SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For Quarter Ended June 30, 1998 Commission File No. 1-7939
------------------------- -------
VICON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
NEW YORK STATE 11-2160665
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
89 Arkay Drive, Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 952-2288
(Former name, address, and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
At June 30, 1998, the registrant had outstanding 4,456,383 shares of Common
Stock, $.01 par value.
<PAGE>
PART I - FINANCIAL INFORMATION
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
6/30/98 6/30/97
Net sales............................. $16,106,001 $13,725,759
Cost of sales......................... 10,655,224 9,815,328
----------- -----------
Gross profit........................ 5,450,777 3,910,431
Operating expenses:
General and administrative expense 1,194,222 997,476
Selling expense................... 2,376,629 2,050,980
---------- ----------
3,570,851 3,048,456
---------- ----------
Operating income.................... 1,879,926 861,975
Interest expense, net................. 230,449 309,274
Other income.......................... - (6,273)
----------- ------------
Income before income taxes........ 1,649,477 558,974
Income tax expense.................... 75,000 16,000
----------- ------------
Net income........................ $ 1,574,477 $ 542,974
=========== ============
Earnings per share:
Basic $ .40 $ .19
=== ===
Diluted $ .38 $ .18
=== ===
Shares used in computing
earnings per share:
Basic 3,900,699 2,802,728
Diluted 4,162,632 3,049,335
See Notes to (Condensed) Consolidated Financial Statements.
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<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended
6/30/98 6/30/97
-------- --------
Net sales............................. $45,711,106 $37,351,404
Cost of sales......................... 30,805,651 26,867,870
----------- -----------
Gross profit........................ 14,905,455 10,483,534
Operating expenses:
General and administrative expense 3,241,103 2,661,844
Selling expense................... 6,777,591 5,807,037
Relocation expense................ - 225,129
---------- ----------
10,018,694 8,694,010
---------- ----------
Operating income.................... 4,886,761 1,789,524
Interest expense, net................. 924,279 834,207
Other income.......................... - (39,896)
----------- ------------
Income before income taxes........ 3,962,482 995,213
Income tax expense.................... 225,000 71,000
----------- ------------
Net income........................ $ 3,737,482 $ 924,213
=========== ============
Earnings per share:
Basic $ 1.13 $ .33
==== ===
Diluted $ 1.04 $ .31
==== ===
Shares used in computing
earnings per share:
Basic 3,315,510 2,794,168
Diluted 3,596,902 2,950,071
See Notes to (Condensed) Consolidated Financial Statements.
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<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS 6/30/98 9/30/97
- ------ -------- --------
CURRENT ASSETS
Cash............................................ $ 3,028,170 $ 287,580
Accounts receivable (less allowance
of $644,000 at June 30, 1998 and
$493,000 at September 30, 1997)............... 12,185,540 9,578,297
Inventories:
Parts, components, and materials.............. 2,677,978 3,399,133
Work-in-process............................... 2,672,535 2,046,174
Finished products............................. 11,670,631 11,188,217
----------- -----------
17,021,144 16,633,524
Prepaid expenses................................ 285,911 307,580
----------- -----------
TOTAL CURRENT ASSETS............................ 32,520,765 26,806,981
- --------------------
Property, plant and equipment................... 12,396,263 8,362,930
Less accumulated depreciation and amortization.. (5,421,587) (4,870,717)
----------- -----------
6,974,676 3,492,213
Other assets.................................... 778,321 900,417
----------- -----------
TOTAL ASSETS.................................... $40,273,762 $31,199,611
- ------------ =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Borrowings under U.K. revolving credit agreement - 169,006
Current maturities of long-term debt............ 273,971 515,092
Accounts payable:
Related party................................. 5,300,404 7,146,985
Other......................................... 2,438,505 1,407,917
Accrued wages and expenses...................... 2,404,171 2,111,670
Income taxes payable............................ 242,906 105,188
---------- ----------
TOTAL CURRENT LIABILITIES 10,659,957 11,455,858
- -------------------------
Long-term debt:
Related party................................. - 1,440,000
Banks and other............................... 3,536,493 6,904,368
Other long-term liabilities..................... 467,545 485,402
SHAREHOLDERS' EQUITY
Common stock, par value $.01.................... 45,166 30,470
Capital in excess of par value.................. 20,858,629 9,868,063
Retained earnings............................... 5,018,389 1,280,907
------------ -----------
25,922,184 11,179,440
Less treasury stock 60,202 shares and
45,952 shares at cost......................... (391,312) (298,686)
Foreign currency translation adjustment......... 78,895 33,229
------------ -----------
TOTAL SHAREHOLDERS' EQUITY 25,609,767 10,913,983
- -------------------------- ------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $ 40,273,762 $31,199,611
- ------------------------------------------ ============ ===========
See Notes to (Condensed) Consolidated Financial Statements.
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<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
6/30/98 6/30/97
Cash flows from operating activities: -------- --------
Net income..................................... $3,737,482 $ 924,213
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization................ 568,129 587,666
Amortization of gain on sale and leaseback... - (433,993)
Unrealized foreign exchange gain............. - (39,896)
Change in assets and liabilities:
Accounts receivable........................ (2,558,375) (857,330)
Inventories................................ (333,730) (3,534,235)
Prepaid expenses........................... 23,576 162,986
Other assets............................... 122,096 (48,789)
Accounts payable........................... 989,321 130,184
Accrued wages and expenses................. 284,730 708,692
Income taxes payable....................... 135,518 4,020
Other liabilities.......................... (17,857) (46,682)
------------ ------------
Net cash provided by (used in)
operating activities................... 2,950,890 (2,443,164)
------------ ------------
Cash flows from investing activities:
Capital expenditures, net of
minor disposals............................ (4,005,944) (771,553)
------------ ------------
Net cash used in investing activities.... (4,005,944) (771,553)
------------ ------------
Cashflows from financing activities:
(Decrease) increase in borrowings under U.S.
bank credit agreement...................... (6,003,416) 2,065,139
Decrease in borrowings under U.K.
revolving credit agreement................. (172,136) (226,766)
Net proceeds from sale of common stock....... 10,800,916 -
Proceeds from U.S. mortgage and term loans... 2,900,000 -
Proceeds from U.K. term loan................. - 830,000
(Decrease) increase in interest-bearing
accounts payable to related party.......... (1,812,228) 992,258
Repayment of promissory note to related party (1,800,000) (200,000)
Proceeds from exercise of stock options...... 111,720 -
Repayment of U.K. mortgage................... - (353,112)
Repayments of other debt..................... (168,789) (79,912)
------------ ------------
Net cash provided by financing activities.. 3,856,067 3,027,607
------------ -----------
Effect of exchange rate changes on cash.......... (60,423) 86,458
------------ -----------
Net increase (decrease) in cash.................. 2,740,590 (100,652)
Cash at beginning of year........................ 287,580 205,876
------------ -----------
Cash at end of period............................ $ 3,028,170 $ 105,224
============ ===========
See Notes to (Condensed) Consolidated Financial Statements.
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<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO (CONDENSED) CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1998
Note 1: Basis of Presentation
- ------------------------------
The accompanying unaudited (condensed) consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended June 30,
1998 are not necessarily indicative of the results that may be expected for the
fiscal year ended September 30, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the fiscal year ended September 30,
1997.
Note 2: Earnings per Share
- ---------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share" which
requires companies to present basic and diluted earnings per share (EPS) instead
of primary and fully diluted EPS that was previously required. Basic EPS are
computed based on the weighted average number of shares outstanding for the
period. Diluted EPS reflect the maximum dilution that would have resulted from
the exercise of stock options and incremental shares issuable under a deferred
compensation agreement. The new standard was initially adopted by the Company in
the quarter ended December 31, 1997. All EPS figures for prior periods reported
have been restated. The following table provides the components of the basic and
diluted earnings per share (EPS) computations:
For the Three Months For the Nine Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
(Unaudited) (Unaudited)
Basic EPS Computation
Net income..................... $1,574,477 $ 542,974 $3,737,482 $ 924,213
Weighted average
shares outstanding............ 3,900,699 2,802,728 3,315,510 2,794,168
Basic earnings per share....... $ .40 $ .19 $ 1.13 $ .33
========== ========== ========== ==========
Diluted EPS Computation
Net income..................... $1,574,477 $ 542,974 $3,737,482 $ 924,213
Weighted average
shares outstanding............ 3,900,699 2,802,728 3,315,510 2,794,168
Stock options.................. 251,401 246,607 273,597 155,903
Stock compensation
arrangement................... 10,532 - 7,795 -
--------- ---------- ---------- ----------
Diluted shares outstanding..... 4,162,632 3,049,335 3,596,902 2,950,071
Diluted earnings per share..... $ .38 $ .18 $ 1.04 $ .31
========== ========== ========== ==========
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<PAGE>
Note 3: Common Stock Offering
- ------------------------------
In May 1998, the Company sold an additional 1,371,200 shares of its Common Stock
in a public offering, the net proceeds of which were approximately $10.8
million. The proceeds were principally used to repay borrowings under the U.S.
bank credit agreement, the related party term loan and certain interest-bearing
accounts payable.
Note 4: Subsequent Event
- -------------------------
In July 1998, the Company entered into a $14 million unsecured revolving credit
and term loan agreement with a new bank. Such agreement includes a $7.5 million
revolving credit facility which expires in July 2002, with an option to increase
the facility to $9.5 million at any time through July 2000. Borrowings under the
facility bear interest at the bank's prime rate minus 2% or, at the Company's
option, LIBOR plus 90 basis points (6.50% and 6.56%, respectively, at July 20,
1998). The agreement also provides for a $4.5 million five year term loan
payable in equal monthly installments through July 2003, with interest at LIBOR
plus 1%. The proceeds of the term loan were used to repay interest-bearing
accounts payable to a related party.
The agreement contains restrictive covenants which, among other things, require
the Company to maintain certain levels of earnings and ratios of debt service
coverage and debt to tangible net worth.
-7-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Three Months Ended June 30, 1998 Compared with June 30, 1997
- ------------------------------------------------------------
Net sales for the quarter ended June 30, 1998 increased $2.4 million or 17% to
$16.1 million compared with $13.7 million in the year ago period. The sales
growth was experienced in the U.S. as domestic sales increased $2.6 million or
28% to $11.7 million principally as a result of system sales supplied under a
contract with the U.S. Postal Service entered into in July 1997. International
sales declined $196,000 or 4% to $4.4 million due to lower sales in Asia.
Gross profit margins for the third quarter of 1998 increased to 33.8% compared
with 28.5% in the year ago period. The margin improvement was primarily the
result of a better sales mix of higher margin products, lower procurement costs
for certain video products and greater fixed cost absorption associated with the
sales growth.
Operating expenses for the third quarter of 1998 were $3.6 million or 22.2% of
net sales compared with $3.0 million or 22.2% of net sales in the year ago
period. The increase was principally the result of higher selling expenses
associated with the sales growth and profit related bonus accruals.
Operating income rose to $1.9 million for the third quarter of 1998 compared
with $862,000 in the year ago period as a result of increased sales, higher
gross margins and greater absorption of fixed operating expenses.
Interest expense decreased $79,000 to $230,000 for the third quarter of 1998 as
$9.0 million of interest-bearing debt was repaid in May 1998 with the net
proceeds from a public stock offering.
Income tax expense was $75,000 for the third quarter of 1998 compared with
$16,000 in the year ago period. In both periods, the Company utilized net
operating loss ("NOL") carryforwards to substantially offset federal and state
taxable income. The nominal tax provision related primarily to foreign
subsidiary income.
As a result of the foregoing, net income increased to $1.6 million for the third
quarter of 1998 compared with net income of $543,000 for the year ago period.
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Nine Months Ended June 30, 1998 Compared with June 30, 1997
- -----------------------------------------------------------
Net sales for the nine months ended June 30, 1998 increased $8.3 million or 22%
to $45.7 million compared with $37.4 million in the year ago period. The sales
growth was experienced principally in the U.S. as domestic sales increased $7.7
million or 33% to $31.2 million principally as a result of system sales supplied
under a contract with the U.S. Postal Service entered into in July 1997 and
sales from a new line of dome cameras introduced in February 1997. International
sales increased $637,000 or 5% to $14.5 million. The increase was due to greater
system sales and sales to a private label customer in Europe. International
growth was limited as a result of lower sales in Asia. The backlog of unfilled
orders was $11.4 million at June 30, 1998 compared with $4.4 million at June 30,
1997.
Gross profit margins for the first nine months of 1998 increased to 32.6%
compared with 28.1% in the year ago period. The margin improvement was primarily
the result of a better sales mix of higher margin products, lower procurement
costs and greater fixed cost absorption associated with the sales growth.
Operating expenses for the first nine months of 1998 were $10.0 million or 21.9%
of net sales compared with $8.5 million or 22.7% of net sales in the year ago
period, exclusive of relocation expense. The increase was principally the result
of higher selling expenses associated with the sales growth and profit related
bonus accruals.
Operating income rose to $4.9 million for the first nine months of 1998 compared
with $1.8 million in the year ago period as a result of increased sales, higher
gross margins and greater absorption of fixed operating expenses.
Interest expense increased $90,000 to $924,000 principally as a result of higher
borrowing levels during the first six months of 1998.
Income tax expense was $225,000 for the first nine months of 1998 compared with
$71,000 in the year ago period. In both periods, the Company utilized NOL
carryforwards to substantially offset federal and state taxable income. As of
June 30, 1998, the remaining NOL was approximately $.5 million for federal
income tax purposes. The nominal tax provision relates primarily to foreign
subsidiary income.
As a result of the foregoing, net income increased to $3.7 million for the first
nine months of 1998 compared with net income of $924,000 for the year ago
period.
-9-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND FINANCIAL CONDITION
- ---------------------------------
Net cash provided by operating activities was $3.0 million for the first nine
months of 1998 due primarily to the $3.7 million net income reported for the
period and an increase in accounts payable, offset in part by an increase in
accounts receivable due to higher sales activity. Net cash used in investing
activities was $4.0 million for the first nine months of 1998 as a result of the
Company's purchase of its principal operating facility for $3.3 million and
capital expenditures for tooling and office equipment. Net cash provided by
financing activities was $3.9 million, which includes $10.8 million of net
proceeds received from a public stock offering in May 1998 and $2.9 million of
proceeds from mortgage loans used to finance the facility purchase. These
inflows were partially offset by a $6.0 million reduction of borrowings under
the U.S. Bank Credit Agreement and the repayment of a $1.8 million term loan and
$1.8 million of interest-bearing accounts payable to a related party. As a
result of the foregoing, the net increase in cash was $2.7 million for the first
nine months of 1998 after the nominal effect of exchange rate changes on the
cash position of the Company.
The Company maintains a bank overdraft facility of 600,000 Pounds Sterling
(approximately $1,002,000) in the U.K. to support local working capital
requirements of Vicon U.K. At June 30, 1998, there were no outstanding
borrowings under this facility.
In July 1998, the Company entered into a $14 million unsecured revolving credit
and term loan agreement with a new bank. Such agreement includes a $7.5 million
revolving credit facility which expires in July 2002, with an option to increase
the facility to $9.5 million at any time through July 2000. Borrowings under the
facility bear interest at the bank's prime rate minus 2% or, at the Company's
option, LIBOR plus 90 basis points (6.50% and 6.56%, respectively, at July 20,
1998). The agreement also provides for a $4.5 million five year term loan
payable in equal monthly installments through July 2003, with interest at LIBOR
plus 1%. The proceeds of the term loan were used to repay all interest-bearing
accounts payable to a related party. The agreement contains restrictive
covenants which, among other things, require the Company to maintain certain
levels of earnings and ratios of debt service coverage and debt to tangible net
worth.
The Company believes that cash flow from operations and funds available under
its credit agreements will be sufficient to meet its anticipated operating,
capital expenditures and debt service requirements for at least the next twelve
months.
Year 2000
- ---------
The Company's software-based products have been tested for year 2000 compliance
and the Company believes that such products are year 2000 compatible. With
respect to its own computer operating systems, the Company is in the process of
upgrading its principal operating computer software to the most recent available
revisions sold by its software suppliers, which the suppliers have represented
to be year 2000 compliant. The Company believes that such upgrades will identify
and solve those year 2000 problems that could affect its operating software and
can be accomplished before the year 2000 at a reasonable cost. It is possible
that certain computer systems or software products of the Company's customers or
suppliers may experience year 2000 problems and that such problems could
adversely affect the Company. The Company is in the process of assessing the
status of its principal suppliers' year 2000 readiness and their plans to
address problems that their computer systems may face in correctly processing
date information as the year 2000 approaches. However, since the ultimate
success of the Company's customers and suppliers to become compliant is largely
outside of the Company's control, no assurances can be made that the Company
will be unaffected by the year 2000.
-10-
<PAGE>
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995
- -----------------------------------------------------------------------------
Statements in this Report on Form 10-Q and other statements made by the Company
or its representatives that are not strictly historical facts including, without
limitation, statements included herein under the captions "Liquidity and
Financial Condition" and "Year 2000" are "forward-looking" statements within the
meaning of the Private Securities Litigation Reform Act of 1995 that should be
considered as subject to the many risks and uncertainties that exist in the
Company's operations and business environment. The forward-looking statements
are based on current expectations and involve a number of known and unknown
risks and uncertainties that could cause the actual results, performance and/or
achievements of the Company to differ materially from any future results,
performance or achievements, express or implied, by the forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, and that in light of the significant uncertainties
inherent in forward-looking statements, the inclusion of such statements should
not be regarded as a representation by the Company or any other person that the
objectives or plans of the Company will be achieved. The Company also assumes no
obligation to update its forward-looking statements or to advise of changes in
the assumptions and factors on which they are based.
