<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2000 Commission File Number 0-8623
ROBOTIC VISION SYSTEMS, INC.
(Exact name of Registrant as specified in charter)
DELAWARE 11-2400145
(State or other jurisdiction of IRS Employer
incorporation or organization) Identification Number
5 SHAWMUT ROAD, CANTON, MASSACHUSETTS 02021
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (781) 302-2439
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 twelve 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 / /
Number of shares of Common Stock outstanding as of May 8, 2000 34,346,758
No of Pages 12
<PAGE> 2
PART 1. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
2000 1999
--------- -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ........................................... $ 34,080 $ 6,293
Accounts receivable, net ............................................ 55,441 37,502
Inventories ......................................................... 38,592 32,553
Prepaid expenses and other current assets ........................... 3,558 1,288
--------- ---------
Total current assets .............................................. 131,671 77,636
Plant and equipment, net ............................................ 12,643 12,281
Deferred income taxes ............................................... 8,820 8,820
Goodwill, net ....................................................... 4,990 5,250
Software development costs, net ..................................... 14,140 13,965
Other assets ........................................................ 7,066 5,249
--------- ---------
$ 179,330 $ 123,201
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt ................. $ 233 $ 35,627
Accounts payable .................................................... 26,556 21,093
Accrued expenses and other current liabilities ...................... 15,614 16,531
--------- ---------
Total current liabilities ......................................... 42,403 73,251
Long-term debt ...................................................... 2,676 2,855
--------- ---------
Total liabilities ................................................. 45,079 76,106
Commitments and contingencies ....................................... -- --
Prepaid warrants .................................................... 8,644 9,105
Stockholders' Equity:
Common stock $0.01 par value; shares authorized 75,000; issued and
outstanding March 31, 2000 - 34,003 and
September 30, 1999 - 27,354.......................................... 340 274
Additional paid-in capital .......................................... 262,791 179,466
Accumulated deficit ................................................. (137,267) (141,683)
Accumulated other comprehensive income .............................. (257) (67)
--------- ---------
Total stockholders' equity ........................................ 125,607 37,990
--------- ---------
$ 179,330 $ 123,201
========= =========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 3
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
---------------------- ----------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues ................................... $ 56,743 $ 27,294 $103,823 $ 56,699
Cost of revenues ........................... 32,013 15,433 58,269 32,267
-------- -------- -------- --------
Gross profit ............................. 24,730 11,861 45,554 24,432
-------- -------- -------- --------
Operating costs and expenses:
Research and development expenses .......... 6,604 4,882 12,467 10,472
Selling, general and
administrative expenses.................... 13,886 10,654 26,423 21,870
-------- -------- -------- --------
Income (loss) from operations ............ 4,240 (3,675) 6,664 (7,910)
Gain on sale of assets ..................... -- (250) -- (3,048)
Interest expense, net ...................... 692 687 1,763 1,522
-------- -------- -------- --------
Income (loss) before income taxes ........ 3,548 (4,112) 4,901 (6,384)
Provision for income taxes ................. 71 -- 98 --
-------- -------- -------- --------
Net income (loss) ........................ 3,477 (4,112) 4,803 (6,384)
======== ======== ======== ========
Net income (loss) per share
Basic .................................... $ 0.11 $ (0.17) $ 0.15 $ (0.26)
======== ======== ======== ========
Diluted .................................. $ 0.09 $ (0.17) $ 0.13 $ (0.26)
======== ======== ======== ========
Weighted Average shares
Basic .................................... 29,782 24,885 28,570 24,881
Diluted .................................. 39,062 24,885 36,980 24,881
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
------------------------
2000 1999
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ................................................................. $ 4,803 $ (6,384)
Adjustments to reconcile net income (loss) to net cash used in operating activities
Depreciation and amortization ................................................... 5,088 5,277
Gain on sale of assets .......................................................... -- (3,048)
Changes in operating assets and liabilities
Accounts receivable ........................................................... (17,939) (244)
Inventories ................................................................... (6,039) 4,301
Prepaid expense and other current assets ...................................... (2,270) (141)
Other assets .................................................................. (144) (162)
Accounts payable .............................................................. 5,463 (2,713)
Accrued expenses and other current liabilities ................................ (1,794) (4,912)
-------- --------
Net cash used in operating activities ......................................... (12,832) (8,026)
-------- --------
INVESTING ACTIVITIES:
Additions to plant and equipment, net ............................................. (3,022) (593)
Additions to software development costs ........................................... (2,071) (2,702)
Proceeds from sale of assets ...................................................... -- 4,300
-------- --------
Net cash (used in) provided by investing activities ............................. (5,093) 1,005
-------- --------
FINANCING ACTIVITIES:
Proceeds from the issuance of equity placements, net of offering costs ............ 79,330 9,686
Proceeds from the exercise of stock options and warrants .......................... 1,961 12
Net payments of short-term borrowings ............................................. (35,394) (2,112)
Repayment of long-term borrowings ................................................. (179) (207)
-------- --------
Net cash provided by financing activities ....................................... 45,718 7,379
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ...................... (6) --
NET INCREASE IN CASH AND CASH EQUIVALENTS ......................................... 27,787 358
CASH AND CASH EQUIVALENTS:
Beginning of year ............................................................... 6,293 2,421
-------- --------
End of period ................................................................... $ 34,080 $ 2,779
-------- --------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid ..................................................................... $ 2,799 $ 822
-------- --------
Taxes paid ........................................................................ $ 95 $ --
-------- --------
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of subordinated note payable in connection with asset purchase agreement . $ 2,000 $ --
-------- --------
Conversion of subordinated note payable and accrued interest into common stock .... $ (2,067) $ --
-------- --------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
1. CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Balance Sheet of Robotic Vision Systems, Inc., and
Subsidiaries (The "Company") as of March 31, 2000, the Consolidated Statement of
Operations for the three and six month periods ended March 31, 2000 and 1999 and
the Consolidated Statement of Cash Flows for the six month periods ended March
31, 2000 and 1999 have been prepared by the Company, without audit. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial condition, results of
operations and cash flows for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed consolidated financial
statements are not necessarily indicative of the operating results for the full
year and should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Form 10-K for the year
ended September 30, 1999.
2. PUBLIC OFFERING
On February 23, 2000, the Company completed a public offering of 6,008 shares
of common stock including 5,750 shares sold by the Company for net proceeds of
approximately $79,330, after selling expenses. In addition, Polaroid Corporation
converted the subordinated note, referred to in Note 9, plus accrued interest
into 258 shares and sold them in the offering.
3. INVENTORIES
Inventories at March 31, 2000 and September 30, 1999 consisted of the
following:
<TABLE>
<CAPTION>
MARCH 31, 2000 SEPTEMBER 30, 1999
-------------- ------------------
<S> <C> <C>
Raw Materials $ 22,076 $ 16,817
Work-in-Process 7,292 7,360
Finished Goods 9,224 8,376
-------- --------
Total $ 38,592 $ 32,553
======== ========
</TABLE>
4. NOTES PAYABLE
On February 29, 2000, the Company repaid borrowings of $35,325 outstanding
on the revolving credit agreement with three domestic banks. The Company
cancelled 500 warrants issued to these banks, because the warrants were only
exercisable if the agreement was extended beyond March 17, 2000. On April 28,
2000, the Company entered into a three year $35,000 revolving credit
agreement with another domestic bank. This agreement is collateralized by
substantially all of the domestic tangible and intangible assets of the Company.
This agreement allows for borrowings based on a 85% of eligible receivables plus
up to a $10,000 of availability provided under the Export-Import Bank of the
United States guarantee of certain foreign accounts receivables and inventories.
5. SALE OF PRODUCT LINE
In December 1998, the Company sold its Aircraft Safety product line to a
subsidiary of B.F. Goodrich for $4,050 in cash. The Company no longer considered
this technology a key component of its product portfolio or future strategic
direction. The Company sold certain inventory, equipment and intellectual
property in the transaction, resulting in a gain of $3,048. Proceeds from the
sale were used for working capital requirements and to repay $2,025 of
outstanding bank debt.
5
<PAGE> 6
6. EARNINGS PER SHARE
Basic net income (loss) per share is computed using the weighted average
number of shares outstanding during each period. Diluted net income per share
reflects the effect of the Company's outstanding stock options and warrants
(using the treasury stock method), except where such options and warrants would
be anti-dilutive. The calculations for earnings per share for the three and six
months ended March 31, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
BASIC EPS 2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss) .................................................................. $ 3,477 $ (4,112) $ 4,803 $ (6,384)
Premium on prepaid warrants ........................................................ (192) (77) (385) (77)
-------- -------- -------- --------
Income (loss) - basic numerator 3,285 (4,189) 4,418 (6,461)
Weighted average number of common shares - basic denominator ....................... 29,782 24,885 28,570 24,881
Net income (loss) per share - basic $ 0.11 $ (0.17) $ 0.15 $ (0.26)
-------- -------- -------- --------
DILUTED EPS
Income (loss) - basic numerator 3,285 (4,189) 4,418 (6,461)
Effect of conversion of prepaid warrants .......................................... 192 -- 385 --
-------- -------- -------- --------
Income (loss) - diluted numerator .................................................. $ 3,477 $ (4,189) $ 4,803 $ (6,461)
Weighted average number of common shares - basic denominator ....................... 29,782 24,885 28,570 24,881
Effect of conversion of prepaid warrants .......................................... 2,778 -- 2,778 --
Effect of other dilutive common stock options and warrants ......................... 6,502 -- 5,632 --
-------- -------- -------- --------
Weighted average number of common and common equivalent shares -
diluted denominator................................................................ 39,062 24,885 36,980 24,881
-------- -------- -------- --------
Net income (loss) per share - diluted .............................................. $ 0.09 $ (0.17) $ 0.13 $ (0.26)
-------- -------- -------- --------
</TABLE>
For the three and six months ended March 31, 2000, the Company had common
stock options and warrants excluded from the earnings per share calculations of
670 and 813 respectively, as they were anti-dilutive. For the three and six
months ended March 31, 1999, the Company had common stock options and warrants
excluded from the earnings per share calculations of 5,900 and 4,483
respectively, as they were anti-dilutive.
7. COMPREHENSIVE INCOME (LOSS)
In addition to net income or loss, the only item that the Company currently
records as other comprehensive income or loss is the change in the cumulative
translation adjustment resulting from the changes in exchange rates and the
effect of those changes upon translation of the financial statements of the
Company's foreign operations. For the three months ended March 31, 2000 and
1999, total comprehensive income (loss) of $3,103 and $(4,189), respectively,
included net income (loss) of $3,285 and $(4,189), respectively, and foreign
currency translation adjustments of $(182) and $0, respectively. For the six
months ended March 31, 2000 and 1999, total comprehensive income (loss) of
$4,228 and $(6,461), respectively, included net income (loss) of $4,418 and
$(6,461), respectively, and foreign currency translation adjustments of $(190)
and $0, respectively.
6
<PAGE> 7
8. SEGMENT INFORMATION
The Company operates in two reporting segments of the machine vision
industry. Intersegment sales by the Acuity CiMatrix division were $1,632 and
$862 for the first six months of fiscal 2000 and 1999, respectively. Other
income (loss) is comprised of corporate general and administrative expenses. The
following table presents information about the Company's reportable segments for
the three and six months ended March 31:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Semiconductor Equipment ........... $ 45,757 $ 16,622 $ 81,029 $ 34,344
Acuity CiMatrix ................... 10,986 10,672 22,794 22,355
--------- --------- --------- ---------
Total Revenues .................... $ 56,743 $ 27,294 $ 103,823 $ 56,699
--------- --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS
Semiconductor Equipment ........... $ 6,861 $ (233) $ 10,687 $ (2,317)
Acuity CiMatrix ................... (521) (949) (642) (2,011)
Other ............................. (2,090) (2,493) (3,381) (3,582)
--------- --------- --------- ---------
Total income(loss) from
operations....................... $ 4,250 $ (3,675) $ 6,664 $ (7,910)
--------- --------- --------- ---------
DEPRECIATION AND AMORTIZATION
Semiconductor Equipment ........... $ 1,949 $ 1,674 $ 3,726 $ 3,672
Acuity CiMatrix ................... 743 971 1,362 1,605
--------- --------- --------- ---------
Total depreciation and
amortization...................... $ 2,692 $ 2,645 $ 5,088 $ 5,277
--------- --------- --------- ---------
</TABLE>
9. ACQUISITION OF INTELLECTUAL PROPERTY RIGHTS
In December 1998, Acuity CiMatrix introduced the MXi, the first hand-held
imager for reading direct part marks, 1-D barcodes and new digital 2-D
symbologies, such as the Data Matrix code. The MXi is a result of a joint
development and marketing arrangement with Polaroid. In November 1999, the
Company acquired Polaroid's interest in the MXi, including all relevant
intellectual property rights, for $2.0 million and the Company's agreement to
pay Polaroid a 10-year royalty upon net sales of the MXi. The Company's $2.0
million obligation to Polaroid was evidenced by a five-year subordinated note,
which bore interest at 11% payable at maturity. The Company concurrently entered
into an agreement with Polaroid calling for it to manufacture this product on
the Company's behalf. In conjunction with the public offering, the note was
converted into shares of the Company's common stock at $8.00 per share. See Note
2.
10. RECLASSIFICATION OF WARRANT PREMIUM
In March 2000, the Company has elected to pay cash instead of shares for the
warrant premium accrued, and has reclassified $847 from prepaid warrants to
accrued expenses.
7
<PAGE> 8
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
RESULTS OF OPERATIONS
Revenues were $56.7 million in the three months ended March 31, 2000
compared to $27.3 million in the three months ended March 31, 1999, an increase
of 107.9% associated with the increased levels of revenues for semiconductor
inspection and handling equipment. In the three months ended March 31, 2000,
revenues for the Company's Semiconductor Equipment Group represented 80.6% of
total revenues, compared to 60.9% of total revenues in the three months ended
March 31, 1999.
Revenues were $103.8 million in the six months ended March 31, 2000 compared
to $56.7 million in the six months ended March 31, 1999, an increase of 83.1%.
The increase in revenues year-to-year was due to the same factors that affected
the current quarter. In the six months ended March 31, 2000, revenues for the
Company's Semiconductor Equipment Group represented 78.0% of total revenues,
compared to 60.6% of total revenues in the six months ended March 31, 1999.
The gross profit margin was consistent at 43.6% of revenues in the three
months ended March 31, 2000 compared to 43.5% of revenues in the three months
ended March 31, 1999. The gross profit margin was 43.9% of revenues in the six
months ended March 31, 2000 compared to 43.1% of revenues in the six months
ended March 31, 1999. The higher gross profit margin year-to-year primarily
reflects the impact of the higher level of sales attributable to the
Semiconductor Equipment Group.
Research and development expenses were $6.6 million, or 11.6% of revenues,
in the three months ended March 31, 2000, compared to $4.9 million, or 17.9% of
revenues, in the three months ended March 31, 1999. The Company has continued to
invest in new product development, including new semiconductor inspection and
component handling systems, as well as enhancing its 1-D barcode reading
products and expanding its new matching vision platform, Visionscape. In the
three months ended March 31, 2000, the Company capitalized $1.1 million in
software development costs under Statement of Financial Accounting Standards No.
86, compared to $1.2 million in the three months ended March 31, 1999.
Research and development expenses were $12.5 million, or 12.0% of revenues,
in the six months ended March 31, 2000, compared to $10.5 million, or 18.5% of
revenues, in the six months ended March 31, 1999. In the six months ended March
31, 2000, the Company capitalized $2.1 million in software development costs
under Statement of Financial Accounting Standards No. 86, compared to $2.7
million in the six months ended March 31, 1999.
Selling, general and administrative expenses were $13.9 million, or 24.5% of
revenues, in the three months ended March 31, 2000, compared to $10.7 million,
or 39.0% of revenues, in the three months ended March 31, 1999. The higher level
of expense dollars reflects a combination of higher level of variable selling
expenses associated with the increase in revenues, including increased
commissions, salaries and related expenses.
Selling, general and administrative expenses were $26.4 million, or 25.5% of
revenues, in the six months ended March 31, 2000, compared to $21.9 million, or
38.6% of revenues, in the six months ended March 31, 1999. The higher level of
expense dollars were primarily related to same factors that affected quarterly
expenses.
In fiscal 1999, the Company sold its Aircraft Safety division to a
subsidiary of B.F. Goodrich for $4.05 million in cash. The Company no longer
considered this technology a key component of its product portfolio or future
strategic direction. The Company sold certain inventory, equipment and
intellectual property in the transaction, resulting in a gain of $3.0 million.
Proceeds from the sale were used for working capital requirements and to repay
$2.0 million of outstanding bank debt.
Net interest expense was $0.7 million in the three months ended March 31,
2000, consistent when compared to $0.7 million in the three months ended March
31, 1999. On a sequential basis, interest is down $0.4 million, resulting from
the repayment of $35.3 million of bank debt on February 29, 2000, under the
former credit facility.
The tax provision for the three and six months ended March 31, 2000
reflected minimum federal income taxes. There was no tax provision in the three
and six months ended March 31, 1999, due to the loss in those fiscal periods.
8
<PAGE> 9
Net income was $3.5 million for the three months ended March 31, 2000,
compared with a net loss of $4.1 million for the three months ended March 31,
1999. Net income was $4.8 million for the six months ended March 31, 2000,
compared with a net loss of $6.4 million for the six months ended March 31,
1999. Excluding the $3.0 million gain from the sale of the Company's Aircraft
Safety division, the net loss for the six months ended March 31, 1999 was $9.4
million.
LIQUIDITY AND CAPITAL RESOURCES
On February 23, 2000, the Company completed a public offering of its common
stock for proceeds of $79.3 million, after selling expenses. As a result of the
public offering, the Company repaid its $35.3 million of borrowings under its
existing credit facility and then terminated that facility.
The Company's cash balance increased $27.8 million, to $34.1 million, in
the six months ended March 31, 2000. Net cash of $45.7 million was provided by
financing activities, offset by $12.8 million of net cash used in operating
activities and $5.1 million of net cash used in investing activities.
The $45.7 million of net cash provided by financing activities was primarily
the result of the proceeds of the Company's public offering of $79.3 million and
other proceeds of exercises of stock options and warrants $2.0 million, which
was offset debt repayments of $35.6 million.
The $12.8 million of net cash used in operating activities was primarily a
result of an increase in accounts receivable of $17.9 million and a $6.0 million
increase in inventories, partially offset by net income $4.8 million,
depreciation and amortization of $5.1 million and a $5.5 million increase in
accounts payable.
Additions to plant and equipment were $3.0 million in the six months ended
March 31, 2000, as compared to $0.6 million the six months ended March 31, 1999.
Capitalized software development costs in the six months ended March 31, 2000
were $2.1 million.
During the quarter ended March 31, 2000, the Company repaid its $35.3
million of borrowings outstanding under its revolving credit agreement.
Subsequent to the end of the quarter, the Company entered into a three year
$35.0 million revolving credit agreement with another domestic bank. This
agreement is collateralized by substantially all of the domestic tangible and
intangible assets of the Company. This agreement allows for borrowings based on
a 85% of eligible receivables plus up to a $10.0 million of availability
provided under the Export-Import Bank of the United States guarantee of certain
foreign accounts receivables and inventories.
Management believes that through its current cash balances, working capital
and bank financing, the Company will have sufficient liquidity to fund its cash
requirements for at least the next 12 months.
EFFECT OF INFLATION
Management believes that during the three months ended March 31, 2000 the
effect of inflation was not material.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1999, the FASB issued Statement of Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of the
Effective Date of FASB Statement No. 133." SFAS No. 137 delays the
implementation of SFAS No. 133 until our fiscal year ending September 30, 2001.
We have not completed our evaluation of the effects of SFAS No. 133.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 summarizes certain of the SEC's views in applying
revenue recognition in financial statements. The provisions of SAB No. 101 are
effective for fiscal years beginning October 1, 2000. The Company has not
completed its evaluation of the effects of SAB No. 101.
9
<PAGE> 10
YEAR 2000 STATUS
To date, the Company has experienced no failures or disruptions in its
internal operating systems, in its products or its third party vendors and
suppliers either on or after January 1, 2000. It is possible that future
failures or disruptions stemming from Year 2000 issues may yet result and hamper
the Company's ability to process transactions, send invoices, accept customer
orders or timely provide customers with product services.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This report contains forward-looking statements including statements
regarding, among other items, financing activities and anticipated trends in the
Company's business, which are made pursuant to the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. These statements are based
largely on the Company's expectations and are subject to a number risks and
uncertainties, some of which cannot be predicted or quantified and are beyond
the Company's control, including the following: its principal market is the
highly cyclical semiconductor industry which causes a cyclical impact on its
financial results; the Company's return to sustained profitability cannot be
assured; the market for semiconductor capital equipment is highly concentrated;
economic difficulties encountered by certain of the Company's foreign customers
have resulted in order cancellations and reduced collections of outstanding
accounts receivable; development of the Company's products requires significant
lead time and it may fail to correctly anticipate the technical needs of its
markets; the Company's success is dependent on its ability to hire and retain
qualified personnel; the large number of shares available for future sale could
adversely affect the price of the Company's common stock; and the Company's
stock price is volatile.
Future events and actual results could differ materially from those set
forth in, contemplated by, or underlying the forward-looking statements.
Statements in this report, including those set forth above, describe factors,
among others, that could contribute to or cause such differences.
This 10-Q should be read in conjunction with detailed risk factors in the
Company's most recent registration statement, and other risk factors in the
Company's annual report on Form 10-K, and other filings with the Securities and
Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Financial instruments that potentially subject the Company to concentrations
of credit-risk consist principally of cash equivalents and trade receivables. It
places its cash equivalents with high-quality financial institutions, limits the
amount of credit exposure to any on institution and has established investment
guidelines relative to diversification and maturities designed to be maintain
safety and liquidity. The Company's trade receivables result primarily from
sales to semiconductors manufacturers located in North America, Japan, the
Pacific Rim and Europe. Receivables are mostly from major corporations,
distributors or are supported by letters of credit. The Company maintains
reserves for potential credit losses and such losses have been immaterial.
The Company is also exposed to the impact of foreign currency fluctuations.
During fiscal 1999, most local currencies of its international subsidiaries
weakened against the U.S. dollar. Since the Company translates foreign
currencies into U.S. dollars for reporting purposes, these weakened currencies
have a negative, though immaterial, impact on its results. The Company believes
that its exposure to currency exchange fluctuation is insignificant because its
international subsidiaries sell to customers, and satisfy their financial
obligations, almost exclusively in their local currencies. During fiscal 1999
and 2000, the Company did not engage in foreign currency hedging activities.
Based on a hypothetical ten percent adverse movement in foreign currency
exchange rates, the potential losses in future earnings, the fair value of
risk-sensitive instruments, and cash flow are immaterial, although the actual
effects may differ materially from this hypothetical analysis.
The Company estimates the fair value of its notes payable and long-term
liabilities based on quoted market prices for the same or similar issues or on
current rates offered to it for debt of the same remaining maturities. For all
other balance sheet financial instruments, the carrying amount approximates fair
value.
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders was held on March 23, 2000.
(b) At that meeting, all of the current directors were re-elected. The
vote was as follows:
<TABLE>
<CAPTION>
For Withhold Authority
<S> <C> <C>
Pat V. Costa ......... 21,338,393 1,606,362
Frank A. DiPietro...... 22,128,973 815,782
Jay M. Haft ......... 22,167,410 777,345
Tomas Kohn ......... 22,080,899 863,856
Donald J. Kramer....... 22,125,737 819,018
Mark J. Lerner......... 22,020,873 923,882
Howard Stern ........ 21,291,466 1,653,289
Robert H. Walker....... 22,130,469 814,286
</TABLE>
(c) At that meeting, the shareholders ratified the amendment of the
Company's 1996 Stock Plan to increase the number of shares of Common
Stock available thereunder from 2,500,000 to 4,500,000 The vote was
as follows:
<TABLE>
<S> <C>
For 6,311,793
Against 2,772,410
Abstain 166,829
Broker Non-Votes 13,693,723
</TABLE>
(d) At that meeting, the shareholders ratified the selection of Deloitte
& Touche LLP as the Company's independent auditors for fiscal 2000.
The vote was as follows:
<TABLE>
<S> <C>
For 22,874,670
Against 21,083
Abstain 49,002
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10.1 - Revolving Credit and Security Agreement, dated April
28, 2000 between PNC Bank, National Association (as lender and
agent), Registrant and certain of Registrant's subsidiaries (as
borrower) and other lenders identified therein.
(b) Exhibit 27 - Financial Data Schedule
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROBOTIC VISION SYSTEMS, INC.
----------------------------
Registrant
Dated: May 11, 2000 /s/ PAT V. COSTA
----------------------------
PAT V. COSTA
President and CEO
(Principal Executive Officer)
Dated: May 11, 2000 /s/ FRANK D. EDWARDS
----------------------------
FRANK D. EDWARDS
Chief Financial Officer
(Principal Financial and
Accounting Officer)
12
<PAGE> 1
REVOLVING CREDIT
AND
SECURITY AGREEMENT
PNC BANK, NATIONAL ASSOCIATION
(AS LENDER AND AS AGENT)
WITH
ROBOTIC VISION SYSTEMS, INC.
AND
CIMATRIX LLC
ACUITY IMAGING LLC
SYSTEMATION ENGINEERED PRODUCTS, INC.
VANGUARD AUTOMATION, INC.
