SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 9, 2000
TECHDYNE, INC.
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(Exact name of registrant as specified in its charter)
Florida 0-14659 59-1709103
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2330 West 77th Street, Hialeah, Florida 33016
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 556-9210
<PAGE>
Item 5. Other Events
The Company entered into two credit facilities with The Provident Bank
in Ohio (the "Bank") for an aggregate borrowing of $5,500,000. This new
financing replaced the line of credit and the three commercial loans with
NationsBank in Florida which had an original principal amount of $4,012,500,
and a principal balance of $3,115,500 at February 9, 2000, the repayment date,
and a smaller borrowing from another Florida bank in the amount of approxi-
mately $145,000. The credit facility with NationsBank was secured by all of
the Company's assets, with the line of credit having a maturity date of May 1,
2000. The Company's parent, Medicore, Inc. ("Medicore") had subordinated in
excess of $2,000,000 in principle indebtedness due to it from the Company to
the NationsBank financing facilities, and Medicore had unconditionally
guaranteed the payment and performance by the Company of the NationsBank
financing. Medicore is not guaranteeing the Company's financing with the
Bank, but one of the negative covenants precludes loans to or the payment
of loans from affiliates, which includes Medicore.
The new financing with the Bank includes a three-year revolving line of
credit, renewable annually at the discretion of the Bank, which credit line
carries an interest rate of prime minus .25%, or at a fixed rate equal to
the relevant quoted LIBOR rate plus 2.5%, at the election of the Company.
Also part of the financing is a five-year term loan of $1,000,000 at the same
interest rate as the revolving line of credit, based upon a five-year
amortization schedule. The financing is guaranteed by the Company's subsid-
iary, Lytton Incorporated ("Lytton"), which subsidiary has provided the Bank
with a Security Agreement securing its guaranty of the Company's financing.
The Security Agreement includes all of Lytton's property, including accounts,
equipment, inventory, general intangibles, and the proceeds of such
collateral. Lytton has also provided the Bank with a Conditional Assignment
of Lease, assigning all of its right, title and interest as tenant under the
lease to the Bank as further security for its guaranty of the Company's
financing. The Conditional Assignment of Lease takes effect only if Lytton
defaults in any of its obligations under the lease or any of its obligations
under its guaranty of the Company's financing. That lease is with Stanley
Avenue Properties, Ltd., a limited liability company whose membership includes
Lytton and Patricia Crossley, the wife of Lytton Crossley, former President of
Lytton and a director of the Company, who is also Assistant to the President
of Lytton under an Employment Agreement requiring 40 hours per month at an
annual salary of $30,000.
The financing, evidenced by an Asset Based Loan and Security Agreement,
provides for all the assets of the Company to collateralize the financing, as
well as affirmative and negative covenants. Certain of the affirmative
covenants require maintenance of a consolidated tangible net worth at all
times greater than $7,500,000, a ratio of consolidated liabilities to
consolidated tangible net worth of not more than 2.6 to 1.0, a debt coverage
ratio of at least 1.5 to 1.0. Some of the negative covenants, among others,
include prohibiting sale of any of its assets or properties except inventory
in the ordinary course of business, declaring or paying any dividends or
making any other payments on its capital stock, consolidating or merging with
any other corporation or acquiring or purchasing any equity interest in any
other entity, or assuming any obligations of any other entity the value of
which exceeds $100,000, except for notes and receivables acquired in the
ordinary course of business, incur, assume, guaranty or remain liable with
respect to any indebtedness, except for certain existing indebtedness
disclosed in its financial statements, or undertake any capital expenditures
in excess of $100,000 in any one fiscal year. The credit line also provides
for restrictions on transactions with related persons, precludes changes in
ownership in the Company, or changes in its management or any material change
in any of its business objectives, purposes and operations which might
adversely affect repayment of the financing.
Lytton also entered into amendments to its financing agreements with the
Bank. Lytton had an Asset Based Loan and Security Agreement with the Bank
dated April 14, 1995, amended over the last
<PAGE>
several years, evidenced by a $3,000,000 Revolving Credit Promissory Note,
together with a Term Loan Promissory Note in the amount of $1,400,000, and
an Equipment Acquisition Promissory Note in the amount of $500,000
(collectively the "Notes"). The line of credit was extended for a three-
year term coinciding with the term of the Company's line of credit. The
Bank also agreed to reduce the interest rates charged under the Notes, and
Lytton and the Bank entered into modification and amendments of the
aggregate $4,900,000 loan agreements and Notes, restated at the same
interest rates, at the election of Lytton as provided to the Company in
its credit facilities with the Bank. The Company is guaranteeing Lytton's
financing with the Bank, which guaranty is unconditional and is secured by
a Security Agreement between the Company and the Bank which provides the
Bank with a continuing first priority security interest on all the property
of the Company.
The Company intends to use the proceeds for its working capital needs
and other legal and proper corporate purposes.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial statements of businesses acquired
Not Applicable
(b) Pro forma financial information
Not Applicable
(c) Exhibits
(10) Material Contracts
(i) Asset Based Loan and Security Agreement between the Company
and The Provident Bank dated February 9, 2000.
(ii) Line of Credit Promissory Note for $4,500,000 from the
Company to The Provident Bank dated February 9, 2000.
(iii) Term Loan Promissory Note for $1,000,000 from the Company
to The Provident Bank dated February 9, 2000.
(iv) Guaranty of the Company for the Lytton Incorporated(1)
financing with The Provident Bank dated February 9, 2000.
(v) Security Agreement of the Company for its Guaranty of the
Lytton Incorporated(1) financing with The Provident Bank
dated February 9, 2000.
(vi) Amendment to Asset Based Loan and Security Agreement
between Lytton Incorporated(1) and The Provident Bank dated
February 9, 2000.
(vii) Amended and Restated Revolving Credit Promissory Note for
$3,000,000 from Lytton Incorporated(1) to The Provident
Bank dated February 9, 2000.
(viii) Amended and Restated Term Loan Promissory Note for
$1,400,000 from Lytton Incorporated(1) to The Provident
Bank dated February 9, 2000.
(vix) Amended and Restated Equipment Acquisition Loan Promissory
Note for $500,000 from Lytton Incorporated(1) to The
Provident Bank dated February 9, 2000.
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(x) Guaranty of Lytton Incorporated(1) for the Company's
financing with The Provident Bank dated February 9, 2000.
(xi) Security Agreement for Lytton Incorporated(1) with respect
to its Guaranty of the Company's financing with The
Provident Bank dated February 9, 2000.
(xii) Conditional Assignment of Lease by Lytton Incorporated(1)
to The Provident Bank dated February 9, 2000(2).
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(1) A 100%-owned subsidiary of the Company.
(2) Two such identical documents were executed, one for the guaranty and one
for the indebtedness.
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 hereunto duly authorized.
TECHDYNE, INC.
/s/ Thomas K. Langbein
By---------------------------------
THOMAS K. LANGBEIN, Chairman
of the Board and Chief
Executive Officer
Dated: March 1, 2000
ASSET BASED
LOAN AND SECURITY AGREEMENT
THIS ASSET BASED LOAN AND SECURITY AGREEMENT ("Agreement"), dated February
9, 2000, is between TECHDYNE, INC., a Florida corporation ("Borrower"),
whose mailing address is 2230 West 77th Street, Hialeah, Florida 33016, and
THE PROVIDENT BANK, an Ohio banking corporation ("Bank"), whose mailing
address is One East Fourth Street, Cincinnati, Ohio 45202.
1. Definitions. As used herein, the following terms, when initial
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capital letters are used, shall have the respective meanings set forth below.
In addition, all terms defined in the Uniform Commercial Code as adopted in
Ohio shall have the meanings given therein unless otherwise defined herein.
1.1 Accounts shall mean all of Borrower's accounts (as that term is
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defined in the Uniform Commercial Code, as defined herein), accounts
receivable, chattel paper, contract rights, documents and instruments; all
other obligations or indebtedness owed to Borrower from whatever source
arising; all guarantees of any of the foregoing and all security therefor;
all of the right, title and interest of Borrower in and with respect to the
goods, services or other property which gave rise to or which secure any of
the foregoing and all insurance policies and proceeds relating thereto; all
of the foregoing whether now owned by Borrower or hereafter acquired or in
existence.
1.2 Affiliate shall mean any person, company or business entity
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controlling, controlled by or under common control with, Borrower, whether
such common control is direct or indirect, and all of the partners, officers,
directors and shareholders of Borrower and such entities, including, but not
limited to Techdyne (Europe) Limited and Lytton Incorporated.
1.3 Cash Collateral Account shall mean that deposit account maintained
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by Borrower at Bank into which all collections on the collateral shall be
deposited and over which Bank shall have the sole power of withdrawal.
1.4 Collateral shall mean (a) all of the Borrower's Accounts, Equipment,
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General Intangibles, Inventory and all other items of personal property now
owned or hereafter acquired by the Borrower or in which the Borrower has
granted or may in the future grant a security interest to the Bank hereunder
or in any supplement hereto or otherwise; (b) all of the Borrower's right,
title and interest in and to all goods or other property represented by or
securing any of the Accounts, including all goods that may be reclaimed or
repossessed from or returned by Debtors; (c) all of the Borrower's rights
as an unpaid seller, including stoppage in transit, detinue and reclamation;
(d) all additional amounts due to the Borrower from any Debtor, irrespective
of whether such additional amounts have
<PAGE> 1
been specifically assigned to the Bank; (e) all guaranties, or other agree-
ments or property securing or relating to any of the items referred to in
(a) above, or acquired for the purpose of securing and enforcing any of
such items; (f) all instruments, documents, securities, cash, property,
deposit accounts (including but not limited to deposits made to Borrower's
Cash Collateral Account), and the proceeds of any of the foregoing, owned by
the Borrower or in which it has an interest, which are now or may hereafter
be in the possession or control of the Bank or in transit by mail or carrier
to or from the Bank, or in possession of any third party acting on behalf
of Bank, without regard to whether Bank received same in pledge, for
safekeeping, as agent for collection or transmission or otherwise or
whether Bank had conditionally released the same; (g) all ledger sheets,
files, records, documents, blueprints, drawings and instruments (including,
without limitation, computer programs, tapes and related electronic data
processing software) evidencing an interest in or relating to the foregoing;
and (h) all proceeds and products of the collateral described above,
including, without limitation, all claims against third parties for damage
to or loss or destruction of any of the foregoing, including insurance
proceeds, and accounts, contract rights, chattel paper and general intangi-
bles arising out of any sale, lease or other disposition of any of the
foregoing.
1.5 Debtor shall mean the account debtor with respect to any of the
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Borrower's Accounts and/or the prospective purchaser with respect to any
contract right, and/or any party who enters into or proposes to enter into
any contract or other arrangement with the Borrower pursuant to which the
Borrower is to deliver any personal property or perform any service.
1.6 Eligible Inventory shall mean goods now owned or hereafter acquired
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by the Borrower, wherever located, which are held for sale, lease or other
disposition or are to be furnished under contracts of service, or which are
raw materials or materials used or consumed in the business of the Borrower
and all accessions thereto and products thereof; provided, however, that
Eligible Inventory shall not include works-in-progress and goods that are
in stock but not to be sold, used or consumed within 365 days from the date
the goods were acquired by Borrower.
1.7 Eligible Accounts shall mean such Accounts which are and at all
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times shall continue to be acceptable to the Bank in all respects and in
which Bank shall have a perfected first priority security interest.
Criteria for eligibility shall be fixed and revised from time to time solely
by the Bank in its exclusive judgment. In general, an Account shall in no
event be deemed to be eligible unless (a) delivery of the merchandise or
the rendition of services has been completed; (b) no return, rejection or
repossession has occurred; (c) such merchandise or services have been
finally accepted by the customer without dispute, offset, defense or
counterclaims; (d) such Account continues to be in full
<PAGE> 2
conformity with the representations and warranties made by the Borrower to
the Bank with respect thereto; (e) no more than 90 days have elapsed from
the invoice date; and (f) the Bank is and continues to be satisfied with
the credit standing of the Debtor in relation to the amount of credit
extended.
1.8 Equipment shall mean all of Borrower's equipment (as that term is
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defined in the Uniform Commercial Code, as defined herein), including,
without limitation, all furniture, fixtures, machinery and other equipment
of any kind and all substitutions and replacements thereof and accessories
and parts therefor, all whether now owned or hereafter acquired by Borrower.
1.9 Event of Default shall mean any event described in Section 9.1.
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1.10 General Intangibles shall mean all of Borrower's general
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intangibles and payment intangibles (as those terms are defined in the
Uniform Commercial Code, as defined herein), including, without limitation,
all goodwill, patents, formulas, blueprints, proprietary manufacturing
processes, trademarks, trade names, licenses, franchises, beneficial
interests in trusts, joint venture interests, partnership interests, rights
to tax refunds, rights to insurance proceeds, causes of action, pension
plan overfundings, literary rights and other contractual rights of Borrower,
all whether now owned or hereafter acquired by Borrower.
1.11 Inventory shall mean all of Borrower's inventory (as that term is
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defined in the Uniform Commercial Code, as defined herein), including,
without limitation, all goods, merchandise and other personal property which
are held for sale or lease, or are furnished or to be furnished under any
contract of service by Borrower, or are raw materials, work-in-progress,
supplies or materials used or consumed in Borrower's business, and all
products thereof, and all substitutions, replacements, additions and
accessories thereto, all whether now owned or hereafter acquired by
Borrower; and all of Borrower's right, title and interest in and to any
leases or rental agreements for such inventory.
1.12 Loans shall have the meaning set forth in Section 2.1.
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1.13 Loan Documents shall mean this Agreement, the Notes (as defined
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herein), the Guaranty and all other documents executed in connection with
the Loan.
1.14 Maximum Loan Amount shall have the meaning set forth in Section 2.1.
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1.15 Notes shall mean one or more promissory notes evidencing the Loans
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pursuant to Section 2.2.
<PAGE> 3
1.16 Obligations shall mean, without limitation, all Loans (as defined
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in Section 2) and all other debts, obligations, or liabilities of every kind
and description of Borrower to Bank, now due or to become due, direct or
indirect, absolute or contingent, presently existing or hereafter arising,
joint or several, secured or unsecured, whether for payment or performance,
regardless of how the same arise or by what instrument, agreement or book
account they may be evidenced, or whether evidenced by any instrument,
agreement or book account, including, without limitation, all loans
(including any loan by renewal or extension), all overdrafts, all
guarantees, all bankers acceptances, all agreements, all letters of
credit issued by Bank for Borrower and the applications relating thereto,
all indebtedness of Borrower to Bank, all undertakings to take or refrain
from taking any action and all indebtedness, liabilities and obligations
owing from Borrower to others which Bank may obtain by purchase, negotiation,
discount, assignment or otherwise. Obligations shall also include all
interest and other charges chargeable to the Borrower or due from the
Borrower to the Bank from time to time and all costs and expenses referred
to in Section 10.
1.17 Permitted Liens shall mean the liens and interests in favor of
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Bank granted in connection herewith and, to the extent reflected on
Borrower's books and records and not impairing the operations of Borrower or
any performance hereunder or contemplated hereby:
(i) liens arising by operation of law for taxes not yet due and
payable;
(ii) statutory liens of mechanics, materialmen, shippers and ware-
housemen for services or materials for which payment is not yet due;
(iii) liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security;
(iv) liens, if any, specifically permitted by Bank from time to time
in writing; and
(v) the following if the validity or amount thereof is being contested
in good faith and by appropriate and lawful proceedings promptly initiated
and diligently conducted of which Borrower has given prior notice to Bank
and for which appropriate reserves (in Bank's reasonable judgment) have
been established and so long as levy and execution have been and continue
to be stayed: claims and liens for taxes due and payable and claims of
mechanics, materialmen, shippers, warehousemen, carriers and landlords.
<PAGE> 4
1.18 Uniform Commercial Code shall mean the Uniform Commercial Code
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in effect as of the date hereof or as hereafter adopted or amended in any
jurisdiction where the Collateral is or may from time to time be located.
2. Loans and Interest.
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2.1 Loans. The Bank proposes to make the following loans to the
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Borrower:
2.1.1 Automated Revolving Credit Loan. The Bank will make a revolving
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line of credit loan ("LOC Loan") to Borrower in an aggregate amount not to
exceed at any one time outstanding the lesser of (i) $4,500,000.00 or (ii)
the sum of (a) the lesser of $1,500,000.00 or 40% of the cost or market
value, whichever is lower, of Eligible Inventory, and (b) 85% of the
outstanding amount of Eligible Accounts (the sum of (a) and (b) being
herein referred to as the "Borrowing Base") (the lesser of (i) or (ii)
being referred to hereinafter as the "Maximum LOC Loan Amount"). Should
the outstanding amount of the LOC Loan at any time exceed the Maximum LOC
Loan Amount, Borrower shall on demand immediately repay such excess amount.
All such loans will be made from time to time in the absolute discretion of
the Bank, and neither this Agreement nor any loans or other action by the
Bank shall obligate the Bank to make further loans to the Borrower. Such
loans may be made in excess of the Maximum LOC Loan Amount in the sole
discretion of the Bank. The LOC Loan shall be for an initial term of three
(3) years, and may be renewed annually thereafter on the anniversary of the
effective date of the LOC Note (defined herein) at the sole discretion of
the Bank.
At such times as may from time to time be required by Bank, but at least
once each month during the term of the LOC Loan, Borrower shall provide
Bank with a true and correct Borrowing Base Certificate, in form attached
hereto as Exhibit A and made a part hereof, stating the then-current
Borrowing Base. If the outstanding amount of the LOC Loan at any time
exceeds the Maximum LOC Loan Amount, based on the then-current Borrowing
Base, then Borrower shall pay to Bank all such excess amounts immediately
on demand. All advances under the LOC Loan will be made from time to time
in the absolute discretion of the Bank, and neither this Agreement nor any
loans or other action by the Bank shall obligate the Bank to make further
advances to the Borrower. The Bank's maximum commitment hereunder shall be
reduced by the amount of outstanding letters of credit issued by the Bank
for the benefit of Borrower, and any banker's acceptances and time drafts
resulting therefrom.
2.1.2 Term Loan. The Bank will make a Term Loan ("Term Loan") to
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Borrower in the amount of $1,000,000.00 ("Term Loan Amount"). The Term
Loan shall be for a term of five (5) years as more particularly set out in
the Term Loan Note (defined herein).
<PAGE> 5
2.1.3 Loans. The LOC Loan and the Term Loan listed in this Section 2.1
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shall be herein collectively called the "Loans".
2.2 Evidence of Loans. The Loans shall be evidenced by a Revolving
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Credit Promissory Note in the principal amount of $4,500,000.00 and a Term
Loan Note in the principal amount of $1,000,000.00 (collectively the "Notes")
in forms satisfactory to Bank. The Notes shall bear interest on the daily
outstanding balance thereof at the rates set forth in such Notes.
2.3 Interest Rate. Amounts advanced to Borrower under the Notes shall
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bear interest at (i) a fluctuating rate equal to the Prime Rate (as defined
herein) charged by Bank, minus one-quarter of one percent (.25%) ("Prime Rate
Election"); or (ii) at a fixed rate equal to the relevant Quoted LIBOR Rate
plus two and one-half percent (2.50%) per annum, as elected by Borrower in
the manner set out herein ("LIBOR Rate Election").
Interest shall be calculated on a 360-day year basis and shall be due
and payable on the first day of each calendar month (but charged based on
actual days) during the term of and at maturity of the respective Notes. In
the case of a Prime Rate Election, the interest rate shall be adjusted,
whenever necessary, to reflect any change in the Prime Rate then in effect
at the Bank, and such adjustment shall be effective on the date such change
is announced as effective by the Bank. Such new rate shall remain in effect
until the next date an adjustment is required or until the Borrower makes a
LIBOR Rate Election or the respective Note is paid in full.
2.3.1 Interest Periods. Upon closing of the Loans, or at the time
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Borrower gives any notice of borrowing relating to the LOC Loan, or at the
time Borrower gives notice of conversion of any Loan to a Quoted LIBOR Rate,
which notice shall be given at least three (3) Business Days prior to the
expiration of an existing Interest Period, and provided Borrower is not
otherwise in default hereunder, Borrower shall have the right to elect the
Interest Period applicable to a Quoted LIBOR Rate Election by giving the
Bank notice thereof, which Interest Period shall be a thirty (30), sixty
(60), ninety (90) or one hundred eighty (180) day period, provided, however,
that Borrower shall have no right to elect an Interest Period that would
extend beyond the maturity date of the LOC Loan or the Term Loan. In the
case of the LOC Loan, the Interest Period may be selected at the time a
request for an advance is made, in the manner required by the Bank for
giving such notice. In the case of both the LOC Loan and the Term Loan,
the Interest Period and applicable interest rate may also be selected by
giving notice in accordance with Section 2.3.2 below. The Interest Period
may commence at any time after proper notice, and each Interest Period
occurring thereafter, if any, in respect of such a Loan shall commence on
the day on which the next preceding
<PAGE> 6
Interest Period expires. If any Interest Period would otherwise expire on a
day which is not a business day, such Interest Period shall expire on the
next succeeding business day. If upon the expiration of any Interest Period
for a Quoted LIBOR Rate Election, Borrower has failed to repay the borrowing
or elect a new Interest Period to be applicable, Borrower shall be deemed to
have elected to convert to or continue (as the case may be) with a Prime Rate
Election effective as of the expiration date of such current Interest Period.
2.3.2 Continuation and Conversions. Provided that no Event of Default
----------------------------
then exists, Borrower shall have the option, subject to the provisions of
Sections 2.3.1 and 2.3.3 and the following provisions of this Section 2.3.2,
on the first day following expiration of an Interest Period in the case of a
Quoted LIBOR Rate Election or at any time in the case of a Prime Rate
Election, to continue a previously selected Quoted LIBOR Rate Election for
an additional Interest Period or to convert all or a portion of the
outstanding principal amount of under any Prime Rate Election to a Quoted
LIBOR Rate Election, provided that the outstanding principal amount of
Loans being continued as or converted into a Quoted LIBOR Rate Election
shall be at least Two Hundred Fifty Thousand Dollars U.S. ($250,000.00).
Each such conversion shall be effected by Borrower giving the Bank prior
notice in the form as required by the Bank, specifying the Loan and amount
of such Loan to be so continued or converted, and the Interest Period.
2.3.3 Increased Costs, Illegality Etc.
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A. In the event the Bank shall have determined (which determination
shall, absent manifest error be final and conclusive and binding upon all
parties):
(i) on any date for determining the rate applicable to any Quoted
LIBOR Rate Election for any Interest Period, that by reason of any changes
arising after the date of this Agreement affecting the interbank Eurodollar
market, adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of such Quoted
LIBOR Rate Election; or
(ii) at any time, that by reason of (x) any change since the date
of this Agreement in any applicable law or governmental rule, regulation,
guideline or order (or any interpretation thereof and including the intro-
duction of any new law or governmental rule, regulation, guideline or order)
(such as for example, but not limited to, a change in capital adequacy
requirements or in official reserve requirements, but, in all events,
excluding reserves required under Regulation D to the extent included in
the computation of the Quoted LIBOR Rate and/or (y) other circumstances
affecting a Bank or the interbank Eurodollar market or the position of such
Bank in such market, the Quoted LIBOR Rate or
<PAGE> 7
T-Bill Rate shall not represent the effective pricing to such Bank for
funding or maintaining the affected Quoted LIBOR Rate Election; or
(iii) at any time, that the making or continuance of any Quoted
LIBOR Rate Election has become unlawful by compliance by a Bank in good
faith with any law, governmental rule, regulation, guideline or order, or
has become impracticable as a result of a contingency occurring after the
date of this Agreement which materially and adversely affects the interbank
Eurodollar market; then, and in any such event, the Bank shall on such date
give notice to Borrower of such determination. Thereafter, (x) in the case
of clauses (i) and (ii) above, Borrower shall pay to each Bank, upon written
demand therefor, such additional amounts (in the form of an increased rate
of, or a different method of calculating, interest or otherwise as such Bank
in its sole discretion shall determine) as shall be required to cause such
Bank to receive interest with respect to its affected Quoted LIBOR Rate
Election at a rate per annum which shall equal the effective pricing to the
Bank to make or maintain such Quoted LIBOR Rate Election, respectively, plus
2.25 percent per annum (a written notice as to additional amounts owed such
Bank, showing the basis for the calculation thereof, submitted to Borrower
by such Bank shall, absent manifest error, be final and conclusive and
binding upon all of the parties hereto) and (y) in the case of clause (iii),
take one of the actions specified in Section 3.3.3.C. below, as promptly as
possible and, in any event, within the time period required by law.
B. If the Bank determines that (i) maintenance of any Quoted LIBOR
Rate Election would violate any applicable law, rule, regulation, or
directive, whether or not having the force of law, (ii) deposits of a type
and maturity appropriate to match fund any Quoted LIBOR Rate Election are
not available , (ii) the Quoted LIBOR Rate does not accurately reflect the
cost of making or maintaining a Quoted LIBOR Rate Election, then the Bank
shall suspend the availability of the affected rate option and require any
Quoted LIBOR Rate Election outstanding under an affected rate option to be
repaid.
