Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
__________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8782
GLEASON CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
16-1224655
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
1000 University Avenue, Rochester, New York 14692
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716) 473-1000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( ).
The number of shares outstanding of the registrant's Common
stock, par value $1 per share, at September 30, 1995 was
5,176,982 shares.
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<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
(In thousands)
SEPTEMBER 30 DECEMBER 31
1995 1994
Assets
<S> <C> <C>
Current assets
Cash and equivalents $ 8,183 $ 3,173
Trade accounts receivable 50,035 42,363
Inventories 34,170 11,244
Other current assets 7,418 3,911
Total current assets 99,806 60,691
Property, plant and equipment, at cost 158,647 145,722
Less accumulated depreciation 98,957 92,118
59,690 53,604
Other assets 8,420 6,191
Net assets of discontinued operations 1,418 1,530
Total assets $ 169,334 $ 122,016
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C>
Current liabilities
Short-term borrowings $ 2,312 $ 613
Current portion of long-term debt 23 70
Trade accounts payable 15,312 10,335
Income taxes 2,201 3,324
Other current liabilities 29,354 17,753
Total current liabilities 49,202 32,095
Long-term debt 24,571 2,600
Pension plans and other retiree benefits 42,302 42,543
Other liabilities 3,262 2,579
Total liabilities 119,337 79,817
Stockholders' equity
Common stock 5,796 5,796
Additional paid-in capital 11,837 11,909
Retained earnings 49,260 40,870
Cumulative foreign currency translation adjustment (1,682) (917)
Minimum pension liability adjustment (5,009) (5,009)
60,202 52,649
Less treasury stock, at cost 10,205 10,450
Total stockholders' equity 49,997 42,199
Total liabilities and stockholders' equity $ 169,334 $ 122,016
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
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<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
(In thousands,except
per share amounts)
THREE MONTHS ENDED
SEPTEMBER 30
1995 1994
<S> <C> <C>
Net sales $ 54,550 $ 26,392
Costs and expenses
Cost of products sold 38,472 18,105
Selling, general and
administrative expenses 9,802 5,854
Research and development expenses 1,533 1,053
Interest expense--net 327 3
Other (income)--net (328) (140)
Income before income taxes 4,744 1,517
Provision for income taxes 972 485
Net income $ 3,772 $ 1,032
Weighted average number of common shares
outstanding 5,171,584 5,162,965
Net income per common share $ .73 $ .20
Cash dividends declared per common share $ .125 $ .10
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
(In thousands,except
per share amounts)
NINE MONTHS ENDED
SEPTEMBER 30
1995 1994
<S> <C> <C>
Net sales $ 127,055 $ 77,699
Costs and expenses
Cost of products sold 88,295 56,128
Selling, general and
administrative expenses 22,723 16,386
Research and development expenses 4,231 3,342
Interest (income) expense --net 239 (7)
Other (income)--net (767) (595)
Income from continuing operations before income taxes 12,334 2,445
Provision for income taxes 2,006 745
Income from continuing operations 10,328 1,700
Gain on disposal of discontinued operations -- 1,440
Net income $ 10,328 $ 3,140
Weighted average number of common shares
outstanding 5,168,517 5,162,982
Income per common share:
Income from continuing operations $ 2.00 $ .33
Gain on disposal of discontinued operations -- .28
Net income $ 2.00 $ .61
Cash dividends declared per common share $ .375 $ .30
<FN>
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
(In thousands)
NINE MONTHS ENDED
SEPTEMBER 30
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 10,328 $ 3,140
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 7,594 6,997
(Gain) on disposals of property, plant
and equipment (26) (51)
(Benefit) for deferred income taxes (1,121) (245)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (7,637) 736
(Increase) in inventories (14,106) (9,374)
(Increase) decrease in other current assets (3,537) 1,482
Increase in trade accounts payable 4,958 3,041
Increase in all other current operating
liabilities 2,680 2,657
Other, net 274 (513)
(Gain) on disposal of discontinued operations -- (1,840)
Discontinued operations (435) 2,525
Net cash provided by (used in) operating activities (1,028) 8,555
Cash flows from investing activities:
Capital expenditures (5,087) (1,683)
Acquisition of assets of Hurth (10,582) --
Proceeds from asset disposals 36 3,699
Proceeds from collection of notes receivable 147 3,236
Net cash provided by (used in) investing activities (15,486) 5,252
Cash flows from financing activities:
Proceeds from short-term borrowings 1,689 1,424
Net proceeds (repayments) under
revolving credit agreements 21,700 (11,540)
Proceeds from long-term debt 111 72
(Repayment) of long-term debt (50) (122)
Net stock issues 173 --
Dividends paid (1,938) (1,549)
Net cash provided by (used in)
financing activities 21,685 (11,715)
Effect of exchange rate changes on cash
and equivalents (161) 349
Increase in cash and equivalents 5,010 2,441
Cash and equivalents, beginning 3,173 4,155
Cash and equivalents, ending $ 8,183 $ 6,596
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
GLEASON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(Unaudited)
1. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
necessary to present fairly (a) the results of operations
for the three and nine month periods ended September 30,
1995 and 1994, (b) the financial position at September 30,
1995 and December 31, 1994, and (c) the cash flows for the
nine month periods ended September 30, 1995 and 1994, of
Gleason Corporation and subsidiaries.
2. The results of operations for the three and nine month
periods ended September 30, 1995 are not necessarily
indicative of the results to be expected for the full year.
3. All significant intercompany transactions are eliminated in
consolidation.
4. On July 1, 1995, the Company acquired certain assets of
Hurth Maschinen und Werkzeuge GmbH for approximately $10.6
million in cash. The Company accounted for the acquisition
under the purchase accounting method.
5. The components of inventories were as follows:
(In thousands) 9/30/95 12/31/94
Raw materials and
purchased parts $ 3,719 $ 1,405
Work in process 23,930 6,955
Finished goods 6,521 2,884
$ 34,170 $ 11,244
6. The land and building of the Company's former Alliance Metal
Stamping and Fabricating division are classified as net
assets of discontinued operations at September 30, 1995 and
December 31, 1994.
7. Net cash payments (refunds) for income taxes were $3,487,000
and ($1,398,000) for the nine months ended September 30,
1995 and 1994, respectively. Interest payments were $387,000
and $370,000 for the nine months ended September 30,
1995 and 1994, respectively.
<PAGE>
<PAGE>
GLEASON CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition
The following are management's comments relating to significant
changes in the results of operations for the three and nine month
periods ended September 30, 1995 and 1994 and in the Company's
financial condition during the nine months ended September 30,
1995.
Results of Operations
The Company had net income for the third quarter ended September
30, 1995 of $3,772,000, or $.73 per share, compared to
$1,032,000, or $.20 per share, for the 1994 third quarter. For
the nine months ended September 30, 1995, the Company had net
income of $10,328,000, or $2.00 per share, compared to
$3,140,000, or $.61 per share, in the 1994 nine month period.
Net income for the 1994 period included a gain on the disposal of
discontinued operations of $1,440,000, or $.28 per share.
Order levels for the three and nine month periods ended September
30, 1995 were $69.7 million and $170.9 million versus $43 and
$110 million in the comparable 1994 periods. Orders for the
Company's subsidiary, Hurth Maschinen und Werkzeuge GmbH, which
was acquired on July 1, 1995, totaled $27.2 million for the third
quarter, of which approximately $12.8 million related to a major
program from a single customer. Machine and tooling orders,
excluding Hurth's products, increased in the nine month period 46
percent and 18 percent, respectively. The higher order rate is
attributable to the success of the Company's new products and
improving demand from the Company's overseas markets.
Consolidated backlog at September 30, 1995 increased to $139.3
million from $54.7 million at December 31, 1994. Backlog at
September 30, 1994 was $58.6 million. Orders for Hurth's
products included in the current backlog totaled $54 million.
Net sales were $54,550,000 and $127,055,000 for the three and
nine month periods ended September 30, 1995, compared to
$26,392,000 and $77,699,000 for the comparable 1994 periods. The
1995 third quarter and year-to-date periods included sales of
$13,951,000 from the Company's Hurth subsidiary. Machine product
sales, excluding Hurth, increased 108 percent and 75 percent for
the quarter and nine months compared to the prior year periods.
Shipments of bevel gear production machines were approximately 66
percent higher in both the three and nine month periods ended
September 30, 1995 compared to the prior year period. This
improvement is attributable to higher production volumes in the
light and heavy truck industries, which are the principal users
of bevel gears. In addition, the quality and productivity
advantages offered by the Company's Phoenix line of products,
combined with relatively old age of the installed base of bevel
gear-making equipment, has stimulated demand for replacement
equipment. The higher shipments of bevel machines were
primarily to the Asia/Pacific and North/South American regions.
The Company's parallel axis gear machine sales, excluding Hurth's
products, increased 55 percent and 94 percent for the 1995 three
and nine month periods versus the comparable 1994 periods.
Higher shipments of the Company's 125GH gear hobbing machine
accounted for the majority of this increase. For the nine month
period, shipments of these machines has more than doubled
compared to the prior year. Shipments of parallel axis gear
machines to customers in the U.S. accounted for 80 percent of the
nine month total. With the inclusion of the Hurth machine
product line, shipments of parallel axis gear machinery for the
quarter exceeded, for the first time, those of the Company's
bevel product line. The acquisition of Hurth has added
complementary product lines which strengthen the Company's
position in the parallel axis gear equipment market.
Tooling sales, excluding Hurth products, were higher in 1995 for
both the quarter and nine month periods, increasing 26 percent in
the first nine months of 1995 compared to the same period in
1994. This increase was primarily attributable to higher
shipments of bevel gear cutting tools into all regions, with the
largest portion of this increase being to the U.S. market. Sales
of other products, which include spare parts, service, customer
training, software and application support, increased 11 percent
in the nine months of 1995 compared to the 1994 period primarily
due to higher shipments of spare parts to customers in Europe and
the Asia/Pacific region.
Cost of products sold as a percentage of sales were 70.5 percent
and 69.5 percent for the three and nine month periods ended
September 30, 1995 compared to 68.6 percent and 72.2 percent for
the comparable 1994 periods. The higher cost of sales percentage
in the third quarter compared to last year was due to a larger
percentage of machines in the sales mix. Margins on machines, in
general, are lower than for tooling products. This was partially
offset by an improvement in machine margins for the quarter. The
reduction in the cost of sales percentage for machines for the
three and nine month periods was primarily due to benefits
derived from higher production volumes through the Company's new
factory and improved production efficiencies for many of the new
machine models introduced in 1993 and 1994 which are now in full
production and being manufactured at much lower costs than in the
prior year. Tooling margins also improved due to the operating
leverage created by higher production volumes. Margins in the
fourth quarter of 1995 are expected to be somewhat lower than the
first three quarters of the year due to a higher percentage of
machines in the overall sales mix.
Selling, general and administrative expenses were $9,802,000, or
18.0 percent of sales, and $22,723,000, or 17.9 percent of sales,
for the three and nine month periods ended September 30, 1995.
The comparable 1994 periods were $5,854,000, or 22.2 percent of
sales, and $16,386,000, or 21.1 percent of sales. The decrease as
a percentage of sales is attributable to the higher sales
volumes. The increase in spending levels is due to the addition
of Hurth, the establishment of greater direct sales
representation in Europe, and higher business activity levels.
Commissions paid to outside dealers, as a percentage of sales,
increased with higher sales into regions where the Company is
represented by third party machine dealers.
Research and development expenses were $1,533,000 and $4,231,000
for the three and nine month periods ended September 30, 1995, an
increase compared to the 1994 periods of 46 percent and 27
percent respectively. Development spending for the year is
planned to increase compared to 1994 levels with major projects
including a modernization program for the Company's tooling
products and a new CNC gear testing machine.
For the first nine months of 1995 the Company recorded a tax
provision of $2,006,000, or an effective tax rate of 16.3
percent. The comparable 1994 period had an effective tax rate of
30.5 percent. The 1995 tax provision consisted primarily of
foreign and domestic state taxes. The federal current income tax
provision was offset by a deferred tax benefit resulting in an
increase to the domestic deferred tax asset to approximately $4.9
million at September 30, 1995. Under the provisions of FAS No.
109, the Company has been limited in the amount of the deferred
tax asset it has been able to record based on future income.
Management has determined that it is more likely than not future
income will be sufficient to fully realize the deferred asset
recorded at September 30, 1995. As future domestic income is
generated, additional deferred tax benefits can be recognized.
Liquidity and Capital Resources
Cash and cash equivalents increased $5,010,000 in the first nine
months of 1995 to $8,183,000 at September 30, 1995. The cash on
hand at quarter-end was primarily at the Company's overseas
operating units. Borrowings under the Company's revolving credit
agreements increased to $24 million at September 30, 1995 from
$2.1 million at December 31, 1994. In the third quarter of 1995,
the Company entered into a new three-year $40 million unsecured
revolving credit agreement, of which $10 million of the facility
is allocated to standby letters of credit and bank guarantees.
Unused credit lines with banks, including revolving credit
facilities, totaled $8.9 million at September 30, 1995.
Dividend payments to stockholders totaled $1,938,000 in the nine
months ended September 30, 1995.
For the nine month period ending September 30 ,1995, net cash
used by operating activities totaled $1,028,000 versus net cash
provided by operations of $8,555,000 in the comparable 1994
period. Operating cash flows were reduced in 1995 due to higher
working capital requirements, income tax payments and lower cash
flow from discontinued operations. Higher operating earnings in
1995 partially offset these negative effects on operating
cashflows. The increase in working capital, associated with the
higher business volumes and the addition of the Hurth operations,
included higher inventory and accounts receivable levels and
deposits with vendors, partially offset by increases in accounts
payable. Payments for income taxes totaled $3,487,000 in the
1995 first nine months versus net income tax refunds of
$1,398,000 in the 1994 period. Operating cash flows for the 1994
nine month period were favorably impacted by the liquidation of
inventory and collections of accounts receivable of the Alliance
Metal Stamping and Fabricating division which was closed in the
third quarter of 1994.
Investing activities used $15,486,000 of cash in the 1995 nine
month period versus cash provided of $5,252,000 in the comparable
prior year period. Uses of cash for investing activities in 1995
included the purchase of the assets of Hurth for $10.6 million.
Capital expenditures totaled $5,087,000 through nine months
compared to $1,683,000 in the first nine months of 1994. The
Company expects full year capital spending levels in 1995 to be
somewhat lower than its depreciation expense. Other contributing
factors to the year-to-year variance in cash flows associated
with investing activities included higher proceeds in 1994 from
collections of notes receivable associated with the sales of
former businesses ($147,000 in 1995 versus $3,236,000 in 1994)
and higher proceeds from the sale of assets in 1994 which
included $3,550,000 from the sale of machinery and equipment of
discontinued operations.
The Company's cash balances, presently available lines of
credit, and anticipated funds from operations should be
sufficient to meet its near-term operating and investing
activities. Management believes it will be able to obtain
additional long-term financing if such financing is
required.
Phoenix is a registered trademark of The Gleason Works.
<PAGE>
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Default Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Material Contracts - The credit agreement between
the Company and its subsidiaries and the Chase Manhattan Bank,
N.A. and NBD Bank dated September 29, 1995 is filed as an
exhibit to this Form 10-Q.
(b) Reports on Form 8-K
Amendment No. 1 to the Current Report on Form 8-K
dated June 30, 1995 was filed on Form 8-K/A dated July 10,
1995 for Item 7(c) related to the Company's acquisition of
certain assets of Hurth Maschinen und Werkzeuge GmbH.
Amendment No. 2 to the Current Report on Form 8-K
dated June 30, 1995 was filed on Form 8-K/A dated August 24,
1995 for Items 7(a) and (b) related to the Company's
acquisition of certain assets of Hurth Maschinen
und Werkzeuge GmbH.
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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.
