, and for all taxable years ended prior to said
date have been properly filed, and any additional assessments in
connection with any of such years have been paid. There are no
objections to or controversies or assessments due in respect of
the United States federal income tax returns of the Company for
any taxable year ending after December 31, 1994 pending, nor to
the knowledge of the Company is any such objection, controversy
or assessment threatened.
Section 5.9. Approvals. No authorization, consent,
license, or exemption from, or filing or registration with, any
court or governmental department, agency or instrumentality, nor
any approval or consent of the stockholders of the Company or any
other Person, is or will be necessary to the valid execution,
delivery or performance by the Company of this Agreement or any
other Loan Document.
Section 5.10. Good Title. The Company has good and
defensible title to its assets as reflected on the most recent
balance sheet of the Company furnished to the Bank (except for
sales of assets by the Company in the ordinary course of its
business), subject to no Liens other than such thereof as are
permitted by Section 7.12 hereof.
Section 5.11. Affiliates. The Company is not a party to
any contracts or agreements with any of its Affiliates on terms
and conditions which are less favorable to the Company than would
be usual and customary in similar contracts or agreements between
Persons not affiliated with each other.
Section 5.12. ERISA. The Company is in compliance in all
material respects with ERISA to the extent applicable to it and
has received no notice to the contrary from the PBGC or any other
governmental entity or agency; and the Company would have no
liability to PBGC in respect of unfunded employee benefit plan
liabilities if all employee benefit plans covering any officers
or employees of the Company had been terminated as of the date
hereof.
<PAGE>
Section 5.13. Compliance with Laws. The Company is in
compliance with the requirements of all federal, state and local
laws, rules and regulations applicable to or pertaining to the
Properties or business operations of the Company (including,
without limitation, the Occupational Safety and Health Act of
1970, the Americans with Disabilities Act of 1990, and laws and
regulations establishing quality criteria and standards for air,
water, land and toxic or hazardous wastes or substances), non-
compliance with which could have a material adverse effect on the
financial condition, Properties, business or operations of the
Company. The Company has not received notice to the effect that
its operations are not in compliance with any of the requirements
of applicable federal, state or local environmental health and
safety statutes and regulations or are the subject of any
governmental investigation evaluating whether any remedial action
is needed to respond to a release of any toxic or hazardous waste
or substance into the environment, which non-compliance or
remedial action could have a material adverse effect on the
financial condition, Properties, business or operations of the
Company and its Subsidiaries.
Section 5.14. Other Agreements. The Company is not in
default under the terms of any covenant, indenture or agreement
of or affecting the Company or any of its Properties, which
default, if uncured, would have a material adverse effect on the
financial condition, Properties, business or operations of the
Company.
Section 5.15. No Default. No Default or Event of Default
has occurred or is continuing.
<PAGE>
SECTION 6. CONDITIONS PRECEDENT.
The obligation of the Bank to make any Loan pursuant hereto
or to issue any Letter of Credit hereunder shall be subject to
the following conditions precedent:
Section 6.1. All Advances. As of the time of the making of
each Loan (including the initial Loan) or as of the time of the
issuance of each Letter of Credit hereunder:
(a) each of the representations and warranties set forth in
Section 5 hereof and in the other Loan Documents shall be
true and correct as of said time, except that the
representations and warranties made under Section 5.4 shall
be deemed to refer to the most recent financial statements
furnished to the Bank pursuant to Section 7.5 hereof;
(b) the Company shall be in full compliance with all of the
terms and conditions hereof and of the other Loan Documents,
and no Default or Event of Default shall have occurred and
be continuing;
(c) such extension of credit shall not violate any order,
judgment or decree of any court or other authority or any
provision of law or regulation applicable to the Bank
(including, without limitation, Regulation U of the Board of
Governors of the Federal Reserve System) as then in effect;
(d) in the case of the issuance of any Letter of Credit, the
Bank shall have received a properly completed Application
therefor together with the fees called for hereby; and
<PAGE>
(e) with respect to each requested Loan or Letter of Credit,
after giving effect to the requested extension of credit and
to each Loan that has been made or Letter of Credit issued,
such extension of credit, taken together with all Loans,
Letters of Credit, and Reimbursement Obligations, would not
exceed the Commitment.
The request for any Loan or Letter of Credit pursuant hereto
shall be and constitute the Company s warranty as to the
foregoing effects.