NORTHEAST ROBOTICS LLC
(BORROWERS)
APRIL 28, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
I. DEFINITIONS .......................................................... 1
1.1 Accounting Terms ............................................ 1
1.2 General Terms ............................................... 1
1.3 Uniform Commercial Code Terms ............................... 19
1.4 Certain Matters of Construction ............................. 19
II. ADVANCES, PAYMENTS ................................................... 20
2.1 (a) Revolving Advances ................................. 20
(b) Individual Revolving Advances ...................... 20
(c) Discretionary Rights ............................... 21
2.2 Procedure for Borrowing Advances ............................ 21
2.3 Disbursement of Advance Proceeds ............................ 23
2.4 Maximum Advances ............................................ 23
2.5 Repayment of Advances ....................................... 23
2.6 Repayment of Excess Advances ................................ 24
2.7 Statement of Account ........................................ 24
2.8 Letters of Credit ........................................... 24
2.9 Issuance of Letters of Credit ............................... 25
2.10 Requirements For Issuance of Letters of Credit .............. 25
2.11 Additional Payments ......................................... 26
2.12 Manner of Borrowing and Payment ............................. 27
2.13 Reductions of the Revolving Credit. ......................... 28
2.14 Use of Proceeds ............................................. 28
2.15 Defaulting Lender ........................................... 28
III. INTEREST AND FEES .................................................... 29
3.1 Interest .................................................... 29
3.2 Letter of Credit Fees ....................................... 30
(b) Facility Fee ....................................... 31
3.3 Intentionally Left Blank .................................... 31
3.4 Computation of Interest and Fees ............................ 31
3.5 Maximum Charges ............................................. 31
3.6 Increased Costs ............................................. 31
3.7 Basis For Determining Interest Rate Inadequate or Unfair .... 32
3.8 Capital Adequacy ............................................ 33
IV. COLLATERAL: GENERAL TERMS ........................................... 33
4.1 Security Interest in the Collateral ......................... 33
4.2 Perfection of Security Interest ............................. 33
4.3 Disposition of Collateral ................................... 34
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
4.4 Preservation of Collateral .................................. 34
4.5 Ownership of Collateral ..................................... 34
4.6 Defense of Agent's and Lenders' Interests ................... 35
4.7 Books and Records ........................................... 35
4.8 Financial Disclosure ........................................ 35
4.9 Compliance with Laws ........................................ 36
4.10 Inspection of Premises ...................................... 36
4.11 Insurance ................................................... 36
4.12 Failure to Pay Insurance .................................... 37
4.13 Payment of Taxes ............................................ 37
4.14 Payment of Leasehold Obligations ............................ 37
4.15 Receivables ................................................. 38
(a) Nature of Receivables .............................. 38
(b) Solvency of Customers .............................. 38
(c) Locations of Borrower .............................. 38
(d) Collection of Receivables .......................... 38
(e) Notification of Assignment of Receivables .......... 38
(f) Power of Agent to Act on Borrowers' Behalf ......... 39
(g) No Liability ....................................... 39
(h) Establishment of a Lockbox Account, Dominion Account 39
(i) Adjustments ........................................ 40
4.16 Inventory ................................................... 40
4.17 Maintenance of Equipment .................................... 40
4.18 Exculpation of Liability .................................... 40
4.19 Environmental Matters ....................................... 40
4.20 Financing Statements ........................................ 43
V. REPRESENTATIONS AND WARRANTIES ....................................... 43
5.1 Authority ................................................... 43
5.2 Formation and Qualification ................................. 43
5.3 Survival of Representations and Warranties .................. 43
5.4 Tax Returns ................................................. 44
5.5 Financial Statements ........................................ 44
5.6 Corporate Name .............................................. 44
5.7 O.S.H.A. and Environmental Compliance ....................... 45
5.8 Solvency; No Litigation, Violation, Indebtedness or Default . 45
5.9 Patents, Trademarks, Copyrights and Licenses ................ 46
5.10 Licenses and Permits ........................................ 47
5.11 Default of Indebtedness ..................................... 47
5.12 No Default .................................................. 47
5.13 No Burdensome Restrictions .................................. 47
5.14 No Labor Disputes ........................................... 47
5.15 Margin Regulations .......................................... 47
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
5.16 Investment Company Act ...................................... 48
5.17 Disclosure .................................................. 48
5.18 Hedge Agreements ............................................ 48
5.19 Conflicting Agreements ...................................... 48
5.20 Application of Certain Laws and Regulations ................. 48
5.21 Business and Property of Borrowers .......................... 48
5.22 Year 2000 ................................................... 48
5.23 Section 20 Subsidiaries ..................................... 49
VI. AFFIRMATIVE COVENANTS ................................................ 49
6.1 Payment of Fees ............................................. 49
6.2 Conduct of Business and Maintenance of Existence and Assets . 49
6.3 Violations .................................................. 49
6.4 Government Receivables ...................................... 49
6.5 Fixed Coverage Charge Ratio ................................. 49
6.6 Execution of Supplemental Instruments ....................... 50
6.7 Payment of Indebtedness ..................................... 50
6.8 Standards of Financial Statements ........................... 50
6.9 Covenant to Assume Obligations and Give Security ............ 50
6.10 Further Assurances .......................................... 51
6.11 Keeping of Books and Records ................................ 51
6.12 Cash Flow Projections ....................................... 52
6.13 Bank Accounts ............................................... 52
VII. NEGATIVE COVENANTS ................................................... 52
7.1 Merger, Consolidation, Acquisition and Sale of Assets ....... 52
7.2 Creation of Liens ........................................... 52
7.3 Guarantees .................................................. 52
7.4 Investments ................................................. 52
7.5 Loans ....................................................... 53
7.6 Capital Expenditures ........................................ 53
7.7 Dividends ................................................... 53
7.8 Indebtedness ................................................ 54
7.9 Nature of Business .......................................... 54
7.10 Transactions with Affiliates ................................ 54
7.11 Leases ...................................................... 54
7.12 Subsidiaries ................................................ 54
7.13 Fiscal Year and Accounting Changes .......................... 55
7.14 Pledge of Credit ............................................ 55
7.15 Amendment of Articles of Incorporation, By-Laws ............. 55
7.16 Compliance with ERISA ....................................... 55
7.17 Prepayment of Indebtedness .................................. 56
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<S> <C>
VIII. CONDITIONS PRECEDENT ................................................. 56
8.1 Conditions to Initial Advances .............................. 56
(a) Loan Documents ..................................... 56
(b) Filings, Registrations and Recordings .............. 56
(c) Corporate Proceedings of Borrowers ................. 56
(d) Incumbency Certificates of Borrowers ............... 56
(e) Certificates ....................................... 57
(f) Good Standing Certificates ......................... 57
(g) Legal Opinion ...................................... 57
(h) No Litigation ...................................... 57
(i) Financial Condition Certificates ................... 57
(j) Collateral Examination ............................. 57
(k) Fees ............................................... 57
(l) Pro Forma Financial Statements ..................... 57
(m) Insurance .......................................... 57
(n) Payment Instructions ............................... 58
(o) Blocked Accounts ................................... 58
(p) Consents ........................................... 58
(q) No Adverse Material Change ......................... 58
(r) Leasehold Agreements ............................... 58
(s) Contract Review .................................... 58
(t) Closing Certificate ................................ 58
(u) Borrowing Base ..................................... 58
(v) Closing Undrawn Availability ....................... 58
(w) Evidence of Termination of Credit Facility ......... 59
(x) Assignment of Inter-Company Indebtedness ........... 59
(y) Other .............................................. 59
8.2 Conditions to Each Advance .................................. 59
(a) Representations and Warranties ..................... 59
(b) No Default ......................................... 59
(c) Maximum Advances ................................... 59
IX. INFORMATION AS TO BORROWERS .......................................... 59
9.1 Disclosure of Material Matters .............................. 59
9.2 Schedules ................................................... 60
9.3 Environmental Reports ....................................... 60
9.4 Litigation .................................................. 60
9.5 Material Occurrences ........................................ 60
9.6 Government Receivables ...................................... 61
9.7 Annual Financial Statements ................................. 61
9.8 Quarterly Financial Statements .............................. 61
9.9 Other Reports ............................................... 62
9.10 Additional Information ...................................... 62
</TABLE>
(iv)
<PAGE> 6
<TABLE>
<S> <C>
9.11 Projected Operating Budget .................................. 62
9.12 Variances From Operating Budget ............................. 62
9.13 Notice of Suits, Adverse Events ............................. 62
9.14 ERISA Notices and Requests .................................. 63
9.15 Additional Documents ........................................ 63
9.16 Intentionally Left Blank .................................... 63
9.17 Intellectual Property Reports ............................... 63
X. EVENTS OF DEFAULT .................................................... 64
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT ........................... 66
11.1 Rights and Remedies ......................................... 66
11.2 Agent's Discretion .......................................... 67
11.3 Setoff ...................................................... 67
11.4 Rights and Remedies not Exclusive ........................... 67
XII. WAIVERS AND JUDICIAL PROCEEDINGS ..................................... 67
12.1 Waiver of Notice ............................................ 67
12.2 Delay ....................................................... 68
12.3 Jury Waiver ................................................. 68
XIII. EFFECTIVE DATE AND TERMINATION ....................................... 68
13.1 Term ........................................................ 68
13.2 Termination ................................................. 68
XIV. REGARDING AGENT ...................................................... 69
14.1 Appointment ................................................. 69
14.2 Nature of Duties ............................................ 69
14.3 Lack of Reliance on Agent and Resignation ................... 69
14.4 Certain Rights of Agent ..................................... 70
14.5 Reliance .................................................... 70
14.6 Notice of Default ........................................... 70
14.7 Indemnification ............................................. 71
14.8 Agent in its Individual Capacity ............................ 71
14.9 Delivery of Documents ....................................... 71
14.10 Borrowers' Undertaking to Agent ............................. 71
14.11 Amendment of Article 14 ..................................... 71
XV. BORROWING AGENCY ..................................................... 72
15.1 Borrowing Agency Provisions ................................. 72
15.2 Waiver of Subrogation ....................................... 72
XVI. MISCELLANEOUS ........................................................ 72
</TABLE>
(v)
<PAGE> 7
<TABLE>
<S> <C>
16.1 Governing Law ............................................... 72
16.2 Entire Understanding ........................................ 73
16.3 Successors and Assigns; Participations; New Lenders ......... 75
16.4 Application of Payments ..................................... 76
16.5 Indemnity ................................................... 77
16.6 Notice ...................................................... 77
16.7 Survival .................................................... 78
16.8 Severability ................................................ 78
16.9 Expenses .................................................... 78
16.10 Injunctive Relief ........................................... 78
16.11 Consequential Damages ....................................... 79
16.12 Captions .................................................... 79
16.13 Counterparts; Telecopied Signatures ......................... 79
16.14 Construction ................................................ 79
16.15 Confidentiality; Sharing Information ........................ 79
16.16 Publicity ................................................... 80
16.17 EXIM Borrower Agreement ..................................... 80
16.18 Pledge Agreement ............................................ 80
</TABLE>
(vi)
<PAGE> 8
REVOLVING CREDIT
AND
SECURITY AGREEMENT
This Revolving Credit and Security Agreement (this "Agreement") dated
April 28, 2000 by and among Robotic Vision Systems, Inc., a corporation
organized under the laws of the State of Delaware ("Robotic"), CiMatrix LLC, a
limited liability company organized under the laws of the State of Delaware
("CiMatrix"), Acuity Imaging LLC, a limited liability company organized under
the laws of the State of Delaware ("Acuity"), Systemation Engineered Products,
Inc., a corporation organized under the laws of the State of Wisconsin
("Systemation"), Vanguard Automation, Inc., a corporation organized under the
laws of the State of Delaware ("Vanguard") and Northeast Robotics LLC, a limited
liability company organized under the laws of the State of Delaware ("Northeast
Robotics") (each a "Borrower" and collectively "Borrowers"), the financial
institutions which are now or which hereafter become a party hereto
(collectively, the "Lenders" and individually a "Lender") and PNC BANK, NATIONAL
ASSOCIATION ("PNC"), as agent for Lenders (PNC, in such capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, Borrowers, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
1.1 Accounting Terms . As used in this Agreement, any of the Other
Documents, or any certificate, report or other document made or delivered
pursuant to this Agreement, accounting terms not defined in Section 1.2 or
elsewhere in this Agreement and accounting terms partly defined in Section 1.2
to the extent not defined, shall have the respective meanings given to them
under GAAP; provided, however, whenever such accounting terms are used for the
purposes of determining compliance with financial covenants in this Agreement,
such accounting terms shall be defined in accordance with GAAP as applied in
preparation of the audited financial statements of Borrowers for the fiscal year
ended September 30, 1999.
1.2 General Terms . For purposes of this Agreement the following
terms shall have the following meanings:
"Accountants" shall have the meaning set forth in Section 9.7
hereof.
"Advances" shall mean and include the Revolving Advances and
Letters of Credit.
"Advance Rates" shall have the meaning set forth in Section
2.1(a) hereof. 2.10 1.1
"Affiliate" of any Person shall mean (a) any Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with such Person, or (b) any Person who is a director or officer (i) of
such Person, (ii) of any Subsidiary of such Person or (iii) of any Person
described in clause (a) above. For purposes of this definition, control of a
Person shall
<PAGE> 9
mean the power, direct or indirect, (x) to vote 10% or more of the securities
having ordinary voting power for the election of directors of such Person, or
(y) to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.
"Agent" shall have the meaning set forth in the preamble to
this Agreement and shall include its successors and assigns.
"Authority" shall have the meaning set forth in Section
4.19(d).
"Base Rate" shall mean the base commercial lending rate of PNC
as publicly announced to be in effect from time to time, such rate to be
adjusted automatically, without notice, on the effective date of any change in
such rate. This rate of interest is determined from time to time by PNC as a
means of pricing some loans to its customers and is neither tied to any external
rate of interest or index nor does it necessarily reflect the lowest rate of
interest actually charged by PNC to any particular class or category of
customers of PNC.
"Blocked Accounts" shall have the meaning set forth in Section
4.15(h).
"Borrower" or "Borrowers" shall have the meaning set forth in
the preamble to this Agreement.
"Borrowing Base Certificate" shall mean a certificate duly
executed by an officer of Borrowing Agent appropriately completed and in
substantially the form of Exhibit A hereto.
"Borrowers on a consolidated basis" shall mean the
consolidation of accounts and liabilities of Robotics and its Subsidiaries in
accordance with GAAP.
"Borrowers' Account" shall have the meaning set forth in
Section 2.7.
"Borrowing Agent" shall mean Robotic Vision Systems, Inc.
"Business Day" shall mean any day other than Saturday or
Sunday or a legal holiday on which commercial banks are authorized or required
by law to be closed for business in East Brunswick, New Jersey and, if the
applicable Business Day relates to any Eurodollar Rate Loans, such day must also
be a day on which dealings are carried on in the London interbank market.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601
et seq.
"Change of Control" means the occurrence of any of the
following events:
(a) any person or group shall have become the
beneficial owner of voting shares entitled to exercise more than 20% of
the total voting power of all
2
<PAGE> 10
outstanding voting shares of the Borrower (including any voting shares
which are not then outstanding of which such person or group is deemed
the beneficial owner); or
(b) a change in the composition of the Managing
Person of the Borrower shall have occurred in which the individuals who
constituted the Managing Person of the Borrower at the Closing Date
(together with any other director whose election by the Managing Person
of the Borrower or whose nomination for election by the shareholders of
the Borrower was approved by a vote of at least a majority of the
members of such Managing Person then in office who either were members
of such Managing Person on the Closing Date or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the members of such Managing Person
then in office.
For purposes of this definition (i) the terms "person" and
"group" shall have the respective meanings ascribed thereto in Sections 13(d)
and 14(d)(2) of the Exchange Act, (ii) the term "beneficial owner" shall have
the meaning ascribed thereto in Rule 13d-3 under the Exchange Act and (iii) the
term "voting shares" shall mean all outstanding shares of any class or classes
(however designated) of Capital Stock of the Borrower entitled to vote generally
in the election of members of the Managing Person thereof.
"Charges" shall mean all taxes, charges, fees, imposts, levies
or other assessments, including, without limitation, all net income, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation
and property taxes, custom duties, fees, assessments, liens, claims and charges
of any kind whatsoever, together with any interest and any penalties, additions
to tax or additional amounts, imposed by any taxing or other authority, domestic
or foreign (including, without limitation, the Pension Benefit Guaranty
Corporation or any environmental agency or superfund), upon the Collateral, any
Borrower or any of its Affiliates.
"Closing Date" shall mean April 28, 2000.
"Closing Undrawn Availability" at a particular date shall mean
an amount equal to (a) the lesser of (i) the Formula Amount or (ii) the Maximum
Revolving Advance Amount minus (b) the sum of (i) the outstanding amount of
Revolving Advances plus (ii) all amounts due and owing to Borrowers' trade
creditors which are outstanding more than sixty (60) days past due, plus (iii)
fees and expenses for which Borrowers are liable but which have not been paid or
charged to Borrowers' Account, plus (c) cash of the Borrowers in Blocked
Accounts or in accounts of any of the Borrowers with the Agent.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time and the regulations promulgated thereunder.
"Collateral" shall mean and include:
3
<PAGE> 11
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Investment Property;
(f) all Real Property (to the extent that the
Agent has requested or in the future requests an interest in such Real
Property);
(g) all Subsidiary Stock (subject to the
limitations in Section 6.9 hereof);
(h) the Leasehold Interests;
(i) all of each Borrower's right, title and
interest in and to (i) its respective goods and other property including, but
not limited to, all merchandise returned or rejected by Customers, relating to
or securing any of the Receivables; (ii) all of each Borrower's rights as a
consignor, a consignee, an unpaid vendor, mechanic, artisan, or other lienor,
including stoppage in transit, setoff, detinue, replevin, reclamation and
repurchase; (iii) all additional amounts due to any Borrower from any Customer
relating to the Receivables; (iv) other property, including warranty claims,
relating to any goods securing this Agreement; (v) all of each Borrower's
contract rights (but only to the extent that a grant of a security interest in
such contract rights in favor of the Agent would not cause a default or violate
the terms thereof), rights of payment which have been earned under a contract
right, instruments, documents, chattel paper, warehouse receipts, deposit
accounts and money; (vi) if and when obtained by any Borrower, all rights of
such Borrower in real and personal property of third parties in which such
Borrower has been granted a lien or security interest as security for the
payment or enforcement of Receivables; and (vii) any other goods, personal
property or real property now owned or hereafter acquired in which any Borrower
has expressly granted a security interest or may in the future grant a security
interest to Agent hereunder, or in any amendment or supplement hereto or
thereto, or under any other agreement between Agent and any Borrower;
(j) all of each Borrower's ledger sheets, ledger
cards, files, correspondence, records, books of account, business papers,
computers, computer software (owned by any Borrower or in which it has an
interest to the extent that the grant of such security interest would not
violate the terms of any agreement, license or other arrangement pursuant to
which the Borrower acquired such interest), computer programs, tapes, disks and
documents relating to any of the assets or property described in this
definition;
(k) all of the collateral referred to in the
Other Documents and all other property and assets that is intended to be subject
to any lien in favor of the Agent for the benefit of the Lenders; and
4
<PAGE> 12
(l) all proceeds and products of any of the
assets and property described in this definition in whatever form, including,
but not limited to: cash, deposit accounts (whether or not comprised solely of
proceeds), certificates of deposit, insurance proceeds (including hazard, flood
and credit insurance), negotiable instruments, investment property and other
instruments for the payment of money, chattel paper, security agreements,
documents, eminent domain proceeds, condemnation proceeds and tort claim
proceeds.
"Commitment Percentage" of any Lender shall mean the
percentage set forth below such Lender's name on the signature page hereof as
same may be adjusted upon any assignment by a Lender pursuant to Section 16.3(b)
hereof.
"Commitment Transfer Supplement" shall mean a document in the
form of Exhibit 16.3 hereto, properly completed and otherwise in form and
substance satisfactory to Agent by which the Purchasing Lender purchases and
assumes a portion of the obligation of Lenders to make Advances under this
Agreement.
"Consents" shall mean all filings and all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and other third parties, domestic or foreign, necessary to carry on
any Borrower's business, including, without limitation, any Consents required
under all applicable foreign, federal, state or other applicable law.
"Consolidated Net Income" shall mean the net income (or
deficit) from operations of the Borrowers, after taxes, determined in accordance
with GAAP.
"Controlled Group" shall mean all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with any Borrower, are treated as a single
employer under Section 414 of the Code.
"Current Assets" at a particular date, shall mean all cash,
cash equivalents, accounts and inventory of Borrowers on a consolidated basis
and all other items which would, in conformity with GAAP, be included under
current assets on a balance sheet of Borrowers on a consolidated basis as at
such date; provided, however, that such amounts shall not include (a) any
amounts for any Indebtedness owing by an Affiliate of any Borrower, unless such
Indebtedness arose in connection with the sale of goods or rendition of services
in the ordinary course of business and would otherwise constitute current assets
in conformity with GAAP or (b) any shares of stock issued by an Affiliate of any
Borrower.
"Current Liabilities" at a particular date, shall mean all
amounts which would, in conformity with GAAP, be included under current
liabilities on a balance sheet of Borrowers on a consolidated basis, as at such
date, but in any event including, without limitation, the amounts of (a) all
Indebtedness of Borrowers on a consolidated basis payable on demand, or, at the
option of the Person to whom such Indebtedness is owed, not more than twelve
(12) months after such date, (b) any payments in respect of any Indebtedness of
any Borrower (whether installment, serial maturity, sinking fund payment or
otherwise) required to be made not more than twelve
5
<PAGE> 13
(12) months after such date, (c) all reserves in respect of liabilities or
Indebtedness payable on demand or, at the option of the Person to whom such
Indebtedness is owed, not more than twelve (12) months after such date, the
validity of which is not contested at such date, and (d) all accruals for
federal or other taxes measured by income payable within a twelve (12) month
period.
"Customer" shall mean and include the account debtor with
respect to any Receivable and/or the prospective purchaser of goods, services or
both with respect to any contract or contract right, and/or any party who enters
into or proposes to enter into any contract or other arrangement with any
Borrower, pursuant to which such Borrower is to deliver any personal property or
perform any services.
"Customs" shall have the meaning set forth in Section 2.10(c).
"Default" shall mean an event which, with the giving of notice
or passage of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning set forth in Section 3.1
hereof.
"Defaulting Lender" shall have the meaning set forth in
Section 2.15(a) hereof.
"Depository Accounts" shall have the meaning set forth in
Section 4.15(h) hereof.
"Documents" shall mean this Agreement, the Other Documents and
any other agreement, document or instrument issued pursuant or in connection
with any of the foregoing and in each case as amended, restated, supplemented or
otherwise modified from time to time.
"Dollar" and the sign "$" shall mean lawful money of the
United States of America.
"Domestic Rate Loan" shall mean an Advance at any time that
bears interest based on the Base Rate.
"Domestic Subsidiary" of any Person shall mean any Subsidiary
other than a Foreign Subsidiary.
"Earnings Before Interest and Taxes" shall mean for any period
the sum of (i) net income (or loss) of Borrowers on a consolidated basis for
such period (excluding extraordinary gains and losses), plus (ii) all interest
expense of Borrowers on a consolidated basis for such period, plus (iii) all
charges against income of Borrowers on a consolidated basis for such period for
federal, state and local taxes actually paid.
"EBITDA" shall mean for any period the sum of (i) Earnings
Before Interest and Taxes for such period plus (ii) depreciation expenses for
such period, plus (iii) amortization expenses for such period plus (iv) other
non-cash charges (including, without limitation, non-
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<PAGE> 14
cash charges in connection with the granting of options, warrants or other
equity interests and any write-off of deferred financing costs existing as of
the Closing Date but excluding write-offs of Inventory to the extent such
write-offs are deemed to be non-cash charges or Inventory reserves), plus (v)
transaction costs incurred by Borrower in connection with acquisitions and
investments entered into by Borrower after the Closing Date not to exceed the
aggregate amount of $1,000,000 in any fiscal year. In addition EBITDA shall be
calculated without giving effect to (x) non-cash purchase accounting adjustments
required or permitted by Account Principles Board Opinion Nos. 16 (including
non-cash write-ups and non-cash charges), in each case arising in connection
with any acquisition entered into by Borrower after the Closing Date and 17
(including non-cash charges relating to intangibles and goodwill arising in
connection with any such Permitted Acquisition), and (y) any non-cash gains or
losses recognized in determining Consolidated Net Income (or net loss) for such
period in respect of post-retirement benefits as a result of the application of
FASB 106.
"Eligible Receivables" shall mean and include with respect to
each Borrower, each Receivable of such Borrower arising in the ordinary course
of such Borrower's business. A Receivable shall not be deemed eligible unless
such Receivable is subject to Agent's first priority perfected security interest
and no other Lien (other than Permitted Encumbrances), and is evidenced by an
invoice or other documentary evidence satisfactory to Agent. In addition, no
Receivable shall be an Eligible Receivable if:
(a) it arises out of a sale made by any Borrower to an
Affiliate of any Borrower or to a Person controlled by an Affiliate of any
Borrower;
(b) it is due or unpaid more than one hundred twenty
(120) days after the original invoice date or is more than sixty (60) days past
the applicable due date;
(c) fifty percent (50%) or more of the Receivables from
such Customer are not deemed Eligible Receivables hereunder;
(d) any covenant, representation or warranty contained in
this Agreement or Other Document with respect to such Receivable has been
breached in any material respect;
(e) the Customer shall (i) apply for, suffer, or consent
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 call a meeting of its creditors, (ii) admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present business, (iii) make a general assignment for the benefit of creditors,
(iv) commence a voluntary case under any state or federal bankruptcy laws (as
now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi)
file a petition seeking to take advantage of any other law providing for the
relief of debtors, (vii) acquiesce to, or fail to have dismissed, any petition
which is filed against it in any involuntary case under such bankruptcy laws, or
(viii) take any action for the purpose of effecting any of the foregoing;
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<PAGE> 15
(f) the sale is to a Customer outside the continental
United States of America, unless the sale is on letter of credit, guaranty,
foreign credit insurance, or acceptance terms, in each case acceptable to Agent
in its sole discretion or such Receivable constitutes an EXIM Bank Guaranteed
Receivable;
(g) the sale to the Customer is on a bill-and-hold,
guaranteed sale, sale-and-return, sale on approval, consignment or any other
repurchase or return basis or is evidenced by chattel paper;
(h) Agent believes, in its reasonable judgment, that
collection of such Receivable is insecure or that such Receivable may not be
paid by reason of the Customer's financial inability to pay;
(i) the Customer is the United States of America, any
state within the United States of America or any department, agency or
instrumentality of any of them, unless the applicable Borrower assigns its right
to payment of such Receivable to Agent pursuant to the Assignment of Claims Act
of 1940, as amended (31 U.S.C. Sub-Section 3727 et seq. and 41 U.S.C.
Sub-Section 15 et seq.) or has otherwise complied with other applicable statutes
or ordinances;
(j) the goods giving rise to such Receivable have not
been shipped to the Customer or the services giving rise to such Receivable have
not been performed by the applicable Borrower or the Receivable otherwise does
not represent a final sale;
(k) the Receivable is owing from any Customer that is
also a creditor or supplier of a Borrower to the extent the amount of such
Receivable is subject to any offset, deduction, defense, dispute, counterclaim,
or the Receivable is contingent in any respect or for any reason, unless such
Customer has waived all rights of set-off in a manner acceptable to the Agent;
(l) the applicable Borrower has made any agreement with
any Customer for any deduction therefrom, except for discounts or allowances
made in the ordinary course of business for prompt payment, all of which
discounts or allowances are reflected in the calculation of the face value of
each respective invoice related thereto;
(m) any return, rejection or repossession of the
merchandise has occurred or the rendition of services has been disputed;
(n) such Receivable is not payable to a Borrower; or
(o) such Receivable is owing from any Person from which
an aggregate amount of more than 50% of the Receivables owing are (i) more than
sixty (60) days past due or (ii) in dispute.
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<PAGE> 16
"Environmental Complaint" shall have the meaning set forth in
Section 4.19(d) hereof.
"Environmental Laws" shall mean all foreign, federal, state
and local environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances and codes relating to the protection of
the environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
"Equipment" shall mean and include as to each Borrower all of
such Borrower's goods (other than Inventory) whether now owned or hereafter
acquired and wherever located including, without limitation, all equipment,
machinery, apparatus, motor vehicles, fittings, furniture, furnishings,
fixtures, parts, accessories and all replacements and substitutions therefor or
accessions thereto.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time and the rules and regulations promulgated
thereunder.
"Eurodollar Rate" shall mean for any Eurodollar Rate Loan for
the then current Interest Period relating thereto the interest rate per annum
determined by PNC by dividing (the resulting quotient rounded upwards, if
necessary, to the nearest 1/100th of 1% per annum) (i) the rate of interest
determined by PNC in accordance with its usual procedures (which determination
shall be conclusive absent manifest error) to be the average of the London
interbank offered rates for U.S. Dollars quoted by the British Bankers'
Association as set forth on Dow Jones Markets Service (formerly known as
Telerate) (or appropriate successor or, if British Banker's Association or its
successor ceases to provide such quotes, a comparable replacement determined by
PNC) display page 3750 (or such other display page on the Dow Jones Markets
Service system as may replace display page 3750) two (2) Business Days prior to
the first day of such Interest Period for an amount comparable to such
Eurodollar Rate Loan and having a borrowing date and a maturity comparable to
such Interest Period by (ii) a number equal to 1.00 minus the Reserve
Percentage. The Eurodollar Rate may also be expressed by the following formula:
Average of London interbank offered rates quoted by BBA as
Eurodollar Rate =shown on Dow Jones Markets Service display page 3750 or
appropriate successor
---------------------------------------------------------------
1.00 - Reserve Percentage
"Eurodollar Rate Loan" shall mean an Advance at any time that
bears interest based on the Eurodollar Rate.
"Event of Default" shall mean the occurrence of any of the
events set forth in Article X hereof.
"EXIM Bank" shall mean the Export-Import Bank of the United
States.
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<PAGE> 17
"EXIM Borrower Agreement" shall mean that certain Borrower
Agreement dated as of April 28, 2000 by and among the Borrowers and the Agent
substantially in the form of Exhibit B hereto, with (i) a certain waiver letter
dated February 7, 2000 from EXIM Bank and (ii) a certain waiver letter dated
March 14, 2000 from EXIM Bank, as may be amended, restated, supplemented or
otherwise modified from time to time.
"EXIM Bank Guaranteed Inventory" shall mean the Eligible
Export-Related Inventory as such term is defined in the EXIM Borrower Agreement.
"EXIM Bank Guaranteed Receivables" shall mean Eligible
Export-Related Account Receivable as such term is defined in the EXIM Borrower
Agreement.
"EXIM Receivables Advance Rate" shall have the meaning set
forth in Section 2.1(a)(y)(iii) hereof.
"Federal Funds Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or if such rate is not so published for
any day which is a Business Day, the average of quotations for such day on such
transactions received by PNC from three Federal funds brokers of recognized
standing selected by PNC.
"Fee Letter" shall mean the fee letter dated April 28, 2000
among Borrowers and PNC.
"Fixed Charge Coverage Ratio" shall mean and include, with
respect to any fiscal period, the ratio of (a) EBITDA minus unfinanced
capitalized expenditures made during such period, minus cash dividends paid
during such period, minus capitalized software development costs for such
period, minus income taxes paid for such period to (b) all Senior Debt Payments
plus Subordinated Debt Payments made during such Period.
"Foreign Subsidiary" shall mean a Subsidiary that is organized
under the laws of a jurisdiction other than the United States or any state
thereof or the District of Columbia.
"Formula Amount" shall have the meaning set forth in Section
2.1(a).
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time subject to Section 1.1
hereof.
"General Intangibles" shall mean and include as to each
Borrower all of such Borrower's general intangibles, whether now owned or
hereafter acquired including, without limitation, all choses in action, causes
of action, corporate or other business records, inventions, designs, patents,
patent applications, equipment formulations, manufacturing procedures, quality
control procedures, trademarks, service marks, trade secrets, goodwill,
copyrights, design rights,
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<PAGE> 18
registrations, licenses, franchises, customer lists, tax refunds, tax refund
claims, computer programs, all claims under guaranties, security interests or
other security held by or granted to such Borrower to secure payment of any of
the Receivables by a Customer all rights of indemnification and all other
intangible property of every kind and nature (other than Receivables).
"Governmental Body" shall mean any nation or government, any
state or other political subdivision thereof or any entity exercising the
legislative, judicial, regulatory or administrative functions of or pertaining
to a government.
"Hazardous Discharge" shall have the meaning set forth in
Section 4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation, any
flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New York State Environmental Conservation Law or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any other applicable
foreign, federal and state laws now in force or hereafter enacted relating to
hazardous waste disposal.
"Hedge Agreements" shall mean any interest rate swap, cap or
collar arrangement or any other derivative product customarily offered by banks
or other financial institutions to their customers in order to reduce the
exposure of such customers to interest rate fluctuations.
"Indebtedness" of a Person at a particular date shall mean all
obligations of such Person which in accordance with GAAP would be classified
upon a balance sheet as liabilities (except capital stock and surplus earned or
otherwise) and in any event, without limitation by reason of enumeration, shall
include all indebtedness, debt and other similar monetary obligations of such
Person whether direct, contingent or guaranteed, and all premiums and other
amounts, if any, which are currently due with respect to such indebtedness, and
all indebtedness secured by a Lien on assets owned by such Person, whether or
not such indebtedness actually shall have been created, assumed or incurred by
such Person. Any indebtedness of such Person resulting from the acquisition by
such Person of any assets subject to any Lien shall be deemed, for the purposes
hereof, to be the equivalent of the creation, assumption and incurring of the
indebtedness secured thereby, whether or not actually so created, assumed or
incurred.
