<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission file number 0-12489
SPECTRAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2729372
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 Hall Road, Sturbridge, Massachusetts 01566
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 347-2261
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 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.
The number of shares of the registrant's Common Stock outstanding as of
April 30, 1996, was 5,354,052.
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PART I - FINANCIAL INFORMATION
SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1996 1995
------------ -----------
<S> <C> <C>
Net Sales $ 13,472,523 $ 7,965,079
Cost of Sales 8,716,304 5,071,503
------------ -----------
Gross Profit 4,756,219 2,893,576
Selling & Administrative Expenses 2,819,116 2,037,649
Research & Development Costs 909,279 753,445
------------ -----------
Income from Operations 1,027,824 102,482
Other Income (Expense):
Interest Income 67,912 84,623
Interest Expense (186,198) (101,813)
Other 33,778 56,146
------------ -----------
(84,508) 38,956
------------ -----------
Income before Income Taxes 943,316 141,438
Income Tax Expense 259,411 58,524
------------ -----------
Net Income $ 683,905 $ 82,914
============ ===========
Weighted Average Number of Shares of
Common Stock Outstanding 5,749,951 5,228,710
============ ===========
Net Income per Share of Common Stock $ .12 $ .02
============ ===========
</TABLE>
See accompanying notes to these consolidated condensed financial statements.
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SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 1,037,046 $ 1,624,515
Current Portion of Marketable Securities 1,228,320 4,088,316
Accounts Receivable, Trade, net 8,746,521 7,798,517
Inventories 7,700,736 7,414,718
Current Deferred Income Taxes, net 588,000 588,000
Prepaid Expenses and Other Current Assets 659,931 513,356
------------ ------------
Total Current Assets 19,960,554 22,027,422
Property, Plant and Equipment, net 11,779,190 10,290,048
Other Assets:
Long-term Marketable Securities 2,065,599 1,132,682
License Agreements, net 954,195 1,004,417
Deferred Income Taxes, net 1,852,000 1,652,000
Goodwill, net 4,082,611 4,156,392
Other 110,509 101,751
------------ ------------
Total Other Assets 9,064,914 8,047,242
------------ ------------
Total Assets $ 40,804,658 $ 40,364,712
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 2,729,774 $ 2,762,265
Income Taxes Payable 565,987 224,576
Accrued Liabilities 2,546,018 3,082,431
------------ ------------
Total Current Liabilities 5,841,779 6,069,272
Long-term Debt 10,000,000 10,000,000
Stockholders' Equity:
Common Stock, voting, $.10 par value; authorized
20,000,000 shares; outstanding 5,354,052 shares and
5,353,686 shares in 1996 and 1995, respectively 535,405 535,369
Common Stock, non-voting, $.10 par value;
authorized 250,000 shares; no shares outstanding -- --
Paid-in Capital 26,444,953 26,442,794
Net Unrealized Loss on Marketable Securities (40,925) (22,264)
Retained Earnings (Deficit) (1,976,554) (2,660,459)
------------ ------------
Total Stockholders' Equity 24,962,879 24,295,440
------------ ------------
Total Liabilities & Stockholders' Equity $ 40,804,658 $ 40,364,712
============ ============
</TABLE>
See accompanying notes to these consolidated condensed financial statements.
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SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 683,905 $ 82,914
Reconciliation of Net Income to Net Cash Provided by
Operating Activities
Add Charges (Deduct Credits) Items Not Affecting Cash:
Depreciation and Amortization 705,863 484,795
Other Non-Cash Charges (71,202) (17,517)
Changes in Other Components of Working Capital (1,748,636) (115,548)
----------- -----------
Net Cash Provided by Operating Activities (430,070) 434,644
Cash Flows from Investing Activities:
Deposit on Acquisition of Business -- (1,613,062)
Acquisition of Property, Plant and Equipment (2,064,941) (420,643)
Purchase of Marketable Securities (6,011,110) (352,943)
Proceeds from Sale/Maturity of Marketable Securities 7,916,457 --
----------- -----------
Cash Used in Investing Activities (159,594) (2,386,648)
----------- -----------
Cash Flows from Financing Activities:
Borrowings of Long-term Debt -- 1,651,942
Proceeds from Exercise of Stock Options and Warrants 2,195 --
----------- -----------
Cash Provided by Financing Activities 2,195 1,651,942
Decrease in Cash and Cash Equivalents (587,469) (300,062)
Cash and Cash Equivalents at Beginning of Period 1,624,515 477,022
----------- -----------
Cash and Cash Equivalents at End of Period $ 1,037,046 $ 176,960
=========== ===========
</TABLE>
See accompanying notes to these consolidated condensed financial statements.
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SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The financial information for the three months ended March 31, 1996, is
unaudited but reflects all adjustments (consisting solely of normal recurring
adjustments) which the Company considers necessary for a fair statement of
results for the interim period. The results of operations for the three months
ended March 31, 1996, are not necessarily indicative of the results for the
entire year.
The consolidated results for the three months ended March 31, 1996,
include the accounts of SpecTran Corporation (the Company) and all wholly owned
subsidiaries: SpecTran Communication Fiber Technologies, Inc., SpecTran
Specialty Optics Company and Applied Photonic Devices, Inc. All significant
intercompany balances and transactions have been eliminated.
These financial statements supplement, and should be read in
conjunction with, the Company's audited financial statements for the year ended
December 31, 1995, as contained in the Company's Form 10-K as filed with the
United States Securities and Exchange Commission.
2. INVENTORIES
Inventories consisted of:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Raw Materials $3,342,814 $3,131,753
Work in Process 1,342,515 1,507,830
Finished Goods 3,015,407 2,775,135
---------- ----------
$7,700,736 $7,414,718
========== ==========
</TABLE>
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3. PROPERTY, PLANT & EQUIPMENT
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Property, plant and equipment consisted of:
Land and Land Improvements $ 407,705 $ 407,705
Buildings and Improvements 3,747,097 3,729,114
Machinery and Equipment 17,650,882 17,229,195
Construction in Progress 3,266,057 1,640,786
---------- -----------
25,071,741 23,006,800
Less Accumulated Depreciation and Amortization 13,292,551 12,716,752
----------- -----------
$11,779,190 $10,290,048
=========== ===========
</TABLE>
4. INCOME PER SHARE OF COMMON STOCK
Income per share of common stock is based on the weighted average of
the number of shares outstanding during the periods, including common stock
equivalents of stock purchase warrants and stock options for both primary and
fully diluted earnings per share. Fully diluted income per share approximates
primary income per share.
5. SUBSEQUENT EVENT
On April 25, 1996, SpecTran Corporation and its subsidiaries
(collectively, the "Company") entered into a Loan and Security Agreement with
Fleet National Bank ("Fleet Bank") pursuant to which the Company can borrow up
to $22,000,000, subject to certain limitations based on the Company's accounts
receivable and inventory and the appraisal value of certain machinery, equipment
and real property owned by the Company. The loan consists of a $12,000,000
revolving note which is payable April 1, 1999, a $5,000,000 term note which is
payable in quarterly installments commencing January 1, 1997 and matures on
April 1, 2001 and a $5,000,000 mortgage note which is payable in quarterly
installments commencing July 1, 1997 and matures on April 1, 2006. Interest on
each note is payable quarterly commencing July 1, 1996. The Company has the
option from time to time to select the interest rate on the notes at either
Fleet Bank's prime rate or the LIBOR rate plus 1.5%, provided that under certain
circumstances, Fleet Bank may deem that the LIBOR rate is not available. The
loans are secured by all of the Company's assets, including real property.
At March 31, 1996, the Company had outstanding a $10 million loan under
a revolving credit agreement with Fleet. This loan was repaid from the proceeds
from the new $12 million revolving credit agreement, leaving $2 million of
borrowing available under the agreement.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Versus Three Months Ended March 31,
1995
Overview
SpecTran's revenue increased 69.1% to $13,472,523 and the Company
earned net income of $683,905, or $.12 per share in the first quarter of 1996
compared with revenues of $7,965,079 and net income of $82,914, or $.02 per
share in the first quarter of 1995. The improved revenues and earnings in 1996
resulted from continued strong market demand for the Company's standard and
specialty products and the results of Applied Photonic Devices, Inc., acquired
in May 1995.
Net Sales
Consolidated net sales of $13,472,523 for the three months ended March
31, 1996, were $5,507,444 (69.1%) higher than for the comparable period of 1995.
The increase was primarily due to strong market demand for the Company's
standard multimode fiber products. Also contributing to the increase in the
first quarter of 1996 were sales of Applied Photonic Devices, Inc., acquired by
the Company in May 1995.
Gross Profit
SpecTran earned a consolidated gross profit of $4,756,219 during the
1996 first quarter which was $1,862,643 (64.4%) higher than the comparable
period of 1995. The increase in gross profit was primarily due to the higher
sales level in the 1996 first quarter. The gross margin, as a percentage of
sales, decreased to 35.3% in 1996 from 36.3% in the first quarter of 1995. The
decrease in the margin was principally due to the lower margin earned by the APD
cabling operation which was acquired in May 1995. Royalties expense was 4.2% and
5.1% of SpecTran's sales during the first quarter of 1996 and 1995,
respectively, with a higher level of sales in the 1996 first quarter not subject
to royalties.
Selling and Administration
Consolidated selling and administrative expenses increased by $781,467
(38.4%) during the 1996 first quarter. The increase was primarily due to
expenses incurred by Applied Photonic Devices, Inc. in the 1996 March quarter.
As a percentage of sales these expenses decreased during 1996 to 20.9% from
25.6% in the first quarter of 1995.
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Research and Development
Consolidated spending for internal research and development increased
by $155,834 (20.7%) during the 1996 first quarter. As a percentage of sales,
consolidated research and development costs decreased to 6.7% in the first
quarter of 1996 versus 9.5% in the comparable period of 1995. The Company's
increased research and development spending is primarily in programs designed to
improve manufacturing cost and product performance in both the multimode and
single-mode product lines, to develop new special performance fiber products and
to develop alternative process technologies.
Other Income (Expense), net
Net other expense in the first quarter of 1996 was $84,509 compared to
net other income in the first quarter of 1995 of $38,956, a change of $123,465
(316.9%). Interest income decreased by $16,711 (19.7%) during the 1996 first
quarter primarily as a result of a lower investment balance than in the
comparable period of 1995. Interest expense increased during the first quarter
of 1996 by $84,385 (82.9%) as a result of increased debt levels.
Income Taxes
A tax provision of 27.5% of pre-tax income was provided in the first
quarter of 1996 compared to a tax provision of 41% of pre-tax income in the
first quarter of 1995. The estimated effective tax rate for 1996 of 27.5% is
lower than the statutory tax rate due to an anticipated reduction in the
valuation allowance for deferred tax assets due to the Company's belief that it
is more likely than not that the additional deferred tax asset will be realized
through the utilization of operating loss and tax credit carryforwards.
Net Income
Net income for the 1996 first quarter was $683,905 which was a 5.1%
return on sales. Net income for the same period in 1995 was $82,914, or 1.0% of
sales, an increase of $600,991 (724.8%).
Liquidity and Capital Resources
At March 31, 1996, the Company had net working capital of $14,118,775,
a current ratio of 3.4 to 1, and an aggregate of $1,037,046 in cash and cash
equivalents. In addition, the Company had total marketable securities of
$3,293,919 including $2,065,599 classified at long-term which could be converted
into cash if needed.
Capital expenditures in the first quarter of 1996 were $2,064,941, an
increase of $1,644,298 (390.9%) compared to capital expenditures in the first
quarter of 1995, for the purpose of increasing capacity and efficiency. The
Company is considering additional significant increases in capital expenditures
during the remainder of 1996 and is exploring debt financing necessary to
support these expenditures (see "Subsequent Event").
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The Company expects but can not assure that existing working capital,
borrowings, and expected positive cash flow should be sufficient to meet the
Company's cash needs in 1996.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 10.66 Loan and Security Agreement Among SpecTran Corporation,
SpecTran Specialty Optics Company, Applied Photonic
Devices, Inc., SpecTran Communication Fiber
Technologies, Inc. and Fleet National Bank dated April
25, 1996.
Exhibit 10.67 Mortgage By SpecTran Corporation in Favor of Fleet
National Bank dated April 25, 1996.
Exhibit 10.68 Pledge Agreement Among SpecTran Corporation, Fleet
National Bank and Fleet Investment Advisors dated April
25, 1996.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the quarter
which this report was filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPECTRAN CORPORATION
(Registrant)
Date: May 10, 1996 BY:
/s/ Glenn E. Moore
---------------------------
Glenn E. Moore
President and
Chief Executive Officer
Date: May 10, 1996 BY:
/s/ Bruce A. Cannon
---------------------------
Bruce A. Cannon
Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
----------- -----------
Exhibit 10.66 Loan and Security Agreement Among SpecTran Corporation,
SpecTran Specialty Optics Company, Applied Photonic
Devices, Inc., SpecTran Communication Fiber
Technologies, Inc. and Fleet National Bank dated April
25, 1996.
Exhibit 10.67 Mortgage By SpecTran Corporation in Favor of Fleet
National Bank dated April 25, 1996.
Exhibit 10.68 Pledge Agreement Among SpecTran Corporation, Fleet
National Bank and Fleet Investment Advisors dated April
25, 1996.
Exhibit 27 Financial Data Schedule
<PAGE> 1
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is dated as of April 25th, 1996 and is among
SPECTRAN CORPORATION ("SpecTran"), SPECTRAN SPECIALTY OPTICS COMPANY ("Optics"),
APPLIED PHOTONIC DEVICES, INC. ("Photonic"), SPECTRAN COMMUNICATION FIBER
TECHNOLOGIES, INC. ("Communication") and FLEET NATIONAL BANK (the "Lender").
Each of SpecTran, Optics, Photonic and Communication are sometimes referred to
as a "Borrower" and collectively the "Borrowers".
W I T N E S S E T H:
BACKGROUND. The Borrowers have requested the Lender to lend up to the sum of (i)
$12,000,000.00 on a revolving loan basis, (ii) $5,000,000.00 on a term loan
basis, and (iii) $5,000,000.00 on a mortgage loan basis (collectively the
"Loans") and the Lender is willing to do so upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises herein contained, and each
intending to be legally bound hereby, the parties agree as follows:
ARTICLE 1 DEFINITIONS
As used herein:
1.01 "Accounts," "Chattel Paper," "Contracts," "Documents," "Equipment,"
"Fixtures," "General Intangibles," "Goods," "Instruments," and "Inventory" shall
have the same respective meanings as are given to those terms in the Uniform
Commercial Code as presently adopted and in effect in the Commonwealth of
Massachusetts.
1.02 "Affiliate" means, as to any Person, each other Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
under common control with, such Person.
1.03 "Agreement" means this Loan and Security Agreement, as the same may from
time to time be amended or supplemented.
1.04 "Assets" means all assets on the consolidated balance sheets of the
Borrowers prepared in accordance with GAAP.
1.05 "Borrowing Base" means, at any time, the amount computed on the Borrowing
Base Certificate most recently delivered to, and accepted by, the Lender in
accordance with this Agreement and equal to the lesser of:
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(a) $12,000,000.00; or
(b) The aggregate of (i) one hundred percent (100%) of cash on deposit
with the Lender or the Lender's Affiliates; (ii) eighty percent (80%) of
Eligible Accounts, and (iii) thirty-three percent (33%) of Eligible Inventory;
provided, however, advances for Eligible Inventory may not exceed $2,000,000.00.
1.06 "Borrowing Base Certificate" means a fully completed certificate in the
form of Exhibit 1.06 attached hereto, certified by the chief financial
officer of SpecTran to be correct and delivered to, and accepted by, the Lender
pursuant to this Agreement.
1.07 "Business Day" means a day other than a Saturday, a Sunday, or a day on
which commercial banks in Worcester, Massachusetts are authorized to close.
1.08 "Capital Assets" means Assets that are required or permitted to be
depreciated or amortized in accordance with GAAP.
1.09 "Capital Expenditures" means, for the applicable period, the aggregate
amount of all expenditures for the acquisition, construction, improvement,
replacement or purchase of Capital Assets, including but not limited to,
expenditures funded under Capital Leases.
1.10 "Capital Leases" means capital leases, conditional sales contracts and
other title retention agreements relating to the purchase or acquisition of
Capital Assets.
1.11 "Closing" has the meaning given to such term in Section 3.01.
1.12 "Collateral" has the meaning given to such term in Section 4.01.
1.13 "Collateral Documents" means the Mortgage and the documents, whether
deliverable at or after the Closing, required under Article 4 and/or referenced
in Exhibit 3.01(m) attached hereto.
1.14 "Current Maturities of Long-Term Indebtedness" means the principal amount
of long-term Indebtedness paid during the twelve (12) months ended the date of
calculation, including, but not limited to, amounts required to be paid during
such period under Capital Leases.
1.15 "EBITDA" means, for each fiscal quarterly period (i.e. March 31, June 30,
September 30 and December 31), Operating Income plus Interest, taxes,
depreciation and amortization determined in accordance with GAAP.
1.16 "EBITDA Cumulative" means, Operating Income plus Interest, taxes,
depreciation and amortization determined on a rolling four (4) quarters basis in
accordance with GAAP.