Section 6.2. Initial Advance. At or prior to the making of
the initial Loan hereunder, the following conditions precedent
shall also have been satisfied:
(a) the Bank shall have received the following (each to be
properly executed and completed) and the same shall have
been approved as to form and substance by the Bank:
(i) the Note;
(ii) the Bank shall have received an incumbency
certificate containing the name, title and genuine
signatures of each of the Company's Authorized
Representatives;
(iii) copies (executed or certified, as may be
appropriate) of all legal documents or proceedings
taken in connection with the execution and delivery of
this Agreement and the other Loan Documents to the
extent the Bank or its counsel may reasonably request;
<PAGE>
(b) legal matters incident to the execution and delivery of
this Agreement, the other Loan Documents and to the
transactions contemplated hereby and thereby shall be
satisfactory to the Bank and its counsel; and the Bank shall
have received the favorable written opinion of counsel for
the Company in form and substance satisfactory to the Bank
and its counsel;
(c) the Bank shall have received such valuations and
certifications as it may require in order to satisfy itself
as to the financial condition of the Company, and the lack
of material contingent liabilities of the Company;
(d) the Bank shall have received a good standing certificate
for the Company (dated as of the date no earlier than
fifteen (15) days prior to the date hereof) from the Office
of the Secretary of State of Illinois and each state in
which it is qualified to do business as a foreign
corporation; and
(e) the Bank shall have received such other agreements,
instruments, documents, certificates and opinions as the
Bank may reasonably request.
<PAGE>
SECTION 7. COVENANTS.
The Company agrees that, so long as any amount remains
unpaid on the Note or any Reimbursement Obligation, or any Letter
of Credit remains outstanding or undrawn, or any credit is
available to or in use by the Company hereunder, except to the
extent compliance in any case or cases is waived in writing by
the Bank:
Section 7.1. Corporate Existence, Etc. The Company shall
at all times preserve and maintain its corporate existence. The
Company will preserve and keep in force and effect all licenses,
permits and franchises necessary to the proper conduct of its
business, in which the failure to do so would result in a
material adverse change in the financial condition, Properties,
business or operations of the Company
Section 7.2. Maintenance of Properties. The Company
will maintain, preserve and keep its Properties in good repair,
working order and condition (ordinary wear and tear excepted) and
will from time to time make all needful and proper repairs,
renewals, replacements, additions and betterments thereto so that
at all times the efficiency thereof shall be fully preserved and
maintained.
Section 7.3. Taxes and Assessments. The Company will duly
pay and discharge all taxes, rates, assessments, fees and
governmental charges upon or against it or against its
Properties, in each case before the same become delinquent and
before penalties accrue thereon, unless and to the extent that
the same are being contested in good faith and by appropriate
proceedings and adequate reserves are provided therefor.
<PAGE>
Section 7.4. Insurance. The Company will insure and keep
insured in good and responsible insurance companies, all
insurable Property owned by it which is of a character usually
insured by Persons similarly situated and operating like
Properties against loss or damage from such hazards or risks as
are insured by Persons similarly situated and operating like
Properties; and the Company will insure such other hazards and
risks (including employers' and public liability risks) in good
and responsible insurance companies as and to the extent usually
insured by Persons similarly situated and conducting similar
businesses.
Section 7.5. Financial Reports. The Company will maintain
a standard and modern system of accounting in accordance with
GAAP and will furnish to the Bank and its duly authorized
representatives such information respecting the business and
financial condition of the Company as the Bank may reasonably
request; and without any request, will furnish to the Bank:
<PAGE>
(a) Monthly Reports. As soon as available, and in any event
within 45 days after the close of each calendar month, (i) a
copy of the statement of financial condition as of the last
day of such month and the statements of income and cash
flows of the Company for such period then ended, all in
reasonable detail showing in comparative form the figures
for the corresponding date and period in the previous fiscal
year, prepared by the Company in accordance with GAAP and
certified to by the chief financial officer of the Company,
and (ii) a status report detailing, among other things,
accounts receivable and aging in reasonable detail as of the
close of business on the last day of such month, prepared by
you and certified to by your chief financial officer;
(b) Yearly Reports. As soon as available, and in any event
within 90 days after the close of each fiscal year of the
Company, a copy of the statement of financial condition of
the Company as of the close of such fiscal year and
statements of income, retained earnings and cash flows of
the Company for such period then ended, and accompanying
notes thereto, all in reasonable detail showing in
comparative form the figures for the previous fiscal year,
accompanied by an unqualified opinion thereon of KPMG Peat
Marwick or another firm of independent public accountants of
recognized national standing, selected by the Company and
satisfactory to the Bank, to the effect that the financial
statements have been prepared in accordance with GAAP and
present fairly in accordance with GAAP the financial
condition of the Company as of the close of such fiscal year
and the results of operations and cash flows for the fiscal
year then ended and that an examination of such accounts in
connection with such financial statements has been made in
accordance with generally accepted auditing standards and,
accordingly, such examination included such tests of the
accounting records and such other auditing procedures as
were considered necessary in the circumstances;
(c) SEC and Other Reports. Promptly upon its becoming
available, one copy of each financial statement, report,
notice or proxy statement sent by the Company to
stockholders generally and of each regular or periodic
report, registration statement or prospectus filed by the
Company with any securities exchange or the Securities and
Exchange Commission or any successor agency; and
<PAGE>
(d) Adverse Change. Promptly after knowledge thereof shall
have come to the attention of any responsible officer of the
Company, written notice of any threatened or pending
litigation or governmental proceeding against the Company
which, if adversely determined, would adversely effect the
financial condition, Properties, business or operations of
the Company or of the occurrence of any Default or Event of
Default hereunder.
