================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
OCTOBER 29, 1997
---------------------------------
(Date of earliest event reported)
Commission file number 1-8533
DRS TECHNOLOGIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-2632319
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 SYLVAN WAY, PARSIPPANY, NEW JERSEY 07054
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(973) 898-1500
--------------------------------------------------
(Registrant's telephone number, including area code)
================================================================================
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 29, 1997 (the "Closing Date"), DRS Technologies, Inc. ("the
Company") acquired, through certain of its subsidiaries, the assets of
the Applied Systems Division of Spar Aerospace Limited ("Spar"), a
Canadian corporation, and 100% of the stock of Spar Aerospace (UK)
Limited, incorporated under the laws of England and Wales (the
"Acquisition"), pursuant to a Purchase Agreement (the "Agreement")
dated as of September 19, 1997, between DRS Technologies, Inc., a
Delaware corporation, and Spar. The Company paid approximately $29
million in cash for the Acquisition.
Headquartered in Kanata, Ontario, Canada, and now operating under the
name DRS Flight Safety and Communications, Spar Applied Systems
Division has been an international provider of aviation and defense
systems for over 30 years. It designs, manufactures and markets
sophisticated flight safety systems, naval communications systems and
other advanced electronics for government and commercial customers
around the world. It also provides custom manufacturing services for
complex electronic assemblies and systems. DRS Flight Safety and
Communications leases a 70,000 square-foot building in Kanata, Ontario,
Canada that houses its executive offices and principal engineering
facilities, as well as a 5,600 square-foot production facility in
Hayes, Middlesex, United Kingdom. It also owns a 131,000 square-foot
production facility in Carleton Place, Ontario. DRS Flight Safety and
Communications currently employs approximately 360 people.
The Acquisition will be accounted for using the purchase method of
accounting. Reference is made to Item 7 for additional information.
In connection with the Acquisition, the Company entered into a $60
million secured credit facility with Mellon Bank, N.A., consisting of a
$20 million term loan (the "Term Loan") and a $40 million revolving
line of credit (the "Line of Credit"). This facility expires on March
31, 2003 and replaces the Company's existing $15 million unsecured
revolving line of credit and $5 million secured equipment line of
credit/term loan facility. The Term Loan was used to finance a portion
of the Acquisition. The Line of Credit was used to finance the
remaining balance due in connection with the Acquisition and to repay
outstanding borrowings on the $15 million unsecured revolving line of
credit and the $5 million secured equipment line of credit/term loan
facility. The Line of Credit is available for working capital, general
corporate purposes and acquisitions.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements*:
As it is impracticable to provide the required financial
statements for DRS Flight Safety and Communications with this
report on Form 8-K, such financial statements will be filed by
amendment to Form 8-K as soon as practicable, but not later than
60 days after the filing of this report.
(b) Pro Forma Financial Information*:
1. Unaudited pro forma condensed consolidated balance sheet of
DRS Technologies, Inc. and subsidiaries and DRS Flight
Safety and Communications as of September 30, 1997.
2. Unaudited pro forma condensed consolidated statements of
earnings of DRS Technologies, Inc. and subsidiaries and DRS
Flight Safety and Communications for the fiscal year ended
March 31, 1997 and the six-month period ended September 30,
1997.
(c) Exhibits:
1. Purchase Agreement, dated as of September 19, 1997, between
DRS Technologies, Inc. and Spar Aerospace Limited.
2. Revolving Credit Loan and Term Loan Agreement, dated as of
October 29, 1997, by and among DRS Technologies, Inc., DRS
Technologies Canada Company/Compagnie DRS Technologies
Canada, DRS Technologies Canada, Inc. and Mellon Bank, N.A.
- ----------
* To be filed by amendment
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DRS TECHNOLOGIES, INC.
Registrant
Date: November 13, 1997 /s/ NANCY R. PITEK
--------------------------------------
Nancy R. Pitek
Vice President, Finance and Treasurer
TABLE OF CONTENTS
SECTION DESCRIPTION PAGE
- ------- ----------- ----
ARTICLE I
INTERPRETATION
1.1 Defined Terms....................................................1
1.2 Currency.........................................................9
1.3 Sections and Headings............................................9
1.4 Number, Gender and Persons.......................................9
1.5 Accounting Principles...........................................10
1.6 Entire Agreement................................................10
1.7 Meaning of Knowledge............................................10
1.8 Time of Essence.................................................11
1.9 Applicable Law..................................................11
1.10 Successors and Assigns..........................................11
1.11 Amendments and Waivers..........................................12
1.12 Schedules.......................................................12
ARTICLE II
PURCHASE AND SALE OF PURCHASED ASSETS
2.1 Purchased Assets................................................13
2.2 Excluded Assets.................................................16
2.3 Non-Transferability.............................................19
2.4 Reassignment of Rights..........................................20
ARTICLE III
PURCHASE PRICE
3.1 Purchase Price..................................................21
3.2 Closing Date Payment............................................21
3.3 Determination of Working Capital Adjustment.....................21
(a) Closing Balance Sheet.....................................21
(b) Working Capital Calculation...............................22
(c) Approval of Closing Financial Statements..................23
3.4 Adjustment of Closing Date Payment..............................24
(i)
<PAGE>
3.5 Allocation of Purchase Price....................................25
3.6 ETA Election....................................................25
3.7 Transfer Taxes..................................................25
3.8 Income Tax Elections............................................26
ARTICLE IV
ASSUMPTION OF LIABILITIES
4.1 Assumption of Certain Liabilities by the Purchaser..............26
4.2 Excluded Liabilities............................................27
4.2.1 Panavia Tax Liability ..........................................29
4.3 Product Liability and Warranty Obligations......................29
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
5.1 Organization....................................................30
5.2 Authorization...................................................31
5.3 No Other Agreements to Purchase.................................31
5.4 No Violation....................................................31
5.5 Sufficiency of Purchased Assets.................................32
5.6 Spar (UK).......................................................33
5.7 No Subsidiaries.................................................34
5.8 Title to Personal Property......................................34
5.9 Location of Real Property.......................................34
5.10 Real Property and Leased Property...............................34
5.11 Leased Property.................................................36
5.12 Inventories.....................................................37
5.13 Accounts Receivable.............................................37
5.14 Intellectual Property...........................................38
5.15 Insurance.......................................................39
5.16 No Expropriation................................................39
5.17 Agreements and Commitments......................................39
5.18 Compliance with Laws; Governmental Authorization................43
5.19 Consents and Approvals..........................................43
5.20 Financial Statements............................................44
5.21 Books and Records...............................................45
5.22 Absence of Changes..............................................45
5.23 Non-Arm's Length Transactions...................................47
(ii)
<PAGE>
5.24 Taxes...........................................................48
5.25 Litigation......................................................49
5.26 Residency.......................................................49
5.27 GST Registration................................................49
5.28 Environmental...................................................49
5.29 Customers and Suppliers.........................................53
5.30 Employee Plans..................................................53
5.31 Collective Agreements...........................................55
5.32 Employees.......................................................55
5.33 Employee Accruals...............................................56
5.34 Changes.........................................................57
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
6.1 Organization....................................................57
6.2 Authorization...................................................58
6.3 No Violation....................................................58
6.4 Consents and Approvals..........................................59
6.5 GST Registration................................................59
6.6 Relationship with Major Customers...............................59
ARTICLE VII
SURVIVAL OF COVENANTS, REPRESENTATIONSAND WARRANTIES
7.1 Survival of Covenants, Representations and Warranties...........59
ARTICLE VIII
COVENANTS
8.1 Access to Purchased Business and Purchased Assets...............62
8.2 Delivery of Books and Records...................................63
8.3 Conduct of Purchased Business and other Matters Prior to Closing63
(a) Conduct Business in the Ordinary Course...................63
(b) Continue Insurance........................................64
(c) Regulatory Consents.......................................64
(d) Contractual Consents......................................64
(e) Preserve Business.........................................64
(f) Discharge Liabilities.....................................64
(iii)
<PAGE>
(g) Corporate Action..........................................65
(h) Commercially Reasonable Efforts...........................65
8.4 Delivery of Conveyancing Documents..............................65
8.5 Retail Sales Tax Certificate....................................65
8.6 Delivery of Vendor's Closing Documentation......................66
8.7 Delivery of Purchaser's Closing Documentation...................66
8.8 Employees.......................................................66
8.9 Employee Plans..................................................68
8.10 Transfer of Pension Plan Assets.................................69
8.11 Spar Name.......................................................73
8.12 Bulk Sales Compliance...........................................74
8.15 Non-Competition Covenant........................................77
ARTICLE IX
CONDITIONS OF CLOSING
9.1 Conditions of Closing in Favour of the Purchaser................79
(a) Representations and Warranties............................79
(b) Covenants.................................................79
(c) Regulatory Consents.......................................80
(d) Contractual Consents......................................80
(e) No Action or Proceeding...................................80
(f) No Material Damage or Loss................................80
(g) No Material Adverse Effect................................80
(h) Legal Matters.............................................80
(i) Legal Opinion.............................................81
(j) Customer Assurances.......................................81
9.2 Conditions of Closing in Favour of the Vendor ..................83
(a) Representations and Warranties............................83
(b) Covenants.................................................83
(c) Regulatory Consents.......................................84
(d) Contractual Consents......................................84
(e) No Action or Proceeding...................................84
(f) Legal Matters.............................................84
(g) Legal Opinion.............................................84
(h) Lenders' Consent..........................................84
9.3 Extension of Closing Date.......................................85
(iv)
<PAGE>
ARTICLE X
CLOSING DATE AND TRANSFER OF POSSESSION
10.1 Transfer........................................................86
10.2 Place of Closing................................................86
10.3 Further Assurances..............................................86
10.4 Risk of Loss....................................................86
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification by the Vendor...................................87
11.2 Indemnification by the Purchaser................................88
11.3 Limitation on Indemnities.......................................89
11.4 Maximum Liability...............................................89
11.5 Notice of Claim.................................................89
11.6 Direct Claims...................................................90
11.7 Third Party Claims..............................................90
11.8 Settlement of Third Party Claims................................91
11.9 Co-operation....................................................92
11.10 Exclusivity.....................................................92
11.11 Change of Purchase Price........................................92
ARTICLE XII
MISCELLANEOUS
12.1 Notices.........................................................93
12.2 Commissions, etc................................................94
12.3 Consultation....................................................94
12.4 Disclosure......................................................94
12.5 Confidentiality.................................................95
12.6 Commercially Reasonable/Best Efforts............................95
12.7 Counterparts....................................................95
12.8 No Third Party Beneficiaries....................................96
(v)
<PAGE>
THIS AGREEMENT made the 19th day of September, 1997,
B E T W E E N:
SPAR AEROSPACE LIMITED, a corporation
existing under the laws of Canada
(hereinafter called the "Vendor"),
- and -
DRS TECHNOLOGIES, INC., a corporation
existing under the laws of State of Delaware
(hereinafter called the "Purchaser"),
THIS AGREEMENT WITNESSES THAT in consideration of the respective
covenants, agreements, representations, warranties and indemnities of the
parties herein contained and for other good and valuable consideration (the
receipt and sufficiency of which are acknowledged by each party), the parties
agree as follows:
ARTICLE I
INTERPRETATION
I.1 Defined Terms
For the purposes of this Agreement, unless the context otherwise requires,
the following terms shall have the respective meanings specified or referred to
below and grammatical variations of such terms shall have corresponding
meanings:
<PAGE>
- 2 -
(a) "Act" means the Canada Business Corporations Act as in effect on
the date hereof;
(b) "Affiliate" has the meaning given to that term in the Act;
(c) "Agreement" means this Asset Purchase Agreement and all amendments
made in writing by the parties hereto, "herein" and similar
expressions mean and refer to this Agreement and not to any
particular Article, section, subsection or Schedule;
(d) "Annual Financial Statements" means the unaudited combined financial
statements of the Vendor in respect of the Purchased Business
(including Spar (UK)) and the financial statements of Spar (UK), in
both cases as at and for each of the financial years ended December
31, 1994, 1995 and 1996, including the notes thereto, a copy of
which is annexed hereto as Schedule 1;
(e) "Arbitrator" has the meaning set out in subsection 3.3(c);
(f) "Associate" has the meaning given to that term in the Act;
(g) "Assumed Liabilities" has the meaning set out in section 4.1;
(h) "Business Day" means any day, other than a Saturday or a Sunday, on
which banks are open to the public for the transaction of banking
business in Toronto, Ontario and New York, New York;
(i) "Cash on Hand" means cash on hand or in banks or other depositories,
term or time deposits and similar cash items including all accrued
interest thereon and any capital gains relating thereto;
<PAGE>
- 3 -
(j) "Claim" has the meaning set out in section 11.5;
(k) "Closing" means the completion of the purchase and sale of the
Purchased Assets as contemplated hereby;
(l) "Closing Balance Sheet" has the meaning set out in subsection
3.3(a);
(m) "Closing Date" means, subject to sections 7.2, 9.1 and 9.3, October
9, 1997 or such other date as the Vendor and the Purchaser may
mutually determine;
(n) "Closing Date Payment" has the meaning set out in section 3.2;
(o) "Closing Financial Statements" has the meaning set out in subsection
3.3(c);
(p) "Contract" means any agreement, indenture, contract, lease, deed of
trust, licence, option, instrument or other commitment, whether
written or oral and shall include any open invoice, tender, bid,
quote or order which have been accepted or remain open for
acceptance;
(q) "Customer-Owned Property" means any property and assets located on
or in the premises of the Purchased Business that (i) has been
supplied or furnished by customers of the Purchased Business
(including governments and government agencies); (ii) is not owned
or leased by the Vendor or Spar (UK); and (iii) is used in or
relates to the Purchased Business;
(r) "Employee Plans" has the meaning set out in section 5.30;
<PAGE>
- 4 -
(s) "Employees" means those salaried and hourly-paid employees of the
Vendor who are employed in the Purchased Business immediately prior
to the Time of Closing other than employees who are on long-term
disability leave or retirees;
(t) "Encumbrance" means any encumbrance, lien, charge, hypothec, pledge,
mortgage, title retention agreement, security interest of any
nature, adverse claim, exception, reservation, easement, right of
occupation, any matter capable of registration against title,
option, right of pre-emption, privilege or any Contract to create
any of the foregoing;
(u) "Environmental Laws" has the meaning set out in subsection 5.28(a);
(v) "Environmental Permits" has the meaning set out in subsection
5.28(b);
(w) "ETA" means Part IX of the Excise Tax Act (Canada), as amended from
time to time;
(x) "Excluded Assets" has the meaning set out in section 2.2;
(y) "Excluded Liabilities" has the meaning set out in section 4.2;
(z) "Financial Statements" means the Annual Financial Statements and
the Interim Financial Statements;
(aa) "GST" means all taxes payable under the ETA or under any provincial
legislation similar to the ETA, and any reference to a specific
provision of the ETA or any such provincial legislation shall refer
to any successor provision thereto of like or similar effect;
<PAGE>
- 5 -
(bb) "Hazardous Substances" has the meaning set out in subsection 5
.28(a);
(cc) "Indemnified Party" has the meaning set out in section 11.5;
(dd) "Indemnifying Party" has the meaning set out in section 11.5;
(ee) "Intellectual Property" has the meaning set out in subsection
2.1(j);
(ff) "Interim Financial Statements" means the unaudited combined
financial statements of the Vendor in respect of the Purchased
Business (including Spar (UK)) and the unaudited financial
statements of Spar (UK) in each case as at and for the seven month
period ended July 31, 1997 a copy of which is annexed hereto as
Schedule 2;
(gg) "Leased Property" has the meaning set out in section 5.9;
(hh) "Leases" has the meaning set out in section 5.11;
(ii) "Licences" has the meaning set out in section 5.18;
(jj) "Losses" means, in respect of any matter, all claims, demands,
proceedings, losses, damages, liabilities, deficiencies, costs and
expenses (including, without limitation, all legal and other
professional fees and disbursements, interest, penalties and amounts
paid in settlement) arising directly as a consequence of such
matter;
(kk) "Major Customers" means Agusta SpA, Smiths Industries Aerospace,
Defence Systems, North America and GkN Westland Helicopters
Limited;
<PAGE>
- 6 -
(ll) "Material Adverse Effect" means any change or effect that is
materially adverse to the financial condition, properties, assets,
operations or business of the Purchased Business taken as a whole;
(mm) "Material Contracts" has the meaning set out in section 5.17;
(nn) "Pension Plan" means the Spar Ontario Non-Represented Pension Plan;
(oo) "Permitted Encumbrances" means:
(i) servitudes, easements, restrictions, rights-of-way and other
similar rights in real property or any interest therein,
provided the same are not of such nature as to materially
adversely affect the use of the property subject thereto;
(ii) undetermined or inchoate liens, charges and privileges
incidental to current construction or current operations save
and except for liens, charges and privileges related to Taxes;
(iii) statutory liens, charges, adverse claims, security interests
or encumbrances of any nature whatsoever claimed or held by
any governmental authority that have not at the time been
filed or registered against the title to the asset or served
upon the Vendor pursuant to law or that relate to obligations
not due or delinquent, save and except for liens, charges,
adverse claims, security interests or encumbrances related to
Taxes;
<PAGE>
- 7 -
(iv) assignments of insurance provided to landlords (or their
mortgagees) pursuant to the terms of any lease, and liens or
rights reserved in any lease for rent or for compliance with
the terms of such lease;
(v) security given in the ordinary course of the Purchased
Business to any public utility, municipality or government or
to any statutory or public authority in connection with the
operations of the Purchased Business, other than security for
borrowed money;
(vi) the reservations in any original grants from the Crown of any
real property or interest therein and statutory exceptions to
title, which do not materially detract from the value of the
real property concerned or materially impair its use in the
operation of the Purchased Business; and
(vii) the Encumbrances described in Schedule 12;
(pp) "Prime Rate" means the annual variable rate of interest quoted or
published from time to time by The Bank of Nova Scotia at its main
branch in Toronto, Ontario as the "prime rate" of interest charged
by it for Canadian dollar commercial loans made in Canada;
(qq) "Purchase Price" has the meaning set out in section 3.1;
(rr) Intentionally Deleted;
(ss) "Purchased Assets" has the meaning set out in section 2.1;
(tt) "Purchased Business" means the business carried on by the Vendor's
Applied Systems Division and the business carried on by Spar (UK)
consisting primarily
<PAGE>
- 8 -
of the business of design, manufacture, and marketing of avionics
and flight safety systems, communications and other advanced
electronic products and systems;
(uu) "Real Property" has the meaning set out in section 5.9;
(vv) "Reimbursable Costs" means, in respect of any party, the reasonable
out-of-pocket costs of such party together with all direct
incremental labour and material costs of such party but excluding
for greater certaint any charges for overhead, general
administration or management costs;
(ww) "Replacement Plans" has the meaning set out in section 8.9;
(xx) "Spar(UK)" means Spar Aerospace (UK) Ltd., a company incorporated
under the laws of England and Wales;
(yy) "Spar (UK) Asets" means the assets and property owned or leased
by Spar (UK);
(zz) "Spar (UK) Shars" means the 200,000 Ordinary Shares of Spar (UK)
which are owned by the Vendor;
(aaa) "Tax" or "Taxes" mens any federal, provincial, state, local,
foreign or other income, gross receipts, profits, franchise,
transfer, sales, use, customs, payroll, withholding, occupation,
health, property, excise, GST or other taxes, liabilities for the
employer's portion of Canada pension plan, employment insurance and
employee health insurance contributions, fees, duties, assessments,
withholdings or governmental charges of any nature (including
interest, penalties and additions to such taxes or charges);
<PAGE>
- 9 -
(bbb) "Tax Act" means the Income Tax Act (Canada), as amended from time to
time;
(ccc) "Time of Closing" means 10:00 a.m. (Toronto time) on the Closing
Date, or such other time on the Closing Date as the Vendor and the
Purchaser may mutually determine;
(ddd) "Transferred Employees" has the meaning set out in section 8.8;
(eee) "Warranty Provision" has the meaning set out in subsection
4.3(a); and
(fff) "Working Capital" has the meaning set out in subsection 3.3(b).
I.2 Currency
Unless otherwise indicated, all dollar amounts in this Agreement are
expressed in Canadian funds.
I.3 Sections and Headings
The division of this Agreement into Articles, sections and subsections and
the insertion of headings are for convenience of reference only and shall not
affect the interpretation of this Agreement. Unless otherwise indicated, any
reference in this Agreement to an Article, section, subsection or Schedule
refers to the specified Article, section or subsection of or Schedule to this
Agreement.
I.4 Number, Gender and Persons
<PAGE>
- 10 -
In this Agreement, words importing the singular number only shall include
the plural and vice versa, words importing gender shall include all genders and
words importing persons shall include individuals, corporations, partnerships,
associations, trusts, unincorporated organizations, governmental bodies and
other legal or business entities of any kind whatsoever.
I.5 Accounting Principles
Any reference in this Agreement to generally accepted accounting
principles refers to generally accepted accounting principles that have been
established in Canada, including those approved from time to time by the
Canadian Institute of Chartered Accountants or any successor body thereto.
I.6 Entire Agreement
Except as otherwise provided herein, this Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether written or oral. There are no conditions, covenants, agreements,
representations, warranties or other provisions, express or implied, collateral,
statutory or otherwise, relating to the subject matter hereof except as herein
provided.
I.7 Meaning of Knowledge
Whenever a representation or warranty of the Vendor is expressed to be "to
the knowledge", "to the best of the knowledge" or "to the belief" of the Vendor
or Spar (UK) (or words of similar import, including words that such person "is
aware of" certain matters) or has been based upon facts or circumstances of
which such person is aware or has notice of, the knowledge of the Vendor or Spar
(UK), as the case may be, shall be deemed to be the knowledge
<PAGE>
- 11 -
of the persons identified on Exhibit 5, having conducted due inquiry of their
files and their immediate subordinates.
I.8 Time of Essence
Time shall be of the essence of this Agreement provided however that if
the last day of any period of time herein provided for would be a day other than
a Business Day such period shall be deemed to end on the next ensuing day that
is a Business Day.
I.9 Applicable Law
This Agreement shall be construed, interpreted and enforced in accordance
with, and the respective rights and obligations of the parties shall be governed
by, the laws of the Province of Ontario and the federal laws of Canada
applicable therein, and each party irrevocably and unconditionally submits to
the non-exclusive jurisdiction of the courts of such province and all courts
competent to hear appeals therefrom.
I.10 Successors and Assigns
This Agreement shall enure to the benefit of and shall be binding on and
enforceable by the parties and their respective successors and permitted
assigns. Except as herein set forth neither party may assign any of its rights
or obligations hereunder without the prior written consent of the other party.
<PAGE>
- 12 -
The Purchaser may assign its rights and obligations hereunder in whole or
in part to one or more wholly-owned subsidiaries (as defined in the Act) (which
subsidiaries may, but need not, be incorporated under Canadian laws) provided
that such assignment shall not release or relieve the Purchaser from any of its
obligations hereunder and each such subsidiary enters into satisfactory
arrangements with the Vendor pursuant to which such subsidiary also covenants to
perform the obligations assigned to it and provides evidence reasonably
satisfactory to the Vendor that the representations and warranties set forth in
Article VI are true and correct, mutatis mutandis, as if the word "Purchaser"
was replaced with the name of the subsidiary.
I.11 Amendments and Waivers
No amendment or waiver of any provision of this Agreement shall be binding
on either party unless consented to in writing by such party. No waiver of any
provision of this Agreement shall constitute a waiver of any other provision,
nor shall any waiver constitute a continuing waiver unless otherwise provided.
I.12 Schedules
The following Schedules are attached to and form part of this Agreement:
Schedule 1 - Annual Financial Statements
Schedule 2 - Interim Financial Statements
Schedule 3 - Real Property
Schedule 4 - Machinery and Equipment
Schedule 5 - Vehicles
Schedule 6 - Material Contracts
Schedule 7 - Employee Matters
Schedule 8 - Licences and Permits
Schedule 9 - Intellectual Property
<PAGE>
- 13 -
Schedule 10 - Allocation of Purchase Price
Schedule 11 - Location of Assets
Schedule 12 - Permitted Encumbrances
Schedule 13 - Insurance Policies
Schedule 14 - Legal and Regulatory Proceedings
Schedule 15 - Regulatory Consents
Schedule 16 - Third Party Consents
Schedule 17 - Environmental Matters
Schedule 18 - Major Customers
Schedule 19 - Excluded Assets
Schedule 20 - Plans and Improvements
Schedule 21 - Changes
Schedule 22 - Material Regulatory Consents
Schedule 23 - Material Contractual Consents
Schedule 24 - Customer Owned Assets
Exhibit 1 - Opinion of Vendor's Counsel
Exhibit 2 - Opinion of Purchaser's Counsel
Exhibit 3 - Intentionally Omitted
Exhibit 4 - Actuarial Assumptions
Exhibit 5 - Knowledge of Vendor
Disclosure of information on any one Schedule shall be deemed to be
disclosure on all other applicable Schedules.
ARTICLE II
PURCHASE AND SALE OF PURCHASED ASSETS
II.1 Purchased Assets
<PAGE>
- 14 -
Subject to the provisions of this Agreement, the Vendor agrees to sell,
assign and transfer to the Purchaser and the Purchaser agrees to purchase from
the Vendor, effective as of the Time of Closing, all of the property and assets
used in connection with or otherwise relating to the Purchased Business (other
than the Excluded Assets), whether real or personal, tangible or intangible, of
every kind and description and wheresoever situate, as a going concern
(collectively, the "Purchased Assets"), including without limitation:
(a) Real Property. All real property, together with all buildings,
structures, improvements and appurtenances situate thereon
including, without limitation, the real property identified in
Schedule 3 as being owned by the Vendor;
(b) Leases of Real Property. All rights (whether as lessee or lessor)
under leases of real property, together with all leasehold
improvements relating thereto, including, without limitation, all
rights under the leases described in Schedule 3;
(c) Machinery and Equipment. All machinery, equipment, fixtures,
furniture, furnishings, parts, tooling moulds, dyes, jigs or
patterns and other fixed assets, including, without limitation, the
machinery and equipment described in Schedule 4;
(d) Vehicles. All trucks, cars and other vehicles, including, without
limitation, the vehicles described in Schedule 5;
(e) Inventories. All inventories, including, without limitation,
unbilled inventories, raw materials, work-in-process, finished goods
and replacement parts;
<PAGE>
- 15 -
(f) Accounts Receivable. All accounts receivable, trade accounts, notes
receivable, book debts, holdbacks and other debts due or accruing
due to the Vendor and the benefit of all security for such accounts,
notes and debts;
(g) Prepaid Expenses. All prepaid expenses of the Purchased Business
(other than those related to Excluded Assets);
(h) Agreements. All rights under leases of personal property, orders or
contracts for the provision of goods or services (whether as buyer
or seller), distribution and agency agreements, employment and
collective agreements, agreements and instruments relating to
employee pension or benefit plans and other Contracts not otherwise
referred to in this section 2.1, including, without limitation, the
Material Contracts described in Schedules 6 and 7;
(i) Licences and Permits. All licences, permits, approvals, consents,
registrations, certificates and other authorizations used in the
Purchased Business to the extent that same may be transferred and to
the extent any requisite consents are obtained, including, without
limitation, those described in Schedule 8;
(j) Intellectual Property. All trade or brand names, business names,
trade marks, trade mark registrations and applications, service
marks, service mark registrations and applications, copyrights,
copyright registrations and applications, patents, patent
registrations and applications and other patent rights (including
any patents issued on such applications or rights), trade secrets,
proprietary manufacturing information and know-how, equipment and
parts lists and descriptions, instruction manuals, inventions,
inventors' notes, research data, unpatented blue prints, drawings
and designs, formulae, processes, technology and other intellectual
property, together with all rights under licences, technology
transfer agreements
<PAGE>
- 16 -
and other agreements or instruments relating to any of the foregoing
(collectively, "Intellectual Property"), including, without
limitation, the trade marks, copyrights, patents, licences and
agreements described in Schedule 9 but excluding all trade or brand
names, business names, trade marks, trade mark registrations and
applications, service marks, service mark registrations and
applications and copyright containing or respecting the words "Spar"
or "Spar Aerospace";
(k) Computer Hardware and Software. All computer hardware and software,
including all rights under licences and other agreements or
instruments relating thereto;
(l) Books and Records. All books and records (other than those required
by law to be retained by the Vendor, copies of which will be made
available to the Purchaser), including without limitation, customer
lists, sales records, price lists and catalogues, sales literature,
advertising material, manufacturing data, production records,
employee manuals, personnel records, supply records, inventory
records and correspondence files (together with, in the case of any
such information that is stored electronically, the media on which
the same is stored);
(m) Goodwill. All goodwill of the Purchased Business, together with the
exclusive right for the Purchaser to represent itself as carrying on
the Purchased Business in succession to the Vendor and the right to
use any words indicating that the Purchased Business is so carried
on; and
(n) Shares of Spar (UK). All of the Spar (UK) Shares.
II.2 Excluded Assets
The Purchased Assets shall not include any of the following property and
assets (collectively, the "Excluded Assets"):
<PAGE>
- 17 -
(a) All Cash on Hand of the Vendor;
(b) All liabilities and obligations of the Vendor or any of its
Affiliates to the Purchased Business existing, accrued or accruing
due immediately prior to the Time of Closing provided that the
Vendor shall ensure that all accounts receivable owing from the
Vendor or any of its Affiliates to the Purchased Business will have
been paid at the Time of Closing;
(c) All income and corporate capital tax instalments paid by the Vendor
and the right to receive any refund of income, corporate capital or
other taxes paid by the Vendor including, without limitation, any
investment tax credit or any manufacturing and processing profits
tax reduction or refund;
(d) All rights of the Vendor in respect of all Employee Plans including,
without limitation, all assets held under such plans and all rights
of the Vendor to any refunds or funds on deposit relating to such
plans which relate to favourable claims experience during the period
prior to the Closing;
(e) All rights of the Vendor and Spar (UK) to use the name(s) "Spar
Aerospace", "Spar" or any word or name containing such phrases or
words (including without limitation, all logos, trade or brand
names, business names, trade marks, trade mark registrations and
applications, service mark registrations and applications and
copyrights containing or in respect of such words or phrases);
(f) All rights of action and claims (and benefits arising therefrom) of
the Vendor against third persons in the conduct of the Purchased
Business arising by reason of any facts or circumstances that
occurred or existed prior to the Closing Date
<PAGE>
- 18 -
whether or not an action or any other proceeding shall have been
commenced before such time, provided that Excluded Assets shall not
include any such rights of action or claims relating to any
Purchased Asset or which are necessary to permit the Purchaser to
realize the benefits of the Purchased Assets (including, for greater
certainty, any Contract constituting part thereof) or which relate
to obligations or liabilities of, or assumed by, the Purchaser;
(g) Subject to section 10.4, insurance policies of the Vendor relating
to the Purchased Business and the Purchased Assets and all rights in
connection therewith, including, without limitation, any rights to
outstanding claims thereunder or refunds of insurance premiums;
(h) All rights of the Vendor to any refunds of workers' compensation
assessments made in respect of any period ended before the Closing
Date;
(i) All notes, memoranda, correspondence or similar material reflecting
the legal conclusions, recommendations or work product of lawyers
for the Vendor;
(j) All constating documents, minute books and shareholder records of
the Vendor;
(k) All files, books, records, correspondence, lists, papers and other
instruments prepared in connection with the sale of the Purchased
Business, including information received from third persons in
respect of Purchased Businesses and analysis relating to the sale of
the Purchased Business;
(l) The office software and intellectual property owned or licensed by
the Vendor or Spar (UK) that is set forth on Schedule 19;
<PAGE>
- 19 -
(m) The assets and Contracts listed on Schedule 19;
(n) All rights, properties and assets of the Vendor not used in
connection with or relating to the Purchased Business of whatever
nature or kind and wherever situate;
(o) All rights of the Vendor under this Agreement and agreements,
instruments and certificates delivered pursuant to this Agreement;
and
(p) All Customer-Owned Property, including those assets set forth in
Schedule 24.
II.3 Non-Transferability
(a) Subject to subsections 2.3(b) and 2.3(c), to the extent that any
Purchased Asset is not capable of being sold, assigned, transferred,
delivered or subleased without the consent or waiver of any person,
or if such sale, assignment, transfer, delivery or sublease, or
attempted sale, assignment, delivery or sublease would constitute a
breach thereof or a violation of any law, statute, ordinance,
regulation, rule having the force of law, judgment, decree, order,
writ, injunction or award, this Agreement shall not constitute a
sale, assignment, transfer, delivery or sublease thereof until such
consent or waiver of the applicable person is received.
(b) The Vendor shall diligently attempt to obtain (and the Purchaser
shall reasonably cooperate with the Vendor), on or before the
Closing Date and thereafter as required, the consents and waivers
referred to in subsection 2.3(a) and to resolve the impediments to
the sale, assignment, transfer, delivery or sublease referred to in
subsection 2.3(a) and to obtain any other consents and waivers
necessary to convey to the Purchaser any of the Purchased Assets
provided that in no event shall the Vendor be required to incur any
financial cost or burden (other than incidental costs) to obtain
such consents or waivers or resolve such impediments.
<PAGE>
- 20 -
(c) To the extent that the consents and waivers referred to in
subsection 2.3(a) are not obtained by the Vendor, or until the
impediments to the sale, assignment, transfer, delivery or sublease
referred to therein are resolved, the Vendor shall, after the
Closing Date:
(i) hold the benefits of any Purchased Asset referred to in
subsection 2.3(a) in trust for the Purchaser in accordance
with the provisions of this subsection 2.3(c);
(ii) cooperate in any reasonable and lawful arrangement, approved
by the Purchaser, designed to provide such benefits to the
Purchaser, without the Vendor thereby incurring any financial
obligation to the Purchaser; and
(iii) enforce and perform for the account of the Purchaser, any
rights or obligations of the Vendor arising from any Purchased
Asset referred to in subsection 2.3(a) against or in respect
of any person, including the right to elect to terminate in
accordance with the terms thereof upon the advice of the
Purchaser.
This subsection 2.3(c) shall not constitute a waiver of any right of
the Purchaser or Vendor to require delivery of all consents and
waivers on the Closing Date pursuant to sections 9.1 or 9.2.
II.4 Reassignment of Rights
If any Claim is asserted against the Vendor in connection with any
Excluded Liability, the Purchaser shall, at the request of the Vendor, cooperate
in any reasonable and lawful arrangement with the Vendor which assists the
Vendor in its defence of such Claim (including a reassignment
<PAGE>
- 21 -
of a Contract or rights thereunder) provided that such arrangement does not
adversely affect the Purchaser's right or ability to realize the benefits from
any of the Purchased Assets. The Vendor shall pay to the Purchaser the
Reimbursable Costs incurred by the Purchaser in complying with any such request.
ARTICLE III
PURCHASE PRICE
III.1 Purchase Price
The aggregate purchase price (the "Purchase Price") payable by the
Purchaser to the Vendor for acquiring the Purchased Assets and assuming the
Assumed Liabilities shall be the Closing Date Payment, as defined in Section
3.2, as adjusted pursuant to Section 3.4. In addition, for greater certainty,
the Purchaser shall assume and satisfy the Assumed Liabilities in accordance
with the terms of this Agreement.
III.2 Closing Date Payment
At the Time of Closing, the Purchaser shall pay the Vendor the amount of
Cdn $48,150,000 (the "Closing Date Payment"), by certified cheque or bank draft
payable to or to the order of the Vendor or, if the Vendor so directs at least
two Business Days prior to the Closing Date, by way of electronic transfer of
immediately available funds to such bank account in Toronto, Ontario as the
Vendor may specify in such direction.
III.3 Determination of Working Capital Adjustment
(a) Closing Balance Sheet. Within 60 days following the Closing Date,
the Vendor shall deliver to the Purchaser an audited combined
balance sheet (the "Closing
<PAGE>
- 22 -
Balance Sheet") of the Purchased Business and Spar (UK) as at the
opening of business on the Closing Date, prepared in accordance with
generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the Annual
Financial Statements. For greater certainty the Closing Balance
Sheet shall include the assets and liabilities of Spar (UK) and
shall not include the book value to the Vendor of the Spar (UK)
Shares. In addition, all assets and liabilities of the Purchased
Business which are denominated in a currency other than Canadian
dollars shall be translated into the equivalent amount of Canadian
dollars in accordance with the accounting practices of the Vendor,
consistently applied based on currency exchange rates in effect as
at the Closing Date.
For the purpose of preparing the Closing Balance Sheet, the
Purchaser agrees to grant the Vendor's authorized representatives
reasonable access to relevant records, facilities and personnel of
the Purchaser.
(b) Working Capital Calculation. At the time of delivery of the Closing
Balance Sheet, the Vendor shall also deliver to the Purchaser a
written statement setting forth a detailed calculation (the "Working
Capital Calculation") of the Working Capital, herein defined, and of
the amount by which the Working Capital is greater or less than Cdn
$14.1 million. The Working Capital Calculation shall be accompanied
by:
(i) an itemized list of all Assumed Liabilities and liabilities of
Spar (UK) both to the extent reflected as liabilities in the
Closing Balance Sheet (excluding, however, deferred revenues
associated with the pricing adjustments relating to the
Panavia customer contracts); and
<PAGE>
- 23 -
(ii) an itemized list of all current assets of the Purchased
Business as reflected in the Closing Balance Sheet, being more
specifically, Cash on Hand (excluding Cash on Hand of the
Vendor) the accounts and notes receivable, inventories and
prepaid expenses.
"Working Capital" is defined herein as the amount by which the net
book value of the assets identified in (ii) above exceed the net
book value of the liabilities identified in (i) above, all as set
forth on the Closing Balance Sheet.
(c) Approval of Closing Financial Statements. The Purchaser shall have a
period of 30 days from the date it receives the Closing Balance
Sheet, the Working Capital Calculation and the report of the
Vendor's auditors thereon (collectively, the "Closing Financial
Statements") in which to review the same. For the purpose of such
review, the Vendor agrees to cause its auditors to permit the
Purchaser and its authorized representatives to examine all working
papers, schedules and other documentation used or prepared by the
Vendor's auditors. If no objection to the Closing Financial
Statements is given to the Vendor by the Purchaser within such
30-day period, the Closing Financial Statements shall be deemed to
have been approved as of the last day of such 30-day period.
If the Purchaser objects to any of the Closing Financial Statements
within such 30-day period by giving notice to the Vendor setting out
in reasonable detail the nature of such objection, the parties agree
to attempt to resolve the matters in dispute within 15 days from the
date the Purchaser gives such notice to the Vendor. If all matters
in dispute are resolved by the parties, the Closing Financial
Statements shall be modified to the extent required to give effect
to such resolution and shall be deemed to have been approved as of
the date of such resolution.
<PAGE>
- 24 -
If the parties cannot resolve all matters in dispute within such
15-day period, all unresolved matters shall be submitted to a
nationally recognized firm of chartered accountants acceptable to
the Vendor and the Purchaser which is not the auditors of either the
Purchaser or the Vendor (the "Arbitrator") for resolution, and the
Arbitrator shall be given access to all materials and information
reasonably requested by it for such purpose. The rules and
procedures to be followed in the arbitration proceedings shall be
determined by the Arbitrator in its discretion. The Arbitrator's
determination of all such matters shall be final and binding on both
parties and shall not be subject to appeal by either party. The fees
and expenses of the Arbitrator shall be borne equally by the
parties. The Closing Financial Statements shall be modified to the
extent required to give effect to the Arbitrator's determination and
shall be deemed to have been approved as of the date of such
determination.
III.4 Adjustment of Closing Date Payment
Within two Business Days after the Closing Financial Statements are deemed
to have been approved in accordance with section 3.3:
(a) if the Working Capital exceeds Cdn $14.1 million, the Purchaser
shall pay the Vendor an amount equal to such excess, together with
interest thereon at the Prime Rate from and including the Closing
Date to but excluding the date of payment; and
(b) if the Working Capital is less than Cdn $14.1 million, the Vendor
shall pay to the Purchaser an amount equal to such deficit, together
with interest thereon at the Prime Rate from and including the
Closing Date to but excluding the date of payment.
<PAGE>
- 25 -
III.5 Allocation of Purchase Price
The Vendor and the Purchaser agree to allocate the Purchase Price among
the Purchased Assets and Assumed Liabilities in accordance with Schedule 10 and
to report the sale and purchase of the Purchased Assets for all federal,
provincial and local tax purposes in a manner consistent with such allocation.
III.6 ETA Election
The Purchaser and the Vendor shall elect jointly under subsection 167(1)
of the ETA, in the form prescribed for the purposes of that subsection, in
respect of the sale and transfer of the Purchased Assets hereunder, and the
Purchaser shall file such election in its GST return for its reporting period
that includes the Closing Date. The Purchaser shall indemnify the Vendor for any
and all liability, including taxes, interest and penalties incurred by the
Vendor for GST payable by the Purchaser in connection with this transaction as a
result of the failure of Revenue Canada to accept in whole or in part such
election by the parties.
III.7 Transfer Taxes
The Purchaser shall be liable for and shall pay all federal and provincial
sales taxes (including any GST, retail sales taxes and land transfer taxes) and
all other Taxes properly payable by the Purchaser in connection with the
transfer of the Purchased Assets by the Vendor to the Purchaser (excluding, for
greater clarity, Taxes for which the Vendor is liable in respect of its
business, operations and/or income). The Purchaser shall deliver to the Vendor
on the Closing Date purchase exemption certificates or similar documents in
respect of such of the Purchased Assets as may, upon delivery of such
certificates or documents, be acquired under applicable legislation without
payment of sales tax.
<PAGE>
- 26 -
III.8 Income Tax Elections
The Purchaser and the Vendor agree to elect jointly in the prescribed form
under section 22 of the Tax Act as to the sale of the accounts receivable and
other assets that are referred to in subsection 2.1(f) and described in section
22 of the Tax Act and to designate in such election an amount equal to the
portion of the Purchase Price allocated to such assets pursuant to section 3.5
as the consideration paid by the Purchaser therefor. The Purchaser and the
Vendor agree to elect jointly in the prescribed manner under subsection 20(24)
of the Tax Act in respect of all deposits and other prepayments received by the
Vendor from customers of the Purchased Business which are transferred by the
Vendor to the Purchaser in consideration of the Purchaser assuming the
obligation to fulfill the related Contracts.
ARTICLE IV
ASSUMPTION OF LIABILITIES
IV.1 Assumption of Certain Liabilities by the Purchaser
The Purchaser agrees to assume, pay, satisfy, discharge, perform and
fulfil, from and after the Time of Closing, only those obligations and
liabilities of the Vendor relating to the Purchased Business existing, accrued
or accruing (whether direct, indirect or contingent) as at the Time of Closing
(the "Assumed Liabilities") and which are described below:
(a) all liabilities and obligations under or relating to the Contracts
comprising part of the Purchased Assets (including, without
limitation, the Contracts described in Schedules 3, 6, 7 and 9) but
excluding any obligation or liability which was required to be
disclosed by the Vendor pursuant to Article V but was not so
disclosed by the Vendor;
<PAGE>
- 27 -
(b) all liabilities and obligations under all letters of credit or
performance bonds (including obligations to reimburse the issuer
thereof for any payments made thereunder) issued to secure or ensure
performance by the Vendor or Spar (UK) of its obligations or
liabilities under any Contract comprising part of the Purchased
Assets;
(c) all licences, liabilities and obligations under or relating to the
Licences comprising part of the Purchased Assets;
(d) all trade and other accounts payable and other existing or accrued
current liabilities arising in respect of, or in the ordinary course
of the Purchased Business (including, without limitation, capital
lease payments, if any, taxes respecting Real Property, liabilities
in respect of Permitted Encumbrances and accrued vacation pay and
wages) to the extent the same are reflected in the Closing Balance
Sheet;
(e) all liabilities and obligations under or relating to the Permitted
Encumbrances; and
(f) all liabilities and obligations that the Purchaser has expressly
assumed, or for which the Purchaser is expressly responsible, under
this Agreement.
IV.2 Excluded Liabilities
For greater certainty, and without limiting the generality of section 4.1,
the Vendor shall remain liable for and shall pay, satisfy, discharge, perform
and fulfil, all other obligations and liabilities of the Vendor relating to the
Purchased Business existing, accrued or accruing (whether direct, indirect or
contingent) as at the Time of Closing (the "Excluded Liabilities"), including,
without limitation:
<PAGE>
- 28 -
(a) any liability for Taxes payable, collectible or remittable by the
Vendor in respect of the Purchased Business and the Purchased Assets
in respect of the period prior to the Closing Date other than real
property and other Taxes levied with respect to the Purchased Assets
or Purchased Business to the extent the same are reflected on the
Closing Balance Sheet;
(b) any liabilities owing to a lender of the Vendor other than the
liabilities contained in the Contracts relating to the Defence
Industry Production Program as described in Schedule 6;
(c) any liability or obligation relating to an Excluded Asset;
(d) any liability or obligation resulting from (i) any violation of, or
failure to comply with, on or prior to the Closing Date, or (ii) any
statutory liability under, any Environmental Law or Environmental
Permit in effect on or prior to the Closing Date in connection with
the ownership or operation of the Purchased Business or the
Purchased Assets by the Vendor or any predecessor in title to the
Vendor; and
(e) all liabilities or obligations of the Vendor to or in respect of the
Employees and the Employer Plans arising prior to the Time of
Closing.
The Vendor's obligations hereunder to remain liable for and to pay or perform
the Excluded Liabilities shall not be limited, terminated or reduced by any
representation or warranty concerning the same matter or by any disclosures or
qualifications contained therein nor by any limitations of liability applicable
to such representation or warranty or any indemnity given in connection
therewith.
<PAGE>
- 29 -
4.2.1 Panavia Tax Liability
Notwithstanding anything contained herein to the contrary, the Vendor
shall have no liability under or pursuant to this Agreement (including if the
same would result in a misrepresentation under section 5.20) for taxes payable
by Spar (UK) in connection with the deferred revenues relating to price
adjustments for Panavia customer contracts which have not been recognized as
income by Spar (UK) prior to Closing, including without limitation if
reassessments by applicable tax authorities determine that such taxes are
payable before the Closing Date (provided that in such case the Vendor shall be
liable for all interest, penalties or fines payable as a result of Spar (UK)
failing to pay any such Taxes when due).
IV.3 Product Liability and Warranty Obligations
(a) Without in any way limiting section 11.1, the Purchaser shall not
assume, and the Vendor shall be solely responsible for and shall
indemnify and hold harmless the Purchaser from and against any and
all Losses arising out of or resulting from any product liability,
product warranty and other claims and obligations respecting
products delivered, and/or services provided, by the Vendor in
connection with the Purchased Business up to the Time of Closing
whether such Losses arise before or after the Time of Closing and
whether known or unknown as of the Time of Closing to the extent
such Losses exceed any provision or allowance for product warranty
or liability claims reflected in the Closing Balance Sheet (the
"Warranty Provision").
Notwithstanding anything contained herein to the contrary, the
Purchaser may if the Purchaser, acting reasonably, determines in
good faith to do so for valid business reasons, and shall if
requested to do so in writing by the Vendor, satisfy
<PAGE>
- 30 -
or perform any such product warranty obligation of the Vendor not
assumed by the Purchaser, provided however that the Purchaser shall
first provide the Vendor with an opportunity to assess the claim and
comment on its validity and any proposed response by the Purchaser.
In any such case, provided such product warranty obligation was a
valid and enforceable obligation or liability of the Vendor and the
claim in respect thereof was valid, the Vendor shall reimburse the
Purchaser forthwith following demand by the Purchaser for all
Reimbursable Costs incurred by the Purchaser in repairing or
replacing products. The Vendor's obligation to reimburse the
Purchaser for any such Reimbursable Costs in respect of each
warranty claim will be applicable only to the extent that such
Reimbursable Costs in respect of such claim exceeds $25,000 and then
only to the extent that the aggregate amount of all such
Reimbursable Costs exceeds the Warranty Provision.
In all other circumstances, the provisions of sections 11.5 to 11.10
inclusive, shall apply mutatis mutandis to any indemnity claim
pursuant to this subsection 4.3(a).
(b) The Vendor shall not be responsible for, and the Purchaser shall
be solely responsible for and shall indemnify and hold harmless the
Vendor from and against any and all Losses arising out of or
resulting from any product liability, product warranty and other
claims and obligations respecting products manufactured or
delivered, and/or services provided, (i) by the Purchaser in
connection with the Purchased Business after the Time of Closing and
(ii) by the Vendor in connection with the Purchased Business prior
to the time of Closing to the extent of the Warranty Provision The
provisions of sections 11.5 to 11.10, inclusive, shall apply mutatis
mutandis to any indemnity claim pursuant to this subsection 4.3(b).
<PAGE>
- 31 -
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
The Vendor represents and warrants to the Purchaser as follows and
acknowledges that the Purchaser is relying on such representations and
warranties in connection with its purchase of the Purchased Assets:
V.1 Organization
The Vendor is a corporation duly incorporated and validly subsisting under
the laws of Canada and Spar (UK) is a company duly incorporated and validly
subsisting under the laws of England and Wales and each has the corporate power
and capacity to own, or lease and operate its property, to carry on the
Purchased Business as now being conducted by it and, in the case of the Vendor,
to enter into this Agreement and to perform its obligations hereunder.
V.2 Authorization
This Agreement has been duly authorized, executed and delivered by the
Vendor and is a legal, valid and binding obligation of the Vendor, enforceable
against the Vendor by the Purchaser in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency and other laws affecting
the rights of creditors generally and except that equitable remedies may be
granted only in the discretion of a court of competent jurisdiction.
V.3 No Other Agreements to Purchase
No person other than the Purchaser has any written or oral agreement or
option or any right or privilege (whether by law, pre-emptive or contractual)
capable of becoming an agreement or option for the purchase or acquisition from
the Vendor or Spar (UK) of any of the Purchased Assets or the Spar (UK) Assets,
other than (i) pursuant to purchase orders for the sale of Inventory accepted by
the Vendor or Spar (UK) in the ordinary course of the Purchased Business
<PAGE>
- 32 -
or (ii) agreements for the sale of assets having a fair market value of less
than $5,000 which are not material to or currently used in the operation of the
Purchased Business.
V.4 No Violation
The execution and delivery of this Agreement by the Vendor and the
consummation of the transactions herein provided for will not result in:
(a) the breach or violation of any of the provisions of, or constitute a
default under, or conflict with or cause the acceleration of any
legally binding obligation of the Vendor or Spar (UK) (other than
Contracts which do not constitute Material Contracts) including
without limitation under:
(i) any Material Contract to which the Vendor or Spar (UK) is a
party or by which it is or the Purchased Assets are bound
provided the consents and waivers set forth in Schedule 16 are
obtained;
(ii) any provision of the constating documents or by-laws or
resolutions of the board of directors (or any committee
thereof) or shareholders of the Vendor or Spar (UK);
(iii) any judgment, decree, order or award of any court,
governmental body or arbitrator having jurisdiction over the
Vendor or Spar (UK);
(iv) any Licence necessary to the operation of the Purchased
Business; or
(v) any applicable law, statute, ordinance, regulation or rule
having the force of law, other than the Bulk Sales Act
(Ontario); nor
<PAGE>
- 33 -
(b) the creation or imposition of any Encumbrance on any of the
Purchased Assets or the Spar (UK) Assets.
V.5 Sufficiency of Purchased Assets
The Purchased Assets owned or leased by the Vendor, together with the Spar
(UK) Assets and the Customer-Owned Property, are sufficient to carry on the
Purchased Business. To the knowledge of the Vendor, except as set forth in
Schedules 4, 5 and 20 hereto, all of the material tangible assets forming part
of the Purchased Assets and the Spar (UK) Assets are in good operating condition
and are in a state of good repair and maintenance, normal wear and tear excepted
after taking into account the age and use of such assets. With the exception of
inventory in transit, all the tangible assets of the Purchased Business are
situate at the locations set out in Schedule 11. Schedule 24 contains a complete
description of all Customer-Owned Property as at the date hereof having a market
value of more than $10,000.
V.6 Spar (UK)
(a) The authorized capital of Spar (UK) consists of 200,000 Ordinary
Shares of which only the Spar (UK) Shares are issued and
outstanding. All of the Spar (UK) Shares are validly issued, fully
paid and non-assessable.
(b) Other than the Purchaser hereunder, no person has any written or
oral agreement or option or any right or privilege (whether by law,
pre-emptive or contractual) capable of becoming an agreement or
option, including convertible securities, warrants or convertible
obligations of any nature, for the purchase, subscription
<PAGE>
- 34 -
or acquisition of the Spar (UK) Shares, or for the purchase,
subscription, allotment or issuance of any authorized but unissued
shares or other securities of Spar (UK).
(c) The Vendor is the beneficial owner of record of the Spar (UK)
Shares, with good and marketable title thereto, free and clear as at
Closing, of all Encumbrances (other than the Permitted Encumbrances)
and, without limiting the generality of the foregoing, none of the
Spar (UK) Shares is subject to any voting trust, shareholder
agreement or voting agreement. Upon completion of the transaction
contemplated by this Agreement, all of the Spar (UK) Shares will be
owned by the Purchaser as the beneficial owner of record, with a
good and marketable title thereto.
V.7 No Subsidiaries
With the exception of the Vendor's ownership of Spar (UK), the Vendor does
not, in connection with the Purchased Business, and Spar (UK) does not, own or
have any agreements of any nature to acquire, directly or indirectly, any shares
in the capital of or other equity or proprietary interests in any person.
V.8 Title to Personal Property
The Purchased Assets and the Spar (UK) Assets are owned by the Vendor and
Spar (UK), respectively, and on Closing will be owned by the Vendor or Spar
(UK), as the case may be, free and clear of all Encumbrances other than
Permitted Encumbrances.
V.9 Location of Real Property
Schedule 3 sets forth the municipal addresses and complete and accurate
legal descriptions of all the real property that is used in the Purchased
Business and of which the Vendor or Spar
<PAGE>
- 35 -
(UK) is the beneficial or legal owner (the "Real Property") or which is leased
by the Vendor or Spar (UK) (the "Leased Property").
V.10 Real Property and Leased Property
Neither the Vendor nor Spar (UK) is the beneficial or registered owner of
nor has it agreed to acquire any real property or any interest in any real
property other than the Real Property and the Leased Property. The Vendor has
the exclusive right to possess, use and occupy and has good and marketable title
in fee simple to all the Real Property, and on Closing will have good and
marketable title in fee simple to the Real Property free and clear of all
Encumbrances, other than Permitted Encumbrances. To the knowledge of the Vendor,
all buildings, structures, improvements and appurtenances situated on the Real
Property or the Leased Property are, in all material respects, in good operating
condition and in a state of good maintenance and repair having regard to the use
and age thereof and are adequate and suitable for the purposes for which they
are currently being used, except as disclosed in Schedule 20. None of such
buildings, structures, improvements or appurtenances (or any equipment therein),
nor the operation or maintenance thereof, violates any restrictive covenant or
any provision of any federal, provincial or municipal law, by-laws, ordinance,
or other rule or regulation, or encroaches on any property owned by others,
other than violations or encroachments which would not constitute a Material
Adverse Effect and other than Environmental Laws (which are dealt with in
Section 5.28). Without limiting the generality of the foregoing:
(a) the Real Property, the Leased Property, the current uses thereof and
the conduct of the Purchased Business comply with all regulations,
statutes, enactments, laws and by-laws, orders and approvals
including, without limitation, those dealing with zoning, parking,
access, loading facilities, landscaped areas, building construction,
fire, public health and safety, official plans and Planning Act
approvals except
<PAGE>
- 36 -
where such non-compliance would not constitute a Material Adverse
Effect and other than Environmental Laws (which are dealt with in
Section 5.28);
(b) except as disclosed in Schedule 20, no material alteration, repair,
improvement or other work has been ordered, directed or requested in
writing to be done or performed to or in respect of the Real
Property, the Leased Property or to any of the plumbing, heating,
elevating, water, drainage or electrical systems, fixtures or works
by any municipal, provincial or other competent authority, which
alteration, repair, improvement or other work has not been
completed, and the Vendor knows of no written notification having
been given to it of any such outstanding work being ordered,
directed or requested, other than those that have been complied
with;
(c) all accounts for work and services performed and materials placed or
furnished upon or in respect of the Real Property or the Leased
Property at the request of the Vendor have been fully paid (to the
extent the same is due and owing) and satisfied in all material
respects, and no person is entitled to claim a lien under the
Construction Lien Act (Ontario) or similar legislation in other
provinces of Canada against the Real Property, the Leased Property
or any part thereof, other than current accounts in respect of which
the payment due date has not yet passed;
(d) as at Closing the Permitted Encumbrances will constitute all of the
Encumbrances that affect the Real Property or the Leased Property;
and
(e) except as disclosed in Schedule 20, to the knowledge of the Vendor,
each of the Real Property and the Leased Property (including all
buildings, improvements and fixtures) is fit for its present use and
there are no material repairs or replacements that are necessary
and, without limiting the foregoing, there are no material repairs
<PAGE>
- 37 -
to, or replacements of, the roof or the mechanical, electrical,
heating, ventilating, air-conditioning, plumbing or drainage
equipment or systems that are necessary; and none of the Real
Property or the Leased Property is currently undergoing any material
alteration or renovation nor is any such alteration or renovation
contemplated.
V.11 Leased Property
Neither the Vendor nor Spar (UK) is a party to any lease or agreement to
lease or sublease in respect of any real or immovable property, whether as
lessor or lessee or sublessor or sublessee, other than the leases and subleases
(the "Leases") described in Schedule 3 relating to the Leased Property. Schedule
3 sets out the parties to each of the Leases, the locations of the leased lands
and premises and the current annual base rent payable thereunder. Except as
described in Schedule 3, the Vendor or Spar (UK), as applicable, occupies the
Leased Property and has the exclusive right to occupy and use the Leased
Property. Each of the Leases is in good standing and in full force and effect in
all material respects, and neither the Vendor, Spar (UK) nor any other party
thereto is in breach of any material covenant, condition or obligation contained
therein. The Vendor has provided a true and complete copy of each Lease and all
amendments thereto to the Purchaser.
V.12 Inventories
The inventories of finished products of the Vendor relating to the
Purchased Business and of Spar (UK) (excluding inventories which have been
written off on the books of the Vendor or Spar (UK)) do not include any items
that are slow moving, or of a quality or quantity not usable or saleable in the
normal course of business, except to the extent provided for in any applicable
allowance or provision reflected in the Financial Statements or the Closing
Balance Sheet. The
<PAGE>
- 38 -
inventory levels of the Vendor and Spar (UK) have been maintained at such
amounts as are required for the operation of the Purchased Business as
previously conducted.
V.13 Accounts Receivable
All accounts receivable, book debts and other debts due or accruing to the
Vendor in connection with the Purchased Business are bona fide, subject to any
Accounts Receivable that have been previously written off and to an allowance
for doubtful accounts that has been reflected on the books of the Vendor in
accordance with generally accepted accounting principles. The sale of accounts
receivable by the Vendor to the Purchaser will be eligible for the election
under section 22 of the Tax Act.
V.14 Intellectual Property
Schedule 9 sets out all Intellectual Property which has been registered
under applicable legislation or in respect of which registrations are pending
(including particulars of registration or application for registration) and all
licences and other Contracts that comprise or relate to Intellectual Property.
The Intellectual Property comprises all trade or brand names, business names,
trade marks, service marks, copyrights, patents, trade secrets, know-how,
inventions, designs and other industrial or intellectual property necessary to
conduct the Purchased Business. Except as set forth on Schedule 9, the Vendor or
Spar (UK), as the case may be, is the beneficial owner of the Intellectual
Property free and clear of all Encumbrances, and is not a party to or bound by
any Contract or any other obligation whatsoever that limits or impairs its
ability to sell, transfer, assign or convey, or that otherwise affects, the
Intellectual Property. Neither the Vendor nor Spar (UK) has granted any interest
in or right to use all or any portion of the Intellectual Property except as set
forth in Schedule 9. The conduct of the Purchased Business does not infringe
upon the industrial or intellectual property rights, domestic or foreign, of any
other person. The Vendor is not aware of a claim of any infringement or breach
of any industrial or intellectual property rights of any other person, nor has
the Vendor or Spar (UK) received any notice that the conduct of the Purchased
Business, including the use of the Intellectual Property,
<PAGE>
- 39 -
infringes upon or breaches any industrial or intellectual property rights of any
other person, and the Vendor has no knowledge of any infringement or violation
of any of its rights in the Intellectual Property. The Vendor is not aware of
any state of facts that could reasonably be expected to render invalid or
unenforceable any of the Intellectual Property. The Vendor has provided to the
Purchaser a true and complete copy of all Contracts and amendments thereto that
comprise or relate to the Intellectual Property.
V.15 Insurance
Schedule 13 sets out all insurance policies (specifying the insurer, the
amount of the coverage, the type of insurance, the policy number and any pending
claims thereunder) maintained by the Vendor on the Purchased Assets, the
Purchased Business and the Spar (UK) Assets or their personnel as of the date
hereof. Neither the Vendor nor Spar (UK) is in default in any material respect
with respect to any of the provisions contained in any such insurance policy and
has not failed to give any notice or present any material claim under any such
insurance policy, in due and timely fashion. The Vendor has provided details of
each insurance policy referred to in Schedule 13 to the Purchaser.
V.16 No Expropriation
No part of the Purchased Assets or the Spar (UK) Assets has been taken or
expropriated by any federal, provincial, municipal or other authority, nor has
any notice or proceeding in respect thereof been given or commenced, nor is the
Vendor aware of any intent or proposal to give any such notice or commence any
such proceedings.
<PAGE>
- 40 -
V.17 Agreements and Commitments
Except as described in Schedules 3, 6, 7 and 9, neither the Vendor nor
Spar (UK) is a party to or bound by any of the following Contracts in connection
with or relating to the Purchased Business:
(a) any distributor, sales, advertising, agency or manufacturer's
representative Contract;
(b) any collective bargaining agreement, letter of understanding, letter
of intent, other written communication or other Contract
(collectively, "Collective Agreements") with any labour union, trade
union, council of trade unions, employer bargaining agency or
affiliated bargaining agent;
(c) any employment or consulting Contract or any other Contract with any
officer, employee or consultant (other than oral Contracts of
indefinite hire terminable by the Vendor without cause on reasonable
notice);
(d) any profit sharing, bonus, stock option, pension, retirement,
disability, stock purchase, medical, dental, hospitalization,
insurance or similar plan or agreement providing benefits to any
current or former officer, employee or consultant;
(e) any indenture, mortgage, promissory note, loan agreement, guarantee
or other Contract for the borrowing of money or a leasing
transaction of the type required to be capitalized in accordance
with generally accepted accounting principles;
(f) any Contract for the sale of any assets, other than sales of
inventory to customers in the ordinary course of the Purchased
Business;
<PAGE>
-41-
(g) any Contract pursuant to which the Vendor or Spar (UK) is a lessor
or lessee of any machinery, equipment, motor vehicles, office
furniture, fixtures or other personal property where the lease
payments are in excess of $5,000 annually;
(h) any confidentiality, secrecy or non-disclosure Contract (whether the
Vendor or Spar (UK) is a beneficiary or obligor thereunder) pursuant
to which goods or services continue to be provided or pursuant to
which there are continuing obligations of the parties thereto
relating to any proprietary or confidential information or any
non-competition or similar Contracts (other than purchase orders or
supply contracts containing standard provisions regarding
confidential or proprietary information);
(i) any licence, franchise or other agreement that relates in whole or
in part to any Intellectual Property;
(j) any agreement of guarantee, support, indemnification, assumption or
endorsement of, or any other similar commitment with respect to, the
obligations, liabilities (whether accrued, absolute, contingent or
otherwise) or indebtedness of any other person, except for cheques
endorsed for collection in the ordinary course of the Purchased
Business; or
(k) any Contract for the supply of goods or services material to the
Purchased Business which goods or services can not otherwise be
readily obtained at comparable prices;
(l) any Contract for capital expenditures, other than any such Contract
involving an expenditure of less than $25,000 provided that all such
Contracts not described in
<PAGE>
-42-
the aforesaid schedules do not involve expenditures of more than
$150,000 in the aggregate;
(m) any Contract involving the sale of inventory or the supply of
services to customers in excess of $150,000 or which expire after
one year from the date of this Agreement;
(n) any Contract for the purchase of materials, supplies, equipment or
services not constituting a capital expenditure, other than any such
Contract involving an expenditure of less than $50,000 provided that
all such Contracts not described in the aforesaid schedules do not
involve expenditures of more than $500,000 in the aggregate;
(o) any Contract providing for payments or receipts in excess of $25,000
that expires, or may expire if the same is renewed or extended at
the option of any person other than the Vendor, more than one year
after the date of this Agreement;
(p) any Contract or Contracts involving the payment or receipt by the
Vendor of royalties, ongoing licence fees or similar payments in
excess of, in aggregate, $10,000 per annum;
(q) any Contract not described in subsections 5.17(a) to (p), inclusive,
having obligations on any party thereto in excess of $100,000,
(collectively, the "Material Contracts").
The Vendor or Spar (UK), as the case may be, is in compliance with all
obligations required to be performed by it and is entitled to all benefits
under, and is not in default or alleged
<PAGE>
-43-
to be in default in any respect of, any Material Contract relating to the
Purchased Business, Purchased Assets or Spar (UK) Assets to which it is a party
or by which it is bound except where such breach or non-compliance would not
constitute a Material Adverse Effect and all such Material Contracts are in good
standing and in full force and effect, and no event, condition or occurrence
exists that, after notice or lapse of time or both, would constitute a default
in any material respect by any party thereto under any of the foregoing except
to the extent the same does not constitute a Material Adverse Effect. The Vendor
has provided to the Purchaser a true and complete copy of each Material Contract
listed or described in Schedules 3, 6, 7 and 9 and all amendments thereto.
V.18 Compliance with Laws; Governmental Authorization
The Vendor and Spar (UK) is in compliance with all laws, statutes,
ordinances, regulations, rules, judgments, decrees or orders applicable to the
Purchased Business, the Purchased Assets or the Spar (UK) Assets except where
such non-compliance does not constitute a Material Adverse Effect and except in
respect of Environmental Laws (which are dealt with separately in section 5.28).
Schedule 8 sets out a complete and accurate list of all governmental or
regulatory licences, permits, approvals, consents, certificates, registrations
and authorizations (the "Licences") held by or granted to the Vendor in respect
of the Purchased Business or Spar (UK), and there are no other Licences
necessary to carry on the Purchased Business or to own or lease any of the
Purchased Assets or the Spar (UK) Assets, other than those Licences the failure
of which to hold or be granted does not constitute a Material Adverse Effect and
other than Environmental Permits (which are dealt with separately in section
5.28). Each Licence described in Schedule 8 is valid, subsisting and in good
standing and neither the Vendor nor Spar (UK) is in default or breach in any
material respect of any such Licence and, to the knowledge of the Vendor, no
proceeding is pending or threatened to revoke or limit any Licence. The Vendor
has provided a true and complete copy of each such Licence and all amendments
thereto to the Purchaser.