"Individual Formula Amount" shall mean at the date of
determination thereof shall be the Formula Amount for each Borrower calculated
pursuant to Section 2.1(a)(y) with respect to such Borrower's Eligible
Receivables, EXIM Bank Guaranteed Inventory, EXIM Bank Guaranteed Receivables,
outstanding Letters of Credit issued or cause to be issued on behalf of such
Borrower and reserves the Agent may require in its reasonable discretion.
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<PAGE> 19
"Ineligible Security" shall mean any security which may not be
underwritten or dealt in by member banks of the Federal Reserve System under
Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as
amended.
"Initial Pricing Period" shall mean the period beginning on
the date that is three (3) Business Days after the date on which the Borrowers
provide the Agent with their audited financial statements for the fiscal year
ending September 30, 2000 pursuant to Section 9.7 hereof and ending on the date
that is three (3) Business Days after the date on which the Borrowers provide
the Agent with their financial statements for the fiscal quarter ending December
31, 2000 pursuant to Section 9.8 hereof.
"Intellectual Property Security Agreement" shall mean the
Intellectual Property Security Agreement dated as of the date hereof by and
among the Agent, on behalf of the Lenders, and the Borrowers as amended,
supplemented and modified from time to time.
"Inter-Company Notes" shall have the meaning set forth in
Section 6.11.
"Internet Subsidiary" shall have the meaning set forth in
Section 7.12.
"Interest Period" shall mean the period provided for any
Eurodollar Rate Loan pursuant to Section 2.2(b).
"Investments" shall have the meaning set forth in Section 7.4.
"Inventory" shall mean and include as to each Borrower all of
such Borrower's now owned or hereafter acquired goods, merchandise and other
personal property, wherever located, to be furnished under any contract of
service or held for sale or lease, all raw materials, work in process, finished
goods and materials and supplies of any kind, nature or description which are or
might be used or consumed in such Borrower's business or used in selling or
furnishing such goods, merchandise and other personal property, and all
documents of title or other documents representing them.
"Inventory Advance Rate" shall have the meaning set forth in
Section 2.1(a)(y)(ii) hereof.
"Investment Property" shall mean and include as to each
Borrower, all of such Borrower's now owned or hereafter acquired securities
(whether certificated or uncertificated), securities entitlements, securities
accounts, commodities contracts and commodities accounts.
"Leasehold Interests" shall mean all of each Borrower's right,
title and interest in and to the premises at such locations designated by the
Agent in writing to the Borrowers.
"Lender" and "Lenders" shall have the meaning ascribed to such
term in the preamble to this Agreement and shall include each Person which
becomes a transferee, successor or assign of any Lender.
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<PAGE> 20
"Letter of Credit Application" shall have the meaning set
forth in Section 2.9.
"Letters of Credit" shall have the meaning set forth in
Section 2.8.
"Letter of Credit Fees" shall have the meaning set forth in
Section 3.2.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any easement, right of way
or other encumbrance relating to real property, any lease having substantially
the same economic effect as any of the foregoing, and the filing of, or
agreement to give, any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction.
"Line of Business" shall mean, collectively the design,
manufacture, marketing, sale and services related to (w) automated
one-dimensional, two-dimensional and three-dimensional machine vision-based
products and systems for inspection, measurement and identification, including
advanced electro-optical sensor technology and lighting systems, (x) ball grid
array and chip scale packaging equipment and tape-and-reel component processing
systems for the semiconductor and connector industries, (y) data collection and
distribution products and services and (z) businesses and activities which are
ancillary or reasonably related or necessary to the foregoing.
"Managing Person" shall mean with respect to any Person that
is (i) a corporation, its board of directors, (ii) a limited liability company,
its board of control, managing member or members, (iii) a limited partnership,
its general partner, (iv) a general partnership or a limited liability
partnership, its managing partner or executive committee or (v) any other
Person, the managing body thereof or other Person analogous to the foregoing.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the condition, operations, assets, business or prospects of the
applicable Person or Persons, (b) the ability of the Borrowers on a consolidated
basis to pay the Obligations in accordance with the terms thereof, (c) the value
of the Collateral, or Agent's Liens on the Collateral or the priority of any
such Lien or (d) the practical realization of the benefits of Agent's and each
Lender's rights and remedies under this Agreement and the Other Documents.
"Maximum Revolving Advance Amount" shall mean $35,000,000,
subject to the limitations on Advances in connection with Permitted Acquisitions
set forth in Section 2.4(c) hereof and permanent reductions to the Maximum
Revolving Advance Amount pursuant to Section 2.13 hereof.
"Monthly Advances" shall have the meaning set forth in Section
3.1 hereof.
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<PAGE> 21
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Sections 3(37) and 4001(a)(3) of ERISA.
"Net Worth" at a particular date, shall mean the aggregate
amount of all assets of Borrowers on a consolidated basis as may properly be
classified as such in accordance with GAAP consistently applied and such other
assets as are properly classified as "intangible assets", less (b) the aggregate
amount of all Indebtedness of Borrowers on a consolidated basis.
"Non-Defaulting Lenders" shall have the meaning set forth in
Section 2.15(b).
"Non-EXIM Receivables Advance Rate" shall have the meaning set
forth in Section 2.1(a)(y)(i) hereof.
"Obligations" shall mean and include any and all loans,
advances, debts, liabilities, obligations, covenants and duties owing by
Borrowers to Lenders or Agent or to any other direct or indirect subsidiary or
affiliate of Agent or any Lender of any kind or nature, present or future
(including, without limitation, any interest accruing thereon after maturity, or
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding relating to any Borrower, whether
or not a claim for post-filing or post-petition interest is allowed in such
proceeding), whether or not evidenced by any note, guaranty or other instrument,
arising under or in connection with the transactions contemplated by this
Agreement, the Other Documents or Secured Hedge Agreement, whether direct or
indirect (including those acquired by assignment or participation), absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising, contractual or tortious, liquidated or unliquidated, and including any
and all of any Borrower's Indebtedness and/or liabilities under this Agreement,
the Other Documents, Secured Hedge Agreement or under any other agreement
between Agent or Lenders and any Borrower in connection therewith (including
without limitation under any cash management or cash dominion arrangement) and
any amendments, extensions, renewals or increases and all costs and expenses of
Agent and any Lender incurred in the documentation, negotiation, modification,
enforcement, collection or otherwise in connection with any of the foregoing,
including but not limited to reasonable attorneys' fees and expenses and all
obligations of any Borrower to Agent or Lenders to perform acts or refrain from
taking any action.
"Other Documents" shall mean the Revolving Credit Notes, each
Letter of Credit and Letter of Credit Application, Secured Hedge Agreements, the
Questionnaire, Subordination Agreement, EXIM Borrower Agreement, Pledge
Agreement, Intellectual Property Security Agreement and landlord consents and
estoppel certificates and any and all other agreements, instruments and
documents, including, without limitation, guaranties, pledges, powers of
attorney, consents, and all other writings heretofore, now or hereafter executed
by any Borrower delivered to Agent or any Lender in respect of the transactions
contemplated by this Agreement.
"Parent" of any Person shall mean a corporation or other
entity owning, directly or indirectly at least 50% of the shares of stock or
other ownership interests having ordinary
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<PAGE> 22
voting power to elect a majority of the directors of the Person, or other
Persons performing similar functions for any such Person.
"Participant" shall mean each Person who shall be granted the
right by any Lender to participate in any of the Advances and who shall have
entered into a participation agreement in form and substance satisfactory to
such Lender.
"Payment Office" shall mean initially Two Tower Center
Boulevard, East Brunswick, New Jersey 08816; thereafter, such other office of
Agent, if any, which it may designate by notice to Borrowing Agent and to each
Lender to be the Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Acquisitions" shall mean acquisitions by a Borrower
of all of the stock or all or substantially all of the assets or a line of
business of another Person, provided that the following terms and conditions are
met:
(a) The Person to be acquired or whose assets are to be
acquired shall be organized under the laws of the United States of
America or any state thereof and be engaged in substantially the same
Line of Business as the Borrowers.
(b) The Board of Directors and the requisite number of
shareholders, partners or members of the Person to be acquired shall
have approved such acquisition.
(c) The Borrower shall have received the written consent of
the Agent and the Required Lenders for any acquisition with an
aggregate gross purchase price in excess of $50,000,000.
(d) No Default or Event of Default shall exist at the time of
or after giving effect to each such acquisition on a pro forma basis.
(e) Perfected first security interests shall have been granted
to the Agent on behalf of the Lenders in all of such person's assets
and equity interests subject to no other liens or encumbrances (other
than Permitted Encumbrances).
(f) Phase one environmental surveys, title insurance and
evidence of proper zoning reasonably satisfactory to the Agent shall
have been provided to the Agent within ten (10) days prior to such
acquisition.
(g) The Borrower shall have provided the Agent written notice
of each proposed acquisition at least twenty (20) days prior to the
consummation of such acquisition together with a certificate certifying
compliance with each provision of this definition and that aggregate
amount of all Advances made to the Borrowers for Permitted Acquisitions
through the date thereof.
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<PAGE> 23
(h) After giving effect to the proposed acquisition the
Borrowers shall have Closing Undrawn Availability of at least
$5,000,000.
(i) The Borrower shall not assume any Indebtedness in
connection with such acquisition other than the assumption of not more
than $5,000,000 of Indebtedness on account of borrowed money and
capitalized leases in the aggregate for all Permitted Acquisitions.
(j) After giving effect to the proposed acquisition the
Borrowers shall have a minimum Fixed Coverage Charge Ratio of at least
1.05 to 1:00.
"Permitted Encumbrances" shall mean (a) Liens in favor of
Agent for the benefit of Agent and Lenders; (b) Liens for taxes, assessments or
other governmental charges not delinquent or being contested in good faith and
by appropriate proceedings and with respect to which proper reserves have been
taken by Borrowers; provided, that, the Lien shall have no effect on the
priority of the Liens in favor of Agent or the value of the assets in which
Agent has such a Lien and a stay of enforcement of any such Lien shall be in
effect; (c) Liens disclosed in the financial statements referred to in Section
5.5; (d) deposits or pledges to secure obligations under worker's compensation,
social security or similar laws, or under unemployment insurance; (e) deposits
or pledges to secure bids, tenders, contracts (other than contracts for the
payment of money), leases, statutory obligations, surety and appeal bonds and
other obligations of like nature arising in the ordinary course of any
Borrower's business; (f) judgment Liens that have been stayed or bonded and
discharged within sixty (60) days and mechanics', workers', materialmen's or
other like Liens arising in the ordinary course of any Borrower's business with
respect to obligations which are not due or which are being contested in good
faith by the applicable Borrower and with respect to which proper reserves have
been taken by Borrowers; (g) Liens placed upon fixed assets hereafter acquired
to secure a portion of the purchase price thereof, provided that (x) any such
lien shall not encumber any other property of the Borrowers and (y) the
aggregate amount of Indebtedness secured by such Liens incurred as a result of
such purchases during any fiscal year shall not exceed the amount provided for
in Section 7.6; (h) Liens disclosed on Schedule 1.2; (i) liens on assets or
property securing obligations of Foreign Subsidiaries not to exceed $2,500,000;
and (j) easements, rights of way or other encumbrances relating to Real Property
which do not materially impair its usefulness in the course of Borrower's
business.
"Person" shall mean any individual, sole proprietorship,
partnership, corporation, business trust, joint stock company, trust,
unincorporated organization, association, limited liability company,
institution, public benefit corporation, joint venture, entity or government
(whether foreign, federal, state, county, city, municipal or otherwise,
including any instrumentality, division, agency, body or department thereof).
"Plan" shall mean any employee benefit plan within the meaning
of Section 3(3) of ERISA, maintained for employees of Borrowers or any member of
the Controlled Group or any such Plan to which any Borrower or any member of the
Controlled Group is required to contribute on behalf of any of its employees.
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<PAGE> 24
"Pledge Agreement" shall mean the Pledge Agreement of even
date herewith from the Borrowers to the Agent on behalf of the Lenders
substantially in the form of Exhibit C hereto, pursuant to which the Borrowers
have pledged to the Agent all of the capital stock or other equity interests in
each of their direct and indirect Subsidiaries (subject to limitations in
Section 6.9 hereof with respect to Foreign Subsidiaries) to secure the
Obligations, as the same may be modified, amended or supplemented from time to
time.
"Pro Forma Balance Sheet" shall have the meaning set forth in
Section 5.5(a) hereof.
"Pro Forma Financial Statements" shall have the meaning set
forth in Section 5.5(b) hereof.
"Projections" shall have the meaning set forth in Section
5.5(b) hereof.
"Purchasing Lender" shall have the meaning set forth in
Section 16.3 hereof.
"Questionnaire" shall mean the Documentation Information
Questionnaire and collateral certificate and the responses thereto provided by
Borrowers and delivered to Agent.
"RCRA" shall mean the Resource Conservation and Recovery Act,
42 U.S.C. Sections 6901 et seq., as same may be amended from time to time.
"Real Property" shall mean all of each Borrower's right, title
and interest in and to the owned and leased premises identified on Schedule 4.19
hereto.
"Receivables" shall mean and include, as to each Borrower, all
of such Borrower's accounts, contract rights, instruments (including those
evidencing indebtedness owed to Borrowers by their Affiliates), documents,
chattel paper, general intangibles relating to accounts, drafts and acceptances,
and all other forms of obligations owing to such Borrower arising out of or in
connection with the sale or lease of Inventory or the rendition of services, all
guarantees and other security therefor, whether secured or unsecured, now
existing or hereafter created, and whether or not specifically sold or assigned
to Agent hereunder.
"Release" shall have the meaning set forth in Section
5.7(c)(i) hereof.
"Reportable Event" shall mean a reportable event described in
Section 4043(b) of ERISA or the regulations promulgated thereunder.
"Required Lenders" shall mean Lenders holding more than
sixty-six and two-thirds percent (66.66%) of the Advances and, if no Advances
are outstanding, shall mean Lenders holding more than sixty-six and two-thirds
percent (66.66%) of the Commitment Percentages.
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<PAGE> 25
"Reserve Percentage" shall mean the maximum effective
percentage in effect on any day as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining the reserve
requirements (including, without limitation, supplemental, marginal and
emergency reserve requirements) with respect to eurocurrency funding.
"Revolving Advances" shall mean advances made pursuant to
Section 2.1(a) hereof.
"Revolving Credit Notes" shall mean, collectively, the
promissory notes referred to in Section 2.1(a) hereof.
"Revolving Interest Rate" shall mean (A) prior to delivery on
the Borrower's audited financial statements for its fiscal year ending September
30, 2000, an interest rate per annum equal to (a) the Base Rate, with respect to
Domestic Rate Loans, (b) the sum of the Eurodollar Rate plus two and one half
(2.5%) percent, with respect to Eurodollar Rate Loans and (B) subsequent to
delivery of the Borrower's audited financial statements for its fiscal year
ending September 30, 2000, as set forth on Schedule 1 hereto, the Revolving
Interest Rate may change quarterly as the EBITDA of the Borrowers on a
consolidated basis changes for the period consisting of the four (4) consecutive
fiscal quarters of the Borrowers' most recently ended, provided (i) no change in
the Revolving Interest Rate shall be effective until three (3) Business Days
after the date on which the Agent receives the financial information required to
be delivered at the end of each fiscal quarter pursuant to Section 9.8 hereof
and (ii) the Revolving Interest Rate shall be at Level I pricing (as set forth
on Schedule 1) for so long as the Borrowers have not submitted to the Agent the
information described in clause (a) of this proviso as and when required at the
end of each fiscal quarter or during the continuance of an Event of Default.
Notwithstanding the foregoing but subject to Section 3.1, during the
continuation of an Event of Default, the Revolving Interest Rate shall be at
Level I pricing (as set forth on Schedule 1).
"Section 20 Subsidiary" shall mean the Subsidiary of the bank
holding company controlling PNC, which Subsidiary has been granted authority by
the Federal Reserve Board to underwrite and deal in certain Ineligible
Securities.
"Secured Hedge Agreement" shall mean any Hedge Agreement
entered into by the Borrower with a counterparty that was a Lender (or an
Affiliate thereof) at the time such Hedge Agreement was entered into.
"Senior Debt Payments" shall mean and include all cash
actually expended by Borrowers to make (a) interest payments on any Advances
hereunder, plus, (b) payments for all fees, commissions and charges set forth
herein and with respect to any Advances, but not including up-front or one-time
fees paid on or prior to the Closing Date in connection with the closing of the
financing transactions contemplated hereunder, plus (c) capitalized lease
payments, plus (d) payments with respect to borrowed money.
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"Settlement Date" shall mean the Closing Date and thereafter
Wednesday of each week unless such day is not a Business Day in which case it
shall be the next succeeding Business Day.
"Standby Letters of Credit" shall mean any Letters of Credit
issued hereunder, other than any Trade Letters of Credit.
"Subordinated Debt Payments" shall mean and include all cash
actually expended to make payments of principal and interest on the Subordinated
Note.
"Subordinated Loans" shall mean the loan evidenced by the
Subordinated Note.
"Subordinated Note" shall mean the subordinated promissory
note issued by Borrowers in favor of General Scanning Inc.
"Subordination Agreements" shall mean the Subordination
Agreement among Agent, Borrowers and General Scanning Inc.
"Subsidiary" shall mean, with respect to any Person, a
corporation or other entity of whose shares of stock or other ownership
interests having ordinary voting power (other than stock or other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the directors of such corporation, or other Persons
performing similar functions for such entity, are owned, directly or indirectly,
by such Person; provided, however, that for purposes of the representations,
warranties, covenants and Events of Defaults herein, the term Subsidiary shall
not include the Internet Subsidiary.
"Subsidiary Stock" shall mean all of the issued and
outstanding shares of stock owned by the Borrowers and their Subsidiaries.
"Termination Date" shall have the meaning set forth in Section
13.1 hereof.
"Termination Event" shall mean (i) a Reportable Event with
respect to any Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower
or any member of the Controlled Group from a Plan or Multiemployer Plan during a
plan year in which such entity was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a Plan in a distress termination described in Section 4041(c) of
ERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan or
Multiemployer Plan; (v) any event or condition (a) which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan or Multiemployer Plan, or (b) that may
result in termination of a Multiemployer Plan pursuant to Section 4041A of
ERISA; or (vi) the partial or complete withdrawal within the meaning of Sections
4203 and 4205 of ERISA, of any Borrower or any member of the Controlled Group
from a Multiemployer Plan.
"Toxic Substance" shall mean and include any material present
on the Real Property or the Leasehold Interests which has been shown to have
significant adverse effect on
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human health or which is subject to regulation under the Toxic Substances
Control Act (TSCA), 15 U.S.C. Sections 2601 et seq., applicable state law,
or any other applicable foreign, federal or state laws now in force or hereafter
enacted relating to toxic substances. "Toxic Substance" includes but is not
limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.
"Trade Letters of Credit" shall mean any Letters of Credit
that are issued hereunder for the benefit of a supplier of inventory to any
Borrower to effect payment of such inventory.
"Transferee" shall have the meaning set forth in Section
16.3(b) hereof.
"Undrawn Availability" at a particular date shall mean an
amount equal to (a) the lesser of (i) the Formula Amount or (ii) the Maximum
Revolving Advance Amount minus (b) the sum of (i) the outstanding amount of
Advances plus (ii) fees and expenses for which Borrowers are liable but which
have not been paid or charged to Borrowers' Account, plus (c) cash of the
Borrowers in Blocked Accounts or in accounts of the Borrowers with the Agent.
"Week" shall mean the time period commencing with the opening
of business on a Wednesday and ending on the end of business the following
Tuesday.
"Working Capital" at a particular date, shall mean the excess,
if any, of Current Assets over Current Liabilities at such date.
1.3 Uniform Commercial Code Terms. All terms used herein and defined in
the Uniform Commercial Code as adopted in the State of New York shall have the
meaning given therein in addition to the meanings defined herein.
1.4 Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise provided, all
references to any instruments or agreements to which Agent is a party,
including, without limitation, references to any of the Other Documents, shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
II. ADVANCES, PAYMENTS.
2.1 (a) Revolving Advances. Subject to the terms and conditions set
forth in this Agreement including, without limitation, Section 2.1(b), each
Lender, severally and not jointly, will make loans (the "Revolving Advances") to
Borrowers in aggregate amounts outstanding at any time equal to such Lender's
Commitment Percentage of the lesser of (x) the Maximum
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Revolving Advance Amount less the aggregate amount of drawings outstanding and
additional amounts available to be drawn under Letters of Credit or (y) an
amount equal to the sum of:
(i) up to 85%, subject to the provisions of Section
2.1(c) hereof ("Non-EXIM Receivables Advance Rate"), of
Eligible Receivables, plus
(ii) up to the lesser of (A) 80%, subject to the
provisions of Section 2.1(c) hereof ("Inventory Advance
Rate"), of the value of the EXIM Bank Guaranteed Inventory or
(B) $20,000,000 in the aggregate at any one time, plus
(iii) up to the lesser of 90%, subject to the
provisions of Section 2.1(c) hereof (the "EXIM Receivables
Advance Rate"), of the value of the EXIM Bank Guaranteed
Receivables (the Non-EXIM Receivables Advance Rate, the EXIM
Receivables Advance Rate and the Inventory Advance Rate shall
be referred to collectively, as the "Advance Rates");
provided, however, that in no event shall (A) the sum of
2.1(a)(y)(ii) and 2.1(a)(y)(iii) exceed $10,000,000 or (B) the
ratio of 2.1(a)(y)(ii) to 2.1(a)(y)(iii) exceed 4.0:1.0 or
such other ratio as may be required by the EXIM Borrower
Agreement, minus
(iv) the aggregate maximum amount of drawings
outstanding and additional amounts available under Letters of
Credit, minus
(v) such reserves as Agent in good faith may
reasonably deem proper and necessary from time to time.
The amount derived from the sum of (x) Sections 2.1(a)(y)(i), (ii) and
(iii) minus (y) Section 2.1 (a)(y)(iv) and (v) at any time and from time to time
shall be referred to as the "Formula Amount"; provided, however, with the
written consent of the Required Lenders, the Formula Amount shall also include
on a pro forma basis Eligible Receivables, EXIM Bank Guaranteed Inventory and
EXIM Bank Guaranteed Receivables of any Person to be acquired in a Permitted
Acquisition. The Revolving Advances shall be evidenced by one or more secured
promissory notes (collectively, the "Revolving Credit Notes") substantially in
the form attached hereto as Exhibit 2.1(a).
(b) Individual Revolving Advances. Each Lender, severally and
not jointly, will make Revolving Advances to each Borrower in aggregate amounts
outstanding at any time not greater than such Lender's Commitment Percentage of
the lesser of (i) the Maximum Revolving Advance Amount and (ii) such Borrower's
Individual Formula Amount less the maximum amount available to be drawn on
Letters of Credit.
(c) Discretionary Rights. Subject to Section 16.2 hereof, the
Advance Rates may be increased or decreased by Agent at any time and from time
to time in the exercise of its reasonable discretion, based on such
considerations as Agent may in good faith from time to time deem reasonably
appropriate (such reasonable discretion standard of the Agent at the time of any
decrease in the Advance Rates shall be based on a reasonableness standard of
financial
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institutions of similar size and with similar loan policies of the Agent, faced
with similar facts and circumstances).
2.2 Procedure for Borrowing Advances.
(a) Borrowing Agent on behalf of any Borrower may notify Agent
prior to 11:00 a.m. on a Business Day of a Borrower's request to incur, on that
day, a Revolving Advance hereunder. Subject to the satisfaction of the
conditions set forth in the definition of Permitted Acquisition, in the event
any Borrower desires to use the Revolving Advances for a Permitted Acquisition,
Borrowing Agent shall give Agent at least three (3) Business Days' prior written
notice together with a certificate in reasonable detail demonstrating that the
Borrowers will be in compliance with the limitations set forth in Section 2.4
hereof. Should any amount required to be paid as interest hereunder, or as fees
or other charges under this Agreement or any other agreement with Agent or
Lenders, or with respect to any other Obligation, become due, same shall be
deemed a request for a Revolving Advance as of the date such payment is due, in
the amount required to pay in full such interest, fee, charge or Obligation
under this Agreement or any other agreement with Agent or Lenders, and such
request shall be irrevocable.
(b) Notwithstanding the provisions of (a) above, in the event
any Borrower desires to obtain a Eurodollar Rate Loan, Borrowing Agent shall
give Agent at least three (3) Business Days' prior written notice, specifying
(i) the date of the proposed borrowing (which shall be a Business Day), (ii) the
type of borrowing and the amount on the date of such Advance to be borrowed,
which amount shall be in a minimum amount of $1,000,000 and in integral
multiples of $250,000 thereafter, and (iii) the duration of the first Interest
Period therefor. Interest Periods for Eurodollar Rate Loans shall be for one,
two, three or six months; provided, if an Interest Period would end on a day
that is not a Business Day, it shall end on the next succeeding Business Day
unless such day falls in the next succeeding calendar month in which case the
Interest Period shall end on the next preceding Business Day. No Eurodollar Rate
Loan shall be made available to Borrower during the continuance of a Default or
an Event of Default.
(c) Each Interest Period of a Eurodollar Rate Loan shall
commence on the date such Eurodollar Rate Loan is made and shall end on such
date as Borrowing Agent may elect as set forth in subsection (b)(iii) above;
provided that the exact length of each Interest Period shall be determined in
accordance with the practice of the interbank market for offshore Dollar
deposits and no Interest Period shall end after the last day of the Term.
Borrowing Agent shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(b) or by its notice of conversion given to Agent pursuant to Section
2.2(d), as the case may be. Borrowing Agent shall elect the duration of each
succeeding Interest Period by giving irrevocable written notice to Agent of such
duration not less than three (3) Business Days prior to the last day of the then
current Interest Period applicable to such Eurodollar Rate Loan. If Agent does
not receive timely notice of the Interest Period elected by Borrowing Agent,
Borrowers shall be deemed to have elected to convert to a Domestic Rate Loan
subject to Section 2.2(d) hereinbelow.
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(d) Provided that no Default shall have occurred and be
continuing, any Borrower may, on the last Business Day of the then current
Interest Period applicable to any outstanding Eurodollar Rate Loan, or on any
Business Day with respect to Domestic Rate Loans, convert any such loan into a
loan of another type in the same aggregate principal amount provided that any
conversion of a Eurodollar Rate Loan shall be made only on the last Business Day
of the then current Interest Period applicable to such Eurodollar Rate Loan. If
a Borrower desires to convert a loan, Borrowing Agent shall give Agent not less
than three (3) Business Days' prior written notice to convert from a Domestic
Rate Loan to a Eurodollar Rate Loan or one (1) Business Day's prior written
notice to convert from a Eurodollar Rate Loan to a Domestic Rate Loan,
specifying the date of such conversion, the loans to be converted and if the
conversion is from a Domestic Rate Loan to any other type of loan, the duration
of the first Interest Period therefor. After giving effect to each such
conversion, there shall not be outstanding more than five (5) Eurodollar Rate
Loans, in the aggregate.
(e) At its option and upon three (3) Business Days' prior
written notice, any Borrower may prepay the Eurodollar Rate Loans in whole at
any time or in part from time to time, without premium or penalty, but with
accrued interest on the principal being prepaid to the date of such repayment.
Such Borrower shall specify the date of prepayment of Advances which are
Eurodollar Rate Loans and the amount of such prepayment. In the event that any
prepayment of a Eurodollar Rate Loan is required or permitted on a date other
than the last Business Day of the then current Interest Period with respect
thereto, such Borrower shall indemnify Agent and Lenders therefor in accordance
with Section 2.2(f) hereof.
(f) Each Borrower shall indemnify Agent and Lenders and hold
Agent and Lenders harmless from and against any and all losses or expenses that
Agent and Lenders may sustain or incur as a consequence of any prepayment,
conversion of or any default by any Borrower in the payment of the principal of
or interest on any Eurodollar Rate Loan or failure by any Borrower to complete a
borrowing of, a prepayment of or conversion of or to a Eurodollar Rate Loan
after notice thereof has been given, including, but not limited to, any interest
payable by Agent or Lenders to lenders of funds obtained by it in order to make
or maintain its Eurodollar Rate Loans hereunder. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by Agent
or any Lender to Borrowing Agent shall be conclusive absent manifest error.
(g) Notwithstanding any other provision hereof, if any
applicable law, treaty, regulation or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Lender
(for purposes of this subsection (g), the term "Lender" shall include any Lender
and the office or branch where any Lender or any corporation or bank controlling
such Lender makes or maintains any Eurodollar Rate Loans) to make or maintain
its Eurodollar Rate Loans , the obligation of Lenders to make Eurodollar Rate
Loans hereunder shall forthwith be canceled and Borrowers shall, if any affected
Eurodollar Rate Loans are then outstanding, promptly upon request from Agent,
either pay all such affected Eurodollar Rate Loans or convert such affected
Eurodollar Rate Loans into loans of another type. If any such payment or
conversion of any Eurodollar Rate Loan is made on a day that is not the last day
of the Interest Period applicable to such Eurodollar Rate Loan, Borrowers shall
pay Agent, upon
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Agent's request, such amount or amounts as may be necessary to compensate
Lenders for any loss or expense sustained or incurred by Lenders in respect of
such Eurodollar Rate Loan as a result of such payment or conversion, including
(but not limited to) any interest or other amounts payable by Lenders to lenders
of funds obtained by Lenders in order to make or maintain such Eurodollar Rate
Loan. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by Lenders to Borrowing Agent shall be conclusive
absent manifest error.
