UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(a) of
the Securities Exchange Act of 1934
Date of Report
December 11, 1998
COMPUDYNE CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation)
1-4245 23-1408659
(Commission File Number) (IRS Employer Identification No.)
120 Union Street
Willimantic, Connecticut 06226
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code
(860) 456-4187
Item 2. Acquisition or Disposition of Assets
Acquisition of Norment Industries, Inc. Capital Stock.
Pursuant to the terms of a certain Stock Purchase Agreement entered
into by and between CompuDyne Corporation ("the Company") and Apogee
Enterprises, Inc. (the "Seller"), dated as of November 10, 1998, and
amended as of November 28, 1998 the Company on December 3, 1998,
consummated the acquisition, as of November 28, 1998, of all of the
capital stock of Norment Industries, Inc. ("Norment") and Norshield
Corporation ("Norshield") from the Seller.
Norment and Norshield represent the two subsidiaries comprising
Apogee's Detention & Security business unit. Seller's Detention &
Security business unit is based in Montgomery, Alabama, and is a leader
in providing security products and related systems integration services
for prisons, courthouses and embassies.
Norment is the leading systems integrator and manufacturer of
physical and electronic security systems for the corrections market and
consists of four divisions. SESCO is the largest detention system
contractor in the United States. Trentech is one of the leading
electronic security systems manufacturer and integrator serving the
corrections industry. Airteq manufactures the most technologically
advanced lock product line in the corrections industry. Engineered
Maximum Security Systems ("EMSS") is a leading detention system
contractor located on the West Coast. Norshield is the world's largest
manufacturer and supplier of ballistic, attack and blast resistant
products.
The consideration paid to the Seller for the stock of Norment and
Norshield was $22.5 million in immediately available funds, subject to
adjustment upon the completion of an audited closing date balance sheet.
The Company reviewed the recent financial performance of Norment
and Norshield, visited facilities, evaluated management, and considered
current backlog and future business potential in coming to the
determination of the consideration to be paid. The Company also
considered the ability of Norment and Norshield business to complement
CompuDyne's other security-related business lines consistent with
CompuDyne's strategic direction.
In order to provide the funds required to purchase the stock of
Norment and Norshield and provide working capital, the Company issued $9
million in subordinated notes with warrants for 297,924 shares of
CompuDyne common stock and 1,075,507 shares of the corporation's common
stock for a purchase price of $3 million to William Blair Mazzanine
CapitalFund II Limited Partnership, and obtained senior secured credit
facility of $18 million, to include a three year revolving credit
facility of up to $6.5 million and a five year term loan of $11.5
million from LaSalle National Bank.
Item 7. Financial Statements and Exhibits
(a) Audited financial statements of Norment and Norshield are not
currently available, and will be filed as soon as practicable, but
within 60 days from the date of this report.
(b) Pro-forma financial statements to reflect the acquisition of Norment
and Norshield are not currently available, and will be filed as soon as
practicable, but within 60 days of the date of this report.
(c) (i) Exhibit (99.1) Stock Purchase Agreement dated as of November 10,
1998 by and between Apogee Enterprises, Inc. and CompuDyne Corporation;
(ii) Exhibit (99.2) Credit Agreement dated as of November 30, 1998 among
CompuDyne Corporation and LaSalle National Bank and (iii) Exhibit (99.3)
Subordinated Loan and Investment Agreement dated as of November 30, 1998
among CompuDyne Corporation and William Blair Mezzanine Capital Fund, II
L.P.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereto duly authorized.
COMPUDYNE CORPORATION
Date: December 10, 1998 By:/s/William C. Rock
William C. Rock
Chief Financial Officer
Index To Exhibits
Exhibit (99.1) Stock Purchase Agreement dated November 10, 1998 by and
between CompuDyne Corporation and Apogee Enterprises, Inc..
Exhibit (99.2) Credit Agreement dated as of November 30, 1998 among
CompuDyne Corporation and LaSalle National Bank.
Exhibit (99.3) Subordinated Loan and Investment Agreement dated as of
November 30, 1998 among CompuDyne Corporation and William Blair Mezzanine
Capital Fund, II L.P.
EXHIBIT 99.1
STOCK PURCHASE AGREEMENT
dated as of November 10, 1998
by and among
APOGEE ENTERPRISES, INC.
as Seller
and
COMPUDYNE CORPORATION,
as Purchaser
STOCK PURCHASE AGREEMENT
THIS AGREEMENT dated as of November 10, 1998 is made and entered
into by and between APOGEE ENTERPRISES, INC., a Minnesota corporation
("Seller"), and COMPUDYNE CORPORATION, a Nevada corporation "Purchaser").
Capitalized terms not otherwise defined herein have the meanings set
forth in Section 10.01.
STATEMENT OF PURPOSE
WHEREAS, Seller owns all of the outstanding capital stock of Norment
Industries, Inc., a Delaware corporation ("Norment"), and Norshield
Corporation., an Alabama corporation ("Norshield" and each of Norment and
Norshield is herein individually referred to as the "Company" and
collectively as the "Companies"), that own, manage and operate a number
of separate businesses which collectively are engaged in the design,
manufacturer, installation and distribution of locks, bullet resistant
glass, metal window surrounds, electronic control systems and similar
products that are integrated into detention security systems under the
names Norment Industries, Norshield, SESCO, EMSS, Airteq and Trentech
(with the exception of the Voice Track business of Norment (as
hereinafter defined), the foregoing businesses are herein referred to as
the "Business");
WHEREAS, Purchaser desires to purchase from Seller, and Seller
desires to sell to Purchaser all of the outstanding capital stock of the
Companies to enable Purchaser to acquire substantially all of the assets
primarily used in, held for use or held for the benefit of the Business
except as hereinafter provided;
WHEREAS, in connection with such purchase and sale, the Companies
will retain certain liabilities of the Companies and the Companies and
Purchaser will indemnify and hold Seller and its Affiliates harmless with
respect to such liabilities;
WHEREAS, in connection with such purchase and sale, Seller will
assume certain liabilities of the Companies and Seller will indemnify and
hold the Companies and the Purchaser harmless with respect thereto; and
WHEREAS, Purchaser and Seller desire to enter into this Agreement to
effect the purchase and sale of the capital stock of the Companies
pursuant to the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
SALE OF SHARES AND CLOSING
1.01 Purchase and Sale. Seller agrees to sell to Purchaser, and
Purchaser agrees to purchase from Seller, all of the outstanding shares
of capital stock of each of the Companies (collectively the "Shares").
As a result of the purchase of the Shares, Purchaser will acquire
(through the Companies) the right, title and interest of the Companies in
and to the following assets at the Closing on the terms and subject to
the conditions set forth in this Agreement:
Transferred Projects. All Contracts for Construction
Projects related to the Business (collectively the "Transferred
Projects") which (i) are in process as of October 31, 1998 as listed on
Schedule 1.01(a)(i) and have not been completed by the Closing Date, (ii)
have been awarded as of the date hereof for bids submitted prior to
October 31, 1998, but have not yet been contracted as listed on Schedule
1.01(a)(ii) and have not been completed by the Closing Date, (iii) have
been contracted but not commenced as of October 31, 1998, as listed on
Schedule 1.01(a)(iii) and have not been completed by the Closing Date,
(iv) are awarded or contracted after October 31, 1998 for bids that have
been submitted as of October 31, 1998 as listed on Schedule 1.01(a)(iv)
and have not been completed by the Closing Date, and (v) are bid in the
Ordinary Course of Business after the date hereof and awarded or
contracted, whether before or after the Closing and, if contracted prior
to the Closing Date, have not been completed by the Closing Date, in all
cases, regardless of whether or not either of the Companies, as opposed
to Seller or another Affiliate of Seller other than the Companies, is or
are parties to such Contracts. A Transferred Project will not be
"completed" unless all amounts under the Contract have been billed. In
the event any Contract for a Transferred Project is not in the name of
one of the Companies but is in the name of an Affiliate of Seller, Seller
will take or cause such Affiliate to take, without undue liability or
expense to Seller or such Affiliate, such action as either of the
Companies or Purchaser may reasonably request to enable Purchaser to have
the benefits of such Contract after Closing; provided that the Purchaser
shall (i) cause the Companies to indemnify Seller and its Affiliates
with respect to any liabilities or obligations under the Contracts
for such Transferred Projects, and (ii) indemnify Seller and its
Affiliates with respect to any liabilities or obligations under the
Contracts for such Transferred Projects.
Customer Orders. All Contracts for Customer Orders for which
payment in full has not been received as of the Closing Date.
(c) Acquired Assets. Except for the Excluded Assets and as disclosed
on Schedule 2.06, the term "Acquired Assets" as used in this Agreement
shall include the assets, properties and rights used by either of the
Companies or by Seller or one of its Affiliates other than the Companies
primarily in the Business or reflected on the balance sheet as of August
29, 1998 for the Business referred to in Section 2.04(a) subject to
changes in the Ordinary Course of Business prior to the Closing Date,
including but not limited to the following:
(i) tangible personal property (such as supplies, packaging goods,
equipment, manufactured and purchased parts, machinery, furniture,
automobiles, trucks, tractors, trailers, tools, jigs, and dies but
excluding inventories),
(ii) inventories of raw materials, supplies, manufactured and processed
parts, work in process, packaging goods and finished goods (the
"Inventories"),
(iii)accounts receivable, notes, chattel paper and other receivables,
(iv) agreements, contracts, indentures, mortgages, instruments, liens,
guarantees, other similar arrangements, and rights thereunder, including
without limitation, agreements with sales agents and representatives,
(v) Government Authorizations held by the Companies to the extent
transferable,
(iv) intellectual property, goodwill associated therewith, licenses and
sublicenses granted and obtained with respect thereto and with respect to
the use of computer software used by each Company, and rights to
protection of interests therein under the laws of all jurisdictions,
(vii)the trade names, trademarks, service marks and patents listed in
Schedule 2.22(c) and Schedule 2.22(d)together with all other intangible
property, including customer lists,
(viii)real property, fixtures, improvements, and fittings thereon,
leaseholds and subleaseholds therein, and easements, rights-of-way, and
other appurtenants thereto (such as appurtenant rights in and to public
streets),
(ix) leases, subleases, and rights thereunder,
(x) prepayments, prepaid expenses, and deferred items and deposits, and
(xi) Books and Records.
1.02 Excluded Assets. Notwithstanding any other provision of this
Agreement, the Acquired Assets shall exclude and, prior to Closing
(or after Closing and upon the request of Seller), the Companies
shall assign or transfer to Seller or an Affiliate of Seller, as
designated by Seller, the following assets, properties and rights of the
Companies (the "Excluded Assets"):
(a) all Inter-Company Contracts with Affiliates that do not relate to
the Transferred Projects;
(b) Cash as of the Closing Date;
(c) all Inter-Company Receivables payable to either of the Companies by
Seller or any of its Affiliates as of the Closing Date;
(d) all assets primarily used in the Voice Track business of Norment as
set forth on Schedule 1.02(d);
(e) all insurance policies maintained by the Companies, Seller or
Seller's Affiliates;
(f) all refunds or credits, if any, of Taxes owed to either of the
Companies as of the Closing Date (except to the extent such refunds or
credits are included in the Closing Balance Sheet);
(g) any rights, including indemnification and claims for recovery under
litigation of either of the Companies, against third parties arising out
of or relating to events prior to Closing or projects or Customer Orders
completed prior to Closing (including any retainage not yet paid with
respect to such projects subject to litigation as of the Closing Date),
except any such rights relating to Transferred Projects;
(h) the rights of either of the Companies in, to and under all Contracts
which are the responsibility of Seller under Section 8.02;
(i) all bank accounts, lockboxes and safety boxes, credit card accounts
and all related records;
(j) all computer programs for the accounting and payroll systems owned
by or licensed to an Affiliate of the Companies and used in the Business;
and
(k) the other excluded assets listed on Schedule 1.02(k) hereto.
1.03 Company Liabilities. After the Closing, the Companies will be
responsible and obligated for and will timely pay and discharge the
following Liabilities (the "Company Liabilities") relating to the
Business:
(a) all Liabilities reflected on the Closing Date Balance Sheet;
(b) all obligations arising on or after Closing Date under (i)all
Contracts of either of the Companies required to be disclosed to
Purchaser under Article II of this Agreement if so disclosed, and (ii)
all Contracts of either of the Companies primarily relating to the
Business or the Acquired Assets and not required to be disclosed under
Article II;
(c) all Liabilities arising or resulting from or related to the
Transferred Projects and Customer Orders, including but not limited to
completion of such projects or orders and all warranty claims with
respect to such projects or orders regardless of whether or not such
warranty claims relate to work performed prior to the Closing Date; and
(d) all Liabilities arising out of the Business as conducted by the
Companies or the Purchaser or their respective successors and assigns on
or after the Closing Date.
1.04 Seller Liabilities. "Seller Liabilities" shall mean all liabilities
and obligations of Seller and the Companies arising prior to the Closing
Date, whether such liabilities and obligations relate to payment,
performance or otherwise, are matured or unmatured, are known or unknown,
are contingent or non-contingent, are fixed or undetermined, or are
present, future or otherwise, other than the Company Liabilities. All of
the Seller Liabilities shall remain the sole responsibility of and shall
be retained, paid, performed or discharged solely by the Seller.
Notwithstanding anything to the contrary contained herein, and without
limiting the foregoing, the following liabilities and obligations of the
Companies shall be considered Seller Liabilities for the purposes of this
Agreement (and the Closing Date Balance Sheet shall not include any
Seller Liabilities):
(a) any liability or obligation for the following Taxes: (A) any Taxes
arising as a result of the operation of the Business or ownership of the
Acquired Assets before the Closing Date, (B) any deferred Taxes of any
nature as of the Closing Date, and (C) any taxes arising from the
transfer (whether prior to, or after the Closing Date) to Seller or an
Affiliate of Seller as designated by Seller of any of the Excluded Assets
in accordance with Section 1.02 hereof;
(b) any Environmental, Health and Safety Liabilities arising out of or
relating to the operation of the Business or ownership or operation of
real property prior to the Closing Date;
(c) any liability or obligation arising out of or relating to any
employee grievance commenced or relating to periods prior to the Closing
Date;
(d) any liability or obligation to indemnify, reimburse or advance
amounts to any officer, director, employee or agent of the Companies for
matters arising prior to the Closing Date, including without limitation
contributions to the applicable retirement plans for employees of the
Business earned through the Closing Date and any severance or other
payments with respect to any employee of the Business terminated prior to
the Closing, but excluding (i) those relating to Transferred Projects or
Customer Orders, and (ii) those relating to employee bonuses as accrued
on the Balance Sheet and will be accrued on the Closing Balance Sheet in
accordance with Seller's practice for accruing bonuses as reflected on
the Balance Sheet;
(e) any liability or obligation arising out of or resulting from the
non-compliance by either of the Companies with any Law or Order prior to
the Closing Date;
(f) any trade accounts payable that are delinquent as of the Closing
Date; and
(g) any Liability of either of the Companies to Seller shown as
"Intercompany Debt" on the balance sheets for the Business referred to in
Section 2.04(a).
1.05 Purchase Price. Subject to the adjustment under Section 1.07, the
purchase price for the Shares is Twenty-two Million Five Hundred
Thousand U.S. Dollars ($22,500,000.00) (the "Purchase Price"), payable as
follows:(i) Purchaser shall deliver the sum of Two Hundred Fifty
Thousand U.S.Dollars ($250,000.00) into escrow simultaneously with the
execution hereof pursuant to the terms of an escrow agreement in form
and substance substantially identical to Exhibit A attached hereto (the
"Escrow Agreement") which amount shall be released to Seller, together
with all interest earned thereon, upon consummation of the transactions
contemplated by this Agreement on the Closing Date; and (ii) at Closing,
Purchaser shall deliver to Seller the Purchase Price less the amount
delivered under clause (i) in the manner provided in Section 1.06.
1.06 Closing. The closing of the transactions contemplated by this
Agreement will take place at the offices of Kaplan, Strangis and Kaplan,
P.A., 5500 Norwest Center, 90 South Seventh Street, Minneapolis,
Minnesota 55402 or at such other place as Purchaser and Seller mutually
agree, at 10:00 A.M. local time, on the Closing Date. At the Closing: (i)
Purchaser and Seller shall deliver written instructions to the escrow
agent under the Escrow Agreement to pay the escrow funds held under the
Escrow Agreement, together with all interest earned thereon, to Seller by
wire transfer of immediately available funds, and (ii) Purchaser shall
deliver to Seller the balance of the Purchase Price (as preliminarily
adjusted pursuant to Section 1.07(b) hereof) by wire transfer of
immediately available funds to such account as Seller may reasonably
direct by written notice delivered to Purchaser by Seller at least two
Business Days before the Closing Date. Simultaneously therewith, Seller
will assign and transfer to Purchaser good and valid title in and to the
Shares and cause all of the Acquired Assets to be free and clear of all
Liens except Permitted Liens. At the Closing, there shall be executed
and delivered to Seller and Purchaser the Administrative Services
Agreement to be delivered pursuant to Section 4.12, and the opinions,
certificates, documents and instruments of conveyance to be delivered
under Articles VI and VII.
1.07 Adjustment to Purchase Price.
(a) No later than three (3) Business Days prior to the Closing Date,
Seller shall prepare and deliver to Purchaser a calculation of the Net
Working Capital (as defined below) estimated as of the opening of
business on the Closing Date (the "Estimated Net Working Capital"). The
Estimated Net Working Capital shall be calculated in accordance with
GAAP, as applied on a consistent basis with the Financial Statements
provided to Purchaser pursuant to Section 2.04 hereof (the "Working
Capital Balance Sheet"); provided that there shall be no reserve or
accrual for warranty claims related to any projects which are not
Transferred Projects or Customer Orders. As used herein, the term "Net
Working Capital" shall mean an amount equal to the excess of total
current assets over total current liabilities of the Business calculated
in accordance with GAAP on a consistent basis with the Working Capital
Balance Sheet.
(b) If the Estimated Net Working Capital is less than $16,352,196
("Minimum Target Net Working Capital"), then the Purchase Price payable
to Seller at Closing shall be reduced by an amount equal to the amount of
such deficit (the "Estimated Working Capital Deficit Adjustment"). If
the Estimated Net Working Capital is in excess of $19,180,349 (the
"Maximum Net Working Capital" Purchaser shall pay to Seller an amount
equal to the amount of such excess (the "Estimated Working Capital
Surplus Adjustment").
(c) Within forty-five (45) days after the Closing Date, the Purchaser
will prepare and deliver to the Seller (i) a draft consolidated balance
sheet (the "Draft Closing Date Balance Sheet") for the Business as of the
Closing Date, including related schedules and work papers, (ii) a
computation and determination of the Net Working Capital as of the
Closing Date, and (iii) a computation and determination of the Adjusted
Purchase Price.
(d) If Seller has any objections to the Draft Closing Date Balance
Sheet, it will deliver a detailed statement describing such objections to
the Purchaser within fifteen (15) days of receipt thereof. Purchaser and
Seller will use reasonable efforts to resolve any such objections among
themselves. If the parties do not obtain a final resolution within
thirty (30) days after Purchaser has received the statement of
objections, Purchaser and Seller will select an independent accounting
firm mutually acceptable to them to resolve any remaining objections. If
Purchaser and Seller are unable to agree on the choice of an accounting
firm, they will select by lot a nationally-recognized accounting firm
which is not then currently and has not provided the principal outside
auditing services to any of the parties hereto or any of their Affiliates
within the past three (3) years, which shall be jointly instructed by the
Purchaser, on the one hand, and the Seller, on the other hand, to
determine the Net Working Capital and the Adjusted Purchase Price in
accordance with this Agreement. (The accounting firm selected by either
mutual agreement or lot is herein referred to as the "Accountant".) The
Accountant shall deliver to each of Purchaser and Seller its
determinations within thirty (30) days after receiving the joint
instructions from Purchaser and Seller, and the determinations of the
Accountant will be set forth in writing and will be conclusive and
binding upon the parties. The expenses of the Accountant shall be borne
equally by Purchaser and Seller in amounts determined in reverse
proportion to the net benefit derived by each from any modification
resulting from the Seller's objection to the Draft Closing Balance Sheet.
The Purchaser will give the Seller the Draft Closing Date Balance Sheet
revised to reflect the Accountant's determinations. The "Closing Date
Balance Sheet" shall mean the Draft Closing Date Balance Sheet, together
with any revisions thereto pursuant to this Section 1.07, including the
determination of the Accountant. The "Adjusted Purchase Price" shall
mean the Purchase Price, together with any revisions thereto pursuant to
this Section 1.07, including the determination of the Accountant.
(e) For purposes of Seller's review of the Closing Date Balance Sheet
and the Adjusted Purchase Price, Purchaser will make reasonably available
to Seller and its accountants and other representatives the work papers
and backup materials used in preparing the Draft Closing Date Balance
Sheet at reasonable times and upon reasonable notice at any time during
(i) the preparation by Purchaser of the Draft Closing Date Balance Sheet,
(ii) the review by Seller of the Draft Closing Date Balance Sheet, and
(iii) the resolution by the parties of any objections thereto.
(f) If the Net Working Capital as of the Closing Date is less than the
Minimum Net Working Capital by more than the Estimated Working Capital
Deficit Adjustment, Seller shall pay to Purchaser an amount equal to the
amount of such deficit over the Estimated Working Capital Deficit
Adjustment plus, if any, the Estimated Net Working Capital Surplus
Adjustment. If the Net Working Capital as of the Closing Date is less
than the Minimum Net Working Capital by less than the Estimated Working
Capital Deficit Adjustment, Purchaser shall pay to Seller the difference
between such actual deficit and the Estimated Working Capital Deficit
Adjustment. If Net Working Capital as of the Closing Date exceeds
Maximum Net Working Capital by more than the Estimated Working Capital
Surplus Adjustment, Purchaser shall pay to Seller an amount equal to the
amount of such excess over the Estimated Working Capital Surplus
Adjustment plus, if any, the Estimated Working Capital Deficit
Adjustment. If Net Working Capital as of Closing Date exceeds the Target
Net Working Capital by less than the Estimated Working Capital Surplus
Adjustment, Seller shall pay to Purchaser an amount equal to the
difference between the Estimated Working Capital Surplus Adjustment and
such actual excess amount. All payments to be made under this Section
1.07(f) shall be made no later than five (5) Business Days after the
earliest to occur of (i) the 30th day after the Draft Closing Date
Balance Sheet shall have been given by Purchaser to Seller, if Seller
shall not have objected to the Draft Closing Date Balance Sheet within
such period; (ii) the first business day after which the Purchaser and
Seller have resolved any objection raised by Seller; or (iii) the first
business day after the date on which the determination of the Accountant
referred to in Section 1.06(d) above is given to Purchaser and Seller.
1.08 Section 338(h)(10) Election and Allocation. Seller and Purchaser
agree to make a joint election under Section 338(h)(10) of the
Code to treat the sale of the Shares as a sale of the assets of the
Companies to Purchaser. The Adjusted Purchase Price under this Agreement
shall be allocated between each of the Companies based on the net book
value of each of the Companies as of the Closing Date and then allocated
in accordance with Schedule 1.08 hereto. After the Closing, the parties
shall make consistent use of the allocation specified in Schedule 1.08
for all Tax purposes and in any and all filings, declarations and reports
with the IRS in respect thereof, including the reports required to be
filed under Section 1060 of the Code, if applicable, it being understood
that Purchaser shall prepare and deliver IRS Forms 8594 and 8023 to
Seller within forty-five (45) days after the Closing Date for Seller's
review and approval if such forms are required to be filed with the IRS.
In any proceeding related to the determination of any Tax, neither
Purchaser nor Seller or their respective Affiliates shall contend or
represent that such allocation is not a correct allocation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller, as to itself and as to each of the Companies, hereby
represents and warrants to Purchaser (and with respect to Section
2.24(b), Purchaser acknowledges and agrees) as follows as of the date
hereof:
2.01 Organization and Good Standing.
(a) Seller is a corporation validly existing and in good standing under
the Laws of the State of Minnesota. Each Company is a corporation
validly existing and in good standing under the laws of its jurisdiction
of incorporation, with full corporate power and authority to conduct it
business as it is now being conducted, to own or use the properties and
assets that it purports to own or use, and to perform all its obligations
under the Contracts included in the Acquired Assets. Each Company is
duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such qualification,
except as disclosed on Schedule 2.01(a) and except for those
jurisdictions in which the failure to be qualified and in good standing
would not have, and would not reasonably be expected to have a Material
Adverse Effect on the Business.
(b) The Company has no subsidiaries except as disclosed on Schedule
2.01(b), and does not own any shares of capital stock or other securities
of any other Person.
2.02 Enforceability; Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding obligation
of Seller, enforceable against it in accordance with its terms. Upon the
execution and delivery by Seller of the documents to be executed and
delivered by Seller at the Closing (collectively, the "Transaction
Documents"), each of the Transaction Documents will constitute the legal,
valid, and binding obligation of Seller, enforceable against Seller in
accordance with its terms. Seller has the corporate power and authority
to execute and deliver this Agreement and the Transaction Documents to
which it is a party and to perform its obligations under this Agreement
and the Transaction Documents to which it is a party.
(b) Except as set forth in and subject to the provisions of Schedule
2.02(b), neither the execution and delivery of this Agreement nor the
consummation or performance of any of the transactions contemplated
hereby will, directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with, or result in a violation or breach of (A)
any provision of the organizational documents of Seller, or (B) any
resolution adopted by the board of directors or the shareholders of
Seller;
(ii) contravene, conflict with, or result in a violation or breach of, or
give any governmental body or other Person the right to challenge any of
the transactions contemplated hereby or to exercise any remedy or obtain
any relief under, any Law or any Order to which Seller or either Company,
or any of the assets of either Company, may be subject except where such
contraventions, conflicts, violations, breaches, and rights (A) would
not, or would not reasonably be expected to, in the aggregate have a
Material Adverse Effect on the Business, or (B) would occur as a result
of the identity or the legal or regulatory status of Purchaser or its
Affiliates;
(iii) contravene, conflict with, or result in a violation or breach of
any of the terms or requirements of, or give any Governmental Authority
the right to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by either Company or that
otherwise relates to the assets or the business of either Company except
where such contraventions, conflicts, violations, breaches, and rights
(A) would not, or would not reasonably be expected to, in the aggregate
have a Material Adverse Effect on the Business; or (B) would occur as a
result of the identity or the legal or regulatory status of Purchaser or
its Affiliates;
(iv) contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any Contract included in the
Acquired Assets except where such contraventions, conflicts, violations,
breaches and rights would not, or would not reasonably be expected to, in
the aggregate have a Material Adverse Effect on the Business; or
(v) result in the imposition or creation of any Lien upon or with
respect to any of the Acquired Assets, except for any imposition or
creation of any Lien imposed by any action of Purchaser or at Purchaser's
direction.
(c) Except as set forth in Schedule 2.02(c), neither of the Companies
nor Seller is required to give any notice to or obtain any consent from
any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the transactions
contemplated hereby except where failure to give such notice or obtain
such consent would not, or would not reasonably be expected to, in the
aggregate have a Material Adverse Effect on the Business.
2.03 Capitalization. The authorized equity securities of Norment consist
of 1,000 shares of common stock, par value $.01 per share, of which 100
shares are issued and outstanding. The authorized equity securities of
Norshield consist of 10,000 shares of common stock, par value $.01 per
share, of which 1,000 shares are issued and outstanding. Seller is and
will be on the Closing Date the record and beneficial owner of all of the
shares of equity securities of each Company issued and outstanding, free
and clear of all Liens except for any Liens to be released at the
Closing. All of the outstanding equity securities of each Company have
been duly authorized and validly issued and are fully paid and
nonassessable. There are no contracts relating to the issuance, sale, or
transfer of any equity securities or other securities of either Company.
None of the securities of either Company was issued in violation of Law.
Except as set forth in Schedule 2.01(b), neither Company owns, or has
any right to acquire, any securities of any Person or any direct or
indirect equity or ownership interest in any other business.
2.04 Financial Statements. Prior to the execution of this Agreement,
Seller has delivered to Purchaser true and complete copies of the
following financial statements:
(a) the unaudited, consolidating balance sheets of the Business dated as
of February 28, 1996, 1997 and 1998, May 31 1998, and August 29, 1998
(the latter of which is referred to herein as the "Balance Sheet"); and
(b) the unaudited consolidating statements of income for the Business
for the year ended February 28, 1996, 1997 and 1998, and for the
quarterly periods ended May 31, 1998 and August 29, 1998.
Except as set forth on Schedule 2.04, all such financial statements were
prepared in accordance with GAAP applied on a consistent basis throughout
the periods and present fairly the financial condition and results of
operations of the Business, as of the respective dates thereof and for
the respective periods covered thereby except for the absence of
footnotes and normal year-end adjustments which an audit would reveal and
which will not have a Material Adverse Effect on the Business.
2.05 Books and Records. The books of account and other financial records
of each Company, all of which have been made available to Purchaser, are
complete and correct in all material respects. The minute books of each
Company are complete and accurate in all material respects, and contain
records of all meetings held (and consents in lieu of meetings executed
by) the shareholders and the board of directors of each Company.
2.06 Sufficiency of Assets. Except as set forth on Schedule 2.06, the
Acquired Assets constitute all of the assets, tangible and intangible, of
any nature whatsoever, required to operate the Business as currently
operated by the Companies, except for such assets the absence of which
would not, or would not be reasonably expected to, result in a Material
Adverse Effect on the Business.
2.07 Description of Real Property.
(a) Owned Real Property. Schedule 2.07(a) contains a true and correct
legal description and common address of all tracts and parcels of land
owned by each Company or owned by an Affiliate of Seller and used in the
Business which will be owned by one of the Companies as of the Closing
Date (the "Real Property").
(b) Leased Real Property. Schedule 2.07(b) contains a true and correct
common address of all tracts and parcels of land leased by each Company
or leased by an Affiliate of Seller which, subject to the consent of the
lessor, if required, to the assignment of such lease by such Affiliate to
one of the Companies, will be leased by one of the Companies as of the
Closing Date, and a true and correct description (by subject property,
name of lessor and lease term) of all related leases (the "Leases").
2.08 Leases. Except as disclosed on Schedule 2.08, each of the Leases is
a valid and binding obligation of the respective Company, is enforceable
against the respective Company in accordance with its terms and is, to
Seller's Knowledge, in full force and effect. There are no offsets or
defenses by either of the Companies or, to Seller's Knowledge, the other
party thereto under the Leases. There are no existing material defaults
by either of the Companies, and no events or circumstances have occurred
which, with or without notice or lapse of time or both, would constitute
material defaults by either of the Companies, under any of the Leases.
Except as described in Schedule 2.08, the sale of the Shares by Seller to
Purchaser hereunder will not (i) permit the lessor to accelerate the rent
or cause the terms of any of the Leases to be renegotiated, (ii)
constitute a default under any of the Leases or (iii) require the consent
of the lessor under the Leases.
2.09 Title to Assets and Existing Evidence of Title to Real Property.
Each Company owns or will, as of the Closing Date, own good and
marketable title to all of the Real Property, and owns or will, as of the
Closing Date, own all of the other Acquired Assets owned by it, in each
case free and clear of any Liens, other than:
(a) Permitted Liens and as described on Schedule 2.09(a); and
(b) Liens described in Schedule 2.09(b), all of which will be removed at
or prior to the Closing.
Seller has delivered to Purchaser true and complete copies of all deeds,
existing title insurance policies and surveys of or pertaining to the
Real Property in Seller's or the Companies' possession.
2.10 Condition of Facilities. Except as disclosed on Schedule 2.10:
(a) Real Property. Use of the Real Property for the various purposes
for which it is presently being used is permitted as of right under all
material zoning laws and is not subject to "permitted non-conforming" use
or structure classifications. The Improvements are in compliance with
all Laws in all material respects, including zoning and building laws.
The Improvements are in good repair and in good condition in all
material respects, ordinary wear and tear excepted and, to Seller's
Knowledge, are free from patent and latent defects. To Seller's
Knowledge, no part of the Improvements encroaches on any real property
not included in the Real Property and there are no Improvements primarily
situated on adjoining property which encroach on any part of the Real
Property. To Seller's Knowledge, there is no existing or proposed plan
to modify or realign any street or highway or any existing or proposed
eminent domain proceeding that would result in the taking of any material
part of any Facility or that would materially prevent or hinder the
continued use of any Facility as heretofore used in the conduct of the
Business.
(b) Tangible Personal Property. The Tangible Personal Property is in
good repair and good operating condition in all material respects,
ordinary wear and tear excepted, and, to Seller's Knowledge, is free from
material latent and patent defects. All material Tangible Personal
Property is under the possession or control of the Companies and their
employees.
2.11 Accounts Receivable. All accounts receivable that are reflected on
the Balance Sheet or on the accounting records of the Company as of the
Closing Date represent or will represent valid obligations arising from
sales actually made, to be made, or services actually performed or to be
performed by the Company in the Ordinary Course of Business except for
billing errors in the Ordinary Course of Business that will not have a
Material Adverse Effect on the Business. No Inter- Company Receivables
are reflected on the Balance Sheet or any of the other financial
statements described in Section 2.04 above. Schedule 2.11 contains a
complete and accurate list of all accounts receivable as of the date of
the Balance Sheet, which list sets forth the aging of each such account
receivable. Since the date of the Balance Sheet, the Company has not
changed its normal credit and collection practices.
2.12 Inventories. Inventories now on hand that were purchased subsequent
to the date of the Balance Sheet were purchased in the Ordinary Course of
Business of the Company at a cost, to Seller's Knowledge, consistent
with market prices prevailing at the time of purchase.
2.13 Taxes. Subject to the disclosures on Schedule 2.13:
(a) Each Company, Seller or one of Seller's Affiliates has duly filed or
caused to be filed (or obtained valid, currently effective extensions for
filing set forth on Schedule 2.13) all federal, state, local and foreign
income, franchise, excise, payroll, sales and use, property, provider,
withholding and other tax returns, reports, estimates and information and
other statements or returns which relate to the Business (including all
federal income tax returns for the consolidated group of which the
Companies are a part) and which are required to be filed by or on behalf
of it pursuant to Law ("Tax Returns"). All such Tax Returns were correct
in all material respects as filed and reflect in all material respects
the federal, state, local and foreign income, franchise, excise, payroll,
sales and use, property, provider, withholding and other taxes, duties,
fees, imposts and governmental charges (and charges in lieu of any
thereof), together with interest, and additions to tax and penalties
required to be paid or collected by (or allocable to) either Company
(collectively "Taxes"). Seller, one of Seller's Affiliates, or one of
the Companies (i) has paid or caused to be paid all Taxes as shown due on
the Tax Returns and on any assessment received by it with respect to the
Business, and (ii) has properly and fully recorded as accrued or deferred
liabilities all Taxes for any period from the date of the last reporting
period covered by such Tax Returns; provided, however, that any such
accrued or deferred liability shall be a Seller Liability in accordance
with Section 1.04(a). Neither Company nor Seller has received any
written notice of any audit, or any dispute or claim being threatened by
any relevant taxing authority concerning any such Tax Return or liability
for such Taxes.
(b) There is no Tax sharing or allocation agreement that will require
any payment by either Company after the Closing Date except as provided
in Section 1.02(f) with respect to refunds of Taxes. Neither Company is
nor within the five years immediately preceding the Closing Date has been
an "S" corporation under the Code.
2.14 Employee Benefits. Seller and Purchaser acknowledge and agree that,
except for any multi-employer pension plan to which contributions are
made for union employees in the Business pursuant to a collective
bargaining agreement, all of the Employee Plans are Seller's plans and
will be retained by Seller after Closing so that after Closing such
Employee Plans shall not be applicable to the Transferred Employees and
Purchaser will need to implement its own employee benefit plans.
(a) Set forth on Schedule 2.14(a) is a complete and correct list of all
"employee benefit plans" as defined by Section 3(3) of ERISA, all
specified fringe benefit plans as defined in Section 6039D of the Code,
and all other bonus, incentive compensation, deferred compensation,
profit sharing, stock option, stock appreciation right, stock bonus,
stock purchase, employee stock ownership, savings, severance,
supplemental unemployment, layoff, salary continuation, retirement,
pension, health, life insurance, disability, accident, group insurance,
vacation, holiday, sick leave, fringe benefit or welfare plan, and any
other employee compensation or benefit plan, agreement, policy, practice,
commitment, contract, or understanding (whether qualified or
nonqualified, currently effective or terminated, written or unwritten),
and any trust, escrow or other agreement related thereto, that (i) is
maintained or contributed to by either Company or any other corporation
or trade or business controlled by, controlling, or under common control
with either Company (within the meaning of Section 414 of the Code or
Section 4001(a)(14) or 4001(b) of ERISA) ("ERISA Affiliate") and relating
to employees of the Business, and (ii) provides benefits, or describes
policies or procedures applicable to any current employee of either
Company or the dependents of any thereof, regardless of whether funded
(the "Employee Plans").
(b) Seller has made available to Purchaser true, accurate and complete
copies of (i) the documents comprising each Employee Plan(or, with
respect to any Employee Plan which is unwritten, a detailed written
description of eligibility, participation, benefits, funding
arrangements, assets and any other matters which relate to the
obligations of the Company or any ERISA Affiliate), (ii) all collective
bargaining agreements pursuant to which contributions are currently made
or obligations incurred (including both pension and welfare benefits) by
either Company or with respect to the employees of the Business, and
(iii) all current summary plan descriptions and employee handbooks
regarding the Employee Plans.
(c) Full payment has been made of all amounts which are required under
the terms of each Employee Plan to be paid as contributions by the
Companies, Seller or Seller's Affiliates with respect to the last day of
the most recent fiscal year of such Employee Plan ended on or before the
date of this Agreement. No accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code) has been incurred with
respect to such Employee Plan, whether or not waived provided that no
representations are made as to the accumulated deficiency status of any
multi-employer plan as defined in Section 3(37) of ERISA (the
"Multi-Employer Plan"). Neither Company is required to provide security
to an Employee Plan under Section 401(a)(29) of the Code. Each Company,
Seller or an Affiliate of Seller has paid in full all required insurance
premiums, subject only to normal retrospective adjustments in the
ordinary course, with regard to the Employee Plans for policy years or
other applicable policy periods ending on or before the Closing Date. To
the extent any such retrospective adjustment results in a refund with
respect to any period ending on or prior to the Closing, such refund
shall be an Excluded Asset and to the extent such adjustment shall result
in an obligation with respect to any period ending on or prior to the
Closing, such obligation shall be a Seller Liability.
(d) Except as disclosed in Schedule 2.14(d), no Employee Plan, if
subject to Title IV of ERISA, has been completely or partially
terminated. The Pension Benefit Guaranty Corporation ("PBGC") has not
instituted or, to Seller's Knowledge, threatened a proceeding to
terminate any of the Employee Plans pursuant to Subtitle 1 of Title IV of
ERISA. To Seller's Knowledge, none of the Employee Plans has been the
subject of a reportable event (as defined in Section 4043 of ERISA) as to
which a notice would be required to be filed with the PBGC. Each
Company, Seller or an Affiliate of Seller has paid in full all insurance
premiums due to the PBGC with regard to the Employee Plans for all
applicable periods ending on or before the Closing Date.
(e) To Seller's Knowledge, the transactions contemplated hereby will not
result in any liability, (i) for the termination of or withdrawal from
any Employee Plan under Sections 4062, 4063, or 4064 of ERISA, (ii) for
any lien imposed under Section 302(f) of ERISA or Section 412(n) of the
Code, (iii) for any interest payments required under Section 302(e) of
ERISA or Section 412(m) of the Code, (iv) for any excise tax imposed by
Section 4971 of the Code, (v) for any minimum funding contributions under
Section 302(c)(11) of ERISA or Section 412(c)(11) of the Code, or (vi)
for withdrawal from any Multi- Employer Plan under Section 4201 of ERISA.
(f) Except as disclosed on Schedule 2.14(f), each Company has complied
with the continuation coverage provisions of the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA"), as amended, with respect to
all current employees and former employees of the Business and other
"qualified beneficiaries" (as defined in Code Section 4980B(g)(1) and
ERISA Section 607(3)). To Seller's Knowledge, all current and former
Employee Plans that are "group health plans," as defined in Section
5000(b) of the Code, have been operated in conformance with the Medicare
as Secondary Payer provisions of the Social Security Act, and no person
is subject to liability under Section 5000(a) of the Code with respect to
any such Employee Plan.
(g) The forms of all Employee Plans are in compliance with the
applicable terms of ERISA, the Code, and any other applicable laws,
including the Americans with Disabilities Act and the Family Medical
Leave Act, and such plans have been operated in compliance with such laws
and the written Employee Plan documents, except where such failures would
not have, and would not reasonably be expected to have, in the aggregate
a Material Adverse Effect on the Business. Neither of the Companies nor,
to Seller's Knowledge, any fiduciary of an Employee Plan has violated the
requirements of Section 404 of ERISA. All required reports and
descriptions of the Employee Plans (including Internal Revenue Service
Form 5500 Annual Reports, Summary Annual Reports and Summary Plan
Descriptions) have been timely filed with the IRS, the United States
Labor Department, or any other state or federal agency and distributed,
and all notices required by ERISA or the Code or any other state or
federal law or any ruling or regulation of any state or federal
administrative agency with respect to the Employee Plans have been
appropriately given, except where such failures would not have, and would
not reasonably be expected to have, in the aggregate a Material Adverse
Effect on the Business.
(h) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
IRS, except that no representation is given as to any Multi-Employer
Plans. Each trust created under any Employee Plan has been determined to
be exempt from taxation under Section 501(a) of the Code. Each of the
Employee Plans that is an Employee Welfare Benefit Plan (as defined in
Section 3(1) of ERISA) that utilizes a funding vehicle described in
Section 501(c)(9) of the Code or is subject to the provisions of Section
505 of the Code has been the subject of a notification by the IRS that
such funding vehicle qualifies for tax- exempt status under Section
501(c)(9) of the Code and/or that the plan complies with Section 505 of
the Code, unless the IRS does not as a matter of policy issue such
notification with respect to the particular type of plan, except that no
representation is given as to any Multi-Employer Plans. With respect to
each Employee Plan, to Seller's Knowledge, no event has occurred which
will give rise to a loss of any intended tax consequence or to any tax
under Section 511 of the Code, except that no representation is given as
to any Multi- Employer Plans.
(i) There is no material pending or, to Seller's Knowledge, threatened
Proceeding relating to any Employee Plan. Neither of the Companies nor,
to Seller's Knowledge, any fiduciary of an Employee Plan has engaged in a
transaction with respect to any Employee Plan that, assuming the taxable
period of such transaction expired as of the date hereof, would subject
either Company or Purchaser to a tax or penalty imposed by either Section
4975 of the Code or Section 502(l) of ERISA or a violation of Section 406
of ERISA. The transactions contemplated hereby will not result in the
potential assessment of a tax or penalty under Section 4975 of the Code
or Section 502(l) of ERISA nor result in a violation of Section 406 of
ERISA.
(j) Each Company, Seller or an Affiliate of Seller has maintained
workers' compensation coverage on the Employees as required by applicable
state law for at least 30 days prior to the execution of this Agreement.
(k) Except as required by Laws and as disclosed on Schedule 2.14(k), the
consummation of the Transactions contemplated hereby will not accelerate
the time of vesting or the time of payment, or increase the amount, of
compensation due to any Transferred Employee. There are no contracts or
arrangements providing for payments that would subject either Company or
Purchaser to liability for tax under Section 4999 of the Code.
(l) Except for the continuation coverage requirements of COBRA, neither
Company has obligations or potential liability for benefits to employees
following termination of employment or retirement under any of the
Employee Plans that are Employee Welfare Benefit Plans.
2.15 Compliance with Laws; Governmental Authorizations.
(a) Except as set forth in Schedule 2.15(a):
(i) Each Company is in compliance with each Law that is applicable to it
or to the conduct or operation of the Business or the ownership or use of
any of its assets included in the Acquired Assets, except any instances
of noncompliance that would not have, and would not reasonably be
expected to have, in the aggregate a Material Adverse Effect on the
Business;
(ii) To the Knowledge of Seller, neither Company has received any notice
or other communication (whether oral or written) from any Governmental
Authority or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any Law,
or (B) any actual, alleged, possible, or potential obligation on the part
of the Company to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature, except in cases with respect to
which notice or communication either (x) has been resolved without any
liability resulting from such resolution being included in the Closing
Balance Sheet, or (y) will be retained by Seller as a Seller Liability
(and no amount will be accrued therefor in the Closing Balance Sheet).
(b) Schedule 2.15(b) contains a complete and accurate list of each
Governmental Authorization that is held by each Company or that otherwise
relates to the Business or the Acquired Assets. Schedule 2.15(b)
identifies the holder of each Governmental Authorization not held by
either Company that is used in the Business. Each Governmental
Authorization listed or required to be listed in Schedule 2.15(b) is
valid and in full force and effect, except where the invalidity or
failure to be in full force and effect would not have, and would not
reasonably be expected to have, in the aggregate a Material Adverse
Effect on the Business. Except as set forth in Schedule 2.15(b):
(i) Each Company is in compliance with all of the terms and requirements
of each Governmental Authorization identified or required to be
identified in Schedule 2.15(b), except where such failure would not have,
and would not reasonably be expected to have, in the aggregate a Material
Adverse Effect on the Business.
(ii) To Seller's Knowledge, neither Company has received any notice or
other communication (whether oral or written) from any Governmental
Authority or any other Person regarding (A) any actual, alleged,
possible, or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any actual,
proposed, possible, or potential revocation, withdrawal, suspension,
cancellation termination of, or modification to any Governmental
Authorization, in each case which notice or communication has not been
resolved; and
(iii) all applications required to have been filed for the renewal of the
Governmental Authorizations listed or required to be listed in Schedule
2.15(b) have been duly filed on a timely basis with the appropriate
Governmental Authorities, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made
on a timely basis with the appropriate Governmental Bodies, except where
the failure to make such filings would not and would not reasonably be
expected to have, in the aggregate a Material Adverse Effect on the
Business.
Except as disclosed in Schedule 2.15(a), the Governmental Authorizations
listed in Schedule 2.15(b) collectively constitute all of the
Governmental Authorizations necessary to permit the Companies to lawfully
conduct and operate the Business as of the date hereof and to permit the
Companies to own and use its assets in the manner in which it owns and
uses such assets as of the date hereof, except for such omissions that
would not have, and would not reasonably be expected to have, in the
aggregate, a Material Adverse Effect on the Business.
2.16 Legal Proceedings; Orders.
(a) Except as set forth in Schedule 2.16(a) there is no pending or, to
Seller's Knowledge, threatened Proceeding:
(i) by or against either Company or that otherwise relates to or would
reasonably be expected to affect the Business or any of the Acquired
Assets, except such Proceedings that would not reasonably be expected to
have a Material Adverse Effect on the Business; or
(ii) that challenges, or that will or could reasonably be expected to
prevent, delay, make illegal, or otherwise interfere with, any of the
transactions contemplated hereby.
(b) Except as set forth in Schedule 2.16(b):
(i) there is no Order or group of Orders to which either Company or any
of the Acquired Assets is subject and which is material to either Company
or to the operation of the Business (a "Material Order"); and
(ii) to the Knowledge of Seller, no employee or agent of either Company,
who, in the case of an employee, is a Transferred Employee and, in the
case of an agent, is a party to a contract that is a Company Liability,
is subject to any Order that prohibits such employee or agent from
engaging in or continuing any conduct, activity, or practice relating to
the Business in any material respect.
(c) Except as set forth in Schedule 2.16(c):
(i) Each Company is in compliance with all of the terms and requirements
of each Order, except where such failure would not have, and would not
reasonably be expected to have, in the aggregate a Material Adverse
Effect on the Business;
(ii) To Seller's Knowledge, neither Company has received any notice or
other communication (whether oral or written) from any Governmental
Authority or any other Person regarding any actual, alleged or potential
violation of, or failure to comply with, any term or requirement of any
Material Order.
2.17 Absence of Certain Changes and Events. Except as set forth in
Schedule 2.17, since the date of the Balance Sheet, each Company has
conducted the Business only in the Ordinary Course of Business and with
respect to the Business there has not been any:
(a) change in either Company's authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital stock of
either Company; or issuance of any security convertible into such capital
stock;
(b) amendment to the organizational documents of either Company;
(c) increase by either Company of any bonuses, salaries, or other
compensation (except in the Ordinary Course of Business) to any
Transferred Employee or entry into any employment, severance, or similar
Contract with any Transferred Employee or enter into any agreement with
any of the above for any bonus or other payment contingent on the
consummation of the transactions contemplated in the Transaction
Documents;
(d) adoption of, amendment to, or increase in the payments to or
benefits under, any Employee Plan (except as required by law) applicable
to Transferred Employees;
(e) damage to or destruction or loss of any Acquired Asset material to
the Business, whether or not covered by insurance;
(f) entry into, termination of, or receipt of notice of termination of
(i) any material license, distributorship, dealer, sales representative,
joint venture, credit, or similar agreement to which either Company is a
party and which constitutes an Acquired Asset or relates to the Business,
or (ii) any Contract or transaction involving a total remaining
commitment of at least $150,000.
(g) sale (other than sales of Inventories in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the
Company (except a disposition of such property in the Ordinary Course of
Business) including without limitation the sale, lease, or other
disposition of any of the Intellectual Property Assets or the creation of
any Lien on any Acquired Asset;
(h) cancellation or waiver of any claims or rights with a current value
to the Company in excess of $150,000;
(i) material change in the accounting methods used by the Company; or
(j) agreement, whether oral or written, by the Company to do any of the
foregoing.
2.18 Contracts; No Defaults.
(a) Schedule 2.18(a) contains an accurate and complete list, and Seller
has made available to Purchaser accurate and complete copies, of:
(i) each Contract included in the Acquired Assets that involves
performance of services or delivery of goods or materials by either
Company of a remaining amount or value in excess of $150,000 other than
Contracts for Transferred Projects and Customer Orders;
(ii) each Contract included in the Acquired Assets that involves
performance of services or delivery of goods or materials to either
Company of a remaining amount or value in excess of $150,000, except with
respect to any such Contract that is entered into for the procurement of
services, goods or materials for a Transferred Project disclosure will be
made on schedule 2.18(a) only if the remaining amount or value for such
Contract is in excess of $500,000;
(iii) each Contract of either Company relating to the Business that was
not entered into in the Ordinary Course of Business;
(iv) each Lease;
(v) each Contract with respect to Intellectual Property Assets that is
material to the Business;
(vi) each Contract with any labor union covering the Transferred
Employees or other employee representative of a group of the Transferred
Employees relating to wages, hours, and other conditions of employment;
(vii) each Contract binding on either Company after Closing containing
covenants that restrict either Company's business activity or limit the
freedom of the Company to engage in any line of business or to compete
with any Person;
(viii) a description of the types of powers of attorney of either of the
Companies that are currently effective and outstanding;
(ix) each Contract included in the Acquired Assets for capital
expenditures by either Company having a remaining balance in excess of
$150,000;
(x) with respect to the Business, each written warranty, guaranty, and
or other similar undertaking with respect to contractual performance
extended by the Company other than in the Ordinary Course of Business and
other than Contracts relating to Transferred Projects or Customer Orders
or to completed projects which will be Seller's responsibility after
Closing;
(xi) each Contract included in the Acquired Assets providing for
commissions payable by either of the Companies in respect of sales by
either of the Companies; and
(xii) each amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing.
(b) Except as set forth in Schedule 2.18(b):
(i) as of the Closing, Seller will not have any rights under, and will
not become subject to any obligation or liability under, any Contract
that relates to the business of either Company, or any of the Acquired
Assets except for the Seller Liabilities and the rights, benefits,
liabilities and obligations of any Contract relating thereto and except
for the Excluded Assets; and
(ii) to the Knowledge of Seller, no officer, director, agent, employee,
consultant, or contractor of either Company who is a Transferred
Employee is bound by any Contract that purports to limit the ability of
such officer, director, agent, employee, consultant, or contractor to (A)
engage in or continue any conduct, activity, or practice relating to the
Business, or (B) assign to the Company any rights to any invention,
improvement, or discovery relating to the Business.
(c) Except as set forth in Schedule 2.18(c):
(i) each Contract identified or required to be identified in Schedule
2.18(a) is valid and enforceable against the respective Company that is a
party thereto and to Seller's Knowledge, against the other party or
parties thereto in accordance with its terms; and
(ii) each Contract identified or required to be identified in Schedule
2.18(a) does not require the consent or approval of the other party to
such Contract in connection with consummation of the sale of the Shares
by Seller to Purchaser.
(d) Except as set forth in Schedule 2.18(d), as to the Contracts
identified or required to be identified in Schedule 2.18(a):
(i) to the Knowledge of Seller, each Company is in compliance with all
applicable terms and requirements of each Contract except where such
failure would not have, and would not reasonably be expected to have, in
the aggregate a Material Adverse Effect on the Business;
(ii) to the Knowledge of Seller, each other Person that has or had any
obligation or liability under any Contract is in compliance with all
applicable terms and requirements of such Contract, except where such
failure would not have, and would not reasonably be expected to have, in
the aggregate a Material Adverse Effect on the Business; and
(iii)neither Company has given to or, to Seller's Knowledge, received
from any other Person any notice or other communication (whether oral or
written) regarding any actual, alleged, possible, or potential violation
or breach of, or default under, any Contract that would have, or would
reasonably be expected to have, in the aggregate a Material Adverse
Effect on the Business.
(e) Except as disclosed in Schedule 2.18(e), there are no enegotiations
of, attempts to renegotiate, or outstanding rights to renegotiate any
material amounts paid or payable to the Company under any Contracts
included in the Acquired Assets with any Person having the contractual or
statutory right to demand or require such renegotiation and no such
Person has made written demand for such renegotiation that would have, or
would reasonably be expected to have, in the aggregate a Material Adverse
Effect on the Business.
(f) Each Contract listed in Schedule 2.18(a) relating to the sale,
design, manufacture, or provision of products or services by either
Company has been entered into in the Ordinary Course of Business of the
Company and has been entered into without the commission of any act alone
or in concert with any other Person, or any consideration having been
paid or promised, that is or would be in violation of any Law.