<PAGE>
-44-
The Vendor is not subject to any debarment or suspension proceedings by
the United States government or in respect of its status as supplier thereto and
is not subject to any similar proceedings by the Canadian government or in
respect of its status as supplier thereto.
V.19 Consents and Approvals
There is no requirement to make any filing with, give any notice to or to
obtain any Licence, consent or approval of, any governmental or regulatory
authority as a condition to the lawful consummation of the transactions
contemplated by this Agreement, except for the filings, notifications and
Licences described in Schedule 15 or that relate solely to the identity of the
Purchaser or the nature of any business carried on by the Purchaser. There is no
requirement under any Material Contract to which the Vendor or Spar (UK) is a
party or by which it is bound to give any notice to, or to obtain the consent or
approval of, any party to such agreement, instrument or commitment relating to
the consummation of the transactions contemplated by this Agreement, except for
the notifications, consents and approvals described in Schedule 16.
V.20 Financial Statements
The Financial Statements of the Purchased Business are special purpose
financial statements prepared for internal use and represent the combined
operations of the Spar Applied Systems Division and Spar (UK). Except as set
forth in Schedules 1-1 and 2-1 the Financial Statements of Spar (UK) have been
prepared in accordance with U.K. generally accepted accounting principles,
applied on a basis consistent with prior periods and the Financial Statements of
the Purchased Business have been prepared in accordance with generally accepted
accounting principles (except that such Financial Statements have been prepared
based on materiality thresholds applicable to the consolidated financial
statements of the Vendor and its subsidiaries) applied on a basis consistent
with prior periods. The Financial Statements present fairly the
<PAGE>
-45-
assets, liabilities (whether accrued, absolute, contingent or otherwise) and
financial condition of the Purchased Business and Spar (UK), as the case may be,
as at the respective dates of the Financial Statements and the sales, earnings
and results of operations of the Purchased Business and Spar (UK) for the
respective periods covered by the Financial Statements. The Vendor has provided
true and complete copies of the Financial Statements to the Purchaser.
Except for the liabilities reflected or disclosed in this Agreement, the
Financial Statements or the Closing Balance Sheet, and except for liabilities
incurred in the ordinary course of business after July 31, 1997, the Vendor does
not have any material (for greater certainty, based on materiality thresholds
ordinarily applicable to businesses similar in size to the Purchased Business)
liabilities (whether absolute or contingent) relating to the Purchased Business
and Spar (UK) does not have any material liabilities (whether absolute or
contingent).
V.21 Books and Records
Each of the Vendor and Spar (UK) has maintained its accounting books and
records of the Purchased Business in accordance with generally accepted
accounting principles.
V.22 Absence of Changes
Since July 31, 1997, except as disclosed in Schedule 21, the Purchased
Business has been carried on only in the ordinary and normal course consistent
with past practice and there has not been:
(a) any adverse change in the condition (financial or otherwise),
assets, liabilities, operations, earnings or business of the
Purchased Business which would constitute a Material Adverse Effect;
<PAGE>
-46-
(b) any damage, destruction or loss (whether or not covered by
insurance) affecting the Purchased Assets or the Spar (UK) Assets
which would constitute a Material Adverse Effect;
(c) any material obligation or liability (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) incurred
by the Vendor in connection with the Purchased Business or Spar
(UK), other than those incurred in the ordinary and normal course of
the Purchased Business and consistent with past practice and which
are or shall be disclosed to the Purchaser by the Vendor prior to
Closing;
(d) any payment, discharge or satisfaction of any material Encumbrance,
liability or obligation of the Vendor in relation to the Purchased
Business or the Purchased Assets or liability or obligation of Spar
(UK) (whether absolute, accrued, contingent or otherwise, and
whether due or to become due) other than payment of accounts payable
and tax liabilities incurred in the ordinary and normal course of
business consistent with past practice;
(e) any licence, sale, assignment, transfer, disposition, pledge,
mortgage or granting of a security interest or other Encumbrance on
or over any Purchased Assets or the Spar (UK) Assets, other than (i)
Permitted Encumbrances, (ii) sales of inventory to customers in the
ordinary and normal course of the Purchased Business, and (iii)
sales of assets having a fair market value of less than $10,000
which are not material to or currently used in the operation of the
Purchased Business;
(f) any general increase in the compensation of employees of the Vendor
involved in the Purchased Business or Spar (UK) (including, without
limitation, any increase pursuant to any Employee Plan or
commitment) or any increase in any such
<PAGE>
-47-
compensation or bonus payable to any officer, employee, consultant
or agent thereof (having an annual salary or remuneration in excess
of $100,000) or the execution of any employment contract with any
officer, consultant or employee (having an annual salary or
remuneration in excess of $100,000), or the making of any loan to,
or engagement in any transaction with, or hiring or dismissal of any
employee, officer or director of the Vendor in relation to the
Purchased Business or of Spar (UK) having an annual salary or
remuneration in excess $100,000;
(g) any capital expenditures or commitments relating to the Purchased
Business in excess of $200,000 in the aggregate;
(h) any forward purchase commitments in excess of the requirements of
the Purchased Business for normal operating inventories or at prices
materially higher than the current market prices;
(i) any forward sales commitments other than in the ordinary and normal
course of the Purchased Business or any failure to satisfy in any
material respect any accepted order for goods or services;
(j) any change in the accounting or tax practices followed by the Vendor
in relation to the Purchased Business or by Spar (UK); or
(k) any material change in the credit terms offered to customers of, or
by suppliers to, the Purchased Business.
V.23 Non-Arm's Length Transactions
With respect to the Purchased Business:
<PAGE>
-48-
(a) neither the Vendor nor Spar (UK) has since December 31, 1996 made
any payment or loan to, or borrowed any moneys from or is otherwise
indebted to, any employee or any other person not dealing at arm's
length with the Purchased Business (within the meaning of the Tax
Act) except as disclosed on the Financial Statements and except for
employee reimbursements, bonuses and compensation paid in the
ordinary course of the Purchased Business; and
(b) except for Contracts of employment, neither the Vendor nor Spar (UK)
is a party to any Contract with any employee or any other person not
dealing at arm's length with the Purchased Business (within the
meaning of the Tax Act).
V.24 Taxes
The Vendor has duly filed on a timely basis all tax returns required to be
filed by it and has paid all taxes that are due and payable, and all
assessments, reassessments, governmental charges, penalties, interest and fines
due and payable by it to the extent the same could affect the ongoing conduct of
the Purchased Business, the Purchased Assets, constitute any Encumbrance on the
Purchased Assets or become liabilities of the Purchaser. There are no
investigations or Claims pending or, to the knowledge of the Vendor, threatened
against the Vendor in respect of taxes, governmental charges or assessments, nor
are there any material matters under discussion with any governmental authority
relating to such taxes, governmental charges or assessments asserted by any such
authority, which could affect the Purchased Assets, or the ongoing conduct of
the Purchased Business or become a liability of the Purchaser.
Spar (UK) has duly filed on a timely basis all tax returns required to be
filed by it and has paid all taxes that are due and payable, and all
assessments, reassessments, governmental charges, penalties, interest and fines
due and payable by it. There are no investigations or Claims pending
<PAGE>
-49-
or, to the knowledge of the Vendor, threatened against Spar (UK) in respect of
taxes, governmental charges or assessments, nor are there any material matters
under discussion with any governmental authority relating to such taxes,
governmental charges or assessments asserted by any such authority.
Each of the Vendor and Spar (UK) has withheld from each payment made to,
and taxable benefit conferred upon, any of the employees of the Purchased
Business, the amount of all taxes or other deductions required to be withheld
therefrom and has paid the same to the proper tax or other receiving officers
within the time required under applicable legislation. Each of the Vendor and
Spar (UK) has remitted to the appropriate tax authority, when required by law to
do so, all amounts collected by it on account of GST or Value Added Taxes which
could become a liability of the Purchaser.
V.25 Litigation
Except as described in Schedule 14, there are no actions, suits or
proceedings (whether or not purportedly on behalf of the Vendor or Spar (UK))
pending or, to the best knowledge of the Vendor, after due enquiry, threatened
against or affecting the Purchased Business at law or in equity or before or by
any federal, provincial, municipal or other governmental department, court,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
before or by an arbitrator or arbitration board. The Vendor is not aware of any
ground on which any such action, suit or proceeding might be commenced with any
reasonable likelihood of success.
V.26 Residency
The Vendor is not a non-resident of Canada for the purposes of the Tax
Act.
V.27 GST Registration
<PAGE>
-50-
The Vendor is a registrant for purposes of the ETA whose registration
number is 10495 1983 RT 0001.
V.28 Environmental
(a) To the knowledge of the Vendor except as described in Schedule 17,
the Vendor, in respect of the Purchased Business, the Purchased
Assets and Spar (UK) are in compliance with all applicable federal,
provincial, municipal and local laws, statutes, ordinances, by-laws
and regulations, and orders, directives and decisions rendered by
any ministry, department or administrative or regulatory agency
("Environmental Laws") relating to the protection of the
environment, occupational health and safety or the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of any pollutants, contaminants, chemicals or
industrial toxic or hazardous wastes or substances ("Hazardous
Substances"), except for any non-compliance which does not
constitute a Material Adverse Effect.
(b) To the knowledge of the Vendor except as described in Schedule 17
the Vendor has obtained all licences, permits, approvals, consents,
certificates, registrations and other authorizations under
Environmental Laws (the "Environmental Permits") required for the
operation of the Purchased Business except where the failure to
obtain the same would not constitute a Material Adverse Effect, all
of which are described in Schedule 8. To the knowledge of the Vendor
except as described in Schedule 17 each Environmental Permit is
valid, subsisting and in good standing, and neither the Vendor nor
Spar (UK) is in default or breach of any such Environmental Permit
except for defaults or breaches which does not constitute a
<PAGE>
-51-
Material Adverse Effect and no proceeding is pending or threatened
to revoke or limit any Environmental Permit.
(c) To the knowledge of the Vendor except as set forth in Schedule 17:
(i) the Vendor, in connection with the Purchased Business or the
Purchased Assets, and Spar (UK) have not used or permitted to
be used, except in material compliance with all Environmental
Laws, any of its property (including any of the Real Property
and Leased Property) or facilities to generate, manufacture,
process, distribute, use, treat, store, dispose of, transport
or handle any Hazardous Substance;
(ii) since December 31, 1991, neither the Vendor in connection with
the Purchased Business or the Purchased Assets, nor Spar (UK)
has received any notice of or been prosecuted for
non-compliance with any Environmental Laws, nor has the Vendor
settled any allegation of non-compliance short of prosecution;
(iii) neither the Vendor, in connection with the Purchased Business
or the Purchased Assets, nor Spar (UK) has caused or
permitted, nor has any knowledge of, the release, in any
manner whatsoever, of any Hazardous Substance on or from any
of its properties or assets (including any of the Real
Property and Leased Property) utilized in the Purchased
Business, or any such release on or from a facility owned or
operated by third parties but with respect to which the Vendor
in connection with the Purchased Business or Spar (UK) is or
may reasonably be alleged to have liability other than
releases which do not constitute a Material Adverse Effect. To
the knowledge of the Vendor except as set forth in Schedule 17
all
<PAGE>
-52-
Hazardous Substances and all other wastes and other materials
and substances used in whole or in part by the Vendor in
connection with the Purchased Business or resulting from the
Purchased Business, or Spar (UK) have been disposed of,
treated and stored in compliance, in all material respects,
with all Environmental Laws. To the knowledge of the Vendor
Schedule 17 identifies all of the locations where Hazardous
Substances used in whole or in part by the Vendor in
connection with the Purchased Business are being stored or
disposed of by the Vendor or Spar (UK);
(iv) neither the Vendor nor Spar (UK) has received any notice that
the Vendor or Spar (UK) is potentially responsible for a
federal, provincial, municipal or local clean-up site or
corrective action under any Environmental Laws in connection
with the Purchased Business. Neither the Vendor, in connection
with the Purchased Business, nor Spar (UK) has received any
request for information in connection with any federal,
provincial, municipal or local inquiries as to disposal sites;
(v) to the knowledge of the Vendor there are no changes to any
applicable statutes or regulations relating to environmental
laws which have been enacted or issued but are not yet in
force which would render unlawful or restrict in any material
respect the operations of the Vendor or the Purchased
Business, or any part thereof or the manufacture, sale,
distribution or provision of any products or services by the
Vendor in the Purchased Business;
(vi) the Vendor has provided all material reports and information
to the appropriate regulatory authority as required by such
regulatory authority pursuant to all Environmental Laws and
the Environmental Permits
<PAGE>
-53-
applicable to the Purchased Business or the Purchased Assets.
The Vendor has fully disclosed to the Purchaser the
circumstances in which such reports have been filed. Copies of
such reports and any supporting material have been provided to
the Purchaser; and
(vii) the Vendor knows of no release or disposal of any Hazardous
Substance from any property that could have a Material Adverse
Effect on the Purchased Business or the Purchased Assets and,
to the Vendors knowledge, no property adjacent to any of the
Real Property has been used for the disposal, processing or
treatment of any Hazardous Substance or as a dump site, either
permanently or temporarily in a manner which could reasonably
be expected to have a Material Adverse Effect on the Purchased
Business or the Purchased Assets.
(d) The Vendor's obligations to remain liable for and to pay or perform
the Excluded Liabilities, including liabilities relating to
environmental matters, as provided elsewhere in this Agreement shall
not be limited, terminated or reduced by the representations or
warranties contained in this section 5.28 or by any disclosures or
qualifications contained therein (including qualifications relating to
the knowledge of the Vendor or materiality qualifications) nor by any
limitations of liability applicable to such representation or warranty
or any indemnity given in connection therewith.
V.29 Customers and Suppliers
<PAGE>
-54-
Schedule 18 sets out the major customers and suppliers of the Purchased
Business (being those customers of the Purchased Business accounting for more
than 10% of sales for the period January 1, 1996 to December 31, 1996 and
suppliers of the Purchased Business accounting for more than $500,000 of
purchases during the same period) and, to the knowledge of the Vendor since
January 1, 1997 there has been no termination or cancellation of, and no
material adverse change in, the Vendor's business relationship with any major
customer or supplier or group of major customers or suppliers relating to the
Purchased Business.
V.30 Employee Plans
Schedule 7 identifies each retirement, pension, bonus, stock purchase,
profit sharing, stock option, deferred compensation, severance or termination
pay, insurance, medical, hospital, dental, vision care, drug, sick leave,
disability, salary continuation, legal benefits, unemployment benefits,
vacation, incentive or other compensation plan or arrangement or other employee
benefit that is maintained, or otherwise contributed to or required to be
contributed to, by the Vendor or Spar (UK) for the benefit of employees or
former employees of the Vendor or Spar (UK) relating to the Purchased Business
(the "Employee Plans") and a true and complete copy of each Employee Plan has
been furnished to the Purchaser. Each Employee Plan has been maintained in all
material respects in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations that are
applicable to such Employee Plan. Except as described in Schedule 7:
(a) all contributions to, and payments from, each Pension Plan that may
have been required to be made in accordance with the terms of any
such Pension Plan, and, where applicable, the laws of the
jurisdictions that govern such Pension Plan, have been made in all
material respects in a timely manner;
<PAGE>
-55-
(b) all material reports, returns and similar documents (including
applications for approval of contributions) with respect to any
Pension Plan required to be filed with any government agency or
distributed to any Pension Plan participant have been duly filed or
distributed in all material respects in a timely manner;
(c) to the knowledge of the Vendor, there are no pending investigations
by any governmental or regulatory agency or authority involving or
relating to any Employee Plan, no threatened or pending claims
(except for claims for benefits payable in the normal operation of
the Employee Plans), suits or proceedings against any Employee Plan
or asserting any rights or claims to benefits under any Employee
Plan that could give rise to a material liability nor are there any
facts that could give rise to any material liability in the event of
such investigation, claim, suit or proceeding (for greater
certainty, the qualification of this representation by the knowledge
of the Vendor shall not affect or reduce the Vendor's obligations
hereunder to satisfy Excluded Liabilities);
(d) no written notice has been received by the Vendor of any complaints
or other proceedings of any kind involving the Vendor or, to the
Vendor's knowledge, any of the employees of the Purchased Business
before any pension board or committee relating to any Pension Plan
or to the Purchased Business or the Purchased Assets; and
(e) the assets of each Pension Plan are at least equal to the
liabilities of such Pension Plans based on the actuarial assumptions
utilized in the most recent valuation performed by the actuary for
such Pension Plan.
V.31 Collective Agreements
<PAGE>
-56-
Except as disclosed in Schedule 7, the Vendor is not a party, either
directly or by operation of law, to any Collective Agreement in respect of any
of the Employees. Except as disclosed in Schedule 7, no trade union, council of
trade unions, employee bargaining agency or affiliated bargaining agent holds
bargaining rights with respect to any of the Employees by way of certification,
interim certification, voluntary recognition, or successor rights, or has
applied or threatened to apply to be certified as the bargaining agent of any of
the Employees. To the knowledge of the Vendor, there are no threatened or
pending union organizing activities involving the Employees. To the Vendor's
knowledge, the Vendor does not have any labour problems that might reasonably be
expected to materially adversely affect the operations of the Business or lead
to an interruption of operations of the Business.
V.32 Employees
Schedule 7 contains a complete and accurate list of the names of all
individuals who are employees of the Vendor employed or engaged in the Purchased
Business and employees of Spar (UK) as of the date of this Agreement specifying:
(a) with respect to the hourly employees, the rate of hourly pay,
accrued vacation pay, length of service, age, and whether or not
such employee is absent for any reason such as disability, parental
leave, leave of absence or workers' compensation; and
(b) with respect to salaried employees, the length of service, age,
title, rate of salary and commission or bonus structure, accrued
vacation pay for each such employee and whether or not such employee
is absent for any reason such as disability, parental leave, leave
of absence or workers' compensation.
No notice has been received by the Vendor or Spar (UK) of any currently
outstanding complaint filed by any of the employees of the Purchased Business
against the Vendor or Spar (UK) claiming
<PAGE>
-57-
that the Vendor and Spar has violated the Employment Standards Act (Ontario),
the Human Rights Code (Ontario) (or any other applicable labour relations
employee or human rights or similar legislation in the other jurisdictions in
which the Purchased Business is conducted) or of any complaints or proceedings
of any kind involving the Purchased Business or, to the Vendor's knowledge,
before any, labour relations board, except as disclosed in Schedule 7. There are
no outstanding orders or charges against the Vendor concerning the Purchased
Business under the Occupational Health and Safety Act (Ontario) (or any
applicable health and safety legislation in the other jurisdictions in which the
Purchased Business is conducted). All levies, assessments and penalties made
against the Vendor pursuant to the Workers' Compensation Act (Ontario) (and any
applicable workers' compensation legislation in the other jurisdictions in which
the Purchased Business is conducted) have been paid by the Vendor or Spar (UK),
as the case may be, and neither the Vendor nor Spar (UK) has been reassessed
under any such legislation during the past 5 years.
V.33 Employee Accruals
All accruals in respect of the employees of the Purchased Business for
unpaid vacation pay, premiums for unemployment insurance, health premiums,
Canada Pension Plan premiums, accrued wages, salaries and commissions and
employee benefit plan payments have been reflected in the books and records of
the Vendor or Spar (UK), as the case may be.
V.34 Changes
For the purposes of the representations and warranties contained in this
Article V the occurrence on or after the date hereof of any of the events,
changes or developments described in section 9.1.1 (except to the extent such
events, changes or developments occur as a result of any failure of the Vendor
to comply with the terms, covenants and conditions of this Agreement) shall be
deemed not to have or constitute a Material Adverse Effect.
<PAGE>
-58-
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Vendor as follows and
acknowledges and confirms that the Vendor is relying on such representations and
warranties in connection with its sale of the Purchased Assets:
VI.1 Organization
The Purchaser is a corporation duly incorporated and validly subsisting
under the laws of the State of Delaware and has the corporate power and capacity
to enter into this Agreement and to perform its obligations hereunder. The
Purchaser is or, on the Closing Date, will be duly registered to carry on
business in Ontario and has the requisite corporate power to carry on the
Purchased Business following Closing.
VI.2 Authorization
This Agreement has been duly authorized, executed and delivered by the
Purchaser and is a legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser by the Vendor in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency and other
laws affecting the rights of creditors generally and except that equitable
remedies may only be granted in the discretion of a court of competent
jurisdiction.
VI.3 No Violation
<PAGE>
-59-
The execution and delivery of this Agreement by the Purchaser and the
consummation of the transactions herein provided for will not result in the
violation of, or constitute a default under, or conflict with or cause the
acceleration of any obligation of the Purchaser under:
(a) any Contract to which the Purchaser is a party or by which it is
bound;
(b) any provision of the constating documents or by-laws or resolutions
of the board of directors (or any committee thereof) or shareholders
of the Purchaser;
(c) any judgment, decree, order or award of any court, governmental body
or arbitrator having jurisdiction over the Purchaser; or
(d) assuming the consents or waivers described in Schedule 15 are
obtained on or prior to Closing any applicable law, statute,
ordinance, regulation or rule having the force of law, other than
the Bulk Sales Act (Ontario).
VI.4 Consents and Approvals
There is no requirement for the Purchaser to make any filing with, give
any notice to or obtain any licence, permit, certificate, registration,
authorization, consent or approval of, any government or regulatory authority as
a condition to the lawful consummation of the transactions contemplated by this
Agreement except notification under the Investment Canada Act.
VI.5 GST Registration
The Purchaser or its assignee will, at the Time of Closing, be a
registrant for purposes of the ETA and the Purchaser will provide to the Vendor
such ETA registration number prior to Closing.
<PAGE>
-60-
VI.6 Relationship with Major Customers
The Purchaser is not aware of any reason why its acquisition of the
Purchased Business is likely to materially adversely affect the current
relationship between the Purchased Business and any of the Major Customers
following Closing.
ARTICLE VII
SURVIVAL OF COVENANTS, REPRESENTATIONS
AND WARRANTIES
VII.1 Survival of Covenants, Representations and Warranties
To the extent that they have not been fully performed at or prior to the
Time of Closing, the covenants, representations and warranties contained in this
Agreement and in all certificates and documents delivered pursuant to or
contemplated by this Agreement shall survive the closing of the transactions
contemplated hereby and shall continue for the applicable limitation period
notwithstanding such closing nor any investigation made by or on behalf of the
party entitled to the benefit thereof or any knowledge of such party; provided,
however, that:
(a) the representations and warranties set out in this Agreement (other
than section 5.24) and the corresponding representations and
warranties set out or incorporated in the certificates to be
delivered pursuant to subsection 9.1(a) or 9.2(a), as the case may
be shall terminate on September 30, 1999; and
(b) the representations and warranties contained in section 5.24 and the
corresponding representations and warranties set out or incorporated
in the certificates to be
<PAGE>
-61-
delivered pursuant to subsection 9.1(a) shall survive until the
expiration of all applicable time periods for assessment, liens and
appeals relating thereto,
and any claim for breach or inaccuracy of such representations and warranties,
to be effective, must be asserted in writing prior to ninety (90) days after
such expiration. For greater certainty, neither party shall have any liability
in respect of any breach or inaccuracy of any representation or warranty unless
and to the extent only that, any claim in respect thereof is asserted in writing
within the time periods herein specified.
VII.2 Knowledge of Breach of Representation or Warranty
(a) The exercise of any rights of inspection by or on behalf of the Purchaser
under this Agreement (including section 8.1) shall not mitigate or otherwise
affect any of the representations and warranties of the Vendor hereunder, which
shall continue in full force and effect as provided in section 7.1, except and
to the extent only that the Purchaser has, or prior to Closing obtains, actual
knowledge of a breach or inaccuracy in any material respect of a representation
or warranty of the Vendor (in which event the Vendor's rights in respect thereof
shall be limited to the rights set out in subsection (b) hereof).
(b) If the Purchaser has, or prior to Closing obtains, actual knowledge of a
breach or inaccuracy in any material respect of a representation or warranty of
the Vendor and does not wish to terminate this Agreement prior to Closing, the
Purchaser shall prior to the Closing Date provide written notice to the Vendor
describing in reasonable detail the alleged breach or inaccuracy and the
Purchaser's estimate of the amount payable by the Vendor hereunder in respect of
any Claim it may have against the Vendor in respect thereof (the "Subject
Claim"). Upon receipt of such notice the Vendor and the Purchaser shall
immediately meet to discuss and attempt to resolve the validity of the Subject
Claim and the Vendor's obligations in respect thereof and
<PAGE>
-62-
either party may postpone the Closing Date by up to three Business Days for the
purposes of attempting to resolve the same prior to Closing.
If the parties are unable to reach a mutually satisfactory agreement regarding
such Subject Claim prior to Closing and the Vendor's liability in respect of the
Subject Claim exceeds $1,500,000 the Purchaser may elect to terminate this
transaction and the parties' obligations hereunder pursuant to section 9.1. If
the parties are unable to reach a mutually satisfactory agreement regarding the
Subject Claim prior to Closing and the Vendor elects not to so terminate this
transaction or if the Vendor's liability in respect of the Subject Claim does
not exceed $1,500,000, and provided the Purchaser has given notice to the Vendor
(as hereinbefore provided), the Purchaser may complete this transaction (subject
to the Vendor's right to terminate this transaction as hereinafter provided) and
thereafter pursue the Subject Claim against the Vendor following the Closing.
Notwithstanding the foregoing, if the parties are unable to reach a
mutually satisfactory agreement regarding the Subject Claim prior to Closing and
the Vendor's liability in respect of the Subject Claim exceeds $1,500,000 the
Vendor may by notice in writing to the Purchaser elect to terminate this
Agreement and the obligations of the Vendor and the Purchaser under this
Agreement.
ARTICLE VIII
COVENANTS
VIII.1 Access to Purchased Business and Purchased Assets
The Vendor shall forthwith make available to the Purchaser and its
authorized representatives and, if requested by the Purchaser, provide a copy to
the Purchaser of, all title documents, Contracts, financial statements,
policies, plans, reports, licences, orders, permits, books of account,
accounting records and all other documents, information and data relating to
<PAGE>
-63-
the Purchased Business. The Vendor shall afford the Purchaser and its authorized
representatives every reasonable opportunity to have access to the Purchased
Assets, the Spar (UK) Assets and all other property and assets utilized in the
Purchased Business provided such access is limited to normal business hours and
does not disrupt the ongoing operations of the Purchased Business. At the
request of the Purchaser, the Vendor shall execute such consents, authorizations
and directions as may be necessary to permit any inspection of the Purchased
Business or any of the Purchased Assets or the Spar (UK) Assets or to enable the
Purchaser or its authorized representatives to obtain full access to all files
and records relating to any of the Purchased Assets maintained by governmental
or other public authorities.
The Purchaser has advised the Vendor that it intends to retain an
independent environmental consultant (the "Environmental Consultant") to conduct
a Phase I Environmental Audit (the "Phase I") in respect of the Purchased Assets
and the Purchased Business. At the request of the Purchaser the Vendor shall
provide access and cooperation to the Purchaser and the Environmental Consultant
to permit the Purchaser to conduct the Phase I (and any further tests or
investigations resulting therefrom) provided however that, upon request by the
Vendor, the Purchaser shall provide to the Vendor copies of such Phase I and all
information gathered from such Phase I.
Prior to Closing the Vendor shall arrange for visits by the Purchaser with
representatives of each Major Customer for the purpose of discussions concerning
the acquisition by the Purchaser of the Purchased Business and future
relationships between the Purchaser as successor to the Purchased Business and
such Major Customer. The Vendor may, at its option, attend any such visits. The
Purchaser shall use its best efforts to ensure that the current relationship
between the Purchased Business and each Major Customer is maintained following
Closing. If the Purchased Business is to be acquired by a subsidiary of the
Purchaser, the Purchaser shall, if requested by a Major Customer, provide
assurances to such Major Customer that the Purchaser
<PAGE>
-64-
will guarantee or otherwise support in a similar manner the obligations of such
subsidiary to the Major Customer.
VIII.2 Delivery of Books and Records
At the Time of Closing, there shall be delivered to the Purchaser by the
Vendor all the books and records described in subsection 2.1(l). The Purchaser
agrees that it will preserve the books and records so delivered to it for a
period of six years from the Closing Date, or for such longer period as is
required by any applicable law or by any Contract relating to the Purchased
Business or Purchased Assets, and will permit the Vendor or its authorized
representatives reasonable access thereto in connection with the affairs of the
Vendor relating to its matters, but the Purchaser shall not be responsible or
liable to the Vendor for or as a result of any accidental loss or destruction of
or damage to any such books or records.
VIII.3 Conduct of Purchased Business and other Matters Prior to Closing
Without in any way limiting any other obligations of the Vendor and the
Purchaser hereunder, during the period from the date hereof to the Time of
Closing:
(a) Conduct Business in the Ordinary Course. The Vendor shall conduct
the Purchased Business only in the ordinary and normal course
consistent with past practice and the Vendor shall not, without the
prior written consent of the Purchaser, which consent shall not be
unreasonably withheld, enter into any transaction or refrain from
doing any action that, if effected before the date of this
Agreement, would constitute a breach in any material respect of any
representation, warranty, covenant or other obligation of the Vendor
contained herein;
<PAGE>
-65-
(b) Continue Insurance. The Vendor shall continue to maintain in full
force and effect all policies of insurance or renewals thereof now
in effect and shall give all notices and present all claims under
all policies of insurance in a due and timely fashion;
(c) Regulatory Consents. The Vendor and, if applicable, the Purchaser
shall (each in cooperation and consultation with the other) use its
commercially reasonable efforts to obtain, at or prior to the Time
of Closing, from all appropriate federal, provincial, municipal or
other governmental or regulatory bodies, the licences, permits,
consents, approvals, certificates, registrations and authorizations
described in Schedule 15;
(d) Contractual Consents. The Vendor shall give and shall use its best
efforts to obtain (and the Purchaser shall reasonably cooperate with
the Vendor), at or prior to the Time of Closing, the notices,
consents and approvals described in Schedule 16 in the manner
contemplated by section 2.3;
(e) Preserve Business. The Vendor shall use its best efforts to preserve
intact the Purchased Business, Purchased Assets and Spar (UK) Assets
and to carry on the Purchased Business as currently conducted;
(f) Discharge Liabilities. The Vendor shall pay and discharge the
liabilities of the Vendor relating to the Purchased Business in the
ordinary course in accordance and consistent with the previous
practice of the Vendor, except those contested in good faith by the
Vendor;
(g) Corporate Action. The Vendor and the Purchaser shall take or cause
to be taken all necessary corporate action, steps and proceedings to
approve or authorize validly and effectively the transfer of the
Purchased Assets to the Purchaser and the execution and delivery of
this Agreement and the other agreements and documents
<PAGE>
-66-
contemplated hereby and to cause all necessary meetings of directors
and shareholders of the Vendor or the Purchaser to be held for such
purpose; and
(h) Commercially Reasonable Efforts. Each of the Vendor and the
Purchaser shall use their respective commercially reasonable efforts
to satisfy the conditions contained in sections 9.1 and 9.2.
VIII. 4 Delivery of Conveyancing Documents
The Vendor shall deliver to the Purchaser all necessary deeds,
conveyances, bills of sale, assurances, transfers, assignments and any other
documentation necessary or reasonably required to transfer the Purchased Assets
to the Purchaser with a good and marketable title, free and clear of all
Encumbrances whatsoever except for Permitted Encumbrances.
VIII.5 Retail Sales Tax Certificate
The Vendor shall deliver to the Purchaser a certificate issued by the
Minister of Revenue of Ontario under subsection 6(1) of the Retail Sales Tax Act
(Ontario).
VIII. 6 Delivery of Vendor's Closing Documentation
The Vendor shall deliver to the Purchaser a certificate of compliance and
two copies, certified by a senior officer of the Vendor as of the Closing Date,
of the constating documents and by-laws of the Vendor and Spar (UK) and of the
resolution authorizing the execution, delivery and performance by the Vendor of
this Agreement and any documents to be provided by it pursuant to the provisions
hereof. The Vendor shall also execute and deliver or cause to be executed and
delivered to the Purchaser two copies of such other documents relevant to the
closing of the transactions contemplated hereby as the Purchaser, acting
reasonably, may request, including
<PAGE>
-67-
without limitation, share certificates evidencing the Spar (UK) Shares duly
endorsed in blank for transfer.
VIII. 7 Delivery of Purchaser's Closing Documentation
The Purchaser shall deliver to the Vendor a certificate of good standing
(or similar certificate issued by the applicable governmental authorities) and
two copies, certified by a senior officer of the Purchaser as of the Closing
Date, of its constating documents and by-laws and of the resolution authorizing
the execution, delivery and performance by the Purchaser of this Agreement and
any documents to be provided by it pursuant to the provisions hereof. The
Purchaser shall also execute and deliver or cause to be executed and delivered
two copies of such other documents relevant to the closing of the transactions
contemplated hereby as the Vendor, acting reasonably, may request.
VIII. 8 Employees
(a The Vendor agrees to provide the Purchaser with an up-to-date list
of the names of the Employees at least 6 Business Days and not more
than 10 Business Days prior to the Closing Date. The Purchaser
agrees that it shall offer employment to each of the Employees
(within 25 miles of their current place of employment) effective as
at the Time of Closing on terms and conditions of employment no less
favourable in the aggregate to the Employees than the terms and
conditions which are then applicable to such Employee (all Employees
who accept such offer are herein called the "Transferred
Employees"). The Vendor shall be responsible for and shall indemnify
and hold harmless the Purchaser from and against all Losses suffered
or incurred by the Purchaser as a result of or arising directly or
indirectly out of, in connection with or pursuant to (i) any Claim
by any employee or former
<PAGE>
-68-
employee of the Vendor in respect of the Purchased Business (other
than the Transferred Employees) arising out of the termination of
employment of such employee by the Vendor (including termination and
severance pay, vacation pay and other obligations under the Employee
Plans but excluding obligations under the Pension Plan) or (ii) any
Claim by any Employee relating to services rendered to the Vendor
prior to the Closing Date other than those set forth or reserved
against on the Closing Balance Sheet. The Purchaser shall indemnify
and hold harmless the Vendor from and against all Losses suffered or
incurred by the Vendor after the Time of Closing as a result of or
arising directly or indirectly out of, in connection with or
pursuant to: (i) any Claim by a Transferred Employee constituting
Assumed Liabilities or in respect of obligations for services
rendered to the Purchaser after the Closing Date; (ii) any Claim by
a Transferred Employee resulting from the termination of the
employment of the Transferred Employee by the Purchaser; and (iii)
any Claim by a Transferred Employee in respect of any change in
employment position, salary, benefits or other change in employment
status or compensation that occurs upon or subsequent to the
Closing. If, for any reason, the Purchaser terminates the employment
of any Transferred Employee the Purchaser shall be solely
responsible for giving notice or payment of severance or damages in
lieu thereof to such Transferred Employee and (to the extent the
Vendor would have had such an obligation if it had terminated the
Transferred Employee in similar circumstances) shall include the
period of employment of such Transferred Employee with the Vendor
and the "Leigh Bridged Service" as set forth in Schedule 7 for the
purposes of determining the amount of notice, or amount of
termination and severance pay in lieu thereof, to which such
Transferred Employee is entitled.
The provisions of sections 11.5 to 11.10 inclusive shall apply mutatis
mutandis to any indemnity claim pursuant to this subsection 8.8(a). No
employee of the Purchased
<PAGE>
-69-
Business shall be entitled to any rights under this subsection 8.8(a) or
under any other provisions of this Agreement.
(b) The Vendor shall employ all of the employees set out in Schedule 7
until the Time of Closing, except for any employees who prior to the
Time of Closing:
(i) are terminated for cause;
(ii) are terminated with the Purchaser's consent, which consent
shall not be unreasonably withheld;
(iii) voluntarily resign; or
(iv) retire.
VIII. 9 Employee Plans
Without in any way limiting subsection 11.1(d), subject as hereinafter
provided (including section 8.10), the Purchaser shall not assume any liability
for accrued benefits under any of the Employee Plans nor shall the Purchaser be
entitled to any of the assets or surpluses of any such Employee Plan. The
Purchaser agrees that it will establish replacement plans (such plans, excluding
for greater certainty the Purchaser's Plan, as defined in section 8.10, are
herein called the "Replacement Plans") for those Transferred Employees in
respect of their employment by the Purchaser from and after the Time of Closing
that provide benefits to the Transferred Employees that are comparable to the
benefits provided to the Transferred Employees under the Employee Plans except
for the Pension Plan (which is dealt with in section 8.10). For the purpose of
determining the eligibility of a Transferred Employee for membership or benefits
under the Replacement Plans his or her period of employment shall include
employment with both the
<PAGE>
-70-
Vendor (and, to the extent the Vendor has agreed thereto, employment with any
prior owner of the Purchased Business or portion thereof) and the Purchaser and
shall be deemed not to have been interrupted at the Time of Closing and his or
her period of membership shall include membership in the relevant Employee Plans
and the Replacement Plans and shall be deemed not to have been interrupted at
the Time of Closing. The Purchaser agrees to obtain the required approvals of
all applicable regulatory authorities in connection with the establishment and
registration of the Replacement Plans.
VIII. 10 Transfer of Pension Plan Assets
(a) The Purchaser will adopt, effective as of the Closing Date, a
defined benefit retirement plan ("Purchaser's Plan") covering the
Employees who, as of the Closing Date, participated in, or who were
in the process of satisfying the eligibility requirements for
participation in the Pension Plan, but for greater certainty
excluding all employees of the Vendor who terminated employment with
a deferred vested pension or who were retired or on long-term
disability under the Pension Plan on or prior to the Closing Date.
The Purchaser's Plan as adopted and the benefits provided thereunder
shall be substantially similar to and shall provide benefits that
are no less favourable than those provided under the Pension Plan.
(b) Schedule 7 contains a complete and accurate list of all Employees
who are participants in the Pension Plan together with his or her
credited service in the Pension Plan as at the date hereof.
(c) The Purchaser's Plan shall provide for an accrued benefit as of the
Closing Date, being an individual=s accrued credited service and
earnings history recognized under the Pension Plan, for all
Employees covered by the Purchaser's Plan (the
<PAGE>
-71-
total of such accrued benefits shall be referred to herein as the
"Accrued Benefits"). Subject to applicable law, the Accrued Benefits
shall be determined in accordance with the provisions of the Pension
Plan.
(d) The Vendor agrees to cause the transfer of that amount of assets
(the "Transferred Amount") from the trust fund (the "Vendor's
Trust") established to fund the Pension Plan, determined in
accordance with the summary of actuarial methods and assumptions
annexed hereto as Exhibit 4, which are necessary to fund the Accrued
Benefits, as certified by KPMG Actuarial, Benefits and Compensation
Inc. ("VA") and approved by an independent actuary selected by the
Purchaser ("PA"). If VA and PA are unable to agree on the
Transferred Amount, their differences shall be resolved by a third
independent actuary selected by VA and PA, and the expense of such
independent actuary shall be paid one half by the Vendor and one
half by the Purchaser. In certifying, verifying or reviewing the
Transferred Amount, the actuaries referred to herein shall have no
responsibility, obligation or right to change the methods,
assumptions or any other term or condition of the summary of
actuarial methods or assumptions annexed hereto as Exhibit 4, it
being understood and agreed that the duties requested of such
actuaries shall be solely to calculate and otherwise determine the
Transferred Amount in a manner consistent with said current funding
requirements. If the Pension Commission of Ontario requires an
amount other than the Transferred Amount to be transferred, the
parties agree that such amount shall be the "Transferred Amount"
hereunder.
(e) The Purchaser shall, within 120 days following Closing, file
applications for registration of the Purchaser's Plan and the
associated funding media (the "Purchaser's Trust") and for approval
of the transfer of funds from the Vendor's Trust to the Purchaser's
Trust contemplated hereunder with the Pension Commission of Ontario
and any other necessary provincial regulatory authority and
<PAGE>
-72-
Revenue Canada pursuant to the Pension Benefits Act (Ontario) (or
any successor legislation) and the equivalent legislation in any
other applicable province and the Tax Act, respectively. The
Purchaser agrees to diligently pursue such applications for
registration and approval of transfer. The Vendor agrees to
diligently cooperate with the Purchaser by amending the Pension Plan
and filing or otherwise providing to the Purchaser any information
with respect thereto to the extent necessary to allow the Purchaser
to effect the registration of the Purchaser's Plan and to obtain the
necessary approvals for the transfer of funds from the Vendor=s
Trust to the Purchaser's Trust as expeditiously as possible.
(f) On the last Business Day of the month in which the last of the
registrations and approvals contemplated in paragraph (e) is
received by the Buyer or so soon thereafter as is practicable (the
"Transfer Date"), the Purchaser shall cause to be transferred from
the Vendor's Trust to the Purchaser's Trust cash or assets with a
value equal to the Transferred Amount. The Vendor shall, on behalf
of the Purchaser's Plan and the Purchaser's Trust, but out of the
Pension Plan and the Vendor's Trust, pay or cause to be paid all
benefits payable under the Purchaser's Plan and the Purchaser's
Trust with respect to the Employees until the completion of the
transfer of funds to the Purchaser's Plan and the Purchaser's Trust
as contemplated herein. On the Transfer Date, the amount transferred
from the Vendor's Trust to the Purchaser's Trust shall be the
Transferred Amount, adjusted for investment earnings and losses for
the period between the Closing Date and the Transfer Date at the
rate of return under the Vendor's Trust for the Pension Plan and
reduced by the amount of any benefit payments and reasonable share
of the investment and administrative expenses for such period, as
determined by the Vendor. The Vendor shall provide the Purchaser
such information and
<PAGE>
-73-
reports as Purchaser may reasonably require in order to administer
the Pension Plan in respect of the Employees.
(g) The Purchaser shall not be entitled to any of the assets of the
Pension Plan, except as expressly provided in this Section 8.10,
whereby assets are transferred from the Vendor's Trust to the
Purchaser's Trust. For greater certainty, the Purchaser shall have
no right, interest or entitlement to surplus assets under the
Pension Plan.
(h) The Vendor has provided the Purchaser with all government inspection
reports under occupational health and safety legislation relating to
the Purchased Business or Spar (UK) received by the Vendor or Spar
(UK) since January 1, 1994. There are no outstanding inspection
orders nor, to the Vendor's knowledge, any pending or threatened
charges made under any occupational health and safety legislation
relating to the Purchased Business or Spar (UK). There have been no
fatal or critical accidents within the last year which are
reasonably likely to lead to charges under occupational health and
safety legislation. The Vendor has complied in all material respects
with any orders issued under occupational health and safety
legislation. There are no appeals of any orders under occupational
health and safety legislation relating to the Purchased Business or
Spar (UK) which are currently outstanding.
(i) There are no notices of assessment, provisional assessment,
reassessment, supplementary assessment, penalty assessment or
increased assessment (collectively, "assessments") or any other
communications related thereto which the Vendor has received from
any workers' compensation board or similar authorities in any
jurisdictions where the Purchased Business or the business of Spar
(UK) is carried on and there are no assessments which are due but
are not yet paid on the date hereof or which will be unpaid at the
Time of Closing and, to the
<PAGE>
-74-
Vendor's knowledge, there are no facts or circumstances which would
likely result in a material increase in liability to the Purchaser
from any applicable workers' compensation legislation, regulations
or rules after the Time of Closing. The Vendor's accident cost
experience relating to the Purchased Business or the business of
Spar (UK) is such that there are no material pending or likely
assessments and there are no claims or potential claims which may
materially adversely affect the Vendor's accident cost experience.
VIII. 11 Spar Name
The Purchaser agrees that neither it nor Spar (UK) shall have any right or
entitlement to the words "Spar" or "Spar Aerospace" or any word or expression
similar thereto. Within thirty (30) days following the Closing, the Purchaser
shall cause Spar (UK) to change its name to a name which does not include such
words or expressions and shall remove or cause to be removed all such words or
expressions from all property, stationery and literature used by the Purchaser,
Spar (UK) or any of its Affiliates. The Purchaser and its Affiliates (including
Spar (UK)) shall as soon as practical and in any event within thirty (30) days
from Closing cease all public use and shall as soon as practical and in any
event within sixty (60) days from Closing cease all internal use, of any logos,
trademarks, trade names or other references containing the words "Spar", "Spar
Aerospace" or any word or expression similar thereto. Any public use of
references to such words in connection with any statements, representations,
negotiations or other acts which could reasonably be expected to create legal
obligations shall clearly state that the Purchased Business is being carried on
by the Purchaser and not by the Vendor.
VIII. 12 Bulk Sales Compliance
Promptly following the execution and delivery of this Agreement, the
Vendor shall apply for an order (the "Bulk Sales Exemption Order") exempting the
transaction provided for in this
<PAGE>
-75-
Agreement from the application of the Bulk Sales Act (Ontario) and, if obtained
prior to Closing, the Vendor shall provide the Purchaser with evidence
reasonably satisfactory to the Purchaser that the Vendor has so obtained such
Order.
If the Vendor has not obtained, for any reason not attributable to any
default by the Vendor with its obligations hereunder, the Bulk Sales Exemption
Order on or prior to Closing the Purchaser waives compliance with the Bulk Sales
Act (Ontario), or similar legislation, in connection with this transaction. The
foregoing waiver does not affect the Purchaser's rights under subsection 11.1(c)
hereof.
VIII. 13 Performance Bonds
The Purchaser shall on or immediately following the Closing (i) replace
each of the performance bonds identified on Schedule 6.2(b) (each, a
"Performance Bond") with performance bonds issued by banks, sureties or other
institutions acceptable to the beneficiaries thereof on the same terms as those
contained in such Performance Bond (or terms otherwise acceptable to
beneficiary) and (ii) cause the Performance Bond to be cancelled and returned to
the Vendor upon delivery to the beneficiary of the said replacement bond.
The Purchaser shall reimburse the Vendor on demand for any costs incurred
by the Vendor in maintaining each Performance Bond for the period following
Closing and shall indemnify and hold harmless the Vendor from and against any
Losses suffered or incurred by the Vendor as a result of or arising out of any
payment made or obligation incurred under any of the Performance Bonds on or
following Closing provided that this indemnity shall not apply if and to the
extent that any such Loss results from any breach or default of the Vendor prior
to Closing of its obligations to the applicable beneficiary.
<PAGE>
-76-
If for any reason the Purchaser is unable, within sixty (60) days following
Closing, to cause a Performance Bond to be returned to the Vendor, the Purchaser
shall deliver to the Vendor a standby letter of credit or similar instrument
from a bank or financial institution reasonably acceptable to the Purchaser in
an amount at least equal to the amount of the Performance Bonds and on terms
reasonably acceptable to the Vendor to secure the obligations of the Purchaser
under the preceding paragraph.
VIII. 14 Environmental Remediation
The Vendor shall as soon as practical after the date hereof remediate, at
Vendor's sole cost and expense, the Chromium Deposits described in Schedule 17
to the extent required by Environmental Laws and/or Environmental Permits (such
work together with the UST Remediation, as defined in Schedule 17 is herein
called the "Remediation Work"). Prior to and during the conduct of such
Remediation Work the Vendor shall consult with the Purchaser regarding the scope
of work required, the remediation schedule and the status of the Remediation
Work for the purposes of permitting the Purchaser to satisfy itself, acting
reasonably, that such Remediation Work is being conducted in accordance with and
complies with applicable Environmental Laws and Environmental Permits. The
Vendor shall use reasonable efforts to complete the Remediation Work prior to
Closing.
The parties acknowledge that, notwithstanding the efforts of the Vendor,
all or part of the Remediation Work may be conducted following Closing. The
Purchaser shall cooperate with the Vendor and permit the Vendor and its
representatives access at all reasonable times to the Real Property and the
Purchased Business for the purposes of conducting and completing such
Remediation Work and complying with its obligations hereunder.
If any substantial portion of the Remediation Work will not be completed
by Closing the Vendor shall, prior to Closing, notify the Purchaser of such fact
and shall provide details of the
<PAGE>
-77-
scope and estimated cost of the Remediation Work which is anticipated to occur
following Closing. Upon receipt of such information, the Vendor and the
Purchaser or their respective representatives or consultants shall meet to
discuss and agree upon the estimated costs to the Vendor to complete the
Remediation Work after the Closing (the "Post-Closing Remediation Costs"). In
this regard, the Vendor shall provide the Purchaser with access to relevant
books and records relating to the Remediation Work. If the Post-Closing
Remediation Costs exceed $500,000, the Purchaser may on Closing, at its option,
withhold from the Closing Date Payment the amount of such Post-Closing
Remediation Costs and pay such amount to the counsel to the Vendor to be held in
escrow by such counsel and to be released from escrow (i) to pay the
Post-Closing Remediation Costs upon presentation of invoices from the Vendor or
the Purchaser or (ii) upon receipt of confirmation that the Vendor has completed
all of the Remediation Work. The foregoing escrow shall be subject to such other
terms and conditions as the Vendor, the Purchaser and counsel for the Vendor may
agree upon. Such escrow shall not affect the Vendors right and obligation
hereunder to conduct such Remediation Work following Closing. The appointment of
Vendor's counsel as escrow agent and the performance of its obligations in
connection therewith shall not prevent or disqualify such counsel from acting as
legal counsel to the Vendor in respect of all matters relating to this Agreement
and the transactions contemplated hereby.
If at any time following Closing the Purchaser intends to make any Claim
against the Vendor under the terms of this Agreement in respect of any breach
of, or liabilities under, Environmental Laws or Environmental Permits (including
the UST Remediation as defined in Schedule 17) the Purchaser shall, except in
the case of emergency situations, forthwith provide written notice to the Vendor
(the "Purchaser's Notice") of such Claim and provide the Vendor with the
opportunity, at the Vendor's option and cost, to conduct such remediation or
similar activities as the Vendor may deem necessary or appropriate to satisfy,
in whole or in part, as the case may be, the liabilities of the Vendor in
respect of the Claim. If the Vendor wishes to conduct any such remediation
activities in respect of a Claim, Vendor shall within sixty (60) days after
receipt of the Purchaser's Notice, give notice in writing to the Purchaser
informing the Purchaser
<PAGE>
-78-
of its election to do so and, in such event, the Vendor shall carry out such
remediation activities as soon as practical thereafter. The Purchaser shall
provide the Vendor and its representatives and consultants with reasonable
access to the Purchased Assets and the Purchased Business (including records,
correspondence or reports in respect of the circumstances relating to the Claim)
and shall otherwise cooperate with the Vendor and its employees for the purpose
of permitting the Vendor to assess the Claim and the type and scope of
remediation work which may be required and, if the Vendor so elects, to complete
such remediation activities.
If the Vendor is required to remediate pursuant to applicable
Environmental Laws (including the remediation of the Chromium Deposit or the
UST). The Vendor shall perform such remediation in accordance with applicable
clean-up guidelines or such other standard as the applicable governmental
authority may approve.
For greater certainty the election by the Vendor to not conduct such
remediation activities (or the failure of the Vendor to do so) shall not
restrict, limit or terminate the Vendor's liability hereunder for such Claim.
VIII. 15 Non-Competition Covenant
(a) The Vendor will not, except as a supplier of goods and services
to or at the request of the Purchaser or an affiliate of the
Purchaser, either individually or in partnership or in conjunction
with any person or persons, firm, association, syndicate or body
corporate as principal, agent, shareholder (other than a holder of
not more than 5% of the shares of a body corporate the shares of
which are listed on a stock exchange), guarantor, creditor, or in
any other manner whatsoever, directly or indirectly, for a period of
three years after the Closing Date,
<PAGE>
-79-
(i) within Canada,
(ii) within the United States of America,
(iii) within the United Kingdom of Great Britain and Northern
Ireland,
(iv) elsewhere within the European Community, and
(v) in any other party of the world in which the Vendor now
carries on the Purchased Business, or in which it has a
customer which is a party to a Material Contract,
(each of which areas shall be severable for the purposes of
enforcement of this covenant) manufacture, design, produce or sell
any of the products (or any enhanced or improved versions thereof)
which have been since January 1, 1991 or are currently being
manufactured, designed, produced or sold by the Purchased Business
or which are currently under development by the Purchased Business.
(b) Notwithstanding the foregoing, the restriction in subsection (a)
shall not prohibit or restrict the Vendor or any subsidiary from
directly or indirectly acquiring a business, company or other
operation which as an incidental part of its normal business carries
on any of the activities described in subsection (a), provided that
following such acquisition such activities continue to constitute an
incidental part of such business' operations for the period
described in subsection (a) hereof.
VIII. 16 Change in Tax Year End
The Purchaser acknowledges that prior to Closing Spar (UK) may change its
tax year end to the Closing Date or the day prior to such date. If Spar (UK)
effects such change (i) the
<PAGE>
-80-
Purchaser shall not, and shall, following Closing, ensure that Spar (UK) shall
not, take any steps or action to rescind, revoke or otherwise render ineffective
such change of Spar (UK)'s tax year end (provided that Spar (UK) may change its
tax year end for periods following Closing) and (ii) the Vendor shall reimburse
Spar (UK) for all reasonable costs and expenses incurred by it in connection
with the preparation of all tax returns or other activities required as a result
of the change in tax year end.
ARTICLE IX
CONDITIONS OF CLOSING
IX.1 Conditions of Closing in Favour of the Purchaser
The sale and purchase of the Purchased Assets is subject to the following
terms and conditions for the exclusive benefit of the Purchaser, to be performed
or fulfilled at or prior to the Time of Closing:
(a) Representations and Warranties. The representations and warranties
of the Vendor contained in this Agreement shall be true and correct
in all material respects at the Time of Closing with the same force
and effect as if such representations and warranties were made at
and as of such time, and a certificate of a senior officer of the
Vendor, dated the Closing Date, to that effect shall have been
delivered to the Purchaser, such certificate to be in form and
substance satisfactory to the Purchaser, acting reasonably (provided
that the Purchaser's right to terminate this Agreement relying on
this condition shall apply only to the extent permitted under
subsection 7.2(b) hereof);
(b) Covenants. All of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Vendor at or
before the Time of Closing shall have been complied with or
performed in all material respects, and a certificate of
<PAGE>
-81-
a senior officer of the Vendor, dated the Closing Date, to that
effect shall have been delivered to the Purchaser, such certificate
to be in form and substance satisfactory to the Purchaser, acting
reasonably;
(c) Regulatory Consents. There shall have been obtained from all
appropriate federal, provincial, municipal or other governmental or
administrative bodies those Licences, permits, consents, approvals,
certificates, registrations and authorizations described in Schedule
22, in each case in form and substance satisfactory to the
Purchaser, acting reasonably;
(d) Contractual Consents. There shall have been given or obtained the
notices, consents and approvals described in Schedule 23, in each
case in form and substance satisfactory to the Purchaser, acting
reasonably;
(e) No Action or Proceeding. No legal or regulatory action or proceeding
shall be pending or threatened by any person to enjoin, restrict or
prohibit the purchase and sale of the Purchased Assets contemplated
hereby or which could materially adversely affect the Purchaser's
right to own and operate the Purchased Business or to own the
Purchased Assets;
(f) No Material Damage or Loss. No material damage by fire or other
hazard to, or expropriation or seizure by governmental or other
lawful authority of, the whole or any material part of the Purchased
Assets shall have occurred from the date hereof to the Time of
Closing;
(g) No Material Adverse Effect. No event or circumstance shall have
occurred since the date of the Interim Financial Statements which
constitutes a Material Adverse Effect;
<PAGE>
-82-
(h) Legal Matters. All actions, proceedings, instruments and documents
required to implement this Agreement, or instrumental thereto shall
have been approved as to form and legality by the Purchaser, acting
reasonably;
(i) Legal Opinion. The Vendor shall have delivered to the Purchaser
favourable opinions of counsel to the Vendor in the respective forms
annexed hereto as Exhibit 1; and
(j) Customer Assurances. The Purchaser shall have been satisfied, acting
reasonably, that, based on its meetings with representatives of the
Major Customers and the Canadian Department of Supply and Services
(ADSS@), the Major Customers and DSS will consent to the assignment
to the Purchaser of Contracts currently in existence between the
Vendor (or Spar (UK), as the case may be) and such Major Customer or
DSS; and the Purchaser shall have not been informed by any Major
Customer that the current relationship between the Purchased
Business and such Major Customer is not a positive one or will be
materially adversely affected as a result of the acquisition by the
Purchaser of the Purchased Business (if the Purchaser claims that it
has been so informed that the said relationship with such Major
Customer is not positive or will be materially adversely affected,
this condition shall not be considered to be not satisfied if the
Vendor can produce evidence to the contrary in respect of such
claim).
If any of the conditions contained in this section 9.1 shall not be
performed or fulfilled at or prior to the Time of Closing to the satisfaction of
the Purchaser, acting reasonably, the Purchaser may, by notice to the Vendor,
terminate this Agreement and the obligations of the Vendor and the Purchaser
under this Agreement, other than the obligations contained in sections 12.2,
12.3, and 12.4, provided that the Purchaser may also bring an action pursuant to
Article XI
<PAGE>
-83-
against the Vendor for damages suffered by the Purchaser where the
non-performance or non-fulfilment of the relevant condition is as a result of a
breach of covenant, representation or warranty by the Vendor. Any such condition
may be waived in whole or in part by the Purchaser without prejudice to any
claims it may have for breach of covenant, representation or warranty.
Notwithstanding the foregoing, if for any reason, the condition set forth
in subsection 9.1(j) is not satisfied, the Purchaser shall not terminate this
Agreement and the obligations of the parties hereunder unless, prior thereto,
the Purchaser gives to the Vendor written notice of such non-satisfaction
together with details thereof. Immediately upon receipt of such notice senior
representatives of the Vendor and the Purchaser shall meet to discuss the
background and reasons for the non-satisfaction of such condition and shall
negotiate in good faith to attempt to satisfactorily address such issue and
complete the transactions contemplated hereby. Either party may postpone the
Closing Date for up to five Business Days for the purposes of permitting such
good faith negotiations to take place.
9.1.1 Except to the extent the same constitutes a failure by the Vendor to
satisfy the condition set forth in subsection 9.1(b), the conditions in Section
9.1 shall be deemed satisfied notwithstanding that any one or more of the
following events, changes or developments shall have occurred on or after the
date hereof and such events changes or developments have or could reasonably be
expected to have a Material Adverse Effect:
(a) new contracts (or amendments to Contracts) entered into by the
Vendor or Spar (UK) with respect to which the Purchaser has given,
or is not required hereunder to give, its consent;
(b) delay, failure or inability by the Vendor to acquire new customers
or prospective orders, including, without limiting the generality of
the foregoing, the failure or
<PAGE>
-84-
inability to execute contracts and agreements currently under
discussion or negotiation;
(c) changes in general market conditions related to the Purchased
Business, including, without limiting the generality of the
foregoing, the entry of new competitors into the markets related to
the Purchased Business or the expansion of existing competitors
within such markets;
(d) delays in product shipments in the ordinary course of business;
(e) delays in the delivery of materials from suppliers in the ordinary
course of business;
(f) loss of customers due to a pre-existing competitive relationship
between the customer and Purchaser; or
(g) delays in the design or implementation process of products in the
ordinary course of business.
IX.2 Conditions of Closing in Favour of the Vendor
The sale and purchase of the Purchased Assets is subject to the following
terms and conditions for the exclusive benefit of the Vendor, to be performed or
fulfilled at or prior to the Time of Closing:
(a) Representations and Warranties. The representations and warranties
of the Purchaser contained in this Agreement shall be true and
correct in all material respects at the Time of Closing with the
same force and effect as if such
<PAGE>
-85-
representations and warranties were made at and as of such time, and
a certificate of a senior officer of the Purchaser, dated the
Closing Date, to that effect shall have been delivered to the
Vendor, such certificate to be in form and substance satisfactory to
the Vendor, acting reasonably;
(b) Covenants. All of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Purchaser at or
before the Time of Closing shall have been complied with or
performed in all material respects, and a certificate of a senior
officer of the Purchaser, dated the Closing Date, to that effect
shall have been delivered to the Vendor, such certificate to be in
form and substance satisfactory to the Vendor, acting reasonably;
(c) Regulatory Consents. There shall have been obtained from all
appropriate federal, provincial, municipal or other governmental or
administrative bodies those licences, permits, consents, approvals,
certificates, registrations and authorizations described in Schedule
22, in each case in form and substance satisfactory to the Vendor,
acting reasonably;
(d) Contractual Consents. There shall have been given or obtained the
notices, consents and approvals described in Schedule 23, in each
case in form and substance satisfactory to the Vendor acting
reasonably;
(e) No Action or Proceeding. No legal or regulatory action or proceeding
shall be pending or threatened by any person to enjoin, restrict or
prohibit the purchase and sale of the Purchased Assets contemplated
hereby or which could materially adversely affect the Purchaser's
right to own and operate the Purchased Business or to own the
Purchased Assets;
<PAGE>
-86-
(f) Legal Matters. All actions, proceedings, instruments and documents
required to implement this Agreement, or instrumental thereto, shall
have been approved as to form and legality by the Vendor, acting
reasonably;
(g) Legal Opinion. The Purchaser shall have delivered to the Vendor a
favourable opinion of counsel to the Purchaser in the form annexed
hereto as Exhibit 2; and
(h) Lenders' Consent. The Vendor's banking syndicate shall have
consented to the transaction and discharged its security interests
in the Purchased Business and Purchased Assets.
If any of the conditions contained in this section 9.2 shall not be
performed or fulfilled at or prior to the Time of Closing to the satisfaction of
the Vendor acting reasonably, the Vendor may, by notice to the Purchaser,
terminate this Agreement and the obligations of the Vendor and the Purchaser
under this Agreement, other than the obligations contained in sections 12.2,
12.3 and 12.4, provided that the Vendor may also bring an action pursuant to
Article XI against the Purchaser for damages suffered by it where the
nonperformance or non-fulfilment of the relevant condition is as a result of a
breach of covenant, representation or warranty by the Purchaser. Any such
condition may be waived in whole or in part by the Vendor without prejudice to
any claims it may have for breach of covenant, representation or warranty.
IX.3 Extension of Closing Date
If any of the conditions contained in section 9.1 or section 9.2 shall not
be performed or fulfilled at or prior to the Time of Closing to the satisfaction
of the Purchaser or the Vendor, as the case may be, acting reasonably, either
party hereto (provided such party is not in default of any of its obligations
hereunder) may, at or prior to the Time of Closing, provide written notice to
the other party extending the Closing Date and, provided such condition may be
performed or
<PAGE>
-87-
fulfilled within ten Business Days thereafter, the F Closing shall be postponed
until such date as the parties may agree, provided however that if the parties
are unable to agree on a new Closing Date the Closing Date shall occur on the
tenth Business Day following the original Closing Date.
ARTICLE X
CLOSING DATE AND TRANSFER OF POSSESSION
X.1 Transfer
Subject to compliance with the terms and conditions hereof, the transfer
of possession of the Purchased Assets shall be deemed to take effect as at the
Time of Closing.
X.2 Place of Closing
The closing shall take place at the Time of Closing at the offices of
Borden & Elliot, counsel for Vendor, Suite 4400, 40 King Street West, Toronto,
Ontario.
X.3 Further Assurances
From time to time subsequent to the Closing Date, each party to this
Agreement covenants and agrees that it will at all times after the Closing Date,
at the expense of the requesting party, promptly execute and deliver all such
documents, including, without limitation, all such additional conveyances,
transfers, consents and other assurances and do all such other acts and things
as the other party, acting reasonably, may from time to time request be executed
or done in order to better evidence or perfect or effectuate any provision of
this Agreement or of any agreement or other document executed pursuant to this
Agreement or any of the respective obligations intended to be created hereby or
thereby.
<PAGE>
-88-
X.4 Risk of Loss
From the date hereof up to the Time of Closing, the Purchased Assets shall
be and remain at the risk of the Vendor. If, prior to the Time of Closing, all
or any part of the Purchased Assets that are necessary to carry on the Purchased
Business as currently conducted are destroyed or damaged by fire or any other
casualty or shall be appropriated, expropriated or seized by governmental or
other lawful authority, unless the Purchaser terminates its obligations under
this Agreement as contemplated by section 9.1, the Purchaser shall complete the
purchase without reduction of the Purchase Price, in which event all proceeds of
insurance or compensation for expropriation or seizure shall be paid to the
Purchaser at the Time of Closing and all right and claim of the Vendor to any
such amounts not paid by the Closing Date shall be assigned at the Time of
Closing to the Purchaser.
ARTICLE XI
INDEMNIFICATION
XI.1 Indemnification by the Vendor
The Vendor shall indemnify and save harmless the Purchaser from all Losses
suffered or incurred by the Purchaser as a result of or arising directly or
indirectly out of or in connection with:
(a) any breach by the Vendor of or any inaccuracy of any representation
or warranty of the Vendor contained in this Agreement or in any
agreement, certificate or other document delivered pursuant hereto
(provided that the Vendor shall not be required to indemnify or save
harmless the Purchaser in respect of any breach or inaccuracy of any
representation or warranty unless the Purchaser shall have provided
notice to the Vendor in accordance with section 11.5 on or prior to
the expiration of the
<PAGE>
-89-
applicable time period related to such representation and warranty
as set out in section 7.1);
(b) any breach or non-performance by the Vendor of any covenant to be
performed by it that is contained in this Agreement or in any
agreement, certificate or other document delivered pursuant hereto;
(c) if the Vendor shall not have obtained the Bulk Sales Exemption
Order, any failure by the Vendor to comply with the applicable
provisions of the Bulk Sales Act (Ontario), or similar applicable
legislation, other than Losses resulting directly or indirectly from
the failure of the Purchaser to satisfy or discharge any of the
Assumed Liabilities; and
(d) any of the Excluded Liabilities.
XI.2 Indemnification by the Purchaser
The Purchaser shall indemnify and save harmless the Vendor from all Losses
suffered or incurred by the Vendor as a result of or arising directly or
indirectly out of or in connection with:
(a) any breach by the Purchaser of or any inaccuracy of any
representation or warranty contained in this Agreement or in any
agreement, instrument, certificate or other document delivered
pursuant hereto;
(b) any breach or non-performance by the Purchaser of any covenant to be
performed by it that is contained in this Agreement or in any
agreement, certificate or other document delivered pursuant hereto;
and
<PAGE>
-90-
(c) any liabilities or obligations imposed on or incurred by the Vendor
as a result of the ownership or use of the Purchased Assets by the
Purchaser or the operations of the Purchased Business by the
Purchaser after the Time of Closing; and
(d) any failure by the Purchaser to pay, satisfy, discharge, perform or
fulfil any of the Assumed Liabilities.
XI.3 Limitation on Indemnities
Notwithstanding section 11.1, the Vendor=s obligation to indemnify the
Purchaser in respect of Losses for breaches or inaccuracies of one or more
representations or warranties will be applicable only to the extent that the
amount of the Loss in respect of any such breach or inaccuracy exceeds an amount
equal to $40,000 (a "Material Loss") and then only to the extent that the
aggregate of such Material Losses exceeds an amount equal to $300,000 (the
"Threshold").