GLEASON CORPORATION
Registrant
DATE: November 10, 1995 John J. Perrotti
John J. Perrotti
Vice President - Finance
(Chief Financial Officer)
WO=ROC12:90899
CREDIT AGREEMENT
dated as of September 29, 1995
among
GLEASON CORPORATION
THE GLEASON WORKS
GLEASON INTERNATIONAL MARKETING CORPORATION
HURTH MASCHINEN UND WERKZEUGE NACHF.GMBH
GLEASON WORKS (HOLDINGS) LIMITED
GLEASON WORKS LIMITED
and
GLEASON WORKS ACQUISITION CORP.
as "Borrowers"
with
THE CHASE MANHATTAN BANK, N.A.
and
NBD BANK
as "Lenders"
and
THE CHASE MANHATTAN BANK, N.A.
as "Agent"
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
PART 1. DEFINITIONS 1
PART 2. REVOLVING CREDIT LOANS 13
2.1 The Commitment. 13
2.2 The Revolving Credit Notes and Foreign Currency Notes 15
2.3 Borrowing Procedure 15
2.4 Interest 16
2.5 Maturity of Revolving Credit Loans and Foreign
Currency Loans 18
2.6 Application of Payments 18
2.7 Fees 18
2.8 Prepayment 19
2.9 Reduction or Termination of Commitment 19
2.10 Additional Costs 19
2.11 HLT Classification 20
2.12 Limitation on Types of Loans 21
2.13 Illegality 21
2.14 Compensation 21
2.15 Survival 22
PART 3. TERM LOANS 22
3.1 Term Loans 22
3.2 Number of Term Loans 23
3.3 Maximum Conversion 23
3.4 Minimum Amount of Term Note 23
3.5 Terms of Repayment 23
3.6 Interest 23
3.7 Application of Payments 24
3.8 Prepayments 24
PART 4. PAYMENT; LATE PAYMENT CHARGES; POST-DEFAULT RATE
OF INTEREST 25
4.1 Payments 25
4.2 Late Payments 25
4.3 Post-Default Rate of Interest 26
4.4 Certain Notices 26
PART 5. CONDITIONS PRECEDENT 27
5.1 Representations and Warranties 27
5.2 Execution and Delivery of Documents
and Opinion of Counsel 27
PART 6. REPRESENTATIONS AND WARRANTIES 27
6.1 Existence, Ownership and Legal Power 27
6.2 Right to Act 28
6.3 Approval by Necessary Organizational Action 28
6.4 Financial Statements 29
6.5 Litigation; Regulatory Compliance 29
6.6 ERISA Compliance 30
6.7 Title and Freedom from Liens 30
6.8 Absence of Default 31
6.9 Taxes 31
6.10 Existing Debts 31
6.11 Margin Stock 31
6.12 Compliance with Conditions Precedent 32
6.13 Interdependent Relationship 32
PART 7. COVENANTS 32
7.1 Punctual Payment 32
7.2 Financial Information 32
7.3 Inspection of Borrowers' Property and Records 34
7.4 Preservation of Borrower's Existence and Business 34
7.5 Payment of Debts and Obligations 34
7.6 Loans and Guaranties by the Primary Borrower 35
7.7 Insurance Coverage 35
7.8 Litigation 35
7.9 ERISA Compliance 35
7.10 FLSA Compliance 35
7.11 Compliance with All Laws, Etc. 35
7.12 Mergers, Acquisitions, Bulk Sales and Reorganization 36
7.13 Subsidiaries 36
7.14 Ownership of Securities 37
7.15 Maintenance of Properties 37
7.16 Notice to Lenders and Agent of Default 37
7.17 Tangible Net Worth 37
7.18 Liabilities to Tangible Net Worth 38
7.19 Working Capital 38
7.20 EBITDA to Funded Indebtedness 38
7.21 Interest Coverage 38
7.22 Restrictions on Use of Proceeds 38
7.23 Certain Indebtedness to Net Worth 38
7.24 Restrictions on Other Borrowings 38
PART 8. GUARANTY 39
PART 9. DEFAULT 41
9.1 Events of Default 41
9.2 Optional Acceleration 44
9.3 Automatic Acceleration 44
9.4 Acceleration of Other Obligations to Lenders 44
PART 10. THE AGENT; RELATIONS AMONG LENDERS AND BORROWER 44
10.1 Appointment, Powers and Immunities of Agent 44
10.2 Reliance by Agent 45
10.3 Defaults 45
10.4 Rights of Agent as a Lender 46
10.5 Indemnification of Agent 46
10.6 Documents 47
10.7 Non-Reliance on Agent and Other Lenders 47
10.8 Failure of Agent to Act 47
10.9 Resignation or Removal of Agent 48
10.10 Amendments Concerning Agency Function 48
10.11 Liability of Agent 48
10.12 Transfer of Agency Function 48
10.13 Non-Receipt of Funds by the Agent 49
10.14 Withholding Taxes 49
10.15 Several Obligations and Rights of Lenders 49
10.16 Pro Rata Treatment of Loans, Etc. 50
10.17 Sharing of Payments Among Lenders 50
PART 11. MISCELLANEOUS 50
11.1 Amendments and Waivers 50
11.2 Usury 51
11.3 Expenses 51
11.4 Survival 52
11.5 Assignment; Participations 52
11.6 Notices 53
11.7 Setoff 53
11.8 Table of Contents; Headings 53
11.9 Severability 53
11.10 Counterparts 54
11.11 Governing Law 54
11.12 Headings 54
11.13 Interpretation 54
11.14 Jurisdiction; Immunities; Agent for
Service of Process 54
11.15 Enforcement of Judgments 55
Exhibits
Exhibit A-1 -- Revolving Credit Note
Exhibit A-2 -- Foreign Currency Note -- Deutsch Mark
Exhibit A-3 -- Foreign Currency Note -- Italian Lire
Exhibit A-4 -- Foreign Currency Note -- Sterling
Exhibit B -- Term Note
Exhibit C-1 -- Notice of Borrowing -- Domestic
Exhibit C-2 -- Notice of Borrowing -- Foreign Currency Loan
Exhibit D -- Notice of Conversion to Term Loan
Exhibit E -- Notice of Conversion of Interest Rate
Exhibit F -- List of Officers and Employees
Authorized to Request Advances
Schedules
Schedule A - List of Closing Documents
Schedule B - List of Subsidiaries
Schedule C - Liens and Encumbrances
Schedule D - Existing Indebtedness
<PAGE>
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of September 29, 1995, is
among GLEASON CORPORATION, a Delaware corporation with its
principal office located at 1000 University Avenue, Rochester,
Monroe County, New York 14692 (the "Primary Borrower"), THE
GLEASON WORKS, a New York corporation with its principal office
located at 1000 University Avenue, Rochester, Monroe County, New
York 14692, GLEASON INTERNATIONAL MARKETING CORPORATION, a
Delaware corporation with its principal office located at 1000
University Avenue, Rochester, New York 14692 (an "Affiliate
Borrower"), HURTH MASCHINEN UND WERKZEUGE NACHF.GMBH, a
corporation organized under the laws of the Federal Republic of
Germany with its principal office located in Munich, Germany (an
"Affiliate Borrower"), GLEASON WORKS (HOLDINGS) LIMITED, a
corporation organized under the laws of the United Kingdom with
its principal office located in Plymouth, England (an "Affiliate
Borrower"), GLEASON WORKS LIMITED, a corporation organized under
the laws of the United Kingdom with its principal office located
in Plymouth, England (an "Affiliate Borrower"), and GLEASON WORKS
ACQUISITION CORP., a Delaware corporation with its principal
office located at 1000 University Avenue, Rochester, New York
14692 (an "Affiliate Borrower") (the Primary Borrower and the
Affiliate Borrowers being hereinafter collectively referred to as
the "Borrowers") and THE CHASE MANHATTAN BANK, N.A., a national
banking association with its principal office located at One
Chase Plaza, New York, New York, 10081 and having a regional
office at One Chase Square, Rochester, New York 14643 (a
"Lender"), NBD BANK, a Michigan banking corporation with its
principal office located at 611 Woodward Avenue, Detroit, Wayne
County, Michigan 48226 (a "Lender") and THE CHASE MANHATTAN BANK,
N.A., as agent for the Lenders (in such capacity, the "Agent").
Lenders, Borrowers and Agent hereby agree as follows:
PART 1. DEFINITIONS
As used in this Agreement, the following words and terms
have the following meanings (all terms defined in this Part 1 or
in other provisions of this Credit Agreement in the singular to
have the same meanings when used in the plural and vice versa):
"Agreement" means this Credit Agreement and all
amendments, modifications and supplements hereto.
"Applicable Exchange Rate" means, at any given time
that it is used in a computation under this Agreement, the
exchange rate which shall be publicly announced from time to time
by a Foreign Currency Lender between U.S. Dollars and a Foreign
Currency which corresponds to a Foreign Currency Loan and which
was or shall be in effect as of the later of: (i) the last
business day of the preceding calendar month, or (ii) the date on
which the Foreign Currency Loan was made; provided further that
if the Facility Obligations equal or exceed ninety percent (90%)
of the Commitment, the Applicable Exchange Rate shall be such
exchange rate in effect as of the last business day of the
preceding calendar week (as reported by the Primary Borrower
pursuant to Section 7.2(h) hereof).
"Applicable Margin" means (i) with respect to Fed
Funds Rate Loans, one percent (1.00%), and (ii) with respect to
Eurodollar Loans, initially four-tenths of one percent (.40%) and
after the Primary Borrower shall have delivered its financial
reports for the Fiscal Quarter ending September 30, 1995 and in
respect of each Fiscal Quarter thereafter, the Applicable Margin
shall be that which is set forth below which corresponds with the
Pricing Ratio based upon the twelve month period ending on the
last day of the preceding Fiscal Quarter for which the Primary
Borrower shall have furnished financial reports in accordance
with Section 7.2(b) hereof and, if the Applicable Margin changes
as a result of such financial reports, effective on the first day
of the calendar month following the day on which such financial
reports shall have been delivered in accordance with Section
7.2(b), provided further that once reset, the Applicable Margin
shall remain in effect for not less than ninety (90) days:
Pricing Ratio Applicable Margin
Less than or equal to 0.50 1.00%
Greater than 0.50 and less than or
equal to 1.75 0.75%
Greater than 1.75 and less than or
equal to 2.50 0.60%
Greater than 2.50 0.40%
PROVIDED FURTHER, however, that the Applicable Margin shall be
increased for all outstanding Loans by 1 percent (1%) on and
after either: (i) the cancellation of the entire Commitment
pursuant to Section 2.9; or (ii) the occurrence of the Expiration
Date.
"Borrowers' Affiliates" means any Subsidiary and any
other Person, now existing or formed hereafter, controlled by the
Primary Borrower or any partners or shareholders of the Primary
Borrower and which is engaged in operations related, directly or
indirectly, to the business of the Primary Borrower.
"Business Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a legal holiday for commercial
banks in the State of New York. When used in connection with
Eurodollar Loans, it shall mean any Business Day on which
commercial banks are also open for domestic and international
business (including dealings in U.S. Dollar deposits) in London,
England.
"Chase" means The Chase Manhattan Bank, N.A.
"Commitment" means, with respect to each Lender, the
obligation of such Lender to make Revolving Credit Loans under
this Agreement in the aggregate principal amount following, as
such amount may be reduced pursuant to 2.9:
Chase: $20,000,000
NBD: $20,000,000
Total: $40,000,000
For the purpose of determining the remaining unused Commitment of
each Lender outstanding at any time there shall be deducted from
the amount of each Lender's Commitment (a) the amount computed by
multiplying such Lender's Pro Rata Commitment by the sum of the
amount of the Letter of Credit Exposure plus the aggregate
principal amount of all Revolving Credit Loans (not including
Foreign Currency Loans), and (b) the aggregate principal amount
of such Lender's Foreign Currency Loans. For the purposes of
such computation, the amount of all Foreign Currency Loans shall
be determined by applying the Applicable Exchange Rate.
"Consolidated Current Assets" means all assets of the
Primary Borrower and any Subsidiaries which should, in accordance
with generally accepted accounting principles consistently
applied, be classified as current assets, but in any event
excluding any assets which are pledged or deposited as security
for, or for the purpose of paying, any Indebtedness which is not
included in Consolidated Current Liabilities, plus LIFO reserve,
minus other current assets.
"Consolidated Current Liabilities" means all
Indebtedness of the Primary Borrower and any Subsidiaries which
should, in accordance with generally accepted accounting
principles consistently applied, be classified as current
liabilities after eliminating inter-company items.
"Consolidated Funded Indebtedness" means all Funded
Indebtedness of the Primary Borrower and any Subsidiaries after
eliminating inter-company items, except that Consolidated Funded
Indebtedness shall include any Indebtedness outstanding pursuant
to and under any of the Credit Agreements.
"Consolidated Interest Expense" means, for any period,
all interest payable and amortization of debt discount with
respect to all Indebtedness, in each case, of the Primary
Borrower and any Subsidiaries, determined on a consolidated
basis, for such period (after giving effect to the net cost
associated with all interest rate swap agreements, interest rate
cap agreements, interest rate collar agreements, or other
financial arrangements designed to protect the Primary Borrower
against fluctuations in interest rates).
"Consolidated Liabilities" means and includes all items
which would be included in determining total liabilities of the
Primary Borrower and any Subsidiaries in accordance with
generally accepted accounting principles consistently applied;
provided, however, that for the purposes of this Agreement,
"Consolidated Liabilities" excludes all Subordinated Debt but
includes without limitation:
(a) all Indebtedness other than Subordinated Debt,
including the Indebtedness evidenced by the Notes and all notes
executed and delivered by the Primary Borrower pursuant to any
Credit Agreement; and
(b) all obligations in respect of lease rentals which,
under generally accepted accounting principles consistently
applied, would be shown in a balance sheet of the obligor as a
liability item.
"Consolidated Net Income" means the net income of
the Primary Borrower and any Subsidiaries, after taxes and after
extraordinary items (but without giving effect to any gain
resulting from the re-appraisal or write-up of any asset unless
such gain results from a cash sale of such asset), as determined
on a consolidated basis in accordance with generally accepted
accounting principles applied on a basis consistent with the
accounting procedures used in preparing the financial statements
referred to in Sections 6.4 and 7.2 hereof.
"Consolidated Net Working Capital" means the amount by
which Consolidated Current Assets exceeds Consolidated Current
Liabilities.
"Consolidated Tangible Net Worth" means the total of
shareholders' equity of the Primary Borrower as it appears on the
consolidated balance sheet of the Primary Borrower, minus the net
carrying value of intangible assets (including, but not limited
to, goodwill, organizational expenses, trademarks, tradenames,
licenses, patents, capitalized research and development costs),
provided, however, that for the purposes of this definition,
cumulative translation gains or losses, as determined in
accordance with FASB Rule 52 and minimum pension liability
adjustments for Borrower's defined benefit and money purchase
pension plans as determined in accordance with FASB 87, and
identified as such in the Primary Borrower's consolidated
financial statements, shall be excluded from the computation of
Consolidated Tangible Net Worth.
"Credit Agreements" means this Agreement and any credit
agreement entered into (or amended and restated) by the Primary
Borrower on the date hereof with any of the Lenders, as amended
hereafter from time to time, or hereafter entered into by the
Primary Borrower with a Lender, provided that, if such Lender
enters into a credit agreement in substantially the same form and
substance as this Agreement, such Lender may enter into the
Intercreditor Agreement with the Lenders in respect of such
credit agreement.
"Default" means any event, condition or act which with
the giving of notice or lapse of time, or both, would become an
Event of Default.
"Deutshe Mark", "DM" and "DEM" each means the lawful
currency of the Federal Republic of Germany.
"EBITDA" means the sum of the following items measured
for each twelve month period ending on the last day of each
Fiscal Quarter:
(i) net income, plus
(ii) depreciation, amortization, and all
other non-cash charges to income not
affecting working capital, plus
(iii) taxes, plus
(iv) interest expense, minus
(v) extraordinary items.
"Effective Date" means September 29, 1995.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, including any rules
and regulations promulgated thereunder.
"Eurodollar Base Rate" means with respect to a
Eurodollar Loan the rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) quoted by the Reference
Bank at approximately 11:00 a.m. London time (or as soon
thereafter as practicable) two Business Days prior to the first
day of the Interest Period for such Loan for the offering by the
Reference Bank to leading banks in the London interbank market of
U.S. Dollar deposits having a term equal to such Interest Period
and in an amount comparable to the principal amount of the
Eurodollar Loan made by the Lender to which such Interest Period
relates.
"Eurodollar Loans" means the Loans the interest rates
on which are determined on the basis of the Eurodollar Base Rate.
"Event of Default" means any of the events of default
described in Section 9.1 of this Agreement.
"Expiration Date" means September 29, 1998.
"Facility Documents" means this Credit Agreement, the
Notes, and the Guaranties.
"Facility Obligations" means any and all sums now
payable or which shall hereafter become payable (including, but
not limited to all principal, interest, fees, expenses, expenses
of collection and other amounts payable), whether at maturity, by
acceleration or otherwise, to the Lenders or the Agent by any of
the Borrowers pursuant to or under the Facility Documents.
"Federal Funds Rate" means, for any day it is offered
by the Lenders, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds
brokers on such day, as published by the Federal Reserve Bank of
New York on the Business Day next succeeding such day, provided
that if the day for which such rate is to be determined is not a
Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day, provided,
however, that if such rate is not so published for any day, the
Federal Funds Rate for such day shall be the average rate charged
to the Lenders on such day on such transactions, as determined by
the Lenders.
"Fed Funds Rate Loans" means the Loans, if offered by
the Lenders, the interest rates on which are determined on the
basis of the Federal Funds Rate.
"Fiscal Quarter" means each fiscal quarter-year period
of the Primary Borrower.
"Fiscal Year" means the fiscal year of the Primary
Borrower, which is a twelve month period commencing January 1 and
ending on December 31 in each calendar year.
"Fixed Rate Loan" means any Eurodollar Loan or Fed
Funds Rate Loan.
"Foreign Banking Office" means:
(i) In respect of Chase, the offices maintained
by Chase for the transaction of business in the Federal Republic
of Germany, the Republic of Italy and the United Kingdom which
are designated as the places at which a Foreign Currency Note is
payable to Chase by a Foreign Currency Borrower.
(ii) In respect of NBD in the Federal Republic of
Germany, NBD Frankfurt Branch, Hachstrasse 35, 60313
Frankfurt/Main, Germany, and in the United Kingdom, NBD London
Branch, 28 Finsbury Circus, London ECTM 7AV England.
"Foreign Currency" means (i) in respect of Gleason
International Marketing Corporation, Deutsch Mark and Italian
Lire, (ii) in respect of Hurth Maschinen und Werkzeuge
NACHF.GmbH, Deutsch Mark, and (iii) in respect of in respect of
Gleason Works (Holdings) Limited and Gleason Works Limited,
Sterling.
