UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1995
Commission file number: 1-10245
RCM TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Nevada 95-1480559
(State of Incorporation) (IRS Employer Identification No.)
2500 McClellan Avenue, Suite 350, Pennsauken, New Jersey 08109-4613
(Address of principal executive offices)
(609) 486-1777
(Registrant's telephone number, including area code)
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 16,275,118
Common Stock, $.05 par value Outstanding as of September 8, 1995
1
<PAGE>
<TABLE>
<CAPTION>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements Page
<S> <C>
Consolidated Balance Sheets as of July 31, 1995 (Unaudited)
and October 31, 1994 (Audited) 3-4
Unaudited Consolidated Statements of Income for the Three Month
Periods Ended July 31, 1995 and 1994 5
Unaudited Consolidated Statements of Income for the Nine Month
Periods Ended July 31, 1995 and 1994 6
Unaudited Consolidated Statement of Changes in Shareholders'
Equity for the Nine Month Period Ended July 31, 1995 7
Unaudited Consolidated Statements of Cash Flows for the Nine
Month Periods Ended July 31, 1995 and 1994 8-9
Notes to Unaudited Consolidated Financial Statements 10-11
ITEM 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations 12-15
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings 16
ITEM 5 - Other Information 16
ITEM 6 - Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
2
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Part I Item 1 Financial Information
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
July 31, 1995 and October 31, 1994
<TABLE>
<CAPTION>
ASSETS
1995 1994
(Unaudited) (Audited)
<S> <C> <C>
Current assets
Cash and cash equivalents $3,195,600 $2,534,073
Accounts receivable (net of allowance for doubtful accounts
of $30,379 and $15,000 in 1995 and 1994, respectively) 2,689,263 3,500,079
Prepaid expenses and other current assets 579,459 319,793
--------- ---------
Total current assets 6,464,322 6,353,945
--------- ---------
Property and equipment, at cost
Equipment and leasehold improvements 814,893 749,666
Less: accumulated depreciation and amortization 687,611 616,054
--------- --------
127,282 133,612
--------- --------
Other assets
Deposits 34,083 36,431
Deferred charges 276,810 142,324
------- -------
310,893 178,755
------- -------
Total assets $6,902,497 $6,666,312
========= =========
</TABLE>
3
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RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
July 31, 1995 and October 31, 1994
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
1995 1994
(Unaudited) (Audited)
<S> <C> <C>
Current liabilities
Current maturities of long-term debt $ 116,856 $ 38,901
Accounts payable and accrued expenses 90,809 73,915
Accrued payroll 395,546 589,218
Billings in excess of costs and estimated earnings 148,229
Taxes other than income taxes 108,804 183,600
Income taxes payable 93,100 119,473
---------- ----------
Total current liabilities 805,115 1,153,336
---------- ----------
Long term debt 43,447 35,496
---------- ----------
Shareholders' equity
Common stock, $0.05 par value; 40,000,000 shares authorized;
14,713,565 issued and outstanding 735,678 735,678
Additional paid-in capital 9,143,765 9,143,765
Accumulated deficit (3,762,687) (4,339,142)
----------- -----------
6,116,756 5,540,301
Less: treasury stock, at cost, 314,000 shares 62,821 62,821
---------- ----------
6,053,935 5,477,480
---------- ----------
Total liabilities and shareholders' equity $6,902,497 $6,666,312
========= =========
</TABLE>
4
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RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended July 31,
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Revenues
Sales of services $ 5,015,376 $ 7,527,585
Interest income and other 46,826 14,874
---------- ----------
Total revenues 5,062,202 7,542,459
---------- ----------
Cost and expenses
Cost of services 4,121,280 6,108,580
Selling, general and administrative 834,403 933,010
Interest and other 15,893 13,344
---------- ---------
Total costs and expenses 4,971,576 7,054,934
---------- ---------
Income before income taxes 90,626 487,525
Income taxes 20,910 55,680
---------- ---------
Net income $ 69,716 $ 431,845
========== ==========
Net income per share: $ .01 $ .03
========== ==========
</TABLE>
5
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RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended July 31,
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
Revenues
Sales of services $17,988,304 $21,385,472
Interest income and other 127,813 38,482
---------- ----------
Total revenues 18,116,117 21,423,954
---------- ----------
Cost and expenses
Cost of services 14,788,433 17,594,900
Selling, general and administrative 2,639,122 2,733,564
Interest and other 36,954 36,054
---------- ----------
Total costs and expenses 17,464,509 20,364,518
---------- ----------
Income before income taxes 651,608 1,059,436
Income taxes 75,153 125,081
---------- ----------
Net income $ 576,455 $ 934,355
========= =========
Net income per share: $ .04 $ .06
========= =========
</TABLE>
6
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RCM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Nine Months Ended July 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated Treasury
Shares Amount Capital Deficit Stock
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1994 14,713,565 $ 735,678 $ 9,143,765 ($4,339,142) ($ 62,821)
Net Income 576,455
---------
Balance, July 31, 1995 14,713,565 $ 735,678 $ 9,143,765 ($3,762,687) ($ 62,821)
========== ======== ========== ========= =========
</TABLE>
7
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RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended July 31,
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 576,455 $ 934,355
--------- ---------
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 97,071 69,485
Provision for losses on accounts
receivable 15,379 8,861
Changes in assets and liabilities:
Accounts receivable 795,437 ( 333,332)
Prepaid expenses and other
current assets ( 259,666) ( 211,992)
Accounts payable and accrued expenses 16,894 28,339
Accrued payroll ( 193,671) ( 90,122)
Billings in excess of costs and
estimated earnings ( 148,229) ( 32,669)
Taxes other than income taxes ( 74,796) ( 1,999)
Income taxes payable ( 26,373) 24,736
--------- ---------
Total adjustments 222,046 ( 538,693)
--------- ---------
Net cash provided by operating activities 798,501 395,662
--------- ---------
</TABLE>
8
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RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Nine Months Ended July 31,
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Cash flows from investing activities:
Increase in deferred charges ($ 10,000)
Property and equipment acquired ( 65,227) ($ 9,447)
Increase decrease in deposits 2,347 2,845
--------- ---------
Net cash used in investing activities ( 72,880) ( 6,602)
--------- ---------
Cash flows from financing activities:
Net repayments under
short term debt arrangements ( 4,703)
Repayments of long term debt ( 64,094) ( 26,092)
-------- ---------
Net cash used in financing activities ( 64,094) ( 30,795)
-------- ---------
Net increase in cash and cash equivalents 661,527 358,265
Cash and cash equivalents at beginning of period 2,534,073 913,535
--------- ---------
Cash and cash equivalents at July 31, $3,195,600 $1,271,800
======== =========
Supplemental cash flow information:
Cash paid for:
Interest expense $ 18,811 $ 22,549
Income taxes $ 129,796 $ 102,042
</TABLE>
9
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RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying consolidated financial statements have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). This Report on Form 10-Q should be read in
conjunction with the Company's annual report on Form 10-K for the year ended
October 31, 1994. Certain information and footnote disclosures which are
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to SEC
rules and regulations. The information reflects all normal and recurring
adjustments which, in the opinion of Management, are necessary for a fair
presentation of the financial position of the Company and its results of
operations for the interim periods set forth herein. The results for the nine
months ended July 31, 1995 are not necessarily indicative of the results to be
expected for the full year.
2. Income per Share
Income per share is based on the weighted average number of common shares
outstanding during the periods. For the nine months ended July 31, 1995 and
1994, the weighted average number of shares outstanding was 14,822,366, and
14,508,327, respectively.
3. Acquisitions
On December 15, 1994, the Company purchased certain operating assets of
Great Lakes Design, Inc. for $200,000 in the form of a $150,000 note
payable and $50,000 in cash. In addition, the Company will share with the seller
a portion of the operating income for a period of five years. This acquisition
has been accounted for using the purchase method of accounting. Costs in excess
of assets acquired of approximately $160,000 are being amortized over a period
of five years. The operating assets are not significant to the Company's
consolidated results of operations. The note payable is uncollateralized, bears
interest at 8% per annum and is payable in quarterly installments of $20,490
including interest with a final maturity date of December 1, 1996.
On August 30, 1995, RCM Technologies, Inc. ("Registrant") acquired
Cataract, Inc., a Newtown, Pennsylvania-based supplier of management,
engineering, design and technical services to the nuclear power, fossil fuel,
electric utilities and process industries. The acquisition was completed through
a merger transaction (the "Merger") pursuant to which Cataract, Inc. was merged
with and into a newly-created subsidiary of the Registrant, which then
concurrently changed its name to "Cataract, Inc."
Following the Merger, the directors and or executive officers of Cataract,
Inc. consist of Leon Kopyt, Stanton Remer and Rocco Campanelli.
The Merger consideration payable to the former shareholders of Cataract,
Inc. consisted of $2,000,000 cash and 1,561,553 restricted shares of the
Registrant's common stock (the "Shares") valued at $1,200,000 (based upon the
average closing bid price of the Registrant's common stock for the 30 calendar
days immediately preceding the closing date). The source of cash utilized in the
merger was $1,145,000 from the internal sources and $855,000 from the
Registrants' line of credit facility. The Registrant used an additional
$1,747,000 of the line of credit facility to satisfy certain loan obligations of
Cataract, Inc. at the closing. The acquisition has been accounted for under the
purchase method of accounting. The cost in excess of net assets acquired will be
approximately $3,000,000. It is anticipated the cost in excess of net assets
acquired will be amortized over a 15 to 20 year period.
The shares issued to the former Cataract, Inc. shareholders have been
pledged to the Company for a period of three years to secure the performance of
certain conditions subsequent to the Merger relating to the achievement of
certain levels of sales revenues that have been warranted by the former
Cataract, Inc. shareholders.
<PAGE>
Following the expiration of the pledge period, the Shares are to be placed
in a voting trust until the earlier of: (i) the public or private sale of such
Shares in open market transactions to unaffiliated third parties; or (ii) the
resignation or removal from office of Leon Kopyt, currently Chief Executive
Officer and President of the Registrant. Notwithstanding the above, one-third of
the Shares shall be released from trust commencing upon the fifth anniversary of
the closing, and thereafter, an additional one-third of the Shares shall be
released from trust upon each of the sixth and seventh annual anniversaries of
the closing date.
During the period in which the Shares are subject to pledge and the voting
trust, the Shares are to be voted by the Registrant's Board of Directors on
behalf of the former shareholders of Cataract, Inc.
10
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RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
4. Deferred Charges
Deferred charges consist of the following:
<TABLE>
<CAPTION>
July 31, October 31,
Amortization 1995 1994
Period (Unaudited) (Audited)
<S> <C> <C> <C>
Cost in excess of net assets acquired 20 years $ 165,434 $ 165,435
Covenants not to compete 5 years 160,000
--------- ---------
325,434 165,435
48,624 23,111
--------- ---------
$ 276,810 $ 142,324
========= =========
</TABLE>
5. Contingencies
There are no material legal proceedings to which the Company or any of its
subsidiaries is a party or to which any of their property is subject.
11
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RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview
During the last several years, the Company has redirected its resources and
streamlined its operations in response to changing economic conditions. The
Company has developed an operating model which consists of a strong, balanced
approach to management, while maintaining an entrepreneurial spirit. Corporate
management focuses on the overall performance of the Company. It establishes and
maintains financial controls and provides financial data processing and
administrative assistance to all its operating offices. It develops the business
strategy, goals, and general operating guidelines for the Company, maintains
strong relationships with the Company's principal customers, and oversees local
management of operations. The Company believes that its performance-based
compensation structure and its management techniques are necessary for providing
proper incentives and maintaining overall monitoring and control of operations.
The present downsizing of U.S. corporations is a "permanent phenomenon" and
management believes is essential in order to achieve productivity improvements,
payroll cost reduction and work force flexibility.
Liquidity and Capital Resources
Key indicators of liquidity, balance sheet strength and capital resources are as
shown in the following table:
<TABLE>
<CAPTION>
July 31, October 31,
1995 1994
(Unaudited) (Audited)
<S> <C> <C>
Current assets $6,464,322 $6,353,945
Current liabilities 805,115 1,153,336
------------ ----------
Working capital $5,659,207 $5,200,609
========== ==========
Current ratio 8.03 to 1 5.51 to 1
Borrowed capital $ 160,303 $ 74,397
Shareholders' equity $6,053,935 $5,477,480
Borrowed capital/
Shareholders' equity 2.65% 1%
Common shares outstanding 14,399,565 14,399,565
(Net of Treasury shares)
Book value per common share $.42 $.38
</TABLE>
12
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RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Liquidity and Capital Resources (continued)
During the nine months ended July 31, 1995, working capital increased by
$458,598. This was due primarily to the continued profitable operations of the
Company. The Company, at July 31 1995 had $43,447 in long-term debt and the
Company held $3,195,600 of cash and cash equivalents.
Concurrently, with the acquisition of Cataract, Inc., (See Footnote 3) the
Company renegotiated its credit facility with Mellon Bank, N.A.. Maximum
borrowing permitted under the credit facility is $6,000,000 and the agreement
expires June 1998. The credit facility is collateralized by the accounts
receivable, contract rights and furniture and fixtures of Intertec Design, Inc.
(Intertec) and Cataract, Inc. (Cataract), the operating subsidiaries, with
unlimited guarantees from RCM Technologies, Inc. The credit facility is used to
supply the subsidiaries with the cash requirements needed to finance payroll
relating to the provision of services to clients prior to the time that the
subsidiaries are paid by its customers. The loan requires the combined companies
and RCM Technologies, Inc., individually to meet certain covenants with respect
to financial ratios and earnings. Advances to RCM Technologies, Inc., from the
subsidiaries, in excess of its operating expenses must have prior bank approval.
The Company believes this will sufficiently support the operations of Intertec,
Cataract and RCM Technologies, Inc.
Borrowing under the renegotiated credit facility is based on 85% of
accounts receivable on which not more than ninety days have elapsed since the
date of invoicing. The interest rate charged is the prime rate of the Bank
(effective rate of 8.75% and 9.0% at July 30, 1995 and October 31, 1994,
respectively). The bank charges a fee of .25% per annum on the unused portion of
the credit facility. At July 31, 1995, there was no outstanding borrowing under
the credit facility. The outstanding loan balance at September 8, 1995 was
$1,800,906 as a result of the acquisition financing of Cataract, Inc.
The Company does not currently have material commitments for capital
expenditures and does not anticipate entering into any such commitments during
the next twelve months. The Company continues to evaluate for acquisition
various businesses which offer potential synergy with its current operations.
The Company's current commitments consist primarily of lease obligations for
office space. The Company believes that its capital resources are sufficient to
meet its obligations incurred in the normal course of business for at least the
next twelve months.
13
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RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
1995 Compared to 1994
Results of Operations
For the nine months ended July 31, 1995, the Company experienced declining
sales. Revenues decreased $3,307,837 or approximately 15.4% from sales for 1994.
Sales by IDI Personnel Services decreased approximately $1,773,000. Sales to Dow
Chemical and Dow Corning decreased approximately $742,000. Sales to Sikorsky
Aircraft (Sikorsky) decreased approximately $2,806,000. Sikorsky has reduced its
direct labor force and virtually eliminated the contract and temporary labor
force. Consequently, the Company has experienced a significant reduction in
revenues from Sikorsky contracts and does not anticipate significant revenues
from Sikorsky in the foreseeable future. The percentage of the Company's
revenues received from Dow Chemical, Dow Corning and Sikorsky has declined over
the last three years and the Company expects to continue its efforts to reduce
its dependence on these customers. The Company is aggressively engaged in
pursuing ways to restore the lost revenues through expanding it's sales efforts
and accelerating it's search for possible acquisition and merger candidates.
On December 15, 1994, the Company completed the acquisition of the business
operations of Great Lakes Design, Inc. located in Grand Rapids and Grand Haven,
Michigan. This acquisition has established the Company's market presence in
Western Michigan and provides for participation in the expanding industrial
sectors located in the Central and Western Regions.
On August 30, 1995, the Company completed the acquisition of Cataract,Inc.
In its last fiscal year, Cataract reported gross revenues of over
$20,000,000 and an operating profit of over $1,100,000 before interest,
depreciation, amortization and taxes.
On May 15, 1995, Dow Corning filed for Chapter 11 bankruptcy protection relating
primarily to its on going breast implant litigation. In recent communication
received by the Company from the President of Dow Corning, the Company was
informed of no anticipated changes to Dow Corning's business conduct during this
period.
Results of operations for the nine months ended July 31, 1995 reflected a net
income of $576,455 ($.04 per share) in 1995 as compared to $934,355 ($.06 per
share) for the comparable period in 1994.
Cost of sales decreased $2,806,467 or approximately 16.0% from 1994 as a result
of the decrease in revenues.
Gross profit decreased by $595,701 or approximately 15.7% from 1994. The Company
continues to effectively control its payroll and payroll-related costs as well
as it's efforts to increase markups with new and existing clients.
Operating costs decreased by $95,442 or approximately 3.5% from 1994. The 1995
decrease in operating costs resulted from significant efforts to control costs.
Operating costs would have decreased approximately $313,000 without the addition
of Great Lakes Design offices in Grand Haven and Grand Rapids, Michigan on
December 15, 1994.
Income tax expense decreased by $49,928 or approximately 40.0% from 1994. This
is the result of a reduction of income before taxes as well as an income tax
over accrual of approximately $10,000 from the year ended October 31, 1994.
14
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RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
1994 Compared to 1993
Results of Operations
The Company, with continued implementation of its strategic business plan,
continued to show operational improvements. Results of operations reflected a
net income of $934,355 vs $554,970 in 1993. The continuing focus on Intertec
Design, Inc. has improved profitability by $379,385 or 68.4% over results for
1993.
Sales for Intertec Design, Inc., the Company's operating subsidiary, increased
by $369,058, or approximately 1.8% from sales for the nine months ended July 31,
1993. In the Los Angeles area, sales by IDI Personnel Services increased by
$871,294. Sales to the offices servicing Dow Chemical and Dow Corning decreased
by $224,139. Sales to Sikorsky Aircraft decreased by $238,161.
Cost of sales decreased by $365,263 or approximately 2.0% from the nine months
ended July 31, 1993. Gross profit increased by $734,321 or approximately 24.0%
from the nine months ended July 31, 1993. This increase occurred as a result of
the Company's continuing efforts to control its workmen's compensation and
payroll related costs as well as its efforts to increase mark-up with new and
existing clients.
Operating costs increased by $318,048 or approximately 13.2% from the nine
months ended July 31, 1993. The 1994 increase in operating costs resulted from
the addition of two offices in the new England area as well as bad debts of
approximately $102, 000. The two additional offices were merged together on
April 1, 1994 to achieve efficiency and cost effectiveness.