XI.4 Maximum Liability
Notwithstanding anything contained herein, the obligation of each of the
Vendor and the Purchaser to indemnify the other party in respect of Losses for
breaches or inaccuracies of one or more representations or warranties contained
in this Agreement or in any agreement, certificate or other document to be
executed and delivered pursuant hereto shall be limited to an aggregate maximum
liability in respect of all such Losses of an amount equal to seventy-five
percent (75%) of the Purchase Price.
<PAGE>
-91-
XI.5 Notice of Claim
In the event that a party (the "Indemnified Party") shall become aware of
any claim, proceeding or other matter (a "Claim") in respect of which the other
party (the "Indemnifying Party") agreed to indemnify the Indemnified Party
pursuant to this Agreement, the Indemnified Party shall promptly give written
notice thereof to the Indemnifying Party. Such notice shall specify whether the
Claim arises as a result of a claim by a person against the Indemnified Party (a
"Third Party Claim") or whether the Claim does not so arise (a "Direct Claim"),
and shall also specify with reasonable particularity (to the extent that the
information is available):
(a) the factual basis for the Claim; and
(b) the amount of the Claim, if known.
If, through the fault of the Indemnified Party, the Indemnifying Party does not
receive notice of any Claim in time to effectively contest the determination of
any liability susceptible of being contested, the Indemnifying Party shall be
entitled to set off against the amount claimed by the Indemnified Party the
amount of any Losses incurred by the Indemnifying Party resulting from the
Indemnified Party's failure to give such notice on a timely basis.
XI.6 Direct Claims
With respect to any Direct Claim, following receipt of notice from the
Indemnified Party of the Claim, the Indemnifying Party shall have 90 days to
make such investigation of the Claim as is considered necessary or desirable.
For the purpose of such investigation, the Indemnified Party shall make
available to the Indemnifying Party the information relied upon by the
Indemnified Party to substantiate the Claim, together with all such other
information as the Indemnifying Party may reasonably request. If both parties
agree at or prior to the expiration of such 90-day period (or any mutually
agreed upon extension thereof) to the validity and amount of such Claim, the
Indemnifying Party shall immediately pay to the Indemnified Party the full
<PAGE>
-92-
agreed upon amount of the Claim, failing which the matter shall be referred to
binding arbitration in such manner as the parties may agree or shall be
determined by a court of competent jurisdiction.
XI.7 Third Party Claims
With respect to any Third Party Claim, the Indemnifying Party shall have
the right, at its expense, to participate in or assume control of the
negotiation, settlement or defence of the Claim and, in such event, the
Indemnifying Party shall reimburse the Indemnified Party for all the Indemnified
Party's out-of-pocket expenses as a result of such participation or assumption.
If the Indemnifying Party elects to assume such control, the Indemnified Party
shall have the right to participate in the negotiation, settlement or defence of
such Third Party Claim and to retain counsel to act on its behalf, provided that
the fees and disbursements of such counsel shall be paid by the Indemnified
Party unless the Indemnifying Party consents to the retention of such counsel or
unless the named parties to any action or proceeding include both the
Indemnifying Party and the Indemnified Party and a representation of both the
Indemnifying Party and the Indemnified Party by the same counsel would be
inappropriate due to the actual or potential differing interests between them
(such as the availability of different defences). If the Indemnifying Party,
having elected to assume such control, thereafter fails to defend the Third
Party Claim within a reasonable time, the Indemnified Party shall be entitled to
assume such control and the Indemnifying Party shall be bound by the results
obtained by the Indemnified Party with respect to such Third Party Claim. If any
Third Party Claim is of a nature such that the Indemnified Party is required by
applicable law to make a payment to any person (a "Third Party") with respect to
the Third Party Claim before the completion of settlement negotiations or
related legal proceedings, the Indemnified Party may make such payment and the
Indemnifying Party shall, forthwith after demand by the Indemnified Party,
reimburse the Indemnified Party for such payment. If the amount of any liability
of the Indemnified Party under the Third Party Claim in respect of which such a
payment was made, as finally determined, is less than the amount that was paid
by the Indemnifying Party to the Indemnified Party, the Indemnified Party shall,
forthwith
<PAGE>
-93-
after receipt of the difference from the Third Party, pay the amount of such
difference to the Indemnifying Party.
XI.8 Settlement of Third Party Claims
If the Indemnifying Party fails to assume control of the defence of any
Third Party Claim, the Indemnified Party shall have the exclusive right to
contest, settle or pay the amount claimed. Whether or not the Indemnifying Party
assumes control of the negotiation, settlement or defence of any Third Party
Claim, the Indemnifying Party shall not settle any Third Party Claim without the
written consent of the Indemnified Party, which consent shall not be
unreasonably withheld or delayed; provided, however, that the liability of the
Indemnifying Party shall be limited to the proposed settlement amount if any
such consent is not obtained for any reason.
XI.9 Co-operation
The Indemnified Party and the Indemnifying Party shall co-operate fully
with each other with respect to Third Party Claims, and shall keep each other
fully advised with respect thereto (including supplying copies of all relevant
documentation promptly as it becomes available).
XI.10 Exclusivity
The provisions of this Article XI shall apply to any Claim for breach of
any covenant, representation, warranty or other provision of this Agreement or
any agreement, certificate or other document delivered pursuant to this
Agreement (other than a claim for specific performance or injunctive relief)
with the intent that all such Claims shall be subject to the limitations and
other provisions contained in this Article XI.
<PAGE>
-94-
XI.11 Change of Purchase Price
Any amount paid under this Article in respect of a breach or inaccuracy of
a representation or warranty shall be deemed to increase or decrease the
Purchase Price, as the case may be, by the amount of such payment.
ARTICLE XII
MISCELLANEOUS
XII.1 Notices
(a) Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be delivered in person,
transmitted by telecopy or similar means of recorded electronic
communication or sent by registered mail, charges prepaid, addressed
as follows:
(i) if to the Vendor:
Spar Aerospace Limited
121 King Street West
Suite 1800
Toronto, Ontario
M5H 4C2
Attention: Vice-President, Legal Counsel
Telecopier No.: (416) 682-7631
(ii) if to the Purchaser:
DRS Technologies, inc.
5 Sylvan Way
Parsippany, New Jersey
07054
Attention: General Counsel
Telecopier No.: (973) 898-4730
<PAGE>
-95-
(b) Any such notice or other communication shall be deemed to have been
given and received on the day on which it was delivered or
transmitted (or, if such day is not a Business Day, on the next
following Business Day) or, if mailed, on the fifth Business Day
following the date of mailing; provided, however, that if at the
time of mailing or within five Business Days thereafter there is or
occurs a labour dispute or other event that might reasonably be
expected to disrupt the delivery of documents by mail, any notice or
other communication hereunder shall be delivered or transmitted by
means of recorded electronic communication as aforesaid.
(c) Either party may at any time change its address for service from
time to time by giving notice to the other party in accordance with
this section 12.1.
XII.2 Commissions, etc.
Each party agrees to indemnify and save harmless the other from and
against all Losses suffered or incurred by such other party in respect of any
commission or other remuneration payable or alleged to be payable to any broker,
agent or other intermediary who purports to act or have acted for or on behalf
of such first mentioned party.
XII.3 Consultation
The parties shall consult with each other before issuing any press release
or making any other public announcement with respect to this Agreement or the
transactions contemplated hereby and, except as required by any applicable law
or regulatory requirement, neither of them shall issue any such press release or
make any such public announcement without the prior written consent of the
other, which consent shall not be unreasonably withheld or delayed.
<PAGE>
-96-
XII.4 Disclosure
Prior to any public announcement of the transaction contemplated hereby
pursuant to section 12.3, neither party shall disclose this Agreement or any
aspects of such transaction except to its board of directors, its senior
management, its legal, accounting, financial or other professional advisors, any
financial institution contacted by it with respect to any financing required in
connection with such transaction and counsel to such institution, or as may be
required by any applicable law or any regulatory authority or stock exchange
having jurisdiction.
XII.5 Confidentiality
The letter agreement dated July 1, 1997 between the Vendor's agent and the
Purchaser regarding confidentiality of information shall, notwithstanding
execution and delivery of this Agreement, remain in full force and effect
pending completion of the transactions contemplated hereby and shall continue to
apply to all information and materials referred to in such letter, whether
received before or after the date of this Agreement.
XII.6 Commercially Reasonable/Best Efforts
The parties acknowledge and agree that, for all purposes of this
Agreement, an obligation on the part of either party to use its best efforts or
commercially reasonable efforts to obtain any waiver, consent, approval, permit,
licence or other document shall not require such party to make any payment to
any person for the purpose of procuring the same, other than payments for
amounts due and payable to such person, payments for incidental expenses
incurred by such person and payments required by any applicable law or
regulation.
<PAGE>
-97-
XII.7 Counterparts
This Agreement may be executed in counterparts, each of which when
executed (and delivered by facsimile transmission or otherwise) shall constitute
an original and all of which taken together shall constitute one and the same
instrument.
XII.8 No Third Party Beneficiaries
This contract is not intended to grant rights to any persons not parties
hereto.
IN WITNESS WHEREOF this Agreement has been executed by the parties.
SPAR AEROSPACE LIMITED
By:_____________________________
DRS TECHNOLOGIES, INC.
By:_____________________________
<PAGE>
SCHEDULE 10
ALLOCATION OF THE PURCHASE PRICE CANADIAN $
-----------
Shares of Spar Aerospace U.K. Limited $13,100,000
Assets of Applied Systems Division (excludes assets of Spar UK)
Trade Receivables $5,010,000
Holdbacks receivables $1,480,000
Inventory - Work in process $75,000
Inventory - Unbilled $5,103,000
Prepaid Expenses ___________
$11,668,000
Net Working Capital Adjustment $0
Land $100,000
Building $600,000
Machinery & Equipment
Leasehold Improvements $150,000
Machinery & Equipment & test equipment $925,000
Test Equipment $1,485,000
Furniture & Equipment $200,000
Computer Hardware $350,000
Computer Software $190,000
Subtotal for Machinery & Equipment $3,300,000
-----------
Assets before Goodwill $15,668,000
Trade Accounts Payable ($1,681,000)
Accrued Liabilities ($1,943,000)
Warranty Provision ($1,248,000)
Customer Advance Payments ($1,796,000)
-----------
Assumed Liabilities in Applied (6,668,000)
Net Assets $9,000,000
Goodwill $26.050.000
-----------
Purchase price $48,150,000
-----------
Note: The components of working capital will be the balances reflected on the
closing audited balance sheet.
<PAGE>
SCHEDULE 11.
LOCATION OF ASSETS
The assets of Spar Aerospace Limited, Applied Systems are located at:
Spar Applied Systems
115 Emily Street
Carleton Place, Ontario
K7C 4J5
Spar Applied Systems
365 March Road
Kanata, Ontario
K2K 2C9
and
Spar (UK) Limited
Springfield Road
Hayes, Middlesex
England, UB4 0TY
- --------------------------------------------------------------------------------
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT
executed by and among
DRS TECHNOLOGIES, INC., DRS TECHNOLOGIES CANADA
COMPANY / COMPAGNIE DRS TECHNOLOGIES CANADA,
AND DRS TECHNOLOGIES CANADA, INC.
as the Co-Borrowers,
AND
MELLON BANK, N.A.,
as the Agent and as a Lender
AND
MELLON BANK CANADA
as a Lender
AND
OTHER LENDERS HEREAFTER
SIGNATORY HERETO
as a Lender
DATED: OCTOBER 29, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PREAMBLE AND RECITALS........................................................ 1
ARTICLE I
DEFINITIONS; RULES OF
INTERPRETATION AND CONSTRUCTION;
AND ACCOUNTING PRINCIPLES
Section 1.01 Definitions..................................................... 4
Section 1.02 Rules of Interpretation and Construction........................31
Section 1.03 Accounting Principles...........................................32
ARTICLE II
AMOUNTS AND TERMS OF THE
LOAN FACILITIES
Section 2.01 Revolving Credit Loan Facility..................................34
Section 2.02 Term Loan Facility..............................................42
Section 2.03 Interest on the Loan Facilities.................................43
Section 2.03A Canadian Bankers Acceptances....................................47
Section 2.04 Fees.............................................................50
Section 2.05 Prepayments......................................................51
Section 2.06 Payments; Collection of Accounts................................52
Section 2.07 Special Provisions Governing Eurodollar Rate Loans..............54
Section 2.08 Increased Capital...............................................58
Section 2.09 Authorized Officers of the Co-Borrowers.........................58
Section 2.10 Taxes............................................................58
Section 2.11 Security for the Loan Facilities................................61
Section 2.12 Joint and Several Liability.....................................61
ARTICLE III
CONDITIONS TO THE LOAN FACILITIES
Section 3.01 Conditions Precedent to the Effectiveness of this
Loan Agreement..................................................63
Section 3.02 Conditions Precedent to All Loans and Letters of Credit.........65
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Representations and Warranties on the Closing Date..............67
Section 4.02 Subsequent Funding Representations and Warranties...............75
<PAGE>
ARTICLE V
REPORTING COVENANTS
Section 5.01 Statement of Accounting.........................................76
Section 5.02 Reporting and Information Requirements..........................77
Section 5.03 Environmental Notices...........................................80
Section 5.04 Notice of Name Changes and Location Changes.....................81
ARTICLE VI
AFFIRMATIVE COVENANTS
Section 6.01 Corporate Existence, etc........................................82
Section 6.02 Corporate Powers, etc...........................................82
Section 6.03 Compliance with Laws, etc.......................................82
Section 6.04 Payment of Taxes and Claims.....................................82
Section 6.05 Maintenance of Properties; Insurance............................82
Section 6.06 Inspection of Property; Books and Records; Discussions..........83
Section 6.07 Litigation, Claims, etc.........................................83
Section 6.08 Labor Disputes..................................................83
Section 6.09 Maintenance of Licenses, Permits, etc...........................83
Section 6.10 Use of Proceeds.................................................84
Section 6.11 Continuation of or Change in Business...........................84
Section 6.12 Additional Corporate Guarantors and/or Partnership Guarantors...84
Section 6.13 Minimum Asset Coverage..........................................84
Section 6.14 Minimum Required Interest Rate Hedge Protection.................84
ARTICLE VII
NEGATIVE COVENANTS
Section 7.01 Consolidated Debt...............................................85
Section 7.02 Sales of Assets; Liens..........................................85
Section 7.03 Loans, Advances and Investments.................................86
Section 7.04 Restricted Junior Payments......................................87
Section 7.05 Restriction on Fundamental Changes..............................87
Section 7.06 ERISA...........................................................87
Section 7.07 Amendment of Articles of Incorporation or By-Laws...............88
Section 7.08 Margin Regulations..............................................88
Section 7.09 Cancellation of Consolidated Debt; Prepayments..................88
Section 7.10 Environmental Liabilities.......................................88
Section 7.11 Guaranties......................................................88
Section 7.12 No Negative Pledges to Other Person.............................89
ii
<PAGE>
ARTICLE VIII
FINANCIAL COVENANTS
Section 8.01 Minimum Consolidated Net Worth..................................90
Section 8.02 Maximum Consolidated Senior Debt Leverage Ratio.................90
Section 8.03 Maximum Consolidated Funded Debt Leverage Ratio.................91
Section 8.04 Minimum Consolidated Fixed Charge Coverage Ratio................91
ARTICLE IX
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
Section 9.01 Events of Default...............................................93
Section 9.02 Rights and Remedies.............................................94
Section 9.03 Application of Proceeds.........................................95
Section 9.04 No Notices......................................................96
Section 9.05 Agreement to Pay Attorneys' Fees and Expenses...................96
Section 9.06 No Additional Waiver Implied by One Waiver......................96
Section 9.07 Failure to Exercise Rights......................................96
Section 9.08 Waiver Of Jury Trial............................................97
Section 9.09 Remedies Cumulative.............................................97
ARTICLE X
THE AGENT
Section 10.01 Appointment....................................................98
Section 10.02 General Nature of the Agent's Duties...........................98
Section 10.03 Exercise of Powers.............................................98
Section 10.04 General Exculpatory Provisions.................................99
Section 10.05 Administration by the Agent...................................100
Section 10.06 Each Lender Not Relying on Agent or Other Lenders.............100
Section 10.07 Indemnification...............................................101
Section 10.08 Agent in its Individual Capacity..............................101
Section 10.09 Holders of Notes..............................................101
Section 10.10 Successor Agent...............................................101
Section 10.11 Additional Agents.............................................102
Section 10.12 Calculations..................................................102
iii
<PAGE>
ARTICLE XI
MISCELLANEOUS
Section 11.01 Concerning the Collateral and the Collateral Documents........103
Section 11.02 Assignments and Participations................................103
Section 11.03 Expenses......................................................106
Section 11.04 Indemnity.....................................................106
Section 11.05 Ratable Sharing...............................................107
Section 11.06 Amendments and Waivers........................................108
Section 11.07 Independence of Covenants.....................................108
Section 11.08 Notices.......................................................109
Section 11.09 Survival of Warranties and Agreements.........................109
Section 11.10 Marshalling; Recourse to Security; Payments Set Aside.........109
Section 11.11 Severability..................................................109
Section 11.12 Governing Law.................................................109
Section 11.13 Successors and Assigns........................................109
Section 11.14 Consent to Jurisdiction and Service of Process................109
Section 11.15 Counterparts; Effectiveness; Inconsistencies..................110
Section 11.16 Construction..................................................110
Section 11.17 Entire Agreement..............................................110
Section 11.18 Process Agent.................................................110
Section 11.19 Judgment Currency.............................................111
iv
<PAGE>
EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit "A" Form of Assignment and Acceptance Agreement
Exhibit "B" Form of Letters of Credit Reimbursement Agreement
Exhibit "C" Form of Borrowing Base Certificate
Exhibit "D" Form of Notice of Borrowing
Exhibit "E" Form of Notice of Conversion/Continuation
Exhibit "F" Form of Officer's Certificate
Exhibit "G" Form of Revolving Credit Loan Note and Form of Canadian
Revolving Credit Loan Note
Exhibit "H" Form of Swap Agreement
Exhibit "I" Form of Term Loan Note
Exhibit "J" Form of Opinion Letter
SCHEDULES
Schedule 1.01-A List of Leased Properties
Schedule 1.01-B Customary Permitted Liens
Schedule 1.01-C Eurodollar Affiliates
Schedule 1.01-D Permitted Encumbrances
Schedule 2.01 List of Subsidiaries and/or Affiliates who may Borrow
and/or Have Letters of Credit Issued for their Account
Schedule 2.01 (vi) Schedule of Existing Letters of Credit
Schedule 2.04 (ii) Letter of Credit Fees
Schedule 4.01 (iii) Ownership of Capital Stock
Schedule 4.01 (vii) Pending or Threatened Litigation
Schedule 4.01 (xv) Environmental Matters
Schedule 4.01 (xvii) ERISA
Schedule 4.01 (xx) Joint Venture/Partnership
Schedule 4.01 (xxi) Insurance Policies, Programs and Claims
Schedule 4.01 (xxv) List of Undisclosed Liabilities
Schedule 4.01 (xxvii) Labor Matters
Schedule 4.01 (xxx) Business Names
Schedule 4.01 (xxxi) Location of Collateral
Schedule 6.05 Schedule of Insurance Policies and Programs
Schedule 7.01(iii) Permitted Existing Debt
Schedule 7.02 (ii) Existing Permitted Liens
Schedule 7.03 Existing Loans, Advances, Investments
Schedule 7.11(i) Existing Guaranties
v
<PAGE>
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT
THIS REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT (including all
amendments, modifications and supplements is hereinafter referred to as this
"Loan Agreement"), is made this _____ day of October, 1997, by and among
DRS TECHNOLOGIES, INC., a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, having its
principal office located at 5 Sylvan Way, Parsippany, New Jersey 07054
(hereinafter referred to as "DRS"),
AND
DRS TECHNOLOGIES CANADA, INC., a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, having
its principal office located at 5 Sylvan Way, Parsippany, New Jersey 07054
(hereinafter referred to as "DRS Canada Inc."),
AND
DRS TECHNOLOGIES CANADA COMPANY / COMPAGNIE DRS TECHNOLOGIES CANADA, a
Nova Scotia company, having its principal office and chief executive office
located at 365 March Road, Kanata, Ontario K2K 1X3 (hereinafter referred to as
"DRS Flight Safety" and hereinafter DRS, DRS Canada Inc., and DRS Flight Safety
shall be collectively referred to as the "Co-Borrowers" and sometimes
individually referred to as a "Borrower"),
AND
MELLON BANK, N.A., a national banking association duly organized and
validly existing under the laws of the United States of America, having an
office located at Mellon Bank Center, 1735 Market Street, Philadelphia,
Pennsylvania 19101, strictly in its capacity as a lender hereunder (hereinafter
sometimes referred to individually as "Mellon US" and/or as a "Lender"),
AND
MELLON BANK CANADA, one of the chartered banks of Canada, duly
organized and validly existing under the laws of Canada, having an office
located at Royal Trust Tower, 32nd Floor, Toronto Dominion Center, Toronto,
Ontario M5K 1K2, strictly in its capacity as a lender hereunder (hereinafter
sometimes referred to as "Mellon Canada" and/or as a "Lender" and, in its
capacity as a maker of Canadian Loans or issuer of or participant in Canadian
Letters of Credit, a "Canadian Lender"),
AND
OTHER FINANCIAL INSTITUTIONS, that are either signatories to this Loan
Agreement or who from time to time may hereafter become a lender under the Loan
Agreement pursuant to Section 11.8 hereof (hereinafter together with Mellon U.S.
and Mellon Canada, collectively referred to as the "Lenders" and individually
referred to as a "Lender"),
1
<PAGE>
AND
MELLON BANK, N.A., a national banking association duly organized and
validly existing under the laws of the United States of America, having an
office located at Mellon Bank Center, 1735 Market Street, Philadelphia,
Pennsylvania 19101, in its capacity as the agent for the Lenders hereunder
(hereinafter referred to as the "Agent", as said definition is more fully
described in Section 1.01 hereof).
W I T N E S S E T H:
WHEREAS, the Co-Borrowers are engaged in the business of designing,
manufacturing and marketing high technology products for military and commercial
customers in the United States, Canada and overseas; and
WHEREAS, the Co-Borrowers have requested that the Lenders make
available to the Co-Borrowers a secured recourse revolving credit loan in the
aggregate principal amount of up to Forty Million and 00/100 (US$40,000,000.00)
Dollars for the purposes of financing (i) a portion of the Co-Borrowers' general
corporate requirements, including, without limitation, (A) working capital, (B)
commercial/documentary and standby letters of credit and (ii) the acquisition by
DRS Canada Inc. of 100% of the stock of Spar Aerospace (U.K.) Limited, a company
incorporated under the laws of England and Wales ("Spar (UK)") as more fully
described herein (hereinafter referred to as the "Revolving Credit Loan
Facility"); and
WHEREAS, the Co-Borrowers have requested that the Lenders make
available to the Co-Borrowers a secured recourse term loan in Canadian Dollars,
having a Dollar Equivalent in the aggregate principal amount of Twenty Million
and 00/100 (US$20,000,000.00) Dollars, for the purpose of financing the
acquisition by DRS Flight Safety of certain assets and properties of Spar
Aerospace Limited, a corporation existing under the laws of Canada, all as more
fully described herein (hereinafter referred to as the "Term Loan Facility");
and
WHEREAS, for the purposes of this Loan Agreement, the Revolving Credit
Loan Facility and the Term Loan Facility, as they may from time to time be
hereinafter amended, modified, extended, refinanced and/or otherwise
supplemented, shall be collectively referred to as the "Loan Facilities"); and
WHEREAS, the Lenders have agreed to make the Loan Facilities available
to the Co-Borrowers, subject to the terms, conditions and provisions hereinafter
set forth; and
WHEREAS, the Co-Borrowers and the Lenders anticipate and contemplate
that the Lenders may sell, assign and transfer at times after the date hereof, a
portion of their respective interests in the Loan Facilities to other financial
institutions described in the definition of "Eligible Assignee" set forth in
Section 1.01 of this Loan Agreement, and said additional lenders shall
hereinafter be a part of and constitute a member of the Lenders; and
WHEREAS, the Lenders have requested that the Agent act as
administrative and collateral agent for the Lenders in connection with the Loan
Facilities, and the Agent has agreed to accept such responsibilities and duties,
subject to the terms, conditions and provisions hereinafter set forth.
2
<PAGE>
NOW, THEREFORE, in consideration of these premises and the mutual
representations, covenants and agreements of the Co-Borrowers, the Lenders and
the Agent, each party binding itself and its respective successors and assigns,
hereby promises, covenants and agrees as follows:
3
<PAGE>
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION AND
CONSTRUCTION; AND ACCOUNTING PRINCIPLES
Section 1.01 Definitions. The following terms, as used in this Loan
Agreement, shall have the following meanings, unless the context clearly
indicates and requires otherwise:
"Acceptance Fee" means the fee payable at the time of the acceptance
of a Canadian Bankers Acceptance established by multiplying the face amount of
such Canadian Bankers Acceptance by the BA Margin as of the date of issue and
acceptance of such Canadian Bankers Acceptance and by multiplying the product so
obtained by a fraction having a numerator equal to the number of days in the
term of such Canadian Bankers Acceptance and a denominator of 365.
"Accounts" or "Account Receivable" or "Accounts Receivable" shall mean
(i) any "account", as such term is defined in Section 9-106 of the Uniform
Commercial Code of each State where applicable (or any successor section of the
Uniform Commercial Code) and (ii) any "account" as such term is defined in
subsection 1(1) of the Personal Property Security Act (Ontario), whether now
owned or hereafter acquired by any one of the Co-Borrowers and/or their
Subsidiaries and Affiliates, and in any event, includes, without limitation, all
accounts, contracts, contract rights, chattel paper, general intangibles, notes,
drafts, acceptances, chattel mortgages, conditional sale contracts, bailment
leases, security agreements, contribution rights and other forms of obligations
now or hereafter arising out of or acquired in the course of or in connection
with any business of the Co-Borrowers', their Subsidiaries' or Affiliates'
conduct, together with all liens, guaranties, securities, rights, remedies and
privileges pertaining to any of the foregoing, whether now existing or hereafter
created or arising, and all rights with respect to returned and repossessed
items of inventory.
"Accrued Unbilled Government Accounts Receivable" shall mean the
aggregate face amount owing in respect of Accounts of the Co-Borrowers, their
Subsidiaries and Affiliates, generated in connection with Contractual
Obligations with any Governmental Authority for work performed for which payment
to vendors or subcontractors has been made or accrued, if the Account (i) has
not yet been invoiced to the relevant Governmental Authority as a result of the
normal frequency of billing under the particular contract or governmental delays
in the preparation of contract documents and (ii) will otherwise meet all
requirements of Qualified Billed Government Accounts Receivable upon invoicing.
"Advance Limit" shall mean the Dollar Equivalent of the amount of the
Revolving Credit Facility which the Lenders may from time to time advance to the
Co-Borrowers in the form of either direct Revolving Credit Loans or Letters of
Credit or Canadian Bankers Acceptances, and which amount shall not in the
aggregate at any time outstanding exceed the lesser of (i) US$40,000,000.00 or
(ii) the sum of (a) eighty percent (80%) of all Qualified Billed Accounts
Receivable (including Qualified Billed Government Accounts Receivable), as of
the date of determination, plus (b) fifty (50%) of all Accrued Unbilled
Government Accounts Receivable, as of the date of determination and (c) fifty
percent (50%) of the Qualified Inventory (net of all progress billings and/or
payments), as of the date of determination, provided, however, in no event shall
the amount described in clause (c) ever exceed the lesser of (1)
US$10,000,000.00 or (2) thirty percent (30%) of the total Revolving Credit Loans
outstanding, as of the date of determination.
4
<PAGE>
"Affiliate" of any Person shall mean any other Person which or who,
directly or indirectly, controls or is controlled by, or is under common control
with such Person; provided, however, natural persons and minority partners of
any said Person shall not be deemed an Affiliate for purposes of this
definition. For the purposes of the preceding sentence, "controls" (including,
with correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise, and in any case
shall include direct or indirect ownership (beneficially or of record) of, or
direct or indirect power to vote, fifty percent (50%) or more of the outstanding
shares of any class of capital stock of such Person (or in the case of Person
that is not a corporation, fifty percent (50%) or more of any class of equity
interest).
"Affiliate Canadian Lender" shall mean an Affiliate, branch or agency
of a Lender that is resident in Canada for purposes of the Income Tax Act
(Canada) and qualified as a bank under the Bank Act (Canada) or a trust or loan
company under the applicable Laws of Canada.
"Agent" shall have the meaning ascribed and assigned to such term as
set forth in the preamble of this Loan Agreement; provided, however, pursuant to
Section 10.11, Agent hereby designates Mellon Bank Canada to act as a co-agent
or agent with respect to the administration and funding of Canadian Bankers
Acceptances and Canadian Loans and Canadian Letters of Credit to the extent
appropriate, the establishment of the "Prime Rate" for relevant Canadian Loans
and the administration of Lenders' rights with respect to any Collateral located
in Canada (including, without limitation, under the Bank Act (Canada)).
"Agent's Office" shall mean the Agent's principal office located at
Mellon Bank Center, 1735 Market Street, Philadelphia, Pennsylvania 19101, or at
such office or offices of the Agent or branch, subsidiary or affiliate thereof,
as may be designated in writing from time to time by the Agent to the
Co-Borrowers and the Lenders.
"Agreement of Guaranty" shall mean that certain Agreement of Guaranty
executed by the Corporate Guarantors and the Partnership Guarantor, on a joint
and several basis, and delivered to the Agent, for the benefit of the Lenders,
dated the date of this Loan Agreement, pursuant to which the Corporate
Guarantors and the Partnership Guarantor unconditionally guaranty the prompt and
complete performance of all of the Co-Borrowers' duties, covenants and
obligations under this Loan Agreement, the Revolving Credit Loan Notes, the Term
Loan Notes and the other Loan Documents. The term "Agreement of Guaranty" shall
also be deemed to mean and refer to all amendments, modifications and
supplements to said agreement made and/or entered into subsequent to the Closing
Date, including, without limitation, all amendments which are consummated for
the purposes of adding any new and/or additional Persons as guarantors, all as
provided for in Section 6.12 of this Loan Agreement.
"Agreements of Lease" shall mean a reference to those certain lease
agreements between any one or more of the Co-Borrowers, as tenants, and various
owners, as landlords (as more fully set forth on Schedule 1.01-A hereto),
pursuant to which such Co-Borrowers have agreed to lease certain real property
from their respective landlords.
"Applicable Interest Rate" shall mean the applicable per annum
interest rate with respect to each of (i) the Revolving Credit Loans determined
pursuant to Section 2.03(i)(a) of this Loan
5
<PAGE>
Agreement and/or (ii) the Term Loan determined pursuant to Section 2.03(i)(b) of
this Loan Agreement.
"Applicable Margin" shall have the meaning set forth in Section
2.03(i)(c) of this Loan Agreement.
"Assignment and Acceptance Agreement" shall mean an Assignment and
Acceptance Agreement in the form of Exhibit "A" attached hereto and made a part
hereof (with blanks appropriately filled in) delivered to the Agent in
connection with an assignment to an Eligible Assignee of a Lender's interest
under this Loan Agreement pursuant to Section 11.02 hereof.
"Authorized Officer" shall mean those officers/general partners of the
Co-Borrowers, the Corporate Guarantors, the Partnership Guarantor and any
Affiliates, whose signatures and incumbency shall have been certified to the
Agent pursuant to an Officer's Certificate delivered on the Closing Date or any
other form of resolution or certification delivered to and approved by the Agent
after the Closing Date.
"BA Margin" shall mean the applicable percentage set forth in the
Leverage Matrix under the heading "BA Margin".
"Bankruptcy Act" shall mean the Bankruptcy and Insolvency Act (Canada)
as amended from time to time, or any successor statute.
"Bankruptcy Code" shall mean Title 11 of the United States Bankruptcy
Code (11 U.S.C. Section 101 et seq.), as amended from time to time, or any
successor statute.
"Benefit Plan" shall mean a defined benefit plan as defined in Section
3 (35) of ERISA (other than a Multiemployer Plan) in respect of which any of the
Co-Borrowers or an ERISA Affiliate is, or within the immediately preceding six
(6) years was, an "employer" as defined in Section 3(5) of ERISA.
"Big-Six Accounting Firm" shall mean any of Arthur Andersen & Co.,
KPMG Peat Marwick, Coopers & Lybrand, Ernst & Young, Deloitte & Touche and Price
Waterhouse or any of their respective successors.
"Borrower" shall have the meaning ascribed and assigned to such term
as set forth in the preamble of this Loan Agreement.
"Borrowing" and/or "Borrowings" shall mean, except as otherwise
provided in Section 2.06(v)(b) hereof, a borrowing consisting of either
Revolving Credit Loans of the same type made on the same day by all or some of
the Lenders, as applicable, and/or the Term Loan.
"Borrowing Base Certificate" shall mean a certificate duly executed by
an Authorized Officer of the Co-Borrowers in the form of Exhibit "C" attached
hereto and made a apart hereof, setting forth the Co-Borrowers' calculations of
the Advance Limit for purposes of determining the availability of a Borrowing
under the Revolving Credit Facility.
"Borrowing Date" shall mean, with respect to (i) any Revolving Credit
Loan, any Business Day specified in any Notice of Borrowing delivered to the
Agent by the Co-Borrowers in accordance with the provisions of Section 2.01(ii)
of this Loan Agreement, as the date upon
6
<PAGE>
which the Co-Borrowers request the Lenders to make a Revolving Credit Loan
hereunder (including a conversion or rollover of credit) and upon which such
Revolving Credit Loan is made and (ii) the Term Loan, the Closing Date as
specified in a Notice of Borrowing delivered to the Agent by the Co-Borrowers in
accordance with the provisions of Section 2.02(i)(c) of this Loan Agreement, as
the date upon which DRS Flight Safety requests that Mellon Canada make the Term
Loan hereunder and upon which the Term Loan is made.
"Business Day" shall mean (i) for all purposes (other than as covered
by clause (ii) below), any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the Commonwealth of Pennsylvania and/or the laws
of the Province of Ontario (Canada) or is a day upon which banking institutions
located in such state or province are required or authorized by law or other
governmental action to close, (ii) with respect to all notices, determination,
fundings and payments in connection with the Eurodollar Rate, any day which is a
Business Day described in clause (i) and which is also a day for trading by and
between banks in the London interbank eurodollar market and (iii) when such term
is used in respect of a day on which a Canadian Loan is to be made or an
interest rate with respect thereto is to be set, a payment is to be made in
respect of a Canadian Loan, an Exchange Rate is to be set in respect of Canadian
Dollars or any other dealing in Canadian Dollars is to be carried out pursuant
to this Agreement, such term shall mean a day on which banks in Toronto, Canada
are open for general banking business, other than a Saturday, Sunday or other
day on which commercial banks in Pennsylvania are authorized or required by law
to close.
"Canadian Borrower" shall mean DRS Flight Safety.
"Canadian Bankers Acceptance" means a Canadian Loan in the form of a
non-interest bearing bill of exchange denominated in Canadian Dollars, drawn and
endorsed by the Canadian Borrower and accepted by a Canadian Lender pursuant to
this Agreement, having a term of one month to six months, and maturing on a
Business Day on or before the Revolving Credit Termination Date or the Term Loan
Maturity Date, as the case may be.
"Canadian Bankers Acceptance Notice" shall have the meaning ascribed
and assigned to such term as set forth in Section 2.03A(i) of this Loan
Agreement.
"Canadian Dollar", "Canadian Dollars" and the symbol "C$" shall mean
lawful money of Canada.
"Canadian Dollar Equivalent" shall mean with respect to an amount of
U.S. Dollars on any date, the amount of Canadian Dollars that may be purchased
with such amount of U.S. Dollars at the Exchange Rate with respect to U.S.
Dollars on such date.
"Canadian Letters of Credit" shall mean those Letters of Credit issued
by Mellon Bank Canada that are denominated in Canadian Dollars and for the
account of the Canadian Borrower.
"Canadian Letter of Credit Obligations" shall mean, at any time, the
sum of (i) Reimbursement Obligations at such time for Canadian Letters of Credit
and (ii) the Dollar Equivalent of the aggregate maximum amount then available
for drawing under the outstanding Canadian Letters of Credit.
7
<PAGE>
"Canadian Loan" means a Loan denominated in Canadian Dollars that is
to, or is to be made for the account of, the Canadian Borrower (and which shall
include the Canadian Revolving Credit Loans and the Term Loan).
"Canadian Revolving Credit Exposure" shall have the meaning ascribed
to such term in Section 11.02(i)(g) of this Loan Agreement.
"Canadian Revolving Credit Loans" shall mean those Revolving Credit
Loans that also constitute Canadian Loans, and which shall include, Canadian
Bankers Acceptances.
"Canadian Revolving Credit Note" shall have the meaning ascribed to
such term in Section 2.01(i)(a) of this Loan Agreement.
"Canadian Revolving Credit Sublimit" shall have the meaning ascribed
to such term in Section 2.01(i)(a) of this Loan Agreement.
"Capital Expenditures" shall mean, for any period, the aggregate of
all expenditures (whether paid in cash or accrued as liabilities during such
period) of any one or more of the Co-Borrowers, their Subsidiaries and
Affiliates, which would be properly classified as capital expenditures in
accordance with Generally Accepted Accounting Principles (including, without
limitation, expenditures for maintenance and repairs which are capitalized, and
Capitalized Leases to the extent an asset is recorded in connection therewith in
accordance with Generally Accepted Accounting Principles).
"Capitalized Lease" and "Capitalized Leases" shall mean at any time
any lease which is, or is required under Generally Accepted Accounting
Principles to be, capitalized on the balance sheet of the lessee at such time.
"Capitalized Lease Obligation" and "Capitalized Lease Obligations"
shall mean all monetary obligations of any Person under any leasing or similar
arrangement which, in accordance with Generally Accepted Accounting Principles,
are or would be classified as Capitalized Leases.
"CDIC" shall mean the Canada Deposit Insurance Corporation.
"CERCLIS" shall mean the Comprehensive Environmental Response,
Compensation and Liability Information System List, as the same may be amended
from time to time.
"Claim" shall mean any claim or demand, by any Person, of whatsoever
kind or nature for any alleged Liabilities and Costs, based in dispute whether
based in contract, tort, implied or express warranty, strict liability, criminal
or civil statute, permit, ordinance or regulation, common law or otherwise, the
consequences of which disputes are reasonably likely to result in a Material
Adverse Effect.
"Closing Date" shall mean the date upon which this Loan Agreement is
executed by the Lenders, the Co-Borrowers and the Agent, and the conditions set
forth in Section 3.01 of this Loan Agreement have been completed and fulfilled
to the satisfaction of the Agent.
"Co-Borrowers" shall have the meaning ascribed and assigned to such
term as set forth in the preamble of this Loan Agreement.
8
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended, any
successor statute of similar import, and regulations thereunder, in each case as
in effect from time to time. References to sections of the Code shall be
construed also to refer to any successor sections.
"Collateral" shall mean all property, assets, contracts, interests
and/or rights on or in which a Lien is granted to the Agent on behalf of the
Lenders pursuant to this Loan Agreement, the Pledge of Stock Agreements, the
Security Agreements and/or any other Collateral Documents provided for herein or
therein or delivered or to be delivered hereunder or thereunder, as any such
Collateral Documents may be amended, supplemented, restated or otherwise
modified from time to time in accordance with the provisions hereof or thereof.
"Collateral Documents" shall mean the collective reference to the
Security Agreements, and any other security agreements, mortgages, deeds of
trust, collateral assignments, instruments, documents, certificates or
agreements executed and delivered by, or on behalf of, the Co-Borrowers, the
Corporate Guarantors and the Partnership Guarantor, to the Agent, on behalf of
the Lenders, at any time pursuant to or in connection with the Loan Facilities
to create, continue or evidence Liens to secure the Obligations (which, however,
in the case of any Swap Obligation owed to Mellon Bank, N.A. or any other
Lender, all said Liens shall be subordinated to the senior and superior
interests of the Agent and the Lenders in the Collateral securing their non-Swap
Obligations).
"Commitment Percentage" of a Lender at any time shall mean the
percentages for such Lender set forth below its name on the signature pages to
this Loan Agreement with respect to its Pro Rata Share of the Loan Facilities,
adjusted from time to time to give effect to any transfer by a Lender to another
Lender of all or any portion of said Lender's Pro Rata Share, all as provided
for in Section 11.02 of this Loan Agreement. A Lender may have both a Revolving
Credit Loan Pro Rata Share and a Term Loan Pro Rata Share.
"Commitments" shall mean the aggregate of each Lender's Revolving
Credit Commitment and Term Loan Commitment.
"Consolidated Cash and Cash Equivalents" shall mean all (i) cash and
cash equivalents and (ii) any of the following: (a) marketable direct
obligations issued or unconditionally guarantied by the United States Government
or issued by an agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one (1) year after the date of
acquisition thereof; (b) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one (1) year after the date
of acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Corporation or Moody's
Investors Service, Inc. and not listed in Credit Watch published by Standard &
Poor's Corporation; (c) commercial paper of a corporation having a net worth of
not less than US$1,000,000,000.00, other than commercial paper issued by the
Co-Borrowers, their Subsidiaries or Affiliates, maturing no more than ninety
(90) days after the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 or P-1 from either Standard & Poor's Corporation
or Moody's Investors Service, Inc.; (d) domestic certificates of deposit or
domestic time deposits or repurchase agreements maturing within one (1) year
after the date of acquisition thereof issued by any commercial bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia having FDIC deposit insurance; (e) any funds deposited or
invested by any of the Co-Borrowers, their Subsidiaries and/or Affiliates in
accounts maintained with the Agent
9
<PAGE>
and/or any of the Lenders and/or with any other commercial bank organized under
the laws of (1) Canada having insurance with CDIC or (2) the United States of
America or any state thereof or the District of Columbia having FDIC insurance;
and (f) money market funds having assets in excess of US$1,000,000,000.00.
"Consolidated Debt" shall mean with respect to the Co-Borrowers, their
Subsidiaries and Affiliates, the aggregate sum of the following items as such
items may appear on a consolidated balance sheet of the Co-Borrowers, their
Subsidiaries and Affiliates to any Person (other than each other) in accordance
with Generally Accepted Accounting Principles: (i) the unpaid principal balance
of all indebtedness or liability for money borrowed by the Co-Borrowers, their
Subsidiaries and/or Affiliates to any Person (other than each other) from time
to time (including any renewals, extensions and refundings thereof), whether or
not the indebtedness was heretofore or hereafter created, issued, incurred,
assumed or guarantied; (ii) the unpaid principal balance of all indebtedness or
liability for the deferred purchase price of property or services incurred
(including trade obligations); (iii) all obligations as lessee under leases
which have been or should be recorded as Capitalized Lease Obligations; (iv) all
current Obligations in respect of any unfunded vested benefits under any Plan
covered by Title IV of ERISA; (v) all obligations, contingent or otherwise
relative to the face amount of all Letters of Credit issued for the
Co-Borrowers', their Subsidiaries' and/or Affiliates' account, whether or not
drawn; (vi) all obligations arising under bankers' acceptance facilities issued
for the account of the Co-Borrowers, their Subsidiaries and/or Affiliates; (vii)
all guaranties, endorsements and other contingent obligations to purchase, to
provide funds for payments, to supply funds to invest in the Co-Borrowers, their
Subsidiaries and/or Affiliates or otherwise to assure a creditor against loss
(except endorsements of negotiable instruments for deposit or collection in the
ordinary course of business shall not constitute Consolidated Debt); and (viii)
all obligations secured by any mortgage, lien, pledge, or security interest or
other charge or encumbrance on property, whether or not the obligations have
been assumed.
"Consolidated EBITDA" shall mean with respect to the Co-Borrowers,
their Subsidiaries and Affiliates, as of any date of determination thereof, for
the period of four (4) consecutive Fiscal Quarters immediately preceding said
date of determination taken together as one accounting period, the amount equal
to the sum of (i) Consolidated Net Income for such test period, plus (ii) all
gross interest expense on Consolidated Debt of the Co-Borrowers, their
Subsidiaries and Affiliates, for such test period, plus (iii) all charges
against income of the Co-Borrowers, their Subsidiaries and Affiliates for
foreign, federal, state and local taxes for such test period, plus (iv) all
depreciation expense for such test period, plus (v) all amortization expense for
such test period plus (vi) all other net non-cash charges for such test period,
after eliminating therefrom any, (a) extraordinary items, (b) gains and losses
from the sale of assets in connection with any sale/leaseback transaction or
arrangement and (c) results of discontinued operations, all as determined in
accordance with Generally Accepted Accounting Principles.
"Consolidated Fixed Charge Coverage Ratio" shall mean, as of any date
of determination thereof, for the period of four (4) consecutive Fiscal Quarters
immediately preceding said date of determination taken together as one
accounting period, the ratio of (i) Consolidated EBITDA for such test period
minus all Capital Expenditures paid or incurred during said test period divided
by (ii) all interest expenses on all Consolidated Debt incurred during such test
period plus all principal payments due and payable on all Consolidated Debt
incurred during such test period, all as calculated in accordance with Generally
Accepted Accounting Principles.
10
<PAGE>
"Consolidated Funded Debt" shall mean, as of any date of determination
thereof, all items which in accordance with Generally Accepted Accounting
Principles would be Consolidated Debt, including, without limitation, all
Consolidated Subordinated Debt, but exclusive of those items described in clause
(ii), (iv), (v) and (vii) of the definition of Consolidated Debt.
"Consolidated Funded Debt Leverage Ratio" shall mean, as of any date
of determination thereof, the ratio of Consolidated Funded Debt divided by
Consolidated EBITDA.
"Consolidated Net Income" shall mean, as of any date of determination
for any test period, all amounts which, in accordance with Generally Accepted
Accounting Principles, would be included under net income (after the provision
for the payment of all federal and state income taxes) on a consolidated income
statement of the Co-Borrowers, their Subsidiaries and Affiliates for such test
period.
"Consolidated Net Worth" shall mean, as at any date of determination,
all items which, in accordance with Generally Accepted Accounting Principles,
would be included under shareholders' equity on a consolidated balance sheet of
the Co-Borrowers, their Subsidiaries and Affiliates at such date.
"Consolidated Senior Debt" shall mean, as at any date of
determination, all items which in accordance with Generally Accepted Accounting
Principles would be included on a consolidated balance sheet of the
Co-Borrowers, their Subsidiaries and Affiliates as Consolidated Funded Debt,
excluding, however, Consolidated Subordinated Debt.
"Consolidated Senior Debt Leverage Ratio" shall mean, as of any date
of determination thereof, the ratio of Consolidated Senior Debt divided by
Consolidated EBITDA.
"Consolidated Subordinated Debt" shall mean, as at any date of
determination, any Consolidated Debt of the Co-Borrowers, their Subsidiaries
and/or Affiliates, which in accordance with the terms of the documentation
evidencing said Consolidated Debt, is subordinated to the repayment of the Loan
Facilities, including, without limitation, (i) the then outstanding principal
balance of an original US$25,000,000.00, 9% Senior Subordinated Convertible
Debentures Due October 1, 2003, evidenced by that certain Indenture dated as of
September 22, 1995, executed by and between DRS and The Trust Company of New
Jersey and (ii) the then outstanding principal balance of an original
US$25,000,000.00, 8-1/2 % Convertible Subordinated Debentures Due August 1,
1998, evidenced by that certain Indenture dated August 1, 1983, executed by and
between DRS and Bankers Trust Company.
"Contractual Obligation" shall mean with respect to any Person, any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, contract, undertaking, document, instrument or other agreement or
instrument to which that Person is a party or by which it or any of its
properties is bound, or to which it or any of its properties is subject
(including, without limitation, any restrictive covenant affecting such Person
or any of its properties).
"Corporate Guarantors" shall mean the collective reference to (i) DRS
Electronic Systems, Inc., a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, having its principal
office located at 200 Professional Drive, Gaithersburg, Maryland 20879; (ii) DRS
Photronics Corp., a corporation duly organized, validly existing and in good
standing under the laws of the State of New York, having its principal office
located at 138 Bauer
11
<PAGE>
Drive, Oakland, New Jersey 07436; (iii) DRS Precision Echo, Inc., a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, having its principal office located at 3105 Patrick Henry
Drive, Santa Clara, California 95054; (iv) DRS Ahead Technology, Inc., a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, having its principal office located at 6410 Via Del
Oro, San Jose, California 95054; (v) DRS Optronics, Inc., a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, having its principal office located at 2330 Commerce Park Drive, N.E.,
Second Floor, Palm Bay, Florida 32905; (vi) DRS Systems Management Corporation,
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, having its principal office located at 5 Sylvan
Way, Parsippany, New Jersey 07054; (vii) DRS Technical Services, Inc., a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, having its principal office located at 2535 Camino Del
Rio, Suite 300, San Diego, California 92108; (viii) DRS/MS, Inc., a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, having its principal office located at 5 Sylvan Way,
Parsippany, New Jersey 07054; (ix) DRS International, Inc., a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, having its principal office located at 5 Sylvan Way, Parsippany, New
Jersey 07054 ; (x) DRS Air, Inc., a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, having its
principal office located at 5 Sylvan Way, Parsippany, New Jersey 07054 and (xi)
any new or additional Subsidiaries of the Co-Borrowers which are purchased,
acquired or created during the term of the Loan Facilities. Each of the
Corporate Guarantors may sometimes be hereinafter referred to individually as a
"Corporate Guarantor".
"Customary Permitted Liens" shall mean
(i) Liens (other than Environmental Liens and any Lien imposed under
ERISA) for taxes, assessments or charges of any Governmental Authority or claims
not yet due or which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves or other appropriate
provisions are being maintained in accordance with Generally Accepted Accounting
Principles;
(ii) statutory Liens of landlord and Liens of carriers, warehousemen,
mechanics, materialmen and other Liens (other than any Lien imposed under ERISA)
imposed by Law, including, without limitation, Liens in favor of any
Governmental Authority securing progress payments made under government
contracts created in the ordinary course of business and for amounts not yet due
or which are being contested in good faith by appropriate proceedings which are
sufficient to prevent imminent foreclosure of such Liens, are promptly
instituted and diligently conducted and with respect to which adequate reserves
or other appropriate provision are being maintained in accordance with Generally
Accepted Accounting Principles;
(iii) Liens (other than any Lien imposed under ERISA) incurred or
deposits made in the ordinary course of business (including, without limitation,
surety bonds and appeal bonds) in connection with workers' compensation,
unemployment insurance and other types of social security benefits which have
accrued but are not yet payable or due to be remitted or to secure the
performance of tenders, bids, leases, contracts (other than for the repayment of
Debt), statutory obligations and other similar obligations or arising as a
result of progress payments under government contracts;
12
<PAGE>
(iv) easements (including, without limitation, reciprocal easement
agreements and utility agreements), rights-of-way, covenants, consents,
reservations, encroachments, variations and other restrictions, charges or
encumbrances (whether or not recorded) affecting the use of real property or
impair the use thereof;
(v) Liens arising as a result of filing of any financing statement
under the Uniform Commercial Code of a particular State, the Personal Property
Security Act (Ontario) or any comparable Law of any jurisdiction covering
consigned or leased goods which do not constitute assets of any of the
Co-Borrowers and/or their Subsidiaries or Affiliates and which consignment
and/or lease is not intended as security;
(vi) Liens arising out of and with respect to customer deposits made
in the ordinary course of the Co-Borrowers', their Subsidiaries and/or
Affiliates businesses; and
(vii) Liens, security interests and other encumbrances as listed on
Schedule 1.01-B;
(viii) extensions, renewals or replacements of any Lien referred to in
paragraphs (i) through (vii) above, provided (a) that, in the case of
subparagraphs (i), (ii), (iii), (v) and (vi) above, the principal amount of the
obligation secured thereby is not increased and (b) that any such extension,
renewal or replacement is limited to the property originally encumbered thereby.
"Default Rate" shall mean a rate of interest equal to two hundred
basis points (2.0 %) above the applicable nondefault annual interest rate with
respect to the Loans.
"Discount" shall mean, with respect to any issue of Canadian Bankers
Acceptances, the amount by which the face value of such Canadian Bankers
Acceptances exceeds the Discounted Proceeds of such Canadian Bankers
Acceptances.
"Discounted Proceeds" shall mean, with respect to any Canadian Bankers
Acceptance to be purchased by a Canadian Lender, an amount (rounded to the
nearest whole Canadian cent, and with one-half of one Canadian cent being
rounded up) calculated on the day of such purchase by multiplying (i) the face
amount of such Canadian Bankers Acceptance times (ii) the quotient equal to
(such quotient being rounded up or down to the nearest fifth decimal place and
.000005 being rounded up) (a) one divided by (b) the sum of (1) one plus (2) the
product of (A) the Discount Rate (expressed as a decimal) applicable to such
Canadian Bankers Acceptance times (B) the quotient equal to (x) the term to
maturity of such Canadian Bankers Acceptance divided by (y) the number of days
in the calendar year in which such Canadian Bankers Acceptance is to mature.
"Discount Rate" as applicable to a Canadian Bankers Acceptance being
purchased by any Canadian Lender on any day, the percentage discount rate
(expressed to two decimal places and rounded upward, if necessary, to the
nearest 1/100th of 1%) quoted by Mellon Bank Canada as the percentage discount
rate at which Mellon Bank Canada would, in accordance with normal practice, at
or about 9:30 a.m. Toronto time, on such day, be prepared to purchase Canadian
Bankers Acceptances accepted by such Canadian Lender in an amount and having a
maturity date comparable to the amount and maturity date of such Canadian
Bankers Acceptance.
"DOL" shall mean the United States Department of Labor and any
successor department or agency.
13
<PAGE>
"Dollar Equivalent" means, with respect to (a) the amount of any
Canadian Dollars on any date, the equivalent amount in U.S. Dollars that may be
purchased with such amount of Canadian Dollars, as determined by the Agent using
the Exchange Rate and (b) any amount in U.S. Dollars, such amount.
"Domestic Letters of Credit" shall mean those Letters of Credit
denominated in U.S. Dollars for the joint and several account of the
Co-Borrowers.
"Eligible Assignee" shall mean any Person(s), each of whom must be
acceptable to the Agent and the Co-Borrowers; provided, however, in each such
instance, said bank or other institutional lender must then be in compliance
with all then applicable Laws regarding regulatory capital requirements after
giving effect to any "phase-in" provisions thereof; provided, further, that such
Person shall have an Affiliate Canadian Lender which shall purchase and assume a
Pro Rata Share of the Canadian Revolving Credit Sublimit and the Term Loan and
Term Loan Commitment, and the term Eligible Assignee as used herein shall
include such Person and its Affiliate Canadian Lender as the context requires.
"Environment" shall mean all air, surface water, water, vapor,
groundwater, drinking water supply or land, including land surface or
subsurface, and includes all fish, wildlife, biota and all other natural
resources, whether located in the United States, Canada or elsewhere.
"Environmental Affiliate" shall mean, with respect to any Person, any
other Person whose liability (contingent or otherwise) for any Environmental
Claim such first mentioned Person has retained, assumed or otherwise is liable
for (by Law, agreement or otherwise).
"Environmental Approval" shall mean any Governmental Action pursuant
to or required under any Environmental Law.
"Environmental Claim" shall mean, with respect to any Person, any
action, suit, proceeding, investigation, notice, claim, complaint or demand,
made by any other Person (including but not limited to, any Governmental
Authority, citizens' group or present or former employee of such first Person)
alleging, asserting or claiming any actual or potential (i) violation of any
Environmental Law, (ii) liability under any Environmental Law or (iii) liability
for investigatory costs, cleanup costs, governmental response costs, damages to
the Environment, property damages, personal injuries, fines or penalties arising
out of, based on or resulting from the presence, or release into the
Environment, of any Environmental Concern Materials at any location, whether or
not owned by such Person; provided, however, in no event shall any voluntary
action, proceeding or investigation made or brought by the Co-Borrowers, their
Subsidiaries and/or Affiliates from time to time in connection with their own
activities or inactivities be included in this definition.
"Environmental Cleanup Site" shall mean any location whether located
in the United States, Canada or elsewhere which is listed or proposed for
listing on the National Priorities List, on CERCLIS or on any similar state list
of sites or identified by any Canadian Governmental Authority requiring
investigation or cleanup, or which is the subject of any pending or threatened
action, suit, proceeding or investigation related to or arising from any alleged
violation of any Environmental Law.
"Environmental Concern Materials" shall mean (i) any flammable
substance, explosive, radioactive material, hazardous material, hazardous waste,
toxic substance, solid waste,
14
<PAGE>
pollution, contaminate or any related material, raw material, substance, product
or by-product of any substance specified in or regulated or otherwise affected
by any Environmental Law (including but not limited to any "hazardous substance"
as defined in any Environmental Law), (ii) any toxic chemical or other substance
from or related to industrial, commercial or institutional activities, and (iii)
asbestos, gasoline, diesel fuel, motor oil, waste and used oil, heating oil and
other petroleum products or compounds, polychlorinated biphenyls, radon and
urea-formaldehyde.
"Environmental Law" and "Environmental Laws" shall mean any Law,
whether now existing or subsequently enacted or amended, relating to (i)
pollution or protection of the Environment, (ii) exposure of Persons, including
but not limited to employees, to Environmental Concern Materials, (iii)
protection of the public health or welfare from the effects of products,
by-products, wastes, emissions, discharges or releases of Environmental Concern
Materials or (iv) regulation of the manufacture, generation, use or introduction
into commerce of Environmental Concern Materials including their manufacture,
formulation, packaging, labeling, distribution, treatment, transportation,
handling, storage or disposal. Without limitation, "Environmental Law" shall
include (a) any Environmental Approval and the terms and conditions thereof; (b)
the following statutes: the Clean Air Act (42 U.S.C.A. (section)7401 et seq.);
the Comprehensive Environmental Response Compensation and Liability Act of 1980
(42 U.S.C. (section)9601 et seq.); the Federal Water Pollution Control Act (33
U.S.C. (section)1251 et seq.), the Hazardous Material Transportation Act (49
U.S.C. (section)1801 et seq.); the Federal Insecticide, Fungicide and
Rodenticide Act (7 U.S.C. (section)136), the Resource Conservation and Recovery
Act of 1976 (42 U.S.C. (section)6901 et seq.) (including the Hazardous and Solid
Waste Amendments of 1984), the Toxic Substance Control Act (15 U.S.C.
(section)2601 et seq.), the Federal Occupational Safety & Health Act of 1970 (29
U.S.C. (section)651 et seq.) (including (section)3101 of the Omnibus
Reconciliation Act of 1990); the New Jersey Spill Compensation and Control Act
(N.J.S.A. 58:10-23.11 et seq.); the New Jersey Environmental Cleanup
Responsibility Act (N.J.S.A. 13:lK-6 et seq.); and the New Jersey Leaking
Underground Storage Tank Act (N.J.S.A. 58:l0A-21 et seq.), and all regulations
promulgated thereunder and all as amended from time to time; (c) the
Environmental Protection Act (Ontario), the Water Resources Act (Ontario), the
Canadian Environmental Protection Act and The Transportation of Dangerous Goods
Act (Canada) and (d) any common law doctrine (including, without limitation,
injunctive relief and tort, such as negligence, nuisance, trespass and strict
liability) that may impose obligations or liabilities for personal injury or
property damage due to, or threatened as a result of, the presence of or
exposure to Environmental Concern Materials.
"Environmental Lien" shall mean a Lien in favor of any Governmental
Authority for (i) any liability currently due and payable under any
Environmental Laws or (ii) damages arising from, or costs incurred by such
Governmental Authority in response to, a Release or threatened Release of any
Environmental Concern Material into the Environment.
"Equipment" of any Person, shall mean and include all of said Person's
now owned and hereafter acquired (i) machinery, (ii) manufacturing,
distribution, selling, data processing and office equipment and (iii) furniture,
furnishings, appliances, fixtures and trade fixtures, tools, toolings, molds,
dies, vehicles, vessels, aircraft and all other goods of every type and
description (other than Inventory).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute of similar import,
together with the regulations
15
<PAGE>
promulgated thereunder by the United States Treasury Department, the Department
of Labor and/or the PBGC.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with all or any of the Co-Borrowers would be deemed
to be a "single employer" within the meaning of Section 4001 of ERISA.
"Eurodollar Affiliate" shall mean with respect to each Lender, the
Affiliate of such Lender, if any, including, without limitation, those
Affiliates set forth on Schedule 1.01-C attached to this Loan Agreement.
"Eurodollar Interest Payment Date" shall mean, with respect to any
Eurodollar Rate Loan, the last day of each Eurodollar Interest Period applicable
to such Eurodollar Rate Loan.
"Eurodollar Interest Period" shall mean one or more periods of time
during which the Co-Borrowers may select, convert to or continue a Eurodollar
Rate Loan, such funding period to be either a one (1), two (2) or three (3)
month period subject to availability, all as more fully subject to the
provisions of Section 2.07 of this Loan Agreement.
"Eurodollar Interest Rate Determination Date" shall mean the date on
which the Agent determines the Eurodollar Rate applicable to (i) a Borrowing of
a Eurodollar Rate Loan or (ii) the continuation or conversion of Eurodollar Rate
Loans. The Eurodollar Interest Rate Determination Date shall be the second
Business Day prior to the first day of the Eurodollar Interest Period applicable
to such Borrowing, continuation or conversion.
"Eurodollar Portion" of any Revolving Credit Loan or the Term Loan
shall mean at any time the portion, including the whole, of such Revolving
Credit Loan or the Term Loan which is bearing interest at any time under the
Eurodollar Rate.
"Eurodollar Rate" shall mean, with respect to any Eurodollar Interest
Period applicable to a Borrowing of Eurodollar Rate Loans, an interest rate per
annum determined by the Agent obtained by dividing (i) the rate of interest
determined by the Agent in good faith in accordance with its usual procedure
(which determination shall be conclusive, if made in good faith, absent manifest
error) to be the average (rounded upward to the nearest whole multiple of one
one-thousandth of one percent (1/1000 of 1%) per annum if such average is not
such a multiple) of the rates per annum at which deposits in U.S. Dollars and/or
Canadian Dollars are offered by the Agent to major money center banks in the
London interbank eurodollar market at approximately 11:00 A.M. (London time) on
the Eurodollar Interest Rate Determination Date for a period equal to such
Eurodollar Interest Period and in an amount substantially equal to the amount of
the Eurodollar Rate Loan to be made by the Lenders and to be outstanding during
such Eurodollar Interest Period, by (ii) a percentage equal to 100% minus the
Eurodollar Reserve Percentage. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the Eurodollar
Reserve Percentage. The "Eurodollar Rate" may also be expressed by the following
formula:
[average of the rates offered by the Agent to
major money center banks in the
London interbank Eurodollar market
Eurodollar Rate = determined by the Agent ]
------------------------------------
[1.00- Eurodollar Reserve Percentage ]
16
<PAGE>
Finally, the "Eurodollar Rate" shall in all circumstances mean the
rate of interest which is customarily referred to as the "London Interbank
Offered Rate".
"Eurodollar Rate Loans" shall mean those Revolving Credit Loans and
the Term Loan outstanding which bear interest at a rate determined by reference
to the Eurodollar Rate as provided for in Section 2.03(i) of this Loan
Agreement.
"Eurodollar Rate Option" shall mean one of the interest rates
available to the Co-Borrowers as provided for and described in Section 2.03(i)
of this Loan Agreement.
"Eurodollar Rate Taxes" shall have the meaning ascribed to such term
in Section 2.07(vii) (a) of this Loan Agreement.
"Eurodollar Reserve Percentage" shall mean for any date that
percentage, if any, (expressed as a decimal, rounded upward to the nearest 1/100
of 1%), as determined in good faith by the Agent (which determination shall be
conclusive, if made in good faith, absent manifest error) which is in effect on
such date, as prescribed by the Federal Reserve Board, for determining the
maximum reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for a member bank of the
Federal Reserve System in respect of "eurocurrency liabilities" having a term
equal to the applicable Eurodollar Interest Period (or in respect of any other
category of liabilities which includes deposits by reference to which the
interest rate on Eurodollar Loans is determined or any category of extensions of
credit or other assets which includes loans by a non-United States office of any
bank to United States residents).
"Event of Default" or "Events of Default" shall mean any of the events
of default as defined and described in Section 9.01 of this Loan Agreement.
"Excess Cash Flow" shall mean as of any date of determination thereof
for the period of four (4) consecutive Fiscal Quarters immediately preceding
said date of determination, taken together as one accounting period,
Consolidated EBITDA minus the sum of, without duplication (i) interest expense
on all Consolidated Debt of the Co-Borrowers for such test period, plus (ii)
principal amortization payments due and payable on all Consolidated Debt during
such test period, plus (iii) Capital Expenditures during such test period, plus
(iv) Restricted Junior Payments paid during such test period, plus (v) voluntary
prepayments of principal made on all Consolidated Senior Debt during such test
period and plus (vi) all charges against income of the Co-Borrowers for federal,
state and local taxes accrued for such test period, all as calculated in
accordance with Generally Accepted Accounting Principles.
"Exchange Rate" shall mean, on any day, (a) with respect to Canadian
Dollars in relation to U.S. Dollars, the spot rate as quoted by Mellon Bank
Canada as its noon spot rate at which U.S. Dollars are offered on such day for
Canadian Dollars, and (b) with respect to U.S. Dollars in relation to Canadian
Dollars, the spot rate as quoted by Mellon Bank Canada as its noon spot rate at
which Canadian Dollars are offered on such day for U.S. Dollars.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"Federal Funds Effective Rate" for any day shall mean the rate per
annum (rounded upward to the nearest 1/100 of 1%) determined by the Agent (which
determination shall be
17
<PAGE>
conclusive, if made in good faith, absent manifest error) to be the rate per
annum announced by the Federal Reserve Bank of Philadelphia or the Federal
Reserve Bank of Cleveland, as selected by the Agent (or any successor) on such
day as being the weighted average of the rates on overnight Federal funds
transactions arranged by Federal funds brokers on the previous trading day, as
computed and announced by such Federal Reserve Bank (or any successor) in
substantially the same manner as such Federal Reserve Bank computes and
announces the weighted average it refers to as the "Federal Funds Effective
Rate" as of the date of this Agreement; provided, that if such Federal Reserve
Bank (or its successor) does not announce such rate on any day, the "Federal
Funds Effective Rate" for such day shall be the Federal Funds Effective Rate for
the last day on which such rate was announced.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System or any governmental authority succeeding to its
functions.
"Fiscal Quarter" shall mean the following three month periods of each
Fiscal Year:
April 1 - June 30
July 1 - September 30
October 1 - December 31
January 1 - March 31
"Fiscal Year" shall mean that period commencing on April 1 and ending
on March 31 of each succeeding year or such other period as the Co-Borrowers may
designate and the Agent may approve in writing.