1.17 "Eligible Account" means, at any time, an Account that conforms and
continues to
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conform to the following conditions:
(a) The Account arose from a bona fide outright sale of Goods by any
Borrower or from services performed by any Borrower, and such Goods have been
shipped to the appropriate account debtors or their designees (or the sale has
otherwise been consummated), or the services have been performed for the
appropriate account debtors;
(b) The Account is based upon an enforceable order or contract, written
or oral, for Goods shipped or held or for services performed, and the same were
shipped, held, or performed in accordance with such order or contract;
(c) The title of any Borrower to the Account and, except as to the
account debtor, to any Goods is absolute and is not subject to any prior
assignment, claim, lien, or security interest, except in favor of the Lender;
(d) The amount shown on the books of any Borrower and on any invoice or
statement delivered to the Lender is owing to any Borrower, less any partial
payment that has been made thereon by anyone;
(e) The Account shall be eligible only to the extent that it is not
subject to any claim of reduction, counterclaim, setoff, recoupment, or any
claim for credits, allowances, or adjustments by the account debtor because of
returned, inferior, or damaged Goods or unsatisfactory services, or for any
other reason;
(f) The account debtor has not returned or refused to retain, or
otherwise notified any Borrower of any dispute concerning, or claimed
nonconformity of, any of the Goods or services from the sale of which the
Account arose;
(g) The Account is not outstanding more than ninety (90) days from the
date of the invoice therefor, unless the Account is backed by a letter of credit
acceptable to the Lender;
(h) The Account does not arise out of a contract with, or order from,
an account debtor that, by its terms, forbids or makes void or unenforceable the
assignment by any Borrower to the Lender of the Account arising with respect
thereto;
(i) No Borrower has received any note, trade acceptance, draft, or
other Instrument with respect to, or in payment of, the Account, nor any Chattel
Paper with respect to the Goods giving rise to the Account;
(j) No Borrower has received any notice of the death of the account
debtor or a partner thereof; nor of the dissolution, termination of existence,
insolvency, business failure, appointment of a receiver for any part of the
property of, assignment for the benefit of creditors by, or the filing of a
petition in bankruptcy or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against, the account debtor. Upon the
receipt by any
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Borrower of any such notice, it will promptly give the Lender written advice
thereof;
(k) The account debtor does not have a principal place of business
outside of the United States, unless the Account is backed by a letter of credit
or foreign credit insurance acceptable to the Lender;
(l) The account debtor is not a Subsidiary or other Affiliate of any
Borrower; and
(m) The Lender has not deemed such account ineligible because of
reasonable uncertainty about the creditworthiness of the account debtor or
because the Lender otherwise reasonably considers the collateral value thereof
to the Lender to be impaired or its ability to realize such value to be
insecure.
In the event of any dispute, under the foregoing criteria, about
whether an Account is or has ceased to be an Eligible Account, the commercially
reasonable decision of the Lender shall control.
1.18 "Eligible Inventory" means Inventory consisting of raw materials and
finished goods, valued at the lower of cost or fair market value as determined
in accordance with GAAP, which is owned and held by any Borrower at its place of
business identified on Exhibit 5.01(a) attached hereto, and which is
subject to a valid and first priority, fully perfected security interest in
favor of the Lender, free of all security interests or liens of any other
Person, and which the Lender determines to be acceptable for including in the
Borrowing Base. The following Inventory will not, in any event, constitute
Eligible Inventory:
(a) Work-in-process Inventory;
(b) Inventory which is obsolete, not in good condition, not of
merchantable quality or saleable in the ordinary course of the Borrowers'
businesses or which is subject to defects which would affect its market value;
and
(c) Inventory which has been consigned to Persons other than the
Borrowers.
1.19 "Event of Default" has the meaning provided in Section 7.01.
1.20 "Financial Statements" means the audited, consolidated (i) cash flow
statements of the Borrowers, (ii) income statements of the Borrowers, and (iii)
balance sheets of the Borrowers as of December 31, 1994 and December 31, 1995
and notes thereto certified by KPMG Peat Marwick to present fairly the
consolidated financial position and results of operations of the Borrowers at
such dates and for such periods in accordance with GAAP.
1.21 "Fixed Charge Coverage Ratio" means the ratio of EBITDA Cumulative minus
cash taxes and Capital Expenditures for the applicable four (4) quarters period
to Interest for the applicable four (4) quarters period plus Current Maturities
of Long-Term Indebtedness. For this definition
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only, Capital Expenditures will be deemed to be $5,000,000.00 for the fiscal
year ending December 31, 1996 and thereafter.
1.22 "GAAP" means generally accepted accounting principles applied consistently
with such changes or modifications thereto as may be approved in writing by the
Lender.
1.23 "Indebtedness" means, as to any Borrower:
(a) Obligations for borrowed money;
(b) Obligations representing the deferred purchase price of property or
services (other than accounts payable arising in the ordinary course of any
Borrower's business payable on terms customary in the trade);
(c) Obligations, whether or not assumed, secured by liens or payable
out of the proceeds of production from property now or hereinafter owned or
acquired by any Borrower;
(d) Obligations which are evidenced by notes, acceptances or other
instruments; and
(e) Obligations under Capital Leases.
1.24 "Intellectual Property" means trademarks, service marks, trade names, trade
styles, logos, goodwill, trade secrets, patents, and licenses acquired under any
statutory, common law or registration process in any state or nation at any
time, or under any agreement executed with any person or entity at any time. The
term "license" refers not only to rights granted by agreement from the owner of
patents, trademarks, service marks and the like, but also to rights granted by a
franchiser under a franchise or similar agreement. The foregoing enumeration is
not intended as a limitation of the meaning of the word "license".
1.25 "Interest" means, for the applicable period, interest paid or payable,
including but not limited to, interest paid or payable on Indebtedness
determined in accordance with GAAP.
1.26 "Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any government or political subdivision or
agency thereof, or of any court or similar entity established by any thereof.
1.27 "Leverage Ratio" means the ratio of Liabilities to Tangible Net Worth.
1.28 "Liabilities" means all liabilities that, in accordance with GAAP, should
be classified as liabilities on a consolidated balance sheet of the Borrowers in
accordance with GAAP.
1.29 "Mortgage" means that certain Mortgage covering SpecTran's real property in
Sturbridge, Massachusetts for the benefit of the Lender, as from time to time
supplemented or amended.
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1.30 "Mortgage Note" means the Mortgage Note referred to in Section 2.06 hereof.
1.31 "Net Income" means, for the applicable period, net income determined in
accordance with GAAP.
1.32 "Notes" means the Revolving Note, the Term Note and the Mortgage Note.
1.33 "Obligations" is intended to be used in its most comprehensive sense and
means the obligations of the Borrowers:
(a) To pay the principal of, and interest on, the Notes in accordance
with the terms thereof and to satisfy all other liabilities to the Lender,
whether hereunder or otherwise, whether now existing or hereafter incurred,
matured or unmatured, direct or contingent, joint or several, including any
extensions, modifications, renewals thereof and substitutions therefor;
(b) To repay to the Lender all amounts advanced by the Lender hereunder
or otherwise on behalf of any Borrower, including, but without limitation,
advances for principal or interest payments to prior secured parties,
mortgagees, or lienors, or for taxes, levies, insurance, rent, or repairs to, or
maintenance or storage of, any of the Collateral; and
(c) To reimburse the Lender, on demand, for all of the Lender's
expenses and costs, including without limitation the reasonable fees and
expenses of its counsel, in connection with the preparation, administration,
amendment, modification, or enforcement of this Agreement and the documents
required hereunder, including, without limitation, any proceeding brought, or
threatened, to enforce payment of any of the obligations referred to in the
foregoing paragraphs (a) and (b).
1.34 "Operating Income" means, for the applicable period, Net Income less the
sum of (i) extraordinary and nonrecurring gains and (ii) gains from the sale of
Capital Assets plus the sum of (x) extraordinary and nonrecurring losses and (y)
losses from the sale of Capital Assets.
1.35 "Person" means any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, joint venture, court,
or government or political subdivision or agency thereof.
1.36 "Permitted Liens" means:
(a) Liens for taxes, assessments, statutory obligations or similar
charges, incurred in the ordinary course of business, that are not yet due and
payable or if overdue being contested in good faith by appropriate and lawful
proceedings, so long as levy and execution thereon have been stayed and continue
to be stayed and they do not, in the aggregate, materially detract from the
value of the property of any Borrower or materially impair the operation of any
Borrower's business;
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(b) Pledges or deposits made in the ordinary course of business to
secure payment of worker's compensation, or to participate in any fund in
connection with worker's compensation, unemployment insurance, old-age pensions,
or other social security programs;
(c) Liens of mechanics, materialmen, warehousemen, carriers, or other
like liens, securing obligations incurred in the ordinary course of business
that are not yet due and payable;
(d) Encumbrances consented to by the Lender in writing including zoning
restrictions, easements, or other restrictions on the use of real property, none
of which materially impairs the use of such property by any Borrower in the
operation of its business, and none of which is violated in any material respect
by existing or proposed structures or land use;
(e) Purchase money security interests granted to secure the purchase
price of assets, the purchase of which does not violate the terms of this
Agreement; and
(f) Liens consented to by the Lender in writing.
1.37 "Records" means correspondence, memoranda, tapes, discs, papers, books and
other documents, or transcribed information of any type, whether expressed in
ordinary or machine readable language.
1.38 "Revolving Note" means the Revolving Note referred to in Section 2.04
hereof.
1.39 "Stockholders' Equity" means the aggregate of the following accounts on the
consolidated balance sheet of the Borrowers prepared in accordance with GAAP (i)
the par or stated value of all outstanding capital stock, (ii) capital surplus,
and (iii) retained earnings.
1.40 "Subsidiary" means any Affiliate (i) that is directly, or indirectly
through one or more intermediaries, controlled by any Borrower or (ii) of which
not less than 50% of the voting capital stock of which is owned, directly or
through one or more intermediaries, by any Borrower.
1.41 "Tangible Net Worth" means Stockholders' Equity, less the sum of (i) any
surplus resulting from any write up of Assets, (ii) goodwill, including any
amounts however designated on the consolidated balance sheet of the Borrowers
representing the excess of the purchase price paid for assets or stock acquired
over the value assigned thereto on the books of any Borrower, (iii) patents,
trademarks, trade names, copyrights and licenses, (iv) any amount at which
shares of capital stock of any Borrower appears as an asset on the consolidated
balance sheet of the Borrowers, (v) loans and advances to Affiliates,
stockholders, directors, officers or employees, (vi) deferred expenses, and
(vii) any other amount in respect of an intangible (except for the tax
intangible related to FASB 109) that should be classified as an asset on a
consolidated balance sheet of the Borrowers in accordance with GAAP.
1.42 "Term Note" means the Term Note referred to in Section 2.05 hereof.
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1.43 Accounting. Accounting terms used and not otherwise defined in this
Agreement have the meanings determined by, and all calculations with respect to
accounting or financial matters unless otherwise provided herein shall be
computed in accordance with, GAAP.
ARTICLE 2 THE LOAN
2.01 General Terms.
Subject to the terms hereof, the Lender will lend the Borrowers the
principal sum of (i) $12,000,000.00 on a revolving loan basis, (ii)
$5,000,000.00 on a term loan basis, and (iii) $5,000,000.00 on a mortgage loan
basis.
2.02 The Notes.
At the Closing, the Borrowers will execute and deliver to the Lender the
Revolving Note, the Term Note and the Mortgage Note.
2.03 Disbursement.
The Lender will credit the proceeds of (i) the Revolving Note to the Lender
to pay the existing Indebtedness to the Lender in full and thereafter, from time
to time and subject to the terms hereof, to the Borrowers' deposit account
identified in Exhibit 2.03 attached hereto, (ii) the Term Note as set forth in
Exhibit 2.05 attached hereto, and (iii) the Mortgage Note as set forth in
Exhibit 2.06 attached hereto.
2.04 Revolving Note.
Subject to the terms hereof, the Lender will lend the Borrowers, from time
to time until March 31, 1999 (the "Termination Date") or the occurrence of an
Event of Default, whichever occurs first, such sums in integral multiples of
$50,000.00 as SpecTran may request by reasonable same day notice to the Lender,
received by the Lender not later than 12:00 p.m. of such day, but which shall
not exceed, in the aggregate principal amount at any one time outstanding, the
Borrowing Base. The Termination Date may be extended by the Lender, as
determined in its sole and absolute discretion, by written notice to any
Borrower. The Borrowers may borrow, repay without penalty or premium (except for
repayments of principal subject to LIBOR interest rates prior to the expiration
of the Index Period as more fully set forth in the Notes) and reborrow
hereunder, from the date of this Agreement until the Termination Date or the
occurrence of an Event of Default, whichever occurs first. It is the intention
of the parties that the outstanding principal amount of the Revolving Note will
not exceed the then existing Borrowing Base, and if, at any time, an excess
shall for any reason exist, the full amount of such excess, together with
accrued and unpaid interest thereon, shall be immediately due and payable in
full.
2.05 Term Note.
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Subject to the terms hereof, the Lender agrees to lend to the Borrowers
on a term loan basis the amount of $5,000,000.00, the payment terms to be in
accordance with the provisions of the Term Note. Advances under the Term Note
will only be made in accordance with and subject to the conditions contained in
Exhibit 2.05 attached hereto. The outstanding principal balance of the
Term Note is to be paid in equal monthly installments of $83,334.00. The Term
Note is to be due and payable in any event on April 1, 2001. In addition, the
Borrowers will be required to prepay the Term Note to the extent of the
Borrowers' "Excess Cash Flow" as defined in the Term Note. The outstanding
principal balance of the Term Note shall at no time exceed seventy-five percent
(75%) of the auction value of the Borrowers' Equipment, and if, at any time, an
excess for any reason shall exist, the full amount of such excess, together with
accrued and unpaid interest thereon, shall be immediately due and payable in
full.
2.06 Mortgage Note.
Subject to the terms hereof, the Lender agrees to lend to the Borrowers
on a mortgage loan basis the amount of $5,000,000.00, the payment terms to be in
accordance with the provisions of the Mortgage Note. The Mortgage Note is to be
amortized over twenty (20) years and due and payable in any event on April 1,
2006. Advances under the Mortgage Note will only be made in accordance with and
subject to the conditions contained in Exhibit 2.06 attached hereto. The
outstanding principal balance of the Mortgage Note shall at no time exceed
seventy-five percent (75%) of the fair market value of the real estate
encumbered by the Mortgage and, if, at any time, an excess for any reason shall
exist, the full amount of such excess, together with accrued and unpaid interest
thereon, shall be immediately due and payable in full.
2.07 Interest Rate and Payments of Interest.
Interest on the principal balances of the Loans from time to time
outstanding shall accrue at the rates and be payable as set forth in the Notes.
2.08 Payment to the Lender.
The Borrowers have designated the deposit account identified in Exhibit
2.03 attached hereto as the account for all payments under the Notes and
hereunder. Notwithstanding such designation, the Lender may charge against any
deposit account of any Borrower all or any part of any amount due under the
Notes and hereunder.
2.09 The Facility Fee.
From and after the date hereof until the Termination Date, the Borrower
shall pay an aggregate Facility Fee of one half of one percent (0.50%) per annum
on the average daily undisbursed amount of the loan evidenced by the Revolving
Note. The Facility Fee shall be payable quarterly in arrears on the first
Business Day of each April, July, October and January.
2.10 The Commitment Fee.
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At the Closing, the Borrowers shall pay an aggregate commitment fee to
the Lender in the amount of $60,000.00.
ARTICLE 3 CONDITIONS PRECEDENT
The obligation of the Lender to make the Loans is subject to the following
conditions precedent:
3.01 Documents Required for the Closing.
The Borrowers shall have delivered to the Lender, prior to the initial
disbursement of the Loans (the "Closing"), the following:
(a) The Revolving Note, the Term Note, and the Mortgage Note each duly
executed by the Borrowers;
(b) The Mortgage, which shall have been duly executed by all proper
parties and recorded at the appropriate recording office, with all recording
fees therefor paid;
(c) The Financial Statements;
(d) The financing statements and other instruments required by Article
4;
(e) A copy, certified as of the date of the Closing, of votes of the
boards of directors of each Borrower and shareholders (except for SpecTran) of
each Borrower, authorizing the execution, delivery, and performance of this
Agreement, the Notes, the Collateral Documents, and each other document to be
delivered pursuant hereto;
(f) A copy, certified as of the date of the Closing, of the bylaws of
each Borrower;
(g) A certificate (dated the date of the Closing) of the corporate
clerk and/or secretary of each Borrower as to the incumbency and signatures of
the officers of each Borrower signing this Agreement, the Notes, the Collateral
Documents, and each other document to be delivered pursuant hereto;
(h) A copy, certified as of the most recent date practicable by the
secretary of the state of incorporation, of the charter of each Borrower, and
all amendments thereto, together with a certificate (dated the date of the
Closing) of the corporate clerk and/or secretary of each Borrower to the effect
that such charter has not been further amended since the date of the aforesaid
certification of the secretary of the state of incorporation;
(i) A certificate of good standing dated as of the most recent date
practicable, issued by the secretary of the state of incorporation as to the
legal existence, charter, and good legal standing of each Borrower;
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(j) Certificates, as of the most recent dates practicable, of the
secretary of each state in which each Borrower is qualified as a foreign
corporation and, if applicable, of the department of revenue or taxation of each
of such states, as to the good tax standing of each Borrower;
(k) A written opinion of the law firm of Hackmyer & Nordlicht, legal
counsel for the Borrowers, dated the date of the Closing and addressed to the
Lender, in form and content satisfactory to the Lender and its counsel;
(l) A duly executed Borrowing Base Certificate; and
(m) Each of the agreements and documents referred to in that certain
Closing Agenda, a copy of which is attached hereto as Exhibit 3.01(m).
3.02 Documents Required for Subsequent Disbursements.
At the time of, and as a condition to, any disbursement of any part of
the Loans to be made by the Lender subsequent to the Closing, the Lender may
require the Borrowers to deliver to the Lender a certificate, dated the date on
which any such disbursement is to be made, signed by the chief financial officer
of SpecTran and to the effect that:
(i) As of the date thereof, no Event of Default has occurred and is
continuing, and no event has occurred and is continuing that, but for the giving
of notice or passage of time or both, would be an Event of Default;
(ii) No material adverse change has occurred in the business
prospects, financial condition, or results of operations of any Borrower since
the date of the Financial Statements; and
(iii) Each of the representations and warranties contained herein
is true and correct in all respects as if made on and as of the date of such
disbursement.