Each financial statement furnished to the Bank pursuant to clause
(b) of this Section shall be accompanied by a written certificate
in the form attached hereto as Schedule 7.5 signed by the chief
financial officer of the Company to the effect that to the best
of the chief financial officer's knowledge and belief no Default
or Event of Default has occurred during the period covered by
such statement or, if any such Default or Event of Default has
occurred during such period, setting forth a description of such
Default or Event of Default and specifying the action, if any,
taken by the Company to remedy the same. Such certificate shall
also set forth the calculations supporting such statements in
respect of Sections 7.7, 7.8, 7.9 and 7.10 of this Agreement.
The Company shall, in any event, provide the Bank a certificate
as aforesaid with any written notice delivered to the Bank
pursuant to clause (d) of this Section.
Section 7.6. Inspection and Field Audit. The Company will
permit the Bank and its duly authorized representatives and
agents to visit and inspect any of the Properties, corporate
books and financial records of the Company, to examine and make
copies of the books of accounts and other financial records of
the Company, and to discuss the affairs, finances and accounts of
the Company with, and to be advised as to the same by, its
officers and independent public accountants (and by this
provision the Company authorizes such accountants to discuss with
the Bank the finances and affairs of the Company) at such
reasonable times and reasonable intervals as the Bank may
designate. Prior to a Default or an Event of Default, the Bank
agrees to provide the Company notice of any face-to-face meetings
with such accoutants and to provide the Company an opportunity to
be present at such meetings, and shall notify the Company of any
discussions with such accountants regarding a Default or Event of
Default hereunder.
<PAGE>
Section 7.7. Current Ratio. The Company will at all times
maintain a Current Ratio of not less than 1.75 to 1.0.
Section 7.8. Tangible Net Worth. The Company will, at all
times during each of the periods specified below, maintain
Tangible Net Worth at not less than:
Tangible Net Worth
From and Including To and Including Shall Not Be Less
Than:
The date hereof December 31, 1995 $9,000,000
January 1, 1996 and each
December 31, 1996 and each *
January 1 thereafter December 31 thereafter
* the sum of (i) the previous period s Tangible Net Worth
Requirement and (ii) 50% of the previous fiscal year s Net
Income, provided the Tangible Net worth requirement shall not be
decreased should the previous periods Net Income be a negative
number.
Section 7.9. Leverage Ratio. The Company will at all times
maintain a ratio of Total Liabilities to Tangible Net Worth of
not more than .75 to 1.0.
Section 7.10. Capital Expenditures. The Company will not
expend or become obligated for capital expenditures (as
determined in accordance with GAAP) in an aggregate amount in
excess of the amount properly charged to depreciation on the
books of the Company for the immediately preceding fiscal year.
<PAGE>
Section 7.11. Indebtedness for Borrowed Money. The Company
will not issue, incur, assume, create or have outstanding any
Indebtedness for Borrowed Money; provided, however, that the
foregoing provisions shall not restrict nor operate to prevent:
(a) the Obligations of the Company owing to the Bank and
other indebtedness and obligations of the Company from time
to time owing to the Bank;
(b) Capital Lease Obligations in an aggregate amount not
to exceed $300,000 at any one time outstanding; and
(c) purchase money indebtedness secured by Liens permitted
by Section 7.12(d) hereof in an aggregate amount not to
exceed $200,000 at any one time outstanding.