"Funding Segment" shall mean with respect to an Eurodollar Rate Loan,
the entire principal amount of such Eurodollar Portion to which, at the time in
question, there is applicable a particular Eurodollar Interest Period beginning
on a particular day and ending on a particular day. (By definition, each such
Eurodollar Portion is at all times composed of an integral number of discrete
Funding Segments and the sum of the principal amounts of all Funding Segments of
any such Portion at any time equals the principal amount of such Portion at such
time.)
"Generally Accepted Accounting Principles" shall mean generally
accepted accounting principles in the United States of America, as in effect
from time to time, as developed, modified and set forth in the opinions and
pronouncements of the Accounting Principles Board, the American Institute of
Certified Public Accountants and the Financial Accounting Standards Board, or in
such other statements by such other Person as may be in general use by
significant segments of the accounting profession, which are applicable to the
circumstances as of the date of determination, subject to the terms of Section
1.03 of this Loan Agreement.
"Governmental Action" shall mean any approval, order, consent,
authorization, certificate, license, permit or validation of, or exemption or
other action by, or filing, recording or registration with or notice to, any
Governmental Authority.
"Governmental Acts" shall have the meaning ascribed to such term in
Section 2.01(vii)(a) of this Loan Agreement.
18
<PAGE>
"Governmental Approvals" shall mean any approval, order, consent,
authorization, certificate, license, permit or validation of, or exemption or
other action by, or filing, recording or registration with or notice to, any
Governmental Authority.
"Governmental Authority" shall mean any government or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.
"Indemnified Party" and "Indemnified Parties" shall mean the Agent,
each Lender and the directors, officers, trustees, employees, agents, attorneys
and controlling shareholders of the Agent and each Lender.
"Independent Certified Public Accountant" shall mean KPMG Peat
Marwick, and its successors and any other independent certified public
accounting firm selected by the Co-Borrowers, their Subsidiaries and Affiliates,
which accounting firm is reasonably satisfactory to the Agent and the Requisite
Lenders including, without limitation, any one of the Big-Six Accounting Firms.
"Inventory" shall mean all "inventory", as such term is defined in (i)
the Uniform Commercial Code for each State in the United States in which the
Co-Borrowers, their Subsidiaries and Affiliates may now or hereafter have such
inventory located and (ii) the Personal Property Security Act for each Province
in Canada in which the Co-Borrowers, their Subsidiaries and Affiliates may now
or hereafter have such inventory located, whether now owned and hereafter
acquired by the Co-Borrowers, and shall also mean and include all inventory,
wherever located (whether in possession of the Co-Borrowers or of a bailee or
other Person), now owned or hereafter acquired by the Co-Borrowers or in which
the Co-Borrowers has or hereafter may acquire any rights, title or interests
including, without limitation, all goods, materials, supplies, merchandise and
other personal property furnished under any contract of service or intended for
sale or lease, including, without limitation, all raw materials, work in
process, finished goods and materials, parts and supplies of any kind, nature or
description which are used or consumed in such Person's business, all returned
or repossessed goods now, or at any time or times hereafter, in the possession
or under the control of such Person, and all documents of title or documents
representing the same, but excluding all goods not owned by such Person which
have been sold on consignment by such Person to the extent included in the
foregoing; together with all proceeds and products thereof.
"IRS" shall mean the Internal Revenue Service and any Person
succeeding to the functions thereof.
"Issuing Bank" and "Issuing Banks" shall mean (individually or
collectively, as the context requires) any one or more of Mellon Bank, N.A. or
an Affiliate of Mellon Bank N.A., including, without limitation, Mellon Bank
Canada (with respect to Canadian Letters of Credit), which has agreed to act as
the issuer hereunder for purposes of issuing Letters of Credit.
"Law" shall mean any law (including common law), constitution,
statute, treaty, convention, regulation, rule, ordinance, order, injunction,
writ, decree or award of any Governmental Authority.
"Lender" and "Lenders" shall mean Mellon Bank, N.A., Mellon Bank
Canada, and each financial banking institution that has purchased and/or
acquired a portion of Mellon Bank,
19
<PAGE>
N.A.'s, Mellon Bank Canada's or any other Lender's rights and interests under
this Loan Agreement, subject to the terms and conditions of Section 11.02 of
this Loan Agreement. For purposes of this agreement, "Lender" includes each
Canadian Lender unless the context otherwise requires.
"Letter of Credit" or "Letters of Credit" shall mean any sight
commercial/documentary or standby letter of credit issued by the Issuing Bank
for the account of the Co-Borrowers pursuant to Section 2.01(vi) of this Loan
Agreement (and shall include Canadian Letters of Credit).
"Letter of Credit Obligations" shall mean, at any time, the sum of (i)
Reimbursement Obligations at such time for Letters of Credit and (ii) the Dollar
Equivalent of the aggregate maximum amount then available for drawing under the
outstanding Letters of Credit.
"Letters of Credit Reimbursement Agreement" shall mean, with respect
to any Letter of Credit, such form of application therefor and form of
continuing Letters of Credit Reimbursement Agreement therefor (in the form of a
single document), as Issuing Bank may employ in the ordinary course of business
for its own account, all as more fully set forth in Exhibit "B" attached hereto
and made a part hereof.
"Letter of Credit Sublimit" shall mean the lesser of (i) the
applicable Advance Limit or (ii) US$15,000,000.00 minus the outstanding
principal amount of all Revolving Credit Loans in excess of US$25,000,000.00.
"Leverage Matrix" shall mean the following matrix, upon which (i)
interest rates described in Section 2.03 hereof and (ii) certain fees described
in Section 2.04 hereof are determined on the basis of the Consolidated Funded
Debt Leverage Ratio:
<TABLE>
<CAPTION>
Consolidated Unused
Funded Debt Eurodollar Prime Rate BA Commitment Letter of Credit
Leverage Ratio Spread Spread Margin Fee Rate Annual Fee
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
I less than 1.5 1.0% 0% 1.0% 0.125% 0.75%
II equal to or
greater than
1.5 but less
than 2.0 1.25% 0% 1.25% 0.125% 0.75%
III equal to or
greater than 2.0
but less than 2.5 1.5% 0% 1.5% 0.20% 1.0%
IV equal to or
greater than 2.5
but less than 3.0 1.75% 0.25% 1.75% 0.25% 1.0%
V equal to or
greater than 3.0 2.0% 0.50% 2.0% 0.25% 1.25%
</TABLE>
20
<PAGE>
"Liabilities and Costs" shall mean all liabilities, obligations,
responsibilities, losses, damages, punitive damages, consequential damages,
treble damages, costs and expenses (including, without limitation, attorneys',
experts and consulting fees and costs of investigation and feasibility studies),
fines, penalties and monetary sanctions, interest, direct or indirect, known or
unknown, absolute or contingent, past, present or future, arising out of or
relating to any actions, suit, proceeding or resolution or settlement thereof.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other) or
preference, priority, security interest, or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any
conditional sale or other title retention agreement, any financing lease
involving substantially the same economic effect as any of the foregoing and the
filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction).
"Loan Account" shall have the meaning ascribed to such term in Section
2.06(v) of this Loan Agreement.
"Loan Agreement" shall have the meaning ascribed and assigned to such
term as set forth in the preamble of this Loan Agreement.
"Loan Documents" shall mean any and all agreements, documents,
certificates and instruments executed by any one or more of the Co-Borrowers,
the Corporate Guarantors, the Partnership Guarantor and/or any other Person and
delivered by them to either or both the Lenders or the Agent pursuant to and in
connection with the Loan Facilities, including, without limitation, this Loan
Agreement, the Notes, the Collateral Documents and the Swap Agreement(s) in each
case as amended, supplemented, restated or otherwise modified from time to time
in accordance with the provisions thereof.
"Loan Facilities" shall have the meaning ascribed and assigned to such
term as set forth in the fourth recital of this Loan Agreement.
"Loans" shall mean a collective reference to all Revolving Credit
Loans and the Term Loan outstanding from time to time.
"Margin Stock" shall have the meaning ascribed and assigned to such
term in Regulation G and Regulation U.
"Marketable Securities" shall mean any stock, shares, voting trust
certificates, bonds, debentures, notes or other evidences of indebtedness
commonly known as "securities", secured or unsecured, convertible, subordinated
or otherwise, and in general any instruments commonly known as "securities" or
any certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing which can readily be bought and sold
on any nationally recognized securities exchange and would properly be
classified as marketable securities on the consolidated balance sheet of the
Co-Borrowers and its Subsidiaries in accordance with Generally Accepted
Accounting Principles.
"Material Adverse Effect" shall mean (i) a material adverse effect
upon the business, financial condition, financial performance, properties or
operations of any one or more of the Co-Borrowers, their Subsidiaries and/or
Affiliates taken as a whole or (ii) a material adverse effect
21
<PAGE>
upon the ability of the Co-Borrowers, their Subsidiaries and/or Affiliates to
perform their Obligations under the Loan Documents.
"Maximum Amount of Revolving Credit Loans" shall mean, as of any date
of determination, the available Advance Limit (as determined by the calculations
set forth in a current Borrowing Base Certificate) minus the amount of the
Letter of Credit Obligations as of any date of determination.
"Maximum Canadian Exposure" shall have the meaning ascribed to such
term in Section 2.12 of this Loan Agreement.
"Multiemployer Plan" shall mean an employee benefit plan defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by the Co-Borrowers, their Subsidiaries, their
Affiliates or an ERISA Affiliate.
"Note" or "Notes" shall mean the reference to (i) the Revolving Credit
Loan Note(s) and (ii) the Term Loan Notes, together with all amendments,
modifications, extensions, renewals, refinancings or refundings of any thereof,
in whole or in part.
"Notice of Borrowing" shall mean with respect to a proposed Borrowing
pursuant to Section 2.01(ii) or Section 2.02(i)(c) hereof, a written loan
authorization and certificate duly executed by an Authorized Officer of the
Co-Borrowers and delivered to the Agent in the form of Exhibit "D" attached
hereto.
"Notice of Conversion/Continuation" shall mean, with respect to a
proposed conversion or continuation of a Revolving Credit Loan or the Term Loan
as a Eurodollar Rate Loan or a Prime Rate Loan, pursuant to Section 2.03(iii)
hereof, a notice in the form of Exhibit "E" attached hereto.
"Obligations" shall mean all present and future indebtedness and other
liabilities of each of the Co-Borrowers owing to the Agent, any Lender, or any
Person entitled to indemnification pursuant to Section 11.04 hereof, or any of
their respective permitted successors, transferees or assigns, of every type and
description, arising under or in connection with this Loan Agreement or any
other Loan Document, whether or not for the payment of money, whether direct or
indirect (including those acquired by assignment), absolute or contingent, due
or to become due, now existing or hereafter arising and however acquired. The
term includes, without limitation, all Reimbursement Obligations, Swap
Obligations, all interest, charges, expenses, fees, attorneys' fees and
disbursements and any other sum chargeable to the Co-Borrowers under this Loan
Agreement or any other Loan Document.
"Office" when used in connection with the Agent, shall mean its
principal office located at 1735 Market Street, Philadelphia, Pennsylvania
19101, or at such office or offices of the Agent or branch, subsidiary or
affiliate thereof as may be designated in writing from time to time by the Agent
to the Co-Borrowers and the Lenders.
"Officer's Certificate" shall mean a certificate for the Co-Borrowers
executed by any Authorized Officers of the Co-Borrowers, including, without
limitation, the president, any vice-president, the chief financial officer, the
controller and the treasurer, in the form of Exhibit "F".
22
<PAGE>
"OECD" shall mean the Organization for Economic Cooperation and
Development.
"Operating Lease" shall mean, as applied to any Person, any lease of
any property (whether real, personal or mixed) by that Person as lessee which is
not a Capitalized Lease.
"Partnership Guarantor" shall mean (i) Laurel Technologies Partnership
t/a DRS Laurel Technologies, a general partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware, having
its principal office located at 423 Walters Avenue, Johnstown, Pennsylvania
15904 and (ii) any new or additional non-corporate Affiliates of the
Co-Borrowers in which any of the Co-Borrowers acquires an ownership interest of
more than fifty percent (50%).
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
Person succeeding to any or all of its functions and duties under ERISA.
"Pension Plan" shall mean any "employee pension benefit plan" within
the meaning of Section 3(2) of ERISA (other than a Multiemployer Plan) covered
by Title IV of ERISA by reason of Section 4021 of ERISA, of which the
Co-Borrowers or any ERISA Affiliate are or have been within the preceding five
years a "contributing sponsor" within the meaning of Section 4001(a)(13) of
ERISA, or which are or have been within the preceding five years maintained for
employees of the Co-Borrowers or any ERISA Affiliate.
"Permits" shall mean any permit, approval, authorization, license,
variance, or permission required from a Governmental Authority under an
applicable Requirement of Law.
"Permitted Encumbrances" shall mean a collective reference to (i) any
Customary Permitted Liens, (ii) any Liens created or contemplated by the Loan
Documents and (iii) any Liens existing on the Closing Date, as described on
Schedule 1.01-D attached hereto and made a part hereto which Liens are
reasonably acceptable to the Lender.
"Person" or "Persons" shall mean any natural person, employee, general
or limited partnership, corporation (including a business trust), joint stock
company, trust, unincorporated association, joint venture, limited liability
company, trust, bank or other organization, whether or not a legal entity or any
other non-governmental entity, or any Governmental Authority.
"Plan" shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA (other than a Multiemployer Plan) of which the
Co-Borrowers or any ERISA Affiliate are, or within the preceding five years
were, an "employer" as that term is defined in Section 3(5) of ERISA.
"Pledge of Stock Agreements" shall mean a collective reference to (i)
that certain Pledge of Stock Agreement #2, dated as of October 29, 1997,
executed by DRS, as pledgor, pledging 100% of the authorized, issued and
outstanding voting capital stock of (a) DRS International, (b) DRS Canada Inc.,
(c) DRS Systems Management, (d) DRS/MS, (e) DRS Air, (f) DRS Electronic Systems,
(g) DRS Photronics and (h) DRS Precision Echo; (ii) that certain Pledge of Stock
Agreement #1, dated as of October 29, 1997, executed by DRS Canada Inc., as
pledgor, pledging 100% of the authorized, issued and outstanding voting capital
stock of DRS Flight Safety; (iii) that certain Pledge of Stock Agreement #3,
dated as of October 29, 1997, executed by DRS Electronic Systems, as pledgor,
pledging 100% of the authorized, issued and outstanding voting capital stock of
DRS Technical Services; (iv) that certain Pledge of Stock Agreement #4, dated
23
<PAGE>
as of October 29, 1997, executed by DRS Precision Echo, as pledgor, pledging
100% of the authorized, issued and outstanding voting capital stock of DRS Ahead
Technology; (v) that certain Pledge of Stock Agreement #5, dated as of October
29, 1997, executed by DRS Photronics, as pledgor, pledging 100% of the
authorized, issued and outstanding voting capital stock of DRS Optronics and
(vi) that certain Pledge of Stock Agreement #6, dated as of October 31, 1997,
executed by DRS Canada Inc., as pledgor, pledging 100% of the authorized, issued
and outstanding voting capital stock of Spar (UK).
"Potential Event of Default" shall mean an event, condition or
situation which, with the giving of any required notice and/or the passage of
any required grace or cure periods, or any combination of the foregoing, would
constitute an Event of Default.
"Prime Rate" or "Prime Lending Rate" shall mean the fluctuating
interest rate per annum publicly announced by the Agent from time to time as its
"prime rate" or "prime lending rate", which interest rate may not necessarily be
the rate actually charged by the Agent to its most creditworthy customers.
"Prime Rate Loans" shall mean all Revolving Credit Loans and the Term
Loan outstanding which bear interest at a rate determined by reference to the
Prime Rate as provided for in Section 2.03(i) of this Loan Agreement.
"Prime Rate Option" shall mean one of the two interest rates available
to the Co-Borrowers as provided for and described in Section 2.03(i)(a) and
Section 2.03(i)(b) of this Loan Agreement.
"Prime Rate Portion" of any Borrowing or Borrowings shall mean at any
time the portion, including the whole, of such Borrowing or Borrowings bearing
interest at such time under the Prime Rate Option. If no Borrowing or Borrowings
is specified, "Prime Rate Portion" shall refer to the Prime Rate Portion of all
Borrowings outstanding at such time.
"Property" shall mean any real or personal property, plant, building,
facility, structure, underground storage tank, machinery and Equipment,
Inventory, Accounts or other assets now or hereafter owned, leased or operated
by the Co-Borrowers.
"Pro Rata Share" for any Lender shall mean with respect to (i) the
Revolving Credit Facility, a fraction (expressed as a percentage), the numerator
of which shall be the amount of such Lender's Revolving Credit Commitment and
the denominator of which shall be the aggregate amount of all of the Lenders'
Revolving Credit Commitments, as adjusted from time to time to give effect to
any applicable Assignment and Acceptance Agreement and any reduction of the
Revolving Credit Facility under Section 2.01(v) of this Loan Agreement and (ii)
the Term Loan Facility, a fraction (expressed as a percentage), the numerator of
which shall be the amount of such Lender's Term Loan Commitment and the
denominator of which shall be the aggregate amount of all of the Lenders' Term
Loan Commitments, as adjusted from time to time to give effect to any applicable
Assignment and Acceptance Agreement.
"Purchase Agreement" shall mean that certain agreement dated September
19, 1997 by and between Spar Aerospace Limited, as the Seller, and DRS
Technologies, Inc., as the Purchaser, pursuant to which Spar Aerospace Limited
has agreed to sell to DRS Technologies, Inc. certain of the assets of the Spar
Applied Systems Division and 100% of the stock of Spar Aerospace (U.K.) Limited.
24
<PAGE>
"Qualified Billed Accounts Receivable" shall mean an Account which has
been identified by the Co-Borrowers, their Subsidiaries and Affiliates to the
Agent in the Borrowing Base Certificate and is represented by the Co-Borrowers,
the Corporate Guarantors and the Partnership Guarantor to the best of their
knowledge (by their acceptance of Revolving Credit Loans hereunder) as meeting
all of the following criteria on its origination date and thereafter until
collected, and is in all other respects acceptable to the Agent based on its
customary credit and collateral considerations regarding the value of the
Account: (i) the Co-Borrowers, their Subsidiaries and Affiliates are the sole
owners of the Account and have not sold, assigned or otherwise transferred it,
and the Account is not subject to any claim or Lien (other than any Lien granted
to the Agent in connection with the Loan Facilities); (ii) the Account is bona
fide and legally enforceable and owing to the Co-Borrowers, their Subsidiaries
and Affiliates for the sale of goods and performance of services in the United
States, Canada and/or their respective territories and possessions, and in the
ordinary course of business and the Account does not require any further act on
the part of the Co-Borrowers, their Subsidiaries and Affiliates to make it owing
by the Account debtor, and the Co-Borrowers, their Subsidiaries and Affiliates
have delivered to the Agent if required by the Agent, invoices, billings,
shipping documents and other documents evidencing the obligation to pay the
Account; (iii) the Account does not represent a conditional sale, consignment or
other sale on a basis other than that of absolute sale, is not evidenced by any
note, instrument, chattel paper or like document; (iv) the Account is invoiced
for payment promptly on or about the date Inventory or other goods represented
thereby are shipped to the account debtor, and said Account (a) has not remained
unpaid for more than ninety (90) days after its due date and (b) does not
provide for the remaining payment terms to exceed one-hundred fifty (150) days;
(v) the Account is not subject to any valid defense, offset, request for
equitable adjustment, claim, counterclaim, credit, allowance or adjustment
except usual and customary prompt payment discounts, nor has the account debtor
returned the goods or indicated any dispute or complaint concerning them;
provided, however, if the account debtor has returned any goods, or indicated a
dispute or complaint with respect thereto or with respect to the Account, then
the Account will be disqualified under this clause (v) only to the extent of the
goods returned or the amount of the dispute or the complaint if the account
debtor can reasonably be expected to pay the remainder of the Account; (vi) the
Co-Borrowers, their Subsidiaries and Affiliates have not received any notice,
nor have any knowledge, of any facts which materially adversely affect the
creditworthiness of the applicable Account debtor, including, without
limitation, the customer, is not the subject of any bankruptcy or other
insolvency proceeding; (vii) the account debtor is not an Affiliate of the
Co-Borrowers, their Subsidiaries or Affiliates nor a director or officer of the
Co-Borrowers, their Subsidiaries or Affiliates or an Affiliate of any director
or officer; (viii) the Account does not represent a contra account; (ix) the
Agent holds a first priority perfected security interest lien on said Account,
subject to any rights of any Governmental Authority under a Contractual
Obligation; (x) the Account is not with a customer located in any state denying
creditors access to said state's courts in the absence of a Notice of Business
Activities Report or other similar filing, unless the Co-Borrowers, their
Subsidiaries and Affiliates have either qualified as a foreign corporation
authorized to transact business in such state or has filed a Notice of Business
Activities Report or similar filing with the applicable state agency for the
then current year; and (xi) the Account is not due from an account debtor whose
principal place of business is located outside the United States of America or
Canada unless (a) such Account is backed by a letter of credit issued or
confirmed by a bank that is organized under the laws of the United States of
America or a State thereof and has capital and surplus in excess of
US$1,000,000,000.00 (provided, however, that such letter of credit shall have
been delivered to the Agent as additional Collateral under the Loan Documents)
or such Account is covered by foreign credit insurance reasonably satisfactory
to the Lender or (b) such account debtor is, in the reasonable commercial
judgment of the Agent, creditworthy in relation to the Accounts
25
<PAGE>
owing by such customer to the Co-Borrowers, their Subsidiaries and Affiliates.
The Agent shall have the right to request from the Co-Borrowers, their
Subsidiaries and Affiliates, at any time, such information concerning an Account
or Accounts as the Agent may reasonably require in order to ascertain that the
criteria set forth above in clauses (i) through (xi) have been satisfied with
respect to such Account or Accounts. In addition, if an Account or Accounts of
an account debtor representing fifty (50%) percent or more of the total balance
due on all Accounts of said account debtor fail(s) to satisfy the requirements
described in clauses (i) through (xi) above, then all Accounts of said account
debtor shall be ineligible and shall not be "Qualified Billed Accounts
Receivable".
Additionally, without limiting any other provision of this Loan
Agreement, or the discretion of the Agent or Lenders to deem Accounts ineligible
pursuant to any other provision of this Loan Agreement, it is expressly
understood and agreed that if any of the Co-Borrowers, their Subsidiaries or
Affiliates, (i) has been debarred or suspended by any Governmental Authority, or
been issued a notice of proposed debarment or notice of proposed suspension by
any Governmental Authority; (ii) is the subject of an investigation by any
Governmental Authority (other than a normal and customary review) involving or
possibly involving fraud, willful misconduct or any other wrongdoing, and which
could result in criminal liability, civil liability or expense in excess of Five
Hundred Thousand and 00/100 (US$500,000.00) Dollars, suspension, debarment or
any other adverse administrative action; (iii) is a party to any Contractual
Obligation with any Governmental Authority which has been actually terminated
due to such Co-Borrower's, Subsidiary's or Affiliate's alleged fraud, willful
misconduct or any other wrongdoing; (iv) is a party to any Contractual
Obligation with any Governmental Authority which has been actually terminated
for any other reason whatsoever, which could result in liability or expense in
excess of Five Hundred Thousand and 00/100 (US$500,000.00) Dollars, and (v) has
been issued a cure notice or show cause notice under any Contractual Obligation
with any Governmental Authority involving amounts in excess of Five Hundred
Thousand and 00/100 (US$500,000.00) Dollars and has failed to cure the default
giving rise to such cure notice or failed to resolve the matter set forth in the
show cause notice (a) within the time period available to such Co-Borrower,
Subsidiary or Affiliate, pursuant to such Contractual Obligation with any
Governmental Authority and/or such notice or (b) before the date on which the
Contractual Obligation as a consequence of such default or matter set forth in
the show cause notice, then in any such event, any and all Accounts of such
Co-Borrower, Subsidiary or Affiliate, may, in the sole but reasonable discretion
of the Agent, be deemed and treated by the Agent as ineligible Accounts and
shall not be "Qualified Billed Accounts Receivable."
"Qualified Billed Government Accounts Receivable" shall mean all
Accounts arising from a Contractual Obligation with any Governmental Authority
which (i) represents amounts due and owing to the Co-Borrowers, their
Subsidiaries or Affiliates pursuant to a Contractual Obligation with any
Governmental Authority, (ii) have been properly billed, (iii) arise in the
ordinary course of Co-Borrowers', their Subsidiaries' or Affiliates' businesses,
(iv) are due, owing and not subject to any defense, set-off or counterclaim and
(v) are otherwise in all cases a Qualified Billed Accounts Receivable.
"Qualified Inventory" shall mean the Inventory of each of the
Co-Borrowers, their Subsidiaries and Affiliates in the sole possession or
control of such Co-Borrowers, their Subsidiaries and Affiliates, stored in a
location or locations and in a manner acceptable to the Agent, valued at the
lower of cost or market value, which Inventory is, and at all times continues to
be, acceptable to the Agent, and in which the Agent has an enforceable perfected
security interest under the applicable Uniform Commercial Code or the Personal
Property Security Act which is
26
<PAGE>
prior to all Liens, except Liens for taxes not yet due and payable to the extent
given priority by statute and prior to any rights of suppliers in Canada to
repossess thirty (30) day goods pursuant to the Bankruptcy Act.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42
U.S.C. (section)6901 et. seq., and any successor statute, and regulations
promulgated thereunder.
"Refunding Bankers Acceptance" shall have the meaning ascribed and
assigned to such term as set forth in Section 2.03A(ii) in this Loan Agreement.
"Regulation D" shall mean Regulation D of the Federal Reserve Board,
or any successor statute or regulation thereto, as in effect from time to time.
"Regulation G" shall mean Regulation G of the Federal Reserve Board,
or any successor statute or regulation thereto, as in effect from time to time.
"Regulation T" shall mean Regulation T of the Federal Reserve Board,
or any successor statute or regulation thereto, as in effect from time to time.
"Regulation U" shall mean Regulation U of the Federal Reserve Board,
or any successor statute or regulation thereto, as in effect from time to time.
"Regulation X" shall mean Regulation X of the Federal Reserve Board,
or any successor statute or regulation thereto, as in effect from time to time.
"Reimbursement Obligations" shall mean the Dollar Equivalent of the
unpaid reimbursement or repayment obligations of the Co-Borrowers to either or
both Issuing Banks pursuant to the Letter(s) of Credit Reimbursement Agreement
for amounts paid out under Letters of Credit.
"Release" shall mean release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of
Environmental Concern Materials in violation of Environmental Laws into the
indoor or outdoor Environment or into or out of any Property, including the
movement of Environmental Concern Materials through or in the air, soil, surface
water, groundwater or Property.
"Remedial Action" shall mean actions required to (i) clean up, remove,
treat or in any other way address Environmental Concern Materials in the indoor
or outdoor Environment; (ii) prevent the Release or threat of Release or
minimize the further Release of Environmental Concern Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor Environment; or (iii) perform pre-remedial studies and
investigations and post-remedial monitoring and care.
"Reportable Event" shall mean any event described as such in Section
4043 of ERISA or regulations promulgated thereunder.
"Restricted Junior Payments" shall mean (i) any dividend or other
distribution to the shareholders of DRS (whether direct or indirect and whether
in cash, property, Securities or otherwise) on account of any shares of any
class of capital stock (or equivalent partnership interest) of the DRS now or
hereafter outstanding, (ii) any scheduled payment or prepayment of principal of,
27
<PAGE>
premium, if any, or interest on, or fees in respect of, redemption, conversion,
exchange, purchase, retirement, defeasance, sinking fund or similar payment with
respect to any Consolidated Subordinated Debt after the occurrence of an Event
of Default and (iii) any prepayment in advance of anticipated and scheduled
payment dates of principal of, premium, if any, or interest on, or fees in
respect of, redemption, conversion, exchange, purchase, retirement, defeasance,
sinking fund or similar payment with respect to any Consolidated Subordinated
Debt (except for (a) prepayments in connection with the refinance of such
Consolidated Subordinated Debt in amounts and on terms and conditions equal to
or better than the existing terms and conditions and (b) prepayments of up to
US$1,000,000.00 in the aggregate of outstanding principal on any said
Consolidated Subordinated Debt).
"Requirements of Law" shall mean, as to any Person, the charter and
by-laws or other organization or governing documents of such Person, and any
law, rule or regulation, Permit, or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject, including, without limitation, the Securities Act, the Securities
Exchange Act, Regulations G, U and X, and any certificate of occupancy, zoning
ordinance, building, environmental or land use requirement or Permit or
occupational safety or health law, rule or regulation.
"Requisite Lenders" shall mean, as of any date of determination, (i)
if the Commitments are then in effect, Lenders having Pro Rata Shares which are,
in the aggregate, sixty-six and two-thirds percent (66 2/3%) or more of the then
aggregate amount of the Commitments then in effect and (ii) if the Commitments
are not then in effect but there are Obligations outstanding, Lenders holding,
in the aggregate, sixty-six and two thirds percent (66 2/3%) or more of the
outstanding Obligations.
"Revolving Credit Accommodations" shall mean, at any time, the sum of
(i) all Revolving Credit Loans outstanding at such time and (ii) all Letter of
Credit Obligations outstanding at such time.
"Revolving Credit Commitment" shall mean, with respect to each Lender,
as of any date of determination, such Lender's Revolving Credit Loan Pro Rata
Share of the amount of the Revolving Credit Loan Facility as of such date which
percentage and amount shall be set forth on the signature pages to this Loan
Agreement and/or in any Assignment and Acceptance Agreement.
"Revolving Credit Commitments" shall mean, as of any date of
determination, collectively, the aggregate amount of each Revolving Credit
Commitment of all the Lenders as of such date.
"Revolving Credit Loan Facility" shall have the meaning ascribed and
assigned to such term as set forth in the second recital of this Loan Agreement.
"Revolving Credit Loan" and "Revolving Credit Loans" shall have the
meaning ascribed and assigned to such term in Section 2.01(i) of this Loan
Agreement.
"Revolving Credit Loan Note" or "Revolving Credit Loan Notes" shall
mean those Revolving Credit Notes in substantially the form attached hereto as
Exhibit "G" with blanks
28
<PAGE>
appropriately filled, each such note payable to the order of a Lender in a face
amount equal to such Lender's Pro Rata Share of the Revolving Credit
Commitments.
"Revolving Credit Termination Date" shall mean the earlier of (i)
March 31, 2003, (ii) the date of the permanent termination of the Revolving
Credit Commitments pursuant to Section 2.01(v) of this Loan Agreement or (iii)
the date of termination of the Revolving Credit Commitments pursuant to Section
9.02 of this Loan Agreement.
"Securities" shall mean any stock, shares, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, and in general any
instruments commonly known as "securities", or any certificates of interest,
shares, or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing, but shall not include any evidence of the Obligations.
"Securities Act" shall mean the Securities Act of 1933, as amended to
the date hereof and from time to time hereafter, and any successor statute.
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended to the date hereof from time to time hereafter, and any
successor statute.
"Security Agreement" and "Security Agreements" shall mean those
certain Security Agreements dated the date of this Loan Agreement, whereby the
Co-Borrowers, the Corporate Guarantors and the Partnership Guarantor have
collaterally assigned, hypothecated, pledged, conveyed, transferred, given and
granted to the Agent, for the benefit of all of the Lenders, a continuing
security interest in all of their respective rights, title and interests in and
to certain assets and properties of the Co-Borrowers, the Corporate Guarantors
and the Partnership Guarantor described therein (including, without limitation,
Accounts, Inventory and Equipment.)
"Senior Financial Officer" shall mean the chief financial officer of
the Co-Borrowers designated by the Co-Borrowers in a written statement delivered
to the Agent.
"Single Employer Plan" shall mean any Plan which is not a
Multiemployer Plan under ERISA.
"Solvent" shall mean when used with respect to any Person, that at the
time of determination:
(i) the fair value of its assets (both at fair valuation and at
present fair salable value) in excess of the total amount of its liabilities,
including, without limitation, contingent liabilities; and
(ii) is then able to pay its Consolidated Debts as they mature;
and
(iii) it owns property having a value (both at fair valuation and
at present fair salable value) in excess of the total amount required to pay its
Consolidated Debts.
"Subsidiary" or "Subsidiaries" shall mean (i) a corporation a majority
of whose capital stock with voting power, under ordinary circumstances, to elect
a majority of directors is at the time, directly or indirectly, owned by any of
the Co-Borrowers, by any of the Co-Borrowers and
29
<PAGE>
one or more Subsidiaries of any of the Co-Borrowers or by one or more
Subsidiaries of any of the Co-Borrowers, (ii) any other Person (other than a
corporation) in which the Co-Borrowers and one or more Subsidiaries of the
Co-Borrowers, directly or indirectly, at the date of determination thereof has
at least majority ownership interest and/or (iii) any entity whose net earnings
(losses) or portions thereof would be properly included and consolidated with
the net earnings of the Co-Borrowers in accordance with Generally Accepted
Accounting Principles; provided, however, that the term Subsidiary shall not
include any entity that is not reflected on the consolidated balance sheet of
the Co-Borrowers due to inactivity and lack of material assets and liabilities.
"Swap Agreement" shall mean one or more written agreements between any
of the Co-Borrowers and one or more financial institutions providing for "swap",
"cap", "collar" or other interest rate or currency exchange protection with
respect to any of the Loan Facilities, including, without limitation, that
certain Interest Rate and Currency Exchange Agreement in substantially the form
attached hereto as Exhibit "H", as said Interest and Currency Rate Exchange
Agreement may hereinafter be executed by the Co-Borrowers and delivered to the
Agent, all as it may be amended, modified, supplemented, extended, renewed or
otherwise renegotiated by and between the Agent and the Co-Borrowers.
"Swap Obligation" shall mean the Co-Borrowers' obligations to any
Person (that is or was a Lender or an Affiliate of a Lender at the time of
entering into a Swap Agreement) arising from time to time under a Swap
Agreement, including any and all payment or reimbursement obligations of
whatever nature.
"Taxes" shall have the meaning ascribed and assigned to such term as
set forth in Section 2.09 of this Loan Agreement.
"Termination Event" shall mean (i) any Reportable Event with respect
to any Benefit Plan, (ii) the withdrawal of the Co-Borrowers, or an ERISA
Affiliate from a Benefit Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, (iii) the notification by
either the Co-Borrowers or an ERISA Affiliate to affected parties of an intent
to terminate a Benefit Plan in a distress termination described in Section
4041(c) of ERISA, (iv) the institution by the PBGC of proceedings to terminate
any Benefit Plan, (v) any event or condition which constitutes grounds under
Section 4042 of ERISA for the appointment of a trustee to administer a Benefit
Plan or (vi) the partial or complete withdrawal of the Co-Borrowers or any ERISA
Affiliate from a Multiemployer Plan.
"Term Loan" shall mean the term loan in Canadian Dollars with a Dollar
Equivalent in the aggregate principal amount of US$20,000,000.00 made to the
Canadian Borrower by the Canadian Lenders under Section 2.02 of this Loan
Agreement.
"Term Loan Commitment" shall mean, with respect to each Canadian
Lender, as of any date of determination, such Lender's Pro Rata Share of the
amount of the Term Loan Facility, as of such date, which percentage and amount
shall be set forth on the signature pages to this Loan Agreement and/or in any
Assignment and Acceptance Agreement.
"Term Loan Commitments" shall mean, as of any date of determination,
collectively the aggregate amount of each Term Loan Commitment of all of the
Canadian Lenders as of such date.
30
<PAGE>
"Term Loan Facility" shall have the meaning ascribed and assigned to
such term as set forth in the third recital of this Loan Agreement.
"Term Loan Maturity Date" shall mean March 31, 2003.
"Term Loan Note" and "Term Loan Notes" shall mean those Term Loan
Notes in substantially the form attached hereto as Exhibit "I" with blanks
appropriately filled in, each such note payable to the order of a Canadian
Lender in a face amount equal to such Lender's Pro Rata Share of the Term Loan
Commitments.
"Uniform Customs" shall mean the Uniform Customs and Practice for
Documentary Credits (1993 Revisions), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.
"Unused Commitment Fee Rate" shall mean, as of each date of
determination during the term of the Loan Facilities, the applicable percentage
set forth in the Leverage Matrix opposite the Consolidated Funded Debt Leverage
Ratio (determined as of the last day of the prior Fiscal Quarter).
"US Dollar", "US Dollars" and the symbol "US$" shall mean lawful money
of the United States of America.
Section 1.02 Rules of Interpretation and Construction. In this Loan
Agreement unless the context otherwise clearly requires:
(i) Articles and Sections mentioned by number only are the respective
Articles and Sections of this Loan Agreement as so numbered;
(ii) Words importing a particular gender mean and include every other
gender, and words importing the singular number mean and include the plural
number and vice versa;
(iii) Words importing persons mean and include firms, associations,
partnerships (including limited partnerships), societies, trusts, corporations
or other legal entities, including public or governmental bodies, as well as
natural persons;
(iv) Any headings preceding the texts of the several Articles and
Sections of this Loan Agreement, and any table of contents or marginal notes
appended to copies hereof, shall be solely for convenience of reference and
shall not affect or control the meaning, construction or interpretation of this
Loan Agreement;
(v) If any clause, provision or section of this Loan Agreement shall
be ruled invalid or unenforceable by any court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any of the remaining
provisions thereof, unless not invalidating or rendering unenforceable the
remaining provisions shall be inequitable;
(vi) The terms "herein", "hereunder", "hereby", "hereto", "hereof" and
any similar terms as used in this Loan Agreement refer to this Loan Agreement as
a whole and not to any particular provision of this Loan Agreement; the term
"heretofore" means before the date of execution of this Loan Agreement; and the
term "hereafter" means on or after the date of execution of this Loan Agreement;
31
<PAGE>
(vii) This Loan Agreement and all matters relating hereto shall be
governed by and construed and interpreted in accordance with the laws of the
Commonwealth of Pennsylvania;
(viii) If any clause, provision or section of this Loan Agreement
shall be determined to be apparently contrary to or conflicting with any other
clause, provision or section of this Loan Agreement, then the clause, provision
or section containing the more specific provisions shall control and govern with
respect to such apparent conflict;
(ix) References in this Loan Agreement to "determination" (and similar
terms) by the Agent or by any Lender include good faith estimates by the Agent
or by any Lender (in the case of quantitative determinations) and good faith
beliefs by the Agent or by any Lender (in the case of qualitative
determinations); and
(x) Any reference to "$" when used herein, shall be construed to mean
and refer to dollars denominated in the currency of the United States, unless
the context clearly indicates otherwise.
Section 1.03 Accounting Principles.
(i) As used in this Loan Agreement "Generally Accepted Accounting
Principles" shall be established on the date a relevant computation or
determination is to be made or the date of relevant financial statements, as the
case may be.
(ii) Except as otherwise provided in this Loan Agreement, all
computations and determinations as to accounting or financial matters shall be
made, and all financial statements to be delivered pursuant to this Loan
Agreement shall be prepared, in accordance with Generally Accepted Accounting
Principles (including principles of consolidation where appropriate), and all
accounting or financial terms shall have the meanings ascribed to such terms by
Generally Accepted Accounting Principles.
(iii) If any change in Generally Accepted Accounting Principles after
the date of this Loan Agreement is or shall be required to be applied to
transactions then or thereafter in existence, and a violation of one or more
provisions of this Loan Agreement shall have occurred or in the opinion of the
Co-Borrowers would likely occur which would not have occurred or be likely to
occur if no change in accounting principles had taken place, (a) the
Co-Borrowers and the Agent agree that such violation shall not be considered to
constitute an Event of Default or a Potential Event of Default for a period of
thirty (30) days from the date the Co-Borrowers notify the Agent and the Lenders
of the applicability of this Section 1.03 (iii); (b) the Co-Borrowers, the Agent
and the Lenders agree in such event to negotiate in good faith an amendment of
this Loan Agreement which shall approximate to the extent possible the economic
effect of the original financial covenants after taking into account such change
in Generally Accepted Accounting Principles; and (c) if the Co-Borrowers, the
Agent and the Lenders are unable to negotiate such an amendment within the
thirty (30) day period described above in clause (a), the Co-Borrowers shall
have the option of (1) prepaying the Loans (pursuant to applicable provisions
hereof) or (2) submitting the drafting of such an amendment to a firm of
independent certified public accountants of nationally recognized standing
acceptable to the Co-Borrowers, the Agent and the Lenders, which shall complete
its draft of such amendment, which shall be binding upon the parties, within
thirty (30) days of submission; if the Co-Borrowers, the Agent and the Lenders
32
<PAGE>
cannot agree, the firm shall be selected by binding arbitration in the City of
Philadelphia, Pennsylvania in accordance with the rules then obtaining of the
American Arbitration Association. If the Co-Borrowers do not exercise either
such option within said period, then as used in this Loan Agreement, "Generally
Accepted Accounting Principles" shall mean generally accepted accounting
principles in effect at the relevant date. The Co-Borrowers, the Agent and the
Lenders agree that if the Co-Borrowers elect the option in clause (2) above,
until such firm has been selected and completes drafting such amendment, no such
violation shall constitute an Event of Default or a Potential Event of Default.
(iv) If any change in Generally Accepted Accounting Principles after
the date of this Loan Agreement is required to be applied to transactions or
conditions then or thereafter in existence, and the Agent shall assert that the
effect of such change is or shall likely be to distort materially the effect of
any of the definitions of financial terms in Article I of this Loan Agreement or
any of the covenants of the Co-Borrowers in Article VIII of this Loan Agreement
(hereinafter referred to as the "Financial Provisions"), so that the intended
economic effect of any of the Financial Provisions will not in fact be
accomplished, then
(a) the Agent shall notify the Co-Borrowers of such assertion,
specifying the change in Generally Accepted Accounting Principles which is
objected to, and until otherwise determined as provided below, the specified
change in Generally Accepted Accounting Principles shall not be made by the
Co-Borrowers in their financial statements for the purpose of applying the
Financial Provisions; and
(b) the Agent and the Co-Borrowers shall follow the procedures
set forth in paragraph (iii)(b) and the first sentence of paragraph (c) of
subsection (iii) of this Section 1.03. If the Agent, the Co-Borrowers and the
Lenders are unable to agree on an amendment as provided in said paragraph
(iii)(b) and if the Co-Borrowers does not exercise either option set forth in
the first sentence of said paragraph (iii)(c) within the specified period, then
as used in this Loan Agreement "Generally Accepted Accounting Principles" shall
mean generally accepted accounting principles in effect at the relevant date,
except that the specified change in "Generally Accepted Accounting Principles"
which is objected to by the Agent shall not be made in applying the Financial
Provisions. The Agent, the Co-Borrowers and the Lenders agree that if the
Co-Borrowers elect the option in clause (2) of this first sentence of said
paragraph (iii)(c), until such independent accounting firm has been selected and
completes drafting such amendment, the specified change in "Generally Accepted
Accounting Principles" shall not be made in applying the Financial Provisions.
(v) All expenses of compliance with this Section 1.03 shall be paid
for by the Co-Borrowers, except the Co-Borrowers and the Lenders shall be
responsible for their own costs and expenses associated with proceedings under
Section 1.03(iii)(c) hereof other than the cost and expense payable to the
American Arbitration Association and any such accounting firm which shall be
divided equally between the Agent and Lenders on the one hand and the
Co-Borrowers on the other.
33
<PAGE>
ARTICLE II
AMOUNTS AND TERMS FOR THE LOAN FACILITIES
Section 2.01 Revolving Credit Loan Facility.
(i) Availability. (a) Subject to the terms and conditions set forth in
this Loan Agreement, and provided no Potential Event of Default or Event of
Default shall have occurred and be continuing, each Lender hereby severally and
not jointly agrees to make available to the Co-Borrowers (or to any other Person
described on Schedule 2.01 attached hereto, as directed by the Co-Borrowers in
writing), and each Canadian Lender hereby severally and not jointly agrees to
make available to the Canadian Borrower, from time to time during the period
from the Closing Date to the Business Day next preceding the Revolving Credit
Termination Date, revolving credit loans (each individually, a "Revolving Credit
Loan" and collectively, the "Revolving Credit Loans"), in a principal amount
which shall not exceed, in the aggregate at any time outstanding, such Lender's
Pro Rata Share of the Revolving Credit Commitments in effect at such time;
provided, however, that (1) at no time shall the aggregate principal amount of
all Revolving Credit Loans outstanding at any time exceed the Maximum Amount of
Revolving Credit Loans at such time, (2) the aggregate Dollar Equivalent of the
outstanding principal amount of the Canadian Revolving Credit Loans and the
Canadian Letter of Credit Obligations shall not exceed a maximum aggregate
amount outstanding equal to US$20,000,000.00 (the "Canadian Revolving Credit
Sublimit") and (3) Canadian Revolving Credit Loans shall be (A) made solely to
the Canadian Borrower, (B) made only by the Canadian Lenders and (C) denominated
in Canadian Dollars or U.S. Dollars, as selected by the Canadian Borrower. The
Revolving Credit Loans may be made in U.S. Dollars or Canadian Dollars and from
time to time be (x) in the case of Revolving Credit Loans denominated in U.S.
Dollars, Eurodollar Rate Loans or Prime Rate Loans and (y) in the case of
Revolving Credit Loans that are denominated in Canadian Dollars, Eurodollar Rate
Loans, Prime Rate Loans or Canadian Bankers Acceptances. The Revolving Credit
Loans shall be evidenced by the Revolving Credit Notes. Each Lender (including
each Canadian Lender) is hereby authorized to record the date and amount of each
Revolving Credit Loan (including Canadian Revolving Credit Loans) made by said
Lender, the date and amount of each payment or prepayment of principal thereof
either (1) on the Schedule "1" annexed to and constituting a part of said
Lender's Revolving Credit Note or (2) by entering such information into said
Lender's automated loan tracking system, and any such recordation shall
constitute prima facie evidence of the accuracy of the information so recorded;
provided, however, the failure to make such notation(s) with respect to any
Borrowing shall not limit or otherwise affect the obligation of the Co-Borrowers
to the Lenders under this Loan Agreement or the Revolving Credit Notes. The
Canadian Revolving Credit Loans shall be evidenced by separate promissory notes
of the Canadian Borrower in substantially the form of Exhibit G hereto (each, a
"Canadian Revolving Credit Note"), dated as of the Closing Date and completed
with appropriate insertions. One Canadian Revolving Credit Note shall be payable
to the order of each Canadian Lender in an amount equal to its Pro Rata Share of
the Canadian Revolving Credit Sublimit.
If the outstanding amount of the Revolving Credit Loans shall exceed the
Maximum Amount of the Revolving Credit Loans at any time, such excess shall be
immediately due and payable to the Lenders. The Co-Borrowers hereby acknowledge
and agree that they are jointly and severally liable for all Revolving Credit
Loans.
34
<PAGE>
(b) All Revolving Credit Loans under this Loan Agreement shall be made
by the Lenders simultaneously and proportionately to their respective Pro Rata
Share of the Revolving Credit Commitments. It shall be understood that no Lender
shall be responsible for any failure by any other Lender to perform its
obligation to make a Revolving Credit Loan hereunder and that the Revolving
Credit Commitment of any Lender shall not be increased or decreased as a result
of the failure by any other Lender to perform its obligation to make a Revolving
Credit Loan.
(c) Revolving Credit Loans may be voluntarily prepaid pursuant to
Section 2.05(i) hereof and, subject to the provisions of this Loan Agreement,
any amounts so prepaid may be reborrowed, up to the amount available under this
Section 2.01(i) at the time of such Borrowing, until the Business Day next
preceding the Revolving Credit Termination Date. Each Lender's Revolving Credit
Commitment shall expire and each Revolving Credit Loan then outstanding shall be
repaid by the Co-Borrowers no later than the Revolving Credit Termination Date.
The final payment of all principal, unpaid accrued interest, fees and expenses,
if any, owing to the Lenders on the Revolving Credit Loan Facility shall be due
and payable on the Revolving Credit Termination Date.
(ii) Notice of Borrowing. Whenever the Co-Borrowers (or in the case of a
Canadian Revolving Credit Loan, the Canadian Borrower) desire to borrow under
this Section 2.01, the Co-Borrowers (or in the case of a Canadian Revolving
Credit Loan, the Canadian Borrower) shall deliver to the Agent a Notice of
Borrowing no later than 10:00 A.M. (Philadelphia, Pennsylvania time) (a) at
least one (1) Business Day in advance of the proposed Borrowing Date, in the
case of a Borrowing as a Prime Rate Loan and (b) at least three (3) Business
Days in advance of the proposed Borrowing Date in the case of a Borrowing as a
Eurodollar Rate Loan; provided that the Co-Borrowers may deliver to the Agent a
Notice of Borrowing no later than 10:00 A.M. (Philadelphia, Pennsylvania time)
on the proposed Borrowing Date if in connection with such Borrowing the Agent
would be required to comply with Section 2.01(iii)(a) hereof. The Notice of
Borrowing shall specify (1) the Borrowing Date (which shall be a Business Day)
in respect of the Revolving Credit Loan, (2) the amount of the proposed
Borrowing which shall not be less than US$100,000.00 (or in the case of a
Canadian Revolving Credit Loan, an amount in Canadian Dollars of which the
Dollar Equivalent is at least US$100,000.00) (except in those situations where a
Letter of Credit becomes a Reimbursement Obligation under Section 2.0l(vi)(d)(2)
hereof), (3) the designation of whether the Borrowing shall be made available to
the Co-Borrowers in U.S. Dollars or to the Canadian Borrower in Canadian Dollars
(in which case the Borrowing shall be funded and booked by the Canadian
Lenders), (4) the applicable interest rate option as described in Section
2.02(i) of this Loan Agreement and, if applicable, (5) the Eurodollar Interest
Period. In lieu of delivering the above-described Notice of Borrowing, the
Co-Borrowers may give the Agent telephonic notice of any proposed Borrowing by
the time required under this Section 2.01(ii); provided, however, that such
notice shall be confirmed in writing by delivery to the Agent promptly (but in
no event later than the Borrowing Date of the requested Revolving Credit Loan)
of a Notice of Borrowing. Any Notice of Borrowing (or telephonic notice in lieu
thereof) pursuant to this Section 2.01(ii) shall be irrevocable.
(iii) Making of Revolving Credit Loans. (a) Promptly after receipt of a
Notice of Borrowing under Section 2.01(ii) hereof (or telephonic notice in lieu
thereof), the Agent shall notify Mellon Bank, N.A. and its syndicate members
and/or participants or Mellon Bank Canada and its syndicate members and/or
participants with a Revolving Credit Commitment, by telex or telecopy or other
similar form of teletransmission, of the proposed Borrowing. Each such Lender
35
<PAGE>
shall make the amount of its Pro Rata Share of each Revolving Credit Loan
available to the Agent in the requested currency (U.S. Dollars or Canadian
Dollars, as applicable), and in immediately available funds, to such bank and
account, in Philadelphia, Pennsylvania, or in Toronto, Canada as the Agent may
designate, not later than 10:00 A.M. (Philadelphia, Pennsylvania time) on the
Borrowing Date. After the Agent's receipt of the proceeds of such Revolving
Credit Loans, the Agent shall make the proceeds of such Revolving Credit Loan
available to the Co-Borrowers in Philadelphia, Pennsylvania or to the Canadian
Borrower in Toronto, Canada on such Borrowing Date and shall disburse such funds
in U.S. Dollars or Canadian Dollars, as applicable, and in immediately available
funds to an account of the Co-Borrowers at the Agent (or to an account of the
Canadian Borrower at Mellon Bank Canada in Toronto, Canada) and thereafter to
any substitute account, designated in writing by the Co-Borrowers (or the
Canadian Borrower, as the case may be) in the Notice of Borrowing.
(b) In connection with Revolving Credit Loans funded pursuant to
Section 2.01(iii) (a) hereof, unless the Agent shall have been notified by any
Lender prior to any Borrowing Date in respect of any Borrowing of Revolving
Credit Loans that such Lender does not intend to make available to the Agent
such Lender's Pro Rata Share of the requested Revolving Credit Loan on such
Borrowing Date, the Agent may assume that such Lender has made such amount
available to the Agent on such Borrowing Date and the Agent in its sole
discretion may, but shall not be obligated to, make available to the
Co-Borrowers a corresponding amount on such Borrowing Date. If such
corresponding amount is not in fact made available to the Agent by such Lender
on or prior to a Borrowing Date, such Lender agrees to pay (and, provided the
Agent fund said amount, the Co-Borrowers agree to repay the Agent in accordance
with the terms of the Loan Documents) such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Co-Borrowers until the date such amount is paid or repaid to the Agent, at
(1) in the case of such non-performing Lender, the Federal Funds Effective Rate
(or if a Canadian Lender, the corresponding rate for overnight funds) and (2) in
the case of the Co-Borrowers (or the Canadian Borrower), the interest rate
applicable at the time to a Borrowing of Prime Rate Loans made on such Borrowing
Date. If such non-performing Lender shall pay to the Agent such corresponding
amount, such amount so paid shall constitute such Lender's Pro Rata Share of the
Revolving Credit Loan, and if both such Lender and the Co-Borrowers (or the
Canadian Borrower) shall have paid and repaid, respectively, such corresponding
amount, the Agent shall promptly return to the Co-Borrowers (or the Canadian
Borrower) such corresponding amount in same day funds. Nothing in this Section
2.01(iii) shall be deemed to relieve any Lender of its obligation hereunder to
fund its Pro Rata Share of the Revolving Credit Loan on any Borrowing Date.
(iv) Use of Proceeds of Revolving Credit Loans and Use of Letters of
Credit. The proceeds of the Revolving Credit Loans shall be used by the
Co-Borrowers for working capital in the ordinary course of their business and
for other lawful and permitted corporate purposes to the extent not otherwise
prohibited hereunder including, without limitation (a) up to US$5,000,000.00 (or
its Canadian Dollar Equivalent) for acquisition by DRS Flight Safety of certain
of the assets of Spar Aerospace Limited as described in the Purchase Agreement,
(b) up to US$10,000,000.00 for acquisition by DRS of 100% of the authorized,
issued and outstanding capital stock of Spar Aerospace (U.K.) Limited, as
described in the Purchase Agreement, (c) refinancing Consolidated Debt, (d)
working capital in the ordinary course of the Co-Borrowers', their Subsidiaries'
and Affiliates' businesses, (d) up to US$20,000,000.00 (or its Canadian Dollar
Equivalent) of proceeds of the Revolving Credit Loans for acquisitions and (e)
Letters of Credit, subject to the Letter of Credit Sublimit. Letters of Credit
may be used in support of working
36
<PAGE>
capital in the ordinary course of business and for other lawful and permitted
corporate purposes to the extent not otherwise prohibited hereunder.
(v) Reduction of Revolving Credit Commitments; Revolving Credit
Termination Date. (a) The Co-Borrowers shall have the right, at any time and
from time to time, to terminate in whole or permanently reduce in part, without
premium or fee, the Revolving Credit Commitments by an amount not to exceed the
amount of (1) the aggregate Revolving Credit Commitments in effect at such time
minus (2) the aggregate principal amount of the Revolving Credit Accommodations
then outstanding. The Co-Borrowers shall give not less than five (5) Business
Days' prior express written notice to the Agent designating the date (which
shall be a Business Day) of such termination or total permanent reduction and
the amount of any partial permanent reduction. Promptly after receipt of a
notice of such termination or reduction, the Agent shall notify each Lender of
the proposed termination or reduction. Such termination or partial reduction of
the Revolving Credit Commitments shall be effective on the date specified in the
Co-Borrowers' notice and shall reduce the Revolving Credit Commitment of each
Lender proportionately in accordance with its Pro Rata Share of all of the
Revolving Credit Commitments (including each Canadian Lender's corresponding Pro
Rata Share of the Canadian Revolving Credit Sublimit). Any such partial
reduction of the Revolving Credit Commitments shall be in an aggregate minimum
amount of US$5,000,000.00 and integral multiples of US$1,000,000.00 in excess of
that amount.
(b) Each Lender's Revolving Credit Commitment shall expire
without further action on the part of the Lenders, and all then outstanding
Revolving Credit Loans and Reimbursement Obligations shall be due and payable in
full on the Revolving Credit Termination Date.
(vi) Issuance of Letters of Credit. (a) Subject to the terms and
conditions set forth in this Loan Agreement, the Issuing Banks agree to issue
for the account of the Co-Borrowers one or more Letters of Credit up to an
aggregate face amount at any one time outstanding equal to the Letter of Credit
Sublimit, from time to time during the period commencing on the Closing Date and
ending on a Business Day at least sixty (60) Business Days preceding the
Revolving Credit Termination Date; provided, however, the Letters of Credit
described on Schedule 2.01(v)(i) attached hereto shall also be considered
Letters of Credit issued under this Loan Agreement. The Letter of Credit
Obligations shall constitute financial accommodations under the Revolving Credit
Loan Facility and shall reduce availability under the Revolving Credit
Commitments by the stated amount of such Letter of Credit Obligations. Each
Letter of Credit (1) shall be denominated in U.S. Dollars or Canadian Dollars,
(2) shall be in all instances either a standby letter of credit or a
documentary/commercial letter of credit and (3) shall expire no later than
thirty (30) days prior to the Revolving Credit Termination Date. Each Letter of
Credit shall be subject to the Uniform Customs and, to the extent not
inconsistent therewith, the Laws of the Commonwealth of Pennsylvania if issued
by Mellon Bank, N.A., or the Laws of the Province of Ontario if issued by Mellon
Bank Canada.
(b) In addition to being subject to the satisfaction of the conditions
precedent contained in Section 3.02 hereof, the obligation of the Issuing Bank
to issue any Letter of Credit is subject to the satisfaction in full of the
following conditions:
(1) the Co-Borrowers shall have delivered to the Issuing Bank at
such times and in such manner as the Issuing Bank may prescribe, a Letter
of Credit Reimbursement Agreement and such other documents and materials as
may be required
37
<PAGE>
pursuant to the terms thereof and the terms of the proposed Letter of
Credit shall be reasonably satisfactory to the Issuing Bank thereof;
(2) immediately after the issuance of such Letter of Credit, the
aggregate principal amount of Letter of Credit Obligations then existing
shall not exceed the Letter of Credit Sublimit; and
(3) as of the date of issuance, no order, judgment or decree of
any court, arbitrator or Governmental Authority shall purport by its terms
to enjoin or restrain the Issuing Bank from issuing the Letter of Credit
and no Law applicable to the Issuing Bank and no request or directive
(whether or not having the force of Law and whether or not the failure to
comply therewith would be unlawful) from any Governmental Authority with
jurisdiction over the Issuing Bank shall prohibit or request that the
Issuing Bank refrain from the issuance of letters of credit generally or
the issuance of such Letter of Credit.
(c) To open a Letter of Credit, the Co-Borrowers shall give the
Issuing Bank written notice at the following address: (1) if the Letter of
Credit is to be denominated in U.S. Dollars, then Mellon Bank, N.A., 3 Mellon
Bank Center, Room 2329, Pittsburgh, PA 15259 not later than 10:00 A.M.
(Philadelphia, Pennsylvania time) on the requested issuance date thereof under
this Loan Agreement and (2) if the Letter of Credit is to be denominated in
Canadian Dollars, then Mellon Bank Canada, Royal Trust Tower, 32nd Floor,
Toronto Dominion Center, Toronto, Ontario, M5K 1K2 not later than 10:00 A.M.
(Toronto, Canada time) on the requested issuance date thereof under this Loan
Agreement. Such notice shall be irrevocable and shall specify (1) the stated
amount of the Letter of Credit requested, (2) the effective date (which day
shall be a Business Day) of issuance of such requested Letter of Credit, (3) the
date on which such requested Letter of Credit is to expire (which date shall be
a Business Day), (4) the Person for whose benefit the requested Letter of Credit
is to be issued, (5) the stated amount of then outstanding Letter of Credit
Obligations and (6) the principal amount of then outstanding Revolving Credit
Loans. A copy of such notice shall be delivered by facsimile to the Agent
contemporaneously therewith at the Agent's Edison, New Jersey address.
(d) Notwithstanding any provisions to the contrary in any Letter of
Credit Reimbursement Agreement:
(1) the Co-Borrowers shall unconditionally reimburse the Issuing
Bank for drawings under such Letter of Credit no later than the time
specified in such Letter of Credit Reimbursement Agreement irrespective of
any claim, set-off, defense or other right which the Co-Borrowers may have
at any time against the Agent, Issuing Bank and/or the Lenders, except with
respect to the Agent's, the Issuing Bank's and/or the Lender's gross
negligence or willful misconduct; and
(2) in connection with a Letter of Credit issued by the Issuing
Bank, to the extent any Reimbursement Obligation is not paid when due, such
Reimbursement Obligation shall be deemed to be a Revolving Credit Loan
payable to the Lenders in the amount of such Reimbursement Obligation made
in accordance with Section 2.01(i) hereof;
(3) any Reimbursement Obligation with respect to any Letter of
Credit shall bear interest from the date of the relevant drawing under the
pertinent Letter of
38
<PAGE>
Credit at the interest rate applicable to Prime Rate Loans described in
Section 2.03(i)(a) hereof, until paid in full; and
(4) With respect to all Letters of Credit which, on or before the
Revolving Credit Termination Date, have not been presented for honor,
notwithstanding the occurrence of the Revolving Credit Termination Date and
the satisfaction of all other obligations under the Loan Documents, the
Co-Borrowers' obligations under the Loan Documents shall continue until all
amounts paid by the Issuing Bank under such Letters of Credit have been
reimbursed (as well as all other Obligations under the Loan Documents have
been satisfied) and the Liens granted under and pursuant to the Loan
Documents shall continue to secure such Letter of Credit Obligations;
provided, however, that the Agent may release the Liens under the Loan
Documents (but not the other Obligations thereunder) upon (i) the deposit
by the Co-Borrowers in an interest-bearing cash collateral account opened
by the Agent of an amount in Cash or Cash Equivalents equal to the
aggregate amount of the Letter of Credit Obligations to collateralize the
Reimbursement Obligations with respect to such Letters of Credit or (ii) an
indemnification agreement from a financial institution or "back-up" letters
of credit issued by a financial institution all in form and substance
reasonably satisfactory to the Agent. Notwithstanding, the payment of all
other Obligations under the Loan Documents, the Reimbursement Obligations
associated with such Letters of Credit shall accrue interest in accordance
with Section 2.01(vi)(d)(3) until such Reimbursement Obligations have been
satisfied in full.
(5) With respect to any Reimbursement Obligation, such
Reimbursement Obligation shall: (A) be payable by the Co-Borrowers upon
demand, (B) be deemed to be a Revolving Credit Loan as described in Section
2.0l(vi)(d)(2) above, (C) bear interest from the date of payment by the
Agent at the interest rate applicable to Prime Rate Loans described in
Section 2.03(i)(a) hereof, until paid in full and (D) be subject to
immediate reimbursement by the Lenders to the Agent, in an amount equal to
each Lender's Pro Rata Credit Share of the Revolving Credit Commitments.
(e) No action taken or omitted to be taken by the Issuing Bank under
or in connection with any Letter of Credit (except in connection with its gross
negligence or willful misconduct) shall put the Issuing Bank under any resulting
liability to the Co-Borrowers and/or any Lender or, subject to paragraph (b)
above, relieve that Lender of its obligations hereunder to reimburse the Issuing
Bank. In the event this Loan Agreement and any Letter of Credit Reimbursement
Agreement are inconsistent, the terms of this Loan Agreement shall prevail. In
determining whether to pay under any Letter of Credit, the Issuing Bank shall
have no obligation to the other Lenders other than to confirm that any documents
required to be delivered under such Letter of Credit appear to have been
delivered and that they appear on their face to comply with the requirements of
such Letter of Credit.
(f) (1) Immediately upon issuance by the Issuing Bank of any Letter of
Credit for the account of the Co-Borrowers in accordance with the
procedures set forth in this Section 2.01(vi), each Lender for Domestic
Letters of Credit and each Canadian Lender for Canadian Letters of Credit
(other than the Issuing Bank) shall be deemed to have irrevocably and
unconditionally purchased and received from the Issuing Bank without
recourse to or warranty from the Issuing Bank an undivided interest in such
Letter of Credit in the amount of such Lender's Pro Rata Share (including,
without limitation, all obligations of the Co-Borrowers with respect
thereto other than amounts
39
<PAGE>
owing to the Issuing Bank under Section 2.03(ii) hereof) and any security
therefor or guaranty pertaining thereto.
(2) If the Issuing Bank makes any payment under any Letter of Credit
(whether prior or subsequent to the Revolving Credit Termination Date) and
the Co-Borrowers do not repay such amount to the Issuing Bank pursuant to
Section 2.01(vi)(d) above or effect a Borrowing as provided for in Section
2.01(vi)(d) above or Section 2.01(vi)(g) below, the Agent shall promptly
notify each other Lender of such failure, and each such other Lender or its
Affiliate Canadian Lender (other than the Issuing Bank) shall promptly and
unconditionally pay to the Agent for the account of the Issuing Bank the
amount of such Lender's Pro Rata Share of such payment, in U.S. Dollars or
Canadian Dollars, as applicable, and in immediately available funds, and
the Agent shall promptly pay such amount, and any other amounts received by
the Agent for the Issuing Bank's account pursuant to this Section
2.01(vi)(f), to the Issuing Bank. If the Agent so notifies a Lender prior
to 10:00 A.M. (Philadelphia, Pennsylvania time) on any Business Day, such
Lender or its Affiliate Canadian Lender shall make available to the Agent
for the account of the Issuing Bank, its Pro Rata Share of the amount of
such payment on such Business Day in U.S. Dollars or Canadian Dollars, as
applicable, and in immediately available funds in Pittsburgh, Pennsylvania.
If and to the extent such Lender shall not have so made its Pro Rata Share
of the amount of such payment available to the Agent for the account of the
Issuing Bank, such Lender agrees to pay to the Agent for the account of the
Issuing Bank forthwith on demand such amount together with interest
thereon, for each day from the date such payment was first due until the
date such amount is paid to the Agent for the account of the Issuing Bank,
at the Federal Funds Effective Rate (or the corresponding Canadian
overnight rate) for three (3) Business Days and then at the Prime Rate. The
failure of any Lender (other than the Issuing Bank) to make available to
the Agent for the account of the Issuing Bank its Pro Rata Share of any
such payment shall not relieve any other Lender (other than the Issuing
Bank) of its obligation hereunder to make available to the Agent for the
account of the Issuing Bank its Pro Rata Share of any payment on the date
such payment is to be made.
(3) Whenever the Issuing Bank receives a payment on account of a
Reimbursement Obligation, including any interest thereon, as to which the
Agent has previously received payments from the Lenders (other than the
Issuing Bank) for the account of the Issuing Bank pursuant to this
paragraph (f), it shall promptly pay to the Agent and the Agent shall
promptly pay to each Lender which has funded its participating interest
therein, in Pittsburgh, Pennsylvania, in U.S. Dollars or Canadian Dollars,
as applicable, and in the kind of funds so received, an amount equal to
such Lender's Pro Rata Share thereof. Each such payment shall be made by
the Issuing Bank or the Agent, as the case may be, on the Business Day on
which such Person receives the funds paid to such Person pursuant to the
preceding sentence, if received prior to 10:00 A.M. (Philadelphia,
Pennsylvania time) on such Business Day, and otherwise on the next
succeeding Business Day.