2.3 Disbursement of Advance Proceeds. All Advances shall be
disbursed from whichever office or other place Agent may designate from time to
time and, together with any and all other Obligations of Borrowers to Agent or
Lenders, shall be charged to Borrowers' Account on Agent's books. During the
Term, Borrowers may use the Revolving Advances by borrowing, prepaying without
premium or penalty (subject to Section 2.13 hereof) and reborrowing, all in
accordance with the terms and conditions hereof. The proceeds of each Revolving
Advance requested by Borrowers or deemed to have been requested by Borrowers
under Section 2.2(a) hereof shall, with respect to requested Revolving Advances
to the extent Lenders make such Revolving Advances, be made available to the
applicable Borrower on the day so requested by way of credit to such Borrower's
operating account at PNC, or such other bank as Borrowing Agent may designate
following notification to Agent, in immediately available federal funds or other
immediately available funds or, with respect to Revolving Advances deemed to
have been requested by any Borrower, be disbursed to Agent to be applied to the
outstanding Obligations giving rise to such deemed request.
2.4 Maximum Advances.
(a) The aggregate balance of Revolving Advances outstanding at
any time shall not exceed the lesser of (i) Maximum Revolving Advance Amount or
(ii) the Formula Amount.
(b) The aggregate balance of Revolving Advances outstanding at
any time to any individual Borrower shall not exceed (A) the lesser of (i) the
Maximum Revolving Advance Amount or (ii) such Borrower's Individual Formula
Amount.
(c) The aggregate amount of all Advances made hereunder to the
Borrowers for Permitted Acquisitions shall not exceed $10,000,000.
2.5 Repayment of Advances.
(a) The Revolving Advances shall be due and payable in full on
the last day of the Term subject to earlier prepayment as herein provided.
(b) Each Borrower recognizes that the amounts evidenced by
checks, notes, drafts or any other items of payment relating to and/or proceeds
of Collateral may not be collectible by Agent on the date received. In
consideration of Agent's agreement to conditionally credit Borrowers' Account as
of the Business Day on which Agent receives those
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items of payment, each Borrower agrees that, in computing the charges under this
Agreement, all items of payment shall be deemed applied by Agent on account of
the Obligations one (1) Business Day after the Business Day Agent receives such
payments via wire transfer or electronic depository check. Agent is not,
however, required to credit Borrowers' Account for the amount of any item of
payment which is unsatisfactory to Agent and Agent may charge Borrowers' Account
for the amount of any item of payment which is returned to Agent unpaid.
(c) All payments of principal, interest and other amounts
payable hereunder, or under any of the Other Documents shall be made to Agent at
the Payment Office not later than 1:00 P.M. (New York Time) on the due date
therefor in lawful money of the United States of America in federal funds or
other funds immediately available to Agent. Agent shall have the right to
effectuate payment on any and all Obligations due and owing hereunder by
charging Borrowers' Account or by making Advances as provided in Section 2.2
hereof.
(d) Borrowers shall pay principal, interest, and all other
amounts payable hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
2.6 Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall be immediately due and payable without the necessity of any
demand, at the Payment Office, whether or not a Default or Event of Default has
occurred.
2.7 Statement of Account. Agent shall maintain, in accordance with its
customary procedures, a loan account ("Borrowers' Account") in the name of
Borrowers in which shall be recorded the date and amount of each Advance made by
Agent and the date and amount of each payment in respect thereof; provided,
however, the failure by Agent to record the date and amount of any Advance shall
not adversely affect Agent or any Lender. Each month, Agent shall send to
Borrowing Agent a statement showing the accounting for the Advances made,
payments made or credited in respect thereof, and other transactions between
Agent and Borrowers, during such month. The monthly statements shall be deemed
correct and binding upon Borrowers in the absence of manifest error and shall
constitute an account stated between Lenders and Borrowers unless Agent receives
a written statement of Borrowers' specific exceptions thereto within thirty (30)
days after such statement is received by Borrowing Agent. The records of Agent
with respect to the loan account shall be conclusive evidence absent manifest
error of the amounts of Advances and other charges thereto and of payments
applicable thereto.
2.8 Letters of Credit. Subject to the terms and conditions hereof,
Agent shall issue or cause the issuance of Letters of Credit ("Letters of
Credit") on behalf of any Borrower; provided, however, that Agent will not be
required to issue or cause to be issued any Letters of Credit to the extent that
the face amount of such Letters of Credit would then cause the sum of (i) the
outstanding Revolving Advances plus (ii) outstanding Letters of Credit to exceed
the lesser of (x) the Maximum Revolving Advance Amount or (y) the Formula
Amount; provided, further, however, that Agent will not be required to issue or
cause to be issued any Letters of Credit to the extent that the face amount of
such Letters of Credit issued for such Borrower would then
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cause the sum of (i) the outstanding Revolving Advances to such Borrower plus
(ii) the amount available to be drawn under outstanding Letters of Credit issued
or caused to be issued on behalf of such Borrower to exceed the lesser of (x)
such Borrower's Individual Maximum Revolving Advance Amount or (y) such
Borrower's Individual Formula Amount. The maximum amount of outstanding Letters
of Credit shall not exceed $3,500,000 in the aggregate at any time. All
disbursements or payments related to Letters of Credit shall be deemed to be
Domestic Rate Loans consisting of Revolving Advances and shall bear interest at
the Revolving Interest Rate for Domestic Rate Loans; Letters of Credit that have
not been drawn upon shall not bear interest.
2.9 Issuance of Letters of Credit.
(a) Borrowing Agent, on behalf of Borrowers, may request Agent
to issue or cause the issuance of a Letter of Credit by delivering to Agent at
the Payment Office, Agent's form of Letter of Credit Application (the "Letter of
Credit Application") completed to the satisfaction of Agent; and, such other
certificates, documents and other papers and information as Agent may reasonably
request. Borrowing Agent, on behalf of Borrowers, also has the right to give
instructions and make agreements with respect to any application, any applicable
letter of credit and security agreement, any applicable letter of credit
reimbursement agreement and/or any other applicable agreement, any letter of
credit and the disposition of documents, disposition of any unutilized funds,
and to agree with Agent upon any amendment, extension or renewal of any Letter
of Credit.
(b) Each Letter of Credit shall, among other things, (i)
provide for the payment of sight drafts or acceptances of usance drafts when
presented for honor thereunder in accordance with the terms thereof and when
accompanied by the documents described therein and (ii) have an expiry date not
later than one (1) year after such Letter of Credit's date of issuance and in no
event later than the last day of the Term. Each Letter of Credit shall be
subject to the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500, and any
amendments or revision thereof adhered to by the Issuer and, to the extent not
inconsistent therewith, the laws of the State of New York.
(c) Agent shall use its reasonable efforts to notify Lenders
of the request by Borrowing Agent for a Letter of Credit hereunder.
2.10 Requirements For Issuance of Letters of Credit.
(a) In connection with the issuance of any Letter of Credit,
Borrowers shall indemnify, save and hold Agent, each Lender and each Issuer
harmless from any loss, cost, expense or liability, including, without
limitation, payments made by Agent, any Lender or any Issuer and expenses and
reasonable attorneys' fees incurred by Agent, any Lender or Issuer arising out
of, or in connection with, any Letter of Credit to be issued or created for any
Borrower. Borrowers shall be bound by Agent's or any Issuer's regulations and
good faith inter pretations of any Letter of Credit issued or created for
Borrowers' Account, although this inter pretation may be different from its own;
and, neither Agent, nor any Lender, nor any Issuer nor
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any of their correspondents shall be liable for any error, negligence, or
mistakes, whether of omission or commission, in following Borrowing Agent's or
any Borrower's instructions or those contained in any Letter of Credit or of any
modifications, amendments or supplements thereto or in issuing or paying any
Letter of Credit except for Agent's, any Lender's, any Issuer's or such
correspondents' willful misconduct or gross negligence.
(b) Borrowing Agent shall authorize and direct any Issuer to
name the applicable Borrower as the "Applicant" or "Account Party" of each
Letter of Credit. If Agent is not the Issuer of any Letter of Credit, Borrowing
Agent shall authorize and direct the Issuer to deliver to Agent all instruments,
documents, and other writings and property received by the Issuer pursuant to
the Letter of Credit and to accept and rely upon Agent's instructions and
agreements with respect to all matters arising in connection with the Letter of
Credit, or the application therefor.
(c) In connection with all Letters of Credit issued or caused
to be issued by Agent under this Agreement, each Borrower hereby appoints Agent,
or its designee, as its attorney, with full power and authority if an Event of
Default or Default shall have occurred, (i) to sign and/or endorse such
Borrower's name upon any warehouse or other receipts, letter of credit
applications; (ii) to sign such Borrower's name on bills of lading; (iii) to
clear Inventory through the United States of America Customs Department
("Customs") in the name of such Borrower or Agent or Agent's designee, and to
sign and deliver to Customs officials powers of attorney in the name of such
Borrower for such purpose; and (iv) to complete in such Borrower's name or
Agent's, or in the name of Agent's designee, any order, sale or transaction,
obtain the necessary documents in connection therewith, and collect the proceeds
thereof. Neither Agent nor its attorneys will be liable for any acts or
omissions nor for any error of judgment or mistakes of fact or law, except for
Agent's or its attorney's willful misconduct. This power, being coupled with an
interest, is irrevocable as long as any Letters of Credit remain outstanding.
(d) Each Lender shall to the extent of the percentage amount
equal to the product of such Lender's Commitment Percentage times the aggregate
amount of all unreimbursed reimbursement obligations arising from disbursements
made or obligations incurred with respect to the Letters of Credit be deemed to
have irrevocably purchased an undivided participation in each such unreimbursed
reimbursement obligation. In the event that at the time a disbursement is made
the unpaid balance of Revolving Advances exceeds or would exceed, with the
making of such disbursement, the lesser of the Maximum Revolving Advance Amount
or the Formula Amount, and such disbursement is not reimbursed by Borrowers
within two (2) Business Days, Agent shall promptly notify each Lender and upon
Agent's demand each Lender shall pay to Agent such Lender's proportionate share
of such unreimbursed disbursement together with such Lender's proportionate
share of Agent's unreimbursed costs and expenses relating to such unreimbursed
disbursement. Upon receipt by Agent of a repayment from any Borrower of any
amount disbursed by Agent for which Agent had already been reimbursed by
Lenders, Agent shall deliver to each Lender that Lender's pro rata share of such
repayment. Each Lender's participation commitment shall continue until the last
to occur of any of the following events: (A) Agent ceases to be obligated to
issue or cause to be issued Letters of Credit hereunder; (B) no Letter of Credit
issued hereunder remains outstanding and uncancelled or (C)
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all Persons (other than the applicable Borrower) have been fully reimbursed for
all payments made under or relating to Letters of Credit.
2.11 Additional Payments. Any sums expended by Agent or any Lender
due to any Borrower's failure to perform or comply with its obligations under
this Agreement or any Other Document including, without limitation, any
Borrower's obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof,
may be charged to Borrowers' Account as a Revolving Advance and added to the
Obligations.
2.12 Manner of Borrowing and Payment.
(a) Each borrowing of Revolving Advances shall be advanced
according to the applicable Commitment Percentages of Lenders.
(b) Each payment (including each prepayment) by Borrowers on
account of the principal of and interest on the Revolving Advances, shall be
applied to the Revolving Advances pro rata according to the applicable
Commitment Percentages of Lenders, subject to Section 2.5 hereof. Except as
expressly provided herein, all payments (including prepayments) to be made by
any Borrower on account of principal, interest and fees shall be made without
set off or counterclaim and shall be made to Agent on behalf of the Lenders to
the Payment Office, in each case on or prior to 1:00 P.M., New York time, in
Dollars and in immediately available funds.
(c) (i) Notwithstanding anything to the contrary contained in
Sections 2.12(a) and (b) hereof, commencing with the first Business Day
following the Closing Date, each borrowing of Revolving Advances shall be
advanced by Agent and each payment by any Borrower on account of Revolving
Advances shall be applied first to those Revolving Advances advanced by Agent.
On or before 1:00 P.M., New York time, on each Settlement Date commencing with
the first Settlement Date following the Closing Date, Agent and Lenders shall
make certain payments as follows: (I) if the aggregate amount of new Revolving
Advances made by Agent during the preceding Week (if any) exceeds the aggregate
amount of repayments applied to outstanding Revolving Advances during such
preceding Week, then each Lender shall provide Agent with funds in an amount
equal to its applicable Commitment Percentage of the difference between (w) such
Revolving Advances and (x) such repayments and (II) if the aggregate amount of
repayments applied to outstanding Revolving Advances during such Week exceeds
the aggregate amount of new Revolving Advances made during such Week, then Agent
shall provide each Lender with funds in an amount equal to its applicable
Commitment Percentage of the difference between (y) such repayments and (z) such
Revolving Advances.
(ii) Each Lender shall be entitled to earn interest at the
applicable Revolving Interest Rate on outstanding Advances which it has funded.
(iii) Promptly following each Settlement Date, Agent shall
submit to each Lender a certificate with respect to payments received and
Advances made during the Week
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immediately preceding such Settlement Date. Such certificate of Agent shall be
conclusive in the absence of manifest error.
(d) If any Lender or Participant (a "benefitted Lender") shall
at any time receive any payment of all or part of its Advances, or interest
thereon, or receive any Collateral in respect thereof (whether voluntarily or
involuntarily or by set-off) in a greater proportion than any such payment to
and Collateral received by any other Lender, if any, in respect of such other
Lender's Advances, or interest thereon, and such greater proportionate payment
or receipt of Collateral is not expressly permitted hereunder, such benefitted
Lender shall purchase for cash from the other Lenders a participation in such
portion of each such other Lender's Advances, or shall provide such other Lender
with the benefits of any such Collateral, or the proceeds thereof, as shall be
necessary to cause such benefitted Lender to share the excess payment or
benefits of such Collateral or proceeds ratably with each of the other Lenders;
provided, however, that if all or any portion of such excess payment or benefits
is thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Each Lender so purchasing a portion of another
Lender's Advances may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
(e) Unless Agent shall have been notified by telephone,
confirmed in writing, by any Lender that such Lender will not make the amount
which would constitute its applicable Commitment Percentage of the Advances
available to Agent, Agent may (but shall not be obligated to) assume that such
Lender shall make such amount available to Agent on the next Settlement Date
and, in reliance upon such assumption, make available to Borrowers a
corresponding amount. Agent will promptly notify Borrowers of its receipt of any
such notice from a Lender. If such amount is made available to Agent on a date
after such next Settlement Date, such Lender shall pay to Agent on demand an
amount equal to the product of (i) the daily average Federal Funds Rate
(computed on the basis of a year of 360 days) during such period as quoted by
Agent, times (ii) such amount, times (iii) the number of days from and including
such Settlement Date to the date on which such amount becomes immediately
available to Agent. A certificate of Agent submitted to any Lender with respect
to any amounts owing under this paragraph (e) shall be conclusive, in the
absence of manifest error. If such amount is not in fact made available to Agent
by such Lender within three (3) Business Days after such Settlement Date, Agent
shall be entitled to recover such an amount, with interest thereon at the rate
per annum then applicable to such Revolving Advances hereunder, on demand from
Borrowers; provided, however, that Agent's right to such recovery shall not
prejudice or otherwise adversely affect Borrowers' rights (if any) against such
Lender.
2.13 Reductions of the Revolving Credit. The Borrowers may at any time
and from time to time, upon not less than ten (10) Business Days' written notice
to the Agent, elect to reduce permanently and terminate the Maximum Revolving
Advance Amount without premium or penalty (other than the losses and expenses
set forth in Section 2.2(f) hereof, if applicable) in whole or in part, provided
that any such partial reductions shall be in a minimum amount of $500,000, in
integral multiples of $100,000 and an aggregate amount not to exceed
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$10,000,000, and provided, further, that any amounts so terminated may not be
reinstated. In connection with any such reduction, the Borrower shall pay to the
Agent the principal amount of the Revolving Advances to the extent subject to
reduction, together with all accrued but unpaid interest on such amounts to the
date of prepayment, and all other amounts payable with respect to such amounts,
if any.
2.14 Use of Proceeds. Borrowers shall apply the proceeds of
Advances to (i) pay fees and expenses relating to this transaction, (ii) to
provide for their working capital needs and (iii) up to $10,000,000 in the
aggregate for Permitted Acquisitions.
2.15 Defaulting Lender.
(a) Notwithstanding anything to the contrary contained herein,
in the event any Lender (x) has refused (which refusal constitutes a breach by
such Lender of its obligations under this Agreement) to make available its
portion of any Advance or (y) notifies either Agent or Borrowing Agent that it
does not intend to make available its portion of any Advance (if the actual
refusal would constitute a breach by such Lender of its obligations under this
Agreement) (each, a "Lender Default"), all rights and obligations hereunder of
such Lender (a "Defaulting Lender") as to which a Lender Default is in effect
and of the other parties hereto shall be modified to the extent of the express
provisions of this Section 2.15 while such Lender Default remains in effect.
(b) Advances shall be incurred pro rata from Lenders (the
"Non-Defaulting Lenders") which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender pro rata based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that, the aggregate amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage
of all Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to give
instructions to Agent or to approve, disapprove, consent to or vote on any
matters relating to this Agreement and the Other Documents. All amendments,
waivers and other modifications of this Agreement and the Other Documents may be
made without regard to a Defaulting Lender and, for purposes of the definition
of "Required Lenders", a Defaulting Lender shall be deemed not to be a Lender
and not to have Advances outstanding.
(d) Other than as expressly set forth in this Section 2.15,
the rights and obligations of a Defaulting Lender (including the obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing in
this Section 2.15 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
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hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.
(e) In the event a Defaulting Lender retroactively cures to
the satisfaction of Agent the breach which caused a Lender to become a
Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting Lender
and shall be treated as a Lender under this Agreement.
III. INTEREST AND FEES.
3.1 Interest. Interest on Advances shall be payable in arrears on
the first day of each month with respect to Domestic Rate Loans and, with
respect to Eurodollar Rate Loans, at the end of each Interest Period or, for
Eurodollar Rate Loans with an Interest Period in excess of three months, the
date which is three (3) months after the commencement of such Eurodollar Rate
Loan and at the end of the Interest Period. Interest charges shall be computed
on the actual principal amount of Advances outstanding during the month (the
"Monthly Advances") at a rate per annum equal to the applicable Revolving
Interest Rate. Whenever, subsequent to the date of this Agreement, the Base Rate
announced by PNC changes, the Revolving Interest Rate shall be increased or
decreased without notice or demand of any kind by an amount equal to the amount
of such change in the Base Rate as of the effective date of such change. The
Eurodollar Rate shall be adjusted with respect to Eurodollar Rate Loans without
notice or demand of any kind on the effective date of any change in the Reserve
Percentage as of such effective date. Upon and after the occurrence of an Event
of Default, and during the continuation thereof, (i) the Obligations shall bear
interest at the applicable Revolving Interest Rate for Domestic Loans plus two
percent (2%) per annum (as applicable, the "Default Rate").
3.2 Letter of Credit Fees.
(a) Borrowers shall pay (x) to Agent, for the benefit of
Lenders, fees for each Letter of Credit for the period from and excluding the
date of issuance of same to and including the date of expiration or termination,
equal to the average daily face amount of each outstanding Letter of Credit
multiplied by (i) one and one-half percent (1.50%) per annum with respect to
Trade Letters of Credit or (ii) (A) prior to delivery on the Borrower's audited
financial statements for its fiscal year ending September 30, 2000, the
applicable percentage per annum over the Eurodollar Rate for Level II pricing as
set forth on Schedule 1 hereto and (B) from and after the third Business Day
after delivery of the Borrower's audited financial statements for its fiscal
year ending September 30, 2000, the then applicable percentage per annum over
the Eurodollar Rate for the then applicable Level, as set forth on Schedule 1
hereto, with respect to Standby Letters of Credit, such fees to be calculated on
the basis of a 360-day year for the actual number of days elapsed and to be
payable monthly in arrears on the first day of each month and on the last day of
the Term (y) to Agent, for the benefit of the Issuer, one-quarter percent (.25%)
of the face amount of each Standby Letters of Credit, and (z) to the Issuer, any
and all fees and expenses as agreed upon by the Issuer and the Borrowing Agent
in connection with any Letter of Credit, including, without limitation, in
connection with the opening, amendment or renewal of any such Letter of Credit
and any acceptances created thereunder and shall reimburse Agent for any and
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all fees and expenses, if any, paid by Agent to the Issuer (all of the foregoing
fees, the "Letter of Credit Fees"). All such charges shall be deemed earned in
full on the date when the same are due and payable hereunder and shall not be
subject to rebate or proration upon the termination of this Agreement for any
reason. Any such charge in effect at the time of a particular transaction shall
be the charge for that transaction, notwithstanding any subsequent change in the
Issuer's prevailing charges for that type of transaction. All Letter of Credit
Fees payable hereunder shall be deemed earned in full on the date when the same
are due and payable hereunder and shall not be subject to rebate or proration
upon the termination of this Agreement for any reason.
At the Agent's request at any time while an Event of Default is
continuing, Borrowers will cause cash to be deposited and maintained in an
account with Agent, as cash collateral, in an amount equal to one hundred and
five percent (105%) of the outstanding Letters of Credit, and each Borrower
hereby irrevocably authorizes Agent, in its discretion, on such Borrower's
behalf and in such Borrower's name, to open such an account and to make and
maintain deposits therein, or in an account opened by such Borrower, in the
amounts required to be made by such Borrower, out of the proceeds of Receivables
or other Collateral or out of any other funds of such Borrower coming into any
Lender's possession at any time. Agent will invest such cash collateral (less
applicable reserves) in such short-term money-market items as to which Agent and
such Borrower mutually agree and the net return on such investments shall be
credited to such account and constitute additional cash collateral. No Borrower
may withdraw amounts credited to any such account except upon cure or waiver of
such Event of Default as long as no other Event of Default is then continuing or
upon payment and performance in full of all Obligations and termination of this
Agreement or if the amounts held therein exceed the amounts available to be
drawn under such Letters of Credit plus amounts drawn and outstanding thereunder
by more than 105%.
(b) Facility Fee. If, for any month during the Term, the
average daily unpaid balance of the Revolving Advances for each day of such
month does not equal the Maximum Revolving Advance Amount, then Borrowers shall
pay to Agent for the ratable benefit of Lenders a fee at a rate equal to 3/8 of
one percent (.375%) per annum on the amount by which the Maximum Revolving
Advance Amount exceeds such average daily unpaid balance. Such fee shall be
payable to Agent in arrears on the last day of each month.
3.3 Intentionally Left Blank.
3.4 Computation of Interest and Fees. Interest and fees hereunder
shall be computed on the basis of a year of 360 days and for the actual number
of days elapsed. If any payment to be made hereunder becomes due and payable on
a day other than a Business Day, the due date thereof shall be extended to the
next succeeding Business Day and interest thereon shall be payable at the
Revolving Interest Rate for Domestic Rate Loans during such extension.
3.5 Maximum Charges. In no event whatsoever shall interest and
other charges charged hereunder exceed the highest rate permissible under law.
In the event interest and other charges as computed hereunder would otherwise
exceed the highest rate permitted under law, such excess amount shall be first
applied to any unpaid principal balance owed by Borrowers,
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and if the then remaining excess amount is greater than the previously unpaid
principal balance, Lenders shall promptly refund such excess amount to Borrowers
and the provisions hereof shall be deemed amended to provide for such
permissible rate.
3.6 Increased Costs. In the event that any applicable law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of this Section
3.6, the term "Lender" shall include Agent or any Lender and any corporation or
bank controlling Agent or any Lender) and the office or branch where Agent or
any Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any
request or directive (whether or not having the force of law) from any central
bank or other financial, monetary or other authority, shall:
(a) subject Agent or any Lender to any tax of any kind
whatsoever with respect to this Agreement or any Other Document or change the
basis of taxation of payments to Agent or any Lender of principal, fees,
interest or any other amount payable hereunder or under any Other Documents
(except for changes in the rate of tax on the overall net income of Agent or any
Lender by the jurisdiction in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or deposits
in or for the account of, advances or loans by, or other credit extended by, any
office of Agent or any Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender or the London interbank
Eurodollar market any other condition with respect to this Agreement or any
Other Document;
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material, then, in
any case Borrowers shall promptly pay Agent or such Lender, upon its demand,
such additional amount as will compensate Agent or such Lender for such
additional cost or such reduction, as the case may be, provided that the
foregoing shall not apply to increased costs which are reflected in the
Eurodollar Rate. Agent or such Lender shall certify the amount of such
additional cost or reduced amount to Borrowers, and such certification shall be
conclusive absent manifest error.
3.7 Basis For Determining Interest Rate Inadequate or Unfair. In the
event that Agent or any Lender shall have determined that:
(a) reasonable means do not exist for ascertaining the
Eurodollar Rate applicable pursuant to Section 2.2 hereof for any Interest
Period; or
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(b) Dollar deposits in the relevant amount and for the relevant
maturity are not available in the London interbank Eurodollar market, with
respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan,
or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan
then Agent shall give Borrowing Agent prompt written, telephonic or telegraphic
notice of such determination. If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrowing
Agent shall notify Agent no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the date of such proposed borrowing, that its request for
such borrowing shall be canceled or made as an unaffected type of Eurodollar
Rate Loan , (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to
have been converted to an affected type of Eurodollar Rate Loan shall be
continued as or converted into a Domestic Rate Loan, or, if Borrowing Agent
shall notify Agent, no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the proposed conversion, shall be maintained as an
unaffected type of Eurodollar Rate Loan, and (iii) any outstanding affected
Eurodollar Rate Loans shall be converted into a Domestic Rate Loan, or, if
Borrowing Agent shall notify Agent, no later than 10:00 a.m. (New York City
time) two (2) Business Days prior to the last Business Day of the then current
Interest Period applicable to such affected Eurodollar Rate Loan, shall be
converted into an unaffected type of Eurodollar Rate Loan, on the last Business
Day of the then current Interest Period for such affected Eurodollar Rate Loans.
Until such notice has been withdrawn, Lenders shall have no obligation to make
an affected type of Eurodollar Rate Loan or maintain outstanding affected
Eurodollar Rate Loans and no Borrower shall have the right to convert a Domestic
Rate Loan or an unaffected type of Eurodollar Rate Loan into an affected type of
Eurodollar Rate Loan.
3.8 Capital Adequacy.
(a) In the event that Agent or any Lender shall have determined
that any change in any applicable law, rule, regulation or guideline regarding
capital adequacy, or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by Agent or any
Lender (for purposes of this Section 3.8, the term "Lender" shall include Agent
or any Lender and any corporation or bank controlling Agent or any Lender) and
the office or branch where Agent or any Lender (as so defined) makes or
maintains any Eurodollar Rate Loans with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on Agent or any Lender's capital as a consequence of its
obligations hereunder to a level below that which Agent or such Lender could
have achieved but for such adoption, change or compliance (taking into
consideration Agent's and each Lender's policies with respect to capital
adequacy) by an amount deemed by Agent or any Lender to be material, then, from
time to time, Borrowers shall pay upon demand to Agent or such Lender such
additional amount or amounts as will compensate Agent or such Lender for such
reduction. In determining such amount or amounts, Agent or such Lender shall use
reasonable averaging or attribution methods. The protection of this Section 3.8
shall be available to Agent and each Lender regardless of any possible
contention of invalidity or inapplicability with respect to the applicable law,
regulation or condition.
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(b) A certificate of Agent or such Lender setting forth such
amount or amounts as shall be necessary to compensate Agent or such Lender with
respect to Section 3.8(a) hereof when delivered to Borrowers shall be conclusive
absent manifest error.
IV. COLLATERAL: GENERAL TERMS
4.1 Security Interest in the Collateral. To secure the prompt
payment and performance to Agent and each Lender of the Obligations, each
Borrower hereby assigns, pledges and grants to Agent for its benefit and for the
ratable benefit of each Lender a continuing security interest in and to all of
its Collateral, whether now owned or existing or hereafter acquired or arising
and wheresoever located. Each Borrower shall mark its books and records as may
be necessary or appropriate to evidence, protect and perfect Agent's security
interest and shall cause its financial statements to reflect such security
interest.
4.2 Perfection of Security Interest. Each Borrower shall take all
action that may be necessary or desirable, or that Agent may request, so as at
all times to maintain the validity, perfection, enforceability and priority of
Agent's security interest in the Collateral or to enable Agent to protect,
exercise or enforce its rights hereunder and in the Collateral, including, but
not limited to, (i) immediately discharging all Liens other than Permitted
Encumbrances, (ii) obtaining landlords' or mortgagees' lien waivers (unless
otherwise agreed to in writing by the Agent), (iii) delivering to Agent,
endorsed or accompanied by such instruments of assignment as Agent may specify,
and stamping or marking, in such manner as Agent may specify, any and all
chattel paper, instruments, letters of credits and advices thereof and documents
evidencing or forming a part of the Collateral, (iv) entering into warehousing,
lockbox and other custodial arrangements satisfactory to Agent, and (v)
executing and delivering financing statements, instruments of pledge, mortgages,
notices and assignments, in each case in form and substance satisfactory to
Agent, relating to the creation, validity, perfection, maintenance or
continuation of Agent's security interest under the Uniform Commercial Code or
other applicable law. Agent is hereby authorized to file financing statements
signed by Agent instead of Borrower in accordance with Section 9-402(2) of
Uniform Commercial Code as adopted in the State of New York. All charges,
expenses and fees Agent may incur in doing any of the foregoing, and any local
taxes relating thereto, shall be charged to Borrowers' Account as a Revolving
Advance of a Domestic Rate Loan and added to the Obligations, or, at Agent's
option, shall be paid to Agent for the ratable benefit of Lenders immediately
upon demand.