3.03 Certain Events.
At the time of, and as a condition to, the Closing and each
disbursement of any part of the Loans to be made by the Lender at or subsequent
to the Closing:
(a) No Event of Default shall have occurred and be continuing, and no
event shall have occurred and be continuing that, with the giving of notice or
passage of time or both, would be an Event of Default;
(b) No material adverse change shall have occurred in the financial
condition, or results of operations of any Borrower since the dates of the
Financial Statements; and
(c) All of the Collateral Documents shall have remained in full force
and effect.
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3.04 Legal Matters.
At the time of the Closing and each subsequent disbursement, all legal
matters incidental thereto shall be reasonably satisfactory to Mirick,
O'Connell, DeMallie & Lougee, legal counsel to the Lender.
ARTICLE 4 COLLATERAL SECURITY
4.01 Composition of the Collateral.
The property in which a security interest is granted pursuant to the
provisions of Sections 4.02 and 4.03 is herein collectively called the
"Collateral". The Collateral, together with all other property of any Borrower
of any kind held by the Lender, shall stand as one general, continuing
collateral security for all Obligations and may be retained by the Lender until
all Obligations have been satisfied in full.
4.02 Rights in Property Held by the Lender.
As security for the prompt satisfaction of all Obligations, each
Borrower hereby assigns, transfers, and sets over to the Lender all of its
right, title, and interest in and to, and grants the Lender a lien on and a
security interest in, all amounts that may be owing, from time to time, by the
Lender to any Borrower in any capacity, including, but without limitation, any
balance or share belonging to any Borrower, or any deposit or other account with
the Lender, which lien and security interest shall be independent of, and in
addition to, any of the Lender's right of set-off.
4.03 Rights in Property Held Either by any Borrower or by the Lender.
As further security for the prompt satisfaction of all of the
Obligations, each Borrower hereby assigns to the Lender all of its right, title
and interest in and to, and grants the Lender a lien upon and a continuing
security interest in, all of the following, wherever located, whether now owned
or hereafter acquired, together with all replacements therefor and proceeds
(including, but without limitation, insurance proceeds) and products thereof:
(a) All Inventory;
(b) All Accounts, Contracts, accounts receivable, contract rights, and
Chattel Paper, regardless of whether or not they constitute proceeds of other
Collateral;
(c) All General Intangibles, regardless of whether or not they
constitute proceeds of other Collateral, including, without limitation, all
rights (which the Lender may exercise or not as it in its sole discretion may
determine) to acquire or obtain Goods and/or services with respect to the
manufacture, processing, storage, sale, shipment, delivery or
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installation of any Inventory or other Collateral;
(d) All rights to payment of any insurance proceeds or awards for
damages in connection with any condemnations or takings of any interest in and
to any real or personal property, wherever located, or any conveyance in lieu
thereof;
(e) All products of and accessions to any of the Collateral;
(f) All liens, guaranties, securities, rights, remedies and
privileges pertaining to any of the Collateral, including the right of stoppage
in transit;
(g) All obligations owing to any Borrower of every kind and
nature, and all choses in action;
(h) All tax refunds of every kind and nature to which any Borrower
is now or hereafter may become entitled no matter however arising, including,
without limitation, loss carry back refunds;
(i) All Intellectual Property, goodwill, trade secrets, computer
programs, customer lists, trade names, trademarks and patents;
(j) All Chattel Paper, Documents and Instruments (whether
negotiable or non-negotiable, regardless of their being attached to Chattel
Paper);
(k) All Equipment, including without limitation machinery,
furniture, motor vehicles, Fixtures and all other goods used in the conduct of
the business of any Borrower;
(l) All proceeds of Collateral of every kind and nature and in
whatever form, including, without limitation, both cash and non-cash proceeds
resulting or arising from the rendering of services by any Borrower or the sale
or other disposition by any Borrower of the Inventory or other Collateral;
(m) All books and Records relating to the conduct of any
Borrower's business including, without in any way limiting the generality of the
foregoing, those relating to its Accounts; and
(n) All deposit accounts maintained by any Borrower with any bank,
trust company, investment firm or fund, or any similar institution or
organization.
4.04 Priority of Liens.
The foregoing liens shall be first priority liens.
4.05 Financing Statements.
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(a) Each Borrower will:
(i) Execute such financing statements (including amendments thereto
and continuation statements thereof) in form satisfactory to the Lender as the
Lender, from time to time, may specify;
(ii) Pay, or reimburse the Lender for paying, all costs and taxes
of filing or recording the same in such public offices as the Lender may
designate; and
(iii) Take such other steps as the Lender, from time to time, may
direct, including the noting of the Lender's lien on the Collateral and on any
certificates of title therefor, all to perfect to the satisfaction of the Lender
the Lender's interest in the Collateral.
(b) In addition to the foregoing, and not in limitation thereof:
(i) A carbon, photographic, or other reproduction of this Agreement
shall be sufficient as a financing statement and may be filed in any appropriate
office in lieu thereof; and
(ii) To the extent lawful, each Borrower hereby appoints the Lender
as its attorney-in-fact (without requiring the Lender to act as such) to execute
any financing statement in the name of any Borrower, and to perform all other
acts that the Lender deems appropriate to perfect and continue its security
interest in, and to protect and preserve, the Collateral.
4.06 Mortgagees', Landlords', and Warehousemen's Waivers.
Each Borrower will, within twenty (20) days after any request of the
Lender, use its best efforts to obtain from any mortgagee of real estate owned
by any Borrower, any landlord of premises leased by any Borrower, and any
warehouseman or other bailee on whose premises any of the Collateral may be
located to execute and deliver to the Lender instruments, in form and substance
satisfactory to the Lender, by which such mortgagee, landlord or warehouseman or
other bailee waives its rights, if any, in and to all Goods comprising a part of
the Collateral.
ARTICLE 5 REPRESENTATIONS AND WARRANTIES
5.01 Original.
To induce the Lender to enter into this Agreement, each Borrower
represents and warrants to the Lender as follows:
(a) Each Borrower is a corporation duly organized, validly existing,
and in good standing under the Laws of the state of its incorporation; no
Borrower has any Subsidiaries, except as set forth in Exhibit 5.01(a)
attached hereto; each Borrower has the lawful power to own
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its properties and to engage in the business it conducts, and is duly qualified
and in good standing as a foreign corporation in the jurisdictions wherein the
nature of the business transacted by it or property owned by it makes such
qualification necessary; the states in which each Borrower is qualified to do
business are set forth in Exhibit 5.01(a) attached hereto; the identity
of each shareholder of each Borrower (except for SpecTran) and the number of
shares owned by each is set forth in Exhibit 5.01(a); the addresses of
all places of business of each Borrower are as set forth in Exhibit
5.01(a);
(b) No Borrower is directly or indirectly controlled by, or acting on
behalf of, any Person which is an "Investment Company", within the meaning of
the Investment Company Act of 1940, as amended;
(c) No Borrower is in default with respect to any of its existing
Liabilities, and the making and performance of this Agreement, the Notes, and
the Collateral Documents will not (immediately or with the passage of time, the
giving of notice, or both):
(i) Violate the charter or by-laws of any Borrower, or violate any
Laws or result in a default under any contract, agreement, or instrument to
which any Borrower is a party or by which any Borrower or its property is bound;
or
(ii) Result in the creation or imposition of any security interest
in, or lien or encumbrance upon, any of the Assets of any Borrower, except in
favor of the Lender;
(d) Each Borrower to the extent applicable to it, has the power and
authority to enter into and perform this Agreement, the Notes and the Collateral
Documents, and to incur the obligations herein and therein provided for, and has
taken all actions necessary to authorize the execution, delivery, and
performance of this Agreement, the Notes, and the Collateral Documents;
(e) This Agreement, the Notes, and the Collateral Documents are, or
when delivered will be, valid, binding, and enforceable in accordance with their
respective terms, except to the extent enforceability is subject to the exercise
of judicial discretion in accordance with general equitable principles and to
applicable bankruptcy, insolvency, reorganization, moratorium or other laws for
the relief of debtors heretofore or hereafter enacted;
(f) Except as disclosed on Exhibit 5.01(f) attached hereto,
there is no pending order, notice, claim (other than claims arising in the
ordinary course of business for amounts not exceeding $25,000.00 individually or
$100,000.00 in the aggregate), litigation, proceeding, or investigation against
or affecting any Borrower, whether or not covered by insurance;
(g) Each Borrower has good and marketable title to all of its Assets,
none of which is subject to any security interest, encumbrance or lien, or claim
of any third Person, except for liens in favor of the Lender and Permitted
Liens;
(h) The Financial Statements, including any schedules and notes
pertaining thereto,
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have been prepared in accordance with GAAP, and fully and fairly present the
financial condition of the Borrowers at the dates thereof and the results of
operations for the periods covered thereby, and there have been no material
adverse changes in the financial condition or business of any Borrower from
December 31, 1995 to the date hereof;
(i) As of the date hereof, no Borrower has Indebtedness of any nature,
except as disclosed on Exhibit 5.01(i) attached hereto;
(j) Each Borrower has filed all federal, state, and local tax returns
and other reports required by any applicable Laws to have been filed prior to
the date hereof, has paid or caused to be paid all taxes, assessments, and other
governmental charges that are due and payable prior to the date hereof, and has
made adequate provision for the payment of such taxes, assessments, or other
charges accruing but not yet payable; no Borrower has knowledge of any
deficiency or additional assessment in a materially important amount in
connection with any taxes, assessments, or charges not provided for on its
books;
(k) Except to the extent that the failure to comply would not
materially interfere with the conduct of the business of any Borrower, each
Borrower has complied with all applicable Laws with respect to (i) any
restrictions, specifications, or other requirements pertaining to products that
it manufactures or sells or to the services it performs; (ii) the conduct of its
business; and (iii) the use, maintenance, and operation of the real and personal
properties owned or leased by it in the conduct of its business;
(l) No representation or warranty by or with respect to any Borrower
contained herein or in any certificate or other document furnished by any
Borrower pursuant hereto contains any untrue statement of a material fact or
omits to state a material fact necessary to make such representation or warranty
not misleading in light of the circumstances under which it was made;
(m) Each consent, approval or authorization of, or filing, registration
or qualification with, any Person required to be obtained or effected by any
Borrower in connection with the execution and delivery of this Agreement, the
Notes, and the Collateral Documents or the undertaking or performance of any
obligation hereunder or thereunder has been duly obtained or effected;
(n) To the best of each Borrower's knowledge, the Borrowers and all
other parties to all material leases, contracts, and other commitments to which
any Borrower is a party have all complied in all material respects with the
provisions of such leases, contracts, and other commitments and no party is in
default under any thereof and no event has occurred which, but for the giving of
notice or the passage of time, or both, would constitute a default;
(o) No Borrower has made any agreement or taken any action which may
cause anyone to become entitled to a commission or finder's fee as a result of
or in connection with the making of the Loans;
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(p) Each Borrower's federal tax returns for all years of operation,
including the year ended December 31, 1994, have been filed with the Internal
Revenue Service and have not been challenged;
(q) Any Employee Pension Benefit Plans, as defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), of any Borrower
meet, as of the date hereof, the minimum funding standards of 29 U.S.C.A. 1082
(Section 302 of ERISA), and no Reportable Event or Prohibited Transaction, as
defined in ERISA, has occurred with respect to any Employee Benefit Plans, as
defined in ERISA, of any Borrower;
(r) SpecTran has filed all registration statements, forms and other
reports with the Securities and Exchange Commission required by any applicable
Laws to have been filed prior to the date hereof; and
(s) The liens and security interests created pursuant to Sections 4.02
and 4.03 are in all cases first priority liens, except for Permitted Liens.
5.02 Survival.
All of the representations and warranties set forth in Section 5.01
shall survive until all Obligations are satisfied in full and there remain no
outstanding commitments hereunder.
ARTICLE 6 COVENANTS OF THE BORROWERS
6.01 Affirmative Covenants.
Each Borrower does hereby covenant and agree with the Lender that, so
long as any of the Obligations remain unsatisfied or any commitments hereunder
remain outstanding, it will comply at all times with the following affirmative
covenants:
(a) The Borrowers will use the proceeds of the Loans only for the
purposes set forth in Exhibit 6.01(a), and will furnish the Lender such
evidence as it may reasonably require with respect to such use;
(b) SpecTran will furnish the Lender:
(1) As soon as available, but in any event within thirty (30) days
after the close of each calendar month in each fiscal year: (i) consolidated and
consolidating statements of cash flows of the Borrower for such month, (ii)
consolidated and consolidating income statements of the Borrowers for such
month, and (iii) consolidated and consolidating balance sheets of the Borrowers
as of the end of such month-all such statements to be in reasonable detail,
including all supporting schedules and comments, subject to normal year-end
audit adjustments and certified
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by the chief financial officer of SpecTran to have been prepared in accordance
with GAAP and to present fairly the financial position and results of operations
of the Borrowers;
(2) As soon as available, but in any event within forty-five (45)
days after the close of each of the initial three quarterly accounting periods
in each fiscal year (i.e. March 31, June 30 and September 30) a copy of
SpecTran's Form 10-Q, and management's: (i) consolidated and consolidating
statements of cash flows of the Borrowers for such quarter, (ii) consolidated
and consolidating income statements of the Borrowers for such quarter, and (iii)
consolidated and consolidating balance sheets of the Borrowers as of the end of
such quarter-all such statements to be in reasonable detail, including all
supporting schedules and comments, subject to normal year-end audit adjustments
and certified by the chief financial officer of SpecTran to have been prepared
in accordance with GAAP and to present fairly the financial position and results
of operations of the Borrowers;
(3) As soon as available, but in any event within ninety (90) days
after the close of each fiscal year, a copy of SpecTran's Form 10-K and Annual
Report (including the audited consolidated financial statements prepared by KPMG
Peat Marwick or another independent certified public accountant selected by
SpecTran and reasonably acceptable to the Lender) and management's: (i)
consolidated and consolidating statements of cash flows for the Borrowers for
such fiscal year, (ii) consolidated and consolidating income statements of the
Borrowers for such fiscal year, and (iii) consolidated and consolidating balance
sheets of the Borrowers as of the end of such fiscal year-all such statements to
be in reasonable detail, including all supporting schedules and comments; the
consolidated statements and balance sheets included in the Form 10-K and Annual
Report to be audited by KPMG Peat Marwick or another independent certified
public accountant selected by SpecTran and reasonably acceptable to the Lender,
and certified by such accountants to have been prepared in accordance with GAAP
and to present fairly the financial position and results of operations of the
Borrower; in addition, SpecTran will obtain from such independent certified
public accountants and deliver to the Lender, within ninety (90) days after the
close of each fiscal year, their written statement that in making the
examination necessary to their certification they have obtained no knowledge of
any Event of Default by the Borrowers, or disclosing all Events of Default of
which they have obtained knowledge (it being understood and agreed by the Lender
that in making their examination, such accountants shall not be required to go
beyond the bounds of generally accepted auditing procedures for the purpose of
certifying financial statements); the Lender shall have the right, from time to
time to discuss the affairs of any Borrower directly with such independent
certified public accountants after notice to SpecTran and opportunity of
SpecTran to be represented at any such discussions;
(4) Contemporaneously with the year-end financial report required
by the foregoing paragraph (3), a copy of the management letter issued to
SpecTran by KPMG Peat Marwick or another certified public accountant selected by
SpecTran and reasonably acceptable to the Lender;
(5) Contemporaneously with each quarterly and year-end financial
report required by the foregoing paragraphs (2) and (3) a certificate of the
chief financial officer of SpecTran
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substantially in the form of Exhibit 6.01(b)(5) attached hereto stating
that he has individually reviewed the provisions of this Agreement and that a
review of the activities of the Borrowers during such year or quarterly period,
as the case may be, has been made by him or under his supervision, with a view
to determining whether the Borrowers have fulfilled all of their obligations
under this Agreement, and that, to the best of his knowledge, the Borrowers have
observed and performed each undertaking contained in this Agreement and are not
in default in the observance or performance of any of the provisions hereof or,
if the Borrowers shall be so in default, specifying all such defaults and events
of which he may have knowledge;
(6) As soon as available but in no event later than thirty (30)
days prior to the commencement of the next fiscal year, management prepared
financial projections, including (i) consolidated and consolidating statements
of cash flow, (ii) consolidated and consolidating income statements, and (iii)
consolidated and consolidating balance sheets;
(7) Promptly after the sending or making available or filing of the
same, copies of all reports, proxy statements, and financial statements that any
Borrower sends or makes available to its stockholders and all registration
statements and reports that any Borrower files with the Securities and Exchange
Commission or any successor Person; and
(8) Within twenty (20) days after the end of each calendar month
(and at any additional time in the discretion of the Lender) a Borrowing Base
Certificate as of the end of such month (or as of a date not more than three (3)
days prior to the date of any such additional Borrowing Base Certificate). Each
Borrowing Base Certificate will include without limitation, in such form and
detail as shall be satisfactory to the Lender (i) an aging, as of the end of
such month of the then Eligible Accounts and all other Accounts of the
Borrowers, (ii) a listing of Eligible Inventory, showing the amount, size,
grade, manufacturer, and cost of each item or group thereof and (iii) a
statement reflecting all amounts on deposit by any Borrower with the Lender and
the Lender's Affiliates. Each Borrowing Base Certificate shall be effective only
as accepted by the Lender (and with such revisions, if any, as the Lender may
require as a condition to such acceptance), such acceptance to be presumed after
receipt of such Borrowing Base Certificate unless the Lender otherwise notifies
the Borrowers, whether thereafter, theretofore, or contemporaneously therewith;
(c) Each Borrower will maintain its Inventory, Equipment, real estate,
and other properties in good condition and repair (normal wear and tear
excepted), and will pay and discharge or cause to be paid and discharged, when
due, the cost of repairs to, or maintenance of, the same to the extent it is
