<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 28, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________
Commission file number 1-5492-1
NASHUA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 02-0170100
(State of incorporation) (I.R.S. Employer Identification Number)
44 Franklin Street
P.O. Box 2002
Nashua, New Hampshire 03061-2002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603) 880-2323
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 22, 1997
Common Stock, par value $1.00 6,623,215 shares (excluding 24,040 shares
held in treasury)
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NASHUA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 28, 1997 December 31,
ASSETS: (Unaudited) 1996
--------- ---------
<S> <C> <C>
Cash and cash equivalents $ 14,268 $ 20,018
Accounts receivable 21,079 20,112
Inventories
Materials and supplies 4,487 6,676
Work in process 2,168 2,498
Finished goods 8,864 7,494
--------- ---------
15,519 16,668
Other current assets 16,167 15,367
--------- ---------
Total current assets 67,033 72,165
--------- ---------
Plant and equipment 115,369 118,577
Accumulated depreciation (56,938) (58,459)
--------- ---------
58,431 60,118
--------- ---------
Intangible assets 34,096 35,606
Accumulated amortization (10,606) (10,483)
--------- ---------
23,490 25,123
--------- ---------
Investment in unconsolidated affiliate 7,242 7,218
Other assets 12,052 12,065
--------- ---------
Total assets $ 168,248 $ 176,689
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current maturities of long-term debt $ 806 $ 811
Accounts payable 22,834 22,678
Accrued expenses 22,050 24,880
Income taxes payable 1,381 2,623
--------- ---------
Total current liabilities 47,071 50,992
--------- ---------
Long-term debt 1,912 2,044
Other long-term liabilities 20,119 21,736
--------- ---------
Total long-term liabilities 22,031 23,780
--------- ---------
Common stock and additional capital 18,754 18,754
Retained earnings 84,364 85,757
Cumulative translation adjustment (3,215) (1,837)
Treasury stock, at cost (757) (757)
--------- ---------
Total shareholders' equity 99,146 101,917
--------- ---------
Commitments and contingencies
--------- ---------
Total liabilities and shareholders' equity $ 168,248 $ 176,689
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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<PAGE> 3
NASHUA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share data) Three Months Ended
------------------
March 28, March 29,
1997 1996
--------- ---------
<S> <C> <C>
Net sales $ 75,176 $ 101,497
Cost of products sold 56,611 77,451
--------- ---------
Gross margin 18,565 24,046
Research, selling, distribution and
administrative expenses 21,146 26,610
Equity in net income of Cerion Technologies (25) --
Interest expense 57 1,539
Interest income (211) (122)
--------- ---------
Loss from continuing operations
before income tax benefit (2,402) (3,981)
Income tax benefit (1,009) (1,741)
--------- ---------
Loss from continuing operations (1,393) (2,240)
Income from discontinued operation -- 206
--------- ---------
Net loss (1,393) (2,034)
Retained earnings, beginning of period 85,757 61,563
--------- ---------
Retained earnings, end of period $ 84,364 $ 59,529
========= =========
Earnings (loss) per common and common equivalent share:
Loss from continuing operations $ (.22) $ (.35)
Income from discontinued operation -- .03
--------- ---------
Net loss $ (.22) $ (.32)
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
-3-
<PAGE> 4
NASHUA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 28, March 29,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities of continuing operations:
Net loss $ (1,393) $ (2,034)
Adjustments to reconcile net loss to cash
provided by (used in) continuing operating activities:
Depreciation and amortization 3,171 4,283
Equity in net income of Cerion Technologies (25) --
Income from discontinued operations -- (206)
Net change in working capital and other assets (5,809) 1,667
-------- --------
Cash provided by (used in) continuing operating activities (4,056) 3,710
-------- --------
Cash flows from investing activities of continuing operations:
Investment in plant and equipment (1,596) (2,263)
Retirement of fixed assets 173 --
-------- --------
Cash used in investing activities of continuing operations (1,423) (2,263)
-------- --------
Cash flows from financing activities of continuing operations:
Repayment of borrowings (137) --
-------- --------
Cash used in financing activities of continuing operations (137) --
-------- --------
Cash provided by activities of discontinued operation -- 1,257
Effect of exchange rate changes on cash (134) (30)
-------- --------
Increase (decrease) in cash and cash equivalents (5,750) 2,674
Cash and cash equivalents at beginning of period 20,018 8,390
-------- --------
Cash and cash equivalents at end of period $ 14,268 $ 11,064
======== ========
Interest paid $ 42 $ 1,269
======== ========
Income taxes paid $ 1,663 $ 37
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
-4-
<PAGE> 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Indebtedness
During the first quarter of 1997, the Company established a new $18 million
secured credit facility. The new facility replaces the Company's credit facility
that was established in 1996. The new facility has a total of $18 million of
credit available under a revolving credit facility with up to $5 million of
credit available for letters of credit. Interest on amounts outstanding under
the new facility is payable at the prime rate. The new facility requires an
issuance fee of 1.5 percent on letters of credit. The new facility expires on
April 30, 1999.
Earnings Per Common and Common Equivalent Share
Earnings per common and common equivalent share is computed based on the total
of the weighted average number of common shares and, as applicable, the weighted
average number of common equivalent shares outstanding during the period. The
average common and common equivalent shares for the three month periods ended
March 28, 1997 and March 29, 1996 were 6,378,000 shares and 6,374,000 shares,
respectively.
In February 1997, the Financial Accounting Standards Board issued "Statement of
Financial Accounting Standards No. 128 Earnings per Share" ("FAS 128"). This
pronouncement will be effective for the Company's year ended December 31, 1997
financial statements. FAS 128 will supersede the pronouncement of the
Accounting Principles Board No. 15. FAS 128 eliminates the calculation of
primary earnings per share and requires the disclosure of Basic Earnings per
Share and Diluted Earnings per Share (formerly referred to as fully diluted
earnings per share), if applicable. As the Company has recorded net losses for
the three month periods ended March 28, 1997 and March 29, 1996, any common
stock equivalents would be antidilutive; therefore, earnings per common and
common equivalent share as presented on the condensed consolidated statements
of operations and retained earnings is equivalent to Basic Earnings per Share
and Diluted Earnings per Share under FAS 128.
Reclassification
Beginning in the fourth quarter of 1996, postage expenses relating to prepaid
photo mailers, which were treated as selling expenses, have been reclassified to
cost of products sold. The cost of products sold and selling expenses for the
first quarter of 1996 have been adjusted by $2.1 million to reflect the change.
Stock Options
At March 28, 1997, options for 782,180 shares of common stock were outstanding.
Stock options for an additional 277,815 shares may be awarded under the
Company's 1996 Stock Incentive Plan.
Commitments and Contingencies
In respect to patent litigation brought by Ricoh Company, Ltd., the Federal
District Court for New Hampshire decided on March 31, 1997 to enjoin the Company
from manufacturing, using or selling its NT-50 and NT-6750 toner cartridges.
Sales of these products in 1996 amounted to less than one percent of the
Company's total sales. The Court left the subject of damages, if any, to
subsequent proceedings. The Company disagrees with the Court's decision to
enjoin the Company and has filed a notice of appeal.
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<PAGE> 6
Other
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments, consisting of normal recurring
adjustments, necessary to present fairly the financial position as of March 28,
1997, the results of operations for the three month periods ended March 28, 1997
and March 29, 1996, and cash flows for the three month periods ended March 28,
1997 and March 29, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales of $75.2 million for the first quarter of 1997 were down 26 percent
from the same period in 1996. The sales decrease was due to the partial
divestiture of Cerion Technologies Inc. (Cerion) and the sale of the mainland
European photo business. Excluding the results of these units and the liquid
toner and OPC drum product lines, which the Company is exiting, the sales
decreased 9 percent from the first quarter of 1996. The majority of the
remaining sales decrease was caused by lower revenues in the Commercial Products
Group. The Company recorded a net loss from continuing operations of $1.4
million compared with a net loss of $2.2 million in the first quarter of 1996.
The net loss improvement was due to the sale of the mainland European photo
business and improved productivity and lower costs in the Commercial Products
Group, partially offset by the impact of the partial divestiture of Cerion.
The Commercial Products Group's first quarter sales decreased 15.7 percent to
$44.4 million compared to the first quarter of 1996. The decrease was primarily
in the Imaging Supplies division and was due to lower toner and cartridge
volumes and lower paper revenue. The toner volume decrease is due to declining
sales through the dealer agent channel and lower order rates from certain larger
distributors. The cartridge sales decline appears to be due to the residual
effect of quality problems experienced in 1996 and declining sales in the dealer
agent channel. The paper revenue decreased due to a decrease in the sales price
caused by an increase in the supply of paper in the marketplace. The Commercial
Products Group's operating profit increased from an operating loss of $2.7
million for the first quarter of 1996 to an operating profit of $.7 million due
to improved productivity and lower manufacturing costs.
The Photo Group's sales for the first quarter of 1997 decreased 16.9 percent to
$30.7 million compared to the first quarter of 1996 primarily due to the sale of
the mainland European photo business in the fourth quarter of 1996. Excluding
the impact of the mainland European photo business sale, sales for the first
quarter of 1997 decreased $.3 million or 1 percent due to lower volumes and
lower selling prices in the Canadian Photo business. Sales in the U.S., U.K. and
Ireland Photo businesses were unchanged in the first quarter of 1997 compared to
1996. The U.S. Photo processing sales volume increased but was offset by a
decrease in merchandise sales. Volume decreases in the U.K. and Ireland
businesses and lower pricing in the U.K. were offset by the impact of a weaker
dollar compared to the first quarter of 1996. The Photo Group recorded an
operating loss of $1.4 million for the first quarter of 1997 versus an operating
loss of $1.1 million for the same period in 1996. The increased operating loss
was primarily due to lower volumes and pricing in the U.K.
-6-
<PAGE> 7
Research, selling, distribution and administrative expenses for the first
quarter of 1997 decreased 20.5 percent or $5.5 million versus the same period of
1996. The sale of the mainland European photo business in the fourth quarter of
1996 accounted for $3.3 million of the decrease and the partial divestiture of
Cerion in the second quarter of 1996 accounted for another $1.3 million of the
decrease. Research expense decreased $.2 million due to the partial divestiture
of Cerion. Selling and distribution expense decreased $2.8 million primarily due
to the sale of the mainland European photo business and the impact of lower
sales in the Commercial Products Group. Administrative expenses decreased $2.5
million primarily due to the sale of the mainland European photo business and
the partial divestiture of Cerion.
Net restructuring and other unusual charges of $7.2 million were recorded in
1996 related to the sale of the mainland European photo business, the
divestiture of the organic photoconductor ("OPC") drum product line and other
business unit and functional realignments in Corporate and the Photo Group.
Details of the charges related to continuing operations and the activity
recorded during the first quarter of 1997 follows.
<TABLE>
<CAPTION>
Balance Current Current Balance
(In thousands) Dec. 31, Period Period Mar. 28,
1996 Provision Charges 1997
------ -------- ------ ------
<S> <C> <C> <C> <C>
Provisions for severance related to
workforce reductions $ 790 $ -- $ 190 $ 600
Provisions for assets to be sold or discarded 3,325 -- 115 3,210
Other 2,265 -- 190 2,075
------ -------- ------ ------
Total $6,380 $ -- $ 495 $5,885
====== ======== ====== ======
</TABLE>
The provision for assets to be sold or discarded relates primarily to the net
assets of the OPC drum product line and certain assets of the mainland European
photo business. All charges, excluding asset write-downs, are principally cash
in nature and are expected to be funded from operations. Disposal of the assets
is expected to be completed in 1997.
The estimated annual effective income tax benefit of 42 percent for the first
quarter of 1997 is higher than the U.S. statutory rate primarily due to the
unfavorable impact of non-deductible goodwill and state income taxes.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Working capital decreased $1.2 million from December 31, 1996 primarily due to a
$5.7 million decrease in cash caused by a $2.8 million decrease in accrued
liabilities and a $1.2 million decrease in income taxes payable. The decrease in
accrued liabilities was due to the payment of certain 1996 year end accruals.
During the first quarter of 1997, the Company established a new $18 million
secured credit facility. The new facility replaces the Company's credit facility
that was established in 1996. The new facility has a total of $18 million of
credit available under a revolving credit facility with up to $5 million of
credit available for letters of credit. Interest on amounts outstanding under
the new facility is payable at the prime rate. The new facility requires an
issuance fee of 1.5 percent on letters of credit. The new facility expires on
April 30, 1999.
-7-
<PAGE> 8
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 8, 1996, an individual plaintiff, Joshua Teitelbaum, initiated a
lawsuit against the Company, Cerion, William Blair & Co. ("Blair") and certain
Cerion directors and officers in the Circuit Court of Cook County, Illinois. On
September 4, 1996, a second individual plaintiff, Philippe Olczyk, initiated a
similar lawsuit against the Company, Cerion, Blair and certain Cerion directors
in the Circuit Court of Cook County, Illinois. Both lawsuits purport to be
brought on behalf of a class consisting of all persons (other than the
defendants) who purchased the common stock of Cerion between May 24, 1996 and
July 9, 1996.
These two cases were consolidated before the same judge. On March 24, 1997,
Teitelbaum and Olczyk, joined by a third plaintiff, Robert K. Pickup, filed a
Consolidated Amended Class Action Complaint ("Consolidated Complaint") against
the Company, Cerion, Blair, and certain Cerion directors and officers.
The Consolidated Complaint supersedes the prior complaints and also purports to
be on behalf of a class consisting of all persons (other than the defendants)
who purchased the common stock of Cerion between May 24, 1996 and July 9, 1996.
The Consolidated Complaint alleges that, in connection with the Cerion initial
public offering, the defendants issued certain materially false and misleading
statements and omitted the disclosure of material facts regarding, in
particular, certain significant customer relationships. The Consolidated
Complaint alleges that the defendants violated sections 11, 12(a)(2), and 15 of
the 1933 Securities Act, section 13 of the Illinois Blue Sky Law, and the
Illinois Consumer Fraud and Deceptive Practices Act. The Consolidated Complaint
seeks a declaration that the case may proceed as a class action; damages;
rescission of the sale of Cerion common stock by Cerion and the Company, to the
extent purchasers still hold Cerion shares, or rescissory damages, if they have
sold their Cerion stock; attorneys fees and costs; and other relief. The Company
believes the Consolidated Complaint to be without merit and intends to defend
vigorously against the consolidated cases.
In respect to patent litigation brought by Ricoh Company, Ltd., the Federal
District Court for New Hampshire decided on March 31, 1997 to enjoin the Company
from manufacturing, using or selling its NT-50 and NT-6750 toner cartridges.
Sales of these products in 1996 amounted to less than one percent of the
Company's total sales. The Court left the subject of damages, if any, to
subsequent proceedings. The Company disagrees with the Court's decision to
enjoin the Company and has filed a notice of appeal.
ITEM 5. OTHER INFORMATION
Factors Which May Affect Future Results
This report may contain forward-looking statements as that term is defined in
the Private Securities Litigation Reform Act of 1995. When used in this report,
the words "believe," "expects" and similar expressions are intended to identify
such forward-looking statements. Any such forward-looking statements and the
Company's future results of operations and financial condition are subject to
risks and uncertainties which could cause actual results to differ materially
from those anticipated and from past results. Such risks and uncertainties
include, but are not limited to, fluctuations in customer demand, intensity of
competition from other vendors, timing and acceptance of new product
introductions, general economic and industry conditions, delays or difficulties
in programs designed to increase sales and return the Company to profitability,
the possibility of a final award of material damages in the patent litigation
brought against the Company by Ricoh Company, Ltd. and the Cerion securities
litigation and other risks detailed in the Company's filings with the
Securities and Exchange Commission.
-8-
<PAGE> 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.01 Revolving Credit Promissory Note dated as of March 28, 1997.
10.02 Loan and Security Agreement dated as of March 28, 1997.
(b) Reports on Form 8-K
On April 3, 1997, the Company filed a Form 8-K concerning a ruling in the
patent litigation suit brought by Ricoh Company, Ltd.