-11-
<PAGE>
PART II
ITEM 1 - LEGAL PROCEEDINGS
- ------ -----------------
The Company has no material outstanding litigation.
ITEM 2 - CHANGES IN SECURITIES
- ------ ---------------------
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
- ------ -------------------------------
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
None
ITEM 5 - OTHER INFORMATION
- ------ -----------------
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
- ------ --------------------------------
EXHIBIT
NUMBERS DESCRIPTION
- ------- -----------
10 Material Contracts
(.1) Advice of borrowing terms between the Registrant and National
Westminster Bank PLC dated March 27, 1998.
(.2) Credit Agreement between the Registrant and KeyBank National
Association dated July 20, 1998.
No Form 8-K was required to be filed during the current quarter.
-12-
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 13, 1998
VICON INDUSTRIES, INC.
Kenneth M. Darby Arthur D. Roche
President Executive Vice President
Chief Executive Officer Chief Financial Officer
-13-
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 13, 1998
VICON INDUSTRIES, INC.
VICON INDUSTRIES, INC.
Kenneth M. Darby Arthur D. Roche
Kenneth M. Darby Arthur D. Roche
President Executive Vice President
Chief Executive Officer Chief Financial Officer
ADVICE OF BORROWING TERMS Ref: CM RM03
BRANCH/UNIT: National Westminster Bank PLC
4th Floor, Society Building,
176 London Road, Portsmouth, PO2 9DR
DATE: 27 March 1998
BORROWER'S NAME: VICON INDUSTRIES (UK) LIMITED (Registered Number 1551194)
Brunel Way, Fareham, Hants PO15 5TX
(This letter replaces the Advice of Borrowing Terms letter dated 22 April 1997)
Subject to the Bank's rights below and subject to the Bank's rights under the
`General terms upon which the Bank makes facilities available', it is the Bank's
current intention that the facilities specified in this `Advice of Borrowing
Terms' (except for those facilities which are subject to their own separate
facility documentation covered below under `Facilities subject to separate
documentation') should remain available until 27 March 1999.
FACILITY 1:
Facility Type: Overdraft.
Amount: (pound)600,000 (Six hundred thousand pounds).
Purpose: Working capital requirements.
Repayment: Fully fluctuating.
1st Debit Interest Rate: 2% per annum above NatWest's Base Rate from time to
time.
2nd Debit Interest Rate: (Applicable above(pound)600,000) 5% per annum above
NatWest's Base Rate.
Payable: Quarterly.
<PAGE>
REPAYMENT:
It is the Bank's current intention that the facilities should be reviewed by the
dates indicated herein. However, all amounts outstanding under the facilities
are repayable on demand, which may be made by the Bank at its sole discretion at
any time. The facilities may also, by notice, be withdrawn, reduced or made
subject to further conditions or otherwise varied.
INTEREST:
All rates specified above are variable. If the interest rate specified above is
not linked to the Bank's Base Rate, interest will be charged initially at the
rate per annum specified above, which may vary from time to time at the Bank's
absolute discretion. Details of the current rates are available from the branch
or office where the facility is provided.
Interest on any indebtedness from time to time in excess of agreed facilities
will be charged at the interest rate detailed above. An excess fee will be
charged at the Bank's published rate from time to time (currently (pound)3.50
per day) for each day that your agreed overdraft limit is exceeded . The Bank is
not obliged to allow (or to continue to allow) any such excess borrowing.
The Bank may alter the basis upon which interest is calculated (including the
size of the margin charged over the Bank's Base Rate or other published rate) on
facilities and/or the amount of any regular repayments of facilities which are
repayable on demand (or by notice), but it will give the customer one month's
notice before doing so.
OTHER FACILITIES:
Facility Type: Forward Exchange Liability.
Amount: (pound)200,000 (represents 10% of contract).
Facility Type: Terminable Indemnities (T/I).
Amount: (pound)200,000.
Purpose: HM Customs & Excise Duty Deferment Bond.
Facility Type: Inward Collections - Documents Release in Trust
Amount: (pound)20,000.
These facilities may by notice be withdrawn, reduced or made subject to further
conditions or otherwise varied.
<PAGE>
SECURITY:
The Bank continues to rely on its existing security (and requires additional
security where specified) detailed below for the discharge on demand of all
present and future liabilities (both actual and contingent) of the Borrower(s)
to the Bank. The liabilities secured will include without limitation, all
liabilities, of the Borrower to the Bank under the facility or facilities
specified in this Advice of Borrowing Terms including those which are listed
below under the heading `Facilities subject to separate documentation'.
From time to time the Bank may wish to revalue the security and the cost of any
valuations required by the Bank will be met by the Borrower. Further information
is included in the `General terms upon which the Bank makes facilities
available'.
Date Executed/New Title of Security Asset
- ------------------ -------------------------- ------------------------------
6 July 1989 Guarantee(pound)1,000,000 Given by Vicon Industries Inc.
17 October 1990 Mortgage Debenture Capturing all assets of the
company.
9 April 1997 First Legal Mortgage Site P3, Brunel Way,
Segensworth Industrial Estate,
Fareham.
FEES:
Type: Overdraft renewal fee.
Amount: (pound)1,850 (from account 01144642 560064).
Date to be debited: 15 April 1998 (last annual fee was paid on 27 March 1997).
OTHER CONDITIONS:
Please continue to provide monthly management accounts in the existing
format, together with aged debtor profile.
Lending formulae to continue whereby: 1) Debtors less than 90 days plus
stock (minus preferentials) to cover overdraft by 250%, 2) Debtors alone
less than 90 days to provide 150% cover of overdraft.
FACILITIES SUBJECT TO SEPARATE DOCUMENTATION
Facility Type: Commercial Fixed Rate Loan
Amount: Balance(pound)454,167 plus interest (Originally(pound)500,000
drawndown 14 April 1997)
<PAGE>
GENERAL TERMS:
Please note that all facilities specified in this `Advice of Borrowing Terms'
are made available subject to the `General terms upon which the Bank makes
facilities available', except for those subject to separate facility
letters/agreement forms which do not expressly incorporate the General Terms.
Please note that all facilities are also subject to any terms which may be
implied by English Law.
John McLellan
Corporate Manager
The Borrower confirms acceptance of the above terms and conditions pursuant to a
30 - 3 - 98
Resolution of the Board of Directors on .......................................
Chris Wall
BORROWER'S SIGNATURE: ......................................................
For and on behalf of
Vicon Industries (UK) Limited
30th March 1998
...........................................................Date
$14,000,000
CREDIT AGREEMENT
July 20, 1998
between
VICON INDUSTRIES, INC.
and
KEYBANK NATIONAL ASSOCIATION
<PAGE>
CREDIT AGREEMENT (the "Agreement") dated July 20, 1998 between Vicon
Industries, Inc., 89 Arkay Drive, Hauppauge, New York 11788 ("Borrower") and
KeyBank National Association, 1377 Motor Parkway, Islandia, New York 11788, a
national banking association (the "Bank").
Borrower desires that the Bank extend credit to it as provided
herein, and the Bank is willing to do so. Accordingly, Borrower and the Bank
agree as follows:
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS.
Section 1.01. Definitions. As used in this Agreement, the
following terms have the following meanings:
"Acquisition" means any transaction pursuant to which Borrower or
any of its Subsidiaries (a) acquires equity securities (or warrants, options or
other rights to acquire such securities) of any corporation, partnership,
limited liability company or other business organization, or any Person which is
not then a Subsidiary of Borrower, pursuant to a solicitation of tenders
therefor, or in one or more negotiated block, market or other transactions not
involving a tender offer, or a combination of any of the foregoing, or (b) makes
any Person not then a Subsidiary of Borrower a Subsidiary of Borrower, or causes
any such Person to be merged into or purchased by Borrower or any of its
Subsidiaries, in any case pursuant to a merger, purchase of assets or any
reorganization providing for the delivery or issuance to the holders of such
Person's then outstanding securities, in exchange for such securities, of cash
or securities of Borrower or any of its Subsidiaries, or a combination thereof,
or (c) purchases all or substantially all of the business or assets of any
Person.
"Additional Costs" shall have the meaning given to that term in
Section 4.01 hereof.
"Affiliate" means, with respect to any Person, any Person (a) that
directly or indirectly controls, or is controlled by, or is under common control
with, such Person, (b) that directly or indirectly beneficially owns or holds 5%
or more of any class of voting stock of such Person, (c) 5% or more of the
voting stock of which is directly or indirectly beneficially owned or held by
such Person, (d) which is a partnership or limited liability company in which
such Person is respectively a general partner or manager or (e) who is among
such Person's officers, directors joint venturers, managers or partners. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.
"Aggregate Bankers Acceptance Outstandings" means, at a particular
time, the sum of aggregate amount of Bankers Acceptances created by the Bank for
Borrower hereunder.
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<PAGE>
"Aggregate Letters of Credit Outstandings" means, at a particular
time, the sum of (a) the aggregate maximum amount then available or available in
the future to be drawn under all outstanding Letters of Credit plus (b) the
aggregate amount of any payments made by the Bank under any Letter of Credit
that have not been reimbursed by the Borrower.
"Aggregate Outstandings" means, at a particular time, the sum of (a)
the aggregate outstanding principal balance of all Revolving Credit Loans, (b)
the Aggregate Letters of Credit Outstandings and (c) the Aggregate Bankers
Acceptance Outstandings.
"Agreement" means this Credit Agreement, as amended or supplemented
from time to time.
"Amortization" means amortization as determined in accordance with GAAP.
"Bank" means KeyBank National Association and its successors and assigns.
"Bankers Acceptances" means bankers' acceptances established by the
Bank hereunder which satisfy eligibility requirements established by the Board
of Governors of the Federal Reserve System from time to time.
"Banking Day" means any day on which commercial banks are not
authorized or required to close in New York State, and whenever such day relates
to a LIBOR Loan or notice with respect to any LIBOR Loan, a day on which
dealings in dollar deposits are also carried out in the London interbank market.
"Capital Expenditures" means expenditures for any fixed assets or
improvements, replacements, substitutions, or additions thereto which have a
useful life of more than one year.
"Capital Lease" means any lease which is required to be capitalized
on the balance sheet of the lessee in accordance with GAAP.
"Chun Shin" means Chun Shin Industries, Inc., a corporation formed
under the laws of the Republic of Korea.
"Chun Shin Acquisition Debt" is defined in the definition below for
Debt Coverage Ratio.
"Closing Date" means the date this Agreement has been executed by
Borrower and the Bank.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
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<PAGE>
"Current Chun Shin Acquisition Debt" is defined in the definition
below for Debt Coverage Ratio.
"Current Debt" means, on the date of determination with respect to
any Person, that portion of such Person's long term debt, including Capital
Leases and the outstanding principal balance of the Term Loan, that is due and
payable within the next 12 months. Current Debt shall exclude all Revolving
Credit Loans.
"Debt" means, with respect to any Person (a) indebtedness of such
Person for borrowed money, (b) indebtedness relating to the acquisition of
property where the full purchase price is not paid at the time such property is
acquired but is required to be paid, in whole or in part, thereafter (excluding
trade debt and accounts payable), (c) the face amount of any outstanding letters
of credit issued for the account of such Person, (d) obligations arising under
acceptance facilities, (e) guaranties and endorsements (other than endorsements
for collection in the ordinary course of business) under which such Person has a
direct, non-contingent payment or performance obligation, (f) other direct,
non-contingent obligations to purchase, to provide funds for payment, to supply
funds to invest in any Person, or otherwise to assure a creditor against loss,
(g) obligations secured by any Lien on property of such Person, (h) obligations
of such Person as lessee under Capital Leases and (i) indebtedness of such
Person evidenced by a note, bond, indenture or similar instrument.
"Debt Coverage Ratio" means (a) the consolidated EBITDA of Borrower
and its Subsidiaries, minus any cash Dividends paid or declared to be paid to
shareholders of Borrower for the prior 12 month period, (b) divided by the sum
of the Current Debt (including Current Chun Shin Acquisition Debt, except as
provided below) and Interest Expense of Borrower and its Subsidiaries all on a
consolidated basis, as determined at the end of each fiscal quarter, based upon
Borrower's financial statements delivered in accordance with Section 8.08. If
Borrower completes an Acquisition of Chun Shin under terms where all or part of
the Acquisition price is payable following consummation of the Acquisition
("Chun Shin Acquisition Debt"), and if, at the date of determination of Debt
Coverage Ratio, the amount of the Revolving Credit Commitment then available to
Borrower hereunder equals or exceeds that portion of the Chun Shin Acquisition
Debt which is due and payable within the next 12 months ("Current Chun Shin
Acquisition Debt"), then 50% of the Current Chin Shin Acquisition Debt shall be
excluded from Current Debt for the purposes of computing the Debt Coverage
Ratio.
"Default" means any event which with the giving of notice or lapse
of time, or both, would become an Event of Default.
"Default Rate" means, with respect to the principal of any Loan and,
to the extent permitted by law, any other amount payable by Borrower under this
Agreement or the Notes, a rate per annum equal to the Prime Rate plus a margin
of 2%.
"Depreciation" means depreciation as determined in accordance with GAAP.
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<PAGE>
"Dividends" means, for any period, dividends paid by Borrower or any
Subsidiary during such period.
"Domestic Subsidiary" means a Subsidiary which is formed under the
laws of any United States jurisdiction and which has its principal office and
business operations in the United States.
"EBITDA" means, for any period, the sum of (a) Net Income, (b)
income taxes paid or payable to any government or government instrumentality,
(c) all Interest Expense paid or accrued on any Debt, (d) Depreciation and (e)
Amortization during such period.
"Environmental Laws" means (i) the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), (ii) the Resource
Conservation and Recovery Act ("RCRA"), (iii) the Federal Water Pollution
Control Act, (iv) the Clean Air Act, (v) the Toxic Substances Control Act, (vi)
the Safe Drinking Water Act, (vii) the Occupational Safety and Health Act of
1970, and (viii) the New York State Environmental Conservation Law ("ECL"),
Articles 1 through 71, (ix) the Hazardous Material Transportation Act, and (x)
any so-called federal, state or local "Superfund" or "Superlien" laws and (b)
any and all other laws, rules or regulations, relating to or imposing liability,
including without limitation (i) strict liability, (ii) standards of conduct
concerning hazardous materials, (iii) protection of the environment (including,
without limitation, air, surface water, ground water, or soil), including,
without limitation, any of the same relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, including any rules and regulations promulgated
thereunder.
"ERISA Affiliate" means any corporation or trade or business which
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as Borrower or is under common control (within the
meaning of Section 414(c) of the Code) with Borrower.
"Event of Default" has the meaning given such term in Section 11.01.
"Facility Fee" means the fee described in Section 2.09 hereof.
"Forfeiture Proceeding" means the commencement of any prejudgment
action or proceeding affecting Borrower or any of its Subsidiaries pursuant to
any statute, rule or regulation which permits any governmental agency or
instrumentality to obtain a prejudgment seizure or forfeiture of any of their
property.
- 4 -
<PAGE>
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, applied on a basis consistent
with those used in the preparation of the financial statements referred to in
Section 7.05.
"Guaranty" means the Guaranty in the form of Exhibit B to be
executed by each of the Guarantors.
"Guarantors" means Vicon Industries International Sales Corp.,
Vicon Industries Foreign Sales Corp. and each future Subsidiary which is
required to become a party to the Guaranty in accordance with Section 9.10
hereof.
"Hazardous Substance" means any substance, waste or material
regulated under by any Environmental Law, and any substance which, due to its
toxicity or reactivity (as determined by any court, governmental or regulatory
authority or agency having jurisdiction or interpretative power thereon), poses
a threat to human health or the environment, including, but not limited to, all
materials, wastes, substances, pollutants and contaminants from time to time
defined or classified as such under any Environmental Law.
"Interest Expense" means interest expense of Borrower and its
Subsidiaries on a consolidated basis for a particular period as reflected in its
financial statements and calculated in accordance with GAAP.
"Interest Period" means the period commencing on the date a LIBOR
Loan is made (or, with respect to a LIBOR Loan that represents the continuation
of a previous LIBOR Loan, the day immediately following the last day of the
Interest Period of such previous LIBOR Loan), and ending, as Borrower may select
on the 30th, 60th or 90th day thereafter, provided that no Interest Period shall
extend beyond the Revolving Credit Termination Date.
"Letters of Credit" means any letter of credit issued by the Bank
for Borrower pursuant to the terms of this Agreement.
"LIBOR" means, for any LIBOR Loan, the rate per annum (rounded
upwards if necessary to the nearest 1/16 of 1%) quoted by the Bank two Banking
Days prior to the first day of the Interest Period for such Revolving Credit
Loan for the offering to leading banks in the London interbank market of U.S.
dollar deposits in immediately available funds, for a period, and in an amount,
comparable to such Interest Period and principal amount of the LIBOR Loan which
shall be outstanding during such Interest Period.
"LIBOR Loan" means any Revolving Credit Loan when and to the extent
the interest rate therefor is determined on the basis of LIBOR.
"Lien" means any lien (statutory or otherwise), security interest,
mortgage, deed of trust, priority, pledge, charge, conditional sale, title
retention agreement, Capital Lease or other encumbrance or similar right of
others, or any agreement to give any of the foregoing.
- 5 -
<PAGE>
"Loan" means any loan made by the Bank pursuant to Section 2.01 or
3.01 hereof.
"Loan Documents" means this Agreement, the Notes, the Guaranty and
all other documents or instruments executed in connection herewith or therewith.