commercially reasonable for such repairs to be made or maintenance to be
performed, and will pay or cause to be paid in a timely manner all rental or
mortgage payments due on such real estate. Each Borrower hereby agrees that, in
the event it fails to pay or cause to be paid any such payment, it will promptly
notify the Lender thereof, and the Lender may, in its discretion, do so and on
demand be reimbursed therefor by the Borrowers;
(d) Each Borrower will maintain public liability insurance and fire and
extended coverage insurance on all assets that are of a character usually
insured by corporations engaged
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in the same or similar businesses, all in form and amount sufficient to
indemnify each Borrower for 100% of the appraised value of any such asset lost
or damaged subject to any deductible customary in the industry. Each Borrower
will cause all such insurance policies to be payable to the Lender. Such
policies shall contain a provision whereby they cannot be cancelled except after
thirty (30) days' written notice to the Lender. Each Borrower will furnish to
the Lender such evidence of insurance as the Lender may reasonably require. Each
Borrower hereby agrees that, in the event it fails to pay or cause to be paid
the premium on any such insurance when due, the Lender, in its discretion, may
do so and be reimbursed by the Borrowers therefor. Each Borrower hereby assigns
to the Lender any returned or unearned premiums that may be due any Borrower
upon cancellation by the insurer of any such policy for any reason whatsoever
and direct any such insurer to pay the Lender any amounts so due. The Lender is
hereby appointed the attorney-in-fact of each Borrower (without requiring the
Lender to act as such) to endorse any check which may be payable to any
Borrower, to collect any premiums or the proceeds of such insurance (other than
proceeds of public liability insurance) and any amount so collected may be
applied by the Lender toward satisfaction of any of the Obligations whether due
or not yet due;
(e) Each Borrower will pay when due, all taxes, assessments, and
charges or levies imposed upon it or on any of its property or which it is
required to withhold and pay except where contested in good faith by appropriate
proceedings with adequate reserves therefor having been set aside on its books;
provided, however, that each Borrower shall pay or cause to be paid all such
taxes, assessments, charges or levies forthwith whenever foreclosure on any lien
that may have attached (or security therefor) appears imminent;
(f) The Borrowers will maintain on a consolidated basis:
(i) a Fixed Charge Coverage Ratio of at least 1.25:1.00 to be
measured quarterly (i.e. March 31, June 30, September 30, December
31), commencing with the fiscal quarter ending December 31, 1996;
(ii) Tangible Net Worth of at least $18,500,000.00 as of the
Closing; thereafter Tangible Net Worth must increase as of December
31 of each fiscal year by an amount equal to seventy-five percent
(75%) of that fiscal year's Net Income; Tangible Net Worth to be
measured quarterly;
(iii) EBITDA of at least (i) $1,200,000.00 for the fiscal quarter
ending March 31, 1996, (ii) $2,000,000.00 for the fiscal quarter
ending June 30, 1996, (iii) $2,500,000.00 for the fiscal quarter
ending September 30, 1996 and (iv) $3,000,000.00 for each fiscal
quarter thereafter to be measured quarterly (i.e. March 31, June
30, September 30, December 31);
(g) Each Borrower will, when requested to do so, make available for
inspection by duly authorized representatives of the Lender any of its books and
Records and will furnish the Lender any information regarding its business
affairs and financial condition within a reasonable time after written request
therefor, provided that any confidential information disclosed to the
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Lender shall not be disclosed by the Lender to any unauthorized Person and
further provided that SpecTran may require the Lender to provide a certificate
of an officer of the Lender stating that the confidential information will not
be disclosed to any unauthorized Person;
(h) Each Borrower will (i) carry on and conduct its business in
substantially the same manner and in substantially the same fields of expertise
as presently conducted, and (ii) do all things necessary to remain duly
incorporated, validly existing and in good standing in its state of
incorporation and maintain all requisite authority to conduct its business in
each jurisdiction in which its business is conducted and where the failure to
maintain authority would have a materially adverse effect on any of the
Borrowers and comply in all material respects with all present and future Laws
applicable to it in the operation of its business and all material agreements to
which it is subject;
(i) Each Borrower will collect its Accounts and sell its Inventory only
in the ordinary course of business;
(j) Each Borrower will keep accurate and complete Records of its
Accounts, Inventory, and Equipment consistent with sound business practices;
(k) Each Borrower will give immediate notice to the Lender of any
litigation or proceeding in which it is a party;
(l) Within ten (10) days after the filing thereof, each Borrower will
furnish the Lender with copies of federal income tax returns filed by any
Borrower;
(m) Each Borrower will pay when due (or within applicable grace
periods) all of its Liabilities, except when the amount thereof is being
contested in good faith by appropriate proceedings and with adequate reserves
therefor being set aside on its books and as otherwise disclosed in Exhibit
6.01(m) attached hereto. If default be made by any Borrower in the payment
of any of its Liabilities, the Lender shall have the right, in its discretion,
to pay such amount for the account of any Borrower and be reimbursed by the
Borrowers therefor, except for Liabilities being contested in good faith by
appropriate and lawful proceedings, so long as levy and execution thereon have
been stayed and continue to be stayed and they do not, in the aggregate,
materially detract from the value of the property of the Borrowers or materially
impair the use thereof in the operation of their businesses and for which
adequate reserves have been established;
(n) Each Borrower will notify the Lender immediately if it becomes
aware of the occurrence of any Event of Default or of any fact, condition, or
event that only with the giving of notice or passage of time or both, could
become an Event of Default or if it becomes aware of any material adverse change
in the business prospects, financial condition (including, without limitation,
proceedings in bankruptcy, insolvency, reorganization, or the appointment of a
receiver or trustee), or results of operations of any Borrower, or of the
failure of any Borrower to observe any undertakings hereunder or under the
Collateral Documents;
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(o) Each Borrower will notify the Lender thirty (30) days in advance of
any change in the location of any of its places of business or of the
establishment of any new, or the discontinuance of any existing, place of
business;
(p) Each Borrower will (i) fund any of its Employee Pension Benefit
Plans in accordance with no less than the minimum funding standards of 29
U.S.C.A. 1082 (Section 302 of ERISA); (ii) furnish the Lender, promptly after
the filing of the same, with copies of any reports or other statements filed
with the United States Department of Labor or the Internal Revenue Service with
respect to any such Plan; and (iii) promptly advise the Lender of the occurrence
of any Reportable Event or Prohibited Transaction with respect to any Employee
Benefit Plan;
(q) SpecTran will file all registration statements, forms and other
reports with the Securities and Exchange Commission required by any applicable
Law to be filed; and
(r) The Borrowers will each maintain all of their principal depository
accounts with the Lender and the Lender's Affiliates and the Lender and the
Lender's Affiliates will continue to manage the Borrowers' cash; notwithstanding
the foregoing, the Borrowers may maintain depository accounts with other
financial institutions for convenience only provided the aggregate amount of all
such accounts does not exceed $250,000.00.
6.02 Negative Covenants.
Each Borrower does hereby covenant and agree with the Lender that, so
long as any of the Obligations remain unsatisfied or any commitments hereunder
remain outstanding, it will comply at all times with the following negative
covenants, unless the Lender shall otherwise have agreed in writing:
(a) No Borrower will change its name, enter into any merger,
consolidation, reorganization or recapitalization, or reclassify its capital
stock;
(b) No Borrower will sell, transfer, lease, or otherwise dispose of all
or (except in the ordinary course of business) any part of its Assets valued on
a consolidated basis in excess of an aggregate amount of $500,000.00 during the
term of this Agreement;
(c) No Borrower will sell, lease, transfer, assign, or otherwise
dispose of any of the Collateral, except for the sale of Inventory in the
ordinary course of business;
(d) No Borrower will move the Collateral, except for the sale of
Inventory in the ordinary course of business and as disclosed in Exhibit 6.02(d)
attached hereto;
(e) No Borrower will sell or otherwise dispose of, or for any reason
cease operating, any of its divisions, franchises, or lines of business;
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(f) No Borrower will mortgage, pledge, grant, or permit to exist a
security interest in, or a lien upon, any of its Assets of any kind, now owned
or hereafter acquired, except for liens in favor of the Lender and Permitted
Liens;
(g) No Borrower will become liable, directly or indirectly, as
guarantor or otherwise for any obligation of any other Person, except (i) for
the endorsement of commercial paper for deposit or collection in the ordinary
course of business, (ii) on a consolidated basis up to $250,000.00 in the
aggregate during the term of this Agreement and (iii) the obligations of any
Borrower to the extent otherwise permitted hereunder;
(h) No Borrower will incur, create, assume, or permit to exist any
Liabilities except: (i) the Loans; (ii) existing Indebtedness listed on
Exhibit 5.01(i) to the extent shown on such Exhibit 5.01(i) to
be permitted to exist after the Closing; and (iii) trade indebtedness incurred
in the ordinary course of business (provided, however, that no Borrower may
acquire Inventory other than for cash or on open account except as expressly
approved in writing and in advance by the Lender);
(i) No Borrower will make any assignment or transfer of Accounts, or,
other than in the ordinary course of business, of Inventory;
(j) No Borrower will form any subsidiary (except for Subsidiaries which
are capitalized with less than $100.00), make any investment in (including any
assignment of Inventory or other property), or make any loan in the nature of an
investment to, any Person, except for investments up to $500,000.00 in the
aggregate during the term of this Agreement and investments in or loans to any
Borrower;
(k) No Borrower will make any loan or advance to any Person, except for
(i) business travel and similar temporary advances in the ordinary course of
business, (ii) on a consolidated basis up to $100,000.00 during the term of this
Agreement and (iii) loans or advances to any Borrower;
(l) No Borrower will purchase or otherwise invest in or hold
securities, nonoperating real estate, or other nonoperating Assets, except for
investments meeting the parameters set forth in Exhibit 6.02 (l)
attached hereto;
(m) No Borrower will enter into any sale-leaseback transaction;
(n) No Borrower will acquire or agree to acquire any stock in, or all
or substantially all of the assets of, any Person;
(o) No Borrower will pay or commit to pay on a consolidated basis for
any one fiscal year (commencing with the current fiscal year), lease obligations
(including without limitation Capital Leases and operating leases) in excess of
$500,000.00;
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(p) No Borrower will furnish the Lender any certificate or other
document that will contain any untrue statement of material fact or that will
omit to state a material fact necessary to make it not misleading in light of
the circumstances under which it was furnished;
(q) No Borrower will directly or indirectly apply any part of the
proceeds of the Loans to the purchasing or carrying of any "margin stock" within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System, or any regulations, interpretations, or rulings thereunder; and
(r) The Borrowers will not permit on a consolidated basis:
(1) its Leverage Ratio to exceed 1.25:1.0 to be measured quarterly
(i.e. March 31, June 30, September 30, December 31); and
(2) Capital Expenditures to exceed $10,000,000.00 for the fiscal
year ending December 31, 1996, $14,050,000.00 for the fiscal year
ending December 31, 1997 and $5,000,000.00 for each fiscal year
thereafter to be measured annually; with respect to Capital
Expenditures for the fiscal year ending December 31, 1996, the
Borrowers will not permit on a consolidated basis such Capital
Expenditures to exceed $2,400,000.00 in the aggregate for the
fiscal quarter ending March 31, 1996, $3,614,000.00 in the
aggregate for the six (6) month fiscal period ending June 30, 1996
and $7,066,000.00 for the nine (9) month fiscal period ending
September 30, 1996 to be measured quarterly.
ARTICLE 7 DEFAULT
7.01 Events of Default.
The occurrence of any one or more of the following events shall
constitute an Event of Default hereunder:
(a) Any Borrower shall fail to pay when due any of its Obligations to
the Lender;
(b) Any Borrower shall fail to observe or perform any of the
obligations set forth in Section 6.01(b), Section 6.01(d), Section 6.01(k),
Section 6.01(l) and Section 6.01(o) of this Agreement and such failure shall
continue for ten (10) days after (i) notice of such failure from the Lender; or
(ii) the Lender is notified of such failure or should have been so notified
pursuant to the provisions of Section 6.01(n), whichever is earlier;
(c) Any Borrower shall fail to observe or perform any one of the
obligations set forth in Section 6.01(c), Section 6.01(e) and Section
6.01(h)(ii) of this Agreement and such failure shall continue for thirty (30)
days after (i) notice of such failure from the Lender; or (ii) the Lender is
notified of such failure or should have been so notified pursuant to the
provisions of
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Section 6.01(n), whichever is earlier, provided, it shall not be an Event of
Default hereunder if any of the Borrowers has commenced taking action to cure
the default within the time period set forth in this Section 7.01(c) which could
not reasonably be completed within such time period and continues to diligently
attempt to cure such default; at no time will the cure period exceed sixty (60)
days;
(d) Any Borrower shall fail to observe or perform any other obligation
to be observed or performed by it hereunder;
(e) Any Borrower shall fail to pay any Indebtedness due any third
Persons (except as disclosed in Exhibit 6.01(m) attached hereto), or any
Borrower shall suffer to exist any other event of Default beyond any applicable
cure period under any Agreement binding any Borrower, except for a failure to
pay or an event of default which is being contested in good faith by appropriate
and lawful proceedings, so long as levy and execution thereon have been stayed
and continue to be stayed and such failure to pay or event of default does not
materially detract from the value of the property of any Borrower or materially
impair the use thereof in the operation of any of their businesses, provided
further that such failure to pay or event of default shall continue for ten (10)
days after (i) notice of such failure or event of default from the Lender; or
(ii) the Lender is notified of such failure or event of default or should have
been so notified pursuant to the provisions of Section 6.01(n), whichever is
earlier;
(f) Any financial statement, representation, warranty, or certificate
made or furnished by or with respect to any Borrower to the Lender in connection
with this Agreement, or as inducement to the Lender to enter into this
Agreement, or in any separate statement or document to be delivered to the
Lender hereunder, shall be materially false, incorrect, or incomplete when made;
(g) Any Borrower shall admit its inability to pay its debts as they
mature or shall make an assignment for the benefit of itself or any of its
creditors;
(h) Proceedings in bankruptcy, or for reorganization of any Borrower
for the readjustment of any of its debts under the Bankruptcy Code, as amended,
or any part thereof, or under any other Laws, whether state or federal, for the
relief of debtors, now or hereafter existing, shall be commenced against or by
any Borrower and, except with respect to any such proceedings instituted by any
Borrower, shall not be discharged within sixty (60) days of their commencement;
(i) A receiver or trustee shall be appointed for any Borrower or for
any substantial part of its Assets, or any proceedings shall be instituted for
the dissolution or the full or partial liquidation of any Borrower, and except
with respect to any such appointments requested or instituted by any Borrower,
such receiver or trustee shall not be discharged within sixty (60) days of his
appointment, and except with respect to any such proceedings instituted by any
Borrower, such proceedings shall not be discharged within sixty (60) days of
their commencement, or any Borrower shall discontinue business or materially
change the nature of its business;
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(j) Any Borrower shall suffer final judgments for payment of money and
shall not discharge the same within a period of sixty (60) days unless, pending
further proceedings, execution has not been commenced or, if commenced, has been
effectively stayed;
(k) A judgment creditor of any Borrower shall obtain possession of any
of the Collateral by any means, including (without implied limitation) levy,
distraint, replevin, or self-help; or
(l) The occurrence of an Event of Default under the Mortgage.
7.02 Acceleration.
At its option, and at any time, whether immediately or otherwise, the
Lender may, upon the occurrence of any Event of Default, declare all Obligations
immediately due payable without further action of any kind, including without
notice, demand or presentment. Notwithstanding the foregoing, if at any time
after the Obligations have been declared due and payable and before any judgment
with respect thereto has been entered, every Event of Default has been made good
or cured, then the Lender may, by written instrument delivered to SpecTran,
rescind and annul such declaration and its consequences; but no such rescission
shall extend to or effect any subsequent default or Event of Default or impair
any rights of the Lender.
ARTICLE 8 THE LENDER'S RIGHTS AND REMEDIES
8.01 The Lender's Rights Upon Default
Upon the occurrence of an Event of Default and at any time thereafter,
the Lender, without presentment, demand, notice, protest or advertisement of any
kind, will have all of the rights under all Laws, including without limitation
all of the rights hereinafter set forth.
8.02 Account Debtors
Upon the occurrence of an Event of Default and at any time thereafter,
the Lender may notify account debtors, at the Borrowers' expense, that the
Collateral has been assigned to the Lender and that payments shall be made
directly to the Lender. Upon request of the Lender, each Borrower will notify
such account debtors that their accounts must be paid to the Lender. Upon the
occurrence of an Event of Default and at all times thereafter, each Borrower
will hold all checks, drafts, cash and other remittances in trust for the Lender
and deliver them in kind to the Lender. The Lender shall have full power to
collect, compromise, endorse, sell or otherwise deal with the Collateral or
proceeds thereof in its own name or in the name of any Borrower.
8.03 Possession and Foreclosure of Collateral
Upon the occurrence of an Event of Default and at any time thereafter,
to the extent that
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any Borrower could legally do so, the Lender may enter onto, occupy and use any
premises owned by any Borrower or in which any Borrower has any interest. The
Lender may take possession of all Collateral. In the Lender's sole discretion,
the Lender may operate and use any Equipment, complete work in process and sell
Inventory without being liable to any Borrower on account of any losses, damage
or depreciation that may occur as a result thereof (so long as the Lender acts
in good faith). The Lender may lease or license the Collateral to any Person for
such purposes. In any event, the Lender may sell, lease, assign and deliver the
whole or any part of the Collateral, at public or private sale, for cash, upon
credit or for future delivery, at such prices and upon such terms as the Lender
deems advisable. The Lender may sell or lease Collateral alone or in conjunction
with other property, real or personal, and allocate the sale proceeds or leases
among the items of Collateral sold without the necessity of the Collateral being
present at any such sale, or in view of prospective purchasers thereof. If
notice of sale is legally required, each Borrower agrees that ten (10) days
written notice shall be deemed reasonable. Upon such sale, the Lender may become
the purchaser of the whole or any part of the Collateral sold, discharged from
all claims and free from any right of redemption. In case of any such sale by
the Lender of all or any of the Collateral on credit, or for future delivery,
such Collateral so sold may be retained by the Lender until the selling price is
paid by the purchaser. The Lender shall incur no liability in case of the
failure of the purchaser to take possession and pay for the Collateral so sold.