(4) The obligations of a Lender (other than the Issuing Bank) to make
payments to the Agent for the account of the Issuing Bank with respect to a
Letter of Credit issued on behalf of the Co-Borrowers by such Issuing Bank
shall be irrevocable, shall not be subject to any qualification or
exception whatsoever and shall be honored in accordance with the terms and
conditions of this Loan Agreement under all circumstances (subject to
paragraph (b) above) including, without limitation any of the following
40
<PAGE>
circumstances (except in connection with the gross negligence or willful
misconduct of the Issuing Bank):
(A) any lack of validity or enforceability of this Loan Agreement
or any of the other Loan Documents;
(B) the existence of any claim, set-off , defense or other right
which the Co-Borrowers may have at any time against a beneficiary named in
a Letter of Credit or any transferee of any Letter of Credit (or any Person
for whom any such transferee may be acting), the Agent, the Issuing Bank
any Lender, or any other Person, whether in connection with this Loan
Agreement, any Letter of Credit, the transactions contemplated herein or
any unrelated transactions (including any underlying transactions between
the Co-Borrowers and the beneficiary named in any Letter of Credit);
(C) any draft, certificate of any other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(D) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan Documents;
(E) any failure by the Agent or the Issuing Bank to make any
reports required pursuant to paragraph (viii) below; or
(F) the occurrence of any Event of Default or Potential Event of
Default.
(g) (1) The Co-Borrowers unconditionally agree to pay to the
Issuing Bank the amount of all Reimbursement Obligations, interest and
other amounts payable to the Issuing Bank under or in connection with any
Letter of Credit issued on behalf of one or more of the Co-Borrowers
immediately when due, irrespective of any claim, set-off, defense or other
right which the Co-Borrowers may have at any time against the Issuing Bank
or any other Person.
(2) In the event any payment by the Co-Borrowers received by the
Issuing Bank with respect to such Letter of Credit and distributed by the
Agent to the Lenders on account of their participations is thereafter set
aside, avoided or recovered from the Issuing Bank in connection with any
receivership, liquidation or bankruptcy proceeding or otherwise, each
Lender which received such distribution shall, upon demand by the Issuing
Bank, contribute such Lender's Pro Rata Share of the amount set aside,
avoided or recovered together with interest at the rate required to be paid
by the Issuing Bank upon the amount required to be repaid by it.
(vii) Issuing Bank, Agent and Lenders Not Liable. (a) In addition to
amounts payable as elsewhere provided in Section 2.01(vi), the Co-Borrowers
hereby agree on a joint and several basis to protect, indemnify, pay and save
the Agent, the Issuing Bank and each Lender harmless from and against any and
all Liabilities and Costs which the Agent or the Issuing Bank or any Lender may
incur or be subject to as a consequence, direct or indirect, of (1) the issuance
of a Letter of Credit for the account of the Co-Borrowers other than, in the
case of the Issuing Bank, as a result of its gross negligence or willful
misconduct, as determined by the final judgment of a
41
<PAGE>
court of competent jurisdiction or (2) the failure of the Issuing Bank to honor
a drawing under such Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
Governmental Authority (all such acts or omissions hereinafter referred to as
the "Governmental Acts").
(b) As between the Co-Borrowers, their Subsidiaries and Affiliates,
the Lenders, the Agent and the Issuing Bank, subject to the second to the last
sentence of this subparagraph (b), the Co-Borrowers assume all risks of the acts
and omissions of, or misuse of such Letter of Credit by the beneficiary of such
Letter of Credit. In furtherance and not in limitation of the foregoing, subject
to the provisions of the Letter of Credit Reimbursement Agreements, the Agent,
the Issuing Bank and the Lenders shall not be responsible: (1) for the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by the Co-Borrowers or the beneficiary in connection with the
application for and issuance of the Letters of Credit, even if it should in fact
prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent
or forged; (2) for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason; (3) for failure of the beneficiary
of a Letter of Credit to comply duly with conditions required in order to draw
upon such Letter of Credit; (4) for errors, omissions, interruptions or delays
in transmission or delivery of any messages, by mail, cable, telegraph, telex,
or other similar form of teletransmission or otherwise, whether or not they be
in cipher; (5) for errors in interpretation of technical terms; (6) for any loss
or delay in the transmission or otherwise of any document required in order to
make a drawing under any Letter of Credit or of the proceeds thereof; (7) for
the misapplication by the beneficiary of a Letter of Credit of the proceeds of
any drawing under such Letter of Credit; and (8) for any consequences arising
from causes beyond the control of the Agent, the Issuing Bank and the Lenders
including, without limitation, any Governmental Acts. None of the above shall
affect, impair, or prevent the vesting of any of the rights or powers of the
Issuing Bank under this subparagraph (b); provided, however, the Co-Borrowers
may have a Claim against either the Agent, the Issuing Bank and/or the Lenders,
to the extent of any direct, but not consequential, damages suffered by the
Co-Borrowers that were caused by the Agent's, Issuing Bank's and/or Lenders'
willful misconduct or gross negligence. In furtherance and not in limitation of
the foregoing, the Issuing Bank may accept documents that appear on their face
to be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary.
(c) In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Issuing
Bank under or in connection with Letters of Credit issued on behalf of the
Co-Borrowers and/or the Persons described on Schedule 2.01 attached hereto in
accordance with written directions of the Co-Borrowers, or any related
certificates, if taken or omitted in good faith, shall not, in the absence of an
express violation of the standards set forth in the Uniform Customs and
subsequent revisions thereof, put the Issuing Bank, the Agent or any Lender
under any resulting liability to the Co-Borrowers or relieve the Co-Borrowers of
any of its obligations hereunder to any such Person.
Section 2.02 Term Loan Facility
(i) Availability. (a) Subject to the terms and conditions set forth in
this Loan Agreement, each of the Canadian Lenders hereby severally and not
jointly agrees to make available to the Canadian Borrower on the Closing Date, a
term loan (hereinafter referred to as the "Term
42
<PAGE>
Loan") in the principal amount which shall not exceed in the aggregate at any
time outstanding, such Lender's Pro Rata Share of the Term Loan Commitments in
effect at such time. The Term Loan shall be evidenced by the Term Loan Notes.
The Co-Borrowers hereby acknowledge and agree that they are jointly and
severally liable for the Term Loan made to the Canadian Borrower.
(b) The Canadian Borrower may not reborrow any principal amount
repaid or prepaid on the Term Loan Facility.
(c) The Canadian Borrower shall deliver to the Agent at least two
(2) days prior to the Closing Date, a Notice of Borrowing which shall specify
the appropriate interest rate selected by the Canadian Borrower and the
designation of Mellon Bank Canada as the Lender.
(ii) Use of Proceeds of the Term Loan Facility. The proceeds of the
Term Loan Facility shall be used by the Canadian Borrower for the sole purpose
of acquiring certain of the assets of Spar Aerospace Limited, pursuant to the
Purchase Agreement, including the payment of closing costs and expenses.
(iii) Amortization of the Term Loan Facility. Subject to the
provisions of Section 2.05 of this Loan Agreement, the Canadian Borrower shall
repay to the Agent for the account of the Canadian Lenders the outstanding
principal balance of the Term Loan Facility in consecutive quarterly
installments commencing on June 30, 1998 and continuing thereafter on the last
day of each succeeding calendar quarter, in an amount as set forth in the
following schedule (the entire unpaid principal amount of the Term Loan
Facility, together with all accrued and unpaid interest, fees and other charges
shall be due and payable on the Term Loan Maturity Date):
Quarterly Principal Payments (of an
amount in Canadian Dollars for which
During Fiscal Year the Dollar Equivalent is:)
- ------------------ --------------------------
Closing Date through March 31, 1998 US$0.00
April 1, 1998 through March 31, 1999 US$375,000.00
April 1, 1999 through March 31, 2000 US$1,000,000.00
April 1, 2000 through March 31, 2001 US$1,125,000.00
April 1, 2001 through March 31, 2002 US$1,125,000.00
April 1, 2002 through March 31, 2003 US$1,375,000.00
Section 2.03 Interest on the Loan Facilities.
(i) Rates of Interest. (a) All Revolving Credit Loans (other than
Canadian Bankers Acceptances which are described in Section 2.03A below) shall
bear interest computed daily on the outstanding principal balance thereof from
the date made until paid in full at one or more of the interest rate options
selected by the Co-Borrowers (or the Canadian Borrower for Canadian Loans) from
between the two (2) interest rate options set forth below. Subject to the
provisions of this Loan Agreement, the Co-Borrowers (or the Canadian Borrower
for Canadian
43
<PAGE>
Loans) may select different options to apply simultaneously to different
portions of the Revolving Credit Loans and may select different Funding Segments
to apply simultaneously to different parts of the Eurodollar Rate Portion of the
Revolving Credit Loans. Each selection of a rate option shall apply separately
and without overlap to the Revolving Credit Loans as a class. The aggregate
number of Funding Segments applicable to the Eurodollar Rate Portion of the
Revolving Credit Loans at any time shall not exceed twenty (20).
Interest Rate Options For Revolving Credit Loans:
(1) Prime Rate Option: A fluctuating rate per annum for each day
equal to the Prime Rate of the Agent, in effect from time to time (such
interest rate to change immediately upon any change in the Prime Rate) plus
the Applicable Margin for such day; or
(2) Eurodollar Rate Option. A fixed rate per annum for each day
during a Eurodollar Interest Period equal to the Eurodollar Rate plus the
Applicable Margin for such day. The Agent shall give prompt notice to the
Co-Borrowers and to the Lenders of the Eurodollar Rate determined or
adjusted in accordance with the provisions hereof, which determination or
adjustment shall be conclusive (absent manifest error) if made in good
faith. The Eurodollar Rate shall be calculated in accordance with the
Eurodollar Reserve Percentage, if the Agent is required to hold such
reserves.
(b) The Term Loan (other than Canadian Bankers Acceptances which are
described in Section 2.03A below) shall bear interest computed daily on the
outstanding principal balance thereof from the date made until paid in full at
one or more of the interest rate options selected by the Canadian Borrower from
between the two (2) interest rate options set forth below. The aggregate number
of Funding Segments applicable to the Eurodollar Rate Portion of the Term Loan
at any time shall not exceed five (5).
Interest Rate Options For Term Loan:
(1) Prime Rate Option: A fluctuating rate per annum for each day
equal to the Prime Rate of the Agent, in effect from time to time (such
interest rate to change immediately upon any change in the Prime Rate) plus
the Applicable Margin for such day; or
(2) Eurodollar Rate Option. A fixed rate per annum for each day
during a Eurodollar Interest Period equal to the Eurodollar Rate plus the
Applicable Margin for such day. The Agent shall give prompt notice to the
Canadian Borrower and to the Lenders of the Eurodollar Rate determined or
adjusted in accordance with the provisions hereof, which determination or
adjustment shall be conclusive (absent manifest error) if made in good
faith. The Eurodollar Rate shall be calculated in accordance with the
Eurodollar Reserve Percentage, if the Agent is required to hold such
reserves.
(c) The Applicable Margin for Prime Rate Loans, Eurodollar Rate Loans
and Canadian Bankers Acceptances with respect to both Loan Facilities for any
day shall be the applicable percentage set forth in the Leverage Matrix. For
purposes of this Section 2.03(i)(d), the Co-Borrowers' Consolidated Funded Debt
Leverage Ratio shall be tested at the end of the periods covered by the
quarterly and annual consolidated financial statements which are to be provided
to the Agent pursuant to Section 5.02 of the Loan Agreement. Any change in the
Applicable Margin (both increases and decreases therein) shall be effective on
the first (1st) day of
44
<PAGE>
the Fiscal Quarter following the Fiscal Quarter in which the Agent is entitled
to receive said submitted financial statements all as provided for in Article V
hereof. For example, for financial statements covering the first Fiscal Quarter
of any Fiscal Year, the effective date of any increase or decrease in the
Applicable Margin would be October 1st of said calendar year. For the period
from the Closing Date up through and including March 31, 1998, the Applicable
Margin for Prime Rate Loans, Eurodollar Rate Loans and Canadian Bankers
Acceptances shall be the percentage described at level V on the Leverage Matrix.
(d) Notwithstanding subsection (a), (b) and (c) above, interest in
respect of any Loan shall not exceed the maximum rate permitted by applicable
Law.
(ii) Interest Payments. Subject to Section 2.03(iv) hereof, (a) interest
accrued on all Prime Rate Loans in any calendar quarter shall be payable by the
Co-Borrowers in arrears (1) on the last day of each calendar quarter during the
term of this Loan Agreement, commencing on the last such day following the
making of each such Prime Rate Loan, (2) upon the prepayment thereof in full and
(3) at maturity and (b) interest accrued on each Eurodollar Rate Loan shall be
payable by the Co-Borrowers in arrears (1) on each Eurodollar Interest Payment
Date applicable to that Loan, (2) upon prepayment thereof in full or (3) at
maturity.
(iii) Conversion or Continuation. (a) Subject to the provisions of Section
2.07 and Section 2.08 hereof, the Co-Borrowers shall have the option (1) to
convert at any time all or any part of outstanding Loans which, in the
aggregate, equal US$100,000.00 or an integral multiple of US$1,000.00 in excess
of that amount from Prime Rate Loans to Eurodollar Rate Loans; or (2) to convert
at any time all or any part of the outstanding Loans which, in the aggregate,
equal US$100,000.00 or an integral multiple of US$1,000.00 in excess of that
amount from Eurodollar Rate Loans to Prime Rate Loans on the expiration date of
any Eurodollar Interest Period applicable thereto; or (3) upon the expiration of
any Eurodollar Interest Period applicable to a Borrowing of Eurodollar Rate
Loans, to continue all or any portion of such Loans equal to US$100,000.00 or an
integral multiple of US$1,000.00 in excess of that amount as Eurodollar Rate
Loans of the same type, and the succeeding Eurodollar Interest Period of such
continued Loans shall commence on the expiration date of the Eurodollar Interest
Period applicable thereto; provided, however, that no outstanding Loan may be
continued as, or be converted into, a Eurodollar Rate Loan when any Event of
Default or Potential Event of Default has occurred and is continuing. Without
limiting the generality of the foregoing sentence, by giving a Notice of
Conversion/Continuation, the Canadian Borrower may, subject again to Sections
2.07 and 2.08 hereof, elect from time to time (A) to convert such Borrower's
Canadian Prime Rate or Eurodollar Loans (on the maturity thereof) to Canadian
Bankers Acceptances or (B) to convert such Borrower's Canadian Bankers
Acceptances (on the maturity thereof) to Canadian Prime Rate or Eurodollar
Loans; provided that a Canadian Bankers Acceptance may be converted only on the
last day of its term. By giving a Notice of Continuation, the Canadian Borrower
may renew any of such Canadian Borrower's outstanding Canadian Bankers
Acceptances for an additional term.
(b) In the event the Co-Borrowers shall elect to convert or continue a
Loan under this Section 2.03(iii), the Co-Borrowers (or for a Canadian Loan, the
Canadian Borrower) shall deliver a Notice of Conversion/Continuation to the
Agent no later than 10:00 A.M. (Philadelphia, Pennsylvania time) (1) at least
one (1) Business Day in advance of the proposed conversion date in the case of a
conversion to a Prime Rate Loan, (2) at least two (2) Business Days in advance
of a proposed conversion or continuation/rollover into or, of Canadian Bankers
Acceptances and (3) at least three (3) Business Days in advance of the proposed
45
<PAGE>
conversion/continuation date in the case of a conversion to, or a continuation
of a Eurodollar Rate Loan. A Notice of Conversion/Continuation shall specify (A)
the proposed conversion/continuation date (which shall be a Business Day), (B)
the amount of the Loan to be converted/continued, (C) the nature of the proposed
conversion/continuation and (D) in the case of a conversion to, or continuation
of, a Eurodollar Rate Loan, the requested Eurodollar Interest Period. In lieu of
delivering the above-described Notice of Conversion/Continuation, the
Co-Borrowers may give the Agent telephonic notice of any proposed
conversion/continuation by the time required under this Section 2.03(iii);
provided, however, that such notice shall be confirmed in writing by delivery to
the Agent promptly (but in no event later than the proposed
conversion/continuation date) of a Notice of Conversion/Continuation. Promptly
after receipt of a Notice of Conversion/ Continuation under this Section
2.03(iii) (or telephonic notice in lieu thereof), the Agent shall notify each
Lender by telex, telecopy, telegram, telephone or other similar form of
transmission, of the proposed conversion/continuation. In the event the
Co-Borrowers fail to provide the Agent with the requisite Notice of
Conversion/Continuation for a conversion to, or a continuation of, a Loan, said
affected Loan shall automatically continue as, or convert to, a Prime Rate Loan.
(c) Any Co-Borrower (other than the Canadian Borrower) may convert
Revolving Credit Loans outstanding in U.S. Dollars to Revolving Credit Loans in
Canadian Dollars and vice versa by repaying such Loans in the first currency and
borrowing Loans in such different currency. If the Canadian Borrower shall fail
to timely give a Notice of Conversion/Continuation in respect of outstanding and
maturing Canadian Bankers Acceptances, such Canadian Borrower shall be deemed to
have given a Notice of Conversion/Continuation such that it will be deemed to
have requested a Prime Rate Loan to repay such maturing Canadian Bankers
Acceptances.
(d) Any Notice of Conversion/Continuation for conversion to, or
continuation of, a Loan (or telephonic notice in lieu thereof) shall be
irrevocable and the Co-Borrowers shall be bound to convert or continue in
accordance therewith.
(iv) Default Interest. Notwithstanding the rates of interest specified in
Section 2.03(i) hereof and the payment dates specified in Section 2.03(ii)
hereof, effective immediately upon the occurrence of any Event of Default under
Section 9.01 of this Loan Agreement, as determined by the Agent, and for as long
thereafter as any such Event of Default shall be continuing the principal
balance of all Loans then outstanding and, to the extent permitted by applicable
Law, any interest payments on the Loans not paid when due, shall bear interest
payable upon demand at the Default Rate.
(v) Computation of Interest. Except as otherwise described in the last
sentence of this Section 2.03(v), below, interest on Prime Rate Loans and
Eurodollar Rate Loans shall be computed on the basis of the actual number of
days elapsed in the period during which interest accrues and a year of 360 days.
In computing interest on any Loan, the date of the making of the Loan or the
first day of a Eurodollar Interest Period, as the case may be, shall be included
and the date of payment or the expiration date of a Eurodollar Interest Period,
as the case may be, shall be excluded; provided, however, that if a Loan is
repaid on the same day on which it is made, one day's interest shall be paid on
that Loan. For purposes of complying with the Interest Act (Canada) where any
interest is calculated pursuant to this Loan Agreement at a rate based upon a
360 day period (the "first rate"), the yearly rate or percentage of interest to
which the "first rate" is equivalent is the "first rate" multiplied by the
actual number of days in the applicable calendar year divided by 360.
46
<PAGE>
(vi) Changes; Legal Restrictions. Except as provided in Section 2.07(iv)
hereof with respect to certain determinations on Eurodollar Interest Rate
Determination Dates, in the event that after the date hereof (a) the adoption of
or any change in any law, treaty, rule, regulation, guideline or determination
of a court or Governmental Authority or any change in the interpretation or
application thereof by a court or Governmental Authority or (b) compliance by
any Lender with any request or directive (whether or not having the force of law
and whether or not the failure to comply therewith would be unlawful) from any
central bank or other Governmental Authority or quasi-governmental authority:
(1) does or may impose, modify, or hold applicable, in the
determination of a Lender, any reserve, special deposit, compulsory loan, FDIC
insurance, CDIC insurance, capital allocation or similar requirement against
assets held by, or deposits or other liabilities (including those pertaining to
Letters of Credit) in or for the account of advances or loans by, Commitments
made, or other credit extended by, or any other acquisition of funds by, a
Lender or any applicable lending office or Eurodollar Affiliate of such Lender
(except, with respect to Prime Rate Loans, to the extent that the reserve and
FDIC insurance or CDIC insurance requirements or requirements of the Office of
the Superintendent of Financial Institutions (Canada) are reflected in the
definition of "Prime Rate" and, with respect to a Eurodollar Rate Loan, to the
extent that the reserve requirements are reflected in the definition of
"Eurodollar Rate"); or
(2) does impose on such Lender any other condition materially more
burdensome in nature, extent or consequence than those in existence as of the
Closing Date;
and the result of any of the foregoing is to increase the cost to such Lender of
making, renewing or maintaining the Loans, its Revolving Credit Commitment and
its Term Loan Commitment to the Co-Borrowers or issuing for the account of any
one or more of the Co-Borrowers any Letter of Credit or to reduce any amount
receivable thereunder, then, in any such case, the Co-Borrowers shall pay to
such Lender, within thirty (30) days following demand, and delivery to the
Co-Borrowers and the Agent of the statement described in the next sentence, such
amount or amounts (based upon an allocation thereof by such Lender to the
financing transactions contemplated by this Loan Agreement and effected by this
Section 2.03 (vi)) as may be necessary to compensate that Lender for any such
additional cost incurred or reduced amount received. Such Lender shall deliver
to the Co-Borrowers a written statement of the costs or reductions claimed and
the basis therefor, and the allocation made by such Lender of such costs and
reductions shall be conclusive, absent manifest error if made in good faith. If
a Lender subsequently recovers any amount previously paid by the Co-Borrowers
pursuant to this Section 2.03 (vi), such Lender shall, within thirty (30) days
after receipt of such recovery and to the extent permitted by applicable Law,
pay to the Co-Borrowers the amount of any such recovery.
Section 2.03A Canadian Bankers Acceptances.
(i) Acceptance and Purchase. Subject to the terms and conditions
hereof, each Canadian Lender severally agrees to the extent of its respective
Pro Rata Share of the Revolving Credit Commitments accept and purchase Canadian
Bankers Acceptances drawn upon it by the Canadian Borrower denominated in
Canadian Dollars. The Canadian Borrower shall notify the Agent by irrevocable
written notice (each a "Canadian Bankers Acceptance Notice") by 10:00 a.m.
(Toronto, Ontario time) two (2) Business Days prior to the date of any Borrowing
47
<PAGE>
(including a conversion into or continuation/rollover of) by way of Canadian
Bankers Acceptances. Each Borrowing by way of Canadian Bankers Acceptances shall
be in a minimum aggregate face amount of C$500,000.00 and integral multiples of
C$100,000.00 in excess thereof. Each Canadian Bankers Acceptance Notice shall be
in the form of Exhibit "D". In no event shall the Dollar Equivalent of the
aggregate face amount (without discount) of all outstanding Canadian Bankers
Acceptances exceed the Maximum Canadian Exposure minus the sum of the
outstanding principal amount of all Canadian Loans (expressed in its Dollar
Equivalent thereof), plus the Canadian Letter of Credit Obligations (expressed
in its Dollar Equivalent thereof).
(a) Term. Bankers Acceptances shall be issued and shall mature on a
Business Day. Each Bankers Acceptance shall have a term of 30, 60, 90 or 180
days and shall mature no later than five (5) days prior to the Revolving Credit
Termination Date, or the Term Loan Maturity Date, as the case may be, and shall
be in form and substance reasonably satisfactory to the Canadian Lender which is
accepting such Bankers Acceptance.
(b) Canadian Bankers Acceptances in Blank. To facilitate the
acceptance of Canadian Bankers Acceptances under this Agreement, the Canadian
Borrower shall, upon execution of this Agreement and from time to time as
required, provide to the Agent drafts, in form satisfactory to the Agent, duly
executed and endorsed in blank by the Canadian Borrower in quantities sufficient
for each Canadian Lender to fulfill its obligations hereunder. In addition, the
Canadian Borrower hereby appoints each Canadian Lender as its attorney to
complete the relevant parts of Canadian Bankers Acceptances (pursuant to the
Canadian Bankers Acceptance Notice) with amount, term and other relevant details
and to sign and endorse on its behalf, in handwriting or by facsimile or
mechanical signature as and when deemed necessary by such Canadian Lender, blank
forms of Canadian Bankers Acceptances. The Canadian Borrower recognizes and
agrees that all Canadian Bankers Acceptances so completed, signed and/or
endorsed on its behalf by a Canadian Lender shall bind the Canadian Borrower as
fully and effectually as if signed in the handwriting of and duly issued by the
proper signing officers of the Canadian Borrower. Each Canadian Lender is hereby
authorized to issue such Canadian Bankers Acceptances endorsed in blank in such
face amounts as may be determined by such Canadian Lender provided that the
aggregate amount thereof is equal to the aggregate amount of Canadian Bankers
Acceptances required to be accepted by such Lender pursuant to clause (d) below.
No Canadian Lender shall be responsible or liable for its failure to accept a
Canadian Bankers Acceptance if the cause of such failure is, in whole or in
part, due to the failure of the Canadian Borrower to provide duly executed and
endorsed drafts to the Agent on a timely basis nor shall any Canadian Lender or
the Agent be liable for any damage, loss or other claim arising by reason of any
loss or improper use of any such instrument except loss or improper use arising
by reason of the gross negligence or willful misconduct of such Lender or the
Agent, its officers, employees, agents or representatives. Each Canadian Lender
shall maintain a record with respect to Canadian Bankers Acceptances (A)
received by it from the Agent in blank hereunder, (B) voided by it for any
reason, (C) accepted by it hereunder, (D) purchased by it hereunder and (E)
canceled at their respective maturities. Each Canadian Lender further agrees to
retain such records in the manner and for the statutory periods provided in the
various Canadian provincial or federal statutes and regulations which apply to
such Lender. The Agent and each Canadian Lender shall hold all Canadian Bankers
Acceptances endorsed in blank and delivered to them in safekeeping in the same
manner as they would hold their own property of a similar kind.
(c) Execution of Bankers Acceptances. Drafts of the Canadian Borrowers
to be accepted as Bankers Acceptances hereunder shall be duly executed by one
or more duly
48
<PAGE>
authorized officers on behalf of the Canadian Borrower, subject to Section
2.03A(i)(b) above. Notwithstanding that any Person whose signature appears on
any Canadian Bankers Acceptance as a signatory for the Canadian Borrower may no
longer be an authorized signatory for the Canadian Borrower at the date of
issuance of a Canadian Bankers Acceptance, such signature shall nevertheless be
valid and sufficient for all purposes as if such authority had remained in force
at the time of such issuance and any such Canadian Bankers Acceptance so signed
shall be binding on the Canadian Borrower.
(d) Issuance of Bankers Acceptances. Promptly following receipt of a
Canadian Bankers Acceptance Notice, the Agent shall so advise the Canadian
Lenders of the face amount of each Canadian Bankers Acceptance to be accepted by
it and the term thereof. The aggregate face amount of Canadian Bankers
Acceptances to be accepted by a Canadian Lender shall be determined by the Agent
by reference to the respective Pro Rata Shares of the Canadian Revolving Credit
Sublimit and the respective Term Loan Commitments of the Canadian Lenders,
except that, if the face amount of a Bankers Acceptance, which would otherwise
be accepted by a Canadian Bank, would not be C$100,000.00 or an integral
multiple thereof, such face amount shall be increased or reduced by the Agent in
its sole and unfettered discretion to the nearest integral multiple of
C$100,000.00.
(e) Acceptances of Bankers Acceptances. Each Canadian Bankers
Acceptance to be accepted by a Canadian Lender shall be accepted at such
Lender's office as designated by said Canadian Lender from time to time.
(f) Purchase of Canadian Bankers Acceptances. On the relevant date of
borrowing, each Canadian Lender severally agrees to purchase from the Canadian
Borrower, at the face amount thereof discounted by the Discount Rate, any
Bankers Acceptance accepted by it and provide to the Agent, for the account of
the Canadian Borrower, the Discounted Proceeds in respect thereof after
deducting therefrom the amount of the Acceptance Fee payable by the Canadian
Borrower to such Canadian Lender under Section 2.03A(iii) in respect of such
Canadian Bankers Acceptance.
(g) Sale of Bankers Acceptances. Each Canadian Lender may at any time
and from time to time hold, sell, rediscount or otherwise dispose of any or all
Bankers Acceptances accepted and purchased by it.
(h) Waiver of Presentment and Other Conditions. The Canadian Borrower
waives presentment for payment and any other defense to payment of any amounts
due to a Canadian Lender in respect of a Canadian Bankers Acceptance accepted by
such Canadian Lender pursuant to this Agreement which might exist solely by
reason of such Canadian Bankers Acceptance being held, at the maturity thereof,
by such Canadian Lender in its own right. The Canadian Borrower shall not claim
or require any days of grace or require the Agent or any Canadian Lender to
claim or allow any days of grace for the payment of any Canadian Bankers
Acceptance.
(ii) Refunding Canadian Bankers Acceptances. With respect to each
Canadian Bankers Acceptance, the Canadian Borrower, prior to the occurrence and
continuation of an Event of Default, may give irrevocable telephone or written
notice (or such other method of notification as may be agreed upon between the
Agent and the Canadian Borrower) to the Agent at or before 2:00 P.M. (Toronto,
Ontario time) two (2) Business Days prior to the maturity date of such Canadian
Bankers Acceptance followed by written confirmation electronically transmitted
49
<PAGE>
to the Agent on the same day, of the Canadian Borrower's intention to issue one
or more Canadian Bankers Acceptances on such maturity date (each a "Refunding
Canadian Bankers Acceptance") to provide for the payment of such maturing
Canadian Bankers Acceptance (it being understood that payments by the Canadian
Borrower and fundings by the Canadian Lenders in respect of each maturing
Canadian Bankers Acceptance and each related Refunding Canadian Bankers
Acceptance shall be made on a net basis reflecting the difference between the
face amount of such maturing Canadian Bankers Acceptance and the Discounted
Proceeds (net of the applicable Acceptance Fee) of such Refunding Canadian
Bankers Acceptance). Any funding on account of any maturing Canadian Bankers
Acceptance must be made at or before 12:00 noon (Toronto, Ontario) on the
maturity date of such Canadian Bankers Acceptance. If the Canadian Borrower
fails to give such notice, the Canadian Borrower shall be irrevocably deemed to
have requested and to have been advanced a Canadian Prime Rate Loan in the face
amount of such maturing Canadian Bankers Acceptance on the maturity date of such
maturing Canadian Bankers Acceptance from the Canadian Lender which accepted
such maturing Canadian Bankers Acceptance, which Canadian Prime Rate Loan shall
thereafter bear interest as such in accordance with the provisions hereof and
otherwise shall be subject to all provisions of this Agreement applicable to
Canadian Prime Rate Loans until paid in full.
(iii) Acceptance Fee. An Acceptance Fee shall be payable by the
Canadian Borrower to each Canadian Lender and each Canadian Lender shall deduct
the amount of such Acceptance Fee from the Discounted Proceeds (in the manner
specified in Section 2.03A(i)(f) in respect of each Canadian Bankers
Acceptance).
(iv) Cash Collateral. Subject to the terms and conditions of Section
11.05 of this Loan Agreement, upon the occurrence and during the continuance of
any Event of Default or Potential Event of Default, and in addition to any other
rights or remedies of any Canadian Lender and the Agent hereunder (a) the
Canadian Borrower shall, notwithstanding the maturity date of outstanding
Canadian Bankers Acceptances, pay to the Agent upon demand therefor an amount
equivalent to the amount required to pay in the aggregate the undiscounted face
amount of all outstanding Canadian Bankers Acceptances which shall be deposited
into a cash collateral account with the Agent as additional security for payment
of the undiscounted face amount of such Canadian Bankers Acceptances upon
maturity thereof, and (b) any Canadian Lender or the Agent as and by way of
collateral security (or such alternate arrangement as may be agreed upon by the
Canadian Borrower and such Canadian Lender or the Agent, as applicable) shall be
entitled to deposit and retain in an account to be maintained by the Agent
(bearing interest at the Agent's rates as may be applicable in respect of other
deposits of similar amounts for similar terms) amounts which are received by
such Canadian Lender or the Agent from the Canadian Borrower hereunder or as
proceeds of the exercise of any rights or remedies of any Canadian Lender or the
Agent hereunder against the Canadian Borrower, to the extent such amounts may be
required to satisfy any contingent or unmatured obligations or liabilities of
the Canadian Borrower to the Canadian Lenders or the Agent, or any of them
hereunder, in respect of Canadian Bankers Acceptances.
Section 2.04 Fees
(i) Unused Commitment Fee. From and after the Closing Date until the
Obligations are paid in full and the Revolving Credit Commitments are
terminated, the Co-Borrowers shall pay to the Agent, for the ratable accounts of
the applicable Lenders according to their Pro Rata Shares, an unused commitment
fee accruing at a rate per annum equal to the Unused Commitment Fee Rate in
effect from time to time multiplied by the average daily
50
<PAGE>
amount of the excess of the Revolving Credit Commitments over the Dollar
Equivalent of all Revolving Credit Loans and Letter of Credit Obligations
outstanding from time to time. All such commitment fees payable under this
paragraph shall be payable quarterly in arrears on the last day in each calendar
quarter beginning after the Closing Date. For the period from the Closing Date
up through and including March 31, 1998, the Unused Commitment Fee Rate shall be
the percentage described at level V on the Leverage Matrix.
(ii) Letter of Credit Fees. The Co-Borrowers shall pay to the Agent,
for the account of the Issuing Bank in connection with the issuance,
negotiation, termination, draw under, transfer of and any other related Letter
of Credit activity, the customary fees as are established from time to time by
the Issuing Bank in connection with Letters of Credit, including, without
limitation, the fees for the issuance, administration, amendment, payment or
cancellation of any Letter of Credit, all as more fully set forth on Schedule
2.04(ii) and all as more fully revised from time to time based upon the Leverage
Matrix. For the period from the Closing Date up through and including March 31,
1998, the annual Letter of Credit fee shall be the percentage described at level
V on the Leverage Matrix.
(iii) Late Charge Fee. In the event that any payment, including,
without limitation, interest or principal, required to be made by the
Co-Borrowers under the Notes or under this Loan Agreement shall not be received
by the Agent within fifteen (15) days of when due, the Agent, on behalf of the
Lenders, may charge, and if so charged, the Co-Borrowers shall pay, a late
charge of ($0.05) for each dollar ($1.00) of each delinquent payment for the
purpose of defraying the expense incident to the handling of such delinquent
payment. In no event shall said late charge fee be less than ten dollars
($10.00).
(iv) Agent's Fee. The Co-Borrowers shall pay to the Agent, for the
Agent's own account and not for the Lenders, an annual fee agreed upon by and
between the Co-Borrowers and the Agent.
(v) Payment of Fees. The fees described in this Section 2.04 represent
compensation for services rendered and to be rendered separate and apart from
the lending of money or the provision of credit and do not constitute
compensation for the use, detention or forbearance of money, and the obligation
of the Co-Borrowers to pay each fee described herein shall be in addition to,
and not in lieu of, the obligation of the Co-Borrowers to pay interest, other
fees and expenses otherwise described in this Loan Agreement. Fees shall be
payable when due in Philadelphia, Pennsylvania in immediately available funds.
All fees shall be non-refundable when paid, except as may be otherwise expressly
provided in this Loan Agreement. All fees and expenses specified or referred to
in this Loan Agreement due and owing to the Agent or to a Lender, including,
without limitation, those referred to in this Section 2.04 and in Section 11.3
hereof shall bear interest, if not paid when due, at the Default Rate (but not
to exceed the maximum rate permitted by applicable Law), shall constitute
Obligations and shall be secured by all of the Collateral. Except as described
in the last sentence of this Section 2.04 (v) below, all fees described in this
Section 2.04 which are expressed as a per annum charge shall be calculated on
the basis of the actual number of days elapsed in a 360-day year. For purposes
of complying with the Interest Act (Canada) where any interest is calculated
pursuant to this Loan Agreement at a rate based upon a 360 day period (the
"first rate"), the yearly rate or percentage of interest to which the "first
rate" is equivalent is the "first rate" multiplied by the actual number of days
in the applicable calendar year divided by 360.
51
<PAGE>
Section 2.05 Prepayments.
(i) Voluntary Prepayments of the Loans. The Co-Borrowers may, upon not
less than two (2) Business Days' prior written or telephonic notice confirmed
promptly in writing to the Agent (which notice the Agent shall promptly transmit
by telegram, telecopy or telephone to each Lender), at any time and from time to
time, prepay any Prime Rate Loan in whole or in part, without prepayment premium
or fee, in an aggregate minimum amount of US$1,000,000.00 and integral multiples
of US$1,000,000.00 in excess of that amount. Eurodollar Rate Loans may be
prepaid in whole or in part, without prepayment premium or fee, on the
expiration date of the Eurodollar Interest Period applicable thereto and
otherwise only upon payment of the amounts described in Section 2.07(vi) hereof.
Notwithstanding the foregoing, in the event that any prepayments are made in
connection with the termination of this Loan Agreement, such prepayments shall
be made only upon ten (10) Business Days' prior written notice to the Agent. Any
notice of prepayment given to the Agent under this Section 2.04(i) shall specify
the date of prepayment and the aggregate principal amount of the prepayment.
(ii) Mandatory Prepayment of the Loans. (a) The Co-Borrowers shall
make, in addition to the required quarterly principal payments on the Term Loan
Facility described in Section 2.02 hereof, a mandatory prepayment of the Term
Loan:
(1) once each year, in an amount equal to fifty percent (50%) of
the Excess Cash Flow for the prior Fiscal Year. The Excess Cash Flow
shall be determined from the annual financial statements to be
delivered to the Agent pursuant to Section 5.02 of this Loan
Agreement. The mandatory prepayment of principal, if any, shall be
made on or before August 15th of each Fiscal Year, with the first
payment due and owing on August 15, 1999 for the prior 1999 Fiscal
Year (which Fiscal Year ended on March 31, 1999); and
(2) from time to time as Properties are damaged, destroyed or
condemned in an amount equal to the net insurance or condemnation
proceeds / award (each to the extent that such net insurance or
condemnation proceeds / award are not reinvested by the Co-Borrowers
in similar Properties within twelve (12) months of the receipt of net
proceeds from the damage, destruction or condemnation.
(b) All mandatory prepayments of the Term Loan Facility shall be
applied in the inverse order of maturity until the Term Loan Facility has been
repaid in full.
(c) To the extent of any remaining monies available under Section
2.05(ii)(a) above, after repayment in full of the Term Loan Facility, all such
monies shall be the sole property of the Co-Borrowers and the Agent and the
Lenders shall have no rights or interests therein.
Section 2.06 Payments; Collection of Accounts.
(i) Collection of Accounts (a) The Co-Borrowers are authorized to
collect the Accounts and any other proceeds of Collateral on behalf of and in
trust for the Agent and the Lenders, at the Co-Borrowers' expense, but such
authority shall automatically terminate upon the occurrence of an Event of
Default. The Agent may modify or terminate such authority at any time upon the
occurrence of an Event of Default and directly collect the Accounts and other
52
<PAGE>
monetary obligations included in the Collateral. The Co-Borrowers shall, at the
Co-Borrowers' expense and in the manner requested by the Agent from time to
time, direct that remittances and all other proceeds of Accounts and other
Collateral shall be delivered to the Agent pursuant to the terms of the
Restricted Account Agreement.
(ii) Manner and Time of Payment. All payments of principal, interest,
Reimbursement Obligations and fees hereunder or under any Letter of Credit
payable to the Agent and/or the Lenders shall be made without condition or
reservation or right, in the applicable Currency and in immediately available
funds, delivered to the Agent not later than 10:00 A.M. (Philadelphia,
Pennsylvania time) on the date due, to such account of the Agent at the Agent's
Office or Mellon Bank Canada's principal office in Toronto, Ontario, as the
Agent may designate, for the account of the Lenders. Funds received by the Agent
after that time and date shall be deemed to have been paid on the next
succeeding Business Day. The Agent shall send a monthly and/or quarterly
invoice, as applicable, to the Co-Borrowers reflecting the accrued interest due
and owing and all fees due and owing hereunder. The Co-Borrowers hereby agree
that on the Business Day that any payment of principal, interest and fees are
due, the Agent shall automatically charge a demand deposit account of the
Co-Borrowers, which account shall be maintained with the Agent at all times
throughout the term of the Loan Facilities. The Co-Borrowers' authorization of
the Agent to charge such account having sufficient funds on deposit shall
constitute payment of the amount so authorized notwithstanding the Agent's
failure to charge said account. Any failure or delay by the Agent in submitting
invoices for interest and fee payments shall not discharge or relieve the
Co-Borrowers of the obligation to make such payments into the demand deposit
account. All payments actually received by the Agent pursuant to the Loan
Documents for the account of the Lenders shall be paid to them promptly after
receipt thereof by the Agent.
(iii) Apportionment of Payments. So long as there does not exist an
Event of Default, all payments of principal and interest in respect of
outstanding Loans, all payments of the fees described herein and all payments in
respect of any other obligation (other than any fees payable by the Co-Borrowers
solely to the Agent under any Swap Agreement) shall be allocated amongst the
Agent and the Lenders as they may be entitled thereto as provided herein. After
the occurrence and during the continuance of an Event of Default, the Agent may,
and shall upon the direction of the Requisite Lenders, after providing notice to
the Co-Borrowers that payments and proceeds shall be so applied, apply all
payments remitted to the Agent and all amounts and proceeds of Collateral
received by the Agent, subject to the provisions of this Loan Agreement, (a)
first, to pay Obligations in respect of any fees, expense reimbursements or
indemnities then due to the Agent from the Co-Borrowers; (b) second, to pay
Obligations in respect of any fees, expense reimbursements or indemnities then
due to any Lender from the Co-Borrowers, (c) third, to pay interest due in
respect of Loans and Reimbursement Obligations, (d) fourth, to pay or prepay
principal of the Term Loan; (e) fifth, to pay or prepay principal of Revolving
Credit Loans and Reimbursement Obligations, and to pay (or to the extent such
Obligations are contingent, prepay or provide cash collateral in respect of)
Letter of Credit Obligations; (f) sixth, to the ratable payment of all other
non-Swap Obligations and (g) seventh, to pay Swap Obligations; provided,
however, that if sufficient funds are not available to fund all payments to be
made in respect of the Obligations owing by the Co-Borrowers described in any of
the foregoing clauses (a) through (g), the available funds shall be allocated
within the last particular clause to the payment of such Obligations ratably,
based on the proportion of the Agent's and each Lender's interest in the
aggregate outstanding Obligations described in such clause.
The Agent shall promptly distribute to each Lender at its primary
address set forth on the appropriate signature page hereof, or at such other
address as a Lender may request in
53
<PAGE>
writing, such funds as it may be entitled to receive, provided that the Agent
shall in any event not be bound to inquire into or determine the validity, scope
or priority of any interest or entitlement of any Lender and may suspend all
payments or seek appropriate relief (including, without limitation, instructions
from the Requisite Lenders or an action in the nature of an interpleader) in the
event of any doubt or dispute as to any apportionment or distribution
contemplated hereby. The order of priority herein is set forth solely to
determine the rights and priorities of the Lenders as among themselves and at
any time or from time to time may be changed by the Lenders as they may elect,
in writing in accordance with Section 11.08 hereof, without necessity of notice
to or consent of or approval by the Co-Borrowers or any other Person.
(iv) Payments on Non-Business Days. Whenever any payment to be made by
the Co-Borrowers hereunder shall be stated to be due on a day which is not a
Business Day, payments shall be made on the next succeeding Business Day and
such extension of time shall be included in the computation of the payment of
interest hereunder (at the otherwise applicable rate) and of any of the fees
specified in Section 2.04 hereof, as the case may be.
(v) Agent's or Lender's Accounting. The Agent shall maintain a loan
account (hereinafter referred to as the "Loan Account") on its books in which
shall be recorded (a) the names and addresses of the Lenders and the Commitments
of and principal amount of the Term Loan, the Revolving Credit Loans and Letter
of Credit Obligations owing to, each Lender from time to time; (b) all other
appropriate debits and credits as provided in this Loan Agreement, including,
without limitation, all interest, fees, expenses, charges and other Obligations;
(C) all payments of Obligations made by the Co-Borrowers, or for the
Co-Borrowers' account. All entries in the Loan Account shall be made in
accordance with the Agent's customary accounting practices as in effect from
time to time. The Agent will render a statement of the Loan Account monthly to
the Co-Borrowers and will deliver a copy thereof to each Lender. The Agent will
notify each Lender monthly, if any Letter of Credit Obligations with respect to
Letters of Credit issued by the Issuing Bank are outstanding on such date, and
the principal amount of such Letter of Credit Obligation owing to each Lender on
such date. Each and every such statement shall be deemed final, binding and
conclusive upon the Co-Borrowers and the Lenders in all respects as to all
matters reflected therein (if made in good faith, absent manifest error), unless
the Co-Borrowers or any Lender, within twenty (20) days after the date such
statement is rendered, delivers to the Agent written notice of any objection
which the Co-Borrowers or such Lender may have to any such statement. In that
event, only those items expressly objected to in such notice shall be deemed to
be disputed by the Co-Borrowers or the Lenders and all of the Agent's other
entries in the Loan Account evidencing Loans, Letters of Credit and other
financial accommodations made from time to time shall be final, binding and
conclusive upon the Co-Borrowers and the Lenders (if made in good faith, absent
manifest error) as to the existence and amount of the Obligations recorded in
the Loan Account.
Section 2.07. Spection Provisions Governing Eurodollar Rate Loans.
Notwithstanding other provisions of this Loan Agreement to the contrary, if any,
the following provisions shall govern with respect to Eurodollar Rate Loans as
to the matters covered:
(i) Amount of Eurodollar Rate Loans. Each Eurodollar Rate Loan shall
be for a minimum amount of US$100,000.00 and in integral multiples of
US$1,000.00 in excess of that amount.
(ii) Determination of Eurodollar Interest Period. By giving notice as
set forth in Section 2.01(ii) and Section 2.03(iii) hereof (with respect to a
conversion into or a
54
<PAGE>
continuation of Eurodollar Rate Loans), the Co-Borrowers shall have the option,
subject to the other provision of this Section 2.07, to specify an Eurodollar
Interest Period to apply to the Borrowing of Eurodollar Rate Loans described in
such notice, subject to availability. The determination of Eurodollar Interest
Periods shall be subject to the following provisions:
(a) In the case of immediately successive Eurodollar Interest
Periods applicable to a Borrowing of Eurodollar Rate Loans, each successive
Eurodollar Interest Period shall commence on the day on which the next preceding
Eurodollar Interest Period expires;
(b) If any Eurodollar Interest Period would otherwise expire on a
day which is not a Business Day, the Eurodollar Interest Period shall be
extended to expire on the next succeeding Business Day; provided, however, that
if any such Eurodollar Interest Period applicable to a Borrowing of Eurodollar
Rate Loans would otherwise expire on a day which is not a Business Day but is a
day of the month after which no further Business Day occurs in that month, that
Eurodollar Interest Period Shall expire on the immediately preceding Business
Day;
(c) The Co-Borrowers may not select a Eurodollar Interest Period
for any Loan which terminates later than March 31, 2003;
(d) The Co-Borrowers may not select a Eurodollar Interest Period
with respect to any portion of principal of a Eurodollar Rate Loan which extends
beyond a date on which the Co-Borrowers are required to make a scheduled payment
of any portion of principal, it being understood and agreed that any Eurodollar
Rate Loan whose Eurodollar Interest Period ends less than one month prior to
such required principal payment date shall be deemed converted to a Prime Rate
Loan as of the last day of such Eurodollar Interest Period for purposes of
determining whether any portion of principal of any Eurodollar Rate Loan is
required in order to make a mandatory payment of principal; and
(e) There shall be no more than twenty-five (25) Eurodollar
Interest Periods under this Loan Agreement in effect at any one time.
(iii) Determination of Interest Rate. As soon as practicable after
10:00 A.M. (Philadelphia, Pennsylvania time) on any Eurodollar Interest Rate
Determination Date, the Agent shall determine (which determination shall, absent
manifest error, be presumptively correct) the interest rate which shall apply to
the Eurodollar Rate Loans for which an interest rate is then being determined
for the applicable Eurodollar Interest Period and shall promptly give notice
thereof (in writing or by telephone confirmed in writing) to the Co-Borrowers
and to each Lender.
(iv) Interest Rate Unascertainable, Inadequate or Unfair. If, with
respect to any Eurodollar Interest Period, the Agent or any Lender determines
that (a) deposits in Dollars (in the applicable amounts) are not being offered
in the relevant market for such Eurodollar Interest Period, (b) adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate, (c) a
contingency has occurred which materially and adversely affects the London
interbank Eurodollar market as a whole, or (d) the effective cost to such Lender
of funding a proposed Funding Segment of the Eurodollar Portion from a
corresponding source of funds in the London interbank eurodollar market shall
exceed the Eurodollar Rate, applicable to such Funding Segment, the Agent shall
forthwith give notice thereof to the Co-Borrowers, whereupon until the Agent
notifies the Co-Borrowers that the circumstances giving rise to such suspension
no longer exist, (1) the right of the Co-Borrowers to elect to have Loans bear
interest based upon
55
<PAGE>
the Eurodollar Rate shall be suspended and (2) each outstanding Eurodollar Rate
Loan shall be converted into a Prime Rate Loan on the last day of the then
current Eurodollar Interest Period therefor, notwithstanding any prior election
by the Co-Borrowers to the contrary.
(v) Illegality. (a) In the event that on any date any Lender shall
have determined (which determination shall, absent manifest error, be final and
conclusive and binding upon all parties) that the making or continuation of any
Eurodollar Rate Loan has become unlawful by compliance by that Lender in good
faith with any Law of any Governmental Authority (whether or not having the
force of Law and whether or not failure to comply therewith would be unlawful),
then, and in any such event, such Lender shall promptly give notice (by
telephone promptly confirmed in writing) to the Co-Borrowers and the Agent
(which notice the Agent shall promptly transmit to each Lender) of that
determination.
(b) Upon the giving of the notice referred to in Section
2.07(v)(a) hereof, (1) the Co-Borrowers' right to request of such Lender and
such Lender's obligation to make Eurodollar Rate Loans shall be immediately
suspended, and such Lender shall make a Revolving Credit Loan, as part of any
requested Borrowing of Eurodollar Rate Loans, as a Prime Rate Loan, which Prime
Rate Loan shall, for all purposes, be considered a part of such Borrowing, and
(2) if the affected Eurodollar Rate Loan or Loans are then outstanding, the
Co-Borrowers shall immediately (or, if permitted by applicable Law, no later
than the date permitted thereby, upon at least one (1) Business Day's written
notice to the Agent and the affected Lender) convert each such Revolving Credit
Loan into a Prime Rate Loan.
(c) In the event that such Lender determines at any time
following its giving of the notice referred to in Section 2.07(iv) and/or
Section 2.07(v)(a) hereof that such Lender may lawfully make Eurodollar Rate
Loans of the type referred to in such notice, such Lender shall promptly give
notice (by telephone confirmed in writing) to the Co-Borrowers and the Agent
(which notice the Agent shall promptly transmit to each Lender) of that
determination, whereupon the Co-Borrowers' right to request of such Lender, and
such Lender's obligation to make, Eurodollar Rate Loans shall be restored.
(vi) Compensation. In addition to such amounts as are required to be
paid by the Co-Borrowers pursuant to Sections 2.03(i), 2.03(iv) and 2.03(v)
hereof, the Co-Borrowers shall compensate each Lender, upon demand, for all
losses, expenses and liabilities (including, without limitation, any loss or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds required by such Lender to fund or maintain such Lender's Eurodollar
Rate Loans to the Co-Borrowers) which losses, expenses and liabilities such
Lender may sustain (a) if for any reason, other than the gross negligence or
willful misconduct of the Agent or such Lender, a Borrowing, conversion or
continuation of Eurodollar Rate Loans does not occur on a date specified
therefor in a Notice of Borrowing or a Notice of Conversion/Continuation or in a
telephonic request for borrowing or conversion/continuation or a successive
Eurodollar Interest Period does not commence after notice therefor is given
pursuant to Section 2.03(iii) hereof, (b) if any prepayment of Eurodollar Rate
Loan (including, without limitation, any prepayment pursuant to Section 2.05
hereof) occurs for any reason on a date which is not the last day of the
applicable Eurodollar Interest Period, (c) as a consequence of any required
conversion of a Eurodollar Rate Loan to a Prime Rate Loan as a result of any of
the events indicated in Section 2.07(v), or (d) as a consequence of any other
failure by the Co-Borrowers (other than the failure of the Agent to charge any
account having sufficient funds as authorized by the Co-Borrowers pursuant to
Section 2.07(ii) hereof) to repay Eurodollar Rate Loans when required by the
terms of this Loan Agreement. Such Lender shall deliver to the Co-Borrowers a
written statement as to
56
<PAGE>
such losses, expenses and liabilities which statement shall be conclusive as to
such amounts in the absence of manifest error.
(vii) Eurodollar Rate Taxes. The Co-Borrowers agree that:
(a) provided the Co-Borrowers shall have received a written
request therefor, together with a certificate setting forth the basis therefor
and calculation thereof, the Co-Borrowers will pay, on the later of (1) thirty
(30) days following its receipt of such request and certificate or (2) the
Business Day immediately prior to the date upon which penalties attach thereto,
all present and future stamp and other taxes, levies, or costs and charges
whatsoever imposed, assessed, levied or collected on or in respect of a Loan
solely as a result of the interest rate being determined by reference to the
Eurodollar Rate or the provisions of this Loan Agreement relating to the
Eurodollar Rate or the recording, registration, notarization or other
formalization of any thereof or any payments of principal, interest or other
amounts made on or in respect of a Loan made to the Co-Borrowers when the
interest rate is determined by reference to the Eurodollar Rate (all such taxes,
levies, costs and charges being herein collectively called "Eurodollar Rate
Taxes"), excluding any of the foregoing arising out of the gross negligence or
willful misconduct of any Lender; provided, however, that Eurodollar Rate Taxes
shall not include net income or franchise taxes imposed by any Governmental
Authorities. The Co-Borrowers shall also pay such additional amounts equal to
increases in Eurodollar Rate Taxes attributable to payments made by the
Co-Borrowers pursuant to this clause (a). Promptly after the date on which
payment of any such Eurodollar Rate Tax is due pursuant to the preceding
sentence, the Co-Borrowers will, at the request of such Lender, furnish to such
Lender evidence, in form and substance satisfactory to such Lender, that the
Co-Borrowers have met their obligation under this Section 2.07(vii); and
(b) the Co-Borrowers will indemnify each Lender against, and
reimburse each Lender on demand for, any Eurodollar Rate Taxes paid by such
Lender in respect of a Loan made to the Co-Borrowers, as determined by such
Lender in its reasonable business judgment, provided that the Lender shall have
provided the Co-Borrowers with (1) appropriate receipts for any payments or
reimbursements made by the Co-Borrowers pursuant to this clause (b) and (2) such
information as may reasonably be required to indicate the basis for such
Eurodollar Rate Taxes; provided, however, that if a Lender subsequently
recovers, or receives a net tax benefit with respect to, any amount of
Eurodollar Rate Taxes previously paid or indemnified by the Co-Borrowers
pursuant to this Section 2.07 (vii)(a) or (b), such Lender shall, within thirty
(30) days after receipt of such refund, and to the extent permitted by
applicable Law, pay to the Co-Borrowers the amount of any such recovery or net
tax benefit. The amount of Eurodollar Rate Taxes due pursuant to the provisions
of this subsection (b) shall only be payable to the extent such Eurodollar Rate
Taxes exceed the amount paid pursuant to subsection (a) of Section 2.07(vii).
(c) Notwithstanding anything contained in this Section 2.07, the
provisions of Section 2.10 hereof applicable to Taxes shall be fully applicable,
mutatis mutandis, to Eurodollar Rate Taxes, and the Co-Borrowers shall not be
required to pay any amount under this Section 2.07 that would not be payable
after taking into account the provisions of such Section 2.10, including,
without limitation, any limitation on the amount payable to the Co-Borrowers
pursuant to subsections (iii) through (ix) inclusive of such Section 2.10.
(viii) Booking of Eurodollar Rate Loans. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of, any of its branch
offices, agencies or
57
<PAGE>
the office of a Eurodollar Affiliate of that Lender; provided, however, no such
Lender shall be entitled to receive any greater amount under Section 2.03(vi) or
Section 2.07(vii) hereof as a result of the transfer of any such Eurodollar Rate
Loan than such Lender would be entitled to immediately prior thereto unless (a)
such transfer occurred at a time when circumstances giving rise to the claim for
such greater amount did not exist and were not reasonably foreseeable in the
view of such Lender and (b) such claim would have arisen even if such transfer
had not occurred.
(ix) Affiliates Not Obligated. Unless expressly provided herein, no
Eurodollar Affiliate or other Affiliate of any Lender shall be deemed a party to
this Loan Agreement or shall have any rights, liability or obligation under this
Loan Agreement.
Section 2.08. Increased Capital. If either (i) the introduction of or any
change in or in the interpretation of any Law or regulation or (ii) compliance
by any Lender with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law and whether or
not the failure to comply therewith would be unlawful) affects or would affect
the amount of capital required or expected to be maintained by such Lender or
any corporation controlling such Lender and such Lender determines that the
amount of such capital is increased by or based upon the existence of such
Lender's Commitment and other commitments of this type or upon the existence of
Letters of Credit (or similar contingent obligations), then, upon demand by such
Lender, together with the certificate referred to in the last sentence of this
Section 2.08, the Co-Borrowers shall immediately pay to such Lender, from time
to time as specified by such Lender, additional amounts sufficient to compensate
such Lender for any loss in its net yield from the transactions contemplated by
this Loan Agreement in the light of such circumstances, to the extent that such
Lender determines such increase in capital to be allocable to the existence of
such Lender's Commitment or to the issuance or maintenance of any Letter of
Credit for the account of the Co-Borrowers. A certificate as to such amounts,
together with calculations evidencing such additional amount and the law, rule,
interpretation, regulation or guideline with respect thereto, submitted to the
Co-Borrowers by such Lender, shall, in the absence of manifest error, be
conclusive and binding for all purposes.
Section 2.09. Authorized Officers of the Co-Borrowers. The Co-Borrowers
shall notify the Agent in writing of the names of the officers and employees
authorized to request Loans and Letters of Credit and to request a
conversion/continuation of any Loan and shall provide the Agent with a specimen
signature of each such Authorized Officer. The Agent and each of the Lenders
shall be entitled to rely conclusively on such officer's or employee's authority
to request such Loan or Letter of Credit or such conversion/continuation until
the Agent receives written notice to the contrary. Neither the Agent nor any of
the Lenders shall have any duty to verify the authenticity of the signature
appearing on any written Notice of Borrowing or Notice of
Conversion/Continuation which it believes in good faith and absent gross
negligence has been signed or presented by the proper party or parties and, with
respect to an oral request for such a Loan or Letter of Credit or such
conversion/continuation, neither the Agent nor any of the Lenders shall have any
duty to verify the identity of any Person representing himself as one of the
officers or employees authorized to make such request on behalf of the
Co-Borrowers. Neither the Agent nor any Lender shall incur any liability to the
Co-Borrowers in acting upon any telephonic notice referred to above which the
Agent believes in good faith and absent gross negligence to have been given by a
duly Authorized Officer or other person authorized to borrow on behalf of the
Co-Borrowers or for otherwise acting in good faith under this Section 2.09.
Section 2.10 Taxes.
58
<PAGE>
(i) Payments Net of Taxes. Provided that each Lender and the Agent
shall have complied with the provisions of subsection (iii) of this Section
2.10, all payments made by the Co-Borrowers under this Loan Agreement or any
other Loan Document shall be made free and clear of, and without reduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, including, without limitation, any taxes assessed by the
United States, any State in the United States, Canada and/or any Province in
Canada, and all liabilities with respect thereto, excluding
(a) in the case of the Agent and each Lender, net income or
franchise taxes imposed on the Agent or such Lender by the jurisdiction under
the laws of which the Agent or such Lender is organized or any political
subdivision or taxing authority thereof or therein or as a result of a
connection between such Lender and any jurisdiction (whether or not attributable
to the transactions contemplated hereby), and
(b) in the case of each Lender, net income or franchise taxes
imposed by any jurisdiction in which such Lender's lending offices which make or
book loans are located or any political subdivision or taxing authority thereof
or therein (all such non-excluded taxes, levies, imposts, duties, deductions,
charges, fees or withholdings of such Governmental Authorities, including Canada
and the United States, being hereinafter called "Taxes"). If any Taxes are
required to be withheld or deducted from any amounts payable to the Agent or any
Lender under this Loan Agreement or any other Loan Document, the Co-Borrowers
shall pay the relevant amount of such Taxes and the amounts so payable to the
Agent or such Lender shall be increased to the extent necessary to yield to the
Agent or such Lender (after payment of all Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this Loan
Agreement and the other Loan Documents. Whenever any Taxes are paid by the
Co-Borrowers with respect to payments made in connection with this Loan
Agreement or any other Loan Document, as promptly as possible thereafter, the
Co-Borrowers shall send to the Agent for its own account or for the account of
such Lender, as the case may be, a certified copy of an original official
receipt received by the Co-Borrowers showing payment thereof.
(ii) Indemnity. Provided that each Lender and the Agent shall have
complied with the provisions of subsection (iii) of this Section 2.10, the
Co-Borrowers hereby agree to indemnify the Agent and each of the Lenders for the
full amount of all Taxes attributable to payments by or on behalf of the
Co-Borrowers hereunder or under any of the other Loan Documents paid by the
Agent or such Lender (including any incremental Taxes, interest or penalties
that may become payable by the Agent or such Lender as a result of any failure
to pay such Taxes), whether or not such Taxes were correctly or legally
asserted, excluding any of the foregoing arising out of the Agent's or any
Lender's gross negligence or willful misconduct. The amount of Taxes due
pursuant to the preceding sentence shall only be payable to the extent such
Taxes exceed the amount of Taxes paid pursuant to subsection (i) of this Section
2.10. Such indemnification shall be made within thirty (30) days from the date
such Lender or the Agent, as the case may be, makes written demand therefrom
together with the calculation thereof and the basis therefor.
(iii) Withholding and Backup Withholding. (a) Each Lender that is
incorporated or organized under the Laws of any jurisdiction other than the
United States or any State thereof agrees that, on or prior to the date any
payment is due to be made to it hereunder or under any other Loan Document in
connection with its Revolving Credit Commitment and Term
59
<PAGE>
Loan Commitment for Loans and Letters of Credit which are to be booked in the
United States, as directed by the Co-Borrowers, it will furnish to the
Co-Borrowers and the Agent
(1) two valid, duly completed copies of United States Internal
Revenue Service Form 4224 or United States Internal Revenue Form 1001 or
successor applicable form, as the case may be, certifying in each case that such
Lender is entitled to receive payments under this Loan Agreement and the other
Loan Documents without deduction or withholding of any United States federal
income taxes and
(2) a valid, duly completed Internal Revenue Service Form W-8 or
W-9 or successor applicable form, as the case may be, to establish an exemption
from United States backup withholding tax.
Each Lender which so delivers to the Co-Borrowers and the Agent a Form 1001 or
4224 and Form W-8 or W-9, or successor applicable forms agrees to deliver to the
Co-Borrowers and the Agent two further copies of the said Form 1001 or 4224 and
Form W-8 or W-9, or successor applicable forms, or other manner of
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or otherwise is required to be resubmitted as a
condition to obtaining an exemption from withholding tax, or after the
occurrence of any event requiring a change in the most recent form previously
delivered by it, and such extensions or renewals thereof as may reasonably be
requested by the Co-Borrowers and the Agent, certifying in the case of a Form
1001 or Form 4224 that such Lender is entitled to receive payments under this
Loan Agreement or any other Loan Document without deduction or withholding of
any United States federal income taxes, unless a change of Law has occurred
prior to the date on which any such delivery would otherwise be required which
renders all such forms inapplicable or which would prevent such Lender from duly
completing and delivering any such letter or form with respect to it and such
Lender advises the Co-Borrowers and the Agent that it is not capable of
receiving payments without any deduction or withholding of United States federal
income tax, and in the case of a Form W-8 or W-9, establishing an exemption from
United States backup withholding tax. If the form provided by the Lender or the
Agent (other than in the event of a change in law) indicates a withholding tax
in excess of zero, then such withholding tax shall be considered excluded from
Taxes and no payment shall be due under this Section 2.10 with respect to such
withholding tax.
(b) Each Lender that is incorporated or organized under the Laws of any
jurisdiction other than Canada or any Province of Canada agrees that, on or
prior to the date any payment is to be made to it hereunder or under any other
Loan Document in connection with its Revolving Credit Commitment and Term Loan
Commitment for Loans and Letters of Credit which are to be booked in Canada, as
directed by the Co-Borrowers, it will furnish or will have previously furnished
to the Canadian Borrower and the Agent a Certificate of Residency, in a form
reasonably acceptable to the Agent.
(iv) Any Lender or the Agent claiming amounts payable under this
Section 2.10 or Section 2.07(vii) of this Loan Agreement shall use reasonable
efforts to mitigate taxes (e.g., changing the jurisdiction of its lending
office) if such efforts would reduce the amounts payable under this Section 2.10
or Section 2.07(vii) of this Loan Agreement.
(v) Upon the payment in full to a Lender or the Agent with respect to
Taxes or Eurodollar Rate Taxes under this Section 2.10 or Section 2.07(vii) the
Co-Borrowers shall be subrogated to all rights of the applicable Lender or the
Agent to seek recovery or reimbursement
60
<PAGE>
from any Person of such amounts. Provided a Lender has complied with the terms
of this Section 2.10 and Section 11.02 of this Loan Agreement, there shall be no
right of the Co-Borrowers to recover or receive reimbursement against or from
said Lender or the Agent for foreign tax credits in respect of said Lender's
taxable income in respect of such Taxes or Eurodollar Rate Taxes. Each Lender
and the Agent shall reasonably assist the Co-Borrowers to recover amounts paid
pursuant to this Section 2.10 or Section 2.07(vii) from the relevant taxing
authority. If a Lender or the Agent subsequently recovers, or receives a net tax
benefit with respect to any amount of Taxes or Eurodollar Rate Taxes paid or
indemnified by the Co-Borrowers, then such Lender or the Agent, as applicable,
shall pay to the Co-Borrowers the amount of any such recovery or net tax benefit
within thirty (30) days of the receipt of such refund.
(vi) Unless the Co-Borrowers have given their prior written consent,
none of the Lenders or the Agent shall be entitled to a payment under this
Section 2.10 or Section 2.07(vii) of this Loan Agreement with respect to Taxes
or Eurodollar Rate Taxes which resulted directly from the Agent's or a Lender's
change in account, branch or office.
(vii) None of the Lenders or the Agent shall be entitled to a payment
under this Section 2.10 or Section 2.07(vii) to the extent such payment arises
out of the Lender's or the Agent's gross negligence or willful misconduct.
(viii) No amounts will be payable under this Section 2.10 to the
extent that such amounts have been covered pursuant to another section of this
Loan Agreement.
(ix) All payments made pursuant to this Section 2.10 or Section
2.07(vii) shall be treated by the relevant parties as additional interest
hereunder.