-9-
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NASHUA CORPORATION
--------------------------------------
(Registrant)
Date: May 9, 1997 By: /s/Daniel M. Junius
- ----------------- -----------------------------------
Daniel M. Junius
Vice President-Finance,
Chief Financial Officer and Treasurer
(principal financial and duly authorized officer)
-10-
<PAGE> 1
EXHIBIT 10.01
REVOLVING CREDIT PROMISSORY NOTE
$18,000,000.00 Manchester, New Hampshire
March 28, 1997
MAKERS' NAMES AND ADDRESSES:
Nashua Corporation
a Delaware corporation
44 Franklin Street
Nashua, New Hampshire 03061 (hereinafter sometimes referred to as "Parent")
Nashua Photo Inc.
a Delaware corporation
44 Franklin Street
Nashua, New Hampshire 03061
(Nashua Corporation and Nashua Photo Inc. are sometimes referred to in the
singular as a "Maker" and collectively jointly and severally as the "Makers")
Principal Amount: Up to Eighteen Million Dollars ($18,000,000.00) ("Principal
Amount")
Maturity Date: April 30, 1999
1. PROMISE TO PAY. FOR VALUE RECEIVED, Makers hereby, jointly and severally,
promise to pay on or before April 30, 1999 to the order of Citizens Bank New
Hampshire, a guaranty savings bank organized under the laws of the State of New
Hampshire, with its place of business at 875 Elm Street, Manchester, New
Hampshire 03101 (the "Bank"), or to any holder, at 875 Elm Street, Manchester,
New Hampshire 03101 or at such other place as Bank or any subsequent holder
hereof may in writing designate in the amount and manner hereinafter specified
and in lawful currency of the United States of America, as herein provided, up
to the Principal Amount outstanding, as from time to time advanced and
readvanced by Bank, to Makers under a revolving line of credit facility as
described in a Loan and Security Agreement of even date by and between Makers
and Bank, including all subsequent extensions, modifications and amendments
thereto (the "Loan Agreement"), with interest thereon from the date hereof on
the Principal Amount from time to time outstanding at the Applicable Interest
Rate (as herein defined). This Note is issued pursuant to, and is subject to,
the terms and conditions of the Loan Agreement all of which are incorporated
herein by reference as if set forth in full herein. Any capitalized term not
otherwise defined herein shall have the meaning set forth in the Loan Agreement.
<PAGE> 2
2. INTEREST AND PRINCIPAL PAYMENTS.
2.1 Definitions. As used herein, the following terms shall have the
meanings set forth below:
2.1.1 "Applicable Notice" means either a LIBOR Rate Notice or
Floating Rate Notice;
2.1.2 "Applicable Period" means either a LIBOR Rate Period or
Floating Rate Period;
2.1.3 "Applicable Interest Rate" means either the LIBOR Rate or the
Floating Rate in effect at any time pursuant to the terms hereof on a portion or
all of the Principal Amount outstanding. In the event that the index upon which
any Applicable Interest Rate is determined is no longer published or determined,
Bank may substitute an equivalent or substitute index therefore, and Bank shall
have the right to apply a new margin to such index in its discretion in order to
provide a comparable return to the Bank as provided by the margin provided for
herein;
2.1.4 "Business Day" shall mean any day on which commercial banks
are not authorized or required to close in Manchester, New Hampshire;
2.1.5 "LIBOR Rate Notice" means Parent's irrevocable telephone
notice (confirmed in writing in accordance with Section 2.3.3 hereof) stating
that Makers elect to pay interest on the Principal Amount (or portion thereof,
in minimum principal amounts of Five Hundred Thousand Dollars ($500,000.00)) at
the LIBOR Rate (as defined herein) for the LIBOR Rate Period;
2.1.6 "LIBOR Rate Period" means a period of one month, two months,
three months or six months at Makers' election, provided, however, that no
period shall extend beyond the Maturity Date. If the proposed period would
extend beyond the Maturity Date, Makers shall not be able to select that LIBOR
Rate Period. Any LIBOR Rate Period which terminates on a non-Business Day shall
be deemed, for purposes hereof, to terminate on the next Business Day;
2.1.7 "Floating Rate Notice" means Parent's irrevocable telephone
notice stating that Makers elect to pay interest on the Principal Amount (or
allowable portion thereof) at the Floating Rate for the applicable Floating Rate
Period; and,
2
<PAGE> 3
2.1.8 "Floating Rate Period" means any period that the Principal
Amount or portion thereof is not bearing interest at the LIBOR Rate (to the time
remaining prior to the Maturity Date). Any Floating Rate Period which terminates
on a non-Business Day shall be deemed, for purposes hereof, to terminate on the
next succeeding Business Day;
2.2 Interest Rate. The interest rate will be a variable rate, which
will be changed as provided below:
2.2.1 Provided Makers are not in default under this Note (or
the Loan Agreement or the Instruments), Makers, pursuant to Section 2.3 below,
may elect as specified in the Applicable Notice pursuant to the terms hereof to
pay interest on the outstanding Principal Amount (or allowable portion thereof)
at a rate per annum equal to either (i) the LIBOR Rate defined as follows and/or
(ii) the Floating Rate defined as follows, during the Applicable Period.
1. The "LIBOR Rate" will be equal to two percent (2.0%)
above the following Index: LIBOR Rate (rounded upward, if necessary, to the
nearest fourth (4th) decimal place) as published in the Money Rates Section of
the Wall Street Journal (the "LIBOR Index") for the LIBOR Rate Period specified
in the applicable LIBOR Rate Notice (i.e., a one month election will have the
LIBOR Index for the one month quote, a two month election will have the LIBOR
Index for the two month quote) or other equivalent publication if the Wall
Street Journal ceases to publish "LIBOR" (or a specific LIBOR Rate), or any
equivalent successor to such rate, two (2) Business Days before the commencement
of such LIBOR Rate Period, as being the interest rate offered two (2) business
days before publication in the Wall Street Journal in the London Interbank
Market for deposits in Dollars for delivery on the first (1st) date of each
respective LIBOR Rate Period, and for a period comparable to such LIBOR Rate
Period elected by Makers.
2. The "Floating Rate" will be equal to the Wall Street
Journal Prime Rate, so-called, as adjusted from time to time per annum. For
purposes of calculating the Interest Rate hereunder, the "Wall Street Journal
Prime Rate" shall mean the prime rate (the base rate on corporate loans at large
U.S. money center commercial banks) as published in the Money Rates section of
the Wall Street Journal or other equivalent publication if the Wall Street
Journal no longer publishes such information (if more than one such prime rate
is published on any given day, the lowest of such published rates shall be the
Wall Street Journal Prime Rate of purposes of this Note) ("Index"). The Floating
Rate based on the Index will change each time and as of the time that the Index
changes without notice to Makers each time the Index changes during the
applicable Floating Rate Period ("Payment Change Date"). Each new Floating Rate
will become effective on the Payment Change Date.
3
<PAGE> 4
2.3 Selection of Interest Rate.
2.3.1 Makers shall elect the Applicable Rate for the outstanding
Principal Amount (or allowable portion thereof) pursuant to an Applicable
Notice. The first (1st) Applicable Notice shall be received by Bank four
Business Days prior to the first monthly payment date. For all other Applicable
Notices, Bank must receive such Applicable Notice prior to 3:00 p.m., New
Hampshire time, on a Business Day at least four (4) Business Days prior to the
last day of an Applicable Period.
2.3.2 If Makers through Parent, fail to give an Applicable
Notice at least four (4) Business Days prior to the end of an Applicable Period,
then, the Applicable Rate for the following Applicable Period shall revert to
the Floating Rate.
2.3.3 Makers shall provide Bank with a certificate signed by the
chief financial officer of Parent setting forth and reaffirming its election of
an Applicable Rate by the fifth (5th) day of every Applicable Period.
2.3.4 If Makers have elected a LIBOR Rate, the Principal Balance
shall bear interest at said rate until expiration of the LIBOR Rate Period.
2.4 Interest and Principal Payments.
2.4.1 Interest on this Note, at the Applicable Interest Rate,
shall be due and payable monthly in arrears, calculated daily upon the Principal
Balance, with the first such payment due on the first day of the next succeeding
month and each subsequent payment due on the first day of each calendar month
thereafter. If the due date for any payment required hereunder falls on a
non-Business Day, such payment shall be deemed due on the next succeeding
business day and interest at the Applicable Interest Rate shall continue to
accrue through the actual date of payment.
2.4.2 In the absence of an earlier Event of Default and
acceleration by Bank, the outstanding Principal Amount hereof together with all
accrued but unpaid interest hereon shall be due and payable in full without
further notice or demand in a lump sum on the Maturity Date.
2.4.3 Interest, at whatever Applicable Rate applies, shall be
computed on the actual number of days elapsed over a year of 360 days.
2.5 Prepayments. Prepayments are subject to the following:
2.5.1 At any time the Principal Amount (or portion thereof) is
accruing interest at a Floating Rate, prepayment, in whole or in part, is
permitted by Makers without penalty;
2.5.2 At any time the Principal Amount (or portion thereof) is
accruing interest at the LIBOR Rate prepayment in whole or in part is permitted
together with a prepayment penalty
4
<PAGE> 5
equal to the amount Bank would have earned for the Applicable LIBOR Rate Period
will be paid by Makers at the time of payment or acceleration.
2.6 Late Fees.
2.6.1 Makers shall pay to Bank in addition to all other amounts
then due a late charge (as liquidated damages) equal to five percent (5%) of any
installment of interest not received by Bank on or before the tenth (10th) day
after such payment is due. Acceptance by Bank of any late payment charge shall
not be deemed a waiver of any Event of Default or demand previously made by
Bank.
3. ADVANCES. Makers and any endorser(s) or guarantor(s) hereof agree that Bank
will make loan advances to Makers as provided for and on the terms set forth
herein and in the Loan Agreement.
4. EVENTS OF DEFAULT. Upon the occurrence of any of the following events of
default (the "Events of Default"), all sums payable under this Note shall, at
the option of Bank, become immediately due and payable upon notice without
further demand:
4.1 failure to make a payment of principal or interest on this Note, or
any other sum payable hereunder, within two (2) Business Days after it is due,
or on any other obligation of Makers to Bank, now existing or subsequently
created;
4.2 any breach, default or failure of warranty or representation caused
by Makers in connection with this Note, the Loan Agreement or with any other
document now or subsequently executed by Makers to Bank in connection with this
Note or otherwise, including, but not limited to, the other instruments, or
other documents delivered in connection herewith or therewith;
4.3 if a court or agency having jurisdiction makes a determination of
the illegality or unenforceability (in whole or in material part) of this Note
or any Instrument delivered in connection herewith; or,
4.4 if on the Maturity Date Makers have not paid its obligations
hereunder in full.
5. WAIVERS. Makers and all sureties, endorsers and guarantors of this Note
hereby (a) waive demand, presentment for payment, notice of nonpayment, protest,
notice of protest and all other notice, filing of suit and diligence in
collecting this Note, in enforcing any of the security rights or in proceeding
against any of the property covered by the Instruments, (b) agree to any
substitution, exchange, addition or release of any such property or the addition
or release of any party or person primarily or secondarily liable hereon, (c)
agree that Bank shall not be required first to institute any suit, or to exhaust
its remedies against Makers or any other person or party in order to enforce
payment of this Note or any guarantee, (d) consent to any extension,
rearrangement, renewal or postponement of time of payment of this Note and to
any other indulgence with respect hereto without notice, consent or
consideration to any of them, (e) waive
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any defense arising out of the alleged release of any parties, and (f) agree
that, notwithstanding the occurrence of any of the foregoing, except as to any
such person expressly released in writing by Bank they shall be and remain
jointly and severally, directly and primarily, liable for all sums due
hereunder.
6. RIGHT OF SET-OFF. In the event of default, or upon notice of issue of any
legal process by which process any of Makers' assets in the possession of Bank
may be trusteed, attached or levied upon, and in addition to the other rights
contained herein, Bank shall have the immediate and unconditional right of
off-set against all demand deposits, accounts, certificates, securities, choses
in action and all other rights or property of Makers or any guarantor reflecting
an obligation of Bank to Makers or of any guarantor, or any endorser, or any of
them, which are then maintained with (or in existence as against) Bank ("Cash
Collateral"). Makers and all guarantors hereby expressly grant to Bank a
security interest in the said Cash Collateral pursuant to RSA 382-A:9-101 et
seq.
7. GENERAL PROVISIONS.
7.1 No delay or omission on the part of Bank in exercising any right
hereunder shall operate as a waiver of such right, or of any other right of
Bank, nor shall any delay, omission or waiver on any one occasion be deemed a
bar to or waiver of the same or any other right on any future occasion. No
single or partial exercise of a power hereunder shall preclude other exercises
thereof, or the exercise of any other power hereunder.
7.2 Any reference herein to a party in the masculine gender shall be
construed in the feminine or neuter gender, as the context may require.
7.3 In addition to any other right or remedy set forth in the
Instruments, if this Note is in default, or is collected or attempted to be
collected by the initiation or prosecution of any suit or through any probate or
bankruptcy court, or by any other judicial proceeding, or is placed in the hands
of an attorney for collection, then Makers shall pay, in addition to all other
amounts owing hereunder, all reasonable collection costs, court costs,
appraisers fees and reasonable attorney's fees and every other reasonable cost
incurred by Bank.
7.4 This Note shall be deemed delivered and accepted by Bank in the
State of New Hampshire and shall be governed exclusively by the laws of the
State of New Hampshire. Makers hereby agree that any action under this Note
shall be maintained in a court of competent jurisdiction located therein, and
consent to the jurisdiction of any such New Hampshire Court for all purposes
connected herewith. Makers consent to the jurisdiction of any court in any state
in which property of Makers is located. Any action by Makers against Bank may be
maintained only in the State and Federal courts in the State of New Hampshire.
7.5 In the event any payment of principal or interest received upon
this obligation and paid by Makers or any guarantor, surety, co-maker or
endorser, shall be deemed by final order of a court of competent jurisdiction to
have been a voidable preference or fraudulent conveyance under the bankruptcy or
insolvency laws of the United States, or otherwise, then in
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such event to the extent thereof, the obligation of the undersigned, or any
guarantor, surety, co-maker or endorser shall, jointly and severally, survive as
an obligation due hereunder and shall not be discharged or satisfied by said
payment or payments, which obligation shall be payable ON DEMAND with interest
as provided herein, notwithstanding return by Bank hereof to said parties of
this original hereof or any guaranty, endorsement or the like.
7.6 This Note shall inure to the benefit of Bank, and subject to the
terms of the Loan and Security Agreement its successors, assigns, endorsees and
any person to whom Bank may grant any interest in this Note, including without
limitation, a participation interest by another bank or financial institution,
and shall be binding upon the undersigned and the successors, assigns, heirs,
executors, administrators and other legal representatives thereof; this Note is
not intended to create any right or other cause of action in or on behalf of any
person other than Bank, its successors, assigns, endorsees and any person to
whom Bank may grant any interest in this Note.
7.7 To the extent possible, each provision of this Note shall be
interpreted in a manner as to be valid, legal and enforceable under applicable
law. If any provision of this Note shall be held invalid, illegal or
unenforceable, such provision shall be ineffective only to the extent of such
invalidity, illegality or unenforceability and the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
7.8 This Note may be extended, modified, or renewed by mutual agreement
of Bank and Makers without releasing, discharging or affecting the liability of
Makers or any sureties, endorsers or guarantors of this Note.
7.9 The Makers shall be jointly and severally liable hereunder.
7.11 This Note shall have the effect of an instrument executed under
seal.
7.12 The undersigned acknowledges receipt of an exact copy of this
Note.
IN WITNESS WHEREOF, Makers have caused this Note to be duly executed as of the
date first above written.
IN THE PRESENCE OF: MAKERS:
NASHUA CORPORATION
/s/Denise A. Poulos By: /s/Daniel M. Junius
- --------------------- --------------------
Witness Daniel M. Junius
Vice President
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NASHUA PHOTO INC.
/s/Denise A. Poulos By: /s/Daniel M. Junius
- ------------------- --------------------
Witness Daniel M. Junius
Treasurer
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
On this the 28th day of March, 1997, before me, the undersigned officer,
personally appeared Daniel M. Junius, who acknowledged himself to be the Vice
President of Nashua Corporation, a corporation, and that he as such Vice
President, being authorized so to do, executed the foregoing instrument for the
purposes therein contained on behalf of the corporation.
/s/Denise A. Poulos
-------------------------------
Justice of the Peace
My Commission Expires: 3/31/98
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STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
On this the 28th day of March, 1997, before me, the undersigned officer,
personally appeared Daniel M. Junius, who acknowledged himself to be the
Treasurer of Nashua Photo Inc., a corporation, and that he as such Treasurer,
being authorized so to do, executed the foregoing instrument for the purposes
therein contained on behalf of the corporation.
/s/Denise A. Poulos
-------------------------------
Justice of the Peace
My Commission Expires: 3/31/98
9
<PAGE> 1
EXHIBIT 10.02
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (the "Agreement") is dated as of this
28th day of March, 1997, by and between Nashua Corporation, a Delaware
corporation, with a mailing address at 44 Franklin Street, Nashua, New Hampshire
03061(hereinafter sometimes referred to as "Parent"), and Nashua Photo Inc., a
Delaware corporation (hereinafter each of these enterprises including Parent is
sometimes referred to in the singular as a "Borrower" and collectively with
Parent as the "Borrowers") and Citizens Bank New Hampshire, a guaranty savings
bank organized under the laws of New Hampshire, with a place of business at 875
Elm Street, Manchester, New Hampshire 03101 (hereinafter referred to as the
"Bank").
In consideration of the mutual promises, covenants and agreements herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. RECITALS.
1.1 Borrowers have made certain representations to Bank as contained in
this Agreement or as referenced herein, and have requested to borrow from Bank
up to an aggregate amount of Eighteen Million Dollars ($18,000,000.00) in the
form of a revolving line of credit loan and letter of credit facilities on the
terms and conditions more specifically provided herein.
1.2 Bank, in reliance on said representations of Borrowers, has agreed to
lend funds to Borrowers on the terms and conditions contained herein.