2.19 Environmental Matters. Except as disclosed in Schedule 2.19:
(a) Each Company is, and at all times has been, in compliance with, and
has not been and is not in violation of or liable under, any
Environmental Law, except where such failure, violation or liability
would not have, and would not reasonably be expected to have, a Material
Adverse Effect on the Business. Neither Company nor Seller has received
any actual or threatened order, notice, or other communication which is
currently unresolved from (i) any governmental body or private citizen
acting in the public interest, or (ii) the current or prior owner or
operator of any Facilities, of any actual or potential violation or
failure to comply with any Environmental Law, or of any actual or
threatened obligation to undertake or bear the cost of any Environmental,
Health, and Safety Liabilities with respect to any of the Facilities or
any other properties or assets (whether real, personal, or mixed) in
which either Company has had an interest, or with respect to any property
or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by
either Company or any other Person for whose conduct either Company may
be held responsible.
(b) There are no pending or, to the Knowledge of Seller, threatened
claims, Liens, or other restrictions of any nature, resulting from any
Environmental, Health, and Safety Liabilities or arising under or
pursuant to any Environmental Law, with respect to or affecting any of
the Facilities or any other properties and assets (whether real,
personal, or mixed) in which either Company has or had an interest.
(c) To Seller's Knowledge, there are no Hazardous Materials present on
or in the Facilities or at any geologically or hydrologically adjoining
property, including any Hazardous Materials contained in barrels, above
or underground storage tanks, landfills, land deposits, dumps, equipment
(whether movable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, or sumps, except for
Hazardous Materials used in the Business which use is in accordance with
the Environmental Laws in all material respects. To the Knowledge of
Seller, neither Company nor, any other Person, has permitted or
conducted, any Hazardous Activity conducted with respect to the
Facilities or any other properties or assets (whether real, personal, or
mixed) in which either Company has or had an interest except in
compliance in all material respects with the Environmental Laws.
(d) To Seller's Knowledge, there has been no Release or threat of
Release, of any Hazardous Materials at or from the Facilities, or from or
by any other properties and assets (whether real, personal, or mixed) in
which either Company has or had an interest, or any geologically or
hydrologically adjoining property, whether by the Company or any other
Person.
(e) Seller has delivered to Purchaser true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed
or initiated by Seller or, to Seller's Knowledge, initiated by either of
the Companies, pertaining to Hazardous Materials or Hazardous Activities
in, on, or under the Facilities, or concerning compliance by either
Company or any other Person for whose conduct it is or may be held
responsible, with Environmental Laws.
2.20 Employees. Schedule 2.20 contains a complete and accurate list of:
(a) the following information for each of the Employees who are not
covered by a collective bargaining agreement as of August 29, 1998:
current compensation paid or payable, and date of hire; and (b) all
Employees who are covered by a collective bargaining agreement as of
October 30, 1998.
2.21 Labor Disputes; Compliance. Except as disclosed in Schedule 2.21,
(i) neither Company is a party to any collective bargaining agreement
or other labor contract; (ii) there is not presently pending or
existing, and, to Seller's Knowledge, there is not threatened, any
strike, slowdown, picketing, work stoppage or material employee
grievance process involving either Company; (iii) to Seller's Knowledge,
there is no organizational activity or other labor dispute against or
affecting either Company or the Facilities; (iv) to Seller's Knowledge,
no application for certification of a collective bargaining agent for any
class of employees of either Company is pending; (vii) no grievance or
arbitration proceeding is pending which would have, or would reasonably
be expected to have, a Material Adverse Effect on the Business, and;
(viii) there is no lockout of any employees by either Company, and no
such action is contemplated by Seller.
2.22 Intellectual Property Assets.
(a) The term "Intellectual Property Assets" means all intellectual
property owned, used or licensed (as licensor or licensee) by either
Company in connection with the Business, including:
(i) Each Company's name, all assumed fictional business names, trading
names, registered and unregistered trademarks, service marks, and
applications (collectively, "Marks");
(ii) all patents, patent applications, and inventories and discoveries
that may be patentable (collectively, "Patents");
(iii)all copyrights in both published works and unpublished works
(collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential information, customer
lists, software, technical information, data, process technology, plans,
drawings, and blue prints (collectively, "Trade Secrets").
(b) Schedule 2.22(b) contains a complete and accurate list of all
Contracts relating to the Intellectual Property Assets to which either
Company is a party or by which the Company is bound, except for any
license implied by the sale of a product and perpetual, paid-up licenses
for commonly available software programs with a value of less than
$150,000 under which the Company is the licensee. There are no
outstanding and, to Seller's Knowledge, no threatened disputes or
disagreements with respect to any Contract disclosed on Schedule 2.22(b).
(c) Schedule 2.22(c) contains a complete and accurate list of all
Patents in connection with the Business owned or, as of the Closing Date,
to be owned by the Companies. All of the issued Patents are currently in
compliance in all material respects with formal Laws in the United
States. No Patent is now involved in any interference, reissue,
reexamination, or opposition proceeding. To Seller's Knowledge, no
Patent is infringed or has been challenged or threatened in any material
way, except as disclosed on Schedule 2.22(c). To Seller's Knowledge,
none of the products manufactured or sold, nor any process or know-how
used, by either Company infringes or is alleged to infringe any patent or
other proprietary right of any other Person.
(d) Schedule 2.22(d) contains a complete and accurate list of all Marks
in connection with the Business owned or, as of the Closing Date, to be
owned, by the Companies. All such Marks that have been registered with
the United States Patent and Trademark Office are currently in compliance
in all material respects with all formal Laws in the United States. To
Seller's Knowledge, no such Mark is now involved in any opposition,
invalidation, or cancellation and no such action is threatened with
respect to any of such Marks. To Seller's Knowledge, there is no
interfering trademark or trademark application of any third party. To
Seller's Knowledge, no such Mark is infringed or has been challenged or
threatened in any way, except as set forth in Schedule 2.22(d). To
Seller's Knowledge, none of such Marks used by the Company infringes or
is alleged to infringe any trade name, trademark, or service mark of any
third party.
(e) To Seller's Knowledge, no Copyright is infringed or has been
challenged or threatened in any way. To Seller's Knowledge, none of the
subject matter or any of the Copyrights infringes or is alleged to
infringe any copyright of any third party or is a derivative work based
on the work of a third party.
(f) To Seller's Knowledge, no Trade Secret is subject to any material
adverse claim or has been challenged or threatened in any way.
2.23 Compliance with the Foreign Corrupt Practices Act and Export
Control Laws
(a) To the Seller's Knowledge, the Companies and their officers,
managers, employees or agents have not, to obtain or retain business,
directly or indirectly offered, paid, or promised to pay, or authorized
the payment of, any money or other thing of value (including any fee,
gift, sample, travel expense, or entertainment with a value in excess of
$10,000 in the aggregate to any one individual in any year) or any
commission payment payable to:
(i) any person who is an official, officer, agent, employee or
representative of any Governmental Authority, or of any existing or
prospective customer (whether government-owned or non-government-owned);
(ii) any political party or official thereof;
(iii)any candidate for political or political party office; or
(iv) any other individual or entity while knowing or having reason to
believe that all or any portion of such money or thing of value would be
offered, given, or promised, directly or indirectly, to any such
official, officer, agent, employee, representative, political party,
political party official, candidate, individual or any entity affiliated
with such customer, political party or official, or political office.
(b) The Companies have at all times been in material compliance with the
export control laws of the United States. No product sold or service
provided by either Company during the last five-years has been, directly
or indirectly, sold to or performed on behalf of Cuba, Iraq, Iran, Libya,
or North Korea.
2.24 Disclosure; Disclaimer; Disclosure Schedules
(a) No representation or warranty or other statement made by the Company
or Seller in this Article II omits to state a material fact necessary to
make any of them, in light of the circumstances in which it was made, not
misleading.
(b) Except as expressly set forth in this Article II, Seller makes no
representation or warranty, express or implied, at law or in equity, with
respect to Seller, the Companies or the Business or any of the Acquired
Assets, Liabilities (including Company Liabilities) or operations of the
Companies or the Business, including without limitation, with respect to
merchantability or fitness for any particular purpose, and any such
representations and warranties are hereby expressly disclaimed.
Purchaser hereby acknowledges and agrees that, except to the extent
specifically set forth in this Article II, Purchaser is purchasing the
Acquired Assets on an AS IS and WHERE IS basis. Without limiting the
generality of the foregoing, Purchaser acknowledges that it has not
relied upon any representation, estimate, projection or statement made by
or on behalf of Seller as to the future profitability of the Business,
the Transferred Projects or the Acquired Assets, and Purchaser shall make
no claim (whether for indemnification or otherwise) against Seller as to
any projection, representation, estimate or statement made by or on
behalf of Seller as to the future profitability of the Business, the
Transferred Projects or the Acquired Assets and Seller specifically
disclaims any representations or warranties as to any such
representation, estimate, projection or statement.
(c) Wherever a matter is disclosed by Seller on any Schedule delivered
by Seller to Purchaser under this Article II, such disclosure shall
modify any other representations or warranties contained in this Article
II to which such disclosure also applies even if it is not specifically
referenced on another relevant Schedule.
2.25 Relationships with Affiliates. Neither Seller nor any Affiliate
of Seller (except the Companies) has any interest in any property
(whether real, personal, or mixed and whether tangible or intangible),
primarily used in or pertaining to the Business, except as disclosed on
Schedule 2.25. Neither Seller nor any Affiliate of Seller (except the
Companies) owns of record or as a beneficial owner, an equity interest
or any other financial or profit interest in any Person that (a)
currently has a material financial interest in any transaction with
either Company other than business dealings or transactions disclosed in
Schedule 2.25, each of which has been conducted in the Ordinary Course
of Business with the Company at substantially prevailing market prices
and on substantially prevailing market terms, or is currently engaged
in competition with the Company with respect to any line of the
products or services of the Company (a "Competing Business") in any
market presently served by the Company, except for ownership of less than
one percent of the outstanding capital stock of any Competing Business
that is publicly traded on any recognized exchange or in the
over-the-counter market.
2.26 Brokers or Finders. Neither of the Companies nor Seller has
incurred any obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar
payment in connection with the sale of the Shares pursuant to this
Agreement or the transactions contemplated hereby.
2.27 Year 2000 Disclosure. To Seller's Knowledge, the failure of the
computer systems of the Companies which are not expected to be replaced
by the Enterprise Resource Planning system referred to in Section 4.02
to be year 2000 compliant will not have a Material Adverse Effect on the
Business.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows as of
the date hereof:
3.01 Corporate Existence. Purchaser is a corporation validly existing
and in good standing under the Laws of the State of Nevada. Purchaser has
full corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby.
3.02 Authority. The execution and delivery by Purchaser of this
Agreement, and the performance by Purchaser of its obligations
hereunder, have been duly and validly authorized by the board of
directors of Purchaser, no other corporate action on the part of
Purchaser or its stockholders being necessary. This Agreement has been
duly and validly executed and delivered by Purchaser and constitutes
a legal, valid and binding obligation of Purchaser enforceable against
Purchaser in accordance with its terms.
3.03 No Conflicts. The execution and delivery by Purchaser of this
Agreement do not, and the performance by Purchaser of its obligations
under this Agreement and the consummation of the transactions
contemplated hereby will not:
(a) conflict with or result in a violation or breach of any of the
articles of incorporation or by-laws of Purchaser;
(b) subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in Schedule 3.03(b) hereto,
conflict with or result in a violation or breach of any Law or Order
applicable to Purchaser or any of its assets and properties other than
such conflicts, violations or breaches which would not in the aggregate
reasonably be expected to materially and adversely affect the validity or
enforceability of this Agreement; or
(c) (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default
under, (iii) require Purchaser to obtain any consent, approval or action
of, make any filing with or give any notice to any Person as a result or
under the terms of, or (iv) result in the creation or imposition of any
Lien upon Purchaser or any of its assets or properties under, any
Contract or License to which Purchaser is a party or by which any of its
assets and properties is bound and which, individually or in the
aggregate with other such Contracts and Licenses, is material to the
validity or enforceability of this Agreement or the performance by
Purchaser of its obligations under this Agreement.
3.04 Governmental Approvals and Filings. Except as disclosed in Schedule
3.04 hereto, no consent, approval or action of, filing with or notice
to any Governmental or Regulatory Authority on the part of Purchaser is
required in connection with the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated
hereby except where the failure to obtain any such consent, approval or
action, to make any such filing or to give any such notice could not
reasonably be expected to materially and adversely affect the validity or
enforceability of this Agreement or the performance by Purchaser of its
obligations under this Agreement.
3.05 Legal Proceedings. There are no Actions or Proceedings pending
or, to the knowledge of Purchaser, threatened against, relating to or
affecting Purchaser or any of its assets and properties which could
reasonably be expected to result in the issuance of an Order
restraining, enjoining or otherwise prohibiting or making illegal
the consummation of any of the transactions contemplated by this
Agreement or the performance by Purchaser of its obligations under this
Agreement.
3.06 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Purchaser
directly with Seller without the intervention of any Person on behalf of
Purchaser in such manner as to give rise to any valid claim by any Person
against Purchaser or Seller for a finder's fee, brokerage commission or
similar payment.
3.07 Financing and Bond Commitments. Purchaser has delivered to Seller
(a) a written commitment or commitments from reputable financing sources
(the "Financing Commitment") sufficient to provide all of the financing
required by Purchaser to consummate the transaction contemplated by this
Agreement, and (b) a written commitment or commitments from a reputable
bonding company or companies (the "Bonding Commitment") to satisfy the
Bonding Condition at Closing. Seller has accepted the Financing
Commitment and the Bonding Commitment and reasonably expects such
commitments to be completed in connection with the Closing. The
Financing Commitment and Bonding Commitment are attached hereto as
Schedule 3.07.
3.08 Financial Statements. Prior to the execution of this Agreement,
Purchaser has delivered to Seller true and complete copies of the
following financial statements:
(a) the audited consolidated balance sheet of Purchaser as of December
31, 1997 and the consolidated statements of operations, cash flows and
changes in stockholders' equity for the year ended December 31, 1997; and
(b) the unaudited consolidated balance sheet of Purchaser as of June 30,
1998 and the consolidated statements of operations and cash flows for the
six months ended June 30, 1998.
All such financial statements were prepared in accordance with GAAP
applied on a consistent basis throughout the periods and present fairly
the financial condition and results of operations of Purchaser for the
respective periods covered thereby except, in the case of the unaudited
financial statements, for the absence of footnotes and normal year-end
adjustments which an audit would reveal and which will not have a
materially adverse effect.
3.09 Security Clearances. Purchaser has all necessary security
clearances to purchase and own the Shares of the Companies and to enable
the Companies to operate the Business which clearances are described on
Schedule 3.09.
ARTICLE IV
COVENANTS OF SELLER
Seller covenants and agrees with Purchaser that, at all times from and
after the date hereof until or at the Closing with respect to Sections
4.01 through 4.10 and 4.12 hereof, and thereafter with respect to
Sections 4.11 and 4.13 hereof, Seller will comply with all covenants and
provisions of this Article IV, except to the extent Purchaser may
otherwise consent or waive in writing.
4.01 Due Diligence. Seller will (a) provide Purchaser and its officers,
employees, counsel, accountants, financial advisors, consultants,
lenders, and other representatives (together,"Representatives") with
reasonable access, upon reasonable prior notice and during normal
business hours, to all officers, employees, agents, attorneys and
accountants of the Business and to the Acquired Assets and the Books and
Records related thereto, but only to the extent that such access does not
unreasonably interfere with the business and operations of the Companies
or the Business, and (b) furnish Purchaser with all such information and
data (including without limitation copies of Contracts, Benefit Plans and
other Books and Records) concerning the business and operations of the
Business and the Companies as Purchaser reasonably may request in
connection with the transactions contemplated by this Agreement, except
to the extent that furnishing any such information or data would violate
any Law, Order, Contract or License applicable to either of the Companies
or the Business or by which any of their respective assets and properties
are bound in which case Seller shall describe the information or data to
the extent permitted and the specific reasons for Seller's in ability to
furnish the information or data to Purchaser.
4.02 Conduct of Business. Seller will cause the Companies to conduct the
Business only in the Ordinary Course of Business. Without limiting the
generality of the foregoing, Seller will cause the Companies to make all
usual or planned capital expenditures, including without limitation,
expenditures with respect to implementation of the Enterprise Resource
Planning system (also known as ERP or the Penta System), to pay all trade
and account payables of the Companies in accordance with their customary
practices, to collect accounts receivable in accordance with their
customary practices, and to use commercially reasonable efforts, to (a)
preserve intact the present business organization and reputation of the
Business, (b) keep available (subject to dismissals and retirements in
the Ordinary Course of Business) the services of the key officers and
employees of the Business, (c) maintain the Acquired Assets in good
working order and condition, ordinary wear and tear excepted, and (d)
maintain the good will of key customers and suppliers of the Business.
4.03 Fulfillment of Conditions; Other Actions. Seller will proceed
diligently and in good faith to satisfy each condition to the obligations
of Seller contained in this Agreement and will not take or fail to take
any action that is reasonably expected to (or the omission of which would
reasonably be expected to) result in the nonfulfillment of any such
condition. Promptly after the date hereof, Seller shall cause to be
delivered to Purchaser a title insurance commitment covering the Real
Property. From the date hereof until the Closing, Seller will cause the
Companies to reasonably cooperate with Purchaser in taking such actions
as Purchaser reasonably deems necessary to effect a transition of the
Business upon closing, provided that such requests shall not unreasonably
interfere with the conduct of the Business nor require the Companies to
effect any filings, incur any liabilities or enter into any Contracts
without Seller's prior written consent which may be withheld by Seller in
its reasonable discretion.
4.04 Hart-Scott-Rodino Act. As soon as practicable after the date
of this Agreement, Seller agrees to make any filings required under the
Hart-Scott-Rodino Act. Seller will furnish to Purchaser such necessary
information and reasonable assistance as the Purchaser may reasonably
request in connection with its preparation of any additional necessary
filings or submissions to any governmental agency, including, without
limitation, any additional filings necessary under the Hart-Scott-Rodino
Act.
4.05 Notice of Developments. Seller will give prompt written notice
to Purchaser of any material adverse development affecting the Business
and any breach of its representations and warranties contained in Article
II hereof.
4.06 Exclusivity. Seller will not solicit, initiate, encourage or accept
any proposal or offer from any Person relating to the acquisition of the
Shares or any of the Acquired Assets (including any acquisition
structured as a merger, consolidation, or share exchange) other than in
the Ordinary Course of Business and neither Seller, its officers or any
other representatives of Seller shall participate in any discussions or
negotiations regarding, furnish any information with respect to, assist
or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing.
4.07 New Transferred Projects and Bids. After the date hereof until
the Closing Date, Seller will promptly notify Purchaser of (a) any bid
made by Seller that would be a Transferred Project if such bid was
accepted and (b) the acceptance or award of any bid made by Seller which
shall become a Transferred Project. To the extent that Purchaser is not
also making a bid on any project, Seller will cause the Companies to
consult with Purchaser on any such bid in advance of submitting such bid
if the respective bid represents work or services to be provided by the
Companies (excluding subcontracted work or services provided by a third
party) of more than One Million Dollars ($1,000,000).
4.08 Establishment of Relationships. Upon the request of Purchaser,
Seller will cause the Companies, at Purchaser's expense, to use their
reasonable efforts to assist the Purchaser in establishing relationships
with representatives and agents in foreign countries comparable to those
to which the Companies are currently parties and which relate to the
Business.
4.09 Updating Representations and Warranties. From time to time prior to
the Closing, Seller shall promptly supplement or amend any of its
representations and warranties under Article II which apply to the period
after the date hereof by delivering an updated Schedule to Purchaser with
respect to any change in fact occurring hereafter or event arising
hereafter which would render any such representation or warranty, if made
after the date of this Agreement, inaccurate or incomplete. Such
supplement or amendment to Seller's representations and warranties
contained in an updated schedule shall be deemed to modify the
representations and warranties of Seller, and no such supplement or
amendment, or the information contained in an updated Schedule, shall
constitute a breach of a representation or warranty of Seller. If the
information in such supplement or amendment, together with the
information in any or all of the supplements or amendments previously
provided by Seller or otherwise in the possession of Purchaser indicates
to Purchaser that the Business has suffered or is reasonably likely to
suffer a Material Adverse Effect, Purchaser may terminate this Agreement
within fifteen (15) days after the receipt of such supplement or
amendment, provided that if it appears to Purchaser that the Material
Adverse Effect may be cured within thirty (30) days from the date the
Purchaser received such supplement or amendment (the "Cure Period") and
the cure is promptly commenced by the Seller, Purchaser may not terminate
this Agreement under this Section until the day after the Cure Period
expires.
4.10 Hedge Contract. Seller has a hedge contract with Harris Bank &
Trust Company (the "Bank") with respect to the South African currency.
The Bank has advised Seller that it will not permit the assignment of
these contracts to Norment or Purchaser. Within ten (10) Business Days
after the Closing, Seller and Purchaser shall reasonably cooperate with
each other to effect a close out all of its hedge contracts with respect
to the South African currency in the most efficient manner reasonably
possible, and either (i) Seller will pay Purchaser the net profit (after
taking into account the costs and expenses incurred by Seller in
connection with such hedge contracts), or (ii) Purchaser will pay Seller
the net loss (after taking into account the costs and expenses incurred
by Seller in connection with such hedge contracts).
4.11 Covenant Not to Compete; Non-Solicitation of Transferred
Employees.
(a) For a period of five (5) years after the Closing Date, neither
Seller nor any Affiliate of Seller shall directly or indirectly, own,
manage, operate, control, act as consultant or advisor to, render any
services for, have any financial interest (other than as a creditor) in,
or otherwise be connected in any manner with the ownership, management,
operation, or control of any Person, firm, partnership, corporation, or
other entity (a "Competitor") that is engaged in any business that
directly competes with the Business; provided that, notwithstanding any
of the foregoing, nothing contained in this Section 4.11 shall (i)
restrict the ability of Seller and its Affiliates to manufacture,
fabricate, install or service glass products, including the sale of
bullet resistant glass for or to a Competitor or any customer of the
Business, (ii) impose any restriction on any party that may acquire
assets, properties or a business from Seller or its Affiliates, or (iii)
prevent Seller or any Affiliate from acquiring or holding equity
securities of any publicly traded company if the amount of such
securities represents less than 1% of the outstanding capital stock of
such company. All of the foregoing provisions are reasonable and are
necessary to protect and preserve the value of the Shares to be acquired
by Purchaser under this Agreement and to prevent any unfair advantage
being conferred on Seller or its Affiliates. For a period of two (2)
years after the Closing Date, neither Seller nor any Affiliate of Seller
shall make any direct sales to the U. S. Department of State for use and
installation in embassies of fabricated and finished window or door
systems using bullet resistant glass, excluding field constructed
curtainwall.
(b) Prior to Closing, Seller shall not, and shall cause its Affiliates
other than the Companies not to directly or indirectly solicit any of the
Transferred Employees to be hired or employed by Seller or such
Affiliates other than in the Business prior to the Closing. For the two
(2) years after the Closing Date, Seller shall not, and Seller shall
cause its Affiliates not to, directly or indirectly solicit or hire any
of the Transferred Employees so long as they are employed by the
Companies or Purchaser. Upon Closing, the Transferred Employees shall be
deemed employees of the Companies.
4.12 Administrative Services. At the Closing, Seller will cause its
Affiliate, Harmon Ltd., to enter into the administrative services
agreement in form and substance substantially identical to Exhibit B
attached hereto (the "Administrative Services Agreement") with the
Companies, and the Purchaser shall cause the Companies to enter into the
Administrative Services Agreement at Closing.
4.13 Vesting of Benefits under Certain Employee Plans. Seller will
cause to vest on the Closing Date all contributions to the Apogee
Enterprises, Inc. Retirement Plan (Plan No. 001) and Apogee Enterprises,
Inc. Tax Relief Investment Plan (Plan No. 005) with respect to each
Transferred Employee, which contributions have been accrued as of the
Closing Date and will make payment of all such contributions to such
Employee Plans on or promptly after the Closing Date.
ARTICLE V
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Seller that, at all times from
and after the date hereof until the Closing with respect to Sections 5.01
through 5.04 hereof, and as of the Closing and thereafter with respect to
Sections 5.05 through 5.10 hereof, Purchaser will comply with all
covenants and provisions of this Article V, except to the extent Seller
may otherwise consent or waive in writing.
5.01 Hart-Scott-Rodino Act. As soon as practicable after the date
of this Agreement, Purchaser agrees to make any filings required under
the Hart-Scott-Rodino Act. Purchaser will furnish to Seller such
necessary information and reasonable assistance as Seller may reasonably
request in connection with its preparation of any additional necessary
filings or submissions to any governmental agency, including, without
limitation, any additional filings necessary under the Hart-Scott-Rodino
Act.
5.02 Notice of Developments. Purchaser will give prompt written notice
to Seller of any material adverse development affecting Purchaser or any
breach of any of its representations and warranties in Article III
hereof.
5.03 Fulfillment of Conditions. Purchaser covenants and agrees with
Seller that, at all times from and after the date hereof until the
Closing, Purchaser will proceed diligently and in good faith to (a)
satisfy each condition to the obligations of Purchaser contained in this
Agreement, (b) obtain the financing contemplated by the Financing
Commitment and the bonding contemplated by the Bonding Commitment, and
(c) obtain all security clearances and other licenses (including
construction licenses) necessary for performance of the Contracts for the
Transferred Projects (or the subcontract thereof) to Purchaser as
contemplated by this Agreement, and will not take or fail to take any
action that is reasonably be expected to (or the omission of which would
be reasonably expected to) result in the nonfulfillment of any such
condition.
5.04 Payment and Performance Bonds. Purchaser shall use reasonable
commercial efforts to provide the individual standard subcontract payment
and performance bonds as provided in Schedule 5.04 hereto (the "Bonding
Condition").
5.05 Offer of Employment to Employees. Purchaser shall, as of the
Closing Date, offer to employ (on substantially similar terms as such
Employees are currently employed in the Business) all of the Employees
listed on Schedule 2.20 who are employed in the Business as of the
Closing and such other persons who are hired in the ordinary course of
business after August 29, 1998 and are employed in the Business as of the
Closing Date, including Employees who are on sick leave, military leave
or other duly authorized leave of absence. Each Employee who accepts
Purchaser's offer of employment is herein referred to as a "Transferred
Employee" and all such employees are herein referred to as "Transferred
Employees;" provided, however, the persons listed on Schedule 2.20 as
remaining with Seller or its Affiliates shall not be Transferred
Employees. Purchaser shall not terminate a Transferred Employee (except
for cause) for a period of sixty (60) days after employment of such
Transferred Employee. To effect the foregoing transition, upon Closing
the Transferred Employees shall be deemed employees of the Companies.
5.06 Employee Benefits. Purchaser will provide the Transferred
Employees hired by Purchaser under Section 5.05 with substantially the
same employee benefits as provided to its other employees which shall be
reasonably comparable to the Employee Plans. Purchaser will insure that,
to the extent permitted by law, such benefits provided to the Transferred
Employees treat employment with the Companies or Seller's Affiliates
prior to the Closing Date the same as employment with Purchaser from and
after the Closing Date for purposes of eligibility, vesting and benefit
accrual under such benefit plans.
5.07 Warranty and Other Work. For a period of five (5) years after
Closing and upon the request of Seller, Purchaser agrees to perform
warranty work or repairs on any project of the Business that is not a
Transferred Project. Purchaser will promptly and diligently perform any
such warranty work or repairs requested by Seller. Purchaser will charge
Seller and Seller will pay Purchaser for any such warranty work or
repairs performed by Purchaser the actual cost (under Purchaser's
customary costing formula) incurred by Purchaser to perform such work or
repairs plus 5% thereof. In the event that Purchaser receives a claim
from any customer of a breach of contractual warranty with respect to
work performed prior to Closing other than with respect to any
Transferred Project, Purchaser shall promptly notify Seller. In the
event Seller and such customer do not resolve such claim within a
reasonable period after its submission, a responsible officer of Seller
and Purchaser will confer in good faith to reach a mutually acceptable
resolution of the claim. In the event Seller and Purchaser fail to reach
a mutually acceptable resolution within thirty (30) days after such
representatives first meet, then either party may request that the extent
of Seller's responsibility be determined by binding arbitration in the
manner contemplated by Section 8.04(b).
5.08 Access to Books and Records; Personnel. For a period of seven
(7) years after the Closing Date, Purchaser shall, upon the request of
Seller, provide Seller or its Representatives reasonable access to the
Books and Records of the Companies for any period prior to the Closing
Date and permit the taking of copies therefrom. So long as Seller has a
right of access under this Section 5.08, Purchaser will provide Seller at
least thirty (30) days prior written notice before destroying such Books
and Records or otherwise make such Books and Records not readily
accessible by Seller so that Seller may elect to receive such Books and
Records. For a period of seven (7) years after the Closing, Purchaser
shall make personnel of the Companies reasonably available to Seller to
provide information relating to any of the Seller Liabilities. Seller
shall reimburse Purchaser its reasonable out of pocket costs to provide
such assistance.
5.09 Multi-Employer Plan. At Closing and after Closing, Purchaser shall,
and Purchaser shall cause the Companies to, execute and deliver such
agreement or agreements consistent with ERISA Section4204 and take all
actions as may be required by such agreements and by ERISA Section 4204
to the extent that executing such agreements and taking such reasonable
actions would prevent the Seller (or any Affiliate of the Seller) from
incurring any partial or complete withdrawal liability to any
Multiemployer Plan as a result of the transactions contemplated by
this Agreement if such transactions were to be deemed to constitute
an asset sale rather than a stock purchase. Purchaser and Companies
shall indemnify Seller (and Affiliates of the Seller) from any
withdrawal liability that may arise to the extent that such withdrawal
liability is the result of Purchaser's and/or Companies' failure to
execute and deliver such agreement or agreements consistent with
ERISA Section4204 and take such reasonable actions
as may be required by such agreements and by ERISA Section4204.
5.10 Voice Track. After Closing, Purchaser shall, and shall cause
the Companies to, (a) promptly transfer to Seller all amounts received by
Purchaser or either of the Companies in respect to accounts receivable
for the Voice Track business of Norment which are Excluded Assets, and
(b) provide Seller reasonable assistance in billing and collecting the
accounts receivable for the Voice Track business of Norment, provided
that neither Purchaser nor either of the Companies shall be required to
commence any Proceeding to effect such collections.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder are subject to the
fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by
Purchaser in its sole discretion):
6.01 Representations and Warranties. The representations and warranties
made by Seller in this Agreement shall be true and correct in all
material respects on and as of the Closing Date as though made on and
as of the Closing Date or, in the case of representations and warranties
made as of a specified date earlier than the Closing Date, on and as of
such earlier date, and Seller shall have delivered to Purchaser a
certificate to that effect at Closing, signed by an officer of Seller.
6.02 Performance. Seller shall have performed and complied with, in all
material respects, the agreements, covenants and obligations required by
this Agreement to be so performed or complied with by Seller at or before
the Closing.
6.03 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated
by this Agreement.
6.04 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory
Authority necessary to permit Purchaser and Seller to consummate the
transactions contemplated hereby shall have been duly obtained, made or
given and shall be in full force and effect, and all terminations or
expirations of waiting periods (including the waiting period under the
Hart-Scott-Rodino Act) imposed by any Governmental or Regulatory
Authority necessary for the consummation of the transactions contemplated
by this Agreement shall have occurred.
6.05 Third Party Consents. The consents, approvals and actions listed in
Schedules 2.02(b), 2.02(c), 3.03(b) and 3.04 hereto shall have been
obtained or taken and shall be in full force and effect.
6.06 Officer's Certificate. Seller shall have delivered to Purchaser an
officer's certificate dated as of the Closing Date certifying that (i)
attached thereto is a true and complete copy of Seller's Articles of
Incorporation and all amendments thereto; (ii) attached thereto is a true
and complete copy of Seller's Bylaws as in effect on the date of such
certification; (iii) attached thereto is a true and complete copy of
resolutions of Seller's board of directors approving this Agreement, all
other agreements and documents contemplated hereby and the consummation
of the transactions contemplated hereby and thereby; and (iv) as to the
incumbency and genuineness of the signature of each officer of Seller
executing this Agreement or any of the other documents contemplated
hereby.
6.07 Financing and Bonding. Purchaser shall have obtained the financing
contemplated by the Financing Commitment or such other financing as is
acceptable to Purchaser to consummate the transactions contemplated by
this Agreement. Purchaser shall have obtained the bonding contemplated
by the Bonding Commitment to satisfy the Bonding Condition.
6.08 Closing Documents. At Closing, Seller shall execute and deliver (or
cause to be executed and delivered) to Purchaser the stock certificates
for the Shares accompanied by duly executed stock powers to effect the
transfer of the Shares to Purchaser and other agreements or instruments
of conveyance as may be reasonably necessary to consummate the
transactions contemplated herein. All actions to be taken by Seller in
connection with consummation of the transactions contemplated hereby and
all certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to Purchaser and its counsel.
6.09 No Material Adverse Change. Since the date hereof to the Closing
Date, there shall not have been any material adverse change in the
business, operations, results of operations or financial condition of the
Business or the Companies.
6.10 Director Resignations. At Closing, Seller will cause to be executed
and delivered to Purchaser resignations as of the Closing Date.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller hereunder are subject to the fulfillment,
at or before the Closing, of each of the following conditions (all or any
of which may be waived in whole or in part by Seller in its sole
discretion):
7.01 Representations and Warranties. The representations and warranties
made by Purchaser in this Agreement, shall be true and correct in all
material respects on and as of the Closing Date as though made on and as
of the Closing Date or, in a case of representations and warranties made
as of a specified date earlier than the Closing Date, on and as of such
earlier date, and Purchaser shall deliver to Seller a certificate to that
effect at Closing, signed by an officer of Purchaser.
7.02 Performance. Purchaser shall have performed and complied with, in
all material respects, the agreements, covenants and obligations required
by this Agreement to be so performed or complied with by Purchaser at or
before the Closing.
7.03 Officer's Certificates. Purchaser shall have delivered to Seller an
officer's certificate dated as of the Closing Date certifying that (i)
attached thereto is a true and complete copy of Purchaser's Articles of
Incorporation and all amendments thereto; (ii) attached thereto is a true
and complete copy of Purchaser's Bylaws as in effect on the date of such
certification; (iii) attached thereto is a true and complete copy of
resolutions of Purchaser's board of directors approving this Agreement,
all other agreements and documents contemplated hereby and the
consummation of the transactions contemplated hereby and thereby; and
(iv) as to the incumbency and genuineness of the signature of each
officer of Purchaser executing this Agreement or any of the other
documents contemplated hereby.
7.04 Orders and Laws. There shall not be in effect on the Closing Date
any Order or Law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated
by this Agreement.
7.05 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory
Authority necessary to permit Seller and Purchaser to consummate the
transactions contemplated hereby shall have been duly obtained, made or
given and shall be in full force and effect, and all terminations or
expirations of waiting periods (including the waiting period under the
Hart-Scott-Rodino Act) imposed by any Governmental or Regulatory
Authority necessary for the consummation of the transactions contemplated
by this Agreement shall have occurred.
7.06 Third Party Consents. The consents (or in lieu thereof, waivers)
listed in Schedules 2.02(b), 2.02(c), 3.03(b) and 3.04 shall have been
obtained and shall be in full force and effect.
7.07 Bonding Condition. Purchaser shall have provided to Seller and its
Affiliates the bonding and other documents required to satisfy the
Bonding Condition.
7.08 Closing Documents. At Closing, Purchaser shall deliver to Seller
the balance of the Purchase Price, and shall execute and deliver, or
cause to be delivered, such agreements or instruments as may be
reasonably necessary to consummate the transactions contemplated herein.
All actions to be taken by Purchaser in connection with consummation of
the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and
substance to Seller and its counsel.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS, INDEMNIFICATION
8.01 Survival of Representations, Warranties, Covenants and
Agreements. The representations and warranties of Seller and Purchaser
contained in Articles II and III of this Agreement will survive the
Closing (unless the party asserting a breach thereof or misrepresentation
thereunder knew of the misrepresentation or breach at the time of
Closing) and remain in full force and effect for a period of one year
from the date of the Closing, provided, however, that the representations
and warranties of the Seller contained in Sections, 2.01, 2.02, 2.03 and
2.26 and the representations and warranties of Purchaser in Sections
3.01, 3.02, 3.03 and 3.06 shall survive the Closing and remain in full
force and effect without time limit; and provided further, however, the
representations and warranties of the Seller contained in Sections 2.13
and 2.14 will survive the Closing until the expiration of any applicable
statutes of limitations (as the same may be extended from time to time).
The covenants and agreements of the parties contained in this Agreement
shall survive the Closing unless and until they are otherwise terminated
pursuant to their terms or as a matter of applicable laws.
8.02 Indemnification by Seller.
(a) Subject to Closing and the limitations of Section 8.02(b) and the
adjustments provided for in Section 8.02(c), Seller will indemnify and
hold harmless the Purchaser and its representatives, shareholders,
subsidiaries and Affiliates (collectively, the "Purchaser Indemnified
Parties") and will reimburse the Purchaser Indemnified Parties for any
loss, liability, claim, damage, expense (including reasonable costs of
investigation and defense and reasonable attorneys fees and expenses to
the extent defense is not provided by Seller and, with respect to matters
arising out of Contracts that neither constitute Company Liabilities nor
relate to Transferred Projects, the reasonable time charges for
participation in the defense of such matters by Purchaser's personnel) or
diminution of value, whether or not involving a third party claim
(collectively, "Losses"), arising from or in connection with:
(i) any breach of any representation or warranty made by Seller in
Article II of this Agreement;
(ii)any breach of any covenant or obligation of Seller in(A) Sections
4.01 through 4.10 of this Agreement and (B) Sections 4.11 through 4.13,
Section 11.06 and Article VIII of this Agreement;
(iii) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Seller or either of the
Companies (or any Person acting on their behalf) in connection with any
of the transactions contemplated by this Agreement;
(iv) any product or component thereof sold and delivered by or any
services provided by, the Companies, prior to the Closing Date other than
in connection with the Transferred Projects and subject to the provisions
of Section 5.07 hereof;
(v) all Seller Liabilities; and
(vi) any claims or threatened claims arising out of the actions or
inactions of either of the Companies, Seller or its other Affiliates with
respect to the Business prior to the Closing Date, excluding however, any
claims arising or resulting from or related to the Transferred Projects
regardless of whether such claims result from actions or inactions of
either of the Companies, Seller or its other Affiliates taken or failed
to be taken prior to the Closing Date or from actions or inactions of
the Companies, Purchaser or its Affiliates taken or failed to be taken on
or after the Closing Date.
The Losses described in clauses (i) and (ii)(A) above are collectively
referred to herein as "Purchaser Losses".
(b) Seller shall be liable to the Purchaser Indemnified Parties for any
Purchaser Losses only if the aggregate amount of all Purchaser Losses
exceeds $500,000 (the "Deductible"), in which case Seller shall only be
obligated to indemnify Purchaser for Purchaser Losses in excess of the
Deductible and, then, only to the extent indemnification payable by
Seller with respect to Purchaser Losses under this Section 8.02 does not
in the aggregate exceed $5,000,000.
(c) Notwithstanding anything contained herein to the contrary, the
amount for which a Purchaser Indemnified Party is entitled to
indemnification hereunder for Purchaser's Losses shall be reduced by
the amount of any and all tax benefits, amounts recovered under
insurance policies, insurance loss funds or insurance deposits (net
of deductibles and incidental expenses) and further reduced by
recovery of any setoffs or counterclaims realized by the Purchaser
Indemnified Party that are measurable in dollars with reasonable
certainty (net of cost and expenses of recovering such amounts).
(d) For the purposes of determining Purchaser Losses, the Seller's
representations and warranties in Article II hereof, shall be deemed to
be made without reference to any materiality qualifications, including,
without limitation Material Adverse Effect qualifications.
(e) Any indemnification payable by Seller under this Section 8.02 shall
be, to the extent permitted by law, an adjustment to Purchase Price.
8.03 Indemnification by Purchaser. Purchaser will indemnify and hold
harmless Seller and its officers, directors, employees, agents,
shareholders and Affiliates (collectively the "Seller Indemnified
Parties") and will reimburse the Seller Indemnified Parties for any loss,
liability, claim, damage, expense (including reasonable costs of
investigation and defense and reasonable attorneys fees and expenses to
the extent defense is not provided by Purchaser and, with respect to
matters arising out of Contracts that either constitute Company
Liabilities or relate to Transferred Projects, the reasonable time
charges for participation in the defense of such matters by Seller's
personnel) or diminution of value, whether or not involving a third party
claim, arising from or in connection with:
(a) any breach of any representation or warranty made by Purchaser in
Article III of this Agreement;
(b) any breach of any covenant or obligation of Purchaser in this
Agreement;
(c) any claim by any Person for brokerage or finder's fees or commissions
or similar payments based upon any agreement or understanding alleged to
have been made by any such Person with Purchaser (or any Person acting on
its behalf) in connection with any of the transactions contemplated by
this Agreement;
(d) any product or component thereof sold and delivered, or any services
provided by, the Companies, on or after the Closing Date;
(e) all Company Liabilities;
(f) any claims or threatened claims arising out of the actions or
inactions of either of the Companies, Purchaser or its other Affiliates
with respect to the Business on or after the Closing Date, and
(g) any claims arising or resulting from or related to the Transferred
Projects regardless of whether such claims result from actions or
inactions of either of the Companies, Seller or its other Affiliates
taken or failed to be taken prior to the Closing Date, from consummation
of the transactions contemplated by this Agreement, from actions taken by
Seller or any of its Affiliates after Closing pursuant to Purchaser's
request under Section 1.01(a), or from actions or inactions of the
Companies, Purchaser or its other Affiliates taken or failed to be taken
on or after the Closing Date.
At Closing, Purchaser will cause the Companies to provide an
indemnification agreement in form and substance substantially identical
to Exhibit C attached hereto with joint and several liability for the
Companies containing the terms of this Article VIII and covering the
matters set forth in clauses (d) through (g) above.
8.04 Method of Asserting Claims. As used herein, an "Indemnified Party"
shall refer to a Purchaser Indemnified Party or a Seller Indemnified
Party, as applicable; the "Notifying Party" shall refer to the party
hereto whose Indemnified Parties are entitled to indemnification
hereunder; and the "Indemnifying Party" shall refer to the party hereto
obligated to indemnify such Notifying Party's Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a defendant
in or party to any action or proceeding, judicial or administrative,
instituted by any third party for the liability or the costs or expenses
of which are Losses (any such third party action or proceeding being
referred to as a "Claim"), the Notifying Party shall give the
Indemnifying Party prompt notice thereof. The failure to give such
notice shall not affect any Indemnified Party's ability to seek
reimbursement unless such failure has materially and adversely affected
the Indemnifying Party's ability to defend successfully a Claim. The
Indemnifying Party shall be entitled to contest and defend such Claim;
provided, that the Indemnifying Party (i) has a reasonable basis for
concluding that such defense may be successful and (ii) diligently
contests and defends such Claim. Notice of the intention so to contest
and defend shall be given by the Indemnifying Party to the Notifying
Party within 20 Business Days after the Notifying Party's notice of such
Claim (but, in all events, at least five Business Days prior to the date
that an answer to such Claim is due to be filed). Such contest and
defense shall be conducted by reputable attorneys engaged by the
Indemnifying Party. The Notifying Party shall be entitled at any time,
at its own cost and expense (which expense shall not constitute a Loss
unless the Notifying Party reasonably determines that the Indemnifying
Party is not adequately representing or, because of a conflict of
interest, may not adequately represent, any interests of the Indemnified
Parties, and only to the extent that such expenses are reasonable) to
participate in such contest and defense and to be represented by
attorneys of its or their own choosing. If the Notifying Party elects to
participate in such defense, the Notifying Party will cooperate with the
Indemnifying Party in the conduct of such defense. Neither the Notifying
Party nor the Indemnifying Party may concede, settle or compromise any
Claim without the consent of the other party, which consents will not be
unreasonably withheld. Notwithstanding the foregoing, (i) if a Claim
seeks equitable relief or (ii) if the subject matter of a Claim relates
to the ongoing business of any of the Indemnified Parties, which Claim,
if decided against any of the Indemnified Parties, would materially
and adversely affect the ongoing business or reputation of any of the
Indemnified Parties, then, in each such case, the Indemnified Parties
alone shall be entitled to contest, defend and settle such Claim in the
first instance and, if the Indemnified Parties do not contest, defend or
settle such Claim, the Indemnifying Party shall then have the right to
contest and defend (but not settle) such Claim.
(b) In the event any Indemnified Party shall have a claim against any
Indemnifying Party that does not involve a Claim, the Notifying Party
shall deliver a notice of such claim with reasonable promptness to the
Indemnifying Party. If the Indemnifying Party notifies the Notifying
Party that it does not dispute the claim described in such notice or
fails to notify the Notifying Party within 30 days after delivery of such
notice by the Notifying Party whether the Indemnifying Party disputes the
claim described in such notice, the Loss in the amount specified in the
Notifying Party's notice will be conclusively deemed a liability of the
Indemnifying Party and the Indemnifying Party shall pay the amount of
such Loss to the Indemnified Party on demand. If the Indemnifying Party
has timely disputed its Liability with respect to such claim, the chief
executive officers of each of the Indemnifying Party and the Notifying
Party will proceed in good faith to negotiate a resolution of such
dispute, and if not resolved through the negotiations of such Chief
Executive Officers within 60 days after the delivery of the Notifying
Party's notice of such claim, such dispute shall be resolved fully and
finally in Minneapolis, Minnesota by an arbitrator selected pursuant to,
and an arbitration governed by, the Commercial Arbitration Rules of the
American Arbitration Association. The arbitrator shall resolve the
dispute within 30 days after selection and judgment upon the award
rendered by such arbitrator may be entered in any court of competent
jurisdiction.
(c) After the Closing, the rights set forth in this Article VIII shall
be each party's sole and exclusive remedies against the other party
hereto for misrepresentations or breaches of covenants contained in this
Agreement. Notwithstanding the foregoing, nothing herein shall prevent
any of the Indemnified Parties from bringing an action based upon actual
and knowing fraud or other intentional breach of an obligation of or with
respect to either party in connection with this Agreement and the Related
Documents. In the event such action is brought, the prevailing party's
attorneys' fees and costs shall be paid by the nonprevailing party.
ARTICLE IX
TERMINATION
9.01 Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written agreement of
Seller and Purchaser;
(b) at any time before the Closing, by Seller or Purchaser, in the event
that any Order or Law becomes final which effectively restrains, enjoins
or otherwise prohibits or makes illegal the consummation of any of the
transactions contemplated by this Agreement upon notification of the
non-terminating party by the terminating party;
(c) at any time after the Closing Date by Seller or Purchaser upon
notification to the non-terminating party by the terminating party if the
Closing shall not have occurred on or before such date;
(d) at any time before the Closing, by either Purchaser or Seller if
there has been a material misrepresentation, breach of warranty or breach
of covenant on the part of the other in the representations, warranties
and covenants set forth in this Agreement; or
(e) by Purchaser pursuant to Section 4.09 hereof.
9.02 Effect of Termination. Upon termination pursuant to Section 9.01,
this Agreement will forthwith become null and void, and there will be no
liability or obligation on the part of Seller or Purchaser (or any of
their respective officers, directors, employees, agents or other
representatives or Affiliates), except that (i) the provisions with
respect to expenses in Section 11.03 and confidentiality in Section 11.05
will continue to apply following any such termination; and (ii) Section
9.03 will continue to apply following any such termination and shall
govern the disposition of the escrow deposit made pursuant to Section
1.05.
9.03 Escrow Deposit. Upon termination of this Agreement by Seller or
Purchaser pursuant to Section 9.01(c) due to the failure of Purchaser
to complete the financing contemplated by the Financing Commitment or the
bonding contemplated by the Bonding Commitment or by Seller pursuant to
Section 9.01(d), any and all deposits made pursuant to the Escrow
Agreement, and all interest or earnings thereon then held by the Escrow
Agent, shall be distributed to Seller. Upon any other termination of
this Agreement, any and all deposits made pursuant to the Escrow
Agreement, and all interest or earnings thereon then held by the escrow
agent, shall be distributed to Purchaser.
ARTICLE X
DEFINITIONS
10.01 Definitions.
(a) As used in this Agreement, the following defined terms shall have
the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding, arbitration
or Governmental or Regulatory Authority investigation.
"Affiliate" means any Person that directly, or indirectly through one of
more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition,
control of a Person means the power, direct or indirect, to direct or
cause the direction of the management and policies of such Person whether
by Contract or otherwise and, in any event and without limitation of the
previous sentence, any Person owning more than 50% of the voting
securities of a second Person shall be deemed to control that second
Person.
"Agreement" means this Stock Purchase Agreement, the exhibits and the
schedules hereto and the certificates delivered in accordance with the
terms hereof, as the same shall be amended from time to time.
"Books and Records" means all files, documents, instruments, papers,
books and records, including without limitation personnel records,
financial statements, budgets, pricing guidelines, ledgers, journals,
deeds, title policies, Licenses, customer lists, computer files and
programs, retrieval programs, operating data and plans and environmental
studies and plans.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the States of Connecticut, Illinois or Minnesota
are authorized or obligated to close.
"Business or Condition of" means the business, financial condition or
results of operations of the referenced company.
"Cash" means cash and cash equivalents, including marketable securities
and short term investments, calculated in accordance with GAAP applied on
a basis consistent with the preparation of the Financial Statements.
"Closing" means the closing of the transactions contemplated by Section
1.05.
"Closing Date" means the earlier of (a) forty five (45) days after the
date of this Agreement, (b) two (2) Business Days after the conditions in
Articles VI and VII have been satisfied, or (c) such other date as
Purchaser and Seller mutually agree upon in writing., provided however
that (x) in the event Seller shall have amended or supplemented any
representation or warranty pursuant to the provisions of Section 4.09,
the Closing Date shall not occur until the expiration of 15 days after
the date Purchaser receives such amendment or supplement, and (y) if such
amendment or supplement shall give rise to a Cure Period the expiration
of which shall occur later than the earlier of (a), (b), or (c) above,
the Purchaser may elect to extend the Closing Date to the day after the
last day of the Cure Period, and (z) if Purchaser reasonably requests,
the Closing Date shall not occur until two weeks after the date that
would have been the Closing Date if the extension were not requested.
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"Contract" means any agreement, lease, sublease, evidence of
Indebtedness, mortgage, indenture, security agreement or other similar
arrangements.
"Construction Project" means any project for which the Companies provide
labor and materials to install security or detention products offered for
sale in the Business at the customer site; provided that a construction
project does not include Customer Orders.
"Customer Orders" means any purchase order from a customer for security
or detention products offered for sale in the Business where the product
is manufactured, assembled or fabricated by the Business and shipped to
the customer who installs the product.
"Environmental, Health and Safety Liabilities" means any cost, damages,
expense, liability, obligation, or other responsibility arising from or
under Environmental Law or Occupational Safety and Health Law and
consisting of or relating to:
(a) any environmental, health, or safety matter or condition (including
on-site or off-site contamination, occupational safety and health, and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and
response, remedial, or inspection costs and expenses arising under any
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under any Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including
any cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by any applicable Environmental Law or
Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Authority or any other Person)
and for any natural resource damages; or
(d) any other compliance, corrective, or remedial measures required
under any Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action" include the
types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 et seq., as amended ("CERCLA").
"Environmental, Health and Safety Requirements" shall mean all federal,
state, local and foreign statutes, regulations, and ordinances concerning
public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those
relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control, or
cleanup of any hazardous materials, substances or wastes, as such
requirements are enacted and in effect on or prior to the Closing Date.
"Environmental Law" means any Law that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits, or other prohibitions and the
commencements of activities, such as resource extraction or construction,
that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and used
so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for
injuries done to public assets.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Employee" means the persons employed by Seller or an Affiliate of Seller
whose primary responsibilities are to perform duties for the Business.
"Facilities" means the Real Property and Tangible Personal Property
currently constituting leasehold improvements or fixtures in any of the
Real Property.
"Financial Statements" means the financial statements of the Business
delivered to Purchaser pursuant to Section 2.05.
"GAAP" means generally accepted accounting principles, consistently
applied throughout the specified period and in the immediately prior
comparable period as applied, in the United States.
"Governmental Authorization" means any consent, license, or permit
issued, granted, given, or otherwise made available by or under the
authority of any Governmental or Regulatory Authority or pursuant to any
Law.
"Governmental or Regulatory Authority" means any court, tribunal,
rbitrator, authority, agency, commission, official or other
instrumentality of the United States, Canada or any state, county, city
or other political subdivision.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Hazardous Activity" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including
any withdrawal or other use of groundwater) of Hazardous Materials in,
on, under, about, or from the Facilities or any part thereof into the
Environment, and any other act, business, operation, or thing that
increases the danger, or risk of danger, or poses an unreasonable risk of
harm to persons or property on or off the Facilities, or that may affect
the value of the Facilities or the Assets.
"Hazardous Material" means any substance, material or waste which is
regulated by any Governmental Authority, including any material,
substance or waste which is defined as a "hazardous waste," "hazardous
material," "hazardous substance," "extremely hazardous waste,"
"restricted hazardous waste," "contaminant," "toxic waste" or "toxic
substance" under any provision of Environmental Law, which includes
petroleum, petroleum products, asbestos, presumed asbestos-containing
material or asbestos-containing material, urea formaldehyde and
polychlorinated biphenyls.
"Improvements" means any buildings, fixtures and permanent improvements
located on the land, including any such items currently under
construction thereon used in the Business.
"Indebtedness" of any Person means all obligations of such Person (i) for
borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred in the ordinary course of
business), (iv) under capital leases and (v) in the nature of guarantees
of the obligations described in clauses (i) through (iv) above of any
other Person.
"Inter-Company Contract" means any Contract between one of the Companies
on the one hand and Seller or its other Affiliates on the other hand."
"Inter-Company Receivables" means receivables payable to any of the
Companies from Seller or its other Affiliates."
"IRS" means the United States Internal Revenue Service.
"Knowledge of Seller or Seller's Knowledge" means the actual knowledge of
any officer of Seller, Dennis Flynn (President of Norment and
Norshield), Stanley Sasser, (Vice President Finance and Administration
of Norment) or Jon Lucynski (Executive Vice President of Norment),
without imputation of notice or knowledge of any other source or Person.
"Laws" means all laws, statutes, rules, regulations, ordinances and other
pronouncements having the effect of law of the United States, Canada, any
other foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory
Authority.
