SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 29, 1998
METRO-TEL CORP.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-9040 11-2014231
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(Commission File Number) (IRS Employer Identification No.)
290 N.E. 68 Street, Miami, Florida 33138
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 754-4551
250 South Milpitas Boulevard, Milpitas, CA 95035
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(Former name or former address, if changed since last report)
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Item 1. Changes in Control of Registrant.
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and
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Item 2. Acquisition or Disposition of Assets.
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On November 1, 1998, pursuant to an Agreement of Merger dated
as of July 1, 1998 ("Merger Agreement"), among the Company, Metro-Tel
Acquisition Corp., a newly formed wholly-owned subsidiary of the Company
("Subsidiary"), Steiner-Atlantic Corp., a Florida corporation ("Steiner"),
William K. Steiner and Michael S. Steiner, Subsidiary was merged with and into
Steiner; Steiner became a wholly-owned subsidiary of the Company; and William K.
Steiner and Michael S. Steiner, the sole stockholders of Steiner, were issued an
aggregate of 4,720,954 shares of Common Stock of the Company (representing
approximately 69% of the outstanding shares of Common Stock of the Company
following the Merger). In addition, 100,000 shares of the Company's Common Stock
are being issued to Slusser Associates, Inc. ("Slusser"), the Company's
financial advisor in connection with the Merger. In addition, Slusser received
$100,000 and is being reimbursed for its out-of-pocket expenses. Slusser
previously received a $25,000 fee for financial advisory services provided to
the Company. The 2,054,046 shares of the Company's Common Stock outstanding at
the time of the Merger remain outstanding and represent, in the aggregate,
approximately 30% of the Company's Common Stock after the Merger. A copy of the
Merger Agreement was annexed as Exhibit A to the Company's Proxy Statement dated
October 5, 1998 and is incorporated by reference as Exhibit 2.1 to this Report.
William K. Steiner, Michael S. Steiner and Slusser have
acknowledged that they are "accredited investors" within the meaning of Rule
501(a) of Regulation D promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), and are acquiring the shares being issued to each for
his or its sole account for investment and not with a view to resale or
distribution. Accordingly the Company believes that the exemption from
registration afforded by Section 4(2) of the Securities Act is applicable to the
issuance of these shares.
Pursuant to the Merger Agreement, in addition to William K.
Steiner and Michael S. Steiner, Stuart Wagner and David Blyer were designated by
Steiner to serve on the Company's Board of Directors. Venerando J. Indelicato
and Lloyd Frank continue to serve as directors of the Company and, in accordance
with the Merger Agreement, Michael Epstein and Michael Michaelson have resigned
as directors of the Company. Michael S. Steiner has been elected President and
Chief Executive Officer of the Company, replacing Mr. Indelicato in that
capacity. Mr. Indelicato continues to serve as Treasurer and Chief Financial
Officer of the Company.
The terms of the Merger Agreement were negotiated by the
Company and Steiner. Prior to the Merger, William K. Steiner and Michael S.
Steiner had no material relationship with the Company or any of the Company's
affiliates, directors or officers or any associate of any director or officer of
the Company. The Company received a written opinion from Slusser that the
consideration to be paid by the Company in connection with the Merger was fair
to the Company and its stockholders from a financial point of view. The
stockholders of the Company approved the Merger at the Company's 1998 Annual
Meeting of Stockholders held on October 29, 1998.
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<PAGE>
Founded in 1960, Steiner is a supplier of dry cleaning
equipment, industrial laundry equipment and steam boilers, offering over 30
lines of commercial systems to customers in South Florida, the Caribbean and
Central and South American markets. Steiner's services include: (1) designing
and planning "turn-key" laundry and/or dry cleaning systems to meet the layout,
volume and budget needs of a variety of institutional and retail customers, (2)
supplying replacement equipment and parts to its customers, (3) providing
warranty and preventive maintenance through factory-trained technicians and
service managers, (4) selling its own line of dry cleaning systems to customers
in the United States, the Caribbean and Latin America, and (5) selling process
steam systems and boilers. The Company intends to continue Steiner's operations
as a subsidiary of the Company.
Item 5. Other Events.
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(a) On October 30, 1998, the Company filed an Amendment to its
Certificate of Incorporation to increase the number of shares of Common Stock,
$.025 par value per share, which it is authorized to issue from 6,000,000 shares
to 15,000,000 shares. This Amendment was approved by the Company's stockholders
at the Company's 1998 Annual Meeting of Stockholders. A copy of such Amendment
is annexed to this Report as Exhibit 4.1(g).
(b) On October 29, 1998, at the Company's 1998 Annual Meeting
of Stockholders, the Company's stockholders approved an amendment to the
Company's 1991 Stock Option Plan to increase the number of shares of Common
Stock which the Company is authorized to issue thereunder from 250,000 shares to
850,000 shares. A copy of the Company's 1991 Stock Option Plan as amended to
date is annexed to this Report as Exhibit 99.3.
(c) On November 2, 1998, Steiner entered into a Loan and
Security Agreement (the "Loan Agreement") with First Union National Bank (the
"Bank"). The Loan Agreement provides for a term loan to Steiner of $2,400,000
(the "Term Loan") and a revolving credit facility to Steiner of up to $2,250,000
(the "Revolving Loan" and, together with the Term Loan, the "Loans"). The Loans,
which are guaranteed by the Company, are secured by pledges of substantially all
of the present and future assets and property, excluding real estate, of the
Company and Steiner.
The following is a brief discussion of the loan arrangement
and is qualified in its entirety by reference to the Loan Agreement and the
Guaranty and Security Agreement dated November 2, 1998 by the Company in favor
of the Bank, which are annexed hereto as Exhibits 4.2(a) and 4.2(b),
respectively.
The unpaid principal balance of the Term Loan bears interest
at (a) a variable rate per annum equal to the Bank's prime rate or (b) a fixed
rate for any one-month interest period equal to 2.75% per annum above the LIBOR
rate applicable to such period, as selected by Steiner from time to time. The
Term Loan is to be repaid in consecutive monthly installments of $40,000
commencing on January 1, 1999, with the remaining unpaid principal balance due
on January 2, 2002.
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Under the Revolving Loan, Steiner may request advances of up
to $2,250,000, limited by a borrowing base equal to the sum of (i) 60% of
eligible accounts receivable (as defined), plus (ii) 50% of eligible inventory
(as defined) consisting of spare parts, plus (iii) 60% of eligible inventory (as
defined) consisting of equipment. The unpaid principal balance of the Revolving
Loan bears interest at a variable rate per annum equal to (a) the Bank's prime
rate as in effect from time to time or (b) 2.75% per annum above the LIBOR
market index rate, as selected by Steiner from time to time. The scheduled
maturity date of the Revolving Loan is November 2, 1999.
The Loan Agreement requires, among other things, that Steiner
and the Company maintain, on a consolidated basis: (a) as of the last day of
each fiscal year of Steiner and the Company, a ratio of (i) the sum of (1) the
consolidated net income after tax for the fiscal year then ended, plus (2)
consolidated depreciation and amortization for the fiscal year then ended, less
(3) dividends declared or paid by the Company during the fiscal year then ended
to (ii) current maturities of long-term debt, including capitalized leases and
excluding the Revolving Loan, of at least 1.25 to 1.0; and (b) a ratio of
consolidated total liabilities (as defined) to consolidated tangible net worth
(as defined) of at least 2.0 to 1.0. Steiner and the Company may declare or pay
dividends or distributions only to the extent that such payments would not
result in a failure to maintain such ratios. In addition, among other things,
the Loan Agreement restricts the ability of Steiner and the Company to incur
liens, make loans to others, guarantee obligations, purchase securities and make
capital contributions and prohibits Steiner and the Company from purchasing,
redeeming or otherwise acquiring any stock or other equity interests.
Item 7. Financial Statements, Pro Forma Financial Information and
- ------ Exhibits.
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(a) Financial statements of business acquired:
The following historical financial statements of
Steiner-Atlantic Corp. are incorporated by reference to pages F-16 to F-27 of
the definitive Proxy Statement of the Company filed with the Commission on
October 5, 1998 (File No. 0-9040):
Report of Independent Certified Public Accountants
Balance Sheets at December 31, 1997 (audited) and June 30,
1998 (unaudited)
Statements of Income for the years ended December 31, 1996
and 1997 (audited) and for the six months ended June 30,
1997 and 1998 (unaudited)
Statements of Shareholders Equity for the years ended
December 31, 1996 and 1997 (audited) and for the six months
ended June 30, 1998 (unaudited)
Statements of Cash Flows for the years ended December 31,
1996 and 1997 (audited) and for the six months ended June
30, 1997 and 1998 (unaudited)
Notes to Financial Statements
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<PAGE>
(b) Pro forma financial information:
The following unaudited Pro Forma Combined Condensed
Financial Statements are incorporated by reference to pages 35 to 39 of the
definitive Proxy Statement of the Company filed with the Commission on October
5, 1998 (File No. 0-9040):
Introductory Statement
Unaudited Pro Forma Combined Condensed Balance Sheet of the
Company and Steiner at June 30, 1998.
Unaudited Pro Forma Combined Condensed Statements of
Operations for the year ended December 31, 1997 and the six
months ended June 30, 1998.
Notes to Unaudited Pro Forma Combined Condensed Financial
Statement.
(c) Exhibits:
2.1 Agreement of Merger dated as of July 1, 1998 among the
Company, Metro-Tel Acquisition Corp., Steiner-Atlantic
Corp., William K. Steiner and Michael S. Steiner.
Incorporated by reference to Exhibit A of the definitive
Proxy Statement of the Company filed with the Commission on
October 5, 1998 (File No. 0-9040).
*4.1(a) Certificate of Incorporation of the Company, as filed with
the Secretary of State of the State of Delaware on June 30,
1963.
*4.1(b) Certificate of Amendment to the Certificate of Incorporation
of the Company, as filed with the Secretary of State of the
State of Delaware on March 27, 1968.
*4.1(c) Certificate of Amendment to the Certificate of Incorporation
of the Company, as filed with the Secretary of State of the
State of Delaware on November 4, 1983.
*4.1(d) Certificate of Amendment to the Certificate of Incorporation
of the Company, as filed with the Secretary of State of the
State of Delaware on November 5, 1986.
*4.1(e) Certificate of Change of Location of Registered Office and
of Agent, as filed with the Secretary of State of the State
of Delaware on December 31, 1986.
*4.1(f) Certificate of Ownership and Merger of Design Development
Incorporated into the Company, as filed with the Secretary
of State of the State of Delaware on June 30, 1998.
*4.1(g) Certificate of Amendment to the Company's Certificate of
Incorporation as filed with the Secretary of State of the
State of Delaware on October 30, 1998.
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<PAGE>
*4.2(a) Loan and Security Agreement dated November 2, 1998 between
Steiner-Atlantic Corp. and First Union National Bank.
*4.2(b) Guaranty and Security Agreement dated November 2, 1998 by
the Company in favor of First Union National Bank.
*99.1 Financial Statement of Steiner-Atlantic Corp.
*99.2 Pro Forma Financial Information.
*99.3 The Company's 1991 Stock Option Plan, as amended.
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* Filed herewith.
Item 8. Change in Fiscal Year.
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Since, for financial accounting purposes, the Merger will be
accounted for as a reverse acquisition of the Company by Steiner, and since
Steiner's fiscal year ends on December 31 and Steiner will be adopting the
Company's June 30 fiscal year, a transition report on Form 10-K will be required
for the six months ended June 30, 1998. The determination to use a June 30
fiscal year was made by the Company's Board of Directors on November 2, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
METRO-TEL CORP.
Date: November 12, 1998 By: /s/ Venerando J. Indelicato
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Venerando J. Indelicato, Treasurer
and Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
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Exhibit
Number Description
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2.1 Agreement of Merger dated as of July 1, 1998 among the
Company, Metro-Tel Acquisition Corp., Steiner-Atlantic Corp.,
William K. Steiner and Michael S. Steiner. Incorporated by
reference to Exhibit A of the definitive Proxy Statement of
the Company filed with the Commission on October 5, 1998 (File
No. 0-9040).
*4.1(a) Certificate of Incorporation of the Company, as filed with the
Secretary of State of the State of Delaware on June 30, 1963.
*4.1(b) Certificate of Amendment to the Certificate of Incorporation
of the Company, as filed with the Secretary of State of the
State of Delaware on March 27, 1968.
*4.1(c) Certificate of Amendment to the Certificate of Incorporation
of the Company, as filed with the Secretary of State of the
State of Delaware on November 4, 1983.
*4.1(d) Certificate of Amendment to the Certificate of Incorporation
of the Company, as filed with the Secretary of State of the
State of Delaware on November 5, 1986.
*4.1(e) Certificate of Change of Location of Registered Office and of
Agent, as filed with the Secretary of State of the State of
Delaware on December 31, 1986.
*4.1(f) Certificate of Ownership and Merger of Design Development
Incorporated into the Company, as filed with the Secretary of
State of the State of Delaware on June 30, 1998.
*4.1(g) Certificate of Amendment to the Company's Certificate of
Incorporation as filed with the Secretary of State of the
State of Delaware on October 30, 1998.
*4.2(a) Loan and Security Agreement dated November 2, 1998 between
Steiner-Atlantic Corp. and First Union National Bank.
*4.2(b) Guaranty and Security Agreement dated November 2, 1998 by the
Company in favor of First Union National Bank.
*99.1 Financial Statement of Steiner-Atlantic Corp.
*99.2 Pro Forma Financial Information.
*99.3 The Company's 1991 Stock Option Plan, as amended.
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* Filed herewith.
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EXHIBIT 4.1(a)
CERTIFICATE OF INCORPORATION
OF
METRO-TEL CORP.
FIRST: The name of this corporation is:
METRO-TEL CORP.
SECOND: The location of its principal office in the State of Delaware
is 129 South State Street, in the City of Dover, County of Kent. The name of the
resident agent therein and in charge thereof is the Registrar and Transfer
Company, 129 South State Street, Dover, Kent County, Delaware.
THIRD: The objects and purposes for which and for any of which this
corporation is formed are to do any and all of the things herein set forth to
the same extent as natural persons might or could do, viz:
1. As principal, agent,factor or otherwise, at wholesale, retail, on
commission or otherwise to manufacture, assemble, import, purchase, or otherwise
acquire, to hold, own, mortgage, distribute, export, sell, assign on commission
and transfer or otherwise dispose of, to invest in, trade, experiment with,
conduct research with respect to, design, develop, process, and generally deal
in and with electronic, electrical, and communications products, systems,
circuits and processes, devices and equipment of every kind, class and
description, including the appliances, accessories, equipment, supplies and
appurtenances necessary therefor or incidental thereto; in general, but without
limitation, to engage in the electronic, electrical and communications
businesses in all their varied branches.
<PAGE>
2. To manufacture, purchase, lease or otherwise acquire, to hold, own,
mortgage, pledge, sell, assign and transfer or otherwise dispose of, to invest,
trade, import, export, deal in and deal with real and personal property of every
class and description and in particular, goods, wares, merchandise, lands,
properties, easements, buildings, business concerns and undertaking,
concessions, produce, and any interest in real or personal property, and any
claims against such property or against any person or corporation, and to carry
on any business concern, or undertaking so acquired.
3. To purchase, receive, hold and own and dispose of bonds, mortgages,
debentures, notes shares of capital stock and other securities, obligations,
contracts and evidences of indebtedness of any company, corporation or
association, or of any government, state, municipality or body politic; to
receive, collect and dispose of interest, dividends, and income upon, of and
from any of the bonds, mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of indebtedness and other property
held or owned by it, and to exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities, obligations, contracts,
evidences of indebtedness and other property, any and all the rights, powers and
privileges of individual ownership thereof, including the right to vote thereon.
4. To acquire the good will, rights and property, and to undertake the
whole or any part of the assets and liabilities of any person, firm, association
or corporation, and to pay for the same in cash, stock or bonds of this
corporation or otherwise.
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5. To acquire, hold, use, sell, assign, lease, grant licenses in
respect of, mortgage or otherwise dispose of letters patent of the United States
or any foreign country, patents, patent rights, licenses and privileges,
inventions, improvements and processes, trade marks and trade names and
copyrights relating to or useful in connection with any business of this
corporation.
6. To enter into, make, perform and carry out contracts of every kind
for any lawful purpose, without limit as to amount, with any person, firm,
association or corporation.
7. To draw, make, accept, endorse, discount, execute and issue
promissory notes, bills of exchange, warrants and other negotiable or
transferable instruments.
8. To borrow money, issue bonds, debentures or obligations of this
corporation from time to time, for any of the objects or purposes of the
corporation, and to secure the same by mortgage, pledge, deed of trust or
otherwise.
9. To purchase, hold and reissue the shares of its capital stock;
provided that this corporation shall not use its funds or property for the
purchase of its own shares of capital stock when such use would cause any
impairment of the capital of the corporation; and provided further that shares
of its own capital stock belonging to the corporation shall not be voted upon
directly or indirectly.
10. To have one or more offices, to carry on all or any of its
operations and business and without restriction or limit as to amount, to
purchase or otherwise acquire, to hold, own, mortgage, sell, convey or otherwise
dispose of real and personal property of every class and description in any of
the States, Districts, Territories or Colonies of the United States and in any
and all foreign countries, subject to the laws of such States, Districts,
Territories, Colonies or Countries.
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<PAGE>
11. In general, to carry on the foregoing or any other business in
connection with the foregoing, either as principal, agent, factor or otherwise,
at wholesale, retail, on commission or otherwise, whether manufacturing or
otherwise, and to have and to exercise all the powers conferred by the laws of
Delaware upon corporations formed under the act hereinafter referred to.
12. The foregoing clauses shall be construed as objects and powers and
it is hereby expressly provided that the foregoing enumeration of specific
powers shall not be held to limit or restrict in any manner the powers of this
corporation.
FOURTH: The total authorized capital stock of this corporation is Fifty
Thousand Dollars ($50,000), divided into Five Hundred Thousand (500,000) shares
of the par value of Ten Cents ($.10) each, all of which shall be known as Common
Stock.
The amount of capital with which this corporation will commence
business is the sum of One Thousand Dollars ($1,000).
FIFTH: The names and places of residence of each of the original
incorporators are as follows:
M. P. Gorsuch Dover, Delaware
E. E. Boyles Dover, Delaware
M. R. Hall Dover, Delaware
SIXTH: This corporation is to have perpetual existence.
SEVENTH: The private property of the stockholders shall not be subject
to the payment of corporate debts to any extent whatever.
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EIGHTH: No holder of any stock of this corporation shall be entitled as
of right to purchase or subscribe for any part of any stock of the corporation
authorized herein or of any additional stock of any class to be issued by reason
of any increase of the authorized capital stock of the corporation, or of any
bonds, certificates of indebtedness, debentures or other securities convertible
into stock of the corporation, but any stock authorized herein or any such
additional authorized issue of any stock or of securities convertible into stock
may be issued and disposed of by the board of directors to such persons, firms,
corporations or associations, and upon such terms and conditions as the board of
directors may in their discretion determine, without offering any thereof on the
same term or on any terms to the stockholders then of record or to any class of
stockholders.
NINTH: In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized:
a) To make, alter, amend and rescind the by-laws of this corporation;
to fix the amount to be reserved as working capital; to authorize and cause to
be executed mortgages and liens upon the real and personal property of this
corporation.
b) From time to time to determine whether and to what extent and at
what times and places and under what conditions and regulations the accounts and
books of this corporation, other than the stock ledger, or any of them, shall be
open to the inspection of the stockholders, and no stockholder shall have any
right of inspecting any account or book or document of this
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<PAGE>
corporation except as conferred by statue, or authorized by the directors, or by
a resolution of the stockholders.
c) If the by-laws so provide, to designate two or more of their number
to constitute an executive committee, which committee shall for the time being,
as provided in said resolution or in the by-laws of this corporation, have and
exercise any or all of the powers of the board of directors in the management of
the business and affairs of this corporation, and have power to authorize the
seal of this corporation to be affixed to all papers which may require it.
TENTH: This corporation may in its by-laws confer powers additional to
the foregoing upon the directors, in addition to the powers and authorities
expressly conferred upon them by the statute.
ELEVENTH: Both stockholders and directors shall have power, if the
by-laws so provide, to hold their meetings either within or without the State of
Delaware; and the corporation may have one or more offices in addition to the
principal office in Delaware, and keep its books (subject to the provisions of
the statutes) outside of the State of Delaware at such places as may be from
time to time designated by the board.
TWELFTH: No contract or other transaction between the corporation and
any other firm or corporation shall be effected or invalidated by the fact that
any one or more of the directors or officers of the corporation is or are
interested in or is a member, director, officer or stockholder or are members,
directors, officers or stockholders of, such other firm or corporation, and any
director or directors, officer or officers, individually or jointly, may be a
party or parties to or may be interested in any contract or transaction of the
corporation or in which the corporation is interested; and no contract, act or
transaction of the corporation with any person, firm, corporation or association
shall be affected or invalidated by
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<PAGE>
the fact that any director or directors, or officer or officers of the
corporation is a party or are parties to or interested in such contract, act or
transaction, or in any way connected with such person, firm, corporation or
association, and each and every person, who may become a director or officer of
the corporation is hereby relieved, as far as is legally permissible, from any
disability which might otherwise prevent him from contracting with the
corporation for the benefit of himself, or of any firm, corporation or
association in which he may in any way be interested.
THIRTEENTH: The corporation shall have power to indemnify any and all
of its directors or officers or former directors or officers or any person who
may have served at its request as a director or officer of another corporation
in which it owns shares of capital stock or of which it is a creditor against
expenses actually and necessarily incurred by them in connection with the
defense of any action, suit or proceeding in which they, or any of them, are
made parties or a party, by reason of being or having been directors or officers
or a director or officer of the corporation, or of such other corporation,
except in relation to matters as to which any such director or officer or former
director or officer or person shall be adjudged in such action, suit or
proceeding to be liable for negligence or misconduct in the performance of duty.
Such indemnification shall not be deemed exclusive of any other rights to which
those indemnified may be entitled, under any by-law, agreement, vote of
stockholders, or otherwise.
FOURTEENTH: Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or
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<PAGE>
stockholder thereof or on the application of any Receiver or Receivers appoint
for this corporation under the provisions of Section 291 of the Revised Code of
1953 of said State, or on the application of trustee in dissolution or of any
Receiver or Receivers appointed for this corporation under the provisions of
Section 279 of the General Corporation Law of the State of Delaware, order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders, as the case may be, to be summoned in such manner as the
said court directs. If a majority in number representing three fourths in value
of the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the Court to which the said application
has been made be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders of this corporation, as the case
may be, and also on this corporation.
FIFTEENTH: This corporation reserves the right to amend, alter, change
or repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred on
stockholders herein are granted subject to this reservation.
WE, THE UNDERSIGNED, being each of the original incorporators
hereinbefore named, for the purpose of forming a corporation to do business both
within and without the State of Delaware, and in pursuance of the General
Corporation Law of the State of Delaware do make
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<PAGE>
and file this certificate, hereby declaring and certifying that the facts herein
stated are true, and accordingly have hereunto set our hands and seal this 12th
day of June, A.D., 1963.
/s/ M.P. Gorsuch
-----------------------------
M.P. Gorsuch
/s/ E.E. Boyles
-----------------------------
E.E. Boyles
/s/ M.R. Hall
-----------------------------
M.R. Hall
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<PAGE>
STATE OF DELAWARE )
) SS:
COUNTY OF DELAWARE )
BE IT REMEMBERED, that on this 12th day of June, A.D., 1963, personally
came before me, Emma V. Hall, a Notary Public for the State of Delaware, M.P.
Gorsuch, E.E. Boyles and M. R. Hall, parties to the foregoing certificate of
incorporation known to me personally to be such and severally acknowledged the
said certificates to be the act and deed of the signers respectively and that
the facts therein states are truly set forth. GIVEN under my hand and seal of
office the day and year aforesaid.
/s/ Emma V. Hall
-------------------------------
Emma V. Hall
Notary Public
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EXHIBIT 4.1(b)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * *
METRO-TEL CORP., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the Board of Directors of said corporation, at a
meeting duly held, adopted resolutions proposing and declaring advisable the
following amendment of the Certificate of Incorporation of said corporation:
RESOLVED, that this Corporation's Certificate of
Incorporation be amended by striking out the first paragraph of
Article FOURTH thereof and substituting in lieu of said paragraph
the following new paragraph:
"FOURTH: The total authorized capital stock of this
Corporation is Fifty Thousand Dollars ($50,000.00), divided
into Two Million Shares (2,000,000) of the par value of
Two and a Half Cents ($.025) each, all of which shall be
known as Common Stock."
SECOND: That the said amendment has been consented to and
authorized by the vote of more than a majority of all the issued and outstanding
shares of stock entitled to vote, at a meeting duly called and held for that
purpose on the 22nd day of March, 1968, at the office of the corporation.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Sections 242 and 228 of The General
Corporation Law of Delaware.
<PAGE>
FOURTH: All of the shares of the issued and outstanding capital
stock of the corporation shall by this Amendment be changed and reclassified
into shares of the new common stock of this corporation so that each share of
stock as the same existed immediately preceding the effective date of this
Amendment shall by this Amendment be reclassified into four shares of the new
capital stock.
FIFTH: That the capital of said corporation will not be reduced
under or by reason of said amendment.
IN WITNESS WHEREOF, said METRO-TEL CORP., has caused its corporate
seal to be hereunto affixed and this certificate to be signed by Venerando J.
Indelicato, its President, and Lloyd Frank, its Secretary, this 22nd day of
March, 1968.
METRO-TEL CORP.
By: /s/ Venerando J. Indelicato
----------------------------------
Venerando J. Indelicato,
President
By: /s/ Lloyd Frank
----------------------------------
Lloyd Frank,
Secretary
Attest:
<PAGE>
STATE OF NEW YORK ) SS:
)
COUNTY OF NEW YORK )
BE IT REMEMBERED, that on this 22nd day of March, 1968, personally
came before me, a Notary Public in and for the County and State aforesaid,
VENERANDO J. INDELICATO, President of METRO-TEL CORP., a corporation of the
State of Delaware, the corporation described in and which executed the foregoing
certificate, known to me personally to be such, and he, the said VENERANDO J.
INDELICATO, as such President, duly executed said certificate before me and
acknowledged the said certificate to be his act and deed and the act and deed of
said corporation; that the signatures of the said President and of the Secretary
of said corporation to said foregoing certificate are in the handwriting of the
said President and Secretary of said corporation, respectively, and that the
seal affixed to said certificate is the common or corporate seal of said
corporation, and that the facts therein stated are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office
the day and year aforesaid.
/s/ Paul E.
-------------------------------
Paul E.
Notary Public
EXHIBIT 4.1(c)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
METRO-TEL CORP.
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"Corporation") is Metro- Tel Corp.
2. The Certificate of Incorporation of the Corporation is
hereby amended by striking out Article FOURTH thereof and by substituting in
lieu thereof the following new Article FOURTH:
"FOURTH: The total number of shares of shares of
capital stock which the Corporation is authorized to
issue is 6,200,000 shares, consisting of:
(1) 6,000,000 shares of Common Stock, having
a par value of $.025 per share; and
(2) 200,000 shares of Preferred Stock having
a par value of $1.00 per share. The Board of
Directors of the Corporation is authorized, subject
to limitations prescribed by law and by filing any
certificate prescribed by law, to provide for the
issuance of such Preferred Stock in series and to
establish the number of shares to be included in each
such series, the full or limited voting powers, or
the denial of voting powers of each such series, and
such designations, preferences and relative,
participating, optional or other special rights, and
the qualifications or restrictions and other
distinguishing characteristics, if any, of the shares
of each such series. The authority of the Board of
Directors with
<PAGE>
respect to the shares of each such series shall
include, without limitation, determination of the
following:
(a) the number of shares of such series and
the designation thereof;
(b) the annual rate or amount of dividends,
if any, payable on shares of each such series (which
dividends would be payable in preference to any
dividends on Common Stock), whether such dividends
shall be cumulative or non-cumulative and the
conditions upon which and/or the date when such
dividends shall be payable;
(c) whether the shares of each such series
shall be redeemable and, if so, the terms and
conditions of such redemption, including the time or
times when and the price or prices at which shares of
each such series may be redeemed;
(d) the amount, if any, payable on shares of
each such series in the event of liquidation,
dissolution or winding up of the affairs of the
Corporation;
(e) whether the shares of each such series
shall be convertible into or exchangeable for shares
of any other class, or any series of the same or any
other class, and, if so, the terms and conditions
thereof, including the price or prices or the rate or
rates at which shares of each such series shall be so
convertible or exchangeable, and the adjustment which
shall be made, and the circumstances in which such
adjustments shall be made, in such conversion or
exchange prices or rates; and
(f) whether the shares of each such series
shall have any voting rights in addition to those
prescribed by law and, if so, the terms and
conditions of exercise of voting rights."
3. The amendment to the Certificate of Incorporation herein
certified has been duly adopted in accordance with the provisions of Section 242
of the General Corporation Law of the State of Delaware.
-2-
<PAGE>
4. The capital of the Corporation will not be reduced under or
by reason of the amendment herein certified.
Executed at New York, New York on October 27, 1983.
/s/ Venerando J. Indelicato
-------------------------------------
Venerando J. Indelicato, President
Attest;
/s/ Sheppard Beidler
- -------------------------------
Sheppard Beidler, Secretary
-3-
EXHIBIT 4.1(d)
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
METRO-TEL CORP.
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"Corporation") is METRO-TEL CORP.
2. The Certificate of Incorporation of the Corporation is hereby
amended by striking out Article THIRTEENTH thereof and by substituting in lieu
of said Article the following new Article:
"THIRTEENTH: To the full extent authorized by law,
the Corporation shall indemnify, and advance expenses to, any
person made or threatened to be made a party to an action,
suit or proceeding, whether criminal, civil, administrative
or investigative, by reason of the fact that he, his heir,
executor or administrator, is or was a director, officer,
employee or agent of the Corporation or serves or served at
the request of the Corporation as a director, officer,
employee or agent of any other corporation, partnership,
joint venture, trust or other enterprise."
The Certificate of Incorporation of the Corporation is further
amended by adding the following new Article SIXTEENTH:
"SIXTEENTH: No director of the Corporation shall be
personally liable to the Corporation or its stockholders for
monetary damages for any breach of fiduciary duty as a
director, except that this Article SIXTEENTH, to the extent
required by applicable law, does not eliminate or limit the
liability of a director (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii)
under
<PAGE>
Section 174 of the General Corporation Law of the State of
Delaware, as same exists or hereafter may be amended, or (iv)
for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this
Article SIXTEENTH, or adoption of any provision of this
Certificate of Incorporation inconsistent with this Article
SIXTEENTH, shall prejudice the exculpatory effect of this
Article SIXTEENTH with respect to any act or omission
occurring prior to the effective date of such amendment,
repeal or inconsistent provision."
3. The amendments of the Certificate of Incorporation herein
certified have been duly adopted in accordance with the provisions of Section
242 of the General Corporation Law of the State of Delaware.
Signed and attested to on November 3, 1986.
