<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM_________________ TO____________________
Commission file number 0-828
BIRD CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-3082903
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1077 Pleasant Street Norwood, MA 02062
(Address of principal executive offices) (Zip Code)
(617) 551-0656
(Registrant's telephone number, including area code)
________________________________________________________________________________
(Former name, former address and former fiscal year, if changed, since last
report.)
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 .
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes . No .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of October 1, 1997. 4,155,377 shares.
<PAGE> 2
BIRD CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
Part I. Financial Information:
<S> <C>
Condensed Consolidated Balance Sheets
September 30, 1997 and December 31, 1996................................................ 2
Condensed Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 1997 and 1996................................ 4
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1997 and 1996........................................... 5
Notes to Condensed Consolidated Financial Statements....................................... 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................................... 10
Part II. Other Information ............................................................... 13
</TABLE>
1
<PAGE> 3
BIRD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE, PAR VALUE, AND LIQUIDATION VALUE DATA)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1997 1996
---- ----
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $567 $2,310
Accounts and notes receivable 7,863 5,341
Allowance for doubtful accounts (198) (150)
Inventories 6,113 5,273
Prepaid expenses and other assets 284 784
Deferred income taxes 435 435
------ ------
Total current assets 15,064 13,993
------ ------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 3,294 3,099
Buildings 7,039 6,936
Machinery and equipment 31,011 30,455
Construction in progress 320 255
------ ------
41,664 40,745
Less - Depreciation 20,863 18,805
------ ------
20,801 21,940
------ ------
Deferred income taxes 3,631 3,631
Other assets 40 105
------ ------
$39,536 $39,669
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
BIRD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE, PAR VALUE, AND LIQUIDATION VALUE DATA)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1997 1996
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 7,913 $ 8,441
Revolving line of credit 3,700 0
Long term debt, portion due within one year 349 2,177
-------- --------
Total current liabilities 11,962 10,618
Long term debt, portion due after one year 0 255
Other liabilities 3,254 3,526
-------- --------
Total liabilities 15,216 14,399
-------- --------
STOCKHOLDERS' EQUITY:
5 % cumulative preferred stock, par value $100. Authorized
15,000 shares; issued 5,795 shares in 1997 and 5,820 shares in 1996
(liquidating preference $110 per share, aggregating $637,000 in 1997
and $640,000 in 1996) 580 582
Preference stock, par value $1. Authorized 1,500,000 shares;
issued 814,300 shares of $1.85 cumulative convertible
preference stock (liquidating preference $20 per share,
aggregating $16,286,000) 814 814
Common stock, par value $1. Authorized 15,000,000 shares;
4,430,489 shares issued in 1997 and 4,414,991 shares
issued in 1996 4,430 4,415
Other capital 27,497 27,436
Retained earnings (deficit) (6,010) (4,986)
-------- --------
27,311 28,261
Less -
Treasury stock, at cost:
Common - 275,112 shares in 1997 and 275,102
shares in 1996 (2,991) (2,991)
-------- --------
24,320 25,270
-------- --------
$ 39,536 $ 39,669
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
BIRD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $12,072 $17,084 $34,438 $38,490
----------- ----------- ----------- -----------
Costs and expenses:
Cost of sales 10,782 13,545 30,026 32,120
Selling, general and administrative expense 1,191 1,825 4,056 5,269
Interest expense 89 137 228 354
Gain on disposal of businesses 0 (535) 0 (945)
----------- ----------- ----------- -----------
Total costs and expenses 12,062 14,972 34,310 36,798
----------- ----------- ----------- -----------
Earnings from continuing operations
before income taxes 10 2,112 128 1,692
Provision (benefit) for income taxes 0 0 0 0
----------- ----------- ----------- -----------
Earnings from continuing operations 10 2,112 128 1,692
Earnings from discontinued operations 0 81 0 141
----------- ----------- ----------- -----------
Net earnings before dividends 10 2,193 128 1,833
Preferred and preference stock cumulative dividends 384 384 1,152 1,152
----------- ----------- ----------- -----------
Net earnings (loss) applicable to common stock ($374) $1,809 ($1,024) $681
=========== =========== =========== ===========
Primary earnings (loss) per common share after dividends:
Continuing operations ($0.09) $0.42 ($0.25) $0.13
Discontinued operations $0.00 $0.02 $0.00 $0.03
----------- ----------- ----------- -----------
($0.09) $0.44 ($0.25) $0.16
=========== =========== =========== ===========
Fully diluted earnings (loss) per common share
after dividends:
Continuing operations ($0.09) $0.42 ($0.25) $0.13
Discontinued operations $0.00 $0.02 $0.00 $0.03
----------- ----------- ----------- -----------
($0.09) $0.44 ($0.25) $0.16
=========== =========== =========== ===========
Average number of shares used in primary
earnings per share computations 4,152,629 4,132,572 4,148,059 4,138,836
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
BIRD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
-------------
1997 1996
---- ----
<S> <C> <C>
Cash flows provided (used) by operations:
Net earnings $128 $1,833
Adjustments to reconcile to net cash used by operations:
Depreciation and amortization 2,157 2,096
Provision for losses on accounts receivable 16 78
Changes in balance sheet items:
Accounts receivable (2,490) (5,532)
Inventories (840) (547)
Prepaid expenses 401 765
Liabilities not related to financing activities (800) 817
Other assets 65 (62)
------ ------
Cash flows used by operations (1,363) (552)
------ ------
Cash flows used in investing activities:
Acquisition of property, plant and equipment (919) (883)
Cash flows from financing activities:
Debt proceeds 6,400 7,670
Debt repayments (4,783) (8,933)
Dividends paid (1,152) (768)
Other equity changes 74 74
------ ------
Net cash provided (used) by financing activities 539 (1,957)
------ ------
Net decrease in cash and equivalents (1,743) (3,392)
Cash and equivalents at beginning of year 2,310 3,679
------ ------
Cash and equivalents at end of period $567 $287
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 7
BIRD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of Bird Corporation (the "Company"), the accompanying
unaudited Condensed Consolidated Financial Statements contain all
adjustments (consisting of only normal, recurring accruals) necessary
to present fairly its financial position as of September 30, 1997 and
December 31, 1996 and the results of its operations and cash flows for
the three and nine month periods ended September 30, 1997 and 1996.
2. The Company's business is seasonal to the extent that activity in the
outside repair and remodeling business and in new construction declines
in certain areas of the country during the winter months. Accordingly,
the results of operations for the three and nine month periods ended
September 30, 1997 and 1996 are not necessarily indicative of the
results to be expected for the full year.
3. Primary earnings(loss) per common share are determined after deducting
the dividend requirements of the preferred and preference shares and
are based on the weighted average number of common shares outstanding
during each period increased by the effect of dilutive stock options.
Fully diluted earnings(loss) per common share also give effect to the
reduction in earnings per share, if any, which would result from the
conversion of the $1.85 cumulative convertible preference stock at the
beginning of each period if the effect is dilutive.
In February 1997, the Financial Accounting Standards Board issued
"Statement of Financial Accounting Standards No. 128 Earnings per
Share"("FAS 128"). This pronouncement will be effective for the
Company's year ended December 31, 1997 financial statements. FAS 128
will supersede the pronouncement of the Accounting Principles
Board("APB") No. 15. The statement eliminates the calculation of
primary earnings per share and requires the disclosure of Basic
Earnings per Share and Diluted Earnings per Share (formerly referred to
as fully diluted earnings per share), if applicable. Basic Earnings per
Share for the three and nine month periods ended September 30, 1997 and
1996 are equivalent to primary earnings per common share after
dividends as presented on the consolidated statements of operations.
Diluted Earnings per Share are equivalent to fully diluted earnings
(loss) per common share disclosed above.
4. It is not practical to separate LIFO inventories by raw materials and
finished goods components; however, the following table presents these
components on a current cost basis with the LIFO reserve shown as a
reduction (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Current costs:
Raw materials $ 1,229 $ 1,378
Finished goods 5,082 4,093
--------- ---------
6,311 5,471
Less: LIFO reserve 198 198
---------- ----------
$ 6,113 $ 5,273
========= =========
</TABLE>
6
<PAGE> 8
BIRD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
5. The Company's borrowing and debt obligations are summarized as follows
(in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Debt Obligations:
Term loan $ 0 $1,804
Revolving Credit Facility 3,700 0
Obligations under capital leases 349 628
------ ------
4,049 2,432
Less - portion due within one year 4,049 2,177
------ ------
Long Term Debt $0 $255
====== ======
</TABLE>
The Company plans to continue its aggressive efforts of managing
working capital as a means of generating funds. The Company's external
financing needs are augmented by the ability of its wholly owned
subsidiary, Bird Incorporated ("Bird") to borrow under the three year,
$15,000,000 Revolving Credit and Security Agreement (the "Credit
Agreement") dated July 8, 1997 between Bird and Fleet National Bank
("Fleet"). Up to $3 million of the revolving credit facility can be
used for letters of credit. As of September 30, 1997, letters of credit
outstanding totaled $805,000.
Borrowings by Bird Incorporated under the Credit Agreement are
guaranteed by the Company and the Company's other subsidiaries and are
secured by accounts receivable and inventory. The revolving credit line
availability is determined with reference to a percentage of accounts
receivable and inventory. Under the Credit Agreement, the availability
calculation does not allow borrowings to the full extent of the
revolving credit commitment due to the seasonality of the building
materials manufacturing business. As of September 30, 1997, an
aggregate of $9,750,000 was available to the Company under the terms of
the Credit Agreement of which $5,245,000 remains available, net of
current borrowings and letters of credit.
Interest on the Credit Agreement accrues at the Fleet Bank base rate
less 1/2% (as specified in such Credit Agreement) or the London
Interbank Offering Rate ("LIBOR") plus 1 1/2% at the Company's
election. The interest rate on outstanding borrowings at September 30,
1997 was 7.125%.
The Credit Agreement contains financial and operating covenants which,
among other things (i) require the Company to maintain prescribed
levels of tangible net worth, total liabilities to tangible net worth,
fixed charge coverage ratio and (ii) place limits on the Company's
capital expenditures. As of September 30, 1997, the Company was in
default under Section 5.9 of the Credit Agreement as a result of
failing to achieve the minimum fixed charge coverage ratio for the
third quarter of 1997. As a result of the weak re-roofing market during
1997, sales volume and earnings were less than anticipated, negatively
impacting cash flow. At the request of the Company, Fleet waived the
fixed ratio covenant for the third quarter without penalty.
7
<PAGE> 9
BIRD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
6. Since 1981 Bird has been named as a defendant in approximately 650
product liability cases throughout the United States by persons
claiming to have suffered asbestos-related diseases as a result of
alleged exposure to asbestos used in products manufactured and sold by
Bird. Approximately 200 of these cases are currently pending and costs
of approximately $2 million in the aggregate have been incurred in the
defense of these claims since 1981. Employers Insurance of Wausau has
accepted the defense of these cases under an agreement for sharing of
the costs of defense, settlements and judgments, if any. At September
30, 1997, the Company has a reserve of $950,000 to cover the estimated
cost of these claims. In light of the nature and merits of the claims
alleged, in the opinion of management, the resolution of these
remaining claims will not have a material adverse effect on the results
of operations or financial condition of the Company.
In 1986, the Company, along with numerous other companies, was named by
the United States Environmental Protection Agency ("EPA") as a
Potentially Responsible Party ("PRP") under the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended, 42
U.S.C. Paragraph 9601, et seq. ("CERCLA"), in connection with the
existence of hazardous substances at a site known as the Fulton
Terminal Superfund site located in Fulton, Oswego County, New York. On
September 28, 1990 the Company and a number of other PRPs reached a
negotiated settlement with the EPA pursuant to which the settling PRPs
agreed to pay the costs of certain expenses in connection with the
proceedings, and to pay certain other expenses including the costs and
expenses of administering a trust fund to be established by the
settling PRPs. The settlement agreement is embodied in a consent decree
lodged with the United States District Court for the Western District
of New York and fixed the Company's proportionate share of the total
expenses. The soil has been cleaned-up and the groundwater is now being
treated. The remaining cost to the Company of the remedial work and
other expenses covered by the settlement agreement is estimated to be
approximately $500,000 payable over the next three years. At September
30, 1997, the Company has adequate reserve to cover the estimated cost
of the Company's remaining proportionate share (i.e., 17%) of the cost
to clean-up the groundwater. Under a cost-sharing arrangement set forth
in a consent decree with the EPA, the other PRPs have agreed to incur
83% of the aggregate cost of remediation of this site. Based on
information currently available to the Company, management believes
that it is probable that the major responsible parties will fully pay
the cost apportioned to them. Management believes that, based on its
financial position and the estimated accrual recorded, the remediation
expense with respect to this site is not likely to have a material
adverse effect on the consolidated financial position or results of
operations of the Company.
7. The Company has owned and operated a sanitary landfill since the late
1960's used exclusively by the Company's roofing plant for the disposal
of its own manufacturing process waste, primarily asphalt roofing
materials. No hazardous or other specially regulated wastes have been
disposed of at this site. As a result of a 1995 regulatory decision by
the Massachusetts Department of Environmental Protection ("D.E.P.") to
disallow the continued operation of all unlined landfills, the company
chose not to seek to renew its operating permit
8
<PAGE> 10
BIRD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
at the state or local level which expired at the end of August 1997. To
continue to operate the landfill would be of no financial benefit over
the existing outside disposal alternatives, given the new regulatory
requirements and the minimal quantities of waste being disposed of
presently. Therefore, as a result of this decision, the Company has
begun negotiating a landfill closure plan with the D.E.P. which will
commence construction in 1998 and be completed in 1999. As of September
30, 1997, the Company has maintained a reserve of approximately
$800,000 to cover the estimated cost to close the landfill. Management
believes that the closure expense with respect to this site will not
have a material adverse effect on the results of operations or
financial condition of the Company.
8. Restrictions on the payment of dividends on common and preference stock
are imposed by the terms of the Credit Agreement. Payment of dividends
on currently accrued preferred and preference stock are permitted under
the Credit Agreement. Dividends in arrears on the preference stock in
the aggregate amount of $1,506,000 for the four quarterly periods ended
February 15, 1995 and $377,000 for the quarterly period ended May 15,
1996 require Fleet approval prior to distribution. As of September 30,
1997, all dividends accrued on the preferred stock have been declared
and paid in full. The quarterly dividend on the preferred stock due
December 1, 1997 in the amount of $7,000 and the quarterly dividend on
the preference stock due November 15, 1997 in the amount of $377,000
were declared on September 16, 1997 and, with the consent of Fleet, are
expected to be paid in full.
9. Bird warrants under certain circumstances, that its building material
products meet certain manufacturing specifications. The warranty policy
is unique to each portion of the labor and material cost and requires
the owner to meet specific criteria such as proof of purchase, etc.
Bird offers the original manufacturer's warranty only as part of the
original sale and at no additional cost to the customer. Bird records
the liability for warranty claims when it determines that a specific
liability exists or a payment will be made.
9
<PAGE> 11
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
As of September 30, 1997, the Company had cash and equivalents on hand totaling
$567,000 and total debt of approximately $4 million. Letters of credit
outstanding as of September 30, 1997 totaled $805,000. The Company plans to
continue its aggressive efforts of managing working capital as a means of
generating funds. The Company's external financing needs are augmented by the
ability of its wholly owned subsidiary, Bird Incorporated ("Bird"), to borrow
under the three year $15,000,000 Revolving Credit and Security Agreement (the
"Credit Agreement") dated July 8, 1997 between Bird and Fleet National Bank
("Fleet"). Up to $3 million of the revolving credit facility can be used for
letters of credit.
Borrowings by Bird Incorporated under the Credit Agreement are guaranteed by the
Company and the Company's other subsidiaries and are secured by accounts
receivable and inventory. The revolving credit line availability is determined
with reference to a percentage of accounts receivable and inventory. Under the
Credit Agreement, the availability calculation does not allow borrowings to the
full extent of the revolving credit commitment due to the seasonality of the
building materials manufacturing business. As of September 30, 1997, an
aggregate of $9,750,000 was available to the Company under the terms of the
Credit Agreement of which $5,245,000 remains available, net of current
borrowings and letters of credit.
Interest on the Credit Agreement accrues at the Fleet Bank base rate less 1/2%
(as specified in such Credit Agreement) or the London Interbank Offering Rate
("LIBOR") plus 1 1/2% at the Company's election. The interest rate on
outstanding borrowings at September 30, 1997 was 7.125%.
The Credit Agreement contains financial and operating covenants which, among
other things (i) require the Company to maintain prescribed levels of tangible
net worth, total liabilities to tangible net worth, fixed charge coverage ratio
and (ii) place limits on the Company's capital expenditures. As of September 30,
1997, the Company was in default under Section 5.9 of the Credit Agreement as a
result of failing to achieve the minimum fixed charge coverage ratio for the
third quarter of 1997. As a result of the weak re-roofing market during 1997,
sales volume and earnings were less than anticipated, negatively impacting cash
flow. At the request of the Company, Fleet waived the fixed ratio covenant for
the third quarter without penalty.
Net cash and cash equivalents decreased during the nine month period ended
September 30, 1997 by approximately $1.7 million. The cash used by operations
for the period ended September 30, 1997 increased by $811,000 from $552,000 to
$1,363,000 as compared to the same period in 1996. Cash used by operations was
attributable to several changes in the balance sheet such as an a increase of
$2,490,000 in trade accounts receivable, an increase of $840,000 in inventories,
and by an increase of $800,000 in liabilities not relating to financing
activities; offset by a decrease of $401,000 in prepaid expenses and $2,157,000
of depreciation expense.
The Company used $919,000 for capital expenditures for the period ended
September 30, 1997 as compared to $883,000 of cash used during the same period
in the prior year.
10
<PAGE> 12
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The net cash resulting from financing activities changed by $2,496,000 from the
same period in the prior year. Cash provided by financing activities during 1997
was primarily due to approximately $1.6 million of net borrowings as compared to
1996 when the Company had repayments of debt approximately $1.3 million.
The Company believes that cash flows generated from operations and funds
available as a result of its borrowing capacity will be adequate to meet its
working capital, projected capital expenditures and other financing needs.
RESULTS OF OPERATIONS
Net sales decreased $4,052,000 or 10.5% for the first nine months of 1997
compared to the same period in the prior year. The Company's net sales decreased
$5,012,000 or 29.3% for the third quarter of 1997 compared to the same quarter
in the prior year. Mild weather conditions in the northeastern region of the
United States during the first nine months of 1997 unfavorably affected sales.