Section 7.12. Liens. The Company will not create, incur or
permit to exist any Lien of any kind on any Property owned by the
Company; provided, however, that this Section shall not apply to
nor operate to prevent:
(a) Liens arising by statute in connection with worker's
compensation, unemployment insurance, old age benefits,
social security obligations, taxes, assessments, statutory
obligations or other similar charges, good faith cash
deposits in connection with tenders, contracts or leases
to which the Company is a party or other cash deposits
required to be made in the ordinary course of business,
provided in each case that the obligation is not for
borrowed money and that the obligation secured is not
overdue or, if overdue, is being contested in good faith by
appropriate proceedings and adequate reserves have been
established therefor;
<PAGE>
(b) mechanics', workmen's, materialmen's, landlords',
carriers', warehousemen's or other similar Liens arising in
the ordinary course of business with respect to obligations
which are not due or which are being contested in good faith
by appropriate proceedings which prevent enforcement of the
Lien;
(c) the pledge of assets for the purpose of securing an
appeal, stay or discharge in the course of any legal
proceeding, provided that the aggregate amount of
liabilities of the Company secured by a pledge of assets
permitted under this clause, including interest and
penalties thereon, if any, shall not be in excess of $50,000
at any one time outstanding; and
(d) purchase money Liens securing indebtedness permitted by
Section 7.11(c) hereof by the vendor in respect of equipment
now owned or hereafter acquired by the Company (not
extending to any other Property), or Liens on equipment so
acquired (not extending to any other Property) existing at
the time of acquisition thereof, or renewals, extensions and
refundings of any such Liens (not extending to any other
Property), provided that the principal amount of
indebtedness secured by any such Lien shall not exceed 80%
of the cost or fair market value, whichever is less, of the
Property covered by such Lien at the time of the creation
thereof or the acquisition of such Property.
Section 7.13. Investments, Acquisitions, Loans, Advances
and Guaranties. The Company will not directly or indirectly,
make, retain or have outstanding any investments (whether through
purchase of stock or obligations or otherwise) in, or loans or
advances to, any other Person, or acquire all or any substantial
part of the assets or business of any other Person, or be or
become liable as endorser, guarantor, surety or otherwise for any
debt, obligation or undertaking of any other Person, or otherwise
agree to provide funds for payment of the obligations of another,
or supply funds thereto or invest therein or otherwise assure a
creditor of another against loss or apply for or become liable to
the issuer of a letter of credit which supports an obligation of
another, or subordinate any claim or demand it may have to the
claim or demand of any other Person; provided, however, that the
foregoing provisions shall not apply to nor operate to prevent:
<PAGE>
(a) investments in direct obligations of the United States
of America or of any agency or instrumentality thereof whose
obligations constitute full faith and credit obligations of
the United States of America, provided that any such
obligations shall mature within one year of the date of
issuance thereof;
(b) investments in commercial paper rated at least P-1 by
Moody's Investors Services, Inc. and at least A-1 by
Standard & Poor's Corporation maturing within 270 days of
the date of issuance thereof;
(c) investments in certificates of deposit issued by any
United States commercial bank having capital and surplus of
not less than $100,000,000.00 which have a
maturity of one year or less; and
(d) endorsement of items for deposit or collection in the
ordinary course of business.
Section 7.14. Operating Leases. The Company will not
acquire the use or possession of any Property under a lease or
similar arrangement, whether or not the Company has the express
or implied right to acquire title to or purchase such Property at
any time if, after giving effect thereto, either (i) the
aggregate amount of fixed rentals and other consideration payable
by the Company over the remaining unexpired terms of all such
leases or similar arrangements would exceed $1,000,000 or
(ii) the aggregate amount of fixed rentals and other
consideration payable by the Company under all such leases or
similar arrangements would exceed $300,000 during any fiscal year
of the Company. Capital Leases shall not be included in
computing compliance with this Section to the extent the
Company's liability in respect of the same is permitted by
Section 7.11 hereof.
<PAGE>
Section 7.15. Sales and Leasebacks. Except as permitted by
Section 7.11(b), the Company will not enter into any arrangement
with any bank, insurance company or any other lender or investor
providing for the leasing by the Company of more than 10% in the
aggregate at any one time outstanding of the Property theretofore
owned by it and which has been or is to be sold or transferred by
such owner to such lender or investor.
Section 7.16. Dividends and Certain Other Restricted
Payments. The Company will not during any fiscal year (a)
declare or pay any dividends on any class or series of its
capital stock (other than dividends payable solely in its capital
stock), (b) directly or indirectly purchase, redeem or otherwise
acquire or retire any of its capital stock, or (c) make any other
distributions in respect of its capital stock.