C. At any time that any of its Quoted LIBOR Rate Elections are affected
by the circumstances described in Section 2.3.3.A.(iii), Borrower shall
either (x) if the affected Quoted LIBOR Rate Election is then being made
pursuant to an initial borrowing or a conversion, cancel said borrowing or
conversion by giving the Bank telephonic notice confirmed in writing thereof
on the same date that Borrower was notified by the Bank pursuant to Section
2.3.3.A, or (y) if the affected Quoted LIBOR Rate Elections are then
outstanding, upon at least two (2) Business Days' notice to the Bank,
require the Bank to convert each affected Quoted LIBOR Rate Election into a
Prime Rate Election.
2.3.4 Compensation. Borrower shall compensate the Bank upon written
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request (which request shall set forth the basis for requesting such
<PAGE> 8
amounts), for all reasonable losses, expenses and liabilities (including,
without limitation, any interest paid by the Bank to lenders of funds
borrowed by them to make or carry a Quoted LIBOR Rate Election to the extent
not recovered by the Bank in connection with the re-employment of such funds),
which the Bank may sustain: (i) if for any reason (other than a default by the
Bank) a borrowing of, or conversion from or into, Quoted LIBOR Rate Election
does not occur on a date specified therefor in a notice of borrowing or
notice of conversion (whether or not withdrawn), or (ii) as a consequence of
any other default by Borrower to repay its Quoted LIBOR Rate Elections when
required by the terms of this Agreement.
2.3.5 Rate Adjustment. Notwithstanding anything to the contrary
---------------
contained herein, the Interest Rate charged under the Notes shall be reduced
for the remaining term of each such Note to (i) a fluctuating rate equal to
the Prime Rate charged by Bank, minus one half of one percent (.50%); or (ii)
a fixed rate equal to the relevant Quoted LIBOR Rate plus two and one quarter
percent (2.25%), effective December as of January 1, 2001 if the following
conditions are satisfied:
a. Borrower's Debt Service Coverage Ratio (as defined in Section
5.16 hereof) shall be greater than 2.00 to 1.00 for the year
ending December 31, 2000;
b. Borrower's ratio of Consolidated Liabilities to Consolidated
Tangible Net Worth (both as defined in Section 5.16 hereof)
shall be not more than 2.25 to 1.00 as of December 31, 2000; and
c. There has not occurred an Event of Default hereunder or under
the any loans from Bank to Lytton Incorporated, either now
existing or hereafter made ("Lytton Loans").
In the event the above conditions are satisfied, Borrower agrees
to execute and deliver to Bank, an Amended and Restated LOC Note and an
Amended and Restated Term Loan Note, each setting out the new interest rate
set out herein, which new Notes shall be effective as of January 1, 2001.
2.4 Loan Payments. All payments of interest, principal and all other
-------------
amounts owing hereunder or under the Notes shall be made by the Borrower to
the Bank in immediately available funds at its principal office in Dayton,
Ohio or at such other place as the Bank may designate in writing, at such
times as shall be set forth herein or in the Notes. Borrower hereby
authorizes Bank, at Bank's option, to charge any account or charge or
increase any Loan balance of Borrower at Bank for the payment or repayment
of any interest or principal of the Loans or any fees, charges or other
amounts due to Bank hereunder.
<PAGE>
3. Security.
--------
3.1 Grant of Security Interest. To secure the payment and performance
--------------------------
of all of the Obligations, as herein defined, the Borrower hereby grants to
the Bank a continuing security interest in and assigns to the Bank all of
the Collateral. The security interest granted hereby shall constitute a
first and best lien on the Collateral, subject to the Permitted Liens.
3.2 Guaranty. Lytton Incorporated (hereinafter "Guarantor") shall
--------
guarantee the Borrower's performance of this Agreement and repayment of all
principal and interest due under the Notes by execution of a Guaranty in
form and substance satisfactory to Bank ("Guaranty"). To secure payment and
performance of the Guaranty, Guarantor shall grant to Bank a security
interest in all of Guarantor's accounts, inventory, equipment and general
intangibles (as those terms are defined in the Uniform Commercial Code as
adopted in Ohio) ("Lytton Collateral") by execution of a security agreement
in form satisfactory to Bank. Such security interest shall constitute a
first and best lien on the Lytton Collateral, subject only to an existing
lien held by Bank pursuant to that certain Security Agreement dated February
9, 2000. In addition, Guarantor shall execute and deliver to Bank, as
additional security for the Guaranty, a Conditional Assignment of Lease
relating to its premises at 1784 Stanley Avenue, Dayton, Ohio.
4. Representations and Warranties. The Borrower hereby represents and
------------------------------
warrants to the Bank that:
4.1 (a) Organization and Authority. The Borrower is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State
of its incorporation and currently has the corporate power and authority to
conduct its business as now conducted and as proposed to be conducted while
this Agreement is in effect; (b) the execution and delivery of this
Agreement, the Notes and other Loan Documents and the performance of the
transactions contemplated hereby and thereby are within the corporate
authority of the Borrower and have been duly authorized by all proper and
necessary corporate action; (c) the execution and delivery of this
Agreement, the Notes and other Loan Documents and the performance of the
transactions contemplated hereby and thereby will not violate or contravene
any provisions of law or the articles of incorporation or bylaws of the
Borrower, or result in a breach or default in respect of the terms of any
other agreement to which the Borrower is a party or by which it is bound,
which breach or default would result in the creation, imposition or
enforcement of any lien against any of the Collateral, or would have a
material adverse affect on the conduct of the Borrower's business as it is
now being conducted, or would otherwise impair the value of the security
interest granted to the Bank hereunder;
<PAGE> 10
and (d) the Borrower is duly qualified as a foreign corporation and is in
good standing and duly authorized to do business in every jurisdiction where
the nature of its properties or the conduct of its business requires such
qualification and authorization.
4.2 Binding Effect of Documents. The Loan Documents are legal and
---------------------------
binding obligations of the Borrower enforceable in accordance with their
terms.
4.3 Government Consent. The execution and delivery of this Agreement
------------------
and the Notes and the performance of the transactions contemplated hereby
and thereby do not require any approval or consent of any governmental
agency or authority, or of any other governmental party.
4.4 Financial Statements. The Borrower has delivered to the Bank copies
--------------------
of its consolidated and consolidating financial statements as of and for
the year or other period ending September 30, 1999. All of these financial
statements are true and correct, present fairly and completely the financial
condition and results of operations of Borrower and its subsidiaries in all
material respects for the periods covered therein and were prepared in
accordance with generally accepted accounting principles ("GAAP") applied
on a basis consistent with prior periods and are in accordance with the
respective books of account and records of the business which are not
reflected in the financial statements described in this Section 4.4.
4.5 No Material Change in Financial Condition. Since the ending date
-----------------------------------------
of the financial statement described in Section 4.4, there has been no
material change in the assets, liabilities, financial condition or operation
of the Borrower, other than changes in the ordinary course of business.
4.6 No Other Liabilities. Except to the extent reflected in the
--------------------
financial statements described in Section 4.4, the Borrower, as of the
date of this Agreement, does not know or have reasonable grounds to know of
any basis for the assertion against it of any liabilities or obligations of
any nature, direct or indirect, accrued, absolute or contingent, including,
without limitation, liabilities for taxes then due or to become due whether
incurred in respect of or measured by the income of the Borrower for any
period prior to the date of this Agreement or arising out of transactions
entered into, or any state of facts existing prior thereto.
4.7 Taxes. To the best of Borrower's knowledge the Borrower has filed
-----
all federal, state, local and other tax returns and reports required to be
filed by it and such returns and reports are true and correct. To the best
of Borrower's knowledge the Borrower has paid all taxes, assessments and
other governmental
<PAGE> 11
charges lawfully levied or imposed on or against it or its properties, other
than those presently payable without penalty or interest.
4.8 No Litigation. To the best of Borrower's knowledge there is no
-------------
litigation or proceeding or governmental investigation pending or, to the
knowledge of the Borrower, threatened against or relating to the Borrower,
its properties or business which is not reflected in the financial
statements described in Section 4.4.
4.9 Compliance with Laws. To the best of Borrower's knowledge the
--------------------
Borrower is not in violation of or default under any statute, regulation,
license, permit, order, writ, injunction or decree of any government,
governmental department, commission, board, bureau, agency, instrumentality
or court, which violation or default would have a material adverse effect
on the business, properties or condition, financial or otherwise, of the
Borrower.
4.10 No Default. The Borrower is not in default under a material
----------
order, writ, judgment, injunction, decree, indenture, agreement, lease or
other instrument or contract, which default would have a material adverse
effect on the business, properties or condition, financial or otherwise, of
the Borrower, or in the performance of any covenants or conditions
respecting any of its indebtedness, and no holder of any indebtedness of
the Borrower has given notice of any asserted default thereunder, and no
liquidation or dissolution of the Borrower and no receivership, insolvency,
bankruptcy, reorganization or other similar proceedings relative to the
Borrower or its properties is pending or, to the knowledge of the Borrower,
is threatened against Borrower.
4.11 Location of Collateral. The Borrower maintains places of business
----------------------
and owns collateral only at 1784 Stanley Avenue, Dayton, Ohio; 2230 West
77th Street, Hialeah, Florida; 7110 Brittmore, Suite 300, Houston, Texas;
800 Palomo Drive, Round Rock, Texas and 113 Cedar Street, Millford,
Massachusetts and maintains its books of account and records, including
all records concerning the Collateral, only at 2230 West 77th Street,
Hialeah, Florida 33016. The Borrower maintains its chief executive office
at 2230 West 77th Street, Hialeah, Florida 33016.
4.12 Title to Collateral. The Borrower is and at all times during the
-------------------
term of this Agreement will be the sole owner of and have good and marketable
title to the Collateral, free from all liens, encumbrances and security
interests in favor of any person other than the Bank except Permitted Liens,
and has full right and power to grant the Bank a security interest therein.
All information furnished to Bank concerning the Collateral is and will be
complete, accurate and correct in all material respects when furnished.
<PAGE> 12
4.13 Rights of Borrower to Accounts. As to each and every Account (a)
------------------------------
it is a bona fide existing obligation, valid and enforceable against the
Debtor for a sum certain for sales of goods shipped or delivered, or goods
leased, or services rendered in the ordinary course of business; (b) all
supporting documents, instruments, chattel paper and other evidence of
indebtedness, if any, delivered to the Bank are complete and correct and
valid and enforceable in accordance with their terms, and all signatures
and endorsements that appear thereon are genuine, and all signatories and
endorsers have full capacity to contract; (c) the Debtor is liable for the
amount expressed in such Account according to its terms; (d) it will be
subject to no discount, allowance or special terms of payment without the
prior approval of the Bank; (e) it is subject to no dispute, defense or
offset, real or claimed; (f) it is not subject to any prohibition or
limitation upon assignment; (g) the Borrower has full right and power to
grant the Bank a security interest therein and the security interest granted
in such Account to the Bank in Section 3 hereof, when perfected, will be a
valid first security interest which will inure to the benefit of the Bank
without further action. The warranties set out herein shall be deemed to
have been made with respect to each and every Account now owned or hereafter
acquired by the Borrower.
4.14 Rights of Borrower in Inventory. The Inventory (a) is and will
-------------------------------
be of good and merchantable quality, free from defects (subject to normal
returns and warranty claims not to exceed at any one time an aggregate value
of $75,000.00) and (b) none of the inventory is or will be stored with a
bailee without the prior written consent of Bank.
4.15 Employee Benefit Plans. Other than as set forth on Schedule 4.15
----------------------
hereto, Borrower has no Plans which are subject to regulation under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Borrower has not received any notice to the effect that it is not in full
compliance with any of the requirements of ERISA, and no fact or situation,
including but not limited to any "Reportable Event," or "Prohibited
Transaction," as such terms are defined in ERISA, exists which is or could
in any way be construed as a violation of ERISA in connection with any Plan.
Borrower has complied with all applicable provisions of ERISA, including
minimum funding requirements, has made all filings required to be made by
Borrower or any of its Plans (now or at any time in the past maintained)
under ERISA, has not applied for any extensions of time in which to make
contributions to any Plan maintained (now or at any time in the past) by it
or to which it is, or has been, required to contribute, has timely made all
contributions and paid all premiums required to be paid to the Pension
Benefit Guaranty Corporation, and no matters are presently pending before
the United States Labor Department or the Internal Revenue Service
concerning any Plan maintained (now or at any time in the past) by Borrower
to which it is or was required to contribute. Each employee pension benefit
plan (as defined in Section 3(2) of ERISA) maintained by Borrower is
qualified and tax exempt under the
<PAGE> 13
Internal Revenue Code. Borrower has never had any obligation or liability
with respect to a multi-employer plan as defined in Section 3(37) of ERISA.
4.16 Use of Proceeds Will Not Violate Federal Reserve Board Regulations.
------------------------------------------------------------------
Borrower will not use any portion of the proceeds of the Loans hereunder for
the purpose of purchasing or carrying any "margin stock" within the meaning
of Regulation U or X of the Board of Governors of the Federal Reserve System
(herein called "Margin Stock"), or for the purpose of reducing or retiring
any indebtedness which was originally incurred to purchase or carry Margin
Stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of Regulation U or X, or in any manner
which might involve the Bank in a violation of Regulation X, or cause this
Agreement or any transaction contemplated hereby to violate Regulation U,
Regulation X or any other regulation of the Board of Governors of the
Federal Reserve System, or under the Securities Exchange Act of 1934, each
as now in effect or as the same may hereafter be in effect.
4.17 Name Rights, Licenses, Franchises, etc. Borrower possesses and,
--------------------------------------
so long as any Obligations hereunder remain unpaid, Borrower will continue
to possess all permits, trade memberships, franchises, contracts and
licenses required and all trade mark rights, trade names, trade name
rights, patents, patent rights, and fictitious name rights necessary to
enable it to conduct the business in which it is now engaged without
conflict with the rights of others. Nothing in this Section, however,
shall prevent Borrower from failing to renew or from entering into
additional permits, trade memberships, franchises, contracts and licenses
or trademark rights, trade names, trade name rights, patents, patent rights
and fictitious name rights if in the judgment of Borrower reasonably
exercised such action is advisable for business purposes and will not
materially and adversely affect the business in which it is then engaged.
4.18 Accuracy of Representations. No representation or warranty by or
---------------------------
with respect to the Borrower contained herein or in any certificate or other
document furnished by the Borrower pursuant hereto contains any untrue
statement of a material fact or omits to state a material fact necessary to
make such representation or warranty not misleading in light of the
circumstances under which it was made.
4.19 Representations as Inducement to Bank. The foregoing representa-
-------------------------------------
tions and warranties are made by the Borrower with the knowledge and
intention that the Bank will rely thereon, and shall survive the execution
and delivery of this Agreement and the making of all Loans hereunder. The
receipt of Borrower of each Loan advance shall constitute a representation
and warranty by Borrower that the representations and warranties of Borrower
contained in this
<PAGE> 14
Section 4 are true and correct as of the date of such Loan advance, except
to the extent such representations and warranties expressly relate to an
earlier date.
5. Affirmative Covenants. The Borrower covenants and agrees that until
---------------------
all of the Obligations have been paid in full, unless the Bank shall
otherwise consent in writing, it shall and shall cause each of its
subsidiaries to:
5.1 Books and Records. Maintain complete and accurate books of account
-----------------
and records pertaining to the Collateral and the operations of the Borrower,
and all such books of account and records shall be kept and maintained at
the location specified in Section 4.11. The Borrower shall not move such
books of account and records or change its chief executive office without
giving the Bank at least 30 days prior written notice. Prior to moving any
of such books of account and records or changing the location of its chief
executive office, the Borrower shall execute and deliver to the Bank
financing statements satisfactory to the Bank. All such books of account
and records and all financial statements and reports furnished to the Bank
shall be maintained and prepared in accordance with GAAP applied on a basis
consistent with prior periods.
5.2 Access to Information. Grant the Bank, or its representatives, full
---------------------
and complete access to the Collateral and to all books of account, records,
correspondence and other papers relating to the Collateral during normal
business hours and the right to inspect, examine, verify and make abstracts
from the copies of such books of account, records, correspondence and other
papers, and to investigate such other records, activities and business of
the Borrower as it may deem necessary or appropriate at the time.
5.3 Evidence of Accounts and Inventory. Within twenty (20) days after
----------------------------------
the end of each calendar month, deliver to the Bank updated schedules of
all outstanding Accounts and information relating to the movement of
inventory. Such schedules shall be in form satisfactory to the Bank and
shall show the age of such Accounts in intervals of not more than 30 days,
and contain such other information and be accompanied by such supporting
documents as the Bank may from time to time prescribe. The Borrower shall
also deliver to the Bank copies of Debtor's invoices, evidences of shipment
or delivery and such other schedules and information as the Bank may
reasonably request. The items to be provided under this Section are to be
prepared and delivered to the Bank solely for its convenience in maintaining
records of the Collateral and the Borrower's failure to give any of such
items to the Bank shall not affect, terminate, modify or otherwise limit
the Bank's security interest granted herein.
5.4 Financial Information. (a) Deliver to the Bank not later than
---------------------
forty-five (45) days after the close of each calendar month, monthly
financial statements, including, but not limited to the following: balance
sheets and income statements
<PAGE> 15
and such other statements as the Bank may require, each in form satisfactory
to the Bank; (b) Deliver to the Bank not later than forty-five (45) days
after the end of each fiscal quarter, the quarterly 10-Q statements of
Borrower; and (c) deliver to the Bank not more than ninety (90) days after
the close of each fiscal year of the Borrower consolidated and consolidating
audited financial statements for Borrower and its subsidiaries, including a
balance sheet and related profit and loss statement, prepared in accordance
with GAAP by independent certified public accountants acceptable to the Bank,
who shall give their unqualified opinion with respect thereto.
5.5 Certificates of CFO. The Chief Financial Officer of Borrower
-------------------
shall provide at the times that the quarterly financials are provided to the
Bank, within forty-five (45) days after the end of each fiscal quarter, the
following certificates:
(a) A certificate stating that the current financial statements are
complete and correct and fairly represent the financial position of Borrower
as of their respective dates and the results of Borrower's operations for the
periods then ended; and
(b) A certificate stating (i) that Borrower has complied with and is
then in compliance with all terms and covenants of this Agreement, and (ii)
that there exists no Event of Default as defined in this Agreement, and no
event which, with the giving of notice or the lapse of time, or both, would
constitute such an Event of Default.
5.6 Other Information. Furnish to the Bank such other financial and
-----------------
business information and reports in form and substance satisfactory to the
Bank as and when the Bank may from time to time request.
5.7 Maintenance of Existence and Licenses. While this Agreement remains
-------------------------------------
in effect and until the Obligations have been paid in full, (a) maintain its
corporate existence in good standing; (b) make no change in the nature or
character of its business or engage in any business in which it was not
engaged on the date of this Agreement; (c) maintain and keep in full force
and effect all licenses and permits necessary to the proper conduct of its
business and (d) at the request of the Bank, qualify as a foreign corporation
and obtain all requisite licenses and permits in each state (other than the
state of its incorporation) where the Borrower does business.
5.8 Maintenance and Insurance of Properties. Maintain and keep all of
---------------------------------------
its properties, real and personal, in good working order, condition and
repair and insure and keep insured all such properties at all times against
loss of damage by fire, theft, and such other risks and hazards as are
customarily insured against by corporations in similar circumstances, or as
the Bank may specify from time
<PAGE> 16
to time, with insurers and in amounts acceptable to the Bank. If the
Borrower fails to do so, the Bank may obtain such insurance and charge the
cost thereof to the Borrower's account and add it to the Obligations. The
Borrower agrees that, if any loss should occur, the proceeds of all such
insurance policies may be applied to the payment of all or any part of the
Obligations, as the Bank may direct. Bank shall be named loss payee on
such insurance policies to the extent that such policies insure the
Collateral. All policies shall provide for at least 10 days prior written
notice of cancellation to the Bank. Borrower shall deliver at least annually
to Bank, or sooner if requested by Bank, certificates of insurance evidencing
Borrower's compliance herewith. Upon the occurrence of an Event of Default
(as defined herein), Bank or Bank's designated agent is hereby irrevocably
constituted and appointed Borrower's attorney-in-fact to (either in the name
of Borrower or in the name of Bank) make adjustments of all insurance losses,
sign all applications, releases and other papers necessary for the collection
of any such loss, make settlements and endorse and collect all instruments
payable to Borrower or issued in connection therewith.
5.9 Liability Insurance. At all times, maintain in full force and
-------------------
effect such liability insurance with respect to its activities and business
interruption and other insurance as may be reasonably required by Bank,
such insurance to be provided by insurer(s) acceptable to Bank, and if
requested by Bank, such insurance shall name Bank as an additional insured.
Borrower shall deliver at least annually to Bank, or sooner if requested by
Bank, certificates of insurance evidencing Borrower's compliance herewith.
5.10 Notice of Certain Events. Give prompt notice in writing to the
------------------------
Bank of any Event of Default hereunder, or of any condition which with the
passage of time or the giving of notice or both would give rise to an Event
of Default, and of any development, financial or otherwise, which would
materially adversely affect its business, properties or affairs or the
ability of the Borrower to perform its obligations under this Agreement or
the Notes.
5.11 Payment of Taxes. Pay all taxes, assessments or governmental
----------------
charges lawfully levied or imposed on or against it and its properties prior
to the date when such taxes, assessments or charges shall become delinquent,
unless the Borrower shall contest the validity thereof in good faith and
shall post any bond or other security required by applicable law or by the
Bank against the payment thereof
5.12 Dealings in Inventory. With respect to the Inventory (a) sell or
---------------------
dispose of the Inventory only to buyers in the ordinary course of business,
(b) immediately notify the Bank of any change in location of any of the
Inventory and, prior to any such change, execute and deliver to the Bank
such financing statements satisfactory to the Bank as the Bank may request
and (c) report, in form
<PAGE> 17
satisfactory to the Bank and with such frequency as determined by the Bank,
such information as the Bank may request regarding the Inventory.
5.13 Claims Against Borrower. Immediately upon learning thereof, report
-----------------------
to the Bank any reclamation, return or repossession of goods, any claim or
dispute asserted by any Debtor or other obligor, and any other matters
affecting the value and enforceability or collectibility of any of the
Collateral. In addition, the Borrower shall, at its sole cost and expense
(including attorney's fees), settle any and all such claims and disputes
and indemnify and protect the Bank against any liability, loss or expense
arising therefrom or out of any such reclamation, return or repossession of
goods, provided, however, if the Bank shall so elect, and if an Event of
Default has occurred and is continuing beyond any applicable cure periods,
Bank shall have the right at all times to settle, compromise, adjust or
litigate all claims or disputes directly with the Debtor or other obligor
upon such terms and conditions as it deems advisable and charge all costs
and expenses thereof (including attorneys' fees) to the Borrower's account
and add them to the Obligations.
5.14 Defense of Collateral. Defend the Collateral against all claims
---------------------
and demands of all persons at any time claiming the same or any interest
therein and pay all costs and expenses (including attorneys' fees) incurred
in connection with such defense.
5.15 Financing Statements. At the request of the Bank, execute and
--------------------
deliver such financing statements, documents and instruments, and perform
all other acts as the Bank deems necessary or desirable, to carry out and
perform the intent and purpose of this Agreement, and pay, upon demand,
all expenses (including attorneys' fees) incurred by the Bank in
connection therewith. A photocopy of this Agreement shall be sufficient
as a financing statement and may be filed in any appropriate office in
lieu thereof.
5.16 Financial Covenants. Maintain the following financial covenants:
-------------------
(a) Consolidated Tangible Net Worth at all times greater than
$7,500,000.00.
(b) A ratio of Consolidated Liabilities to Consolidated Tangible Net
Worth of not more than 2.6 to 1.0.
(c) A Debt Coverage Ratio of at least 1.5 to 1.0.
The following terms shall have the following meaning when used herein:
<PAGE> 18
"Consolidated Liabilities" shall mean all indebtedness, obligations and
other liabilities of Borrower, whether matured or unmatured, liquidated or
unliquidated, direct or contingent or joint or several, that should, in
accordance with GAAP, be classified as liabilities on a consolidated balance
sheet of Borrower and its subsidiaries (if any).
"Consolidated Tangible Net Worth" shall mean, at any time, Stockholder's
Equity, less the sum of (i) any surplus resulting from any write-up of assets
subsequent to September 30, 1999, (ii) goodwill, including any amounts,
however designated on a consolidated balance sheet of Borrower and its
subsidiaries, representing the excess of the purchase price paid for assets
or stock acquired over the value assigned thereto on the books of the
Borrower, (iii) patents, trademarks, tradenames and copyrights, (iv) any
amount at which shares of capital stock of the Borrower appear as an asset
on the Borrower's balance sheet, (v) deferred expenses and (vi) any other
amount in respect of an intangible that should be classified as an asset on
a consolidated balance sheet of Borrower in accordance with GAAP.
"Debt Coverage Ratio" shall mean, as of any date, the ratio of (i) net
income for the period of the four (4) most recent fiscal quarters ending on
or prior to such date, after deducting taxes and cash dividends, and adding
back depreciation, amortization, and interest expenses to (ii) interest
expenses for such period, plus current maturities of long term debt as of
such date.