"Liabilities" means all Indebtedness, obligations and other liabilities
of a Person (whether absolute, accrued, contingent, fixed or otherwise,
or whether due or to become due).
"Licenses" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security interest, lease,
lien, adverse claim, levy, charge or other encumbrance.
"Material Adverse Effect" means, with respect to an entity, business, or
assets, any condition, event, change or occurrence that would reasonably
be expected to have, a material adverse effect on the assets, business,
operations, results of operations, or financial condition of such
business, entity or assets.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, or other Contract that gives the right to
purchase or otherwise receive or be issued any shares of capital stock of
such Person or any security of any kind convertible into or exchangeable
or exercisable for any shares of capital stock of such Person.
"Order" means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Ordinary Course of Business" means the ordinary operations of the
Business, consistent with custom and practice (including with respect to
quantity and frequency).
"Permitted Lien" means (i) any Lien for Taxes (A) not yet due or
delinquent or (B) being contested in good faith by appropriate
proceedings for which Seller will remain liable as a Seller Liability
(and no amounts for such liability will be included in the Closing
Balance Sheet), (ii) any statutory Lien arising in the ordinary course of
business by operation of Law with respect to a Liability that is not yet
due or delinquent and (iii) with respect to any real property, any
easements of record that do not materially adversely affect the current
use and enjoyment of such real estate or materially detract from its
value and any minor imperfection of title or similar Lien which
individually or in the aggregate with other such Liens does not
materially adversely affect the value of the real estate or materially
impair the use of the real property.
"Person" means any natural person, corporation, general partnership,
limited partnership, proprietorship, other business organization, trust,
union, association or Governmental or Regulatory Authority.
"Proceeding" means any charge, action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, judicial or investigative, whether formal or informal,
whether public or private) commenced, brought, conducted, or heard by or
before, or otherwise involving, any governmental body or arbitrator.
"Release" means any release, spill, emission, leaking, pumping, pouring,
dumping, emptying, injection, deposit, disposal, discharge, dispersal,
leaching, or migration on or into the Environment or into or out of any
property.
"Subsidiaries" means any Persons in which the Business, directly or
indirectly through Subsidiaries or otherwise, beneficially owns more than
50% of either the equity interests in,or the voting control of, such
Persons.
"Tangible Personal Property" means all machinery, equipment, tools,
furniture, office equipment, computer hardware, supplies, materials,
vehicles and other items of tangible personal property (other than
Inventories) of every kind owned or leased by either of the Companies
(wherever located and whether or not carried on such Company's books).
"Voice Track Business of Norment" means the assets and properties
(including Contracts) used primarily in the business of Norment relating
to automated computer surveillance tracking system utilizing voice
verification and telecommunications technology to track offenders who are
released into the community by the criminal justice system.
(b) Unless the context of this Agreement otherwise requires,(i) words of
any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively;
(iii) the terms "hereof," "herein," "hereby" and derivative or similar
words refer to this entire Agreement;(iv) the terms "Article" or
"Section" refer to the specified Article or Section of this Agreement;
and (v) the phrase "ordinary course of business" refers to the Business
as conducted by the Business. All accounting terms used herein and not
expressly defined herein shall have the meanings given to them under
GAAP. Any representation or warranty contained herein as to the
enforceability of a Contract shall be subject to the effect of any
bankruptcy, insolvency, reorganization, moratorium or other similar law
affecting the enforcement of creditors' rights generally and to general
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at Law).
ARTICLE XI
MISCELLANEOUS
11.01 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class
postage prepaid) to the parties at the following addresses or facsimile
numbers:
If to Purchaser, to:
CompuDyne Corporation
120 Union Street
Willimantic, Connecticut 06226
Attention: Marty Roenigk, Chairman and Chief Executive Officer
and
Quanta Security Systems, Inc.
Parkway Industrial Park
7255 Standard Drive
Hanover, MD 21076
Attention: William Rock
with a copy to:
Tyler Cooper & Alcorn, LLP
185 Asylum Street
City Place, 35th Floor
Hartford, Connecticut 06103-3488
Facsimile No. (860) 278-3802
Attention: Robert J. Metzler
If to Seller, to:
7900 Xerxes Avenue South, Suite 1800
Minneapolis, Minnesota 55431-1159
Facsimile No. (612) 896-2400
Attention: Robert G. Barbieri, Chief Financial Officer
with a copy to:
Kaplan, Strangis and Kaplan, P.A.
5500 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Facsimile No. (612) 375-1143
Attention: Bruce J. Parker
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given
upon delivery, (ii) if delivered by facsimile transmission to the
facsimile number as provided in this Section, be deemed given upon
receipt, and (iii) if delivered by mail in the manner described above to
the address as provided in this Section, be deemed given upon receipt (in
each case regardless of whether such notice is received by any other
Person to whom a copy of such notice, request or other communication is
to be delivered pursuant to this Section). Any party from time to time
may change its address, facsimile number or other information for the
purpose of notices to that party by giving notice specifying such change
to the other party hereto.
11.02 Entire Agreement. This Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter
hereof, including without limitation the letter of intent dated August
18, 1998 between Purchaser and Apogee Enterprises, Inc., and the
confidentiality agreement dated July 16, 1998 between Purchaser and
Apogee Enterprises, Inc., and contains the sole and entire agreement
between the parties hereto and their Affiliates with respect to the
subject matter hereof.
11.03 Expenses. Except as otherwise expressly provided in this
Agreement whether or not the transactions contemplated hereby are
consummated, each party will pay its own costs and expenses incurred in
connection with the negotiation, execution and closing of this Agreement
and the transactions contemplated hereby ("Expenses").
11.04 Public Announcements. Upon execution of this Agreement, Seller
and Purchaser shall announce the transaction contemplated by this
Agreement in a press release or press releases mutually agreed by Seller
and Purchaser. Following execution of this Agreement, Seller and
Purchaser shall make such filings as required by the federal securities
laws, including a Form 8-K Current Report with the Securities and
Exchange Commission. At all times at or before the Closing, Seller and
Purchaser will not issue or make any reports, statements or releases to
the public or generally to the employees, customers, suppliers or other
Persons to whom the Business sells goods or provides services or with
whom the Business otherwise has significant business relationships with
respect to this Agreement or the transactions contemplated hereby without
the consent of the other. If either party is unable to obtain the
approval of its public report, statement or release from the other party
and such report, statement or release is, in the opinion of legal counsel
to such party, required by Law in order to discharge such party's
disclosure obligations, then such party may make or issue the legally
required report, statement or release and promptly furnish the other
party with a copy thereof. Seller and Purchaser will also obtain the
other party's prior approval of any press release to be issued
immediately following the Closing announcing the consummation of the
transactions contemplated by this Agreement.
11.05 Confidentiality. Each party hereto will hold, and will use its
best efforts to cause its Affiliates and, in the case of Purchaser, any
Person who has provided, or who is considering providing, financing to
Purchaser to finance all or any portion of the Purchase Price or to
provide bonding to satisfy the Bonding Condition and their respective
Representatives to hold, in strict confidence from any Person (other than
any such Affiliate, Person who has provided, or who is considering
providing, financing or Representative), unless (i) compelled to disclose
by judicial or administrative process (including without limitation in
connection with obtaining the necessary approvals of this Agreement and
the transactions contemplated hereby of Governmental or Regulatory
Authorities) or by other requirements of Law or (ii) disclosed in an
Action or Proceeding brought by a party hereto in pursuit of its rights
or in the exercise of its remedies hereunder, all documents and
information concerning the other party or any of its Affiliates furnished
to it by the other party or such other party's Representatives in
connection with this Agreement or the transactions contemplated hereby,
except to the extent that such documents or information can be shown to
have been (a) previously known by the party receiving such documents or
information, (b) in the public domain (either prior to or after the
furnishing of such documents or information hereunder) through no fault
of such receiving party or (c) later acquired by the receiving party from
another source if the receiving party is not aware that such source is
under an obligation to another party hereto to keep such documents and
information confidential; provided that following the Closing the
foregoing restrictions will not apply to Purchaser's use of documents and
information concerning the Business furnished by Seller hereunder. In
the event the transactions contemplated hereby are not consummated, upon
the request of the other party, each party hereto will, and will cause
its Affiliates, any Person who has provided, or who is providing,
financing to such party and their respective Representatives to, promptly
(and in no event later than five days after such request) redeliver or
cause to be redelivered all copies of confidential documents and
information furnished by the other party in connection with this
Agreement or the transactions contemplated hereby and destroy or cause to
be destroyed all notes, memoranda, summaries, analyses, compilations and
other writings related thereto or based thereon prepared by the party
furnished such documents and information or its Representatives.
11.06 Further Assurances; Post-Closing Cooperation.
(a) Subject to the terms and conditions of this Agreement, at any time
or from time to time after the Closing, each of the parties hereto shall
execute and deliver such other documents and instruments, provide such
materials and information and take such other actions as may reasonably
be necessary, proper or advisable, to the extent permitted by Law, to
fulfill its obligations under this Agreement.
(b) Following the Closing, each party will afford the other party, its
counsel and its accountants, during normal business hours, reasonable
access to the books, records and other data relating to the Business in
its possession with respect to periods prior to the Closing and the right
to make copies and extracts therefrom, to the extent that such access may
be reasonably required by the requesting party in connection with (i) the
preparation of Tax Returns, (ii) the determination or enforcement of
rights and obligations under this Agreement, (iii) compliance with the
requirements of any Governmental or Regulatory Authority or (iv) in
connection with any actual or threatened Action or Proceeding.
(c) If, in order properly to prepare its Tax Returns, other documents or
reports required to be filed with Governmental or Regulatory Authorities
or its financial statements or to fulfill its obligations hereunder, it
is necessary that a party be furnished with additional information,
documents or records relating to the Business not referred to in
paragraph (b) above, and such information, documents or records are in
the possession or control of the other party, such other party agrees to
use its commercially reasonable efforts to furnish or make available such
information, documents or records (or copies thereof) at the recipient's
request, cost and expense. Any information obtained by Seller in
accordance with this paragraph shall be held confidential by Seller in
accordance with Section 11.05.
(d) In the event and for so long as any party hereto is actively
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i)
any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction
involving the Business, the other parties will cooperate with the
contesting or defending party and its counsel in the contest or defense,
reasonably make available its personnel (including in-house and outside
counsel, provided there shall be no waiver of any attorney-client work
product or other privileges), and provide such testimony and access to
its books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is entitled to
indemnification therefor under Article VIII above).
11.07 Waiver. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument
duly executed by or on behalf of the party waiving such term or
condition. No waiver by any party of any term or condition of this
Agreement, in any one or more instances, shall be deemed to be or
construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
11.08 Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of each party
hereto.
11.09 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and it is not the
intention of the parties to confer third-party beneficiary rights upon
any other Person.
11.10 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other parties hereto and
any attempt to do so will be void, except for assignments and transfers
by operation of Law. Subject to the preceding sentence, this Agreement
is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
11.11 Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the
provisions hereof.
11.12 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and
if the rights or obligations of any party hereto under this Agreement
will not be materially and adversely affected thereby, (a) such provision
will be fully severable, (b) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (c) the remaining provisions of this Agreement
will remain in full force and effect and will not be affected by the
illegal, invalid or unenforceable provision or by its severance herefrom
and (d) in lieu of such illegal, invalid or unenforceable provision,
there will be added automatically as a part of this Agreement a legal,
valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
11.13 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
11.14 Consent to Jurisdiction. Each party hereby (a) irrevocably and
unconditionally submits to the exclusive jurisdiction of the courts of
the State of Minnesota and of the United States of America located in the
State of Minnesota with respect to all actions and proceedings arising
out of or relating to this Agreement and the transactions contemplated
hereby, (b) agrees that all claims with respect to any such action or
proceeding shall be heard and determined in such Minnesota State or
Federal court and agrees not to commence any action or proceeding
relating to this Agreement or the transactions contemplated hereby except
in such courts, (c) irrevocably and unconditionally waives any objection
to the laying of venue of any action or proceeding arising out of this
Agreement or the transactions contemplated hereby and irrevocably and
unconditionally waives the defense of an inconvenient forum, (d) consents
to service of process upon him, her or it by mailing or delivering such
service to the address set forth in Section 11.01 hereof, and (e) agrees
that a final judgement in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
11.15 Governing Law. This Agreement shall be governed by and construed
in accordance with the Laws of the State of Minnesota applicable to a
Contract executed and performed in such State without giving effect to
the conflicts of laws principles thereof.
11.16 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but allof which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the
date first above written.
SELLER:
APOGEE ENTERPRISES, INC.
By:/s/Russell Huffer
Russell Huffer
President and Chief Executive Officer
PURCHASER:
COMPUDYNE CORPORATION
By:/s/Martin A. Roenigk
Martin A. Roenigk
Cairman and Chief Executive Officer
EXHIBIT A
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is made and entered into
as of November 10, 1998 by and among APOGEE ENTERPRISES, INC., a
Minnesota corporation ("Seller"), COMPUDYNE CORPORATION, a Nevada
corporation ("Purchaser"), and THE BANK OF NEW YORK, as escrow agent
("Escrow Agent").
STATEMENT OF PURPOSE
WHEREAS, Purchaser and Seller are entering into this Agreement
pursuant to the terms of that Stock Purchase Agreement dated as of
November 10, 1998 (the "Purchase Agreement").
WHEREAS, pursuant to the Purchase Agreement, Purchaser is required
to deposit certain funds into escrow pursuant to this Agreement.
AGREEMENT
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of other good and valuable
consideration, the receipt and sufficiency whereof is hereby
acknowledged, the parties hereby agree as follows:
1. Definition of Terms. Terms not otherwise defined herein shall have
the meaning ascribed to such terms in the Purchase Agreement. The Escrow
Agent shall not be responsible for any other provisions of the Purchase
Agreement.
2. Appointment and Acceptance. Purchaser and Seller hereby appoint
Escrow Agent as escrow agent for the purposes and upon the terms and
conditions set forth in this Agreement. Escrow Agent hereby accepts such
appointment and agrees to act as escrow agent hereunder and to hold,
invest and dispose of any funds received by it hereunder in accordance
with the terms and conditions set forth in this Agreement.
3. Deposit of Escrowed Funds. On the date hereof, Purchaser shall,
as partial payment of the Purchase Price, deliver to Escrow Agent for
deposit in escrow pursuant to the provisions of this Agreement, a wire
transfer of immediately available funds in the amount of $250,000 (the
"Escrowed Funds").
4. Delivery of Escrow Funds upon Termination relating to Financing
or Bonding Contingencies. In accordance with paragraph 6 below, the
Escrow Agent shall deliver to Purchaser the Escrowed Funds upon receipt
of notice from Seller to the Escrow Agent and Purchaser that the Purchase
Agreement has been terminated due to a failure to satisfy the Financing
Condition or the bonding Condition under the Purchase Agreement.
5. Delivery of Escrowed Funds in Other Circumstances. In accordance
with paragraph 6 below, the Escrow Agent shall deliver to Purchaser the
Escrowed Funds upon receipt of notice from Purchaser to the Escrow Agent
and Seller that the Purchase Agreement has been terminated for reasons
other than due to a failure to satisfy the Financing Condition or the
Bonding Condition under the Purchase Agreement.
6. Contest of a Claim to Escrow Funds.
(a) If, at any time Seller or Purchaser shall claim that it is entitled
to payment of all or a portion of the Escrowed Funds (a "Right of
Payment"), such party shall give notice of such Right of Payment (the
"Notice of Payment") to the other party and the Escrow Agent. The Notice
of Payment shall be an affidavit describing the event or circumstances
giving rise to the Right of Payment, specifying the amount of the
Escrowed Funds requested and certifying that the Notice of Payment is
being submitted in good faith.
(b) If Escrow Agent shall have received a Notice of Payment, Escrow
Agent shall promptly deliver a copy thereof to the other party hereto.
Within ten (10) Business Days ("Dispute Period") after delivery by Escrow
Agent of a copy of such Notice of Payment to such other party, such other
party may deliver to Escrow Agent a written notice (the "Notice of
Dispute") disputing the request for payment of Escrowed Funds stated in
the Notice of Payment. The Notice of Dispute shall be an affidavit
specifying the amount being disputed (the "Disputed Amount"), describing
in reasonable detail the reasons for such dispute and certifying that the
Notice of Dispute is being submitted in good faith. If Escrow Agent has
not received a Notice of Dispute prior to the expiration of Dispute
Period referred to above, then Escrow Agent shall immediately pay to such
requesting party, by check or wire transfer of immediately available
funds, the full amount of the Escrowed Funds requested in the Notice of
Payment. If Escrow Agent has received a Notice of Dispute during the
Dispute Period which disputes in part the request for payment of Escrowed
Funds stated in the Notice of Payment, then Escrow Agent shall, following
receipt of such Notice of Dispute, immediately pay to such requesting
party, by check or wire transfer of immediately available funds, the
amount, if any, of Escrowed Funds requested in the Notice of Payment
which is in excess of the Disputed Amount.
(c) If Escrow Agent receives a Notice of Dispute, Escrow Agent shall
promptly deliver a copy of the Notice of Dispute to the other party
hereto, and shall not deliver the Disputed Amount until Escrow Agent
shall have received one of the following:
(i) A certified copy of an order, decree or judgment issued or rendered
by a court of competent jurisdiction, which order, decree or judgment has
been finally affirmed on appeal or which by lapse of time or otherwise is
no longer subject to appeal (a "Final Decision")directing the
distribution of the Escrow Funds; or
(ii) A joint written direction executed by Purchaser and Seller directing
the distribution of the Escrowed Funds.
Upon receipt of either (i) or (ii) above, Escrow Agent shall immediately
deliver the Escrowed Funds to the proper party in accordance therewith.
7. Investment of Escrowed Funds. Escrow Agent shall invest the
Escrowed Funds, from time to time, in 30-day United States Treasury
obligations or certificates of daily deposit having a maturity not to
exceed 30 days, any governmental mutual funds, or such other investments
mutually designated by Purchaser and Seller. The proceeds of all
investments made hereunder shall be distributed in accordance with this
Agreement. Escrow Agent shall deliver monthly statements to Purchaser
and Seller in accordance with Escrow Agent's regular practice; the
parties hereby agree that, except for the foregoing, Escrow Agent shall
have no obligations to monitor, or advise the parties with respect to,
such investments. All interest or other income earned on the Escrow
Funds shall become and be retained and disbursed as part of the Escrow
Funds. The party hereunder that receives the interest or other income
shall be responsible for filing all necessary tax returns for any
interest or other income paid or attributed to it hereunder and shall pay
any taxes thereon.
8. Termination of Escrow. On the Closing Date, Purchaser and Seller
shall direct the Escrow Agent to pay Seller the Escrow Funds and, upon
such payment, the escrow under this Agreement shall terminate. In the
event of a termination of the Purchase Agreement, Escrow Agent shall
disburse the Escrowed Funds in accordance with the provisions of
paragraphs 4 through 6 hereof, whereupon the escrow under this Agreement
shall terminate.
9. No Liens on Escrowed Funds. During the term of this Agreement,
each of Purchaser and Seller agree to keep the Escrowed Funds free and
clear of all liens, claims, encumbrances, levies, garnishments or other
attachments arising with respect to it.
10. Notices. Any notices or other communication required to be sent
or given hereunder by any of the parties shall in every case be in
writing and shall be deemed properly served if (a) delivered personally,
(b) sent by registered or certified mail, in all such cases with first
class postage prepaid, return receipt requested, (c) delivered by a
recognized overnight courier service, or (d) sent by facsimile
transmission to the parties at the addresses as set forth below or at
such other addresses as may be furnished in writing.
If to the Seller:
Apogee Enterprises, Inc.
7900 Xerxes Avenue South, Suite 1800
Minneapolis, Minnesota 55431-1159
Facsimile No. (612) 896-2400
Attention: Robert G. Barbieri, Chief Financial Officer
with a copy to:
Kaplan, Strangis and Kaplan, P.A.
5500 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Facsimile No. (612) 375-1143
Attention: Bruce J. Parker
If to the Purchaser:
CompuDyne Corporation
120 Union Street
Willimantic, Connecticut 06226
Attention: Marty Roenigk, Chairman and Chief Executive Officer
and
Quanta Security Systems, Inc.
Parkway Industrial Park
7255 Standard Drive
Hanover, MD 21076
Attention: William Rock
with a copy to:
Tyler Cooper & Alcorn, LLP
185 Asylum Street
City Place, 35th Floor
Hartford, Connecticut 06103-3488
Facsimile No. (860) 278-3802
Attention: Robert J. Metzler
If to Escrow Agent:
The Bank of New York
101 Barclay Street, 12 East Escrow Insurance Unit
New York, NY 10286
Facsimile No. (212)-815-7181
Attention: David G. Sampson
Date of service of such notice shall be (i) the date such notice is
personally delivered, (ii) three days after the date of mailing if sent
by certified or registered mail, (iii) the next succeeding business day
after date of delivery to the overnight courier if sent by overnight
courier, or (iv) the next succeeding business day after transmission by
facsimile.
11. Escrow Agent's Liability. Escrow Agent undertakes to perform
such duties and only such duties as are specifically set forth in this
Agreement, and no implied covenants or obligations shall be read into
this Agreement against Escrow Agent. In the absence of bad faith, gross
negligence or wilful misconduct on its part, Escrow Agent may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions
furnished to Escrow Agent. Escrow Agent may act upon any instrument,
certificate, opinion or other writing believed by it in good faith and
without gross negligence to be genuine, and shall not be liable in
connection with the performance by it of its duties pursuant to the
provisions of the Agreement, except for its own bad faith, gross
negligence or wilful misconduct. Escrow Agent may consult with counsel
of its own choice and shall have full and complete authorization and
protection for any action taken, suffered or omitted by it hereunder in
good faith and in accordance with the opinion of such counsel. Escrow
Agent may execute powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys.
12. Indemnification of Escrow Agent. Purchaser and Seller hereby agree
jointly and severally to indemnify Escrow Agent for, and to hold it
harmless against, any loss, liability or expense incurred without gross
negligence, wilful misconduct or bad faith on the part of Escrow Agent,
arising out of or in connection with its entering into the Agreement,
carrying out its duties hereunder and accepting the Escrowed Funds,
including the costs and expenses of defending itself against any claim of
liability in connection with the exercise or performance of any of its
powers or duties hereunder (including reasonable fees, expenses and
disbursements of its counsel); provided that, as between Purchaser and
Seller the foregoing indemnity obligations shall be borne one-half by
Purchaser and one-half by Seller.
13. Escrow Agent to Follow Instructions of Purchaser and Seller.
Notwithstanding any provision contained herein to the contrary, Escrow
Agent shall at any time and from time to time take such action hereunder
with respect to the Escrowed Funds (and the securities in which any of
the Escrowed Funds shall have been invested) as shall be directed in
writing by both Purchaser and Seller, provided that Escrow Agent shall
first be indemnified to its satisfaction with respect to any of its costs
or expenses which might be involved.
14. Resignation of Escrow Agent. Escrow Agent, or any successor,
may resign at any time upon giving written notice, thirty (30) days
before such resignation shall take effect, to Purchaser and Seller. In
the event Escrow Agent shall resign or be unable to serve, it shall be
succeeded by such bank or trust company as Purchaser and Seller shall
appoint, or if no appointment is made, by a bank or trust company
appointed by a court of competent jurisdiction. In the absence of a
successor so appointed by Purchaser and Seller, Escrow Agent may petition
such a court to appoint a successor escrow agent. The resigning escrow
agent shall transfer to its successor all monies, securities and
investments then held subject to this escrow and all pending notices,
instructions and directions then in its possession, and shall thereupon
be discharged, and the successor shall thereupon succeed to all the
rights, powers and duties and shall assume all of the obligations of the
resigning escrow agent.
15. Escrow Agent's Fee and Expenses, Etc.
(a) Escrow Agent shall be entitled to (i) a fee for services rendered
and for reimbursement of extraordinary expenses incurred in performance
of its duties which expenses are not included in said fee, plus (ii) out
of pocket expenses which expenses shall be charged as incurred. Such
fees and expenses shall be divided equally between the Purchaser, on one
hand and Seller, on the other hand.
(b) In case said property shall be attached, garnished, or levied
upon any court order, or the delivery thereof shall be stayed or enjoined
by an order of court, or any order, judgement or decree shall be made or
entered by any court order affecting the property deposited under this
Agreement, or any part thereof, Escrow Agent is hereby expressly
authorized in its sole direction, to obey and comply with all writs,
orders or decrees so entered or issued, which it is advised by legal
counsel of its own choosing is binding upon it, whether with or without
jurisdiction, and in case Escrow Agent obeys or complies with any such
writ, order or decree it shall not be liable to any of the parties hereto
or to any other person, firm or corporation, by reason of such compliance
notwithstanding such writ, order or decree be subsequently reversed,
modified, annulled, set aside or vacated.
(c) In case said Escrow Agent becomes involved in litigation on account
of this deposit or of this Agreement, it shall have the right to retain
counsel and shall have a lien on the property deposited hereunder for any
and all costs, attorneys' fees, charges, disbursements, and expenses in
connection with such litigation; and shall be entitled to reimburse
itself therefor out of the property deposited hereunder, and if it shall
be unable to reimburse itself from the property deposited hereunder, the
parties hereto jointly and severally agree to pay to said Escrow Agent on
demand, its reasonable charges, counsel and attorneys' fees,
disbursements, and expenses in connection with such litigation.
(d) In case conflicting demands are made upon it for any situation
not addressed in this Agreement, Escrow Agent may withhold performance of
this escrow until such time as said conflicting demands shall have been
withdrawn or the rights of the respective parties shall have been settled
by court adjudication, arbitration, joint order or otherwise.
(e) The parties acknowledge that Escrow Agent will have no obligations
or responsibilities with respect to tax reporting of the parties.
16. Successors. The obligations imposed and the rights conferred by
this Escrow Agreement shall be binding upon and inure to the benefit of
the respective heirs (including estates), successors and permitted
assigns of the parties hereto, but will not be assignable or delegable by
any party without the prior written consent of the other parties.
17. Governing Law. This Escrow Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of law.
18. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the transactions contemplated
herein.
19. Amendment. This Agreement cannot be terminated, altered or amended
except pursuant to an instrument in writing signed by Purchaser, Seller
and Escrow Agent.
20. Enforceability. If any provision of the Agreement shall be held
invalid or unenforceable, such invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or
render invalid or unenforceable any other provision of this Escrow
Agreement, and the Agreement shall be carried out as if any such invalid
or unenforceable provision were not contained herein.
21. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed on original and all of which
together shall constitute one and the same instrument.
22. No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against
any party hereto.
23. Attorneys' Fees. In the event of a dispute between Purchaser and
Seller regarding the distribution of the Escrowed Funds, upon the
issuance of a final, non-appealable order or judgment by a court of
competent jurisdiction, the prevailing party's legal fees and related
expenses shall be paid by the non-prevailing party. The determination of
which party is the "prevailing" party shall be made by the court issuing
such final, non-appealable order or judgment.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be signed as of the date first above written.
APOGEE ENTERPRISES, INC.
By:
Russell Huffer
President and Chief Executive Officer
COMPUDYNE CORPORATION
By:
Martin A. Roenigk
Chairman and Chief Executive Officer
THE BANK OF NEW YORK
By:
David G. Sampson
Vice President
EXHIBIT B
ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT, dated as of , 1998 is made and entered into
by and among HARMON, LTD., a Minnesota corporation ("Provider"), NORMENT
INDUSTRIES, INC., a Delaware corporation ("Norment"), and NORSHIELD
CORP., an Alabama corporation ("Norshield" and collectively with Norment,
the "Companies").
STATEMENT OF PURPOSE
WHEREAS, on this date, Apogee Enterprises, Inc. ("Seller") has sold
all of the outstanding capital stock of the Companies to CompuDyne
Corporation ("Purchaser") pursuant to that certain Stock Purchase
Agreement dated November __, 1998 (the "Stock Purchase Agreement")
between Seller and Purchaser;
WHEREAS, while the Companies were part of Seller's group of
entities, the Companies were provided certain administrative services;
WHEREAS, Purchaser has requested that certain administrative
services continue to be provided to the Companies for a period of time
not to extend beyond September 1, 1999 in order to provide Purchaser
sufficient time to implement its own administrative systems; and
WHEREAS, pursuant to Section 4.12 of the Stock Purchase Agreement,
this Agreement is being entered into in conjunction with the Closing
under the Stock Purchase Agreement in order to provide the Companies with
certain administrative services as herein provided.
AGREEMENT
1. Administrative Services. Upon the terms and conditions of this
Agreement, Provider shall provide the Companies, on a non-exclusive
basis,the services described in Exhibit A hereto on a basis comparable to
that currently provided by Provider to the Companies (the "Services").
The Services will be provided within the limitations, conventions and
parameters of the system currently used to provide the Services.
2. Term. The term of this Agreement will commence as of the date
of this Agreement and will continue until the earlier of (i) sixty (60)
days after written notice of termination is given to Provider by the
Companies, or (ii) September 1, 1999 (the "Termination Date").
3. Extension or Sale. If the Companies still require the Services
after September 1. 1999, and the hardware, software, manuals and other
items used in providing those services are still being utilized within
the Provider, the Service Period will be extended as required. If the
hardware, software, manuals and other items used to provide those
services are not being utilized within the Provider, the Companies may
purchase the hardware, software, manuals and other items used in
providing the services at their then remaining book value plus any costs
associated with assumption of leases and necessary consents for
assignments.
4. Compensation for Services. The Companies agree to pay Provider for
the Services as follows:
(a) from the date hereof until February 28, 1999 or such later date
as the Provider starts using alternative hardware and software for the
Provider's internal services (the "Adjustment Date"), a monthly fee of
$25,000 commencing on the date hereof; provided that if the Termination
Date or the Adjustment Date occurs in such a manner as to result in the
provision of services for less than a full month, the monthly fee shall
be prorated accordingly; and
(b) from the Adjustment Date through the Termination Date, Provider's
reasonable cost (including personnel costs, overhead allocation and third
party expenses) to provide the Services, which cost the parties
anticipate will be higher than the fees set forth above.
Payment of such fees shall be paid monthly in advance commencing on the
date hereof and the same date for each month thereafter. In addition, the
Companies will reimburse Provider for any additional costs or expenses
incurred by Provider for additional services performed at the specific
request of the Companies or Purchaser.
5. Other Rights and Obligations.
(a) Without the prior written consent of the other party, each party
agrees that it shall use reasonable efforts to not disclose to any third
party any information proprietary to the other, including information
concerning trade secrets, customer lists, methods, processes or
procedures, or any other confidential information of the other party
which it learns during the course of its performance of this Agreement.
No party shall use the proprietary information of the other for any
purpose, other than the purposes enumerated in this Agreement, without
the written consent of the other party.
(b) The Companies shall, jointly and severally, indemnify and hold
harmless Provider, its successors and assigns, from and against any and
all claims, actions, proceedings, costs, damages and liabilities,
including reasonable attorneys' fees and expenses, arising out of,
connected with, or resulting from the Services provided by Provider to
the Companies hereunder, except to the extent resulting from the gross
negligence or willful misconduct of Provider.
(c) Provider does not warrant or guarantee in any way the results of
the Services, provided that Provider agrees to use reasonable care in
performing the Services in a businesslike manner.
(d) Provider shall not have any liability to the Companies in connection
with this Agreement for any consequential, exemplary, special, incidental
or punitive damages even if it has been advised of the possibility of
such damages.
As an inducement to Provider's undertakings hereunder, the Companies
agree that Provider shall not be liable for any mistakes of judgment,
except as a result of the gross negligence or willful misconduct of
Provider. Notwithstanding the preceding sentence, the liability of
Provider for any reason and upon any cause of action or claim in
contract, tort or otherwise, shall be limited to an amount equal to the
amount actually paid to Provider by the Companies under this Agreement,
excluding reimbursement of costs and expenses paid by Provider to any
third party providing a portion of the Services. This limitation applies
to all causes of action or claims in the aggregate including without
limitation, breach of contract, breach of warranty, negligence, strict
liability, misrepresentations and other torts.
(f) The Companies acknowledge that the Services provided and the hardware
and software utilized to provide those services are not year 2000
compliant and are not intended to become year 2000 compliant at any time
during the term of this Agreement.
5. Miscellaneous.
(a) This Agreement is binding upon and inures to the benefit of the
respective parties hereto and their successors and assigns.
(b) Any written notice provided pursuant to this Agreement shall be
deemed given (i) if by hand delivery, upon receipt thereof, (ii) if
mailed, three (3) days after deposit in the United States mail, postage
prepaid, (iii) if by facsimile, on the date of confirmation thereof; or
(iv) if by next day delivery service, upon such delivery. All notices
shall be addressed to the respective party at the address set forth below
its name (or such other address as a party may in the future specify in
writing).
(c) The section headings used herein are for reference and convenience
only and shall not be deemed to affect the meaning or construction of the
provisions thereof.
(d) Provider shall not be liable to the other for any delay or failure
to perform any of the Services due to causes beyond its reasonable
control. Performance times shall be considered extended for a period of
time equivalent to the time lost because of such delay.
(e) If any provision of this Agreement is invalid under any applicable
statute or rule of law, it is to that extent deemed omitted and the
remaining provisions shall not be affected but shall remain in full
force and effect.
(f) The waiver or failure of either party to exercise any right in any
respect provided for herein shall not be deemed a waiver of any further
right hereunder.
(g) No amendment hereof shall be valid unless in writing and signed
by an authorized representative of both parties.
(h) This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof, and supersedes all previous
communications, letters of understanding, and agreements, whether
written or oral, with respect to such subject matter. There are no
representations, understandings or agreements relative hereto which are
not fully expressed herein.
(i) The validity, construction and interpretation of this Agreement
shall be governed by the laws of the State of Minnesota.
(j) All provisions of this Agreement relating to indemnification and
confidentiality shall survive the termination of this Agreement.
IN WITNESS WHEREOF, Provider and the Companies have each caused
this Agreement to be signed and delivered by its duly authorized officer,
all as of the date first set forth above.
HARMON, LTD.
By:
Name:
Title:
Address:
NORMENT INDUSTRIES, INC.
By:
Name:
Title:
Address:
NORSHIELD CORP.
By:
Name:
Title:
Address:
[CAPTION]
Exhibit A
DESCRIPTION OF SERVICES
<TABLE>
<S>
<C> <C> <C> <C>
Provider Service Companies Provider Personnel
Job Set-up Set-up in AS400 Job details sent Acct. Clerk
for set-up in AS400
Purchasing
Generate Input the coded Provide check stock A/P clerk;
Payment for invoice into for A/P processing partial Acctg.
A/P AS400
Manage
Production/
Job
Record labor Direct entry into
hours system or ADP
Record Feed from A/P
material input
used
Manage Maintain AS400 Manages w/DCD ond
inventory AS400
Job P&L Material & labor Partial staff
tracking date feed from accountant &
AS400 acctg. Mgr;
AS400 support;
provides month-
end G/L support
Bill the
Customer
Compile & Customer set up Job & customer info Billing Clerk
Maintain in AS400 with job provided to Provider
setup
Invoice the
customer Enter invoice data Invoice generated Accounting Clerk
in AS400 for job in the field & sent
& A/R to Provider
A/R Input collection Provide A/R collection
info into AS400 information to clear
A/R and to feed
balance sheet
Payroll
Maintain
payroll
related Employee set up Personnel data sent Payroll clerk;
in AS400 to Provider Payroll mgr;
Controller
Enter labor
hours Direct entry into
AS400 or ADP
worksheet
Generate
paychecks weekly * Coordinate w/ ADP
Account
reconcil-
iation monthly * Coordinate w/ ADP
Labor/union
reporting job; union
(monthly) * Coordinate w/ ADP
Data feed to
G/L and jobs Run payroll to Coordinate w/ ADP Payroll clerk;
G/L AS400 support and Provider Payroll mgr;
Controller;
on AS400
Tax deposits Filed * Coordinate w/ ADP
W2's Printed from Coordinate w/ ADP
Payroll system *
Per diems Calculated by
payroll * Person specific
terms provided to
Provider
Month-End
Accounting
G/L Manual Direct G/L entry of Controller; misc.
Adjustments; Run manual adjustments Acctg. Staff;
AS400 support
/TABLE
<PAGE>
EXHIBIT C
INDEMNITY AGREEMENT
THIS AGREEMENT dated as of November __, 1998 is made and entered
into by and between APOGEE ENTERPRISES, INC., a Minnesota corporation
("Seller"), NORMENT INDUSTRIES, INC., Nevada corporation ("Norment"), and
NORSHIELD CORPORATION, an Alabama corporation ("Norshield").
WHEREAS, Seller and CompuDyne Corporation ("Purchaser") have entered
into the stock purchase agreement dated November ___, 1998 (the "Purchase
Agreement") pursuant to which Seller will, on this date, sell the
outstanding capital stock of Norment and Norshield to Purchaser;
WHEREAS, pursuant to the Purchase Agreement, Purchaser has agreed to
cause Norment and Norshield to enter into this indemnity agreement with
and in favor of Seller as a condition to the closing under the Purchase
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, the capitalized terms
herein shall have the meanings set forth in the Purchase Agreement.
2. Indemnification by Norment and Norshield. Norment and Norshield
will, jointly and severally, indemnify and hold harmless Apogee and its
officers, directors, employees, agents, shareholders and Affiliates
(collectively the "Seller Indemnified Parties") and will reimburse the
Apogee Indemnified Parties for any loss, liability, claim, damage,
expense (including reasonable costs of investigation and defense and
reasonable attorneys fees and expenses to the extent defense is not
provided by Norment, Norshield or Purchaser and, with respect to matters
arising out of Contracts that either constitute Company Liabilities or
relate to Transferred Projects, the reasonable time charges for
participation in the defense of such matters by Apogee's personnel) or
diminution of value, whether or not involving a third party claim,
arising form or in connection with:
(a) any breach of any representation or warranty made by Purchaser in
Article III of the Purchase Agreement;
(b) any breach of any covenant or obligation of Purchaser in the
Purchase Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Purchaser (or any
Person acting on its behalf) in connection with any of the transactions
contemplated by the Purchase Agreement;
(d) any product or component thereof sold and delivered,or any services
provided by, the Companies, on or after the Closing Date;
(e) all Company Liabilities;
(f) any claims or threatened claims arising out of the actions or
inactions of either of the Companies, Purchaser or its other Affiliates
with respect to the Business on or after the Closing Date, and
(g) any claims arising or resulting from or related to the Transferred
Projects regardless of whether such claims result from actions or
inactions of either of the Companies, Seller or its other Affiliates
taken or failed to be taken prior to the Closing Date, from consummation
of the transactions contemplated by the Purchase Agreement, from actions
taken by Seller or any of its Affiliates after Closing pursuant to
Purchaser's request under Section 1.01(a),or from actions or inactions of
the Companies, Purchaser or its other Affiliates taken or failed to be
taken on or after the Closing Date.
3. Applicability of Section 8.04. The provisions of Section 8.04 of
the Purchase Agreement shall also apply to this Agreement, except that,
as used therein, (a) "Indemnified Party" and "Notifying Party" mean the
Seller and its Affiliates, (b) "Indemnifying Party" means Norment and
Norshield (jointly and severally), and (iii) "Claim" means any claim for
indemnification asserted by Seller under this Agreement.
4. Miscellaneous. The provisions of Article IX of the Purchase
Agreement (other than Sections 11.02 and 11.13) shall also apply to this
Agreement, except that, as used therein "Purchaser" means Norment and
Norshield.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the
date first above written.
SELLER:
APOGEE ENTERPRISES, INC.
By:
Its:
NORMENT:
NORMENT INDUSTRIES, INC.
By:
Its:
NORSHIELD:
NORSHIELD CORPORATION
By:
Its:
CREDIT AGREEMENT
dated as of November 30, 1998
among
COMPUDYNE CORPORATION,
THE SUBSIDIARY BORROWERS,
VARIOUS FINANCIAL INSTITUTIONS
FROM TIME TO TIME PARTY HERETO
and
LASALLE NATIONAL BANK,
as Agent
TABLE OF CONTENTS
SECTION 1 DEFINITIONS 1
1.1 Definitions 1
1.2 Other Interpretive Provisions 17
SECTION 2 COMMITMENTS OF THE BANKS; BORROWING, CONVERSION AND
LETTER OF CREDIT PROCEDURES 18
2.1 Commitments 18
2.1.1 Revolving Loan Commitment 18
2.1.2 Term Loan Commitment 18
2.1.3 L/C Commitment 19
2.2 Loan Procedures 19
2.2.1 Various Types of Loans 19
2.2.2 Borrowing Procedures 19
2.2.3 Conversion and Continuation Procedures 20
2.3 Letter of Credit Procedures 21
2.3.1 L/C Applications 21
2.3.2 Participations in Letters of Credit 22
2.3.3 Reimbursement Obligations 22
2.3.4 Limitation on Obligations of Issuing Bank 22
2.3.5 Funding by Banks to Issuing Bank 22
2.4 Commitments Several 23
2.5 Certain Conditions 23
SECTION 3 NOTES EVIDENCING LOANS 23
3.1 Notes 23
3.2 Recordkeeping 24
SECTION 4 INTEREST 24
4.1 Interest Rates 24
4.2 Interest Payment Dates 24
4.3 Setting and Notice of Eurodollar Rates 24
4.4 Computation of Interest 25
SECTION 5 FEES 25
5.1 Non-Use Fee 25
5.2 Letter of Credit Fees 25
5.3 Upfront Fees 25
5.4 Agent's Fees 26
SECTION 6 REDUCTION OR TERMINATION OF THE REVOLVING COMMITMENT
AMOUNT; PREPAYMENTS 26
6.1 Reduction or Termination of the Revolving
Commitment Amount 26
6.1.1 Voluntary Reduction or Termination of the Revolving
Commitment Amount 26
6.1.2 All Reductions of the Revolving Commitment Amount 26
6.2 Prepayments 26
6.2.1 Voluntary Prepayments 26
6.2.2 Mandatory Prepayments 26
6.3 All Prepayments 27
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES 27
7.1 Making of Payments 27
7.2 Application of Certain Payments 28
7.3 Due Date Extension 28
7.4 Setoff 28
7.5 Proration of Payments 28
7.6 Taxes 28
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR
LOANS 30
8.1 Increased Costs 30
8.2 Basis for Determining Interest Rate Inadequate or Unfair 31
8.3 Changes in Law Rendering Eurodollar Loans Unlawful 31
8.4 Funding Losses 32
8.5 Right of Banks to Fund through Other Offices 32
8.6 Discretion of Banks as to Manner of Funding 32
8.7 Mitigation of Circumstances; Replacement of Banks 32
8.8 Conclusiveness of Statements; Survival of Provisions 33
SECTION 9 WARRANTIES 33
9.1 Organization 33
9.2 Authorization; No Conflict 34
9.3 Validity and Binding Nature 34
9.4 Financial Statements and Projections 34
9.5 No Material Adverse Change 35
9.6 Litigation and Contingent Liabilities 35
9.7 Ownership of Properties; Liens 35
9.8 Subsidiaries 35
9.9 Pension Plans 35
9.10 Investment Company Act 36
9.11 Public Utility Holding Company Act 36
9.12 Regulation U 36
9.13 Taxes 36
9.14 Solvency, etc. 36
9.15 Environmental Matters 37
9.16 Year 2000 Problem 38
9.17 Insurance 38
9.18 Real Property 38
9.19 Information 38
9.20 Intellectual Property 39
9.21 Burdensome Obligations 39
9.22 Labor Matters 39
9.23 No Default 39
9.24 Purchase Agreement, etc. 39
SECTION 10 COVENANTS 40
10.1 Reports, Certificates and Other Information 40
10.1.1 Annual Report 40
10.1.2 Interim Reports 41
10.1.3 Compliance Certificates 41
10.1.4 Reports to the SEC and to Shareholders 41
10.1.5 Notice of Default, Litigation and ERISA Matters 41
10.1.6 Borrowing Base Certificates 42
10.1.7 Management Reports 43
10.1.8 Projections 43
10.1.9 Subordinated Debt Notices 43
10.1.10 Year 2000 Problem 43
10.1.11 Other Information 43
10.2 Books, Records and Inspections 43
10.3 Maintenance of Property; Insurance 44
10.4 Compliance with Laws; Payment of Taxes and Liabilities 45
10.5 Maintenance of Existence, etc. 45
10.6 Financial Covenants 45
10.6.1 Fixed Charge Coverage Ratio 45
10.6.2 Interest Coverage Ratio 45
10.6.3 Senior Debt to EBITDA Ratio 46
10.6.4 Capital Expenditures 46
10.6.5 EBITDA 46
10.7 Limitations on Debt 47
10.8 Liens 47
10.9 Operating Leases 48
10.10 Restricted Payments 49
10.11 Mergers, Consolidations, Sales 49
10.12 Modification of Organizational Documents 50
10.13 Use of Proceeds 50
10.14 Further Assurances 50
10.15 Transactions with Affiliates 50
10.16 Employee Benefit Plans 51
10.17 Environmental Matters 51
10.18 Unconditional Purchase Obligations 51
10.19 Inconsistent Agreements 51
10.20 Business Activities 51
10.21 Investments 51
10.22 Restriction of Amendments to Certain Documents 52
10.24 Fiscal Year 52
10.25 Cancellation of Debt 53
10.26 Certain Documents 53
SECTION 11 EFFECTIVENESS; CONDITIONS OF LENDING, ETC 53
11.1 Initial Credit Extension 53
11.1.1 Notes 53
11.1.2 Resolutions 54
11.1.3 Consents, etc. 54
11.1.4 Incumbency and Signature Certificates 54
11.1.5 Security Agreement 54
11.1.6 Pledge Agreements 54
11.1.7 Real Estate Documents 54
11.1.8 Purchase Agreement Assignment 55
11.1.10 Opinions of Counsel 55
11.1.11 Insurance 55
11.1.13 Payment of Fees 55
11.1.14 Solvency Certificate 56
11.1.16 Search Results; Lien Terminations 56
11.1.17 Filings, Registrations and Recordings 56
11.1.18 Closing Certificate 56
11.1.19 Borrowing Base Certificate 56
11.1.20 Purchase Certificate, Consents and Permits 56
11.1.21 Other 57
11.2 Conditions 57
11.2.1 Compliance with Warranties, No Default, etc. 57
11.2.2 Confirmatory Certificate 57
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT 58
12.1 Events of Default 58
12.1.1 Non-Payment of the Loans, etc. 58
12.1.2 Non-Payment of Other Debt 58
12.1.3 Other Material Obligations 58
12.1.4 Bankruptcy, Insolvency, etc. 58
12.1.5 Non-Compliance with Loan Documents 59
12.1.6 Warranties 59
12.1.7 Pension Plans 59
12.1.8 Judgments 59
12.1.9 Invalidity of Guaranty, etc. 59
12.1.10 Invalidity of Collateral Documents, etc. 59
12.1.11 Invalidity of Subordination Provisions, etc. 59
12.1.12 Change of Control 60
12.1.13 Material Adverse Effect 60
12.2 Effect of Event of Default 60
SECTION 13 THE AGENT 61
13.1 Appointment and Authorization 61
13.2 Delegation of Duties 61
13.3 Liability of Agent 61
13.4 Reliance by Agent 62
13.5 Notice of Default 62
13.6 Credit Decision 62
13.7 Indemnification 63
13.8 Agent in Individual Capacity 64
13.9 Successor Agent 64
13.10 Collateral Matters 64
SECTION 14 GENERAL 64
14.1 Waiver; Amendments 64
14.2 Confirmations 65
14.3 Notices 65
14.4 Computations 65
14.5 Regulation U 66
14.6 Costs, Expenses and Taxes 66
14.7 Subsidiary References 66
14.8 Captions 66
14.9 Assignments; Participations 66
14.9.1 Assignments 66
14.9.2 Participations 68
14.10 Governing Law 68
14.11 Counterparts 69
14.12 Successors and Assigns 69
14.13 Indemnification by the Company 69
14.14 Nonliability of Lenders 69
14.15 Forum Selection and Consent to Jurisdiction 70
14.16 Waiver of Jury Trial 70
SCHEDULES
Pricing Schedule
SCHEDULE 2.1 Banks and Pro Rata Shares
SCHEDULE 3.1 Term Loan Installments
SCHEDULE 9.4 Financial Statements and Projections
SCHEDULE 9.6 Litigation and Contingent Liabilities
SCHEDULE 9.8 Subsidiaries
SCHEDULE 9.15 Environmental Matters
SCHEDULE 9.17 Insurance
SCHEDULE 9.18 Real Property
SCHEDULE 9.22 Labor Matters
SCHEDULE 9.24 Purchase Agreement
SCHEDULE 10.6 ERP Upgrade
SCHEDULE 10.7 Existing Debt
SCHEDULE 10.8 Existing Liens
SCHEDULE 10.21 Investments
SCHEDULE 11.1 Debt to be Repaid
SCHEDULE 12.1.12 Key Executives
SCHEDULE 14.3 Addresses for Notices
EXHIBITS
EXHIBIT A Form of Note (Section 3.1)
EXHIBIT B Form of Compliance Certificate (Section 10.1.3)
EXHIBIT C Form of Guaranty (Section 1.1)
EXHIBIT D Form of Security Agreement (Section 1.1)
EXHIBIT E Form of Pledge Agreement (Section 1.1)
EXHIBIT F Form of Purchase Agreement Assignment (Section 11.1.8)
EXHIBIT G Form of Borrowing Base Certificate (Section 1.1)
EXHIBIT H [Intentionally Omitted]
EXHIBIT I Form of Opinion of Counsel to the Companies (Section 11.1.10)
EXHIBIT J Form of Solvency Certificate (Section 11.1.14)
EXHIBIT K Form of Subordination and Intercreditor Agreement
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of November 30, 1998 (this
"Agreement") is entered into among COMPUDYNE CORPORATION, a Nevada
corporation ("Compudyne"), the SUBSIDIARY BORROWERS (as hereinafter
defined) (Compudyne and each Subsidiary Borrower are sometimes referred
to herein, collectively, as the "Company" or the "Companies"), the
financial institutions that are or may from time to time become parties
hereto (together with their respective successors and assigns, the
"Banks") and LASALLE NATIONAL BANK (in its individual capacity,
"LaSalle"), as agent for the Banks.
WHEREAS, the Banks have agreed to make available to the Company
term loans and a revolving credit facility (which includes letters of
credit) upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
SECTION 1 DEFINITIONS.
1.1 Definitions. When used herein the following terms shall have
the following meanings:
Account Debtor means any Person who is obligated to the Company or
any Subsidiary under an Account Receivable.
Account Receivable means, with respect to any Person, any right of
such person to payment for goods sold or leased or for services rendered,
whether or not evidenced by an instrument or chattel paper and whether or
not yet earned by performance.
Acquired Debt means mortgage Debt or Debt with respect to Capital
Leases of a Person existing at the time such Person became a Subsidiary
or assumed by the Company or a Subsidiary of the Company pursuant to an
Acquisition permitted hereunder (and not created or incurred in
connection with or in anticipation of such Acquisition).
Acquisition means any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the
acquisition of all or substantially all of the assets of a Person, or of
all or substantially all of any business or division of a Person, (b) the
acquisition of in excess of 50% of the capital stock, partnership
interests, membership interests or equity of any Person, or otherwise
causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than a
Person that is a Subsidiary).
Adjusted Working Capital means the remainder of:
(a) (i) the consolidated current assets of the Company and its
Subsidiaries less (ii) the amount of cash and cash equivalents included
in such consolidated current assets;
minus
(b) (i) consolidated current liabilities of the Company and its
Subsidiaries less (ii) the amount of short-term Debt (including current
maturities of long-term Debt) of the Company and its Subsidiaries
included in such consolidated current liabilities.
Affected Loan - see Section 8.3.
Affiliate of any Person means (i) any other Person which, directly
or indirectly, controls or is controlled by or is under common control
with such Person and (ii) any officer or director of such Person. A
Person shall be deemed to be "controlled by" any other Person if such
Person possesses, directly or indirectly, power to vote 5% or more of the
securities (on a fully diluted basis) having ordinary voting power for
the election of directors or managers or power to direct or cause the
direction of the management and policies of such Person whether by
contract or otherwise.
Agent means LaSalle in its capacity as agent for the Banks
hereunder and any successor thereto in such capacity.
Agreement - see the Preamble.
Asset Sale means the sale, lease, assignment or other transfer for
value (each a "Disposition") by the Company or any Subsidiary to any
Person (other than the Company or any Subsidiary) of any asset or right
of the Company or such Subsidiary other than (a) the Disposition of any
asset which is to be replaced, and is in fact replaced, within 30 days
with another asset performing the same or a similar function, and (b) the
sale or lease of inventory in the ordinary course of business.
Assignment Agreement - see Section 14.9.1.
Attorney Costs means, with respect to any Person, all reasonable
fees, charges and disbursements of any counsel to such Person, the
reasonable allocable cost of internal legal services of such Person, all
reasonable disbursements of such counsel and all filing, search, court
costs and similar legal expenses.
Bank - see the Preamble. References to the "Banks" shall include
the Issuing Bank; for purposes of clarification only, to the extent that
LaSalle (or any successor Issuing Bank) may have any rights or
obligations in addition to those of the other Banks due to its status as
Issuing Bank, its status as such will be specifically referenced.
Base Rate means at any time the greater of (a) the Federal Funds
Rate plus 0.5% and (b) the Prime Rate.
Base Rate Loan means any Loan which bears interest at or by
reference to the Base Rate.
Base Rate Margin - see the Pricing Schedule.
Blair means William Blair Mezzanine Capital Fund II, L.P., its
successors, assigns and its transferees of any rights under the
Subordinated Debt Documents.
Borrowing Base means an amount equal to the total of (a) 50% of the
unpaid amount (net of such reserves and allowances as the Agent deems
necessary in its reasonable discretion) of all Eligible Accounts
Receivable plus (b) 25% of the value of all Eligible Inventory valued at
the lower of cost or market (net of such reserves and allowances as the
Agent deems necessary in its reasonable discretion).
Borrowing Base Certificate means a certificate substantially in the
form of Exhibit G.
Business Day means any day on which LaSalle is open for commercial
banking business in Chicago, Illinois and, in the case of a Business Day
which relates to a Eurodollar Loan, on which dealings are carried on in
the London interbank eurodollar market.