"Foreign Currency Borrowers" means Gleason
International Marketing Corporation, Hurth Maschinen und
Werkzeuge NACHF.GmbH, Gleason Works (Holdings) Limited and
Gleason Works Limited.
"Foreign Currency Lender" means, in respect of each
Foreign Currency Loan, the Lender making that Foreign Currency
Loan.
"Foreign Currency Loan" means a Loan made available in
the discretion of the Lenders pursuant to and under Subsection
(c) of Section 2.1 hereof.
"Foreign Currency Notes" means Notes in the form of
Exhibit A-2, A-3 or A-4 hereto.
"Funded Indebtedness" means any outstanding
Indebtedness to any third party including all Indebtedness to the
Lenders and other financial institutions, domestic or foreign,
including all secured and unsecured notes payable, all industrial
revenue bonds, all capital lease obligations and other debt
obligations and the current maturities thereof, but excluding all
trade accounts payable, customer advances, accrued expenses,
income and other taxes payable, deferred income and other taxes
and accrued pension liabilities.
"Guarantor" means any guarantor of the Notes.
"Guaranty" means any guaranty agreement executed by any
Guarantor.
"Indebtedness" means and includes in respect of any
Person (a) all items which in accordance with generally accepted
accounting principles consistently applied would be included on
the liability side of a balance sheet as at the date as of which
indebtedness is to be determined, excluding capital Stock,
capital and earned surplus, surplus reserves and deferred
credits, (b) guaranties, endorsements and other contingent
obligations in respect of, or any obligations to purchase or
otherwise acquire, indebtedness of others excluding contingent
obligations incurred pursuant to the deposit and collection of
checks and similar items in the ordinary course of business, (c)
indebtedness secured by any mortgage, pledge, security interest
or lien existing on property owned by such Person, whether or not
the indebtedness secured thereby shall have been assumed, (d) all
obligations arising under any conditional sale, lease or title
retention agreement covering property acquired or used by such
Person or any Subsidiaries, and (e) the full amount of all
indebtedness of others, the payment of which such Person or any
Subsidiary has agreed, contingently or otherwise, to advance or
supply funds for or with respect to which such Person or any
Subsidiary is contingently liable, including, without limitation,
indebtedness for borrowed money and indebtedness guaranteed or
supported indirectly by such Person or any Subsidiary through an
agreement, contingent or otherwise (i) to purchase the
indebtedness, or (ii) to purchase, sell, transport or lease (as
lessee or lessor) property at prices or in amounts designed to
enable the debtor to make payment of the indebtedness or to
assure the owner of the indebtedness against loss, or (iii) to
supply funds to or in any manner invest in the debtor; provided,
however, that such Indebtedness does not mean or include any
standby or performance letters of credit issued to a third party
beneficiary for the account of such Person or indebtedness of
such Person in respect of which moneys sufficient to pay
indebtedness (as such indebtedness may be duly called for
redemption and payment) shall be deposited with a depositary,
agency or trustee in trust for the payment thereof.
"Initial Guarantors" means the Primary Borrower, The
Gleason Works and Gleason International Marketing Corporation.
"Interest Due Date" means the dates on which interest
payments on the Notes are due as set forth herein and in the
Notes.
"Interest Period" means:
(a) With respect to any Eurodollar Loans, the
period commencing on the date such Loans are made and ending on
the numerically corresponding day in the first, second, third or
sixth calendar month thereafter, as the Primary Borrower may
select as provided in Section 2.4 hereof, except that each such
Interest Period which commences on the last Business Day of a
calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent
calendar month; and
(b) With respect to any Fed Funds Rate Loan, one
Business Day or such other period as may from time to time be
offered by a Lender and accepted by the Primary Borrower pursuant
to Section 4.4; and
(c) As and if available from the Lenders from
time to time, with respect to Eurodollar Loans, the period
commencing on the date such Loans are made and ending fourteen
days later.
Notwithstanding the foregoing: (i) each Interest
Period which would otherwise end on a day which is not a Business
Day shall end on the next succeeding Business Day (or, in the
case of an Interest Period for Eurodollar Loans, if such next
succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day); (ii) no Interest
Period for any Eurodollar Loan shall have a duration of less than
one month and, if any Interest Period would otherwise be a
shorter period, such Loans shall be Prime Rate Loans during such
period; and (iii) each Interest Period for each type of Loan
which would otherwise commence before and end after the
Expiration Date shall end on the Expiration Date.
"Italian Lire", "Lire" and "ITL" each means the lawful
currency of the Republic of Italy.
"Lenders" means Chase and NBD and any other financial
institutions which may subsequently become parties to this Credit
Agreement by way of a supplemental agreement which is acceptable
to the Borrowers and all other Lenders and includes such Lenders
in their capacity as Foreign Currency Lenders hereunder.
"Letters of Credit" means the Letters of Credit which
have been or will be issued from time to time by Chase pursuant
to Section 2.1(b). Any Letter of Credit issued by Chase for the
account of the Borrower and outstanding as of the date of this
Agreement shall be deemed a Letter of Credit under this
Agreement.
"Letter of Credit Exposure" means the maximum amount
available to be drawn under all outstanding Letters of Credit
(converted to U.S. Dollars based on the exchange rate in effect
at the time the Letter of Credit Exposure is determined).
"Loans" means, collectively, the loans made by the
Lenders pursuant to and under this Credit Agreement and evidenced
by the Revolving Credit Note, a Foreign Currency Note or a Term
Note; and a "Loan" means, separately, each of the Loans having a
different initial borrowing date, a different basis on which
interest is to be computed, or a different Interest Period or
tenor.
"Monthly Due Date" means the first day of each month.
"NBD" means NBD Bank.
"Notes" means the Revolving Credit Notes and the
Foreign Currency Notes described in Part 2 of this Credit
Agreement or any Term Note described in Part 3 of this Credit
Agreement and "Note" means any of the Notes.
"Organizational Agreements" means the certificate of
incorporation and by-laws of any of the Borrowers or any
Subsidiary and any amendments to such documents.
"Person" means natural persons, corporations (which
shall be deemed to include business trusts), associations,
companies, partnerships, joint ventures, limited liability
companies or other legal entities, and governments, agencies and
political subdivisions.
"Post-Default Rate" means, in respect of any payment of
the principal of any Loan or of any other amount other than
interest which is payable by the Borrowers under this Credit
Agreement or the Notes and which is not paid when due (whether at
stated maturity, by acceleration or otherwise), a rate per annum
which shall apply during the period from the due date of such
payment to the date such payment shall be paid in full and which
rate shall be (i) in respect of any payment of the principal
amount of a Loan, 2% above the interest rate applicable to such
Loan, and (ii) in respect of any payment other than of the
principal of or interest on a Loan, 2% above the Prime Rate.
"Pricing Ratio" means EBITDA divided by Funded
Indebtedness.
"Prime Rate" means that rate of interest from time to
time announced by Chase at its head office as its prime
commercial lending rate.
"Prime Rate Loans" means Loans the interest rates on
which are determined on the basis of the Prime Rate.
"Pro Rata Commitment" means the following percentages
for each of the following Lenders:
Lender Percentage
Chase 50%
NBD 50%
"Quarterly Due Date" means the first day of each
January, April, July and October.
"Reference Bank" means the principal London office of
Chase.
"Regulatory Change" means any change after the date of
this Agreement in United States federal, state, municipal or
foreign laws or regulations or the adoption or making after such
date of any interpretations, directives or requests applying to a
class of banks including the Lenders of or under any United
States, federal, state, municipal or foreign laws or regulations
(whether or not having the force of law) by any court or
governmental or monetary authority charged with the
interpretation or administration thereof.
"Reimbursement Obligation" means any obligation of the
Primary Borrower to reimburse the issuer of a Letter of Credit
any amount paid by such issuer from time to time pursuant to and
under any Letter of Credit.
"Required Lenders" means all of the Lenders.
"Revolving Credit Loan" means any Loan evidenced by the
Revolving Credit Note as described in Part 2 of this Agreement;
"Revolving Credit Loans" means all of such Loans.
"Revolving Credit Note" means the Revolving Credit
Notes described in Part 2 of this Agreement.
"Sterling", "L" and "GBP" each means the lawful
currency of the United Kingdom.
"Stock" means and includes any and all shares,
interests, participations or other equivalents (howsoever
designated) of corporate stock. See also "Voting Stock."
"Subordinated Debt" means Indebtedness of any Borrower
subordinated in right of payment to all debts of such Borrower to
the Lenders by written terms or agreement in form and substance
satisfactory to the Lenders.
"Subsidiary" means any corporation the majority of the
shares of Voting Stock of which at any time outstanding is owned
directly or indirectly by the Primary Borrower or by one or more
of its other subsidiaries or by the Primary Borrower in
conjunction with one or more of its other subsidiaries. See also
"Wholly-owned Subsidiary."
"Term Loan" means any Loan evidenced by a Term Note as
described in Part 3 of this Agreement; "Term Loans" means all of
such Loans.
"Term Note" means any of the Notes described in Part 3
of this Agreement, and "Term Notes" means all of such Notes.
"U.S. Dollar", "Dollar", "U.S.$", "$" and "USD" each
means the lawful currency of the United States of America.
"Voting Stock" means Stock having voting power in the
election of directors of such corporations, other than Stock
having such power only by reason of the happening of a
contingency.
"Wholly-owned Subsidiary" means any corporation of
which all the Voting Stock (other than directors' qualifying
shares) at the time is owned or controlled, directly or
indirectly, by the Primary Borrower.
"Working Capital" means the excess of Consolidated
Current Assets over Consolidated Current Liabilities.
All accounting terms appearing in this Agreement have
the meanings respectively given to them in accordance with
generally accepted accounting principles consistently applied at
the Effective Date, except as expressly otherwise defined in this
Agreement. No change or adjustment shall be made for
determination of any accounting matters hereunder by reason of
any changes which may be required after the Effective Date in
connection with the reporting of liabilities for payment of
expenses pursuant to changes to generally accepted accounting
principles.
PART 2. REVOLVING CREDIT LOANS
2.1 The Commitment.
(a) Subject to the terms and conditions of this
Agreement, each of the Lenders severally agrees to make Revolving
Credit Loans to the Borrowers from time to time from and
including the date hereof to but excluding the Expiration Date up
to but not exceeding the amount of the remaining unused
Commitment. The Revolving Credit Loans may be outstanding as
Prime Rate Loans, Fed Funds Rate Loans or Eurodollar Loans (each
a "type" of Revolving Credit Loan), provided that not more than
five Eurodollar Loans shall be outstanding to any Lender at any
one time. The Revolving Credit Loans of each type of each Lender
shall be made and maintained at such Lender's lending office for
such type of Loans. If Loans shall be made in an aggregate
principal amount in excess of the Commitment, the Borrowers shall
immediately repay such excess amount upon demand by the Agent.
(b) Subject to the terms and conditions of this
Agreement, and the execution and delivery of an acceptable and
customary letter of credit application, Chase agrees to issue
Letters of Credit for the account of any Borrower from time to
time from and including the date hereof to but excluding the
Revolving Credit Termination Date up to but not exceeding the
lesser of (i) the aggregate unused amount of the Commitment, or
(ii) the difference between $15,000,000 and the Letter of Credit
Exposure. Each Letter of Credit issued, renewed or extended
shall have an expiry date no later than thirty (30) days prior to
the Revolving Credit Termination Date. The Borrowers shall
deposit with Chase on or before the Termination Date an amount
equal to the amount by which (i) the Letter of Credit Exposure
exceeds the Commitment or (ii) the Letter of Credit Exposure
extends beyond the Revolving Credit Termination Date, which
amount shall be held by Chase for the benefit of the Lenders as
cash collateral for all Reimbursement Obligations. Subject to
the terms and conditions of this Agreement, the Lenders agree to
participate in the credit risk of each Letter of Credit, as
follows: each Reimbursement Obligation shall be deemed to be a
Revolving Credit Loan from each of the Lenders in accordance with
each Lender's Pro Rata Commitment. Chase shall notify the
Lenders and the Agent of the creation of any Reimbursement
Obligation within one day of any payment made by Chase pursuant
to and under any Letter of Credit, whereupon each Lender other
than Chase shall remit to the Agent for the account of Chase the
amount of such Lender's Pro Rata Commitment in respect of the
resulting Revolving Credit Loan thereby created together with
interest thereon for the period from the date of such notice by
Chase until the date the Agent receives such amount at a rate per
annum equal to the average daily Federal Funds Rate for such
period. Each Revolving Credit Loan resulting from the creation
of a Reimbursement Obligation shall be deemed to be a Prime Rate
Loan until notice, if any, is received from the Borrower in
accordance with Section 4.4 hereof for conversion of such Loan to
another type. Upon the Expiration Date or earlier termination of
this Agreement, the Borrower agrees to provide to Chase cash
collateral or cash equivalent collateral having a fair market
value at least equal to the Letter of Credit Exposure on such
date as security for payment of any Reimbursement Obligation.
(c) Subject to availability as offered by Lenders in
their sole discretion and further subject to the terms and
conditions of this Agreement (including the aggregate unused
amount of the Commitment and the further limits set forth in this
Subsection (c)), the Lenders may make Foreign Currency Loans to
the Foreign Currency Borrowers under the Foreign Currency Notes.
Notwithstanding anything in this Agreement, a Foreign Currency
Loan shall not be funded on a pro-rata basis between the Lenders
but shall be funded entirely by the Foreign Currency Lender from
which it shall be requested. Each Foreign Currency Loan shall be
repayable (principal and interest) in the same Foreign Currency
in which the proceeds of such Foreign Currency Loan shall have
been disbursed. The interest rate payable on each Foreign
Currency Loan shall be the rate offered by the Foreign Currency
Lender and accepted by the Foreign Currency Borrower in respect
of such Foreign Currency Loan. Foreign Currency Loans may be
borrowed by the Foreign Currency Borrowers subject to the
following U.S. Dollar limits determined by applying the
Applicable Exchange Rate:
(i) Gleason International Marketing Corporation
may borrow in Deutsche Marks at a Foreign Banking Office in the
Federal Republic of Germany up to a combined aggregate principal
amount of $4,000,000 outstanding at any one time.
(ii) Hurth Maschinen und Werkzeuge NACHF.GmbH may
borrow in Deutsche Marks at a Foreign Banking Office in the
Federal Republic of Germany up to an aggregate principal amount
of $4,000,000 outstanding at any one time.
(iii)Gleason International Marketing Corporation
may borrow in Italian Lire at a Foreign Banking Office in the
Republic of Italy up to an aggregate principal amount of
$1,000,000 outstanding at any one time.
(iv) Gleason Works (Holdings) Limited and Gleason
Works Limited may borrow in Sterling at a Foreign Banking Office
in the United Kingdom up to a combined, aggregate principal
amount of $2,000,000 outstanding at any one time.
If Loans shall be made to an Affiliate Borrower in an aggregate
principal amount in excess of these stated limits, whether by
operation of changes in the Applicable Exchange Rate or
otherwise, such Affiliate Borrower or the Primary Borrower shall
immediately repay such excess amount upon demand by the Agent.
2.2 The Revolving Credit Notes and Foreign Currency Notes.
The obligation of the Borrowers to repay all amounts other than
Foreign Currency Loans loaned by each Lender under this Part will
be evidenced by two separate Revolving Credit Notes issued by all
of the Borrowers to each of the Lenders in the face amount of
each Lender's Commitment, payable to the order of each Lender, in
the form attached hereto as Exhibit A-1, with the blanks
appropriately completed. The obligation of the Foreign Currency
Borrowers to repay Foreign Currency Loans loaned by each Lender
under this Part will be evidenced by Foreign Currency Notes
issued by the Foreign Currency Borrowers to each of the Lenders
in the forms attached hereto as Exhibits A-2, A-3, A-4 with the
blanks appropriately completed. Except for the Initial
Guarantors, the liability of each Affiliate Borrower shall be
limited to the sum of the principal amount of Loans made to such
Affiliate Borrower under this Part 2, and the Reimbursement
Obligations of each Affiliate Borrower together with interest,
costs and expenses as set forth in this Agreement.
2.3 Borrowing Procedure.
(a) The officers and employees listed in Exhibit F
attached hereto and made a part hereof, and as amended from time
to time by a notice in the form of Exhibit F, may request
Revolving Credit Loans hereunder (subject to the terms and
conditions of this Agreement, including the limit of the
Commitment, the exchange rate for conversion of Foreign Currency
Loans to U.S. Dollars on the date each Foreign Currency Loan is
made, and the notice requirements of 4.4). All requests for
(i) Revolving Credit Loans shall be submitted to the Agent in
substantially the form of Exhibit C-1 hereto, and (ii) Foreign
Currency Loans shall be submitted to the Foreign Currency Lenders
at their Foreign Banking Offices in substantially the form of
Exhibit C-2 hereto. Each Foreign Currency Borrower shall use its
reasonable efforts in good faith to request Foreign Currency
Loans from the Foreign Currency Lenders on a pro-rata basis in
respect of the aggregate principal amount of all Foreign Currency
Loans in any one Foreign Currency (but not in respect of any
single Foreign Currency Loan). Each request by a Borrower to the
Agent or to a Foreign Currency Lender shall constitute a
representation that, at the time thereof and giving effect to the
Loan requested thereby, all conditions precedent in Part 5 have
been satisfied and all representations and warranties in Part 6
are true and correct. The Agent and the Lenders shall be
protected and held harmless by the Borrowers in acting upon any
request for a Loan believed by it to have been genuine and to
have been given by a proper Person.