"Stockholder's Equity" shall mean, at any time, the aggregate of the
following amounts set forth on a consolidated balance sheet of the Borrower
and its subsidiaries prepared in accordance with GAAP; (i) the par or
stated value of all outstanding capital stock, (ii) capital surplus (iii)
retained earnings and (iv) all indebtedness which is subordinated to the
Loans in a manner satisfactory to the Bank.
5.17 Maintenance of Bank Accounts. At Bank's option, maintain all of
----------------------------
its depository accounts with Bank, including without limitation, all demand
deposit, lock box, time deposit, concentration and zero balance accounts,
other than a local account(s) maintained for payroll purposes. Borrower
shall maintain a minimum collected balance of $100,000 in demand deposits.
6. Negative Covenants. The Borrower covenants and agrees that so long
------------------
as this Agreement shall remain in effect and until the Obligations have been
paid in full, unless the Bank shall consent in advance in writing, it shall
not and shall not permit any subsidiary to:
6.1 Sale of Assets or Merger. Discontinue its business or liquidate,
------------------------
sell, transfer, directly or indirectly, assign or otherwise dispose of a
material part of its
<PAGE>
assets or of the Collateral, by sale, merger, consolidation or otherwise,
provided, however, that it may sell in the ordinary course of business and
for a full consideration in money or money's worth, any product, merchandise
or service produced, marketed or furnished by it.
6.2 Liens and Encumbrances. Sell, assign, pledge, grant or suffer to
----------------------
exist a security interest, lien, mortgage or other encumbrance on any of
the Collateral to any person other than the Bank, or permit any lien,
encumbrance or security interest to attach to any of the Collateral, except
in favor of the Bank and except Permitted Liens.
6.3 Contingent Liabilities. Endorse, guarantee or become surety for
----------------------
the obligations of any person, firm or corporation, except that the Borrower
may endorse checks and negotiable instruments for collection or deposit in
the ordinary course of business.
6.4 Loans. Make any loans to its Affiliates or other parties, repay
-----
any loans made to its Affiliates or other parties, guaranty any loans
(other than to Bank for the Lytton Loans) to its Affiliates or other parties
or make any advances to its Affiliates or other parties. Notwithstanding
anything to the contrary herein, Borrower shall be permitted to make loans
to its officers provided:
(i) such loan(s) are made solely for the purpose of allowing such
officer(s) to exercise vested stock options in Borrower;
(ii) the loan(s) are not made as cash disbursements, but solely as
stock advances; and
(iii) such loan(s) do not negatively impact the Borrower's ability to
meet the financial covenants set out in Section 5.16 hereof.
6.5 Distributions and Dividends. Declare or pay any dividends or make
---------------------------
any other payments on its capital stock, redeem, repurchase or retire any of
its capital stock, or make any other distribution to its stockholders.
6.6 Dealings with Accounts. Compromise or discount any Account except
----------------------
for ordinary trade discounts or allowances for prompt payment.
6.7 Investments. Without Bank's prior written consent which consent
-----------
shall not be unreasonably withheld, change its name or consolidate or merge
with any other corporation or acquire or purchase any equity interest in any
other entity, including shares of stock of other corporations, or acquire or
purchase any assets or assume any obligations of any other entity the value
of which exceeds $100,000.00 (whether in one transaction or in a series of
transactions), except
<PAGE> 20
that the Borrower is permitted to own notes and other receivables acquired
in the ordinary course of business.
6.8 Change in Management or Business. Change its management or make
--------------------------------
any material change in any of its business objectives, purposes and opera-
tions which might in any way adversely affect the repayment of the Loans.
6.9 Change in Ownership. Permit to occur a change in record or
-------------------
beneficial ownership of voting stock of Borrower which Bank, in its sole
discretion, deems material with respect to the control over Borrower.
6.10 Transaction with Affiliates. Enter into, or be a party to, any
---------------------------
transaction with any of Borrower's Affiliates, except in the ordinary course
of business and pursuant to the reasonable requirements of Borrower's
business, and upon fair and reasonable terms which are fully disclosed to
Bank and are no less favorable to Borrower than Borrower could obtain in a
comparable arm's length transaction with a person not an Affiliate of
Borrower.
6.11 Indebtedness. Directly or indirectly create, incur, assume,
------------
guaranty or be or remain liable with respect to any indebtedness, except for
(a) the Obligations, (b) any existing indebtedness disclosed in the financial
statements referenced in Section 4.4 hereof, (c) any purchase money
indebtedness not to exceed $50,000.00 per year and (d) any other indebtedness
to which Bank has consented in writing.
6.12 Capital Expenditures. Undertake any capital expenditures in excess
--------------------
of $1,000,000.00 in any one fiscal year of Borrower.
7. Collection of Collateral and Notice of Assignment.
-------------------------------------------------
7.1 Collections on Collateral. So long as the Bank does not request
-------------------------
that the Debtors on the Collateral be notified of the consignment thereof
to Bank or that all collections be directed to a lock box at Bank, Borrower
may make collections on the Collateral. All collections on the Collateral
shall be the property of the Bank, shall be held in trust for the Bank by
the Borrower and shall not be commingled with the Borrower's other funds or
be deposited in any bank account of the Borrower (except for the Cash
Collateral Account), or used in any manner except to pay the Obligations.
Borrower shall immediately deposit all collections on the Collateral in the
Cash Collateral Account of Borrower maintained at Bank for that purpose,
over which the Bank alone shall have the sole power of withdrawal. On a
daily basis, Bank will apply all or part of the collected balance of the
Cash Collateral Account against the Obligations, the amount, order and method
of such application to be in the sole discretion of Bank. In no event shall
Bank be obligated to apply any funds deposited in the Cash Collateral Account
<PAGE> 21
before the second business day after the day of deposit. Any part of the
collected balance in the Cash Collateral Account which the Bank elects not
to apply to Borrower's obligations may be paid over and deposited by Bank
to the Borrower's commercial account. The crediting of items deposited in
the Cash Collateral Account to the reduction of the Obligations shall be
conditioned upon final payment of the item and if any item is not so paid,
the amount of any credit given for it may be charged to the Obligations or
to any other deposit account of the Borrower, whether or not the item is
returned.
7.2 Notice of Assignment. Upon the occurrence and continuance of an
--------------------
Event of Default beyond any applicable cure periods, the Bank shall have the
right at any time to notify Debtors of its security interest in the Accounts
and to require payments to be made directly to the Bank. Upon request of
the Bank at any time, Borrower will so notify the account debtors and will
indicate on all billings to the account debtors that the Accounts are payable
to the Bank. To facilitate direct collection, the Borrower hereby appoints
the Bank and any officer or employee of the Bank, as the Bank may from time
to time designate, as attorney-in-fact for the Borrower to (a) receive, open
and dispose of all mail addressed to the Borrower and take therefrom any
payments on or proceeds of Accounts; (b) take over the Borrower's post
office boxes or make other arrangements, in which the Borrower shall
cooperate, to receive the Borrower's mail, including notifying the post
office authorities to change the address for delivery of mail addressed to
the Borrower to such address as the Bank shall designate; (c) endorse the
name of the Borrower in favor of the Bank upon any and all checks, drafts,
money orders, notes, acceptances or other evidences or payment or Collateral
that may come into the Bank's possession; (d) sign and endorse the name of
the Borrower on any invoice or bill of lading relating to any of the
Accounts, on verifications of Accounts sent to any Debtor, to drafts
against Debtors, to assignments of Accounts and to notices to Debtors; and
(e) do all acts and things necessary to carry out this Agreement, including
signing the name of the Borrower on any instruments required by law in
connection with the transactions contemplated hereby and on financing state-
ments as permitted by the Uniform Commercial Code. The Borrower hereby
ratifies and approves all acts of such attorneys-in-fact, and neither the
Bank nor any other such attorney-in-fact shall be liable for any acts of
commission or omission, or for any error of judgment or mistake of fact or
law. This power, being coupled with an interest, is irrevocable so long as
any of the Obligations remain unsatisfied.
7.3 Enforcement of Accounts. The Bank shall not, under any circum-
-----------------------
stances, be liable for any error or omission or delay of any kind occurring
in the settlement, collection or payment of any Accounts or any instruments
received in payment thereof or for any damage resulting therefrom. Upon the
ccurrence and continuance of an Event of Default beyond any applicable cure
periods, the Bank may, without notice to or consent from the Borrower, sue
upon
<PAGE> 22
or otherwise collect, extend the time of payment of, or compromise or settle
for cash, credit or otherwise upon any terms, any of the Accounts or any
securities, instruments or insurance applicable thereto and/or release the
obligator thereon. The Bank is authorized to accept the return of the
goods represented by any of the Accounts, without notice to or consent by
the Borrower, or without discharging or any way affecting the Obligations
hereunder.
7.4 Returned or Rejected Goods. Upon the occurrence and continuance
--------------------------
of an Event of Default beyond any applicable cure periods, upon receipt of
any returned or rejected goods the Borrower shall immediately issue and
deliver a credit memo to the Bank with respect thereto. Or, at the Bank's
election, the Borrower shall set aside such goods, mark them in the Bank's
name and hold them in trust for the Bank at the Borrower's expense, and,
upon request, shall pay the Bank the sales price thereof If the Bank shall
request the Borrower to pay the sales price of such goods and the Borrower
fails to forthwith pay the sales price to the Bank, the Bank may take
possession of such goods and sell or cause the goods to be sold, at public
or private sale, at such prices, to such purchasers and upon such terms as
the Bank deems advisable. The Borrower shall remain liable to the Bank for
any deficiency and shall pay the costs and expenses of such sale, including
reasonable attorneys' fees.
7.5 Limitation of Bank's Liability. The Bank shall not be liable for
------------------------------
or prejudiced by any loss, depreciation or other damage to the Accounts or
other Collateral unless caused by the Bank's willful and malicious act, and
the Bank shall have no duty to take any action to preserve or collect any
Account or other Collateral.
7.6 Verification of Accounts. The Bank may confirm and verify all
------------------------
Accounts in any reasonable manner at any time. Bank shall have no obligation
to disclose or discuss with Borrower the names or identities of any customers
from whom the Bank obtains or requests information as to Accounts. Borrower
agrees to cooperate with Bank in the confirmation and verification of any
Accounts, or reconciling any discrepancy between those amounts verified by
the Bank and information provided to the Bank by the Borrower.
8. One General Obligation: Cross Collateral. All loans and advances by
----------------------------------------
Bank to Borrower under this Agreement and under all other agreements
constitute one loan, and all indebtedness and obligations of Borrower to Bank
under this and under all other agreements, present and future, constitute
one general obligation secured by the Collateral and security held and to be
held by Bank hereunder and by virtue of all other assignments and security
agreements between Borrower and Bank now and hereafter existing. It is
expressly understood and agreed that all of the rights of Bank contained in
this Agreement shall likewise apply insofar as applicable to any modification
of or supplement to
<PAGE> 23
this Agreement and to any other agreements, present and future, between Bank
and Borrower.
9. Events of Default and Remedies.
------------------------------
9.1 Event of Default. If the Loans are due on a specific date (e.g.
----------------
not due on demand), the following shall constitute Events of Default under
this Agreement, it being agreed that time is of the essence hereof: (a)
failure of the Borrower to pay when due any of the Obligations; (b) failure
of the Borrower to observe or perform any covenant contained in this
Agreement or in any other agreement between the Borrower and the Bank; (c)
any representation or warranty at any time made by the Borrower to the Bank
orally or in this Agreement or in any other agreement between the Borrower
and the Bank, or in any document or instrument delivered to the Bank pursuant
to this Agreement or any such other agreement is, or becomes, untrue or
misleading in any material respect; (d) acceleration of the maturity of any
of the Obligations; (e) Borrower shall be in default or breach under any
material obligation for the payment of borrowed money or for the payment of
rent under any lease agreement covering real or personal property; (of
failure of the Borrower or any guarantor, after request by the Bank, to
furnish financial information or to permit the inspection of its books of
account and records; (g) suspension by the Borrower or any guarantor of the
operation of its present business, or the insolvency of the Borrower or any
guarantor, or the inability of the Borrower or any guarantor to meet its
debts as they mature, or its admission in writing to such effect, or its
calling any meeting of all or any of its creditors or committing any act of
bankruptcy, or the filing by or against the Borrower or any guarantor of any
petition under any provision of the Bankruptcy Act, as amended, provided
that, Bank may, in its sole but reasonable discretion, allow Borrower up to
sixty (60) days to cause such filing to be released if Bank, in its
reasonable judgment, deems such a grace period to be warranted or appropriate
or the entry of any judgment or filing of any material lien against the
Borrower or any guarantor; (h) there shall occur any material adverse change
in the Borrower's condition or affairs (financial or otherwise) or in that of
any endorser, guarantor of surety for any of the Obligations; (i) loss,
theft, damage, destruction or encumbrance of any of the Collateral or any
levy, seizure or attachment thereof; (j) any guarantor of the Obligations
denies his obligation to guarantee any Obligations then existing or attempts
to limit or terminate his obligation to guarantee any future Obligations,
including future Loan advances; (k) the death of any Borrower, co-maker,
guarantor or surety of the Loans; and (l) any default by Lytton under any of
the Lytton Loans.
9.2 Rights of Bank upon Default. Upon the occurrence of an Event of
---------------------------
Default described in Section 9.1, or at any time in the sole discretion of
the Bank if the Loan is due on demand, the Bank at its option may: (a)
declare the Obligations of the Borrower immediately due and payable, without
presentment,
<PAGE> 24
notice, protest or demand of any kind for the payment of all or any part of
the Obligations (all of which are expressly waived by Borrower) and exercise
all of its rights and remedies against the Borrower and any Collateral
provided herein, in any other agreement between Borrower and Bank, at law or
in equity; (b) exercise all rights granted to a secured party under the Ohio
Uniform Commercial Code or otherwise; and (c) declare a default under any or
all Lytton Loans. Upon the occurrence of an Event of Default, or in the
event of non-payment of a Loan when due in the case of a demand Loan, Bank
may take possession of the Collateral, or any part thereof, and Borrower
hereby grants Bank authority to enter upon any premises on which the
Collateral may be situated, and remove the Collateral from such premises or
use such premises, together with the materials, supplies, books and records
of Borrower, to maintain possession and/or the condition of the Collateral
and to prepare the Collateral for sale. Borrower shall, upon demand by
Bank, assemble the Collateral and make it available at a place designated
by Bank which is reasonably convenient to both parties. Unless the
Collateral is perishable or threatens to decline speedily in value or is
of a type customarily sold on a recognized market, Bank will give Borrower
reasonable notice of the time and place of any public sale thereof or of
the time after which any private sales or other intended disposition thereof
is to be made. The requirement of reasonable notice shall be met if such
notice is mailed, postage prepaid, to the address of the Borrower shown at
the beginning of this Agreement at least 5 days prior to the time of such
sale or disposition.
9.3 Application of Proceeds. The Bank shall have the right to apply
-----------------------
the proceeds of any disposition of the Collateral to the payment of the
Obligations in such order of application as the Bank may, in its sole
discretion, elect. The Bank shall have no obligation to marshall any assets
in favor of the Borrower or any other party.
9.4 Bank's Right of Offset. Any and all deposits or other sums at any
----------------------
time credited by, or due from Bank to Borrower or Guarantor shall at all
times constitute additional security for the amount of the Notes then
outstanding with interest and may be set off against any of said
indebtedness to the Bank at any time, whether or not other security held
by the Bank is considered by the Bank to be adequate. In addition, any and
all instruments, documents, monies, securities, goods, choses in action,
chattel paper and any other property of Borrower or Guarantor, or in which
Borrower or Guarantor has any interest, tangible or intangible, and the
proceeds thereof, which now or hereafter are at any time in the custody or
possession of the Bank or any third party acting in the Bank's behalf,
without regard to whether the Bank received the same in pledge, for safe-
keeping, as agent for collection or transmission or otherwise or whether
the Bank has conditionally released the same, shall constitute additional
security for the Notes and may be applied at any time to the liability
represented thereby which is then due, whether by acceleration or otherwise.
<PAGE> 25
9.5 Remedies Cumulative. The rights, options and remedies of the Bank
-------------------
shall be cumulative and no failure or delay by the Bank in exercising any
right, option or remedy shall be deemed a waiver thereof or of any other
right, option or remedy, or waiver of any Event of Default hereunder, nor
shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy hereunder. Bank shall not be deemed to have waived
any of the Bank's rights hereunder or under any other agreement, instrument
or paper signed by Borrower unless such waiver be in writing and signed by
the Bank.
10. Miscellaneous
-------------
10.1 Acquisition Loan. Bank acknowledges that it will provide a
----------------
$3,000,000 loan to finance the acquisition by Borrower of the assets or stock
f another company ("Acquisition Loan") upon application by Borrower to Bank
for such financing provided:
(i) Bank and Borrower succeed in negotiating mutually agreeable
terms of such Acquisition Loan, including the interest rate
and financial covenants;
(ii) No Event of Default has occurred under this Agreement; and
(iii) The Bank deems the Acquisition Loan to be in the Bank's best
interest in its sole discretion.
10.2 Governing Law, Jurisdiction and Venue. The provisions of this
-------------------------------------
Agreement shall be governed by and interpreted in accordance with the laws
of the State of Ohio. The Bank and Borrower hereby designate all courts of
record sitting in Cincinnati, Ohio, both state and federal, as forums where
any action, suit or proceeding in respect of or arising out of this Agreement
or the transactions contemplated by this Agreement may be prosecuted as to
all parties, their successors and assigns, and by the foregoing designation
the Bank and Borrower consent to the jurisdiction and venue of such courts.
10.3 MUTUAL WAIVER OF JURY TRIAL. AS A SPECIFICALLY BARGAINED
---------------------------
INDUCEMENT FOR THE BANK TO EXTEND CREDIT TO BORROWER AND FOR BORROWER TO
BORROW FROM BANK, AND AFTER HAVING THE OPPORTUNITY TO CONSULT COUNSEL,
BORROWER AND BANK HEREBY EXPRESSLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY
<PAGE> 26
LAWSUIT OR PROCEEDING RELATING TO THIS AGREEMENT OR ARISING IN ANY WAY FROM
THE OBLIGATIONS.
10.4 Other Waivers. The Borrower waives notice of nonpayment, demand,
-------------
notice of demand, presentment, protest and notice of protest with respect to
the Obligations, or notice of acceptance hereof, notice of Loans made, credit
extended, Collateral received or delivered, or any other action taken in
reliance hereon, and all other demands and notices of any description,
except such as are expressly provided for herein.
10.5 Collection Costs. All costs and expenses incurred by the Bank to
----------------
obtain, enforce or preserve the security interests granted by this Agreement
and to collect the Obligations, including, without limitation, stationery
and postage, telephone and telegraph, secretarial and clerical expenses,
the fees or salaries of any collection agents utilized, all costs to
maintain and preserve the Collateral and all reasonable attorneys' fees
and legal expenses incurred in obtaining or enforcing payment of any of
the Obligations or foreclosing the Bank's security interest in any of the
Collateral, whether through judicial proceedings or otherwise, or in
enforcing or protecting its rights and interests under this Agreement or
under any other instrument or document delivered pursuant hereto, or in
protecting the rights of any holder or holders with respect thereto, or
in defending or prosecuting any actions or proceedings arising out of or
relating to the Bank's transactions with the Borrower, shall be paid by
the Borrower to the Bank, upon demand, or, at the Bank's election, charged
to the Borrower's account and added to the Obligations, and the Bank may
take judgment against the Borrower for all such costs, expense and fees in
addition to all other amounts due from the Borrower hereunder.
10.6 Expenses. The Borrower shall reimburse the Bank for up to
--------
$10,000.00 of all out-of-pocket costs and expenses incurred by the Bank
in connection with the preparation of this Agreement and the making of the
Loans hereunder, including the reasonable fees and expenses of the Bank's
counsel, and for all UCC search, filing, recording and other costs
connected with the perfection of the Bank's security interest in the
Collateral.
10.7 Notices. All notices, requests, directions, demands, waivers and
-------
other communications provided for herein shall be in writing and shall be
deemed to have been given or made when delivered personally, by telecopy,
or sent by registered or certified mail, postage prepaid and return
receipt requested, addressed to the Borrower or the Bank, as the case may
be, at their respective addresses set forth at the beginning of this
Agreement. Notices of changes of address shall be given in the same manner.
<PAGE> 27
10.8 Severability. Any provision of this Agreement which is prohibited
------------
and unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
10.9 Entire Agreement, Modification, Benefit. This Agreement shall
---------------------------------------
constitute the entire agreement of the parties and no provision of this
Agreement, including the provisions of this Section, may be modified,
deleted or amended in any manner except by agreement in writing executed
by the parties. All terms of this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns, provided, however, that the Borrower
shall not assign or transfer its rights hereunder.
10.10 Construction. All references in this Agreement to the single
------------
number and neuter gender shall be deemed to mean and include the plural
number and all genders, and vice versa, unless the context shall otherwise
require.
10.11 Headings. The underlined headings contained herein are for
--------
convenience only and shall not affect the interpretation of this Agreement.
10.12 Counterparts. This Agreement may be executed in more than one
------------
counterpart, each of which shall be deemed an original.
10.13 Nonliability of Bank. The relationship between the Borrower and
--------------------
the Bank shall be solely that of borrower and lender. The Bank shall not
have any fiduciary responsibilities to the Borrower. The Bank undertakes
no responsibility to the Borrower to review or inform the Borrower of any
matter in connection with any phase of the Borrower's business or operations.
10.14 Limitation of Liability. No claim may be made by the Borrower
-----------------------
against the Bank, or the affiliates, directors, officers, employees,
attorneys or agents of Bank for any special, consequential or punitive
damages in respect of any claim for breach of contract or any other theory
of liability arising out of or related to the transactions contemplated by
this Agreement, or any act, omission or event occurring in connection
therewith; and the Borrower hereby waives, releases and agrees not to sue
upon any such claim for any such damages, whether or not accrued and whether
or not known or suspected to exist in its favor.
10.15 Warrant of Attorney. The Borrower authorizes any attorney at law,
-------------------
including an attorney engaged by the Bank, to appear in any court of record
in the State of Ohio or any other State or Territory of the United States,
after the occurrence of an Event of Default hereunder and waive the issuance
and service
<PAGE> 28
of process and confess judgment against the Borrower in favor of the Bank,
for the amount of the Obligations then appearing due, together with costs
of suit and, thereupon, to release all errors and waive all rights of appeal
and stay of execution. The Borrower hereby expressly waives any conflict
of interest that the Bank's attorney may have in confessing such judgment
against Borrower and expressly consents to the confessing attorney receiving
a legal fee from the holder for confessing such judgment against Borrower.
The foregoing warrant of attorney shall survive any judgment; and if any
judgment be vacated for any reason, the Bank nevertheless may thereafter use
the foregoing warrant of attorney to obtain an additional judgment or
judgments against the Borrower.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers.
WARNING-BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
- -------------------------------------------------------------------------
TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
- ----------------------------------------------------------------------------
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
- -----------------------------------------------------------------------------
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER
- ---------------------------------------------------------------------------
FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
- ------------------------------------------------------------------------
AGREEMENT OR ANY OTHER CAUSE.
- -----------------------------
TECHDYNE, INC., THE PROVIDENT BANK,
a Florida corporation an Ohio banking corporation
/s/ David Watts /s/ Clifford M. Bishop
BY-------------------------------- BY---------------------------------
David Watts Clifford M. Bishop
Title: Chief Financial Officer Title: Vice President
LINE OF CREDIT PROMISSORY NOTE
DATE OF NOTE: February 9, 2000
MAXIMUM CREDIT: FOUR MILLION FIVE HUNDRED THOUSAND DOLLARS ($4,500,000)
MATURITY DATE: February 8, 2003
FOR VALUE RECEIVED, TECHDYNE, INC., a Florida corporation,("Borrower"),
does hereby promise to pay to the order of THE PROVIDENT BANK, an Ohio
banking corporation, or its successors or assigns, at its principal office
located at 10 West Second Street, Courthouse Plaza, Suite 1100, Dayton, Ohio
45402 ("Lender"), or at such other place as the Lender may designate to
Borrower in writing from time to time, in legal tender of the United States,
the Maximum Credit, as set forth above, or such portion thereof which has been
advanced to Borrower and remains unpaid on the Maturity Date, together with
interest at the Interest Rate, as set forth in Section 2 below, on the
outstanding principal balance until this Note is paid in full. Except as
otherwise defined herein, all capitalized terms shall have the meanings
ascribed to them in the Loan Agreement (as herein defined).
1. REVOLVING CREDIT
----------------
The loan evidenced by this Note is an automated revolving line of credit
subject to the terms of this Note and the Loan Agreement of even date between
the Lender and the Borrower ("Loan Agreement") and until maturity or
occurrence of an Event of Default as defined in the Loan Agreement, the
Borrower may borrow and reborrow from the Lender and the Lender may lend and
relend to the Borrower such amounts not to exceed the Maximum Credit as
either of the undersigned may, at any time and from time to time, request
upon satisfactory notice to the Lender.
2. INTEREST RATE
-------------
The "Interest Rate" is shall be equal to: (1) the Prime Rate, as defined
herein, charged by the Lender, minus one quarter of one percent (.25%), or
(2) a fixed rate equal to the Quoted LIBOR Rate plus two and one-half percent
(2.50%) per annum, as elected by Borrower pursuant to the Asset Based Loan
and Security Agreement between Lender and Borrower ("Loan Agreement"), as
defined and determined under the Loan Agreement.