Section 7.17. Mergers, Consolidations and Sales. The
Company will not, without the Bank's prior written consent, be a
party to any merger or consolidation, or sell, transfer, lease or
otherwise dispose of all or any substantial part of its Property
(except for sales of inventory in the ordinary course of
business), or in any event sell or discount (with or without
recourse) any of its notes or accounts receivable. The term
"substantial" as used herein shall mean the sale, lease or other
disposition of Property of the Company in any fiscal year of 10%
or more of such Property of the Company.
Section 7.18. ERISA. The Company will promptly pay and
discharge all obligations and liabilities arising under ERISA of
a character which if unpaid or unperformed might result in the
imposition of a Lien against any of its Properties. The Company
will promptly notify the Bank of (i) the occurrence of any
reportable event (as defined in ERISA) which might result in the
termination by the PBGC of any Plan, (ii) receipt of any notice
from the PBGC of its intention to seek termination of any Plan or
appointment of a trustee therefor, (iii) its intention to
terminate or withdraw from any Plan, and (iv) the incurrence of
any event with respect to any Plan which would result in the
incurrence by the Company of any material liability, fine or
penalty, or any material increase in the contingent liability of
the Company with respect to any post-retirement Welfare Plan
benefit.
<PAGE>
Section 7.19. Burdensome Contracts With Affiliates. The
Company will not enter into any contract, agreement or business
arrangement with any of its Affiliates on terms and conditions
which are less favorable to the Company than would be usual and
customary in similar contracts, agreements or business
arrangements between Persons not affiliated with each other.
Section 7.20. No Changes in Fiscal Year. The Company will
not change its fiscal year from its present basis without the
prior written consent of the Bank.
Section 7.21. Formation of Subsidiaries. The Company will
not form or acquire any Subsidiary without the prior written
consent of the Bank.
Section 7.22. Compliance with Laws. The Company will
comply in all material respects with the requirements of all
federal, state and local laws, rules, regulations and orders
applicable to or pertaining to the Properties or business
operations of the Company, non-compliance with which could have a
material adverse effect on the financial condition, Properties,
business or operations of the Company.
Section 7.23. Initial Loan Proceed Application. The
Company shall apply all proceeds of the initial Loan hereunder
first to the payment in full of any and all indebtedness,
obligations and liabilities of the Company to the Bank owing
under the Old Loan Facility (whereupon such facility shall expire
and the Bank shall be under no further obligation to extend
credit thereunder), and thereafter as directed by the Company in
accordance with the terms hereof.
<PAGE>
SECTION 8. EVENTS OF DEFAULT AND REMEDIES.
Section 8.1. Events of Default. Any one or more of the
following shall constitute an Event of Default hereunder:
(a) default in the payment when due (whether by lapse of
time, acceleration or otherwise) of any principal or
interest on the Note, any Application, any Reimbursement
Obligation or any fee or other Obligation payable by the
Company hereunder or under any other Loan Document; or
(b) default in the observance or performance of any covenant
set forth in Sections 7.5, 7.6, 7.7, 7.8, 7.9, 7.10, 7.12,
7.13, 7.14, 7.15, 7.16, 7.17, 7.18, 7.19, 7.21 hereof; or
(c) default in the observance or performance of any other
provision hereof, any Application or of any other Loan
Document which is not remedied within thirty (30) days after
written notice thereof to the Company by the Bank; or
(d) any representation or warranty made by the Company
herein or in any other Loan Document, or in any statement or
certificate furnished by it pursuant hereto or thereto, or
in connection with any Loan made hereunder, proves untrue in
any material respect as of the date of the issuance or
making thereof; or
<PAGE>
(e) any event occurs or condition exists (other than those
described in clauses (a) through (d) above) which is
specified as an event of default under any of the other Loan
Documents, or any of the Loan Documents shall for any reason
not be or shall cease to be in full force and effect, or any
of the Loan Documents is declared to be null and void; or
(f) default shall occur under any evidence of Indebtedness
for Borrowed Money in an aggregate principal amount
exceeding $25,000 at any time outstanding, issued, assumed,
or guaranteed by the Company or under any indenture,
agreement or other instrument under which the same may be
issued, and such default shall continue for a period of time
sufficient to permit the acceleration of the maturity of any
such Indebtedness for Borrowed Money (whether or not such
maturity is in fact accelerated) or any such Indebtedness
for Borrowed Money shall not be paid when due (whether by
lapse of time, acceleration or otherwise); or
(g) any judgment or judgments, writ or writs or warrant or
warrants of attachment, or any similar process or processes