4.3 Disposition of Collateral. Each Borrower will safeguard and
protect all Collateral for Agent's general account and make no material
disposition thereof whether by sale, lease or otherwise except the sale of
Inventory in the ordinary course of business and dispositions permitted by
Section 7.1.
4.4 Preservation of Collateral. During the continuance of an Event
of Default in addition to the rights and remedies set forth in Section 11.1
hereof, Agent: (a) may at any time take such steps as Agent deems necessary to
protect Agent's interest in and to preserve the Collateral, including the hiring
of such security guards or the placing of other security protection
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measures as Agent may deem appropriate; (b) may employ and maintain at any of
any Borrower's premises a custodian who shall have full authority to do all acts
necessary to protect Agent's interests in the Collateral; (c) may lease
warehouse facilities to which Agent may move all or part of the Collateral; (d)
may use any Borrower's owned or leased lifts, hoists, trucks and other
facilities or equipment for handling or removing the Collateral; and (e) shall
have, and is hereby granted, a right of ingress and egress to the places where
the Collateral is located, and may proceed over and through any of Borrower's
owned or leased property. Each Borrower shall cooperate fully with all of
Agent's efforts to preserve the Collateral and will take such actions to
preserve the Collateral as Agent may direct. All of Agent's expenses of
preserving the Collateral, including any expenses relating to the bonding of a
custodian, shall be charged to Borrowers' Account as a Revolving Advance of a
Domestic Rate Loan and added to the Obligations.
4.5 Ownership of Collateral. With respect to the Collateral, at
the time the Collateral becomes subject to Agent's security interest: (a) each
Borrower shall be the sole owner of and fully authorized and able to sell,
transfer, pledge and/or grant a first priority security interest in each and
every item of its respective Collateral to Agent; and, except for Permitted
Encumbrances the Collateral shall be free and clear of all Liens and
encumbrances whatsoever; (b) each document and agreement executed by each
Borrower or delivered to Agent or any Lender in connection with this Agreement
shall be true and correct in all material respects; (c) all signatures and
endorsements of each Borrower that appear on such documents and agreements shall
be genuine and each Borrower shall have full capacity to execute same; and (d)
each Borrower's Equipment and Inventory shall be located as set forth on
Schedule 4.5 and shall not be removed from such location(s) without the prior
written consent of Agent except with respect to the sale of Inventory in the
ordinary course of business.
4.6 Defense of Agent's and Lenders' Interests. Until (a) payment
and performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. During such period no Borrower shall, without Agent's prior written
consent, pledge, sell (except Inventory in the ordinary course of business and
dispositions permitted by Section 7.1), assign, transfer, create or suffer to
exist a Lien upon or encumber or allow or suffer to be encumbered in any way
except for Permitted Encumbrances and dispositions permitted by Section 7.1, any
part of the Collateral. Each Borrower shall defend Agent's interests in the
Collateral against any and all Persons whatsoever. At any time following demand
by Agent for payment of all Obligations, Agent shall have the right to take
possession of the indicia of the Collateral and the Collateral in whatever
physical form contained, including without limitation: labels, stationery,
documents, instruments and advertising materials. If Agent exercises this right
to take possession of the Collateral, Borrowers shall, upon demand, assemble it
in the best manner possible and make it available to Agent at a place reasonably
convenient to Agent. In addition, with respect to all Collateral, Agent and
Lenders shall be entitled to all of the rights and remedies set forth herein and
further provided by the Uniform Commercial Code or other applicable law. Each
Borrower shall, and Agent may, at its option, instruct all suppliers, carriers,
forwarders, warehousers or others receiving or holding cash, checks, Inventory,
documents or instruments in which Agent holds a security interest to deliver
same to Agent and/or subject to Agent's order and if they shall come into any
Borrower's
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possession, they, and each of them, shall be held by such Borrower in trust as
Agent's trustee, and such Borrower will immediately deliver them to Agent in
their original form together with any necessary endorsement.
4.7 Books and Records. Each Borrower shall (a) keep proper books
of record and account in which full, true and correct entries will be made of
all dealings or transactions of or in relation to its business and affairs; (b)
set up on its books accruals with respect to all taxes, assessments, charges,
levies and claims; and (c) on a reasonably current basis set up on its books,
from its earnings, allowances against doubtful Receivables, advances and
investments and all other proper accruals (including without limitation by
reason of enumeration, accruals for premiums, if any, due on required payments
and accruals for depreciation, obsolescence, or amortization of properties),
which should be set aside from such earnings in connection with its business.
All determinations pursuant to this subsection shall be made in accordance with,
or as required by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by Borrowers.
4.8 Financial Disclosure. Each Borrower hereby irrevocably
authorizes and directs all accountants and auditors employed by such Borrower at
any time during the Term to exhibit and deliver to Agent and each Lender copies
of any of any Borrower's financial statements, trial balances or other
accounting records of any sort in the accountant's or auditor's possession, and
to disclose to Agent and each Lender any information such accountants may have
concerning such Borrower's financial status and business operations. Each
Borrower hereby authorizes all federal, state and municipal authorities to
furnish to Agent and each Lender copies of reports or examinations relating to
such Borrower, whether made by such Borrower or otherwise; however, Agent and
each Lender will attempt to obtain such information or materials directly from
such Borrower prior to obtaining such information or materials from such
accountants or such authorities.
4.9 Compliance with Laws. Each Borrower shall comply with all
acts, rules, regulations and orders of any legislative, administrative or
judicial body or official applicable to its respective Collateral or any part
thereof or to the operation of such Borrower's business the non-compliance with
which could reasonably be expected to have a Material Adverse Effect on such
Borrower. Each Borrower may, however, contest or dispute any acts, rules,
regulations, orders and directions of those bodies or officials in any
reasonable manner, provided that any related Lien is inchoate or stayed and
sufficient reserves are established to the reasonable satisfaction of Agent to
protect Agent's Lien on or security interest in the Collateral. The Collateral
at all times shall be maintained in accordance with the requirements of all
insurance carriers which provide insurance with respect to the Collateral so
that such insurance shall remain in full force and effect.
4.10 Inspection of Premises. At all reasonable times Agent and each
Lender shall have full access to and the right to audit, check, inspect and make
abstracts and copies from each Borrower's books, records, audits, correspondence
and all other papers relating to the Collateral and the operation of each
Borrower's business. Agent, any Lender and their agents may enter upon any of
each Borrower's premises at any time after prior notice during business hours
and at
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any other reasonable time, and from time to time, for the purpose of inspecting
the Collateral and any and all records pertaining thereto and the operation of
such Borrower's business.
4.11 Insurance. Each Borrower shall bear the full risk of any loss
of any nature whatsoever with respect to the Collateral. At each Borrower's own
cost and expense in amounts and with carriers acceptable to Agent, each Borrower
shall (a) keep all its insurable properties and properties in which each
Borrower has an interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies engaged
in businesses similar to such Borrower's including, without limitation, business
interruption insurance;, (b) maintain a bond in such amounts as is customary in
the case of companies engaged in businesses similar to such Borrower insuring
against larceny, embezzlement or other criminal misappropriation of insured's
officers and employees who may either singly or jointly with others at any time
have access to the assets or funds of such Borrower either directly or through
authority to draw upon such funds or to direct generally the disposition of such
assets; (c) maintain public and product liability insurance against claims for
personal injury, death or property damage suffered by others; (d) maintain all
such worker's compensation or similar insurance as may be required under the
laws of any state or jurisdiction in which such Borrower is engaged in business;
(e) furnish Agent with (i) copies of all policies and evidence of the
maintenance of such policies by the renewal thereof at least thirty (30) days
before any expiration date, and (ii) appropriate loss payable endorsements in
form and substance satisfactory to Agent, naming Agent as a co-insured and loss
payee as its interests may appear with respect to all insurance coverage
referred to in clauses (a) and (c) above, and providing (A) that all proceeds
thereunder shall be payable to Agent, (B) no such insurance shall be affected by
any act or neglect of the insured or owner of the property described in such
policy, and (C) that such policy and loss payable clauses may not be canceled,
amended or terminated unless at least thirty (30) days' prior written notice is
given to Agent. In the event of any loss thereunder, the carriers named therein
hereby are directed by Agent and the applicable Borrower to make payment for
such loss to Agent and not to such Borrower and Agent jointly. If any insurance
losses are paid by check, draft or other instrument payable to any Borrower and
Agent jointly, Agent may endorse such Borrower's name thereon and do such other
things as Agent may deem advisable to reduce the same to cash. Agent is hereby
authorized to adjust and compromise claims under insurance coverage referred to
in clauses (a) and (b) above. All loss recoveries received by Agent upon any
such insurance may be applied to the Obligations, in such order as Agent in its
sole discretion shall determine. Any surplus shall be paid by Agent to Borrowers
or applied as may be otherwise required by law. Any deficiency thereon shall be
paid by Borrowers to Agent, on demand.
4.12 Failure to Pay Insurance. If any Borrower fails to obtain
insurance as hereinabove provided, or to keep the same in force, Agent, if Agent
so elects, may obtain such insurance and pay the premium therefor on behalf of
such Borrower, and charge Borrowers' Account therefor as a Revolving Advance of
a Domestic Rate Loan and such expenses so paid shall be part of the Obligations.
4.13 Payment of Taxes. Each Borrower will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon such Borrower or
any of the Collateral including,
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without limitation, real and personal property taxes, assessments and charges
and all franchise, income, employment, social security benefits, withholding,
and sales taxes, except such taxes, assessments or Charges to the extent that
any Borrower has contested or disputed those taxes, assessments or Charges in
good faith, by expeditious protest, administrative or judicial appeal or similar
proceeding provided that any related tax lien is stayed and sufficient reserves
are established to the reasonable satisfaction of Agent. If any tax by any
governmental authority is or may be imposed on or as a result of any transaction
between any Borrower and Agent or any Lender which Agent or any Lender may be
required to withhold or pay or if any taxes, assessments, or other Charges
remain unpaid after the date fixed for their payment, or if any claim shall be
made which, in Agent's or any Lender's opinion, may possibly create a valid Lien
on the Collateral, Agent may without notice to Borrowers pay the taxes,
assessments or other Charges and each Borrower hereby indemnifies and holds
Agent and each Lender harmless in respect thereof. Agent will not pay any taxes,
assessments or Charges to the extent that any Borrower has contested or disputed
those taxes, assessments or Charges in good faith, by expeditious protest,
administrative or judicial appeal or similar proceeding provided that any
related tax lien is stayed and sufficient reserves are established to the
reasonable satisfaction of Agent to protect Agent's security interest in or Lien
on the Collateral. The amount of any payment by Agent under this Section 4.13
shall be charged to Borrowers' Account as a Revolving Advance of a Domestic Rate
Loan and added to the Obligations and, until Borrowers shall furnish Agent with
an indemnity therefor (or supply Agent with evidence satisfactory to Agent that
due provision for the payment thereof has been made), Agent may hold without
interest any balance standing to Borrowers' credit and Agent shall retain its
security interest in any and all Collateral held by Agent.
4.14 Payment of Leasehold Obligations. Each Borrower shall at all
times pay, when and as due, its rental obligations under all leases under which
it is a tenant, and shall otherwise comply, in all material respects, with all
other terms of such leases and keep them in full force and effect and, at
Agent's request will provide evidence of having done so, provided, however, each
Borrower may contest or dispute in good faith any obligations under such leases
without sufficient reserves established to the reasonable satisfaction of the
Agent.
4.15 Receivables.
(a) Nature of Receivables. Each of the Receivables shall be a
bona fide and valid account representing a bona fide indebtedness incurred by
the Customer therein named, for a fixed sum as set forth in the invoice relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of a Borrower, or work, labor or services theretofore
rendered by a Borrower as of the date each Receivable is created. Same shall be
due and owing in accordance with the applicable Borrower's standard terms of
sale without dispute, setoff or counterclaim except as may be stated on the
accounts receivable schedules delivered by Borrowers to Agent.
(b) Solvency of Customers. Except as has been disclosed to the
Agent in writing, each Customer, to the best of each Borrower's knowledge, as of
the date each
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Receivable is created, is and will be solvent and able to pay all Receivables on
which the Customer is obligated in full when due or with respect to such
Customers of any Borrower who are not solvent such Borrower has set up on its
books and in its financial records bad debt reserves adequate to cover such
Receivables.
(c) Locations of Borrower. Each Borrower's chief executive
office is located at the addresses set forth on Schedule 4.15(c) hereto. Until
written notice is given to Agent by Borrowing Agent of any other office at which
any Borrower keeps its records pertaining to Receivables, all such records shall
be kept at such executive office.
(d) Collection of Receivables. Until any Borrower's authority
to do so is terminated by Agent (which notice Agent may give at any time during
the continuance of an Event of Default), each Borrower will, at such Borrower's
sole cost and expense, but on Agent's behalf and for Agent's account, collect as
Agent's property and in trust for Agent all amounts received on Receivables, and
shall not commingle such collections with any Borrower's funds or use the same
except to pay Obligations (until such Obligations have been paid in full) or as
provided for in any cash management arrangement with the Agent. If Undrawn
Availability at any time becomes less than fifteen percent (15%) of the Maximum
Revolving Advance Amount or at any time during the continuance of an Event of
Default, each Borrower shall, upon request, deliver to Agent, or deposit in the
Blocked Account, in original form and on the date of receipt thereof, all
checks, drafts, notes, money orders, acceptances, cash and other evidences of
Indebtedness.
(e) Notification of Assignment of Receivables. At any time
during the continuance of an Event of Default, Agent shall have the right to
send notice of the assignment of, and Agent's security interest in, the
Receivables to any and all Customers or any third party holding or otherwise
concerned with any of the Collateral and Agent shall have the sole right to
collect the Receivables, take possession of the Collateral, or both. Agent's
actual collection expenses, including, but not limited to, stationery and
postage, telephone and telegraph, secretarial and clerical expenses and the
salaries of any collection personnel used for collection, may be charged to
Borrowers' Account and added to the Obligations.
(f) Power of Agent to Act on Borrowers' Behalf. At any time
during the continuance of an Event of Default, Agent shall have the right to
receive, endorse, assign and/or deliver in the name of Agent or any Borrower any
and all checks, drafts and other instruments for the payment of money relating
to the Receivables, and each Borrower hereby waives notice of presentment,
protest and non-payment of any instrument so endorsed. If Undrawn Availability
at any time becomes less than fifteen percent (15%) of the Maximum Revolving
Advance Amount, each Borrower hereby constitutes Agent or Agent's designee as
such Borrower's attorney with power (i) to endorse such Borrower's name upon any
notes, acceptances, checks, drafts, money orders or other evidences of payment
or Collateral; (ii) to sign such Borrower's name on any invoice or bill of
lading relating to any of the Receivables, drafts against Customers, assignments
and verifications of Receivables; (iii) to send verifications of Receivables to
any Customer; (iv) to sign such Borrower's name on all financing statements or
any other documents or instruments deemed necessary or appropriate by Agent to
preserve, protect, or perfect Agent's interest in the
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Collateral and to file same; (v) to demand payment of the Receivables; (vi) to
enforce payment of the Receivables by legal proceedings or otherwise; (vii) to
exercise all of Borrowers' rights and remedies with respect to the collection of
the Receivables and any other Collateral; (viii) to settle, adjust, compromise,
extend or renew the Receivables; (ix) to settle, adjust or compromise any legal
proceedings brought to collect Receivables; (x) to prepare, file and sign such
Borrower's name on a proof of claim in bankruptcy or similar document against
any Customer; (xi) to prepare, file and sign such Borrower's name on any notice
of Lien, assignment or satisfaction of Lien or similar document in connection
with the Receivables; and (xii) to do all other acts and things necessary to
carry out this Agreement. All acts of said attorney or designee are hereby
ratified and approved, and said attorney or designee shall not be liable for any
acts of omission or commission nor for any error of judgment or mistake of fact
or of law, unless done maliciously or with gross (not mere) negligence; this
power being coupled with an interest is irrevocable while any of the Obligations
remain unpaid. Agent shall have the right at any time during the continuance of
an Event of Default, to change the address for delivery of mail addressed to any
Borrower to such address as Agent may designate and to receive, open and dispose
of all mail addressed to any Borrower.
(g) No Liability. Neither Agent nor any Lender shall, under
any circumstances or in any event whatsoever, have any liability for any error
or omission or delay of any kind occurring in the settlement, collection or
payment of any of the Receivables or any instrument received in payment thereof,
or for any damage resulting therefrom. Agent may, without notice or consent from
any Borrower, sue upon or otherwise collect, extend the time of payment of,
compromise or settle for cash, credit or upon any terms any of the Receivables
or any other securities, instruments or insurance applicable thereto and/or
release any obligor thereof. Agent is authorized and empowered to accept during
the continuance of an Event of Default the return of the goods represented by
any of the Receivables, without notice to or consent by any Borrower, all
without discharging or in any way affecting any Borrower's liability hereunder.
(h) Establishment of a Lockbox Account, Dominion Account. If
Undrawn Availability at any time becomes less than fifteen percent (15%) of the
Maximum Revolving Advance Amount, then all proceeds of Collateral shall, at the
direction of Agent, be deposited by Borrowers into a lockbox account, dominion
account or such other "blocked account" ("Blocked Accounts") as Agent may
require pursuant to an arrangement with such bank as may be selected by
Borrowers and be acceptable to Agent. Borrowers shall issue to any such bank, an
irrevocable letter of instruction directing said bank to transfer such funds so
deposited to Agent, either to any account maintained by Agent at said bank or by
wire transfer to appropriate account(s) of Agent. All funds deposited in such
Blocked Account shall immediately become the property of Agent to be applied
against the Obligations or in accordance with any cash management arrangement
with the Agent and Borrowers shall obtain the agreement by such bank to waive
any offset rights against the funds so deposited; provided, that prior to the
occurrence and continuance of an Event of Default, the Borrowers shall not pay
any breakage fees incurred as a consequence of any prepayment of the principal
of or interest on any outstanding Eurodollar Rate Loan upon application of such
funds against the Obligations or in accordance with any cash management
arrangement with the Agent. Neither Agent nor any Lender assumes any
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responsibility for such blocked account arrangement, including without
limitation, any claim of accord and satisfaction or release with respect to
deposits accepted by any bank thereunder. Alternatively, Agent may establish
depository accounts ("Depository Accounts") in the name of Agent at a bank or
banks for the deposit of such funds and Borrowers shall deposit all proceeds of
Collateral or cause same to be deposited, in kind, in such Depository Accounts
of Agent in lieu of depositing same to the Blocked Accounts.
(i) Adjustments. No Borrower will, without Agent's consent,
compromise or adjust any material amount of the Receivables (or extend the time
for payment thereof) or accept any material returns of merchandise or grant any
additional discounts, allowances or credits thereon except for those
compromises, adjustments, extensions, returns, discounts, credits and allowances
as have been heretofore customary in the business of such Borrower.
4.16 Inventory. To the extent Inventory held for sale or lease has
been produced by any Borrower, it has been and will be produced by such Borrower
in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and
all rules, regulations and orders thereunder.
4.17 Maintenance of Equipment. The Equipment shall be maintained in
good operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved. No
Borrower shall use or operate the Equipment in violation of any law, statute,
ordinance, code, rule or regulation.
4.18 Exculpation of Liability. Nothing herein contained shall be
construed to constitute Agent or any Lender as any Borrower's agent for any
purpose whatsoever, nor shall Agent or any Lender be responsible or liable for
any shortage, discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of the cause thereof.
Neither Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assume any of any Borrower's obligations under any contract or
agreement assigned to Agent or such Lender, and neither Agent nor any Lender
shall be responsible in any way for the performance by any Borrower of any of
the terms and conditions thereof.
4.19 Environmental Matters.
(a) Borrowers shall ensure that the Real Property remains in
compliance with all Environmental Laws if failure to do so would have a Material
Adverse Effect on the Borrowers taken as a whole and they shall not place or
permit to be placed any Hazardous Substances on any Real Property except as
permitted by applicable law or appropriate governmental authorities.
(b) Borrowers shall establish and maintain a system to assure
and monitor continued compliance with all applicable Environmental Laws which
system shall include periodic reviews of such compliance.
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(c) Borrowers shall (i) employ in connection with the use of
the Real Property appropriate technology necessary to maintain compliance with
any applicable Environmental Laws and (ii) dispose of any and all Hazardous
Waste generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrowers shall use their best efforts to obtain certificates of disposal, such
as hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrowers in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.
(d) Except where failure to do so could not reasonably be
expected to have a Material Adverse Effect on the Borrowers taken as a whole, in
the event any Borrower obtains, gives or receives notice of any Release or
threat of Release of a reportable quantity of any Hazardous Substances at the
Real Property (any such event being hereinafter referred to as a "Hazardous
Discharge") or receives any notice of violation, request for information or
notification that it is potentially responsible for investigation or cleanup of
environmental conditions at the Real Property, demand letter or complaint,
order, citation, or other written notice with regard to any Hazardous Discharge
or violation of Environmental Laws affecting the Real Property or any Borrower's
interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority"), then Borrowing
Agent shall, within five (5) Business Days, give written notice of same to Agent
detailing facts and circumstances of which any Borrower is aware giving rise to
the Hazardous Discharge or Environmental Complaint. Such information is to be
provided to allow Agent to protect its security interest in the Real Property
and the Collateral and is not intended to create nor shall it create any
obligation upon Agent or any Lender with respect thereto.
(e) Except where failure to do so could not reasonably be
expected to have a Material Adverse Effect on the Borrowers taken as a whole,
Borrowers shall promptly forward to Agent copies of any request for information,
notification of potential liability, demand letter relating to potential
responsibility with respect to the investigation or cleanup of Hazardous
Substances at any other site owned, operated or used by any Borrower to dispose
of Hazardous Substances and shall continue to forward copies of correspondence
between any Borrower and the Authority regarding such claims to Agent until the
claim is settled. Borrowers shall promptly forward to Agent copies of all
documents and reports concerning a Hazardous Discharge at the Real Property that
any Borrower is required to file under any Environmental Laws. Such information
is to be provided solely to allow Agent to protect Agent's security interest in
the Real Property and the Collateral.
(f) Except where failure to do so could not reasonably be
expected to have a Material Adverse Effect on the Borrowers taken as a whole,
Borrowers shall respond promptly to any Hazardous Discharge or Environmental
Complaint and take all necessary action in order to safeguard the health of any
Person and to avoid subjecting the Collateral or Real Property to any Lien. If
any Borrower shall fail to respond promptly to any Hazardous Discharge or
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Environmental Complaint or any Borrower shall fail to comply with any of the
requirements of any Environmental Laws, Agent on behalf of Lenders may, but
without the obligation to do so, if Agent reasonably believes such failure could
have a Material Adverse Effect on the Borrower for the sole purpose of
protecting Agent's interest in Collateral: (A) give such notices or (B) enter
onto the Real Property (or authorize third parties to enter onto the Real
Property) and take such actions as Agent (or such third parties as directed by
Agent) deem reasonably necessary or advisable, to clean up, remove, mitigate or
otherwise deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Agent and Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Domestic Rate Loans constituting Revolving Advances shall
be paid upon demand by Borrowers, and until paid shall be added to and become a
part of the Obligations secured by the Liens created by the terms of this
Agreement or any other agreement between Agent, any Lender and any Borrower.
(g) Promptly upon the written request of Agent from time to
time, Borrowers shall provide Agent, at Borrowers' expense, with an
environmental site assessment or environmental audit report prepared by an
environmental engineering firm acceptable in the reasonable opinion of Agent, to
assess with a reasonable degree of certainty the existence of a Hazardous
Discharge and the potential costs in connection with abatement, cleanup and
removal of any Hazardous Substances found on, under, at or within the Real
Property. Any report or investigation of such Hazardous Discharge proposed and
acceptable to an appropriate Authority that is charged to oversee the clean-up
of such Hazardous Discharge shall be acceptable to Agent. If such estimates,
individually or in the aggregate, exceed $100,000, Agent shall have the right to
require Borrowers to post a bond, letter of credit or other security reasonably
satisfactory to Agent to secure payment of these costs and expenses.
(h) Borrowers shall defend and indemnify Agent and Lenders and
hold Agent, Lenders and their respective employees, agents, directors and
officers harmless from and against all loss, liability, damage and expense,
claims, costs, fines and penalties, including attorney's fees, suffered or
incurred by Agent or Lenders under or on account of any Environmental Laws,
including, without limitation, the assertion of any Lien thereunder, with
respect to any Hazardous Discharge, the presence of any Hazardous Substances
affecting the Real Property, whether or not the same originates or emerges from
the Real Property or any contiguous real estate, including any loss of value of
the Real Property as a result of the foregoing except to the extent such loss,
liability, damage and expense is attributable to any Hazardous Discharge
resulting from actions on the part of Agent or any Lender. Borrowers'
obligations under this Section 4.19 shall arise upon the discovery of the
presence of any Hazardous Substances at the Real Property, whether or not any
federal, state, or local environmental agency has taken or threatened any action
in connection with the presence of any Hazardous Substances. Borrowers'
obligation and the indemnifications hereunder shall survive the termination of
this Agreement.
(i) For purposes of Section 4.19 and 5.7, all references to
Real Property shall be deemed to include all of Borrowers' right, title and
interest in and to its owned and leased premises.
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4.20 Financing Statements. Except as respects the financing statements
filed by Agent and the financing statements described on Schedule 1.2, no
financing statement covering any of the Collateral or any proceeds thereof is on
file in any public office.
V. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants as follows:
5.1 Authority. Each Borrower has full power, authority and legal
right to enter into this Agreement and the Other Documents and to perform all
its respective Obligations hereunder and thereunder. This Agreement and the
Other Documents constitute the legal, valid and binding obligation of such
Borrower enforceable in accordance with their terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally. The execution,
delivery and performance of this Agreement and of the Other Documents (a) are
within such Borrower's corporate powers, have been duly authorized, are not in
contravention of law or the terms of such Borrower's by-laws, certificate of
incorporation or other applicable documents relating to such Borrower's
formation or to the conduct of such Borrower's business or of any material
agreement or undertaking to which such Borrower is a party or by which such
Borrower is bound, and (b) will not conflict with nor result in any breach in
any of the provisions of or constitute a default under or result in the creation
of any Lien except Permitted Encumbrances upon any asset of such Borrower under
the provisions of any agreement, charter document, instrument, by-law, or other
instrument to which such Borrower is a party or by which it or its property may
be bound.
5.2 Formation and Qualification.
(a) Each Borrower is duly incorporated and in good standing
under the laws of the state listed on Schedule 5.2(a) and is qualified to do
business and is in good standing in the states listed on Schedule 5.2(a) which
constitute all states in which qualification and good standing are necessary for
such Borrower to conduct its business and own its property and where the failure
to so qualify could reasonably be expected to have a Material Adverse Effect on
such Borrower. Each Borrower has delivered to Agent true and complete copies of
its certificate of incorporation and by-laws and will promptly notify Agent of
any amendment or changes thereto.
(b) The only Subsidiaries of each Borrower are listed on
Schedule 5.2(b).
5.3 Survival of Representations and Warranties. All
representations and warranties of such Borrower contained in this Agreement and
the Other Documents shall be true at the time of such Borrower's execution of
this Agreement and the Other Documents, and shall survive the execution,
delivery and acceptance thereof by the parties thereto and the closing of the
transactions described therein or related thereto.
5.4 Tax Returns. Each Borrower's federal tax identification number
is set forth on Schedule 5.4. Each Borrower has filed all federal, state and
local tax returns and other reports
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each is required by law to file and has paid all taxes, assessments, fees and
other governmental charges that are due and payable. Federal, state and local
income tax returns of each Borrower have been examined and reported upon by the
appropriate taxing authority or closed by applicable statute and satisfied for
all fiscal years prior to and including the fiscal year ending 1999. The
provision for taxes on the books of each Borrower are adequate for all years not
closed by applicable statutes, and for its current fiscal year, and no Borrower
has any knowledge of any deficiency or additional assessment in connection
therewith not provided for on its books.
5.5 Financial Statements.
(a) The pro forma balance sheet of Borrowers on a consolidated
basis (the "Pro Forma Balance Sheet") furnished to Agent on the Closing Date is
accurate, complete and correct and fairly reflects the financial condition of
Borrowers on a consolidated basis as of the Closing Date and has been prepared
in accordance with GAAP, consistently applied. The Pro Forma Balance Sheet has
been certified as accurate, complete and correct in all material respects by the
President and Chief Financial Officer of Borrowing Agent. All financial
statements referred to in this subsection 5.5(a), including the related
schedules and notes thereto, have been prepared, in accordance with GAAP, except
as may be disclosed in such financial statements.
(b) The quarterly cash flow projections of the Borrowers on a
consolidated basis and their projected balance sheets as of the Closing Date,
copies of which are annexed hereto as Exhibit 5.5(b) (the "Projections") were
prepared by the Chief Financial Officer of Borrowing Agent, are based on
underlying assumptions which provide a reasonable basis for the projections
contained therein and reflect Borrowers' judgment based on present circumstances
of the most likely set of conditions and course of action for the projected
period. (The Projections together with the Pro Forma Balance Sheet, are referred
to as the "Pro Forma Financial Statements").