/s/ Venerando J. Indelicato
--------------------------------------
Venerando J. Indelicato, President
Attest:
/s/ Lloyd Frank
- --------------------------
Lloyd Frank, Secretary
EXHIBIT 4.1(e)
CERTIFICATE OF CHANGE OF LOCATION OF
REGISTERED OFFICE AND OF AGENT
OF
METRO-TEL CORP.
--------------------------------------------------
Adopted in accordance with the Provisions
of Section 133 of the General Corporation
Law of the State of Delaware.
--------------------------------------------------
It is hereby certified that:
I. The name of the corporation is Metro-Tel Corp.
II. The registered office of the corporation within the state
of Delaware is hereby changed to 229 South State Street, in the City of Dover,
County of Kent, 19901.
III. The Registered agent of the corporation within the state
of Delaware is hereby changed to United States Corporation Company, the business
office of which is identical with the registered office as hereby changed.
IV. The corporation has authorized the changes hereinabove set
forth by resolution of its Board of Directors.
IN WITNESS WHEREOF, we have signed this certificate this 29th day of
December 1986.
/s/ Venerando J. Indelicato
------------------------------------
Venerando J. Indelicato,
President
ATTEST:
/s/ Lloyd Frank
- --------------------------
Lloyd Frank, Secretary
EXHIBIT 4.1(f)
CERTIFICATE OF OWNERSHIP AND MERGER
OF
DESIGN DEVELOPMENT INCORPORATED
(a California corporation)
into
METRO-TEL CORP.
(a Delaware corporation)
It is hereby certified that:
1. METRO-TEL CORP (hereinafter sometimes referred to as the
"Corporation") is a business corporation of the State of Delaware.
2. The Corporation is the owner of all of the outstanding shares of
stock of DESIGN DEVELOPMENT INCORPORATED, which is a business corporation of the
State of California.
3. The laws of the jurisdiction of organization of DESIGN DEVELOPMENT
INCORPORATED permit the merger of a business corporation of that jurisdiction
with a business corporation of another jurisdiction.
4. The Corporation hereby merges DESIGN DEVELOPMENT INCORPORATED into
the Corporation.
5. The following is a copy of the resolutions adopted on June 7, 1988
by the Board of Directors of the Corporation to merge the said DESIGN
DEVELOPMENT INCORPORATED into the Corporation:
RESOLVED, that DESIGN DEVELOPMENT
INCORPORATED be merged into this Corporation, and
that all of the estate, property, rights, privileges,
powers, and franchises of DESIGN DEVELOPMENT
INCORPORATED be vested in and held and enjoyed by
this Corporation as fully and entirely and without
change or diminution as the same were before held and
enjoyed by DESIGN DEVELOPMENT INCORPORATED in its
name;
<PAGE>
RESOLVED, that this Corporation assume all
of the obligations of DESIGN DEVELOPMENT
INCORPORATED;
RESOLVED, that this Corporation shall cause
to be executed and filed and/or recorded the
documents prescribed by the laws of the State of
Delaware, by the laws of the State of California, and
by the laws of any other appropriate jurisdiction and
will cause to be performed all necessary acts within
the jurisdiction of organization of DESIGN
DEVELOPMENT INCORPORATED and of this Corporation and
in any other appropriate jurisdiction;
RESOLVED, that the effective time of the
Certificate of Ownership and Merger setting forth a
copy of these resolutions shall be June 30, 1988, and
that, insofar as the General Corporation Law of the
State of Delaware shall govern the same, said time
shall be the effective Merger time.
Executed on June 7, 1988.
METRO-TEL CORP.
By:/s/ Vernerando J. Indelicato
---------------------------------
Vernerando J. Indelicato,
President
Attest:
/s/Lloyd Frank
- -----------------------
Lloyd Frank, Secretary
-2-
EXHIBIT 4.1(g)
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
METRO-TEL CORP.
METRO-TEL CORP., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Corporation
duly called and held, resolutions were duly adopted setting forth a proposed
amendment of the Certificate of Incorporation of the Corporation, as amended,
declaring said amendment to be advisable and calling for consideration thereof
at a meeting of the stockholders of the Corporation. The resolution setting
forth the proposed amendment is as follows:
RESOLVED, that Article FOURTH of the Certificate of
Incorporation of the Corporation, as amended, be further
amended to increase the number of shares of Common Stock, par
value $.025 per share, which the Corporation is authorized to
issue from 6,000,000 shares to 15,000,000 shares, which
Article, as amended, will read as follows:
<PAGE>
"FOURTH: The total number of shares of capital stock
which the Corporation is authorized to issue is 15,200,000
shares, consisting of:
(1) 15,000,000 shares of Common Stock, having a par
value of $.025 per share; and
(2) 200,000 shares of Preferred Stock having a par
value of $1.00 per share. The Board of Directors of the
Corporation is authorized, subject to limitations prescribed
by law and by filing any certificate prescribed by law, to
provide for the issuance of such Preferred Stock in series and
to establish the number of shares to be included in each such
series, the fully or limited voting powers, or the denial of
voting powers of each such series, and such designations,
preferences and relative, participating, optional or other
special rights, and the qualifications or restrictions and
other distinguishing characteristics, if any, of the shares of
each such series. The authority of the Board of Directors with
respect to the shares of each such series shall include,
without limitation, determination of the following:
(a) the number of shares of each such series and the
designation thereof;
-2-
<PAGE>
(b) the annual rate or amount of dividends, if any,
payable on shares of each such series (which dividends would
be payable in preference to any dividends on Common Stock),
whether such dividends shall be cumulative or non-cumulative
and the conditions upon which and/or the date when such
dividends shall be payable;
(c) whether the shares of each such series shall be
redeemable and, if so, the terms and conditions of such
redemption, including the time or times when and the price or
prices at which shares of each such series may be redeemed;
(d) the amount, if any, payable on shares of each
such series in the event of liquidation, dissolution or
winding up of the affairs of the Corporation;
(e) whether the shares of each such series shall be
convertible into or exchangeable for shares of any other
class, or any series of the same or any other class, and, if
so, the terms and conditions thereof, including the price or
prices or the rate or rates at which shares of each such
series shall be so convertible or exchangeable, and the
adjustment which shall be made, and the circumstances in which
such adjustments shall be made, in such conversion or exchange
prices or rates; and
-3-
<PAGE>
(f) whether the shares of each such series shall have
any voting rights in addition to those prescribed by law and,
if so, the terms and conditions of exercise of voting rights."
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, an annual meeting of the stockholders of the Corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
Signed on October 29, 1998.
/s/ Venerando J. Indelicato
-----------------------------------
Venerando J. Indelicato,
President
-4-
EXHIBIT 4.2(a)
LOAN AND SECURITY AGREEMENT
between
STEINER-ATLANTIC CORP.
("Borrower")
and
FIRST UNION NATIONAL BANK
("Lender")
Dated November 2, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
1. Definitions; Financial and Other Terms...................................................................1
1.1. Definitions..................................................................................1
1.2. Financial Terms..............................................................................7
1.3. Other Terms..................................................................................7
2. Representations and Warranties...........................................................................7
2.1. Valid Existence and Power....................................................................7
2.2. Authority....................................................................................8
2.3. Condition....................................................................................8
2.4. Financial Statements.........................................................................8
2.5. Litigation; Government Regulation............................................................8
2.6. Agreements, Etc..............................................................................8
2.7. Authorizations...............................................................................8
2.8. Title; Collateral............................................................................9
2.9. Location and Names...........................................................................9
2.10. Taxes........................................................................................9
2.11. Labor Law Matters............................................................................9
2.12. Accounts.....................................................................................9
2.13. Use and Location of Collateral...............................................................9
2.14. Judgment Liens..............................................................................10
2.15. Intent and Effect of Transactions; Borrower's Solvency......................................10
2.16. Subsidiaries................................................................................10
2.17. Hazardous Materials.........................................................................10
2.18. ERISA.......................................................................................10
2.19. Investment Company Act......................................................................10
2.20. Use of Proceeds.............................................................................10
2.21. Trade Relations.............................................................................10
2.23. Full Disclosure.............................................................................11
3. Loans...................................................................................................11
3.1. Advances of Loans...........................................................................11
3.2 The Notes...................................................................................12
3.3 Notice and Manner of Borrowing..............................................................12
3.4. Interest....................................................................................12
3.5 Repayment of Loans..........................................................................13
3.6. Costs, Fees and Expenses....................................................................14
3.7. Prepayments.................................................................................14
3.8 Payments and Computations...................................................................14
3.9. Facility for Letters of Credit..............................................................14
3.10. Facility for Foreign Exchange...............................................................16
4. Conditions Precedent to Borrowing.......................................................................17
4.1. Advance.....................................................................................17
4.2. Conditions Precedent to Each Advance of a Loan or Issuance of a Letter of Credit or
Purchasing Forward Exchange.................................................................19
4.3. Waiver of Conditions Precedent..............................................................19
i
<PAGE>
Page
5. Covenants of the Borrower...............................................................................20
5.1. Use of Loan Proceeds........................................................................20
5.2. Maintenance of Business and Properties......................................................20
5.3. Insurance...................................................................................20
5.4. Notice of Default...........................................................................20
5.5. Inspections.................................................................................21
5.6. Financial Information.......................................................................21
5.7. Year 2000 Compatibility.....................................................................22
5.8. Liens.......................................................................................22
5.9. Redemptions.................................................................................22
5.10. Merger, Sale, Etc...........................................................................22
5.11. Loans, Guaranties and Other Investments.....................................................22
5.12. Change in Business..........................................................................23
5.13. Accounts....................................................................................23
5.14. Transactions with Affiliates................................................................23
5.15. No Change in Name or Offices; Removal of Collateral.........................................23
5.16. No Sale, Leaseback..........................................................................23
5.17. Margin Stock................................................................................23
5.18. Payment of Taxes, Etc.......................................................................23
5.19. Comply with ERISA...........................................................................23
5.20. Compliance; Hazardous Materials.............................................................24
5.21. Subsidiaries................................................................................24
5.22. Compliance with Assignment Laws.............................................................24
5.23. Further Assurances..........................................................................24
5.24. Withholding Taxes...........................................................................24
5.25. Financial Covenants.........................................................................24
5.26. Lender Account..............................................................................24
5.27. Change in Ownership of Borrower.............................................................24
5.28. Fiscal Year; Accounting Method..............................................................24
5.29. Default on Other Obligations................................................................24
5.30. NASDAQ......................................................................................25
5.31. SEC Filing..................................................................................25
6. Default.................................................................................................25
6.1. Events of Default...........................................................................25
6.2. Acceleration of the Indebtedness............................................................26
6.3. Default Rate................................................................................26
6.4. Rights and Remedies.........................................................................27
6.5. Application of Proceeds.....................................................................27
6.6. Appointment of the Lender as the Borrower's Lawful Attorney.................................28
7. Security Agreement......................................................................................28
7.1. Security Interest...........................................................................28
7.2. Inspection of Collateral....................................................................29
7.3. Other Rights................................................................................29
7.4. Tangible Collateral; Inventory..............................................................29
7.5. The Lender's Payment of Claims Asserted Against the Collateral..............................29
ii
<PAGE>
Page
8. Term of Agreement.......................................................................................29
8.1. Term and Right to Terminate.................................................................29
8.2. Effect of Termination.......................................................................30
9. Miscellaneous...........................................................................................30
9.1. Rights and Remedies Cumulative; Non-Waiver; Etc.............................................30
9.2. Survival of Representations; Reinstatement of Indebtedness..................................30
9.3. Expenses; Indemnification...................................................................30
9.4. Notices.....................................................................................31
9.5. Successors and Assigns......................................................................32
9.6. Counterparts; Construction; Gender..........................................................32
9.7. Powers......................................................................................32
9.8. Approvals...................................................................................32
9.9. Indemnification of the Lender...............................................................32
9.10. Waivers by the Borrower.....................................................................32
9.11. Lawful Charges; Late Charge.................................................................33
9.12. Amendment...................................................................................33
9.13. Severability................................................................................33
9.14. Entire Agreement............................................................................33
9.15. Separate Legal Counsel......................................................................33
9.16. Right of Setoff.............................................................................33
9.17. Arbitration; Preservation and Limitation of Remedies........................................33
9.18. Governing Law; Jurisdiction and Venue; Waiver of Jury Trial.................................34
iii
</TABLE>
<PAGE>
LOAN AND SECURITY AGREEMENT
AGREEMENT, dated as of November 2, 1998, between STEINER-ATLANTIC
CORP., a Florida corporation (the "Borrower"), and FIRST UNION NATIONAL BANK, a
national banking association (the "Lender");
W I T N E S S E T H :
In consideration of the mutual covenants herein contained and to induce
the Lender to extend credit to the Borrower, the parties agree as follows:
1. Definitions; Financial and Other Terms.
1.1. Definitions. In addition to the terms defined elsewhere in
this Agreement, the following terms shall have the meanings set forth below:
"Accounts" means all accounts, accounts receivable, contract
rights, notes, bills, acceptances, choses in action, chattel paper, instruments,
documents, and other forms of obligations at any time owing to a Person, and all
"Accounts," as that term is defined in the Code, the proceeds thereof and all of
such Person's rights with respect to any goods represented thereby, whether or
not delivered, goods returned by customers and all rights as an unpaid vendor or
lienor, including rights of stoppage in transit and of recovering possession by
proceedings including replevin and reclamation, together with all customer
lists, books and records, ledger and account cards, computer tapes, disks,
printouts and records, whether now in existence or hereafter created, relating
to Accounts.
"Account Debtor" means any Person who is or who may become
obligated to a Person, under, with respect to, or on account of an Account.
"Adjusted LIBOR" means LIBOR plus two and three-quarters
percent (2.75%) per annum.
"Adjusted LIBOR Market Index Rate" means the LIBOR Market Index
Rate plus two and three-quarters percent (2-3/4%) per annum.
"Advance" means the advance of funds under a Revolving Credit
Loan.
"Advance Date" means the date a Revolving Credit Loan is
Advanced hereunder.
"Advance Request" means a request for an Advance of a Revolving
Credit Loan or an interest rate conversion under Section 3.3, substantially in
the form of Exhibit B or such other form as Lender shall request.
"Affiliate" of a named Person means (a) any Person owning 5% or
more of the voting stock or rights of such named Person or of which the named
Person owns 5% or more of such voting stock or rights; (b) any Person
controlling, controlled by or under common control with such named Person; (c)
any officer or director of such named Person or any Affiliates of the named
Person; and (d) any family member of the named Person or any Affiliate of such
named Person. For the purposes of this definition, "control" means the
possession, directly or indirectly, to direct or cause the direction of
management and policies of such Person, whether through ownership of securities,
by control or otherwise.
"Beneficiary" means the person who is the beneficiary of a
Letter of Credit.
"Borrower Collateral" means all property of the Borrower (other
than real estate), wherever located and whether now owned by Borrower or
hereafter acquired, including, but not limited to all of Borrower's: (a)
Inventory; (b) General Intangibles; (c) Accounts and Chattel Paper and any other
instrument or intangible representing payment for goods or services; (d)
Equipment; (e) funds on deposit with or under the control of the Lender or its
agents or correspondents and all lockboxes which may be established; and (f)
parts, replacements, additions, accessions, substitutions, profits, and products
and cash and non-cash proceeds of any of the foregoing (including insurance
proceeds
<PAGE>
payable by reason of loss or damage thereto) in any form and wherever located.
Borrower Collateral shall include all written or electronically recorded records
relating to any such Borrower Collateral and other rights relating thereto.
"Borrowing Base" means the lesser of (i) $2,250,000 or (ii) 60%
of Eligible Accounts plus 50% of Eligible Inventory consisting of spare parts
plus 60% of Eligible Inventory consisting of Equipment.
"Borrowing Base Certificate" means the Borrowing Base
Certificate substantially in the form of Exhibit A or such other form as Lender
may request.
"Business Day" means a weekday on which commercial banks are
open for business in Miami, Florida.
"Chattel Paper" means all writing or writings which evidence
both a monetary obligation and a security interest in or the lease of specific
goods and in addition includes all property included in the definition of
"chattel paper" as used in the Code.
"Closing Date" means the date first above written.
"Code" means the Uniform Commercial Code, as in effect in
Florida and in any other jurisdiction, as applicable, from time to time.
"Collateral" means all Borrower Collateral and all Metro-Tel
Collateral.
"Consolidated Tangible Total Assets" means all assets which
would properly be shown on Borrower's and Metro-Tel's consolidated balance sheet
in accordance with GAAP, less the aggregate amount of such assets which are
classified as intangible assets or General Intangibles in accordance with GAAP.
"Consolidated Tangible Net Worth" means Consolidated Tangible
Total Assets less Consolidated Total Liabilities.
"Consolidated Total Liabilities" means all liabilities which
would properly be shown on Borrower's and Metro-Tel's consolidated balance sheet
in accordance with GAAP, except indebtedness for borrowed money which is
subordinated in a manner satisfactory to Lender in its sole discretion.
"Debt" means all liabilities of a Person as determined under
GAAP and all obligations which such Person has guaranteed or endorsed or for
which such Person is otherwise secondarily or jointly liable, and shall include,
without limitation (a) all obligations for borrowed money or purchased assets,
(b) obligations secured by assets whether or not any personal liability exists,
(c) the capitalized amount of any capital or finance lease obligations, (d) the
unfunded portion of pension or benefit plans or other similar liabilities, (e)
obligations as a general partner, (f) contingent obligations pursuant to
guaranties, endorsements, letters of credit and other secondary liabilities and
(g) obligations for deposits.
"Default" means any event which with the passage of time or the
giving of notice or both would become an Event of Default.
"Default Rate" means a rate equal to the lesser of (a) the
Prime Rate plus five percent per annum or (b) the highest rate of interest
allowed by applicable law.
"Eligible Accounts" shall mean all genuine, bona fide Accounts
(valued net of the maximum amount of any discounts or other reductions) of the
Borrower arising in the ordinary course of Borrower's business from the sale and
delivery of Inventory or the rendition of services as to which the Lender has a
first priority perfected Lien subject only to Permitted Liens, excluding: (a)
Accounts outstanding for 91 days or more from the date of invoice; (b) Accounts
owing from any Affiliate of the Borrower; (c) Accounts owed by a creditor of the
Borrower or which are
2
<PAGE>
in dispute or subject to any counterclaim, deduction, contra-account or offset;
(d) Accounts owing by any Account Debtor which is not Solvent; (e) Accounts
arising from a sale on a bill-and-hold, guaranteed sale, sale-or-return,
sale-on-approval, consignment or similar basis or which is subject to
repurchase, return, rejection, repossession, loss or damage; (f) Accounts owed
by an Account Debtor in the State of Minnesota or the State of New Jersey
(unless Borrower has qualified to do business in such State or filed a current
Notice of Business Activities report in such State); (g) Accounts as to which
the goods giving rise to the Account have not been delivered to and accepted by
the Account Debtor or the service giving rise to the Account has not been
completely performed or which do not represent a final sale; (h) Accounts owed
by the United States of America unless the Borrower shall have complied to the
Lender's satisfaction with the Federal Assignment of Claims Act; (i) the total
Accounts owed by an Account Debtor and its Affiliates exceeds a credit limit
established by the Lender in its discretion (to the extent of such excess); (j)
the Account is evidenced by a note or other instrument, (other than Chattel
Paper) or reduced to judgment; (k) Accounts which, by contract, subrogation,
mechanics' lien laws or otherwise, are subject to claims by the Borrower's
creditors or other third parties or which are owed by Account Debtors as to whom
any creditor of the Borrower (including any bonding company) has lien rights;
(l) other Accounts for which the validity, collectibility or amount of which is
determined in good faith by the Borrower or the Lender to be doubtful; (m) any
Account for which there is any discount, allowance, claim, set-off, counterclaim
or Lien which has not been disclosed in writing to the Lender; (n) any Account
to the extent it is not for a liquidated amount; and (o) any other Account which
the Lender, upon notice to the Borrower, deems ineligible in its sole credit
judgment. No Accounts shall be Eligible Accounts if any representation,
warranties or covenants herein relating thereto shall be inaccurate or violated.
Unless the Borrower notifies the Lender in writing to the contrary, the Borrower
shall be deemed to have made a continuing representation and warranty that each
Eligible Account has not become ineligible.
"Eligible Inventory" shall mean Inventory created or acquired
in the ordinary course of the Borrower's business consisting of finished goods
and raw materials of the Borrower as to which the Lender has a first priority
perfected Lien subject only to Permitted Liens, of a kind usually and
customarily sold by the Borrower and which is not, because of damage, age,
unmerchantability, obsolescence or any other condition or circumstance, impaired
in condition, value or marketability in the credit judgment of the Lender or the
Borrower, and which is not, in the good faith credit judgment of the Lender,
deemed ineligible after notice to the Borrower. No Inventory shall be eligible
if it is consigned or if it fails to meet all applicable governmental standards
for its use and sale. No Inventory shall be eligible unless it is located at the
location of Borrower set forth in Section 9.4 or on Schedule 2.9 or at 297 N.E.
67th Street, Miami, Florida 33138 or at 277 N.E. 67th Street, Miami, Florida
33138, or at 286 N.E. 67th Street, Miami, Florida 33138 or at 6701 N.E. 2nd
Court, Miami, Florida 33138, or if it is stored with a warehouseman, bailee or
similar party. Eligible Inventory shall be computed at the lesser of cost or
fair market value. No Inventory shall be Eligible Inventory if any
representation, warranty, or covenant herein relating to such Inventory is
inaccurate or violated. Unless the Borrower notifies the Lender in writing to
the contrary, the Borrower shall be deemed to have made a continuing
representation and warranty that none of the Eligible Inventory has become
ineligible.
"Equipment" means all furniture, fixtures, equipment, motor
vehicles, rolling stock and other tangible property of a Person of every
description, except Inventory, and in addition includes all property included in
the definition of "equipment" as used in the Code.
"Event of Default" means any event specified as such in Section
6.1, provided that there shall have been satisfied any requirement in connection
with such event for the giving of notice or the lapse of time, or both.
"Foreign Exchange Subfacility" has the meaning set forth in
Section 3.10.
"Forward" shall have the meaning set forth in Section 3.10.
"GAAP" shall have the meaning ascribed thereto in Section 1.2.
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"General Intangibles" means all intangible personal property
(including things in action) except Accounts, Chattel Paper and instruments (as
defined in the Code), including all contract rights, copyrights, trademarks,
trade names, service marks, patents, patent drawings, designs, formulas, rights
to a Person's name itself, customer lists, rights to all prepaid expenses,
marketing expenses, rights to receive future contracts, fees, commissions and
orders relating in any respect to any business of a Person, all licenses and
permits, all computer programs and other software owned by a Person, or which a
Person has the right to use, and all rights for breach of warranty or other
claims for funds to which a Person may be entitled, and in addition includes all
property included in the definition of "general intangibles" as used in the
Code. Without limiting the foregoing, General Intangibles includes all rights
under the Merger Agreement.
"Guarantor" shall mean any Person now or hereafter
guaranteeing, endorsing or otherwise becoming liable for any Indebtedness,
including, but not limited to, Metro-Tel.
"Guaranty Agreement" or "Guaranty" shall mean any guaranty
instrument now or hereinafter executed by a Guarantor in favor of Lender.
"Indebtedness" means all obligations now or hereafter owed to
the Lender and/or its Affiliates by the Borrower and/or its Affiliates, whether
fixed, contingent or otherwise, and whether related or unrelated to the Loans,
including, without limitation, amounts owed or to be owed under the terms of the
Loan Documents, or arising out of the transactions described therein, including,
without limitation, the Loans, Letter of Credit Obligations, obligations
relating to the Foreign Exchange Subfacility, sums advanced to pay overdrafts on
any account maintained by the Borrower with the Lender, reimbursement
obligations for outstanding letters of credit issued at the request of the
Borrower, amounts paid by the Lender under letters of credit or drafts accepted
by the Lender for the account of the Borrower, together with all interest
accruing thereon, and all fees, costs or expenses payable by Borrower under any
Loan Document, including, but not limited to, all costs of collection,
reasonable attorneys' fees, and expenses of or advances by the Lender which the
Lender pays or incurs in discharge of obligations of the Borrower or to
repossess, protect, preserve, store or dispose of any Collateral, whether such
amounts are now due or hereafter become due, direct or indirect and whether such
amounts due are from time to time reduced or entirely extinguished and
thereafter re-incurred. The term also includes, but without limitation, the
obligations of the Borrower under any Interest Rate Swap Agreement for any and
all "Loss", "Settlement Amount" and "Unpaid Amounts", as such terms are defined
in such Interest Rate Swap Agreement.
"Interest Rate Swap Agreement" means each and every ISDA Master
Agreement, including all schedules, confirmations and exhibits thereto, entered
into at any time between Lender and the Borrower, as such agreement may be
amended or otherwise modified from time to time hereafter.
"Inventory" means all goods, merchandise and other personal
property of a Person which is held for sale or lease or furnished or to be
furnished under a contract for services or raw materials, and all work in
process and materials used or consumed or to be used or consumed in a Person's
business, and in addition, includes all property included in the definition of
"inventory" as used in the Code.
"Letter of Credit" means a Trade Letter of Credit.
"Letter of Credit Agreement" shall mean the Continuing
Commercial Credit Agreement (and each Application by Applicant for a Credit as
referenced therein) of even date herewith between Lender and the Borrower,
the form of which is attached hereto as B, it being understood that each Letter
of Credit issued thereunder or in connection therewith shall be issued pursuant
to and subject to the terms and conditions of this Agreement.
"Letter of Credit Obligations" shall mean all outstanding
obligations incurred by Lender at the request of the Borrower, whether direct or
indirect, contingent or otherwise, due or not due, in connection with the
issuance by Lender of Letters of Credit. The amount of such Letter of Credit
Obligations shall equal the maximum amount which may be payable by Lender
thereupon or pursuant thereto.
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"LIBOR" is the rate for U.S. Dollar deposits of that many
months maturity as reported on Telerate page 3750 as of 11:00 a.m. London time,
on the second Business Day before such LIBOR Period begins (or, if not so
reported, then as determined by Lender from another recognized source or
interbank quotation).
"LIBOR Loan" means, at any time, any outstanding Loan or
portion thereof that bears interest at Adjusted LIBOR at such time.
"LIBOR Market Index Rate Loan" means, at any time, any
outstanding portion of any Loan that bears interest at the Adjusted LIBOR Market
Index Rate at such time.
"LIBOR Market Index Rate", for any day, is the rate for one
month U.S. dollar deposits as reported on Telerate page 3750 as of 11:00 a.m.,
London time, on such day, or if such day is not a Business Day, then the
immediately preceding Business Day (or if not so reported, then as may be
determined by Lender from another recognized source or interbank quotation).
"LIBOR Period" means the period commencing on the date a LIBOR
Loan is made and ending on the numerically corresponding day in the first
calendar month thereafter; provided that if a LIBOR Period would end on a day
which is not a Business Day, such LIBOR Period shall be extended to the next
Business Day unless such Business Day would fall in the next calendar month, in
which event such LIBOR Period shall end on the immediately preceding Business
Day.
"Lien" means any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any lease or title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
under the UCC or comparable law of any jurisdiction).
"Loans" means the Term Loan and the Revolving Credit Loans.
"Loan Documents" means this Agreement, any other Security
Agreement, the Notes, any Guaranty Agreement, all Letter of Credit Agreements
(and all agreements and documents executed in connection therewith), all UCC-1
financing statements required under this Agreement or any of the other Loan
Documents, any Interest Rate Swap Agreement, and all other agreements, documents
and instruments now or hereafter evidencing, describing, guaranteeing, relating
to or securing the Indebtedness.
"Material Adverse Change" means a material adverse change in
any of: (i) the condition (financial or otherwise), business, performance,
profits, cash flows, operations, properties or prospects of the Borrower or
Metro-Tel; (ii) the legality, validity or enforceability of any Loan Document
which substantially deprives the Lender of the benefits thereof; (iii) the
ability of the Borrower or Metro-Tel to repay the Indebtedness or to perform its
obligations under any Loan Document; (iv) the rights and remedies of the Lender
under the Loan Documents which substantially deprives the Lender of the benefits
thereof; or (v) the Collateral or the Lender's Liens in the Collateral or the
priority of such Liens.
"Material Adverse Effect" means an effect that has a reasonable
likelihood of resulting in or causing a Material Adverse Change.
"Metro-Tel" means Metro-Tel Corp., a Delaware corporation.
"Merger" has the meaning set forth in Section 4.1.
"Merger Agreement" has the meaning set forth in Section 4.1.
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"Metro-Tel Collateral" means all property of Metro-Tel (other
than real estate), wherever located and whether now owned by Metro-Tel or
hereafter acquired, including, but not limited to all of Metro-Tel's: (a)
Inventory; (b) General Intangibles; (c) Accounts and Chattel Paper and any other
instrument or intangible representing payment for goods or services; (d)
Equipment; (e) funds on deposit with or under the control of the Lender or its
agents or correspondents and all lockboxes which may be established; and (f)
parts, replacements, additions, accessions, substitutions, profits, and products
and cash and non-cash proceeds of any of the foregoing (including insurance
proceeds payable by reason of loss or damage thereto) in any form and wherever
located. Metro-Tel Collateral shall include all written or electronically
recorded records relating to any such Metro-Tel Collateral and other rights
relating thereto.
"Notes" means the Term Note and the Revolving Credit Note.
"Permitted Debt" means (a) the Indebtedness; (b) Debt payable
to suppliers and other trade creditors in the ordinary course of business on
ordinary and customary trade terms and which is not past due more than 30 days;
(c) Debt secured by Permitted Liens; (d) Debt which is subordinated in right and
time of payment to all Indebtedness in a manner reasonably satisfactory in form
and substance to the Lender; and (e) such other Debt as the Lender may consent
to in writing from time to time.
"Permitted Liens" means (a) Liens securing the Indebtedness;
(b) Liens for taxes and other statutory Liens, landlord's Liens and similar
Liens arising out of operation of law (provided they are subordinate to the
Lender's Liens on Collateral) so long as the obligations secured thereby are not
past due more than 30 days; (c) Liens described on Schedule 1.1 hereto (if any),
provided, however, that no Debt not now secured by such Liens shall become
secured by such Liens hereafter other than Liens arising by operation of law
(provided they are subordinate to the Lender's Liens on Collateral) and such
Liens shall not encumber any other assets; and (d) purchase money Liens to the
extent such Liens secure not more than 100% of the purchase price of assets
purchased without violating the terms hereof and cover only assets purchased.
"Person" means any natural person, corporation, unincorporated
organization, trust, joint-stock company, joint venture, association, limited or
general partnership, limited liability company, any government, or any agency or
political subdivision of any government.
"Prime Rate" shall be (for any day) that rate of interest
announced by Lender from time to time as its Prime Rate and is one of several
interest rate bases used by Lender. Lender lends at rates both above and below
its Prime Rate, and Borrower acknowledges that Lender's Prime Rate is not
represented or intended to be the lowest or most favorable rate of interest
offered by Lender.
"Prime Rate Loan" means a Loan which bears interest at the
Prime Rate.
"Revolving Credit Loan" shall have the meaning set forth in
Section 3.1(b).
"Revolving Credit Loan Maturity Date" shall mean the earlier of
(i) November 2, 1999 or (ii) the date the Lender demands repayment of the
Revolving Credit Loans.