In addition, competitive pricing pressure also had an adverse effect on sales
volume.
The Company's cost of sales for the first nine months of 1997 compared to the
same period in the prior year decreased 6.5% from $32,120,000 to $30,026,000
primarily attributable to sales volume. The Company's cost of sales for the
third quarter of 1997 compared to the same period in the prior year decreased
20.4% from $13,545,000 to $10,782,000 primarily due to the decrease in sales
volume. For the three and nine month periods ended September 30, 1997, cost of
sales as percentage of sales increased 10% and increased 3.7%, respectively, as
compared to the same periods in the prior year. The fluctuations related
primarily to volume variances and lower conversion costs.
Selling, general and administrative ("SG&A") expenses for the three months ended
September 30, 1997 decreased 34.7% from $1,825,000 to $1,191,000 and decreased
23% for the nine month comparative period from $5,269,000 to $4,056,000. SG&A
expenses for the three and nine month periods ended September 30, 1996 included
costs of approximately $500,000 and $1,150,000, respectively, associated with
the terminated merger agreement with CertainTeed Corporation and the closed
investigation by the United State Department of Justice.
Interest expense decreased approximately 35% from $137,000 to $89,000 for the
third quarter of 1997 compared to the third quarter of 1996. For the nine months
ended September 30, 1997, interest expense decreased approximately 35.6% or
$126,000 as compared to the same period in the prior year. The decreased
interest expense relates to the reduction of debt.
Gain on Disposal of Businesses for the three and nine month periods ended
September 30, 1996 reflects the favorable settlement of legal disputes related
to former businesses of $535,000 and $945,000, respectively.
11
<PAGE> 13
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
No tax provisions were recorded for the three and nine month periods ended
September 30, 1997 and September 30, 1996 as the Company expects to utilize
existing loss carryforwards to offset any future tax obligations.
The roofing business is seasonal to the extent that activity in the outside
repair and remodeling business and in new construction declines in certain areas
of the country during the winter months. Severe weather conditions also have a
negative impact on short term profitability. Accordingly, the results of
operations for the nine month period ended September 30, 1997 are not
necessarily indicative of the results to be expected for the full year.
12
<PAGE> 14
BIRD CORPORATION
PART II - OTHER INFORMATION
Item 2. Changes in Securities
The Revolving Credit and Security Agreement dated as of July 8, 1997
("Credit Agreement") by and among Bird Incorporated, a wholly owned
subsidiary of the Company, and Fleet National Bank imposes restrictions
on the Company with respect to the purchase, redemption, or other
retirement of, or any other distribution on or in respect of any shares
of any class of capital stock of the Company with the exception of
payments of dividends on the Company's 5% cumulative preferred stock,
and $1.85 cumulative preference stock ("Preference Stock") which accrue
after the date of the Credit Agreement.
The Company is in arrears in the payment of dividends on its Preference
Stock. (See Item 3 (b), below). The Articles of Organization of the
Company provide that in the event that full cumulative dividends on the
Preference Stock have not been declared and paid, the Company may not
declare or pay any dividends or make any distributions on, or make
payment on its common stock, until full cumulative dividends on the
Preference Stock are declared and paid or set aside for payment.
Item 3. Defaults Upon Senior Securities
(b) Dividends are in arrears on the Preference Stock in the
aggregate amount of $1,506,000 for the four quarterly periods
ended February 15, 1995 and $377,000 for the quarterly period
ended May 15, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10 (z) - Revolving Credit and Security Agreement dated
as of July 8, 1997 by and between Fleet National Bank and Bird
Incorporated.
Exhibit 11 - Statement Regarding computation of per Share
Earnings
(b) Reports on Form 8-K. None
13
<PAGE> 15
BIRD CORPORATION
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.
BIRD CORPORATION
Date: November 14, 1997
/s/ Richard C. Maloof
- ---------------------
Richard C. Maloof
President and Chief Operating Officer
/s/ Donald L. Sloper, Jr.
- -------------------------
Donald L. Sloper, Jr.
Controller (Principal Accounting Officer)
<PAGE> 16
BIRD CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit No. Page No.
- ----------- --------
<S> <C> <C>
10(z) Revolving Credit and Security Agreement dated as of July 8, 1997 by and
between Fleet National Bank and Bird Incorporated.
11 Statement regarding computation of per share earnings
</TABLE>
<PAGE> 1
EXHIBIT 10 (Z)
REVOLVING CREDIT AND SECURITY AGREEMENT
between
BIRD INCORPORATED
and
FLEET NATIONAL BANK
DATED AS OF JULY 8 1997
<PAGE> 2
TABLE OF CONTENTS
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<CAPTION>
Section Page
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<S> <C>
SECTION I - DEFINITIONS........................................................................ 1
1.1 General............................................................................. 1
1.2 Accounting Terms.................................................................... 11
SECTION II - DESCRIPTION OF CREDIT............................................................. 11
2.1 Credit Facilities................................................................... 11
2.2 Notice and Manner of Borrowing or Conversion........................................ 12
2.3 Commitment Fees..................................................................... 13
2.4 The Note............................................................................ 13
2.5 Duration of Interest Periods........................................................ 13
2.6 Interest Rates and Payments of Interest............................................. 14
2.7 Changed Circumstances............................................................... 14
2.8 The Loan Account.................................................................... 15
2.9 Statement of Loan Account........................................................... 16
2.10 Payments and Prepayments of the Loans............................................... 16
2.11 Method of Payment................................................................... 16
2.12 Computation of Interest and Fees.................................................... 16
2.13 Borrowing Base Excesses............................................................. 16
2.14 Authorization to Debit Accounts..................................................... 16
2.15 Capital Requirements................................................................ 17
2.16 Overdue Payments.................................................................... 17
2.17 Prepayments of LIBOR Loans.......................................................... 18
SECTION III - CONDITIONS OF LOANS.............................................................. 18
3.1 Conditions Precedent to Initial Loan................................................ 18
3.2 Conditions Precedent to All Loans................................................... 20
SECTION IV - REPRESENTATIONS AND WARRANTIES ................................................... 21
4.1 Organization and Qualification ..................................................... 21
4.2 Authority .......................................................................... 21
4.3 Valid Obligations .................................................................. 21
4.4 Consents or Approvals .............................................................. 22
4.5 Title to Properties; Absence of Liens .............................................. 22
4.6 Financial Statements ............................................................... 22
4.7 Changes ............................................................................ 22
4.8 Defaults ........................................................................... 22
4.9 Taxes .............................................................................. 22
4.10 Litigation ......................................................................... 23
4.11 Use of Proceeds .................................................................... 23
4.12 Organizational Structure; Directors, Officers; Guarantor Group; Equity Investments .
23
4.13 Investment Company Act.............................................................. 23
4.14 Compliance with ERISA............................................................... 23
4.15 Security Interest................................................................... 24
4.16 Application of Proceeds............................................................. 24
4.17 Taxes and Charges Relating to the Agreement......................................... 24
4.18 Solvency............................................................................ 24
4.19 Projections......................................................................... 24
4.22 Environmental Compliance............................................................ 24
4.21 Licenses, Etc....................................................................... 26
4.22 Material Agreements and Contracts................................................... 26
SECTION V - AFFIRMATIVE COVENANTS.............................................................. 27
5.1 Financial Statements and other Reporting Requirements............................... 27
</TABLE>
(i)
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<TABLE>
<S> <C>
5.2 Conduct of Business................................................................. 29
5.3 Maintenance and Insurance........................................................... 29
5.4 Taxes............................................................................... 29
5.5 Commercial Finance Examinations, Verification of Accounts, Etc...................... 29
5.6 Maintenance of Books and Records.................................................... 30
5.7 Minimum Consolidated Tangible Net Worth............................................. 30
5.8. Maximum Consolidated Total Liabilities to Consolidated Tangible Net Worth........... 30
5.9. Minimum Consolidated Fixed Charge Coverage Ratio.................................... 30
5.10 Maximum Consolidated Capital Expenditures........................................... 30
5.11 Maximum Permitted Dividends......................................................... 30
5.11 Accounting Principles............................................................... 31
5.13 Maintenance of Accounts with Lender................................................. 31
5.14 Further Assurances.................................................................. 31
SECTION VI - NEGATIVE COVENANTS................................................................ 31
6.1 Indebtedness........................................................................ 31
6.2 Contingent Liabilities.............................................................. 31
6.3 Liens............................................................................... 32
6.4 ERISA............................................................................... 33
6.5 Merger; Consolidation; Change of Control; Sale or Lease of Assets................... 33
6.6 Additional Stock Issuance........................................................... 33
6.7 Transactions with Affiliates........................................................ 33
6.8 Sale and Leaseback.................................................................. 33
6.9 Investments......................................................................... 34
6.10 Negative Pledge Agreements.......................................................... 34
6.10 Dividends and other Equity Distributions............................................ 34
6.12 Loans to Employees, Directors, Officers, etc........................................ 34
SECTION VII - SECURITY AGREEMENT............................................................... 34
7.1 Creation of Security Interest....................................................... 34
7.2 Covenants Pertaining to Collateral.................................................. 35
7.3 Reports, etc. Pertaining to Collateral.............................................. 36
7.4 Collection of Accounts and Adjustments.............................................. 37
7.5 Credit of Proceeds of Collection.................................................... 38
7.6 Lender's Rights in Collateral....................................................... 38
7.7 Remedies............................................................................ 39
7.8 Waivers............................................................................. 40
SECTION VIII - DEFAULTS........................................................................ 40
8.1 Events of Default................................................................... 40
8.2 Remedies............................................................................ 42
SECTION IX - MISCELLANEOUS..................................................................... 43
9.1 Notices............................................................................. 43
9.2 Expenses; Indemnification........................................................... 44
9.3 Set-Off............................................................................. 44
9.4 Term of Agreement; Post-Termination Letters of Credit............................... 44
9.5 No Waivers.......................................................................... 45
9.6 Governing Law....................................................................... 45
9.7 Amendments.......................................................................... 45
9.8 Binding Effect of Agreement......................................................... 45
9.9 Counterparts........................................................................ 45
9.10 Severability........................................................................ 45
9.11 Captions............................................................................ 45
9.12 Assignments and Participations...................................................... 45
9.13 Entire Agreement.................................................................... 46
9.14 JURY WAIVER......................................................................... 46
</TABLE>
(ii)
<PAGE> 4
EXHIBITS
EXHIBIT A Form of Revolving Credit Note
EXHIBIT B Compliance Certificate
EXHIBIT C Form of Collateral Update Certificate
SCHEDULES
SCHEDULE 1.1 Guarantor Group Members
SCHEDULE 4.7 Material Adverse Changes
SCHEDULE 4.10 Litigation
SCHEDULE 4.12 Organizational Structure of the Borrower and Guarantor Group
SCHEDULE 4.20 Environmental Matters
SCHEDULE 4.21 Licenses, Permits, etc.
SCHEDULE 6.2(b) Guarantees
SCHEDULE 7.2 (d) Location of Collateral
(iii)
<PAGE> 5
REVOLVING CREDIT AND SECURITY AGREEMENT
THIS REVOLVING CREDIT AND SECURITY AGREEMENT (this "Agreement") is made
as of July 8 1997 between BIRD INCORPORATED, a Massachusetts corporation, with
its chief executive office at 1077 Pleasant Street, Norwood, Massachusetts 02062
(the "Borrower") and FLEET NATIONAL BANK (the "Lender"), a national banking
association having its head office at One Federal Street, Boston, Massachusetts
02110.
SECTION I
DEFINITIONS
1.1 General. All capitalized terms used in this Agreement or in any
certificate, report or other document made or delivered pursuant to this
Agreement (unless otherwise defined therein) shall have the meanings assigned to
them below:
Accounts. With respect to any Person, all rights of such Person to payment
for goods sold or leased or for services rendered, all sums of money or
other proceeds due or becoming due thereon, all instruments pertaining
thereto, all guarantees and security therefor, all goods giving rise thereto
and all rights pertaining to and interest in such goods, including the right
of stoppage in transit, replevin and reclamation, all of such Person's
chattel paper and rights under contracts to receive money, or any contract
rights in general intangibles pertaining thereto, all accounts receivables,
all of such Person's other rights and claims to the payment of money, under
contracts and otherwise, including, without limitation, amounts due from
Affiliates, all insurance proceeds with respect to all of the foregoing, and
all other property of such Person constituting "accounts," as such term is
defined in the UCC.
Affiliate. As to any Person, any other Person which, directly or indirectly,
is in control of, is controlled by, or is under common control with, such
Person. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either (i) to vote 5% or more of the
securities having ordinary voting power for the election of directors of
such Person or (ii) to direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise.
Agreement. This Agreement (including all exhibits, schedules, annexes and
the like referred to herein) as originally executed, or if amended, varied
or supplemented from time to time, as so amended, varied or supplemented.
Borrowing Base. On any date of determination thereof, the lesser of (x)
$15,000,000.00, or (y) the sum of (i) 85% of the Net Value of Eligible
Accounts and (ii) the lesser of (a) 60% of the Net Value of Eligible
Inventory or (b) $6,000,000 (or such lesser percentages as the Lender may in
its discretion determine from time to time upon thirty days written notice
to the Borrower).
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Business Day. (i) For all purposes other than as covered by clause (ii)
below, any day other than a Saturday, Sunday or legal holiday on which
Lenders in Boston, Massachusetts are open for the conduct of a substantial
part of their commercial banking business; and (ii) with respect to all
notices and determinations in connection with, and payments of principal and
interest on, LIBOR Loans, any day that is a Business Day described in clause
(i) and that is also a day for trading by and between Lenders in U.S. Dollar
deposits in the London interbank eurodollar market.
Consolidated Capital Expenditures. At any date as of which the amount
thereof shall be determined, all expenditures paid or incurred by the
Borrower, and the Guarantor Group in respect of (i) the acquisition,
construction, improvement or replacement of land, buildings, machinery,
equipment, any other fixed assets or leaseholds and (ii) to the extent
related to and not included in (i) above, materials, contract labor and
direct labor, which expenditures have been or should be, in accordance with
GAAP, capitalized on the books of the Borrower or the Guarantor Group. Where
a fixed asset is acquired by a lease which is required to be capitalized
pursuant to Statement of Financial Accounting Standards number 13 or any
successor thereto, the amount required to be capitalized in accordance
therewith shall be considered to be an expenditure in the year such asset is
first leased.
Code. The Internal Revenue Code of 1986 and the rules and regulations
thereunder, collectively, as the same may from time to time be supplemented
or amended and remain in effect.
Collateral. Any and all property in which the Lender now has, or hereafter
acquires, a security interest, lien or other encumbrance as security for all
or any portion of the Obligations, including without limitation, the
property described in the security interest grant set forth at Section 7.1
of this Agreement.
Collateral Update Certificate. See Section 7.3(d).
Consolidated Tangible Net Worth. At any date as of which the amount thereof
shall be determined, (i) the consolidated total assets of the Borrower and
the Guarantor Group (determined on the basis of "first-in, first out" or
"FIFO" inventory valuation) minus (ii) the sum of any amounts attributable
to (a) goodwill, (b) intangible items such as unamortized debt discount and
expense, patents, trade and service marks and names, copyrights, capitalized
research and development costs, (c) all reserves not already deducted from
assets, (d) any write-up in the book value of assets resulting from any
revaluation thereof subsequent to the date of the financial statements
referred to in Section 4.6, (e) the value of any minority interest in
Subsidiaries, (f) the value of non-compete agreements and (g) accounts and
indebtedness owing to the Borrower from any employee, affiliate or related
entity (to the extent, if any, permitted hereunder) minus (iii) Consolidated
Total Liabilities.
Consolidated Total Liabilities. At any date as of which the amount thereof
shall be determined, all obligations that should, in accordance with GAAP,
be classified as liabilities
<PAGE> 7
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on the consolidated balance sheet of the Borrower and the Guarantor Group
(determined on the basis of FIFO inventory valuation), excluding
shareholder equity, but including in any event all Indebtedness.
Controlled Group. All trades or businesses (whether or not incorporated)
under common control that, together with the Borrower, are treated as a
single employer under Section 414(b) or 414(c) of the Code or Section 4001
of ERISA.
Covenant Compliance Certificate. See Section 5.1(c).
Current Maturities. That portion of any long term debt of the Borrower or
any member of the Guarantor Group maturing or becoming due within the
previous twelve (12) month period for the most recent fiscal year.
Default. An event or condition that, with the passage of time or the giving
of notice, or both, would constitute an Event of Default.
EBITDA. At any date as of which the amount thereof shall be determined, and
based upon the consolidated results of the Borrower and the Guarantor Group,
the earnings from continuing operations (determined on the basis of FIFO
inventory valuation), excluding any nonrecurring or extraordinary gains,
before any interest expense, taxes, depreciation, amortization, other
non-cash charges incurred for such period determined on an accrual and
consolidated tax basis in accordance with GAAP.
Effective LIBO Rate. "With respect to any Interest Period, the "Effective
LIBO Rate" is an interest rate per annum equal to the rate per annum
obtained by dividing (a) the rate quoted by the Bank as being the rate of
interest determined by the Bank to be the prevailing rate per annum
(rounded upwards to the nearest 1/8 of one percent) at which deposits in
United States dollars are offered to the Bank by first-class banks in the
London interbank eurodollar market in which it regularly participates on or
about 11:00 a.m. (Boston time) (or as soon thereafter as practicable) two
Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the LIBOR Loan to which such
Interest Period is to apply for a period of time approximately equal to
such Interest Period, by (b) a percentage equal to 100% minus the LIBOR
Reserve Percentage. The "LIBOR Reserve Percentage" applicable to any
Interest Period means the maximum effective rate (expressed as a decimal)
of the statutory reserve requirements (without duplication, but including,
without limitation, basic, supplemental, marginal and emergency reserves)
applicable to the Bank during such Interest Period under regulations of the
Board of Governors of the Federal Reserve System (or any successor),
including, without limitation, Regulation D or any other regulation dealing
with maximum reserve requirements which are applicable to the Bank with
respect to its "eurocurrency liabilities", as that term may be defined from
time to time by the Board of Governors of the Federal Reserve System (or
any successor), or which in any other respect relate to the funding of
LIBOR Loans. The Effective LIBO Rate shall be adjusted automatically on and
as of the effective date of any change in the LIBOR Reserve Percentage.