(c) The consolidated and consolidating balance sheets of the
Borrowers, their Subsidiaries and such other Persons described therein
(including the accounts of all Subsidiaries for the respective periods during
which a subsidiary relationship existed) as of December 31, 1999, and the
related statements of income, changes in stockholder's equity, and changes in
cash flow for the period ended on such date, all accompanied by reports thereon
containing opinions without qualification by independent certified public
accountants, copies of which have been delivered to Agent, have been prepared in
accordance with GAAP, consistently applied (except for changes in application in
which such accountants concur) and present fairly the financial position of the
Borrowers and their Subsidiaries at such date and the results of their
operations for such period. Since December 31, 1999, there has been no change in
the condition, financial or otherwise, of Borrowers or their Subsidiaries as
shown on the consolidated balance sheet as of such date and no change in the
aggregate value of machinery, equipment and Real Property owned by Borrowers and
their respective Subsidiaries, except changes in the ordinary course of
business, none of which individually or in the aggregate has been materially
adverse.
5.6 Corporate Name. Except as set forth on Schedule 5.6, no
Borrower has been known by any other corporate name in the past five years and
does not sell Inventory under any
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other name, nor has any Borrower been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets of any Person
during the preceding five (5) years.
5.7 O.S.H.A. and Environmental Compliance.
(a) Each Borrower has duly complied with, and its facilities,
business, assets, property, leaseholds and Equipment are in compliance in all
material respects with, the provisions of the Federal Occupational Safety and
Health Act, the Environmental Protection Act, RCRA and all other Environmental
Laws; there have been no outstanding citations, notices or orders of
non-compliance issued to any Borrower or relating to its business, assets,
property, leaseholds or Equipment under any such laws, rules or regulations.
(b) Each Borrower has been issued all required federal, state
and local licenses, certificates or permits relating to all applicable
Environmental Laws, unless the failure to obtain such licenses, certificates or
permits could not reasonably be expected to have a Material Adverse Effect on
the Borrowers taken as a whole.
(c) To the best of Borrowers' knowledge, (i) there are no
visible signs of releases, spills, discharges, leaks or disposal (collectively
referred to as "Releases") of Hazardous Substances at, upon, under or within any
Real Property or any premises leased by any Borrower; (ii) there are no
underground storage tanks or polychlorinated biphenyls on the Real Property or
any premises leased by any Borrower; (iii) neither the Real Property nor any
premises leased by any Borrower has ever been used as a treatment, storage or
disposal facility of Hazardous Waste; and (iv) no Hazardous Substances are
present on the Real Property or any premises leased by any Borrower, excepting
such quantities as are handled in accordance with all applicable manufacturer's
instructions and governmental regulations and in proper storage containers and
as are necessary for the operation of the commercial business of any Borrower or
of its tenants.
5.8 Solvency; No Litigation, Violation, Indebtedness or Default.
(a) Borrowers are solvent, able to pay their debts as they
mature, have capital sufficient to carry on their business and all businesses in
which they are about to engage, and (i) as of the Closing Date, the fair present
saleable value of their assets, calculated on a going concern basis, is in
excess of the amount of their liabilities and (ii) subsequent to the Closing
Date, the fair saleable value of their assets (calculated on a going concern
basis) will be in excess of the amount of their liabilities.
(b) Except as disclosed in Schedule 5.8(b), no Borrower has
(i) any pending or threatened litigation, arbitration, actions or proceedings
which involve the possibility of having a Material Adverse Effect on such
Borrower, and (ii) any liabilities nor indebtedness for borrowed money other
than the Obligations.
(c) No Borrower is in violation of any applicable statute,
regulation or ordinance in any respect which could reasonably be expected to
have a Material Adverse Effect
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on such Borrower, nor is any Borrower in violation of any order of any court,
governmental authority or arbitration board or tribunal.
(d) No Borrower nor any member of the Controlled Group
maintains or contributes to any Plan other than those listed on Schedule 5.8(d)
hereto. Except as set forth in Schedule 5.8(d), (i) no Plan has incurred any
"accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA and
Section 412(a) of the Code, whether or not waived, and each Borrower and each
member of the Controlled Group has met all applicable minimum funding
requirements under Section 302 of ERISA in respect of each Plan, (ii) each Plan
which is intended to be a qualified plan under Section 401(a) of the Code as
currently in effect has been determined by the Internal Revenue Service to be
qualified under Section 401(a) of the Code and the trust related thereto is
exempt from federal income tax under Section 501(a) of the Code, (iii) no
Borrower nor any member of the Controlled Group has incurred any liability to
the PBGC other than for the payment of premiums, and there are no premium
payments which have become due which are unpaid, (iv) no Plan has been
terminated by the plan administrator thereof nor by the PBGC, and there is no
occurrence which would cause the PBGC to institute proceedings under Title IV of
ERISA to terminate any Plan, (v) at this time, the current value of the assets
of each Plan exceeds the present value of the accrued benefits and other
liabilities of such Plan and no Borrower nor any member of the Controlled Group
knows of any facts or circumstances which would materially change the value of
such assets and accrued benefits and other liabilities, (vi) no Borrower nor any
member of the Controlled Group has breached any of the responsibilities,
obligations or duties imposed on it by ERISA with respect to any Plan, (vii) no
Borrower nor any member of a Controlled Group has incurred any liability for any
excise tax arising under Section 4972 or 4980B of the Code, and no fact exists
which could give rise to any such liability, (viii) no Borrower nor any member
of the Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has
engaged in a "prohibited transaction" described in Section 406 of the ERISA or
Section 4975 of the Code nor taken any action which would constitute or result
in a Termination Event with respect to any such Plan which is subject to ERISA,
(ix) each Borrower and each member of the Controlled Group has made all
contributions due and payable with respect to each Plan, (x) there exists no
event described in Section 4043(b) of ERISA, for which the thirty (30) day
notice period contained in 29 CFR Section 2615.3 has not been waived, (xi) no
Borrower nor any member of the Controlled Group has any fiduciary responsibility
for investments with respect to any plan existing for the benefit of persons
other than employees or former employees of any Borrower and any member of the
Controlled Group, and (xii) no Borrower nor any member of the Controlled Group
has withdrawn, completely or partially, from any Multiemployer Plan so as to
incur liability under the Multiemployer Pension Plan Amendments Act of 1980.
5.9 Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, design rights, tradenames,
assumed names, trade secrets and licenses owned or utilized by any Borrower are
set forth on Schedule 5.9, are valid and have been duly registered or filed with
all appropriate governmental authorities and constitute all of the intellectual
property rights which are necessary for the operation of its business; there is
no objection to or pending challenge to the validity of any such patent,
trademark, copyright, design
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right, tradename, trade secret or license and no Borrower is aware of any
grounds for any challenge, except as set forth in Schedule 5.9 hereto. Each
patent, patent application, patent license, trademark, trademark application,
trademark license, service mark, service mark application, service mark license,
design right, copyright, copyright application and copyright license owned or
held by any Borrower and all trade secrets used by any Borrower consist of
original material or property developed by such Borrower or was lawfully
acquired by such Borrower from the proper and lawful owner thereof. Each of such
items has been maintained so as to preserve the value thereof from the date of
creation or acquisition thereof, except where failure to do so could not
reasonably be expected to have a Material Adverse Effect on the Borrowers taken
as a whole or such Collateral. With respect to all software used by any
Borrower, such Borrower is in possession of all source and object codes related
to each piece of software or is the beneficiary of a source code escrow
agreement, each such source code escrow agreement being listed on Schedule 5.9
hereto.
5.10 Licenses and Permits. Except as set forth in Schedule 5.10,
each Borrower (a) is in compliance with and (b) has procured and is now in
possession of, all material licenses or permits required by any applicable
federal, state, provincial or local law or regulation for the operation of its
business in each jurisdiction wherein it is now conducting or proposes to
conduct business and where the failure to procure such licenses or permits could
reasonably be expected to have a Material Adverse Effect on the Borrowers taken
as a whole.
5.11 Default of Indebtedness. No Borrower is in default in the
payment of the principal of or interest on any Indebtedness or under any
instrument or agreement under or subject to which any Indebtedness has been
issued and no event has occurred under the provisions of any such instrument or
agreement which with or without the lapse of time or the giving of notice, or
both, constitutes or would constitute an event of default thereunder, other than
Indebtedness which in the aggregate could not reasonably be expected to have a
Material Adverse Effect on the Borrowers taken as a whole.
5.12 No Default. No Borrower is in default in the payment or
performance of any of its contractual obligations which default could reasonably
be expected to have a Material Adverse Effect on the Borrowers taken as a whole
and no Default has occurred.
5.13 No Burdensome Restrictions. No Borrower is party to any
contract or agreement the performance of which could reasonably be expected to
have a Material Adverse Effect on the Borrowers taken as a whole. No Borrower
has agreed or consented to cause or permit in the future (upon the happening of
a contingency or otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a Lien which is not a Permitted Encumbrance.
5.14 No Labor Disputes. No Borrower is involved in any labor
dispute; there are no strikes or walkouts or union organization of any
Borrower's employees threatened or in existence and no labor contract is
scheduled to expire during the Term other than as set forth on Schedule 5.14
hereto.
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5.15 Margin Regulations. No Borrower is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U or Regulation G of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect. No part of the proceeds
of any Advance will be used for "purchasing" or "carrying" "margin stock" as
defined in Regulation U of such Board of Governors.
5.16 Investment Company Act. No Borrower is an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.17 Disclosure. No representation or warranty made by any Borrower in
this Agreement or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to Borrowers
or which reasonably should be known to Borrowers which Borrowers have not
disclosed to Agent in writing with respect to the transactions contemplated by
this Agreement which could reasonably be expected to have a Material Adverse
Effect on the Borrowers taken as a whole.
5.18 Hedge Agreements. No Borrower is a party to, nor will it be a
party to, any Hedge Agreement unless (i) it is a Secured Hedge Agreement that
provides that damages upon termination following an event of default thereunder
are payable on an unlimited "two-way basis" without regard to fault on the part
of either party or (ii) such Borrower has provided the Lenders with a reasonable
opportunity to enter into a Secured Hedge Agreement on substantially the same
terms and conditions as such Hedge Agreement.
5.19 Conflicting Agreements. Except as set forth on Schedule 5.19, no
provision of any mortgage, indenture, contract, agreement, judgment, decree or
order binding on any Borrower or affecting the Collateral conflicts with, or
requires any Consent which has not already been obtained, or would in any way
prevent the execution, delivery or performance of, the terms of this Agreement
or the Other Documents.
5.20 Application of Certain Laws and Regulations. No Borrower nor any
Affiliate of any Borrower is subject to any statute, rule or regulation which
regulates the incurrence of any Indebtedness, including without limitation,
statutes or regulations relative to common or interstate carriers or to the sale
of electricity, gas, steam, water, telephone, telegraph or other public utility
services.
5.21 Business and Property of Borrowers. Upon and after the Closing
Date, Borrowers will not engage in any business other than the Line of Business
and activities necessary to conduct the foregoing. On the Closing Date, each
Borrower will own all the property and possess all of the rights and Consents
necessary for the conduct of the business of such Borrower.
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5.22 Year 2000. Borrowers and their respective Subsidiaries have
reviewed the areas within their business and operations which could be adversely
affected by, and have developed a program to address on a timely basis, the risk
that certain computer applications used by Borrowers or their respective
Subsidiaries (or any of their respective material suppliers, customers or
vendors) may be unable to recognize and perform properly date-sensitive
functions involving dates after December 31, 1999 (the "Year 2000 Problem"). The
Year 2000 Problem will not have a Material Adverse Effect on Borrowers.
5.23 Section 20 Subsidiaries. Borrowers do not intend to use and shall
not use any portion of the proceeds of the Advances, directly or indirectly, to
purchase during the underwriting period, or for 30 days thereafter, Ineligible
Securities being underwritten by a Section 20 Subsidiary.
VI. AFFIRMATIVE COVENANTS.
Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
6.1 Payment of Fees. Pay to Agent on demand all usual and customary
fees and expenses which Agent incurs in connection with (a) the forwarding of
Advance proceeds and (b) the establishment and maintenance of any Blocked
Accounts or Depository Accounts as provided for in Section 4.15(h). Agent may,
without making demand, charge Borrowers' Account for all such fees and expenses.
6.2 Conduct of Business and Maintenance of Existence and Assets. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
design rights, tradenames, trade secrets and trademarks and take all actions
necessary to enforce and protect the validity of any intellectual property right
or other right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect on the Borrowers taken
as a whole; and (c) make all such reports and pay all such franchise and other
taxes and license fees and do all such other acts and things as may be lawfully
required to maintain its rights, licenses, leases, powers and franchises under
the laws of the United States or any political subdivision thereof where the
failure to do so could reasonably be expected to have a Material Adverse Effect
on the Borrowers taken as a whole.
6.3 Violations. Promptly notify Agent in writing of any violation of
any law, statute, regulation or ordinance of any Governmental Body, or of any
agency thereof, applicable to any Borrower which could reasonably be expected to
have a Material Adverse Effect on any Borrower.
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6.4 Government Receivables. Take all steps necessary to protect Agent's
interest in the Collateral under the Federal Assignment of Claims Act or other
applicable state or local statutes or ordinances and deliver to Agent
appropriately endorsed, any instrument or chattel paper connected with any
Receivable arising out of contracts between any Borrower and the United States,
any state or any department, agency or instrumentality of any of them.
6.5 Fixed Coverage Charge Ratio. Maintain during each period consisting
of four (4) consecutive fiscal quarters of the Borrowers on a consolidated basis
a Fixed Coverage Charge Ratio of not less than 1.05 to 1.0 for the twelve month
period then ending; provided, however, that the Borrowers shall not have to
comply with this Section 6.5 so long as at all times during such applicable test
period, the Borrowers on a consolidated basis have an Undrawn Availability of at
least $10,000,000.
6.6 Execution of Supplemental Instruments. Execute and deliver to Agent
from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may request, in order that the
full intent of this Agreement may be carried into effect.
6.7 Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the failure to do so could not
reasonably be expected to have a Material Adverse Effect or when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and each Borrower shall have provided for such reserves as Agent may
reasonably deem proper and necessary, subject at all times to any applicable
subordination arrangement in favor of Lenders.
6.8 Standards of Financial Statements. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, and 9.13 as to which
GAAP is applicable to be complete and correct in all material respects (subject,
in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).
6.9 Covenant to Assume Obligations and Give Security. Upon (x) the
request of the Agent, (y) the formation or acquisition of any new direct or
indirect Foreign Subsidiary or Domestic Subsidiary of any Borrower, or (z) the
acquisition of any property by any Borrower, and such property, in the judgment
of the Agent, shall not already be subject to a perfected first priority
security interest in favor of the Agent for the benefit of the Lenders, then the
Borrower shall, in each case at the Borrower's expense:
(i) within 10 days after such request, formation or
acquisition of a Subsidiary, cause each such Subsidiary and
each direct and indirect Subsidiary of such Subsidiary to duly
execute and deliver to the Agent a joinder agreement, in form
and substance satisfactory to the Agent, thereby joining this
Agreement, as a
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borrower and grantor of security interests and liens and
assuming all of the Obligations under this Agreement and the
Other Documents provided that no joinder, grant of a security
interest or assumption may be required (if acceptable to the
Agent) from a Subsidiary organized or located outside of the
United States if the execution and delivery thereof would
result in material adverse tax consequences to the Borrowers.
(ii) at any time and from time to time, promptly
execute and deliver any and all further instruments and
documents and take all such other action as the Agent may deem
reasonably necessary or desirable in obtaining the full
benefits of, or in perfecting and preserving the Liens of,
such assumptions, joinders, mortgages, pledges, assignments,
security agreements and security agreement supplements; and
(iii) promptly upon such request, formation or
acquisition related to any Subsidiary or joint venture, the
Borrower shall pledge to the Agent on behalf of the Lender (to
the extent that it has not already done so), 100% of the total
outstanding shares or other ownership interests of such Person
owned by the Borrower, provided that only 65% of the total
outstanding shares or other ownership interest need be pledged
with respect to a Subsidiary organized or located outside of
the United States if the execution and delivery of 100% of
such shares would result in material adverse tax consequences
to the Borrowers
6.10 Further Assurances.
(i) Promptly upon request by the Agent, or any Lender
through the Agent, correct any material defect or error that
may be discovered in this Agreement or any Other Document or
in the execution, acknowledgment, filing or recordation
thereof, and
(ii) Promptly upon request by the Agent, or any party
through the Agent, do, execute, acknowledge, deliver, record,
re-record, file, re-file, register and re-register any and all
such further acts, deeds, conveyances, pledge agreements,
mortgages, deeds of trust, trust deeds, assignments, financing
statements and continuations thereof, termination statements,
notices of assignment, transfers, certificates, assurances and
other instruments as the Agent, or any Lender through the
Agent, may reasonably require from time to time in order to
(A) carry out more effectively the purposes of this Agreement
or any Other Document, (B) to the fullest extent permitted by
applicable law, subject any Borrower's or any of its Domestic
(or, if permitted, Foreign) Subsidiaries' properties, assets,
rights or interests to the Liens now or hereafter intended to
be covered by any of the Other Documents, (C) perfect and
maintain the validity, effectiveness and priority of any of
the Other Documents and any of the Liens intended to be
created thereunder and (D) assure, convey, grant, assign,
transfer, preserve, protect and confirm more effectively unto
the Agent and the Lenders the
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rights granted or now or hereafter intended to be granted to
the Administrative Agent and the Lenders under this Agreement
or any Other Documents or under any other instrument executed
in connection with this Agreement or any Other Document to
which any Borrower or any of its Subsidiaries is or is to be a
party, and cause each of its Subsidiaries to do so.
6.11 Keeping of Books and Records. Keep and cause each other Borrower
and each of its Subsidiaries (i) to keep, proper books of record and account, in
which full and correct entries shall be made of all financial transactions and
the assets and business of the Borrowers and each of their Subsidiaries in
accordance with GAAP and (ii) evidence all Indebtedness from and between any
Borrower and any Foreign Subsidiary by promissory notes in the form of Exhibit D
hereto (the "Inter-Company Note").
6.12 Cash Flow Projections. Within thirty (30) days of the Closing
Date, provide the Agent with updated cash flow projections of the Borrowers on a
consolidated basis prepared by the Chief Financial Officer of Borrowing Agent,
and based on underlying assumptions which provide a reasonable basis for the
projections contained therein and reflect Borrowers' judgment based on present
circumstances of the most likely set of conditions and course of action for the
projected period.
6.13 Bank Accounts. Maintain at all times all of its primary operating
and disbursement account with the Agent; provided, however, that the Borrowers
may maintain deposits in employee payroll and other similar ordinary course of
business accounts with financial institutions other than the Agent in an amount
not to exceed $6,000,000 in the aggregate. Notwithstanding the foregoing, the
Borrowers may maintain accounts with financial institutions other than the Agent
for the sole purpose of holding proceeds from equity offerings (including equity
proceeds raised prior to the Closing Date), provided that the Borrowers provide
the Agent with a list of such accounts and notice of the creation of any new
accounts for such purpose.
VII. NEGATIVE COVENANTS.
No Borrower shall, until satisfaction in full of the Obligations and
termination of this Agreement:
7.1 Merger, Consolidation, Acquisition and Sale of Assets.
(a) Enter into any merger, consolidation or other
reorganization with or into any other Person or permit any other Person to
consolidate with or merge with it; provided, however, any Borrower may merge or
consolidate with (i) another Borrower or (ii) an entity acquired in a Permitted
Acquisition so long as such Borrower is the surviving entity.
(b) Sell, lease, transfer or otherwise dispose of any of its
properties or assets, except for sales of Inventory and Equipment in the
ordinary course of its business and other dispositions of assets having a value
not to exceed $1,000,000 in any one year.
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(c) Acquire all or a substantial portion of the assets of
stock of any Person other than Permitted Acquisitions with aggregate gross
purchase prices at all times not greater than $50,000,000 (taking into account
Section 7.4(e) hereof).
7.2 Creation of Liens. Create or suffer to exist any Lien or transfer
upon or against any of its property or assets now owned or hereafter acquired,
except Permitted Encumbrances.
7.3 Guarantees. Become liable upon the obligations of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders)
except (a) as disclosed on Schedule 7.3, (b) the endorsement of checks in the
ordinary course of business and (c) as permitted under Section 7.8 hereof,
including any guaranties of the Obligations.
7.4 Investments. Purchase or acquire obligations or stock of, or any
other interest in, any Person (such purchases or acquisitions collectively,
"Investments"), except (a) obligations issued or guaranteed by the United States
of America or any agency thereof, (b) commercial paper with maturities of not
more than 180 days and a published rating of not less than A-1 or P-1 (or the
equivalent rating), (c) certificates of deposit and bankers' acceptances having
maturities of not more than 180 days and repurchase agreements backed by United
States government securities of a commercial bank if (i) such bank has a
combined capital and surplus of at least $500,000,000, or (ii) its debt
obligations, or those of a holding company of which it is a Subsidiary, are
rated not less than A (or the equivalent rating) by a nationally recognized
investment rating agency, (d) U.S. money market funds that invest solely in
obligations issued or guaranteed by the United States of America or an agency
thereof, (e) Permitted Acquisitions with aggregate purchase prices at all times
of not more than $50,000,000 (taking into account Section 7.1(c)), (f)
Investments in Foreign Subsidiaries in an aggregate amount at all times for all
Borrowers not to exceed (i) $2,000,000 in any single calendar year (minus any
outstanding Loans advanced by the Borrowers to Foreign Subsidiaries permitted
pursuant to Section 7.5(c)(i) hereof and advanced during such calendar year) and
(ii) $5,000,000 from March 31, 2000 through the Termination Date (minus any
outstanding Loans advanced by the Borrowers to Foreign Subsidiaries permitted
pursuant to Section 7.5(c)(ii) hereof and advanced during the term of this
Agreement), (g) Investments in Domestic Subsidiaries to the extent such Domestic
Subsidiary is a Borrower, (h) as set forth on Schedule 7.4 and (i) Investments
in addition to the Investments otherwise permitted hereunder not to exceed
$2,000,000 in the aggregate.
7.5 Loans. Make advances, loans or extensions of credit to any Person,
including without limitation, any Parent, Subsidiary or Affiliate except with
respect to (a) the extension of commercial trade credit in connection with the
sale of Inventory in the ordinary course of its business, (b) intercompany loans
among the Borrowers and (c) to Foreign Subsidiaries in an aggregate amount at
all times for all Borrowers not to exceed (i) $2,000,000 in any single calendar
year (minus any outstanding Investments in Foreign Subsidiaries permitted
pursuant to Section 7.4(f)(i) hereof and advanced during such calendar year) and
(ii) $5,000,000 from March 31, 2000 through the Termination Date (minus any
outstanding Investments in Foreign Subsidiaries permitted pursuant to Sections
7.4(f)(ii) and made during the term of this Agreement).
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7.6 Capital Expenditures. Other than the assumption of up to $5,000,000
of capitalized leases in connection with Permitted Acquisitions (as described in
paragraph (i) of the definition of Permitted Acquisitions), contract for,
purchase or make any expenditure or commitments for fixed or capital assets
(including capitalized leases and capitalized software) in any fiscal year in an
aggregate amount for all Borrowers in excess of $25,000,000, less the amount of
any assumed capitalized leases in connection with any Permitted Acquisitions.
7.7 Dividends. Declare, pay or make any dividend or distribution on any
shares of the common stock or preferred stock of any Borrower (other than
dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds, property or assets to
the purchase, redemption or other retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of common or preferred
stock of any Borrower except that the Borrower may declare, pay or make any such
dividend or distribution and may redeem or repurchase its common or preferred
stock so long as (a) a notice of termination with regard to this Agreement shall
not be outstanding, (b) no Event of Default shall have occurred and be
continuing, (c) after giving effect to the payment of such dividends or such
redemption or repurchase there shall not exist any Event of Default, and (d) the
aggregate amount of such dividends, redemptions or repurchases does not exceed
33% of the Consolidated Net Income of the Borrowers for the most recent fiscal
year; provided, however, that the Borrowers make may distributions or dividends
(including premium payments) under the those certain five year pre-paid common
stock warrants dated February 23, 1999 with a stated value of $11,000 so long as
(a) no Event of Default shall have occurred and be continuing, and (b) after
giving effect to the payment of such dividends or such redemption or repurchase
there shall not exist any Event of Default.
7.8 Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) except in respect of (a) the Obligations
owing to Lenders, (b) Indebtedness incurred for capital expenditures permitted
under Section 7.6 hereof, (c) Indebtedness in connection with Permitted
Acquisitions, subject to Section 2.4 hereof, (d) Indebtedness owing by any
Borrower to any Foreign Subsidiary in an aggregate amount at all times for all
Borrowers not to exceed $1,000,000, (e) Indebtedness existing on the Closing
Date and listed on Schedule 7.8 hereto, (f) guarantees permitted under Section
7.3 hereof, (g) Indebtedness on account of Current Liabilities (other than for
money borrowed) incurred in the normal and ordinary course of business, (h)
unsecured Indebtedness in addition to the Indebtedness otherwise permitted
hereunder not to exceed $500,000 in the aggregate and (i) intercompany
Indebtedness among the Borrowers so long as such Indebtedness is evidenced by a
note pledged to the Agent on terms and conditions satisfactory to the Agent and
such note has been delivered to the Agent.
7.9 Nature of Business. Substantially change the nature of the business
in which it is presently engaged, nor, except as specifically permitted in this
Agreement purchase or invest, directly or indirectly, in any assets or property
other than in the ordinary course of business for assets or property which are
useful in, necessary for and are to be used in its business as presently
conducted.
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7.10 Transactions with Affiliates. Except for those transactions listed
on Schedule 7.10 hereto, directly or indirectly, purchase, acquire or lease any
property from, or sell, transfer or lease any property to, or otherwise deal
with, any Affiliate, except transactions in the ordinary course of business, on
an arm's-length basis on terms no less favorable than terms which would have
been obtainable from a Person other than an Affiliate.
7.11 Leases. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 7.6 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $7,500,000 in any one fiscal year in the aggregate for all
Borrowers.
7.12 Subsidiaries.
(a) Form any Subsidiary unless (i) such Subsidiary if a
Domestic Subsidiary expressly joins in this Agreement as a borrower and becomes
jointly and severally liable for the obligations of Borrowers hereunder, under
the Revolving Credit Note and under any other agreement between any Borrower and
Lenders, (ii) such Subsidiary if a Foreign Subsidiary guarantees the obligations
of Borrowers hereunder, under the Revolving Credit Note and under any other
agreement between any Borrower and Lenders provided that such Foreign Subsidiary
is not required to guarantee the Obligations if to do so would have a material
adverse tax impact on such Borrower and (iii) Agent shall have received all
documents, including legal opinions, it may reasonably require to establish
compliance with each of the foregoing conditions. Notwithstanding the foregoing,
the Borrowers may form a Subsidiary for the purpose of promoting the product
development, marketing and distribution of the Borrowers' businesses on the
internet (the "Internet Subsidiary"); provided, however, the total of
Investments of the Borrowers in or to the Internet Subsidiary shall not exceed
$2,000,000 (less any Investments permitted under Section 7.4(i)) hereof.
(b) Enter into any partnership, joint venture or similar
arrangement, except for product development, marketing and distribution
arrangements entered into in the ordinary course of any of the Borrowers'
businesses.
7.13 Fiscal Year and Accounting Changes. Change its fiscal year from
September 30 or make any change (a) in accounting treatment and reporting
practices except as required by GAAP or (b) in tax reporting treatment except as
required by law.
7.14 Pledge of Credit. Now or hereafter pledge Agent's or any Lender's
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than such Borrower's business as conducted
on the date of this Agreement.
7.15 Amendment of Articles of Incorporation, By-Laws. Amend, modify or
waive any term or material provision of its Articles of Incorporation or By-Laws
unless required by law.
7.16 Compliance with ERISA. (a) (i) Maintain, or permit any member of
the Controlled Group to maintain, or (ii) become obligated to contribute, or
permit any member of
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the Controlled Group to become obligated to contribute, to any Plan, other than
those Plans disclosed on Schedule 5.8(d), (b) engage, or permit any member of
the Controlled Group to engage, in any non-exempt "prohibited transaction", as
that term is defined in section 406 of ERISA and Section 4975 of the Code, (c)
incur, or permit any member of the Controlled Group to incur, any material
"accumulated funding deficiency", as that term is defined in Section 302 of
ERISA or Section 412 of the Code, (d) terminate, or permit any member of the
Controlled Group to terminate, any Plan where such event could result in any
material liability of any Borrower or any member of the Controlled Group or the
imposition of a lien on the property of any Borrower or any member of the
Controlled Group pursuant to Section 4068 of ERISA, (e) assume, or permit any
member of the Controlled Group to assume, any obligation to contribute to any
Multiemployer Plan not disclosed on Schedule 5.8(d), (f) incur, or permit any
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (g) fail promptly to notify Agent of the occurrence of any
Termination Event, (h) fail to comply, or permit a member of the Controlled
Group to fail to comply, with the requirements of ERISA or the Code or other
applicable laws in respect of any Plan if such failure could reasonably be
expected to have a Material Adverse Effect on the Controlled Group or the
Borrowers taken as a whole, (ix) fail to meet, or permit any member of the
Controlled Group to fail to meet, all minimum funding requirements under ERISA
or the Code or postpone or delay or allow any member of the Controlled Group to
postpone or delay any funding requirement with respect of any Plan if such
failure could reasonably be expected to have a Material Adverse Effect on the
Controlled Group or the Borrowers taken as a whole. Notwithstanding the
foregoing, upon at least [thirty (30)] days written notice to the Agent, the
Borrowers may merge any existing Plans or form a new Plan so long as the merging
or formation of such Plans could not reasonably be expected to have a Material
Adverse Effect on the Controlled Group or the Borrowers taken as a whole.