Net other expense decreased by $33,133 or approximately 107.9% from the nine
months ended July 31, 1993. The majority of this decrease resulted from the
reduction of financing and interest costs associated with the Company's line of
credit.
Income tax expense increased by 70,021 or approximately 127.2% from the nine
months ended July 31, 1994. This is the result of the expiration of the net
operating loss carryfowards on the state level in 1994 and the Company's
becoming subject to the alternative minimum tax on the federal level.
15
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings to which the Company or any of its
subsidiaries is a party or to which any of their property is subject.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10) Amended and Restated Loan and Security Agreement By and
Between Intertec Design, Inc.,CI Acquisition Corp.
and Mellon Bank, N.A., dated August 31, 1995
(11) Computation of earnings per share.
(27) Financial Data Schedule.
16
<PAGE>
RCM TECHNOLOGIES, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
RCM Technologies, Inc.
(Registrant)
Date: September 8, 1995 By:/s/ Leon Kopyt
--------------
Leon Kopyt
Chairman, President,
Chief Executive Officer
and Director
Date: September 8, 1995 By:/s/ Stanton Remer
-----------------
Stanton Remer
Chief Financial Officer,
Treasurer and Director
EXHIBIT 11
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
Nine Months Ended July 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Income
Net income applicable to common stock $ 576,455 $ 934,355
========= ==========
Shares
Weighted average number of shares
outstanding 14,399,565 14,374,565
Common stock equivalents 422,801 133,762
---------- ----------
Total 14,822,366 14,508,327
========== ==========
Primary earnings per share $ .04 $ .06
========== ==========
Fully diluted earnings per share $ .04 $ .06
========== ==========
</TABLE>
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
By and Among
INTERTEC DESIGN, INC.,
CI ACQUISITION CORP.
and
MELLON BANK, N.A.
Dated: _August 31, 1995
/AJK/2722-79/9980_4 082395/14:58
<PAGE>
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the "Agreement") is
made effective the 31TH day of _August________, 1995, by and among INTERTEC
DESIGN, INC. ("Intertec"), CI ACQUISITION CORP. ("CI") and MELLON BANK,
N.A. ("Bank"). Intertec and CI are hereinafter collectively referred to as
the "Borrowers" and each individually as a "Borrower". BACKGROUND A.
Intertec has previously entered into a Loan Agreement (the "Prior Loan
Agreement") and a Security Agreement (the "Prior Security Agreement") with
Meritor Savings Bank ("Meritor"), both dated December 3, 1991, pursuant to
which Meritor agreed to extend to Intertec a line of credit in accordance
with the terms thereof. B. Pursuant to a certain Purchase and Assumptions
Agreement dated December 11, 1992, Bank purchased the rights of Meritor in,
to and under the Prior Loan Agreement, the Prior Security Agreement and all
documents collateral thereto from the Federal Deposit Insurance
Corporation, in its capacity as receiver for Meritor. C. The Prior Loan
Agreement and the Prior Security Agreement were amended and restated
pursuant to an Amended and Restated Loan and Security Agreement dated June
30, 1993 (the "Prior Amended and Restated Loan Agreement"). D. The Prior
Loan Agreement, Prior Security Agreement, Prior Amended and Restated Loan
Agreement and all documents collateral thereto are referred to as the
"Prior Loan Documents". E. Borrowers have requested that Bank: (a) increase
the line of credit maximum amount, (b) add CI as a co-borrower, and (c)
otherwise amend and restate the Prior Amended and Restated Loan Agreement
and the Prior Security Agreement, which Bank is willing to do, subject to
the terms hereof. F. Capitalized terms not otherwise defined herein will
have the meanings set forth therefor in Section 14 of this Agreement. NOW,
THEREFORE, in consideration of the terms and conditions contained herein,
and of any extensions of credit now or hereafter made to or for the benefit
of Borrowers by Bank, the parties hereto, intending to be legally bound
hereby, agree that the Prior Amended and Restated Loan Agreement is amended
and restated to read in its entirety as follows: /AJK/2722-79/9980_4
082395/14:58
<PAGE>
1. THE LINE; TERM LOAN; USE OF PROCEEDS.
1.1. Line of Credit. Bank will establish for Borrowers for and during
the period from the date hereof and until June 30, 1998 (the "Contract
Period"), subject to the terms and conditions hereof, a revolving
demand line of credit (the "Line") pursuant to which Bank will from
time to time make loans or other extensions of credit to Borrowers in
an aggregate amount not exceeding at any time the lesser of: (a) an
amount up to eighty-five percent (85%) of the amount of Borrowers'
Eligible Receivables, or (b) Six Million Dollars ($6,000,000.00).
Bank, at its sole discretion, may require that certain reserves be
established against certain Eligible Receivables from time to time.
Within the limitations set forth above, Borrowers may borrow, repay
and reborrow under the Line. The Line shall be subject to all terms
and conditions set forth in all of the Loan Documents (as hereafter
defined) which terms and conditions are incorporated herein.
Borrowers' obligation to repay the loans and extensions of credit
under the Line shall be evidenced by Borrowers' promissory note (the
"Note") in the face amount of Six Million Dollars ($6,000,000.00),
which shall be in the form attached hereto as Exhibit "A", with the
blanks appropriately filled in. The Line shall be subject to review
and renewal, at the sole discretion of Bank. The obligation of
Intertec to repay advances under the Prior Amended and Restated Loan
Agreement previously evidenced by a certain promissory note from
Intertec payable to the order of Bank dated June 30, 1993 in the
original face amount of Two Million Five Hundred Thousand Dollars
($2,500,000.00) (the "Prior Note") remains outstanding as of the date
hereof and such advances shall continue to be secured by the
Collateral and the Loan Documents. The Note (a) supersedes the Prior
Note; (b) re-evidences the Indebtedness previously evidenced by the
Prior Note; (c) is given in substitution of, and not in payment of,
the Prior Note; and (d) is in no way intended to constitute a novation
of the Prior Note. It will be noted on the Prior Note that the Prior
Note has been superseded by the Note. 1.2. Use of Proceeds. Borrowers
agree to use advances under the Line for proper working capital
purposes and, with the prior written consent of Bank, for business
acquisitions. Up to _____ Three Million______________ Dollars
($_3,000,000) in advances under the Line may be used to finance the
Cataract Merger. 1.3. Method of Advances. On any Business Day,
Borrowers may request an advance under the Line by delivering to the
bank officer designated by Bank no later than 11:00 a.m. Philadelphia
time on the Business Day such advance is requested to be funded.
Subject to the terms and conditions of this Agreement, Bank may make
the proceeds of an advance available to Borrowers by crediting such
proceeds to either Borrower's deposit account with Bank. Such request
may be by telephone, unless Bank has advised Borrowers that written
requests are required. Bank may require prompt written confirmation of
any telephone request and additional back-up documentation, from time
to time. Each request for an advance under the Line shall be
conclusively presumed to be made by a person authorized by Borrowers
to do so. However, Bank may require that specified officers of
Borrowers sign each borrowing requests. 1.4. Closing. Closing
hereunder will take place at the offices of Lesser & Kaplin, P.C. at
350 Sentry Parkway, Building 640, Blue Bell, Pennsylvania 19422
effective on the date of this Agreement. /AJK/2722-79/9980_4
082395/14:58 -2-
<PAGE>
1.5. Confirmation of Indebtedness and Security. Borrowers hereby
ratify and confirm all indebtedness currently outstanding and owed to
Bank pursuant to the Prior Loan Documents and acknowledge and agree
that all such indebtedness shall constitute Bank Indebtedness under
the Line. Borrowers ratify and confirm all security interests granted
under the Prior Loan Documents,which security interests shall remain
valid, binding and in full force and effect as amended and restated
hereby. Borrowers agree that they have no defense, set-off,
counterclaim or challenge against the payment of all sums outstanding
under the Prior Loan Documents or the enforcement of any of the
provisions thereof.
2. INTEREST RATE.
2.1. Interest on the Line. Interest on the unpaid principal balance of
the Line will accrue from the date of advance until final payment
thereof at the rate per annum which is equal to the Prime Rate in
effect from time to time (such interest rate to change immediately
upon any change in the Prime Rate). 2.2. Default Interest. Interest
will accrue on the principal balance of the Line after the occurrence
of an Event of Default or expiration of the Contract Period at a rate
which is three percent (3%) in excess of the non- default rate
otherwise set forth above for the Line . 2.3. Post Judgment Interest.
Any judgment obtained for sums due hereunder or under the Loan
Documents will accrue interest at the applicable default rate set
forth above until paid. 2.4. Calculation. Interest will be computed on
the basis of a year of 360 days and paid for the actual number of days
elapsed. 2.5. Limitation of Interest to Maximum Lawful Rate. In no
event will the rate of interest payable hereunder exceed the maximum
rate of interest permitted to be charged by applicable law (including
the choice of law rules) and any interest paid in excess of the
permitted rate will be refunded to Borrowers. Such refund will be made
by application of the excessive amount of interest paid against any
sums outstanding hereunder and will be applied in such order as Bank
may determine. If the excessive amount of interest paid exceeds the
sums outstanding, the portion exceeding the sums outstanding will be
refunded in cash by Bank. Any such crediting or refunding will not
cure or waive any default by Borrowers. Borrowers agree, however, that
in determining whether or not any interest payable hereunder exceeds
the highest rate permitted by law, any non-principal payment,
including without limitation prepayment fees and late charges, will be
deemed to the extent permitted by law to be an expense, fee, premium
or penalty rather than interest.
3. PAYMENTS AND FEES.
3.1. Interest Payments on the Line. Borrowers will pay interest on the
principal balance of the Line monthly, on the first day of each
calendar month commencing the first day of the first calendar month
following the date hereof. 3.2. Principal Payments on the Line.
Borrowers will pay the outstanding principal balance of the Line,
together with any accrued and unpaid interest thereon, and any other
sums due pursuant to the terms hereof, ON DEMAND after the occurrence
of an Event of Default or after expiration of the Contract Period. If
any Out-Of- Formula Advance arises or exists under the Line for any
reason whatsoever, including inventory or accounts becoming ineligible
or required reserves, Borrowers will repay such Out-Of-Formula Advance
immediately, without demand. 3.3. Loan Fee. Borrowers shall pay to
Bank a loan fee of Twenty-Five Thousand Dollars ($25,000.00). Four
Thousand One Hundred Sixty-Six and 66/100 ($4,166.66) Dollars of this
fee has been paid prior to Closing. Upon consummation of the Cataract
Merger as further described in Section 6.29 below, Borrowers will pay
the balance of such fee in five (5) equal and consecutive installments
of Four Thousand One Hundred Sixty-Six and 66/100 Dollars ($4,166.66)
each on the 1st day of each month commencing on September 1, 1995;
provided, however, if such merger is not consummated on the terms and
conditions set forth in the Merger Agreement, as defined herein,
Borrowers shall not be obligated to pay to Bank the balance of such
fee. /AJK/2722-79/9980_4 082395/14:58 -3-
<PAGE>
3.4. Usage Fee. So long as the Line is outstanding and has not been
terminated, and the Bank Indebtedness has not been satisfied in full,
Borrowers shall unconditionally pay to Bank a fee equal to one-fourth
of one percent (1/4%) per annum of the daily unused portion of the
Line (which shall be calculated as the difference between Six Million
Dollars ($6,000,000.00) (or such greater amount if the maximum
committed amount for the Line is ever increased), minus the
outstanding principal balance of advances under the Line at the close
of business on the date such calculation is made), which fee shall be
computed on a monthly basis in arrears and shall be due and payable on
the first day of each month commencing on the first day of the first
full month after the date hereof.
3.5. Collateral Management Fee. So long as the Line has not been
terminated pursuant to the terms hereof, and the Bank Indebtedness has
not been satisfied in full, Borrowers shall unconditionally pay to
Bank a non- refundable annual collateral management fee of Ten
Thousand Dollars ($10,000.00). If any Bank Indebtedness continues
outstanding after the expiration of the Contract Period, such fee
shall be as Bank may require, but in no event will such fee be less
than Ten Thousand Dollars ($10,000.00) per annum. All of such fees
shall be paid annually in advance.
3.6. Termination of Line and Termination Fee. Borrowers may terminate
the Line prior to the expiration of the Contract Period, only upon
sixty (60) days' written notice to Bank. In the event that (a) the
Line is terminated by Borrowers for any reason, including without
limitation prepayment or refinancing of the Line with another lender,
or (b) Borrowers default under the Line and the Line is terminated,
Borrowers shall pay to Bank a termination fee equal to the greater of
(a) Sixty Thousand Dollars ($60,000.00), or (b) one percent (1%) of
the maximum committed amount of the Line.
3.7. Payment Method. Borrowers irrevocably authorize Bank to debit all
payments required to be made by Borrowers hereunder, under the Line,
on the date due, from any deposit account maintained by any Borrower
with Bank. Otherwise, Borrowers will be obligated to make such
payments directly to Bank. All payments are to be made in immediately
available funds. If Bank accepts payment in any other form, such
payment shall not be deemed to have been made until the funds
comprising such payment have actually been received by or made
available to Bank.
3.8. Application of Payments. Any and all payments on account of the Line will
be applied to accrued and unpaid interest, outstanding principal and other
sums due hereunder or under the Loan Documents, in such order as Bank, in
its discretion, elects. If Borrowers make a payment or payments and such
payment or payments, or any part thereof, are subsequently invalidated,
declared to be fraudulent or preferential, set aside or are required to be
repaid to a trustee, receiver, or any other person under any bankruptcy
act, state or federal law, common law or equitable cause, then to the
extent of such payment or payments, the obligations or part thereof
hereunder intended to be satisfied shall be revived and continued in full
force and effect as if said payment or payments had not been made.
3.9. Loan Account. Bank will open and maintain on its books a loan account (the
"Loan Account") with respect to advances made, repayments, prepayments, the
computation and payment of interest and fees and the computation and final
payment of all other amounts due and sums paid to Bank under this
Agreement. Except in the case of manifest error in computation, the Loan
Account will be conclusive and binding on the Borrowers as to the amount at
any time due to Bank from Borrowers under this Agreement or the Note.
3.10.Indemnity; Loss of Margin. Borrowers will indemnify Bank against any loss
or expense which Bank sustains or incurs as a consequence of an Event of
Default, including, without limitation, any failure of Borrowers to pay
when due (at maturity, by acceleration or otherwise) any principal,
interest, fee or any other amount due under this Agreement or the other
Loan Documents. If Bank sustains or incurs any such loss or expense it will
from time to time notify Borrowers in writing of the amount determined in
good faith by the Bank to be necessary to indemnify Bank for the loss or
expense. Such amount will be due and payable by Borrowers to Bank within
ten (10) days after presentation by Bank of a statement setting forth a
brief explanation of and Bank's calculation of such amount, which statement
shall be conclusively deemed correct absent manifest error. Any amount
payable to the Bank under this section will bear interest at the default
rate payable under the Line from the due date until paid, both before and
after judgment. /AJK/2722-79/9980_4 082395/14:58 -4-
<PAGE>
In the event that any present or future law, rule, regulation, treaty or
official directive or the interpretation or application thereof by any
central bank, monetary authority or governmental authority, or the
compliance with any guideline or request of any central bank, monetary
authority or governmental authority (whether or not having the force of
law):
(a) subjects Bank to any tax with respect to any amounts payable under this
Agreement or the other Loan Documents by Borrowers or otherwise with
respect to the transactions contemplated under this Agreement or the other
Loan Documents (except for taxes on the overall net income of Bank imposed
by the United States of America or any political subdivision thereof); or
(b) imposes, modifies or deems applicable any deposit insurance, reserve,
special deposit, capital maintenance, capital adequacy, or similar
requirement against assets held by, or deposits in or for the account of,
or loans or advances or commitment to make loans or advances by, the Bank;
or (c) imposes upon Bank any other condition with respect to advances or
extensions of credit or the commitment to make advances or extensions of
credit under this Agreement, and the result of any of the foregoing is to
increase the costs of Bank, reduce the income receivable by or return on
equity of Bank or impose any expense upon Bank with respect to any advances
or extensions of credit or commitments to make advances or extensions of
credit under this Agreement, Bank shall so notify Borrowers in writing.
Borrowers agree to pay Bank the amount of such increase in cost, reduction
in income, reduced return on equity or capital, or additional expense
within ten (10) days after presentation by Bank of a statement concerning
such increase in cost, reduction in income, reduced return on equity or
capital, or additional expense. Such statement shall set forth a brief
explanation of the amount and Bank's calculation of the amount (in
determining such amount the Bank may use any reasonable averaging and
attribution methods), which statement shall be conclusively deemed correct
absent manifest error. As provided in Section 3.7, Bank may debit the
amount set forth in such statement after presentation of such statement
from any account maintained by any Borrower with Bank. If there are
insufficient funds to pay such amount, interest will be payable on the
unpaid amount at the default rate payable under the Line from the due date
until paid, both before and after judgment.
3.11.Limitation on Liabilities. Anything contained in this Agreement to the
contrary notwithstanding, the obligations of each Borrower hereunder shall
not exceed a maximum aggregate amount equal to the largest amount that
would not render its obligations hereunder subject to avoidance as a
fraudulent transfer or conveyance under 548 of Title 11 of the United
States Code or any applicable provisions of comparable state law
(collectively, the "Fraudulent Transfer Laws"), if and to the extent such
Borrower (or a trustee on its behalf) has properly invoked the protections
of the Fraudulent Transfer Laws, in each case after giving effect to all
other liabilities of such Borrower, contingent or otherwise, that are
relevant under the Fraudulent Transfer Laws.
4. SECURITY; COLLECTION OF RECEIVABLES AND PROCEEDS OF COLLATERAL.
4.1. Personal Property. As security for the full and timely payment and
performance of all Bank Indebtedness, Intertec hereby ratifies and confirms
the existing security interest granted under the Prior Loan Documents and
each Borrower further grants to Bank a security interest in all of the
following:
(a) All of such Borrower's present and future accounts, contract rights,
chattel paper, instruments and documents and all other rights to the
payment of money whether or not yet earned, for services rendered or goods
sold, consigned, leased or furnished by such Borrower or otherwise,
together with (i) all goods (including any returned, rejected, repossessed
or consigned goods), the sale, consignment, lease or other furnishings of
which shall be given or may give rise to any of the foregoing, (ii) all of
such Borrower's rights as a consignor, consignee, unpaid vendor or other
lienor in connection therewith, including stoppage in transit, set-off,
detinue, replevin and reclamation, (iii) all general intangibles related
thereto, (iv) all guaranties, mortgages, security interests, assignments,
and other encumbrances on real or personal property, leases and other
agreements or property securing or relating to any accounts, (v)
choses-in-action, claims and judgments, (vi) any return or unearned
premiums, which may be due upon cancellation of any insurance policies, and
(vii) all products and proceeds of any of the foregoing.