<PAGE> 8
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Eligible Account. All Accounts owned by the Borrower other than Accounts:
(a) more than sixty (60) days past due, but no more than one hundred
twenty (120) days from the date of the original invoice, under the terms
of the initial invoice relating thereto;
(b) arising from bill and hold sales;
(c) arising from consignments or other guaranteed sale arrangements;
(d) all or any portion of which is evidenced by a lease, promissory note
or other form of chattel paper or instrument;
(e) owing by any account debtor which has (i) applied for, suffered, or
consented to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its property or called a meeting of its creditors,
(ii) admitted in writing its inability, or be generally unable, to pay its
debts as they become due or ceased operations of its business, (iii) made
a general assignment for the benefit of creditors, (iv) commenced a
voluntary case under any state or federal Bankruptcy law (as now or
hereafter in effect), (v) been adjudicated a Bankrupt or insolvent, (vi)
filed a petition seeking to take advantage of any other law providing for
the relief of debtors, (vii) acquiesced in, or failed to have dismissed,
any petition which was filed against it in any involuntary case under such
Bankruptcy laws; or (viii) is entitled to or has claimed a set-off,
credit, warranty claim, allowance (including a volume rebate allowance) or
adjustment except discounts allowed for prompt payment, or the account
debtor has protested as to its liability thereon or has returned any of
the goods from which the account arose.
(f) owing by an Affiliate, including any officer, member, employee or
sales representative of the Borrower;
(g) payable in any currency other than U.S. Dollars;
(h) owing by an account debtor located outside of the continental United
States of America or located in the States of Indiana, New Jersey or
Minnesota unless the Borrower has filed all legally required notices of
Business Activities Reports with the appropriate office or agency of such
State and is properly qualified to do business and is in good standing in
such State;
(i) as to which the Lender does not hold a first priority perfected
security interest subject to no other Lien other than a Permitted Lien or
which arose from the sale of goods which were subject to any Lien other
than a Permitted Lien;
(j) subject to the Assignment of Claims Act of 1940, as amended from time
to time, or any applicable law now or hereafter existing similar in effect
thereto, as determined in
<PAGE> 9
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the reasonable discretion of the Lender, or which are otherwise not
assignable without notice or consent, unless the Borrower has effected an
effective and enforceable assignment to the Lender, pursuant to such
applicable laws;
(k) as to which, when aggregated with all Accounts of the account debtor
exceeds 35% of the then aggregate Eligible Accounts;
(l) determined by the Lender to be ineligible for any other reason based
upon such credit and collateral considerations as the Lender may
reasonably deem appropriate.
PROVIDED THAT if at any time thirty-three percent (33%) or more of the
aggregate amount of the Accounts due from any account debtor are unpaid in
whole or in part more than sixty (60) days past due or one-hundred twenty
(120) days from the respective dates of invoice, from and after such time
none of the Accounts (then existing or thereafter arising) due from such
account debtor shall be deemed to be Eligible Accounts until such time as
all Accounts due from such account debtor are (as a result of actual
payments received thereon) no more than sixty (60) days past due or
one-hundred-twenty (120) days from the date of invoice.
Eligible Inventory. All finished and unfinished goods Inventory owned by the
Borrower which is subject to a first priority perfected Lien, in good
condition and meets all standards applicable to such goods, their use or
sale imposed by any governmental agency, or department or division thereof,
having regulatory authority over such matters, and which is currently either
useable or saleable, at prices approximating at least cost, in the normal
course of the Borrower's business, other than Inventory which is:
(a) located at a location not identified on Schedule 7.2(d) hereto or
otherwise approved by the Lender in writing;
(b) located at a location as to which the Lender has not received a valid
landlord waiver or warehouseman's confirmation, as appropriate, each in
form and substance satisfactory to the Lender;
(c) out on consignment or held by a third party under a bill and hold
arrangement, unless consented to by Lender;
(d) covered by a Letter of Credit;
(e) evidenced by an Account;
(f) located outside of the United States;
(g) work in process inventory and processed raw materials (excluding
asphalt coating, base slate and colored slate);
<PAGE> 10
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(h) packaging, shipping materials and supplies;
(i) shutters inventory;
(j) obsolete or slow-moving inventory (as reasonably determined by
Lender); or
(k) sample inventory.
(l) determined by the Lender to be ineligible for any other reason based
upon such credit and collateral considerations as the Lender may
reasonably deem appropriate;
Equipment. With respect to any Person, all machinery, equipment and
fixtures, office furniture, furnishings and trade fixtures, specialty tools
and parts, motor vehicles and materials handling equipment of such Person
together with such Person's interest in, and right to, any and all manuals,
computer programs, data bases and other materials relating to the use,
operation or structure of any of the foregoing, and all of such Person's
other property constituting "equipment," as such term is defined in the UCC.
ERISA. The Employee Retirement Income Security Act of 1974 and the rules and
regulations thereunder, collectively, as the same may from time to time be
supplemented or amended and remain in effect.
Event of Default. Any event described in Section 8.1.
Federal Funds Effective Rate. For any day, a fluctuating interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Lender of
New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such
transactions received by the Lender from three Federal funds brokers of
recognized standing selected by the Lender.
Consolidated Fixed Charge Coverage Ratio. As applied to the Borrower and the
Guarantor Group, means for each period measured, the ratio of (i) EBITDA for
such period, minus taxes actually paid during such period (excluding a tax
benefit), minus dividends paid during such period, minus non-financed
Capital Expenditures made during such period, to (ii) interest plus Current
Maturities of long term debt (excluding any principal payments on long term
debt previously provided by Fleet Capital Corporation and retired with the
proceeds of this Agreement).
GAAP. Generally accepted accounting principles consistent with those in
effect at the time of and used in preparing the audited financial statements
referred to in Section 5.1.
Guarantor Group. The Borrower and its Subsidiaries and the Guarantor and its
Subsidiaries as of the date of this Agreement and as set forth on Schedule
1.1, provided that at the option of
<PAGE> 11
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the Lender, any newly acquired Subsidiary of the Borrower and said Guarantor
may be included herewith.
Guarantor. Any and all Guarantors, sureties and endorsers of the Note and
all other Persons now or hereafter liable for Indebtedness evidenced by the
Note, any Letters of Credit Documents, this Agreement or any other Loan
Documents, and any amendments, modifications, supplements, substitutions,
additions, renewal replacements and extensions thereof, including without
limitation, Bird Corporation.
Guarantees. As applied to any Person, all guarantees, endorsements or other
contingent or surety obligations with respect to obligations of others
whether or not reflected on the balance sheet of such Person, including any
obligation to furnish funds, directly or indirectly (whether by virtue of
partnership arrangements, by agreement to keep-well or otherwise), through
the purchase of goods, supplies or services, or by way of stock purchase,
capital contribution, advance or loan, or to enter into a contract for any
of the foregoing, for the purpose of payment of obligations of any other
Person.
Indebtedness. As applied to any Person, (i) all obligations for borrowed
money or other extensions of credit, including all obligations representing
the deferred purchase price of property, other than accounts payable arising
in the ordinary course of business, (ii) all obligations evidenced by bonds,
notes, debentures or other similar instruments, (iii) all obligations
secured by any mortgage, pledge, security interest or other lien on property
owned or acquired by such Person whether or not the obligations secured
thereby shall have been assumed, (iv) that portion of all obligations
arising under capital leases that is required to be capitalized on the
consolidated balance sheet of such Person, and (v) all Guarantees of such
Person.
Interest Period. With respect to each LIBOR Loan, the period commencing on
the date of the making or continuation of or conversion to such LIBOR Loan
and ending seven days, thirty days, sixty days, ninety days or one-hundred
eighty days thereafter, as the Borrower may elect in the applicable Notice
of Borrowing or Conversion provided that:
(i) any Interest Period (other than an Interest Period determined pursuant
to clause (iii) below) that would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding Business Day unless,
in the case of LIBOR Loans, such Business Day falls in the next calendar
month, in which case such Interest Period shall end on the immediately
preceding Business Day;
(ii) any Interest Period applicable to a LIBOR Loan that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (iii) below, end on the last
Business Day of a calendar month;
(iii) any Interest Period that would otherwise end after the Termination
Date shall end on the Termination Date;
<PAGE> 12
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(iv) notwithstanding clause (iii) above, the Interest Period applicable to
a LIBOR Loan shall have a duration of not less than seven days, and if any
Interest Period applicable to such Loans would be for a shorter period,
such Interest Period shall not be available hereunder.
Inventory. With respect to any Person, all goods, merchandise and other
personal property (including warehouse receipts and other negotiable and
non-negotiable documents of title covering any such property) of such Person
held for sale, lease or other disposition, or for display or demonstration,
or leased or consigned, or that are raw materials, piece goods,
work-in-process or materials used or consumed or to be used or consumed in
such Person's business, whether in transit or in the possession of such
Person or another, including without limitation all goods covered by
purchase orders and contracts with suppliers and all goods billed and held
by suppliers and goods located on the premises of any carriers, forwarding
agents, truckers, warehousemen, vendors, selling agents or other third
parties, all proprietary rights, patents, plans, drawings, diagrams,
schematics, assembly and display materials relating to any of the foregoing;
and all other property of such Person constituting "inventory," as such term
is defined in the UCC.
Investments. As applied to any Person, the direct or indirect purchase or
other acquisition of, or a beneficial interest in, any share of capital
stock, partnership interest, evidence of indebtedness or other equity
security of any other Person, any direct or indirect loan, advance or
extension of credit to, or contribution to the capital of, any other Person
(including all indebtedness and accounts receivable from that other Person
which are not current assets or did not arise from sales to that other
Person in the ordinary course of business), any real estate held for sale or
investment, any commodities futures contracts held other than in connection
with bona fide hedging transactions, any other investment in any other
Person, and the making of any commitment or acquisition of any option to
make any of the foregoing.
Letter of Credit. Any letter of credit issued by the Lender for the account
of the Borrower pursuant to the Letter of Credit Documents and Section
2.1(b) hereof, including without limitation, any stand-by Letters of Credit
and any letter of credit with respect to which any indemnity agreement has
been executed by the Lender for the benefit of any other issuer of such
letter of credit for the account of the Borrower indemnifying such issuer
for payment of any draw fees or expenses due and owing under said letter of
credit.
Letter of Credit Documents. The Letters of Credit and all reimbursement and
other agreements and documents entered into or delivered by the Borrower in
connection with the issuance of a Letter of Credit.
LIBOR Loan. Any Loan bearing interest at a rate determined by reference to
the Effective LIBO Rate.
Lien. See Section 6.3.
<PAGE> 13
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Loan. A Loan made to the Borrower by the Lender pursuant to Section II of
this Agreement, and "Loans" means of all such Loans, collectively.
Loan Account. The general ledger account in the name of the Borrower on the
books of the Lender in which will be recorded loans and advances made by the
Lender to the Borrower pursuant to this Agreement, payments made on such
loans, and other appropriate debits and credits as provided by this
Agreement.
Loan Documents. This Agreement, the Note, the Letter of Credit Documents,
the UCC Financing Statements, and any and all other instruments or
agreements entered into in connection with this Agreement.
Maximum Commitment. $15,000,000 or any lesser amount, including zero,
resulting from a termination or reduction of such amount in accordance with
this Agreement.
Net Value of Eligible Accounts. As of the date of any determination thereof,
the aggregate outstanding amount of all Eligible Accounts less the aggregate
amount owing thereon which is in dispute, or relates to goods which have
been returned or rejected, and all other offsets, contras, credits,
adjustments and deductions relating thereto, and amounts of interest, if
any, owing thereon.
Net Value of Eligible Inventory. As of the date of any determination
thereof, the aggregate value of all Eligible Inventory determined as the
lower of cost or market on a "first-in, first-out" basis.
Note. A promissory note of the Borrower, substantially in the form of
Exhibit A hereto, evidencing the obligation of the Borrower to repay the
Loans, as originally executed, or if amended, as amended, and including all
substitutions, and replacements therefor, and notations thereof.
Notice of Borrowing or Conversion. See Section 2.2.
Obligations. Any and all obligations of the Borrower or any member of the
Guarantor Group to the Lender and any of the Lender's Affiliates of every
kind and description, direct or indirect, absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising or
acquired, regardless of how they arise or are acquired or by what agreement
or instrument, if any, and including obligations to perform acts and refrain
from taking action as well as obligations to pay money.
PBGC. The Pension Benefit Guaranty Corporation or any entity succeeding to
any or all of its functions under ERISA.
Permitted Liens. See Section 6.3.
<PAGE> 14
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Person. An individual, a corporation, a partnership, a limited liability
company, a joint venture, an association, a joint stock company, a trust, an
unincorporated organization or a government or any agency or political
subdivision thereof.
Plan. At any time, an employee pension or other benefit plan that is subject
to Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member
of the Controlled Group or (ii) if such Plan is established, maintained
pursuant to a collective bargaining agreement or any other arrangement under
which more than one employer makes contributions and to which the Borrower,
or any 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.
Prime Rate. The greater of (i) floating rate of interest per annum
designated from time to time by the Lender at its head office at One Federal
Street, Boston, Massachusetts 02110 as its "Prime Rate," such interest rate
to be adjusted on the effective date of any change thereof by the Lender, it
being understood that said Prime Rate is a reference rate and not
necessarily the lowest rate of interest from time to time charged by the
Lender; or (ii) the Federal Funds Rate, such interest rate to be adjusted on
the effective date of any change thereof by the Federal Reserve Bank of New
York.
Prime Rate Loan. Any Loan bearing interest at a rate determined by reference
to the Prime Rate.
Proceeds. Whatever is received upon the sale, lease, exchange, collection or
other disposition of the Collateral including, but not limited to, all
Accounts, goods, money, checks, deposit accounts, and insurance proceeds.
Qualified Investments. Investments in (i) notes, bonds or other obligations
of the United States of America or any agency thereof that as to principal
and interest constitute direct obligations of or are guaranteed by the
United States of America; (ii) certificates of deposit or other deposit
instruments or accounts of Lender or trust companies organized under the
laws of the United States or any state thereof that have capital and surplus
of at least $100,000,000, (iii) commercial paper that is rated not less than
prime-one or A-1 or their equivalents by Moody's Investors Service, Inc. or
Standard & Poor's Corporation, respectively, or their successors, and (iv)
any repurchase agreement secured by any one or more of the foregoing.
Subsidiary. Any corporation, association, joint stock company, business
trust or other similar organization of which 50% or more of the ordinary
voting power for the election of a majority of the members of the board of
directors or other governing body of such entity is held or controlled by
the Borrower or the Guarantor; or any other such organization the management
of which is directly or indirectly controlled by the Borrower or the
Guarantor through the exercise of voting power or otherwise; or any joint
venture, whether incorporated or not, in which the Borrower or the Guarantor
has a 50% ownership interest.
<PAGE> 15
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Termination Date. July 1, 2000, or such earlier date on which the Lender's
commitment hereunder is terminated or reduced to zero in accordance with the
terms of this Agreement.
UCC. The Uniform Commercial Code as adopted by The Commonwealth of
Massachusetts as amended from time to time.
UCC Financing Statements. Any and all UCC financing statements, covering all
or any portion of the Collateral naming the Lender as secured party, which
are delivered to the Lender in connection with this Agreement, in form and
substance satisfactory to the Lender, naming the Lender as secured party.
1.2 Accounting Terms. All terms of an accounting character shall have
the meanings assigned thereto by GAAP applied on a basis consistent with the
financial statements referred to in Section 4.6 of this Agreement, modified to
the extent, but only to the extent, that such meanings are specifically modified
herein.
SECTION II
DESCRIPTION OF CREDIT
2.1 Credit Facilities.
(a) Loans. Subject to the terms and conditions hereof, the Lender will
make Loans to the Borrower from time to time until the close of business on the
last Business Day preceding the Termination Date, in such amounts as the
Borrower may request, provided that the aggregate principal amount of all Loans
plus the amount drawable or drawn and not reimbursed under all Letters of Credit
at any time outstanding shall not at any time exceed the amount available under
the Borrowing Base. The Borrower may borrow, repay pursuant to Section 2.10, and
reborrow, from the date of this Agreement until the last Business Day preceding
the Termination Date, any amount available under the Borrowing Base as provided
in this Agreement. Any Loan not repaid by the Termination Date shall be due and
payable on such date;
(b) Letters of Credit. Subject to the terms and conditions hereof and
in the Letter of Credit Documents, the Borrower may request in accordance with
the terms of the Letter of Credit Documents, the issuance of one or more Letters
of Credit from time to time, provided that the aggregate amount drawable, or
drawn and not reimbursed, under all Letters of Credit plus the aggregate
principal amount of all Loans at any time outstanding at any time shall not
exceed the Borrowing Base, but in any event the aggregate amount drawable, or
drawn and not reimbursed under all Letters of Credit shall not exceed
$3,000,000. Upon each request for the issuance of a Letter of Credit, Borrower
shall execute and deliver all Letter of Credit Documents, as applicable. The
issuance by the Lender of each Letter of Credit shall be at the Lender's sole
and absolute discretion. All Letters of Credit shall expire on or before the
Termination Date, provided, however,
<PAGE> 16
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that the Lender may, in its sole discretion, in reliance upon the terms of
Section 9.4 hereof, issue Letters of Credit with expiration dates after the
Termination Date.
The Borrower shall be liable to the Lender for reimbursement of any and
all draws under any Letter of Credit and all other amounts required to be paid
under the applicable Letter of Credit Documents. Accordingly, the Borrower
agrees to pay to the Lender any and all such amounts required to be paid under
the applicable Letter of Credit Documents, when and as required to be paid
thereby, in such amounts designated herein and therein.
If the Borrower fails to pay to the Lender promptly, any amounts drawn
under the Letter of Credit or any other amount required to be paid in accordance
with the terms hereof and the Letters of Credit Documents pursuant to which such
Letter of Credit was issued, the Lender is hereby irrevocably authorized and
directed, in its sole discretion, to make a Loan in an amount sufficient to
discharge all such amounts due under any Letter of Credit including any other
amounts required to be paid hereunder or under the Letter of Credit Documents,
including all interest accrued thereon but unpaid at the time of such Loan, and
such Loan shall be a Prime Rate Loan and shall be evidenced by the Note.