Capital Expenditures means all expenditures which, in accordance
with GAAP, would be required to be capitalized and shown on the
consolidated balance sheet of the Company, but excluding expenditures
made in connection with the replacement, substitution or restoration of
assets to the extent financed (i) from insurance proceeds (or other
similar recoveries) paid on account of the loss of or damage to the
assets being replaced or restored or (ii) with awards of compensation
arising from the taking by eminent domain or condemnation of the assets
being replaced.
Capital Lease means, with respect to any Person, any lease of (or
other agreement conveying the right to use) any real or personal property
by such Person that, in conformity with GAAP, is accounted for as a
capital lease on the balance sheet of such Person.
Cash Collateralize means to deliver cash collateral to the Agent,
to be held as cash collateral for outstanding Letters of Credit, pursuant
to documentation satisfactory to the Agent, Derivatives of such term have
corresponding meanings.
Cash Equivalent Investment means, at any time, (a) any evidence of
Debt, maturing not more than one year after such time, issued or
guaranteed by the United States Government or any agency thereof, (b)
commercial paper, maturing not more than one year from the date of issue,
or corporate demand notes, in each case (unless issued by a Bank or its
holding company) rated at least A-l by Standard & Poor's Ratings Group or
P-l by Moody's Investors Service, Inc., (c) any certificate of deposit
(or time deposits represented by such certificates of deposit) or
banker's acceptance, maturing not more than one year after such time, or
overnight Federal Funds transactions that are issued or sold by any Bank
or its holding company or by a commercial banking institution that is a
member of the Federal Reserve System and has a combined capital and
surplus and undivided profits of not less than $500,000,000 and (d) any
repurchase agreement entered into with any Bank (or other commercial
banking institution of the stature referred to in clause (c)) which (i)
is secured by a fully perfected security interest in any obligation of
the type described in any of clauses (a) through (c) and (ii) has a
market value at the time such repurchase agreement is entered into of not
less than 100% of the repurchase obligation of such Bank (or other
commercial banking institution) thereunder.
CERCLA - see Section 9.15.
Closing Date - see Section 11.1.
Code means the Internal Revenue Code of 1986.
Collateral Access Agreement means an agreement in form and
substance reasonably satisfactory to the Agent pursuant to which a
mortgagee or lessor of real property on which collateral is stored or
otherwise located, or a warehouseman, processor or other bailee of
Inventory, acknowledges the Liens of the Agent and waives any Liens held
by such Person on such property, and, in the case of any such agreement
with a mortgagee or lessor, permits the Agent access to and use of such
real property for a reasonable amount of time following the occurrence
and during the continuance of an Event of Default to assemble, complete
and sell any collateral stored or otherwise located thereon.
Collateral Documents means the Security Agreement, the Purchase
Agreement Assignment, each Mortgage, each Pledge Agreement and any other
agreement or instrument pursuant to which the Company, any Subsidiary or
any other Person grants collateral to the Agent for the benefit of the
Banks.
Commitment means, as to any Bank, such Bank's commitment to make
Loans, and to issue or participate in Letters of Credit, under this
Agreement. The initial amount of each Bank's Pro Rata Share of the
Revolving Commitment Amount and of the aggregate amount of the Term Loans
is set forth on Schedule 2.1.
Company - see the Preamble.
Computation Period means each of the following periods: (i) the
Fiscal Quarter ending March 31, 1999; (ii) the period of two consecutive
Fiscal Quarters ending June 30, 1999; (iii) the period of three
consecutive Fiscal Quarters ending September 30, 1999; and (iv) each
period of four consecutive Fiscal Quarters ending on the last day of a
Fiscal Quarter thereafter.
Consolidated Net Income means, with respect to the Company and its
Subsidiaries for any period, the net income (or loss) of the Company and
its Subsidiaries for such period.
Controlled Group means all members of a controlled group of
corporations and all members of a controlled group of trades or
businesses (whether or not incorporated) under common control which,
together with the Company, are treated as a single employer under Section
414 of the Code or Section 4001 of ERISA.
Debt of any Person means, without duplication, (a) all indebtedness
of such Person for borrowed money, whether or not evidenced by bonds,
debentures, notes or similar instruments, (b) all obligations of such
Person as lessee under Capital Leases which have been or should be
recorded as liabilities on a balance sheet of such Person in accordance
with GAAP, (c) all obligations of such Person to pay the deferred
purchase price of property or services (excluding trade accounts payable
in the ordinary course of business), (d) all indebtedness secured by a
Lien on the property of such Person, whether or not such indebtedness
shall have been assumed by such Person, (e) all obligations, contingent
or otherwise, with respect to the face amount of all letters of credit
(whether or not drawn) and banker's acceptances issued for the account of
such Person (including the Letters of Credit), (f) all Hedging
Obligations of such Person, (g) all Suretyship Liabilities of such Person
and (h) all Debt of any partnership of which such Person is a general
partner.
Debt to be Repaid means Debt listed on Schedule 11.1.
Designated Proceeds - see Section 6.2.2(a).
Disposal - see the definition of "Release".
Dollar and the sign "$" mean lawful money of the United States of
America.
EBITDA means, for any period, Consolidated Net Income for such
period plus, to the extent deducted in determining such Consolidated Net
Income, Interest Expense, income tax expense, depreciation, amortization
and noncash extraordinary losses for such period, minus any gains from
Asset Sales, any noncash extraordinary gains and any gains from
discontinued operations.
Eligible Account Receivable means an Account Receivable owing to
the Company or any Subsidiary which meets each of the following
requirements:
(1) it arises from the sale of goods or the rendering of services by the
Company or the applicable Subsidiary; and if it arises from the sale of
goods, (i) such goods comply with such Account Debtor's specifications
(if any) and have been delivered to such Account Debtor and (ii) the
Company or the applicable Subsidiary has possession of, or if requested
by the Agent has delivered to the Agent, delivery receipts evidencing
such delivery;
(2) it (a) is subject to a perfected Lien in favor of the Agent and (b)
is not subject to any other assignment, claim or Lien;
(3) it is a valid, legally enforceable and unconditional obligation of
the Account Debtor with respect thereto, and is not subject to any
counterclaim, credit, allowance, discount, rebate or adjustment by the
Account Debtor with respect thereto, or to any claim by such Account
Debtor denying liability thereunder in whole or in part (provided, that
in the event any counterclaim, credit, allowance, rebate or adjustment is
asserted, or discount is granted, the Account Receivable shall only be
ineligible pursuant to this clause (3) to the extent of the same);
(4) there is no bankruptcy, insolvency or liquidation proceeding by or
against the Account Debtor with respect thereto;
(5) the Account Debtor with respect thereto is a resident or citizen of,
and is located within, the United States or Canada, unless the sale of
goods or services giving rise to such Account Receivable is on letter of
credit, banker's acceptance or other credit support terms reasonably
satisfactory to the Agent;
(6) it is not an Account Receivable arising from a "sale on approval,"
"sale or return," "consignment" or "bill and hold" or subject to any
other repurchase or return agreement;
(7) it is not an Account Receivable with respect to which possession
and/or control of the goods sold giving rise thereto is held, maintained
or retained by the Company or any Subsidiary (or by any agent or
custodian of the Company or any Subsidiary) for the account of or subject
to further and/or future direction from the Account Debtor with respect
thereto;
(8) it arises in the ordinary course of business of the Company or the
applicable Subsidiary;
(9) if the Account Debtor is the United States or any department, agency
or instrumentality thereof, the Company or the applicable Subsidiary has
assigned its right to payment of such Account Receivable to the Agent
pursuant to the Assignment of Claims Act of 1940;
(10) if the Company maintains a credit limit for an Account Debtor, the
aggregate dollar amount of Accounts Receivable due from such Account
Debtor, including such Account Receivable, does not exceed such credit
limit;
(11) if the Account Receivable is evidenced by chattel paper or an
instrument, the originals of such chattel paper or instrument shall have
been endorsed and/or assigned and delivered to the Agent in a manner
satisfactory to the Agent;
(12) such Account Receivable is not more than (a) 90 days past the due
date thereof (reduced by the number of days, if any, by which the due
date exceeds 30) or (b) 120 days past the original invoice date thereof,
in each case according to the original terms of sale;
(13) it is not an Account Receivable with respect to an Account Debtor
that is located in any jurisdiction which has adopted a statute or other
requirement with respect to which any Person that obtains business from
within such jurisdiction must file a notice of business activities report
or make any other required filings in a timely manner in order to enforce
its claims in such jurisdiction's courts unless such notice of business
activities report has been duly and timely filed or the Company or the
applicable Subsidiary is exempt from filing such report and has provided
the Agent with satisfactory evidence of such exemption;
(14) the Account Debtor with respect thereto is not the
Company or an Affiliate of the Company;
(15) it is not owed by an Account Debtor with respect to which 25% or
more of the aggregate amount of outstanding Accounts Receivable owed at
such time by such Account Debtor is classified as ineligible under clause
(12) of this definition; and
(16) if the aggregate amount of all Accounts Receivable owed by the
Account Debtor thereon exceeds 50% (or, in the case of Accounts
Receivable owed by the Account Debtor in respect of a particular
contract, 25%) of the aggregate amount of all Accounts Receivable at such
time, then, in either case, all Accounts Receivable owed by such Account
Debtor in excess of such amount shall be deemed ineligible.
An Account Receivable which is at any time an Eligible Account
Receivable, but which subsequently fails to meet any of the foregoing
requirements, shall forthwith cease to be an Eligible Account Receivable.
Further, with respect to any Account Receivable, if the Agent or the
Required Banks at any time hereafter determine in their discretion that
the prospect of payment or performance by the Account Debtor with respect
thereto is materially impaired for any reason whatsoever, such Account
Receivable shall cease to be an Eligible Account Receivable after notice
of such determination is given to the Company.
Eligible Inventory means Inventory of the Company or any Subsidiary
which meets each of the following requirements:
(1) it (a) is subject to a perfected Lien in favor of the Agent and (b)
is not subject to any other assignment, claim or Lien;
(2) it is salable;
(3) it is in the possession and control of the Company or any
Subsidiary and it is stored and held in facilities owned by the Company
or any Subsidiary or, if such facilities are not so owned, the Agent is
in possession of a Collateral Access Agreement or a consent referred to
in Section 11.1.7 with respect thereto;
(4) it is not Inventory produced in violation of the Fair Labor
Standards Act and subject to the "hot goods" provisions contained in
Title 29 U.S.C. Section 215;
(5) it is not subject to any agreement which would restrict the Agent's
ability to sell or otherwise dispose of such Inventory;
(6) it is located in the United States or in any territory or possession
of the United States that has adopted Article 9 of the Uniform Commercial
Code;
(7) it is not "in transit" to the Company or any Subsidiary or held by
the Company or any Subsidiary on consignment; and
(8) the Agent shall not have determined in its discretion that it is
unacceptable due to age, type, category, quality, quantity and/or any
other reason whatsoever.
Inventory which is at any time Eligible Inventory but which subsequently
fails to meet any of the foregoing requirements shall forthwith cease to
be Eligible Inventory.
Environmental Claims means all claims, however asserted, by any
governmental, regulatory or judicial authority or other Person alleging
potential liability or responsibility for violation of any Environmental
Law, or for release or injury to the environment.
Environmental Laws means all present or future federal, state or
local laws, statutes, common law duties, rules, regulations, ordinances
and codes, together with all administrative orders, directed duties,
requests, licenses, authorizations and permits of, and agreements with,
any governmental authority, in each case relating to Environmental
Matters.
Environmental Matters means any matter arising out of or relating
to health and safety, or pollution or protection of the environment or
workplace, including any of the foregoing relating to the presence, use,
production, generation, handling, transport, treatment, storage,
disposal, distribution, discharge, release, control or cleanup of any
Hazardous Substance.
ERISA means the Employee Retirement Income Security Act of 1974.
Eurocurrency Reserve Percentage means, with respect to any
Eurodollar Loan for any Interest Period, a percentage (expressed as a
decimal) equal to the daily average during such Interest Period of the
percentage in effect on each day of such Interest Period, as prescribed
by the FRB, for determining the aggregate maximum reserve requirements
applicable to "Eurocurrency Liabilities" pursuant to Regulation D or any
other then applicable regulation of the FRB which prescribes reserve
requirements applicable to "Eurocurrency Liabilities" as presently
defined in Regulation D.
Eurodollar Loan means any Loan which bears interest at a rate
determined by reference to the Eurodollar Rate (Reserve Adjusted).
Eurodollar Margin - see the Pricing Schedule.
Eurodollar Office means with respect to any Bank the office or
offices of such Bank which shall be making or maintaining the Eurodollar
Loans of such Bank hereunder. A Eurodollar Office of any Bank may be, at
the option of such Bank, either a domestic or foreign office.
Eurodollar Rate means, with respect to any Eurodollar Loan for any
Interest Period, a rate per annum equal to the offered rate for deposits
in Dollars for a period equal or comparable to such Interest Period which
appears on Telerate page 3750 as of 11:00 A.M. (London time) two Business
Days prior to the first day of such Interest Period. "Telerate Page 3750
"means the display designated as "Page 3750" on the Telerate Service (or
such other page as may replace page 3750 on that service or such other
service as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Bankers'
Association Interest Settlement Rates for Dollar deposits).
Eurodollar Rate (Reserve Adjusted) means, with respect to any
Eurodollar Loan for any Interest Period, a rate per annum (rounded
upwards, if necessary, to the nearest 1/16th of 1%) determined pursuant
to the following formula:
Eurodollar Rate = Eurodollar Rate
(Reserve Adjusted) 1-Eurocurrency
Reserve Percentage.
Event of Default means any of the events described in Section 12.1.
Excess Cash Flow means, for any period, the remainder of
(a) EBITDA for such period,
less
(b) the sum, without duplication, of
(i) scheduled repayments of principal of Term Loans made during such
period,
plus
(ii) voluntary prepayments of the Term Loans pursuant to Section 6.2.1
during such period,
plus
(iii) cash payments made in such period with respect to Capital
Expenditures,
plus
(iv) all federal, state, local and foreign income taxes paid in cash by
the Company and its Subsidiaries during such period,
plus
(v) cash Interest Expense of the Company and its Subsidiaries during
such period,
plus
(vi) any net increase in Adjusted Working Capital during such period.
Federal Funds Rate means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including
any such successor publication, "H.15(519)") on the preceding Business
Day opposite the caption "Federal Funds (Effective)"; or, if for any
relevant day such rate is not so published on any such preceding Business
Day, the rate for such day will be the arithmetic mean as determined by
the Agent of the rates for the last transaction in overnight Federal
funds arranged prior to 9:00 A.M. (New York City time) on that day by
each of three leading brokers of Federal funds transactions in New York
City selected by the Agent.
Fiscal Quarter means a fiscal quarter of a Fiscal Year.
Fiscal Year means the fiscal year of the Company and its
Subsidiaries, which period shall be the 12-month period ending on
December 31 of each year. References to a Fiscal Year with a number
corresponding to any calendar year (e.g., "Fiscal Year 1998") refer to
the Fiscal Year ending on December 31 of such calendar year.
Fixed Charge Coverage Ratio means, for any Computation Period, the
ratio of (a) the total for such period of EBITDA minus the sum of all
income taxes paid by the Company and its Subsidiaries and all Capital
Expenditures to (b) the sum for such period of (i) Interest Expense plus
(ii) required payments of principal of Funded Debt (including, without
limitation, the Term Loans but excluding the Revolving Loans).
FRB means the Board of Governors of the Federal Reserve System or
any successor thereto.
Funded Debt means, as to any Person, all Debt of such Person that
matures more than one year from the date of its creation (or is renewable
or extendible, at the option of such Person, to a date more than one year
from such date).
GAAP means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature
and authority within the U.S. accounting profession), which are
applicable to the circumstances as of the date of determination.
Group - see Section 2.2.1.
Guaranty means a guaranty substantially in the form of Exhibit C.
Hazardous Substances - see Section 9.15.
Hedging Agreement means any interest rate, currency or commodity
swap agreement, cap agreement or collar agreement, and any other
agreement or arrangement designed to protect a Person against
fluctuations in interest rates, currency exchange rates or commodity
prices.
Hedging Obligation means, with respect to any Person, any liability
of such Person under any Hedging Agreement.
Interest Coverage Ratio means, for any Computation Period, the
ratio of (a) EBITDA for such Computation Period to (b) Interest Expense
for such Computation Period.
Interest Expense means for any period the consolidated interest
expense of the Company and its Subsidiaries for such period (including
all imputed interest on Capital Leases and excluding any noncash interest
payable with respect to Subordinated Debt).
Interest Period means, as to any Eurodollar Loan, the period
commencing on the date such Loan is borrowed or continued as, or
converted into, a Eurodollar Loan and ending on the date one, two, three
or six months thereafter as selected by the Company pursuant to Section
2.2.2 or 2.2.3, as the case may be; provided that:
(i) if any Interest Period would otherwise end on a day that is not a
Business Day, such Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(ii) any Interest Period that begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period shall end on the last Business Day of the calendar month
at the end of such Interest Period;
(iii) the Company may not select any Interest Period for a Revolving
Loan which would extend beyond the scheduled Termination Date; and
(iv) the Company may not select any Interest Period for a Term Loan if,
after giving effect to such selection, the aggregate principal amount of
all Term Loans having Interest Periods ending after any date on which an
installment of the Term Loans is scheduled to be repaid would exceed the
aggregate principal amount of the Term Loans scheduled to be outstanding
after giving effect to such repayment.
Inventory has the meaning assigned to such term in the Uniform
Commercial Code as in effect in the State of Illinois on the date hereof.
Investment means, relative to any Person, any investment in another
Person, whether by acquisition of any debt or equity security, by making
any loan or advance or by becoming obligated with respect to a Suretyship
Liability in respect of obligations of such other Person (other than
travel and similar advances to employees in the ordinary course of
business).
Issuing Bank means LaSalle in its capacity as the issuer of Letters
of Credit hereunder and its successors and assigns in such capacity.
LaSalle - see the Preamble.
L/C Application means, with respect to any request for the issuance
of a Letter of Credit, a letter of credit application in the form being
used by the Issuing Bank at the time of such request for the type of
letter of credit requested.
LC Fee Rate - see the Pricing Schedule.
Letter of Credit - see Section 2.1.3.
Lien means, with respect to any Person, any interest granted by
such Person in any real or personal property, asset or other right owned
or being purchased or acquired by such Person which secures payment or
performance of any obligation and shall include any mortgage, lien,
encumbrance, charge or other security interest of any kind, whether
arising by contract, as a matter of law, by judicial process or
otherwise.
Loan Documents means this Agreement, the Notes, the Guaranty, the
L/C Applications, the Subordination Agreement and the Collateral
Documents.
Loan Party means the Company and each Subsidiary.
Loans means Revolving Loans and Term Loans.
Mandatory Prepayment Event - see Section 6.2.2(a).
Margin Stock means any "margin stock" as defined in Regulation U.
Material Adverse Effect means (a) a material adverse change in, or
a material adverse effect upon, the financial condition, operations,
assets, business, properties or prospects of the Company and its
Subsidiaries taken as a whole, (b) a material impairment of the ability
of the Company or any Subsidiary (other than MicroAssembly or Sysco) to
perform any of its obligations under any Loan Document or (c) a material
adverse effect upon any substantial portion of the collateral under the
Collateral Documents or upon the legality, validity, binding effect or
enforceability against the Company or any Subsidiary of any Loan
Document.
Mortgage means a mortgage, deed of trust, leasehold mortgage or
similar instrument granting the Agent a Lien on real property of the
Company or any Subsidiary.
Multiemployer Pension Plan means a multiemployer plan, as defined
in Section 4001(a)(3) of ERISA, to which the Company or any member of the
Controlled Group may have any liability.
Net Cash Proceeds means:
(a) with respect to any Asset Sale the aggregate cash proceeds(including
cash proceeds received by way of deferred payment of principal pursuant
to a note, installment receivable or otherwise, but only as and when
received) received by the Company or any Subsidiary pursuant to such
Asset Sale, but only to the extent such proceeds exceed $100,000 in any
Fiscal Year, net of (i) the direct costs relating to such sale, transfer
or other disposition (including sales commissions and legal, accounting
and investment banking fees), (ii) taxes paid or reasonably estimated by
the Company to be payable as a result thereof (after taking into account
any available tax credits or deductions and any tax sharing arrangements)
and (iii) amounts required to be applied to the repayment of any Debt
secured by a Lien on the asset subject to such Asset Sale (other than the
Loans); and
(b) with respect to any issuance of equity securities, the aggregate
cash proceeds received by the Company or any Subsidiary pursuant to such
issuance, net of the direct costs relating to such issuance (including
sales and underwriter's commission); and
(c) with respect to any issuance of Debt, the aggregate cash proceeds
received by the Company or any Subsidiary pursuant to such issuance, net
of the direct costs of such issuance(including up-front fees and
placement fees).
Non-Use Fee Rate - see the Pricing Schedule.
Note - see Section 3.1.
Operating Lease means any lease of (or other agreement conveying
the right to use) any real or personal property by the Company or any
Subsidiary, as lessee, other than any Capital Lease.
PBGC means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
Pension Plan means a "pension plan", as such term is defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than
a Multiemployer Pension Plan), and to which the Company or any member of
the Controlled Group may have any liability, including any liability by
reason of having been a substantial employer within the meaning of
Section 4063 of ERISA at any time during the preceding five years, or by
reason of being deemed to be a contributing sponsor under Section 4069 of
ERISA.
Person means any natural person, corporation, partnership, trust,
limited liability company, association, governmental authority or unit,
or any other entity, whether acting in an individual, fiduciary or other
capacity.
Pledge Agreement means a pledge agreement in substantially the form
of Exhibit E.
Pro Rata Share means, with respect to any Bank, the percentage
specified opposite such Bank's name on Schedule 2.1 hereto, as adjusted
from time to time in accordance with the terms hereof.
Prime Rate means, for any day, the rate of interest in effect for
such day as publicly announced from time to time by LaSalle as its prime
rate (whether or not such rate is actually charged by LaSalle). Any
change in the Prime Rate announced by LaSalle shall take effect at the
opening of business on the day specified in the public announcement of
such change.
Purchase means the acquisition by Compudyne of all of the
outstanding capital stock of Norment and Norshield pursuant to the
Purchase Agreement.
Purchase Agreement means that certain Stock Purchase Agreement
dated as of November 10, 1998 by and between Apogee Enterprises, Inc., a
Minnesota corporation, and Compudyne.
Purchase Agreement Assignment means a purchase agreement assignment
in substantially the form of Exhibit F.
RCRA - see Section 9.15.
Regulation D means Regulation D of the FRB.
Regulation U means Regulation U of the FRB.
Release has the meaning specified in CERCLA and the term "Disposal"
(or "Disposed") has the meaning specified in RCRA; provided that in the
event either CERCLA or RCRA is amended so as to broaden the meaning of
any term defined thereby, such broader meaning shall apply as of the
effective date of such amendment; and provided, further, that to the
extent that the laws of a state wherein any affected property lies
establish a meaning for "Release" or "Disposal" which is broader than is
specified in either CERCLA or RCRA, such broader meaning shall apply.
Required Banks means Banks having Pro Rata Shares aggregating 66 %
or more.
Revolving Commitment Amount means $6,500,000, as reduced from time
to time pursuant to Section 6.1.
Revolving Loan - see Section 2.1.1.
Revolving Outstandings means, at any time, the sum of (a) the
aggregate principal amount of all outstanding Revolving Loans, plus (b)
the Stated Amount of all Letters of Credit.
SEC means the Securities and Exchange Commission or any other
governmental authority succeeding to any of the principal functions
thereof.
Security Agreement means a security agreement substantially in the
form of Exhibit D.
Senior Debt means all Debt of the Company and its Subsidiaries
other than Subordinated Debt and Hedging Obligations.
Senior Debt to EBITDA Ratio means, as of the last day of any Fiscal
Quarter, the ratio of (i) Senior Debt as of such day to (ii) EBITDA for
the Computation Period ending on such day.
Stated Amount means, with respect to any Letter of Credit at any
date of determination, (a) the maximum aggregate amount available for
drawing thereunder under any and all circumstances plus (b) the aggregate
amount of all unreimbursed payments and disbursements under such Letter
of Credit.
Subordinated Debt means (i) the $9,000,000 Senior Subordinated Term
Note issued by Compudyne to Blair and (ii) any other unsecured Debt of
the Company which has subordination terms, covenants, pricing and other
terms which have been approved in writing by the Required Banks.
Subordination Agreement means the subordination and intercreditor
agreement substantially in the form of Exhibit K.
Subordinated Debt Documents means the (i) Subordinated Loan and
Investment Agreement dated November 30, 1998 between Compudyne and Blair
(the "Investment Agreement"), (ii) Senior Subordinated Term Note in the
principal amount of $9,000,000 issued by Compudyne to Blair, (iii)
Warrant to Purchase 297,924 shares of Compudyne stock issued to Blair by
Compudyne, (iv) Registration Rights Agreement dated November 30, 1998
between Compudyne and Blair, and (v) Corporate Governance and Shareholder
Agreement dated November 30, 1998 among Compudyne, Blair and certain
shareholders of Compudyne.
Subsidiary means, with respect to any Person, a corporation,
partnership, limited liability company or other entity of which such
Person and/or its other Subsidiaries own, directly or indirectly, such
number of outstanding shares or other ownership interests as have more
than 50% of the ordinary voting power for the election of directors or
other managers of such corporation, partnership, limited liability
company or other entity. Unless the context otherwise requires, each
reference to Subsidiaries herein shall be a reference to Subsidiaries of
the Company.
Subsidiary Borrower means each of Norment Industries, Inc., a
Delaware corporation ("Norment"), Norshield Corporation, an Alabama
corporation ("Norshield"), Quanta Systems Corporation, a Connecticut
corporation, Quanta SecurSystems, Inc., a Maryland corporation,
MicroAssembly Systems, Inc., a Connecticut corporation ("MicroAssembly"),
and Sysco Security Systems, Inc., a Nevada corporation ("Sysco").
Suretyship Liability means any agreement, undertaking or
arrangement by which any Person guarantees, endorses or otherwise becomes
or is contingently liable upon (by direct or indirect agreement,
contingent or otherwise, to provide funds for payment, to supply funds to
or otherwise to invest in a debtor, or otherwise to assure a creditor
against loss) any indebtedness, obligation or other liability of any
other Person (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other
distributions upon the shares of any other Person. The amount of any
Person's obligation in respect of any Suretyship Liability shall (subject
to any limitation set forth therein) be deemed to be the principal amount
of the debt, obligation or other liability supported thereby.
Term Loan - see Section 2.1.2.
Termination Date means the earlier to occur of (a) November 30,
2001 or (b) such other date on which the Commitments terminate pursuant
to Section 6 or 12.
Total Debt means all Debt of the Company and its Subsidiaries,
determined on a consolidated basis, excluding (i) contingent obligations
in respect of Suretyship Liabilities (except to the extent constituting
Suretyship Liabilities in respect of Debt of a Person other than the
Company or any Subsidiary), (ii) Hedging Obligations , and (iii) Debt of
the Company to Subsidiaries and Debt of Subsidiaries to the Company or to
other Subsidiaries and (iv) contingent obligations in respect of undrawn
letters of credit.
Type of Loan or Borrowing - see Section 2.2.1. The types of Loans
or borrowings under this Agreement are as follows: Base Rate Loans or
borrowings and Eurodollar Loans or borrowings.
Unmatured Event of Default means any event that, if it continues
uncured, will, with lapse of time or notice or both, constitute an Event
of Default.
Unobtained Permits - see Section 11.1.21.
Wholly-Owned Subsidiary means, as to any Person, another Person all
of the shares of capital stock or other ownership interests of which
(except directors' qualifying shares) are at the time directly or
indirectly owned by such Person and/or another Wholly-Owned Subsidiary of
such Person.
Year 2000 Problem means the risk that computer applications and
embedded microchips in non-computing devices may be unable to recognize
and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999.
1.2 Other Interpretive Provisions. (a) The meanings of defined terms are
equally applicable to the singular and plural forms of the defined terms.
(b) Section, Schedule and Exhibit references are to this Agreement
unless otherwise specified.
(c) The term "including" is not limiting and means "including without
limitation."
(d) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including"; the
words "to" and "until" each mean "to but excluding", and the word
"through" means "to and including."
(e) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments
shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and
(ii) references to any statute or regulation shall be construed as
including all statutory and regulatory provisions amending, replacing,
supplementing or interpreting such statute or regulation.
(f) This Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are
cumulative and each shall be performed in accordance with its terms.
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the
Company, the Banks and the other parties thereto and are the products of
all parties. Accordingly, they shall not be construed against the Agent
or the Banks merely because of the Agent's or Banks' involvement in their
preparation.
SECTION 2 COMMITMENTS OF THE BANKS; BORROWING, CONVERSION AND LETTER
OF CREDIT PROCEDURES.
2.1 Commitments. On and subject to the terms and conditions of this
Agreement, each of the Banks, severally and for itself alone, agrees
to make loans to, and to issue or participate in letters of credit for
the account of, the Company as follows:
2.1.1 Revolving Loan Commitment. Each Bank will make loans on a
revolving basis ("Revolving Loans") from time to time until the
Termination Date in such Bank's Pro Rata Share of such aggregate amounts
as the Company may request from all Banks; provided that the Revolving
Outstandings will not at any time exceed the lesser of (x) the Revolving
Commitment Amount and (y) the Borrowing Base.
2.1.2 Term Loan Commitment. Each Bank agrees to make a loan to the
Company (each such loan, a "Term Loan") on the Closing Date in such
Bank's Pro Rata Share of $11,500,000. The commitments of the Banks to
make Term Loans shall expire concurrently with the making of the Term
Loans on the Closing Date.
2.1.3 L/C Commitment. (a) The Issuing Bank will issue letters of credit,
in each case containing such terms and conditions as are permitted by
this Agreement and are reasonably satisfactory to the Issuing Bank (each
a "Letter of Credit"), at the request of and for the account of the
Company from time to time before the date which is 30 days prior to the
Termination Date and (b) as more fully set forth in Section 2.3.2, each
Bank agrees to purchase a participation in each such Letter of Credit;
provided that (i) the aggregate Stated Amount of all Letters of Credit
shall not at any time exceed $1,500,000 and (ii) the Revolving
Outstandings will not at any time exceed the lesser of (x) the Revolving
Commitment Amount and (y) the Borrowing Base.
2.2 Loan Procedures.
2.2.1 Various Types of Loans. Each Revolving Loan shall be, and each
Term Loan may be divided into tranches which are, either a Base Rate
Loan or a Eurodollar Loan (each a "type" of Loan), as the Company shall
specify in the related notice of borrowing or conversion pursuant to
Section 2.2.2 or 2.2.3. Eurodollar Loans having the same Interest Period
are sometimes called a "Group" or collectively "Groups". Base Rate Loans
and Eurodollar Loans may be outstanding at the same time, provided that
not more than five different Groups of Eurodollar Loans shall be
outstanding at any one time. All borrowings, conversions and repayments
of Revolving Loans shall be effected so that each Bank will have a pro
rata share (according to its Pro Rata Share) of all types and Groups of
Loans.
2.2.2 Borrowing Procedures. (a) The Company shall give written notice or
telephonic notice (followed immediately by written confirmation thereof)
to the Agent of each proposed borrowing not later than (a) in the case of
a Base Rate borrowing, 11:00 A.M., Chicago time, on the proposed date of
such borrowing, and (b) in the case of a Eurodollar borrowing, 11:00
A.M., Chicago time, at least three Business Days prior to the proposed
date of such borrowing. Each such notice shall be effective upon receipt
by the Agent, shall be irrevocable, and shall specify the date, amount
and type of borrowing and, in the case of a Eurodollar borrowing, the
initial Interest Period therefor. Promptly upon receipt of such notice,
the Agent shall advise each Bank thereof. Not later than 1:00 P.M.,
Chicago time, on the date of a proposed borrowing, each Bank shall
provide the Agent at the office specified by the Agent with immediately
available funds covering such Bank's Pro Rata Share of such borrowing
and, so long as the Agent has not received written notice that the
conditions precedent set forth in Section 11 with respect to such
borrowing have not been satisfied, the Agent shall pay over the funds
received by the Agent to the Company on the requested borrowing date.
Each borrowing shall be on a Business Day. Each Base Rate borrowing
shall be in an aggregate amount of at least $50,000 and an integral
multiple of $50,000, and each Eurodollar borrowing shall be in an
aggregate amount of at least $300,000 and an integral multiple of
at least $100,000.
(b) Each Subsidiary Borrower hereby designates Compudyne as its
representative and agent on its behalf for the purposes of issuing
notices of borrowing and conversion notices, giving instructions with
respect to the disbursement of proceeds of the Loans, selecting interest
rate options, requesting Letters of Credit, giving and receiving all
other notices and consents hereunder or under any of the other Loan
Documents and taking all other actions (including in respect of
compliance with covenants and with respect to any agreement for any
amendments, modifications, consents and waivers regarding this Agreement
or any other Loan Document) on behalf of any Subsidiary Borrower under
the Loan Documents. Compudyne hereby accepts such appointment. The
Agent and each Bank may regard any notice or other communication pursuant
to any Loan Document from Compudyne as a notice or communication from all
of the Companies, and may give any notice or communication required to be
given to any Subsidiary Borrower hereunder to Compudyne on behalf of such
Subsidiary Borrower. Each Subsidiary Borrower agrees that each notice,
election, representation, warranty, covenant, agreement and undertaking
made on its behalf by Compudyne shall be deemed for all purposes to have
been made by such Subsidiary Borrower and shall be binding upon and
enforceable against such Subsidiary Borrower to the same extent as if the
same had been made directly by such Subsidiary Borrower.
2.2.3 Conversion and Continuation Procedures. (a) Subject to Section
2.2.1, the Company may, upon irrevocable written notice to the Agent in
accordance with clause (b) below:
(i) elect, as of any Business Day, to convert any Loans(or any part
thereof in an aggregate amount not less than $300,000 or a higher
integral multiple of $100,000) into Loans of the other type; or
(ii) elect, as of the last day of the applicable Interest Period, to
continue any Eurodollar Loans having Interest Periods expiring on such
day (or any part thereof in an aggregate amount not less than $300,000 or
a higher integral multiple of $100,000) for a new Interest Period;
provided that after giving effect to any prepayment, conversion or
continuation, the aggregate principal amount of each Group of Eurodollar
Loans shall be at least $300,000 and an integral multiple of $100,000.
(b) The Company shall give written or telephonic (followed immediately
by written confirmation thereof) notice to the Agent of each proposed
conversion or continuation not later than (i) in the case of conversion
into Base Rate Loans, 11:00 A.M., Chicago time, on the proposed date of
such conversion and (ii) in the case of conversion into or continuation
of Eurodollar Loans, 11:00 A.M., Chicago time, at least three Business
Days prior to the proposed date of such conversion or continuation,
specifying in each case:
(i) the proposed date of conversion or continuation;
(ii) the aggregate amount of Loans to be converted or continued;
(iii) the type of Loans resulting from the proposed conversion or
continuation; and
(iv) in the case of conversion into, or continuation of, Eurodollar
Loans, the duration of the requested Interest Period therefor.
(c) If upon the expiration of any Interest Period applicable to
Eurodollar Loans, the Company has failed to select timely a new
Interest Period to be applicable to such Eurodollar Loans, the Company
shall be deemed to have elected to convert such Eurodollar Loans into
Base Rate Loans effective on the last day of such Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of a notice
of conversion or continuation pursuant to this Section 2.2.3 or, if no
timely notice is provided by the Company, of the details of any automatic
conversion.
(e) Any conversion of a Eurodollar Loan on a day other than the last day
of an Interest Period therefor shall be subject to Section 8.4.
2.3 Letter of Credit Procedures.
2.3.1 L/C Applications. The Company shall give notice to the Agent
and the Issuing Bank of the proposed issuance of each Letter of Credit on
a Business Day which is at least three Business Days (or such lesser
number of days as the Agent and the Issuing Bank shall agree in any
particular instance in their sole discretion) prior to the proposed date
of issuance of such Letter of Credit. Each such notice shall be
accompanied by an L/C Application, duly executed by the Company and in
all respects satisfactory to the Agent and the Issuing Bank, together
with such other documentation as the Agent or the Issuing Bank may
request in support thereof, it being understood that each L/C Application
shall specify, among other things, the date on which the proposed Letter
of Credit is to be issued, the expiration date of such Letter of Credit
(which shall not be later than the earlier to occur of (x) one year after
the date of issuance thereof (provided that a Letter of Credit with a
one-year tenor may be automatically renewable annually upon notice to the
Agent so long as, after giving effect to any renewal, the expiration date
of such Letter of Credit shall not extend beyond the date referred to in
clause (y)) and (y) thirty days prior to the scheduled Termination Date)
and whether such Letter of Credit is to be transferable in whole or in
part. So long as the Issuing Bank has not received written notice that
the conditions precedent set forth in Section 11 with respect to the
issuance of such Letter of Credit have not been satisfied, the Issuing
Bank shall issue such Letter of Credit on the requested issuance date.
The Issuing Bank shall promptly advise the Agent of the issuance of each
Letter of Credit and of any amendment thereto, extension thereof or event
or circumstance changing the amount available for drawing thereunder. In
the event of any inconsistency between the terms of any L/C Application
and the terms of this Agreement, the terms of this Agreement shall
control.
2.3.2 Participations in Letters of Credit. Concurrently with the
issuance of each Letter of Credit, the Issuing Bank shall be deemed to
have sold and transferred to each other Bank, and each other Bank shall
be deemed irrevocably and unconditionally to have purchased and received
from the Issuing Bank, without recourse or warranty, an undivided
interest and participation, to the extent of such other Bank's Pro Rata
Share, in such Letter of Credit and the Company's reimbursement
obligations with respect thereto. For the purposes of this Agreement,
the unparticipated portion of each Letter of Credit shall be deemed to be
the Issuing Bank's "participation" therein. The Issuing Bank hereby
agrees, upon request of the Agent or any Bank, to deliver to the Agent or
such Bank a list of all outstanding Letters of Credit issued by the
Issuing Bank, together with such information related thereto as the Agent
or such Bank may reasonably request.
2.3.3 Reimbursement Obligations. The Company hereby unconditionally and
irrevocably agrees to reimburse the Issuing Bank for each payment or
disbursement made by the Issuing Bank under any Letter of Credit honoring
any demand for payment made by the beneficiary thereunder, in each case
on the date that such payment or disbursement is made. Any amount not
reimbursed on the date of such payment or disbursement shall bear
interest from the date of such payment or disbursement to the date that
the Issuing Bank is reimbursed by the Company therefor, payable on
demand, at a rate per annum equal to the Base Rate from time to time in
effect plus the Base Rate Margin from time to time in effect plus,
beginning on the third Business Day after receipt of notice from the
Issuing Bank of such payment or disbursement, 2%. The Issuing Bank shall
notify the Company and the Agent whenever any demand for payment is made
under any Letter of Credit by the beneficiary thereunder; provided that
the failure of the Issuing Bank to so notify the Company shall not affect
the rights of the Issuing Bank or the Banks in any manner whatsoever.
2.3.4 Limitation on Obligations of Issuing Bank. In determining whether
to pay under any Letter of Credit, the Issuing Bank shall not have any
obligation to the Company or any Bank other than to confirm that any
documents required to be delivered under such Letter of Credit appear
to have been delivered and appear to comply on their face with the
requirements of such Letter of Credit. Any action taken or omitted to be
taken by the Issuing Bank under or in connection with any Letter of
Credit, if taken or omitted in the absence of gross negligence and
willful misconduct, shall not impose upon the Issuing Bank any liability
to the Company or any Bank and shall not reduce or impair the Company's
reimbursement obligations set forth in Section 2.3.3 or the obligations
of the Banks pursuant to Section 2.3.5.
2.3.5 Funding by Banks to Issuing Bank. If the Issuing Bank makes any
payment or disbursement under any Letter of Credit and the Company has
not reimbursed the Issuing Bank in full for such payment or disbursement
by 11:00 A.M., Chicago time, on the date of such payment or disbursement,
or if any reimbursement received by the Issuing Bank from the Company is
or must be returned or rescinded upon or during any bankruptcy or
reorganization of the Company or otherwise, each other Bank shall be
obligated to pay to the Agent for the account of the Issuing Bank, in
full or partial payment of the purchase price of its participation in
such Letter of Credit, its Pro Rata Share of such payment or disbursement
(but no such payment shall diminish the obligations of the Company under
Section 2.3.3), and, upon notice from the Issuing Bank, the Agent shall
promptly notify each other Bank thereof. Each other Bank irrevocably and
unconditionally agrees to so pay to the Agent in immediately available
funds for the Issuing Bank's account the amount of such other Bank's
Percentage of such payment or disbursement. If and to the extent any
Bank shall not have made such amount available to the Agent by 2:00 P.M.,
Chicago time, on the Business Day on which such Bank receives notice from
the Agent of such payment or disbursement (it being understood that any
such notice received after noon, Chicago time, on any Business Day shall
be deemed to have been received on the next following Business Day), such
Bank agrees to pay interest on such amount to the Agent for the Issuing
Bank's account forthwith on demand, for each day from the date such
amount was to have been delivered to the Agent to the date such amount is
paid, at a rate per annum equal to (a) for the first three days after
demand, the Federal Funds Rate from time to time in effect and (b)
thereafter, the Base Rate from time to time in effect. Any Bank's
failure to make available to the Agent its Pro Rata Share of any such
payment or disbursement shall not relieve any other Bank of its
obligation hereunder to make available to the Agent such other Bank's Pro
Rata Share of such payment, but no Bank shall be responsible for the
failure of any other Bank to make available to the Agent such other
Bank's Pro Rata Share of any such payment or disbursement.
2.4 Commitments Several. The failure of any Bank to make a requested
Loan on any date shall not relieve any other Bank of its obligation (if
any) to make a Loan on such date, but no Bank shall be responsible for
the failure of any other Bank to make any Loan to be made by such other
Bank.
2.5 Certain Conditions. Notwithstanding any other provision of this
Agreement, no Bank shall have an obligation to make any Loan, or to
permit the continuation of or any conversion into any Eurodollar Loan,
and the Issuing Bank shall not have any obligation to issue any Letter of
Credit, if an Event of Default or Unmatured Event of Default exists.
SECTION 3 NOTES EVIDENCING LOANS.
3.1 Notes. The Loans of each Bank shall be evidenced by a promissory
note (each a "Note") substantially in the form set forth in Exhibit A,
with appropriate insertions, payable to the order of such Bank in a face
principal amount equal to the sum of such Bank's Pro Rata Share of the
Revolving Commitment Amount plus the principal amount of such Bank's Term
Loan, as follows:
(a) each Revolving Loan of such Bank shall be paid in full on the
Termination Date; and
(b) the Term Loan of such Bank shall be paid in installments equal to
such Bank's Pro Rata Share of the aggregate principal amount of the
installments of the Term Loans as set forth on Schedule 3.1.
3.2 Recordkeeping. Each Bank shall record in its records, or at its
option on the schedule attached to its Note, the date and amount of
each Loan made by such Bank, each repayment or conversion thereof and, in
the case of each Eurodollar Loan, the dates on which each Interest Period
for such Loan shall begin and end. The aggregate unpaid principal amount
so recorded shall be rebuttable presumptive evidence of the principal
amount owing and unpaid on such Note. The failure to so record any such
amount or any error in so recording any such amount shall not, however,
limit or otherwise affect the obligations of the Company hereunder or
under any Note to repay the principal amount of the Loans evidenced by
such Note together with all interest accruing thereon.
SECTION 4 INTEREST.
4.1 Interest Rates. Each of the Companies promises to pay, on a joint
and several basis, interest on the unpaid principal amount of each Loan
for the period commencing on the date of such Loan until such Loan is
paid in full as follows:
(a) at all times while such Loan is a Base Rate Loan, at a rate per
annum equal to the sum of the Base Rate from time to time in effect plus
the Base Rate Margin from time to time in effect; and
(b) at all times while such Loan is a Eurodollar Loan, at a rate per
annum equal to the sum of the Eurodollar Rate (Reserve Adjusted)
applicable to each Interest Period for such Loan plus the Eurodollar
Margin from time to time in effect;
provided that at any time an Event of Default exists, if requested by the
Required Banks, the interest rate applicable to each Loan shall be
increased by 2%.
4.2 Interest Payment Dates. Accrued interest on each Base Rate Loan
shall be payable in arrears on the last day of each calendar quarter
and at maturity. Accrued interest on each Eurodollar Loan shall be
payable on the last day of each Interest Period relating to such Loan
(and, in the case of a Eurodollar Loan with a six-month Interest Period,
on the three-month anniversary of the first day of such Interest Period)
and at maturity. After maturity, accrued interest on all Loans shall be
payable on demand.
4.3 Setting and Notice of Eurodollar Rates. The applicable Eurodollar
Rate for each Interest Period shall be determined by the Agent, and
notice thereof shall be given by the Agent promptly to the Company and
each Bank. Each determination of the applicable Eurodollar Rate by the
Agent shall be conclusive and binding upon the parties hereto, in the
absence of demonstrable error. The Agent shall, upon written request of
the Company or any Bank, deliver to the Company or such Bank a statement
showing the computations used by the Agent in determining any applicable
Eurodollar Rate hereunder.
4.4 Computation of Interest. Interest shall be computed for the actual
number of days elapsed on the basis of a year of 360 days. The
applicable interest rate for each Base Rate Loan shall change
simultaneously with each change in the Base Rate.
SECTION 5 FEES.
5.1 Non-Use Fee. Each of the Companies agrees to pay, on a joint and
several basis, to the Agent for the account of each Bank a non-use fee,
for the period from the Closing Date to the Termination Date, at the
Non-Use Fee Rate in effect from time to time of such Bank's Pro Rata
Share (as adjusted from time to time) of the unused amount of the
Revolving Commitment Amount. For purposes of calculating usage under
this Section, the Revolving Commitment Amount shall be deemed used to the
extent of the aggregate principal amount of all outstanding Revolving
Loans plus the Stated Amount of all Letters of Credit. Such non-use fee
shall be payable in arrears on the last day of each calendar quarter and
on the Termination Date for any period then ending for which such non-use
fee shall not have previously been paid. The non-use fee shall be
computed for the actual number of days elapsed on the basis of a year of
360 days.
5.2 Letter of Credit Fees. (a) Each of the Companies agrees to pay, on
a joint and several basis, to the Agent for the account of each Bank a
letter of credit fee for each Letter of Credit equal to the LC Fee Rate
in effect from time to time of such Bank's Pro Rata Share (as adjusted
from time to time) of the undrawn amount of such Letter of Credit
(computed for the actual number of days elapsed on the basis of a year of
360 days); provided that, if requested by the Required Banks, the rate
applicable to each Letter of Credit shall be increased by 2% at any time
that an Event of Default exists. Such letter of credit fee shall be
payable in arrears on the last day of each calendar quarter and on the
Termination Date (or such later date on which such Letter of Credit
expires or is terminated) for the period from the date of the issuance of
each Letter of Credit (or the last day on which the letter of credit fee
was paid with respect thereto) to the date such payment is due or, if
earlier, the date on which such Letter of Credit expired or was
terminated.
(b) In addition, with respect to each Letter of Credit, each of the
Companies agrees to pay, on a joint and several basis, to the Issuing
Bank, for its own account, (i) such fees and expenses as the Issuing Bank
customarily requires in connection with the issuance, negotiation,
processing and/or administration of letters of credit in similar
situations and (ii) a letter of credit fronting fee in the amount and at
the times agreed to by the Company and the Issuing Bank.
5.3 Upfront Fees. Each of the Companies agrees to pay, on a joint and
several basis, to the Agent an upfront fee of $225,000.
5.4 Agent's Fees. Each of the Companies agrees to pay, on a joint and
several basis, to the Agent such agent's fees as are mutually agreed to
from time to time by the Company and the Agent; provided that no such
agent's fees shall be payable hereunder for so long as (i) LaSalle is the
sole Bank or (ii) the Revolving Commitment Amount and the Term Loans do
not exceed $18,000,000, in aggregate; provided further that, to the
extent payable hereunder, such agent's fees shall be payable in respect
of the aggregate Commitments of the Banks.
SECTION 6 REDUCTION OR TERMINATION OF THE REVOLVING COMMITMENT AMOUNT;
PREPAYMENTS.
6.1 Reduction or Termination of the Revolving Commitment Amount.
6.1.1 Voluntary Reduction or Termination of the Revolving Commitment
Amount. The Company may from time to time on at least five Business
Days' prior written notice received by the Agent (which shall promptly
advise each Bank thereof) permanently reduce the Revolving Commitment
Amount to an amount not less than the Revolving Outstandings. Any such
reduction shall be in an amount not less than $500,000 or a higher
integral multiple of $100,000. Concurrently with any reduction of the
Revolving Commitment Amount to zero, the Company shall pay all interest
on the Revolving Loans, all non-use fees and all letter of credit fees
and shall Cash Collateralize in full all obligations arising with respect
to the Letters of Credit.
6.1.2 All Reductions of the Revolving Commitment Amount. All reductions
of the Revolving Commitment Amount shall reduce the Commitments pro rata
among the Banks according to their respective ProRata Shares.
6.2 Prepayments.
6.2.1 Voluntary Prepayments. The Company may from time to time prepay
the Loans in whole or in part; provided that the Company shall give the
Agent (which shall promptly advise each Bank) notice thereof not later
than 11:00 A.M., Chicago time, on the day of such prepayment (which shall
be a Business Day), specifying the Loans to be prepaid and the date and
amount of prepayment. Any such partial prepayment shall be in an amount
equal to $50,000 or a higher integral multiple of $50,000.
6.2.2 Mandatory Prepayments. (a) The Company shall make a prepayment of
the Term Loans upon the occurrence of any of the following (each a
"Mandatory Prepayment Event") at the following times and in the following
amounts (such applicable amounts being referred to as "Designated
Proceeds"):
(i) Concurrently with the receipt by the Company or any Subsidiary of
any Net Cash Proceeds from any Asset Sale, in an amount equal to 100% of
such Net Cash Proceeds.
(ii) Concurrently with the receipt by the Company or any Subsidiary of
any Net Cash Proceeds from any issuance of equity securities of the
Company or any Subsidiary (excluding (x) any issuance of shares of
capital stock pursuant to any employee or director stock option program,
benefit plan or compensation program and (y) any issuance by a Subsidiary
to the Company or another Subsidiary), in an amount equal to 100% of such
Net Cash Proceeds.
(iii) Concurrently with the receipt by the Company or any Subsidiary of
any Net Cash Proceeds from any issuance of any Debt of the Company or any
Subsidiary (excluding Debt permitted by clauses (a) through (i)of Section
10.7), in an amount equal to 100% of such Net Cash Proceeds.
(iv) Within 90 days after the end of each Fiscal Year(commencing with
Fiscal Year 1999), in an amount equal to 75% of Excess Cash Flow for such
Fiscal Year, or, if for any Fiscal Year (commencing with Fiscal Year
1999) the Senior Debt to EBITDA Ratio shall be equal to or less than
1.50, 50% of Excess Cash Flow for such Fiscal Year.
(b) If on any day the Revolving Outstandings exceed the Borrowing Base,
the Company shall immediately prepay Revolving Loans and/or Cash
Collateralize the outstanding Letters of Credit, or do a combination of
the foregoing, in an amount sufficient to eliminate such excess.
6.3 All Prepayments. Each voluntary partial prepayment shall be in a
principal amount of $50,000 or a higher integral multiple of $50,000. Any
partial prepayment of a Group of Eurodollar Loans shall be subject to the
proviso to Section 2.2.3(a). Any prepayment of a Eurodollar Loan on a
day other than the last day of an Interest Period therefor shall include
interest on the principal amount being repaid and shall be subject to
Section 8.4. All prepayments of Term Loans shall be applied pro rata to
the remaining installments thereof.
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES.
7.1 Making of Payments. All payments of principal of or interest on the
Notes, and of all fees, shall be made by the Company to the Agent in
immediately available funds at the office specified by the Agent not
later than noon, Chicago time, on the date due; and funds received after
that hour shall be deemed to have been received by the Agent on the
following Business Day. The Agent shall promptly remit to each Bank its
share of all such payments received in collected funds by the Agent for
the account of such Bank. All payments under Section 8.1 shall be made
by the Company directly to the Bank entitled thereto.
7.2 Application of Certain Payments. Each payment of principal shall be
applied to such Loans as the Company shall direct by notice to be
received by the Agent on or before the date of such payment or, in the
absence of such notice, as the Agent shall determine in its discretion.
Concurrently with each remittance to any Bank of its share of any such
payment, the Agent shall advise such Bank as to the application of such
payment.
7.3 Due Date Extension. If any payment of principal or interest with
respect to any of the Loans, or of any fees, falls due on a day which is
not a Business Day, then such due date shall be extended to the
immediately following Business Day (unless, in the case of a Eurodollar
Loan, such immediately following Business Day is the first Business Day
of a calendar month, in which case such due date shall be the immediately
preceding Business Day) and, in the case of principal, additional
interest shall accrue and be payable for the period of any such
extension.
7.4 Setoff. The Company agrees that the Agent and each Bank have all
rights of set-off and bankers' lien provided by applicable law, and in
addition thereto, the Company agrees that at any time any Event of
Default exists, the Agent and each Bank may apply to the payment of any
obligations of the Company hereunder, whether or not then due, any and
all balances, credits, deposits, accounts or moneys of the Company then
or thereafter with the Agent or such Bank.
7.5 Proration of Payments. If any Bank shall obtain any payment or
other recovery (whether voluntary, involuntary, by application of offset
or otherwise, but excluding any payment pursuant to Section 8.7 or 14.9
and payments of interest on any Affected Loan) on account of principal of
or interest on any Loan (or on account of its participation in any Letter
of Credit) in excess of its pro rata share of payments and other
recoveries obtained by all Banks on account of principal of and interest
on the Loans (or such participation) then held by them, such Bank shall
purchase from the other Banks such participations in the Loans (or sub-
participations in Letters of Credit) held by them as shall be necessary
to cause such purchasing Bank to share the excess payment or other
recovery ratably with each of them; provided that if all or any portion
of the excess payment or other recovery is thereafter recovered from such
purchasing Bank, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery.