/AJK/2722-79/9980_4 082395/14:58 -5-
<PAGE>
(b) All of such Borrower's present and future inventory (including but not
limited to goods held for sale or lease or furnished or to be furnished
under contracts for service, raw materials, work-in-process, finished goods
and goods used or consumed in such Borrower's business) whether owned,
consigned or held on consignment, together with all merchandise, component
materials, supplies, packing, packaging and shipping materials, and all
returned, rejected or repossessed goods sold, consigned, leased or
otherwise furnished by such Borrower, all documents of title covering any
of such goods or inventory and all products and proceeds of any of the
foregoing.
(c) All of such Borrower's present and future general intangibles (including
but not limited to tax refunds and rebates, manufacturing and processing
rights, designs, patent rights and applications therefor, trademarks and
registration or applications therefor, tradenames, brand names, logos,
inventions, copyrights and all applications and registrations therefor),
licenses, permits, approvals, software and computer programs, license
rights, royalties, trade secrets, methods, processes, know-how, formulas,
drawings, specifications, descriptions, label designs, plans, blueprints,
patterns and all memoranda, notes and records with respect to any research
and development, and all products and proceeds of any of the foregoing.
(d) All of such Borrower's present and future machinery, equipment, furniture,
fixtures, motor vehicles, tools, dies, jigs, molds and other articles of
tangible personal property of every type together with all parts,
substitutions, accretions, accessions, attachments, accessories, additions,
components and replacements thereof, all documents of title relating
thereto and all manuals of operation, maintenance or repair, and all
products and proceeds of any of the foregoing.
(e) All of such Borrower's present and future general ledger sheets, files,
records, customer lists, books of account, invoices, bills, certificates or
documents of ownership, bills of sale, business papers, correspondence,
credit files, tapes, cards, computer runs and all other data and data
storage systems whether in the possession of such Borrower or any service
bureau.
(f) All letters of credit now existing or hereafter issued naming such Borrower
as a beneficiary or assigned to such Borrower, including the right to
receive payment thereunder, and all documents and records associated
therewith.
(g) All deposits, funds, instruments, documents, commercial paper, investments,
policies and certificates of insurance, securities, chattel paper and other
assets of such Borrower or in which such Borrower has an interest and all
proceeds thereof, now or at any time hereafter on deposit with or in the
possession or control of Bank or owing by Bank to such Borrower or in
transit by mail or carrier to Bank or in the possession of any other Person
acting on Bank's behalf, without regard to whether Bank received the same
in pledge, for safekeeping, as agent for collection or otherwise, or
whether Bank has conditionally released the same, and in all assets of such
Borrower in which Bank now has or may at any time hereafter obtain a lien,
mortgage, or security interest for any reason.
(h) All present and future deposit, other bank and investment accounts
maintained by such Borrower with Bank or any other financial institution.
(i) All records and other information relating to such Borrower's fee basis
personnel business, including, without limitation, all resumes, all resume
files and all computer media on which such files exist.
4.2. Surety. As further security for the Bank Indebtedness, Borrowers shall
cause to be executed and delivered to Bank, the absolute, unconditional,
unlimited surety agreement (the "Surety Agreement") of RCM Technologies,
Inc. ("RCMT"), in form and content satisfactory to Bank. RCMT is sometimes
referred to as "Guarantor".
-6-
<PAGE>
4.3. General. The collateral described above in Sections 4.1 is collectively
referred to herein as the "Collateral". The above-described security
interests, assignments, liens and guarantees shall not be rendered void by
the fact that no Bank Indebtedness exists as of any particular date, but
shall continue in full force and effect until the Bank Indebtedness has
been repaid, Bank has no agreement or commitment outstanding pursuant to
which Bank may extend credit to or on behalf of any Borrower and Bank has
executed termination statements or releases with respect thereto. IT IS THE
EXPRESS INTENT OF THE BORROWERS THAT ALL OF THE COLLATERAL SHALL SECURE NOT
ONLY THE OBLIGATIONS UNDER THE LOAN DOCUMENTS, BUT ALSO ALL OTHER PRESENT
AND FUTURE OBLIGATIONS OF EACH BORROWER TO BANK.
4.4. Collection of Receivables; Proceeds of Collateral. (a) Borrowers will
collect their accounts receivable only in the ordinary course of business.
Borrowers will notify all of their account debtors to forward all accounts
receivable collections owed to Borrowers to a lockbox maintained by Bank,
and will execute such lockbox agreements as may be required by Bank and
will pay to Bank all customary fees in connection with such lockbox
arrangement. Immediately upon receipt, Borrowers will forward to Bank all
other checks, drafts and other monies received by Borrowers which are
proceeds of the Collateral to the lockbox maintained by Bank. (b) All
accounts receivable collections of Borrowers and all checks, drafts and
othermonies received by Borrowers which are proceeds of the Collateral
will be deposited in a non-interest bearing cash collateral account or
accounts maintained at Bank (collectively, the "Cash Collateral Account").
Bank will have sole dominion and control over all items and funds
in the Cash Collateral Account and such items and funds may be withdrawn
only by Bank. However, Bank will have the right to apply all or any part
of such funds towards payment of any of the Bank Indebtedness.
(c) The Cash Collateral Account will be cleared by Bank daily as to available
funds, and such available funds will be applied to the principal balance of
and accrued interest on the Line, at the Bank's election. Upon the
occurrence of an Event of Default, Bank may apply such available funds to
the Bank Indebtedness in such order as it may elect. Borrowers will
reimburse Bank on demand for the amount of any items credited as provided
above and subsequently returned unpaid.
(d) Borrowers agree that all monies, checks, notes, instruments, drafts or
other payments relating to or constituting proceeds of any accounts
receivable or other Collateral of Borrowers which come into the possession
or under the control of any Borrower or any employees, agents or other
persons acting for or in concert with any Borrower, shall be received and
held in trust for Bank and such items shall be the sole and exclusive
property of Bank. Immediately upon receipt thereof, Borrowers and such
other persons shall remit the same or cause the same to be remitted, in
kind, to Bank. Borrowers shall deliver or cause to be delivered to Bank,
with appropriate endorsement and assignment to Bank with full recourse to
Borrowers, all instruments, notes and chattel paper constituting an account
receivable or proceeds thereof or other Collateral. Bank is hereby
authorized to open all mail addressed to any Borrower and endorse all
checks, drafts or other items for payment on behalf of any Borrower. Bank
is granted a power of attorney by each Borrower with full power of
substitution to execute on behalf of such Borrower and in such Borrower's
name or to endorse such Borrower's name on any check, draft, instrument,
note or other item of payment or to take any other action or sign any
document in order to effectuate the foregoing. Such power of attorney being
coupled with an interest is irrevocable. 4.5. Borrowers' Stock. RCMT agrees
that it shall not assign, pledge, transfer, grant a security interest
in, encumber or grant any option rights with respect to any or all of the
stock and any other securities of any Borrower. RCMT will not enter
into any agreement with any other Person which will prohibit RCMT from
granting, creating or suffering to exist the assignment and pledge by
RCMT of its interest in all or any part of the stock and any other
securities of any Borrower to or for the benefit of Bank. Upon the
occurrence of an Event of Default, at the request of Bank, RCMT will
assign and pledge to Bank all of such stock and other securities of
each Borrower and will deliver to Bank the original certificates
evidencing such stock and securities, with blank stock powers duly
executed by RCMT, together with any books and records of each
Borrower, requested by Bank. /AJK/2722-79/9980_4 082395/14:58 -7-
<PAGE>
5. REPRESENTATIONS AND WARRANTIES. Borrowers and Guarantor represent
and warrant as follows:
5.1. Valid Organization, Good Standing and Qualification. Intertec is a
corporation duly incorporated, validly existing and in good standing
under the laws of the State of New York, has full power and authority
to execute, deliver and comply with the Loan Documents, and to carry
on its business as it is now being conducted and is duly licensed or
qualified as a foreign corporation in good standing under the laws of
the State of New Jersey and each other jurisdiction in which the
character or location of the properties owned by it or the business
transacted by it requires such licensing or qualification.
CI is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Pennsylvania, has full power and
authority to execute, deliver and comply with the Loan Documents, and to
carry on its business as it is now being conducted and is duly licensed or
qualified as a foreign corporation in good standing under the laws of the
State of Pennsylvania and each other jurisdiction in which the character or
location of the properties owned by it or the business transacted by it
requires such licensing or qualification. RCMT is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Nevada, has full power and authority to execute, deliver and
comply with the Loan Documents, and to carry on its business as it is now
being conducted and is duly licensed or qualified as a foreign
corporation in good standing under the laws of each other jurisdiction
in which the character or location of the properties owned by it or the
business transacted by it requires such licensing or qualification.
5.2. Licenses. Borrowers, Guarantor and their employees, servants and
agents have all licenses, registrations, approvals and other authority
as may be necessary to enable them to own and operate their business and
perform all services and business which they have agreed to perform in any
state, municipality or other jurisdiction.
5.3. Ownership Interests. The ownership of all stock, debentures,
options, warrants, bonds and other securities (debt and equity) of
Borrowers and all pledges, proxies, voting trusts, powers of attorney and
other agreements affecting the ownership or voting rights of said interests
is as set forth on Schedule 5.3 attached hereto.
5.4. Subsidiaries. Except as set forth on Schedule 5.4 attached
hereto, Borrowers and Guarantor do not own any shares of stock or other
equity interests in any Person, directly or indirectly (by any Subsidiary
or otherwise).
5.5. Financial Statements. Intertec has furnished to Bank the audited
financial statements of Intertec and the Guarantor certified
without qualification by independent public accountants as of
October 31, 1994, and all management and comment letters from
such accountants in connection therewith, and the internally
prepared interim consolidated and consolidating financial
statements of Intertec and Guarantor as of June 30, 1995. CI has
furnished to Bank the audited financial statements of Cataract,
Inc., certified without qualification by independent public
accountants as of October 2, 1994, and all management and comment
letters from such accountants in connection therewith. All of
such financial statements (together with the related notes and
comments), are correct and complete, fairly present the financial
condition and the assets and liabilities of Borrowers, Cataract,
Inc. and the Guarantor at such dates, and have been prepared in
accordance with GAAP. With respect to the interim statements,
such statements are subject to year-end adjustment and any
accompanying footnotes.
5.6. No Material Adverse Change in Financial Condition. There has been
no material adverse change in the financial condition of
Borrowers or Guarantor since October 31, 1994, or of Cataract,
Inc. since October 2, 1994.
-8-
<PAGE>
5.7. Pending Litigation or Proceedings. Except as set forth on
Schedule 5.7 attached hereto, there are no judgments outstanding or
actions, suits or proceedings pending or, to the best of Borrowers'
knowledge, threatened against or affecting Cataract, Inc., Borrowers
or Guarantor, at law or in equity or before or by any federal, state,
municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, which individually or
in the aggregate, if finally determined adversely to Cataract, Inc.,
Borrowers or Guarantor, involves the possibility of any judgment or
liability in excess of Twenty-Five Thousand Dollars ($25,000.00),
individually, or Fifty Thousand Dollars ($50,000.00) in the aggregate,
or which individually or in the aggregate may materially and adversely
affect any of their activities, properties or financial condition,
their right to carry on activities as now conducted, or their ability
to perform its obligations under this Agreement or the Loan Documents.
5.8. Due Authorization; No Legal Restrictions. The execution and
delivery by Borrowers and Guarantor of the Loan Documents, the
consummation of the transactions contemplated by the Loan Documents
and the fulfillment and compliance with the respective terms,
conditions and provisions of the Loan Documents: (a) have been duly
authorized by all requisite corporate action of Borrowers and
Guarantor, (b) will not conflict with or result in a breach of, or
constitute a default (or might, upon the passage of time or the giving
of notice or both, constitute a default) under, any of the terms,
conditions or provisions of any applicable statute, law, rule,
regulation or ordinance or any Borrower's or Guarantor's Certificates
or Articles of Incorporation or By-Laws or any indenture, mortgage,
loan or credit agreement or instrument to which any Borrower or
Guarantor is a party or by which any of them may be bound or affected,
or any judgment or order of any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, and (c) will not result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of the
property or assets of any Borrower or Guarantor under the terms or
provisions of any such agreement or instrument, except liens in favor
of Bank.
5.9. Enforceability. The Loan Documents have been duly executed
by Borrowers and Guarantor and delivered to Bank and constitute legal,
valid and binding obligations of Borrowers and Guarantor, enforceable
in accordance with their terms, except as enforceability may be
limited by any bankruptcy, insolvency, reorganization, moratorium or
other laws or equitable principles affecting creditors' rights
generally.
5.10. No Default Under Other Obligations, Orders or Governmental
Regulations. Borrowers and Guarantor are not in violation of their
Certificates or Articles of Incorporation or in default in the
performance or observance of any of their obligations, covenants or
conditions contained in any indenture or other agreement creating,
evidencing or securing any Indebtedness or pursuant to which any such
Indebtedness is issued. Borrowers and Guarantor are not in violation
of or in default under any other agreement or instrument or any
judgment, decree, order, statute, rule or governmental regulation,
applicable to them or by which their properties may be bound or
affected.
5.11. Governmental Consents. No consent, approval or
authorization of or designation, declaration or filing with any
governmental authority on the part of Borrowers or Guarantor is
required in connection with the execution, delivery or performance by
Borrowers or Guarantor of the Loan Documents or the consummation of
the transactions contemplated thereby. 5.12. Taxes. Cataract, Inc.,
Borrowers and Guarantor have filed all tax returns which they are
requiredto file and have paid, or made provision for the payment of,
all taxes which have or may have become due pursuant to such returns
or pursuant to any assessment received by them, except such taxes
(other than real estate taxes which must be paid regardless of
challenge), if any, as are being contested in good faith and as to
which adequate reserves have been provided. Such tax returns are
complete and accurate in all respects. Borrowers and Guarantor do not
know of any proposed additional assessment or basis for any assessment
of additional taxes.
/AJK/2722-79/9980_4 082395/14:58 -9-
<PAGE>
5.13. Title to Collateral. The Collateral is and will be owned by
Borrowers free and clear of all liens and other encumbrances of any
kind (including liens or other encumbrances upon properties acquired
or to be acquired under conditional sales agreements or other title
retention devices), excepting only liens in favor of the Bank and
those liens and encumbrances permitted under Section 6.9 below.
Borrowers will defend the Collateral against any claims of all persons
or entities other than the Bank. Borrowers have not acquired by
purchase any of the Collateral during the past five (5) years, except
for purchases of inventory and equipment in the ordinary course of
business. 5.14. Addresses. During the past five (5) years, Borrowers
and Guarantor have not been known by any names (including tradenames)
other than those set forth in Schedule 5.14 attached hereto and have
not been located at any addresses other than those set forth on
Schedule 5.14 attached hereto. The portions of the Collateral which
are tangible property and Borrowers' books and records pertaining
thereto will at all times be located at the addresses set forth on
Schedule 5.14; or such other location determined by Borrowers after
prior notice to Bank and delivery to Bank of any items requested by
Bank to maintain perfection and priority of Bank's security interests
and access to Borrowers' books and records. Schedule 5.14 identifies
the chief executive offices of Borrowers.
5.15. Current Compliance. Borrowers and Guarantor are currently
in compliance with all of the terms and conditions of the Loan
Documents.
5.16. Pension Plans. Except as disclosed on Schedule 5.16 hereto,
(a) Borrowers and Guarantor have no obligations with respect to any
employee pension benefit plan ("Plan") (as such term is defined in the
Employee Retirement Income Security Act of 1974, as amended
("ERISA")), (b) no events, including, without limitation, any
"Reportable Event" or "Prohibited Transaction" (as those terms are
defined under ERISA), have occurred in connection with any Plan of
Borrowers or Guarantor which might constitute grounds for the
termination of any such Plan by the Pension Benefit Guaranty
Corporation ("PBGC") or for the appointment by any United States
District Court of a trustee to administer any such Plan, (c) all of
the Borrowers' and Guarantor's Plans meet with the minimum funding
standards of Section 302 of ERISA, and (d) Borrowers and Guarantor
have no existing liability to the PBGC. Borrowers and Guarantor are
not subject to or bound to make contributions to any "multi-employer
plan" as such term is defined in Section 4001(a)(3) of ERISA.
5.17. Leases and Contracts. Borrowers have complied with the
provisions of all material leases, contracts or commitments of any
kind (such as employment agreements, collective bargaining agreements,
powers of attorney, distribution agreements, patent license
agreements, contracts for future purchase or delivery of goods or
rendering of services, bonus, pension and retirement plans or accrued
vacation pay, insurance and welfare agreements) to which it is a party
and is not in default thereunder. No other party is in default under
any such leases, contracts or other commitments and no event has
occurred which, but for the giving of notice or the passage of time or
both, would constitute an event of default thereunder.
5.18. Intellectual Property. Borrowers own or possess the
irrevocable right to use all of the patents, trademarks, service
marks, trade names, copyrights, licenses, franchises and permits and
rights with respect to the foregoing necessary to own and operate the
Borrowers' properties and to carry on its business as presently
conducted and presently planned to be conducted without conflict with
the rights of others. Schedule 5.18 sets forth an accurate list and
description of each such patent, trademark, service mark, trade name,
copyright, license, franchise and permit and right with respect to the
foregoing.
/AJK/2722-79/9980_4 082395/14:58 -10-
<PAGE>
5.20. Business Interruptions. Within five (5) years prior to the
date hereof, neither the business, Collateral nor operations of
Cataract, Inc. or any Borrower have been materially and adversely
affected in any way by any casualty, strike, lockout, combination of
workers, order of the United States of America, or any state or local
government, or any political subdivision or agency thereof, directed
against Cataract, Inc. or any Borrower. There are no pending or
threatened labor disputes, strikes, lockouts or similar occurrences or
grievances against the business being operated by Borrowers.
5.22. Interrelatedness of Borrowers and Guarantor. The business
operations of each Borrower and Guarantor are interrelated and
complement one another and such entities have a common business
purpose, with intercompany bookkeeping and accounting adjustments used
to separate their respective properties, liabilities and transactions.
To permit their uninterrupted and continuous operations, such entities
now require and will from time to time hereafter require funds and
credit accommodations for general business purposes. The proceeds of
advances under the Line and credit facilities extended hereunder will
directly or indirectly benefit each Borrower and Guarantor hereunder,
severally and jointly, regardless of which Borrower requests or
receives part or all of the proceeds of the advances.