In case of any such failure, the said Collateral may be resold. Any Collateral
remaining unsold after being offered at public auction may be abandoned or
disposed of for no consideration in such manner as the Lender deems appropriate.
In any event, at any time and from time to time the Lender may abandon
the Collateral or any part thereof. Each Borrower agrees immediately upon demand
to take possession of any and all abandoned Collateral and to remove it from any
location in the possession of or under the control of the Lender.
8.04 Use of Intellectual Property
Sixty (60) days after the occurrence of an Event of Default and at any
time thereafter, the Lender may use all or any part of any Borrower's
Intellectual Property which any Borrower now has or may hereafter acquire to the
extent lawfully permitted. The Lender may license such Intellectual Property to
third Persons, seek registration of such Intellectual Property in any state or
nation or prosecute pending applications for patent, trademark, or service marks
in any Borrower's name in any state or nation, to the extent lawfully permitted.
8.05 Notification of Default to Third Parties
Upon the occurrence of an Event of Default and at any time thereafter,
the Lender may notify any Borrower's suppliers, account debtors and other third
parties of the default and of any and all decisions made and actions taken by
the Lender with respect to this Agreement, the Obligations or the Collateral,
without liability of any kind. The Lender will provide written notice of such
action to SpecTran. Failure to provide such notice will not impair the Lender's
rights under this Section.
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8.06 Assembly of Collateral
Upon the occurrence of an Event of Default and at any time thereafter,
the Lender may require any Borrower to assemble the Collateral in a single
location at a place to be designated by the Lender and make the Collateral at
all times secure and available to the Lender.
8.07 Right of Set-Off.
Upon the occurrence of an Event of Default and at any time thereafter,
the Lender may, and is hereby authorized by each Borrower, to the fullest extent
permitted by applicable Laws, without advance notice to any Borrower (any such
notice being expressly waived by the Borrowers), set-off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and any other indebtedness at any time owing by the Lender to, or for the
credit or the account of, any Borrower against any or all of the Obligations of
the Borrowers, now or hereafter existing, whether or not such Obligations have
matured and irrespective of whether the Lender has exercised any other rights
that it has or may have with respect to such Obligations, including without
limitation any acceleration rights. The Lender agrees promptly to notify the
applicable Borrower after any such set-off and application, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Lender hereunder are in addition to the other
rights and remedies (including, without limitation, other rights of set-off)
which the Lender may have.
8.08 Exercise of Other Remedies
Upon the occurrence of any Event of Default and at any time thereafter,
the Lender may exercise the remedies of a secured party afforded by the Uniform
Commercial Code and other applicable Laws or by the terms of any agreement
between any Borrower and the Lender.
8.09 Cumulative Rights and Remedies
All rights and remedies of the Lender, whether provided for herein or
in other agreements, instruments or documents or conferred by law, are
cumulative and may be exercised alone or simultaneously.
ARTICLE 9 ATTORNEY-IN-FACT
9.01 Attorney-In-Fact
Effective upon the occurrence of an Event of Default, and at all times
thereafter, each Borrower hereby irrevocably appoints the Lender, or its
designee, as each Borrower's true and lawful attorney-in-fact, with full power
as follows: (i) to endorse the name of any Borrower on any assignments, notes,
checks, drafts, money orders, or other instruments of payment for Collateral;
(ii) to sign or endorse the name of any Borrower on any negotiable instrument,
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invoice, freight or express bill, bill of lading, storage or warehouse receipts,
drafts, assignments, verifications and notices in connection with Accounts;
(iii) to obtain, adjust, settle and cancel, in any Borrower's name, insurance
policies as required herein and to sign any Borrower's name on settlement checks
or drafts; (iv) in any Borrower's name, to do any act which this Agreement
requires any Borrower to do, and, (v) to give notice to the United States Post
Office to effect changes of address so that mail addressed to any Borrower may
be delivered directly to the Lender. In exercising this power-of-attorney, the
Lender shall not be liable to the extent that it acts in good faith.
ARTICLE 10 MISCELLANEOUS
10.01 Connecticut Waiver.
TO THE EXTENT ANY COLLATERAL AND/OR REAL ESTATE IS LOCATED IN
CONNECTICUT, THE BORROWERS ACKNOWLEDGE THAT THIS AGREEMENT AND EACH TRANSACTION
RELATED TO IT IS A "COMMERCIAL TRANSACTION" WITHIN THE MEETING OF CHAPTER 903A
OF THE CONNECTICUT GENERAL STATUES, AS AMENDED. THE BORROWERS HEREBY WAIVE ANY
RIGHT WHICH THEY MIGHT HAVE TO NOTICE IN A HEARING OR A PRIOR COURT ORDER, UNDER
SAID CHAPTER 903A OR AS OTHERWISE PROVIDED UNDER ANY APPLICABLE FEDERAL OR STATE
LAW, IN THE EVENT THE LENDER SEEKS ANY PREJUDGMENT REMEDY AT ANY TIME PRIOR TO
FINAL JUDGMENT IN ANY LITIGATION INSTITUTED IN CONNECTION WITH THIS AGREEMENT
WHETHER BY WAY OF ATTACHMENT, FOREIGN ATTACHMENT, GARNISHMENT OR REPLEVIN.
10.02 Appraisals/Audit.
The Lender may perform, at the Borrowers' expense, periodic appraisals
of any Borrower's Equipment and real estate and the cost of each appraisal will
be borne by the Borrowers. The Lender agrees that appraisals will not be
required more frequently than annually unless required by applicable Laws or
after the occurrence of an Event of Default. The Lender may perform, at the
Borrowers' expense, periodic audits of any Borrower at any time and the cost of
each audit will be borne by the Borrowers.
10.03 Joint and Several.
All Obligations of the Borrowers hereunder are the joint and several
obligations of each of SpecTran, Optics, Photonic and Communications.
10.04 Construction.
The provisions of this Agreement shall be in addition to those of any
guaranty, pledge or security agreement, note, or other evidence of liability now
or hereafter held by the Lender, all
29
<PAGE> 30
of which shall be construed as complementary to each other. Nothing herein
contained shall prevent the Lender from enforcing any or all other guaranty,
pledge or security agreements, notes, or other evidences of liability in
accordance with their respective terms.
10.05 Further Assurance.
From time to time, each Borrower will execute and deliver to the Lender
such additional documents and will provide such additional information as the
Lender may reasonably require to carry out the terms of this Agreement and be
informed of the status and affairs of each Borrower.
10.06 Enforcement and Waiver by the Lender.
The Lender shall have the right at all times to enforce the provisions
of this Agreement and the Collateral Documents in strict accordance with the
terms hereof and thereof, notwithstanding any conduct or custom on the part of
the Lender in refraining from so doing at any time or times. The failure of the
Lender at any time or times to enforce its rights under such provisions,
strictly in accordance with the same, shall not be construed as having created a
custom in any way or manner contrary to specific provisions of this Agreement or
as having in any way or manner modified or waived the same. All rights and
remedies of the Lender are cumulative and concurrent and the exercise of one
right or remedy shall not be deemed a waiver or release of any other right or
remedy.
10.07 Expenses of the Lender.
The Borrowers will, on demand, reimburse the Lender for all expenses,
including the reasonable fees and expenses of legal counsel for the Lender,
incurred by the Lender in connection with the preparation, administration,
amendment, modification, or enforcement of this Agreement and the Collateral
Documents and the collection or attempted collection of any of the Obligations.
10.08 Notices.
Any notices, requests or consents required or permitted by this
Agreement shall be in writing and shall be deemed delivered if delivered in
person or if sent by certified mail, postage prepaid, return receipt requested,
facsimile or telegraph, as follows, unless such address is changed by written
notice hereunder:
(a) If to the Borrowers:
SpecTran Corporation
Attention: Bruce Cannon, C.F.O.
50 Hall Road
Sturbridge, MA 01566
30
<PAGE> 31
(b) If to the Lender:
Fleet National Bank
Attention: John F. Lynch, V.P.
370 Main Street
Worcester, MA 01608
10.09 Waiver and Release by the Borrowers.
To the maximum extent permitted by applicable Laws, each Borrower:
(a) Waives (i) protest of all commercial paper at any time held by the
Lender on which any Borrower is in any way liable; (ii) except as the same may
herein be specifically granted, notice of acceleration and of intention to
accelerate; and (iii) notice and opportunity to be heard before exercise by the
Lender of the remedies of self-help, set-off, or of other summary procedures
permitted by any applicable Laws or by any agreement with any Borrower, and,
except where required hereby or by any applicable Laws, notice of any other
action taken by the Lender (the Lender agrees to provide notice to SpecTran of
acceleration of the Obligations and such notice will reference a Section or
Sections of this Agreement under which a default has occurred, failure to send
such notice will not impair the Lender's rights hereunder); and
(b) Releases the Lender and its officers, attorneys, agents, and
employees from all claims for loss or damage caused by any act or omission on
the part of any of them except willful misconduct.
10.10 Participation.
Notwithstanding any other provision of this Agreement, each Borrower
understands that the Lender may at any time enter into participation agreements
with one or more participating banks whereby the Lender will allocate certain
percentages of its commitment to them. Each Borrower acknowledges that, for the
convenience of all parties, this Agreement is being entered into with the Lender
only and that its obligations under this Agreement are undertaken for the
benefit of, and as an inducement to, any such participating bank as well as the
Lender, and each Borrower hereby grants to each such participating bank, to the
extent of its participation in the Loans, the right to set off deposit accounts
maintained by any Borrower with such bank subject to the terms of this
Agreement. The Lender agrees to provide SpecTran with five (5) days prior
written notice of any such participation. The Lender will also provide five (5)
days prior written notice of any pledge or assignment of any of the Notes,
except in connection with an acquisition of the Lender.
10.11 Applicable Law.
This Agreement is entered into and performable in the Commonwealth of
Massachusetts
31
<PAGE> 32
and shall be subject to and construed and enforced in accordance with the laws
of the Commonwealth of Massachusetts.
10.12 Consent to Jurisdiction.
EACH OF THE BORROWERS, TO THE EXTENT THAT THE BORROWERS MAY LAWFULLY DO
SO, HEREBY CONSENTS TO THE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS AND THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
MASSACHUSETTS, AS WELL AS TO THE JURISDICTION OF ALL COURTS FROM WHICH AN APPEAL
MAY BE TAKEN FROM THE AFORESAID COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR
OTHER PROCEEDING ARISING OUT OF ANY OF THE BORROWERS' OBLIGATIONS UNDER OR WITH
RESPECT TO THIS AGREEMENT, AND EXPRESSLY WAIVES ANY AND ALL OBJECTIONS ANY OF
THE BORROWERS MAY HAVE AS TO VENUE IN ANY OF SUCH COURTS.
10.13 Binding Effect, Assignment, and Entire Agreement.
This Agreement shall inure to the benefit of, and shall be binding
upon, the respective successors and permitted assigns of the parties hereto. No
Borrower has the right to assign any of its rights or obligations hereunder
without the prior written consent of the Lender. This Agreement, including the
Exhibits hereto, all of which are hereby incorporated herein by reference, and
the documents executed and delivered pursuant hereto, constitute the entire
agreement between the parties and may be amended only by a writing signed on
behalf of each party.
10.14 Severability.
If any provision of this Agreement shall be held invalid under any
applicable Laws, such invalidity shall not affect any other provision of this
Agreement that can be given effect without the invalid provision, and, to this
end, the provisions hereof are severable.
10.15 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute but one and the same instrument.
10.16 Waiver of Jury Trial
THE LENDER AND THE BORROWERS AGREE THAT THEY (INCLUDING ANY ASSIGNEE OR
SUCCESSOR) SHALL NOT SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM,
OR ANY OTHER LITIGATION PROCEDURE BASED UPON, OR ARISING OUT OF, THIS AGREEMENT,
ANY RELATED INSTRUMENTS, ANY
32
<PAGE> 33
COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP AMONG ANY OF THEM. THEY SHALL NOT
SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL
CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN
FULLY DISCUSSED BY THE LENDER AND THE BORROWERS AND THESE PROVISIONS SHALL BE
SUBJECT TO NO EXCEPTIONS. THEY HAVE NOT AGREED WITH OR REPRESENTED TO THE OTHER
THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as a
sealed instrument as of the day and year first above written.
BORROWERS:
SPECTRAN CORPORATION
/s/ Brian M. Hand By: /s/ Glenn E. Moore
- --------------------- ---------------------------
Witness Its Duly Authorized Officer
SPECTRAN SPECIALTY OPTICS
COMPANY
/s/ Brian M. Hand By: /s/ Glenn E. Moore
- --------------------- ---------------------------
Witness Its Duly Authorized Officer
APPLIED PHOTONIC DEVICES, INC.
/s/ Brian M. Hand By: /s/ Glenn E. Moore
- --------------------- ---------------------------
Witness Its Duly Authorized Officer
SPECTRAN COMMUNICATION FIBER
TECHNOLOGIES, INC.
/s/ Brian M. Hand By: /s/ Glenn E. Moore
- --------------------- ---------------------------
Witness Its Duly Authorized Officer
33
<PAGE> 34
LENDER:
FLEET NATIONAL BANK
/s/ By: /s/ John Lynch
- --------------------- ---------------------------
Witness Its Duly Authorized Officer
34
<PAGE> 35
Exhibit 1.06
SPECTRAN CORPORATION
BORROWING BASE CERTIFICATE
MONTH ENDED _______
<TABLE>
<S> <C> <C>
A. CASH:
CASH ON DEPOSIT AT FLEET $_________
CASH INVESTED AT FLEET INVEST.SERV $_________
(1) TOTAL CASH $_________
B. ACCOUNTS RECEIVABLE
GROSS ACCOUNTS $_________
LESS:
OVER 90 DAYS FROM INVOICE $_________
(NOT BACKED BY L.C.)
FOREIGN ACCOUNTS $_________
(NOT BACKED BY L.C.)
TOTAL INELIGIBLE $_________
ELIGIBLE ACCOUNTS $_________
ADVANCE RATE .80
(2)LOAN VALUE $_________
C. INVENTORY
GROSS INVENTORY $_________
LESS:
OBSOLETE $_________
STALE $_________
TOTAL ELIGIBLE $_________
ELIGIBLE INVENTORY $_________
ADVANCE RATE .33
</TABLE>
35
<PAGE> 36
<TABLE>
<S> <C>
(3) LOAN VALUE $_________
TOTAL LOAN VALUE (1+2+3) $_________
LOAN $_________
RATIO: TOTAL LOAN VALUE:LOAN $_________
</TABLE>
SPECTRAN CORPORATION
BY:_____________________________________
BRUCE CANNON, CHIEF FINANCIAL OFFICER
36
<PAGE> 37
Exhibit 2.03
DEPOSIT ACCOUNT
Account No. 00792489
37
<PAGE> 38
Exhibit 2.05
DISBURSEMENT OF TERM NOTE
No disbursements will be made under the Term Note until all conditions
set forth in the Agreement have been satisfied. The Lender will disburse the
proceeds of the Term Note to SpecTran's deposit account identified in Exhibit
2.03, subject to the Lender's prior receipt from SpecTran of evidence,
satisfactory to the Lender, of the purchase price of the Equipment to be
purchased with such proceeds, including without limitation copies of invoices
(paid or to be paid). In no event will (i) any disbursement exceed one hundred
percent (100%) of the purchase price of such Equipment and (ii) all
disbursements, in the aggregate, exceed seventy-five percent (75%) of the
auction value of all of the Borrowers' Equipment as set forth in the "Auction
Value Appraisal" prepared by Appraisal & Liquidation Services, Inc. to be
delivered to the Lender on or before May 1, 1996. Disbursements will not be made
more frequently than monthly. No disbursements will be made after September 30,
1996 or after the occurrence of an Event of Default.
38
<PAGE> 39
Exhibit 2.06
DISBURSEMENT OF MORTGAGE NOTE
No disbursements will be made under the Mortgage Note until all
conditions set forth in the Agreement have been satisfied, including without
limitation, the Lender's receipt of (a) an environmental site assessment
covering the real property subject to the Mortgage satisfactory to the Lender
and (b) a zoning opinion satisfactory to the Lender and its counsel. The Lender
will disburse the proceeds of the Mortgage Note to SpecTran's deposit account
identified in Exhibit 2.03, subject to the Lender's prior receipt of (i) a
completed and executed A1A form in the form attached hereto as Exhibit 2.06A
setting forth in detail satisfactory to the Lender the expenditures giving rise
to the request for such disbursement and (ii) paid invoices with respect to the
expenditures listed on the related A1A form. In no event will (i) any
disbursement exceed one hundred percent (100%) of the cost of improvements to
the real property subject to the Mortgage and (ii) all disbursements, in the
aggregate, exceed seventy five percent (75%) of the fair market value of the
real property subject to the Mortgage as set forth in the "As Is, Fair Market
Value Appraisal" conducted by L.J. Boudreau Associates to be delivered to the
Lender on or before May 1, 1996. After completion of the improvements to the
real property subject to the Mortgage and the issuance of an occupancy permit,
the "As Completed, Fair Market Value Appraisal" prepared by L. J. Boudreau
Associates may be used instead of the "As Is, Fair Market Value Appraisal".
Disbursements will not be made more frequently than monthly. No disbursements
will be made after March 31, 1997 or after the occurrence of an Event of
Default.
39
<PAGE> 40
Exhibit 3.01(m)
Counsel for Bank: Counsel for Borrower:
Paul J. D'Onfro, Esquire Brian M. Hand, Esquire
Mirick, O'Connell, DeMallie Hackmyer & Nordlicht
& Lougee 645 Fifth Avenue
1700 Bank of Boston Tower New York, NY 10022
Worcester, MA 01608-1477 (212) 421-6500
(508) 799-0541 ("H&N")
("MODL")
FLEET NATIONAL BANK
(the "Bank")
$22,000,000.00 LOANS
TO
SPECTRAN CORPORATION
("SpecTran")
and
SPECTRAN SPECIALTY OPTICS COMPANY
("Optics")
and
APPLIED PHOTONIC DEVICES, INC.