7.6 Taxes. All payments of principal of, and interest on, the Loans and
all other amounts payable hereunder shall be made free and clear of and
without deduction for any present or future income, excise, stamp or
franchise taxes and other taxes, fees, duties, withholdings or other
charges of any nature whatsoever imposed by any taxing authority,
excluding franchise taxes and taxes imposed on or measured by any Bank's
net income or receipts (all non-excluded items being called "Taxes"). If
any withholding or deduction from any payment to be made by the Company
hereunder is required in respect of any Taxes pursuant to any applicable
law, rule or regulation, then the Company will:
(a) pay directly to the relevant authority the full amount required to
be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
(c) pay to the Agent for the account of the Banks such additional amount
or amounts as is necessary to ensure that the net amount actually
received by each Bank will equal the full amount such Bank would have
received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Agent or any
Bank with respect to any payment received by the Agent or such Bank
hereunder, the Agent or such Bank may pay such Taxes and the Company will
promptly pay such additional amounts (including any penalty, interest or
expense) as is necessary in order that the net amount received by such
Person after the payment of such Taxes (including any Taxes on such
additional amount) shall equal the amount such Person would have received
had such Taxes not been asserted.
If the Company fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent, for the account of the
respective Banks, the required receipts or other required documentary
evidence, the Company shall indemnify the Banks for any incremental
Taxes, interest or penalties that may become payable by any Bank as a
result of any such failure. For purposes of this Section 7.6, a
distribution hereunder by the Agent or any Bank to or for the account of
any Bank shall be deemed a payment by the Company.
Each Bank that (a) is organized under the laws of a jurisdiction
other than the United States of America and (b)(i) is a party hereto on
the Closing Date or (ii) becomes an assignee of an interest under this
Agreement under Section 14.9.1 after the Closing Date (unless such Bank
was already a Bank hereunder immediately prior to such assignment) shall
execute and deliver to the Company and the Agent one or more (as the
Company or the Agent may reasonably request) United States Internal
Revenue Service Forms 4224 or Forms 1001 or such other forms or
documents, appropriately completed, as may be applicable to establish
that such Bank is exempt from withholding or deduction of Taxes. The
Company shall not be required to pay additional amounts to any Bank
pursuant to this Section 7.6 to the extent that the obligation to pay
such additional amounts would not have arisen but for the failure of such
Bank to comply with this paragraph.
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR LOANS.
8.1 Increased Costs. (a) If, after the date hereof, the adoption
of, or any change in, any applicable law, rule or regulation, or any
change in the interpretation or administration of any applicable law,
rule or regulation by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or any Eurodollar Office of such
Bank) with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency
(i) shall subject any Bank (or any Eurodollar Office of such Bank) to
any tax, duty or other charge with respect to its Eurodollar Loans, its
Note or its obligation to make Eurodollar Loans, or shall change the
basis of taxation of payments to any Bank of the principal of or interest
on its Eurodollar Loans or any other amounts due under this Agreement in
respect of its Eurodollar Loans or its obligation to make Eurodollar
Loans (except for changes in the rate of tax on the overall net income of
such Bank or its Eurodollar Office imposed by the jurisdiction in which
such Bank's principal executive office or Eurodollar Office is located);
(ii) shall impose, modify or deem applicable any reserve (including any
reserve imposed by the FRB, but excluding any reserve included in the
determination of interest rates pursuant to Section 4), special deposit
or similar requirement against assets of, deposits with or for the
account of, or credit extended by any Bank(or any Eurodollar Office of
such Bank); or
(iii) shall impose on any Bank (or its Eurodollar Office) any other
condition affecting its Eurodollar Loans, its Note or its obligation to
make Eurodollar Loans;
and the result of any of the foregoing is to increase the cost to (or to
impose a cost on) such Bank (or any Eurodollar Office of such Bank) of
making or maintaining any Eurodollar Loan, or to reduce the amount of any
sum received or receivable by such Bank (or its Eurodollar Office) under
this Agreement or under its Note with respect thereto, then upon demand
by such Bank (which demand shall be accompanied by a statement setting
forth the basis for such demand and a calculation of the amount thereof
in reasonable detail, a copy of which shall be furnished to the Agent),
the Company shall pay directly to such Bank such additional amount as
will compensate such Bank for such increased cost or such reduction.
(b) If any Bank shall reasonably determine that any change in, the
adoption or phase-in of, any applicable law, rule or regulation 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 any Bank or any Person controlling such Bank 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 such Bank's or
such controlling Person's capital as a consequence of such Bank's
obligations hereunder or under any Letter of Credit to a level below that
which such Bank or such controlling Person could have achieved but for
such change, adoption, phase-in or compliance (taking into consideration
such Bank's or such controlling Person's policies with respect to capital
adequacy) by an amount deemed by such Bank or such controlling Person to
be material, then from time to time, upon demand by such Bank (which
demand shall be accompanied by a statement setting forth the basis for
such demand and a calculation of the amount thereof in reasonable detail,
a copy of which shall be furnished to the Agent), the Company shall pay
to such Bank such additional amount as will compensate such Bank or such
controlling Person for such reduction.
8.2 Basis for Determining Interest Rate Inadequate or Unfair. If with
respect to any Interest Period:
(a) deposits in Dollars (in the applicable amounts) are not being
offered to the Agent in the interbank eurodollar market for such Interest
Period, or the Agent otherwise reasonably determines (which determination
shall be binding and conclusive on the Company) that by reason of
circumstances affecting the interbank eurodollar market adequate and
reasonable means do not exist for ascertaining the applicable Eurodollar
Rate; or
(b) Banks having aggregate Pro Rata Shares of 40% or more advise the
Agent that the Eurodollar Rate (Reserve Adjusted) as determined by the
Agent will not adequately and fairly reflect the cost to such Banks of
maintaining or funding Eurodollar Loans for such Interest Period (taking
into account any amount to which such Banks may be entitled under Section
8.1) or that the making or funding of Eurodollar Loans has become
impracticable as a result of an event occurring after the date of this
Agreement which in the opinion of such Banks materially affects such
Loans;
then the Agent shall promptly notify the other parties thereof and, so
long as such circumstances shall continue, (i) no Bank shall be under any
obligation to make or convert into Eurodollar Loans and (ii) on the last
day of the current Interest Period for each Eurodollar Loan, such Loan
shall, unless then repaid in full, automatically convert to a Base Rate
Loan.
8.3 Changes in Law Rendering Eurodollar Loans Unlawful. If any change
in, or the adoption of any new, law or regulation, or any change in the
interpretation of any applicable law or regulation by any governmental or
other regulatory body charged with the administration thereof, should
make it (or in the good faith judgment of any Bank cause a substantial
question as to whether it is) unlawful for any Bank to make, maintain or
fund Eurodollar Loans, then such Bank shall promptly notify each of the
other parties hereto and, so long as such circumstances shall continue,
(a) such Bank shall have no obligation to make or convert into Eurodollar
Loans (but shall make Base Rate Loans concurrently with the making of or
conversion into Eurodollar Loans by the Banks which are not so affected,
in each case in an amount equal to the amount of Eurodollar Loans which
would be made or converted into by such Bank at such time in the absence
of such circumstances) and (b) on the last day of the current Interest
Period for each Eurodollar Loan of such Bank (or, in any event, on such
earlier date as may be required by the relevant law, regulation or
interpretation), such Eurodollar Loan shall, unless then repaid in full,
automatically convert to a Base Rate Loan. Each Base Rate Loan made by a
Bank which, but for the circumstances described in the foregoing
sentence, would be a Eurodollar Loan (an "Affected Loan") shall remain
outstanding for the same period as the Group of Eurodollar Loans of which
such Affected Loan would be a part absent such circumstances.
8.4 Funding Losses. The Company hereby agrees that upon demand by any
Bank (which demand shall be accompanied by a statement setting forth
the basis for the amount being claimed, a copy of which shall be
furnished to the Agent), the Company will indemnify such Bank against any
net loss or expense which such Bank may sustain or incur (including any
net loss or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such Bank to fund or maintain any
Eurodollar Loan), as reasonably determined by such Bank, as a result of
(a) any payment, prepayment or conversion of any Eurodollar Loan of such
Bank on a date other than the last day of an Interest Period for such
Loan (including any conversion pursuant to Section 8.3) or (b) any
failure of the Company to borrow, convert or continue any Loan on a date
specified therefor in a notice of borrowing, conversion or continuation
pursuant to this Agreement. For this purpose, all notices to the Agent
pursuant to this Agreement shall be deemed to be irrevocable.
8.5 Right of Banks to Fund through Other Offices. Each Bank may, if it
so elects, fulfill its commitment as to any Eurodollar Loan by causing a
foreign branch or Affiliate of such Bank to make such Loan; provided that
in such event for the purposes of this Agreement such Loan shall be
deemed to have been made by such Bank and the obligation of the Company
to repay such Loan shall nevertheless be to such Bank and shall be deemed
held by it, to the extent of such Loan, for the account of such branch or
Affiliate.
8.6 Discretion of Banks as to Manner of Funding. Notwithstanding any
provision of this Agreement to the contrary, each Bank shall be entitled
to fund and maintain its funding of all or any part of its Loans in any
manner it sees fit, it being understood, however, that for the purposes
of this Agreement all determinations hereunder shall be made as if such
Bank had actually funded and maintained each Eurodollar Loan during each
Interest Period for such Loan through the purchase of deposits having a
maturity corresponding to such Interest Period and bearing an interest
rate equal to the Eurodollar Rate for such Interest Period.
8.7 Mitigation of Circumstances; Replacement of Banks. (a) Each Bank
shall promptly notify the Company and the Agent of any event of which it
has knowledge which will result in, and will use reasonable commercial
efforts available to it (and not, in such Bank's sole judgment, otherwise
disadvantageous to such Bank) to mitigate or avoid, (i) any obligation by
the Company to pay any amount pursuant to Section 7.6 or 8.1 or (ii) the
occurrence of any circumstances described in Section 8.2 or 8.3 (and, if
any Bank has given notice of any such event described in clause (i) or
(ii) above and thereafter such event ceases to exist, such Bank shall
promptly so notify the Company and the Agent). Without limiting the
foregoing, each Bank will designate a different funding office if such
designation will avoid (or reduce the cost to the Company of) any event
described in clause (i) or (ii) of the preceding sentence and such
designation will not, in such Bank's sole judgment, be otherwise
disadvantageous to such Bank.
(b) If the Company becomes obligated to pay additional amounts to any
Bank pursuant to Section 7.6 or 8.1, or any Bank gives notice of the
occurrence of any circumstances described in Section 8.2 or 8.3, the
Company may designate another bank which is acceptable to the Agent and
the Issuing Bank in their reasonable discretion (such other bank being
called a "Replacement Bank") to purchase the Loans of such Bank and such
Bank's rights hereunder, without recourse to or warranty by, or expense
to, such Bank, for a purchase price equal to the outstanding principal
amount of the Loans payable to such Bank plus any accrued but unpaid
interest on such Loans and all accrued but unpaid fees owed to such Bank
and any other amounts payable to such Bank under this Agreement, and to
assume all the obligations of such Bank hereunder, and, upon such
purchase and assumption (pursuant to an Assignment Agreement), such Bank
shall no longer be a party hereto or have any rights hereunder (other
than rights with respect to indemnities and similar rights applicable to
such Bank prior to the date of such purchase and assumption) and shall be
relieved from all obligations to the Company hereunder, and the
Replacement Bank shall succeed to the rights and obligations of such Bank
hereunder.
8.8 Conclusiveness of Statements; Survival of Provisions. Determinations
and statements of any Bank pursuant to Section 8.1, 8.2, 8.3 or 8.4 shall
be conclusive absent demonstrable error. Banks may use reasonable
averaging and attribution methods in determining compensation under
Sections 8.1 and 8.4, and the provisions of such Sections shall survive
repayment of the Loans, cancellation of the Notes, expiration or
termination of the Letters of Credit and termination of this Agreement.
SECTION 9 WARRANTIES.
To induce the Agent and the Banks to enter into this Agreement and
to induce the Banks to make Loans and issue and participate in Letters of
Credit hereunder, each of the Companies warrants, jointly and severally,
to the Agent and the Banks that:
9.1 Organization. Each of the Companies is a corporation validly
existing and in good standing under the laws of the State of its
incorporation; each Subsidiary is validly existing and in good standing
under the laws of the jurisdiction of its organization; and each of the
Companies and each Subsidiary is duly qualified to do business in each
jurisdiction where, because of the nature of its activities or
properties, such qualification is required, except for such jurisdictions
where the failure to so qualify would not have a Material Adverse Effect.
9.2 Authorization; No Conflict. Each of the Companies and each other
Loan Party is duly authorized to execute and deliver each Loan Document
to which it is a party, each of the Companies is duly authorized to
borrow monies hereunder and each of the Companies and each other Loan
Party is duly authorized to perform its obligations under each Loan
Document to which it is a party. The execution, delivery and performance
by each of the Companies of this Agreement and by each of the Companies
and each other Loan Party of each Loan Document to which it is a party,
and the borrowings by the Companies hereunder, do not and will not (a)
require any consent or approval of any governmental agency or authority
(other than any consent or approval which has been obtained and is in
full force and effect), (b) conflict with (i) any provision of law, (ii)
the charter, by-laws or other organizational documents of the Companies
or any other Loan Party or (iii) any material agreement, indenture,
instrument or other document, or any judgment, order or decree, which is
binding upon any of the Companies or any other Loan Party or any of their
respective properties or (c) require, or result in, the creation or
imposition of any Lien on any asset of any of the Companies, any
Subsidiary or any other Loan Party (other than Liens in favor of the
Agent created pursuant to the Collateral Documents).
9.3 Validity and Binding Nature. Each of this Agreement and each other
Loan Document to which any of the Companies or any other Loan Party is a
party is the legal, valid and binding obligation of such Person,
enforceable against such Person in accordance with its terms, subject to
bankruptcy, insolvency and similar laws affecting the enforceability of
creditors' rights generally and to general principles of equity.
9.4 Financial Statements and Projections. (a) Schedule 9.4 contains a
complete and correct copy of the audited consolidated balance sheets of
Compudyne as of December 31, 1995, December 31, 1996 and December 31,
1997 and audited consolidated statements of income and cash flow for the
Fiscal Years then ended. Such consolidated financial statements were
prepared in accordance with GAAP consistently applied from prior periods,
and fairly present in all material respects the financial condition and
results of operations of Compudyne as of the dates thereof and for the
periods then ended. Schedule 9.4 also contains unaudited balance sheets
of Norment and Norshield as of February 29, 1996, February 28, 1997 and
February 28, 1998 and unaudited statements of income and cash flow for
the fiscal years then ended. Such financial statements were prepared in
accordance with GAAP consistently applied from prior periods, and fairly
present in all material respects the financial condition and results of
operations of Norment and Norshield, respectively, as of the dates
thereof and for the periods then ended.
(b) Schedule 9.4 also contains a complete and correct copy of the
unaudited pro forma consolidated balance sheet of Compudyne (including
Norment and Norshield) as of September 30, 1998 and pro forma
consolidated statements of income, cash flow and shareholders' equity for
the nine-month period then ended. Such pro forma financial statements
were prepared in accordance with GAAP consistently applied from prior
periods, and fairly present in all material respects the pro forma
financial condition and pro forma results of operations of the Company
(including Norment and Norshield) as of the date thereof and for the
period then ended, subject to normal year-end adjustments and the absence
of footnotes.
(c) The financial projections attached as Schedule 9.4(c) (the
"Projections") have been prepared by Compudyne in light of the past
operations of its business and in good faith, subject to the
uncertainties inherent in estimating Compudyne's future performance and
the limited familiarity of Compudyne with respect to Norment and
Norshield. The Projections are based on assumptions that, as of the
respective dates thereof, were reasonable in light of the information
available to Compudyne on or prior to the date hereof.
9.5 No Material Adverse Change. Since September 30, 1998 there has
been no material adverse change in the financial condition, operations,
assets, business, properties or prospects of any of the Companies and
their Subsidiaries taken as a whole.
9.6 Litigation and Contingent Liabilities. No litigation (including
derivative actions), arbitration proceeding or governmental investigation
or proceeding is pending or, to the Companies' knowledge, threatened
against any of the Companies or any Subsidiary which might reasonably be
expected to have a Material Adverse Effect, except as set forth in
Schedule 9.6. Other than any liability incident to such litigation or
proceedings, none of the Companies or any Subsidiary has any material
contingent liabilities not listed on Schedule 9.6 or permitted by Section
10.7.
9.7 Ownership of Properties; Liens. Each of the Companies and each
Subsidiary owns good and, in the case of real property, marketable title
to all of its properties and assets, real and personal, tangible and
intangible, of any nature whatsoever (including patents, trademarks,
trade names, service marks and copyrights), free and clear of all Liens,
charges and claims (including infringement claims with respect to
patents, trademarks, service marks, copyrights and the like) except as
permitted by Section 10.8.
9.8 Subsidiaries. As of the Closing Date, the Companies have no
Subsidiaries other than those listed on Schedule 9.8. Neither Compudyne,
Inc. nor Compudyne Corp. of Maryland own, or will own, any assets or
engage, or will engage, in any business during the term hereof.
9.9 Pension Plans. (a) During the twelve-consecutive-month period prior
to the date of the execution and delivery of this Agreement or the making
of any Loan or the issuance of any Letter of Credit, (i) no steps have
been taken to terminate any Pension Plan and (ii) no contribution failure
has occurred with respect to any Pension Plan sufficient to give rise to
a Lien under Section 302(f) of ERISA. No condition exists or event or
transaction has occurred with respect to any Pension Plan which could
result in the incurrence by any of the Companies of any material
liability, fine or penalty.
(b) All contributions (if any) have been made to any Multiemployer
Pension Plan that are required to be made by any of the Companies or any
other member of the Controlled Group under the terms of the plan or of
any collective bargaining agreement or by applicable law; none of the
Companies or any member of the Controlled Group has withdrawn or
partially withdrawn from any Multiemployer Pension Plan, incurred any
withdrawal liability with respect to any such plan or received notice of
any claim or demand for withdrawal liability or partial withdrawal
liability from any such plan, and no condition has occurred which, if
continued, might result in a withdrawal or partial withdrawal from any
such plan; and none of the Companies or any member of the Controlled
Group has received any notice that any Multiemployer Pension Plan is in
reorganization, that increased contributions may be required to avoid a
reduction in plan benefits or the imposition of any excise tax, that any
such plan is or has been funded at a rate less than that required under
Section 412 of the Code, that any such plan is or may be terminated, or
that any such plan is or may become insolvent.
9.10 Investment Company Act. None of the Companies or any Subsidiary is
an "investment company" or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940.
9.11 Public Utility Holding Company Act. None of the Companies or any
Subsidiary is a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935.
9.12 Regulation U. None of the Companies are engaged principally, or as
one of their important activities, in the business of extending credit
for the purpose of purchasing or carrying Margin Stock.
9.13 Taxes. Each of the Companies and each Subsidiary has filed all tax
returns and reports required by law to have been filed by it and has paid
all taxes and governmental charges thereby shown to be owing, except any
such taxes or charges which are being diligently contested in good faith
by appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books.
9.14 Solvency, etc. On the Closing Date, and immediately prior to and
after giving effect to the issuance of each Letter of Credit and each
borrowing hereunder, the issuance of subordinated debt pursuant to the
Subordinated Debt Documents and the use of the proceeds thereof to fund
the Purchase and for other purposes permitted hereunder, (a) each of the
Companies' and each other Loan Party's assets will exceed its liabilities
and (b) each of the Companies and each other Loan Party will be solvent,
will be able to pay its debts as they mature, will own property with fair
saleable value greater than the amount required to pay its debts and will
have capital sufficient to carry on its business as then constituted.
9.15 Environmental Matters.
(a) No Violations. Except as set forth on Schedule 9.15, none of the
Companies or any Subsidiary, or, to the best knowledge of the Company,
any operator of the Companies' or any Subsidiary's properties, is in
violation, or alleged violation, of any judgment, decree, order, law,
permit, license, rule or regulation pertaining to environmental matters,
including those arising under the Resource Conservation and Recovery Act
("RCRA"), the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 or any other Environmental Law which (i) in
any single case, requires expenditures in any three-year period of
$100,000 or more by such Company and its Subsidiaries in penalties and/or
for investigative, removal or remedial actions or (ii) individually or in
the aggregate otherwise might reasonably be expected to have a Material
Adverse Effect.
(b) Notices. Except as set forth on Schedule 9.15 and for matters
arising after the Closing Date, in each case none of which could singly
or in the aggregate be expected to have a Material Adverse Effect, none
of the Companies or any Subsidiary has received notice from any third
party, including any Federal, state or local governmental authority: (a)
that any one of them has been identified by the U.S. Environmental
Protection Agency as a potentially responsible party under CERCLA with
respect to a site listed on the National Priorities List, 40 C.F.R. Part
300 Appendix B; (b) that any hazardous waste, as defined by 42 U.S.C.
Section 6903(5), any hazardous substance as defined by 42 U.S.C. Section
601(14), any pollutant or contaminant as defined by 42 U.S.C. Section
9601(33) or any toxic substance, oil or hazardous material or other
chemical or substance regulated by any Environmental Law (all of the
foregoing, "Hazardous Substances") which any one of them has generated,
transported or disposed of has been found at any site at which a Federal,
state or local agency or other third party has conducted a remedial
investigation, removal or other response action pursuant to any
Environmental Law; (c) that any of the Companies or any Subsidiary must
conduct a remedial investigation, removal, response action or other
activity pursuant to any Environmental Law; or (d) of any Environmental
Claim.
(c) Handling of Hazardous Substances. Except as set forth on Schedule
9.15, (i) no portion of the real property or other assets of the
Companies or any Subsidiary has been used for the handling, processing,
storage or disposal of Hazardous Substances except in accordance in all
material respects with applicable Environmental Laws; and no underground
tank or other underground storage receptacle for Hazardous Substances is
located on such properties; (ii) in the course of any activities
conducted by the Companies, any Subsidiary or, to the best knowledge of
the Company, the operators of any real property of the Companies or any
Subsidiary, no Hazardous Substances have been generated or are being used
on such properties except in accordance in all material respects with
applicable Environmental Laws; (iii) there have been no Releases or
threatened Releases of Hazardous Substances on, upon, into or from any
real property or other assets of any of the Companies or any Subsidiary,
which Releases singly or in the aggregate might reasonably be expected to
have a material adverse effect on the value of such real property or
assets; (iv) there have been no Releases on, upon, from or into any real
property in the vicinity of the real property or other assets of the
Companies or any Subsidiary which, through soil or groundwater
contamination, may have come to be located on, and which might reasonably
be expected to have a material adverse effect on the value of, the real
property or other assets of any of the Companies or any Subsidiary; and
(v) to the best knowledge of the Company, any Hazardous Substances
generated by the Companies and their Subsidiaries have been transported
offsite only by properly licensed carriers and delivered only to
treatment or disposal facilities maintaining valid permits as required
under applicable Environmental Laws, which transporters and facilities
have been and are operating in compliance in all material respects with
such permits and applicable Environmental Laws.
9.16 Year 2000 Problem. Each of the Companies and its Subsidiaries (a)
have reviewed the areas within their business and operations which could
be adversely affected by, and have developed or are developing a program
to address on a timely basis, the Year 2000 Problem and (b) have made
appropriate inquiries as to the effect the Year 2000 Problem will have on
their material suppliers and customers. Based on such review, program
and inquiries, each of the Companies reasonably believes that the "Year
2000 Problem" will not have a Material Adverse Effect.
9.17 Insurance. Set forth on Schedule 9.17 is a complete and accurate
summary of the property and casualty insurance program of each of the
Companies and its Subsidiaries as of the Closing Date (including the
names of all insurers, policy numbers, expiration dates, amounts and
types of coverage, annual premiums, exclusions, deductibles, self-insured
retention, and a description in reasonable detail of any self-insurance
program, retrospective rating plan, fronting arrangement or other risk
assumption arrangement involving each Company or any Subsidiary).
9.18 Real Property. Set forth on Schedule 9.18 is a complete and
accurate list, as of the Closing Date, of the address of all real
property owned or leased by each of the Companies or any Subsidiary,
together with, in the case of leased property, the name and mailing
address of the lessor of such property.
9.19 Information. All information heretofore or contemporaneously
herewith furnished in writing by the Company or any other Loan Party to
the Agent or any Bank for purposes of or in connection with this
Agreement and the transactions contemplated hereby is, and all written
information hereafter furnished by or on behalf of the Company or any
Subsidiary to the Agent or any Bank pursuant hereto or in connection
herewith will be, true and accurate in every material respect on the date
as of which such information is dated or certified, and none of such
information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading in light of the
circumstances under which made (it being recognized by the Agent and the
Banks that any projections and forecasts provided by the Company are
based on good faith estimates and assumptions believed by the Company to
be reasonable as of the date of the applicable projections or assumptions
and that actual results during the period or periods covered by any such
projections and forecasts may differ from projected or forecasted
results).
9.20 Intellectual Property. Each of the Companies and each Subsidiary
owns and possesses or has a license or other right to use all patents,
patent rights, trademarks, trademark rights, trade names, tradename
rights, service marks, service mark rights and copyrights as are
necessary for the conduct of the business of such Company and its
Subsidiaries, without any infringement upon rights of others which could
reasonably be expected to have a Material Adverse Effect.
9.21 Burdensome Obligations. None of the Companies or any Subsidiary is
a party to any agreement or contract or subject to any corporate or
partnership restriction which might reasonably be expected to have a
Material Adverse Effect.
9.22 Labor Matters. Except as set forth on Schedule 9.22, none of the
Company or any Subsidiary is subject to any labor or collective
bargaining agreement. There are no existing or, to the best knowledge of
the Company, threatened strikes, lockouts or other labor disputes
involving any of the Companies or any Subsidiary that singly or in the
aggregate could reasonably be expected to have a Material Adverse Effect.
Hours worked by and payment made to employees of each of the Companies
and its Subsidiaries are not in violation of the Fair Labor Standards Act
or any other applicable law, rule or regulation dealing with such
matters.
9.23 No Default. No Event of Default or Unmatured Event of Default
exists or would result from the incurring by the Company of any Debt
hereunder or under any other Loan Document.
9.24 Purchase Agreement, etc. (a) The Company has heretofore furnished
the Agent a true and correct copy of the Purchase Agreement.
(b) Each of Compudyne and, to the Companies' knowledge, each other party
to the Purchase Agreement, has duly taken all necessary corporate,
partnership or other organizational action to authorize the execution,
delivery and performance of the Purchase Agreement and the consummation
of transactions contemplated thereby.
(c) Except as otherwise set forth on Schedule 9.24, the Purchase will
comply with all applicable legal requirements, and all necessary
governmental, regulatory, creditor, shareholder, partner and other
material consents, approvals and exemptions required to be obtained by
Compudyne and, to the Companies' knowledge, each other party to the
Purchase Agreement in connection with the Purchase will be, prior to
consummation of the Purchase, duly obtained and will be in full force and
effect. As of the date of the Purchase Agreement, all applicable waiting
periods with respect to the Purchase will have expired without any action
being taken by any competent governmental authority which restrains,
prevents or imposes material adverse conditions upon the consummation of
the Purchase.
(d) The execution and delivery of the Purchase Agreement did not, and
the consummation of the Purchase will not, violate any statute or
regulation of the United States (including any securities law) or of any
state or other applicable jurisdiction, or any order, judgment or decree
of any court or governmental body binding on any of the Companies or, to
the Companies' knowledge, any other party to the Purchase Agreement, or,
except as set forth on Schedule 9.24, result in a breach of, or
constitute a default under, any material agreement, indenture, instrument
or other document, or any judgment, order or decree, to which any of the
Companies is a party or by which any of the Companies is bound or, to the
Companies' knowledge, to which any other party to the Purchase Agreement
is a party or by which any such party is bound.
(e) No statement or representation made in the Purchase Agreement by any
of the Companies or, to the Companies' knowledge, any other Person,
contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which
they are made, not misleading.
SECTION 10 COVENANTS.
Until the expiration or termination of the Commitments and
thereafter until all obligations of the Company hereunder and under the
other Loan Documents are paid in full and all Letters of Credit have been
terminated, the Company agrees that, unless at any time the Required
Banks shall otherwise expressly consent in writing, it will:
10.1 Reports, Certificates and Other Information. Furnish to the Agent
and each Bank:
10.1.1 Annual Report. Promptly when available and in any event within 90
days after the close of each Fiscal Year: (a) a copy of the annual audit
report of the Company and its Subsidiaries for such Fiscal Year,
including therein consolidated balance sheets and statements of earnings
and cash flows of the Company and its Subsidiaries as at the end of such
Fiscal Year, certified without qualification by Deloitte & Touche LLP or
other independent auditors of recognized standing selected by the Company
and reasonably acceptable to the Required Banks, together with (i) a
written statement from such accountants to the effect that in making the
examination necessary for the signing of such annual audit report by such
accountants, nothing came to their attention that caused them to believe
that the Company was not in compliance with any provision of Section
10.6, 10.7, 10.9 or 10.10 of this Agreement insofar as such provision
relates to accounting matters or, if something has come to their
attention that caused them to believe that the Company was not in
compliance with any such provision, describing such non-compliance in
reasonable detail and (ii) a comparison with the budget for such Fiscal
Year and a comparison with the previous Fiscal Year; and (b)
consolidating balance sheets of the Company and its Subsidiaries as of
the end of such Fiscal Year and a consolidating statement of earnings for
the Company and its Subsidiaries for such Fiscal Year, certified by the
Chief Financial Officer or the Treasurer of the Company.
10.1.2 Interim Reports. (a) Promptly when available and in any event
within 45 days after the end of each Fiscal Quarter (except the last
Fiscal Quarter of each Fiscal Year), consolidated and consolidating
balance sheets of the Company and its Subsidiaries as of the end of such
Fiscal Quarter, together with consolidated and consolidating statements
of earnings and cash flows for such Fiscal Quarter and for the period
beginning with the first day of such Fiscal Year and ending on the last
day of such Fiscal Quarter, together with a comparison with the
corresponding period of the previous Fiscal Year and a comparison with
the budget (which budget shall not include Norment or Norshield for
periods prior to January 1, 1999) for such period of the current Fiscal
Year, certified by the Chief Financial Officer or the Treasurer of the
Company; and (b) promptly when available and in any event within 30 days
after the end of each month (except the last month of each Fiscal
Quarter), consolidated and consolidating balance sheets of the Company
and its Subsidiaries as of the end of such month, together with
consolidated and consolidating statements of earnings and a consolidated
statement of cash flows for such month and for the period beginning with
the first day of such Fiscal Year and ending on the last day of such
month, together with a comparison with the corresponding period of the
previous Fiscal Year and a comparison with the budget for such period of
the current Fiscal Year, certified by the Chief Financial Officer or the
Treasurer of the Company.
10.1.3 Compliance Certificates. Contemporaneously with the furnishing
of a copy of each annual audit report pursuant to Section 10.1.1 and each
set of quarterly statements pursuant to Section 10.1.2, a duly completed
compliance certificate in the form of Exhibit B, with appropriate
insertions, dated the date of such annual report or such monthly
statements and signed by the Chief Financial Officer or the Treasurer of
the Company, containing (i) a computation of each of the financial ratios
and restrictions set forth in Section 10.6 and to the effect that such
officer has not become aware of any Event of Default or Unmatured Event
of Default that has occurred and is continuing or, if there is any such
event, describing it and the steps, if any, being taken to cure it and
(ii) a written statement of the Company's management setting forth a
discussion of the Company's financial condition, changes in financial
condition and results of operations.
10.1.4 Reports to the SEC and to Shareholders. Promptly upon the filing
or sending thereof, copies of all regular, periodic or special reports of
the Company or any Subsidiary filed with the SEC; copies of all
registration statements of the Company or any Subsidiary filed with
the SEC (other than on Form S-8); and copies of all proxy statements or
other communications made to security holders generally.
10.1.5 Notice of Default, Litigation and ERISA Matters. Promptly upon
becoming aware of any of the following, written notice describing the
same and the steps being taken by the Company or the Subsidiary affected
thereby with respect thereto:
(a) the occurrence of an Event of Default or an Unmatured Event of
Default;
(b) any litigation, arbitration or governmental investigation or
proceeding not previously disclosed by the Company to the Banks which has
been instituted or, to the knowledge of the Company, is threatened
against the Company or any Subsidiary or to which any of the properties
of any thereof is subject which might reasonably be expected to have a
Material Adverse Effect;
(c) the institution of any steps by any member of the Controlled Group
or any other Person to terminate any Pension Plan, or the failure of any
member of the Controlled Group to make a required contribution to any
Pension Plan (if such failure is sufficient to give rise to a Lien under
Section 302(f) of ERISA) or to any Multiemployer Pension Plan, or the
taking of any action with respect to a Pension Plan which could result in
the requirement that the Company furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event with respect to
any Pension Plan or Multiemployer Pension Plan which could result in the
incurrence by any member of the Controlled Group of any material
liability, fine or penalty (including any claim or demand for withdrawal
liability or partial withdrawal from any Multiemployer Pension Plan), or
any material increase in the contingent liability of the Company with
respect to any post-retirement welfare plan benefit, or any notice that
any Multiemployer Pension Plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or
the imposition of an excise tax, that any such plan is or has been funded
at a rate less than that required under Section 412 of the Code, that any
such plan is or may be terminated, or that any such plan is or may become
insolvent;
(d) any cancellation or material change in any insurance maintained by
the Company or any Subsidiary;
(e) any other event (including (i) any violation of any Environmental
Law or the assertion of any Environmental Claim or (ii) the enactment or
effectiveness of any law, rule or regulation) which might reasonably be
expected to have a Material Adverse Effect; or
(f) any notice provided in connection with, or the occurrence of any
default under, the Bond Document (as defined in Section 12.1.2).
10.1.6 Borrowing Base Certificates. Within 30 days of the end of each
month, a Borrowing Base Certificate dated as of the end of such month and
executed by the Chief Financial Officer or the Treasurer of the Company
on behalf of the Company (provided that (i) the Company may deliver a
Borrowing Base Certificate more frequently if it chooses and (ii) at any
time an Event of Default exists, the Agent may require the Company to
deliver Borrowing Base Certificates more frequently).
10.1.7 Management Reports. Promptly upon the request of the Agent or
any Bank, copies of all detailed financial and management reports
submitted to the Company by independent auditors in connection with each
annual or interim audit made by such auditors of the books of the
Company.
10.1.8 Projections. As soon as practicable, and in any event prior to
the commencement of each Fiscal Year (or, in the case of Fiscal Year
1999, by no later than January 31, 1999), financial projections for the
Company and its Subsidiaries for such Fiscal Year (including an operating
budget and a cash flow budget) prepared in a manner consistent with the
projections delivered by the Company to the Banks prior to the Closing
Date or otherwise in a manner reasonably satisfactory to the Agent,
accompanied by a certificate of the Chief Financial Officer or the
Treasurer of the Company on behalf of the Company to the effect that (i)
such projections were prepared by the Company in good faith, (ii) the
Company has a reasonable basis for the assumptions contained in such
projections and (iii) such projections have been prepared in accordance
with such assumptions.
10.1.9 Subordinated Debt Notices. Promptly from time to time, copies of
any notices (including notices of default or acceleration) received from
any holder or trustee of, under or with respect to any Subordinated Debt
or with respect to any of the Subordinated Debt Documents.
10.1.10 Year 2000 Problem. Promptly upon the request of the Agent or
any Bank, such updated information or documentation as may be requested
from time to time regarding the efforts of the Company and its
Subsidiaries to address the Year 2000 Problem.
10.1.11 Other Information. Promptly from time to time, such other
information concerning the Company and its Subsidiaries as any Bank or
the Agent may reasonably request.
10.2 Books, Records and Inspections. Keep, and cause each Subsidiary to
keep, its books and records in accordance with sound business practices
sufficient to allow the preparation of financial statements in accordance
with GAAP; permit, and cause each Subsidiary to permit, any Bank or the
Agent or any representative thereof to inspect the properties and
operations of the Company or such Subsidiary; and permit, and cause each
Subsidiary to permit, at any reasonable time and with reasonable notice
(or at any time without notice if an Event of Default exists), any Bank
or the Agent or any representative thereof to visit any or all of its
offices, to discuss its financial matters with its officers and its
independent auditors (and the Company hereby authorizes such independent
auditors to discuss such financial matters with any Bank or the Agent or
any representative thereof), and to examine (and, at the expense of the
Company or the applicable Subsidiary, photocopy extracts from) any of its
books or other records; and permit, and cause each Subsidiary to permit,
the Agent and its representatives to inspect the Inventory and other
tangible assets of the Company or such Subsidiary, to perform appraisals
of the equipment of the Company or such Subsidiary, and to inspect,
audit, check and make copies of and extracts from the books, records,
computer data, computer programs, journals, orders, receipts,
correspondence and other data relating to Inventory, Accounts Receivable
and any other collateral. All such inspections or audits by the Agent
shall be at the Company's expense, provided that so long as no Event of
Default or Unmatured Event of Default exists, the Company shall not be
required to reimburse the Agent for appraisals more frequently than once
each Fiscal Year or for field audits more frequently than twice each
Fiscal Year.
10.3 Maintenance of Property; Insurance. (a) Keep, and cause each
Subsidiary to keep, all property useful and necessary in the business of
the Company or such Subsidiary in good working order and condition,
ordinary wear and tear excepted.
(b) Maintain, and cause each Subsidiary to maintain, with responsible
insurance companies, such insurance as may be required by any law or
governmental regulation or court decree or order applicable to it and
such other insurance, to such extent and against such hazards and
liabilities, as is customarily maintained by companies similarly situated
and, upon request of the Agent or any Bank, furnish to the Agent or such
Bank a certificate setting forth in reasonable detail the nature and
extent of all insurance maintained by the Company and its Subsidiaries.
The Company shall cause each issuer of an insurance policy to provide the
Agent with an endorsement (i) showing loss payable to the Agent with
respect to each policy of property or casualty insurance and naming the
Agent and each Bank as an additional insured with respect to each policy
of insurance for liability for personal injury or property damage, (ii)
providing that 30 days' notice will be given to the Agent prior to any
cancellation of, material reduction or change in coverage provided by or
other material modification to such policy and (iii) reasonably
acceptable in all other respects to the Agent. The Company shall execute
and deliver to the Agent a collateral assignment, in form and substance
satisfactory to the Agent, of each business interruption insurance policy
maintained by the Company.
(c) UNLESS THE COMPANY PROVIDES THE AGENT WITH EVIDENCE OF THE INSURANCE
COVERAGE REQUIRED BY THIS AGREEMENT, THE AGENT MAY, UPON PRIOR NOTICE TO
THE COMPANY, PURCHASE INSURANCE AT THE COMPANY'S EXPENSE TO PROTECT THE
AGENT'S AND THE BANKS' INTERESTS IN THE COLLATERAL. THIS INSURANCE MAY,
BUT NEED NOT, PROTECT THE COMPANY'S INTERESTS. THE COVERAGE THAT THE
AGENT PURCHASES MAY NOT PAY ANY CLAIM THAT IS MADE AGAINST THE COMPANY IN
CONNECTION WITH THE COLLATERAL. THE COMPANY MAY LATER CANCEL ANY
INSURANCE PURCHASED BY THE AGENT, BUT ONLY AFTER PROVIDING THE AGENT WITH
EVIDENCE THAT THE COMPANY HAS OBTAINED INSURANCE AS REQUIRED BY THIS
AGREEMENT. IF THE AGENT PURCHASES INSURANCE FOR THE COLLATERAL, THE
COMPANY WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING
INTEREST AND ANY OTHER CHARGES THAT MAY BE IMPOSED WITH THE PLACEMENT OF
THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION
OF THE INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO THE
PRINCIPAL AMOUNT OF THE LOANS OWING HEREUNDER. THE COSTS OF THE
INSURANCE MAY BE MORE THAN THE COST OF THE INSURANCE THE COMPANY MAY BE
ABLE TO OBTAIN ON ITS OWN.
10.4 Compliance with Laws; Payment of Taxes and Liabilities. (a)
Comply, and cause each Subsidiary to comply, in all material respects
with all applicable laws, rules, regulations, decrees, orders, judgments,
licenses and permits, except where failure to comply could not reasonably
be expected to have a Material Adverse Effect; and (b) pay, and cause
each Subsidiary to pay, prior to delinquency, all taxes and other
governmental charges against it or any of its property, as well as claims
of any kind which, if unpaid, might become a Lien on any of its property;
provided that the foregoing shall not require the Company or any
Subsidiary to pay any such tax or charge so long as it shall contest the
validity thereof in good faith by appropriate proceedings and shall set
aside on its books adequate reserves with respect thereto in accordance
with GAAP.
10.5 Maintenance of Existence, etc. Maintain and preserve, and (subject
to Section 10.11) cause each Subsidiary to maintain and preserve, (a) its
existence and good standing in the jurisdiction of its organization and
(b) its qualification to do business and good standing in each
jurisdiction where the nature of its business makes such qualification
necessary (except in those instances in which the failure to be qualified
or in good standing does not have a Material Adverse Effect).
10.6 Financial Covenants.
10.6.1 Fixed Charge Coverage Ratio. Not permit the Fixed Charge Coverage
Ratio for any Computation Period to be less than the applicable ratio set
forth below for such Computation Period:
Computation Fixed Charge
Period Ending Coverage Ratio
3/31/99 - 12/31/02 1.10
3/31/03 and thereafter 1.15
10.6.2 Interest Coverage Ratio. Not permit the Interest Coverage Ratio
for any Computation Period to be less than the applicable ratio set forth
below for such Computation Period:
Computation Interest
Period Ending Coverage Ratio
3/31/99 - 12/31/99 1.50
3/31/00 - 12/31/00 2.00
3/31/01 - 12/31/01 2.25
3/31/02 - 12/31/02 2.75
3/31/03 and thereafter 3.00
10.6.3 Senior Debt to EBITDA Ratio. Not permit the Senior Debt to EBITDA
Ratio as of the last day of any Computation Period to exceed the
applicable ratio set forth below for such Computation Period:
Computation Senior Debt to
Period Ending EBITDA Ratio
03/31/99 12.00
6/30/99 5.75
9/30/99 3.50
12/31/99 - 6/30/00 2.75
9/30/00 2.50
12/31/00 and thereafter 2.00
10.6.4 Capital Expenditures. Not permit the aggregate amount of all
Capital Expenditures made by the Company and its Subsidiaries in any
period specified below to exceed the amounts set forth below for such
period:
Period EBITDA
11/30/98 - 12/31/98 $100,000
Fiscal Year 1999 800,000
Fiscal Year 2000 880,000
Fiscal Year 2001 968,000
Fiscal Year 2002 1,064,800
Fiscal Year 2003 1,171,280
Notwithstanding the above: (a) the Company may spend an additional
$850,000 on upgrading its computer systems during the period November 30,
1998 through December 31, 1999 (the "ERP Upgrade") (a preliminary budget
outlining various Capital Expenditures falling under the ERP Upgrade is
attached as Schedule 10.6; and (b) the Company may spend an additional
amount, during Fiscal Years 1999 and 2000, not to exceed $1,750,000, in
the aggregate, on Capital Expenditures related to the expansion of its
Norshield manufacturing facility located at 3224 Mobile Highway,
Montgomery Alabama (the "Norshield Expansion"). For purposes of
calculating the Fixed Charge Coverage Ratio under this Section 10.6,
Capital Expenditures shall exclude amounts spent on the ERP Upgrade and
the Norshield Expansion.
10.6.5 EBITDA. Not permit EBITDA for any Computation Period to be less
than the applicable amount set forth below for such Computation Period:
Computation
Period EBITDA
1/1/99 - 3/31/99 $1,300,000
1/1/99 - 6/30/99 2,700,000
1/1/99 - 9/30/99 4,200,000
1/1/99 - 12/31/99 6,000,000
10.7 Limitations on Debt. Not, and not permit any Subsidiary to,
create, incur, assume or suffer to exist any Debt, except:
(a) obligations under this Agreement and the other Loan Documents;
(b) Debt secured by Liens permitted by Section 10.8(d), and extensions,
renewals and refinancings thereof; provided that the aggregate amount of
all such Debt at any time outstanding shall not exceed $300,000;
(c) Debt of Subsidiaries to the Company;
(d) unsecured Debt of the Company to Subsidiaries;
(e) Subordinated Debt;
(f) Hedging Obligations incurred for bona fide hedging purposes and not
for speculation;
(g) Debt described on Schedule 10.7 and any extension, renewal or
refinancing thereof so long as the principal amount thereof is not
increased;
(h) the Debt to be Repaid (so long as such Debt is repaid on the Closing
Date with the proceeds of the initial Loans hereunder); and
(i) other Debt, in addition to the Debt listed above, in an aggregate
amount not at any time exceeding $150,000.
10.8 Liens. Not, and not permit any Subsidiary to, create or permit to
exist any Lien on any of its real or personal properties, assets or
rights of whatsoever nature (whether now owned or hereafter acquired),
except:
(a) Liens for taxes or other governmental charges not at the time
delinquent or thereafter payable without penalty or being contested in
good faith by appropriate proceedings and, in each case, for which it
maintains adequate reserves;
(b) Liens arising in the ordinary course of business (such as (i) Liens
of carriers, warehousemen, mechanics and materialmen and other similar
Liens imposed by law and (ii) Liens incurred in connection with worker's
compensation, unemployment compensation and other types of social
security (excluding Liens arising under ERISA) or in connection with
surety bonds, bids, performance bonds and similar obligations) for sums
not overdue or being contested in good faith by appropriate proceedings
and not involving any deposits or advances or borrowed money or the
deferred purchase price of property or services and, in each case, for
which it maintains adequate reserves;
(c) Liens described on Schedule 10.8;
(d) subject to the limitation set forth in Section 10.7(b), (i) Liens
arising in connection with Capital Leases (and attaching only to the
property being leased), (ii) Liens existing on property at the time of
the acquisition thereof by the Company or any Subsidiary (and not created
in contemplation of such acquisition) and (iii) Liens that constitute
purchase money security interests on any property securing debt incurred
for the purpose of financing all or any part of the cost of acquiring
such property, provided that any such Lien attaches to such property
within 60 days of the acquisition thereof and attaches solely to the
property so acquired;
(e) attachments, appeal bonds, judgments and other similar Liens, for
sums not exceeding $300,000 arising in connection with court proceedings,
provided the execution or other enforcement of such Liens is effectively
stayed and the claims secured thereby are being actively contested in
good faith and by appropriate proceedings;
(f) easements, rights of way, restrictions, minor defects or
irregularities in title and other similar Liens not interfering in any
material respect with the ordinary conduct of the business of the Company
or any Subsidiary;
(g) Liens arising under the Loan Documents;
(h) Liens securing Acquired Debt permitted by Section 10.7(i), provided
that such Liens do not extend to any assets other than the property
financed with such Acquired Debt; and
(i) the replacement, extension or renewal of any Lien permitted by
clauses (c) or (h) above upon or in the same property theretofore subject
thereto arising out of the extension, renewal or replacement of the Debt
secured thereby (without increase in the amount thereof).
10.9 Operating Leases. Not permit the aggregate amount of all rental
payments under Operating Leases made (or scheduled to be made) by the
Company and its Subsidiaries (on a consolidated basis) to exceed the sum
of $1,400,000 plus $500,000 in respect of all vehicles leases in any
Fiscal Year.
10.10 Restricted Payments. Not, and not permit any Subsidiary to, (a)
make any distribution to any of its shareholders, (b) purchase or redeem
any of its capital stock or other equity interests or any warrants,
options or other rights in respect thereof, (c) pay any management fees
or similar fees to any of its shareholders or any Affiliate thereof, (d)
make any redemption, prepayment, defeasance or repurchase of any
Subordinated Debt or (e) set aside funds for any of the foregoing.
Notwithstanding the foregoing, (i) any Subsidiary may pay dividends or
make other distributions to the Company or to a Wholly-Owned Subsidiary;
(ii) Compudyne may repurchase up to $150,000, in aggregate, of its
capital stock during the term hereof for the purpose of making resales to
employees under its stock discount plan or matching contributions under
its 401(k) plan; (iii) Compudyne may repurchase up to $150,000, in
aggregate, of its capital stock and may redeem up to $150,000, in
aggregate, of its capital stock owned by employees, in each case, during
the term hereof and in connection with the performance of its obligations
under Compudyne's employee stock option plan; (iv) Compudyne may pay to
Blair the fee payable pursuant to Section 3.10 of the Investment
Agreement and (v) so long as no Event of Default or Unmatured Event of
Default exists or would result therefrom, the Company may make scheduled
payments of interest under the Subordinated Debt Documents to the extent
not otherwise prohibited by the Subordination Agreement.
10.11 Mergers, Consolidations, Sales. Not, and not permit any
Subsidiary to, be a party to any merger or consolidation, or purchase or
otherwise acquire all or substantially all of the assets or any stock of
any class of, or any partnership or joint venture interest in, any other
Person, or, except in the ordinary course of its business, sell,
transfer, convey or lease all or any substantial part of its assets, or
sell or assign with or without recourse any receivables, except for (a)
any such merger, consolidation, sale, transfer, conveyance, lease or
assignment of or by any Wholly-Owned Subsidiary into the Company or into,
with or to any other Wholly-Owned Subsidiary; (b) any such purchase or
other acquisition by the Company or any Wholly-Owned Subsidiary of the
assets or stock of any Wholly-Owned Subsidiary; (c) any Acquisition by
the Company or any Wholly-Owned Subsidiary where (1) the assets acquired
(in the case of an asset purchase) are for use, or the Person acquired
(in the case of any other Acquisition) is engaged, solely in the security
systems and/or fire alarm businesses; (2) immediately before and after
giving effect to such Acquisition, no Event of Default or Unmatured Event
of Default shall exist; (3) the consideration to be paid by the Company
and its Subsidiaries (including any Debt assumed or issued in connection
therewith, the amount thereof to be calculated in accordance with GAAP)
in connection with such Acquisition (or any series of related
Acquisitions) and any other Acquisitions consummated during the same
Fiscal Year is less than $600,000, in aggregate; (4) immediately after
giving effect to such Acquisition, the Company is in pro forma compliance
with all the financial ratios and restrictions set forth in Section 10.6;
(5) in the case of the Acquisition of any Person, the Board of Directors
of such Person has approved such Acquisition; (6) the EBITDA in respect
of the business (in the case of an asset purchase) or Person (in the case
of any other Acquisition) acquired is not less than zero; and (7) the
Company provides ten days prior written notice of such Acquisition to the
Agent; and (d) sales and dispositions of assets (including the stock of
Subsidiaries) for at least fair market value (as determined by the Board
of Directors of the Company) so long as the net book value of all assets
sold or otherwise disposed of in any Fiscal Year does not exceed 10% of
the net book value of the consolidated assets of the Company and its
Subsidiaries as of the last day of the preceding Fiscal Year.
10.12 Modification of Organizational Documents. Not permit the
Certificate or Articles of Incorporation, By-Laws or other organizational
documents of the Company or any Subsidiary to be amended or modified in
any way which might reasonably be expected to materially adversely affect
the interests of the Banks.
10.13 Use of Proceeds. Use the proceeds of the Loans, and the Letters
of Credit, solely to finance the Purchase, for working capital, for
Capital Expenditures and for other general corporate purposes; and not
use or permit any proceeds of any Loan to be used, either directly or
indirectly, for the purpose, whether immediate, incidental or ultimate,
of "purchasing or carrying" any Margin Stock.
10.14 Further Assurances. (a) Take, and cause each Subsidiary to take,
such actions as are necessary or as the Agent or the Required Banks may
reasonably request from time to time (including the execution and
delivery of guaranties, security agreements, pledge agreements,
mortgages, deeds of trust, financing statements and other documents, the
filing or recording of any of the foregoing, and the delivery of stock
certificates and other collateral with respect to which perfection is
obtained by possession) to ensure that (a) the obligations of the Company
hereunder and under the other Loan Documents (i) are secured by
substantially all of the assets of the Company and (ii) guaranteed by all
of its Subsidiaries (including, promptly upon the acquisition or creation
thereof, any Subsidiary acquired or created after the date hereof, unless
the Agent determines, in its discretion, that such Subsidiary should be a
borrower hereunder, in which event, such Subsidiary shall become a party
hereto) by execution of a counterpart of the Guaranty and (b) the
obligations of each Subsidiary under the Guaranty are secured by
substantially all of the assets of such Subsidiary.
(b) Cause all collections from Accounts Receivable to be directed to a
bank account maintained with the Agent.
10.15 Transactions with Affiliates. Not, and not permit any Subsidiary
to, enter into, or cause, suffer or permit to exist any transaction,
arrangement or contract with any of its other Affiliates (other than the
Company and its Subsidiaries) which is on terms which are less favorable
than are obtainable from any Person which is not one of its Affiliates.
10.16 Employee Benefit Plans. Maintain, and cause each Subsidiary to
maintain, each Pension Plan in substantial compliance with all applicable
requirements of law and regulations.
10.17 Environmental Matters. (a) If any Release or Disposal of Hazardous
Substances shall occur or shall have occurred on any real property or any
other assets of the Company or any Subsidiary, the Company shall, or
shall cause the applicable Subsidiary to, cause the prompt containment
and removal of such Hazardous Substances and the remediation of such real
property or other assets as necessary to comply with all Environmental
Laws and to preserve the value of such real property or other assets.
Without limiting the generality of the foregoing, the Company shall, and
shall cause each Subsidiary to, comply with any valid Federal or state
judicial or administrative order requiring the performance at any real
property of the Company or any Subsidiary of activities in response to
the Release or threatened Release of a Hazardous Substance.
(b) To the extent that the transportation of "hazardous waste" as
defined by RCRA is permitted by this Agreement, the Company shall, and
shall cause its Subsidiaries to, dispose of such hazardous waste only at
licensed disposal facilities operating in compliance with Environmental
Laws.
10.18 Unconditional Purchase Obligations. Not, and not permit any
Subsidiary to, enter into or be a party to any contract for the purchase
of materials, supplies or other property or services if such contract
requires that payment be made by it regardless of whether delivery is
ever made of such materials, supplies or other property or services.
10.19 Inconsistent Agreements. Not, and not permit any Subsidiary to,
enter into any agreement containing any provision which would (a) be
violated or breached by any borrowing by the Company hereunder or by the
performance by the Company or any Subsidiary of any of its obligations
hereunder or under any other Loan Document, (b) prohibit the Company or
any Subsidiary from granting to the Agent, for the benefit of the Banks,
a Lien on any of its assets or (c) create or permit to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary
to (i) pay dividends or make other distributions to the Company or any
other applicable Subsidiary, or pay any Debt owed to the Company or any
other Subsidiary, (ii) make loans or advances to the Company or (iii)
transfer any of its assets or properties to the Company.