Interest shall be computed daily for the actual number of days elapsed over
a year of 360 days. As used herein, the Prime Rate is that percentage rate
of interest calculated on the basis of a 360-day year which is established
by Lender from time to time as its Prime Rate, which is in effect until the
new rate is established and which provides a base to which loan rates may be
referenced; it is not
<PAGE>
necessarily the Lender's lowest loan rate. In the event of a change in
such Prime Rate, the interest rate hereunder shall be adjusted accordingly,
and such adjustment shall become effective on the date such Prime Rate
changes. The Quoted LIBOR Rate shall be as defined in the Loan Agreement.
3. BORROWING BASE
--------------
The principal balance outstanding under this Note shall not at any time
exceed the Borrowing Base. The "Borrowing Base" for purposes of this Note
shall mean an amount equal to the sum of (i) the lesser of $1,500,000 or
forty percent (40%) of the cost or market value, whichever is lower, of
Eligible Inventory (as defined in the Loan Agreement), and (ii) eighty-five
percent (85%) of the outstanding amount of Eligible Accounts (as defined in
the Loan Agreement). In the event the principal balance outstanding under
this Note at any time exceeds the Borrowing Base (as verified in the manner
set out in the Loan Agreement), then Borrower shall pay to Bank all such
excess amounts immediately on demand.
3. PRINCIPAL AND INTEREST PAYMENTS
--------------------------------
All accrued interest on the outstanding principal balance under this Note
shall be due and payable monthly commencing on March 1, 2000, and
continuing on the first day of each and every calendar month thereafter
until this Note is paid in full. Unless sooner paid, the entire outstanding
principal balance and all accrued, unpaid interest hereunder shall be due
and payable on the Maturity Date, unless extended by Lender in the manner
set forth in the Loan Agreement.
Borrower shall pay a late payment premium of five percent (5%) of any
principal or interest payment made more than ten (10) days after the
Borrower receives written notice of nonpayment, which shall be due with any
such late payment.
All payments made by Borrower shall be applied monthly, first to reimburse
Lender, if required, for any costs incurred by the Lender under any document
executed as collateral security for this Note; second, to interest which is
then due and payable; third, to the payment of late charges provided herein;
and the balance to principal, until the full amount of principal and interest
has been paid in full.
4. PREPAYMENT
----------
The Borrower shall have the right to prepay all or any part of the Amount
of Note outstanding for which Borrower has made the Prime Rate Election
(as defined in the Loan Agreement), together with all accrued interest
thereon at any time without penalty. Any partial prepayments of principal
shall be applied against installments of principal due hereunder in inverse
order of maturity.
Borrower may not prepay all or any portion of the Amount of Note outstanding
during any Interest Period (as defined in the Loan Agreement) for which
<PAGE>
Borrower has made a LIBOR Rate Election (as defined in the Loan Agreement).
If the Lender has elected to accelerate the repayment in the case of the
occurrence of an Event of Default, or in the case of casualty as set out in
the Loan Agreement, then Lender may, at its sole option:
(i) elect to delay any mandatory prepayments of any LIBOR Rate
Elections for a period up to the expiration of the then-current
Interest Period or Interest Periods, as applicable, in order to
coordinate the prepayment date with the last day of the
applicable Interest Periods; or
(ii) require prepayment by Borrower, in which case the Borrower shall
pay to the Lender, immediately upon demand, in addition to all
principal and accrued interest due on the Note, a prepayment
charge, computed solely by the Lender, in the amount necessary
to compensate the Lender for reasonable losses, expenses and
liabilities the Lender may sustain as a result of such prepayment,
including, without limitation, any losses and expenses arising
from the liquidation or reemployment of deposits acquired to fund
or maintain the principal amount prepaid. In calculating the
amount of such a prepayment charge, the Lender's determination of
the amount of such reimbursement shall be conclusive in the absence
of manifest error. Upon request, Lender shall provide Borrower
with documentation supporting the Lender's calculation of the
prepayment charge.
5. EXTENSION OF NOTE
-----------------
Any extension or renewal of this Note at the end of the original three-year
term will be entirely within the Lender's discretion. The term of any such
extension or renewal shall be for terms of not more than one (1) year at a
time.
6. LOAN AGREEMENT; COLLATERAL
--------------------------
This Note is issued under and entitled to the benefits of the Loan Agreement,
to which Loan Agreement reference is hereby made for a statement of the
rights in respect thereto of the holder of this Note.
This Note will be secured by the collateral identified and described in
Section 3 of the Loan Agreement (the "Collateral"), to which section reference
is hereby made for a statement of the rights in respect thereto of the holder
of this Note.
<PAGE>
7. DEFAULT
-------
Upon the occurrence of any event constituting an Event of Default under the
terms of the Loan Agreement, the entire balance of the principal and
interest upon this Note then owing and unpaid, at the option of the holder
hereof, immediately shall become due and payable. Delay on the part of the
holder of this Note in execution of the right to declare this obligation
due shall not be a waiver thereof.
After an Event of Default, the Amount of Note outstanding shall bear interest
at three percent (3%) per annum in excess of the Interest Rate in effect
from time to time, each change in such rate to be effective as of the date
of such change.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other
court proceedings (whether at the trial or appellate level), or should this
Note be placed in the hands of attorneys for collection upon the occurrence
of an Event of Default, the Borrower agrees to pay, in addition to the
principal, premium and interest due and payable hereon, all costs of
collection, including reasonable attorneys' fees and expenses.
All parties to this Note, whether the Borrower, principal, surety, guarantor
or endorser, hereby jointly and severally waive presentment for payment,
demand, protest, notice of protest, notice of dishonor and any other notice
required to be given by law in connection with the delivery, acceptance,
performance, default or enforcement of this Note or any endorsement or
guaranty of this Note, and consent to all forbearance or waiver of any term
hereof or release or discharge by the holder hereof of the Borrower,
guarantors, endorsers, or sureties of the release, substitution or exchange
of any security for the payment hereof or the failure to act on the part of
the holder or any other indulgence shown by the holder from time to time, in
one or more instances (without notice to or further assent from the Borrower,
guarantors, endorsers or sureties) and the Borrower, guarantors, endorsers or
sureties agree that no such action, failure to act or failure to exercise any
right or remedy on the part of the holder shall in any way affect or impair
the obligations of the Borrower hereunder or of any guarantors, endorsers or
sureties or be construed as a waiver by the holder of or otherwise affect any
of the holder's rights under this Note, under any endorsement or guaranty of
this Note or under any document or instrument evidencing any security for
payment of this Note.
8. MODIFICATION
------------
This Note may not be changed orally, but only by an agreement in writing,
signed by the party against whom enforcement of any change or modification
is sought.
<PAGE>
9. LIMITATION ON INTEREST
----------------------
Anything herein to the contrary notwithstanding, the obligations of the
Borrower under this Note shall be subject to the limitation that payments
of interest shall not be required to the extent that receipt of any such
payment by the Lender would be contrary to provisions of law applicable to
the Lender limiting the maximum rate of interest that may be charged or
collected by the Lender.
10. GOVERNING LAW
-------------
This Note shall be governed by, and shall be construed and enforced in
accordance with, the laws of the State of Ohio.
11. WAIVER OF JURY TRIAL
--------------------
As a specifically bargained inducement for Lender to extend credit to the
Borrower, the Borrower hereby expressly waives the right to trial by jury
in any lawsuit or proceeding related to this Note or arising in any way
from the indebtedness or transactions involving the Lender and the Borrower.
12. CONFESSION OF JUDGMENT
----------------------
The Borrower authorizes any attorney-of-law to appear in any court of record
in Hamilton County or Montgomery County, Ohio, or in any court of record in
the jurisdiction in which the Borrower against which or whom a judgment is
then sought may then reside, or in any court of record in the jurisdiction
in which the property described in the Mortgage is located, after the
indebtedness evidenced hereby becomes due, and to waive the issuing and
service of process and to confess judgment against the Borrower in favor of
the Lender for the amount then appearing due, together with costs of suit
and thereupon to release all errors and waive all rights of appeal and stay
of execution.
WARNING: BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE
AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY
BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF
A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS
YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY
GOODS, FAILURE ON ITS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE. YOU AGREE THAT THE HOLDER'S ATTORNEY MAY CONFESS
JUDGMENT PURSUANT TO THE FOREGOING WARRANT OF ATTORNEY. YOU FURTHER
AGREE THAT THE
<PAGE>
ATTORNEY CONFESSING JUDGMENT PURSUANT TO THE FOREGOING WARRANT
OF ATTORNEY MAY RECEIVE A LEGAL FEE OR OTHER THING OF VALUE FROM
THE HOLDER (OHIO REVISED CODE SECTION 2323.13).
IN WITNESS WHEREOF, the Borrower has executed and delivered this Note
on the day and year first above written.
Borrower:
TECHDYNE, INC., a Florida corporation
/s/ David Watts
By---------------------------------
David Watts
Its Chief Financial Officer
STATE OF OHIO, COUNTY OF MONTGOMERY, SS:
The foregoing instrument was acknowledged before me this 9th day of
February, 2000, by David Watts, the Chief Financial Officer of Techdyne, Inc.,
a Florida corporation, on behalf of said corporation.
/s/ M. Shannon Martin
-----------------------------------
Attorney at Law, Ohio
TERM LOAN PROMISSORY NOTE
DATE OF NOTE: February 9, 2000
AMOUNT OF NOTE: ONE MILLION DOLLARS ($1,000,000)
MATURITY DATE: February 8, 2005
FOR VALUE RECEIVED, TECHDYNE, INC., a Florida corporation ("Borrower"),
does hereby promise to pay to the order of THE PROVIDENT BANK, an Ohio
banking corporation, or its successors or assigns, at its office located at
10 West Second Street, Courthouse Plaza, Suite 1100, Dayton, Ohio 45402
("Lender"), or at such other place as the Lender may designate to the
Borrower in writing from time to time, in legal tender of the United States,
the Amount of Note, as set forth above, together with interest at the
Interest Rate, as set forth in Section 1 below, on the Amount of Note until
this Note is paid in full. Except as otherwise defined herein, all
capitalized terms shall have the meanings ascribed to them in the Loan
Agreement (as herein defined).
1. INTEREST RATE
-------------
The "Interest Rate" is shall be equal to: (1) the Prime Rate, as defined
herein, charged by the Lender, minus one quarter of one percent (.25%), or
(2) a fixed rate equal to the Quoted LIBOR Rate plus two and one-half percent
(2.50%) per annum, as elected by Borrower pursuant to the Asset Based Loan
and Security Agreement between Lender and Borrower ("Loan Agreement"), as
defined and determined under the Loan Agreement.
Interest shall be computed daily for the actual number of days elapsed over
a year of 360 days. As used herein, the Prime Rate is that percentage rate
of interest calculated on the basis of a 360-day year which is established
by Lender from time to time as its Prime Rate, which is in effect until the
new rate is established and which provides a base to which loan rates may be
referenced; it is not necessarily the Lender's lowest loan rate. In the
event of a change in such Prime Rate, the interest rate hereunder shall be
adjusted accordingly, and such adjustment shall become effective on the date
such Prime Rate changes. The Quoted LIBOR Rate shall be as defined in the
Loan Agreement.
2. AMORTIZATION PERIOD
-------------------
The "Amortization Period" shall be five (5) years from the date of this Note.
3. PRINCIPAL AND INTEREST PAYMENTS
-------------------------------
Payments of principal in the amount of $16,667.00 each, plus all accrued
interest, shall be due and payable monthly, commencing on March 1, 2000,
and continuing on the first day of each and every calendar month thereafter
until this
<PAGE>
Note is paid in full. Unless sooner paid, the entire outstanding principal
balance and all accrued, unpaid interest hereunder shall be due and payable
on the Maturity Date.
Borrower shall pay a late payment premium of five percent (5%) of any
principal or interest payment made more than ten (10) days after the
Borrower receives written notice of nonpayment, which shall be due with any
such late payment.
All payments made by the Borrower shall be applied monthly, first to
reimburse Lender, if required, for any costs incurred by the Lender under
any other document executed as collateral security for this Note; second,
to interest which is then due and payable; third, to the payment of late
charges provided herein; and the balance to principal, until the full amount
of principal and interest has been paid in full.
4. PREPAYMENT
----------
The Borrower shall have the right to prepay all or any part of the Amount of
Note outstanding for which Borrower has made the Prime Rate Election (as
defined in the Loan Agreement), together with all accrued interest thereon
at any time without penalty. Any partial prepayments of principal shall be
applied against installments of principal due hereunder in inverse order of
maturity.
Borrower may not prepay all or any portion of the Amount of Note outstanding
during any Interest Period (as defined in the Loan Agreement) for which
Borrower has made a LIBOR Rate Election (as defined in the Loan Agreement).
If the Lender has elected to accelerate the repayment in the case of the
occurrence of an Event of Default, or in the case of casualty as set out in
the Loan Agreement, then Lender may, at its sole option:
(i) elect to delay any mandatory prepayments of any LIBOR Rate
Elections for a period up to the expiration of the then-current
Interest Period or Interest Periods, as applicable, in order to
coordinate the prepayment date with the last day of the applicable
Interest Periods; or
(ii) require prepayment by Borrower, in which case the Borrower shall
pay to the Lender, immediately upon demand, in addition to all
principal and accrued interest due on the Note, a prepayment charge,
computed solely by the Lender, in the amount necessary to compensate
the Lender for reasonable losses, expenses and liabilities the
Lender may sustain as a result of such prepayment, including,
without limitation, any losses and expenses arising from the
liquidation or reemployment of deposits acquired to fund or
maintain the principal amount prepaid. In calculating the amount
of such a prepayment charge, the Lender's determination of the
amount of such reimbursement shall be conclusive in the absence of
manifest error. Upon request, Lender shall provide Borrower with
<PAGE>
documentation supporting the Lender's calculation of the prepay-
ment charge.
5. LOAN AGREEMENT; COLLATERAL
--------------------------
This Note is issued under and entitled to the benefits of the Loan Agreement,
to which Loan Agreement reference is hereby made for a statement of the
rights in respect thereto of the holder of this Note.
This Note will be secured by the collateral identified and described in
Section 3 of the Loan Agreement (the "Collateral"), to which section
reference is hereby made for a statement of the rights in respect thereto of
the holder of this Note.
6. DEFAULT
-------
Upon the occurrence of any event constituting an Event of Default under
the terms of the Loan Agreement, the entire balance of the principal and
interest upon this Note then owing and unpaid, at the option of the holder
hereof, immediately shall become due and payable. Delay on the part of the
holder of this Note in execution of the right to declare this obligation due
shall not be a waiver thereof.
After an Event of Default, the Amount of Note outstanding shall bear interest
at three percent (3%) per annum in excess of the Interest Rate in effect from
time to time, each change in such rate to be effective as of the date of such
change.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other
court proceedings (whether at the trial or appellate level), or should this
Note be placed in the hands of attorneys for collection upon the occurrence
of an Event of Default, the Borrower agrees to pay, in addition to the
principal, premium and interest due and payable hereon, all costs of
collection, including reasonable attorneys' fees and expenses.
All parties to this Note, whether the Borrower, principal, surety, guarantor
or endorser, hereby jointly and severally waive presentment for payment,
demand, protest, notice of protest, notice of dishonor and any other notice
required to be given by law in connection with the delivery, acceptance,
performance, default or enforcement of this Note or any endorsement or
guaranty of this Note, and consent to all forbearance or waiver of any term
hereof or release or discharge by the holder hereof of the Borrower,
guarantors, endorsers, or sureties of the release, substitution or exchange
of any security for the payment hereof or the failure to act on the part of
the holder or any other indulgence shown by the holder from time to time, in
one or more instances (without notice to or further assent from the
Borrower, guarantors, endorsers or sureties) and the Borrower, guarantors,
endorsers or sureties agree that no such action, failure to act or failure
to exercise any right or remedy on the part of the holder shall in any way
affect or impair the
<PAGE>
obligations of the Borrower hereunder or of any guarantors, endorsers or
sureties or be construed as a waiver by the holder of or otherwise affect
any of the holder's rights under this Note, under any endorsement or guaranty
of this Note or under any document or instrument evidencing any security for
payment of this Note.
7. MODIFICATION
------------
This Note may not be changed orally, but only by an agreement in writing,
signed by the party against whom enforcement of any change or modification
is sought.
8. LIMITATION ON INTEREST
----------------------
Anything herein to the contrary notwithstanding, the obligations of the
Borrower under this Note shall be subject to the limitation that payments of
interest shall not be required to the extent that receipt of any such payment
by the Lender would be contrary to provisions of law applicable to the Lender
limiting the maximum rate of interest that may be charged or collected by the
Lender.
9. GOVERNING LAW
-------------
This Note shall be governed by, and shall be construed and enforced in
accordance with, the laws of the State of Ohio.
10. WAIVER OF JURY TRIAL
--------------------
As a specifically bargained inducement for Lender to extend credit to the
Borrower, the Borrower hereby expressly waives the right to trial by jury in
any lawsuit or proceeding related to this Note or arising in any way from the
indebtedness or transactions involving the Lender and the Borrower.
11. CONFESSION OF JUDGMENT
----------------------
The Borrower authorizes any attorney-of-law to appear in any court of record
in Hamilton County or Montgomery County, Ohio, or in any court of record in
the jurisdiction in which the Borrower against which or whom a judgment is
then sought may then reside, or in any court of record in the jurisdiction
in which the property described in the Mortgage is located, after the
indebtedness evidenced hereby becomes due, and to waive the issuing and
service of process and to confess judgment against the Borrower in favor of
the Lender for the amount then appearing due, together with costs of suit
and thereupon to release all errors and waive all rights of appeal and stay
of execution.
WARNING: BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE
AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY
BE TAKEN AGAINST YOU WITHOUT YOUR
<PAGE>
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON
ITS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. YOU
AGREE THAT THE HOLDER'S ATTORNEY MAY CONFESS JUDGMENT PURSUANT
TO THE FOREGOING WARRANT OF ATTORNEY. YOU FURTHER AGREE THAT
THE ATTORNEY CONFESSING JUDGMENT PURSUANT TO THE FOREGOING
WARRANT OF ATTORNEY MAY RECEIVE A LEGAL FEE OR OTHER THING OF
VALUE FROM THE HOLDER (OHIO REVISED CODE SECTION 2323.13).
IN WITNESS WHEREOF, the Borrower has executed and delivered this Note
on the day and year first above written.
Borrower: TECHDYNE, INC., a
Florida corporation
/s/ David Watts
By---------------------------------
DAVID WATTS
Its Chief Financial Officer
STATE OF OHIO, COUNTY OF MONTGOMERY, SS:
The foregoing instrument was acknowledged before me this 9th day of
February, 2000, by David Watts, the Chief Financial Officer of Techdyne, Inc.,
a Florida corporation, on behalf of the corporation..
/s/ M. Shannon Martin
-----------------------------------
Attorney at Law, Ohio
GUARANTY
THIS GUARANTY is made this 9th day of February, 2000, among TECHDYNE,
INC., a Florida corporation (the "Guarantor"), and THE PROVIDENT BANK, an
Ohio banking corporation ("Lender"), under the following circumstances:
WHEREAS, Lender has entered into an Asset Based Loan and Security
Agreement ("the Loan Agreement") committing Lender to loan up to the
principal sum of FIVE MILLION FIVE HUNDRED THOUSAND DOLLARS ($5,500,000.00)
(the "Guarantor Loan") to Guarantor.
WHEREAS, Lender has previously entered into an Asset Based Loan and
Security Agreement (the "Lytton Agreement") with an affiliate of Guarantor,
Lytton Incorporated ("Borrower"), which Lytton Agreement was dated April 14,
1995 and amended July 31, 1997, April 29, 1998, September 8, 1998, June 30,
1999 and February 9, 2000.
WHEREAS, the indebtedness under the Lytton Agreement is evidenced by
(a) Borrower's Amended and Restated Revolving Asset Promissory Note in the
amount of $3,000,000.00, (b) Borrower's Amended and Restatead Term Loan
Promissory Note in the amount of $1,400,000.00, and (c) Borrower's Amended
and Restated Equipment Acquisition Promissory Note in the amount of
$500,000.00, each of which are hereinafter collectively referred to as the
"Lytton Notes".
WHEREAS, Secured Party has agreed, in connection with the Guarantor
Loan, to reduce the interest rates charged under the Lytton Notes.
WHEREAS, the ability of Borrower to borrow from time to time under the
Lytton Agreement at a reduced interest rate will benefit Guarantor as an
affiliate of Borrower and is necessary and convenient to the conduct,
promotion and attainment of the business of Guarantor.
WHEREAS, Guarantor has determined reasonably and in good faith that it
has adequate capital to conduct business as presently conducted and as
proposed to be conducted and that it will be able to meet its obligations
hereunder and in respect of its other existing and future indebtedness and
liabilities as and when the same shall become due and payable.
WHEREAS, Guarantor has determined that the execution and delivery of
this Agreement are to its advantage and benefit taking into account all
relevant facts and circumstances.
WHEREAS, as an inducement to Lender to reduce the interest rates charged
to Borrower under the Lytton Notes, the Guarantor is willing to guaranty all
obligations of the Borrower under the Lytton Notes and to execute and deliver
this Guaranty.
<PAGE>
NOW, THEREFORE, Guarantor and Lender agree as follows:
Section 1. Representations and Warranties. Guarantor hereby represents
--------- ------------------------------
and warrants as follows:
(a) Guarantor is a corporation duly organized, existing and in good
standing under the laws of the State of Florida and is authorized to
do business in Ohio. Guarantor has the power to own its own
properties and to carry on its business as now being conducted;
(b) the execution of this Guaranty has been fully authorized by Guarantor
and the officer so executing same has been duly authorized;
(c) this Guaranty is a legal, valid and binding obligation of the
Guarantor, enforceable in accordance with its terms except as
enforcement of such terms may be limited by (i) bankruptcy,
insolvency or similar laws affecting enforcement of creditors'
rights generally and (ii) equitable principles which may limit the
availability of the remedy of specific performance or other
equitable remedies;
(d) the execution, delivery and performance of this Guaranty do not and
will not violate or contravene the Articles of Incorporation or
By-Laws of Guarantor, any authority having the force of law or any
material indenture, agreement or other instrument to which the
Guarantor is a party or by which the Guarantor or any of its property
or assets is or may be bound or materially affected.
(e) The value of the benefits received and to be received by Guarantor
as a result of Borrower and Lender entering into a modification of
the Lytton Agreement is reasonably worth at least as much as the
liability and obligation of Guarantor thereunder and such liability
and obligation and the Lytton Agreement have benefited and may
reasonably be expected to benefit Guarantor directly and indirectly
and are necessary to the conduct, promotion and attainment of
business of Guarantor.
(f) The statements set forth in the recitals to this Agreement are true
and correct.
Section 2. Statement of Guaranty. Guarantor hereby absolutely and
--------- ---------------------
unconditionally guarantees prompt payment when due of any and all existing
and future indebtedness or liability of every kind, nature or character
(including, without limitation, principal, interest, all costs of collection,
and attorneys' fees) owing to Lender by Borrower, whether direct or indirect,
absolute or contingent, joint or several, whether due or to become due and
whether now existing or hereafter arising under the Lytton Notes and Lytton
Agreement and all extensions and renewals thereof (the "Indebtedness"). The
Guarantor undertakes this continuing, absolute, and unconditional guaranty of
the
<PAGE>
aforementioned payment and performance by Borrower notwithstanding that
any portion of the Indebtedness shall be void or voidable as between the
Borrower and any of its creditors, including, without limitation, any
bankruptcy trustee of the Borrower.
Section 3. Waiver. This absolute, continuing, unconditional guaranty
--------- ------
is a guaranty of payment and not a guaranty of collection. Upon Borrower's
failure to pay the Indebtedness promptly when due, Lender, at its sole
option, may proceed against the Guarantor to collect the Indebtedness, with
or without proceeding against the Borrower, any co-maker or co-surety or co-
guarantor, any indorser or any collateral held as security for the Indebted-
ness. The Guarantor waives any right to require that any action be brought
against the Borrower or to require that resort be had to any security or
other right or remedy which may be available to Lender. Any and all
payments upon the Indebtedness made by the Borrower, the Guarantor, or any
other person, and the proceeds of any and all collateral securing the payment
of the Indebtedness and this Guaranty, may be applied by Lender in whatever
manner it may determine in its sole discretion. The Guarantor agrees to
reimburse Lender for all reasonable expenses of any nature whatsoever
including, without limitation, reasonable attorneys' fees, incurred or paid
by Lender in exercising any right, power, or remedy conferred by this
Guaranty. Until the Indebtedness is paid in full, the Guarantor shall not
exercise any right of subrogation with respect to payments made by the
Guarantor pursuant to this Guaranty.