in an aggregate amount in excess of $10,000.00 shall be
entered or filed against the Company or against any of its
Property and remains unvacated, unbonded or unstayed for a
period of 30 days; or
<PAGE>
(h) the Company or any member of its Controlled Group shall
fail to pay when due an amount or amounts aggregating in
excess of $50,000 which it shall have become liable to pay
to the PBGC or to a Plan under Title IV of ERISA; or notice
of intent to terminate a Plan or Plans having aggregate
Unfunded Vested Liabilities in excess of $50,000
(collectively, a Material Plan ) shall be filed under Title
IV of ERISA by the Company or any other member of its
Controlled Group, any plan administrator or any combination
of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate or to cause a trustee
to be appointed to administer any Material Plan or a
proceeding shall be instituted by a fiduciary of any
Material Plan against the Company or any other member of its
Controlled Group to enforce Section 515 or 4219(c)(5) of
ERISA and such proceeding shall not have been dismissed
within thirty (30) days thereafter; or a condition shall
exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Material Plan must be
terminated; or
(i) the Company shall (i) have entered involuntarily against
it an order for relief under the United States Bankruptcy
Code, as amended, (ii) not pay, or admit in writing its
inability to pay, its debts generally as they become due,
(iii) make an assignment for the benefit of creditors, (iv)
apply for, seek, consent to, or acquiesce in, the
appointment of a receiver, custodian, trustee, examiner,
liquidator or similar official for it or any substantial
part of its Property, (v) institute any proceeding seeking
to have entered against it an order for relief under the
United States Bankruptcy Code as amended, to adjudicate it
insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it
or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors or fail to
file an answer or other pleading denying the material
allegations of any such proceeding filed against it, or (vi)
fail to contest in good faith any appointment or proceeding
described in Section 8.1(j) hereof; or
(j) a custodian, receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Company or any
substantial part of any of its Property, or a proceeding
described in Section 8.1(i)(v) shall be instituted against
the Company, and such appointment continues undischarged or
such proceeding continues undismissed or unstayed for a
period of sixty (60) days.
<PAGE>
Section 8.2. Non-Bankruptcy Default Remedies. When any
Event of Default described in clauses (a) through (h),
both inclusive, of Section 8.1 has occurred and is
continuing, the Bank or any holder of the Note may, by
notice to the Company, take either or both of the following
actions:
(a) terminate the obligation of the Bank to extend any
further credit hereunder on the date (which may be the date
thereof) stated in such notice; and
(b) declare the principal of and the accrued interest on the
Note to be forthwith due and payable and thereupon the Note,
including both principal and interest and all fees, charges
and other amounts payable hereunder and under the other Loan
Documents, shall be and become immediately due and payable
without further demand, presentment, protest or notice of
any kind.
Section 8.3. Bankruptcy Default Remedies. When any Event
of Default described in clauses (i) or (j) of Section 8.1 has
occurred and is continuing, then the Note, including both
principal and interest and all fees and charges payable hereunder
and under the other Loan Documents, shall immediately become due
and payable without presentment, demand, protest or notice of any
kind, and the obligation of the Bank to extend further credit
pursuant to any of the terms hereof shall immediately terminate.
<PAGE>
Section 8.4. Cash Collateralization of Letters of Credit in
Default. When any Event of Default, other than an Event of
Default in subsections (i) or (j) of Section 8.1, has occurred
the Company shall, upon demand of the Bank, and when any Event of
Default described in clauses (i) or (j) of Section 8.1 has
occurred the Company shall, without notice or demand from the
Bank, immediately pay to the Bank the full amount of each Letter
of Credit then outstanding, the Company agreeing to immediately
make such payment and acknowledging and agreeing that the Bank
would have an adequate remedy at law for failure of the Company
to honor any such demand and that the Bank shall have the right
to require the Company to specifically perform such undertaking
whether or not any draws have been made under any such Letters of
Credit.
Section 9. Miscellaneous.
Section 9.1. Holidays. If any payment hereunder becomes
due and payable on a day which is not a Business Day, the due
date of such payment shall be extended to the next succeeding
Business Day on which date such payment shall be due and payable.
In the case of any principal falling due on a day which is not a
Business Day, interest on such principal amount shall continue to
accrue during such extension at the rate per annum then in
effect, which accrued amount shall be due and payable on the next
scheduled date for the payment of interest.