/AJK/2722-79/9980_4 082395/14:58 -11-
<PAGE>
6. GENERAL COVENANTS. Except with the prior written consent of Bank,
Borrowers and Guarantor will comply with the following: 6.1. Payment of
Principal, Interest and Other Amounts Due. Borrowers will pay when due all Bank
Indebtedness and all other amounts payable by it hereunder. 6.2. Limitation on
Sale and Leaseback. Neither Borrowers nor Guarantor will enter into any
arrangement whereby it will sell or transfer any real property or improvements
thereon or other fixed assets owned by it and then or thereafter rent or lease
as lessee such property, improvements or assets or any part thereof, or other
property which Borrowers or Guarantor shall intend to use for substantially the
same purposes as the property sold or transferred. 6.3. Limitation on
Indebtedness. Neither Borrowers nor Guarantor will have at any time outstanding
to any Person other than Bank, any Indebtedness for borrowed money, Capitalized
Lease Obligations or any outstanding letters of credit, except: (a) Current
accounts payable incurred in the ordinary course of Borrowers' and Guarantor's
business, accrued expenses and other current items arising out of transactions
(other than borrowings) in the ordinary course of Borrowers' and Guarantor's
business; (b) Existing Indebtedness for borrowed money and Capitalized Lease
Obligations described on Schedule 6.3; (c) Future purchase money Indebtedness
and Capitalized Lease Obligations incurred to finance Capital Expenditures
permitted under Section 7.5, provided that Bank shall have the right of first
refusal to provide such financing on reasonably competitive terms; and (d) The
Subordinated Indebtedness. Any of such existing permitted Indebtedness may not
be refinanced or replaced without the consent of the Bank. 6.4. Investments and
Loans Neither Borrowers nor Guarantor will not have or make any investments in
all or a material portion of the capital stock or securities of any Person, or
any loans, advances or extensions of credit to any Person, except: (a)
Investments in direct or indirect obligations of, or obligations unconditionally
guaranteed by, the United States of America and maturing within twelve (12)
months from the date of acquisition; (b) Investments held in an account
maintained with Bank and which shall be pledged as Collateral hereunder, in
commercial paper of Bank or commercial paper rated "Prime-1" by Moody's
Investors Services or "A-1" by Standard & Poor's Corporation, or with an
equivalent rating by another rating agency of nationally recognized standing,
maturing within three hundred sixty-five (365) days from the date of
acquisition; (c) Certificates of deposit maturing within twelve (12) months from
the date of acquisition issued by the Bank; (d) Investments and loans listed on
Schedule 6.4 attached hereto; and (e) The Subordinated Indebtedness.
/AJK/2722-79/9980_4 082395/14:58 -12-
<PAGE>
6.5. Guaranties. Neither Borrowers nor Guarantor will directly or
indirectly guarantee, endorse (other than for collection or deposit in the
ordinary course of business), discount, sell with recourse or for less than the
face value or agree (contingently or otherwise) to purchase or repurchase or
otherwise acquire, or otherwise become directly or indirectly liable for, or
agree (contingently or otherwise) to supply or advance funds (whether by loan,
stock purchase, capital contribution or otherwise) in respect of, any
Indebtedness, obligations or liabilities of any Person, except guarantees in
favor of the Bank. 6.6. Disposition of Assets. Neither Borrowers nor Guarantor
will sell, lease, transfer or otherwise dispose of all, substantially all, or
any material portion of its property or assets. Borrowers will not sell any of
its accounts receivable, with or without recourse. 6.7. Merger; Consolidation;
Business Acquisitions; Subsidiaries. Neither Borrowers nor Guarantor will merge
into or consolidate with any Person, acquire any material portion of the stock,
ownership interests, assets or business of any Person, permit any Person to
merge into it, or form any new Subsidiaries, or fund the operations of any
Subsidiary other than Borrowers. 6.8. Taxes; Claims for Labor and Materials.
Borrowers and Guarantor will pay or cause to be paid when due all taxes,
assessments, governmental charges or levies imposed upon it or its income,
profits, payroll or any property belonging to them, including without limitation
all withholding taxes, and all claims for labor, materials and supplies which,
if unpaid, might become a lien or charge upon any of their properties or assets;
provided that they shall not be required to pay any such tax (other than real
estate taxes which must be paid regardless of challenge), assessment, charge,
levy or claim so long as the validity thereof shall be contested in good faith
by appropriate proceedings promptly initiated and diligently conducted by them,
and neither execution nor foreclosure sale or similar proceedings shall have
been commenced in respect thereof (or such proceedings shall have been stayed
pending the disposition of such contest of validity), and they shall have set
aside on its books, or at the request of Bank deposited with Bank, adequate
reserves with respect thereto. Neither Borrowers nor Guarantor will file or
consent to the filing of, any consolidated income tax return with any Person
other than a parent or a subsidiary. 6.9. Liens. Neither Borrowers nor Guarantor
will create, incur or permit to exist any mortgage, pledge, encumbrance, lien,
security interest or charge of any kind (including liens or charges upon
properties acquired or to be acquired under conditional sales agreements or
other title retention devices) on its property or assets, whether now owned or
hereafter acquired, or upon any income, profits or proceeds therefrom, except:
(a) Security interests and mortgages held by Bank; (b) Liens incurred or
deposits made in the ordinary course of business (i) in connection with worker's
compensation, unemployment insurance, social security and other like laws or
(ii) to secure the performance of statutory obligations, not incurred in
connection with either (A) the borrowing of money or (B) the deferred purchase
price of goods or inventory; (c) Encumbrances consisting of zoning restrictions,
easements, restrictions on the use of real property or minor irregularities of
title thereto, none of which impairs the use of such property by Borrowers or
Guarantor in the operation of its business; (d) Liens and security interests
listed on Schedule 6.9 attached hereto; or (e) Purchase money liens or
Capitalized Leases, provided that: (f) the property subject to any of the
foregoing is acquired or leased by Borrowers or Guarantor in the ordinary course
of its business and the lien on any such property is created contemporaneously
with such acquisition;
/AJK/2722-79/9980_4 082395/14:58 -13-
<PAGE>
(1) purchase money Indebtedness or Capitalized Lease Obligations so created
shall not exceed 100% of the lesser of cost or fair market value as of the time
of acquisition or lease of the property covered thereby; (2) the purchase money
Indebtedness or Capitalized Lease Obligations shall only be secured by the
property so acquired or leased; and (3) the purchase money Indebtedness or
Capitalized Lease Obligations are permitted by the provisions of Section 6.3 and
Section 7.5. Neither Borrowers nor Guarantor shall enter into any agreement with
any other Person which shall prohibit it from granting, creating or suffering to
exist, or otherwise restrict in any way (whether by covenant, by identifying
such event as a default under such agreement or otherwise) the ability of the
Borrowers or Guarantor to grant, create or suffer to exist, any lien, security
interest or other charge or encumbrance upon or with respect to any of its
assets in favor of the Bank. 6.10. Existence; Approvals; Qualification; Business
Operations; Compliance with Laws. Each Borrower and Guarantor (a) will obtain,
preserve and keep in full force and effect its separate corporate existence and
all rights, licenses, registrations and franchises necessary to the proper
conduct of its business or affairs; (b) will qualify and remain qualified as a
foreign corporation in each jurisdiction in which the character or location of
the properties owned by it or the business transacted by it requires such
qualification; (c) will continue to operate its business as presently operated
and will not engage in any new businesses or business acquisitions without the
prior written consent of Bank; and (d) will comply with the requirements of all
applicable laws and all rules, regulations (including environmental regulations)
and orders of regulatory agencies and authorities having jurisdiction over it.
6.11. Maintenance of Properties, Intellectual Property. Each Borrower and
Guarantor will maintain, preserve, protect and keep or cause to be maintained,
preserved, protected and kept its real and personal property used or useful in
the conduct of its business in good working order and condition, reasonable wear
and tear excepted, and will pay and discharge when due the cost of repairs to
and maintenance of the same. With respect to any and all trademarks,
registrations, copyrights, patents, patent rights and applications for any of
the foregoing, each Borrower and Guarantor shall maintain and protect the same
and shall take and assert any and all remedies available to it to prevent any
other Person from infringing upon or claiming any interest in any such
trademarks, registrations, copyrights, patents, patent rights or application for
any of the foregoing. Each Borrower and Guarantor will notify Bank immediately
of (a) the filing of any patent or trademark application, whether domestic or
foreign, by each Borrower, Guarantor or any of its employees; (b) the grant of
any patent or trademark, whether domestic or foreign, to each Borrower,
Guarantor or any of its employees; or (c) each Borrower's or Guarantor's intent
to abandon a patent or trademark. Each Borrower will, if requested by Bank, (i)
execute and deliver to Bank assignments, financing statements, patent mortgages
or such other documents, in form and substance acceptable to Bank, necessary to
perfect and maintain Bank's security interest in all existing and future
patents, patent applications, trademarks, trademark applications, and other
general intangibles owned by each Borrower; (ii) furnish Bank with evidence
satisfactory to Bank, in its sole discretion, that all actions necessary to
maintain and protect each trademark and patent owned by each Borrower or its
employees have been taken in a timely manner; and (iii) execute and deliver to
Bank an agreement permitting Bank to exercise all of each Borrower's rights in,
to and under any patent or trademark owned by each Borrower or any of its
employees. /AJK/2722-79/9980_4 082395/14:58 -14-
<PAGE>
6.12. Insurance. Borrowers and Guarantor will carry adequate insurance
issued by an insurer acceptable to Bank, in amounts acceptable to Bank (at least
adequate to comply with any co-insurance provisions) and against all such
liability and hazards as are usually carried by entities engaged in the same or
a similar business similarly situated or as may be required by Bank. In the case
of insurance on any of the Collateral, Borrowers shall carry insurance in the
full insurable value thereof and cause Bank to be named as loss payee (with a
lender's loss payable endorsement) with respect to all personal property, and
additional insured with respect to all liability insurance, as its interests may
appear with thirty (30) days' notice to be given Bank by the insurance carrier
prior to cancellation or material modification of such insurance coverage.
Borrowers and Guarantor shall cause to be delivered to Bank the insurance
policies therefor or in the alternative, certificates of insurance and at least
thirty (30) business days prior to the expiration of any such insurance,
additional policies or duplicates thereof or in the alternative, certificates of
insurance evidencing the renewal of such insurance and payment of the premiums
therefor. Borrowers and Guarantor shall direct all insurers that in the event of
any loss thereunder or the cancellation of any insurance policy, the insurers
shall make payments for such loss and pay all return or unearned premiums
directly to Bank and not to Borrowers or Guarantor and Bank jointly. In the
event of any loss, Borrowers and Guarantor will give Bank immediate notice
thereof and Bank may make proof of loss whether the same is done by Borrowers
and Guarantor. Bank is granted a power of attorney by each Borrower and
Guarantor with full power of substitution to file any proof of loss in such
Borrower's, Guarantor's or Bank's name, to endorse such Borrower's and
Guarantor's name on any check, draft or other instrument evidencing insurance
proceeds, and to take any action or sign any document to pursue any insurance
loss claim. Such power being coupled with an interest is irrevocable. In
the event of any loss, Bank, at its option, may (a) retain and apply all or any
part of the insurance proceeds to reduce, in such order and amounts as Bank may
elect, the Bank Indebtedness, or (b) disburse all or any part of such insurance
proceeds to or for the benefit of Borrowers for the purpose of repairing or
replacing Collateral after receiving proof satisfactory to Bank of such repair
or replacement, in either case without waiving or impairing the Bank
Indebtedness or any provision of this Agreement. Any deficiency thereon shall be
paid by Borrowers to Bank upon demand. Borrowers shall not take out any
insurance without having Bank named as loss payee or additional insured thereon.
Borrowers shall bear the full risk of loss from any loss of any nature
whatsoever with respect to the Collateral.
6.13. Inspections; Examinations. Borrowers and Guarantor hereby irrevocably
authorize and direct all accountants and auditors employed by Borrowers or
Guarantor at any time to exhibit and deliver to Bank copies of any and all of
Borrowers' and Guarantor's financial statements, trial balances or other
accounting records of any sort in the accountant's or auditor's possession and
copies of all reports submitted to Borrowers or Guarantor by such accountants or
auditors, including management letters, "comment" letters and audit reports, and
to disclose to Bank any information they may have concerning Borrowers' and
Guarantor's financial status and business operations. Borrowers and Guarantor
further authorize all federal, state and municipal authorities to furnish to
Bank copies of reports or examinations relating to Borrowers and Guarantor,
whether made by Borrowers or Guarantor or otherwise.
The officers of Bank, or such Persons as any of them may designate, may
visit and inspect any of the properties of Borrowers and Guarantor, examine
(either by Bank's employees or by independent accountants) any of the Collateral
or other assets of Borrowers and Guarantor, including the books of account of
Borrowers and Guarantor, and discuss the affairs, finances and accounts of
Borrowers and Guarantor with their officers and with their independent
accountants, at such times as Bank may desire.
Bank may conduct at any time and from time to time, and Borrowers and
Guarantor will fully cooperate with, field examinations of the accounts
receivable and business affairs of Borrowers and Guarantor. If an Event of
Default has occurred, Borrowers will reimburse Bank for all costs, expenses and
charges as may be required by Bank in connection with all field examinations, in
addition to the payment of the Collateral Management Fee set forth in Section
3.5.
/AJK/2722-79/9980_4 082395/14:58 -15-
<PAGE>
6.14. Default Under Other Indebtedness. Neither Borrowers nor Guarantor
will permit any of its Indebtedness to be in default. If any Indebtedness of
Borrowers or Guarantor is declared or becomes due and payable before its
expressed maturity by reason of default or otherwise or, to the knowledge of
Borrowers or Guarantor, the holder of any such Indebtedness shall have the right
(or upon the giving of notice or the passage of time, or both, shall have the
right) to declare such Indebtedness to be so due and payable, Borrowers and
Guarantor will immediately give Bank written notice of such declaration,
acceleration or right of declaration.
6.15. Pension Plans. Borrowers and Guarantor shall (a) keep in full force
and effect any and all of their Plans which are presently in existence or may,
from time to time, come into existence under ERISA, unless such Plans can be
terminated without material liability to Borrowers and Guarantor in connection
with such termination (as distinguished from any continuing funding obligation);
(b) make contributions to all of Borrowers' and Guarantor's Plans in a timely
manner and in a sufficient amount to comply with the requirements of ERISA; (c)
comply with all material requirements of ERISA which relate to such Plans so as
to preclude the occurrence of any Reportable Event, Prohibited Transaction or
material "accumulated funding deficiency" as such term is defined in ERISA; and
(d) notify Bank immediately upon receipt by Borrowers or Guarantor of any notice
of the institution of any proceeding or other action which may result in the
termination of any Plan and deliver to Bank, promptly after the filing or
receipt thereof, copies of all reports or notices which Borrowers or Guarantor
file or receive under ERISA with or from the Internal Revenue Service, the PBGC,
or the U.S. Department of Labor.
6.16. Bank of Account. Borrowers and Guarantor will maintain Bank as their
principal bank of account, unless otherwise agreed by Bank in writing. All
existing bank accounts currently maintained by Borrowers or Guarantor with any
financial institution (other than Bank) are described on Schedule 6.16.
Borrowers and Guarantor will notify Bank in writing and on a continuing basis,
of all deposit accounts and certificates of deposit (including the numbers
thereof) maintained with or purchased from any other financial institutions.
6.17. Maintenance of Management. Borrowers and Guarantor will cause their
business to be continuously managed by their present executive management or
such other persons (serving in such management positions) as may be reasonably
satisfactory to Bank. Leon Kopyt as President and Chief Financial Officer shall
be deemed satisfactory to Bank. The existing directors and executive officers of
Borrowers and Guarantor are set forth on Schedule 6.17. Borrowers and Guarantor
will notify Bank promptly in writing of any change in their board of directors
or executive officers and will provide Bank with a copy of any proposed
amendments to their Articles of Incorporation or By-Laws, at least five (5) days
prior to adoption.
6.18. Capital Stock; Dividends. Neither Borrowers or Guarantor will redeem,
repurchase or otherwise make any payment or distribution to acquire any of their
capital stock. Neither Borrowers nor Guarantor will pay dividends or make other
distributions on account of their capital stock.
6.19. Transactions with Affiliates. Neither Borrowers nor Guarantor shall
enter into or conduct any transaction with any Affiliate except on terms that
would be usual and customary in a similar transaction between Persons not
affiliated with each other and except as disclosed to Bank. Borrowers will not
pay any fees to, expenses of or other sums to RCMT or any other Affiliate except
as permitted under Sections 7.9 and 7.10. Neither Borrowers nor Guarantor will
make any loans or extensions of credit to any of its Affiliates, shareholders,
directors or officers, except for the existing loans described in Schedule 6.19
attached hereto. Borrowers will cause all of their Indebtedness at any time owed
to RCMT, its Affiliates, shareholders, directors and officers to be subordinated
in all respects to all present and future Bank Indebtedness and will not make
any payments thereon, except as approved by Bank in writing.
6.21. Name or Address Change. Neither Borrowers nor Guarantor will change
their respective names or addresses except upon thirty (30) days prior written
notice to Bank and delivery to Bank of any items requested by Bank to maintain
perfection and priority of Bank's security interests and access to Borrowers'
and Guarantor's books and records.
/AJK/2722-79/9980_4 082395/14:58 -16-
<PAGE>
6.22. Notices. Borrowers and Guarantor will promptly notify Bank of (a) any
action or proceeding brought against Cataract, Inc., any Borrower or Guarantor
wherein such action or proceeding would, if determined adversely to Cataract,
Inc., or any Borrower or Guarantor result in liability of Borrowers or Guarantor
in excess of Twenty-Five Thousand Dollars ($25,000.00) individually, or Fifty
Thousand Dollars ($50,000.00) in the aggregate, (b) the occurrence of any Event
of Default, (c) any fact, condition or event which, with the giving of notice or
the passage of time or both, could become an Event of Default, (d) the failure
of Borrowers or Guarantor to observe any of their undertakings under the Loan
Documents, (e) any material adverse change in the assets, business, operations
or financial condition of Borrowers or Guarantor or, (f) any dispute in
connection with the Merger Agreement or the breach of any representation,
warranty or covenant therein.
6.23. Additional Documents and Future Actions. Borrowers will, at their
sole cost, take such actions and provide Bank from time to time with such
agreements, financing statements and additional instruments, documents or
information as the Bank may in its discretion deem necessary or advisable to
perfect, protect, maintain or enforce the security interests in the Collateral,
to permit Bank to protect or enforce its interest in the Collateral, or to carry
out the terms of the Loan Documents. Borrowers hereby authorize and appoint Bank
as their attorney-in-fact, with full power of substitution, to take such actions
as Bank may deem advisable to protect the Collateral and its interests thereon
and its rights hereunder, to execute on Borrowers' behalf and file at Borrowers'
expense financing statements, and amendments thereto, in those public offices
deemed necessary or appropriate by Bank to establish, maintain and protect a
continuously perfected security interest in the Collateral, and to execute on
Borrowers' behalf such other documents and notices as Bank may deem advisable to
protect the Collateral and its interests therein and its rights hereunder. Such
power being coupled with an interest is irrevocable. Borrowers irrevocably
authorize the filing of a carbon, photographic or other copy of this Agreement,
or of a financing statement, as a financing statement and agree that such filing
is sufficient as a financing statement.