("Photonic")
and
SPECTRAN COMMUNICATION FIBER TECHNOLOGIES, INC.
("Communication")
(SpecTran, Optics, Photonic and Communication
are collectively referred to as the "Borrowers")
CLOSING DOCUMENT AGENDA
Responsible
Party
MODL 1. Loan and Security Agreement among the Borrowers and the Bank
MODL 2. Borrowers' $12,000,000.00 Revolving Note
MODL 3. Borrowers' $5,000,000.00 Term Note
40
<PAGE> 41
MODL 4. Borrowers' $5,000,000.00 Mortgage Note
H&N 5. Insurance binder from SpecTran naming the Bank as loss payee
and mortgagee, including:
a) Casualty; and
b) General Liability
MODL 6. UCC-1 Financing Statements against SpecTran to be filed with:
a) Massachusetts Secretary of State
b) Sturbridge, Massachusetts Town Clerk
c) Worcester District Registry of Deeds
H&N 7. UCC-11 pre-closing Searches for Spectran from:
a) Massachusetts Secretary of State
b) Sturbridge, Massachusetts Town Clerk
H&N 8. Federal and State Tax Lien Searches for SpecTran
MODL 9. Pledge Agreement between SpecTran and the Bank
H&N 10. Composite Certificate of Secretary of Spectran with attached:
a) Certificate of Incorporation with all
amendments (certified to by the Delaware
Secretary of State)
b) By-Laws
c) Votes
H&N 11. Certificate of Legal Existence and Good Standing for SpecTran
issued by the Delaware Secretary of State
H&N 12. Certificate of Qualification To Do Business in Massachusetts
for SpecTran issued by the Massachusetts Secretary of State
H&N 13. Certificate of Good Tax Standing for SpecTran issued by the
Massachusetts Department of Revenue
H&N 14. Insurance binder from Optics naming the Bank as loss payee,
including:
a) Casualty; and
b) General Liability
MODL 15. UCC-1 Financing Statements against Optics from:
a) Connecticut Secretary of State
b) Avon, Connecticut Town Clerk-Land Records
41
<PAGE> 42
H&N 16. UCC-11 pre-closing Searches for Optics from:
a) Connecticut Secretary of State
b) Avon, Connecticut Town Clerk-Land Records
H&N 17. Federal and State Tax Lien Searches for Optics
H&N 18. Copies of any leases for Optics
MODL 19. Assignments of Leases with respect to Optics' interests and
tenant
MODL 20. Landlord's Consents and Waivers
H&N 21. Composite Certificate of Secretary of Optics with attached:
a) Certificate of Incorporation with all
amendments (certified to by the Delaware
Secretary of State)
b) By-Laws
c) Votes
H&N 22. Certificate of Legal Existence and Good Standing for Optics
issued by the Delaware Secretary of State
H&N 23. Certificate of Qualification To Transact Business in
Connecticut for Optics issued by the Connecticut Secretary of
State
H&N 24. Accountant's letter regarding filing of tax returns and payment
of taxes
H&N 25. Insurance binder from Photonic naming the Bank as loss payee
and mortgagee, including:
a) Casualty; and
b) General Liability
MODL 26. UCC-1 Financing Statements against Photonic to be filed with:
a) Connecticut Secretary of State
b) Brooklyn, Connecticut Town Clerk-Land Records
c) Killingly, Connecticut Town Clerk-Land Records
H&N 27. UCC-11 pre-closing Searches for Photonic from:
a) Connecticut Secretary of State
b) Brooklyn, Connecticut Town Clerk-Land Records
c) Killingly, Connecticut Town Clerk-Land Records
MODL 28. UCC-11 post-closing Searches for Photonic from:
a) Connecticut Secretary of State
42
<PAGE> 43
b) Brooklyn, Connecticut Town Clerk-Land Records
c) Killingly, Connecticut Town Clerk-Land Records
H&N 29. Federal and State Tax Lien Searches for Photonic interests as
tenant
H&N 30. Copies of any leases for Photonic
MODL 31. Assignments of Leases with respect to Photonic interests as
tenant
MODL 32. Landlord's Consents and Waivers
H&N 33. Composite Certificate of Secretary of Photonic with attached:
a) Certificate of Incorporation with all
amendments (certified to by the Connecticut
Secretary of State)
b) By-Laws
c) Votes
H&N 34. Certificate of Legal Existence and Good Standing for Photonic
issued by the Connecticut Secretary of State
H&N 35. Accountant's letter regarding filing of tax returns and payment
of taxes
H&N 36. Insurance binder from Communication naming the Bank as Loss
Payee, including:
a) Casualty; and
b) General Liability
MODL 37. UCC-1 Financing Statements against Communication to be filed
with:
a) Massachusetts Secretary of State
b) Sturbridge, Massachusetts Town Clerk
c) Worcester District Registry of Deeds
H&N 38. UCC-11 pre-closing Searches for Communication from:
a) Massachusetts Secretary of State
b) Sturbridge, Massachusetts Town Clerk
MODL 39. UCC-11 post-closing Searches for Communication from:
a) Massachusetts Secretary of State
b) Sturbridge, Massachusetts Town Clerk
H&N 40. Federal and State Tax Lien Searches for Communication
H&N 41. Copies of any leases for Communication
43
<PAGE> 44
MODL 42. Assignments of Leases with respect to Communication interests
as tenant
MODL 43. Landlord's Consents and Waivers
H&N 44. Composite Certificate of Secretary of Communication
with attached:
a) Certificate of Incorporation with all
amendments (certified to by the Delaware
Secretary of State)
b) By-Laws
c) Votes
H&N 45. Certificate of Legal Existence and Good Standing for
Communication issued by the Delaware Secretary of State
H&N 46. Certificate of Qualification To Do Business in Massachusetts
for Communication issued by the Massachusetts Secretary of
State
H&N 47. Certificate of Good Tax Standing for Communication issued by
the Massachusetts Department of Revenue
MODL 48. Mortgage securing $5,000,000.00 Mortgage Note covering real
estate located at 50 hall Road, Sturbridge, Massachusetts
("Sturbridge Property")
MODL 49. Assignment of Leases and Rents for Sturbridge Property
H&N 50. Detailed Construction Budget in form and substance acceptable
to the Bank
MODL 51. Certificate of Municipal Liens for Sturbridge Property
H&N 52. Survey for Sturbridge Property containing Flood Hazard
Certification sufficient to delete survey exception in Title
Insurance Policy
Bank 53. Appraisal of Sturbridge Property
Bank 54. 21E Site assessment for Sturbridge Property
H&N 55. Title V Inspection and Certification
H&N 56. Title V Certification re: adequate septic system to service
addition
H&N 57. Building Permit
MODL 58. Title Report with copies of instrument shown as encumbrances on
Title Report for Sturbridge Property
44
<PAGE> 45
MODL 59. Title Insurance Affidavit for Sturbridge Property
MODL 60. Lender's Title Insurance Policy deleting standard exceptions
for: Taxes (except those not yet due and payable), Survey,
Parties in Possession and Mechanics Liens
H&N 61. Opinion of Counsel to Borrowers regarding due execution,
authority, enforceability and perfection
H&N 62. Opinion of Counsel to SpecTran regarding zoning
MODL 63. Disbursement Authorizations
H&N 64. Payment of $60,000.00 Commitment Fee
45
<PAGE> 46
Exhibit 5.01(a)
Subsidiaries, Jurisdictions, Shareholders and Addresses
1. Optics, Photonic and Communication are wholly owned subsidiaries of
SpecTran.
2. The following companies are qualified to do business in the following
states.
Name State
SpecTran Delaware, Massachusetts
Optics Delaware, Connecticut
Photonic Connecticut
Communications Delaware, Massachusetts
3. SpecTran owns ten shares of common stock of each of Optics and
Communication and 100 shares of common stock of Photonics.
4. The addresses of each place of business of the Borrowers are as
follows:
SpecTran Communication 50 Hall Road
Sturbridge, MA
Optics 18 Parkside Lane
Avon, CT
150 Fisher Drive
Avon, CT
18 Parkside Lane
(the "Barn")
Avon, CT
Photonics 50 Tiffany Street
Brooklyn, CT
300 Lake Road
Dayville, CT
46
<PAGE> 47
Exhibit 5.01(f)
LITIGATION
Applied Photonic Devices, Inc. was a named defendant in the case of
Buchanan Sound & Communications, Inc. v. America Fibertek, Inc. and Applied
Photonic Devices, Inc. filed in the Circuit Court for Kanawha County, West
Virginia. The civil action number is 93-C-5844 an the original amount of the
claim is $6,364.40 plus applicable interest. Applied Photonic Devices, Inc. has
received no information or updates concerning this case since it was originally
filed in 1993. The case was filed against a customer of APD, and also named APD,
Inc. as a defendant because APD was a component supplier.
47
<PAGE> 48
Exhibit 5.01(i)
INDEBTEDNESS
The Borrowers have no Indebtedness, other than Indebtedness to the Lender and
under Capitalized Leases, including leases with Copelco Leasing Corporation and
Liquid Carbonic Corp.
48
<PAGE> 49
Exhibit 6.01(a)
USES OF LOAN PROCEEDS
The proceeds of the Loans will be used only for the following purposes:
Revolving Note: Working capital and general corporate purposes;
Term Note: Purchase of Machinery and Equipment; and
Mortgage Note: Plant expansion at the Sturbridge, Massachusetts facility.
49
<PAGE> 50
Exhibit 6.01(b)(5)
FLEET NATIONAL BANK ("FLEET")
Loan to
SpecTran Corporation et al
Certificate of Loan Covenant Compliance
as of ________________
<TABLE>
<CAPTION>
Section Covenant Limit Actual
- ------- -------- ----- ------
<S> <C> <C> <C>
6.01
f(i) Fixed Charge Coverage Ratio 1.25:1.00
f(ii) Tangible Net Worth $18,5000,000
f(iii) Minimum Quarterly EBITDA
Section
6.02
r(1) Leverage Ratio 1.25:1.0
r(2) Capital Expenditures
</TABLE>
I, the undersigned officer of SpecTran hereby certify that I have read the Loan
and Security Agreement among Fleet and SpecTran, et al dated April __, 1996, and
to the best of my knowledge and belief, as of ________________________, SpecTran
is in compliance with all the Covenants, Terms and Provisions contained in the
Loan and Security Agreement and no Event of Default exists.
SPECTRAN CORPORATION
By:
--------------------------
Its Treasurer Date
50
<PAGE> 51
Exhibit 6.01(m)
DISPUTED LIABILITIES
None.
51
<PAGE> 52
Exhibit 6.02(d)
CONSIGNMENT INVENTORY
SpecTran has placed optical fiber inventory on consignment with Optical Cable
Corporation ("OCC") of Roanoke, Virginia. As of March 31, 1996 the consigned
inventory was valued at $405,343.
52
<PAGE> 53
Exhibit 6.02(l)
The investment objectives will be to maximize total return within the
confines of a short to average overall maturity framework. The fund will utilize
US Governments, domestic corporates, asset-backed paper (AAA rated), Govt Agency
mortgage-backed paper including short term CMO's and Govt Agency backed
short-term floating rato paper. Positions required for liquidity needs will be
held in high grade short-term or money market balances. The horizon on these
corporate funds will be approximately 1/3 for immediate liquidity needs (if
necessary), approximately 1/3 to be used for intermediate term purposes, and the
remaining approximately third for long term expansion purposes. SpecTran will
have full authority and discretion on all investment changes.
53
<PAGE> 1
Record and Return to:
Paul J. D'Onfro, Esquire
Mirick, O'Connell, DeMallie & Lougee
1700 Bank of Boston Tower
Worcester, MA 01608
MORTGAGE
SPECTRAN CORPORATION, a Delaware corporation having a principal place
of business at 50 Hall Road, Sturbridge, Massachusetts ("Mortgagor"), for
consideration paid, grants the Premises to FLEET NATIONAL BANK, a national
banking corporation with a place of business at 370 Main Street, Worcester,
Massachusetts ("Mortgagee") with MORTGAGE COVENANTS, to secure the payment,
performance and observance of all the Obligations. The term "Obligations" means
all of the debts, liabilities, agreements and other obligations of Mortgagor,
SPECTRAN SPECIALTY OPTICS COMPANY ("Optics"), APPLIED PHOTONIC DEVICES, INC.
("Photonic") and SPECTRAN COMMUNICATION FIBER TECHNOLOGIES, INC.
("Communication") (Mortgagor, Optics, Photonic and Communication and sometimes
hereinafter referred to as "Obligors") due Mortgagee, whether direct or
indirect, absolute or contingent, joint or several, due or to become due, now
existing or arising in the future. The term "Loan Documents" includes this
Mortgage, the $5,000,000.00 Mortgage Note of Obligors, the $5,000,000.00 Term
Note of Obligors, the $12,000,000.00 Revolving Note of Obligors, the Loan and
Security Agreement among Obligors and Mortgagee and all other documents
delivered to Mortgagee in connection with this Mortgage by Obligors and all
amendments, extensions and renewals of this Mortgage and the other agreements
and documents referred to above.
The term "Premises" includes the following, all of which are subject to
this Mortgage:
(i) The land in Sturbridge, Worcester County, Massachusetts having an
address of 50 Hall Road, more particularly described in Exhibit A
attached;
(ii) All buildings, structures and improvements now or at any time in
the future on the land;
(iii) All Fixtures, which term means (1) all goods, equipment,
fixtures, building materials and tangible personal property (except (a)
consumable goods, (b) equipment of Mortgagor which is not affixed to the real
estate and (c) personal property owned by tenants of the Premises which the
tenants are entitled to remove by law or agreement) now or in the future located
on, attached to or incorporated in the construction of and used in connection
with the operation of the Premises including, but not limited to, all
sidetracks, boilers, tanks, pumps, furnaces, radiators, alarm systems, cooling
towers, compressors, elevators, escalators, cranes and all heating, lighting,
power, plumbing, electrical, communications, ventilating, refrigerating, air
conditioning, sprinkler, incinerating and building service equipment, and (2)
all related accessories, additions and replacements;
<PAGE> 2
(iv) All right, title and interest of Mortgagor in all easements,
rights (including mineral, air and water rights), privileges, appurtenances,
licenses, permits and governmental approvals, now or in the future pertaining to
the Premises; and
(v) All rents, income, profits, royalties or accounts receivables from
the Premises.
SECTION 1 - GENERAL COVENANTS OF MORTGAGOR. Until the Obligations are
paid, performed and observed in full, in addition to the STATUTORY CONDITION,
Mortgagor agrees as follows:
1.1 INSURANCE. To keep all buildings, improvements and
Fixtures which are part of the Premises insured against direct risk of physical
loss in an amount not less than 100% of their replacement cost with deductibles
satisfactory to Mortgagee. Mortgagor agrees to maintain such other insurance and
in such amounts and on such terms as Mortgagee reasonably requests. If a
structure which is part of the Premises is within a flood hazard area, Mortgagor
agrees to carry flood insurance to the extent required under applicable law or
by Mortgagee. Mortgagor agrees to keep all buildings and improvements under
construction insured under a Builder's Risk, Completed Value, non-reporting form
of policy which provides coverage for "completion and/or premises occupancy."
All insurance will (i) be written with a standard mortgagee clause by companies
of recognized responsibility authorized to write such insurance in Massachusetts
and having a Best's financial rating of B or better, (ii) be in amounts and on
forms satisfactory to Mortgagee, (iii) be payable in case of loss to Mortgagee,
as its interest may appear, and (iv) contain a provision that it may not be
cancelled or modified without at least ten (10) days prior written notice to
Mortgagee. Mortgagor agrees to deliver to Mortgagee, when requested,
satisfactory evidence of (a) all existing insurance policies, (b) new policies
for insurance about to expire at least ten (10) days before the expiration and
(c) payment of all insurance premiums. Subject to the rights of the holder of
any prior mortgage, after demand by Mortgagee, Mortgagor agrees (x) to deposit
with Mortgagee on each day that interest payments are required by the terms of
the Loan Documents, a sum equal to that fraction of insurance premiums payable
each year estimated by Mortgagee to be sufficient to provide, in total, a sum
adequate to pay the insurance premiums when due, (y) to deposit with Mortgagee
the balance necessary to pay the insurance premiums in full before they are due
and (z) to forward to Mortgagee bills for the insurance premiums as soon as they
are received by Mortgagor.
1.2 TAXES. To pay or cause to be paid, before the last
day on which payment may be made without penalty or interest (the "Payment
Date") all taxes (or payments in lieu of taxes), special or general assessments,
water and sewer charges and other municipal charges with respect to the Premises
("Taxes"), except for Taxes which Mortgagor is contesting in good faith for
which adequate reserves have been made. After the occurrence of an Event of
Default and upon written demand by Mortgagee, Mortgagor agrees (i) to deposit
with Mortgagee on each day that interest payments are required by the terms of
the Loan Documents, a sum equal to that fraction of the Taxes for each year
estimated by Mortgagee to be sufficient to provide, in total, a sum adequate to
pay the Taxes on the Payment Date, (ii) to deposit with Mortgagee the balance
necessary to pay the Taxes in full before the Payment Date and (iii) to forward
to Mortgagee bills
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for the Taxes as soon as they are received by Mortgagor. Mortgagee may invest
all sums deposited by Mortgagor for its own account without obligation to pay
interest to Mortgagor.
1.3 MORTGAGES AND ENCUMBRANCES. To keep the title to the
Premises free of all mortgages and other encumbrances except (i) the lien for
Taxes not yet due, (ii) the lien for Taxes being contested in good faith for
which adequate reserves have been made, (iii) encumbrances assented to by
Mortgagee, (iv) encumbrances which individually do not exceed $5,000.00 and (v)
encumbrances for more than $5,000.00 which are not discharged, satisfied, stayed
or bonded within thirty (30) days after Mortgagor becomes aware of the existence
of such encumbrances.