<PAGE>
Section 9.2. No Waiver, Cumulative Remedies. No delay or
failure on the part of the Bank or on the part of the holder of
the Note in the exercise of any power or right shall operate as a
waiver thereof or as an acquiescence in any default, nor shall
any single or partial exercise of any power or right preclude any
other or further exercise thereof, or the exercise of any other
power or right. The rights and remedies hereunder of the Bank
and of the holder of the Note are cumulative to, and not
exclusive of, any rights or remedies which any of them would
otherwise have.
Section 9.3. Amendments, Etc. No amendment, modification,
termination or waiver of any provision of this Agreement or any
other Loan Document nor consent to any departure by the Company
therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Bank. No notice to or demand on
the Company in any case shall entitle the Company to any other or
further notice or demand in similar or other circumstances.
Section 9.4. Costs and Expenses. The Company agrees to pay
on demand the costs and expenses of the Bank in connection with
the negotiation, preparation, execution and delivery of this
Agreement and the other Loan Documents and the other instruments
and documents to be delivered hereunder or thereunder and in
connection with the transactions contemplated hereby or thereby
and in connection with any consents hereunder or waivers or
amendments hereto, including the fees and out-of-pocket expenses
of counsel for the Bank in an amount not to exceed $2500, with
respect to all of the foregoing (whether or not the transactions
contemplated hereby are consummated); and all costs and expenses
(including attorneys' fees), if any, incurred by the Bank or any
other holder of the Obligations in connection with the
enforcement of this Agreement, any other Loan Document or any
other instrument or document to be delivered hereunder or in
connection with any action, suit or proceeding brought against
the Bank by any Person which arises out of the transactions
contemplated hereby or out of any action or inaction by the Bank
hereunder or thereunder. In addition, at the time of requesting
any amendment hereof or consent or waiver hereunder, the Company
must negotiate with the Bank a fee to the Bank for engaging in
and documenting any such action.
<PAGE>
Section 9.5. Documentary Taxes. The Company agrees to pay
any documentary, stamp or similar taxes payable in respect of
this Agreement or any other Loan Document, including interest and
penalties, in the event any such taxes are assessed, irrespective
of when such assessment is made and whether or not any credit is
then in use or available hereunder.
Section 9.6. Survival of Representations. All
representations and warranties made herein or in certificates
given pursuant hereto shall survive the execution and delivery of
this Agreement and of the other Loan Documents, and shall
continue in full force and effect with respect to the date as of
which they were made as long as any credit is in use or available
hereunder.
Section 9.7. Notices. Except as otherwise specified
herein, all notices hereunder shall be in writing (including
cable or telecopy) and shall be given to the relevant party at
its address or telecopier number set forth below, or such other
address or telecopier number as such party may hereafter specify
by notice to the other given by United States certified or
registered mail, by telecopy or by other telecommunication device
capable of creating a written record of such notice and its
receipt. Notices hereunder shall be addressed:.
To the Company at:
Wells-Gardner Electronics Corporation
2701 North Kildare
Chicago, IL 60639
Attention: Mr. Anthony Spier and
Mr. Richard L. Conquest
Telephone: (312) 292-5605
Telecopy: (312) 252-8072
To the Bank at:
Harris Trust and Savings Bank
P.O. Box 755
111 West Monroe Street
Chicago, Illinois 60690
Attention: Middle Market D, Market Manager
Telephone: (312) 461-6158
Telecopy: (312) 765-1655
<PAGE>
Each such notice, request or other communication shall be
effective (i) if given by telecopier, when such telecopy is
transmitted to the telecopier number specified in this Section
and a confirmation of such telecopy has been received by the
sender, (ii) if given by mail, five (5) days after such
communication is deposited in the mail, certified or registered
with return receipt requested, addressed as aforesaid or (iii) if
given by any other means, when delivered at the addresses
specified in this Section; provided that any notice given
pursuant to Section 1 hereof shall be effective only upon
receipt.
Section 9.8. Headings. Section headings used in this
Agreement are for convenience of reference only and are not a
part of this Agreement for any other purpose.
Section 9.9. Severability of Provisions. Any provision of
this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the
validity or enforceability of such provision in any other
jurisdiction.
Section 9.10. Counterparts. This Agreement may be executed
in any number of counterparts, and by different parties hereto on
separate counterparts, and all such counterparts taken together
shall be deemed to constitute one and the same instrument.