The obligations of the Guarantor set forth in this Guaranty shall extend
to all amendments, supplements, modifications, renewals, replacements or
extensions of the Indebtedness at any rate of interest. The liability of the
Guarantor and the rights of Lender under this Guaranty shall not be impaired
or affected in any manner by, and the Guarantor hereby consents in advance to
and waives any requirement of notice for, any (1) disposition, impairment,
release, surrender, substitution, or modification of any collateral securing
the Indebtedness or the obligations created by this Guaranty or any failure
to perfect a security interest in any collateral through no fault on the part
of Lender; (2) release (including adjudication or discharge in bankruptcy) or
settlement with any person primarily or secondarily liable for the Indebted-
ness (including, without limitation, any maker, indorser, guarantor or
surety); (3) delay in enforcement of payment of the Indebtedness or delay in
enforcement of this Guaranty; (4) delay, omission, waiver, or forbearance in
exercising any right or power with respect to the Indebtedness or this
Guaranty; (5) defense arising from the enforceability or validity of the
Indebtedness or any part thereof or the genuineness, enforceability or
validity of any agreement relating thereto: (6) any defenses or counterclaims
that the Borrower may assert on the Indebtedness, including but not limited
to failure of consideration, breach of warranty, fraud, payment, statute of
frauds, bankruptcy, infancy, statute of limitations, lender liability,
accord and satisfaction and usury; or (7) other act or omission which might
constitute a legal or equitable discharge of the Guarantor. The Guarantor
waives presentment, protest, demand for payment, any right or set-off, notice
of dishonor or default, notice of acceptance of this Guaranty, notice of the
incurring of any of the Indebtedness and notice of any other kind in
connection with the Indebtedness or this Guaranty.
<PAGE>
Section 4. Insolvency of Borrower. The Guarantor agrees that in the
--------- ----------------------
event of (i) the dissolution or insolvency of the Borrower, (ii) the inability
of the Borrower to pay its debts as they become due, (iii) an assignment by
the Borrower for the benefit of its creditors, or (iv) the institution of any
bankruptcy or other proceeding by the Borrower or the filing of an
involuntary bankruptcy proceeding against Borrower alleging that the Borrower
is insolvent or unable to pay its debts as they become due (provided however,
that Borrower shall have sixty (60) days in which to cause the petition to be
released or dismissed if, in Lender's reasonable judgment, such petition is
likely to be released or dismissed within such sixty (60) days); and whether
or not such event shall occur at a time when the Indebtedness was then due
and payable, the Guarantor shall pay the Indebtedness to Lender promptly upon
demand as if the Indebtedness was then due and payable. The Guarantor hereby
waives any claim, right or remedy which the Guarantor may now have or here-
after acquire against Borrower that arises hereunder and/or from the
performance by the Guarantor hereunder including, without limitation, any
claim, remedy or right of subrogation, reimbursement, exoneration, contribu-
tion, indemnification, or participation in any claim, right or remedy of
Lender against Borrower or any security which Lender now has or hereafter
acquires, whether or not such claim, right or remedy arises in equity, under
contract, by statute, under common law or otherwise.
The Guarantor agrees that this Guaranty shall continue to be effective
or be reinstated, as the case may be, if at any time payment, or any part
thereof, of principal, interest or any other amount with respect to the
Indebtedness is rescinded or must otherwise be restored by Lender upon the
bankruptcy or reorganization of the Borrower, any other person or otherwise.
Upon any portion of the Indebtedness becoming due and not being fully
paid and satisfied, the total sum then due hereunder may immediately be
charged against any account or accounts maintained by the Guarantor with
Lender, without notice to or further consent from the Guarantor. The
Guarantor shall promptly provide such financial information as the holder
shall reasonably request from time to time.
Lender shall not be compelled to resort first to any collateral for
payment of any of the Indebtedness, but may at its election require the
obligation to be paid by the Guarantor, with or without suit. The provisions
of this Guaranty shall apply to any new or additional collateral given by the
Guarantor to further secure the Indebtedness and the obligations created by
this Guaranty.
Section 5. Security. This Guaranty will be secured by a Security
--------- --------
Agreement granting Lender a security interest in all of Guarantor's Accounts,
Equipment, General Intangibles, Inventory and all other items of personal
property now owned or hereafter acquired by the Guarantor or in which the
Guarantor has granted or may in the future grant a security interest to the
Bank hereunder ("Collateral").
Section 6. Waiver of Jury Trial. As a specifically bargained induce-
--------- --------------------
ment for Lender to extend credit to Borrower: (i) THE GUARANTOR HEREBY
EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING
<PAGE>
RELATED TO THIS GUARANTY OR ARISING IN ANY WAY FROM THE INDEBTEDNESS OR
TRANSACTIONS INVOLVING LENDER AND THE DEBTOR AND (ii) THE GUARANTOR
HEREBY DESIGNATES ALL COURTS OF RECORD SITTING IN DAYTON, OHIO AND HAVING
JURISDICTION OVER THE SUBJECT MATTER, STATE AND FEDERAL, AS FORUMS WHERE
ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING FROM OR OUT OF
THIS GUARANTY, ITS MAKING, VALIDITY OR PERFORMANCE, MAY BE PROSECUTED AS
TO ALL PARTIES, THEIR SUCCESSORS AND ASSIGNS, AND BY THE FOREGOING DESIGNA-
TION THE GUARANTOR CONSENTS TO THE JURISDICTION AND VENUE OF SUCH COURTS.
Section 7. Successors and Assigns. This Guaranty shall inure to the
--------- ----------------------
benefit of and bind the parties hereto, their successors and assigns, and
their legal representatives or heirs. Lender may, at its option, assign
this Guaranty to any other party who is or becomes the indorsee or assignee
of any part of the Indebtedness or who is in possession of or the bearer of
any part of the Indebtedness that is payable to the bearer, and the Guarantor
shall continue to be liable under this Guaranty to such other party to the
extent of such indorsed, assigned, or possessed Indebtedness.
Section 8. Confession of Judgment. The Guarantor authorizes any
--------- ----------------------
attorney at law, including an attorney engaged by Lender, to appear in
Hamilton County or Montgomery County, Ohio, or in any other court of record
in the State of Ohio or any other State or Territory of the United State,
after the indebtedness evidenced hereby, or any part thereof, becomes due
and waive the issuance and service of process and confess judgment against
the Guarantor in favor of Lender, for the amount then appearing due, together
with costs of suit, and thereupon, to release all errors and waive all rights
of appeal and stay of execution. The Guarantor hereby expressly waives any
conflict of interest that Lender's attorney may have in confessing such
judgment against the Guarantor and expressly consents to the confessing
attorney receiving a legal fee from Lender or confessing such judgment
against the Guarantor. This warrant of attorney to confess judgment is a
joint and several warrant of attorney. The foregoing warrant of attorney
shall survive any judgment; and if any judgment be vacated for any reason,
the holder hereof nevertheless may thereafter use the foregoing warrant of
attorney to obtain an additional judgment or judgments against the Guarantor.
WARNING--BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE
AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY
BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE, AND THE POWERS OF
A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU
MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY
GOODS, FAILURE ON ITS PART TO COMPLY WITH THE AGREEMENT OR ANY OTHER
CAUSE.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Guaranty on the day and year first above written.
WITNESSES GUARANTOR
TECHDYNE, INC.
a Florida corporation
/s/ Anne Marie Linnert /s/ David Watts
- ---------------------------------- By---------------------------------
David Watts
/s/ M. Shannon Martin, Esq. Its Chief Financial Officer
- ----------------------------------
LENDER
THE PROVIDENT BANK,
an Ohio banking corporation
/s/ Anne Marie Linnert /s/ Clifford M. Bishop
- ---------------------------------- By---------------------------------
Clifford M. Bishop
/s/ M. Shannon Martin, Esq. Vice President
- ----------------------------------
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made this 9th day of February, 2000 between
TECHDYNE, INC., a Florida corporation ("Debtor") and THE PROVIDENT BANK
("Secured Party"), under the following circumstances:
A. Secured Party has entered into an Asset Based Loan and Security
Agreement (Techdyne Agreement") of even date herewith with Debtor
providing for a loan commitment of $5,500,000.00 in the aggregate
("Techdyne Loan").
B. Lender has previously entered into an Asset Based Loan and
Security Agreement with Lytton Incorporated ("Lytton"), an affiliate
of Debtor, which Lytton Agreement was dated April 14, 1995 and amended
July 31, 1997, April 29, 1998, September 8, 1998, June 30, 1999 and
________, 2000 ("Lytton Agreement").
C. The indebtedness under the Lytton Agreement is evidenced by
Lytton's (a) Amended and Restated Revolving Asset Promissory Note in
the amount of $3,000,000.00, (b) Amended and Restated Term Loan
Promissory Note in the amount of $1,400,000.00, and (c) Amended and
Restated Equipment Acquisition Promissory Note in the amount of
$500,000.00, each of which are hereinafter collectively referred to as
the "Lytton Notes".
D. Secured Party has agreed, in connection with the making of the
Techdyne Loan, to reduce the interest rates charged to Lytton under the
Lytton Notes.
E. As an inducement to Lender to make the Techdyne Loan and to reduce
the interests rates charged to Lytton under the Lytton Notes, the Debtor
has executed and delivered a Guaranty of even date herewith, wherein
Debtor guaranteed the obligations of Lytton under the Lytton Notes
("Guaranty").
F. As security for the Guaranty, Debtor has agreed to pledge to
Secured Party certain of its assets.
NOW, THEREFORE, Debtor and Secured Party agree as follows:
Section 1. Grant of First Priority Security Interest. Debtor hereby
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assigns, pledges and transfers to Secured Party a continuing first priority
security interest in all of the property described in this Section 1,
subject only to a prior security interest granted to Secured Party pursuant
to the Techdyne Agreement, dated of even date herewith. All of the property
described in Section 1 is hereafter called "Collateral".
1.1 All of Debtor's accounts (as that term is defined in the Uniform
Commercial Code, as defined herein), accounts receivable, chattel paper,
contract rights,
<PAGE>
documents and instruments; all other obligations or indebtedness owed to
Debtor from whatever source arising; all guarantees of any of the foregoing
and all security therefor; all of the right, title and interest of Debtor
in and with respect to the goods, services or other property which gave
rise to or which secure any of the foregoing and all insurance policies and
proceeds relating thereto; all of the foregoing whether now owned by Debtor
or hereafter acquired or in existence.
1.2 All of Debtor's equipment (as that term is defined in the Uniform
Commercial Code, as defined herein), including, without limitation, all
furniture, fixtures, machinery and other equipment of any kind and all
substitutions and replacements thereof and accessories and parts therefor,
all whether now owned or hereafter acquired by Debtor.
1.3 All of Debtor's inventory (as that term is defined in the Uniform
Commercial Code, as defined herein), including, without limitation, all
goods, merchandise and other personal property which are held for sale or
lease, or are furnished or to be furnished under any contract of service
by Borrower, or are raw materials, work-in-progress, supplies or materials
used or consumed in Borrower's business, and all products thereof, and all
substitutions, replacements, additions and accessories thereto, all whether
now owned or hereafter acquired by Borrower; and all of Borrower's right,
title and interest in and to any leases or rental agreements for such
inventory.
1.4 All of Debtor's general intangibles and payment intangibles (as
those terms are defined in the Uniform Commercial Code, as defined herein),
including, without limitation, all goodwill, patents, formulas, blueprints,
proprietary manufacturing processes, trademarks, licenses, franchises,
beneficial interests in trusts, joint venture interest, partnership
interests, rights to tax refunds, pension plan over funding, literary
rights and other contractual rights of Debtor, all whether now owned or
hereafter acquired by Debtor.
1.5 All instruments, documents, securities, cash, property, deposit
accounts, certificates of deposit and the proceeds of any of the foregoing,
owned by Debtor or in which Debtor has an interest, which now or hereafter
are at any time in the possession or control of Secured Party or in transit
by mail or carrier to or from Secured Party, or in possession of any third
party acting on behalf of Secured Party, without regard to whether Secured
Party received same in pledge, for safekeeping, as agent for collection or
transmission or otherwise or whether Secured Party had conditionally
released the same.
1.6 All ledger sheets, files, records, documents, blueprints, drawings
and instruments (including without limitation, computer programs, tapes and
related electronic data processing software) evidencing an interest in or
relating to the Collateral described in this Section 1.
1.7 All proceeds and products of the Collateral described above in
this Section 1, including, without limitation, all claims against third
parties for damage to or loss or destruction of any of the foregoing,
including insurance proceeds, and accounts, contract
<PAGE>
rights, chattel paper and general intangibles arising out of any sale, lease
or other disposition of any of the foregoing.
1.8 As used herein, the Uniform Commercial Code refers to the Uniform
Commercial Code in effect as of the date hereof or as hereafter adopted or
amended in any jurisdiction where the Collateral is or may from time to time
be located.
Section 2. Indebtedness. The security interests granted hereby are
--------- ------------
granted to secure the following:
2.1 The payment and performance of all indebtedness, liabilities and
obligations to Secured Party of every kind and description, direct or
indirect, absolute or contingent, joint or several, whether due or to become
due and whether now existing or hereafter arising under the Guaranty and all
extensions and renewals thereof (collectively, the "Indebtedness").
2.2 All reasonable costs incurred by Secured Party to obtain, preserve,
and/or enforce the security interests granted by this Agreement; to collect
the obligations secured hereby; and to maintain and preserve the Collateral,
with such costs including, but not limited to, expenditures made by Secured
Party for taxes, assessments, insurance premiums, repairs, reasonable
attorneys' fees and other legal expenses, storage costs, rents, and expenses
of sale, together with interest on the above amounts at the highest rate
being paid by Lytton on any of its obligations to Secured Party, all of
which Debtor agrees to pay to Secured Party; and
Notwithstanding the foregoing, Secured Party waives any rights arising
out of this Security Agreement to the Collateral as security for any
indebtedness of an individual Debtor to which the Truth-in-Lending Act and
Regulation Z promulgated thereunder apply.
Section 3. Debtor's Warranties. Debtor warrants to Secured Party as
--------- -------------------
follows:
3.1 Except for the security interests granted herein and in the
Techdyne Agreement, Debtor represents and warrants that it is, and as to
the Collateral to be acquired after the date hereof, shall be, the owner
of the Collateral free from any lien, security interest or encumbrance,
and Debtor shall defend the Collateral and its proceeds and products
against all claims and demands of all persons at any time claiming the
same or any interest therein adverse to Secured Party, and shall preserve
the Collateral free from any subsequent liens, encumbrances or security
interests.
3.2 Debtor represents and warrants that at the time any account
becomes subject to a security interest in favor of Secured Party, said
account shall be a good and valid account representing a bona fide outright
sale of goods by Debtor or services performed by Debtor and such goods shall
have been shipped to the respective account debtors or the services have
been performed for the respective account debtors. Each account shall not
be subject to any claim for credit, allowance or adjustment by account
<PAGE>
debtor or any setoff, defense or counterclaim. Debtor shall immediately
notify Secured Party in the event of the refusal of any goods which are the
subject of any such account, and of the bankruptcy, insolvency or financial
embarrassment of any account debtor and of any claim asserted for credit,
allowance, adjustment, setoff or counterclaim.
Section 4. Debtor's Obligations. Debtor agrees that:
--------- --------------------
4.1 Debtor shall keep accurate and complete records in accordance with
sound accounting practices of all of its Collateral, and shall at all
reasonable times allow Secured Party to inspect the Collateral, to examine,
audit or make extracts from Debtor's books and records, and to arrange for
verification of the Collateral under reasonable procedures directly with
account debtors and other persons or by other procedures. Debtor will
furnish to Secured Party on request additional statements of any account
together with all notes or other documents and information relating thereto.
4.2 Debtor shall keep the Collateral insured against such casualties,
and in such amounts and on such terms as required by the Loan Agreement.
Debtor shall furnish Secured Party with satisfactory evidence of such
insurance and Secured Party shall be added to any such insurance as loss
payee. Debtor shall promptly pay when due all taxes and assessments imposed
on, or with respect to the Collateral, and shall maintain the Collateral in
good condition and repair. If Debtor fails to pay the premiums on any such
insurance or such taxes when due, or to maintain the Collateral in good
condition and repair, the Secured Party may do so for Debtor's account and
add the amount of its expenditures with respect thereto to Debtor's out-
standing obligations, which said amount shall be payable on demand with
interest at the highest rate being paid by Debtor on any of its obligations
to Secured Party. If an Event of Default has occurred and is continuing
beyond any applicable cure periods, Secured Party shall have the right to
settle and compromise any and all claims under any of the insurance policies
required to be maintained by Debtor hereunder, and Debtor hereby irrevocably
appoints Secured Party as its attorney-in-fact, with power to demand, receive
and receipt for all monies payable thereunder, to execute in the name of the
Debtor any proof of loss, notice, draft, and other instruments in connection
with such policies or loss thereunder and generally to do and perform any and
all acts as Debtor could perform in connection with such policies.
4.3 Debtor shall execute such financing statements and other documenta-
tion as shall reasonably be requested by Secured Party in order to perfect
the security interests granted Secured Party hereunder and to carry out the
terms of this Agreement. A photocopy of this Security Agreement shall be
sufficient as a financing statement and may be filed in any appropriate
office in lieu thereof.
4.4 Upon request of Secured Party, Debtor shall furnish Secured Party
with any financial statements or other information as required by the terms
of the Loan Agreement.
<PAGE>
Section 5. Debtor's Rights with Respect to the Collateral.
--------- ----------------------------------------------
5.1 With respect to the Collateral specified in Section 1.1, Debtor
is authorized to collect the proceeds of such Collateral and utilize them
in the ordinary course of business, provided that Secured Party shall have
the right at any time, before or after default, to notify account debtors
on any and all of Debtor's accounts of the security interest of Secured Party
in such accounts, to send requests for verification to the account debtors,
and, after an Event of Default, to notify such account debtors to make
payments of such accounts directly to Secured Party. At the request of
Secured Party, Debtor shall so notify such account debtors and indicate on
all billings that the accounts are payable directly to Secured Party. In
addition, Debtor shall, at the request of Secured Party, hold all proceeds
from collection of accounts in trust for Secured Party without commingling
the same with other funds, and shall promptly turn over the same to Secured
Party in the identical form received, endorsed by Debtor to Secured Party.
The proceeds of such Collateral shall be applied to the Indebtedness in such
order as Secured Party determines in its sole discretion.
5.2 Until default, Debtor shall have the right to use, consume, or
sell any items of the Collateral described in Section 1.2 in the regular
course of business, but not to otherwise dispose of such Collateral.
Section 6. Default. If the Indebtedness is due other than on demand,
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upon the happening of any one or more of the following events or conditions,
Secured Party may, at its option, declare the entire amount of Indebtedness
of Debtor to it then outstanding due and payable immediately without notice
to Debtor, and Secured Party may proceed to enforce payment of the same, and
to exercise all of the rights and remedies of a Secured Party under the
Ohio Uniform Commercial Code, in addition to the rights and remedies
provided herein. The events of default hereunder are as follows:
6.1 Default in the payment of any of the Indebtedness when due.
6.2 The failure of Debtor to observe or perform any of the provisions
of this Agreement, the Loan Agreement or any other agreement between the
Debtor and the Secured Party.
6.3 If any warranty, representation, certificate, schedule, financial
statement or other information given to Secured Party hereunder shall prove
to be untrue or materially misleading.
6.4 If any proceedings are instituted by or against Debtor under any
insolvency laws, or if Debtor shall become insolvent or otherwise suffer
such changes in his condition or affairs as in the sole discretion of Secured
Party impairs Secured Party's security interests hereunder, or increases its
risk as to repayment of any item of the Indebtedness, or if Secured Party
shall otherwise deem itself insecure with respect to the Indebtedness.
<PAGE>
If the Indebtedness is due on demand, the Secured Party may proceed to
enforce payment of same and exercise all of the remedies provided herein at
any time, without notice and without reason.
Secured Party's remedies include, but are not limited to, the right to
take possession of the Collateral or any part thereof, and Debtor hereby
grants Secured Party authority to enter upon any premises on which the
Collateral or any part thereof may be situated, and remove the Collateral
from such premises or use such premises, together with the materials,
supplies, books and records of Debtor, to maintain possession and/or the
condition of the Collateral and to prepare the Collateral for sale. All
rights and remedies of Secured Party hereunder shall be cumulative, not
exclusive, and shall be enforceable alternatively, successively or concur-
rently with any other remedy available hereunder or otherwise available at
law or in equity.
Section 7. Power of Attorney. Debtor hereby irrevocably appoints
--------- -----------------
Secured Party as Debtor's true and lawful attorney-in-fact, with full power
of substitution, for Debtor, and in Debtor's name, place and stead, upon
the occurrence of any event of default as defined in Section 6 above, and
in the event that Secured Party elects to exercise any rights granted to it
hereunder. As attorney-in-fact, Secured Party may act for Debtor with
respect to the Collateral as if Secured Party were the owner thereof, and
may endorse and cash promissory notes, checks and other instruments,
institute legal proceedings, make, adjust, and settle claims, and do all
other acts necessary and incidental to the exercise of its rights provided
hereunder, or otherwise available to it in the event of default. Neither
Secured Party nor its agents shall be liable for any acts or omissions or
for any error of judgment or mistake of fact or law in its capacity as such
attorney-in-fact.
Section 8. Miscellaneous. Any required notices to Debtor, including
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notice of the sale of any of the Collateral, shall be deemed to be reasonable
if mailed to Debtor at the address shown below, or such other address
furnished Secured Party in writing, at least five (5) business days prior to
the action which is the subject of the notice. The term "Debtor" as used
herein shall include the singular as well as the plural, and other words in
the singular shall include the plural and words of one gender shall include
the other gender when the sense requires. The term "Uniform Commercial Code"
as used herein shall mean the Uniform Commercial Code as adopted by the State
of Ohio. No waivers by Secured Party of any default shall be effective
unless given in writing, and shall not operate as a waiver of any other
default. The rights of Secured Party shall inure to the benefits of its
successors and assigns, and the obligations of Debtor shall bind Debtor's
heirs, executors, administrators, successors and assigns. If there is more
than one Debtor, their obligations hereunder shall be joint and several.
This Agreement contains the entire understanding between the parties
hereto with respect to the transactions contemplated herein, and such
understanding shall not be modified except in a writing signed by or on
behalf of the parties hereto. This Agreement shall be deemed to be a
contract entered into and made pursuant to the laws of the State of Ohio
and shall in all respects be governed, construed, applied and enforced in
accordance with the laws of said state.
<PAGE>
As a specifically bargained inducement for Secured Party to extend
credit to Debtor: (i) THE DEBTOR HEREBY EXPRESSLY WAIVES THE RIGHT TO TRIAL
BY JURY IN ANY LAWSUIT OR PROCEEDING RELATED TO THIS SECURITY AGREEMENT OR
ARISING IN ANY WAY FROM THE INDEBTEDNESS OR TRANSACTIONS INVOLVING SECURED
PARTY AND THE DEBTOR AND (ii) THE DEBTOR HEREBY DESIGNATE(S) ALL COURTS OF
RECORD SITTING IN CINCINNATI, OHIO AND HAVING JURISDICTION OVER THE SUBJECT
MATTER, STATE AND FEDERAL, AS FORUMS WHERE ANY ACTION, SUIT OR PROCEEDING
IN RESPECT OF OR ARISING FROM OR OUT OF THIS SECURITY AGREEMENT, ITS MAKING,
VALIDITY OR PERFORMANCE, MAY BE PROSECUTED AS TO ALL PARTIES, THEIR
SUCCESSORS AND ASSIGNS, AND BY THE FOREGOING DESIGNATION THE DEBTOR
CONSENT(S) TO THE JURISDICTION AND VENUE OF SUCH COURTS.
EXECUTED at ________________, Ohio on the 9th day of February, 2000.
THE PROVIDENT BANK
("Secured Party")
/s/ Clifford M. Bishop
BY:--------------------------------
Clifford M. Bishop
Vice President
TECHDYNE, INC.
("Debtor")
/s/ David Watts
BY:--------------------------------
David Watts
ITS Chief Financial Officer
AMENDMENT TO ASSET BASED
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT TO ASSET BASED LOAN AND SECURITY AGREEMENT ("Amendment")
is executed as of February 9, 2000 among LYTTON INCORPORATED ("Borrower"), a
Delaware corporation whose mailing address is 1784 Stanley Avenue, Dayton,
Ohio 45404 and THE PROVIDENT BANK, an Ohio banking corporation ("Bank"),
whose mailing address si Courthouse Plaza, 10 West Second Street, Dayton,
Ohio 45402.
RECITALS
A. Borrower and Bank entered into an Asset Based Loan and Security
Agreement dated April 14, 1995, which was later amended on July 31,
1997, April 29, 1998, September 8, 1998 and June 30, 1999 ("Agreement"),
whereby Bank has made certain loans to Borrower in the aggregate amount
of $4,900,000.00 ("Loans")
B. The Loans are evidenced by (a) Borrower's Amended and Restated Revolving
Asset Promissory Note in the amount of $3,000,000.00, (b) 'Borrower's
Amended and Restated Term Loan Promissory Note in the amount of
$1,400,000.00, and (c) Borrower's Amended and Restated Equipment
Acquisition Promissory Note in the amount of $500,000.00, each of which
are hereinafter collectively referred to as the "Notes".
C. Bank and Borrower wish to amend the Agreement to change the interest
rate or rates charged under the Notes to add Techdyne, Inc. as a
guarantor and to modify the financial covenants contained in the
Agreement.