(b) The minimum amount of each Loan under this Part
shall be $100,000.
(c) Except as provided in Subsection (d) below, each
Lender will cause the proceeds of each Revolving Credit Loan to
be made to a Borrower by such Lender to be made available to the
Agent for deposit to the such Borrower's account with the Agent.
In the event that any Lender other than Chase does not promptly
fund the Revolving Credit Loan which it is committed to make
under this Agreement, Chase may, at its sole option, make such
Loan hereunder (up to the amount of Chase's Commitment).
(d) From time to time a Foreign Currency Borrower may
borrow a Foreign Currency Loan directly from a Foreign Banking
Office without making such borrowing through the Agent. In any
such case, such Foreign Currency Borrower and the corresponding
Foreign Currency Lender shall report the making of such a Foreign
Currency Loan immediately to the Agent and to the other Lenders
and such Foreign Currency Lender shall take all such action as
may be necessary within its organization and that of its
affiliates so that such Foreign Currency Loan shall become a
Foreign Currency Loan hereunder.
(e) The Lenders (including the Foreign Currency
Lenders) will maintain records of the date and amount of each
borrowing, the interest rate selected and the Interest Period
therefor, and each principal payment under this Part and will
make a statement of these records available to a Borrower upon
request. Each Lender may endorse on the grid portion of the
Revolving Credit Note or a Foreign Currency Note, as applicable,
the date and the amount of each borrowing obtained from such
Lender, the interest rate selected and the Interest Period
therefor and the initials or other identifying symbol of the
Person making the endorsement; provided, however, that any
failure to make such an endorsement shall not invalidate the
Note. All such records and endorsements shall be presumed to be
correct absent manifest error.
2.4 Interest.
(a) The Borrowers will pay to the Agent for the
account of each of the Lenders interest on the unpaid principal
amount of each Revolving Credit Loan made by such Lender for the
period commencing on the date of such Loan to but excluding the
date such Loan shall be paid in full, at the following rates per
annum:
(i) During such periods such Loan is a Prime Rate
Loan, the Prime Rate (as in effect from time to time).
(ii) During such periods such Loan is a Eurodollar
Loan, for each Interest Period relating thereto, the Eurodollar
Base Rate for such Loan for such Interest Period plus the
Applicable Margin.
(iii)During such periods such Loan is a Fed Funds
Rate Loan, for each Interest Period relating thereto, the Fed
Funds Rate for such Loan for such Interest Period plus the
Applicable Margin.
(b) Each Foreign Currency Borrower will pay to its
Foreign Currency Lender interest on the unpaid principal amount
of each Foreign Currency Loan made by such Foreign Currency
Lender for the period commencing on the date of such Loan to but
excluding the date such Loan shall be paid in full, at the rate
per annum and on the dates agreed to by such Foreign Currency
Borrower with such Foreign Currency Lender in respect of such
Loan in writing (which may be a fax confirmation from such Lender
to such Borrower of the Notice of Borrowing in the form of
Exhibit C-2 hereto) prior to the making of such Loan.
(c) Interest shall be calculated on the basis of a
year of 365 days for the actual number of days elapsed (including
any time extended by reason of Saturdays, Sundays and holidays).
(d) Notwithstanding the foregoing, the Borrowers will
pay to each Lender interest at the applicable Post-Default Rate
on any principal of any Loan (including any Foreign Currency
Loan) made by such Lender, and (to the fullest extent permitted
by law) on any other amount (other than interest) payable to each
Lender by a Borrower hereunder or under the Notes, which shall
not be paid in full when due (whether on the last day of the
applicable Interest Period, on the Expiration Date, by
acceleration or otherwise), for the period commencing on the due
date thereof until the same is paid in full.
(e) Accrued interest on each Revolving Credit Loan
shall be payable
(i) in the case of a Prime Rate Loan, monthly on
the Monthly Due Date,
(ii) in the case of a Eurodollar Loan or a Fed
Funds Rate Loan on the last day of each Interest Period therefor
and, in the case of an Interest Period which is greater than
three (3) months, at three months after the first day of such
Interest Period; if, however, such Interest Period is shorter
than thirty (30) days, accrued interest shall be payable on the
last day of the calendar month following the expiration of the
Interest Period, and
(iii)in the case of any Revolving Credit Loan,
upon the payment or prepayment thereof (but only on the principal
so paid or pre-paid), except that interest payable at the
Post-Default Rate shall be payable from time to time on demand of
the Agent at the request of the Required Lenders.
(e) Promptly after the determination of any interest
rate provided for herein with respect to any Revolving Credit
Loans or any change therein, the Agent shall notify the Lenders
and the Borrower thereof.
2.5 Maturity of Revolving Credit Loans and Foreign Currency
Loans. Except to the extent provided by Part 3 hereof, all
outstanding Revolving Credit Loans and all Foreign Currency Loans
shall be repaid on the Expiration Date.
2.6 Application of Payments. All payments made hereunder
shall be applied, first, to fees and expenses, then to late
charges, then to accrued and unpaid interest and the balance, if
any, to unpaid principal.
2.7 Fees. (a) Borrower agrees to pay a commitment fee to
the Agent for the account of the Lenders as a consideration for
the Commitment. The commitment fee shall be calculated at the
rate of one-eighth of one percent (1/8 of 1%) per annum (based on
a year of 365 days) from the Effective Date, on the average daily
unborrowed amount of the Lenders' Commitment. The commitment fee
will be payable on each Quarterly Due Date and on the Expiration
Date, for the preceding period for which such fee has not been
paid. After any and each permanent reduction of the Commitment
by Borrower, future commitment fees shall be calculated upon the
Commitment of the Lenders as so reduced and excluding any amounts
which are evidenced by Term Notes and after deduction of the
Letter of Credit Exposure.
(b) On the Effective Date, the Borrower shall pay to
the Agent for the account of the Lenders a facility fee in an
amount equal to one-eighth of one percent (1/8 of 1%) of the
Commitment as then in effect.
(c) At the time any Letter of Credit shall be issued,
the Borrower shall pay to Chase such ordinary and usual
administrative fees incurred in the issuance of a Letter of
Credit. The Borrower shall also pay to Agent for the account of
each of the Lenders a letter of credit fee for each Letter of
Credit quarterly in arrears from the issuance date of each Letter
of Credit (the "Payment Dates") determined in respect of each
Letter of Credit, as follows: the face amount of the Letter of
Credit outstanding on each Payment Date multiplied by a rate per
year (on a 365 day basis) equal to (i) in respect of stand-by
letters of credit, three-quarters of one percent (3/4 of 1%), and
(ii) in respect of performance letters of credit, one-half of one
percent (1/2 of 1%). The determination as to whether any
particular Letter of Credit is a standby Letter of Credit or a
performance Letter of Credit shall be made by Chase in its sole
discretion reasonably exercised.
2.8 Prepayment. Borrower shall have the right to prepay
Revolving Credit Loans at any time or from time to time, provided
that:
(a) Borrower shall give Agent notice of each such
prepayment as provided in Section 4.4 hereof; and
(b) Eurodollar Loans and Fed Funds Rate Loans may be
prepaid only on the last day of an Interest Period for such
Loans.
2.9 Reduction or Termination of Commitment. The Primary
Borrower may at any time and from time to time permanently reduce
or terminate the Commitment by giving not less than two (2)
Business Days' prior written notice to such effect to Agent,
provided that any partial reduction shall be in the aggregate
amount of $500,000 or a multiple thereof and that the Primary
Borrower shall prepay such part, if any, of the principal of the
Revolving Credit Note then outstanding as may be in excess of the
amount of the Commitment as so reduced.
2.10 Additional Costs.
(a) Borrower shall pay to the Agent for the account of
the Lenders from time to time such amounts as a Lender may
reasonably determine to be necessary to compensate it for any
increased costs which such Lender determines are attributable to
its making or maintaining any Loan under this Agreement or its
undertaking to make or maintain any Loan hereunder, or any
reduction in any amount receivable by such Lender hereunder in
respect of any Loan or such undertaking, including without
limitation any increase in the amount of capital and reduced rate
of return (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting
from any Regulatory Change applicable to such Lender which: (i)
changes the basis of taxation of any amounts payable to such
Lender under this Agreement in respect of any Loan (other than
federal and state taxes imposed on the overall net income of such
Lender on account of any Loan by the jurisdiction in which the
such Lender is located); or (ii) imposes or modifies any reserve,
special deposit, deposit insurance or assessment, minimum
capital, capital ratio or similar requirements relating to any
extensions of credit or other assets of, or any deposits with or
other liabilities of, such Lender (including any Loan or any
deposits referred to in the definition of Eurodollar Base Rate);
or (iii) imposes any other condition affecting the making or
maintaining of any Loan under this Agreement. Each Lender will
notify the Agent and the Borrower of any event occurring after
the date of this Agreement which will entitle such Lender to
compensation pursuant to this Part as promptly as practicable
after it obtains knowledge thereof and determines to request such
compensation. All payments required from Borrower hereunder
shall be made within fifteen (15) days of Borrower's receipt of
notice that such payments are due.
(b) Without limiting the effect of the foregoing
provisions of this Part, in the event that, by reason of any
Regulatory Change applicable to a Lender, such Lender either (i)
incurs Additional Costs based on or measured by the excess above
a specified level of the amount of a category of deposits or
other liabilities of such Lender which includes deposits by
reference to which the Eurodollar Base Rate is determined as
provided in this Agreement or a category of extensions of credit
or other assets of such Lender which includes Fixed Rate Loans or
(ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then, if
such Lender so elects by notice to the Agent and the Borrower,
the undertaking of such Lender to make or renew such Fixed Rate
Loan, or to convert any Loan to an affected Fixed Rate Loan shall
be suspended until the date such applicable Regulatory Change
ceases to be in effect, and Borrower shall on the last day of the
then current Interest Period for such affected outstanding Loans
pay or convert such Loans in accordance with this Agreement;
provided, however, that this sub-paragraph (ii) does not apply to
Term Loans in existence at the time such Lender becomes subject
to such restrictions unless Section 2.12 is otherwise applicable.
(c) Determinations and allocations by a Lender for
purposes of this Part of the effect of any applicable Regulatory
Change on its costs of making or maintaining such Loans or on
amounts receivable by it in respect of such Loans, and of the
additional amounts required to compensate such Lender in respect
of any Additional Costs, shall be conclusive, provided that such
determinations are made in good faith on a reasonable basis.
Such Lender shall provide Borrower with a statement setting forth
in reasonable detail such Additional Costs.
2.11 HLT Classification. If, after the date hereof, a
Lender or the Agent has received notice from any governmental
authority, central bank or comparable agency having jurisdiction
over a Lender or from any bank examiner or other official
reviewing the loan portfolio of a Lender that the definition of
highly leveraged transaction has been modified with the result
that its Loans hereunder are classified as a "highly leveraged
transaction" (an "HLT Classification"), by reason of a Regulatory
Change affecting such Lender any Loan hereunder has become
subject to HLT Classification, or, if Borrower takes any action
which causes this transaction to be subject to HLT
Classification, such Lender shall promptly give notice of such
HLT Classification to Borrower. In such event, if such Lender
incurs Additional Costs as a result of such HLT Classification,
Borrower shall compensate such Lender for such Additional Costs
which payments shall be made by Borrower within fifteen (15) days
of Borrower's receipt of notice that such payments are due. Each
Lender acknowledges that a HLT Classification is not an Event of
Default hereunder.
2.12 Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if a Lender determines, in good faith
(which determination shall be conclusive), that quotations of
interest rates for the relevant deposits referred to in the
definition of Eurodollar Base Rate are not being provided in the
relevant amounts or for the relevant maturities for purposes of
determining the rate of interest for Eurodollar Loans as provided
in this Agreement or the relevant rates of interest which are the
basis of the Eurodollar Base Rate do not adequately cover
the cost to such Lender of making or maintaining the Eurodollar
Loans, then such Lender shall give Borrower and the Agent prompt
notice thereof, and so long as such condition remains in effect,
such Lender shall be under no obligation to make such Loans and
Borrower shall, on the last day(s) of the then current Interest
Period(s) for the outstanding Loans of the affected type, pay
such Loans in accordance with this Agreement.
2.13 Illegality. Notwithstanding any other provision in
this Agreement, in the event that it becomes unlawful for a
Lender to (a) honor its undertaking to make any Fixed Rate Loans
hereunder, or (b) maintain such Fixed Rate Loans hereunder, then
such Lender shall promptly notify Borrower thereof and such
Lender's undertaking to make such Loans shall be suspended until
such time as such Lender may again make and maintain such
affected Loans and interest rate option, and Borrower shall, on
the last day(s) of the then current Interest Period(s) for the
outstanding Fixed Rate Loans (or on such earlier date as such
Lender may specify to Borrower, due to the illegality of
maintaining such Loans), pay such Loans in accordance with this
Agreement. In the event that a Lender requires payment of such
Loans on a date earlier than the last day of an Interest Period,
such Lender agrees to waive its right to compensation pursuant to
Section 2.13 hereof.
2.14 Compensation. Borrower shall pay to Agent for the
account of a Lender, upon the request of a Lender and within
fifteen (15) days of such request, such amount or amounts as
shall be sufficient (in the reasonable opinion of such Lender) to
compensate it for any loss, cost or expense which such Lender
determines is attributable to:
(a) any payment or prepayment of a Eurodollar Loan,
where such payment or prepayment occurs on a date other than the
last day of an Interest Period for the respective Loans (whether
by reason of demand by such Lender for payment or otherwise); or
(b) any failure by Borrower to, on the date specified
therefor in the relevant notice under this Agreement, enter into
a Eurodollar Loan.
Without limiting the foregoing, such compensation shall include
an amount equal to the excess, if any, of (i) the amount of
interest which otherwise would have accrued on the principal
amount so paid or prepaid or not borrowed for the period from and
including the date of such payment or prepayment or failure to
borrow to but excluding the last day of the then current Interest
Period for such Loan (or, in the case of a failure to borrow to
but excluding the last day of the Interest Period for such Loan
which would have commenced on the date specified therefor in the
relevant notice) at the applicable rate of interest for such Loan
provided for herein over (ii) the amount of interest (as
reasonably determined by such Lender) the Lender would have bid
in the London interbank market for U.S. Dollar deposits for
amounts comparable to such principal amount and maturities
comparable to such Interest Period. A determination of the a
Lender as to the amounts payable pursuant to this Part shall be
conclusive, provided that such determinations are made in good
faith on a reasonable basis.
2.15 Survival. The undertaking of Borrower under this Part
2 shall survive the repayment of the Revolving Credit Loans.
PART 3. TERM LOANS
3.1 Term Loans. Subject to the terms and conditions
contained in this Part, and provided that no Event of Default and
no event, condition or act which with notice or lapse of time
would constitute an Event of Default shall have occurred and be
continuing, the Primary Borrower may exercise at any time prior
to one year from the Effective Date, upon prior written notice to
the Agent in substantially the form of Exhibit D hereto and in
accordance with Section 4.4 hereof, its option to refund
outstanding amounts under any Revolving Credit Loans by issuing
Term Notes to each of the Lenders in amounts which correspond
with each Lender's Pro Rata Commitment and which Term Notes shall
be in the form of the Term Note attached hereto as Exhibit B with
the blanks appropriately completed and subject to the conditions
contained therein; provided however, that the Required Lenders
may, not more than ninety (90) days and not less than forty-five
(45) days prior to each anniversary of the Effective Date, render
a written declaration to the Primary Borrower that the option to
obtain Term Loan financing pursuant to this Part 3 is extended.
In the absence of such written declaration, such option shall be
automatically terminated effective on such anniversary.
3.2 Number of Term Loans. The aggregate number of Term
Loans outstanding at any one time shall be limited to three (3)
Term Loans.
3.3 Maximum Conversion. The aggregate amount of all Term
Notes issued pursuant to this Part 3 shall not exceed
$10,000,000.00 at any time.
3.4 Minimum Amount of Term Note. The minimum principal
amount of any Term Note issued under this Part shall be
$500,000.00 at the time of its issuance.
3.5 Terms of Repayment. For each Term Loan, the Primary
Borrower will repay the principal amount of the Term Notes issued
pursuant to this Part 3 in substantially equal installments, to
be paid on each Monthly Due Date with the first installment to
commence on the Monthly Due Date which next follows the exercise
by Borrower of its option and its issuance of the Term Note.
Each Term Note will have a maturity, at the option of the Primary
Borrower, of not more than sixty (60) months from the date of its
issuance.
3.6 Interest.
(a) Each Term Loan shall bear interest each day on the
unpaid principal amount from time to time outstanding until paid
in full at a rate per annum determined as a Prime Rate Loan, Fed
Funds Rate Loan or Eurodollar Loan as elected by the Primary
Borrower from time to time upon notice to the Agent as provided
in Section 4.4 hereof. The Primary Borrower shall have the right
to convert any Term Loan from one type into another type only on
the last day of an Interest Period by giving notice as provided
in Section 4.4. At the end of each Interest Period in respect of
any portion of the Term Loan which is not required to be paid on
such date, the Primary Borrower will either (i) convert the
principal amount of such portion of the Term Loan to another type
of Loan in accordance with Section 4.4 hereof, or (ii) such
principal amount shall automatically become a Prime Loan
hereunder. If any principal of or interest on a Term Loan shall
not be paid when due (at stated maturity, by acceleration or
otherwise), a late charge shall be payable as provided for herein
in Part 4.