6.24. Accounts Receivable. Unless Bank notifies Borrowers in writing that
it dispenses with any one or more of the following requirements, Borrowers will
(a) inform Bank immediately of the rejection of goods, claims made or delay in
delivery or performance in regard to any account or contract right upon which
Borrowers have based availability for advances under the Line and will adjust
the borrowing base calculation under the Line to reduce the availability for
advances under the Line by the amount of such account and will repay any
Out-Of-Formula Advance resulting therefrom; (b) make no change in any account
upon which Borrowers have based availability for advances under the Line, unless
such change is reflected in the borrowing base calculation and does not result
in any Out-Of- Formula Advance under the Line; (c) furnish to Bank all
information received by Borrowers affecting the financial standing of any
account debtor whose account or contract right has been specifically assigned to
Bank; (d) pay Bank the amount loaned against any account or contract right if
the goods are returned by purchaser or the contract is canceled or terminated or
adjust the borrowing base calculation to reduce the availability for advances
under the Line by the amount of such account and repay any Out-Of-Formula
Advance resulting therefrom; (e) immediately notify Bank if any of its accounts
arise out of contracts with the United States or any department, agency or
instrumentality thereof, and execute any instruments and take any steps required
by Bank in order that all monies due and to become due under such contract shall
be assigned to Bank and notice thereof given to the Government under the Federal
Assignment of Claims Act; and (f) deliver to Bank, with appropriate endorsement
or assignment, any instrument or chattel paper representing an account or
contract right. Any permission granted to Borrowers by Bank to omit any of the
requirements of this Section 6.24 may be revoked by Bank at any time.
/AJK/2722-79/9980_4 082395/14:58 -17-
<PAGE>
Borrowers will, if requested by Bank (a) give Bank assignments, in form
acceptable to Bank, of specific accounts or groups of accounts and monies due
and to become due under specific contracts and specific general intangibles; (b)
furnish to Bank a copy, with such duplicate copies as Bank may request, of the
invoice applicable to each account specifically assigned to Bank or arising out
of a contract right, bearing a statement that such account has been assigned to
Bank and such additional statements as Bank may require; (c) mark their records
evidencing their accounts in a manner satisfactory to Bank so as to show which
accounts have been assigned to Bank; (d) furnish to Bank satisfactory evidence
of the shipment and receipt of any goods specified by Bank and the performance
of any services or obligations covered by accounts or contracts in which Bank
has a security interest; (e) pay Bank the unpaid portion of any account or
contract right upon which Borrowers have based availability for advances under
the Line if (i) such account is not paid promptly after its maturity, (ii) an
account debtor does not accept the goods or services, (iii) any petition under
the Bankruptcy Code or any similar Federal or State statute is filed by or
against a purchaser, or (iv) Bank shall at any time reject the account as
unsatisfactory; and until such payment is made by Borrowers, Bank may retain any
such account or contract right as security and may charge any deposit account of
Borrowers with any such amounts; (f) join with Bank in executing a financing
statement, notice, affidavit or similar instrument, in form satisfactory to
Bank, and such continuation statements and other instruments as Bank may from
time to time request and pay the cost of filing the same in any public office
deemed advisable by Bank; (g) give Bank such financial statements, reports,
certificates, lists of purchasers (showing names, addresses, and amounts owing)
and other data concerning its accounts, contracts, collections, inventory,
general intangibles and other matters as Bank may from time to time specify; (h)
segregate cash proceeds of Collateral so that they may be identified readily,
and deliver the same to the Bank at such time or times and in such manner and
form as the Bank may direct; (i) furnish such witnesses as may be necessary to
establish legal proof of the Collateral or records relating to the Collateral;
(j) obtain from any owner, encumbrancer or other person having an interest in
the property where any Collateral is located, written consent to Bank's removal
of the Collateral therefrom, without liability on the part of the Bank to such
owner, encumbrancer or other person, or from any such owner, encumbrancer or
other person such waivers of any interest in the Collateral as the Bank may
require; and (k) furnish to the Bank, on demand or as soon as possible
thereafter, such additional property as Collateral as the Bank may from time to
time require.
6.25. Material Adverse Contracts. Neither Borrowers nor Guarantor will
become or be a party to any contract or agreement which has a materially adverse
impact on Borrowers' or Guarantor's ability to perform under this Agreement or
any other agreement with Bank to which any Borrower or Guarantor is a party.
6.26. Restrictions on Use of Proceeds. Borrowers will not carry or purchase
with the proceeds of the Line any "margin security" within the meaning of
Regulations U, G, T or X of the Board of Governors of the Federal Reserve
System.
6.27. Leases. Borrowers and Guarantor will pay all rent or other sums
required by every lease to which any of them is a party as the same becomes due
and payable, perform all their obligations as tenant or lessee thereunder,
except where contested in good faith by lawful and appropriate proceedings and
where adequate reserves therefor have been set aside, and will keep all such
leases at all times in full force and effect during the terms thereof.
6.28. Subordinated Indebtedness. Borrowers will not make any payments on or
with respect to any of the Subordinated Indebtedness, except as approved by Bank
in writing, or except as authorized by Bank in that certain Subordination
Agreement of even date and will comply with all of the terms of such
Subordination Agreement.
6.29. Cataract Merger. CI and Guarantor will comply with all of the terms
and conditions of that certain Merger Agreement dated on or about July 31, 1995
by and among Guarantor, CI, Cataract, Inc. and certain shareholders of Cataract,
Inc. (the "Merger Agreement") and will not amend any of the terms thereof or
waive any of their rights or remedies thereunder without the prior written
consent of Bank. CI and Guarantor will cause the merger of Cataract, Inc. into
CI with CI as the surviving corporation to be complete prior to or
contemporaneously with the disbursement of proceeds under the Line used to pay
sums necessary to complete such merger and will furnish Bank with evidence
thereof satisfactory to Bank. /AJK/2722-79/9980_4 082395/14:58 -18-
<PAGE>
Borrowers and Guarantor acknowledge and agree that all representations and
warranties with respect to CI in this Agreement are true and complete as if the
transactions contemplated under the Merger Agreement have been completed.
6.30. Fiscal Year End. Borrowers and Guarantor will not change or amend the
date of the close of their respective fiscal year.
7. FINANCIAL COVENANTS. Except with the prior written consent of Bank,
Borrowers and Guarantor will comply with the following: 7.1. Net Income.
Borrowers will have Net Income determined on a combined basis in accordance with
GAAP of not less than (a) $250,000.00 for the twelve (12) month period ending
October 31, 1995; and (b) $500,000.00 for each fiscal twelve (12) month period
thereafter.
7.2. Effective Net Worth. Borrowers will maintain Effective Net Worth
determined on a combined basis in accordance with GAAP of not less than (a)
$3,396,000.00 as of November 1, 1994 and at all times thereafter until October
30, 1995; (b) $3,650,000.00 as of October 31, 1995 and at all times thereafter
until October 30, 1996; (c) $4,150,000.00 as of October 31, 1996 and at all
times thereafter until October 30, 1997; and (d) $4,650,000.00 as of October 31,
1997 and at all times thereafter.
7.3. Working Capital. Borrowers will maintain Working Capital determined on
a combined basis in accordance with GAAP of not less than (a) $3,050,000.00 as
of October 31, 1994 and at all times thereafter until October 30, 1995; (b)
$3,200,000.00 as of October 31, 1995 and at all times thereafter until October
30, 1996; (c) $3,700,000.00 as of October 31, 1996 and at all times thereafter
until October 30, 1997; and (d) $4,200,000.00 as of October 31, 1997 and at all
times thereafter.
7.4. Senior Indebtedness to Effective Net Worth Ratio. Borrowers will
maintain a ratio of Senior Indebtedness to Effective Net Worth determined on a
combined basis in accordance with GAAP of not than 1.7 to 1.0 as of the date
hereof and at all times thereafter.
7.5. Capital Expenditures. Borrowers will not cause, suffer or permit
Borrowers' aggregate annual Capital Expenditures to exceed $100,000.00 for any
fiscal year. Such permitted Capital Expenditures are on a non- cumulative basis
as to unused portions for any fiscal year.
7.6. Current Ratio. Borrowers will maintain a ratio of Current Assets to
Current Liabilities determined on a combined basis in accordance with GAAP of
not less than (a) 1.35 to 1.0 as of the date hereof and at all times thereafter
until October 30, 1996; (b) 1.60 to 1.0 as of October 31, 1996 and at all times
thereafter until October 30, 1997; and (c) 1.85 to 1.0 as of October 31, 1997
and at all times thereafter. 7.7. Consolidated Working Capital. Borrowers and
the Guarantor will maintain Working Capitaldetermined on a consolidated basis in
accordance with GAAP of not less than (a) $3,050,000.00 as of October 31, 1994
and at all times thereafter until October 30, 1995; (b) $3,200,000.00 as of
October 31, 1995 and at all times thereafter until October 30, 1996; (c)
$3,700,000.00 as of October 31, 1996 and at all times thereafter until October
30, 1997; and (d) $4,200,000.00 as of October 31, 1997 and at all times
thereafter.
7.8.Consolidated Tangible Net Worth. Borrowers and the Guarantor will
maintain Tangible Net Worth determined on a consolidated basis in accordance
with GAAP of not less than (a) $3,396,000.00 as of November 1, 1994 and at all
times thereafter until October 30, 1995; (b) $3,650,000.00 as of October 31,
1995 and at all times thereafter until October 30, 1996; (c) $4,150,000.00 as of
October 31, 1996 and at all times thereafter until October 30, 1997; and (d)
$4,650,000.00 as of October 31, 1997 and at all times thereafter.
/AJK/2722-79/9980_4 082395/14:58 -19-
<PAGE>
7.9. Management Fees. Borrowers will not pay any fees to, expenses of or
other sums to RCMT or any Affiliates of Borrowers for any reason, except that,
Borrowers may pay up to $218,500.00 in the aggregate in any one fiscal year of
Borrowers to RCMT to cover administrative services rendered by RCMT on behalf of
or for the benefit of Borrowers, provided that (a) no Event of Default, or event
which, with the giving of notice, passage of time or both, would constitute an
Event of Default, has occurred, and (b) such payment would not result in an
Event of Default. Such permitted payments are on a non-cumulative basis as to
unused portions. 7.10. Warrant Registration Expenses. Notwithstanding anything
herein to the contrary, Borrowers may pay the actual out-of-pocket expenses
incurred by RCMT in connection with the annual registration of their current
outstanding stock warrants, directly or indirectly as a repayment of
Subordinated Indebtedness owed to RCMT, provided that (a) no Event of Default,
or Event which, with the giving of notice or passage of time or both, would
constitute an Event of Default, has occurred, (b) such payment would not result
in an Event of Default, and (c) such amount paid shall not exceed in the
aggregate $25,000.00 in any one fiscal year. Such permitted payments are on a
non-cumulative basis as to unused portions.
7.11. Changes to Financial Covenants. The Bank may condition extension of
the Line after the Contract Period upon revision of the foregoing financial
covenants, including without limitation revisions for periods after June 30,
1998, as Bank in its sole discretion may require.
8. ACCOUNTING RECORDS, REPORTS AND FINANCIAL STATEMENTS. Borrowers and
Guarantor will maintain books of record and account in which full, correct and
current entries in accordance with GAAP will be made of all of their dealings,
business and affairs, and Borrowers and Guarantor will deliver to Bank the
following:
8.1. Annual Statements. As soon as available and in any event within ninety
(90) days after the end of each fiscal year of Borrowers and Guarantor: (a) the
audited, consolidated and consolidating income and retained earnings statements
ofBorrowers and Guarantor for such fiscal year,
(c)the audited, consolidated and consolidating statement of cash flow of
Borrowers and Guarantor for such fiscal year, setting forth in comparative form
the corresponding figures as at the end of the previous fiscal year, all in
reasonable detail, including all supporting schedules and comments. The
foregoing statements and balance sheets shall be prepared in accordance with
GAAP and shall be audited by independent certified public accountants of
recognized standing acceptable to Bank in the reasonable exercise of its
discretion with respect to which such accountants shall deliver their
unqualified opinion. /AJK/2722-79/9980_4 082395/14:58 -20-
<PAGE>
8.2. Projections and Cash Flow. As soon as available and in any event
within sixty (60) days prior to the end of each fiscal year of Borrowers and
Guarantor, projections and cash flows for Borrowers and Guarantor on a
month-by-month basis for the next succeeding twelve (12) months, prepared by the
chief financial officer of Borrowers and Guarantor. Borrowers and Guarantor have
furnished to Bank initial projections containing the information required by
this Section 8.2. Borrowers and Guarantor represent and covenant that (a) the
initial projections have been and all projections required by this Section 8.2
shall be prepared by the chief financial officer of Borrowers and Guarantor and
represent, and in the future shall represent, the best available good faith
estimate of Borrowers and Guarantor regarding the course of Borrowers' and
Guarantor's business for the periods covered thereby; (b) the assumptions set
forth in the initial projections are and the assumptions set forth in the future
projections delivered hereafter shall be reasonable and realistic based on then
current economic conditions; (c) Borrowers and Guarantor know of no reason why
Borrowers and Guarantor should not be able to achieve the performance levels set
forth in the initial projections and Borrowers and Guarantor shall have no
knowledge at the time of delivery of future projections of any reason why
Borrowers and Guarantor shall not be able to meet the performance levels set
forth in said projections; and (d) Borrowers and Guarantor have sufficient
capital as may be required for their ongoing business and to pay their existing
and anticipated debts as they mature. 8.3. Quarterly Statements. As soon as
available and in any event within forty-five (45) days after the
close of each fiscal quarter of Borrowers and Guarantor;
(a) the consolidated income and retained earnings statements of Borrowers
and Guarantor for such quarter, (b) the consolidated balance sheet of Borrowers
and Guarantor as of the end of such quarter, and (c) the consolidated statement
of cash flow of Borrowers and Guarantor for such quarter, setting forth in
comparative form the corresponding figures as at the end of the corresponding
quarter of the previous fiscal year (if applicable), all in reasonable detail,
subject to year end adjustments and certified by the chief financial officer of
Borrowers and Guarantor to be accurate and to have been prepared in accordance
with GAAP. 8.4. Monthly Statements. As soon as available and in any event within
thirty (30) days after the end of each calendar month: (a) the consolidated and
consolidating income and retained earnings statements of Borrowers and Guarantor
for such month, (b) the consolidated and consolidating balance sheet of
Borrowers and Guarantor as of the end of such month, and (c) the consolidated
and consolidating statement of cash flow of Borrowers and Guarantor for such
month, setting forth in comparative form the corresponding figures as at the end
of the corresponding month of the previous fiscal year (if applicable) and the
projected figures based upon the projections required under Section 8.2, all in
reasonable detail, subject to year-end adjustments, and certified by the chief
financial officer of Borrowers and Guarantor to be accurate and to have been
prepared in accordance with GAAP. 8.5. Accounts Receivable and Accounts Payable
Statements. As soon as available and in any event within ten (10) days after the
end of each calendar month, a schedule of the Borrowers' accounts receivable and
accounts payable, identifying all Eligible Receivables, and the aging thereof by
open invoice of each account debtor of Borrowers, all certified as to accuracy
by the chief financial officer of Borrowers. Borrowers will also provide Bank
with all information requested by Bank with respect to any account debtor.
/AJK/2722-79/9980_4 082395/14:58 -21-
<PAGE>
8.6. Accounts Receivable Borrowing Base Information and Related Documents.
At least once every calendar week, on the last Business Day of each calendar
month, and, if requested by Bank, as a condition of each advance under the Line,
and otherwise as requested by Bank, an accounts receivable assignment and a
sales, collection and credit report in the form of Exhibit "B" attached hereto
and a copy of Borrowers' sales, collection and credit journal entries for the
week then ended, together with such additional information and details as may be
requested by Bank, all certified as to accuracy by the chief financial officer
of Borrowers.
8.7. Audit Reports. Promptly upon receipt thereof, one copy of
each other report submitted to Borrowers or Guarantor, by independent
accountants, including management letters, "comment" letters, in connection with
any annual, interim or special audit report made by them of the books of
Borrowers or Guarantor.
8.8. Reports to Governmental Agencies and Other
Creditors. With reasonable promptness, copies of all such financial reports,
statements and returns which Borrowers or Guarantor shall file with any federal
or state department, commission, board, bureau, agency or instrumentality and
any report or statement delivered by Borrowers or Guarantor to any supplier or
other creditor in connection with any payment restructuring.
8.9. Securities
Information. As soon as available, copies of such financial statements, notices,
reports and proxy statements as the Borrowers or Guarantor shall furnish to
their stockholders; copies of all registration statements and periodic reports
which the Borrowers or Guarantor may file with the Securities and Exchange
Commission, and any other similar or successor agency of the Federal government
administering the Securities Act of 1933, as amended, the Securities Exchange
Act of 1934, as amended, or the Trust Indenture Act of 1939, as amended; and
copies of all reports relating to the Borrowers or Guarantor of their securities
which they may file with any securities exchange on which any of their
securities may be registered.
8.10. Requested Information. With reasonable
promptness, all such other data and information in respect of the condition,
operation and affairs of Borrowers or Guarantor as Bank may reasonably request
from time to time, including copies of tax returns.
8.11. Compliance
Certificates. Within the periods provided in Sections 8.1 and 8.4 above, a
certificate of the chief financial officer of Borrowers and Guarantor: (a)
stating that Borrowers and Guarantor have observed, performed and complied with
each and every undertaking contained herein, (b) setting forth the information
and computations (in sufficient detail) required in order to establish whether
Borrowers and Guarantor were operating in compliance with the financial
covenants in Section 7 of this Agreement, and (c) certifying that as of the date
of such certification, there does not exist any Event of Default or any
occurrence or state of affairs which with the giving of notice, passage of time
or both would constitute an Event of Default. Such certificate will be in the
form of Exhibit "C" attached hereto.