1.3 Bank has requested security for such loans in the form of Uniform
Commercial Code security interests in the Accounts Receivable and Inventory of
Borrowers as provided herein.
2. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings set forth below (any term of an accounting nature not otherwise defined
herein shall have the meaning usually assigned to it under generally accepted
accounting principles applied in a consistent fashion):
2.1 "Accounts" and "Accounts Receivable" shall mean, "accounts" as defined
in the UCC and also all accounts, accounts receivable, notes, drafts, chattel
paper, acceptances, contracts, contract rights, bills, and all other debts,
obligations and liabilities in whatever form, owing to Borrowers from any
person, firm or corporation or any other legal entity, whether now existing or
hereafter arising, now or hereafter received by or belonging or owing to
Borrowers for goods sold by them or for services rendered by them, all
guarantees and securities thereof, all
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right, title and interest of Borrowers in the merchandise or services which gave
rise thereto, including the rights of reclamation and stoppage in transit, all
rights of an unpaid seller of merchandise or services, together with all cash
and non-cash proceeds of any of the foregoing;
2.2 "Affiliate" shall mean any Person that directly or indirectly
controls, or is under common control with, or is controlled by, the Borrowers.
As used in this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") shall mean the possession,
directly or indirectly, of power to direct or cause the direction of the
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise); provided that, in any
event, any Person that owns directly or indirectly securities having 5% or more
of the voting power for the election of directors or other governing body of a
corporation or, 5% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person. Notwithstanding the
foregoing, the definition of "Affiliate" shall not encompass any individual
solely by reason of his or her being a director, officer or employee of the
Borrowers or any of their Subsidiaries;
2.3 "Agreement" or the "Loan Agreement" refers to this Loan and Security
Agreement, and to all annexes, schedules and exhibits forming a part of it;
2.4 "Availability" shall mean the sum of Eighteen Million Dollars
($18,000,000.00);
2.5 "Business Day" shall mean any day on which commercial banks are not
authorized or required to close in Manchester, New Hampshire;
2.6 "Code" shall mean the Internal Revenue Code of 1986, as amended;
2.7 "Collateral" shall mean:
2.7.1 all Accounts and Accounts Receivable;
2.7.2 all Inventory;
2.7.3 all Chattel Paper as defined in the UCC;
2.7.4 all books, records and information relating to the
Collateral and/or to the operation of Borrowers' business, and all rights of
access to such books, records and information;
2.7.5 all liens, guarantees, rights, remedies and privileges
pertaining to any of the foregoing, including the right of stoppage in transit;
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2.7.6 all substitutions, replacements, after acquired property or
accessions thereto and products and proceeds thereof, including without
limitation all insurance proceeds, arising out of any of the foregoing (2.7.1
through 2.7.5);
2.7.7 the Pledged Account defined in Section 3.10.4;
2.8 "Consolidated" when used with reference to any term defined herein
means that term as applied to the accounts of Borrowers and their Subsidiaries
consolidated in accordance with generally accepted accounting principles,
consistently applied;
2.9 "Consolidated Current Assets" means cash, and cash equivalents of
Borrowers and their Subsidiaries calculated, in accordance with generally
accepted accounting principles consistently applied, together with Accounts
Receivables exclusive of (i) intercompany Accounts Receivable; (ii) those
Accounts Receivable not reasonably collectible within one year; and (iii)
Accounts Receivable outstanding greater than one (1) year;
2.10 "Consolidated Current Liabilities" means all liabilities of Borrowers
and their Subsidiaries which would, in accordance with generally accepted
accounting principles consistently applied, be classified as current liabilities
of Borrowers and their Subsidiaries, including, without limitation, all rental
payments due under leases required to be capitalized in accordance with
applicable Statements of Financial Accounting Standards and fixed prepayments of
and sinking fund payments with respect to Indebtedness, which payments are
required to be made within one (1) year from the date of determination;
2.11 "Consolidated Net Income" means, for any period, the net income of
Borrowers and their Subsidiaries on a consolidated basis for such period, after
all expenses, taxes and other proper charges, determined in accordance with
generally accepted accounting principles, consistently applied eliminating (i)
all intercompany items, (ii) all earnings or losses attributable to equity
interests in entities that are not Subsidiaries unless actually received or paid
by Borrowers or their Subsidiaries, (iii) all income arising from the
forgiveness, adjustment or negotiated settlement of any Indebtedness, and (iv)
any increase or decrease of income arising from any change in the method of
accounting including any changes in applicable financial accounting standards;
2.12 "Consolidated Subsidiary" shall mean, for any Person, each Subsidiary
of such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated with
the financial statements of such Person in accordance with generally accepted
accounting principles, consistently applied;
2.13 "Consolidated Tangible Net Worth" means, at any dates, the sum of
Consolidated shareholders' equity, less goodwill and less the cumulative
translation adjustment as shown on Borrowers' and their Subsidiaries
Consolidated balance sheet, as determined in accordance with generally accepted
accounting principles, consistently applied, eliminating any
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effect resulting from the adoption of financial accounting standards different
from those in effect as of the date hereof;
2.14 "Costs of Collection" include, without limitation, all reasonable
attorneys' fees, and out-of-pocket expenses incurred by Bank's attorneys, and
all other costs incurred by Bank, including such reasonable costs and expenses
which are incurred in connection with Bank's efforts to collect any of the
Liabilities and/or to enforce any of its rights, remedies, or powers against or
in respect of Borrowers, whether or not suit is instituted in connection with
such efforts. The Costs of Collection shall be added to the Liabilities of
Borrowers to Bank, as if such were lent, advanced and credited by Bank to
Borrowers, or for the benefit of Borrowers;
2.15 "Environmental Claim" shall mean, with respect to any Person, any
written notice, claim, demand or other written communication (collectively, a
"claim") by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or release into the
environment by such Person, of any Hazardous Material at any location, whether
or not owned by such Person, or (ii) violation, of any Environmental Law. The
term "Environmental Claim" shall include any claim by any Governmental Person
for enforcement, cleanup, removal, response, remedial or other actions or
damages pursuant to any applicable Environmental Law, and any claim by any third
party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the presence of Hazardous
Materials or arising from alleged injury or threat of injury to human or animal
health or safety or to the environment;
2.16 "Environmental Laws" shall mean any and all present and future
Governmental Rules relating to the regulation or protection of human health or
safety or of the environment or to emissions, discharges, release or threatened
releases of pollutants, contaminants, chemicals or toxic or hazardous substances
or wastes (including Hazardous Materials) into the indoor or outdoor
environment, including ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals or toxic or hazardous substances or wastes.
The term "Environmental Law" shall include the terms and conditions of any
Governmental Approval issued under any Environmental Law or with respect to any
Hazardous Material;
2.17 "Event of Default" refers to those events set forth in Section 10
hereof;
2.18 "Governmental Approvals" shall mean any authorization, consent,
approval, license, lease, ruling, permit, waiver, exemption, filing, or
registration by or with any Governmental Person;
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2.19 "Governmental Person" shall mean any national (Federal or foreign),
state or local government, any political subdivision or any governmental,
quasi-governmental, judicial, public or statutory instrumentality, authority,
agency, body or entity, including the PBGC, Federal Deposit Insurance
Corporation, the Comptroller of the Currency, the Board of Governors of the
Federal Reserve System, any central bank or any comparable authority;
2.20 "Governmental Rules" shall mean any law, rule, regulation, ordinance,
order, code, judgment, decree, directive, written guideline or policy, or any
similar form of decision of, or any interpretation or administration of any of
the foregoing by, any Governmental Person;
2.21 "Hazardous Material" shall mean, collectively, (i) any petroleum or
petroleum products, flammable explosives, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCBs), (ii) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes, " "restricted hazardous wastes," "toxic
substances," "toxic pollutants," "contaminants," "infectious wastes,"
"pollutants" or words of similar import under any Environmental Law and (iii)
any other chemical or other material or substance, exposure to which or use of
which is now or hereafter prohibited, limited or regulated under any
Environmental Law;
2.22 "Indebtedness" means all obligations, contingent and otherwise, which
should, in accordance with generally accepted accounting principles consistently
applied, be classified upon Borrowers' and their Subsidiaries' Consolidated
balance sheet as liabilities, but in any event including, without limitation,
liabilities secured by any mortgage on property owned or acquired subject to
such mortgage, whether or not the liability secured thereby shall have been
assumed, and also including, without limitation, (i) all guaranties,
endorsements and other contingent obligations in respect of Indebtedness of
others, whether or not the same are or should be so reflected in said balance
sheet, except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business which have
not been protested or rejected, and (ii) the present value of any lease payments
due under leases required to be capitalized in accordance with applicable
Statements of Financial Accounting Standards, determined in accordance with
applicable Statements of Financial Accounting Standards;
2.23 "Instruments" shall mean the Loan Agreement, the Note, the documents
and filings evidencing the Liens, and all other instruments, documents or
writings executed or delivered (or to be executed or delivered from time to
time) by Borrowers to Bank in connection with the Loan;
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2.24 "Inventory" shall mean "inventory" as defined in the UCC and also all
goods, wares, merchandise, raw materials (in place or on back order for which
the Borrowers have already tendered payment or possess title), work in process,
finished goods, and other tangible personal property of every description held
for sale or lease or furnished or to be furnished under a contract or contracts
of service by Borrowers, or used or consumed or to be used or consumed in
Borrowers' business but excluding expendable tools, dies and repair parts (not
held for resale), and all goods of said description which are in transit, and
all returned, repossessed and rejected goods of said description, and all such
goods of said description which are detained from or rejected for entry into the
United States, and all documents (whether or not negotiable) which represent any
of the foregoing, whether any of the same are now owned or subsequently acquired
or manufactured and wherever located, all the products thereof, and all cash and
non-cash proceeds of the foregoing, including insurance proceeds;
2.25 "Letter of Credit" shall have the meaning assigned to such term in
Section 3.7;
2.26 "Letter of Credit Documents" shall mean, with respect to any Letter
of Credit, collectively, any application for any Letter of Credit and any other
agreements, reimbursement document, instruments, guarantees or other documents
(whether general in application or applicable only to such Letter of Credit)
governing or providing for (i) the rights and obligations of the parties
concerned or at risk with respect to such Letter of Credit or (ii) any
collateral security for any of such obligations;
2.27 "Letter of Credit Liability" shall mean, without duplication, at any
time and in respect of any Letter of Credit, the sum of (i) the undrawn face
amount of such Letter of Credit plus (ii) the aggregate unpaid principal amount
of all Reimbursement Obligations of the Borrowers at such time due and payable
in respect of all drawings made under such Letter of Credit;
2.28 "Liability" and "Liabilities" shall mean any and all liabilities,
debts and obligations of Borrowers to Bank under any of the Instruments,
including, but not limited to the Loan, the Note, and any Letters of Credit;
each of every kind, nature and description, whether presently existing, arising
or incurred in the future, contingent or direct, including without implied
limitation, all Costs of Collection;
2.29 "Lien" or "Liens" refers to the security interests under Article 9 of
the Uniform Commercial Code ("UCC") which secure the Note and all of Borrowers'
Liabilities to Bank;
2.30 "Loan" refers to the revolving line of credit loan to Borrowers and
the Letters of Credit issued in favor of the Borrowers, both as more
particularly described in Section 3 below;
2.31 "Maturity Date" shall have the meaning set forth in Section 3.1,
below;
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2.32 "Note" refers to the Revolving Credit Promissory Note of Borrowers,
of even date, delivered to Bank to evidence their obligations to Bank on the
Loan;
2.33 "Person" refers to any individual, limited liability company,
partnership, joint venture, corporation, trust, voluntary association,
unincorporated organization or government, or any department or agency thereof;
2.34 "Quick Ratio" means the ratio of Consolidated Current Assets to
Consolidated Current Liabilities;
2.35 "Receivable Collateral" refers to that portion of the Collateral
which consists of Borrowers' Accounts and Accounts Receivable, Chattel Paper,
instruments, documents of title; whether now existing or hereafter arising, and
the products and proceeds thereof;
2.36 "Reimbursement Obligations" shall mean, at any time, the obligations
of the Borrowers then outstanding, or which may thereafter arise in respect of
all Letters of Credit then outstanding, to reimburse amounts paid by the Bank in
respect of any drawings under a Letter of Credit;
2.37 "Subsidiary" shall mean, for any Person, any corporation, partnership
or other entity of which at least a majority of the securities or other
ownership interests having by their terms ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
of such corporation, partnership or other entity (irrespective of whether or not
at the time securities or other ownership interests of any other entity shall
have or might have voting power by reason of the happening of any contingency)
is at the time directly or indirectly owned or controlled by such Person or one
or more Subsidiaries of such Person. "Wholly Owned Subsidiary" shall mean any
such corporation, partnership or other entity of which all of the equity
securities or other ownership interests (other than, in the case of a
corporation, directors' qualifying shares) are so owned or controlled; and
2.38 "UCC" refers to the Uniform Commercial Code as set forth in New
Hampshire RSA Section 382-A, as amended;
3. THE REVOLVING CREDIT LOAN.
3.1 Bank hereby establishes a line of credit (hereinafter the "Revolving
Credit") in Borrowers' favor in the amount of Borrowers' Availability, but in no
event to exceed Eighteen Million Dollars ($18,000,000.00). All advances made by
Bank under the within Agreement, and all of Borrowers' other Liabilities to Bank
under or pursuant to the within Agreement, shall, in the absence of an earlier
Event of Default, be due and payable in full on April 30, 1999 (the "Maturity
Date"), all as provided in the Note of Borrowers.
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3.2 Subject to the terms and conditions of this Agreement and of the
Instruments, and the continued non-existence of any default or any event,
circumstance, act or omission which with the passage of time would constitute an
Event of Default, Borrowers through Parent (as more specifically set forth in
Section 3A.) may request advances and readvances from Bank from time to time
hereafter in amounts up to the then aggregate of Borrowers' Availability, which
advances Bank shall make pursuant to the requirements of this Agreement.
Borrowers agree that they shall not request any advances hereunder which would
cause the aggregate amount of advances outstanding hereunder to exceed the
Availability. Any termination of the Revolving Credit, whether by acceleration
of the Liabilities by Bank or as a result of the existence of an Event of
Default, shall relieve Bank of its obligation to make advances under the
Revolving Credit, or otherwise lend money hereunder, and shall in no way
release, terminate, discharge or excuse Borrowers from their absolute duty and
agreement to pay or perform the Liabilities.
3.3 If at any time the unpaid principal amount of the Revolving Credit
exceeds the Borrowers' Availability, Borrowers shall on the next business day,
upon notice from Bank, make a payment on the Note in an amount equal to such
excess, and thereafter Bank may, without prior notice to Borrowers, charge any
accounts of Borrowers with Bank to effect such payment.
3.4 At the time of each advance or readvance made under or pursuant to
this Agreement, Borrowers shall immediately become indebted to Bank for the
amount thereof. Each such advance may be (i) credited by Bank to any deposit
account of Borrowers with any bank with which Borrowers maintain a deposit
account, (ii) paid to Borrowers, or (iii) delivered otherwise as so authorized
by Borrowers.
3.5 Prior to the making of the first advance under the Revolving Credit,
Borrowers shall have satisfied the requirements set forth in Section 9 below.
Thereafter, requests for advances under the Revolving Credit may be made by
Parent on any Business Day in writing, by telephone or by facsimile, by a
representative of Borrowers. Borrowers agree to indemnify and hold Bank harmless
for any action, loss or expense taken or incurred by Bank in reliance upon any
telephone or facsimile request which Bank in good faith believes to have been
made by a duly authorized representative of Parent. If such a request is
received by Bank prior to 12:00 Noon on a Business Day, the advance shall be
made on such Business Day, and otherwise on the next Business Day. Each request
for an advance under the Revolving Credit by the Parent shall constitute a
confirmation by Borrowers that they are in compliance with all covenants
contained in any of the Instruments, and Bank may, at its option, require a
letter signed by the assistant treasurer, treasurer or chief financial officer
of Parent or any Borrower to such effect.
3.6 Subject to the terms and conditions of this Agreement, the
Availability may be utilized, upon the request of the Parent, in addition to the
loans provided for by Section 3.2, by the issuance by the Bank of letters of
credit (collectively, "Letters of Credit") for the account of the Borrowers;
provided that in no event shall (i) the aggregate amount of all Letter of Credit
Liabilities, together with the aggregate principal amount outstanding of the
loans provided for by Section 3.2 exceed the aggregate amount of the
Availability as in effect from time to time, (ii)
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the outstanding aggregate amount of all Letter of Credit Liabilities exceed Five
Million Dollars ($5,000,000.00) and (iii) the expiration date of any Letter of
Credit extend beyond the earlier of the Maturity Date and the date thirteen (13)
months following the issuance of the Letter of Credit.
3.6.1 The Borrowers through the Parent shall give the Bank at
least three (3) Business Days' prior notice (effective upon receipt) specifying
the Business Day (which shall be no later than thirty (30) days preceding the
Maturity Date) each Letter of Credit is to be issued and describing in
reasonable detail the proposed terms of such Letter of Credit (including its
beneficiary) and the nature of the transactions or obligations proposed to be
supported.