"Multiemployer Plan" means a Plan defined as such in Section
4001(a)(3) of ERISA to which contributions have been made by Borrower or any
ERISA affiliate and which is covered by Title IV of ERISA.
"Net Income" means, with respect to any Person for any period, such
Person's net income after taxes for such period as reflected on such Person's
financial statements.
"Notes" mean the Revolving Credit Note and the Term Note.
"Notice of Borrowing" means the document signed by an officer of
Borrower in the form annexed as Exhibit D.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, limited liability company, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
"Plan" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by Borrower or any ERISA
Affiliate and which is covered by Title IV of ERISA or to which Section 412 of
the Code applies provided that such term shall not include plans terminated
prior to the date hereof.
"Prime Rate" means that rate of interest from time to time
determined or announced by the Bank at its Principal Office from time to time as
its base lending rate. The Prime Rate is not necessarily the lowest rate of
interest charged by the Bank on loans or other credit relationships.
"Prime Rate Loans" mean any Revolving Credit Loan when and to the
extent the interest rate for such Revolving Credit Loan is determined in
relation to the Prime Rate.
"Principal Office" means the principal office of the Bank, presently
located at 127 Public Square, Cleveland, Ohio.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
- 6 -
<PAGE>
"Regulatory Change" means any change after the date of this
Agreement in federal, state, municipal or foreign laws or regulations (including
Regulation D) or the adoption or making after such date of any interpretations,
directives or requests applying to a class of banks including the Bank of any
federal, state, municipal or foreign laws or regulations (whether or not having
the force of law) by any court or governmental or monetary authority charged
with the interpretation or administration thereof.
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA as to which events the PBGC by regulation has not waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided that a failure to meet the minimum
funding standard of Section 412 of the Code or Section 302 of ERISA shall be a
Reportable Event regardless of any waivers given under Section 412(d) of the
Code.
"Revolving Credit Commitment" means the obligation of the Bank to
extend revolving credit to Borrower in accordance with the terms hereof in the
aggregate principal amount not to exceed $7,500,000, or if Borrower elects under
Section 2.06 to increase the Revolving Credit Commitment, $9,500,000, as such
amount may be reduced or otherwise modified from time to time in accordance with
the terms hereof.
"Revolving Credit Facility" means the Revolving Credit Facility
provided for in Article II hereof.
"Revolving Credit Loans" mean any Loan made by the Bank pursuant to
Section 2.01 hereof.
"Revolving Credit Note" means a promissory note of Borrower in the
form of Exhibit A-1 evidencing the Revolving Credit Loans made by the Bank
hereunder.
"Revolving Credit Termination Date" means the earlier of (i) the
date on which the Revolving Credit Loan is paid in full and the Revolving Credit
Commitments shall terminate hereunder and the obligations of Borrower in
connection therewith have been satisfied or (ii) the date four years from the
date hereof unless such date is not a Banking Day, then the next succeeding
Banking Day.
"Solvent" means, when used with respect to any Person on a
particular date, that on such date (a) the fair saleable value of its assets is
in excess of the total amount of its liabilities, including, without limitation,
the reasonably expected amount of such Person's obligations with respect to
contingent liabilities, (b) the present fair saleable value of the assets of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its Debts as they become absolute and
matured, (c) such Person does not intend to and does not believe that it will
incur Debts or liabilities beyond such Person's ability to pay as such Debts and
liabilities mature and (d) such Person is not engaged in business or a
transaction, for which such Person's property, would constitute an unreasonably
small capital.
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<PAGE>
"Subsidiary" means, as to any Person, any corporation, partnership,
limited liability company or other business organization or entity of which at
least a majority of the securities or other ownership interests having ordinary
voting power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by such Person. For the purposes of the financial covenants set forth
in Article 10 and the definitions of Current Debt, Debt, Debt Coverage Ratio,
EBITDA, Interest Expense, Net Income, Tangible Net Worth, Total Assets and Total
Liabilities, the balance sheet information and results of operations of Vicon
U.K. and any other Subsidiary which is not a Guarantor shall be excluded.
"Tangible Net Worth" means, at any particular date, the amount of
excess of Total Assets over Total Liabilities which would, in accordance with
GAAP, be included under shareholders' equity on a consolidated balance sheet of
Borrower and its Subsidiaries as at such date. There shall be excluded from the
determination of Total Assets all intangible assets, including, without
limitation, organizational expenses, patents, trademarks, copyrights, goodwill,
covenants not to compete, research and developmental costs, training costs,
treasury stock, deferred charges and any loans receivable from officers or
Affiliates, other than loans receivable from Affiliates incurred as a result of
sales of goods in the ordinary course of business.
"Term Loan" means the Loan to Borrower pursuant to Section 3.01.
"Term Loan Commitment Fee" means the fee described in Section 3.07.
"Term Loan Maturity Date" means July 21, 2003.
"Term Loan Note" means the promissory note of Borrower in the form
of Exhibit A-2 evidencing a Term Loan made by the Bank hereunder.
"Total Assets" means, at a particular date, all amounts which would,
in accordance with GAAP, be included under assets on a consolidated balance
sheet of Borrower and its Subsidiaries as at such date.
"Total Liabilities" means, at a particular date, all amounts which
would, in accordance with GAAP, be included under liabilities on a consolidated
balance sheet of Borrower and its Subsidiaries as at such date.
"Unfunded Vested Liabilities" means, with respect to any Plan, the
amount (if any) by which the present value of all vested benefits under the Plan
exceeds the fair market value of all Plan assets allocable to such benefits, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA for calculating the potential liability of Borrower or
any ERISA Affiliate to the PBGC or the Plan under Title IV of ERISA.
"Vicon U.K." means Vicon Industries (U.K.), Ltd., a corporation
formed under the laws of the United Kingdom.
- 8 -
<PAGE>
Section 1.02. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP, and all
financial data required to be delivered hereunder shall be prepared in
accordance with GAAP.
ARTICLE 2. REVOLVING CREDIT FACILITY
Section 2.01. Revolving Credit Loans.
(a) Subject to the terms and conditions of this Agreement, the Bank
agrees to make Revolving Credit Loans to Borrower from time to time from and
including the date hereof to but excluding the Revolving Credit Termination Date
up to but not exceeding at any one time outstanding the amount of its Revolving
Credit Commitment; provided, that no Revolving Credit Loan shall be made if,
after giving effect to such Revolving Credit Loan, the Aggregate Outstandings at
the time would exceed the Revolving Credit Commitment in effect on such date.
The Revolving Credit Loans may be Prime Rate Loans or LIBOR Loans at Borrower's
option; provided, however, that during the occurrence and continuance of an
Event of Default, the Bank shall have no obligation to make any Revolving Credit
Loans. Subject to the foregoing limits, Borrower may borrow, repay and reborrow,
on or after the date hereof and prior to the Revolving Credit Termination Date,
all or a portion of the Revolving Credit Commitment hereunder.
(b) If at any time for any reason the Aggregate Outstandings exceed
the amount of the Revolving Credit Commitment, Borrower shall pay the amount of
such excess to the Bank immediately on demand. The amount of the Revolving
Credit Commitment available to Borrower is subject to reduction as provided in
Section 9.01.
Section 2.02. The Revolving Credit Note. The Revolving Credit Loans
shall be evidenced by a single Revolving Credit Note in favor of the Bank
substantially in the form of Exhibit A-1 with appropriate insertions, duly
executed and completed by Borrower. The Bank is authorized to record the date,
type and amount of each Revolving Credit Loan, the date and amount of each
payment or prepayment of principal thereof, the date of each interest rate
conversion pursuant to Section 2.05 and the principal amount subject thereto and
the Interest Period and interest rate with respect thereto in its records or on
the schedules annexed to and constituting a part of the Revolving Credit Note,
and, absent manifest error, any such recordation shall constitute conclusive
evidence of the information so recorded; provided that the failure to make any
such recordation shall not in any way affect Borrower's obligation to repay the
Revolving Credit Loans. The Revolving Credit Note shall (a) be dated the date
hereof, (b) mature on the Revolving Credit Termination Date and (c) bear
interest from and including the date hereof on the unpaid principal amount
thereof from time to time outstanding as provided herein.
Section 2.03. Use of Revolving Credit Proceeds.
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<PAGE>
(a) Borrower shall use the proceeds of the Revolving Credit Loans
(i) for general working capital purposes and letters of credit, (ii) subject to
the sublimit described in Section 2.08, to finance Acquisitions permitted under
Section 9.07 and (iii) for investments and advances permitted under Section
9.03. Borrower may not advance any proceeds from a Revolving Credit Loan to any
Subsidiary or Affiliate unless it is a Guarantor.
(b) No part of the proceeds of any Loans will be used for any
purpose which violates the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System as in effect on the date of making such
Loans.
(c) Borrower shall indemnify the Bank and hold it harmless from and
against any and all liabilities, losses, damages, costs and expenses (including,
without limitation, the reasonable fees and disbursements of counsel for the
Bank in connection with any investigative, administrative or judicial
proceeding, whether or not the Bank is designated a party thereto) which may be
incurred by the Bank, relating to or arising out of this Agreement or any actual
or proposed use of proceeds of Loans hereunder; provided, that the Bank shall
not have the right to be indemnified hereunder for its own gross negligence or
willful misconduct.
Section 2.04. Borrowing Procedures for Revolving Credit Loans.
Borrower may request a borrowing under the Revolving Credit Commitment as
provided in Section 4.01. Not later than 11:00 a.m. New York City time on the
date of such borrowing as stated in a Notice of Borrowing, subject to the
conditions of this Agreement, the Bank shall make available to Borrower, in
immediately available funds, the amount of such Revolving Credit Loan by
crediting a designated account of Borrower maintained with the Bank.
Section 2.05. Interest on Revolving Credit Loans.
(a) Prime Rate Loans. Borrower shall pay interest on the outstanding
and unpaid principal amount of each Prime Rate Loan made under this Agreement at
a fluctuating rate per annum equal to the Prime Rate from time to time in
effect, minus a margin of 200 basis points. Each change in the interest rate
shall take effect simultaneously with the corresponding change in the Prime
Rate. Borrower shall pay interest on Prime Rate Loans in arrears on the first
day of each month and on the Revolving Credit Termination Date, calculated on
the basis of the actual number of days elapsed divided by a 360 day year. Any
principal amount not paid when due (at maturity, on acceleration, or otherwise)
shall bear interest thereafter until paid at the Default Rate.
(b) LIBOR Loans. Borrower shall pay interest on the outstanding
principal amount of each LIBOR Loan made under this Agreement at a fixed rate
equal to LIBOR plus a margin of 90 basis points. Borrower shall pay interest on
LIBOR Loans calculated on the basis of the actual number of days elapsed divided
by a 360 day year. Any principal amount not paid when due (at maturity or
acceleration or otherwise) shall bear interest thereafter until paid at the
Default Rate. Accrued interest on LIBOR Loans shall be due and payable in
arrears upon any date that Borrower makes a payment of principal and on the last
day of the Interest
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<PAGE>
Period with respect thereto; provided that, after an Event of Default, interest
shall accrue at the Default Rate and shall be due and payable from time to time
on demand of the Bank. Any principal amount of LIBOR Loans not paid when due (at
maturity, on acceleration, or otherwise) shall bear interest thereafter until
paid at such Default Rate. Borrower may not have more than five LIBOR Loans
outstanding at any one time.
(c) Interest Periods for LIBOR Loans. In the case of each LIBOR
Loan, Borrower shall select an Interest Period of any duration in accordance
with the definition of Interest Period in Section 1.01, except that if an
Interest Period would end on a day which is not a Banking Day, such Interest
Period shall be extended to the next Banking Day, unless such Banking Day would
fall in the next calendar month, in which event such Interest Period shall end
on the immediately preceding Banking Day. Any Interest Period which would
otherwise extend beyond the Revolving Credit Termination Date shall end on the
Revolving Credit Termination Date.
(d) Conversions. Upon the expiration of an Interest Period for any
LIBOR Loan, or any portion thereof, such LIBOR Loan or portion thereof shall be
automatically converted to a Prime Rate Loan except to the extent that such
Revolving Credit Loan shall be repaid hereunder or shall be required to be paid
hereunder or unless Borrower shall have notified the Bank, as provided in
Section 4.01 hereof, of its intention to continue such LIBOR Loan or any portion
thereof as a LIBOR Loan. Subject to the following conditions and to the terms
and conditions of this Agreement, Borrower may convert any Revolving Credit Loan
or portion thereof to a different type of Revolving Credit Loan:
(i) if less than all Revolving Credit Loans at the time
outstanding shall be converted, the notice given by Borrower to the Bank shall
specify the aggregate amount of Revolving Credit Loans in each case to be
converted;
(ii) in the case of a conversion of less than all outstanding
Revolving Credit Loans, the aggregate principal amount of Revolving Credit Loans
to be converted shall not be less than $50,000 (and if greater in integral
multiples of $10,000);
(iii) no Revolving Credit Loan may be converted to a LIBOR
Loan less than one month before the Revolving Credit Termination Date;
(iv) a LIBOR Loan may be converted to a Prime Rate Loan only
on the last day of an Interest Period; and
(v) no Revolving Credit Loan or portion thereof may be
converted to a LIBOR Loan during the occurrence and continuance of an Event of
Default.
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<PAGE>
Section 2.06. Changes of Commitment.
(a) At the date hereof, the Revolving Credit Commitment is limited
to a maximum of $7,500,000. Borrower may increase the amount of the Revolving
Credit Commitment to a maximum of $9,500,000 at any time prior to July 20, 2000
by giving notice to the Bank as provided in Section 4.01, together with payment
of an additional fee of $4,000. Once increased, the Revolving Credit Commitment
may not be reduced.
(b) Borrower may reduce or terminate the amount of unused Revolving
Credit Commitment from time to time but not more than four times during the term
of this Agreement or more than once during any calendar year by giving notice to
the Bank of each such reduction or termination to the Bank as provided in
Section 4.01. Any partial reduction shall be in a minimum aggregate amount of
$1,000,000 or, if greater, in integral multiples of $250,000. Once reduced or
terminated, the Revolving Credit Commitment may not be reinstated.
Section 2.07. Minimum Amounts. Except for borrowings which exhaust
the full remaining amount of the Revolving Credit Commitment, and prepayments
(in the case of Prime Rate Loans only) which result in the prepayment of all
Loans, each borrowing and each prepayment of principal shall be at least
$50,000, and if greater, in integral multiples of $10,000.
Section 2.08. Sublimits. (a) Subject to the terms and conditions
hereof, the Bank agrees to make one or more Revolving Credit Loans to finance
Borrower's Acquisitions, provided that, (a) the aggregate amount of such
Revolving Credit Loans shall not exceed (i) $7,500,000 if Borrower consummates
the Acquisition of Chun Shin, and (ii) if Borrower does not acquire Chun Shin,
$4,500,000 for all other Acquisitions permitted under Section 9.07, in the
aggregate and (b) no Revolving Credit Loan for Acquisitions shall be permitted
if (i) an Event of Default has occurred which continues at such time, (ii) after
giving effect to such Loan, the Aggregate Outstandings at the time of such
issuance would exceed the Revolving Credit Commitment in effect on such date or
(iii) as a result of such Acquisition or the making of such Loan, an Event of
Default would occur.
(b) Subject to the terms and conditions hereof, the Bank agrees to
create Bankers Acceptances for Borrower and to issue Letters of Credit on its
behalf, provided that, after giving effect to the same, the sum of the Aggregate
Bankers Acceptance Outstandings and the Aggregate Letters of Credit Outstandings
will not exceed $5,000,000.
Section 2.09. Letters of Credit and Bankers Acceptances. If the Bank
issues Letters of Credit on Borrower's behalf or extends credit to Borrower
under the Revolving Credit Commitment by creating Bankers Acceptances, the Bank
shall require Borrower to execute such documents as it customarily uses in
connection with Letters of Credit and Bankers Acceptance financing for its
borrowers generally. The interest rate that the Bank shall charge to Borrower in
connection with any Bankers Acceptance financing shall be such Bank's "Bankers
Acceptance Reference Rate" or other rate normally quoted by such Bank for such
purposes, plus a margin
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of 100 basis points. Borrower shall pay the customary fees and charges the Bank
imposes in connection with letter of credit financing.
Section 2.10. Mandatory Prepayment. If at any time the Aggregate
Outstandings exceed the Revolving Credit Commitment, Borrower promptly shall pay
or prepay so much of the Revolving Credit Loans outstanding as shall be
necessary to reduce the Aggregate Outstandings to the amount of the Revolving
Credit Commitment then in effect. All such prepayments shall be subject to
Section 5.05, and shall be applied first to Revolving Credit Loans outstanding,
and then to Bankers Acceptances in such order as the Banks shall determine.
Section 2.11. Facility Fee. Borrower shall pay the Bank a Facility
Fee equal to $15,000 at the Closing Date. Until the Revolving Credit Termination
Date, Borrower shall pay the Bank an additional Facility Fee equal to ten basis
points on the average daily unused portion of the Revolving Credit Commitment.
This additional Facility Fee shall be due and payable in arrears on the first
day of each calendar quarter and at the Revolving Credit Termination Date, and
shall not be reduced due to limitations on availability as provided in Section
9.01.
ARTICLE 3. TERM LOAN.
Section 3.01. Term Loan. Subject to the terms and conditions
hereof, the Bank shall make a five year Term Loan to Borrower in the amount of
$4,500,000 on the date hereof.