8.12. Accountant's Statement.
Within theperiod provided in Section 8.1, a statement of the independent
public accountants who render an opinion with respect to the financial
statements referred to therein, stating that nothing has come to their attention
to cause them to believe that the calculations contained in the annual
compliance certificate delivered by the Borrowers and Guarantor pursuant to
Section 8.11 are inaccurate. Bank acknowledges that such independent public
accountants shall not be obligated to take any measures other than those which
are part of such firm's auditing procedures used in conducting audits of
financial statements. /AJK/2722-79/9980_4 082395/14:58 -22-
<PAGE>
9. ENVIRONMENTAL REPRESENTATIONS AND COVENANTS.
9.1. Representations. Borrowers and Guarantor represent to Bank as follows:
(a) the Environmental Affiliates are in compliance with all Environmental
Requirements and Borrowers and Guarantor have no knowledge of any circumstances
which may prevent or interfere with such compliance in the future; (b) the
Environmental Affiliates have all licenses, permits, approvals and
authorizations required under applicable Environmental Requirements; (c) there
are no pending or threatened claims against any of the Environmental Affiliates
or any of their assets related to the failure to comply with any Environmental
Requirements, or any facts or circumstances which could give rise to such a
claim; (d) no facility or property now or previously owned, operated or leased
by any Environmental Affiliate is an Environmental Cleanup Site; (e) no
Environmental Affiliate has treated, stored, transported, handled or disposed of
Special Materials at or adjacent to any Environmental Cleanup Site; (f) there
are no liens or claims for cost reimbursement outstanding or threatened against
any Environmental Affiliate or any of their assets, or any facts or
circumstances which could give rise to such a lien or claim; and (g) there are
no facts or circumstances which, under the provisions of any Environmental
Requirements, could restrict the use, occupancy or transferability of any of the
Collateral or any of the facilities owned, leased or operated by any
Environmental Affiliate.
9.2. Real Property. Borrowers and Guarantor represent and warrant to Bank
that there are no Special Materials presently located on or, to the best of
their knowledge, near any real property owned, leased or operated by any
Environmental Affiliate (collectively, "Real Property") except for Special
Materials which are and have at all times been treated, stored, transported,
handled and disposed of in compliance with all Environmental Requirements.
Borrowers and Guarantor represent to Bank that the Real Property is not now
being used nor, to the best of their knowledge, has it ever been used in the
past for activities involving Special Materials, including but not limited to
the use, generation, collection, storage, treatment, or disposal of any Special
Materials except for Special Materials which are and have at all times been
treated, stored, transported, handled and disposed of in compliance with all
Environmental Requirements. Without limiting the generality of the foregoing,
the Real Property is not being used nor, to the best of Borrowers' and
Guarantor's knowledge, has it ever been used in the past for a landfill, surface
impoundment or other area for the treatment, storage or disposal of solid waste
(including solid waste such as sludge).
9.3. Covenant Regarding Compliance. Borrowers and Guarantor shall take or
cause all Environmental Affiliates to take, at Borrowers' and such Environmental
Affiliate's sole expense, such actions as may be necessary to comply with all
Environmental Requirements, as hereinafter defined. If any Environmental
Affiliate shall fail to take such action, Bank may make advances or payments
towards performance or satisfaction of the same but shall be under no obligation
to do so. All sums so advanced or paid, including all sums advanced or paid by
Bank in connection with any judicial or administrative investigation or
proceeding relating thereto, including, without limitation, attorney's fees,
fines, or other penalty payments, shall be at once repayable by Borrowers and
all sums so advanced or paid shall become a part of the Bank Indebtedness.
The Environmental Affiliates will maintain all licenses, permits, approvals
and authorizations required under applicable Environmental Requirements. In
connection with off-site treatment, storage, handling, transportation or
disposal of Special Materials, the Environmental Affiliates will conduct such
activities only at facilities and with carriers who operate in compliance with
all Environmental Requirements and will obtain certificates of compliance or
disposal from all contractors retained in connection with such activities.
9.4. Notices. In the event Borrowers and Guarantor become aware of any
past, present or future facts or circumstances which have given rise or could
give rise to a claim against any Environmental Affiliate related to a failure to
comply with any Environmental Requirements, Borrowers and Guarantor will
promptly give Bank notice thereof, together with a written statement of an
officer of Borrowers and Guarantor setting forth the details thereof and the
action with respect thereto taken or proposed to be taken by the Environmental
Affiliates. /AJK/2722-79/9980_4 082395/14:58 -23-
<PAGE>
9.5. Indemnity. Borrowers and Guarantor agree to indemnify, defend and hold
harmless Bank, its parents, subsidiaries, successors and assigns, and any
officer, director, shareholder, employee, Affiliate or agent of Bank, for all
loss, liability, damage, cost and expenses, including, without limitation,
attorney's fees and disbursements (including the reasonable allocated cost of
in-house counsel and staff) arising from or related to (a) the release of any
Special Materials at any facility at any time owned, leased or operated by
Borrowers or Guarantor or any of their Environmental Affiliates, (b) the release
of any Special Materials treated, stored, transported, handled, generated or
disposed of by or on behalf of Borrowers or any of their Environmental
Affiliates at any third party owned site, (c) any claim against Borrowers,
Guarantor or any Environmental Affiliate that they have failed to comply with
all Environmental Requirements, and (d) the breach by Borrowers of any
representation or covenant in this Section 9.
9.6. Testing. Bank shall have the right from time to time to designate such
persons ("Environmental Consultants") as Bank may select to visit, inspect,
examine and test all properties owned, leased or operated by and all products
and wastes generated, treated, stored, transported, handled or disposed of by or
on behalf of any Environmental Affiliate, for the purpose of investigating
compliance with Environmental Requirements, any actual or potential claims
related thereto, and any condition which could result in potential liability,
cost or expenses to the Bank. Borrowers will permit, and will cause all
Environmental Affiliates to permit, such Environmental Consultants to have
access to all of such properties, products and wastes and all books, records and
reports related to compliance by the Environmental Affiliates with all
Environmental Requirements. Borrowers will supply, and will cause all
Environmental Affiliates to supply, Bank or the Environmental Consultants with
all information, records, correspondence, audits, reviews and materials related
to compliance by the Environmental Affiliates with all Environmental
Requirements and will make available to Bank or the Environmental Consultants
appropriate personnel employed by or consultants retained by the Environmental
Affiliates having knowledge of such matters.
The cost of such visits, inspections, examination and tests shall be borne
by the Borrowers. In the event Bank pays such costs, such sums shall be at once
repayable by Borrowers and all sums so advanced or paid by Bank shall become
part of the Bank Indebtedness. Notwithstanding the foregoing, the Bank shall
have no obligation to perform any tests, examinations or inspections or to
monitor the Environmental Affiliates' compliance with all Environmental
Requirements.
9.7. Survival. The representations and covenants of Borrowers and Guarantor
contained in this Section 9, including without limitation the indemnification
obligation of Borrowers and Guarantor, shall survive the occurrence of any event
whatsoever, including the payment of the Bank Indebtedness or any investigation
by or knowledge of Bank.
9.8. Definitions. For purposes of the foregoing: (a) "Environmental Cleanup
Site" shall mean any location which is listed or proposed for listing on the
National Priorities List, on CERCLIS or on any similar state list of sites
requiring investigation or cleanup, or which is the subject of any pending or
threatened action, suit, proceeding or investigation related to or arising from
any alleged violation of any Environmental Requirements.
(b) "Environmental Requirements" means any and all applicable federal,
state or local laws, statutes, ordinances, regulations or standards,
administrative or court orders or decrees, common law doctrines or private
agreements, relating to (i) pollution or protection of the environment and
natural resources, (ii) exposure of employees or other persons to Special
Materials, (iii) protection of the public health and welfare from the effects of
Special Materials and their products, by-products, wastes, emissions, discharges
or releases, and (iv) regulation, licensing, approval or authorization of the
manufacture, generation, use, formulation, packaging, labeling, transporting,
distributing, handling, storing or disposing of any Special Materials.
/AJK/2722-79/9980_4 082395/14:58 -24-
<PAGE>
(c) "Special Materials" means any and all materials which, under
Environmental Requirements, require special handling in use, generation,
collection, storage, treatment or disposal, or payment of costs associated with
responding to the lawful directives of any court or agency of competent
jurisdiction or for similar economic loss. Special Materials shall include,
without limitation: (i) any flammable substance, explosive, radioactive
material, hazardous material, hazardous waste, toxic substance, solid waste,
pollutant, contaminant or any related material, raw material, substance, product
or by-product of any substance specified in or regulated or otherwise affected
by any Environmental Requirements (including but not limited to any "hazardous
substance" as defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 as amended or any similar state or local law), (ii)
any toxic chemical or other substance from or related to industrial, commercial
or institutional activities, and (iii) asbestos, gasoline, diesel fuel, motor
oil, waste and used oil, heating oil and other petroleum products or compounds,
polychlorinated biphenyls, radon, urea formaldehyde and lead-containing
materials.
10. CONDITIONS OF CLOSING. The obligation of Bank to make available the
Line is subject to the performance by Borrowers and Guarantor of all of their
agreements to be performed hereunder and to the following further conditions
(any of which may be waived by Bank):
10.1. Loan Documents. Borrowers, Guarantor and all other required persons
and entities will haveexecuted and delivered to Bank the Loan Documents.
10.2. Representations and Warranties. All representations and warranties of
Borrowers and Guarantor set forth in the Loan Documents will be true at and as
of the date hereof.
10.3. No Default. No condition or event shall exist or have occurred which
would constitute an Event of Default hereunder (or would, upon the giving of
notice or the passage of time or both, constitute such an Event of Default).
10.4. Proceedings and Documents. All proceedings taken by Borrowers and
Guarantor in connection with the transactions contemplated by this Agreement and
all documents incident to such transactions shall be satisfactory in form and
substance to Bank and Bank's counsel, and Bank shall have received all documents
or other evidence which it reasonably may request in connection with such
proceedings and transactions. Borrowers and Guarantor shall have delivered to
Bank a certificate, in form and substance satisfactory to Bank, dated the date
hereof and signed on behalf of the Borrowers and Guarantor by an officer of
Borrowers and Guarantor, certifying (a) true copies of the Articles of
Incorporation and bylaws of the Borrowers and Guarantor in effect on such date,
(b) true copies of all corporate actions taken by Borrowers and Guarantor
relative to the Loan Documents, and (c) the names, true signatures and
incumbency of the officers of the Borrowers and Guarantor authorized to execute
and deliver this Agreement and the other Loan Documents. Bank may conclusively
rely on such certificate unless and until a later certificate revising the prior
certificate has been received by Bank.
10.5. Landlord's Release and Waiver Agreements. Bank shall have received
such landlord's release and waiver agreements, satisfactory in form and
substance to Bank, as Bank may require. As a condition of closing, Intertec
shall have delivered such release and waiver agreement for its chief executive
office location in Pennsauken, New Jersey and CI shall have delivered such
release and waiver agreement for its location in Newtown, Pennsylvania.
Borrowers shall use their best efforts to obtain such release and waiver
agreements for their other business locations. If any Borrower ever relocates
its chief executive office or the location of any books or records related to
its accounts receivable, Borrowers shall provide to Bank a landlord's release
and waiver agreement in form satisfactory to Bank for such new location, prior
to and as a condition of any such relocation.
10.6. Delivery of Other Documents. The following documents shall have been
delivered by or on behalf of Borrowers and Guarantor to Bank:
/AJK/2722-79/9980_4 082395/14:58 -25-
<PAGE>
(a) Good Standing Certificates. A good standing certificate of the
Corporate Bureau of their respective states of incorporation certifying to the
good standing and corporate status of Cataract, Inc., each Borrower and
Guarantor, good standing/foreign qualification certificates from all other
jurisdictions in which Cataract, Inc., each Borrower and Guarantor, are required
to be qualified to do business. As soon as reasonably available, but in any
event within six (6) months after the date hereof, Borrowers shall furnish to
Bank tax lien certificates for Borrowers and Guarantor from each jurisdiction in
which Borrowers and Guarantor are required to be qualified to do business,
indicating that Borrowers and Guarantor have no outstanding tax liens.
(b) Authorization Documents. Evidence of authorization of Borrowers' and
Guarantor's execution and full performance of this Agreement, the Loan Documents
and all other documents and actions required hereunder.
(c) Insurance. Evidence of the insurance coverage required under Section
6.12, together with a lender's loss payable endorsement in favor of Bank.
(d) Opinion of Counsel. An opinion of counsel for Borrowers and Guarantor
in form and content satisfactory to Bank.
(e) Lien Search. Copies of record searches (including UCC searches and
judgments, suits and other lien searches) confirming that Bank has a first
priority security interest in the Collateral, acceptable to Bank.
(f) No Material Adverse Change. Evidence satisfactory to the Bank that no
material adverse change has occurred with respect to the Borrowers or Guarantor
since October 31, 1994.
(g) Licenses and Approvals. Copies of all licenses, approvals, consents,
authorizations and filings of Borrowers, required or necessary for the operation
by Borrowers of their business.
(h) Subordination Agreement. Duly executed Subordination Agreements in form
satisfactory to Bank from RCMT as a creditor of each Borrower.
(i) Releases and Terminations. Duly executed lien releases and UCC-3
termination statements covering all liens encumbering assets of Cataract, Inc.
(j) Other Documents. Such other documents as may be required by Bank.
10.7. Minimum Availability. As of the date hereof and as of the first
advance hereunder, there shall be a minimum additional availability for advances
under the Line of Five Hundred Thousand Dollars ($500,000.00) after payment of
all payables (including all trade and supplier payables) in the ordinary course
of business when due without delay, default or any requested extensions, and
payment of all closing costs and expenses and all other advances hereunder.
10.8. Cataract Merger. The transactions contemplated under the Merger
Agreement shall have been duly completed. The Merger as defined therein shall
have been duly filed. Bank shall have received all documentation in connection
with the Merger Agreement and the transactions contemplated thereunder as Bank
may require, including, without limitation, all opinions, agreements,
certifications, covenants, releases, termination statements, merger certificates
and authorizing resolutions.
11. CERTAIN CONDITIONS TO SUBSEQUENT ADVANCES. Subsequent advances shall be
conditioned upon the following conditions and each request by Borrowers for an
advance shall constitute a representation by Borrowers and Guarantor to Bank
that each condition has been met or satisfied: /AJK/2722-79/9980_4 082395/14:58
<PAGE>
11.1. Representations and Warranties. All representations and warranties of
Borrowers and Guarantor contained herein or in the Loan Documents shall be true
at and as of the date of such advance as if made on such date, and each request
for an advance shall constitute reaffirmation by Borrowers and Guarantor that
such representations and warranties are then true.
11.2. No Default. No condition or event shall exist or have occurred at or
as of the date of such advance which would constitute an Event of Default
hereunder (or would, upon the giving of notice or the passage of time or both,
constitute such an Event of Default).
11.3. Other Requirements. Bank shall have received all certificates,
authorizations, affidavits, schedules and other documents which are provided for
hereunder or under the Loan Documents, or which Bank may reasonably request.
12. DEFAULT AND REMEDIES.
12.1. Events of Default. The occurrence of any one or more of the following
events shall constitute an Event or Events of Default hereunder:
(a) The failure of any Borrower to pay any amount of principal or interest
on the Note, or any fee or other sums payable hereunder, or any other Bank
Indebtedness on the date on which such payment is due, whether on demand, at the
stated maturity or due date thereof, or by reason of any requirement for the
prepayment thereof, by acceleration or otherwise;
(b) The failure of any Borrower or Guarantor to duly perform or observe any
obligation, covenant or agreement on its part contained herein or in any other
Loan Document not otherwise specifically constituting an Event of Default under
this Section 12.1 and such failure continues unremedied for a period of ten (10)
Business Days after the earlier of (i) notice from Bank to Borrowers of the
existence of such failure, or (ii) any officer or principal of any Borrower or
Guarantor knows or should have known of the existence of such failure, provided
that, in the event such failure is incapable of remedy or consists of a default
of Section 6.28 or of any of the financial covenants in Section 7, or was
wilfully caused or permitted by any Borrower or Guarantor, Borrowers and
Guarantor shall not be entitled to any notice or grace hereunder;
(c) The failure of any Borrower or Guarantor to pay any Indebtedness for
borrowed money due to any third Person or the existence of any other event of
default under any loan, security agreement, mortgage or other agreement
pertaining thereto binding any Borrower or Guarantor, after the expiration of
any notice and/or grace periods permitted in such documents;
(d) The failure of any Borrower or Guarantor to pay or perform any other
obligation to Bank under any other agreement or note or otherwise arising,
whether or not related to this Agreement, after the expiration of any notice
and/or grace periods permitted in such documents;
(e) The adjudication of any Borrower or Guarantor as a bankrupt or
insolvent, or the entry of an Order for Relief against any Borrower or Guarantor
or the entry of an order appointing a receiver or trustee for any Borrower or
Guarantor of any of their property or approving a petition seeking
reorganization or other similar relief under the bankruptcy or other similar
laws of the United States or any state or any other competent jurisdiction;
(f) A proceeding under any bankruptcy, reorganization, arrangement of debt,
insolvency, readjustment of debt or receivership law is filed by or against any
Borrower or Guarantor or any Borrower or Guarantor makes an assignment for the
benefit of creditors, or any Borrower or Guarantor takes any action to authorize
any of the foregoing;
/AJK/2722-79/9980_4 082395/14:58 -27-
<PAGE>
(g) The suspension of the operation of any Borrower's or Guarantor's
present business, or any Borrower or Guarantor becoming unable to meet its debts
as they mature, or the admission in writing by any Borrower or Guarantor to such
effect, or any Borrower or Guarantor calling any meeting of all or any material
portion of its creditors for the purpose of debt restructure;
(h) All or any part of the Collateral or the assets of any Borrower or
Guarantor are attached, seized, subjected to a writ or distress warrant, or
levied upon, or come within the possession or control of any receiver, trustee,
custodian or assignee for the benefit of creditors;
(i) The entry of a final judgment for the payment of money against any
Borrower or Guarantor which, within ten (10) days after such entry, shall not
have been discharged or execution thereof stayed pending appeal or shall not
have been discharged within five (5) days after the expiration of any such stay;
(j) Any representation or warranty of any Borrower or Guarantor in any of
the Loan Documents is discovered to be untrue in any material respect or any
statement, certificate or data furnished by any Borrower or Guarantor pursuant
hereto is discovered to be untrue in any material respect as of the date as of
which the facts therein set forth are stated or certified;
(k) Any Borrower or Guarantor voluntarily or involuntarily dissolves or is
dissolved, terminates or is terminated;
(l) Any Borrower or Guarantor is enjoined, restrained, or in any way
prevented by the order of any court or any administrative or regulatory agency,
the effect of which order restricts any Borrower or Guarantor from conducting
all or any material part of its business;
(m) A breach by any Borrower or Guarantor occurs under any material
agreement, document or instrument, whether heretofore, now or hereafter existing
between any Borrower or Guarantor and any other Person;
(n) A material and adverse change occurs in any of any Borrower's or
Guarantor's operations, management or financial condition or in the value of the
Collateral;
(o) The Collateral or the prospects of the payment of the Bank Indebtedness
is jeopardized or impaired or Bank otherwise deems itself insecure with respect
to any Borrower's or Guarantor's ability to pay the Bank Indebtedness or
otherwise perform hereunder;
(p) Any material uninsured damage to, or loss, theft, or destruction of,
any of the Collateral occurs;
(q) Any strike, lockout, labor dispute, embargo, condemnation, act of God
or public enemy, or other casualty loss occurs resulting in the cessation or
substantial curtailment of production or other revenue producing activities at
any facility of any Borrower or any Guarantor for more than thirty (30)
consecutive days;
(r) The loss, suspension, revocation or failure to renew any license or
permit now held or hereafter acquired by any Borrower or Guarantor, which loss,
suspension, revocation or failure to renew might have a material adverse effect
on the business profits, assets or financial condition of any Borrower or
Guarantor;
(s) Any change in the stock ownership of any Borrower, as described on
Schedule 5.3, any issuance of stock, debentures, warrants or other securities of
any Borrower or any pledge of the stock of any Borrower;
(t) Any projection delivered to Bank pursuant hereto indicates that an
Event of Default will occur; /AJK/2722-79/9980_4 082395/14:58 -28-
<PAGE>
(u) Any breach by any Borrower or any creditor of its obligations under any
subordination agreement now or hereafter executed in favor of Bank;
(v) The validity or enforceability of this Agreement, or any of the Loan
Documents, is contested by any Borrower, Guarantor or any stockholder of any
Borrower or Guarantor;
(w) Any Borrower or Guarantor denies that it has any or any further
liability or obligation hereunder or under any of the Loan Documents; or
(x) Any material term or provision of any of the Loan Documents is found or
declared to be invalid, avoidable or non-enforceable by any court of competent
jurisdiction.