3.6.2 Upon receipt from the beneficiary of any Letter of Credit
of any demand for payment under such Letter of Credit, the Bank shall promptly
notify Borrowers through the Parent of the amount to be paid by the Bank as a
result of such demand, the date on which payment is to be made or has been made
by the Bank to such beneficiary in respect of such demand. The Borrowers hereby
unconditionally agree to pay and reimburse the Bank for the amount of each
payment made in accordance with such Letter of Credit on or before the Business
Day following the date on which payment is to be made by the Bank to the
beneficiary under such Letter of Credit, without presentment, demand, protest or
other formalities of any kind.
3.6.3 Forthwith upon its receipt of a notice referred to in
clause 3.6.2 of this Section 3.6, the Borrowers shall advise the Bank whether or
not the Borrowers intend to borrow under Section 3.2 to finance their obligation
to reimburse the Bank for the amount of the related demand for payment and, if
they do, the Borrowers shall submit a notice of such borrowing as provided in
Section 3.5.
3.6.4 Upon the issuance of any Letter of Credit, the Borrowers
shall pay to the Bank in respect of each Letter of Credit an issuance fee in an
amount equal to 1.5% of the face amount of such Letter of Credit.
3.6.5 The issuance by the Bank of each Letter of Credit shall be
subject, in addition to the conditions precedent set forth in Section 9, to the
conditions precedent that (i) such Letter of Credit shall be in such form, and
contain such terms as shall be satisfactory to the Bank consistent with its then
current practices and procedures with respect to letters of credit of the same
or similar type and (ii) the Borrowers shall have executed and delivered such
applications, agreements, reimbursement agreements and other instruments
relating to such Letter of Credit as the Bank shall have reasonably requested
consistent with its then current practices and procedures with respect to
letters of credit of the same type and consistent with the terms of this
Agreement; provided that in the event of any conflict between any such
application, agreement, reimbursement agreement or other instrument and the
provisions of this Agreement, the provisions of this Agreement shall control.
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3.6.6 Without affecting the Borrowers' liabilities or
indemnification obligations under any other section of this Agreement, the
Borrowers agree to indemnify the Bank, and their respective Affiliates,
directors, officers, employees, attorneys and agents from, and hold each of them
harmless against, any and all losses, liabilities, damages or expenses incurred
by any of them in connection with or by reason of any actual or threatened
investigation, litigation or other proceeding relating to (i) the execution and
delivery of any Letter of Credit; (ii) the use of the proceeds of any drawing
under any Letter of Credit; or (iii) the transfer or substitution of, or payment
or failure to pay under, any Letter of Credit, including the reasonable fees and
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding, but excluding damages, losses, liabilities or
expenses to the extent, but only to the extent, incurred by reason of (a) the
negligence, gross negligence or willful misconduct of the Bank in determining
whether a document presented under any Letter of Credit complies with the terms
of such Letter of Credit or (b) the Bank's willful or voluntary failure to pay
under any Letter of Credit after presentation to it of documents strictly
complying with the terms and conditions of such Letter of Credit. It shall not
be a condition to any such indemnification that the Bank shall be a party to any
such investigations, litigation or other proceeding. Nothing in this Section 3.6
is intended to limit the Borrowers' payment obligations under this Agreement.
3.6.7 Except as specified below, the Borrowers assume all risks
of the acts or omissions of any beneficiary of any Letter of Credit with respect
to the use of the Letter of Credit. None of the Bank's nor any of its respective
Affiliates, officers, directors, employees, attorneys or agents shall be liable
or responsible for: (i) the use which may be made of the Letter of Credit or for
any acts or omissions of any beneficiary of any Letter of Credit in connection
with such Letter of Credit; (ii) the validity, or genuineness of documents
presented to the Bank which otherwise conform to the requirements of the Letter
of Credit, or of any endorsement on such documents, even if such documents
should in fact prove to be in any or all respect invalid, fraudulent or forged;
(iii) payment by the Bank against presentation of documents which do not comply
with the terms of any Letter of Credit, including failure of any documents to
bear any reference or adequate reference to such Letter of Credit; or (iv) any
other circumstances whatsoever in making or failing to make payment under any
Letter of Credit; provided that the Borrowers shall have a claim against the
Bank to the extent, but only to the extent, of any direct, as opposed to
consequential, damages suffered by the Borrowers which the Borrowers prove were
caused by (a) the Bank's negligence, gross negligence or willful misconduct in
determining whether a document presented under any Letter of Credit complies
with the terms of such Letter of Credit or (b) the Bank's willful or voluntary
failure to pay under the Letter of Credit after presentation to it of documents
strictly complying with the terms and conditions of such Letter of Credit. In
furtherance and not in limitation of the foregoing, the Bank may accept
documents that appear on their face to be in order, without responsibility for
further investigation.
3.7 3.7.1 An account shall be opened on the books of Bank
(hereinafter the "Loan Account"), in which account a record shall be kept of all
advances made by Bank to Borrowers under or pursuant to this Agreement, and all
payments thereon.
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3.7.2 Bank may also keep a record (either in the Loan Account or
elsewhere, as Bank may from time to time elect) of all interest, service
charges, costs, expenses and other debits owed Bank on account of the loan
arrangement contemplated hereby, and of all credits against such amounts so
owed.
3.7.3 All credits against Borrowers' indebtedness indicated in
the Loan Account shall be conditional upon final payment to Bank of the items
giving rise to such credits. The amount of any item credited against the Loan
Account which is not so paid or which is charged back against Bank for any
reason may be charged as a debit to the Loan Account, or may be charged back
against any deposit account maintained by Borrowers with Bank, and shall be a
Liability, in each instance whether or not the item so charged back or not so
paid is returned, provided that to the extent the Bank has possession of an item
which is charged back, Bank shall return such item to Borrowers.
3.7.4 Both the amount owed Bank as indicated in the record
described in Section 3.7.2 above, and the current balance of the Loan Account
are, in the absence of an earlier Event of Default, due and payable in full on
April 30, 1999, all as provided in the Note of Borrowers. Until payment in full,
however and whenever the same shall occur, interest shall be payable as provided
in the Note, and any service charges, costs, expenses and other debits owed Bank
on account of the Loan arrangement contemplated hereby (other than loans and
advances reflected in the Loan Account) shall be payable on demand, and if not
so paid, (i) added to the Loan Account during the month in which such item
arose, or (ii) charged to any deposit account maintained by Borrowers with Bank,
as Bank may determine in each instance.
3.7.5 Any statement rendered by Bank to Borrowers shall be
considered correct and accepted by Borrowers, and shall be conclusively binding
upon Borrowers unless Borrowers provide Bank with a written objection thereto
within twenty (20) Business Days from the mailing of such statement, which
written objection shall indicate, with particularity, the reason for such
objection.
3.8 All loans and advances made to Borrowers under the Revolving Credit
shall bear interest, until repaid, at a rate set forth in the Note, and shall be
subject to all of the other terms and conditions set forth in the Note.
3.9 Borrowers authorize Bank to charge any account which Borrowers
maintain with Bank for any payments due from Borrowers after applicable grace
periods, if any.
3.10 The Chase Manhattan Bank Letters of Credit. Upon the date of
execution hereof the Borrowers confirm and agree that they are obligated to
reimburse Chase Manhattan Bank ("Chase"), as Agent for The First National Bank
of Boston, Bank of Montreal and itself, for any amounts drawn under the letters
of credit defined in Section 3.10.1 below. Borrowers further hereby confirm and
agree that until such time as all of said letters of credit are canceled
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the following provisions shall apply to this Agreement and to the extent that
any of the provisions of this Section 3.10 conflict with any other provision of
the Agreement or any of the Instruments the terms of this Section 3.10 shall
control:
3.10.1 For purposes hereof a "Chase Letter of Credit" means
individually one of the following and "Chase Letters of Credit" means
collectively the following letters of credit:
(i) Letter of Credit No. T-387984 in the available amount of
$1,117,833;
(ii) Letter of Credit No. T-388031 in the available amount of
$1,031,590;
(iii) Letter of Credit No. T-388024 in the available amount of
$818,223;
(iv) Letter of Credit No. T-387829 in the available amount of
$655,000;
(v) Letter of Credit No. T-384442 in the available amount of
$69,375;
(vi) Letter of Credit No. T-388008 in the available amount of
$50.000;
3.10.2 Until the Chase Letters of Credit are terminated or
surrendered the Availability hereunder shall be reduced on a dollar for dollar
basis by the face amount of each Chase Letter of Credit.
3.10.3 In the event that a draw is made under any of the Letters of
Credit, Borrowers hereby authorize the Bank, in Bank's sole discretion, to
advance funds under the Revolving Credit in order to satisfy such draw, and the
Borrowers shall immediately become indebted to Bank for said amounts in
accordance with the terms of this Agreement and the Instruments.
3.10.4 In order to further secure its obligations to the Bank under
this Section 3.10, in addition to the Collateral pledged to Bank elsewhere in
this Agreement, Borrowers upon or prior to execution of this Agreement shall
establish a segregated account with Bank in the minimum amount of Five Hundred
Thousand Dollars ($500,000.00) in a form reasonably acceptable to the parties
hereto (the "Pledged Account"). The Pledged Account shall be a restricted
account and the Borrowers shall have no right to remove any cash from the
Pledged Account. Borrowers hereby pledge, deliver, assign and grant a security
interest to Bank in the Pledged Account. In the event that any draw is made
pursuant to any of the Letters of Credit, in addition to the remedies set forth
herein and in Section 3.10.3, the Bank shall have the right to reimburse Chase
for any sums paid on the draw.
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3.10.5 Borrowers know of no event or occurrence which would give the
beneficiaries of the Chase Letters of Credit the right to request a draw.
Borrowers shall notify Bank within 24 hours of receiving notice of any requested
draw on any Chase Letter of Credit.
3.10.6 The Borrowers shall use their best efforts to obtain evidence
of the termination of the Chase Letters of Credit or replacement thereof with
Letters of Credit issued by the Bank within 30 days of the date hereof.
3.10.7 If the Chase Letters of Credit have not been terminated
within forty-five (45) days of the date hereof, Borrowers shall deposit with
Chase cash in an amount equal to the then outstanding available amount of the
Chase Letters of Credit and grant to Chase a security interest in such cash or
any investments thereof in order to cause Chase to release its security interest
in the assets of Borrower.
3.10.8 Upon replacement or termination of all of the Letters of
Credit the Bank shall release the Pledged Account to Borrowers.
3.11 Foreign Exchange Contracts Reserve. Bank shall reserve an amount
under the Revolving Credit equal to ten percent (10%) of the face amount of the
outstanding forward purchase or sale contracts ("Foreign Exchange Contracts") up
to a maximum of Five Hundred Thousand Dollars ($500,000.00) for Foreign Exchange
Contracts entered into at Borrowers' request and on Borrowers' behalf by Bank's
International Department (the "Reserves"). Reserves shall be used to margin
Foreign Exchange Contracts as described above, and shall be treated as advances
under the Revolving Credit for purposes of determining availability under
Section 3.1, above. Bank reserves the right to make advances under the Revolving
Credit to cover any losses incurred by Bank's International Department by reason
of Borrowers' failure to perform under any Foreign Exchange Contract entered
into with Bank. Such advances shall be made immediately upon demand by Bank's
International Department whether or not so instructed by Borrowers. Conversely,
any gains resulting from Borrowers' failure to perform under a Foreign Exchange
Contract entered into with Bank shall be credited as payments on the Revolving
Credit. In this regard, Bank's International Department will communicate
directly to Bank's Lending Group the amount to be reserved under the Revolving
Credit as a Reserve before entering into a Forward Purchase Contract. To the
extent aggregate advances outstanding under the Revolving Credit exceed the
maximum amount set forth in Section 3.1 as a result of Reserves, Borrowers shall
immediately pay down the outstanding balance to be within such maximum amount.
3A. NATURE OF THE BORROWERS' RIGHTS AND OBLIGATIONS.
3A.1 The obligations of each of the Borrowers hereunder shall be joint and
several and any obligation expressed herein as an obligation of any Borrower or
the Borrowers is an
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obligation owed by all the Borrowers jointly and severally, irrespective of, to
or for the account of which of the Borrowers the proceeds are disbursed. Without
limiting the generality of the foregoing, it shall not be a defense for any
Borrower hereunder that as a consequence of lack of capacity or authority or for
any other reason whatsoever (including, without limitation, the matters and laws
referred to in Section 3A.2 below, the application of the provisions of that
Section, and any waiver in favor of or indulgence to or compounding or
composition with or like dealing relating to the obligations hereunder of any
other Borrower) any Borrower has no or only limited liability in respect of any
obligation for which, according to the terms of the Instruments, the Borrowers
are jointly and severally liable.
3A.2 Notwithstanding anything to the contrary provided in any provision of
any of the Instruments, if (i) any Borrower shall become subject to bankruptcy
or similar proceedings, and (ii) the obligations assumed or expressed to be
assumed by it in such capacity under the Instruments are claimed to be and would
but for this provision be subject to avoidance under Section 548 of the United
States Bankruptcy Code or any comparable provision of any applicable State law,
and (iii) such obligations or the amount thereof were reduced or limited in some
way, then the obligations of such Borrower shall be reduced or limited to the
extent (and only to the extent) necessary in order that such obligations, to the
maximum extent possible, may remain valid and not subject to avoidance as
aforesaid, provided always that this Section 3A.2 shall not apply in any
circumstances whatsoever so as to reduce or limit the obligations of any
Borrower with respect to the repayment, prepayment or accelerated repayment of
or the payment of interest on or the payment of any other amount relating to any
amount the proceeds of which were disbursed to it or for its account.
3A.3 In the event that a Borrower is determined to be an "insider" for the
purposes of the United States Bankruptcy Code with respect to any other Borrower
and in the event that such determination would be a necessary element in causing
any payment or other transfer of an interest in property from such other
Borrower to the Bank to be a voidable transfer under the United States
Bankruptcy Code, then, notwithstanding anything to the contrary in any of the
Instruments, such Borrower hereby irrevocably waives all rights which may have
arisen to be subrogated to any of the rights (whether contractual, under the
United States Bankruptcy Code, including Section 509 thereof, under common law
or otherwise) of Bank against such other Borrower or against any collateral
security or guarantee or right of set-off held by Bank for the payment of
amounts owed by such other Borrower, and hereby further irrevocably waives all
contractual, common law, statutory or other rights of reimbursement,
contribution, exoneration or indemnity (or any similar right) from or against
such other Borrower or any other person which may have arisen in connection with
the Instruments and any amounts payable thereunder. The provisions of this
Section 3A.3 shall survive the payment in full of all amounts payable by any and
all Borrowers and guarantors under the Instruments and the termination of the
Loan.
3A.4 Each Borrower (other than Parent) irrevocably authorizes and appoints
Parent as its agent to give all notices and instructions (including all requests
for advances) and to make such agreements and give such consents as are capable
of being given or made by the Borrowers
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or any of them or Parent and, notwithstanding that they may affect such
Borrower, without further reference to or the consent of such Borrower.
3A.5 Every act, omission, agreement, undertaking, settlement, waiver,
notice, request or other communication given or made by Parent hereunder or in
connection herewith (whether or not known to any other Borrower and whether
occurring before or after such other Borrower became a Borrower hereunder) shall
be deemed to have been effected given or made by Parent for itself and acting
also as agent for all of the other Borrowers and shall be binding for all
purposes on all of the other Borrowers as if the other Borrowers had expressly
concurred therewith and given or made the same themselves directly. In the event
of any conflict between any notices or other communications of Parent and any
other Borrower, those of the Parent shall prevail.
4. COLLECTION OF COLLATERAL AND NOTICE OF ASSIGNMENT.
4.1 Bank hereby authorizes and permits Borrowers and their Subsidiaries
to:
4.1.1 hold, process, sell, use or otherwise to dispose of
Inventory for fair consideration, all in the conduct of Borrowers' and their
Subsidiaries' business in the ordinary course.
4.1.2 receive from Borrowers' account and contract debtors all
amounts due as proceeds of the Collateral at Borrowers' own cost, risk, expense
and liability, subject always, however, to the provisions of the within
Agreement; and
Bank may, at any time following the occurrence of an Event of
Default, terminate all or any part of the authority and permission granted
Borrowers with reference to the Collateral.
4.2 Borrowers and their Subsidiaries may in the ordinary course of
business grant such allowances or other adjustments to Borrowers' account
debtors as Borrowers or their Subsidiaries may reasonably deem to accord with
sound business practice, provided, however, the authority granted Borrowers and
their Subsidiaries pursuant to this Section 4.2 may be limited or terminated by
Bank at any time following the occurrence of an Event of Default, and provided
further that Borrowers shall furnish Bank with such reports as Bank may
reasonably request with respect to any such adjustments, allowances or returns.