(b) Interest shall be calculated on the basis of a
year of 365 days for the actual number of days elapsed (including
any time extended by reason of Saturdays, Sundays and holidays).
Accrued interest on each Term Loan shall be payable
(i) in the case of a Prime Rate Loan, monthly on
the Monthly Due Date,
(ii) in the case of a Eurodollar Loan or a Fed
Funds Rate Loan on the last day of each Interest Period therefor
and, in the case of an Interest Period which is greater than
three (3) months, at three months after the first day of such
Interest Period; if, however, such Interest Period is shorter
than thirty (30) days, accrued interest shall be payable on the
last day of the calendar month following the expiration of the
Interest Period, and
(iii)in the case of any Term Loan, upon the
prepayment thereof (but only on the principal so pre-paid),
except that interest payable at the Post-Default Rate shall be
payable from time to time on demand of the Agent at the request
of the Required Lenders.
(c) Promptly after the determination of any interest
rate provided for herein or any change therein, the Agent shall
notify the Lenders and the Primary Borrower thereof.
(d) Notwithstanding the foregoing, Primary Borrower
will pay to the Agent for the account of each Lender interest at
the applicable Post-Default Rate on any principal of any Term
Loan made by the Lenders, and (to the fullest extent permitted by
law) on any other amount (other than interest) payable to the
Lenders by Borrower hereunder or under any Term Note, which shall
not be paid in full when due (whether by acceleration or
otherwise), for the period commencing on the due date thereof
until the same is paid in full. Interest payable at the
Post-Default Rate shall be payable from time to time on demand of
Agent at the request of the Required Lenders.
3.7 Application of Payments. All payments made hereunder
shall be applied, first, to fees and expenses, then to late
charges, then to accrued and unpaid interest and the balance, if
any, to unpaid principal.
3.8 Prepayments.
(a) No portion of the Term Loan may be prepaid during
any Interest Period which applies to such portion of the Term
Loan.
(b) The Primary Borrower shall give to Agent prior
written or telegraphic notice of any prepayment as set forth in
Section 4.4 hereof, specifying the aggregate principal amount to
be prepaid and the prepayment date and such notice shall be
irrevocable. The Agent shall forward such notice to the Lenders.
(c) Each prepayment shall be in an amount equal to at
least $500,000.00.
PART 4. PAYMENT; LATE PAYMENT CHARGES; POST-DEFAULT RATE OF
INTEREST
4.1 Payments.
(a) All payments of principal of and interest on the
Revolving Credit Notes and the Term Notes shall be made by the
Borrowers when due on or prior to 11:00 a.m. (New York time) to
the Agent for the account of each Lender in U.S. Dollars and in
immediately available funds.
(b) All payments of principal of and interest on each
Foreign Currency Note shall be made by the Foreign Currency
Borrower or Borrowers signatory to such Note at the Foreign
Banking Office designated on such Note when due on or prior to
11:00 a.m. (local time at such Foreign Banking Office) for the
account of the corresponding Lender in the corresponding Foreign
Currency and in immediately available funds.
4.2 Late Payments.
(a) If Borrower fails to make any payment when due,
the Agent may, at the request of the Required Lenders, require
the payment of a late charge to be assessed each day on the
amount overdue based upon the following formulas:
(i) For overdue interest:
(Amount overdue) x 110% x (Prime Rate + 2%)
365
(ii) For overdue principal:
(Amount overdue) x 10% x (Prime Rate + 2%)
365
(b) Late charges may be added to the amount owing on
any future payment, and such assessment and/or collection of
late charges shall in no way impair the Lenders' rights to pursue
any other remedies upon default.
(c) If the sum of the late charges computed as in (a)
is less than $10, a minimum late charge of $10 per late payment
may be assessed. The imposition of any late charge shall not
preclude the exercise by the Lenders or the Agent of any other
right or remedy it may have.
4.3 Post-Default Rate of Interest. If any Note is not paid
at maturity, whether maturity occurs by lapse of time or
acceleration, the outstanding principal of that Note, thereafter
until paid, shall bear interest each day at the Post-Default
Rate.
4.4 Certain Notices. Notices by Borrower to the Agent of
the termination or reduction of the Commitment, of borrowings
under the Revolving Credit Note (in substantially the form of
Exhibit C-1 hereto), of prepayments of the Revolving Credit Loans
and Term Loans, of converting borrowings under the Revolving
Credit Note to a Term Loan as described in Part 3 hereof (in
substantially the form of Exhibit D hereto), or of converting a
Loan from one type to another type (in substantially the form of
Exhibit E hereto) shall be irrevocable and shall be effective
only if received by the Agent not later than 11:00 a.m. New York
time on the date, or the number of days prior to the date, of the
relevant termination, reduction, borrowing, prepayment or
conversion to a Term Loan or the first day of such Interest
Period specified below:
Type of Notice Date or Number of Days Prior
Termination or reduction of
Commitment 2 Business Days
Borrowing or prepayment of or
conversion to Prime Rate Loans or
Fed Funds Rate Loans Same Business Day
Borrowing or prepayment of or
conversion to Eurodollar Loans 3 Business Days
Conversion to Term Loan 5 Business Days
PROVIDED FURTHER, that from time to time the Required Lenders may
notify the Agent that Fed Funds Rate Loans are available for
period of more than one Business Day on such notice as the
Required Lenders may require in such instance.
PART 5. CONDITIONS PRECEDENT
5.1 Representations and Warranties. The obligation of the
Lenders to make any Loan under this Agreement is subject to the
accuracy of the representations and warranties contained in
Part 6 as of the dates of this Agreement and of each Loan. Each
such representation and warranty shall be true on and as of the
date of each Loan hereunder with the same effect as though such
representations and warranties had been made on and as of such
date; and on each such date no Event of Default and no condition,
event or act which, with the giving of notice or the lapse of
time, or both, would constitute an Event of Default shall have
occurred and be continuing or shall exist.
5.2 Execution and Delivery of Documents and Opinion of
Counsel. As further conditions precedent to any Loan under this
Agreement, Borrower shall deliver to the Lenders and the Agent on
or before the Effective Date all documents which Lenders and the
Agent may reasonably require, executed and in a form acceptable
to Lenders and the Agent, including, without limitation, the
following:
(a) All Facility Documents;
(b) An opinion of counsel for each Borrower and each
Guarantor, dated as of the date of this Agreement and in form
satisfactory to Lenders and the Agent; and
(c) A Certificate of the Secretary or Assistant
Secretary of each Borrower and each Guarantor in form
satisfactory to Lenders and the Agent;
PART 6. REPRESENTATIONS AND WARRANTIES
Each of the Borrowers severally represents and warrants the
following, as of the date of this Agreement and of each Loan:
6.1 Existence, Ownership and Legal Power.
(a) Each Borrower is an organization duly organized,
validly existing and in good standing under the laws of the state
of its origination. At the Effective Date, each Borrower is duly
qualified to do business and is in good standing in all
jurisdictions in which it owns substantial properties or in which
it conducts substantial business or in which any of its
activities make such qualification necessary except in those
jurisdictions in which failure to so qualify would not result in
a material adverse impact on Borrower's ability to conduct
business or own properties. If, subsequent to the Effective
Date, any Borrower does not qualify in any such jurisdictions to
do business or to own properties, such Borrower shall give the
Agent prompt written notice of such change in circumstances.
(b) At the Effective Date, the Primary Borrower owns
the Subsidiaries specified in Schedule B which is attached hereto
and made a part hereof, each of which is duly organized, validly
existing and in good standing under the laws of the states or
countries of their originations and is duly qualified to do
business in all jurisdictions in which each owns substantial
properties or conducts substantial business or in which any of
their activities make such qualification necessary except in
those jurisdictions in which failure to so qualify would not
result in a material adverse impact on such Subsidiary's ability
to conduct business or own properties. If, subsequent to the
Effective Date, any such Subsidiaries do not qualify in any such
jurisdictions to do business or to own properties, Borrower shall
give the Agent and the Lenders prompt written notice of such
change in circumstances. At the Effective Date, the Primary
Borrower's record and beneficial ownership of each Subsidiary is
free from any material restriction, equity, security interest, or
other lien.
(c) Each Borrower has all requisite power and
authority under the laws of the jurisdiction of its origination
to carry on its business and to enter into and carry out the
terms of this Agreement and the Notes.
6.2 Right to Act. Neither the execution and delivery of
this Agreement or the Notes, the consummation of any transaction
contemplated by those documents, nor compliance with their terms
and provisions will:
(a) conflict with or result in a breach of any of the
terms, conditions or provisions the Organizational Agreements of
any Borrower or any Subsidiary or any law or any regulation,
order, writ, injunction or decree of any court or governmental
instrumentality, or any agreement or instrument to which any
Borrower or any Subsidiary is a party or is subject or by which
properties of any Borrower or any Subsidiary may be bound;
(b) result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever, upon the property
or assets of any Borrower or any Subsidiary; or
(c) require the consent of any Person.
6.3 Approval by Necessary Organizational Action. The
execution and delivery of the Agreement, the making of the
borrowings contemplated or permitted by the Agreement, and the
execution, issuance and delivery of the Notes to evidence the
borrowings have each been duly authorized by all necessary
organizational action on the part of each Borrower. The
Agreement and the Notes have been duly and validly executed and
delivered by each Borrower and constitute the valid and legally
binding agreements of each Borrower enforceable in accordance
with their terms, except as may be limited by (a) bankruptcy,
insolvency, or other laws of general application relating to or
affecting the enforcement of creditors' rights and remedies
generally and (b) the exercise of judicial discretion in
accordance with general principles of equity.
6.4 Financial Statements.
(a) At the Effective Date, each financial statement
and all other related information furnished to the Agent and the
Lenders by the Primary Borrower pursuant to this Agreement have
been prepared in accordance with generally accepted accounting
principles and practices consistently applied in the preparation
of the Primary Borrower's and any Subsidiaries' previous
financial statements, are true and complete, and fairly present
the Primary Borrower's and any Subsidiaries' financial condition
and results of operations as of the date of each statement or
other information and for the respective period stated. There
has been no material adverse change in the Primary Borrower's
financial condition, properties, business or operations, taken as
a whole on a consolidated basis, since the date of the Primary
Borrower's most recent financial statements delivered to the
Agent and the Lenders.
(b) The Primary Borrower has delivered to the Agent
and the Lenders copies of its most recent annual and interim
financial statements.
6.5 Litigation; Regulatory Compliance. Except as may be
described in the opinion of counsel delivered pursuant to
Section 5.2(a):
(a) At the Effective Date, there are no actions, suits
or proceedings pending or threatened against or affecting any
Borrower or any Subsidiary before any court or before any
federal, state, provincial, municipal or other governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which involve the possibility of any
judgment or liability not covered in full by insurance or which
could in one case or in the aggregate result in any material
adverse change in the business, operations, property, assets or
financial condition of the Primary Borrower and its Subsidiaries
taken as a whole. If, subsequent to the Effective Date, there
are any such actions, suits or proceedings pending or threatened
against or affecting any Borrower, the Primary Borrower shall
give the Agent and the Lenders prompt written notice of such
actions, suits or proceedings.
(b) Neither any Borrower nor any Subsidiaries are in
default with respect to any order, writ, injunction or decree of
any court, arbitrator or federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
6.6 ERISA Compliance. At the Effective Date:
(a) Neither any Borrower nor any Subsidiary has
incurred any material accumulated funding deficiency within the
meaning of ERISA.
(b) The Pension Benefit Guaranty Corporation has not
asserted that any Borrower or any Subsidiary has incurred any
material liability in connection with any employee pension
benefit plan.
(c) No lien has been attached and no Person has
threatened to attach a lien on any property of any Borrower or
any Subsidiary as a result of any Borrower's or any Subsidiary's
failure to comply with such act or regulations.
6.7 Title and Freedom from Liens. At the Effective Date,
each Borrower and each Subsidiary has good, marketable and
indefeasible title to all of its properties and assets, real and
personal, free and clear of all liens and encumbrances, except
for the following:
(a) in the case of real properties, easements,
restrictions, exceptions, reservations or defects which, in the
aggregate, do not interfere materially with the continued use of
such properties for the purposes for which they are used and do
not affect materially the value thereof;
(b) pledges, deposits or stay or appeal bonds to
secure obligations under workers' compensation laws or similar
legislation or to secure performance in connection with bids,
tenders and contracts (other than contracts for the payment of
borrowed money) to which any Borrower or any Subsidiary is a
party;
(c) deposits to secure public or statutory obligations
of any Borrower and any Subsidiaries or otherwise required by law
or government regulations as a condition of transacting business
or executing any right, privilege or license;
(d) materialmen's, mechanics', carriers', workers' or
other like liens arising in the ordinary course of business, or
deposits of cash or United States obligations to obtain the
release of such liens;
(e) liens for taxes, assessments or governmental
charges which are not delinquent or are being contested in good
faith and against which adequate reserves have been provided; if
any such amount is in excess of $500,000, Borrower will notify
the Agent and the Lenders as soon as reasonably practicable; and
(f) mortgages, liens, security interests or
encumbrances granted to either of the Lenders or as set out in
Schedule C to this Agreement in existence as of the Effective
Date.
If, subsequent to the Effective Date, any Borrower or any
Subsidiary shall grant any mortgage, lien, security interest or
encumbrance to a third party on any of its or their properties or
assets in a single transaction or in related transactions (i) in
an amount in excess of $500,000, the Primary Borrower shall
provide the Agent and the Lenders with written notice as soon as
reasonably practicable, or (ii) in any lesser amount, the Primary
Borrower shall provide the Agent and the Lenders with written
notice from time to time of any such mortgage, lien, security
interest or encumbrance. Mortgages, liens, security interests
and encumbrances shall be subject to the limitations contained in
Section 7.23.
6.8 Absence of Default. No Event of Default as described
in this Agreement and no condition, event or act which, with the
giving of notice or the lapse of time or both, would constitute
an Event of Default has occurred and is continuing.
6.9 Taxes. Each Borrower and all Subsidiaries have filed
all tax returns, which to the knowledge of the Primary Borrower
are required to be filed by any jurisdiction, and have paid any
material taxes, assessments and governmental charges and levies
which, to the knowledge of Borrower, have become due except those
being contested in good faith by appropriate and timely
proceedings, and with respect to which reserves have been
provided or are otherwise available.
6.10 Existing Debts. On the Effective Date, no Borrower has
Indebtedness except for (a) trade credit incurred in the ordinary
course of business and (b) other Indebtedness set forth in
Schedule D to this Agreement.
6.11 Margin Stock. No Borrower is engaged principally, or
as one of its important activities, in the business of extending
or arranging for the extension of credit for the purpose of
purchasing or carrying "margin security" or "margin Stock" (as
defined in Regulations G and U issued by the Board of Governors
of the Federal Reserve System). No Borrower owns or intends to
carry or purchase any "margin security" or "margin Stock," except
for stock of the Primary Borrower. No Borrower will not use the
proceeds of any Loan to purchase or carry (or refinance any
borrowings the proceeds of which were used to purchase or carry)
any "margin security" or "margin Stock," except for stock of the
Primary Borrower.
6.12 Compliance with Conditions Precedent. Each Borrower
has (a) executed and delivered to the Agent and the Lenders the
documents described in Section 5.2 and Schedule A hereto; (b)
obtained and delivered to the Agent and the Lenders the Opinion
of Counsel described in Section 5.2; and (c) otherwise complied
with all other conditions hereto.
6.13 Interdependent Relationship. Each of the Affiliate
Borrowers use, in common with the Primary Borrower, the
management of the Primary Borrower and the accounting systems and
other organizational and operational support systems of the
Primary Borrower to the extent that, as of the date of this
Agreement, the Affiliate Borrowers could not operate
independently from or without the Primary Borrower unless and
until the Affiliate Borrowers made fundamental changes in their
organizational structure and operations.
PART 7. COVENANTS
Each Borrower will perform and observe each of the following
provisions while this Agreement remains in effect and thereafter
until the principal of and interest on the Loans are paid in
full, unless the Agent at the request of the Required Lenders
shall render a prior written notice to the Primary Borrower that
the Required Lenders otherwise consent.
7.1 Punctual Payment. Each Borrower will punctually pay or
cause to be paid the principal and interest due in respect of the
Loans according to the terms hereof and the commitment fees
provided in Part 2 hereof. Each Borrower shall be jointly and
severally liable for all debts, liabilities and obligations of
all Borrowers hereunder.
7.2 Financial Information.
(a) The Primary Borrower will furnish to the Agent and
each of the Lenders annually within one hundred twenty (120) days
after and as at the close of each Fiscal Year its audited
financial statements, including, without limitation, consolidated
and consolidating balance sheets and statements of operations and
earnings and changes in financial position, each examined and
reported upon by an independent certified public accounting firm
of national reputation, and prepared in accordance with generally
accepted accounting principles consistently applied, and the
report of such accountants shall not contain any qualification or
disclaimer of opinion by reason of audit limitations imposed by
the Primary Borrower.