NOW THEREFORE, the Borrower and Bank agree as follows:
1. The Agreement is hereby amended by adding Section 2.6 which shall read
as follows:
Interest Rate. Amounts advanced to Borrower under the Notes shall bear
-------------
interest at (i) a fluctuating rate equal to the Prime Rate (as defined
herein) charged by Bank, minus one-quarter of one percent (.25%) ("Prime
Rate Election"); or (ii) at a fixed rate equal to the relevant Quoted
LIBOR Rate plus two and one-half percent (2.50%) per annum, as elected
by Borrower in the manner set out herein ("LIBOR Rate Election").
Interest shall be calculated on a 360-day year basis and shall be due
and payable on the first day of each calendar month (but charged based
on actual days) during the term of and at maturity of the respective
Notes. In the case of a Prime Rate Election, the interest rate shall
be adjusted, whenever necessary, to reflect any change in the Prime
Rate then in effect at the Bank, and such adjustment shall be effective
on the date such change is announced as effective by the Bank. Such
new rate shall remain in effect until the next date an adjustment is
required or until the Borrower makes a LIBOR Rate Election or the
respective Note is paid in full.
<PAGE>
2.6.1 Interest Periods. Commencing upon the execution of this
----------------
Amendment, or at the time Borrower gives any notice of borrowing relating
to the Revolving Asset Loan, or at the time Borrower gives notice of
conversion of any Loan subject to this Section 2.6 to a Quoted LIBOR
Rate, which notice shall be given at least three (3) Business Days prior
to the expiration of an existing Interest Period, and provided Borrower
is not otherwise in default hereunder, Borrower shall have the right to
elect the Interest Period applicable to a Quoted LIBOR Rate Election by
giving the Bank notice thereof, which Interest Period shall be a thirty
(30), sixty (60), ninety (90) or one hundred eighty (180) day period,
provided, however, that Borrower shall have no right to elect an Interest
Period that would extend beyond the maturity date of the Revolving Asset
Loan, the Term Loan or the Equipment Acquisition Loan. In the case of
the Revolving Asset Loan, the Interest Period may be selected at the
time a request for an advance is made, in the manner required by the
Bank for giving such notice. In the case of the Revolving Asset Loan,
the Term Loan and the Equipment Acquisition Loan, the Interest Period
and applicable interest rate may also be selected by giving notice in
accordance with Section 2.6.2 below. The Interest Period may commence
at any time after proper notice, and each Interest Period occurring
thereafter, if any, in respect of such a Loan shall commence on the day
on which the next preceding Interest Period expires. If any Interest
Period would otherwise expire on a day which is not a business day,
such Interest Period shall expire on the next succeeding business day.
If upon the expiration of any Interest Period for a Quoted LIBOR Rate
Election, Borrower has failed to repay the borrowing or elect a new
Interest Period to be applicable, Borrower shall be deemed to have
elected to convert to or continue (as the case may be) with a Prime
Rate Election effective as of the expiration date of such current
Interest Period.
2.6.2 Continuation and Conversions. Provided that no Event of Default
----------------------------
then exists, Borrower shall have the option, subject to the provisions of
Sections 2.6.1 and 2.6.3 and the following provisions of this Section
2.6.2, on the first day following expiration of an Interest Period in
the case of a Quoted LIBOR Rate Election or at any time in the case of
a Prime Rate Election, to continue a previously selected Quoted LIBOR
Rate Election for an additional Interest Period or to convert all or a
portion of the outstanding principal amount of under any Prime Rate
Election to a Quoted LIBOR Rate Election, provided that the outstanding
principal amount of Loans being continued as or converted into a Quoted
LIBOR Rate Election shall be at least Two Hundred Fifty Thousand Dollars
U.S. ($250,000.00). Each such conversion shall be effected by Borrower
giving the Bank prior notice in the form as required by the Bank,
specifying the Loan and amount of such Loan to be so continued or
converted, and the Interest Period.
2.6.3 Increased Costs, Illegality Etc.
-------------------------------
A. In the event the Bank shall have determined (which determination
shall, absent manifest error be final and conclusive and binding upon
all parties):
<PAGE> 2
(i) on any date for determining the rate applicable to any Quoted
LIBOR Rate Election for any Interest Period, that by reason of any
changes arising after the date of this Agreement affecting the
interbank Eurodollar market, adequate and fair means do not exist
for ascertaining the applicable interest rate on the basis provided for
in the definition of such Quoted LIBOR Rate Election; or
(ii) at any time, that by reason of (x) any change since the date
of this Agreement in any applicable law or governmental rule, regulation,
guideline or order (or any interpretation thereof and including the
introduction of any new law or governmental rule, regulation, guideline
or order) (such as for example, but not limited to, a change in capital
adequacy requirements or in official reserve requirements, but, in all
events, excluding reserves required under Regulation D to the extent
included in the computation of the Quoted LIBOR Rate and/or (y) other
circumstances affecting a Bank or the interbank Eurodollar market or the
position of such Bank in such market, the Quoted LIBOR Rate or T-Bill
Rate shall not represent the effective pricing to such Bank for funding
or maintaining the affected Quoted LIBOR Rate Election; or
(iii) at any time, that the making or continuance of any Quoted
LIBOR Rate Election has become unlawful by compliance by a Bank in good
faith with any law, governmental rule, regulation, guideline or order,
or has become impracticable as a result of a contingency occurring after
the date of this Agreement which materially and adversely affects the
interbank Eurodollar market; then, and in any such event, the Bank shall
on such date give notice to Borrower of such determination. Thereafter,
(x) in the case of clauses (i) and (ii) above, Borrower shall pay to each
Bank, upon written demand therefor, such additional amounts (in the form
of an increased rate of, or a different method of calculating, interest
or otherwise as such Bank in its sole discretion shall determine) as
shall be required to cause such Bank to receive interest with respect to
its affected Quoted LIBOR Rate Election at a rate per annum which shall
equal the effective pricing to the Bank to make or maintain such Quoted
LIBOR Rate Election, respectively, plus 2.25% per annum (a written notice
as to additional amounts owed such Bank, showing the basis for the
calculation thereof, submitted to Borrower by such Bank shall, absent
manifest error, be final and conclusive and binding upon all of the
parties hereto) and (y) in the case of clause (iii), take one of the
actions specified in Section 2.6.3.C. below, as promptly as possible and,
in any event, within the time period required by law.
B. If the Bank determines that (i) maintenance of any Quoted LIBOR
Rate Election would violate any applicable law, rule, regulation, or
directive, whether or not having the force of law, (ii) deposits of a
type and maturity appropriate to match fund any Quoted LIBOR Rate
Election are not available , (ii) the Quoted LIBOR Rate does not
accurately reflect the cost of making or maintaining a Quoted LIBOR
Rate Election, then the Bank shall suspend the availability of the
affected rate option and require any Quoted LIBOR Rate Election
outstanding under an affected rate option to be repaid.
<PAGE> 3
C. At any time that any of its Quoted LIBOR Rate Elections are affected
by the circumstances described in Section 2.6.3.A. (iii), Borrower shall
either (x) if the affected Quoted LIBOR Rate Election is then being made
pursuant to an initial borrowing or a conversion, cancel said borrowing
or conversion by giving the Bank telephonic notice confirmed in writing
thereof on the same date that Borrower was notified by the Bank pursuant
to Section 2.6.3.A, or (y) if the affected Quoted LIBOR Rate Elections
are then outstanding, upon at least two (2) Business Days' notice to
the Bank, require the Bank to convert each affected Quoted LIBOR Rate
Election into a Prime Rate Election.
2.6.4 Compensation. Borrower shall compensate the Bank upon written
------------
request (which request shall set forth the basis for requesting such
amounts), for all reasonable losses, expenses and liabilities (including,
without limitation, any interest paid by the Bank to lenders of funds
borrowed by them to make or carry a Quoted LIBOR Rate Election to the
extent not recovered by the Bank in connection with the re-employment
of such funds), which the Bank may sustain: (i) if for any reason
(other than a default by the Bank) a borrowing of, or conversion from
or into, Quoted LIBOR Rate Election does not occur on a date specified
therefor in a notice of borrowing or notice of conversion (whether or
not withdrawn), or (ii) as a consequence of any other default by Borrower
to repay its Quoted LIBOR Rate Elections when required by the terms of
this Agreement.
2.6.5 Rate Adjustment. Notwithstanding anything to the contrary
---------------
contained herein, the Interest Rate charged under the Notes shall be
reduced for the remaining term of each such Note to (i) a fluctuating
rate equal to the Prime Rate charged by Bank, minus one half of one
percent (.50%); or (ii) a fixed rate equal to the relevant Quoted LIBOR
Rate plus two and one quarter percent (2.25%), effective as of January
1, 2001 if the following conditions are satisfied:
a. The Debt Service Coverage Ratio (as defined herein) shall be
greater than 2.00 to 1.00 for the year ending December 31, 2000;
b. The ratio of Consolidated Liabilities to Consolidated Tangible
Net Worth (both as defined herein) shall be not more than 2.25
to 1.00 as of December 31, 2000; and
c. There has not occurred an Event of Default under the Agreement
or under any loan from Bank to Techdyne, Inc.
In the event the above conditions are satisfied, Borrower agrees to
execute and deliver to Bank, an Amended and Restated Revolving Asset Note,
an Amended and Restated Term Loan Note, and an Amended and Restated
Equipment Acquisition Note each setting out the new interest rate set out
herein, which new Notes shall be effective as of January 1, 2001.
<PAGE> 4
2. The terms of the Revolving Asset Loan, Term Loan and Equipment Acquisition
Loan each shall be extended for three (3) years commencing as of the date of
this Agreement. Any extension or renewal of the Revolving Asset Loan, Term
Loan or Equipment Acquisition Loan at the end of the original three-year term
will be entirely within the Lender's discretion. The term of any such
extension or renewal shall be for terms of not more than one (1) year at a
time.
3. Section 3.1 of the Agreement is hereby amended to add Techdyne, Inc., a
Florida corporation, as a guarantor of the Loans. Techdyne, Inc. shall
guarantee the Borrower's performance of the Agreement and repayment of all
principal and interest due under the Notes by execution of a Guaranty in
form and substance satisfactory to the Bank. The Guaranty shall be secured
by a security interest in all of assets, equipment, accounts, inventory and
general intangibles of Techdyne, Inc., evidence by a Security Agreement from
Techdyne, Inc. in form and substance satisfactory to Bank.
4. Section 3 of the Agreement is hereby amended to add a Conditional
Assignment of Lease as Collateral for the Loans, wherein Borrower
collaterally assigns to Bank its interest as Tenant under that certain
Lease dated August 1, 1997 with Stanley Avenue Properties, Ltd for the
premises at 1784 Stanley Avenue, Dayton, Ohio.
5. Section 6.17 of the Agreement is hereby amended and replaced in its
entirety with the following language:
Financial Covenants. Maintain the following financial covenants:
-------------------
(a) Consolidated Tangible Net Worth at all times greater than
$7,500,000.00.
(b) A ratio of Consolidated Liabilities to Consolidated Tangible Net
Worth of not more than 2.6 to 1.0.
(c) A Debt Coverage Ratio of at least 1.5 to 1.0.
The following terms shall have the following meaning when used herein:
"Consolidated Liabilities" shall mean all indebtedness, obligations and
other liabilities of Borrower as depicted on the consolidated financial
statements of Techdyne, Inc., whether matured or unmatured, liquidated
or unliquidated, direct or contingent or joint or several, that should,
in accordance with GAAP, be classified as liabilities on a consolidated
balance sheet of Techdyne, Inc.
"Consolidated Tangible Net Worth" shall mean, at any time, Stockholder's
Equity, less the sum of (i) any surplus resulting from any write-up of
assets subsequent to September 30, 1999, (ii) goodwill, including any
amounts, however designated on a consolidated balance sheet of Techdyne,
Inc. and its subsidiaries, representing the
<PAGE> 5
excess of the purchase price paid for assets or stock acquired over the
value assigned thereto on the books of the Borrower and Techdyne, Inc.,
(iii) patents, trademarks, tradenames and copyrights, (iv) any amount at
which shares of capital stock of the Borrower appear as an asset on
Techdyne's consolidated balance sheet, (v) deferred expenses and (vi) any
other amount in respect of an intangible that should be classified as an
asset on a consolidated balance sheet of Borrower in accordance with
GAAP.
"Debt Coverage Ratio" shall mean, as of any date, the ratio of (i) net
income for the period of the four (4) most recent fiscal quarters ending
on or prior to such date, after deducting taxes and cash dividends, and
adding back depreciation, amortization, and interest expenses to (ii)
interest expenses for such period, plus current maturities of long term
debt as of such date.
"Stockholder's Equity" shall mean, at any time, the aggregate of the
following amounts set forth on a consolidated balance sheet of the
Borrower and Techdyne, Inc. prepared in accordance with GAAP; (i) the par
or stated value of all outstanding capital stock, (ii) capital surplus
(iii) retained earnings and (iv) all indebtedness which is subordinated
to the Loans in a manner satisfactory to the Bank.
6. Borrower hereby agrees to execute and deliver to Bank, an Amended and
Restated Revolving Asset Promissory Note, an Amended and Restated Term
Promissory Note, and an Amended and Restated Equipment Acquisition Promissory
Note to reflect the change in interest rates as set out in Section 1 hereof.
7. Borrower and Bank agree that:
a. the execution and delivery of this Amendment is not intended to
discharge any obligation of the Borrower due to the Bank under the
Agreement;
b. there is not novation by the execution and delivery of this Amendment;
c. all the terms and conditions contained in the Agreement and all
documents executed in accordance therewith, except as modified herein,
shall continue unchanged and remain in full force and effect; and
d. capitalized terms used in this Amendment and not defined herein shall
have the meanings attributed to them in the Agreement.
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
BORROWER: LYTTON INCORPORATED,
a Delaware corporation
/s/ David Watts
By:--------------------------------
DAVID WATTS
Its: Chief Financial Officer
BANK: THE PROVIDENT BANK,
an Ohio banking corporation
/s/ Clifford M. Bishop
By:--------------------------------
Clifford M. Bishop, Vice President
AMENDED AND RESTATED
REVOLVING CREDIT PROMISSORY NOTE
DATE OF NOTE: February 9, 2000
MAXIMUM CREDIT: THREE MILLION THOUSAND DOLLARS ($3,000,000)
MATURITY DATE: February 8, 2003
FOR VALUE RECEIVED, the undersigned ("Borrower"), does hereby jointly
and severally promise to pay to the order of THE PROVIDENT BANK, an Ohio
banking corporation, or its successors or assigns, at its principal office
located at 10 West Second Street, Courthouse Plaza, Suite 1100, Dayton,
Ohio 45402 ("Lender"), or at such other place as the Lender may designate
to Borrower in writing from time to time, in legal tender of the United
States, the Maximum Credit, as set forth above, or such portion thereof
which has been advanced to Borrower and remains unpaid on the Maturity
Date, together with interest at the Interest Rate, as set forth in Section
2 below, on the outstanding principal balance until this Note is paid in
full. Except as otherwise defined herein, all capitalized terms shall have
the meanings ascribed to them in the Loan Agreement (as herein defined).
1. REVOLVING CREDIT
----------------
The loan evidenced by this Note is a revolving credit subject to the terms
of this Note and the Loan Agreement of even date between the Lender and the
Borrower ("Loan Agreement") and until maturity or occurrence of an Event of
Default as defined in the Loan Agreement, the Borrower may borrow and
reborrow from the Lender and the Lender may lend and relend to the Borrower
such amounts not to exceed the Maximum Credit as either of the undersigned
may, at any time and from time to time, request upon satisfactory notice to
the Lender.
2. INTEREST RATE
-------------
The "Interest Rate" is shall be equal to: (1) the Prime Rate, as defined
herein, charged by the Lender, minus one quarter of one percent (.25%), or
(2) a fixed rate equal to the Quoted LIBOR Rate plus two and one-half percent
(2.50%) per annum, as elected by Borrower pursuant to the Asset Based Loan
and Security Agreement between Lender and Borrower ("Loan Agreement"), as
defined and determined under the Loan Agreement.
Interest shall be computed daily for the actual number of days elapsed over
a year of 360 days. As used herein, the Prime Rate is that percentage rate
of interest calculated on the basis of a 360-day year which is established
by Lender from time to time as its Prime Rate, which is in effect until the
new rate is established and which provides a base to which loan rates
<PAGE> 1
may be referenced; it is not necessarily the Lender's lowest loan rate. In
the event of a change in such Prime Rate, the interest rate hereunder shall
be adjusted accordingly, and such adjustment shall become effective on the
date such Prime Rate changes. The Quoted LIBOR Rate shall be as defined in
the Loan Agreement.
3. BORROWING BASE
--------------
The principal balance outstanding under this Note shall not at any time
exceed the Borrowing Base. The "Borrowing Base" for purposes of this Note
shall mean an amount equal to the sum of (i) the lesser of $1,000,000.00 or
forty percent (40%) of the cost or market value, whichever is lower, of
Eligible Inventory (as defined in the Loan Agreement), and (ii) seventy-five
percent (75%) of the outstanding amount of Eligible Accounts (as defined in
the Loan Agreement). In the event the principal balance outstanding under
this Note at any time exceeds the Borrowing Base (as verified in the manner
set out in the Loan Agreement), then Borrower shall pay to Bank all such
excess amounts immediately on demand.
4. PRINCIPAL AND INTEREST PAYMENTS
-------------------------------
All accrued interest on the outstanding principal balance under this Note
shall be due and payable monthly commencing on March 1, 2000, and
continuing on the 1st day of each and every calendar month thereafter until
this Note is paid in full. Unless sooner paid, the entire outstanding
principal balance and all accrued, unpaid interest hereunder shall be due
and payable on the Maturity Date, unless extended by Lender in the manner
set out in the Loan Agreement.
Borrower shall pay a late payment premium of five percent (5%) of any
principal or interest payment made more than ten (10) days after the
Borrower receive notice of nonpayment, which shall be due with any such
late payment.
All payments made by Borrower shall be applied monthly, first to reimburse
Lender, if required, for any costs incurred by the Lender under any
document executed as collateral security for the Note; second, to interest
which is then due and payable; third, to the payment of late charges
provided herein; and the balance to principal, until the full amount of
principal and interest has been paid in full.
5. PREPAYMENT
----------
The Borrower shall have the right to prepay all or any part of the Amount of
Note outstanding for which Borrower has made the Prime Rate Election (as
defined in the Loan Agreement), together with all accrued interest thereon
at any time without penalty. Any partial prepayments of principal shall be
applied against installments of principal due hereunder in inverse order of
maturity.
<PAGE> 2
Borrower may not prepay all or any portion of the Amount of Note outstanding
during any Interest Period (as defined in the Loan Agreement) for which
Borrower has made a LIBOR Rate Election (as defined in the Loan Agreement).
If the Lender has elected to accelerate the repayment in the case of the
occurrence of an Event of Default, or in the case of casualty as set out in
the Loan Agreement, then Lender may, at its sole option:
(i) elect to delay any mandatory prepayments of any LIBOR Rate Elections
for a period up to the expiration of the then-current Interest Period
or Interest Periods, as applicable, in order to coordinate the prepay-
ment date with the last day of the applicable Interest Periods; or
(ii) require prepayment by Borrower, in which case the Borrower shall pay
to the Lender, immediately upon demand, in addition to all principal
and accrued interest due on the Note, a prepayment charge, computed
solely by the Lender, in the amount necessary to compensate the Lender
for reasonable losses, expenses and liabilities the Lender may sustain
as a result of such prepayment, including, without limitation, any
losses and expenses arising from the liquidation or reemployment of
deposits acquired to fund or maintain the principal amount prepaid.
In calculating the amount of such a prepayment charge, the Lender's
determination of the amount of such reimbursement shall be conclusive
in the absence of manifest error. Upon request, Lender shall provide
Borrower with documentation supporting the Lender's calculation of the
prepayment charge.
6. EXTENSION OF NOTE
-----------------
Any extension or renewal of this Note at the end of the original three-year
term and any renewal term will be entirely within the Lender's discretion.
7. LOAN AGREEMENT; COLLATERAL
--------------------------
This Note is issued under and entitled to the benefits of the Loan Agreement,
to which Loan Agreement reference is hereby made for a statement of the rights
in respect thereto of the holder of this Note.
This Note will be secured by the collateral identified and described in
Section 2 of the Loan Agreement (the "Collateral"), to which section
reference is hereby made for a statement of the rights in respect thereto of
the holder of this Note.
<PAGE> 3
8. DEFAULT
-------
Upon the occurrence of any event constituting an Event of Default under the
terms of the Loan Agreement, the entire balance of the principal and
interest upon this Note then owing and unpaid, at the option of the holder
hereof, immediately shall become due and payable. Delay on the part of the
holder of this Note in execution of the right to declare this obligation
due shall not be a waiver thereof.
After an Event of Default, the Amount of Note outstanding shall bear interest
at three percent (3%) per annum in excess of the Interest Rate in effect
from time to time, each change in such rate to be effective as of the date
of such changes.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other
court proceedings (whether at the trial or appellate level), or should this
Note be placed in the hands of attorneys for collection upon the occurrence
of an Event of Default, the Borrower agrees to pay, in addition to the
principal, premium and interest due and payable hereon, all costs of
collection, including reasonable attorneys' fees and expenses.
All parties to this Note, whether the Borrower, principal, surety, guarantor
or endorser, hereby jointly and severally waive presentment for payment,
demand, protest, notice of protest, notice of dishonor and any other notice
required to be given by law in connection with the delivery, acceptance,
performance, default or enforcement of this Note or any endorsement or
guaranty of this Note, and consent to all forbearance or waiver of any term
hereof or release or discharge by the holder hereof of the Borrower,
guarantors, endorsers, or sureties of the release, substitution or exchange
of any security for the payment hereof or the failure to act on the part of
the holder or any other indulgence shown by the holder from time to time, in
one or more instances (without notice to or further assent from the Borrower,
guarantors, endorsers or sureties) and the Borrower, guarantors, endorsers
or sureties agree that no such action, failure to act or failure to exercise
any right or remedy on the part of the holder shall in any way affect or
impair the obligations of the Borrower hereunder or of any guarantors,
endorsers or sureties or be construed as a waiver by the holder of or
otherwise affect any of the holder's rights under this Note, under any
endorsement or guaranty of this Note or under any document or instrument
evidencing any security for payment of this Note.
9. MODIFICATION
------------
This Note may not be changed orally, but only by an agreement in writing,
signed by the party against whom enforcement of any change or modification
is sought.
10. LIMITATION ON INTEREST
----------------------
Anything herein to the contrary notwithstanding, the obligations of the
Borrower under this Note shall be subject to the limitation that payments of
interest shall not be required to the extent that receipt of any such payment
by the Lender would be contrary to provisions of law applicable to the Lender
limiting the maximum rate of interest that may be charged or collected by the
Lender.
<PAGE> 4
11. GOVERNING LAW
-------------
This Note shall be governed by, and shall be construed and enforced in
accordance with, the laws of the State of Ohio.
12. WAIVER OF JURY TRIAL
--------------------
As a specifically bargained inducement for Lender to extend credit to the
Borrower, the Borrower hereby expressly waives the right to trial by jury
in any lawsuit or proceeding related to this Note or arising in any way
from the indebtedness or transactions involving the Lender and the Borrower.
13. CONFESSION OF JUDGMENT
----------------------
The Borrower authorizes any attorney-of-law to appear in any court of record
in Hamilton County or Montgomery County, Ohio, or in any court of record in
the jurisdiction in which the Borrower against which or whom a judgment is
then sought may then reside, or in any court of record in the jurisdiction
in which the property described in the Collateral is located, after the
indebtedness evidenced hereby becomes due, and to waive the issuing and
service of process and to confess judgment against the Borrower in favor of
the Lender for the amount then appearing due, together with costs of suit
and thereupon to release all errors and waive all rights of appeal and stay
of execution.
WARNING: BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE
AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY
BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS
YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY
GOODS, FAILURE ON ITS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
<PAGE> 5
IN WITNESS WHEREOF, the Borrower has executed and delivered this Note on
the day and year first above written.
Borrower:
LYTTON INCORPORATED, a Delaware
corporation
/s/ David Watts
By---------------------------------
DAVID WATTS
Its Chief Financial Officer
STATE OF OHIO, COUNTY OF MONTGOMERY, SS:
The foregoing instrument was acknowledged before me this 9th day of February,
2000 by David Watts, the Chief Financial Officer of Lytton Incorporated, a
Delaware corporation, on behalf of said corporation.
/s/ M. Shannon Martin
-----------------------------------
Attorney at Law, Ohip
AMENDED AND RESTATED
TERM LOAN PROMISSORY NOTE
DATE OF NOTE: February 9, 2000
AMOUNT OF NOTE: ONE MILLION FOUR HUNDRED THOUSAND DOLLARS ($1,400,000)
MATURITY DATE: June 30, 2004
FOR VALUE RECEIVED, the undersigned ("Borrower"), does hereby promise to
pay to the order of THE PROVIDENT BANK, an Ohio banking corporation, or its
successors or assigns, at its office located at 10 West Second Street,
Courthouse Plaza, Suite 1100, Dayton, Ohio 45402 ("Lender"), or at such other
place as the Lender may designate to the Borrower in writing from time to
time, in legal tender of the United States, the Amount of Note, as set forth
above, together with interest at the Interest Rate, as set forth in Section 1
below, on the Amount of Note until this Note is paid in full. Except as
otherwise defined herein, all capitalized terms shall have the meanings
ascribed to them in the Loan Agreement (as herein defined).