Section 3.02. The Term Loan Note. The Term Loan shall be evidenced
by a single promissory note of Borrower substantially in the form of Exhibit
A-2, with appropriate insertions, payable to the order of the Bank and
representing the obligation of Borrower to pay the unpaid principal amount of
the Term Loan, with interest thereon as described herein. The Term Loan Note
shall (a) be dated the date hereof, (b) provide for repayment in 60 equal
consecutive monthly installments of principal, be payable on the first day of
each month commencing on September 1, 1998 and ending on the Term Loan Maturity
Date, and (c) bear interest, payable monthly on the first date of each month
(beginning August 1, 1998) for a period from the date hereof on the unpaid
principal amount thereof at the applicable rates per annum specified herein. All
accrued and unpaid interest and fees shall be due and payable on the Term Loan
Maturity Date.
Section 3.03. Interest Periods for Term Loan. While the Term Loan is
outstanding, Borrower shall select an Interest Period of any duration in
accordance with the definition of Interest Period in Section 1.01, subject to
the following limitations: (a) no Interest Period shall have a duration less
than one month, and if any such proposed Interest Period would otherwise be for
a shorter period, such Interest Period shall not be available and (b) if an
Interest Period would end on a day which is not a Banking Date, such Interest
Period shall be extended to the next Banking Day, unless such Banking Day would
fall in the next calendar month in which event such Interest Period shall end on
the immediately preceding Banking Day. Any Interest Period which would otherwise
extend beyond the Term Loan Maturity Date shall end on the Term Loan Maturity
Date.
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Section 3.04. Interest on the Term Loan. Borrower shall pay interest
on the outstanding and unpaid principal balance of the Term Loan a rate per
annum equal to LIBOR, for the applicable Interest Period, plus a margin of 100
basis points. Interest on the Term Loan shall be calculated on the basis of a
360 day year and shall be paid in arrears on the first day of each month and on
the Term Loan Maturity Date. Accrued interest on the Term Loan Note shall be due
and payable in arrears upon any date that Borrower makes a payment of principal
and on the last day of the Interest Period with respect thereto. Any principal
amount not paid when due (at maturity, on acceleration or otherwise) shall bear
interest thereafter until paid at the Default Rate.
Section 3.05. Conversion to Fixed Rate Loan. At Borrower's election
made during the period beginning on the date hereof through September 18, 1998,
provided no Default or Event of Default then exists, Borrower may effect a
change in the interest rate on the Term Loan to a fixed rate by entering into a
Swap Agreement between the Borrower and the Bank, at the rate established by
exchange, through Key Capital Markets, Inc., of the obligation evidenced by the
Term Loan Note for an obligation bearing interest at a fixed rate having a term
that is equivalent to the remaining term of the Term Loan. The rights and
obligations of Borrower and the Bank respecting such exchange shall be set forth
in a Swap Agreement to be executed between them. Once converted to a fixed rate,
the interest rate on the Term Loan may not change to any other rate.
Section 3.06. Use of Proceeds of Term Loan. Borrower shall use the
proceeds of the Term Loan to repay existing Debt, to pay amounts due to Chugai
Boyeki (America) Corp. and Chugai Boyeki Company Limited and for general working
capital purposes. Borrower may not advance any proceeds from the Term Loan to
any Subsidiary or Affiliate unless it is a Guarantor.
Section 3.07. Commitment Fee. Borrower shall pay the Bank a Term
Loan Commitment Fee of $6,750 at the Closing Date.
ARTICLE 4. GENERAL CREDIT PROVISIONS; FEES AND PAYMENTS.
Section 4.01. Certain Notices. (a) Borrower shall give Notice of
Borrowing to the Bank of each borrowing pursuant to Section 2.04, each
prepayment pursuant to Section 4.02, each conversion or continuation of LIBOR
Loans pursuant to Section 2.05 and each increase, reduction or termination of
Revolving Credit Commitment pursuant to Section 2.06. Each such notice shall be
irrevocable, and shall be effective on the date of receipt only if received by
the Bank not later than 11:00 a.m., New York City time as follows:
(i) In the case of borrowings and prepayments of Prime Rate
Loans, at least one Banking Day prior thereto;
(ii) In the case of LIBOR Loans, at least three Banking Days
prior thereto;
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(iii) In the case of reductions or termination of the
Revolving Credit Commitment, ten days prior thereto; and
(iv) In the case of conversions or continuations of Loans
pursuant to Section 2.05, three Banking Days prior thereto.
Each such notice relating to the borrowing, conversion or prepayment of a Loan
shall specify the Loans to be borrowed, converted or prepaid and the amount and
type of the Loans to be borrowed or prepaid and the date of borrowing,
conversion or prepayment (which shall be a Banking Day). Each such notice of
reduction or termination of the Revolving Credit Commitment shall specify the
amount of the Revolving Credit Commitment to be reduced or terminated. Notices
to the Bank under this Section 4.01 may be by facsimile to a telephone number
furnished by the Bank for that purpose, provided Borrower gives further notice
sent the same day in accordance with Section 12.06.
(b) The Bank shall establish notice procedures for issuing Letters
of Credit and creating Bankers Acceptances consistent with the foregoing notice
requirements and with its customary practices for such facilities.
Section 4.02. Prepayments.
(a) Borrower shall have the right at any time and from time to time
to prepay any Prime Rate Loan, in whole or in part, upon at least one Banking
Day's prior written notice to the Bank; provided, however, that each such
partial prepayment of Prime Rate Loans shall not be less than $50,000 or if
greater, in amounts which are integral multiples of $10,000. Except as required
by paragraph (b) below or on the last day of an Interest Period with respect
thereto, Borrower shall not be permitted to prepay LIBOR Loans.
(b) On the date of any reduction of the Revolving Credit Commitment
as provided in Section 2.06, Borrower shall pay or prepay so much of the Loans
as shall be necessary in order that the Aggregate Outstandings will not exceed
the Revolving Credit Commitment after giving effect to such reduction. All
prepayments of LIBOR Loans due to a reduction of the Revolving Credit Commitment
shall be subject to Section 5.05.
(c) All prepayments of principal required by paragraph (b) above
shall be applied first to Prime Rate Loans outstanding, and then to LIBOR Loans
outstanding.
(d) All prepayments of principal shall be accompanied by the payment
of all accrued interest on the amount so prepaid and, in the case of LIBOR
Loans, by all amounts required to be paid pursuant to Section 5.05.
Section 4.03. Default Interest. Notwithstanding any other provision
of this Agreement, upon the occurrence and continuance of an Event of Default,
each Loan outstanding hereunder shall bear interest at a rate per annum equal to
the Default Rate.
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Section 4.04. Payments Generally. All payments under this Agreement
or the Notes shall be made in immediately available funds not later than 2:00
p.m. New York City time on the relevant dates specified above at the Bank's
office at 1377 Motor Parkway, Islandia, New York 11788.
(a) Any payment made after such time on such due date shall be
deemed to have been made on the next succeeding Banking Day.
(b) Whenever a new Loan is to be made on a date Borrower repays any
principal of an outstanding Loan, the Bank shall apply the proceeds of such new
Loan to the payment of the principal to be repaid and only an amount equal to
the difference between the principal to be borrowed and the principal to be
repaid shall be made available by the Bank to Borrower as provided in Section
2.04 or paid by Borrower to the Bank pursuant to this Section 4.04, as the case
may be.
(c) The Bank may (but shall not be obligated to) debit the amount of
any such payment which is not made by the time specified in Section 4.04(a) to
any ordinary deposit account of Borrower with the Bank. Borrower shall, at the
time of making each payment under this Agreement or the Note, specify to the
Bank the principal or other amount payable by Borrower under this Agreement. If
Borrower fails to so specify, the payment will be applied first to interest and
then to principal, unless a Default or Event of Default has occurred and is
continuing, in which case the Bank may apply such payment as it may elect in its
sole discretion. If the due date of any payment under this Agreement or the Note
would otherwise fall on a day which is not a Banking Day, such date shall be
extended to the next succeeding Banking Day and interest shall be payable for
any principal so extended for the period of such extension.
ARTICLE 5. YIELD PROTECTION; ETC.
Section 5.01. Additional Costs.
(a) Borrower shall pay directly to the Bank from time to time on
demand such amounts as the Bank may determine (in the manner set forth in
Section 5.01(d)) to be necessary to compensate it for any increases in costs
attributable to its making or maintaining any LIBOR Loans under this Agreement
or its Note or its obligation to make any LIBOR Loans hereunder or any reduction
in any amount receivable by the Bank hereunder in respect of any LIBOR Loans or
such obligation or capital in respect of this Agreement (such increases in costs
and reductions in amounts receivable being herein called "Additional Costs"),
resulting from any Regulatory Change which: (i) changes the basis of taxation of
any amounts payable to the Bank under this Agreement or the Revolving Credit
Note in respect of any of such LIBOR Loans (other than taxes imposed on the
overall net income of the Bank for any LIBOR Loans by the jurisdiction in which
the Bank has its principal office); or (ii) imposes or modifies any reserve,
special deposit, deposit insurance or assessment, minimum capital, capital ratio
or similar requirements relating to any extensions of credit or other assets of,
or any deposits with or other liabilities of, the Bank; or (iii) imposes any
other condition affecting this Agreement or the Note
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<PAGE>
(or any of such extensions of credit or liabilities). The Bank will notify
Borrower of any event occurring after the date of this Agreement which will
entitle the Bank to compensation pursuant to this Section as promptly as
practicable after it obtains knowledge thereof by furnishing Borrower a written
statement describing the Additional Costs entitling it to compensation hereunder
and the Bank's method of allocating to Borrower such Additional Costs. If the
Bank requests compensation from Borrower under this Section or under Section
5.01(c), Borrower may suspend the obligation of the Bank to make Loans of the
type with respect to which such compensation is requested.
(b) Without limiting the effect of the foregoing provisions of this
Section, if by reason of any Regulatory Change, the Bank either (i) incurs
Additional Costs based on or measured by the excess above a specified level of a
category of deposits or other liabilities of the Bank which includes deposits by
reference to which the interest rate on LIBOR Loans is determined as provided in
this Agreement or a category of extensions of credit or other assets of the Bank
which includes LIBOR Loans or (ii) becomes subject to restrictions on the amount
of such a category of liabilities or assets which it may hold, then, if the Bank
so elects by notice to Borrower, the obligation of the Bank to make Loans of
such type hereunder shall be suspended until the date such Regulatory Change
ceases to be in effect.
(c) Without limiting the effect of the foregoing provisions of this
Section, Borrower shall pay directly to the Bank from time to time on request
such amounts as the Bank may determine (in the manner set forth in Section
5.01(d)) to be necessary to compensate the Bank for any Additional Costs which
are attributable to the maintenance by it or any of its affiliates (pursuant to
any Regulatory Change) of capital in respect of its Loans hereunder or its
obligation to make Loans hereunder (such compensation to include, without
limitation, an amount equal to any reduction in return on assets or equity of
the Bank to a level below that which it would have achieved but for such
Regulatory Change). The Bank will notify Borrower if it is entitled to
compensation pursuant to this Section as promptly as practicable after it
obtains knowledge thereof by furnishing Borrower with a written statement
describing the Additional Costs entitling it to compensation hereunder and the
Bank's method of allocating to Borrower such Additional Costs.
(d) Reasonable determinations and allocations by the Bank for
purposes of the effect of any Regulatory Change pursuant to Sections 5.01(a),
(b) or (c) on its costs of making or maintaining Loans or its obligation to make
Loans, or on amounts receivable by, or the rate of return to, it in respect of
Loans or such obligation, and of the additional amounts required to compensate
the Bank, shall be conclusive absent demonstrated error.
Section 5.02. Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if:
(a) the Bank determines (which determination shall be conclusive
absent demonstrated error) that quotations of interest rates for the relevant
deposits referred to in the definition of "LIBOR" in Section 1.01 are not being
provided in the relevant amounts or for the
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relevant maturities for purposes of determining the rate of interest for any
type of LIBOR Loans as provided in this Agreement; or
(b) the Bank determines (which determination shall be conclusive
absent demonstrated error) that the relevant rates of interest referred to in
the definition of LIBOR in Section 1.01 upon the basis of which the rate of
interest for any type of LIBOR Loans is to be determined do not adequately cover
the cost to the Bank of making or maintaining such Loans; then the Bank shall
give Borrower prompt notice thereof, and so long as such condition remains in
effect, the obligations of the Bank to make LIBOR Loans shall be suspended (in
which case the provisions of Section 5.04 shall be applicable).
Section 5.03. Illegality. Notwithstanding any other provision in
this Agreement, if it becomes unlawful for the Bank to honor its obligation to
make or maintain LIBOR Loans hereunder, the Bank shall promptly notify Borrower
and the Bank's obligation to make or maintain LIBOR Loans hereunder shall be
suspended until such time as the Bank may again make and maintain such affected
Loans (in which case the provisions of Section 5.04 shall be applicable).
Section 5.04. Conversion to Prime Rate Loans. If the obligations of
the Bank to make LIBOR Loans shall be suspended pursuant to any of the foregoing
Sections all Loans which would otherwise be made by the Bank as LIBOR Loans
shall be made instead as Prime Rate Loans and, if an event referred to in
Section 5.01(b) or 5.03 has occurred and the Bank so requests by notice to
Borrower, all LIBOR Loans of the Bank then outstanding shall be automatically
converted into Prime Rate Loans on the date specified by the Bank in such
notice, and, to the extent that LIBOR Loans are so made as (or converted into)
Prime Rate Loans, all payments of principal which would otherwise be applied to
the Bank's LIBOR Loans shall be applied instead to its Prime Rate Loans. If any
LIBOR Loan is converted to a Prime Rate Loan pursuant to this Section prior to
the last day of the Interest Period with respect to such LIBOR Loan, Borrower
shall pay to the Bank all amounts required to be paid pursuant to Section 5.05
hereof.
Section 5.05. Certain Compensation.
(a) Borrower shall pay to the Bank such reasonable amount or amounts
as shall be sufficient (in the reasonable opinion of the Bank) to compensate it
for any loss, cost or expense which the Bank determines is attributable to:
(i) Borrower's prepayment of a LIBOR Loan (whether by reason
of the mandatory or voluntary prepayment provisions of this Agreement or
otherwise) or failure to pay principal or interest on a LIBOR Loan when due; or
(ii) Borrower's failure to borrow, convert into or continue a
LIBOR Loan on the date specified therefor in the relevant notice given under
Section 4.01; or
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<PAGE>
(iii) Borrower's failure to prepay a LIBOR Loan on the date
specified therefor in the relevant notice under Section 4.02.
(b) A reasonable determination by the Bank of amounts payable
pursuant to this Section shall be conclusive absent manifest error. In the case
of prepayments of LIBOR Loans, Borrower shall pay to the Bank a prepayment
premium equal to any costs, loss or expense that it may sustain or incur as a
result of Borrower's prepaying the LIBOR Loan, including (but not limited to)
the Bank's loss of anticipated interest on such LIBOR Loan at the applicable
interest rate, or any interest or other charge payable by the Bank to others who
provided funds to the Bank to enable it to make or maintain such LIBOR Loan. In
addition, Borrower shall reimburse the Bank for all administrative costs
incurred by the Bank as a result of such prepayment.
ARTICLE 6. CONDITIONS PRECEDENT.
Section 6.01. Conditions to the Initial Borrowings Hereunder. The
obligations of the Bank to make the Loans constituting the initial borrowing
under Section 2.01 and the Term Loan under Section 3.01, are subject to the
conditions precedent that:
(a) the Bank shall have received on or before the date of such Loans
each of the following, in form and substance satisfactory to the Bank and its
counsel:
(i) the Revolving Credit Note and the Term Loan Note, duly
executed by Borrower;
(ii) a certificate of the Secretary or Assistant Secretary of
Borrower and of each Guarantor, dated the Closing Date, attesting to all
corporate action taken by Borrower or such Guarantor, including resolutions of
its Board of Directors authorizing the execution, delivery and performance of
the Loan Documents and each other document to be delivered pursuant to this
Agreement and certifying the names and true signatures of the officers of
Borrower or each Guarantor executing the Loan Documents and the other documents
to be delivered by Borrower or such Guarantor under this Agreement and stating
that such resolutions have not been amended, modified, revoked or rescinded
since the date of such certificate;
(iii) certified copies of the certificate or articles of
incorporation and the by-laws of Borrower or each Guarantor, with a certificate
of the Secretary or Assistant Secretary of Borrower and each Guarantor stating
that the corporate documents thereby certified have not been amended or
modified, as of the date of such certificate;
(iv) a certificate of a duly authorized officer of Borrower,
dated the Closing Date, stating that the representations and warranties in
Article 7 are true and correct on such date as though made on and as of such
date (unless made as of a specific date earlier than the date hereof, in which
case they shall be true and correct as of such earlier date) and that no event
has occurred and is continuing which constitutes a Default or Event of Default;
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(v) the Guaranty duly executed by each of the Guarantors;
(vi) the Bank shall have received satisfactory evidence that
all Debt to Chugai Boyeki Company Limited and IBJ Schroder Bank and Trust
Company has been paid;
(vii) such duly executed UCC-3 Termination Statements (or
equivalents) as are necessary to terminate existing Liens (other than Liens
permitted hereby) on the assets of Borrower;
(viii) a favorable opinion of counsel for Borrower, dated the
Closing Date, in substantially the form of Exhibit C and as to such other
matters as the Bank may reasonably request;
(ix) satisfactory evidence that Borrower and each of the
Guarantors is duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation;
(x) Borrower's consolidated forecasted balance sheets showing
its projected financial condition for the fiscal years ended September 30, 1998
and 1999;
(xi) The Bank's year 2000 credit risk assessment worksheet, in
substance and form reasonably satisfactory to the Bank; and
(xii) such other documents, instruments, approvals, opinions
and evidence of compliance with the terms hereof as the Bank may require.