"Revolving Credit Note" shall mean the revolving credit note
referenced in Section 3.2.
"Security Agreement" means this Agreement as it relates to a
Lien on any or all of the Collateral, and any other mortgage, security agreement
or similar instrument now or hereafter executed by the Borrower or any other
Person granting the Lender a Lien on any Collateral to secure the Indebtedness.
"Solvent" means, as to any Person, that such Person has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage and is able to pay its debts as they
mature and
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owns property having a value, both at fair valuation and at present fair
saleable value, greater than the amount required to pay its debts.
"Spot" shall have the meaning set forth in Section 3.10.
"Subsidiary" means any corporation, partnership or other Person
in which the Borrower, directly or indirectly, owns 50% or more of the stock,
capital or income interests, or other beneficial interests.
"Term" shall have the meaning ascribed thereto in Section 8.1.
"Term Loan" shall have the meaning set forth in Section 3.1(a).
"Term Loan Maturity Date" shall mean January 2, 2002.
"Term Note" means the term note referenced in Section 3.2.
"Trade Letter of Credit" shall mean a letter of credit (sight
or time) issued by the Lender for the account of the Borrower payable to a
supplier of Borrower upon presentation of appropriate supporting documentation.
1.2. Financial Terms. All financial terms used herein shall
have the meanings assigned to them under generally accepted accounting
principles consistently applied and maintained on a basis for the Borrower
throughout the period indicated and consistent with the prior financial practice
of the Borrower on a consolidated basis ("GAAP"), unless another meaning shall
be specified.
1.3. Other Terms. All other terms contained in this Agreement
shall, when the context so indicates, have the meanings provided for by the Code
to the extent the same are used or defined therein. Any reference to this
Agreement or any other Loan Document shall include any amendment, supplement,
enlargement, extension, renewal, restatement or other modification thereof.
2. Representations and Warranties. In order to induce the Lender to
enter into this Agreement and to make the Loans, to issue the Letters of Credit
and to extend credit accommodations under the Foreign Exchange Subfacility, the
Borrower makes the following representations and warranties, all of which shall
survive the execution and delivery of the Loan Documents and the making of the
Loans and the issuance of Letters of Credit hereunder, and shall be deemed to be
made on each day on which any Loan is outstanding (except to the extent a
representation and warranty is made as of a particular date, in which case they
shall be true and correct as of such date).
2.1. Valid Existence and Power. Each of Borrower and Metro-Tel
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and is duly qualified or licensed
to transact business in all places where the failure to be so qualified could
reasonably be expected to have a Material Adverse Effect. Each of Borrower and
Metro-Tel has the power to make and perform the Loan Documents executed by it
and all such instruments will constitute the legal, valid and binding
obligations of such Person, enforceable in accordance with their respective
terms, except to the extent enforceability may be limited by bankruptcy,
fraudulent conveyance, insolvency, moratorium or other laws relating to
creditors' rights generally and general principles of equity.
2.2. Authority. The execution, delivery and performance of the
Loan Documents by each of Borrower and Metro-Tel have been duly authorized by
all necessary action of such Person, and do not and will not violate any
provision of law or regulation, or any writ, order or decree of any court or
governmental or regulatory authority or agency or any provision of the governing
instruments of such Person, and do not and will not, with the passage of time or
the giving of notice, result in a breach of, or constitute a default or require
any consent under, or result in the creation of any Lien, other than Permitted
Liens, upon any property or assets of such Person pursuant to, any law,
regulation, instrument
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or agreement to which such Person is a party or by which such Person or its
respective properties may be subject, bound or affected.
2.3. Condition. Other than as disclosed in the financial
statements most recently delivered to the Lender, neither Borrower nor Metro-Tel
has any direct or contingent obligations or liabilities required to be disclosed
therein under GAAP (including any guarantees or leases) or any material
unrealized or anticipated losses from any commitments required to be disclosed
therein under GAAP, except for executory contracts. To the Borrower's knowledge,
there is no fact which the Borrower has not disclosed to the Lender in writing
which could reasonably be expected to have a Material Adverse Effect.
2.4. Financial Statements. The financial statements of Borrower
and Metro-Tel delivered to Lender have been prepared in accordance with GAAP,
contain no material misstatements or omissions, and fairly present in all
material respects the financial position, assets and liabilities of such Person
as of the respective dates thereof and the results of operations and cash flows
of such Person for the respective periods then ended.
2.5. Litigation; Government Regulation. There are no actions,
suits or proceedings pending or threatened against or affecting the Borrower or
Metro-Tel at law or in equity before any court or administrative officer or
agency which, if adversely determined as to Borrower or Metro-Tel, could
reasonably be expected to have a Material Adverse Effect. Neither Borrower nor
Metro-Tel is in violation of or in default under any applicable statute, rule,
order, decree, writ, injunction or regulation of any governmental body
(including any court), the violation of which could reasonably be expected to
have a Material Adverse Effect.
2.6. Agreements, Etc. Neither Borrower nor Metro-Tel is a party
to any agreement or instrument or subject to any court order, governmental
decree or any charter or other corporate restriction which could reasonably be
expected to have a Material Adverse Effect. Neither Borrower nor Metro-Tel is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement or instrument to which it is
a party, or any law, regulation, decree, order or the like which could
reasonably be expected to have a Material Adverse Effect. No Default or Event of
Default has occurred.
2.7. Authorizations. All authorizations, consents, approvals
and licenses required under applicable law or regulation for the ownership or
operation of the property owned or operated by the Borrower or Metro-Tel or for
the conduct of any business in which the Borrower or Metro-Tel is engaged have
been duly issued and are in full force and effect, and neither the Borrower nor
Metro-Tel is in default, nor has any event occurred which, with the passage of
time or the giving of notice, or both, would constitute a default, under any of
the terms or provisions of any part thereof, or under any order, decree, ruling,
regulation or other decision or instrument of any governmental commission,
bureau or other administrative agency or public regulatory body having
jurisdiction over the Borrower or Metro-Tel, which default is reasonably likely
to have a Material Adverse Effect. Except as noted herein, no approval, consent
or authorization of, or filing or registration with, any governmental
commission, bureau or other regulatory authority or agency is required with
respect to the execution, delivery or performance of any Loan Document by the
Borrower or Metro-Tel.
2.8. Title; Collateral. The Borrower and/or Metro-Tel has good
title to the Collateral and to all of the assets set forth in the financial
statements most recently delivered to the Lender (except Inventory sold since
the date of such financial statements in the ordinary course of business), free
and clear of all Liens, except Permitted Liens. The Borrower and Metro-Tel alone
have full ownership rights in all Collateral, subject only to Permitted Liens.
The Liens granted to the Lender herein and pursuant to any other Security
Agreement (a) constitute and, as to subsequently acquired property, will
constitute, Liens under applicable law including, without limitation, the Code,
entitled to all of the rights, benefits and priorities provided by applicable
law including, without limitation, the Code and (b) are, and as to such
subsequently acquired property will be, first priority, fully perfected,
superior and prior to the rights of all third persons, now existing or hereafter
arising, subject only to Permitted Liens. All of the Collateral is intended for
use solely in the Borrower's and Metro-Tel's business. Except as set forth on
Schedule 2.8, no Affiliate of Borrower or Metro-Tel has any interest in any
assets used in Borrower's or Metro-Tel's business.
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2.9. Location and Names. The chief executive office and
principal place of business of the Borrower and of Metro-Tel, where their
respective business records are located, is the address designated for notices
in Section 9.4 and at 250 South Milipitas Boulevard, Milipitas, California
95035, respectively. Neither Borrower nor Metro-Tel has any other places of
business, except as shown on Schedule 2.9. Neither the Borrower, nor Metro- Tel
has, during the past five years, been known as or used any other corporate,
fictitious or trade names or been the subject of any bankruptcy or similar
proceeding.
2.10. Taxes. Neither the Borrower nor Metro-Tel is delinquent
in the payment of any taxes which have been levied or assessed by any
governmental authority against it or its assets. The Borrower and Metro-Tel have
timely filed all tax returns which are required by law to be filed, and have
paid all taxes and all other assessments or fees levied upon the Borrower or
Metro-Tel or upon their respective properties to the extent that such taxes,
assessments or fees have become due. No controversy in respect of taxes is
pending or, to the knowledge of the Borrower, threatened against the Borrower or
Metro-Tel. The Borrower and Metro-Tel have paid all withholding, FICA and other
payments required by federal, state or local governments with respect to any
wages paid to employees.
2.11. Labor Law Matters. None of Borrower's or Metro-Tel's
employees is a member of a labor union, and neither the Borrower nor Metro-Tel
is a party to or otherwise bound by, or threatened with any labor or collective
bargaining agreement. None of the Borrower's or Metro-Tel's employees is known
to be engaged in organizing any labor union or other employee group that is
seeking recognition as a bargaining unit. No goods or services have been or will
be produced by the Borrower or Metro-Tel in violation of any applicable labor
laws or regulations or in violation of any minimum wage, wage-and-hour or other
similar laws or regulations. Neither the Borrower nor Metro-Tel is subject to
any material labor dispute.
2.12. Accounts. Each Account, instrument, Chattel Paper and
other writing constituting any portion of the Collateral is (a) genuine and
enforceable in accordance with its terms except for such limits thereon arising
from bankruptcy and similar laws relating to creditors' rights; (b) not subject
to any defense, setoff, claim or counterclaim of any nature against the Borrower
or Metro-Tel except (i) for claims not exceeding $50,000 in the aggregate
incurred in the ordinary course of business or (ii) as to which the Borrower has
notified the Lender in writing; and (c) not subject to any other circumstances
that would impair the validity, enforceability or amount of such Collateral
except as to which the Borrower has notified the Lender in writing. Each Account
and all Inventory included in any Advance Request or Borrowing Base Certificate
or calculation delivered to Lender as an Eligible Account or Eligible Inventory
meets and will meet all requirements of an Eligible Account or Eligible
Inventory, as the case may be.
2.13. Use and Location of Collateral. The Collateral is located
only, and shall at all times be kept and maintained only, at the Borrower's or
Metro-Tel's location or locations as described on Schedule 2.9, which are (i)
owned and operated by the Borrower or Metro-Tel (and for each of which a
mortgagee's waiver has been delivered
in accordance with Section 4.1(f)), or (ii) leased and operated by the Borrower
or Metro-Tel (and for each of which a landlord's lien waiver has been delivered
in accordance with Section 4.1(f)).
2.14. Judgment Liens. Neither the Borrower nor Metro-Tel nor
any of their assets is subject to any unpaid judgments (whether or not stayed)
or any judgment liens in any jurisdiction.
2.15. Intent and Effect of Transactions; Borrower's Solvency.
This Agreement and the transactions contemplated herein are not made or incurred
with intent to hinder, delay or defraud any Person to whom the Borrower or
Metro-Tel has been, is now, or may hereafter become indebted. The Borrower and
Metro-Tel are Solvent. After giving effect to this Agreement, and the
transactions contemplated hereby (including the uses of proceeds permitted by
this Agreement), the Borrower and Metro-Tel will be Solvent and will not be left
with an unreasonably small capital with which to engage in their businesses or
in any businesses or transactions in which Borrower or Metro-Tel intend to
engage. This Agreement is not entered into with the intent to incur, or with the
belief that the Borrower or Metro-Tel would incur, debts that would be beyond
Borrower's or Metro-Tel's ability to pay as such debts mature.
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2.16. Subsidiaries. Borrower has no Subsidiaries. Other than
Borrower, Metro-Tel has no Subsidiaries.
2.17. Hazardous Materials. Except as disclosed on Schedule
2.17, the Borrower's and Metro-Tel's properties and improvements thereon have
not in the past been used, are not presently being used, and will not in the
future be used for, nor does the Borrower or Metro-Tel engage in, the handling,
storage, manufacture, disposition, processing, transportation, use or disposal
of hazardous or toxic materials, in any such instance in violation of applicable
environmental laws.
2.18. ERISA. Either the Borrower and Metro-Tel have no pension,
profit-sharing or other benefit plan subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or they have furnished to the Lender
true and complete copies of the latest annual report required to be filed
pursuant to Section 104 of ERISA, with respect to each employee benefit plan or
other plan maintained for employees of the Borrower or Metro- Tel and covered by
Title IV of ERISA (a "Plan"), and no Termination Event (as hereinafter defined)
with respect to any Plan has occurred and is continuing and no fact exists which
might constitute grounds for a Termination Event or for the appointment of a
trustee to administer any such plan. For the purposes of this Agreement, a
"Termination Event" means a "reportable event" as defined in Section 4043(b) of
ERISA ("Reportable Event"), or the filing of a notice of intent to terminate
under Section 4041 of ERISA. Neither the Borrower nor Metro-Tel has any unfunded
liability with respect to any such Plan. No "prohibited transaction" (as defined
under ERISA) has occurred with respect to any such Plan. Each such Plan has been
administered in accordance with ERISA and the Code.
2.19. Investment Company Act. Neither the Borrower nor
Metro-Tel is an "investment company" as defined in the Investment Company Act of
1940, as amended.
2.20. Use of Proceeds. The Loans shall be used solely to repay
outstanding indebtedness to Lender and to finance working capital.
2.21. Trade Relations. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship of the Borrower or Metro-Tel with any customer or any
group of customers whose purchases individually or in the aggregate are material
to the business of the Borrower or Metro-Tel, or with any material supplier.
2.22. Maintenance of Business and Properties. Each of Borrower
and Metro-Tel shall at all times maintain, preserve and protect its property
used or useful in the conduct of its business, and keep the same in good repair,
working order and condition, and from time to time make, or cause to be made,
all material needful and proper repairs, renewals, replacements, betterments and
improvements thereto so that the business carried on in connection therewith may
be conducted properly and in accordance with standards generally accepted in
businesses of a similar type and size at all times, and maintain and keep in
full force and effect all licenses and permits necessary to the proper conduct
of its business.
2.23. Full Disclosure. The Loan Documents, together with the
statements furnished by or on behalf of the Borrower or Metro-Tel to the Lender
in connection with the Loan Documents do not, contain any untrue statement of a
material fact or omit a material fact necessary to make the statements contained
therein or herein not misleading. To the Borrower's knowledge, there is no fact
which the Borrower has not disclosed to the Lender in writing which might
reasonably be expected to have a Material Adverse Effect.
3. Loans.
3.1. Advances of Loans.
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(a) Advance of Term Loan. Upon the terms and subject
to the conditions of this Agreement and the other Loan Documents, and provided
there has not occurred a Default or Event of Default, the Lender agrees to make
a term loan (the "Term Loan") to the Borrower on the Closing Date, in the
principal amount of $2,400,000. The Lender will disburse the proceeds of the
Term Loan to the Borrower in accordance with written instructions furnished to
the Lender by the Borrower on or before the Closing Date.
(b) Advance of Revolving Credit Loans. Upon the terms
and subject to the conditions of this Agreement and the other Loan Documents,
and provided there has not occurred a Default or Event of Default and Lender has
not demanded repayment of the Revolving Credit Loans (as defined herein) (and
provided a Default or Event of Default would not occur as a result of the making
of a Revolving Credit Loan), from time to time upon the request of the Borrower
until the Revolving Credit Loan Maturity Date, upon Lender's receipt from
Borrower of an Advance Request, the Lender may in its discretion make revolving
credit loans ("Revolving Credit Loans") to Borrower, up to a total principal
amount not at any time to exceed the Borrowing Base less all Letter of Credit
Obligations less the total value of outstanding Forward and Spot transactions.
Upon the terms and subject to the conditions of this Agreement and the other
Loan Documents, and provided that there has not occurred a Default or Event of
Default and Lender has not demanded repayment of the Revolving Credit Loans, the
outstanding principal balance of the Revolving Credit Loans may increase and
decrease from time to time, and Advances thereunder may be repaid and
reborrowed, so long as the total principal balance of all outstanding Revolving
Credit Loans does not at any time exceed the Borrowing Base less all Letter of
Credit Obligations less the total value of outstanding Forward and Spot
transactions. Should there occur any overdraft of any deposit account maintained
by the Borrower with the Lender, the Lender may, at its option, disburse funds
(whether or not in excess of the Borrowing Base) to eliminate such overdraft and
such disbursement shall be deemed an advance of Revolving Credit Loan proceeds
hereunder entitled to all of the benefits of the Loan Documents. Nothing herein
shall be deemed an authorization of or consent to the creation of an overdraft
in any account or create any obligations on the part of the Lender. The Borrower
shall immediately repay to the Lender any amount by which the principal amount
of Revolving Credit Loans outstanding exceeds the Borrowing Base less all Letter
of Credit Obligations less the total value of outstanding Forward and Spot
transactions. All Advances, whether or not in excess of the Borrowing Base shall
be part of the Revolving Credit Loans and Indebtedness, shall bear interest as
provided herein, shall be payable in accordance herewith and shall be entitled
to all rights and security provided for herein and in the other Loan Documents.
In determining the Borrowing Base, the Lender shall have the right from time to
time upon notice to the Borrower to establish and re-establish such reserves as
it deems appropriate in its sole credit judgment.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, BORROWER SHALL REPAY ALL REVOLVING CREDIT
LOANS IN FULL IMMEDIATELY UPON DEMAND OF LENDER, REGARDLESS OF WHETHER ANY
DEFAULT OR EVENT OF DEFAULT HAS OCCURRED OR IS CONTINUING.
3.2 The Notes. The obligation of the Borrower to repay (i) the
Term Loan shall be evidenced by the term note in the form of Exhibit C hereto
(the "Term Note") and, (ii) the Revolving Credit Loan shall be evidenced by the
revolving credit note in the form of Exhibit D hereto (the "Revolving Credit
Note"); in each instance duly executed by the Borrower, dated the Closing Date
and payable to the order of the Lender.
3.3 Notice and Manner of Borrowing. Upon the terms and subject
to the conditions hereof, Borrower shall give Lender irrevocable written notice
("Advance Request") of each proposed Advance or rate conversion not later than
11:00 a.m., Miami time, (i) on the same Business Day as such proposed borrowing
or rate conversion to a Prime Rate Loan or a LIBOR Market Index Rate Loan and
(ii) at least two Business Days before each proposed Advance or rate conversion
to a LIBOR Loan. Each such notice shall include or be accompanied by a Borrowing
Base Certificate and specify (i) the date of such Advance or rate conversion,
which shall be a Business Day, (ii) the amount to be Advanced or converted,
(iii) the type of Loan (i.e., Prime Rate Loan, LIBOR Loan or LIBOR Market Index
Rate Loan) selected, (iv) for LIBOR Loans, that the LIBOR Period shall be for a
period of one month, and (v) containing such other information as Lender shall
reasonably request. Advance Requests received after 11:00 a.m. shall be deemed
received on the next Business Day. Once delivered, any Advance Request shall be
irrevocable. All obligations hereunder and under the other
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Loan Documents shall constitute one general obligation of the Borrower. All
outstanding Revolving Credit Loans shall either be Prime Rate Loans or LIBOR
Market Index Rate Loans (but not both at any time) and the Term Loan shall
either be a Prime Rate Loan or a LIBOR Loan (but not both at any time), all as
elected by Borrower as provided herein. When the Prime Rate is selected, it
shall be adjusted daily as applicable to reflect the Prime Rate and the Prime
Rate shall continue to apply until another interest rate option is selected
pursuant to the terms hereof. When the Adjusted LIBOR Market Index Rate is
selected, it shall be adjusted daily as applicable to reflect the LIBOR Market
Index Rate and the Adjusted LIBOR Market Index Rate shall continue to apply
until another interest rate option is selected pursuant to the terms hereof.
When the Adjusted LIBOR Rate is selected, such rate shall be fixed for the LIBOR
Period and shall apply for successive LIBOR Periods at the then prevailing
successive rate until another interest rate option is selected pursuant to the
terms hereof. A LIBOR Loan may only be repaid, converted or renewed at the end
of the LIBOR Period. All Loans shall initially be Prime Rate Loans unless
otherwise requested by Borrower.
3.4. Interest.
(a) Generally. All interest accrued on any Loan shall
be due and payable on each date when all or any amount of the unpaid principal
balance of such Loan shall be due (whether by maturity, optional or mandatory
prepayment, acceleration or otherwise). Interest on all Loans shall also be due
and payable in arrears on the earlier of the first Business Day of each month or
the end of the applicable LIBOR Period, if any. Except as otherwise expressly
provided herein, interest on Revolving Credit Loans shall be payable at a rate
per annum equal to the Prime Rate or the Adjusted LIBOR Market Index Rate, as
selected by Borrower in the manner set forth herein. Except as otherwise
expressly provided herein, interest on the Term Loan shall be payable at a rate
per annum equal to the Prime Rate of Adjusted LIBOR, as selected by Borrower in
the manner set forth herein.
(b) Restrictions on LIBOR Loans. Notwithstanding any
provision to the contrary set forth herein, the right of Borrower to elect to
have LIBOR Loans outstanding shall be subject to the following restrictions:
(i) no advance, renewal or continuation of a
LIBOR Loan upon the expiration of a LIBOR Period shall be permitted
during the continuation of a Default or an Event of Default and upon
the occurrence and during the continuance of any Default or Event of
Default, all LIBOR Loans then outstanding shall immediately and
automatically bear interest at the Default Rate;
(ii) anything herein to the contrary
notwithstanding, if Lender determines that quotations of interest rates
for deposits are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining the rate of interest
for LIBOR Loans or LIBOR Market Index Rate Loans under this Agreement,
or that the rate of interest referred to in the definition of LIBOR
Rate or LIBOR Market Index Rate does not accurately cover the cost to
Lender incurred in making or maintaining such LIBOR Loans or LIBOR
Market Index Rate Loans, then Lender shall give Borrower prompt notice
thereof, and so long as such condition remains in effect, Lender shall
be under no obligation to make further LIBOR Loans or LIBOR Market
Index Rate Loans and all Loans shall thereafter bear interest at the
Prime Rate (or if an Interest Rate Swap Agreement has been executed, at
the floating rate payable by Lender thereunder with respect to the
amount covered thereby);
(iii) if, at any time, a new or a revision
of any existing law or interpretation or administration (including
reversals) thereof by any applicable governmental authority, central
bank or comparable agency imposes, increases or modifies any reserve or
similar requirement against assets, deposits or other charges (except
taxes on Lender's net income), and any of the foregoing increases the
cost to Lender of maintaining any LIBOR Loan or reduces the amount of
any sum received or receivable by Lender in connection with any LIBOR
Loan, then upon notice to Borrower, the Term Loan shall bear interest
at the Adjusted LIBOR Market Index Rate; and
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(iv) no LIBOR Loan shall have a LIBOR Period
extending beyond the term Loan Maturity Date.
(c) Additional Payments for LIBOR Loans. Borrower
shall pay to Lender such amount as Lender determines shall be sufficient to
compensate Lender for any loss, cost or expense incurred as a result of any
payment of a LIBOR Loan on a date other than the last day of the LIBOR Period
for such LIBOR Loan. Any such payment shall include, without limitation, an
amount equal to (X) any loss sustained by Lender as a result of reinvesting or
redeploying any amount prepaid at a rate lower than Lender's cost of match
funding such amount, calculated for the period consisting of the remainder of
the relevant LIBOR Period or (Y) any direct breakage or unwinding costs
resulting from the liquidation of deposits that match funded any amount not
borrowed for the duration of the relevant LIBOR Period. Lender's determination
of any such amounts, as specified in Lender's notice to Borrower, shall be
conclusive.
3.5 Repayment of Loans. The principal amount of the Loans shall
be repaid as follows:
(a) Term Loan. Borrower shall repay the principal
amount of the Term Loan in consecutive monthly installments of $40,000 on the
first day of each month, commencing on January 1, 1999. Notwithstanding anything
to the contrary set forth herein, the entire remaining unpaid principal balance
of Term Loan shall be repaid on the earlier of the Term Loan Maturity Date or
the date upon which Borrower's obligations hereunder have been accelerated upon
the occurrence of an Event of Default.
(b) Revolving Credit Loans. Borrower shall repay the
entire principal amount of all Revolving Credit Loans immediately upon the
earliest of (i) the Revolving Credit Loan Maturity Date, (ii) the acceleration
of Borrower's obligations hereunder upon the occurrence of an Event of Default,
(iii) at such time and to the extent that the amount of Revolving Credit Loans
outstanding exceeds the amount permitted hereby or (iv) upon demand by Lender.
3.6. Costs, Fees and Expenses. Costs, fees and expenses which
are payable pursuant to this Agreement or any other Loan Document shall be
payable by Borrower to Lender or Lender's designee upon written demand by Lender
to Borrower. Borrower irrevocably authorizes and directs Lender, at Lender's
option, to cause all sums payable hereunder or under any Loan Document to be
paid on the date due by charging such payment as a Revolving Credit Loan.
Without limiting the generality of the foregoing, all such amounts which are not
paid when due hereunder shall be Indebtedness secured by the Collateral and
shall bear interest at the Default Rate.
3.7. Prepayments. Subject to the terms and conditions of any
Interest Rate Swap Agreement, Borrower may prepay any Loan other than a LIBOR
Loan in whole at any time or in part from time to time on any Business Day by
notifying Lender by 9:00 a.m., Miami, Florida time, on such Business Day,
without penalty or premium; provided, however, that
(i) each such prepayment shall be accompanied by the
payment of accrued interest to the date of such prepayment on the
amount prepaid and shall designate whether it is a payment of a Term
Loan or a Revolving Credit Loan, and
(ii) each partial prepayment of any Term Loan shall
be applied to the remaining scheduled payments of principal prepaid in
the inverse order of their maturities.
Notwithstanding anything to the contrary set forth herein or in
any Loan Document, any prepayment will not affect Borrower's obligation to
continue making payments in connection with any Interest Rate Swap Agreement,
which will remain in full force and effect, notwithstanding such prepayment.
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3.8 Payments and Computations.
(a) The Borrower shall make each payment hereunder
and under the Notes not later than 12:00 noon, Miami, Florida time, on the day
when due in lawful money of the United States of America to the Lender at its
office at Commercial Loan Payment Center, P.O. Box 740502, Atlanta, Georgia
30374-0502 or such other address as Lender shall designate from time to time.
(b) The Borrower hereby authorizes the Lender, if and
to the extent payment is not made when due hereunder or under any Note, to
charge from time to time against the Borrower's accounts, if any, with the
Lender any amount so due.
(c) All computations of interest shall be made by the
Lender on the basis of a year of three hundred sixty (360) days for the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such interest is payable.
(d) Whenever any payment to be made hereunder or
under any Note shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of payment
of interest.
3.9. Facility for Letters of Credit.
(a) Subject to all of the terms and conditions of
this Agreement and the other Loan Documents, and provided there does not then
exist a Default or Event of Default and provided that no Default or Event of
Default would result from the issuance of a Letter of Credit, the Lender will
issue, upon the Borrower's written request therefor, from time to time on and
after the Closing Date until the Revolving Credit Loan Maturity Date or demand
by Lender of repayment of the Revolving Credit Loans, Trade Letters of Credit
for the account of the Borrower, upon the execution of such documents and
agreements as Lender shall require. In no event shall Letter of Credit
Obligations outstanding at any time hereunder exceed $1,000,000 in the
aggregate. Subject to the terms and conditions set forth in this Agreement and
the other Loan Documents, Lender shall be under no obligation to issue any
Letter of Credit on the Borrower's behalf if, after giving effect to the
requested issuance, the sum of outstanding Revolving Credit Loans plus all
Letter of Credit Obligations plus the total value of outstanding Forward and
Spot transactions would exceed the Borrowing Base.
(b) Notwithstanding anything to the contrary set
forth in this Section 3.9, Lender shall be under no obligation to issue any
Letter of Credit having a maturity date or expiry date which is later than the
Revolving Credit Loan Maturity Date or which is payable in a currency other than
United States Dollars, Italian Lira or Euro-currency (at such time Lender issues
letters of credit generally in Euro-currency).
(c) In the event that Lender shall make any payment
on, or pursuant to, any Letter of Credit, the Borrower shall be obligated to,
following notice of such payment by Lender, immediately reimburse Lender for any
such payment. If the Borrower does not reimburse Lender on the same day that
Lender provides such notice, the Lender shall have the right (but not the
obligation) to make a Revolving Credit Loan in an amount equal to such
unreimbursed portion of such payment; and if Lender elects not to make such
advance of a Revolving Credit Loan, the entire unreimbursed amount and fees and
costs shall continue to be Indebtedness secured by the Collateral and shall
accrue interest at the Default Rate.
(d) In the event that any Letter of Credit
Obligations, whether or not then due and payable, shall for any reason be
outstanding on the date Lender demands repayment of the Revolving Credit Loans
or the Revolving Credit Loan Maturity Date, the Borrower will either (i) provide
the Lender with a letter of credit or other guaranty of payment for all then
outstanding Letters of Credit issued by Lender, satisfactory to the Lender in
its discretion, or (ii) pay to the Lender for the account of Lender cash in an
amount equal to the maximum amount then available to be drawn under
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such Letters of Credit and fees and costs. All funds delivered to the Lender
pursuant to this subsection (d) shall be held by Lender for the account of the
Borrower.
(e) The Borrower shall comply with all of the terms
and conditions imposed upon the Borrower under each Letter of Credit Agreement
executed by Borrower.
(f) In the event of the Borrower's failure to pay to
the Lender, upon demand, the total amount of liabilities incurred or sums paid
by the Lender in connection with any such Letter of Credit, the Lender shall, in
addition to its rights under the UCC of the State of Florida and under this
Agreement, be fully subrogated to the rights of any Beneficiary of the Letters
of Credit with respect to any obligation of the Borrower to such Beneficiary
discharged with the proceeds of any Letter of Credit.
(g) The Borrower hereby unconditionally agrees to
reimburse the Lender for the total amount of the sums paid by Lender in
connection with the issuance of any Letters of Credit or any additional or
further liability which may accrue against Lender in connection with the same.
(h) The Borrower hereby unconditionally agrees to
indemnify the Lender and hold the Lender harmless from any and all losses,
claims or liabilities arising from any transactions or occurrences relating to
Letters of Credit issued for the Borrower's account, and all obligations
incurred in connection therewith, including any loss or claim due to any action
taken or omitted by any Beneficiary thereof. The Borrower's unconditional
obligation to the Lender shall not be modified or diminished for any reason or
in any amount whatsoever. The Borrower agrees that any action taken by the
Lender in connection with a Letter of Credit, if taken in good faith, shall be
binding upon the Borrower and shall not impose any resulting liability on the
Lender.
(i) In the event that this Agreement is terminated
for any reason by the Borrower or the Lender as herein provided, the Lender
demands repayment of the Revolving Credit Loans or there are any Letter of
Credit Obligations outstanding on the Business Day prior to the Revolving Credit
Loan Maturity Date, the Lender shall be entitled to charge immediately the
Borrower's Revolving Credit Loan account hereunder or any of its other accounts
with the full amount of any outstanding Letter of Credit Obligations, whether
the Borrower's obligations with respect thereto are absolute or contingent at
any time. All funds related to such charge shall be held by Lender to be applied
against Indebtedness. The Lender shall also be entitled to hold an amount which
the Lender may deem reasonably necessary to cover possible claims under any
outstanding Letters of Credit unless and until the Lender is supplied with an
indemnity reasonably satisfactory to it with respect to any possible liability
under such Letters of Credit or a release of its liabilities thereunder.