1. INTEREST RATE
-------------
The "Interest Rate" is shall be equal to: (1) the Prime Rate, as defined
herein, charged by the Lender, minus one quarter of one percent (.25%), or
(2) a fixed rate equal to the Quoted LIBOR Rate plus two and one-half percent
(2.50%) per annum, as elected by Borrower pursuant to the Asset Based Loan
and Security Agreement between Lender and Borrower ("Loan Agreement"), as
defined and determined under the Loan Agreement.
Interest shall be computed daily for the actual number of days elapsed over
a year of 360 days. As used herein, the Prime Rate is that percentage rate
of interest calculated on the basis of a 360-day year which is established
by Lender from time to time as its Prime Rate, which is in effect until the
new rate is established and which provides a base to which loan rates may
be referenced; it is not necessarily the Lender's lowest loan rate. In the
event of a change in such Prime Rate, the interest rate hereunder shall be
adjusted accordingly, and such adjustment shall become effective on the
date such Prime Rate changes. The Quoted LIBOR Rate shall be as defined in
the Loan Agreement.
2. AMORTIZATION PERIOD
-------------------
The "Amortization Period" shall be four (4) years from the date of this Note.
<PAGE>
3. PRINCIPAL AND INTEREST PAYMENTS
-------------------------------
Payments of principal in the amount of $20,833.00 each plus all accrued
interest shall be due and payable monthly commencing on March 1, 1995,
and continuing on the 1st day of each and every calendar month
thereafter until this Note is paid in full. Unless sooner paid, the entire
outstanding principal balance and all accrued, unpaid interest hereunder
shall be due and payable on the Maturity Date.
Borrower shall pay a late payment premium of five percent (5%) of any
principal or interest payment made more than ten (10) days after the
Borrower receives written notice of nonpayment, which shall be due with any
such late payment.
All payments made by the Borrower shall be applied monthly, first to
reimburse Lender, if required, for any costs incurred by the Lender under
any other document executed as collateral security for this Note; second,
to interest which is then due and payable; third, to the payment of late
charges provided herein; and the balance to principal, until the principal
and interest has been paid in full.
4. PREPAYMENT
----------
The Borrower shall have the right to prepay all or any part of the Amount of
Note outstanding for which Borrower has made the Prime Rate Election (as
defined in the Loan Agreement), together with all accrued interest thereon at
any time without penalty. Any partial prepayments of principal shall be
applied against installments of principal due hereunder in inverse order of
maturity.
Borrower may not prepay all or any portion of the Amount of Note outstanding
during any Interest Period (as defined in the Loan Agreement) for which
Borrower has made a LIBOR Rate Election (as defined in the Loan Agreement).
If the Lender has elected to accelerate the repayment in the case of the
occurrence of an Event of Default, or in the case of casualty as set out in
the Loan Agreement, then Lender may, at its sole option:
(i) elect to delay any mandatory prepayments of any LIBOR Rate
Elections for a period up to the expiration of the then-current
Interest Period or Interest Periods, as applicable, in order to
coordinate the prepayment date with the last day of the applicable
Interest Periods; or
(ii) require prepayment by Borrower, in which case the Borrower shall
pay to the Lender, immediately upon demand, in addition to all
principal and accrued interest due on the Note, a prepayment charge,
computed solely by the Lender, in the amount necessary to compensate
the Lender for reasonable losses, expenses and liabilities the
Lender may sustain as a result of such prepayment, including,
without limitation, any losses and expenses arising from the
liquidation or reemployment of deposits
<PAGE>
acquired to fund or maintain the principal amount prepaid. In
calculating the amount of such a prepayment charge, the Lender's
determination of the amount of such reimbursement shall be
conclusive in the absence of manifest error. Upon request,
Lender shall provide Borrower with documentation supporting the
Lender's calculation of the prepayment charge.
5. LOAN AGREEMENT; COLLATERAL
--------------------------
This Note is issued under and entitled to the benefits of a Loan Agreement
of even date herewith ("Loan Agreement") among Lender and the Borrower, to
which Loan Agreement reference is hereby made for a statement of the rights
in respect thereto of the holder of this Note.
This Note will be secured by the collateral identified and described in
Section 2 of the Loan Agreement (the "Collateral"), to which section
reference is hereby made for a statement of the rights in respect thereto of
the holder of this Note.
6. DEFAULT
-------
Upon the occurrence of any event constituting an Event of Default under the
terms of the Loan Agreement, the entire balance of the principal and
interest upon this Note then owing and unpaid, at the option of the holder
hereof, immediately shall become due and payable. Delay on the part of the
holder of this Note in execution of the right to declare this obligation
due shall not be a waiver thereof.
After an Event of Default, the Amount of Note outstanding shall bear interest
at three percent (3%) per annum in excess of the Interest Rate in effect from
time to time, each change in such rate to be effective as of the date of such
changes.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other
court proceedings (whether at the trial or appellate level), or should this
Note be placed in the hands of attorneys for collection upon the occurrence
of an Event of Default, the Borrower agrees to pay, in addition to the
principal, premium and interest due and payable hereon, all costs of
collection, including reasonable attorneys' fees and expenses.
All parties to this Note, whether the Borrower, principal, surety, guarantor
or endorser, hereby jointly and severally waive presentment for payment,
demand, protest, notice of protest, notice of dishonor and any other notice
required to be given by law in connection with the delivery, acceptance,
performance, default or enforcement of this Note or any endorsement or
guaranty of this Note, and consent to all forbearance or waiver of any term
hereof or release or discharge by the holder hereof of the Borrower,
guarantors, endorsers, or sureties of the release, substitution or exchange
of any security for the payment hereof or the failure to
<PAGE>
act on the part of the holder or any other indulgence shown by the holder
from time to time, in one or more instances (without notice to or further
assent from the Borrower, guarantors, endorsers or sureties) and the
Borrower, guarantors, endorsers or sureties agree that no such action,
failure to act or failure to exercise any right or remedy on the part of
the holder shall in any way affect or impair the obligations of the Borrower
hereunder or of any guarantors, endorsers or sureties or be construed as a
waiver by the holder of or otherwise affect any of the holder's rights
under this Note, under any endorsement or guaranty of this Note or under
any document or instrument evidencing any security for payment of this Note.
7. MODIFICATION
------------
This Note may not be changed orally, but only by an agreement in writing,
signed by the party against whom enforcement of any change or modification is
sought.
8. LIMITATION ON INTEREST
----------------------
Anything herein to the contrary notwithstanding, the obligations of the
Borrower under this Note shall be subject to the limitation that payments of
interest shall not be required to the extent that receipt of any such payment
by the Lender would be contrary to provisions of law applicable to the Lender
limiting the maximum rate of interest that may be charged or collected by the
Lender.
9. GOVERNING LAW
-------------
This Note shall be governed by, and shall be construed and enforced in
accordance with, the laws of the State of Ohio.
10. WAIVER OF JURY TRIAL
--------------------
As a specifically bargained inducement for Lender to extend credit to the
Borrower, the Borrower hereby expressly waives the right to trial by jury in
any lawsuit or proceeding related to this Note or arising in any way from the
indebtedness or transactions involving the Lender and the Borrower.
11. CONFESSION OF JUDGMENT
----------------------
The Borrower authorizes any attorney-of-law to appear in any court of record
in Hamilton County or Montgomery County, Ohio, or in any court of record in
the jurisdiction in which the Borrower against which or whom a judgment is
then sought may then reside, or in any court of record in the jurisdiction
in which the property described in the Collateral is located, after the
indebtedness evidenced hereby becomes due, and to waive the issuing and
service of process and to confess judgment against the Borrower in favor of
the Lender for the amount then appearing due, together with costs of suit
and thereupon to release all errors and waive all rights of appeal and stay
of execution.
<PAGE>
WARNING: BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE
AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY
BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS
YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY
GOODS, FAILURE ON ITS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
IN WITNESS WHEREOF, the Borrower has executed and delivered this Note on
the day and year first above written.
Borrower:
LYTTON INCORPORATED, a
Delaware corporation
/s/ David Watts
By---------------------------------
DAVID WATTS
Its Chief Financial Officer
STATE OF OHIO, COUNTY OF MONTGOMERY, SS:
The foregoing instrument was acknowledged before me this 9th day of
February, 2000, by David Watts, the Chief Financial Officer of Lytton
Incorporated, a Delaware corporation, on behalf of said corporation.
/s/ M. Shannon Martin
-----------------------------------
Attorney at Law, Ohio
AMENDED AND RESTATED
EQUIPMENT ACQUISITION LOAN PROMISSORY NOTE
DATE OF NOTE: February 9, 2000
AMOUNT OF NOTE: FIVE HUNDRED THOUSAND DOLLARS ($500,000.00)
MATURITY DATE: February 8, 2003
FOR VALUE RECEIVED, the undersigned ("Borrower"), does hereby promise to
pay to the order of THE PROVIDENT BANK, an Ohio banking corporation, or its
successors or assigns, at its office located at 10 West Second Street,
Courthouse Plaza, Suite 1100, Dayton, Ohio 45402 ("Lender"), or at such
other place as the Lender may designate to the Borrower in writing from time
to time, in legal tender of the United States, the Amount of Note, as set
forth above, together with interest at the Interest Rate, as set forth in
Section 1 below, on the Amount of Note until this Note is paid in full.
Except as otherwise defined herein, all capitalized terms shall have the
meanings ascribed to them in the Loan Agreement (as herein defined).
1. INTEREST RATE
-------------
The "Interest Rate" is shall be equal to: (1) the Prime Rate, as defined
herein, charged by the Lender, minus one quarter of one percent (.25%), or
(2) a fixed rate equal to the Quoted LIBOR Rate plus two and one-half percent
(2.50%) per annum, as elected by Borrower pursuant to the Asset Based Loan
and Security Agreement between Lender and Borrower ("Loan Agreement"), as
defined and determined under the Loan Agreement.
Interest shall be computed daily for the actual number of days elapsed over
a year of 360 days. As used herein, the Prime Rate is that percentage rate
of interest calculated on the basis of a 360-day year which is established
by Lender from time to time as its Prime Rate, which is in effect until the
new rate is established and which provides a base to which loan rates may be
referenced; it is not necessarily the Lender's lowest loan rate. In the
event of a change in such Prime Rate, the interest rate hereunder shall be
adjusted accordingly, and such adjustment shall become effective on the
date such Prime Rate changes. The Quoted LIBOR Rate shall be as defined in
the Loan Agreement.
2. AMORTIZATION PERIOD
The "Amortization Period" shall be years commencing , 2000.
------- ----------
<PAGE>
3. PRINCIPAL AND INTEREST PAYMENTS
-------------------------------
Payments of principal in an amount equal to , plus interest, shall be
---------
due and payable monthly commencing on , 2000, and continuing on the
-----------
first day of each and every calendar month thereafter until this Note is paid
in full. Unless sooner paid, the entire outstanding principal balance and all
accrued, unpaid interest hereunder shall be due and payable on the Maturity
Date.
Borrower shall pay a late payment premium of five percent (5%) of any
principal or interest payment made more than ten (10) days after the Borrower
receives written notice of nonpayment, which shall be due with any such late
payment.
All payments made by the Borrower shall be applied monthly, first to
reimburse Lender, if required, for any costs incurred by the Lender under
any other document executed as collateral security for this Note; second,
to interest which is then due and payable; third, to the payment of late
charges provided herein; and the balance to principal, until the principal
and interest has been paid in full.
4. PREPAYMENT
----------
The Borrower shall have the right to prepay all or any part of the Amount of
Note outstanding for which Borrower has made the Prime Rate Election (as
defined in the Loan Agreement), together with all accrued interest thereon
at any time without penalty. Any partial prepayments of principal shall be
applied against installments of principal due hereunder in inverse order of
maturity.
Borrower may not prepay all or any portion of the Amount of Note outstanding
during any Interest Period (as defined in the Loan Agreement) for which
Borrower has made a LIBOR Rate Election (as defined in the Loan Agreement).
If the Lender has elected to accelerate the repayment in the case of the
occurrence of an Event of Default, or in the case of casualty as set out in
the Loan Agreement, then Lender may, at its sole option:
(i) elect to delay any mandatory prepayments of any LIBOR Rate
Elections for a period up to the expiration of the then-current
Interest Period or Interest Periods, as applicable, in order to
coordinate the prepayment date with the last day of the
applicable Interest Periods; or
(ii) require prepayment by Borrower, in which case the Borrower shall
pay to the Lender, immediately upon demand, in addition to all
principal and accrued interest due on the Note, a prepayment
charge, computed solely by the Lender, in the amount necessary
to compensate the Lender for reasonable losses, expenses and
liabilities the Lender may sustain as a result of such prepayment,
including, without limitation, any losses and expenses arising
from the liquidation or reemployment of deposits acquired to fund
or maintain the principal amount prepaid. In calculating
<PAGE>
the amount of such a prepayment charge, the Lender's determination
of the amount of such reimbursement shall be conclusive in the
absence of manifest error. Upon request, Lender shall provide
Borrower with documentation supporting the Lender's calculation of
the prepayment charge.
5. LOAN AGREEMENT; COLLATERAL
--------------------------
This Note is issued under and entitled to the benefits of a Loan Agreement
dated April 14, 1995, as amended by amendments dated July 31, 1997, April
29, 1998, September 8, 1998, June 30, 1999 and , 2000 ("Loan
------------
Agreement") among Lender and the Borrower, to which Loan Agreement reference
is hereby made for a statement of the rights in respect thereto of the
holder of this Note.
This Note will be secured by the collateral identified and described in
Section 2 of the Loan Agreement (the "Mortgage" and "Collateral"), to which
section reference is hereby made for a statement of the rights in respect
thereto of the holder of this Note.
6. DEFAULT
-------
Upon the occurrence of any event constituting an Event of Default under
the terms of the Loan Agreement, the entire balance of the principal and
interest upon this Note then owing and unpaid, at the option of the holder
hereof, immediately shall become due and payable. Delay on the part of the
holder of this Note in execution of the right to declare this obligation
due shall not be a waiver thereof.
After an Event of Default, the Amount of Note outstanding shall bear interest
at three percent (3%) per annum in excess of the Interest Rate in effect from
time to time, each change in such rate to be effective as of the date of such
changes.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other
court proceedings (whether at the trial or appellate level), or should this
Note be placed in the hands of attorneys for collection upon the occurrence
of an Event of Default, the Borrower agrees to pay, in addition to the
principal, premium and interest due and payable hereon, all costs of collec-
tion, including reasonable attorneys' fees and expenses.
All parties to this Note, whether the Borrower, principal, surety, guarantor
or endorser, hereby jointly and severally waive presentment for payment,
demand, protest, notice of protest, notice of dishonor and any other notice
required to be given by law in connection with the delivery, acceptance,
performance, default or enforcement of this Note or any endorsement or
guaranty of this Note, and consent to all forbearance or waiver of any term
hereof or release or discharge by the holder hereof of the Borrower,
guarantors, endorsers, or sureties of the release,
<PAGE>
substitution or exchange of any security for the payment hereof or the
failure to act on the part of the holder or any other indulgence shown by
the holder from time to time, in one or more instances (without notice to
or further assent from the Borrower, guarantors, endorsers or sureties) and
the Borrower, guarantors, endorsers or sureties agree that no such action,
failure to act or failure to exercise any right or remedy on the part of the
holder shall in any way affect or impair the obligations of the Borrower
hereunder or of any guarantors, endorsers or sureties or be construed as a
waiver by the holder of or otherwise affect any of the holder's rights under
this Note, under any endorsement or guaranty of this Note or under any
document or instrument evidencing any security for payment of this Note.
7. MODIFICATION
------------
This Note may not be changed orally, but only by an agreement in writing,
signed by the party against whom enforcement of any change or modification
is sought.
8. LIMITATION ON INTEREST
----------------------
Anything herein to the contrary notwithstanding, the obligations of the
Borrower under this Note shall be subject to the limitation that payments
of interest shall not be required to the extent that receipt of any such
payment by the Lender would be contrary to provisions of law applicable to
the Lender limiting the maximum rate of interest that may be charged or
collected by the Lender.
9. GOVERNING LAW
-------------
This Note shall be governed by, and shall be construed and enforced in
accordance with, the laws of the State of Ohio.
10. WAIVER OF JURY TRIAL
--------------------
As a specifically bargained inducement for Lender to extend credit to the
Borrower, the Borrower hereby expressly waives the right to trial by jury in
any lawsuit or proceeding related to this Note or arising in any way from
the indebtedness or transactions involving the Lender and the Borrower.
11. CONFESSION OF JUDGMENT
----------------------
The Borrower authorizes any attorney-of-law to appear in any court of record
in Hamilton County or Montgomery County, Ohio, or in any court of record in
the jurisdiction in which the Borrower against which or whom a judgment is
then sought may then reside, or in any court of record in the jurisdiction
in which the property described in the Collateral is located, after the
indebtedness evidenced hereby becomes due, and to waive the issuing and
service of process and to confess judgment against the Borrower in favor of
the Lender for the amount then
<PAGE>
appearing due, together with costs of suit and thereupon to release all
errors and waive all rights of appeal and stay of execution.
WARNING: BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE
AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY
BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS
YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS,
FAULTY GOODS, FAILURE ON ITS PART TO COMPLY WITH THE AGREEMENT, OR
ANY OTHER CAUSE.
IN WITNESS WHEREOF, the Borrower has executed and delivered this Note
on the day and year first above written.
Borrowers:
LYTTON INCORPORATED, a
Delaware corporation
/s/ David Watts
By---------------------------------
DAVID WATTS
Its Chief Executive Officer
STATE OF OHIO, COUNTY OF MONTGOMERY, SS:
The foregoing instrument was acknowledged before me this 9th day of
February, 2000, by David Watts, the Chief Executive Officer of Lytton
Incorporated, a Delaware corporation, on behalf of said corporation.
/s/ M. Shannon Martin
-----------------------------------
Attorney at Law, Ohio
GUARANTY
THIS GUARANTY is made this 9th day of February, 2000, among LYTTON
INCORPORATED, a Delaware corporation (the "Guarantor"), and THE PROVIDENT
BANK, an Ohio banking corporation ("Lender"), under the following circum-
stances:
WHEREAS, Lender has entered into an Asset Based Loan and Security
Agreement ("the Loan Agreement") committing Lender to loan up to the
principal sum of FIVE MILLION FIVE HUNDRED THOUSAND DOLLARS ($5,500,000.00)
(the "Loan") to Techdyne, Inc., a Florida corporation ("Borrower").
WHEREAS, the indebtedness is evidenced by (a) Borrower's Line of Credit
Promissory Note in the amount of FOUR MILLION FIVE HUNDRED THOUSAND DOLLARS
($4,500,000.00) ("Line of Credit Note"), and (b) Borrower's Term Loan
Promissory Note in the amount of ONE MILLION DOLLARS ($1,000,000.00) ("Term
Note"), both of which are dated February 9, 2000 and are hereinafter
collectively referred to as the "Notes".
WHEREAS, the Notes are secured by a security interest in all of
Borrower's assets, inventory, accounts, equipment and general intangibles.
WHEREAS, as an inducement to Lender to make the Loan to Borrower pursuant
to the Loan Agreement, the Guarantor is willing to guaranty all obligations of
the Borrower under the Notes and to execute and deliver this Guaranty.
NOW, THEREFORE, Guarantor and Lender agree as follows:
Section 1. Representations and Warranties. Guarantor hereby represents
--------- ------------------------------
and warrants as follows:
(a) Guarantor is a corporation duly organized, existing and in good
standing under the laws of the State of Delaware and is authorized
to do business in Ohio. Guarantor has the power to own its own
properties and to carry on its business as now being conducted;
(b) the execution of this Guaranty has been fully authorized by Guarantor
and the officer so executing same has been duly authorized;
(c) this Guaranty is a legal, valid and binding obligation of the
Guarantor, enforceable in accordance with its terms except as
enforcement of such terms may be limited by (i) bankruptcy,
insolvency or similar laws affecting enforcement of creditors' rights
generally and (ii) equitable principles which may limit the
availability of the remedy of specific performance or other equitable
remedies;
<PAGE> 1
(d) the execution, delivery and performance of this Guaranty do not and
will not violate or contravene the Articles of Incorporation or
By-Laws of Guarantor, any authority having the force of law or any
material indenture, agreement or other instrument to which the
Guarantor is a party or by which the Guarantor or any of its property
or assets is or may be bound or materially affected.
Section 2. Statement of Guaranty. Guarantor hereby absolutely and
--------- ---------------------
unconditionally guarantees prompt payment when due of any and all existing
and future indebtedness or liability of every kind, nature or character
(including, without limitation, principal, interest, all costs of collection,
and attorneys' fees) owing to Lender by Borrower, whether direct or indirect,
absolute or contingent, joint or several, whether due or to become due and
whether now existing or hereafter arising under the Notes and Loan Agreement
and all extensions and renewals thereof (the "Indebtedness"). The Guarantor
undertakes this continuing, absolute, and unconditional guaranty of the
aforementioned payment and performance by Borrower notwithstanding that any
portion of the Indebtedness shall be void or voidable as between the
Borrower and any of its creditors, including, without limitation, any
bankruptcy trustee of the Borrower.
Section 3. Waiver. This absolute, continuing, unconditional guaranty
--------- ------
is a guaranty of payment and not a guaranty of collection. Upon Borrower's
failure to pay the Indebtedness promptly when due, Lender, at its sole
option, may proceed against the Guarantor to collect the Indebtedness, with
or without proceeding against the Borrower, any co-maker or co-surety or co-
guarantor, any indorser or any collateral held as security for the
Indebtedness. The Guarantor waives any right to require that any action be
brought against the Borrower or to require that resort be had to any security
or other right or remedy which may be available to Lender. Any and all
payments upon the Indebtedness made by the Borrower, the Guarantor, or any
other person, and the proceeds of any and all collateral securing the payment
of the Indebtedness and this Guaranty, may be applied by Lender in whatever
manner it may determine in its sole discretion. The Guarantor agrees to
reimburse Lender for all reasonable expenses of any nature whatsoever
including, without limitation, reasonable attorneys' fees, incurred or paid
by Lender in exercising any right, power, or remedy conferred by this
Guaranty. Until the Indebtedness is paid in full, the Guarantor shall not
exercise any right of subrogation with respect to payments made by the
Guarantor pursuant to this Guaranty.
The obligations of the Guarantor set forth in this Guaranty shall extend
to all amendments, supplements, modifications, renewals, replacements or
extensions of the Indebtedness at any rate of interest. The liability of
the Guarantor and the rights of Lender under this Guaranty shall not be
impaired or affected in any manner by, and the Guarantor hereby consents
in advance to and waives any requirement of notice for, any (1) disposition,
impairment, release, surrender, substitution, or modification of any
collateral securing the Indebtedness or the obligations created by this
Guaranty or any failure to perfect a security interest in any collateral
through no fault on the part of Lender; (2) release (including adjudication
or discharge in bankruptcy) or settlement with any person primarily or
secondarily liable for the Indebtedness (including, without limitation,
any maker, indorser, guarantor or surety); (3) delay in enforcement of
payment of the Indebtedness or delay in enforcement of this Guaranty; (4)
delay, omission, waiver, or forbearance in exercising any right or power with
respect to the Indebtedness or this Guaranty; (5) defense arising from the
enforceability
<PAGE> 2
or validity of the Indebtedness or any part thereof or the genuineness,
enforceability or validity of any agreement relating thereto: (6) any
defenses or counterclaims that the Borrower may assert on the Indebtedness,
including but not limited to failure of consideration, breach of warranty,
fraud, payment, statute of frauds, bankruptcy, infancy, statute of limita-
tions, lender liability, accord and satisfaction and usury; or (7) other act
or omission which might constitute a legal or equitable discharge of the
Guarantor. The Guarantor waives presentment, protest, demand for payment,
any right or set-off, notice of dishonor or default, notice of acceptance of
this Guaranty, notice of the incurring of any of the Indebtedness and notice
of any other kind in connection with the Indebtedness or this Guaranty.
Section 4. Insolvency of Borrower. The Guarantor agrees that in the
--------- ----------------------
event of (i) the dissolution or insolvency of the Borrower, (ii) the
inability of the Borrower to pay its debts as they become due, (iii) an
assignment by the Borrower for the benefit of its creditors, or (iv) the
institution of any bankruptcy or other proceeding by the Borrower or the
filing of an involuntary bankruptcy proceeding against Borrower alleging that
the Borrower is insolvent or unable to pay its debts as they become due
(provided however, that Borrower shall have sixty (60) days in which to cause
the petition to be released or dismissed if, in Lender's reasonable judgment,
such petition is likely to be released or dismissed within such sixty (60)
days); and whether or not such event shall occur at a time when the Indebted-
ness was then due and payable, the Guarantor shall pay the Indebtedness to
Lender promptly upon demand as if the Indebtedness was then due and payable.