(b) Borrower shall have paid or caused to be paid all fees required
to be paid hereunder or in connection herewith and all accrued fees and expenses
of the Bank in connection with the preparation, execution and delivery of this
Agreement, and the other Loan Documents and the consummation of the transactions
contemplated thereby.
(c) Borrower and the Guarantors shall have obtained all consents,
permits and approvals required in connection with the execution, delivery and
performance by Borrower and the Guarantors of their respective obligations
hereunder and under the other Loan Documents and such consents, permits and
approvals shall continue in full force and effect.
(d) All legal matters in connection with this financing shall be
satisfactory to the Bank and its counsel.
Section 6.02. Conditions to All Borrowings. The obligations of the
Bank to make any Loan (including the initial Revolving Credit Loan and the Term
Loan) hereunder shall be subject to the further conditions precedent that on the
date of such Loan:
(a) the following statements shall be true:
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(i) the representations and warranties contained in Article 7
are true and correct on and as of the date of such Loan as though made on and as
of such date (unless such representations and warranties are made as of a
specific earlier date in which case they shall be true and correct as at such
date);
(ii) no Default or Event of Default has occurred and is
continuing, or would result from such Loan; and
(iii) no material adverse change shall have occurred in the
business, financial condition or operations of Borrower since the date of the
most recent financial statements of Borrower delivered to the Bank hereunder or
in connection herewith; and
(b) the Bank shall have received a Notice of Borrowing for any
Revolving Credit Loan; and
(c) the Bank shall have received such approvals, opinions, documents
or instruments as the Bank may have reasonably requested.
Section 6.03. Deemed Representations. Unless Borrower otherwise
notifies the Bank prior to any borrowing hereunder, the acceptance by Borrower
of the proceeds of any Loan shall constitute a representation and warranty that
the statements contained in Section 6.02(a) are true and correct as of the date
of such Loan.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES.
Borrower hereby represents and warrants that:
Section 7.01. Incorporation, Good Standing and Due Qualification;
Compliance with Law. Each of Borrower and the Guarantors is duly formed, validly
existing and in good standing under the laws of the jurisdiction of its
formation, has the power and authority to own its assets and to transact the
business in which it is now engaged or proposed to be engaged, and is duly
qualified as a foreign corporation (or other entity) and in good standing under
the laws of each other jurisdiction in which such qualification is required
except where the failure to so qualify and/or be in good standing could not in
any case or in the aggregate, have a material adverse effect on the operations,
business, property or financial condition of any of Borrower or any Guarantor or
on its respective ability to perform its respective obligations hereunder. In
addition, each of Borrower and the Guarantors is in compliance with all laws,
treaties, rules or regulations, or determination of an arbitration or a court or
other governmental authority, in each case applicable to or binding upon it or
any of its property or to which it or any of its property is subject, except to
the extent that the failure to so comply could not, in any case or in the
aggregate, have a material adverse effect on the operations, business, property
or financial condition of Borrower and the Guarantors or on their ability to
perform their obligations under the Loan Documents.
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<PAGE>
Section 7.02. Power and Authority; No Conflicts. The execution,
delivery and performance by each of Borrower and each of the Guarantors of the
Loan Documents have been duly authorized by all necessary action and do not and
will not (a) require any consent or approval of its stockholders or other equity
holders that has not been obtained, (b) contravene its charter, by-laws or other
governing instruments, (c) violate any provision of, or require any filing
(other than filings contemplated hereby and/or by the other Loan Documents),
registration, consent or approval under, any law, rule, regulation (including,
without limitation, the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System as in effect from time to time), order,
writ, judgment, injunction, decree, determination or award presently in effect
having applicability to Borrower or such Guarantor, (d) result in a breach of or
constitute a default or require any consent under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which Borrower
or such Guarantor is a party or by which any of its properties may be bound or
affected, (e) result in, or require, the creation or imposition of any Lien,
upon or with respect to any of the properties now owned or hereafter acquired by
Borrower or such Guarantor, or (f) cause Borrower or such Guarantor to be in
default under any such rule, regulation, order, writ, judgment, injunction,
decree, determination or award or any such indenture, agreement, lease or
instrument.
Section 7.03. Legally Enforceable Agreements. Each Loan Document is,
or when delivered under this Agreement will be, a legal, valid and binding
obligation of Borrower or each Guarantor party thereto, enforceable against
Borrower or such Guarantor in accordance with its terms.
Section 7.04. Litigation. There are no actions, suits or proceedings
pending or to Borrower's knowledge, threatened against or affecting Borrower or
any of the Guarantors or any of their respective Subsidiaries before any court,
governmental agency or arbitrator, which could, in any one case or in the
aggregate, adversely affect the financial condition, operations, properties or
business of Borrower and the Guarantors or their ability to perform their
respective obligations under the Loan Documents.
Section 7.05. Financial Statements. The consolidated balance sheet
of Borrower and its Subsidiaries as at September 30, 1997 and the related
consolidated income statement and statement of cash flow of Borrower and its
Subsidiaries for the fiscal year then ended, and the accompanying notes,
together with the opinion thereon, of KPMG Peat Marwick LLP, independent
certified public accountants (the "Auditor"), and the consolidated financial
statements for the six month period ended March 31, 1998, copies of which were
delivered to the Bank, fairly present the consolidated financial condition of
Borrower and its Subsidiaries as at such dates and the consolidated results of
the operations of Borrower and its Subsidiaries for the periods covered by such
statements, all in accordance with GAAP consistently applied. As of the date
hereof, there are no liabilities of Borrower and its Subsidiaries, fixed or
contingent, which are material but are not reflected in such financial
statements or in the notes thereto, other than liabilities arising in the
ordinary course of business since March 31, 1998 and the liabilities created by
this Agreement. There has been no material adverse change in the condition
(financial or otherwise), business, operations or, to the knowledge of Borrower,
prospects of any
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of Borrower or the Guarantors since the date of the most recent financial
statements delivered to the Bank and the Closing Date. With respect to any Loans
made after the Closing Date, Borrower shall represent and warrant that from the
time that Borrower has delivered to the Bank its most recent financial
statements under Section 8.08 and the date of such Loan, there has been no
material adverse change in the condition (financial or otherwise), business,
operations or, to the knowledge of Borrower, prospects of Borrower and the
Guarantors.
Section 7.06. Ownership and Liens. Each of Borrower and the
Guarantors has title to, or valid leasehold interests in, all of its properties
and assets, real and personal, reflected in the financial statements referred to
in Section 7.05 (other than any properties or assets disposed of since the date
of such financial statements as no longer used or useful in the conduct of their
respective business or as have been disposed of in the ordinary course of
business), and none of the properties and assets owned by Borrower or the
Guarantors, or any of them, and none of their leasehold interests, is subject to
any Lien, except as disclosed in Schedule I or as may be permitted hereunder.
Section 7.07. Taxes. Each of Borrower and the Guarantors has filed
all tax returns (federal, state and local) required to be filed. Each of
Borrower and the Guarantors has paid when due all taxes, assessments and
governmental charges and levies shown thereon to be due, including interest and
penalties, other than taxes, assessments and governmental charges and levies
being contested in good faith by appropriate proceedings and with respect to
which adequate reserves in conformity with GAAP shall have been provided on the
books of Borrower or the Guarantors, as the case may be.
Section 7.08. ERISA. Each of Borrower and the Guarantors is in
compliance in all material respects with all applicable provisions of ERISA. No
Reportable Event has occurred with respect to any Plan, no notice of intent to
terminate a Plan has been filed nor has any Plan been terminated, no
circumstance exists which constitutes grounds under Section 4042 of ERISA
entitling the PBGC to institute proceedings to terminate, or appoint a trustee
to administer, a Plan, nor has the PBGC instituted any such proceedings, none of
Borrower nor its ERISA Affiliates has completely or partially withdrawn under
Sections 4201 or 4204 of ERISA from a Multiemployer Plan and each of Borrower
and each of its ERISA Affiliates has met its minimum funding requirements under
ERISA with respect to all of its Plans and there are no Unfunded Vested
Liabilities. None of Borrower nor its ERISA Affiliates has incurred any
liability to the PBGC under ERISA, other than to make contributions in the
ordinary course and other than contingent liabilities that would arise on the
termination of any Plan (no such termination being reasonably foreseen by
Borrower).
Section 7.09. Subsidiaries and Ownership of Stock. Schedule II is a
complete and accurate list of the Subsidiaries of Borrower, showing the
jurisdiction of incorporation or organization of each Subsidiary and the
percentage of Borrower's ownership of the outstanding stock or other interest of
each such Subsidiary.
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Section 7.10. Credit Arrangements. Schedule III is a complete and
correct list of all credit agreements, indentures, purchase agreements outside
the ordinary course of Borrower's business, guaranties, Capital Leases and other
investments, agreements and arrangements in effect on the date of this Agreement
providing for or relating to extensions of credit to Borrower or to the
Guarantors or to any of them (including agreements and arrangements for the
issuance of letters of credit or for acceptance financing) in respect of which
Borrower, the Guarantors or any of them is in any manner directly or
contingently obligated. Schedule III shows the maximum principal or face amounts
of the credit in question, outstanding and which can be outstanding, are
correctly stated, and all Liens of any nature given or agreed to be given as
security therefor are correctly described or indicated in such Schedule and
Schedule I.
Section 7.11. Operation of Business. Each of Borrower and each
Guarantor possesses all material licenses, permits, franchises, patents,
copyrights, trademarks and trade names, or rights thereto, to conduct their
business as now conducted and as presently proposed to be conducted and to
Borrower's best knowledge, none of Borrower nor any of the Guarantors is in
violation of any valid rights of others with respect to any of the foregoing.
Section 7.12. Hazardous Substances. Each of Borrower and the
Guarantors is in compliance with all Environmental Laws, and has obtained all
necessary licenses and permits required to be issued pursuant to any
Environmental Law. None of Borrower nor any of the Guarantors has received any
written notice or communication from any governmental agency with respect to any
Hazardous Substance relative to its operations, property or acts or any
investigation, demand or request pursuant to or enforcing any Environmental Law
relating to it or its operations, and no such investigation is pending or, to
the knowledge of Borrower, threatened.
Section 7.13. Compliance with Loans and Judgments. Borrower and each
Subsidiary are in compliance, in all material respects, with all laws, rules,
regulations, orders and decrees which are applicable to Borrower or its
Subsidiaries, or to any of their respective properties. Each of Borrower and the
Guarantors has satisfied all judgments and none of Borrower nor any of the
Guarantors is in default with respect to any judgment, writ, injunction, decree,
rule or regulation of any court, arbitrator or federal, state, municipal or
other governmental authority, commission, board, bureau, agency or
instrumentality, domestic or foreign.
Section 7.14. No Defaults on Other Agreements. Except as disclosed
on Schedule IV, none of Borrower nor any of the Guarantors is a party to any
indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any charter or corporate restriction which would in any
case or in the aggregate have an adverse effect on its ability to carry out its
obligations under the Loan Documents. None of Borrower nor any of the Guarantors
is in default in any respect in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in any agreement or
instrument material to its business to which it is a party except where such
default would not, in any case or in the
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aggregate, have a material and adverse effect on the business, properties,
assets, operations or condition, financial or otherwise, of Borrower and the
Guarantors or on their ability to perform their obligations under the Loan
Documents.
Section 7.15. Labor Disputes and Force Majure. Neither the business
nor the properties of Borrower or any of the Guarantors is affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought, storm,
hail, earthquake, embargo, force majure or of the public enemy or other casualty
(whether or not covered by insurance), materially and adversely affecting such
business or properties or the operations of Borrower and the Guarantors or their
ability to perform their obligations under the Loan Documents.
Section 7.16. Governmental Regulation. None of Borrower or the
Guarantors is subject to regulation under the Public Utility Holding Company Act
of 1935, the Investment Company Act of 1940 or any other statute or regulation
limiting its ability to incur indebtedness for money borrowed as contemplated
hereby.
Section 7.17. Partnerships. None of Borrower or the Guarantors is
a partner in any partnership or a member of any joint venture or limited
liability company, except as indicated in Schedule II.
Section 7.18. No Forfeiture. None of Borrower nor any of the
Guarantors is engaged in or proposes to be engaged in any unlawful activity
which is reasonably likely to result in a Forfeiture Proceeding and no
Forfeiture Proceeding against any of them is pending or, to the best of
Borrower's knowledge, threatened.
Section 7.19. Disclosure. This Agreement, each Loan Document and
each other document, certificate, exhibit, report or written statement furnished
to the Bank by or on behalf of Borrower or for use in connection with the Loans,
do not contain any untrue statement of material fact or omit to state a material
fact necessary to make the statement contained herein or therein not misleading
under the circumstances in which they were made.
Section 7.20. Year 2000 Compliance. By December 31, 1998, all of
Borrower's principal operating computer hardware and software will have the
ability to (a) consistently handle date information before, during and after
January 1, 2000, including but not limited to accepting date input, providing
date output and performing calculations on dates or portions of dates, (b)
function accurately in accordance with the specifications of such computer
hardware or software and without interruption before, during and after January
1, 2000, without any change in operations associated with the advent of the new
century, (c) respond to two-digit date input in a way that resolves any
ambiguity as to century in a disclosed, defined and predetermined manner and (d)
store and provide output of date information in ways that are unambiguous as to
century. Any reprogramming or other corrective modifications required to permit
the proper functioning beginning immediately after December 31, 1999 of (i) the
computer systems of Borrower and its Subsidiaries and (ii) equipment containing
embedded microchips (including systems and equipment supplied by others or with
which systems of
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Borrower and its Subsidiaries interface) and the testing of all such systems and
equipment, as so reprogrammed, will be completed by December 31, 1998.
ARTICLE 8. AFFIRMATIVE COVENANTS.
So long as any Note shall remain unpaid or the Bank shall have any
obligations under this Agreement, Borrower shall and shall cause the Guarantors
to:
Section 8.01. Maintenance of Existence. Except as otherwise provided
in this Agreement, preserve and maintain its corporate existence and good
standing in the jurisdiction of its incorporation, and qualify and remain
qualified as a foreign corporation in each jurisdiction in which such
qualification is required.
Section 8.02. Conduct of Business. Continue to engage in its
current business or related businesses.
Section 8.03. Maintenance of Properties. Maintain, keep and preserve
all of its properties (tangible and intangible) necessary to the conduct of its
business in good working order and condition, ordinary wear and tear excepted.
Section 8.04. Maintenance of Records. Keep records and books of
account, in which complete entries will be made in accordance with GAAP.
Section 8.05. Maintenance of Insurance. Maintain insurance with
financially sound and reputable insurance companies or associations in such
amounts and covering such risks as are usually carried by companies engaged in
the same or a similar business and similarly situated.
Section 8.06. Compliance with Laws. Comply in all respects with
all applicable laws, rules, regulations and orders.
Section 8.07. Right of Inspection. At any reasonable time and from
time to time, upon reasonable notice during normal business hours, permit the
Bank or any agent or representative thereof, to examine and make copies and
abstracts from the records and books of account of, and visit the properties of,
such Person, to discuss the affairs, finances and accounts of such Person with
any of their respective officers and directors and such Person's independent
accountants. Once yearly at Borrower's expense, and if more frequently, at the
Bank's sole cost, the Bank or its representatives may conduct such collateral
and other audits as the Bank deems necessary.