(j) As additional consideration for Lender's issuing
Letters of Credit for the account of Borrower, Borrower agrees to such fees and
costs in connection therewith as Lender specifies.
(k) All Trade Letters of Credit shall be used only
for the purpose of supporting Borrower's obligations with respect to the
purchase of Inventory or for any other purpose approved in writing by Lender.
3.10. Facility for Foreign Exchange.
(a) Subject to all of the terms and conditions set
forth in this Agreement and the other Loan Documents and provided that there
does not then exist a Default or Event of Default and provided that no Default
or Event of Default would result from the Lender's purchase of foreign exchange
for Borrower, the Lender shall, upon Borrower's written request, purchase
foreign exchange (the "Foreign Exchange Subfacility") for the Borrower's use
from time to time on and after the Closing Date and until the Revolving Credit
Loan Maturity Date, upon Borrower's execution of such documents and agreements
as Lender may request.
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(b) The Borrower may request that the Lender engage
in spot foreign exchange ("Spot") for a value in U.S. Dollars for the purpose of
hedging currency exposure in connection with the Borrower's import activities.
In addition, the Borrower may request that the Lender enter into forward foreign
exchange contracts ("Forward") to hedge currency exposure in connection with the
Borrower's import activities. The amount of Spot and Forward contracts shall not
exceed on any given day or in the aggregate at any time the amount agreed to in
writing by Borrower and Lender. Subject to the terms and conditions set forth in
this Agreement and the other Loan Documents, Lender shall be under no obligation
to enter into any Spot or Forward transactions on Borrower's behalf if, after
giving effect to the requested transaction, the sum of outstanding Revolving
Credit Loans plus all Letter of Credit Obligations plus the total value of
outstanding Forward and Spot transactions would exceed the Borrowing Base.
(c) Obligations under Spot transactions shall be due
and payable by Borrower in U.S. Dollar or foreign currency equivalent, whichever
the case may be, within two Business Days from the date Borrower buys the Spot
foreign exchange (the "Spot Value Date"). Obligations under Forward transactions
shall be due and payable by the Borrower in U.S. Dollar or foreign currency
equivalent, whichever the case may be, on or prior to the maturity date of the
respective contract (the "Forward Value Date"). The Spot Value Date and the
Forward Value Date shall be collectively referred to hereinafter as the "Value
Date".
(d) The Borrower hereby gives the Lender the
authority to make Revolving Credit Loans for all amounts due under the Spot or
Forward transaction on the Value Date.
(e) In the event that any Spot or Forward is
outstanding on the Revolving Credit Loan Maturity Date, the Borrower will
provide or pay to the Lender for any settlement of outstanding Spot or Forwards
either of the following: (i) a standby letter of credit acceptable to the Lender
or other guaranty of payment acceptable to the Lender; or (ii) cash funds to be
directed into an escrow account. The amount required of the Borrower in (i) and
(ii) shall be determined by Lender. Such determination shall be the maximum
amount sufficient for any settlement of outstanding Spot or Forwards engaged in
or entered into with the Borrower.
(f) The Borrower agrees that Lender's internal books
and records, and any other documents required by Lender to evidence such
indebtedness shall be conclusive evidence (absent manifest error) with respect
to all repayments and repayment dates and of the Borrower's indebtedness to
Lender under the Foreign Exchange Subfacility.
(g) The Borrower hereby unconditionally agrees to
indemnify the Lender and hold the Lender harmless from any and all losses,
claims or liabilities arising from any transactions or occurrences relating to
the Foreign Exchange Subfacility, including any loss or claim due to any action
taken or omitted by any third party which is not an Affiliate of the Lender. The
Borrower's unconditional obligation to the Lender shall not be modified or
diminished for any reason or in any amount whatsoever. The Borrower agrees that
any action taken by the Lender in connection with the Foreign Exchange
Subfacility, if taken in good faith, shall be binding upon the Borrower and
shall not impose any resulting liability on the Lender. The Borrower
specifically acknowledges and agrees that all transactions hereunder shall be
undertaken solely on the order of, and at and for the risk of the Borrower. The
Borrower further acknowledges and understands that Lender may engage in similar
transactions for its own account or provide similar facilities for its own
customers. The Borrower recognizes and acknowledges that Lender may, to the
extent permitted by law, engage in transactions and take action for its own
account or in the performance of its duties to other customers, which
transactions or action may differ from the transactions engaged in, or the
action taken (including, without limitation, the timing and nature of such
transaction or action) with respect to the Borrower's account. Nothing in this
Agreement shall be deemed to impose upon Lender any obligation to cause to be
engaged in, for the Borrower's account or the account of any other customer, any
transaction which Lender may engage in for its own account or recommend for the
account of any other customer.
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4. Conditions Precedent to Borrowing.
4.1. Advance. In addition to any other requirement or condition
precedent set forth herein, Lender shall not be required to make the initial
advance on any Loan or issue the initial Letter of Credit, unless and until, in
the sole discretion of Lender, each of the following conditions shall have been
satisfied:
(a) Loan Documents. The Borrower and each other party
to any Loan Documents, as applicable, shall have executed and delivered this
Agreement, any Interest Rate Swap Agreement, the Letter of Credit Agreement, the
Term Note, the Revolving Credit Note, the Guaranty, any subordination
agreements, all Forms UCC- 1, the Notes and other required Loan Documents, all
in form and substance satisfactory to the Lender.
(b) Opinion of Counsel. The Lender shall have
received the opinion of counsel for each of the Borrower and Metro-Tel, as to
the transactions contemplated by this Agreement and the Merger Agreement, in
form and substance satisfactory to the Lender.
(c) Supporting Documents. The Borrower shall cause to
be delivered to the Lender the following documents:
(i) A copy of the Articles or Certificate of
Incorporation of Metro-Tel and the Borrower and a good standing
certificate of the Borrower and Metro-Tel, certified by the
appropriate official of such corporation's state of
incorporation and each state in which such corporation is
qualified to do business;
(ii) Bylaws of the Borrower and Metro-Tel,
certified by an officer thereof;
(iii) Incumbency certificate and certified
resolutions of the board of directors of the Borrower and
Metro-Tel authorizing the execution, delivery and performance
of the Loan Documents;
(iv) UCC-11 searches and other Lien searches
showing no existing Liens on the Collateral other than the
Liens of the Lender and Permitted Liens, or except as approved
by the Lender in its sole and absolute discretion;
(v) a letter to Borrower's and Metro-Tel's
independent accountants, in form and substance satisfactory to
the Lender, authorizing such
accountants to disclose information with respect to the
Borrower and Metro-Tel to the Lender; and
(vi) a copy of the executed Merger Agreement
and all documents and agreements executed in connection
therewith, all certified as true and complete copies by an
officer of Borrower.
(d) Insurance. The Borrower shall have delivered to
the Lender satisfactory evidence of insurance meeting the requirements of
Section 5.3.
(e) Perfection of Liens. UCC-1 financing statements
executed by the Borrower and Metro-Tel shall have been duly executed and
delivered to Lender in a form appropriate for recordation or filing in the
manner and places required by law to establish, preserve, protect and perfect
the interests and rights created or intended to be created by this Agreement and
any other Security Agreement; and all taxes, fees and other charges in
connection with the execution, delivery and filing of this Agreement, each
Security Agreement and the financing statements shall duly have been paid.
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(f) Landlord's Waivers; Mortgagee's Waivers. The
Lender shall have received, in form and content satisfactory to Lender (i)
waivers from all lessors that might have landlord's Liens on any Collateral and
(ii) waivers from all mortgagees of the Borrower's and Metro-Tel's premises in
which any Collateral is located.
(g) Swap Agreement. The Borrower shall have executed
and delivered to the Lender the Interest Rate Swap Agreement, if the Borrower
desires to do so.
(h) Taxes and Expenses. All taxes, fees and other
charges in connection with the execution, recordation, filing, registration and
delivery hereof shall have been paid.
(i) Merger. The merger ("Merger") contemplated by the
Agreement and Plan of Merger, dated as of July 1, 1998, to which Borrower and
Metro-Tel are parties ("Merger Agreement") shall have been consummated in a
manner and on terms and conditions satisfactory to Lender.
(j) Commitment Fee and Expenses. Borrower shall pay
Lender at closing a (i) commitment fee of $14,500, (ii) all reasonable costs and
expenses incurred by Lender in connection herewith and (iii) a $450 out-of-state
closing fee.
(k) Interim Financial Statements. The most current
interim financial statements of Borrower and Metro-Tel shall have been delivered
to Lender and shall be satisfactory to Lender.
(l) SEC Filings. All of Metro-Tel's filings with the
Securities and Exchange Commission since January 1, 1998 shall have been
received by and shall be satisfactory to Lender.
(m) Trade References. Metro-Tel shall have provided
such trade and credit references to Lender as Lender shall request, which shall
be satisfactory to Lender.
4.2. Conditions Precedent to Each Advance of a Loan or Issuance
of a Letter of Credit or Purchasing Forward Exchange. In addition to any other
requirement or condition precedent set forth herein, Lender shall not be
required to make any advance of any Loan or issue any Letter of Credit or enter
into any Spot or Forward transaction unless and until, in the sole discretion of
Lender, each of the following conditions shall have been satisfied:
(a) Prior Conditions. At or prior to Closing,
Borrower shall have satisfied (i) all conditions precedent set forth in Section
4.1, and (ii) all conditions precedent set forth elsewhere in this Agreement and
in any other Loan Document.
(b) Advance Request. Borrower shall have delivered to
the Lender an Advance Request and Borrowing Base Certificate and other
information, in such form and containing such information as Lender shall
request.
(c) No Default. No Default or Event of Default shall
have occurred or will occur upon the making of the advance or the issuance of
the Letter of Credit in question and Borrower shall have delivered to Lender an
officer's certificate to such effect, which may be incorporated in the advance
request.
(d) Correctness of Representations and Compliance
with Covenants. All representations and warranties made by Borrower and each
Guarantor herein or otherwise in writing in connection herewith shall be true
and correct in all material respects (except where such representations and
warranties are subject to a materiality caveat, in which case they shall be true
and correct in all respects, and except where such representations and
warranties are made as of a particular date, in which case, they shall be true
and correct as of such date) with the same effect as though the representations
and warranties had been made on and as of the proposed Advance Date, and
Borrower and each Guarantor shall have delivered to Lender an officer's
certificate to such effect, which may be incorporated in the Advance Request.
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Borrower and each Guarantor shall have complied in all material respects (except
where such covenants are subject to a materially caveat, in which case they
shall have been complied with in all respects) with all of its covenants and
agreements set forth in any Loan Document, and Borrower and each Guarantor shall
have delivered to Lender an officer's certificate to such effect, which may be
incorporated in the Advance Request.
(e) No Injunction, Etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to enjoin,
restrain, or prohibit, or to obtain damages in respect of, or which is related
to or arises out of this Agreement or the consummation of the transactions
contemplated hereby, or which, in the Lender's reasonable discretion, would make
it inadvisable to consummate any transactions contemplated by this Agreement.
(f) No Adverse Change. There shall have been no
material adverse change in the management, business, operations, condition,
assets or prospects of the Borrower or Metro-Tel from such condition as it
existed on the date of the most recent financial statements of such Person
delivered to the Lender prior to the date hereof, and no Material Adverse Effect
shall have occurred.
(g) Further Assurances. Borrower shall have delivered
such further documentation, opinions, certificates, agreements and assurances as
Lender may reasonably require.
4.3. Waiver of Conditions Precedent. If the Lender makes any
Loan or issues any Letter of Credit or enters into any Forward or Spot
transaction hereunder prior to the fulfillment of any of the conditions
precedent set forth in this Section 4, the making of such Loan or the issuance
of such Letter of Credit shall constitute only an extension of time for the
fulfillment of such condition and not a waiver thereof, and the Borrower shall
thereafter fulfill each such condition promptly.
5. Covenants of the Borrower. The Borrower covenants and agrees that
from the date hereof and until payment in full of the Indebtedness unless the
Lender shall otherwise consent in writing, the Borrower covenants and agrees as
follows:
5.1. Use of Loan Proceeds. The proceeds of the Loans shall be
used only for the purposes permitted herein and Borrower shall furnish the
Lender all evidence that it may require with respect to such use.
5.2. Maintenance of Business and Properties. Borrower and
Metro-Tel shall at all times maintain, preserve and protect all Collateral and
all the remainder of their respective properties used or useful in the conduct
of their respective business, and keep the same in good repair, working order
and condition, and from time to time make, or cause to be made, all material
needful and proper repairs, renewals, replacements, betterments and improvements
thereto so that the business carried on in connection therewith may be conducted
properly and in accordance with standards generally accepted in businesses of a
similar type and size at all times, and maintain and keep in full force and
effect all licenses and permits necessary to the proper conduct of their
respective businesses.
5.3. Insurance. Borrower and Metro-Tel shall maintain and pay
for insurance upon all Collateral, wherever located, and otherwise covering
casualty, hazard, workers' compensation, business interruption, public liability
and such other risks (as is customary in the businesses in which Borrower and
Metro-Tel are engaged) and in such amounts and with such insurance companies as
shall be reasonably satisfactory to the Lender and in compliance with law. The
Borrower and Metro-Tel shall deliver such certificates of insurance to the
Lender with loss payable endorsements naming the Lender as loss payee thereunder
in form reasonably satisfactory to the Lender. Borrower and Metro-Tel shall
maintain and pay for insurance in such amount, with such companies and in such
form as shall be reasonably satisfactory to the Lender insuring the Borrower and
Metro-Tel against any claims, suits, loss or damages suffered by any Person on
any property owned or leased by the Borrower and Metro-Tel and against such
other casualties and contingencies as is customary in the business in which the
Borrower or Metro-Tel is engaged, and deliver such certificates of insurance to
the Lender with satisfactory endorsements naming the Lender as additional
insured thereunder. Each policy of insurance
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shall contain a clause requiring the insurer to give not less than thirty (30)
days' prior written notice to the Lender before any cancellation of the policies
for any reason whatsoever and a clause that the interest of the Lender shall not
be impaired or invalidated by any act or neglect of the Borrower or Metro-Tel or
the owner of the property nor by the occupation of the premises wherein such
property is located for purposes more hazardous than are permitted by said
policy. The Borrower hereby directs all insurers under such policies of
insurance on the Collateral to pay all proceeds payable thereunder directly to
the Lender following an Event of Default. The Borrower hereby irrevocably makes,
constitutes and appoints the Lender (and all officers, employees or agents
designated by the Lender) as the Borrower's true and lawful attorney (and
agent-in- fact) for the purpose of making, settling and adjusting claims under
such policies of insurance, endorsing the name of the Borrower on any check,
draft, instrument or other item of payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect to such
policies of insurance; provided, however, that such power shall not be used
until after the occurrence of and during the continuation of an Event of
Default. Prior to the occurrence of an Event of Default, neither the Borrower
nor Metro-Tel will make, settle or adjust any material claim without the prior
written consent of the Lender, which consent will not be unreasonably withheld.
If the Borrower fails to obtain and maintain any of the policies of insurance or
to pay any premium in whole or in part, then the Lender may, at the Borrower's
expense, without waiving or releasing any obligation or default by the Borrower
hereunder, procure the same, but shall not be required to do so. All sums so
disbursed by the Lender, including attorneys' fees, court costs, expenses and
other charges related thereto, shall be payable on demand by the Borrower to the
Lender and shall be additional Indebtedness hereunder secured by the Collateral.
5.4. Notice of Default. Borrower shall provide to the Lender
immediate notice of (a) the occurrence of a Default or an Event of Default, (b)
any material threatened or pending litigation or material changes in existing
litigation or any material judgment against it or its assets or any Guarantor or
any Guarantor's assets, (c) any material damage or loss to property or material
labor controversy with respect to Borrower or any Guarantor, (d) any notice from
taxing authorities as to claimed deficiencies or any tax Lien or any notice
relating to alleged ERISA violations, (e) any Reportable Event, as defined in
ERISA, (f) any rejection, return, offset, dispute, loss or other circumstance
reasonably likely to have a material adverse effect on the Collateral (or
Lender's Lien or priority therein) or the Borrower or any Guarantor or their
respective businesses, operations, conditions, properties or prospects, (g) any
loss or threatened loss of material licenses or permits, (h) any notice of any
material violation of any law, rule or regulations and (i) the occurrence of any
event which is reasonably likely to have a Material Adverse Effect.
5.5. Inspections. Each of Borrower and Metro-Tel shall permit
inspections of the Collateral and the records pertaining thereto, at such
reasonable times and in such manner as may be reasonably required by the Lender
and shall further permit such inspection, review and audits of its other records
and its properties (with such frequency and at such times as the Lender may
reasonably request) by the Lender as the Lender may reasonably deem necessary or
desirable from time to time. The reasonable cost of such audits, reviews and
inspections shall be borne by the Borrower.
5.6. Financial Information. Each of Borrower and Metro-Tel
shall maintain its books and records in accordance with GAAP and shall furnish
to Lender the following periodic information in form reasonably satisfactory to
Lender:
(a) Within fifty (50) days after the close of each
fiscal quarter, beginning with the current fiscal quarter, consolidated and
consolidating balance sheets of the Borrower and Metro-Tel as of the close of
such quarter, and consolidated and consolidating statements of income and cash
flows (along with supporting schedules and in detail reasonably acceptable to
Lender) for such quarter and for that portion of the fiscal year to date then
ended, prepared in accordance with GAAP (subject to ordinary course,
non-material audit and year-end adjustments), applied on a basis consistent with
that of the preceding period or containing disclosure of the effect on the
financial position or results of operations of any change in the application of
accounting principles and practices during the period, and certified by the
Chief Financial Officer of the Borrower; and within thirty (30) days after the
close of each quarter, beginning with the current quarter, agings of Accounts of
Borrower by invoice date (including summary reports as prepared by Borrower) and
an inventory listing of Borrower, all in such detail and with such supporting
schedules and information as shall be reasonably required by Lender;
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(b) Within one hundred twenty (120) days after the
close of each fiscal year of the Borrower and Metro-Tel audited consolidated and
consolidating balance sheets of the Borrower and Metro-Tel as of the close of
such fiscal year and audited consolidated and unaudited consolidating statements
of income and retained earnings and cash flows, for the fiscal year then ended,
prepared in accordance with GAAP, applied on a basis consistent with the
preceding year or containing disclosure of the effect on financial position or
results of operation of any change in the application of accounting principles
and practices during the year, and (i) accompanied by a report thereon (from
Borrower's or Metro-Tel's existing independent certified public accounting firm
or another regional or national accounting firm reasonably acceptable to
Lender), containing an unqualified opinion, without scope limitations imposed by
the Borrower or Metro-Tel, from such firm, and (ii) within thirty (30) days
after delivery of the financial statements required under this subsection (b), a
copy of each "management letter", if any, from such accountants to the Borrower
or Metro-Tel in connection with such accountants' audit and management-prepared
financial projections with respect to next fiscal year, in form and detail
reasonably acceptable to Lender, along with such supporting schedules and other
information and certificates as Lender shall reasonably request.
(c) Concurrently with the delivery of the financial
statements described in subsection (b) above, a certificate from the firm of
independent certified public accountants that in making their examination of the
financial statements of the Borrower and Metro-Tel, no knowledge of the
occurrence or existence of any Default or any Event of Default, was disclosed by
their examination or a statement specifying the nature and period of existence
of any such condition or event;
(d) Concurrently with the delivery of the financial
statements described in subsections (a) and (b) above, a certificate from the
Chief Financial Officer of the Borrower certifying to the Lender on behalf of
Borrower that to the best of his knowledge, each of the Borrower and Metro-Tel
has kept, observed, performed and fulfilled each and every covenant, obligation
and agreement binding upon the Borrower or Metro-Tel contained in this Agreement
and the other Loan Documents, and that no Default or Event of Default has
occurred or specifying any such Default or Event of Default, together with
financial covenant compliance worksheet, in form satisfactory to the Lender,
reflecting the computation of the financial covenants set forth in Section 5.25
hereof as of the end of the period covered by such financial statements;
(e) Upon the Lender's written request, such other
information about the Collateral or the financial condition and operations of
the Borrower as the Lender may from time to time reasonably request. The Lender
may reasonably require more frequent rendering of the reports and certificates
described in (a) through (d) above.
(f) Simultaneously with filing thereof with any
governmental authority, Borrower shall deliver to Lender copies of Borrower's
and Metro-Tel's federal, state and local income tax returns, as applicable.
(g) Within 45 days after the close of each month,
beginning with the current month, a Borrowing Base Certificate substantially in
the form of Exhibit A ("Borrowing Base Certificate"), along with the latest
month-end accounts receivable aging report and within 45 days after the close of
each quarter beginning with the current quarter, a current inventory listing, in
each case certified as true and correct by Borrower's Chief Financial Officer.
(h) Within two Business Days after any report or
filing is made with the Securities and Exchange Commission by Metro-Tel, a copy
of such report or filing.
(i) Within two Business Days after any written
communication is sent to Metro-Tel's shareholders, a copy of such
correspondence.
5.7. Year 2000 Compatibility. Borrower and Metro-Tel shall take
all action necessary to assure that Borrower's and Metro-Tel's computer-based
systems are able to operate and effectively process data including dates on and
after January 1, 2000. At the request of Lender, Borrower shall provide Lender
assurance acceptable to Lender of Borrower's and Metro-Tel's year 2000
compatibility.
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5.8. Liens. Neither Borrower nor Metro-Tel shall create or
permit to exist any Liens on any of the Collateral, except Permitted Liens.
5.9. Redemptions. Neither Borrower nor Metro-Tel shall
purchase, redeem or otherwise acquire any stock or other equity interests; and
neither of them shall declare or pay any dividend or distribution that would be
reasonably likely to cause Borrower to not comply at any time with Section 5.25.
5.10. Merger, Sale, Etc. Each of Borrower and Metro-Tel shall
maintain its corporate existence, good standing and necessary qualifications to
do business, and shall not, except as expressly agreed to by Lender in writing,
(i) merge or consolidate with or into any Person or acquire all or substantially
all of the assets of, or any equity interest of, any Person, (ii) permit any
Person to transfer to it, directly or indirectly, any of its issued and
outstanding stock or securities (except as permitted in Section 5.11), or (iii)
permit the sale, lease, assignment or other disposition of any Collateral or any
of its or Metro-Tel's other assets (other than sales of obsolete or worn-out
Equipment and sales of Inventory in the ordinary course of business consistent
with past practices or other than sales of Equipment for less than $50,000 in
the aggregate in any fiscal year).
5.11. Loans, Guaranties and Other Investments. Neither Borrower
nor Metro-Tel shall make or permit to exist any advances or loans to, or
guarantee or become contingently liable, directly or indirectly, in connection
with the obligations, leases, stock or dividends of, or own, purchase or make
any commitment to purchase any stock, bonds, notes, debentures or other
securities of, or any interest in, or make any capital contributions to (all of
which are sometimes collectively referred to herein as "Investments"), any
Person except for (a) purchases of direct obligations of the federal government,
(b) deposits in commercial banks, (c) commercial paper of any U.S. corporation
having at least an A rating by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, (d) endorsement of negotiable instruments for collection in
the ordinary course of business, (e) advances in the ordinary course of the
Borrower's and Metro-Tel's business not in the aggregate in excess of $50,000,
or (f) overnight bank repurchase agreements.
5.12. Change in Business. Neither Borrower nor Metro-Tel shall,
except as expressly agreed to in writing by Lender, enter into any business
which is substantially different from the business or businesses in which it is
presently engaged.
5.13. Accounts. Neither Borrower nor Metro-Tel shall sell,
assign or discount any of its Accounts or Chattel Paper or any promissory notes
held by it other than the discount of such notes in the ordinary course of
business for collection; and Borrower shall notify Lender promptly in writing of
any discount, offset or other deductions not shown on the face of an Account of
Borrower or Metro Tel invoice in excess of $50,000 and any dispute over any
Account in excess of $50,000, and any information known to Borrower relating to
any material adverse change in any Account Debtor's financial condition or
ability to pay its obligations.
5.14. Transactions with Affiliates. Except as set forth on
Schedule 5.14, neither Borrower nor Metro-Tel shall, directly or indirectly
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, or otherwise deal with, in the ordinary course of business or
otherwise, any Affiliate; provided, however, that any acts or transactions
prohibited by this Section 5.14 may be performed or engaged in, after written
notice to the Lender, if upon terms not less favorable to the Borrower than if
no such Affiliate relationship existed.
5.15. No Change in Name or Offices; Removal of Collateral.
Neither Borrower nor Metro-Tel shall, (a) change its name or the location of its
chief executive office or other office where books or records are kept or (b)
permit any Inventory or other tangible Collateral to be located at any location
other than as specified on Schedule 2.9.
5.16. No Sale, Leaseback. Neither Borrower nor Metro-Tel shall
enter into any sale-and-leaseback or similar transaction.
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5.17. Margin Stock. Neither Borrower nor Metro-Tel shall use
any proceeds of any Loan to purchase or carry any margin stock (within the
meaning of Regulation U of the Board of Governors of Federal Reserve System) or
extend credit to others for the purpose of purchasing or carrying any margin
stock.
5.18. Payment of Taxes, Etc. Neither Borrower nor Metro-Tel
shall pay before delinquent all of its debts and taxes except that the Lender
shall not unreasonably withhold its consent to nonpayment of taxes being
actively contested in good faith and in accordance with law (provided that the
Lender may require bonding or other assurances of any amount in excess of
$50,000).
5.19. Comply with ERISA. Each of Borrower and Metro-Tel shall
at all times make prompt payment of contributions required to meet the minimum
funding standards set forth in ERISA with respect to any employee benefit plan;
promptly after the filing thereof, furnish to the Lender copies of any annual
report required to be filed under ERISA in connection with each employee benefit
plan; not withdraw from participation in, permit the termination or partial
termination of, or permit the occurrence of any other event with respect to any
employee benefit plan that could result in liability to the Pension Benefit
Guaranty Corporation; notify the Lender as soon as practicable of any Reportable
Event and of any additional act or condition arising in connection with any
employee benefit plan which the Borrower believes might constitute grounds for
the termination thereof by the Pension Benefit Guaranty Corporation or for the
appointment by the appropriate United States district court of a trustee to
administer such plan; and furnish to the Lender upon the Lender's request, such
additional information about any employee benefit plan as may be reasonably
requested.
5.20. Compliance; Hazardous Materials. Except as disclosed on
Schedule 2.17, each of Borrower and Metro-Tel shall comply with all laws,
regulations, ordinances and other legal requirements, specifically including,
without limitation, ERISA, all securities laws and all laws relating to
hazardous materials and the environment. Neither Borrower nor Metro-Tel shall
engage in the storage, manufacture, disposition, processing, handling, use or
transportation of any hazardous or toxic materials, not in compliance with
applicable laws and regulations.
5.21. Subsidiaries. Neither Borrower nor Metro-Tel shall
acquire or form any Subsidiary.
5.22. Compliance with Assignment Laws. Each of Borrower and
Metro-Tel shall, if reasonably required by the Lender, comply with the Federal
Assignment of Claims Act and any other applicable law relating to assignment of
government contracts and Accounts arising from the performance thereof.
5.23. Further Assurances. Each of the Borrower and Metro-Tel
shall take such further action and provide to the Lender such further assurances
as may be reasonably requested by the Lender to ensure compliance with the
intent of this Agreement and the other Loan Documents.
5.24. Withholding Taxes. Each of Borrower and Metro-Tel shall
pay as and when due all employee withholding, FICA and other payments required
by federal, state and local governments with respect to wages paid to employees.
5.25. Financial Covenants. Borrower and Metro-Tel shall at all
times be in compliance with the following financial covenants:
(a) Debt Service Coverage Ratio. As of the last day
of each fiscal year of Borrower and Metro-Tel, Borrower shall not permit the
ratio of (i) the sum of consolidated net income after tax for the fiscal year
then ended plus consolidated depreciation and amortization for the fiscal year
then ended less dividends declared or paid by Metro-Tel for the fiscal year then
ended to (ii) current maturities of long-term debt (including capitalized leases
and excluding Revolving Loans) to be less than 1.25 to 1.0.
(b) Leverage. Borrower shall not, at any time, permit
the ratio of Consolidated Total Liabilities to Consolidated Tangible Net Worth,
to exceed 2.0 to 1.0.
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5.26. Lender Account. Borrower shall, at all times, maintain
with Lender its primary operating and depository account including cash
management accounts.
5.27. Fiscal Year; Accounting Method. Neither Borrower nor
Metro-Tel shall change its fiscal year, or change its method of accounting to a
method inconsistent with current practices (except for the change of Borrower's
fiscal year to that of Metro-Tel's after written notice thereof to Lender).
5.28. Default on Other Obligations. Neither Borrower nor
Metro-Tel shall default on any material contract or obligation to any other
Person nor shall either of them default in the timely and due performance of any
material obligation to any other Person relating to indebtedness for borrowed
money.
5.29. SEC Filing. Metro-Tel shall timely file with the
Securities and Exchange Commission all filings and reports required by Sections
12 and 15 of the Securities Act of 1933, as amended, and under applicable law in
order for it to continue to be a public company, and no such filings and reports
will contain any untrue statement of a material fact or omit a material fact
necessary to make the statement made therein not misleading.
5.30. Compliance with Laws. Borrower and Metro-Tel shall, in
all material respects, at all times operate their business in accordance with
(and otherwise be in material compliance with) all applicable laws, rules and
regulations.
5.31. Merger Agreement. Without Lender's prior written consent,
neither Borrower nor Metro- Tel shall amend or otherwise modify the Merger
Agreement.
5.32. Chattel Paper. Neither Borrower nor Metro-Tel nor any of
their customers shall execute any security agreement, note or other instrument,
agreement or document evidencing or securing any sale by Borrower or Metro-Tel,
unless such security agreement, note or other instrument, agreement or document
constitutes Chattel Paper; and none of Borrower's or Metro-Tel's Accounts or
other receivables shall be represented by any security agreement, note or other
instrument, agreement or document unless it is Chattel Paper.