7.17 Prepayment of Indebtedness. At any time, directly or indirectly,
prepay any Indebtedness for borrowed money (other than to Lenders), or
repurchase, redeem, retire or otherwise acquire any Indebtedness for borrowed
money of any Borrower, provided, however, that absent an Event of Default and
provided that the occurrence of which or payment thereof will not constitute an
Event of Default, the Borrower may (a) make regularly scheduled payments on such
Indebtedness and (b) prepay such Indebtedness in an aggregate amount not to
exceed $1,000,000.
VIII. CONDITIONS PRECEDENT.
8.1 Conditions to Initial Advances. The agreement of Lenders to make
the initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Lenders, immediately prior to or concurrently with
the making of such Advances, of the following conditions precedent:
(a) Loan Documents. Agent shall have received this Agreement
and Other Documents duly executed and delivered by an authorized officer of each
Borrower;
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(b) Filings, Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code financing statement)
required by this Agreement, any related agreement or under law or reasonably
requested by the Agent to be filed, registered or recorded in order to create,
in favor of Agent, a perfected first priority security interest in or lien upon
the Collateral shall have been properly filed, registered or recorded in each
jurisdiction in which the filing, registration or recordation thereof is so
required or requested, and Agent shall have received an acknowledgment copy, or
other evidence satisfactory to it, of each such filing, registration or
recordation and satisfactory evidence of the payment of any necessary fee, tax
or expense relating thereto;
(c) Corporate Proceedings of Borrowers. Agent shall have
received a copy of the resolutions in form and substance reasonably satisfactory
to Agent, of the Board of Directors of each Borrower authorizing (i) the
execution, delivery and performance of this Agreement, the Other Documents and
any related agreements and (ii) the granting by each Borrower of the security
interests in and liens upon the Collateral in each case certified by the
Secretary or an Assistant Secretary of each Borrower as of the Closing Date;
and, such certificate shall state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded as of the date of such
certificate;
(d) Incumbency Certificates of Borrowers. Agent shall have
received a certificate of the Secretary or an Assistant Secretary of each
Borrower, dated the Closing Date, as to the incumbency and signature of the
officers of each Borrower executing this Agreement, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
(e) Certificates. Agent shall have received a copy of the
Articles of Organization or Formation (as the case may be) of each Borrower, and
all amendments thereto, certified by the Secretary of State or other appropriate
official of its jurisdiction of incorporation together with copies of the
By-Laws or LLC Agreement (as the case may be) of each corporate Borrower and all
agreements of each Borrower's shareholders certified as accurate and complete by
the Secretary of each Borrower;
(f) Good Standing Certificates. Agent shall have received good
standing certificates for each Borrower dated not more than five (5) days prior
to the Closing Date, issued by the Secretary of State or other appropriate
official of each Borrower's jurisdiction of incorporation and each jurisdiction
where the conduct of each Borrower's business activities or the ownership of its
properties necessitates qualification;
(g) Legal Opinion. Agent shall have received the executed
legal opinions of Bingham, Dana LLP and Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, s.c. in form and substance satisfactory to Agent which shall cover
such matters incident to the transactions contemplated by this Agreement, the
Revolving Credit Notes, Other Documents and related agreements as Agent may
reasonably require and each Borrower hereby authorizes and directs such counsel
to deliver such opinions to Agent and Lenders;
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(h) No Litigation. (i) No litigation, investigation or
proceeding before or by any arbitrator or Governmental Body shall be continuing
or threatened against any Borrower or against the officers or directors of any
Borrower (A) in connection with the Other Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of Agent, is deemed
material or (B) which could, in the reasonable opinion of Agent, have a Material
Adverse Effect; and (ii) no injunction, writ, restraining order or other order
of any nature materially adverse to any Borrower or the conduct of its business
or inconsistent with the due consummation of the Transactions shall have been
issued by any Governmental Body;
(i) Financial Condition Certificates. Agent shall have
received an executed Financial Condition Certificate in the form of Exhibit
8.1(i).
(j) Collateral Examination. Agent shall have completed
Collateral examinations and received appraisals, the results of which shall be
satisfactory in form and substance to Lenders, of the Receivables, Inventory,
General Intangibles and Equipment of each Borrower and all books and records in
connection therewith;
(k) Fees. Agent shall have received all fees payable to Agent
and Lenders on or prior to the Closing Date pursuant to Article III hereof;
(l) Pro Forma Financial Statements. Agent shall have received
a copy of the Pro Forma Financial Statements which shall be satisfactory in all
respects to Lenders;
(m) Insurance. Agent shall have received in form and substance
satisfactory to Agent, certified copies of Borrowers' casualty insurance
policies, together with loss payable endorsements on Agent's standard form of
loss payee endorsement naming Agent as loss payee, and certified copies of
Borrowers' liability insurance policies, together with endorsements naming Agent
as a co-insured;
(n) Payment Instructions. Agent shall have received written
instructions from Borrowers directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(o) Blocked Accounts. Agent shall have received duly executed
agreements establishing the Blocked Accounts or Depository Accounts with
financial institutions acceptable to Agent for all collection accounts with
financial institutions other than the Agent or as otherwise required by the
Documents;
(p) Consents. Agent shall have received any and all Consents
necessary to permit the effectuation of the transactions contemplated by this
Agreement and the Other Documents; and, Agent shall have received such Consents
and waivers of such third parties as might assert claims with respect to the
Collateral, as Agent and its counsel shall deem necessary including without
limitation any UCC-3 termination statements;
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(q) No Adverse Material Change. (i) since December 31, 1999,
there shall not have occurred any event, condition or state of facts which could
reasonably be expected to have a Material Adverse Effect and (ii) no
representations made or information supplied to Agent shall have been proven to
be inaccurate or misleading in any material respect;
(r) Leasehold Agreements. Agent shall have received landlord,
mortgagee or warehouseman agreements satisfactory to Agent with respect to all
premises leased by Borrowers at which Inventory is located;
(s) Contract Review. Agent shall have reviewed all material
contracts of Borrowers including, without limitation, leases, union contracts,
labor contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be satisfactory in all
respects to Agent;
(t) Closing Certificate. Agent shall have received a closing
certificate signed by the Chief Financial Officer of each Borrower dated as of
the date hereof, stating that (i) all representations and warranties set forth
in this Agreement and the Other Documents are true and correct on and as of such
date, (ii) Borrowers are on such date in compliance with all the terms and
provisions set forth in this Agreement and the Other Documents and (iii) on such
date no Default or Event of Default has occurred or is continuing;
(u) Borrowing Base. Agent shall have received evidence from
Borrowers that the Formula Amount and each Individual Formula Amount is
sufficient in value and amount to support Advances in the amount requested by
Borrowers on the Closing Date;
(v) Closing Undrawn Availability. On the Closing Date, after
giving effect to the initial Advances hereunder, Borrowers shall have Closing
Undrawn Availability of at least $10,000,000;
(w) Evidence of Termination of Credit Facility. Agent shall
have received from the Borrower evidence satisfactory to the Agent that the
credit facility and all related obligations by and among the Borrower, Bank of
New York, Fleet National Bank and First Union Bank have been terminated;
(x) Assignment of Inter-Company Indebtedness. Agent shall have
received an assignment of the Inter-Company Note in form and substance
satisfactory to the Agent; and
(y) Other. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
Transactions shall be satisfactory in form and substance to Agent and its
counsel.
8.2 Conditions to Each Advance. The agreement of Lenders to make any
Advance requested to be made on any date (including, without limitation, the
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
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(a) Representations and Warranties. Each of the
representations and warranties made by any Borrower in or pursuant to this
Agreement and any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement or any related agreement shall be true and correct in all
material respects on and as of such date as if made on and as of such date;
(b) No Default. No Event of Default or Default shall have
occurred and be continuing on such date, or would exist after giving effect to
the Advances requested to be made, on such date; provided, however that Lenders,
in their sole discretion, may continue to make Advances notwithstanding the
existence of an Event of Default or Default and that any Advances so made shall
not be deemed a waiver of any such Event of Default or Default; and
(c) Maximum Advances. In the case of any Advances requested to
be made, after giving effect thereto, the aggregate Advances shall not exceed
the maximum amount of Advances permitted under Section 2.1 hereof.
Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.
IX. INFORMATION AS TO BORROWERS.
Each Borrower shall, until satisfaction in full of the Obligations and
the termination of this Agreement:
9.1 Disclosure of Material Matters. Immediately upon learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral including, without limitation,
any Borrower's reclamation or repossession of, or the return to any Borrower of,
a material amount of goods or claims or disputes asserted by any Customer or
other obligor.
9.2 Schedules. Deliver to Agent on or before the fifteenth (15th) day
of each month as and for the prior month (a) accounts receivable agings, (b)
accounts payable schedules and (c) Inventory reports (with respect to
subparagraphs (a), (b) and (c) each Borrower shall also provide a reconciliation
of each report to the general ledger of such Borrower) and (d) a Borrowing Base
Certificate (which shall be calculated as of the last day of the prior month and
which shall not be binding upon Agent or restrictive of Agent's rights under
this Agreement). In addition, each Borrower will deliver to Agent at such
intervals as Agent may require: (i) confirmatory assignment schedules, (ii)
copies of Customer's invoices, (iii) evidence of shipment or delivery, and (iv)
such further schedules, documents and/or information regarding the Collateral as
Agent may require including, without limitation, trial balances and test
verifications. Agent shall have the right to confirm and verify all Receivables
by any manner and through any medium it considers advisable and do whatever it
may deem reasonably necessary to protect its interests
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hereunder. The items to be provided under this Section are to be in form
satisfactory to Agent and executed by each Borrower and delivered to Agent from
time to time solely for Agent's convenience in maintaining records of the
Collateral, and any Borrower's failure to deliver any of such items to Agent
shall not affect, terminate, modify or otherwise limit Agent's Lien with respect
to the Collateral.
9.3 Environmental Reports. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Sections 9.7 and 9.8, with a
certificate signed by the President of each Borrower stating, to the best of his
knowledge, that each Borrower is in compliance in all material respects with all
federal, state and local laws relating to environmental protection and control
and occupational safety and health. To the extent any Borrower is not in
compliance with the foregoing laws, the certificate shall set forth with
specificity all areas of non-compliance and the proposed action such Borrower
will implement in order to achieve full compliance.
9.4 Litigation. Promptly notify Agent in writing of any litigation,
suit or administrative proceeding affecting any Borrower, whether or not the
claim is covered by insurance, and of any suit or administrative proceeding,
which in any such case could reasonably be expected to have a Material Adverse
Effect on any Borrower.
9.5 Material Occurrences. Promptly notify Agent in writing upon the
occurrence of (a) any Event of Default or Default; (b) any event, development or
circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of any
Borrower as of the date of such statements; (c) any accumulated retirement plan
funding deficiency which, if such deficiency continued for two plan years and
was not corrected as provided in Section 4971 of the Code, could subject any
Borrower to a tax imposed by Section 4971 of the Code; (d) each and every
default by any Borrower which might result in the acceleration of the maturity
of any Indebtedness in excess of $1,000,000, including the names and addresses
of the holders of such Indebtedness with respect to which there is a default
existing or with respect to which the maturity has been or could be accelerated,
and the amount of such Indebtedness; and (e) any other development in the
business or affairs of any Borrower which could reasonably be expected to have a
Material Adverse Effect; in each case describing the nature thereof and the
action Borrowers propose to take with respect thereto.
9.6 Government Receivables. Notify Agent promptly (but in any event no
later than the third Business Day) if any of its Receivables arise out of
contracts between any Borrower and the United States, any state, or any
department, agency or instrumentality of any of them.
9.7 Annual Financial Statements. Furnish Agent within ninety (90) days
after the end of each fiscal year of Borrowers, financial statements of
Borrowers on a consolidating and consolidated basis including, but not limited
to, statements of income and stockholders' equity and cash flow from the
beginning of the current fiscal year to the end of such fiscal year and the
balance sheet as at the end of such fiscal year, all prepared in accordance with
GAAP applied on a basis consistent with prior practices, and in reasonable
detail and reported upon without qualification by an independent certified
public accounting firm selected by Borrowers and
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satisfactory to Agent (the "Accountants"). The report of the Accountants shall
be accompanied by a statement of the Accountants certifying that (i) they have
caused the Loan Agreement to be reviewed, (ii) in making the examination upon
which such report was based either no information came to their attention which
to their knowledge constituted an Event of Default or a Default under this
Agreement or any related agreement or, if such information came to their
attention, specifying any such Default or Event of Default, its nature, when it
occurred and whether it is continuing, and such report shall contain or have
appended thereto calculations which set forth Borrowers' compliance with the
requirements or restrictions imposed by Sections 6.5, 7.6 and 7.11 hereof. In
addition, the reports shall be accompanied by a certificate of each Borrower's
Chief Financial Officer which shall state that, based on an examination
sufficient to permit him to make an informed statement, no Default or Event of
Default exists, or, if such is not the case, specifying such Default or Event of
Default, its nature, when it occurred, whether it is continuing and the steps
being taken by such Borrower with respect to such event, and such certificate
shall have appended thereto calculations which set forth Borrowers' compliance
with the requirements or restrictions imposed by Sections 6.5, 7.6 and 7.11
hereof; provided, however, that the Borrower shall not have to provide the
compliance calculations with respect solely to Section 6.5, so long as at all
times during such applicable quarter, the Borrower has Undrawn Availability of
at least $10,000,000 and demonstrates such availability in its financial
statements.
9.8 Quarterly Financial Statements. Furnish Agent within forty-five
(45) days after the end of each fiscal quarter, an unaudited balance sheet of
Borrowers on a consolidated and consolidating basis and unaudited statements of
income and stockholders' equity and cash flow of Borrowers on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
fiscal year to the end of such quarter and for such quarter, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal and recurring year end adjustments that individually
and in the aggregate are not material to the business of Borrowers. The reports
shall be accompanied by a certificate signed by the Chief Financial Officer of
each Borrower, which shall state that, based on an examination sufficient to
permit him to make an informed statement, no Default or Event of Default exists,
or, if such is not the case, specifying such Default or Event of Default, its
nature, when it occurred, whether it is continuing and the steps being taken by
Borrowers with respect to such default and, such certificate shall have appended
thereto calculations which set forth Borrowers' compliance with the requirements
or restrictions imposed by Sections 6.5, 7.6 and 7.11 hereof; provided, however,
that the Borrower shall not have to provide the compliance calculations with
respect solely to Sections 6.5, 7.6 and 7.11 so long as at all times during such
applicable quarter, the Borrower has Undrawn Availability of at least
$10,000,000 and demonstrates such availability in its financial statements.
9.9 Other Reports. Furnish Agent as soon as available, but in any event
within ten (10) days after the issuance thereof with copies of such financial
statements, reports and returns as each Borrower shall send to its stockholders
9.10 Additional Information. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Other Documents have been complied with
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by Borrowers including, without limitation and without the necessity of any
request by Agent, (a) copies of all environmental audits and reviews, (b) at
least thirty (30) days prior thereto, notice of any Borrower's opening of any
new office or place of business or any Borrower's closing of any existing office
or place of business, (c) monthly financial reports and (d) promptly upon any
Borrower's learning thereof, notice of any labor dispute to which any Borrower
may become a party, any strikes or walkouts relating to any of its plants or
other facilities, and the expiration of any labor contract to which any Borrower
is a party or by which any Borrower is bound.
9.11 Projected Operating Budget. Furnish Agent, no later than thirty
(30) days prior to the beginning of each Borrower's fiscal years commencing with
fiscal year 2001, a quarter by quarter projected operating budget and cash flow
of Borrowers on a consolidated and consolidating basis for such fiscal year
(including an income statement for each quarter and a balance sheet at the end
of each fiscal quarter), such projections to be accompanied by a certificate
signed by the President or Chief Financial Officer of each Borrower to the
effect that such projections have been prepared on the basis of sound financial
planning practice consistent with past budgets and financial statements and that
such officer has no reason to question the reasonableness of any material
assumptions on which such projections were prepared.
9.12 Variances From Operating Budget. Furnish Agent, concurrently with
the delivery of the financial statements referred to in Section 9.7 and each
quarterly report, a written report summarizing all material variances from
budgets submitted by Borrowers pursuant to Section 9.11 and a discussion and
analysis by management with respect to such variances.
9.13 Notice of Suits, Adverse Events. Furnish Agent with prompt notice
of (i) any lapse or other termination of any Consent issued to any Borrower by
any Governmental Body or any other Person that is material to the operation of
any Borrower's business, (ii) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (iii) copies of any periodic or
special reports filed by any Borrower with any Governmental Body or Person, if
such reports indicate any material change in the business, operations, affairs
or condition of any Borrower, or if copies thereof are requested by Lender, and
(iv) copies of any material notices and other communications from any
Governmental Body or Person which specifically relate to any Borrower.
9.14 ERISA Notices and Requests. Furnish Agent with immediate written
notice in the event that (i) any Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which such Borrower or any member of the Controlled Group has taken, is taking,
or proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, Department of Labor or PBGC with
respect thereto, (ii) any Borrower or any member of the Controlled Group knows
or has reason to know that a prohibited transaction (as defined in Sections 406
of ERISA and 4975 of the Code) has occurred together with a written statement
describing such transaction and the action which such Borrower or any member of
the Controlled Group has taken, is taking or proposes to take with respect
thereto, (iii) a funding waiver request has been filed with respect to any Plan
together
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with all communications received by any Borrower or any member of the Controlled
Group with respect to such request, (iv) any increase in the benefits of any
existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which any Borrower or any member of the Controlled
Group was not previously contributing shall occur, (v) any Borrower or any
member of the Controlled Group shall receive from the PBGC a notice of intention
to terminate a Plan or to have a trustee appointed to administer a Plan,
together with copies of each such notice, (vi) any Borrower or any member of the
Controlled Group shall receive any favorable or unfavorable determination letter
from the Internal Revenue Service regarding the qualification of a Plan under
Section 401(a) of the Code, together with copies of each such letter; (vii) any
Borrower or any member of the Controlled Group shall receive a notice regarding
the imposition of withdrawal liability, together with copies of each such
notice; (viii) any Borrower or any member of the Controlled Group shall fail to
make a required installment or any other required payment under Section 412 of
the Code on or before the due date for such installment or payment; (ix) any
Borrower or any member of the Controlled Group knows that (a) a Multiemployer
Plan has been terminated, (b) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC
has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
9.15 Additional Documents. Execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
9.16 Intentionally Left Blank
9.17 Intellectual Property Reports. Execute and deliver to the Agent a
written report, in reasonable detail, on a semi-annual basis (starting, for this
year, on June 30, 2000, and thereafter on June 30 and December 31 of each
succeeding year), setting forth each new patent, patent application, trademark
or service mark registration, trademark or service mark application, copyright
registration, copyright application or License that each such Borrower has
filed, acquired or otherwise obtained in the preceding six month reporting
period. Each Borrower authorizes the Agent to modify the Intellectual Property
Security Agreement by amending Schedules I, II, III and IV thereto (and shall
cooperate with the Agent in effecting any such amendment) to include any patent,
patent application, trademark or service mark registration, trademark or service
mark application, copyright registration, copyright application or License
which becomes part of the Intellectual Property Collateral (as defined in the
Intellectual Property Security Agreement).
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
10.1 failure by any Borrower to pay any principal or any interest or
fees or other amounts (and such failure to pay interest or fees shall continue
for a period of three (3) days) on
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the Obligations when due, whether at maturity or by reason of acceleration
pursuant to the terms of this Agreement or Other Document or by notice of
intention to prepay, or by required prepayment or failure to pay any other
liabilities or make any other payment, fee or charge provided for herein when
due or in any Other Document;
10.2 any representation or warranty made or deemed made by any Borrower
in this Agreement or Other Document or any related agreement or in any
certificate, document or financial or other statement furnished at any time in
connection herewith or therewith shall prove to have been misleading in any
material respect on the date when made or deemed to have been made;
10.3 failure by any Borrower to (i) furnish financial information when
due or (ii) permit the inspection of its books or records;
10.4 issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of any Borrower's property.
10.5 except as otherwise provided for in Sections 10.1 and 10.3,
failure or neglect of any Borrower to perform, keep or observe any term,
provision, condition, covenant herein contained, or contained in any Other
Documents or any other agreement or arrangement, now or hereafter entered into
between any Borrower and Agent or any Lender, except for a failure or neglect of
any Borrower to perform, keep or observe any term, provision, condition or
covenant, contained in Sections 4.6, 4.7, 4.9, 4.11, 6.3, 6.4, 9.4 or 9.6 hereof
which is cured within fifteen (15) days from the occurrence of such failure or
neglect;
10.6 any judgment or judgments are rendered or judgment liens filed
against any Borrower for an aggregate amount in excess of $2,500,000 which
within thirty (30) days of such rendering or filing is not either satisfied,
stayed or discharged of record;
10.7 any Borrower shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, or fail to have dismissed, within forty-five (45)
days, any petition filed against it in any involuntary case under such
bankruptcy laws, or (vii) take any action for the purpose of effecting any of
the foregoing;
10.8 any Borrower shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business;
10.9 any Subsidiary of any Borrower shall (i) apply for, consent to or
suffer the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar fiduciary of itself or of all or a
substantial part of its property, (ii) admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present
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business, (iii) make a general assignment for the benefit of creditors, (iv)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vii) acquiesce to, or fail to have dismissed, within forty-five (45)
days, any petition filed against it in any involuntary case under such
bankruptcy laws, or (viii) take any action for the purpose of effecting any of
the foregoing;
10.10 any change in the Borrowers' condition or affairs (financial or
otherwise) which in Agent's opinion has a Material Adverse Effect on the
Borrowers taken as a whole;
10.11 any Lien created hereunder or provided for hereby or under any
related agreement for any reason ceases to be or is not a valid and perfected
Lien having a first priority interest;
10.12 a default of the obligations of any Borrower under any other
agreement to which it is a party shall occur which adversely affects its
condition, affairs or prospects (financial or otherwise) which default is not
cured within any applicable grace period or any default in connection with any
Indebtedness of any Borrower with any aggregate principal amount in excess of
$1,000,000;
10.13 any Change of Control shall occur;
10.14 any material provision of this Agreement shall, for any reason,
cease to be valid and binding on any Borrower, or any Borrower shall so claim in
writing to Agent;
10.15 (i) any Governmental Body shall (A) revoke, terminate, suspend or
adversely modify any license, permit, patent trademark or tradename of any
Borrower, the continuation of which is material to the continuation of any
Borrower's business, or (B) commence proceedings to suspend, revoke, terminate
or adversely modify any such license, permit, trademark, tradename or patent and
such proceedings shall not be dismissed or discharged within sixty (60) days, or
(c) schedule or conduct a hearing on the renewal of any license, permit,
trademark, tradename or patent necessary for the continuation of any Borrower's
business and the staff of such Governmental Body issues a report recommending
the termination, revocation, suspension or material, adverse modification of
such license, permit, trademark, tradename or patent; (ii) any agreement which
is necessary or material to the operation of any Borrower's business shall be
revoked or terminated and not replaced by a substitute acceptable to Agent
within thirty (30) days after the date of such revocation or termination, and
such revocation or termination and non-replacement would reasonably be expected
to have a Material Adverse Effect on any Borrower;
10.16 any portion of the Collateral shall be seized or taken by a
Governmental Body, or any Borrower or the title and rights of any Borrower of
any material portion of the Collateral shall have become the subject matter of
litigation which might, in the opinion of Agent, upon final determination,
result in impairment or loss of the security provided by this Agreement or the
Other Documents;
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10.17 the operations of any Borrower's manufacturing facility are
interrupted at any time for more than 24 hours during any period of 30
consecutive days, unless such Borrower shall (i) be entitled to receive for such
period of interruption, proceeds of business interruption insurance sufficient
to assure that it will be able to meet its per diem cash needs during such
period in an amount at least equal to its average per diem cash needs for the
consecutive three-month period immediately preceding the initial date of
interruption and (ii) receive such proceeds in the amount described in clause
(i) preceding not later than thirty (30) days following the initial date of any
such interruption; provided, however, that notwithstanding the provisions of
clauses (i) and (ii) of this section, an Event of Default shall be deemed to
have occurred if such Borrower shall be receiving the proceeds of business
interruption insurance for a period of thirty (30) consecutive days; or
10.18 an event or condition specified in Sections 7.16 or 9.14 hereof
shall occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, any Borrower or
any member of the Controlled Group shall incur, or in the opinion of Agent be
reasonably likely to incur, a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of Agent, would have a Material Adverse Effect on any
Borrower.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1 Rights and Remedies. Upon the occurrence of (i) an Event of
Default pursuant to Section 10.7 all Obligations shall be immediately due and
payable and this Agreement and the obligation of Lenders to make Advances shall
be deemed terminated; (ii) a filing of a petition against Borrower in any
involuntary case under any state or federal bankruptcy laws, the obligation of
Lenders to make Advances hereunder shall be terminated other than as may be
required by an appropriate order of the bankruptcy court having jurisdiction
over any Borrower; or (iii) any of the other Events of Default and at any time
thereafter (such default not having previously been cured), at the option of
Required Lenders all Obligations shall be immediately due and payable and
Lenders shall have the right to terminate this Agreement and to terminate the
obligation of Lenders to make Advances. Upon the occurrence of any Event of
Default, Agent shall have the right to exercise any and all other rights and
remedies provided for herein, under the Uniform Commercial Code and at law or
equity generally, including, without limitation, the right to foreclose the
security interests granted herein and to realize upon any Collateral by any
available judicial procedure and/or to take possession of and sell any or all of
the Collateral with or without judicial process. Agent may enter any of any
Borrower's premises or other premises without legal process and without
incurring liability to any Borrower therefor, and Agent may thereupon, or at any
time thereafter, in its discretion without notice or demand, take the Collateral
and remove the same to such place as Agent may deem advisable and Agent may
require Borrowers to make the Collateral available to Agent at a convenient
place. With or without having the Collateral at the time or place of sale, Agent
may sell the Collateral, or any part thereof, at public or private sale, at any
time or place, in one or more sales, at such price or prices, and upon such
terms, either for cash, credit or future delivery, as Agent may elect. Except as
to that part of the Collateral which is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market, Agent
shall give Borrowers reasonable
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notification of such sale or sales, it being agreed that in all events written
notice mailed to Borrowers at least five (5) days prior to such sale or sales is
reasonable notification. At any public sale Agent or any Lender may bid for and
become the purchaser, and Agent, any Lender or any other purchaser at any such
sale thereafter shall hold the Collateral sold absolutely free from any claim or
right of whatsoever kind, including any equity of redemption and such right and
equity are hereby expressly waived and released by each Borrower. In connection
with the exercise of the foregoing remedies, Agent is granted permission to use
all of each Borrower's trademarks, trade styles, trade names, patents, patent
applications, licenses, franchises and other proprietary rights which are used
in connection with (a) Inventory for the purpose of disposing of such Inventory
and (b) Equipment for the purpose of completing the manufacture of unfinished
goods. The proceeds realized from the sale of any Collateral shall be applied as
follows: first, to the reasonable costs, expenses and attorneys' fees and
expenses incurred by Agent for collection and for acquisition, completion,
protection, removal, storage, sale and delivery of the Collateral; second, to
interest due upon any of the Obligations and any fees payable under this
Agreement; and, third, to the principal of the Obligations. If any deficiency
shall arise, Borrowers shall remain liable to Agent and Lenders therefor.
11.2 Agent's Discretion. Agent shall have the right in its sole
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.
11.3 Setoff. In addition to any other rights which Agent or any Lender
may have under applicable law, upon the occurrence of an Event of Default
hereunder, Agent and such Lender shall have a right to apply any Borrower's
property held by Agent and such Lender to reduce the Obligations.
11.4 Rights and Remedies not Exclusive. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the exercise
of any right or remedy shall not preclude the exercise of any other right or
remedies provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1 Waiver of Notice. Each Borrower hereby waives notice of
non-payment of any of the Obligations and Receivables, demand, presentment,
protest and notice thereof with respect to any and all instruments, notice of
acceptance hereof, notice of loans or advances made, credit extended, Collateral
received or delivered, or any other action taken in reliance hereon, and all
other demands and notices of any description, except such as are expressly
provided for herein.
12.2 Delay. No delay or omission on Agent's or any Lender's part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.
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12.3 Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1 Term. This Agreement, which shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of each
Borrower, Agent and each Lender, shall become effective on the date hereof and
shall continue in full force and effect until April 28, 2003 (the "Termination
Date") unless sooner terminated as herein provided. Borrowers may terminate this
Agreement at any time upon ninety (90) days' prior written notice upon payment
in full of the Obligations.
13.2 Termination. The termination of this Agreement shall not affect
any Borrower's, Agent's or any Lender's rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The security interests, Liens and rights
granted to Agent and Lenders hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrowers' Account may from time
to time be temporarily in a zero or credit position, until all of the
Obligations of each Borrower have been paid or performed in full after the
termination of this Agreement or each Borrower has furnished Agent and Lenders
with an indemnification satisfactory to Agent and Lenders with respect thereto.