Section 8.08. Reporting Requirements. Furnish directly to each of
the Bank:
(a) as soon as available and in any event within 90 days after the
end of each fiscal year of Borrower, consolidating and consolidated financial
statements of Borrower and its
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consolidated Subsidiaries which shall include a consolidating and consolidated
balance sheet of Borrower and its Subsidiaries as of the end of such fiscal year
and a consolidating and consolidated income statement and statement of cash
flows of such entities for such fiscal year, stating in comparative form the
respective consolidating and consolidated figures for the corresponding date and
period in the prior fiscal year and all prepared in accordance with GAAP,
accompanied by an unqualified opinion thereon acceptable to the Bank by the
Auditor, which opinion neither includes an exception as to adherence with GAAP
nor contains a disclaimer;
(b) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of Borrower, a
consolidating and consolidated balance sheet of Borrower and its Subsidiaries as
of the end of such quarter and a consolidating and consolidated income statement
and statements of cash flows of such entities for the period commencing at the
end of the previous fiscal year and ending with the end of such quarter, all in
reasonable detail and stating in comparative form the respective consolidating
and consolidated figures for the corresponding date and period in the previous
fiscal year and all prepared in accordance with GAAP and attested to by the
president or chief financial officer of Borrower;
(c) simultaneously with the delivery of the financial statements
referred to in (a) and (b) above, a certificate of the president or chief
financial officer of Borrower (i) certifying that to the best of his knowledge
no Default or Event of Default has occurred and is continuing or, if a Default
or Event of Default has occurred and is continuing, a statement as to the nature
thereof and the action which is proposed to be taken with respect thereto, and
(ii) with computations demonstrating compliance with the covenants contained in
Article 10;
(d) within 30 days after the delivery of the financial statements
referred to in (a) above, annual forecasts and Borrower's budget for the
upcoming fiscal year, with a comparison of actual results to budget for the
fiscal year then ended;
(e) promptly upon receipt thereof, a copy of the management letter,
if any, prepared by the Auditor;
(f) on or prior to the fifteenth day of each calendar quarter, a
schedule of accounts receivable of the Company and its Subsidiaries certified by
the President or Chief Financial Officer and current as of the last Banking Day
of the preceding month, which shall include accounts receivable summary agings,
all in form and in such detail satisfactory to the Bank;
(g) on or prior to the fifteenth day of each calendar quarter, a
schedule of inventory of the Company and its Subsidiaries certified by the
President or Chief Financial Officer and current as of the last Banking Day of
the preceding month, which shall contain a breakdown of the inventory by type,
amount and location and such other information reasonably requested by the Bank;
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(h) on each January 2 and July 1 while any Loan is outstanding, a
certificate from the President or Chief Financial Officer certifying that the
lien search report obtained by the Bank (at Borrower's expense) on or about
those dates is accurate and complete;
(i) promptly after Borrower becomes aware of the commencement
thereof, notice of all actions, suits, and proceedings before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, involving claims of $50,000 or more affecting Borrower, or
any of its Subsidiaries, including, without limitation, any such proceeding
relating to any alleged violation of any Environmental Law;
(j) as soon as possible and in any event within five days after the
occurrence of each Default or Event of Default, a written notice specifying and
describing in reasonable detail such Default or Event of Default and describing
in reasonable detail the action which is proposed to be taken by Borrower with
respect thereto;
(k) promptly after the commencement thereof or promptly after
Borrower knows of the commencement or threat thereof, notice of any Forfeiture
Proceeding;
(l) promptly after submission, all documents and information
furnished to any government or regulatory agency, other than documents and
information prepared in the normal course of business, but including information
which relates to any adverse action proposed to be taken by such agency or
information which, if not so submitted, would result in the taking of an adverse
action by such agency;
(m) as soon as possible and in any event within five Banking Days
after Borrower knows that any of the events or conditions specified below with
respect to any Plan or Multiemployer Plan have occurred or exist, a statement
signed by a chief financial officer of Borrower setting forth details respecting
such event or condition and the action, if any, which Borrower or the ERISA
Affiliate propose to take with respect thereto (and a copy of any report or
notice required to be filed with or given to PBGC by Borrower or an ERISA
Affiliate with respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan, as to which
PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA
that it be notified within 30 days of the occurrence of such event (provided
that a failure to meet the minimum funding standard of Section 412 of the Code
or Section 302 of ERISA shall be a reportable event regardless of the issuance
of any waivers in accordance with Section 412(d) of the Code);
(ii) the filing under Section 4041 of ERISA of a notice of
intent to terminate any Plan or the termination of any Plan;
(iii) the institution by PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by
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Borrower or any ERISA Affiliate, of a notice from a Multiemployer Plan that such
action has been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal by Borrower or any
ERISA Affiliate under Section 4201 or 4204 of ERISA from a Multiemployer Plan,
or the receipt by Borrower, or any ERISA Affiliate, of notice from a
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated
under Section 4041A of ERISA; and
(v) the institution of a proceeding by a fiduciary or any
Multiemployer Plan against Borrower or any ERISA Affiliate to enforce Section
515 of ERISA, which proceeding is not dismissed within 30 days;
(n) promptly, and in any event within five business days after the
sending or filing thereof, copies of all proxy statements, financial statements,
and reports which Borrower sends to its stockholders, and copies of all regular,
periodic and special reports and all registration statements which Borrower
files with the Securities and Exchange Commission or any other governmental
authority, or with any national securities exchange;
(o) such other information respecting the condition or operations,
financial or otherwise, of Borrower, or any Guarantor, as the Bank may from time
to time reasonably request.
Section 8.09. Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all material Debt.
Section 8.10. Payment of Taxes. Pay and discharge promptly all
taxes, assessments and government charges or levies imposed upon it or upon its
income and profits, or upon any of its property, real, personal or mixed, or
upon any part thereof, before the same shall become in default, and all other
material obligations (including lawful claims for labor, materials and supplies
which, if unpaid, might become a Lien) except that neither the Company nor any
Guarantor shall be required to pay any such tax, assessment, charge, levy or
claim so long as the validity thereof shall be contested in good faith by
appropriate proceedings and there shall have been set aside on its books
adequate reserves determined in accordance with GAAP with respect to any such
tax, assessment, charge, levy or claim so contested, provided that, except as
provided in Section 9.02, the Company and each Guarantor shall pay all such
taxes, assessments, charges, levies or claims promptly if any Lien has attached
as security therefor.
Section 8.11. Acquisitions. Prior to entering into any letter of
intent, agreement or other commitment relating to any Acquisition, furnish the
Bank with notice of same and with such information relating to the Acquisition
as Borrower possesses at the time it provides notice to the Bank and which the
Bank may reasonably request.
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ARTICLE 9. NEGATIVE COVENANTS.
So long as any Note shall remain unpaid or the Bank shall have any
obligations under this Agreement, Borrower shall not and shall not permit any
Guarantor to:
Section 9.01. Debt and Guaranties.
(a) Create, incur, assume or allow to exist, or permit any
Guarantors to create, incur, assume or allow to exist any Debt, except:
(i) Debt arising under this Agreement or the Notes;
(ii) Debt described in Schedule III;
(iii) Subsidiaries may incur Debt of up to $2,000,000, but
whenever and to the extent that such Debt exceeds $500,000 in the aggregate, the
Revolving Credit Commitment shall be reduced on a dollar for dollar basis by the
amount of such excess;
(iv) Debt incurred in connection with operating leases entered
into by Borrower, the Guarantors, or any of them, consistent with past practices
or in the ordinary course of business; and
(v) Debt of Borrower, or the Guarantors, or any of them,
secured by purchase money Liens permitted by Section 9.02.
(b) Guaranty, endorse, become surety for or otherwise in any way
become or be responsible for the Debt or obligations of any Person, whether by
agreement to maintain capital, equity, net worth or solvency of any Person, by
agreement to purchase or discharge the Debt of any Person, or agreement to
purchase merchandise, materials, supplies or other property, if such agreement
provides that payment shall be made whether or not delivery of such merchandise,
materials, supplies or other property is ever made or tendered except:
(i) Borrower's guarantee up to (pound)1,000,000 of Debt of
Vicon U.K. and any other guarantees executed prior to the date hereof, all as
described on Schedule V;
(ii) Borrower may guarantee Debt of Subsidiaries which are
Guarantors of up to a total of $2,000,000, but whenever and to the extent such
guarantees relate to Guarantor Debt that exceeds $500,000 in the aggregate, the
Revolving Credit Commitment shall be reduced on a dollar for dollar basis by the
amount of such excess;
(iii) endorsements of negotiable instruments for collection or
deposit in the ordinary course of business; and
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(iv) guarantees under this Agreement or of Debt of Borrower or
any Guarantor owing to the Bank.
Section 9.02. Liens. Create, incur, assume or allow to exist, or
permit any of the Guarantors to create, incur, assume or allow to exist, any
Lien, upon or with respect to any of its properties, now owned or hereafter
acquired, or enter into any agreement, contract or undertaking with any Person
not to create, incur, assume or allow any such Lien to exist, except:
(a) Any negative pledge agreement with the Bank or any Liens in
favor of the Bank;
(b) Liens for taxes or assessments or other government charges or
levies if not yet due and payable or if due and payable if they are being
contested in good faith by appropriate proceedings and for which appropriate
reserves are maintained in conformity with GAAP;
(c) Liens imposed by law, such as mechanic's, supplier's,
materialmen's, landlord's, warehousemen's and carrier's Liens, and other similar
Liens, securing obligations incurred in the ordinary course of business which
are not past due for more than 30 days and which total less than $50,000;
(d) Liens under workers' compensation unemployment insurance, social
security or similar legislation (other than ERISA);
(e) judgment and other similar Liens arising in connection with
court proceedings that have been in existence for fewer than 30 days after entry
of the judgment or the execution or other enforcement of which is effectively
stayed, and the claims secured thereby are being actively contested, in good
faith and by appropriate proceedings, or which relate to judgments which, when
aggregated with all other judgments secured by such Liens, total less than
$50,000; and
(f) purchase money Liens on any property heretofore or hereafter
acquired or the assumption of any Lien on property existing at the time of such
acquisition, or a Lien incurred in connection with any conditional sale or other
title retention agreement or a Capital Lease; provided that such liens attach
only to the property as acquired and do not extend to any additional property of
Borrower.
Section 9.03. Investments and Advances. Make or permit any
Subsidiary to make any loan or advance to any Person, or purchase, redeem or
otherwise acquire, or permit any such Subsidiary to purchase, redeem or
otherwise acquire any capital stock, assets, obligations or other securities, or
make any capital contribution to otherwise invest in or acquire any interest in
any Person (including, without limitation, any Borrower or any Subsidiary or
Affiliate of any Borrower), except:
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(a) obligations issued or guaranteed by states or municipalities
within the United States of American and rated at least A-1 by Standard &
Poor's;
(b) obligations issued or guaranteed by the United States of America
or any agency or subdivision thereof, the payment or guarantee of which
constitutes a full faith and credit obligation of the United States of America;
(c) certificates of deposit, time deposits, Eurodollar certificates
of deposit, bankers acceptances and other money market instruments issued by any
bank, trust company or financial institution organized under the laws of the
United States of America or any state (or in the case of Eurodollar certificates
of deposit, a branch of any such bank, trust company or financial institution)
having capital and surplus in an aggregate amount not less than $200,000,000 and
with such instrument rated at least A-1 by Standard & Poor's;
(d) commercial paper rated at least Prime-1 by Moody's Investor
Services or A-1 by Standard & Poor's;
(e) repurchase agreements entered into with any bank, trust company
or other financial institution organized under the laws of the United States of
America or any state having capital and surplus in an aggregate amount not less
than $200,000,000 and which are fully secured by obligations of the type
described in Section 9.03(b);
(f) Acquisitions permitted pursuant to Section 9.07 hereof;
(g) Investments of Borrower in a Domestic Subsidiary, provided it is
a Guarantor;
(h) Borrower's investments or advances in amounts of up to an
aggregate of $750,000 in Affiliates which are not Domestic Subsidiaries; and
(i) Purchases of Borrower's common stock in connection with the
exercise of options granted under Borrower's employee stock option plans.
Section 9.04. Sale of Assets. Sell, lease, assign, transfer or
otherwise dispose of, or permit any of the Guarantors to sell, lease, assign,
transfer or otherwise dispose of, any of its now owned or hereafter acquired
assets (including, without limitation, shares of stock of any Subsidiary or
indebtedness due from any Subsidiary, receivables and leasehold interests)
except for (i) assets disposed of as no longer used or useful in the conduct of
their respective business or as have been disposed of in the ordinary course of
business consistent with Borrower's past practice, (ii) transfers of assets
between or among Borrower and Subsidiaries of Borrower, provided all such
Subsidiaries are Guarantors or (iii) sales of inventory in the ordinary course
of business.
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Section 9.05. Transactions with Affiliates. Enter into any
transaction, including, without limitation, the purchase, sale or exchange of
property or the rendering of any service, with any Affiliate or permit any of
the Guarantors to enter into any transaction, including, without limitation, the
purchase, sale or exchange of property or the rendering of any service, with any
Affiliate, except as permitted under this Agreement or as provided below, and
except in the ordinary course of and pursuant to the reasonable requirements of
Borrower's or such Guarantors business and upon fair and reasonable terms not
materially less favorable to Borrower or such Guarantor than would be obtained
in a comparable arm's length transaction with a Person not an Affiliate.
Borrower may sell inventory to Affiliates at favorable pricing in the ordinary
course of business, provided the aggregate of such sales transactions in any
fiscal quarter are not priced at less than Borrower's cost of goods sold of such
inventory.
Section 9.06. Mergers. Except as permitted in Section 9.07, and
except for mergers of any Subsidiary with and into either Borrower or any
Subsidiary which is at such time a Guarantor, merge or consolidate with, or
sell, assign, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to any Person, or acquire all or substantially all
of the assets or the business of any Person (or enter into any agreement to do
any of the foregoing), or permit any of the Guarantors to do so.
Section 9.07. Acquisitions. Make any Acquisition, unless the Person
to be acquired is primarily in the business of manufacturing or selling
security, surveillance, safety control or protection systems or system
components, and the Bank has been furnished with (a) such documents as are
necessary in the Bank's discretion to provide the Bank with a Guaranty of the
Person to be acquired, (b) satisfactory evidence that, during the period
beginning on the Closing Date through the Revolving Credit Termination Date, the
consideration paid or to be paid by the Borrower in connection with such
Acquisition, when aggregated with the consideration paid or to be paid in
connection with all other Acquisitions does not exceed either, (i) if Borrower
consummates the Acquisition of Chun Shin, $7,500,000 or (ii) if Borrower does
not acquire Chun Shin, $4,500,000, (c) satisfactory evidence that if the
Acquisition involves a Person other than Chun Shin, such Person has its
principal business operations in the United States and, if an entity, was formed
under the laws of a United States jurisdiction, (d) a certificate of the
President or Chief Financial Officer of Borrower certifying that no Default or
Event of Default has occurred and is continuing and that no Default or Event of
Default would occur as a result of Borrower's making such Acquisition and (e)
prior to completing such Acquisition, financial statements of the Borrower
demonstrating compliance with the covenants contained in Article 10, (i) on a
pro forma basis at the time immediately after the Acquisition and (ii) on a
projected basis, for the four fiscal quarters immediately following such
Acquisition.
Section 9.08. No Activities Leading to Forfeiture Proceeding.
Engage in or permit any Guarantor to engage in any unlawful activity which could
reasonably be expected to result in a Forfeiture Proceeding.
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Section 9.09. Corporate Documents; Fiscal Year. Change its fiscal
year, or amend, modify or supplement its certificate or articles of
incorporation or by-laws in any way.
Section 9.10. New Subsidiaries. Form, or permit any Guarantor to
form, any Subsidiary unless such Subsidiary shall become a party to the
Guaranty.
Section 9.11. Capital Expenditures. Not make any Capital
Expenditures in excess of $2,000,000 any fiscal year, excluding (a) Acquisitions
permitted under Section 9.07, and (b) Capital Expenditures incurred in
Borrower's one time expansion of its existing facility on Arkay Drive,
Hauppauge, New York.
ARTICLE 10. FINANCIAL COVENANTS.
So long as any of the Notes shall remain unpaid or the Bank has any
obligations under this Agreement:
Section 10.01. Net Income. Borrower shall on a consolidated basis
(i) maintain a positive Net Income on a fiscal year basis, (ii) not have two
consecutive fiscal quarters in which it has net losses that total in excess of
$500,000 and (iii) not have net losses for four consecutive fiscal quarters that
total in excess of $800,000.
Section 10.02. Maximum Liabilities to Worth Ratio. Borrower shall
maintain on a consolidated basis at all times a ratio of Total Liabilities to
Tangible Net Worth of not more than 1.50:1.0.
Section 10.03. Debt Coverage Ratio. Borrower shall maintain on a
consolidated basis at all times a Debt Coverage Ratio of not less than 1.25:1.0,
to be tested quarterly on a rolling four quarter basis.
Section 10.04. Determination of Compliance. Compliance with these
financial covenants shall be determined by reference to the consolidated and
consolidating financial statements of Borrower and its Subsidiaries delivered to
the Bank in accordance with Section 8.08, and shall exclude any balance sheet
information or results of operations of any Subsidiary which is not also a
Guarantor. Except as set forth in 10.01, all financial covenants shall be
applicable at all times and shall be tested at the end of each fiscal quarter.
ARTICLE 11. EVENTS OF DEFAULT.
Section 11.01. Events of Default. The occurrence of any of the
following events shall be an "Event of Default":
(a) Borrower shall fail to pay within five days of due date (i)
principal of the Note, (ii) interest on the Note or (iii) any fee or other
amount due hereunder as and when due and payable.
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(b) Any representation or warranty made or deemed made by Borrower
in this Agreement, or by Borrower or any Guarantor in any certificate delivered
pursuant to this Agreement or any other Loan Document, or which is contained in
any certificate, document, opinion, financial or other statement furnished to
the Bank at any time pursuant to any Loan Document, shall prove to have been
incorrect in any material respect on or as of the date made or deemed made;
(c) Borrower shall fail to perform or observe any term, covenant or
agreement contained in Section 2.03, Section 3.06 or Articles 8, 9 or 10;
(d) Borrower or any Guarantor shall fail to perform or observe any
term, covenant or agreement on its part to be performed or observed in any Loan
Document and such failure shall continue for 15 consecutive days;
(e) Borrower or any Guarantor shall (i) fail to pay any amounts with
respect to any Debt in favor of the Bank, including but not limited to
indebtedness for borrowed money (other than the payment obligations described in
(a) above) of Borrower or such Guarantor, as the case may be, or any interest or
premium thereon, when due (giving effect to any applicable grace period),
whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise, (ii) fail to pay any other Debt, including but not limited to
indebtedness for borrowed money of Borrower or such Guarantor, as the case may
be, or any interest or premium thereon, when due (giving effect to any
applicable grace period), whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise, (iii) fail to perform or observe any term,
covenant or condition on its part to be performed or observed under any
agreement or instrument relating to any Debt when required to be performed or
observed, if the effect of such failure to perform or observe is to accelerate,
or to permit the acceleration of, after the giving of notice or passage of time
or both, the maturity of such Debt, whether or not such failure to perform or
observe shall be waived by the holder of such Debt or (iv) any Debt shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment) prior to the stated maturity thereof;
(f) Borrower or any Guarantor shall (i) generally not, be unable to
or admit in writing its or their inability to, pay its or their debts as such
debts become due; or (ii) make an assignment for the benefit of creditors,
petition or apply to any court or otherwise for the appointment of a custodian,
receiver or trustee for it or a substantial part of its or their assets, (iii)
as debtor, commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect, (iv) have had any such
petition or application filed or any such proceeding shall have been commenced,
against it or them, in which an adjudication or appointment is made or order for
relief is entered, and which petition, application or proceeding remains
undismissed for a period of 30 days or more, or (v) by any act or omission shall
indicate its or their consent to, approval of or acquiescence in any such
petition, application or proceeding or order for relief or the appointment of a
custodian, receiver or trustee for all or any substantial part of its or their
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<PAGE>
property, (vi) allow any such custodianship, receivership or trusteeship to
continue undischarged for a period of 30 days or more or (vii) cease to be
Solvent;
(g) One or more judgments, decrees or orders for the payment of
money in excess of $50,000 in the aggregate in respect of uninsured or unbonded
claims shall be rendered against Borrower or any of Guarantor and such
judgments, decrees or orders shall continue unsatisfied and in effect for a
period of 30 consecutive days without being vacated, discharged, satisfied or
stayed or bonded pending appeal;
(h) An event or condition specified in Section 8.08(m) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a result
of such event or condition, together with all other such events or conditions,
Borrower or any ERISA Affiliate shall incur or in the opinion of the Bank shall
be reasonably likely to incur a liability to a Plan, a Multiemployer Plan or
PBGC (or any combination of the foregoing) which is, in the determination of the
Bank, material in relation to the financial condition, operations, business or
prospects of Borrower or the Guarantors;
(i) Any Forfeiture Proceeding shall have been commenced;
(j) Any Loan Document shall at any time after its execution and
delivery and for any reason cease to be in full force and effect, or shall be
declared null and void, or the validity or enforceability thereof shall be
contested by Borrower, or any Guarantor shall deny that it has any further
liability or obligation under the Guaranty to which it is a party, or Borrower
or any Guarantor shall fail to perform any of its material obligations under any
Loan Document to which it is a party; or
(k) If any one or more conditions or events occur or exist which the
Bank determines resulted or is reasonably likely to result in a material adverse
change in the business operations, properties or financial condition of
Borrower.