The Borrower shall, on the date of issuance or any extension of any
Letter of Credit and at such other time or times as such charges are customarily
made by the Lender, pay a fee (in each case, a "Letter of Credit Fee") to the
Lender and the expenses of Lender in respect of each such Letter of Credit.
(c) Conversions. Provided that no Default shall have occurred and be
continuing, and provided further that the Borrower shall have no more than three
(3) LIBOR Loans outstanding at any one time, the Borrower may convert all or any
part (in minimum amounts of $500,000 and integral multiples of $100,000) of any
outstanding Loan into a Loan of any other type provided for in this Agreement in
the same aggregate principal amount, on any Business Day (which, in the case of
a conversion of a LIBOR Loan, shall be the last day of the Interest Period
applicable to such LIBOR Loan). The Borrower shall give the Lender prior notice
of each such conversion (which notice shall be effective upon receipt) in
accordance with Section 2.2.
2.2 Notice and Manner of Borrowing or Conversion.
(a) Whenever the Borrower desires to obtain or continue a Loan
hereunder or convert an outstanding Loan into a Loan of another type provided
for in this Agreement, the Borrower shall notify the Lender (which notice shall
be irrevocable) by telex, telecopier, or telephone received no later than (i)
12:00 p.m. Boston time on the day on which the requested Loan is to be made or
continued as or converted to a Prime Rate Loan, and (ii) 12:00 p.m. Boston time
on the date two Business Days before the day on which the requested Loan is to
be made or continued as or converted to a LIBOR Loan. Such notice shall specify
(i) the effective date and amount of each Loan or portion thereof to be
continued or converted, subject to the limitations set forth in Section 2.1,
(ii) the interest rate option to be applicable thereto, and (iii) the duration
of the applicable Interest Period, if any (subject to the provisions of the
definitions of Interest Period and Section 2.5). Each such notification (a
"Notice of Borrowing or Conversion") shall be immediately
<PAGE> 17
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followed by a written confirmation thereof by the Borrower in a form acceptable
to the Lender provided that if such written confirmation differs in any material
respect from the action taken by the Lender, the records of the Lender shall
control absent manifest error;
(b) Subject to the terms and conditions hereof, the Lender shall make
each Loan on the effective date specified therefor by debiting the amount of
such Loan to the Loan Account and crediting a like amount to the demand deposit
account of the Borrower with the Lender, or, to such other account as the
Borrower may direct; and
(c) Subject to the terms and conditions hereof, the Borrower may also
obtain Prime Rate Loans hereunder by writing drafts on any checking account
which it may maintain with the Lender or any of the Lender's Affiliates. The
amount of each such Loan shall be debited to the Loan Account.
2.3 Commitment Fees. None.
2.4 The Note.
(a) The Loans shall be evidenced by the Note, substantially in the form
of Exhibit A hereto, dated the date of this Agreement with the blanks therein
appropriately completed.
(b) The Lender shall, and is hereby irrevocably authorized by the
Borrower to, enter on the schedule forming a part of the Note, or otherwise in
its records, appropriate notations evidencing the date and the amount of each
Loan, the interest rate applicable thereto and the date and amount of each
payment of principal made by the Borrower with respect thereto, and in the
absence of manifest error, such notations shall constitute conclusive evidence
thereof. The Lender is hereby irrevocably authorized by the Borrower to attach
to and make a part of the Note a continuation of any such schedule as and when
required. No failure on the part of the Lender to make any notation as provided
in this subsection (b) shall in any way affect any Loan or the rights or
obligations of the Lender or the Borrower with respect thereto.
2.5 Duration of Interest Periods
(a) Subject to the provision of the definition of "Interest Period",
the duration of each Interest Period applicable to a LIBOR Loan shall be as
specified in the applicable Notice of Borrowing or Conversion. The Borrower
shall have the option to elect a subsequent Interest Period to be applicable to
such Loan by giving notice of such election to the Lender received no later than
12:00 p.m. Boston time on the date two Business Days before the end of the then
applicable Interest Period if such Loan is to be continued as or converted to a
Prime Rate Loan, two Business Days before the end of the then applicable
Interest Period if such Loan is to be continued as or converted to a LIBOR Loan.
(b) If the Lender does not receive a notice of election of duration of
an Interest Period pursuant to subsection (a) above within the applicable time
limits specified therein, or if, when such notice must be given, a Default
exists, the Borrower shall be deemed to have elected to convert such
<PAGE> 18
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Loan in whole into a Prime Rate Loan on the last day of the then current
Interest Period with respect thereto.
(c) Notwithstanding the foregoing, the Borrower may not select an
Interest Period that would end, but for the provisions of the definition of
"Interest Period", after the Termination Date.
2.6 Interest Rates and Payments of Interest.
(a) Each Prime Rate Loan shall bear interest on the outstanding
principal amount thereof at a rate per annum equal to the Prime Rate minus
one-half of one percent (.5%) which rate shall change contemporaneously with any
change in the Prime Rate. Such interest shall be payable monthly in arrears on
the first day of each month and when such Loan is due (whether at maturity, by
reason of acceleration or otherwise).
(b) Each LIBOR Loan shall bear interest on the outstanding principal
amount thereof, for each Interest Period applicable thereto, at a rate per annum
equal to the Effective LIBO Rate plus one and one-half percent (1.5%). Such
interest shall be payable at the end of such Interest Period unless said
Interest Period exceeds a period of ninety (90) days, then such interest shall
be payable quarterly, in arrears and when such LIBOR Loan is due (whether at
maturity, by reason of acceleration or otherwise).
2.7 Changed Circumstances.
(a) In the event that:
(i) on any date on which the Effective LIBO Rate would otherwise be set
the Lender shall have determined in good faith (which determination shall be
final and conclusive) that adequate and fair means do not exist for ascertaining
such rate, or
(ii) at any time the Lender shall have determined in good faith (which
determination shall be final and conclusive) that:
(A) the making or continuation of or conversion of any Loan to a LIBOR
Loan has been made impracticable or unlawful by (1) the occurrence of a
contingency that materially and adversely affects the London interbank
eurodollar market or (2) compliance by the Lender in good faith with
any applicable law or governmental regulation, guideline or order or
interpretation or change thereof by any governmental authority charged
with the interpretation or administration thereof or with any request
or directive of any such governmental authority (whether or not having
the force of law); or
(B) the Effective LIBO Rate shall no longer represent the effective
cost to the Lender for U.S. dollar deposits in the interbank market for
deposits in which it regularly participates;
<PAGE> 19
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then, and in any such event, the Lender shall forthwith so notify the Borrower
thereof. Until the Lender notifies the Borrower that the circumstances giving
rise to such notice no longer apply, the obligation of the Lender to allow
selection by the Borrower of the type of Loan affected by the contingencies
described in this Section 2.7(a) (herein called "Affected Loans") shall be
suspended. If at the time the Lender so notifies the Borrower, the Borrower has
previously given the Lender a Notice of Borrowing or Conversion with respect to
one or more Affected Loans but such Loans have not yet gone into effect, such
notification shall be deemed to be void and the Borrower may borrow Loans of a
non-affected type by giving a substitute Notice of Borrowing or Conversion
pursuant to Section 2.2 hereof.
Upon such date as shall be specified in such notice (which shall not be earlier
than the date such notice is given) the Borrower shall, with respect to the
outstanding Affected Loans, prepay the same, together with interest thereon and
any amounts required to be paid pursuant to Section 2.17, and may borrow a Loan
of another type in accordance with Section 2.1 hereof by giving a Notice of
Borrowing or Conversion pursuant to Section 2.2 hereof.
(b) In case any law, regulation, treaty or official directive or the
interpretation or application thereof by any court or by any governmental
authority charged with the administration thereof or the compliance with any
guideline or request of any central Lender or other governmental authority
(whether or not having the force of law):
(i) subjects the Lender to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by the Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of the Lender imposed by the United States of America
or any political subdivision thereof), or
(ii) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, the Lender (other than such
requirements as are already included in the determination of the Effective LIBO
Rate), or
(iii) imposes upon the Lender any other condition with respect to
its performance under this Agreement, and the result of any of the foregoing is
to increase the cost to the Lender, reduce the income receivable by the Lender
or impose any expense upon the Lender with respect to any Loans, the Lender
shall notify the Borrower thereof. The Borrower agrees to pay to the Lender the
amount of such increase in cost, reduction in income or additional expense as
and when such cost, reduction or expense is incurred or determined, upon
presentation by the Lender of a statement in the amount and setting forth the
Lender's calculation thereof, which statement shall be deemed true and correct
absent manifest error.
2.8 The Loan Account. The Loans shall be evidenced by the Note and by
debit entries to the Loan Account. The Lender shall also record in the Loan
Account all payments made by the Borrower on account of indebtedness evidenced
by the Loan Account and all proceeds of Collateral which are finally paid to the
Lender at its office in cash or solvent credits, and may record therein, in
accordance with customary accounting practice, other debits and credits,
including all charges
<PAGE> 20
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and expenses properly chargeable to the Borrower and any other Obligation. The
debit balance of the Loan Account shall reflect the amount of the Borrower's
indebtedness to the Lender from time to time by reason of Loans and other
appropriate charges hereunder.
2.9 Statement of Loan Account. At least once each month the Lender
shall render a statement of account showing as of its date the debit balance of
the Loan Account and charges to the Loan Account for such month. Each such
statement shall be considered correct and accepted by the Borrower and
conclusively binding upon it absent manifest error unless, within thirty (30)
days after the date of any such statement, notice to the contrary is received by
the Lender from the Borrower.
2.10 Payments and Prepayments of the Loans. In addition to any
prepayments required pursuant to Section 2.13 hereof, (i) LIBOR Loans may be
prepaid, without premium or penalty, on the last day of any Interest Period
applicable thereto, upon two Business Days' notice; (ii) Prime Rate Loans may be
prepaid at any time, without premium or penalty. Any interest accrued on the
amounts so prepaid for a LIBOR Loan to the date of such payment must be paid at
the time of any such payment. No prepayment of any Loans shall affect or impair
the Borrower's right to borrow as set forth in Section 2.1.
2.11 Method of Payment. All payments and prepayments of principal and
any and all other amounts due hereunder shall be made by the Borrower to the
Lender at One Federal Street, Boston, Massachusetts in immediately available
funds and in United States Dollars, on or before 2:00 p.m. (Boston time) on the
due date thereof, free and clear of, and without any deduction or withholding
for, any taxes or other payments.
2.12 Computation of Interest and Fees. Interest and all fees payable
hereunder shall be computed daily on the basis of a year of 360 days and paid
for the actual number of days for which due. If the due date for any payment of
principal is extended by operation of law, interest shall be payable for such
extended time. If any payment required by this Agreement becomes due on a day
that is not a Business Day such payment shall be made on the next succeeding
Business Day, and such extension shall be included in computing interest in
connection with such payment.
2.13 Borrowing Base Excesses. If at any time or times the debit balance
of the Loan Account plus the aggregate amount drawable or drawn and not
reimbursed under all Letters of Credit then outstanding exceeds the Borrowing
Base, the Borrower shall pay immediately to the Lender the amount of any such
excess to be credited to the Loan Account.
2.14 Authorization to Debit Accounts. The Borrower authorizes the
Lender, in the Lender's sole discretion, to charge when due any monetary
Obligation, including, without limitation, all amounts drawn and not reimbursed
under any Letter of Credit and all amounts owing for interest, fees, costs and
expenses and other charges provided by this Agreement, including but not limited
to Section 9.2 of this Agreement, to any demand deposit or savings account
maintained by the Borrower with the Lender, or at the Lender's option, by debits
to the Loan Account, in which case such amounts shall be Loans hereunder and
shall be disclosed promptly to the Borrower by way of written advices of debits
to the Loan Account.
<PAGE> 21
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2.15 Capital Requirements. If, after the date hereof, the Lender shall
have determined that the adoption of any applicable law, rule, regulation,
guideline, directive or request (whether or not having the force of law)
regarding capital requirements for Lender or Lender's holding companies, or any
change therein or in the interpretation or administration thereof by any
governmental authority, central Lender or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender with any
of the foregoing imposes or increases a requirement by the Lender to allocate
capital resources to the Lender's commitment to make Loans hereunder which has
or would have the effect of reducing the return on the Lender's capital to a
level below that which the Lender could have achieved (taking into consideration
the Lender's then existing policies with respect to capital adequacy and
assuming full utilization of the Lender's capital) but for such adoption, change
or compliance by any amount reasonably deemed by the Lender to be material, then
the Lender shall notify the Borrower thereof. The Borrower agrees to pay to the
Lender the amount of such reduction in the Lender's return on capital as and
when such reduction is determined upon presentation by the Lender of a statement
which shall set forth the nature of the occurrence giving rise to such
compensation, the additional amount or amounts to be paid to it hereunder and
the method by which such amounts were determined. In determining such amount,
the Lender may use any reasonable averaging and attribution methods. Such
statement and the determinations set forth therein shall be conclusive in the
absence of manifest error.
2.16 Overdue Payments.
(a) Overdue principal (whether at maturity, by reason of acceleration
or otherwise) and, to the extent permitted by applicable law, overdue interest
and fees or any other amounts payable hereunder or under the Note shall bear
interest from and including the due date thereof until paid, compounded daily
and payable on demand, at a rate per annum equal to (i) if such due date occurs
prior to the end of an Interest Period, 2% above the interest rate applicable to
such Loan for such Interest Period until the expiration of such Interest Period,
and thereafter, 2% above the Prime Rate, and (ii) in all other cases, 2% above
the rate then applicable to Prime Rate Loans.
(b) If a payment of principal or interest hereunder is not made within
10 days of its due date, the Borrower will also pay on demand a late payment
charge equal to 5% of the amount of such payment.
(c) Upon the occurrence of an Event of Default, and at the option of
the Lender, the Lender may convert any LIBOR Loan to a Prime Rate Loan, which
loan shall bear interest at the rate then applicable to Prime Rate Loans plus
two percent (2%), and in which event the Borrower shall be liable for any
prepayment penalties pursuant to Section 2.17 herein.
Nothing in this Section 2.16 shall affect the Lender's right to exercise any of
its rights or remedies, including those provided in Section 7.7, if an Event of
Default has occurred.
<PAGE> 22
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2.17 Prepayments of LIBOR Loans. If the Borrower for any reason makes
any payment of principal with respect to any LIBOR Loan on any day other than
the last day of an Interest Period applicable to such LIBOR Loan, or fails to
borrow or continue or convert to a LIBOR Loan after giving a Notice of Borrowing
or Conversion pursuant to Section 2.2, or if any LIBOR Loan is accelerated
pursuant to Section 7.7 (a) for a default under this Agreement , the Borrower
shall pay to the Lender an amount computed pursuant to the following formula:
L = (R - T) x P x D
360
L = amount payable to the Lender
R = interest rate on such Loan
T = effective interest rate per annum at which any readily
marketable bond or other obligation of the United
States, selected at the Lender's sole discretion,
maturing on or near the last day of the then applicable
Interest Period of such Loan and in approximately the
same amount as such Loan can be purchased by the Lender
on the day of such payment of principal or failure to
borrow or continue or convert
P = the amount of principal prepaid or the amount
of the requested Loan
D = the number of days remaining in the Interest Period as
of the date of such payment or the number of days of
the requested Interest Period
The Borrower shall pay such amount upon presentation by the Lender of a
statement setting forth the amount and the Lender's calculation thereof pursuant
hereto, which statement shall be deemed true and correct absent manifest error.
SECTION III
CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Loan. The obligation of the Lender
to make its initial Loan or consider an application for the issuance of the
initial Letter of Credit hereunder is subject to the condition precedent that
the Lender shall have received, in form and substance reasonably satisfactory to
the Lender and its counsel, the following:
(a) this Agreement and the Note, duly executed by the Borrower;
(b) the Guaranty, duly executed by the Guarantor;
(c) a certificate of the Secretary of the Borrower as to the truth,
correctness and completeness of copies of (i) its Articles of Organization filed
with the Secretary of State in the jurisdiction where Borrower is organized
together with all amendments thereto; (ii) its by-laws,
<PAGE> 23
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(iii) resolutions of Borrower authorizing the execution and delivery of this
Agreement, the Note and the other Loan Documents and identifying the officer(s)
authorized to execute, deliver and take all other actions required under this
Agreement, and providing specimen signatures of such officers;
(d) a certificate of Secretary of the Guarantor as to the truth,
correctness and completeness of copies of (i) its Articles of Organization filed
with the Secretary of State in the jurisdiction where Guarantor is organized,
together with all amendments thereto; (ii) its by-laws; (iii) the resolutions of
such Guarantor authorizing the execution and delivery of this Agreement, the
Note an the other Loan Documents and identifying the officer(s) authorized to
execute, deliver and take all other actions required under this Agreement, and
providing specimen signatures of each officers.
(e) a certificate of the Secretary of State in the jurisdiction where
Borrower is organized as to legal existence and good standing of the Borrower in
such state and listing all documents on file in the office of said Secretary of
State.
(f) a certificate of the Secretary of State in the jurisdiction where
Guarantor is organized as to legal existence and good standing of the Guarantor
in such state and listing all documents on file in the office of said Secretary
of State.
(g) a certificate of foreign qualification, if applicable, of Borrower
certified as of a recent date by the Secretary of State of Foreign Jurisdiction.
(h) a certificate of foreign qualification, if applicable, of
Guarantor, certified as of a recent date by the Secretary of State of Foreign
Jurisdiction.
(i) Evidence, satisfactory to the Lender, of the filing of UCC
Financing Statements in the central and local filing offices with respect to
each of the locations shown on Schedule 7.2 (d) hereto;
(j) Search Reports for each filing office referenced in the preceding
subclause (i) reflecting no filings of record naming either the Borrower or any
of its tradenames as debtor other than filings in favor of any secured party (i)
whose duly executed Uniform Commercial Code Termination Statements has been
delivered to the Lender's counsel, or (ii) holding a Permitted Lien;
(k) evidence of insurance on Accord Form 27 confirming the requirements
of Section 5.3;
(l) a Collateral Update Certificate as of the month end preceding the
date of the initial Loan or Letter of Credit hereunder, or such other date as
the Lender may direct, certified by the president, treasurer or chief accounting
officer of the Borrower;
(m) Landlord Waivers, in form and substance satisfactory to the Lender,
duly executed by the lessor of any premises leased by the Borrower identified on
Schedule 7.2(d) hereto;
<PAGE> 24
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(n) an opinion addressed to the Lender from counsel to the Borrower and
Guarantor, in a form acceptable to Lender;
(o) Warehousemen acknowledgments of the Lender's Liens in the
Borrower's Inventory for each public warehouse identified on Schedule 7.2(d)
hereto and confirmation by all such warehousemen that all Inventory of the
Borrower kept at such warehouse is held under non-negotiable documents of title;
(p) a payout letter signed by the Borrower's existing lender(s)
together with all UCC Termination Statements necessary to terminate such
lender(s) UCC financing statements on record against the Borrower in form and
substance satisfactory to the Lender; and
(q) disbursement instructions
(r) such other documents, and completion of such other matters, as the
Lender or counsel for the Lender may deem necessary or appropriate.