The Guarantor hereby waives any claim, right or remedy which the Guarantor
may now have or hereafter acquire against Borrower that arises hereunder
and/or from the performance by the Guarantor hereunder including, without
limitation, any claim, remedy or right of subrogation, reimbursement,
exoneration, contribution, indemnification, or participation in any claim,
right or remedy of Lender against Borrower or any security which Lender now
has or hereafter acquires, whether or not such claim, right or remedy arises
in equity, under contract, by statute, under common law or otherwise.
The Guarantor agrees that this Guaranty shall continue to be effective
or be reinstated, as the case may be, if at any time payment, or any part
thereof, of principal, interest or any other amount with respect to the
Indebtedness is rescinded or must otherwise be restored by Lender upon the
bankruptcy or reorganization of the Borrower, any other person or otherwise.
Upon any portion of the Indebtedness becoming due and not being fully
paid and satisfied, the total sum then due hereunder may immediately be
charged against any account or accounts maintained by the Guarantor with
Lender, without notice to or further consent from the Guarantor. The
Guarantor shall promptly provide such financial information as the holder
shall reasonably request from time to time.
Lender shall not be compelled to resort first to any collateral for
payment of any of the Indebtedness, but may at its election require the
obligation to be paid by the Guarantor, with or without suit. The provisions
of this Guaranty shall apply to any new or additional collateral given by
the Guarantor to further secure the Indebtedness and the obligations created
by this Guaranty.
<PAGE> 3
Section 5. Security. This Guaranty will be secured by a Security
--------- --------
Agreement granting Lender a security interest in all of Guarantor's Accounts,
Equipment, General Intangibles, Inventory and all other items of personal
property now owned or hereafter acquired by the Guarantor or in which the
Guarantor has granted or may in the future grant a security interest to the
Bank hereunder ("Collateral").
Section 6. Waiver of Jury Trial. As a specifically bargained induce-
--------- --------------------
ment for Lender to extend credit to Borrower: (i) THE GUARANTOR HEREBY
EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING
RELATED TO THIS GUARANTY OR ARISING IN ANY WAY FROM THE INDEBTEDNESS OR
TRANSACTIONS INVOLVING LENDER AND THE DEBTOR AND (ii) THE GUARANTOR HEREBY
DESIGNATES ALL COURTS OF RECORD SITTING IN DAYTON, OHIO AND HAVING JURIS-
DICTION OVER THE SUBJECT MATTER, STATE AND FEDERAL, AS FORUMS WHERE ANY
ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING FROM OR OUT OF THIS
GUARANTY, ITS MAKING, VALIDITY OR PERFORMANCE, MAY BE PROSECUTED AS TO ALL
PARTIES, THEIR SUCCESSORS AND ASSIGNS, AND BY THE FOREGOING DESIGNATION THE
GUARANTOR CONSENTS TO THE JURISDICTION AND VENUE OF SUCH COURTS.
Section 7. Successors and Assigns. This Guaranty shall inure to the
--------- ----------------------
benefit of and bind the parties hereto, their successors and assigns, and
their legal representatives or heirs. Lender may, at its option, assign
this Guaranty to any other party who is or becomes the indorsee or assignee
of any part of the Indebtedness or who is in possession of or the bearer of
any part of the Indebtedness that is payable to the bearer, and the
Guarantor shall continue to be liable under this Guaranty to such other
party to the extent of such indorsed, assigned, or possessed Indebtedness.
Section 8. Confession of Judgment. The Guarantor authorizes any
--------- ----------------------
attorney at law, including an attorney engaged by Lender, to appear in
Hamilton County or Montgomery County, Ohio, or in any other court of record
in the State of Ohio or any other State or Territory of the United State,
after the indebtedness evidenced hereby, or any part thereof, becomes due
and waive the issuance and service of process and confess judgment against
the Guarantor in favor of Lender, for the amount then appearing due,
together with costs of suit, and thereupon, to release all errors and waive
all rights of appeal and stay of execution. The Guarantor hereby expressly
waives any conflict of interest that Lender's attorney may have in confessing
such judgment against the Guarantor and expressly consents to the confessing
attorney receiving a legal fee from Lender or confessing such judgment
against the Guarantor. This warrant of attorney to confess judgment is a
joint and several warrant of attorney. The foregoing warrant of attorney
shall survive any judgment; and if any judgment be vacated for any reason,
the holder hereof nevertheless may thereafter use the foregoing warrant of
attorney to obtain an additional judgment or judgments against the Guarantor.
WARNING--BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND
COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN
AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE, AND THE POWERS OF A COURT
CAN BE USED TO
<PAGE> 4
COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON ITS
PART TO COMPLY WITH THE AGREEMENT OR ANY OTHER CAUSE.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Guaranty on the day and year first above written.
WITNESSES GUARANTOR
LYTTON INCORPORATED,
a Delaware corporation
/s/ Anne Marie Linnert /s/ David Watts
- ---------------------------------- By---------------------------------
DAVID WATTS
/s/ M. Shannon Martin, Esq. Its Chief Financial Officer
- ----------------------------------
LENDER
THE PROVIDENT BANK,
an Ohio banking corporation
/s/ Anne Marie Linnert /s/ Clifford M. Biship
- ---------------------------------- By---------------------------------
Clifford M. Bishop
/s/ M. Shannon Martin, Esq. Vice President
- ----------------------------------
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made this 9th day of February, 2000 between
LYTTON INCORPORATED, a Delaware corporation ("Debtor") and THE PROVIDENT
BANK ("Secured Party"), under the following circumstances:
A. Secured Party has entered into an Asset Based Loan and Security
Agreement ("the Loan Agreement") of even date herewith with Techdyne,
Inc., a Florida corporation, ("Techdyne") providing for a loan
commitment of $5,500,000.00 in the aggregate ("Loan").
B. As security for the Loan, Debtor executed and delivered to Secured
Party, a Guaranty of even date herewith, wherein Debtor guaranteed the
obligations of Techdyne ("Guaranty").
C. As security for the Guaranty, Debtor has agreed to pledge to
Secured Party certain of its assets.
NOW, THEREFORE, Debtor and Secured Party agree as follows:
Section 1. Grant of First Priority Security Interest. Debtor hereby
--------- -----------------------------------------
assigns, pledges and transfers to Secured Party a continuing first priority
security interest in all of the property described in this Section 1,
subject only to a prior security interest granted to Secured Party pursuant
to an Asset Based Loan and Security Agreement, dated April 14, 1995 and
amended on July 31, 1997, April 29, 1998, September 8, 1998, June 30, 1999
and February 9, 2000 ("Lytton Loan Agreement"). All of the property described
in Section 1 is hereafter called "Collateral".
1.1 All of Debtor's accounts (as that term is defined in the Uniform
Commercial Code, as defined herein), accounts receivable, chattel paper,
contract rights, documents and instruments; all other obligations or
indebtedness owed to Debtor from whatever source arising; all guarantees of
any of the foregoing and all security therefor; all of the right, title and
interest of Debtor in and with respect to the goods, services or other
property which gave rise to or which secure any of the foregoing and all
insurance policies and proceeds relating thereto; all of the foregoing
whether now owned by Debtor or hereafter acquired or in existence.
1.2 All of Debtor's equipment (as that term is defined in the Uniform
Commercial Code, as defined herein), including, without limitation, all
furniture, fixtures, machinery and other equipment of any kind and all
substitutions and replacements thereof and accessories and parts therefor,
all whether now owned or hereafter acquired by Debtor.
1.3 All of Debtor's inventory (as that term is defined in the Uniform
Commercial Code, as defined herein), including, without limitation, all
goods, merchandise and other personal property which are held for sale or
lease, or are furnished
<PAGE>
or to be furnished under any contract of service by Borrower, or are raw
materials, work-in-progress, supplies or materials used or consumed in
Borrower's business, and all products thereof, and all substitutions,
replacements, additions and accessories thereto, all whether now owned or
hereafter acquired by Borrower; and all of Borrower's right, title and
interest in and to any leases or rental agreements for such inventory.
1.4 All of Debtor's general intangibles and payment intangibles (as
those terms are defined in the Uniform Commercial Code, as defined herein),
including, without limitation, all goodwill, patents, formulas, blueprints,
proprietary manufacturing processes, trademarks, licenses, franchises,
beneficial interests in trusts, joint venture interest, partnership
interests, rights to tax refunds, pension plan over funding, literary rights
and other contractual rights of Debtor, all whether now owned or hereafter
acquired by Debtor.
1.5 All instruments, documents, securities, cash, property, deposit
accounts, certificates of deposit and the proceeds of any of the foregoing,
owned by Debtor or in which Debtor has an interest, which now or hereafter
are at any time in the possession or control of Secured Party or in transit
by mail or carrier to or from Secured Party, or in possession of any third
party acting on behalf of Secured Party, without regard to whether Secured
Party received same in pledge, for safekeeping, as agent for collection or
transmission or otherwise or whether Secured Party had conditionally released
the same.
1.6 All ledger sheets, files, records, documents, blueprints, drawings
and instruments (including without limitation, computer programs, tapes and
related electronic data processing software) evidencing an interest in or
relating to the Collateral described in this Section 1.
1.7 All proceeds and products of the Collateral described above in this
Section 1, including, without limitation, all claims against third parties
for damage to or loss or destruction of any of the foregoing, including
insurance proceeds, and accounts, contract rights, chattel paper and general
intangibles arising out of any sale, lease or other disposition of any of the
foregoing.
1.8 As used herein, the Uniform Commercial Code refers to the Uniform
Commercial Code in effect as of the date hereof or as hereafter adopted or
amended in any jurisdiction wherein the Collateral is or may from time to
time be located.
Section 2. Indebtedness. The security interests granted hereby are
--------- ------------
granted to secure the following:
2.1 The payment and performance of all indebtedness, liabilities and
obligations to Secured Party of every kind and description, direct or
indirect, absolute or contingent, joint or several, whether due or to become
due and whether now existing or hereafter arising under the Guaranty and all
extensions and renewals thereof (collectively, the "Indebtedness").
<PAGE>
2.2 All reasonable costs incurred by Secured Party to obtain, preserve,
and/or enforce the security interests granted by this Agreement; to collect
the obligations secured hereby; and to maintain and preserve the Collateral,
with such costs including, but not limited to, expenditures made by Secured
Party for taxes, assessments, insurance premiums, repairs, reasonable
attorneys' fees and other legal expenses, storage costs, rents, and expenses
of sale, together with interest on the above amounts at the highest rate
being paid by Techdyne on any of its obligations to Secured Party, all of
which Debtor agrees to pay to Secured Party; and
Notwithstanding the foregoing, Secured Party waives any rights arising
out of this Security Agreement to the Collateral as security for any
indebtedness of an individual Debtor to which the Truth-in-Lending Act and
Regulation Z promulgated thereunder apply.
Section 3. Debtor's Warranties. Debtor warrants to Secured Party as
--------- -------------------
follows:
3.1 Except for the security interests granted herein and in the Lytton
Loan Agreement, Debtor represents and warrants that it is, and as to the
Collateral to be acquired after the date hereof, shall be, the owner of the
Collateral free from any lien, security interest or encumbrance, and Debtor
shall defend the Collateral and its proceeds and products against all claims
and demands of all persons at any time claiming the same or any interest
therein adverse to Secured Party, and shall preserve the Collateral free
from any subsequent liens, encumbrances or security interests.
3.2 Debtor represents and warrants that at the time any account
becomes subject to a security interest in favor of Secured Party, said
account shall be a good and valid account representing a bona fide outright
sale of goods by Debtor or services performed by Debtor and such goods shall
have been shipped to the respective account debtors or the services have
been performed for the respective account debtors. Each account shall not
be subject to any claim for credit, allowance or adjustment by account
debtor or any setoff, defense or counterclaim. Debtor shall immediately
notify Secured Party in the event of the refusal of any goods which are the
subject of any such account, and of the bankruptcy, insolvency or financial
embarrassment of any account debtor and of any claim asserted for credit,
allowance, adjustment, setoff or counterclaim.
Section 4. Debtor's Obligations. Debtor agrees that:
--------- --------------------
4.1 Debtor shall keep accurate and complete records in accordance
with sound accounting practices of all of its Collateral, and shall at all
reasonable times allow Secured Party to inspect the Collateral, to examine,
audit or make extracts from Debtor's books and records, and to arrange for
verification of the Collateral under reasonable procedures directly with
account debtors and other persons or by other procedures. Debtor will
furnish to Secured Party on request additional statements of any account
together with all notes or other documents and information relating thereto.
<PAGE>
4.2 Debtor shall keep the Collateral insured against such casualties,
and in such amounts and on such terms as required by the Loan Agreement.
Debtor shall furnish Secured Party with satisfactory evidence of such
insurance and Secured Party shall be added to any such insurance as loss
payee. Debtor shall promptly pay when due all taxes and assessments imposed
on, or with respect to the Collateral, and shall maintain the Collateral in
good condition and repair. If Debtor fails to pay the premiums on any such
insurance or such taxes when due, or to maintain the Collateral in good
condition and repair, the Secured Party may do so for Debtor's account and
add the amount of its expenditures with respect thereto to Debtor's out-
standing obligations, which said amount shall be payable on demand with
interest at the highest rate being paid by Debtor on any of its obligations
to Secured Party. If an Event of Default has occurred and is continuing
beyond any applicable cure periods, Secured Party shall have the right to
settle and compromise any and all claims under any of the insurance policies
required to be maintained by Debtor hereunder, and Debtor hereby irrevocably
appoints Secured Party as its attorney-in-fact, with power to demand, receive
and receipt for all monies payable thereunder, to execute in the name of the
Debtor any proof of loss, notice, draft, and other instruments in connection
with such policies or loss thereunder and generally to do and perform any and
all acts as Debtor could perform in connection with such policies.
4.3 Debtor shall execute such financing statements and other
documentation as shall reasonably be requested by Secured Party in order to
perfect the security interests granted Secured Party hereunder and to carry
out the terms of this Agreement. A photocopy of this Security Agreement
shall be sufficient as a financing statement and may be filed in any
appropriate office in lieu thereof.
4.4 Upon request of Secured Party, Debtor shall furnish Secured Party
with any financial statements or other information as required by the terms
of the Loan Agreement.
Section 5. Debtor's Rights with Respect to the Collateral.
--------- ----------------------------------------------
5.1 With respect to the Collateral specified in Section 1.1, Debtor
is authorized to collect the proceeds of such Collateral and utilize them
in the ordinary course of business, provided that Secured Party shall have
the right at any time, before or after default, to notify account debtors
on any and all of Debtor's accounts of the security interest of Secured Party
in such accounts, to send requests for verification to the account debtors,
and, after an Event of Default, to notify such account debtors to make
payments of such accounts directly to Secured Party. At the request of
Secured Party, Debtor shall so notify such account debtors and indicate on
all billings that the accounts are payable directly to Secured Party. In
addition, Debtor shall, at the request of Secured Party, hold all proceeds
from collection of accounts in trust for Secured Party without commingling
the same with other funds, and shall promptly turn over the same to Secured
Party in the identical form received, endorsed by Debtor to Secured Party.
The proceeds of such Collateral shall be applied to the Indebtedness in such
order as Secured Party determines in its sole discretion.
<PAGE>
5.2 Until default, Debtor shall have the right to use, consume, or
sell any items of the Collateral described in Section 1.2 in the regular
course of business, but not to otherwise dispose of such Collateral.
Section 6. Default. If the Indebtedness is due other than on demand,
--------- -------
upon the happening of any one or more of the following events or conditions,
Secured Party may, at its option, declare the entire amount of Indebtedness
of Debtor to it then outstanding due and payable immediately without notice
to Debtor, and Secured Party may proceed to enforce payment of the same, and
to exercise all of the rights and remedies of a Secured Party under the Ohio
Uniform Commercial Code, in addition to the rights and remedies provided
herein. The events of default hereunder are as follows:
6.1 Default in the payment of any of the Indebtedness when due.
6.2 The failure of Debtor to observe or perform any of the provisions
of this Agreement, the Loan Agreement or any other agreement between the
Debtor and the Secured Party.
6.3 If any warranty, representation, certificate, schedule, financial
statement or other information given to Secured Party hereunder shall prove
to be untrue or materially misleading.
6.4 If any proceedings are instituted by or against Debtor under any
insolvency laws, or if Debtor shall become insolvent or otherwise suffer
such changes in his condition or affairs as in the sole discretion of
Secured Party impairs Secured Party's security interests hereunder, or
increases its risk as to repayment of any item of the Indebtedness, or if
Secured Party shall otherwise deem itself insecure with respect to the
Indebtedness.
If the Indebtedness is due on demand, the Secured Party may proceed
to enforce payment of same and exercise all of the remedies provided herein
at any time, without notice and without reason.
Secured Party's remedies include, but are not limited to, the right to
take possession of the Collateral or any part thereof, and Debtor hereby
grants Secured Party authority to enter upon any premises on which the
Collateral or any part thereof may be situated, and remove the Collateral
from such premises or use such premises, together with the materials,
supplies, books and records of Debtor, to maintain possession and/or the
condition of the Collateral and to prepare the Collateral for sale. All
rights and remedies of Secured Party hereunder shall be cumulative, not
exclusive, and shall be enforceable alternatively, successively or
concurrently with any other remedy available hereunder or otherwise available
at law or in equity.
Section 7. Power of Attorney. Debtor hereby irrevocably appoints
--------- -----------------
Secured Party as Debtor's true and lawful attorney-in-fact, with full power
of substitution, for Debtor, and in Debtor's name, place and stead, upon the
occurrence of any event of default as
<PAGE>
defined in Section 6 above, and in the event that Secured Party elects to
exercise any rights granted to it hereunder. As attorney-in-fact, Secured
Party may act for Debtor with respect to the Collateral as if Secured Party
were the owner thereof, and may endorse and cash promissory notes, checks
and other instruments, institute legal proceedings, make, adjust, and settle
claims, and do all other acts necessary and incidental to the exercise of
its rights provided hereunder, or otherwise available to it in the event of
default. Neither Secured Party nor its agents shall be liable for any acts
or omissions or for any error of judgment or mistake of fact or law in its
capacity as such attorney-in-fact.
Section 8. Miscellaneous. Any required notices to Debtor, including
--------- -------------
notice of the sale of any of the Collateral, shall be deemed to be reasonable
if mailed to Debtor at the address shown below, or such other address
furnished Secured Party in writing, at least five (5) business days prior to
the action which is the subject of the notice. The term "Debtor" as used
herein shall include the singular as well as the plural, and other words in
the singular shall include the plural and words of one gender shall include
the other gender when the sense requires. The term "Uniform Commercial Code"
as used herein shall mean the Uniform Commercial Code as adopted by the State
of Ohio. No waivers by Secured Party of any default shall be effective
unless given in writing, and shall not operate as a waiver of any other
default. The rights of Secured Party shall inure to the benefits of its
successors and assigns, and the obligations of Debtor shall bind Debtor's
heirs, executors, administrators, successors and assigns. If there is more
than one Debtor, their obligations hereunder shall be joint and several.
This Agreement contains the entire understanding between the parties
hereto with respect to the transactions contemplated herein, and such
understanding shall not be modified except in a writing signed by or on
behalf of the parties hereto. This Agreement shall be deemed to be a
contract entered into and made pursuant to the laws of the State of Ohio
and shall in all respects be governed, construed, applied and enforced in
accordance with the laws of said state.
As a specifically bargained inducement for Secured Party to extend
credit to Debtor: (i) THE DEBTOR HEREBY EXPRESSLY WAIVES THE RIGHT TO TRIAL
BY JURY IN ANY LAWSUIT OR PROCEEDING RELATED TO THIS SECURITY AGREEMENT OR
ARISING IN ANY WAY FROM THE INDEBTEDNESS OR TRANSACTIONS INVOLVING SECURED
PARTY AND THE DEBTOR AND (ii) THE DEBTOR HEREBY DESIGNATE(S) ALL COURTS OF
RECORD SITTING IN CINCINNATI, OHIO AND HAVING JURISDICTION OVER THE SUBJECT
MATTER, STATE AND FEDERAL, AS FORUMS WHERE ANY ACTION, SUIT OR PROCEEDING
IN RESPECT OF OR ARISING FROM OR OUT OF THIS SECURITY AGREEMENT, ITS MAKING,
VALIDITY OR PERFORMANCE, MAY BE PROSECUTED AS TO ALL PARTIES, THEIR
SUCCESSORS AND ASSIGNS, AND BY THE FOREGOING DESIGNATION THE DEBTOR
CONSENT(S) TO THE JURISDICTION AND VENUE OF SUCH COURTS.
<PAGE>
EXECUTED at ________________, Ohio on the 9th day of February, 2000.
THE PROVIDENT BANK
("Secured Party")
/s/ Clifford M. Bishop
BY:--------------------------------
Clifford M. Bishop,
Vice President
LYTTON INCORPORATED
("Debtor")
/s/ David Watts
BY:--------------------------------
DAVID WATTS
ITS Chief Financial Officer
CONDITIONAL ASSIGNMENT OF LEASE
LYTTON INCORPORATED, whose address is 1748 Stanley Avenue, Dayton, Ohio
("Tenant" or Assignor"), a Delaware corporation, as tenant under a certain
Lease with Stanley Avenue Properties, Ltd., whose address is 1748 Stanley
Avenue, Dayton, Ohio ("Landlord"), a limited liability company, which Lease
is dated August 1, 1997, and is for property at 1748 Stanley Avenue, City of
Dayton, Montgomery County, Ohio, as more fully described on Exhibit A
attached hereto, hereby assigns all of its right, title and interest as
Tenant under said Lease to THE PROVIDENT BANK, 10 West Second Street,
Courthouse Plaza, Suite 1100, Dayton, Ohio 45402 ("Assignee"), as security
for the indebtedness of Tenant to the Assignee under that certain Loan
Agreement dated April 14, 1995 and amended July 31, 1997, April 29, 1998,
September 8, 1998, June 30, 1999 and February 9, 2000 ("Loan Agreement"),
on the condition that this Assignment shall take effect only if (i) Tenant
defaults in any of its obligations under said Lease, or (ii) Tenant defaults
in any of its obligations to the Assignees under the Loan Agreement.
In the event this Assignment takes effect pursuant to the preceding
paragraph, the Assignee may at its option, assume all of the obligations,
rights and privileges of Tenant under said Lease by serving written notice
upon Tenant and Landlord, provided that Assignee will not be responsible
for obligations of Tenant prior to the date such notice is given.
Tenant warrants that the Lease shall not be cancelled or modified in any
manner without the prior written approval of Assignee. Tenant has made no
other assignment or sublease of its rights under the Lease, and Tenant shall
not sell, transfer, pledge or assign its interest under the Lease without
Assignee's prior written approval.
IN WITNESS WHEREOF, the undersigned has executed this Assignment as of
the 9th day of February, 2000.
LYTTON INCORPORATED,
a Delaware corporation
/s/ Anne Marie Linnert /s/ David Watts
- ---------------------------------- By---------------------------------
David Watts
/s/ Clifford M. Bishop Its Chief Financial Officer
- ----------------------------------
<PAGE>
STATE OF OHIO, COUNTY OF MONTGOMERY, SS:
The foregoing instrument was acknowledged before me this 9th day of
February, 2000, by David Watts, the Chief Financial Officer of Lytton
Incorporated, a Delaware corporation, on behalf of said corporation.
/s/M. Shannon Martin
-----------------------------------
Attorney at Law,Ohio
THIS INSTRUMENT PREPARED BY:
M. Shannon Martin, Esq.
Coolidge, Wall, Womsley & Lombard Co. LPA
33 West First Street, Ste 600
Dayton, Ohio 45402
<PAGE>
LANDLORD WAIVER AND CONSENT
STANLEY AVENUE PROPERTIES, LTD., an Ohio limited liability company,
("Landlord"), the Landlord under the above referenced Lease with Lytton
Incorporated ("Tenant"), hereby acknowledges and consents to the foregoing
Conditional Assignment of Lease to The Provident Bank ("Assignee"). Landlord
further agrees to notify Assignee in writing of any default by Tenant under
the terms of the Lease and to allow Assignee a reasonable opportunity to
cure said default (not less than fifteen (15) days after notice to Assignee),
before Landlord exercises any of its rights upon default. Landlord further
agrees that, in the event this Conditional Assignment becomes effective,
Assignee, may, at its option, occupy the Premises and exercise all of
Tenant's rights under the Lease, provided that Assignee perform all
obligations of Tenant from and after the date Assignee take possession of
the Premises. Assignee also shall have the right to further assign their
rights under said Lease with the consent of Landlord, which consent shall
not be unreasonably withheld.
IN WITNESS WHEREOF, this Consent has been executed as of the 24th day of
February, 2000.
WITNESSES: STANLEY AVENUE PROPERTIES, LTD.
an Ohio general partnership
/s/ Sharon Funk /s/ Lytton Crossley
- ---------------------------------- By---------------------------------
Its Managing Member
/s/ Colleen R. Johnston
- ----------------------------------
STATE OF OHIO, COUNTY OF MONTGOMERY, SS:
The foregoing instrument was acknowledged before me this 24th day of
February, 2000, by Lytton Crossley, the Managing Member of Stanley Avenue
Properties, Ltd., an Ohio limited liability company, on behalf of said
company.
/s/ Darlene Shilf
-----------------------------------
Notary Public
This instrument prepared by:
M. Shannon Martin, Esq.
Coolidge, Wall, Womsley & Lombard Co. LPA
33 West First Street, Suite 600
Dayton, Ohio 45402