10.20 Business Activities. Not, and not permit any Subsidiary to,
engage in any line of business other than the businesses engaged in on
the date hereof and businesses reasonably related thereto (including the
fire alarm business).
10.21 Investments. Not, and not permit any Subsidiary to, make or
permit to exist any Investment in any other Person, except (without
duplication) the following:
(a) contributions by the Company to the capital of any of its
Subsidiaries, or by any such Subsidiary to the capital of any of its
Subsidiaries;
(b) in the ordinary course of business, Investments by the Company in
any Subsidiary or by any Subsidiary in the Company, by way of
intercompany loans, advances or guaranties, all to the extent permitted
by Section 10.7;
(c) Suretyship Liabilities permitted by Section 10.7;
(d) Cash Equivalent Investments;
(e) bank deposits in the ordinary course of business, provided that the
aggregate amount of all such deposits which are maintained with any bank
other than a Bank shall not at any time after December 31, 1998 exceed
$100,000 plus collections of accounts which are immediately deposited in
local banks and transferred to the Agent within three Business Days
thereafter);
(f) Investments in securities of account debtors received pursuant to any
plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of such account debtors;
(g) Investments to consummate Acquisitions permitted by Section 10.11;
and
(h) Investments listed on Schedule 10.21;
provided that (x) any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent Investment"
may continue to be held notwithstanding that such Investment if made
thereafter would not comply with such requirements; (y) no Investment
otherwise permitted by clause (b), (c), or (g) shall be permitted to be
made if, immediately before or after giving effect thereto, any Event of
Default or Unmatured Event of Default exists.
10.22 Restriction of Amendments to Certain Documents. Not amend or
otherwise modify, or waive any rights under, the Purchase Agreement and
the Subordinated Debt Documents.
10.23 Interest Rate Protection. Enter into, not later than 120 days
after the Closing Date, an interest rate protection mechanism with a term
of at least three years on an ISDA standard form with one or more Banks
or Affiliates thereof or with counterparties reasonably acceptable to the
Agent to hedge the interest rate with respect to not less than 50% of the
principal amount of the Term Loans in form and substance reasonably
satisfactory to the Agent.
10.24 Fiscal Year. Not change its Fiscal Year.
10.25 Cancellation of Debt. Not, and not permit any Subsidiary to,
cancel any claim or debt owing to it, except for reasonable consideration
or in the ordinary course of business.
10.26 Certain Documents. Not, and not permit any Subsidiary to, enter
into any contract providing for receipt by the Company or any Subsidiary
of amounts in excess of (i) in the case of any contract in respect of any
domestic project, $15,000,000; (ii) in the case of any contract in
respect of any South African project, $4,000,000; and (iii) in the case
of all contracts entered into in any Fiscal Year, in respect of
international projects (other than in South Africa), $5,000,000, in
aggregate, in each case, without the prior written consent of the Agent,
such consent not to be unreasonably withheld in the exercise of Agent's
reasonable credit judgment.
SECTION 11 EFFECTIVENESS; CONDITIONS OF LENDING, ETC.
The obligation of each Bank to make its Loans and of the Issuing
Bank to issue Letters of Credit is subject to the following conditions
precedent:
11.1 Initial Credit Extension. The obligation of the Banks to make the
initial Loans and the obligation of the Issuing Bank to issue its
initial Letter of Credit (whichever first occurs) is, in addition to the
conditions precedent specified in Section 11.2, subject to the conditions
precedent that (1) all Debt to be Repaid has been (or concurrently with
the initial borrowing will be) paid in full, and that all agreements and
instruments governing the Debt to be Repaid and that all Liens securing
such Debt to be Repaid have been (or concurrently with the initial
borrowing will be) terminated and (2) the Agent shall have received (a)
evidence, reasonably satisfactory to the Agent, that the Company has
received (i) cash equity contributions from Blair in an amount not less
than $3,000,000 and (ii) net cash proceeds of not less than $9,000,000
from the issuance of a senior subordinated term note to Blair, which
shall be satisfactory in all respects to the Agent; (b) evidence,
reasonably satisfactory to the Agent, that the Company has completed, or
concurrently with the initial credit extension hereunder will complete,
the Purchase in accordance with the terms of the Purchase Agreement
(without any amendment thereto or waiver thereunder unless consented to
by the Required Banks, including, without limitation, any supplement or
amendment provided under Section 4.09 of the Purchase Agreement); (c)
evidence, reasonably satisfactory to the Agent, that the funds required
for the Purchase and the refinancing of all existing debt of the Company
shall not exceed $25,500,000 and the aggregate fees and expenses with
respect to the Purchase and the transactions contemplated hereby and
under the Subordinated Debt Documents shall not exceed $1,500,000; and
(d) all of the following, each duly executed and dated the Closing Date
(or such earlier date as shall be satisfactory to the Agent), in form and
substance satisfactory to the Agent (and the date on which all such
conditions precedent have been satisfied or waived in writing by the
Agent and the Required Banks is called the "Closing Date"):
11.1.1 Notes. The Notes.
11.1.2 Resolutions. Certified copies of resolutions of the Board of
Directors of each of the Companies authorizing the execution, delivery
and performance by such Company of this Agreement, the Notes and the
other Loan Documents to which such Company is a party; and certified
copies of resolutions of the Board of Directors of each other Loan Party
authorizing the execution, delivery and performance by such Loan Party of
each Loan Document to which such entity is a party.
11.1.3 Consents, etc. Certified copies of all documents evidencing any
necessary corporate or partnership action, consents and governmental
approvals (if any) required for the execution, delivery and performance
by the Company and each other Loan Party of the documents referred to in
this Section 11.
11.1.4 Incumbency and Signature Certificates. A certificate of the
Secretary or an Assistant Secretary (or other appropriate representative)
of each Loan Party certifying the names of the officer or officers of
such entity authorized to sign the Loan Documents to which such entity is
a party, together with a sample of the true signature of each such
officer (it being understood that the Agent and each Bank may
conclusively rely on each such certificate until formally advised by a
like certificate of any changes therein).
11.1.5 Security Agreement. A counterpart of the Security Agreement
executed by each of the Companies and each Subsidiary.
11.1.6 Pledge Agreements. Pledge Agreements executed by the each of the
Companies, together with all items required to be delivered in connection
therewith.
11.1.7 Real Estate Documents. With respect to each parcel of real
property owned by the Company or any Subsidiary, a duly executed Mortgage
providing for a fully perfected Lien, in favor of the Agent, in all
right, title and interest of the Company or such Subsidiary in such real
property, together with:
(a) an ALTA Loan Title Insurance Policy, issued by an insurer acceptable
to the Agent, insuring the Agent's Lien on such real property and
containing such endorsements as the Agent may reasonably require (it
being understood that the amount of coverage, exceptions to coverage and
status of title set forth in such policy shall be acceptable to the
Agent);
(b) copies of all documents of record concerning such real property as
shown on the commitment for the ALTA Loan Title Insurance Policy referred
to above;
(c) original or certified copies of all insurance policies required to
be maintained with respect to such real property by this Agreement, the
applicable Mortgage or any other Loan Document;
(d) a survey certified to the Agent meeting such standards as the Agent
may reasonably establish and otherwise reasonably satisfactory to the
Agent;
(e) a flood insurance policy concerning such real property, reasonably
satisfactory to the Agent, if required by the Flood Disaster Protection
Act of 1973; and
(f) an environmental audit, in form and substance satisfactory to the
Agent.
Additionally, in the case of leased real property set forth on
Schedule 11.1, a consent, in form and substance satisfactory to the
Agent, from the owner and/or mortgagee waiving any landlord's Lien in
respect of personal property kept at the premises subject to such lease.
11.1.8 Purchase Agreement Assignment. A purchase agreement assignment
substantially in the form of Exhibit F (the "Purchase Agreement
Assignment") executed by Compudyne and Apogee Enterprises, Inc.
11.1.9 Subordination/Intercreditor Agreement. A subordination and
intercreditor agreement substantially in the form of Exhibit K.
11.1.10 Opinions of Counsel. (a) The opinion of Tyler Cooper & Alcorn,
LLP, special counsel to the Company, substantially in the form of Exhibit
I; and (b) all opinions delivered in connection with the closing of the
Purchase Agreement (which opinions shall state, or be accompanied by
letters which state, that the Agent and the Banks may rely thereon).
11.1.11 Insurance. Evidence satisfactory to the Agent of the existence
of insurance required to be maintained pursuant to Section 10.3(b),
together with evidence that the Agent has been named as a lender's loss
payee and an additional insured on all related insurance policies.
11.1.12 Copies of Documents. Copies, certified by the Secretary of
Compudyne, of the Purchase Agreement and the Subordinated Debt Documents,
including all exhibits and schedules thereto and any side agreements
entered into in connection therewith.
11.1.13 Payment of Fees. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses to the extent then due and
payable on the Closing Date, together with all Attorney Costs of the
Agent to the extent invoiced prior to the Closing Date, plus such
additional amounts of Attorney Costs as shall constitute the Agent's
reasonable estimate of Attorney Costs incurred or to be incurred by the
Agent through the closing proceedings (provided that such estimate shall
not thereafter preclude final settling of accounts between the Company
and the Agent).
11.1.14 Solvency Certificate. A Solvency Certificate, substantially in
the form of Exhibit J, executed by the Chief Financial Officer of each of
the Companies.
11.1.15 Pro Forma. A consolidated pro forma balance sheet of the Company
as at the Closing Date (which will be based on the balance sheet of
Compudyne as of September 30, 1998, and the balance sheets of Norment
and Norshield as of August 31, 1998), adjusted to give effect to the
consummation of the Purchase and the financings contemplated hereby and
under the Subordinated Debt Documents as if such transactions had
occurred on such date, consistent in all material respects with the
sources and uses of cash as previously described to the Banks and the
forecasts previously provided to the Banks.
11.1.16 Search Results; Lien Terminations. Certified copies of Uniform
Commercial Code Requests for Information or Copies (Form UCC-11), or a
similar search report certified by a party acceptable to the Agent, dated
a date reasonably near to the Closing Date, listing all effective
financing statements which name the Companies and each Subsidiary (under
their present names and any previous names) as debtors and which are
filed in the jurisdictions in which filings are to be made pursuant to
the Collateral Documents, together with (i) copies of such financing
statements, (ii) executed copies of proper Uniform Commercial Code Form
UCC-3 termination statements, if any, necessary to release all Liens and
other rights of any Person in any collateral described in the Collateral
Documents previously granted by any Person (other than Liens permitted by
Section 10.8) and (iii) such other Uniform Commercial Code Form UCC-3
termination statements as the Agent may reasonably request.
11.1.17 Filings, Registrations and Recordings. The Agent shall have
received each document (including Uniform Commercial Code financing
statements) required by the Collateral Documents or under law or
reasonably requested by the Agent to be filed, registered or recorded in
order to create in favor of the Agent, for the benefit of the Banks, a
perfected Lien on the collateral described therein, prior and superior to
any other Person, in proper form for filing, registration or recording.
11.1.18 Closing Certificate. A certificate signed by the President of
each of the Companies dated as of the Closing Date, affirming the matters
set forth in Section 11.2.1 as of the Closing Date.
11.1.19 Borrowing Base Certificate. A Borrowing Base Certificate dated
as of the Closing Date.
11.1.20 Purchase Certificate, Consents and Permits. A certificate
executed by the President of the Company on behalf of the Company
certifying the occurrence of the closing of the Purchase and the
financing contemplated by the Subordinated Debt Documents and that such
closings have been consummated in accordance with the terms of the
Purchase Agreement and the Subordinated Debt Documents, respectively,
without waiver of any material condition thereof; together with evidence
satisfactory to the Agent that (i) all necessary governmental,
regulatory, creditor, shareholder, partner and other material consents,
approvals and exemptions required to be obtained by the Company in
connection with the Purchase and the financing contemplated by the
Subordinated Debt Documents have been duly obtained and are in full force
and effect and (ii) all material permits necessary for the operation of
the acquired business have been obtained or will be obtained within a
reasonable time after the Closing and that, as to any material permit not
obtained at Closing ("Unobtained Permits"), the Company may legally
operate in the manner in which it intends to operate until the same is
obtained without impairment or prejudice due to such permit not having
been obtained. The Company agrees to use its best efforts to obtain any
Unobtained Permit as promptly as practicable, and in any event within 60
days, after the Closing Date.
11.1.21 Other. Such other documents as the Agent or any Bank may
reasonably request.
11.2 Conditions. The obligation (a) of each Bank to make each Loan and
(b) of the Issuing Bank to issue each Letter of Credit is subject to the
following further conditions precedent that:
11.2.1 Compliance with Warranties, No Default, etc. Both before and
after giving effect to any borrowing and the issuance of any Letter of
Credit, the following statements shall be true and correct:
(a) the representations and warranties of the Company and each
Subsidiary set forth in this Agreement and the other Loan Documents shall
be true and correct in all material respects with the same effect as if
then made (except to the extent stated to relate to a specific earlier
date, in which case such representations and warranties shall be true and
correct as of such earlier date); and
(b) no Event of Default or Unmatured Event of Default shall have then
occurred and be continuing.
11.2.2 Confirmatory Certificate. If requested by the Agent or any Bank,
the Agent shall have received (in sufficient counterparts to provide one
to each Bank) a certificate dated the date of such requested Loan or
Letter of Credit and signed by a duly authorized representative of the
Company as to the matters set out in Section 11.2.1 (it being understood
that each request by the Company for the making of a Loan or the issuance
of a Letter of Credit shall be deemed to constitute a warranty by the
Company that the conditions precedent set forth in Section 11.2.1 will be
satisfied at the time of the making of such Loan or the issuance of such
Letter of Credit), together with such other documents as the Agent or any
Bank may reasonably request in support thereof.
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT.
12.1 Events of Default. Each of the following shall constitute an Event
of Default under this Agreement:
12.1.1 Non-Payment of the Loans, etc. Default in the payment when due
of the principal of any Loan; or default, and continuance thereof for
five days, in the payment when due of any interest, fee, reimbursement
obligation with respect to any Letter of Credit or other amount payable
by the Company hereunder or under any other Loan Document.
12.1.2 Non-Payment of Other Debt. (a) Any default shall occur under the
terms applicable to any Debt of the Company or any Subsidiary in an
aggregate amount (for all such Debt so affected) exceeding $100,000 and
such default shall (i) consist of the failure to pay such Debt when due,
whether by acceleration or otherwise, or (ii) accelerate the maturity of
such Debt or permit the holder or holders thereof, or any trustee or
agent for such holder or holders, to cause such Debt to become due and
payable (or require the Company or any Subsidiary to purchase or redeem
such Debt) prior to its expressed maturity or (b) any Event of Default
shall occur under the Subordinated Debt Documents or the general
agreement of indemnity among the Company, Liberty Mutual Insurance
Company and certain other parties thereto, as amended from time to time
after the date hereof, and any replacement thereto (the "Bond Document").
12.1.3 Other Material Obligations. Default in the payment when due, or
in the performance or observance of, any material obligation of, or
condition agreed to by, the Company or any Subsidiary with respect to any
material purchase or lease of goods or services where such default,
singly or in the aggregate with all other such defaults, might reasonably
be expected to have a Material Adverse Effect.
12.1.4 Bankruptcy, Insolvency, etc. The Company or any Subsidiary
becomes insolvent or generally fails to pay, or admits in writing its
inability or refusal to pay, debts as they become due; or the Company or
any Subsidiary applies for, consents to, or acquiesces in the appointment
of a trustee, receiver or other custodian for the Company or such
Subsidiary or any property thereof, or makes a general assignment for the
benefit of creditors; or, in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian is appointed for the
Company or any Subsidiary or for a substantial part of the property of
any thereof and is not discharged within 60 days; or any bankruptcy,
reorganization, debt arrangement, or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation
proceeding, is commenced in respect of the Company or any Subsidiary, and
if such case or proceeding is not commenced by the Company or such
Subsidiary, it is consented to or acquiesced in by the Company or such
Subsidiary, or remains for 30 days undismissed; or the Company or any
Subsidiary takes any action to authorize, or in furtherance of, any of
the foregoing.
12.1.5 Non-Compliance with Loan Documents. (a) Failure by the Company to
comply with or to perform any covenant set forth in Sections 10.1.5(a),
10.5 through 10.15, and 10.20 through 10.22; or (b) failure by the
Company to comply with or to perform any other provision of this
Agreement or any other Loan Document (and not constituting an Event of
Default under any other provision of this Section 12) and continuance of
such failure described in this clause (b) for 30 days.
12.1.6 Warranties. Any warranty made by the Company or any Subsidiary
herein or any other Loan Document is breached or is false or misleading
in any material respect, or any schedule, certificate, financial
statement, report, notice or other writing furnished by the Company or
any Subsidiary to the Agent or any Bank in connection herewith is false
or misleading in any material respect on the date as of which the facts
therein set forth are stated or certified.
12.1.7 Pension Plans. (i) Institution of any steps by the Company or any
other Person to terminate a Pension Plan if as a result of such
termination the Company could be required to make a contribution to such
Pension Plan, or could incur a liability or obligation to such Pension
Plan, in excess of $100,000; (ii) a contribution failure occurs with
respect to any Pension Plan sufficient to give rise to a Lien under
Section 302(f) of ERISA; or (iii) there shall occur any withdrawal or
partial withdrawal from a Multiemployer Pension Plan and the withdrawal
liability (without unaccrued interest) to Multiemployer Pension Plans as
a result of such withdrawal (including any outstanding withdrawal
liability that the Company and the Controlled Group have incurred on the
date of such withdrawal) exceeds $100,000.
12.1.8 Judgments. Final judgments which exceed an aggregate of $100,000
shall be rendered against the Company or any Subsidiary and shall not
have been paid, discharged or vacated or had execution thereof stayed
pending appeal within 30 days after entry or filing of such judgments.
12.1.9 Invalidity of Guaranty, etc. The Guaranty shall cease to be in
full force and effect with respect to either of any Subsidiary; or any
Subsidiary (or any Person by, through or on behalf of such Subsidiary)
shall contest in any manner the validity, binding nature or
enforceability of the Guaranty with respect to such Subsidiary.
12.1.10 Invalidity of Collateral Documents, etc. Any Collateral
Document shall cease to be in full force and effect; or the Company or
any Subsidiary (or any Person by, through or on behalf of the Company or
any Subsidiary) shall contest in any manner the validity, binding nature
or enforceability of any Collateral Document.
12.1.11 Invalidity of Subordination Provisions, etc. Any subordination
provision in any document or instrument governing Subordinated Debt
(including the Subordinated Debt Documents), or any subordination
provision in any guaranty by any Subsidiary of any Subordinated Debt,
shall cease to be in full force and effect, or the Company or any other
Person (including the holder of any applicable Subordinated Debt) shall
contest in any manner the validity, binding nature or enforceability of
any such provision.
12.1.12 Change of Control. (a) Any Person (other than Blair) or group
of Persons (within the meaning of Section 13 or 14 of the Securities
Exchange Act of 1934) shall acquire beneficial ownership (within the
meaning of Rule 13d-3 promulgated under such Act) of more than 20% of the
outstanding securities (on a fully diluted basis and taking into account
any securities or contract rights exercisable, exchangeable or
convertible into equity securities) of the Company having voting rights
in the election of directors under normal circumstances; or (b) a
majority of the members of the Board of Directors of the Company shall
cease to be Continuing Members; or (c) a period of 30 consecutive days
shall have elapsed during which any two of the individuals named in
Schedule 12.1.12 shall have ceased to hold executive offices with the
Company at least equal in seniority and responsibility to such
individuals' present offices, as set out in such Schedule 12.1.12,
excluding any such individual who has been replaced by another individual
or individuals reasonably satisfactory to the Required Banks (it being
understood that any such replacement individual shall be deemed added to
Schedule 12.1.12 on the date of approval thereof by the Required Banks)
or (d) Blair or Affiliates thereof shall cease to own and control at
least 5%, or Marty Roenigk shall cease to own and control at least 15%,
of the outstanding voting stock of the Company or shall cease to serve as
Compudyne's Chairman. For purposes of the foregoing, "Continuing Member"
means a member of the Board of Directors of the Company who either (i)
was a member of the Company's Board of Directors on the day before the
Closing Date and has been such continuously thereafter or (ii) became a
member of such Board of Directors after the day before the Closing Date
and whose election or nomination for election was approved by a vote of
the majority of the Continuing Members then members of the Company's
Board of Directors.
12.1.13 Material Adverse Effect. The occurrence of any event having a
Material Adverse Effect.
12.2 Effect of Event of Default. If any Event of Default described in
Section 12.1.4 shall occur, the Commitments (if they have not theretofore
terminated) shall immediately terminate and the Loans and all other
obligations hereunder shall become immediately due and payable and the
Company shall become immediately obligated to Cash Collateralize all
Letters of Credit, all without presentment, demand, protest or notice of
any kind; and, if any other Event of Default shall occur and be
continuing, the Agent (upon written request of the Required Banks) shall
declare the Commitments (if they have not theretofore terminated) to be
terminated and/or declare all Loans and all other obligations hereunder
to be due and payable and/or demand that the Company immediately Cash
Collateralize all Letters of Credit, whereupon the Commitments (if they
have not theretofore terminated) shall immediately terminate and/or all
Loans and all other obligations hereunder shall become immediately due
and payable and/or the Company shall immediately become obligated to Cash
Collateralize all Letters of Credit, all without presentment, demand,
protest or notice of any kind. The Agent shall promptly advise the
Company of any such declaration, but failure to do so shall not impair
the effect of such declaration. Notwithstanding the foregoing, the
effect as an Event of Default of any event described in Section 12.1.1 or
Section 12.1.4 may be waived by the written concurrence of all of the
Banks, and the effect as an Event of Default of any other event described
in this Section 12 may be waived by the written concurrence of the
Required Banks. Any cash collateral delivered hereunder shall be held by
the Agent (without liability for interest thereon) and applied to
obligations arising in connection with any drawing under a Letter of
Credit. After the expiration or termination of all Letters of Credit,
such cash collateral shall be applied by the Agent to any remaining
obligations hereunder and any excess shall be delivered to the Company or
as a court of competent jurisdiction may elect.
SECTION 13 THE AGENT.
13.1 Appointment and Authorization. (a) Each Bank hereby irrevocably
(subject to Section 13.9) appoints, designates and authorizes the Agent
to take such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform such
duties as are expressly delegated to it by the terms of this Agreement or
any other Loan Document, together with such powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the
Agent shall not have any duty or responsibility except those expressly
set forth herein, nor shall the Agent have or be deemed to have any
fiduciary relationship with any Bank, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be
read into this Agreement or any other Loan Document or otherwise exist
against the Agent.
(b) The Issuing Bank shall act on behalf of the Banks with respect to
any Letters of Credit issued by it and the documents associated
therewith. The Issuing Bank shall have all of the benefits and
immunities (i) provided to the Agent in this Section 13 with respect to
any acts taken or omissions suffered by the Issuing Bank in connection
with Letters of Credit issued by it or proposed to be issued by it and
the applications and agreements for letters of credit pertaining to such
Letters of Credit as fully as if the term "Agent", as used in this
Section 13, included the Issuing Bank with respect to such acts or
omissions and (ii) as additionally provided in this Agreement with
respect to the Issuing Bank.
13.2 Delegation of Duties. The Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
13.3 Liability of Agent. None of the Agent nor any of its directors,
officers, employees or agents shall (i) be liable for any action taken or
omitted to be taken by any of them under or in connection with this
Agreement or any other Loan Document or the transactions contemplated
hereby (except for its own gross negligence or willful misconduct), or
(ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Company or any
Subsidiary or Affiliate of the Company, or any officer thereof, contained
in this Agreement or in any other Loan Document, or in any certificate,
report, statement or other document referred to or provided for in, or
received by the Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of the Company or any other party to any
Loan Document to perform its obligations hereunder or thereunder. The
Agent shall not be under any obligation to any Bank 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 other Loan
Document, or to inspect the properties, books or records of the Company
or any of the Company's Subsidiaries or Affiliates.
13.4 Reliance by Agent. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation believed
by it to be genuine and correct and to have been signed, sent or made by
the proper Person or Persons, and upon advice and statements of legal
counsel (including counsel to the Company), independent accountants and
other experts selected by the Agent. The Agent shall be fully justified
in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or
concurrence of the Required Banks as it deems appropriate and, if it so
requests, confirmation from the Banks of their obligation to indemnify
the Agent against any and all liability and expense which may be incurred
by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Required Banks and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Banks.
13.5 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Event of Default or Unmatured Event of
Default except with respect to defaults in the payment of principal,
interest and fees required to be paid to the Agent for the account of the
Banks, unless the Agent shall have received written notice from a Bank or
the Company referring to this Agreement, describing such Event of Default
or Unmatured Event of Default and stating that such notice is a "notice
of default". The Agent will notify the Banks of its receipt of any such
notice. The Agent shall take such action with respect to such Event of
Default or Unmatured Event of Default as may be requested by the Required
Banks in accordance with Section 12; provided that unless and until the
Agent has received any such request, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Event of Default or Unmatured Event of Default as it
shall deem advisable or in the best interest of the Banks.
13.6 Credit Decision. Each Bank acknowledges that the Agent has not
made any representation or warranty to it, and that no act by the Agent
hereafter taken, including any review of the affairs of the Company and
its Subsidiaries, shall be deemed to constitute any representation or
warranty by the Agent to any Bank. Each Bank represents to the Agent
that it has, independently and without reliance upon the Agent and based
on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness
of the Company and its Subsidiaries, and made its own decision to enter
into this Agreement and to extend credit to the Company hereunder. Each
Bank also represents that it will, independently and without reliance
upon the Agent and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this
Agreement and the other Loan Documents, and to make such investigations
as it deems necessary to inform itself as to the business, prospects,
operations, property, financial and other condition and creditworthiness
of the Company. Except for notices, reports and other documents
expressly herein required to be furnished to the Banks by the Agent, the
Agent shall not have any duty or responsibility to provide any Bank with
any credit or other information concerning the business, prospects,
operations, property, financial or other condition or creditworthiness of
the Company which may come into the possession of the Agent.
13.7 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Banks shall indemnify upon demand the Agent
and its directors, officers, employees and agents (to the extent not
reimbursed by or on behalf of the Company and without limiting the
obligation of the Company to do so), pro rata, from and against any and
all Indemnified Liabilities; provided that no Bank shall be liable for
any payment to any such Person of any portion of the Indemnified
Liabilities resulting from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Bank shall
reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent
in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations,
legal proceedings or otherwise) of, or legal advice in respect of rights
or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that
the Agent is not reimbursed for such expenses by or on behalf of the
Company. The undertaking in this Section shall survive repayment of the
Loans, cancellation of the Notes, expiration or termination of the
Letters of Credit, any foreclosure under, or modification, release or
discharge of, any or all of the Collateral Documents, termination of this
Agreement and the resignation or replacement of the Agent.
13.8 Agent in Individual Capacity. LaSalle and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with
the Company and its Subsidiaries and Affiliates as though LaSalle were
not the Agent or the Issuing Bank hereunder and without notice to or
consent of the Banks. The Banks acknowledge that, pursuant to such
activities, LaSalle or its Affiliates may receive information regarding
the Company or its Affiliates (including information that may be subject
to confidentiality obligations in favor of the Company or such Affiliate)
and acknowledge that the Agent shall be under no obligation to provide
such information to them. With respect to their Loans (if any), LaSalle
and its Affiliates shall have the same rights and powers under this
Agreement as any other Bank and may exercise the same as though LaSalle
were not the Agent and the Issuing Bank, and the terms "Bank" and "Banks"
include LaSalle and its Affiliates, to the extent applicable, in their
individual capacities.
13.9 Successor Agent. The Agent may resign as Agent upon 30 days'
notice to the Banks. If the Agent resigns under this Agreement, the
Required Banks shall, with (so long as no Event of Default exists) the
consent of the Company (which shall not be unreasonably withheld or
delayed), appoint from among the Banks a successor agent for the Banks.
If no successor agent is appointed prior to the effective date of the
resignation of the Agent, the Agent may appoint, after consulting with
the Banks and the Company, a successor agent from among the Banks. Upon
the acceptance of its appointment as successor agent hereunder, such
successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent, and
the retiring Agent's appointment, powers and duties as Agent shall be
terminated. After any retiring Agent's resignation hereunder as Agent,
the provisions of this Section 13 and Sections 14.6 and 14.13 shall inure
to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement. If no successor agent has accepted
appointment as Agent by the date which is 30 days following a retiring
Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Banks shall perform all
of the duties of the Agent hereunder until such time, if any, as the
Required Banks appoint a successor agent as provided for above.
13.10 Collateral Matters. The Banks irrevocably authorize the Agent, at
its option and in its discretion, (a) to release any Lien granted to or
held by the Agent under any Collateral Document (i) upon termination of
the Commitments and payment in full of all Loans and all other
obligations of the Company hereunder and the expiration or termination of
all Letters of Credit; (ii) constituting property sold or to be sold or
disposed of as part of or in connection with any disposition permitted
hereunder; or (iii) subject to Section 14.1, if approved, authorized or
ratified in writing by the Required Banks; or (b) to subordinate its
interest in any collateral to any holder of a Lien on such collateral
which is permitted by clause (d)(i) or (d)(iii) of Section 10.8 (it being
understood that the Agent may conclusively rely on a certificate from the
Company in determining whether the Debt secured by any such Lien is
permitted by Section 10.7(b)). Upon request by the Agent at any time,
the Banks will confirm in writing the Agent's authority to release, or
subordinate its interest in, particular types or items of collateral
pursuant to this Section 13.10.
SECTION 14 GENERAL.
14.1 Waiver; Amendments. No delay on the part of the Agent or any Bank
in the exercise of any right, power or remedy shall operate as a waiver
thereof, nor shall any single or partial exercise by any of them of any
right, power or remedy preclude other or further exercise thereof, or the
exercise of any other right, power or remedy. No amendment, modification
or waiver of, or consent with respect to, any provision of this Agreement
or the Notes shall in any event be effective unless the same shall be in
writing and signed and delivered by Banks having an aggregate Pro Rata
Share of not less than the aggregate Pro Rata Share expressly designated
herein with respect thereto or, in the absence of such designation as to
any provision of this Agreement or the Notes, by the Required Banks, and
then any such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given. No amendment, modification, waiver or consent shall change
the Pro Rata Share of any Bank without the consent of such Bank. No
amendment, modification, waiver or consent shall (i) increase the
Revolving Commitment Amount, (ii) extend the date for payment of any
principal of or interest on the Loans or any fees payable hereunder,
(iii) reduce the principal amount of any Loan, the rate of interest
thereon or any fees payable hereunder, (iv) release the Guaranty or all
or any substantial part of the collateral granted under the Collateral
Documents or (v) reduce the aggregate Pro Rata Share required to effect
an amendment, modification, waiver or consent without, in each case, the
consent of all Banks. No provision of Section 13 or other provision of
this Agreement affecting the Agent in its capacity as such shall be
amended, modified or waived without the consent of the Agent. No
provision of this Agreement relating to the rights or duties of the
Issuing Bank in its capacity as such shall be amended, modified or waived
without the consent of the Issuing Bank.
14.2 Confirmations. The Company and each holder of a Note agree from
time to time, upon written request received by it from the other, to
confirm to the other in writing (with a copy of each such confirmation to
the Agent) the aggregate unpaid principal amount of the Loans then
outstanding under such Note.
14.3 Notices. Except as otherwise provided in Sections 2.2.2 and 2.2.3,
all notices hereunder shall be in writing (including facsimile
transmission) and shall be sent to the applicable party at its address
shown on Schedule 14.3 or at such other address as such party may, by
written notice received by the other parties, have designated as its
address for such purpose. Notices sent by facsimile transmission shall
be deemed to have been given when sent; notices sent by mail shall be
deemed to have been given three Business Days after the date when sent by
registered or certified mail, postage prepaid; and notices sent by hand
delivery or overnight courier service shall be deemed to have been given
when received. For purposes of Sections 2.2.2 and 2.2.3, the Agent shall
be entitled to rely on telephonic instructions from any person that the
Agent in good faith believes is an authorized officer or employee of the
Company, and the Company shall hold the Agent and each other Bank
harmless from any loss, cost or expense resulting from any such reliance.
14.4 Computations. Where the character or amount of any asset or
liability or item of income or expense is required to be determined, or
any consolidation or other accounting computation is required to be made,
for the purpose of this Agreement, such determination or calculation
shall, to the extent applicable and except as otherwise specified in this
Agreement, be made in accordance with GAAP, consistently applied;
provided that if the Company notifies the Agent that the Company wishes
to amend any covenant in Section 10 to eliminate or to take into account
the effect of any change in GAAP on the operation of such covenant (or if
the Agent notifies the Company that the Required Banks wish to amend
Section 10 for such purpose), then the Company's compliance with such
covenant shall be determined on the basis of GAAP in effect immediately
before the relevant change in GAAP became effective, until either such
notice is withdrawn or such covenant is amended in a manner satisfactory
to the Company and the Required Banks.
14.5 Regulation U. Each Bank represents that it in good faith is not
relying, either directly or indirectly, upon any Margin Stock as
collateral security for the extension or maintenance by it of any credit
provided for in this Agreement.
14.6 Costs, Expenses and Taxes. The Company agrees to pay on demand all
reasonable out-of-pocket costs and expenses of the Agent (including
Attorney Costs) in connection with the preparation, execution,
syndication, delivery and administration of this Agreement, the other
Loan Documents and all other documents provided for herein or delivered
or to be delivered hereunder or in connection herewith (including any
amendment, supplement or waiver to any Loan Document), and all reasonable
out-of-pocket costs and expenses (including Attorney Costs) incurred by
the Agent and each Bank after an Event of Default in connection with the
enforcement of this Agreement, the other Loan Documents or any such other
documents. In addition, the Company agrees to pay, and to save the Agent
and the Banks harmless from all liability for, (a) any stamp or other
taxes (excluding income taxes and franchise taxes based on net income)
which may be payable in connection with the execution and delivery of
this Agreement, the borrowings hereunder, the issuance of the Notes or
the execution and delivery of any other Loan Document or any other
document provided for herein or delivered or to be delivered hereunder or
in connection herewith and (b) any fees of the Company's auditors in
connection with any reasonable exercise by the Agent and the Banks of
their rights pursuant to Section 10.2. All obligations provided for in
this Section 14.6 shall survive repayment of the Loans, cancellation of
the Notes, expiration or termination of the Letters of Credit and
termination of this Agreement.
14.7 Subsidiary References. The provisions of this Agreement relating
to Subsidiaries shall apply only during such times as the Company has one
or more Subsidiaries.
14.8 Captions. Section captions used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
14.9 Assignments; Participations.
14.9.1 Assignments. Any Bank may, with the prior written consents of
the Issuing Bank and the Agent and (so long as no Event of Default
exists) the Company (which consents shall not be unreasonably delayed or
withheld and, in any event, shall not be required for an assignment by a
Bank to one of its Affiliates), at any time assign and delegate to one or
more commercial banks or other Persons (any Person to whom such an
assignment and delegation is to be made being herein called an
"Assignee") all or any fraction of such Bank's Loans and Commitment
(which assignment and delegation shall be of a constant, and not a
varying, percentage of all the assigning Bank's Loans and Commitment) in
a minimum aggregate amount equal to the lesser of (i) the amount of the
assigning Bank's Pro Rata Share of the Revolving Commitment Amount plus
the unpaid amount of such Bank's Term Loan and (ii) $5,000,000; provided
that (a) no assignment and delegation may be made to any Person if, at
the time of such assignment and delegation, the Company would be
obligated to pay any greater amount under Section 7.6 or Section 8 to the
Assignee than the Company is then obligated to pay to the assigning Bank
under such Sections (and if any assignment is made in violation of the
foregoing, the Company will not be required to pay the incremental
amounts) and (b) the Company and the Agent shall be entitled to continue
to deal solely and directly with such Bank in connection with the
interests so assigned and delegated to an Assignee until the date when
all of the following conditions shall have been met:
(x) five Business Days (or such lesser period of time as the Agent and
the assigning Bank shall agree) shall have passed after written notice of
such assignment and delegation, together with payment instructions,
addresses and related information with respect to such Assignee, shall
have been given to the Company and the Agent by such assigning Bank and
the Assignee,
(y) the assigning Bank and the Assignee shall have executed and
delivered to the Company and the Agent an assignment agreement in form
and substance satifactory to the Agent (an "Assignment Agreement"),
together with any documents required to be delivered thereunder, which
Assignment Agreement shall have been accepted by the Agent, and
(z) except in the case of an assignment by a Bank to one of its
Affiliates, the assigning Bank or the Assignee shall have paid the Agent
a processing fee of $3,500.
From and after the date on which the conditions described above have been
met, (x) such Assignee shall be deemed automatically to have become a
party hereto and, to the extent that rights and obligations hereunder
have been assigned and delegated to such Assignee pursuant to such
Assignment Agreement, shall have the rights and obligations of a Bank
hereunder and (y) the assigning Bank, to the extent that rights and
obligations hereunder have been assigned and delegated by it pursuant to
such Assignment Agreement, shall be released from its obligations
hereunder. Within five Business Days after effectiveness of any
assignment and delegation, the Company shall execute and deliver to the
Agent (for delivery to the Assignee and the Assignor, as applicable) a
new Note in the principal amount of the Assignee's Pro Rata Share of the
Revolving Commitment Amount plus the principal amount of the Assignee's
Term Loan and, if the assigning Bank has retained a Commitment hereunder,
a replacement Note in the principal amount of the Pro Rata Share of the
Revolving Commitment Amount retained by the assigning Bank plus the
principal amount of the Term Loan retained by the assigning Bank (such
Note to be in exchange for, but not in payment of, the predecessor Note
held by such assigning Bank). Each such Note shall be dated the
effective date of such assignment. The assigning Bank shall mark the
predecessor Note "exchanged" and deliver it to the Company. Accrued
interest on that part of the predecessor Note being assigned shall be
paid as provided in the Assignment Agreement. Accrued interest and fees
on that part of the predecessor Note not being assigned shall be paid to
the assigning Bank. Accrued interest and accrued fees shall be paid at
the same time or times provided in the predecessor Note and in this
Agreement. Any attempted assignment and delegation not made in
accordance with this Section 14.9.1 shall be null and void.
Notwithstanding the foregoing provisions of this Section 14.9.1 or any
other provision of this Agreement, any Bank may at any time assign all or
any portion of its Loans and its Note to a Federal Reserve Bank (but no
such assignment shall release any Bank from any of its obligations
hereunder).
14.9.2 Participations. Any Bank may at any time sell to one or more
commercial banks or other Persons participating interests in any Loan
owing to such Bank, the Note held by such Bank, the Commitment of such
Bank, the direct or participation interest of such Bank in any Letter of
Credit or any other interest of such Bank hereunder (any Person
purchasing any such participating interest being herein called a
"Participant"). In the event of a sale by a Bank of a participating
interest to a Participant, (x) such Bank shall remain the holder of its
Note for all purposes of this Agreement, (y) the Company and the Agent
shall continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations hereunder and (z) all amounts
payable by the Company shall be determined as if such Bank had not sold
such participation and shall be paid directly to such Bank. No
Participant shall have any direct or indirect voting rights hereunder
except with respect to any of the events described in the fourth sentence
of Section 14.1. Each Bank agrees to incorporate the requirements of the
preceding sentence into each participation agreement which such Bank
enters into with any Participant. The Company agrees that if amounts
outstanding under this Agreement and the Notes are due and payable (as a
result of acceleration or otherwise), each Participant shall be deemed to
have the right of setoff in respect of its participating interest in
amounts owing under this Agreement, any Note and with respect to any
Letter of Credit to the same extent as if the amount of its participating
interest were owing directly to it as a Bank under this Agreement or such
Note; provided that such right of setoff shall be subject to the
obligation of each Participant to share with the Banks, and the Banks
agree to share with each Participant, as provided in Section 7.5. The
Company also agrees that each Participant shall be entitled to the
benefits of Section 7.6 and Section 8 as if it were a Bank (provided that
no Participant shall receive any greater compensation pursuant to Section
7.6 or Section 8 than would have been paid to the participating Bank if
no participation had been sold).
14.10 Governing Law. This Agreement and each Note shall be a contract
made under and governed by the internal laws of the State of Illinois
applicable to contracts made and to be performed entirely within such
State. Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this
Agreement. All obligations of the Company and rights of the Agent and
the Banks expressed herein or in any other Loan Document shall be in
addition to and not in limitation of those provided by applicable law.
14.11 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts
and each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement.
14.12 Successors and Assigns. This Agreement shall be binding upon
the Company, the Banks and the Agent and their respective successors and
assigns, and shall inure to the benefit of the Company, the Banks and the
Agent and the successors and assigns of the Banks and the Agent.
14.13 Indemnification by the Company. In consideration of the execution
and delivery of this Agreement by the Agent and the Banks and the
agreement to extend the Commitments provided hereunder, the Company
hereby agrees to indemnify, exonerate and hold the Agent, each Bank and
each of the officers, directors, employees, Affiliates and agents of the
Agent and each Bank (each a "Bank Party") free and harmless from and
against any and all actions, causes of action, suits, losses,
liabilities, damages and expenses, including Attorney Costs
(collectively, the "Indemnified Liabilities"), incurred by the Bank
Parties or any of them as a result of, or arising out of, or relating to
(i) any tender offer, merger, purchase of stock, purchase of assets
(including the Purchase) or other similar transaction financed or
proposed to be financed in whole or in part, directly or indirectly, with
the proceeds of any of the Loans, (ii) the use, handling, release,
emission, discharge, transportation, storage, treatment or disposal of
any hazardous substance at any property owned or leased by the Company or
any Subsidiary, (iii) any violation of any Environmental Laws with
respect to conditions at any property owned or leased by the Company or
any Subsidiary or the operations conducted thereon, (iv) the
investigation, cleanup or remediation of offsite locations at which the
Company or any Subsidiary or their respective predecessors are alleged to
have directly or indirectly disposed of hazardous substances or (v) the
execution, delivery, performance or enforcement of this Agreement or any
other Loan Document by any of the Bank Parties, except for any such
Indemnified Liabilities arising on account of the applicable Bank Party's
gross negligence or willful misconduct. If and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Company
hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. All obligations provided for in this Section 14.13
shall survive repayment of the Loans, cancellation of the Notes,
expiration or termination of the Letters of Credit, any foreclosure
under, or any modification, release or discharge of, any or all of the
Collateral Documents and termination of this Agreement.
14.14 Nonliability of Lenders. The relationship between the Company on
the one hand and the Banks and the Agent on the other hand shall be
solely that of borrower and lender. Neither the Agent nor any Bank shall
have any fiduciary responsibility to the Company. Neither the Agent nor
any Bank undertakes any responsibility to the Company to review or inform
the Company or any matter in connection with any phase of the Company's
business or operations. The Company agrees that neither the Agent nor
any Bank shall have liability to the Company (whether sounding in tort,
contract or otherwise) for losses suffered by the Company in connection
with, arising out of, or in any way related to the transactions
contemplated and the relationship established by the Loan Documents, or
any act, omission or event occurring in connection therewith, unless it
is determined in a final non-appealable judgment by a court of competent
jurisdiction that such losses resulted from the gross negligence or
willful misconduct of the party from which recovery is sought. Neither
the Agent nor any Bank shall have any liability with respect to, and the
Company hereby waives, releases and agrees not to sue for, any special,
indirect or consequential damages suffered by the Company in connection
with, arising out of, or in any way related to the Loan Documents or the
transactions contemplated thereby.
14.15 Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED
THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER
PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE
COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF
THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT
COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE. THE COMPANY FURTHER IRREVOCABLY CONSENTS
TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE COMPANY
HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE
AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
14.16 Waiver of Jury Trial. EACH OF THE COMPANY, THE AGENT AND EACH
BANK HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY
NOTE, ANY OTHER LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH OR THEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING
IN CONNECTION WITH ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH ACTION
OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
Delivered at Chicago, Illinois, as of the day and year first above
written.
COMPUDYNE CORPORATION
By
Title
NORMENT INDUSTRIES, INC.
By
Title
NORSHIELD CORPORATION
By
Title
QUANTA SYSTEMS CORPORATION
By
Title
QUANTA SECURSYSTEMS, INC.
By
Title
MICROASSEMBLY SYSTEMS, INC.
By
Title
SYSCO SECURITY SYSTEMS, INC.
By
Title
LASALLE NATIONAL BANK, as Agent
By
Title
LASALLE NATIONAL BANK,
as Issuing Bank and as a Bank
By
Title
PRICING SCHEDULE
The Eurodollar Margin, the Base Rate Margin, the Non-Use Fee Rate
and the LC Fee Rate shall be determined as set forth below.
Initially, the Eurodollar Margin shall be 2.50% per annum, the Base
Rate Margin shall be 1.00% per annum, the Non-Use Fee Rate shall be .50%
per annum and the LC Fee Rate shall be 2.50% per annum.
On and after June 30, 1999, the Eurodollar Margin, the Base Rate
Margin, the Non-Use Fee Rate and the LC Fee Rate shall be equal to the
applicable rate per annum set forth in the table below opposite the
applicable Senior Debt to EBITDA Ratio:
<TABLE>
<S> <C> <C> <C> <C>
Senior Debt Eurodollar Base Rate Non-Use LC Fee
to EBITBDA Ratio Margin Margin Fee Rate Rate
Greater than or
equal to 2.50:1 2.75% 1.25% .50% 2.75%
Greater than or
equalto 2.00:1
but less than 2.50:1 2.50% 1.00% .50% 2.50%
Greater than or equal
to 1.50:1 but less
than 2.00:1 2.25% .75% .50% 2.25%
Less than 1.50:1 2.00% .50% .50% 2.00%
</TABLE>
The Eurodollar Margin, the Base Rate Margin, the Non-Use Fee Rate and the
LC Fee Rate shall be adjusted, to the extent applicable, on the 45th (or,
in the case of the last Fiscal Quarter of each Fiscal Year, 90th) day
after the end of each Fiscal Quarter based on the Senior Debt to EBITDA
Ratio as of the last day of such Fiscal Quarter; it being understood that
if the Company fails to deliver the financial statements required by
Section 10.1.1 or 10.1.2, as applicable, and the related Compliance
Certificate, required by Section 10.1.3 by the 45th day (or, if
applicable, the 90th day) after any Fiscal Quarter, the Eurodollar Margin
shall be 2.75%, the Base Rate Margin shall be 1.25%, the Non-Use Fee Rate
shall be .050% and the LC Fee Rate shall be 2.75% until such financial
statements and Compliance Certificate are delivered. Notwithstanding the
foregoing, no reduction to the foregoing interest rate margins or fee
rates shall become effective at any time when an Event of Default or
Unmatured Event of Default has occurred and is continuing.
<TABLE>
SCHEDULE 2.1
BANKS AND PRO RATA SHARES
<S> <C> <C> <C>
Pro Rate Share
of Revolving Amount of
Bank Commitment Amount Term Loan Pro Rata Share */
LaSalle
National
Bank $6,500,000 $11,500,000 100%
TOTALS $6,500,000 $11,500,000 100%
*/ Carry out to nine decimal places.
</TABLE>
<TABLE>
SCHEDULE 3.1
TERM LOAN INSTALLMENTS
<S> <C>
Date Amount
June 30, 1999 $375,000
September 30, 1999 $375,000
December 31, 1999 $375,000
March 31, 2000 $375,000
June 30, 2000 $500,000
September 30, 2000 $500,000
December 31, 2000 $500,000
March 31, 2001 $500,000
June 30, 2001 $625,000
September 30, 2001 $625,000
December 31, 2001 $625,000
March 31, 2002 $625,000
June 30, 2002 $625,000
September 30, 2002 $625,000
December 31, 2002 $625,000
March 31, 2003 $625,000
June 30, 2003 $750,000
September 30, 2003 $750,000
December 31, 2003 $750,000
March 31, 2004 $750,000
</TABLE>
SCHEDULE 9.4
FINANCIAL STATEMENTS AND PROJECTIONS
SCHEDULE 9.6
LITIGATION AND CONTINGENT LIABILITIES
SCHEDULE 9.8
SUBSIDIARIES
SCHEDULE 9.15
ENVIRONMENTAL MATTERS
SCHEDULE 9.17
INSURANCE
SCHEDULE 9.18
REAL PROPERTY
SCHEDULE 9.22
LABOR MATTERS
SCHEDULE 9.24
PURCHASE AGREEMENT
SCHEDULE 10.7
EXISTING DEBT
SCHEDULE 10.8
EXISTING LIENS
SCHEDULE 10.21
INVESTMENTS
SCHEDULE 11.1
DEBT TO BE REPAID
SCHEDULE 12.1.12
KEY EXECUTIVES
Martin Roenigk
SCHEDULE 14.3
ADDRESSES FOR NOTICES
COMPUDYNE CORPORATION OR ANY SUBSIDIARY BORROWER
120 Union Street
Willimantic, Connecticut 06226
Attention: Marty Roenigk, Chairman and Chief Executive Officer
Telephone: (860) 456-4187
Facsimile: (860) 456-1187
and
QUANTA SECURSYSTEMS, INC.
Parkway Industrial Park
7255 Standard Drive
Hanover, MD 21076
Attention: William Rock
Telephone: (410) 712-6020
Facsimile: (410) 712-0712
with a copy to:
Tyler, Cooper & Alcorn, LLP
185 Asylum Street
City Place, 35th Floor
Hartford, Conn. 06103-3488
Attention: Robert J. Metzler
Telephone: (860)725-6200
Facsimile: (860) 278-3802
LASALLE NATIONAL BANK, as Agent, Issuing Bank and a Bank
Notices of Borrowing , Conversion, Continuation and Letter of Credit
Issuance
135 South LaSalle Street
Chicago, Illinois 60603
Attention: Mary Junkroski
Telephone: (312)904-7072
Facsimile: (312)606-4779
All Other Notices
135 South LaSalle Street
Chicago, Illinois 60603
Attention: Bradley A. Farris
Telephone: (312) 904-7072
Facsimile: (312) 606-8423
with a copy to:
Seyfarth, Shaw, Fairweather & Geraldson
55 East Monroe Street, Suite 4200
Chicago, IL 60603
Attention: Theodore E. Cornell III
Telephone: (312) 269-8907
Fax: (312) 269-8869
EXHIBIT A
FORM OF
NOTE
,
$ Chicago, Illinois
Each of the undersigned, for value received, jointly and
severally promises to pay to the order of (the "Bank") at the
principal office of LaSalle National Bank (the "Agent") in Chicago,
Illinois the aggregate unpaid amount of all Loans made to the undersigned
by the Bank pursuant to the Credit Agreement referred to below (as shown
on the schedule attached hereto (and any continuation thereof) or in the
records of the Bank), such principal amount to be payable on the dates
set forth in the Credit Agreement.
The undersigned further jointly and severally promise to pay
interest on the unpaid principal amount of each Loan from the date of
such Loan until such Loan is paid in full, payable at the rate(s) and at
the time(s) set forth in the Credit Agreement. Payments of both
principal and interest are to be made in lawful money of the United
States of America.
This Note evidences indebtedness incurred under, and is
subject to the terms and provisions of, the Credit Agreement, dated as of
November , 1998 (as amended or otherwise modified from time to time,
the "Credit Agreement"; terms not otherwise defined herein are used
herein as defined in the Credit Agreement), among the undersigned,
certain financial institutions (including the Bank) and the Agent, to
which Credit Agreement reference is hereby made for a statement of the
terms and provisions under which this Note may or must be paid prior to
its due date or its due date accelerated.
This Note is made under and governed by the laws of the State
of Illinois applicable to contracts made and to be performed entirely
within such State.
COMPUDYNE CORPORATION
By
Title
NORMENT INDUSTRIES, INC.
By
Title
NORSHIELD CORPORATION
By
Title
QUANTA SYSTEMS CORPORATION
By
Title
QUANTA SECURSYSTEMS, INC.
By
Title
MICROASSEMBLY SYSTEMS, INC.
By
Title
SYSCO SECURITY SYSTEMS, INC.
By
Title
Schedule attached to Note dated , of COMPUDYNE CORPORATION
and certain Subsidiary Borrowers payable to the order of
<TABLE>
<S> <C> <C> <C> <C>
Date and Date and
Amount of Amount of
Loan or of Repayment or of Interest
Conversion from Conversion into Period/ Unpaid
another type of another type of Maturity Principal Notation
Loan Loan Date Balance Made by
1. BASE RATE LOANS
2. EURODOLLAR LOANS
</TABLE>
EXHIBIT B
FORM OF COMPLIANCE CERTIFICATE
To: LaSalle National Bank, as Agent
Please refer to the Credit Agreement dated as of November ,
1998 (as amended or otherwise modified from time to time, the "Credit
Agreement") among Compudyne Corporation and certain Subsidiary Borrowers
(as defined in the Loan Agreement) (the "Company"), various financial
institutions and LaSalle National Bank, as agent. Terms used but not
otherwise defined herein are used herein as defined in the Credit
Agreement.
I. Reports. Enclosed herewith is a copy of the [annual
audited/quarterly/monthly] report of the Company as at , (the
"Computation Date"), which report fairly presents in all material
respects the financial condition and results of operations [(subject to
the absence of footnotes and to normal year-end adjustments)] of the
Company as of the Computation Date and has been prepared in accordance
with GAAP consistently applied.
II. Financial Tests. The Company hereby certifies and warrants to you
that the following is a true and correct computation as at the
Computation Date of the following ratios and/or financial restrictions
contained in the Credit Agreement:
[REVISE AS APPROPRIATE]
A. Section 10.6.1 - Minimum Fixed Charge Coverage Ratio
1. Consolidated Net Income $
2. Plus: Interest Expense $
income tax expense $________
depreciation $
amortization $
3. Total (EBITDA) $________
4. Income taxes paid $
5. Capital Expenditures $________
6. Sum of (4) and (5) $
7. Remainder of (3) minus (6) $________
8. Interest Expense $
9. Required payments of
principal of Funded Debt
(including Term Loans but
excluding Revolving Loans) $
10. Sum of (8) and (9) $________
11. Ratio of (7) to (10) to 1
12. Minimum Required ___ _ to 1
B. Section 10.6.2 - Minimum Interest Coverage Ratio
1. EBITDA $________
(from Item A(3) above)
2. Interest Expense $
3. Ratio of (1) to (2) ____ to 1
4. Minimum required to 1
C. Section 10.6.3 - Maximum Senior Debt to EBITDA Ratio
1. Total Debt $
2. EBITDA $
(from Item A(3) above)
3. Ratio of (1) to (2) to 1
4. Maximum allowed to 1
D. Section 10.6.4 - Capital Expenditures
1. Capital Expenditures for the
Fiscal Year $
2. Maximum Permitted Capital
Expenditures $
E. Section 10.6.5 - Minimum EBITDA
1. EBITDA (from item A(3) above) $
2. Minimum required $
The Company further certifies to you that no Event of Default or
Unmatured Event of Default has occurred and is continuing.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed and delivered by its duly authorized officer on , .