(b) The Primary Borrower will furnish to the Agent and
each of the Lenders within sixty (60) days after and as at the
close of each Fiscal Quarter its interim financial statements,
including, without limitation, consolidated and consolidating
balance sheets and related statements of operations and earnings
and changes in financial position of the Primary Borrower for the
previous Fiscal Quarter and from the beginning of the Fiscal Year
to the end of such Fiscal Quarter, together with comparisons to
the previous year, if appropriate, prepared by the Primary
Borrower's accounting staff in accordance with generally accepted
accounting principles consistently applied. Such financial
statements shall be accompanied by a certificate of the Primary
Borrower's chief financial officer that, based on such
statements, the Primary Borrower is not in default of the
financial covenants hereunder.
(c) The Primary Borrower will promptly furnish upon
their becoming available, copies of all regular and periodic
financial reports, if any, which the Primary Borrower or any of
its Subsidiaries shall file with the Securities and Exchange
Commission or with any securities exchange.
(d) The Primary Borrower will promptly furnish upon
their becoming available, copies of all prospectuses of the
Primary Borrower and all reports, proxy statements and financial
statements mailed by the Primary Borrower to its shareholders
generally.
(e) The Primary Borrower will promptly furnish to the
Agent and each of the Lenders on a quarterly basis within sixty
(60) days after and as at the close of each Fiscal Quarter with a
schedule of any outstanding standby or performance letters of
credit issued to a third party beneficiary for the account of the
Primary Borrower.
(f) The Primary Borrower will furnish Agent and each
of the Lenders as soon as reasonably practicable with such
further information regarding the Primary Borrower's business,
condition, other credit sources, property, assets or operations,
financial or otherwise, as the Agent, at the instruction of the
Required Lenders, may from time to time reasonably request, all
prepared in form and detail reasonably satisfactory to the Agent
and the Lenders.
(g) The Primary Borrower will at all times maintain
true and complete records and books of account including, without
limiting the generality of the foregoing, appropriate reserves
for possible losses and liabilities, all in accordance with
generally accepted accounting principles consistently applied.
(h) The Primary Borrower will furnish to the Agent and
each of the Lenders on each Monthly Due Date a report detailing
(i) each Letter of Credit issued and each Foreign Currency Loan
made since the prior Monthly Due Date, together with the amount
of the Foreign Currency disbursed in respect of each such Foreign
Currency Loan and the equivalent amount of U.S. Dollars based
upon the Applicable Exchange Rate, and (ii) all outstanding
Letters of Credit identifying in each case the corresponding
Borrower and the principal amount of the corresponding Letter of
Credit Exposure, and (iii) all outstanding Foreign Currency
Loans, identifying in each case the corresponding Foreign
Currency Borrower and the remaining unpaid principal of the
corresponding Foreign Currency Loan in the equivalent amount of
U.S. Dollars computed under the Applicable Exchange Rate.
Should the Facility Obligations equal or exceed ninety percent
(90%) of the Commitment, such report shall be furnished on the
first Business Day of each week.
7.3 Inspection of Borrowers' Property and Records. Each
Borrower shall permit, and cause any Subsidiary to permit,
representatives of the Agent and the Lenders (a) to visit and
inspect any of the properties of such Borrower or any Subsidiary,
(b) to examine its or their corporate books and records, (c) to
make extracts or copies of such books and records, and (d) to
discuss its or their affairs, finances and accounts with its or
their officers or partners, as applicable. The foregoing may be
done at any time within regular business hours upon one (1)
Business Day's advance notice.
7.4 Preservation of Borrower's Existence and Business.
(a) Each Borrower will preserve and keep in full force
and effect such Borrower's existence, rights, licenses and
franchises and those of any Subsidiaries which are necessary and
material to such Borrower's and Subsidiaries' operations taken as
a whole.
(b) No Borrower will make or permit to be made any
material change in the character of Borrower's business or
operations.
7.5 Payment of Debts and Obligations. Each Borrower will
duly pay and discharge, and the Primary Borrower will cause each
of the Subsidiaries to pay and discharge, all (i) its material
obligations when due and (ii) taxes, assessments and governmental
charges of which it has knowledge assessed against it or against
its properties prior to the dates on which penalties are attached
thereto, unless and to the extent only that such obligations,
taxes, assessments or charges are not material or shall be
contested in good faith and by appropriate proceedings by it.
7.6 Loans and Guaranties by the Primary Borrower. The
Primary Borrower may loan or make advances to, or guarantee, the
obligations or Indebtedness of any other Person, including any
Subsidiary, directly or indirectly, or any Subsidiary may do so,
provided that in the event any such loan, advance or guaranty is
in an amount in excess of $5,000,000.00, the Primary Borrower
shall provide, or shall cause any Subsidiary to provide, the
Agent and the Lenders with prompt written notice of such loan,
advance or guaranty and such other information as the Agent or
the Lenders may reasonably request.
7.7 Insurance Coverage. The Primary Borrower will maintain,
and cause any Subsidiaries to maintain, an adequate insurance
program covering all such properties and risks as are customarily
insured by, and in amounts not less than those customarily
carried by, corporations engaged in similar business and
similarly situated.
7.8 Litigation. The Primary Borrower will promptly notify
the Agent and the Lenders in writing of the commencement of any
single litigation in excess of One Million Dollars
($1,000,000.00), or related litigations, which, when aggregated,
are in excess of One Million Dollars ($1,000,000.00), to which
any Borrower or any Subsidiary, is a party defendant or is a
cross- or counter-defendant, except for litigation in which any
Borrower's contingent liability is fully covered by insurance.
The Primary Borrower will promptly notify the Agent and the
Lenders in writing of any judgment against any Borrower or
Subsidiary in excess of $500,000.00.
7.9 ERISA Compliance. No Borrower will (a) incur any
accumulated funding deficiency within the meaning of the Employee
Retirement Income Security Act of 1974, as amended from time to
time and the regulations thereunder, equal to 5% of Consolidated
Tangible Net Worth with regard to its defined benefit and money
purchase pension plans or (b) incur any liability of comparable
size to the Pension Benefit Guaranty Corporation.
7.10 FLSA Compliance. Each Borrower will and the Primary
Borrower will cause each Subsidiary to comply with the provisions
of the Fair Labor Standards Act of 1938, as amended.
7.11 Compliance with All Laws, Etc. No Borrower will
knowingly be, nor will the Primary Borrower permit any Subsidiary
to knowingly be, in violation of any law or regulation, order,
writ, injunction or decree of any court or governmental
instrumentality or in breach of any agreement or instrument to
which any Borrower or any Subsidiary is subject or in default
thereunder, which violation, breach or default results in a
material adverse impact on the Primary Borrower's consolidated
financial condition.
7.12 Mergers, Acquisitions, Bulk Sales and Reorganization.
No Borrower will enter into or be a party to any merger,
consolidation or reorganization, nor will the Primary Borrower
permit any Subsidiary to do so, or sell, transfer, convey, lease
or otherwise dispose of all or substantially all of any
Borrower's or any Subsidiary's capital assets or business;
provided, however, that this Part does not limit in any way the
making of leases by any Borrower, as lessor, of such Borrower's
products, programs or other inventory in the ordinary course of
such Borrower's business; and provided further that any
Wholly-owned Subsidiary may be merged into the Primary Borrower
or any other Wholly-owned Subsidiary; and provided further that
the Primary Borrower may sell assets or otherwise dispose of
Alliance Tool Corporation. Notwithstanding the foregoing, the
Primary Borrower may enter into or be a party to any agreement to
acquire the Stock or assets of a corporation or any part thereof
or issue its Stock in exchange for the assets or Stock of a
corporation or any part thereof, provided, however, that there
shall be no material adverse impact on the consolidated financial
condition or ownership of the Primary Borrower if any of the
foregoing occur.
7.13 Subsidiaries.
(a) No Borrower will organize or cause to exist any
Subsidiaries, except for the Subsidiaries listed in Schedule B,
unless such Subsidiary shall provide the Lenders and the Agent
with a guaranty of payment, in a form acceptable to the Lenders
and the Agent, of the Note and all other Indebtedness of the
Borrowers to the Lenders and the Agent created under this
Agreement. The amount of Indebtedness guaranteed by any
Subsidiary created or acquired after the Effective Date shall be
limited to the aggregate amount of moneys from time to time
advanced by the Primary Borrower to the new Subsidiary together
with the fair market value of any property transferred from time
to time by the Primary Borrower to the new Subsidiary (whether
such advances or transfers are made as loans or as equity
contributions) which have not been repaid or returned to the
Primary Borrower.
(b) No Borrower will sell, convey, transfer, assign,
pledge or otherwise encumber any of the Stock of any Subsidiary
to any Person except for the Stock of Alliance Tool Corporation.
(c) With regard to any Subsidiaries created after the
Effective Date, such Subsidiaries shall be duly organized,
validly existing and in good standing under the laws of the
states or countries of their originations and duly qualified to
do business in all jurisdictions in which each owns substantial
properties or conducts substantial business or in which any of
their activities makes such qualification necessary except in
those jurisdictions in which failure to so qualify would not
result in a material adverse impact on such Subsidiary's ability
to conduct business or own properties. If any such Subsidiaries
do not qualify in any such jurisdictions to do business or to own
properties, Borrower shall give the Agent and the Lenders prompt
written notice of such change in circumstances.
7.14 Ownership of Securities. Except as permitted pursuant
to and under Section 7.6 and except in the ordinary course of
Borrower's business, no Borrower will make or hold any investment
in any securities of any kind other than ownership of Stock of
Subsidiaries or make or keep outstanding any advance or loan.
The foregoing provision shall not apply to any investment in
direct obligations of the United States of America, certificates
of deposit issued by a member bank of the Federal Reserve System,
or any investment in commercial paper which at the time of such
investment is assigned a high quality rating in accordance with
the rating systems employed by either Moody's Investors Service,
Inc. or Standard & Poor's Corporation.
7.15 Maintenance of Properties. Each Borrower will maintain
and keep its properties in good condition, and from time to time
make all repairs, renewals and replacements, to the extent
necessary for the conduct of its business, and the Primary
Borrower will cause the Subsidiaries to do the same.
7.16 Notice to Lenders and Agent of Default. The Primary
Borrower will immediately notify the Lenders and the Agent in
writing with full details if (a) any event occurs or any
condition exists which constitutes, or which but for a
requirement of lapse of time or notice or both would constitute,
an Event of Default under Section 9.1, or which might materially
and adversely affect the consolidated financial condition or
operations of the Primary Borrower or (b) any representation or
warranty made in this Agreement or in any writing related to it
may for any reason cease in any material respect to be true and
complete.
7.17 Tangible Net Worth. The Primary Borrower will not
permit its Consolidated Tangible Net Worth to decline by more
than more than 20% during each twelve month period (without carry-
over from any prior period and on a non-cumulative basis) ending
on the last day of each Fiscal Quarter; provided, however, that,
if the Primary Borrower shall repurchase its own capital Stock,
up to an aggregate amount of $10,000,000 of such repurchases
during the term of this Agreement shall be excluded from the
computation of Consolidated Tangible Net Worth for the purposes
of this Section 7.17.
7.18 Liabilities to Tangible Net Worth. The Primary
Borrower will not permit its Consolidated Liabilities to be at
any time more than 300% of its Consolidated Tangible Net Worth.
7.19 Working Capital. The Primary Borrower shall maintain
Working Capital of $33,000,000 at all times.
7.20 EBITDA to Funded Indebtedness. The Primary Borrower
shall not permit the ratio of EBITDA to Consolidated Funded
Indebtedness to be less than 0.20 to 1.00 as measured during each
twelve month period ending on the last day of each Fiscal
Quarter.
7.21 Interest Coverage. The Primary Borrower shall not
permit the ratio of EBITDA to Consolidated Interest Expense to be
less than 3.0 to 1.0 for each twelve month period ending on the
last day of each such Fiscal Quarter.
7.22 Restrictions on Use of Proceeds. Each Borrower shall
use the proceeds of the Loans to fund capital expenditures,
working capital and other general corporate expenditures,
including repurchases of the Primary Borrower's capital Stock and
including investments in businesses similar in nature to that of
the Primary Borrower, and for no other purposes. No proceeds of
any of the Loans made pursuant to this Agreement or pursuant to
any of the Credit Agreements shall be used by any Borrower to
make any advance to or investment in, directly or indirectly, any
of its Subsidiaries unless the Subsidiary is a Guarantor of the
Loans hereunder as required by Section 7.13(a).
7.23 Certain Indebtedness to Net Worth. The Primary
Borrower will not permit the total portion of its Consolidated
Liabilities which is comprised of liabilities of every nature
that are secured by liens on its property or incurred under,
pursuant to or in connection with any title retention agreement
or any industrial development revenue bond to exceed in the
aggregate 25% of its Consolidated Tangible Net Worth; provided,
however, that liabilities under any industrial development
revenue bond which are not secured by a security interest in or
lease of property shall be excluded from such computation.
7.24 Restrictions on Other Borrowings. No Borrower shall
enter into, and the Primary Borrower shall not permit any
Subsidiary to enter into, any agreement or contractual commitment
which limits the payment of dividends or the repayment of
advances by any of the Subsidiaries to the Primary Borrower.
PART 8. GUARANTY
Without limitation of any obligation of any of the Borrowers
or any right of the Lenders hereunder, the Initial Guarantors
hereby unconditionally guaranty to the Lenders and the Agent the
full, prompt and punctual payment when due of any and all
Facility Obligations.
The Initial Guarantors agree and understand that their
obligations under this Part 8 shall be unconditional, regardless
of any circumstances which might constitute a legal or equitable
discharge of a surety or guarantor and regardless of any law,
rule, regulation, decree or order now or hereafter in effect in
any jurisdiction purporting to affect in any manner any of the
terms of the Facility Obligations or the rights of the Lenders or
the Agent under this Part 8, and the Initial Obligors expressly
waive each of the foregoing. In furtherance, but not in
limitation, of the foregoing, the liability of the Initial
Guarantors under this Part 8 shall be unconditional irrespective
of the following:
(i) The lack of genuineness, validity, regularity or
enforceability of the Facility Obligations or of any debt,
liability or obligation evidenced thereby or contained therein;
(ii) Any extension of time of payment or renewal in whole or
in part of any Facility Obligation;
(iii)The failure of the Lenders or the Agent to obtain
rights in any collateral or to perfect rights in any collateral
which may now or hereafter secure payment of any Facility
Obligation;
(iv) Any exchange or release of, or compromise or settlement
with respect to, any obligation or any collateral which may now
or hereafter secure payment of any Facility Obligation;
(v) Any change in or waiver of the time, manner or place of
payment, or any other term, of any Facility Obligation;
(vi) The bankruptcy, insolvency, dissolution,
reorganization, merger, consolidation, sale of assets, discharge
in bankruptcy, adjustment or composition of debts, appointment of
a trustee or receiver, or any other proceeding or event, with
respect to any Borrower;
(vii)The release of, or any compromise or settlement with,
any guarantor, endorser or other party, person or entity liable
primarily or secondarily on any Facility Obligation;
(viii)Any delay or lack of promptness or diligence by the
Lenders or the Agent in enforcing the rights of the Lenders or
the Agent under any Facility Document;
(ix) The existence of any claim, set-off or other rights
which any Borrower may have at any time against the Lenders or
the Agent or other corporation or person, whether in connection
herewith or any unrelated transactions, provided that nothing
herein shall prevent the assertion of any such claim by separate
suit or compulsory counterclaim;
(x) Any claim of invalidity or unenforceability relating to
or against any other Borrower or any Guarantor for any reason
with respect to the Facility Obligations, or any provision of
applicable law or regulation purporting to prohibit the payment
by any other Borrower or any such Guarantor of any Facility
Obligation; or
(xi) Any other act or omission to act or delay of any kind
by any Borrower, any Guarantor, the Lenders or the Agent or any
other corporations or person, or any other circumstance
whatsoever which might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of a Borrower's
obligations under this Part 8.
The Initial Guarantors agree that if the Lenders or the
Agent are ever required to repay all or any part of any amount or
amounts received by the Lenders or the Agent in payment or on
account of any Facility Obligation, by reason of any judgment,
order or decree of any court or administrative body, or by reason
of any settlement or compromise of any claim made upon the
Lenders or the Agent to repay any such amount or amounts, then
any such judgment, order, decree, settlement or compromise shall
be binding upon each Initial Guarantor notwithstanding any
termination of this Agreement or the cancellation of any Facility
Obligation; and the Initial Guarantors shall be and remain liable
to the Lenders and the Agent under this Part 8 for the amounts so
repaid to the same extent as if such amounts had never originally
been received by the Lenders or the Agent.
The Lenders and the Agent may proceed to exercise any rights
or remedies which the Lenders and the Agent may have under this
Part 8 without first pursuing or exhausting any other rights or
remedies which the Lenders or the Agent may have against any
Borrower, any collateral security for the payment of the Facility
Obligations, or any other Guarantor or other person or entity.
If a Borrower makes any payment pursuant to and under this
Agreement, including without limitation this Part 8, such
Borrower shall not exercise any right of subrogation or any right
of contribution unless and until the Lenders and the Agent have
received payment in full of the Facility Obligations.
This Part 8 is a continuing guaranty and shall remain in
force and effect until all of the Facility Obligations (including
all expenses and reasonable attorneys' fees which may be incurred
in enforcing any rights of the Lenders and the Agent under this
Part 8) shall be paid or performed.
Each Borrower hereby irrevocably waives notice of acceptance
hereof, presentment, demand, protest and any notice not provided
for herein.