3.2 Conditions Precedent to All Loans. The obligation of the Lender to
make each Loan, including the initial Loan, or continue or convert Loans to
Loans of another type, or to consider any application for a Letter of Credit is
further subject to the following conditions:
(a) timely receipt by the Lender of the Notice of Borrowing or
Conversion;
(b) the representations and warranties contained in Section IV shall be
true and accurate in all material respects on and as of the effective date of
each Loan as though made at and as of each such date (except to the extent that
such representations and warranties expressly relate to an earlier date), and no
Default shall have occurred and be continuing, or would result from such Loan;
(c) the resolutions of the Borrower referred to in Section 3.1(c) shall
remain in full force and effect; and
(d) no change shall have occurred in any law or regulation or
interpretation thereof that, in the opinion of counsel for the Lender, would
make it illegal or against the policy of any governmental agency or authority
for the Lender to make Loans hereunder.
The making of each Loan and issuance of each Letter of Credit shall be
deemed to be a representation and warranty by the Borrower on the date of such
Loan or issuance of such Letter of Credit as to the accuracy of the facts
referred to in subsection (b) of this Section 3.2.
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SECTION IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to make
Loans hereunder, the Borrower represents and warrants to the Lender that:
4.1 Organization and Qualification. The Borrower and each member of the
Guarantor Group: (a) is duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization: (b) has all requisite power
to own its property and conduct its business as now conducted: and (c) is duly
qualified and in good standing and is duly authorized to do business in each
jurisdiction where the nature of its properties or business requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, financial condition, assets or
properties of the Borrower taken as a whole.
4.2 Authority. The execution, delivery and performance of this
Agreement, the Note and the other Loan Documents to which the Borrower and any
member of the Guarantor Group is a party and the transactions contemplated
hereby are within the power and authority of the Borrower and each such member
of said Guarantor Group and have been authorized by all necessary proceedings,
and do not and will not:
(a) require any consent or approval of the officers, directors or
shareholders of the Borrower or member of the Guarantor Group other than those
consents and approvals, if any, previously obtained;
(b) contravene any provision of the charter documents, or any law, rule
or regulation applicable to the Borrower or any member of the Guarantor Group;
(c) contravene any provision of, or constitute an event of default or
event that, but for the requirement that time elapse or notice be given, or
both, would constitute an event of default under, any other agreement,
instrument, order or undertaking binding on the Borrower or any member of the
Guarantor Group; or
(d) result in or require the imposition to any Lien on any of the
properties, assets or rights of the Borrower or any member of the Guarantor
Group, except any Permitted Lien.
4.3 Valid Obligations. This Agreement, the Note and the other Loan
Documents to which the Borrower or any member of the Guarantor Group is a party
and all of their respective terms and provisions are the legal, valid and
binding obligations of the Borrower and any member of the Guarantor Group party
thereto, enforceable in accordance with its terms except as may be limited by
Bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally, and except as the remedy of specific
performance or of injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
<PAGE> 26
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4.4 Consents or Approvals. The execution, delivery and performance of
this Agreement, the Note and the other Loan Documents to which the Borrower or
any member of the Guarantor Group is a party, and the transactions contemplated
herein do not require any approval or consent of, or filing or registration
with, any governmental or other agency or authority, or any other Person.
4.5 Title to Properties; Absence of Liens. The Borrower and each member
of the Guarantor Group has good and marketable title to all of the properties,
assets and rights of every name and nature now purported to be owned by it,
including, without limitation, such properties, assets and rights as are
reflected in the financial statements referred to in Section 4.6 (except such
properties, assets or rights as have been disposed of in the ordinary course of
business since the date thereof), free from all Liens except Permitted Liens
and, except as so disclosed, free from all defects of title that might
materially adversely affect such properties, assets or rights, taken as a whole.
4.6 Financial Statements. The Borrower and the Guarantor Group have
furnished the Lender with its consolidated balance sheet as of December 31, 1996
and with a related consolidated statement of income, changes in stockholders'
equity and cash flow as of each such date, and related footnotes, audited and
unqualified by Price Waterhouse LLP. The Borrower and the Guarantor Group have
also furnished the Lender its related unaudited consolidated balance sheet and
unaudited consolidated statements of income, as of April 30, 1997. All such
financial statements were prepared in accordance with GAAP applied on a
consistent basis throughout the periods specified and present fairly in all
material respects the consolidated financial position of such entity as of such
dates and the related results of the consolidated operations for such periods.
There are no liabilities, contingent or otherwise, not disclosed in such
financial statements that involve a material amount.
4.7 Changes. Other than as disclosed on Schedule 4.7 hereto, since the
date of the most recent financial statements referred to in Section 4.6, there
have been no material adverse changes in the assets, liabilities, financial
condition, business or prospects of the Borrower or any member of the Guarantor
Group other than changes in the ordinary course of business, the effect of which
has not, in the aggregate, been materially adverse.
4.8 Defaults. As of the date of this Agreement, no Default exists.
4.9 Taxes. The Borrower and each member of the Guarantor Group have
filed all federal, state and other tax returns which were due prior to the date
of this Agreement, or have filed proper extensions for said tax returns and all
taxes, assessments and other governmental charges due from the Borrower and each
member of the Guarantor Group prior to or as of the date hereof (including
without limitation all withholding and other payroll taxes) have been fully
paid. The Borrower and each member of the Guarantor Group have established and
will maintain on its books reserves adequate for the payment of all federal,
state and other tax liabilities.
<PAGE> 27
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4.10 Litigation.
(a) Except as set forth on Schedule 4.10 hereto, there is no
litigation, arbitration, proceeding or investigation pending of which the
Borrower has received notice or, to the knowledge of the officers of the
Borrower threatened, against the Borrower or any of its officers, directors or
shareholders or any of the members of the Guarantor Group that, if adversely
determined, would result in a material judgment not fully covered by insurance,
or would otherwise have a material adverse effect on the assets or business of
the Borrower;
(b) Except as set forth on Schedule 4.10 hereto, there is no judgment
or order for the payment of money outstanding against the Borrower or any member
of the Guarantor Group by any court, or a warrant of attachment or execution or
similar process issued or levied and outstanding against property of the
Borrower or any member of the Guarantor Group.
4.11 Use of Proceeds. No portion of any Loan is to be used for the
"purpose of purchasing or carrying" any "margin stock" as such terms are used in
Regulations G, U and X of the Board of Governors of the Federal Reserve System,
12 C.F.R. 221 and 224, as amended; and following the application of the proceeds
of each Loan, the value of all "margin stock" of the Borrower will not exceed
25% of the value of the total assets of the Borrower that are subject to the
restrictions set forth in Section 6.3 hereof.
4.12 Organizational Structure; Directors; Officers, Guarantor Group;
Equity Investments. Schedule 4.12 correctly sets forth the ownership interests
of all shareholder interests in the Borrower and the Guarantor and the
Borrower's ownership interest and the Guarantor's ownership interest in each of
its respective Subsidiaries and all other equity investments of the Borrower and
the Guarantor in any Person. Except as set forth on Schedule 4.12 hereto, as of
the date of this Agreement, the Borrower and the Guarantor have no Subsidiaries
and no equity investments in any Person. The Borrower is the owner, free and
clear of all Liens, of all of the issued and outstanding stock of each of its
Subsidiaries. The Guarantor is the owner, free and clear of all Liens, of all of
the issued and outstanding stock of each of its Subsidiaries. All shares of
ownership interests in the Borrower, the Guarantor and all of the Borrower's and
Guarantor's shares of stock in each of its respective Subsidiaries have been
validly issued and are fully paid and nonassessable, and, except as set forth in
Schedule 4.12 hereto, with respect to the Borrower no rights to subscribe to any
additional shares have been granted, and no options, warrants or similar rights
are outstanding.
4.13 Investment Company Act. The Borrower is not subject to regulation
under the Investment Company Act of 1940, as amended.
4.14 Compliance with ERISA. The Borrower, each member of the Guarantor
Group and each member of the Controlled Group have fulfilled their obligations
under the minimum funding standards of ERISA and the Code with respect to each
Plan and are in compliance in all material respects with the applicable
provisions of ERISA and the Code, and have not incurred any liability
<PAGE> 28
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to the PBGC or a Plan under Title IV of ERISA; and no "prohibited transaction"
or "reportable event" (as such terms are defined in ERISA) has occurred with
respect to any Plan.
4.15 Security Interest. This Agreement creates in favor of the Lender a
continuing security interest in the Collateral identified in Section 7.1 hereof.
All financing statements with respect to the Collateral on the date of this
Agreement, have been executed and delivered to the Lender on or before the date
of the initial Loan hereunder and, when filed in all offices necessary to
perfect a security interest in the Collateral, such security interest will
constitute a first priority perfected security interest in the Collateral,
except in Collateral (if any) in which a security interest cannot be perfected
by filing under the Uniform Commercial Code or by notice or other non-possessory
means.
4.16 Application of Proceeds. The proceeds of Loans made and all
Letters of Credit issued hereunder shall be used for working capital purposes of
the Borrower.
4.17 Taxes and Charges Relating to the Agreement. All state and local
recording, franchise, stamp, documentary and other governmental charges and
assessments required to be paid in connection with the execution, delivery,
filing or recordation of, or as a condition to, the enforcement of this
Agreement, the Note, or any other Loan Document, or the Lender's lien on or
security interest in the Collateral, have been duly paid.
4.18 Solvency. After giving effect to this Agreement, the Note and the
other Loan Documents and any Loan or Letter of Credit outstanding hereunder, the
Borrower and each member of the Guarantor Group (i) will be able to pay its
debts as they become due; (ii) will have funds and capital sufficient to carry
on its business and all businesses in which it is about to engage; and (iii)
will own assets having a value both at fair valuation and at present fair
saleable value greater than the amount required to pay its debts as they will
become due. Neither the Borrower nor any member of the Guarantor Group will be
rendered insolvent by the execution and delivery of this Agreement or any of the
other Loan Documents or by the transactions contemplated hereunder.
4.19 Projections. The Borrower and each member of the Guarantor Group
have provided the Lender with consolidated profit and loss projections for its
fiscal year ending December 31, 1997. Such projections (including the material
assumptions and adjustments made in their preparation and disclosed therein)
were, to the best of the Borrower's knowledge and belief, reasonable when made.
4.20 Environmental Compliance.
(a) Except as set forth on Schedule 4.20 hereto, to the best of the
Borrower's knowledge, none of the Borrower, any member of the Guarantor's Group
or any operator of any property owned or operated by the Borrower or any member
of the Guarantor Group (the "Property") is in violation, or alleged violation,
of any judgment, decree, order, law, license, rule or regulation pertaining to
environmental matters, including without limitation those arising under the
Resource Conservation and Recovery Act (RCRA), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the
Superfund Amendments and Reauthorization
<PAGE> 29
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Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air Act,
the Toxic Substances Control Act, or any federal, state, or local statute,
regulation, ordinance, order or decree under the laws of the United States, The
Commonwealth of Massachusetts and any other applicable jurisdiction relating to
the environment (hereinafter "Environmental Laws"), which violation would have a
material adverse effect on the environment or the business, operations,
properties, assets or financial condition of the Borrower and the Guarantor
Group taken as a whole;
(b) Except as set forth on Schedule 4.20 hereto, to the best of the
Borrower's knowledge, neither the Borrower nor any member of the Guarantor Group
has received written notice from any third party including without limitation
any federal, state, or local governmental authority of the United States, (i)
that the Borrower or any member of the Guarantor Group or any predecessor in
interest has been identified by the United States Environmental Protection
Agency (EPA) as a potentially responsible party under CERCLA with respect to a
site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B
(1986); (ii) that any "hazardous waste" as defined by 42 U.S.C. 6903(5), any
"hazardous substances" as defined by 42 U.S.C. 9601(14), any "pollutant or
contaminant" as defined by 42 U.S.C. 9601(33) or any toxic substance, oil or
hazardous materials or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") which any one of them has generated,
transported or disposed of has been found at any site at which a federal, state
or local agency of the United States or other third party has conducted or has
ordered that the Borrower or any member of the Guarantor Group or any
predecessor in interest conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; or (iii) that any of them is
or shall be a named party to any claim, action, cause of action, complaint or
legal or administrative proceeding (in each case, contingent or otherwise)
arising out of any third party's incurrence of costs, expenses, losses or
damages of any kind whatsoever in connection with the release of Hazardous
Substances;
(c) Except as set forth on Schedule 4.20 hereto, to the best of the
Borrower's knowledge (i) no portion of the Property has been used for the
handling, manufacturing, processing, storage or disposal of Hazardous Substances
except in compliance with applicable law; and no underground tank or other
underground storage receptacle for Hazardous Substances is located on such
properties except in compliance with applicable law; (ii) in the course of any
activities conducted by the Borrower or any member of the Guarantor Group or
operators of any of the Property, no Hazardous Substances have been generated or
are being used on such properties except in compliance with applicable law;
(iii) there have been no releases (e.g. any past or present releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
disposing or dumping) or threatened releases of Hazardous Substances on, upon,
into or from any of the Property; (iv) there have been no releases on, upon,
from or into any real property in the vicinity of any of the Property which,
through soil or groundwater contamination, may have come to be located on, and
which would have a material adverse effect on the value of, the properties of
the Borrower or any member
<PAGE> 30
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of the Guarantor Group; and (v) in addition, any Hazardous Substances that have
been generated on any of the Property have been transported offsite only by
carriers having an identification number issued by the EPA or in compliance with
applicable requirements of the United States, treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required under
applicable Environmental Laws, which transporters and facilities have been and
are, to the best of the Borrower's knowledge, operating in compliance with such
permits and applicable Environmental Laws; and
(d) Except as set forth on Schedule 4.20 hereto, to the best of the
Borrower's knowledge, none of the Property is or shall be subject to any
applicable environmental cleanup responsibility law or environmental restrictive
transfer law or regulation by virtue of the transactions set forth herein and
contemplated hereby.
4.21 Licenses, Etc. Schedule 4.21 hereto accurately and completely
lists all material authorizations, licenses, permits and franchises of any
public or governmental regulatory body granted or assigned to the Borrower or
any member of the Guarantor Group and the same constitute the only material
authorizations, licenses, permits and franchises of any public or governmental
regulatory body which are necessary for the conduct of the business of the
Borrower and the Guarantor Group (such authorizations, licenses, permits and
franchises, together with any extensions or renewals thereof, being herein
sometimes referred to collectively as the "Licenses"). All of such Licenses are
validly issued and in full force and effect and the Borrower and each member of
the Guarantor Group have fulfilled and performed all of their respective
obligations with respect thereto and have full power and authority to operate
thereunder.
4.22 Material Agreements and Contracts. As of the date of this
Agreement, the Borrower and the Guarantor Group have in place all agreements and
contracts material to the Borrower's business and necessary to the fulfillment
of the results projected in the projections referenced in Section 4.19 and all
such agreements and contracts, if any, which were entered into by and all
consents to such assignments and transfers required by the terms of those
agreements and contracts or by law in order to make each enforceable by the
Borrower and each member of the Guarantor Group, as applicable against the other
parties thereto have been obtained.
4.23 Ownership of Collateral. All Inventory and Accounts as disclosed
on and evidenced by any financial statements submitted to the Lender in
connection with the Loans and this Agreement are owned by the Borrower.
<PAGE> 31
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SECTION V
AFFIRMATIVE COVENANTS
The Borrower acknowledges that any reference herein to "consolidated"
statements shall mean and include the Borrower and the Guarantor Group. So long
as the Lender has any commitment to lend hereunder or any Loan or Letter of
Credit or other Obligation remains outstanding, the Borrower covenants as
follows:
5.1 Financial Statements and other Reporting Requirements. The Borrower
shall furnish to the Lender:
(a) as soon as available to the Borrower, but in any event within one
hundred twenty (120) days after the end of each of its fiscal years, a
consolidated balance sheet as of the end of, and a related consolidated
statement of income for, changes in equity and cash flow for, such year, audited
and unqualified by an independent certified public accountant acceptable to the
Lender; and, concurrently with such financial statements, a copy of said
certified public accountants' management report and a written statement by such
accountants that, in the making of the audit necessary for their report and
opinion upon such financial statements they have obtained no knowledge of any
Default or, if in the opinion of such accountants any such Default exists, they
shall disclose in such written statement the nature and status thereof;
(b) as soon as available to the Borrower, but in any event no later
than forty-five (45) days after the end of each fiscal quarter, a consolidated
balance sheet as of the end of, and a related consolidated statement of income
and consolidated cash flow and changes in equity for the period then ended
prepared internally by or on behalf of the Borrower and the Guarantor Group in
accordance with GAAP and certified as accurate and complete by Borrower's
president, treasurer or chief accounting officer;
(c) as soon as available to the Borrower, but in no event later
forty-five (45) days after the end of each fiscal quarter, a certificate in
substantially the form of Exhibit B hereto internally prepared by or on behalf
of the Borrower and Guarantor Group and certified as accurate and complete by
Borrower's president, treasurer or chief accounting officer;
(d) as soon as available by the Borrower, but in no event later than
forty-five (45) days after the end of each month, monthly consolidated balance
sheet, related statements of income and changes in equity and cash flow
internally prepared by or on behalf of Borrower and the Guarantor Group in
accordance with GAAP and certified as accurate and complete by Borrower's
president, treasurer or chief accounting officer;
(e) within forty-five (45) days before the beginning of each of its
fiscal year, annual consolidated balance sheet, related statement of income and
changes in equity and cash flow internally prepared by or on behalf of Borrower
and the Guarantor Group in accordance with GAAP and certified as accurate and
complete by Borrower's president, treasurer or chief accounting officer.