COMPUDYNE CORPORATION
By
Title
NORMENT INDUSTRIES, INC.
By____________________________________________
Title
NORSHIELD CORPORATION
By
Title
QUANTA SYSTEMS CORPORATION
By____________________________________________
Title
QUANTA SECURSYSTEMS, INC.
By____________________________________________
Title
MICROASSEMBLY SYSTEMS, INC.
By
Title
SYSCO SECURITY SYSTEMS, INC.
By____________________________________________
Title
EXHIBIT G
FORM OF BORROWING BASE CERTIFICATE
To: LaSalle National Bank, as Agent
135 S. LaSalle St.
Chicago, Illinois 60603
Ladies and Gentlemen:
Please refer to the Credit Agreement dated as of November ,
1998 (as amended or otherwise modified from time to time, the "Credit
Agreement") among Compudyne Corporation and certain Subsidiary borrowers
(as defined in the Credit Agreement) (the "Company"), various financial
institutions and LaSalle National Bank, as agent. This certificate (this
"Certificate"), together with supporting calculations attached hereto, is
delivered to you pursuant to the terms of the Credit Agreement.
Capitalized terms used but not otherwise defined herein shall have the
same meanings herein as in the Credit Agreement.
The Company hereby certifies and warrants to the Agent and the
Banks that at the close of business on , (the "Calculation Date"),
the Borrowing Base was $ , computed as set forth on the schedule
attached hereto.
IN WITNESS WHEREOF, the Company has caused this Certificate to
be executed and delivered by its officer thereunto duly authorized on
, .
COMPUDYNE CORPORATION
By
Title
NORMENT INDUSTRIES, INC.
By
Title
NORSHIELD CORPORATION
By
Title
QUANTA SYSTEMS CORPORATION
By
Title
QUANTA SECURSYSTEMS, INC.
By
Title
MICROASSEMBLY SYSTEMS, INC.
By
Title
SYSCO SECURITY SYSTEMS, INC.
By
Title
<TABLE>
SCHEDULE TO BORROWING BASE CERTIFICATE
Dated as of [ ]
<S> <C> <C>
1. Gross Accounts Receivable $
2. Less Ineligibles
- Agent's Lien Not Perfected $_________
- Subject to other Lien $
- Subject to Offset, etc. $
- Account Debtor not in U.S.
or Canada $_________
- Sale on Approval, Sale or
Return, Bill and Hold or
Consignment $
- Over 90 days past due or
over 120 days past invoice
date $
- Affiliate Receivables $
- Other $
- Total $
3. Eligible Accounts Receivable [Item
1 minus Item 2] $
4. Item 3 times 50% $
5. Gross Inventory $
6. Less Ineligibles
- Agent's Lien Not Perfected $
- Subject to other Lien $_________
- Not Salable $
- Located off-site and no
Collateral Access Agreement or Waiver $_________
- Not located in U.S. $
- Other $
- Total $
7. Eligible Inventory [Item 5 minus Item 6] $
8. Item 7 times 25% $
9. Borrowing Base
[Item 4 plus Item 8] $
10. Lesser of Item 9 and
the Revolving Commitment Amount $
11. Revolving Outstandings $
12. Net Availability
[Excess of Item 10 over Item 11] $_________
13. Required Prepayment
[Excess of Item 11 over Item 10] $
</TABLE>
WILLIAM BLAIR MEZZANINE CAPITAL FUND II, L.P.
SUBORDINATED LOAN AND INVESTMENT AGREEMENT
$9,000,000 SENIOR SUBORDINATED TERM NOTE DUE
DECEMBER 31, 2005
1,075,507 SHARES OF COMMON STOCK
AND A WARRANT TO PURCHASE 297,924 SHARES OF
ADDITIONAL COMMON STOCK OF
COMPUDYNE CORPORATION
TABLE OF CONTENTS
Page No.
1. Purchase and Sale of the Note, Common Stock and Warrant
2. Credit Terms
2.1 Repayment of Principal
2.2 Interest
(a) Periodic Interest Payments
(b) Default Interest Rate
(c) Saving Clause
2.3 Prepayments
(a) Prepayments From Proceeds of Lender-Approved Transaction
(b) Other Optional Prepayments
2.4 Payments
2.5 Use of Proceeds
2.6 Certain Definitions
3. The Closing; Conditions to Closing
3.1 Opinion of Counsel
3.2 Closing Certificates
3.3 Corporate Resolutions
3.4 Proceedings and Documents
3.5 Intercreditor Agreements
3.6 Acquisition
3.7 Common Stock and Warrant
3.8 Corporate Governance and Shareholder Agreement
3.9 Bank Financing
3.10 Investment Fee
3.11 Non-Compete Agreement
3.12 Environmental Reports
3.14 Registration Rights
3.15 Regulatory Consents and Approvals
3.16 Subsidiary Guaranties
4. Representations and Warranties
4.1 Existence and Rights
(a) The Company
(b) Subsidiaries
(c) Qualification
4.2 Agreement Authorized
4.3 Capitalization
(a) The Company
(b) The Subsidiaries
4.4 Subsidiaries; Other Investments
4.5 Litigation
4.6 Financial Statements and Projections
4.7 Personal Property
4.8 Real Estate
4.9 Intellectual Property
4.10 Absence of Changes
4.11 No Materially Adverse or Other Contracts, Etc.
4.12 Employee Benefit Plans
4.13 Compliance with Laws, Instruments, Etc.
(a) Generally
(b) Environmental
4.14 Securities Laws
4.15 Brokers
4.16 Taxes
4.17 Insurance
4.18 Products Liability and Product Warranty
4.19 Related Transactions
4.20 Minute Books and Stock Record Books
4.21 Employee Matters
4.22 Profit Payments
4.23 Bank Accounts
4.24 Investment Company
4.25 Solvency
4.26 Regulations G and X
4.27 Year 2000 Compliance
4.28 Disclosure
5. Affirmative Covenants
5.1 Payment of Note
5.2 Taxes
5.3 Maintain Rights and Facilities
5.4 Insurance; Bonds
5.5 Financial Reports
5.6 Budget
5.7 Books and Records; Inspection
5.8 Maintain Properties
5.9 Compliance with Instruments, Laws, Etc.
5.10 Notices
5.11 Shareholder Agreement
5.12 Observation Rights
6. Negative Covenants
6.1 Use of Proceeds
6.2 Redemption; Distributions
6.3 Investments, Loans and Advances
6.4 Acquisition or Sale of Business; Merger or Consolidation
6.5 Change Capital Structure
6.6 Officers' Salaries and Loans
6.7 Amendments or Changes in Charter or Agreements
6.8 Dealings with Affiliates
6.9 Pension and Profit Sharing Plan or Arrangements
6.10 Permitted Indebtedness
6.11 Liens
6.12 Capital Expenditures
6.13 Changes in Business or Fiscal Year
6.14 Operating Leases
6.15 Sale and Lease-Backs
6.16 Sale or Discount of Receivables
6.17 Financial Covenants
6.18 Certain Definitions
7. Events of Default and Remedies
7.1 Events of Default
7.2 Notice to Holder
7.3 Acceleration
7.4 Expenses
7.5 Remedies Cumulative
8. Representations and Warranties of Lender
8.1 Capacity
8.2 Accredited Lender
8.3 Investment Purpose
8.4 Disclosure
9. Transfer of Note; Transfer of Equity Securities; Participation
9.1 Successor and Assigns in General
9.2 Conditions
10. Additional Provisions
10.1 Expenses
10.2 Survival of Representations and Warranties
10.3 Notices
10.4 No Waiver, Remedies Cumulative
10.5 Amendments and Waivers
10.6 Divisibility and Replacement of Note and Equity Securities
10.7 Integration
10.8 Separability
10.9 Headings
10.10 Governing Law; Waivers; Personal Jurisdiction
10.11 Indemnification
(a) General
(b) Environmental Liabilities
SUBORDINATED LOAN AND INVESTMENT AGREEMENT
THIS SUBORDINATED LOAN AND INVESTMENT AGREEMENT (the
"Agreement") is made and entered into as of November 30, 1998 by
and between COMPUDYNE CORPORATION, a Nevada corporation (the
"Company"), and WILLIAM BLAIR MEZZANINE CAPITAL FUND II, L.P., an
Illinois limited partnership (the "Lender").
RECITALS
A. The Company desires to obtain a senior subordinated loan
from the Lender and the Lender is willing to make such senior
subordinated loan on the terms and conditions provided below.
B. The Company desires to issue and sell, and the Lender is
willing to purchase, common stock and a warrant to purchase
additional common stock on the terms and conditions provided
below.
AGREEMENTS
In consideration of the recitals and the mutual agreements
which follow, the parties agree:
1. Purchase and Sale of the Note, Common Stock and Warrant.
(a) Subject to the terms, covenants and conditions of this
Agreement, on the Closing Date (as defined in section 3), the
Company will issue and sell, and the Lender shall buy a
$9,000,000 Senior Subordinated Note (the "Note") evidencing a
term loan in the principal amount of $9,000,000 (the "Loan").
The Note shall be dated as of the Closing Date, shall be subject
to the terms and conditions of this Agreement, and shall be in
the form of Appendix 1. The consideration to be paid by the
Lender for the Note is $9,000,000 and shall be paid by the Lender
at Closing, by wire transfer of same day funds to the Company's
account, upon receipt by the Lender of the Note, duly executed
and in proper form. The Company and the Lender agree that the
value of the Note at Closing is $9,000,000, and all tax and other
reporting by either of them shall reflect such initial value.
(b) Subject to the terms, covenants and conditions of this
Agreement, on the Closing Date the Company will issue and sell,
and the Lender shall buy, the below-described securities
(sometimes collectively referred to as the "Equity Securities"),
consisting in the aggregate of 1,075,507 shares (the "Shares") of
the Company's Common Stock (the "Common Stock") and a warrant
("Warrant") to purchase an additional 297,924 shares of the
Company's Common Stock for an initial exercise price of $3.25 per
share.
The consideration to be paid by the Lender at the Closing
for the Equity Securities issued to and purchased by it at the
Closing is: (a) for the Shares an aggregate of $2,999,000; and
(b) for the Warrant an aggregate further consideration of $1,000.
The consideration to be paid by the Lender for the Equity
Securities, in the aggregate amount of $3,000,000, will be paid
at the Closing, by wire transfer of same day funds to the
Company's account, upon receipt by the Lender of a certificate or
certificates for the Shares and the Warrant, in each case duly
executed and in proper form.
2. Credit Terms.
2.1 Repayment of Principal. Subject to sections 2.3 and 7.3
hereof, the Company shall repay the principal balance of the Loan
in consecutive quarterly installments of $500,000 each on March
31, 2004, June 30, 2004, September 30, 2004, December 31, 2004,
March 31, 2005, June 30, 2005, September 30, 2005, and a final
payment of all unpaid principal on December 31, 2005.
2.2 Interest. So long as no Event of Default (as defined in
section 7.1) has occurred, the Loan shall bear interest from the
Closing Date until the Loan is paid in full at a fixed annual
rate of 13.15%, computed on the basis of a 360-day year and the
actual number of days elapsed in the period during which interest
accrues.
(a) Periodic Interest Payments. Accrued interest on the Loan
shall be due and payable quarterly in arrears on the last day of
December, March, June and September (each, a "Quarterly Payment
Date") beginning on December 31, 1998. In addition, all accrued
and unpaid interest shall be paid upon the payment in full of the
entire outstanding principal amount of the Loan and, if payment
in full is not paid when due, thereafter on demand.
(b) Default Interest Rate. After the occurrence of any Event of
Default specified in section 7.1 of this Agreement, the
outstanding principal amount of the Loan, all accrued interest
and all other amounts, fees and obligations payable hereunder and
under the Note shall bear interest at the fixed rate of 15.15%
per annum, computed on the basis of a 360-day year and the actual
number of days elapsed in the period during which interest
accrues, and such interest shall be payable on demand, subject to
the final sentence of Section 7.3.
(c) Saving Clause. Notwithstanding any other provision
contained in this Agreement, the aggregate annual interest rate
charged with respect to the Loan (including all charges and fees
deemed to be interest pursuant to applicable law) shall not
exceed the maximum annual rate permitted by applicable law. In
the event that the aggregate annual interest rate payable with
respect to the Loan (including all charges and fees deemed to be
interest under applicable laws) exceeds the maximum legal rate,
the Company shall only pay the Lender interest at the maximum
permitted rate, and the Company shall continue to make such
interest payments at the maximum permitted rate until all
amounts, fees and obligations payable hereunder and under the
Note have been paid in full.
2.3 Prepayments. Except as provided in section 7 and section
2.3(a), the Loan may not be prepaid, in whole or in part, prior
to December 31, 2001. Thereafter, the Loan may be prepaid as
provided in section 2.3(b).
(a) Prepayments From Proceeds of Lender-Approved Transaction.
"Lender-Approved Transaction" shall mean any of the following
transactions if the Lender has approved such transaction in
writing prior to its consummation: (i) a sale, transfer or other
disposition of all or substantially all of the assets of the
Company; (ii) a merger of the Company with or into any other
person, or any transaction or series of related transactions,
that results in a change of ownership of 50% or more of the
voting power or equity of the Company. If, at any time, the
Company consummates a Lender-Approved Transaction, the Company
may, at its option, prepay the Loan, in whole but not in part.
In the event of any prepayment of the Loan in connection with a
Lender-Approved Transaction, the Company shall pay all accrued
interest and all other fees, expenses and amounts payable by
the Company to the Lender, plus the Prepayment Fee (as defined
below). If the Lender notifies the Company, within 30 days after
the consummation of the Lender-Approved Transaction, that the
Lender desires the Loan to be repaid, the Company shall, within
five days after such notification, prepay the Loan in full,
including all accrued interest and all other fees, expenses and
amounts payable to the Lender, including the Prepayment Fee.
(b) Other Optional Prepayments. After December 31, 2001, the
Company may at its option prepay all or part of the Loan. Any
partial payment of principal shall be made only on a Quarterly
Payment Date, shall be not less than $500,000, and shall be a
multiple of $500,000, and the Company shall pay therewith all
accrued interest. In addition, the Company shall pay a
prepayment fee of 3% of the amount prepaid on or prior to
December 31, 2002 and 2% of the amount prepaid on or after
January 1, 2003 and on or prior to December 31, 2003 (the
"Prepayment Fee"). On and after January 1, 2004, the Loan may be
prepaid in whole or in part without premium. In the event of any
such prepayment, the Company shall also pay all accrued interest
and other fees, expenses and amounts payable by the Company to
the Lender. Partial prepayments will be applied to scheduled
principal payments in the order of their maturity.
2.4 Payments. All payments and prepayments to be made with
respect to principal, interest or otherwise on the Loan and other
charges hereunder shall become due at 3:00 o'clock p.m., Chicago,
Illinois time. Payments shall be made to the Lender at the
Lender's account at Harris Trust & Savings Bank, 111 West Monroe,
Chicago, Illinois 60603, Account Number 448-3509, ABA Number
071000288, Attention: Gail Guida (or at any other payment
office in the United States previously designated by the Lender
to the Company in writing), on the day when due, in lawful money
of the United States of America, by wire transfer in funds
immediately available at such payment office. The Lender or any
other holder of the Note is hereby authorized to endorse on the
Note an appropriate notation evidencing each scheduled payment
and each prepayment of principal and each payment of interest.
All payments hereunder and under the Note shall, except as
required by applicable law, be made without setoff, offset,
deduction or counterclaim, free and clear of all taxes (other
than those based on the income of the Lender), levies, imports,
duties, fees and charges, and without any withholding,
restriction or conditions imposed by any governmental authority
(it being understood that, if any payment hereunder or thereunder
is required by applicable law to be subject to any setoff,
offset, deduction or counterclaim, tax, levy, import, duty, fee,
charge or withholding (each of such items is referred to herein
as a "Deduction"), the Company shall, at such time as any payment
hereunder or thereunder is so reduced by a Deduction, pay to the
Lender an amount necessary to place the Lender in the same
position the Lender would have been had such payment not been
subject to a Deduction).
2.5. Use of Proceeds. The Company shall use the entire amount
of the Loan to finance the Acquisition (as defined in section
3.6), to restructure the Company's debt and for related fees and
expenses.
2.6. Certain Definitions. "Subsidiary" means, with respect to
the Company, a corporation, partnership, limited liability
company or other entity of which the Company and/or its other
Subsidiaries owns, directly or indirectly, such number of
outstanding shares or other ownership interests as have more than
50% of the ordinary voting power for the election of directors
or other managers of such corporation, partnership, limited
liability company or other entity. Unless the context otherwise
requires, each reference to Subsidiaries herein shall be a
reference to all of the Subsidiaries of the Company after giving
effect to the Acquisition (as defined in section 3.6).
Notwithstanding the foregoing, CompuDyne Corp. of Maryland and
CompuDyne, Inc. will not be included in the definition of
"Subsidiaries."
"Material Adverse Effect" means (a) a material adverse
change in, or a material adverse effect upon, the financial
condition, operations, assets, business, properties or prospects
of the Company and its Subsidiaries taken as a whole, (b) a
material impairment of the ability of the Company or any
Subsidiary (other than MicroAssembly Systems, Inc. or Sysco
Security Systems, Inc.) to perform any of its obligations under
this Agreement, the Note, the Warrant, the Shareholder Agreement,
the Registration Agreement or the Senior Loan Documents or (c) a
material adverse effect upon the legality, validity, binding
effect or enforceability against (i) the Company of any of
the documents listed in clause (b) or (ii) any Subsidiary (other
than MicroAssembly Systems, Inc. or Sysco Security Systems, Inc.)
of its Subsidiary Guaranty.
3. The Closing; Conditions to Closing. Subject to the
conditions hereof, the transactions described herein will be
closed (the "Closing") at ____ a.m. at the offices of Seyfarth,
Shaw, Fairweather & Geraldson, 55 East Monroe Street, Suite 4200,
Chicago, Illinois or at such other place as all the parties
hereto may agree, on November 30, 1998 (the "Closing Date"). All
of the obligations of the Lender to purchase the Note and the
Equity Securities described in this Agreement are subject to the
accuracy on the Closing Date of all the representations and
warranties by the Company contained herein, and to the
performance by the Company of all the terms, covenants and
conditions on its part to be performed hereunder on or prior to
the Closing Date and to the satisfaction of the following
additional conditions precedent:
3.1 Opinion of Counsel. The Lender shall have received from
Tyler Cooper & Alcorn, LLP, counsel for the Company, a favorable
opinion, dated the date hereof, addressed to the Lender, in the
form attached hereto as Appendix 2.
3.2 Closing Certificates.
(a) The Company shall have delivered to the Lender a Certificate
signed by the Chief Executive Officer of the Company, to the
effect that: (i) all of the representations and warranties of
the Company contained in this Agreement are true, correct and
complete in all material respects as of the Closing Date; (ii)
the Company has complied with and performed all of the terms,
covenants and agreements contained in the Agreement which are to
be complied with or performed by the Company on or before the
Closing Date; and (iii) to the knowledge of the Company, there
does not exist any state of facts which would constitute
noncompliance under this Agreement or, with notice or lapse of
time as provided herein, or both, would constitute noncompliance.
(b) The Lender shall have received a copy of the Articles of
Incorporation of the Company and each of the Subsidiaries, as
amended, certified by the appropriate office of the jurisdiction
of incorporation as of a recent date (a true and correct
photocopy shall suffice).
(c) The Lender shall have received from the Company a
certificate of good standing from the appropriate office of the
jurisdiction of incorporation, in a form acceptable to the
Lender, and a certificate of good standing from the appropriate
office of each other jurisdiction where the Company is required
to qualify to do business (a true and correct photocopy shall
suffice).
(d) The Lender shall have received a true and correct copy of
the Company's By-Laws, as amended, certified by an officer of the
Company.
3.3 Corporate Resolutions. A certified copy of the resolutions
adopted by the Board of Directors of the Company authorizing and
approving (a) the execution, performance and delivery of this
Agreement, (b) the issuance of the Note and the Equity Securities
and (c) the other transactions contemplated hereby, shall have
been delivered to the Lender.
3.4 Proceedings and Documents. All proceedings taken or to be
taken in connection with the transactions contemplated by this
Agreement to be consummated at, or prior to, the execution and
Closing hereof and all other documents, schedules, exhibits,
opinions and certificates in connection therewith shall each be
satisfactory in form and substance to the Lender, and the Lender
shall have received copies of all such documents and all other
documents which the Lender has requested in connection with the
transaction contemplated by this Agreement and of all corporate
proceedings in connection therewith, in form and substance
satisfactory to the Lender.
3.5 Intercreditor Agreements. The Company, the Lender and
LaSalle National Bank ("LaSalle Bank") shall have executed and
delivered an intercreditor agreement satisfactory in form and
content to the Lender. The Company, the Lender and Liberty Bond
Services shall also have executed and delivered an intercreditor
agreement satisfactory in form and content to the Lender.
3.6 Acquisition. The Company shall furnish to the Lender
evidence that the Company has consummated (without waiving any
condition precedent to the Company's obligation to close pursuant
to the Stock Purchase Agreement pursuant to which the Acquisition
is to be made) the acquisition from Apogee Enterprises, Inc.
("Apogee") of all of the outstanding capital stock of Norment
Industries, Inc.("Norment") and Norshield Corp.("Norshield") for
an aggregate purchase price (subject to adjustment) of
$22,500,000 (the "Acquisition"), and the Company shall have
furnished to the Lender a true and correct copy of the documents
executed and delivered in connection with the Acquisition
certified by the Chief Executive Officer of the Company.
3.7 Common Stock and Warrant. The Company shall have issued
to the Lender the Shares for an aggregate purchase price of
$2,999,000. The Company shall have issued to the Lender the
warrant to purchase Common Stock (the "Warrant"), in the form
attached as Appendix 3, for an aggregate issue price of $1,000.
3.8 Corporate Governance and Shareholder Agreement. The Lender,
the Company and the principal shareholders of the Company shall
have entered into a Corporate Governance and Shareholder
Agreement in the form attached as Appendix 4 (the "Shareholder
Agreement").
3.9 Bank Financing. LaSalle Bank and the Company shall have
entered into a credit agreement providing the Company with an
aggregate credit facility of $18,000,000 (including a revolving
credit facility which shall haveexcess availability at the
Closing of at least $4,000,000) on terms and conditions
acceptable to the Lender, and a true and correct copy of the loan
documents (the "Senior Loan Documents"), certified by the Chief
Executive Officer of the Company, shall have been provided to the
Lender.
3.10 Investment Fee. The Company shall have paid to the Lender
an aggregate investment fee of $120,000; the Lender acknowledges
receipt of $50,000 upon the signing of the Lender's Investment
Proposal dated September 9, 1998.
3.11 Non-Compete Agreement. The Company and Martin Roenigk,
Kevin Robison and Jon Lucynski shall each have executed and
delivered a Non-Compete Agreement in the form attached as
Appendix 5.
3.12 Environmental Reports. The Lender must have received one
or more environmental assessment reports regarding the Company,
its Subsidiaries and their properties satisfactory in form and
substance to the Lender.
3.13 Bonding Facility. The Company shall have received a
commitment for a bonding facility of at least $50 million on
terms acceptable to the Lender.
3.14 Registration Rights. The Company and the Lender shall
have entered into the Registration Rights Agreement in the form
attached as Appendix 6 (the "Registration Agreement").
3.15 Regulatory Consents and Approvals. All consents, approvals
and actions of, filings with and notices to any governmental or
regulatory authority necessary to consummate the Acquisition
shall have been duly obtained, made or given and shall be in full
force and effect, and all terminations or expirations of waiting
periods (including the waiting period under the Hart-Scott-Rodino
Act) imposed by any governmental or regulatory authority
necessary for the consummation of the Acquisition shall have
occurred.
3.16 Subsidiary Guaranties. Each Subsidiary specified by the
Lender shall have executed and delivered to the Lender a
Subsidiary Guaranty in the form of Appendix 7.
4. Representations and Warranties. In order to induce the
Lender to make the Loan and to purchase the Note and the Equity
Securities, and notwithstanding any investigation made by or on
behalf of the Lender, the Company makes the following
representations and warranties, each of which is independently
material and relied upon by Lender (except where the context
requires otherwise, all representations and warranties with
respect to the "Company" are intended to cover, and shall be
deemed to be representations and warranties with respect to, the
Company and each Subsidiary, giving effect to the closing of the
Acquisition):
4.1 Existence and Rights.
(a) The Company. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Nevada. The Company has delivered to the Lender a true,
complete and correct copy of its Articles of Incorporation and
By-Laws. The Company has all requisite corporate power and
authority to own and operate its properties, to carry on its
business as now conducted and proposed to be conducted, to enter
into this Agreement and each agreement, document or instrument
contemplated by this Agreement to which it is a party and to
carry out the transactions contemplated hereby and thereby.
(b) Subsidiaries. Each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. Each Subsidiary has
delivered to the Lender a true, complete and correct copy of its
charter documents. Each Subsidiary has all requisite corporate
power and authority to own and operate its properties, to carry
on its business as now conducted and proposed to be conducted, to
enter into this Agreement and to carry out the transactions
contemplated hereby and thereby.
(c) Qualification. The Company and each Subsidiary are duly
qualified and in good standing wherever the failure to so qualify
would have a Material Adverse Effect. All jurisdictions in which
such parties are qualified to do business are set forth on
Schedule 4.1(c).
4.2 Agreement Authorized. The execution and performance of
this Agreement and the other agreements, documents and
instruments contemplated hereby are duly authorized and do not
require the consent or approval of any governmental body, other
regulatory authority or other third party. All action on the
part of the Company and each Subsidiary, and all necessary or
appropriate approvals and consents for the due execution,
delivery and performance of this Agreement, including the
creation, issuance and sale of the Note and the Equity
Securities, have been duly and validly obtained or taken. No
right of the Company or any Subsidiary is impaired or infringed
upon by the execution and performance of this Agreement. This
Agreement and the Note and all other documents, instruments and
agreements of the Company or a Subsidiary, as applicable, in
connection executed herewith and therewith, constitute the valid
and binding obligations of the Company or a Subsidiary, as
applicable, enforceable against the Company or a Subsidiary, as
applicable, in accordance with their respective terms.
4.3 Capitalization.
(a) The Company. The authorized and outstanding capital stock
of the Company is set forth in Schedule 4.3(a). All of the
outstanding shares of capital stock of the Company are, and upon
issuance the Shares and the Common Stock issuable upon exercise
of the Warrant will be, duly authorized, validly issued, fully
paid and nonassessable and were, and will have been, issued in
compliance with all applicable state and federal laws and
regulations concerning the issuance of securities. No shares of
the Company's capital stock, other than those described above,
are issued and outstanding. Except as described in Schedule 4.3,
or as contemplated by this Agreement or the Shareholder
Agreement, there are no preemptive or other outstanding rights,
options, warrants, conversion rights or similar agreements or
understandings for the purchase or acquisition of such capital
stock.
(b) The Subsidiaries. Schedule 4.3(b) sets forth the ownership
of the issued and outstanding capital stock of each Subsidiary.
All of the outstanding shares of capital stock of each Subsidiary
are duly authorized, validly issued, fully paid and
nonassessable, free and clear of all Liens other than those in
favor of LaSalle Bank, and were issued in compliance with all
state and federal laws and regulations concerning the issuance of
securities. There are no preemptive or other outstanding rights,
options, warrants, conversion rights or similar agreements or
understandings for the purchase or acquisition of the capital
stock of any Subsidiary.
4.4 Subsidiaries; Other Investments. Except for CompuDyne Corp.
of Maryland, CompuDyne, Inc. and the Subsidiaries, the Company
has no subsidiaries, or any investment in any other business or
entity. For the purpose of this section the term "subsidiary" or
"subsidiaries" means any corporation or other entity of which the
securities having a majority of the voting power in electing the
Board of Directors are owned by the Company either directly or by
another subsidiary. The Company does not control or have any
contract or commitment to own or control any capital stock, bonds
or other securities of and does not have a proprietary interest
in any corporation, partnership, proprietorship or other business
organization. Except as set forth on Schedule 4.4, CompuDyne
Corp. of Maryland and CompuDyne, Inc. are inactive corporations,
neither of which, to the Company's best knowledge, has any
assets, liabilities or operations.
4.5 Litigation. Except as set forth on Schedule 4.5, there is
no litigation or other proceeding (including any government
proceeding or investigation) pending or, to the knowledge of the
Company, threatened against or affecting the Company, or the
assets of the Company, or which questions the validity of this
Agreement or of any action taken or to be taken pursuant to or
in connection with the provisions of this Agreement. Without
limiting the generality of the foregoing, there is no pending or,
to the knowledge of the Company, threatened action, proceeding or
investigation involving the prior employment or consultancy of
any of the Company's employees or consultants or their use of any
information or techniques alleged to be proprietary to any other
person or business. To the knowledge of the Company there is no
set of presently existing facts or circumstances reasonably
likely to be asserted by any person as the basis for any of the
foregoing, except as set forth on Schedule 4.5. Except as set
forth on Schedule 4.5, in connection with the Acquisition, Apogee
has assumed liability for all loss, damages, costs or expenses
that may arise with respect to the properties or operations of
Norment and Norshield relating to the period prior to the Closing
Date.
4.6 Financial Statements and Projections.
(a) Schedule 4.6 contains a complete and correct copy of the
audited consolidated balance sheets of the Company as of December
31, 1995, December 31, 1996 and December 31, 1997 and audited
consolidated statements of income and cash flow for the fiscal
years then ended. Such consolidated financial statements were
prepared in accordance with generally accepted accounting
principles consistently applied from prior periods, and fairly
present in all material respects the financial condition and
results of operations of the Company as of the dates thereof and
for the periods then ended. Schedule 4.6 also contains unaudited
balance sheets of Norment and Norshield as of February 29, 1996,
February 28, 1997 and February 28, 1998 and unaudited statements
of income and cash flow for the fiscal years then ended. Such
financial statements were, to the best knowledge of the Company,
prepared in accordance with generally accepted accounting
principles consistently applied from prior periods, and fairly
present in all material respects the financial condition and
results of operations of Norment and Norshield, respectively, as
of the dates thereof and for the periods then ended.
(b) Schedule 4.6 also contains a complete and correct copy of
the unaudited pro forma consolidated balance sheet of the Company
(including Norment and Norshield) as of September 30, 1998 and
pro forma consolidated statements of income, cash flow and
shareholders' equity for the nine-month period then ended. Such
pro forma financial statements were, to the best knowledge of the
Company, prepared in accordance with generally accepted
accounting principles consistently applied from prior periods,
and fairly present in all material respects the pro forma
financial condition and pro forma results of operations of the
Company (including Norment and Norshield) as of the date thereof
and for the period then ended, subject to normal year-end
adjustments and the absence of footnotes. The pro forma balance
sheet as of September 30, 1998 is referred to as the "Balance
Sheet," and September 30, 1998 is referred to as the "Balance
Sheet Date."
(c) Except as and to the extent reflected or reserved against on
the Balance Sheet or set forth on Schedule 4.6, the Company has
no outstanding indebtedness or any liabilities or obligations of
any nature, whether absolute, accrued, contingent or otherwise,
whether due or to become due, except for (i) liabilities entered
into in the ordinary course of business and (ii) liabilities
which, in the aggregate, do not result in any material adverse
change in the financial condition of the Company from that set
forth on the Balance Sheet.
(d) The financial projections attached as Schedule 4.6(d) (the
"Projections") have been prepared by the Company in light of the
past operations of its business and in good faith, subject to the
uncertainties inherent in estimating the Company's future
performance and the limited familiarity of the Company with
respect to Norment and Norshield. The Projections are based on
assumptions that, as of the respective dates thereof, were
reasonable in light of the information available to the Company
on or prior to the date hereof.
4.7 Personal Property. Except as specifically disclosed on
Schedule 4.7 and on the Balance Sheet and footnotes thereto, the
Company has good, marketable and indefeasible title to all
personal property which it purports to own, including, but not
limited to, that reflected on the Balance Sheet (except as
disposed of since the Balance Sheet Date in the ordinary course
of business), free and clear of all security interests, liens and
encumbrances, except for Permitted Liens (as defined in section
6.11). Schedule 4.7 also sets forth a list of all material
property covered by each lease (requiring annual payments in
excess of $10,000 or total payments in excess of $75,000) of
personal property to which the Company is a party and a list of
all such leases and commitments relating to or affecting any
interest in tangible personal property to which the Company is a
party or by which it or any of its property is in any way bound
or affected. None of the rights of the Company under any such
lease or other similar interest in tangible personal property
will be impaired by the consummation of the transactions
contemplated by this Agreement. All tangible personal property
owned or leased by the Company is in operating condition and
repair, reasonable wear and tear excepted, sufficient to conduct
the operations of the Company as presently conducted. No
material modifications or additions to such personal property
are needed or planned for the conduct of the Company's business
as presently contemplated, except as reflected in the
Projections. Except for tangible personal property covered by
the leases listed in Schedule 4.7, the Company does not use any
material tangible personal property not owned by it.
4.8 Real Estate.
(a) Schedule 4.8 hereto identifies and sets forth a complete
legal description for each parcel of owned real property or
interest therein, and an identifying description of each parcel
of leased real property, in whole or part used by the Company.
Except for Permitted Liens and as set forth in Schedule 4.8, the
Company has good and marketable title, free and clear of all
liens, encumbrances and imperfections of title, to the real
estate and real estate interests described in such schedule.
(b) None of the rights of the Company under any leasehold or
other interest in real property will be impaired by the
consummation of the transactions contemplated by this Agreement.
The Company has adequate rights of ingress and egress to and from
such owned and leased real property. All real property owned or
leased by the Company is in condition and repair, reasonable wear
and tear excepted, sufficient to conduct the business of the
Company as presently conducted and as contemplated. Except as
reflected in the Projections, no material additions or
modifications to such owned or leased real property are needed or
planned. The Company has not received notice of, nor have there
occurred, any pending or, to the knowledge of the Company,
threatened condemnation proceedings or any other matter
materially and adversely affecting the value of such owned or
leased real property. The Company's operations and the
improvements on such real property comply in all material
respects with all applicable zoning laws and building codes.
(c) Each title insurance policy owned by the Company with
respect to any real estate or real estate interest described in
Schedule 4.8 is identified in Schedule 4.8 and a copy of each
such title insurance policy has previously been delivered to
Lender.
(d) To the knowledge of the Company, except as disclosed in the
Environmental Reports (as defined below), there have been no acts
or omissions occurring on or with respect to the real estate or
real estate interests described in Schedule 4.8 (whether or not
such acts or omissions were permitted by the Company) which
constituted or resulted, or may have constituted or resulted in
the creation of any federal, state or local common law nuisance
or which violate or have violated federal, state and local
environmental laws, including but not limited to, the Clean Water
Act, the Toxic Substances Control Act, the Comprehensive
Environmental Response, Compensation and Liability Act and/or the
Resource Conservation and Recovery Act and their state and local
law counterparts, all rules and regulations promulgated
thereunder and all other legal requirements in connection with
the ownership and use of the real estate and real estate
interests described in such schedule. The Company has no
liability with respect to the storage, treatment or disposal of
any hazardous waste or substance. Schedule 4.8 lists all reports
(true and complete copies of which have been delivered to the
Lender) relating to all environmental audits or surveys performed
during the past ten years (the "Environmental Reports") on any
real property required to be described in Schedule 4.8.
4.9 Intellectual Property. Except as set forth on Schedule 4.9,
the Company owns, licenses or otherwise has authority to use,
free and clear of all liens, encumbrances, licenses, claims and
other restrictions or burdens (except Permitted Liens), all
patents, trade names, trademarks, copyrights, inventions,
processes, designs, custom or proprietary computer software,
works of authorship, franchises, formulas, trade secrets,
know-how and other intangible property and proprietary rights
(collectively, "Intellectual Property") necessary for or used in
the conduct of its business, and may, to the Company's knowledge,
use all such Intellectual Property in the conduct of its business
with no conflict with or infringement of the rights of others.
Schedule 4.9 lists all licenses and other agreements with respect
to Intellectual Property to which the Company is a party or by
which it or any of its assets are bound. Except as set forth on
Schedule 4.9, the Company has no knowledge of any material
infringement by any third party upon any Intellectual Property
owned or used by it and it has not intentionally taken or omitted
to take any action which would have the effect of waiving any of
its rights thereunder. Schedule 4.9 lists all patents,
trademarks, trade names, copyrights and applications for any of
the foregoing owned or used by the Company.
4.10 Absence of Changes. Except as set forth on Schedule 4.10,
since the Balance Sheet Date, the Company's business has been
developed and operated in the ordinary course thereof consistent
with past practices, and the Company has not:
(a) Undergone any material adverse change in the assets of the
Company, its condition (financial or otherwise), or, to the best
of the Company's knowledge, its prospects;
(b) Suffered any material damage, destruction or loss (whether
or not covered by insurance) affecting the assets of the Company;
(c) Incurred any indebtedness, including, but not limited to,
any account payable, other than indebtedness incurred in the
ordinary course of business and consistent with past practices;
(d) Paid, discharged or satisfied any claim, lien, encumbrance
or liability of the Company (whether absolute, accrued,
contingent or otherwise and whether due or to become due), other
than in the ordinary course of business and consistent with past
practices;
(e) Declared, set aside or paid any dividend or other
distribution in respect of any equity security of the Company, or
any direct or indirect redemption, purchase or other acquisition
of any equity security of the Company;
(f) Sold, transferred, pledged, mortgaged, or otherwise disposed
of any tangible or intangible asset of the Company, nor has the
Company subjected any of its assets to any lien (other than
Permitted Liens), security interest, charge or encumbrance, or
made any sale, assignment, transfer or other disposition of any
patents, copyrights, trademarks, trade names, licenses,
franchises, know-how, proprietary processes, formulae or other
intangible assets (other than the sale of tangible assets in the
ordinary course of business);
(g) Increased the compensation paid or payable to any officer,
managerial employee, consultant or agent of the Company
(including, without limitation, any increase pursuant to any
bonus, pension, profit sharing or other plan or commitment) other
than in the ordinary course of business consistent with past
practices;
(h) Made any capital expenditure or commitment for additions to
property, plant or equipment in excess of $35,000;
(i) Entered into any forward purchase commitments other than in
the ordinary course of business;
(j) Made any change in the accounting methods or practices
followed by the Company, or any change in depreciation, cost
recovery or amortization policies or rates theretofore adopted;
(k) Entered into any transaction other than in the ordinary
course of business (except as described on Schedule 3.6);
(l) Entered into or become subject to any agreement, whether in
writing or otherwise, to take any of the actions specified above;
or
(m) Received any notice or indication of termination or
potential termination of any other material contract, lease or
relationship, including relationships with customers and
suppliers, which, in any case or in the aggregate, has or may
have an adverse effect upon the Company, its business or its
prospects.
4.11 No Materially Adverse or Other Contracts, Etc. The Company
is not obligated under any contract, agreement or decree which
materially and adversely affects the assets of the Company, its
condition (financial or otherwise) or its prospects. Neither the
execution nor the delivery of this Agreement nor the consummation
of the transactions contemplated hereby, (including, but not
limited to, the Acquisition), nor the fulfillment of the terms
hereof, will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under,
either the Articles of Incorporation or By-Laws of the Company,
or of any agreement, restriction, undertaking, instrument, law,
ordinance, regulation, governmental license, approval, tariff,
any order or decision of any court, any lien, charge or
encumbrance under which the Company or any of its properties is
bound or obligated.
Except as set forth on Schedule 4.11, the Company is not
a party to, nor obligated under any:
(a) Written employment or other contracts with employees,
independent contractors, consultants or similar individuals or
entities;
(b) Loans, borrowing contracts, notes, indentures, mortgages,
leases, royalty or similar agreements (except for the Senior Loan
Documents);
(c) Power of attorney granted by or to the Company;
(d) Agreement which contains covenants limiting the freedom of
the Company to compete in any line of business or market or with
any entity or person;
(e) Any license agreements, distributor, sales representative or
agency agreements to which the Company is a party, which involved
the payment by the Company of $50,000 in the past 12 months; or
(f) Contract to which the Company is a party which by its terms
involves the future payment by or to the Company of $200,000 or
more or is otherwise material to the Company, its business or
prospects.
Neither the Company nor, to the Company's knowledge, any other
party to any contract material to the Company is in material
default in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in any such
contract and no such party has made any claim of a material
default by the Company. All such contracts are enforceable
against the Company and, to the knowledge of the Company, against
the other parties thereto (subject only to bankruptcy,
reorganization, insolvency or other similar laws or any
applicable rules of equity). All such contracts are in full
force and effect and have been approved by all third parties
whose approval is required. The consummation of the transactions
contemplated hereby (including, but not limited to the
Acquisition) will not and no state of facts exists which with the
passage of time or the giving of notice or both would constitute
a default under or breach of any of such contracts by the Company
or, to the Company's knowledge, by any other party thereto.
Adequate arrangements have been made in connection with the
Acquisition to assure that the Company will receive the full
economic benefit of each of the contracts transferred or assigned
to the Company by Apogee or an affiliate of Apogee pursuant to
the Acquisition.
4.12 Employee Benefit Plans.
(a) Except as set forth on Schedule 4.12, the Company does not
maintain or contribute to (i) any nonqualified deferred
compensation or retirement plans or arrangements; (ii) any
defined contribution retirement plans or arrangements; (iii) any
defined benefit pension plan; (iv) any other plan, program,
agreement or arrangement under which former employees of the
Company or their beneficiaries are entitled, or under which
current employees of the Company will be entitled following
termination of employment, to medical, health, life insurance or
other benefits (other than health continuation coverage described
in section 4980B of the Code, Part 6 of Title I of ERISA or
applicable state insurance law and any right of an employee to
benefits continued coverage by reason of disability or any
conversion feature provided under any insurance arrangement); (v)
any other employee benefit, health, welfare, medical, disability,
life insurance or other program, agreement, arrangement or
policy; or (vi) any other "employee benefit plan," as such term
is defined in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and regulations
thereunder. The plans required to be described in Schedule 4.12
are referred to as the "Plans."
(b) Except as set forth in Schedule 4.12, the Company is not
part of a Controlled Group or Affiliated Service Group.
"Affiliated Service Group," for purposes of this section, is
defined in section 414(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). "Controlled Group," for purposes of
this section, means a group of trades or businesses (whether or
not incorporated) under common control, as defined in the
regulations issued pursuant to section 414(b) or (c) of the Code,
or other such regulations prescribed by the Pension Benefit
Guaranty Corporation pursuant to section 4001 of ERISA, of which
the Company is a part.
(c) No Plan to which the Company contributes is a multiemployer
plan, as defined in section 4001(a)(3) of ERISA, or a defined
benefit plan, as defined in section 3(35) of ERISA.
(d) The Plans have been administered in all material respects in
compliance with the applicable requirements of ERISA, all
applicable foreign laws and the plan documents, and the Plans
meet all applicable requirements for favorable tax treatment
under the Code in both form and operation except as otherwise
disclosed on Schedule 4.12. All of the Plans which constitute
employee pension benefit plans or employee welfare plans subject
to ERISA and the trusts or other funding vehicles related to the
Plans have, in all material respects, been maintained in
compliance in both form and operation with the requirements of
ERISA and any applicable state law except as otherwise disclosed
on Schedule 4.12. The Plans which constitute employee pension
benefit plans, as defined in section 3(2) of ERISA, comply, in
all material respects, with the requirements of the Tax Reform
Act of 1986, and the Omnibus Budget Reconciliation Act of 1989,
and all subsequent legislation, requirements and amendments, and
the Company has received from the Internal Revenue Service a
favorable determination letter as to each such Plan except as
otherwise disclosed on Schedule 4.12. All required contributions
pursuant to the Plans for all periods prior to Closing have been
made or will be made prior to the Closing or are adequately
reflected on the Balance Sheet. There have been no nonexempt
prohibited transactions, as defined in section 406 of ERISA
or section 4975 of the Code, with respect to any of the Plans or
any parties in interest or disqualified persons with respect to
the Plans or any reduction or curtailment of accrued benefits
with respect to any Plans. There are no pending or, to the
knowledge of the Company, threatened claims, lawsuits or
arbitrations which have been asserted or instituted against the
Plans or any fiduciaries thereof with respect to their duties to
the Plans or the assets of any of the trusts under any Plans. No
representations or communications with respect to participation,
eligibility for benefits, vesting, benefit accrual or coverage
under the Plans have been made to the Company's employees other
than those which are substantially in accordance with the terms
of such Plans in effect immediately prior to the Closing.
(e) No Plan which is a "group health plan," as defined in Code
section 4980B, has failed to comply with the continuation
coverage requirements of section 4980B of the Code for all
periods prior to Closing.
(f) The Company has furnished to the Lender true and complete
copies of:
(i) the Plans' summary plan descriptions;
(ii) the most recent determination letter received from the
Internal Revenue Service regarding the Plans and copies of any
pending applications, filings or notices with respect to any of
the Plans with the Internal Revenue Service, the Pension Benefit
Guaranty Corporation, the Department of Labor or any other
governmental agency;
(iii) the latest financial statements and annual reports of each
of the Plans as of the end of the most recent Plan year;
(iv) the reports of the most recent actuarial valuations of the
Plans, if any; and
(v) copies of any investment management agreements thereunder
and of any fiduciary insurance policies, fidelity bonds, rules,
regulations or policies of the trustees or any committee
thereunder.
4.13 Compliance with Laws, Instruments, Etc.
(a) Generally. The Company is not in violation of its
Articles of Incorporation or By-Laws, as amended, or in violation
in any material respect of any applicable law, statute or
regulation of any federal, state, municipal or other governmental
or quasi-governmental agency, board, bureau or body relating to
the conduct of its business or maintenance, operation or use of
the assets of the Company, or in violation or default in any
material respect with respect to any order, license, regulation
or demand of any court or governmental agency, or in default in
any respect under any indenture, mortgage, lease, agreement or
other instrument under which it is bound. Except as disclosed on
Schedule 4.13, the Company holds all governmental or regulatory
licenses, qualifications and permits required or necessary to
conduct its business and to perform all contracts to which it is
bound, or which were assigned to it by Apogee (or an affiliate of
Apogee) in connection with the Acquisition, in each such
jurisdiction where such licenses, qualifications or permits are
required or necessary to allow the Company to receive payment in
full under such contracts. The Company is in compliance with and
has performed each and every obligation required to be complied
with and performed pursuant to each contract, lease, license,
mortgage, indenture, instrument and other agreement by which it
is bound or obligated, and there is no default by the Company,
and to its knowledge, by any other party thereto, under any such
contract, lease, license, mortgage, indenture, instrument or
other agreement now existing, or which would come into existence
with the passage of time, the giving of notice, or both. The
Company and its employees, agents and representatives have not,
to obtain or retain business, directly or indirectly offered,
paid, promised to pay or authorized the payment of any money or
other thing of value, directly or indirectly, to any person who
is a foreign governmental official, an official of any foreign
political party or any candidate for a foreign governmental or
political party office.
(b) Environmental. Except as disclosed in the Environmental
Reports, the Company has complied and is in compliance in all
respects with all applicable federal, state, local and foreign
laws, statutes, rules, regulations, ordinances and other
requirements, including, without limitation, permits issued
thereunder, judicial and administrative orders and determinations
and contractual obligations concerning public health and safety,
worker health and environmental contamination of any type
whatsoever, including, without limitation, all such standards of
conduct and obligations relating to the presence, use,
production, generation, handling, transport, treatment, storage,
disposal, sale, distribution, labeling, testing, processing,
discharge, release, threatened release, control or cleanup of any
hazardous, toxic or otherwise dangerous chemical, material,
substance or waste, or mixture, pesticide, petroleum product or
byproduct, asbestos, polychlorinated biphenyls, noise or
radiation. Except as disclosed in the Environmental Reports,
there are no claims, demands, and/or governmental or third party
investigations, pending or, to the Company's knowledge,
threatened, relating to any hazardous materials (collectively
called "Environmental Claims") against the Company or relating to
any real property currently or formerly owned or leased by the
Company, or operated by the Company. Except as disclosed in the
Environmental Reports, there are no lawsuits, judgments, consent
decrees, administrative orders and/or administrative proceedings
(collectively called "Environmental Litigation") pending, or to
the Company's knowledge, threatened against the Company or any
real property presently or formerly owned by the Company,
relating to any hazardous materials treated, stored, used and/or
disposed of by the Company. Except as disclosed in the
Environmental Reports, to the Company's knowledge, no other
person has caused, discharged, permitted or arranged for any
hazardous material to be used, generated, reclaimed, transported,
released, treated, stored, recycled, refined or disposed of in a
manner which is likely to form the basis for an Environmental
Claim or Environmental Litigation against the Company. Except as
disclosed on Schedule 4.13, in connection with the Acquisition,
Apogee has assumed liability for all loss, damages, costs or
expenses that may arise with respect to the properties or
operations of Norment and Norshield relating to the period prior
to the Closing Date. The Company has not assumed any liability
of any person for cleanup, remediation, removal, compliance or
required capital expenditures in connection with any
Environmental Claim or Environmental Litigation. Except as
described in the Environmental Reports: (i) there are no
underground storage tanks or surface impoundments that are or
were located, on real property currently owned or leased by the
Company or on adjacent parcels of real property; and (ii) no part
of such currently owned, leased and operated real property, and
no part of parcels adjacent to such real property, including the
groundwater located thereon, is presently contaminated by
hazardous materials in violation of any applicable environmental
law.
4.14 Securities Laws. The sale and delivery of the Note and
the Equity Securities issued to the Lender are (assuming the
accuracy of the Lender's representations in section 8), exempt
from the requirement of registration under the Securities Act of
1933, as amended ("Securities Act") and applicable state "Blue
Sky" laws.
4.15 Brokers. The Company has not incurred any liability for
any finders' fees, brokerage fees or similar fees or expenses in
connection with entering into this transaction with the Lender
except as fully described on Schedule 4.15.
4.16 Taxes. The Company has timely filed, or obtained valid
extensions of time for filing (which extensions have not
expired), all federal, state, local and other tax returns and
reports required to be filed by the Company. All such tax
returns are true and correct in all material respects. No claim
has been made by any taxing authority in any jurisdiction where
the Company did not file tax returns that the Company is or may
be subject to taxation by that jurisdiction. Except as disclosed
on Schedule 4.16, in connection with the Acquisition, Apogee has
assumed liability for all loss, damages, costs or expenses that
may arise with respect to the properties or operations of Norment
and Norshield relating to the period prior to the Closing
Date. Except as disclosed in Schedule 4.16:
(a) The Company has paid all taxes (including all deficiency
assessments, additions to taxes, penalties and interest, of which
notice has been received) to the extent that such amounts have
become due or are claimed to be due from any federal, state,
local or foreign taxing authorities.
(b) Adequate provisions have been made in the balance sheet of
the Company as of December 31, 1997 and in the Balance Sheet for
the payment of all then accrued and unpaid federal, state, local
and other taxes, whether or not then due and payable and whether
or not disputed.
(c) There are no tax liens (other than liens for taxes which are
not yet due and payable) on any property of the Company.
(d) There are no pending or, to the Company's knowledge,
threatened tax return examinations against the Company.
(e) There are no tax deficiencies asserted by any jurisdiction
against the Company.
(f) The Company has not granted any extensions of limitation
periods applicable to tax claims that are currently open.
4.17 Insurance. Schedule 4.17 contains a correct schedule of
all policies of insurance carried by the Company (including all
policies of which the Company is a beneficiary, is the owner or
pays the premiums with respect thereto) showing material facts as
to coverage. The insurance it carries is reasonably adequate in
kind and amount to cover insurable risks normally insured against
by companies similarly situated, is subject to the deductibles
and self-insurance programs disclosed on Schedule 4.17, and all
premiums thereon have been paid as and when due. All such
policies are in full force and effect. No notice of cancellation
or termination has been received with respect to any such policy.
Such policies are valid, outstanding and enforceable policies and
will not in any way be affected by, or terminate or lapse by
reason of, the transactions contemplated by this Agreement. The
liability insurance coverage to which the Company was a party
throughout the five years preceding the Closing was comparable
(considering inflation during such period) to the coverage
currently in effect and was adequate considering the nature of
its businesses. During such five year period the Company
suffered no material insurable loss for which a claim was not
made. The Company has not been refused any insurance with
respect to any material assets or operations, nor has its
coverage been limited in any respect material to its operations,
by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance during the last
five years. The bonding facility described in section 3.13 is
adequate in scope and amount for the Company's current and
projected business.
4.18 Products Liability and Product Warranty. Schedule 4.18
sets forth all cash expenses, non-cash charges and reserve
activity with respect to the Company's products liability
lawsuits, claims and settlements during the past five years.
Schedule 4.18 sets forth all cash expenses and non-cash charges
related to warranties of the Company in connection with the sale
of products by the Company during the past three years. All
products sold by the Company are in all material respects
manufactured in conformity with all applicable contractual
commitments and all express or implied warranties. Except as
disclosed on Schedule 4.18, in connection with the Acquisition,
Apogee has assumed liability for all loss, damages, costs or
expenses that may arise with respect to the properties or
operations of Norment and Norshield relating to the period prior
to the Closing Date.
4.19 Related Transactions. "Affiliate" of any person shall mean
any other person which directly or indirectly controls, is
controlled by or is under common control with such person. For
purposes hereof, "control" shall mean the direction of management
or policies (whether through ownership of securities, by contract
or otherwise), provided that any person which owns directly or
indirectly 5% or more of the securities of any other person
having ordinary voting power for the election of directors shall
be deemed to control such other person. Under no circumstances
shall the Lender be deemed for purposes of this Agreement to be
an Affiliate of the Company or any of its Affiliates. Except as
disclosed on Schedule 4.19: (a) no Affiliate nor any officer,
director or stockholder of the Company or, to the Company's
knowledge, to any person related by blood or marriage to any such
person or any entity in which any such person owned or owns any
beneficial interest, was or is a party to any agreement,
contract, commitment or transaction with the Company or had
or has any interest in any property used by the Company; (b) no
Affiliate is the direct or indirect owner of any interest in any
corporation, firm, association or business organization which is
a competitor or supplier of the Company (except for passive
investments of less than 5% in companies whose securities are
traded on NASDAQ or a national stock exchange); (c) no Affiliate
is the recipient of income from any source other than the Company
which should properly accrue to the Company.