All sums to the credit of any Initial Guarantor and any
property of any Initial Guarantor in the possession of any Lender
or the Agent at any time shall be deemed held by such Lender or
the Agent as security for payment of the Facility Obligations and
each Initial Guarantor hereby grants to each Lender and the Agent
the right, without notice to such Initial Guarantor, to set off
such sums against any obligations of such Initial Guarantor
hereunder.
Each Initial Guarantor shall have no right of subrogation,
reimbursement, indemnity or contribution from any Borrower
(including another Initial Guarantor) unless and until all
Facility Obligations shall have been paid in full.
PART 9. DEFAULT
9.1 Events of Default. Each of the following shall
constitute an Event of Default under this Agreement:
(a) Any Borrower fails to pay any principal or
interest owing under this Agreement or any Note when due and
payable and such default shall have continued for a period of
five (5) Business Days thereafter;
(b) Any Borrower defaults in the performance of any
other covenant, condition, or provision in this Agreement or the
Notes, or any Guarantor of the Notes defaults in the performance
of any covenant, condition, or provision of a Guaranty, and such
Borrower or the Guarantor, as the case may be, does not remedy
that default within a period of thirty (30) days after written
notice of such default shall have been rendered to the Primary
Borrower by the Agent at the request of the Required Lenders.
(c) Any representation or warranty made by any
Borrower in this Agreement, by any Guarantor in any Guaranty or
by any Borrower or any Guarantor in any certificate or financial
statement furnished to the Lenders or the Agent is false or
misleading in any material respect as of the time made or
furnished and such Borrower or Guarantor shall fail to take
corrective measures satisfactory to the Required Lenders within
thirty (30) days (or five (5) days as to Section 7.2(h)) after
written notice of such false or misleading representation or
warranty shall have been rendered to the Primary Borrower by the
Agent at the request of the Required Lenders;
(d)(i) Any Borrower defaults in any payment of the
principal of or interest on any obligation(s) for borrowed money
or evidences of Indebtedness (other than hereunder) in an amount
in excess of $10,000 (including underlying principal), whether
owing to the Lenders or any other Person and including
Subordinated Debt, or in the performance of any other material
term or condition contained in any agreement under which any such
obligation(s) or evidences of Indebtedness are created, or (ii)
any of Borrowers' Affiliates or any Guarantor defaults in any
payment of the principal of or interest on any obligation(s) for
borrowed money or evidences of Indebtedness (other than hereunder
or trade Indebtedness which continues to be contested in good
faith and by appropriate proceedings), whether owing to the
Lenders or any other Person and including Subordinated Debt, or
in the performance of any other term or condition contained in
any agreement under which any such obligation(s) or evidences of
Indebtedness are created, provided that any such default is a
material default, and such default(s) shall continue beyond the
period of grace, if any, specified therein, regardless of whether
such obligation or Indebtedness is actually accelerated and, in
the case of Subordinated Debt, regardless of whether payment upon
such acceleration is postponed pursuant to the terms of such
subordination, unless a Borrower, any of Borrowers' Affiliates or
any Guarantor, as the case may be, is in the process of
contesting such default(s) in good faith and by appropriate
proceedings;
(e)(i) Any event occurs or condition exists which,
with notice or lapse of time or both, would make any employee
pension or benefit plan of any Borrower, any Subsidiary or any
Guarantor subject to termination under subsections (1), (2) and
(3) of Section 4042(a) of ERISA, unless the Agent at the request
of the Required Lenders has first given its prior written
approval of such event or condition, which approval will not be
unreasonably withheld, or (ii) any Borrower, any Subsidiary, any
Guarantor or any of their respective plan administrators shall
have received notice from the Pension Benefit Guaranty
Corporation indicating that it has made a determination that any
employee pension benefit plan of Borrower, any Subsidiary or any
Guarantor is subject to termination under Section 4042(a)(4) of
ERISA, or (iii) any Borrower, any Subsidiary or any Guarantor is
subject to employer's liability under Sections 4062, 4063, or
4064 of ERISA, in each case under ERISA as now or hereafter
amended, unless, however, Borrower, any Subsidiary or any
Guarantor, as the case may be, is in the process of contesting
such termination or determination of employer's liability under
ERISA in good faith and by appropriate proceedings, the Agent and
the Lenders have received prior written notice of such contest
and, by such contest, Borrower is not otherwise in violation of
Section 7.9 hereof; and provided further, that Borrower's planned
curtailment and standard termination of Borrower's Defined
Benefit Pension Plan as defined at the Effective Date, if
consummated in accordance with ERISA and if such consummation
does not violate any of the covenants hereunder, shall, for the
purposes of this Part, not be considered an Event of Default;
(f) any Borrower, any Subsidiary or any Guarantor is
generally not paying its debts, respectively, as they become due
in the ordinary course of its business;
(g) any Borrower, any Subsidiary or any Guarantor
makes an assignment for the benefit of creditors, commences (as
the debtor) any case in bankruptcy, or commences (as the debtor)
any proceeding under any other insolvency law;
(h) A case in bankruptcy or any proceeding under any
insolvency law is commenced against any Borrower, any Subsidiary
or any Guarantor (as the debtor in such case or proceeding) and a
court having jurisdiction in the premises enters an order for
relief against such Borrower, the Subsidiary or the Guarantor in
such case or proceeding and that order is not overturned or
stayed within sixty (60) days of entry, or such case or
proceeding is consented to by such Borrower, the Subsidiary or
the Guarantor, or such Borrower, the Subsidiary or the Guarantor
consents to or admits the material allegations against it in any
such case or proceeding;
(i) A trustee, receiver, agent or custodian (however
named) is appointed or authorized to take charge of substantially
all of the property of any Borrower, any Subsidiary or any
Guarantor for the purpose of enforcing a lien against such
property for the benefit of creditors and the order, if any,
appointing the trustee, receiver, agent or custodian is not
overturned or stayed within thirty (30) days of entry;
(j) One or more final judgments which when aggregated
are in excess of Five Hundred Thousand Dollars ($500,000.00) or
more at any one time outstanding are rendered against any
Borrower, any Subsidiary or any Guarantor and are not satisfied,
bonded, stayed or insured for a period of thirty (30) days
thereafter; and
(k) Any of the Guaranties actually delivered pursuant
hereto shall at any time not be in full force and effect and
valid and binding with respect to the Guarantor under such
Guaranty for any reason whatsoever.
9.2 Optional Acceleration. If one or more Events of
Default occur under Section 9.1(a), (b), (c), (d), (e), (f), (j)
or (k) above which is not cured as provided or waived by the
Required Lenders, the Agent shall, upon request of the Required
Lenders, by a written notice to the Borrower: (a) declare the
Commitments to be terminated, whereupon the same shall forthwith
terminate, and (b) declare the outstanding principal of the
Notes, all interest thereon and all other amounts payable under
this Agreement and the Notes to be forthwith due and payable,
whereupon the Notes, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrowers.
9.3 Automatic Acceleration. If one or more Events of
Default occur under Section 9.1(g), (h) or (i) above, then the
Commitment shall automatically and forthwith terminate and the
Notes and interest accrued thereon and all liabilities of the
Borrowers under this Agreement to the Lenders and the Agent shall
automatically become forthwith due and payable in full. The
Notes shall then become due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby
expressly waived.
9.4 Acceleration of Other Obligations to Lenders. If the
Notes become due and payable under the terms of this Part, then
each and every other note of the Borrowers payable to the Lenders
will also become forthwith due and payable, without presentment,
demand, protest or notice of any kind, all of which are expressly
waived.
PART 10. THE AGENT; RELATIONS AMONG LENDERS AND BORROWER
10.1. Appointment, Powers and Immunities of Agent. Each
Lender hereby irrevocably (but subject to removal by the Required
Lenders pursuant to 10.9) appoints and authorizes the Agent to
act as its agent hereunder and under any other Facility Document
with such powers as are specifically delegated to the Agent by
the terms of this Agreement and any other Facility Document,
together with such other powers as are reasonably incidental
thereto. The Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and any other
Facility Document, and shall not by reason of this Agreement be a
trustee for any Lender. The Agent shall not be responsible to
the Lenders for any recitals, statements, representations or
warranties made by the Borrowers or any officer or official of
the Borrowers or any other Person contained in this Agreement or
any other Facility Document, or in any certificate or other
document or instrument referred to or provided for in, or
received by any of them under, this Agreement or any other
Facility Document, or for the value, legality, validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Facility Document or any other document or
instrument referred to or provided for herein or therein, for the
perfection or priority of any collateral security for the Loans
or for any failure by the Borrowers to perform any of its
obligations hereunder or thereunder. The Agent may employ agents
and attorneys-in-fact and shall not be responsible, except as to
money or securities received by it or its authorized agents, for
the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Neither
the Agent nor any of its directors, officers, employees or agents
shall be liable or responsible for any action taken or omitted to
be taken by it or them hereunder or under any other Facility
Document or in connection herewith or therewith, except for its
or their own gross negligence or willful misconduct.
10.2. Reliance by Agent. The Agent shall be entitled to
rely upon any certification, notice or other communication
(including any thereof by telephone, telex, telegram or cable)
believed by it to be genuine and correct and to have been signed
or sent by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel, independent accountants
and other experts selected by the Agent. The Agent may deem and
treat each Lender as the holder of the Loans made by it for all
purposes hereof unless and until a notice of the assignment or
transfer thereof satisfactory to the Agent signed by such Lender
shall have been furnished to the Agent but the Agent shall not be
required to deal with any Person who has acquired a participation
in any Loan from a Lender. As to any matters not expressly
provided for by this Agreement or any other Facility Document,
the Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder in accordance with instructions
signed by the Required Lenders, and such instructions of the
Required Lenders and any action taken or failure to act pursuant
thereto shall be binding on all of the Lenders and any other
holder of all or any portion of any Loan.
10.3. Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default or Event of Default
(other than the non-payment of principal of or interest on the
Loans to the extent the same is required to be paid to the Agent
for the account of the Lenders) unless the Agent has received
notice from a Lender or the Borrowers specifying such Default or
Event of Default and stating that such notice is a "Notice of
Default." In the event that the Agent receives such a notice of
the occurrence of a Default or Event of Default, the Agent shall
give prompt notice thereof to the Lenders (and shall give each
Lender prompt notice of each such non-payment). The Agent shall
(subject to 10.8) take such action with respect to such Default
or Event of Default which is continuing as shall be directed by
the Required Lenders; provided that, unless and until the Agent
shall have received such directions, the Agent may take such
action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the
best interest of the Lenders; and provided further that the Agent
shall not be required to take any such action which it determines
to be contrary to law.
10.4. Rights of Agent as a Lender. With respect to its
Commitment and the Loans made by it, the Agent in its capacity as
a Lender hereunder shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though
it were not acting as the Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include
the Agent in its capacity as a Lender. The Agent and its
affiliates may (without having to account therefor to any Lender)
accept deposits from, lend money to (on a secured or unsecured
basis), and generally engage in any kind of banking, trust or
other business with, the Borrowers (and any of Borrowers'
Affiliates) as if it were not acting as the Agent, and the Agent
may accept fees and other consideration from the Borrowers for
services in connection with this Agreement or otherwise without
having to account for the same to the Lenders. Although the
Agent and its affiliates may in the course of such relationships
and relationships with other Persons acquire information about
the Borrowers, Borrowers' Affiliates and such other Persons, the
Agent shall have no duty to disclose such information to the
Lenders.
10.5. Indemnification of Agent. The Lenders agree to
indemnify the Agent (to the extent not reimbursed under 11.3 or
under the applicable provisions of any other Facility Document,
but without limiting the obligations of the Borrowers under
11.3 or such provisions), ratably in accordance with the
aggregate unpaid principal amount of the Loans made by the
Lenders (without giving effect to any participations, in all or
any portion of such Loans, sold by them to any other Person) (or,
if no Loans are at the time outstanding, ratably in accordance
with their respective Commitments), for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of this
Agreement, any other Facility Document or any other documents
contemplated by or referred to herein or the transactions
contemplated hereby or thereby (including, without limitation,
the costs and expenses which the Borrowers is obligated to pay
under 11.3 or under the applicable provisions of any other
Facility Document but excluding, unless a Default or Event of
Default has occurred, normal administrative costs and expenses
incident to the performance of its agency duties hereunder) or
the enforcement of any of the terms hereof or thereof or of any
such other documents or instruments; provided that no Lender
shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the party to
be indemnified.
10.6. Documents. The Agent will forward to each Lender,
promptly after the Agent's receipt thereof, a copy of each
report, notice or other document required by this Agreement or
any other Facility Document to be delivered to the Agent for such
Lender.
10.7. Non-Reliance on Agent and Other Lenders. Each Lender
agrees that it has, independently and without reliance on the
Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit
analysis of the Borrowers and its Subsidiaries and decision to
enter into this Agreement and that it will, independently and
without reliance upon the Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at
the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any other
Facility Document. The Agent shall not be required to keep
itself informed as to the performance or observance by the
Borrowers of this Agreement or any other Facility Document or any
other document referred to or provided for herein or therein or
to inspect the properties or books of the Borrowers or any
Subsidiary. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by
the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or
business of the Borrowers or any Subsidiary (or any of Borrowers'
Affiliates) which may come into the possession of the Agent or
any of its affiliates. The Agent shall not be required to file
this Agreement, any other Facility Document or any document or
instrument referred to herein or therein, for record or give
notice of this Agreement, any other Facility Document or any
document or instrument referred to herein or therein, to anyone.
10.8. Failure of Agent to Act. Except for action expressly
required of the Agent hereunder, the Agent shall in all cases be
fully justified in failing or refusing to act hereunder unless it
shall have received further assurances (which may include cash
collateral) of the indemnification obligations of the Lenders
under 10.5 in respect of any and all liability and expense
which may be incurred by it by reason of taking or continuing to
take any such action.
10.9. Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided
below, the Agent may resign at any time by giving written notice
thereof to the Lenders and the Borrowers, and the Agent may be
removed at any time with or without cause by the Required
Lenders; provided that the Borrowers and the other Lenders shall
be promptly notified thereof. Upon any such resignation or
removal, the Required Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so
appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Agent's giving of
notice of resignation or the Required Lenders' removal of the
retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be a bank which
has an office in New York, New York. The Required Lenders or the
retiring Agent, as the case may be, shall upon the appointment of
a successor Agent promptly so notify the Borrowers and the other
Lenders. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Part 10 shall
continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the
Agent.
10.10. Amendments Concerning Agency Function. The Agent
shall not be bound by any waiver, amendment, supplement or
modification of this Agreement or any other Facility Document
which affects its duties hereunder or thereunder unless it shall
have given its prior consent thereto.
10.11. Liability of Agent. The Agent shall not have any
liabilities or responsibilities to the Borrowers on account of
the failure of any Lender to perform its obligations hereunder or
to any Lender on account of the failure of the Borrowers to
perform its obligations hereunder or under any other Facility
Document.
10.12. Transfer of Agency Function. Without the consent of
the Borrowers or any Lender, the Agent may at any time or from
time to time transfer its functions as Agent hereunder to any of
its offices wherever located, provided that the Agent shall
promptly notify the Borrowers and the Lenders thereof.
10.13. Non-Receipt of Funds by the Agent. Unless the Agent
shall have been notified by a Lender or the Borrowers (either one
as appropriate being the "Payor") prior to the date on which such
Lender is to make payment hereunder to the Agent of the proceeds
of a Loan or the Borrowers is to make payment to the Agent, as
the case may be (either such payment being a "Required Payment"),
which notice shall be effective upon receipt, that the Payor does
not intend to make the Required Payment to the Agent, the Agent
may assume that the Required Payment has been made and may, in
reliance upon such assumption (but shall not be required to),
make the amount thereof available to the intended recipient on
such date and, if the Payor has not in fact made the Required
Payment to the Agent, the recipient of such payment (and, if such
recipient is a Borrower and the Payor Lender fails to pay the
amount thereof to the Agent forthwith upon demand) such Borrower
shall, on demand, repay to the Agent the amount made available to
it together with interest thereon for the period from the date
such amount was so made available by the Agent until the date the
Agent recovers such amount at a rate per annum equal to the
average daily Federal Funds Rate for such period.
10.14. Withholding Taxes. Each Lender represents that it
is entitled to receive any payments to be made to it hereunder
without the withholding of any tax and will furnish to the Agent
such forms, certifications, statements and other documents as the
Agent may request from time to time to evidence such Lender's
exemption from the withholding of any tax imposed by any
jurisdiction or to enable the Agent to comply with any applicable
laws or regulations relating thereto. Without limiting the
effect of the foregoing, if any Lender is not created or
organized under the laws of the United States of America or any
state thereof, in the event that the payment of interest by the
Borrowers is treated for U.S. income tax purposes as derived in
whole or in part from sources from within the U.S., such Lender
will furnish to the Agent Form 4224 or Form 1001 of the Internal
Revenue Service, or such other forms, certifications, statements
or documents, duly executed and completed by such Lender as
evidence of such Lender's exemption from the withholding of U.S.
tax with respect thereto. The Agent shall not be obligated to
make any payments hereunder to such Lender in respect of any Loan
or such Lender's Commitment until such Lender shall have
furnished to the Agent the requested form, certification,
statement or document.
10.15. Several Obligations and Rights of Lenders. The
failure of any Lender to make any Loan to be made by it on the
date specified therefor shall not relieve any other Lender of its
obligation to make its Loan on such date, but no Lender shall be
responsible for the failure of any other Lender to make a Loan to
be made by such other Lender. The amounts payable at any time
hereunder to each Lender shall be a separate and independent
debt, and each Lender shall be entitled to protect and enforce
its rights arising out of this Agreement, and it shall not be
necessary for any other Lender to be joined as an additional
party in any proceeding for such purpose.