5. GRANT OF SECURITY INTEREST AND ADDITIONAL SECURITY.
5.1 To secure Borrowers' prompt, punctual and faithful performance of all
and each of Borrowers' present and future Liabilities to Bank, Borrowers hereby
grant, pledge and assign to Bank a continuing security interest in, a general
lien upon and right of setoff against their Collateral, and each item thereof,
whether now owned or now due, or in which Borrowers
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have an interest, or hereafter, at any time in the future, acquired, arising, or
to become due, or in which Borrowers obtain an interest, and all products,
proceeds, substitutions and accessions of or to any of the Collateral.
5.2 The within grant of a security interest is in addition to, and
supplemental of, any other security interest previously granted by Borrowers to
Bank, and all such security interests shall continue in full force and effect,
applicable to all Liabilities and to any future advances made by Bank to, or on
behalf of, Borrowers until this Agreement and the Note is specifically
terminated in writing by a duly authorized officer of Bank and any outstanding
Letters of Credit have expired.
5.3 Contemporaneous with the execution hereof, Borrowers shall execute all
such documents, and shall take all such further actions as may be required by
Bank with respect to the perfection of the security interests granted herein,
including without limitation, the execution and filing of financing statements
and amendments thereto in such form, and to be filed in accordance with the
provisions of the UCC with such filing authorities and in such jurisdictions as
Bank may determine. Notwithstanding the above, for Collateral of the Borrowers
located outside the United States, the security interest created by Section 5.1
in said foreign Collateral shall attach and be valid, binding and enforceable as
of the date hereof, however, Bank shall not perfect in the security interest in
said foreign Collateral until the occurrence of an Event of Default as provided
in Section 10 (which has not otherwise been waived by Bank), or the transfer of
Collateral (having a value in excess of Five Million Dollars ($5,000,000.00)) to
Borrowers' operations or locations outside of the United States; at that time
Borrowers shall take any and all action(s) necessary or requested by Bank
(including, but not limited to, executing any and all documents, instruments,
financing statements and charges) necessary to perfect the first security
interest granted herein in the foreign Collateral.
5.4 Bank shall have the right at any time upon the occurrence of an Event
of Default (which has not otherwise been waived by Bank), to collect all amounts
due on account of the Collateral. The within rights on the part of Borrowers,
being unique, shall be specifically enforceable by Bank.
6. REPRESENTATIONS AND WARRANTIES.
To induce Bank to establish the loan arrangement contemplated herein, to
make advances and readvances under the Revolving Credit, and to issue any
Letters of Credit (each of which advances shall be deemed to have been made in
reliance upon the following) Borrowers hereby represent, warrant and covenant as
follows (each of which shall be deemed independently material, and each of which
shall survive the execution and delivery hereof, and any independent
investigation by Bank or its representatives):
6.1 Corporate Existence. Each of the Borrowers and their Subsidiaries: (i)
is a corporation, partnership or other entity duly organized, validly existing
and in good standing
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under the laws of the jurisdiction of its organization; (ii) has all requisite
corporate or other power, and has all material Governmental Approvals necessary,
to own its assets and to carry on its business as now being conducted; and (iii)
is qualified to do business and is in good standing in all jurisdictions in
which the nature of the business conducted by it makes such qualification
necessary and where the failure to so qualify would result in a material adverse
effect to Borrowers or their Subsidiaries.
6.2 Financial Condition. The Borrowers have previously furnished to the
Bank consolidated and consolidating balance sheets of the Borrowers and their
Consolidated Subsidiaries as at December 31, 1996 and the related consolidated
and consolidating statements of income, retained earnings and cash flow of the
Borrowers and their Consolidated Subsidiaries, as requested, for the fiscal year
ended on that date, with the opinion (in the case of those consolidated balance
sheet and statements) of Price Waterhouse LLP. As used in this Agreement the
term "Consolidating" refers to individual financial statements of: (i)
Borrowers' divisions (if any, as defined in the Business Plan referenced in
Section 6.17, below); and (ii) Borrowers' Subsidiaries.
All such financial statements are complete and correct and fairly
present the consolidated financial condition of the Borrowers and their
Consolidated Subsidiaries, and (in the case of the consolidating financial
statements) the respective unconsolidated financial condition of the Borrowers
of each of their Consolidated Subsidiaries, as at such date and the consolidated
and unconsolidated result of their operations for the fiscal year ended on such
date, all in accordance with generally accepted accounting principles and
practices applied on a consistent basis. Neither the Borrowers nor any of their
Subsidiaries has on the date hereof any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for in the most recent balance sheet referred to above or
except as set forth on Schedule 6.2. Since December 31, 1996 there has been no
material adverse change in the consolidated financial condition, operations,
business or prospects taken as a whole of the Borrowers and their Consolidated
Subsidiaries from that set forth in the financial statements as at such date for
the period ending on that date.
6.3 Litigation. Except as disclosed to the Bank in Schedule 6.3, there are
no legal or arbitral proceedings, or any proceedings by or before any
Governmental Person which are pending or (to the knowledge of the Borrowers)
threatened against the Borrowers or any of their Subsidiaries which, if
adversely determined, could have a material adverse effect on the financial
conditions of the Borrowers or any of their Subsidiaries on a consolidated
basis.
6.4 No Breach. None of the execution and delivery of the Instruments, the
consummation of the transactions contemplated in the Instruments or compliance
with the terms and provisions of the Instruments will conflict with or result in
a breach of, or require any consent not obtained under, (i) the charter, by-laws
or any applicable organizational document of any of the Borrowers or any
Subsidiaries; (ii) any applicable Governmental Rule; or (iii) any
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agreement or instrument to which the Borrowers or any of their Subsidiaries are
a party or by which any of them or any of their property is bound or to which
any of them is subject, or constitute a default under, or result in the
acceleration or mandatory prepayment of, any indebtedness evidenced by or
termination of any such agreement or instrument, or result in the creation or
imposition of any lien upon any property of any of the Borrowers or any of their
Subsidiaries pursuant to the terms of any such agreement or instrument.
6.5 Action. The Borrowers have all necessary corporate and other power and
authority to execute, deliver and perform its obligations under each of the
Instruments; the execution, delivery and performance by the Borrowers of each of
the Instruments has been duly authorized by all necessary corporate or other
action on its part (including any required shareholder, partner or member
approvals); and this Agreement has been duly and validly executed and delivered
by the Borrowers and constitutes, and the Note and the other Instruments when
executed and delivered by the Borrowers will constitute, their legal, valid and
binding obligations, enforceable against the Borrowers in accordance with its
terms.
6.6 Approvals. No Governmental Approvals are necessary for the execution,
delivery or performance by the Borrowers of the Instruments or for the legality,
validity or enforceability of any Instrument.
6.7 Margin Stock. Neither the Borrowers nor any of their Subsidiaries is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose, whether immediate, incidental or ultimate, of
buying or carrying Margin Stock, and no part of the proceeds of any extension of
credit under this Agreement will be used to buy or carry any Margin Stock.
6.8 Taxes. (i) The Borrowers and their Subsidiaries have filed all tax
returns required to be filed by them and have paid or made adequate provision
for the payment of all taxes due pursuant to such returns or pursuant to any
assessment received by the Borrowers or any of their Subsidiaries (except such
as are being contested in good faith and by appropriate proceedings diligently
conducted which are set forth in Schedule 6.8, hereto); no audits or reviews of
Borrowers or any of their Subsidiaries by any taxing authority are ongoing or
have been scheduled or advised which if determined adversely would have a
material adverse effect on the Borrowers; and no claims are being asserted or
contested with respect to such taxes that are required by generally accepted
accounting principles to be reflected in its financial statements referred to in
Section 6.2 and are not so reflected. The charges, accruals and reserves on the
books of the Borrowers and their Subsidiaries in respect of taxes and other
governmental charges are considered by the Borrowers to be adequate.
(ii) Except as set forth on Schedule 6.8, there is no tax
sharing, tax allocation or similar agreement currently in effect providing for
the manner in which tax payments owing by the Borrowers or any of their
Subsidiaries (whether in respect of Federal or state income or other taxes) are
allocated among such Persons. The Borrowers have not given or
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been requested to give a waiver of the statute of limitations relating to the
payment of Federal or other taxes.
6.9 Certain Regulations. Neither the Borrowers nor any of their
Subsidiaries is (i) an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940;
(ii) a "holding company," or an "affiliate" of a "holding company" or a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935; or (iii) subject to any other Governmental
Rule restricting its ability to incur the obligations under this Agreement or
the other Instruments.
6.10 Collateralized Debt and Guarantees. Schedule 6.10 is a complete and
correct list, as of the date hereof of each credit agreement, loan agreement,
indenture, guarantee, letter of credit to, or guarantee by, the Borrowers or any
of their Subsidiaries, the aggregate principal or face amount of which equals or
exceeds (or may equal or exceed) One Million Dollars ($1,000,000.00) and the
aggregate principal or face amount outstanding or that may become outstanding
under each such arrangement is correctly described in Schedule 6.10.
6.11 Environmental Matters. Each of the Borrowers and their Subsidiaries
has obtained all Governmental Approvals required under all Environmental Laws to
carry on its business as now being or as proposed to be conducted, except to the
extent failure to have any such Governmental Approvals would not have a material
adverse effect on the Borrowers and their Subsidiaries. Each of such
Governmental Approvals is in full force and effect to the best of Borrowers'
knowledge and the Borrowers and their Subsidiaries are in all material respects
compliance with the terms and conditions of such Governmental Approvals, and are
also in compliance in all material respects with all other provisions of any
applicable Environmental Law or in any Governmental Rule issued, entered,
promulgated or approved under any Environmental Law, except to the extent
failure to comply with such provisions would not have a material adverse effect
on the Borrowers or their Subsidiaries.
In addition, except as set forth in Schedule 6.11:
6.11.1 No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any Governmental Person with respect to any alleged failure by the
Borrowers or any of their Subsidiaries to have any Governmental Approval
required under any Environmental Law in connection with the conduct of the
business of the Borrowers or any of their Subsidiaries, or with respect to any
generation, treatment, storage, recycling, transportation or release of any
Hazardous Materials generated by the Borrowers or any of their Subsidiaries.
6.11.2 Neither the Borrowers nor any of their Subsidiaries own,
operate or lease a treatment, storage or disposal facility requiring a permit
under the Resource Conservation and Recovery Act of 1976 or under any comparable
state or local statute.
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6.11.3 To the best of Borrowers' knowledge neither the Borrowers
nor any of their Subsidiaries has transported or arranged for the transportation
of any Hazardous Material to any location that is listed on the National
Priorities List ("NPL") under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), listed for possible inclusion
on the NPL by the Environmental Protection Agency in the Comprehensive
Environmental Response and Liability Information System, as provided for by 40
C.F.R. Section 300.5 ("CERCLIS"), or on any similar state or local list or that
is the subject of Federal, state or local enforcement actions or other
investigations that may lead to Environmental Claims against the Borrowers or
any of their Subsidiaries.
6.11.4 No liens have arisen under or pursuant to any
Environmental Laws on any site or facility owned, operated or leased by the
Borrowers or any of their Subsidiaries, and no action has been taken or is in
process by any Governmental Person that could subject any such site or facility
to such liens, and neither the Borrowers nor any of their Subsidiaries would be
required to place any notice or restriction relating to the presence of
Hazardous Materials at any site or facility owned by it or in any instrument of
transfer affecting such site or facility.
6.12 Subsidiaries, Etc. Set forth on Schedule 6.12 is a complete and
correct list, as of the date hereof, of all of the Subsidiaries of the
Borrowers, together with, for each such Subsidiaries, (i) the jurisdiction of
organization of such Subsidiary, and (ii) the principal place of business and
location of the executive offices of each Subsidiary.
6.13 True and Complete Disclosure. The information, reports, financial
statements, exhibits and schedules furnished in writing by or on behalf of the
Borrowers to Bank in connection with the negotiation, preparation or delivery of
the Instruments or included in or delivered pursuant to any Instruments, when
taken as a whole do not contain any untrue statement of material fact or omit to
state any material fact necessary to make the statements in any Instruments, in
light of the circumstances under which they were made, not misleading, or, in
the case of the projections are not based on unreasonable estimates. All written
information furnished after the date hereof by the Borrowers and their
Subsidiaries to the Bank in connection with the Instruments and the transactions
contemplated by the Instruments will be true, complete and accurate in every
material respect, or, in the case of projections, based on reasonable estimates,
on the date as of which such information is stated or certified. There is no
fact known to any of the Borrowers that is likely to have a material adverse
effect on the Borrowers or their Subsidiaries that has not been disclosed in the
Instruments or in a report, financial statement, exhibit, schedule, disclosure
letter or other writing furnished to the Bank for use in connection with the
transactions contemplated by the Instruments.
6.14 Compliance with Laws. Except as disclosed on Schedule 6.14, Borrowers
and their Subsidiaries are in full compliance with all laws and regulations
which apply to the conduct of its business, except to the extent that the
failure to so comply with any of the foregoing would
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not, either individually or in the aggregate, have a material adverse effect on
Borrowers and their Subsidiaries. Borrowers and their Subsidiaries hold all
licenses, permits and franchises which are required to permit it to conduct its
business as presently conducted or contemplated, except to the extent that the
failure to have obtained or maintained any of the foregoing would not, either
individually or in the aggregate, have a material adverse effect on Borrowers
and their Subsidiaries.
6.15 Title to Assets. Borrowers and their Subsidiaries own all of the
Collateral purported to be owned by them, free and clear of any liens,
mortgages, attachments, or other like claims, except as to the security interest
created herein and in the other Instruments, and the security interests, liens,
mortgages, leases and other encumbrances listed on Schedule 6.15 annexed hereto,
and does not presently have possession of any property on consignment to it
which is included as an asset on Borrowers' financial statements;
6.16 Books and Collateral. The Collateral, and the books, records and
papers of Borrowers pertaining thereto, are kept and maintained (and have been
maintained in the past four (4) months) solely at the principal executive
offices of Borrowers and those other locations, all as listed on Schedule 6.16,
annexed hereto;
6.17 Business Plan. Borrowers have delivered to Bank a revised so-called
base case Business Plan under cover letter of Parent dated January 13, 1997, a
copy of which is attached hereto as Schedule 6.17 (the "Business Plan"). The
Business Plan was prepared in good faith, and Borrowers believe that the
Business Plan and the assumptions on which it is based were reasonable when
made, and continue to be reasonable as of the date hereof. Each projection
furnished in the Business Plan was prepared with due care based on reasonable
assumptions, and as of the date of the Business Plan and as of the date hereof
represents Borrowers' best estimate of future results based on information
available as of the date of the Business Plan;
6.18 ERISA. As of the date hereof, none of the following events has
occurred or exists which would result in any loss of priority of the Bank's lien
or would have a material adverse effect with respect to Borrowers, their
Subsidiaries or any ERISA Affiliate ("ERISA Affiliate" means any entity that
together with the Borrowers is treated as a single entity under Section 414 of
the Code): (i) any "prohibited transaction" (as defined in Section 406 of ERISA
or Section 4975 of the Code) involving any plan covered by the Employee
Retirement Income Security Act of 1974 ("ERISA") (any such plan is referred to
herein as a "Plan"); (ii) any "reportable event" (as defined in Section 4043 of
ERISA and the regulations issued under such Section) with respect to any Plan;
(iii) the filing under Section 4041 of ERISA of a notice of intent to terminate
any Plan, or the termination of any Plan; (iv) any event or circumstance which
might constitute grounds entitling the Pension Benefit Guaranty Corporation
("PBGC") to institute proceedings under Section 4042 of ERISA for the
termination of, or for the appointment of a trustee to administer, any Plan, or
the institution by the PBGC of any such proceedings; or, (v) partial withdrawal
under Section 4201 or 4204 of ERISA from a Multi-employer Plan (as defined in
Section 3(37) of ERISA) or the reorganization, insolvency or termination of any
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Multi-employer Plan. Borrowers have not incurred any material accumulated
funding deficiency within the meaning of ERISA which has not been corrected, nor
do Borrowers have any material liability to the PBGC or to any Plan in
connection with the termination of, or Borrowers' withdrawal from, any Plan, and
no such material liability would result from the termination of, or Borrowers'