Section 2.11 Security for the Loan Facilities. As security for the due and
punctual payment and performance of the Obligation of the Co-Borrowers under the
Loan Documents, the Co-Borrowers shall execute, or cause to be executed, and
deliver to the Agent, for the benefit of all of the Lenders, the Collateral
Documents.
Section 2.12 Currency Fluctuations.
(a) Not later than 1:00 P.M. (Philadelphia, Pennsylvania time) on the
last Business Day of each calendar month (the "Calculation Date"), the Agent
shall determine the Exchange Rate as of such date. The Exchange Rate so
determined shall become effective on the first Business Day immediately
following such determination (a "Reset Date") and shall remain effective until
the next succeeding Reset Date.
(b) Not later than 4:00 P.M. (Philadelphia, Pennsylvania time) on each
Reset Date, the Agent shall determine the Dollar Equivalent of the outstanding
Canadian Loans, Canadian Bankers Acceptances (without discount) and Canadian
Letters of Credit denominated in Canadian Dollars.
(c) If, on any Reset Date and on the Term Loan Maturity Date and
Revolving Credit Termination Date, the aggregate outstanding amount (expressed
in U.S. Dollars) of all Canadian Loans, Canadian Letter of Credit Obligations
and the aggregate face amount of all outstanding Canadian Bankers Acceptances
(without discount) exceeds the sum of the Term Loan Commitments and the Canadian
Revolving Credit Sublimit expressed in U.S. Dollars (such
61
<PAGE>
sum being the "Maximum Canadian Exposure") [by more than $100,000,] then (i) the
Agent shall give notice thereof to the Canadian Borrower and the Canadian
Lenders and (ii) within two (2) Business Days thereafter, the Canadian Borrower
shall repay or prepay Canadian Loans in accordance with this Agreement in an
aggregate principal amount such that, after giving effect thereto, the aggregate
outstanding amount (expressed in U.S. Dollars) of all Canadian Loans, Canadian
Letter of Credit Obligations and the aggregate face amount (without discount) of
all outstanding Canadian Bankers Acceptances no longer exceeds the Maximum
Canadian Exposure; provided, that nothing herein shall diminish the Canadian
Borrower's obligation to repay in full all Obligations in respect of the Term
Loan on the Term Loan Maturity Date and to repay in full all Obligations in
respect of the Revolving Credit Loans owed by the Canadian Borrower on the
Revolving Credit Termination Date.
(d) Without limiting subsection 2.12(c), if, on any day prior to the
Term Loan Maturity Date, the aggregate outstanding amount (expressed in U.S.
Dollars) of all Canadian Loans, the Canadian Letter of Credit Obligations and
the aggregate face amount of all outstanding Canadian Bankers Acceptances
(without discount) exceeds the Maximum Canadian Exposure by five percent (5%) or
more, then (i) the Agent shall give notice thereof to the Canadian Borrower and
the Canadian Lenders and (ii) within two (2) Business Days thereafter, the
Canadian Borrower shall repay or prepay Canadian Loans in accordance with this
Agreement in an aggregate principal amount such that, after giving effect
thereto, the aggregate outstanding amount (expressed in U.S. Dollars) of all
Canadian Loans, the Canadian Letter of Credit Obligations and the aggregate face
amount of all outstanding Canadian Bankers Acceptances (without discount) no
longer exceeds the Maximum Canadian Exposure. Nothing set forth in this Section
2.12 shall be construed to require the Agent to calculate daily compliance under
this Section 2.12.
(e) To the extent the repayments and prepayments referenced in
Sections 2.12(c) and 2.12(d) are such that, after giving effect thereto, the
Canadian Letter of Credit Obligations and the aggregate face amount of all
outstanding Canadian Bankers Acceptances (without discount) still exceeds the
Maximum Canadian Exposure (expressed in U.S. Dollars), then the Canadian
Borrower shall immediately upon demand provide cash collateral to the Agent
required to obtain such results.
Section 2.13 Joint and Several Liability. The Co-Borrowers hereby
acknowledge, covenant and agree that all Obligations, liabilities and covenants
made, incurred and undertaken by them under this Loan Agreement and the other
Loan Documents are on a joint and several basis, including, without limitation,
all obligations to pay principal, interest, fees and expenses.
62
<PAGE>
ARTICLE III
CONDITIONS TO THE LOAN FACILITIES
Section 3.01. Conditions Precedent to the Effectivenes of this Loan
Agreement. This Loan Agreement shall become effective on the Closing Date when
the following conditions precedent have been satisfied (unless waived by the
Requisite Lenders or unless the deadline for delivery has been extended by the
Agent):
(i) Certain Documents. The Agent shall have received on or before the
Closing Date all of the following, all of which, except as otherwise
specifically described below, shall be in form and substance satisfactory to the
Requisite Lenders and in sufficient copies for each of the Lenders:
(a) This Loan Agreement, together with all Exhibits and Schedules
attached hereto;
(b) A Notice of Borrowing pursuant to Section 2.01 and Section
2.02 hereof dated the Closing Date and executed by the Co-Borrowers;
(c) A Revolving Credit Loan Note made payable to Mellon Bank,
N.A.;
(d) A Term Loan Note made payable to Mellon Bank Canada;
(e) A Revolving Credit Loan Note made payable to Mellon Bank
Canada;
(f) The Security Agreements;
(g) The Pledge of Stock Agreements;
(h) The Agreement of Guaranty;
(i) Each UCC-1 Financing Statement filing or Personal Property
Security Act (Ontario) financing statement and registration form for the
Collateral permitting registration in Nova Scotia, Canada, signed by the
Co-Borrowers;
(j) Opinions addressed to the Agent and each Lender, dated the
Closing Date, of counsel to the Co-Borrowers, the Corporate Guarantors, the
Partnership Guarantor and Spar Aerospace (U.K.) Limited covering the matters
addressed in Exhibit "J" hereto and such other matters as may be requested by
the Agent, all in form and substance reasonably satisfactory to the Agent; and
(k) Certificates of the Secretary or Assistant Secretary of the
Co-Borrowers, their Subsidiaries and Affiliates dated the Closing Date
certifying (1) the names and true signatures of the incumbent officers of the
Co-Borrowers, their Subsidiaries and Affiliates authorized to sign this Loan
Agreement and all other Loan Documents executed by the Co-Borrowers, their
Subsidiaries and Affiliates in connection with this Loan Agreement, (2) the
By-Laws of the Co-Borrowers, their Subsidiaries and Affiliates as in effect on
the date of such
63
<PAGE>
certification, (3) the resolutions of the Co-Borrowers', their Subsidiaries' and
Affiliates' respective Board of Directors approving and authorizing the
execution, delivery and performance of this Loan Agreement and all other Loan
Documents executed by the Co-Borrowers, their Subsidiaries and Affiliates in
connection therewith, or filed by the Co-Borrowers, their Subsidiaries and
Affiliates and (4) that there have been no changes in the Certificate of
Incorporation of the Co-Borrowers, their Subsidiaries and Affiliates since the
date of the most recent certification thereof by the office of the appropriate
Governmental Authority delivered to the Agent prior to the Closing Date;
(l) The Certificates of Incorporation of the Co-Borrowers, their
Subsidiaries and Affiliates, as amended, modified or supplemented to the Closing
Date, which shall be certified to be true, correct and complete by the office of
the appropriate Governmental Authority delivered to the Agent prior to the
Closing Date;
(m) Good Standing Certificates or Certificates of Status
certified by the appropriate Secretaries of State or the Registrar of Joint
Stock Companies of Nova Scotia, Canada, relating to the Co-Borrowers, their
Subsidiaries and Affiliates for each of the states in which the Co-Borrowers,
their Subsidiaries and Affiliates are qualified to conduct business;
(n) Projected consolidated balance sheets, income statements and
cash flow projections for the Co-Borrowers, their Subsidiaries and Affiliates
for the Fiscal Years 1998 through 2003 and such other financial information
(including any annual or quarterly financial statements of the Co-Borrowers,
their Subsidiaries and Affiliates) as the Agent or the Requisite Lenders may
reasonably request;
(o) Evidence of the insurance required by the terms of the
Collateral Documents, containing the endorsements required by such Collateral
Documents and this Loan Agreement;
(p) A contemporaneous search of UCC, Personal Property Security
Act (and corresponding personal property security registries in Nova Scotia,
Canada) real property, tax, judgment and litigation dockets and records and
other appropriate registers shall have revealed no filings or recordings in
effect with respect to the Collateral purported to be covered by the Collateral
Documents, except such as are acceptable to the Agent (it being understood that
such acceptance does not limit the obligations of the Co-Borrowers with respect
to the priority of the Liens in favor of the Agent) and the Agent shall have
received a copy of the search reports received as a result of the search;
(q) The partnership agreements for the Partnership Guarantor
shall be certified to be true, correct and complete by the Partnership Guarantor
as of the Closing Date;
(r) Such additional documentation as the Agent or the Requisite
Lenders may reasonably require.
(ii) Fees and Expenses Paid. The Co-Borrowers shall have paid to the
Agent, for its own account and for the account of each Lender, as applicable,
all fees and expenses due and payable under this Loan Agreement, if any, on or
before the Closing Date.
(iii) Representations and Warranties. All of the representations and
warranties of the Co-Borrowers, their Subsidiaries and Affiliates contained in
subsections (i) through
64
<PAGE>
(xxxiv) of Section 4.01 hereof and in any other Loan Document (other than for
changes permitted or contemplated by this Loan Agreement and/or the Agreement of
Guaranty) shall be true and correct in all material respects on and as of the
Closing Date as though made on and as of that date (except any such
representations and warranties stated to be given on a specific date other than
the Closing Date).
(iv) No Default. No Event of Default or Potential Event of Default
hereunder or under the other Loan Documents shall have occurred and be
continuing on the Closing Date.
(v) No Injunction. No Requirements of Law shall prohibit, and no
order, judgment or decree of any Governmental Authority shall and, except as set
forth on Schedule 4.01(vii) hereto, no litigation shall be pending or threatened
which in the reasonable judgment of the Agent or Requisite Lenders would,
enjoin, prohibit restrain, impose or result in the imposition of any material
adverse condition upon the consummation of the transactions contemplated hereby.
(vi) Collateral Information. The Agent shall have received complete
and accurate information from the Co-Borrowers with respect to (a) the name and
the location of the principal place of business and chief executive office for
the Co-Borrowers, their Subsidiaries and Affiliates.
(vii) Consents. The Co-Borrowers, the Corporate Guarantors and the
Partnership Guarantor shall have received all consents and authorizations
required pursuant to any material contractual obligation with any other Person
and shall have obtained all consents and authorizations of, and effected all
notices to and filings with, any Governmental Authority, in each case, as may be
necessary to allow the Co-Borrowers, the Corporate Guarantor and the Partnership
Guarantor lawfully (a) to execute, deliver and perform, in all material
respects, their respective obligations under this Loan Agreement, the other Loan
Documents to which they are, or are to be, a party and each other agreement or
instrument to be executed and delivered by them pursuant thereto or in
connection therewith and (b) to create and perfect or continue the perfection of
the Liens on the Collateral to be owned by them in the manner and for the
purpose contemplated by the Collateral Documents.
(viii) No Material Adverse Effect. No Material Adverse Effect shall
have occurred since the date of the most recent annual "audited" financial
report of the Co-Borrowers, their Subsidiaries and Affiliates delivered to the
Agent and the Requisite Lenders through the Closing Date, as to the condition
(financial or otherwise), operations, performance, properties or prospects of
the Co-Borrowers, their Subsidiaries and Affiliates.
Section 3.02. Conditions Precedent to All Loans and Letters of Credit. The
obligation of each Lender to make any Loan requested to be made by it, and of
the Issuing Bank to issue any Letter of Credit, on any date, is subject to the
following conditions precedent as of such date:
(i) Notice of Borrowing. With respect to a request for a Revolving
Credit Loan, the Agent shall have received in accordance with the provisions of
Section 2.0l(ii) hereof, on or before any Borrowing Date, an original or
facsimile, duly executed, Notice of Borrowing. With respect to a request for a
Term Loan, the Agent shall have received in accordance with the provisions of
Section 2.02 (ii) hereof, on or before the Closing Date, an original or
facsimile, duly executed, Notice of Borrowing.
65
<PAGE>
(ii) Application for Letters of Credit. With respect to a request for
the issuance of a Letter of Credit, the Agent shall have received in accordance
with the provisions of Section 2.01(vi) hereof, on or before the date of
issuance, an original and duly executed Letters of Credit Reimbursement
Agreement.
(iii) Additional Matters. As of the Borrowing Date for any Loan or the
date of issuance of any Letter of Credit:
(a) Representations and Warranties. All of the representations
and warranties of the Co-Borrowers, their Subsidiaries and Affiliates contained
in subsections (i) through (xxxiv) of Section 4.01 hereof and in any other Loan
Document (other than representations and warranties which expressly speak only
of a different date and other than for changes permitted or contemplated by this
Loan Agreement) shall be true and correct in all material respects on and as of
such Borrowing Date, as though made on and as of such date;
(b) No Default. No Event of Default or Potential Event of Default
shall have occurred and be continuing or would result from the making of the
requested Loan or the issuance of the requested Letter of Credit;
(c) No Injunction. No law or regulations shall prohibit, and no
order, judgment or decree of any Governmental Authority shall, and, except as
set forth on Schedule 4.01(vii) hereto, no litigation shall be pending or
threatened which in the judgment of the Agent or the Requisite Lenders would,
enjoin, prohibit, restrain, impose or result in the imposition of any material
adverse condition upon, (1) any Lender from making the Loan requested to be made
on the Borrowing Date or (2) the Issuing Bank, as the case may be, from issuing
the Letter of Credit requested to be issued on the Borrowing Date; and
(d) No Material Adverse Change. No Material Adverse Effect shall
have occurred after the Closing Date.
Each submission by the Co-Borrowers to the Agent of a Notice of
Borrowing with respect to a Loan and the acceptance by the Co-Borrowers of the
proceeds of each such Loan made hereunder, or the request for the issuance of a
Letter of Credit and the issuance of such Letter of Credit, shall constitute a
representation and warranty by the Co-Borrowers as of the Borrowing Date in
respect of such Loan and the date of issuance of any Letter of Credit that all
the conditions contained in this Section 3.02 have been satisfied.
66
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Representations and Warranties on the Closing Date. In order
to induce the Agent and the Lenders to enter into this Loan Agreement, the
Co-Borrowers hereby represent and warrant to the Agent and the Lenders that the
following statements are true, correct and complete on and as of the Closing
Date:
(i) Organization; Corporate Powers. Each of the Co-Borrowers and their
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its respective incorporation or
formation, (b) except for DRS and DRS Electronic Systems, Inc., is duly
qualified to conduct business as a foreign corporation and is in good standing
under the Laws of each jurisdiction in which it owns or leases real property or
in which the nature of its business requires it to be so qualified, and (c) has
all requisite power and authority to own, operate and encumber its property and
assets and to conduct its business as presently conducted and as proposed to be
conducted in connection with and following the consummation of the transactions
contemplated by the Loan Documents. The Certificate of Authority to Conduct
Business in the Commonwealth of Virginia has been revoked for both DRS and DRS
Electronic Systems, Inc. DRS and DRS Electronic Systems, Inc. are diligently
proceeding to have their respective Certificates of Authority to Conduct
Business in the Commonwealth of Virginia reinstated.
(ii) Authority. (a) Each of the Co-Borrowers and Corporate Guarantors
has the requisite corporate power and authority (1) to execute, deliver and
perform each of the Loan Documents executed by it, or to be executed by it and
(2) to file the Loan Documents filed by it, or to be filed by it, with the
appropriate Governmental Authority.
(b) The Partnership Guarantor has the requisite power and
authority (1) to execute, deliver and perform each of the Loan Documents
executed by it, or to be executed by it and (2) to file the Loan Documents filed
by it, or to be filed by it, with the appropriate Governmental Authority.
(c) The execution, delivery and performance (or filing, as the
case may be) of each of the Loan Documents to which it is a party and the
consummation of the transactions contemplated thereby, have been duly authorized
by the Board of Directors of said Co-Borrower or Corporate Guarantor and no
further corporate proceedings on the part of said Co-Borrower or Corporate
Guarantor are necessary to consummate such transactions.
(d) Each of the Loan Documents to which said Co-Borrower,
Corporate Guarantor or Partnership Guarantor is a party has been duly executed
and delivered (or filed, as the case may be) by said Co-Borrower, Corporate
Guarantor or Partnership Guarantor and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
(iii) Subsidiaries and Ownership of Capital Stock. As of the Closing
Date, DRS has thirteen (13) Subsidiaries. In addition, the Partnership Guarantor
is an Affiliate of DRS. Except for DRS, the Pledge of Stock Agreements set forth
the number of authorized, issued and outstanding shares of each class of capital
stock of the Co-Borrowers and their Subsidiaries. Except for DRS, no capital
stock (or any securities, instruments, warrants, option or purchase rights,
conversion or exchange rights, calls, commitments or claims of any character
convertible
67
<PAGE>
into or exercisable for capital stock) of the Co-Borrowers and their
Subsidiaries is subject to issuance under any security, instrument, warrant,
option or purchase rights, conversion or exchange rights, call, commitment or
claim of any right, title or interest therein or thereto, except as set forth on
Schedule 4.01(iii) attached hereto. The outstanding capital stock of all of the
Co-Borrowers and their Subsidiaries has been duly authorized, validly issued,
fully paid and nonassessable and is not Margin Stock; provided upon the
liquidation or dissolution of DRS Flight Safety the shareholders of DRS Flight
Safety would be liable for the unsatisfied obligations of DRS Flight Safety to
the extent the assets are insufficient to cover the liabilities.
(iv) No Conflict. The execution and delivery by the Co-Borrowers, the
Corporate Guarantors and the Partnership Guarantor of each Loan Document and the
performance of each of the transactions contemplated thereby do not and will not
(a) to the best knowledge of the Co-Borrowers, constitute a tortious
interference with any Contractual Obligation of the Co-Borrowers, the Corporate
Guarantors and/or the Partnership Guarantor, (b) conflict with or violate the
Co-Borrowers' and/or the Corporate Guarantors' Certificates of Incorporation or
By-Laws, (c) conflict with or violate the Partnership Guarantor's partnership
agreement, (d) conflict with, result in a breach of or constitute (with or
without notice or lapse of time or both) a default under any Requirement of Law,
subject to clause (a) above, or require termination of any Contractual
Obligation, the consequences of which conflict or default or termination are
reasonably likely to have a Material Adverse Effect, (e) result in or require
the creation or imposition of any Lien whatsoever upon any of the properties or
assets of the Co-Borrowers (other than Liens in favor of the Agent permitted
pursuant to Section 7.02(ii) hereof) or (f) require any approval of
stockholders, other than as otherwise obtained.
(v) Governmental Consents. The execution, delivery and performance of
each Loan Document and the transactions contemplated thereby do not and will not
require any registration with, consent or approval of, or notice to, or other
action to, with or by any Governmental Authority, except filings, consents or
notices which have been, or will in due course, be made, obtained or given.
(vi) Governmental Regulation. The Co-Borrowers, their Subsidiaries and
Affiliates are not subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, the
Investment Company Act of 1940 or any other Law such that the Co-Borrowers',
their Subsidiaries' and/or Affiliates' ability to incur indebtedness is limited
or its ability to consummate the transactions contemplated hereby is materially
impaired.
(vii) Litigation; Adverse Effects. (a) Except as set forth in Schedule
4.01(vii) attached hereto, there is no claim, request for equitable adjustment,
termination for convenience or default, action, suit, proceeding, audit,
governmental investigation or arbitration, at law or in equity, or before or by
or against any Governmental Authority, pending, or to the knowledge of the
Co-Borrowers, threatened against the Co-Borrowers, their Subsidiaries or
Affiliates or any Property of the Co-Borrowers, their Subsidiaries or Affiliates
which is reasonably likely to (1) result in any Material Adverse Effect, (2)
materially and adversely affect the ability of the Co-Borrowers, their
Subsidiaries and Affiliates to perform their respective obligations under the
Law, any material Contractual Obligation and/or the Loan Documents or (3)
materially and adversely affect the ability of the Co-Borrowers, their
Subsidiaries and/or Affiliates to perform their collective Obligations or the
Lenders' ability to enforce such Obligations.
68
<PAGE>
(b) The Co-Borrowers, their Subsidiaries or Affiliates are not
(1) in violation of any applicable Law which violation has or is reasonably
likely to have a Material Adverse Effect or (2) subject to or in default with
respect to any final judgment, writ, injunction, decree, rule or regulation of
any court or Governmental Authority which has or is reasonably likely to have a
Material Adverse Effect. Except as set forth in Schedule 4.01(vii) attached
hereto, there is no action, suit, proceeding or investigation pending or,
threatened against or affecting the Co-Borrowers, their Subsidiaries or
Affiliates challenging the validity or the enforceability of any of the Loan
Documents.
(viii) No Material Adverse Change. Since March 31, 1997, no material
adverse change has occurred in the condition (financial or otherwise),
operations or performance of the Co-Borrowers, their Subsidiaries or Affiliates,
or the ability of the Co-Borrowers, their Subsidiaries or Affiliates to perform
their Obligations under the Loan Documents.
(ix) Payment of Taxes. All tax returns and reports of the
Co-Borrowers, their Subsidiaries and Affiliates required to be filed, have been
timely filed (or appropriate extensions of time for the filing of same have been
timely requested), and all taxes, assessments, fees and other governmental
charges thereupon and upon their respective Properties, assets, income and
franchises which are shown on such returns as being due and payable, have been
paid when due and payable, except such taxes, if any, that are reserved against
in accordance with Generally Accepted Accounting Principles, such taxes as are
being contested in good faith by appropriate proceedings or such filings or
taxes the failure to file or to make payment of which when due and payable would
not have, in the aggregate, a Material Adverse Effect. The Co-Borrowers have no
knowledge of any proposed written tax assessment against the Co-Borrowers, their
Subsidiaries and Affiliates that is reasonably likely to have a Material Adverse
Effect, which is not being actively contested in good faith by the Co-Borrowers,
their Subsidiaries and Affiliates.
(x) Material Adverse Agreements. The Co-Borrowers, their Subsidiaries
and Affiliates are not a party to or subject to any Contractual Obligation or
other restriction contained in their respective Certificates of Incorporation,
By-Laws, partnership agreements or similar governing documents which is
reasonably likely to have a Material Adverse Effect.
(xi) Performance. The Co-Borrowers, their Subsidiaries and Affiliates
are not in default in the performance, observance or fulfillment of any of the
material obligations, covenants or conditions contained in any Contractual
Obligation applicable to them, and no condition exists which, with the giving of
notice or the lapse of time or both, would constitute a default under such
Contractual Obligation, in each case, except where the consequences, direct or
indirect, of such default or defaults, if any, are not reasonably likely to have
a Material Adverse Effect.
(xii) Securities Activities. The Co-Borrowers, their Subsidiaries and
Affiliates are not engaged principally in the business of extending credit for
the purpose of purchasing or carrying any Margin Stock.
(xiii) Requirements of Law. The Co-Borrowers, their Subsidiaries and
Affiliates have no actual knowledge of any non-compliance with respect to all
Requirements of Law applicable to the Co-Borrowers, their Subsidiaries and
Affiliates and their respective businesses, and to the Co-Borrowers' knowledge,
the Co-Borrowers, their Subsidiaries and Affiliates are not charged with, under
investigation with respect to, any violation of any such Requirements of Law,
except where a non-compliance or violation of all Requirements of Law would not
reasonably be likely to result in a Material Adverse Effect.
69
<PAGE>
(xiv) Patents, Trademarks, Permits, etc. The Co-Borrowers, their
Subsidiaries and Affiliates own, are licensed to use or otherwise have the
lawful right to use, or have all permits and other governmental approvals,
patents, trademarks, trade names, copyrights, technology, know-how and processes
used in or necessary for the conduct of their respective businesses as currently
conducted, except as would not reasonably be likely to have a Material Adverse
Effect. To the Co-Borrowers' knowledge, the use of such permits and other
governmental approvals, patents, trademarks, trade names, copyrights,
technology, know how and processes by the Co-Borrowers, their Subsidiaries and
Affiliates does not infringe on the rights of any Person, subject to such claims
and infringements and do not, in the aggregate, give rise to any liability on
the part of the Co-Borrowers, their Subsidiaries and Affiliates which has or is
reasonably likely to have a Material Adverse Effect. As of the Closing Date, the
Co-Borrowers, their Subsidiaries and Affiliates have no filings or registrations
for patents, trademarks or tradenames in the United States Patent and Trademark
Office or the Canadian Intellectual Property Office (for patents, trademarks,
copyrights or otherwise), except one registered patent held by DRS Ahead
Technology, Inc. for a "microglide burnish head" in the United States Patent and
Trademark Office.
(xv) Environmental Matters. Except as disclosed in Schedule 4.01(xv)
attached hereto and except where the failure to comply with the provisions of
clauses (a) through (k) below does not result in a Material Adverse Effect, (a)
the operations of the Co-Borrowers, their Subsidiaries and Affiliates comply in
all substantial respects with all applicable environmental, health and safety
Requirements of Law; (b) the Co-Borrowers, their Subsidiaries and Affiliates
have obtained all environmental, health and safety Permits necessary for their
respective operations, and all such Permits are in good standing, and the
Co-Borrowers, their Subsidiaries and Affiliates are in material compliance with
all terms and conditions of such Permits; (c) the Co-Borrowers', their
Subsidiaries' and Affiliates' respective present Properties and operations, and
to the best of the Co-Borrowers' knowledge, the Co-Borrowers', their
Subsidiaries' and Affiliates' respective past Properties and operations, are not
the subject of any order from or agreement with any Governmental Authority or
private party or any judicial or administrative proceeding or investigations
respecting any environmental, health or safety Requirements of Law, and are not
the subject of any Remedial Action or other Liabilities and Costs arising from
the Release or threatened Release of an Environmental Concern Material into the
Environment; (d) the Co-Borrowers, their Subsidiaries and Affiliates have not
filed any notice under any Requirement of Law indicating past or present
treatment, storage or disposal of an Environmental Concern Material in violation
of any Environmental Law; (e) the Co-Borrowers, their Subsidiaries and
Affiliates have not filed any notice under any applicable Requirement of Law
reporting a Release of an Environmental Concern Material into the Environment in
violation of any Environmental Law; (f) there is not now, nor has there ever
been, on or in the Property of the Co-Borrowers, their Subsidiaries and/or
Affiliates in violation of any Environmental Law: (1) any generation, treatment,
recycling, storage or disposal of any Environmental Concern Material, (2) any
underground storage tanks or surface impoundments, (3) any asbestos-containing
material, or (4) any polychlorinated biphenyls (PCB's) used in hydraulic oils,
electrical transformers or other equipment; (g) the Co-Borrowers, their
Subsidiaries and/or Affiliates have not received any notice or claim to the
effect that it is or may be liable to any Person as a result of the Release or
threatened Release of a Environmental Concern Material into the Environment, or
as a result of exposure to asbestos or to cotton dust, which may result in any
liability; (h) after due inquiry, no Environmental Lien has attached to any
Property of the Co-Borrowers, their Subsidiaries and/or Affiliates; (i) the
Co-Borrowers, their Subsidiaries and Affiliates have not entered into any
negotiations or agreements with any Person (including, without limitation, the
prior owner(s) of any Property owned or leased by the Co-Borrowers, their
Subsidiaries and/or Affiliates) relating to any Remedial Action or
environmentally related Claim;
70
<PAGE>
(j) the Co-Borrowers, their Subsidiaries and Affiliates have no material
contingent liability in connection with any Release or threatened Release of any
Environmental Concern Material into the Environment; and (k) none of the
products that the Co-Borrowers, their Subsidiaries and/or Affiliates
manufacture, distribute or sell, or, to the best of the Co-Borrowers', their
Subsidiaries' or Affiliates' knowledge, ever have manufactured, distributed or
sold, contains an asbestos-containing material.
(xvi) ERISA. As of the Closing Date, the Co-Borrowers, their
Subsidiaries, Affiliates and any ERISA Affiliate do not maintain or contribute
to any Plan other than a Plan listed on Schedule 4.01(xvi) attached hereto.
Except as otherwise provided on Schedule 4.01(xvi), each Plan which is intended
to be a qualified plan has been determined by the IRS to be qualified under
Section 401(a), and each trust related to any such Plan has been so determined
to be exempt from federal income tax under Section 501(a) of the Code prior to
its amendment by the Tax Reform Act of 1986, and such Plan and trust are being
operated in all material respects in compliance with and will be timely amended
in accordance with the Tax Reform Act of 1986 and the Omnibus Budget
Reconciliation Act of 1987 as interpreted by the regulations promulgated
thereunder. Except as otherwise provided on Schedule 4.01(xvi) attached hereto,
the Co-Borrowers, their Subsidiaries, Affiliates and any ERISA Affiliate do not
maintain or contribute to any employee welfare benefit plan within the meaning
of Section 3(1) of ERISA which provides lifetime benefits to retirees other than
as may be required by the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended and interpreted by regulations promulgated thereunder. The
Co-Borrowers, their Subsidiaries, Affiliates and all of their ERISA Affiliates
are in compliance in all material respects with the responsibilities,
obligations or duties imposed on them by ERISA or regulations promulgated
thereunder with respect to all Plans. No material accumulated funding deficiency
(as defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code) exists
in respect to any Benefit Plan. The Co-Borrowers, their Subsidiaries, Affiliates
any ERISA Affiliate and any fiduciary of any Plan (a) have not engaged in a
nonexempt "prohibited transaction" described in Section 406 of ERISA or Section
4975 of the Code or (b) have not taken any action which would constitute or
result in a Termination Event with respect to any Plan such that actions under
(a) or (b) or both would result in a material obligation to pay money. The
Co-Borrowers, their Subsidiaries, Affiliates and any ERISA Affiliate have not
incurred any material liability to the PBGC which remains outstanding other than
the liability to pay the PBGC insurance premiums for the current year. Schedule
B to the most recent annual report filed with the IRS with respect to each
Benefit Plan (which has been furnished to the Agent) is complete and accurate in
all material respects. Except as provided on Schedule 4.01(xvi) attached hereto,
since the date of each such Schedule B, there has been no material adverse
change in the funding status or financial condition of the Benefit Plan relating
to such Schedule B which would result in a Material Adverse Effect. The
Co-Borrowers, their Subsidiaries, Affiliates and any ERISA Affiliate have not
failed to make a required installment under subsection (m) of Section 412 of the
Code or any other payment required under Section 412 of the Code on or before
the due date for such installment or other payment which would in the aggregate
have a Material Adverse Effect. The Co-Borrowers, their Subsidiaries, Affiliates
and any ERISA Affiliate are not required to provide security to a Plan under
Section 401(a)(29) of the Code due to a Plan amendment that results in an
increase in current liability for the plan year. The Co-Borrowers, their
Subsidiaries, Affiliates and any ERISA Affiliate are not contributing and have
not ever contributed to or been obligated to contribute to any Multiemployer
Plan, and no employees or former employees of the Co-Borrowers, their
Subsidiaries, Affiliates or any ERISA Affiliate have been covered by any
Multiemployer Plan in respect of their employment by the Co-Borrowers or any
ERISA Affiliate, and, accordingly, the representations and warranties in this
paragraph (xvi) do not apply to Multiemployer Plans.
71
<PAGE>
(xvii) Solvency. The Co-Borrowers, their Subsidiaries and Affiliates
taken as a whole are Solvent after giving effect to the transactions
contemplated by this Loan Agreement and the other Loan Documents, the payment
and accrual of all costs payable on the Closing Date with respect to any of the
foregoing, and all obligations, if any, under any Plan or the equivalent for
unfunded past service liability and any other unfunded medical (including
post-retirement) and death benefits.
(xviii) Notes Qualification. As of the date on which this
representation and warranty is made, the offering and issuance of the Notes are
exempt from registration under Section 5 of the Securities Act and the Notes
issued by the Canadian Borrower to the Canadian Lenders are exempt from the
prospectus filing and renewal requirements of the applicable Securities Acts of
the Provinces of Ontario and Nova Scotia, Canada or has been registered pursuant
to a registration statement filed pursuant to the Securities Act and, if so
registered, is qualified under the Trust Indenture Act of 1939, as amended.
(xix) Assets and Properties. Substantially all of the assets and
properties owned by, leased to or used by the Co-Borrowers, their Subsidiaries
and Affiliates (a) are in good operating condition and repair, (ordinary wear
and tear excepted), (b) are free and clear of any known defects (except such
defects as do not substantially interfere with the continued use thereof in the
conduct of normal operations) and (c) are able to serve the function for which
they are currently being used, in each case where the failure of such asset to
meet such requirements would not have or is not reasonably likely to have a
Material Adverse Effect.
(xx) Joint Venture; Partnership. Except as set forth in Schedule
4.01(xx) attached hereto, as of the Closing Date the Co-Borrowers, their
Subsidiaries and Affiliates are not engaged in any joint venture or partnership
with any other Person.
(xxi) Insurance. The Co-Borrowers, their Subsidiaries and Affiliates
maintain with financially sound and reputable insurers not related to or
affiliated with the Co-Borrowers, their Subsidiaries and Affiliates, insurance
with respect to its Properties and businesses, insured against such liabilities,
casualties and contingencies and in such types and amounts as is customary in
the case of corporations engaged in the same or a similar business or having
similar properties similarly situated. Schedule 4.01(xxi) attached hereto sets
forth a list of all insurance currently maintained by or in respect of the
Co-Borrowers, their Subsidiaries and Affiliates setting forth the identity of
the insurance carrier, the type of coverage, the amount of coverage and the
deductible. There are no claims, actions, suits, proceedings against, arising
under or based upon any of such insurance policies except as set forth in
Schedule 4.01(xxi) attached hereto.
(xxii) Title to Property. The Co-Borrowers, their Subsidiaries and
Affiliates have good and marketable title in fee simple to all respective
Property owned or purported to be owned by them, including, without limitation
to all Property reflected in the most recent consolidated balance sheet referred
to in Section 4.01(xxiii) hereof or submitted pursuant to Article V (except as
sold or otherwise disposed of in the ordinary course of business after the date
of such balance sheet), in each case free and clear of all Liens, other than
Liens permitted under the terms of Section 7.02(ii) of this Loan Agreement..
(xxiii) Audited Financial Statements. The Co-Borrowers have heretofore
furnished to the Agent a consolidated and consolidating "audited" balance sheet
of DRS, its Subsidiaries and Affiliates dated as of March 31, 1997, and the
related statements of income, cash flows and changes in stockholders' equity for
the 1997 Fiscal Year then ended, as examined and reported on by their
72
<PAGE>
Independent Certified Public Accountant, who delivered an unqualified opinion in
respect thereof, all as set forth in the Form 10-K. Such financial statements
(including the notes thereto) present fairly the financial condition of DRS, its
Subsidiaries and Affiliates as of the end of such 1997 Fiscal Year and the
results of their operations and their cash flows for the 1997 Fiscal Year then
ended, all in conformity with Generally Accepted Accounting Principles.
(xxiv) Interim Financial Statements. The Co-Borrowers have heretofore
furnished to the Agent interim balance sheets of DRS, its Subsidiaries and
Affiliates as of the end of their first Fiscal Quarter of the 1998 Fiscal Year
which began on April 1, 1997, together with the related statements of income and
cash flows for the applicable fiscal periods ending on each such date, all as
set forth in the Form 10-Q. Such financial statements present fairly the
financial condition of DRS, its Subsidiaries and Affiliates as of the end of
such Fiscal Quarter and the results of their operations and their cash flows for
the fiscal periods then ended, all in conformity with Generally Accepted
Accounting Principles (except to the extent set forth in the notes to said
financial statements), subject to normal and recurring year-end audit
adjustments.
(xxv) Absence of Undisclosed Liabilities. Except as provided on
Schedule 4.01 (xxv) attached hereto and made a part hereof, the Co-Borrowers,
their Subsidiaries and Affiliates have no liability or obligation of any nature
whatever (whether absolute, accrued, contingent or otherwise, whether or not
due), forward or long-term commitments or unrealized or anticipated losses from
unfavorable commitments, except (a) as disclosed in the financial statements
referred to in Sections 4.01(xxiii) and 4.01(xxiv) above, (b) matters that,
individually or in the aggregate could not have a Material Adverse Effect and
(c) Contractual Obligations incurred in the ordinary course of the
Co-Borrowers', their Subsidiaries' and Affiliates' businesses.
(xxvi) Margin Regulations. No part of the proceeds of the Loan
Facilities will be used for the purpose of buying or carrying any Margin Stock,
as such term is used in Regulations G and U of the Federal Reserve Board, as
amended from time to time, or to extend credit to others for the purpose of
buying or carrying any Margin Stock. The Co-Borrowers, their Subsidiaries and
Affiliates are not engaged in the business of extending credit to others for the
purpose of buying or carrying Margin Stock. Neither the making of any Loan nor
any use of proceeds of any such Loan will violate or conflict with the
provisions of Regulation G, T, U or X of the Federal Reserve Board, as amended
from time to time.
(xxvii) Labor Matters. Except as set forth on Schedule 4.01(xxvii)
attached hereto, the Co-Borrowers, their Subsidiaries and Affiliates are not a
party to any labor union or collective bargaining agreements. The Co-Borrowers,
their Subsidiaries and Affiliates are in compliance with all applicable laws
respecting employment and employment practices, including, without limitation,
laws, regulations, and judicial and administrative decisions relating to wages,
hours, conditions of work, collective bargaining, health and safety, payment of
social security, payroll, withholding and other taxes, worker's compensation,
insurance requirements, as well as requirements of ERISA and the Consolidated
Omnibus Budget Reconciliation Act, except to the extent that noncompliance would
not have a Material Adverse Effect. There is no (a) unfair labor practice
complaint pending or, to the best knowledge of the Co-Borrowers, their
Subsidiaries and Affiliates, threatened against the Co-Borrowers, their
Subsidiaries and Affiliates before the National Labor Relations Board, any court
or any other Governmental Authority nor any pending or, to the best knowledge of
the Co-Borrowers, their Subsidiaries and Affiliates, threatened sexual
harassment, or wrongful discharge claim, (b) labor strike, dispute, slowdown, or
stoppage pending or, to the best knowledge of the Co-Borrowers, their
Subsidiaries and Affiliates, threatened against the Co-Borrowers, their
Subsidiaries and Affiliates, or (c) representation petition, respecting the
73
<PAGE>
employees of the Co-Borrowers, their Subsidiaries and Affiliates filed or
threatened to be filed with the National Labor Relations Board.
(xxviii) Brokerage Commissions. No other Person is entitled to receive
from the Co-Borrowers, their Subsidiaries and/or Affiliates any brokerage
commission, finder's fee or similar fee or payment in connection with the
consummation of the transactions contemplated by this Loan Agreement. No
brokerage or other fee, commission or compensation is to be paid by the Lender
by reason of any act, alleged act or omission of the Co-Borrowers, their
Subsidiaries and/or Affiliates with respect to the transactions contemplated
hereby.
(xxix) Books and Records. All of the Co-Borrowers (except DRS Flight
Safety) maintain their books and records relative to their assets, Properties
and business transactions at DRS's chief executive offices located at 5 Sylvan
Way, Parsippany, New Jersey 07054. DRS Flight Safety maintains its books and
records relative to its assets, Properties and business transactions at its
chief executive offices located at 365 March Road, Kanata, Ontario, Canada K2K
1X3. All of the Subsidiaries and Affiliates maintain their respective books and
records at their respective chief executive offices described in the Agreement
of Guaranty.
(xxx) Business Name. The only name by which the Co-Borrowers, their
Subsidiaries and Affiliates are known or under which they are conducting their
businesses are set forth on Schedule 4.01(xxx) attached hereto and made a part
hereof.
(xxxi) Location of Collateral. Except as set forth (a) on Schedule
4.01(xxxi) attached hereto and made a part hereof and (b) in the Security
Agreements, as of the Closing Date, none of the Collateral pledged to the Lender
as collateral security pursuant to this Loan Agreement, the Collateral Documents
or any other Loan Documents, is or will be located in, AT or on any location or
property other than as set forth on Schedule 4.01(xxxi) (except Inventory
temporarily in transit or Collateral located at Properties other than those
described on Schedule 4.01 (xxxi) for which the Agent has received the requisite
notice described in Section 5.04 hereof). None of the Collateral (including,
without limitation, Inventory) is now or will hereafter be located in the
Province of Quebec, Canada. During the six (6) month period immediately
preceding the Closing Date, none of the Collateral was located in, at or on any
location or property other than those sites listed on Schedule 4.01 (xxxi)
attached hereto and in the Security Agreements (except Inventory temporarily in
transit).
(xxxii) Accounts Receivable. The most recent list of Accounts
Receivable of the Co-Borrowers, their Subsidiaries and Affiliates delivered to
the Agent is complete in all material respects, and contains an aging thereof
that is accurate in all material respects. The Accounts Receivable of the
Co-Borrowers, their Subsidiaries and Affiliates have arisen in the ordinary
course of their businesses and reflect bona fide obligations for the payment of
goods or services provided by the Co-Borrowers or their predecessors subject to
reserves for uncollectable amounts (including, without limitation, markdown
allowances and chargebacks) established in the ordinary course of business. As
of the Closing Date, all Accounts Receivable are collectable in the ordinary
course of the Co-Borrowers', their Subsidiaries' and Affiliates' businesses,
subject to reserves for uncollectable amounts (including, without limitation,
markdown allowances and chargebacks) established in the ordinary course of
business; are subject to no counter-claims or set-offs of any nature whatsoever
(other than those arising out of customer deposits) that would have a Material
Adverse Effect; and require no further act on the Co-Borrowers', their
Subsidiaries' and Affiliates' part to make such Accounts owing by the account
debtors. None of the Accounts Receivable includes consignments or sales on any
basis other than that of absolute sale in the ordinary and
74
<PAGE>
usual course of business, except as otherwise set forth on said list. No
agreement has been made under which any deductions or discounts may be claimed
as to any such account except regular discounts in the usual course of business.
(xxxiii) Inventory. Subject to the second sentence of this Section
4.01(xxxiii), the Inventory of the Co-Borrowers, their Subsidiaries and
Affiliates (a) does not contain a misbranded hazardous substance or a barred
hazardous substance, (b) is suitable and useful for the purposes of the
Co-Borrowers', their Subsidiaries' and Affiliates' businesses, (c) is not
obsolete, spoiled, contaminated or damaged and (d) consists of items of a
quality and quantity useable or saleable in the ordinary course of the
Co-Borrowers' business, except that which would not have a Material Adverse
Effect. The value of obsolete items, items below standard quality and items in
the process of repair have been written down to realizable market value, or
adequate reserves have been provided therefor, and the values carried on the
balance sheet are set at the lower of cost or market, in accordance with
Generally Accepted Accounting Principles.
(xxxiv) Pledge of Collateral. The Co-Borrowers, their Subsidiaries and
Affiliates have good and marketable title to the Collateral pledged by them, and
all such Collateral is free and clear of all Liens except for (a) Permitted
Encumbrances and (b) as specifically permitted or contemplated by the terms and
provisions of this Loan Agreement and the Collateral Documents relating to such
Collateral.
Section 4.02. Subsequent Funding Representations and Warranties. In order
to induce the Agent and the Lenders to enter into this Loan Agreement and to
make the Loans and issue the Letters of Credit, the Co-Borrowers hereby
represent and warrant to the Agent and the Lenders that the statements set forth
in paragraphs (i) through (xxxiv) of Section 4.01 hereof (except (i) to the
extent that such statements (a) are made expressly only as of the Closing Date
or (b) other than for changes permitted or contemplated by this Loan Agreement),
are true, correct and complete in all material respects on and as of the
Borrowing Date in respect of each Borrowing after the Closing Date and the date
of issuance of each Letter of Credit (the making of each Revolving Credit Loan
and the issuance of each Letter of Credit being referred to as a "Subsequent
Funding").
75
<PAGE>
ARTICLE V
REPORTING COVENANTS
On and after the Closing Date and so long as the Co-Borrowers shall have
any Obligation hereunder or any Lender shall have any Commitment hereunder,
unless the Requisite Lenders shall give their prior express written consent to
the effect otherwise, then:
Section 5.01. Statement of Accounting. The Co-Borrowers, their Subsidiaries
and Affiliates shall make and keep books, records and accounts which, in
reasonable detail, accurately and fairly reflect their transactions and
dispositions of their assets and shall maintain a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary (a) to permit preparation of financial
statements in conformity with Generally Accepted Accounting Principles and any
other accounting principles applicable thereto and (b) to maintain
accountability for assets and (iii) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences; provided, however, that with respect
to DRS Flight Safety all transactions, books and records are maintained in
accordance with generally accepted accounting principles as in effect from time
to time in Canada as said principles are developed, modified and set forth in
the opinions and pronouncements and/or Handbook of the Canadian Institute of
Chartered Accountants.
Section 5.02 Reporting and Information Requirements. The Co-Borrowers shall
deliver or cause to be delivered to the Agent the following financial
statements, data, reports and information, at the Co-Borrowers' own cost and
expense:
(i) Annual Audited Consolidated and Consolidating Financial Statements
of the Co-Borrowers, their Subsidiaries and Affiliates. As soon as available,
but in any event within ninety (90) days after the close of each Fiscal Year of
the Co-Borrowers, "audited" consolidated statements of income, retained earnings
and a statement of cash flows for the Co-Borrowers, their Subsidiaries and
Affiliates for such Fiscal Year and a consolidated balance sheet for the
Co-Borrowers, their Subsidiaries and Affiliates as of the close of such Fiscal
Year, and notes to each, all as set forth in the Form 10-K filed with the United
States Securities and Exchange Commission. Such consolidated financial
statements shall be accompanied by an opinion of the Independent Certified
Public Accountant, which opinion shall be free of exceptions or qualifications
which is of "going concern" or like nature or which relates to a more limited
scope of examination. Such opinion shall in any event contain a written
statement of such accountants substantially to the effect that (a) such
accountants examined the financial statements in accordance with Generally
Accepted Auditing Standards and accordingly made such tests of accounting
records and such other auditing procedures as such accountants considered
necessary under the circumstances and (b) in the opinion of such accountants
such financial statements present fairly the financial position and cash flows
of the Co-Borrowers, their Subsidiaries and Affiliates as of the end of such
Fiscal Year, and the results of the Co-Borrowers', their Subsidiaries' and
Affiliates' operations and the changes in their financial position for such
Fiscal Year, in conformity with Generally Accepted Accounting Principles applied
on a basis consistent with that of the preceding Fiscal Year. In addition to the
delivery of the annual "audited" consolidated financial statements, the
Co-Borrowers shall also deliver to the Agent and each of the Lenders, at the
same time, an "unaudited" management prepared consolidating statement of income
for the Co-Borrowers, their Subsidiaries and Affiliates for such Fiscal Year and
a consolidating balance sheet for the Co-Borrowers, their Subsidiaries and
76
<PAGE>
Affiliates as of the close of such Fiscal Year, all prepared and certified to
the Agent and the Lenders by the Co-Borrowers' chief accounting officer in her
capacity as an Authorized Officer.
(ii) Annual Operating Plan. As soon as available, but in any event
within ninety (90) days after the close of each Fiscal Year of the Co-Borrowers,
a copy of the Co-Borrowers', their Subsidiaries' and Affiliates' annual
operating plan for the then current Fiscal Year.
(iii) Quarterly Consolidated and Consolidating Financial Statements of
the Co-Borrowers, their Subsidiaries and Affiliates. As soon as available, but
in any event within forty-five (45) days after the close of each of the first
three Fiscal Quarters of each Fiscal Year of the Co-Borrowers, "unaudited"
consolidated statements of income and a statement of cash flows for the
Co-Borrowers, their Subsidiaries and Affiliates for such Fiscal Quarter and for
the period from the beginning of such Fiscal Year to the end of such Fiscal
Quarter, and an "unaudited" balance sheet of the Co-Borrowers, their
Subsidiaries and Affiliates as of the close of such Fiscal Quarter, all as set
forth in the Form 10-Q filed with the United States Securities and Exchange
Commission. In addition to the delivery of the quarterly consolidated financial
statements, the Co-Borrowers shall also deliver to the Agent and the Lenders, at
the same time, an "unaudited" management prepared consolidating statement of
income for the Co-Borrowers, their Subsidiaries and Affiliates for such Fiscal
Quarter and for the period from the beginning of such Fiscal Year to the end of
such Fiscal Quarter and an "unaudited" consolidating balance sheet of the
Co-Borrowers, their Subsidiaries and Affiliates as of the close of such Fiscal
Quarter, all as certified by the chief accounting officer of the Co-Borrowers in
her capacity as an Authorized Officer as presenting fairly the financial
position of the Co-Borrowers, their Subsidiaries and Affiliates as of the end of
such dates and fiscal periods and the results of the Co-Borrowers', their
Subsidiaries' and Affiliates' operations and the changes in the Co-Borrowers',
their Subsidiaries' and Affiliates' financial position and cash flows for such
fiscal periods, in conformity with Generally Accepted Accounting Principles
applied in a manner consistent with that of the most recent audited financial
statements furnished to the Agent, subject to normal and recurring year-end
audit adjustments.
(iv) Contract Backlog Report. As soon as available, but in any event
within forty-five (45) days after the close of each Fiscal Quarter of each
Fiscal Year of the Co-Borrowers, a contract backlog report for the Co-Borrowers,
their Subsidiaries and Affiliates signed by an Authorized Officer of the
Co-Borrowers.
(v) Compliance Certificates. Together with each delivery of any
financial statement pursuant to this Section 5.02(i) and Section 5.02(iii)
above, an Officer's Certificate of the Co-Borrowers substantially in the form of
Exhibit "E" attached hereto, (a) stating that the officer signatory thereto in
his or her capacity as an Authorized Officer has reviewed the terms of this Loan
Agreement and the principal Loan Documents, and has made, or caused to be made
under his or her supervision, a review in reasonable detail of the transactions
and condition of the Co-Borrowers, their Subsidiaries and Affiliates, taken as a
whole, during the accounting period covered by such financial statements, and
that such review has not disclosed the existence during or at the end of such
accounting period, and that the signer does not have knowledge of the existence
as at the date of the Officer's Certificate, of any condition or event which
constitutes an Event of Default or Potential Event of Default, or, if any such
condition or event existed or exists, specifying the nature and period of
existence thereof and what action the Co-Borrowers have taken, are taking and
propose to take with respect thereto; and (b) demonstrating in reasonable detail
compliance during and at the end of such accounting periods with the financial
covenants contained in Article VIII of this Loan Agreement.
77
<PAGE>
(vi) Monthly Accounts Receivable Aging Reports, etc. As soon as
available, but in any event within thirty (30) days after the close of each
month during each Fiscal Year, a monthly accounts receivable aging report in
summary form only, setting forth the amounts due and owing to each of the
Co-Borrowers, their Subsidiaries and Affiliates, respectively, as of the close
of the preceding month.
(vii) Borrowing Base Certificates. As soon as available, but in any
event within thirty (30) days after the close of the prior month during each
Fiscal Year, a Borrowing Base Certificate signed by an Authorized Officer of the
Co-Borrowers. In addition, the Co-Borrowers may deliver to the Agent, at any
time during a calendar month, additional Borrowing Base Certificates at the time
of each request for a Borrowing.
(viii) Other Reports and Information. Promptly upon their becoming
available to the Co-Borrowers, a copy of (a) all reports, financial statements
and other information distributed generally by the Co-Borrowers, their
Subsidiaries and/or Affiliates to their respective stockholders, partners,
bondholders or the financial community and (b) all accountants' management
letters pertaining to, all other reports submitted by accountants in connection
with any audit of, and all other material reports, if any, from outside
accountants with respect to, the Co-Borrowers, their Subsidiaries and/or
Affiliates.
(ix) Further Information. The Co-Borrowers shall promptly furnish to
the Agent such business, financial or other information concerning the
Co-Borrowers, their Subsidiaries and Affiliates in such form as the Agent and
said Lenders may reasonably request from time to time.
(x) Notice of Event of Default. Promptly upon becoming aware of any
Event of Default or Potential Event of Default, the Co-Borrowers shall give the
Agent written notice thereof, together with a written statement of the President
or chief accounting officer of the Co-Borrowers in her capacity as an Authorized
Officer setting forth the details thereof and any action with respect thereto
taken or contemplated to be taken by the Co-Borrowers.
(xi) Notice of Material Adverse Change. Promptly upon becoming aware
thereof, the Co-Borrowers shall give the Agent written notice concerning any
material adverse change in the business, assets, operations or financial
condition of the Co-Borrowers, their Subsidiaries and/or Affiliates taken as a
whole, including, without limitation, (a) any loss from casualty or theft in
excess of $500,000.00 whether or not insured, affecting any Property of the
Co-Borrowers, their Subsidiaries and Affiliates, setting forth the details
thereof and any action with respect thereto taken or contemplated to be taken by
the Co-Borrowers, (b) any loss of funding for the continuation of a multi-year
and/or cost-plus contract with any Person whereby any one of the Co-Borrowers,
their Subsidiaries or Affiliates is the contractor and said contract has a
remaining value in excess of US$5,000,000.00, (c) any modification of a contract
with any Person where any one of the Co-Borrowers, their Subsidiaries or
Affiliates is the contractor, under the "changes clause" of said contract
resulting in the deletion of at least fifty percent (50%) of the work originally
intended to be performed under such contract resulting in said contract as
changed having a remaining value in excess of US$2,500,000.00, (d) the
termination for default of any contract with any Governmental Authority and (e)
the termination for convenience of any contract with any Governmental Authority
whereby any one of the Co-Borrowers, their Subsidiaries or Affiliates is the
service provider and said contract has a remaining value in excess of
US$5,000,000.00.
(xii) Notice of Material Proceedings. Promptly upon becoming aware
thereof, the Co-Borrowers shall give the Agent written notice of the
commencement, existence or threat of any
78
<PAGE>
action, suit, claim, request for equitable adjustment, proceeding, audit,
governmental investigation or arbitration against or by or otherwise affecting
the Co-Borrowers, their Subsidiaries and/or Affiliates (including without
limitation, litigation, arbitration or administration proceedings) which, if
adversely decided, would have a Material Adverse Effect on the business, assets,
operations or financial condition of the Co-Borrowers, their Subsidiaries and/or
Affiliates taken as a whole or on the ability of the Co-Borrowers, their
Subsidiaries and/or Affiliates to perform their obligations under this Loan
Agreement or the other Loan Documents.
(xiii) Notice of Pension-Related Events. The Co-Borrowers shall give
the Agent the following:
(a) As soon as possible, and in any event within ten (10) days
after the Co-Borrowers, their Subsidiaries, their Affiliates or an ERISA
Affiliate knows or has reason to know that a Termination Event has occurred, a
written statement of the chief accounting officer of the Co-Borrowers describing
such Termination Event and the action, if any, which the Co-Borrowers, their
Subsidiaries, their Affiliates. or an ERISA Affiliate has taken, is taking or
proposes to take with respect thereto, and when known, any action taken or
threatened by the IRS, the DOL or PBGC with respect thereto;
(b) As soon as possible, and in any event within fifteen (15)
days, after the Co-Borrowers, their Subsidiaries, their Affiliates or an ERISA
Affiliate knows or has reason to know that a non-exempt prohibited transaction
(as defined in Section 406 of ERISA and Section 4975 of the Code) has occurred,
a statement of the chief accounting officer of the Co-Borrowers describing such
transaction;
(c) Within ten (10) days after the filing thereof with the DOL,
IRS or PBGC, copies of each annual report, filed with respect to each Benefit
Plan;
(d) Within ten (10) days after the filing thereof with the IRS, a
copy of each funding waiver request filed with respect to any Benefit Plan and
all communications received by the Co-Borrowers, their Subsidiaries, their
Affiliates, or an ERISA Affiliate with respect to such request;
(e) Within thirty (30) days after a written request from the
Agent, information describing an amendment of any existing Benefit Plan which
will result in a material increase in the benefits under such Benefit Plan or a
notification of any such increase, or the establishment of any new Plan or the
commencement of contributions to any Plan to which the Co-Borrowers, their
Subsidiaries, their Affiliates or an ERISA Affiliate was not previously
contributing in a material amount;
(f) Promptly upon, and in any event within fifteen (15) Business
Days after, receipt by the Co-Borrowers, their Subsidiaries, their Affiliates or
an ERISA Affiliate of the PBGC's intention to terminate a Benefit Plan or to
have a trustee appointed to administer a Benefit Plan, copies of each such
notice;
(g) Promptly upon, and in any event within ten (10) Business Days
after, receipt by the Co-Borrowers, their Subsidiaries, their Affiliates or an
ERISA Affiliate of an unfavorable determination letter from the IRS regarding
the qualification of a Plan under Section 401(a) of the Code;
79
<PAGE>
(h) Promptly upon, and in any event within fifteen (15) Business
Days after, receipt by the Co-Borrowers, their Subsidiaries, their Affiliates or
an ERISA Affiliate of a notice from a Multiemployer Plan regarding the
imposition of withdrawal liability; and
(i) Promptly upon, and in any event within fifteen (15) Business
Days after, the Co-Borrowers, their Subsidiaries, their Affiliates or any ERISA
Affiliate fails to make a required installment under subsection (m) of Section
412 of the Code or any other payment required under Section 412 of the Internal
Revenue Code on or before the due date for such installment or payment, a
notification of such failure provided that such installment payment is an amount
which is material.
(xiv) Notice of Other Material Defaults. Promptly upon becoming aware
of any material default by the Co-Borrowers, their Subsidiaries and/or
Affiliates under any Contractual Obligation to which the Co-Borrowers, their
Subsidiaries and/or Affiliates or by which the Co-Borrowers, their Subsidiaries
and/or Affiliates or their respective properties may be bound (the result of
which could reasonably be expected to have a Material Adverse Effect), the
Co-Borrowers shall give the Agent written notice thereof, together with a
written statement of the President or chief accounting officer of the
Co-Borrowers in her capacity as an Authorized Officer setting forth the details
thereof and any action with respect thereto taken or contemplated to be taken by
the Co-Borrowers, their Subsidiaries and/or Affiliates.
(xv) Notice of Material Claims. The Co-Borrowers shall promptly notify
the Agent of all written claims, complaints, orders, citations or notices,
whether formal or informal, received by the Co-Borrowers, their Subsidiaries or
Affiliates from a Governmental Authority or other Person relating to any Law,
including, without limitation, any Environmental Law or health and safety law,
which could reasonably be expected to have a Material Adverse Effect. Such
notices shall include, among other information, the name of the party who filed
the claim, the potential amount of the claim, and the nature of the claim.
Section 5.03 Environmental Notices. (i) The Co-Borrowers shall notify the
Agent, in writing, promptly, and in any event within five (5) Business Days
after obtaining knowledge, of any: (a) notice or claim to the effect that the
Co-Borrowers, their Subsidiaries and/or Affiliates are or may be liable to any
Person as a result of the Release or threatened Release of any Environmental
Concern Material into the Environment which may have a Material Adverse Effect;
(b) notice that the Co-Borrowers, their Subsidiaries or Affiliates are under
investigation by any Governmental Authority evaluating whether any Remedial
Action is needed to respond to the Release or threatened Release of any
Environmental Concern Material into the Environment which may have a Material
Adverse Effect; (c) notice that any Property of the Co-Borrowers, their
Subsidiaries or Affiliates is subject to an Environmental Lien which could
reasonably be expected to have a Material Adverse Effect; (d) notice of
violation to the Co-Borrowers, their Subsidiaries or Affiliates or awareness by
the Co-Borrowers, their Subsidiaries or Affiliates of a condition which might
reasonably result in a notice of violation of any environmental, health or
safety Requirement of Law, which could have a Material Adverse Effect; (e)
commencement or threat of any judicial or administrative proceeding alleging a
violation of any environmental, health or safety Requirement of Law which may
have a Material Adverse Effect; (f) new or proposed changes to any existing
environmental, health or safety Requirement of Law that could have a Material
Adverse Effect on the operations of the Co-Borrowers, their Subsidiaries or
Affiliates; or (g) any proposed acquisition of stock, assets, real estate, or
leasing of property, or any other action by the Co-Borrowers, their Subsidiaries
or Affiliates that could subject the Co-Borrowers, their Subsidiaries or
Affiliates to environmental, health or safety Liabilities and Costs that could
have a Material Adverse Effect.
80
<PAGE>
(ii) Upon written request of the Agent, no more frequently than once a
year, the Co-Borrowers shall submit to the Agent a report prepared by an
Authorized Officer of the Co-Borrowers providing an update of the status of each
material health or safety compliance hazard or liability issue identified in any
notice or report required pursuant to Section 5.03(i) hereof.
Section 5.04 Notice of Name Changes and Location Changes. The Co-Borrowers
shall (i) immediately notify the Agent if any of the Co-Borrowers, their
Subsidiaries or Affiliates is known by or conducting business under any names
other than the names described in Section 4.01 (xxx) hereof, (ii) notify the
Agent within fifteen (15) days if the Co-Borrowers, their Subsidiaries or
Affiliates are conducting any of their businesses or operations at or out of
offices or locations other than those described in Section 4.01(xxix) and
(xxxii) hereof, and (iii) notify the Agent at least fifteen (15) days prior to
the date upon which the Co-Borrowers intend to change the location of their
chief executive offices, principal places of business or location of Collateral
from those locations set forth Schedule 4.01(xxxi) attached hereto.
81
<PAGE>
ARTICLE VI
AFFIRMATIVE COVENANTS
The Co-Borrowers covenant and agree that, on and after the Closing
Date and so long as any Lender shall have any Commitment hereunder and until
payment in full of all of the obligations, unless the Requisite Lenders shall
otherwise give prior express written consent:
Section 6.01 Corporate Existence, etc. The Co-Borrowers, their Subsidiaries
and Affiliates shall at all times maintain their respective status as a
corporation and/or partnership, as applicable, duly organized, validly existing
and in good standing under the laws of their respective jurisdiction of
incorporation and/or formation and preserve and keep in full force and effect
their rights and franchises unless the failure to maintain such rights and
franchises would not have a Material Adverse Effect.
Section 6.02 Corporate Powers, etc. The Co-Borrowers, their Subsidiaries
and Affiliates shall qualify and remain qualified to conduct business in each
jurisdiction in which the nature of their respective businesses or the ownership
of their respective Properties or both requires it to be so qualified, unless
the failure to maintain so qualified would not have a Material Adverse Effect.
The Co-Borrowers, their Subsidiaries and Affiliates shall transact business in
their own names and trade names and shall invoice all accounts in their own
respective names and trade names.
Section 6.03 Compliance with Laws, etc. The Co-Borrowers, their
Subsidiaries and Affiliates shall comply with all Requirements of Law, and all
restrictive covenants affecting the Co-Borrowers, their Subsidiaries and
Affiliates or the business, Properties, assets or operations of the
Co-Borrowers, their Subsidiaries and Affiliates except to the extent that
non-compliance with this Section 6.03 would not result in a Material Adverse
Effect.
Section 6.04 Payment of Taxes and Claims. The Co-Borrowers, their
Subsidiaries and Affiliates shall pay or cause to be paid (i) all taxes,
assessments and other governmental charges imposed upon them or on any of their
respective properties or assets or in respect of any of their respective
franchises, business, income or property before any penalty or interest accrues
thereon and (ii) all Claims (including, without limitation, claims for labor,
services, materials and supplies) for sums material in the aggregate to the
Co-Borrowers, their Subsidiaries and Affiliates which have become due and
payable and which by Law have or may become a Lien (other than a Customary
Permitted Lien) upon the Co-Borrowers', their Subsidiaries' and/or Affiliates'
Property, prior to time when any penalty or fine shall be incurred with respect
thereto; provided, however, that no such taxes, assessments and governmental
charges referred to in clause (i) above or Claims referred to in clause (ii)
above need be paid if being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted and if adequate reserves shall have
been set aside therefor in accordance with Generally Accepted Accounting
Principles.
Section 6.05. Maintenance of Properties; Insurance. The Co-Borrowers, their
Subsidiaries and Affiliates shall maintain or cause to be maintained in good
repair, working order and condition, excepting ordinary wear and tear, all of
their respective Properties material to their operations and will make or cause
to be made all appropriate repairs, renewals and replacements thereof,
consistent with past practice. The Co-Borrowers, their Subsidiaries and
Affiliates shall maintain or cause to be maintained with financially sound and
reputable insurers reasonably acceptable to the Agent, the insurance policies
and programs listed on Schedule 6.05 attached hereto or substantially similar
programs or policies and amounts or other programs, policies and amounts
acceptable to the Agent.
82
<PAGE>
Not later than thirty (30) days later than the renewal, replacement or material
modification of any policy or program, the Co-Borrowers shall deliver or cause
to be delivered to the Agent a certificate of insurance setting forth for each
such policy or program: (i) the amount of such policy, (ii) the risks insured
against by such policy, (iii) the name of the insurer and each insured party
under such policy, and (iv) the policy number of such policy.
Section 6.06. Inspection of Property; Books and Records; Discussions.
Except for information and records which the Co-Borrowers may not under
applicable Law disseminate or disclose to the Agent and/or the Lenders, the
Co-Borrowers, their Subsidiaries and Affiliates shall permit any authorized
representative(s) designated by the Agent and/or the Lenders to visit, to
conduct a field audit or to otherwise inspect any of the Co-Borrowers', their
Subsidiaries' and/or Affiliates' respective Properties, including their
financial and accounting records, and to make copies and take extracts
therefrom, and to discuss the Co-Borrowers', their Subsidiaries' and/or
Affiliates' respective affairs, finances and accounts with the Agent's and the
Lenders' officers, employees, representatives or independent certified public
accountants, upon reasonable notice and during normal business hours. All
information furnished to the Agent and/or the Lenders shall be received and
maintained by the Agent and the Lenders in strict confidence and in accordance
with applicable Law, and they shall not disseminate said information to any
Person except where required by and in accordance with applicable Law or where
contemplated by the Loan Documents. The Agent and the Lenders agree that it
shall not take any action or omit to take any action which would cause or result
in the violation of Law (including without limitation, any export control law)
by the Co-Borrowers, their Subsidiaries and Affiliates. Each such visitation and
inspection by or on behalf of the Agent and/or the Lenders after the occurrence
and during the continuance of an Event of Default shall be at the Co-Borrowers'
own reasonable cost and expense. The Co-Borrowers shall, and shall cause their
Subsidiaries and Affiliates, to keep proper books and records and account in
accordance with sound and accepted accounting practices, consistently applied
(and all Requirements of Law).
Section 6.07. Litigation, Claims, etc. The Co-Borrowers shall provide the
Agent with (i) a litigation status report with respect to any suit at law or in
equity asserted against it of the type referred to in Schedule 4.01(vii)
attached hereto, in form and substance satisfactory to the Agent, promptly after
the close of each calendar quarter; (ii) notice of any suit at law or in equity
or claim brought or asserted against the Co-Borrowers, their Subsidiaries and/or
Affiliates promptly after learning thereof with respect to any suit or claim
involving money or property valued in excess of $500,000.00 or any such suits or
claims which in the aggregate involve money or property valued in excess of
$500,000.00; and (iii) prompt notice of any investigation or proceeding before
or by any Governmental Authority, the effect of which is reasonably likely to
have a Material Adverse Effect.