1.4 MAINTENANCE AND USE OF PREMISES. To maintain the Premises
in substantially the same condition as they now are or may be in the future,
reasonable wear and tear excepted. Mortgagor agrees not to permit (i) removal,
demolition or other waste of the Premises, (ii) lapse or revocation of any
material license, permit or other governmental authorization issued with respect
to the Premises, (iii) material change in the structure or use of the Premises
or (iv) violation in any material respect of a law or ordinance affecting the
Premises or its use. At Mortgagee's request, Mortgagor agrees to provide
evidence of compliance with the provisions of this or any other covenant in the
Loan Documents.
1.5 LEASES. To deliver to Mortgagee for examination and copying
originals of all leases, licenses, franchises and other agreements under which a
person occupies any part of the Premises ("Leases"). Mortgagor assigns the
Leases and all rent, income, fees and other amounts due Mortgagor under the
Leases ("Rents") to Mortgagee as additional security for the Obligations.
Mortgagor grants to Mortgagee full power, as irrevocable attorney-in-fact of
Mortgagor, to execute and deliver assignments of the Leases and the Rents to
itself, to any future holder of this Mortgage or to any person claiming title to
the Premises as a result of foreclosure proceedings in the event Mortgagor fails
to do so. When an Event of Default exists, Mortgagee may, without waiving any of
its other rights, collect the Rents and enforce all obligations of tenants under
the Leases without taking possession of the Premises and without performing any
obligations of the landlord under the Leases.
1.6 ENVIRONMENTAL LAWS AND COMPLIANCE. To comply with and to
cause the Premises to comply in all material respects with all applicable
Federal, state and local laws, codes, ordinances, rules, regulations and
interpretations now or in the future existing, and all applicable orders of
administrative agencies including, but not limited to, the Comprehensive
Environmental Response Compensation and Liability Act, the Resource Conservation
and Recovery Act of 1976, the Superfund Amendments and Reauthorization Act of
1986 and Massachusetts General Laws, Chapters 21C and 21E, relating to the
environment, health, safety, sanitation, underground storage tanks and the
"release or threat of release" of Hazardous Materials (the "Environmental
Laws"). The term "Hazardous Materials" means (i) lead paint, asbestos, radon and
(ii) "oil", "hazardous materials", "hazardous wastes" and "hazardous substances"
as those terms are defined in the Environmental Laws.
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1.6.1 COPIES OF NOTICES. To give to Mortgagee,
immediately, copies of all notices, reports, citations and other communications
given or received by Mortgagor in connection with any Environmental Laws whether
or not relating to the Premises.
1.6.2 TESTING AND REMEDIATION. Provided Mortgagee has
reasonable grounds to believe that Hazardous Materials have been released at the
Premises in amounts in excess of reportable thresholds, Mortgagee or its agents
may enter the Premises at any time and perform, or may require Mortgagor to
deliver to Mortgagee, whatever tests it considers necessary to determine the
existence or non-existence of Hazardous Materials. If Hazardous Materials exist
on the Premises in amounts exceeding reportable thresholds and such Hazardous
Materials are not contained and/or removed in accordance with applicable law by
Mortgagor within 30 days after receipt of notice thereof from Mortgagee or if
such Hazardous Materials cannot be contained and/or removed within such period,
Mortgagee has not commenced containment and/or removal and does not continue to
prosecute such containment and/or removal with reasonable diligence (in any
event such containment and/or removal must be completed within 180 days after
notice thereof from Mortgagee), Mortgagee has the right (but not the obligation)
to cause the Hazardous Material to be contained and/or removed, and, using
contractors of its choice, to enter the Premises to perform any remedial action
it considers necessary, all without incurring liability to Mortgagor for any
action taken by Mortgagee or its agents, except for liability incurred by
Mortgagor resulting from Mortgagees gross negligence.
1.7 INDEMNIFICATION. To defend, indemnify and hold Mortgagee
and its directors, officers, agents and employees harmless against all claims,
losses and liabilities, including reasonable attorneys' fees and costs of
litigation (but not including consequential, special, exemplary or punitive
damages), incurred by Mortgagee on account of (i) Mortgagor's failure to comply
with Environmental Laws, (ii) a release or threat of release of Hazardous
Materials on the Premises, (iii) any activity on or condition of the Premises
which requires removal, remediation or corrective action under applicable
Environmental Laws and (iv) any future law, regulation, judicial order or
governmental action affecting the Premises.
1.8 ALIENATION. Not to cause or permit, directly or indirectly,
whether voluntarily or by operation of law, (i) title to all or part of the
Premises to become vested in a person other than Mortgagor, or (ii) all or part
of the Premises to become subject to the provisions of Massachusetts General
Laws, Chapter 183A relating to condominiums. If any of the changes described
above occur, in addition to exercising remedies available to it, Mortgagee may,
at its option and without notice to Mortgagor, deal with the successor in
interest with reference to this Mortgage and the Obligations in the same manner
as with Mortgagor, without reducing or discharging Mortgagor's liability for the
Obligations.
SECTION 2 - EVENTS OF DEFAULT. The occurrence of one or more of the
following events or conditions is an Event of Default and a breach of the
condition of this Mortgage:
(i) The failure to pay an Obligation when due and, except in the
case of a demand Obligation, the continuation of the failure beyond an
applicable period of notice or grace;
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(ii) The failure, other than in the payment of money, to perform or
observe an Obligation which continues beyond an applicable period of notice or
grace;
(iii) A statement, certificate, report, financial statement,
representation or warranty made or furnished to Mortgagee by a party to the Loan
Documents or in compliance with the provisions of the Loan Documents proves to
have been false or incomplete in any material respect when made;
(iv) Mortgagor or a guarantor of the Obligations (a) is or becomes
insolvent within the meaning of the Massachusetts Uniform Commercial Code; (b)
files a petition in bankruptcy or a petition to take advantage of an insolvency
act; (c) makes an assignment for the benefit of its creditors; (d) consents to
the appointment of a receiver or custodian of itself or of the whole or a
substantial part of its property; (e) is named debtor party in an involuntary
bankruptcy proceeding and the proceeding is not dismissed within sixty (60)
days; (f) files a petition or answer seeking reorganization or arrangement under
a Federal or state law; or (g) dies, dissolves or terminates its existence;
(v) With respect to Mortgagor or a guarantor, and without the
consent of either, a court enters an order (a) appointing a receiver or
custodian of either or of the whole or a substantial part the property of
either, or (b) approving a petition filed against either seeking reorganization
or arrangement under a Federal or state law, and the order is not vacated, set
aside or stayed within sixty (60) days after it is entered;
(vi) Under a law for the relief or aid of debtors, a court assumes
custody or control of Mortgagor or a guarantor or of the whole or a substantial
part of the property of either, and the custody or control is not terminated or
stayed within sixty (60) days after the date it is assumed;
(vii) A court enters final judgment against Mortgagor or a guarantor
for the payment of money, and within sixty (60) days after entry of the judgment
Mortgagor or the guarantor does not (a) discharge the judgment or provide for
its discharge in accordance with its terms, or (b) procure a stay of execution
and within the (60) day period, or such longer period during which execution of
the judgment has been stayed, appeal and cause the execution to be stayed during
the appeal;
(viii) The failure by Mortgagor or a guarantor (a) to pay when due
the principal of, or interest or premium on, any indebtedness (other than an
Obligation) incurred or assumed by Mortgagor or the guarantor for money borrowed
or for the acquisition of property or (b) to perform or observe any of the
obligations which are imposed on Mortgagor or the guarantor by an agreement
securing or evidencing the indebtedness or under which the indebtedness is
issued, and in either case the failure is not cured within an applicable period
of grace or notice; or
(ix) The occurrence of an Event of Default under the Loan Documents.
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SECTION 3 - RIGHTS AND REMEDIES. Without prejudice to Mortgagee's
rights with respect to Obligations payable on demand, if an Event of Default
exists, Mortgagee may, without notice except to the extent notice is required by
law, exercise the rights and remedies provided in this Section 3, conferred by
law or under the Loan Documents with respect to the Premises, Mortgagor or any
other person. Mortgagee's rights and remedies are cumulative and not exclusive
of or alternative to any rights or remedies it would otherwise have. A delay or
failure by Mortgagee in exercising or enforcing its rights or remedies does not
constitute a waiver.
3.1 REMEDIES. Whenever an Event of Default exists, Mortgagee may:
(i) Declare the Obligations immediately due and payable, without
presentment, notice, protest or further demand, all of which are hereby
expressly waived;
(ii) Exercise the STATUTORY POWER OF SALE;
(iii) Initiate actions or proceedings available to Mortgagee under
applicable law to protect its interest in the Premises and the Obligations; or
(iv) Petition for the appointment of a receiver of the Premises,
which appointment may be made ex parte and without notice except to the extent
notice is required by law, without regard to the solvency of Mortgagor or a
guarantor at the time of application for the receiver and without regard to the
value of the Premises.
3.2 RECEIVER. Effective upon the occurrence of an Event of Default,
Mortgagor consents to the appointment of Mortgagee or other qualified person as
receiver, to take possession of and to operate the Premises and to collect the
Rents. Notwithstanding the appointment of a receiver or other custodian,
Mortgagee is entitled, as pledgee, to the possession and control of all cash,
deposits and instruments at the time payable or deliverable under this Mortgage.
3.3 SPECIFIC PERFORMANCE. Failure by Mortgagor to perform its
agreements contained in the Loan Documents will result in irreparable harm to
Mortgagee for which Mortgagee has no adequate remedy at law. Therefore,
Mortgagor agrees that its agreements contained in the Loan Documents are
specifically enforceable by Mortgagee.
3.4 FORECLOSURE SALES. Mortgagee has the right in case of a sale which
it is entitled to make, to sell the Premises at public auction, either as a
whole or by parcels and without regard to other collateral now or in the future
securing the Obligations. In the case of a sale by parcels, the purchaser of a
parcel will take good title, even if a sum may already have been realized from
the sale of other parcels sufficient to satisfy all the Obligations. The
foreclosure sale may be held at the offices of Mortgagee or on or near the
Premises, without notice or demand, except to the extent notice or demand is
required by law.
3.5 FORECLOSURE EXPENSES, SURPLUS. If (i) foreclosure, bankruptcy or
other legal proceedings involve Mortgagee's interest under this Mortgage,
whether the proceedings are begun
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by Mortgagee or others and whether the proceedings are suspended or terminated
or the Premises redeemed, or (ii) Mortgagee takes possession of the Premises,
Mortgagee will be entitled to collect and Mortgagor agrees to reimburse
Mortgagee for all expenses, including reasonable attorneys' fees, incurred by
Mortgagee in the foreclosure, bankruptcy or other legal proceeding or in the
maintenance, protection and management of the Premises. If surplus proceeds are
realized from a foreclosure sale, Mortgagee will not be liable for interest on
the proceeds pending distribution, and all costs and reasonable attorneys' fees
incurred by it in proceedings to determine the person or persons entitled to the
surplus will be paid from the surplus proceeds.
3.6 FORBEARANCE NOT A WAIVER. The liability of Mortgagor will not be
reduced, the priority of this Mortgage will not be affected, and the rights of
Mortgagee with respect to Mortgagor or the security for the Obligations will not
be impaired by any of the following events, regardless of whether Mortgagee
receives additional consideration: (i) the sale of all or part of the Premises,
(ii) a forbearance by Mortgagee, (iii) an extension of the time for payment or
performance of the Obligations, (iv) a release of security for or a guarantor of
the Obligations or (v) an indulgence given by Mortgagee to Mortgagor or to any
other person having an interest in the Premises or liable for the Obligations.
Mortgagor waives notice of any extension, forbearance or indulgence and agrees
that no waiver, express or implied, by Mortgagee of a default by a party to the
Loan Documents will constitute a waiver of a future default in the same or any
other provision of the Loan Documents.
3.7 INSURANCE POLICIES. If this Mortgage is foreclosed, Mortgagor
grants to Mortgagee full power, as irrevocable attorney-in-fact of Mortgagor, to
cancel the insurance required to be maintained by Mortgagee under this Mortgage,
retain the return premiums and apply them to the Obligations or to transfer the
insurance to a person claiming title to the Premises as a result of foreclosure
proceedings.
SECTION 4 - DAMAGE TO PREMISES. Mortgagor appoints Mortgagee as its
irrevocable attorney-in-fact (i) to adjust and to settle claims on account of
damage to the Premises resulting from a taking or casualty, (ii) to receive all
condemnation and insurance proceeds ("Proceeds") arising out of the damage and
(iii) to endorse in favor of itself or any other person drafts or checks for
Proceeds received by it. Provided no Event of Default exists under the Loan
Documents, all Proceeds will be applied by Mortgagee, to the cost of restoring
the Premises. Mortgagee may, in its discretion, (a) pay the Proceeds to
Mortgagor for application to the cost of the work, or (b) advance the Proceeds
from time to time to Mortgagor and/or its contractor for application to the cost
of the work as the cost is certified to Mortgagee by an architect or contractor
in charge of the restoration who has been approved in writing by Mortgagee.
Mortgagee is not obligated to make advances if, as a result, the balance of the
Proceeds are or will become less than the amount specified in the architect's or
contractor's certificate as the amount required to complete the restoration.
Upon receipt by Mortgagee of satisfactory evidence that the restoration has been
completed, that the cost of all labor and materials has been paid in full and
that there are no liens on the Premises and if no Event of Default exists,
Mortgagee agrees to pay the balance of the Proceeds held by it to Mortgagor. If
the Proceeds held by
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Mortgagee are insufficient to pay the entire cost of restoration, Mortgagor
agrees to pay the deficiency on demand. After the occurrence of an Event of
Default under the Loan Documents, Mortgagee may, at its option, apply all
Proceeds to the Obligations, whether or not then due, in any order Mortgagee
determines.
SECTION 5 - PAYMENTS BY MORTGAGEE. Mortgagee is authorized but not obligated
(i) to pay all Taxes with accrued interest, penalties and charges, (ii) to pay
the premiums for insurance required under the Loan Documents, (iii) to incur and
pay reasonable expenses, including attorneys' fees, in protecting its rights
under the Loan Documents, and maintaining, protecting or managing the collateral
securing the Obligations, (iv) to pay indebtedness secured by a mortgage of real
estate or security interest in property or Fixtures included as part of the
Premises, (v) to add all amounts paid or incurred for the above purposes to the
principal amount of the Obligations, and (vi) to apply to the above purposes or
to the repayment of amounts paid by Mortgagee, sums paid under the Loan
Documents as interest or principal. The amounts paid by Mortgagee will bear
interest at the highest rate payable under the Loan Documents and will be
payable on demand.
SECTION 6 - ENTRY BY MORTGAGEE. Mortgagee or its agents may enter the
Premises at any time upon reasonable advance notice, before or after an Event of
Default, to inspect the Premises, to appraise the Premises, to determine
compliance with the provisions of the Loan Documents and to take any action
while on the Premises authorized under this Mortgage or which it considers
necessary to preserve the value of the Premises. Entry by Mortgagee for the
purposes authorized under this Section will not be considered entry for any
other purpose or constitute possession of the Premises. Mortgagor agrees to
reimburse Mortgagee on demand for all expenses incurred in connection with an
entry made under this Section, including the cost of appraisal, testing,
remedial action or other activities by Mortgagee or its agents while on the
Premises other than expenses attributable to Mortgagee's gross negligence.
SECTION 7 - NOTICES AND COMMUNICATIONS. All notices, demands, requests and
other communications provided for or permitted under this Mortgage must be in
writing and be delivered by hand or sent by telecopy, nationally recognized and
reputable overnight delivery service, express mail, certified mail or
first-class mail, postage prepaid, to the parties, respectively at the following
addresses:
(a) If to Mortgagee, at the address stated at the beginning of this
Mortgage (or at such other address as Mortgagee designates in writing to
Mortgagor), with a copy to the persons Mortgagee designates in writing to
Mortgagor, or
(b) if to Mortgagor, at the address stated at the beginning of this
Mortgage (or at such other address as Mortgagor designates in writing to
Mortgagee) with a copy to the persons Mortgagor designates in writing to
Mortgagee.
A communication provided for in this Mortgage will become effective only when
the person to whom it is given receives it or is considered to have received it.
If it is mailed by express,
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certified or first-class mail, it will be considered to be received on (i) the
second business day after being mailed or (ii) the day of its receipt, whichever
is earlier. If given by telecopy, it will be considered to be received when
confirmation of complete receipt is received by the transmitting person during
normal business hours on a business day, or on the next business day if
confirmation is received after normal business hours.
SECTION 8 - MISCELLANEOUS PROVISIONS. The following miscellaneous provisions
are applicable to this Mortgage:
8.1 SUCCESSORS AND ASSIGNS. The term "Mortgagee" includes
Mortgagee, its successors and assigns, and any subsequent holder or holders of
this Mortgage. The term "Mortgagor" includes Mortgagor and any subsequent owner
or owners of the equity of redemption of the Premises assented to by Mortgagee.
All of the agreements of Mortgagor are binding upon the successors and assigns
of the original Mortgagor and any person claiming under Mortgagor.
8.2 AMENDMENT. This Mortgage may not be amended except by
written agreement signed by Mortgagor and Mortgagee.
8.3 HEADINGS. The headings contained in this Mortgage are for
reference purposes only and do not affect the meaning or interpretation of this
Mortgage.
8.4 GOVERNING LAW. This Mortgage will be construed under and
governed by the laws of the Commonwealth of Massachusetts.
8.5 SEVERABILITY. If a provision of this Mortgage is held to be
invalid or unenforceable, the provision will be enforceable to the extent that a
court, after limiting or reducing it, considers it reasonable to enforce the
provision. If it is held to be unreasonable to enforce the provision to any
extent, the provision will be severed from this Mortgage and the remainder of
this Mortgage will continue in effect.