withdrawal from, any such Plan; and,
7. AFFIRMATIVE COVENANTS.
7.1 Borrowers agree that until payment in full to Bank of all of their
obligations and Liabilities to Bank and Bank's termination hereunder, and for so
long as they remain indebted to Bank hereunder, Borrowers shall:
7.1.1 Financial Statements and Information. Furnish or cause to
be furnished to Bank the following financial statements and information:
(i) as soon as available and in any event within ninety
(90) days after the end of each fiscal year of the Parent, consolidated and
consolidating statements of income, retained earnings and cash flow of the
Borrowers and their Consolidated Subsidiaries for such fiscal year and the
related consolidated and consolidating balance sheets of the Borrowers and their
Consolidated Subsidiaries as at the end of such fiscal year, setting forth in
each case in comparative form the corresponding consolidated and consolidating
figures for the preceding fiscal year, and accompanied (i) in the case of those
consolidated statements and balance sheet of the Borrowers, by an opinion of
independent certified public accountants of recognized national standing, which
opinion shall state that those consolidated financial statements fairly present
the consolidated financial condition and results of operations of the Borrowers
and their Consolidated Subsidiaries as at the end of, and for, such fiscal year
in accordance with generally accepted accounting principles, consistently
applied, (ii) in the case of those consolidating statements and balance sheets,
by a certificate of a senior financial officer of the Parent, which certificate
shall state that those consolidating financial statements fairly present the
respective individual unconsolidated financial condition and results of
operations of the Borrowers and each of their Consolidated Subsidiaries, and
(iii) management letter of the certified public accountants to the Borrowers, in
each case in accordance with generally accepted accounting principles,
consistently applied, as at the end of, and for, such fiscal year;
(ii) as soon as available, and in any event within
forty-five (45) days after the close of each quarterly fiscal period of each
fiscal year of Parent, quarterly and fiscal year to date by division (as that
term is set forth in the Business Plan of Borrowers referenced in Section 6.17,
above) consolidated and consolidating statement of income, retained earnings,
balance sheets and cash flow by division (as that term is set forth in the
Business Plan of Borrowers referenced in Section 6.17, above) of the Borrowers
and their Consolidated Subsidiaries, accompanied by a certificate of a senior
financial officer of the Parent, which certificate shall state that those
quarterly consolidated financial statements fairly present the consolidated
financial condition and result of operations of the Borrowers and their
Consolidated
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Subsidiaries, and those rolling consolidated cash flow statements fairly present
the respective consolidated financial condition and results of operations of the
Borrowers and each of their Consolidated Subsidiaries, in each case in
accordance with generally accepted accounting principles, consistently applied,
as at the end of, and for, such period (subject to normal year-end audit
adjustments) together with a so-called rolling four quarter cash flow projection
which Bank agrees shall be prepared by Parent on a consolidated basis without a
division (as that term is used in the Business Plan referenced in Section 6.10,
above) or Subsidiary roll-up of financial statements;
(iii) promptly upon their becoming available, copies
of all registration statements and regular periodic reports, if any, which the
Borrowers or any Subsidiary shall have filed with the Securities and Exchange
Commission or any national securities exchange, including, but not limited to,
10-Ks, 8-Ks and the Borrower's 10-Q Statement, which must be delivered within
forty-five (45) days of the end of each fiscal quarter;
(iv) promptly upon their being mailed or provided to
the shareholders of the Borrowers generally or to any holder of Indebtedness
generally, copies of all financial statements, reports and proxy statements so
mailed or provided;
(v) promptly after the Borrowers know or have reason
to believe that any Event of Default or an event but for the passage of time or
giving of notice would become an Event of Default has occurred, a notice of such
Event of Default describing the same in reasonable detail;
(vi) from time to time such other information
regarding the financial condition, operations, business or prospects of the
Borrowers or any of their Subsidiaries (including any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA) as Bank
may reasonably request;
(vii) not more than sixty (60) days after the
beginning of each of Parent's fiscal years commencing with fiscal year end
December 31, 1997, a quarter by quarter consolidated projection of revenues,
expenses, income and cash flow of Borrowers by division and their Subsidiaries
for such fiscal year (in the same format as the financial statements referred to
in subsections (i) and (ii) above, including an income statement and statement
of cash flows for each quarter and balance sheet as at the end of each quarter),
such projections to be accompanied by a certificate signed by the President or
chief financial officer of Parent to the effect that such projections have been
prepared in good faith on the basis of sound financial planning practices and
are based on assumptions which are reasonable; and
(viii) with each of the financial statements required
by subsection (i) or (ii) above, a report discussing or summarizing material
variances of financial condition and results of operations from the projections
submitted by Parent pursuant to subsection (vii) above.
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7.1.2 Inspections, Audits. Borrowers and each Subsidiary shall
accord Bank and Bank's representatives with access from time to time as Bank and
such representatives may reasonably require to all properties owned by or over
which Borrowers have control, for among other things, the auditing of Borrowers'
books and records. Borrowers agree to reimburse Bank for all reasonable costs
incurred in connection with any such audit or review, provided that prior to any
Event of Default Borrowers shall only be required to reimburse Bank for the
costs of one audit per year. Bank, and Bank's representatives, shall have the
right, and Borrowers and their Subsidiaries will permit Bank and such
representatives from time to time as Bank and such representatives may
reasonably request, to examine, inspect, copy, and make extracts from any and
all of the Collateral, and any and all of Borrowers' and/or their Subsidiaries'
books, records, electronically stored data, papers, and files, and to verify the
Collateral or any portion thereof (such verification, including, without
limitation, through contact with account debtors).
7.2 Insurance. Borrowers and their Subsidiaries shall maintain insurance:
(i) with respect to the Inventory against fire and any extended casualties and
hazards, in an amount at all times equal to the insurable value of the
Inventory; and, (ii) with respect to all other assets and risks, in such amounts
and against such hazards and liabilities as customarily is maintained by other
companies similarly situated and operating like properties; and against such
public liability, employer's liability, and other risks as is usually maintained
by companies similarly situated and engaged in like operations. Such insurance
shall be maintained with good and responsible insurance companies, reasonably
acceptable to Bank, and upon the request of Bank a certificate summarizing the
nature and extent of the insurance maintained pursuant hereto will be furnished
to Bank. For purposes of this Agreement, any insurance carrier with an A.M. Best
rating of B+ or better shall be reasonably acceptable to Bank. Bank shall be
named as a loss payee with respect to those policies insuring the Collateral
against loss, and the policies shall be noncancellable without thirty (30) days
prior written notice to Bank. In the event of the failure by Borrowers to
provide and maintain insurance as herein provided, Bank may, at its option,
provide such insurance. Borrowers shall advise Bank of each claim in excess of
One Hundred Thousand Dollars ($100,000.00) made by Borrowers under any policy of
insurance which covers the Collateral within ten (10) days of loss, and will
permit Bank, at Bank's option following the occurrence of an Event of Default
and to the exclusion of Borrowers, to conduct the adjustment of each such claim
and Borrowers hereby appoint Bank as Borrowers' attorney-in-fact to obtain,
adjust, settle, and cancel any insurance described in this section and to
endorse in favor of Bank any and all drafts and other instruments with respect
to such insurance. The within appointment, being coupled with an interest, is
irrevocable until the within Agreement is terminated by a written instrument
executed by a duly authorized officer of Bank. Bank shall not be liable on
account of any exercise pursuant to said power except for any exercise in gross
negligence or actual willful misconduct. Bank may apply any proceeds of such
insurance against the Liabilities, whether or not such have matured, in such
order of application as Bank may determine and in accordance with applicable law
and the terms and conditions of any intercreditor agreement in effect at such
time.
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7.3 Payment of Taxes, Assessments, Etc. Borrowers shall and cause each of
their Subsidiaries to promptly pay, as they become due and payable, all taxes
and unemployment contributions and other charges levied or assessed against
Borrowers and/or its Subsidiaries or the Collateral by any Governmental Person
unless such amounts are being contested in good faith and by appropriate
proceedings, provided that (i) such contest is made prior to any unpaid amounts
becoming a fixed and ascertainable lien upon any Collateral , or (ii) Borrowers
or their Subsidiaries have posted adequate security for payment of any such
amounts with Bank. Borrowers and their Subsidiaries will properly exercise any
trust responsibilities imposed upon them by reason of withholding from
employees' pay. At its option, Bank may, but shall not be obligated to, pay all
taxes, unemployment contributions, and any and all other charges levied or
assessed upon Borrowers or the Collateral by any governmental authority, as Bank
may, in its discretion, deem necessary or desirable, to protect, maintain,
preserve, collect, or realize upon any or all of the Collateral or the value
thereof or any right or remedy pertaining thereto.
7.4 Compliance with Laws. Borrowers shall and shall cause each of their
Subsidiaries to comply in all material respects with all laws and regulations
which apply to the conduct of their business including, without limitation, all
applicable federal, state and local laws, ordinances, rules, regulations and
permits relating to the protection of the environment, waters and air of the
State of New Hampshire, State of any Borrower's incorporation and the United
States of America, the release or disposition of hazardous substances and
occupational health and safety, except to the extent that the failure to so
comply with any of the foregoing, would not, either individually or in the
aggregate, have a material adverse effect on Borrowers and/or their
Subsidiaries. Borrowers shall and shall cause each of their Subsidiaries to
procure and maintain in full force and effect all licenses, permits and
franchises which are required to permit it to conduct its business as then
conducted or contemplated except to the extent that the failure to have obtained
or maintained any of the foregoing would not, either wazzu individually or in
the aggregate, have a material adverse effect on Borrowers and/or their
Subsidiaries. Borrowers shall promptly notify Bank of any pending or threatened
enforcement action, administrative order or proceeding, notice of violation or
investigation relating to such laws, ordinances, rules, regulations or permits
which action would have a material adverse effect on Borrowers. In addition,
Borrowers agree to indemnify Bank from any such liability.
7.5 Reimbursement of Expenses. Borrowers shall pay or reimburse Bank for
all reasonable out-of-pocket expenses of every nature which Bank may incur in
connection with the preparation, perfection, execution or enforcement of the
Instruments; with the making of any loan provided for herein; with obtaining
security for the Loan; or with the collection of Borrowers' Liabilities,
including but not limited to, reasonable attorneys' fees related to the
preparation of such papers and reasonable expenses related to the repossession,
preservation or sale of any or all of the Collateral.
7.6 Continuation. Borrowers shall and shall cause each of their
Subsidiaries to continue in the same general lines of business as they conduct
as of the date hereof and shall operate their businesses actively and shall use
their best efforts to operate in accordance with the
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Business Plan; Borrowers shall and shall cause each of their Subsidiaries to
preserve and maintain their separate corporate existence in good standing in
each jurisdiction as required by law except when in the good business judgment
of Borrowers' Boards of Directors a Subsidiary should be liquidated and maintain
the Collateral and their properties material to their business in good operating
condition, reasonable wear and tear and normal obsolescence and deterioration
excepted and from time to time make all necessary and proper repairs, renewals,
replacements and improvements thereto; and maintain and preserve and protect all
licenses, copyrights, patents and trademarks owned or held under license and
material to the business of Borrowers and/or their Subsidiaries. Borrowers will
give Bank prompt written notice at least ten (10) Business Days prior to the
date they or any of their Subsidiaries remove any Collateral from, discontinue
operations at, or change, any of their business addresses as listed on Schedules
6.12 and 6.16 hereof.
7.7 Banking Relations. Borrowers and their Subsidiaries shall maintain a
depository relationship with the Bank.
7.8 Preservation of Security Interest. Borrowers shall, subject to the
provision of Section 5.3, execute and deliver such financing statement or
statements or amendments, or other instruments as Bank may from time to time
require in order to comply with the UCC and any other applicable laws to
preserve and protect the security interests hereby granted. In the event that
the law of any jurisdiction becomes or is applicable to the Collateral or any
part thereof, or to any obligations or liability of Borrowers to Bank, Borrowers
agree to execute and deliver all instruments and to do all such other things as
may be necessary or appropriate to preserve, protect and enforce the security
interests and liens of Bank under the law of such other jurisdiction(s).
Borrowers will pay any filing fees or other costs with respect to any such
filings and any fees for prior lien searches. If for any reason Borrowers
improperly refuse to execute any such financing statements or amendments, Bank
is authorized to file the same without the signature of Borrowers to the full
extent permitted by law.
7.9 ERISA. Borrowers will and will cause their Subsidiaries to maintain
all of their Plans in material compliance with ERISA and all other applicable
laws and shall currently fund all obligations thereunder. Borrowers shall not
permit any of the following events to occur or exist with respect to Borrowers,
any Subsidiary or any ERISA affiliate: (i) any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Internal Revenue Code)
involving any Plan which would have a material adverse effect on the Borrowers
or will result in a loss of priority of Bank's Lien; (ii) the occurrence of any
event which would constitute a "reportable event" (as defined in Section 4043 of
ERISA and the regulations issued under such Section) with respect to any Plan
which is not waived; (iii) the filing under Section 4041 of ERISA of a notice of
intent to terminate any Plan or the termination of any Plan if as a result of
such termination Borrowers would incur a material liability; (iv) any event or
circumstance which might constitute grounds entitling the PBGC to institute
proceedings under Section 4042 of ERISA for the termination of, or for the
appointment of a trustee to administer, any Plan, or the institution by the PBGC
of any such proceedings; or, (v) partial withdrawal under Section
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4201 or 4204 of ERISA from a Multi-employer Plan; and in each case above, such
event or condition, together with all other events or conditions, if any, which
could in the opinion of the Bank subject Borrowers to any material tax, penalty,
or other liability to a Plan, a Multi-employer Plan, the PBGC, or otherwise.
7.10 Use of Proceeds. Borrowers shall use the proceeds of this Loan solely
for ongoing working capital requirements to further the business of Borrowers.
Except as permitted by the express terms hereof, no proceeds shall be commingled
with funds of any stockholder, or Affiliate that is not a Subsidiary or any
general or limited partner, nor shall any proceeds be transferred to any
stockholder, or Affiliate that is not a Subsidiary or any general or limited
partner, other than in the ordinary course of business.
7.11 Notification of Default. Borrowers shall promptly notify Bank when
they become aware of the occurrence of any event which currently constitutes or
with the passage of time would constitute a breach of any covenant on their part
made herein or in any of the Instruments or which would otherwise constitute an
Event of Default hereunder or under any of the Instruments. Borrowers shall
within thirty (30) days notify Bank of any litigation, administrative action or
other proceeding either initiated or threatened in writing against Borrowers or
any of their Subsidiaries, by or before any court or administrative agency which
could reasonably be expected to materially and adversely affect the financial
condition of Borrowers or any of their Subsidiaries, their operations or
prospects and shall keep Bank apprised of the status of the matters set forth on
Schedule 6.3 hereto and of any other matters subsequently disclosed to Bank.
Borrowers shall notify Bank promptly of any material deviations from the
performance projected in the Business Plan. Borrowers shall also notify Bank
promptly upon Borrowers or any of their Subsidiaries entering into any contract
for the provision of goods or services where applicable law requires further
filings or notice or the consent of third parties, in order to perfect the liens
granted hereby with respect to such contracts.
7.12 Casualty, Litigation, Regulatory Changes. Borrowers shall promptly
give notice to Bank of any material casualty to any property, labor trouble,
statutory or regulatory change (other than changes of general application to all
businesses), act of God, confiscation or condemnation, whether or not covered by
insurance, which can reasonably be expected to have a material adverse effect
upon the financial condition, assets, business or prospects of Borrowers or any
of their Subsidiaries;
7.13 Copies of Modifications to Material Documents. Borrowers shall
promptly furnish to Bank copies of all amendments, consent letters, waivers or
modifications to the Certificate of Incorporation or By-Laws of Borrower or any
of their Subsidiaries.
7.14 Fees. Borrowers shall pay to Bank a Facility Fee (the "Facility Fee")
in the amount of Twenty Two Thousand Five Hundred Dollars ($22,500.00).
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7.15 The within representations, covenants, and warranties are in addition
to any others made or hereafter made by Borrowers to or with Bank in any other
Instrument or document delivered in connection herewith.
7.16 Any affirmative covenant herein may be waived in writing by Bank,
whether prior or subsequent to the occurrence of such an event.
7A. FINANCIAL COVENANTS
7A.1 Quick Ratio. Borrowers shall maintain a Quick Ratio of not less than
.5:1.00. Compliance with this covenant shall be measured and reviewed by Bank on
a quarterly basis.
7A.2 Consolidated Tangible Net Worth. On December 31, 1996, Borrowers
shall have had a Consolidated Tangible Net Worth of not less than Seventy
Million Dollars ($70,000,000.00). Thereafter for the term of this Agreement,
this requirement shall increase quarterly by seventy five percent (75.0%) of
Borrowers' Consolidated Net Income for the prior quarter. There shall be no
negative adjustment for losses. Compliance with this covenant shall be measured
on a quarterly basis.
7A.3 Indebtedness to Consolidated Tangible Net Worth. Borrowers shall
maintain a ratio of Indebtedness to Consolidated Tangible Net Worth of no
greater than 1.25:1.00 for the period ending March 30, 1998 and 1.10:1.00
thereafter. Compliance with this covenant shall be reviewed and measured on a
quarterly basis.