6. Default.
6.1. Events of Default. Each of the following shall constitute
an Event of Default:
(a) Any representation or warranty made by the
Borrower or any Guarantor in any Loan Document or in any certificate or report
furnished in connection herewith or therewith shall have been untrue or
incorrect in any material respect when made; or
(b) There shall occur any failure by the Borrower or
any Guarantor in the payment, when due, of any principal of or interest on any
Note, or under any other Loan Document; or Borrower shall fail to pay on demand
any returned or dishonored draft, check or other item which has been presented
to Lender and for which Borrower has received provisional credit; or
(c) There shall occur (i) any default by the Borrower
or any Guarantor in the performance of any agreement, covenant or obligation
contained in this Agreement or any other Loan Document not provided for
elsewhere in this Section 6.1 and such Default or other default is not cured
within seven Business Days of notice from Lender, or (ii) a "Potential Event of
Default" or "Event of Default", as such terms are defined in the Interest Rate
Swap Agreement, if an Interest Rate Swap Agreement has been executed; or
(d) The Borrower or any Guarantor shall be in default
under any Debt owed to any other obligee in an amount in excess of $50,000,
which default entitles the obligee to accelerate any such Debt or exercise other
remedies with respect thereto; or
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(e) The Borrower or any Guarantor shall (i)
voluntarily liquidate or terminate operations or apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of Borrower or any Guarantor or of all or of a substantial part of
its assets, (ii) admit in writing its inability, or be generally unable, to pay
its debts as the debts become due, (iii) make a general assignment for the
benefit of its creditors, (iv) commence a voluntary case under any federal
bankruptcy law (as now or hereafter in effect), (v) file a petition seeking to
take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, or (vi) take
any corporate action for the purpose of effecting any of the foregoing; or
(f) Without its application, approval or consent, a
proceeding shall be commenced and remain undismissed or unstayed for more than
60 days, in any court of competent jurisdiction, seeking, in respect of the
Borrower or any Guarantor, any remedy under any federal bankruptcy law, or any
law pertaining to liquidation, reorganization, dissolution, winding-up, or
composition or readjustment of debt, or seeking the appointment of a trustee,
receiver, liquidator or the like with respect to the Borrower or any Guarantor,
or any of its assets or other like relief under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of debts;
or
(g) Any Lien of the Lender hereunder or under any
other Security Agreement shall not constitute a perfected first priority Lien in
the Collateral thereby encumbered, subject only to Permitted Liens; or
(h) A judgment, writ of garnishment or attachment in
excess of $50,000 shall be rendered against the Borrower or any Guarantor or any
of its assets and shall remain undischarged, undismissed and unstayed for more
than 20 days; or
(i) The Borrower or any Guarantor is enjoined,
restrained or in any way prevented by the order of any court or governmental
entity from conducting any material part of its business; or
(j) The Borrower or any Guarantor shall cease to be
Solvent, or ceases to conduct any material part of its business as now
conducted; or
(k) There shall occur any Material Adverse Effect; or
(l) A notice of lien, levy or assessment is filed of
record with respect to all or any portion of the Borrower's or any Guarantor's
assets by the United States, or any department, agency or instrumentality
thereof, or by any state, county, municipal or other governmental agency, or if
any taxes or debts in excess of $50,000 owing at any time or times hereafter to
any one of them becomes a Lien upon the Collateral or any other asset of the
Borrower or any Guarantor and the same is not dismissed, released, discharged,
or bonded in a manner satisfactory to Lender within 10 days after the same
becomes a Lien or, in the case of ad valorem taxes, prior to the last day when
payment may be made without penalty; or
(m) Any of the Loan Documents for any reason ceases
to be in full force and effect or is declared to be null and void, or the
Borrower or any Guarantor denies that it has any further liability (including,
but not limited to any full or partial repudiation or revocation of any
Guaranty) under any Loan Document to which it is a party, or gives notice to
such effect; or
(n) The loss, suspension or revocation of, or failure
to renew, any material license or permit now held or hereafter acquired by the
Borrower or any Guarantor; or
(o) The occurrence of any of the following events:
(i) the happening of a Reportable Event with respect to any profit sharing or
pension plan of the Borrower or any Guarantor governed by ERISA which has a
Material Adverse Effect; (ii) the termination of any such plan which has a
Material Adverse Effect; (iii) the appointment of a trustee by an appropriate
United States District Court to administer any such plan; or (iv) the
institution of any
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proceedings by the Pension Benefit Guaranty Corporation to terminate any such
plan or to appoint a trustee to administer any such plan;
(p) The occurrence of any material casualty or damage
to Collateral; or
(q) William Steiner and Michael Steiner shall fail to
own (beneficially and of record) in the aggregate, at least 51% of each
outstanding class and series of Metro-Tel's equity securities (including all
securities convertible into equity securities); or any Person other than
Metro-Tel shall own (beneficially or of record) any of Borrower's equity
securities (including all securities convertible into equity securities).
6.2. Acceleration of the Indebtedness. Without in any way
limiting the right of the Lender to demand payment of any portion of the
Indebtedness (a) upon and after an Event of Default (other than an Event of
Default specified in Subsections 6.1(e) or (f)), all of the Indebtedness may, at
the option of the Lender, and without notice or legal process of any kind, be
declared, and immediately shall become, due and payable, and (b) Borrower upon
and after the occurrence of an Event of Default specified in Subsections 6.1(e)
or (f), all of the Indebtedness shall automatically become due and payable,
without demand, notice or legal process of any kind, anything in any Note or
other instrument or document evidencing any such Indebtedness or in the Loan
Documents or in any other agreement to the contrary notwithstanding. If any
Default or Event of Default occurs, Lender shall have no obligation to make any
additional advances of Loans or issue or accept additional Letters of Credit or
enter into any further Spot or Forward transactions.
6.3. Default Rate. Upon the occurrence and during the
continuation of an Event of Default, all of the Indebtedness shall bear interest
at the Default Rate.
6.4. Rights and Remedies. Upon and after the occurrence of any
Event of Default, the Lender shall have, in addition to all other rights and
remedies which the Lender may have under this Agreement, the other Loan
Documents, and applicable law, the following rights and remedies, all of which
may be exercised with or without further notice to the Borrower: (a) all of the
rights and remedies of a secured party under applicable law; (b) to foreclose
the Liens created under this Agreement and the other Loan Documents or under any
other agreement relating to the Collateral, by any available judicial procedure
or without judicial process; (c) to enter any premises where the Collateral may
be located, through self-help and without judicial process, without first
obtaining a final judgment or giving the Borrower notice and opportunity for a
hearing on the validity of the Lender's claim, for the purpose of taking
possession or removing the same; and/or (d) to sell, assign, lease, or otherwise
dispose of the Collateral or any part thereof, either at public or private sale,
in lots or in bulk, for cash, on credit or otherwise, with or without representa
tions or warranties, and upon such terms as shall be acceptable to the Lender,
in its sole discretion, and the Lender may bid or become the purchaser at any
such public sale, free from any right of redemption which is hereby expressly
waived by the Borrower, and the Lender shall have the option to apply or be
credited with the amount of all or any part of the Indebtedness against the
purchase price bid by the Lender at any such sale. The Borrower agrees that the
Lender has no obligation to preserve rights to the Collateral against prior
Persons or to marshall any Collateral for the benefit of any Person. The Lender
is hereby granted a license or other right to use, without charge, the
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and the Borrower's rights under
all licenses and franchise agreements shall inure to the Lender's benefit; and
in each instance, Lender shall only utilize such license after the occurrence of
an Event of Default. In addition, the Borrower agrees that in the event notice
is necessary under applicable law, written notice mailed to the Borrower in the
manner specified herein five days prior to the date of public sale of any of the
Collateral or prior to the date after which any private sale or other
disposition of the Collateral will be made shall constitute commercially
reasonable notice to the Borrower. Upon the occurrence of an Event of Default,
the Lender shall also have the right to seek the appointment of a receiver to
take possession of and operate and dispose of Borrower's assets. The Lender may,
at any time during the continuance of an Event of Default, and at Borrower's
expense, employ and maintain custodians at the Borrower's premises who shall
have full authority to protect Lender's interests. Upon the occurrence and
during the continuation of an Event of Default, the Borrower authorizes the
Lender to collect
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and set-off and apply against the Indebtedness when due any cash or deposit
accounts in its possession, and any refund of insurance premiums or any
insurance proceeds payable on account of the loss or damage to any of the
Collateral and irrevocably appoints the Lender as its attorney-in-fact to
endorse any check or draft or take other action necessary to obtain such funds.
All or any part of the Collateral may be liquidated and sold by Lender for
failure of Borrower to pay any of the Indebtedness, regardless of whether any of
the Loans have been accelerated or whether the Interest Rate Swap Agreement has
been terminated early. Notwithstanding anything to the contrary set forth
herein, Collateral may be liquidated upon Borrower's failure to pay any
Indebtedness on a timely basis, whether or not any acceleration has occurred or
the Interest Rate Swap Agreement has been terminated early.
6.5. Application of Proceeds. After an Event of Default, the
net cash proceeds resulting from the collection, liquidation, sale, lease or
other disposition of the Collateral shall be applied first to the expenses
(including all reasonable attorneys' fees) of retaking, holding, storing,
processing and preparing for sale, selling, collecting, liquidating and the
like, and then to the satisfaction of all Indebtedness. The Borrower irrevocably
waives the right to direct the application of any and all payments and
collections at any time or times hereafter received by the Lender from or on
behalf of the Borrower, and the Borrower does hereby irrevocably agree that the
Lender shall have the continuing exclusive right to apply and to reapply any and
all such payments and collections received at any time or times hereafter by the
Lender or its agent against the Indebtedness which is due and payable at the
time of such application, in such manner as the Lender, in its sole discretion,
may determine, notwithstanding any entry by the Lender upon any of its books and
records. The Borrower shall be liable to the Lender and shall pay to the Lender
on demand any deficiency which may remain after such sale, disposition,
collection or liquidation of the Collateral. The Lender shall remit to the
Borrower or the Person entitled thereto any surplus remaining after all
Indebtedness have been paid in full. If any of the Collateral shall require
repairs, maintenance, preparation or the like, or is in process or other
unfinished state, the Lender shall have the right, but shall not be obligated to
perform such repairs, maintenance, preparation, processing or completion of
manufacturing for the purpose of putting the same in such saleable form as the
Lender shall deem appropriate, but the Lender shall have the right to sell or
dispose of the Collateral without such processing. The Borrower will, at the
Lender's request, assemble all the Collateral and make it available to the
Lender at places which the Lender may select, whether at premises of the
Borrower or elsewhere, and will make available to the Lender all premises and
facilities of the Borrower for the purpose of the Lender's taking possession of
the Collateral or of removing or putting the Collateral in saleable form.
6.6. Appointment of the Lender as the Borrower's Lawful
Attorney. The Borrower hereby irrevocably designates, makes, constitutes and
appoints the Lender (and all Persons designated by the Lender) as the Borrower's
true and lawful attorney (and agent-in-fact) and the Lender, or the Lender's
agent, may, upon and after the occurrence and during the continuation of an
Event of Default, in the Borrower's or the Lender's name: (i) exercise all of
the Borrower's rights and remedies with respect to the Accounts and the other
Collateral; (ii) take control, in any manner, of any item of payment or
proceeds; (iii) prepare, file and sign the Borrower's name on a proof of claim
in bankruptcy or similar document against any Account Debtor; (iv) do all acts
and things necessary, in the Lender's sole discretion, to fulfill the Borrower's
obligations under this Agreement; (v) endorse the name of the Borrower upon any
of the items of payment or proceeds referred to herein and deposit the same to
the account of the Lender on account of the Indebtedness; (vi) endorse the name
of the Borrower upon any chattel paper, document, instrument, invoice, freight
bill, bill of lading or similar document or agreement relating to the Accounts
or Inventory; (vii) use the Borrower's stationery and sign the name of the
Borrower to verifications of the Accounts and notices thereof to Account
Debtors; and (viii) use the information, recorded on or contained in any data
processing equipment and computer hardware and software relating to the Accounts
and Inventory to which the Borrower has access. All acts of the Lender or its
designee, except the Lender's or its designees' acts of gross negligence or
willful misconduct, taken pursuant to this Section 6.6 are hereby ratified and
confirmed and the Lender or its designee shall not be liable for any acts of
omission or commission nor for any error of judgment or mistake of fact or law.
6.7 Collections; The Lender's Right to Notify Account Debtors and to
Endorse Borrower's Name. Borrower hereby authorizes Lender (1) upon the
occurrence and during the continuation of a Default or an Event of
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Default, to open Borrower's mail and collect any and all amounts due to Borrower
from Account Debtors; (2) after the occurrence and during the continuation of a
Default or an Event of Default, notify any or all Account Debtors that the
Accounts have been assigned to Lender and that Lender has a security interest
therein; and (3) after the occurrence and during the continuation of a Default
or an Event of Default, direct such Account Debtors to make all payments due
from them to Borrower upon the Accounts directly to Lender or to a lock box
designated by Lender. Lender shall promptly furnish Borrower with a copy of any
such notice sent and Borrower hereby agrees that any such notice may be sent on
Borrower's stationery, in which event Borrower shall co-sign such notice with
Lender. Borrower irrevocably makes, constitutes and appoints Lender (and all
Persons designated by Lender for that purpose) as Borrower's true and lawful
attorney (and agent-in-fact) to endorse Borrower's name on any checks, notes,
drafts or any other payment relating to and/or proceeds of the Collateral which
come into either Lender's possession or control.
7. Security Agreement; Collateral.
7.1. Security Interest.
(a) As security for the payment and performance of
any and all of the Indebtedness and the performance of all other obligations and
covenants of the Borrower hereunder and under the other Loan Documents, absolute
or contingent, now existing or hereafter arising, which are now, or may at any
time or times hereafter be owing by the Borrower to the Lender, the Borrower
hereby pledges to the Lender and gives and grants the Lender a continuing and
general security interest in and Lien upon and right of set-off against, all
right, title and interest of the Borrower in and to the Borrower Collateral,
whether now owned or hereafter acquired by the Borrower; provided, however, that
notwithstanding anything to the contrary set forth herein, no Indebtedness shall
be secured by any real property.
(b) At the Lender's request, the Borrower shall cause
the execution and delivery to the Lender, in form and substance reasonably
satisfactory to the Lender, of all such agreements, documents, financing
statements and other writings reasonably requested by the Lender to perfect and
maintain the perfection and priority of its security interests in and Liens on
the Borrower Collateral and to consummate the other transactions contemplated
hereby, and the Borrower shall pay all filing fees and documentary stamp,
intangible and similar taxes in connection therewith. The Borrower irrevocably
designates the Lender as its attorney-in-fact to effectuate the foregoing.
(c) Except as herein or by applicable law otherwise
expressly provided, the Lender shall not be obligated to exercise any degree of
care in connection with any Borrower Collateral, to take any steps necessary to
preserve any rights in any of the Borrower Collateral or to preserve any rights
therein against prior parties. No segregation or specific allocation by the
Lender of specified items of Borrower Collateral against any liability of the
Borrower shall waive or affect any Lien against other items of Borrower
Collateral or any of the Lender's options, powers or rights under this Agreement
or otherwise arising.
(d) All collateral which the Lender may at any time
acquire from any other source as security for the payment of any Indebtedness
shall constitute cross-collateral for all Indebtedness without apportionment or
designation as to particular Indebtedness, and all Indebtedness shall be secured
by all such collateral; and the Lender shall have the right, in its sole
discretion, to determine the order in which its rights in or remedies against
such collateral are to be exercised and which types or portions of the
collateral are to be proceeded against and the order of application of proceeds
of Borrower Collateral against particular Indebtedness; provided, however, that
notwithstanding anything to the contrary set forth herein, no Indebtedness shall
be secured by any real property.
7.2. Inspection of Collateral. The Borrower hereby irrevocably
consents to any act by the Lender or its agents in entering upon any premises
for the purposes of either (i) following reasonable prior notice to Borrower
inspecting the Collateral and making extracts from and copies of any books and
records relating thereto during regular business hours or (ii) taking possession
of the Collateral at any time following the occurrence and during the
continuation of an Event of Default; and the Borrower hereby waives its right to
assert against the Lender or its agents any claim based upon trespass or any
similar cause of action for entering upon any premises where the Collateral may
be located.
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Following the occurrence and during the continuation of an Event of Default, the
Borrower irrevocably consents to the Lender's requesting information pertaining
to the Borrower from any Person and to the Lender's verifying such or any other
information pertaining to the Borrower, including, but not limited to the
amount, quality, existence, quantity, value and condition of any Account or any
other Collateral.
7.3. Other Rights. The Borrower authorizes the Lender without
affecting either the Borrower's or the Lender's obligations hereunder or under
any other Loan Document from time to time to take from any party and hold
additional collateral or guaranties for the payment of the Indebtedness or any
part thereof, and to exchange, enforce, substitute or release such collateral or
guaranty of payment of the Indebtedness or any part thereof and to release or
substitute any endorser or guarantor or any party who has given any Lien on any
collateral as security for the payment of the Indebtedness or any part thereof
or any party in any way obligated to pay the Indebtedness or any part thereof.
7.4. Tangible Collateral; Inventory. No Inventory, Equipment or
other tangible Borrower Collateral shall be commingled with, or become an
accession to or part of, any property of any other Person so long as such
property is Collateral. No tangible Borrower Collateral is or shall be allowed
to become a fixture. No tangible Collateral shall be stored with any
warehouseman, bailee or similar party.
7.5. The Lender's Payment of Claims Asserted Against the
Collateral. In the event a Lien, other than a Permitted Lien, is asserted by any
Person against the Collateral and if the Lender has given Borrower five days'
prior written notice and Borrower has failed to either (i) satisfy the Lien or
(ii) cause the Lien to be transferred to a bond acceptable to the Lender, then
the Lender may at any time after such five-day period in its discretion without
waiving or releasing any obligation, liability or duty of the Borrower under
this Agreement, the other Loan Documents or any Default or Event of Default,
pay, acquire and/or accept an assignment of such Lien. All sums paid by the
Lender in respect thereof and all costs, fees and expenses, including, without
limitation, attorneys' fees, court costs, expenses and other charges relating
thereto, which are incurred by the Lender on account thereof, shall be payable,
upon demand, by the Borrower to the Lender and shall be additional Indebtedness
hereunder secured by the Collateral.
8. Term of Agreement.
8.1. Term and Right to Terminate. Subject to the other
provisions herein, the provisions of this Agreement shall continue in full force
and effect until January 2, 2002 (the "Term"). Notwithstanding any term herein
to the contrary or any other term in any of the other Loan Documents, the
Borrower and the Lender agree that all Indebtedness hereunder shall be payable
in accordance with Section 3. Notwithstanding any provision to the contrary set
forth in any Loan Document, the Lender may terminate the financing arrangements
under this Agreement and the Notes at any time, upon notice to Borrower but
without legal process of any kind, upon the occurrence and during the
continuation of an Event of Default; provided, however, that the Lender shall
retain the right to payment of the Indebtedness in accordance with Section 3.
8.2. Effect of Termination. Without limiting the generality of
the other provisions regarding Default and acceleration hereunder, upon the
effective date of termination, all Indebtedness to the Lender, whether or not
incurred under this Agreement (and notwithstanding any term of any other Loan
Document), shall become immediately due and payable, including, but not limited
to, all Indebtedness (contingent or otherwise) with respect to any Interest Rate
Swap Agreement and all Letters of Credit and Forward and Spot transactions.
Notwithstanding any provision to the contrary in any Loan Document, and
notwithstanding any such termination, the obligations of the Borrower and the
rights, remedies and Liens of the Lender hereunder and under each Loan Document
shall remain in full force and effect until the Indebtedness is indefeasibly and
finally paid and discharged in full and all Letters of Credit and Forward and
Spot transactions and the Interest Rate Swap Agreement have been terminated or
canceled and Lender is released from all liability in connection therewith;
provided, however, that Lender shall promptly release its Liens in the
Collateral upon the indefeasible and final payment and discharge in full of all
Indebtedness.
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9. Miscellaneous.
9.1. Rights and Remedies Cumulative; Non-Waiver; Etc. The
enumeration of the Lender's rights and remedies set forth in this Agreement is
not intended to be exhaustive and the exercise by the Lender of any right or
remedy shall not preclude the exercise of any other rights or remedies, all of
which shall be cumulative, and shall be in addition to any other right or remedy
given hereunder, under the Loan Documents or under any other agreement to which
the Borrower or any Guarantor and the Lender are now or hereafter become
parties, or which may hereafter exist in law or in equity or by suit or
otherwise. No delay or failure to take action on the part of the Lender in
exercising any right, power or privilege shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any Event of Default.
No course of dealing between the Borrower or any Guarantor and the Lender or the
Lender's employees shall be effective to change, modify or discharge any
provision of this Agreement or to constitute a waiver of any Event of Default.
The Lender shall not, under any circumstances or in any event whatsoever, have
any liability for any error, omission or delay of any kind occurring in the
liquidation of the Collateral or for any damages resulting therefrom except
damages directly attributable to the Lender's gross negligence or willful
misconduct.
9.2. Survival of Representations; Reinstatement of
Indebtedness. All covenants, agreements, representations and warranties made by
Borrower or any Guarantor in connection herewith shall survive the making of the
Loans hereunder and the delivery of the Notes, and shall continue in full force
and effect so long as any Indebtedness is outstanding. The Borrower further
agrees that to the extent that the Borrower makes a payment or payments to the
Lender, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy, insolvency or similar state or federal law, common law or equitable
cause, then, to the extent of such payment or repayment, the Indebtedness or
part thereof intended to be satisfied shall be revived and continued in full
force and effect as if such payment had not been received by the Lender.
9.3. Expenses; Indemnification. Whether or not the transactions
contemplated by this Agreement shall be consummated, the Borrower will pay or
reimburse the Lender upon demand for all reasonable expenses (including, without
limitation, reasonable attorneys' and paralegals' fees, costs and expenses)
incurred or paid by the Lender in connection with: (a) the preparation,
execution and delivery of this Agreement or the other Loan Documents; (b)
charges for examiners, auditors or similar Persons whom the Lender may engage
with respect to rendering opinions concerning the Borrower's or Metro-Tel's
financial condition and the condition and value of the Collateral in accordance
with the terms hereof; (c) any arbitration, litigation, contest, dispute, suit,
proceeding, enforcement or action (whether instituted by the Lender or the
Borrower or any other Person) in any way relating to the Collateral, this
Agreement or the other Loan Documents, or the Borrower's or Metro-Tel's business
or affairs; (d) any attempt to enforce any rights of the Lender against the
Borrower or any other Person which may be obligated to the Lender by virtue of
this Agreement or the other Loan Documents, including without limitation, the
Account Debtors; (e) any attempt to inspect, verify, protect, collect, sell,
liquidate or otherwise dispose of the Collateral in accordance with the terms
hereof; (f) the filing and recording of all documents required by the Lender to
perfect the Lender's Liens in the Collateral, including without limitation, any
documentary stamp tax or any other taxes incurred because of such filing or
recording; (g) all costs incurred in connection with any lockbox; and (h) all
costs of modifying or amending any Loan Document. The Borrower shall indemnify
and hold the Lender harmless from and against any and all finder's or brokerage
fees and commissions which may be payable in connection with the transactions
contemplated by this Agreement other than any fees or commissions of finders or
brokers engaged by the Lender. If the Borrower should fail to pay any tax or
other amount required by this Agreement to be paid or which may be necessary to
protect or preserve any Collateral or the Borrower's or Lender's interests
therein, the Lender may make such payment and the amount thereof shall be
payable on demand, shall bear interest at the Default Rate from the date of
demand until paid and shall be deemed to be Indebtedness entitled to the benefit
and security of the Loan Documents. In addition, the Borrower agrees to pay and
save the Lender harmless against any liability for payment of any state
documentary stamp taxes, intangible taxes or similar taxes (including interest
or penalties, if any) and fees which may now or hereafter be determined to be
payable with respect to the execution, delivery or recording of any Loan
Document or the making of any Advance, whether originally thought to be due or
not, and regardless of any mistake of
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fact or law on the part of the Lender or the Borrower with respect to the
applicability of such tax or fee. The provisions of this Section 9.3 shall
survive payment in full of the Loans and termination of this Agreement.
9.4. Notices. Any notice or other communication hereunder to
any party hereto shall be by hand delivery, facsimile transmission, nationally
recognized overnight courier for next business day delivery or registered or
certified mail and unless otherwise provided herein shall be deemed to have been
received when delivered personally or three days after deposit in such mail or
with such courier postage prepaid, addressed to the party at its address
specified below (or at any other address that the party may hereafter specify to
the other parties in writing):
The Lender: First Union National Bank
Portfolio Management Group
4299 N.W. 36th Street, 4th Floor
Miami Springs, Florida 33166
Fax: (305) 883-4198
With a copy to: Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A.
Suite 2200
150 West Flagler Street
Miami, Florida 33130
Attention: Carl D. Roston, Esquire
Fax: (305) 789-3395
The Borrower: Steiner-Atlantic Corp.
290 NE 68th Street
Miami, Florida 33138
Fax: (305) 751-4903
Attn: President
With a copy to: Harold Berritt, Esq.
Greenberg Traurig
1221 Brickell Avenue
Miami, Florida 33131
Fax:(305) 579-0717
9.5. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the Borrower and the Lender, and their
respective successors and assigns; provided that the Borrower may not assign any
of its rights or duties hereunder without the prior written consent of the
Lender and any such assignment made without such consent will be void. Nothing
in this Agreement or any other Loan Document shall prohibit or restrict Lender
from pledging or assigning the Loan Documents, including the Collateral, to any
Federal Reserve Bank in accordance with applicable law.
9.6. Counterparts; Construction; Gender. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original and all of which when taken together shall constitute but one
and the same instrument. Any telecopied version of a signature shall be deemed a
manually executed and delivered original. This Agreement shall be construed
without any presumption that it be construed against the party causing it to be
drafted. All references in this Agreement or any of the other Loan Documents to
the masculine, feminine or neuter gender shall include all such genders unless
the context clearly indicates otherwise. Each representation, warranty, covenant
and agreement set forth in any
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Loan Document shall be construed independently. The parties acknowledge that a
Default or an Event of Default shall be deemed continuing until cured, as
determined by Lender in accordance with this Agreement or any other Loan
Document.
9.7. Powers. All powers of attorney granted to the Lender are
coupled with an interest and are irrevocable until all indebtedness is
irrevocably paid in full and Lender has no further obligations hereunder.
9.8. Approvals. If this Agreement calls for the approval or
consent of the Lender, such approval or consent may be given or withheld in the
sole credit judgment of the Lender.
9.9. Indemnification of the Lender. From and at all times after
the date of this Agreement, and in addition to all of the Lender's other rights
and remedies against the Borrower, the Borrower agrees to hold the Lender
harmless from, and to indemnify the Lender against, all losses, damages, costs
and expenses (including, but not limited to, reasonable attorneys' and
paralegals' fees, costs and expenses) incurred or paid by the Lender, whether
direct, indirect or consequential, as a result of or arising from or relating to
any suit, action or proceeding by any Person, whether threatened or initiated,
asserting a claim for any legal or equitable remedy against any Person under any
statute or regulation, including, but not limited to, any federal or state
securities or tax laws, or under any common law or equitable cause or otherwise,
arising from or in connection with the negotiation, preparation, execution or
performance of, or the financing transactions contemplated by, this Agreement
and the other Loan Documents or the Lender's furnishing of funds to the Borrower
pursuant to this Agreement; provided, however, that the foregoing
indemnification shall not protect the Lender from loss, damage, cost or expense
directly attributable to the Lender's willful misconduct or gross negligence.
All of the foregoing losses, damages, costs and expenses of the Lender shall be
payable by the Borrower upon demand by the Lender, as the case may be, and shall
be additional Indebtedness hereunder secured by the Collateral.
9.10. Waivers by the Borrower. Except as otherwise provided for
in this Agreement, the Borrower waives (a) presentment, demand and protest and
notice of presentment, protest, non-payment, maturity and all other notices; (b)
notice prior to taking possession or control of the Collateral or any bond or
security which might be required by any court prior to allowing the Lender to
exercise any of its remedies; and (c) the benefit of all valuation, appraisement
and exemption laws. The Borrower consents to all extensions of time, renewals
and postponements of time of payment with respect to any Loan Document from time
to time prior to or after the end of the Term or any Default or Event of
Default, without notice, consent or consideration to any of the foregoing.
9.11. Lawful Charges; Late Charge. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to the
Loans, together with all fees, charges and other amounts which are treated as
interest on the Loans under applicable law (collectively the "Charges"), shall
exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for,
charged, taken, received or reserved by the Lender in accordance with applicable
law, the rate of interest payable in respect of the Loans, together with all
Charges payable in respect thereof, shall be limited to the Maximum Rate, and,
to the extent lawful, the interest and Charges that would have been payable in
respect of the Loans but were not payable as a result of the operation of these
provisions shall be cumulated and the interest and Charges payable to the Lender
in respect of other Indebtedness or periods shall be increased (but not above
the Maximum Rate therefor) until such cumulated amount, together with interest
thereon at the Adjusted LIBOR Market Index Rate to the date of repayment, shall
have been received by the Lender. A late charge of five percent of any payment
required hereunder shall be imposed on each and every payment, including the
final payment due hereunder, not received by the Lender within 10 days after it
is due. The late charge is not a penalty, but liquidated damages to defray
administrative and related expenses due to such late payment. The late charge
shall be immediately due and payable and shall be paid by the Borrower to the
Lender without notice or demand. This provision for a late charge is not and
shall not be deemed a grace period, and Lender has no obligation to accept a
late payment. Further, the acceptance of a late payment shall not constitute a
waiver of any Default or other default then existing or thereafter arising under
any Loan Document.
9.12. Amendment. This Agreement and the other Loan Documents
cannot be amended, changed, discharged or terminated orally, but only by an
instrument in writing signed by the Lender and the Borrower.
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9.13. Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall endeavor
in good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
9.14. Entire Agreement. This Agreement and the other documents,
certificates and instruments referred to herein constitute the entire agreement
between the parties and supersede and rescind any prior agreements relating to
the subject matter hereof. In the event of any conflict between the terms of any
other Loan Document and the terms of this Agreement, the terms of this Agreement
shall govern.
9.15. Separate Legal Counsel. Each Borrower and each Guarantor
has been represented by its own legal counsel (and not that of the Lender) in
connection with the negotiation and documentation of the Loan Documents.
9.16. Right of Setoff. If an Event of Default shall have
occurred and be continuing, the Lender is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by the Lender to or for
the credit or the account of the Borrower against any of and all the obligations
of the Borrower now or hereafter existing under this Agreement and other Loan
Documents, irrespective of whether or not the Lender shall have made any demand
under this Agreement or such other Loan Documents and although such obligations
may be unmatured. The rights of the Lender under this Section 9.16 are in
addition to other rights and remedies (including other rights of setoff) which
the Lender may have.