Section 11.02. Remedies. If any Event of Default shall occur, the
Bank may, at its option (a) declare the Revolving Credit Commitment to be
terminated, whereupon the same shall forthwith terminate, and/or (b) declare the
outstanding principal of the Notes, all interest thereon and all other amounts
payable under this Agreement and the Notes to be forthwith due and payable,
whereupon the Notes, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by Borrower;
provided that, in the case of an Event of Default referred to in Section
11.01(e) or Section 11.01(h) above, the Commitments shall be immediately
terminated, and the Note, all interest thereon and all other amounts payable
under this Agreement and the Note shall be immediately due and payable without
notice, presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by Borrower.
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<PAGE>
ARTICLE 12. MISCELLANEOUS.
Section 12.01. Amendments and Waivers. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement may be amended or
modified only by an instrument in writing signed by Borrower and the Bank, and
any provision of this Agreement may be waived by Borrower or by the Bank;
provided that no amendment, modification or waiver shall be effective, unless by
an instrument signed by the Bank. No failure on the part of the Bank to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof or preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
Section 12.02. Usury. Anything herein to the contrary
notwithstanding, the obligations of Borrower under this Agreement and the Notes
shall be subject to the limitation that payments of interest shall not be
required to the extent that receipt thereof would be contrary to provisions of
law applicable to the Bank limiting rates of interest which may be charged or
collected by the Bank.
Section 12.03. Expenses. Borrower shall reimburse the Bank on demand
for all reasonable costs, expenses, and charges (including, without limitation,
reasonable fees and charges of external legal counsel for the Bank) incurred by
the Bank in connection with the preparation or performance of this Agreement and
the Loan Documents. In addition, Borrower shall reimburse the Bank for all of
its reasonable costs and expenses in connection with the enforcement or
preservation of any rights under this Agreement, the Note or the other Loan
Documents. Borrower agrees to indemnify the Bank and its directors, officers,
employees and agents from, and hold each of them harmless against, any and all
losses, liabilities, claims, damages or expenses incurred by any of them arising
out of or by reason of any investigation or litigation or other proceedings
(including any threatened investigation or litigation or other proceedings)
relating to any actual or proposed use by Borrower, of the proceeds of the
Loans, including, without limitation, the reasonable fees and disbursements of
counsel incurred in connection with any such investigation or litigation or
other proceedings (but excluding any such losses, liabilities, claims, damages
or expenses incurred by reason of the gross negligence or willful misconduct of
the Person to be indemnified).
Section 12.04. Survival. The obligations of Borrower under Section
2.03(c), Article 5 and Section 12.03 shall survive the repayment of the Loans
for a period corresponding to the maximum applicable statute of limitations in
effect in the State of New York from time to time.
Section 12.05. Assignment. This Agreement shall be binding upon, and
shall inure to the benefit of, Borrower and the Bank and their respective
successors and assigns, except that Borrower may not assign or transfer its
rights or obligations hereunder.
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<PAGE>
Section 12.06. Notices. All notices, consents, approvals and other
communications required or permitted to be given to a party under this Agreement
shall be in writing and shall be delivered personally to the party, sent by any
national overnight courier or mailed first class mail, to the party at the
address indicated on page one, to the attention of James V. Maiorino for the
Bank and to the attention of Kenneth M. Darby for Borrower. Any item delivered
in accordance with the provisions of this Section shall be deemed to have been
delivered (i) on the date of personal delivery, (ii) on the business day
following the date deposited with the overnight courier or (ii) on the fifth day
following the date on which it was so mailed, as the case may be.
Section 12.07. Setoff. Borrower agrees that, in addition to (and
without limitation of) any right of setoff, banker's lien or counterclaim the
Bank may otherwise have, the Bank shall be entitled, at its option without any
prior notice to Borrower (any such notice being expressly waived by Borrower to
the extent permitted by applicable law), to offset balances (general or special,
time or demand, provisional or final) held by it for the account of Borrower at
any of the Bank's offices against any amount then due and payable by Borrower to
the Bank under this Agreement or the Note which is not paid when due (regardless
of whether such balances are then due to Borrower), in which case it shall
promptly notify Borrower thereof, provided that the Bank's failure to give such
notice shall not affect the validity thereof. Payments by Borrower hereunder
shall be made without setoff or counterclaim.
Section 12.08. Jurisdiction; Immunities.
(a) Borrowers hereby irrevocably submits to the jurisdiction of any
New York State or United States Federal court sitting in Suffolk or Nassau
County over any action or proceeding arising out of or relating to this
Agreement or the Note, and Borrower hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in such New
York State or Federal court. To the extent permitted by applicable law, Borrower
irrevocably consents to the service of any and all process in any such action or
proceeding by the mailing (by certified or registered mail) of copies of such
process to it. Borrower agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. To the extent
permitted by applicable law, Borrower further waives any objection to venue in
such State or Federal Court and any objection to an action or proceeding in such
State or Federal Court on the basis of forum non conveniens. Borrower further
agrees that any action or proceeding brought against the Bank shall be brought
only in New York State or United States Federal court sitting in Suffolk or
Nassau County.
(b) THE PARTIES WAIVE ANY RIGHT TO A JURY TRIAL.
(c) Nothing in this Section shall affect the right of the Bank to
serve legal process in any other manner permitted by law or affect the right of
the Bank to bring any action or proceeding against Borrower or its property in
the courts of any other jurisdictions.
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<PAGE>
(d) To the extent that Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether from
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, Borrower hereby
irrevocably waives, to the extent permitted by applicable law, such immunity in
respect of its obligations under this Agreement and the Notes.
Section 12.09. Severability. The provisions of this Agreement are
intended to be severable. If for any reason any provision of this Agreement
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without in any manner affecting the validity
or enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
Section 12.10. Integration. The Loan Documents set forth the entire
agreement among the parties relating to the transactions contemplated thereby
and supersede any prior oral or written statements or agreements with respect to
such transactions.
Section 12.11. Governing Law. This Agreement shall be governed by,
and interpreted and construed in accordance with, the law of the State of New
York applicable to agreements made and to be performed wholly within the State
of New York.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
VICON INDUSTRIES, INC. KEYBANK NATIONAL ASSOCIATION
By:____________________________ By:____________________________
Name: Kenneth M. Darby Name: James V. Maiorino
Title: President Title: Vice President
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<PAGE>
List of Schedules and Exhibits
Schedule I Description of Liens
Schedule II List of Subsidiaries, Partnerships, etc.
Schedule III List of Credit Agreements (including indentures,
purchase agreements, guaranties, Capital Leases, etc.)
Schedule IV Agreements effecting Loan Documents
Schedule V List of Guaranties
* * * * *
Exhibit A-1 Form of Revolving Credit Note
Exhibit A-2 Form of Term Note
Exhibit B Form of Guaranty
Exhibit C Form of Opinion of Counsel
Exhibit D Form of Notice of Borrowing
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<PAGE>
REVOLVING CREDIT NOTE
$7,500,000 July 20, 1998
For value received, Vicon Industries, Inc. ("Borrower"),
hereby promises to pay to the order of KeyBank National Association, a national
banking association (the "Bank"), at the Bank's office at 1377 Motor Parkway,
Islandia, New York 11788, on or before July 22, 2002, the principal amount of
$7,500,000, or the actual amount loaned by the Bank to Borrower pursuant to the
"Credit Agreement" (defined below), in lawful money of the United States of
America and in immediately available funds, on the date and in the manner
provided in the Credit Agreement. Borrower also promises to pay interest on the
unpaid principal balance hereof at the rate or rates of interest as provided in
the Credit Agreement, on the dates and in the manner provided therein.
The holder of this Revolving Credit Note shall record the date
and amount of each Revolving Credit Loan made by the Bank, and the date and
amount of each payment of principal or interest, either on the schedule attached
hereto, or on such computer, magnetic disk, tape or other such electronic data
storage and retrieval system as the Bank considers adequate for such purpose, in
its sole and absolute discretion. Any such record shall constitute prima facie
evidence of the accuracy of the information so recorded, but no failure so to
record, or any error in so recording, shall affect the obligation of the
Borrower to repay any Revolving Credit Loans, with interest thereon, as provided
herein or in the Credit Agreement.
This is the Revolving Credit Note referred to in that certain
Revolving Credit Agreement dated July 20, 1998 between Borrower and the Bank as
amended from time to time (the "Credit Agreement"), and evidences the Revolving
Credit Loans made by the Bank thereunder. All capitalized terms not defined
herein shall have the meanings given to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the
maturity of principal upon the occurrence of certain Events of Default, for a
Default Rate of interest and for pre- payments on the terms and conditions
specified therein.
Borrower waives presentment, notice of dishonor, protest and
any other notice or formality with respect to this Revolving Credit Note, except
as may be set forth in the Credit Agreement.
The terms of this Revolving Credit Note may not be changed
orally, but only by an instrument duly executed by Borrower and the Bank.
<PAGE>
This Note shall be governed by, and interpreted and construed
in accordance with, the law of the State of New York applicable to agreements
made and to be performed wholly within the State of New York.
VICON INDUSTRIES, INC.
By:_______________________________
Name: Kenneth M. Darby
Title: President
<PAGE>
SCHEDULE OF REVOLVING CREDIT LOANS
Date Type Principal
Principal
of of Interest Amount of Maturity Paid or
Loan Loan Rate Loan of Loan Unpaid
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<PAGE>
TERM LOAN NOTE
$4,500,000 July 20, 1998
For value received, Vicon Industries, Inc. ("Borrower"),
hereby promises to pay to the order of KeyBank National Association, a national
banking association (the "Bank"), at the Bank's office at 1377 Motor Parkway,
Islandia, New York 11788, the principal sum of $4,500,000 in 60 equal
consecutive monthly installments of $75,000, in lawful money of the United
States of America and in immediately available funds, in the manner provided in
the "Credit Agreement" (defined below) on the first day of each calendar month
commencing on September 1, 1998 and ending with a final installment of all
unpaid principal hereunder on July 21, 2003. Borrower also promises to pay
interest on the unpaid principal balance hereof at an annual rate of interest
equal to LIBOR, for the applicable Interest Period, plus a margin of 100 basis
points, as provided in the Credit Agreement, on the dates and in the manner set
forth therein.
This is the Term Loan Note referred to in that certain Credit
Agreement dated July 20, 1998 between Borrower and the Bank, as amended from
time to time (the "Credit Agreement"), and evidences the Term Loan made by the
Bank thereunder. All capitalized terms not defined herein shall have the
meanings given to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the
maturity of principal upon the occurrence of certain Events of Default, for a
Default Rate of interest and for pre-payments on the terms and conditions
specified therein.
Borrower waives presentment, notice of dishonor, protest and
any other notice or formality with respect to this Term Loan Note. The terms of
this Term Loan Note may not be changed orally, but only by an instrument duly
executed by Borrower and the Bank.
This Note shall be governed by, and interpreted and construed
in accordance with, the law of the State of New York applicable to agreements
made and to be performed wholly within the State of New York.
VICON INDUSTRIES, INC.
By:_______________________________
Name: Kenneth M. Darby
Title: President
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<PAGE>
Guaranty
Guaranty dated July 20, 1998 from the person whose name and address
is set forth on the signature page hereof ("Guarantor") to KeyBank National
Association, 1377 Motor Parkway, Islandia, New York 11788 ("Lender").
Vicon Industries, Inc. ("Borrower"), has obtained credit of up to
$14,000,000 from Lender (the "Loan") pursuant to a Credit Agreement dated July
20, 1998 between Borrower and Lender ("Credit Agreement"). The Loan is evidenced
by Borrower's promissory notes consisting of a Term Loan Note and a Revolving
Credit Note (collectively, the "Note").
As part of the consideration for Lender's agreeing to make the Loan,
Borrower has agreed to obtain and deliver this Guaranty to Lender. Guarantor is
a Subsidiary of Borrower will benefit substantially as a result of Lender's
extending the Loan, and Borrower and Guarantor acknowledge that Guarantor's
execution and delivery of this Guaranty is a condition to Lender's obligation to
make further advances of the Loan.
Accordingly, in consideration of Lender's making the Loan available
to Borrower, Guarantor agrees with Lender as follows:
1. Guarantor irrevocably and unconditionally guaranties to Lender
(i) the prompt and complete payment by Borrower of all amounts due pursuant to
the Note, the Credit Agreement or any other instrument or agreement executed in
connection with the Loan, referred to in the Credit Agreement (all of the
foregoing referred to herein as the "Loan Documents") and (ii) all other payment
and performance obligations of Borrower pursuant to the Loan Documents and (iii)
any other payment or performance obligations due from Borrower to Lender (all of
the foregoing under clauses (i), (ii) and (iii) being collectively referred to
as the "Guaranteed Obligations"). If Borrower shall default in payment of any
amount due pursuant to the Loan Documents or otherwise default beyond any
applicable grace period in the performance of the Guaranteed Obligations,
Guarantor irrevocably and unconditionally agrees to pay to Lender upon demand
the amount in default or to cure the default if it is a non-payment default (it
being understood, however, that a non-payment may result in the acceleration of
all indebtedness and a demand for payment in full by Guarantor under this
Guaranty). Guarantor understands, agrees and confirms that Lender may enforce
this Guaranty up to the full amount of the Guaranteed Obligations owing against
Guarantor without proceeding against Borrower, against any security for the
Guaranteed Obligations or against any other guarantor under any other guaranty
respecting the Guaranteed Obligations. This is a continuing Guaranty and the
obligations of Guarantor are absolute and unconditional, without regard to the
validity, regularity or enforceability of any Loan Document. Guarantor
acknowledges receipt of a true copy of each Loan Document, and has reviewed and
approved the same.
<PAGE>
2. Guarantor shall indemnify and hold Lender harmless from all costs
and damages that Lender may suffer by reason of Borrower's failure to pay or
perform any of the Guaranteed Obligations.
3. (a) Lender in its sole and absolute discretion, may at any time
and from time to time without the consent of or notice to Guarantor, without
incurring responsibility to Guarantor, without impairing or releasing the
obligations of Guarantor hereunder, upon or without any terms or conditions and
in whole or in part:
(i) by agreement with Borrower, change the manner, place or
terms of payment of, change or extend the time of payment of, or renew or alter
any of the Loan Documents or the Guaranteed Obligations, any security therefor
or any liability incurred directly or indirectly in respect thereof, and this
Guaranty shall apply to the Loan Documents and Guaranteed Obligations as so
changed, extended, renewed or altered;
(ii) exercise or refrain from exercising any rights against
Borrower or others or otherwise act or refrain from acting;
(iii) release, settle or compromise any of the Guaranteed
Obligations, any security therefor or any liability (including any of those
hereunder) incurred directly or indirectly in respect thereof or hereof, and
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) to creditors of Borrower other than Guarantor;
(iv) consent to or waive any breach of, or any act, omission
or default under any Loan Document or otherwise amend, modify or supplement any
Loan Document;
(v) agree to the substitution, exchange, release or other
disposition of all or any part of any property securing the Guaranteed
Obligations;
(vi) make advances for the purposes of performing any term or
covenant contained in any agreement between Lender and Borrower with respect to
which Borrower may be in default;
(vii) assign or otherwise transfer all or any part of the
Guaranteed Obligations; or
(viii) deal in all respects with Borrower as if this Guaranty
were not in effect.