8. NEGATIVE COVENANTS.
Borrowers agree that until payment in full of all of their obligations and
Liabilities to Bank and so long as they remain indebted to Bank hereunder,
Borrowers shall not, without the prior written consent of Bank:
8.1 Liens and Encumbrances. Contract, create, incur, suffer, assume or
allow to exist, or permit any of their Subsidiaries to contract, create, incur,
suffer, assume or allow to exist, any mortgage, security interest, lien or other
charge or encumbrance of any kind (including the charge upon property purchased
under any conditional sale or other title retention agreement) upon or with
respect to any of their property or assets, whether now owned or hereafter
acquired, except:
8.1.1 liens in connection with worker's compensation,
unemployment insurance or other social security or similar obligations;
8.1.2 deposits or pledges securing the performance of bids,
tenders, contracts (other than contracts for payment of money), leases,
statutory obligations, surety and appeal bonds and other obligations of like
nature made in the ordinary course of business;
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8.1.3 mechanics', carriers', landlords', warehouseman's,
workers', materialmen's or other like liens arising in the ordinary course of
business with respect to obligations which are not due or which are being
contested in good faith;
8.1.4 liens for taxes, assessments, levies or governmental
charges imposed upon Borrowers or any Subsidiary or its properties, operations,
income, products or profits, which shall not at the time be due or payable or if
the validity thereof is being contested in good faith by appropriate
proceedings;
8.1.5 reservations, exceptions, encroachments, easements, rights
of way, covenants, conditions, restrictions and other similar title exceptions
or encumbrances affecting real property which do not materially detract from the
value of the property affected or materially interfere with the ordinary conduct
of the business of Borrowers and their Subsidiaries;
8.1.6 an attachment, judgment and other similar liens arising in
connection with court proceedings, which in the aggregate do not exceed One
Million Dollars ($1,000,000.00) provided the execution or other enforcement
thereof is effectively stayed (including stays resulting from the filing of an
appeal) within sixty (60) days and the claims secured thereby are being
contested in good faith by appropriate proceedings;
8.1.7 those liens permitted and listed on Schedule 6.15 and any
refinancing of these permitted liens;
8.1.8 additional liens securing purchase money indebtedness or
capitalized leases or mortgages the principal amount of which in the aggregate
do not exceed Two Million Five Hundred Thousand Dollars ($2,500,000.00)
outstanding at any one time;
8.2 Indebtedness. The Borrowers will not, nor will it permit any of their
Subsidiaries to, create, incur or suffer to exist any Indebtedness except:
8.2.1 Indebtedness to the Bank under the Instruments;
8.2.2 Indebtedness outstanding and available on the date hereof
and listed on Schedule 6.10; provided, however, and notwithstanding any other
provision hereof, with respect to those matters set forth on Schedule 6.10
pertaining to foreign Subsidiaries of Borrowers or branches of United States
Subsidiaries in foreign countries the Borrowers may increase that Indebtedness
by an amount not to exceed One Million Dollars ($1,000,000.00) and all
extension, renewals or refinancings thereof;
8.2.3 Indebtedness secured by Liens permitted by Schedule 6.15;
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8.2.4 Capitalized Leases permitted by Section 8.8;
8.2.5 Indebtedness incurred in the ordinary course of business,
including, but not limited to trade debt, accruals, tax and pension liabilities;
8.2.6 Indebtedness secured by liens permitted by Section 8.1 and
any renewal, extension or refinancing thereof.
8.3 Loans. Lend money, or make or permit to be outstanding loans or
advances, to any Person, firm, corporation or other enterprise, or permit any
Subsidiary to lend, make or permit any thereof, except:
8.3.1 loans or advances in the nature of deposits or prepayments
to subcontractors, suppliers and others in the ordinary course of business;
8.3.2 employee loans or advances not to exceed in the aggregate
One Million Dollars ($1,000,000.00) outstanding at any one time.
8.4 Intercorporate Transactions. Transfer of any assets of Borrowers to
any Subsidiaries, other than in the ordinary course of business, and in no event
in an amount greater than ten percent (10%) of the value of the Collateral in
the United States as of the date hereof.
8.5 Guaranties. Agree to purchase or repurchase the indebtedness of, or
assume, guarantee (directly or indirectly or by instrument having the effect of
assuring another's payment or performance or capability of so doing), endorse,
or otherwise become obligated upon the indebtedness, stock, dividend or other
obligation of, any Person, firm, joint venture, corporation, partnership or
other entity other than the obligations of a Subsidiary, or suffer any thereof
to exist, or permit any Subsidiary so to do, except by endorsement of negotiable
instruments for deposit or collection in the ordinary course of business.
8.6 Liquidation or Disposition of Business. Without prior notification and
approval of Bank, not to be unreasonably withheld, wind up, liquidate its
affairs or dissolve, enter into any transaction of merger, consolidation,
recapitalization, stock split or similar transaction, or permit any Subsidiary
to do so; or convey, sell, lease or otherwise dispose of all or (except
inventory sold in the ordinary course of business) any substantial part of its
assets or properties, or permit any Subsidiary to do so. Provided that Borrowers
may sell any product line, division (as that term is defined in the Business
Plan of Borrowers) or Subsidiary, the net asset value of which is less than Five
Million Dollars ($5,000,000.00); provided that: (i) the net asset value of all
product lines, divisions or subsidiaries sold in any fiscal year would when
added to other sales does not exceed Ten Million Dollars ($10,000,000.00); and
(ii) the Borrowers have provided Bank with notice of such sale(s).
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8.7 New Business; Acquisitions. Substantially change, or permit any
Subsidiary to substantially change, the nature of the business in which
Borrowers or such Subsidiary is engaged; or purchase or lease, or permit any
Subsidiary to purchase or lease any assets or properties without notice and
approval by Bank which shall not be unreasonably withheld, provided that such
approval shall not be required if (i) such purchase or lease would be in the
ordinary course of the business of such Subsidiary, and such assets or property
would be useful or used in the business of the Borrowers or such Subsidiary as
then being conducted; or (ii) the acquisition of assets of another Person where
the cash consideration to be paid or the amount of liabilities to be assumed in
any one transaction does not exceed Five Million Dollars ($5,000,000.00) for any
one transaction and when added to all other such acquisitions, in any fiscal
year does not exceed Ten Million Dollars ($10,000,000.00) in the aggregate.
Parent shall not relocate or otherwise move its chief executive office from
Nashua, New Hampshire.
8.8 Leases.
8.8.1 Except as permitted by Section 8.8.2 enter into or be a
party to, or permit any Subsidiary to enter into or be a party to, any
arrangement providing for the leasing to Borrowers or any Subsidiary of real or
personal property provided that Borrowers may be a party to leases existing on
the date hereof.
8.8.2 Borrowers may enter into or be party to other such
arrangements if (i) the aggregate of the rental payments (other than under
capital leases) to be made thereafter by Borrowers does not exceed Five Million
Dollars ($5,000,000.00) per annum, or (ii) such lease of property is a
capitalized lease under generally accepted accounting principles and is
permitted by Section 8.9.
8.9 Capital Expenditures. Make capital expenditures (including capitalized
leases permitted under Section 8.8) for fixed or capital assets exceeding, in
the aggregate for Borrowers in any fiscal year, the amount of such expenditures
set forth in the projections for such year approved by the Board of Directors of
Borrowers; provided that such amount in any one (1) fiscal year of Borrowers
shall not in any case exceed Eighteen Million One Hundred Thousand Dollars
($18,100,000.00).
8.10 Dividends and Redemptions. Declare or pay dividends upon any class of
its capital stock or any warrants, preferred stock or other stock interest now
or hereafter outstanding or return any capital to any of Borrowers' stockholders
or make any other distribution, payment or delivery of property or cash to
Borrowers' stockholders in their capacities as such, or redeem, retire, purchase
or acquire directly or indirectly, any shares of Borrowers' capital stock now or
hereafter outstanding if there exists an Event of Default or an event but for
the passage of time or giving of notice, or both, would become an Event of
Default or any of the above actions would result in a violation of any of those
covenants set forth in Section 7A, hereof.
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8.11 ERISA. Terminate or withdraw, or permit any Subsidiary to terminate
or withdraw, from any "plan", as defined in Section 4021(a) of ERISA,
established or maintained after the date hereof in respect of which Borrowers or
any Subsidiary are an "employer" or a "substantial employer" as defined in
Sections 3(5) and 4001(a)(2) of ERISA, respectively, so as to result in any
material liability of Borrowers or any Subsidiary to the PBGC pursuant to
Subtitle A of Title IV of ERISA or material liability of Borrowers or any
Subsidiary to such plan; engage, or permit any Subsidiary to engage, in any
"prohibited transaction" (as defined in Section 4975 of the Code) involving any
such plan which would result in a material liability for an excise tax or civil
penalty in connection therewith; incur or suffer to exist, or permit any
Subsidiary to incur or suffer to exist, any material "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived,
involving any such plan; incur, or permit any Subsidiary to incur, any material
withdrawal liability in connection with a "complete withdrawal" or a "partial
withdrawal", as defined in Sections 4203 and 4205, respectively, of ERISA, with
respect to any multi-employer plan as defined in Section 3(37) of ERISA.
8.12 Material Agreements. Modify, amend, release or grant any waiver or
acquiescence under or in connection with, or violate (or permit any Subsidiary
to do so), any term or provision of any material agreement as the same are set
forth on Schedule 6.10, if any such modification, amendment, release, waiver,
acquiescence or violation can reasonably be expected to have a material adverse
effect on the business, operations, property or financial condition of Borrowers
and their Subsidiaries taken as a whole, or on the ability of Borrowers to
perform their obligations under this Agreement.
8.13 Corporate Documents. Amend or modify the Certificate of Incorporation
or By-Laws or any other organizational document of Borrowers from the forms
thereof in effect on the date hereof without notice to Bank.
8.14 Removal of Collateral. Without prior notice to Bank, remove or allow
their Subsidiaries to remove the Collateral from its present location(s) as set
forth in Schedules 6.12 and 6.16; except in the ordinary course of business,
sell, transfer, change the registration, if any, dispose of, attempt to dispose
of, substantially modify, or abandon the Collateral or any part thereof, without
prior written notice to and consent of Bank, provided that, Borrowers and their
Subsidiaries may sell or otherwise dispose of obsolete or worn out Collateral no
longer used or useful in its business.
Any negative covenant herein may be waived in writing by Bank, whether prior or
subsequent to the occurrence of the event giving rise to the breach of such
negative covenant.
9. CONDITIONS OF LENDING.
The obligation of Bank to make advances under the Loan, and the
disbursements hereunder, is subject to the condition (in addition to all other
requirements of the Loan
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Agreement) that each of the following shall have been delivered or performed to
the satisfaction of Bank prior to the making of the initial advance:
9.1 A copy of the Articles of Organization and/or other incorporation or
registration document of each Borrower certified by the Secretary of the State
of incorporation, together with a certificate by such Secretary of the State as
to the legal existence and good standing of Borrowers together with evidence of
authorization to do business in those states which Borrowers respectively
maintain Collateral (Bank agrees that the certificates of registration to do
business currently in Bank's possession are sufficient to satisfy this
condition);
9.2 A certificate of the Secretary of each Borrower as to (i) a copy of
the Articles of Organization of each Borrower, (ii) a copy of the by-laws of
each Borrower, (iii) a copy of the action taken to authorize this Loan and the
transactions contemplated by the Instruments, and (iv) a list of the incumbent
officers of each Borrower authorized to sign any of the Instruments;
9.3 Executed Uniform Commercial Code financing statements and amendments
and releases of certain prior liens;
9.4 The executed Instruments;
9.5 Opinions, satisfactory in scope, form, and substance to Bank and its
counsel, as to such matters as Bank may reasonably request from counsel of each
Borrower;
9.6 Policies or certificates of insurance as required by the Instruments;
9.7 Receipt of those items and matters requested by Bank and required of
Borrowers on the Closing Agenda attached hereto as Exhibit A;
9.8 Written confirmation from Chase as to the outstanding Chase Letters of
Credit, also stating that other than draws on Chase Letters of Credit, Chase
will not advance additional funds on its outstanding credit facilities to
Borrowers;
9.10 All closing documents shall be satisfactory in scope, form, and
substance to Bank and its counsel.
10. EVENTS OF DEFAULT.
Upon the occurrence of any one or more of the following events of default
(referred to herein as an "Event of Default"), at the option of Bank, any and
all Liabilities of Borrowers to Bank shall become immediately due and payable
without further notice or demand and Bank may exercise its rights and remedies
upon default, as set forth in Section 11 hereof. In addition, at Bank's option
and without notice or demand, the occurrence of any such Event of Default
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shall also constitute a default under (i) the Instruments, (ii) all other
agreements between Bank, Borrowers, their Subsidiaries, and (iii) instruments
and papers given Bank by Borrowers:
10.1 Failure to make any payment of interest, principal or any other sum
due on the Note or under any of the Instruments, or with respect to any other
obligation or Liability of Borrowers to Bank, whether now existing or hereafter
created, within two (2) Business Days of the date such payment is due;
10.2 If any representation or warranty contained in this Agreement or
referenced herein, made by Borrowers or any of their Subsidiaries proves to have
been materially incorrect, false, inaccurate or misleading in any material
respect when such representation or warranty was made;
10.3 Borrowers or any Subsidiary default in the observance or performance
of any term, covenant, agreement, condition, undertaking or provision of this
Loan Agreement; and does not cure such default within five (5) days of notice
thereof;
10.4 Borrowers or any Subsidiary fail to pay any principal of or interest
on any of its indebtedness for borrowed money, under capitalized leases or
evidenced by a bond, debenture, note or similar instrument in a principal amount
in excess of Three Hundred Thousand Dollars ($300,000.00) to any Person for a
period longer than the grace period, if any, provided for such payment; or there
exists any other default under any instrument or agreement evidencing, creating,
securing or otherwise relating to such indebtedness (including without
limitation any guaranty or assumption agreement relating to such indebtedness)
or other event occurs and continues beyond any applicable grace period, if the
effect of such default or other event is to cause, or to permit the holders of
such indebtedness (or a trustee on their behalf) to cause, such indebtedness (or
the obligations under any such guaranty or assumption agreements) to become due
and payable prior to the stated maturity thereof.
10.5 One or more final judgments, decrees or orders shall be entered
against Borrowers or any Subsidiary involving in the aggregate a liability (not
fully covered by insurance other than applicable deductibles) of One Million
Dollars ($1,000,000.00) or more and all such judgments, decrees or orders shall
not have been satisfied, vacated, dismissed, or stayed or bonded pending appeal
(or other contest by appropriate proceedings) within sixty (60) days from the
entry thereof.
10.6 Pursuant to one or more judgments, decrees, orders, or other
proceedings, whether legal or equitable, any attachment, execution or other writ
is levied upon any material part of the property or assets of Borrowers or any
Subsidiary and is not satisfied, dismissed or stayed (including stays resulting
from the filing of an appeal) within forty-five (45) days, except for
attachments, executions or writs which would not, either individually or in the
aggregate, have a material adverse effect upon the business, operations, assets
or financial condition of Borrowers and their Subsidiaries taken as a whole.
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10.7 All or any material part of the assets or properties of Borrowers or
any Subsidiary are condemned, seized or appropriated by any government or
governmental authority.
10.8 Any order is entered in any proceeding directing the winding up,
dissolution or split-up of any Borrower.
10.9 Any event occurs of a type described in Section 4043(b) of ERISA with
respect to, or any proceedings are instituted by the PBGC to have a trustee
appointed to administer or to terminate, any plan referred to in Section 8.l0
hereof of Borrowers or any Subsidiary, which event or institution of proceedings
is likely to result in a termination of such plan and to have a material adverse
effect upon the business, operations, assets or financial condition of Borrowers
and their Subsidiaries taken as a whole; or if a trustee shall be appointed by a
United States District Court to administer any such plan with vested unfunded
liabilities that are material in relation to the business, operations, assets or
financial condition of Borrowers and their Subsidiaries taken as a whole.
10.10 If Borrowers or any Subsidiary make an assignment for the benefit of
creditors, file a petition in bankruptcy, has an order for relief entered
against them, are adjudicated insolvent or bankrupt, petition or apply to any
tribunal for a receiver or any trustee of any substantial part of their
property; or Borrowers or any Subsidiary commence any proceeding related to
Borrowers or any Subsidiary under any reorganization, arrangement, readjustment
of debt, dissolution or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect, or if there is commenced against Borrowers or any
Subsidiary any such proceeding, or Borrowers or any Subsidiary by any act
indicate their consent to, approval of, or acquiescence to any such proceeding
or to the appointment of any receiver of, custodian or trustee for, Borrowers or
any Subsidiary or any substantial part of their property, or upon the issuance
of any attachment or execution against Borrowers, or any governmental agency or
instrumentality shall seize, appropriate, condemn, occupy or interfere in any
manner with any of Borrowers' or any Subsidiary's operation of, all or any
substantial portion of their property, or the Collateral or any right of
Borrowers therein shall be subject to judicial process or condemnation or
forfeiture proceedings, which in any of the foregoing cases is not dismissed
within forty-five (45) days;
10.11 The imposition of any lien (except as permitted herein) upon any of
the Collateral of Borrowers, which lien is not discharged or judgment appealed
from or satisfied within forty five (45) days of its imposition or entry, or a
filing against, or relating to, Borrowers of a federal tax lien in favor of the
United States or any political subdivision thereof in an amount which has not
been bonded by Borrowers;
10.12 The determination by any court or agency having jurisdiction over
the parties of the unenforceability (in whole or in material part) of any
Instrument;
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10.13 The entry of any court order which enjoins, restrains or in any way
prevents Borrowers or any Subsidiary from conducting all or any material part of
their business affairs in the ordinary course of business;
10.14 The attachment by trustee process of any funds of Borrowers on
deposit with Bank which is not discharged or released within thirty (30) days;
10.15 If at any time the amount of Liabilities to Bank exceeds the
aggregate amount of Borrowers' Availability and Borrowers do not immediately
make a payment in an amount equal to such excess;
10.16 A change in the Person or powers and/or duties of office of the
President/Chief Executive Officer of Parent without a replacement or similar
post created reasonably acceptable to Bank within nine (9) months of the change
or termination thereof; or,
10.17 Failure of the Borrowers to comply with the requirements of Section
3.10.7.