Section 6.08 Labor Disputes. The Co-Borrowers shall notify the Agent in
writing, promptly, but in any event within two (2) Business Days after learning
thereof, of any material labor dispute to which the Co-Borrowers, their
Subsidiaries and/or Affiliates may become a party, any strikes or walkouts
relating to any of their Properties and the expiration of any labor contract to
which they are a party or by which they are bound.
Section 6.09 Maintenance of Licenses, Permits, etc. The Co-Borrowers (i)
shall maintain in full force and effect, and shall cause each of their
Subsidiaries and Affiliates, to maintain in full force and effect, all licenses,
permits, governmental approvals, franchises, authorizations or other rights
necessary for the operation of the Co-Borrowers', their Subsidiaries' and/or
Affiliates' businesses, except where the failure to obtain any of the foregoing
would not have or is not
83
<PAGE>
reasonably likely to have a Material Adverse Effect and (ii) shall notify the
Agent in writing, promptly after learning thereof, of the suspension,
cancellation, revocation or discontinuance of or of any pending or threatened
action or proceeding seeking to suspend, cancel, revoke or discontinue any such
license, permit, governmental approval, franchise authorization or right, where
the result thereof could reasonably be expected to have a Material Adverse
Effect.
Section 6.10 Use of Proceeds. The Co-Borrowers shall not use the proceeds
of any Loans hereunder directly or indirectly for any unlawful purpose, in any
manner inconsistent with Section 2.01(iv) and Section 2.02(ii) hereof, or
inconsistent with any other provision of any Loan Document.
Section 6.11 Continuation of or Change in Business. The Co-Borrowers, their
Subsidiaries and Affiliates shall continue to engage in their collective
businesses substantially as conducted and operated during the present and
preceding Fiscal Year, and the Co-Borrowers, their Subsidiaries and Affiliates
shall not engage in any other material business other than the business of high
technology products and services for military and commercial customers in the
United States and abroad.
Section 6.12 Additional Corporate Guarantors and/or Partnership Guarantors.
The Co-Borrowers shall cause any Subsidiaries and/or Affiliates which are
acquired or formed after the Closing Date to execute the Agreement of Guaranty.
Section 6.13 Minimum Asset Coverage. The Co-Borrowers, their Subsidiaries
and Affiliates shall maintain at all times during the term of the Loan
Facilities the sum of the following assets as reflected on their consolidated
balance sheet, as of the date of determination, in excess of all Consolidated
Senior Debt as also reflected on their consolidated balance sheet, as of the
same date of determination: (i) Accounts Receivable, (ii) Inventory and (iii)
Cash and Cash Equivalents which are domiciled in either or both of the United
States or Canada.
Section 6.14 Minimum Required Interest Rate Hedge Protection. The
Co-Borrowers shall maintain for at least three (3) consecutive years during the
term of the Term Loan Facility a Swap Agreement in place covering at least fifty
percent (50%) of the aggregate outstanding principal balance of the Term Loan,
from time to time.
84
<PAGE>
ARTICLE VII
NEGATIVE COVENANTS
The Co-Borrowers covenant and agree that, on and after the Closing Date and
so long as any Lender shall have any obligation hereunder and until payment in
full of all of the Obligations, unless the Requisite Lenders shall otherwise
give prior written consent thereto:
Section 7.01. Consolidated Debt. The Co-Borrowers, their Subsidiaries and
Affiliates shall not directly or indirectly create, incur, assume or otherwise
become or remain directly or indirectly liable with respect to, any Consolidated
Debt, except for:
(i) the Obligations;
(ii) accounts payable (including royalties and similar payments) owing
to and letters of credit in favor of trade creditors arising from current
liabilities for goods and services purchased in the normal course of the
Co-Borrowers', their Subsidiaries' and/or Affiliates' respective businesses;
(iii) the permitted existing Consolidated Debt as described on
Schedule 7.01(iii) attached hereto, and extensions, renewals, replacements and
refinancing thereof, not exceeding the principal amount outstanding on the date
of such extension, renewal, replacement or refinancing, provided that the terms
are no less advantageous to the Co-Borrowers, their Subsidiaries and/or
Affiliates than the predecessor obligation; provided, however, in any event, the
Co-Borrowers shall be permitted to refinance any of the existing Consolidated
Senior Debt described on Schedule 7.01(iii) with proceeds of the Revolving
Credit Facility;
(iv) Consolidated Debt in respect of guarantees permitted by Section
7.11 hereof; and
(v) Consolidated Debt in connection with purchase money Liens
permitted by Section 7.02(ii)(e) hereof; and
(vi) Unsecured Consolidated Funded Debt having in the aggregate an
outstanding principal balance of not more than US$5,000,000.00, which
Consolidated Debt was acquired by the Co-Borrowers, their Subsidiaries and/or
Affiliates in connection with the acquisition (whether a stock acquisition or
asset acquisition) of any Subsidiary, Affiliate or any other Person.
Section 7.02. Sales of Assets; Liens.
(i) Sales. The Co-Borrowers, their Subsidiaries and Affiliates shall
not sell, assign, transfer, lease, convey, abandon or otherwise dispose of,
voluntarily or involuntarily, any Properties, whether now owned or hereafter
acquired, or any income or profits therefrom, except:
(a) sales of Inventory in the ordinary course of business; and/or
(b) sales of any Properties having net sales proceeds of up to
US$750,000.00 per year in the aggregate (and the Agent and the Lenders agree to
release their security interest in the Collateral which is sold for no
consideration).
85
<PAGE>
(ii) Liens. The Co-Borrowers, their Subsidiaries and Affiliates shall
not directly or indirectly create, incur, assume or permit to exist any Lien on
or with respect to any of their respective Properties except:
(a) Liens securing the Obligations;
(b) any interest or title of a lessor or secured by a lessor's
interest under any lease permitted by this Loan Agreement;
(c) Liens existing on the date of this Loan Agreement securing
any of the existing Consolidated Debt described on Schedule 7.01(iii) attached
hereto (but said Liens may not be increased in principal amount);
(d) Customary Permitted Liens;
(e) purchase money Liens securing Consolidated Debt (including
the interest of a lessee under a Capitalized Lease) in the aggregate principal
amount outstanding at any time not to exceed US$1,000,000.00; and
(f) Liens securing Consolidated Debt permitted under Section
7.01(vi) above.
Section 7.03. Loans, Advances and Investments. The Co-Borrowers, their
Subsidiaries and Affiliates shall not, at any time make or suffer to exist or
remain outstanding, any loan or advance to, or purchase, acquire or own
(beneficially or of record) any stock, bonds, notes or securities of, or any
partnership interest (whether general or limited) in, or any other interest in,
or make any capital contribution to or other investment in, any other Person, or
agree, become or remain liable (contingent or otherwise) to do any of the
foregoing, except:
(i) Loans and investments existing on the date hereof and listed in
Schedule 7.03 attached hereto and extensions, renewals and refinancing thereof
on terms no less favorable than those existing immediately before such
extension, renewal or refinancing);
(ii) Accounts receivable owing to the Co-Borrowers, their Subsidiaries
and Affiliates arising from sales of inventory under usual and customary terms
in the ordinary course of business and loans and advances extended by the
Co-Borrowers, their Subsidiaries and/or Affiliate to subcontractors or suppliers
(excluding subcontractors or suppliers who are Subsidiaries or Affiliates) under
usual and customary terms in the ordinary course of business;
(iii) Loans from a Co-Borrower, a Subsidiary or an Affiliate to
another Co-Borrower, Subsidiary or Affiliate;
(iv) Loans or advances not to exceed US$500,000.00 in the aggregate at
any time outstanding made to officers, partners or other employees of the
Co-Borrowers, their Subsidiaries and/or Affiliates;
(v) Investments in Cash or Cash Equivalents;
(vi) Investments in all existing and any new Subsidiaries or
Affiliates who are conducting business similar to or the same as the
Co-Borrowers, their Subsidiaries or Affiliates;
86
<PAGE>
provided, that, the Co-Borrowers shall deliver to the Agent at least ten (10)
Business Days prior to the actual closing date of the formation or acquisition
of said new Subsidiaries or Affiliates, a proforma compliance certificate in the
form set forth in Exhibit "F-1" attached hereto, taking into consideration the
effect of said acquisition or formation; and
(vii) Loans not to exceed US$2,000,000.00 in the aggregate at any time
outstanding to Persons whom the Co-Borrowers, their Subsidiaries and/or
Affiliates have identified to the Lender in writing are targets of a proposed or
contemplated acquisition by the Co-Borrowers, their Subsidiaries and/or
Affiliates.
Section 7.04. Restricted Junior Payments. The Co-Borrowers, their
Subsidiaries and Affiliates shall not declare or make any Restricted Junior
Payment, except (i) they may make any distribution (whether direct or indirect
and whether in the form of cash, property, securities or otherwise) to
shareholders, employees or other permitted distributees under DRS's 1996 Omnibus
Plan and other benefit or retirement plans maintained by the Co-Borrowers, their
Subsidiaries and Affiliates and (ii) they may distribute shares of their capital
stock to any Person or the owners of said Person in connection with an
acquisition of said Person.
Section 7.05. Restriction on Fundamental Changes. The Co-Borrowers, their
Subsidiaries and Affiliates shall not enter into any merger or consolidation, or
liquidate, windup or dissolve (or suffer any liquidation or dissolution), or
convey, lease, sell, transfer or otherwise dispose of, in one transaction or
series of transactions, all or any substantial part of their respective
businesses, properties or assets, whether now or hereafter acquired except (i)
as permitted by Section 7.02(i) hereof and (ii) mergers of any Subsidiary or
Affiliate into (a) any of the Co-Borrowers or (b) another Subsidiary or
Affiliate.
Section 7.06. ERISA. The Co-Borrowers, their Subsidiaries and Affiliates
shall not, and the Co-Borrowers shall not permit any of its ERISA Affiliates to,
do any of the following to the extent that such act or failure to act would
result in the aggregate, after taking into account any other such acts or
failure to act, in an obligation to pay a sum of money that is material to the
business of the Co-Borrowers, their Subsidiaries and Affiliates:
(i) Engage, or permit an ERISA Affiliate to engage, in any prohibited
transaction described in Section 406 of ERISA or Section 4975 of the Code for
which a class exemption is not available or a private exemption has not been
obtained from the DOL;
(ii) Permit to exist any accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived;
(iii) Fail, or permit an ERISA Affiliate to fail, to pay timely
required contributions or annual installments due with respect to any waived
funding deficiency to any Plan;
(iv) Terminate, or permit an ERISA Affiliate to terminate, any Benefit
Plan which would result in any liability of the Co-Borrowers, their
Subsidiaries, Affiliates or an ERISA Affiliate under Title IV of ERISA; or
(v) Fail, or permit any ERISA Affiliate to fail, to pay any required
installment under section (m) of Section 412 of the Code or any other payment
required under Section 412 of the Code on or before the due date for such
installment or other payment.
87
<PAGE>
Section 7.07 Amendment of Articles of Incorporation or By-Laws. The
Co-Borrowers, their Subsidiaries and Affiliates shall not materially amend,
modify or supplement their respective articles of incorporation, by-laws or
partnership agreements, except upon at least ten (10) days' prior express
written notice to the Agent.
Section 7.08 Margin Regulations. No portion of the proceeds of any credit
extended under this Loan Agreement shall be used in any manner which might cause
the extension of credit or the application of such proceeds to violate
Regulation G, Regulation U or Regulation X or any other regulation of the
Federal Reserve Board or to violate the Securities Exchange Act or the
Securities Act, in each case as in effect on the date or dates of such Borrowing
and such use of proceeds.
Section 7.09 Cancellation of Consolidated Debt; Prepayment. The
Co-Borrowers, their Subsidiaries and Affiliates shall not cancel any Claim or
Consolidated Debt (except for adequate consideration and in the ordinary course
of their respective businesses) and shall not prepay any long-term Consolidated
Subordinated Debt; provided, however, that the foregoing shall not prohibit the
prepayment of the Obligations or the refinance of any Consolidated Subordinated
Debt in amounts and on terms and conditions equal to or better than the existing
terms and conditions.
Section 7.10 Environmental Liabilities. The Co-Borrowers, their
Subsidiaries and Affiliates shall not become subject to any Liabilities and
Costs which the Agent deems has or is likely to have a Material Adverse Effect
arising out of or related to (i) the Release or threatened Release at any
location of any Environmental Concern Material into the Environment, or any
Remedial Action in response thereto, or (ii) any violation of any Environmental,
health or safety Requirement of Law; provided, however, that this covenant shall
not be violated so long as (a) the Co-Borrowers, their Subsidiaries and
Affiliates shall have notified the Agent of the assertion of such liability or
required expenditures promptly upon receiving written notice of such assertion,
(b) the Co-Borrowers shall have continued to furnish the Agent with such
information concerning such asserted liability or required expenditure as the
Agent shall have reasonably requested, or as otherwise provided herein, (c) the
Co-Borrowers, their Subsidiaries and Affiliates shall be diligently pursuing
indemnification for such liability or required expenditures from any Person
which has an obligation to provide such indemnification, and (d) the Agent is
satisfied that the imposition of such liability during the pendency of the
Co-Borrowers', their Subsidiaries' or Affiliates' pursuit of indemnification
will not materially impair the Co-Borrowers', its Subsidiaries' or its
Affiliates' ability to perform its financial obligations under this Loan
Agreement.
Section 7.11 Guaranties. The Co-Borrowers, their Subsidiaries and
Affiliates shall not assume, guaranty, endorse or otherwise be or become
directly or contingently responsible or liable, for obligations or liabilities
of any Person, except for:
(i) guaranties existing on the Closing Date as described on Schedule
7.11(i) attached hereto;
(ii) guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(iii) guaranties of direct obligations of any of the Co-Borrowers,
their Subsidiaries and/or Affiliates.
88
<PAGE>
Section 7.12 No Negative Pledges to Other Person. The Co-Borrowers, their
Subsidiaries and Affiliates shall not grant to another Person a covenant
commonly referred to as a "negative pledge" with respect to their respective
assets and Properties.
89
<PAGE>
ARTICLE VIII
FINANCIAL COVENANTS
The Co-Borrowers covenant and agree that, on and after the Closing
Date so long as any Lender has any Commitment hereunder and until payment in
full of all the Obligations unless the Requisite Lenders shall otherwise give
prior written consent thereto:
Section 8.01 Minimum Consolidated Net Worth. The Co-Borrowers, their
Subsidiaries and Affiliates shall have on the last day of each Fiscal Year
(which covenant shall be tested at the end of the periods covered by the annual
consolidated and consolidating financial statements which are to be provided to
the Agent pursuant to Section 5.02 of this Loan Agreement), a minimum
Consolidated Net Worth of at least the amount set forth below for each
corresponding Fiscal Year:
Fiscal Year Test Dates Minimum Consolidated Net Worth
---------------------- ------------------------------
March 31, 1998 the greater of (i) US$29,688,000.00 or
(ii) ninety percent (90%) of the actual
Consolidated Net Worth as of said
March 31, 1998
On the last day of each
subsequent Fiscal Year
thereafter *
* For each Fiscal Year after the Fiscal Year ending on March 31, 1998, the
Co-Borrowers, their Subsidiaries and Affiliates shall maintain a Minimum
Consolidated Net Worth of not less than the minimum actual Consolidated Net
Worth for the immediately preceding Fiscal Year plus (a) fifty percent (50%) of
the Consolidated Net Income (profits but not losses) of the Co-Borrowers, their
Subsidiaries and Affiliates for each said Fiscal Year then ended and (b) one
hundred percent (100%) of the net proceeds received by any one or more of the
Co-Borrowers, their Subsidiaries or Affiliates from the equity issuance of their
capital stock to Persons other than the Co-Borrowers, their Subsidiaries or
Affiliates.
Section 8.02 Maximum Consolidated Senior Debt Leverage Ratio. The
Co-Borrowers, their Subsidiaries and Affiliates shall have on the last day of
each Fiscal Quarter and each Fiscal Year (which covenant shall be tested at the
end of the periods covered by the quarterly and annual consolidated and
consolidating financial statements which are to be provided to the Agent
pursuant to Section 5.02 of this Loan Agreement) a Consolidated Senior Debt
Leverage Ratio equal to or less than the ratios set forth below for each
corresponding test date.
Fiscal Quarter Test Dates Maximum Permitted Ratio
------------------------- -----------------------
December 31, 1997 and 2.5 - to - 1.0
March 31, 1998
June 30, 1998, September 30, 1998, 2.0 - to - 1.0
December 31, 1998 and
March 31, 1999
June 30, 1999 and each 1.5 - to - 1.0
September 30, December 31,
March 31 and June 30 thereafter
up through and including
March 31, 2003
90
<PAGE>
Section 8.03 Maximum Consolidated Funded Debt Leverage Ratio. The
Co-Borrowers, their Subsidiaries and Affiliates shall have on the last day of
each Fiscal Quarter and each Fiscal Year (which covenant shall be tested at the
end of the periods covered by the quarterly and annual consolidated and
consolidating financial statements which are to be provided to the Agent
pursuant to Section 5.02 of this Loan Agreement) a Consolidated Funded Debt
Leverage Ratio equal to or less than the ratios set forth below for each
corresponding test date.
Fiscal Quarter Test Dates Maximum Permitted Ratio
------------------------- -----------------------
December 31, 1997 and 3.5 - to - 1.0
March 31, 1998
June 30, 1998, September 30, 1998, 3.0 - to - 1.0
December 31, 1998 and
March 31, 1999
June 30, 1999, September 30, 1999, 2.75 - to - 1.0
December 31, 1999 and
March 31, 2000
June 30, 2000 and each 1.75 - to - 1.0
September 30, December 31,
March 31 and June 30 thereafter
up through and including
March 31, 2003
91
<PAGE>
Section 8.04 Minimum Consolidated Fixed Charge Coverage Ratio. The
Co-Borrowers, their Subsidiaries and Affiliates shall have on the last day of
each Fiscal Quarter and each Fiscal Year (which covenant shall be tested at the
end of the periods covered by the quarterly and annual consolidated and
consolidating financial statements which are to be provided to the Agent
pursuant to Section 5.02 of this Loan Agreement) a Consolidated Fixed Charge
Coverage Ratio equal to or greater than the ratios set forth below for each
corresponding test date.
Fiscal Quarter Test Dates Maximum Permitted Ratio
------------------------- -----------------------
December 31, 1997, 1.25 - to - 1.0
March 31, 1998, June 30, 1998,*
September 30, 1998,
December 31, 1998 and
March 31, 1999
June 30, 1999, September 30, 1999, 1.5 - to - 1.0
December 31, 1999 and
March 31, 2000
June 30, 2000, September 30, 2000, 1.75 - to - 1.0
December 31, 2000 and
March 31, 2001
June 30, 2001 and each 2.0 - to - 1.0
September 30, December 31,
March 31 and June 30 thereafter
up through and including
March 31, 2003
* For purposes of this Section 8.04, the Consolidated Fixed Charge Coverage
Ratio for the test dates of December 31, 1997, March 31, 1998 and June 30, 1998
shall be calculated not on a rolling four (4) quarters basis but rather only for
the prior Fiscal Quarter ending on each such date. Commencing on September 30,
1998 and continuing at all times thereafter, the Consolidated Fixed Charge
Coverage Ratio shall be tested for the period of four (4) consecutive Fiscal
Quarters immediately preceding said date of determination taken together as one
(1) accounting period.
92
<PAGE>
ARTICLE IX
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
Section 9.01 Events of Default. The occurrence of any of the following
events with the passing of any applicable notice and cure periods shall
constitute an "Event of Default" under this Loan Agreement (hereinafter referred
to as an "Event of Default"):
(i) Any representation or warranty made by any one or more of the
Co-Borrowers, the Partnership Guarantor, the Corporate Guarantors or any other
Person in any of the Loan Documents furnished in connection with the Loan
Facilities, shall prove to have been false, incorrect or misleading in any
substantial and material respect on the date as of which made;
(ii) Any one or more of the Co-Borrowers shall have failed to make any
payment of any installment of interest on any of the Notes, the Letters of
Credit Reimbursement Agreement and/or under this Loan Agreement on their
respective due dates;
(iii) Any one or more of the Co-Borrowers shall have failed to make
any payment of principal on any of the Notes, the Letters of Credit
Reimbursement Agreement and/or under this Loan Agreement on their respective due
dates;
(iv) Any one or more of the Co-Borrowers, the Partnership Guarantor
and/or the Corporate Guarantors shall have failed to duly observe or perform any
covenant, condition or agreement with respect to the payment of monies on the
part of the Co-Borrowers, the Partnership Guarantor and/or the Corporate
Guarantors to be observed or performed pursuant to the terms of the Loan
Documents, other than the payment of principal and interest which shall be
governed by Section 9.01(ii) and (iii) above, and such default shall have
remained uncured for a period of thirty (30) days after written notice thereof
to the Co-Borrowers, the Partnership Guarantor and/or the Corporate Guarantors
by the Agent;
(v) Any one or more of the Co-Borrowers, the Partnership Guarantor
and/or the Corporate Guarantors shall have failed to duly observe or perform any
covenant, condition or agreement on the part of the Co-Borrowers, the
Partnership Guarantor and/or the Corporate Guarantors to be observed or
performed pursuant to the terms of the Loan Documents other than the payment of
monies which shall be governed by Section 9.01 (ii), (iii) and (iv) above, and
such default shall have remained uncured for a period of thirty (30) days after
written notice thereof to the Co-Borrowers, the Partnership Guarantor and/or the
Corporate Guarantors by the Agent;
(vi) Any one or more of the Co-Borrowers, the Partnership Guarantor
and/or the Corporate Guarantors shall have applied for or consented to the
appointment of a custodian, receiver, trustee or liquidator of all or a
substantial part of their respective assets; a custodian shall have been
appointed with or without consent of the Co-Borrowers, the Partnership Guarantor
and/or the Corporate Guarantors; the Co-Borrowers, the Partnership Guarantor
and/or the Corporate Guarantors shall generally not be paying their respective
Debts as they become due; the Co-Borrowers, the Partnership Guarantor and/or the
Corporate Guarantors shall have made a general assignment for the benefit of
their respective creditors; the Co-Borrowers, the Partnership Guarantor and/or
the Corporate Guarantors, shall have filed a voluntary petition (or assignment)
in bankruptcy, or a petition or an answer seeking reorganization or an
arrangement with their respective creditors, or shall have taken advantage of
any insolvency law, or shall have filed an answer admitting the material
allegations of a petition in bankruptcy, reorganization or insolvency
93
<PAGE>
proceeding; or a petition in bankruptcy shall have been filed against any one or
more of the Co-Borrowers, the Partnership Guarantor and/or the Corporate
Guarantors and shall not have been dismissed for a period of sixty (60)
consecutive days, or an Order for Relief or Receiving Order or Interim Order
shall have been entered against the Co-Borrowers, the Partnership Guarantor
and/or the Corporate Guarantors under either the Bankruptcy Code or the
Bankruptcy Act; or an order, judgment or decree shall have been entered without
the application, approval or consent of the Co-Borrowers, the Partnership
Guarantor and/or the Corporate Guarantors by any court of competent jurisdiction
appointing a receiver, trustee, custodian or liquidator of the Co-Borrowers, the
Partnership Guarantor and/or the Corporate Guarantors of a substantial part of
their respective assets and such order, judgment or decree shall have continued
unstayed and in effect for any period of sixty (60) consecutive days;
(vii) A writ of execution or attachment or any similar process shall
be issued or levied against all or any part of or interest in any of the
Properties of any one or more of the Co-Borrowers, the Partnership Guarantor
and/or the Corporate Guarantors or any judgment involving monetary damages shall
be entered against any one or more of the Co-Borrowers, the Partnership
Guarantor and/or the Corporate Guarantors which shall become a lien on any one
or more of the Co-Borrowers', the Partnership Guarantor's and/or the Corporate
Guarantors' Properties or any portion thereof or interest therein and such
execution, attachment or similar process is not released, bonded, satisfied,
vacated or stayed within thirty (30) days after its entry or levy, and said writ
of execution, attachment, levy or judgment shall involve monetary damages
aggregating more than US$500,000.00;
(viii) Seizure or foreclosure of any of the Properties of any one or
more of the Co-Borrowers, the Partnership Guarantor and/or the Corporate
Guarantors pursuant to process of law or by respect of legal self-help,
involving monetary damages aggregating more than US$500,000.00, unless said
seizure or foreclosure is stayed or bonded within thirty (30) days after the
occurrence of same;
(ix) The voluntary permanent closing of business or ceasing of
operations of any one or more of the Co-Borrowers, the Partnership Guarantor
and/or the Corporate Guarantors, the result of which would have a Material
Adverse Effect;
(x) Default by any one or more of the Co-Borrowers, the Partnership
Guarantor and/or the Corporate Guarantors in any of the terms or conditions of
any agreement (excluding the Loan Documents) covering the payment of borrowed
money from the Agent and/or any other creditor (which with respect to any other
creditor shall be in an amount involving not less than US$500,000.00), which
default has been declared by the Agent or said other creditor, and said
Consolidated Debt with respect to any other creditor has been accelerated;
(xi) The occurrence of a material adverse change in the business,
financial condition, financial performance, properties or operations of any one
or more of the Co-Borrowers, the Partnership Guarantor and the Corporate
Guarantors taken as a whole; and
(xii) The occurrence of a Reportable Event, the result of which would
have a Material Adverse Effect.
Section 9.02 Rights and Remedies.
94
<PAGE>
(i) Acceleration. Upon the occurrence and during the continuance of
any Event of Default described in the foregoing Section 9.01(vi) hereof, the
Commitments shall automatically and immediately terminate and the unpaid
principal amount of and any and all accrued interest on the Loans and all
Reimbursement Obligations shall automatically become immediately due and
payable, with all additional interest from time to time accrued thereon and
without presentment, demand, or protest or other requirements of any kind
(including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and of acceleration), all
of which are hereby expressly waived by the Co-Borrowers, their Subsidiaries and
Affiliates, and the obligation of each of the Lenders to make any additional
Revolving Credit Loans or issue any additional Letters of Credit hereunder shall
thereupon terminate. Upon the occurrence and during the continuance of any other
Event of Default described in Section 9.01 above, the Agent shall, at the
request, or may with the consent, of the Requisite Lenders, by written notice to
the Co-Borrowers, (a) declare that the Commitments are terminated, whereupon the
Commitments and the obligation of each Lender to make any Loan or the Issuing
Bank to issue any Letters of Credit hereunder shall immediately terminate and/or
(b) declare the unpaid principal amount of and any and all accrued and unpaid
interest on the Loans and all Reimbursement Obligations to be, and the same
shall thereupon be, immediately due and payable with all additional interest
from time to time accrued thereon and without presentment, demand, or protest or
other requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and of acceleration), all of which are hereby expressly waived by the
Co-Borrowers.
(ii) Deposit for Letters of Credit. Upon demand by the Agent or the
Issuing Bank after the occurrence and during the continuance of any Event of
Default, the Co-Borrowers shall deposit with the Agent for the benefit of the
Issuing Bank with respect to each Letter of Credit then outstanding for the
account of the Co-Borrowers, promptly upon the demand of the Agent, Cash or Cash
Equivalents in an amount equal to the greatest amount for which all such Letter
of Credit may be drawn. Such deposit shall be held by the Agent for the benefit
of the Issuing Bank as security for, and to provide for the payment of, the
Reimbursement Obligations.
(iii) Rights Under Loan Documents. Upon the occurrence and during the
continuance of any Event of Default, the Agent may and upon the direction of the
Required Lenders, shall take any lawful action against the Co-Borrowers, the
Corporate Guarantors and/or the Partnership Guarantor to collect the payments
then due and thereafter to become due under the Loan Documents, including,
without limitation, any rights under the Collateral Documents.
(iv) Set-off. Upon the occurrence and during the continuance of any
Event of Default, without prior notice or other action (any such notice being
expressly waived by the Co-Borrowers; however the Agent and each Lender shall
give the Co-Borrowers notice within three (3) days after the Agent and/or the
Lender has set off any amounts) the Agent and each Lender may set-off any money
owed by the Agent and said Lender in any capacity to the Co-Borrowers or any
Property of the Co-Borrowers in the possession of the Agent and said Lender
against any of the monetary obligations of the Co-Borrowers to the Agent and
said Lender under the Loan Documents, and the Agent and said Lender shall be
deemed to have exercised such right of set-off and to have made a charge against
any such money or property immediately, even though the actual book entries may
be made at some time subsequent thereto.
Section 9.03 Application of Proceeds. (i) All payments and proceeds
received under Section 9.02 of this Loan Agreement shall be applied in the
following order of priority:
95
<PAGE>
(a) First, to the payment of all reasonable fees, costs and
expenses (including reasonable attorney's fees and expenses) incurred by the
Agent, any Lender and/or their agents or representatives in connection with the
realization of such payments or proceeds;
(b) Next, to the payment in full of all unpaid principal, accrued
interest and other sums, if any, due and owing under the Term Loan Facility;
(c) Next, to the payment in full of all unpaid principal, accrued
interest and other sums, if any, due and owing under the Revolving Credit
Facility;
(d) Next, to any Swap Obligations;
(e) Next, the balance, if any, or such payments, proceeds, or
amounts to the Co-Borrowers, or, if otherwise determined by a court of competent
jurisdiction, to whomever may be entitled thereto.
(ii) If the amount of the proceeds received from the sale or other
disposition of the Collateral shall be insufficient to satisfy in full the
amounts referred to in clauses (a) and (d) above, then the Co-Borrowers shall
remain and be jointly and severally liable for any such deficiency.
Section 9.04 No Notices. In order to entitle the Agent to exercise any
remedy available to it under Section 9.02 of this Loan Agreement, it shall not
be necessary for the Agent to give any notice, other than such notice as may be
required expressly in this Loan Agreement or by applicable Law.
Section 9.05 Agreement to Pay Attorneys' Fees and Expenses. Upon the
occurrence and during the continuance of an Event of Default, as a result of
which the Agent and/or any Lender shall require and employ attorneys or incur
other expenses for the collection of payments due or to become due or the
enforcement or performance or observance of any obligation or agreement on the
part of the Co-Borrowers contained herein, the Co-Borrowers shall, on demand,
pay to the Agent and/or the applicable Lender, the reasonable fees of such
attorneys and such other expenses so incurred by them.
Section 9.06 No Additional Waiver Implied by One Waiver. In the event that
any agreement contained in this Loan Agreement should be breached by any party
and thereafter waived by the other parties, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.
Section 9.07 Failure to Exercise Rights. Nothing herein contained shall
impose upon the Agent and the Lenders any obligation to enforce any terms,
covenants or conditions contained in this Loan Agreement and the other Loan
Documents. Failure of the Agent and/or the Lenders, in any one or more
instances, to insist upon strict performance by the Co-Borrowers of any terms,
covenants or conditions of this Loan Agreement and the other Loan Documents,
shall not be considered or taken as a waiver or relinquishment by the Agent and
the Lenders of its right to insist upon and to enforce in the future, by
injunction or other appropriate legal or equitable remedy, strict compliance by
the Co-Borrowers with all the terms, covenants and conditions of this Loan
Agreement and the other Loan Documents. The consent of the Agent and/or the
Lenders to any act or omission by the Co-Borrowers shall not be construed to be
a consent to any other or subsequent act or omission or to waive the requirement
for the Agent's or the Lender's consent to be obtained in any future or other
instance.
96
<PAGE>
Section 9.08 Waiver Of Jury Trial. THE CO-BORROWERS, THE AGENT AND THE
LENDERS HEREBY WAIVE ANY AND ALL RIGHTS THAT THEY MAY NOW OR HEREAFTER HAVE
UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR ANY STATE, TO A TRIAL BY JURY
OF ANY AND ALL ISSUES ARISING EITHER DIRECTLY OR INDIRECTLY IN ANY ACTION OR
PROCEEDING BETWEEN THE CO-BORROWERS, THE AGENT AND THE LENDERS OR THEIR
SUCCESSORS AND ASSIGNS, OUT OF OR IN ANY WAY CONNECTED WITH THIS LOAN AGREEMENT
AND THE OTHER LOAN DOCUMENTS. IT IS INTENDED THAT SAID WAIVER SHALL APPLY TO ANY
AND ALL DEFENSES, RIGHTS, AND/OR COUNTERCLAIMS IN ANY ACTION OR PROCEEDING. THE
CO-BORROWERS, THE AGENT AND THE LENDERS RECOGNIZE THAT ANY DISPUTE ARISING IN
CONNECTION WITH THE REVOLVING CREDIT FACILITY IS LIKELY TO BE COMPLEX AND
CONSEQUENTLY THEY WISH TO STREAMLINE AND MINIMIZE THE COST OF THE DISPUTE
RESOLUTION PROCESS BY AGREEING TO WAIVE THEIR RIGHTS TO A JURY TRIAL.
Section 9.09 Remedies Cumulative. No remedy herein conferred upon or
reserved to the Agent and/or the Lenders is intended to be exclusive of any
other remedy or remedies; but each and every such remedy shall be cumulative,
and shall be in addition to every other remedy given hereunder, or now or
hereafter existing at law or in equity or by statute. No express or implied
waiver by the Agent and/or the Lender of any Event of Default hereunder shall in
any way be, or be construed to be, a waiver of any future or subsequent Event of
Default. No delay or omission to exercise any right or power accruing upon any
Event of Default continuing as aforesaid, shall impair any such right or power
or shall be construed to be a waiver of any such Event of Default, or
acquiescence therein; and every such right and power may be exercised from time
to time and as often as may be deemed expedient.
97
<PAGE>
ARTICLE X
THE AGENT
Section 10.01 Appointment. (i) Each Lender hereby irrevocably designates
and appoints Mellon Bank N.A. as the Agent of such Lender under this Loan
Agreement and the Loan Documents. Each Lender hereby irrevocably authorizes the
Agent to take such action on its behalf under the provisions of this Loan
Agreement and the other Loan Documents and to exercise such powers as are set
forth herein or therein together with such other powers as are incidental
thereto. Each Lender hereby irrevocably authorizes the Agent to execute and
deliver each of the Loan Documents and to accept delivery of such of the other
Loan Documents as may not require execution by the Agent. Each Lender agrees
that the rights and remedies granted to the Agent under the Loan Documents shall
be exercised exclusively by the Agent, and that no Lender shall have any right
individually to exercise any such right or remedy, except to the extent
expressly provided herein or therein. The Agent agrees to act as such on the
express conditions contained in this Article X.
(ii) The provisions of this Article X are solely for the benefit of
the Agent and the Lenders, and the Co-Borrowers shall not have any rights to
rely on or enforce any of the provisions hereof. In performing its functions and
duties under this Loan Agreement, the Agent shall act solely as agent of the
Lenders and does not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust with or for the
Co-Borrowers.
Section 10.02 General Nature of the Agent's Duties. Notwithstanding
anything to the contrary elsewhere in this Loan Agreement or in any other Loan
Document:
(i) The Agent shall have no duties or responsibilities except those
expressly set forth in this Loan Agreement and the other Loan Documents, and no
implied duties or responsibilities on the part of the Agent shall be read into
this Loan Agreement or any Loan Document or shall otherwise exist.
(ii) The duties and responsibilities of the Agent under this Loan
Agreement and the other Loan Documents shall be mechanical and administrative in
nature, and the Agent shall not have a fiduciary relationship in respect of any
Lender.
(iii) The Agent is and shall be solely the agent of the Lenders. The
Agent does not assume, and shall not at any time be deemed to have, any
relationship of agency or trust with or for, or any other duty or responsibility
to, the Co-Borrowers, the Subsidiaries or their Affiliates or any other Person
(except only for its relationship as agent for, and its express duties and
responsibilities to the Lenders as provided in this Loan Agreement and the other
Loan Documents).
(iv) The Agent shall be under no obligation to take any action
hereunder or under any other Loan Document if the Agent believes in good faith
that taking such action may conflict with any Law or any provision of this Loan
Agreement or any other Loan Document, or may require the Agent to qualify to do
business in any jurisdiction where it is not then so qualified.
Section 10.3 Exercise of Powers. The Agent shall take any action of the
type specified in this Loan Agreement or any other Loan Document as being within
the Agent's rights, powers
98
<PAGE>
or discretion in accordance with directions from the Requisite Lenders (or, to
the extent this Loan Agreement or such other Loan Document expressly requires
the direction or consent of some other Person or set of Persons, then instead in
accordance with the directions of such other Person or set of Persons). In the
absence of such directions, the Agent shall have the authority (but under no
circumstances shall be obligated), in its sole discretion, to take any such
action, except to the extent this Loan Agreement or such Loan Document expressly
requires the direction or consent of the Requisite Lenders (or some other Person
or set of Persons), in which case the Agent shall not take such action absent
such direction or consent. Any action or inaction pursuant to such direction,
discretion or consent shall be binding on all the Lenders. The Agent shall not
have any liability to any Person as a result of (i) the Agent acting or
refraining from acting in accordance with the directions of the Requisite
Lenders (or other applicable Person or set of Persons), (ii) the Agent
refraining from acting in the absence of instructions to act from the Requisite
Lenders (or other applicable Person or set of Persons), whether or not the Agent
has discretionary power to take such action, or (iii) the Agent taking
discretionary action it is authorized to take under this Section (subject, in
the case of this clause (iii), to the provisions of Section 10.04(i) hereof).
Section 10.04 General Exculpatory Provisions. Notwithstanding anything to
the contrary elsewhere in this Loan Agreement or any other Loan Document:
(i) The Agent shall not be liable for any action taken or omitted to
be taken by it under or in connection with this Loan Agreement or any other Loan
Documents, unless caused by its own gross negligence or willful misconduct.
(ii) The Agent shall not be responsible for (a) the execution,
delivery, effectiveness, enforceability, genuineness, validity or adequacy of
this Loan Agreement or any other Loan Document, (b) any recital, representation,
warranty, document, certificate, report or statement in, provided for in, or
received under or in connection with, this Loan Agreement or any other Loan
Document, (c) any failure of the Co-Borrowers, their Subsidiaries or Affiliates
or any Lender to perform any of their respective obligations under this Loan
Agreement or any other Loan Document, (d) the existence, validity,
enforceability, perfection, recordation, priority, adequacy or value, now or
hereafter, of any Lien or other direct or indirect security afforded or
purported to be afforded by any of the Loan Documents or otherwise from time to
time, or (e) caring for, protecting, insuring, or paying any taxes, charges or
assessments with respect to any Collateral.
(iii) The Agent shall not be under any obligation to ascertain,
inquire or give any notice relating to (a) the performance or observance of any
of the terms or conditions of this Loan Agreement or any other Loan Document on
the part of the Co-Borrowers, their Subsidiaries or Affiliates (b) the business,
operations, condition (financial or otherwise) or prospects of the Co-Borrowers,
their Subsidiaries or Affiliates or (c) except to the extent set forth in
Section 10.05(vi) hereof, the existence of any Event of Default or any Potential
Event of Default.
(iv) The Agent shall not be under any obligation, either initially or
on a continuing basis, to provide any Lender with any notices, reports or
information of any nature, whether in its possession presently or hereafter,
except for such notices, reports and other information expressly required by
this Loan Agreement or any other Loan Document to be furnished by the Agent to
such Lender, of which the Agent has actual receipt or possession.
99
<PAGE>
Section 10.05 Administration by the Agent.
(i) The Agent may rely upon any notice or other communication of any
nature (written or oral, including but not limited to telephone conversations,
whether or not such notice or other communication is made in a manner permitted
or required by this Loan Agreement or any Loan Document) purportedly made by or
on behalf of the proper party or parties, and the Agent shall not have any duty
to verify the identity or authority of any Person giving such notice or other
communication.
(ii) The Agent may consult with legal counsel (including, without
limitation, in-house counsel for the Agent or in-house or other counsel for the
Co-Borrowers or any Lender), independent certified public accountants and any
other experts selected by it from time to time, and the Agent shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts.
(iii) The Agent may conclusively rely upon the truth of the statements
and the correctness of the opinions expressed in any certificates or opinions
furnished to the Agent in accordance with the requirements of this Loan
Agreement or any other Loan Document. Whenever the Agent shall deem it necessary
or desirable that a matter be proved or established with respect to the
Co-Borrowers or any Lender, such matter may be established by a certificate of
the Co-Borrowers or any Lender, as the case may be, and the Agent may
conclusively rely upon such certificate (unless other evidence with respect to
such matter is specifically prescribed in this Loan Agreement or another Loan
Document).
(iv) The Agent may fail or refuse to take any action unless it shall
be indemnified to its satisfaction from time to time against any and all
amounts, liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature which
may be imposed on, incurred by or asserted against the Agent by reason of taking
or continuing to take any such action.
(v) The Agent may perform any of its duties under this Loan Agreement
or any other Loan Document by or through agents or attorneys-in-fact. The Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
(vi) The Agent shall not be deemed to have any knowledge or notice of
the occurrence of any Event of Default or Potential Event of Default unless the
Agent has received notice from a Lender or the Co-Borrowers referring to this
Loan Agreement, describing such Event of Default or Potential Event of Default,
and stating that such notice is a "notice of default". If the Agent receives
such a notice, the Agent shall give prompt notice thereof to each Lender.
Section 10.06 Each Lender Not Relying on Agent or Other Lenders. Each
Lender acknowledges as follows: (i) neither the Agent nor any other Lender has
made any representation or warranties to it, and no act taken or hereafter by
the Agent or any other Lender shall be deemed to constitute any representation
or warranty by the Agent or such other Lender to it; (ii) it has, independently
and without reliance upon the Agent or any other Lender, and based upon such
documents and information as it has deemed appropriate, made its own credit and
legal analysis and decision to enter into this Loan Agreement and the other Loan
Documents; and (iii)
100
<PAGE>
it will, independently and without reliance upon the Agent or any other Lender,
and based upon such documents and information as it shall deem appropriate at
the time, make its own decisions to take or not take action under or in
connection with this Loan Agreement and the other Loan Documents.
Section 10.07 Indemnification. Each Lender agrees to reimburse and
indemnify the Agent and its directors, officers, employees, attorneys and agents
(to the extent not reimbursed by the Co-Borrowers and without limitation of the
obligations of the Co-Borrowers to do so), for such Lender's Pro Rata Share
(based on the Commitments), from and against any and all amounts, losses,
liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs or disbursements of any kind or nature (including,
without limitation, the fees and disbursements of counsel for the Agent for such
other Person in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not the Agent or such other
Person shall be designated a party thereto) that may at any time be imposed on,
incurred by or asserted against the Agent or such other Person as a result of,
or arising out of, or in any way related to or by reason of, this Loan
Agreement, any other Loan Document, any transaction from time to time
contemplated hereby or thereby, or any transaction financed in whole or in part
or directly or indirectly with the proceeds of any Loan; provided, however, no
Lender shall be liable for any portion of such amounts, losses, liabilities,
claims, damages, expenses, obligations, penalties, actions, judgments, suits,
costs or disbursements resulting solely from the gross negligence or willful
misconduct of the Agent or such other Person. Payment under this Section 10.07
shall be due and payable on demand, and to the extent that any Lender fails to
pay any such amount on demand, such amount shall bear interest for each day from
the date of demand until paid (before and after judgment) at a rate per annum
(calculated on the basis of a year of 360 days and actual days elapsed) which
for each day shall be equal to the Federal Funds Effective Rate.
Section 10.08 Agent in its Individual Capacity. With respect to its
Commitments and the Obligations owing to it, the Agent shall have the same
rights and powers under this Loan Agreement and each other Loan Document as any
other Lender and may exercise the same as though it were not the Agent, and the
terms "Lenders," "holders of Notes" and like terms shall include the Agent in
its individual capacity as such. The Agent and its Affiliates may, without
liability to account, make loans to, accept deposits from, acquire debt or
equity interests in, act as trustee under indentures of, and engage in any other
business with the Co-Borrowers as though the Agent were not the Agent hereunder.
Section 10.09 Holders of Notes. The Agent may deem and treat the Lender
which is payee of a Note as the owner and holder of such Note for all purposes
hereof unless and until an Assignment and Acceptance with respect to the
assignment or transfer thereof shall have been filed with the Agent in
accordance with Section 11.02 hereof. Any authority direction or consent of any
person who at the time of giving such authority, direction or consent is shown
in the Loan Account as being a Lender shall be conclusive and binding on each
present and subsequent holder, transferee or assignee of any Note or Notes
payable to such Lender or of any Note or Notes issued in exchange therefor.
Section 10.10 Successor Agent. The Agent may resign at any time by ten (10)
days prior express written notice thereof to the Lenders and the Co-Borrowers.
The Agent may be removed by the Requisite Lenders at any time, for cause, by
giving ten (10) days prior express written notice thereof to the Agent, the
other Lenders and the Co-Borrowers. Upon any such resignation or removal, the
Requisite Lenders shall have the right to appoint a successor Agent. If no
101
<PAGE>
successor Agent shall have been so appointed and consented to, and shall have
accepted such appointment, within thirty (30) days after such notice of
resignation or removal, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent. Each successor Agent shall be a commercial bank or
trust company organized under the laws of the United States of America, or any
State thereof, or Canada, or any Province thereof, and having a combined capital
and surplus of at least US$1,000,000,000.00 and is otherwise in compliance with
all then applicable laws or regulations regarding regulatory capital
requirements after giving effect to any "phase-in" provisions thereof. Upon the
acceptance by a successor Agent of its appointment as Agent hereunder, such
successor Agent shall thereupon succeed to and become vested with all the
properties, rights, powers, privileges and duties of the former Agent, without
further act, deed or conveyance. Upon the effective date of resignation or
removal of a retiring Agent, such Agent shall be discharged from its duties
under this Loan Agreement and the other Loan Documents, but the provisions of
this Loan Agreement shall inure to its benefit as to any actions taken or
omitted by it while it was Agent under this Loan Agreement. If and so long as no
successor Agent shall have been appointed, then any notice or other
communication required or permitted to be given by the Agent shall be
sufficiently given if given by the Requisite Lenders, all notices or other
communications required or permitted to be given to the Agent shall be given to
each Lender, and all payments to be made to the Agent shall be made directly to
the Co-Borrowers or the Lender for whose account such payment is made.
Section 10.11 Additional Agents. If the Agent shall from time to time deem
it necessary or advisable, for its own protection in the performance of its
duties hereunder or in the interest of the Lenders, then the Agent and the
Co-Borrowers shall execute and deliver a supplemental agreement and all other
instruments and agreements necessary or advisable, in the opinion of the Agent,
to constitute another commercial bank or trust company, or one or more other
Persons approved by the Agent, to act as co-Agent or agent with respect to any
part of the Collateral with such powers of the Agent as may be provided in such
supplemental agreement, and to vest in such bank, trust company or Person as
such co-Agent or separate agent, as the case may be, any properties, rights,
powers, privileges and duties of the Agent under this Loan Agreement or any
other Loan Document.
Section 10.12 Calculations. The Agent shall not be liable for any
calculation, apportionment or distribution of payments made by it in good faith.
If such calculation, apportionment or distribution is subsequently determined to
have been made in error, the sole recourse of any Lender to whom payment was due
but not made shall be to recover from the other Lenders any payment in excess of
the amount to which they are determined to be entitled or, if the amount due was
not paid by the Co-Borrowers, to recover such amount from the Co-Borrowers.
102
<PAGE>
ARTICLE XI
MISCELLANEOUS
Section 11.01 Concerning the Collateral and the Collateral Documents. Each
Lender authorizes and directs the Agent for the benefit of the Lenders, to enter
into the Collateral Documents. Each Lender agrees that any action taken by the
Agent or the Requisite Lenders in accordance with the provisions of this Loan
Agreement or the Collateral Documents, and the exercise by the Agent or the
Requisite Lenders of the powers set forth herein or therein, together with such
other powers as are reasonably incidental thereto, shall be authorized and
binding upon all of the Lenders.
Section 11.02 Assignments and Participations.
(i) Each Lender (including, without limitation, each Canadian Lender)
may assign to any bank or financial institution, all or a portion of its rights
and obligations under this Loan Agreement (including, without limitation, all or
a portion of its Revolving Credit Commitments, its Term Loan Commitments, its
Pro Rata Share of the Term Loan and its Pro Rata Share of the Revolving Credit
Loans owing to it) subject to the following conditions: (a) each such
assignment, shall be of a constant, and not a varying, percentage of the
assigning Lender's rights and obligations under this Loan Agreement and the
assignments shall cover the same percentage of such Lender's (including its
Affiliate Canadian Lender's) Revolving Credit Commitment, Term Loan Commitment,
Letter of Credit Obligations, Term Loan and Revolving Credit Loans, (b) the
aggregate amount of the Commitments of the assigning Lender being assigned
pursuant to each such assignment (determined as of the date of the Assignment
and Acceptance Agreement with respect to such assignment) shall not cause or
otherwise result in said assigning Lender's remaining unassigned aggregate
amount of Commitments, Letter of Credit Obligations, Term Loan and Revolving
Credit Loans to be less than US$7,500,000.00 (except the Agent, in its capacity
as a Lender, shall always retain at least US$10,000,000.00), (c) each such
assignment shall be to an Eligible Assignee, (d) the Eligible Assignee shall
execute and deliver to the Agent, for its approval, acceptance and recording in
a register maintained by the Agent, an Assignment and Acceptance Agreement,
together with processing and recordation fee of Five Thousand and 00/100
(US$5,000.00) Dollars unless waived by the Agent; (e) the principal amount of an
assigned Revolving Credit Commitments, Letter of Credit Obligations and
Revolving Credit Loans shall be not less than US$7,500,000.00 or any integral
multiple of US$1,000,000.00 in excess thereof; (f) the Agent and, so long as no
Event of Default exists or is continuing, the Co-Borrowers have provided their
respective prior express written consents to such assignment, with consent shall
not be unreasonably withheld and which consent shall be indicated by their
execution of said Assignment and Acceptance Agreement (it being understood and
agreed that the Lenders may assign their rights and interests under the Loan
Documents to any Person or Persons following the occurrence of an Event of
Default, without the consent of any of the Co-Borrowers, the Corporate
Guarantors or the Partnership Guarantor); and (g) a Lender may not assign, or
permit its Affiliate Canadian Lender to assign, its Pro Rata Share of the
Canadian Revolving Credit Sublimit (its "Canadian Revolving Credit Exposure") or
the Term Loan or Term Loan Commitments to an Eligible Assignee that is a
non-resident of Canada for purposes of the Income Tax Act of Canada (with
respect to which payments to such non-resident of principal, interest, fees and
other amounts by the Canadian Borrower would be subject to Canadian withholding
tax) at a rate higher than that then applicable to the assignor, provided
further, that the assignment by a Lender of its Affiliate Canadian Lender's
Canadian
103
<PAGE>
Revolving Credit Exposure, shall constitute the assignment of a like amount of
such Lender's Revolving Credit Loans and Revolving Credit Commitment. Upon such
execution, delivery, approval, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance Agreement, (1) the
Eligible Assignee thereunder shall be a party to this Loan Agreement and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance Agreement, have the rights and obligations of
a Lender hereunder and (2) the Lender assignor thereunder shall to the extent
that rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance Agreement, relinquish its rights and be released from
its obligations under this Loan Agreement.
(ii) By executing and delivering an Assignment and Acceptance
Agreement, the assignor Lender thereunder and the Eligible Assignee thereunder
confirm to and agree with each other and the other parties hereto as follows:
(a) other than as provided in such Assignment and Acceptance Agreement, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Loan Agreement or any other Loan Document or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Loan Agreement or any other Loan Document or any other instrument
or document furnished pursuant hereto; (b) such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Co-Borrowers, their Subsidiaries or Affiliates or the
performance or observance by the Co-Borrowers, their Subsidiaries or Affiliates
of any of their obligations under any Loan Document or any other instrument or
document furnished pursuant hereto; (c) such Eligible Assignee confirms that it
has received all Loan Documents and other documents and information as such
Eligible Assignee has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance Agreement; (d) such
Eligible Assignee will, independently and without reliance upon the Agent, such
assigning Lender or any other Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Loan Agreement; (e) such
Eligible Assignee confirms that it is an Eligible Assignee; (f) such Eligible
Assignee appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to the Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto; and (g) such
Eligible Assignee agrees that it will perform in accordance with its terms all
of the obligations which by the terms of this Loan Agreement are required to be
performed by it as a Lender.
(iii) The Agent shall maintain at its address referred to on the
signature pages hereof a copy of each Assignment and Acceptance Agreement
delivered to and accepted by it and shall record in the Loan Account the names
and addresses of each Lender and the Commitment of, and principal amount of the
Loans owing to, such Lender from time to time. The Co-Borrowers, their
Subsidiaries and Affiliates, the Agent and the Lenders may treat each Person
whose name is recorded in the Loan Account as a Lender hereunder for all
purposes of this Loan Agreement.
(iv) Upon its receipt of an Assignment and Acceptance Agreement
executed by an assigning Lender and an Eligible Assignee representing that it is
an Eligible Assignee, the Agent shall, if such Assignment and Acceptance
Agreement has been properly completed and is in substantially the form of
Exhibit "A" attached hereto, (a) accept such Assignment and Acceptance
Agreement, (b) record the information contained therein in the Loan Account and
(c) give prompt notice thereof to the Co-Borrowers.
104
<PAGE>
(v) Each Lender may sell to any bank or other financial institution
one or more participations, in any amounts, in and to a portion of its rights
and obligations under this Loan Agreement (including, without limitation, all or
a portion of its Revolving Credit Commitment, Term Loan Commitment, Loans and
Letter of Credit Obligations owing to it) subject to the following conditions:
(a) such Lender's obligations under this Loan Agreement (including, without
limitation, its Revolving Credit Commitment, Term Loan Commitment, Loans and
Letter of Credit Obligations to the Co-Borrowers hereunder) shall remain
unchanged; (b) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations; (c) the Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Loan Agreement,
including voting rights, and with regard to any and all payments to be made
under this Loan Agreement; (d) Mellon Bank, N.A. shall at all times retain a
beneficial interest in the Loan Facilities of not less than US$7,500,000.00; and
(e) the holder of any such participation shall not (1) be entitled to voting
rights or the right to approve of any action under this Loan Agreement or
otherwise, except that such selling Lender may agree that it will not vote,
without the consent of Persons holding a majority of such Lender's rights and
interests under this Loan Agreement, solely with respect to the amendment or
modification of those provisions of this Loan Agreement for which, pursuant to
Section 11.06 hereof, the consent of all the Lenders would be required and (2)
be permitted to contact the Co-Borrowers without the prior express written
consent of the Selling Lender and the Agent (which consent may be rescinded by
the Co-Borrowers at any time).
The Co-Borrowers authorize the Agent and each Lender to disclose to
any prospective participant any and all financial and other information in such
Person's possession concerning the Co-Borrowers which have been or may have been
delivered to such Person by or on behalf of the Co-Borrowers in connection with
this Loan Agreement or any other Loan Document or such Person's credit
evaluation of the Co-Borrowers, their Subsidiaries and Affiliates provided,
however, said prospective participant shall enter into a confidentiality
agreement with the selling Person in form and substance satisfactory to the
Agent.
(vi) Any Lender may at any time assign and pledge to any Federal
Reserve Bank (or to an Affiliate of such Lender for the purpose of permitting
such Affiliate to assign and pledge to any Federal Reserve Bank), as collateral
security pursuant to Regulation A and any Operating Circular issued by such
Federal Reserve Bank all or any portion of its Revolving Credit Commitment, Term
Loan Commitment, Letter of Credit Obligations and Loans. No such assignment
shall release the assigning Lender from its obligations hereunder.
(vii) In connection with the execution and delivery of each Assignment
and Acceptance Agreement as provided for in Section 11.02(iv) above, the
assigning Lender shall deliver to the Agent the superseded Note and the Agent
shall deliver to the Co-Borrowers for execution by the Co-Borrowers, new Notes
in order to reflect the Pro Rata Share of Commitments of the assigning Lender
and the applicable Eligible Assignee after giving effect to such Assignment and
Acceptance Agreement. The Co-Borrowers covenant and agree to execute said new
Notes and to return them to the Agent so that the Agent may deliver said new
Notes to the appropriate Lenders; provided, however, the Agent shall not deliver
said new Notes unless and until the assigning Lender shall have delivered the
superseded Note to the Agent. The assigning Lender hereby appoints the Agent as
its attorney-in-fact (coupled with an interest) for the sole purpose of
canceling the superseded Note and the assigning Lender hereby covenants and
agrees that the Agent shall not be liable for any action taken or omitted to be
taken by the
105
<PAGE>
Agent in connection therewith, unless caused by the Agent's own gross negligence
or willful misconduct. Upon the Co-Borrowers' request, the Agent shall stamp the
superseded Note "CANCELED" and return said superseded Note to the Co-Borrowers
and shall deliver the new Notes to the appropriate Lenders.
Section 11.03 Expenses
(i) Generally. The Co-Borrowers agree upon demand to pay or reimburse
the Agent for, all of the Agent's reasonable external legal costs and expenses
(but not internal legal costs and expenses) and all internal and external audit,
appraisal, valuation and investigation expenses and for all other reasonable
out-of-pocket costs and expenses of every type and nature (including, without
limitation, the reasonable fees, expenses and disbursements of Reed Smith Shaw &
McClay LLP and any other attorneys retained by the Agent, auditors, accountants,
appraisers, printers, insurance and environmental advisers, and other
consultants and agents) incurred by the Agent in connection with (a) the
protection of the Agent's Liens in the Collateral (including, without
limitation, any fees and expenses for title and lien searches, local counsel in
various jurisdictions, filing and recording fees and taxes, duplication costs
and corporate search fees), (b) administration of this Loan Agreement, the Loan
Documents, the Loans and the Collateral, including consultation with attorneys
in connection therewith and in connection with the amendment, waiver or consents
required or requested hereunder and (c) the protection, collection or
enforcement of any of the Obligations or the Collateral.
(ii) After Default. The Co-Borrowers further agree to pay, or
reimburse the Agent and the Lenders for all reasonable out-of-pocket costs and
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, and costs of settlement incurred by the Agent after the
occurrence of an Event of Default (a) in enforcing any Obligation or in
foreclosing against the Collateral or exercising or enforcing any other right or
remedy available by reason of such Event of Default, (b) in connection with any
refinancing or restructuring of the credit arrangements provided under this Loan
Agreement in the nature of a "work-out" or in any insolvency or bankruptcy
proceeding, (c) in commencing, defending or intervening in any litigation or in
filing a petition, complaint, answer, motion or other pleadings in any legal
proceeding relating to the Co-Borrowers and related to or arising out of the
transactions contemplated thereby or by any of the Loan Documents, (d) in taking
any other action in or with respect to any suit or proceeding (whether in
bankruptcy or otherwise), (e) in protecting, preserving, collecting, leasing,
selling, taking possession of, or liquidating any of the Collateral, or (f)
attempting to enforce or enforcing any security interest in any of the
Collateral or any other rights under the Collateral Documents.
Section 11.04 Indemnity. The Co-Borrowers further agree to defend, protect,
indemnify, and hold harmless the Indemnified Parties from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including, without limitation, the reasonable fees and disbursements
of counsel for the Indemnified Parties in connection with any investigative,
administrative or judicial proceeding, whether or not the Indemnified Parties
shall be designated a party thereto), imposed on, incurred by or asserted
against the Indemnified Parties (whether direct, indirect or consequential and
whether based on any Federal or state Laws or other statutory regulations,
including, without limitation, securities and commercial laws and regulations,
under common law or at equitable cause, or on contract or otherwise, including
any liability and costs under Federal,
106
<PAGE>
state or local environmental, health or safety laws, regulations, or common law
principles, arising from or in connection with the past, present or future
environmental condition of the Property, the presence of asbestos-containing
materials at the Property, or the Release or threatened Release of any
Environmental Concern Material into the Environment from the Property) in any
manner relating to the conduct of the business of the Co-Borrowers, their
Subsidiaries and/or Affiliates or the use or intended use of the proceeds of the
Loans hereunder (collectively, the "Indemnified Matters"); provided, however,
that the Co-Borrowers shall not have any obligation to an Indemnified Party
hereunder with respect to (a) matters for which such Indemnified Party has been
compensated pursuant to or for which an exemption is provided in Section 2.06
and Section 2.07 hereof or any other provision of this Loan Agreement and (b)
Indemnified Matters caused by or resulting from the willful misconduct or gross
negligence of that Indemnified Party, as determined by a court of competent
jurisdiction. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, the Co-Borrowers 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 the
Indemnified Parties.
Section 11.05 Ratable Sharing. Subject to Article II hereof, the Lenders
agree among themselves that (i) with respect to all amounts received by them
which are applicable to the payment of the Obligations (excluding the fees
described in Section 2.04) hereof, equitable adjustment will be made so that, in
effect, all such amounts will be shared among them ratably in proportion to the
respective principal amounts of the Loans then outstanding to each Lender (or if
no Loans are outstanding, ratably according to the respective amount of each
Lender's Revolving Credit Commitment to all Revolving Credit Commitments and
each Lender's Term Loan Commitment to all Term Loan Commitments), whether
received by voluntary payment, by the exercise of the right of set-off or
banker's lien, by counterclaim or cross action or by the enforcement of any or
all of the Obligations (excluding the fees described in Section 2.04 hereof) or
the Collateral, (b) if any of them shall by voluntary payment or by the exercise
of any right of counterclaim, set-off, banker's lien or otherwise, receive
payment of a proportion of the aggregate amount of the Obligations held by it
which is greater than its ratable share, determined in proportion to the
respective principal amounts of the Loans then outstanding to each Lender (or if
no Loans are outstanding, ratably according to the respective amount of each
Lender's Revolving Credit Commitment to all Revolving Credit Commitments and
each Lender's Term Loan Commitment to all Term Loan Commitments), of the
payments on account of Obligations (excluding the fees described in Section 2.04
hereof), the one receiving such excess payment shall purchase, without recourse
or warranty, an undivided interest and participation (which it shall be deemed
to have done simultaneously upon the receipt of such payment) in such
obligations shall be applied ratably in proportion to respective principal
amounts of the Loans then outstanding to each Lender (or if no Loans are
outstanding, ratably according to the respective amount of each Lender's
Revolving Credit Commitment to all Revolving Credit Commitments and each
Lender's Term Loan Commitment to all Term Loan Commitments); provided, however,
that if all or part of such excess payment received by the purchasing party is
thereafter recovered from it, those purchases shall be rescinded and the
purchase prices paid for such participations shall be returned to that party to
the extent necessary to adjust for such recovery, but without interest except to
the extent the purchasing party is required to pay interest in connection with
such recovery. The Co-Borrowers agree that any Lender so purchasing a
participation from another Lender pursuant to this Section 11.05 may, to the
fullest extent permitted by law, exercise all its rights of payment with respect
to such participation as fully as if such Lender were the direct creditor of the
Co-Borrowers in the amount of such participation. For purposes of this Section
11.05, the Swap Agreement shall not be included as part of the
107
<PAGE>
defined term "Obligations" in determining, as set forth above, all amounts that
shall be shared ratably amongst the Lenders.
Section 11.06 Amendments and Waivers. No amendment or modification of any
provision of this Loan Agreement shall be effective without the written
agreement of the Requisite Lenders and the Co-Borrowers, and no termination or
waiver of any provision of this Loan Agreement, or consent to any departure by
the Co-Borrowers therefrom, shall in any event be effective without the written
concurrence of the Requisite Lenders, which the Requisite Lenders shall have the
right to grant or withhold at their sole discretion; except that any amendment,
modification or waiver of any of the following provisions shall be effective
only if evidenced by a writing signed by or on behalf of all Lenders:
(i) Increase the Revolving Credit Commitment of any Lender over the
amount thereof then in effect, or extend the Revolving Credit Termination Date
or the maturity;
(ii) Increase the Term Loan Commitment of any Lender over the amount
thereof then in effect, or extend the Term Loan Maturity Date;
(iii) Reduce the principal amount of or extend the time for any
scheduled payment of principal of any of the Loans or Reimbursement Obligations,
or reduce the rate of interest or extend the time for payment of interest borne
by any of the Loans or Reimbursement Obligations or extend the time for payment
or reduce the payment of any fees, or reduce or postpone the payment of any
other expenses, indemnities or amounts payable under any of the Loan Documents;
(iv) Change the definition of "Requisite Lenders" or amend this
Section 11.06;
(v) Release any Collateral or any guarantees of the Loan Facilities;
and
(vi) Change the definition of "Pro Rata Share".
No amendment, modification, termination, or waiver of any provision of Article X
hereof or any other provision referring to the Agent shall be effective without
the prior express written consent of the Agent. The Agent may, but shall have no
obligation to, with the concurrence of any Lender, execute amendments,
modifications, waivers or consents on behalf of such Lender. Any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on the Co-Borrowers in
any case shall entitle the Co-Borrowers to any other or further notice or demand
in similar or other circumstances. Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 11.06 shall be
binding on each assignee, transferee or recipient of a Lender's Revolving Credit
Commitment or Loans at the time outstanding, each future assignee, transferee or
recipient of a Lender's Revolving Credit Commitment, Term Loan Commitment,
Letter of Credit Obligations or Loans, and, if signed by the Co-Borrowers, on
the Co-Borrowers.
Section 11.07 Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitation of, another covenant shall
not avoid the occurrence of an Event of Default or potential Event of Default if
such action is taken or condition exists.
108
<PAGE>
Section 11.08 Notices. Unless otherwise specifically provided therein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served or sent by confirmed telecopy
transmission, nationally recognized overnight courier service or United States
mail and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of a confirmed telecopy transmission or four (4)
Business Days after deposit in the United States mail (registered or certified,
with postage prepaid and properly addressed). Notices to the Agent pursuant to
Article II hereof shall not be effective until received by the Agent. For the
purposes hereof, the addresses of the parties hereto (until notice of a. change
thereof is delivered as provided in this Section 11.08) shall be as set forth
below each party's name on the signature pages hereof, or, as to each party, at
such other address as may be designated by such party in a written notice to all
of the other parties.
Section 11.09 Survival of Warranties and Agreement. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Loan Agreement and the other Loan Documents and the making and
repayment of the Loans hereunder.
Section 11.10 Marshalling; Recourse to Security; Payments Set Aside. The
Agent and the Lenders shall not be under any obligation to marshall any assets
in favor of the Co-Borrowers or any other party or against or in payment of any
or all of the Obligations. Recourse to the Collateral shall not be required at
any time. To the extent that the Co-Borrowers make a payment or payments to the
Agent or a Lender, or the Agent or a Lender enforces their security interests or
exercise their rights of set-off, and such payment or payments or the proceeds
of such enforcement or set-off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or federal law, common law or equitable cause, then to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or set-off and not occurred.
Section 11.11 Severability. In case any provision in or obligation under
this Loan Agreement or the other Loan Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
Section 11.12 Governing Law. This Loan Agreement shall be governed by, and
shall be construed and enforced in accordance with, the laws of the Commonwealth
of Pennsylvania.