9.17. Arbitration; Preservation and Limitation of Remedies.
Upon demand of any party hereto, whether made before or after institution of any
judicial proceeding, any dispute, claim or controversy arising out of, connected
with or relating to this Agreement or any other Loan Documents ("Disputes")
between parties to this Agreement shall be resolved by binding arbitration as
provided herein. Institution of a judicial proceeding by a party does not waive
the right of that party to demand arbitration hereunder. Disputes may include,
without limitation, tort claims, counterclaims, disputes as to whether a matter
is subject to arbitration, claims brought as class actions, claims arising from
Loan Documents executed in the future, or claims arising out of or connected
with the transaction reflected by this Agreement. Arbitration shall be conducted
under and governed by the Commercial Financial Disputes Arbitration Rules (the
"Arbitration Rules") of the American Arbitration Association (the "AAA") and
Title 9 of the U.S. Code. All arbitration hearings shall be conducted in the
city in which the office of Lender first stated above is located. The expedited
procedures set forth in Rules 51 et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000. All applicable statutes of
limitation shall apply to any Dispute. A judgment upon the award may be entered
in any court having jurisdiction. The panel from which all arbitrators are
selected shall be comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general jurisdiction, state or federal, of the state where the hearing will
be conducted or if such person is not available to serve, the single arbitrator
may be a licensed attorney. Notwithstanding the foregoing, this arbitration
provision does not apply to disputes under or related to the Interest Rate Swap
Agreement. Notwithstanding the preceding binding arbitration provisions, the
parties agree to preserve, without diminution, certain remedies that any party
hereto may employ or exercise freely, independently or in connection with an
arbitration proceeding or after an arbitration action is brought. The parties
shall have the right to proceed in any court of proper jurisdiction or by self-
help to exercise or prosecute the following remedies, as applicable: (i) all
rights to foreclose against any real or personal property or other security by
exercising a power of sale granted under Loan Documents or under applicable law
or by judicial foreclosure and sale, including a proceeding to confirm the sale;
(ii) all rights of self-help including peaceful occupation of real property and
collection of rents, set-off, and peaceful possession of personal property;
(iii) obtaining provisional or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment, appointment of receiver and filing an
involuntary bankruptcy proceeding; and (iv) when applicable, a judgment by
confession of judgment. Preservation of these remedies does not limit the power
of an arbitrator to grant similar remedies that may be requested by a party in a
Dispute. The parties agree that they shall not have a
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remedy of punitive or exemplary damages against the other in any Dispute and
hereby waive any right or claim to punitive or exemplary damages they have now
or which may arise in the future in connection with any Dispute whether the
Dispute is resolved by arbitration or judicially.
9.18. Governing Law; Jurisdiction and Venue; Waiver of Jury
Trial. SUBJECT TO THE TERMS OF SECTION 9.17, THIS AGREEMENT SHALL BE
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF
THE STATE OF FLORIDA. SUBJECT TO THE TERMS OF SECTION 9.17, AS PART OF THE
CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, THE BORROWER HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN DADE COUNTY, STATE
OF FLORIDA, AND CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY REGISTERED OR
CERTIFIED MAIL DIRECTED TO THE BORROWER AT THE ADDRESS STATED IN SECTION 9.4 AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL
RECEIPT THEREOF OR THREE DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER
POSTAGE PREPAID. SUBJECT TO THE TERMS OF SECTION 9.17, EACH OF THE BORROWER AND
THE LENDER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY
SUIT OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS. SUBJECT TO THE TERMS OF SECTION 9.17, THE BORROWER WAIVES ANY
OBJECTION WHICH THE BORROWER MAY HAVE BASED ON LACK OF JURISDICTION OR IMPROPER
VENUE OR FORUM NON CONVENIENS TO ANY SUIT OR PROCEEDING INSTITUTED BY THE LENDER
UNDER THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN ANY STATE OR FEDERAL COURT
LOCATED WITHIN DADE COUNTY, FLORIDA AND CONSENTS TO THE GRANTING OF SUCH LEGAL
OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. SUBJECT TO THE TERMS
OF SECTION 9.17, NOTHING IN THIS SECTION 9.18 SHALL AFFECT THE RIGHT OF THE
LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE
RIGHT OF THE LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR
ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH HAS JURISDICTION OVER
THE BORROWER OR ITS PROPERTY. SUBJECT TO THE TERMS OF SECTION 9.17, THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER TO ENTER INTO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS, MAKE THE LOANS AND EXTEND THE OTHER FINANCIAL
ACCOMMODATIONS CONTEMPLATED HEREUNDER AND THEREUNDER.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
STEINER-ATLANTIC CORP.
By: /s/ Michael Steiner
--------------------------------
Name: Michael Steiner
Title: President
FIRST UNION NATIONAL BANK,
a national banking association
By: /s/ Kathryn McDonald
-------------------------------
Name: Kathryn McDonald
Title: SVP
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INDEX OF SCHEDULES
Schedule 1.1 Permitted Liens
Schedule 2.8 Affiliates' Assets
Schedule 2.9 Locations
Schedule 2.17 Environmental Compliance
Schedule 5.14 Affiliated Transactions
INDEX OF EXHIBITS
Exhibit A Borrowing Base Certificate
Exhibit B Advance Request
Exhibit C Term Note
Exhibit D Revolving Credit Note
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SCHEDULE 2.9
Any location other than those described below, as to which: (i)
Borrower has given Lender 30 days' prior written notice; (ii) all acts
have been taken (including, but not limited to, the filing of financing
statements and the execution and delivery to Lender of landlords' or
mortgagees' waivers in form and substance reasonably acceptable to
Lender) to ensure Lender's continued first priority security interest
in all Collateral located at such location; and (iii) Borrower and
Metro-Tel shall have executed all such documents and agreements as
Lender shall have reasonably requested to effectuate clause (ii),
above.
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EXHIBIT 4.2(b)
GUARANTY AND SECURITY AGREEMENT
THIS GUARANTY AND SECURITY AGREEMENT is dated as of November
2, 1998, from Metro-Tel Corp., a Delaware corporation (the "Guarantor"), in
favor of First Union National Bank, a national banking association (the
"Lender").
W I T N E S S E T H:
WHEREAS, Steiner-Atlantic Corp., a Florida corporation (the
"Borrower"), and Lender have entered into a Loan and Security Agreement dated as
of the date hereof (as at any time amended, modified or supplemented, the "Loan
Agreement").
WHEREAS, Borrower is a wholly-owned subsidiary of Guarantor
and Guarantor will derive direct and indirect economic benefits from the
financings to be made by Lender pursuant to the Loan Agreement.
WHEREAS, in connection with the making of the Loans under the
Loan Agreement and as a condition precedent thereto, Lender is requiring that
Guarantor shall have executed and delivered this Guaranty.
NOW, THEREFORE, in consideration of the premises and the
covenants, agreements, terms and conditions contained herein, the parties hereto
hereby agree as follows:
SECTION 1 DEFINITIONS.
1.1 Defined Terms. For purposes of this Guaranty, in addition to (i)
the terms defined in the Loan Agreement, which shall be used herein as defined
therein if not separately defined herein, and (ii) the terms defined elsewhere
in this Guaranty, the following terms shall have the meanings set forth below
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Guaranty" or "this Guaranty" shall include all amendments,
modifications and supplements hereto and restatements hereof and shall refer to
this Guaranty and Security Agreement as the same may be in effect at the time
such reference becomes operative.
1.2 Terms. All other terms contained in this Guaranty shall, when the
context so indicates, have the meanings provided for by the Code to the extent
the same are used or defined therein.
SECTION 2 THE GUARANTY
2.1 Guaranty of Indebtedness of Borrower. The Guarantor hereby
unconditionally guarantees to Lender, and its successors, endorsees, transferees
and assigns, the prompt payment (whether at stated maturity, by acceleration or
otherwise) and performance of the Indebtedness. Guarantor agrees that this
Guaranty is a guaranty of payment and performance and not of collection, and
that its obligations under this Guaranty shall be primary, absolute and
unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability or
any future amendment of, or change in this Guaranty, the Loan
Agreement, any other Loan Document or any other agreement, document or
instrument to which Borrower and/or Guarantor is or are or may become a
party;
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(b) the absence of any action to enforce this Guaranty, the
Loan Agreement or any other Loan Document or the waiver or consent by
Lender with respect to any of the provisions thereof;
(c) the existence, value or condition of, or failure to
perfect its Lien against, any security for the Indebtedness or any
action, or the absence of any action, by Lender in respect thereof
(including, without limitation, the release of any such security); or
(d) any other action or circumstances which might otherwise
constitute a legal or equitable dis charge or defense of a surety or
guarantor;
it being agreed by Guarantor that its obligations under this Guaranty shall not
be discharged until the payment and performance and discharge in full, of the
Indebtedness. Guarantor shall be regarded, and shall be in the same posi tion,
as principal debtor with respect to the Indebtedness. Guarantor expressly waives
all rights it may have now or in the future under any statute, or at common law,
or at law or in equity, or otherwise, to compel Lender to proceed in respect of
the Indebtedness against Borrower or any other party or against any security for
the payment and perfor mance of the Indebtedness before proceeding against, or
as a condition to proceeding against, Guarantor. Guarantor agrees that any
notice or directive given at any time to Lender which is inconsistent with the
waiver in the immediately preceding sentence shall be null and void and may be
ignored by Lender, and, in addition, may not be pleaded or introduced as
evidence in any litigation relating to this Guaranty for the reason that such
pleading or intro duction would be at variance with the written terms of this
Guaranty, unless Lender has specifically agreed otherwise in writing. It is
agreed between Guarantor and Lender that the foregoing waivers are of the
essence of the transaction contemplated by the Loan Documents and that, but for
this Guaranty and such waivers, Lender would decline to make the Loans under the
Loan Agreement.
2.2 Demand by Lender. In addition to the terms of the Guaranty set
forth in section 2.1 hereof, and in no manner imposing any limitation on such
terms, it is expressly understood and agreed that, if the then outstanding
principal amount of the Indebtedness (together with all accrued interest
thereon) is declared to be, or otherwise becomes, immediately due and payable,
then, Guarantor shall, upon demand in writing therefor by Lender to Guarantor,
pay to Lender in immediately available federal funds the entire outstanding
Indebtedness due and owing to holder or holders of the Indebtedness. Such
payment by Guarantor shall be credited and applied upon the Indebtedness to an
account designated by Lender or at the address set forth herein for the giving
of notice to Lender or at any other address that may be specified in writing
from time to time by Lender.
2.3 Enforcement of Guaranty. In no event shall Lender have any
obligation (although Lender is entitled, at its option) to proceed against
Borrower or any other Person or any real or personal property pledged to secure
the Indebtedness before seeking satisfaction from Guarantor, and Lender may
proceed, prior or subsequent to, or simul taneously with, the enforcement of
Lender's rights hereunder, to exercise any right or remedy which it may have
against any property as a result of any Lien it may have as security for all or
any portion of the Indebtedness.
2.4 Waiver. In addition to the waivers contained in section 2.1 hereof,
Guarantor waives, and agrees that it shall not at any time insist upon, plead or
in any manner whatever claim or take the benefit or advantage of, any appraisal,
valuation, stay, extension, marshalling of assets or redemption laws, or
exemption, whether now or at any time hereafter in force, which may delay,
prevent or otherwise affect the performance by Guarantor of its obligations
under, or the enforcement by Lender of, this Guaranty. Guarantor hereby waives
diligence, presentment and demand (whether for non-payment or protest or of
acceptance, maturity, extension of time, change in nature or form of the
Indebtedness, acceptance of further security, release of further security,
composition or agreement arrived at as to the amount of, or the terms of, the
Indebtedness, notice of adverse change in Borrower's financial condition or any
other fact which might materially increase the risk to Guarantor) with respect
to any of the Indebtedness or all other demands whatsoever and waives the
benefit of all provisions of law which are or might be in conflict with the
terms of this Guaranty. Guarantor represents, warrants and agrees that, as of
the date of this Guaranty, its obligations under this Guaranty are not subject
to any offsets or defenses against Lender or Borrower
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of any kind. Guarantor further agrees that its obligations under this Guaranty
shall not be subject to any counter claims, offsets or defenses against Lender
or Borrower of any kind which may arise in the future.
2.5 Benefit of Guaranty. The provisions of this Guaranty are for the
benefit of Lender and its succes sors, transferees, endorsees and assigns, and
nothing herein contained shall impair, as between Borrower, on the one hand, and
Lender, on the other hand, the obligations of Borrower under the Loan Agreement.
In the event all or any part of the Indebtedness is transferred, endorsed or
assigned by Lender to any Person or Persons, any reference to "Lender" herein
shall be deemed to refer equally to such Person or Persons.
2.6 Modification of Loans, Etc. If Lender shall at any time or from
time to time, with or without the consent of, or notice to, Guarantor:
(a) change or extend the manner, place or terms of payment of,
or renew or alter all or any portion of, the Indebtedness;
(b) take any action under or in respect of any of the Loan
Documents in the exercise of any remedy, power or privilege contained
therein or available to it at law, equity or otherwise, or waive or
refrain from exercising any such remedies, powers or privileges;
(c) amend, modify or restate in any manner whatsoever, any of
the Loan Documents;
(d) extend or waive the time for Guarantor's, Borrower's or
other Person's performance of, or compliance with, any term, covenant
or agreement on its part to be performed or observed under any of the
Loan Documents, or waive such performance or compliance or consent to a
failure of, or departure from, such performance or compliance;
(e) take and hold any additional security or collateral for
the payment of the Indebtedness guaranteed hereby or sell, exchange,
release, dispose of, or otherwise deal with, any property pledged,
mortgaged or conveyed, or in which Lender has been granted a Lien, to
secure any indebtedness of Guarantor or Borrower to Lender;
(f) release anyone who may be liable in any manner for the
payment of any amounts owed by Guarantor or Borrower to Lender;
(g) modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors of
Guarantor or Borrower are subordinated to the claims of Lender; and/or
(h) apply any sums by whomever paid or however realized to any
amounts owing by Guarantor or Borrower to Lender in such manner as
Lender shall determine in its sole discretion;
then Lender shall not incur any liability to Guarantor pursuant hereto as a
result thereof, and no such action shall impair or release the obligations of
Guarantor under this Guaranty.
2.7 Reinstatement. This Guaranty shall remain in full force and effect
and continue to be effective in the event that any petition is filed by or
against Borrower or Guarantor for liquidation or reorganization, in the event
that Borrower or Guarantor becomes insolvent or makes an assignment for the
benefit of creditors or in the event that a receiver or trustee is appointed for
all or any significant part of Borrower's, or Guarantor's assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Indebtedness, or any part thereof, is, pursuant
to applicable law, rescinded or reduced in amount, or must otherwise be restored
or returned by Lender, whether as a "voidable preference", "fraudulent
conveyance", or otherwise, all as though such payment or performance had not
been made. In the event that any payment, or any part thereof, is
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rescinded, reduced, restored or returned, the Indebtedness shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
2.8 Waiver of Subrogation, Etc.
(a) If, pursuant to applicable law, Guarantor, by payment or
otherwise, becomes subrogated to all or any of the rights of Lender under any of
the Loan Documents, the rights of Lender to which Guarantor shall be subrogated
shall be accepted by Guarantor "as is" and without any representation or
warranty of any kind by Lender, express or implied, with respect to the
legality, value, validity or enforceability of any of such rights, or the
existence, availability, value, merchantability or fitness for any particular
purpose of any Collateral and shall be without recourse to Lender.
(b) If Lender, under applicable law, proceeds to realize its
benefits under any of the Loan Documents giving Lender a Lien upon any
Collateral, whether owned by Borrower, Guarantor or by any other Person, either
by judicial foreclosure or by non-judicial sale or enforcement, Lender may, at
its sole option, determine which of its remedies or rights it may pursue without
affecting any of its rights and remedies under this Guaranty. If, in the
exercise of any of its rights and remedies, Lender forfeits any of its rights or
remedies, including its right to enter a deficiency judgment against Borrower or
any other Person, whether because of any applicable laws pertaining to "election
of remedies" or the like, Guarantor hereby consents to such action by Lender and
waives any claim based upon such action, even if such action by Lender shall
result in a full or partial loss of any rights of subrogation which Guarantor
might otherwise have had but for such action by Lender. Any election of remedies
which results in the denial or impairment of the right of Lender to seek a
deficiency judgment against Borrower shall not impair Guarantor's obligation to
pay the full amount of the Indebtedness. In the event that Lender bids at any
foreclosure or trustee's sale or at any private sale permitted by law or any of
the Loan Documents, Lender may bid all or less than the amount of the
Indebtedness and the amount of such bid need not be paid by Lender but shall be
credited against the Indebtedness. The amount of the successful bid at any such
sale, whether Lender or any other party is the successful bidder, shall be
conclusively deemed to be the fair market value of the subject collateral and
the difference between such bid amount and the remaining balance of the
Indebtedness shall be conclusively deemed to be the amount of the Indebtedness
guaranteed under this Guaranty, notwithstanding that any present or future law
or court decision or ruling may have the effect of reducing the amount of any
deficiency claim to which Lender might otherwise be entitled but for such
bidding at any such sale.
2.9 Continuing Guaranty. Guarantor agrees that this Guaranty is a
continuing guaranty and shall remain in full force and effect until the payment
and performance in full of the Indebtedness; provided, however, that if any sums
paid to and applied by Lender toward the Indebtedness are thereafter required to
be repaid to Borrower or to any Affiliate, or to any trustee, receiver or other
person, by reason of the application of the Bankruptcy Code, the Uniform
Fraudulent Transfer Act or any other law relating to creditors' rights
generally, then this Guaranty shall be reinstated, ab initio, as if such portion
of the Indebtedness had never been paid.
SECTION 3 SECURITY FOR THE OBLIGATIONS.
3.1 Security Interest in the Metro-Tel Collateral. To secure the
payment and performance of any and all of the Indebtedness and the performance
of all obligations and covenants of Guarantor hereunder and under the other Loan
Documents, absolute or contingent, now existing or hereafter arising, which are
now, or may at any time or times hereafter be owing by Guarantor to Lender,
Guarantor hereby pledges to Lender and gives and grants Lender a continuing and
general security interest in and Lien upon and right of set-off against, all
right, title and interest of Guarantor in and to all of the Metro-Tel Collateral
whether now owned or hereafter acquired by Guarantor; provided, however, that
notwithstanding anything to the contrary set forth herein, none of Guarantor's
obligations hereunder shall be secured by real property.
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3.2 Disclosure of Security Interest. Guarantor shall make appropriate
entries upon its financial statements and its books and records disclosing
Lender's Liens and security interests in all of the Metro-Tel Collateral.
3.3 Supplemental Documentation. At Lender's request, Guarantor shall
cause the execution and delivery to Lender, in form and substance satisfactory
to Lender, of all such agreements, documents, financing statements and other
writings requested by Lender to perfect and maintain the perfection and priority
of its security interests in and Liens on the Metro-Tel Collateral and to
consummate the other transactions contemplated hereby, and Guarantor shall pay
all filing fees and documentary stamp, intangible and similar taxes in
connection therewith. Guarantor irrevocably designates Lender as its
attorney-in-fact to effectuate the foregoing.
3.4 Inspection. Guarantor hereby irrevocably consents to any reasonable
act by Lender or its agents in entering upon any premises during normal business
hours for the purposes of either (i) inspecting the Collateral and making
extracts from and copies of any books and records relating thereto or (ii)
taking possession of the Collateral at any time following the occurrence of an
Event of Default; and Guarantor hereby waives its right to assert against Lender
or its agents any claim based upon trespass or any similar cause of action for
entering upon any premises where the Collateral may be located. Guarantor
irrevocably consents to Lender's requesting information pertaining to Guarantor
from any Person and to Lender's verifying such or any other information
pertaining to Guarantor, including, but not limited to the amount, quality,
existence, quantity, value and condition of any Account of Metro- Tel or any
other Collateral.
3.5 Cross-Collateralization. All collateral which Lender may at any
time acquire from any other source as security for the payment of any
Indebtedness shall constitute cross-collateral for all Indebtedness without
apportionment or designation as to particular Indebtedness, and all Indebtedness
shall be secured by all such collateral; and Lender shall have the right, in its
sole discretion, to determine the order in which its rights in or remedies
against such collateral are to be exercised and which types or portions of the
collateral are to be proceeded against and the order of application of proceeds
of collateral against particular Indebtedness.
3.6 Collections; Lender's Right to Notify Account Debtors and to
Endorse Guarantor's Name. Guarantor hereby authorizes Lender (a) upon the
occurrence and during the continuation of a Default or an Event of Default, to
open Guarantor's mail and collect any and all amounts due to Guarantor from
Account Debtors; (b) after the occurrence of a Default or an Event of Default,
notify any or all Account Debtors that the Accounts have been assigned to Lender
and that Lender has a security interest therein; and (c) after the occurrence of
a Default or an Event of Default, direct such Account Debtors to make all
payments due from them to Guarantor upon the Accounts directly to Lender or to a
lock box designated by Lender. Lender shall promptly furnish Guarantor with a
copy of any such notice sent and Guarantor hereby agrees that any such notice
may be sent on Guarantor's stationery, in which event Guarantor shall co-sign
such notice with Lender. Guarantor irrevocably makes, constitutes and appoints
Lender (and all Persons designated by Lender for that purpose) as Guarantor's
true and lawful attorney (and agent-in-fact) to endorse Guarantor's name on any
checks, notes, drafts or any other payment relating to and/or proceeds of the
Collateral which come into either Lender's possession or control.
3.7 Preservation of Rights in Collateral. Except as herein or by
applicable law otherwise expressly provided, Lender shall not be obligated to
exercise any degree of care in connection with any Collateral, to take any steps
necessary to preserve any rights in any of the Collateral or to preserve any
rights therein against prior parties. No segregation or specific allocation by
Lender of specified items of Collateral against any liability of Guarantor shall
waive or affect any Lien against other items of Collateral or any of Lender's
options, powers or rights under this Guaranty or otherwise arising.
3.8 Other Rights. Guarantor authorizes Lender without affecting either
Guarantor's or Lender's obligations hereunder or under any other Loan Document
from time to time to take from any party and hold additional collateral or
guaranties for the payment of the Indebtedness or any part thereof, and to
exchange, enforce,
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substitute or release such collateral or guaranty of payment of the Indebtedness
or any part thereof and to release or substitute any endorser or guarantor or
any party who has given any Lien on any collateral as security for the payment
of the Indebtedness or any part thereof or any party in any way obligated to pay
the Indebtedness or any part thereof.
3.9 Tangible Collateral; Inventory. No Inventory, Equipment or other
tangible collateral shall be commingled with, or become an accession to or part
of, any property of any other Person so long as such property is Collateral. No
tangible Collateral is or shall be allowed to become a fixture. No tangible
Collateral shall be stored with any warehouseman, bailee or similar party.
3.10 Lender's Payment of Claims Asserted Against the Collateral. In the
event a Lien, other than a Permitted Lien, is asserted by any Person against the
Collateral and if Lender has given Guarantor five days' prior written notice and
Guarantor has failed to either (i) satisfy the Lien or (ii) cause the Lien to be
transferred to a bond acceptable to Lender, then Lender may at any time after
such five-day period in its discretion without waiving or releasing any
obligation, liability or duty of Guarantor under this Guaranty, the other Loan
Documents or any Default or Event of Default, pay, acquire and/or accept an
assignment of such Lien. All sums paid by Lender in respect thereof and all
reasonable costs, fees and expenses, including, without limitation, reasonable
attorneys' fees, court costs, expenses and other charges relating thereto, which
are incurred by Lender on account thereof, shall be payable, upon demand, by
Guarantor to Lender and shall be additional Indebtedness hereunder secured by
the Collateral.
SECTION 4 COVENANTS OF GUARANTOR.
Guarantor covenants and agrees that from the date hereof and until
payment in full of the Indebtedness unless Lender shall otherwise consent in
writing, Guarantor:
4.1 Compliance with Loan Documents. Shall, and shall cause Borrower to,
comply with all terms, conditions, covenants and agreements set forth in the
Loan Documents.
4.2 Insurance. Shall, and shall cause Borrower to, maintain and pay for
insurance upon all Collateral, wherever located, and otherwise covering
casualty, hazard, workers' compensation, business interruption, public liability
and such other risks (as is customary in the businesses in which Borrower and
Guarantor are engaged) and in such amounts and with such insurance companies as
shall be reasonably satisfactory to Lender and in compliance with law. Borrower
and Metro-Tel shall deliver such certificates of insurance to Lender with loss
payable endorsements naming Lender as loss payee thereunder in form reasonably
satisfactory to Lender. Guarantor also agrees to, and to cause Borrower to,
maintain and pay for insurance in such amount, with such companies and in such
form as shall be reasonably satisfactory to Lender insuring Borrower and
Guarantor against any claims, suits, loss or damages suffered by any Person on
any property owned or leased by Borrower and Guarantor and against such other
casualties and contingencies as is customary in the business in which Borrower
or Guarantor is engaged, and deliver such certificates of insurance to Lender
with satisfactory endorsements naming Lender as additional insured thereunder.
Each policy of insurance shall contain a clause requiring the insurer to give
not less than thirty (30) days' prior written notice to Lender before any
cancellation of the policies for any reason whatsoever and a clause that the
interest of Lender shall not be impaired or invalidated by any act or neglect of
Borrower or Guarantor or the owner of the property nor by the occupation of the
premises wherein such property is located for purposes more hazardous than are
permitted by said policy. Guarantor hereby directs all insurers under such
policies of insurance on the Collateral to pay all proceeds payable thereunder
directly to Lender following an Event of Default. Guarantor hereby irrevocably
makes, constitutes and appoints Lender (and all officers, employees or agents
designated by Lender) as Guarantor's true and lawful attorney (and
agent-in-fact) for the purpose of making, settling and adjusting claims under
such policies of insurance, endorsing the name of Guarantor on any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect to such
policies of insurance; provided, however, that such power shall not be used
until after the occurrence of and during
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the continuation of an Event of Default. Prior to the occurrence of an Event of
Default, neither Borrower nor Guarantor will make, settle or adjust any material
claim without the prior written consent of Lender, which consent will not be
unreasonably withheld. If Guarantor fails to obtain and maintain any of the
policies of insurance or to pay any premium in whole or in part, then Lender
may, at Guarantor's expense, without waiving or releasing any obligation or
default, procure the same, but shall not be required to do so. All sums so
disbursed by Lender, including attorneys' fees, court costs, expenses and other
charges related thereto, shall be payable on demand by Guarantor to Lender and
shall be additional Indebtedness hereunder secured by the Collateral.
4.3 Liens. Shall not create or permit to exist any Liens on any of the
Metro-Tel Collateral or its other assets, except Permitted Liens.
SECTION 5 EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
(a) Guarantor fails to pay any portion of the Indebtedness
when due and payable or declared due and payable, or fails to remit or deposit
items or funds as required by the terms of this Guaranty; or
(b) Guarantor fails or neglects to observe, perform or comply
with any other term, provision, condition, covenant, warranty or representation
contained in this Guaranty, or the other Loan Documents or in any other
agreement now existing or hereafter executed evidencing, securing or relating in
any way to the Indebtedness or the obligations of Guarantor hereunder, which is
required to be observed, performed or complied with by Guarantor, in any such
instance after the passage of any applicable grace period; or
(c) A Default or an Event of Default (as such term is defined
in the Loan Agreement) shall occur.
SECTION 6 RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT.
6.1 Rights and Remedies. Upon and after the occurrence of any Event of
Default, Lender shall have, in addition to all other rights and remedies which
Lender may have under this Guaranty, the other Loan Documents, and applicable
law, the following rights and remedies, all of which may be exercised with or
without further notice to Guarantor: (a) all of the rights and remedies of a
secured party under the Code and applicable law; (b) to foreclose the Liens
created under this Guaranty and the other Loan Documents or under any other
agreement relating to the Collateral, by any available judicial procedure or
without judicial process; (c) to enter any premises where the Collateral may be
located, through self-help and without judicial process, without first obtaining
a final judgment or giving Guarantor notice and opportunity for a hearing on the
validity of Lender's claim, for the purpose of taking possession or removing the
same, or require Guarantor to assemble the Collateral and make it available to
Lender at a place to be designated by Lender; and/or (d) to sell, assign, lease,
or otherwise dispose of the Collateral or any part thereof, either at public or
private sale, in lots or in bulk, for cash, on credit or otherwise, with or
without representation or warranties, and upon such terms as shall be acceptable
to Lender, in its sole discretion, and Lender may bid or become the purchaser at
any such public sale, free from any right of redemption which is hereby
expressly waived by Guarantor, and Lender shall have the option to apply or be
credited with the amount of all or any part of the Indebtedness owing to Lender
against the purchase price bid by Lender at any such sale. Lender may, if it
deems it reasonable, postpone or adjourn any sale of the Collateral from time to
time by an announcement at the time and place of such postponed or adjourned
sale, without being required to give a new notice of sale. Guarantor agrees that
Lender has no obligation to preserve rights to the Collateral against prior
Persons or to marshall any Collateral for the benefit of any Person. Lender is
hereby granted a license or other right to use, without charge, Guarantor's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, and
-7-
<PAGE>
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling any
Collateral and Guarantor's rights under all licenses and franchise agreements
shall inure to Lender's benefit. In addition, Guarantor agrees that in the event
notice is necessary under applicable law, written notice mailed to Guarantor in
the manner specified herein five (5) days prior to the date of public sale of
any of the Collateral or prior to the date after which any private sale or other
disposition of the Collateral will be made shall constitute commercially
reasonable notice to Guarantor. Upon the occurrence of an Event of Default,
Lender shall also have the right to seek the appointment of a receiver to take
possession of and operate and dispose of Guarantor's assets. Lender may, at any
time during the continuance of an Event of Default, and at Guarantor's expense,
employ and maintain custodians at Guarantor's premises who shall have full
authority to protect Lender's interests. Upon the occurrence and during the
continuation of an Event of Default, Guarantor authorizes Lender to collect and
set-off and apply against the Indebtedness when due any cash or deposit accounts
in its possession, and any refund of insurance premiums or any insurance
proceeds payable on account of the loss or damage to any of the Collateral and
irrevocably appoints Lender as its attorney-in-fact to endorse any check or
draft or take other action necessary to obtain such funds. All or any part of
the Collateral may be liquidated and sold by Lender for failure of Guarantor to
pay any of the Indebtedness, regardless of whether any of the Loans have been
accelerated or whether the Interest Rate Swap Agreement has been terminated
early. Notwithstanding anything to the contrary set forth herein, Collateral may
be liquidated upon Borrower's failure to pay any Indebtedness on a timely basis,
whether or not any acceleration has occurred or the Interest Rate Swap Agreement
has been terminated early.
6.2 Application of Proceeds. After an Event of Default, the net cash
proceeds resulting from the collection, liquidation, sale, lease or other
disposition of the Collateral shall be applied first to the expenses (including
all reasonable attorneys' fees) of retaking, holding, storing, processing and
preparing for sale, selling, collecting, liquidating and the like, and then to
the satisfaction of all Indebtedness, application as to particular Indebtedness
or against principal or interest to be in Lender's absolute discretion. With
limiting the generality of any other provision herein, Guarantor shall be liable
to Lender and shall pay to Lender on demand any deficiency which may remain
after such sale, disposition, collection or liquidation of the Collateral. With
limiting the generality of any other provision herein, Lender shall forthwith
remit to Guarantor or the Person entitled thereto any surplus remaining after
all Indebtedness has been paid in full. If any of the Collateral shall require
repairs, maintenance, preparation or the like, or is in process or other
unfinished state, Lender shall have the right, but shall not be obligated, to
perform such repairs, maintenance, preparation, completion of manufacturing or
processing, for the purpose of putting the same in such saleable form as Lender
shall deem appropriate, but Lender shall have the right to sell or dispose of
the Collateral without any such repairs, maintenance, preparation, completion of
manufacturing or processing. Guarantor will, at Lender's request, assemble (as
soon as reasonably practicable) all the Collateral and make it available to
Lender at places which Lender may select, whether at premises of Guarantor or
elsewhere, and will make available to Lender all premises and facilities of
Guarantor for the purpose of Lender's taking possession of the Collateral or of
removing or putting the Collateral in saleable form.