<PAGE> 32
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(f) promptly after the receipt thereof by the Borrower or any member of
the Guarantor Group, copies of any reports submitted to the Borrower or any
member of the Guarantor Group by independent public accountants in connection
with any interim review of the accounts of the Borrower and the Guarantor Group
made by such accountants;
(g) if and when the Borrower and any member of the Guarantor Group
gives or is required to give notice to the PBGC of any "Reportable Event" (as
defined in Section 4043 of ERISA) with respect to any Plan that might constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows that
any member of the Controlled Group or the plan administrator of any Plan has
given or is required to give notice of any such Reportable Event, a copy of the
notice of such Reportable Event given or required to be given to the PBGC;
(h) immediately upon becoming aware of the existence of any condition
or event that constitutes a Default, written notice thereof specifying the
nature and duration thereof and the action being or proposed to be taken with
respect thereto;
(i) promptly upon becoming aware of any litigation or of any
investigative proceedings by a governmental agency or authority commenced or
threatened against the Borrower, any of its officers, directors, stockholders or
any principals thereof, or any member of the Guarantor Group of which it has
notice, and which is a single claim in excess of $100,000, or which with other
such claims in the aggregate exceeds $250,000 the outcome of which would
reasonably be likely to have a materially adverse effect on the assets, business
or financial condition of the Borrower or any member of the Guarantor Group,
written notice thereof and the action being or proposed to be taken with respect
thereto;
(j) promptly upon becoming aware of any judgment or order for the
payment of money entered against the Borrower or any member of the Guarantor
Group, by any court, or a warrant of attachment or execution or similar process
issued or levied against the property of the Borrower or any member of the
Guarantor Group, which is a single judgment in excess of $100,000 or, which with
other outstanding judgments against the Borrower and the Guarantor Group, in the
aggregate exceeds $250,000 in value, written notice thereof and the action being
or proposed to be taken with respect thereto;
(k) from time to time, such other information about the Borrower or any
member of the Guarantor Group as the Lender may request.
<PAGE> 33
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5.2 Conduct of Business. The Borrower and each member of the Guarantor
Group shall:
(a) duly observe and comply in all material respects with all
applicable laws and valid requirements of any governmental authorities relative
to its corporate existence, rights and franchises, to the conduct of its
business and to its property and assets, and shall maintain and keep in full
force and effect all licenses and permits necessary in any material respect to
the proper conduct of its business, except where the failure to do so would not
materially adversely effect the business of Borrower and the Guarantor Group
taken as a whole;
(b) maintain its corporate existence; and
(c) when considered as a whole, remain engaged substantially in the
business of manufacturing and marketing of asphalt roofing shingles.
5.3 Maintenance and Insurance. The Borrower and each member of the
Guarantor Group shall maintain its properties in good repair, working order and
condition as required for the normal conduct of its business. The Borrower and
each member of the Guarantor Group shall at all times maintain with financially
sound and reputable insurers, liability and casualty insurance customary for
companies engaged in businesses similar to that of the Borrower and each member
of the Guarantor Group including in any event fire and extended coverage and
theft, and any other insurance deemed necessary by the Lender, and, with respect
to casualty insurance covering the Collateral, shall, in addition be in amounts,
containing such terms, in such form, and for such periods as may be reasonably
satisfactory to the Lender, such insurance to be payable to the Lender (as loss
payee and additional insured) and the Borrower and/or any member of the
Guarantor Group as applicable as their interests may appear. All such policies
of insurance shall provide for no less than thirty (30) days written minimum
cancellation notice to the Lender. In the event the Borrower or any member of
the Guarantor Group fails to provide and maintain insurance as herein required,
the Lender may, at its option, provide such insurance and charge the amount
thereof to the Loan Account which amount shall bear interest at the rate
specified herein for Prime Rate Loans. The Borrower shall furnish to the Lender
certificates or other evidence reasonably satisfactory to the Lender of
compliance with the foregoing insurance provisions. Any sums received by the
Lender in payment of losses under such policy may be applied by the Lender to
the payment or prepayment of any Obligation to the extent such sums exceed all
then outstanding Obligations, with the balance, if any, remaining to be paid to
the Borrower.
5.4 Taxes. The Borrower and each member of the Guarantor Group shall
pay or cause to be paid all taxes, assessments or governmental charges on or
against it or its properties on or prior to the time when they become due unless
any such tax, assessment or charge is being contested in good faith by
appropriate proceedings and with adequate reserves established and maintained in
accordance with GAAP provided no liens in the aggregate exceed $100,000.
5.5 Commercial Finance Examinations, Verification of Accounts, Etc. The
Borrower shall permit the Lender or its designees, at any time during normal
business hours and upon verbal notice (or if a Default shall have occurred and
is continuing, at any time and without prior notice), to (i) visit and inspect
the properties of the Borrower and each member of the Guarantor Group, (ii)
<PAGE> 34
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examine and make copies of and take abstracts from the books and records of the
Borrower and the Guarantor Group, (iii) discuss the affairs, finances and
accounts of the Borrower and the Guarantor Group, employees and accountants and
(iv) arrange for verification of Accounts under reasonable procedures directly
with the Borrower's accountants, the account debtors or by other methods. To the
extent any of the foregoing is conducted as part of a commercial finance
examination, the Borrower shall be obligated to reimburse the Lender in
accordance with Section 9.2 hereof, but in any event Borrower shall not be
obligated to reimburse Lender for fees and expenses incurred in connection with
this Section 5.5 in any amount to exceed $2,500, annually.
5.6 Maintenance of Books and Records. The Borrower and each member of
the Guarantor Group shall keep adequate books and records of account, in which
true and complete entries will be made reflecting all of its business and
financial transactions, and such entries will be made in accordance with GAAP
consistently applied and applicable law.
5.7 Minimum Consolidated Tangible Net Worth As at the end of each of
Borrower's fiscal quarters ending June 30, 1997 and thereafter, the Consolidated
Tangible Net Worth shall not be less than $21,000,000.
5.8. Maximum Consolidated Total Liabilities to Consolidated Tangible
Net Worth As the end of each of Borrower's fiscal quarters ending June 30,
1997 and thereafter the ratio of (a) Consolidated Total Liabilities to (b)
Consolidated Tangible Net Worth shall not exceed 1.5:1.0.
5.9. Minimum Consolidated Fixed Charge Coverage Ratio As at the end of
each of the Borrower's fiscal quarters, the Consolidated Fixed Charge Coverage
Ratio for the immediately preceding twelve (12) month period shall be not less
than the ratio specified below
Fiscal Quarters Ended
---------------------
March 31 1.0 :1
June 30 1.25:1
September 30 1.25:1
December 31 1.0 :1
5.10 Maximum Consolidated Capital Expenditures. During each of the
Borrower's fiscal years the Consolidated Capital Expenditures for such period
shall not exceed $2,000,000.
5.11 Maximum Permitted Dividends The Borrower or any member of the
Guarantor Group may distribute all dividends required by the Preferred Stock and
Preference Stock of the Borrower and the Guarantor Group, which amounts accrue
after the date of this Agreement provided that Borrower is in compliance with
all other financial covenants and any other covenants hereunder at the time of
such dividend distribution and remains in compliance with all other financial
covenants and any other covenants hereunder subsequent to said dividend
distribution. The Borrower or any member of the Guarantor Group shall not,
without the prior consent of the Lender, provide for any such stock dividend
distribution, which such dividends accrued but were unpaid prior to the date of
this Agreement. Additionally, the Borrower or any member of the Guarantor Group
shall not, without the prior consent of the Lender, provide for any dividends,
whether accrued
<PAGE> 35
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prior to or after the date of this Agreement, distributable to the Common Stock
of the Borrower or any member of the Guarantor Group.
5.12 Accounting Principles. 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, such determination or consolidation will be done in
accordance with GAAP.
5.13 Maintenance of Accounts with Lender. Throughout the term of the
Loans, the Borrower and each member of the Guarantor Group shall open and
maintain all depository relationships, including without limitation all
operating accounts with the Lender.
5.14 Further Assurances At any time and from time to time the Borrower
shall, and shall cause each member of the Guarantor Group to, execute and
deliver such further instruments and take such further action as may reasonably
be requested by the Lender to effect the purposes of this Agreement and the
other Loan Documents.
SECTION VI
NEGATIVE COVENANTS
So long as the Lender has any commitment to lend hereunder or any Loan
or Letter of Credit or other Obligation remains outstanding, the Borrower
covenants as follows:
6.1 Indebtedness. Neither the Borrower nor any member of the Guarantor
Group will create, incur, assume, guarantee or be or remain liable with respect
to any Indebtedness other than the following:
(a) Indebtedness of the Borrower to the Lender or any of the Lender's
Affiliates;
(b) Normal trade Indebtedness and relating to the acquisition of goods
and supplies;
(c) Indebtedness secured by Permitted Liens;
(d) Other Indebtedness not to exceed $250,000 in the aggregate at any
time.
6.2 Contingent Liabilities. Neither the Borrower nor any member of the
Guarantor Group shall create, incur, assume, guarantee or remain liable with
respect to any Guarantees other than the following:
(a) Guarantees in favor of the Lender, or any of the Lender's
Affiliates;
<PAGE> 36
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(b) Guarantees existing on the date of this Agreement and disclosed on
Schedule 6.2(b) hereto;
(c) Guarantees resulting from the endorsement of negotiable instruments
for collection in the ordinary course of business;
(d) Guarantees with respect to surety, appeal performance and
return-of-money and other similar obligations incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money) not
exceeding $250,000 in the aggregate at any time; and
(e) Guarantees of normal trade debt relating to the acquisition of
goods and supplies.
6.3 Liens. Neither the Borrower nor any member of the Guarantor Group
shall create, incur, assume or suffer to exist any mortgage, pledge,
security interest, lien or other charge or encumbrance, including the lien
or retained security title of a conditional vendor upon or with respect to
any of its property or assets ("Liens"), or assign or otherwise convey any
right to receive income, including the sale or discount of accounts
receivable with or without recourse, except the following ("Permitted
Liens"):
(a) Liens in favor of the Lender, or any of the Lender's Affiliates;
(b) Liens for taxes, fees, assessments and other governmental charges
to the extent that payment of the same may be postponed or is not required in
accordance with the provisions of Section 5.4;
(c) Landlords' non-consensual statutory or common law Liens in respect
of rent not in default on property located at such landlord's leased premises,
provided that such Liens have been waived or subordinated by such landlord in
writing in favor of the Lender and its Affiliates, in form and substance
satisfactory to the Lender;
(d) Liens in respect of pledges or deposits under workers'
compensation, unemployment insurance, social security laws, or similar
legislation (other than ERISA) or in connection with appeal and similar bonds
incidental to litigation; mechanics', laborers' and materialmen's and similar
liens, if the obligations secured by such liens are not then delinquent; and
statutory obligations incidental to the conduct of its business that do not in
the aggregate materially detract from the value of its property or materially
impair the use thereof in the operation of its business;
(e) Judgment liens in an amount exceeding $100,000 in the aggregate,
that shall not have been in existence for a period longer than 30 days after the
creation thereof or, if a stay of execution shall have been obtained, for a
period longer than 30 days after the expiration of such stay, or an appeal has
been filed and is pending;
(f) Rights of lessors under capital leases;
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(g) easements, rights of way, restrictions and other similar charges
relating to real property and not interfering in a material way with the
ordinary conduct of its business; and
(h) Liens in respect of any purchase money obligations for any
equipment used in the business of the Borrower or the Guarantor Group which at
any time outstanding shall not exceed $250,000 in the aggregate; provided that
any such Lien shall not extend to property and assets of the Borrower or any
member of such Guarantor Group not financed by such purchase money obligation.
6.4 ERISA Neither the Borrower, the Guarantor Group nor any member of
the Controlled Group shall permit any Plan maintained by it to (i) engage in any
"prohibited transaction" (as defined in Section 4975 of the Code, (ii) incur any
"accumulated funding deficiency" (as defined in Section 302 of ERISA) whether or
not waived, or (iii) terminate any Plan in a manner that could result in the
imposition of a lien or encumbrance on the assets of the Borrower pursuant to
Section 4068 of ERISA.
6.5 Merger; Consolidation; Change of Control; Sale or Lease of Assets
Other than as permitted by Section 7.2 of this Agreement, neither the Borrower
nor the Guarantor shall sell, lease or otherwise dispose of its assets or
properties, or liquidate, merge or consolidate into or with any other Person, or
engage in or permit a Change of Control, provided however, any Subsidiary may
(i) merge or consolidate into or with any other wholly-owned Subsidiary of the
Borrower or the Guarantor, and (ii) so long as the Borrower or the Guarantor is
the surviving entity, merge into or consolidate with the Borrower or the
Guarantor.
6.6 Additional Stock Issuance Neither the Borrower nor the Guarantor
shall permit any of its respective Subsidiaries to issue any additional shares
of its capital stock or other equity securities, any option therefor or any
securities convertible thereto other than to the Borrower or the Guarantor.
Neither the Borrower nor the Guarantor shall sell, transfer or otherwise dispose
of any of the capital stock or other equity securities of a Subsidiary, except
(i) to the Borrower, the Guarantor, or any of its respective wholly-owned
Subsidiaries, or (ii) in connection with a transaction permitted by Section 6.5.
6.7 Transactions with Affiliates From and after the date of this
Agreement, the Borrower will not, and will not permit any of its Subsidiaries
to, enter into or be a party to any transaction or arrangement with any
Affiliate (including, without limitation, the purchase from, sale to or exchange
of property with, or the rendering of any service by or for, any Affiliate),
except in the ordinary course of and pursuant to the reasonable requirements of
the Borrower's or its Subsidiary's business and upon fair and reasonable terms
no less favorable to the Borrower or its Subsidiary than would obtain in a
comparable arm's-length transaction with a Person other than an Affiliate.
6.8 Sale and Leaseback. Without the prior written consent of the
Lender, neither the Borrower nor the Guarantor shall enter into any arrangement,
directly or indirectly, whereby it shall sell or transfer any property owned by
it in order to repurchase or lease such property or lease other property that it
intends to use for substantially the same purpose as the property being sold or
transferred.
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6.9 Investments. Other than Qualified Investments, without the prior
written consent of the Lender, neither the Borrower nor any member of the
Guarantor Group shall make or maintain any Investment (which, as defined herein,
includes but is not limited to the direct or indirect purchase or other
acquisition of any share of capital stock, partnership interest or other equity
security of any other Person).
6.10 Negative Pledge Agreements. The Borrower and the Guarantor Group
shall not enter into any agreements, oral or written, with any Person, other
than the Lender, which prohibits the Borrower or any member of the Guarantor
Group from granting, or in any way restricts the Borrower's or any member of the
Guarantor Group's ability to grant any Lien on any of the Borrower's or any
member of the Guarantor Group's assets or property.
6.11 Dividends and other Equity Distributions The Borrower and the
Guarantor Group shall not make any distributions or dividend payments in excess
of or other than those dividends permitted pursuant to Section 5.11 hereunder;
however, upon the occurrence of an Event of Default and so long as any such
event is continuing, the Borrower or any member of the Guarantor Group shall not
pay any dividends on any class of its ownership interests or make any other
distribution or payment on account of, or in redemption, retirement or purchase
of, such ownership interest; provided that this Section shall not apply to (i)
the issuance, delivery or distribution by the Borrower of shares of its
ownership interests pro rata to its members and (ii) the purchase or redemption
by the Borrower of its ownership interests with the proceeds of the issuance of
additional shares of ownership interests.
6.12 Loans to Employees, Directors, Officers, etc. The Borrower or any
member of the Guarantor Group shall not make any loans or advances with the
exception of loans or advances to any employee, director, officer or shareholder
thereof, in the normal course of Borrower's business, which such loans or
advances shall not exceed an aggregate outstanding amount of $100,000.
SECTION VII
SECURITY AGREEMENT
7.1 Creation of Security Interest. As collateral security for the
payment and performance in full of the Obligations, the Borrower hereby assigns
to the Lender all of its rights, title and interest in, and grants to the Lender
a continuing security interest in all of the Borrower's Accounts and Inventory;
all contract rights; all chattel paper; all other rights to the payment of
money, including without limitation amounts due from affiliates, sales
representatives, tax refunds, and insurance proceeds; all interest in goods as
to which an account shall have arisen; all files, records (including without
limitation computer programs, tapes and related electronic data processing
software) and writings of the Borrower or in which it has an interest in any way
relating to the foregoing property; all goods, instruments, documents of title,
policies and certificates
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of insurance, chattel paper, deposits, cash or other property owned by the
Borrower or in which it has an interest which are now or may hereafter be in the
possession of the Lender or as to which the Lender may now or hereafter control
possession by documents of title or otherwise; and any rights to retrieval from
third parties of electronically processed and recorded information pertaining to
any of the foregoing types of collateral; all deposit accounts; all property
referenced herein wherever located and whether now existing or hereafter
acquired or arising, and any and all additions, substitutions, accessions,
Proceeds and products to, for or of any of the foregoing.
7.2 Covenants Pertaining to Collateral. The Borrower covenants that:
(a) Other than sales of Inventory or grants of licenses and other
rights in the ordinary course of the Borrower's business for cash or an open
account and on terms of payment ordinarily extended to its customers, the
Borrower will not grant, assign or transfer any interest in, or otherwise
encumber, any of the Collateral other than in favor of the Lender, or any of the
Lender's Affiliates, except for Permitted Liens. The Borrower shall defend the
Collateral against, and take any action reasonably necessary to remove any Liens
other than Permitted Liens and defend the right, title and interest of the
Lender in and to any of the Borrower's rights in the Collateral.
(b) At the time any Account becomes subject to a security interest in
favor of the Lender, such Account shall be a valid, legal and binding obligation
of the account debtor named therein for goods sold or services theretofore
performed by the Borrower, enforceable in accordance with its terms, but subject
to returns in the ordinary course of business (which terms shall be expressly
set forth on the face of the invoice applicable thereto).
(c) It will keep all of its property and assets (the "Property") in
good order and repair, subject to reasonable wear and tear, and will not use the
same in violation of law or any policy of insurance thereon, and will pay
promptly when due all taxes, assessments, or charges upon the Property and
Collateral or for its use or operation.