10.16. Pro Rata Treatment of Loans, Etc. Except to the
extent otherwise provided: (a) each borrowing under 2.1 shall
be made from the Lenders, each reduction or termination of the
amount of the Commitments under 2.9 shall be applied to the
Commitments of the Lenders, and each payment accruing under 2.7
shall be made for the account of the Lenders, pro rata according
to the amounts of their respective unused Commitments; and (b)
each prepayment and payment of principal of or interest on Loans
of a particular type and a particular Interest Period shall be
made to the Agent for the account of the Lenders holding Loans of
such type and Interest Period pro rata in accordance with the
respective unpaid principal amounts of such Loans in respect of
such Interest Period held by such Lenders.
10.17. Sharing of Payments Among Lenders. If a Lender
shall obtain payment of any principal of or interest on any Loan
made by it through the exercise of any right of setoff, banker's
lien, counterclaim, or by any other means, it shall promptly
purchase from the other Lenders participations in (or, if and to
the extent specified by such Lender, direct interests in) the
Loans made by the other Lenders in such amounts, and make such
other adjustments from time to time as shall be equitable to the
end that all the Lenders shall share the benefit of such payment
(net of any expenses which may be incurred by such Lender in
obtaining or preserving such benefit) pro rata in accordance with
the unpaid principal and interest on the Loans held by each of
them. To such end the Lenders shall make appropriate adjustments
among themselves (by the resale of participations sold or
otherwise) if such payment is rescinded or must otherwise be
restored. The Borrowers agrees that any Lender so purchasing a
participation (or direct interest) in the Loans made by other
Lenders may exercise all rights of setoff, banker's lien,
counterclaim or similar rights with respect to such participation
(or direct interest). Nothing contained herein shall require any
Lender to exercise any such right or shall affect the right of
any Lender to exercise, and retain the benefits of exercising,
any such right with respect to any other indebtedness of the
Borrowers.
PART 11. MISCELLANEOUS
11.1. Amendments and Waivers. Except as otherwise
expressly provided in this Agreement, any provision of this
Agreement may be amended or modified only by an instrument in
writing signed by the Borrowers, the Agent and the Required
Lenders, or by the Borrowers and the Agent acting with the
consent of the Required Lenders and any provision of this
Agreement may be waived by the Required Lenders or by the Agent
acting with the consent of the Required Lenders; provided that no
amendment, modification or waiver shall, unless by an instrument
signed by all of the Lenders or by the Agent acting with the
consent of all of the Lenders: (a) increase or extend the term,
or extend the time or waive any requirement for the reduction or
termination, of the Commitments, (b) extend the date fixed for
the payment of principal of or interest on any Loan or any fee
payable hereunder, (c) reduce the amount of any payment of
principal thereof or the rate at which interest is payable
thereon or any fee payable hereunder, (d) alter the terms of this
Section 11.1, (e) amend the definition of the term "Required
Lenders", (f) waive any of the documentary conditions precedent
set forth in Section 5.2 and Schedule A hereto, or (g)
intentionally release any collateral from any security interest
under the Security Agreements; and provided, further, that any
amendment of Part 10 hereof or any amendment which increases the
obligations of the Agent hereunder shall require the consent of
the Agent. No failure on the part of the Agent or any Lender to
exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof or preclude any other or further
exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
11.2. Usury. Anything herein to the contrary
notwithstanding, the obligations of the Borrowers under this
Agreement and the Notes shall be subject to the limitation that
payments of interest shall not be required to the extent that
receipt thereof would be contrary to provisions of law applicable
to a Lender limiting rates of interest which may be charged or
collected by such Lender.
11.3. Expenses. The Borrowers shall reimburse the Agent
and the Lenders on demand for all reasonable costs, expenses, and
charges (including reasonable attorney's fees, both outside
counsel and the allocated cost of in-house counsel) incurred by
the Agent or the Lenders (a) in connection with the negotiation,
preparation and documentation of the Facility Documents and any
subsequent amendments, modifications or waivers thereto, and (b)
subsequent to any Default in connection with the enforcement or
work-out of the Loans, including the negotiation and preparation
of any other agreements, instruments or documents pertaining to
the Loans or any of the debts, liabilities or obligations of the
Borrowers or the Guarantors under any of the Facility Documents.
The Borrowers agrees to indemnify the Agent and each Lender and
their respective directors, officers, employees and agents from,
and hold each of them harmless against, any and all losses,
liabilities, claims, damages or expenses incurred by any of them
arising out of or by reason of any investigation or litigation or
other proceedings (including any threatened investigation or
litigation or other proceedings) relating to any actual or
proposed use by the Borrowers or any Subsidiary of the proceeds
of the Loans, including without limitation, the reasonable fees
and disbursements of counsel incurred in connection with any such
investigation or litigation or other proceedings (but excluding
any such losses, liabilities, claims, damages or expenses
incurred by reason of the gross negligence or willful misconduct
of the Person to be indemnified). The obligations of the
Borrowers under this paragraph shall survive the payment of the
Notes.
11.4. Survival. The obligations of the Borrowers under
2.10, 2.11, 2.14, 10.5 and 11.3 shall survive the repayment of
the Loans and the termination of the Commitments.
11.5. Assignment; Participations. (a) This Agreement shall
be binding upon, and shall inure to the benefit of, the
Borrowers, the Agent, the Lenders and their respective successors
and assigns, except that the Borrowers may not assign or transfer
its rights or obligations hereunder. Each Lender may assign, or
sell participations in, all or any part of its commitment or any
Loan to another bank or other entity, in which event (i) in the
case of an assignment, upon notice thereof by the Lender to the
Borrowers with a copy to the Agent, the assignee shall have, to
the extent of such assignment (unless otherwise provided
therein), the same rights, benefits and obligations as it would
have if it were a Lender hereunder; and (ii) in the case of a
participation, the participant shall have no rights under the
Facility Documents and all amounts payable by the Borrowers under
2.10, 2.11 and 2.14 shall be determined as if such Lender had
not sold such participation. No assignment can be made without
the consent of the Borrowers and the Agent (which consents will
not be unreasonably withheld) or in a principal amount which is
less than $5,000,000 ; provided further that no consent of the
Borrowers to any assignment shall be required after the
occurrence of an Event of Default which shall be continuing. The
agreement executed by a Lender in favor of any participant shall
not give the participant the right to require such Lender to take
or omit to take any action hereunder except action directly
relating to (i) the extension of the Revolving Credit Termination
Date, (ii) the extension of a payment date with respect to any
portion of the principal of or interest on any amount outstanding
hereunder allocated to such participant, (iii) the reduction of
the principal amount outstanding hereunder or (iv) the reduction
of the rate of interest payable on such amount or any amount of
fees payable hereunder to a rate or amount, as the case may be,
below that which the participant is entitled to receive under its
agreement with such Lender. Such Lender may furnish any
information concerning the Borrowers in the possession of such
Lender from time to time to assignees and participants (including
prospective assignees and participants) with the prior written
consent of the Borrowers, which consent shall not be unreasonably
withheld; provided that such Lender shall require any such
prospective assignee or such participant (prospective or
otherwise) to agree in writing to maintain the confidentiality of
such information. In connection with any assignment pursuant to
this paragraph (a), an administrative fee in the amount of $2,500
shall be paid to the Agent by the assignee for processing such
assignment.
(b) In addition to the assignments and participations
permitted under paragraph (a) above, any Lender may assign and
pledge all or any portion of its Loans and Note to (i) any
Affiliate of such Lender or (ii) any Federal Reserve Lender as
collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any Operating
Circular issued by such Federal Reserve Lender. No such
assignment shall release the assigning Lender from its
obligations hereunder.
11.6. Notices. All notices and other communications
provided for herein (including, without limitation, any
modifications of, or waivers or consents under, this Agreement)
shall be given or made by telex, telegraph, cable or in writing
and telexed, telecopied, telegraphed, cabled, mailed or delivered
to the intended recipient at the "Address for Notices" specified
below its name on the signature page hereof or, as to any party,
at such other address as shall be designated by such party in a
notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been
duly given when transmitted by telex or telecopier, delivered to
the telegraph or cable office or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or
addressed as aforesaid.
11.7. Setoff. The Borrowers agrees that, in addition to
(and without limitation of) any right of setoff, banker's lien or
counterclaim a Lender may otherwise have, each Lender shall be
entitled, at its option, to offset balances (general or special,
time or demand, provisional or final) held by it for the account
of the Borrowers at any of such Lender's offices, in U.S. Dollars
or in any other currency, against any amount payable by the
Borrowers to such Lender under this Agreement or such Lender's
Note which is not paid when due (regardless of whether such
balances are then due to the Borrowers), in which case it shall
promptly notify the Borrowers and the Agent thereof; provided
that such Lender's failure to give such notice shall not affect
the validity thereof. Payments by the Borrowers hereunder shall
be made without setoff or counterclaim.
11.8. Table of Contents; Headings. Any table of contents
and the headings and captions hereunder are for convenience only
and shall not affect the interpretation or construction of this
Agreement.
11.9. Severability. The provisions of this Agreement are
intended to be severable. If for any reason any provision of
this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining
provisions hereof in any jurisdiction.
11.10. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall
constitute one and the same instrument, and any party hereto may
execute this Agreement by signing any such counterpart.
11.11. Governing Law. Pursuant to Section 5-1401 of the
New York General Obligations Law, the whole of this Agreement and
the rights and obligations of party hereunder shall be governed,
construed and interpreted in accordance with, the laws of the
State of New York without regard to any conflicts-of-laws rules
which would require the application of the laws of any other
jurisdiction; provided that the foregoing is not intended to
limit the maximum rate of interest which may be charged or
collected by a Lender hereunder if, under the law applicable to
it, such Lender may charge or collect such interest at a higher
rate than is permissible under the law of New York State.
11.12. Headings. The headings to Parts and Sections
appearing in this Agreement have been inserted for the purpose of
convenience and ready reference. They do not purport to, and
shall not be deemed to, define, limit or extend the scope or
intent of the Parts or Sections to which they apply.
11.13. Interpretation. In the event any of the terms,
provisions and conditions of this Agreement are inconsistent with
the terms, provisions and conditions of the Notes, the terms,
provisions and conditions of this Agreement shall control.
11.14. Jurisdiction; Immunities; Agent for Service of
Process. (a) Each Borrower hereby irrevocably submits to the
jurisdiction of any New York State or United States Federal court
sitting in Monroe County, New York over any action or proceeding
arising out of or relating to this Agreement or the Notes or any
other Facility Document, and each Borrower hereby irrevocably
agrees that all claims in respect of such action or proceeding
may be heard and determined in such New York State or Federal
court. Each Borrower irrevocably consents to the service of any
and all process in any such action or proceeding by the mailing
of copies of such process to such Borrower at its address
specified in 11.6. Each Borrower further waives any objection
to venue in Monroe County, New York and any objection to an
action or proceeding in Monroe County, New York on the basis of
forum non conveniens. Each Borrower further agrees that any
action or proceeding brought against the Agent shall be brought
only in New York State or United States Federal court sitting in
Monroe County.
(b) Nothing in this 11.14 shall affect the right of
the Agent to serve legal process in any other manner permitted by
law or affect the right of the Agent to bring any action or
proceeding against each Borrower or its property in the courts of
any other jurisdictions.
(c) To the extent that any Borrower has or hereafter
may acquire any immunity from jurisdiction of any court or from
any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution, execution or
otherwise) with respect to itself or its property, such Borrower
hereby irrevocably waives such immunity in respect of its
obligations under this Agreement and the Notes.
(d) Each Affiliate Borrower irrevocably appoints the
Primary Borrower as its agent to receive service of process
within the State of New York. By executing this Agreement, the
Primary Borrower irrevocably consents to act as agent under this
appointment.
11.15. Enforcement of Judgments. (a) Each Borrower agrees
that a final judgment obtained against it in any action or
proceeding in the courts of the United States or of the State of
New York in respect of any claim of the Lenders or the Agent
under this Agreement shall be conclusive and binding and not
subject to collateral attack by it for any reason whatsoever.
Each Affiliate Borrower further agrees that any such judgment may
be sued upon and enforced in any court of competent jurisdiction
in any other jurisdiction by suit on such judgment or in any
other manner provided by law, with full power of execution and
levy, and waives any defense it may have to the enforcement of
such judgment.
(b) If for the purpose of obtaining judgment in any
court of competent jurisdiction or for any other purpose
hereunder it is necessary to convert an amount due hereunder into
U.S. Dollars ("U.S. Currency") from another currency ("Second
Currency"), the rate of exchange applied shall be the spot rate
at which, in accordance with normal banking procedures, the Agent
could purchase, in the New York foreign exchange market, the U.S.
Currency with the Second Currency on the date two Business Days
preceding that on which judgment is given. Each Borrower agrees
that its obligation in respect of any Second Currency due from it
to the Lenders or the Agent hereunder shall, notwithstanding any
judgment in the U.S. Currency, be discharged by a payment made to
such Lender or the Agent on account thereof in the U.S. Currency
only to the extent that, on the Business Day following receipt of
such payment in the U.S. Currency, such Lender or the Agent may,
in accordance with normal banking procedures, purchase, in the
New York foreign exchange market, the Second Currency with the
amount of the U.S. Currency so paid; and if the amount of the
Second Currency which may be so purchased is less than the amount
originally due in the Second Currency, each Borrower agrees as a
separate and independent obligation and notwithstanding any such
payment or judgment to indemnify such Lender and the Agent
against such deficiency. The term "rate of exchange" in this
Section includes any premium and costs of exchange payable in
connection with the purchase of the Second Currency.
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<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their duly
authorized officers have executed this Agreement as of the day
and year first above written.
GLEASON CORPORATION
/s/ John J. Perrotti
By: John J. Perrotti
Its: Vice President - Finance
Address for Notices:
Gleason Corporation
1000 University Avenue
Rochester, New York 14692-2970
Attn: John J. Perrotti
Chief Financial Officer
Telecopier No.: (716) 461-4092
THE GLEASON WORKS
/s/ John J. Perrotti
By: John J. Perrotti
Its: Vice President - Finance
Address for Notices:
The Gleason Works
1000 University Avenue
Rochester, New York 14692-2970
Attn: John J. Perrotti
Vice President -- Finance
Telecopier No.: (716) 461-4092
GLEASON INTERNATIONAL MARKETING CORPORATION
/s/ Ralph E. Harper
By: Ralph E. Harper
Its: Secretary
Address for Notices:
Gleason International Marketing
Corporation
c/o Gleason Corporation
1000 University Avenue
Rochester, New York 14692-2970
Attn: Ralph E. Harper
Secretary and Treasurer
Telecopier No.: (716) 461-4092
HURTH MASCHINEN UND WERKZEUGE NACHF.GMBH
/s/ Dr. Horst Gohren
By: Dr. Horst Gohren
Its: Managing Director
Address for Notices:
Hurth Maschinen und Werkzeuge NACHF.GmbH
c/o Gleason Corporation
1000 University Avenue
Rochester, New York 14692-2970
Attn: John J. Perrotti
Vice President and Controller
Telecopier No.: (716) 461-4092
GLEASON WORKS (HOLDINGS) LIMITED
/s/ Ralph E. Harper
By: Ralph E. Harper
Its: Secretary
Address for Notices:
Gleason Works Limited
c/o Gleason Corporation
1000 University Avenue
Rochester, New York 14692-2970
Attn: Ralph E. Harper
Secretary
Telecopier No.: (716) 461-4092
GLEASON WORKS LIMITED
/s/ Ralph E. Harper
By: Ralph E. Harper
Its: Secretary
Address for Notices:
Gleason Works Limited
c/o Gleason Corporation
1000 University Avenue
Rochester, New York 14692-2970
Attn: Ralph E. Harper
Secretary
Telecopier No.: (716) 461-4092
GLEASON WORKS ACQUISITION CORP.
/s/ Ralph E. Harper
By: Ralph E. Harper
Its: Secretary
Address for Notices:
Gleason Works Acquisition Corp.
c/o Gleason Corporation
1000 University Avenue
Rochester, New York 14692-2970
Attn: John J. Perrotti
Treasurer
Telecopier No.: (716) 461-4092
THE CHASE MANHATTAN BANK, N.A.
/s/ Thomas C. Strasenburgh
By: Thomas C. Strasenburgh
Its: Vice President
Lending Office and Address for Notices:
The Chase Manhattan Bank, N.A.
One Chase Square
Rochester, New York 14643
Attn: Thomas C. Strasenburgh
Vice President
Telecopier No.: (716) 258-4258
NBD BANK
/s/ Karl I. Bell
By: Karl I. Bell
Its: Vice President
Lending Office and Address for Notices:
611 Woodward Avenue
Detroit, MI 48222
Attn: Karl I. Bell, Vice President
Telecopier # (313) 225-1586
THE CHASE MANHATTAN BANK, N.A.,
as Agent
/s/ Thomas C. Strasenburgh
By: Thomas C. Strasenburgh
Its: Vice President
Address for Notices:
The Chase Manhattan Bank, N.A.
One Chase Square
Rochester, New York 14643
Attn: Thomas C. Strasenburgh
Vice President
Telecopier No.: (716) 258-4258