12.2. Remedies. At the option of the Bank, upon the occurrence of an Event
of Default, or at any time thereafter:
(a) The entire unpaid principal of the Line, all other Bank Indebtedness,
or any part thereof, all interest accrued thereon, all fees due hereunder and
all other obligations of Borrowers to Bank hereunder or under any other
agreement, note or otherwise arising will become immediately due and payable
without any further demand or notice;
(b) The Line will immediately terminate and the Borrowers will receive no
further extensions of credit thereunder;
(c) Bank may increase the interest rate on the Line to the applicable
default rate set forth herein, without notice;
(d) Bank may reduce availability for advances under the formula set forth
in Section 1.1 or require additional reserves without notice;
(e) Bank may enter the premises occupied by any Borrower or Guarantor and
take possession of the Collateral and any records relating thereto; and/or
(f) Bank may exercise each and every right and remedy granted to it under
the Loan Documents, under the Uniform Commercial Code and under any other
applicable law or at equity.
If an Event of Default occurs under Section 12.1(e) or (f), all Bank
Indebtedness shall become immediately due and payable.
12.3. Sale or Other Disposition of Collateral. The sale, lease or other
disposition of the Collateral, or any part thereof, by Bank after an Event of
Default may be for cash, credit or any combination thereof, and Bank may
purchase all or any part of the Collateral at public or, if permitted by law,
private sale, and in lieu of actual payment of such purchase price, may set-off
the amount of such purchase price against the Bank Indebtedness then owing. Any
sales of the Collateral may be adjourned from time to time with or without
notice. The Bank may cause the Collateral to remain on Borrowers' or Guarantor's
premises or otherwise or to be removed and stored at premises owned by other
persons, at Borrowers' expense, pending sale or other disposition of the
Collateral. Borrowers or Guarantor, at Bank's request, shall assemble the
Collateral consisting of inventory and tangible assets and make such assets
available to Bank at a place to be designated by Bank. Bank shall have the right
to conduct such sales on Borrowers' or Guarantor's premises, at Borrowers' or
Guarantor's expense, or elsewhere, on such occasion or occasions as Bank may see
fit. Any notice required to be given by Bank of a sale, lease or other
disposition or other intended action by Bank with respect to any of the
Collateral which is deposited in the United States mail, postage prepaid and
duly addressed to Borrowers and Guarantor at the address specified in Section
13.1 below, at least five (5) business days prior to such proposed action, shall
constitute fair and reasonable notice to Borrowers of any such action.
/AJK/2722-79/9980_4 082395/14:58 -29-
<PAGE>
The net proceeds realized by Bank upon any such sale or other disposition,
after deduction for the expenses of retaking, holding, storing, transporting,
preparing for sale, selling or otherwise disposing of the Collateral incurred by
Bank in connection therewith and all other costs and expenses related thereto
including attorney fees, shall be applied in such order as Bank, in its sole
discretion, elects, toward satisfaction of the Bank Indebtedness. Bank shall
account to Borrowers for any surplus realized upon such sale or other
disposition, and Borrowers and Guarantor shall remain liable for any deficiency.
The commencement of any action, legal or equitable, or the rendering of any
judgment or decree for any deficiency shall not affect Bank's security interest
in the Collateral. Borrowers and Guarantor agree that Bank has no obligation to
preserve rights to the Collateral against any other parties. Bank is hereby
granted a license or other right to use, after an Event of Default, without
charge, Borrowers' and Guarantor's labels, general intangibles, intellectual
property, equipment, real estate, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, service marks and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale and selling any inventory or
other Collateral and Borrowers' and Guarantor's rights under all contracts,
licenses, approvals, permits, leases and franchise agreements shall inure to
Bank's benefit. Bank shall be under no obligation to marshall any assets in
favor of Borrowers or Guarantor or any other party or against or in payment of
any or all of the Bank Indebtedness.
12.4. Actions with Respect to Accounts. Each Borrower hereby irrevocably
makes, constitutes and appoints Bank (and any of Bank's designated officers,
employees or agents) as its true and lawful attorney-in-fact, with full power of
substitution, with power to sign its name and to take any of the following
actions, in its name or the name of Bank, as Bank may determine, without notice
to Borrowers or Guarantor and at Borrowers' expense:
(a) Verify the validity and amount of or any other matter relating to the
Collateral by mail, telephone, telecopy or otherwise;
(b) After occurrence of an Event of Default, notify all account debtors
that such Borrower's accounts have been assigned to Bank and that Bank has a
security interest therein;
(c) After occurrence of an Event of Default, direct all account debtors to
make payment of all of such Borrower's accounts directly to Bank and forward
invoices directly to such account debtors;
(d) After occurrence of an Event of Default, take control in any manner of
any cash or non- cash items of payment or proceeds of such accounts;
(e) Notify the United States Postal Service to change the address for
delivery of mail addressed to any Borrower to such address as Bank may
designate;
(f) After occurrence of an Event of Default, have access to any lockbox or
postal boxes into which any Borrower's mail is deposited and receive, open and
dispose of all mail addressed to any Borrower (any sums received pursuant to the
exercise of the rights provided in Sections 12.4 (a) through (f) above may, at
Bank's option, be deposited in the cash collateral account provided for herein);
(g) After occurrence of an Event of Default, take control in any manner of
any rejected, returned, stopped in transit or repossessed goods relating to any
accounts;
(h) After occurrence of an Event of Default, enforce payment of and collect
any accounts, by legal proceedings or otherwise, and for such purpose Bank may:
(1) Demand payment of any accounts or direct any account debtors to make
payment of accounts directly to Bank;
(2) Receive and collect all monies due or to become due to any Borrower;
(3) Exercise all of any Borrower's rights and remedies with respect to the
collection of accounts;
/AJK/2722-79/9980_4 082395/14:58 -30-
<PAGE>
(4) Settle, adjust, compromise, extend, renew, discharge or release the
accounts;
(5) Sell or assign the accounts on such terms, for such amount and at such
times as Bank deems advisable;
(6) Prepare, file and sign such Borrower's name or names on any Proof of
Claim or similar document in any proceeding filed under federal or state
bankruptcy, insolvency, reorganization or other similar law as to any account
debtor;
(7) Prepare, file and sign such Borrower's name or names on any Notice of
Lien, Claim of Mechanic's Lien, Assignment or Satisfaction of Lien or Mechanic's
Lien or similar document in connection with the Collateral;
(8) Endorse the name of such Borrower upon any chattel papers, documents,
instruments, invoices, freight bills, bills of lading or similar documents or
agreements relating to the accounts or goods pertaining thereto or upon any
checks or other media of payment or evidences of a security interest that may
come into Bank's possession;
(9) Sign the name of such Borrower to verifications of accounts and notices
thereof sent by account debtors to such Borrower; or
(10) Take all other actions necessary or desirable to protect such
Borrower's or Bank's interest in the accounts.
Notwithstanding any of the foregoing provisions pursuant to which Bank
agrees to take any of the foregoing actions only after occurrence of an Event of
Default, there shall be no restriction on the Bank's rights to take such actions
in connection with or in furtherance of the lockbox arrangement between
Borrowers and Bank required hereunder. Borrowers and Guarantor ratify and
approve all acts of said attorneys and agree that said attorneys shall not be
liable for any acts of commission or omission, nor for any error of judgment or
mistake of fact or law, except willful misconduct. This power, being coupled
with an interest, is irrevocable. Borrowers and Guarantor agree to assist the
Bank in the collection and enforcement of its accounts and not to hinder, delay
or impede the Bank in its collection or enforcement of said accounts.
12.5. Set-Off. Without limiting the rights of Bank under applicable law,
Bank has and may exercise, and each Borrower and Guarantor hereby grant to Bank,
a right of set-off, a lien against and a security interest in all property of
such Borrower or Guarantor now or at any time in Bank's possession in any
capacity whatsoever, including but not limited to any balance of any deposit,
trust or agency account, or any other bank account with Bank, as security for
all Bank Indebtedness. At any time and from time to time following the
occurrence of an Event of Default, or an event which with the giving of notice
or passage of time or both would constitute an Event of Default, Bank may
without notice or demand, set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by Bank to or for the credit of any Borrower or
Guarantor against any or all of the Bank Indebtedness and such Borrower's and
Guarantor's obligations under the Loan Documents.
If any bank account of any Borrower or Guarantor with Bank is attached or
otherwise liened or levied upon by any third party, Bank need not await the
running of any applicable grace period hereunder, but Bank shall have and be
deemed to have the immediate right of set-off and may apply the funds or amount
thus set-off against such Borrower's and Guarantor's obligations to the Bank.
/AJK/2722-79/9980_4 082395/14:58 -31-
<PAGE>
12.6. Delay or Omission Not Waiver. Neither the failure nor any delay on
the part of Bank to exercise any right, remedy, power or privilege under the
Loan Documents upon the occurrence of any Event of Default or otherwise shall
operate as a waiver thereof or impair any such right, remedy, power or
privilege. No waiver of any Event of Default shall affect any later Event of
Default or shall impair any rights of Bank. No single, partial or full exercise
of any rights, remedies, powers and privileges by the Bank shall preclude
further or other exercise thereof. No course of dealing between Bank and any
Borrower or Guarantor shall operate as or be deemed to constitute a waiver of
Bank's rights under the Loan Documents or affect the duties or obligations of
any Borrower or Guarantor.
12.7. Remedies Cumulative; Consents. The rights, remedies, powers and
privileges provided for herein shall not be deemed exclusive, but shall be
cumulative and shall be in addition to all other rights, remedies, powers and
privileges in Bank's favor at law or in equity. Whenever the Bank's consent or
approval is required or permitted, such consent or approval shall be at the sole
and absolute discretion of Bank.
12.8. Certain Fees, Costs, Expenses and Expenditures. Borrowers agree to
pay on demand all costs and expenses of Bank, including without limitation:
(a) all costs and expenses in connection with the preparation, review,
negotiation, execution, delivery and administration of the Loan Documents, and
the other documents to be delivered in connection therewith, or any amendments,
extensions and increases to any of the foregoing (including, without limitation,
attorney's fees and expenses, and the cost of appraisals and reappraisals of
Collateral), and the cost of periodic lien searches and tax clearance
certificates, as Bank deems advisable;
(b) all losses, costs and expenses in connection with the enforcement,
protection and preservation of the Bank's rights or remedies under the Loan
Documents, or any other agreement relating to any Bank Indebtedness, or in
connection with legal advice relating to the rights or responsibilities of Bank
(including without limitation court costs, attorney's fees and expenses of
accountants and appraisers); and
(c) any and all stamp and other taxes payable or determined to be payable
in connection with the execution and delivery of the Loan Documents, and all
liabilities to which Bank may become subject as the result of delay in paying or
omission to pay such taxes.
In the event any Borrower shall fail to pay taxes, insurance, assessments,
costs or expenses which it is required to pay hereunder, or fails to keep the
Collateral free from security interests or lien (except as expressly permitted
herein), or fails to maintain or repair the Collateral as required hereby, or
otherwise breaches any obligations under the Loan Documents, Bank in its
discretion, may make expenditures for such purposes and the amount so expended
(including attorney's fees and expenses, filing fees and other charges) shall be
payable by Borrowers on demand and shall constitute part of the Bank
Indebtedness.
With respect to any amount required to be paid by Borrowers under this
section, in the event Borrowers fail to pay such amount on demand, Borrowers
shall also pay to Bank interest thereon at the default rate set forth in Section
2.2 for the Line. Borrowers' obligations under this section shall survive
termination of this Agreement.
Borrowers and Guarantor agree to indemnify and hold harmless, Bank and Bank
officers, directors, shareholders, employees and agents, from and against any
and all claims, liabilities, losses, damages, costs and expenses (whether or not
such person is a party to any litigation), including attorney's fees and costs
and costs of investigation, document production, attendance at depositions or
other discovery with respect to or arising out of this Agreement, the use of any
proceeds advanced hereunder, the transactions contemplated hereunder, or any
claim, demand, action or cause of action being asserted against any Borrower,
Guarantor or any of their Affiliates.
Borrowers' and Guarantor's obligations under this section shall survive
termination of this Agreement and repayment of the Bank Indebtedness.
<PAGE>
12.9. Time is of the Essence. Time is of the essence in Borrowers' and
Guarantor's performance of their obligations under the Loan Documents.
12.10. Acknowledgement of Confession of Judgment Provisions. BORROWERS AND
GUARANTOR ACKNOWLEDGE AND AGREE THAT THE NOTE AND THE LOAN DOCUMENTS CONTAIN
PROVISIONS WHEREBY BANK MAY ENTER JUDGMENT BY CONFESSION AGAINST BORROWERS AND
GUARANTOR. BEING FULLY AWARE OF THEIR RIGHTS TO PRIOR NOTICE AND PRIOR HEARING
ON THE QUESTION OF THE VALIDITY OF ANY CLAIMS THAT MAY BE ASSERTED AGAINST THEM
BY BANK UNDER THE NOTE AND LOAN DOCUMENTS, BEFORE JUDGMENT CAN BE ENTERED,
BORROWERS AND GUARANTOR HEREBY WAIVE THESE RIGHTS AND AGREE AND CONSENT TO BANK
ENTERING JUDGMENT AGAINST BORROWERS AND GUARANTOR BY CONFESSION. ANY PROVISION
IN A CONFESSION OF JUDGMENT IN ANY OF THE LOAN DOCUMENTS FOR AN ATTORNEY'S
COLLECTION COMMISSION SHALL IN NO WAY LIMIT BORROWERS' AND GUARANTOR'S LIABILITY
TO REIMBURSE BANK FOR ALL LEGAL FEES ACTUALLY INCURRED BY BANK, EVEN IF SUCH
FEES ARE IN EXCESS OF THE ATTORNEY'S COLLECTION COMMISSION PROVIDED FOR IN SUCH
CONFESSION OF JUDGMENT.
13. COMMUNICATIONS AND NOTICES.
13.1. Communications and Notices. All notices, requests and other
communications made or given in connection with the Loan Documents shall be in
writing and, unless receipt is stated herein to be required, shall be deemed to
have been validly given if delivered personally to the individual or division or
department to whose attention notices to a party are to be addressed, or by
private carrier, or registered or certified mail, return receipt requested, or
by telecopy with the original forwarded by first-class mail, in all cases, with
charges prepaid, addressed as follows, until some other address (or individual
or division or department for attention) shall have been designated by notice
given by one party to the other:
To Borrowers and Guarantor:
Intertec Design, Inc.
2500 McClellan Avenue
Suite 350
Pennsauken, NJ 08109
Attention: Leon Kopyt, President
Telecopy Number: (609) 488-8833
To Bank:
Mellon Bank, N.A.
1735 Market Street, 6th Floor
P.O. Box 7899
Philadelphia, PA 19101-7899
Attention: Lawrence P. Garni, Vice President
Telecopy Number: (215) 553-0201
/AJK/2722-79/9980_4 082395/14:58 -33-
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With a copy to:
LESSER & KAPLIN, P.C.
350 Sentry Parkway, Building 640
Blue Bell, Pennsylvania 19422
Attention: Anthony J. Krol, Esquire
Telecopy Number: (610) 828-1555
14. DEFINITIONS. The following words and phrases as used in capitalized
form in this Agreement, whether in the singular or plural, shall have the
meanings indicated:
14.1. "Accounting Terms". As used in this Agreement, or any certificate,
report or other document made or delivered pursuant to this Agreement,
accounting terms not defined elsewhere in this Agreement shall have the
respective meanings given to them under GAAP.
14.2. "Affiliate", as to any Person, means each other Person that directly
or indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, the Person in question.
14.3. "Bank Indebtedness" shall mean all obligations and Indebtedness of
any Borrower to Bank, whether now or hereafter owing or existing, including,
without limitation, all obligations under the Loan Documents, all obligations to
reimburse Bank for payments made by Bank pursuant to any letter of credit issued
for the account or benefit of such Borrower by Bank, all other obligations or
undertakings now or hereafter made by or for the benefit of any Borrower to or
for the benefit of Bank under any other agreement, promissory note or
undertaking now existing or hereafter entered into by any Borrower with Bank,
including, without limitation, all obligations of any Borrower to Bank under any
guaranty or surety agreement and all obligations of any Borrower to immediately
pay to Bank the amount of any overdraft on any deposit account maintained with
Bank, together with all interest and other sums payable in connection with any
of the foregoing.
14.4. "Business Day" means any day except a Saturday, Sunday or other day
on which commercial banks in Pennsylvania are authorized by law to close.
14.5. "Capital Expenditures" means any expenditure that would be classified
as a capital expenditure on a statement of cash flow of Borrowers prepared in
accordance with GAAP.
14.6. "Capitalized Leases" means all lease obligations which have been or
should be, in accordance with GAAP, capitalized on the books of the lessee.
14.7. "Capitalized Lease Obligations" means all amounts payable with
respect to a Capitalized Lease.