Section 11.13 Successors and Assigns. This Loan Agreement and the other
Loan Documents shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
the successors and permitted assigns of the Lenders. The terms and provisions of
this Loan Agreement shall inure to the benefit of any assignee or transferee of
the Loans and Commitments of any Lender, and in the event of such transfer or
assignment, the rights and privileges herein conferred upon Lenders shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof. The Co-Borrowers' duties and
Obligations hereunder, may not be assigned without the prior express written
consent of the Requisite Lenders.
Section 11.14 Consent to Jurisdiction and Service of Process. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST THE CO-BORROWERS, THEIR
109
<PAGE>
SUBSIDIARIES AND/OR AFFILIATES WITH RESPECT TO THIS LOAN AGREEMENT OR ANY OTHER
LOAN DOCUMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE CITY OF PHILADELPHIA, PENNSYLVANIA, AND BY EXECUTION AND
DELIVERY OF THIS LOAN AGREEMENT, THE CO-BORROWERS ACCEPT, FOR THEMSELVES AND IN
CONNECTION WITH THEIR PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREE TO BE
BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS LOAN
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS FROM WHICH NO APPEAL HAS BEEN TAKEN
OR IS AVAILABLE. THE CO-BORROWERS IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS
OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
ITS NOTICE ADDRESS SPECIFIED ON THE SIGNATURE PAGES HEREOF, SUCH SERVICE TO
BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. THE CO-BORROWERS, THE
SUBSIDIARIES AND AFFILIATES, THE AGENT AND THE LENDERS IRREVOCABLY WAIVE ANY
OBJECTION (INCLUDING WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH THEY MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS LOAN
AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE.
NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF ANY LENDER TO BRING PROCEEDINGS
AGAINST THE CO-BORROWERS IN THE COURTS OF ANY OTHER JURISDICTION.
Section 11.15 Counterparts; Effectiveness; Inconsistencies. This Loan
Agreement and any amendments, waivers, consents, or supplements may be executed
in counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Loan Agreement and each of the other Loan Documents shall
be construed to the extent reasonable to be consistent one with the other, but
to the extent that the terms and conditions of this Loan Agreement are actually
inconsistent with the terms and conditions of any other Loan Documents, this
Loan Agreement shall govern.
Section 11.16 Construction. The parties acknowledge that each party and its
counsel have reviewed and revised this Loan Agreement and that the normal rule
of construction to the effect that any ambiguities are to be resolved against
the drafting party shall not be employed in the interpretation of this Loan
Agreement or any amendments or exhibits hereto.
Section 11.17 Entire Agreement. This Loan Agreement, taken together with
all of the other Loan Documents and all certificates and other documents
delivered by the Co-Borrowers or any other Person to the Agent or the Lenders,
embody the entire agreement and supersede all prior agreements, written and
oral, relating to the subject matter hereof.
Section 11.18 Process Agent. The Canadian Borrower hereby irrevocably
appoints DRS Technologies, Inc., with an address on the date hereof at 5 Sylvan
Way, Parsippany, New Jersey 07054 (the "Process Agent"), as process agent in its
name, place and stead to receive and
110
<PAGE>
forward service of any and all writs, summonses and other legal process in any
suit, action or proceeding brought in the State of Pennsylvania, agrees that
such service in any such suit, action or proceeding may be made upon the Process
Agent and agrees to take all such action as may be necessary to continue said
appointment in full force and effect or to appoint another agent so that such
Canadian Borrower will at all times have an agent for service of process for the
above purposes.
Section 11.19 Judgment Currency. The payment obligation of the Canadian
Borrower shall not be discharged by an amount paid in another currency (other
than U.S. Dollars) or in another place, whether pursuant to a judgment or
otherwise, to the extent the amount so paid on prompt conversion to U.S. Dollars
and transferred to the Agent, under normal banking procedures does not yield the
amount of U.S. Dollars in the Agent's Office due hereunder. In the event that
any payment by or on behalf of the Canadian Borrower, whether pursuant to a
judgment or otherwise, upon conversion and transfer does not result in payment
of such amount of U.S. Dollars to the Agent at the Agent's Office, the Agent
shall have a separate cause of action against the Co-Borrowers for the
additional amount necessary to yield the amount due and owing to the Agent and
the Lenders hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be executed and delivered by their proper and duly authorized corporate
officers, and each of the Co-Borrowers has caused its corporate seal to be
hereunto affixed and attested pursuant to the resolution of its Board of
Directors, all as of the day and year first hereinabove written.
[SEAL] DRS TECHNOLOGIES, INC.,
ATTEST: a Delaware corporation, as a Co-Borrower
______________________ By:_______________________________
Nancy R. Pitek Mark S. Newman
Assistant Secretary President
Notice Address:
5 Sylvan Way
Parsippany, New Jersey 07054
Attn.: Nancy R. Pitek
Vice President, Finance and Treasurer
Telecopy No.: (973) 898-4730
111
<PAGE>
With a copy to:
Hannoch Weisman, A Professional Corporation
4 Becker Farm Road
Roseland, New Jersey 07068
Attn.: Jonathan M. Gross, Esq.
Telecopy No.: (973) 994-7198
[SEAL] DRS TECHNOLOGIES CANADA COMPANY/ ATTEST:
ATTEST: COMPAGNIE DRS TECHNOLOGIES CANADA
a Nova Scotia company, as a Co-Borrower
_____________________ By:_______________________
Nancy R. Pitek Mark S. Newman
Assistant Secretary President
Notice Address:
5 Sylvan Way
Parsippany, New Jersey 07054
Attn.: Nancy R. Pitek
Vice President, Finance and Treasurer
Telecopy No.: (973) 898-4730
With a copy to:
Hannoch Weisman, A Professional Corporation
4 Becker Farm Road
Roseland, New Jersey 07068
Attn.: Jonathan M. Gross, Esq.
Telecopy No.: (973) 994-7198
[SEAL] DRS TECHNOLOGIES CANADA, INC.,
ATTEST: a Delaware corporation, as a Co-Borrower
______________________ By:_________________________________
Nancy R. Pitek Mark S. Newman
Assistant Secretary President
Notice Address:
5 Sylvan Way
Parsippany, New Jersey 07054
Attn.: Nancy R. Pitek
Vice President, Finance and Treasurer
Telecopy No.: (973) 898-4730
112
<PAGE>
With a copy to:
Hannoch Weisman, A Professional Corporation
4 Becker Farm Road
Roseland, New Jersey 07068
Attn.: Jonathan M. Gross, Esq.
Telecopy No.: (973) 994-7198
MELLON BANK, N.A.,
as a Lender
By:___________________________
G. Richard Bertolet
Senior Vice President
Notice Address:
Mellon Financial Services
Raritan Plaza One
Raritan Center
Edison, New Jersey 08837
Attn.: Peter A. Dontas
Vice President
Telecopy No.: (732) 225-4820
With a copy to:
Reed Smith Shaw & McClay LLP
136 Main Street
Princeton Forrestal Village
Princeton, New Jersey 08540
Attn.: Daniel F. Peck, Jr., Esq.
Telecopy No.: (609) 951-0824
(1) Commitment Percentage of
Revolving Credit Loan Facility: 100%
(2) Pro Rata Share of
Revolving Credit Commitments:
US$40,000,000.00
(3) Commitment Percentage of
Term Loan Facility:_-0-_%
(4) Pro Rata Share of
Term Loan Commitments:
US$_____-0-_________
113
<PAGE>
MELLON BANK CANADA,
as a Lender
By:____________________________
Notice Address:
Mellon Bank Canada
Royal Trust Tower
P.O. Box 320, Suite 3200
Toronto Dominion Centre, 32nd Floor
Toronto, Ontario M5K 1K2
Attn.: Vice President and Manager,
Corporate Banking
Telecopy No.:(416) 860-2409
With a copy to:
Reed Smith Shaw & McClay LLP
136 Main Street
Princeton Forrestal Village
Princeton, New Jersey 08540
Attn.: Daniel F. Peck, Jr., Esq.
Telecopy No.: (609) 951-0824
and
Mellon Financial Services
Raritan Plaza One
Raritan Center
Edison, New Jersey 08837
Attn.: Peter A. Dontas
Vice President
Telecopy No.: (732) 225-4820
and
Fraser & Beatty, Barristers & Solicitors
P.O. Box 100
1 First Canadian Place
100 King Street, West
Toronto, Ontario M5X 1B2
Canada
Attn.: Peter E. Murphy
Telecopy No.: (416) 863-4592
(1) Commitment Percentage of
Revolving Credit Loan Facility: 50 %*
(2) Pro Rata Share of
Revolving Credit Commitments:
US$20,000,000.00*
114
<PAGE>
(3) Commitment Percentage of
Term Loan Facility:_100_%
(4) Pro Rata Share of
Term Loan Commitments:
US$20,000,000.00____
* This percentage and dollar amount
represents a sublimit of the Revolving
Credit Loan Facility.
115
<PAGE>
MELLON BANK, N.A.,
as the Agent
By:__________________________
G. Richard Bertolet
Senior Vice President
Notice Address:
Mellon Financial Services
Raritan Plaza One
Raritan Center
Edison, New Jersey 08837
Attn.: Peter A. Dontas
Vice President
Telecopy No.: (732) 225-4820
With a copy to:
Reed Smith Shaw & McClay LLP
136 Main Street
Princeton Forrestal Village
Princeton, New Jersey 08540
Attn.: Daniel F. Peck, Jr., Esq.
Telecopy No.: (609) 951-0824
116
<PAGE>
EXHIBIT "A"
ATTACHED TO AND MADE A PART OF THAT
CERTAIN REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT
BY AND AMONG DRS TECHNOLOGIES, INC., ET AL.,
AS THE CO-BORROWERS,
AND MELLON BANK, N.A., AS THE AGENT,
DATED OCTOBER 29, 1997
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
THIS ASSIGNMENT AND ACCEPTANCE AGREEMENT, dated as of ___________________
(hereinafter referred to as the "Assignment Agreement"), executed by and between
_____________, a [national banking association organized and existing under the
laws of the United States of America] [state banking institution organized and
existing under the laws of the State of __________ ] (hereinafter referred to as
the "Assignor") and _______________, a [national banking association organized
and existing under the laws of the United States of America] [state banking
institution organized and existing under the laws of the State of __________ ]
(hereinafter referred to as the "Assignee").
PRELIMINARY STATEMENTS
WHEREAS, the Assignor in its capacity as a Lender is a party to that
certain Revolving Credit Loan and Term Loan Agreement dated October 29, 1997,
executed by and among DRS Technologies, Inc., DRS Technologies Canada Company /
Compagnie DRS Technologies Canada and DRS Technologies Canada, Inc. (hereinafter
collectively referred to as the "Co-Borrowers"), Mellon Bank, N.A., as the Agent
for all of the Lenders (hereinafter referred to as the "Agent"), and the Lenders
identified therein (hereinafter each individually referred to as a "Lender" and
hereinafter said Revolving Credit Loan and Term Loan Agreement as it may be from
time to time amended, supplemented or otherwise modified in accordance with its
terms shall be referred to as the "Loan Agreement" and all capitalized terms
used herein but not expressly defined herein shall have the meanings assigned to
such terms in the Loan Agreement); and
WHEREAS, in accordance with Section 11.02 of the Loan Agreement, the
Assignor wishes to sell, assign and transfer to the Assignee, and the Assignee
wishes to purchase, accept and acquire from the Assignor, a portion, specified
herein, of the Assignor's outstanding Credit Loans, Term Loan, Letter of Credit
Obligations, Revolving Credit Commitments and term Loan Commitments, subject to
and in accordance with all of the terms and conditions of this Assignment
Agreement; and
<PAGE>
NOW THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
SECTION 1. ASSIGNMENT; PAYMENTS; THE NOTES.
(a) Subject to the terms and conditions hereof, the Assignor hereby
irrevocably sells, assigns and transfers to the Assignee, without recourse, and
the Assignee hereby purchases, takes and assumes from the Assignor all of the
Assignor's rights, title and interests in and to, together with all of the
Assignor's duties, liabilities and obligations in connection with: (i) that
percentage (hereinafter referred to as the "Percentage") identified on Exhibit
"A" attached hereto, of the Assignor's Revolving Credit Commitment and Term Loan
Commitment, under the Loan Agreement and other Loan Documents; and (ii) an
identical Percentage of all Revolving Credit Loans, Term Loan and Letter of
Credit Obligations owned by the Assignor outstanding and other amounts under the
Loan Agreement and the Notes owned by the Assignor as of the date hereof; and
(iii) all guarantees thereof and collateral security therefore and all rights,
duties, instruments and documents pertaining thereto and arising under or in
connection with the Loan Agreement or the Loan Documents (hereinafter the
foregoing Sections (i), (ii) and (iii) shall be collectively referred to as the
"Assigned Obligations"). From and after the date hereof: (1) principal due on or
after the date hereof that would otherwise be payable to the Assignor pursuant
to the Loan Agreement, its Revolving Credit Note and its Term Loan Note shall be
payable to the Assignee to the extent of the Assignee's Percentage (as now
reflected in the Assignor's and the Assignee's respective new Revolving Credit
Notes [AND TERM NOTES]; (2) the Assignor and Assignee shall make all appropriate
adjustments in payments for periods prior to the date hereof or with respect to
the making of this Assignment Agreement, directly between themselves, it being
understood that interest and fees with respect to the assigned obligations and
accruing prior to the date hereof shall be the property of the Assignor, and
interest and fees with respect to the assigned obligations and accruing on or
after the date hereof shall be the property of the Assignee, and (3) with
respect to the Assigned Obligations, the Assignee shall assume and perform all
of the Assignor's duties and liabilities under or in connection with the Loan
Agreement, the Revolving Credit Note, the Term Loan Note and the Loan Documents.
(b) In consideration of the transfer of the Assigned Obligations, the
Assignee shall pay to the Assignor, concurrently with the execution of this
Assignment Agreement, the purchase price (hereinafter referred to as the
"Purchase Price") listed on Exhibit "A" attached hereto representing the
Assignee's Percentage of the outstanding principal amount of the Assignor's
Revolving Credit Loans, Term Loan and Letter of Credit Obligations. The Assignor
and this Assignee shall make appropriate adjustments in payments of interest or
fees for periods prior to the date hereof, it being understood that regardless
of how or where received, interest and fees with respect to the Assigned
Obligations accruing prior to the date hereof shall be the property of the
Assignor, and interest and fees with respect to the Assigned Obligations
accruing on or after the date hereof shall be the property of the Assignee.
SECTION 2. MUTUAL REPRESENTATIONS AND WARRANTIES; MUTUAL COVENANT.
(a) Each of the Assignor and the Assignee represents and warrants to the
other as follows: (i) it is duly organized and validly existing and has full
power, authority and legal right to execute and deliver this Assignment
Agreement and to perform the provisions of this Assignment Agreement on its part
to be performed; (ii) the execution, delivery and performance of this Assignment
Agreement have been duly authorized by all necessary corporate action; (iii)
<PAGE>
this Assignment Agreement is its legal, valid and binding obligation,
enforceable against it in accordance with the terms hereof, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws
affecting the creditor's rights generally, and subject, as to enforceability, to
general principles of equity or at law; and (iv) no governmental or regulatory
consents, or other official authorizations and approvals are required for the
due execution, delivery and performance of this Assignment Agreement, and no
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for such execution, delivery or performance.
(b) Each of the Assignor and the Assignee agree that at any time and from
time to time upon the request of the other party, it will execute and deliver
such further documents and do such further acts and things as such other party
may reasonably request in order to effect the purposes of this Assignment
Agreement.
SECTION 3. DISCLAIMER.
Except as set forth below, the Assignor makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representation made in or in connection with the Loan Agreement,
the Loan Documents or any document or any instrument related thereto or the
execution, legality, validity, enforceability, genuineness or sufficiency of any
such document and assumes no responsibility for the financial condition of the
Co-Borrowers or any other party obligated with respect to the Loan Agreement or
the Loan Documents or the Notes or the sufficiency or adequacy of any security
therefor. The Assignor represents and warrants to the Assignee that the Assignor
has good and valid title to the Assigned Obligations, free and clear of any
liens, security interests and encumbrances.
SECTION 4. ACKNOWLEDGMENTS AND AGREEMENTS OF THE ASSIGNEE.
(a) The Assignee acknowledges receipt of a conformed copy of the Loan
Agreement and all the other Loan Documents and any other documents and
instruments incorporated into any of the foregoing. The Assignee agrees to be
bound by all of the terms and provisions of the Loan Agreement and the other
Loan Documents (including without limitation the provisions of the Section 11.02
of the Loan Agreement with respect to subsequent sale, assignment or
participation of all or a portion of the Loans) as if an original Lender
signatory or party thereto.
(b) The Assignee expressly accepts this Assignment Agreement without
recourse to the Assignor. The Assignee hereby confirms that it has made an
independent credit investigation and appraisal of the Co-Borrowers, the
Corporate Guarantors, the Partnership Guarantor, the Revolving Credit Loan
Facility, the Term Loan Facility and the sufficiency of any Collateral for the
Assigned Obligations on the basis of such information as the Assignee has deemed
appropriate, has entered into this Assignment Agreement on the basis of such
independent investigation and appraisal and has made and shall continue to make
its own credit decisions with respect to the Assigned Obligations and the Loan
Agreement and actions taken or not taken thereunder. The Assignee expressly
acknowledges that it is not relying upon any representation or warranty of the
Assignor, express or implied relating to the validity, genuineness,
enforceability, collectibility or other status of the Assigned Obligations or
the credit worthiness of the Co-Borrowers or any other Person obligated with
respect to the Assigned Obligations under or in connection with the Loan
Agreement, the Assignor's Term Note and the Assignor's Revolving Credit Note and
the Loan Documents or the value of any security therefor. The
<PAGE>
Assignee further acknowledges that the Assignor has made no assurances that the
Assignor will not transfer all or any part of its remaining outstanding
Revolving Credit Loans, Term Loan, Letter of Credit Obligations, Term Loan
Commitment or Revolving Credit Commitment under the Loan Agreement, except that
the Assignor shall be required to comply with the provisions of Section 11.02 of
the Loan Agreement.
SECTION 5. ASSIGNMENT.
Neither the Assignee nor the Assignor may assign any of its rights or
obligations under this Assignment Agreement without the prior express written
consent of the other party, such consent not to be unreasonably withheld or
delayed.
SECTION 6. NOTICES; AUTHORIZED COMMUNICATIONS.
(a) All notices and other communications provided for in this Assignment
Agreement shall be in writing, which may be by confirmed telecopier transmission
and addressed as set forth below or to such other address or telecopier number
as may from time to time be designated by the intended recipient thereof by
notice to the other party. All such notices and other communications shall be
hand-delivered, or mailed by airmail, postage prepaid, or telecopied, addressed
as aforesaid, and shall be effective if hand-delivered, upon delivery, or if
mailed, when received, or if telecopied, when transmitted.
(b) Each party hereto shall be authorized and entitled to rely upon any
communication reasonably believed by such party to be signed, sent or made by a
proper and duly authorized person.
SECTION 7. AMENDMENT.
This Assignment Agreement may not be amended, supplemented or modified
except in writing, signed by both the Assignee and the Assignor.
SECTION 8. WAIVER.
No failure or delay on the part of either party in exercising any right
hereunder shall operate as a waiver of, or impair such right. No single or
partial exercise of any such right shall preclude any other further exercise
thereof or the exercise of any other rights. No waiver of any such right shall
be effective unless given in writing. No waiver of any such right shall be
deemed a waiver of any other right hereunder.
SECTION 9. ENTIRE AGREEMENT.
This Assignment Agreement contains the entire agreement between the parties
relating to the subject matter herein and supersedes all previous oral
statements and other writings with respect thereto. The section headings used
herein are intended for convenience only and shall not be deemed to control or
effect any interpretation of any of the provisions hereof.
SECTION 10. GOVERNING LAW.
This Assignment Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania.
<PAGE>
SECTION 11 COUNTERPARTS.
This Assignment Agreement and any amendments, waivers, consents, or
supplements may be executed in counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by an authorized signatory and delivered as of the day and year first
written above.
ASSIGNOR:
____________________________
By:_________________________
ASSIGNEE:
____________________________
____________________________
By:_________________________
CONSENTED TO AND AGREED UPON THIS ____
DAY OF __________, 19___
MELLON BANK, N.A.,
as the Agent
By: __________________________
Name:
Title:
CONSENTED TO AND AGREED UPON THIS ____
DAY OF __________, 19___
<PAGE>
DRS TECHNOLOGIES, INC.
as a Co-Borrower
By: __________________________
Name:
Title:
DRS TECHNOLOGIES CANADA COMPANY /
COMPAGNIE DRS TECHNOLOGIES CANADA
as a Co-Borrower
By: __________________________
Name:
Title:
DRS TECHNOLOGIES CANADA, INC.
as a Co-Borrower
By: __________________________
Name:
Title:
<PAGE>
EXHIBIT "A"
ASSIGNED OBLIGATIONS - _________________FORM
DATE:_______________
1. ASSIGNOR'S REVOLVING CREDIT COMMITMENT (PRIOR TO _________________
ASSIGNMENT):
US$_________; ( % Pro Rata Share)*
ASSIGNEE'S REVOLVING CREDIT COMMITMENT (AFTER _______ ASSIGNMENT):
US$_________; ( % Pro Rata Share)*
ASSIGNOR'S REVOLVING CREDIT COMMITMENT (AFTER _______ ASSIGNMENT):
US$_________; ( % Pro Rata Share)*
2. AGGREGATE REVOLVING CREDIT LOANS OWNED BY THE ASSIGNOR AND OUTSTANDING
(PRIOR TO ASSIGNMENT):
US$_________ Revolving Credit Loans
AGGREGATE REVOLVING CREDIT LOANS OWNED BY THE ASSIGNEE AND OUTSTANDING
(AFTER ASSIGNMENT):
US$_________ Revolving Credit Loans
AGGREGATE REVOLVING CREDIT LOANS OWNED BY THE ASSIGNOR AND OUTSTANDING
(AFTER ASSIGNMENT):
US$_________ Revolving Credit Loans
3. AGGREGATE LETTERS OF CREDIT OWNED BY THE ASSIGNOR AND OUTSTANDING
(PRIOR TO ASSIGNMENT):
US$_________Letters of Credit
AGGREGATE LETTERS OF CREDIT OWNED BY THE ASSIGNEE AND OUTSTANDING
(AFTER ASSIGNMENT):
US$_________Letters of Credit
AGGREGATE LETTERS OF CREDIT OWNED BY THE ASSIGNOR AND OUTSTANDING
(AFTER ASSIGNMENT):
US$_________Letters of Credit
4. AGGREGATE TERM LOAN COMMITMENT OWNED BY THE ASSIGNOR
(PRIOR TO ASSIGNMENT):
US$_________; Term Loan ( % Pro Rata Share)
AGGREGATE TERM LOAN COMMITMENT OWNED BY THE ASSIGNEE
(AFTER ASSIGNMENT):
US$_________; Term Loan ( % Pro Rata Share)
<PAGE>
AGGREGATE TERM LOAN COMMITMENT OWNED BY THE ASSIGNOR
(AFTER ASSIGNMENT):
US$_________; Term Loan ( % Pro Rata Share)
* sublimit under U.S. Revolver, if Canadian Assignor and Assignee.
<PAGE>
EXHIBIT "B"
ATTACHED TO AND MADE A PART OF THAT
CERTAIN REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT
BY AND AMONG DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS,
AND MELLON BANK, N.A., AS THE AGENT,
DATED OCTOBER 29, 1997
FORM OF LETTER OF CREDIT REIMBURSEMENT AGREEMENT
See Attached
<PAGE>
EXHIBIT "C"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT
BY AND AMONG DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS,
AND MELLON BANK, N.A., AS THE AGENT,
DATED OCTOBER 29, 1997
FORM OF BORROWING BASE CERTIFICATE
- ------------------------------------------------------------------------------
DRS TECHNOLOGIES, INC.,
DRS TECHNOLOGIES CANADA COMPANY / COMPAGNIE DRS TECHNOLOGIES CANADA,
DRS TECHNOLOGIES CANADA, INC.
BORROWING BASE/NON-DEFAULT CERTIFICATE
US$40,000,000 REVOLVING CREDIT LOAN
TO: Mellon Bank, N.A.
FROM: DRS Technologies, Inc., DRS Technologies Canada Company / Compagnie
DRS Technologies Canada, and DRS Technologies Canada, Inc.
DATE: ______________,
- -----------------------------------------------------------------------------
QUALIFIED BILLED ACCOUNTS RECEIVABLE
1. Total Qualified Billed Accounts Receivable US$________
1.a: Qualified Billed Government Accounts Receivable US$________
2. Less: 90 Days from Date of Original Invoice US$________
3. Other (explanation attached) US$________
4. Total Ineligible Accounts Receivable US$________
5. Eligible Billed Accounts Receivable (Line 1 - Line 4) US$________
6. Available from Billed Accounts Receivable (80% of Line 5) US$________
ACCRUED UNBILLED GOVERNMENT ACCOUNTS RECEIVABLE
7. Total Unbilled Accounts Receivable US$________
8. Less (explanation attached) US$________
9. Total Ineligible Accounts Receivable US$________
10. Eligible Unbilled Accounts Receivable (Line 7- Line 9) US$________
11. Available from Unbilled Accounts Receivable (50% of US$________
Line 10)
INVENTORY
12. Inventory (gross) US$________
12a: Unbilled Government WIP US$________
13. Less: Progress Billings and customer advances US$________
14. Eligible Inventory US$________
<PAGE>
15. Margined Inventory (50% of line 14; capped at 30% US$________
of Revolving Credit Facility outstanding Balance or
$10,000,000)
BORROWING BASE AVAILABILITY
16. Borrowing Base (Ln 6 + Ln 15 + Ln 11, not >$40,000,000) US$________
17. Current Loan Balance US$________
18. Borrowing Base Availability (Line 16 - Line 17) US$________
The undersigned certifies to the Agent, on behalf of each of the Co-borrowers
(a) the foregoing Borrowing Base Certificate is true and correct in all
respects, is in accordance with the books and records of the undersigned and is
prepared in accordance with the terms of the Agreement; (b) all of the
representations and warranties of the Co-borrowers contained in the Loan
Agreement are true and correct in all respects (if unable to recertify certain
representation and/or warranties, please describe the circumstances thereof on
Attachment A); and (c) no default or Event of Default or any act, event or
condition which, with the giving of notice or the passage of time or both, would
constitute a default or Event of Default under the Loan Agreement exists.
IN WITNESS THEREOF, the undersigned has duly executed this Borrowing
Base/Non-Default Certificate this ___day of ______, 199_.
DRS TECHNOLOGIES, INC.,
DRS TECHNOLOGIES CANADA COMPANY /
COMPAGNIE DRS TECHNOLOGIES CANADA
AND DRS TECHNOLOGIES CANADA, INC.
By:___________________________
Title:________________________
<PAGE>
EXHIBIT "D"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
FORM OF NOTICE OF BORROWING
To: Mellon Bank, N.A. (hereinafter referred to as "Mellon") in its capacity as
agent (hereinafter referred to as "Agent") under that certain Revolving Credit
Loan and Term Loan Agreement dated October 29, 1997 (hereinafter referred to as
the "Loan Agreement") by and between DRS Technologies, Inc., DRS Technologies
Canada Company / Compagnie DRS Technologies Canada and DRS Technologies Canada,
Inc. (hereinafter collectively referred to as the "Co-Borrowers") and Mellon
Bank, N.A. as Agent and a Lender and certain other financial institutions as
Lenders. Terms defined in the Loan Agreement and not otherwise expressly defined
herein are used herein as therein defined.
CC: Mellon Bank Canada (for Canadian transactions only)
Pursuant to Section 2.01(ii) and Section 2.02 of the Loan Agreement, this
Notice of Borrowing in respect of [REVOLVING CREDIT LOANS] [TERM LOAN]
(hereinafter referred to as the "Notice") represents the request of the
[CO-BORROWERS][CANADIAN BORROWER] to borrow on _______________, 19 (hereinafter
referred to as the "Borrowing Date") from the Lenders an aggregate principal
amount of [US$][C$]_________________ in [REVOLVING CREDIT LOANS][TERM LOAN] as a
[PRIME RATE LOAN] [EURODOLLAR RATE LOAN] [CANADIAN BANKERS ACCEPTANCE]. In
connection with a Eurodollar Rate Loan, the Co-Borrowers hereby elect an
Eurodollar Interest Period of [ONE (1)] [TWO (2)] [THREE (3)] months. The
maturity date of the Canadian Bankers Acceptance to be issued is _____ days
after the date of purchase thereof. Proceeds of such [REVOLVING CREDIT
LOANS][TERM LOAN] are to be deposited on the Borrowing Date in the account
maintained by the Co-Borrowers with [MELLON BANK, N.A.][MELLON BANK CANADA],
Account No. ______, in immediately available funds [and immediately thereafter
such proceeds shall be wire-transferred to an account maintained with _________,
Account Number: ________].
The Co-Borrowers hereby certify that (i) the representations and
warranties of the Co-Borrowers as set forth in Sections 4.01 and Section 4.02 of
the Loan Agreement and in any other Loan Document (except (a) representations
and warranties which expressly speak only as of a different date, and (b)
changes permitted or contemplated by the Loan Agreement) are true and correct in
all material respects as of the Borrowing Date; (ii) no Event of Default or
Potential Event of Default has occurred and is continuing under the Loan
Agreement or any other Loan Document or will result from this proposed
Borrowing; and (iii) the Co-Borrowers shall have performed in all material
respects all agreements contained in and satisfied all conditions under Section
3.02 of the Loan Agreement and the other Loan Documents required to be performed
by it on or prior to the Borrowing Date.
<PAGE>
The Co-Borrowers hereby represent and warrant and agree that the proceeds
of the [REVOLVING CREDIT LOANS][TERM LOAN] requested by this Notice shall be
used for a purpose which is permitted under Section 2.01 and/or Section 2.02 of
the Loan Agreement.
Dated:___________________, 19__
DRS TECHNOLOGIES, INC.,
as a Co-Borrower
By: __________________________
Name:
Title:
DRS TECHNOLOGIES CANADA COMPANY /
COMPAGNIE DRS TECHNOLOGIES CANADA
as a Co-Borrower
By: __________________________
Name:
Title:
DRS TECHNOLOGIES CANADA, INC.,
as a Co-Borrower
By: __________________________
Name:
Title:
<PAGE>
EXHIBIT "E"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY
AND AMONG DRS TECHNOLOGIES, INC., ET AL., AS THE
CO-BORROWERS, AND MELLON BANK, N.A.,
AS THE AGENT,
DATED OCTOBER 29, 1997
FORM OF NOTICE OF CONVERSION/CONTINUATION
To: Mellon Bank, N.A. (hereinafter referred to as "Mellon") in its capacity as
agent (hereinafter referred to as "Agent") under that certain Revolving Credit
Loan and Term Loan dated October 29, 1997 (hereinafter referred to as the "Loan
Agreement") by and between DRS Technologies, Inc., DRS Technologies Canada
Company / Compagnie DRS Technologies Canada and DRS Technologies Canada, Inc.
(hereinafter collectively referred to as the "Co-Borrowers") and Mellon Bank,
N.A. as Agent and a Lender and certain other financial institutions as Lenders.
Terms defined in the Loan Agreement and not otherwise expressly defined herein
are used herein as therein defined.
CC: Mellon Bank Canada (for Canadian transactions only)
Pursuant to Section 2.03(iii) of the Loan Agreement, this Notice of
Conversion/Continuation (hereinafter referred to as the "Notice") represents the
Co-Borrowers' election to [insert one of the following"]:
*convert an aggregate principal amount of [US$][C$]___________ of [REVOLVING
CREDIT LOANS][TERM LOAN] which are [PRIME RATE LOANS][CANADIAN BANKERS
ACCEPTANCES] to [US$][C$] Eurodollar Rate Loans on _________ 19__. The
initial Eurodollar Interest Period for such Eurodollar Rate Loans is required
to be a [ONE (1)] [TWO (2)] [THREE (3)] month period.
**convert an aggregate principal amount of [US$][C$]_________ of [REVOLVING
CREDIT LOANS][TERM LOAN] which are [EURODOLLAR RATE LOANS WITH A CURRENT
EURODOLLAR INTEREST PERIOD ENDING__________, 19__ ][CANADIAN BANKERS ACCEPTANCES
WITH A TERM ENDING ___________, 19__], to [US$][C$] Prime Rate Loans on
____________, 19__ [.]***
[***, and continue as Eurodollar Rate Loans in an aggregate principal of
[US$][C$]__________ of Eurodollar Rate Loans with a current Eurodollar Interest
Period ending __________, 19__. The succeeding Eurodollar Interest Period is
requested to be a [ONE (1) [TWO (2)] [THREE (3)] month period.]
[****, and continue as a Canadian Bankers Acceptance in an aggregate principal
of [US$][C$]__________ to be issued __ days after the date of purchase thereof.
<PAGE>
* Use if converting Prime Rate Loans or Canadian Bankers Acceptances to
Eurodollar Rate Loans.
** Use if converting Eurodollar Rate Loans or Canadian Bankers Acceptances
to Prime Rate Loans.
*** Use if continuing as a portion of Eurodollar Rate Loan.
**** Use if continuing a Canadian Bankers Acceptance.
<PAGE>
The Co-Borrowers hereby certify that no Event of Default or Potential
Event of Default has occurred and is continuing under the Loan Agreement.
Dated:____________________, 19__
DRS TECHNOLOGIES, INC.,
as a Co-Borrower
By: __________________________
Name:
Title:
DRS TECHNOLOGIES CANADA COMPANY /
COMPAGNIE DRS TECHNOLOGIES CANADA
as a Co-Borrower
By: __________________________
Name:
Title:
DRS TECHNOLOGIES CANADA, INC.,
as a Co-Borrower
By: __________________________
Name:
Title:
<PAGE>
EXHIBIT "F"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
FORM OF OFFICER'S CERTIFICATE
This Officer's Certificate of DRS TECHNOLOGIES, INC., DRS TECHNOLOGIES
CANADA COMPANY / COMPAGNIE DRS TECHNOLOGIES CANADA AND DRS TECHNOLOGIES CANADA,
INC. (hereinafter referred to as the "Certificate") is delivered to you pursuant
to Section 5.02(v) of the Revolving Credit Loan and Term Loan Agreement dated
October 29, 1997 (hereinafter said Revolving Credit Loan and Term Loan Agreement
as it may be amended from time to time shall hereinafter be referred to as the
"Loan Agreement") by and among DRS TECHNOLOGIES, INC., DRS TECHNOLOGIES CANADA
COMPANY / COMPAGNIE DRS TECHNOLOGIES CANADA AND DRS TECHNOLOGIES CANADA, INC.
(hereinafter referred to as the "Co-Borrowers") and Mellon Bank, N.A., as Agent
and as a Lender and certain other financial institutions as Lenders. Terms
defined in the Loan Agreement and not otherwise defined herein are used herein
as therein defined.
1. I am the duly elected, qualified and acting [CHIEF FINANCIAL OFFICER],
[PRESIDENT] OR [CHIEF ACCOUNTING OFFICER], of Co-Borrowers.
2. I have reviewed and am familiar with the contents of this Certificate.
I am providing this certificate solely in my capacity as an Authorized Officer
of the Co-Borrowers. The matters set forth herein are true to the best of my
knowledge, after diligent inquiry, but I express no personal opinion as to any
conclusions of law or other legal matters.
3. I have reviewed the terms of the Loan Agreement and the principal Loan
Documents and have made, or caused to be made, under my supervision, a review in
reasonable detail of the transactions and condition of the Co-Borrowers, their
Subsidiaries and Affiliates during the accounting period covered by the attached
financial statements and computations attached hereto as Exhibit "F-1"
(hereinafter referred to as the "Financial Statements"). Such review did not
disclose the existence during or at the end of the accounting period covered by
the attached Financial Statements, and I have no knowledge of the existence as
of the date of this Certificate, of any condition or event which constitutes an
Event of Default or Potential Event of Default, except as set forth below:*
* set forth additional factual information if applicable
4. I hereby certify in my capacity as [PRESIDENT] [CHIEF FINANCIAL
OFFICER] OR [CHIEF ACCOUNTING OFFICER] in my capacity as an Authorized Officer
the Financial Statements, as to my knowledge, present fairly the financial
position of the Co-Borrowers, their Subsidiaries and Affiliates as of the end of
such fiscal period and the results of their operations and the changes in their
financial position and cash flows for such fiscal periods, in conformity with
<PAGE>
Generally Accepted Accounting Principles applied in a manner consistent with
that of the most recent audited financial statements furnished to the Agent,
subject to normal and recurring year-end audit adjustments.
IN WITNESS WHEREOF we execute this Certificate this ____ day of
_________ , 19__.
DRS TECHNOLOGIES, INC.,
as a Co-Borrower
By: __________________________
Name:
Title:
DRS TECHNOLOGIES CANADA COMPANY /
COMPAGNIE DRS TECHNOLOGIES CANADA,
as a Co-Borrower
By: __________________________
Name:
Title:
DRS TECHNOLOGIES CANADA, INC.,
as a Co-Borrower
By: __________________________
Name:
Title:
* Describe here (or in a separate attachment to this Certificate) the
exceptions, if any, to paragraph 3 by listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
the Co-Borrowers have taken, are taking and propose to take with respect to each
such condition or event.
<PAGE>
EXHIBIT "F-1"
FORM OF COMPLIANCE CERTIFICATE
DRS TECHNOLOGIES, INC., ET AL.
This Officer's Certificate of DRS TECHNOLOGIES, INC., ET AL.
("Certificate") is delivered to you pursuant to Section 5.01(v) of the Revolving
Credit Loan and Term Loan Agreement dated October 29, 1997 (hereinafter said
Revolving Credit Loan and Term Loan Agreement as it may be from time to time
amended, modified and/or supplemented shall be referred to as the "Loan
Agreement") by and among DRS Technologies, Inc., DRS Technologies Canada Company
/ Compagnie DRS Technologies Canada and DRS Technologies Canada, Inc.
(hereinafter referred to as the "Co-Borrowers") and Mellon Bank, N.A., as Agent
and as a Lender and certain other financial institutions as Lenders. Terms
defined in the Loan Agreement and not otherwise defined herein are used herein
as therein defined. The Co-Borrowers hereby deliver to each Lender, together
with the financial statements being delivered to the Lenders pursuant to Section
5.01(i) and (vi) of the Loan Agreement, this Compliance Certificate (hereinafter
referred to as the "Certificate") for the accounting period from ____________,
19 to __________, * 19 . For purposes hereof, section and subsection references
herein relate to sections and subsections, respectively, of the Loan Agreement,
and amounts or ratios refer to the maximum or minimum amounts or ratios required
under the relevant sections of the Loan Agreement.
I. AFFIRMATIVE COVENANTS
A. Minimum Asset Coverage (Section 6.13)
1. Aggregate Consolidated Senior Debt US$_______________
2. Aggregate sum of (i) Accounts Receivable,
(ii) Inventory and (iii) Cash and Cash
Equivalents US$_______________
3. Required Minimum Amount: the
amount described in #1 above must
not exceed the amount described in
#2 above.
II. NEGATIVE COVENANTS
A. Consolidated Debt (Section 7.01)
1. Actual aggregate amount of
additional new Consolidated Debt: US$_________________
2. Permitted amount of additional
Consolidated Debt:
<PAGE>
(a) purchase money debt US$1,000,000.00
(b) permitted additional term loans US$5,000,000.00
B. Loans, Advances and Investments (Section 7.03)
1. Aggregate demand advances to officers and employees outstanding at
any time during the period covered by this Certificate:
(a) Outstanding US$_________________
(b) Maximum permitted per
officer/employee US$ 250,000.00
2. Aggregate loans in connection with the acquisition of another Person
(a) Outstanding US$[___________]
(b) Maximum
permitted US$ 250,000.00
III. FINANCIAL COVENANTS
A. Minimum Consolidated Net Worth (Section 8.01)
1. Consolidated Net Worth, as determined at the end of the period covered
by this Certificate:
(a) Actual Amount US$______________
(b) Minimum Amount US$______________
B. Maximum Consolidated Senior Debt Leverage Ratio (Section 8.02)
1. Total Consolidated Senior Debt to Consolidated EBITDA, as determined at
the end of the period covered by this Certificate:
(a) Actual Ratio_____________ - to -1.0
(b) Maximum Ratio _________- to -1.0
C. Maximum Consolidated Funded Debt Leverage Ratio (Section 8.03)
1. Total Consolidated Funded Debt to Consolidated EBITDA, as determined at
the end of the period covered by this Certificate:
(a) Actual Ratio_____________ - to -1.0
(b) Maximum Ratio _________- to -1.0
D. Minimum Consolidated Fixed Charge Coverage Ratio (Section 8.04)
<PAGE>
1. Total Consolidated EBITDA minus Capital Expenditures -to- Principal and
Interest payments on Consolidated Debt, as determined at the end of the
period covered by this Certificate:
(a) Actual Ratio_____________ - to -1.0
(b) Maximum Ratio _________- to -1.0
We hereby certify, in our capacity as officers of the Company, that the
information set forth above is accurate as of ,19 , to the best of our knowledge
after diligent inquiry.
Dated:____________, 19__
DRS TECHNOLOGIES, INC.,
as a Co-Borrower
By: __________________________
Name:
Title:
DRS TECHNOLOGIES CANADA COMPANY /
COMPAGNIE DRS TECHNOLOGIES CANADA,
as a Co-Borrower
By: __________________________
Name:
Title:
DRS TECHNOLOGIES CANADA, INC.,
as a Co-Borrower
By: __________________________
Name:
Title:
<PAGE>
EXHIBIT "G"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
FORM OF REVOLVING CREDIT NOTE
US$__________ ____________ , ______________
______________, 19__
FOR VALUE RECEIVED, the undersigned, DRS TECHNOLOGIES, INC., DRS
TECHNOLOGIES CANADA COMPANY / COMPAGNIE DRS TECHNOLOGIES CANADA AND DRS
TECHNOLOGIES CANADA, INC., (hereinafter collectively referred to as the
"Co-Borrowers"), promise to pay on a joint and several basis to the order of
____________________________________ (hereinafter referred to as the "Lender")
on or before the Revolving Credit Termination Date, the lesser of (i) the
principal sum of ___________________ AND 00/100 (US$_____________) DOLLARS or
(ii) the aggregate unpaid principal amount of all Revolving Credit Loans made by
the Lender to the Co-Borrowers pursuant to the "Loan Agreement" (as such term is
hereinafter defined). The Co-Borrowers further promise to pay to the order of
the Lender interest on the unpaid principal amount of the Revolving Credit Loans
from the date outstanding at the interest rate or interest rates per annum
determined pursuant to Section 2.03(i)(a) of, or as otherwise provided in, the
Loan Agreement payable on the dates set forth in Section 2.03(ii) of, or as
otherwise provided in, the Loan Agreement.
All payments of principal and interest hereunder shall be due and payable
to Mellon Bank, N.A., as Agent, at Mellon Bank Center, 1735 Market Street,
Philadelphia, Pennsylvania 19101, on or before 10:00 A.M. (Philadelphia,
Pennsylvania time), on the day when due, all as more fully and accurately set
forth in Section 2.06 of the Loan Agreement. Such payments shall be made in U.S.
Dollars in immediately available funds without set-off, counterclaim or other
deduction of any nature.
Except as otherwise provided in the Loan Agreement, if any payment of
principal or interest hereunder shall become due on a day which is not a
Business Day, such payment shall be made on the next following Business Day and
such extension of time shall be included in computing interest in connection
with such payment.
This Revolving Credit Note is one of the "Revolving Credit Notes" referred
to in, and is entitled to the benefits of the Revolving Credit Loan and Term
Loan Agreement dated October 29, 1997 by and among the Co-Borrowers, the Lender
and the other lenders named therein, as Lenders and Mellon Bank N.A., as Agent
(hereinafter as said Revolving Credit Loan and Term
<PAGE>
Loan Agreement may be amended, modified or supplemented from time to time shall
hereinafter be referred to as the "Loan Agreement"), which among other things
provides for the acceleration of the maturity hereof upon the occurrence of
certain events and for prepayments in certain circumstances and upon certain
terms and conditions. This Revolving Credit Note is secured by and is entitled
to the benefits of the Collateral Documents. Terms defined in the Loan Agreement
have the same meanings herein.
The holder of this Revolving Credit Note is authorized to endorse on the
Schedule 1 attached hereto and made a part hereof or on a continuation thereof
which shall be attached hereto and made a part hereof (hereinafter referred to
as the "Grid") the date and amount of each Revolving Credit Loan made pursuant
to Section 2.01 of the Loan Agreement, and the date and amount of each payment
or prepayment of principal thereof, which endorsement shall constitute prima
facie evidence of the accuracy of the information endorsed; provided, however,
that the failure to make any such endorsement shall not affect the obligations
of the Co-Borrowers in respect of such Revolving Credit Loan.
The Co-Borrowers hereby expressly waive presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Revolving Credit Note
and the Loan Agreement, and an action for amounts due hereunder or thereunder
shall immediately accrue.
Notwithstanding the aggregate stated principal amounts of this Revolving
Credit Note and all other Revolving Credit Notes to the contrary, the aggregate
outstanding principal balance with respect to the Revolving Credit Facility
shall not exceed US$40,000,000.00.
This Revolving Credit Note shall be governed by, construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the Co-Borrowers have caused this Revolving Credit
Note to be executed and delivered by its proper and duly Authorized Officers and
has caused its corporate seal to be hereunto affixed and attested, pursuant to
the resolution of its Board of Directors, all on the day and year first
hereinabove written.
DRS TECHNOLOGIES, INC.,
as a Co-Borrower
By: __________________________
Name:
Title:
DRS TECHNOLOGIES CANADA COMPANY /
COMPAGNIE DRS TECHNOLOGIES CANADA,
as a Co-Borrower
By: __________________________
Name:
Title:
<PAGE>
DRS TECHNOLOGIES CANADA, INC.,
as a Co-Borrower
By: __________________________
Name:
Title:
<PAGE>
SCHEDULE A TO REVOLVING LINE OF CREDIT NOTE
LOANS AND PAYMENTS OF REVOLVING CREDIT LOANS
- ----------------------------------------------------------------------------
Unpaid
Amount of Principal
Amount of Principal Balance of Notation
Date Loans Repaid Loans Made By
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
<PAGE>
EXHIBIT "H"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
FORM OF SWAP AGREEMENT
See Attached
<PAGE>
EXHIBIT "I"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
FORM OF TERM LOAN NOTE
US$___________ _____________________
__________, 19__
FOR VALUE RECEIVED, the undersigned, DRS TECHNOLOGIES, INC., DRS
TECHNOLOGIES CANADA COMPANY / COMPAGNIE DRS TECHNOLOGIES CANADA AND DRS
TECHNOLOGIES CANADA, INC., (hereinafter collectively referred to as the
"Co-Borrowers"), promise to pay on a joint and several basis to the order of
________________________ (hereinafter referred to as the "Lender") on or
before the Term Loan Maturity Date, or such other date as may be determined
pursuant to the "Loan Agreement" (as such term is hereinafter defined) the
principal sum of ________________________________________ AND 00/100
(US$____________) DOLLARS. The Undersigned further promise to pay to the order
of the Lender interest on the unpaid principal amount hereof from time to time
at the interest rate or interest rates per annum determined pursuant to Section
2.03(i)(b) of, or as otherwise provided in, the Loan Agreement. Such principal
and interest shall be payable on the dates set forth in Section 2.03(ii) of, or
as otherwise provided in, the Loan Agreement.
All payments of principal and interest hereunder shall be due and
payable to the Lender not later than 2:00 P.M.(New York City time), on the day
when due, all as more fully set forth in Section 2.06 of the Loan Agreement.
Such payments shall be made in U.S. Dollars in immediately available funds
without set-off, counterclaim (other than a compulsory counterclaim) or other
deduction of any nature.
Except as otherwise provided in the Loan Agreement, if any payment of
principal or interest hereunder shall become due on a day which is not a
Business Day, such payment shall be made on the next following Business Day and
such extension of time shall be included in computing interest in connection
with such payment.
This Term Loan Note is the "Term Loan Note" referred to in, and is
entitled to the benefits of the Revolving Credit Loan and Term Loan Agreement
dated October 29, 1997, executed by and among, amongst others, the Undersigned
and the Lender (as the same may be amended, modified or supplemented from time
to time, hereinafter referred to as the "Loan Agreement"), which among other
things provides for the acceleration of the maturity hereof upon the occurrence
of certain events and for prepayments in certain circumstances and upon certain
terms and conditions. Terms defined in the Loan Agreement shall have the same
meanings herein.
<PAGE>
The Undersigned hereby expressly waives presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Term Loan Note and the
Loan Agreement.
This Term Loan Note shall be governed by, construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the Undersigned have caused this Term Loan Note
to be executed and delivered by their proper and duly Authorized Officers and
have caused their respective corporate seals to be hereunto affixed and
attested, pursuant to the resolution of their respective Boards of Directors,
all on the day and year first hereinabove written.
DRS TECHNOLOGIES, INC.,
as a Co-Borrower
By: __________________________
Name:
Title:
DRS TECHNOLOGIES CANADA COMPANY /
COMPAGNIE DRS TECHNOLOGIES CANADA,
as a Co-Borrower
By: __________________________
Name:
Title:
DRS TECHNOLOGIES CANADA, INC.,
as a Co-Borrower
By: __________________________
Name:
Title:
<PAGE>
EXHIBIT "J"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
FORM OF OPINION LETTER
See Attached Form
<PAGE>
SCHEDULE 1.01-A
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
LIST OF LEASED PROPERTIES
See Attached.
<PAGE>
<TABLE>
<CAPTION>
Date of Expiration of
Location/Address Landlord Lease Lease
---------------- -------- ------- -------------
<C> <S> <C> <C> <C>
1. DRS Technologies
5 Sylvan Way Sammis New Jersey Associates 03/31/95 09/27/00
Parsippany, New Jersey 07054
1215 Jefferson Davis Highway Charles E. Smith 08/01/97 07/31/99
Arlington, Virginia 22202
2. DRS Electronic Systems, Inc.
200 Professional Drive Montgomery County Teachers 02/22/94 03/01/00
Gaithersburg, Maryland 20879 Federal Credit Union
DRS Technical Services, Inc. K-B Opportunity Fund LP 12/01/96 01/31/00
2535 Camino Del Rio South / Parkstone Companies
South 300
San Diego, California 92108
DRS Technical Services, Inc. Progressive Land Partners LP 01/03/97 04/30/04
737 Volvo Parkway
Suite 150
Chesapeake, VA 23320
3. DRS Systems Management Corp
c/o DRS Laurel Technologies
423 Walters Avenue Skateland Roller Rink, Inc. 11/10/93 11/30/98
Johnstown, Pennsylvania 15904
15 Route 403 The Picking Company 05/15/96 09/25/98
Davidsville, Pennsylvania 15928
4. DRS Precision Echo, Inc.
3105 Patrick Henry Drive Bay 511 Corporation 07/13/97 10/31/00
Santa Clara, California 95054
5. DRS Ahead Technologies, Inc.
Plymouth Business Center St. Paul/United Properties, Inc. 08/01/97 07/31/02
3550 Annapolis Lane, Suite 60
Plymouth, Minnesota 55447
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Date of Expiration of
Location/Address Landlord Lease Lease
---------------- -------- ------- -------------
<C> <S> <C> <C> <C>
520/530 Blanding Woods Road S. North Land Aluminum 06/17/97 06/17/99
St. Croix Falls, Wisconsin 54024 Products
145 South Third Street Applied Magnetics Corporation 11/06/92 11/06/01
Dassel, Minnesota 55325
6410 Via Del Oro, N. E. South San Jose Interests 8/17/95 08/31/00
San Jose, Ca. 95119
1602 Rhodes Lane Gilbert Surgical and 1/l/97 12/31/00
Bloomington, Illinois Medical Supplies
533 Atlantic Avenue Paul Opsahl Plumbing & 10/22/96 11/15/97
Dassel, Minnesota 55325 Heating Company
6. DRS Optronics, Inc.
2330 Commerce Park Drive, Fred E. Sutton and 08/14/95 8/14/05
N.E., Suite 2 Harold S Sutton
Palm Bay, Florida 32905 d/b/a Sutton Properties
7. DRS Photronics, Inc.
138 Bauer Drive LDR Realty Co. 03/31/84 05/31/98
Oakland, New Jersey 07436
133 Bauer Drive North Holding Partnership 08/9/97 08/08/02
Oakland, New Jersey 07436
8. DRS Technologies Canada Company
365 March Road 151516 Canada Inc. 07/01/93 06/30/98
Kanata, Ontario, Canada C/O RealFund
K2K 2C9
9. Spar UK
Springfield Road SKM EUROPE LIMITED 02/28/97
Hayes Registration No. 2627854
Middlesex, England UB4 OTY
</TABLE>
<PAGE>
SCHEDULE 1.01-B
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT AND TERM LOAN AGREEMENT BY AND AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
CUSTOMARY PERMITTED LIENS
None.
<PAGE>
SCHEDULE 1.01-C
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
EURODOLLAR AFFILIATES
None.
<PAGE>
SCHEDULE 1.01-D
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
PERMITTED ENCUMBRANCES
DRS Photronics, Inc.
1. Security interest in certain equipment held by Manufacturers and Traders
Trust Company, as trustee, as security for Suffolk County Industrial Development
Agency $2,395,000. 1991 Variable Rate Demand Industrial Development Revenue
Refunding Bonds (Photronics Corp. Facility)(the "Photronics Bonds")
2. Security interest in certain equipment, accounts receivable and other assets
and mortgage on the real property located at 270 Motor Parkway, Hauppauge, New
York, held by Morgan Guaranty Trust Company of New York ("Morgan") to secure a
letter of credit issued by Morgan to secure the Photronics Bonds. Morgan has
released this security interest and mortgage. The Morgan security interest and
mortgage will be discharged of record after the Closing Date.
<PAGE>
SCHEDULE 2.01
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
LIST OF SUBSIDIARIES AND/OR AFFILIATES
THAT MAY BORROW AND/OR HAVE LETTERS OF CREDIT
ISSUED FOR THEIR ACCOUNT
All Corporate Guarantors and the Partnership Guarantor
<PAGE>
SCHEDULE 2.01 (vi)
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
SCHEDULE OF EXISTING LETTERS OF CREDIT
ISSUING BANK FAC NUMBER BAL/CUR SHARE FACE/LIMIT MATURITY
------------ ---------- ------------- ---------- --------
Mellon Bank, N.A. 202-451-8476790 3,263,290.39 3,263,290.39 7/30/99
Mellon Bank, N.A. 202-451-8532790 35,600.00 35,600.00 12/30/98
Mellon Bank, N.A. 202-451-8516150 115,752.00 115,752.00 5/31/98
Mellon Bank, N.A. 202-451-8516160 302,767.00 302,767.00 5/31/98
<PAGE>
SCHEDULE 2.04 (ii)
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
LETTER OF CREDIT FEES
Issuance: US$150.00
Amendment: US$ 75.00
Standby Commission: US$250.00 minimum per year
Transfer: US$ one quarter of one percent flat fee / US$200.00
minimum
Assignment of Proceeds: US$100.00
Telecommunications:
Full Text: US$ 40.00
Brief Text: US$ 20.00
Fax Copy: US$ 5.00 per page (domestic) / US$15.00 maximum
US$ 15.00 per page (international) / US$45.00 maximum
<PAGE>
SCHEDULE 4.01 (iii)
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
OWNERSHIP OF CAPITAL STOCK
None.
<PAGE>
SCHEDULE 4.01 (vii)
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
PENDING OR THREATENED LITIGATION
1. Amplicon, Inc. d/b/a Amplicon Financial v. Photronics Corp., et. al., U.S.
District Court, C.D. Cal., Case No. SACV 96-0151 (AHS)(EEx)
This case is going to trial and has a potential claim amount of less than
$300,000.00.
<PAGE>
SCHEDULE 4.01 (xv)
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
ENVIRONMENTAL MATTERS
GENERAL DISCLOSURE
Reference is made to the following documents:
(a) Due Diligence Assessment dated 21 September, 1990, prepared by Environmental
Resources Management, Inc.;
(b) Condition Survey of Leigh Instrument Building dated October 4, 1990,
prepared by Trow Inc.;
(c) Ventilation at Spar Applied Systems dated July 4, 1994, prepared by Trow
Consulting Engineers Ltd.;
(d) Workwell Health & Safety Evaluation dated March 12, 1997;
(e) Report of Findings, Subsurface Investigation at SPAR Aerospace Ltd., 115
Emily Street, Carleton Place, Ontario, dated October 10, 1997, prepared by
ERM-Ontario Inc.;
(f) Subsurface analysis with respect to Borehole No. 3, from a geotechnical
report dated October, 1997, prepared by Morey Houle Chevrier Engineering
Ltd.; and
(g) Report of Findings, Subsurface Investigation at SPAR Applied Systems, 365
March Road, Kanata, Ontario dated October 10, 1997, prepared by ERM-Ontario
Inc.
The documents described in subparagraphs (a) to (g) inclusive (the
"Environmental Reports") have been provided to the Co-Borrowers and disclose
information in relation to the purchased assets.
COMPLIANCE WITH ENVIRONMENTAL LAWS
The Co-Borrowers disclose to the Agent the existence of PAH compounds and metals
in soil and groundwater samples investigated at the property located at 115
Emily Street, Carleton Place, and described in the Environmental Reports, items
(e) and (f) above.
<PAGE>
The Co-Borrowers disclose to the Agent the existence of a disused underground
fuel oil tank and hydrocarbon contamination at the property located at 365 March
Road, Kanata, described in the Environmental Reports, item (g), above.
The Co-Borrowers' records indicate some MSDS have expired and are being renewed.
The Co-Borrowers have not conducted a further assessment of exposure or
likelihood of exposure as a result of a change intended to improve ventilation
for the process involving isocyanates in the airfoil lay-up room, at the
Carleton Place property. Previous assessment of exposures to isocyanates were
within regulated limits.
NOTICES
Since December 31, 1991, the following notices of non-compliance with
Environmental Laws have been received:
(a) Order dated April 29, 1996 re: hand truck
(b) Order dated April 29, 1996 re: lift truck
(c) Inspection report dated May 19, 1994
LOCATION OF HAZARDOUS SUBSTANCES
Annex I hereto contains an inventory of Hazardous Substances used in whole or in
part by the Co-Borrowers in connection with the purchased business, and the
location of such Hazardous Substances.
REPORTS TO REGULATORY AUTHORITIES
The Co-Borrowers disclose to the Agent that on October 20, 1997, the Ministry of
Environment and Energy was notified concerning the findings of PAH compounds and
metals in soil and groundwater samples at 115 Emily Street, Carleton Place,
Ontario.
KANATA UNDERGROUND FUEL OIL TANK
Spar Aerospace Limited ("Spar") shall be responsible for the removal of the
underground fuel oil tank (the "UST") located on its premises at 365 March Road,
Kanata (the "Kanata Premises") and the remediation of the surrounding soil if
and to the extent that such removal and/or remediation is a liability of Spar
either under applicable Environmental Laws and/or Environmental Permits or under
Spar's lease in respect of the Kanata Premises (such removal and/or remediation
obligation, if any, of Spar is herein called the "UST Remediation"). For the
purposes solely of determining Spar's liability to the Co-Borrowers hereunder in
respect of Environmental Laws, provided the UST is not used by the Co-Borrowers,
the UST shall be deemed not to have been used for the three years preceding the
date hereof. If it is determined that as between Spar and the landlord, Spar is
legally responsible for the UST Remediation, such UST Remediation shall
constitute Remediation Work for the purposes of section 8.14 of the Asset
Purchase Agreement.
<PAGE>
Spar has notified the landlord of the Kanata premises that removal of the UST is
required, and provided the landlord with a copy of the report prepared by ERM
Ontario Inc. in respect of the UST (item (g), above). The parties acknowledge
that the landlord of the Kanata Premises may be legally responsible for the
removal of the UST and remediation of the surrounding soil. Nothing contained
herein shall in any way relieve the landlord of such liability or require either
Spar or the Co-Borrowers to perform or satisfy the landlord's liabilities or
obligations in respect thereof. Neither Spar nor the Co-Borrowers shall take any
actions or execute any documents which would relieve the landlord of its
liability and/or impose such liability on the other party hereto.
The parties further acknowledge that the ability of Spar to effect and complete
the UST Remediation shall be subject to the consent and approval of the landlord
of the Kanata premises to the extent such consent or approval is required.
<PAGE>
SCHEDULE 4.01 (xvii)
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
ERISA
PLANS REQUIRING FILING OF 5500'S
DRS Group Health & Life Plans
DRS Optronics Group Health Plan
DRS Optronics Long-Term Disability Plan
DRS Optronics Short-Term Disability Plan
DRS Electronic Systems Group Health & Welfare Plans
DRS Electronic Systems Flex Benefit Plan
DRS Laurel Technologies Group Life Plan
DRS Laurel Technologies Group Health Plan
DRS Retirement/Savings Plan
TAS Employee Savings Plan (frozen, pending termination)
<PAGE>
SCHEDULE 4.01 (xx)
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
JOINT VENTURE/PARTNERSHIP
1. Laurel Technologies Partnership t/a DRS Laurel Technologies
2. DRS Medical Systems (sold all assets in September, 1997 and has ceased all
operations).
<PAGE>
SCHEDULE 4.01 (xxi)
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
INSURANCE POLICIES, PROGRAMS AND CLAIMS
See Attached.
<PAGE>
SCHEDULE 4.01 (xxv)
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
LIST OF UNDISCLOSED LIABILITIES
1. Contingent liability under Panavia agreement.
<PAGE>
SCHEDULE 4.01 (xxvii)
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
LABOR MATTERS
None.
<PAGE>
SCHEDULE 4.01 (xxx)
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
BUSINESS NAMES
1. DRS Technologies Canada Company / Compagnie DRS Technologies Canada also
conducts business under the name of "DRS Flight Safety and
Communications".
2. DRS Technologies, Inc. also conducts business under the name of "DRS
Electronic Systems".
3. Laurel Technologies Partnership also conducts business under the name of
"DRS Laurel Technologies".
<PAGE>
SCHEDULE 4.01 (xxxi)
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
LOCATION OF COLLATERAL
1. DRS Technologies, Inc.
5 Sylvan Way
Parsippany, New Jersey 07054
1215 Jefferson Davis Highway
Arlington, Virginia 22202
2. DRS Electronic Systems, Inc.
200 Professional Drive
Gaithersburg, Maryland 20879
DRS Technical Services, Inc.
2535 Camino Del Rio South
Suite 300
San Diego, California 92108
DRS Technical Services, Inc.
737 Volvo Parkway, Suite 150
Chesapeake, Virginia 23320
3. DRS Laurel Technologies
423 Walters Avenue
Johnstown, Pennsylvania 15904
15 Route 403
Davidsville, Pennsylvania 15928
4. DRS Precision Echo, Inc.
3105 Patrick Henry Drive
Santa Clara, California 95054
<PAGE>
5. DRS Ahead Technologies, Inc.
Plymouth Business Center
3550 Annapolis Lane, Suite 60
Plymouth, Minnesota 55447
520/530 Blanding Woods Road South
St Croix Falls, Wisconsin 54024
145 South Third Street
Dassel, Minnesota 55325
6410 Via Del Oro, N.E.
San Jose, California, California 95119
1602 Rhodes Lane
Bloomington, Illinois 61704
2760 Razlog
1 Stara Planiana Strp.
Bulgaria
533 Atlantic Avenue
Dassel, Minnesota 55325
6. DRS Optronics, Inc.
2330 Commerce Park Drive, N.E., Suite 2
Palm Bay, Florida 32905
7. DRS Photronics, Inc.
270 Motor Parkway
Hauppauge, New York 11788
138 Bauer Drive
Oakland, New Jersey 07436
133 Bauer Drive
Oakland, New Jersey 07436
8. DRS Technologies Canada Company
115 Emily Street
Carleton Place, Ontario, Canada K7C 4J5
365 March Road
Kanata, Ontario, Canada K2K 2C9
<PAGE>
SCHEDULE 6.05
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
SCHEDULE OF INSURANCE POLICIES AND PROGRAMS
See Attached.
<PAGE>
SCHEDULE 7.01 (iii)
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
PERMITTED EXISTING DEBT
1. 9% Senior Subordinated Convertible Debentures due October 1, 2003
Principal amount outstanding: $25,000,000.00
2. 8.5% Convertible Subordinated Debentures due August 1, 1998
Principal amount outstanding: $4,992,000.00
3. Suffolk County Industrial Development Agency 1991 Variable Rate Demand
Industrial Development Revenue Refunding Bonds (Photronics Corp. Facility)
Principal amount outstanding: $1,595,000.00
4. Covenant and Agreement Not to Compete Dated October 28, 1994 Between Ahead
Technology, Inc. and Robert F. Van Houtten
Amount outstanding: $225,000.00 ($9,000.00 per month)
5. Term Note to Southern Alleghenies Planning and Development Commission
Principal amount outstanding: $40,581.00 (monthly installments
through March 1, 2000)
6. Term Note to SPIRC
Principal amount outstanding: $54,947.00 (monthly installments
through March 1, 2000)
7. Term Note to Cananwill, Inc.
Principal amount outstanding: $27,434.00 (monthly installments
through December, 1997)
8. Irrevocable Letter of Credit, No. PB-284327, issued by Morgan Guaranty
Trust Company of New York for the account of Photronics Corp. for the
benefit of Manufacturers and Traders Trust Company in the Stated Amount of
$1,633,743.15 issued on December 19, 1991 and expiring no later than
January 19, 1998.
NOTE: All principal amounts are as of October 24, 1997.
<PAGE>
SCHEDULE 7.02 (ii)
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
LIST OF EXISTING PERMITTED LIENS
See Schedule 1.01-D.
<PAGE>
SCHEDULE 7.03
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
EXISTING LOANS, ADVANCES, INVESTMENTS
I. Loans:
1. Amended and Restated Promissory Note from Mark S. Newman (Chairman
of the Board, President and Chief Executive Officer) to the Company,
dated as of May 26, 1995; $104,100. principal amount; 8% per annum
interest rate.
II. Investments:
1. Excess corporate cash balances are currently invested in the following:
(a) The Pierpont Money Market Fund (J.P. Morgan)
(b) Merrill Lunch Institutional Fund
(c) Dreyfus Treasury Fund
<PAGE>
SCHEDULE 7.11(i)
ATTACHED TO AND MADE A PART OF THAT CERTAIN
REVOLVING CREDIT LOAN AND TERM LOAN AGREEMENT BY AND
AMONG
DRS TECHNOLOGIES, INC., ET AL., AS THE CO-BORROWERS, AND
MELLON BANK, N.A.,
AS THE AGENT, DATED OCTOBER 29, 1997
EXISTING GUARANTIES
None other than as described in Sections 7.11(ii) and 7.11(iii).