11. RIGHTS IN THE EVENT OF DEFAULT.
If an Event of Default shall occur and not be waived by Bank, in its sole
discretion, or not be cured within any applicable cure period, if any, Bank
shall have the following rights:
11.1 Upon notice by Bank to such effect, the Note and any and all other of
Borrowers' Liabilities to Bank, together with interest thereon, shall be and
become immediately due and payable without further demand, protest or notice of
any kind, all of which are hereby expressly waived;
11.2 Bank may exercise all or any of the rights and remedies which it may
have: (i) hereunder, (ii) under the Instruments and any other instrument
delivered by Borrowers in connection with any of their Liabilities to Bank, or
(iii) under the UCC or any other applicable law;
11.3 In the event Bank seeks to take possession of any or all of the
Collateral by court process, Borrowers, to the maximum extent permitted by
applicable law, hereby irrevocably waive any bonds and any surety or security
relating thereto required by any statute, court rule or otherwise as an incident
to such possession, and waive any demand for possession prior to the
commencement of any suit or action to recover with respect thereto and waive the
right to demand a jury in any action in which Bank is a party;
11.4 Except as otherwise expressly provided for herein, demand,
presentment, protest and notice of nonpayment is hereby waived by Borrowers.
Borrowers also waive the benefit of all valuation, appraisement and exemption
laws;
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11.5 In the event of non-payment and acceleration of the Liabilities by
Bank, Borrower hereby waives all rights to notice and hearing of any kind prior
to the exercise by Bank of its rights to repossess the Collateral without
judicial process or to replevy, attach or levy upon said Collateral without
prior notice or hearing;
11.6 The proceeds of any sale or disposition of the Collateral held under
this Agreement or any of the Instruments, shall be applied towards any and all
reasonable expenses of enforcing this Agreement (including, but not limited to
reasonable expenses incurred in liquidating or disposing of the Collateral) or
the Liabilities in such order and manner as expressly required by any of the
Instruments and otherwise as Bank determines in its sole discretion, any
statute, custom, or usage to the contrary notwithstanding. Borrowers hereby
covenant and agree that they shall remain liable to Bank for any deficiency
remaining following such application;
11.7 Bank shall have the right to set-off, without notice to Borrowers,
any and all deposits or other sums at any time or times credited by or due from
Bank to Borrowers, whether in a special account or other account represented by
a certificate of deposit (whether or not matured) and any cash, securities,
instruments or other property of Borrowers in the possession of Bank, whether
for safekeeping or otherwise (the "Items") which deposits and other sums and
Items shall, at all times, constitute additional security for the Liabilities
and may set-off against all or any part of the Liabilities at any time if
Borrowers are primary obligor with respect to such Liabilities, or at or after
the maturity of Liabilities of Borrowers, are a secondary obligor. Borrowers
hereby expressly grant to Bank a security interest in such Items pursuant to
Article 9 of the UCC; and,
11.8 Borrowers hereby irrevocably constitute and appoint Bank as
Borrowers' true and lawful attorney, with full power of substitution, to convert
the Receivables Collateral into cash at the sole risk, cost and expense of
Borrowers. The rights and powers granted Bank by the within appointment include,
but are not limited to, the right and power to compromise, settle or execute
releases with any of Borrowers' account debtors, and to prosecute, defend,
compromise or release any action relating to the Collateral; to receive, open
and dispose of all mail addressed to Borrowers, and to take therefrom any
remittances on or proceeds of any Collateral in which Bank has a security
interest; to notify Post Office authorities to change the address to which
Borrowers' mail is to be sent as Bank shall designate; to endorse the name of
Borrowers in favor of Bank upon any and all checks, drafts, money orders, notes,
acceptances or other instruments of the same or different nature; to sign and
endorse the name of Borrowers on, and to receive as secured party, any of the
Receivables Collateral, any invoices, schedules of Receivables Collateral,
freight or express receipts, or bills of lading, storage receipts, warehouse
receipts, or other documents of title of a same or different nature relating to
the Receivables Collateral; to sign the name of Borrowers on any notice to
Borrowers' account debtors or verification of the Receivables Collateral; and to
sign and file, or record, on behalf of Borrowers any financing or other
statement in order to perfect or protect Bank's security interest. Bank shall
not be obligated to do any of the acts or to exercise any of the powers
authorized herein, but if Bank elects to do any such act, or to exercise any of
such powers, it shall not be accountable for more
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than it actually receives as a result of such exercise of power, and shall not
be responsible to Borrowers except for Bank's actual willful misconduct. All
powers conferred upon Bank by this Agreement, being coupled with an interest,
shall be irrevocable until the within Agreement is terminated as provided
herein.
11.9 In addition to any other right or remedy Bank may have hereunder or
under the UCC, Bank is hereby authorized and empowered, with the aid and
assistance of any person or persons, to enter any premises where the Collateral
or any part thereof is, or may be, placed, and to assemble and/or remove the
same, and to sell or otherwise dispose of such Collateral at public or private
sale upon at least ten (10) days' prior written notice to Borrowers of the date
on, or after, which such sale may be conducted, and Borrowers expressly agree
that it shall constitute fair and reasonable notice to Borrowers, that said
notice may be given regardless of whether or not Bank has taken actual
possession of the Collateral. Bank may require Borrowers to assemble the
Collateral, and to make it available to Bank at a place to be designated by Bank
which is reasonably convenient to both parties. Bank may, without any payment or
hindrance, enter upon any real property where the Collateral or any part thereof
may be located, and, in connection with the enforcement of any right, remedy,
power or privilege conferred upon Bank hereunder, (i) may store the Collateral
or any part thereof on such real property without liability for any rent or
other payment in connection therewith, or (ii) may hold, maintain and preserve
the Collateral for sale or liquidation. Borrowers agree to indemnify and hold
Bank harmless from and against any loss, liability, damage, costs or expenses
whatsoever arising from the use, operation, ownership or possession of the
Collateral or any part thereof by Bank except for losses occasioned by Bank's
gross negligence or willful misconduct. Bank acknowledges that it will be bound
to comply with all applicable law and the terms and conditions of any
intercreditor agreement in effect at the time. In addition to the above,
Borrowers hereby grant to Bank upon exercise of its rights hereunder an
irrevocable license and right to use the tradenames and trademarks of Borrowers
and their Subsidiaries in liquidating the Collateral.
11.10 The rights, remedies, powers, privileges, and discretions of Bank
hereunder and under the other Instruments (herein, the "Bank's Rights and
Remedies") shall be cumulative and not alternative or exclusive of any rights or
remedies which it would otherwise have, and no delays or omissions by Bank in
exercising or enforcing any of Bank's Rights and Remedies shall operate as or
constitute a waiver thereof. No waiver by Bank of any default hereunder, under
the other Instruments, or under any other agreement and no single or partial
exercise of any of Bank's Rights or Remedies, and no other agreement or
transaction, of whatever nature entered into between Bank and Borrowers at any
time, whether before, during or after the date hereof, shall preclude the other
or further exercise of Bank's Rights and Remedies. No waiver or modification on
Bank's part on any one occasion shall be deemed a waiver on any subsequent
occasion, nor shall it be deemed a continuing waiver. All of Bank's Rights and
Remedies under this Agreement, the other Instruments or any other agreement or
transaction may be exercised by Bank at such time or times and in such order of
preference as Bank in its sole discretion may determine.
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11.11 Require the Borrowers to perfect the security interests in the
foreign Collateral.
12. MISCELLANEOUS.
12.1 Borrowers shall indemnify, and save Bank harmless of, to, and from
any liability, claim, or demand made upon Bank in connection with Bank's
exercise of its rights pursuant to the within Agreement or any of the
Instruments, and all reasonable costs and expenses, including, without
limitation, reasonable attorneys' fees, incurred by Bank in connection with any
such liability, claim, or demand. Borrowers' agreement so to indemnify and save
Bank harmless (and to cause their Subsidiaries to indemnify and hold Bank
harmless) is a Liability of Borrowers to Bank and is secured hereby;
12.2 Borrowers hereby indemnify, agree to defend and hold Bank harmless
and against all loss, liability, damage and expense, including costs associated
with administrative and judicial proceedings and reasonable attorneys' fees,
ever suffered or incurred by Bank on account of: (i) Borrowers' failure to
comply with any Environmental Laws or any order of any regulatory or
administrative authority with respect thereto; (ii) any release of oil or
hazardous materials or substances on, upon or into real property owned, operated
or controlled by Borrowers; (iii) any and all damage to natural resources or
real property or harm or injury to Persons resulting or alleged to have resulted
from such failure to comply or release or oil or hazardous materials or
substances by Borrowers; or, (iv) Borrowers' use of the proceeds of the Loan;
12.3 Borrowers agree to pay, on demand, all recording fees, and other
reasonable charges and expenses of any kind or nature whatsoever, including,
without limitation, reasonable attorneys' fees, incurred or expended by Bank in
the negotiation, preparation, execution, implementation and/or recording of this
Agreement or any one or more of the Instruments or documents referred to herein
or otherwise incurred by Bank in administering, supervising, protecting, or
collecting any amounts due under any of the Instruments or incurred by Bank in
the exercising or enforcing of its rights, remedies, powers, or privileges under
this Agreement or any of the Instruments referred to herein.
12.4 Any demand, notice, or other correspondence to Bank, Borrowers or any
other party in connection with this Loan Agreement shall be deemed effective
four (4) days following deposit in the United States mail and sent by registered
or certified mail, postage prepaid, the day when sent if delivered by hand or
transmitted by facsimile with a copy by registered or certified mail, or the day
following deposit with a nationally recognized overnight courier with all costs
prepaid at the addresses set forth below Borrowers hereby covenant and agree
that notice to Parent shall constitute sufficient notice to all Borrowers:
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Borrowers: Nashua Corporation
44 Franklin Street
Nashua, New Hampshire 03061
Attention: Paul Buffum, Esquire
with a copy to:
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
Attention: Mark Polebaum, Esquire
Bank: Citizens Bank New Hampshire
875 Elm Street
Manchester, New Hampshire 03101
Attention: Tara Trafton Hamblett
with a copy to:
Sheehan, Phinney, Bass + Green
Professional Association
1000 Elm Street
Post Office Box 3701
Manchester, New Hampshire 03105-3701
Attention: Alan L. Reische, Esquire
Any of the addresses specified above may be changed on seven (7) days' prior
written notice of the type described herein. Notwithstanding the foregoing, in
no event shall the parties be required to deliver copies of routine notices or
requests or routine periodic financial information to counsel for any of the
parties.
12.5 This Loan Agreement shall be binding upon Borrowers and their
representatives, successors, and assigns and shall inure to the benefit of Bank
and Bank's successors and assigns, provided however, that Borrowers may not
assign any of their rights or delegate any of their obligations hereunder
without the prior written consent of Bank which consent may be withheld for any
reason or for no reason at the sole discretion of Bank. Bank may, with
Borrowers' consent, which consent may not be unreasonably withheld, from time to
time, sell, assign or transfer its rights or its obligations hereunder, however,
Borrowers' consent shall not be required if the assets of Bank are purchased by
a third party, or an Event of Default has occurred hereunder. Bank may, in its
sole discretion, participate or otherwise dispose of all or any part of the
Instruments to any entity domiciled in the United States or foreign entity
having an office in the United States, and all references herein to "Bank" shall
include any
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Person who obtains an interest as a result of any such sale, assignment,
transfer, participation or other disposition.
12.6 To the extent possible, each provision of this Loan Agreement shall
be interpreted in a manner as to be valid, legal and enforceable. Any
determination that any provision of this Loan Agreement or any application
thereof is invalid, illegal, or unenforceable in any respect in any instance
shall be effective only to the extent of such invalidity, illegality or
unenforceability and shall not affect the validity, legality, and enforceability
of such provision in any other instance, or the validity, legality, or
enforceability of any other provision of this Loan Agreement.
12.7 In the event Bank is at any time required to turn over, disgorge, or
repay (whether to the undersigned, a Trustee in Bankruptcy, or to third parties)
any payment previously received by Bank with respect to any of the Liabilities
(whether received from the undersigned or third parties), then the amount of the
Liabilities secured by the Collateral shall be increased by the amount so turned
over or disgorged by Bank, plus reasonable expenses incurred by Bank in the
process, to the same extent as if the amount in question, and expenses, had been
advanced by Bank at the inception of the Liabilities against which the disgorged
payments were originally applied, and had remained unpaid since that date
(whether or not all Liabilities had otherwise been paid at the date of turn
over, all of which shall be payable immediately without demand). If the
Liabilities had previously been paid in full, this Agreement (notwithstanding
any of the terms hereof) shall be deemed revived and in full force and effect
with respect to such payments.
12.8 The recitals and paragraph headings throughout this Loan Agreement
are for convenience and reference only, and the words contained therein shall in
no way be held to explain, modify, amplify or aid in the interpretation,
construction or meaning of the provisions of this Loan Agreement.
12.9 This Loan Agreement shall be governed by the laws of the State of New
Hampshire as the same may exist at the date hereof. The parties hereto hereby
agree that any action hereon between the parties hereto and their successors in
interest may be maintained in a court of competent jurisdiction located within
the State of New Hampshire, and consent to the jurisdiction of any such New
Hampshire court for all purposes connected herewith. All Borrowers who are not
corporations registered to do business in New Hampshire hereby irrevocably
appoint the New Hampshire Secretary of State as their agent for service of
process.
12.10 This Loan Agreement may be executed in multiple counterpart copies,
any one of which when duly executed with all of the formalities hereof, shall be
fully binding and effective as the original of this Loan Agreement.
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<PAGE> 42
12.11 Excepting only the other Instruments executed concurrently herewith,
this Loan Agreement supercedes all prior agreements relating to the Loan,
including without implied limitation, any previous commitment and/or proposal
letters. This Loan Agreement shall be amended only by a subsequent writing
executed with all the formalities hereof.
12.12 This Loan Agreement and all other Instruments and documents which
have been or may hereinafter be furnished by or to either of Borrowers to or by
Bank may be reproduced by Bank, Borrowers, by any photographic, photostatic,
microfilm, xerographic or similar process, and Bank or Borrowers may destroy the
original from which such document was so reproduced. Any such reproduction shall
be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made in the normal course of business).
12.13 This Loan Agreement shall remain in full force and effect until
specifically terminated in writing by a duly authorized officer of Bank; such
termination shall be promptly provided upon payment of all Liabilities,
including all monies due hereunder and under the Instruments.
12.14 Each party hereto intends that this Loan Agreement shall not benefit
or create any right or cause of action in or on behalf of any person other than
the parties hereto.
12.15 Borrowers hereby irrevocably waive to the fullest extent permitted
by applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated by
this Agreement or the Instruments.
IN WITNESS WHEREOF, the parties hereto have caused this Loan and Security
Agreement to be duly executed on their behalf by the persons signing below who
are thereunto duly authorized with the intention that it be effective as of the
day and year first above written.
WITNESS: NASHUA CORPORATION
/s/Denise A. Poulos By: /s/Daniel M. Junius
- ------------------------------ -----------------------------------
Daniel M. Junius
Vice President
42
<PAGE> 43
NASHUA PHOTO INC.
/s/Denise A. Poulos By: /s/Daniel M. Junius
- ------------------------------ -----------------------------------
Daniel M. Junius
Treasurer
CITIZENS BANK NEW HAMPSHIRE
/s/Denise A. Poulos By: /s/Tara Trafton Hamblett, VP
- ------------------------------ -----------------------------------
Tara Trafton Hamblett
Vice President
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
On this the 28th day of March, 1997, before me, the undersigned officer,
personally appeared Daniel M. Junius, who acknowledged himself to be the Vice
President of Nashua Corporation, a corporation, and that he as such Vice
President, being authorized so to do, executed the foregoing instrument for the
purposes therein contained on behalf of the corporation.
/s/Denise A. Poulos
---------------------------------------
Justice of the Peace
My Commission Expires: 3/31/98
43
<PAGE> 44
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
On this the 28th day of March, 1997, before me, the undersigned officer,
personally appeared Daniel M. Junius, who acknowledged himself to be the
Treasurer of Nashua Photo Inc., a corporation, and that he as such Treasurer,
being authorized so to do, executed the foregoing instrument for the purposes
therein contained on behalf of the corporation.
/s/Denise A. Poulos
---------------------------------------
Justice of the Peace
My Commission Expires: 3/31/98
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
On this the 28th day of March, 1997, before me, the undersigned officer,
personally appeared Tara Trafton Hamblett, who acknowledged herself to be the
Vice President of Citizens Bank New Hampshire, a guaranty savings bank, and that
she as such Vice President, being authorized so to do, executed the foregoing
instrument for the purposes therein contained on behalf of the bank.
/s/Denise A. Poulos
---------------------------------------
Justice of the Peace
My Commission Expires: 3/31/98
44
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<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-28-1997
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<PP&E> 115,369
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0
0
<COMMON> 18,754
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<SALES> 75,176
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