(d) All Inventory and other Property shall be located at one of the
addresses set forth on Schedule 7.2(d) hereto or such other address as the
Lender may consent to in writing, and the Borrower will not, without the
Lender's prior written consent, remove any part thereof (except in connection
with dispositions permitted under Section 7.2(a)). The Borrower's chief
executive office and the place where its records concerning the Property or
Collateral are kept is shown on the first page hereof, and the Borrower will
not, without the Lender's prior written consent, change such chief executive
office or remove such records.
(e) At any time and from time to time, upon the written request of the
Lender, and at the sole expense of the Borrower, the Borrower and the Guarantor
will promptly and duly execute and deliver any and all such further instruments
and documents and take such further actions as the Lender may reasonably deem
desirable in obtaining the full benefits of this Agreement and the other Loan
Documents and of the rights and powers herein and therein granted either as to
any one item or in the aggregate which by laws governing the perfection of the
Lender's Lien in such property require the Lender's Lien to be noted thereon and
applications appropriately completed and executed with respect thereto (which
shall be delivered without request by the Lender), the filing of any
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financing or continuation statement under the Uniform Commercial Code in effect
in any jurisdiction with respect to the liens and security interests granted
hereby and thereby, and using its reasonable best efforts to obtain waivers from
landlord's and mortgagees, if necessary on terms satisfactory to the Lender. The
Borrower also hereby authorizes the Lender to file any such financing or
continuation statement without the signature of the Lender to the extent
permitted by applicable law. If any amount payable under or in connection with
any of the Collateral shall be or become evidenced by any promissory note or
other instrument, such note or instrument shall be immediately pledged and
delivered to the Lender, duly endorsed in a manner satisfactory to it.
(f) The Borrower will not change its name, identity or legal structure
in any manner which might make any financing or continuation statement filed
hereunder seriously misleading within the meaning of Section 9-402(7) of the
Uniform Commercial Code (or any other then applicable provision of the Code)
unless the Borrower shall have given the Lender at least 30 days prior written
notice thereof and the Lender shall have received appropriate financing
statements reflecting such change duly executed and duly filed in each
jurisdiction in which UCC-1 filings are required in order to perfect the
security interest granted by this Agreement in the Collateral and shall have
taken all action (or made arrangements to take such action concurrently with
such change if it is impossible to take such action in advance) necessary or
reasonably requested by the Lender to amend such financing statements so that it
is not seriously misleading.
7.3 Reports, etc. Pertaining to Collateral. The Borrower will:
(a) Schedule of Accounts. Deliver to the Lender on or before the date
of the initial Loan or Letter of Credit hereunder and within twenty (20) days
after the end of each fiscal month thereafter and at such other intervals and
for such periods as the Lender may request:
(i) a schedule of accounts receivable which (A) shall be reconciled to
the Collateral Update Certificate as of the last Business Day of the
immediately preceding month, (B) shall set forth a detailed aged trial
balance of all its then existing Accounts, specifying the names and
balances due (and, upon the Lender's request, the address) for each
account debtor obligated on an Account so listed, (C) shall set forth a
detailed report of balances due from and rebates owing to account
debtors, specifying the names and addresses of each account debtor, the
balance due on each account debtor's Account and the amount of any
rebate owed to that account debtor in the ordinary course of the
Borrower's business; and
(ii) if and when requested by the Lender, a schedule of the backlog of
orders, which shall identify (by date of order, requested delivery
date, dollar amount, account party and such other details as the Lender
may reasonably request) each purchase order or contract received by the
Borrower pertaining to goods not yet shipped by the Borrower
(b) Schedule of Inventory. Deliver to the Lender on or before the date
of the initial Loan or Letter of Credit hereunder and within twenty (20) days
after the end of each fiscal month thereafter a schedule of Inventory as of the
last Business Day of the immediately preceding month and at such other intervals
and for such periods as the Lender may request, itemizing and describing the
kind, type and quantity of Inventory and location and the Borrower's cost
thereof.
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(c) Schedule of Letters of Credit. Deliver to the Lender on or before
the date of the initial Loan or Letter of Credit hereunder, a Schedule of all
Letters of Credit to be issued by the Lender, and thereafter at such other
intervals and for such periods as the Lender may request.
(d) Collateral Update Certificate. Deliver to the Lender a Collateral
Update Certificate, substantially in the form of Exhibit C hereto, or in such
other form as Lender may require, on or before the date of the initial Loan or
Letter of Credit hereunder prepared as of the month end preceding such Loan or
Letter of Credit and monthly within twenty (20) days after the end of each such
preceeding month thereafter, prepared as of the close of business on the last
Business Day of the immediately preceding month, and at such other intervals and
for such periods, including daily and/or weekly reporting periods, as the Lender
may request.
(e) Collateral Values. Promptly notify the Lender of any information
received by the Borrower relative to any of the Property or Collateral including
the Inventory and the Accounts, the account debtors, or other persons obligated
in connection therewith, which may in any way have a material adverse effect on
the value of any of its property or the rights and remedies of the Lender in
respect thereto;
(f) Account Debtor Insolvency. Promptly notify the Lender when it
obtains knowledge of actual or imminent Bankruptcy or other insolvency
proceeding of any account debtor owing an aggregate of $100,000 or more to the
Borrower;
(g) Sales and Shipping Information. Deliver to the Lender, as the
Lender may from time to time reasonably request, delivery receipts, customer's
purchase orders, shipping instructions, bills of lading and any other evidence
of shipping arrangements; and
(h) Notice of Diminution in Value. Promptly notify the Lender of any
return or adjustment in excess of $100,000, rejection, repossession and loss or
damage of or to merchandise represented by the Accounts and of any credit
adjustment or dispute arising in connection with the goods or services
represented by the Accounts and the Borrowing Base shall be adjusted
accordingly.
7.4 Collection of Accounts and Adjustments. Until the Lender exercises
its rights to collect the Accounts pursuant to Sections 7.5 or 7.6, the Borrower
shall direct its account debtors to make payments directly to a lockbox
maintained by the Lender and shall implement such collection controls as may be
reasonably requested by the Lender from time to time. In the event any such
payments are delivered directly to the Borrower or to a member of the Guarantor
Group, all such payments, whether in the form of cash, checks, notes, or other
instruments for the payment of money (properly endorsed or assigned where
required to enable the collection of same), shall be held by the Borrower or
such member of the Guarantor Group in trust for the Lender and segregated from
other funds of the Borrower or such member of the Guarantor Group and delivered
to the Lender.
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7.5 Credit of Proceeds of Collection. The Lender shall credit the
proceeds of collection of Accounts received by the Lender to the Loan Account as
of the date of receipt by the Lender; however, for the purpose of computing
interest, payment shall not be considered to have been credited against any
Loans until two (2) Business Days after receipt thereof by the Lender. All such
proceeds of collection of Accounts shall be applied first to any Prime Rate
Loans then outstanding, then to any LIBOR if on the date of such receipt, such
date is the last day of the Interest Period applicable thereto. Such credits
shall be conditional upon final payment in cash or solvent credits of the items
giving rise to them. If any item is not so paid, the Lender, in its discretion,
whether or not the item is returned, may either reverse any credit given for the
item or debit the amount of the item from the deposits or other sums which may
be due to the Borrower from the Lender. So long as no Event of Default has
occurred which is continuing, upon elimination of any debit balance of the Loan
Account relating to Prime Rate Loans, proceeds of collection and other receipts
may then be credited to any deposit account which the Borrower may maintain with
the Lender, or, if there is no such account, held pending instructions from the
Borrower.
7.6 Lender's Rights in Collateral.
(a) After the occurrence of an Event of Default and so long as such an
Event of Default is continuing, with respect to any Accounts, (i) the Borrower
shall, at the request of the Lender, notify account debtors of the security
interest of the Lender in any Account and that payment thereof is to be made
directly to the Lender, and (ii) the Lender itself may, without notice to or
demand upon the Borrower, so notify account debtors. The giving of such
notification shall not affect the duties of the Borrower and each member of the
Guarantor Group, described below with respect to proceeds of collections of
Accounts received by the Borrower or any such member of the Guarantor Group.
After the occurrence of an Event of Default and with respect to any Accounts,
the Lender may, at its option and at any time, whether or not the Obligations
are due, without notice or demand on the Borrower or the Guarantor Group (i)
demand, collect, receipt for, settle, compromise, adjust, give discharges and
releases, all as the Lender may reasonably determine; (ii) commence and
prosecute any actions in any court for the purposes of collecting any such
Accounts and enforcing any other rights in respect thereof; (iii) defend, settle
or compromise any action brought and, in connection therewith, give such
discharge or release as the Lender may deem appropriate; (iv) receive, open and
dispose of mail addressed to the Borrower or any members of the Guarantor Group
and endorse checks, notes, drafts, acceptances, money orders, or other
instruments or documents evidencing payment, on behalf of and in the name of the
Borrower, or securing, or relating to such Accounts; and (v) sell, assign,
transfer, make any agreement in respect of, or otherwise deal with or exercise
rights in respect of, any such Accounts or the services which have given rise
thereto, as fully and completely as though the Lender were the absolute owners
thereof for all purposes.
(b) After the occurrence of an Event of Default and so long as any such
Event of Default is continuing, with respect to any Inventory, make, adjust and
settle claims under any insurance policy related thereto.
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(c) In addition to the remedies provided for herein or otherwise
available to the Lender, the Lender is hereby granted a license or other right
to use, without charge, the Borrower's labels, patents, copyrights, rights of
use of any name, trade secrets, trade names, trademarks and advertising matter,
or any property of a similar nature, as it pertains to the Collateral, in
completing production of, advertising for sale and selling any Collateral and
the Borrower's rights under all licenses and all franchise agreements shall
inure to the Lender's benefit. The Lender shall not exercise any rights provided
by this Section 7.6(c) unless an Event of Default has occurred and is
continuing.
Except as otherwise provided herein, the Lender shall have no duty as
to the collection or protection of the Collateral nor as to the preservation of
any rights pertaining thereto.
7.7 Remedies.
(a) In any jurisdiction where enforcement of rights hereunder is
sought, the Lender shall have, in addition to all other rights and remedies, the
rights and remedies of a secured party under the applicable Uniform Commercial
Code. Upon the occurrence of an Event of Default (such default not having been
previously cured to the reasonable satisfaction of the Lender) for so long as
any part of the Obligations remain unpaid or unperformed, the Lender may, at its
option, without notice or demand, declare all of the Obligations to be
immediately due and payable and take immediate possession of the Collateral, and
for that purpose enter upon any premises on which any of the Collateral is
situated and remove the same therefrom or remain on such premises and in
possession of such Collateral for purposes of conducting a sale or enforcing the
rights of the Lender under this Agreement. The Borrower will, upon demand, make
the Collateral available to the Lender at a place and time designated by the
Lender which is reasonably convenient. After the occurrence of an Event of
Default the Lender may collect and receive all income and proceeds in respect of
the Collateral, exercise all rights of the Borrower with respect thereto, and
apply the Collateral and any and all income and proceeds received by it
hereunder to the payment of all Obligations to the Lender. The Lender may sell,
lease or otherwise dispose of the Collateral at a public or private sale, with
or without having the Collateral at the place of sale, and upon terms and in
such manner as the Lender may determine in accordance with the provisions of the
applicable Uniform Commercial Code, or other law, governing secured party sales,
and the Lender may purchase any Collateral at any such sale. Unless the
Collateral threatens to decline rapidly in value or is of the type customarily
sold on a recognized market, the Lender shall give to the Borrower at least ten
business days' prior written notice of the time and place of any public sale of
the Collateral or of the time after which any private sales or any other
intended disposition thereof is to be made.
(b) Upon the occurrence of an Event of Default and during its
continuance, prior to any disposition of Collateral pursuant to this Agreement,
the Lender may, at its option, cause any of the Collateral to be repaired,
reconditioned, but not upgraded unless mutually agreed, in such manner and to
such extent as to make saleable, and any reasonable sums expended therefor by
the Lender shall be repaid by the Borrower and become part of the Obligations
secured hereby; the Lender shall have the right to enforce one or more remedies
hereunder successively or concurrently, and any
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such action shall not stop or prevent the Lender from pursuing any further
remedy which it may have hereunder or by law.
(c) The Lender shall be entitled to retain and to apply the proceeds of
such sale to: (i) all sums secured hereby; and (ii) its reasonable expenses of
retaking, holding, protecting and maintaining, and preparing for sale and
selling the Collateral, together with interest on such expenses at the rate
specified for Prime Rate Loans in, and in accordance with, this Agreement,
including reasonable attorney's fees and other legal expenses incurred by it in
connection therewith. If a sufficient sum is not realized from any such
disposition of Collateral to pay all Obligations secured by this Agreement, the
Borrower hereby promises and agrees to pay to the Lender any deficiency.
7.8 Waivers. Except as otherwise provided herein, the Borrower waives
demand, notice, protest, notice of acceptance of this Agreement, notice of loans
made, credit extended, Collateral received or delivered or other action taken in
reliance hereon and all other demands and notice of any description. With
respect to both the Obligations and the Collateral, the Borrower assents to any
extension or postponement of the time of payment or any other forgiveness or
indulgence, to any substitution, exchange or release of Collateral, to the
addition or release of any party or person primarily or secondarily liable, to
the acceptance of partial payment thereon and the settlement, compromising or
adjusting of any thereof, all in such manner and at such time or times as the
Lender may deem advisable. The Lender may exercise any rights with respect to
the Collateral without resorting, or regard, to other collateral or sources of
reimbursement for the Obligations.
SECTION VIII
DEFAULTS
8.1 Events of Default. There shall be an Event of Default hereunder if
any of the following events occurs:
(a) The Borrower shall fail to pay when due (i) any amount of principal
or interest on any Loans, including but not limited to amounts due under Section
7.7, (ii) any amount required to be prepaid under Section 2.17, or (iii) any
fees or expenses payable hereunder within three Business Days of the due date
therefor; or
(b) The Borrower shall fail to perform any term, covenant or agreement
contained in Sections 5.1(g), 5.2(b) and (c), 5.3, 5.4, 5.5, 5.7 through 5.11,
Section VI, 7.2, 7.3(a)-(e), or 7.4; or
(c) The Borrower shall fail to perform any term, covenant or agreement
contained in Section 5.2(a) or Sections 7.3(f)-(h) and such default shall
continue for 30 days; or
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(d) The Borrower shall fail to perform any term, covenant or agreement
(other than in respect of subsections 8.1(a) through (c) hereof) contained in
this Agreement and such default shall continue for 30 days after notice to the
Borrower from the Lender; or
(e) Any representation or warranty of the Borrower or any member of the
Guarantor Group made in this Agreement or any other Loan Document or in any
certificate delivered hereunder or thereunder shall prove to have been false in
any material respect upon the date when made or deemed to have been made; or
(f) There shall occur any material adverse change in the assets,
liabilities, financial condition, business or prospects of the Borrower or of
the Guarantor Group, considered as a whole; or
(g) The Borrower or any member of the Guarantor Group shall fail to pay
at maturity, or within any applicable period of grace, (i) any other
Indebtedness to the Lender or any of the Lender's Affiliates, or (ii) any
Indebtedness to any other Person, or fail to observe or perform any term,
covenant or agreement evidencing or securing such Indebtedness, the result of
which failure is to permit the holder or holders of such Indebtedness to cause
such Indebtedness to become due prior to its stated maturity, which such failure
in the case of the Guarantor Group, shall have a material adverse effect on the
Guarantor Group as a whole; or
(h) The Borrower or any member of the Guarantor Group shall (i) apply
for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar official of itself or of all
or a substantial part of its property, (ii) be generally not paying its debts as
such debts become due, (iii) discontinue its business or make a general
assignment for the benefit of its creditors, (iv) commence a voluntary case
under the Federal Bankruptcy Code (as now or hereafter in effect), (v) take any
action or commence any case or proceeding under any law relating to Bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts, or
any other law providing for the relief of debtors, (vi) fail to contest in a
timely or appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under such Bankruptcy Code or other law, (vii)
take any action under the laws of its jurisdiction of incorporation or
organization similar to any of the foregoing, or (viii) take any corporate
action for the purpose of effecting any of the foregoing, which such events in
the case of the Guarantor Group, shall have a material adverse effect on the
Guarantor Group as a whole; or
(i) A proceeding or case shall be commenced, without the application or
consent of the Borrower or any member of the Guarantor Group in any court of
competent jurisdiction, seeking (i) the liquidation, reorganization,
dissolution, winding up, or composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of it or
of all or any substantial part of its assets, or (iii) similar relief in respect
of it, under any law relating to Bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts or any other law providing for
the relief of debtors, and such proceeding or case shall continue undismissed,
or unstayed and in effect, for a period of 60 days following institution
thereof; or an order for relief shall be entered in an involuntary case under
such Bankruptcy Code, against the
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Borrower or action under the laws of the jurisdiction of incorporation or
organization of the Borrower or any member of the Guarantor Group similar to any
of the foregoing shall be taken with respect to the Borrower or any member of
the Guarantor Group and shall continue unstayed and in effect for any period of
60 days, and which such events in the case of the Guarantor Group, shall have a
material adverse effect on the Guarantor Group as a whole; or
(j) A judgment or order for the payment of money shall be entered
against the Borrower or any member of the Guarantor Group by any court, or a
warrant of attachment or execution or similar process shall be issued or levied
against property of the Borrower or any member of the Guarantor Group, which is
a single judgment in excess of $100,000 or which with other outstanding
judgments against the Borrower and the Guarantor Group, in the aggregate exceeds
$250,000 in value and (i) such judgment, order, warrant or process shall
continue undischarged or unstayed for 60 days, or pursuant to which an appeal
has been filed and is pending (ii) proceedings to foreclose any lien, attachment
or charge which may attach as security therefor shall be commenced, or (iii) any
property of the Borrower or the Guarantor Group shall have been seized or
otherwise charged in satisfaction thereof; or
(k) The Borrower or any member of the Guarantor Group or any member of
the Controlled Group shall fail to pay when due any amount 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 shall be filed under Title IV of ERISA by
the Borrower, any of the members of the Guarantor Group, any member of the
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 such Plan or Plans or a
proceeding shall be instituted by a fiduciary of any such Plan or Plans against
the Borrower of any member of the Guaranty Group and such proceedings shall not
have been dismissed within 60 days thereafter; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree adjudicating that
any such Plan or Plans must be terminated.