6.3 Appointment of Lender as Guarantor's Lawful Attorney. Guarantor
hereby irrevocably designates, makes, constitutes and appoints Lender (and all
Persons designated by Lender) as Guarantor's true and lawful attorney (and
agent-in-fact) and Lender, or Lender's agent, may, upon and after the occurrence
of an Event of Default, without notice to Guarantor, and at such time or times
thereafter as Lender or said agent, in its sole discretion, may determine, in
Guarantor's or Lender's name: (i) demand payment of the Accounts; (ii) enforce
payment of the Accounts, by legal proceedings or otherwise; (iii) exercise all
of Guarantor's rights and remedies with respect to the collection of the
Accounts; (iv) settle, adjust, compromise, extend or renew the Accounts; (v)
settle, adjust or compromise any legal proceedings brought to collect the
Accounts; (vi) if permitted by applicable law, sell or assign the Accounts upon
such terms, for such amounts and at such time or times as Lender deems
advisable; (vii) discharge and release the Accounts; (viii) prepare, file and
sign Guarantor's name on a proof of claim in bankruptcy or similar document
against any Account Debtor; (ix) prepare, file and sign Guarantor's name on any
notice of Lien, assignment or satisfaction of Lien or similar document in
connection with the Accounts; (x) do all acts and things necessary, in Lender's
sole discretion, to fulfill Guarantor's obligations under this Guaranty; (xi)
endorse the name of Guarantor upon any chattel paper, document, instrument,
invoice, freight bill, bill of lading or similar document
-8-
<PAGE>
or agreement relating to the Accounts or Inventory; (xii) use Guarantor's
stationery and sign the name of Guarantor to verifications of the Accounts and
notices thereof to Account Debtors; (xiii) use the information recorded, other
than classified information, on or contained in any data processing equipment
and computer hardware and software relating to the Accounts and Inventory to
which Guarantor has access; (xiv) take control, in any manner, of any item of
payment or proceeds referred to in section 3.6 hereof; (xv) endorse the name of
Guarantor upon any item of payment or proceeds referred to in section 3.6 hereof
and deposit the same to the account of Lender on account of the Indebtedness;
and (xvi) endorse Guarantor's name upon any chattel paper, document, instrument,
invoice, freight bill, bill of lading or similar document or agreement relating
to the Accounts or Inventory. All acts of Lender or its designee, except
Lender's and its designees' acts of gross negligence or willful misconduct,
taken pursuant to this section 6.3 are hereby ratified and confirmed and Lender
or its designee shall not be liable for any acts of omission or commission nor
for any error of judgment or mistake of fact or law. This power, being coupled
with an interest, is irrevocable by Guarantor until all Indebtedness is paid in
full.
6.4 Rights and Remedies Cumulative; Non-Waiver; Etc. The enumeration of
Lender's rights and remedies set forth in this Guaranty is not intended to be
exhaustive and the exercise by Lender of any right or remedy shall not preclude
the exercise of any other rights or remedies, all of which shall be cumulative,
and shall be in addition to any other right or remedy given hereunder, under the
Loan Documents or under any other agreement between Guarantor and Lender or
which may now or hereafter exist in law or in equity or by suit or otherwise. No
delay or failure to take action on the part of Lender in exercising any right,
power or privilege shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between Guarantor and Lender or Lender's employees shall be effective to change,
modify or discharge any provision of this Guaranty or to constitute a waiver of
any Event of Default. Lender shall not, under any circumstances or in any event
whatsoever, have any liability for any error, omission or delay of any kind
occurring in the liquidation of the Collateral or for any damages resulting
therefrom except damages directly attributable to Lender's gross negligence or
willful misconduct.
SECTION 7 PAYMENT OF EXPENSES
Provided same shall not have previously been paid by Borrower,
Guarantor shall pay or reimburse Lender upon demand for all reasonable expenses
(including, without limitation, reasonable attorneys' and paralegals' expenses)
incurred or paid by Lender in connection with: (a) any litigation, contest,
dispute, suit, proceeding or action (whether instituted by Lender or Guarantor
or any other Person) in any way relating to the Collateral, this Guaranty or the
other Loan Documents, or Borrower's or Guarantor's business or affairs; (b) any
attempt to enforce any rights of Lender or any participant against Guarantor or
any other Person which may be obligated to Lender by virtue of this Guaranty or
the other Loan Documents, including without limitation, the Account Debtors; (c)
any attempt to inspect, verify, protect, collect, sell, liquidate or otherwise
dispose of the Collateral; (d) the filing and recording of all documents
required by Lender to perfect Lender's Liens in the Collateral, including
without limitation, any documentary stamp tax or any other taxes incurred
because of such filing or recording.
SECTION 8 MISCELLANEOUS.
8.1 Survival of Agreements. All agreements, covenants, representations
and warranties contained herein or made in writing by or on behalf of Guarantor
in connection with the transactions contemplated hereby shall survive the
execution and delivery of this Guaranty and the other Loan Documents and shall
continue in full force and effect so long as any Indebtedness is outstanding. No
termination or cancellation (regardless of cause or procedure) of this Guaranty
shall in any way affect or impair the powers, obligations, duties, rights and
liabilities of the parties hereto in any way with respect to (a) any transaction
or event occurring prior to such termination or cancellation, (b) the
Collateral, or (c) any of Guarantor's undertakings, agreements, covenants,
warranties and representations contained
-9-
<PAGE>
in this Guaranty and the other Loan Documents and all such undertakings,
agreements, covenants, warranties and representations shall survive such
termination or cancellation. Guarantor further agrees that to the extent that
Guarantor makes a payment or payments to Lender, which payment or payments or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy, insolvency or similar state or federal
law, common law or equitable cause, then, to the extent of such payment or
repayment, the Indebtedness or part thereof intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
received by Lender.
8.2 Notices. Any notice or other communication hereunder to any party
hereto shall be by hand delivery, facsimile transmission, nationally recognized
overnight courier for next business day delivery or registered or certified mail
and unless otherwise provided herein shall be deemed to have been received when
delivered personally or three days after deposit in such mail or with such
courier postage prepaid, addressed to the party at its address specified below
(or at any other address that the party may hereafter specify to the other
parties in writing):
Guarantor: Metro-Tel Corp.
290 N.E. 68th Street
Miami, Florida 33138
Facsimile: (305) 751-4903
With a copy to: Harold Berritt, Esq.
Greenberg Traurig
1221 Brickell Avenue
Miami, Florida 33131
Facsimile: (305) 579-0717
Lender: First Union National Bank
Portfolio Management Group
4299 N.W. 36th Street, 4th Floor
Miami Springs, Florida 33166
Facsimile: (305) 883-4198
With a copy to: Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A.
150 West Flagler Street, Suite 2200
Miami, Florida 33130
Attention: Carl D. Roston, Esq.
Facsimile: (305) 789-3395
8.3 Indemnification of Lender. From and at all times after the date of
this Guaranty, and in addition to all of Lender's other rights and remedies
against Guarantor, Guarantor agrees to hold Lender harmless from, and to
indemnify Lender against, all losses, damages, costs and expenses (including,
but not limited to, reasonable attorneys' and paralegals' fees, costs and
expenses) incurred by Lender from and after the date hereof, whether direct,
indirect or consequential, as a result of or arising from or relating to any
suit, action or proceeding by any Person, whether threatened or initiated,
asserting a claim for any legal or equitable remedy against any Person under any
statute or regulation, including, but not limited to, any federal or state
securities laws, or under any common law or equitable cause or otherwise,
arising from or in connection with the negotiation, preparation, execution or
performance of, this Guaranty and the other Loan Documents; provided, however,
that the foregoing indemnification shall not protect a Lender from loss, damage,
cost or expense directly attributable to such Lender's willful misconduct or
gross negligence. All of the foregoing losses, damages, costs and expenses of
Lender shall be payable by Guarantor upon demand by Lender, as the case may be,
and shall be additional Indebtedness hereunder secured by the Collateral.
-10-
<PAGE>
8.4 Assignment. This Guaranty shall be binding upon and shall inure to
the benefit of Guarantor and Lender, and their respective successors and
assigns; provided that Guarantor may not assign any of its rights or duties
hereunder without the prior written consent of Lender and any such assignment
made without such consent shall be void. Nothing in this Guaranty shall prohibit
or restrict Lender from pledging or assigning the Loan Documents, including the
Collateral, to any Federal Reserve Bank in accordance with applicable law.
8.5 Amendment. This Guaranty cannot be amended, changed, discharged or
terminated orally, but only by an instrument in writing signed by Lender and
Guarantor.
8.6 Severability. To the extent any provision of this Guaranty is
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Guaranty.
8.7 Entire Agreement. This Guaranty and the other documents,
certificates and instruments referred to herein constitute the entire agreement
between the parties and supersede and rescind any prior agreements relating to
the subject matter hereof; provided, however, that, notwithstanding the
foregoing, this Guaranty shall not be deemed to modify, supersede, rescind,
revoke or otherwise diminish the terms or conditions of any other guaranty or
similar arrangement executed by Guarantor in favor of Lender.
8.8 Binding Effect. All of the terms of this Guaranty and the other
Loan Documents, as the same may from time to time be amended, shall be binding
upon, inure to the benefit of and be enforceable by the respective successors
and assigns of Guarantor and Lender. This provision, however, shall not be
deemed to modify section 8.5.
8.9 Captions. The captions to the various sections and subsections of
this Guaranty have been inserted for convenience only and shall not limit or
affect any of the terms hereof.
8.10 Conflict of Terms. The provisions of the other Loan Documents and
any Schedule thereto are incorporated in this Guaranty by this reference
thereto. Except as otherwise provided in this Guaranty and except as otherwise
provided in the other Loan Documents, if any provision contained in this
Guaranty is in conflict with, or inconsistent with, any provision of the other
Loan Documents, the provision contained in this Guaranty shall control.
8.11 Injunctive Relief. Guarantor recognizes that in the event
Guarantor fails to perform, observe or discharge any of its obligations or
liabilities under this Guaranty, any remedy of law may prove to be inadequate
relief to Lender. Guarantor therefore agrees that Lender, if Lender so requests,
shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
8.12 Further Assurances. At any time, and from time to time, upon the
written request of Lender, and at the sole expense of Guarantor, Guarantor will
promptly and duly execute and deliver any and all such further instruments and
documents and take such further actions as Lender may reasonably deem desirable
to obtain the full benefits of this Guaranty. Guarantor also hereby authorizes
Lender to file any additional financing or continuation statements without the
signature of Guarantor to the extent permitted by law.
8.13 Separate Legal Counsel. Guarantor has been represented by its own
legal counsel (and not that of Lender) in connection with the negotiation and
documentation of the Loan Documents.
8.14 Counterparts; Construction; Gender. This Guaranty may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which when taken together shall constitute but one and the
same instrument. Any telecopied version of a signature shall be deemed a
manually executed and delivered original. This Guaranty shall
-11-
<PAGE>
be construed without any presumption that it be construed against the party
causing it to be drafted. All references in this Guaranty or any of the other
Loan Documents to the masculine, feminine or neuter gender shall include all
such genders unless the context clearly indicates otherwise. Each
representation, warranty, covenant and agreement set forth in any Loan Document
shall be construed independently. The parties acknowledge that a Default or an
Event of Default shall be deemed continuing until cured, as determined by
Lender, in accordance with the terms hereof and the other Loan Documents.
8.15 Powers. All powers of attorney granted to Lender are coupled with
an interest and are irrevocable, until all Indebtedness is irrevocably paid in
full and Lender has no further obligations to make any Loans.
8.16 Approvals. If this Guaranty calls for the approval or consent of
Lender, such approval or consent may be given or withheld in the sole credit
judgment of Lender.
8.17 Arbitration; Preservation and Limitation of Remedies. Upon demand
of any party hereto, whether made before or after institution of any judicial
proceeding, any dispute, claim or controversy arising out of, connected with or
relating to this Guaranty or any other Loan Documents ("Disputes"), this
Guaranty shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, disputes as to whether a matter is subject to
arbitration, claims brought as class actions, claims arising from Loan Documents
executed in the future, or claims arising out of or connected with the
transaction reflected by this Guaranty. Arbitration shall be conducted under and
governed by the Commercial Financial Disputes Arbitration Rules (the
"Arbitration Rules") of the American Arbitration Association (the "AAA") and
Title 9 of the U.S. Code. All arbitration hearings shall be conducted in the
city in which the office of Lender first stated above is located. The expedited
procedures set forth in Rules 51 et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000. All applicable statutes of
limitation shall apply to any Dispute. A judgment upon the award may be entered
in any court having jurisdiction. The panel from which all arbitrators are
selected shall be comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general jurisdiction, state or federal, of the state where the hearing will
be conducted or if such person is not available to serve, the single arbitrator
may be a licensed attorney. Notwithstanding the foregoing, this arbitration
provision does not apply to disputes under or related to any Interest Rate Swap
Agreement. Notwithstanding the preceding binding arbitration provisions, the
parties agree to preserve, without diminution, certain remedies that any party
hereto may employ or exercise freely, independently or in connection with an
arbitration proceeding or after an arbitration action is brought. The parties
shall have the right to proceed in any court of proper jurisdiction or by
self-help to exercise or prosecute the following remedies, as applicable: (i)
all rights to foreclose against any real or personal property or other security
by exercising a power of sale granted under Loan Documents or under applicable
law or by judicial foreclosure and sale, including a proceeding to confirm the
sale; (ii) all rights of self-help including peaceful occupation of real
property and collection of rents, set-off, and peaceful possession of personal
property; (iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver and
filing an involuntary bankruptcy proceeding; and (iv) when applicable, a
judgment by confession of judgment. Preservation of these remedies does not
limit the power of an arbitrator to grant similar remedies that may be requested
by a party in a Dispute. The parties agree that they shall not have a remedy of
punitive or exemplary damages against the other in any Dispute and hereby waive
any right or claim to punitive or exemplary damages they have now or which may
arise in the future in connection with any Dispute whether the Dispute is
resolved by arbitration or judicially.
8.18 Governing Law; Jurisdiction and Venue; Waiver of Jury Trial.
SUBJECT TO THE TERMS OF SECTION 8.17, THIS GUARANTY SHALL BE INTERPRETED, AND
THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH
THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF
FLORIDA. SUBJECT TO THE TERMS OF SECTION 8.17, AS PART OF THE CONSIDERATION FOR
NEW VALUE THIS DAY RECEIVED, GUARANTOR HEREBY CONSENTS TO THE JURISDICTION OF
ANY STATE
-12-
<PAGE>
OR FEDERAL COURT LOCATED WITHIN DADE COUNTY, STATE OF FLORIDA, AND CONSENTS THAT
ALL SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO
GUARANTOR AT THE ADDRESS STATED IN SECTION 8.2 AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE DAYS
AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID. SUBJECT TO THE
TERMS OF SECTION 8.17, EACH OF GUARANTOR AND Lender HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY SUIT OR PROCEEDING ARISING OUT OF OR
RELATED TO THIS GUARANTY OR THE OTHER LOAN DOCUMENTS. SUBJECT TO THE TERMS OF
SECTION 8.17, GUARANTOR WAIVES ANY OBJECTION WHICH GUARANTOR MAY HAVE BASED ON
LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON CONVENIENS TO ANY SUIT OR
PROCEEDING INSTITUTED BY LENDER UNDER THIS GUARANTY OR THE OTHER LOAN DOCUMENTS
IN ANY STATE OR FEDERAL COURT LOCATED WITHIN DADE COUNTY, FLORIDA AND CONSENTS
TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY
THE COURT. SUBJECT TO THE TERMS OF SECTION 8.17, NOTHING IN THIS SECTION 8.18
SHALL AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF LENDER TO BRING ANY ACTION OR PROCEEDING
AGAINST GUARANTOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH
HAS JURISDICTION OVER GUARANTOR OR ITS PROPERTY. SUBJECT TO THE TERMS OF SECTION
8.17, THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO THIS
GUARANTY AND THE OTHER LOAN DOCUMENTS, MAKE THE LOANS AND EXTEND THE OTHER
FINANCIAL ACCOMMODATIONS CONTEMPLATED HEREUNDER AND THEREUNDER.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty and Security
Agreement to be executed and sealed in its corporate name by its duly authorized
corporate officer as of the date first above written.
METRO-TEL CORP.
By: /s/ Michael Steiner
----------------------
Name: Michael Steiner
Title: President
Accepted and acknowledged by:
FIRST UNION NATIONAL BANK
By: /s/ Steven Leth
---------------------------
Name: Steven Leth
Title: Vice President
-13-
EXHIBIT 99.1
Report of Independent Certified Public Accountants
Board of Directors and Shareholders
Steiner-Atlantic Corp.
Miami, Florida
We have audited the accompanying balance sheet of Steiner-Atlantic Corp. as of
December 31, 1997 and the related statements of income, shareholders' equity and
cash flows for each of the two years in the period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Steiner-Atlantic Corp. at
December 31, 1997, and the results of its operations and its cash flows for each
of the two years in the period then ended in conformity with generally accepted
accounting principles.
/S/ BDO SEIDMAN, LLP
Miami, Florida BDO Seidman, LLP
April 1, 1998, except for Note 1
which is as of July 1, 1998
<PAGE>
<TABLE>
<CAPTION>
Steiner-Atlantic Corp.
Balance Sheets
December 31, June 30,
1997 1998
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 632,331 $ 828,390
Accounts receivable (Note 7) 1,214,523 1,021,213
Current portion of lease receivables (Notes 2 and 7) 193,562 161,007
Inventories 3,108,303 2,767,624
Other current assets (Note 6) 116,653 67,238
- ---------------------------------------------------------------------------------------------------------------
Total current assets 5,265,372 4,845,472
LEASE RECEIVABLES - due after one year (Notes 2 and 7) 214,177 148,651
PROPERTY AND EQUIPMENT, at cost - net of accumulated
depreciation and amortization (Note 3) 147,039 146,461
- ---------------------------------------------------------------------------------------------------------------
$ 5,626,588 $ 5,140,584
===============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit (Note 5) $ 500,000 $ 1,000,000
Accounts payable and accrued expenses (Note 6) 869,035 1,391,222
Customer deposits 304,278 389,371
Current portion of term loan (Note 5) 200,000 200,000
- ------------------------------------------------------------------------------------------------------------
Total current liabilities 1,873,313 2,980,593
TERM LOAN, less current portion (Note 5) 316,613 216,613
- ------------------------------------------------------------------------------------------------------------
Total liabilities 2,189,926 3,197,206
- ------------------------------------------------------------------------------------------------------------
COMMITMENTS (Notes 6, 8 and 9)
- ------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common stock, $.50 par value:
Authorized shares - 600,000; issued and
outstanding 339,500 shares 169,750 169,750
Retained earnings 1,448,950 1,448,950
Undistributed shareholders' earnings 1,817,962 324,678
- ------------------------------------------------------------------------------------------------------------
Total shareholders' equity 3,436,662 1,943,378
- ------------------------------------------------------------------------------------------------------------
$ 5,626,588 $ 5,140,584
============================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
Steiner-Atlantic Corp.
Statements of Income
Year ended December 31, Six months ended June 30,
------------------------------ -----------------------------
1996 1997 1997 1998
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
NET SALES $ 13,857,817 $ 14,093,632 $ 6,511,446 $ 7,747,321
COMMISSIONS AND OTHER INCOME 157,900 155,809 72,714 87,388
- -------------------------------------------------------------------------------------------------------------------------------
Total 14,015,717 14,249,441 6,584,160 7,834,709
- -------------------------------------------------------------------------------------------------------------------------------
COST OF SALES 9,953,041 10,344,113 4,628,985 5,856,339
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (NOTE 6) 3,398,345 3,474,421 1,595,932 1,698,058
- -------------------------------------------------------------------------------------------------------------------------------
Total 13,351,386 13,818,534 6,224,917 7,554,397
- -------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 664,331 430,907 359,243 280,312
- -------------------------------------------------------------------------------------------------------------------------------
Other Income (Expense):
Interest income 138,426 100,158 55,591 40,390
Management fee income (Note 6) 145,000 40,000 - 150,000
Interest expense (83,543) (60,940) (35,740) (26,509)
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME 199,883 79,218 19,851 163,881
- -------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 864,214 $ 510,125 $ 379,094 444,193
===============================================================================================================================
Net income per share $ 2.55 $ 1.50 $ 1.12 $ 1.31
Weighted average number of shares of
common stock outstanding 339,500 339,500 339,500 339,500
PRO FORMA AMOUNTS (UNAUDITED):
Net income $ 864,214 $ 510,125 $ 379,094 444,193
Provision for income taxes (Note 4) 329,935 195,555 144,722 170,939
- -------------------------------------------------------------------------------------------------------------------------------
PRO FORMA NET INCOME (UNAUDITED) $ 534,279 $ 314,570 $ 234,372 $ 273,254
===============================================================================================================================
Pro forma net income per share (unaudited) $ 1.57 $ .93 $ .69 $ .80
Weighted average number of shares of common stock
outstanding 339,500 339,500 339,500 339,500
===============================================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
Steiner-Atlantic Corp.
Statements of Shareholders' Equity
For the years ended December 31, 1996 and 1997
and for the six months ended June 30, 1998
Undistributed Total
Common Retained Shareholders' Stockholders'
Stock Earnings Earnings Equity
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 $ 169,750 $ 1,448,950 $ 1,813,623 $ 3,432,323
Distributions - - (770,000) (770,000)
Net income - - 864,214 864,214
- ----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 169,750 1,448,950 1,907,837 3,526,537
Distributions - - (600,000) (600,000)
Net income - - 510,125 510,125
- ----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 169,750 1,448,950 1,817,962 3,436,662
Distributions - - (1,937,477) (1,937,477)
Net income - - 444,193 444,193
- ----------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1998 (unaudited) $ 169,750 $ 1,448,950 $ 324,678 $ 1,943,378
======================================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
Steiner-Atlantic Corp.
Statements of Cash Flows
Years ended December 31, Six months ended June 30,
1996 1997 1997 1998
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income $ 864,214 $ 510,125 $ 379,094 $ 444,193
Adjustments to reconcile net income to net cash
provided by operating activities:
Bad debt expense 19,414 21,799 - 39,948
Depreciation and amortization 40,064 34,643 14,622 15,621
Net changes in operating assets and liabilities:
(Increase) decrease in:
Accounts and lease receivables 331,387 (373,356) (91,154) 251,443
Inventories (185,972) 73,249 69,903 340,679
Other current assets 32,998 (14,845) (77,328) 49,415
Other assets 134,720 - (3,160) -
Increase (decrease) in:
Accounts payable and accrued expenses (89,415) 70,597 131,436 347,187
Customer deposits (35,138) 124,406 243,442 85,093
- -------------------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities 1,112,272 446,618 666,855 1,573,579
- -------------------------------------------------------------------------------------------------------------------------------
CASH USED FOR INVESTING ACTIVITIES:
Loan to affiliate - (50,000) - -
Capital expenditures (23,850) (30,406) - (15,043)
- -------------------------------------------------------------------------------------------------------------------------------
Cash used for investing activities (23,850) (80,406) - (15,043)
- -------------------------------------------------------------------------------------------------------------------------------
CASH USED FOR FINANCING ACTIVITIES:
Borrowings (repayments) under line of credit (net) (300,000) 500,000 - 500,000
Payments on term loan (183,334) (216,720) (116,666) (100,000)
Cash distributions to shareholders (770,000) (600,000) (200,000) (1,937,477)
Borrowings from shareholder 250,000 - - -
Repayment of loan from shareholder (250,000) - - -
Borrowings from related company - - - 175,000
- -------------------------------------------------------------------------------------------------------------------------------
Cash used for financing activities (1,253,334) (316,720) (316,666) (1,362,477)
- -------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (164,912) 49,492 350,189 196,059
Cash and cash equivalents at beginning of period 747,751 582,839 582,839 632,331
- -------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 582,839 $ 632,331 $ 933,028 $ 828,390
===============================================================================================================================
Supplemental Information:
Cash paid for:
Interest $ 83,543 $ 60,940 $ 35,740 $ 26,509
===============================================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
5
<PAGE>
Steiner-Atlantic Corp.
Summary of Significant Accounting Policies
Unaudited with respect to the six months ended June 30, 1997 and 1998
NATURE OF BUSINESS Steiner-Atlantic Corp. ("Steiner") sells
commercial and industrial laundry and dry
cleaning equipment, boilers and replacement
parts.
Steiner primarily sells to customers located
in the United States, the Caribbean and
Latin America.
INVENTORIES Equipment inventories are valued at the
lower of cost (determined on the specific
identification basis) or market. Replacement
part inventories are valued at the lower of
cost or market determined on the first-in
first-out method.
PROPERTY, EQUIPMENT Property and equipment are stated at cost.
AND DEPRECIATION Depreciation and amortization are calculated
on the accelerated or straight-line methods
for financial reporting purposes and the
accelerated method for income tax purposes
over lives of five to seven years for
furniture and equipment and the life of the
lease for leasehold improvements.
INCOME TAXES Steiner has elected to be taxed as an S
Corporation under applicable provisions of
the Internal Revenue Code. Under such
election, shareholders include Steiner's
income in their own federal income tax
returns. Accordingly, Steiner is not subject
to income taxes.
The pro forma provisions for income taxes
and net income assume that Steiner was
subject to income tax.
For the purpose of the pro forma provision
for income taxes, Steiner has adopted the
provisions of Statement of Financial
Accounting Standards (SFAS) 109, Accounting
for Income Taxes for all periods presented.
Under the asset and liability method of SFAS
109, deferred taxes are recognized for
differences between financial statement and
income tax bases of assets and liabilities.
STATEMENT OF For purposes of this statement, cash
CASH FLOWS equivalents include all highly liquid
investments with original maturities of
three months or less.
6
<PAGE>
Steiner-Atlantic Corp.
Summary of Significant Accounting Policies
Unaudited with respect to the six months ended June 30, 1997 and 1998
ESTIMATES The preparation of financial statements in
conformity with generally accepted
accounting principles requires management to
make estimates and assumptions that affect
the reported amounts of assets and
liabilities and disclosure of contingent
assets and liabilities at the date of the
financial statements and the reported
amounts of revenues and expenses during the
reporting period. Actual results could
differ from those estimates.
EARNINGS Per Share Net income and pro forma net
income per share are based on the weighted
average number of shares of common stock
outstanding during each period.
FAIR VALUE OF The Company's financial instruments consist
FINANCIAL INSTRUMENts principally of cash, accounts receivable,
leases receivables, accounts payable and
accrued expenses. The carrying amounts of
such financial instruments as reflected in
the balance sheet approximate their
estimated fair value as of December 31,
1997. The estimated fair value is not
necessarily indicative of the amounts the
Company could realize in a current market
exchange or of future earnings or cash
flows.
NEW ACCOUNTING In June 1997, the Financial Accounting
PRONOUNCEMENT Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise
and Related Information," which Steiner will
adopt as required for all periods beginning
after December 15, 1997. This statement
requires the disclosure of certain
information about operating segments in the
financial statements. It also requires that
public companies report certain information
about their products and services, the
geographic areas in which they operate and
their major customers.
The new standard is effective for financial
statements for periods beginning after
December 15, 1997 and requires comparative
financial information for earlier years to
be restated. Disclosure is not required for
interim periods during the first year. The
adoption of this new standard is not
expected to have a significant impact on
Steiner's financial statements.
INTERIM FINANCIAL The financial statements for the six months
STATEMENTS ended June 30, 1998 and 1997 are unaudited.
In the opinion of management, such financial
statements include all adjustments
(consisting only of normal recurring
accruals) necessary for a fair presentation
of financial position and the results of
operations. The results of operations for
interim periods are not necessarily
indicative of the results to be expected for
the full year.
7
<PAGE>
Steiner-Atlantic Corp.
Notes to Financial Statements
Unaudited with respect to the six months ended June 30, 1997 and 1998
1. GENERAL On July 1, 1998, Metro-Tel Corp.
("Metro-Tel") and Steiner-Atlantic Corp.
("Steiner") entered into a merger agreement,
whereby Metro-Tel will acquire all the
issued and outstanding shares of capital
stock of Steiner in exchange for 4,720,954
shares of Metro-Tel. In addition, Metro-Tel
will issue up to 500,000 shares of its
common stock or grant options for the
purchase of up to 500,000 shares of its
common stock to shareholders and employees
of Steiner.
For financial accounting purposes, this
transaction will be accounted for as a
reverse acquisition of Metro-Tel by Steiner.
2. LEASE RECEIVABLES Lease receivables result from customer
leases of equipment under arrangements which
qualify as sales-type leases. At June 30,
1998, annual future lease payments, net of
deferred interest ($57,164 at June 30,
1998), due under these leases are as
follows:
Year ending June 30,
--------------------------------------------
1999 $ 161,007
2000 68,026
2001 41,659
2002 24,016
2003 12,628
Thereafter 2,322
--------------------------------------------
$ 309,658
============================================
3. PROPERTY AND Major classes of property and equipment
EQUIPMENT consist of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
-----------------------------------------------------
<S> <C> <C>
Furniture and equipment $ 433,535 $ 448,578
Leasehold improvements 237,682 237,682
-----------------------------------------------------
Total cost 671,217 686,260
Less accumulated depreciation
and amortization 524,178 539,799
-----------------------------------------------------
$ 147,039 $ 146,461
=====================================================
</TABLE>
8
<PAGE>
Steiner-Atlantic Corp.
Notes to Financial Statements
Unaudited with respect to the six months ended June 30, 1997 and 1998
4. INCOME TAXES The following are the components of pro
(UNAUDITED) forma income tax provision:
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30,
1996 1997 1997 1998
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Current
Federal $ 279,616 $ 189,074 $ 131,487 $ 143,910
State 47,864 32,366 22,508 24,536
-------------------------------------------------------------
327,480 221,440 153,995 168,446
-------------------------------------------------------------
Deferred
Federal 2,096 (22,102 ) (7,918) 2,129
State 359 (3,783 ) (1,355) 364
-------------------------------------------------------------
2,455 (25,885 ) (9,273) 2,493
Total $ 329,935 $ 195,555 $ 144,722 $ 170,939
=============================================================
</TABLE>
The pro forma provision for income taxes
represents the estimated income taxes that
would have been reported had Steiner not
been an S Corporation and had been subject
to Federal and state income taxes.
The reconciliation of pro forma income tax
computed at the United States federal
statutory tax rate of 34% to the proforma
provision for income taxes is as follows:
9
<PAGE>
Steiner-Atlantic Corp.
Notes to Financial Statements
Unaudited with respect to the six months ended June 30, 1997 and 1998
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30,
1996 1997 1997 1998
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax at the United
States statutory rate $ 293,833 $ 173,443 $ 128,892 $ 153,826
State income taxes, net
of federal benefit 31,827 18,865 13,961 16,374
Other 4,275 3,247 1,869 739
-------------------------------------------------------------------------
Total $ 329,935 $ 195,555 $ 144,722 $ 170,939
=========================================================================
</TABLE>
If Steiner was subject to income taxes, a
deferred tax liability would be recorded,
through a charge to operations, for the tax
effect of cumulative temporary differences
between financial and tax reporting. Such
deferred tax liability results principally
from temporary differences relating to the
allowance for doubtful accounts and
depreciation and would have amounted to
approximately $20,000 at June 30, 1998 had
Steiner been subject to federal and state
taxes at such date.