(b) Guarantor's liability shall be unaffected by any of the
following, whether or not Guarantor has notice of same:
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<PAGE>
(i) any foreclosure of any collateral securing payment or
performance of the Guaranteed Obligations or any part thereof;
(ii) the exculpatory provisions, if any, in a Loan Document
which may limit Lender's recourse to property encumbered by a Lien or limit
Lender's rights to enforce a deficiency judgment against Borrower;
(iii) the release of Borrower or any other person or entity
from performance or observance or any of the agreements, terms or conditions
contained in any Loan Documents, by operation of law or otherwise;
(iv) any bankruptcy, insolvency, reorganization, arrangement,
assignment for the benefit of creditors, receivership or trusteeship affecting
the Property, Borrower or Guarantor or any of its respective properties or
assets; or
(v) Lender's failure to perfect, protect, secure or insure any
security interest given for the Guaranteed Obligations.
(c) No invalidity, irregularity or unenforceability of all or any
part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty, and this Guaranty is a primary
obligation of Guarantor.
4. (a) Guarantor hereby waives any requirement that Lender institute
any action or proceeding against Borrower or any other person in respect of any
Loan Document or any security held by Lender prior to bringing an action against
Guarantor upon this Guaranty. The liability of Guarantor under this Guaranty
shall be primary, direct and immediate, and not conditional or contingent upon
Lender's pursuit of any remedies it may have against Borrower or any other
guarantor with respect to the Guaranteed Obligations, or against any other
person or entity or against any other collateral. Without limiting the
generality of the foregoing, Lender shall not be required to make any demand on
Borrower, or to sell at foreclosure or otherwise pursue or exhaust its remedies
under the Credit Agreement or otherwise against property securing Borrower's
obligations for the Guaranteed Obligations. All remedies afforded to Lender
pursuant to this Guaranty or the Loan Documents are separate and cumulative
remedies. No one of such remedies, whether exercised by Lender or not, shall be
deemed to exclude any of the other remedies available to Lender and shall not
limit any other legal or equitable remedy available to Lender.
(b) This Guaranty is a continuing one and all liabilities to which
it applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. No failure, forbearance or delay on the
part of Lender in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further
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<PAGE>
exercise thereof or the exercise of any other right, power or privilege. No
notice to or demand on Guarantor in any case shall entitle Guarantor to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of Lender to any other or further action in
any circumstances without notice or demand.
(c) Until each and every term, covenant and condition of the Loan
Documents and this Guaranty are fully performed, Guarantor shall not be released
by any act or event which might, but for this provision of this instrument, be
deemed a legal or equitable discharge of a surety or a guarantor. Guarantor
acknowledges and agrees that it is the purpose and intent of this Guaranty that
the obligations of Guarantor hereunder be absolute and unconditional under all
circumstances.
5. Guarantor hereby expressly waives (a) presentment and demand for
payment of the principal of or interest thereon or any other sums of any nature
with respect thereto, (b) notice of acceptance of this Guaranty or of the
extension of credit to Borrower, (c) notice of any default hereunder, under the
Loan Documents or under any agreements between Lender and Borrower with respect
to the Guaranteed Obligations, (d) demand on Borrower for observance or
performance or enforcement of any terms or provisions of any agreements between
Lender and Borrower with respect to the Guaranteed Obligations and (e) to the
maximum extent permitted by applicable law and except as otherwise provided
herein, the benefit of all laws now or hereafter in effect in any way limiting
or restricting the liability of Guarantor under this Guaranty, including any and
all right to stay of execution and exemption of property in any action to
enforce the liability of Guarantor hereunder. If this Guaranty shall be enforced
by suit or otherwise, Guarantor shall pay Lender on demand for all reasonable
fees and expenses incurred by Lender in connection therewith, including without
limitation, the reasonable fees and expenses of Lender's counsel. Guarantor
shall indemnify Lender against loss, cost or expense (including reasonable
attorneys fees and disbursements) resulting from Borrower's assertion of any
defense to its obligations under any Loan Document, or if Guarantor asserts any
defense to its obligations under this Guaranty.
6. (a) Any amounts which Guarantor advances or becomes obligated to
pay for any purpose to Borrower or which Borrower or now or hereafter owes to
Guarantor ("Subordinated Debt") shall at all times be subordinate as to priority
of payment and all other respects to all amounts due to Lender under the Loan
Documents.
(b) Nothing herein contained is intended or shall be construed to
give Guarantor any right of subrogation in or under any Loan Document,
notwithstanding any payments made by Guarantor under this Guaranty, all such
rights of subrogation and participation being hereby expressly waived or
released.
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<PAGE>
7. Guarantor represents and warrants to Lender as follows:
(a) Guarantor has all necessary power and authority to execute and
deliver this Guaranty and to perform its obligations hereunder.
(b) This Guaranty is and will be the legal, valid and binding
obligation of Guarantor enforceable in accordance with its terms. The execution,
delivery and performance of this Guaranty and such other agreements, documents
and instruments and the performance of the transactions contemplated hereunder
have been and will be duly and validly authorized and do not and will not
require any consent or approval of any third party, other than consents which
have previously been obtained.
(c) The execution and delivery of this Guaranty do not, and the
consummation of the transactions contemplated hereby will not, constitute a
violation of, and are not, and will not be, a default under or conflict with the
terms of any material contract, lease, indenture, agreement, order, judgment, or
decree to which it is a party or by which it is bound or to which any of its
assets are subject, which in any case or in the aggregate could have a material
adverse effect on its ability to carry out its obligations under this Guaranty,
and do not, and will not, violate or constitute a default under any statute,
rule, regulation, order or ordinance of any governmental, judicial or arbitral
body, which in any case, or in the aggregate, could have a material adverse
effect on its ability to carry out its obligations under this Guaranty.
(d) The most recent financial statements of Guarantor, copies of
which have been furnished to Lender, fairly present the financial condition of
Guarantor as of the dates indicated in accordance with generally accepted
accounting principles consistently applied. There has been no material adverse
change in such condition or Guarantor's business operations (by reason of
casualty or otherwise) since the date of each of such financial statements.
Guarantor shall deliver to Lender such additional financial statements as may be
required under the terms of the Credit Agreement on such dates and within such
time periods as shall be specified therein.
(e) There are no actions, suits or proceedings pending, or to the
knowledge of Guarantor, threatened against or affecting Guarantor or the
properties of Guarantor before any court, commission or other governmental
agency or instrumentality which, if determined adversely to Guarantor, would
have a material adverse effect on the financial condition, properties or
operations of Guarantor.
(f) No information, exhibit or report furnished by Guarantor to
Lender in connection with the Credit Agreement or this Guaranty contains any
material misstatement of fact or omits to state a material fact necessary to
make the statements contained therein not misleading.
- 5 -
<PAGE>
8. Guarantor shall furnish Lender with such information respecting
the business, properties, condition of operations, financial or otherwise, of
Guarantor as Lender may from time to time reasonably request.
9. This Guaranty shall be binding upon Guarantor and the respective
successors and assigns of Guarantor, and shall inure to the benefit of Lender
and its successors and assigns. This Guaranty may not be assigned by Guarantor
to any other person or entity without Lender's consent.
10. Neither this Guaranty nor any provision hereof may be changed,
waived, discharged or terminated except with Lender's consent.
11. All notices, demands, consents or other communications provided
for under this Guaranty ("Notices") shall be in writing and shall be given by
personal delivery, by certified mail or by recognized overnight delivery
service. If Notice is delivered to Guarantor, Notice shall be addressed to
Guarantor at _________________________________, and if to Lender, at the address
set forth on page one. Notices shall be effective (a) if by personal delivery,
on the date of delivery, (b) if by certified mail, on the fifth day after
deposit in the mails with postage prepaid and (c) if by recognized overnight
delivery service, on the business day following deposit with such service.
12. This Guaranty and the rights and obligations of Lender and
Guarantor hereunder shall be governed and be construed in accordance with the
laws of the State of New York applicable to agreements made and to be wholly
performed in the State of New York. Guarantor submits to the jurisdiction of any
New York State or United States Federal Court sitting in Nassau County over any
action or proceeding arising out of or relating to the Guaranty, and Guarantor
agrees that all claims in respect of such action or proceeding may be heard and
determined in such New York State or Federal court. To the extent permitted by
applicable law, Guarantor consents to service of any and all process in any such
action or proceeding by mailing (by certified mail) copies of such process to it
at its address specified in Section 12. To the extent permitted by applicable
law, Guarantor waives any objection to venue in such State or Federal court and
any objection to an action or proceeding in such State or Federal court on the
basis of forum non conveniens. Nothing in this Section shall limit Lender's
rights to bring any action or proceeding against Guarantor in the courts of any
other jurisdiction. THE PARTIES WAIVE ANY RIGHT TO A TRIAL BY JURY IN CONNECTION
HEREWITH TO THE EXTENT PERMITTED BY APPLICABLE LAW.
13. If any of the provisions of this Guaranty or the application
thereof to any person or circumstances shall be invalid or unenforceable, the
remainder of this Guaranty, or the application of such provision to persons or
circumstances other than those as to whom it is held invalid or unenforceable,
shall not be affected thereby.
- 6 -
<PAGE>
14. Guarantor waives any right or claim of right to cause a
marshaling of Borrower's assets or to cause Lender to proceed against any
security for the Credit Agreement before proceeding against Guarantor or to
proceed against any other Guarantor in any particular order. Guarantor agrees
that any payments required to be made hereunder shall become due in accordance
with the Note and Credit Agreement immediately upon the happening of any default
under the Note or the Credit Agreement.
15. If Lender is required under any bankruptcy or other law to repay
any amounts previously paid pursuant to this Guaranty to Borrower or Guarantor,
or to any trustee, receiver or other representative of any of them, then this
Guaranty shall be reinstated to include the amount of such repayment. Lender
shall not be required to litigate or otherwise dispute its obligations to make
such repayments if, in good faith and on the advice of counsel, Lender believes
that such obligation exists.
16. If there is more than one person comprising Guarantor, the
liability of each person signing as Guarantor shall be joint and several and any
reference to, or covenant, representation, warranty or waiver made by or any
other obligation of Guarantor shall apply to each Guarantor and all references
to "Guarantor" shall be deemed to be reference to each, any and all parties
comprising Guarantor. Each Guarantor also guaranties the obligations of each
other person signing this Guaranty as a Guarantor. Lender may seek to enforce
any obligation against any Guarantor without having to proceed against any other
Guarantor. The use of neutral pronouns shall include the masculine, as
appropriate.
17. Certain capitalized words and phrases used in this Guaranty and
not defined herein shall have the meanings given them in the Credit Agreement.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty.
Vicon Industries International Sales Corp.
By:_________________________________
Name: Kenneth M. Darby
Title: President
Address: 89 Arkay Drive
Hauppauge, NY 11788
- 7 -
<PAGE>
EXHIBIT C
[Letterhead of S, M & U]
July 20, 1998
KeyBank National Association
1377 Motor Parkway
Islandia, New York 11788
Re: Mortgage Loan from KeyBank National
Association ("Lender") to Vicon Industries, Inc.
Gentlemen:
You have requested our opinion, as counsel for Vicon
Industries, Inc. (the "Borrower") and Vicon Industries International Sales Corp.
("Guarantor", collectively with Borrower, the "Obligors") in connection with a
credit made available by you to the Borrower in the aggregate principal amount
of up to $14,000,000 (the "Loan") and Guarantor's guaranty of Borrower's payment
and performance obligations to Lender under the Loan.
As counsel we have examined and are familiar with the
proceedings taken in forming the Borrower and Guarantor under the laws of its
respective jurisdiction of formation, including its respective Certificate of
Incorporation and all amendments thereto. We have also examined and are familiar
with such proceedings of the Borrower and Guarantor as we have deemed necessary
in the circumstances. We have also examined and are familiar with the Credit
Agreement, Promissory Notes, guaranty and all other instruments executed and
delivered by or on behalf of Borrower or Guarantor in connection with the Loan
and dated the date hereof (collectively, the "Loan Documents"), and have
attended the closing with respect to the Loan. Certain capitalized terms used in
this opinion which are not defined herein shall have the meanings given them in
the Loan Documents.
In addition to the foregoing, we have examined and relied upon
such matters of law, documents and certificates of public officials as we have
deemed relevant to the rendering of our opinion. In all such examinations, we
have assumed the genuineness of all signatures on original and certified
documents and the conformity to original and certified documents of all copies
submitted to us as conformed or photostatic copies. We point out, however, that
we are members of the Bar of the State of New York and are not admitted to
practice in any other jurisdiction.
<PAGE>
KeyBank National Association
July ___, 1998
Page 2
Based on the foregoing and subject to the qualifications
hereinafter set forth we are of the opinion that:
1. Borrower and Guarantor each is a duly organized, validly
existing corporation, and has all the requisite power and authority to own its
property and carry on its business as now being conducted.
2. Borrower has full power and authority to enter into and
perform the Loan Documents and to borrow the Loan, all of which have been duly
authorized by all necessary and proper action. Guarantor has full power and
authority to enter into and perform the Guaranty, which has been duly authorized
by all necessary and proper action. To our knowledge no consent or approval
(government or otherwise) or the taking of any other action (including, without
limitation, by shareholders of the Obligor) is required as a condition to the
validity or enforceability of any of the Loan Documents except for any consents
and approvals heretofore delivered to you.
3. Each of the Loan Documents has been duly executed and
delivered and constitutes the valid and legally binding obligations of Borrower,
enforceable in accordance with its respective terms, except to the extent that
enforcement thereof may be limited by applicable bankruptcy, insolvency or other
similar laws affecting the enforcements of creditors' rights generally. The
Guaranty has been duly executed and delivered and constitutes the valid and
legally binding obligations of Guarantor, enforceable in accordance with its
respective terms, except to the extent that enforcement thereof may be limited
by applicable bankruptcy, insolvency or other similar laws affecting the
enforcements of creditors' rights generally, and by laws limiting enforceability
as to issues of fraudulent conveyance due to possible issues of lack of
consideration for the Guaranty.
4. To our knowledge, there are no actions, suits,
investigations or administrative proceedings of or before any court, arbitrator
or governmental authority, pending or threatened against Borrower or Guarantor
or any of its respective properties or assets which (i) either in any case or in
the aggregate, if adversely determined, would materially, adversely affect the
business, operations or condition, financial or otherwise, of Borrower or
Guarantor; or (ii) question the validity of any of the Loan Documents or any
action to be taken in connection with the transactions contemplated thereby.
5. The execution, delivery and performance by the Obligors of
the Loan Documents do not and will not (i) violate any provision of its
respective Certificate of Incorporation, or to our knowledge (ii) violate any
order, decree or judgment, or any provisions of any statute, rule or regulation,
domestic or foreign; (iii) violate or conflict with, result in a breach of or
constitute (with notice or lapse of time, or both) a default under any
agreement, mortgage, indenture or contract to which Borrower or Guarantor is a
party, or (iv) result in the creation or imposition of any lien, charge or
encumbrance of any nature
<PAGE>
KeyBank National Association
July ___, 1998
Page 3
whatsoever upon any property or assets of Borrower or Guarantor except as
contemplated by the Loan Documents.
6. To our knowledge (after due inquiry) the proceeds of the
Loans are not being and will not be used, directly or indirectly, for the
purpose of "purchasing" or "carrying" any "margin stock" in contravention of
Regulation U or X promulgated by the Board of Governors of the Federal Reserve
System.
7. To our knowledge, the Obligors are not in default with
respect to any order, writ, injunction or decree of any court or of any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or authority, domestic or foreign, or in violation of any law, statute or
regulation, domestic or foreign, to which any of them is, or any of their
respective properties are, subject, except for such defaults or violations
which, in the aggregate, will not have a material, adverse effect on the
business operations or condition, financial or otherwise, of Obligors.
Only you and your counsel may rely on this opinion and then
only in connection with the Loan Documents and the transactions contemplated
thereby.
Very truly yours,
--------------------------
<PAGE>
Exhibit D
Notice of Borrowing
[Insert date]
KeyBank National Association
1377 Motor Parkway
Islandia, New York 11788
Attention: Mr. James V. Maiorino
Re: KeyBank National Association with Vicon Industries, Inc.
Gentlemen:
Pursuant to the Credit Agreement dated July 20, 1998 between
us ("Credit Agreement"), this letter constitutes irrevocable notice that we
request a Revolving Credit Loan as follows:
1. Amount of Loan: [Insert amount]
2. Type of Loan: [Insert Libor or Prime Rate Loan]
3. Interest Period: [If Libor Loan, insert 30, 60 or 90 days]
4. Borrowing Date: [Insert date]
We hereby certify that (i) the representations and warranties
contained in the Credit Agreement and the other Loan Documents are true, correct
and complete on and as of the date hereof to the same extent as though made on
and as of the date hereof, except as previously disclosed to and waived by the
Bank in writing, (ii) no Event of Default or default which, upon notice, lapse
of time or both, would constitute an Event of Default, has occurred under the
Credit Agreement or could result after giving effect to the Loan requested
hereunder and (iii) Borrower has performed all agreements and satisfied all
conditions under the Credit Agreement required to be performed by it on or
before the date hereof.
Capitalized terms used herein but not defined shall have the
respective meanings given to them in the Credit Agreement.
IN WITNESS WHEREOF, Borrower has executed this certificate.
Vicon Industries, Inc.
By:____________________________
Name:
Title:
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<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 3,028,170 3,028,170
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<RECEIVABLES> 13,115,639 13,115,639
<ALLOWANCES> (644,188) (644,188)
<INVENTORY> 17,021,144 17,021,144
<CURRENT-ASSETS> 32,520,765 32,520,765
<PP&E> 13,174,584 13,174,584
<DEPRECIATION> (5,421,587) (5,421,587)
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0 0
0 0
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<INTEREST-EXPENSE> 230,449 924,279
<INCOME-PRETAX> 1,649,477 3,962,482
<INCOME-TAX> 75,000 225,000
<INCOME-CONTINUING> 1,574,477 3,737,482
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