(l) Richard Maloof ceases to hold his current position with the
Borrower.
8.2 Remedies. Upon the occurrence of an Event of Default described in
subsections 8.1(h) and (i), immediately and automatically, and upon the
occurrence of any other Event of Default, at any time thereafter while such
Event of Default is continuing, at the Lender's option and upon the Lender's
declaration:
(a) The Lender's commitment to make any further Loans or consider
applications for Letters of Credit hereunder shall terminate;
(b) The unpaid principal amount of the Loans together with accrued
interest and all other Obligations shall become immediately due and payable
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived; and
(c) The Lender may exercise any and all rights it has under this
Agreement or any other documents or agreements executed in connection herewith,
or at law or in equity, and proceed to
<PAGE> 47
-43-
protect and enforce the Lender's rights by any action at law, in equity or other
appropriate proceeding.
SECTION IX
MISCELLANEOUS
9.1 Notices. All notices, requests and demands to or upon the Borrower
or the Lender shall be deemed to have been duly given or made: if by telecopy,
telex, telegram or by hand, immediately upon sending or delivery; if by any
overnight delivery service, one (1) day after dispatch; and if mailed by
certified mail, return receipt requested, five (5) days after mailing. All
notices, requests and demands are to be given or made to the respective parties
at the following addresses (or to such other address as any party may designate
by notice in accordance with this Section):
(a) If to the Borrower:
Bird Incorporated
1077 Pleasant Street
Norwood, Massachusetts 02062
Attention: Richard C. Maloof, President
Telephone: (617) 551-0656, Ext. 111
Facsimile: (617) 769-0434
(b) If to the Lender:
Fleet National Bank
One Federal Street
Boston, Massachusetts 02210
Attention: Thomas E. Hjerpe, Vice President
Telephone: (617) 346-0509
Facsimile: (617) 346-1558
(c) With a copy to:
Hinckley, Allen & Snyder
One Financial Center, Suite 4600
Boston, Massachusetts 02111
Attention: Frank A. Segall, Esq.
Telephone: (617) 345-9000
Facsimile: (617) 345-9020
<PAGE> 48
-44-
9.2 Expenses; Indemnification.
(a) The Borrower shall, on demand, pay or reimburse the Lender for all
reasonable expenses (including attorneys' fees of outside counsel or allocation
costs of in-house counsel) incurred or paid by the Lender in connection with the
preparation, negotiation and closing of this Agreement and the other Loan
Documents (whether or not the transactions contemplated hereby shall be
consummated) and all reasonable expenses (including attorneys' fees of outside
counsel or allocation costs of in-house counsel) incurred or paid by the Lender
in connection with the administration of this Agreement and the other Loan
Documents and any amendments, waivers, consents and the like with respect
thereto, any appraisals of the Collateral, and with the enforcement of any
Obligation of the Borrower or exercise of any right of the Lender. The Borrower
shall, on demand, pay or reimburse the Lender for all expenses (including the
allocation costs of the Lender's employees) incurred in connection with all
commercial finance examinations of the Borrower and the Guarantor Group
conducted by the Lender. All expenses under this Section 9.2 shall be itemized
in reasonable detail by the Lender.
(b) The Borrower will indemnify the Lender, its directors, officers and
employees and each other Person, if any, who controls the Lender, and will hold
the Lender and such other Persons harmless from and against any and all claims,
damages, losses, liabilities, judgments and expense (including, without
limitation, all reasonable fees and expenses of counsel and all expenses of
litigation or preparation therefor) which the Lender or such other Persons may
incur or which may be asserted against the Lender or such other Persons in
connection with or arising out of any investigation, litigation or proceeding
involving the Borrower or any member of the Guarantor Group, officer, director
or any Affiliate of the Borrower or any such member (including compliance
without contesting of any subpoenas or other process issued against the Lender,
or any director, officer or employee of the Lender, or any Person, if any, who
controls the Lender in any proceeding involving the Borrower or any member of
the Guarantor Group, member or any Affiliate of the Borrower or any such
member), whether or not the Lender is party thereto, other than claims, damages,
losses, liabilities or judgments with respect to any matter as to which the
Lender or such other Person seeking indemnity shall have been finally
adjudicated not to have acted in good faith.
9.3 Set-Off. Regardless of the adequacy of the Collateral, any deposits
or other sums, at any time credited by or due from the Lender to the Borrower
may at any time be applied to or set off against Obligations on which the
Borrower is primarily liable and may at or after the maturity thereof be applied
to or set off against Obligations on which the Borrower is secondarily liable.
9.4 Term of Agreement; Post-Termination Letters of Credit. This
Agreement shall continue in force and effect so long as the Lender has any
commitment to make Loans hereunder or any Loan, Letter of Credit or any other
Obligation hereunder shall be outstanding. To the extent that any Letter of
Credit will remain outstanding after the Termination Date, the Borrower shall,
on or prior to the Termination Date, pay to the Lender, in same day funds, an
amount equal to the aggregate face amount of all such Letters of Credit to be
held by the Lender as security for the payment of any amounts which may
thereafter become due under such Letters of Credit.
<PAGE> 49
-45-
9.5 No Waivers. No failure or delay by the Lender in exercising any
right, power or privilege hereunder or under any other documents or agreements
executed in connection herewith shall operate as a waiver thereof; nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and not exclusive of any rights or
remedies otherwise provided by law.
9.6 Governing Law. This Agreement shall be deemed to be a contract made
under seal and shall be construed in accordance with and governed by the laws of
The Commonwealth of Massachusetts (without giving effect to any conflicts of
laws provisions contained therein).
9.7 Amendments. Neither this Agreement nor any provision hereof or
thereof may be amended, waived, discharged or terminated except by a written
instrument signed by the Lender and, in the case of amendments, by the Borrower.
9.8 Binding Effect of Agreement. This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Lender and their respective
successors and assigns; provided that the Borrower may not assign or transfer
its rights hereunder. The Lender may assign all of its rights and obligations
hereunder without the consent of the Borrower. The Lender may sell, transfer or
grant participations in the Loans and Letters of Credit without the prior
written consent of the Borrower and the Borrower agrees that any transferee or
participant shall be entitled to the benefits of Sections 2.10, 5.5, 9.2 and 9.3
to the same extent as if such transferee or participant were the Lender
hereunder; provided that notwithstanding any such transfer or participation, the
Borrower may, for all purposes of this Agreement, treat the Lender as the person
entitled to exercise all rights hereunder and to receive all payments with
respect thereto.
9.9 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures hereto and thereto were
upon the same instrument.
9.10 Severability. The invalidity or unenforceability of any one or
more phrases, clauses or sections of this Agreement shall not affect the
validity or enforceability of the remaining portions of it.
9.11 Captions. The captions and headings of the various sections and
subsections of this Agreement are provided for convenience only and shall not be
construed to modify the meaning of such sections or subsections.
9.12 Assignments and Participations.
(a) Assignments. The Lender may at any time assign all, or a portion,
of its rights, interests and duties with respect to its commitment to make Loans
hereunder to one or more Lenders or other financial institutions, or any
Affiliate thereof, (each, an "Assignee") on such terms, as between the Lender
and each Assignee, as the Lender may deem appropriate, and such Assignee shall
assume such rights, interests and duties pursuant to an instrument executed by
such Assignee and the Lender, or, in the case of a partial assignment by the
Lender, pursuant to an amended and restated
<PAGE> 50
-46-
form of this Agreement, and for this purpose the Lender may make available to
each of its potential Assignees such information relating to the Borrower and
the Guarantor Group, this Agreement and the transactions contemplated hereby as
the Lender may deem necessary or desirable. Upon notice to the Borrower of an
assignment in full of the Lender's rights, interests and duties hereunder to an
Assignee, such Assignee shall have all the rights, interest and duties of the
Lender hereunder with a commitment to make Loans as set forth in herein, and the
Lender shall be released from its obligations hereunder in full without the
requirement of any further consent or action by the Borrower.
(b) Participations. In addition to its rights to assign all or any
portion of its commitment hereunder pursuant to the foregoing subsection (a) of
this Section 9.12, the Lender may sell participations in the Loans and the
Letters of Credit to one or more Lenders or other financial institutions, or any
Affiliate thereof, on such terms as the Lender may deem appropriate, and for
this purpose the Lender may make available to each potential participant such
information relating to the Borrower and the Guarantor Group, this Agreement and
the transactions contemplated hereby as the Lender may deem necessary or
desirable.
9.13 Entire Agreement. This Agreement and the documents and agreements
executed in connection herewith constitute the final agreement of the parties
hereto and supersede any prior agreement or understanding, written or oral, with
respect to the matters contained herein and therein.
9.14 JURY WAIVER. EACH OF THE BORROWER AND THE LENDER AGREE THAT
NEITHER OF THEM, NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN
ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER ACTION BASED UPON, OR
ARISING OUT OF, THIS AGREEMENT, ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE
DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO
CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY
DISCUSSED BY THE BORROWER AND THE LENDER, AND THESE PROVISIONS SHALL BE SUBJECT
TO NO EXCEPTIONS. NEITHER THE BORROWER NOR THE LENDER HAS AGREED WITH OR
REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
<PAGE> 51
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as an instrument under seal as of the
day and year first above written.
BORROWER:
WITNESSED: BIRD INCORPORATED
/s/Leslie Muldowney By:/s/R. C. Maloof
- ---------------------------- ------------------------
Name:
Title: President
LENDER:
WITNESSED: FLEET NATIONAL BANK
/s/Leslie Muldowney By:/s/Thomas E. Hjerpe
- ---------------------------- ------------------------
Name:
Title: Vice President
<PAGE> 52
EXHIBIT A
*
REVOLVING CREDIT NOTE
$15,000,000 ____________, 199__
Boston, Massachusetts
For value received, the undersigned hereby promises to pay to Fleet
National Bank (the "Lender"), or order, at One Federal Street, Boston,
Massachusetts 02110, or such other place as the Lender may designate, the
principal amount of Fifteen Million Dollars ($15,000,000) or such lesser amount
as shall equal the principal amount outstanding hereunder on the Termination
Date, as defined in the Agreement referenced below, and when the principal
balance hereof is otherwise due (whether at maturity, by reason of acceleration
or otherwise) in accordance with the terms of the Agreement, in lawful money of
the United States of America and in immediately available funds, and to pay
interest on the unpaid principal balance hereof from time to time outstanding,
at said place and in like money and funds. Interest shall be payable in the
manner, on the dates and at the rates specified in that certain Revolving Credit
and Security Agreement dated the date hereof by and between the undersigned and
the Lender (herein, as the same may from time to time be amended or extended,
referred to as the "Agreement"). All principal remaining unpaid and any accrued
but unpaid interest shall in any event be due and payable on the Termination
Date.
This Note is issued pursuant to, and entitled to the benefits of, and
is subject to, the provisions of the Agreement but neither this reference to the
Agreement nor any provision thereof shall affect or impair the absolute and
unconditional obligation of the undersigned maker of this Note to pay the
principal of and interest on this Note as herein provided.
As provided in the Agreement, this Note is secured by certain personal
property of the undersigned and is subject to mandatory prepayment in certain
circumstances.
In case an Event of Default (as defined in the Agreement) shall occur,
the aggregate unpaid principal of and accrued interest on this Note shall become
or may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
The undersigned may at its option prepay all or any part of the
principal of this Note before maturity upon the terms provided in the Agreement.
The undersigned maker hereby waives presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.
This instrument shall have the effect of an instrument executed under
seal and shall be governed by and construed in accordance with the laws of The
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained therein).
<PAGE> 53
-2-
IN WITNESS WHEREOF, the undersigned has caused its duly authorized
officer to execute and deliver this Note as of the date first written above.
WITNESSED: *
_________________________________ By:___________________________________
_________________________________ ___________________________________
Print Name Print Name
Title:_______________________________
[SEAL]
<PAGE> 54
EXHIBIT B
*
COMPLIANCE CERTIFICATE
This Certificate is furnished pursuant to Section 5.1(c) of the
Revolving Credit and Security Agreement dated as of BIRD INCORPORATED (the
"Borrower") and Fleet National Bank, as amended from time to time (the
"Agreement"). Unless otherwise defined herein, the terms used in this Report
have the meanings given to them in the Agreement.
As required by Section 5.1[(a), (b)] of the Agreement, consolidated
financial statements of the Borrower and the Guarantor Group for the
[year/quarter] ended ____________________, 199__ (the "Financial Statements")
prepared in accordance with generally accepted accounting principles
consistently applied accompany this Report. The Financial Statements present
fairly the consolidated financial position of the Borrower and the Guarantor
Group as at the date thereof and the consolidated results of operations of the
Borrower and the Guarantor Group for the period covered thereby (subject only to
normal recurring year-end adjustments).
The figures set forth in Schedule A for determining compliance by the
Borrower with the financial covenants contained in the Agreement are true and
complete as of the date hereof.
The activities of the Borrower and the Guarantor Group during the
period covered by the Financial Statements have been reviewed by the
[President/Treasurer/Chief Accounting Officer] or by employees or agents under
his or her immediate supervision. Based on such review, to the best knowledge
and belief of the [President/Treasurer/Chief Accounting Officer], and as of the
date of this Certificate, no Default has occurred. (1)
WITNESS my hand this ____ day of ____________, 199__
BIRD INCORPORATED
By:__________________________________
Name:________________________________
Title:_______________________________
______________________
(1) If a Default has occurred, this
paragraph is to be modified with an
appropriate statement as to the
nature thereof, the period of
existence thereof and what action
the Borrower has taken, is taking,
or proposes to take with respect
thereto.
<PAGE> 55
SCHEDULE A
to
EXHIBIT B
*
COVENANT COMPLIANCE CERTIFICATE
FOR PERIOD ENDED ___________
Section 5.7 Minimum Tangible Net Worth
Requirement: $21,000,000 Minimum
Actual:
Section 5.8 Maximum Total Liabilities to Tangible Net Worth
Requirement: 1.5:1
Actual:
Section 5.9 Minimum Fixed Charge Coverage Ratio
Fiscal Quarter Ended Minimum Ratio Required Actual Ratio
March 31 1.0 :1
June 30 1.25 :1
September 30 1.25 :1
December 31 1.0 :1
Section 5.10 Maximum Capital Expenditures
Fiscal Year Ended Maximum Allowed Amount Actual Amount
December 31, 1997 $2,000,000
December 31, 1998 $
December 31, 1999
<PAGE> 1
EXHIBIT 11
BIRD CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (1)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary earnings per share
Net earnings from continuing operations $10 $2,112 $128 $1,692
Deduct dividend requirements:
Preferred stock (7) (7) (22) (22)
Convertible preference stock (377) (377) (1,130) (1,130)
--------- --------- --------- ---------
Net earnings (loss) from continuing operations ($374) $1,728 ($1,024) $540
Net earnings from discontinued operations 0 81 0 141
--------- --------- --------- ---------
Net earnings (loss) applicable to common stock ($374) $1,809 ($1,024) $681
========= ========= ========= =========
Weighted average number of common
shares outstanding (1) 4,152,629 4,132,572 4,148,059 4,127,511
Assuming exercise of options reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options (2) 0 0 0 11,325
--------- --------- --------- ---------
Weighted average number of common
shares outstanding as adjusted 4,152,629 4,132,572 4,148,059 4,138,836
========= ========= ========= =========
Primary earnings (loss) per common share:
Continuing operations ($0.09) $0.42 ($0.25) $0.13
Discontinued operations $0.00 $0.02 $0.00 $0.03
--------- --------- --------- ---------
($0.09) $0.44 ($0.25) $0.16
========= ========= ========= =========
</TABLE>
(1) See Note 3 of Notes to Consolidated Financial Statements.
(2) APB 15 paragraph 30 indicates computation of primary earnings per share
should not give effect to common stock equivalents if their inclusion has
the effect of decreasing the loss per share amount otherwise computed or is
anti-dilutive.
<PAGE> 2
EXHIBIT 11
BIRD CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (1)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Fully diluted earnings per share (2)
Net earnings from continuing operations $10 $2,112 $128 $1,692
Deduct dividend requirements of
preferred stock (7) (7) (22) (22)
--------- --------- --------- ---------
Net earnings from continuing operations 3 2,105 106 1,670
Net earnings from discontinued operations 0 81 0 141
--------- --------- --------- ---------
Net earnings applicable to common stock 3 2,186 106 1,811
========= ========= ========= =========
Weighted average number of common
shares outstanding (1) 4,152,629 4,132,572 4,148,059 4,127,511
Assuming exercise of options reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options (3) 0 3,280 13,914 13,137
Assuming conversion of convertible
preference stock 731,955 731,955 731,955 731,955
--------- --------- --------- ---------
Weighted average number of common
shares outstanding as adjusted 4,884,584 4,867,80 4,893,928 4,872,603
========= ========= ========= =========
Fully diluted earnings per common share:
Continuing operations $0.00 $0.43 $0.02 $0.34
Discontinued operations $0.00 $0.02 $0.00 $0.03
--------- --------- --------- ---------
$0.00 $0.45 $0.02 $0.37
========= ========= ========= =========
</TABLE>
(1) See Note 3 of Notes to Consolidated Financial Statements.
(2) These calculations are submitted in accordance with Securities Exchange Act
of 1934, Release No. 9083, although in certain instances, it is contrary to
paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive
result.
(3) APB 15 paragraph 30 indicates computation of primary earnings per share
should not give effect to common stock equivalents if their inclusion has
the effect of decreasing the loss per share amount otherwise computed or is
anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER
30, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FORM 10-Q
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 567,000
<SECURITIES> 0
<RECEIVABLES> 7,863,000
<ALLOWANCES> 198,000
<INVENTORY> 6,113,000
<CURRENT-ASSETS> 15,064,000
<PP&E> 41,664,000
<DEPRECIATION> 20,863,000
<TOTAL-ASSETS> 39,536,000
<CURRENT-LIABILITIES> 11,962,000
<BONDS> 0
0
1,394,000
<COMMON> 4,430,000
<OTHER-SE> 21,487,000
<TOTAL-LIABILITY-AND-EQUITY> 39,536,000
<SALES> 34,438,000
<TOTAL-REVENUES> 34,438,000
<CGS> 30,026,000
<TOTAL-COSTS> 30,026,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 228,000
<INCOME-PRETAX> 128,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 128,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 128,000
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