8.6 DISCHARGE. Upon satisfaction of the Obligations, Mortgagee
will execute and deliver to Mortgagor a discharge of mortgage in recordable
form.
SECTION 9 - CONSENT TO JURISDICTION; WAIVERS. MORTGAGOR IRREVOCABLY AND
UNCONDITIONALLY (i) SUBMITS TO PERSONAL JURISDICTION IN THE COMMONWEALTH OF
MASSACHUSETTS OVER ANY ACTION OR PROCEEDING ARISING OUT OF THE LOAN DOCUMENTS,
AND (ii) WAIVES ALL PERSONAL RIGHTS UNDER THE LAWS OF ANY STATE (a) TO TRIAL BY
JURY, (b) TO OBJECT TO JURISDICTION WITHIN THE COMMONWEALTH OF MASSACHUSETTS OR
VENUE IN A PARTICULAR FORUM WITHIN THE COMMONWEALTH OF MASSACHUSETTS AND (c) TO
CLAIM OR RECOVER ANY DAMAGES OTHER THAN ACTUAL DAMAGES INCLUDING SPECIAL
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES. MORTGAGOR AGREES THAT, IN ADDITION
TO METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER
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APPLICABLE LAW, SERVICE MAY BE MADE BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
DIRECTED TO MORTGAGOR AT THE ADDRESS PROVIDED IN SECTION 7, WHICH SERVICE WILL
BE COMPLETE FIVE (5) DAYS AFTER BEING MAILED. This provision may not be
construed to prevent Mortgagor from bringing an action or proceeding or
exercising its rights in any other jurisdiction. Mortgagor acknowledges that it
has been informed by Mortgagee that the provisions of this Section constitute a
material inducement upon which Mortgagee has relied, is relying and will rely in
entering into this Mortgage and the other Loan Documents, and that it has
reviewed the provisions of this Section with its counsel. Either party may file
an original counterpart or a copy of this Section with any court as written
evidence of the consent of Mortgagor and Mortgagee to the waiver of their rights
to trial by jury.
WITNESS the execution hereof under seal this ______ day of April, 1996.
SPECTRAN CORPORATION
By:/s/Glenn E. Moore
-------------------
Its President
By:/s/ Bruce A. Cannon
-------------------
Its Treasurer
COMMONWEALTH OF MASSACHUSETTS
Worcester, ss. April 25, 1996
Then personally appeared the above-named Glenn Moore, its President,
and acknowledged the foregoing instrument to be the free act and deed of
SPECTRAN CORPORATION, before me.
/s/
----------------------
Notary Public
My Commission Expires:
--------------
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COMMONWEALTH OF MASSACHUSETTS
Worcester, ss. April 25, 1996
Then personally appeared the above-named Bruce A. Cannon, its
Treasurer, and acknowledged the foregoing instrument to be the free act and deed
of SPECTRAN CORPORATION, before me.
/s/
----------------------
Notary Public
My Commission Expires:
--------------
11
<PAGE> 1
PLEDGE AGREEMENT
This PLEDGE AGREEMENT is made this 25th day of April, 1996 and
is among SPECTRAN CORPORATION, having a place of business at 50 Hall Road,
Sturbridge, Massachusetts ("Borrower"); FLEET NATIONAL BANK, having a place of
business at 370 Main Street, Worcester, Massachusetts ("Lender") and FLEET
INVESTMENT ADVISORS, having a place of business at 75 State Street, Boston,
Massachusetts ("Agent").
In order to induce Lender to make a loan in the amount of
$22,000,000.00 (the "Loan") to Borrower and its subsidiaries pursuant to various
notes issued by Borrower and its subsidiaries to Lender dated of even date
herewith (the "Notes") and in consideration thereof and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Pledge of Collateral.
1.1 In order to secure the payment and satisfaction of all sums
due under the Loan and all documents executed in connection therewith, including
the Notes and this Pledge Agreement (the "Documents") and in order to secure the
performance of all of the obligations of Borrower and its subsidiaries under the
Documents, Borrower hereby pledges, assigns, transfers to Lender, grants to
Lender a continuing security interest in and delivers (in the case of
certificated securities of which Borrower is in possession) to Lender the
shares, securities or other property described in Exhibit A attached hereto and
any and all replacements and proceeds thereof (the "Pledged Collateral"). The
Pledged Collateral is held in Borrower's account (#0000610770) with Agent (the
"Account").
2. Rights and Remedies.
2.1 So long as (i) no Event of Default shall have occurred
under the Documents and (ii) Borrower is in compliance with its obligations
under the Documents, Borrower shall be entitled to (a) receive all sums paid in
respect of interest, dividends, or any other distributions on the Pledged
Collateral (whether in the form of cash payments, additional shares,
reclassified or readjusted shares or otherwise) (b) exercise any and all voting
rights as owner of the Pledged Collateral, and (c) sell and/or trade the Pledged
Collateral, provided all of Borrower's investments must be in accordance with
the parameters set forth in Exhibit 6.02(l) to the Loan Agreement. Other than as
set forth above, Borrower acknowledges that it will not give any instructions to
otherwise deal with any of the Pledged Collateral not specifically provided in
the preceding sentence without the prior written consent of Lender.
2.2 If an Event of Default under the Documents shall have
occurred, Lender shall have the following rights and remedies in addition to the
rights and remedies of a secured party under the Uniform Commercial Code, all
such rights and remedies being cumulative, not exclusive, and enforceable
alternatively, successively or concurrently, at such time or times as Lender
deems expedient:
<PAGE> 2
(i) Lender may demand, sue for, collect or make any compromise
or settlement Lender deems suitable in respect of the Pledged Collateral;
(ii) Lender may sell, resell, assign, deliver, or otherwise
dispose of any or all of the Pledged Collateral, for cash upon such terms at
such place or places, at such time or times and to such entities or other
persons as Lender deems expedient, all without demand for performance by
Borrower or any notice or advertisement whatsoever, except as expressly provided
herein; and
(iii) Lender may cause all or any part of the Pledged
Collateral to be transferred into its name or the name of its nominee or
nominees.
2.3 In the event of any private sale of the Pledged Collateral,
Lender shall give Borrower ten (10) days prior written notice of the time after
which any private sale is to be made. In the event of any disposition other than
a private sale no notice will be required. Borrower hereby acknowledges that ten
(10) days prior written notice of private sale shall be reasonable notice.
Lender may enforce its rights hereunder without any other notice and without
compliance with any other condition precedent now or hereafter imposed by
statute, rule of law or otherwise (all of which are hereby expressly waived by
Borrower to the fullest extent permitted by law). Lender may apply the cash
proceeds actually received from any sale or other disposition to the reasonable
expenses of retaking, holding, preparing for sale, selling and the like, to
reasonable attorneys' fees, and other expenses which may be incurred by Lender
in attempting to collect the Loan or to enforce the Documents or in the
prosecution or defense of any action or proceeding related to the subject matter
of the Documents and then to the Loan in such order or preference as Lender may
determine.
3. Covenants and Warranties.
3.1 Borrower agrees to reimburse Lender, on demand, for any
amounts paid or advanced by Lender for the purpose of preserving the Pledged
Collateral or any part thereof and/or any liabilities or expenses incurred by
Lender as the transferor or holder of the Pledged Collateral.
3.2 Lender shall be under no duty to: (i) collect or protect
the Pledged Collateral or any proceeds thereof or give any notice with respect
thereto; (ii) preserve the rights of Borrower with respect to the Pledged
Collateral against third parties; (iii) preserve rights against any parties to
any instrument or chattel paper which may become a part of the Pledged
Collateral; (iv) sell or otherwise realize upon the Pledged Collateral; or (v)
seek payment from any particular source. Without limiting the generality of the
foregoing, Lender shall not be obligated to take any action in connection with
any conversion, call, redemption, retirement or other event relating to any of
the Pledged Collateral.
3.3 Borrower agrees to and hereby instructs Agent to comply at
all times with the covenants set forth in Section 4 of this Pledge Agreement.
2
<PAGE> 3
4. Agent.
4.1 Agent is hereby instructed to make an appropriate entry in
its records, either in writing or electronically, to register the pledge of the
Pledged Collateral to Lender and to the extent it is holding certificated
securities, to hold such securities in its possession on behalf of Lender and to
take any other action necessary in order to perfect Lender's security interest
in the Pledged Collateral. Agent represents and warrants to Lender that it has
taken all necessary action, including making entries in its records reflecting
Lender's security interest in the Pledged Collateral held by Agent in the
Account and shall maintain such book entries with respect to the Pledged
Collateral until it shall have received from Lender written acknowledgment that
the security interest granted to Lender by this Pledge Agreement has been
terminated.
4.2 Agent shall, at all times hereafter, become and irrevocably
remain agent for, and custodian of possession of, all Pledged Collateral in the
Account only on behalf of Lender, in its capacity as assignee and secured party
of Borrower for purposes of maintaining custody of the Pledged Collateral on
behalf of Lender to assure continuing perfection of the pledge, assignment, and
security interest granted hereby and to satisfy the terms and conditions of this
Pledge Agreement.
4.3 All fees, costs, and expenses due, or to become due to
Agent on account of continued maintenance of the Pledged Collateral, shall at
all times, however, remain Borrower's responsibility, without charge to Lender,
and Lender shall have no liability to Agent in the event of dispute, or claim by
Agent against Borrower upon any matter arising out of, or related to, the
Pledged Collateral.
4.4 Agent shall not allow assignment, sale (except in
accordance with Section 2.1 hereof and the investment parameters set forth in
Exhibit 6.02(l) to the Loan Agreement), or hypothecation of the Pledged
Collateral without the express written consent of Lender, nor to itself set-off
or debit any Pledged Collateral, or proceeds of sale thereof, upon claims or
liabilities of Borrower or any other party to it. At Borrower's request, Agent
may substitute certain of the Pledged Collateral with other shares, securities
or other property which meet the investment parameters set forth in Exhibit
6.02(l) to the Loan Agreement and Agent may facilitate such substitutions and
will take all necessary steps to perfect Lender's security interest in such
substituted Pledged Collateral. The Pledged Collateral may not be liquidated and
the proceeds disbursed to Borrower or any other person or entity without
Lender's prior written consent. Unless and until Agent has received written
notice from Lender that an Event of Default has occurred under the Documents,
Borrower shall be entitled to receive and Agent shall pay to Borrower promptly
after receipt, all sums paid in respect of interest, dividends, or any other
distributions on the Pledged Collateral (whether in the form of cash payments,
additional shares, reclassified or readjusted shares or otherwise), exercise any
and all voting rights as owner of the Pledged Collateral, and sell and/or trade
the Pledged Collateral.
4.5 In case any of the Pledged Collateral shall be attached,
garnished or levied upon pursuant to an order of court, or the delivery thereof
shall be stayed or enjoined by an order
3
<PAGE> 4
of court or any other order, judgement or decree shall be made or entered by any
court affecting such Pledged Collateral or any part thereof, or any act of
Agent, Agent is hereby expressly authorized in its reasonable discretion to obey
and comply with all final writs, orders, judgments or decrees so entered or
issued by any court without the necessity of inquiry whether such court had
jurisdiction; and in case Agent obeys or complies with any such writ, order,
judgment or decree, Agent shall not be liable to any of the parties hereto or to
any other person, firm or corporation by reason of such compliance. Agent shall
give written notice promptly to Lender and Borrower if all or any part of the
Pledged Collateral shall be attached, garnished, levied upon or otherwise made
the subject of judicial action. Should any dispute arise with respect to the
Pledged Collateral held by Agent and/or ownership or right of possession of such
Pledged Collateral or as to the existence of any Event of Default under the
Documents, Agent is authorized and directed to retain in its possession without
liability to anyone all (or the portion thereof subject to the dispute) of the
Pledged Collateral, then in its possession until such dispute shall have been
settled either by mutual agreement of the parties or by a final order, decree or
judgement of a court of competent jurisdiction in the United States of America
and time for appeal has expired and no appeal has been perfected, provided,
however, Agent shall be under no duty to institute or defend any such
proceedings.
4.6 Agent may resign at any time upon at least thirty (30) days
written notice to Lender and Borrower. In the event that Agent shall so resign
or shall for any reason be unable to or unwilling to act as Agent hereunder,
then Lender shall appoint a successor agent. Agent and Borrower shall take any
and all action (including delivery of the Pledged Collateral to the successor
agent) and sign, seal, execute, acknowledge and deliver any and all documents
necessary or convenient in the opinion of the succeeding agent to transfer title
to all of the Pledged Collateral to such successor. Notwithstanding the
foregoing, in no event will Agent's resignation or removal be effective unless
and until a successor agent has been appointed in accordance with the terms
hereof.
4.7 Agent shall provide Lender and Borrower with information
reasonably required by Lender with respect to the value of the Pledged
Collateral, income earned thereon or compliance with this Section 4. Agent shall
provide to Lender and Borrower within fifteen (15) days of the end of each month
a report setting forth (i) the value of the Pledged Collateral, (ii) the income
earned thereon, and (iii) such other information as Lender may reasonably
request in order to monitor Borrower's compliance with the terms hereof.
4.8 Agent hereby represents and warrants to Lender that: (i)
the Pledged Collateral is made up of "certificated securities" as that term is
defined in Section 8-102 of the Uniform Commercial Code (the "Code") and the
Pledged Collateral is registered in the name and is subject to the exclusive
control of The Depository Trust Company ("DTC") or its nominee; (ii) Agent is a
"financial intermediary" as that term is defined in Section 8-313(4) of the Code
and is not a "clearing corporation", as that term is defined in Section 8-102(3)
of the Code; (iii) appropriate entries have been made on the books of DTC to
reflect that the Pledged Collateral is being held by DTC for Agent or for one or
more other financial intermediaries for the benefit of Agent and (iv) Agent is
unaware of any other security interest in, or pledge of, the Pledged
4
<PAGE> 5
Collateral.
4.9 Agent's signature hereto will serve as an acknowledgment
that (i) it has received a copy of a duly executed original of this Pledge
Agreement, (ii) it has received the Pledged Collateral, (iii) the Pledged
Collateral has been delivered to the Account, (iv) it has taken all necessary
steps to perfect Lender's security interest in the Pledged Collateral and (v)
Agent is unaware of any other security interest in, or pledge of, the Pledged
Collateral.
4.10 Borrower hereby irrevocably appoints Agent as Borrower's
true and lawful attorney-in-fact, with full power (a) to sign or endorse the
name of Borrower on any and all of the Pledged Collateral held by Agent
hereunder, (b) to keep the Pledged Collateral held hereunder in the form of
street certificates or in the name of a nominee without indication of any
fiduciary capacity, and (c) in Borrower's name, to sign or execute any other
documents or do any act in furtherance of this Pledge Agreement.
4.11 Borrower agrees to indemnify and hold harmless Agent from
and against any cost, expense, damage or liability which Agent may incur as a
result of compliance herewith except for gross negligence or wilful misconduct.
5. General.
5.1 Each reference herein to Lender shall be deemed to include
its successors and assigns, and each reference to Borrower shall be deemed to
include the heirs, administrators, legal representatives, successors and assigns
of Borrower, all of whom are bound by the provisions hereof. All obligations of
Borrower hereunder shall inure to the benefit of Lender.
5.2 No delay on the part of Lender in exercising any rights
hereunder or failure to exercise the same shall operate as a waiver of such
rights; no notice to or demand on Borrower shall be deemed to be a waiver of any
obligations of Borrower or of the right of Lender to take other or further
action without notice or demand as provided herein. In any event, no
modification or waiver of the provisions hereof will be effective unless in
writing and signed by Lender, nor shall any waiver be applicable except in the
specific instance or matter for which given.
5.3 Each provision of this Pledge Agreement shall be
interpreted in accordance with and in all respects governed by the laws of the
Commonwealth of Massachusetts and should any portion of this Pledge Agreement be
declared invalid for any reason, such declaration shall have no effect upon the
remaining portions of this Pledge Agreement.
5.4 Any notices hereunder shall be deemed given upon delivery
if delivered in hand, and only two (2) days after they have been mailed by
registered or certified mail, postage prepaid, or twelve (12) hours after such
notice has been sent by straight telegram, telegraphic charges prepaid, to the
parties at the addresses set forth below:
5
<PAGE> 6
(i) SpecTran Corporation
50 Hall Road
Sturbridge, MA 01566
(ii) Fleet National Bank
370 Main Street
Worcester, MA 01608
Attention: Senior Commercial Loan Officer
(iii) Fleet Investment Advisors
75 State Street
Boston, MA 02109
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed as a sealed instrument this 25th day of April, 1996.
SPECTRAN CORPORATION
By: /s/ G.Moore
------------------------
Its Duly Authorized Officer
FLEET NATIONAL BANK
By:/s/ John Lynch
------------------------
Its Duly Authorized Officer
FLEET INVESTMENT ADVISORS
By:/s/
------------------------
Its Duly Authorized Officer
6
<PAGE> 7
Exhibit A
PLEDGED COLLATERAL
Pledged Collateral held by Agent in account number: 0000610770
as Agent for Lender:
<TABLE>
<CAPTION>
Par Market Value
Cusip Description Amount (April _, 1996)
- ----- ----------- ------ ---------------
<S> <C> <C> <C>
Total $___________
</TABLE>
7
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 1,037,046
<SECURITIES> 1,228,320
<RECEIVABLES> 8,940,900
<ALLOWANCES> 194,379
<INVENTORY> 7,700,736
<CURRENT-ASSETS> 19,960,554
<PP&E> 25,071,741
<DEPRECIATION> 13,292,551
<TOTAL-ASSETS> 40,804,658
<CURRENT-LIABILITIES> 5,841,779
<BONDS> 0
0
0
<COMMON> 535,405
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 40,804,658
<SALES> 13,472,523
<TOTAL-REVENUES> 13,472,523
<CGS> 8,716,304
<TOTAL-COSTS> 12,444,699
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 186,198
<INCOME-PRETAX> 943,316
<INCOME-TAX> 259,411
<INCOME-CONTINUING> 683,905
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 683,905
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