5. CREDIT AGREEMENT The credit agreement with a commercial bank
includes a line of credit of $2,250,000 and
a term loan initially of $1,000,000. At June
30, 1998 and December 31, 1997, Steiner had
available lines of credit in the amount of
$1,250,000 and $1,750,000, respectively, and
owed $416,613 and $516,613, respectively,
under the term loan. The term loan is due in
60 monthly payments of $16,667, plus
interest through August 2000. The line of
credit is due on demand and is available for
working capital purposes and the issuance of
import letters of credit and bankers
acceptances. Borrowings under the agreement
bear interest at the prime rate (8.5% at
June 30, 1998 and 8.5% at December 31,
1997), are collateralized by all of
Steiner's assets, and are personally
guaranteed by the shareholders. The
agreement requires maintenance of certain
financial ratios and contains other
restrictive covenants.
At June 30, 1998 and December 31, 1997,
Steiner had outstanding letters of credit
aggregating approximately $0 and $35,000,
respectively.
10
<PAGE>
Steiner-Atlantic Corp.
Notes to Financial Statements
Unaudited with respect to the six months ended June 30, 1997 and 1998
6. RELATED PARTY During the years ended December 31, 1996 and
TRANSACTIONS 1997 and the six months ended June 30, 1997
and 1998, Steiner charged management fees of
$145,000, $40,000, $0 and $150,000,
respectively, to a company under common
ownership. At December 31, 1997, $50,000 is
due from such company and is included in
other current assets in the accompanying
balance sheet. During 1998, the related
company made a non-interest bearing advance
of $325,000, payable on demand, to Steiner.
At June 30, 1998, $175,000 is due to such
company and is included in accounts payable
and accrued expenses in the accompanying
balance sheet.
Steiner leases warehouse and office space
from a shareholder under an operating lease
which expires in October 2004. Minimum
future rental commitments under this lease
approximate $90,000 per annum through
October 2004.
7. CONCENTRATIONS OF Steiner places its excess cash in overnight
CREDIT RISK deposits with a large national bank.
Concentration of credit risk with respect to
trade and lease receivables is limited due
to a large customer base. Trade and lease
receivables are generally collateralized
with equipment sold.
8. COMMITMENT Steiner leases additional warehouse space
under operating leases which expire in
December 1999, with an option to renew for
an additional three year period. Minimum
future rental commitments under these leases
approximate $50,000 a year. Rent expense,
including rentals paid to related parties,
aggregated $138,768 and $141,700 for the
years ended December 31, 1996 and 1997 and
$71,650 and $70,850 for six months ended
June 30, 1997 and 1998, respectively.
9. DEFERRED Steiner adopted a participatory deferred
COMPENSATION compensation plan wherein it matches
PLAN employee contributions up to 1% of an
eligible employee's yearly compensation. All
employees are eligible to participate in the
plan after one year of service. Steiner
provided for $7,368 and $10,792 for the
years ended December 31, 1996 and 1997 and
$5,260 and $5,735 for the six months ended
June 30, 1997 and 1998, respectively, in
contributions. The plan is tax exempt under
Section 401(k) of the Internal Revenue Code.
10. EXPORT SALES Net sales includes export sales to
nonaffiliated customers as follows for the
years ended December 31, 1996 and 1997 and
for the six months ended June 30, 1997 and
1998:
11
<PAGE>
Steiner-Atlantic Corp.
Notes to Financial Statements
Unaudited with respect to the six months ended June 30, 1997 and 1998
Year Ended Six Months Ended
December 31, June 30,
1996 1997 1997 1998
----------------------------------------------------------------
Caribbean $1,345,301 $ 1,793,076 $ 365,591 $ 1,147,918
Latin America 1,314,838 1,595,797 500,976 1,217,397
Other 381,528 560,639 245,256 65,295
----------------------------------------------------------------
$3,041,667 $ 3,949,512 $1,111,823 $ 2,430,610
================================================================
12
EXHIBIT 99.2
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The accompanying unaudited pro forma combined condensed financial
statements are based upon the historical condensed balance sheets and condensed
statements of operations of the Company and Steiner. The unaudited pro forma
combined condensed balance sheet has been prepared as if the acquisition
occurred on June 30, 1998. The unaudited pro forma combined condensed financial
statements of operations for the year ended December 31, 1997 and for the six
months ended June 30, 1998 have been prepared as if the acquisition had occurred
on January 1, 1997. The statements are based on accounting for the business
combination as a reverse acquisition, whereby the Company will be the surviving
corporate entity, but Steiner is the accounting acquirer. As Steiner is the
accounting acquirer in a transaction accounted for as a purchase in accordance
with generally accepted accounting principles, the purchase price has been
allocated to the Company's assets and liabilities based upon preliminary
estimates of their respective fair values. The pro forma information may not be
indicative of the results that actually would have occurred if the Merger had
been in effect from and on the dates indicated or which may be obtained in the
future.
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED
CONDENSED BALANCE SHEET
JUNE 30, 1998
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
METRO TEL STEINER-ATLANTIC ADJUSTMENTS COMBINED
---------- ---------------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 475,508 $ 828,390 $ 1,303,898
Accounts receivable - net 486,144 1,021,213 1,507,357
Inventory 1,434,147 2,767,624 $ 149,314 (1) 4,351,085
Other assets 78,766 228,245 307,011
------------- ------------ ------------------ ----------
Total current assets 2,474,565 4,845,472 149,314 7,469,351
Fixed assets - net 151,346 146,461 297,807
Deferred income taxes 133,000 (46,000) (9) 87,000
Goodwill 763,628 (763,628) (2) 313,917
313,917 (3)
Other assets 9,676 148,651 158,327
------------ ----------- ------------------ ----------
Total assets $ 3,532,215 $ 5,140,584 $ (346,397) $ 8,326,402
============ ============= ============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 1,000,000 $ 324,678(15)
(1,324,678)(16)
Current portion of long-term debt 200,000 148,258(16) 348,258
Accounts payable and accrued liabilities $ 713,260 1,391,222 2,104,482
Customer deposits 389,371 389,371
------------------ ----------- ------------------ -----------
Total current liabilities 713,260 2,980,593 (851,742) 2,842,111
Deferred income taxes 5,000 5,000
Long-term debt 216,613 1,176,420(16) 1,393,033 (17)
Stockholders' equity:
Common stock at par 52,007 169,750 (169,750) (4) 172,531
120,524 (5)
Treasury stock (68,750) (68,750)
Additional paid-in capital 2,152,423 381,104 (6) 2,533,527
Retained earnings 678,275 1,773,628 (678,275) (6) 1,448,950
(324,678)(15)
------------ ------------- ------------ -------------
Total stockholders' equity 2,813,955 1,943,378 (671,075) 4,086,258
------------ ------------- ------------ -------------
Total liabilities and stockholders' equity $ 3,532,215 $ 5,140,584 $ (346,397) $ 8,326,402
============ ============= ============ =============
</TABLE>
The accompanying notes are an integral part of the Unaudited Pro Forma Combined
Condensed Financial Statements.
-2-
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 SIX MONTHS ENDED JUNE 30, 1998
------------------------------------------------------ -----------------------------------------------------
HISTORICAL HISTORICAL PRO FORMA PRO FORMA HISTORICAL HISTORICAL PRO FORMA PRO FORMA
METRO TEL STEINER-ATLANTIC ADJUSTMENTS COMBINED METRO TEL STEINER-ATLANTIC ADJUSTMENTS COMBINED
---------- ---------------- ----------- --------- ---------- ---------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales 4,148,930 $ 14,093,632 $18,242,562 $ 1,820,035 $ 7,747,321 $9,567,356
Cost of sales 2,531,317 10,344,113 $ 159,650(7) 13,035,080 1,320,783 5,856,339 7,177,122
--------- ---------- -------- ---------- --------- --------- ---------
Gross profit 1,617,613 3,749,519 (159,650) 5,207,482 499,252 1,890,982 2,390,234
Selling, general 1,252,585
and administrative 3,474,421 (25,133)(8) 3,951,873 919,475 1,698,058 $(12,567)(10) 1,929,966
(750,000)(11) (375,000)(11)
(300,000)(12)
Research and
development 218,155 218,155 116,566 116,566
------- ------- ------- -------
Operating
income (loss) 146,873 275,098 615,483 1,037,454 (536,789) 192,924 687,567 343,702
Interest expense 60,940 162,166(14) 223,106 26,509 69,290(14) 95,799
Interest and
other income 8,939 295,967 304,906 4,826 277,778 282,604
----- ------- ------- ----- ------- -------
Income (loss)
before tax 155,812 510,125 453,317 1,119,254 (531,963) 444,193 618,277 530,507
Income tax
expense (benefit) 65,300 363,763(9) 429,063 (162,900) 367,055(9) 204,155
------ ------- ------- --------- ------- -------
Net income
(loss) 90,512 $ 510,125 $ 89,554 690,191 $(369,063) $ 444,193 $ 251,222 $ 326,352
====== ============ ========== ========== ========== =========== ========== ===========
Weighted
average shares
outstanding
Basic 2,051,268 4,820,954(5) 6,872,222 2,054,046 4,820,954(5) 6,875,000
Diluted 2,074,668 4,820,954(5) 6,895,622 2,054,046 4,869,554(13) 6,923,600
Earnings (loss)
per common share
Basic 0.04 $ 0.10 $ (0.18) $ 0.05
Diluted 0.04 0.10 (0.18) 0.05
The accompanying notes are an integral part of the Unaudited Pro Forma Combined
Condensed Financial Statements.
</TABLE>
-3-
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(1) Adjustment for purchase accounting applied to the Company's net assets
acquired by Steiner.
(2) Adjustment to eliminate goodwill recorded on the Company's historical
financial statements.
(3) To reflect excess of cost over acquired net assets. Such goodwill and
related amortization is subject to possible adjustment resulting from
completion of the valuation of the Company's assets and liabilities.
(4) To reflect elimination of Steiner Common Stock at par deemed purchased
by the Company.
(5) To reflect issuance of 4,720,954 shares of the Company's common stock to
former Steiner stockholders and 100,000 shares to the Company's
financial advisor.
(6) To reflect elimination of the Company's historical retained earnings and
adjustment to additional paid-in-capital for purchase accounting.
(7) Adjustment for additional cost of goods sold due to write-up of the
Company's inventory in purchase accounting.
(8) To reflect elimination of amortization on historical Company goodwill of
$29,817 and new amortization on excess of purchase price over acquired
net assets of the Company of $4,684 using an estimated life of 15 years.
(9) The estimated tax effect on the pro forma adjustments and the combined
operations.
(10) To reflect elimination of amortization on historical Company goodwill of
$14,909 and new amortization on excess of purchase price over acquired
net assets of the Company of $2,342 using an estimated life of 15 years.
(11) Adjustment for executive compensation excluding the agreed upon salary
to be paid to Michael J. Steiner after consummation of the transaction.
(12) To reflect elimination of $300,000 of non-recurring transaction costs.
(13) To reflect issuance of 4,720,954 shares of the Company's common stock to
former Steiner stockholders and 100,000 shares to the Company's
financial advisor and an adjustment of 48,600 shares for the assumed
exercise of outstanding stock options of the Company.
(14) Adjustment for additional interest expense incurred on debt used by
Steiner to pay undistributed S-corporation earnings to Steiner
shareholders per the Merger Agreement.
(15) To reflect additional debt and payment of undistributed S-corporation
earnings to Steiner shareholders.
(16) Adjustment to reclassify existing debt arrangements to term loan.
(17) Does not include borrowings subsequent to June 30, 1998.
-4-
<PAGE>
COMPARATIVE PER SHARE DATA (UNAUDITED)
The following table presents, as of the dates and for the periods
indicated on the basis indicated in the footnote to the table, the: (a) book
value per common share and (b) income (loss) from continuing operations per
common share: (i) on a historical basis for each of the Company and Steiner, and
(ii) on a pro forma basis for the Company for determining book value, assuming
the Merger had been effective at June 30, 1998, and for determining income
(loss), assuming the Merger had been effective at January 1, 1997. The following
data should be read in conjunction with the historical financial statements and
the Selected Pro Forma Combined Condensed Financial Statements of the Company
and Steiner included elsewhere in this Proxy Statement. See "INDEX TO FINANCIAL
STATEMENTS".
<TABLE>
<CAPTION>
PER SHARE OF COMMON STOCK
---------------------------------------
BOOK VALUE(1) INCOME (LOSS)(1)
------------- ----------------
<S> <C> <C>
THE COMPANY - HISTORICAL
As of June 30, 1998 and for the year then ended.......................... 1.37 (.17)
STEINER - HISTORICAL
As of December 31, 1997 and for the year then ended...................... .73 .11
For the six months ended June 30, 1997................................... .08
As of June 30, 1998 and for the six months then ended.................... .41 .09
THE COMPANY EQUIVALENT PRO FORMA COMBINED
For the year ended December 31, 1997..................................... .01
As of June 30, 1998 and for the six months then ended.................... .59 .05
</TABLE>
- --------------------
(1) For comparability purposes, book value and income (loss) per share date
for Steiner is based upon 4,720,954 weighted average common shares
outstanding for the dates and periods indicated.
-5-
EXHIBIT 99.3
1991 STOCK OPTION PLAN
of
METRO-TEL CORP.
(As Amended Through October 29, 1998)
1. PURPOSES OF THE PLAN. This stock option plan (the "Plan")
is designed to promote the interests of Metro-Tel Corp., a Delaware corporation
(the "Company"), and its present and future subsidiary corporations, as defined
in Paragraph 19 ("Subsidiaries"), in attracting and retaining key employees
(including directors and officers who are key employees) by enabling them to
acquire or increase a proprietary interest in the Company, to benefit from
appreciation in the value of the Company's Common Stock and, thus, participate
in the long-term growth of the Com pany. The Plan provides for the grant of
"incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified stock
options ("NQSOs"), but the Company makes no warranty as to the qualification of
any option as an "incentive stock option" under the Code.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Paragraph 12, the aggregate number of shares of Common Stock, $.025 par value
per share, of the Company ("Common Stock") for which options may be granted
under the Plan shall not exceed 850,000. Such shares of Common Stock may, in the
discretion of the Board of Directors of the Company (the "Board of Directors"),
consist either in whole or in part of authorized but unissued shares of Common
Stock or shares of Common Stock held in the treasury of the Company. The Company
shall at all times during the term of the Plan reserve and keep available such
number of shares of Common Stock as will be sufficient to satisfy the
requirements of the Plan. Subject to the provisions of Paragraph 13, any shares
of Common Stock subject to an option which for any reason expires, is canceled
or is terminated unexercised or which ceases for any reason to be exercisable
shall again become available for the granting of options under the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be
administered by the Board of Directors which, to the extent it shall determine
may delegate its powers with respect to the administration of the Plan to a
Committee of the Board of Directors of the Company consisting of not less than
two directors, each of whom shall be a "non-employee director" within the
meaning of Rule 16b-3 (or any successor rule or regulation) promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). References
in the Plan to determinations or actions by the Committee shall be deemed to
include determinations and actions by the Board of Directors.
Subject to the express provisions of the Plan, the Committee
shall have the authority, in its sole discretion, to determine the key employees
who shall receive options; the times when they shall receive options; whether an
option shall be an ISO or a NQSO; the number of shares of Common Stock to be
subject to each option; the term of each option; the date each option shall
become exercisable; whether an option shall be exercisable in whole, in part or
in installments, and,
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if in installments, the number of shares of Common Stock to be subject to each
installment, the date each installment shall become exercisable and whether the
installments shall be cumulative; whether to accelerate the date of exercise of
any option or installment; whether shares of Common Stock may be issued on
exercise of an option as partly paid, and, if so, the dates when future
installments of the exercise price shall become due and the amounts of such
installments; the exercise price of each option; the form of payment of the
exercise price; the amount, if any, necessary to satisfy the Company's
obligation to withhold taxes; whether to restrict the sale or other disposition
of the shares of Common Stock acquired upon the exercise of an option and to
waive any such restriction; whether to subject the exercise of all or any
portion of an option to the fulfillment of contingencies as specified in the
Contract referred to in Paragraph 11 (the "Contract"), including without
limitation, contingencies relating to entering into a covenant not to compete
with the Company and its Parent and Subsidiaries, to financial objectives for
the Company, a Subsidiary, a division, a product line or other category, and/or
the period of continued employment of the optionee with the Company, its Parent
or its Subsidiaries, and to determine whether such contingencies have been met;
to construe the respective Contracts and the Plan; with the consent of the
optionee, to cancel or modify an option, provided such option as modified would
be permitted to be granted on such date under the terms of the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan; and to
make all other determinations necessary or advisable for administering the Plan.
The determinations of the Committee on the matters referred to in this Paragraph
3 shall be conclusive.
4. ELIGIBILITY. The Committee may, consistent with the
purposes of the Plan, grant options from time to time, to key employees
(including directors and officers who are key employees) of the Company or any
of its Subsidiaries. Options granted shall cover such number of shares of Common
Stock as the Committee may determine; provided, however, that the aggregate
market value (determined at the time the option is granted) of the shares of
Common Stock for which any eligible person may be granted ISOs under the Plan or
any other plan of the Company, or of a Parent or a Subsidiary of the Company,
which are exercisable for the first time by such optionee during any calendar
year shall not exceed $100,000. The $100,000 ISO limitation shall be applied by
taking ISOs into account in the order in which they were granted. Any option (or
the portion thereof) granted in excess of such amount shall be treated as a
NQSO.
5. EXERCISE PRICE. The exercise price of the shares of
Common Stock under each option shall be determined by the Committee; provided,
however, that the exercise price shall not be less than 100% of the fair market
value of the Common Stock subject to such option on the date of grant; and
further provided, that if, at the time an ISO is granted, the optionee owns (or
is deemed to own under Section 424(d) of the Code) stock possessing more than
10% of the total combined voting power of all classes of stock of the Company,
of any of its Subsidiaries or of a Parent, the exercise price of such ISO shall
not be less than 110% of the fair market value of the Common Stock subject to
such ISO on the date of grant.
The fair market value of the Common Stock on any day shall
be (a) if the principal market for the Common Stock is a national securities
exchange, the average between the high and low sales prices of the Common Stock
on such day as reported by such exchange or on a
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consolidated tape reflecting transactions on such exchange, (b) if the principal
market for the Common Stock is not a national securities exchange and the Common
Stock is quoted on the National Association of Securities Dealers Automated
Quotations System ("NASDAQ"), and (i) if actual sales price information is
available with respect to the Common Stock, the average between the high and low
sales prices of the Common Stock on such day on NASDAQ, or (ii) if such
information is not available, the average between the highest bid and the lowest
asked prices for the Common Stock on such day on NASDAQ, or (c) if the principal
market for the Common Stock is not a national securities exchange and the Common
Stock is not quoted on NASDAQ, the average between the highest bid and lowest
asked prices for the Common Stock on such day as reported on the NASDAQ OTC
Bulletin Board Service or by National Quotation Bureau, Incorporated or a
comparable service; provided that if clauses (a), (b) and (c) of this Paragraph
are all inapplicable, or if no trades have been made or no quotes are available
for such day, the fair market value of the Common Stock shall be determined by
the Committee by any method consistent with applicable regulations adopted by
the Treasury Department relating to stock options. The determination of the
Committee shall be conclusive in determining the fair market value of the stock.
6. TERM OF OPTIONS. The term of each option granted pursuant
to the Plan shall be such term as is established by the Committee, in its sole
discretion, at or before the time such option is granted; provided, however,
that the term of each ISO granted pursuant to the Plan shall be for a period not
exceeding ten (10) years from the date of grant thereof, and further, provided,
that if, at the time an ISO is granted, the optionee owns (or is deemed to own
under Section 424(d) of the Code) stock possessing more than ten (10%) percent
of the total combined voting power of all classes of stock of the Company, of
any of its Subsidiaries or of a Parent, the term of the ISO shall be for a
period not exceeding five (5) years from the date of grant. Options shall be
subject to earlier termination as hereinafter provided.
7. EXERCISE. An option (or any part or installment thereof),
to the extent then exercisable, shall be exercised by giving written notice to
the Company (attention: President) at its principal office, stating which ISO or
NQSO is being exercised, specifying the number of shares of Common Stock as to
which such option is being exercised and accompanied by payment in full of the
aggregate exercise price therefor (or the amount due on exercise if the Contract
permits installment payments) (a) in cash or by certified check or (b) with the
consent of the Committee (in the Contract or otherwise), with previously
acquired shares of Common Stock having an aggregate fair market value, on the
date of exercise, equal to the aggregate exercise price of all options being
exercised, or with any combination of cash, certified check or shares of Common
Stock. The Committee may, in its discretion, permit payment of the exercise
price of options by delivery of a properly executed exercise notice, together
with a copy of irrevocable instructions from the Optionee to a broker
(acceptable to the Committee) to deliver promptly to the Company the amount of
sale or loan proceeds to pay such exercise price. To facilitate the foregoing,
the Company may enter into agreements for coordinated procedures with one or
more brokerage firms.
A person entitled to receive Common Stock upon the exercise
of an option shall not have the rights of a stockholder with respect to such
shares of Common Stock until the date of
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issuance of a stock certificate to him for such shares; provided, however, that
until such stock certificate is issued, any option holder using previously
acquired shares of Common Stock in payment of an option exercise price shall
continue to have the rights of a stockholder with respect to such previously
acquired shares.
No option may be exercised in an amount less than 100 shares
(or the remaining shares then covered by the option if less than 100 shares). In
no case may a fraction of a share of Common Stock be purchased or issued under
the Plan.
8. TERMINATION OF EMPLOYMENT. Any holder of an option whose
employment with the Company (and its Parent and Subsidiaries) has terminated for
any reason other than his death or Disability (as defined in Paragraph 19) may
exercise such option, to the extent exercisable on the date of such termination,
at any time within three months after the date of termination, but not
thereafter and in no event after the date the option would otherwise have
expired; provided, however, that if his employment shall be terminated either
(a) for cause, or (b) without the consent of the Company, said option shall
terminate immediately upon termination of employment. Options granted under the
Plan shall not be affected by any change in the status of the holder so long as
he continues to be a full-time employee of the Company, its Parent or any of the
Subsidiaries (regardless of having been transferred from one corporation to
another).
For the purposes of the Plan, an employment relationship
shall be deemed to exist between an individual and a corporation if, at the time
of the determination, the individual was an employee of such corporation for
purposes of Section 422(a) of the Code. As a result, an individual on military,
sick leave or other bona fide leave of absence shall continue to be considered
an employee for purposes of the Plan during such leave if the period of the
leave does not exceed 90 days, or, if longer, so long as the individual's right
to reemployment with the Company (or a related corporation) is guaranteed either
by statute or by contract. If the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed by statute or by contract,
the employment relationship shall be deemed to have terminated on the 91st day
of such leave.
Nothing in the Plan or in any option granted under the Plan
shall confer on any individual any right to continue in the employ of the
Company, its Parent or any of its Subsidiaries, or interfere in any way with the
right of the Company, its Parent or any of its Subsidiaries to terminate the
employee's employment at any time for any reason whatsoever without liability to
the Company, its Parent or any of its Subsidiaries.
9. DISABILITY OR DEATH OF AN OPTIONEE. Any optionee whose
employment has terminated by reason of Disability may exercise his option, to
the extent exercisable upon the effective date of such termination, at any time
within one year after such date, but not thereafter and in no event after the
date the option would otherwise have expired.
If an optionee dies (a) while he is employed by the Company,
its Parent or any of its Subsidiaries, (b) within three months after the
termination of his employment (unless such termination
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<PAGE>
was for cause or without the consent of the Company or by reason of Disability)
or (c) within one year following the termination of his employment by reason of
Disability, the option may be exercised, to the extent exercisable on the date
of his death, by his executor, administrator or other person at the time
entitled by law to his rights under such option, at any time within one year
after death, but not thereafter and in no event after the date the option would
otherwise have expired.
10. COMPLIANCE WITH SECURITIES LAWS. The Committee may
require in its discretion, as a condition to the exercise of any option, that
either (a) a Registration Statement under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the shares of Common Stock to be issued
upon such exercise shall be effective and current at the time of exercise, or
(b) in the opinion of counsel for the Company, there is an exemption from
registration under the Securities Act for the issuance of such shares. Nothing
herein shall be construed as requiring the Company to register shares subject to
any option under the Securities Act. The Committee may require the optionee to
execute and deliver to the Company his representation and warranty, in form and
substance satisfactory to the Committee, that the shares of Common Stock to be
issued upon the exercise of the option are being acquired by the optionee for
his own account, for investment only and not with a view to the resale or
distribution thereof. In addition, the Committee may require the optionee to
represent and warrant in writing that any subsequent resale or distribution of
shares of Common Stock by such optionee will be made only pursuant to (i) a
Registration Statement under the Securities Act which is effective and current
with respect to the shares of Common Stock being sold, or (ii) a specific
exemption from the registration requirements of the Securities Act, but in
claiming such exemption, the optionee shall prior to any offer of sale or sale
of such shares of Common Stock provide the Company with a favorable written
opinion of counsel, in form and sub stance satisfactory to the Company, as to
the applicability of such exemption to the proposed sale or distribution.
In addition, if at any time the Committee shall determine in
its discretion that the listing or qualification of the shares of Common Stock
subject to such option on any securities exchange or under any applicable law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition to, or in connection with, the granting of an option or
the issue of shares of Common Stock thereunder, such option may not be exercised
in whole or in part unless such listing, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
11. STOCK OPTION CONTRACTS. Each option shall be evidenced
by an appropriate Contract which shall be duly executed by the Company and the
optionee, and shall contain such terms and conditions not inconsistent herewith
as may be determined by the Committee.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwith
standing any other provisions of the Plan, in the event of any change in the
outstanding Common Stock by reason of a stock dividend, stock split, stock
combination, recapitalization, merger or consolidation in which the Company is
the surviving corporation, reorganization or the like, the aggregate number and
kind of shares subject to the Plan, the aggregate number and kind of shares
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<PAGE>
subject to each outstanding option and the exercise price thereof shall be
appropriately adjusted by the Board of Directors, whose determination shall be
conclusive.
In the event of (a) the liquidation or dissolution of the
Company, (b) a merger or consolidation in which the Company is not the surviving
corporation, or (c) any other capital reorganization in which more than 50% of
the shares of Common Stock of the Company entitled to vote in the election of
directors are exchanged, outstanding options shall terminate, unless other
provision is made therefor in the transaction.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was
adopted by the Board of Directors on September 26, 1991. No option may be
granted under the Plan after September 25, 2001. The Board of Directors, without
further approval of the Company's stockholders, may at any time suspend or
terminate the Plan, in whole or in part, or amend it from time to time in such
respects as it may deem advisable, including, without limitation, in order that
ISOs granted hereunder meet the requirements for "incentive stock options" under
the Code, to comply with applicable requirements of the Securities Act and the
Exchange Act, and to conform to any change in applicable law or to regulations
or rulings of administrative agencies; provided, however, that no amendment
shall be effective without the requisite prior or subsequent stockholder
approval which would (a) change the class of those eligible to receive options,
(b) except as contemplated in Paragraph 12, increase the maximum number of
shares of Common Stock for which options may be granted under the Plan, (c)
extend the term of the 1991 Plan or (d) materially increase the benefits to
participants under the Plan. No termination, suspension or amendment of the Plan
shall, without the consent of the holder of an existing option affected thereby,
adversely affect his rights under such option. The power of the Committee to
construe and administer any options granted under the Plan prior to the
termination or suspension of the Plan nevertheless shall continue after such
termination or during such suspension.
14. NON-TRANSFERABILITY OF OPTIONS. No option granted under
the Plan shall be transferable otherwise than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the holder
thereof, only by him or his legal representatives. Except to the extent provided
above, options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process.
15. WITHHOLDING TAXES. The Company may (i) require the
holder of an option to pay, or the Company may withhold, cash, and/or (ii) with
the consent of the Committee (in the Contract or otherwise), accept previously
acquired shares of Common Stock and/or may withhold shares of Common Stock to be
issued with respect to the option having an aggregate fair market value
determined on the date of exercise of the option or date of disposition of the
shares issued upon exercise of the option determined in accordance with
Paragraph 5, in each case equal to the amount which it determines is necessary
to satisfy its obligation to withhold Federal, state and local income taxes or
other taxes incurred by reason of the grant or exercise of an option or the
disposition of the underlying shares of Common Stock, as the case may be. The
Company shall not be required to issue
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any shares of Common Stock pursuant to any such option until all required
payments have been made.
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse
such legend or legends upon the certificates for shares of Common Stock issued
upon exercise of an option under the Plan and may issue such "stop transfer"
instructions to its transfer agent in respect of such shares as it determines,
in its discretion, to be necessary or appropriate to (a) prevent a violation of,
or to perfect an exemption from, the registration requirements of the Securities
Act, (b) implement the provisions of the Plan or any agreement between the
Company and the optionee with respect to such shares of Common Stock, or (c)
permit the Company to determine the occurrence of a "disqualifying disposition,"
as described in Section 421(b) of the Code, of the shares of Common Stock
transferred upon the exercise of an ISO granted under the Plan.
The Company shall pay all issuance taxes with respect to the
issuance of shares of Common Stock upon the exercise of an option granted under
the Plan, as well as all fees and expenses incurred by the Company in connection
with such issuance.
17. USE OF PROCEEDS. The cash proceeds from the sale of
shares of Common Stock pursuant to the exercise of options under the Plan shall
be added to the general funds of the Company and used for such corporate
purposes as the Board of Directors may determine.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN
CONSTITUENT CORPORATIONS. Anything in this Plan to the contrary notwithstanding,
the Board of Directors may, without further approval by the stockholders,
substitute new options for prior options of a Constituent Corporation (as
defined in Paragraph 19) or assume the prior options of such Constituent
Corporation.
19. DEFINITIONS.
(a) Subsidiary. The term "Subsidiary" shall have
the same definition as "subsidiary corporation" in Section 424(f) of the Code.
(b) Parent. The term "Parent" shall have the same
definition as "parent corporation" in Section 424(e) of the Code.
(c) Constituent Corporation. The term "Constituent
Corporation" shall mean any corporation which engages with the Company, its
Parent or any Subsidiary in a transaction to which Section 424(a) of the Code
applies (or would apply if the option assumed or substituted were an ISO), or
any Parent or any Subsidiary of such corporation.
(d) Disability. The term "Disability" shall mean a
permanent and total disability within the meaning of Section 22(e)(3) of the
Code.
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20. GOVERNING LAW. The Plan, such options as may be granted
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
21. PARTIAL INVALIDITY. The invalidity or illegality of any
provision herein shall not affect the validity of any other provision.
22. STOCKHOLDER APPROVAL. The Plan shall be subject to
approval by a majority of the votes present in person or by proxy at the next
meeting of the Company's stockholders at which a quorum is present. No options
granted hereunder may be exercised prior to such approval, provided that the
date of grant of any options granted hereunder shall be determined as if the
Plan had not been subject to such approval. Notwithstanding the foregoing, if
the Plan is not approved by a vote of the stockholders of the Company on or
before September 25, 1992, the Plan and any options granted hereunder shall
terminate.
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