14.8. "Cataract, Inc." means Cataract, Inc., a Pennsylvania corporation to
be merged into CI pursuant to the terms of the Merger Agreement.
14.9. "Cataract Merger" means the merger of Cataract, Inc. into CI pursuant
to the terms of the Merger Agreement.
14.10. "Corporation" means a corporation, partnership, trust,
unincorporated organization, association or joint stock company.
14.11. "Current Assets" at a particular date means the aggregate amount of
all assets of a Person which would be classified as current assets on a balance
sheet of such Person at such date, in accordance with GAAP.
14.12. "Current Liabilities" at a particular date means the liabilities
(including tax and other proper accruals) of a Person which would be included as
current liabilities on a balance sheet of such Person at such date, in
accordance with GAAP.
/AJK/2722-79/9980_4 082395/14:58 -34-
<PAGE>
14.13. "Effective Net Worth" means the aggregate of Borrowers' Tangible Net
Worth, plus Subordinated Indebtedness outstanding at such date.
14.14. "Eligible Receivables" means accounts receivable of each Borrower
which have been due no more than ninety (90) days from the invoice date, are not
subject to offsets or deductions, comply with the representations set forth in
Section 5.19 and meet all specifications established by Bank in its sole
discretion from time to time. Eligible Receivables shall not include: (a)
non-trade receivables, (b) foreign accounts receivable; (c) contra-accounts; (d)
intercompany accounts or accounts from other affiliated corporations,
organizations or individuals; (e) accounts receivable from the United States
government or any of its agencies which have not been assigned to Bank under the
Assignment of Claims Act; (f) finance charges; (g) lease receivables; (h)
accounts receivable owed by a Person if fifty percent (50%) or more of such
Person's accounts receivable owed to any Borrower are ninety (90) days or more
past the invoice date; (i) accounts receivable of poor quality; and (j) accounts
receivable concentrated in individual account debtors in such amounts or
percentage as may be unacceptable to Bank. In the event that any account
receivable previously scheduled, listed or referred to in any certificate,
statement or report by Borrowers and upon which Borrowers are basing
availability under the Line ceases to be an Eligible Receivable, Borrowers shall
notify Bank thereof immediately.
14.15. "Environmental Affiliate" means Cataract, Inc., each Borrower,
Guarantor and any other Person for whom any Borrower or Guarantor at any time
have any liability (contingent or otherwise) with respect to any claims arising
out of the failure of Cataract, Inc., each Borrower, Guarantor or such Person to
comply with all applicable Environmental Requirements.
14.16. "Event of Default" means each of the events specified in Section
12.1.
14.17. "GAAP" means generally accepted accounting principles in the United
States of America, in effect from time to time, consistently applied and
maintained.
14.18. "Indebtedness", as applied to a Person, means:
(a) all items (except items of capital stock or of surplus) which in
accordance with GAAP would be included in determining total liabilities as shown
on the liability side of a balance sheet of such Person as at the date as of
which Indebtedness is to be determined;
(b) to the extent not included in the foregoing, all indebtedness,
obligations, and liabilities secured by any mortgage, pledge, lien, conditional
sale or other title retention agreement or other security interest to which any
property or asset owned or held by such Person is subject, whether or not the
indebtedness, obligations or liabilities secured thereby shall have been assumed
by such Person; and
(c) to the extent not included in the foregoing, all indebtedness,
obligations and liabilities of others which such Person has directly or
indirectly guaranteed, endorsed (other than for collection or deposit in the
ordinary course of business), sold with recourse, or agreed (contingently or
otherwise) to purchase or repurchase or otherwise acquire or in respect of which
such Person has agreed to supply or advance funds (whether by way of loan, stock
purchase, capital contribution or otherwise) or otherwise to become directly or
indirectly liable.
14.19. "Loan Documents" means this Agreement, the Note, the Surety
Agreement, the Subordination Agreements, and all other documents, executed or
delivered by Borrowers or Guarantor pursuant to this Agreement, as they may be
amended from time to time.
14.20. "Merger Agreement" shall have the meaning set forth therefor in
Section 6.29.
/AJK/2722-79/9980_4 082395/14:58 -35-
<PAGE>
14.21. "Net Income" means income (or loss) of Borrowers after income and
franchise taxes and shall have the meaning given such term by GAAP, provided
that there shall be specifically excluded therefrom (a) gains or losses from the
sale of capital assets, (b) net income of any Person in which Borrowers have an
ownership interest, unless received by such Borrowers in a cash distribution,
and (c) any gains arising from extraordinary items, as defined by GAAP.
14.22. "Out-Of-Formula Advance" means the amount by which the then
outstanding principal balance of the Line exceeds the amount that Bank may
advance pursuant to the formula advance provisions of Section 1.1 subject to
such other restrictions on advances as are otherwise set forth in this
Agreement.
14.23. "Person" means an individual, a Corporation or a government or any
agency or subdivision thereof, or any other entity.
14.24. "Prime Rate" means the annual interest rate established from time to
time by Bank and generally known by Bank as its "prime rate", whether published
by it publicly or only for the internal guidance of its loan officers. The Prime
Rate is used merely as a pricing index and is not and should not be considered
to represent the lowest or best rate available to a borrower.
14.25. "Senior Indebtedness" means all Indebtedness of Borrowers other than
Subordinated Indebtedness.
14.26. "Subordinated Indebtedness" means all Indebtedness for borrowed
money owed by any Borrower to RCMT, which is at all times fully subordinated to
all Bank Indebtedness on terms acceptable to Bank in its sole discretion.
14.27. "Subsidiary" means a Corporation (a) which is organized under the
laws of the United States or any State thereof, or any other county or
jurisdiction (b) which conducts substantially all of its business and has
substantially all of its assets within the United States, and (c) of which more
than fifty percent (50%) of its outstanding voting stock of every class (or
other voting equity interest) is owned by Guarantor, any Borrower or one or more
of its Subsidiaries.
14.28. "Tangible Net Worth" shall mean, at any time, the amount by which
all assets of a Person, excluding intangible assets, as that term would be
defined under GAAP, exceed all of such Person's liabilities, as would be shown
on a balance sheet of such Person prepared as of such date in accordance with
GAAP.
14.29. "Working Capital" as applied to a Person means the amount, as of the
date of determination thereof, equal to the difference between the aggregate
Current Assets and the aggregate Current Liabilities (including without
limitation all accrued dividends) of such Person, determined in accordance with
GAAP.
<PAGE>
15. WAIVERS.
15.1. Waivers. In connection with any proceedings under the Loan Documents,
including without limitation any action by Bank in replevin, foreclosure or
other court process or in connection with any other action related to the Loan
Documents or the transactions contemplated hereunder, Borrowers and Guarantor
waive:
(a) all procedural errors, defects and imperfections in such proceedings;
(b) all benefits under any present or future laws exempting any property,
real or personal, or any part of any proceeds thereof from attachment, levy or
sale under execution, or providing for any stay of execution to be issued on any
judgment recovered under any of the Loan Documents or in any replevin or
foreclosure proceeding, or otherwise providing for any valuation, appraisal or
exemption;
(c) all rights to inquisition on any real estate, which real estate may be
levied upon pursuant to a judgment obtained under any of the Loan Documents and
sold upon any writ of execution issued thereon in whole or in part, in any order
desired by Bank;
(d) presentment for payment, demand, notice of demand, notice of
non-payment, protest and notice of protest and all other notices, except those
specifically provided herein, of any of the Loan Documents, including the Note;
(e) any requirement for bonds, security or sureties required by statute,
court rule or otherwise;
(f) any demand for possession of Collateral prior to commencement of any
suit; and
(g) all rights to claim or recover attorney's fees and costs in the event
that Borrowers or Guarantor are successful in any action to remove, suspend or
enforce a judgment entered by confession.
15.2. Forbearance. Bank may release, compromise, forbear with respect to,
waive, suspend, extend or renew any of the terms of the Loan Documents, without
notice to Borrowers or Guarantor.
15.3. Limitation on Liability. Borrowers and Guarantor shall be responsible
for and Bank is hereby released from any claim or liability in connection with:
(a) Safekeeping any Collateral;
(b) Any loss or damage to any Collateral;
(c) Any diminution in value of the Collateral; or
(d) Any act or default of another Person.
Bank shall only be liable for any act or omission on its part constituting
gross negligence or wilful misconduct. In the event that Bank breaches its
required standard of conduct, Borrowers and Guarantor agree that its liability
shall be only for direct damages suffered and shall not extend to consequential
or incidental damages. In the event any Borrower or Guarantor brings suit
against Bank in connection with the transactions contemplated hereunder and Bank
is found not to be liable, Borrowers and Guarantor will indemnify and hold Bank
harmless from all costs and expenses, including attorney's fees, incurred by
Bank in connection with such suit.
/AJK/2722-79/9980_4 082395/14:58 -37-
<PAGE>
This Agreement is not intended to obligate Bank to take any action with
respect to the Collateral or to incur expenses or perform any obligation or duty
of any Borrower.
15.4. Waiver of Subrogation. Borrowers and Guarantor hereby waive any right
to subrogation, reimbursement, contribution or indemnity from any Borrower or
Guarantor in connection with any Borrower's and Guarantor's obligations under
the Loan Documents.
16. SUBMISSION TO JURISDICTION.
16.1. Submission to Jurisdiction. Borrowers and Guarantor hereby consent to
the exclusive jurisdiction of any state or federal court located within the
Commonwealth of Pennsylvania, and irrevocably agree that, subject to the Bank's
election, all actions or proceedings relating to the Loan Documents or the
transactions contemplated hereunder shall be litigated in such courts, and
Borrowers and Guarantor waive any objection which they may have based on lack of
personal jurisdiction, improper venue or forum non conveniens to the conduct of
any proceeding in any such court and waive personal service of any and all
process upon them, and consent that all such service of process be made by mail
or messenger directed to them at the address set forth in Section 13.1. Nothing
contained in this Section 16.1 shall affect the right of Bank to serve legal
process in any other manner permitted by law or affect the right of Bank to
bring any action or proceeding against any Borrower or Guarantor or their
property in the courts of any other jurisdiction.
17. MISCELLANEOUS.
17.1. Brokers. The transaction contemplated hereunder was brought about and
entered into by Bank and Borrowers and Guarantor acting as principals and
without any brokers, agents or finders being the effective procuring cause
hereof. Borrowers and Guarantor represent to Bank that Borrowers and Guarantor
have not committed Bank to the payment of any brokerage fee or commission in
connection with this transaction. If any such claim is made against Bank by any
broker, finder or agent or any other Person, Borrowers and Guarantor agree to
indemnify, defend and hold Bank harmless against any such claim, at Borrowers'
and Guarantor's own cost and expense, including Bank's attorneys' fees.
Borrowers and Guarantor further agree that until any such claim or demand is
adjudicated in Bank's favor, the amount claimed and/or demanded shall be deemed
part of the Bank Indebtedness secured by the Collateral.
17.2. Use of Bank's Name. Borrowers and Guarantor shall not use Bank's name
or the name of any of Bank's Affiliates in connection with any of their business
or activities except as may otherwise be required by the rules and regulations
of the Securities and Exchange Commission or any like regulatory body and except
as may be required in its dealings with any governmental agency.
17.3. No Joint Venture. Nothing contained herein is intended to permit or
authorize Borrowers or Guarantor to make any contract on behalf of Bank, nor
shall this Agreement be construed as creating a partnership, joint venture or
making Bank an investor in any Borrower or Guarantor.
17.4. Survival. All covenants, agreements, representations and warranties
made by Borrowers and Guarantor in the Loan Documents or made by or on their
behalf in connection with the transactions contemplated here shall be true at
all times this Agreement is in effect and shall survive the execution and
delivery of the Loan Documents, any investigation at any time made by Bank or on
its behalf and the making by Bank of the loans or advances to Borrowers. All
statements contained in any certificate, statement or other document delivered
by or on behalf of Borrowers or Guarantor pursuant hereto or in connection with
the transactions contemplated hereunder shall be deemed representations and
warranties by Borrowers and Guarantor.
/AJK/2722-79/9980_4 082395/14:58 -38-
<PAGE>
17.5. No Assignment by Borrowers. Borrowers may not assign any of their
rights hereunder without the prior written consent of Bank, and Bank shall not
be required to lend hereunder except to Borrowers as they presently exists.
17.6. Assignment or Sale by Bank. Bank may sell, assign or participate all
or a portion of its interest in the Loan Documents and in connection therewith
may make available to any prospective purchaser, assignee or participant any
information relative to Borrowers and Guarantor in its possession.
17.7. Binding Effect. This Agreement and all rights and powers granted
hereby will bind and inure to the benefit of the parties hereto and their
respective permitted successors and assigns.
17.8. Severability. The provisions of this Agreement and all other Loan
Documents are deemed to be severable, and the invalidity or unenforceability of
any provision shall not affect or impair the remaining provisions which shall
continue in full force and effect.
17.9. No Third Party Beneficiaries. The rights and benefits of this
Agreement and the Loan Documents shall not inure to the benefit of any third
party.
17.10. Modifications. No modification of this Agreement or any of the Loan
Documents shall be binding or enforceable unless in writing and signed by or on
behalf of the party against whom enforcement is sought.
17.11. Holidays. If the day provided herein for the payment of any amount
or the taking of any action falls on a Saturday, Sunday or public holiday at the
place for payment or action, then the due date for such payment or action will
be the next succeeding Business Day.
17.12. Law Governing. This Agreement has been made, executed and delivered
in the Commonwealth of Pennsylvania and will be construed in accordance with and
governed by the laws of such Commonwealth.
17.13. Integration. The Loan Documents shall be construed as integrated and
complementary of each other, and as augmenting and not restricting Bank's
rights, powers, remedies and security. The Loan Documents contain the entire
understanding of the parties thereto with respect to the matters contained
therein and supersede all prior agreements and understandings between the
parties with respect to the subject matter thereof and do not require parol or
extrinsic evidence in order to reflect the intent of the parties. In the event
of any inconsistency between the terms of this Agreement and the terms of the
other Loan Documents, the terms of this Agreement shall prevail. None of the
Loan Documents shall be construed more stringently against the Bank by virtue of
the fact that they have been drafted by counsel to the Bank.
17.14. Exhibits and Schedules. All exhibits and schedules attached hereto
are hereby made a part of this Agreement.
17.15. Headings. The headings of the Articles, Sections, paragraphs and
clauses of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part of this Agreement.
17.16. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
17.17. Joint and Several Liability. All agreements, conditions, covenants
and provisions of the Loan Documents shall be the joint and several obligation
of each Borrower and Guarantor.
<PAGE>
17.18. Waiver of Right to Trial by Jury. BORROWERS, GUARANTOR AND BANK
WAIVE ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
(a) ARISING UNDER ANY OF THE LOAN DOCUMENTS OR (b) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF BORROWERS, GUARANTOR OR BANK WITH
RESPECT TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR
THERETO, IN EACH CASE WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWERS, GUARANTOR AND BANK AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND
THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF BORROWERS,
GUARANTOR AND BANK TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. BORROWERS AND
GUARANTOR ACKNOWLEDGE THAT THEY HAVE HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL
REGARDING THIS SECTION, THAT THEY FULLY UNDERSTAND ITS TERMS, CONTENT AND
EFFECT, AND THAT THEY VOLUNTARILY AND KNOWINGLY AGREE TO THE TERMS OF THIS
SECTION.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
INTERTEC DESIGN, INC.
By:/s/Leon Kopyt
Leon Kopyt, President
(CORPORATE SEAL)
Attest:/s/ Stanton Remer
Stanton Remer, Secretary
(SIGNATURES CONTINUED ON FOLLOWING PAGE) /AJK/2722-79/9980_4 082395/14:58
-40-
<PAGE>
(SIGNATURES CONTINUED FROM PREVIOUS PAGE)
CI ACQUISITION CORP.
By:/s/ Leon Kopyt
Leon Kopyt, President
(CORPORATE SEAL)
Attest:/s/ Stanton Remer
Stanton Remer, Secretary
MELLON BANK, N.A.
By: /s/Jeffrey G. Saperstein
Name/Title: Jeffrey Saperstein,A.V.P.
The undersigned, intending to be legally bound, hereby join in the
representations and warranties and consent to and agree to be bound by the
terms, conditions and covenants applicable to the undersigned as set forth in
the foregoing Loan and Security Agreement, including without limitations the
waivers set forth in Sections 15.1, 15.4 and 17.18.
RCM TECHNOLOGIES, INC.
By: /s/ Leon Kopyt
Leon Kopyt, President
[CORPORATE SEAL]
Attest: /s/ Stanton Remer
Stanton Remer, Assistant Secretary
/AJK/2722-79/9980_4 082395/14:58
<PAGE>
-41-
EXHIBITS
Exhibit "A" - Note
Exhibit "B" - Form of Accounts Receivable Assignment and Collection Report
Exhibit "C" - Form of Compliance Certificate
/AJK/2722-79/9980_4 082395/14:58
<PAGE>
SCHEDULES
Schedule 5.3 Ownership Interests, Pledges, etc. of any Borrower
Schedule 5.4 Stock owned by any Borrower or RCMT
Schedule 5.7 Pending or Threatened Litigation or Proceedings Against or
Affecting any Borrower and Guarantor
Schedule 5.14 Names (including tradenames) and Addresses of any Borrower
and Guarantor, identifying chief executive office
Schedule 5.16 Employee Pension Benefit Plan Obligations of any Borrower and
Guarantor
Schedule 5.18 Intellectual Property
Schedule 6.3 Permitted Indebtedness for Borrowed Money
Schedule 6.4 Permitted Investments and Loans
Schedule 6.9 Permitted Liens and Security Interests
Schedule 6.16 Other Bank Accounts
Schedule 6.17 Directors and Executive Officers
Schedule 6.19 Permitted Loans to Affiliates, Shareholders, Officers or Directors
/AJK/2722-79/9980_4 082395/14:58
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED JULY 31, 1995 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> JUL-31-1995
<CASH> 3,195,600
<SECURITIES> 0
<RECEIVABLES> 2,719,642
<ALLOWANCES> 30,379
<INVENTORY> 0
<CURRENT-ASSETS> 6,464,322
<PP&E> 814,893
<DEPRECIATION> 687,611
<TOTAL-ASSETS> 6,902,497
<CURRENT-LIABILITIES> 805,115
<BONDS> 0
<COMMON> 735,678
0
0
<OTHER-SE> 6,318,257
<TOTAL-LIABILITY-AND-EQUITY> 6,902,497
<SALES> 17,988,304
<TOTAL-REVENUES> 18,116,117
<CGS> 14,788,433
<TOTAL-COSTS> 17,427,555
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,811
<INCOME-PRETAX> 651,608
<INCOME-TAX> 75,153
<INCOME-CONTINUING> 576,455
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 576,455
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