Accordingly, each Borrower waives any rights which it may have under Section
9-404(1) of the Uniform Commercial Code to demand the filing of termination
statements with respect to the Collateral, and Agent shall not be required to
send such termination statements to each Borrower, or to file them with any
filing office, unless and until this Agreement shall have been terminated in
accordance with its terms and all Obligations paid in full in immediately
available funds. All representations, warranties, covenants, waivers and
agreements contained herein shall survive termination hereof until all
Obligations are paid or performed in full.
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XIV. REGARDING AGENT.
14.1 Appointment. Each Lender hereby designates PNC to act as Agent for
such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Sections
3.3(a) and 3.4), charges and collections (without giving effect to any
collection days) received pursuant to this Agreement, for the ratable benefit of
Lenders. Agent may perform any of its duties hereunder by or through its agents
or employees. As to any matters not expressly provided for by this Agreement
(including without limitation, collection of the Revolving Credit Note) Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Required Lenders,
and such instructions shall be binding; provided, however, that Agent shall not
be required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the Other Documents or applicable law unless Agent
is furnished with an indemnification reasonably satisfactory to Agent with
respect thereto.
14.2 Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by any Borrower or any officer
thereof contained in this Agreement, or in any of the Other Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any of the
Other Documents or for the value, validity, effectiveness, genuineness, due
execution, enforceability or sufficiency of this Agreement, or any of the Other
Documents or for any failure of any Borrower to perform its obligations
hereunder. Agent shall not be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any of the Other Documents, or
to inspect the properties, books or records of any Borrower. The duties of Agent
as respects the Advances to Borrowers shall be mechanical and administrative in
nature; Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender; and nothing in this Agreement, expressed
or implied, is intended to or shall be so construed as to impose upon Agent any
obligations in respect of this Agreement except as expressly set forth herein.
14.3 Lack of Reliance on Agent and Resignation. Independently and
without reliance upon Agent or any other Lender, each Lender has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of each Borrower in connection with the making and the
continuance of the Advances hereunder and the taking or not taking of any action
in connection herewith, and (ii) its own appraisal of the creditworthiness of
each
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Borrower. Agent shall have no duty or responsibility, either initially or on a
continuing basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before making of the
Advances or at any time or times thereafter except as shall be provided by any
Borrower pursuant to the terms hereof. Agent shall not be responsible to any
Lender for any recitals, statements, information, representations or warranties
herein or in any agreement, document, certificate or a statement delivered in
connection with or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any Other
Document, or of the financial condition of any Borrower, or be required to make
any inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement, the Revolving Credit Note, the Other
Documents or the financial condition of any Borrower, or the existence of any
Event of Default or any Default.
Agent may resign on sixty (60) days' written notice to each of Lenders
and Borrowing Agent and upon such resignation, the Required Lenders will
promptly designate a successor Agent reasonably satisfactory to Borrowers.
Any such successor Agent shall succeed to the rights, powers and duties
of Agent, and the term "Agent" shall mean such successor agent effective upon
its appointment, and the former Agent's rights, powers and duties as Agent shall
be terminated, without any other or further act or deed on the part of such
former Agent. After any Agent's resignation as Agent, the provisions of this
Article XIV shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.
14.4 Certain Rights of Agent. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
14.5 Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
14.6 Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or a
Borrower referring to this Agreement or the Other Documents, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that Agent receives such a notice, Agent shall give
notice thereof to
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Lenders. Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Lenders; provided, that,
unless and until Agent shall have received such directions, Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of Lenders.
14.7 Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrowers, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; provided that, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
(not mere) negligence or willful misconduct.
14.8 Agent in its Individual Capacity. With respect to the obligation
of Agent to lend under this Agreement, the Advances made by it shall have the
same rights and powers hereunder as any other Lender and as if it were not
performing the duties as Agent specified herein; and the term "Lender" or any
similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity as a Lender. Agent may engage in business with
any Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from any Borrower for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
14.9 Delivery of Documents. To the extent Agent receives financial
statements required under Sections 9.7, 9.8, 9.11, 9.12 and a Borrowing Base
Certificate from any Borrower pursuant to the terms of this Agreement, Agent
will promptly furnish such documents and information to Lenders.
14.10 Borrowers' Undertaking to Agent. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
each Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy the relevant Borrower's obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.
14.11 Amendment of Article 14. The Borrower agrees that the foregoing
provisions of this Article 14 constitute an agreement among the Agent and the
Lenders (and the Agent and the Lenders acknowledge that except for the
provisions of Section 14.3, the Borrower is not a party to or bound by such
foregoing provisions) and that any and all of the provisions of this Article 14,
with the exception of the reasonable approval of Borrower as may be required
under Section 14.3 hereto, may be amended at any time by the Lenders without the
consent or approval of, or
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notice to, the Borrower (other than the requirement of notice to the Borrower of
the resignation of the Agent and the appointment of a successor Agent).
XV. BORROWING AGENCY.
15.1 Borrowing Agency Provisions.
(a) Each Borrower hereby irrevocably designates Borrowing
Agent to be its attorney and agent and in such capacity to borrow, sign and
endorse notes, and execute and deliver all instruments, documents, writings and
further assurances now or hereafter required hereunder, on behalf of such
Borrower or Borrowers, and hereby authorizes Agent to pay over or credit all
loan proceeds hereunder in accordance with the request of Borrowing Agent.
(b) The handling of this credit facility as a co-borrowing
facility with a borrowing agent in the manner set forth in this Agreement is
solely as an accommodation to Borrowers and at their request. Neither Agent nor
any Lender shall incur liability to Borrowers as a result thereof. To induce
Agent and Lenders to do so and in consideration thereof, each Borrower hereby
indemnifies Agent and each Lender and holds Agent and each Lender harmless from
and against any and all liabilities, expenses, losses, damages and claims of
damage or injury asserted against Agent or any Lender by any Person arising from
or incurred by reason of the handling of the financing arrangements of Borrowers
as provided herein, reliance by Agent or any Lender on any request or
instruction from Borrowing Agent or any other action taken by Agent or any
Lender with respect to this Section 15.1 except due to willful misconduct or
gross (not mere) negligence by the indemnified party.
(c) All Obligations shall be joint and several, and each
Borrower shall make payment upon the maturity of the Obligations by acceleration
or otherwise, and such obligation and liability on the part of each Borrower
shall in no way be affected by any extensions, renewals and forbearance granted
to Agent or any Lender to any Borrower, failure of Agent or any Lender to give
any Borrower notice of borrowing or any other notice, any failure of Agent or
any Lender to pursue or preserve its rights against any Borrower, the release by
Agent or any Lender of any Collateral now or thereafter acquired from any
Borrower, and such agreement by each Borrower to pay upon any notice issued
pursuant thereto is unconditional and unaffected by prior recourse by Agent or
any Lender to the other Borrowers or any Collateral for such Borrower's
Obligations or the lack thereof.
15.2 Waiver of Subrogation. Each Borrower expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution of
any other claim which such Borrower may now or hereafter have against the other
Borrowers or other Person directly or contingently liable for the Obligations
hereunder, or against or with respect to the other Borrowers' property
(including, without limitation, any property which is Collateral for the
Obligations), arising from the existence or performance of this Agreement, until
termination of this Agreement and repayment in full of the Obligations.
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XVI. MISCELLANEOUS.
16.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York. Any judicial proceeding
brought by or against any Borrower with respect to any of the Obligations, this
Agreement or any related agreement may be brought in any court of competent
jurisdiction in the State of New York, United States of America, and, by
execution and delivery of this Agreement, each Borrower accepts for itself and
in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. Each
Borrower hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by registered mail (return
receipt requested) directed to Borrowing Agent at its address set forth in
Section 16.6 and service so made shall be deemed completed five (5) days after
the same shall have been so deposited in the mails of the United States of
America, or, at the Agent's and/or any Lender's option, by service upon
Borrowing Agent which each Borrower irrevocably appoints as such Borrower's
Agent for the purpose of accepting service within the State of New York. Nothing
herein shall affect the right to serve process in any manner permitted by law or
shall limit the right of Agent or any Lender to bring proceedings against any
Borrower in the courts of any other jurisdiction. Each Borrower waives any
objection to jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or based upon
forum non conveniens. Any judicial proceeding by any Borrower against Agent or
any Lender involving, directly or indirectly, any matter or claim in any way
arising out of, related to or connected with this Agreement or any related
agreement, shall be brought only in a federal or state court located in the
County of New York, State of New York.
16.2 Entire Understanding.
(a) This Agreement and the documents executed concurrently
herewith contain the entire understanding between each Borrower, Agent and each
Lender and supersedes all prior agreements and understandings, if any, relating
to the subject matter hereof. Any promises, representations, warranties or
guarantees not herein contained and hereinafter made shall have no force and
effect unless in writing, signed by each Borrower's, Agent's and each Lender's
respective officers. Neither this Agreement nor any portion or provisions hereof
may be changed, modified, amended, waived, supplemented, discharged, cancelled
or terminated orally or by any course of dealing, or in any manner other than by
an agreement in writing, signed by the party to be charged. Each Borrower
acknowledges that it has been advised by counsel in connection with the
execution of this Agreement and Other Documents and is not relying upon oral
representations or statements inconsistent with the terms and provisions of this
Agreement.
(b) The Required Lenders, Agent with the consent in writing of
the Required Lenders, and Borrowers may, subject to the provisions of this
Section 16.2 (b), from time to time enter into written supplemental agreements
to this Agreement or the Other Documents executed by Borrowers, for the purpose
of adding or deleting any provisions or otherwise changing, varying or waiving
in any manner the rights of Lenders, Agent or Borrowers thereunder or the
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conditions, provisions or terms thereof of waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall, without the
consent of all Lenders:
(i) increase the Commitment Percentage, Maximum
Revolving Advance Amount or maximum dollar commitment of any Lender.
(ii) extend the maturity of any Revolving Credit Note
or the due date for any amount payable hereunder, or decrease the rate of
interest or reduce any fee payable by Borrowers to Lenders pursuant to this
Agreement.
(iii) alter the definition of the term Required
Lenders or alter, amend or modify this Section 16.2(b).
(iv) release any Collateral during any calendar year
(other than in accordance with the provisions of this Agreement) having an
aggregate value in excess of $1,000,000.
(v) change the rights and duties of Agent.
(vi) permit any Revolving Advance to be made if after
giving effect thereto the total of Revolving Advances outstanding hereunder
would exceed the Formula Amount for more than thirty (30) consecutive Business
Days or exceed one hundred and ten percent (110%) of the Formula Amount.
(vii) increase the Advance Rates above the Advance
Rates in effect on the Closing Date.
(viii) release of any guaranties.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
In the event that Agent requests the consent of a Lender pursuant to
this Section 16.2 and such Lender shall not respond or reply to Agent in writing
within ten (10) days of delivery of such request, such Lender shall be deemed to
have consented to matter that was the subject of the request. In the event that
Agent requests the consent of a Lender pursuant to this Section 16.2 and such
consent is denied, then PNC may, at its option, require such Lender to assign
its interest in the Advances to PNC or to another Lender or to any other Person
designated by the Agent (the "Designated Lender"), for a price equal to the then
outstanding principal amount thereof plus
77
<PAGE> 85
accrued and unpaid interest and fees due such Lender, which interest and fees
shall be paid when collected from Borrowers. In the event PNC elects to require
any Lender to assign its interest to PNC or to the Designated Lender, PNC will
so notify such Lender in writing within forty five (45) days following such
Lender's denial, and such Lender will assign its interest to PNC or the
Designated Lender no later than five (5) days following receipt of such notice
pursuant to a Commitment Transfer Supplement executed by such Lender, PNC or the
Designated Lender, as appropriate, and Agent.
Notwithstanding the foregoing, Agent may at its discretion and without
the consent of the Required Lenders, voluntarily permit the outstanding
Revolving Advances at any time to exceed the Formula Amount by up to one hundred
and ten percent (110%) of the Formula Amount for up to thirty (30) consecutive
Business Days. For purposes of the preceding sentence, the discretion granted to
Agent hereunder shall not preclude involuntary overadvances that may result from
time to time due to the fact that the Formula Amount was unintentionally
exceeded for any reason, including, but not limited to, Collateral previously
deemed to be either "Eligible Receivables" or "Eligible Inventory", as
applicable, becomes ineligible, collections of Receivables applied to reduce
outstanding Revolving Advances are thereafter returned for insufficient funds or
overadvances are made to protect or preserve the Collateral. In the event Agent
involuntarily permits the outstanding Revolving Advances to exceed the Formula
Amount by more than ten percent (10%), Agent shall endeavor to have Borrowers
decrease such excess in as expeditious a manner as is practicable under the
circumstances and not inconsistent with the reason for such excess. Revolving
Advances made after Agent has determined the existence of involuntary
overadvances shall be deemed to be involuntary overadvances and shall be
decreased in accordance with the preceding sentence.
16.3 Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure to the
benefit of Borrowers, Agent, each Lender, all future holders of the Obligations
and their respective successors and assigns, except that no Borrower may assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of Agent and each Lender.
(b) Each Borrower acknowledges that in the regular course of
commercial banking business one or more Lenders may at any time and from time to
time sell participating interests in the Advances to other financial
institutions (each such transferee or purchaser of a participating interest, a
"Transferee"). Each Transferee may exercise all rights of payment (including
without limitation rights of set-off) with respect to the portion of such
Advances held by it or other Obligations payable hereunder as fully as if such
Transferee were the direct holder thereof provided that Borrowers shall not be
required to pay to any Transferee more than the amount which it would have been
required to pay to Lender which granted an interest in its Advances or other
Obligations payable hereunder to such Transferee had such Lender retained such
interest in the Advances hereunder or other Obligations payable hereunder and in
no event shall Borrowers be required to pay any such amount arising from the
same circumstances and with respect to the same Advances or other Obligations
payable hereunder to both such Lender and such Transferee. Each Borrower hereby
grants to any Transferee a continuing security
78
<PAGE> 86
interest in any deposits, moneys or other property actually or constructively
held by such Transferee as security for the Transferee's interest in the
Advances.
(c) Any Lender may with the consent of Agent which shall not
be unreasonably withheld or delayed sell, assign or transfer all or any part of
its rights under this Agreement and the Other Documents to one or more
additional banks or financial institutions and one or more additional banks or
financial institutions may commit to make Advances hereunder (each a "Purchasing
Lender"), in minimum amounts of not less than $5,000,000, pursuant to a
Commitment Transfer Supplement, executed by a Purchasing Lender, the transferor
Lender, and Agent and delivered to Agent for recording. Upon such execution,
delivery, acceptance and recording, from and after the transfer effective date
determined pursuant to such Commitment Transfer Supplement, (i) Purchasing
Lender thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Commitment Percentage as set forth therein, and (ii) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement, the
Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement and the
Other Documents. Borrowers hereby consent to the addition of such Purchasing
Lender and the resulting adjustment of the Commitment Percentages arising from
the purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and the Other
Documents. Borrowers shall execute and deliver such further documents and do
such further acts and things in order to effectuate the foregoing.
(d) Agent shall maintain at its address a copy of each
Commitment Transfer Supplement delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Advances owing to each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and Borrowers, Agent and Lenders may treat each
Person whose name is recorded in the Register as the owner of the Advance
recorded therein for the purposes of this Agreement. The Register shall be
available for inspection by Borrowers or any Lender at any reasonable time and
from time to time upon reasonable prior notice. Agent shall receive a fee in the
amount of $3,500 payable by the applicable Purchasing Lender upon the effective
date of each transfer or assignment to such Purchasing Lender.
(e) Each Borrower authorizes each Lender to disclose to any
Transferee or Purchasing Lender and any prospective Transferee or Purchasing
Lender any and all financial information in such Lender's possession concerning
such Borrower which has been delivered to such Lender by or on behalf of such
Borrower pursuant to this Agreement or in connection with such Lender's credit
evaluation of such Borrower.
(f) Each Lender authorizes the Agent to transmit a borrowing
request of any Borrower to the Lenders electronically.
79
<PAGE> 87
16.4 Application of Payments. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that any
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for any Borrower's benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver, custodian or any other
party under any bankruptcy law, common law or equitable cause, then, to such
extent, the Obligations or part thereof intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Agent or such Lender.
16.5 Indemnity. Each Borrower shall indemnify Agent, each Lender and
each of their respective officers, directors, Affiliates, employees and agents
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including, without limitation, fees and disbursements
of counsel) which may be imposed on, incurred by, or asserted against Agent or
any Lender in any litigation, proceeding or investigation instituted or
conducted by any govern mental agency or instrumentality or any other Person
with respect to any aspect of, or any transaction contemplated by, or referred
to in, or any matter related to, this Agreement or the Other Documents, whether
or not Agent or any Lender is a party thereto, except to the extent that any of
the foregoing arises out of the willful misconduct of the party being
indemnified.
16.6 Notice. Any notice or request hereunder may be given to any
Borrower or to Agent or any Lender at their respective addresses set forth below
or at such other address as may hereafter be specified in a notice designated as
a notice of change of address under this Section. Any notice or request
hereunder shall be given by (a) hand delivery, (b) overnight courier, (c)
registered or certified mail, return receipt requested, (d) telex or telegram,
subsequently confirmed by registered or certified mail, or (e) telecopy to the
number set out below (or such other number as may hereafter be specified in a
notice designated as a notice of change of address) with electronic confirmation
of its receipt. Any notice or other communication required or permitted pursuant
to this Agreement shall be deemed given (a) when personally delivered to any
officer of the party to whom it is addressed, (b) on the earlier of actual
receipt thereof or three (3) days following posting thereof by certified or
registered mail, postage prepaid, or (c) upon actual receipt thereof when sent
by a recognized overnight delivery service or (d) upon actual receipt thereof
when sent by telecopier to the number set forth below with electronic
confirmation of its receipt, in each case addressed to each party at its address
set forth below or at such other address as has been furnished in writing by a
party to the other by like notice:
(A) If to Agent or PNC Bank, National Association
PNC at: Two Tower Center Boulevard
East Brunswick, New Jersey 08816
Attention: Michelle Stanley-Nurse
Telephone: (732) 220-4337
Telecopier: (732) 220-4393
and
80
<PAGE> 88
One PNC Bank Plaza, 22nd Floor
249 Fifth Avenue
Pittsburgh, PA 15222
Attention: Lisa Pierce
Telephone: (412) 762-6442
Telecopier: (412) 762-8672
with a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
Attention: Steven M. Ellis, P.C.
Telephone: (617) 570-1000
Telecopier: (617) 523-1231
(B) If to a Lender other than Agent, as specified on the signature
pages hereof
(C) If to Borrowing Agent
or any Borrower, at: Robotic Vision Systems, Inc.
5 Shawmut Road
Canton, MA 02021
Attention: Frank D. Edwards
Telephone: (781) 821-0830
Telecopier: (781) 828-9852
with a copy to: Bingham Dana LLP
150 Federal Street
Boston, MA 02110
Attention: Sula R. Fiszman, Esq.
Telephone: (617) 951-8000
Telecopier: (617) 951-8736
16.7 Survival. The obligations of Borrowers under Sections 2.2(f), 3.6,
3.7, 3.8, 4.19(h), 14.7 and 16.5 shall survive termination of this Agreement and
the Other Documents and payment in full of the Obligations.
16.8 Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
16.9 Expenses. All costs and expenses including, without limitation,
reasonable attorneys' fees (including the allocated costs of in house counsel)
and disbursements incurred by (A) Agent or Agent on behalf of the Lenders (a) in
connection with the entering into, modification, amendment and administration of
this Agreement or any consents or waivers hereunder and all related agreements,
documents and instruments, or (b) in connection with any
81
<PAGE> 89
advice given to Agent with respect to its rights and obligations under this
Agreement and all related agreements, or (B) Agent, Agent on behalf of the
Lenders, or the Lenders (a) in all efforts made to enforce payment of any
Obligation or effect collection of any Collateral, or (b) in instituting,
maintaining, preserving, enforcing and foreclosing on Agent's security interest
in or Lien on any of the Collateral, whether through judicial proceedings or
otherwise, or (c) in defending or prosecuting any actions or proceedings arising
out of or relating to Agent's or any Lender's transactions with any Borrower, in
each case may be charged to Borrowers' Account and shall be part of the
Obligations.
16.10 Injunctive Relief. Each Borrower recognizes that, in the event
any Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to Lenders; therefore, Agent, if Agent so requests, shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving that actual damages are not an adequate remedy.
16.11 Consequential Damages. Neither Agent nor any Lender, nor any
agent or attorney for any of them, shall be liable to any Borrower for
consequential damages arising from any breach of contract, tort or other wrong
relating to the establishment, administration or collection of the Obligations.
16.12 Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
16.13 Counterparts; Telecopied Signatures. This Agreement may be
executed in any number of and by different parties hereto on separate
counterparts, all of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
16.14 Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
16.15 Confidentiality; Sharing Information.
(a) Agent, each Lender and each Transferee shall hold all
non-public information obtained by Agent, such Lender or such Transferee
pursuant to the requirements of this Agreement in accordance with Agent's, such
Lender's and such Transferee's customary procedures for handling confidential
information of this nature; provided, however, Agent, each Lender and each
Transferee may disclose such confidential information (a) to its examiners,
affiliates, outside auditors, counsel and other professional advisors, (b) to
Agent, any Lender or to any prospective Transferees and Purchasing Lenders, and
(c) as required or requested by any Governmental Body or representative thereof
or pursuant to legal process; provided, further that (i) unless specifically
prohibited by applicable law or court order, Agent, each Lender and each
82
<PAGE> 90
Transferee shall use its best efforts prior to disclosure thereof, to notify the
applicable Borrower of the applicable request for disclosure of such non-public
information (A) by a Governmental Body or representative thereof (other than any
such request in connection with an examination of the financial condition of a
Lender or a Transferee by such Governmental Body) or (B) pursuant to legal
process and (ii) in no event shall Agent, any Lender or any Transferee be
obligated to return any materials furnished by any Borrower other than those
documents and instruments in possession of Agent or any Lender in order to
perfect its Lien on the Collateral once the Obligations have been paid in full
and this Agreement has been terminated.
(b) Each Borrower acknowledges that from time to time
financial advisory, investment banking and other services may be offered or
provided to such Borrower or one or more of its Affiliates (in connection with
this Agreement or otherwise) by any Lender or by one or more Subsidiaries or
Affiliates of such Lender and each Borrower hereby authorizes each Lender to
share any information delivered to such Lender by such Borrower and its
Subsidiaries pursuant to this Agreement, or in connection with the decision of
such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of
such Lender, it being understood that any such Subsidiary or Affiliate of any
Lender receiving such information shall be bound by the provision of Section
16.15 as if it were a Lender hereunder. Such authorization shall survive the
repayment of the other Obligations and the termination of the Loan Agreement.
16.16 Publicity. Each Borrower and each Lender hereby authorizes Agent
to make appropriate announcements of the financial arrangement entered into
among Borrowers, Agent and Lenders, including, without limitation, announcements
which are commonly known as tombstones, in such publications and to such
selected parties as Agent shall in its sole and absolute discretion deem
appropriate.
16.17 EXIM Borrower Agreement. Each Borrower agrees and acknowledges
that to the extent any provision of this Agreement is inconsistent with any
provision of the EXIM Borrower Agreement, the stricter of the two inconsistent
provisions shall control.
16.18 Pledge Agreement. Each Borrower agrees and acknowledges that to
the extent any provision of this Agreement is inconsistent with any provision of
the Pledge Agreement, the stricter of the two inconsistent provisions shall
control.
(Signature page follows)
83
<PAGE> 91
Each of the parties has signed this Agreement as of the day and year
first above written.
ATTEST ROBOTIC VISION SYSTEMS, INC.
/s/ Frank D. Edwards By: /s/ Pat V. Costa
- ---------------------------- ----------------------------------------
Name: Pat V. Costa
[SEAL] Title: President
Address: 5 Shawmut Road
Canton, MA 02021
ATTEST CIMATRIX LLC
By: Robotic Vision Systems, Inc., its Manager
/s/ Frank D. Edwards By: /s/ Pat V. Costa
- ---------------------------- ----------------------------------------
Name: Pat V. Costa
[SEAL] Title: President
Address: 5 Shawmut Road
Canton, MA 02021
ATTEST ACUITY IMAGING LLC
By: Robotic Vision Systems, Inc., its Manager
/s/ Frank D. Edwards By: /s/ Pat V. Costa
- ---------------------------- ----------------------------------------
Name: Pat V. Costa
[SEAL] Title: President
Address: 5 Shawmut Road
Canton, MA 02021
ATTEST SYSTEMATION ENGINEERED PRODUCTS,
INC.
t
/s/ Frank D. Edwards By: /s/ Pat V. Costa
- ---------------------------- ----------------------------------------
Name: Pat V. Costa
[SEAL] Title: President
Address: 5 Shawmut Road
Canton, MA 02021
<PAGE> 92
ATTEST VANGUARD AUTOMATION, INC.
/s/ Frank D. Edwards By: /s/ Pat V. Costa
- ---------------------------- ----------------------------------------
Name: Pat V. Costa
[SEAL] Title: President
Address: 5 Shawmut Road
Canton, MA 02021
ATTEST NORTHEAST ROBOTICS LLC
By: CiMatrix LLC, its Manager
By: Robotic Vision Systems, Inc., its Manager
/s/ Frank D. Edwards By: /s/ Pat V. Costa
- ---------------------------- ----------------------------------------
Name: Pat V. Costa
[SEAL] Title: President
Address: 5 Shawmut Road
Canton, MA 02021
<PAGE> 93
PNC BANK, NATIONAL ASSOCIATION, as
Lender and as Agent
By: /s/ Scott E. Carpenter
-------------------------------------
Name: Scott E. Carpenter
Title: Vice President
Address: Two Tower Center Boulevard
East Brunswick, New Jersey 08816
<PAGE> 94
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF Norfolk )
---------------------------
On this 28th day of April, 2000, before me personally came Pat V.
Costa , to me known, who, being by me duly sworn, did depose and say that he is
the President of ROBOTIC VISION SYSTEMS, INC., the corporation described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the board of directors of said corporation,
and that he signed his name thereto by like order.
/s/ Diane E. Sarantopoulos
----------------------------------------
Notary Public
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF Norfolk )
-------------------------
On this 28th day of April, 2000, before me personally came Pat V.
Costa, to me known, who, being by me duly sworn, did depose and say that he is
the President of ROBOTIC VISION SYSTEMS, INC. the manager of CIMATRIX LLC, the
limited liability company described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order of the
board of directors of said corporation, and that he signed his name thereto by
like order.
/s/ Diane E. Sarantopoulos
----------------------------------------
Notary Public
<PAGE> 95
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF Norfolk )
-------------------------
On this 28th day of April, 2000, before me personally came Pat V.
Costa, to me known, who, being by me duly sworn, did depose and say that
he is the President of ROBOTIC VISION SYSTEMS, INC. the manager of ACUITY
IMAGING LLC, the limited liability company described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the board of directors of said corporation, and that he signed his name
thereto by like order.
/s/ Diane E. Sarantopoulos
----------------------------------------
Notary Public
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF Norfolk )
-------------------------
On this 28th day of April, 2000, before me personally came Pat V.
Costa, to me known, who, being by me duly sworn, did depose and say that
he is the President of SYSTEMATION ENGINEERED PRODUCTS, INC., the corporation
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the board of directors of said
corporation, and that he signed his name thereto by like order.
/s/ Diane E. Sarantopoulos
----------------------------------------
Notary Public
<PAGE> 96
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF Norfolk )
-----------------------
On this 28th day of April, 2000, before me personally came Pat V.
Costa, to me known, who, being by me duly sworn, did depose and say that
he is the President of VANGUARD AUTOMATION, INC., the corporation described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the board of directors of said corporation,
and that he signed his name thereto by like order.
/s/ Diane E. Sarantopoulos
----------------------------------------
Notary Public
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF Norfolk )
-----------------------
On this 28th day of April, 2000, before me personally came Pat V.
Costa, to me known, who, being by me duly sworn, did depose and say that
he is the President of ROBOTIC VISION SYSTEMS, INC. the manager of CIMATRIX LLC
the manager of NORTHEAST ROBOTICS LLC, the limited liability company described
in and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the board of directors of said corporation,
and that he signed his name thereto by like order.
/s/ Diane E. Sarantopoulos
----------------------------------------
Notary Public
<PAGE> 97
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF SUFFOLK )
On this 28th day of April, 2000, before me personally came Scott E.
Carpenter, to me known, who, being by me duly sworn, did depose and say
that he is the Vice President of PNC BANK, NATIONAL ASSOCIATION, the lending
institution described in and which executed the foregoing instrument and that he
signed his name thereto by on behalf of said lending institution.
/s/ Michael B. McDonough
-------------------------------------
Notary Public
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 34,080
<SECURITIES> 0
<RECEIVABLES> 55,441
<ALLOWANCES> 0
<INVENTORY> 38,592
<CURRENT-ASSETS> 131,671
<PP&E> 12,643
<DEPRECIATION> 0
<TOTAL-ASSETS> 179,330
<CURRENT-LIABILITIES> 42,403
<BONDS> 0
0
0
<COMMON> 340
<OTHER-SE> 125,267
<TOTAL-LIABILITY-AND-EQUITY> 179,330
<SALES> 56,743
<TOTAL-REVENUES> 56,743
<CGS> 32,013
<TOTAL-COSTS> 32,013
<OTHER-EXPENSES> 20,490
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 692
<INCOME-PRETAX> 3,548
<INCOME-TAX> 71
<INCOME-CONTINUING> 3,477
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<EXTRAORDINARY> 0
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</TABLE>