Section 9.11. Binding Nature, Governing Law, Etc. This
Agreement shall be binding upon the Company and its successors
and assigns, and shall inure to the benefit of the Bank and the
benefit of its successors and assigns, including any subsequent
holder of the Note. This Agreement and the rights and duties of
the parties hereto shall be construed and determined in
accordance with the internal laws of the State of Illinois
without regard to principles of conflicts of laws. This
Agreement constitutes the entire understanding of the parties
with respect to the subject matter hereof and any prior
agreements, whether written or oral, with respect thereto are
superseded hereby. The Company may not assign its rights
hereunder without the written consent of the Bank.
Upon your acceptance hereof in the manner hereinafter set
forth, this Agreement shall constitute a contract between us for
the uses and purposes hereinabove set forth.
Dated in Chicago, Illinois as of this 2nd day of October, 1995.
WELLS-GARDNER ELECTRONICS CORPORATION
By: RICHARD L. CONQUEST
(Vice President of Finance, Chief
Financial Officer, Secretary and
Treasurer)
<PAGE>
Accepted and agreed to at Chicago, Illinois as of the day
and year last above written.
HARRIS TRUST AND SAVINGS BANK
By: DAVID ALTHOFF
(Vice President)
EXHIBIT A
WELLS-GARDNER ELECTRONICS CORPORATION
REVOLVING CREDIT NOTE
Chicago, Illinois
$7,000,000 October 2, 1995
On the Termination Date, for value received, the undersigned,
WELLS-GARDNER ELECTRONICS CORPORATION, an Illinois corporation
(the "Company"), promises to pay to the order of HARRIS TRUST
AND SAVINGS BANK (the "Bank") at its office at 111 West Monroe
Street, Chicago, Illinois, the principal sum of (i) SEVEN MILLION
AND 00/100 DOLLARS ($7,000,000), or (ii) the lesser amount as may be
at the time of maturity hereof, whether by acceleration or otherwise,
be the aggregate unpaid principal amount of all Loans owing from the
Company to the Bank under the Revolving Credit provided for in the
Credit Agreement hereinafter mentioned.
This Revolving Credit Note evidences Loans made or to be
made to the Company by the Bank under the Revolving Credit
provided for under that certain Credit Agreement dated as of
even date herewith between the Company and the Bank (said Credit
Agreement, as the same may be amended, modified or restated from
time to time, being referred to herein as the "Credit Agreement")
and the Company promises to pay interest at the office described
above on such Loans evidenced hereby at the rates and at the
times and in the manner specified therefor in the Credit
Agreement.
<PAGE>
Each advance made under the Revolving Credit provided for in
the Credit Agreement by the Bank to the Company, against this
Revolving Credit Note, any repayment of principal hereon, the
status of each such loan as part of the Domestic Rate Portion or
a LIBOR Portion and, in the case of any LIBOR Portion, the
interest rate and Interest Period Applicable thereto, shall be
endorsed by the holder hereof on a schedule to this Revolving
Credit Note or recorded on the books and records of the holder
hereof (provided that such entries shall be endorsed on a
schedule to this Revolving Credit Note prior to any negotiation
hereof). The Company agrees that in any action or proceeding
instituted to collect or enforce collection of this Revolving
Credit Note, the entries so endorsed on a schedule to this
Revolving Credit Note or recorded on the books and records of the
holder hereof shall be prima facie evidence of the unpaid
principal balance of this Revolving Credit Note, the status of
each advance from time to time as part of the Domestic Rate
Portion or a LIBOR Portion and, in the case of any LIBOR Portion,
the interest rate and Interest Period applicable thereto.
This Revolving Credit Note is issued by the Company under
the terms and provisions of the Credit Agreement and this
Revolving Credit Note and the holder hereof are entitled to all
of the benefits provided for thereby or referred to therein, to
which reference is hereby made for a statement thereof. This
Revolving Credit Note may be declared to be, or be and become,
due prior to its expressed maturity, voluntary prepayments may be
made hereon, and certain prepayments are required to be made
hereon, all in the events, on the terms and with the effects
provided in the Credit Agreement. All capitalized terms used
herein without definition shall have the same meanings herein as
such terms are defined in the Credit Agreement.
<PAGE>
This Revolving Credit Note shall be construed in accordance
with, and governed by, the internal laws of the State of Illinois
without regard to principles of conflicts of laws. The Company
promises to pay all costs and expenses (including attorneys'
fees) suffered or incurred by the holder hereof in collecting
this Revolving Credit Note or enforcing any rights in any
collateral therefor. The Company hereby waives presentment for
payment and demand.
WELLS-GARDNER ELECTRONICS CORPORATION
By: RICHARD L. CONQUEST
(Vice President of Finance, Chief
Financial Officer, Secretary and
Treasurer)
<PAGE>