4.20 Minute Books and Stock Record Books. The minute books of
the Company contain true, complete and correct records of all
meetings and other actions of the stockholders or Board of
Directors of the Company. The stock transfer record books of the
Company contain true, complete and correct records of all
transactions involving the Company's capital stock.
4.21 Employee Matters.
(a) Except as disclosed on Schedule 4.21, he Company is not a
party to any collective bargaining agreement;
(b) there is no unfair labor practice complaint against the
Company pending before the National Labor Relations Board;
(c) there is no labor strike, dispute, slowdown, representation
campaign or work stoppage actually pending or threatened against
or affecting the Company;
(d) to the Company's knowledge, no officer or employee of the
Company has entered into any agreement which is now in effect
with any person, corporation, partnership or business
organization other than the Company requiring such person to
assign any interest in any invention or trade secrets or to keep
confidential any trade secrets or other proprietary information
or containing any prohibition or restriction on competition or
solicitation of customers; and
(e) to the Company's knowledge, no managerial employee of the
Company or any Subsidiary intends to terminate his or her
employment with the Company within six months after the Closing.
4.22 Profit Payments. Except as set forth in the Senior Loan
Documents or on Schedule 4.11, the Company is not a party to any
agreement involving payments in excess of $50,000 to any person
or entity based on profits or gross revenues or sales.
4.23 Bank Accounts. Schedule 4.23 hereto contains a true,
complete and correct list of each bank or other depository
account or safe deposit box maintained by the Company, including
the name of the bank or other depository and the names and titles
of all persons authorized to draw thereon or having access
thereto.
4.24 Investment Company. The Company is not an "Investment
Company" or a company controlled by an "Investment Company"
within the meaning of the Investment Company Act of 1940, as
amended.
4.25 Solvency. The Company, after giving effect to the
transactions contemplated by this Agreement, has not incurred,
does not intend to incur, does not believe and has no reason to
believe it will incur, debts which it will be unable to pay as
they become due. The Company is not engaged in a business or a
transaction and is not about to engage in a business or a
transaction for which the property remaining with the Company is
an unreasonably small capital. After giving effect to the
transactions contemplated by this Agreement (including the
Acquisition), the Company owns assets and operations whose fair
saleable value, in the aggregate, is greater than the amount
required to pay all its indebtedness.
4.26 Regulations G and X. The Company is not engaged in the
business of extending credit for the purpose of purchasing or
carrying margin stock (as defined, from time to time, in
Regulation G promulgated by the Board of Governors of the Federal
Reserve System), and no part of the proceeds of the Note shall be
used to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying any margin stock
in violation of Regulations G and X.
4.27 Year 2000 Compliance. Except as described on Schedule 4.27,
the computer programs and software used by the Company, including
all such programs and software embedded in products sold by the
Company, will correctly recognize, calculate, sort, store,
display and/or process dates outside of the range 1900-1998,
including the years 1999, 2000 and beyond, and to correctly
recognize that the year 2000 is a Leap Year and to correctly
handle all date calculations involving the date February 29,
2000.
4.28 Disclosure. All statements of the Company contained in any
exhibit, certificate or other instrument attached hereto or
required to be delivered to the Lender pursuant to this Agreement
shall constitute representations and warranties by the Company
hereunder. Neither this Agreement nor any of the schedules,
attachments, written statements, documents, certificates or other
items required hereby contain any untrue statement of a material
fact or omit a material fact necessary to make each such
statement contained herein or therein not misleading. To the
Company's knowledge, there is no material fact pertaining to the
Company's business which the Company has not disclosed to the
Lender in writing and which, as of the date hereof, could
reasonably be anticipated to have a material adverse effect upon
the existing or expected financial condition, operating results,
assets, customer relations, employee relations or business
prospects of the Company.
5. Affirmative Covenants. From and after the Closing Date and
so long as the Company is indebted to the Lender (with respect to
the Loan, interest or otherwise pursuant to this Agreement) or
the Lender owns at least 10% of the issued and outstanding Common
Stock, the Company (including for purposes of this section 5 each
Subsidiary) shall comply with each of the following actions:
5.1 Payment of Note. The Company shall duly make all principal
and interest payments on the Note, as the same become due and
payable, and shall otherwise comply with the terms and conditions
thereof (including the grace period described in section 7.1(a)
provided the Company pays the default interest required by
section 7.1(a)).
5.2 Taxes. The Company shall accurately prepare all tax returns
required by law to be filed. The Company promptly shall pay and
discharge all taxes, assessments and governmental charges or
levies imposed by applicable law upon it or upon its income or
profit, or upon its properties, real, personal or mixed;
provided, however, that the Company shall not be required to pay
or cause to be paid any such tax, assessment, charge or levy if
the same shall not at the time be due and payable or if the
validity thereof shall be contested in good faith by appropriate
proceedings, if any, in which event it has established adequate
reserves on its books with respect to such tax, assessment,
charge or levy; provided further, however, that the Company
will pay all such taxes, assessments, charges or levies forthwith
whenever, as the result of proceedings to foreclose any lien
which attached as security therefor, foreclosure on such lien
appears imminent, or will obta in a surety bond or take such
other steps as will prevent such foreclosure.
5.3 Maintain Rights and Facilities. The Company shall maintain
and preserve its corporate existence and all its rights,
franchises and qualifications adequate for the conduct of its
business and the ownership of its properties.
5.4 Insurance; Bonds. The Company shall maintain insurance
against all such liabilities, hazards and risks, and in at least
such amounts (in the case of property casualty insurance at least
replacement cost), as are usually carried by persons engaged in
the same or a similar business. All such insurance shall be
effected under valid and enforceable policies issued by insurers
of recognized responsibility, except that the Company may effect
worker's compensation or similar insurance in respect of
operations in any state or other jurisdiction through an
insurance fund approved by such state or other jurisdiction. The
Company shall obtain and maintain in force such contract payment
and performance bonds as are required in connection with the
Company's business.
5.5 Financial Reports. The following financial reports shall be
provided:
(a) The Company shall provide the Lender, within 30 days after
the end of each calendar month, an unaudited financial statement
of the Company which will include a (i) balance sheet, (ii)
statement of income and expense, and (iii) statement of cash
flow, all for such monthly period and for the then current fiscal
year to date together with a monthly comparison of actual
operating results to the previous fiscal year and, beginning
February 1999, to budget. Each of the foregoing financial
statements shall be provided in reasonable detail and prepared in
accordance with accounting principles consistently applied
(subject to the absence of footnotes), and shall be furnished in
consolidated and consolidating form for the Company and the
Subsidiaries. Such financial statements shall be accompanied by
a written narrative describing business developments, for the
month covered by the statements, in form and detail reasonably
satisfactory to the Lender. Such financial statements shall be
certified, subject to audit and normal year-end adjustments, by
the Chief Executive Officer or senior financial officer of the
Company and shall also be accompanied by the certificate of such
officer to the effect that: (i) to his knowledge, there exists
no Event of Default (as defined in section 7 hereof) or event
which, with the giving of notice or passage of time or both,
would constitute an Event of Default or if any such Event of
Default exists, specifying the nature thereof, the period of
existence thereof and what action the Company proposes to take
with respect thereto (provided that the Lender shall not be
subject to any liability, nor shall the Lender be deemed to waive
any right or remedy to which it may be entitled, as a result of
any action taken or not taken subsequent to receipt of such
statement regarding Events of Default); and (ii) nothing has come
to the attention of the management of the Company that caused
them to believe the Company was not in compliance with any terms,
covenants, provisions or conditions of section 5 or 6 of this
Agreement. The Company shall also furnish the Lender copies of
all financial reports furnished to any bank providing senior debt
or to any bonding company.
(b) Within 90 days after the last day of each fiscal year of the
Company, the Company will provide the Lender with an audited
annual report of the Company containing a (i) balance sheet, (ii)
statement of income and expense, (iii) statement of stockholders'
equity and (iv) statement of cash flow for such year, prepared in
accordance with generally accepted accounting principles applied
on a consistent basis and setting forth in each case, in
comparative form, the figures for the previous fiscal year, all
in reasonable detail and, in the case of the audited annual
report, accompanied by an unqualified (as to scope of audit and
going concern) opinion of an independent certified public
accountant satisfactory to the Lender. The annual financial
statements shall be accompanied by a written statement from the
Chief Executive Officer or senior financial officer of the
Company to the effect that: (i) to the knowledge of the Company
there exists no Event of Default or event which, with the giving
of notice or passage of time or both, would constitute an Event
of Default or if any such default exists, specifying the nature
thereof, the period of existence thereof and what action the
Company proposes to take with respect thereto (provided that the
Lender shall not be subject to any liability, nor shall the
Lender be deemed to waive any right or remedy to which it may be
entitled, as a result of any action taken or not taken subsequent
to receipt of such statement regarding Events of Default); and
(ii) nothing has come to the attention of the management of the
Company that caused them to believe the Company was not in
compliance with any terms, covenants, provisions or conditions of
section 5 or 6 of this Agreement. The annual audited financial
statements shall be furnished in consolidated and consolidating
form for the Company and the Subsidiaries. Together with each
delivery of financial statements of the Company pursuant to
section 5.5(b) hereof, the Company shall deliver a written
statement by its independent certified public accountants
addressed to the Lender (i) stating that the examination has
included a review of the terms of this Agreement as they relate
to accounting matters and (ii) stating whether, in connection
with the examination, any condition or event relating to
accounting matters that constitutes (or with notice, the passage
of time, or both, will constitute) an Event of Default has come
to their attention and, if such a condition or event has come to
their attention, specifying the nature and period of existence
thereof.
(c) Promptly upon receipt, the Company will provide the Lender
with copies of all audit reports submitted to the Company by
independent accountants in connection with each annual audit of
the books of the Company and the Subsidiaries and copies of any
and all management reports and recommendations given by its
independent accountants to the Company.
5.6 Budget. On or before January 31, 1999 with respect to the
fiscal year ending December 31, 1999 and on or before the last
day of each fiscal year commencing with the following fiscal
years, the Company shall furnish to the Lender an operating
financial forecast for the Company (including an operating and
capital budget) for the upcoming fiscal year and projections of
(i) the balance sheet of the Company at the end of each month of
such fiscal year, (ii) statements of income and expense for each
month of such fiscal year, (iii) statements of cash flow of the
Company for each month of such fiscal year, and (iv) a budget of
capital expenditures to be incurred by the Company for such
fiscal year, all of the foregoing to be furnished in consolidated
and consolidating form for the Company and the Subsidiaries and
shall be in reasonable detail and certified by the Chief
Executive Officer or senior financial officer of the Company as
having been prepared in good faith and to the best knowledge and
ability of the Company. The Company shall, promptly upon any
material revision of the foregoing, provide such revisions to
the Lender. The business plan referred to above shall include
management's intentions with regard to anticipated significant
business developments or objectives of the Company.
5.7 Books and Records; Inspection. The Company shall keep
proper, complete and accurate books of record and account. The
Lender shall have the right to visit and inspect any of the
properties, books and records of the Company (and to make copies
and take extracts therefrom), to discuss the Company's affairs,
finances and accounts with, and be advised of the same by, its
directors, officers, employees, consultants, and independent
accountants at such reasonable times and intervals, subject to
reasonable prior notice to the Company, as the Lender may desire.
5.8 Maintain Properties. The Company shall keep its properties
in working order and condition, ordinary wear and tear excepted,
and from time to time make all prudent, needful or proper
repairs, replacements, extensions, additional betterments and
improvements thereto, so that the business carried on by the
Company may be efficiently conducted at all times in accordance
with sound business management.
5.9 Compliance with Instruments, Laws, Etc. Except where the
Company's failure to comply would not have a Material Adverse
Effect, the Company shall comply in all respects with the terms,
requirements, restrictions and limitations of any applicable law,
statute or regulation of any federal, state, municipal or other
governmental or quasi-governmental agency, board, bureau or body
materially relating to the conduct of its business and
maintenance and operation of its respective properties (except
where the Company is contesting the applicability thereof by
appropriate legal proceedings), and shall further comply with and
perform the terms, conditions and covenants contained in any
contract, lease, license, mortgage, indenture, instrument or
other agreement under which the Company is obligated.
5.10 Notices. Upon the Company's obtaining notice or knowledge
of any of the following, promptly notify in writing the Lender of
the same and what action the Company proposes to take, and shall
thereafter keep the Lender fully informed, with respect thereto:
(a) Any breach of or default, with respect to which any grace
period has expired, by the Company in the fulfillment of any of
the material terms, covenants or conditions of this Agreement or
any loan agreement or material contract or material governmental
license, permit or tariff by which it is bound or to which it is
a party, or the existence or occurrence of any condition, event,
act or omission which, with the giving of notice or the passage
of time or both, would constitute an Event of Default under this
Agreement (as defined in section 7) or an event of default under
any loan agreement or material contract, or material governmental
license, permit or tariff by which it is bound or to which it is
a party.
(b) Any litigation, investigation or administrative proceeding,
in which the amount in controversy exceeds $250,000 or in which a
criminal sanction or injunctive remedy is sought against the
Company, or any otherwise material determination, fine, penalty
or other materially important dispute to which the Company is a
party or by which it is affected.
(c) Any change or modification in existing contracts, agreements
or commitments to which the Company is a party or is bound, which
change or modification would have a Material Adverse Effect.
(d) Any change in the laws applying in particular to the
Company or the industries in which the Company competes, which
change would have a Material Adverse Effect.
(e) Any bid for a project with respect to which the Company's
proposed contract exceeds $10,000,000.
(f) Any warranty claim made against the Company in which the
amount claimed exceeds $250,000.
(g) Any surety loss under bonds maintained by the Company in
which such loss exceeds $250,000.
5.11 Shareholder Agreement. The Company shall enter into and
comply in all respects with the Shareholder Agreement.
5.12 Observation Rights. The Company shall permit two
representatives of the Lender to attend all meetings of the Board
of Directors and any committees thereof; one of such
representatives shall be the Blair Director (as defined in the
Shareholder Agreement) once such person has been elected to the
Board of Directors.
6. Negative Covenants. From and after the Closing Date and so
long as the Company is indebted to the Lender (with respect to
the Loan, interest or otherwise pursuant to this Agreement) or
the Lender owns at least 10% of the issued and outstanding Common
Stock, the Company and the Subsidiaries will not do or take any
of the following actions without the prior written consent of the
Lender:
6.1 Use of Proceeds. Use the proceeds from the Lender's
purchase of the Note or the Equity Securities for any purpose
other than the Acquisition, the refinancing of the Company's debt
and the payment of fees and expenses associated therewith.
6.2 Redemption; Distributions. Except for the transactions
described on Schedule 6.2, purchase or otherwise acquire, redeem
or retire or make any distribution or pay any dividend with
respect to, the Company's capital stock or agree or commit to do
any of the foregoing. Notwithstanding the foregoing, (i) any
Subsidiary may pay dividends or make other distributions to the
Company or to a wholly-owned Subsidiary of the Company; (ii) the
Company may purchase its capital stock in the open market, in an
amount not to exceed $100,000 per year, for the purpose of making
resales to employees under its stock discount plan or matching
contributions under its 401(k) plan; (iii) the Company may
purchase in the open market up to $150,000 per year of its
capital stock in connection with the performance of its
obligations under the Company's employee and director stock
option plans; and (iv) the Company may purchase such shares of
capital stock as it is required to purchase to satisfy its
obligations under the August 1, 1993 Stock Purchase Agreements
described on Schedule 4.3(a).
6.3 Investments, Loans and Advances. Make or have outstanding
any loans or advances to, or investments in (through the
acquisition of securities or stock or otherwise), any other
person, firm, or corporation, except:
(a) Advances in the ordinary course of business to suppliers in
respect to the purchase of inventory, supplies or equipment;
(b) By endorsement of negotiable instruments for deposit or
collection in the ordinary course of business;
(c) Investments in obligations of the United States Government
and maturing within one year or deposits in or certificates of
deposit issued by a commercial bank organized under the laws of
the United States having capital and surplus in excess of
$100,000,000 and maturing within one year;
(d) Travel and other advances to employees in the ordinary
course of business;
(e) Investments in commercial paper of any United States
corporation rated at least A-1 by Standard & Poor's Corporation
or at least P-1 by Moody's Investors Service, Inc. and maturing
within one year; or
(f) Investments in money market funds substantially all of the
assets of which are comprised of securities of the type described
in sections (c) and (e) above.
(g) Contributions by the Company to the capital of any of its
Subsidiaries, or by any such Subsidiary to the capital of any of
its Subsidiaries.
(h) In the ordinary course of business, Investments by the
Company in any Subsidiary or by any Subsidiary in the Company, by
way of intercompany loans, advances or guaranties, all to the
extent permitted by the Senior Loan Documents.
(i) suretyship liabilities permitted by the Senior Loan
Documents.
(j) any acquisition by the Company or any Subsidiary where (1)
the assets acquired (in the case of an asset purchase) are for
use, or the entity acquired (in the case of any other
acquisition) is engaged, solely in the security systems or fire
alarm businesses; (2) immediately before and after giving effect
to such acquisition, no Event of Default shall exist; (3) the
aggregate consideration to be paid by the Company and its
Subsidiaries (including any Indebtedness assumed or issued in
connection therewith, the amount thereof to be calculated in
accordance with GAAP) in connection with such acquisition (or any
series of related acquisitions) and any other acquisitions
consummated during the same fiscal year is less than $600,000 in
aggregate; (4) immediately after giving effect to such
acquisition, the Company is in pro forma compliance with all the
financial ratios and restrictions set forth in section 6.17; (5)
in the case of the acquisition of any entity, the Board of
Directors of such entity has approved such acquisition; (6) the
EBITDA in respect of the business (in the case of an asset
purchase) or entity (in the case of any other acquisition)
acquired is not less than zero; and (7) the Company provides ten
days prior written notice of such acquisition to the Lender.
6.4 Acquisition or Sale of Business; Merger or Consolidation.
Except as and to the extent permitted under section 6.3, purchase
or otherwise acquire the stock, shares, or other securities, or
substantially all of the assets or business, of any person or
other entity; or liquidate, dissolve, merge, consolidate,
reorganize, recapitalize or otherwise alter its legal status or
commence any proceedings therefor; or sell, lease, transfer, or
dispose of, in any way, any personal or real property assets,
except assets sold or leased in the ordinary and normal course of
business; or assign or transfer any substantial part of its
intangible business rights necessary for the continuance of its
business as now conducted or planned. Notwithstanding the
foregoing, this section 6.4 shall not prohibit: (a) any merger,
consolidation, sale, transfer, conveyance, lease or assignment of
or by any wholly-owned Subsidiary into the Company or into, with
or to any other wholly-owned Subsidiary; (b) any such purchase or
other acquisition by the Company or any wholly owned Subsidiary
of the assets or stock of any wholly-owned Subsidiary; or (c)
sales and dispositions of assets (including the stock of
Subsidiaries) for at least fair market value (as determined prior
to such sale or disposition by the Company's Board of Directors)
so long as the net book value of all assets sold or otherwise
disposed of in any fiscal year of the Company does not exceed
10% of the net book value of the consolidated assets of the
Company and its Subsidiaries as of the last day of the preceding
fiscal year.
6.5 Change Capital Structure. Excluding the transactions listed
on Schedule 6.5, increase or decrease the number of its
authorized shares, or vary or alter the terms, par value or
rights of shares of any class or type of stock, or issue or agree
to issue any capital stock or other securities of the Company, or
any options, warrants or other rights to acquire such capital
stock or other equity securities, or securities convertible into
Common Stock or other equity securities of the Company, or create
any new class of stock of the Company; provided, however, the
Company may issue up to 555,000 shares of Common Stock to members
of the Company's management, and an additional 45,000 shares if
the Company's EBITDA for 2001 is greater than $13 million, all on
terms acceptable to the Lender pursuant to an incentive stock
option program to be implemented by the Company, subject to the
Lender's approval, after Closing, and pursuant to the directors'
option plan described on Schedule 6.2.
6.6 Officers' Salaries and Loans. Pay to the persons listed
on Schedule 6.6 annual compensation in excess of the annual
amounts shown on Schedule 6.6, or as such compensation may in the
future be adjusted by a majority (including Lender's
representative) of the Company's compensation and stock option
committee of the Board of Directors. The term "compensation",
for purposes of this section, shall include all remuneration for
services rendered, whether such payment be called salary, bonus,
drawing account, profit sharing, withdrawals or other form of
recompense (but shall not include fringe benefits, such as the
qualified profit-sharing plan and health and life insurance,
generally available to all salaried employees and deferred
compensation plans and retirement plans approved by the Board of
Directors available to certain members of the Company's
management and vehicles provided to such persons consistent with
historical practice and expense).
6.7 Amendments or Changes in Charter or Agreements. Amend,
modify or supplement in any way, or terminate, its Articles of
Incorporation or By-Laws except as contemplated by this Agreement
or its Appendices; or except as permitted by the Intercreditor
Agreement, modify, alter, supplement, extend or amend any
agreement or document relating to the Senior Debt (as defined in
section 6.10) (the "Senior Loan Documents") to the extent such
modification, alteration, supplement, extension or amendment (i)
increases the Senior Debt, (ii) increases the interest rate or
rates per annum or increase the fees payable in excess of the
amount of such rates of interest or fees currently in existence
thereunder, (iii) accelerates the scheduled payment dates, the
commitment reduction dates or the final maturity dates, or (iv)
imposes terms more restrictive to the Lender (with respect to the
receipt of payments of principal and interest under this
Agreement) than those restrictive terms which exist under the
Senior Loan Documents as of the date hereof.
6.8 Dealings with Affiliates. Enter into any transaction
(including, without limitation, the purchase, sale or exchange of
property or the rendering of any services) with any of the
Company's directors or Affiliates (other than the Company's
Subsidiaries), or any person related by blood or marriage to any
such person or any entity in which any such person owns any
beneficial interest.
6.9 Pension and Profit Sharing Plan or Arrangements. Establish
or, except for Plans identified on Schedule 4.12 as they may be
amended, supplemented or replaced from time to time by
commercially reasonable and customary arrangements, make any
contribution to any employee pension benefit plan, or other
pension or profit sharing plan or arrangement, whereby any part
of the profits or earnings of the Company (on a consolidated
basis) is shared with any person, firm or corporation.
6.10 Permitted Indebtedness. Create, incur, assume, guarantee
or be or remain liable for, contingently or otherwise, or suffer
to exist any Indebtedness (as defined below), except: (a) the
Senior Debt, as defined below; (b) the Loan; (c) purchase money
indebtedness not to exceed $300,000, on a consolidated basis, at
any time, for capital expenditures permitted under section 6.12,
provided any related security interest complies with section
6.11(c); (d) Indebtedness secured by Permitted Liens; (e)
Indebtedness not to exceed $1,750,000 in connection with the IRB
financing contemplated in connection with the Norshield Expansion
(as defined in section 6.12); (f) the Company's obligations under
contract payment and performance bonds entered into in the
ordinary course of business; (g) obligations under any interest
rate, currency or commodity swap agreement, cap agreement or
collar agreement incurred for bona fide hedging purposes and not
for speculation; (h) Indebtedness of any Subsidiary to the
Company or of the Company to any Subsidiary; (i) Indebtedness
described on Schedule 6.10 and any extension, renewal or
refinancing thereof so long as the principal amount is not
increased; and (j) other Indebtedness, in addition to the
Indebtedness listed above, in an aggregate amount not at any time
exceeding $150,000.
"Indebtedness" shall mean: (w) all indebtedness for borrowed
money (including, without limitation, that constituting all or
any part of the deferred purchase price of property or services);
(x) notes payable and drafts accepted representing extensions of
credit whether or not representing obligations for borrowed
money; (y) all Capital Lease Obligations (as defined in section
6.18) and (z) all indebtedness secured by any lien or security
interest on any property or asset owned or held by the Company
regardless of whether the indebtedness secured thereby shall have
been assumed by the Company or is nonrecourse to the credit of
the Company.
"Senior Debt" shall mean any and all obligations, indebtedness
and liabilities now or hereafter owing or due from the Company to
LaSalle Bank under the LaSalle Bank Credit Agreement; provided,
however, that (solely for purposes of section 6.10(a)) Senior
Debt shall not include:
(i) increases in the principal amount of the indebtedness of the
Company to LaSalle Bank in excess of $3,000,00, which amount
shall be reduced in such increments and at such times as
correspond to the reduction in principal of the Company's term
loan with LaSalle Bank and to the reductions in availability
under the LaSalle Bank revolving loan;
(ii) increases in the portion of interest that accrues in respect
of the indebtedness of the Company to LaSalle Bank at a rate in
excess of the otherwise applicable interest rate (or default
rate)(including any adjustable rate or rate to be reset pursuant
to the terms of the LaSalle Bank Credit Agreement) provided for
under the LaSalle Bank Credit Agreement in effect on the date
hereof; and
(iii)increases in the fees, charges or expenses provided for
under the LaSalle Bank Credit Agreement in effect on the date
hereof.
6.11 Liens. Create or suffer to exist, any claim, assessment,
pledge, security interest, mortgage, encumbrance or other lien
(collectively, "Liens") in favor of any person, including the
Lien of a conditional seller, upon any of its properties or
assets, now owned or hereafter acquired, including treasury
shares; provided, however, that this restriction shall not be
applicable to nor prevent the following (referred to in this
Agreement as "Permitted Liens"):
(a) Liens for taxes, assessments or governmental charges not
delinquent or being contested in good faith; undetermined Liens
and charges incident to construction and not resulting from any
delinquent obligation for the payment of money on account of such
construction; the lessor's rights in leasehold property, and
easements, restrictions, minor title irregularities and similar
matters which have no adverse effect as a practical matter upon
the ownership and use of the properties;
(b) Liens or deposits in connection with indebtedness not in
violation of section 6.10 above, worker's compensation or other
insurance or to secure customs duties, public or statutory
obligations, appeals bonds or carrier's, warehousemen's,
mechanics or materialmen's claims not more than 30 days
delinquent or being contested by the Company in good faith and in
appropriate proceedings; or to secure performance of contracts or
bids (other than contracts for the payment of money borrowed), or
deposits required by law or governmental regulations or by a
court order, decree, judgment or rule as a condition to the
transaction of business or the exercise of any right, privilege
or license or other liens of a like nature made in the ordinary
course of business;
(c) Liens securing the Senior Debt;
(d) Purchase money mortgages or Liens for capital expenditures
otherwise permitted by sections 6.10 and 6.12;
(e) Any attachment or judgment lien not constituting an Event of
Default under section 7.1 of this Agreement;
(f) Any interest or title of a lessor or sublessor under any
lease permitted by this Agreement, and any liens arising from
Uniform Commercial Code financing statements filed with respect
to such leases; and
(g) Liens described on Schedule 6.11 or the replacement,
extension or renewal thereof, upon or in the same property,
arising out of the extension, renewal or replacement of the
Indebtedness secured thereby (without increase in the amount
thereof).
6.12 Capital Expenditures. On a consolidated basis for the
Company and the Subsidiaries, make any Capital Expenditures or
incur any Capital Lease Obligations which, in the aggregate, will
exceed the amounts set forth below for the corresponding period
set forth below.
<TABLE>
<S> <C>
Computation Period Capital Expenditure Limit
11/30/98 through 12/31/98 $110,000
Fiscal Year 1999 $880,000
Fiscal Year 2000 $968,000
Fiscal Year 2001 $1,064,800
Fiscal Year 2002 $1,171,280
Fiscal Year 2003 $1,288,408
</TABLE>
Notwithstanding the above: (a) the Company may spend an
additional $850,000 on upgrading its computer systems during the
period November 30, 1998 through December 31, 1999 ("ERP
Upgrade") (a preliminary budget outlining various capital
expenditures falling under the ERP Upgrade is attached as
Schedule 6.12); and (b) the Company may spend an additional
amount, during the period of the fiscal years 1999 and 2000, not
to exceed $1,750,000 in the aggregate, on capital expenditures
related to the expansion of its Norshield manufacturing facility
located at 3224 Mobile Highway, Montgomery, Alabama ("Norshield
Expansion"). For the purposes of calculating the Fixed Charge
Coverage Ratio under section 6.17, the definition of Capital
Expenditures shall exclude amounts spent on the ERP Upgrade and
Norshield Expansion.
6.13 Changes in Business or Fiscal Year. Make any significant
change in the nature of its business or enter into any agreements
which would restrict the Company's or any Subsidiary's right or
ability to perform under this Agreement, its Certificate of
Incorporation or By-Laws, or change its fiscal year.
6.14 Operating Leases. Create or assume any commitment to make
any direct or indirect payment whether as rent or otherwise under
any lease, rental or other arrangement for use of real or
personal property or both having a noncancellable term of more
than three years with aggregated payments under such
arrangements, on a consolidated basis, exceeding $1,500,000 in
any fiscal year of the Company plus $500,000 in respect of all
vehicle leases outstanding at any time.
6.15 Sale and Lease-Backs. Enter into any arrangement with any
lender or investor or to which such lender or investor is a party
providing for the leasing by the Company or any Subsidiary of
real or personal property which has been or is to be sold or
transferred by the Company or any Subsidiary to such lender or
investor or to any person to whom funds have been or are to be
advanced by such lender or investor on the security of such
property or rental obligations of the Company or any Subsidiary.
6.16 Sale or Discount of Receivables. Except for discounts
for prompt payment or to settle immaterial customer disputes in
the ordinary course of business, sell with recourse, or discount
or otherwise sell for less than the face value thereof, any of
its notes or accounts receivable.
6.17 Financial Covenants.
(a) Fixed Charge Coverage Ratio. Permit the Fixed Charge
Coverage Ratio for any Computation Period to be less than the
applicable ratio set forth below for such Computation Period:
Computation Fixed Charge
Period Ending Coverage Ratio
3/31/99 - 12/31/02 1.00
3/31/03 and thereafter 1.05
(b) Interest Coverage Ratio. Permit the Interest Coverage Ratio
for any Computation Period to be less than the applicable ratio
set forth below for such Computation Period:
Computation Period Ending Interest Coverage Ratio
3/31/99 - 12/31/99 1.35
3/31/00 - 12/31/00 1.80
3/31/01 - 12/31/01 2.00
3/31/02 - 12/31/02 2.50
3/31/03 and thereafter 2.70
(c) EBITDA. Permit EBITDA for any Computation Period to be less
than the applicable amount set forth below for such Computation
Period:
Computation Period Ending EBITDA
1/1/99 - 3/31/99 $1,170,000
1/1/99 - 6/30/99 2,400,000
1/1/99 - 9/30/99 3,800,000
1/1/99 - 12/31/99 5,400,000
6.18 Certain Definitions. "Asset Sale" means the sale, lease,
assignment or other transfer for value (each a "Disposition") by
the Company or any Subsidiary of any asset or right of the
Company or such Subsidiary other than (a) the Disposition of any
asset which is to be replaced, and is in fact replaced, within 30
days with another asset performing the same or similar function,
and (b) the sale or lease of inventory in the ordinary course of
business.
"Capital Expenditures" means all expenditures which, in
accordance with GAAP, would be required to be capitalized and
shown on the consolidated balance sheet of the Company, but
excluding expenditures made in connection with the replacement,
substitution or restoration of assets to the extent financed (i)
from insurance proceeds (or other similar recoveries) paid
on account of the loss of or damage to the assets being replaced
or restored or (ii) with awards of compensation arising from the
taking by eminent domain or condemnation of the assets being
replaced.
Capital Lease. The term "Capital Lease" shall mean a lease with
respect to which the lessee's obligations thereunder should, in
accordance with GAAP, be capitalized and reflected as a liability
on the balance sheet of the lessee.
Capital Lease Obligations. The term "Capital Lease Obligations"
shall mean all Indebtedness incurred as a lessee pursuant to a
Capital Lease.
"Computation Period" means each of the following periods:
(a) the fiscal quarter ending March 31, 1999; (b) the period of
two consecutive fiscal quarters ending June 30, 1999; (c) the
period of three consecutive fiscal quarters ending September 30,
1999; and (d) each period of four consecutive fiscal quarters
ending on the last day of a fiscal quarter thereafter.
"Consolidated Net Income" means, with respect to the Company and
its Subsidiaries for any period, the net income (or loss) of the
Company and its Subsidiaries for such period.
"EBITDA" means, for any period, Consolidated Net Income for such
period plus, to the extent deducted in determining such
Consolidated Net Income, Interest Expense, income tax expense,
depreciation and amortization for such period, excluding any
gains from Asset Sales, any noncash extraordinary gains and any
gains from discontinued operations, plus any noncash
extraordinary losses.
"Fixed Charge Coverage Ratio" means, for any Computation Period,
the ratio of (a) the total for such period of EBITDA minus the
sum of all income taxes paid by the Company and its Subsidiaries
and all Capital Expenditures to (b) the sum for such period of
(i) Interest Expense plus (ii) required payments of principal of
Funded Debt (including, without limitation, the Term Loans under
the Senior Loan Documents but excluding the Revolving Loans under
the Senior Loan Documents).
"Funded Debt" means all debt that matures more than one year from
the date of its creation (or is renewable or extendable, at the
option of the Borrower, to a date more than one year from such
date).
"Interest Coverage Ratio" means, for any Computation Period, the
ratio of (a) EBITDA for such Computation Period to (b) Interest
Expense for such Computation Period.
"Interest Expense" means for any period the consolidated interest
expense of the Company and its Subsidiaries for such period
(including all imputed interest on Capital Leases.
7. Events of Default and Remedies.
7.1 Events of Default. So long as any part of the Note remains
unpaid (including principal, interest or otherwise) any one or
more of the following shall constitute an "Event of Default" as
the term is used herein:
(a) Default in the payment on the required due date of principal
or interest on the Note, provided that payment not later than
three days after the stated due date shall not be an Event of
Default if the Company pays interest on the Note at the rate
specified in section 2.2(b) from and after the stated due date;
(b) (1) Failure of the Company or any of its Subsidiaries to pay
when due or within any applicable grace period any principal or
interest on Indebtedness (other than the Note); (2) breach or
default of the Company or any of its Subsidiaries with respect to
any Indebtedness (other than the Note), if the effect of such
failure to pay, default or breach is to cause, or to permit the
holder or holders then to cause, Indebtedness having an
individual principal amount in excess of $100,000 or having an
aggregate principal amount in excess of $100,000 to become or be
declared due prior to their stated maturity, unless such failure
to pay, default or breach set forth in clauses (1) and (2) of
this section 7.1(b) is waived and such acceleration is annulled
by such holder or holders;
(c) Default shall occur in the observance or performance by the
Company of any term, covenant (other than the negative covenants
contained in section 6 of this Agreement) or other provision of
this Agreement, or any other Agreement executed in connection
herewith and such default shall not be remedied within 45 days
after notice thereof shall have been given by the Lender to the
Company;
(d) Default shall occur in the observance or performance by the
Company of any negative covenant contained in section 6 of this
Agreement;
(e) If any representation or warranty made by the Company in
this Agreement, or made by the Company in any exhibit, statement
or certificate attached to this Agreement or furnished to the
Lender in connection with this Agreement, proves untrue in any
material respect on the date as of which made or as of which the
same is to be effective;
(f) The Company becomes bankrupt, or admits in writing its
inability to pay its debts as they mature, or makes an assignment
for the benefit of creditors, or applies for or consents to the
appointment of a trustee or receiver or for the major part of its
properties;
(g) A trustee or receiver is appointed for the Company or for a
material part of its properties and the order of such appointment
is not discharged, vacated or stayed within 60 days after such
appointment;
(h) Any judgment, writ or warrant of attachment or of any
similar post-judgment process in an amount in excess of $250,000
shall be entered or filed against the Company or against any of
its properties or assets and remains unpaid, unvacated, unbonded
or unstayed for a period of 60 days, unless a reputable and
financially sound insurance company has admitted in writing its
responsibility to pay such judgment;
(i) Bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceedings, or other proceedings for relief under
any bankruptcy or similar law or laws for the relief of debtors,
are instituted by or against the Company or any Subsidiary and,
if so instituted, are consented to by the Company or any
Subsidiary, or, if contested, are not dismissed by the adverse
parties or by an order, decree or judgment within 60 days after
such institution; or
(j) If, at any time, Martin Roenigk shall own fewer than 940,000
shares of the Company's Common Stock or Martin Roenigk shall no
longer be serving as the Company's Chairman (except that it will
not be a default if such circumstance results from the death or
total disability of Martin Roenigk).
7.2 Notice to Holder. When any condition, event or act
described in section 7.1 has occurred or exists, the Company
agrees to give notice thereof to the Lender on the next business
day after the Company has knowledge of such condition, event or
act. The Lender agrees that the cure of any curable default
under section 7.1 also constitutes the cure of any failure to
give proper notice thereof under this section 7.2.
7.3 Acceleration. If an Event of Default specified in section
7.1(f), (g) or (i) shall occur, the unpaid balance of the Note
and interest accrued thereon and all other liabilities of the
Company under this Agreement and the Note shall be immediately
due and payable, without presentment, demand, protest or notice
of any kind, all of which are hereby expressly waived by the
Company. When any Event of Default described in the other
sections of section 7.1 has occurred and for so long as such
Event of Default is continuing, the Lender, at its option and
without presentment, demand, protest or notice of any kind (all
of which the Company hereby expressly waives), may declare the
Note to be due and payable in full, and it shall thereupon become
immediately due and payable. From the date of any Event of
Default specified in section 7.1(a), (f), (g), (i) or (j), and
from the date of Lender's written notice thereof to the Company
after any other Event of Default, all unpaid principal of the
Note held by the Lender shall bear interest at the rate specified
in section 2.2(b) until the Note is paid in full.
7.4 Expenses. The Company agrees to pay to the Lender all
reasonable costs and expenses incurred by the Lender (including
reasonable attorneys' fees) in connection with the collection of
the Note or the enforcement or amendment of any provisions of
this Agreement.
7.5 Remedies Cumulative. The remedies provided in this section
7 are in addition to, and not in limitation of, any other rights
and rmedies the Lender may have upon an Event of Default. The
Lender may exercise any or all of the remedies provided by this
section 7.
8. Representations and Warranties of Lender. The Lender
represents and warrants to the Company that the statements
contained in this section 8 are true, accurate and complete with
respect to the Lender.
8.1 Capacity. The Lender has such knowledge and experience
in financial and business matters as to be capable of evaluating
the merits and risks of and to protect its own interest in
connection with the acquisition of the Note and the Equity
Securities.
8.2 Accredited Lender. The Lender is an "accredited investor"
as defined in Regulation D promulgated under the Securities Act.
8.3 Investment Purpose. The Lender is making this investment
for its own account and not for the account of others and not
with a view to the distribution of the Note or the Equity
Securities, and has no present intention of reselling or dividing
the Note or the Equity Securities, it being understood that
neither the Note nor the Equity Securities (subject to the
Lender's rights under the Registration Agreement) will be
registered under the Securities Act and that the Note and the
Equity Securities will have a legend affixed thereto describing
the restrictions on transferability.
8.4 Disclosure. The Lender has received copies of the annual
reports on Form 10-K, annual reports to shareholders, quarterly
reports on Form 10-Q, current reports on Form 8-K, and proxy
statements filed by the Company with the Securities and Exchange
Commission during the past three years in compliance with the
rules under the Securities Exchange Act of 1934, as amended. In
addition, the Lender has had the opportunity to ask questions and
receive written answers concerning the Company and the
Acquisition.
9. Transfer of Note; Transfer of Equity Securities;
Participation.
9.1 Successor and Assigns in General. This Agreement shall
be binding upon and, subject to section 9.2 hereof, inure to the
benefit of the parties hereto and their respective successors and
assigns, except that the Company may not assign or transfer its
rights hereunder or any interest herein or delegate its duties
hereunder without the prior written consent of the Lender. The
Lender shall give the Company prompt written notice of any
assignment of or participation in the Loan hereunder. Except in
connection with an assignment of its entire interest in the Note
and the Equity Securities, the Lender will continue to act as the
sole agent for purposes of this Agreement on behalf of all
holders of or participants in the Note and/or Equity Securities.
The Company shall maintain a book-entry system (which shall
include, without limitation, a record of ownership that
identifies each owner of an interest in the Loan or the Note) for
registration as to the rights to principal and stated interest on
the Loan and the Note, and shall promptly register any such
assignment of or participation in the Loan or the Note upon
receipt of such notice.
9.2 Conditions. The Lender or any Assignee may assign all or
any portion of its interest in and rights under this Agreement,
the Note and the Equity Securities to another person (an
"Assignee"), or grant a participating or beneficial interest in
this Agreement and the Loan to another person (a "Participant"),
subject to the following conditions:
(a) Securities Laws. Such assignment or participation shall not
be made under such circumstances as may constitute a violation of
federal securities laws or any applicable state securities laws
or regulations or (unless the transaction has been registered
under the Securities Act) render the Lender an underwriter, as
defined in the Securities Act. Any proposed assignee or
participant shall be required, as a condition to such assignment
or participation, to provide the Company with written
representations and warranties substantially in the form
contained in section 8.
(b) Payments; Set Off. Any payments to or recoveries by the
Lender or any Assignee or Participant under this Agreement or
under any instrument or agreement delivered in connection
herewith shall be for the account of the Lender, and all
Assignees and Participants, in proportion to the amount of each
such person's interest in the Loan. Rights of setoff and
banker's lien (if any) may be exercised by each such person only
after ten days' prior notice to the Company, and amounts and
property so set off or covered by such Lien may be applied to all
or any of the obligations incurred by the Company under this
Agreement, and all other amounts payable by the Company under
this Agreement which may be due or unpaid as determined by the
Lender, Assignees or Participants to the end that the property
and credit balances of the Company with each such person shall be
security for, and may be applied to the payment of, all or any of
the obligation incurred by the Company under this Agreement, and
such other amounts as though such rights were exercised, and such
amounts were recovered, by the Lender.
(c) Registration. The Company shall have registered any such
assignment or grant of a participating or beneficial interest in
the book-entry system maintained by the Company pursuant to
section 9.1 hereof.
(d) Further Assurance. The Company shall, from time to time at
the request of the Lender, execute and deliver to the Lender or
to such party or parties as the Lender may designate, any and all
further instruments as may in the reasonable opinion of the
Lender be necessary or advisable to give full force and effect to
any transfer contemplated by this section 9.
10. Additional Provisions.
10.1 Expenses. The Company agrees upon demand to pay or
reimburse the Lender for all of its reasonable out-of-pocket
expenses, including, without limitation, all travel, legal,
consulting, accounting and independent analyst fees and expenses,
from time to time (a) arising in connection with (i) the
preparation and execution of this Agreement and all other
documents, agreements, certificates and instruments to be
delivered thereunder and (ii) the legal and financial
investigation and review of the Company, (b) relating to any
amendments, waivers or consents pursuant to the provisions hereof
or thereof, (c) arising in connection with the enforcement of
this Agreement and all other agreements to be delivered hereunder
or collection of the Note, and (d) relating to the attendance of
the Lender's representatives at meetings of the Company's Board
of Directors and the Lender's exercise of its inspection and
visitation rights under section 5.7. The Company agrees to
pay and save the Lender harmless from all liability for any stamp
or other similar taxes which may be payable in connection with
this Agreement and the other Loan or Equity Securities documents
or the performance of any transactions contemplated hereby or
thereby.
10.2 Survival of Representations and Warranties. All
representations and warranties contained herein or made by or on
behalf of the Company in writing in connection with the
transactions contemplated herein shall be true and correct as of
the Closing and shall survive the consummation of the
transactions contemplated hereby for so long as the Lender (or
its Assignees) hold the Note or Equity Securities issued pursuant
to this Agreement.
10.3 Notices. All notices, demands, and communications provided
for herein or made hereunder shall be delivered, or mailed first
class with postage prepaid, or telefaxed, addressed in each case
as follows, until some other address shall have been designated
in a written notice given in like manner, and shall be deemed to
have been given or made when so delivered or mailed or telefaxed:
(a) if to the Company:
CompuDyne Corporation
Attn: Martin Roenigk,
Chairman and Chief Executive Officer
120 Union Street
Willimantic, CT 06226
Telecopy: 860-456-1187
with a copy to:
Quanta SecurSystems, Inc.
Attn: William Rock
7255 Standard Drive
Hanover, MD 21076
Telecopy: 410-712-0172
Tyler Cooper & Alcorn, LLP
Attn: Kathleen A. Maher, Esq.
205 Church Street
P.O. Box 1936
New Haven, CT 06509
Telecopy: 203-865-7865
(b) if to the Lender:
William Blair Mezzanine Capital Fund II, L.P.
Attn: David M. Jones
222 West Adams Street
Chicago, IL 60606
Telecopy: 312-236-8075
with a copy to:
Reinhart, Boerner, Van Deuren,
Norris & Rieselbach, s.c.
Attn: Albert S. Orr, Esq.
1000 North Water Street, Suite 2100
P.O. Box 514000
Milwaukee, WI 53203-3400
Telecopy: 414-298-8097
10.4 No Waiver, Remedies Cumulative. No delay on the part of
the Lender in exercising any right, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, power or privilege hereunder or
thereunder preclude other or further exercise thereof, or the
exercise of any other right, power or privilege. The rights and
remedies provided in this Agreement are cumulative and are in
addition to all rights or remedies which the Lender and such
other holders otherwise may have in law or in equity or by
statute or otherwise. Without limiting the generality of the
foregoing, nothing in this Agreement shall be deemed to preclude
or be in lieu of any right or remedy which the Lender may have in
law or in equity or by statute or otherwise against the Company
or any other person based upon any fraud.
10.5 Amendments and Waivers. This Agreement may not be changed
or amended orally, and no waiver hereunder may be oral, but any
change or amendment hereto or any waiver hereunder must be in
writing and signed by the Lender and the Company.
10.6 Divisibility and Replacement of Note and Equity Securities.
Any instrument representing the Loan or any of the Equity
Securities may be divided into multiple notes or certificates in
such denominations as the Lender may request upon surrender of
such instrument at the principal office of the Company. In case
any instrument evidencing the Loan or any of the Equity
Securities issued to the Lender hereunder shall be mutilated,
lost, stolen, or destroyed, the Company shall issue and deliver
in exchange and substitution for, and upon cancellation of the
mutilated instrument or in lieu of and substitution for the
instrument lost, stolen or destroyed, a new note or other
document of like tenor and representing an equivalent right or
interest, but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction; the affidavit of
the holder, without bond but with promise of indemnity, shall be
satisfactory.
10.7 Integration. This Agreement, the appendices and exhibits
annexed hereto and documents, schedules and certificates referred
to herein contain the entire agreement between the Company and
the Lender with respect to the transactions contemplated herein;
and none of the parties shall be bound by nor shall be deemed to
have made any representations and/or warranties except those
contained herein and therein.
10.8 Separability. If any provision of this Agreement is held
for any reason to be unenforceable by a court of competent
jurisdiction, the remainder of this Agreement shall,
nevertheless, remain in full force and effect in such
jurisdiction.
10.9 Headings. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect
in the construction or interpretation of this Agreement.
10.10 Governing Law; Waivers; Personal Jurisdiction.
(a) Governing Law. THIS AGREEMENT, THE NOTE AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO AND THERETO SHALL BE DEEMED TO
BE CONTRACTS UNDER THE LAWS OF THE STATE OF ILLINOIS AND FOR ALL
PURPOSES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT PROVISION OR RULE
(WHETHER OF THE STATE OF ILLINOIS OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER
THAN THE STATE OF ILLINOIS.
(b) Waivers. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF ANY
AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE BY CERTIFIED MAIL--RETURN RECEIPT REQUESTED,
DIRECTED TO THE COMPANY AT THE ADDRESS INDICATED BELOW, AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED TWO BUSINESS DAYS
AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS,
POSTAGE PREPAID. THE COMPANY HEREBY WAIVES ITS RIGHTS TO A JURY
TRIAL, ANY OBJECTION BASED ON FORUM NON CONVENIENS AND ANY
OBJECTION TO VENUE IN CONNECTION WITH ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF ANY OF THIS AGREEMENT, THE
NOTE OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. THE COMPANY REPRESENTS THAT IT
HAS REVIEWED THIS WAIVER AND KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN
THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS
A WRITTEN CONSENT TO A TRIAL BY THE COURT.
(c) Exclusive Jurisdiction. EXCEPT AS PROVIDED IN SUBSECTION
(d) HEREOF, THE LENDER AND THE COMPANY AGREE THAT ALL DISPUTES
AMONG OR BETWEEN THEM ARISING OUT OF, CONNECTED WITH, RELATED TO,
OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG OR BETWEEN
THEM IN CONNECTION WITH THIS AGREEMENT AND THE NOTE, AND WHETHER
ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE
RESOLVED ONLY BY STATE OR FEDERAL COURTS LOCATED IN COOK COUNTY,
ILLINOIS, UNLESS THE LENDER IN ITS SOLE JUDGMENT ELECTS TO FROM
TIME TO TIME RESOLVE A DISPUTE IN THE STATE OR FEDERAL COURTS
LOCATED IN A DIFFERENT JURISDICTION, AND THE COMPANY HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR
FEDERAL COURT LOCATED WITHIN SAID COUNTY AND SAID STATE, OR SUCH
OTHER COUNTY OR STATE (AS THE CASE MAY BE). THE LENDER AND THE
COMPANY ACKNOWLEDGE, HOWEVER, THAT ANY APPEALS FROM THOSE COURTS
MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK COUNTY,
ILLINOIS OR SUCH OTHER COUNTY (AS THE CASE MAY BE). THE COMPANY
WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE. NOTHING IN THIS
SECTION SHALL AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF
LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE COMPANY OR
ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
(d) Other Jurisdictions. WITHOUT LIMITING THE GENERALITY
OF THE FOREGOING, THE COMPANY AGREES THAT THE LENDER SHALL HAVE
THE RIGHT TO PROCEED AGAINST THE COMPANY IN A COURT IN ANY
LOCATION TO ENABLE THE LENDER TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER ENTERED IN FAVOR OF THE LENDER. THE COMPANY WAIVES
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN
WHICH THE LENDER HAS COMMENCED A PROCEEDING DESCRIBED IN THIS
SECTION.
10.11 Indemnification.
(a) General. In addition to all of the Company's other
obligations under this Agreement, the Company agrees to defend,
protect, indemnify and hold harmless the Lender, its Assignees
and Participants, and all of their respective officers,
directors, shareholders, partners, employees, consultants and
agents (including, without limitation, those retained in
connection with the satisfaction or attempted satisfaction of any
of the conditions set forth in this Agreement) (collectively, the
"Indemnitees") from and against any and all losses, damages,
liabilities, obligations, penalties, fees, costs and expenses
(including, without limitation, reasonable attorneys' and
paralegals' fees, costs and expenses) incurred by such
Indemnitees, whether prior to or from and after the date of this
Agreement, whether direct, indirect or consequential, as a result
of or arising from or relating to any suit, investigation, action
or proceeding by any person, either threatened or initiated,
asserting a claim for any legal or equitable remedy against any
person under any statute or regulation (other than suits or other
actions by the Company against an Indemnitee where the Company is
successful on the merits), regardless of whether the Indemnitee
seeking indemnification is a party to the action or proceeding
for which indemnification is sought, including, without
limitation, any federal or state securities or labor laws,
or under any environmental and safety requirements or common law
principles arising from or in connection with any of the
following: (A) the negotiation, preparation, execution or
performance of the documents, agreements, certificates or
instruments executed or delivered in connection with the Loan
or the Equity Securities, (B) the Lender's furnishing of funds to
the Company under this Agreement or under the Note or the Equity
Securities or (C) any matter relating to the financing
transactions contemplated by this Agreement or by any document,
agreement, certificate or instrument executed or delivered in
connection with the transactions contemplated hereby (including,
without limitation, any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of
the Loan or the Equity Securities) (collectively, "Indemnified
Matters"). The Company's indemnification obligation under this
section 10.11(a) shall be reduced by the amount of any insurance
proceeds actually received by the Indemnitee, or any cash benefit
actually received by Indemnitee through the exercise by
Indemnitee of any set-off rights or from the Indemnitee's
assertion of any counterclaim in connection with such suit,
investigation, action or proceeding. In no event shall the
Lender be liable to the Company or any of its affiliates for
indirect, special, consequential or punitive damages. To the
extent that this undertaking to indemnify, pay and hold harmless
set forth in this section may be unenforceable for any reason,
the Company shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment
and satisfaction of all Indemnified Matters incurred by
Indemnitees.
(b) Environmental Liabilities. Without limiting the generality
of the indemnity set forth in section 10.11(a) hereof, the
Company hereby further indemnifies and agrees to hold harmless
the Lender and all Indemnitees from and against any and all
losses, liabilities, damages, obligations, penalties, injuries,
costs, fees (including, without limitation, attorneys',
paralegals' and expert witnesses' fees, costs and expenses)
expenses and claims of any and every kind whatsoever paid,
incurred or suffered by, or asserted against, the Lender or any
Indemnitee for, with respect to, or as a direct or indirect
result of, the past, present or future activities or operations
of, or the past, present or future condition of any property
owned, operated or otherwise used by the Company, its
predecessors or successors, or any off-site hazardous substance
or waste treatment, storage or disposal facility associated
therewith (the "Properties"), including, without limitation, the
presence on or under, or the escape, seepage, leakage, spillage,
discharge, emission, release, or threatened release into, onto or
from the Properties of any toxic, hazardous or otherwise
dangerous chemical, substance, material or waste, including,
without limitation, any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under any
environmental and safety requirement (including, without
limitation, the Comprehensive Environmental Response,
Compensation and Liability Act), regardless of whether caused by,
or within the control of, the Company.
(c) Survival. All obligations provided for in this section
10.11 shall survive the repayment of the Note and the termination
of this Agreement.
COMPUDYNE CORPORATION
BY
Martin A. Roenigk, Chairman
and Chief Executive Officer
WILLIAM BLAIR MEZZANINE
CAPITAL FUND II, L.P.
BY WILLIAM BLAIR MEZZANINE
CAPITAL PARTNERS II,
L.L.C., its general partner
By
David M. Jones, Director
